NHANCEMENT TECHNOLOGIES INC, SB-2/A, 1996-12-20

NHANCEMENT TECHNOLOGIES INC
SB-2/A, 1996-12-20
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1996

REGISTRATION NO. 333-15563

================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------

AMENDMENT NO. 1

FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
NHANCEMENT TECHNOLOGIES INC.
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7373 84-1360852
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
1746 COLE BOULEVARD, SUITE 265 DOUGLAS S. ZORN
GOLDEN, COLORADO 80401 SECRETARY
(303) 271-0505 1746 COLE BOULEVARD, SUITE 265
(Address and telephone number of GOLDEN, COLORADO 80401
principal executive offices) (303) 271-0505
(Name, address and telephone number
of agent for service)
</TABLE>
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Copies to:
<TABLE>
<S> <C>
LESTER R. WOODWARD, ESQ. KEVIN A. CUDNEY, ESQ.
LAURA B. GILL, ESQ. BETH J. MEIERS, ESQ.
DAVIS, GRAHAM & STUBBS LLP DORSEY & WHITNEY LLP
370 SEVENTEENTH STREET, SUITE 4700 370 SEVENTEENTH STREET, SUITE 4400
DENVER, COLORADO 80202 DENVER, COLORADO 80202
(303) 892-9400 (303) 629-3400
</TABLE>
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APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration for the same offering. [
]

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

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE

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- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM
DOLLAR AMOUNT PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- ------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per
share............................ 2,645,000 shares $4.50 $11,902,500 $3,607
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes 345,000 shares that the Underwriters have the option to purchase
from the Company solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED DECEMBER 20, 1996

PRELIMINARY PROSPECTUS

2,300,000 SHARES

[NHANCEMENT TECHNOLOGIES INC. LOGO]
NHANCEMENT TECHNOLOGIES INC.
COMMON STOCK
------------------------

Of the 2,300,000 shares of Common Stock, $.01 par value (the "Common
Stock"), offered hereby (the "Shares"), 1,700,000 shares are being sold by
NHancement Technologies Inc., a Delaware corporation (the "Company"), and
600,000 shares are being sold by a stockholder of the Company (the "Selling
Stockholder"). See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of the shares by the Selling
Stockholder.

Prior to this offering (this "Offering"), there has been no public market
for the Common Stock, and there can be no assurance that such a market will
develop after the completion of this Offering or that, if developed, it will be
sustained. It is anticipated that the initial public offering price of the
Common Stock will be between $3.50 and $4.50 per share (the "Offering Price").
See "Underwriting" for a discussion of the factors that will be considered in
determining the initial public offering price. The Company has applied for
quotation of the Common Stock on The Nasdaq SmallCap Market ("Nasdaq SmallCap")
under the symbol " ."

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

THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND
IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS," LOCATED AT PAGES 5 THROUGH
12, 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.

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=========================================================================================================
UNDERWRITING PROCEEDS PROCEEDS
PRICE TO DISCOUNTS AND TO THE TO THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(1)(2) STOCKHOLDER
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<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
- ----------------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $ $
=========================================================================================================
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(1) The Company has agreed to sell to the Representative a warrant to purchase
230,000 shares of Common Stock, exercisable at a price per share equal to
120% of the Offering Price (the "Underwriter Warrant"). In addition, see
"Underwriting" for information concerning indemnification arrangements with
the Underwriters and other compensation payable to the Representative.

(2) Before deducting expenses of this Offering estimated at $350,000 payable by
the Company, including the Company's share of a non-accountable expense
allowance payable to the Representative in an amount equal to three percent
(3%) of the gross proceeds realized in this Offering or approximately
$ ($ if the Underwriters' Over-Allotment Option is
exercised in full) (the "Non-accountable Expense Allowance").

(3) The Company has granted the Underwriters an option, exercisable within 30
days after the date hereof, to purchase up to 345,000 additional shares of
Common Stock upon the same terms and conditions as set forth above, solely
to cover over-allotments, if any (the "Over-Allotment Option.") If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, and Proceeds to the Company will be $ ,
$ and $ , respectively. See "Underwriting."

The Shares offered hereby are offered by the several Underwriters named
herein, subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, subject to approval of certain legal matters by counsel for the
Underwriters and certain other conditions. The Underwriters reserve their right
to withdraw, cancel or modify such offer and to reject orders in whole or in
part. It is expected that delivery of share certificates will be made at the
offices of Chatfield Dean & Co., Denver, Colorado, on or about January , 1997.

CHATFIELD DEAN & CO.

The date of this Prospectus is , 1997.

<PAGE> 3

The Company has two federally registered trademarks: Performance Factors(R)
and FACTOR 1000.(R)

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ SMALLCAP MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

FOR CALIFORNIA RESIDENTS ONLY

WITH RESPECT TO SALES OF THE COMMON STOCK BEING OFFERED HEREBY TO CALIFORNIA
RESIDENTS, SUCH COMMON STOCK MAY BE SOLD ONLY TO (1) "ACCREDITED INVESTORS"
WITHIN THE MEANING OF REGULATION D UNDER THE SECURITIES ACT OF 1933, (2) BANKS,
SAVINGS AND LOAN ASSOCIATIONS, TRUST COMPANIES, INSURANCE COMPANIES, INVESTMENT
COMPANIES REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, PENSION AND
PROFIT SHARING TRUSTS, CORPORATIONS OR OTHER ENTITIES WHICH, TOGETHER WITH THE
CORPORATION'S OR OTHER ENTITY'S AFFILIATES WHICH ARE UNDER COMMON CONTROL HAVE A
NET WORTH ON A CONSOLIDATED BASIS ACCORDING TO THEIR MOST RECENT REGULARLY
PREPARED FINANCIAL STATEMENTS (WHICH SHALL HAVE BEEN REVIEWED, BUT NOT
NECESSARILY AUDITED, BY OUTSIDE ACCOUNTANTS) OF NOT LESS THAN $14,000,000 AND
SUBSIDIARIES OF THE FOREGOING, OR (3) ANY PERSON (OTHER THAN A PERSON FORMED FOR
THE SOLE PURPOSE OF PURCHASING THE SECURITY BEING OFFERED HEREBY) WHO PURCHASES
AT LEAST $1,000,000 AGGREGATE AMOUNT OF THE SECURITY OFFERED HEREBY. EACH
CALIFORNIA RESIDENT PURCHASING THE SECURITY OFFERED HEREBY WILL BE DEEMED TO
REPRESENT BY SUCH PURCHASE THAT IT COMES WITHIN ONE OF THE AFOREMENTIONED
CATEGORIES, THAT IT WILL NOT SELL OR OTHERWISE TRANSFER SUCH SECURITY TO A
CALIFORNIA RESIDENT UNLESS THE TRANSFEREE COMES WITHIN ONE OF THE AFOREMENTIONED
CATEGORIES AND THAT IT WILL ADVISE THE TRANSFEREE OF THIS CONDITION WHICH
TRANSFEREE, BY BECOMING SUCH, WILL BE DEEMED TO BE BOUND BY THE SAME
RESTRICTIONS ON RESALE.

<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information appearing elsewhere in this
Prospectus, including the information set forth under "Risk Factors" and in the
financial statements (including the notes thereto). All information concerning
the Company assumes, and has been adjusted to reflect, the consummation of the
transactions described under "The Company." See "The Company." Except where
otherwise indicated, all information in this Prospectus assumes (A) the
conversion in accordance with the terms of certain outstanding promissory notes
into the number of shares of Common Stock equal to the aggregate outstanding
principal amount thereof divided by the Offering Price upon the consummation of
this Offering, (B) no exercise of outstanding options to purchase Common Stock,
exercisable in 60 days, and (C) no exercise of the Over-Allotment Option and the
Underwriter Warrant. See "Capitalization."

THE COMPANY

The Company is a leading voice processing systems integrator, which also
offers a proprietary computerized testing system that measures human
sensorimotor skills to determine an individual's performance readiness and
fitness to perform. The Company will combine the businesses of Voice Plus, Inc.
("VPI"), a national provider of voice processing systems that furnishes
businesses with advanced multimedia and voice processing solutions based on
integrating voice processing systems with various PBXs and computers, and
BioFactors, Inc. ("BFI"), a development stage company that offers the FACTOR
1000(R) system, a proprietary computerized impairment testing system. VPI and
BFI both provide stand-alone and local area network ("LAN") based systems
utilizing the Intel(R) computer platform. VPI derives its revenues from the sale
and installation of various communications systems products such as voice
messaging, facsimile messaging, voice response systems and electronic messaging.
VPI also generates revenues from recurring fees under annual maintenance service
contracts. BFI derives its revenues from recurring annual usage fees for its
FACTOR 1000(R) system and from sublicensing other uses of the technology.

The Company was incorporated to pursue an emerging business opportunity
created by the continuing changes in telecommunications and an increased
corporate emphasis on workplace productivity and security. The Company will
combine the proven marketing, distribution and service capabilities of VPI with
the experienced product and business development skills of BFI management. The
Company also intends to expand into the security business and has signed a
letter of intent to acquire C.C. & Associates ("CCA"), a security systems and
services provider. The Company will pursue aggressively strategic acquisitions
following this Offering.

The Company intends to leverage its position as a leading provider of voice
processing systems to become a diversified provider of a full range of
productivity and security enhancement products and services. The specific
elements of the Company's strategy to achieve this objective are as follows:

- Capitalize and expand on VPI's existing sales and support infrastructure
and systems integration capabilities to market VPI's existing products
and the FACTOR 1000(R) system;

- Exploit a growing trend towards unified networks by providing various
solution-based stand-alone and LAN systems and applications;

- Expand sales of the FACTOR 1000(R) system by customizing the FACTOR
1000(R) system to meet the needs of specific industries such as
transportation, manufacturing and the military;

- Exploit the need for worldwide wide area network ("WAN") capabilities to
meet the growing demands from business globalization;

- Acquire complementary businesses and products; and

- License FACTOR 1000(R) technology for use in other areas.

NHancement Technologies Inc., a Delaware corporation, was incorporated in
October 1996 to succeed to the business of BFI. See "The Company." Unless the
context otherwise requires, references herein to the "Company" refer to the
Company and its subsidiaries. The Company's principal executive offices are
located at 1746 Cole Boulevard, Suite 265, Golden, Colorado 80401, and its
telephone number is 303-271-0505.

1
<PAGE> 5

THIS OFFERING

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<S> <C>
Common Stock outstanding prior to
this Offering.................... 1,866,950 shares
Common Stock offered:
By the Company................... 1,700,000 shares
By the Selling Stockholder....... 600,000 shares
Total............................ 2,300,000 shares
Common Stock to be outstanding
after this Offering(1)........... 4,166,950 shares
Use of Proceeds.................... The Company intends to use the net proceeds it receives
from this Offering for repayment of indebtedness and
accrued interest of BFI of approximately $2.0 million,
for product and market development costs for the FACTOR
1000(R) system of approximately $500,000, for payment of
accrued management salaries and bonuses of $440,500, for
payment of a consulting fee of $40,000 and for general
corporate purposes, including business and product
acquisitions. See "Use of Proceeds."
Nasdaq SmallCap Symbol.............
</TABLE>

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

(1) Includes (i) 1,612,500 shares of Common Stock issued in connection with the
acquisition by the Company of VPI (the "VPI Acquisition") and the proposed
acquisition by the Company of CCA (the "CCA Merger"), 600,000 shares of
which are being sold in this Offering; and (ii) 241,650 shares of Common
Stock, based on an assumed Offering Price of $4.00 per share, issuable upon
the consummation of this Offering pursuant to the terms of BFI's previously
completed bridge financings. See "Business -- Recent Financings."

2
<PAGE> 6

SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA

The following table sets forth certain historical and pro forma combined
financial data of the Company. The summary financial data is derived from the
financial statements of NHancement Technologies Inc. (formerly BFI), VPI and
CCA. The data should be read in conjunction with the Historical Financial
Statements and Notes to Financial Statements and other financial information
included in this Prospectus.

SUMMARY PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1996

(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(4)
-------------------------- PRO FORMA(3) COMBINED
BFI VPI(1) CCA(2) COMBINED AS ADJUSTED
------ ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ 757 $6,193 $747 $ 7,697 $7,697
Gross margin............................. 649 2,293 284 3,226 3,226
Operating income (loss).................. (757) 473 (5) (834) (872)
Other income (expense)................... (438) 17 -- (421) (9)
Income (loss) before taxes............... (1,195) 490 (5) (1,255) (863)
Net income (loss)........................ (1,195) 400 (1) (1,255) (863)
</TABLE>

SUMMARY PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(4)
-------------------------- PRO FORMA(3) COMBINED
BFI VPI(1) CCA(2) COMBINED AS ADJUSTED
------ ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ 451 $7,259 $1,076 $ 8,786 $8,786
Gross margin............................. 264 3,069 512 3,845 3,845
Operating income (loss).................. (620) 286 123 (627) (677)
Other income (expense)................... (519) 30 1 (488) 6
Income (loss) before taxes............... (1,139) 316 124 (1,115) (671)
Net income (loss)........................ (1,139) 172 77 (1,115) (671)
</TABLE>

SUMMARY PRO FORMA COMBINED BALANCE SHEET DATA

AS OF SEPTEMBER 30, 1996

(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(6)
-------------------------- PRO FORMA(5) COMBINED
BFI VPI CCA(2) COMBINED AS ADJUSTED
------ ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents................ $ 83 $1,479 $ 9 $ 621 $ 4,842
Working capital.......................... (3,101) (167) 85 (3,247) 3,440
Excess of cost over net assets
acquired............................... -- -- -- 5,979 5,979
Total assets............................. 344 4,088 246 10,328 14,549
Long-term debt, less current portion..... -- -- -- 1,500 1,500
Total liabilities........................ 3,401 3,958 114 8,574 6,108
Stockholders' equity (deficit)........... (3,057) 130 132 1,754 8,441
</TABLE>

3
<PAGE> 7

NOTES TO THE SUMMARY HISTORICAL AND
PRO FORMA COMBINED FINANCIAL DATA

(1) Since January 1, 1996, VPI has operated as a Subchapter S corporation under
the Internal Revenue Code of 1986, as amended (the "Code"). Upon the
consummation of the VPI Acquisition, the Company will file its federal
income tax returns as a consolidated group. The pro forma income taxes and
net income of VPI for the nine months ended September 30, 1996, assuming C
corporation status and an effective tax rate of 40%, are as follows:

<TABLE>
<S> <C>
Historical income before income taxes............................. $490,000
Pro forma income taxes............................................ 196,000
--------
Pro forma net income.............................................. $294,000
========
</TABLE>

(2) CCA has a September 30 fiscal year end.

(3) The primary differences between the pro forma combined and historical
results of operations for the year ended December 31, 1995 and the nine
months ended September 30, 1996 reflect adjustments associated with the VPI
Acquisition and the proposed CCA Merger, including: (i) compensation expense
resulting from the re-negotiation of employment agreements with key
executives; (ii) amortization of the excess of cost over net assets acquired
in connection with VPI Acquisition; (iii) depreciation expense corresponding
to the estimated increase in estimated current fair value associated with
VPI's fixed assets; and (iv) adjustment of the income tax provision, on a
combined basis, due to the offsetting of current income of both VPI and CCA
with the losses of BFI.

(4) The primary differences between the pro forma combined as adjusted and pro
forma combined results of operations for the year ended December 31, 1995
and the nine months ended September 30, 1996 reflect adjustments associated
with financing activities, including: (i) expenses related to premiums for
directors and officers insurance; and (ii) adjustments to eliminate period
interest associated with bridge financing. See "Business -- Recent
Financings" for the terms of such bridge financing.

(5) The primary differences between the pro forma combined and historical
balance sheet data as of September 30, 1996 reflect adjustments associated
with the VPI Acquisition and the proposed CCA Merger, including: (i) an
increase in estimated current fair value associated with VPI's inventory;
(ii) an increase in estimated current fair value of VPI's fixed assets;
(iii) the excess of cost over net assets acquired in connection with the VPI
Acquisition; (iv) payment of a dividend declared by VPI and payable to the
sole shareholder of VPI; (v) the long-term notes associated with the VPI
Acquisition; and (vi) adjustments to equity as a consequence of the VPI
Acquisition and the proposed CCA Merger.

(6) The primary differences between the pro forma combined as adjusted and pro
forma combined balance sheet data as of September 30, 1996 reflect
adjustments associated with financing activities, including: (i) net
proceeds from this Offering and corresponding adjustments to Common Stock
and retained earnings; (ii) repayment of bridge debt and certain other debts
and accrued interest of the Company; (iii) proceeds and related costs from
bridge debt issued prior to this Offering; and (iv) conversion of certain
notes and associated accrued interest into equity at the Offering Price. See
"Business -- Recent Financings."

4
<PAGE> 8

RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk relating to the Company, the industries in which the Company
operates and the securities markets, particularly the markets for securities of
smaller issuers. Prospective purchasers of Common Stock should consider
carefully the information set forth below, as well as the other information in
this Prospectus, in determining whether to purchase the shares of Common Stock
offered hereby. In addition, certain information included in this Prospectus is
forward-looking. Such forward-looking information involves significant risks and
uncertainties that could cause actual future results to differ significantly
from those expressed in any forward-looking statements made by, or on behalf of,
the Company. These risks and uncertainties include, but are not limited to,
those discussed below.

ABSENCE OF OPERATING HISTORY OF THE COMBINED COMPANIES

To date, each of BFI, VPI and CCA (the "Combined Companies") has been
operating independently, and there can be no assurance that the Combined
Companies will be successfully integrated on an economic basis. There can be no
assurance that management of the Combined Companies will be able to oversee the
Combined Companies successfully and implement their operating and growth
strategies effectively. Results of operations may fluctuate significantly from
quarter to quarter and will depend upon numerous factors, including acceptance
of the Company's products and services in the marketplace. No assurances can be
given that future losses will not occur. There can be no assurance that the
combination of BFI and VPI into the Company will overcome the factors that have
caused BFI operating losses in the past. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business" and
"Management."

RISK FACTORS RELATED TO VOICE PROCESSING BUSINESS

VPI's Strategic Relationship with Centigram Communications Corporation.
VPI's business is based upon the integration of hardware and software and
telecommunications and data processing equipment manufactured by others into
integrated systems designed to meet the needs of its customers. Although VPI has
distributor agreements with a number of equipment manufacturers, approximately
90% of its revenue is based upon products manufactured by Centigram
Communications Corporation ("Centigram"). Mr. Goei, the Company's Chairman,
Chief Executive Officer and President, was previously a director and Chairman of
the Board of Directors of Centigram. Any termination or adverse change in the
Company's distributor relationship with Centigram would have a material adverse
impact upon the Company's voice processing business. In addition, the Company
depends upon Centigram to offer products that are competitive with products
offered by other manufacturers as to technological advancement, reliability and
price. If Centigram's competitors should surpass Centigram in any of these
qualities, the Company may be required to establish alternative strategic
relationships. Any such development would adversely affect the Company's
business for an indeterminate period of time until new supplier relationships
could be established.

Reliance upon VPI's Distributor Relationships. VPI has distributor
agreements with a number of equipment manufacturers in addition to Centigram. In
accordance with the terms of distributor agreements, a manufacturer may
discontinue the distributor relationship because of factors related to a
particular distributor or because of a manufacturer's decision to change its
method of distributing its products to all or parts of its markets. In making
such a change, a manufacturer of key products sold by a distributor may
effectively become a direct competitor of its former distributor. Moreover, a
manufacturer may reduce its dealer discounts, eliminate exclusive distribution
rights, reduce the manufacturer's support of a distributor or otherwise
adversely affect the competitive environment in which the distributor sells the
manufacturer's products. Any material change in VPI's distributor relationships
with its key suppliers or any interruption of the delivery of equipment to VPI
by any of its key suppliers would have a material adverse effect upon the
Company. See "Business -- Suppliers."

Competition in VPI's Voice Processing Business. VPI competes with a number
of larger integrated companies that provide competitive voice processing
products and services as subsets of larger product offerings, including all the
former regional Bell operating companies and major PBX equipment manufacturers,
such as Fujitsu Limited and Lucent Technologies Inc. ("Lucent"), formerly a
division of AT&T. These

5
<PAGE> 9

integrated public company competitors are substantially larger and may encroach
on the Company's voice processing equipment and service market. Additionally, in
the customer premise equipment markets, VPI competes with two types of equipment
companies: (i) interconnects (PBX providers), including Lucent, Northern Telecom
Limited, Fujitsu Limited and NEC Corporation, and (ii) independent voice
processing manufacturers, such as Octel Communications Corporation, Digital
Sound Corp., Active Voice Corp., Applied Voice Technology, Inc., Glenayre
Technologies, Inc. and Comverse Technology, Inc. Glenayre Technologies, Inc. and
Comverse Technology, Inc., among others, also compete with the Company in the
service provider market. Many of the Company's competitors in the voice
processing field have better name recognition in the market, a larger installed
base of customers and greater financial, marketing and technical resources than
the Company. See "Business -- Competition."

RISK FACTORS RELATED TO IMPAIRMENT TESTING BUSINESS

History of Operating Losses; Qualification of Auditors' Opinion. BFI has
experienced $8.4 million in operating losses since its inception. As of
September 30, 1996, BFI had a stockholders' deficit of approximately $3.1
million. The Company's independent auditors have included an explanatory
paragraph in their report on BFI's financial statements at December 31, 1995,
that states that BFI has suffered recurring losses from operations and has a net
stockholders' deficit, the cumulative effect of which raise substantial doubt
about BFI's ability to continue as a going concern. See "Independent Auditors'
Report" and Notes to Financial Statements.

Unknown Market Acceptance of the FACTOR 1000(R) System. The Company's
business success will depend in large part upon its ability to market,
manufacture and license the FACTOR 1000(R) system. The market for the system is
not established, and it is unknown whether demand for the system will meet the
Company's expectations. The FACTOR 1000(R) impairment testing system has been
subjected to commercial trials for less than three years and is in use for beta
testing at only five commercial locations. Also, BFI has had limited success in
licensing the system. Although management believes that at least $500,000 is
needed for product and market development of the FACTOR 1000(R) system, there
can be no assurance that the Company's cash outlays and development efforts will
result in market acceptance of the system. Development of the FACTOR 1000(R)
system could require significantly more funds than the Company anticipates. In
addition, there can be no assurance that the Company's plan to rely upon VPI's
experienced sales force to increase sales of the FACTOR 1000(R) system will be
successful, as VPI has no experience in selling the FACTOR 1000(R) system.
Although VPI's sales force may be successful in increasing sales of the FACTOR
1000(R) system, there can be no assurance that such sales will generate profits
for the Company. If the VPI sales force is not successful in increasing sales of
the FACTOR 1000(R) system, the Company would have to recruit, hire and train a
new sales force. The Company may not have sufficient cash to complete product
and market development of the system. See "Business."

Employee Challenges to Implementation of FACTOR 1000(R) Impairment Testing.
Labor unions generally have resisted any form of employee testing. BFI has
experienced labor union resistance to the FACTOR 1000(R) system, and, in several
instances, labor unions have prevented implementation of the FACTOR 1000(R)
system. Similar resistance from other employee groups also may arise. In
addition, while the FACTOR 1000(R) impairment testing system has not met with
legal challenge to date, there can be no assurance that use of the FACTOR
1000(R) system will not be legally challenged or that future legal decisions
will not restrict or prohibit an employer's use of the FACTOR 1000(R) system. If
the use of the FACTOR 1000(R) system were legally restricted or prohibited, the
Company would be materially adversely affected. See "Business -- Legal
Proceedings and Product Liability Insurance."

License for Critical Tracking Task/Test Software. The Company has an
exclusive license for Critical Tracking Task/Test ("CTT") software, a critical
component of the FACTOR 1000(R) technology, from Systems Technology, Inc.
("STI"). CTT software, which measures human sensorimotor skills, is protected
under patents and copyrights held by STI. The Company's right to market the
FACTOR 1000(R) system is totally dependent on maintenance of its CTT software
license, and the Company relies on STI for product validation and modification.
Although the Company is currently in compliance with the payment and other terms
of its license agreement with STI, the Company has been delinquent in its
payments and certain

6
<PAGE> 10

reporting obligations to STI in the past. The failure to pay future royalty
payments or otherwise to perform its obligations under the license agreement,
including failure to market the product, could result in loss of the license
from STI, which would have a material adverse effect upon the Company.

RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY

Financing Risks. Although the acquisition of complementary businesses and
products is an element of the Company's business strategy, none of the proceeds
of this Offering will be reserved specifically for the funding of future
acquisitions. If a cash payment in excess of available working capital is
required to make an acquisition, the Company will need to obtain additional debt
or equity financing. Debt financing may require the Company to pay significant
amounts as interest and principal payments, thus reducing the resources
available to expand its existing businesses. Equity financing may be dilutive to
the Company's existing stockholders' interest in the assets or earnings of the
Company. There can be no assurance that the Company will be able to obtain
either debt or equity financing if and when it is needed for acquisitions or
that, if available, such financing would be available on terms the Company deems
acceptable. The inability of the Company to obtain such financing would likely
have a material adverse effect on the Company's acquisition strategy. Further,
the refusal of potential acquisition candidates to accept Common Stock as
consideration also could require the Company to reduce or curtail its
acquisition strategy. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation -- Liquidity and Capital Resources" and
"Business -- Strategy."

Risks in Integrating Acquired Companies. Acquisitions may involve a number
of special risks, including adverse short-term effects on the Company's
operating results, diversion of management's attention from the operations of
the Company, dependence on retention, hiring and training of key personnel,
risks associated with unanticipated problems or legal liabilities and
amortization of acquired intangible assets, some or all of which could have a
material adverse effect on the Company's operations and financial performance.
Successfully integrating the operations of additional companies into those of
the Company will require the cooperative efforts of the managers and employees
of the respective business entities, including the integration of the owners or
managers of smaller companies into roles that require them to report to
supervisors. Significant costs and management time may be required to integrate
management control systems. Furthermore, to manage its growth effectively, the
Company must continue to improve its operational, financial and management
controls and information systems, to accurately forecast sales demand, to
control its overhead and to manage its marketing programs. There can be no
assurance of accomplishing these results without encountering substantial costs,
delays or other problems. If management fails to establish the needed controls
and to manage the expected growth effectively, the Company's operating results
and financial condition would be adversely affected. See "Business -- Strategy."

Risk that Consideration for Combined Companies Exceeds Asset Value. The
valuations of each of BFI, VPI and CCA for purposes of their combination were
established through arm's length negotiations between representatives of the
Combined Companies, without the benefit of independent valuations or appraisals.
The consideration to be received by the stockholders of each of the Combined
Companies is based primarily on their values as going concerns and not on the
net asset value of the assets acquired. Accordingly, valuations of the Combined
Companies derived solely from an appraisal of the tangible net assets acquired
would have been lower than the consideration to be paid by the Company. No
assurance can be given that the future performance of the Combined Companies
will be commensurate with the consideration paid or the price of the Common
Stock offered hereby. See "Business."

Risks Associated with Future Unspecified Acquisitions. With the exception
of the proposed acquisition of CCA, the Company has no plans, agreements,
understandings or arrangements with respect to any future acquisition. The
Company does not intend to submit a proposed acquisition or other business
transaction to the review and vote of its stockholders, except as required by
Delaware law. Even if submitted to a vote of stockholders, the Company's
management owns a substantial portion of the Company's outstanding voting
securities and may be able to control the outcome of any such proposal. The
Company's growth strategy is highly dependent on the Company's ability to make
future acquisitions. See "Use of Proceeds" and "Business -- Strategy."

7
<PAGE> 11

SUBORDINATION OF CLAIMS OF STOCKHOLDERS

The Company is a holding company, and its assets consist of its investments
in its subsidiaries, namely VPI, BFI and, upon consummation of the proposed CCA
Merger, CCA. The Company's rights, and, therefore, the extent to which holders
of Common Stock will be able to participate in the distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization, will be subject
to prior claims of the subsidiary's creditors, including trade creditors, except
to the extent that the Company may itself be a creditor with recognized claims
against such subsidiary (in which case the claims of the Company would still be
subject to the prior claims of any secured creditor of such subsidiary and of
any holder of indebtedness of such subsidiary that is senior to that held by the
Company).

DEPENDENCE UPON KEY PERSONNEL

The Company believes its success will depend to a significant extent on the
efforts and abilities of certain of its senior management, in particular, those
of Esmond T. Goei, the Company's Chairman of the Board of Directors, Chief
Executive Officer and President, Douglas S. Zorn, Executive Vice President,
Chief Operating Officer and Chief Financial Officer, James S. Gillespie, Vice
President of Sales and President of VPI, Diane E. Nowak, Vice President of
Sales, Western Region, of VPI, and Bradley J. Eickman, Director of Operations of
VPI. The Company has entered into three-year employment agreements with each of
Messrs. Goei, Zorn and Gillespie. VPI has entered into two-year employment
agreements with Ms. Nowak and Mr. Eickman. The Company has purchased a key man
insurance policy in the amount of $1 million on the life of Mr. Goei, which
names the Company as the sole beneficiary. The Company intends to purchase
additional key man insurance policies on other key employees. There can be no
assurance that the Company will be able to obtain key man insurance policies on
such individuals at an acceptable cost. The loss of the services of any of these
persons would have a material adverse effect on the Company. See "Management --
Directors, Executive Officers and Significant Employees."

RISKS RELATED TO INTELLECTUAL PROPERTY

The Company intends to protect vigorously the CTT software, the FACTOR
1000(R) technology and the Company's other intellectual property against
infringement or misappropriation by others. There can be no assurance, however,
that steps taken by the Company will prevent misappropriation of its
intellectual property or that competitors will not develop products similar to
the FACTOR 1000(R) system. Protection of the CTT software owned by STI requires
the active participation of STI in such efforts. There can be no assurance that
STI will cooperate with the Company regarding such matters. Further, the
enforcement of proprietary rights of the Company through litigation could result
in costs to the Company that could have a material adverse effect on its
financial condition. In addition, although the Company believes that the CTT
software, the FACTOR 1000(R) technology and the Company's other intellectual
property do not infringe on the proprietary rights of third parties, there can
be no assurance that infringement or invalidity claims will not be asserted
against the Company in the future. An adverse determination or the costs of
defending litigation based on such claims would have a material adverse effect
on the Company's business and financial condition. See "Business -- Intellectual
Property."

PRODUCT LIABILITY EXPOSURE; LITIGATION RISK; LIMITED INSURANCE

BFI's impairment testing business exposes it to potential litigation by
employees of companies using FACTOR 1000(R) testing if the employee's employment
relationship is affected thereby and claims by third parties who may be
indirectly affected by the Company's services or products. Product and service
liability insurance is expensive, to the extent it is available at all. BFI
currently maintains general liability insurance in the amount of $1.0 million
per policy year, which the Company intends to increase to $5.0 million per
policy year in connection with the VPI Acquisition. There can be no assurance,
however, that the Company will be able to obtain such insurance on acceptable
terms, that the Company will be able to secure increased coverage if needed or
that any insurance policy will provide adequate protection against successful
claims. A successful claim brought against the Company in excess of the
Company's insurance coverage could have a material adverse effect upon the
Company. See "Business -- Legal Proceedings and Product Liability Insurance."

8
<PAGE> 12

GOVERNMENTAL REGULATION

The Telecommunications Act of 1996 eliminated government mandated barriers
between local and long distance calling, cable television, broadcasting and
wireless service. Consequently, local telephone companies, the traditional long
distance carriers and cable television companies may now provide both local
telephone and long distance service, as well as television programming. Such
increased competition likely will change the infrastructure for implementing
communications applications, such as voice and electronic messaging. Such
changes could have a material adverse impact on VPI's voice processing business.
See "Business -- Governmental Regulation."

Under the Federal Fair Credit Reporting Act, as amended ("FCRA"), CCA is
classified as a consumer reporting agency and is subject to regulation under
FCRA and must comply with all consumer credit disclosure requirements and
protocols of FCRA. Additionally, several states have enacted statutes similar to
FCRA, and at least four states require companies engaged in the background
checking and investigative business to be licensed in order to conduct business
in those states. Many states also regulate the type of information that can be
made available to the public and impose conditions on the release of such
information. In addition, privacy and consumer-rights advocates and federal
regulators have become increasingly concerned with the use of personal
information, particularly credit reports. Attempts have been made, and likely
will continue to be made, by these groups to adopt new or more stringent federal
and state regulations on the use of personal information. See
"Business -- Governmental Regulation."

BROAD DISCRETION IN APPLICATION OF PROCEEDS

Approximately $2.8 million, or approximately 48% of the net proceeds of
this Offering, has been designated for working capital purposes, including the
development and expansion of the Company's existing products, the addition of
complementary products and businesses and general corporate purposes.
Accordingly, the Company will have broad discretion as to the application of
such proceeds. See "Use of Proceeds."

USE OF PROCEEDS FOR REPAYMENT OF INDEBTEDNESS, INCLUDING INDEBTEDNESS TO
MANAGEMENT

The Company intends to use approximately $2.0 million, or approximately 35%
of the net proceeds of this Offering, to repay outstanding indebtedness and
accrued interest, including indebtedness and accrued interest owed to certain
executives in connection with BFI's prior bridge financings. The Company also
intends to use approximately $40,500 (approximately 1%) of the net proceeds of
this Offering to pay deferred salaries for certain executives. See "Use of
Proceeds."

ABSENCE OF PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this Offering, there has been no public market for the Common
Stock offered hereby. Application has been made to have the Common Stock
approved for quotation on Nasdaq SmallCap. However, there can be no assurance
that, following this Offering, an active trading market for the Common Stock
will develop or be sustained or that the market price of the Common Stock will
not decline below the Offering Price. The Offering Price will be determined
solely by negotiations between the Company and the Representative and will not
necessarily reflect the market price of the Common Stock after this Offering.
See "Underwriting" for a discussion of the factors considered in determining the
Offering Price. The market price of the Common Stock could be subject to
significant fluctuations in response to, and may be adversely affected by,
variations in quarterly operating results, changes in earnings estimates by
analysts, developments in the telecommunications industry, adverse earnings or
other financial announcements of the Company's customers and general stock
market conditions, as well as other factors. In addition, the stock market has
experienced extreme price and volume fluctuations from time to time that have,
in certain circumstances, borne no meaningful relationship to performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

9
<PAGE> 13

POSSIBLE VOLATILITY OF STOCK PRICES; PENNY STOCK RULES

The over-the-counter markets for securities such as the Common Stock
historically have experienced extreme price and volume fluctuations during
certain periods. These broad market fluctuations and other factors, such as new
product developments and trends in the Company's industry and the investment
markets generally, as well as economic conditions and quarterly variation in the
Company's results of operations, may adversely affect the market price of the
Common Stock. Although the Common Stock is anticipated to be approved for
quotation on Nasdaq SmallCap, there can be no assurance that it will remain
eligible to be included on Nasdaq SmallCap. In the event that shares of the
Common Stock were no longer eligible for quotation on Nasdaq SmallCap, the
Common Stock could become subject to rules adopted by the Securities and
Exchange Commission (the "Commission") regulating broker-dealer practices in
connection with transactions in "penny stocks." If the Common Stock became
subject to the penny stock rules, many brokers may be unwilling to engage in
transactions in the Common Stock because of the added disclosure requirements,
thereby making it more difficult for purchasers of Common Stock in this Offering
to dispose of their securities.

RISKS ASSOCIATED WITH THE REPRESENTATIVE'S INFLUENCE ON THE MARKET

Assuming the Common Stock is accepted for trading on Nasdaq SmallCap, the
Representative may from time to time following the completion of this Offering
act as a market-maker and otherwise effect transactions in the Common Stock. The
Representative is not legally obligated by law or by contract to continue such
trading, which may be discontinued at any time. Any such cessation could have a
material adverse effect upon the price and liquidity of the Common Stock. The
Representative is subject to the supervision of various governmental and self
regulatory organizations, as well as certain capital requirements. Such
regulatory authorities periodically investigate and audit the activities of
broker-dealers, such as the Representative. In the event the Representative is
required to curtail or cease operations as a result of administrative actions
instituted by the regulatory authorities or because of lack of capital, the
price and liquidity of the Common Stock may be materially adversely affected by
the reduced participation or complete absence of the Representative from the
market.

IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS

Based on the unaudited pro forma net tangible book value of the Company at
September 30, 1996, and assuming an Offering Price of $4.00 per share, investors
in this Offering will suffer an immediate and substantial dilution of their
investment of approximately $3.41 (or 85.3%) in pro forma net tangible book
value per share of the Common Stock. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

The market price for the Common Stock could be adversely affected by the
availability of shares of Common Stock for sale or actual sales of substantial
amounts of Common Stock by existing or future stockholders. Upon completion of
this Offering, the 2,300,000 shares of Common Stock sold in this Offering will
be freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), by persons other than
"affiliates" of the Company. The remaining 1,854,425 shares of Common Stock will
be "restricted securities" within the meaning of Rule 144 under the Securities
Act ("Rule 144") and may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including the
exemption contained in Rule 144. The holders of 520,087 shares of Common Stock
possess registration rights with respect to such shares. The Company's Chairman
of the Board and Chief Executive Officer and affiliates and other officers,
directors and key employees have agreed, with respect to 50% of the shares of
Common Stock held by them, for a period of 18 months from the date of this
Prospectus, and with respect to the remaining 50% of the shares of Common Stock
held by them, for a period of 24 months from the date of this Prospectus, that
they will not publicly offer, sell, contract to sell or otherwise publicly
dispose of any shares of Common Stock directly or indirectly owned by them
without the prior written consent of the Representative. Following the
expiration of such lock-up agreements, 1,334,338 shares of Common Stock will
become available for resale in the public market, subject to the

10
<PAGE> 14

volume limitations, holding periods and other restrictions of Rule 144.
Additionally, as of November 30, 1996, 976,500 shares of Common Stock have been
reserved for issuance under the Company's Equity Incentive Plan, 634,375 shares
of which will be subject to outstanding options of BFI. See "Management." The
Company also has agreed, in connection with this Offering, to grant a warrant to
the Representative to purchase 230,000 shares of Common Stock at an exercise
price equal to 120% of the Offering Price, together with certain registration
rights relating to such shares. Future sales of shares of Common Stock, or the
perception that such sales could occur, could have an adverse effect on the
market price of the Common Stock. If the Over-Allotment Option is exercised in
full, there will be outstanding an additional 345,000 shares of Common Stock,
all of which will be freely tradeable without restriction or further
registration. See "Shares Eligible for Future Sale," "Underwriting" and
"Description of Capital Stock."

PRO FORMA FINANCIAL STATEMENTS

This Prospectus contains certain historical and pro forma financial
statements. The pro forma financial statements reflect the Company's best
estimate of the impact of the VPI Acquisition and the subsequent proposed CCA
Merger on the historical financial statements. Since those transactions have not
closed, the actual impact of those transactions on the Company's future
financial statements could be materially different than as presented.

CONTROL BY MANAGEMENT

Upon completion of this Offering, the Company's officers and directors will
own approximately 34.9% of the then issued and outstanding shares of Common
Stock (assuming no exercise of the Over-Allotment Option, the Underwriter
Warrant or other outstanding stock options and warrants) and, thus, may be able
to influence the election of a majority of the Company's directors and thereby
direct the policies of the Company.

ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") and certain provisions of the
Delaware General Corporation Law may make it difficult to change control of the
Company. See "Description of Capital Stock -- Certain Certificate of
Incorporation, Bylaw and Statutory Provisions Affecting Stockholders." For
example, the Certificate of Incorporation permits the Board of Directors,
without stockholder approval, to issue one or more classes or series of
preferred stock having the number of shares, designations, relative voting
rights, dividend rates, liquidation and other powers, rights, preferences and
limitations that the Board of Directors establishes. The issuance of preferred
stock, while providing flexibility in connection with possible financings,
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting power of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of the
Company, discourage bids for the Common Stock at a premium or otherwise
adversely affect the market price of the Common Stock. Employment agreements
with the Company's Chief Executive Officer and Chief Operating Officer provide
for substantial severance pay in the event of a "Change of Control" of the
Company, as such term is defined in such agreements. See "Description of Capital
Stock -- Certain Certificate of Incorporation, Bylaw and Statutory Provisions
Affecting Stockholders" and "Management -- Employment Agreements."

CONFLICTS OF INTEREST

Certain officers, directors and stockholders of the Company have entered
into loan transactions with the Company, have purchased and sold securities of
the Company and have engaged or may engage in other businesses for their own
account, which may be in competition with the Company, all of which could give
rise to conflicts of interest. See "Certain Transactions." The Company does not
intend to enter into business transactions or arrangements with officers,
directors or stockholders unless they are on terms at least as favorable to the
Company as could be obtained from unrelated third parties. However, there can be
no assurance that any future transaction or arrangement between the Company and
an officer, director or stockholder will be advantageous to the Company, that
conflicts of interest will not arise with respect to such

11
<PAGE> 15

transactions or arrangements, or that if such conflicts arise, they would be
resolved in a manner favorable to the Company.

INDEMNIFICATION OF DIRECTORS AND OFFICERS BY THE COMPANY; LIMITATIONS ON
LIABILITY

The Certificate of Incorporation limits the liability of directors of the
Company for monetary damages for breaches of directors' fiduciary duty of care.
In addition, the Delaware General Corporation Law and the Certificate of
Incorporation contain provisions for indemnification of officers and directors
of the Company. The Certificate of Incorporation requires the Company to
indemnify such persons to the full extent permitted by Delaware law. Each
officer and director will be indemnified in any proceeding alleging breaches of
fiduciary duty to the Company and similar wrongful conduct if he or she acted in
good faith and in a manner which he or she reasonably believed to be in, or not
opposed to, the best interests of the Company. Indemnification would cover
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement. See "Description of Capital Stock -- Certain Certificate of
Incorporation, Bylaw and Statutory Provisions Affecting Stockholders."

The Company's Bylaws also provide that the Board of Directors may cause the
Company to purchase and maintain insurance on behalf of any present or past
director, officer, employee, fiduciary, or agent of the Company insuring against
any liability asserted against such person arising out of such person's
position, whether or not the Company would have the power to indemnify such
person. The Company intends to obtain directors' and officers' liability
insurance, providing $2 million of coverage.

The Company has agreed to indemnify the Underwriters against certain
liabilities in connection with this Offering. See "Underwriting."

NO DIVIDENDS

BFI has not paid dividends on its Common Stock since its inception. VPI in
the past has made distributions to its stockholders. VPI has declared $783,700
in dividends during the first nine months of 1996 and plans to declare an
additional dividend of $550,000 prior to the VPI Acquisition, and to award
bonuses of $250,000, which are accrued in the September 30, 1996 Financial
Statements of VPI. In addition, VPI paid an $85,000 dividend to its sole
stockholder in November 1996, to cover estimated individual income taxes.
However, the Company currently intends to retain earnings, if any, for use in
the business. Accordingly, the Company does not anticipate paying any dividends
to its stockholders in the foreseeable future.

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<PAGE> 16

THE COMPANY

NHancement Technologies Inc., a Delaware corporation (the "Company"), was
incorporated in October 1996 as a holding company and successor to the business
of BFI, the developer and marketer of the FACTOR 1000(R) system. Effective on
the consummation of this Offering, BFI will merge with a subsidiary of the
Company to become a wholly owned subsidiary of the Company (the "BFI Merger").
Also upon the consummation of this Offering, the Company will acquire VPI, a
systems integrator and national distributor of voice processing equipment,
pursuant to a transaction whereby VPI will merge with a subsidiary of the
Company to become a wholly owned subsidiary of the Company (the "VPI
Acquisition"). The business of the Company will be conducted by its operating
company subsidiaries, BFI and VPI. Reference in this Prospectus to "the Company"
refers to the combined operations of BFI and VPI on a going-forward basis.

The Company's principal executive offices are located at 1746 Cole
Boulevard, Suite 265, Golden, Colorado 80401, and its telephone number is
303-271-0505.

MATERIAL TERMS OF THE BFI MERGER

BFI will become a wholly owned subsidiary of the Company pursuant to an
Agreement and Plan of Merger, dated as of October 30, 1996, by and among the
Company, BFI Acquisition Corporation ("BAC") and BFI (the "BFI Merger
Agreement"). The BFI Merger Agreement provides for the merger of BAC with and
into BFI, with BFI as the surviving corporation. Each outstanding share of BFI
Common Stock will be converted into the right to receive seventy-five-hundredths
(75/100) of a share of Common Stock; and the Company will assume the obligations
of the outstanding BFI options and grant to each optionee an option to purchase
5.625 shares of the Common Stock at an exercise price of 80% of the Offering
Price for every 10 shares of BFI Common Stock the optionee was entitled to
purchase (at an exercise price of $0.50 per share) under the existing option. In
addition to certain customary conditions to closing, the consummation of the BFI
Merger is contingent upon the effectiveness of the registration statement of
which this Prospectus is a part, stockholder approval of the BFI Merger, the
closing of the VPI Acquisition and the absence of any pending or threatened
litigation in connection with the BFI Merger Agreement. The Company has agreed
to issue warrants to purchase 109,900 shares of Common Stock (exercisable one
year after the closing of this Offering at an exercise price of 120% of the
Offering Price) to the holders of promissory notes in connection with BFI's
prior bridge financings and to authorize the assignment from BFI and the
assumption by the Company of all obligations under certain registration rights
agreements of BFI. See "Business -- Recent Financings" and "Description of
Capital Stock -- Registration Rights." The BFI Merger Agreement may be
terminated (i) if either party fails to perform any of its obligations under the
BFI Merger Agreement or fails to cure a material breach of any representation,
warranty, agreement or covenant within 10 days after notification or (ii) if the
BFI Merger is not consummated prior to March 31, 1997. The parties have agreed
to indemnify each other with respect to any losses arising out of any
misrepresentation, breach or failure to fulfill obligations under the BFI Merger
Agreement.

MATERIAL TERMS OF THE VPI ACQUISITION

VPI will become a wholly owned subsidiary of the Company pursuant to an
Agreement and Plan of Merger, dated as of October 25, 1996, by and among the
Company, VPI Acquisition Corporation ("VAC"), VPI and James Gillespie, the sole
stockholder of VPI (the "VPI Acquisition Agreement"). The VPI Acquisition
Agreement provides for the merger of VAC with and into VPI, with VPI as the
surviving corporation. In consideration for all the issued and outstanding
shares of common stock of VPI, Mr. Gillespie will receive from the Company (i)
two unsecured promissory notes in principal amounts of $1,000,000 and $500,000,
and (ii) shares of NHancement Common Stock with a market value of $4,680,000 (of
which, shares valued at $2,400,000 will be sold in this Offering, and the
remainder of the shares will be subject to restrictions on transferability under
the Securities Act and pursuant to a lock-up agreement with the Representative).
The notes will each bear interest at the medium term United States Treasury bill
rate and are due on the anniversary of the consummation of the VPI Acquisition,
but are payable earlier, depending on the future earnings of VPI, with 50% of
VPI's pre-tax profits to be applied to pay principal and interest on the
$1,000,000 note quarterly, and $62,500 of principal and accrued interest to be
paid on the $500,000 note in any

13
<PAGE> 17

quarter in which VPI is profitable, payable beginning 45 days after the close of
the fourth quarter 1996. In addition to certain customary conditions to closing,
the consummation of the VPI Acquisition is contingent upon the effectiveness of
the registration statement of which this Prospectus is a part, the closing of
the BFI Merger and the absence of any pending or threatened litigation in
connection with the VPI Acquisition Agreement. The VPI Acquisition Agreement may
be terminated (i) if either party fails to perform any of its obligations under
the VPI Acquisition Agreement or fails to cure a material breach of any
representation, warranty, agreement or covenant within 10 days after
notification or (ii) if the VPI Acquisition is not consummated prior to March
31, 1997. The parties have agreed to indemnify each other with respect to any
losses arising out of any misrepresentation, breach or failure to fulfill
obligations under the VPI Acquisition Agreement, with VPI's indemnification
applying only to claims that in the aggregate exceed $75,000.

USE OF PROCEEDS

The net proceeds to the Company from this Offering, after deducting
underwriting discounts and commissions and the Nonaccountable Expense Allowance
and other offering expenses payable by the Company, are estimated to be
approximately $5,770,000 (approximately $7,053,400 if the Over-Allotment Option
is exercised in full). The Company will not receive any of the proceeds from the
sale of shares by the Selling Stockholder. The Company presently intends to use
the net proceeds of this Offering as follows:

<TABLE>
<CAPTION>
EXERCISE OF
OVER-ALLOTMENT OPTION
-------------------------
PERCENTAGE PERCENTAGE
APPROXIMATE OF NET APPROXIMATE OF NET
APPLICATION OF NET PROCEEDS AMOUNT PROCEEDS AMOUNT PROCEEDS
---------------------------------------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Repayment of notes(1)(2)................ $ 2,025,000 35.1% $ 2,025,000 28.7%
Expenditures for product and market
development of the FACTOR 1000(R)
system................................ 500,000 8.7 500,000 7.1
Payment of deferred salaries for certain
executives(3)......................... 40,500 0.7 40,500 0.6
Performance and retention bonuses for
key employees......................... 400,000 6.9 400,000 5.7
Payment of consulting fee to the
Representative ....................... 40,000 0.7 40,000 0.6
Working capital(4)...................... 2,764,500 47.9 4,047,900 57.3
---------- ----- ---------- -----
Total......................... $ 5,770,000 100.0% $ 7,053,400 100.0%
========== ===== ========== =====
</TABLE>

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

(1) Includes repayment of certain principal and interest amounts due in
connection with recent bridge financings that by their terms are due upon
the consummation of this Offering and bear interest at annual rates of 10%
and 12%. The proceeds from such financings were used for general corporate
purposes. See "Business -- Recent Financings."

(2) Includes (i) the repayment of approximately $495,600 in principal and
accrued interest on certain notes held by Burton Kanter, a director of BFI
and a nominee for director of the Company, and by a former director of BFI
in the respective principal amounts of $54,850 and $252,660, bearing
interest at the rates of 10% and 12%, respectively, and due December 31,
1996, (ii) the repayment of approximately $29,000 in principal and accrued
interest on loans made in April 1995 to the Company from Douglas Zorn,
Executive Vice President, Chief Financial and Operating Officer and a
director of the Company, Mr. Kanter and a former director in the respective
principal amounts of $2,500, $10,000 and $10,000, bearing interest at 12%
and due December 31, 1996, and (iii) the repayment of principal and accrued
interest on loans made in November 1996 to the Company from VPI, of which
James Gillespie, Vice President Sales and a director of the Company, is sole
shareholder, Esmond Goei, President and Chief Executive Officer, Gary
Nemetz, a director of BFI and a nominee for director of the Company, and

14
<PAGE> 18

Mr. Zorn in the respective principal amounts of $50,000, $35,000, $50,000 and
$100,000. See "Certain Transactions."

(3) Represents a portion of salaries deferred by Messrs. Goei and Zorn during
1996.

(4) Although the Company has not designated precise amounts of the remaining net
proceeds for specific purposes and expects that funds generated from
operations, if any, will contribute to meeting the Company's capital needs,
the Company believes that it may use up to $500,000 for the repayment of
certain notes due the sole shareholder of VPI pursuant to the terms of the
VPI Acquisition, between $750,000 and $1,000,000 to expand the sales and
marketing functions, up to $500,000 for new product developments,
approximately $250,000 for professional fees related to future acquisitions
and between $500,000 and $1,000,000 for financing expanded levels of
inventories and accounts receivable in support of future operations.

The net proceeds of this Offering, after repayment of indebtedness and
accrued interest, will be used to develop and expand further the Company's
existing products, to add complementary products and businesses and for general
corporate purposes. The Company plans to use stock to effect acquisitions of
companies with complementary products and businesses; however, management may
elect to use cash or debt for this purpose, if appropriate. No portion of the
net proceeds has been allocated for any specific acquisition, and no acquisition
is pending or in negotiation as of the date of this Prospectus, other than the
proposed CCA Merger. No assurance can be given that any future acquisition will
be consummated or, if consummated, that any acquisition would prove advantageous
to the Company. See "Risk Factors -- Risks Related to the Company's Acquisition
Strategy" and "Business -- Strategy."

While the above use of proceeds indicates the Company's current plans,
there may be changes due to the availability of other business opportunities or
changes in the Company's plan of operation. Management is not currently aware of
any such business opportunities or planned changes in operations.

The Company anticipates that the net proceeds from this Offering, together
with cash flow from operations, will sustain the Company's current and proposed
operations for at least 12 months following the date of this Prospectus. Any
additional net proceeds realized from the exercise of the Over-Allotment Option
will be added to the Company's working capital. Pending use, net proceeds will
be invested in short-term, investment grade, interest-bearing securities or
certificates of deposit. See "Risk Factors -- Risks Related to the Company's
Acquisition Strategy," "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources," and
"Business -- Strategy."

DIVIDEND POLICY

15
<PAGE> 19

CAPITALIZATION

The following table sets forth, as of September 30, 1996: (i) the actual
capitalization of BFI, on a historical basis, and (ii) the pro forma
capitalization of BFI, VPI and CCA, combined and as adjusted to give effect to
the sale of 1,700,000 shares of Common Stock by the Company in this Offering at
an assumed Offering Price of $4.00 per share (after deducting estimated
underwriting discounts and commissions and the Nonaccountable Expense Allowance
and other offering expenses payable by the Company). This table should be read
in conjunction with the historical financial statements of BFI, VPI and CCA and
pro forma combined financial data included elsewhere in this Prospectus. See
"Unaudited Pro Forma Combined Financial Statements," "Notes to Unaudited Pro
Forma Combined Financial Statements," historical financial statements and
related notes.

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ------------------------
----------------------- AS ADJUSTED
BFI VPI CCA COMBINED FOR OFFERING
------- ---- ---- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Short-term debt and current portion of long-term
debt(1)........................................ $ 2,064 $ -- $ 0 $ 2,064 $ 0
Long-term debt, excluding current portion........ 0 -- 1 1,501 1,501
Stockholders' equity (deficit):
Common stock, $0.01 par value, 10,000,000
shares authorized, 2,225,300 shares
outstanding pro forma combined and 4,166,950
shares outstanding pro forma as
adjusted(2)(3).............................. 6 22 3 25 45
Additional paid-in capital..................... 5,314 -- -- 9,978 16,645
Retained earnings (deficit).................... (8,377) 108 128 (8,249 ) (8,249)
------- ---- ---- ------- -------
Total stockholders' equity (deficit)... (3,057) 130 131 1,754 8,441
------- ---- ---- ------- -------
Total capitalization................... $ (993) $130 $132 $ 5,319 $ 9,942
======= ==== ==== ======= =======
</TABLE>

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

(1) Includes capital lease obligations.

(2) Excludes 1,481,559 shares potentially issuable as follows: 634,375 shares of
Common Stock issuable upon the exercise of stock options pursuant to the
NHancement Technologies Inc. Equity Incentive Plan; 7,184 shares of Common
Stock issuable pursuant to the exercise of certain warrants at exercise
prices ranging from $25.88 to $188.80 per share; 610,000 shares issuable
upon the exercise of certain warrants at an exercise price per share of 120%
of the Offering Price; and 230,000 shares of Common Stock issuable upon
exercise of the Underwriter Warrant. See "Management -- Equity Incentive
Plan," "Business -- Recent Financings" and "Underwriting."

(3) Includes approximately 100 holders of record.

16
<PAGE> 20

DILUTION

The aggregate net tangible book value of BFI, VPI and CCA at September 30,
1996 was (2,796,200). The pro forma net tangible book value of the Company at
September 30, 1996 would have been (4,224,600), or ($1.90) per share after
giving effect to the VPI Acquisition and the CCA Merger. "Pro forma net tangible
book value per share" is the pro forma tangible net worth (total pro forma
tangible assets less total liabilities) of the Company, divided by the number of
shares of Common Stock outstanding after giving effect to the proposed CCA
Merger. After giving effect to the sale of Common Stock offered hereby (after
deducting underwriting discounts and commissions and the Nonaccountable Expense
Allowance and estimated offering expenses payable by the Company), the pro forma
net tangible book value of the Company at September 30, 1996 would have been
$2,462,000 or $0.59 per share, representing an immediate increase in pro forma
net tangible book value of $2.49 per share to existing stockholders and an
immediate dilution of $3.41 or approximately 85.3% per share to the investors
purchasing shares of Common Stock in this Offering ("New Investors").

The following table illustrates this dilution to New Investors on a per
share basis:

<TABLE>
<S> <C> <C>
Offering Price per share of Common Stock.............................. $4.00
Net pro forma tangible book value per share of Common Stock before
this Offering.................................................... (1.90)
Increase attributable to the sale of shares of Common Stock offered
hereby........................................................... 2.49
-----
Pro forma net tangible book value per share of Common Stock after this
Offering............................................................ 0.59
-----
Dilution to New Investors............................................. $3.41
=====
</TABLE>

The following table sets forth, at the date of this Prospectus, the number
of shares of Common Stock acquired from the Company, the total consideration to
the Company and the average price per share paid by existing stockholders after
giving effect to the transactions described under "The Company" and the purchase
of Common Stock in this Offering by the New Investors:

<TABLE>
<CAPTION>
SHARES ACQUIRED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... 2,466,950(1) 59.2% $2,720,800(2) 28.6% $1.10
New Investors................... 1,700,000 40.8 6,800,000 71.4 4.00
Total......................... 4,166,950 100.0% $9,520,800 100.0% $2.28
</TABLE>

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

(1) Includes 600,000 selling shares that are part of the VPI Acquisition.

(2) Includes the total consideration paid by the existing stockholders of BFI,
VPI and CCA $1,754,200, plus $966,600 of debt and accrued interest, all of
which converts into shares of Common Stock upon the consummation of this
Offering and at a conversion price equal to the Offering Price. See
"Business -- Recent Financings."

The foregoing analysis assumes no exercise of outstanding options,
outstanding warrants or the Underwriter Warrant. In the event any of the
foregoing is exercised, the percentage ownership of the New Investors will be
reduced.

17
<PAGE> 21

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the Company's results of operations and of its
liquidity and capital resources should be read in conjunction with the
individual historical financial statements of NHancement Technologies Inc.
(formerly BFI), VPI and CCA, the Unaudited Pro Forma Combined Financial
Statements and the related notes thereto appearing elsewhere in this Prospectus.

INTRODUCTION

NHancement Technologies Inc. (the "Company") was formed in 1996 as a
holding company and, simultaneously with the closing of this Offering, BFI and
VPI will become wholly owned subsidiaries of NHancement Technologies Inc. The
VPI Acquisition will be accounted for as a purchase, and the BFI Merger will be
accounted for in a manner similar to a pooling-of-interests. Further, as soon as
practicable after the consummation of this Offering, the Company intends to
acquire CCA in a transaction that will be accounted for as a
pooling-of-interests. Prior to these business combinations, each of BFI and VPI
has been operating as a separate independent entity. Accordingly, historical
results may not be comparable to or indicative of future performance. For all
periods presented, the Historical Financial Statement data include the accounts
of BFI, VPI and CCA without giving effect to the business combinations or this
Offering. The pro forma financial data give effect to the business combinations
and this Offering, and, accordingly, the assets and liabilities of BFI and CCA
are reflected at their historical amounts, with VPI presented at estimated
current fair values.

Since January 1, 1996, VPI has operated as a Subchapter S corporation under
the Code. Upon consummation of the VPI Acquisition, the Company will file as a
consolidated group for federal income tax purposes. For purposes of the
Unaudited Pro Forma Combined Statements of Operations included in this
Prospectus, pro forma federal and state income taxes have been provided as if
VPI had filed C corporation tax returns. An adjustment was made to eliminate the
provision for income taxes due to the application of the net losses of BFI on a
consolidated basis. See "Notes to Unaudited Pro Forma Combined Financial
Statements."

EFFECTS OF THE COMPANY'S ACQUISITION STRATEGY ON FUTURE RESULTS OF OPERATIONS

Management believes that the VPI Acquisition has the potential to enable
the Company to leverage VPI's established and profitable marketing and
distribution capability to cost effectively market current and future compatible
products. The costs associated with establishing such marketing and distribution
capabilities within BFI would be higher in terms of funds and time. Management
believes that the proposed CCA Merger would allow the Company to enter the
security market and to use this acquired expertise to pursue future acquisitions
in the security area. Since BFI's inception, BFI has been developing the FACTOR
1000(R) system, an impairment testing product that is licensed for an annual
fee, resulting in recurring revenues. Management believes that the VPI
Acquisition and the CCA Merger create opportunities to reduce costs by (i)
consolidating physical operating facilities, (ii) eliminating redundant
positions, (iii) cross-training personnel, (iv) consolidating administrative
functions such as accounting, MIS and administration, (v) cross marketing
products among the various customers of each entity, and (vi) leveraging the
increased size of the Company to create economies of scale and to receive
discounts from volume purchases. Although the Company expects to reduce costs
and, correspondingly, to increase profits, there can be no assurance that the
Company will be successful in substantially reducing costs or that such
reduction of costs, if achieved, would result in overall profitability in the
future.

18
<PAGE> 22

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994 and Nine
Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
1995

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.)

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------- ------------------
1994 1995 1995 1996
------ ------ ------- -------
<S> <C> <C> <C> <C>
Net sales............................................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold...................................... 125.5 41.4 37.8% 14.3%
Gross margin............................................ (25.5) 58.6 62.2% 85.7%
Research, selling and administrative expenses........... 482.2 196.1 187.2% 185.7%
Operating loss................................ (507.7) (137.5) (125.0)% (100.0)%
Other expense........................................... (22.8) (115.2) (85.9)% (57.7)%
Loss before income taxes................................ (530.5) (252.7) (210.9)% (157.7)%
Income taxes............................................ 0.0 0.0 0.0% 0.0%
Net loss................................................ (530.5) (252.7) (210.9)% (157.7)%
</TABLE>

BFI is a development stage company focused on employee impairment testing
systems. BFI's net sales and gross margins in all of 1994 and most of 1995 were
attributed to early "beta" type customer installations of the FACTOR 1000(R)
system, with significant negative gross margins and high engineering and
customer installation costs. The increased revenue for 1995 of $450,000
(compared to $375,000 in 1994) was primarily due to receipt of $300,000 as
partial payment of a $1 million licensing fee for BFI's technology for sports-
related applications in late 1995 from SportsTrac, Inc. (formerly, Bogart
Associates International, Inc.) ("SportsTrac"), of which Mr. Kanter, a director
of BFI and a director nominee of the Company, is an 8.1% stockholder, and
customer renewals of licenses for the FACTOR 1000(R) impairment testing system.
One of BFI's strategies is to license its products on a usage basis, as opposed
to one-time sales of systems, resulting in recurring revenues as customers renew
each year. Secondarily, the Company intends to continue to seek licensees in
various specialty market segments, similar to the Company's sports license
agreement. Such agreement resulted in a $1.0 million initial fee, of which
$700,000 was recognized during the nine-month period ended September 30, 1996,
plus an on-going royalty of 8.5% of revenues generated from the license. As a
result of the receipt of such $700,000 payment, BFI's gross margin for the nine
months ended September 30, 1996 increased to 85.7%. Revenues in 1996 continue to
come from customer renewals and licensing fees. The first significant revenues
from the commercial release of the FACTOR 1000(R) system are expected in 1997.

Research, selling, and administrative ("RS&A") expenses as a percentage of
net sales were high during 1994, 1995 and 1996 for the following reasons: (i)
during all of 1994, BFI was in development of the FACTOR 1000(R) system and had
insignificant revenues from early stage customers; (ii) for most of 1995, BFI
continued development of the FACTOR 1000(R) system, working closely with a few
beta customers as the product was made commercially viable, while several of
BFI's early stage customers committed to continue to use the FACTOR 1000(R)
system in a commercial mode; (iii) as development costs significantly decreased
during late 1995 and early 1996, most of the operating costs were expended in
finding complementary businesses to acquire that would provide a viable
marketing channel for the FACTOR 1000(R) system; and (iv) during 1996,
significant expenditures were made in connection with unconsummated mergers and
indirect expenditures were made in connection with the VPI Acquisition and the
CCA Merger and to prepare for this Offering. Management believes that at least
$500,000 is needed for initial product and market development costs for the
FACTOR 1000(R) system.

Other expense increased from $85,400 in 1994 to $519,200 in 1995, primarily
due to interest and original issue discounts associated with bridge financings,
which financings will be repaid or converted upon consummation of this Offering.
Other expense continues to remain at a significant level ($437,000 during the
first nine months of 1996) for the same reasons. BFI will have no debt after the
application of funds from this Offering, except for the $1.5 million in
promissory notes payable in connection with the VPI Acquisition. See "Certain
Transactions."

19
<PAGE> 23

VOICE PLUS, INC.

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
---------------- ----------------
1994 1995 1995 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales.............................................. 100.0% 100.0% 100.0% 100.0%
Cost of goods sold..................................... 62.7 57.7 56.2 63.0
Gross margin........................................... 37.3 42.3 43.8 37.0
Selling and administrative expenses.................... 33.4 38.3 35.6 29.4
Operating income............................. 3.9 4.0 8.2 7.6
Other income........................................... 0.3 0.4 0.3 0.3
Income before income taxes............................. 4.2 4.4 8.5 7.9
Income taxes........................................... (2.0) (2.0) (3.9) (1.4)
Net income............................................. 2.2 2.4 4.6 6.5
</TABLE>

VPI is an integrator and distributor of voice processing and
telecommunications systems for businesses. VPI's net sales increased 9% from
$6.7 million in 1994 to $7.3 million in 1995 and increased 12.9% for the first
nine months of 1996 to $6.2 million. The increase between 1994 and 1995 was
primarily due to the sale of larger voice processing systems. Management expects
VPI's annual revenues to increase for 1996 as compared to 1995, consistent with
prior-years' growth rates. Revenue recognition in the first nine months of 1996
has been delayed due to problems with a new voice processing system introduced
by a major supplier. During the fourth quarter of 1996, VPI expects to obtain
customer acceptances on the remaining installed systems that encountered initial
problems that the manufacturer has substantially corrected.

Gross margin increased 22.7% from $2.5 million in 1994 to $3.1 million in
1995 and declined 4.5% for the first nine months of 1996 to $2.3 million. Gross
margin as a percentage of net sales increased from 37.3% in 1994 to 42.3% in
1995. Gross margin for the first nine months of 1996 was 37.0%, which reflects a
decrease from the gross margin for the first nine months of 1995 at 43.8%. The
higher gross margin experienced during 1995 was primarily due to the sale of a
significant amount of reconditioned equipment to other voice mail service
providers at unusually high margins during the third quarter of 1995. The
overall gross margin trend for VPI's sales, excluding sales of reconditioned
equipment, is declining at a slow rate as a result of industry competition.
Management expects this trend to continue. A major objective of the Company's
business combination strategy is to take advantage of VPI's established
distribution strength by providing VPI with complementary higher gross margin
products, such as the FACTOR 1000(R) system, that are either internally
developed or acquired in future business combinations.

Selling and administrative ("S&A") expenses increased 24% from $2.2 million
in 1994 to $2.8 million in 1995 and have decreased 6.8% during the first nine
months of 1996 to $1.8 million. S&A as a percentage of net sales increased from
33.4% in 1994 to 38.3% in 1995 and declined from 35.6% to 29.4% during the first
nine months of 1996, compared to the first nine months of 1995. The increase
from 1994 to 1995 was attributable to startup costs associated with the addition
of several new marketing and sales persons in 1995 in anticipation of increased
sales in 1996. Although new sales persons normally do not produce significant
sales revenues for almost six months, normal production from established
individual sales persons is over $1.0 million annually.

The effective income tax rate of 46% in 1995 was slightly lower than the
1994 effective tax rate of 47%. These rates are different from the federal
statutory income tax rate principally due to state income taxes. The effective
income tax rate for the first nine months of 1996 of 18% reflects VPI's change
to Subchapter S corporation status, effective January 1, 1996, and the write-off
of a deferred tax asset that is not expected to be realized.

Slight increases in other income, both from 1994 to 1995 and from the first
nine months of 1995, compared to the first nine months of 1996, occurred
primarily due to interest on higher cash balances invested in interest bearing
bank accounts during the later periods. VPI had no debt during the reporting
periods.

20
<PAGE> 24

Year Ended September 30, 1996 Compared to Year Ended September 30, 1995

C.C. & ASSOCIATES

<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
-------------------
1995 1996
------ ------
<S> <C> <C>
Net sales................................................................ 100.0% 100.0%
Cost of goods sold....................................................... 52.4% 59.6%
Gross margin............................................................. 47.6% 40.4%
Selling and administrative expenses...................................... 36.1% 39.5%
Operating income............................................... 11.5% 0.9%
Other income (expense)................................................... 0.0% (0.1)%
Income before income taxes............................................... 11.5% 0.8%
Income taxes............................................................. (4.4)% (0.6)%
Net income............................................................... 7.1% 0.2%
</TABLE>

CCA is a workplace security business that performs investigations and
designs and implements security systems. CCA has a September 30 fiscal year end.
CCA net sales decreased by 15.0% during 1996, as compared to 1995, from $1.1
million to $915,000. The revenue for 1996, as compared to 1995, was not
dependent on a single large customer sale, as was the case in 1995, but rather
was derived from the sale of a number of products to a diverse group of clients.

Gross margin declined for 1996, as compared to 1995, from $511,800 to
$369,100, as there was no such single large customer sale in 1996 as in 1995.
Gross margin as a percentage of revenue declined from 47.6% to 40.4% from 1995
to 1996.

S&A has decreased slightly from $388,400 for 1995 to $361,500 for 1996. S&A
as a percentage of net sales increased to 39.5% in 1996, as compared to 36.1% in
1995.

LIQUIDITY AND CAPITAL RESOURCES

September 30, 1996 Compared to December 31, 1995

BIOFACTORS, INC.

During the first nine months of 1996, net cash used in the operating
activities of BFI was $455,200, and net cash provided by investing and financing
activities totaled $367,600, resulting in a net increase in cash of about
$88,000 during the period. BFI's working capital deficit at September 30, 1996
was $3.1 million. The working capital ratio decreased from 0.38 at December 31,
1995 to 0.09 at September 30, 1996, primarily due to increased bridge debt
financing and one-time costs associated with the VPI Acquisition, the proposed
CCA Merger, other abandoned acquisitions and this Offering.

As of September 30, 1996, BFI had outstanding debt of approximately $2.1
million, without giving effect to the application of net proceeds from this
Offering to repay certain outstanding debts. BFI has financed its working
capital requirements during the last two years through various bridge financings
totaling approximately $2.2 million, including a $500,000 bridge loan that
closed on November 5, 1996. The Company intends to utilize the net proceeds of
this Offering to repay approximately $2.0 million of outstanding debt and
interest accrued at rates between 10% and 12% per annum, to finance
approximately $500,000 of product and market development costs for the FACTOR
1000(R) system and for general corporate purposes. See "Use of Proceeds."

BFI management estimates that it will incur minimal capital expenditures
during the 12 months following this Offering. It is anticipated that all capital
expenditures will be financed through fixed asset leases and will not require
significant direct outlays of cash.

Based upon its present plans, management believes that operating cash flow,
available cash and available credit resources, together with the net proceeds of
this Offering, will be adequate to make the repayments of indebtedness described
herein, to meet the working capital cash needs of the Company and to meet

21
<PAGE> 25

anticipated capital needs during the next 12 months. Although the Company
intends to issue shares of Common Stock as its primary method of financing
acquisitions, it anticipates that additional funds will be required to implement
successfully its acquisition program, and it will use various methods to finance
acquisitions, including the payment of cash, for this purpose.

VOICE PLUS, INC.

During the first nine months of 1996, net cash provided by operating
activities of VPI was approximately $1.6 million, of which $383,700 was used to
pay dividends to VPI's sole shareholder to cover required payments of taxes and
$50,000 was used to repurchase shares of common stock of VPI as treasury shares.
In addition, prior to the VPI Acquisition, VPI intends to declare a dividend to
its sole shareholder in an amount of $550,000. In addition, VPI intends to pay
$250,000 of accrued bonuses and $400,000 of declared dividends prior to the VPI
Acquisition, these amounts have been accrued on the September 30, 1996 Financial
Statements. Cash used in investing activities was $167,700, all of which
consisted of additions to property and equipment. VPI had no debt during these
periods.

VPI's working capital at September 30, 1996 was ($167,600). The working
capital ratio decreased from 1.2 at December 31, 1995 to 0.96 at September 30,
1996, primarily due to increases in deferred revenues and accounts payable
recorded in the first nine months of 1996. Deferred revenues and accounts
payable increased as a result of initial problems with a new product release
from a key supplier, which delayed customers' acceptance and payment for the
products installed. The manufacturer has substantially corrected the product
problems.

Accounts receivable increased approximately 22% during the first nine
months of 1996, while average days outstanding during the first nine months of
1996 increased to 66 days as compared to 58 for 1995, due to customer acceptance
problems in 1996. Customer acceptance problems also caused inventory turnover to
average approximately 31 days during the first nine months of 1996, as compared
to approximately 26 days during 1995.

VPI estimates that it will make minimal capital expenditures during the 12
months following this Offering. It is anticipated that most capital expenditures
will be financed through fixed asset leases and will not require significant
direct outlays of cash.

C.C. & ASSOCIATES

During 1996, net cash provided by the operating activities of CCA was
$27,600, and net cash used in investing and financing activities was $30,300,
resulting in a net decrease in cash of $2,700 and a net decrease in working
capital of $14,500. CCA's working capital at September 30, 1996 was $84,500, and
its working capital ratio increased from 1.4 at September 30, 1995 to 1.7 at
September 30, 1996, primarily due to a decrease in accounts receivable offset by
decreases in accounts payable and accrued expenses. Accounts receivable
decreased approximately 40% in 1996 due to the collection in 1996 of a large
single customer receivable recorded in 1995.

CCA estimates that it will make minimal capital expenditures during the 12
months following this Offering. It is anticipated that most capital expenditures
will be financed through fixed asset leases and will not require significant
direct outlays of cash.

ACCOUNTING STANDARDS

The Company was not significantly affected by its adoption of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of." This statement is
effective for the Company's year ending December 31, 1996.

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," established financial accounting and reporting
standards for stock-based employee compensation plans and certain other
transactions involving the issuance of stock. This statement is effective for
financial statements issued for fiscal years beginning after December 15, 1995.
The Company is in the process of analyzing the

22
<PAGE> 26

impact of this statement and anticipates adopting the provisions of the
statement for the year ended December 31, 1996.

SEASONALITY AND INFLATION

The Company's net sales typically show no significant seasonal variations,
although net sales may be affected in the future by overall hiring trends and
the concentration of vacations of key employees of client companies during the
summer months.

The impact of inflation on the Company's operations has not been
significant to date. However, there can be no assurance that a high rate of
inflation in the future would not have an adverse effect on the Company's
operating results.

23
<PAGE> 27

BUSINESS

GENERAL

The Company is a leading voice processing systems integrator that also
offers a proprietary computerized testing system for measuring human
sensorimotor skills to determine an individual's performance readiness and
fitness to perform. The Company will combine the businesses of VPI, a national
provider of voice processing systems that furnishes businesses with advanced
multimedia and voice processing solutions based on integrating voice processing
systems with various PBXs and computers, and BFI, a development stage company
that offers the FACTOR 1000(R) system, a proprietary computerized impairment
testing system. VPI and BFI both provide stand-alone and LAN-based systems
utilizing the Intel(R) computer platform. VPI derives its revenues from the sale
and installation of various communications systems products such as voice
messaging, facsimile messaging, voice response systems and electronic messaging.
VPI also generates revenues from recurring fees under annual maintenance service
contracts. BFI derives its revenues from recurring annual usage fees for its
FACTOR 1000(R) system and from licensing the system.

The Company was incorporated in October 1996 to pursue an emerging business
opportunity created by the continuing changes in telecommunications and an
increased corporate emphasis on workplace productivity and security. The Company
will combine the proven marketing, distribution and service capabilities of VPI
with the experienced product and business development skills of BFI management.
The Company has signed a letter of intent to acquire CCA, a security systems and
services provider, and will pursue aggressively strategic acquisitions following
this Offering.

STRATEGY

Capitalize and expand on VPI's existing sales and support infrastructure and
systems integration capabilities to market VPI's existing products and the
FACTOR 1000(R) system

The Company's strategy is to fully utilize the combined management,
product development, systems integration and national marketing and
distribution capabilities of BFI and VPI. Initially, the Company will
address productivity from the standpoint of enhancing communications
capability, increasing workers' productivity and reducing workplace
injuries. The Company will focus on cross-marketing the FACTOR 1000(R)
system through the VPI sales force and expanding the installed base of the
FACTOR 1000(R) system. The Company believes that, by utilizing VPI's sales
force and installed base of over 1,000 client organizations, the Company
will be positioned better to exploit the full potential of the FACTOR
1000(R) product as an impairment testing methodology and a strategic
corporate communications tool for reaching the blue collar workforce. BFI
will utilize VPI's national sales and support infrastructure to conduct
FACTOR 1000(R) risk management seminars and on-site product demonstrations,
which management believes will expand market awareness and shorten the time
from product introduction to revenue recognition. VPI has national sales
and marketing presences in major markets geared to sell telecommunications
products and services across the United States, including the San Francisco
Bay Area, Seattle, Chicago, Boston, New York, Phoenix and Dallas.

Exploit a growing trend towards unified networks by providing various
solution-based stand-alone and LAN systems and applications

The Company believes that, when implementing any new system or
technology, businesses seek to maximize the use of current resources and
facilities. As a result, previously disparate electronic systems are being
integrated to operate on a unified network. For example, networked
electronic security systems that provide access control and monitoring
within a premise or over a wide geographic area were developed following
the demand by corporations that the installation of new security systems
utilize

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existing communications networks. Further, the continuing trend towards
outsourcing of services in an environment of increased technological
complexities requires vendors to be highly skilled in integrating telephony
technology with LAN and WAN systems. The Company's goal is to provide
integrated productivity and security systems that achieve these goals.
Management believes that VPI's voice processing integration capabilities,
BFI's proprietary FACTOR 1000(R) impairment testing system and potential
worker communications capability, together with the security products and
services the Company anticipates providing, will offer solutions to meet
the productivity and security needs of corporations.

Expand sales of the FACTOR 1000(R) system by customizing the FACTOR 1000(R)
system to meet the needs of specific industries such as transportation,
manufacturing and the military

The Company intends to customize the testing device and graphical user
interface ("GUI") of the FACTOR 1000(R) system to incorporate the specific
job characteristics of certain industries (e.g., testing devices configured
as a steering wheel for truck drivers and with multiple interfaces for
manufacturing operations). In addition to expanding the sales of the FACTOR
1000(R) system in the transportation and manufacturing industries, the
Company intends to explore the potential for FACTOR 1000(R) system
applications in the military. The ability to deploy troops quickly and
effectively is a function of effective training, measured in terms of
personnel fitness to perform or undergo training, which can be monitored
through the use of the FACTOR 1000(R) system.

Exploit the need for worldwide WAN capabilities to meet the growing demands
from business globalization

The Company has targeted the need for integrated global security
systems and organizations and telecommunications systems integration
capabilities. With multiple synchronized manufacturing sites across
continents, operations increasingly are in real time, and security and
communications must be conducted in real time. The Company intends to
provide communications and security products and services on a global basis
by exploiting, among other things, management contacts in Singapore,
Indonesia, Hong Kong, Malaysia and Taiwan.

Acquire complementary businesses and products

The Company seeks to acquire additional businesses that will expand
its geographic coverage or provide complementary products and services in
the areas of productivity and security. In particular, the Company intends
to expand its product portfolio while maximizing its organizational
strength and expertise in marketing and systems integration. The first
acquisition planned is the CCA Merger. CCA is a provider of security
systems and services. The Company believes that productivity and security
must be addressed in tandem, as methods for increasing productivity that do
not address the corresponding potential for increased liability and asset
loss will result in reduced benefits. The Company intends to acquire
companies that would provide geographical extensions for CCA in the area of
private investigations and specialized personnel protection. The Company
has commenced searching for additional acquisition candidates, including
those that provide WAN security systems. See "Risk Factors -- Risks Related
to the Company's Acquisition Strategy."

License FACTOR 1000(R) technology for use in other areas

The Company has licensed its proprietary FACTOR 1000(R) technology for
use by professional sports teams in baseball, basketball and hockey to
SportsTrac, of which Mr. Kanter, a director of BFI and a director nominee
of the Company, is an 8.1% stockholder, and intends to pursue other
licensing arrangements in areas unrelated to the Company's core business,
such as physical therapy. The Company believes that licensing will increase
public awareness of the FACTOR 1000(R) technology as a noninvasive tool for
measuring sensorimotor skills and detecting fatigue and other impairment in
the workplace and in other environments.

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THE COMPANY'S BUSINESSES

The Company's current and planned businesses include voice processing and
multimedia messaging, impairment testing, background checking and workplace
surveillance.

Voice Processing and Multimedia Messaging

Voice messaging systems, at a minimum, perform the functions of the
telephone operator directing incoming calls and recording messages.
Increasingly, these systems have evolved to provide more complex functions, such
as voice processing or interactive voice response, which enable users to conduct
self-inquiry of electronic databases. These innovations have resulted from the
need to increase productivity. Voice processing enables a corporation to
increase productivity by enhancing corporate communications.

Electronic messaging systems are now commonly accepted and widely used in
offices throughout the U.S. The growth of electronic mail, or "e-mail," has
transcended private corporate networks and crossed public boundaries connecting
users worldwide through a communications medium commonly referred to as the
"World Wide Web." Despite these advances in corporate communications, the
factory worker is still largely excluded. Management believes that the use of
the FACTOR 1000(R) system for impairment testing provides the basis to extend
e-mail and voice messaging to the blue-collar worker.

Impairment Testing

Management believes that corporations are seeking to increase human
productivity, and that to do so, corporations must provide both physical
integrity in performance capability and physical protection. The Company
provides systems that can be used to enhance productivity by identifying and
preventing impaired individuals from performing quality or safety sensitive
tasks, thereby increasing the quality of work performed, reducing errors,
avoiding accidents and enhancing workplace security. The Company has developed
the FACTOR 1000(R) system for routinely screening employees for fitness-for-work
prior to the performance of their jobs. The FACTOR 1000(R) system is a hand-eye
coordination measurement system that runs on an IBM(R) compatible personal
computer platform. The test is performed by the employee, without supervision,
and is administered in less than one minute. See "Risk Factors -- Risks Related
to Impairment Testing Business -- Unknown Market Acceptance of the FACTOR
1000(R) System."

Background Checking and Workplace Surveillance

The Company intends to enter the background checking and workplace
surveillance business through the proposed CCA Merger. Background checking is a
management tool used by organizations to avoid making inappropriate hiring
decisions and wasting resources on unproductive training. Background checking
and workplace surveillance are becoming more common due to increased workplace
violence, greater company liability for employee actions and increased concern
for workplace security and theft deterrence. CCA provides investigative
services, such as background checking and records verification services, and
conducts surveillance and sting operations to deter theft. CCA investigates
unaccountable losses of material or equipment, particularly in high technology
companies where there has been increasing theft of electronic components such as
computer memories and microprocessors. CCA also customizes and resells closed
circuit television ("CCTV") monitoring equipment.

Pursuant to a letter of intent entered into in October 1996, the Company
intends to acquire all of the outstanding stock of CCA, and CCA will become a
wholly owned subsidiary of the Company in exchange for the issuance of 300,000
shares of Common Stock (based on an assumed Offering Price of $4.00 per share)
to the sole stockholder of CCA.

MARKETING

VPI has an established marketing and distribution infrastructure for its
voice processing and electronic messaging products, which will be extended to
include the FACTOR 1000(R) system and other new products. VPI has marketing
personnel, a technical assistance center (including customer service
representatives, system engineers and senior level field technicians) and a
nationwide network of service/support dealers to

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provide its customers with personalized attention, flexibility, responsiveness
and accountability. VPI markets its products and services primarily through
focused telemarketing and calls to prospective customers in specific emerging
growth markets (including the paging and cellular operator markets),
participation in trade shows, acquisition of data bases and inclusion of its
products and services on bidders' lists. VPI maintains a strict sales and
marketing discipline that focuses on pre-sale analysis of its customers' needs
and the rate of return potential of specific sales opportunities to determine
whether they justify the investment of time and effort of VPI's sales and
marketing organization. Typically, VPI will only pursue sales opportunities over
$100,000 where the value added by VPI's products and services provides
significant benefits for the customer. VPI also participates in competitive
bidding for government agency work. In evaluating a prospective sales situation,
VPI also considers the lead time to revenue, the complexities of the customer's
requirements and its ability to satisfy the customer and provide it with the
necessary support. VPI's customers currently include, among others, Western
Wireless, Sysco Foods, Hitachi Data Systems, Santa Clara County and Alameda
County, California.

VPI currently sells and supports voice processing systems throughout the
United States and its territories. VPI has sales and/or support offices in the
San Francisco Bay Area, Seattle, Chicago, Boston, New York, Phoenix and Dallas
and intends to expand into Denver, St. Louis, Salt Lake City, Atlanta and other
markets. BFI conducts its sales and support services from Denver.

PRODUCTS AND SERVICES

Voice Processing and Electronic Messaging

VPI is a systems integrator and national distributor of voice processing
equipment from several manufacturers, which equipment enables users to access
and interact with a broad range of information in a variety of formats
(including voice, text, data and facsimile) from a variety of terminals
(including touch-tone telephones and personal computers). Applications such as
voice messaging, fax store-and-forward, and interactive voice response are
integrated on VPI's communications server, which is based on industry-standard
hardware and software.

VPI offers a broad range of products that supports a number of enterprise
applications such as voice messaging, text messaging, LAN messaging and
interactive voice response or self-inquiry systems.

Telephone Answering. This application is an early evolution of voice
messaging systems whereby messages are recorded when a telephone is either
busy or left unanswered.

Voice Messaging. Voice messaging is the first true communications
application that generally is offered by most voice processing equipment
vendors, including Centigram, Octel Communications Corporation, and
Comverse Technology, Inc. Instead of merely recording a message, the
application enables a user to send, receive, store and forward voice
messages, on or off the system, while control is effected via the keypad of
a touchtone telephone. In some cases, such as with Centigram's One View(TM)
product, a user can access and generate voice messages via a computer. Most
vendors also offer the capability of message notification and other more
advance features such as "message receipt" whereby a sender of a voice
message on the system can obtain verification that a message was received
and the time of such receipt. Each vendor tends to have different user
protocols and keypad definitions that determine the ease of use of the
system.

Automated Attendant. This application is an early adaptation for
messaging systems whereby the system answers an incoming call and allows
callers to direct their calls to various telephone extensions without human
operator intervention.

Paging. Voice processing systems today generally have incorporated a
paging capability. A page is triggered upon receipt and storage of a voice
message. The person paged can complete the communications process by
retrieving the voice message via a touchtone telephone.

Audiotext. An early application of voice processing systems is
audiotext, which provides callers access to recorded voice announcements
such as weather reports and stock quotes.

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Facsimile Messaging. A number of manufacturers have added facsimile
capabilities to their voice processing systems. Some have added the
capability through external peripherals, while others, such as Centigram,
have integrated the feature directly, providing a multimedia capability
that allows mixing of voice and facsimile messaging. The ease of use and
functionality of the facsimile features, such as the ability to broadcast
or forward a facsimile, differ from manufacturer to manufacturer.

Voice Response. Self-inquiry systems became popular with familiar use
of automated teller machines ("ATM"), which allow customers to make routine
inquiry of their account balances and conduct certain transactions. Voice
response systems provide telephone access to electronic databases to enable
users to obtain information, as well as supply information to the system,
via a voice recording or commands via the telephone keypad.

Electronic Messaging. Electronic messaging has grown from simple text
messaging to include delivery of graphic information. E-mail now has
greater geographic coverage effected through private networks (both LANs
and WANs) and public networks such as the World Wide Web.

LAN Integration and Networking. The need for group interaction has
propelled the growth of LAN electronic messaging and the need for localized
group voice messaging through the desktop computer, whereby voice and text
messaging are integrated and available for access simultaneously. Certain
manufacturers, such as Centigram and CallWare Technologies, Inc., have
combined such access capability through the LAN. Networking capability is
an important manufacturer differentiator in terms of connectivity and voice
quality. Electronic messages, which are stored and transmitted in digital
format, preserve the integrity of the information transmitted no matter the
frequency of storing and forwarding of the message. Voice messages, like
facsimiles, undergo severe information degradation depending on the mode of
transmission and storage. A facsimile that undergoes multiple scanning
deteriorates in legibility as each scan reduces the quality of image
capture. Similarly, voice messages that undergo multiple analog to digital
and then digital to analog conversions may become unintelligible.
Networking that converts a voice message digitally only one time at the
time of storage, such as the technology Centigram employs, provides high
quality transmission.

Services. VPI offers comprehensive service and support, including
project coordination, system engineering and integration, application
development, implementation, technical training, and on-going service and
support services. VPI supports its customers with certified technicians,
maintains a large spare parts inventory and attempts to resolve problems
accurately and expeditiously. VPI offers a variety of maintenance programs
that can be customized to address the diverse needs of its customers,
including (i) a comprehensive maintenance program, offering service 24
hours per day, seven days a week; (ii) a standard maintenance program,
offering service and support during principal periods of maintenance; and
(iii) a parts and telephone maintenance program, providing support for more
technically advanced customers.

VPI is a value-added reseller of voice processing equipment from several
manufacturers, including Centigram, Digital Speech Systems, Inc., Octel
Communications Corporation and Active Voice Corp.

The FACTOR 1000(R) System

Impairment Testing. The Company's FACTOR 1000(R) impairment testing system
is based upon the CTT technology, a product of research conducted by STI for the
U.S. military in the late 1950's on pilot control of unstable aircraft. Since
such time, the CTT technology has become the accepted standard for assessing
human sensorimotor performance. Continuing studies performed in the 1970's,
1980's and 1990's used CTT technology as the yardstick to assess the effects on
performance caused by drugs, alcohol, fatigue and stress. In 1988, CTT
technology was licensed exclusively to BFI pursuant to a license agreement from
STI (the "CTT License"), with a term extendable to November 24, 2008. Under the
terms of such license, STI is allowed to use the CTT technology for research
purposes, but routine use of the technology would require STI to pay license
fees to BFI. See "-- Intellectual Property" for the material terms of the CTT
License.

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BFI has invested several million dollars and many staff-years to
commercialize the CTT technology as the FACTOR 1000(R) system. In the FACTOR
1000(R) system, the CTT technology has been enhanced significantly to (i)
operate seamlessly on networked computer systems to afford placement of tracking
stations at key customer defined locations throughout the workplace; (ii)
provide security-controlled, versatile, user-friendly management reports, and
(iii) detect non-compliant employee performance. BFI began beta testing on the
FACTOR 1000(R) system in 1990 and began limited marketing in January 1994 to
companies with employees in safety sensitive jobs, particularly vehicle and
machinery operators in the trucking, manufacturing, paramedic, school bus and
ski industries. The system is currently in regular use by several companies,
including, among others, Shawmut Mills, Durango Ski Corporation and R.F. White
Company, Inc. -- Unocal Distributor.

Future Applications. The Company believes that the design and underlying
technology of the FACTOR 1000(R) system provides a basis for expanding use of
the FACTOR 1000(R) system for applications beyond impairment testing in the
industrial environment. Management believes that the FACTOR 1000(R) system
terminals could be utilized as limited communications devices to send electronic
messages to blue collar workers as they log on at the terminal. The FACTOR
1000(R) system also could be integrated into an overall security system in high
security facilities such as nuclear power plants and military missile bases. The
self-referencing design of the FACTOR 1000(R) system that compares an
individual's performance to his or her own baseline performance may be usable to
identify that individual, providing another level of security screening. The
Company also believes that the FACTOR 1000(R) system potentially could be
integrated into commercial vehicles as interlock devices, disallowing operation
of the vehicle unless the driver successfully completes an impairment test.

Security Services and Systems

CCA provides investigative services, such as background checking and
records verification services, and conducts surveillance and sting operations to
deter theft. CCA investigates unaccountable losses of material or equipment,
particularly in high technology companies where there has been increasing theft
of electronic components such as computer memories and microprocessors. CCA has
five investigators and recently has expanded its program for addressing violence
in the workplace by establishing a workplace violence unit concentrating on gang
activities and psychological evaluations and counseling.

CCA sells customized closed circuit television ("CCTV") monitoring
equipment manufactured by third parties. Such customized systems are designed to
incorporate the variability of the customer's circumstances, such as type of
premise, coverage area, camera resolution required and recording capability.
Evolved from basic television technology, CCTV components are standardized.
Interfaces tend to be standard video and audio interfaces, as commonly found on
VCRs and camcorders, and peripheral components tend to be no more than remote TV
cameras connected to a switch bank with multiple viewing monitors. Simple remote
controls include the ability to pan and zoom a specific area and enable voice
communications through microphones and speakers at the TV camera site.

Following the proposed acquisition of CCA, the Company anticipates
expanding its offering of security products to supplement the CCTV systems
provided by CCA to include access control systems. Access control is
substantially more complex, given the multitude of peripherals that have to be
interconnected and controlled such as electronic door locks, electronic and
magnetic card readers, biometrics scanners (such as fingerprint verification
systems), CCTV subsystems, electronic turnstiles and alarms. Beyond the need for
physical interconnection of these peripherals, additional complexity comes from
designing an effective integrated system that is able to reconcile false alarms
and to provide for human error, power supply interruptions, segregation of
various access, stratification of access privileges and the administration
thereof.

COMPETITION

Voice Processing

The voice processing market is one of the fastest growing segments of the
telecommunications industry. The Company believes that competition within this
highly competitive industry will intensify with the

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introduction of new product enhancements and new competitors. The Company
competes with various companies in different markets, including Customer Premise
Equipment ("CPE") and Service Providers. The Company competes on the basis of
its quality of service. The Company believes that its familiarity with the PBX
equipment manufactured by Lucent, Northern Telecom Limited, Fujitsu Limited, NEC
Corporation and other manufacturers enables the Company to offer better system
integration.

VPI believes that its attention to customer service, as well as to the
customer's technical requirements, has resulted in success in competing and
winning sales bids against its much larger competitors. VPI provides detailed
information and support to its customers beginning with the point of sale and
extensive implementation through training and continuing through ongoing service
and support. Depending on the terms of the maintenance contract purchased, the
Company provides assistance for its customers up to 24 hours per day, 365 days a
year. The Company provides extensive training for its employees in products,
installation, system design and support in order to assist customers in
selecting the right equipment and to provide the quality of service that is
demanded. VPI's technical capabilities and expertise are enhanced by its
experienced technical personnel. VPI's junior field technicians generally have
at least two years of field experience with the particular equipment being
installed, and senior technicians have about eight years of field experience.
This level of experience is significantly more than that offered by many of
VPI's larger competitors and is often a deciding factor in a customer's purchase
decision. VPI believes it has a very loyal customer base founded on satisfaction
with its service capabilities and active account management.

Customer Premise Equipment. In the CPE markets, VPI competes with two types
of companies: interconnects (PBX providers), including Lucent, Northern Telecom
Limited, Fujitsu Limited and NEC Corporation, and independent voice processing
manufacturers, such as Octel Communications Corporation, Glenayre Technologies,
Inc., Digital Sound Corp., Active Voice Corp. and Applied Voice Technology, Inc.

PBX providers sell voice processing equipment as an integrated solution
with their own PBXs. These providers may have a competitive advantage with
customers purchasing a voice processing system at the same time they are
purchasing a new PBX, and, in many situations, the Company is competing with an
organization offering the same product platform. The Company believes its
competitive strengths are its development and delivery of customer applications,
its implementation process and its service and support performance. The Company
also believes its ability to deliver enhanced applications, such as integration
with computer networks, facsimile and voice response systems applications,
differentiates its products and services.

VPI is the only national distributor that focuses solely on voice
processing systems integration and has developed a strong national capability in
meeting and supporting its customers' varying voice processing needs. Other
distributors that focus solely on voice processing do not have a national
organization. VPI's national competitors are generally the manufacturers of
voice processing equipment. Such manufacturers are concerned primarily with the
sale of their own equipment and generally do not promote other manufacturers'
equipment that may better satisfy the needs of their customers.

The Company expects that new or enhanced products will be offered by its
principal existing competitors and new competitors. In addition, the Company
believes that computer software vendors, such as Novell, Inc., Lotus Development
Corp. and Microsoft Corporation, will continue to develop enhanced messaging and
networking software with voice and data information processing applications.

Service Providers. The Company provides products to various service
providers, including cellular communications operators and long-distance
resellers. Competitors include several independent voice processing
manufacturers such as Boston Technology Inc., Octel Communications Corporation,
Centigram, Comverse Technology, Inc., Digital Sound Corp. and Glenayre
Technologies, Inc. The further deregulation of the telecommunications industry
resulting from the Telecommunications Act of 1996 has provided opportunities for
increased competition in the local telephone market. The Company believes that
this market will require extensive integration of equipment supplied by various
vendors and, as such, would benefit from the Company's independence and
integration skills. See "-- Governmental Regulation."

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Impairment Testing.

The FACTOR 1000(R) system is a noninvasive test for impairment that
operates without supervision, takes less than one minute to administer and
report results and can be installed in an industrial environment with minimal
disruption. No direct competition for the FACTOR 1000(R) system exists. The
other current impairment testing technologies -- biochemical, neurological and
methods of performance testing other than the FACTOR 1000(R) system -- lack the
extensive, broadscale scientific validation conducted over the last 30 years on
the CTT technology, the critical component of the FACTOR 1000(R) system.
Biochemical or drug testing is not a true impairment test in that it can only
identify the presence of specific levels of specified substances. Additionally,
biochemical testing is a relatively time intensive and invasive method to manage
risk. Neurological testing is expensive and time intensive due to the
requirement of skilled technicians to evaluate results and is therefore not an
efficient method to evaluate impairment. Performance testing for impairment
includes sensorimotor testing, such as that used in the FACTOR 1000(R) system,
and cognitive testing. Cognitive testing in the industrial environment is time
consuming (test administration can take from five to 45 minutes) and lacks the
level of scientific validity obtainable from other impairment testing methods.
In summary, the Company believes that other impairment testing methods are not
as practical for the commercial environment as is the FACTOR 1000(R) system.

The FACTOR 1000(R) system's testing advantages also include extensive
scientific validation, its ease and speed of administration in an industrial
environment and the fact that it does not compromise the privacy of the test
subject. The test is self-administered in less than one minute, and designated
supervisors and managers have immediate access to a variety of reporting options
to assist them in identifying and managing potential safety risks. To ensure
success, policy consulting, procedural guidelines, operations documentation,
implementation planning, on-site training, trend analyses reporting and ongoing
support is provided to all customers of the FACTOR 1000(R) system. The FACTOR
1000(R) system is available both as a stand-alone system or networked in a LAN.

Security Systems and Services

The Company believes that the private investigation segment historically
has been fragmented, because the work force is primarily from local law
enforcement agencies. Consequently, competition tends to be localized. The
Company also believes that the fragmentation of the business is particularly
suited to the Company's acquisition strategy.

The Company believes that its expertise in integrating complex voice
processing systems and PBXs will enable it to incorporate and integrate access
control security systems with the telecommunications networks that it addresses
through VPI. The electronic access control market is one of the fastest-growing
segments in the security industry, and the Company intends to participate in the
market through acquisitions. The Company believes that, although there are over
2,500 security equipment manufacturers and distributors, the number specializing
in computerized access control is limited. Further, few companies have
demonstrated an effective capability to network a geographically dispersed
system, let alone integrate such systems into existing telecommunications
networks such as LANs and WANs. Although CCA generates minimal revenues from
this segment, the Company intends to combine VPI's distribution capabilities
with CCA's familiarity in the business to increase sales in the future. The
Company believes that few manufacturers have established strong brand
recognition. Accordingly, equipment selection tends to be influenced by
familiarity with the particular distributor at the local level, as in the case
of CCA.

SUPPLIERS

VPI's voice processing equipment sales revenues historically have been
derived primarily from the sale and servicing of equipment supplied by
Centigram. See "-- Marketing." VPI occasionally utilizes other equipment to
satisfy specific client needs and is not restricted from selling equipment made
by other manufacturers.

Pursuant to the Authorized U.S. Distributor Agreement, dated as of April
16, 1996 (the "Distributor Agreement"), between Centigram and VPI, VPI is an
independent distributor of Centigram products in the

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U.S., Puerto Rico and Canada and may expand this territory into international
locations with written authorization from Centigram. Under the Distributor
Agreement, VPI must purchase a certain number of products each quarter from
Centigram. During each of the nine years that this distributor relationship has
existed, VPI has exceeded its quotas by significant amounts. The Distributor
Agreement expires on December 31, 1997, but is renewable automatically for
successive two-year terms until cancelled by either party upon 90 days' notice.
The Distributor Agreement may be terminated for cause in the event (i) VPI
defaults in the payment of any amount due Centigram, and such default continues
unremedied for a period of 60 days after written notice of default; (ii) VPI
breaches certain provisions of the Distributor Agreement concerning the
proprietary rights of Centigram; (iii) VPI is acquired by a business entity that
provides products or services in direct competition with Centigram's products,
and in Centigram's judgment, such acquisition represents a conflict of interest;
(iv) VPI fails to perform any obligation under the Distributor Agreement and
such failure continues for a period of 20 days after written notice; (v) VPI
fails to purchase any Centigram assigned quota for a period of two consecutive
quarters; or (vi) VPI sells a Centigram product outside VPI's designated
territory. In addition, the Distributor Agreement terminates automatically if
VPI becomes insolvent, makes an assignment for the benefit of its creditors or
if bankruptcy proceedings are commenced by, for or against VPI. Any controversy
or claim related to the Distributor Agreement must be submitted to final and
binding arbitration to be held in San Jose, California, according to the rules
of the American Arbitration Association.

INTELLECTUAL PROPERTY

BFI has an exclusive worldwide license to use the CTT technology under the
terms of a license agreement between BFI and STI, dated November 24, 1988, as
amended by Addendum to License Agreement, dated May 19, 1994, and Second
Addendum to License Agreement, dated November 18, 1996 (as amended, the "CTT
License"). CTT, a measure of sensorimotor skills, is a critical component of the
FACTOR 1000(R) system. The CTT License had an initial term of five years and
provides for three additional five-year extensions upon notice given by BFI to
STI. On November 18, 1993, BFI gave the first such notice of extension. The CTT
License requires BFI to make quarterly royalty payments to STI of 8.5% of
revenues directly related to CTT impairment testing of employees. Under the CTT
License, the CTT technology is escrowed, and the escrow agent is instructed
that, in the event STI is acquired, merged or its principal assets acquired, the
CTT technology will be delivered to BFI unless the successor-in-interest agrees
in writing to be bound by all obligations undertaken by STI pursuant to the CTT
License. The CTT License provides that STI may use the FACTOR 1000(R) technology
for research purposes, but any routine use would require payment of fees to BFI.
If either party fails to fulfill its obligations under the CTT License, the
other party may terminate the CTT License by giving 60 days' written notice of
termination, and the CTT License will be terminated unless such obligations are
fulfilled during such 60-day period. In addition, in the event of any
adjudication of bankruptcy, appointment of a receiver, assignment for the
benefit of creditors or levy of execution directly involving BFI, STI may
terminate the CTT License by giving five days' written notice. Finally, any
dispute relating to the interpretation or performance of the CTT License must be
resolved at the request of either party through binding arbitration to be
conducted in Los Angeles, California, under the rules of the American
Arbitration Association.

In addition to end-user licensing, the CTT License permits BFI to
sublicense the CTT technology; provided that the sublicense agreement requires
an initial payment to BFI (the "Initial Sublicense Fee") of at least $250,000
and an on-going royalty payment of 8.5% of revenues (the "Sublicense Royalty").
BFI must make payments to STI on such sublicensing arrangements as follows: (i)
a royalty payment of 8.5% on up to $250,000 of the Initial Sublicense Fee and a
royalty of 50% of any Initial Sublicense Fee in excess of $250,000; and (ii) a
royalty payment equal to 50% of the Sublicense Royalty, which amount must be at
least 4.25% of the gross contract revenue. The agreement also includes a minimum
aggregate payment to STI of $150,000 over each three-year period (which
aggregate amount may include fees paid to STI for consulting services),
beginning with the three-year period commencing on January 1, 1997.

32
<PAGE> 36

The Company is totally dependent on maintenance of its CTT license to
market the FACTOR 1000(R) system and is dependent on STI for product validation
and expert witness testimony of STI's principals regarding aerospace and vehicle
performance dynamics and stability and human operator dynamic response.

In August, 1995, the Company entered into a sublicense agreement with
SportsTrac to license sports-related applications of the FACTOR 1000(R) system
during the term of the CTT License (expiring November 24, 2008 if all options to
extend are exercised) at an initial price of $1,000,000 and an on-going royalty
equal to 8 1/2% of cash receipts from the sale or license of products or
services containing the licensed technology, but not including any revenues from
installation, maintenance, consulting, hardware sales or any other revenues not
directly or indirectly related to such technology. SportsTrac was granted an
exclusive, world-wide license to reproduce, manufacture, use and market the
licensed technology solely for sports-related and sports entertainment
applications. Mr. Kanter, a director of BFI and a director nominee of the
Company, is an 8.1% stockholder of SportsTrac. The Company intends to explore
other opportunities for sublicensing its technologies in businesses that the
Company does not intend to pursue.

In addition to other intellectual property rights, the Company has two
federally registered trademarks: Performance Factors(R) and FACTOR 1000(R). See
"Risks Factors -- Risks Related to Intellectual Property."

GOVERNMENTAL REGULATION

The Telecommunications Act of 1996 eliminated government mandated barriers
between local and long distance calling, cable television, broadcasting and
wireless service. Consequently, local telephone companies, the traditional long
distance carriers and cable television companies may now enter any of these
markets to provide both local telephone and long distance service, as well as
television programming. Such increased competition likely will change the
infrastructure for implementing communications applications, such as voice and
electronic messaging. See "Risk Factors -- Governmental Regulation."

CCA is a "consumer reporting agency" subject to regulation under FCRA and
must comply with all consumer credit disclosure requirements and protocols of
FCRA. Additionally, several states have enacted statutes similar to FCRA, and at
least four states require companies engaged in the background checking and
investigative business to be licensed in order to conduct business in those
states. Many states also regulate the type of information that can be made
available to the public and impose conditions on the release of such
information. In addition, privacy and consumer-rights advocates and federal
regulators have become increasingly concerned with the use of personal
information, particularly credit reports. Attempts have been made, and likely
will continue to be made, by these groups to adopt new or more stringent federal
and state regulations on the use of personal information. See "Risk
Factors -- Governmental Regulation."

RECENT FINANCINGS

On December 1, 1994, BFI closed a bridge financing, pursuant to which it
issued an aggregate of (i) $750,000 principal amount of secured promissory notes
(the "December 1994 Notes"), secured by all of the assets of BFI, bearing
interest at the rate of 12% per annum due and payable on April 1, 1997; and (ii)
shares of BFI Common Stock, which are exchangeable for 112,500 restricted shares
of Common Stock. Such shares of Common Stock are entitled to certain
registration rights. See "Description of Capital Stock -- Registration Rights."
Upon consummation of this Offering, all of the outstanding principal and accrued
interest will be converted into Common Stock at a conversion price equal to the
Offering Price, the security interest will be released, and the Company will
issue warrants to purchase an aggregate of 37,500 shares of Common Stock at an
exercise price of 120% of the Offering Price. The proceeds from the December
1994 Notes were used for general corporate purposes.

On December 1, 1995, BFI closed a bridge financing, pursuant to which it
issued an aggregate of (i) $350,000 principal amount of promissory notes (the
"December 1995 Notes"), bearing interest from the date of issuance until due and
payable on March 31, 1997 at a rate of 10% per annum, and at 18% per annum in
the event of default, and (ii) shares of BFI Common Stock, which are
exchangeable for 78,750 restricted shares of Common Stock. Such shares of Common
Stock are entitled to certain registration rights. See "Description of Capital
Stock -- Registration Rights." At the time the notes were issued, the notes were
secured by the pledge of a promissory note of SportsTrac, payable to BFI.
Subsequently, the SportsTrac Note was paid in full and the security interest
securing the December 1995 Notes was terminated. Upon

33
<PAGE> 37

consummation of this Offering, the outstanding principal amount will be repaid,
all accrued interest will be converted into Common Stock at a conversion price
equal to the Offering Price, and the Company will issue warrants to purchase an
aggregate of 26,250 shares of Common Stock at an exercise price of 120% of the
Offering Price. The proceeds from the December 1995 Notes were used for general
corporate purposes.

On February 1, 1996, BFI closed a bridge financing, pursuant to which it
issued an aggregate of (i) $315,000 principal amount of unsecured promissory
notes (the "February 1996 Notes"), bearing interest from the date of issuance
until due and payable on March 31, 1997 at a rate of 10% per annum, and at 18%
per annum in the event of default, and (ii) shares of BFI Common Stock, which
are exchangeable for 70,875 restricted shares of Common Stock. Such shares of
Common Stock are entitled to certain registration rights. See "Description of
Capital Stock -- Registration Rights." Upon consummation of this Offering, the
outstanding principal amount will be repaid, all accrued interest will be
converted into Common Stock at a conversion price equal to the Offering Price,
and the Company will issue warrants to purchase an aggregate of 23,625 shares of
Common Stock at an exercise price of 120% of the Offering Price. The proceeds
from the February 1996 Notes were used for general corporate purposes.

On May 17, 1996, BFI closed a bridge financing, pursuant to which it issued
an aggregate of (i) $300,000 principal amount of unsecured promissory notes (the
"May 1996 Notes"), bearing interest at a rate of 10% per annum, due and payable
on March 31, 1997, and (ii) shares of BFI Common Stock, which are exchangeable
for 67,500 restricted shares of Common Stock. Such shares of Common Stock are
entitled to certain registration rights. See "Description of Capital
Stock -- Registration Rights." Upon consummation of this Offering, the
outstanding principal amount will be repaid, all accrued interest will be
converted into Common Stock at a conversion price equal to the Offering Price,
and the Company will issue warrants to purchase an aggregate of 22,500 shares of
Common Stock at an exercise price of 120% of the Offering Price. See
"Description of Capital Stock -- Registration Rights." The proceeds from the
sale of the May 1996 Notes were used for general corporate purposes.

On November 5, 1996, BFI closed a bridge financing, pursuant to which it
issued an aggregate of (i) $500,000 principal amount of unsecured promissory
notes (the "November 1996 Notes"), bearing interest at 10% per annum, due and
payable on the earlier of (a) March 31, 1997, or (b) the consummation of this
Offering, and (ii) warrants exercisable to purchase 500,000 restricted shares of
Common Stock at an initial exercise price of 120% of the Offering Price. The
shares of Common Stock issued upon exercise of the warrants are entitled to
certain registration rights. See "Description of Capital Stock -- Registration
Rights." The proceeds from the November 1996 Notes were used to purchase
director and officer liability insurance and to pay legal, accounting and other
fees in connection with this Offering.

The Company intends to use a portion of the proceeds of this Offering to
repay $350,000 of the principal amount of the December 1995 Notes, $315,000 of
the principal amount of the February 1996 Notes, $300,000 of the principal
amount of the May 1996 Notes, and $500,000 of the principal amount and
approximately $8,300 of accrued interest on the November 1996 Notes. See "Use of
Proceeds."

LEGAL PROCEEDINGS AND PRODUCT LIABILITY INSURANCE

BFI's impairment testing business exposes it to potential litigation by
employees of companies using the FACTOR 1000(R) system if the employee's
employment relationship is affected thereby, and claims by third parties who may
be indirectly affected by the Company's services or products. Product and
service liability insurance is expensive, to the extent it is available at all.
BFI currently maintains general liability insurance in the amount of $1.0
million per policy year, which the Company intends to increase to $5.0 million
per policy year in connection with the VPI Acquisition. See "Risk
Factors -- Product Liability Exposure; Litigation Risk; Limited Insurance."

EMPLOYEES

As of November 30, 1996, BFI employed seven employees, and VPI employed 45
employees, all on a full-time basis. Upon consummation of the BFI Merger, the
VPI Acquisition and the proposed CCA Merger,

34
<PAGE> 38

the Company will employ a total of 64 employees, all on a full-time basis. No
employee is covered by a collective bargaining agreement, and management
believes that its relations with its employees are good.

FACILITIES

The Company's corporate offices occupy approximately 3,260 square feet of
office space in Golden, Colorado, currently leased by BFI. This facility is
leased pursuant to a lease agreement expiring December 31, 1998. Rent payments
total $4,071 each month. The Company believes its facilities are adequate for
its current level of operations.

VPI leases office space at various locations under five short-term leases
ranging from month-to-month to one-year terms and totaling approximately 10,635
square feet. Total monthly office rental expense for all such offices is
approximately $17,750. The Company believes that leased office space at market
rates is readily available at all such locations.

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<PAGE> 39

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

The following table sets forth certain information concerning persons (i)
who are officers, directors and key employees of the Company and its
subsidiaries and (ii) who will become directors of the Company prior to
consummation of this Offering.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Esmond T. Goei................ 45 Chairman, Chief Executive Officer, President
and Director
Douglas S. Zorn............... 47 Executive Vice President, Chief Operating and
Financial Officer, Treasurer, Secretary and
Director
Linda K. Wackwitz............. 46 Vice President, General Counsel and Assistant
Secretary
James S. Gillespie............ 44 Vice President Sales and Director; President of
Voice Plus, Inc.
Diane E. Nowak................ 34 Vice President of Sales, Western Region, of
Voice Plus, Inc.
Bradley J. Eickman............ 31 Director of Operations of Voice Plus, Inc.
Kent H. Cossey................ 51 President, CCA
William Brehm................. 52 Director Nominee
Burton W. Kanter.............. 66 Director Nominee
Gary L. Nemetz................ 44 Director Nominee
Richard H. Williams........... 53 Director Nominee
</TABLE>

Directors are elected at the annual meeting of stockholders or may be
appointed by the Board of Directors. Each director holds office until a
successor is elected and qualified or the director resigns. The executive
officers are appointed by the Board of Directors. The following is a brief
summary of the recent background of each director, executive officer and
significant employee of the Company.

Esmond T. Goei. Mr. Goei has served as Chairman of the Board, President and
Chief Executive Officer of the Company since its incorporation in October 1996.
Mr. Goei has served as Chairman of the Board, President and Chief Executive
Officer of BFI since December 1993. Mr. Goei is a General Partner of Transition
Ventures I, L.P., a venture capital fund which he co-founded in October 1992.
Mr. Goei also was the co-founder of Transtech Venture Management Pte. Ltd., an
international venture capital management firm established in 1986, and
co-founder of Transpac Capital Management Pte. Ltd. in 1989, a venture capital
management firm established in 1989, of which he was Chief Executive Officer for
North American operations until 1992. Mr. Goei currently serves as a director
and Vice Chairman of YES! Entertainment Corp., an electronics toy company of
which he was a co-founding investor in 1992 and which is listed on The Nasdaq
National Market ("Nasdaq NMS"). From 1988 to 1995, Mr. Goei was a director of
CliniCom, Inc., a patient care information systems company listed on Nasdaq NMS,
which was sold in 1995 to HBO & Company. From 1987 to March 1995, Mr. Goei was a
director of Centigram Communications Corporation, a voice messaging equipment
company listed on Nasdaq NMS and VPI's largest supplier of voice processing
equipment. Mr. Goei was also Chairman of the Board of Centigram for six years.
From 1988 to 1994, Mr. Goei also was a director of TranSwitch Corp., a
telecommunications semiconductor systems company listed on Nasdaq NMS.

Douglas S. Zorn. Mr. Zorn has served as Executive Vice President Chief
Financial and Operating Officer and Treasurer, Secretary and a director of the
Company since its incorporation in October 1996. Mr. Zorn has served as
Executive Vice President, Secretary and Treasurer and Chief Financial and
Operating

36
<PAGE> 40

Officer of BFI since December 1993. From 1991 until he joined BFI, Mr. Zorn was
Chief Financial Officer of Monterey Telecommunications Corporation, an OEM
wireless switch manufacturer for Motorola, Inc. From 1983 to 1991, he was
employed by Centigram where he last served as Vice President of Finance and
Administration. Prior to joining Centigram, Mr. Zorn held various positions with
Gould, Inc., a manufacturer of sophisticated logic test instruments, including
Operation Controller of the Biomation Division. Mr. Zorn is a licensed certified
public accountant.

Linda K. Wackwitz. Ms. Wackwitz has served as Vice President, General
Counsel and Assistant Secretary of the Company since its incorporation in
October 1996 and has held the same positions with BFI since February 1996. From
1989 until she joined the Company, Ms. Wackwitz was a corporate and securities
attorney with Davis, Graham & Stubbs LLP, a Denver, Colorado law firm.

James S. Gillespie. Mr. Gillespie has been Vice President of Sales and a
director of the Company since its incorporation in 1996 and continues as
President of VPI. Mr. Gillespie was the founder of VPI and has served as
President and Chief Executive Officer since VPI's incorporation in 1987. Mr.
Gillespie was with Centigram from 1983 to 1986, during which time he held a
number of positions, with his final position being Director of National Sales.

Diane E. Nowak. Ms. Nowak has served as Vice President of Sales, Western
Region, for VPI since July 1993. Ms. Nowak joined VPI in 1989 and has served as
Senior Sales Executive (May 1990 to July 1991) and as Director of Major Accounts
(July 1991 to July 1993). Ms. Nowak served as a director of VPI from November
1995 to September 1996.

Bradley J. Eickman. Mr. Eickman has served as Director of Operations for
VPI since November 1995. Prior to that time, Mr. Eickman served as Sales Manager
(January 1994 to November 1995), Manager of Procurement and Quality Assurance
(May 1992 to January 1994), Service Manager (July 1991 to May 1992) and Customer
Support Manager (April 1990 to July 1991). Mr. Eickman served as a director of
VPI from November 1995 to September 1996.

Kent H. Cossey, President of C. C. & Associates ("CCA"). Mr. Cossey is a
co-founder of CCA and has served as its President since CCA's incorporation in
1978. Upon the consummation of the proposed CCA Merger, CCA will become a wholly
owned subsidiary of the Company, and Mr. Cossey will continue as CCA's
President. Mr. Cossey is a retired police detective and received specialized
training in drug use in the workplace, blue and white collar crime,
surveillance, evidence collection and VIP security.

William Brehm. Mr. Brehm will become a director of the Company prior to
consummation of this Offering. Mr. Brehm served from 1994 to June 1995, and from
October 1995 to present, as a director of BFI. From 1989 to 1995, Mr. Brehm was
the Chief Executive Officer, and from 1988 to 1989, Mr. Brehm was President, of
CliniCom, Inc. From 1985 to 1987, he was President of Baxter Intermediate
Systems Division, a healthcare information systems company. From 1984 to 1985,
he was Executive Vice President and Chief Operating Officer of Health
Information Systems, Inc., a healthcare information systems company.

Burton W. Kanter. Mr. Kanter will become a director of the Company prior to
the consummation of this Offering. Mr. Kanter has served as a director of BFI
from its incorporation. Mr. Kanter has been of counsel with Neal, Gerber and
Eisenberg, a Chicago, Illinois law firm, since 1986 and a member of the faculty
of the University of Chicago Law School since 1991. He serves as a director of
numerous entities, including the following public companies: Healthcare COMPARE
Corp., Scientific Measurement Systems, Inc., Powercell Inc., Logic Devices Inc.,
Channel America T.V., Inc. and Walnut Financial Services, Inc. He is also the
Chairman of Walnut Capital Corp., a wholly owned subsidiary of Walnut Financial
Services, Inc. and a registered Small Business Investment Company engaged in
venture capital investments.

Gary L. Nemetz. Mr. Nemetz will become a director of the Company prior to
the consummation of this Offering. Mr. Nemetz has been a director of BFI since
April 1996. In March 1995, Mr. Nemetz was a director of the Company. Mr. Nemetz
served as a consultant to BFI from March 1995 to April 1996. Since 1984, Mr.
Nemetz has served as President of Admiral Capital Corp., a private investment
management firm. He is a general partner of Transition Capital Management
Company and Transition Ventures I, L.P., a venture

37
<PAGE> 41

capital fund. Since 1984, Mr. Nemetz also has conducted a management consulting
business and law practice through G.L. Nemetz, a Professional Corporation. Mr.
Nemetz is a certified public accountant (inactive status). Since 1995, Mr.
Nemetz has served as a director of YES! Entertainment Corp., which is listed on
Nasdaq NMS.

Richard H. Williams. Mr. Williams will become a director of the Company
prior to the consummation of this Offering. Mr. Williams has been a director of
BFI since 1995. Mr. Williams is a technology investor and entrepreneur. From
February 1996 through August 1996, he was a Senior Vice President of Informix
Corp. Mr. Williams was President and Chief Executive Officer of Illustra
Information Technology, Inc., from December 1993 until its acquisition by
Informix in February 1996. From 1991 to 1992, Mr. Williams was an Executive Vice
President of Novell, Inc., in charge of worldwide sales. From 1987 until its
acquisition by Novell, he was President and Chief Executive Officer of Digital
Research, Inc. For 22 years prior to joining Digital Research, Mr. Williams was
employed by IBM Corporation, where his last positions were Vice President of the
Data Systems Division and Vice President of the General Products Division.

BOARD COMMITTEES

Upon completion of this Offering, the Board will have two standing
committees, the Compensation Committee and the Audit Committee. The Compensation
Committee will be responsible for reviewing the compensation of executives of
the Company and recommending changes to the Board. The Compensation Committee
also administers the NHancement Technologies Inc. Equity Incentive Plan with
respect to executives. The Compensation Committee will be composed of Messrs.
Brehm, Nemetz and Williams.

The Audit Committee will be responsible for meeting periodically with
representatives of the Company's independent certified public accountants to
review the general scope of audit coverage, including consideration of the
Company's accounting practices and procedures and systems of internal controls,
and to report to the Board with respect thereto. The Audit Committee also will
recommend to the Board the appointment of the Company's independent auditors.
The Audit Committee will be composed of Messrs. Nemetz and Williams.

EXECUTIVE COMPENSATION

The following table, and the accompanying explanatory footnotes, include
annual and long-term compensation information for services rendered in all
capacities during the fiscal years ended December 31, 1994 and 1995, by (i) the
Company's Chief Executive Officer and (ii) the other most highly compensated
executive officer of the Company at December 31, 1995, and an additional
individual not serving as executive officer of the Company at December 31, 1995,
who received compensation of at least $100,000 during fiscal year ended December
31, 1995 (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- ------------
OTHER ANNUAL SECURITIES
COMPENSATION UNDERLYING
NAME AND POSITION YEAR SALARY($)(1) BONUS($) ($) OPTIONS
- -------------------------------------- ---- ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Esmond T. Goei(2)..................... 1995 $108,000 $ 25,000 4,200 168,750
Chairman of the Board, 1994 108,000 0 4,200 --
President and Chief Executive
Officer
Douglas S. Zorn(2).................... 1995 90,000 25,000 4,200 140,625
Executive Vice President, 1994 90,000 0 4,200 --
Secretary, Chief Operating Officer
and Chief Financial Officer
James S. Gillespie(3)................. 1995 300,000 550,000 15,226 --
Vice President of Sales and 1994 142,750 550,000 53,684 --
President of VPI
</TABLE>

38
<PAGE> 42

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

(1) Data reflects compensation by BFI. In 1995, the Company and Messrs. Goei and
Zorn orally agreed that future cash salary payments would be suspended until
BFI had obtained sufficient funding to pursue a public offering of its
securities. During the period of suspension, from April through December,
Messrs. Goei and Zorn continued to pursue their respective duties in the
interest of BFI. BFI compensated Mr. Goei and Mr. Zorn for their respective
past salaries by issuing to each of them 87,475 shares of fully paid,
nonassessable shares of BFI Common Stock with a fair market value of $0.67
per share.

(2) Messrs. Goei and Zorn joined BFI in December 1993.

(3) Data reflect compensation paid by VPI.

It is anticipated that the BFI Board of Directors will award performance
bonuses for 1996 to three executive officers in an aggregate amount up to
$250,000.

EQUITY INCENTIVE PLAN

Effective upon consummation of the BFI Merger, all outstanding options to
purchase shares of BFI Common Stock will be exchanged for options to purchase an
aggregate of 534,375 shares of Common Stock of the Company at a price per share
equal to 80% of the Offering Price pursuant to the NHancement Technologies Inc.
Equity Incentive Plan (the "Plan"). Additionally, the Company has authorized the
issuance to certain VPI employees, upon consummation of the VPI Acquisition, of
options to purchase an aggregate of 100,000 shares of Common Stock of the
Company at fair market value on the date of grant pursuant to the Plan. Under
the Plan, 976,500 shares of Common Stock have been reserved for issuance upon
exercise of options and other stock rights granted to employees, officers,
directors and consultants of the Company and any subsidiary of the Company. The
Plan is administered by (i) the Compensation Committee of the Board of Directors
with respect to grants to officers and employee directors of the Company, (ii)
by the Board of Directors with respect to discretionary grants to non-employee
directors and (iii) by the Employee Committee consisting of the Company's Chief
Executive Officer with respect to all others (collectively, (i), (ii) and (iii)
are referred to under this caption as the "Committee"). The Committee has full
authority to administer the Plan, including the individuals to whom the grants
are made, the exercise or purchase prices, the number of shares and vesting
schedules.

Under the Plan, incentive stock options ("ISOs"), as defined in Section 422
of the Code may be granted to employees of the Company, and nonqualified stock
options ("NSOs"), stock purchase rights, restricted stock awards and
supplemental bonuses may be granted. ISOs granted under the Plan must have an
exercise price of not less than 100% of the fair market value of the Common
Stock on the date of grant and are exercisable for periods of up to 10 years
from the date of grant (or, in the case of ISOs granted to holders of more than
10% of the voting power of the Company, have an exercise price equal to 110% of
the fair market value, exercisable for a period of five years). NSOs may be
granted at less than fair market value at the discretion of the Committee and
are exercisable for periods of up to 10 years from the date of grant. The
exercise price of options may be paid in cash, check, nonforfeitable shares of
Common Stock, a recourse promissory note, any other consideration that the
Committee may deem appropriate or any combination of the above payment methods.

The Plan also provides for the award of shares of restricted stock, which
will be subject to certain restrictions specified by the Committee, including
continuous employment and attainment of performance goals.

Upon the occurrence of certain events, including a merger, liquidation or
sale of substantially all of the assets of the Company, all outstanding options
under the Plan vest automatically and restrictions on any restricted stock award
automatically lapse. At such time such shares of restricted stock will no longer
be subject to forfeiture.

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<PAGE> 43

STOCK OPTION INFORMATION

The following table sets forth certain information concerning grants of
stock options to the Named Executive Officers during the year ended December 31,
1995.

OPTIONS GRANTED IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED TO EXERCISE OR
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(1) YEAR(2) PER SHARE(3) DATE
- ----------------------------------- ------------------ ------------------ ------------ -----------
<S> <C> <C> <C> <C>
Esmond T. Goei..................... 168,750 43.2% $ 3.20 11/02/2005
Douglas S. Zorn.................... 140,625 36.0% $ 3.20 11/02/2005
</TABLE>

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

(1) The options are incentive stock options with vesting as follows: one-third
of the shares vest immediately upon grant, and the remaining vest 1/24th per
month over the next 24 months.

(2) Based on an aggregate of 390,936 options granted to employees in 1995,
including options granted to the Named Executive Officers.

(3) The options were originally granted under the BFI Stock Option Plan at an
exercise price of $.50 per share. In connection with the BFI Merger, the
Company has assumed all of BFI's obligations under the BFI Stock Option Plan
and will grant an option to purchase 5.625 shares of Common Stock of the
Company (at an exercise price equal to 80% of the Offering Price) for every
10 shares of BFI Common Stock the optionee was entitled to purchase under
the BFI Stock Option Plan. See "The Company -- Material Terms of the BFI
Merger."

401(K) PROFIT SHARING PLAN

VPI has a 401(k) profit sharing plan in which all qualifying employees with
a minimum of 1,000 hours of service at year end are eligible to participate.
Matching contributions are made at the discretion of the board. VPI pays all
fees to administer the plan.

BONUS PLAN

In December 1996, the Board of Directors of the Company approved the 1997
Management and Company Performance Bonus Plan (the "Bonus Plan"), effective for
the period from January 1, 1997 to December 31, 1997. The Bonus Plan is
available to the Company's managers, senior vice presidents, chief executive
officer and chief operating officer. The Company's actual net operating income
and revenue, as compared to targets established under the Bonus Plan, will
determine the percentage of annual base salary to be paid out as a bonus, with
no bonus awarded unless the Company achieves at least 75% of budgeted income and
75% of budgeted revenues. The bonus percentage may be increased or decreased
based on a participant's individual performance. The maximum bonus that may be
earned is 200% of eligible base salary for each individual covered under the
Bonus Plan and the maximum aggregate bonus that the Company may award to all
eligible individuals covered under the Bonus Plan is limited to 10% of the net
income of the Company, calculated after tax liabilities and Bonus Plan payments.
The Bonus Plan may be amended or terminated at any time by the Compensation
Committee of the Board.

DIRECTORS' COMPENSATION

Directors who are also employees of the Company are not separately
compensated for serving on the Board of Directors. Non-employee Directors
receive a fee of $1,000 per board meeting requiring personal attendance and a
fee of $250 per telephonic Board meeting and committee meeting not part of,
immediately preceding or following, a scheduled Board meeting and also are
reimbursed for reasonable travel-related expenses for attendance at meetings.

Pursuant to an Agreement dated October 16, 1995, Burton Kanter, a
non-employee director, received $2,000 per month from October 1995 to June 1996
for his services as a director of BFI. In November 1995, Mr. Kanter received an
NSO to purchase shares of BFI Common Stock, which is currently fully vested and

40
<PAGE> 44

will be exchanged for an NSO to purchase 42,188 shares of the Company's Common
Stock, exercisable at a price per share equal to 80% of the Offering Price. In
June 1996, Mr. Kanter also received shares of BFI Common Stock, which will be
exchanged for 18,750 shares of the Company's Common Stock upon consummation of
the BFI Merger. See "Certain Transactions."

In connection with his election to the Board in December 1995, Mr. Williams
received an NSO to purchase shares of BFI Common Stock, which will be exchanged
for an NSO to purchase 16,875 shares of the Company's Common Stock, exercisable
at a price per share equal to 80% of the Offering Price. The option will vest
50% immediately and 50% one year from the date of such exchange.

Additionally, the Company intends to grant to each of Messrs. Nemetz and
Brehm NSOs to purchase 16,875 shares of Common Stock at a price per share equal
to the fair market value on the date of grant, 50% percent of which will vest
one year from the date of grant and 50% percent of which will vest on the second
anniversary of the date of grant.

EMPLOYMENT AGREEMENTS

The Company has three-year agreements with each of Esmond T. Goei, as
Chairman of the Board of Directors, President and Chief Executive Officer of the
Company, and Douglas S. Zorn, as Executive Vice President, Chief Operating
Officer, Chief Financial Officer, Treasurer and Secretary of the Company. Each
officer's current base salary is $135,000 per year, which may be adjusted from
time to time by mutual agreement between each such officer and the Board of
Directors. The agreements provide for an annual bonus to be paid to each officer
pursuant to a written bonus plan to be approved by the Board of Directors. The
agreements provide that each officer is entitled to reasonable expense
reimbursements, four weeks paid vacation per year and participation in any of
the Company's benefit and deferred compensation plans. Each of the officers also
receives a $500 monthly car allowance. On the annual anniversary date of each
agreement, the period of employment is extended automatically for one year
unless the officer is notified in writing. The agreements also provide for
payments in the event of termination prior to the end of the term, as follows:
if the officer is terminated without cause, then base salary will be paid for
the greater of two years or the balance of the term plus a bonus for each such
year equal to the average bonus for the two preceding years; if the officer is
terminated upon a change of control, then compensation equal to two times the
sum of the base salary plus average bonus will be paid for one year. In the
event of termination (except termination without cause), the officer is subject
to a two-year non-competition agreement.

The Company has a three-year employment agreement with James Gillespie,
Vice President of Sales of the Company and President of VPI. Mr. Gillespie's
agreement provides for a base salary of $150,000, annual sales commissions
targeted to be approximately $200,000 and an annual bonus pursuant to a written
bonus plan to be approved by the Board of Directors. The agreement provides that
Mr. Gillespie is entitled to reasonable expense reimbursements, participation in
any of the Company's benefit and deferred compensation plans, use of a company
car or a monthly car allowance and annual paid vacation, consistent with the
arrangements provided to the Company's senior management. Additionally, the
agreement contains provisions for assignment of inventions and confidentiality
and, in the event of termination, covenants not to compete, to solicit customers
or to hire employees for two years. The agreement also provides that in the
event of termination without cause or a material breach by the Company, Mr.
Gillespie will receive his base salary and 50% of sales commissions for the
duration of the term of the agreement and, in the event of a material breach by
the Company, the two promissory notes in the aggregate principal amount of $1.5
million issued by the Company in consideration for VPI will be accelerated and
immediately become due and payable. See "Certain Transactions."

VPI has two-year employment agreements with each of Diane E. Nowak, Vice
President of Sales, Western Region, of VPI, and Bradley J. Eickman, Director of
Operations for VPI. Each of these employment agreements provides for a base
salary of $65,000, sales commissions payable pursuant to an annual sales manager
compensation plan and performance-based bonus payments. Both agreements also
provide for reasonable expense reimbursements, participation in any of VPI's
benefit plans, use of a car leased by VPI and annual paid vacation.
Additionally, the agreements contain provisions for assignment of inventions and

41
<PAGE> 45

confidentiality and, in the event of termination, covenants not to compete, to
solicit customers or to hire employees for two years. The Company has authorized
(i) the grant, to Ms. Nowak and Mr. Eickman, upon the consummation of the VPI
Acquisition, of ISOs to purchase 50,000 and 35,000 shares of Common Stock,
respectively, at a price per share equal to the fair market value on the date of
grant, 50% of which will vest 18 months from the date of grant and 50% of which
will vest on the second anniversary of the date of grant; and (ii) the payment
to Ms. Nowak and Mr. Eickman of signing and retention bonuses in the amounts of
$100,000 and $50,000, respectively, payable 50% upon the consummation of the VPI
Acquisition and 50% six-months thereafter.

CERTAIN TRANSACTIONS

In December 1994, BFI entered into a Secured Note and Warrant Purchase
Agreement (as subsequently amended) with each of Messrs. Goei, Zorn, Kanter,
Nemetz and Williams for the purchase and sale of BFI's December 1994 Notes in
the principal amounts (including amounts purchased through entities under their
direction and control, see "Principal Stockholders") of (i) $30,363, $27,500,
$25,000, $100,000 and $25,000, respectively, out of an aggregate original
principal amount of $750,000, and (ii) 0.2 shares of BFI Common Stock for each
$1.00 of such portion of the original principal amount of the notes. The
December 1994 Notes are secured by all of the assets of BFI and mature on April
1, 1997. Upon consummation of this Offering, all of the outstanding principal
and accrued interest will be converted into Common Stock at a conversion price
equal to the Offering Price (resulting in the issuance of 9,375, 8,705, 30,175,
8,049 and 7,767 shares to Messrs. Goei, Zorn, Kanter, Nemetz and Williams,
respectively), the security interest will be released, and the Company will
issue warrants to purchase 1,518, 1,375, 1,250, 5,000 and 1,250 shares of Common
Stock at an exercise price of 120% of the Offering Price to Messrs. Goei, Zorn,
Kanter, Nemetz and Williams, respectively. See "Business -- Recent Financings."

In April 1995, BFI accepted unsecured loans from Messrs. Kanter and Zorn,
in the principal amounts of $10,000 and $17,500, respectively, at a rate of
interest of 12% per annum (the "Directors' Loans"). BFI paid Messr. Zorn $15,000
in August 1996 and the balance of the Directors' Loans will be repaid upon the
consummation of this Offering.

In August 1995, BFI entered into a sublicense agreement with SportsTrac, to
license sports-related applications of the FACTOR 1000(@) system during the term
of the CTT License (expiring November 24, 2008 if all options to extend are
exercised) at an initial price of $1,000,000 and an on-going royalty equal to
8 1/2% of cash receipts from the sale or license of products or services
containing the licensed technology, but not including any revenues from
installation, maintenance, consulting, hardware sales or any other revenues not
directly or indirectly related to such technology. SportsTrac was granted an
exclusive, world-wide license to reproduce, manufacture, use and market the
licensed technology solely for sports-related and sports entertainment
applications. SportsTrac agreed to issue warrants to purchase its common stock
to BFI (all of which subsequently were transferred to a current and a former
director as described below) and granted to BFI the right to invest in
SportsTrac and the right to designate one member of its board of directors. Mr.
Kanter is a principal stockholder of SportsTrac, through holdings of entities
under his control and direction. The initial fee due from SportsTrac was paid in
three installments, with receipt of the first installment of $300,000 occurring
in the second quarter of 1995 and receipt of two installments of $350,000
occurring in the second and the third quarter of 1996.

In October 1995, BFI entered into an agreement, subsequently amended on
July 16, 1996, with Mr. Kanter, a holder of BFI's unsecured notes (the "October
1995 Notes") in the aggregate principal amount of $54,850 (represented by five
notes issued between January 29, 1992 and November 1, 1992). Mr. Kanter agreed
(i) to extend the maturity date of the October 1995 Notes and payment of accrued
interest thereon until the earlier of December 31, 1996 or receipt by the
Company of the proceeds of this Offering, (ii) to waive the current default on
the October 1995 Notes (in return for recomputation of interest on the October
1995 Notes on an annually compounded basis from the date each of the October
1995 Notes was issued), and (iii) to subject all Common Stock and Common Stock
equivalents held by Mr. Kanter or his affiliates to a lockup agreement whereby
50% of such shares are locked-up for a period of 18 months, and the remaining

42
<PAGE> 46

50% for a period of 24 months, following this Offering. In return for such
agreements and his past and continuing participation on BFI's Board of
Directors, BFI (i) executed and delivered to Mr. Kanter a stock option to
purchase 75,000 shares of BFI Common Stock, which will be exchanged for an
option to purchase 42,188 shares of NHancement Common Stock, with an exercise
price per share equal to 80% of the Offering Price; (ii) transferred to Mr.
Kanter and another former director all of BFI's rights to invest in SportsTrac;
(iii) transferred to Mr. Kanter one-half of BFI's 7 1/2% warrants in SportsTrac;
and (iv) agreed to pay him a fee of $2,000 per month, plus reasonable expenses,
in connection with his duties as a director. Mr. Kanter subsequently agreed to
forego his $2,000 per month director fees and to be compensated on the same
basis as other non-employee directors. See "Management -- Directors'
Compensation."

In May and June 1996, BFI issued an aggregate of 174,950 shares of BFI
Common Stock to Messrs. Goei and Zorn in lieu of cash compensation. The
aggregate value of these shares totaled $117,200, of which $110,000 was for
payment of deferred compensation accrued in 1994. In June 1996, BFI issued
18,750 shares of Common Stock to Mr. Kanter as consideration for his special
services as a director during 1995, paid out of compensation otherwise owing to
Messrs. Goei and Zorn, in accordance with an agreement dated July 16, 1996 by
and among BFI and Messrs. Goei, Zorn, Kanter and a former director of BFI.

In November 1996, BFI entered into a Unit Subscription Agreement with each
of Messrs. Gillespie, Goei, Nemetz, and Zorn (including purchases through
entities under their direction and control) for the purchase and sale of BFI's
units consisting of (i) unsecured promissory notes in the principal amounts of
$50,000, $35,000, $50,000 and $100,000, respectively, and (ii) warrants to
purchase 50,000, 35,000, 50,000 and 100,000 shares, respectively, at an exercise
price of 120% of the Offering Price. See "Business -- Recent Financings."

Upon consummation of the VPI Acquisition, the Company will acquire all of
the capital stock of VPI from Mr. Gillespie for total consideration valued at
approximately $6,180,000, consisting of: $1,500,000 in two long-term notes in
the principal amounts of $1,000,000 and $500,000, respectively, bearing interest
at the medium-term United States Treasury Bill rate declared at the close of
business on the maturity date or earlier payment date and maturing on the
three-year anniversary of the date of issuance but payable earlier, dependent
upon the future earnings of VPI, with fifty percent (50%) of VPI's pre-tax
profits to be applied to pay principal and accrued interest on the $1,000,000
note quarterly, and $62,500 of principal and accrued interest to be paid on the
$500,000 note in any quarter in which VPI is profitable, beginning 45 days after
the close of the quarter in which this Offering is consummated; $2,400,000 in
shares of Common Stock to be sold in this Offering and $2,280,000 in restricted
shares of Common Stock (712,500 shares based on an assumed Offering Price of
$4.00 per share). In the event of a material breach by the Company of the
employment agreement with Mr. Gillespie, the two promissory notes will be
accelerated and immediately become due and payable. See
"Management -- Employment Agreements." All such restricted shares will be
subject to a lock-up agreement in favor of the Representative for 18 months
following the consummation of this Offering with respect to 50% of the shares
and 24 months following the consummation of this Offering with respect to the
remaining 50% of the shares. Additionally, the Company has agreed to register
150,000 shares of Common Stock issued as consideration for VPI, one year after
the consummation of this Offering, subject to satisfaction by VPI of certain
1997 performance criteria. See "Description of Capital Stock -- Registration
Rights."

In October 1996, the Company signed a letter of intent to acquire all of
the outstanding stock of CCA in exchange for the issuance of 300,000 shares of
Common Stock (based on an assumed Offering Price of $4.00 per share) to Mr.
Cossey, the sole stockholder of CCA. Upon consummation of the proposed CCA
Merger, Mr. Cossey will own approximately 7.2% of the outstanding shares of
Common Stock.

DIRECTOR APPROVAL

The Company believes that all of the transactions described under this
"Certain Transactions" caption were on terms no less favorable to the Company
than those that could have been obtained from unaffiliated parties. Future
transactions, if any, between the Company and its officers, directors and
holders of 5% or more of Common Stock and other affiliated parties, if any, will
be for bona fide business purposes, on terms no less favorable than could be
obtained from unaffiliated third parties, and will be approved by a majority of
the Company's independent disinterested directors.

43
<PAGE> 47

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of Common Stock as of November 30, 1996, after giving effect to the
BFI Merger, the VPI Acquisition and the proposed CCA Merger, by (a) each person
known to the Company to own beneficially more than 5% of the Common Stock, (b)
each of the Company's directors, director nominees and Named Executive Officers,
(c) all executive officers, directors and director nominees as a group and (d)
the stockholder selling Shares in this Offering.

<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY PRE-OFFERING SHARES BENEFICIALLY POST-OFFERING
OWNED PRE- PERCENTAGE SOLD IN THE OWNED %
NAMES AND ADDRESSES OFFERING OWNERSHIP(1) OFFERING POST-OFFERING OWNERSHIP(1)
- ---------------------------------- ---------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
James Gillespie................... -- -- 600,000 712,500 17.1%
198 Country Club Drive
Incline Village, Nevada 89451
Kent Cossey....................... -- -- -- 300,000 7.2
838 Minnesota Avenue
San Jose, California 95,125
Esmond T. Goei.................... 161,551(2) 8.4 -- 161,551 3.8
c/o NHancement Technologies Inc.
1746 Cole Blvd., Suite 265
Golden, Colorado 80401
Douglas S. Zorn................... 148,704(3) 7.7 -- 148,704 3.5
c/o NHancement Technologies Inc.
1746 Cole Blvd., Suite 265
Golden, Colorado 80401
Burton Kanter..................... 78,151(4) 4.1 -- 78,151 1.9
c/o Walnut Capital Corp. Two North
LaSalle Street, 22nd Floor
Chicago, Illinois 60602
Gary L. Nemetz.................... 45,175(5) 2.4 -- 45,175 1.1
c/o Admiral Capital Corporation
2420 Sand Hill Road, Suite 101
Menlo Park, California 94025
Richard H. Williams............... 23,810(6) 1.3 -- 23,810 *
P.O. Box 4281
721 Champagne Road
Incline Village, Nevada 89450
William H. Brehm.................. 14,447 * -- 14,447 *
11400 Queensway
Theodore, Alabama 36582
Directors and executive officers
as a group (8 persons).......... 508,638(7) 48.6% 600,000 1,521,138 34.9%
</TABLE>

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

* Less than 1%

(1) Includes (i) shares of Common Stock issued in connection with the VPI
Acquisition and the proposed CCA Merger, (ii) shares of Common Stock
issuable upon the conversion of all accrued interest through December 15,
1996 on the December 1995 Notes, the February 1996 Notes and the May 1996
Notes, and (iii) shares of Common Stock issuable upon conversion of
principal and all accrued interest through November 30, 1996 on the December
1994 Notes; all such shares of Common Stock are issuable upon the
consummation of this Offering, except the shares to be issued upon
consummation of the proposed CCA Merger.

44
<PAGE> 48

(2) Includes 56,250 options that are presently exercisable or that will become
exercisable within 60 days at an exercise price equal to $3.20 per share.

(3) Includes 46,875 options that are presently exercisable or that will become
exercisable within 60 days at an exercise price equal to $3.20 per share.

(4) Includes 1,157 shares beneficially owned by Antigua International Trust
Ltd., as Trustee for Three B Burton Trust (the "Trust"), with respect to
which Mr. Burton has sole voting and investment power and 16,057 shares and
42,188 options that are presently exercisable or that will become
exercisable within 60 days, by Walnut Capital Corp. (of which Mr. Kanter is
the Chairman and President); excludes 1,175 warrants that are presently
exercisable at $25.88 per share. Walnut Capital Corp.'s address is the same
as Mr. Kanter's, and the Trust's address is c/o Swiss American Bank,
Trustee, Attn: John Greaves, St. John's Antigua Burton Trust, Redcliffe St.,
P.O. Box 1302, St. John's, Antigua, West Indies.

(5) Includes 45,175 shares beneficially owned by Admiral Capital Corporation, as
to which Mr. Nemetz has sole voting and investment power.

(6) Includes 8,438 options that are presently exercisable or that will become
exercisable within 60 days at an exercise price equal to $3.20 per share.

(7) Includes 185,625 vested option shares exercisable at an exercise price of
$3.20 per share and excludes 1,175 warrants that presently are exercisable.

45
<PAGE> 49

DESCRIPTION OF CAPITAL STOCK

The Certificate of Incorporation provides that the Company has the
authority to issue up to 20,000,000 shares of Common Stock, $0.01 par value per
share, and up to 2,000,000 shares of preferred stock, $0.01 par value per share
("Preferred Stock").

COMMON STOCK

Prior to this Offering and after giving effect to the BFI Merger, the VPI
Acquisition and the proposed CCA Merger, there were 2,454,425 shares of Common
Stock issued and outstanding. The Certificate of Incorporation provides that
holders of Common Stock are entitled to one vote for each share on all matters
submitted to a vote of stockholders. The Certificate of Incorporation does not
provide for cumulative voting. Accordingly, holders of a majority of the shares
of Common Stock entitled to vote in any election of directors may elect all of
the directors standing for election if they choose to do so.

The holders of Common Stock are entitled to receive ratably such dividends,
if any, as may be declared by the Board of Directors out of legally available
funds, provided that no dividend may be paid on shares of Common Stock until all
declared but unpaid dividends payable with respect to any outstanding Preferred
Stock have been paid.

Holders of Common Stock have no preemptive, subscription or redemption
rights. All outstanding shares of Common Stock are, and the Common Stock offered
hereby, upon issuance and sale, will be, fully paid and non-assessable. Upon the
liquidation, dissolution or winding up of the Company, after payment of all
debts and liabilities and after payment of the liquidation preferences of all
shares of Preferred Stock then outstanding, the holders of the Common Stock are
entitled to share ratably in all assets that are legally available for
distribution.

PREFERRED STOCK

Pursuant to the Certificate of Incorporation, the Company is authorized to
issue "blank check" preferred stock, which may be issued from time to time upon
authorization by the Board, without further approval of the stockholders. While
providing flexibility in connection with possible acquisitions and other
corporate purposes, such an issuance could, among other things, adversely affect
the voting power of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of the
Company, discourage bids for the Common Stock at a premium or otherwise
adversely affect the market price of the Common Stock.

WARRANTS

Concurrently with the consummation of this Offering, the Company will issue
warrants to purchase an aggregate of 110,000 shares of Common Stock to holders
of the December 1994 Notes, the December 1995 Notes, the February 1996 Notes and
the May 1996 Notes (collectively, the "Bridge Notes") (the "Bridge Warrants"),
at an initial exercise price of 120% of the Offering Price per share (subject to
adjustment upon certain events), exercisable during the 36-month period
commencing one year from the effective date of the registration statement of
which this Prospectus is a part (the "Effective Date").

The Company has assumed BFI's outstanding warrants issued in connection
with the November 1996 Notes (the "November Warrants"), exercisable to purchase
an aggregate of 500,000 shares of Common Stock at an initial exercise price per
share of 120% of the Offering Price (subject to adjustment upon certain events)
during the 36-month period commencing one year from the Effective Date. The
Company also has assumed outstanding warrants issued in July 1990 (the "Old
Warrants"), exercisable to purchase 514 shares of Common Stock at an exercise
price of $188.80 per share, and outstanding BFI warrants to purchase 6,670
shares of Common Stock at an exercise price of $25.88 per share (collectively,
the "Old Warrants").

Neither the Bridge Warrants, the November Warrants nor the Old Warrants
confer upon the holders of such warrants any voting or other rights of a
stockholder of the Company. Shares of Common Stock issuable

46
<PAGE> 50

upon exercise of the Bridge Warrants, the November Warrants and the Old Warrants
are subject to restrictions on transferability.

The Company has agreed to sell to the Representative, for a purchase price
of $100, a warrant to purchase 10% of the shares sold in this Offering at an
exercise price equal to 120% of the Offering Price (the "Underwriter Warrant").
See "Underwriting."

CERTAIN CERTIFICATE OF INCORPORATION, BYLAW AND STATUTORY PROVISIONS AFFECTING
STOCKHOLDERS

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, this statute prohibits a publicly-held
Delaware corporation from engaging, under certain circumstances, in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person becomes an interested
stockholder, unless either (i) prior to the date at which the person becomes an
interested stockholder the Board of Directors approves such transaction or
business combination, (ii) the stockholder acquires more than 85% of the
outstanding voting stock of the corporation (excluding shares held by directors
who are officers or held in certain employee stock plans) upon consummation of
such transaction or (iii) the business combination is approved by the Board of
Directors and by two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder) at a meeting of
stockholders (and not by written consent). An "interested stockholder" is a
person who, together with affiliates and associates, owns (or at any time within
the prior three years did own) 15% or more of the corporation's voting stock.
Section 203 defines a "business combination" to include, without limitation,
mergers, consolidations, stock sales and asset-based transactions and other
transactions resulting in a financial benefit to the interested stockholder.

The Certificate of Incorporation includes a provision which gives the Board
of Directors the authority to issue series of Preferred Stock with such voting
rights and other provisions as the Board of Directors may determine and which
may be deemed to have a potential anti-takeover effect in that it could be used
to delay or prevent a change of control of the Company. Additionally, the
Company is contemplating adopting certain other provisions in its Certificate of
Incorporation and its Bylaws which may have the effect of delaying or preventing
a change in control of the Company, including (i) a prohibition on the taking of
stockholder action by written consent in lieu of a meeting, (ii) the requirement
that a special stockholders' meeting may only be called by the Chairman of the
Board, the Chief Executive Officer, the President or at the direction of the
majority of the Board of Directors, (iii) authorization for the Board of
Directors to consider factors other than the monetary interests of stockholders
relating to certain proposed business transactions; (iv) the requirement that an
affirmative vote of at least 80% of the voting power of the Company is required
to amend certain provisions of the Certificate of Incorporation; and (v) an
advance notice procedure for stockholders to make nominations for candidates for
election as directors.

The Company has included in its Certificate of Incorporation and in its
Bylaws provisions to (i) eliminate the personal liability of its directors for
monetary damages resulting from breaches of their fiduciary duty to the extent
permitted by the General Corporation Law of Delaware and (ii) indemnify its
directors and officers to the fullest extent permitted by the General
Corporation Law of Delaware, including circumstances in which indemnification is
otherwise discretionary. The Company believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the Company's Bylaws, Certificate of Incorporation or the
Underwriting Agreement, the registrant has been advised that, in the opinion of
the Commission, such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable.

TRANSFER AGENT AND REGISTRAR

American Securities Transfer & Trust, Inc. will be the Transfer Agent and
Registrar for the Common Stock.

47
<PAGE> 51

REGISTRATION RIGHTS

Common Stock

Pursuant to a coordinated registration rights agreement (the "Coordinated
Rights Agreement"), the Company has assumed the obligations of BFI to holders of
BFI Common Stock issued in connection with, or issuable upon conversion of all
or part of, the Bridge Notes and the November 1996 Notes and to holders of BFI
Common Stock issued upon the November 1995 conversion of its Series A
Convertible Preferred Stock, par value $.01 per share. See "Business Recent
Financings." The Coordinated Rights Agreement provides for a maximum of two
registrations on Form S-3 pursuant to a demand by the holders of at least 40% of
all of the shares registrable under the agreement to register all or part of
their shares, or a demand by one or more holders to register shares with a
reasonably anticipated aggregate market value of at least $1,000,000, provided
that Form S-3 is available, during the 24-month period commencing one year after
the completion of this Offering.

In connection with the VPI Acquisition, the Company has entered into a
registration rights agreement covering the shares of Common Stock issued as
consideration in the VPI Acquisition. The agreement provides for one demand
registration on Form S-3 (provided Form S-3 is available) for the period of time
ending on the 36-month anniversary of the Effective Date, subject to an
agreement not to sell or otherwise dispose of the shares for the period
commencing on the date of such agreement and ending 18 months after the
Effective Date with respect to 50% of the shares and 24 months after the
Effective Date with respect to all such shares. Additionally, the Company has
agreed to register 150,000 shares of Common Stock issued as consideration for
VPI, one year after the completion of this Offering, subject to satisfaction by
VPI of certain 1997 performance criteria. See "Management -- Employment
Agreements."

Warrants

The shares of Common Stock issuable upon exercise of the Bridge Warrants
and the November Warrants are entitled to the rights granted in the Coordinated
Rights Agreement.

A majority of the holders of the Underwriter Warrant or the underlying
shares of Common Stock issuable upon exercise of the Underwriter Warrant (the
"Warrant Stock"), or both, may at any time within the period commencing 12
months after the Effective Date and ending five years after the Effective Date,
demand one time only that the Company register the Underwriter Warrant or
Warrant Stock and bear the costs of registration, except for the Underwriters'
counsel fees and sales commissions. Additionally, if the Company, at any time
during the period commencing 12 months after the Effective Date and ending five
years after the Effective Date, registers any primary or secondary offering on a
registration statement to be filed with the Commission, the holders of the
Underwriter Warrant and the Warrant Stock will have the right to register all
but not less than 20% of the Warrant Stock (subject to underwriter cutback),
without cost to such holders except for their counsel fees and commissions.

SHARES ELIGIBLE FOR FUTURE SALE

The market price for the Common Stock could be adversely affected by the
availability of shares of Common Stock for sale or actual sales of substantial
amounts of Common Stock by existing or future stockholders. Upon completion of
this Offering, the 2,300,000 shares of Common Stock sold in this Offering will
be freely tradeable without restriction or further registration under the
Securities Act, by persons other than "affiliates" of the Company. The remaining
1,854,425 shares of Common Stock will be "restricted securities" within the
meaning of Rule 144 and may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including the
exemption contained in Rule 144. The holders of 520,087 shares of Common Stock
possess registration rights with respect to such shares. The Company's Chairman
of the Board and Chief Executive Officer and affiliates and other officers,
directors and key employees have agreed that, with respect to 50% of the shares
of Common Stock held by them, for a period of 18 months from the date of this
Prospectus, and with respect to the remaining 50% of the shares of Common Stock
held by them, for a period of 24 months from the date of this Prospectus, they
will

48
<PAGE> 52

not publicly offer, sell, contract to sell or otherwise publicly dispose of any
such shares directly or indirectly owned by them without the prior written
consent of the Representative. Following the expiration of such lock-up
agreements, 1,334,338 shares of Common Stock will become available for resale in
the public market, subject to the volume limitations, holding periods and other
restrictions of Rule 144. Additionally, as of November 30, 1996, 976,500 shares
of Common Stock have been reserved for issuance under the Plan, 634,375 shares
of which will be subject to outstanding options of BFI. See "Management." The
Company also has agreed, in connection with this Offering, to grant a warrant to
the Representative to purchase 230,000 shares of Common Stock at an exercise
price equal to 120% of the Offering Price, together with certain registration
rights relating to such shares. See "Underwriting" and "Description of Capital
Stock."

UNDERWRITING

The underwriters named below (the "Underwriters"), represented by Chatfield
Dean & Co. (the "Representative"), have severally agreed, subject to the terms
and conditions set forth in the Underwriting Agreement, to purchase from the
Company and the Selling Stockholder an aggregate of 2,300,000 shares of Common
Stock (with the number of shares of Common Stock that each Underwriter has
agreed to purchase set forth opposite its name) at the initial public offering
price less the underwriting discount set forth on the cover page of this
Prospectus. The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters are committed to purchase all of such shares if they purchase any.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ---------------------------------------------------------------------------------- ---------
<S> <C>
Chatfield Dean & Co...............................................................

---------
Total................................................................... 2,300,000
=========
</TABLE>

The Representative has advised the Company and the Selling Stockholder that
the Underwriters initially propose to offer Common Stock to the public on the
terms set forth on the cover page of this Prospectus. The Underwriters may allow
to selected dealers a concession of not more than $ per share; and the
Underwriters may allow, and such dealers may reallow, a concession of not more
than $ per share to certain other dealers. After this Offering, the
offering price and other selling terms may be changed by the Representative. The
Common Stock is offered subject to receipt and acceptance by the Underwriters,
and to certain other conditions, including the right to reject orders in whole
or in part. The Representative has advised the Company that it intends to make a
market in the Common Stock after the consummation of this Offering.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase a maximum of
345,000 additional shares of Common Stock to cover over-allotments, if any, at
the same price per share as the initial 2,300,000 shares to be purchased by the
Underwriters. To the extent that the Underwriters exercise this option, each of
the Underwriters will be committed, subject to certain conditions, to purchase
such additional shares in approximately the same proportion as set forth in the
above table. The Underwriters may purchase such shares only to cover over-
allotments made in connection with this Offering.

49
<PAGE> 53

The Company's Chairman of the Board and Chief Executive Officer and
affiliates and other officers, directors and key employees have agreed, subject
to certain limited exceptions, not to publicly sell or offer to sell or
otherwise publicly dispose of any shares of Common Stock currently held by them,
any right to acquire any shares of Common Stock or any securities exercisable
for or convertible into any shares of Common Stock for a period of 18 months
after the date of this Prospectus without the prior written consent of the
Representative. The Representative may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to these
lock-up agreements.

The Underwriting Agreement provides that the Company will indemnify the
Underwriters and their controlling persons against certain liabilities,
including civil liabilities under the Securities Act.

The Representative has advised the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority in excess of 5% of the number of shares of Common Stock offered
hereby.

The Company has agreed to sell to the Representative, for a purchase price
of $100.00, a warrant to purchase shares of Common Stock at 120% of the Offering
Price. The total number of shares of Common Stock that may be purchased on the
exercise of the Underwriter Warrant will be equal to 10% of the number of shares
sold in this Offering, excluding shares sold as part of the Over-Allotment
Option. The Underwriter Warrant will be nonexercisable for a period of 12 months
following the Effective Date and will thereafter be exercisable during the next
succeeding four-year period. The Underwriter Warrant is transferable prior to
the Effective Date to the Representative's officers and to the Underwriters and
their designees. One year after the Effective Date, the Representative may
transfer a portion or all of the Underwriter Warrant to the Representative's
officers, directors, shareholders, employees or registered representatives.

The Company has a financial consulting agreement with the Representative
pursuant to which the Representative will provide the Company with services,
including advising the Company in connection with possible acquisitions,
stockholder relations (including the preparation of the annual report),
long-term financial planning, corporate reorganization, expansion and capital
structure and other financial assistance. The consulting agreement has a term of
one year commencing at the completion of this Offering. The agreement states
that the Representative will be paid a consulting fee of $65,000, $25,000 of
which was paid upon execution of the agreement. The remaining $40,000 will be
paid by the Company upon consummation of this Offering. See "Use of Proceeds."

Prior to this Offering, there has been no public market for the Common
Stock. Consequently, the Offering Price will be determined through negotiations
among the Company and the Representative. Among the factors considered in such
negotiations will be the history of, and prospects for, the Company and the
industry in which it competes, an assessment of the Company's management, the
Company's past and present operations and financial performance, its past and
present earnings and the trend of such earnings, the prospects for future
earnings of the Company, the present state of the Company's development, the
general condition of the securities markets at the time of this Offering and the
market prices of publicly traded common stocks of comparable companies in recent
periods.

LEGAL MATTERS

The due authorization, valid issuance and non-assessability of the Shares
offered hereby will be passed upon for the Company by the law firm of Davis,
Graham & Stubbs LLP, Denver, Colorado. Certain legal matters will be passed on
for the Underwriters by Dorsey & Whitney LLP, Denver, Colorado.

50
<PAGE> 54

EXPERTS

The financial statements of NHancement Technologies Inc., formerly BFI, and
VPI included in this Prospectus and in the Registration Statement have been
audited by BDO Seidman, LLP, independent certified public accountants, to the
extent and for the periods set forth in their reports appearing elsewhere herein
and in the Registration Statement, and are included in reliance upon such
reports given upon the authority of said firm as experts in auditing and
accounting. The report of NHancement Technologies Inc., formerly BFI, contains
an explanatory paragraph regarding the Company's ability to continue as a going
concern. The financial statements of CCA included in this Prospectus and in the
Registration Statement have been audited by Meredith, Cardozo & Lanz LLP,
independent certified public accountants, to the extent and for the periods set
forth in their report appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.

AVAILABLE INFORMATION

The Company has filed with the Commission, a Registration Statement on Form
SB-2 (the "Registration Statement") pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, with respect to the Shares being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission, and to which reference is
hereby made. Statements contained in this Prospectus as to the contents of any
contract or any other document are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
its entirety by such reference. The Registration Statement may be inspected and
copied at the offices of the Commission at Judiciary Plaza Building, 450 Fifth
Street, N.W., Washington, D.C. 20549; and its regional offices located at Suite
1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661, and Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material, or any portion thereof, may be obtained from the Public
Reference Section of the Commission, Judiciary Place, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site
that contains information regarding registrants' electronic filings with the
Commission. The address of the Commission's Web site is http://www.sec.gov.

The Company does not presently file reports and other financial information
with the Commission. However, following completion of this Offering, the Company
expects to make such filings and intends to furnish its stockholders with annual
reports containing audited financial statements examined and reported upon by
its independent certified public accountants and such interim reports, in each
case, as it may determine to furnish or as may be required by law.

51
<PAGE> 55

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
PRO FORMA:
NHANCEMENT TECHNOLOGIES INC. (FORMERLY BIOFACTORS, INC.), VOICE PLUS, INC. AND C.C.
& ASSOCIATES:
Unaudited Pro Forma Combined Balance Sheets as of September 30, 1996............ F-3
Unaudited Pro Forma Combined Statement of Operations for the nine months ended
September 30, 1996............................................................. F-4
Unaudited Pro Forma Combined Statement of Operations for the year ended December
31, 1995....................................................................... F-5
Unaudited Pro Forma Combined Statement of Operations for the year ended December
31, 1994....................................................................... F-6
Notes to Unaudited Pro Forma Combined Financial Statements...................... F-7
HISTORICAL:
NHANCEMENT TECHNOLOGIES INC. (FORMERLY BIOFACTORS, INC.):
Report of BDO Seidman, LLP...................................................... F-10
Balance Sheets as of December 31, 1995 and September 30, 1996 (unaudited)....... F-11
Statements of Operations for the years ended December 31, 1994 and December 31,
1995, for the period from inception (January 5, 1988) to December 31, 1995, and
for the nine months ended September 30, 1995 and September 30, 1996 (unaudited)
and for the period from inception to September 30, 1996 (unaudited)............ F-12
Statements of Stockholders' Deficit for the period from inception (January 5,
1988) to December 31, 1995, and for the nine months ended September 30, 1996
(unaudited).................................................................... F-13
Statements of Cash Flows for the years ended December 31, 1994 and December 31,
1995, for the period from inception (January 5, 1988) to December 31, 1995, and
for the nine months ended September 30, 1995 and September 30, 1996 (unaudited)
and for the period from inception to September 30, 1996 (unaudited)............ F-14
Summary of Accounting Policies.................................................. F-16
Notes to Financial Statements................................................... F-19
VOICE PLUS, INC.:
Report of BDO Seidman, LLP...................................................... F-27
Balance Sheets as of December 31, 1995 and September 30, 1996 (unaudited)....... F-28
Statements of Operations for the years ended December 31, 1994 and December 31,
1995 and the nine months ended September 30, 1995 and September 30, 1996
(unaudited).................................................................... F-29
Statements of Stockholders' Equity for the years ended December 31, 1994 and
December 31, 1995 and the nine months ended September 30, 1996 (unaudited)..... F-30
Statements of Cash Flows for the years ended December 31, 1994 and December 31,
1995 and the nine months ended September 30, 1995 and September 30, 1996
(unaudited).................................................................... F-31
Summary of Accounting Policies.................................................. F-32
Notes to Financial Statements................................................... F-34
C.C. & ASSOCIATES:
Report of Meredith, Cardozo & Lanz LLP.......................................... F-38
Balance Sheet as of September 30, 1996.......................................... F-39
Statements of Operations for the years ended September 30, 1995 and September
30, 1996....................................................................... F-40
Statements of Stockholders' Equity for the years ended September 30, 1995 and
September 30, 1996............................................................. F-41
Statements of Cash Flows for the years ended September 30, 1995 and September
30, 1996....................................................................... F-42
Summary of Accounting Policies.................................................. F-43
Notes to Financial Statements................................................... F-44
</TABLE>

F-1
<PAGE> 56

NHANCEMENT TECHNOLOGIES INC.

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma combined financial statements and
accompanying footnotes give effect (i) to the VPI Acquisition, simultaneous with
the consummation of this Offering, accounted for as a purchase with the assets
acquired and the liabilities assumed recorded at estimated fair values and, (ii)
in a separate transaction expected to occur sometime after this Offering, the
CCA Merger, accounted for as a pooling of interest.

The accompanying pro forma combined financial statements as of September
30, 1996 and for the nine months ended September 30, 1996 and for the year ended
December 31, 1995 illustrate the effect on the Company's financial position and
results of operations of the VPI Acquisition and CCA Merger and, separately, the
receipt and application of the net proceeds of this Offering. The accompanying
unaudited pro forma balance sheet gives effect to the VPI Acquisition and the
CCA Merger, as if they occurred as of September 30, 1996, and is based on the
historical balance sheets of BFI, VPI and CCA as of that date included elsewhere
herein. The pro forma combined statements of operations for the nine months
ended September 30, 1996 and for the year ended December 31, 1995 are based on
the historical statements of operations for those periods of BFI, VPI and CCA
presented elsewhere in this Prospectus, except for CCA, whose 1995 results of
operations are based on its historical year end of September 30, 1995 and whose
nine month results are not presented elsewhere herein. These pro forma combined
statements of operations assume the VPI Acquisition and the CCA Merger took
place on January 1, 1995.

The pro forma combined statement of operations for the year ended December
31, 1994 illustrates the effect of the CCA Merger on the results of operations
of the Company as if the CCA Merger occurred January 1, 1994.

The pro forma combined financial statements are not intended to be
indicative of what the financial position or results of operations would have
been had such transactions occurred at the beginning of the periods presented or
to project the Company's results of operations or financial position in or for
any future period. The pro forma financial statements are based on management's
current estimate of the allocation of the purchase price for VPI. Actual
allocations may differ.

The accompanying unaudited pro forma combined financial statements should
be read in connection with the historical financial statements of BFI, VPI and
CCA included elsewhere in this Prospectus.

F-2
<PAGE> 57

NHANCEMENT TECHNOLOGIES INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 1996

(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ------------------------------------------------------
------------------------- MERGER COMBINED FINANCING COMBINED
BFI VPI CCA ADJUSTMENTS COMPANIES ADJUSTMENTS AS ADJUSTED
------- ------ ---- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............ $ 83 $1,479 $ 9 (950)(a) $ 621 $ 450 (f) $ 4,842
5,770 (g)
(1,488)(h)
(511)(i)
Accounts receivable, net............. 29 1,666 153 1,848 1,848
Inventories, net..................... 12 564 -- $ 486 (a) 1,062 1,062
Prepaid expenses and other
current assets.................... 176 82 37 295 295
------- ------ ---- ------- -------
Total current assets......... 300 3,791 199 3,826 8,047
Property and equipment, net............ 44 276 47 135 (a) 502 502
Excess of cost over net assets
acquired............................. -- -- -- 5,979 (a) 5,979 5,979
Other assets........................... -- 21 -- 21 21
------- ------ ---- ------- -------
TOTAL ASSETS........................... 344 4,088 246 10,328 14,549
======= ====== ==== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt...................... 2,064 -- -- 2,064 500 (f) --
(2,238)(h)
(326)(i)
Accounts payable..................... 396 1,436 12 1,844 1,844
Accrued expenses..................... 896 981 50 (400)(a) 1,527 (217)(h) 1,125
(185)(i)
Deferred revenues.................... 40 1,530 -- 1,570 1,570
Income taxes payable................. -- -- 6 6 6
Deferred income taxes................ -- 11 46 57 57
Current portion of obligations under
capital leases.................... 5 -- -- 5 5
------- ------ ---- ------- -------
Total current liabilities.... 3,401 3,958 114 7,073 4,607
Long-term debt......................... -- -- -- 1,500 (a) 1,500 1,500
Deferred income taxes and other
deferred credits..................... -- -- 1 1 1
STOCKHOLDERS' EQUITY
Common Stock......................... 6 22 3 (6)(a) 25 17 (g) 44
2 (h)
Additional paid-in capital........... 5,314 -- -- 4,664 (a) 9,978 (50)(f) 16,646
5,753 (g)
965 (h)
Retained (deficit) earnings.......... (8,377) 108 128 (108)(a) (8,249) (8,249)
Total stockholders' equity
(deficit).................. (3,057) 130 131 1,754 8,441
------- ------ ---- ------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY............................... $ 344 $4,088 $246 $10,328 $14,549
======= ====== ==== ======= =======
</TABLE>

F-3
<PAGE> 58

NHANCEMENT TECHNOLOGIES INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1996

(IN THOUSANDS)

F-4
<PAGE> 59

NHANCEMENT TECHNOLOGIES INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ------------------------------------------------------
--------------------------- MERGER COMBINED FINANCING COMBINED
BFI VPI CCA(1) ADJUSTMENTS COMPANIES ADJUSTMENTS AS ADJUSTED
------- ------ ------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............................ $ 451 $7,259 $1,076 $ 8,786 $ 8,786
Cost of goods sold................... 187 4,190 564 4,941 4,941
------- ------ ------ ------- ------
Gross margin............... 264 3,069 512 3,845 3,845
Research and development, selling and
administrative expenses............ 884 2,783 389 598(a) 4,472 50(e) 4,522
------- ------ ------ ------- ------
(201)(b)
Income (loss) from operations........ (620) 286 123 19(c) (627) (677)
Interest expense, net and other
expenses (income).................. 519 (30) (1) 488 (494)(f) (6)
------- ------ ------ -------
Income (loss) before provision for
(benefit for) income taxes......... (1,139) 316 124 (1,115) (671)
Provision for income taxes........... -- 144 47 (191)(d) -- --
------- ------ ------ ------- ------
Net income (loss).................... $(1,139) $ 172 $ 77 $(1,115) $ (671)
======= ====== ====== ======= ======
Net loss applicable to common
stockholders....................... $(1,115) $ (671)
Weighted average shares
outstanding(g)..................... 2,315 2,755
Loss per share applicable to common
stockholders....................... $ (0.48) $ (0.24)
</TABLE>

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

(1) CCA's fiscal year end is September 30.

F-5
<PAGE> 60

NHANCEMENT TECHNOLOGIES INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994

(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL
---------------- PROFORMA
BFI CCA(1) COMBINED
------- ---- -------
<S> <C> <C> <C>
Net sales........................................................ $ 374 $375 $ 749
Cost of goods sold............................................... 469 208 677
------- ---- -------
Gross margin (loss)............................................ (95) 167 72
Research and development, selling and administrative expenses.... 1,802 217 2,019
------- ---- -------
Loss from operations............................................. (1,897) (50) (1,947)
Interest expense, net and other expenses (income)................ 86 (3) 83
------- ---- -------
Loss before benefit for income taxes............................. (1,983) (47) (2,030)
Benefit for income taxes......................................... -- (6) (6)
------- ---- -------
Net loss......................................................... $(1,983) $(41) $(2,024)
======= ==== =======
</TABLE>

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

(1) CCA's fiscal year end is September 30th.

F-6
<PAGE> 61

NHANCEMENT TECHNOLOGIES INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 1996

1. UNAUDITED PRO FORMA MERGER ADJUSTMENTS

(a) Adjustments (i) to record the dividend payable to the shareholder of
Voice Plus, Inc. ("VPI") from the available cash of VPI, and (ii) to reflect the
purchase price paid for VPI as follows:

<TABLE>
<CAPTION>
VPI(1)
----------
<S> <C>
CONSIDERATION
Common Stock -- selling shares(2)...................................... $2,400,000
Long-term notes........................................................ $1,500,000
Common Stock(2)........................................................ $2,280,000
----------
Total consideration............................................ $6,180,000
----------
CALCULATION OF GOODWILL:
Net assets acquired(3)................................................. $ 751,200
Dividend prior to Merger............................................... $ (550,000)
----------
Subtotal............................................................... $ 201,200
Excess of cost over net assets acquired................................ $5,978,800
==========
</TABLE>

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

(1) accounted for as a purchase with the assets acquired and liabilities
assumed recorded at estimated fair values.

(2) 712,500 shares subject to lock-up agreements and 600,000 shares to be
sold in this Offering by VPI shareholder.

(3) net assets of $129,600 and an increase of estimated fair value of (i)
inventories of $486,300 and (ii) fixed assets of $135,300. The increase
in valuation of inventories is based on estimated selling prices less a
reasonable profit allowance for installation and selling effort. The
increase in valuation of fixed assets is based on physical counts
valued at current replacement cost.

And (iii) subsequent to this Offering, to record the statutory merger of C.C. &
Associates ("CCA") as a pooling-of-interests for 300,000 shares of NHancement
Technologies Inc. Common Stock.

(b) Adjustment to reflect the recording of estimated goodwill amortization
resulting from the acquisition of VPI for the first nine months of 1996, based
on a 10-year amortization period.

(c) Adjustment to reflect the increase in the corporate overhead of the
newly formed public company resulting from the renegotiation of the employment
agreement of the key management employees of VPI and CCA.

(d) Adjustment to reflect the depreciation expense for the first nine
months of 1996 resulting from the recording of certain fixed assets of VPI at
estimated fair values.

(e) Adjustment to record the income tax effect of the pro forma operating
adjustments and the pro forma tax provisions for VPI, which was organized as a
Subchapter S corporation, effective January 1, 1996, and CCA, a Subchapter C
corporation. The provision for income taxes on the unaudited combined financial
statements has been eliminated due to application of the losses of BFI on a
consolidated reporting basis.

2. UNAUDITED PRO FORMA OFFERING AND USE OF PROCEEDS ADJUSTMENTS

(f) Adjustment to record the proceeds and costs associated with a bridge
debt financing closed by the Company subsequent to the date of the pro forma
financial statements presented herein.

(g) Adjustment to reflect the sale of 2,300,000 shares of Common Stock to
the public, of which 600,000 shares are selling shares with proceeds going to
the shareholder of VPI, at an assumed Offering Price

F-7
<PAGE> 62

NHANCEMENT TECHNOLOGIES INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

of $4.00 per share, net of expenses and underwriting discounts and commissions
and the Nonaccountable Expense Allowance and other offering expenses payable by
the Company.

(h) Adjustment to reflect the (i) repayment from the proceeds of this
Offering of outstanding notes totaling $1.5 million, and (ii) the conversion of
outstanding notes of $750,000 and accrued interest of $216,600 into 241,650
shares of Common Stock at an assumed Offering Price of $4.00 per share.

(i) Adjustment to reflect repayment of unsecured notes and accrued interest
thereon to certain shareholders.

(j) Adjustment to reflect the effect of the recording Officers' and
Directors' insurance expense for the first nine months of 1996.

(k) Adjustment to reflect the reduction of interest expense resulting from
the retirement of debt through the application of a portion of the net proceeds
of this Offering.

(l) The weighted average shares outstanding is based on the estimated
number of shares of common stock and common stock equivalents of the BFI, VPI
and CCA outstanding during the period, calculated as follows:

<TABLE>
<S> <C> <C>
Shares outstanding at December 31, 1995....................... 93,225
Cheap stock:
Shares issued to note holders and management in 1996........ 519,575
Shares of common stock equivalents related to stock
options.................................................. 534,375
Less shares assumed to be repurchased pursuant to the
Treasury Stock method.................................... (445,060) 608,890
--------
Shares issued to VPI, including 600,000 selling shares........ 1,312,500
Shares issued to CCA.......................................... 300,000
---------
Total for combined companies........................ 2,314,615
Shares issued in this Offering to effect conversion and
repayment of indebtedness................................... 741,253
---------
Total for combined companies, as adjusted for debt conversion
and repayment from the proceeds of this Offering............ 3,055,867
=========
</TABLE>

F-8
<PAGE> 63

NHANCEMENT TECHNOLOGIES INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995

1. UNAUDITED PRO FORMA MERGER ADJUSTMENTS

(a) Adjustment to reflect recording of estimated goodwill amortization for
1995 resulting from the acquisition of VPI, based on a ten-year amortization
period.

(b) Adjustment to reflect the decrease in the corporate overhead of the
newly formed public company resulting from the renegotiation of the employment
agreements of the key management employees of VPI and CCA. Adjustment is based
on signed employment agreements that will become effective upon completion of
this Offering.

(c) Adjustment to reflect the depreciation expense for 1995 resulting from
the recording of certain fixed assets of VPI at estimated fair market values.

(d) Adjustment to record the income tax effect of the pro forma operating
adjustments and the pro forma tax provisions for VPI and CCA. The provision for
income taxes on the unaudited combined financial statements has been eliminated
due to application of the losses of BFI on a consolidated reporting basis.

2. UNAUDITED PRO FORMA OFFERING AND USE OF PROCEEDS ADJUSTMENTS

(e) Adjustment to reflect the effect of the recording Officers' and
Directors' insurance expense for 1995.

(f) Adjustment to reflect the reduction of interest expense resulting from
the retirement of debt through the application of a portion of the net proceeds
of this Offering.

(g) The weighted average shares outstanding is based on the estimated
number of shares of common stock and common stock equivalents of the BFI, VPI
and CCA outstanding during the period, calculated as follows:

<TABLE>
<S> <C> <C>
Shares outstanding at December 31, 1995..................... 93,225
Cheap stock:
Shares issued to note holders and management in 1996...... 519,575
Shares of common stock equivalents related to stock
options................................................ 534,375
Less shares assumed to be repurchased pursuant to the
Treasury Stock method.................................. (445,060) 608,890
---------
Shares issued to VPI, including 600,000 selling shares...... 1,312,500
Shares issued to CCA........................................ 300,000
---------
Total for combined companies...................... 2,314,615
Shares issued in this Offering to effect conversion and
repayment of indebtedness................................. 440,025
---------
Total for combined companies, as adjusted for debt
conversion and repayment from the proceeds of this
Offering.................................................. 2,754,640
=========
</TABLE>

F-9
<PAGE> 64

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
and the Stockholders of
NHancement Technologies Inc.

We have audited the accompanying balance sheet of NHancement Technologies
Inc. (formerly BioFactors, Inc., a development stage company) as of December 31,
1995 and the related statements of operations, stockholders' deficit, and cash
flows for the years ended December 31, 1994, 1995 and for the period from
inception (January 5, 1988) to December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NHancement Technologies Inc.
as of December 31, 1995 and the results of its operations and its cash flows for
the years ended December 31, 1994, 1995 and for the period from inception
(January 5, 1988) to December 31, 1995 in conformity with generally accepted
accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying financial
statements, the Company is a development stage company with significant losses
to date and significant stockholders' deficit as of December 31, 1995. Further,
the Company has a significant amount of notes and loans, which per their current
terms, are due to be repaid in early 1997. These items and the additional
factors discussed in Note 1 to the financial statements raise a substantial
doubt about the ability of the Company to continue as a going concern.
Management's plans with regard to these matters are also described in Note 1.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

BDO Seidman, LLP

San Francisco, California
April 19, 1996, except for Notes 10 and 11

which are as of November 5, 1996

F-10
<PAGE> 65

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
(UNAUDITED)
Current
Cash (Note 8)................................................... $ 170,500 $ 82,900
Accounts receivable, net of allowance for doubtful accounts of
$10,000 and $15,000.......................................... 15,000 28,600
Note receivable, related party (Note 2)......................... 700,000 --
Inventory....................................................... 13,900 12,700
Prepaid expenses and other...................................... 31,600 3,800
Prepaid debt issuance and stock offering costs.................. -- 172,100
----------- -----------
Total current assets.................................... 931,000 300,100
----------- -----------
Furniture and equipment........................................... 124,200 136,700
Less accumulated depreciation..................................... 65,600 92,500
----------- -----------
Furniture and equipment, net...................................... 58,600 44,200
----------- -----------
$ 989,600 $ 344,300
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current
Accounts payable................................................ $ 344,900 $ 395,900
Accrued liabilities............................................. 113,700 70,800
Accrued professional fees....................................... 34,000 178,600
Payroll related liabilities..................................... 87,100 244,700
Deferred compensation to officers and stockholders (Note 7)..... 110,000 --
Deferred revenue (Note 2)....................................... 724,700 40,100
Accrued interest................................................ 267,000 402,000
Current portion of long-term debt (Notes 3 and 7)............... 742,400 2,068,800
----------- -----------
Total current liabilities......................................... 2,423,800 3,400,900
Long-term debt, net of current portion (Notes 3 and 7)............ 774,200 --
----------- -----------
Total liabilities................................................. 3,198,000 3,400,900
----------- -----------
Commitments and contingencies (Note 6)
Stockholders' deficit (Notes 4 and 5)
Preferred stock, $0.01 par value, 10,000,000 shares authorized,
no shares issued and outstanding............................. -- --
Common stock, $0.01 par value, 10,000,000 shares authorized,
93,200 and 612,800 shares issued and outstanding at December
31, 1995 and September 30, 1996.............................. 1,000 6,100
Additional paid-in capital...................................... 4,972,600 5,313,900
Deficit accumulated during development stage.................... (7,182,000) (8,376,600)
----------- -----------
Total stockholders' deficit....................................... (2,208,400) (3,056,600)
----------- -----------
$ 989,600 $ 344,300
=========== ===========
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-11
<PAGE> 66

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
INCEPTION INCEPTION
(JANUARY 5, NINE MONTHS (JANUARY 5,
YEARS ENDED DECEMBER 31, 1988) TO ENDED SEPTEMBER 30, 1988) TO
------------------------- DECEMBER 31, ------------------------- SEPTEMBER 30,
1994 1995 1995 1995 1996 1996
----------- ----------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Sales, including $300,000 and
$700,000 from the sale of
sublicense in 1995 and 1996
(Notes 2 and 8).............. $ 373,700 $ 450,700 $ 1,471,600 $ 429,000 $ 757,100 $ 2,228,700
Cost of sales.................. 469,100 186,400 1,571,200 162,000 108,300 1,679,500
----------- ----------- ----------- --------- ----------- -----------
Gross profit (loss)............ (95,400) 264,300 (99,600) 267,000 648,800 549,200
----------- ----------- ----------- --------- ----------- -----------
Operating expenses
Research and development..... 326,600 214,500 2,157,200 184,700 74,300 2,231,500
Selling, marketing and
administrative (Notes 3
and 7).................... 1,475,300 669,500 4,326,500 618,400 1,332,000 5,658,500
----------- ----------- ----------- --------- ----------- -----------
Total operating expenses....... 1,801,900 884,000 6,483,700 803,100 1,406,300 7,890,000
----------- ----------- ----------- --------- ----------- -----------
Loss from operations........... (1,897,300) (619,700) (6,583,300) (536,100) (757,500) (7,340,800)
----------- ----------- ----------- --------- ----------- -----------
Other income (expense)
Interest income.............. -- -- 22,800 -- -- 22,800
Interest expense............. (85,400) (519,200) (704,900) (368,600) (437,100) (1,142,000)
Other........................ -- -- 83,400 -- -- 83,400
----------- ----------- ----------- --------- ----------- -----------
Total other income
(expense).......... (85,400) (519,200) (598,700) (368,600) (437,100) (1,035,800)
----------- ----------- ----------- --------- ----------- -----------
Net loss............. $(1,982,700) $(1,138,900) $ (7,182,000) $(904,700) $(1,194,600) $ (8,376,600)
=========== =========== =========== ========= =========== ===========
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-12
<PAGE> 67

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
CONVERTIBLE COMMON STOCK
PREFERRED STOCK PAR VALUE ADDITIONAL
--------------------- ---------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ----------- ------- ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, inception (January 5, 1988).......... -- $ -- -- $ -- $ -- $ -- $ --
Issuance of common stock for cash ($6.40 and
$188.61 per share) in January and June 1989,
respectively................................ -- -- 100 -- 5,000 -- 5,000
Issuance of PFI Series A Preferred stock for
cash ($188.61 per share) in June 1989....... 2,500 475,100 -- -- -- -- 475,100
Issuance of PFI Series A Preferred stock
($188.61 per share) for cash and conversion
of $280,000 of debt in May 1990............. 2,800 520,900 -- -- -- -- 520,900
Issuance of PFI Series B Preferred stock for
cash ($282.92 per share) in September
1990........................................ 3,900 1,100,000 -- -- -- -- 1,100,000
Issuance of PFI Series C Preferred stock
($377.19 per share) for cash and conversion
of $339,000 in debt in December 1991........ 1,600 600,000 -- -- -- -- 600,000
Net loss (inception to December 31, 1991)..... -- -- -- -- -- (2,923,300) (2,923,300)
------- ----------- ------- ----- ---------- ----------- -----------
Balance, December 31, 1991.................... 10,800 2,696,000 100 -- 5,000 (2,923,300) (222,300)
Net loss...................................... -- -- -- -- -- (393,400) (393,400)
------- ----------- ------- ----- ---------- ----------- -----------
Balance, December 31, 1992.................... 10,800 2,696,000 100 -- 5,000 (3,316,700) (615,700)
Issuance of PFI Series D Preferred stock for
cash ($25.92 per share) in October 1993, net
of offering costs of $25,000................ 15,400 375,000 -- -- -- -- 375,000
Net loss...................................... -- -- -- -- -- (743,700) (743,700)
------- ----------- ------- ----- ---------- ----------- -----------
Balance, December 31, 1993.................... 26,200 3,071,000 100 -- 5,000 (4,060,400) (984,400)
Issuance of PFI Series D Preferred stock in
conversion of debt ($25.92 per share) in
March 1994.................................. 27,500 712,800 -- -- -- -- 712,800
Issuance of PFI Series D Preferred stock for
cash ($25.92 per share) in April 1994....... 400 12,500 -- -- -- -- 12,500
Issuance of PFI Common stock upon conversion
of debt and exercise of options............. -- -- 2,300 -- 58,700 -- 58,700
Issuance of BioFactors Series A Preferred
stock upon conversion of PFI Common stock
($25.92 per share) in May 1994.............. 2,300 58,700 (2,300) -- (58,700) -- --
Issuance of BioFactors Series A Preferred
stock for cash ($96.00 per share) in August
1994, net of offering costs of $97,500...... 9,800 836,300 -- -- -- -- 836,300
Issuance of warrants with notes payable in
November and December 1994.................. -- -- -- -- 158,000 -- 158,000
Compensation related to grant of stock options
in November 1994............................ -- -- -- -- 7,200 -- 7,200
Net loss...................................... -- -- -- -- -- (1,982,700) (1,982,700)
------- ----------- ------- ----- ---------- ----------- -----------
Balance, December 31, 1994.................... 66,200 4,691,300 100 -- 170,200 (6,043,100) (1,181,600)
Conversion of Series A Preferred to Common
Stock....................................... (66,200) (4,691,300) 66,200 700 4,690,600 -- --
Issuance of Common stock in February 1995..... -- -- 300 -- -- -- --
Issuance of Common stock upon exercise of
options in March 1995....................... -- -- 400 -- 2,600 -- 2,600
Issuance of warrants with notes payable in
January through June 1995................... -- -- -- -- 92,000 -- 92,000
Issuance of Common stock with notes payable in
December 1995............................... -- -- 26,200 300 17,200 -- 17,500
Net loss...................................... -- -- -- -- -- (1,138,900) (1,138,900)
------- ----------- ------- ----- ---------- ----------- -----------
Balance, December 31, 1995.................... -- -- 93,200 1,000 4,972,600 (7,182,000) (2,208,400)
Issuance of Common stock with notes payable in
January through June 1996 (unaudited)....... -- -- 303,400 3,000 199,300 -- 202,300
Issuance of Common stock in lieu of salaries
and outside service fees in June 1996
(unaudited)................................. -- -- 216,200 2,100 142,000 -- 144,100
Net loss (unaudited).......................... -- -- -- -- -- (1,194,600) (1,194,600)
------- ----------- ------- ----- ---------- ----------- -----------
Balance, September 30, 1996 (unaudited)....... -- $ -- 612,800 $6,100 $5,313,900 $(8,376,600) $(3,056,600)
======= =========== ======= ===== ========== =========== ===========
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-13
<PAGE> 68

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
INCEPTION INCEPTION
(JANUARY 5, NINE MONTHS (JANUARY 5,
YEARS ENDED DECEMBER 31, 1988) TO ENDED SEPTEMBER 30, 1988) TO
-------------------------- DECEMBER 31, --------------------------- SEPTEMBER 30,
1994 1995 1995 1995 1996 1996
----------- ----------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Cash flows from operating
activities
Net loss......................... $(1,982,700) $(1,138,900) $(7,182,000) $(904,700) $(1,194,600) $(8,376,600)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation..................... 21,700 35,200 99,500 25,000 27,000 126,500
Amortization of deferred
revenue........................ -- 24,700 24,700 26,500 (684,600) (659,900)
Amortization of discount and debt
issue costs on notes payable... 26,300 241,200 267,500 223,700 202,300 469,800
Compensation related to grant of
stock options and common
stock.......................... 7,300 -- 7,300 2,500 34,100 41,400
Changes in assets and
liabilities:
Accounts receivable............ (45,700) 35,700 (15,000) 40,000 (13,600) (28,600)
Note receivable, related
party........................ -- -- -- -- 700,000 700,000
Inventory...................... (5,100) (2,900) (14,000) (12,300) 1,200 (12,800)
Prepaid expenses and other..... (15,300) (7,600) (31,600) 3,600 27,700 (3,900)
Accounts payable and other
current liabilities.......... 443,800 294,100 1,031,200 330,200 445,300 1,476,500
----------- ----------- ----------- --------- ----------- -----------
Net cash used in operating
activities....................... (1,549,700) (518,500) (5,812,400) (265,500) (455,200) (6,267,600)
----------- ----------- ----------- --------- ----------- -----------
Cash flows from investing
activities
Purchases of furniture and
equipment...................... (55,600) (27,700) (165,300) (13,000) (12,500) (177,800)
Proceeds from the sale of
furniture and equipment........ -- -- 14,200 -- -- 14,200
----------- ----------- ----------- --------- ----------- -----------
Net cash used in investing
activities....................... (55,600) (27,700) (151,100) (13,000) (12,500) (163,600)
----------- ----------- ----------- --------- ----------- -----------
Cash flows from financing
activities
Prepaid debt issuance and stock
offering costs................. -- -- -- -- (172,100) (172,100)
Proceeds from sale of preferred
stock.......................... 946,300 -- 3,423,300 -- -- 3,423,300
Preferred and common stock
issuance costs................. (97,500) -- (122,500) -- -- (122,500)
Proceeds from sale of common
stock.......................... -- 2,500 7,500 -- -- 7,500
Proceeds from long-term
convertible debt............... 375,300 -- 1,399,300 -- -- 1,399,300
Proceeds from bank line of
credit......................... -- -- 45,000 -- -- 45,000
Principal payments on bank line
of credit...................... -- -- (45,000) -- -- (45,000)
Proceeds from long-term debt..... 429,600 623,500 1,615,000 314,400 670,000 2,285,000
Repayment of long-term debt...... (40,000) (29,300) (170,900) (5,500) (117,800) (288,700)
Other............................ (12,900) (4,800) (17,700) -- -- (17,700)
----------- ----------- ----------- --------- ----------- -----------
Net cash provided by financing
activities....................... 1,600,800 591,900 6,134,000 308,900 380,100 6,514,100
----------- ----------- ----------- --------- ----------- -----------
Net increase (decrease) in cash.... (4,500) 45,700 170,500 30,400 (87,600) 82,900
Cash, beginning of period.......... 129,300 124,800 -- 124,800 170,500 --
----------- ----------- ----------- --------- ----------- -----------
Cash, end of period................ $ 124,800 $ 170,500 $ 170,500 $ 155,200 $ 82,900 $ 82,900
=========== =========== =========== ========= =========== ===========
Supplemental data:
Interest paid...................... $ -- $ 2,800 $ 4,000 $ 3,300 $ 34,200 $ 38,200
=========== =========== =========== ========= =========== ===========
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-14
<PAGE> 69

DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:

During 1994, property and equipment totaling $15,800 were acquired with
capital leases; accrued liabilities of $44,400 were added to principal on the
bridge financing notes payable; and the Company converted $780,300 notes payable
to Preferred Stock.

In 1995, the Company received $700,000 of notes receivable as partial
proceeds from the sublicense agreement, and the related revenue was deferred as
of December 31, 1995 (see Note 2); accrued interest of $21,300 was added to the
principal of the note payable to a vendor (see Note 3); and 66,200 shares,
adjusted for the 3-for-4 merger exchange and the 1-for-24 reverse stock split,
of the Company Series A Preferred Stock were converted to 66,200 shares of
Common Stock (see Note 4).

In 1996, the Company issued 178,700 shares of its Common Stock to three
officers in lieu of cash compensation. The aggregate value of these shares
totaled $119,700, of which $110,000 was for payment of deferred compensation
accrued in 1994 (see Note 7).

F-15
<PAGE> 70

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

SUMMARY OF ACCOUNTING POLICIES

ORGANIZATION

NHancement Technologies Inc., a Delaware corporation (NHancement), was
incorporated in October 1996 as a holding company and successor to the business
of BioFactors, Inc. (BFI), a Delaware corporation. Concurrently with the
consummation of a proposed initial public offering (IPO) of the Company's common
stock, which is expected to be in January 1997, BFI will merge with a subsidiary
of NHancement whereupon BFI will be the surviving corporation and a wholly owned
subsidiary of NHancement (BFI Merger). NHancement and its wholly owned
subsidiary, BFI, are collectively referred to as "the Company" unless otherwise
indicated by context. Also, concurrently with the consummation of the proposed
IPO, the Company will acquire Voice Plus, Inc. (VPI), a California corporation,
a systems integrator and national distributor of voice processing equipment,
pursuant to a transaction by which VPI will merge with a subsidiary of the
Company, whereupon VPI will be the surviving corporation and a wholly owned
subsidiary of the Company (VPI Acquisition). The business of the Company will be
conducted by its operating company subsidiaries, BFI and VPI (see Note 11).

BFI was incorporated in April 1994 and is a successor corporation to
Performance Factors, Inc. (PFI), a California corporation, incorporated in
January 1988. In May 1994, pursuant to an Agreement and Plan of Merger (PFI
Merger Agreement), PFI was merged with and into BFI, and BFI was the surviving
corporation and continued the business of PFI. Accordingly, the accompanying
financial statements include the accounts of PFI and BFI since the inception of
the California corporation. Further, all per share amounts have been reflected
as if converted to BFI Common Stock, based on the conversion formulas outlined
in the PFI Merger Agreement and giving effect to a 1-for-24 reverse stock split
effected in November 1995.

In addition, all share amounts have been retroactively restated to give
effect to a 3-for-4 exchange ratio in connection with the BFI Merger, except the
stock option plan data which has not been restated (see Note 5).

BUSINESS

The Company is a provider of productivity and security enhancement products
and systems. To date, the Company has principally focused on the development for
commercial implementation of a proprietary computerized testing system, FACTOR
1000(R), which measures human sensorimotor skills to determine an individual's
performance readiness and fitness to perform, the development of supporting
programs, raising capital, personnel recruitment and market analysis.

The Company's FACTOR 1000(R) system is based upon the Critical Tracking
Task (CTT) software, which is exclusively licensed from Systems Technology Inc.
(STI) in Hawthorne, California. CTT is a critical component of the FACTOR
1000(R) system and is protected under patents and copyrights held by STI. The
Company is totally dependent on maintenance of its CTT license to market the
FACTOR 1000(R) system, and is dependent on STI for product validation and expert
witness testimony of STI's principals regarding aerospace and vehicle
performance dynamics and stability, and human operator dynamic response. The
license agreement with STI is effective through November 2008 and grants the
Company the right to issue sublicenses during the term of the agreement (Note
2).

BASIS OF PRESENTATION

The financial statements have been prepared in accordance with the
provisions of Statement of Financial Accounting Standards No. 7, "Accounting and
Reporting by Development Stage Enterprises," which requires development stage
enterprises to employ the same accounting principles as operating companies.

The accompanying balance sheet as of September 30, 1996 and the statements
of operations and cash flows for each of the nine months ended September 30,
1995 and 1996 have not been audited. However, in the

F-16
<PAGE> 71

opinion of management, they include all adjustments necessary for a fair
presentation of the financial position and the results of operations for the
periods presented. The results of operations for the nine months ended September
30, 1996 are not necessarily indicative of results to be expected for any future
period.

REVENUE RECOGNITION

Revenue is currently derived from two principal sources, direct sales and
third-party sales into the commercial marketplace. The Company's only current
product is the FACTOR 1000(R) system used in commercial applications to test
"fitness for work" in safety sensitive jobs. The Company recognizes revenue on
the sale of a FACTOR 1000(R) system when the system has been installed and the
Company's related contractual training and support obligations are substantially
complete.

The Company recognizes other revenue based on the sublicense of the FACTOR
1000(R) system for the measurement and enhancement of on-field athletic
performance (Note 2). The Company bills customers in accordance with the terms
of the individual contracts. Billings in advance of the recognition of revenue
are recorded as deferred revenue in the accompanying financial statements.

INVENTORY

Inventory consists primarily of component parts, raw materials and finished
goods and is valued at the lower of cost (first-in, first-out basis) or market.

FURNITURE AND EQUIPMENT

Furniture and equipment are stated at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of the respective
assets, generally three to five years. Leasehold improvements are amortized
using the straight-line method over the shorter of the lease term or their
estimated useful life. Maintenance and repairs are expensed as incurred, and
improvements are capitalized.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as incurred.

INCOME TAXES

The Company uses the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Deferred income tax assets and liabilities are recognized
based on the temporary differences between the financial statement and income
tax bases of assets, liabilities and carryforwards using enacted tax rates.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.

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,
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.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires that the Company disclose the
estimated fair values for its financial instruments for

F-17
<PAGE> 72

which it is practicable to estimate their values. The following methods and
assumptions were used to estimate the fair value of each class of financial
instruments:

Note receivable, related party -- Due to the related party nature and
terms of the note receivable from related party, the Company is unable to
estimate the fair value of such instrument.

Long-term debt -- The aggregate carrying value of $1,516,600 at
December 31, 1995, including the current portion, approximates the fair
value because of the short-term maturities of these instruments.

NEW ACCOUNTING STANDARDS

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of,"
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. This statement is effective for financial statements for fiscal
years beginning after December 15, 1995. This statement had no effect on the
1996 interim financial statements, and management does not believe that it will
have a material impact on the Company's financial statements for the year ended
December 31, 1996.

F-18
<PAGE> 73

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(INFORMATION FOR SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

1. DEVELOPMENT STAGE RISKS

The Company is in the development stage and has not generated significant
revenue or income from operations. The Company is completing development of its
technology and is currently engaged in establishing its market. Commercial
acceptance of the Company's product will have to occur in the marketplace before
the Company can attain successful operations.

The accompanying financial statements have been prepared on a going-concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, the Company as of September 30, 1996 has incurred recurring losses
totaling $8,438,600 since inception, has a working capital deficit of $3,162,800
and a stockholders' deficit of $3,118,600. Further, the Company has a
significant amount of notes and loans, which per their current terms, are due to
be repaid in early 1997. Presently, the Company is attempting to raise capital
through a proposed public offering; however, there can be no assurance that the
Company will be successful in obtaining any additional financing through this
offering or any other source or that financing will be available on acceptable
terms. The Company's current business strategy is also dependent upon completing
various proposed business acquisitions (see Note 11). If the Company is unable
to raise additional funds when needed, and ultimately attain successful
operations, it may be unable to support its projected growth and business
acquisitions and may be required to defer for a period of time, or indefinitely,
its current business plans.

These factors raise a substantial doubt about the ability of the Company to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

2. NOTE RECEIVABLE, RELATED PARTY

In August 1995, the Company entered into a sublicense agreement (the
Agreement) with SportsTrac, Inc., a company whose chief executive officer is a
minority stockholder and former executive officer of the Company. Also, one of
the directors of this company is an affiliate of a director of the Company. The
Agreement provides for the exclusive, world-wide sublicense of sports and
on-field-athletic-performance related uses of the FACTOR 1000(R) system, through
November 2008. As consideration for the sublicense, the Company received
$300,000 in cash and a $700,000 non-interest bearing note payable in two equal
installments in March 1996 and July 1996. The Company has recognized $300,000 in
revenue during 1995 and $700,000 for the nine months ended September 30, 1996.
In addition, the Company is entitled to royalties at 8.5% of cash receipts from
the sale of products or services containing the licensed technology.

F-19
<PAGE> 74

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER
31, SEPTEMBER 30,
1995 1996
---------- -------------
<S> <C> <C>
Notes payable related to bridge financing secured by all
assets of BFI, no monthly installments, stated interest at
12%, effective interest at 21%, maturity date at April 1,
1997, as amended(1)....................................... $ 750,000 $ 750,000
Notes payable related to bridge financing, secured by a
promissory note from a sublicensee, no monthly
installments, stated interest at 10%, effective interest
at 21%, maturity date at March 31, 1997, as
amended(2)(7)............................................. 300,000 350,000
Notes payable related to bridge financing, unsecured, no
monthly installments, stated interest at 10%, effective
interest at 25%, maturity date at March 31, 1997, as
amended(3)(7)............................................. -- 315,000
Notes payable related to bridge financing, unsecured, no
monthly installments, stated interest at 10%, effective
interest at 30%, maturity date at March 31, 1997, as
amended(4)(7)............................................. -- 300,000
Notes payable to stockholders, unsecured, no monthly
installments, interest ranging from 10% to prime plus 2%
(10.5% and 10.25% at December 31, 1995 and September 30,
1996), unsecured, maturity dates at earlier of various
dates during 1996 or closing date of proposed public
offering(5)............................................... 321,500 326,500
Note payable to a vendor for unpaid royalties under
licensing agreement, unsecured, monthly installments of
$7,500 through August 1996, interest at prime plus 3%
(11.5% at December 31, 1995).............................. 62,700 --
Other, including $38,000 to former BFI officer(6)........... 82,400 27,300
---------- ------------
1,516,600 2,068,800
Less current portion........................................ 742,400 2,068,800
---------- ------------
$ 774,200 $ --
========= ==========
</TABLE>

The aggregate principal maturities of long-term debt as of December 31,
1995 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, TOTAL
------------------------------------------------------------------------- ----------
<S> <C>
1996................................................................... $ 742,400
1997................................................................... 774,200
----------
$1,516,600
==========
</TABLE>

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

(1) In December 1994, BFI entered into a Secured Note and Warrant Purchase
Agreement (the Agreement) with the Purchasers named therein. BFI authorized
the issuance of secured promissory notes in the aggregate principal amount
of $750,000. Accrued interest totaled $90,600 and $160,900 as of December
31, 1995 and September 30, 1996, respectively.

In March and October 1996, BFI and a majority of the Purchasers entered into
amendments (collectively, the Amendments) to the Agreement. The Amendments
provide that, upon consummation of an IPO, the outstanding principal and all
accrued interest on the notes will be converted into the Company's Common
Stock at a conversion price equal to the price per share to the public of
the

F-20
<PAGE> 75

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Common Stock sold in the IPO (IPO price). In addition, upon the closing of
the IPO, note holders would receive, at no additional cost, two shares of
BFI Common Stock (the "Additional Shares") for each $10 of the original
principal balance of the notes and a warrant to purchase 50 shares of BFI
Common Stock for each $1,000 of the outstanding principal balance of the
note held by such holder at an exercise price equal to 120% of the IPO
price. In May 1996, BFI accelerated the issuance of the Additional Shares
and issued 112,500 shares to the Purchasers in respect of the Agreement. BFI
recorded $75,000 of debt issue costs in 1996, based on the estimated fair
value of $0.67 per share.

(2) In December 1995, BFI entered into a Secured Note and Stock Purchase
Agreement (the "December 1995 Agreement") with the Purchasers named therein.
BFI authorized the issuance of secured promissory notes (the "Notes") in the
aggregate principal amount of $350,000 of which $300,000 was received as of
December 31, 1995. In connection with the issuance of the Notes, BFI issued
an aggregate of 26,200 shares of BFI Common Stock and recorded $17,500 of
debt issue costs in 1995, based on the estimated fair value of $0.67 per
share. Accrued interest totaled $1,600 and $27,700 as of December 31, 1995
and September 30, 1996, respectively.

In March 1996, BFI and a majority of the Purchasers entered into an
amendment (the "Amendment") to the December 1995 Agreement. Pursuant to the
Amendment, upon closing of the proposed bridge loan, note holders would
receive, at no additional cost, two shares of BFI Common Stock (the
"Additional Shares") for each $10 of the original principal balance of the
Notes. In May 1996, BFI accelerated the issuance of the Additional Shares
and issued 52,500 shares to the Purchasers pursuant to the Amendment. BFI
recorded $35,000 of debt issue costs in 1996, based on the estimated fair
value of $0.67 per share.

(3) In February 1996, BFI authorized the issuance of unsecured promissory notes
in the aggregate principal amount of $315,000 pursuant to an Unsecured Note
and Stock Purchase Agreement (the "February 1996 Agreement"). In connection
therewith, BFI issued an aggregate of 70,900 shares of BFI Common Stock and
recorded $47,300 of debt issue costs in 1996, based on the estimated fair
value of $0.67 per share.

(4) In May 1996, BFI authorized the issuance of unsecured promissory notes in
the aggregate principal amount of $300,000 pursuant to a Unit Subscription
Agreement (the "May 1996 Agreement"). In connection therewith, BFI issued an
aggregate of 67,500 shares of BFI Common Stock and recorded $45,000 of debt
issue costs, based on the estimated fair value of $0.67 per share.

(5) Accrued interest on these notes totaled $147,100 and $184,400 as of December
31, 1995 and September 30, 1996, respectively.

(6) In March 1996, BFI and a former BFI officer and current minority stockholder
entered into a Settlement Agreement under which BFI agreed to pay the former
BFI officer $75,000 in complete settlement of all claims, including $38,000
in principal amount of unsecured notes and related accrued interest of
approximately $13,000. The amount of settlement in excess of the principal
and accrued interest was charged to administrative expenses for the year
ended December 31, 1995.

(7) In October 1996, BFI and the note holders entered into an amendment to each
of the December 1995, February 1996 and May 1996 Agreements, pursuant to
which, in the event the IPO is consummated prior to March 31, 1997, the
principal of each such note will be paid in full by the proceeds of the IPO
and all accrued interest through the IPO closing date will be converted into
the Company's Common Stock at the IPO price. The amendments also provide
that upon the closing of the IPO, the Company will issue to each note
holder, at no cost, a warrant to purchase 75 shares of the Company's Common
Stock for each $1,000 of the original principal amount of the notes at an
exercise price equal to 120% of the IPO price.

F-21
<PAGE> 76

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. STOCKHOLDERS' EQUITY

In May 1994, pursuant to the PFI Merger Agreement, each share of Series A,
B, and C Preferred Stock and each share of Series D Preferred Stock of PFI was
converted into .05 and .41 shares, respectively, of Series A Preferred Stock of
BFI. In addition, each share of PFI Common Stock was converted into .05 shares
of BFI Common Stock.

At December 31, 1994, BFI had 66,200 shares (giving effect to the reverse
stock split and the 3-for-4 BFI Merger exchange as mentioned below) of its
Series A Preferred Stock issued and outstanding. All outstanding shares of BFI
Series A Preferred Stock at December 31, 1994 were fully paid and
non-assessable. Holders of BFI Series A Preferred Stock had the right to
convert, at any time, some or all of their shares into fully paid and
non-assessable shares of BFI's Common Stock. In July 1995, holders of the BFI
Series A Preferred Stock consented to such conversion, and accordingly, all
shares of BFI Series A Preferred Stock were converted into the same amount of
fully paid non-assessable shares of BFI Common Stock.

Pursuant to an amendment to the Certificate of Incorporation approved by
BFI's Board of Directors and stockholders effective November 1995 (the Charter
Amendment), BFI is authorized to issue 10,000,000 shares of Common Stock, $0.01
par value per share, and 10,000,000 shares of Preferred Stock, $0.01 par value
per share. As provided in the Charter Amendment, each 24 shares of BFI's Common
Stock issued and outstanding were reclassified into one share of BFI Common
Stock. Accordingly, all references in the financial statements to share amounts,
per share amounts and stock option plan data have been restated to reflect this
1-for-24 reverse stock split.

The Charter Amendment also provides that Preferred Stock may be issued from
time to time as a class or in one or more series and that BFI's Board of
Directors is authorized to determine, for a class or each series of Preferred
Stock, the number of shares, dividend rate, terms of redemption, conversion
privilege and voting rights. As of September 30, 1996, no BFI Preferred Stock
was issued and outstanding, and no series of BFI Preferred Stock had been
designated.

The financial statements have been retroactively restated to give effect to
the 3-for-4 exchange ratio in connection with the anticipated BFI Merger (see
Note 11.) Accordingly, all references in the financial statements to share
amounts and per share amounts have been adjusted to reflect the BFI Merger
exchange, except the BFI stock option plan data which has not been restated
(Note 5).

In connection with the issuance of $750,000 notes in December 1994,
$350,000 notes in December 1995, and $315,000 of notes in February 1996 and
$300,000 in May 1996 (see Note 3), BFI issued to the note holders an aggregate
of 329,600 shares of BFI Common Stock. The Company recorded $220,800 of debt
issue costs in 1996 based on the estimated fair market value of $0.67 per share.

5. STOCK OPTIONS AND WARRANTS

Stock Options

BFI's Stock Option Plan adopted in February 1994 (the Plan), which is
administered by the Board of Directors, provides for the granting of 1,302,000
stock options. Upon consummation of the BFI Merger, the stock options
outstanding under BFI's plan will be regranted by the Company, and will be
subject to the terms of the plan the Company intends to adopt. Options granted
may be either incentive stock options, as defined in the Internal Revenue Code,
or non-qualified options. The stock options are exercisable over a period
determined by the Board of Directors of BFI, but no longer than ten years after
the date of grant. Incentive stock options must have an exercise price of not
less than fair market value of the Common Stock on the date of grant (or, for
incentive stock options granted to a person holding more than 10% of the voting
power of BFI, options must have an exercise price equal to 110% of the fair
market value, and be exercisable for a period of

F-22
<PAGE> 77

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

five years). The aggregate fair value of the Common Stock subject to options
granted to an optionee that are exercisable for the first time by an optionee
during any calendar year may not exceed $100,000. Options generally expire three
months following termination of employment. BFI recorded compensation expense
related to grants and exercise of stock options of $7,200 in 1994 and $2,600 in
1995.

The following table summarizes transactions pursuant to the Plan:

<TABLE>
<CAPTION>
OPTION
NUMBER PRICE
OF SHARES PER SHARE
--------- ---------------
<S> <C> <C>
Options outstanding at December 31, 1993.................. 893 $37.68-$141.36
Granted................................................. 34,367 $ 4.80-$ 24.00
Canceled................................................ (271) $ 24.00
Exercised............................................... (3,021) $19.44-$ 24.00
------- --------------
Options outstanding at December 31, 1994.................. 31,968 $ 4.80-$141.36
Granted................................................. 875,000 $ 0.50
Canceled................................................ (31,438) $ 4.80-$141.36
Exercised............................................... (530) $ 4.80
------- --------------
Options outstanding at December 31, 1995.................. 875,000 $ 0.50
Granted................................................. 75,000 $ 0.50
------- --------------
Options outstanding at September 30, 1996................. 950,000 $ 0.50
======= ==============
Options available for grant at September 30, 1996......... 352,000 --
Options exercisable at September 30, 1996................. 492,639 $ 0.50
======= ==============
</TABLE>

The total number of options granted in 1995 consisted of non-statutory
options to purchase 250,000 shares and incentive stock options to purchase
625,000 shares. Incentive stock options to purchase 75,000 shares were granted
in 1996.

Pursuant to the BFI Merger agreement, the Company will grant options to
purchase 5.625 shares of the Company's Common Stock at an exercise price equal
to 80% of the IPO price for every 10 shares of BFI Common Stock the optionee was
entitled to purchase under the Plan (see Note 11). At September 30, 1996, after
giving effect to the BFI Merger agreement, the total number of shares to be
purchased for options outstanding is 534,375, and the number of shares for
options available for grant is 442,125.

Warrants

In connection with previous financings, BFI issued warrants to acquire
7,184 shares of Common Stock at $25.92 per share, which have been assumed by
NHancement in connection with the BFI Merger. Therefore, 7,184 shares of Common
Stock are reserved for issuance upon conversion of outstanding Common Stock
warrants.

In December 1994, BFI entered into a Secured Note and Warrant Purchase
Agreement with various individuals for notes with an aggregate principal amount
of $750,000 (see Note 3). Under this Agreement, BFI issued warrants to purchase
up to an aggregate of 7,800 shares of its Common Stock at a purchase price of
$96.00 per share (250,000 shares at $3.00 per share prior to the 1-for-24
reverse stock split and the 3-for-4 BFI Merger exchange discussed elsewhere
herein). At the issuance, the warrants were valued by BFI at an estimated fair
market value of $250,000. This amount was recorded in additional paid-in capital
($158,000 in 1994 and $92,000 in 1995). These warrants were subsequently
canceled pursuant to the amendment to the Agreement entered into in March 1996.

In October 1996, BFI and a majority of the holders of the December 1994,
December 1995, February 1996 and May 1996 notes entered into amendments to the
respective note agreements, pursuant to

F-23
<PAGE> 78

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

which, upon the closing of an IPO, the Company will issue to each note holder a
warrant to purchase Common Stock at an exercise price equal to 120% of the IPO
price. The aggregate number of shares of Common Stock to be issued upon exercise
of these warrants is approximately 109,900 (see Note 3).

6. COMMITMENTS AND CONTINGENCIES

The Company's impairment testing business exposes it to potential
litigation (i) by employees of companies using the FACTOR 1000(R) system if the
employee's employment relationship is affected thereby and (ii) by third parties
who may be indirectly affected by the Company's services or products. Products
and service liability insurance is expensive, to the extent it is available at
all. The Company currently maintains general liability insurance in the amount
of $1.0 million per policy year, which the Company intends to increase to $5.0
million per policy year in connection with the VPI Acquisition.

The Company leases its office space under a non-cancelable lease agreement
which expires in December 1998. The Company also leases certain office equipment
under operating lease agreements which terminate on various dates through 1999.
Future minimum commitments under these leases are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1996....................................................... $ 62,000
1997....................................................... 61,000
1998....................................................... 60,000
1999....................................................... 10,000
--------
$193,000
========
</TABLE>

Rent expense for its office lease for the years ended December 31, 1995 and
1994 was $29,600 and $37,100, respectively. Rent expense for the nine months
ended September 30, 1996 and 1995 was $41,000 and $22,500, respectively.

The Company's product is based on licensed technology. Accordingly, the
Company is required to pay a royalty of up to 8.5% of sales of the related
product. The license agreement also provides for a minimum aggregate payment
over each three-year period of $150,000. In addition, the Company's license
permits the sublicense of the CTT technology and requires that the Company make
payments to its licensor on such sublicensing arrangements as follows: (i) a
royalty payment of 8.5% on up to $250,000 of the initial sublicense fee and 50%
of any sublicense fee in excess of $250,000; and (ii) a royalty payment equal to
50% of the sublicense fee, which amount must be at least 4.25% of the
sublicensee's gross contract revenue. The Company's ability to sell its product
is dependent on the continuation of this license.

The Company has entered into employment agreements with two officers that
provide for specified severance payments should the Company terminate the
executive's employment with the Company, other than for cause. The amount to be
paid is two years' base salaries and bonuses.

7. RELATED PARTY TRANSACTIONS

During the years 1991 through 1994, BFI borrowed approximately $415,800 in
aggregate from three stockholders. The notes are unsecured and have maturity
dates at the earlier of various dates in 1996 or the closing of the IPO. As of
December 31, 1995 and September 30, 1996, the principal balance was $321,500 and
$326,500, respectively, and accrued interest was $147,100 and $184,400,
respectively (see Note 3).

F-24
<PAGE> 79

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

During the years 1992 and 1993, BFI borrowed approximately $38,000 from a
former BFI officer. These notes were unsecured and were originally due on
demand. In March 1996, BFI and the former officer entered into a Settlement
Agreement under which BFI agreed to pay the former officer $75,000 in complete
settlement of all claims, including $38,000 in principal amount of unsecured
notes and the related accrued interest of approximately $13,000 (see Note 3).

In November 1994, BFI borrowed a total of $55,000 from various BFI
officers. The notes were unsecured and were due on December 14, 1994. The terms
of the notes provided for an interest rate at 12% per annum. In addition, BFI
borrowed $50,000 from a director of BFI. The note was unsecured and due December
14, 1994. The terms of the note provided for an interest rate of 12% per annum.
In December 1994, notes totaling $55,000 from various officers and $50,000 from
a director of BFI were converted into notes issued pursuant to the Secured Note
and Warrant Purchase Agreement dated December 1, 1994. The notes are secured by
the unencumbered assets of BFI and, as amended, have a maturity date of April 1,
1997 (see Note 3).

In June 1996, BFI issued an aggregate of 178,700 shares of its Common Stock
to three of its officers in lieu of cash compensation; and, in June 1996, BFI
issued an aggregate of 37,500 shares to two of its directors for services
rendered. These shares are valued at $0.67 per share. In connection therewith,
$110,000 was accrued as deferred compensation to officers as of December 31,
1995, and the Company recorded an additional $9,700 of compensation expense and
$25,000 of outside service fees in 1996.

On November 5, 1996 two of BFI's officers purchased $135,000 in total of
unsecured promissory notes pursuant to Unit Subscription Agreements (see Note
10).

8. CONCENTRATION RISK

The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and accounts receivable. The Company
places its cash with high quality financial institutions. At December 31, 1995
and periodically throughout the year, the Company maintained a balance in one
bank account in excess of the federally insured limit of $100,000. The Company's
accounts receivable are unsecured and are due from customers located across the
United States. The Company performs on-going credit evaluations of its
customers' financial conditions and establishes an allowance for doubtful
accounts based upon the credit risk of specific customers, historical trends and
other information.

Various customers accounted for more than 10% of total net sales for the
years ended December 31, 1995 and 1994 as follows:

<TABLE>
<CAPTION>
CUSTOMER 1995 1994
------------------------------------------------------------- ---- ----
<S> <C> <C>
A............................................................ 68% --
B............................................................ -- 30%
C............................................................ -- 22
D............................................................ -- 14
E............................................................ -- 13
=== ===
</TABLE>

9. INCOME TAXES

From its inception, the Company has generated losses for both financial
reporting and tax purposes. As of December 31, 1995, the Company's net operating
losses for federal income tax purposes were approximately $6 million, and expire
between the years 2003 and 2010. For state income tax purposes, as of December
31, 1995, the Company had net operating loss carryforwards of approximately $1.5
million for the State of California and $2.5 million for the State of Colorado,
which expire in 1997 and in years between 2008 and

F-25
<PAGE> 80

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2010, respectively. The Company files its income tax returns on the cash basis;
this creates the primary differences between the Company's net operating losses
for financial reporting and tax purposes. The combined Federal and state tax
benefit of the net operating loss carryforwards was approximately $2.2 million
as of December 31, 1995.

This deferred tax asset has been offset completely by a valuation allowance
since management cannot determine that it is more likely than not that the
deferred tax asset can be realized. The use of such net operating loss
carryforwards will be subject to annual limits if the Company has incurred an
"ownership change." In general, an ownership change occurs if, during any
three-year test period, the aggregate of all increases in percentage ownership
by stockholders is more than 50%.

10. PRIVATE PLACEMENT DEBT OFFERING

On November 5, 1996, BFI closed a $500,000 debt offering pursuant to Unit
Subscription Agreements, dated as of October 3, 1996, by and among BFI and
certain Purchasers, for the sale of an aggregate of 10 units, each unit
consisting of (i) an unsecured promissory note in the principal amount of
$50,000, with stated interest at 10%, no monthly installments and a maturity
date of March 31, 1997, and (ii) a warrant to purchase 50,000 shares of BFI
common stock at an exercise price of 120% of the IPO Price, with a provision to
prevent dilution in connection with the BFI Merger (see Note 11).

11. ACQUISITIONS AND MERGER TRANSACTIONS

On October 30, 1996, NHancement entered into an Agreement and Plan of
Merger which provides for the merger, concurrently with the IPO, of a wholly
owned subsidiary of NHancement with and into BFI, whereupon BFI will be the
surviving corporation and a wholly owned subsidiary of NHancement, and the
exchange of shares of NHancement Common Stock for all the issued and outstanding
common stock of BFI, in a ratio of three shares of Common Stock for every four
shares of BFI common stock. Pursuant to the BFI Merger agreement, NHancement
will assume (i) the obligations of BFI's outstanding stock options, by which
assumption the optionee will have the right to purchase 5.625 shares of
NHancement Common Stock for every 10 shares of BFI common stock the optionee
could have purchased prior to the BFI Merger at an exercise price per share
equal to 80% of the IPO Price, (ii) the obligations of BFI's issued and
outstanding warrants in accordance with their terms, and (iii) the obligations
of the Registration Rights Agreement dated as of September 1, 1996, and
NHancement will undertake to issue to certain holders of BFI notes, warrants to
purchase an aggregate of 109,900 shares of NHancement's Common Stock,
exercisable one year from the close of the IPO at an exercise price of 120% of
the IPO Price. The consummation of the BFI Merger is contingent upon BFI
stockholder approval, the registration statement filed in connection with the
IPO having been declared effective, and the VPI Merger having been scheduled to
close concurrently with the IPO (see below).

On October 25, 1996, the Company entered into an Agreement and Plan of
Merger which provides for the merger, concurrently with the IPO, of a
wholly-owned subsidiary of the Company with and into VPI whereupon VPI will be
the surviving corporation and a wholly-owned subsidiary of the Company, and the
exchange of (i) the Company's unsecured promissory note in a principal amount of
$1,000,000, bearing interest at the medium term T-bill rate, due on the third
anniversary of the consummation of the merger, (ii) the Company's unsecured
promissory note in a principal amount of $500,000, bearing interest at the
medium term T-bill rate, due on the third anniversary of the consummation of the
merger, and (iii) shares of NHancement Common Stock with a market value of
$4,680,000 (of which, shares valued at $2,400,000 will be sold in the proposed
IPO, and the remainder of the shares are subject to restrictions on
transferability under the Security Act of 1933 and pursuant to a lock-up
agreement with the underwriter of IPO), for all the issued

F-26
<PAGE> 81

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.
A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

and outstanding common stock of VPI. The consummation of the VPI Acquisition is
contingent upon the registration statement filed in connection with the proposed
IPO having been declared effective. The Agreement terminates, without liability,
if the merger shall not have been consummated prior to March 31, 1997. In
connection with the VPI Acquisition, the Company entered into a three-year
employment agreement with the president and sole stockholder of VPI, pursuant to
which the Company will pay a base salary of $150,000 per year, commissions of
approximately $200,000 per year and an annual performance based bonus. The
employment agreement provides that, if the Company materially breaches the
agreement or terminates the employee without "cause," the Company will continue
to pay base salary and 50% of the commissions for the duration of the term and,
in the event of a material breach by the Company, the two promissory notes will
be accelerated and immediately become due and payable.

In October, 1996, the Company entered into a letter of intent, which
provides for the merger of a wholly owned subsidiary of the Company, with and
into Cossey-Capozzi, Inc. (CCA), whereupon CCA will be the surviving corporation
and a wholly-owned subsidiary of the Company, and the exchange of shares of
Common Stock with a market value of $960,000 (which shares are subject to
restrictions on transfer pursuant to a lock-up agreement) for all of the issued
and outstanding common stock of CCA. The consummation of the merger is
contingent upon the receipt of approval from the California Commissioner of
Corporations. The letter of intent terminates, without liability, if the merger
shall not have been consummated prior to March 31, 1997.

F-27
<PAGE> 82

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
and the Stockholders of
Voice Plus, Inc.

We have audited the accompanying balance sheet of Voice Plus, Inc. as of
December 31, 1995, and the related statements of operations, stockholders'
equity, and cash flows for each of the two years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Voice Plus, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.

BDO Seidman, LLP

San Francisco, California
April 19, 1996, except for notes 10 and 11

which are as of November 26, 1996

F-28
<PAGE> 83

VOICE PLUS, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
SEPTEMBER 30, 1996
DECEMBER 31, 1996 PRO FORMA
1995 ACTUAL (NOTE 9)
------------ ------------- -------------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Current
Cash and cash equivalents (Note 7)................. $ 457,400 $ 1,478,800 $ 1,478,800
Accounts receivable, less allowance for doubtful
accounts of $25,000 and $35,000 in 1995 and
1996............................................ 1,363,300 1,665,600 1,665,600
Inventories........................................ 324,600 564,500 564,500
Prepaid expenses and other......................... 38,800 82,300 82,300
Deferred income taxes (Note 3)..................... 68,300 -- --
---------- ---------- -----------
Total current assets....................... 2,252,400 3,791,200 3,791,200
---------- ---------- -----------
Property and equipment, net (Note 1)................. 168,500 275,700 275,700
---------- ---------- -----------
Other assets......................................... 17,400 21,500 21,500
---------- ---------- -----------
$2,438,300 $ 4,088,400 $ 4,088,400
========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Line of credit (Note 2)............................ $ -- -- --
Deferred revenues.................................. 816,100 1,530,300 1,530,300
Accounts payable................................... 665,300 1,435,800 1,435,800
Accrued expenses................................... 174,800 117,700 117,700
Commissions payable................................ 119,600 142,400 142,400
Accrued compensation and benefits (Note 5)......... 99,500 321,100 321,100
Dividends payable.................................. -- 400,000 950,000
Deferred income taxes (Note 3)..................... -- 11,500 11,500
---------- ---------- -----------
Total current liabilities.................. 1,875,300 3,958,800 4,508,800
---------- ---------- -----------
Commitments and contingencies (Notes 4, 5, 7, 10 and 11)
Stockholders' equity (deficit)
Common stock, no par -- 100,000 shares authorized,
96,000 and 91,000 shares issued and outstanding
in 1995 and 1996 (Note 6)....................... 72,000 22,000 22,000
Retained earnings (deficit) (Note 10).............. 491,000 107,600 (442,400)
---------- ---------- -----------
Total stockholders' equity (deficit)....... 563,000 129,600 (420,400)
---------- ---------- -----------
$2,438,300 $ 4,088,400 $ 4,088,400
========== ========== ===========
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-29
<PAGE> 84

VOICE PLUS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------ --------------------------
1994 1995 1995 1996
---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues................................. $6,698,600 $7,258,900 $ 5,485,400 $ 6,193,300
Cost of revenues............................. 4,197,700 4,190,100 3,082,800 3,900,300
---------- ---------- ---------- ----------
Gross profit................................. 2,500,900 3,068,800 2,402,600 2,293,000
---------- ---------- ---------- ----------
Marketing and selling........................ 1,010,400 1,242,800 942,400 1,147,700
General and administrative, including
$550,000 of officer bonuses in 1994 and
1995....................................... 1,228,800 1,540,300 1,011,000 672,600
---------- ---------- ---------- ----------
Total operating expenses........... 2,239,200 2,783,100 1,953,400 1,820,300
---------- ---------- ---------- ----------
Income from operations....................... 261,700 285,700 449,200 472,700
Interest and other, net...................... 20,500 30,600 15,600 17,300
---------- ---------- ---------- ----------
Income before income taxes................... 282,200 316,300 464,800 490,000
Income taxes (Note 3)........................ 134,000 144,500 212,300 89,700
---------- ---------- ---------- ----------
Net income......................... $ 148,200 $ 171,800 $ 252,500 $ 400,300
========== ========== ========== ==========
Pro forma (Note 9)
Historical income before income taxes...... $ 490,000
Pro forma income taxes..................... 196,000
----------
Pro forma net income............... $ 294,000
==========
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-30
<PAGE> 85

VOICE PLUS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------------ RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ -------- --------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993........................ 96,000 $ 72,000 $ 271,000 $ 343,000
Net income........................................ 148,200 148,200
------ -------- --------- ---------
Balance, December 31, 1994........................ 96,000 72,000 419,200 491,200
Dividends......................................... (100,000) (100,000)
Net income........................................ 171,800 171,800
------ -------- --------- ---------
Balance, December 31, 1995........................ 96,000 72,000 491,000 563,000
Dividends (unaudited)............................. (783,700) (783,700)
Repurchase and retirement of common stock (Note 6)
(unaudited)..................................... (5,000) (50,000) (50,000)
Net income (unaudited)............................ 400,300 400,300
------ -------- --------- ---------
Balance, June 30, 1996 (unaudited)................ 91,000 $ 22,000 $ 107,600 $ 129,600
====== ======== ========= =========
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-31
<PAGE> 86

VOICE PLUS, INC.

STATEMENTS OF CASH FLOWS

DECEMBER 31, NINE MONTHS
YEARS ENDED ENDED SEPTEMBER 30,
----------------------- -------------------------
1994 1995 1995 1996
----------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income................................... $ 148,200 $ 171,800 $ 252,500 $ 400,300
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for doubtful accounts on
accounts receivable..................... -- 13,000 13,000 10,000
Proceeds from sales of assets............. -- -- -- 800
Loss on disposition of assets............. 55,700 3,500 -- 400
Depreciation.............................. 66,500 46,900 31,200 59,300
Deferred income taxes..................... (9,900) (59,400) (87,500) 79,800
Changes in assets and liabilities:
Accounts receivable..................... 301,700 (436,700) (312,300) (312,300)
Inventories............................. 124,600 (40,800) (272,500) (239,900)
Prepaid expenses and other.............. (7,500) (20,400) (4,000) (47,600)
Deferred revenues....................... 15,900 (146,200) 25,400 714,200
Accounts payable and accrued expenses... 6,800 598,900 1,005,000 957,800
----------- --------- ----------- -----------
Net cash provided by operations................ 702,000 130,600 650,800 1,622,800
----------- --------- ----------- -----------
Cash flows from investing activities
Capital expenditures......................... (53,900) (123,700) (73,200) (167,700)
----------- --------- ----------- -----------
Net cash used in investing activities.......... (53,900) (123,700) (73,200) (167,700)
----------- --------- ----------- -----------
Cash flows from financing activities
Borrowings under line of credit.............. 932,000 -- -- --
Repayments on line of credit................. (1,117,000) -- -- --
Repurchase and retirement of common stock.... -- -- -- (50,000)
Dividends paid............................... -- (100,000) -- (383,700)
----------- --------- ----------- -----------
Net cash used in financing activities.......... (185,000) (100,000) -- (433,700)
----------- --------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents.................................. $ 463,100 $ (93,100) $ 577,600 $ 1,021,400
Cash and cash equivalents, beginning of
period....................................... 87,400 550,500 550,500 457,400
----------- --------- ----------- -----------
Cash and cash equivalents, end of period....... $ 550,500 $ 457,400 $ 1,128,100 $ 1,478,800
=========== ========= =========== ===========
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-32
<PAGE> 87

VOICE PLUS, INC.

SUMMARY OF ACCOUNTING POLICIES

BUSINESS

Voice Plus, Inc. (the Company) is a retailer of voice processing equipment
and was incorporated in the State of California in April 1987. The Company also
provides various services, including equipment installation, technical support
and ongoing maintenance. Revenues generated from providing these services were
approximately 25% and 18% of total 1995 and 1994 revenues, respectively. The
Company maintains offices in the states of California, New York, and Arizona,
and as of October 1996 in Texas.

CASH EQUIVALENTS

The Company considers all short-term investments purchased with a maturity
of three months or less to be cash equivalents.

INVENTORIES

Inventories consist primarily of systems and system components and are
valued at the lower of cost (first-in, first-out method) or market.

PROPERTY, EQUIPMENT AND DEPRECIATION

Property and equipment is stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the respective
assets, which range from five to ten years. Maintenance and repairs are expensed
as incurred and improvements are capitalized.

REVENUE RECOGNITION

The Company recognizes revenue under several methods as dictated by the
nature of the service or product provided and the terms of the sales agreement.
System sales are recognized when all significant uncertainties about customer
acceptance of the system have been resolved. Once system installation is
complete, seller obligations, including estimated future technical support
costs, are immaterial. Revenue from maintenance contracts is prorated over the
life of the contract, normally one year, although the entire amount of the
contract is collected at the beginning of the term. Services, labor and the sale
of parts, upgrades, moves, adds and changes are recorded in the period shipped
or provided.

INCOME TAXES

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.

F-33
<PAGE> 88

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires that the Company disclose the
estimated fair value for its financial instruments for which it is practicable
to estimate their values. The Company's financial instruments include cash,
accounts receivable and accounts payable, and their carrying value approximates
fair value due to the short maturities of these instruments.

BASIS OF PRESENTATION

The accompanying balance sheet as of September 30, 1996 and the statements
of operations and cash flows for each of the nine months ended September 30,
1996 and 1995 have not been audited. However, in the opinion of management, they
include all adjustments necessary for a fair presentation of the financial
position and the results of operations for the periods presented. The results of
operations for the nine months ended September 30, 1996 are not necessarily
indicative of results to be expected for any future period.

F-34
<PAGE> 89

VOICE PLUS, INC.

NOTES TO FINANCIAL STATEMENTS

(INFORMATION FOR SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

1. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(UNAUDITED)
<S> <C> <C>
Automobiles................................................. $171,300 $194,000
Office equipment............................................ 56,700 115,100
Furniture and fixtures...................................... 61,700 57,400
Computers................................................... 105,900 183,600
-------- --------
395,600 550,100
Accumulated depreciation.................................... 227,100 274,400
-------- --------
$168,500 $275,700
======== ========
</TABLE>

2. LINE OF CREDIT AGREEMENT

At December 31, 1995, the Company had a $400,000 revolving line of credit,
collateralized by substantially all of the assets of the Company and guaranteed
by the president, who is also a majority stockholder of the Company. Interest is
payable on outstanding borrowings at the bank's prime rate (8.5% at December 31,
1995) plus 1.5%. At December 31, 1995 and September 30, 1996, the Company had no
outstanding borrowings under the line of credit. The credit agreement contains
various restrictions which require, among other things, maintenance of certain
financial ratios. At December 31, 1995, the Company was in compliance with all
such covenants.

3. INCOME TAXES

The provision for income taxes consists of:

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- ---------------------------
1994 1995 1995 1996
-------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current
Federal............................... $122,700 $154,600 $227,300 $ --
State................................. 33,000 49,300 72,500 9,900
-------- -------- -------- -------
155,700 203,900 299,800 9,900
Deferred
Federal............................... (21,700) (59,400) (87,500) 79,800
-------- -------- -------- -------
Provision for income taxes.............. $134,000 $144,500 $212,300 $89,700
======== ======== ======== =======
</TABLE>

Effective January 1, 1996, the Company elected to be taxed under the
Subchapter S rules of the Internal Revenue Code. As a result of this change, the
stockholders will report corporate taxable income in their individual tax
returns and be taxed depending on their personal tax strategies. The effect of
this change during the nine months ended September 30, 1996 was an elimination
of the net deferred tax asset totaling $68,300 and the establishment of an
$11,500 deferred tax liability for potential built-in gains on the effective
date of election. The states in which the Company operates recognize Federal S
Corporation provisions but impose a tax at a reduced rate of approximately 1.5%.

F-35
<PAGE> 90
VOICE PLUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

The following summarizes the difference between the income tax expense and
the amount computed by applying the Federal income tax rate of 34% in 1995 and
1994 to income before income taxes:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------------
1994 1995
-------- --------
<S> <C> <C>
Federal income tax at statutory rate........................... $ 95,900 $107,500
State income taxes, net of Federal tax benefit................. 22,000 33,000
Other, net..................................................... 16,100 4,000
-------- --------
$134,000 $144,500
======== ========
</TABLE>

The effective tax rate for the nine months ended September 30, 1995 differs
from the Federal statutory tax rate due primarily to State income taxes. The
effective tax rate for the nine months ended September 30, 1996 differs from the
Federal statutory tax rate due to the change to the Subchapter S corporation
status effective January 1, 1996.

Deferred tax assets comprise the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1995 AMOUNT
----------------- -------
<S> <C>
Deferred revenue on system sales........................................... $33,300
State income taxes......................................................... 15,100
Reserves and accrued liabilities........................................... 17,200
Accumulated depreciation................................................... 2,700
-------
Net deferred tax asset..................................................... $68,300
=======
</TABLE>

4. COMMITMENTS

The Company leases certain property consisting of corporate and sales
office facilities and equipment under operating leases that expire during 1996
and 1997. Certain facility leases require the Company to pay real estate taxes,
maintenance and utilities.

The Company's future minimum lease commitments for operating leases are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
------------- --------
<S> <C>
1996.................................................................. $166,200
1997.................................................................. 38,600
--------
$204,800
========
</TABLE>

Rent expense under operating leases was $119,600 and $183,800 for the years
ended December 31, 1994 and 1995, respectively, and $130,600 and $130,700 for
the nine months ended September 30, 1995 and 1996, respectively.

5. ACCRUED COMPENSATION AND BENEFITS

The Company has a 401(k) profit sharing plan in which all qualifying
employees with a minimum of 1,000 hours of service at year end are eligible to
participate. Matching contributions are made at the discretion of the Company's
Board of Directors. The Company pays all fees to administer the plan. On
December 29, 1995, the Company accrued matching contributions up to 6.5% of
employee compensation, plus an additional $50,000 for the plan year ended
December 31, 1995. Total expense under this plan was $0 and $99,500 for the

F-36
<PAGE> 91

VOICE PLUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

years ended December 31, 1994 and 1995. The accrued contribution at December 31,
1995 was paid in August 1996. Total expense under this plan was $37,100 and
$37,500 for the nine months ended September 30, 1995 and 1996.

During the nine months ended September 30, 1996, the Company declared a
$250,000 discretionary bonus, of which $125,000 is included in cost of revenues
and $125,000 is included in marketing and selling. At September 30, 1996, this
bonus remains unpaid and is included in accrued compensation and benefits.

6. RELATED PARTY TRANSACTIONS

A customer controlled by a minority stockholder of the Company, purchased
$94,500 and $99,700 of equipment from the Company during the years ended
December 31, 1994 and 1995. Included in accounts receivable at December 31, 1995
is $19,000 due from this related customer. In February 1996, the Company
purchased this minority stockholder's 5% interest in the Company for $50,000 and
retired the related shares of common stock.

7. CONCENTRATION RISK

Revenues from one customer accounted for approximately 13% and 10% of total
net revenues during the years ended December 31, 1994 and 1995. Included in
accounts receivable at December 31, 1995 is $431,900 due from this customer.
Revenues from two customers accounted for approximately 12% and 15% of total net
revenues during the nine months ended September 30, 1995, and approximately 35%
and 22% of total net revenues during the nine months ended September 30, 1996.
Included in accounts receivable at September 30, 1996 is $459,000 and $342,300
due from these two customers.

Trade accounts receivable are due from numerous customers located in many
geographic regions throughout the United States. The Company performs ongoing
credit evaluations of its customers' financial condition and establishes an
allowance for doubtful accounts based upon the credit risk of specific
customers, historical trends and other information. The Company does not require
collateral from its customers.

Substantially all of the Company's inventory purchases in 1994 and 1995
were made from one vendor, Centigram Communications Corporation (Centigram). Any
termination or adverse change in the Company's distributor relationship with
Centigram would have a material adverse impact upon the Company's voice
processing business. In addition, the Company depends upon Centigram to offer
products which are competitive with products offered by other manufacturers as
to technological advancement, reliability and price. If Centigram's competitors
should surpass Centigram in any of these qualities, the Company may be required
to establish alternative strategic relationships. Any such development would
have an adverse effect on the Company's business for an indefinite period until
new supplier relationships could be established. Included in accounts payable at
December 31, 1995 and September 30, 1996 are $634,800 and $1,385,400,
respectively, due to Centigram.

Cash and cash equivalents are held principally at two high quality
financial institutions. At times, such balances may be in excess of the FDIC
insurance limit.

F-37
<PAGE> 92

VOICE PLUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

8. STATEMENT OF CASH FLOWS

Supplemental disclosures of cash flow information:

Cash paid for:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ --------------------------
1994 1995 1995 1996
-------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Interest................................ $ 4,900 $ 1,100 $ 200 $ 3,200
======== ======== ======== ======
Income taxes............................ $135,100 $226,000 $ 224,500 $45,300
======== ======== ======== ======
</TABLE>

During 1994 and 1995, the Company reclassified equipment leased to
customers with a net book value of $29,700 and $4,500, respectively, from
property and equipment to inventories.

9. PRO FORMA

Statement of Operations

In connection with the contemplated purchase of the Company by NHancement
Technologies Inc. (NHancement), successor to BioFactors, Inc. (BFI) (see Note
11), the Company intends to terminate its status as a Subchapter S corporation.
The pro forma adjustment reflects a provision for income taxes at an effective
rate of 40% for the nine months ended September 30, 1996. Prior to January 1,
1996, the Company was a C Corporation.

Balance Sheet

The Company intends to declare a $550,000 dividend and/or bonus to the sole
stockholder prior to the pending merger discussed in Note 11. The pro forma
balance sheet is presented to reflect this change as if it had been recorded at
September 30, 1996.

10. SUBSEQUENT EVENTS

On October 16, 1996, the Company signed a binding letter of intent to
purchase certain assets, including all inventory, fixed assets, customer lists,
trademarks and logos, and assume certain liabilities, including approximately
$52,500 due to Centigram, all liabilities associated with equipment and office
leases and all liabilities incurred in connection with the maintenance of
service contracts with customers, of Phonetics, Inc. (Phonetics), which is
located in Dallas, Texas, for $145,000; and, as of such date, the Company took
control of those assets and liabilities. The purchase is subject to the
completion of due diligence, approval by the directors of both companies,
delivery of a closing balance sheet and the execution and delivery of a
definitive written purchase agreement. Phonetics distributes voice processing
equipment and provides various services including equipment installation,
technical support and ongoing maintenance, primarily within the state of Texas.
Phonetics had unaudited net revenues of $512,000 and a net loss of $12,000
during the eight months ended August 31, 1996.

On November 5, 1996, the Company entered into a Unit Subscription Agreement
with BFI which provides for the Company's purchase of one BFI unit, each unit
consisting of (i) an unsecured promissory note of BFI in the principal amount of
$50,000, with stated interest at 10%, no monthly installments and a maturity
date of March 31, 1997, and (ii) a warrant to purchase 50,000 shares of BFI
Common Stock at an exercise price of 120% of the initial public offering (IPO)
price of NHancement Technologies, Inc., the successor to BFI ("NHancement"),
with a provision to prevent dilution in connection with the merger of a wholly
owned subsidiary of NHancement into BFI.

F-38
<PAGE> 93

VOICE PLUS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION FOR SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)

On November 26, 1996, the Company paid an $85,000 dividend to its sole
stockholder to cover his individual estimated income taxes.

11. ACQUISITION AGREEMENT

On October 25, 1996, the Company entered into an Agreement and Plan of
Merger (the Merger) with NHancement whereby NHancement would acquire,
concurrently with NHancement's proposed IPO, all outstanding shares of the
Company. The consideration for the outstanding shares consists of (i) an
unsecured promissory note in a principal amount of $1,000,000, bearing interest
at the medium term T-bill rate, due on the third anniversary of the consummation
of the Merger, (ii) an unsecured promissory note in a principal amount of
$500,000, bearing interest at the medium term T-bill rate, due on the third
anniversary of the consummation of the Merger, and (iii) shares of NHancement
Common Stock with a market value of $4,680,000 (of which, shares valued at
$2,400,000 will be sold in the proposed IPO, and the remainder of the shares are
subject to restrictions on transferability under the Securities Act of 1933 and
pursuant to a lock-up agreement with the underwriter of the proposed IPO). The
consummation of the Merger is contingent upon the registration statement filed
in connection with the proposed IPO having been declared effective. The
Agreement terminates, without liability, if the merger shall not have been
consummated prior to March 31, 1997. In connection with the Merger, NHancement
entered into a three-year employment agreement with the president and sole
stockholder of the Company, pursuant to which NHancement will pay a base salary
of $150,000 per year, commissions of approximately $200,000 per year and an
annual performance-based bonus. The employment agreement provides that if
NHancement materially breaches the agreement or terminates the employee without
"cause," NHancement will continue to pay base salary and 50% of the commissions
for the duration of the term and, in the event of a material breach, the two
promissory notes will be accelerated and immediately become due and payable.

F-39
<PAGE> 94

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
and the Stockholders of
Cossey-Capozzi, Inc.
dba C. C. & Associates

We have audited the accompanying balance sheet of Cossey-Capozzi, Inc. as
of September 30, 1996, and the related statements of operations, stockholders'
equity, and cash flows for the years ended September 30, 1995 and 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cossey-Capozzi, Inc. as of
September 30, 1996, and the results of its operations and its cash flows for the
years ended September 30, 1995 and 1996 in conformity with generally accepted
accounting principles.

Meredith, Cardozo & Lanz LLP

San Jose, California

October 30, 1996

F-40
<PAGE> 95

COSSEY-CAPOZZI, INC.
DBA C. C. & ASSOCIATES

BALANCE SHEET

ASSETS

<TABLE>
<CAPTION>
SEPTEMBER
30, 1996
------------
<S> <C>
Current assets
Cash and cash equivalents (Note 5).......................................... $ 9,100
Accounts receivable, net of allowance for doubtful accounts of $7,600 (Note
5)....................................................................... 153,000
Due from stockholder (Note 1)............................................... 32,400
Other assets................................................................ 3,900
--------
Total current assets................................................ 198,400
--------
Property and equipment, net (Note 2).......................................... 47,300
--------
$245,700
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable............................................................ $ 11,900
Accrued payroll and related expenses........................................ 50,500
Income taxes payable (Note 3)............................................... 5,500
Deferred income taxes (Note 3).............................................. 46,000
--------
Total current liabilities........................................... 113,900
--------
Deferred income taxes (Note 3)................................................ 1,000
--------
Commitments (Notes 4 and 7)
Stockholders' equity
Common stock, no par value: 500,000 shares authorized, 400 shares issued and
outstanding.............................................................. 3,000
Retained earnings........................................................... 127,800
--------
Total stockholders' equity.......................................... 130,800
--------
$245,700
========
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-41
<PAGE> 96

COSSEY-CAPOZZI, INC.
DBA C. C. & ASSOCIATES

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1995 1996
---------- -----------
<S> <C> <C>
Net revenues (Note 5)................................................ $1,075,800 $ 914,300
Cost of revenues..................................................... 564,000 545,200
---------- ---------
Gross profit......................................................... 511,800 369,100
---------- ---------
Selling, general and administrative expenses......................... 388,400 361,500
---------- ---------
Income from operations............................................... 123,400 7,600
Other income (expense)
Interest expense................................................... (2,100) (700)
Other income....................................................... 2,600 --
---------- ---------
Total other income (expense)............................... 500 (700)
---------- ---------
Income before income taxes........................................... 123,900 6,900
Income taxes (Note 3)................................................ 47,200 5,300
---------- ---------
Net income................................................. $ 76,700 $ 1,600
========== =========
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-42
<PAGE> 97

COSSEY-CAPOZZI, INC.
DBA C. C. & ASSOCIATES

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Balance, September 30, 1994........................... 400 $3,000 $ 49,500 $ 52,500
Net income.......................................... -- -- 76,700 76,700
--- ------ -------- --------
Balance, September 30, 1995........................... 400 3,000 126,200 129,200
Net income.......................................... -- -- 1,600 1,600
--- ------ -------- --------
Balance, September 30, 1996........................... 400 $3,000 $127,800 $ 130,800
=== ====== ======== ========
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-43
<PAGE> 98

COSSEY-CAPOZZI, INC.
DBA C. C. & ASSOCIATES

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1995 1996
--------- -----------
<S> <C> <C>
Cash flows from operating activities (Note 6)
Net income........................................................ $ 76,700 $ 1,600
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................. 19,300 11,600
Deferred income taxes.......................................... 46,400 (2,800)
Changes in assets and liabilities:
Accounts receivable.......................................... (244,000) 104,400
Other assets................................................. -- 5,900
Accounts payable............................................. 43,000 (64,700)
Accrued expenses............................................. 70,000 (33,900)
Income taxes payable......................................... (800) 5,500
--------- ---------
Net cash provided by operating activities........................... 10,600 27,600
--------- ---------
Cash flows from investing activities
Purchase of property and equipment................................ (10,400) (27,200)
Disposition of property and equipment............................. 37,600 --
--------- ---------
Net cash provided by (used in) investing activities................. 27,200 (27,200)
--------- ---------
Cash flows from financing activities
Advances to stockholder........................................... (36,000) (5,600)
Repayment on advances to stockholder.............................. -- 17,800
Proceeds from bank borrowings..................................... 9,200 --
Repayments of bank borrowings..................................... -- (15,300)
Repayment of notes payable........................................ (14,100) --
--------- ---------
Net cash (used in) financing activities............................. (40,900) (3,100)
--------- ---------
Net (decrease) in cash and cash equivalents......................... (3,100) (2,700)
Cash and cash equivalents, beginning of period...................... 14,900 11,800
--------- ---------
Cash and cash equivalents, end of period............................ $ 11,800 $ 9,100
========= =========
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-44
<PAGE> 99

COSSEY-CAPOZZI, INC.
DBA C. C. & ASSOCIATES

SUMMARY OF ACCOUNTING POLICIES

BUSINESS

Cossey-Capozzi, Inc. (the Company) was incorporated in California in 1978.
The Company provides employee investigation services for corporations,
specializing in investigating employee theft and work related drug use.
Investigations include surveillance for employee misconduct.

CASH AND CASH EQUIVALENTS

For purposes of the statements of cash flows, the Company considers all
certificates of deposit and all liquid cash investments with original maturities
of three months or less to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and depreciation is calculated
using the straight-line method over the estimated useful lives of the related
assets, generally three to five years.

REVENUE RECOGNITION

Revenue is generally recognized upon the completion of the services
performed.

ADVERTISING COSTS

The Company expenses advertising costs as incurred. Advertising expenses
were $1,800 and $8,500 for the years ended September 30, 1995 and 1996,
respectively.

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.

INCOME TAXES

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109. Under SFAS No. 109, deferred tax
liabilities or assets at the end of each period are determined using the tax
rate expected to be in effect when taxes are actually paid or recovered.
Deferred income taxes as of September 30, 1996 primarily result from certain
expenses that are not currently deductible for tax purposes.

F-45
<PAGE> 100

COSSEY-CAPOZZI, INC.
DBA C. C. & ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

1. DUE FROM STOCKHOLDER

Due from stockholder consists principally of expenses paid by the Company
for the benefit of the stockholder. This amount is due on demand.

2. PROPERTY AND EQUIPMENT

A summary of property and equipment follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
-------------
<S> <C>
Furniture and fixtures................................................ $ 42,200
Machinery and equipment............................................... 28,900
Office equipment...................................................... 25,700
Leasehold improvements................................................ 700
---------
97,500
Less accumulated depreciation and amortization........................ (50,200)
---------
Property and equipment, net................................. $ 47,300
=========
</TABLE>

3. INCOME TAXES

Income taxes (benefit) comprise:

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------------
1995 1996
------- -------
<S> <C> <C>
Current:
Federal........................................................ $ -- $ 5,200
State.......................................................... 800 2,900
------- -------
800 8,100
Deferred:
Federal........................................................ 38,300 (2,200)
State.......................................................... 8,100 (600)
------- -------
46,400 (2,800)
Total:
Federal........................................................ 38,300 3,000
State.......................................................... 8,900 2,300
------- -------
$47,200 $ 5,300
======= =======
</TABLE>

Deferred income taxes result from temporary differences in the recognition
of certain expenses and income items for tax and financial reporting purposes as
follows:

<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
------------------
1995 1996
------- -------
<S> <C> <C>
Cash to accrual adjustment........................................ $47,400 $(2,800)
Depreciation...................................................... (1,000) --
------- -------
$46,400 $(2,800)
======= =======
</TABLE>

F-46
<PAGE> 101

COSSEY-CAPOZZI, INC.
DBA C. C. & ASSOCIATES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following summarizes the difference between the income tax expense and
the amount computed by applying the Federal income tax rate of 34% in 1995 and
1996 to income before income taxes:

<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
------------------
1995 1996
------- -------
<S> <C> <C>
Federal income tax (benefit) expense at statutory rate............ $42,100 $ 2,300
State income taxes, net of federal tax benefit.................... 7,500 600
Surtax exemption.................................................. (6,400) (1,300)
Other, net........................................................ 4,000 3,700
------- -------
$47,200 $ 5,300
======= =======
</TABLE>

Deferred tax assets (liabilities) comprises the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
-------------
<S> <C>
Cash to accrual adjustment.............................................. $ (48,500)
Depreciation............................................................ 1,500
--------
Net deferred tax liability.................................... $ (47,000)
========
</TABLE>

4. COMMITMENTS

The Company leases its office space under a lease agreement on a month to
month basis from a related party.

Rent expense for the years ended September 30, 1995 and 1996 was $38,400
and $38,100, respectively.

5. CONCENTRATION RISK

Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash and cash equivalents and accounts
receivable. The Company places its cash and cash equivalents with high quality
financial institutions and, by policy, limits the amount of credit exposure to
any one financial institution.

In 1995, one customer accounted for approximately 46% of net revenues. In
1996, three customers accounted for approximately 18%, 12% and 24% of net
revenues.

The Company's accounts receivable are spread across many customers in
various industries. The Company performs credit evaluations of its customers'
financial condition and establishes an allowance for possible losses based upon
credit risk of specific customers, historical trends and other information. The
Company generally does not require cash collateral or other security to support
customer receivables.

F-47
<PAGE> 102

COSSEY-CAPOZZI, INC.
DBA C. C. & ASSOCIATES

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. STATEMENTS OF CASH FLOWS

Supplemental disclosures of cash flow information:

Cash paid for:

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-----------------
1995 1996
------ ----
<S> <C> <C>
Interest.......................................................... $2,100 $700
====== ====
Income taxes...................................................... $1,600 $800
====== ====
</TABLE>

7. MERGER AGREEMENT

The Company entered into a letter of intent dated October 25, 1996, which
provides for the merger of a wholly owned subsidiary of NHancement Technologies
Inc., a Delaware corporation (NHancement), with and into the Company, whereupon
the Company will be the surviving corporation and a wholly owned subsidiary of
NHancement, and the exchange of shares of NHancement common stock with a market
value of $960,000 (which shares are subject to restrictions on transfer pursuant
to a lock-up agreement) for all of the issued and outstanding common stock of
the Company. The consummation of the merger is conditioned upon the terms and
conditions of the merger having been approved by the California Commissioner of
Corporations pursuant to a fairness hearing held pursuant to Section 25142 of
the California Corporate Securities Law of 1968, as amended. The letter of
intent terminates, without liability, if the merger shall not have been
consummated prior to March 31, 1997.

F-48
<PAGE> 103

PLANNED INTEGRATION OF VPI AND BFI PRODUCTS

The diagram will show two separate Novell(R) LAN systems side by side that
are sold by VPI and BFI. One LAN(R) is used in a multimedia application as
provided by VPI. The other LAN is deployed to support BFI's FACTOR 1000(R)
testing system. Two converging arrows are shown between the two LAN systems
depicting the planned integration of the two systems to enable the Company to
offer multimedia messaging to the factory and field workforce.
<PAGE> 104

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

NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING AND NOT CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITY OTHER THAN THE REGISTERED SECURITIES OFFERED BY THIS PROSPECTUS OR AN
OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN
OFFER OR SOLICITATION IS NOT AUTHORIZED OR WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS, NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Summary Historical and Pro Forma
Combined Financial Data............. 3
Risk Factors.......................... 5
The Company........................... 13
Use of Proceeds....................... 14
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 24
Management............................ 36
Certain Transactions.................. 42
Principal and Selling Stockholders.... 44
Description of Capital Stock.......... 46
Shares Eligible for Future Sale....... 48
Underwriting.......................... 49
Legal Matters......................... 50
Experts............................... 51
Available Information................. 51
Index to Financial Statements......... F-1
</TABLE>

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

UNTIL , 1997 (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.

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

2,300,000 SHARES
OF COMMON STOCK

NHANCEMENT LOGO
--------------------

PROSPECTUS
--------------------

CHATFIELD DEAN & CO.

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 105

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company will purchase a directors' and officers' insurance policy with
a $1 million coverage limit per occurrence and $2 million in the aggregate per
year.

Section 7 of the Underwriting Agreement (filed as Exhibit 1.1 hereto)
provides that the Underwriters will indemnify and hold harmless the Company and
each director, officer or controlling person of the Company from and against any
liability caused by any misstatement or omission in this Registration Statement
or Prospectus based on certain information furnished to the Company by the
Underwriters for use in the preparation thereof.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions and the Nonaccountable Expense Allowance,
payable by the Company in connection with the sale of Common Stock being
registered (all amounts are estimated except the Commission Registration Fee and
the Nasdaq SmallCap Filing Fee.

<TABLE>
<S> <C>
Commission Registration Fee....................................................... $ 3,607
Nasdaq SmallCap Filing Fee........................................................ 9,154
NASD Fee.......................................................................... 1,814
Blue Sky Qualification Fees and Expenses (including legal fees)................... [12,275]
Printing Expenses................................................................. K
Legal Fees and Expenses........................................................... K
Accountants' Fees and Expenses.................................................... K
Transfer Agent and Registrar Fees................................................. K
Miscellaneous Expenses............................................................ K
--------
Total........................................................................... $350,000
========
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

In the three years preceding the filing of this Registration Statement, the
Company has issued the following securities that were not registered under the
Securities Act. Except in limited circumstances (as described below), all such
securities were issued in reliance on the exemption from registration provided
by Rule 506 ("Rule 506") promulgated under the Securities Act, all sales were
made to accredited investors and all other requirements of Rule 506 were
satisfied.

On March 16, 1994, BFI's predecessor, Performance Factors, Inc. ("PFI"),
consummated a bridge financing (the "Series D Financing") pursuant to which it
issued an aggregate of (i) 1,212,124 shares of PFI Series D Preferred Stock, and
(ii) $721,550 principal amount of unsecured promissory notes, bearing interest
at the rate equal to 2% per annum above a certain domestic rate announced by the
Bank of America, NT&SA, San Francisco. In May 1994, the stockholders of PFI
approved a merger of PFI with and into BFI. The terms of the merger required
that all PFI common stock be converted into shares of BFI Common Stock and all
other PFI securities, including the PFI Series D Preferred Stock and the Series
D Notes, be converted into

II-1
<PAGE> 106

shares of BFI Series A Preferred Stock as follows: (i) 3.0303 shares of PFI
Series D Preferred Stock for each $1.00 of PFI Series D Notes; and (ii) .4072
shares of BFI Series A Preferred Stock for each share of PFI Series D Preferred
Stock. Concurrently, the BFI shareholders approved a 24-to-one reverse split.
The shares of Common Stock issued upon conversion and exchange of the securities
issued in connection with the BFI Series D Financings are entitled to certain
registration rights. See "Description of Capital Stock -- Registration Rights."
The proceeds from the sale of the Series D Financing were used for general
corporate purposes.

On June 1, 1994, BFI consummated a bridge financing (the "Series A
Financing"), pursuant to which it issued an aggregate of 311,245 shares of its
Series A Preferred Stock in reliance on Rule 506, except with respect to 219,581
shares that were issued in reliance on an exemption from registration provided
by Regulation S ("Regulation S") promulgated under the Securities Act. All sales
under Regulation S were made to qualified offshore investors, and all other
requirements of Regulation S, including the holding period, were satisfied. In
July 1995, the holders of BFI Series A Preferred Stock approved the conversion
of BFI A Preferred Stock into shares of BFI Common Stock, effective in November
1995. Concurrently, the BFI shareholders approved a 24-to-one reverse split. The
shares of Common Stock issued upon conversion and exchange of the securities
issued in connection with the BFI Series A Financing are entitled to certain
registration rights. See "Description of Capital Stock -- Registration Rights."
The proceeds from the sale of the Series A Financing were used for general
corporate purposes.

On December 1, 1994, BFI closed a bridge financing, pursuant to which it
issued an aggregate of (i) $750,000 principal amount of promissory notes (the
"December 1994 Notes"), secured by the all of the assets of BFI, bearing
interest at the rate of 12% per annum due and payable on April 1, 1997; and (ii)
shares of BFI Common Stock, which are exchangeable for 112,500 restricted shares
of Common Stock. The December 1994 Notes and the shares of Common Stock were
issued in reliance on Rule 506, except with respect to $278,327 in principal
amount of December 1994 Notes and 55,665 shares that were issued in reliance on
an exemption from registration provided by Regulation S. All sales under
Regulation S were made to qualified investors, and all other requirements of
Regulation S, including the holding period, were satisfied. Such shares of
Common Stock are entitled to certain registration rights. See "Description of
Capital Stock -- Registration Rights." At the time the notes were issued, the
notes were secured by the pledge of a promissory note of Sports Trac, payable to
BFI. Subsequently, the Sports Trac Note was paid in full and the security
interest securing the December 1995 Notes was terminated. Upon consummation of
this Offering, all of the outstanding principal and accrued interest will be
converted into Common Stock at a conversion price equal to the Offering Price,
the security interest will be released, and the Company will issue warrants to
purchase an aggregate of 37,500 shares of Common Stock at an exercise price of
120% of the Offering Price. The proceeds from the sale of the December 1994
Notes were used for general corporate purposes.

On December 1, 1995, BFI closed a bridge financing pursuant to which it
issued an aggregate of (i) $350,000 principal amount of unsecured promissory
notes (the "December 1995 Notes"), bearing interest from the date of issuance
until due and payable on March 31, 1997 at a rate of 10% per annum, and
thereafter at 18% per annum, and (ii) shares of BFI Common Stock, which are
exchangeable for 78,750 restricted shares of Common Stock. Such shares are
entitled to certain registration rights. See "Description of Capital
Stock -- Registration Rights." Upon consummation of this Offering, the
outstanding principal amount will be repaid and all accrued interest will be
converted into Common Stock at a conversion price equal to the Offering Price,
and the Company will issue warrants to purchase an aggregate of 26,250 shares of
Common Stock at an exercise price of 120% of the Offering Price. The proceeds
from the December 1995 Notes were used for general corporate purposes.

On February 1, 1996, BFI closed a bridge financing, pursuant to which it
issued an aggregate of (i) $315,000 principal amount of unsecured promissory
notes (the "February 1996 Notes"), bearing interest from the date of issuance
until due and payable on March 31, 1997 at a rate of 10% per annum, and
thereafter at 18% per annum, and (ii) shares of BFI Common Stock, which are
exchangeable for 70,875 restricted shares of Common Stock. Such shares of Common
Stock are entitled to certain registration rights. See "Description of Capital
Stock -- Registration Rights." Upon consummation of this Offering, the
outstanding principal amount will be repaid and all accrued interest will be
converted into Common Stock at a conversion

II-2
<PAGE> 107

price equal to the Offering Price, and the Company will issue warrants to
purchase an aggregate of 23,625 shares of Common Stock at an exercise price of
120% of the Offering Price. The proceeds from the February 1996 Notes were used
for general corporate purposes.

On May 17, 1996, BFI closed a bridge financing, pursuant to which it issued
an aggregate of (i) $300,000 principal amount of unsecured promissory notes (the
"May 1996 Notes"), bearing interest at 10% per annum, due and payable on March
31, 1997, and (ii) shares of BFI Common Stock, which are exchangeable for 67,500
restricted shares of Common Stock. Such shares of Common Stock are entitled to
certain registration rights. See "Description of Capital Stock -- Registration
Rights." Upon consummation of this Offering, the outstanding principal amount
will be repaid and all accrued interest will be converted into Common Stock at a
conversion price equal to the Offering Price, and the Company will issue
warrants to purchase an aggregate of 22,500 shares of Common Stock at an
exercise price of 120% of the Offering Price. See "Description of Capital
Stock -- Registration Rights." The proceeds from the sale of the May 1996 Notes
were used for general corporate purposes.

On November 5, 1996, BFI closed a bridge financing, pursuant to which it
issued an aggregate of (i) $500,000 principal amount of unsecured promissory
notes (the "November 1996 Notes"), bearing interest at 10% per annum, due and
payable on the earlier of (a) March 31, 1997, or (b) the consummation of this
Offering, and (ii) warrants exercisable to purchase 500,000 shares of restricted
Common Stock at an initial exercise price of 120% of the Offering Price. The
shares of Common Stock issued upon exercise of the warrants are entitled to
certain registration rights. See "Description of Capital Stock -- Registration
Rights." The proceeds from the November 1996 Notes were used to purchase
directors' and officers' liability insurance and to pay legal fees and
accounting and other fees in connection with this Offering.

II-3
<PAGE> 108

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
1.1** -- Form of Underwriting Agreement
3.1*** -- Certificate of Incorporation of the Company
3.2*** -- Bylaws of the Company
4.1*** -- Form of Common Stock Certificate
4.2** -- Form of Underwriter Warrant
4.3** -- Registration Rights Agreement, dated September 1, 1996 between
BioFactors, Inc. ("BFI") and (i) a majority of the holders of
securities pursuant to the Secured Note and Warrant Purchase
Agreement dated December 1, 1994, as amended; (ii) a majority of the
holders of securities issued pursuant to the Secured Note and Stock
Purchase Agreement, dated December 1, 1995, as amended; (iii) a
majority of the holders of securities issued pursuant to the
Unsecured Note and Stock Purchase Agreement, dated February 1, 1996,
as amended; (iv) a majority of the holders of securities issued
pursuant to the Unit Subscription Agreement, dated May 17, 1996, as
amended; (v) the purchasers of securities issued pursuant to the Unit
Subscription Agreement, dated October 3, 1996; and (vi) the former
holders of BFI's Series A Preferred Stock
4.4*** -- Registration Rights Agreement, dated October 25, 1996, between the
Company and James S. Gillespie
5.1* -- Form of Opinion of Davis, Graham & Stubbs LLP as to the legality of
issuance of the Common Stock
10.1*** -- Formation Agreement, dated as of October 15, 1996, between BFI and
VPI
10.2** -- Agreement and Plan of Merger, dated as of October 30, 1996, between
the Company, BFI Acquisition Corporation and BFI
10.3** -- Agreement and Plan of Merger, dated as of October 25, 1996, between
the Company, VPI Acquisition Corporation, Voice Plus, Inc. ("VPI")
and James S. Gillespie; together with Form of Promissory Note
10.4** -- Letter of Intent, dated as of October 25, 1996, between the Company
and C.C. & Associates
10.5** -- License Agreement, dated November 24, 1988, by and between BFI and
Systems Technology Inc., as amended by Addendum to License Agreement,
dated May 19, 1994, as amended by Second Addendum to License
Agreement, dated November 18, 1996
10.6*** -- Sublicense Agreement, dated August 30, 1995, between BFI and
SportsTrac, Inc., as amended by Addendum to Sublicense Agreement,
dated July 31, 1996
10.7** -- Secured Note and Warrant Purchase Agreement, dated December 1, 1994,
between BFI and the purchasers listed therein, as amended by the
First Amendment to Secured Note and Warrant Purchase Agreement, dated
July 1995, and as amended by Amendment to Secured Note and Warrant
Purchase Agreement, dated December 1, 1995, as amended by Third
Amendment to Secured Note and Warrant Purchase Agreement, dated March
1, 1996, and as amended by Fourth Amendment to Secured Note and
Warrant Purchase Agreement, dated October 1, 1996, together with
Amended and Restated Security Agreement and Form of Secured
Promissory Note
</TABLE>

II-4
<PAGE> 109

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
10.8** -- Secured Note and Stock Purchase Agreement, dated December 1, 1995
between BFI and the purchasers listed therein, as amended by First
Amendment to Secured Note and Stock Purchase Agreement, dated March
22, 1996, as amended by Second Amendment to Secured Note and Stock
Purchase Agreement, dated July 1, 1996, and as amended by Third
Amendment to Secured Note and Stock Purchase Agreement, dated October
1, 1996; together with Form of Secured Promissory Note
10.9** -- Unsecured Note and Stock Purchase Agreement, dated February 1, 1996,
between BFI and the purchasers listed therein, as amended by First
Amendment to Unsecured Note and Stock Purchase Agreement, dated March
22, 1996, as amended by Second Amendment to Unsecured Note and Stock
Purchase Agreement, dated July 1, 1996, and as amended by Third
Amendment to Unsecured Note and Stock Purchase Agreement, dated
October 1, 1996; together with Form of Unsecured Promissory Note
10.10** -- Unit Subscription Agreement, dated May 17, 1996, between BFI and the
purchasers listed therein, as amended by First Amendment to Unit
Subscription Agreement, dated October 1, 1996; together with Form of
Promissory Note
10.11* -- Unit Subscription Agreement, dated October 3, 1996, between BFI and
the purchasers listed therein; together with Form of Promissory Note
and Form of Warrant
10.12* -- Form of Equity Incentive Plan
10.13*** -- Employment Agreement, between Douglas S. Zorn and the Company
10.14*** -- Employment Agreement, between James S. Gillespie and the Company
10.15*** -- Employment Agreement, between Esmond T. Goei and the Company
10.16*** -- Form of Factor 1000(R) Service Contract
10.17** -- Office Building Lease, dated April 8, 1996, between BFI and Denver
West Office Building No. 21 Venture
10.18*** -- Authorized U.S. Distributor Agreement, dated April 16, 1996, between
Centigram Communications Corporation and VPI
10.19** -- Office Lease, dated October 20, 1994, between AJ Partners Limited
Partnership and VPI
10.20** -- Agreement, dated October 16, 1995, between BFI, Burton Kanter and
Elliot Steinberg, as amended by Amendment dated July 16, 1996,
between BFI, Esmond Goei, Douglas Zorn, Burton Kanter and Elliot
Steinberg
10.21** -- Stockholder Agreement, dated October 25, 1996, between the Company
and James S. Gillespie
10.22** -- 1997 Management and Company Performance Bonus Plan
21** -- Subsidiaries
23.1** -- Consent of BDO Seidman, LLP
23.2** -- Consent of Meredith, Cardozo & Lanz LLP
23.3* -- Consent of Davis, Graham & Stubbs LLP (See Exhibit 5.1)
24*** -- Power of Attorney (included on Page II-6)
27** -- Financial Data Schedule
</TABLE>

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

* To be filed by amendment.

** Filed with Amendment No. 1 to Registration Statement on Form SB-2,
Registration Number 333-15563

*** Previously filed with Registration Statement on Form SB-2, Registration
Number 333-15563

II-5
<PAGE> 110

(b) Financial Statement Schedules

None.

ITEM 28. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the Company's Bylaws, Certificate of Incorporation or the
Underwriting Agreement, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense 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 Act and
will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

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

II-6
<PAGE> 111

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 the requirements for filing on Form SB-2 and has authorized this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Denver, State of Colorado, on December 19, 1996.

NHancement Technologies Inc.

By: /s/ ESMOND T. GOEI
------------------------------------
Esmond T. Goei
Chairman, President and Chief
Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears herein constitutes and appoints Esmond T. Goei and Douglas S. Zorn, and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement (including post-effective amendments), including a
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- ---------------------------- ------------------
<C> <S> <C>
/s/ ESMOND T. GOEI Chairman, President, Chief December 19, 1996
- --------------------------------------------- Executive Officer and
Esmond T. Goei Director (Principal
Executive Officer)

/s/ DOUGLAS S. ZORN Executive Vice President, December 19, 1996
- --------------------------------------------- Secretary, Chief Operating
Douglas S. Zorn and Financial Officer,
Treasurer and Director
(Principal Financial and
Accounting Officer)

/s/ JAMES S. GILLESPIE Vice President of Sales and December 19, 1996
- --------------------------------------------- Director
James S. Gillespie
</TABLE>

II-7
<PAGE> 112

EXHIBIT INDEX

<PAGE> 113

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

* To be filed by amendment.

** Filed with Amendment No. 1 to Registration Statement on Form SB-2,
Registration Number 333-15563

*** Previously filed with Registration Statement on Form SB-2, Registration
Number 333-15563

<PAGE> 1

EXHIBIT 1.1

FORM OF

UNDERWRITING AGREEMENT

AMONG

CHATFIELD DEAN & CO., INC.,

NHANCEMENT TECHNOLOGIES INC.

AND

JAMES S. GILLESPIE
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1

Description of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Representative's Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

SECTION 2

Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Registration Statement on Form SB-2 and Related Prospectus . . . . . . . . . . . . . . . . . . . 2
2.2 Accuracy of Registration Statement and Related Prospectus . . . . . . . . . . . . . . . . . . . . 3
2.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Incorporation and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.8 Legality of Outstanding Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9 Legality of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Prior Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Representative's Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.13 Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.14 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.15 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.16 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.17 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.19 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.20 Availability of Information Concerning the Company . . . . . . . . . . . . . . . . . . . . . . . 7
2.21 Suspension Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.22 Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.23 Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.24 Florida Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

SECTION 3

Representations and Warranties of the Selling Shareholder . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Ownership of Selling Shareholder Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>

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3.4 Accuracy of Registration Statement and Related Prospectus . . . . . . . . . . . . . . . . . . . . 9
3.5 Payment of Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

SECTION 4

Issue, Sale and Delivery of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Appointment of Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Default by a Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Offering Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 Principal Terms of Representative's Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Inspection of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.7 Representative's Expense Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.8 Mutual Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9 Sales Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.10 Re-offers By Selected Dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

SECTION 5

Registration Statement and Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Representative's Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Copies of Preliminary Prospectus and Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Post-Effective Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.4 Use of Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

SECTION 6

Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Filing of Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Declaration of Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Amendments at the Request of the Representative . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.4 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Further Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.6 Reports to Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.7 Expenses of Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.8 Stockholder Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.9 1933 Act Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.10 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.11 Transfer Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.12 Information About the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.13 Due Diligence Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.14 Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.15 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.16 Sales Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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6.17 1934 Act Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.18 No Material Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.19 Bound Volumes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.20 Financial Consulting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.21 Restriction on Sale of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.22 Public Relations Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.23 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

SECTION 7

Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

SECTION 8

Effectiveness of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

SECTION 9

Conditions to the Representative's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.1 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 Accuracy of Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.3 Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.5 No Material Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.6 Review by Representative's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.7 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.8 Opinion of Counsel to Selling Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.9 BDO Seidman, LLP Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.10 Meredith Cardozo & Lanz LLP Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.11 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.12 Secretary's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.13 Selling Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.14 Opinion of Representative's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.15 Tender of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.16 Blue Sky Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.17 Approval of Representative's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.18 Officer's Certificate as a Company Representation . . . . . . . . . . . . . . . . . . . . . . . . 39
9.19 NASDAQ Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.20 Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

SECTION 10

Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.1 Termination by Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

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10.2 Termination by Representative--"Market Out" . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3 Survival of Obligations After Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.4 Suspension Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

SECTION 11

Representative's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.1 Registration as Broker-Dealer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.2 No Pending Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.3 Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

SECTION 12

Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

SECTION 13

Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.1 Sole Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
13.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

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EXHIBITS
Representative's Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A

SCHEDULES
Underwriting Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I
List of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.19

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UNDERWRITING AGREEMENT

Chatfield Dean & Co., Inc.
7935 East Prentice Avenue
Suite 200
Englewood, Colorado 80111

Gentlemen:

NHancement Technologies Inc., a Delaware corporation (unless the
context requires otherwise, referred to herein, together with its subsidiaries,
as the "Company") and James S. Gillespie, the record and beneficial owner of
the Selling Shareholder Shares (hereinafter defined) (the "Selling
Shareholder"), hereby confirm their agreement with Chatfield Dean & Co., Inc.,
a Colorado corporation (the "Representative"), and with the other members of
the Underwriting Group named in Schedule I attached hereto (individually
referred to as "Member" and collectively referred to as "Members"), including
the Representative (hereinafter the "Underwriting Group") as follows (if there
is no Schedule I attached, all references in this Agreement to the Underwriting
Group shall be deemed to refer only to the Representative):

SECTION 1

Description of Securities

1.1 Offering. The Company represents, covenants, warrants and
agrees that its authorized, issued and outstanding capitalization, when the
offering (the "Offering") of the Shares (hereinafter defined) contemplated
hereby is permitted to commence and at the Closing Date (hereinafter defined),
will be as set forth in the Registration Statement and related Prospectus (as
such terms are hereinafter defined or described). The Company proposes to
issue, offer and sell to the Underwriting Group an aggregate of 1,700,000
Shares (the "Company Shares"), at an offering price of $____ per Share (the
"Offering Price") and on the terms hereinafter set forth. In addition, the
Selling Shareholder proposes to sell to the Underwriting Group an aggregate of
600,000 Shares (the "Selling Shareholder Shares") as defined below, at an
Offering Price of $____ per Share and on the terms hereinafter set forth. The
Underwriting Group shall also have an over-allotment option to purchase from
the Company up to an additional 345,000 Shares as provided in Section 4.1
hereof.

1.2 Shares. As used herein, the shares of the Company's common
stock, $0.01 par value, which include both the Company Shares and the Selling
Shareholder Shares, may be referred to as the "Stock" or the "Common Stock",
and the shares of the Common Stock to be registered in the Registration
Statement, including those which comprise the over-allotment option described
above, but excluding the Representative's Warrant Stock (defined below), may be
referred to as the "Shares".
<PAGE> 8
1.3 Representative's Warrant. As partial consideration for the
services of the Representative hereunder, the Company will authorize, issue,
sell and deliver to the Representative on the Closing Date for a purchase price
of $100.00, a warrant (the "Representative's Warrant") to purchase a certain
number of shares of the Common Stock (the "Representative's Warrant Stock"), as
more fully set forth at Section 4.4 of this Agreement.

SECTION 2

Representations and Warranties of the Company

In order to induce the Representative to enter into this Agreement,
the Company hereby represents and warrants to, and agrees with, the
Representative as follows:

2.1 Registration Statement on Form SB-2 and Related Prospectus. A
Registration Statement on Form SB-2 (File No. 333-15563) and a Prospectus on
the form specified by Form SB-2 with respect to the Shares, copies of which
have been delivered heretofore by the Company to the Representative, have been
prepared carefully by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and the rules and
regulations promulgated thereunder, including, but not limited to, Regulations
C and S-B (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission"), and the Registration Statement and related
Prospectus, together with all exhibits and other documents required by the
Rules and Regulations have been filed by the Company with the Commission under
the 1933 Act; and the Company will use its best efforts to cause and assist the
Commission in declaring the same effective as promptly as possible. The
Company may file one or more additional amendments to the Registration
Statement and related Prospectus with the Commission on or prior to the
Effective Date defined in Section 8 of this Agreement, and copies of each such
amendment will be delivered to the Representative for its approval prior to
such filing.

As used in this Agreement, the terms "Registration Statement on Form
SB-2" and "Registration Statement" refer to and mean the Registration Statement
on Form SB-2 prepared by the Company in connection with the Offering and any
and all amendments thereto including, but not limited to, exhibits and
financial statements and, in the event of any amendment after the Effective
Date, the term "Registration Statement on Form SB-2" or "Registration
Statement" is inclusive of such amendments. The term "Prospectus" refers to
and means the Prospectus, including the Preliminary Prospectus (hereinafter
defined) prepared by the Company in the form specified by Form SB-2 and all
amendments thereto, and, in the event of any amendment or supplement to such
Prospectus after the Effective Date, the term "Prospectus" shall refer to and
mean such Prospectus inclusive of such amendments or supplements; and the term
"Preliminary Prospectus" means any prospectus included in the Registration
Statement before the Effective Date.

2.2 Accuracy of Registration Statement and Related Prospectus.
The Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus with

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<PAGE> 9
respect to the Shares, and each Preliminary Prospectus has conformed in all
material respects with the requirements of the 1933 Act and the applicable
Rules and Regulations and has not included any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. On the Effective Date and on the Closing Date, the Registration
Statement and Prospectus will comply in all respects with the requirements of
the 1933 Act and the Rules and Regulations for the purpose of the proposed
Offering of the Shares; and all statements of material fact contained in the
Registration Statement and Prospectus will be true and correct, except, to the
extent that the Preliminary Prospectus anticipates facts that will be true and
correct as of the Effective Date that are not true on the date of the
Preliminary Prospectus, and neither the Registration Statement nor the
Prospectus will include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
the Company does not make any representations or warranties as to the
information contained in or omitted from the Registration Statement or
Prospectus in reliance upon written information furnished on behalf of the
Representative specifically for use therein.

2.3 Financial Statements. The audited and other financial
statements of the Company, together with related schedules and notes as set
forth in the Registration Statement and Prospectus, present correctly and truly
the financial position and results of operations of the Company as of the
respective dates, and for the respective periods, to which they apply. Such
statements have been prepared in accordance with generally accepted accounting
principles and the applicable rules and regulations of the Commission relating
to financial statements. All financial statements filed with the Registration
Statement and Prospectus will reflect all liabilities of the Company,
contingent or otherwise, required to be set forth therein under generally
accepted accounting principles in effect as of the respective dates thereof and
will include adequate reserves for all federal and state tax liabilities
incurred prior to their respective dates and the Company will have no material
liabilities, contingent or otherwise, obligations or claims against it except
as set forth therein.

2.4 Independent Public Accountants. BDO Seidman, LLP and
Meredith, Cardozo & Lanz LLP, who have certified or will certify certain of the
financial statements filed or to be filed with the Commission as part of the
Registration Statement and Prospectus and, as experts, have reviewed certain
other information of a financial or accounting nature contained in the
Registration Statement and Prospectus, are independent certified public
accountants as required by the 1933 Act.

2.5 No Material Adverse Change. Except as may be reflected in or
contemplated by the Registration Statement and Prospectus, subsequent to the
dates as of which information is given therein and through the Closing Date:

(1) there shall not have been any material adverse change
in the condition, financial or otherwise, or in the results of
operations of the Company or in its business taken as a whole;

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(2) there shall not have been any material transaction
entered into by the Company other than transactions in the ordinary
course of the Company's business;

(3) the Company shall not have incurred any material
obligations, contingent or otherwise, which are not disclosed in the
Registration Statement and Prospectus;

(4) there shall not have been any change in the capital
stock or long-term debt (except current payments thereof) of the
Company; and

(5) the Company shall not have paid or declared any
dividends or made any other distribution in respect of the capital
stock of the Company.

2.6 No Defaults. Other than as disclosed in the Registration
Statement and Prospectus, the Company is not in default in the performance of
any obligation, agreement or condition contained in any debenture, note or
other evidence of indebtedness or any indenture or loan agreement of the
Company. The execution and delivery of this Agreement and the consummation of
the transactions herein contemplated and compliance with the terms of this
Agreement will not conflict with or result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, the certificate of
incorporation, as amended, or bylaws, as amended, of the Company, any note,
indenture, mortgage, deed of trust or other agreement or instrument to which
the Company is a party or by which it or any of its property is bound, or any
existing law, order, rule, regulation, writ, injunction or decree of any
government, governmental instrumentality, agency or body, arbitration tribunal
or court, domestic or foreign, having jurisdiction over the Company or its
property. The consent, approval, authorization or order of any court or
government instrumentality, agency or body is not required for the consummation
of the transactions herein contemplated except such as may be required under
the 1933 Act or under the Blue Sky, or securities laws, of any state or
jurisdiction.

2.7 Incorporation and Standing. The Company is, and at the
Closing Date will be, duly incorporated and validly existing in good standing
as a corporation under the laws of its jurisdiction of incorporation and with
full power and authority (corporate and other) to own its property and conduct
its business, present and proposed, as described in the Registration Statement
and Prospectus, and the Company has and will have an authorized and outstanding
capital stock as set forth in the Registration Statement and Prospectus; the
Company has full power and authority to enter into this Agreement; the Company
owns, free and clear of any lien, charge or encumbrance, all of the unissued
capital stock as set forth in the Registration Statement and Prospectus; and
the Company is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which it owns or leases real property or transacts
business requiring such qualification, and in which the failure to so qualify
would have a material adverse effect on the Company.

2.8 Legality of Outstanding Common Stock. At the Closing Date,
the Company will have an authorized capitalization of 20,000,000 shares of
Common Stock, $0.01 par value per share, of which no more than 4,175,300 shares
(excluding shares issued pursuant to exercise of

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<PAGE> 11
the over-allotment option described in Section 4.1) will be issued and
outstanding, and no shares of which will be held in the treasury of the
Company. At the Closing Date, the outstanding shares of Common Stock will have
been duly and validly authorized and issued, and will be fully paid and
nonassessable. The outstanding shares of Common Stock conform to all
statements with regard thereto contained in the Registration Statement and
Prospectus. No offers or sales of the Common Stock or other securities have
been made by the Company in violation of the 1933 Act. On the Effective Date,
and through and including the Closing Date, there will be no outstanding
options, warrants or other rights (however characterized or described) to
purchase any shares of the Common Stock or securities convertible into Common
Stock, except as described in the Registration Statement and Prospectus.

2.9 Legality of Securities. The Shares, the Representative's
Warrant, and the Representative's Warrant Stock have been duly and validly
authorized and, when issued and delivered against payment therefor as provided
in this Agreement, will be validly issued, fully paid and nonassessable. Said
securities, upon issuance, will not be subject to any preemptive right of any
stockholder of the Company, and no preemptive rights will exist with respect to
any securities of the Company through the Closing Date or until the expiration
of the Representative's Warrant Period (hereinafter defined). The
Representative's Warrant, when sold and delivered, will constitute a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms. A sufficient number of shares of the Common Stock have been
reserved for issuance as Representative's Warrant Stock upon exercise thereof.
The Shares, the Representative's Warrant and the Representative's Warrant Stock
will conform to all statements with regard thereto in the Registration
Statement and Prospectus.

2.10 Prior Sales. No shares of the Common Stock or other
securities of the Company have been sold by the Company, or by or on behalf of
or for the benefit of any officer, director, predecessor, affiliate, promoter,
associate, principal security holder, Representative or other controlling
person of the Company since three years prior to the date hereof, except as set
forth in the Registration Statement.

2.11 Litigation. Except as set forth in the Registration Statement
and Prospectus, there is, and at the Closing Date there will be, no litigation,
cause of action, suit or proceeding before any court or governmental agency,
authority, or body pending or, to the knowledge of the Company, threatened,
which might result in judgments against the Company not adequately covered by
insurance or which collectively might result in any material adverse change in
the condition (financial or otherwise), the business or the prospects of the
Company or would materially affect the properties or assets of the Company.

2.12 Representative's Warrant. Upon delivery and receipt of
payment for the Representative's Warrant to be sold by the Company as set forth
in Section 4.4 of the Agreement, the Representative and its assignees will
receive good and marketable title thereto, free and clear of all liens,
encumbrances, charges and claims whatsoever; and the Company will have on the
Effective Date and at the time of delivery of the Representative's Warrant,
full legal

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<PAGE> 12
right, power and authority required by law to issue, sell, transfer and deliver
the Representative's Warrant in the manner provided hereunder.

2.13 Finder. The Company represents that no finder's fee has been
or will be paid in connection herewith. It is understood that, should a claim
be made for any finder's fee in connection with the sale of the Shares and
based upon any agreement by the Company, the Company will indemnify the
Representative with respect to any such claim.

2.14 Exhibits. There are no contracts, instruments or other
documents which are required by the 1933 Act or by the Rules and Regulations to
be filed as exhibits to the Registration Statement which have not been so
filed; and each contract or other instrument (however characterized or
described) to which the Company is a party and to which reference is made in
the Registration Statement and Prospectus has been duly and validly executed,
is in full force and effect in all material respects and is enforceable against
the parties thereto in accordance with its terms, and none of such contracts or
instruments has been assigned by the Company; and the Company knows of no
present situation or condition or fact which would prevent compliance by the
parties with the terms of such contracts or instruments as amended to date.
Except for amendments or modifications of such contracts or instruments in the
ordinary course of business, the Company has no intention of exercising any
right which would cause any other party to the contract to cancel any of their
obligations under any of such contracts or instruments, and the Company has no
knowledge that any other party to any of such contracts or instruments has any
intention not to render full performance thereunder.

2.15 Tax Returns. The Company has filed all federal, foreign,
state and local tax returns which are required to be filed, and has paid all
taxes shown on such returns and on all assessments received by it to the extent
such taxes have become due. All taxes with respect to which the Company is
obligated have been paid or adequate accruals have been set up to cover any
taxes which remain unpaid.

2.16 Property. Except as otherwise set forth in, or contemplated
by, the Registration Statement and Prospectus: (i) the Company has good title,
free and clear of all liens, encumbrances and defects, except liens for current
taxes not due and payable, to all real and personal property and assets
described in the Registration Statement and Prospectus as being owned by the
Company, subject only to such exceptions as are not material and do not affect
adversely the present or prospective business of the Company; and (ii) the
properties, including equipment, referred to in the Registration Statement and
Prospectus as being held under lease or option by the Company, are held under
valid, subsisting and enforceable leases or options with only such exceptions
which collectively are not material and do not affect adversely the present or
prospective business of the Company.

2.17 Use of Proceeds. The Company shall apply the proceeds from
the sale of the Shares solely and exclusively to the purposes set forth in the
Registration Statement and Prospectus.

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<PAGE> 13
2.18 Authority. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action, and this
Agreement is the valid and binding obligation of the Company enforceable
against it in accordance with its terms.

2.19 Subsidiaries. The Company has no subsidiaries except for
those described on Schedule 2.19 hereto. Unless the context expressly requires
otherwise, all references in this Agreement to the Company shall refer to the
Company and all of its Subsidiaries.

2.20 Availability of Information Concerning the Company. All
documents and other information relating to the Company's affairs shall be made
available upon request to the Representative and its counsel at the
Representative's office or at the office of its counsel, and copies of any such
documents shall be furnished upon request to the Representative or its counsel.
Prior to the Effective Date, the contents of all such documents and other
information shall be subject to the approval of the Representative and, if not
so approved, the Representative may choose not to proceed with the Offering.
Notice of disapproval of any document shall be given to the Company or counsel
to the Company within a reasonable time after the document is made available to
the Representative or its counsel. Included within the documents to be made
available are the Company's articles of incorporation, as amended, and related
charter documents, bylaws and amendments thereto, minutes of all meetings and
other actions taken by the Company's incorporators, directors and stockholders,
all financial statements, correct copies of any material contracts, licenses,
leases or agreements to which the Company is a party or by which it or its
property is bound, including contracts for the sale of products or services in
the normal course of business and including any employee (including officers
and/or directors) incentive plans and any other type of fringe benefit plan, of
whatever nature, and copies of all patents, patent applications, trademarks and
trademark applications in which the Company may have an interest.

2.21 Suspension Orders. The Company shall advise the
Representative immediately and confirm in writing the receipt of any threat of,
or the initiation of any steps or proceedings which would impair or prevent the
right to offer any of the securities, or the issuance by the Commission or
other regulatory authority of any stop order or suspension order or other
prohibition preventing or impairing the proposed transactions.

2.22 Transfer Agent. The Company has appointed American Securities
Transfer & Trust, Incorporated, 1825 Lawrence Street, Suite 444, Denver,
Colorado 80202, as its transfer agent (the Transfer Agent") for the Common
Stock.

2.23 Employment Agreements. The Company has entered into and
delivered to the Representative employment agreements with each of Esmond T.
Goei, Douglas S. Zorn and James S. Gillespie, which employment agreements
specifically include limits on bonus compensation, noncompetition covenants and
confidentiality provisions satisfactory to the Representative. Voice Plus,
Inc. has entered into and delivered to the Representative employment agreements
with each of Diane E. Nowak and Bradley J. Eickman, which employment agreements
specifically include limits on bonus compensation, noncompetition

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<PAGE> 14
covenants and confidentiality provisions satisfactory to the Representative.
The Company has obtained a key-man life insurance policy on the life of Esmond
T. Goei, in the amount of $1,000,000.

2.24 Florida Compliance. The Company has complied and will comply
with all provisions of Florida Statutes Section 517.075 (Chapter 92-198, Laws
of Florida). Neither the Company, nor any affiliate thereof, does business
with the government of Cuba or with any person or affiliate located in Cuba.

SECTION 3

Representations and Warranties of the Selling Shareholder.

In order to induce the Representative to enter into this Agreement,
the Selling Shareholder hereby represents and warrants to, and agrees with, the
Representative as follows:

3.1 Ownership of Selling Shareholder Shares. The Selling
Shareholder owns all issued and outstanding shares of Common Stock of Voice
Plus, Inc. and at the Closing Date will own the Selling Shareholder Shares free
and clear of any liens, charges, claims, security interests or encumbrances.

3.2 Validity of Agreement. The Agreement has been duly
authorized, executed and delivered by Selling Shareholder and the sale of the
Selling Shareholder Shares by the Selling Shareholder and the compliance by the
Selling Shareholder with all of the provisions of this Agreement and the
consummation of the transactions contemplated herein will not conflict with,
result in a breach or violation of, or constitute, either by itself or upon
notice or passage of time or both, a default under any indenture, mortgage,
deed of trust, loan agreement, lease, franchise, license or other contract,
agreement or instrument to which the Selling Shareholder is a party or by which
the Selling Shareholder is bound or to which any property or assets of the
Selling Shareholder are subject.

3.3 Representations and Warranties. To the knowledge of the
Selling Shareholder, all of the representations and warranties of the Company
contained in this Agreement are true and correct as of the date hereof.

3.4 Accuracy of Registration Statement and Related Prospectus.
The material set forth under "Principal and Selling Stockholders" in the
Prospectus, insofar as it relates to the Selling Shareholder, is accurate and
complete.

3.5 Payment of Costs and Expenses. The Selling Shareholder shall
be responsible for and pay a pro rata share of the non-accountable expense
allowance of the Representative (equal to 3% of the gross proceeds derived from
the sale of the Selling Shareholder Shares) and the Representative's discount
from the Offering Price (equal to 7% of the gross proceeds derived

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<PAGE> 15
from the sale of the Selling Shareholder Shares). Selling Shareholder shall be
entitled to receive only the purchase price specified in Section 4.1 for the
Selling Shareholder Shares.

SECTION 4

Issue, Sale and Delivery of the Shares

4.1 Appointment of Representative. The Company hereby agrees to
sell 1,700,000 Shares and the Selling Shareholder agrees to sell 600,000 Shares
to the Members, severally and not jointly, and each Member, upon the basis of
the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees to purchase from the Company, severally
and not jointly, the number of Shares set forth opposite their respective names
in Schedule I attached hereto at a purchase price of $____ per Share. The
Company hereby grants to the Underwriting Group an over-allotment option for a
period of thirty (30) days after the Effective Date to purchase at a purchase
price of $____ per Share up to 345,000 additional Shares of Common Stock. Such
Shares shall be purchased for the account of each Member as nearly as
practicable in the proportion that the number of Shares set opposite the name
of each of the Members in Schedule I attached hereto bears to the 2,300,000
Shares purchased prior to the exercise of the over-allotment option. The
obligations of the Members hereunder are subject to, among other things: (a)
notice from the Commission of effectiveness of the Registration Statement; (b)
receipt of written advice from the NASD, pursuant to Section 1 of Article III
of the NASD's Rules of Fair Practice, approving the fairness and reasonableness
of the underwriting arrangements in connection with the sale of the Shares; (c)
qualification of the sale of the Shares under applicable state laws and the
absence of any action by any government body, agency or official prohibiting
the sale of the Shares; and (d) the terms and conditions contained in this
Agreement and in the Registration Statement and Prospectus covering the sale of
the Shares to which this Agreement relates.

4.2 Default by a Member. If for any reason one or more Members
shall fail or refuse (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 10 hereof) to
purchase and pay for the number of Shares agreed to be purchased by such
Member, the Company shall immediately give notice thereof to the
Representative, and the non-defaulting Members shall have the right within
twenty-four (24) hours after the receipt by the Representative of such notice,
to purchase or procure one or more other Members to purchase, in such
proportions as may be agreed upon between the Representative and such
purchasing Member or Members, and upon the terms herein set forth, the Shares
which such defaulting Member or Members agreed to purchase. If the non-
defaulting Members fail to make such arrangements with respect to all such
Shares, the number of Shares which each non-defaulting Member is otherwise
obligated to purchase under the Agreement shall be automatically increased pro
rata to absorb the remaining Shares which the defaulting Member or Members
agreed to purchase; provided, however, that the non-defaulting Members shall
not be obligated to purchase the Shares which the defaulting Member or Members
agreed to purchase if the aggregate number of such Shares exceeds ten percent
(10%) of the total number of Shares which all Members agreed to purchase
hereunder. If the total number of

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<PAGE> 16
Shares which the defaulting Member or Members agreed to purchase shall not be
purchased or absorbed in accordance with the two preceding sentences, the
Company shall have the right, within twenty-four (24) hours next succeeding the
twenty-four (24) hour period above referred to, to make arrangements with other
underwriters or purchasers satisfactory to the Representative for the purchase
of such Shares on the terms herein set forth. In any such case, either the
Representative or the Company shall have the right to postpone the Closing
determined as provided in Section 4.6 hereof for not more than seven (7)
business days after the date originally fixed as the Closing pursuant to said
Section in order that any necessary changes in the Registration Statement, the
Prospectus or any other documents or arrangements may be made. If neither the
non-defaulting Members nor the Company shall make arrangements within the
twenty-four (24) hour periods stated above for the purchase of all the Shares
which the defaulting Member or Members agreed to purchase hereunder, this
Agreement shall be terminated without further act or deed and without any
liability on the part of the Company to any non-defaulting Member and without
any liability on the part of any non-defaulting Member to the Company.

Nothing contained in this Section 4.2 shall relieve any defaulting
Member of its liability, if any, to the Company or to the remaining Members for
damages occasioned by its default hereunder.

4.3 Offering Price. After the Commission notifies the Company
that the Registration Statement has become effective, the Members propose to
offer the Shares to the public at an Offering Price of $____ per Share as set
forth in the Prospectus. The Members may allow such concessions and discounts
upon sales to selected dealers as may be determined from time to time by the
Representative. Payment for the Shares (including Shares included in the over-
allotment option) which the Representative agrees to purchase shall be made to
the Company and to the Selling Shareholder or to their order by certified or
official bank check or checks in the amount of the purchase price by or on
behalf of the Representative at the offices of Dorsey & Whitney LLP in Denver,
Colorado, or by wire transfer in the amount of the purchase price pursuant to
instructions delivered by the Company and Selling Shareholder, upon delivery to
the Representative of certificates for the Shares in definitive form in such
numbers and registered in such names as the Representative shall request in
writing at least two (2) full business days prior to such delivery.

4.4 Principal Terms of Representative's Warrant. Upon payment for
the Shares, at the Closing the Company shall sell and deliver to the
Representative and/or its designees, the Representative's Warrant to purchase
230,000 shares of Common Stock, for a purchase price of $100.00. The
Representative's Warrant shall be in the form attached as Exhibit A hereto and
shall be in form and content acceptable to counsel for the Representative; and
the Representative's Warrant shall evidence the right of the Representative to
purchase 230,000 shares of the Common Stock and shall be exercisable commencing
one (1) year after the Effective Date and for a period of four (4) years
thereafter (such four (4) year period shall be known as the "Representative's
Warrant Period") and shall contain antidilution and adjustment provisions
acceptable to the Representative. The Representative's Warrant shall be
exercisable at an exercise price of $______ per share (120% of the Offering
Price). On the fifth anniversary of the

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<PAGE> 17
Effective Date, the Representative's Warrant shall expire. The Company will
not be obligated to sell and deliver the Representative's Warrant, and the
Representative will not be obligated to purchase and pay for the
Representative's Warrant, except upon payment for the Shares. The
Representative's Warrant to be acquired by the Representative and/or its
designees shall be restricted from sale, transfer, exercise, assignment or
hypothecation for twelve (12) months after the Effective Date, except to
officers of the Representative and to Members and their respective officers or
partners or other designees. Such designation will only be made prior to the
Effective Date if the Representative determines that such designation would not
violate the interpretation of the Board of Governors of the NASD relating to
the review of corporate financing arrangements. The Representative has
disclosed to the Company, and the Company has agreed, that the Representative
may transfer, after twelve (12) months from the date of the Representative's
Warrant, a portion or all of the Representative's Warrant to certain persons,
including, but not limited to, the Representative's officers, directors,
stockholders, employees, or registered representatives. The Representative and
the Company agree that such transfers will only be made if they do not violate
the registration provisions of the 1933 Act. The Representative's Warrant
Stock will be registered by the Company in the Registration Statement.

4.5 Inspection of Certificates. For the purpose of expediting the
checking and packaging of the certificates for the securities comprising the
Shares and the Representative's Warrant, the Company agrees to make the
certificates available for inspection by the Representative at the main office
of the Representative in Denver, Colorado, at least one (1) full business day
prior to the proposed delivery date.

4.6 Closing. The time and date of delivery and payment hereunder
is herein called the "Closing Date". The Company and the Selling Shareholder
will deliver the Shares to the Representative at the offices of Dorsey &
Whitney LLP in Denver, Colorado or at such other location as may be specified
by the Representative, at 10:00 a.m. New York time, against payment of the
purchase price, on the third full business day after commencement of the
Offering or, if the Offering commences after 4:30 p.m., New York time, on the
fourth full business day after commencement of the Offering, or such earlier
time as may be agreed upon by the Representative and the Company. Should the
Representative elect to exercise any part of the over-allotment option pursuant
to Section 4.1 hereof, the time and date of delivery and payment for said over-
allotment Shares shall be as mutually agreed, but not later than the thirtieth
(30th) calendar day after the Effective Date. Said date is hereinafter
referred to as the "Over-allotment Closing Date."

4.7 Representative's Expense Allowance. It is understood that the
Company will reimburse the Representative for its expenses on a non-accountable
basis in the amount of three percent (3%) of the gross proceeds from the sale
of the Shares (i.e., $____ per Share), including proceeds from the sale of the
Shares included in the over-allotment option, less a credit to the Company at
Closing of $20,000. In no event shall this expense allowance be refundable or
accountable, except as provided in the next paragraph.

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<PAGE> 18
The Company and the Representative mutually acknowledge that the
Company paid the Representative $20,000 towards the Representative's
nonaccountable expense allowance, and the Representative hereby acknowledges
receipt of such portion of the nonaccountable expense allowance. At the
Closing and, if applicable, on the Over-allotment Closing Date, the Company
shall pay to the Representative the unpaid balance of such expense allowance to
defray the expenses incurred by the Representative in connection with the
Offering. The Representative's expenses shall include, but are not to be
limited to, the fees of Representative's counsel, plus any additional expenses
and fees, travel expenses, postage expenses, duplication expenses, long
distance telephone expenses and other expenses incurred by the Representative
in connection with the proposed sale of the Shares.

4.8 Mutual Warranty. The parties represent and warrant that as of
the date hereof and as of the Closing Date, the representations and warranties
herein contained and the statements contained in all certificates delivered by
any party to another pursuant to this Agreement shall in all respects be true
and correct.

4.9 Sales Reports. The Representative covenants that reasonably
promptly after the Closing Date it will supply the Company with all information
requested in writing by the Company and required from the Representative for
the completion of Form SR as may be required by Rule 463 of Regulation C and
such additional information as the Company may reasonably request to be
supplied to the securities commissions of the states in which the Shares have
been qualified for sale.

4.10 Re-offers By Selected Dealers. On each sale by the
Representative of any of the Shares through such dealers and institutions
agreeing to purchase Shares under the Selected Dealers Agreement with the
Representative (each, a "Selected Dealer"), the Representative shall require
the Selected Dealer purchasing any such Shares to agree to re-offer the same on
the terms and conditions of the Offering set forth in the Registration
Statement and Prospectus.

SECTION 5

Registration Statement and Prospectus

5.1 Representative's Copies. The Company shall deliver to the
Representative, without charge, two (2) signed copies of the Registration
Statement including all financial statements and exhibits and amendments or
supplements thereto as filed with the Commission and shall deliver without
charge to the Representative an additional seven (7) conformed copies of the
Registration Statement and any amendments or supplements thereto, including
such financial statements and exhibits. The signed copies of the Registration
Statement so furnished to the Representative shall include signed copies of any
and all consents and certificates of the independent public accountants
certifying to the financial statements included in the Registration Statement
and Prospectus and signed copies of any and all consents and certificates of
any other person whose profession gives authority to statements made by him and
who is named in the Registration Statement or Prospectus as having prepared,
certified or reviewed any part thereof.

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<PAGE> 19
5.2 Copies of Preliminary Prospectus and Prospectus. Prior to the
Effective Date, the Company shall procure at its expense and shall deliver to
Members and to other broker/dealers, as many printed copies of each Preliminary
Prospectus filed with the Commission bearing the statement required by Rule
481(b)(2) of Regulation C under the 1933 Act as may be required by the
Representative. The Company consents to the use of the same by Members and by
dealers prior to the Effective Date. In addition, on and after the Effective
Date, the Company shall procure at its expense as many printed copies of the
Prospectus at such addresses as the Representative may direct for the purposes
contemplated by this Agreement and shall deliver such printed copies of the
Prospectus within one (1) business day after the Effective Date.

5.3 Post-Effective Amendments. If, during such period of time as
in the opinion of the Representative or its counsel a Prospectus relating to
the sale of the Shares contemplated hereby is required to be delivered under
the 1933 Act, any event occurs or any event known to the Company relating to or
affecting the Company shall occur as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or if it
is necessary at any time after the Effective Date to amend or supplement the
Prospectus to comply with the 1933 Act, the Company shall forthwith notify the
Representative thereof and shall prepare and file with the Commission such
further amendment to the Registration Statement or supplemental or amended
Prospectus as may be required and shall furnish and deliver to the
Representative and to others whose names and addresses are designated by the
Representative, all at the cost of the Company, a reasonable number of copies
of the amended or supplemented Prospectus which, as so amended or supplemented,
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the Prospectus not misleading in the
light of the circumstances existing when it is delivered to a purchaser or
prospective purchaser and which will comply in all respects with the 1933 Act;
and in the event the Representative shall be required to deliver a Prospectus
ninety (90) days or more after the Effective Date, upon request of the
Representative, the Company shall prepare promptly such Prospectus as may be
necessary to permit compliance with the requirements of Section 10 of the 1933
Act.

5.4 Use of Prospectus. The Company authorizes the Members in
connection with the distribution of the Shares, and all dealers to whom any of
the Shares may be sold to or through the Members to use the Prospectus as from
time to time amended or supplemented in connection with the offering and sale
of the Shares and in accordance with the applicable provisions of the 1933 Act,
the applicable Rules and Regulations and the applicable state securities or
Blue Sky laws.

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<PAGE> 20
SECTION 6

Covenants of the Company

The Company covenants and agrees with the Representative and other
Members that:

6.1 Filing of Amendments. After the date hereof, the Company will
not at any time, whether before or after the Effective Date, file any amendment
or supplement to the Registration Statement or Prospectus, a copy of which
amendment or supplement the Representative shall not previously have been
furnished a reasonable time prior to the proposed filing thereof, and as to
which the Representative or its counsel shall have reasonably objected in
writing on the ground that it is not in compliance with the 1933 Act or the
Rules and Regulations. The Company agrees to supply the Representative's
counsel with the contents of any oral comments and copies of all comments,
correspondence and orders received from the Commission in connection with the
filing of any Registration Statement or amendment or supplement thereto.

6.2 Declaration of Effectiveness. The Company shall use its best
efforts to cause the Registration Statement and any post-effective amendment
subsequently filed to become effective as promptly as practicable, but shall
not obtain an Effective Date or allow the Registration Statement to become
effective without the approval of the Representative. The Company will
promptly advise the Representative, and will confirm such advice in writing:

(1) when the Registration Statement shall have become
effective and when any amendment thereto shall have become effective
and when any amendment of or supplement to the Prospectus shall have
been filed with the Commission;

(2) when the Commission shall make a request or
suggestion for any amendment to the Registration Statement or the
Prospectus or for additional information and the nature and substance
thereof;

(3) of the issuance by the Commission of any order
suspending the effectiveness of the Registration Statement pursuant to
Section 8 of the 1933 Act or of the initiation of any proceeding for
that purpose;

(4) of the happening of any event which, in the judgment
of the Company, makes any material statement in the Registration
Statement or Prospectus untrue or which requires the making of any
change in the Registration Statement or Prospectus in order to make
the statements therein not misleading; and

(5) of the refusal to qualify or the suspension of the
qualification of the Shares for offering or sale in any jurisdiction
or of the institution of any proceeding for any of such purposes.

The Company shall use every reasonable effort to prevent the issuance of any
such order or of any order preventing or suspending such use, to prevent any
such refusal to qualify or any such

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<PAGE> 21
suspension and to obtain as soon as possible a lifting of any such order, the
reversal of any such refusal and the termination of any such suspension.

6.3 Amendments at the Request of the Representative. The Company
shall prepare and file promptly with the Commission, upon the request of the
Representative, such amendments or supplements to the Registration Statement
and Prospectus in form satisfactory to counsel to the Company as, in the
opinion of counsel to the Representative, may be necessary or advisable in
connection with the sale of the Shares and will use its best efforts to cause
the same to become effective as promptly as possible.

6.4 Blue Sky. (1) The Company shall, at its sole cost and expense
and when and as requested by the Representative, apply for and qualify the sale
of the Shares in all states in which the Representative reasonably requests in
order to qualify under such state's Blue Sky laws. The Company agrees that the
Representative will instruct its counsel to make all of the appropriate
filings, and the Company agrees to advance to the Representative the estimated
attorneys' fees of the Representative incurred in connection therewith and to
pay any balance of such fees promptly upon the Representative's request
therefor. The maximum number of Shares to be offered in the entire offering
shall be registered in each state (or if sales will be permitted by exemption
rather than registration, the exemption shall be obtained for such maximum
number of Shares), unless the Representative agrees otherwise in writing. The
Company will advance to the Representative all filing fees for all state
filings. The Company will continue such qualifications in effect so long as
required for the purposes of the sale of the Shares. Copies of the
applications for the registration of securities filed with the various states
shall be supplied to the Company's and Representative's counsel, and copies of
all comments and orders received from the various states will be supplied to
Company's and Representative's counsel. (2) No less than one week prior to the
expected Effective Date of the Registration Statement, and immediately prior to
the release of the Preliminary Prospectus, Representative's counsel shall
prepare and deliver to both parties and other counsel, a Preliminary Blue Sky
Memorandum, including, among other things, all states wherein the proposed sale
of the Shares has been qualified or registered for sale and the number of
Shares registered in any such state, and all states where an exemption from
qualification or registration is available, and the basis thereof. Immediately
prior to the Effective Date of the Registration Statement, counsel who prepared
the Blue Sky filings shall prepare and deliver to both parties and other
counsel a final Blue Sky Memorandum, including, among other things, all states
wherein the offering may be sold to the public and all states where an
exemption from qualification or registration is available, the basis thereof,
and the number of Shares which may be sold in each such state.

6.5 Further Reports. The Company, at its own expense, shall
prepare and give and shall continue to give such financial statements and other
information to the Commission and the proper public bodies of the states in
which the Shares may be qualified as may be required from time to time by the
Commission and such proper public bodies and will furnish the Representative
with copies thereof promptly upon the filing thereof with the Commission or
such proper public bodies.

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<PAGE> 22
6.6 Reports to Representative. During the period of five (5)
years from the Closing Date, the Company shall deliver to the Representative
copies of each annual report of the Company, and also shall deliver to the
Representative:

(1) within ninety (90) days (or such later period for
filing of the Company's Annual Report on Form 10-K as may be permitted
under Rule 12b-25) after the close of each fiscal year of the Company,
a financial report of the Company on a consolidated basis (if
applicable) and a similar financial report of all unconsolidated
subsidiaries, if any, all such reports to include a balance sheet as
of the end of the preceding fiscal year, an income statement, a
statement of cash flow, all to be in reasonable detail and certified
by independent public accountants who may, however, be the regularly
employed independent public accountant of the Company;

(2) within forty-five (45) days (or such later period for
filing of the Company's Quarterly Report on Form 10-Q as may be
permitted under Rule 12b-25) after the end of each quarterly fiscal
period of the Company, other than the last quarterly fiscal period in
any fiscal year, copies of the consolidated (if applicable) income
statement and statement of changes in financial condition for that
period and the balance sheet as of the end of that period of the
Company and the income statement, statement of changes in financial
condition and the balance sheet of each unconsolidated subsidiary, if
any, of the Company for that period, all subject to year-end
adjustment, certified by the principal financial or accounting officer
of the Company;

(3) copies of all other statements, documents or other
information which the Company shall mail or otherwise make available
to any class of its security holders or shall file with the Commission
pursuant to the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act") or otherwise;

(4) copies of all news, press or public information
releases when made; and

(5) subject to such assurances of confidentiality as the
Company may request with respect to any non-public information, upon
request in writing from the Representative, furnish to the
Representative such other information as reasonably may be requested
with reference to the property, business and affairs of the Company.

If the Company shall fail to furnish to the Representative financial
statements as provided in subparagraphs (1) and (2) above within the times
specified, and the Company has not received an extension of such time for
filing or is not in the immediate process of preparing such filing, the
Representative shall have the right to have such financial statements prepared
by independent public accountants of its own choosing and the Company shall
furnish such independent public accountants such data and assistance and access
to such records as they may reasonably require to enable them to prepare such
statements and shall pay their reasonable fees and expenses in preparing the
same.

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<PAGE> 23
6.7 Expenses of Offering. The Company shall pay, whether or not
the transactions contemplated hereunder are consummated or this Agreement is
prevented from becoming effective or is terminated, all costs and expenses
incident to the performance of its obligations under this Agreement, including
all expenses incident to the authorization, issuance and delivery of the Shares
and Representative's Warrant, any original issue taxes in connection therewith,
all transfer taxes, if any, incident to the initial sale of the Shares, the
Representative's Warrant and Representative's Warrant Stock, if such sales are
consummated, the initial fees and expenses of the Transfer Agent, if any, the
fees and expenses of the Company's counsel and accountants, the costs and
expenses incident to the preparation, printing and filing under the 1933 Act
and with the NASD of the Registration Statement and Prospectus and any
amendments or supplements thereto, the cost of preparing and filing all
exhibits to the Registration Statement, this Agreement, the Blue Sky
Memorandums and the Questionnaires to officers and directors of the Company for
the obtaining of information for the Registration Statement and Preliminary and
final Prospectus, the cost of printing and furnishing to the Representative
copies of the Registration Statements and copies of the Preliminary and final
Prospectus as herein provided, and the cost of qualifying the Shares under the
state securities or Blue Sky laws as provided in Section 6.4 herein, including
filing fees. In addition to the above, the Company shall also pay all
expenses, up to a maximum of $15,000, incurred in connection with the placement
of a "tombstone" advertisement in the national edition of The Wall Street
Journal, Investor's Business Daily, Investment Dealers Digest and the Rocky
Mountain News or any other periodical determined appropriate by the
Representative, after Closing of the Offering. For a period of twelve (12)
months following the Effective Date, the Company will be responsible for
reasonable travel expenses for visits to or on behalf of the Company by a
representative of the Representative when necessarily occasioned by material
adverse changes or events in the business of the Company. These expenses shall
be paid promptly by the Company upon receipt of a billing from the
Representative. The Company, at its sole expense, shall also make a
representative of its management available for the Representative's corporate
manager's meeting after the completion of the Offering, and the Company shall
be responsible for all reasonable expenses related to such meeting.

6.8 Stockholder Reports. The Company shall, as promptly as
possible after each annual fiscal period, render and distribute reports to its
stockholders which will include audited statements of its operations and cash
flow during such period and its balance sheet as of the end of such period.

6.9 1933 Act Reporting. Within the time during which the
Prospectus is required to be delivered under the 1933 Act, the Company shall
comply at its own expense with all requirements imposed upon it by the 1933
Act, the Rules and Regulations as from time to time in force and any order of
the Commission, so far as is necessary to permit the continuance of offers,
sales and trading of the Shares.

6.10 Use of Proceeds. The Company will apply the net proceeds from
the sale of the Shares solely and exclusively in the manner set forth in the
Registration Statement and Prospectus.

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<PAGE> 24
6.11 Transfer Sheets. The Company shall issue at the Closing
irrevocable instructions to the Transfer Agent to provide the Representative,
for its confidential use and at the Company's expense, reasonable access to its
daily transfer sheets (provided such access does not result in expense to the
Company) and, annually upon request of the Representative to the Transfer Agent
therefor (but more frequently in the event of an investigation requiring the
same or inquiry therefor by the Commission or other government body or agency
or by the NASD), with lists of stockholders of the Company, all for a period of
five (5) years after the Closing Date.

6.12 Information About the Company. The Company shall deliver to
the Representative the documents described in Section 2.20. In addition, at
Closing, the Company shall deliver to the Representative or its counsel,
certificates of good standing in each state where the Company does business,
certificates as to tax status, incumbency or any other certificate or document
which the Representative may reasonably require prior to Closing.

6.13 Due Diligence Investigation. Prior to the Closing Date, the
Company shall cooperate with the Representative in such investigation as it may
make or cause to be made of all the properties, business and operations of the
Company in connection with the sale of the Shares, and the Company shall make
its officers and directors available to the Representative for interrogation,
without cost or expense, in connection therewith, and the Company shall make
available such information in its possession as the Representative may
reasonably request.

6.14 Transfer Agent. During the period three years after the
Closing Date, the Company shall not change or terminate the appointment of the
Transfer Agent pursuant to Section 2.22 hereto, without first obtaining the
written consent of the Representative, which consent shall not be unreasonably
withheld.

6.15 Conditions Precedent. The Company shall use due diligence to
comply or cause to be complied with all conditions precedent to the several
obligations of the Representative specified in this Agreement.

6.16 Sales Reports. If applicable, the Company shall file with the
Commission all required reports on Form SR in accordance with the provisions of
Rule 463 of Regulation C under the 1933 Act and shall provide a copy of each
such report to the Representative and its counsel.

6.17 1934 Act Registration. Simultaneously with a declaration of
effectiveness of the Registration Statement, the Company, at its sole cost and
expense, shall register the Common Stock by filing with the Commission,
pursuant to Section 12(g) of the 1934 Act, a Registration Statement on Form 10,
or Form 8-A, or other appropriate filing, containing such information and
documents as the Commission may specify. Two (2) signed copies of the
Registration Statement on Form 10, or Form 8-A, or other appropriate filing,
including the certified financial statements and other required exhibits, shall
be supplied to the Representative prior to the filing thereof. In addition, any
amendments or supplements as may be made by the Company or required by the
Commission to the Registration Statement on Form 10, or Form 8-A, or other

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<PAGE> 25
appropriate filing, will be furnished to the Representative after the filing
thereof with the Commission. The Company shall thereafter comply with all
periodic reporting and proxy solicitation requirements imposed by the
Commission pursuant to the 1934 Act, so long as the Company is legally required
to do so and shall furnish the Representative promptly with copies of all
materials filed with the Commission pursuant to the 1934 Act or otherwise
furnished to stockholders of the Company. In addition, the Company agrees to
qualify, simultaneously with a declaration of effectiveness of the Registration
Statement, and maintain such qualification with respect to its Common Stock for
listing on the Nasdaq SmallCap Market ("Nasdaq SmallCap"). The Company shall
also maintain its listing and qualification for listing in the Standard &
Poor's Corporation Records so as to afford the availability of secondary
trading under the Blue Sky laws of various states.

6.18 No Material Change. The Company shall not, except as
described in the Prospectus or with approval of the Representative, until (a)
the termination of this Agreement prior to the Closing pursuant to Sections
10.1 or 10.2, or (b) the expiration of ninety (90) days after the Effective
Date, whichever occurs later:

(1) undertake or authorize any change in its capital
structure or authorize or issue or permit any public offering of any
additional shares of its capital stock, except as herein provided;

(2) authorize, create, issue or sell any funded
obligations, notes or other evidences of indebtedness, except in the
ordinary course of business and maturing not more than twelve (12)
months from the date thereof; or

(3) consolidate, merge or form a joint venture with or
into or acquire any other enterprise (whether in the form of a
corporation or otherwise) or create any mortgage or lien upon any of
its properties or assets other than in the ordinary course of
business.

6.19 Bound Volumes. The Company shall supply to the Representative
and the Representative's counsel, at the Company's cost, two sets of bound
transcripts each containing all of the Closing materials within a reasonable
time after the Closing Date, not to exceed six (6) months.

6.20 Financial Consulting Agreement. At the time of Closing, the
Company shall enter into a financial consulting agreement with the
Representative in the form attached hereto as Exhibit B, pursuant to which the
Representative shall receive a consulting fee of $65,000 per annum. The
services of the Representative pursuant to the agreement shall include, but
shall not be limited to, advising the Company in connection with possible
acquisitions, stockholder relations (including the preparation of the annual
report), long term financial planning, corporate reorganizations, expansion and
capital structure and other financial assistance. The term of the consulting
agreement shall be one (1) year commencing at the completion of this Offering.
The

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<PAGE> 26
Representative has been paid $25,000 of this fee and will receive the balance
of $40,000 at the completion of this Offering.

6.21 Restriction on Sale of Securities. Prior to the declaration
of effectiveness of the Registration Statement, the Company will obtain from
the following identified stockholders, and deliver to the Representative,
agreements from said persons concerning restrictions on future sales of
securities owned by them immediately prior to the declaration of effectiveness
of the Registration Statement by the Commission: Selling Shareholder, Kent
Cossey, Esmond T. Goei, Douglas S. Zorn, Burton Kanter, Gary L. Nemetz, Richard
H. Williams, William H. Brehm and Linda K. Wackwitz. All of said agreements
shall be on a form for which prior approval has been obtained from the
Representative, but shall include agreements that such securities and
underlying securities may not be publicly sold during the eighteen (18)-month
period following the Effective Date, without the prior written consent of the
Representative, which shall not be unreasonably withheld; provided, however,
that such securities may be sold during that time period, provided that such
sale or disposition is a privately negotiated transaction, that the purchaser
agrees in writing with the Representative to the provisions of the transferor's
written agreement with the Representative and the disposition is otherwise in
accordance with applicable securities laws. Notwithstanding the foregoing,
the number of shares owned by Kent Cossey equal to [100,000] Shares may be sold
at the six-month anniversary of the Effective Date and, subject to certain
agreements with the Company and the Representative, the number of shares owned
by Selling Shareholder equal to [150,000] Shares may be sold at the one year
anniversary of the Effective Date.

6.22 Public Relations Firm. The Company shall engage a public
relations firm, acceptable to the Representative, by the Effective Date of the
Registration Statement.

6.23 Board of Directors. For three years after the Effective Date,
the Company shall give written notice to the Representative of all Board of
Directors' meetings at the time such meeting is called and as such notice is
given to the Company's directors and the Representative shall be entitled to
have an observer attend all such Board of Directors' meetings, with any
expenses paid by the Company. Such observer shall be an affiliate of the
Representative.

SECTION 7

Indemnification

(a) The Company agrees to indemnify and hold harmless the
Representative and each person, if any, who controls the Representative, its
affiliated companies and each of the Representative's and such affiliated
companies' respective officers, directors, agents and controlling persons
(within the meaning of each of Section 20 of the 1934 Act and Section 15 of the
1933 Act) (each of the foregoing, including the Representative, is individually
referred to in this Section 7 as a "Representative" and collectively are
referred to as the "Representative") against any losses, claims, damages or
liabilities, joint or several, brought by a third party, to which such
Representative or each such controlling person may become subject, under the
1933

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<PAGE> 27
Act, the 1934 Act, the common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of, or are
based upon: (i) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto or made orally or in writing
to the Representative or to any representative of a Member, or the omission or
alleged omission to state in the Registration Statement, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
(provided that the Company shall not be liable to the Representative under the
indemnity agreement in this subsection (i) with respect to any Preliminary
Prospectus or Prospectus to the extent that any such loss, claim, damage or
liability (or action in respect thereof) results from the fact that such
Representative sold Common Stock to a person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
Preliminary Prospectus or Prospectus as then amended or supplemented if the
Company has previously furnished copies thereof to such Representative); or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any application or other statement executed by the Company or
based upon written information furnished by the Company and filed in any
jurisdiction in order to qualify the Shares under, or exempt the Shares or the
sale thereof from qualification under, the securities laws of such
jurisdiction, or the omission or alleged omission to state in such application
or statement a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and, subject to the provisions this Section 7, will
reimburse the Representative for any legal or other expenses reasonably
incurred by the Representative in connection with investigating, defending or
settling any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of, or is based upon, an
untrue statement, or alleged untrue statement, omission or alleged omission,
made in reliance upon and in conformity with information furnished to the
Company by, or on behalf of, the Representative in writing specifically for use
in the preparation of the Registration Statement or any such post effective
amendment thereof, any such Preliminary Prospectus or the Prospectus or other
application or statement filed under any states' securities, or blue sky, law
or any such amendment thereof or supplement thereto. This indemnity agreement
is in addition to any liability which the Company may otherwise have. Any
losses, claims, damages, liabilities or expenses for which the Representative
is entitled to indemnification under this Section 7 shall be paid by the
Company as such losses, claims, damages or expenses are incurred. At the
election of the Representative, and subject to subsection (d) below, the
Representative may request, and is entitled to receive, from the Company
reimbursement for legal or other expenses reasonably incurred on a monthly
basis, with the effect that the Company will pay in full each detailed invoice
for legal or other expenses incurred by the Representative within 30 days after
the date of presentation thereof by the Representative.

(b) The Selling Shareholder agrees to indemnify and hold
harmless the Representative and each person, if any, who controls the
Representative within the meaning of Section 15 of the Act against any losses,
claims, damages or liabilities, joint or several, to which

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<PAGE> 28
the Representative or each such controlling person may become subject, under
the Act, the Exchange Act, the common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of, or
are based upon any breach or violation of any representation or warranty of the
Selling Shareholder contained in Section 3 of this Agreement; and, subject to
the provisions of paragraph (d) of this Section 7, will reimburse the
Representative and each such controlling person for any legal or other expenses
reasonably incurred by the Representative or controlling person in connection
with investigating or defending against any such loss, claim, damage, liability
or action; provided, however, that the Selling Shareholder will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of, or is based upon, an untrue statement, or alleged untrue
statement, omission or alleged omission, made in reliance upon and in
conformity with information furnished to the Selling Shareholder or the Company
by, or on behalf of, the Representative in writing specifically for use in the
preparation of the Registration Statement or any such post effective amendment
thereof, any such Preliminary Prospectus or the Prospectus or other application
or statement filed under any states' securities, or blue sky, law or any such
amendment thereof or supplement thereto. Provided further that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates to
any untrue statement, alleged untrue statement, omission or alleged omission
made in any Preliminary Prospectus but eliminated or remedied in the
Prospectus, such indemnity agreement shall not inure to the benefit of the
Representative (or to the benefit of any person who controls such
Representative), if the person asserting any loss, claim, damage or liability
purchased the Shares from the Representative which are the subject thereof, was
not sent or given a copy of the Prospectus with, or prior to, the written
confirmation of the sale of such Shares to such person. This indemnity
agreement is in addition to any liability which the Selling Shareholder may
otherwise have. Notwithstanding the foregoing provisions of this Section 7(b),
in no event shall (i) the liability of the Selling Shareholder in respect of
the indemnification obligations hereunder exceed the net proceeds received by
the Selling Shareholder from the sale of the Selling Shareholder Shares, or
(ii) the indemnified party become entitled to indemnification from the Selling
Shareholder unless and until such indemnified party has exhausted all
indemnification and contribution rights that it may have against the Company
under this Agreement. Any losses, claims, damages, liabilities or expenses for
which the Representative is entitled to indemnification under this Section 7
shall be paid by the Selling Shareholder as such losses, claims, damages or
expenses are incurred. At the election of the Representative, and subject to
subsection (d) below, the Representative may request, and is entitled to
receive, from the Selling Shareholder reimbursement for legal or other expenses
reasonably incurred on a monthly basis, with the effect that the Selling
Shareholder will pay in full each detailed invoice for legal or other expenses
incurred by the Representative within 30 days after the date of presentation
thereof by the Representative.

(c) The Representative agrees to indemnify and hold
harmless the Company, each of the Company's directors, each of the Company's
officers who has signed the Registration Statement, each person who controls
the Company within the meaning of Section 15 of the 1933 Act and the Selling
Shareholder against any losses, claims, damages or liabilities, joint or
several, to which the Selling Shareholder, the Company or any such director,
officer, or controlling person may become subject, under the 1933 Act, the 1934
Act, the common law or otherwise,

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<PAGE> 29
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of, or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state in the Registration
Statement, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; or (ii) any untrue statement or alleged untrue
statement of a material fact contained in any application or other statement
executed by the Company or by the Representative or based upon written
information furnished by the Company or the Representative and filed in any
jurisdiction in order to qualify the Shares under, or exempt the Shares or the
sale thereof from qualification under, the securities laws of such
jurisdiction, or the omission or alleged omission to state in such application
or statement a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; in each of the above cases to the extent, but only the
extent, that such untrue statement, alleged untrue statement, omission or
alleged omission, was made in reliance upon and in conformity with information
contained in the material set forth under the sections entitled "Underwriting",
"Risk Factors--Possible Volatility of Stock Prices; Penny Stock Rules" and
"Risk Factors--Secondary Trading Market" of the Registration Statement, any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto; any losses, claims, damages, liabilities or expenses for which the
Company is entitled to indemnification under this Section 7 shall be paid by
the Representative as such losses, claims, damages or expenses are incurred.
This indemnity agreement is in addition to any liability which the
Representative may otherwise have. At the election of the Company, and subject
to subsection (d) below, the Company may request, and is entitled to receive,
from the Representative reimbursement for legal or other expenses reasonably
incurred on a monthly basis, with the effect that the Representative will pay
in full each detailed invoice for legal or other expenses incurred by the
Company within 30 days after the date of presentation thereof by the Company.

(d) Promptly after receipt by an indemnified party under
this Section 7 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 7, notify in writing the indemnifying
party of the commencement thereof. The omission to so notify the indemnifying
party will not relieve it from any liability under this Section 7 as to the
particular item for which indemnification is then being sought, unless such
omission so to notify prejudices the indemnifying party's ability to defend
such action. In case any such action is brought against any indemnified party
and the indemnified party notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel who shall be
reasonably satisfactory to such indemnified party; and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 7 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation;

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<PAGE> 30
provided, however, that if, in the reasonable judgment of the indemnified party
or parties, it is advisable for such party or parties and any controlling
persons to be represented by separate counsel by reason of a conflict of
interest of the counsel chosen by the indemnifying party, any indemnified party
shall have the right to employ separate counsel to represent it and other
parties and their controlling persons who may be subject to liability arising
out of any claim in respect of which indemnity may be sought by any party
hereunder, in which event the reasonable fees and expenses of such separate
counsel shall be borne by the indemnifying party. In any such event, the
indemnifying party will not be obligated to pay the fees and expenses of more
than one counsel for the indemnified parties with respect to such claim, unless
either (i) the nature of the claim makes it reasonable to engage counsel in
more than one jurisdiction, or, (ii) in the reasonable judgment of any
indemnified party, a conflict of interest may exist between such indemnified
party and any other indemnified parties with respect to such claim, in which
event the indemnifying party shall be obligated to pay the reasonable fees and
expense of additional counsel or counsels for the indemnified parties. Any
such indemnifying party shall not be liable to any such indemnified party on
account of any settlement of any claim or action effected without the written
consent of such indemnifying party, which consent shall not be unreasonably
withheld. In the event that an indemnifying party assumes the defense of a
claim in accordance with its obligation to indemnify under this Section 7, it
is understood and agreed that the indemnifying party will thereby assume a
fiduciary duty to the indemnified party to conduct the defense of such claim
consistent with the interests of the indemnified party.

SECTION 8

Effectiveness of Agreement

This Agreement shall become effective the later of (a) the
date and time that this Agreement is executed and delivered by the parties
hereto and (b) at 10:00 a.m., Eastern Daylight Time, on the first full business
day following the Effective Date, or at such earlier time after the Effective
Date as the Representative in its discretion shall first release the Shares for
offering to the public. For purposes of this Section 8, the Shares shall be
deemed to have been released to the public upon release by the Representative
of the publication of a newspaper advertisement relating to the Shares or upon
release of a telegram or a letter offering the Shares for sale to securities
dealers, whichever shall first occur.

SECTION 9

Conditions to the Representative's Obligations

The Representative's obligation to purchase the Shares and to make
payment to the Company hereunder on the Closing Date and on the Over-allotment
Closing Date shall be subject to the accuracy, as of the Closing Date and the
Over-allotment Closing Date, of the representations and warranties on the part
of the Company herein contained, to the performance by the Company of all its
agreements herein contained, to the fulfillment of or compliance by the

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<PAGE> 31
Company with all covenants and conditions hereof, and to the following
additional conditions specified in the subsections of this Section 9.

9.1 Effective Date. The effective date of the Registration
Statement (the "Effective Date") shall occur on or prior to 12:00 noon, Denver,
Colorado time, on __________, ____________________, or such later date as the
Representative may agree to in writing. On or prior to the Closing Date, no
order suspending the effectiveness of the Registration Statement pursuant to
Section 8 of the 1933 Act or otherwise shall have been issued and no proceeding
for that purpose shall have been initiated or threatened by the Commission; any
request for additional information on the part of the Commission or the NASD
shall have been complied with to the satisfaction of the Commission or the
NASD, as the case may be; and neither the Registration Statement, the
Prospectus nor any amendment thereto shall have been filed to which counsel to
the Representative reasonably shall have objected in writing.

9.2 Accuracy of Registration Statement. The Representative shall
not have disclosed in writing to the Company that the Registration Statement or
the Prospectus or any amendment thereof or supplement thereto contains an
untrue statement of a fact which, in the opinion of counsel to the
Representative, is material or omits to state a fact which, in the opinion of
such counsel, is material and is required to be stated therein or is necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.

9.3 Casualty. Between the date hereof and the Closing Date and
Over-allotment Closing Date, the Company shall not have sustained any loss on
account of fire, explosion, flood, accident, calamity, rebellion, civil
uprising, act of a foreign state, or any other cause of such character as
materially adversely affects its business or property considered as an entire
entity, whether or not such loss is covered by insurance.

9.4 Litigation. Except as set forth in the Registration
Statement, between the date hereof and the Closing Date and the Over-allotment
Closing Date, there shall be no litigation instituted or threatened against the
Company, and there shall be no proceeding instituted or threatened against the
Company before or by any federal or state commission, regulatory body or
administrative agency or other government body, domestic or foreign, wherein an
unfavorable ruling, decision or finding would materially adversely affect the
business, franchises, licenses, permits, operations or financial condition or
income of the Company.

9.5 No Material Change. Except as contemplated herein or as set
forth in the Registration Statement and Prospectus, during the period
subsequent to the Effective Date, and prior to the Closing Date and the Over-
allotment Closing Date: (1) the Company shall have conducted its business in
the usual and ordinary manner as the same was being conducted on the Effective
Date, and (2) except in the ordinary course of its business, the Company shall
not have incurred any liabilities or obligations (direct or contingent) or
disposed of any of its assets or entered into any material transaction or
suffered or experienced any materially adverse change in its condition,
financial or otherwise. At the Closing Date and the Over-allotment Closing
Date, the capital stock and surplus accounts of the Company shall be
substantially the same as at the

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<PAGE> 32
Effective Date, without considering the proceeds from the sale of Shares, other
than as may be set forth in the Registration Statement and Prospectus.

9.6 Review by Representative's Counsel. The authorization of the
Shares and the Representative's Warrant, the Registration Statement, the
Prospectus and all corporate proceedings and other legal matters incident
thereto and to this Agreement shall be reasonably satisfactory in all respects
to the Representative and its counsel, and the Company shall have furnished the
Representative and such counsel such documents as they may have requested to
enable them to evaluate the matters referred to in this Section.

9.7 Opinion of Company Counsel. The Company shall have furnished
to the Representative the opinion, dated the Closing Date and the Over-
allotment Closing Date, addressed to the Representative, of Davis, Graham &
Stubbs LLP and/or such other counsel as may be acceptable to the
Representative, to the effect that, based upon a review by them of the
Registration Statement, Prospectus, the Company's articles of incorporation,
bylaws, and relevant corporate proceedings, an examination of such statutes and
such other investigation by such counsel as they deem necessary to express such
opinion:

(1) The Company has been duly incorporated and is a
validly existing corporation in good standing under the laws of its
respective state of incorporation (specifying the same and attaching a
certificate of good standing for each), with full corporate power and
authority to own and operate its properties and to carry on its
business as set forth in the Registration Statement and Prospectus.

(2) The Company is duly qualified and registered to
transact the business in which they are respectively engaged and are
qualified and in good standing in each and every foreign or domestic
jurisdiction in which their ownership of property or their conduct of
business requires such qualification or registration and in which
failure to so qualify would have a material adverse effect upon the
business of the Company.

(3) The Company has an authorized and outstanding
capitalization as set forth in the Registration Statement and
Prospectus; the Shares and the Representative's Warrant conform to the
statements concerning them in the Registration Statement and
Prospectus; the outstanding Common Stock of the Company has been duly
and validly issued and is fully paid and nonassessable and no Common
Stock is subject to any preemptive rights; cumulative voting is not
permitted by the holders of any of the Company's securities; the
Shares, Representative's Warrant, and the shares of Representative's
Warrant Stock issuable upon exercise of the Representative's Warrant,
have been duly and validly authorized and, upon issuance thereof and
payment therefor in accordance with this Agreement, will be duly and
validly issued, fully paid and nonassessable, free and clear of all
liens, encumbrances, equities and claims whatsoever, and will not be
subject to any preemptive rights.

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<PAGE> 33
(4) The Representative's Warrant has been duly and
validly authorized and issued and are valid and binding instruments
enforceable against the Company in accordance with their terms.

(5) A sufficient number of shares of Common Stock have
been duly reserved for issuance as Representative's Warrant Stock upon
exercise of the Representative's Warrant.

(6) The holders of the issued and outstanding shares of
Common Stock are, and the holders of the Shares, Representative's
Warrant Stock and Representative's Warrant (when such securities have
been issued and fully paid for in accordance with the provisions of
the Registration Statement) will be entitled to the rights and
preferences set forth in the certificates representing the same.

(7) No consents, approvals, authorizations or orders of
agencies, officers or other regulatory authorities are necessary for
the valid authorization, issue or sale of the Shares, Representative's
Warrant Stock or Representative's Warrant hereunder, except as
required under the 1933 Act or state Blue Sky or other securities
laws.

(8) The issuance and sale of the Shares, Representative's
Warrant Stock and Representative's Warrant and the consummation of the
transactions herein contemplated and compliance with the terms of this
Agreement will not conflict with or result in a breach of any of the
terms, conditions, or provisions of, or constitute a default under,
the Articles of Incorporation, as amended, or Bylaws of the Company,
as amended, or any note, indenture, mortgage, deed of trust or other
agreement or instrument (however characterized or described) known to
such counsel to which the Company is a party or by which the Company
or any of its property is bound or any existing laws, order, rule,
regulation, writ, injunction or decree known to such counsel of any
government, governmental instrumentality, agency, body, arbitration
tribunal or court, domestic or foreign, having jurisdiction over the
Company or its property.

(9) The Registration Statement and Prospectus have become
effective under the 1933 Act and, to the knowledge of such counsel, no
order suspending the effectiveness of the Registration Statement
pursuant to Section 8 of the 1933 Act or otherwise has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated by the Commission under the 1933 Act or otherwise, and
the Registration Statement and Prospectus and each amendment and
supplement thereto comply as to form in all material respects with the
requirements of the 1933 Act and the Rules and Regulations thereunder
(except that no opinion needs to be expressed as to financial
statements and financial data contained in the Registration Statement
or Prospectus).

(10) The Company owns or holds by valid lease the real and
personal properties as shown in the Registration Statement and
Prospectus and, to the extent such properties are owned by the
Company, they are owned free and clear of all liens,

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<PAGE> 34
encumbrances and equities of record except for those expressly
referred to in the Registration Statement and Prospectus and except
for those as do not in the opinion of counsel adversely affect
materially the value of such assets and except for the lien of current
taxes not then due.

(11) This Agreement has been duly authorized and executed
by the Company and is a valid and binding agreement of the Company.

(12) The Company owns one hundred percent (100%) of all of
the issued and outstanding voting stock of each of the Subsidiaries.

(13) The form of certificate for the Shares is in due and
proper form and complies with all applicable statutory requirements.

(14) Nothing has come to the attention of counsel that all
prior offers and sales of securities by the Company were not exempt
from registration under the Act and were not either registered
pursuant to, or exempt from registration under, all pertinent state
securities, or blue sky, laws.

(15) Since _______, 1995, all prior offers and sales of
securities of the Company were exempt from registration under the Act
and were either registered pursuant to, or exempt from registration
under, all pertinent state securities, or blue sky, laws.

(16) To such counsel's knowledge, there are no pending
legal proceedings relating to trademarks, tradenames or service marks
of the Company, and no such proceedings are threatened or
contemplated.

Such opinion shall also cover such other matters incident to the
transactions contemplated by this Agreement in form satisfactory to the
Representative's counsel as the Representative shall reasonably request. As an
illustration of the foregoing, but not as a limitation thereof, it is expected
that such opinion will cover the ownership by the Company of all licenses
required to conduct their businesses and such matters concerning disclosure of
and compliance with applicable environmental laws or regulations as may be
deemed advisable by the Representative.

In addition to the matters set forth above, such opinion shall also
include a statement to the effect that, although such counsel is not passing
upon and does not assume any responsibility for, the accuracy, completeness or
fairness of any of the statements contained in the Registration Statement or
Prospectus and such counsel makes no representation that it has independently
verified the accuracy, completeness or fairness of such statements, in
connection with such counsel's representation of the Company in the preparation
of the Registration Statement and Prospectus, nothing came to the attention of
such counsel which caused it to conclude that, as of the Effective Date, the
Closing Date or the Over-allotment Closing Date, as the case may be, and

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<PAGE> 35
except to the extent that the Preliminary Prospectus anticipates facts true as
of the Effective Date, the Registration Statement or any further amendment
thereto (other than the financial statements and notes thereto and other
financial and statistical data included therein, as to which such counsel need
express no opinion), contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto (other than the financial statements
and notes thereto and other financial and statistical data included therein, as
to which such counsel need express no opinion), contained an untrue statement
of a material fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.

9.8 Opinion of Counsel to Selling Shareholder. The Selling
Shareholder shall have furnished to the Representative the opinion, dated the
Closing Date and the Over-allotment Closing Date, addressed to the
Representative, of _________ and/or such other counsel as may be acceptable to
the Selling Shareholder, to the effect that, based upon a review by them of the
Registration Statement, Prospectus, an examination of such statutes and such
other investigation by such counsel as they deem necessary to express such
opinion:

(1) The Agreement has been duly authorized, executed and
delivered by Selling Shareholder and the performance and consummation
of the Agreement by the Selling Shareholder of the transactions
therein contemplated will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any
statute, any agreement or instrument known to us to which the Selling
Shareholder is a party or by which he is bound or to which any of the
property of the Selling Shareholder is subject, or any order, rule or
regulation known to us of any court or governmental agency or body
having jurisdiction over the Selling Shareholder or any of his
properties; an no consent, approval, authorization or order of, or
filing with, any court or governmental agency or body is required for
the consummation of the transactions contemplated by the Agreement in
connection with the sale of the Selling Shareholder Shares thereunder,
except such as have been obtained under the 1933 Act and such as may
be required under any state securities or Blue Sky laws in connection
with the purchase and distribution by the Representative of the
Shares.

(2) Immediately prior to the time of delivery of the
Selling Shareholder Shares to the Representative, the Selling
Shareholder is the sole registered owner of the shares of Common Stock
to be delivered by the Selling Shareholder free and clear of any
claims, liens, encumbrances or security interests of which we are
aware, and, assuming the Representative purchases such shares for
value in good faith and without notice of any adverse claim, upon
delivery of such shares to the Representative and registration of the
Representative in the stock records of the Company, the Representative
will acquire all of the rights of the Selling Shareholder in such
shares free of any adverse claim, lien in favor of the Company and any
restrictions on transfer imposed by the Company.

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<PAGE> 36
Such opinion shall also cover such other matters incident to the
transactions contemplated by this Agreement in form satisfactory to the
Representative's counsel as the Representative shall reasonably request.

9.9 BDO Seidman, LLP Letter. On the Closing Date and the Over-
allotment Closing Date, the Representative shall have received from BDO
Seidman, LLP an opinion letter dated the Closing Date and Over-allotment
Closing Date, as applicable, stating that (for this Section 9.9 only,
references to the "Company" shall exclude references to Cossey-Capozzi, Inc.,
dba C. C. & Associates):

(1) They are independent public accountants within the
meaning of the 1933 Act and the Rules and Regulations, and the
response to Item 509 of Regulation S-K as reflected by the
Registration Statement is correct insofar as it relates to them;

(2) In their opinion, the financial statements and
supporting schedules of the Company examined by them at all dates and
for all periods referred to in their opinion letter and included in
the Registration Statement and Prospectus comply as to form in all
material aspects with the applicable requirements of the 1933 Act and
the published Rules and Regulations with respect to registration
statements on Form SB-2;

(3) On the basis of certain indicated procedures (but not
necessarily an examination in accordance with generally accepted
accounting principles), including an examination of the Company's
underlying financial books and records, debt instruments (if any) of
the Company described in the Prospectus, a reading of the latest
available interim unaudited financial statements of the Company,
whether or not appearing in the Prospectus, inquiries to the officers
of the Company and other persons responsible for the Company's
financial and accounting matters, and a reading of the minute books of
the Company, nothing has come to their attention which would cause
them to believe that during the period from the date of the last
audited financial statement, to a specified date not more than five
(5) days prior to the date of such opinion letter:

(a) there has been any material change in the
financial position of the Company not contemplated by and
disclosed in the Prospectus;

(b) there has been any material change in the
capital stock and surplus accounts of the Company or any
payment or declaration of any dividend or other distribution
in respect thereof or exchange therefor or in the debt of the
Company from that shown in its audited balance sheet, in the
Registration Statement and Prospectus, other than as set forth
or contemplated by the Registration Statement and Prospectus;

(c) there have been any material decreases in
working capital or shareholders' equity (deficit) as compared
with amounts shown in the last audited balance sheet included
in the Prospectus; or

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<PAGE> 37
(d) there were any material decreases, as
compared with amounts shown in the last audited balance sheet,
in the cash balance, except in all instances for changes
disclosed in or contemplated by the Registration Statements
and Prospectus; and

(4) On the basis of their examinations referred to in
their opinion letter, report and consent included in the Registration
Statement and Prospectus and the indicated procedures and discussions
referred to in clause (3) above, nothing has come to their attention
which, in their judgment, would cause them to believe or indicate that
(a) the financial statements set forth in the Registration Statement
and Prospectus do not present fairly the financial position and
results of operations of the Company, for the period indicated, in
conformity with generally accepted accounting principles applied on a
consistent basis, and are not in all material respects a fair
presentation of the information purported to be shown, and (b) the
dollar amounts, percentages and other financial information set forth
in the Registration Statement and Prospectus under the captions
"Prospectus Summary", "Risk Factors", "Selected Financial Information"
and "Dilution" are not in agreement with the Company's general ledger,
financial records or computations made by the Company therefrom.

9.10 Meredith Cardozo & Lanz LLP Letter. On the Closing Date and
the Over-allotment Closing Date, the Representative shall have received from
Meredith, Cardozo & Lanz LLP an opinion letter dated the Closing Date and Over-
allotment Closing Date, as applicable, stating that:

(2) In their opinion, the financial statements and
supporting schedules of Cossey-Capozzi, Inc., dba C. C. & Associates
("C.C. & Associates") examined by them at all dates and for all
periods referred to in their opinion letter and included in the
Registration Statement and Prospectus comply as to form in all
material aspects with the applicable requirements of the 1933 Act and
the published Rules and Regulations with respect to registration
statements on Form SB-2;

(3) On the basis of certain indicated procedures (but not
necessarily an examination in accordance with generally accepted
accounting principles), including an examination of C.C. & Associates'
underlying financial books and records, debt instruments (if any) of
C.C. & Associates described in the Prospectus, a reading of the latest
available interim unaudited financial statements of C.C. & Associates,
whether or not appearing in the Prospectus, inquiries to the officers
of C.C. & Associates and other persons responsible for C.C. &
Associates' financial and accounting matters, and a reading of the
minute books of C.C. & Associates, nothing has come to their attention
which would cause them to believe that during the period from the date
of the last

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<PAGE> 38
audited financial statement, to a specified date not more than five
(5) days prior to the date of such opinion letter:

(a) there has been any material change in the
financial position of C.C. & Associates not contemplated by
and disclosed in the Prospectus;

(b) there has been any material change in the
capital stock and surplus accounts of C.C. & Associates or any
payment or declaration of any dividend or other distribution
in respect thereof or exchange therefor or in the debt of C.C.
& Associates from that shown in its audited balance sheet, in
the Registration Statement and Prospectus, other than as set
forth or contemplated by the Registration Statement and
Prospectus;

(c) there have been any material decreases in
working capital or shareholders' equity (deficit) as compared
with amounts shown in the last audited balance sheet included
in the Prospectus; or

(d) there were any material decreases, as
compared with amounts shown in the last audited balance sheet,
in the cash balance, except in all instances for changes
disclosed in or contemplated by the Registration Statements
and Prospectus; and

(4) On the basis of their examinations referred to in
their opinion letter, report and consent included in the Registration
Statement and Prospectus and the indicated procedures and discussions
referred to in clause (3) above, nothing has come to their attention
which, in their judgment, would cause them to believe or indicate that
(a) the financial statements set forth in the Registration Statement
and Prospectus do not present fairly the financial position and
results of operations of C.C. & Associates, for the period indicated,
in conformity with generally accepted accounting principles applied on
a consistent basis, and are not in all material respects a fair
presentation of the information purported to be shown, and (b) the
dollar amounts, percentages and other financial information set forth
in the Registration Statement and Prospectus under the captions
"Prospectus Summary", "Risk Factors", "Selected Financial Information"
and "Dilution" are not in agreement with C.C. & Associates' general
ledger, financial records or computations made by C.C. & Associates
therefrom.

9.11 Officer's Certificate. The Company shall have furnished to
the Representative a certificate of the President and Chief Financial Officer
of the Company, and attested by its Secretary, dated the Closing Date and the
Over-allotment Closing Date, to the effect that:

(1) There is no litigation, arbitration, claim by any
current or former employee or any form of regulatory proceeding
instituted or threatened against the Company of a character required
to be disclosed in the Registration Statement and

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<PAGE> 39
Prospectus which is not disclosed; and there is no material contract
required to be filed as an exhibit to the Registration Statement which
has not been so filed.

(2) The representations and warranties of the Company in
this Agreement are true and correct at and as of the date of the
certificate; the Company has complied with all of its agreements
herein contained; no stop order suspending the effectiveness of the
Registration Statement pursuant to Section 8 of the 1933 Act or
otherwise has been issued at or before the date of the certificate and
no proceeding for that purpose have been initiated at or before the
date of the certificate and, to the best of their knowledge, no such
proceeding has been threatened by the Commission; and that any request
for additional information on the part of the Commission or NASD (to
be included in the Registration Statement or the Prospectus or any
amendment or supplement thereto or otherwise) has been complied with
to the reasonable satisfaction of counsel for the Representative and
no amendment or supplement to the Registration Statement or Prospectus
has been filed to which counsel for the Representative has reasonably
objected after adequate notice.

(3) There has been no material adverse change in the
general affairs of the Company, financial or otherwise, except as
disclosed or indicated in the Registration Statement and Prospectus.

(4) Since the Effective Date, there has not been any
material transaction entered into by the Company other than in the
ordinary course of business.

(5) There are no material direct or indirect contingent
liabilities or obligations of the Company not disclosed in the
Registration Statement and Prospectus.

(6) Since the Effective Date, the Company has not
sustained any loss on account of fire, flood, accident or other
calamity of such character as to interfere materially with the
continuous operation of the Company's business or which materially
adversely affects the financial position or business of the Company
regardless of whether or not such loss shall have been insured.

(7) The Company is not delinquent in the filing of any
federal, state or municipal or other local, state or municipal taxes
required to be reported and paid; to the best of their knowledge
(after diligent investigation in connection therewith) there is no
proposed redetermination or reassessment of such taxes adverse to the
Company; and the Company has paid or provided for, by adequate
reserves, all known tax liabilities.

(8) This Agreement, the consummation of the transactions
herein contemplated and the fulfillment of the terms hereof will not
result in a breach by the Company of any term of, or constitute a
default under, any indenture, mortgage, lease, deed of trust, bank
loan or credit agreement or any other agreement or undertaking
(however characterized or described) of the Company, including by way
of specification

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<PAGE> 40
but not by way of limitation, any agreement or instrument to which the
Company is now a party or pursuant to which it has acquired any right
or obligation by succession or otherwise, and that any existing
agreement materially affecting the Company has been delivered to the
Representative or its counsel.

(9) They have carefully examined the Registration
Statement and Prospectus and, in their opinion, (a) as of the
Effective Date, the statements contained in the Registration Statement
and Prospectus are true and correct and the Registration Statement and
Prospectus do not omit to state any material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they are made, not
misleading (such opinion need not be expressed, however, as to any
material contained in the Registration Statement and Prospectus
furnished by the Representative); and (b) since the Effective Date, no
event has occurred which should have been set forth in a supplement to
or amendment of the Registration Statement or Prospectus which has not
been set forth in such supplement or amendment.

(10) At and as of the Effective Date and the date of the
certificate, there are no agreements, understandings or negotiations
in force and effect, in process or contemplated by them or of which
they are aware to the best of their individual and collective
knowledge which, if in force and effect or in process or so
contemplated would be required to be disclosed.

(11) The officers and directors of the Company have not
taken and will not take, directly or indirectly, any action designed
to, or which might reasonably be expected to, cause or result in the
stabilization or manipulation of the price of the Company's Common
Stock to facilitate the sale and resale of the Shares.

9.12 Secretary's Certificate. The Representative shall have
received from the Secretary of the Company a certificate of incumbency, dated
as of the Closing Date, certifying the names, titles and signatures of the
officers authorized to execute, deliver and perform this Agreement. Attached
to such certificate shall be a copy of the Bylaws of the Company and the
resolutions of the Board of Directors of the Company authorizing the execution,
delivery and performance of this Agreement. Such certificate shall also
certify that such resolutions, the Articles of Incorporation of the Company and
the Bylaws of the Company have been validly adopted and have not been amended
or modified, except as described in the Prospectus.

9.13 Selling Shareholder. The Representative shall have received
from the Selling Shareholder a certificate, dated as of the Closing Date, to
the effect that:

(i) The representations and warranties contained
in Section 3 of this Agreement are true and correct with the
same effect as though expressly made as of the Closing Date
and the Selling Shareholder has performed all covenants and
complied with all conditions required by the Agreement on its
part to be

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<PAGE> 41
performed or complied with by it at or prior to the delivery
of the Selling Shareholder Shares and on such date.

(ii) The information set forth in the Registration
Statement and the Prospectus and any amendments or supplements
thereto under the caption "Principal and Selling
Shareholders," insofar as it relates to the Selling
Shareholder, contains all material statements that are
required to be stated therein in accordance with the Act and
the Regulations and conform in all material respects to the
requirements of the Act and the Regulations, and with respect
to such information, neither the Registration Statement nor
the Prospectus nor any amendment or supplement thereto
contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

9.14 Opinion of Representative's Counsel. The Representative shall
have received from Dorsey & Whitney LLP, counsel for the Representative, an
opinion dated the Closing Date, with respect to the incorporation of the
Company, the validity of the Shares, the Registration Statement, the
Prospectus, and other related matters as the Representative may reasonably
request, and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters.

9.15 Tender of Securities. All the Shares being offered by the
Company and the Selling Shareholder and the Representative's Warrant shall be
tendered for delivery in accordance with the terms and provisions of this
Agreement.

9.16 Blue Sky Qualification. The Shares shall be qualified in such
states as determined under paragraph 5.4 above and each qualification shall be
in effect and not subject to any stop order or other proceeding on the Closing
Date.

9.17 Approval of Representative's Counsel. All opinions, letters,
certificates and documents mentioned above or elsewhere in this Agreement shall
be deemed to be in compliance with the provisions hereof only if they are in
form and substance satisfactory to counsel to the Representative, whose
approval shall not be unreasonably withheld.

9.18 Officer's Certificate as a Company Representation. Any
certificate signed by an officer of the Company and delivered to the
Representative or to counsel for the Representative will be deemed a
representation and warranty by the Company to the Representative as to the
statements made therein.

9.19 NASDAQ Listing. The Company's Shares must be qualified for
listing on Nasdaq SmallCap on the Effective Date of the Registration Statement.

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<PAGE> 42
9.20 Board Committees. A compensation committee, which shall
consist of at least two (2) independent outside board members, shall be formed
to review executive compensation and make recommendations to the Board of
Directors on an as needed basis. An audit committee of the Board of Directors
shall be formed consisting of at least two independent outside directors. Such
audit committee shall be charged with reviewing all systems and making
recommendations for corrective actions to the Board of Directors on an as
needed basis.

SECTION 10

Termination

10.1 Termination by Representative. This Agreement may be
terminated by Representative by notice to the Company in the event the Company
shall have failed or been unable to comply with any of the terms, conditions,
representations, warranties, covenants or other provisions of this Agreement on
the part of the Company to be performed, complied with or fulfilled within the
respective times herein provided for, unless compliance therewith or
performance or satisfaction thereof shall have been expressly waived by
Representative in writing.

10.2 Termination by Representative--"Market Out". This Agreement
may be terminated by Representative by notice to the Company at anytime if, in
the sole judgment of the Representative, payment for and delivery of the Shares
is rendered impracticable or inadvisable because of: (a) material adverse
changes in the Company's business, business prospects, management, earnings,
properties or conditions, financial or otherwise; (b) any action, suit or
proceedings, threatened or pending, at law or equity against the Company, or by
any federal, state or other commissions, board or agency wherein any
unfavorable result or decision could materially adversely affect the business,
business prospects, properties, financial condition, income or earnings of the
Company; (c) additional material governmental restrictions not in force and
effect on the date hereof shall have been imposed upon the trading in
securities generally, or minimum or maximum prices shall have been generally
established on a registered securities exchange, or trading in securities
generally on any such exchange shall have been suspended, or a general
moratorium shall have been established by federal or state authorities; (d)
substantial and material changes in the condition of the market beyond normal
fluctuations are such that it would be undesirable, impracticable or
inadvisable in the judgment of the Representative to proceed with this
Agreement or with the offering; (e) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national or international calamity or
emergency if, in the judgment of the Representative, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it impractical
or inadvisable to proceed with completion of the sale of and payment for the
Shares; (f) the NASDAQ Stock Market, Inc. notifies the Company that the Shares
will not be listed for trading on Nasdaq SmallCap as required under this
Agreement; or (g) any suspension of trading in the common stock of the Company
in the over-the-counter market or the interruption or termination of quotations
of the Shares on the NASDAQ System.

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<PAGE> 43
10.3 Survival of Obligations After Termination. Any termination of
this Agreement under Section 10.1 or 10.2 shall be without liability of any
nature whatsoever (including, but not limited to, loss of anticipated profits
or consequential damages) on the part of either party hereto, except that the
Company shall remain obligated to pay the costs and expenses provided to be
paid by it specified in Section 6.7 (subject to the limitation which entitles
the Representative to return or be paid only the accountable out-of-pocket
expenses described therein); and the Company and the Representative shall be
obligated to pay, respectively, all losses, claims, demands, liabilities and
expenses under Section 7.

10.4 Suspension Proceedings. It is understood that the Company and
the Representative will each advise the other party immediately and confirm in
writing the receipt of any threat of or the initiation of any steps or
procedures which would impair or prevent the right to offer any of the
Company's Shares or the issuance of any "suspension orders" or other
prohibitions preventing or impairing the proposed offering by the Commission or
other regulatory authority.

SECTION 11

Representative's Representations and Warranties

The Representative represents, warrants and agrees with the Company
that:

11.1 Registration as Broker-Dealer. The Representative is
registered as Broker/Dealers with the Commission and are registered as
Broker/Dealers in the State of Colorado and are members in good standing of the
NASD.

11.2 No Pending Proceedings. Except as otherwise disclosed in the
Registration Statement, there is not now pending or threatened against such
Representative any material action or proceeding of which such Representative
has been advised, either in any court of competent jurisdiction, before the
Commission or before any state securities commission concerning such
Representative's activities as brokers or dealers that is material to this
offering, nor has such Representative been named as a "cause" in any such
action or proceeding.

11.3 Finder. The Representative represents that no finder's fee
has been or will be paid in connection herewith. It is understood that should
a claim for finder's fee in connection with the sale of the Shares be made, the
Representative will indemnify the Company with respect to any such claim.

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<PAGE> 44
SECTION 12

Notices

All notices, demands or requests required or authorized hereunder
shall only be deemed given sufficiently if in writing and hand delivered by
messenger or courier service or sent by registered mail or certified mail,
return receipt requested and postage prepaid, in the case of the
Representative:

Chatfield Dean & Co., Inc.
7935 East Prentice Avenue, Suite 200
Englewood, Colorado 80111
Attention: Sanford D. Greenberg, President

with a copy to:

Dorsey & Whitney LLP
370 Seventeenth Street, Suite 4400
Denver, Colorado 80202
Attention: Kevin A. Cudney, Esq.

and, in the case of the Company:

NHancement Technologies Inc.
1746 Cole Boulevard, Suite 265
Golden, Colorado 80401
Attention: Douglas S. Zorn, Secretary

with a copy to:

Davis, Graham & Stubbs LLP
370 Seventeenth Street, Suite 4700
Denver, Colorado 80202
Attention: Lester R. Woodward, Esq.

and, in the case of the Selling Shareholder:

James Gillespie
198 Country Club Drive
Incline Village, NV 89451

Any such notice shall be deemed effectively given on the earlier of
the date of actual receipt or the second business day after delivered,
telecopied, or deposit of the notice with the United States Postal Service.

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<PAGE> 45
SECTION 13

Miscellaneous

13.1 Sole Benefit. This Agreement is made solely for the benefit
of the Company, the Representative, the Selling Shareholder, other Members,
their respective officers and directors and any controlling person thereof
within the meaning of Section 15 of the 1933 Act and their respective
successors and assigns; and no other person shall acquire or have any right
under or by virtue of this Agreement. The terms "successors" or "successors
and assigns" shall not under any circumstance include any purchaser, as such
purchaser, of the Shares from any person or of any of the Representative's
Warrant or shares of the Representative's Warrant Stock from any person unless
otherwise expressly provided herein. This Agreement constitutes the entire
agreement between the parties concerning the subject matter hereof, and
supersedes all prior agreements and understandings, including, but not limited
to, the Letter of Intent dated September 3, 1996.

13.2 Survival. The respective indemnities, agreements,
representations, warranties, covenants and other statements of the Company or
its officers or directors and of the Representative as set forth in or made
pursuant to this Agreement, and the indemnity agreements of the Company and the
Representative contained in Section 7 hereof shall survive and remain in full
force and effect regardless of: (a) any investigation or inspection made by or
on behalf of the Company or the Representative or any such officer or director
of either of them or any controlling person (within the meaning of Section 15
of the 1933 Act) of the Company or of the Representative; (b) delivery of or
payment for the Shares; and (c) the Closing Date.

13.3 Governing Law. This Agreement and all instruments, if any,
delivered in connection herewith or pursuant hereto shall be governed by and
construed in accordance with the substantive laws of the State of Colorado.

13.4 Waiver. All the rights and remedies of either party under
this Agreement are cumulative and are not exclusive of any other rights and
remedies provided by law. Unless expressly stated to the contrary elsewhere
herein, no delay or failure on the part of either party in the exercise of any
right or remedy arising from a breach of this Agreement or any agreement or
instrument executed in connection with this Agreement shall operate as a waiver
of any subsequent right or remedy arising from a subsequent breach of this
Agreement or any agreement or instrument executed in connection with this
Agreement. The consent of any party where required hereunder to any act or
occurrence shall not be deemed to be a consent to any other act or occurrence.

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

- 39 -
<PAGE> 46
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose
wherein this letter and your acceptance shall become and evidence a binding
contract between us.

Very truly yours,

NHancement Technologies Inc.,
a Delaware corporation

By:
--------------------------------------
Esmond T. Goei, Chairman of the Board,
President and CEO

-----------------------------------------
James S. Gillespie, Selling
Shareholder

ACCEPTED AND CONFIRMED AS OF THE DAY OF , 1997:
---- ------

Chatfield Dean & Co., Inc. (for itself and
as representative of Members of the
Underwriting Group)

By:
-------------------------------
Sanford D. Greenberg, President

- 40 -
<PAGE> 47
NHANCEMENT TECHNOLOGIES INC.

SCHEDULE I

This Schedule sets forth the name of each Member referred to in the
above Agreement and the number of Shares to be purchased by each Member.

<TABLE>
<CAPTION>
Name Number of Shares
---- ----------------
<S> <C> <C>

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

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

Total
--------------

</TABLE>

- 41 -

<PAGE> 1

EXHIBIT 4.2

FORM OF

WARRANT

TO PURCHASE 230,000 SHARES OF
COMMON STOCK OF

NHANCEMENT TECHNOLOGIES INC.

THIS CERTIFIES THAT, for consideration received of $100.00,
Chatfield Dean & Co., Inc. (the "Representative"), or its registered assigns,
is entitled to subscribe for and purchase from NHancement Technologies Inc., a
Delaware corporation (the "Company"), at any time after _______, 1998 (one year
after the Effective Date as defined in the Underwriting Agreement), and prior
to ________, 2002 (five years after the Effective Date), subject to earlier
termination, up to and including 230,000 fully paid and nonassessable shares of
the Common Stock of the Company at a price equal to 120% of the public offering
price per share of shares offered in the Company's initial public offering (the
"Warrant Exercise Price") pursuant to an Underwriting Agreement dated ________,
1997 by and among the Company, the Representative and James S. Gillespie,
subject to the anti-dilution provisions, and to the provisions of Section 10,
of this Warrant. The shares which may be acquired upon exercise of this
Warrant are referred to herein as the "Warrant Shares"; provided, however,
that, for the purpose of Section 8 hereof, the term "Warrant Shares" shall not
include any shares acquired upon the exercise of this Warrant which have been
sold in the public markets or which may be freely sold or transferred without
registration under the Securities Act of 1933, as amended (the "1933 Act"),
without regard to any legal limitation on the volume of shares so traded or
transferred. As used herein, the term "Holder" means the Representative, any
party who acquires all or a part of this Warrant as a registered transferee of
the Representative, or any record holder or holders of the Warrant Shares
issued upon exercise, whether in whole or in part, of the Warrant; and the term
"Common Stock" means and includes the Company's presently authorized common
stock, $.01 par value per share, and shall also include any capital stock of
any class of the Company hereafter authorized which shall not be limited to a
fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Company.

This Warrant is subject to the following provisions, terms and
conditions:

A-1
<PAGE> 2
1. Exercise; Transferability.

(a) The rights represented by this Warrant may be
exercised by the Holder hereof, in whole or in part (but not as to a
fractional share of Common Stock), by written notice of exercise (in
the form attached hereto) delivered to the Company at the principal
office of the Company prior to the expiration of this Warrant and
accompanied or preceded by the surrender of this Warrant, along with a
check in payment of the Warrant Exercise Price for such shares or
without payment of cash pursuant to Section 10 hereof.

(b) This Warrant may not be sold, assigned, hypothecated,
or otherwise transferred, other than by will or pursuant to the
operation of law, except after __________, 1998 (one year after the
Effective Date as defined in the Underwriting Agreement), this Warrant
may be transferred to a person who is an officer, director,
shareholder, employee or registered representative of the
Representative. Further, this Warrant may not be sold, transferred,
assigned, hypothecated or divided into two or more Warrants of smaller
denominations, nor may any Warrant Shares issued pursuant to exercise
of this Warrant be transferred, except as provided in Section 7
hereof. Notwithstanding anything herein to the contrary, this Warrant
will expire 30 days after a sale or transfer in accordance with
Section 7(c) hereof.

2. Exchange and Replacement.

Subject to Sections 1 and 7 hereof, this Warrant is
exchangeable upon the surrender hereof by the Holder to the Company at its
principal office for new Warrants of like tenor representing in the aggregate
the right to purchase the number of Warrant Shares purchasable hereunder, each
of such new Warrants to represent the right to purchase such number of Warrant
Shares (not to exceed the aggregate total number of Warrant Shares purchasable
hereunder) as shall be designated by the Holder at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to it,
and, upon surrender and cancellation of this Warrant, if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this Warrant;
provided, however, that if the Representative shall be such Holder, an
agreement of indemnity by such Holder shall be sufficient for all purposes of
this Section 2. This Warrant shall be promptly canceled by the Company upon
the surrender hereof in connection with any exchange or replacement. Except as
set forth in this Section 2, the Company shall pay all expenses, taxes (other
than stock transfer taxes) and other charges payable in connection with the
preparation, execution, and delivery of Warrants pursuant to this Section 2.

A-2
<PAGE> 3
3. Issuance of the Warrant Shares.

(a) The Company agrees that the shares of Common Stock
purchased hereby shall be and are deemed to be issued to the Holder as
of the close of business on the date on which this Warrant shall have
been surrendered, with a properly completed notice of exercise, and
the payment made for such Warrant Shares as aforesaid. Subject to the
provisions of the next section, certificates for the Warrant Shares so
purchased shall be delivered to the Holder within a reasonable time,
not exceeding fifteen (15) days after the rights represented by this
Warrant shall have been so exercised, and, unless this Warrant has
expired, a new Warrant representing the right to purchase the number
of Warrant Shares, if any, with respect to which this Warrant shall
not then have been exercised shall also be delivered to the Holder
within such time.

(b) Notwithstanding the foregoing, however, the Company
shall not be required to deliver any certificate for Warrant Shares
upon exercise of this Warrant except in accordance with exemptions
from the applicable securities registration requirements or
registrations under applicable securities laws. Nothing herein,
however, shall obligate the Company to effect registrations under
federal or state securities laws, except as provided in Section 9. If
registrations are not in effect and if exemptions are not available
when the Holder seeks to exercise the Warrant, the Warrant exercise
period will be extended, if need be, to prevent the Warrant from
expiring, until such time as either registrations become effective or
exemptions become available, and the Warrant shall then remain
exercisable for a period of at least 45 calendar days after the date
the Company delivers to the Holder written notice of the availability
of such registrations or exemptions. The Holder agrees to execute
such documents and make such representations, warranties, and
agreements as may be required solely to comply with the exemptions
relied upon by the Company or the registrations made for the issuance
of the Warrant Shares.

4. Covenants of the Company.

The Company covenants and agrees that all Warrant Shares will,
upon issuance, be duly authorized and issued, fully paid, nonassessable and
free from all taxes, liens, claims and charges with respect to the issue
thereof. The Company further covenants and agrees that, during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of issue
or transfer upon exercise of the subscription rights evidenced by this Warrant
a sufficient number of shares of Common Stock to provide for the exercise of
the rights represented by this Warrant.

A-3
<PAGE> 4
5. Anti-dilution Adjustments.

The provisions of this Warrant are subject to adjustment as
provided in this Section 5.

(a) The Warrant Exercise Price shall be adjusted from
time to time such that, in case the Company shall hereafter:

(i) pay any dividends on any class of stock of the
Company payable in Common Stock or securities convertible
into Common Stock;

(ii) subdivide its then outstanding shares of Common
Stock into a greater number of shares; or

(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;

then, in any such event, the Warrant Exercise Price in effect
immediately prior to such event shall (until adjusted again pursuant
hereto) be adjusted immediately after such event to a price determined
by dividing (a) the total number of shares of Common Stock outstanding
immediately prior to such event (including the maximum number of
shares of Common Stock issuable in respect of any securities
convertible into Common Stock), multiplied by the then existing
Warrant Exercise Price, by (b) the total number of shares of Common
Stock outstanding immediately after such event (including the maximum
number of shares of Common Stock issuable in respect of any securities
convertible into Common Stock), and the resulting quotient shall be
the adjusted Warrant Exercise Price per share. An adjustment made
pursuant to this subsection shall become effective immediately after
the record date, in the case of a dividend or distribution, and shall
become effective immediately after the effective date, in the case of
a subdivision, combination or reclassification. If, as a result of an
adjustment made pursuant to this subsection, the Holder of any Warrant
thereafter surrendered for exercise shall become entitled to receive
shares of two or more classes of capital stock or shares of Common
Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive) shall determine the
allocation of the adjusted Warrant Exercise Price between or among
shares of such classes of capital stock or shares of Common Stock and
other capital stock. All calculations under this subsection shall be
made to the nearest cent. In the event that, at any time as a result
of an adjustment made pursuant to this subsection, the holder of any
Warrant thereafter surrendered for exercise shall become entitled to
receive any shares of the Company other than shares of Common Stock,
the Warrant Exercise Price of

A-4
<PAGE> 5
such other shares so receivable upon exercise of any Warrant shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to
Common Stock contained in this Section.

(b) Upon each adjustment of the Warrant Exercise Price pursuant to
Section 5(a) above, the Holder of each Warrant shall thereafter (until
another such adjustment) be entitled to purchase, at the adjusted
Warrant Exercise Price, the number of shares, calculated to the
nearest full share, obtained by multiplying the number of shares
specified in such Warrant (as adjusted as a result of all adjustments
in the Warrant Exercise Price in effect prior to such adjustment) by
the Warrant Exercise Price in effect prior to such adjustment and
dividing the product so obtained by the adjusted Warrant Exercise
Price.

(c) In case of any consolidation or merger to which the
Company is a party, other than a merger or consolidation in which the
Company is the continuing corporation, or in case of any sale or
conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, or in the case of any
statutory exchange of securities with another corporation (including
any exchange effected in connection with a merger of a third
corporation into the Company), there shall be no adjustment under
subsection (a) of this Section above, but the Holder of each Warrant
then outstanding shall have the right thereafter to convert such
Warrant into the kind and amount of shares of stock and other
securities and property which he would have owned or have been
entitled to receive immediately after such consolidation, merger,
statutory exchange, sale, or conveyance had such Warrant been
converted immediately prior to the effective date of such
consolidation, merger, statutory exchange, sale or conveyance, and, in
any such case, if necessary, appropriate adjustment shall be made in
the application of the provisions set forth in this Section with
respect to the rights and interests thereafter of any Holders of the
Warrant, to the end that the provisions set forth in this Section
shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock and other securities
and property thereafter deliverable on the exercise of the Warrant.
The provisions of this subsection shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances.

(d) Upon any adjustment of the Warrant Exercise Price,
then and in each such case, the Company shall give written notice
thereof, by first-class mail, postage prepaid, addressed to the Holder
as shown on the books of the Company, which notice shall state the
Warrant Exercise Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares of Common Stock
purchasable at such adjusted Warrant Exercise Price upon

A-5
<PAGE> 6
the exercise of this Warrant, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is
based.

6. No Voting Rights.

This Warrant shall not entitle the Holder to any voting rights
or other rights as a shareholder of the Company.

7. Notice of Transfer of Warrant or Resale of the Warrant Shares.

(a) Subject to the sale, assignment, hypothecation or
other transfer restriction set forth in Section 1 hereof, the Holder,
by acceptance hereof, agrees to give written notice to the Company
before transferring this Warrant or transferring any Warrant Shares of
such Holder's intention to do so, describing briefly the manner of any
proposed transfer. Promptly upon receiving such written notice, the
Company shall present copies thereof to the Company's counsel and to
counsel to the original purchaser of this Warrant. If, in the opinion
of each such counsel, the proposed transfer may be effected without
registration or qualification (under any federal or state securities
laws), the Company, as promptly as practicable, shall notify the
Holder of such opinion, whereupon the Holder shall be entitled to
transfer this Warrant or to dispose of Warrant Shares received upon
the previous exercise of this Warrant, all in accordance with the
terms of the notice delivered by the Holder to the Company, provided
that an appropriate legend may be endorsed on this Warrant or the
certificates for such Warrant Shares respecting restrictions upon
transfer thereof necessary or advisable in the opinion of counsel and
satisfactory to the Company to prevent further transfers which would
be in violation of Section 5 of the 1933 Act and applicable state
securities laws, and provided further that the prospective transferee
or purchaser shall execute such documents and make such
representations, warranties and agreements as may be required solely
to comply with the exemptions relied upon by the Company for the
transfer or disposition of the Warrant or Warrant Shares.

(b) If, in the opinion of either of the counsel referred
to in this Section 7, the proposed transfer or disposition of this
Warrant or such Warrant Shares described in the written notice given
pursuant to this Section 7 may not be effected without registration or
qualification of this Warrant or such Warrant Shares, the Company
shall promptly give written notice thereof to the Holder, and the
Holder will limit its activities in respect to this Warrant or such
Warrant shares to such activities as, in the opinion of both such
counsel, are permitted by law.

A-6
<PAGE> 7
(c) Notwithstanding anything herein to the contrary, this
Warrant shall expire 30 days after the sale or transfer hereof to any
party who is not identified as (i) an officer of the Representative or
(ii) an Underwriter or its designee in the Underwriting Agreement.

8. Fractional Shares.

Fractional shares shall not be issued upon the exercise of
this Warrant, but in any case where the Holder would, except for the provisions
of this Section, be entitled under the terms hereof to receive a fractional
share, the Company shall, upon the exercise of this Warrant for the largest
number of whole shares then called for, pay a sum in cash equal to the sum of
(a) the excess, if any, of the Market Price on the date of exercise of such
fractional share over the proportional part of the Warrant Exercise Price
represented by such fractional share, plus (b) the proportional part of the
Warrant Exercise Price represented by such fractional share. For purposes of
this Section, the term "Market Price" as of a particular date with respect to
shares of Common Stock of any class or series means the last reported sale
price on such date or, if none, the average of the last reported closing bid
and asked prices on any national securities exchange or quoted in the National
Association of Securities Dealers, Inc.'s Automated Quotations System
("Nasdaq"), or if not listed on a national securities exchange or quoted in
Nasdaq, the average of the last reported closing bid and asked prices as
reported by any over-the-counter exchange on which the shares of Common Stock
are traded.

9. Registration Rights.

(a) If at any time after _________, 1998, and prior to
________, 2002 (five years after the Effective Date as defined in the
Underwriting Agreement), the Company proposes to register under the
1933 Act (except by a Form S-4 or Form S-8 Registration Statement or
any successor forms thereto or such other form as would not allow the
registration of such shares) or qualify for a public distribution
under Section 3(b) of the 1933 Act, any of its equity securities or
debt with equity features, it will give written notice to all Holders
of this Warrant, any Warrants issued pursuant to Section 2 and/or
Section 3(a) hereof and any Warrant Shares of its intention to do so
and, on the written request of any such Holder given within twenty
(20) days after receipt of any such notice (which request shall
specify the interest in the Warrant Shares intended to be sold or
disposed of by such Holder and describe the nature of any proposed
sale or other disposition thereof), the Company will use its best
efforts to cause all such Warrant Shares, the Holders of which shall
have requested the registration or qualification thereof, to be
included in such registration statement proposed to be filed by the
Company; provided, however, that if a greater number of Warrant Shares
is offered for participation in the proposed offering than, in the
reasonable

A-7
<PAGE> 8
opinion of the managing underwriter of the proposed offering, can be
accommodated without adversely affecting the proposed offering, then
the amount of Warrant Shares proposed to be offered by such Holders
for registration, as well as the number of securities of any other
selling shareholders participating in the registration, shall be
proportionately reduced to a number deemed satisfactory by the
managing underwriter.

(b) On a one-time basis during the four-year period,
commencing __________, 1998 (one year after the Effective Date as
defined in the Underwriting Agreement), upon request by the Holder or
Holders of a majority in interest of this Warrant, of any Warrants
issued pursuant to Section 2 and/or Section 3(a) hereof, and of any
Warrant Shares, the Company will promptly, and, in no event, no later
than 30 days after such request, take all necessary steps to register
on Form S-3 under the 1933 Act (if such Form is then available to the
Company) and the securities laws of such states as the Holders may
reasonably request, the number of Warrant Shares issued and to be
issued upon exercise of the Warrants requested by such Holders in
their request to the Company. The Company shall keep effective and
maintain any registration, qualification, notification or approval
specified in this subparagraph (b) for such period (not to exceed 9
months) as may be reasonably necessary for such Holder or Holders of
such Warrant Shares to dispose thereof and from time to time shall
amend or supplement the prospectus used in connection therewith to the
extent necessary in order to comply with applicable law.

(c) With respect to each inclusion of securities in a
registration statement pursuant to this Section 9, the Company shall
bear the following fees, costs, and expenses: all registration, filing
and NASD fees, Nasdaq fees, printing expenses, fees and disbursements
of counsel and accountants for the Company, fees and disbursements of
counsel for the underwriter or underwriters of such securities (if the
offering is underwritten and the Company is otherwise required to bear
such fees and disbursements), all internal expenses, the premiums and
other costs of policies of insurance against liability arising out of
the public offering and legal fees and disbursements and other
expenses of complying with state securities laws of any jurisdictions
in which the securities to be offered are to be registered or
qualified. Fees and disbursements of special counsel and accountants
for the selling Holders, underwriting discounts and commissions,
transfer taxes for selling Holders and any other expenses relating to
the sale of securities by the selling Holders not expressly included
above shall be borne by the selling Holders.

(d) The Company hereby indemnifies each of the Holders of
any Warrant Shares included in any such registration, and the officers
and

A-8
<PAGE> 9
directors, if any, who control such Holders, within the meaning of
Section 15 of the 1933 Act, against all losses, claims, damages, and
liabilities caused by (1) any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement
or Prospectus (and as amended or supplemented if the Company shall
have furnished any amendments thereof or supplements thereto), any
Preliminary Prospectus or any state securities law filings; (2) any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, or
liabilities are caused by any untrue statement or omission contained
in information furnished in writing to the Company by such Holder or
any underwriter expressly for use therein; and each such Holder by its
acceptance hereof severally agrees that it will indemnify and hold
harmless the Company, each of its directors, each of its officers who
signs such Registration Statement, and each person, if any, who
controls the Company, within the meaning of Section 15 of the 1933
Act, with respect to losses, claims, damages, or liabilities which are
caused by any untrue statement or omission contained in information
furnished in writing to the Company by such Holder expressly for use
therein.

10. Additional Right to Convert Warrant.

(a) The Holder of this Warrant shall have the right to
require the Company to convert this Warrant (the "Conversion Right")
at any time after it is exercisable, but prior to its expiration, into
shares of Company Common Stock as provided for in this Section 10.
Upon exercise of the Conversion Right, the Company shall deliver to
the Holder (without payment by the Holder of any Warrant Exercise
Price) that number of shares of Company Common Stock equal to the
quotient obtained by dividing (x) the value of the Warrant at the time
the Conversion Right is exercised (determined by subtracting the
Warrant Exercise Price for a Warrant Share in effect immediately prior
to the exercise of the Conversion Right from the Fair Market Value of
a Warrant Share immediately prior to the date of the exercise of the
Conversion Right and multiplying that number by the number of Warrant
Shares for which the Conversion Right is being exercised) by (y) the
Fair Market Value of a Warrant Share immediately prior to the exercise
of the Conversion Right.

(b) The Conversion Right may be exercised by the Holder,
at any time or from time to time, prior to the expiration of the
Warrant, on any business day by delivering a written notice in the
form attached hereto (the "Conversion Notice") to the Company at the
offices of the Company stating that the Holder desires to exercise the
Conversion Right and specifying (i) the total number of shares with
respect to which the Conversion Right is being

A-9
<PAGE> 10
exercised and (ii) a place and date not less than five or more than 20
business days from the date of the Conversion Notice for the closing
of such purchase.

(c) At any closing under Section 10(b) hereof, (i) the
Holder will surrender the Warrant and (ii) the Company will deliver to
the Holder (A) a certificate or certificates for the number of shares
of Company Common Stock issuable upon such conversion, together with
cash, in lieu of any fraction of a share and (B) a new warrant
representing the number of shares, if any, with respect to which the
Warrant shall not have been exercised.

(d) For purposes of this Section 10, Fair Market Value of
a Warrant Share as of a particular date (the "Determination Date")
shall mean:

(i) If the Company's Common Stock is traded on an
exchange or is quoted on Nasdaq, then the average closing or
last sale prices, respectively, reported for the ten (10)
business days immediately preceding the Determination Date,
and

(ii) If the Company's Common Stock is not traded
on an exchange or on Nasdaq but is traded on the
over-the-counter market, then the average closing bid and
asked prices reported for the ten (10) business days
immediately preceding the Determination Date.

A-10
<PAGE> 11
IN WITNESS WHEREOF, NHancement Technologies Inc. has caused
this Warrant to be signed by its duly authorized officer and this Warrant to be
dated as of _________, 1997.

NHANCEMENT TECHNOLOGIES
INC.

___________________________
By: Esmond T. Goei
Chairman, President,
Chief Executive Officer
and Director

A-11
<PAGE> 12
NHANCEMENT TECHNOLOGIES INC.
WARRANT EXERCISE

(To be signed only upon exercise of Warrant)

The undersigned, the holder of the Warrant to purchase ______
shares of the Common Stock of NHancement Technologies Inc. hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _______ shares of the Common Stock of NHancement
Technologies Inc., to which such Warrant relates and herewith makes payment of
$____________ therefor in cash or by certified or cashier's check and requests
that the certificates for such shares be issued in the name of, and be
delivered to _______________________, whose address is set forth below the
signature of the undersigned. If said number of shares shall not be all the
shares purchasable under the Warrant, a new warrant is to be issued in the name
of the undersigned for the balance remaining of the shares purchasable
thereunder.

Name of Warrant Holder:

________________________
(Please print)

Address of Warrant Holder:

________________________

Tax Identification No. or Social
Security No. of Warrant Holder:

________________________

Signature: ________________

NOTE: The above signature should
correspond exactly with the name of
the Warrant Holder as it appears on
the first page of the Warrant or on
a duly executed Warrant Assignment

Dated: ___________________

A-12
<PAGE> 13
NHANCEMENT TECHNOLOGIES INC.
WARRANT ASSIGNMENT

(To be signed only upon transfer of Warrant)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ______________________, the assignee, whose address is
________________________________________________________________________________
__________, and whose tax identification or social security number is
__________________________, the right represented by the Warrant to purchase
_____ shares of the Common Stock of NHancement Technologies Inc., to which the
foregoing Warrant relates and appoints ________ attorney to transfer said right
on the books of NHancement Technologies Inc., with full power of substitution
in the premises. If said number of shares shall not be all the shares
purchasable under the Warrant, a new warrant is to be issued in the name of the
undersigned for the balance remaining of the shares purchasable thereunder.
The holder of the Warrant and the transferee understand that certain transfers
of the Warrant may accelerate the termination date hereof.

Name of Warrant Holder:

________________________
(Please print)

Address of Warrant Holder:

________________________

Tax Identification No. or Social
Security No. of Warrant Holder:

________________________

Signature ________________

NOTE: The above signature should
correspond exactly with the name of
the Warrant Holder as it appears on
the first page of the Warrant or on
a duly executed Warrant Assignment

Dated: ____________________

A-13
<PAGE> 14
NHANCEMENT TECHNOLOGIES INC.
CONVERSION NOTICE

(To be executed only upon conversion of Warrant pursuant to Section 10)

The undersigned hereby irrevocably elects to exercise the Conversion
Right as provided for in Section 10 of the foregoing Warrant, with respect to
_________ of the previously unexercised shares, which shall result pursuant to
the conversion provisions of Section 10 in the purchase thereunder of
___________ shares of Common Stock of NHancement Technologies Inc., and
herewith tenders the Warrant in full payment for the purchased shares, as
provided for in Section 10 of the foregoing Warrant. If said number of shares
shall not be all the shares purchasable under the Warrant, a new warrant is to
be issued in the name of the undersigned for the remaining balance of the
unexercised shares.

Please issue a certificate or certificates for such Common Stock in
the name of, and pay any cash for any fractional share, to:

Name of Warrant Holder:

________________________
(Please print)

Address of Warrant Holder:

________________________

Tax Identification No. or Social
Security No. of Warrant Holder:

________________________

Signature ________________

NOTE: The above signature should
correspond exactly with the name of
the Warrant Holder as it appears on
the first page of the Warrant or on
a duly executed Warrant Assignment

Dated: ____________________

A-14

<PAGE> 1
EXHIBIT 4.3

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
as of the 1st day of September, 1996, by and between BioFactors, Inc., a
Delaware corporation (the "Company"), a majority of the holders of securities
issued pursuant to that certain Secured Note and Warrant Purchase agreement
dated as of December 1, 1994, as amended (the "December 1994 Agreement"), a
majority of the holders of securities issued pursuant to that certain Secured
Note and Stock Purchase Agreement dated as of December 1, 1995, as amended (the
"December 1995 Agreement"), a majority of the holders of securities issued
pursuant to that certain Unsecured Note and Stock Purchase Agreement dated as of
February 1, 1996, as amended (the "February 1996 Agreement"), and a majority of
the holders of securities issued pursuant to that certain Unit Subscription
Agreement dated as of May 17, 1996, as amended (the "May 1996 Agreement") (as
listed on Schedule A hereto, collectively, the "Majority Holders"), the
purchasers of securities pursuant to that certain Unit Subscription Agreement
dated as of October 3, 1996 (as amended from time to time, the "October 1996
Agreement") (as listed on Schedule B hereto, the "New Investors"), and the
former holders of the Company's Series A Preferred Stock (as listed on Schedule
C hereto, the "Series A Investors"), as each such Schedule may be amended to add
additional holders after the date hereof who execute a counterpart signature
page to this Agreement.

RECITALS

WHEREAS, in connection with the Series A Preferred Stock and
each of the Interim Bridge Agreements (defined below), the Company and each of
the respective Holders (defined below) have entered into agreements granting
such Holders certain registration rights respecting the Registrable Shares
(defined below);

WHEREAS, the Company has entered into the October 1996
Agreement by and between the Company and the Purchasers named therein (the
"Purchasers") providing, subject to the terms thereof, for the sale to and the
purchase by such Purchasers of Units (the "Units") consisting of promissory
notes of the Company and warrants to purchase common stock of the Company;

WHEREAS, the Company has entered into a letter of intent with
Chatfield Dean & Co. ("Chatfield Dean"), providing for underwriting and
financial advisory services (the "Underwriting");

WHEREAS, as a condition precedent to the Underwriting, the
Company is required to enter into a definitive agreement with Voice Plus, Inc.,
a California corporation ("Voice Plus"), for the formation of a holding company
("Registrant") and the merger of each of the Company (the "BFI Merger") and
Voice Plus into separate, wholly-owned subsidiaries of Registrant (together, the
"Mergers"), concurrently with Chatfield Dean's Underwriting of the IPO (defined
below);

WHEREAS, upon the consummation of the BFI Merger, the
Company's stockholders, including the Holders, are to receive shares of
Registrant Common Stock (defined below) in exchange for the BioFactors common
stock and certain other BioFactors securities held by them;

<PAGE> 2

WHEREAS, as a further condition precedent to the Underwriting,
the Company is required to enter into agreements amending the terms of
outstanding securities issued pursuant to the Interim Bridge Agreements;

WHEREAS, to induce the Purchasers to purchase the Units and to
induce Chatfield Dean to complete the Underwriting, the Company desires to enter
into this Agreement with the Series A Investors and the Majority Holders
providing for coordinated registration rights for common stock and securities
convertible into common stock issued upon conversion of the Series A Preferred
Stock and issued pursuant to the respective Interim Bridge Agreements; and

WHEREAS, the Company, the Series A Investors and the Majority
Holders desire that this Agreement shall govern the registration rights to which
the Holders are entitled following the BFI Merger.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the
following mutual covenants and consideration, the parties hereby agree as
follows:

1. Prior Registration Rights Agreements. The Series A Investors and the Majority
Holders hereby agree that this Agreement supersedes and entirely replaces the
following agreements:

1.1 The Subscription and Registration Rights
Agreement and Investment Representation dated February 16, 1996, as amended by
Addendum A thereto, by and between the Company and the holders of the December
1994 Notes.

1.2 Section 4.2 of the December 1995 Agreement as
amended by Addendum A thereto.

1.3 Section 4.2 of the February 1996 Agreement as
amended by Addendum A thereto.

1.4 Section 3 of the May 1996 Agreement.

2. Definitions.

2.1 "Act" means the Securities Act of 1933, as
amended.

2.2 "Common Stock" or "Registrant Common Stock" means
shares of the common stock of Registrant.

-2-

<PAGE> 3

2.3 "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by Registrant with the SEC.

2.4 "Holder" means any person owning or having the
right to acquire Registrable Shares or any assignee thereof in accordance with
Section 3.5 hereof.

2.5 "Interim Bridge Agreements" means the December
1994 Agreement, the December 1995 Agreement, the February 1996 Agreement, the
May 1996 Agreement and the October 1996 Agreement.

2.6 "IPO" means the underwritten initial public
offering of Registrant Common Stock pursuant to a registration statement filed
under the Act with the SEC.

2.7 "IPO Effective Date" means the date the
registration statement filed in connection with the IPO is declared effective by
the SEC.

2.8 "1934 Act" means the Securities Exchange Act of
1934, as amended.

2.9 "Register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.

2.10 "Registrable Shares" means (i) the Common Stock
issued or issuable to holders of BioFactors common stock issued upon the
conversion of the Series A Preferred Stock, (ii) the Common Stock issued or
issuable pursuant to the Interim Bridge Agreements, (iii) the Common Stock
issuable upon conversion or exercise of any security issued pursuant to the
Interim Bridge Agreements, (iv) any Common Stock issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of the shares referenced in clauses (i), (ii) and (iii) above,
excluding in all cases, however, any Registrable Shares sold by a person in a
transaction in which his rights under Section 3 are not assigned.

2.11 "Series A Preferred Stock" means shares of
BioFactors Series A Convertible Preferred Stock, par value $0.01 per share,
issued and subsequently converted on November 2, 1995 into shares of Common
Stock of BioFactors (the "Conversion").

3. Registration Rights. The Company covenants and agrees as follows:

3.1 Demand Registration. At any time, commencing on
the 12-month anniversary of the IPO Effective Date and expiring on the 36-month
anniversary of the IPO Effective Date, (i) the Holders of at least 40% of the
Registrable Shares then outstanding may request the registration on Form S-3 of
part or all of their Registrable Shares or (ii) one or more Holders may request
the registration on Form S-3 of Registrable Shares with a reasonably anticipated
aggregate price to the public of at least $1,000,000 (either such request being
a "Demand Registration"). The Company will:

-3-

<PAGE> 4

(a) promptly give written notice of the
proposed registration, and any related qualification or compliance, to all
other Holders; and

(b) as soon as practicable, effect such
registration of all or such portion of such Holders' Registrable Shares as are
specified in such request, together with all or such portion of the Registrable
Shares of any other Holder or Holders joining in such request as are specified
in a written request given within twenty (20) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance, pursuant
to this Section 3.1: (1) if Form S-3 is not available for such offering by the
selling Holders; (2) if the Company shall furnish to the selling Holders a
certificate signed by the President of the Company stating that, in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such Form S-3 registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not more
than ninety (90) days after receipt of the request of the Holder or Holders
under this Section 3.1; provided, however, that the Company shall not utilize
this right more than once in any twelve (12) month period; or (3) if the Company
has already effected two (2) registrations on Form S-3 for the Holders pursuant
to this Section 3.1.

(c) Subject to the foregoing, the Company
shall use its best efforts to file a registration statement covering the
Registrable Shares and other securities so requested to be registered as soon as
practicable after receipt of the request or requests of the Holders and to cause
such registration statement to be declared effective.

(d) The Company shall be entitled to
participate in any Demand Registration and shall have the right to notify such
of its shareholders as it shall desire of any Demand Registration and to invite
them to participate in such registration; provided, subject to Section 3.2(a),
the Company will give priority for inclusion in such registration (i) first, to
securities requested to be included in such Demand Registration that are
Registrable Shares, and (ii) second, to other securities, if any.

(e) The Company shall not be obligated to
effect any registration pursuant to this Section 3.1 if the Company delivers to
the Holders requesting registration under this Section 3.1 an opinion, in form
and substance acceptable to such Holders, of counsel satisfactory to such
Holders, that all of the Registrable Shares so requested to be registered may be
sold or transferred pursuant to Rule 144 under the Act within a consecutive
three-month period.

3.2 Conditions and Limitations on Registrations. The
registration rights granted by Section 3.1 hereof are subject to the following
conditions and limitations:

(a) Notwithstanding the receipt of a request
for a Demand Registration under Section 3.1 hereof, the Company shall always
have the right to initiate a primary offering of its securities at any time. If
the Company elects to do so, (i) subject to Section 3.2(b) hereof, it may
postpone the filing of a registration statement in response to such demand for
up to 180 days after receipt of such request for registration or (ii) it may
include the Registrable Shares and other securities subject to the demand in
such registration statement. In the event Registrable Shares and other
securities subject to the demand are included in such registration statement,
the Company will give priority for inclusion in such registration (i) first, to
the securities the Company proposes to sell, (ii) second, to

-4-

<PAGE> 5

securities, if any, held by the managing underwriter of the Company's IPO, and
(iii) third, to Registrable Shares, pro rata among the selling Holders on the
basis of the number of shares held. The Company's determination of priority for
inclusion in any such registration statement shall be final and binding, absent
manifest error. If not all the Registrable Shares subject to the demand are
registered, such registration will not constitute a Demand Registration for
purposes of Section 3.1.

(b) The Company shall not be required to
proceed with any Demand Registration for a period of 180 days from the
completion of sales of Registrable Shares in any prior underwritten
registration; provided, however, that the Company shall proceed with such demand
if and to the extent permitted by the managing underwriter of the offering to
which such prior registration relates. If not all the Registrable Shares
requested to be registered in such demand are permitted by the underwriter to be
registered, such request will not constitute a Demand Registration for purposes
of Section 3.1.

(c) If any registration statement pursuant
to Section 3.1 shall be underwritten in whole or in part, the Company may
require that the Registrable Shares requested for inclusion be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriter(s).

(d) No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 3.

3.3 Covenants With Respect to Registration. Whenever
required under Section 3.1 to effect the registration of any Registrable Shares:

(a) The Company shall prepare and file with
the Commission such amendments and supplements to such registration statement
and the prospectus used in connection with such registration statement as, in
the opinion of counsel to the Company, may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.

(b) Before filing any registration statement
or any amendment thereto that includes any Registrable Shares, the Company shall
furnish to the selling Holders copies of the sections in the registration
statement that include information relating to the selling Holders for their
review and comment, and each selling Holder agrees that he or it shall provide
the Company and the managing underwriter, if any, with all information regarding
such Holder that is reasonably requested to be included in the registration
statement.

(c) The Company shall furnish to such
selling Holders such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Act, and such other
documents as they may reasonably request in order to facilitate the disposition
of Shares owned by them.

-5-

<PAGE> 6

Company shall not be required in connection therewith, or as a condition
thereto, to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Act.

(e) If requested by the managing underwriter
in the event of any underwritten public offering, the Company shall enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

(f) The Company shall notify each selling
Holder, at any time when a prospectus is required to be delivered under the Act,
of the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing.

(g) The Company shall cause all such
securities registered pursuant hereto to be listed on each securities exchange
or automated inter-dealer quotation system on which similar securities issued by
the Company are then listed.

(h) It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 3.1 with
respect to the Registrable Shares of any selling Holder that such Holder shall
furnish to the Company such information regarding itself, the securities held by
it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's securities.

(i) The Company shall pay all expenses other
than underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 3.1, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company (but not
including any fees and expenses of counsel or other professionals retained by
the selling Holders).

3.4 Indemnification.

(a) Indemnification of Holder of Registrable
Shares. In the event that the Company registers any of the Registrable Shares
under the Act, the Company will indemnify and hold harmless the Holder thereof
from and against any and all losses, claims, damages, expenses or liabilities to
which he becomes subject under the Act and, except as hereinafter provided, will
reimburse the Holder for any legal or other expenses, if any, reasonably
incurred by him in connection with investigating or defending any actions,
whether or not resulting in any liability, insofar as such losses, claims,
damages, expenses, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement, in any preliminary prospectus or in the prospectus (or
the registration statement or prospectus as from time to time amended or
supplemented by the Company) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein not misleading,
unless (i) such untrue statement or omission was made in such registration
statement, preliminary prospectus or prospectus in reliance upon and in
conformity

-6-

<PAGE> 7

with information furnished in writing to the Company in connection therewith by
the Holder expressly for use therein, or (ii) such violation arises from the
failure of the Holder to comply with any legal requirement applicable to him to
deliver a copy of the prospectus or any supplements or amendments thereto after
the Company has furnished the Holder with a sufficient number of copies of the
same. Promptly after receipt by the Holder of notice of the commencement of any
action in respect of which indemnity may be sought from the Company, the Holder
shall notify the Company in writing of the commencement thereof and, subject to
the provisions hereinafter stated, the Company shall assume the defense of such
action (including the employment of counsel selected by the Company, who shall
be counsel reasonably satisfactory to the Holder), and the payment of expenses
insofar as such action shall relate to any alleged liability of which indemnity
may be sought against the company. The Holder shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
Company. The Company shall not be required to indemnify any person for any
settlement of any such action effected without the Company's prior written
consent. The Company shall not, except with the approval of each party being
indemnified under this Section 3.4(a), consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the parties being so
indemnified of a release from all liability in respect to such claim or
litigation.

(b) Indemnification of the Company. In the
event that the Company registers any of the Registrable Shares under the Act,
the Holder thereof will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
underwriter of the Registrable Shares so registered (including any broker or
dealer through whom the shares may be sold) and each person, if any, who
controls the Company within the meaning of Section 15 of the Act from and
against any losses, claims, damages, expenses or liabilities, joint or several,
to which they become or any of them may become subject under the Act and, except
as hereinafter provided, will reimburse the Company, and each such director,
officer, underwriter or controlling person for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any actions whether or not resulting in any liability, insofar as such
losses, claims, damages, expenses, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the registration statement or in any preliminary prospectus or
prospectus (as from time to time amended or supplemented) or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, but only insofar as any such statement or omission was
made in reliance upon and in conformity with information furnished in writing to
the Company in connection therewith by the Holder expressly for use therein.
Promptly after receipt of notice of the commencement of any action in respect of
which indemnity may be sought against the Holder, the Company will notify the
Holder in writing of the commencement thereof, and the Holder shall, subject to
the provisions hereinafter stated, assume the defense of such action (including
the employment of counsel selected by the Holder, who shall be counsel
reasonably satisfactory to the Company) and the payment of expenses insofar as
such action shall relate to the alleged liability in respect of which indemnity
may be sought against the Holder. The Company and each such director, officer,
underwriter or controlling person shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall not be at the expense of the Holder.
The Holder shall not be required to indemnify any person for any settlement of
any such action effected without the Holder's consent.

3.5 Assignment of Registration Rights. The rights to

-7-

<PAGE> 8

cause the Company to register Registrable Shares pursuant to this Section 3 may
be assigned (but only with all related obligations) by a Holder to any partner
or shareholder of such Holder without restriction or requirement as to number
of shares, or to a transferee or assignee of such securities who, as a result
of such assignment or transfer, acquires at least fifty percent (50%) of such
transferring Holder's Registrable Shares, provided: (a) the Company is, within
a reasonable time after such transfer, furnished with written notice of the
name and address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned; (b) such transferee or
assignee agrees in writing to be bound by and subject to the terms and
conditions of this Agreement, and (c) such assignment shall be effective only
if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Act.

3.6 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 3 after four (4)
years following the IPO Effective Date.

4. Miscellaneous.

4.1 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Shares). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

4.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Colorado, disregarding Colorado
principles of conflicts of laws which would otherwise provide for the
application of the substantive laws of another jurisdiction.

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

4.4 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

4.5 Notices. Unless otherwise provided, all notices, offers,
acceptances and any other acts required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
to the party to be notified, upon receipted delivery by facsimile transmission,
one (1) day after deposit with Federal Express or similar air courier, two (2)
days in the case of non-U.S. purchasers, or four (4) days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid, and
addressed to the party to be notified at the address indicated below for such
party, or at such other address as such party may designate by ten (10) days'
advance written notice to the other, as follows:

-8-

<PAGE> 9

Purchaser: At the address designated on the appropriate
signature page of this Agreement.

The Company: BioFactors, Inc.
1746 Cole Boulevard, Suite 265
Golden, CO 80401
Attn: General Counsel
Tel: 303-271-0505
Fax: 303-271-9493

4.6 Expenses. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.

4.7 Amendments and Waivers. Any term of this
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Shares then outstanding. Any amendment or waiver
effected in accordance with this Section 4.7 shall be binding upon each holder
of any Registrable Shares then outstanding, each future holder of all such
Registrable Shares, and the Company.

4.8 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.

4.9 Entire Agreement. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subjects hereof.

[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK.]

-9-

<PAGE> 10

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

BIOFACTORS, INC.

By: /s/ ESMOND T. GOEI
Esmond T. Goei
President and CEO
1746 Cole Boulevard #265
Golden, CO 80401

<PAGE> 11

SIGNATURE PAGE TO
BIOFACTORS, INC.
REGISTRATION RIGHTS AGREEMENT

NEW INVESTOR: Admiral Capital NEW INVESTOR:
Corporation

By: /s/ GARY L. NEMETZ By: /s/ DR. KENNETH A. BARTON
----------------------------------- ----------------------------------
Name: Gary L. Nemetz Name: Dr. Kenneth A. Barton
--------------------------------- --------------------------------
Title: President Title:
-------------------------------- -------------------------------
Address: Admiral Capital Corp. Address: 836 Hwy 34
------------------------------ -----------------------------
2420 Sand Hill Rd, Ste 101
Menlo Park, CA 94025 [ILLEGIBLE] NJ 07747
- -------------------------------------- -------------------------------------
415-854-9479

NEW INVESTOR: NEW INVESTOR:

By: /s/ ROBERT GILMAN By: /s/ GILBERT L. GLASS
----------------------------------- ----------------------------------
Name: Robert Gilman Name: Dr. Gilbert Glass
--------------------------------- --------------------------------
Title: Title:
-------------------------------- -------------------------------
Address: 505 Tadmore Ct Address: 65 Hance Rd
------------------------------ -----------------------------
Schaumburg, IL 60194 Fairhaven, NJ 07704
- -------------------------------------- -------------------------------------

NEW INVESTOR: NEW INVESTOR:

By: /s/ ESMOND T. GOEI By:
----------------------------------- ----------------------------------
Name: Esmond T. Goei Name:
--------------------------------- --------------------------------
Title: Title:
-------------------------------- -------------------------------
Address: 4486 Hogan Court Address:
------------------------------ -----------------------------
Longmont CO 80503
- -------------------------------------- -------------------------------------

-11-
<PAGE> 12
SIGNATURE PAGE TO
BIOFACTORS, INC.
REGISTRATION RIGHTS AGREEMENT

NEW INVESTOR: NEW INVESTOR:

By:/s/ LOW KENG TEE By: /s/ EDWARD MARUCCI
----------------------------------- ----------------------------------
Name: Low Keng Tee Name: Edward Marucci
--------------------------------- --------------------------------
Title: -- Title:
-------------------------------- -------------------------------
Address: Blk 541, Hougang Ave 8, Address: 40 Andrea Dr.
------------------------------ -----------------------------
A 07-1209, Singapore 530541 N. Caldwell, NJ 07006
- -------------------------------------- -------------------------------------

NEW INVESTOR: NEW INVESTOR:
/s/ REBECCA C. PERRINE /s/ ALFRED SCHWIMER
By: /s/ GARY N. PERRINE By: /s/ CHERYL SCHWIMER
----------------------------------- ----------------------------------
Name: Rebecca C. Perrine
Gary N. Perrine Name: Alfred & Cheryl Schwimer
--------------------------------- --------------------------------
Title: Title: [ILLEGIBLE]
-------------------------------- -------------------------------
Address: 2470 Tarpon Rd Address: 5450 Whitley Park [ILLEGIBLE]
------------------------------ -----------------------------
Naples FL 34102 Bethesda, MD 20804
- -------------------------------------- -------------------------------------

NEW INVESTOR: Voice Plus, Inc. NEW INVESTOR:

By: /s/ JAMES S. GILLESPIE By: /s/ RICHARD H. WILLIAMS
----------------------------------- ----------------------------------
Name: James S. Gillespie Name: Richard H. Williams
--------------------------------- --------------------------------
Title: President Title:
-------------------------------- -------------------------------
Address: 39899 Balentine Dr. Address: 721 Champagne Road
------------------------------ -----------------------------
Suite 350
Newark, CT 94560 Incline Village, NV 89450
- -------------------------------------- -------------------------------------

NEW INVESTOR: NEW INVESTOR:

By: /s/ DOUGLAS S ZORN By:
----------------------------------- ----------------------------------
Name: Douglas S. Zorn Name:
--------------------------------- --------------------------------
Title: Title:
-------------------------------- -------------------------------
Address: 33 Golden Eagle Lane Address:
------------------------------ -----------------------------
Littleton, CO 80127
- -------------------------------------- -------------------------------------

<PAGE> 13
SIGNATURE PAGE TO
BIOFACTORS, INC.
REGISTRATION RIGHTS AGREEMENT

MAJORITY HOLDER:

By: /s/ GEORGE F. ADAM, JR.
----------------------------------------
Name: George F. Adam, Jr.
--------------------------------------
Title: Director
-------------------------------------
Address: 9200 E. Mineral #440
Englewood, CO 80112

MAJORITY HOLDER: ADMIRAL CAPITAL CORPORATION,
AS TRUSTEE

By: /s/ GARY L. NEMETZ
----------------------------------------
Name: Gary L. Nemetz
--------------------------------------
Title: President
-------------------------------------
Address: P.O. Box 958
Saratoga, CA 95071

MAJORITY HOLDER: AFRO-ASIA (DIGITAL ONE) PTE LTD.

By: /s/ TAN CHIN HOON
----------------------------------------
Name: Tan Chin Hoon
--------------------------------------
Title: Director
-------------------------------------
Address: 53 Robinson Road #02-00,
Afro Asia Building
Singapore 0106

MAJORITY HOLDER:

By: /s/ JOSEPH BOYERSMITH
----------------------------------------
Name: Joseph Boyersmith
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ J.G. BRASSFIELD
----------------------------------------
Name: J.G. Brassfield
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ WILLIAM KREHM
----------------------------------------
Name: William Krehm
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ CHAI CHENG HUAN
----------------------------------------
Name: Chai Cheng Huan
--------------------------------------
Title:
-------------------------------------
Address: 95 Whampon Drive
#14-242
Singapore 1232

MAJORITY HOLDER:

By: /s/ ESMOND T. GOEI
----------------------------------------
Name: Esmond T. Goei
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ JON D. GRUBER
----------------------------------------
Name: Jon D. Gruber
--------------------------------------
Title:
-------------------------------------
Address: P.O. Box 214
Ross, CA 94957

MAJORITY HOLDER: DAVID E. HART, TRUSTEE OF THE
DAVID AND BARBARA HART
REVOCABLE TRUST

By: /s/ DAVID E. HART
----------------------------------------
Name: David E. Hart
--------------------------------------
Title: Trustee
-------------------------------------
Address: 982 Paseo La Cresta
Palos Verdes Estates, CA 90274

MAJORITY HOLDER:

By: /s/ BRIAN HIGGINS
----------------------------------------
Name: Brian Higgins
--------------------------------------
Title:
-------------------------------------
Address: 4127 Greens Pl.
Niwot, CO 80503

MAJORITY HOLDER:

By: /s/ PHILIP LIM SENG CHOONG
----------------------------------------
Name: Philip Lim Seng Choong
--------------------------------------
Title:
-------------------------------------
Address: 39 Lorong Chong Knoon Lin 2
6800 Ampang
Selangor
Malaysia

MAJORITY HOLDER:

By: /s/ CATHERINE KNOLL MILBURN
----------------------------------------
Name: Catherine Knoll Milburn
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ LAURENCE ZAYU MOH
----------------------------------------
Name: Laurence Zayu Moh
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ MICHAEL TAN KIAH TECK
----------------------------------------
Name: Michael Tan Kiah Teck
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ TERRY D. WATSON
----------------------------------------
Name: Terry D. Watson
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ RICHARD H. WILLIAMS
----------------------------------------
Name: Richard H. Williams
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ GEORGE F. WINDSOR
----------------------------------------
Name: George F. Windsor
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ DOUGLAS S. ZORN
----------------------------------------
Name: Douglas S. Zorn
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ STUART ELFLAND
----------------------------------------
Name: Stuart Elfland
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ ROBERT D. GILMAN
----------------------------------------
Name: Robert D. Gilman
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ JACK HIRSCHFIELD
----------------------------------------
Name: Jack Hirschfield
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ NICOLE KUBIN
----------------------------------------
Name: Nicole Kubin
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ WAYNE SAKER
----------------------------------------
Name: Wayne Saker
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ BARBARA DALLAS
----------------------------------------
Name: Barbara Dallas
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ SANTANU DAS
----------------------------------------
Name: Santanu Das
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ JOHN W. HEILSHORN, JR.
----------------------------------------
Name: John W. Heilshorn, Jr.
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ MING HSU
----------------------------------------
Name: Ming Hsu
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ RAM IYENGAR
----------------------------------------
Name: Ram Iyengar
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ CHARLES L. LEWIS
----------------------------------------
Name: Charles L. Lewis
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ ALBERT E. PALADINO
----------------------------------------
Name: Albert E. Paladino
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ DALE SCOTT SCHECK
----------------------------------------
Name: Dale Scott Scheck
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ BERNARD AND BARBARA SCHWARTZ
----------------------------------------
Name: Bernard and Barbara Schwartz
--------------------------------------
Title: Joint Tenants
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ WAYNE M. TWARDOSZ
----------------------------------------
Name: Wayne M. Twardosz
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ ALLEN VISCONTI
----------------------------------------
Name: Allen Visconti
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ ALAN GRODKO
----------------------------------------
Name: Alan Grodko
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ JEFFREY GRODKO
----------------------------------------
Name: Jeffrey Grodko
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER: HELERIC TRADING LTD.

By: /s/ LESTER SLOAN
----------------------------------------
Name: Lester Sloan
--------------------------------------
Title: Vice President
-------------------------------------
Address:

MAJORITY HOLDER:

By: /s/ MORRIS HUSARSKY
----------------------------------------
Name: Morris Husarsky
--------------------------------------
Title:
-------------------------------------
Address:

MAJORITY HOLDER: MILCHMAN FAMILY PARTNERS, INC.

By: /s/ ERNEST MILCHMAN
----------------------------------------
Name: Ernest Milchman
--------------------------------------
Title: President
-------------------------------------
Address:

MAJORITY HOLDER: JUANA ELSACA SAUD

By: /s/ EDUARDO J. SABAL
----------------------------------------
Name: Eduardo J. Sabal
--------------------------------------
Title: Attorney in fact
-------------------------------------
Address:

-11-
<PAGE> 14
SIGNATURE PAGE TO
BIOFACTORS, INC.
REGISTRATION RIGHTS AGREEMENT

SERIES A INVESTOR: SERIES A INVESTOR:

By: /s/ G.F. ADAMS By: /s/ TAN CHIN HOON
---------------------------------- -----------------------------------
Name: G. F. Adams 11/20/96 Name: AFRO-ASIA (DIGITAL ONE) PTE. LTD
-------------------------------- ---------------------------------
Title: Title: DIRECTOR
------------------------------- --------------------------------
Address: Address:
----------------------------- ------------------------------

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

SERIES A INVESTOR: SERIES A INVESTOR:

By: /s/ JOE BOYERSMITH 11/11/96 By: /s/ JERRY G. BRASSFIELD
---------------------------------- -----------------------------------
Name: Joe Boyersmith Name: Jerry G. Brassfield
-------------------------------- ---------------------------------
Title: M G (Ret.) Title:
------------------------------- --------------------------------
Address: 11205 W. Jewell Dr. Address: P.O. Box 1198
----------------------------- ------------------------------
Lakewood, CO 80227 Los Gatos, Calif. 95031
- ------------------------------------- --------------------------------------

SERIES A INVESTOR: SERIES A INVESTOR:

By: /s/ WM. H. BREHM By: /s/ LAWRENCE J. CHAZEN
---------------------------------- -----------------------------------
Name: Wm. H. Brehm Name: Lawrence J. Chazen
-------------------------------- ---------------------------------
Title: Title:
------------------------------- --------------------------------
Address: 11400 Queens Way Address:One Embarcadero Ctr. Suite 150
----------------------------- ------------------------------
Theodore, AL 36582 San Francisco, CA 94111
- ------------------------------------- --------------------------------------

SERIES A INVESTOR: SERIES A INVESTOR:

By: /s/ BERT R. COHEN By: /s/ HAROLD S. HENDELMAN
---------------------------------- -----------------------------------
Name: Bert R. Cohen Name: Harold S. Hendelman
-------------------------------- ---------------------------------
Title: Investor Title: General Partner
------------------------------- --------------------------------
Address: 181 North Carmelina Ave Address: 200 West Median St. #3500
----------------------------- ------------------------------
Los Angeles, Calif 90049 Chicago, IL 60606
- ------------------------------------- --------------------------------------

SERIES A INVESTOR: SERIES A INVESTOR:

By: /s/ GORDON P. GETTY By: /s/ WILL K. WEINSTEIN
---------------------------------- -----------------------------------
Name: Gordon P. Getty Name: Will K. Weinstein
-------------------------------- ---------------------------------
Title: Title:
------------------------------- --------------------------------
Address: Address: 909 Montgomery Street
----------------------------- ------------------------------
Suite 600
- ------------------------------------- --------------------------------------
San Francisco, CA 94133
--------------------------------------
<PAGE> 15
SIGNATURE PAGE TO
BIOFACTORS, INC.
REGISTRATION RIGHTS AGREEMENT

SERIES A INVESTOR: SERIES A INVESTOR:

By: /s/ ESMOND T. GOEI By: /s/ GOH AI LIN
---------------------------------- -----------------------------------
Name: Esmond T. Goei Name: Goh Ai Lin
-------------------------------- ---------------------------------
Title: Title:
------------------------------- --------------------------------
Address: Address:
----------------------------- ------------------------------

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

SERIES A INVESTOR: SERIES A INVESTOR:

By: /s/ JON D. GRUBER By: /s/ DAVID E. HART
---------------------------------- -----------------------------------
Name: Jon D. Gruber Name: David E. Hart
-------------------------------- ---------------------------------
Title: Title: Trustee
------------------------------- --------------------------------
Address: 50 Osgood Pl - PH Address: 982 Paseo La Cresta
----------------------------- ------------------------------
San Francisco, CA 94133 Palos Verdes Estates, CA 90274
- ------------------------------------- --------------------------------------

SERIES A INVESTOR: SERIES A INVESTOR:

By: /s/ BRIAN HIGGINS By: /s/ KAYLOE TJIO
---------------------------------- -----------------------------------
Name: Brian Higgins Name: Kayloe Tjio for Leonaris Trust
-------------------------------- ---------------------------------
Title: Title:
------------------------------- --------------------------------
Address: 4127 Greens Pl. Address:
----------------------------- ------------------------------
Longmont, CO 80503
- ------------------------------------- --------------------------------------

SERIES A INVESTOR: SERIES A INVESTOR:

By: /s/ PHILIP LIM SENG CHOONG By: /s/ CATHERINE K. MILBURN
---------------------------------- -----------------------------------
Name: Philip Lim Seng Choong Name: Catherine K. Milburn
-------------------------------- ---------------------------------
Title: Title:
------------------------------- --------------------------------
Address: 39 Lorong Cmong Kmoon Lin 2 Address: 320 Aurora Ave.
----------------------------- ------------------------------
68000 Ampang Malaysia Boulder, CO 80302
- ------------------------------------- --------------------------------------
<PAGE> 16
SIGNATURE PAGE TO
BIO FACTORS, INC.
REGISTRATION RIGHTS AGREEMENT

SERIES A INVESTOR: SERIES A INVESTOR:

By: /s/ N.T. SCHRAMM By: /s/ SOON KIAN LEE
---------------------------------- -----------------------------------
Name: N.T. Schramm Name: Soon Kian Lee
-------------------------------- ---------------------------------
Title: Title:
------------------------------- --------------------------------
Address: 10125 Channel Road Address: Blk 257, Bashan St 22
----------------------------- ------------------------------
Lakeside, CA 92040 # 08-323, Singapore 570257
- ------------------------------------- --------------------------------------

SERIES A INVESTOR: SERIES A INVESTOR:

By: /s/ MICHAEL TAN KIAH TECK By: /s/ TERRY D. WATSON
---------------------------------- -----------------------------------
Name: Michael Tan Kiah Teck Name: Terry D. Watson
-------------------------------- ---------------------------------
Title: Title:
------------------------------- --------------------------------
Address: Address: 2020 Arapahoe St. # 930
----------------------------- ------------------------------
Denver, CO 80205
- ------------------------------------- --------------------------------------

SERIES A INVESTOR: SERIES A INVESTOR:

By: /s/ R.H. WILLIAMS By: /s/ G.F. WINDSOR
---------------------------------- -----------------------------------
Name: R.H. Williams Name: G.F. Windsor
-------------------------------- ---------------------------------
Title: Title: Lawyer
------------------------------- --------------------------------
Address: P.O. Box 4281 Address: 101-1111 Prince of Wales Dr.
----------------------------- ------------------------------
Incline Village, NV 89450 Ottawa, ON K2C3T2
- ------------------------------------- --------------------------------------

SERIES A INVESTOR: SERIES A INVESTOR:

By: /s/ LOUIS WOLFSON III By: /s/ DOUGLAS S. ZORN
---------------------------------- -----------------------------------
Name: Louis Wolfson, III Name: Douglas S. Zorn
-------------------------------- ---------------------------------
Title: Title:
------------------------------- --------------------------------
Address: 9350 S. Dixie Hwy Address: 33 Golden Fagle Ln.
----------------------------- ------------------------------
Miami, FL 33156 Littleton, CO 80127
- ------------------------------------- --------------------------------------
<PAGE> 17

SCHEDULE A TO
BIOFACTORS, INC.
REGISTRATION RIGHTS AGREEMENT

MAJORITY HOLDERS

George F. Adam, Jr.
Admiral Capital Corporation
Afro-Asia (Digital One) Pte Ltd.
Brian Baynes
Joseph Boyersmith
J.G. Brassfield
William Brehm
Chai Cheng Huan
Esmond T. Goei
Goh Cheng Chua
Jon D. Gruber
David E. Hart, Trustee of the David and
Barbara Hart Revocable Trust
Brian Higgins
Philip Lim Seng Choong
Catherine Knoll Milburn
Michael Myers
Soon Kian Lee
Michael Tan Kiah Teck
Terry D. Watson
Richard H. Williams
George F. Windsor
Zayucel Ltd.
Douglas S. Zorn
Stuart Elfland
Robert D. Gilman
Jack Hirschfield
Nicole and Michael Kubin
SAGAX Fund II
Wayne Saker
Barbara Dallas
Santanu Das
Andrew Dunlea
John Heilshorn
Ming Hsu
Ram Iyengar
Charles L. Lewis
Albert E. Paladino
Dale S. Scheck
Bernard and Barbara Schwartz as J.T.
Wayne M. Twardosz
Allen Visconti
Alan Grodko
Jeffrey Grodko
Heleric Trading Ltd.
Morris Husarsky
Milchman Family Partners, Inc.
Juana Elsaca Saud

A-1

<PAGE> 18

SCHEDULE B TO
BIOFACTORS, INC.
REGISTRATION RIGHTS AGREEMENT

NEW INVESTORS

Admiral Capital Corporation
Kenneth A. Barton
Robert Gilman
Gilbert L. Glass
Esmond T. Goei
Low Keng Tee
Edward Marucci
Gary R. Perrine and Rebecca C. Perrine JTWRS
Albert Schwimer and Cheryl Schwimer JTWRS
Voice Plus, Inc.
Richard H. Williams
Douglas S. Zorn

B-1
<PAGE> 19

SCHEDULE C TO
BIOFACTORS, INC.
REGISTRATION RIGHTS AGREEMENT

SERIES A INVESTORS

George F. Adam, Jr.
Afro-Asia (Digital One) Pte. Ltd.
Joseph Boyersmith
Jerry G. Brassfield
William H. Brehm
Lawrence J. Chazen
Bert R. Cohen
Genesis Group Limited Partnership
Gordon P. Getty
Esmond T. Goei
Goh Ai Lin
Jon D. Gruber
David E. Hart, Trustee
Brian Higgins
Leonaris Trust Ltd.
Philip Lim Seng Choong
Catherine K. Milburn
N.T. Schramm
Soon Kian Lee
Michael Tan Kiah Teck
Terry D. Watson
Will K. Weinstein
R.H. Williams
George F. Windsor
Louis Wolfson III
Douglas S. Zorn

C-1

<PAGE> 1

Exhibit 10.2

AGREEMENT AND PLAN OF MERGER

By and Among

NHANCEMENT TECHNOLOGIES INC.
A DELAWARE CORPORATION,

BFI ACQUISITION CORPORATION,
A DELAWARE CORPORATION,

AND

BIOFACTORS, INC.
A DELAWARE CORPORATION
<PAGE> 2

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger; Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Articles of Incorporation; Bylaws; Directors and Officers . . . . . . . . . . . . . . . . . . . . . 2
1.4 Closing; Filing of Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Conversion of Merger Sub Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Conversion of BFI Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9 Stockholders' Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.10 Taking of Necessary Action; Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

ARTICLE 2 EXCHANGE; DELIVERY OF MERGER CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Surrender of Certificates and Delivery of Merger Consideration . . . . . . . . . . . . . . . . . . . 5
2.3 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Escheat Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Organization, Power, Standing and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Authority and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Validity of Contemplated Transactions; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Capitalization of BFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.6 No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.8 Intangibles; Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.9 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.10 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.12 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.13 ERISA Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.15 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.16 Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.17 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.18 Compensation Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.19 Corporate Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.20 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.21 Suppliers and Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.22 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>

-i-

<PAGE> 3

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Conflict with Authority, Bylaws, Other Instruments . . . . . . . . . . . . . . . . . . . . . . . . 15
4.5 Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.6 Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE 5 COVENANTS OF BFI PRIOR TO THE CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1 Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE 6 COVENANTS OF PARENT PRIOR TO THE CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.1 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.2 Offering of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.3 Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.5 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

ARTICLE 7 CONDITIONS PRECEDENT TO THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1 Obligation of Parties to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(c) VPI Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(d) Litigation Affecting Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.2 Obligation of Parent to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Compliance with Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(c) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.3 Obligation of BFI to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Compliance with Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) New Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(c) Assignment .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Transactions at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE 8 BROKERAGE; EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.1 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>

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<PAGE> 4

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 9 TERMINATION PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1 Termination of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Mutual Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) Deadline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) Material Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.2 Termination of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

ARTICLE 10 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.1 Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.2 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.3 Gender; Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.4 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.8 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.9 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.11 No Benefit to Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.12 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>

-iii-

<PAGE> 5

LIST OF EXHIBITS TO AGREEMENT

EXHIBIT A-1 AMENDMENT TO BFI ARTICLES OF INCORPORATION
EXHIBIT A-2 AMENDMENT TO BFI BYLAWS
EXHIBIT B DISCLOSURE SCHEDULE
EXHIBIT C BFI SECRETARY'S CERTIFICATE
EXHIBIT D BFI OFFICERS' CERTIFICATE
EXHIBIT E OPINION OF BFI COUNSEL
EXHIBIT F PARENT OFFICERS' CERTIFICATE
EXHIBIT G ASSIGNMENT

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<PAGE> 6

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this "Agreement") is made as of the
30th day of October, 1996 by and among NHANCEMENT TECHNOLOGIES INC., a Delaware
corporation ("Parent"), BFI ACQUISITION CORPORATION, a Delaware corporation
("Merger Sub"), and BIOFACTORS, INC., a Delaware corporation ("BFI") (Merger
Sub and BFI being sometimes referred to herein as the "Constituent
Corporations").

W I T N E S S E T H

WHEREAS, pursuant to that certain Formation Agreement dated as of
October 15, 1996 by and between BFI and Voice Plus, Inc., a California
corporation ("VPI") (the "Formation Agreement"), BFI and VPI agreed to effect
the formation and incorporation under the laws of the State of Delaware of
Parent (with each of BFI and VPI owning 50% of the outstanding shares of common
stock of Parent) and the subsequent merger of two, wholly-owned subsidiaries of
Parent into BFI and VPI, respectively, concurrently with the underwritten
initial public offering of Parent's securities pursuant to a registration
statement filed under the Securities Act of 1933, as amended, in an integrated
transaction intended for federal income tax purposes to be a transfer pursuant
to Internal Revenue Code Section 351;

WHEREAS, pursuant to and in furtherance of the Formation Agreement,
the respective Boards of Directors of Parent, BFI and Merger Sub each have
determined that it is advisable and in the best interests of such corporations
that Merger Sub merge with and into BFI as authorized by the statutes of the
State of Delaware and upon the terms and subject to the conditions set forth
herein;

THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants, representations, warranties, and agreements herein
contained, and intending to be legally bound, the parties hereby agree as
follows:

ARTICLE 1
THE MERGER

1.1 THE MERGER; EFFECTS OF THE MERGER. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as
hereinafter defined), Merger Sub shall be merged with and into BFI in
accordance with this Agreement, and the separate corporate existence of Merger
Sub shall thereupon cease (the "Merger"). BFI shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation" or as "BFI Sub"). The Merger shall have the effects specified in
the Delaware General Corporation Law (the "DGCL").

<PAGE> 7
1.2 EFFECTIVE TIME. The Merger shall become effective at the time
of filing of the Certificate of Merger with the Secretary of State of the State
of Delaware in accordance with the requirements of Section 251 of the DGCL or at
such later time as the parties hereto shall have agreed upon and designated in
such filings as the effective time of the Merger (the "Effective Time").

1.3 ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS.
The Articles of Incorporation of BFI, amended as set forth in EXHIBIT A-1
hereto, and the Bylaws of BFI, amended as set forth in EXHIBIT A-2, shall
become the Articles of Incorporation and Bylaws of the Surviving Corporation
until thereafter amended as provided therein and under applicable law. The
directors of Merger Sub immediately prior to the Effective Time will be the
initial directors of the Surviving Corporation and shall serve until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws and applicable law. The
officers of Merger Sub immediately prior to the Effective Time will be the
initial officers of the Surviving Corporation and shall serve until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws and appropriate law.

1.4 CLOSING; FILING OF CERTIFICATE OF MERGER. Upon the terms and
subject to the conditions hereof, as soon as practicable following the
satisfaction or waiver of the conditions set forth in Articles 5, 6 and 7,
Merger Sub and BFI shall execute and file with the Delaware Secretary of State,
the document referred to in Section 1.2, in the manner required by applicable
law, and the parties hereto shall take all such other and further actions as
may be required by law to make the Merger effective. Prior to such filing, a
closing (the "Closing") will be held as set forth in Section 7.4 hereof, for
the purpose of confirming all of the foregoing.

1.5 CONVERSION OF MERGER SUB COMMON STOCK. At the Effective Time,
by virtue of the Merger and without any action on the part of Parent, Merger
Sub, BFI or any holder of shares of Merger Sub Common Stock, each share of
Merger Sub Common Stock outstanding immediately prior to the Effective Time
shall be converted into and deemed to be one share of Common Stock, par value
$0.01 per share, of the Surviving Corporation ("Surviving Corporation Common
Stock"). Each certificate which immediately prior to the Effective Time
represents a number of outstanding shares of Merger Sub Common Stock shall,
from and after the Effective Time, be deemed for all purposes to represent one
share of Surviving Corporation Common Stock for each share of Merger Sub Common
Stock represented.

1.6 CONVERSION OF BFI COMMON STOCK.

(a) Each outstanding share of common stock of BFI, $0.01
par value per share (the "BFI Common Stock") issued and outstanding immediately
prior to the Effective Time, shall, at the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive seventy-five-hundredths (75/100) of a share of
Parent

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<PAGE> 8

Common Stock (the "Exchange Ratio"), deliverable to the holder thereof,
without interest on the value thereof, upon the surrender of the certificate(s)
formerly representing such outstanding share. (The shares of Parent Common
Stock, or cash in lieu of fractions thereof, receivable by each BFI stockholder
as described above are referred to hereinafter as the "Merger Consideration").

(b) Each share of BFI Common Stock held in the treasury
of BFI shall, at the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, be cancelled and retired and cease to
exist.

(c) Subject to any applicable escheat laws, until
surrendered and exchanged pursuant hereto, each certificate that immediately
prior to the Effective Time represented outstanding shares of BFI Common Stock
shall be deemed for all corporate purposes of Parent, subject, however, to the
other provisions of this Section 1.6, to evidence the ownership of the number
of whole shares of Parent Common Stock into which the shares of BFI Common
Stock represented thereby shall have been converted, and shall be deemed to
represent the right to receive the amount of cash in lieu of fractional shares,
if any, into which the shares of BFI Common Stock represented thereby shall
have been converted pursuant to subsection (a) of this Section 1.6. No
interest shall be payable with respect to any cash payment in lieu of
fractional shares. No cash or stock dividend payable, no certificate
representing split shares deliverable, and no other distribution payable or
deliverable to holders of record of Parent Common Stock at any time subsequent
to the Effective Time shall be paid or delivered to the holder of any
certificate that at the Effective Time represented BFI Common Stock unless and
until such certificate is surrendered to the Exchange Agent. However, subject
to any applicable escheat laws, upon such surrender, there shall be paid or
delivered to the holder of record of the certificate or certificates for shares
of Parent Common Stock issued and exchanged therefor, the certificates for
shares and/or other property resulting from any such dividends, splits, or
other distributions, as the case may be, that shall have theretofore become
payable or deliverable with respect to such shares of Parent Common Stock
subsequent to the Effective Time. No interest shall be payable with respect to
such payment or delivery of any dividends or other distributions upon the
surrender of certificates that represented BFI Common Stock at the Effective
Time.

(d) No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon surrender of certificates
representing BFI Common Stock converted pursuant hereto, and no dividend, stock
split, or other distribution of Parent shall relate to any such fractional
share interest, and no such fractional share interest shall entitle the owner
thereof to vote or to any other rights of a stockholder of Parent. In lieu of
any such fractional share, any holder of Parent Common Stock shall be entitled,
upon surrender in accordance herewith of such holder's certificate or
certificates representing BFI Common Stock, to receive a cash payment therefor,
without interest, at a pro rata amount based on a per share amount equal to the
price to the public in the IPO (as defined in Section 6.2) (the "IPO Price").
No interest shall accrue with respect to any cash held for the benefit of
holders of unsurrendered certificates theretofore representing shares of BFI
Common Stock at the Effective Time.

(e) All shares of Parent Common Stock into which shares
of BFI Common Stock have been converted pursuant to this Section 1.6 shall be
deemed to have been issued in full

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<PAGE> 9

satisfaction of all rights pertaining to such converted shares and shall, when
issued pursuant to the provisions hereof, be fully paid and nonassessable.

(f) The stock transfer books of BFI shall be closed at
the Effective Time, and thereafter no transfer of any shares of BFI Common
Stock shall be recorded thereon. In the event a transfer of ownership of
shares of BFI Common Stock is not recorded on the stock transfer books of BFI,
a certificate or certificates representing the number of whole shares of Parent
Common Stock into which such shares of BFI Common Stock shall have been
converted in connection with the Merger may be issued to the transferee of such
shares of BFI Common Stock if the certificate or certificates representing such
shares of BFI Common Stock is or are surrendered to the Exchange Agent
accompanied by all documents deemed necessary by the Exchange Agent to evidence
and effect such transfer of ownership of shares of BFI Common Stock by the
payment of any applicable stock transfer tax with respect to such transfer,
subject to compliance with any restrictions or conditions contained herein with
respect to the transfer of shares of BFI Common Stock

1.7 STOCK OPTIONS. Options granted under the Incentive Stock Plan
approved by the Board of Directors and the stockholders of BFI in February 1994
(the "BFI Stock Plan"), regardless of whether such options are currently
exercisable, shall be treated as follows:

(a) At the Effective Time, Parent shall assume BFI's
rights and obligations under each of the outstanding options previously granted
under the BFI Stock Plan (each such option existing immediately prior to the
Effective Time being an "Existing Option," and each such option so assumed by
Parent being called an "Assumed Option"), by which assumption the optionee
shall have the right to purchase 5.625 shares of Parent Common Stock (rounded
down to the nearest whole) for every 10 shares of BFI Common Stock the optionee
was entitled to purchase under the Existing Option. Notwithstanding the
exercise prices determined in connection with the Existing Options, the Assumed
Options shall have an exercise price equal to eighty percent (80%) of the IPO
Price. Each Assumed Option shall constitute a continuation of the Existing
Option, substituting Parent for BFI as issuer and employment by Parent or one
of its subsidiaries for employment by BFI.

1.8 WARRANTS. Warrants issued by BFI and currently outstanding
shall become obligations of Parent in accordance with their terms.

1.9 STOCKHOLDERS' APPROVAL. BFI, acting through its Board of
Directors, shall use its reasonable best efforts to obtain the necessary
approval of the Merger by its Stockholders.

1.10 TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Parent,
Merger Sub and BFI shall use all reasonable efforts to take all such actions as
may be necessary or appropriate in order to effectuate the Merger under the
DGCL as promptly as commercially practicable. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of either of the Constituent Corporations, the officers and
directors of the Surviving Corporation are fully

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<PAGE> 10

authorized in the name of their corporation or otherwise to take, and shall
take, all such lawful and necessary action.

ARTICLE 2
EXCHANGE; DELIVERY OF MERGER CONSIDERATION

2.1 EXCHANGE AGENT. Prior to the Effective Time, Parent shall
designate a bank or trust company to act as Exchange Agent in connection with
the Merger (the "Exchange Agent"). At the Effective Time, Parent shall take
all steps necessary to enable and cause Parent to provide the Exchange Agent
with the certificates representing shares of Parent Common Stock ("Parent Stock
Certificates") and cash in respect of fractional shares necessary to deliver
the Merger Consideration to each holder of BFI Common Stock, as contemplated in
Section 1.6 hereof, prior to the time that such deliveries are required to be
made as provided in this Article 2.

2.2 SURRENDER OF CERTIFICATES AND DELIVERY OF MERGER
CONSIDERATION. Promptly after the Effective Time, the Exchange Agent shall
mail to each record holder (as of the Effective Time) of an outstanding
certificate or certificates that immediately prior to the Effective Time
represented outstanding shares of BFI Common Stock (the "Certificates"), a
letter of transmittal in customary form (which specifies that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent) and instructions for
use in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender to the Exchange Agent of a Certificate, together
with such letter of transmittal properly completed and duly executed, together
with any other required documents, the holder of such Certificate shall be
entitled to receive in exchange therefor Parent Stock Certificates representing
the number of shares of Parent Common Stock and cash in lieu of fractional
shares to which the holder is entitled, and such Certificate shall forthwith be
cancelled. If payment is to be made to a person other than the person in whose
name the Certificate surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of Parent that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions of this
Section 2.2, each Certificate shall represent for all purposes only the right
to receive the Merger Consideration, without any interest on the value thereof.

2.3 RESTRICTIONS ON TRANSFER. The shares of Parent Common Stock
being issued pursuant to Section 1.6 are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from Parent in a transaction not involving a public offering and under
such laws and applicable regulations such shares of Parent Common Stock may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances, in particular, the shares of
Parent Common Stock may not be sold pursuant to Rule 144 promulgated under the
Act ("Rule 144") unless all of the conditions of Rule 144 are met. The Parent
Stock Certificates shall therefor bear one or all of the following legends:

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<PAGE> 11

(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, ASSIGNED OR
TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE ACT, BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED
A WRITTEN OPINION ACCEPTABLE TO THE CORPORATION OF COUNSEL ACCEPTABLE TO THE
CORPORATION THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE
PROVISIONS OF THE ACT, AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR
SECURITIES LAW."

(b) Any legend required by the laws of the State of
Delaware or applicable state securities laws.

2.4 ESCHEAT LAWS. Notwithstanding any provision of this Article
2 to the contrary, neither Parent nor the Surviving Corporation shall be liable
to any holder of Certificates formerly representing shares of BFI Common Stock
for any property properly delivered or amount paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BFI

BFI hereby represents and warrants to Parent as follows:

3.1 ORGANIZATION, POWER, STANDING AND QUALIFICATION. BFI is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full corporate power and authority to
carry on its business as it is now being conducted, and to own, lease, and use
the properties and assets that it purports to own, lease or use. BFI is duly
qualified to do business and is in good standing in Delaware and as of the
Closing Date, is duly qualified to do business as a foreign corporation and is
in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification, other
than jurisdictions in which the failure to so qualify would not have a material
adverse effect on the condition, financial or otherwise, of the business
operations or income of BFI. SECTION 3.1 OF THE DISCLOSURE SCHEDULE attached
hereto as EXHIBIT B (the "Disclosure Schedule") contains a complete and
accurate list of each jurisdiction in which BFI is authorized to do business.

3.2 AUTHORITY AND ENFORCEABILITY.

(a) The Board of Directors of BFI, by unanimous vote of
all directors present at a meeting duly called and held, has (i) determined
that the Merger is fair and in the best interests of the stockholders of BFI
and (ii) resolved to submit the Merger to and recommend approval of the Merger
by the stockholders of BFI.

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<PAGE> 12

(b) BFI has the full corporate power and authority to
execute and deliver this Agreement and to perform the obligations hereunder,
and, upon approval of the transactions provided for herein by its stockholders,
to consummate the transactions contemplated hereby without any other corporate
or stockholder approval. This Agreement has been duly executed and delivered
on behalf of BFI and, at the Closing, all documents and instruments required
hereunder to be executed by BFI (the "Collateral Documents") shall have been
duly executed and delivered. This Agreement and the Collateral Documents will,
when executed and delivered, constitute legal, valid and binding obligations of
BFI enforceable in accordance with their respective terms.

3.3 VALIDITY OF CONTEMPLATED TRANSACTIONS; CONSENTS. The
execution, delivery, and performance of this Agreement, the Collateral
Documents and the consummation of the transactions contemplated hereby and
thereby do not and will not:

(a) contravene any provision of the Certificate of
Incorporation or Bylaws of BFI;

(b) violate, be in conflict with, or constitute a default
under (or any event which, with notice or lapse of time or both would
constitute a default under), cause the acceleration of any payments or
performance pursuant to, result in the termination of or otherwise impair the
good standing, validity, or effectiveness of any agreement, contract, indenture,
lease, or mortgage, or subject any property or asset of BFI to any liens under
any indenture, mortgage, contract, commitment, or agreement to which BFI is a
party, or any of its assets may be bound or affected; or

(c) violate any provision of law, rule, ordinance,
regulation, order, judgment, permit, or license to which BFI, or any of its
assets, is subject.

Except as set forth in SECTION 3.3 OF THE DISCLOSURE SCHEDULE, no consent,
approval or authorization of, notice to, registration or filing with any
person, entity or governmental authority is required on the part of BFI in
connection with the execution, delivery and performance by BFI of this
Agreement, the Collateral Documents or the consummation of any of the
transactions contemplated hereby and thereby.

3.4 CAPITALIZATION OF BFI. The entire authorized capital stock of
BFI consists of twenty million (20,000,000) shares of stock, of which ten
million (10,000,000) shares are designated Common Stock, par value $0.01 per
share, and ten million (10,000,000) shares are designated Preferred Stock, par
value $0.01 per share. All of the outstanding shares of BFI Common Stock (and
any shares issuable pursuant to presently outstanding options or warrants, if
exercised and purchased at the applicable exercise price) were duly authorized
and will be, when issued and the option or warrant price paid, validly issued,
fully paid and nonassessable. None of the capital stock of BFI is entitled to
or subject to preemptive rights. Other than the requisite stockholder vote to
consummate the Merger, the authorization or consent of no other person is
required in order to consummate the transactions contemplated herein by virtue
of any such person having an equitable or beneficial interest in the capital
stock of BFI. Except as set

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<PAGE> 13
forth in SECTION 3.4 OF THE DISCLOSURE SCHEDULE, there are no outstanding
options, warrants, calls, commitments or plans by BFI to issue any additional
shares of its capital stock, to pay any dividends on such shares or to
purchase, redeem or retire any outstanding shares of its capital stock, nor are
there outstanding any securities or obligations that are convertible into or
exchangeable for any shares of capital stock of BFI. Other than as disclosed
in SECTION 3.4 OF THE DISCLOSURE SCHEDULE, there are not now, and at the
Effective Time there will not be, any voting trusts or other agreements or
understandings to which BFI is a party or is bound with respect to the voting
of the capital stock of BFI.

3.5 OWNERSHIP OF SHARES. Except as set forth in SECTION 3.5 OF
THE DISCLOSURE SCHEDULE, to BFI's knowledge, each record shareholder of BFI
securities is also the beneficial owner of such securities. To the knowledge
of BFI on the date hereof, no more than 35 of BFI's shareholders, in the
aggregate, including all record shareholders and all beneficial shareholders
known to BFI would be considered unaccredited purchasers of Parent Common Stock
under either Rule 505 or 506 of Regulation D of the Securities Act of 1933, as
amended.

3.6 NO SUBSIDIARIES. BFI does not own or control, in whole or in
part, directly or indirectly, any corporation, association, partnership or
other business entity.

3.7 TITLE TO PROPERTIES. Except as set forth in SECTION 3.7 OF
THE DISCLOSURE SCHEDULE, BFI has good, valid and marketable title to, or valid
leasehold interests in, all of its properties and assets, real, personal, and
mixed, tangible and intangible including all of the properties and assets
reflected on the latest balance sheet of BFI that is included in the Financial
Statements (as defined in Section 3.9 hereof) and those properties and assets
acquired since the date of such balance sheet, except in each case for
properties and assets sold or otherwise disposed of in the ordinary course of
business, free and clear of all liens, except (a) liens disclosed in such
balance sheet or the notes thereto; (b) liens for current taxes not yet due (c)
liens in connection with workmen's compensation, unemployment insurance, or
other social security obligations; (d) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of business; (e) mechanic's, workmen's,
materialmen's, or other like liens arising in the ordinary course of business
with respect to obligations that are not due or that are being contested in
good faith; and (f) such imperfections of title, liens, easements, and
encumbrances, if any, as are not substantial and do not materially detract from
the value, or materially interfere with the present use, of any of the
properties subject thereto or affected thereby, or otherwise materially impair
the business, operations, or prospects of BFI (collectively, "Liens").

3.8 INTANGIBLES; NAMES. Except as set forth in SECTION 3.8 OF THE
DISCLOSURE SCHEDULE, to the knowledge of BFI, BFI has good and marketable title
to: (i) all service marks, trademarks, trade names, product names, patents and
copyrights necessary to BFI's conduct of its business as presently conducted,
and (ii) all inventions, discoveries, improvements, processes, formulae,
proprietary rights, trade secrets, ideas or other know-how, necessary to
conduct the business of BFI as presently conducted, whether owned by BFI or
otherwise (all of such items are referred to hereinafter collectively as the
"Intangibles"). Except as set forth in SECTION 3.8 OF THE

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<PAGE> 14

DISCLOSURE SCHEDULE, to the knowledge of BFI, (a) none of the Intangibles or
their past or current uses has infringed or infringes, upon any patent,
copyright, trade secret or other proprietary right of any other person; (b) no
person is infringing upon any of the Intangibles. In addition, none of the
Intangibles is owned by or registered in the name of any stockholder of BFI or
any current or former shareholder, director, officer, employee, contractor or
agent of BFI, nor does any such person have any interest therein. No person
has a right to receive a royalty with respect to any of the Intangibles.
SECTION 3.8 OF THE DISCLOSURE SCHEDULE sets forth a correct and complete list
of all of the trademarks, trade names, service marks, registered copyrights,
patents and patent applications owned or licensed by BFI.

3.9 FINANCIAL INFORMATION.

(a) BFI has delivered to Parent audited balance sheets
for the fiscal years ending December 31, 1994 and December 31, 1995, and the
related statement of operations, stockholders' equity and cash flows for the
years then ended, together with the report thereon of BDO Seidman, LLP,
independent certified public accountants, an unaudited balance sheet as of
September 30, 1996 and the related statement of operations, stockholders'
equity and cash flows for the six-months then ended (collectively, the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects, have been prepared in accordance with generally accepted
accounting principles, consistently applied, and present fairly in all material
respects the financial condition of BFI and the results of its operations as of
the respective dates thereof.

(b) BFI has no debts, liabilities or obligations of any
nature, known or unknown, fixed or contingent, other than:

(i) those set forth in the Financial Statements
and the notes thereto;

(ii) those incurred since September 30, 1996 and
not in breach of any of the representations of Section 3.16; and

(iii) those which are not material, individually or
in the aggregate, to BFI's business, assets or financial condition. To the
knowledge of BFI, there are no circumstances, bases (either with notice, lapse
of time or both), conditions, events or arrangements which may hereafter give
rise to any liabilities of BFI except in the ordinary course of business
consistent with past practices.

3.10 CERTAIN TAX MATTERS.

(i) BFI has filed or caused to be filed with the
appropriate foreign, federal, state and local governmental agencies all income,
sales, use, property, ad valorem, profits, severance, payroll, franchise,
withholding, employment, social security, excise, transfer, gains and other tax
returns and reports (the "Tax Returns") which are required to be filed, and has
paid in full or adequately provided for all taxes shown on such Tax Returns,
and for all such

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<PAGE> 15

taxes otherwise due and payable by BFI, except those taxes being contested in
good faith and for which adequate reserves have been set aside on the books of
BFI. All such Tax Returns are true and correct in all material respects and
reflected as of the time of filing the facts regarding the income, business,
operations, activities and status of BFI and any other information required to
be shown therein. BFI has delivered to Parent correct and complete copies
of, and SECTION 3.10 OF THE DISCLOSURE SCHEDULE contains a complete and
accurate list of, all Tax Returns, examination reports, and statements of
deficiencies assessed against, or agreed to by BFI since December 31, 1991.

(ii) Except as set forth in SECTION 3.10 OF THE
DISCLOSURE SCHEDULE, adequate accrual has been made in the Financial Statements
for all the accrued and unpaid foreign, federal, state and local taxes
(including applicable interest and penalties) of BFI for the periods then
ended, whether or not yet due and payable.

(iii) Except as set forth in SECTION 3.10
OF THE DISCLOSURE SCHEDULE, there is no material dispute or claim concerning
any tax liability of BFI either (A) claimed or raised by any authority in
writing or (B) as to which the directors and officers of BFI has knowledge
based upon personal contact with any agent of such authority. SECTION 3.10 OF
THE DISCLOSURE SCHEDULE indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit, including
a reasonably detailed description of the nature and outcome of each audit. BFI
has not waived any statute of limitations in respect of income taxes or agreed
to any extension of time with respect to an income tax assessment or
deficiency.

3.11 LITIGATION. There is no suit, action, claim, arbitration,
administrative or legal or other proceeding, or governmental investigation
pending or, to BFI's knowledge, threatened against BFI which, if adversely
determined, would have a material adverse effect on BFI's businesses, assets or
operations and, to BFI's knowledge, there exists no reasonable basis or grounds
for any such suit, action, claim, arbitration, administrative, legal or other
proceeding that would have a material adverse effect. A correct and complete
list and brief description, including outcome, of all claims threatened or
filed against BFI within the last five (5) years is set forth in SECTION 3.11
OF THE DISCLOSURE SCHEDULE.

3.12 COMPLIANCE WITH LAW. To the best of BFI's knowledge, BFI is
in compliance with all applicable laws, ordinances, requirements, regulations,
judgments, decrees and orders applicable to BFI, the violation of which,
individually or in the aggregate, might have a material adverse effect on the
financial condition, business, results of operations, properties, or assets of
BFI, or Parent's ownership of the Shares. BFI holds all permits, licenses,
consents, authorizations, approvals, privileges, waivers, exemptions and orders
("Permits") necessary or appropriate to permit it to own its properties and to
conduct its business in accordance with applicable laws, regulations and
ordinances. SECTION 3.12 OF THE DISCLOSURE SCHEDULE contains a correct and
complete list of all such Permits. Except as noted on SECTION 3.12 OF THE
DISCLOSURE SCHEDULE, to BFI's knowledge, there are no facts in existence that
could form the basis of any claim against BFI for product liability on account
of any express or implied warranty.

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<PAGE> 16
3.13 ERISA MATTERS. SECTION 3.13 OF THE DISCLOSURE SCHEDULE sets
forth a true and complete list of each employee benefit or compensation plan,
arrangement or agreement that is maintained, or has been maintained by BFI
(including terminated or transferred plans) by BFI or to which BFI makes
contributions and in each case, which covers employees of BFI (the "Plans").
BFI has delivered to Parent correct and complete copies of all plan documents,
summary plan descriptions, annual reports, determination letters, trust
agreements and other material agreements relating to the Plans. None of the
Plans is an "employee benefit plan" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended.

3.14 INSURANCE. Set forth in SECTION 3.14 TO THE DISCLOSURE
SCHEDULE is a complete list of all material insurance policies that BFI
maintains with respect to its businesses, properties or employees. Except as
set forth in SECTION 3.14 TO THE DISCLOSURE SCHEDULE, such policies are in full
force and effect, and no event has occurred that would give any insurance
carrier a right to terminate any such policy. Such policies are adequate to
insure against risks to which BFI and its properties and assets are exposed in
the operation of its business in such amounts and types of coverage as are
commercially reasonable and are consistent with practices in the industry in
which BFI operates. Except as set forth in SECTION 3.14 OF THE DISCLOSURE
SCHEDULE, since September 30, 1996, there has not been any change in BFI's
relationship with its insurers or in the premiums payable pursuant to such
policies.

3.15 CONTRACTS. SECTION 3.15 OF THE DISCLOSURE SCHEDULE identifies
all contracts, licenses, guaranties, notes, leases, agreements and instruments
to which BFI is a party, or is bound which are material to the business of BFI
("Contracts"); a correct and complete copy of each Contract has been provided
to Parent. Except as noted in SECTION 3.15 OF THE DISCLOSURE SCHEDULE, BFI has
in all material respects performed all the material obligations required to be
performed by BFI as of the date hereof pursuant to any Contract, and BFI is not
in default under any Contract, nor, to BFI's knowledge, has an event occurred
which, with the passage of time or giving of notice or both, will result in the
occurrence of a default under any Contract. SECTION 3.15 OF THE DISCLOSURE
SCHEDULE contains a correct and complete list of all powers of attorney, forms
of warranties, and forms of purchase orders, sales contracts and service
contracts, whether or not material to the business of BFI or entered into in
the ordinary course of business. A correct and complete copy of each such
document has been provided to Parent.

3.16 OTHER TRANSACTIONS. Except as disclosed in SECTION 3.16 OF
THE DISCLOSURE SCHEDULE, and except for activities in connection with the IPO,
BFI has not, since September 30, 1996:

(a) operated its business except in the ordinary course;

(b) incurred any debts, liabilities or obligations
except in the ordinary course;

(c) discharged or satisfied any material Liens, or paid
any material debts, liabilities, or obligations, except in the ordinary course;

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<PAGE> 17
(d) mortgaged, pledged, or subjected to any Lien any of
its assets, tangible or intangible, having a book value of more than $20,000
individually or in the aggregate;

(e) sold or transferred any of its tangible assets (other
than inventory in the ordinary course) having a book value of more than
$20,000, or cancelled any material debts or claims;

(f) declared, set aside, or paid any dividend or made any
other distribution (whether in cash, stock or property) with respect to any of
BFI's capital stock;

(g) suffered any material extraordinary losses or waived
any rights of substantial value;

(h) suffered any materially adverse change in its
condition (financial or otherwise) or business, assets, liabilities, properties
or prospects;

(i) increased compensation or benefits payable to any
directors, officers, employees or consultants;

(j) suffered any material losses by theft, fire or other
casualty;

(k) cancelled or suffered the termination of any Contract
except in the ordinary course of business; or

(l) failed to operate the business of BFI in the ordinary
course.

3.17 BANK ACCOUNTS. SECTION 3.17 OF THE DISCLOSURE SCHEDULE sets
forth the name and address of each bank and other financial institution in
which BFI maintains an account (whether checking, savings or otherwise), lock
box, or safe deposit box and the account numbers and names of persons having
signing authority or other access thereto.

3.18 COMPENSATION ARRANGEMENTS. SECTION 3.18 OF THE DISCLOSURE
SCHEDULE sets forth a correct list showing the names and titles of all
officers, employees, and agents performing services for BFI in connection with
its business and the rate of hourly, monthly, or annual compensation (as the
case may be), and any bonus, severance or similar arrangement with any of them.
No union or collective bargaining agreement or employment agreement is
currently in effect or being negotiated by BFI.

3.19 CORPORATE RECORDS. The copies of the Articles of
Incorporation of BFI, as amended to the date of this Agreement, certified by
the Secretary of BFI, and the Bylaws of BFI, as amended to the date of this
Agreement, certified by the Secretary of BFI, which are being delivered
herewith, are true, correct, and complete copies of said Articles and Bylaws as
currently in effect. SECTION 3.19 OF THE DISCLOSURE SCHEDULE sets forth a
true and correct list of the names and titles of all of BFI's current directors
and officers, any fictitious names of BFI and the

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<PAGE> 18
jurisdictions, if any, in which BFI is qualified as a foreign corporation.
Correct and complete copies of BFI's minute books and stock records have been
delivered to the Parent.

3.20 ENVIRONMENTAL MATTERS.

(a) "Environmental Law" shall mean any federal, state or
local statute, ordinance, rule or regulation, any judicial or administrative
order, judgment, request or directive, any common law doctrine or theory and
any provision or condition of any Permit, license or other operating
authorization, primarily relating to (A) protecting the environment, including
without limitation protection of the environment, persons or the public welfare
from actual or potential exposure (or the effects of exposure) to any actual or
potential release, discharge or emission (whether past or present) of, or
regarding the manufacture, processing, importation, use, transportation,
generation, treatment, storage, disposal, transportation or handling of, any
chemical, raw material, pollutant, contaminant or toxic, hazardous or
radioactive substance; (B) occupational or public health or safety; or (C) land
use.

(b) Except as indicated in SECTION 3.20 OF THE DISCLOSURE
SCHEDULE, BFI is, or will be prior to the Closing Date, in compliance with all
Environmental Laws and in possession of and compliance with all necessary
Permits, licenses and other authorizations, and the present condition of BFI
and its property or BFI's present or past activities or manner of operating BFI
and its property including the real property which is currently leased by BFI
(the "Leased Property") (including disposing or arranging for the disposal of
waste materials), does not give rise to any liability to any person, contingent
or otherwise, under any Environmental Law. BFI has fully disclosed to Parent
all documents and information in its possession and control regarding
activities and conditions relating to BFI and the Leased Property which could
in the future result or may in the past have resulted in noncompliance with, or
liability under, any Environmental Law.

(c) To the actual knowledge of BFI, there are no proposed
Environmental Laws or amendments to Environmental Laws which would require any
material change in any of BFI's facilities, equipment, operation or procedures,
or materially affect BFI's business or its costs of conducting its business as
now conducted, and to BFI's knowledge, the operation by the owner of the
building within which BFI's Leased Property is located is and has been in
compliance with all Environmental Laws.

3.21 SUPPLIERS AND CUSTOMERS. Except as set forth in SECTION 3.21
OF THE DISCLOSURE SCHEDULE, no single supplier provided more than five percent
(5%) of BFI's needs in BFI's most recent fiscal year and there is no
"single-source" supplier to BFI that could not be replaced without a material
disruption to BFI's business. In addition, except as set forth in SECTION 3.21
OF THE DISCLOSURE SCHEDULE, no single customer accounted for more than five
(5%) of BFI's net sales in BFI's most recent fiscal year. To the best of BFI's
knowledge, except as disclosed in SECTION 3.21 OF THE DISCLOSURE SCHEDULE, no
officer or director of BFI, nor any spouse or child of any such officer or
director, nor any trust of which any such officer or director is a grantor,
trustee or beneficiary, has any ownership interest in or is a director, officer
or employee of, or

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<PAGE> 19
consultant to, any entity which is a competitor, potential competitor or
supplier of BFI, or has any ownership interest, in whole or in part, in any
property, asset or right which is associated with any property, asset or right
owned or purported to be owned by BFI or which BFI is at present operating or
using or the use of which is necessary or material to BFI's business, or has,
directly or indirectly, engaged in any transaction with BFI other than
transactions inherent in the capacities of director, officer, employee,
consultant or stockholder.

3.22 KNOWLEDGE. When used in this Agreement, "to the knowledge" of
BFI means actual knowledge of BFI after due inquiry (including inquiry of the
officers of BFI with respect to the matters covered by such representations and
warranties) and the examination of whatever sources of information as are
accessible to BFI in order to verify the truth and accuracy of representations
and warranties. BFI acknowledges that Parent has relied and will rely on such
representations and warranties in executing this Agreement and in consummating
the transactions contemplated hereby, and agrees, prior to the Closing Date, to
promptly notify Parent in writing of any knowledge BFI may obtain of any
material change affecting such representations and warranties.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT

Parent hereby represents and warrants to BFI as follows:

4.1 ORGANIZATION AND GOOD STANDING. Each of Parent and Merger Sub
is a corporation duly organized and validly existing under the laws of
Delaware. Parent has full corporate power and authority to carry on its
business as it is now being conducted, and to own and operate the properties
and assets now owned and operated by it. Parent is duly qualified to do
business in each and every jurisdiction where the failure to qualify would have
a material adverse effect upon its financial condition, the conduct of its
business or the ownership of its property and assets.

4.2 CORPORATE POWER AND AUTHORITY. Each of Parent and Merger Sub
has full corporate power and authority to enter into this Agreement and to
perform all of its covenants and undertakings herein set forth. The execution
and delivery of this Agreement, and all documents and instruments required
hereunder to be executed by Parent and Merger Sub (the "Collateral Documents")
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of Parent
and Merger Sub, and this Agreement and the Collateral Documents are valid and
binding obligations of Parent and Merger Sub, enforceable in accordance with
their terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium, or similar laws affecting the rights of
creditors generally.

4.3 CAPITALIZATION.

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(a) Prior to the Closing, Parent's total authorized
capital stock will consist of 20,000,000 shares of common stock, par value
$0.01 per share, and 2,000,000 shares of preferred stock, par value $0.01 par
value per share, of which 200 shares of common stock are currently issued and
outstanding and held equally by BFI and VPI.

(b) Prior to the Closing, Merger Sub's total authorized
capital stock will consist of 1,000 shares of common stock, par value $0.01 per
share, of which 100 shares will be issued and outstanding and held by Parent.

4.4 CONFLICT WITH AUTHORITY, BYLAWS, OTHER INSTRUMENTS. Neither
the execution and delivery of this Agreement and the Collateral Documents nor
the consummation of the transactions contemplated hereby and thereby in the
manner herein and therein provided will:

(a) contravene any provision of the Certificate of
Incorporation or Bylaws of Parent or Merger Sub;

(b) violate, be in conflict with, constitute a default
under, cause the acceleration of any payments pursuant to, or otherwise impair
the good standing, validity, and effectiveness of any lease, license, permit,
authorization, or approval applicable to Parent or Merger Sub; or

(c) to the knowledge of Parent, violate any provision of
law, rule, regulation, order, or permit to which Parent or Merger Sub is
subject.

4.5 AVAILABILITY OF INFORMATION. To the knowledge of Parent, BFI
has granted to Parent and its representatives, the opportunity to examine such
documents and ask such questions of BFI as the Parent has deemed necessary, and
Parent has received satisfactory answers from BFI (or persons acting on BFI's
behalf) concerning the business of BFI and the terms and conditions of the
Merger described herein. Notwithstanding the foregoing, nothing contained in
this representation shall affect the covenants, agreements, representations and
warranties made by BFI under this Agreement.

4.6 VALIDITY OF AGREEMENT. This agreement has been duly executed
and delivered by Parent and Merger Sub and is the legal, valid and binding
obligation of Parent in accordance with its terms.

ARTICLE 5
COVENANTS OF BFI PRIOR TO THE CLOSING DATE

5.1 OPERATION OF BUSINESS. BFI hereby agrees that from and after
the date hereof to the Effective Time, except for activities in connection with
the IPO and as otherwise contemplated by this Agreement and except as otherwise
agreed to in writing by Parent, BFI shall conduct its business solely in the
ordinary course, and BFI shall:

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<PAGE> 21
(a) not amend BFI's Articles of Incorporation or Bylaws,
except as may be necessary to carry out this Agreement or as required by law;

(b) not change BFI's corporate name or permit the use
thereof by any other corporation;

(c) not pay or agree to pay to any employee, officer, or
director of BFI any increase in compensation other than in the ordinary course;

(d) not make any changes in BFI's management;

(e) not merge or consolidate BFI with any other
corporation or allow it to acquire or agree to acquire or be acquired by any
corporation, association, partnership, joint venture, or other entity;

(f) not amend or permit BFI to default in any of its
obligations under any of the Contracts;

(g) not declare or pay any dividend or make any
distribution on any shares of its capital stock or redeem, purchase or
otherwise acquire any shares of its capital stock;

(h) not sell or transfer any of BFI's tangible or
intangible assets having an aggregate book value of $20,000 or more, other than
sales of inventory in the ordinary course, or create any lien or encumbrance on
any of BFI's assets or permit BFI to incur any debt liability or obligation,
permit BFI to waive any right or cancel any debt or claim, enter into any
contract or agreement involving amounts exceeding $20,000;

(i) conduct BFI's business in a diligent manner, and not
make any material change in its business practices; and

(j) in good faith use their best efforts to (i) preserve
BFI's business organization intact; (ii) keep available the services of its
current officers, employees, salesmen, agents and representatives; and (iii)
maintain the good will of its suppliers, customers and other persons having
business relations with BFI and (iv) maintain all of its properties in good
repair, order and condition, and maintain in effect all of the insurance
policies listed in SECTION 3.14 OF THE DISCLOSURE SCHEDULE.

5.2 ACCESS TO INFORMATION. BFI agrees to cooperate fully with
Parent and shall provide Parent and its accountants, counsel, and other
representatives, during normal business hours (or otherwise agreed upon by
BFI), full access to the books, records, equipment, real estate, contracts, and
other assets of BFI and full opportunity to discuss BFI's business, affairs,
and assets with its officers and independent accountants and furnish to Parent
and its representatives copies of such documents, records, and information with
respect to the affairs of BFI, as Parent or its representatives may reasonably
request and without unreasonably disrupting the ordinary

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<PAGE> 22

conduct of BFI's business. BFI shall provide any information reasonably
requested by Parent or its managing underwriter in connection with Parent's
proposed initial public offering.

5.3 BEST EFFORTS. Between the date of this Agreement and the
Closing Date, BFI will use its best efforts to cause the conditions in Sections
7.1 and 7.2 to be met.

ARTICLE 6
COVENANTS OF PARENT PRIOR TO THE CLOSING DATE

6.1 ACCESS TO INFORMATION. Parent agrees to cooperate fully with
BFI and shall provide BFI and its accountants, counsel, and other
representatives, during normal business hours (or otherwise agreed upon by
Parent), full access to the books, records, equipment, real estate, contracts,
and other assets of Parent and full opportunity to discuss Parent's business,
affairs, and assets with its officers and independent accountants and furnish
to BFI and its representatives copies of such documents, records, and
information with respect to the affairs of Parent as BFI or its representatives
may reasonably request and without unreasonably disrupting the ordinary conduct
of Parent's business.

6.2 OFFERING OF SECURITIES. Parent shall use all commercially
reasonable efforts consistent with the prudent conduct of its business to
complete an underwritten initial public offering of its securities pursuant to
a registration statement filed with the Securities and Exchange Commission (the
"IPO").

6.3 WARRANTS. Parent shall authorize the issuance, as soon as
reasonably practicable following the Closing, to holders of BFI promissory
notes issued pursuant to (i) that certain Secured Note and Warrant Purchase
Agreement dated as of December 1, 1994, as amended, by and among BFI and the
Purchasers named therein, (ii) that certain Secured Note and Stock Purchase
Agreement dated as of December 1, 1995, as amended, by and among BFI and the
Purchasers named therein, (iii) that certain Unsecured Note and Stock Purchase
Agreement dated as of February 1, 1996, as amended, by and among BFI and the
Purchasers named therein, and (iv) that certain Unit Subscription Agreement
dated as of May 17, 1996, as amended, by and among BFI and the Purchasers named
therein, warrants to purchase an aggregate of __________ shares of Parent
Common Stock, at an exercise price equal to 120% of the IPO Price (the "New
Warrants").

6.4 ASSIGNMENT. Parent shall authorize the assignment from BFI
and the assumption of all obligations under that certain Registration Rights
Agreement dated as of September 1, 1996, by and between BFI and the Holders
named therein pursuant to a written agreement substantially in the form
attached hereto as EXHIBIT G (the "Assignment").

6.5 BEST EFFORTS. Between the date of this Agreement and the
Closing Date, Parent will use its best efforts to cause the conditions in
Sections 7.1 and 7.3 to be met.

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<PAGE> 23
ARTICLE 7
CONDITIONS PRECEDENT TO THE CLOSING

7.1 OBLIGATION OF PARTIES TO CLOSE. The obligations of each party
hereto to consummate the Merger shall be subject to the satisfaction of the
following conditions on or prior to the Closing Date:

(b) STOCKHOLDER APPROVAL. This Agreement and the Merger
shall have been adopted and approved by the affirmative vote or written consent
of the holders of the outstanding shares of BFI Common Stock by the vote or
written consent required by, and in accordance with, the DGCL.

(c) VPI MERGER. The closing of the merger of Parent and
Voice Plus, Inc. pursuant to the Formation Agreement and the Agreement and Plan
of Merger attached as EXHIBIT C thereto shall be scheduled to occur
substantially concurrently with the IPO.

(d) LITIGATION AFFECTING CLOSING. On the Closing Date,
no proceeding brought by any individual or entity other than the Parties shall
be pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby, unless each of Parent and VPI shall have waived compliance
with this condition.

7.2 OBLIGATION OF PARENT TO CLOSE. The obligations of Parent and
Merger Sub to consummate the Merger shall be subject to the satisfaction of the
following conditions on or prior to the Closing Date or the waiver of such
conditions by Parent:

(a) COMPLIANCE WITH AGREEMENT. BFI shall have performed
all covenants and agreements to be performed by it under this Agreement on or
prior to the Closing Date, and all of the representations and warranties of BFI
set forth in Article 3 herein shall be true and correct in all material
respects as of the Closing Date to the same extent as if given on that date,
without giving effect to any supplements to the DISCLOSURE SCHEDULE attached
hereto as EXHIBIT B, except to the extent such DISCLOSURE SCHEDULE is updated
to reflect events or conditions occurring after the execution hereof that are
not, individually or in the aggregate, material. BFI shall have delivered to
Parent certificates, dated the Closing Date, stating that the representations
and warranties contained in Article 3 are true and correct on the Closing Date
in all material respects as if then made, that BFI has fulfilled the conditions
specified in Article 5 and Section 7.2, and to the effect that the transactions
contemplated by this Agreement were duly authorized by all necessary corporate
action on the part of BFI.

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<PAGE> 24
(b) REQUIRED CONSENTS. The holders of any material
indebtedness of BFI, and the parties to any material Contracts, to the extent
that their consent or approval is required under the pertinent agreement for
the consummation of the transaction contemplated hereby in the manner provided
herein or the continuation of such agreement without termination or penalty to
BFI, shall have granted such consent or approval.

(c) NO MATERIAL ADVERSE CHANGE. There shall have been no
material adverse change in the financial condition, business or prospects of
BFI since September 30, 1996.

7.3 OBLIGATION OF BFI TO CLOSE. The obligation of BFI to
consummate the Merger hereof shall be subject to the satisfaction of the
following conditions on or prior to the Closing Date:

(a) COMPLIANCE WITH AGREEMENT. Parent shall have
performed all covenants and agreements to be performed by it under this
Agreement on or prior to the Closing Date and all of the representations and
warranties of Parent set forth herein shall be true and correct in all material
respects as of the Closing Date to the same extent as if given on that date.
Parent shall have delivered to BFI certificates dated the Closing Date, signed
on behalf of Parent by its President, to such effect and to the effect that the
transactions contemplated by this Agreement were duly authorized by all
necessary corporate action on the part of Parent.

(b) NEW WARRANTS. Parent shall have authorized the
issuance of the New Warrants.

7.4 CLOSING.

(a) TIME AND PLACE OF CLOSING. Unless another place or
date is agreed to in writing by BFI and Parent, the Closing shall be held at
the offices of Davis, Graham & Stubbs LLP, 370 17th Street, Suite 4700, Denver,
Colorado 80202, on the date set for and immediately preceding the closing of
the IPO (the "Closing Date").

(b) TRANSACTIONS AT CLOSING. At the Closing, each of the
following transactions shall occur:

(i) BFI'S PERFORMANCE. At the Closing, BFI shall
deliver to Parent the following:

(1) All of the original books and records of
BFI, including the corporate minute book and stock book of BFI;

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(2) Resignations of each of the existing
directors and officers of BFI, to be effective at the Effective Time;

(3) A certificate of the Secretary of BFI,
dated the Closing Date, in the form of EXHIBIT C attached hereto;

(4) A certificate of the Officers of BFI, dated
the Closing Date, in the form of EXHIBIT D attached hereto;

(5) An opinion of counsel for BFI, dated the
Closing Date, in the form of EXHIBIT E attached hereto; and

(6) The duly executed Assignment.

(ii) PARENT'S PERFORMANCE. At the
Closing, Parent shall deliver to BFI the following:

(1) A certificate of the Officers of Parent,
dated the Closing Date, in the form of EXHIBIT F attached hereto;

(2) Certificates representing the Merger
Consideration; and

(3) The duly executed Assignment.

ARTICLE 8
BROKERAGE; EXPENSES

8.1 BROKERAGE. None of the parties, nor, where applicable, any of
their respective shareholders, officers, directors or employees, has employed
or will employ any broker, agent, finder, or consultant, and each Party
represents to the other Parties that such Party has not incurred nor will the
other Parties incur any liability for any brokerage fees, commissions, finders'
fees, or other fees, in connection with the negotiation or consummation of the
transactions contemplated by this Agreement.

8.2 EXPENSES. Parent shall reimburse BFI for reasonable and
necessary out-of-pocket expenses of BFI, for pre-approved expenses requested by
Parent in connection with this transaction. Parent will pay expenses
associated with (i) third-party accountants retained to prepare the Financial
Statements to be delivered or prepared pursuant hereto, and (ii) legal fees of
Parent's counsel related to the preparation and negotiation of this Agreement
and documents pertaining hereto, and the drafting of disclosure materials
related to BFI for use by Parent in the registration statement filed in
connection with the IPO. BFI is responsible for all other legal expenses
incurred by BFI in connection with this transaction. Except as otherwise
expressly provided in this Agreement, each of the parties agrees to bear its
own expenses of any character incurred in connection with this Agreement or the
transactions contemplated hereby.

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<PAGE> 26
ARTICLE 9
TERMINATION PRIOR TO CLOSING

9.1 TERMINATION OF AGREEMENT. This Agreement may be terminated at
any time prior to the Closing:

(a) MUTUAL CONSENT. By the mutual consent of Parent and
BFI; or

(b) DEADLINE. By Parent or BFI, in writing, without
liability (except as provided in Section 9.1(c)) if the Closing shall not have
occurred on or before March 31, 1997.

(c) MATERIAL BREACH. By notice in writing to the other
party if the other party shall (1) fail to perform in any material respect its
agreements contained herein required to be performed by it, on or prior to the
Closing Date or (2) materially breach any of its representations, warranties,
agreements, or covenants contained herein, provided that such failure or breach
is not cured within ten (10) days after such party has been notified of the
other party's intent to terminate this Agreement pursuant hereto.

9.2 TERMINATION OF OBLIGATIONS. Termination of this Agreement
pursuant to this Article 9 shall terminate all obligations of the parties
hereunder, except for the obligations set forth in Article 8, and except that
any party shall be liable for damages suffered by the other parties resulting
from a breach of this Agreement.

ARTICLE 10
GENERAL

10.1 ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the
entire understanding between the Parties with respect to the subject matter
contained herein and supersedes any prior understandings and agreements among
them respecting such subject matter. This Agreement may be amended,
supplemented, or terminated only by a written instrument duly executed by all
of the Parties.

10.2 HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not affect its interpretation.

10.3 GENDER; NUMBER. Words of gender may be read as masculine,
feminine, or neuter, as required by context. Words of number may be read as
singular or plural, as required by context.

10.4 EXHIBITS AND SCHEDULES. Each Exhibit and Schedule referred to
herein is incorporated into this Agreement by such reference.

-21-
<PAGE> 27
10.5 SEVERABILITY. If any provision of this Agreement is held
illegal, invalid, or unenforceable, such illegality, invalidity, or
unenforceability shall not affect any other provision hereof. This Agreement
shall, in such circumstances, be deemed modified to the extent necessary to
render enforceable the provisions hereof.

10.6 NOTICES. All notices, requests, demands, waivers, consents,
approvals, or other communications required or permitted hereunder shall be in
writing and shall be deemed to have been given if delivered personally, sent by
telegram, telex or sent by certified or registered mail or same day or
overnight courier service, postage prepaid, return receipt requested, to the
following addresses:

If to Parent, to:
NHancement Technologies Inc.
1746 Cole Boulevard, Suite 265
Golden, CO 80401
Attention: General Counsel

If to BFI, to:
BioFactors, Inc.
1746 Cole Boulevard, Suite 265
Golden, CO 80401
Attention: Chief Operating Officer

Notice of any change in any such address shall also be given in the manner set
forth above. Whenever the giving of notice is required, the giving of such
notice may be waived by the Party entitled to receive such notice.

10.7 WAIVER. The failure of any Party to insist upon performance
of any of the terms or conditions of this Agreement shall not constitute a
waiver of any of his/its rights hereunder.

10.8 ASSIGNMENT. No Party may assign any of his/its rights or
delegate any of his/its obligations hereunder without the prior written consent
of the other Parties.

10.9 SUCCESSORS AND ASSIGNS. This Agreement binds, inures to the
benefit of, and is enforceable by the successors and permitted assigns of the
Parties and does not confer any rights on any other persons or entities.

10.10 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with Colorado law.

10.11 NO BENEFIT TO OTHERS. The representations, warranties,
covenants, and agreements contained in this Agreement are for the sole benefit
of the Parties hereto and their successors and

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<PAGE> 28

permitted assigns, and they shall not be construed as conferring and are not
intended to confer any rights on any other persons.

10.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.

[The rest of this page intentionally left blank.]

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<PAGE> 29
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.

PARENT:

NHANCEMENT TECHNOLOGIES INC.

By: /s/ ESMOND GOEI
-------------------------------------
Name:
Title:

MERGER SUB:

BFI ACQUISITION CORPORATION

By: /s/ ESMOND GOEI
-------------------------------------
Name:
Title:

BFI:

BIOFACTORS, INC.

By: /s/ ESMOND GOEI
-------------------------------------
Name:
Title:

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<PAGE> 1
EXHIBIT 10.3
AGREEMENT AND PLAN OF MERGER

By and Among

NHANCEMENT TECHNOLOGIES INC.,
A DELAWARE CORPORATION,

VPI ACQUISITION CORPORATION,
A DELAWARE CORPORATION,

VOICE PLUS, INC.
A CALIFORNIA CORPORATION

AND

JAMES GILLESPIE
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 THE MERGER.................................................. 2
1.1 The Merger.................................................. 2
1.2 Effective Time; Effects of the Merger....................... 2
1.3 Articles of Incorporation; Bylaws; Directors and Officers... 2
1.4 Closing; Filing of Certificate of Merger.................... 3
1.5 Conversion of Merger Sub Common Stock....................... 3
1.6 Conversion of VPI Common Stock.............................. 3
1.7 Taking of Necessary Action; Further Action.................. 5

ARTICLE 2 CANCELLATION; EXCHANGE...................................... 5
2.1 Cancellation................................................ 5
2.2 Exchange.................................................... 5

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER............... 5
3.1 Organization, Power, Standing and Qualification............. 5
3.2 Authority and Enforceability................................ 6
3.3 Validity of Contemplated Transactions; Consents............. 6
3.4 Capitalization of VPI....................................... 6
3.5 Ownership of Shares......................................... 7
3.6 No Subsidiaries............................................. 7
3.7 Title to Properties......................................... 7
3.8 Intangibles; Names.......................................... 7
3.9 Financial Information....................................... 8
3.10 Certain Tax Matters......................................... 8
3.11 Litigation.................................................. 9
3.12 Compliance with Law......................................... 9
3.13 ERISA Matters............................................... 10
3.14 Insurance................................................... 11
3.15 Contracts................................................... 11
3.16 Other Transactions.......................................... 12
3.17 Bank Accounts............................................... 13
3.18 Compensation Arrangements................................... 13
3.19 Corporate Records........................................... 13
3.20 Environmental Matters....................................... 13
3.21 Suppliers and Customers..................................... 14
3.22 Knowledge................................................... 14

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT.................... 15
4.1 Organization and Good Standing.............................. 15
4.2 Corporate Power and Authority............................... 15
4.3 Capitalization.............................................. 15
</TABLE>
-i-

<PAGE> 3

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.4 Conflict with Authority, Bylaws, Other Instruments.......... 15
4.5 Availability of Information................................. 16
4.6 Validity of Agreement....................................... 16

ARTICLE 5 COVENANTS OF VPI AND STOCKHOLDER PRIOR TO THE CLOSING
DATE........................................................ 16
5.1 Operation of Business....................................... 16
5.2 Tax Liability............................................... 17
5.3 Confidentiality............................................. 17
5.4 Access to Information....................................... 18
5.5 Best Efforts................................................ 18

ARTICLE 6 COVENANTS OF PARENT PRIOR TO THE CLOSING DATE............... 18
6.1 Operation of BFI............................................ 18
6.2 Confidentiality............................................. 19
6.3 Access to Information....................................... 19
6.4 Offering of Securities...................................... 19
6.5 Sale of Registered Shares................................... 19
6.6 Best Efforts................................................ 20

ARTICLE 7 CONDITIONS PRECEDENT TO THE CLOSING......................... 20
7.1 Obligation of Parties to Close.............................. 20
(a) Offering............................................... 20
(b) BFI Merger............................................. 20
(c) Litigation Affecting Closing........................... 20
7.2 Obligation of Parent to Close............................... 20
(a) Compliance with Agreement.............................. 20
(b) Required Consents...................................... 21
(c) No Material Adverse Change............................. 21
7.3 Obligation of VPI and Stockholder to Close.................. 21
(a) Compliance with Agreement.............................. 21
(b) No Material Adverse Change............................. 21
7.4 Closing..................................................... 21
(a) Time and Place of Closing.............................. 21
(b) Transactions at Closing................................ 21

ARTICLE 8 POST-CLOSING COVENANT....................................... 23
8.1 Post-Closing Covenant....................................... 23

ARTICLE 9 INDEMNIFICATION............................................. 23
9.1 By Stockholder.............................................. 23
9.2 By Parent................................................... 23
</TABLE>

-ii-

<PAGE> 4

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
9.3 Limitation of Indemnity..................................... 23
9.4 Notice...................................................... 24

ARTICLE 10 BROKERAGE; EXPENSES......................................... 24
10.1 Brokerage................................................... 24
10.2 Expenses.................................................... 24

ARTICLE 11 TERMINATION PRIOR TO CLOSING................................ 25
11.1 Termination of Agreement.................................... 25
(a) Mutual Consent......................................... 25
(b) Deadline............................................... 25
(c) Material Breach........................................ 25
11.2 Termination of Obligations.................................. 25

ARTICLE 12 GENERAL..................................................... 25
12.1 Entire Agreement; Amendments................................ 25
12.2 Headings.................................................... 26
12.3 Gender; Number.............................................. 26
12.4 Exhibits and Schedules...................................... 26
12.5 Severability................................................ 26
12.6 Notices..................................................... 26
12.7 Waiver...................................................... 26
12.8 Assignment.................................................. 27
12.9 Successors and Assigns...................................... 27
12.10 Governing Law............................................... 27
12.11 No Benefit to Others........................................ 27
12.12 Publicity................................................... 27
12.13 Counterparts................................................ 27
</TABLE>

-iii-

<PAGE> 5

LIST OF EXHIBITS TO AGREEMENT

EXHIBIT A-1 AMENDMENT TO VPI ARTICLES OF INCORPORATION
EXHIBIT A-2 AMENDMENT TO VPI BYLAWS
EXHIBIT B DISCLOSURE SCHEDULE
EXHIBIT C-1 FIRST NOTE
EXHIBIT C-2 SECOND NOTE
EXHIBIT D REGISTRATION RIGHTS AGREEMENT
EXHIBIT E EMPLOYMENT AGREEMENT
EXHIBIT F STOCKHOLDER AGREEMENT
EXHIBIT G VPI SECRETARY'S CERTIFICATE
EXHIBIT H VPI OFFICERS' CERTIFICATE
EXHIBIT I OPINION OF VPI COUNSEL
EXHIBIT J PARENT OFFICERS' CERTIFICATE

-iv-

<PAGE> 6

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this "Agreement") is made as of the
25th day of October, 1996 by and among NHANCEMENT TECHNOLOGIES INC., a Delaware
corporation ("Parent"), VPI ACQUISITION CORPORATION, a Delaware corporation
("Merger Sub"), VOICE PLUS, INC., a California corporation ("VPI"), and JAMES
GILLESPIE, a resident of the State of Nevada (the "Stockholder") (Merger Sub and
VPI being sometimes referred to herein as the "Constituent Corporations").

W I T N E S S E T H

WHEREAS, pursuant to that certain Formation Agreement dated as of
October 15, 1996 by and between BioFactors, Inc., a Delaware corporation ("BFI")
and VPI (the "Formation Agreement"), BFI and VPI agreed to effect the formation
and incorporation under the laws of the State of Delaware of Parent (with each
of BFI and VPI owning 50% of the outstanding shares of common stock of Parent)
and the subsequent merger of two, wholly-owned subsidiaries of Parent into BFI
and VPI, respectively, concurrently with the underwritten initial public
offering of Parent's securities pursuant to a registration statement filed under
the Securities Act of 1933, as amended, in an integrated transaction intended
for federal income tax purposes to be a transfer pursuant to Internal Revenue
Code Section 351;

WHEREAS, Parent is a corporation duly organized and existing under the
laws of the State of Delaware;

WHEREAS, Merger Sub is a corporation duly organized and existing under
the laws of the State of Delaware, having an authorized capital stock of 100
shares of common stock, $0.01 par value (the "Merger Sub Common Stock") of which
100 shares are issued and outstanding and owned by Parent and are the only
shares of capital stock of Merger Sub issued and outstanding;

WHEREAS, VPI is a corporation duly organized and existing under the
laws of the State of California, having an authorized capital stock of 100,000
shares of common stock, $1.00 par value per share (the "VPI Common Stock") of
which 91,000 shares are issued and outstanding and owned by Stockholder and are
the only shares of capital stock of VPI issued and outstanding;

WHEREAS, pursuant to and in furtherance of the Formation Agreement, the
respective Boards of Directors of Parent, VPI and Merger Sub each have
determined that it is advisable and in the best interests of such corporations
that Merger Sub merge with and into VPI as authorized by the statutes of the
States of Delaware and California and upon the terms and subject to the
conditions set forth herein; and

<PAGE> 7

WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
VPI have, by resolutions duly adopted, approved this Agreement, Parent has
approved this Agreement as the sole stockholder of Merger Sub and James
Gillespie has approved this Agreement as the sole shareholder of VPI.

ARTICLE 1
THE MERGER

1.1 THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, at the Effective Time (as hereinafter defined), Merger Sub
shall be merged with and into VPI in accordance with this Agreement, and the
separate corporate existence of Merger Sub shall thereupon cease (the "Merger").
VPI shall be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation" or as "VPI Sub"). The Merger shall
have the effects specified in the Delaware General Corporation Law (the "DGCL")
and in the California General Corporation Law ("CGCL").

1.2 EFFECTIVE TIME; EFFECTS OF THE MERGER. The Merger shall become
effective at the later of the time of filing of the certificate of merger with
the Secretary of State of the State of Delaware in accordance with the
requirements of Section 251 of the DGCL and the time of filing of the
certificate of merger with the Secretary of State of the State of California in
accordance with the requirements of Section 1103 of the CGCL or at such later
time which the parties hereto shall have agreed upon and designated in such
filings as the effective time of the Merger (the "Effective Time").

1.3 ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS. The
Articles of Incorporation of VPI, amended as set forth in EXHIBIT A-1 hereto,
and the Bylaws of VPI, amended as set forth in EXHIBIT A-2, shall become the
Articles of Incorporation and Bylaws of the Surviving Corporation until
thereafter amended as provided therein and under applicable law. The directors
of Merger Sub immediately prior to the Effective Time will be the initial
directors of the Surviving Corporation and shall serve until their successors
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws and applicable law. The officers of
Merger Sub immediately prior to the Effective Time will be the initial officers
of the Surviving Corporation and shall serve until their successors have been
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws and appropriate law.

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<PAGE> 8

1.4 CLOSING; FILING OF CERTIFICATE OF MERGER. Upon the terms and
subject to the conditions hereof, as soon as practicable following the
satisfaction or waiver of the conditions set forth in Articles 5, 6 and 7,
Merger Sub and VPI shall execute and file with the Delaware and California
Secretaries of State, respectively, the documents referred to in Section 1.2 in
the manner required by applicable law, and the parties hereto shall take all
such other and further actions as may be required by law to make the Merger
effective. Prior to such filings, a closing (the "Closing") will be held as set
forth in Section 7.4 hereof, for the purpose of confirming all of the foregoing.

1.5 CONVERSION OF MERGER SUB COMMON STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
VPI or any holder of shares of Merger Sub Common Stock, each share of Merger Sub
Common Stock outstanding immediately prior to the Effective Time shall be
converted into and deemed to be 910 shares of Common Stock, par value $0.01 per
share, of the Surviving Corporation ("Surviving Corporation Common Stock"). Each
certificate which immediately prior to the Effective Time represents a number of
outstanding shares of Merger Sub Common Stock shall, from and after the
Effective Time, be deemed for all purposes to represent 910 shares of Surviving
Corporation Common Stock for each share of Merger Sub Common Stock represented.

1.6 CONVERSION OF VPI COMMON STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, VPI or
Stockholder, the aggregate of 91,000 shares of VPI Common Stock, $1.00 par value
per share, issued and outstanding immediately prior to the Effective Time shall
cease to be outstanding and thereupon shall be deemed to have been converted
into the following (the "Merger Consideration"):

(a) Parent's promissory notes, as follows:

(i) Parent's non-negotiable unsecured promissory note (the "First
Note") in the form of EXHIBIT C-1 attached hereto, in the
aggregate original principal amount of One Million Dollars
($1,000,000), bearing interest at the rate of interest quoted at
the close of business on the date of payment for the medium-term
United States Treasury Bill (the "T-bill Rate"). The principal
and all accrued interest thereon shall be due and payable in full
on the three-year anniversary of the Closing Date, or if such
date shall not be a business day, the next following business day
(the "First Note Maturity Date"); provided, however, outstanding
principal of the First Note and accrued interest thereon
(computed at the T-bill Rate quoted at the close of business on
the Quarter Closing Date (defined below)) in an amount equal to
fifty percent (50%) of Net Profit (defined below), and as
reported in VPI Sub's financial statements, (x) for the period of
time ending on the Quarter Closing Date immediately following the
Closing Date, such amount to be calculated based on Net Profit
for the period commencing October 1, 1996 through the Quarter
Closing Date, shall be due and payable within 45 days of the
Quarter Closing Date, and (y) for each succeeding calendar
quarter, such amount to

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<PAGE> 9

be calculated based on Net Profit for such quarter, shall be
due and payable within 45 days of the Quarter Closing Date.
"Quarter Closing Date" shall mean the last day of the
respective calendar quarter.

(ii) Parent's non-negotiable promissory note in the form of
EXHIBIT C-2 attached hereto (the "Second Note") (the First Note
and Second Note, together, the "Promissory Notes"), in the
aggregate original principal amount of Five Hundred Thousand
Dollars ($500,000) bearing interest at the T-bill Rate. The
principal and all accrued interest thereon shall be due and
payable in full on the three-year anniversary of the Closing
Date, or if such date shall not be a business day, the next
following business day (the "Second Note Maturity Date");
provided, however, Sixty-Two Thousand Five Hundred Dollars
($62,500) of the principal and the accrued interest thereon
(computed at the T-bill Rate quoted at the close of business on
the respective Quarter Closing Date) shall be due and payable
within 45 days of the Quarter Closing Date for any calendar
quarter (commencing with the quarter ending December 31, 1996)
in which VPI Sub had a Net Profit (the payment, if any,
relating to the first quarter shall be due and payable within
45 days of the Quarter Closing Date for the Quarter in which
the IPO is consummated).

(iii) "Net Profit" shall mean net profit before taxes of VPI
Sub, as determined in accordance with generally accepted
accounting principles consistently applied, consistent with
operations of VPI in the ordinary course prior to the Merger,
without giving effect to Parent's overhead allocations, to
legal and accounting fees and other extraordinary expenses
incurred in connection with the acquisition at Parent's
direction of the stock or assets of other businesses or to
dividend or compensation payments in an amount up to $1,250,000
declared in calendar year 1996.

(iv) Any failure by Parent to cure, within forty-five (45)
days after written notice from Stockholder, any payment default
on either of the Promissory Notes, shall accelerate the
respective Maturity Date and all outstanding principal and
accrued interest on the Promissory Notes shall immediately
become due and payable (an "Acceleration Event").

(b) The number of shares of common stock of Parent, $0.01 par value
per share (the "Parent Common Stock") equal to the quotient of Five Million Two
Hundred Fifty Thousand Dollars ($5,250,000) divided by the price per share to
the public ("IPO Price") in the IPO (defined in Section 6.4) (the "Consideration
Shares"), which Consideration Shares, subject to the agreements set forth in
Section 6.5, will be subject to the rights and limitations (including the market
stand-off agreement in favor of the underwriter of the IPO (the "Underwriter"))
set forth in the Registration Rights Agreement attached hereto as EXHIBIT D (the
"Rights Agreement").

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<PAGE> 10

1.7 TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Parent, Merger
Sub, Stockholder and VPI shall use all reasonable efforts to take all such
actions as may be necessary or appropriate in order to effectuate the Merger
under the DGCL and the CGCL as promptly as commercially practicable. If, at any
time after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of either of the Constituent Corporations, the
officers and directors of the Surviving Corporation are fully authorized in the
name of their corporation or otherwise to take, and shall take, all such lawful
and necessary action.

ARTICLE 2
CANCELLATION; EXCHANGE

2.1 CANCELLATION. As a result of the Merger and without any action on
the part of the holder thereof, at the Effective Time all shares of VPI Common
Stock shall cease to be outstanding and shall be cancelled and retired, and
Stockholder shall thereafter cease to have any rights with respect to such
shares of VPI Common Stock, except the right to receive, without interest, the
Merger Consideration in accordance with Section 1.6 upon the surrender of
certificates representing such shares of VPI Common Stock. Notwithstanding
anything to the contrary in Section 1.6, all shares of VPI Common Stock held in
VPI's treasury at the Effective Time shall be cancelled.

2.2 EXCHANGE. At or after the Effective Time, Stockholder shall
surrender the VPI Common Stock certificates for cancellation to Parent's
corporate Secretary, who shall act as the exchange agent to effect the exchange
of VPI Common Stock certificates for the Merger Consideration. Until such
surrender and cancellation, each such outstanding VPI Common Stock certificate
shall, after the Effective Time, be deemed for all corporate purposes to
evidence solely the Merger Consideration to which it is entitled under Section
1.6 above.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER

Stockholder hereby represents and warrants to Parent as follows:

3.1 ORGANIZATION, POWER, STANDING AND QUALIFICATION. VPI is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of California and has full corporate power and authority to
carry on its business as it is now being conducted, and to own, lease, and use
the properties and assets that it purports to own, lease or use. VPI is duly
qualified to do business and is in good standing in California and, as of the
Closing Date, is duly qualified to do business as a foreign corporation and is
in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned or used

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<PAGE> 11

by it, or the nature of the activities conducted by it, requires such
qualification, other than jurisdictions in which the failure to so qualify would
not have a material adverse effect on the condition, financial or otherwise, of
the business operations or income of VPI. SECTION 3.1 OF THE DISCLOSURE
SCHEDULE attached hereto as EXHIBIT B (the "Disclosure Schedule") contains a
complete and accurate list of each jurisdiction in which VPI is authorized to do
business.

3.2 AUTHORITY AND ENFORCEABILITY. Each of VPI and Stockholder has the
full corporate power and authority or legal capacity and right, as the case may
be, to execute and deliver this Agreement and to perform the obligations
hereunder. This Agreement has been duly executed and delivered on behalf of VPI
and Stockholder and, at the Closing, all documents and instruments required
hereunder to be executed by VPI and Stockholder (the "Collateral Documents")
shall have been duly executed and delivered. This Agreement and the Collateral
Documents will constitute legal, valid and binding obligations of VPI and
Stockholder, enforceable in accordance with their respective terms.

3.3 VALIDITY OF CONTEMPLATED TRANSACTIONS; CONSENTS. The execution,
delivery, and performance of this Agreement, the Collateral Documents and the
consummation of the transactions contemplated hereby and thereby do not and will
not:

(a) contravene any provision of the Articles of Incorporation or
Bylaws of VPI;

(b) violate, be in conflict with, or constitute a default under (or
any event which, with notice or lapse of time or both would constitute a default
under), cause the acceleration of any payments or performance pursuant to,
result in the termination of or otherwise impair the good standing, validity, or
effectiveness of any agreement, contract, indenture, lease, or mortgage, or
subject any property or asset of VPI to any liens under any indenture, mortgage,
contract, commitment, or agreement to which VPI is a party, or any of its assets
may be bound or affected; or

(c) violate any provision of law, rule, ordinance, regulation,
order, judgment, permit, or license to which Stockholder or VPI, or any of its
assets, is subject.

Except as set forth in SECTION 3.3 OF THE DISCLOSURE SCHEDULE, no consent,
approval or authorization of, notice to, registration or filing with any person,
entity or governmental authority is required on the part of Stockholder or VPI
in connection with the execution, delivery and performance by Stockholder or VPI
of this Agreement, the Collateral Documents or the consummation of any of the
transactions contemplated hereby and thereby.

3.4 CAPITALIZATION OF VPI. VPI's total authorized capital stock
consists of 100,000 shares of common stock, par value $1.00 per share, of which
91,000 shares are presently issued and outstanding (such issued and outstanding
shares being, the "Shares"). All of the Shares are duly authorized, validly
issued, fully paid and non-assessable. There are no outstanding or authorized
options, warrants, purchase rights, conversion rights, exchange rights,
subscription

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<PAGE> 12
rights or other contracts, commitments or rights of any character relating to
the Shares or any authorized but unissued capital stock of VPI.

3.5 OWNERSHIP OF SHARES. Except for the rights acquired by Parent
pursuant to this Agreement, Stockholder holds all of the legal and beneficial
ownership of and title to the Shares, free and clear of any liens. Delivery to
the Parent of certificates representing the Shares pursuant to this Agreement
will transfer to Parent valid title thereto, free and clear of all liens.
Stockholder has no legal obligation, absolute or contingent, to any other person
or firm to sell any of the Shares or to effect any merger, consolidation, or
other reorganization of VPI or to enter into any agreement with respect to the
Shares.

3.6 NO SUBSIDIARIES. VPI does not own or control, in whole or in part,
directly or indirectly, any corporation, association, partnership or other
business entity.

3.7 TITLE TO PROPERTIES. Except as set forth in SECTION 3.7 OF THE
DISCLOSURE SCHEDULE, VPI has good, valid and marketable title to, or valid
leasehold interests in, all of its properties and assets, real, personal, and
mixed, tangible and intangible including all of the properties and assets
reflected on the latest balance sheet of VPI that is included in the Financial
Statements (as defined in Section 3.9 hereof) and those properties and assets
acquired since the date of such balance sheet, except in each case for
properties and assets sold or otherwise disposed of in the ordinary course of
business, free and clear of all liens, except (a) liens disclosed in such
balance sheet or the notes thereto; (b) liens for current taxes not yet due (c)
liens in connection with workmen's compensation, unemployment insurance, or
other social security obligations; (d) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of business; (e) mechanic's, workmen's,
materialmen's, or other like liens arising in the ordinary course of business
with respect to obligations that are not due or that are being contested in good
faith; and (f) such imperfections of title, liens, easements, and encumbrances,
if any, as are not substantial and do not materially detract from the value, or
materially interfere with the present use, of any of the properties subject
thereto or affected thereby, or otherwise materially impair the business,
operations, or prospects of VPI.

3.8 INTANGIBLES; NAMES. Except as set forth in SECTION 3.8 OF THE
DISCLOSURE SCHEDULE, to the knowledge of Stockholder, VPI has good and
marketable title to: (i) all service marks, trademarks, trade names, product
names, patents and copyrights necessary to VPI's conduct of its business as
presently conducted, and (ii) all inventions, discoveries, improvements,
processes, formulae, proprietary rights, trade secrets, ideas or other know-how,
necessary to conduct the business of VPI as presently conducted (all of such
items are referred to hereinafter collectively as the "Intangibles"). Except as
set forth in SECTION 3.8 OF THE DISCLOSURE SCHEDULE, to the knowledge of
Stockholder, (a) none of the Intangibles or their past or current uses has
infringed or infringes, upon any patent, copyright, trade secret or other
proprietary right of any other person; (b) no person is infringing upon any of
the Intangibles. In addition, none of the Intangibles is owned by or registered
in the name of Stockholder or any current or former shareholder, director,
officer, employee, contractor or agent of VPI, nor does any such person

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have any interest therein. No person has a right to receive a royalty with
respect to any of the Intangibles. SECTION 3.8 OF THE DISCLOSURE SCHEDULE sets
forth a correct and complete list of all of the trademarks, trade names, service
marks, registered copyrights, patents and patent applications owned or licensed
by VPI.

3.9 FINANCIAL INFORMATION.

(a) Stockholder has delivered to Parent audited balance sheets for
the fiscal years ending December 31, 1994 and December 31, 1995, and the related
statement of operations, stockholders' equity and cash flows for the years then
ended, together with the report thereon of BDO Seidman, LLP, independent
certified public accountants, an unaudited balance sheet as of September 30,
1996 and the related statement of operations, stockholders' equity and cash
flows for the six-months then ended (collectively, the "Financial Statements").
The Financial Statements are complete and correct in all material respects, have
been prepared in accordance with generally accepted accounting principles,
consistently applied, and present fairly in all material respects the financial
condition of VPI and the results of its operations as of the respective dates
thereof.

(b) VPI has no debts, liabilities or obligations of any nature,
known or unknown, fixed or contingent, other than:

(i) those set forth in the Financial Statements and the
notes thereto;

(ii) those incurred since September 30, 1996 and not in
breach of any of the representations of Section 3.16; and

(iii) those which are not material, individually or in the
aggregate, to VPI's business, assets or financial condition. To the knowledge of
Stockholder, there are no circumstances, bases (either with notice, lapse of
time or both), conditions, events or arrangements which may hereafter give rise
to any liabilities of VPI except in the ordinary course of business consistent
with past practices.

3.10 CERTAIN TAX MATTERS.

(i) VPI has filed or caused to be filed with the appropriate
foreign, federal, state and local governmental agencies all income, sales, use,
property, ad valorem, profits, severance, payroll, franchise, withholding,
employment, social security, excise, transfer, gains and other tax returns and
reports (the "Tax Returns") which are required to be filed, and has paid in full
or adequately provided for all taxes shown on such Tax Returns, and for all such
taxes otherwise due and payable by VPI, except those taxes being contested in
good faith and for which adequate reserves have been set aside on the books of
VPI. In addition, Stockholder has filed with the appropriate federal, state and
local income tax authorities all applicable tax returns and reports, and has
paid all applicable taxes, relating to the income or loss of VPI which is
attributable to Stockholder by virtue of VPI's status as an "S" corporation. All
such Tax Returns

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<PAGE> 14
are true and correct in all material respects and reflected as of the time of
filing the facts regarding the income, business, operations, activities and
status of VPI and any other information required to be shown therein. VPI has
delivered to Parent correct and complete copies of, and SECTION 3.10 OF THE
DISCLOSURE SCHEDULE contains a complete and accurate list of, all Tax Returns,
examination reports, and statements of deficiencies assessed against, or agreed
to by VPI since December 31, 1991.

(ii) Except as set forth in SECTION 3.10 OF THE DISCLOSURE
SCHEDULE, adequate accrual has been made in the Financial Statements for all the
accrued and unpaid foreign, federal, state and local taxes (including applicable
interest and penalties) of VPI for the periods then ended, whether or not yet
due and payable.

(iii) Except as set forth in SECTION 3.10 OF THE DISCLOSURE
SCHEDULE, there is no material dispute or claim concerning any tax liability of
VPI either (A) claimed or raised by any authority in writing or (B) as to which
any of Stockholder and the directors and officers of VPI has knowledge based
upon personal contact with any agent of such authority. SECTION 3.10 OF THE
DISCLOSURE SCHEDULE indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit, including a
reasonably detailed description of the nature and outcome of each audit. VPI has
not waived any statute of limitations in respect of income taxes or agreed to
any extension of time with respect to an income tax assessment or deficiency.

(iv) VPI has made a valid election to be treated as an "S"
corporation for federal (and all applicable state and local) income tax
purposes, beginning with the taxable year of VPI beginning January 1, 1996. A
copy of VPI's Subchapter "S" election and application for approval of a December
31 taxable year, and all correspondence with the Internal Revenue Service
relating to the foregoing, have been delivered to Parent.

3.11 LITIGATION. There is no suit, action, claim, arbitration,
administrative or legal or other proceeding, or governmental investigation
pending or, to Stockholder's knowledge, threatened against VPI which, if
adversely determined, would have a material adverse effect on VPI's businesses,
assets or operations and, to Stockholder's knowledge, there exists no reasonable
basis or grounds for any such suit, action, claim, arbitration, administrative,
legal or other proceeding that would have a material adverse effect. A correct
and complete list and brief description, including outcome, of all claims
threatened or filed against VPI within the last five (5) years is set forth in
SECTION 3.11 OF THE DISCLOSURE SCHEDULE.

3.12 COMPLIANCE WITH LAW. To the best of Stockholder's knowledge, VPI
is in compliance with all applicable laws, ordinances, requirements,
regulations, judgments, decrees and orders applicable to VPI, the violation of
which, individually or in the aggregate, might have a material adverse effect on
the financial condition, business, results of operations, properties, or assets
of VPI, or Parent's ownership of the Shares. VPI holds all permits, licenses,
consents, authorizations, approvals, privileges, waivers, exemptions and orders
("Permits") necessary or appropriate to permit it to own its properties and to
conduct its business in accordance with

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<PAGE> 15
applicable laws, regulations and ordinances. SECTION 3.12 OF THE DISCLOSURE
SCHEDULE contains a correct and complete list of all such Permits. Except as
noted on SECTION 3.12 OF THE DISCLOSURE SCHEDULE, to Stockholder's knowledge,
there are no facts in existence that could form the basis of any claim against
VPI for product liability on account of any express or implied warranty.

3.13 ERISA MATTERS.

(a) SECTION 3.13 OF THE DISCLOSURE SCHEDULE sets forth a true and
complete list of each employee benefit or compensation plan, arrangement or
agreement that is maintained, or has been maintained by VPI (including
terminated or transferred plans) by VPI or to which VPI makes contributions and
in each case, which covers employees of VPI (the "Plans"). VPI has delivered to
Parent correct and complete copies of all plan documents, summary plan
descriptions, annual reports, determination letters, trust agreements and other
material agreements relating to the Plans.

(b) Except as set forth in SECTION 3.13 OF THE DISCLOSURE
SCHEDULE:

(i) each of the Plans that is an "employee benefit plan"
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") materially complies and has always materially
complied with ERISA, to the extent that any noncompliance would not have a
materially adverse effect;

(ii) each of the Plans intended to be "qualified" within the
meaning of I.R.C. Section401(a), complies and has always materially complied
with the Code, except such non-compliance as shall not disqualify such Plan [and
except further that the plan documents have not been amended to reflect the Tax
Reform Act of 1986 and subsequent legislation to the extent such amendment is
not required to be completed prior to the Closing Date];

(iii) each of the Plans has always been operated in accordance
with its terms in all material respects;

(iv) no Plan is or was subject to Title IV of ERISA and VPI
has never maintained or made contribution to any employee benefit plan subject
to Title IV of ERISA;

(v) no Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees of VPI beyond their retirement or other termination of service,
other than

(1) coverage mandated by applicable law,

(2) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA,

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<PAGE> 16

(3) deferred compensation benefits accrued as
liabilities on the books of VPI or

(4) benefits the full cost of which is borne by the
current or former employee (or his beneficiary);

(vi) no Plan is a "multi-employer pension plan," as such
term is defined in Section 3(37) of ERISA and VPI has never made contributions
to such a multi-employer pension plan;

(vii) all contributions or other amounts payable by VPI as of
the Closing Date with respect to each Plan in respect of current or prior plan
years have been paid or accrued in accordance with generally accepted accounting
practices and I.R.C. Section412;

(viii) neither VPI nor any director, officer, employee or
agent of VPI has engaged in a transaction in connection with which VPI would be
subject to either a civil penalty assessed pursuant to Sections 409 or 502(i) of
ERISA or a tax imposed pursuant to I.R.C. SectionSection4975 or 4976;

(ix) all notices required in connection with continuation
coverage for group health plans under I.R.C. Section4980B have been given to
persons entitled thereto in a timely manner; and

(x) to the knowledge of Stockholder, there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the Plans or any trusts related thereto.

3.14 INSURANCE. Set forth in SECTION 3.14 TO THE DISCLOSURE SCHEDULE is
a complete list of all material insurance policies that VPI maintains with
respect to its businesses, properties or employees. Except as set forth in
SECTION 3.14 TO THE DISCLOSURE SCHEDULE, such policies are in full force and
effect, and no event has occurred that would give any insurance carrier a right
to terminate any such policy. Such policies are adequate to insure against risks
to which VPI and its properties and assets are exposed in the operation of its
business in such amounts and types of coverage as are commercially reasonable
and are consistent with practices in the industry in which VPI operates. Except
as set forth in SECTION 3.14 OF THE DISCLOSURE SCHEDULE, since September 30,
1996, there has not been any change in VPI's relationship with its insurers or
in the premiums payable pursuant to such policies.

3.15 CONTRACTS. SECTION 3.15 OF THE DISCLOSURE SCHEDULE identifies all
contracts, licenses, guaranties, notes, leases, agreements and instruments to
which VPI is a party, or is bound which are material to the business of VPI
("Contracts"); a correct and complete copy of each Contract has been provided to
Parent. Except as noted in SECTION 3.15 OF THE DISCLOSURE SCHEDULE, VPI has in
all material respects performed all the material obligations required to be
performed by VPI as of the date hereof pursuant to any Contract, and VPI is not
in default under

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<PAGE> 17

any Contract, nor, to Stockholder's knowledge, has an event occurred which, with
the passage of time or giving of notice or both, will result in the occurrence
of a default under any Contract. SECTION 3.15 OF THE DISCLOSURE SCHEDULE
contains a correct and complete list of all powers of attorney, forms of
warranties, and forms of purchase orders, sales contracts and service contracts,
material to the business of VPI. A correct and complete copy of each such
document has been provided to Parent.

3.16 OTHER TRANSACTIONS. Except as disclosed in SECTION 3.16 OF THE
DISCLOSURE SCHEDULE, VPI has not, since September 30, 1996:

(a) operated its business except in the ordinary course;

(b) incurred any debts, liabilities or obligations except in the
ordinary course;

(c) discharged or satisfied any material Liens, or paid any
material debts, liabilities, or obligations, except in the ordinary course;

(d) mortgaged, pledged, or subjected to any Lien any of its
assets, tangible or intangible, having a book value of more than $20,000
individually or in the aggregate;

(e) sold or transferred any of its tangible assets (other than
inventory in the ordinary course) having a book value of more than $20,000, or
cancelled any material debts or claims;

(f) declared, set aside, or paid any dividend or made any other
distribution (whether in cash, stock or property) with respect to any of VPI's
capital stock;

(g) suffered any material extraordinary losses or waived any
rights of substantial value;

(h) suffered any materially adverse change in its condition
(financial or otherwise) or business, assets, liabilities, properties or
prospects;

(i) increased compensation or benefits payable to any directors,
officers, employees or consultants;

(j) suffered any material losses by theft, fire or other casualty;

(k) cancelled or suffered the termination of any Contract except
in the ordinary course of business; or

(l) failed to operate the business of VPI in the ordinary course.

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<PAGE> 18

3.17 BANK ACCOUNTS. SECTION 3.17 OF THE DISCLOSURE SCHEDULE sets forth
the name and address of each bank and other financial institution in which VPI
maintains an account (whether checking, savings or otherwise), lock box, or safe
deposit box and the account numbers and names of persons having signing
authority or other access thereto.

3.18 COMPENSATION ARRANGEMENTS. SECTION 3.18 OF THE DISCLOSURE SCHEDULE
sets forth a correct list showing the names and titles of all officers,
employees, and agents performing services for VPI in connection with its
business and the rate of hourly, monthly, or annual compensation (as the case
may be), and any bonus, severance or similar arrangement with any of them. No
union or collective bargaining agreement or employment agreement is currently in
effect or being negotiated by VPI.

3.19 CORPORATE RECORDS. The copies of the Articles of Incorporation of
VPI, as amended to the date of this Agreement, certified by the Secretary of
VPI, and the Bylaws of VPI, as amended to the date of this Agreement, certified
by the Secretary of VPI, which are being delivered herewith, are true, correct,
and complete copies of said Articles and Bylaws as currently in effect. SECTION
3.19 OF THE DISCLOSURE SCHEDULE sets forth a true and correct list of the names
and titles of all of VPI's current directors and officers, any fictitious names
of VPI and the jurisdictions, if any, in which VPI is qualified as a foreign
corporation. Correct and complete copies of VPI's minute books and stock records
have been delivered to the Parent.

3.20 ENVIRONMENTAL MATTERS.

(a) "Environmental Law" shall mean any federal, state or local
statute, ordinance, rule or regulation, any judicial or administrative order,
judgment, request or directive, any common law doctrine or theory and any
provision or condition of any Permit, license or other operating authorization,
primarily relating to (A) protecting the environment, including without
limitation protection of the environment, persons or the public welfare from
actual or potential exposure (or the effects of exposure) to any actual or
potential release, discharge or emission (whether past or present) of, or
regarding the manufacture, processing, importation, use, transportation,
generation, treatment, storage, disposal, transportation or handling of, any
chemical, raw material, pollutant, contaminant or toxic, hazardous or
radioactive substance; (B) occupational or public health or safety; or (C) land
use.

(b) Except as indicated in SECTION 3.20 OF THE DISCLOSURE
SCHEDULE, VPI is, or will be prior to the Closing Date, in compliance with all
Environmental Laws and in possession of and compliance with all necessary
Permits, licenses and other authorizations, and the present condition of VPI and
its property or VPI's present or past activities or manner of operating VPI and
its property including the real property which is currently leased by VPI (the
"Leased Property") (including disposing or arranging for the disposal of waste
materials), does not give rise to any liability to any person, contingent or
otherwise, under any Environmental Law. VPI has fully disclosed to Parent all
documents and information in its possession and control regarding activities and
conditions relating to VPI and the Leased Property which could in the future
result

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<PAGE> 19

or may in the past have resulted in noncompliance with, or liability under, any
Environmental Law.

(c) To the actual knowledge of Stockholder, there are no proposed
Environmental Laws or amendments to Environmental Laws which would require any
material change in any of VPI's facilities, equipment, operation or procedures,
or materially affect VPI's business or its costs of conducting its business as
now conducted, and to Stockholder's knowledge, the operation by the owner of the
building within which VPI's Leased Property is located is and has been in
compliance with all Environmental Laws.

3.21 SUPPLIERS AND CUSTOMERS. Except for products and services
currently obtained by VPI from Centigram Communications Corporation and its
affiliates or as set forth in SECTION 3.21 OF THE DISCLOSURE SCHEDULE, no
single supplier provided more than ten percent (10%) of VPI's needs in VPI's
most recent fiscal year and there is no "single-source" supplier to VPI that
could not be replaced without a material disruption to VPI's business. In
addition, except as set forth in SECTION 3.21 OF THE DISCLOSURE SCHEDULE, no
single customer accounted for more than ten (10%) of VPI's net sales in VPI's
most recent fiscal year. To the best of Stockholder's knowledge, except as
disclosed in SECTION 3.21 OF THE DISCLOSURE SCHEDULE, no officer or director of
VPI, nor any spouse or child of any such officer or director, nor any trust of
which any such officer or director is a grantor, trustee or beneficiary, has
any ownership interest in or is a director, officer or employee of, or
consultant to, any entity which is a competitor, potential competitor or
supplier of VPI, or has any ownership interest, in whole or in part, in any
property, asset or right which is associated with any property, asset or right
owned or purported to be owned by VPI or which VPI is at present operating or
using or the use of which is necessary or material to VPI's business, or has,
directly or indirectly, engaged in any transaction with VPI other than
transactions inherent in the capacities of director, officer, employee,
consultant or stockholder.

3.22 KNOWLEDGE. When used in this Agreement, "to the knowledge" of
Stockholder means Stockholder's actual knowledge after due inquiry (including
inquiry of the officers of VPI with respect to the matters covered by such
representations and warranties) and the examination of whatever sources of
information as are accessible to Stockholder in order to verify the truth and
accuracy of representations and warranties. Stockholder acknowledges that Parent
has relied and will rely on such representations and warranties in executing
this Agreement and in closing the acquisition of the Shares pursuant to this
Agreement, and agrees, prior to the Closing Date, to promptly notify Parent in
writing of any knowledge Stockholder may obtain of any material change affecting
such representations and warranties.

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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT

Parent hereby represents and warrants to Stockholder as follows:

4.1 ORGANIZATION AND GOOD STANDING. Each of Parent and Merger Sub is a
corporation duly organized and validly existing under the laws of Delaware.
Parent has full corporate power and authority to carry on its business as it is
now being conducted, and to own and operate the properties and assets now owned
and operated by it. Parent is duly qualified to do business in each and every
jurisdiction where the failure to qualify would have a material adverse effect
upon its financial condition, the conduct of its business or the ownership of
its property and assets.

4.2 CORPORATE POWER AND AUTHORITY. Each of Parent and Merger Sub has
full corporate power and authority to enter into this Agreement and to perform
all of its covenants and undertakings herein set forth. The execution and
delivery of this Agreement, and all documents and instruments required hereunder
to be executed by Parent and Merger Sub (the "Collateral Documents") and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, and this Agreement and the Collateral Documents are valid and binding
obligations of Parent and Merger Sub, enforceable in accordance with their
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium, or similar laws affecting the rights of creditors
generally.

4.3 CAPITALIZATION.

(a) Prior to the Closing, Parent's total authorized capital stock
will consist of 20,000,000 shares of common stock, par value $0.01 per share,
and 2,000,000 shares of preferred stock, par value $0.01 par value per share. As
a result of the merger of BFI with a wholly-owned subsidiary of Parent pursuant
to the Formation Agreement and Exhibit B thereto (the "BFI Merger"), and
excluding the shares of Parent Common Stock to be issued in connection with the
IPO or the Merger contemplated hereby, Parent will have issued and outstanding
729,005 shares of Common Stock, warrants to purchase a total of 617,184 shares
of Common Stock and options to purchase a total of 534,375 shares of Common
Stock.

(b) Merger Sub's total authorized capital stock consists of 1,000
shares of common stock, par value $0.01 per share, of which 100 shares are
issued and outstanding and held by Parent.

4.4 CONFLICT WITH AUTHORITY, BYLAWS, OTHER INSTRUMENTS. Neither the
execution and delivery of this Agreement and the Collateral Documents nor the
consummation of the transactions contemplated hereby and thereby in the manner
herein and therein provided will:

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(a) contravene any provision of the Certificate of Incorporation or
Bylaws of Parent or Merger Sub;

(b) violate, be in conflict with, constitute a default under, cause
the acceleration of any payments pursuant to, or otherwise impair the good
standing, validity, and effectiveness of any lease, license, permit,
authorization, or approval applicable to Parent or Merger Sub; or

(c) to the knowledge of Parent, violate any provision of law, rule,
regulation, order, or permit to which Parent or Merger Sub is subject.

4.5 AVAILABILITY OF INFORMATION. To the knowledge of Parent, VPI and
Stockholder have granted to Parent and its representatives, the opportunity to
examine such documents and ask such questions of VPI as the Parent has deemed
necessary, and Parent has received satisfactory answers from VPI (or persons
acting on VPI's behalf) concerning the business of VPI and the terms and
conditions of the Merger described herein. Notwithstanding the foregoing,
nothing contained in this representation shall affect the covenants, agreements,
representations and warranties made by the Stockholder and VPI under this
Agreement.

4.6 VALIDITY OF AGREEMENT. This agreement has been duly executed and
delivered by Parent and Merger Sub and is the legal, valid and binding
obligation of Parent in accordance with its terms.

ARTICLE 5
COVENANTS OF VPI AND STOCKHOLDER
PRIOR TO THE CLOSING DATE

5.1 OPERATION OF BUSINESS. VPI and Stockholder hereby agree, jointly
and severally, that from and after the date hereof to the Effective Time, except
for a dividend to the Stockholder and/or compensation to key employees in an
aggregate amount not to exceed One Million Two Hundred Thousand Dollars
($1,200,000) and except as otherwise contemplated by this Agreement or agreed to
in writing by Parent, VPI shall conduct its business solely in the ordinary
course, and Stockholder and VPI shall:

(a) not amend VPI's Articles of Incorporation or Bylaws, except as
may be necessary to carry out this Agreement or as required by law;

(b) not change VPI's corporate name or permit the use thereof by
any other corporation;

(c) not pay or agree to pay to any employee, officer, or director
of VPI any increase in compensation other than in the ordinary course;

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<PAGE> 22

(d) not make any changes in VPI's management;

(e) not merge or consolidate VPI with any other corporation or
allow it to acquire or agree to acquire or be acquired by any corporation,
association, partnership, joint venture, or other entity;

(f) not amend or permit VPI to default in any of its obligations
under any of the Contracts;

(g) not declare or pay any dividend or make any distribution on any
shares of its capital stock or redeem, purchase or otherwise acquire any shares
of its capital stock;

(h) not sell or transfer any of VPI's tangible or intangible assets
having an aggregate book value of $20,000 or more, other than sales of inventory
in the ordinary course, or create any lien or encumbrance on any of VPI's assets
or permit VPI to incur any debt liability or obligation, permit VPI to waive any
right or cancel any debt or claim, enter into any contract or agreement
involving amounts exceeding $20,000;

(i) conduct VPI's business in a diligent manner, and not make any
material change in its business practices; and

(j) in good faith use their best efforts to (i) preserve VPI's
business organization intact; (ii) keep available the services of its current
officers, employees, salesmen, agents and representatives; (iii) maintain the
good will of its suppliers, customers and other persons having business
relations with VPI and (iv) maintain all of its properties in good repair, order
and condition, and maintain in effect all of the insurance policies listed in
SECTION 3.14 OF THE DISCLOSURE SCHEDULE.

5.2 TAX LIABILITY. Stockholder agrees to assume, undertake to pay and
discharge in full, all liabilities of VPI in connection with any income taxes
(federal, state, local or otherwise) due or to become due based upon any events
prior to September 30, 1996, which have not been paid or accrued on the books of
VPI prior to the date of this Agreement, and which in the aggregate exceed
$125,000. Notwithstanding the foregoing, any income tax liability resulting
solely from the timing of recognition of income or expenses, and all tax
liability incurred by VPI after September 30, 1996, shall be the liability of
VPI Sub.

5.3 CONFIDENTIALITY. Except as contemplated by this Agreement, VPI and
Stockholder agree jointly and severally to maintain in confidence and to not use
or disclose to any third person any confidential or proprietary information or
documents relating to Parent or any portion of its business that is provided to
Stockholder or VPI by Parent in connection with the consummation of the
transactions contemplated by this Agreement, as provided by and according to the
terms of the Confidentiality and Non-Disclosure Agreement, dated as of February
12, 1996, by and

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among VPI, Stockholder and BFI (the "Confidentiality Agreement"), which
agreement shall survive the signing of this Agreement but not the Closing.

5.4 ACCESS TO INFORMATION. Each of VPI and Stockholder agree to
cooperate fully with Parent and shall provide Parent and its accountants,
counsel, and other representatives, during normal business hours (or otherwise
agreed upon by VPI), full access to the books, records, equipment, real estate,
contracts, and other assets of VPI and full opportunity to discuss VPI's
business, affairs, and assets with its officers and independent accountants and
furnish to Parent and its representatives copies of such documents, records, and
information with respect to the affairs of VPI, as Parent or its representatives
may reasonably request and without unreasonably disrupting the ordinary conduct
of VPI's business. VPI and Stockholder shall provide any information reasonably
requested by Parent or its managing underwriter in connection with Parent's
proposed initial public offering.

5.5 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, VPI and Stockholder will use their best efforts to cause the conditions in
Sections 7.1 and 7.2 to be met.

ARTICLE 6
COVENANTS OF PARENT PRIOR TO THE CLOSING DATE

6.1 OPERATION OF BFI. Parent hereby agrees that from and after the date
of the BFI Merger to the Effective Time, except as otherwise agreed to in
writing by VPI, Parent shall conduct the business of BFI solely in the ordinary
course, and shall:

(a) not amend BFI's Articles of Incorporation or Bylaws, except as
may be necessary to carry out the BFI Merger or as required by law;

(b) not change BFI's corporate name or permit the use thereof by
any other corporation;

(c) not pay or agree to pay to any employee, officer, or director
of BFI any increase in compensation other than in the ordinary course;

(d) except for the BFI Merger, not merge or consolidate BFI with
any other corporation or allow it to acquire or agree to acquire or be acquired
by any corporation, association, partnership, joint venture, or other entity;

(e) not amend or permit BFI to default in any of its obligations
under any material contract to which BFI is a party;

(f) except in connection with the BFI Merger, not declare or pay
any dividend or make any distribution on any shares of its capital stock or
redeem, purchase or otherwise acquire any shares of its capital stock;

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(g) except as may be necessary in connection with the BFI Merger,
not sell or transfer any of BFI's tangible or intangible assets having an
aggregate book value of $20,000 or more, other than sales of inventory in the
ordinary course, or create any lien or encumbrance on any of BFI's assets or
permit BFI to incur any debt liability or obligation, permit BFI to waive any
right or cancel any debt or claim, enter into any contract or agreement
involving amounts exceeding $20,000;

(h) conduct BFI's business in a diligent manner, and not make any
material change in its business practices; and

(i) in good faith use their best efforts to (i) preserve BFI's
business organization intact; (ii) maintain the good will of its suppliers,
customers and other persons having business relations with BFI and (iii)
maintain all of its properties in good repair, order and condition, and maintain
in effect all of the insurance policies.

6.2 CONFIDENTIALITY. Except as contemplated by this Agreement, Parent
shall maintain in confidence and not use or disclose to any third person any
confidential or proprietary information or documents relating to Stockholder or
VPI or any portion of their business that is provided to Parent by Stockholder
or VPI in connection with the consummation of the transactions contemplated by
this Agreement, as provided by and according to the terms of the Confidentiality
Agreement, which agreement shall survive the signing of this Agreement but not
the Closing; provided, that the parties agree that this Section 6.2 and the
terms of the Confidentiality Agreement shall not apply to required disclosure
made by Parent in connection with the IPO.

6.3 ACCESS TO INFORMATION. Parent agrees to cooperate fully with VPI
and Stockholder and shall provide VPI and Stockholder and their accountants,
counsel, and other representatives, during normal business hours (or otherwise
agreed upon by Parent), full access to the books, records, equipment, real
estate, contracts, and other assets of Parent and full opportunity to discuss
Parent's business, affairs, and assets with its officers and independent
accountants and furnish to VPI and Stockholder and their representatives copies
of such documents, records, and information with respect to the affairs of
Parent as VPI and Stockholder or their representatives may reasonably request
and without unreasonably disrupting the ordinary conduct of Parent's business.

6.4 OFFERING OF SECURITIES. Parent shall use all commercially
reasonable efforts consistent with the prudent conduct of its business to
complete an underwritten initial public offering of its securities pursuant to a
registration statement filed with the Securities and Exchange Commission (the
"SEC") (the "IPO").

6.5 SALE OF REGISTERED SHARES. Parent shall cause the Underwriter to
execute a written agreement with Stockholder for the registration and sale in
connection with the IPO of the number of Consideration Shares equal to the
quotient of Two Million Four Hundred Thousand Dollars ($2,400,000) divided by
the IPO Price (the "Registered Shares") and the receipt by Stockholder of the
net proceeds of such sale, it being understood and agreed that Stockholder will

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<PAGE> 25
pay the underwriting fees and discount in connection with such sale (an amount
equal to 10% of the gross proceeds) (the Consideration Shares remaining after
such sale being, the "Restricted Shares").

6.6 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Parent will use its best efforts to cause the conditions in Sections 7.1
and 7.3 to be met.

ARTICLE 7
CONDITIONS PRECEDENT TO THE CLOSING

7.1 OBLIGATION OF PARTIES TO CLOSE. The obligations of each party
hereto to consummate the Merger shall be subject to the satisfaction of the
following conditions on or prior to the Closing Date:

(a) OFFERING. A registration statement filed with the SEC in
connection with the IPO, registering a minimum of 2,300,000 shares of Parent
Common Stock (including the shares comprising the Registered Shares), shall have
been declared effective, the Underwriter shall have informed the Company that it
intends to close the IPO and the closing of the IPO shall be scheduled to occur
promptly on the date of and following the Closing, and there shall have been no
stop order entered by the SEC with respect to the IPO and no other impediment to
the completion of the IPO promptly following the Closing shall be known to
exist.

(b) BFI MERGER. The closing of the BFI Merger pursuant to the
Formation Agreement and the Agreement and Plan of Merger attached as EXHIBIT B
thereto shall have occurred or shall be scheduled to occur substantially
concurrently with the Closing.

(c) LITIGATION AFFECTING CLOSING. On the Closing Date, no
proceeding brought by any individual or entity other than the Parties shall be
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby, unless each of Parent and Stockholder shall have waived
compliance with this condition.

7.2 OBLIGATION OF PARENT TO CLOSE. The obligations of Parent and Merger
Sub to consummate the Merger shall be subject to the satisfaction of the
following conditions on or prior to the Closing Date, or the waiver of such
conditions by Parent:

(a) COMPLIANCE WITH AGREEMENT. VPI and Stockholder shall have
performed all covenants and agreements to be performed by VPI or Stockholder
under this Agreement on or prior to the Closing Date, and all of the
representations and warranties of Stockholder set forth in Article 3 herein
shall be true and correct in all material respects as of the Closing Date to the
same extent as if given on that date, without giving effect to any supplements
to the DISCLOSURE SCHEDULE, except to the extent such DISCLOSURE SCHEDULE is
updated to reflect events or conditions occurring after the execution hereof
that are not, individually or in the aggregate, material. VPI and Stockholder
shall have delivered to Parent certificates, dated the Closing Date, stating
that

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<PAGE> 26
the representations and warranties contained in Article 3 are true and correct
on the Closing Date in all material respects as if then made, that VPI and
Stockholder have fulfilled the conditions specified in Article 5 and Section
7.2, and to the effect that the transactions contemplated by this Agreement were
duly authorized by all necessary corporate action on the part of VPI.

(b) REQUIRED CONSENTS. The holders of any material indebtedness of
VPI, and the parties to any Material Contracts, to the extent that their consent
or approval is required under the pertinent agreement for the consummation of
the transaction contemplated hereby in the manner provided herein or the
continuation of such agreement without termination or penalty to VPI, shall have
granted such consent or approval.

(c) NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the financial condition, business or prospects of VPI since
September 30, 1996.

7.3 OBLIGATION OF VPI AND STOCKHOLDER TO CLOSE. The obligations of VPI
and the Stockholder to consummate the Merger hereof shall be subject to the
satisfaction of the following conditions on or prior to the Closing Date, or the
waiver of such conditions by Stockholder:

(a) COMPLIANCE WITH AGREEMENT. Parent shall have performed all
covenants and agreements to be performed by it under this Agreement on or prior
to the Closing Date and all of the representations and warranties of Parent set
forth herein shall be true and correct in all material respects as of the
Closing Date to the same extent as if given on that date. Parent shall have
delivered to Stockholder certificates dated the Closing Date, signed on behalf
of Parent by its President, to such effect and to the effect that the
transactions contemplated by this Agreement were duly authorized by all
necessary corporate action on the part of Parent.

(b) NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the financial condition, business or prospects of BFI since
September 30, 1996.

7.4 CLOSING.

(a) TIME AND PLACE OF CLOSING. Unless another place or date is
agreed to in writing by VPI and Parent, the Closing shall be held at the offices
of Davis, Graham & Stubbs LLP, 370 17th Street, Suite 4700, Denver, Colorado
80202, on the date set for and immediately preceding the closing of the IPO (the
"Closing Date").

(b) TRANSACTIONS AT CLOSING. At the Closing, each of the following
transactions shall occur:

(i) VPI'S PERFORMANCE. At the Closing, VPI and Stockholder
shall deliver to Parent the following:

(1) A certificate or certificates representing the Shares:

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<PAGE> 27

(2) All of the original books and records of VPI, including
the corporate minute book and stock book of VPI;

(3) Resignations of each of the existing directors and
officers of VPI, to be effective at the Effective Time;

(4) A certificate of the Secretary of VPI, dated the
Closing Date, in the form of EXHIBIT G attached hereto;

(5) A certificate of Stockholder and the Officers of VPI,
dated the Closing Date, in the form of EXHIBIT H attached hereto;

(6) A duly executed Employment Agreement in the form of
EXHIBIT E attached hereto (the "Employment Agreement");

(7) A duly executed Stockholder Agreement in the form of
EXHIBIT F attached hereto (the "Stockholder Agreement");

(8) The Rights Agreement, duly executed; and

(9) An opinion of counsel for VPI, dated the Closing Date,
in the form of EXHIBIT I attached hereto.

(ii) PARENT'S PERFORMANCE. At the Closing, Parent
shall deliver to Stockholder the following:

(1) A certificate of the Officers of Parent, dated the
Closing Date, in the form of EXHIBIT J attached hereto;

(2) The duly executed Stockholder Agreement;

(3) The duly executed Rights Agreement;

(4) The duly executed Employment Agreement;

(5) The Promissory Notes;

(6) A certificate representing the Restricted Shares; and

(7) The proceeds of the sale in the IPO of the Registered
Shares.

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<PAGE> 28

ARTICLE 8
POST-CLOSING COVENANT

8.1 POST-CLOSING COVENANT. The parties acknowledge that, in the event
the sale of Parent Common Stock with an aggregate market value of at least Eight
Million Dollars ($8,000,000) and including all of the Registered Shares, is not
consummated promptly after the Closing, the mutual intent under the Formation
Agreement shall not have been effectuated. In such event, Parent covenants to
immediately deliver to Stockholder a certificate or certificates representing
100% of the issued and outstanding shares of VPI Sub upon Stockholder's
relinquishment of the Merger Consideration and all rights thereto, and both
parties agree to execute and deliver all documents necessary to effectuate such
transfers.

ARTICLE 9
INDEMNIFICATION

9.1 BY STOCKHOLDER. From and after the Closing Date, Stockholder shall
indemnify and hold harmless Parent, VPI and their respective officers,
directors, employees, shareholders and agents from and against any and all
damages, losses, obligations, deficiencies, liabilities, claims, encumbrances,
penalties, costs, and expenses, including reasonable attorneys' fees
(collectively, "Losses"), that any of them may suffer or incur, resulting from,
related to, or arising out of any misrepresentation, breach of any
representation and warranty, or nonfulfillment of any of the respective
covenants or agreements of Stockholder or VPI in this Agreement or from any
misrepresentation in or omission from any Schedule to this Agreement,
certificate, financial statement, or from any other document furnished or to be
furnished to Parent hereunder and any and all actions, suits, investigations,
proceedings, demands, assessments, audits, judgments and claims arising out of
any of the foregoing.

9.2 BY PARENT. From and after the Closing Date, Parent agrees to
indemnify and hold harmless Stockholder from and against any and all Losses that
Stockholder may suffer or incur, resulting from, related to, or arising out of
any misrepresentation, breach of warranty, or nonfulfillment of any of the
covenants or agreements of Parent in this Agreement or from any
misrepresentation in or omission from any certificate or document furnished or
to be furnished to Stockholder hereunder and any and all actions, suits,
investigations, proceedings, demands, assessments, audits, judgments, and claims
arising out of any of the foregoing.

9.3 LIMITATION OF INDEMNITY. Notwithstanding any provisions herein to
the contrary:

(a) Stockholder shall not be liable for any misrepresentation,
breach of warranty, or failure to fulfill any covenant or agreement herein,
except to the extent that the aggregate amount for which Stockholder would
otherwise (but for this provision) be liable on account thereof exceeds the sum
of $75,000 (the "Threshold Amount") and then only to the extent of such excess.

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<PAGE> 29

(b) Except for claims based upon breach of Stockholder's
representations and warranties set forth in Section 3.10 (Taxes) or breach of
Stockholder's covenants in Section 5.2 (Tax Liability) (for which claims may be
brought until the expiration of the applicable statute of limitation and any
extensions thereof), neither party shall be liable to the other party for any
claim based on a misrepresentation, breach of warranty, or nonfulfillment of any
covenant or agreement herein unless such party has received written notice of
such claim within three (3) years following the Closing Date.

9.4 NOTICE. Promptly after acquiring knowledge of any Losses against
which Stockholder has indemnified Parent or against which Parent has indemnified
Stockholder, or as to which any party may be liable, Stockholder or Parent, as
the case may be, shall give to the other party written notice thereof. Each
indemnifying party shall, at its own expense, promptly defend, contest or
otherwise protect against any Losses against which it has indemnified an
Indemnified party, and each indemnified party shall receive from the other party
all necessary and reasonable cooperation in said defense including, but not
limited to, the services of employees of the other party who are familiar with
the transactions out of which any such Losses may have arisen. The indemnifying
party shall have the right to control the defense of any such proceeding unless
it is relieved of its liability hereunder with respect to such defense by the
indemnified party. The indemnifying party shall have the right, at its option,
and, unless so relieved, to compromise or defend, at its own expense by its own
counsel, any such matter involving the asserted liability of the indemnified
party. In the event that the indemnifying party shall undertake to compromise or
defend any such asserted liability, it shall promptly notify the indemnified
party of its intention to do so. In the event that an indemnifying party, after
written notice from an indemnified party, fails to take timely action to defend
the same, the indemnified party shall have the right to defend the same by
counsel of its own choosing, but at the cost and expense of the indemnifying
party.

ARTICLE 10
BROKERAGE; EXPENSES

10.1 BROKERAGE. None of the parties, nor, where applicable, any of
their respective shareholders, officers, directors or employees, has employed or
will employ any broker, agent, finder, or consultant, and each Party represents
to the other Parties that such Party has not incurred nor will the other Parties
incur any liability for any brokerage fees, commissions, finders' fees, or other
fees, in connection with the negotiation or consummation of the transactions
contemplated by this Agreement.

10.2 EXPENSES. Parent shall reimburse Stockholder for reasonable and
necessary out-of-pocket expenses of Stockholder, for pre-approved expenses
requested by Parent in connection with this transaction. Parent will pay
expenses associated with (i) third-party accountants retained to prepare the
Financial Statements to be delivered or prepared pursuant hereto, and (ii) legal
fees of Parent's counsel related to the preparation and negotiation of this
Agreement and documents pertaining hereto, and the drafting of disclosure
materials related to VPI for use by Parent in the registration statement filed
in connection with the IPO. VPI is responsible for all other legal

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<PAGE> 30
expenses incurred by Stockholder or VPI in connection with this transaction.
Except as otherwise expressly provided in this Agreement, each of the parties
agrees to bear its own expenses of any character incurred in connection with
this Agreement or the transactions contemplated hereby.

ARTICLE 11
TERMINATION PRIOR TO CLOSING

11.1 TERMINATION OF AGREEMENT. This Agreement may be terminated at any
time prior to the Closing:

(a) MUTUAL CONSENT. By the mutual consent of Parent and VPI; or

(b) DEADLINE. By Parent or Stockholder, in writing, without
liability (except as provided in Section 11.1(c)) if the Closing shall not have
occurred on or before March 31, 1997.

(c) MATERIAL BREACH. By notice in writing to the other party if
the other party shall (1) fail to perform in any material respect its agreements
contained herein required to be performed by, in, on or prior to the Closing
Date or (2) materially breach any of its representations, warranties,
agreements, or covenants contained herein, provided that such failure or breach
is not cured within ten (10) days after such party has been notified of the
other party's intent to terminate this Agreement pursuant hereto.

11.2 TERMINATION OF OBLIGATIONS. Termination of this Agreement pursuant
to this Article 11 shall terminate all obligations of the parties hereunder,
except for the obligations set forth in Article 10, and except that any party
shall be liable for damages suffered by the other parties resulting from a
breach of this Agreement; provided, however, that in the event of a termination
pursuant to Subsections 11.1(a) or 11.1(b) or resulting from Parent's material
breach pursuant to Subsection 11.1(c), Parent shall reimburse Stockholder as
provided in Section 10.2 for all expenses incurred by Stockholder or VPI up to a
maximum of One Hundred Thousand Dollars ($100,000), which sum shall include,
without limitation, legal fees of Stockholder's counsel and consulting fees
incurred by Stockholder or VPI in connection with the transactions contemplated
by this Agreement.

ARTICLE 12
GENERAL

12.1 ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the
entire understanding between the Parties with respect to the subject matter
contained herein and supersedes any prior understandings and agreements among
them respecting such subject matter. This Agreement may be amended,
supplemented, or terminated only by a written instrument duly executed by all of
the Parties.

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<PAGE> 31

12.2 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not affect its interpretation.

12.3 GENDER; NUMBER. Words of gender may be read as masculine,
feminine, or neuter, as required by context. Words of number may be read as
singular or plural, as required by context.

12.4 EXHIBITS AND SCHEDULES. Each Exhibit and Schedule referred to
herein is incorporated into this Agreement by such reference.

12.5 SEVERABILITY. If any provision of this Agreement is held illegal,
invalid, or unenforceable, such illegality, invalidity, or unenforceability
shall not affect any other provision hereof. This Agreement shall, in such
circumstances, be deemed modified to the extent necessary to render enforceable
the provisions hereof.

12.6 NOTICES. All notices, requests, demands, waivers, consents,
approvals, or other communications required or permitted hereunder shall be in
writing and shall be deemed to have been given if delivered personally, sent by
telegram, telex or sent by certified or registered mail or same day or overnight
courier service, postage prepaid, return receipt requested, to the following
addresses:

If to Parent, to:
Nhancement Technologies Inc.
1746 Cole Boulevard, Suite 265
Golden, CO 80401
Attention: General Counsel

If to VPI, to:
Voice Plus, Inc.
39899 Balentine Dr.
Newark, California 94560
Attention: James Gillespie

If to Stockholder to:
James Gillespie
198 Country Club Drive
Incline Village, Nevada 89451

12.7 WAIVER. The failure of any Party to insist upon performance of any
of the terms or conditions of this Agreement shall not constitute a waiver of
any of his/its rights hereunder.

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<PAGE> 32

12.8 ASSIGNMENT. No Party may assign any of his/its rights or delegate
any of his/its obligations hereunder without the prior written consent of the
other Parties.

12.9 SUCCESSORS AND ASSIGNS. This Agreement binds, inures to the
benefit of, and is enforceable by the successors and permitted assigns of the
Parties and does not confer any rights on any other persons or entities.

12.10 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with Colorado law.

12.11 NO BENEFIT TO OTHERS. The representations, warranties, covenants,
and agreements contained in this Agreement are for the sole benefit of the
Parties hereto and their successors and permitted assigns, and they shall not be
construed as conferring and are not intended to confer any rights on any other
persons.

12.12 PUBLICITY. During the period ending on the Closing Date, all
notices to third parties and all other publicity relating to the transactions
contemplated by this Agreement shall be jointly planned, coordinated, and agreed
to by VPI and Parent. During the period ending on the Closing Date, Stockholder
shall not act unilaterally in this regard without the prior approval of Parent;
provided, however, that such approval shall not be unreasonably withheld by
Parent.

12.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.

[The rest of this page intentionally left blank.]

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<PAGE> 33
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

PARENT:

NHANCEMENT TECHNOLOGIES INC.

By: /s/ ESMOND T. GOEI
-----------------------------------
Esmond T. Goei, President and CEO

MERGER SUB:

VPI ACQUISITION CORPORATION

By: /s/ ESMOND T. GOEI
-----------------------------------
Esmond T. Goei, President and CEO

VPI:

VOICE PLUS, INC.

By: /s/ JAMES GILLESPIE
-----------------------------------
James Gillespie, President

STOCKHOLDER:

/s/ JAMES GILLESPIE
--------------------------------------
James Gillespie

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<PAGE> 34
EXHIBIT 10.3

FORM OF PROMISSORY NOTE

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE AND THE MAKER SHALL HAVE RECEIVED EVIDENCE OF SUCH
EXEMPTION SATISFACTORY TO IT (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN OPINION
OF COUNSEL SATISFACTORY TO THE MAKER).

NHANCEMENT TECHNOLOGIES INC.

NON-NEGOTIABLE UNSECURED PROMISSORY NOTE

$__________ No. ____

____________, 1997

FOR VALUE RECEIVED, the undersigned, NHANCEMENT TECHNOLOGIES INC., a
Delaware corporation ("Maker"), hereby promises to pay to JAMES GILLESPIE, an
individual resident in Nevada ("Payee"), in lawful money of the United States
of America, the principal sum of ONE MILLION DOLLARS ($1,000,000), and to pay
simple interest on the unpaid balance of said principal at a rate of interest
quoted at the close of business on the date of payment for the medium-term
United States Treasury Bill, per annum. Interest shall be calculated on the
basis of a year of 365 or 366 days, as the case may be, and charged for the
actual number of days elapsed.

1. This Note has been executed and delivered pursuant to the terms
of that certain Agreement and Plan of Merger, dated as of October 25, 1996 by
and among Maker, Payee, Voice Plus, Inc., a California corporation, and VPI
Acquisition Corporation, a Delaware corporation, as the same may be amended,
modified or supplemented from time to time as permitted thereby (the "Merger
Agreement"), and is subject to the terms and conditions of the Merger Agreement
which is, by this reference, incorporated herein and made a part hereof.
Capitalized terms used herein without definition shall have the meanings set
forth in the Merger Agreement.

2. Principal in the amount of One Million Dollars ($1,000,000) and
accrued interest under the Note shall be due and payable at the Unsecured Note
Maturity Date, or such earlier date or dates, as set forth in the Merger
Agreement. Payments shall be made by bank cashier's check or by wire transfer
of immediately available funds to an account designated by Payee in writing.

3. The Maker may prepay this Note in whole at any time, or in part
from time to time, without penalty or premium. Each partial prepayment shall
be accompanied by accrued interest on the amount of principal prepaid,
calculated to the date of prepayment.

4. Maker shall have the right to withhold and set-off against any
amount due hereunder the amounts to which Maker may be entitled under the
Merger Agreement.
<PAGE> 35

5. If Maker shall fail to pay when due any payment of principal or
interest on this Note and such failure continues for fifteen (15) days, then
Payee may declare the unpaid principal amount of this Note, together with all
accrued interest thereon, to be immediately due and payable and may exercise
any and all rights and remedies available to it under applicable law,
including, without limitation, the right to collect from Maker all sums due
under this Note. Notwithstanding the foregoing, the exercise in good faith by
Maker of its rights of set-off pursuant to the Merger Agreement, whether or not
ultimately determined to be justified, shall not constitute an event of default
hereunder.

6. Maker hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. Maker promises to pay all reasonable costs of
collection, including reasonable attorneys' fees, if default is made in the
payment of this Note.

7. Any notice required or permitted hereunder shall be given in
accordance with the Merger Agreement.

8. This Note shall bind Maker and its successors and assigns. This
Note shall not be assigned or transferred by Payee without the express prior
written consent of Maker, except by will, or in default thereof, by operation
of law.

9. THE MAKER AND THE PAYEE AGREE THAT THIS NOTE AND THE LEGAL
RELATIONS BETWEEN THE MAKER AND THE PAYEE, AND ALL RIGHTS AND OBLIGATIONS
HEREUNDER, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY, AND PERFORMANCE, SHALL
BE GOVERNED BY AND INTERPRETED, CONSTRUED, APPLIED, AND ENFORCED IN ACCORDANCE
WITH THE LAW OF THE STATE OF COLORADO WITHOUT REFERENCE TO THE LAW OF ANOTHER
JURISDICTION.

IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
as of the _____ day of __________, 1997.

MAKER:

NHANCEMENT TECHNOLOGIES INC.

By:
--------------------------
Name:
Title:

(Corporate Seal)

<PAGE> 1
EXHIBT 10.4

N Hancement Technologies Inc.
1746 Cole Boulevard, Suite 265, Golden, CO 80401
T-303-271-0505 F-303-271-9493

October 25, 1996

Mr. Kent Cossey
C.C. & Associates
P.O. Box 8023
San Jose, CA 95155

RE: Proposal to Purchase Stock of C.C. & Associates ("CCA")

Dear Kent:

This letter ("Letter of Intent") is intended to summarize the principal
terms of an agreement regarding the acquisition ("Acquisition") by NHancement
Technologies Inc. ("Buyer") of all of the outstanding capital stock of CCA from
you and your wife, who are the sole stockholders of CCA ("Sellers") (Buyer and
Sellers, collectively, the Parties).

The Parties have substantially completed their due diligence
investigations and wish to consummate the Acquisition pursuant to a written
agreement (the "Definitive Agreement") subject to, among other things, the
approval of the respective Boards of Directors and stockholders, as necessary,
of the two companies, the preparation, execution and performance of the
Definitive Agreement containing conditions, representations and warranties as
may be agreed upon by the Parties, and the approval by the California
Commissioner of Corporations of the terms and conditions of the Acquisition
pursuant to a fairness hearing held pursuant to Section 25142 of the California
Corporate Securities Law of 1968, as amended. The Parties hereby request that
Buyer's counsel prepare an initial draft of the Definitive Agreement.

It is proposed that the Definitive Agreement include the following
terms:

1. Basic Transaction. The Acquisition is intended to be structured
as a tax-free reorganization pursuant to Internal Revenue Code Section
368(a)(2)(E) and, for financial accounting purposes, as a pooling of
interests, in a transaction whereby CCA will be merged with a wholly-
owned subsidiary of Buyer (the "Merger") and CCA will be the surviving
corporation and become a wholly-owned subsidiary of Seller. The Merger
will be effected in accordance with, and will have the effects of,
relevant Delaware and California laws.

2. Acquisition Consideration. At the closing, all of the
outstanding capital stock of CCA will be exchanged for certificates
representing the number of shares of Buyer common stock, $0.01 par value
per share, equal to the quotient of $1,200,000 divided by the price per
share to the public of Buyer common stock in its initial public offering
(the "IPO") pursuant to a registration statement (the "Registration
Statement") filed with the
<PAGE> 2
Securities and Exchange Commission, all of which shares of Buyer common
stock will be subject to restrictions on transfer pursuant to a market
stand-off agreement between Sellers and the underwriter of the IPO for
the 24 months following the effective date of the Registration
Statement.

3. Employment and Noncompetition Agreements.

a) At the closing, Buyer will enter into a three-year
employment agreement with Kent Cossey under which Kent Cossey
would agree to continue to serve as CCA's president subject to
the direct supervision of Buyer's chief operating officer and
would be entitled to receive: (i) an annual base salary of
$135,000, which in the event the net revenues of CCA (determined
in accordance with generally accepted accounting principals) for
a 12-month period are less than $1,000,000 ("Revenue Target"),
will be reduced by an amount equal to $12,000 for every whole
increment of $100,000 by which the Revenue Target is not met;
(ii) an annual performance bonus for the first two years,
targeted to be $75,000 based on the employee having achieved the
established business plan for CCA, which amount will be increased
upon CCA's performance exceeding the plan, and for the third
year, such bonus amount to be determined pursuant to Buyer's
bonus plan as approved by its board of directors; (iii) use of a
leased vehicle or a monthly car allowance, (iv) and such other
benefits as employees of Buyer shall be entitled. Additionally,
Kent Cossey will enter into two-year confidentiality and
noncompetition agreement in favor of Buyer and CCA, which, among
other things, will prohibit Mr. Cossey from soliciting customers
or hiring employees of Buyer or CCA.

b) At the closing, Buyer will enter into a three-year
employment agreement with Karon Cossey under which Karon Cossey
would agree to continue to serve as CCA's office manager subject
to the direct supervision of CCA's president and would be
entitled to receive: (i) an annual base salary of 40,000; and
(ii) such other benefits as an employee of Buyer with similar
responsibilities would be entitled. Additionally, Karon Cossey
will enter into two-year confidentiality and noncompetition
agreement in favor of Buyer and CCA, which, among other things,
will prohibit Ms. Cossey from soliciting customers or hiring
employees of Buyer or CCA.

During the period from the date this letter is signed by the Sellers
(the "Signing Date") until March 31, 1997, or such date as the Parties mutually
agree to terminate the agreements hereof (the "Termination Date"), Sellers will
afford Buyer with full and free access to CCA, its personnel, properties,
contracts, books and records.

Until the Termination Date Sellers will not and will cause CCA not to,
directly or indirectly, through any representative or otherwise, solicit or
entertain offers from, negotiate with or in any manner encourage, discuss,
accept or consider any proposal of any other person relating to the acquisition
of the outstanding capital stock of CCA or CCA's assets or business, in whole
or in part, by any means; and Sellers will immediately notify Buyer regarding
any contact between Sellers, CCA or their respective representatives and any
other person regarding any such offer or proposal or any related inquiry.
<PAGE> 3
During the period from the Signing Date until the Termination Date,
Sellers shall cause CCA to be operated in the ordinary course and to refrain
from any extraordinary transactions except as may be agreed upon among the
Parties.

The Parties agree to be bound by the Confidentiality and Non-Disclosure
Agreement, dated as of March 7, 1995, by and between CCA and BioFactors, Inc.
(a predecessor to Buyer); provided that the Parties agree that the terms of the
Confidentiality Agreement shall not prevent Buyer from making any disclosure
required in connection with its IPO.

The Parties agree they will each pay their own expenses in connection
with the consummation of the Acquisition; provided that Buyer agrees to pay all
costs and fees of third-party accountants retained to prepare financial
statements of CCA and actual fees of CCA's and Seller's counsel in an amount up
to $75,000.

During the period from the Signing Date to the Termination Date, the
Buyer and each Seller will cooperate with each other and proceed as promptly as
is reasonably practical to consummate the Acquisition.

If this letter correctly sets forth our understanding, please indicate
so by signing and returning to me the enclosed copy of this letter.

Very truly yours,
N Hancement Technologies Inc.

By: /s/ ESMOND T. GOEI
---------------------------------
Esmond T. Goei, President

AGREED TO AND ACCEPTED THIS 25th DAY OF OCTOBER, 1996.

Cossey-Capozzi, Inc.

By: /s/ KENT COSSEY
---------------------------------
Kent Cossey, President

<PAGE> 1
Exhibit 10.5

LICENSE AGREEMENT

THIS AGREEMENT is made and entered into this 24th day of November,
1988, by and between SYSTEMS TECHNOLOGY, INC., a California corporation ("STI"),
and COGNITIVE SYSTEMS, INC., a California corporation ("CSI").

RECITALS

A. STI has developed a computer system and associated protocols and
methodology collectively named Critical Task Testing (CTT) designed to test
operator impairment in an objective manner. This system is described briefly in
Exhibit "B" hereto. This system is hereinafter referred to as the "Property".
The software component of the Property is sometimes hereinafter referred to as
the "Software", and the technology underlying the Property is sometimes
hereinafter referred to as the "Technology".

B. CSI desires to market the Property to customers in the market
segments hereinafter set forth.

C. An agreement was executed on April 6, 1988 between CSI and STI
(hereinafter "First Agreement") for evaluating the marketing and manufacture of
systems incorporating the technology, software and property of this Agreement.
This Agreement upon execution supersedes the First Agreement and the First
Agreement thereafter has no force and effect.

NOW, THEREFORE, the parties hereto agree as follows:

1. EXCLUSIVE LICENSE.

(a) Grant of License. Except as is specifically reserved in
subparagraph 1(c) below, STI hereby grants to CSI a sole and exclusive license
to (i) develop and manufacture or have manufactured devices incorporating the
Property, Software and/or Technology, including all future developments and
improvements that may be made by STI, and (ii) reproduce, use, market and
otherwise fully exploit the commercial potential of the Property, Software,
Technology and/or future developments thereof in the market segments set forth
in Exhibit "A" attached hereto and

<PAGE> 2
incorporated herein. Without limiting the foregoing, CSI shall have the sole
and exclusive right to use the Property in connection with the routine testing
of employees, customers, clients or agents for impairment. Except as granted
to CSI, the right to future development of the Property, Software and/or
Technology shall be left exclusively to STI.

(b) Sublicenses and Assignment. STI also grants to CSI the right to
issue sublicenses during the term of this Agreement. Each sublicense shall
include all of the rights and obligations due STI under the terms of this
Agreement. This Agreement may be assigned by CSI to one of its subsidiaries or
affiliates, provided such subsidiary or affiliate shall be bound by all the
terms and conditions of this Agreement.

(c) Reservation. STI specifically reserves from the license being
granted to CSI, the research market in the same market segments in Exhibit "A".
Notwithstanding the preceding sentence, this reservation shall apply only to
nonprofit entities, including but not limited to, government organizations,
research foundations, educational and trade foundations, and only the right to
use, develop, manufacture and sell the Property for a purpose other than the
routine testing of employees, customers, clients or agents for impairment.

(d) Royalties.

(1) Within sixty (60) days following the conclusion of each
calendar quarter following date of signing this Agreement, CSI shall pay to STI
a royalty of 8-1/2% of the gross contract revenue for CTT related impairment
testing products and services. This only includes employees tested for which CSI
is paid, and does not include employees tested for other purposes such as for
calibration or experimental reasons. STI is not entitled to royalty revenue
derived from installation, maintenance or any other revenues that are not
directly related to CTT impairment testing of employees.

2. TERM.

This Agreement shall commence on the date hereof and continue for an
initial period of five years after the expiration of the First Agreement. The
term of the Agreement may be extended by CSI for a further period of five years
by written notice given to STI in the manner provided in paragraph 15, below at
any time prior to the expiration of such initial period.

-2-
<PAGE> 3
3. ACCOUNTING

(a) Records. CSI shall maintain accurate records covering the
transactions relating to employee testing and assistance projects which utilize
the Property (the "Records"). "Records" shall mean property related (Records)
relating to the Property related employee testing and assistance projects. Each
payment of the Quarterly Fee shall be accompanied by a statement ("fee
statement") setting forth the computation of the Quarterly Fee in accordance
with subparagraph 3(b) below. STI and/or STI's agent, upon giving seven (7) days
prior written notice to CSI, shall have the right to inspect the Records during
normal business hours at CSI's place of business. STI agrees to sign or require
its agent to sign reasonable non-disclosure Agreements obliging STI and its
agent not to disclose confidential information of CSI that does not pertain to
STI, the employee testing and assistance projects, or the Records.

(b) Fee Statements. Each fee statement shall accurately contain the
following information:

(1) The amount in dollars of Gross Testing Receipts from all
Property related employee testing.

(2) The net Quarterly Fee due to STI.

(c) Due Date. Payment with respect to each fee statement shall be
due and payable within thirty (30) days after such statements are dated.

4. MINIMUM PAYMENT.

If the total royalty payment made by CSI to STI at the end of the third
year after execution or this agreement does not exceed $75,000, then STI shall
have the option to terminate this agreement, except that CSI may maintain this
agreement by payment to STI of the difference between the received royalties and
the amount indicated above.

5. MAJOR DEVELOPMENTS.

Major developments involving uses for the Property not know at the date
of this Agreement shall be communicated in writing promptly by STI to CSI and
CSI to STI. Upon request by CSI or STI, (each party,) shall furnish to the other
detailed descriptions of each such major development.

-3-
<PAGE> 4
6. SOFTWARE MAINTENANCE AND PRODUCT DEVELOPMENT.

(a) Billing for Technical Assistance. STI shall be entitled to bill
CSI on a time and materials basis, at its standard hourly rate, for the time
cost and labor cost expended in maintaining the Software or providing CSI with
any technical assistance referred to in this paragraph 6; provided, however,
that STI shall not be entitled to bill CSI for time and labor costs spent on
correcting errors or defects in the Software. All billable technical assistance
shall be estimated by STI and agreed upon in writing by CSI before STI performs
services in connection with any project. STI shall provide monthly statements
for technical assistance which shall itemize the expenditure of time and
materials on a project by project basis.

(b) Maintenance of the Software. STI and CSI acknowledge and agree
that the Software will, from time to time, undergo changes as necessary to
maintain the Property in a commercially viable condition or to exploit certain
or all market segments listed in Exhibit "A". From time to time during the term
of this Agreement, CSI may request STI to make reasonable modifications and
improvements to the software to enhance the marketability of the Property and
the devices, products and special equipment manufactured therefrom, and to
correct any errors or defects that CSI has reason to believe exist in the
Software. STI shall use its best efforts to make such modifications and
improvement, and shall initiate activity to verify and remedy any such error or
defect within 5 working days after written notification. If a requested
modification and/or improvement, or verified error or defect, cannot be remedied
within 60 days, or if STI is unwilling or unable to maintain the Software in a
commercially viable condition, then upon written demand by CSI, STI shall
promptly provide appropriate source codes and consultation to CSI as necessary
to enable CSI to make the modifications or improvements, correct the errors or
defects, and/or maintain the Software in a commercially viable condition.

(c) Product Development and Software Conversion. STI and CSI
acknowledge and agree that the successful commercial exploitation of the
Property will require the manufacture of one or more end devices incorporating
the Property and/or Technology covered by this Agreement. STI and CSI also
acknowledge and agree that it may be necessary at some future time to convert
the Software into another medium (such as firmware), or into another computer
language, in order to successfully market the product. From time to time during
the term of this Agreement, CSI may request STI to provide technical assistance
to CSI and to those

-4-
<PAGE> 5
persons or entities with which CSI contracts or which CSI directs for purposes
of undertaking the tasks expressed and implied in this subparagraph 6(c), and
upon such request by CSI, STI shall make available to CSI qualified technical
personnel for 15 man days per calendar quarter for the purpose of providing such
technical assistance. If STI is unwilling or unable to provide qualified
technical personnel upon request from CSI, then CSI shall have the right to
engage independent contractors and employees as necessary to obtain the
technical assistance required to complete the tasks expressed and implied by
this paragraph 6, and STI shall make available to such independent contractors
and employees all documents and information relevant to completing such tasks.
Without limiting the foregoing, STI shall promptly supply necessary
specifications of the Software, Technology, and Property as reasonably requested
by CSI to facilitate the development of the Property into a product or products
which may be utilized in providing services or sold to prospective customers, in
the market segments listed in Exhibit "A".

(d) Rights in New Development. Any new developments or improvements
made to the devices or Property by CSI or at CSI's expense shall belong to CSI.
CSI grants STI the right to use such new developments or improvements in the
field designated to STI under this Agreement. Upon any termination of this
License Agreement, CSI continues to own the developments or improvements and STI
is limited thereafter to use of the

development or improvement only in STI's field designated in this Agreement.

7. REPRESENTATION AND WARRANTY OF STI.

(a) Right and Power to License. STI represents and warrants that it
is the sole owner of all right, title and interest in and to the Property, and
patents or patent applications therefore, and that it has the full right and
power to grant this license in the manner and form herein expressed, free and
clear of any adverse assignment, grant or any other encumbrances inconsistent
herewith.

(b) Exclusive License. STI represents and warrants that it has not
granted any license relating to the Property in the market segment set forth in
Exhibit "A" to any party and will not negotiate or grant any such license to any
party other than CSI during the term of this Agreement, including any extension
hereof.

-5-
<PAGE> 6
(c) Fitness. STI represents and warrants that the Property is in
substantial accordance with the description previously supplied to CSI, a copy
of which is attached hereto as Exhibit "B" and incorporated herein. This
warranty is in addition to all other warranties, express or implied, including
the implied warranty of merchantability, and fitness for a particular purpose.

8. MANUFACTURING.

(a) Basic Design Specifications. STI shall assist CSI in the
development of a definitive set of basic design specifications (the
"Specifications") for use in manufacturing devices which (i) embody the Property
and (ii) are suitable for use in CSI 's employee testing and assistance
projects. The specifications shall be determined by mutual agreement of the
parties; provided, however, that if the parties fail to reach agreement as to
the Specifications, or any part thereof, CSI shall have the right to resolve any
point of disagreement as CSI, in its sole discretion, deems appropriate.

(b) STI and CSI acknowledge and agree that in order to successfully
exploit the Property CSI must obtain the services of qualified and experienced
contractors that have the technical, competence to manufacture in a timely
manner, and according to the Specifications, the devices, products and
specialized equipment contemplated by this Agreement. STI shall have the right
to submit a bid, as a contractor, for the manufacture of such devices, products
and specialized equipment, which CSI will reasonably consider. CSI and STI will
jointly and by mutual consent establish criteria for accepting bids submitted by
contractors. To be considered as a contractor, STI should (a) demonstrate to the
satisfaction of CSI that STI is capable of manufacturing the Property according
to the Specifications, (b) That STI satisfies such criteria or STI furnishes a
performance bond issued by a corporation surety authorized to issue surety
insurance in the State of California for the faithful performance of the
contract in an amount equal to 100% of the contract price, and (c) submits a bid
that CSI determines is within 5% of the lowest competitive bid. Then CSI will
accept STI's lowest bid. If STI'S bid is the lowest competitive bid, and all
other conditions to CSI's acceptance of STI's bid are otherwise satisfied, then
CSI, if it accepts STI's bid, will pay an amount equal to one hundred five
percent [105%] of STI's bid. In lieu of the performance bond described in the
preceding sentence, CSI may, in its sole discretion, provide STI with an
alternative method of establishing that it has sufficient financial resources

-6-
<PAGE> 7
to indemnify CSI for any losses or delays caused by its inability to manufacture
the devices, products, and specialized equipment contemplated by this paragraph
8, in a timely manner, and in accordance with the Specifications.

9. PROPERTY APPLICATION.

CSI agrees that any promotion to or solicitation from prospective
customers for the Property or devices manufactured therefrom shall be made with
due consideration of the impact to STI's general business and professional
reputation. CSI further agrees that it shall inform and consult with STI as to
proposed promotions of the Property or devices manufactured therefrom for the
purpose of obtaining an appraisal of the performance standards, given the
commercial environment involved, in the operation of the property or the devices
manufactured therefrom for the proposed use by the prospective customer(s). Said
appraisal shall consider the efficiency, efficacy and accuracy of the Property
or devices manufactured therefrom in the proposed commercial environment. In
connection therewith, STI agrees that CSI may with prior written disclosure to
STI publish and release the results of said appraisal to those prospective
customers or to a class of similar prospective customers.

Any consulting requested by CSI under this paragraph 9, including the
rendering of any appraisal, shall be billable as technical assistance in
accordance with paragraph 6.

10. CONFIDENTIALITY.

(a) It is recognized that in the course of the performance of this
Agreement, proprietary, confidential and trade secret information of STI may be
furnished to CSI and proprietary, confidential and trade secret information of
CSI furnished to STI. Any such "Confidential Information" shall be first
presented in a sealed envelope or container that is identified as such on the
outer cover. It is mutually agreed between the parties that any such
Confidential Information that is received and accepted by the other party shall
be kept in confidence, not disclosed to any unauthorized person or persons, and
not used except for carrying out the purposes of this Agreement. It is agreed,
however, that there shall be no liability for the use or disclosure of any such
information, except as may be afforded under the United States or Foreign Patent
and Copyright Laws, if such information was in the public domain at the time of
receipt, was known to recipient at the time of receipt, is disclosed
inadvertently despite the reasonable

-7-

<PAGE> 8
degree of care such as recipient would take to safeguard its own proprietary
information, is disclosed or used with the written approval of the party
providing the information, is used or disclosed after three years from the date
of dissolution of this Agreement, or becomes known to recipient from a source
other than the other party without a breach of this Agreement.

(b) Each party agrees, that it shall take immediate affirmative
steps to ensure that confidentiality is maintained including, without
limitation, obtaining the prior written agreement of all employees, agents and
other individuals who have or may have contact with Confidential Information,
that they shall not disclose Confidential Information to any unauthorized third
party. The parties further agree to protect all Confidential Information
received from each other with the same standard of care and procedures with
which the receiving party's own Confidential Information is protected.

11. ESCROW OF SOURCE CODE.

(a) Creation of Escrow. STI agrees that, it shall place In escrow,
in a system satisfactory to both parties, the complete source code, object code,
related documentation, and similar data relating to the Property, Software and
Technology and shall keep such materials updated as may be required.

(b) Escrow Instructions. The instructions of the escrow shall
direct that CSI shall be delivered the corpus of the escrow by the escrow agent
in the event that:

STI is acquired, merged or its principal assets acquired, unless the
successor-in-interest agrees in writing to be bound by all obligations
undertaken by STI to CSI hereunder.

(c) Finalization. The parties agree that the precise language of
the escrow instructions and choice of an escrow holder for deposit of the source
code and other materials shall be finalized not later than sixty (60) days
following the effective date hereof.

12. PROPERTY OWNERSHIP

CSI acknowledges that the Property is licensed to it pursuant to this
Agreement. The Property shall remain the exclusive property of STI, and STI's
trade name and logo shall be

-8-
<PAGE> 9
clearly displayed on the Property. Except as set forth herein, CSI shall
obtain no ownership rights to the Property.

13. SUPPORT.

If requested by CSI, STI shall advise and assist CSI in the
presentation of the Property to CSI's customers and potential customers, and in
the marketing of the Property generally. CSI shall reimburse STI for its
reasonable expenses incurred in connection with providing such advice and
assistance.

14. NOTICES.

All notices required to be given hereunder shall be in writing and may
be and delivered or sent certified mail, return receipt requested, to the
parties at the following Addresses:

If to STI:
SYSTEMS TECHNOLOGY, INC.
13766 South Hawthorne Blvd.
Hawthorne, California 90250
Attn: President.

If to CSI:
COGNITIVE SYSTEMS, INC.
9925 Channel Rd.
Lakeside, California 92040
Attn: Marc R. Silverman
cc: Elliot G. Steinberg
cc: Ted Schramm

or at such other address as either party may in writing advise to the other
party pursuant to the Paragraph. If notice is given by mail it shall be deemed
effective on the fourth business day following mailing or on the date of actual
receipt, whichever is earlier.

15. INFRINGEMENT.

If either party shall learn of a substantial infringement of CSI's
exclusive rights to use the Properly in connection with the testing of
employees, customers, clients and agents for impairment, and such infringement
is being accomplished by means of information obtained in a confidential
relationship with CSI or STI, or by a device or through the use of information
which was sold by STI under STI's reserved right to market the

-9-
<PAGE> 10
Property, pursuant to this Agreement, then STI shall use its best efforts in
cooperation with CSI to terminate such infringement with or without litigation.

16. INDEMNITIES AND COSTS.

Each party to the Agreement shall, at its own expense, indemnify,
defend, and hold harmless the other party against and in respect of any and all
claims, demands, loses, costs, expenses, obligations, liabilities, damages,
recoveries, and deficiencies, that the other party incurs or suffers which arise
or result from any breach of, or failure by it, to perform any of its
representations, warranties or promises in this Agreement.

(a) However STI makes no representation or warranty that the use of
the Property licensed hereunder will be free of infringement of the rights of
other parties.

(b) STI assumes no liability for the use of the Property under this
License Agreement.

(c) CSI agrees to indemnify STI and to hold STI harmless against
all loss, cost or damage resulting from claims of third party for loss or
injury, arising in connection with the manufacture, assembly, use or sale of
devices licensed under this agreement except in the event such devices are
manufactured by STI. CSI further agrees to include STI as a co-insuree in any
insurance policy obtained to insure against such loss or injury.

17. MISCELLANEOUS

(a) Severability. If any one or more of the provisions of this
Agreement shall be found to be illegal or unenforceable, then this Agreement
shall remain in full force and effect, and such illegal and unenforceable term
or provision shall be deemed stricken

(b) Performance. Neither party's right to require performance of
the other party's obligations hereunder shall be affected by any previous
waiver, forbearance or course of dealing.

(c) Relationship of Parties. No agency, partnership, joint venture
or joint relationship is created hereby and neither party has any authority of
any kind to bind the other in any respect whatever.

-10-
<PAGE> 11

(d) Excusable Default. Notwithstanding anything in this Agreement
to the contrary, no default, delay or failure to perform by either party shall
be a breach of this Agreement if such default, delay or failure to perform is
shown to be due entirely to causes beyond the reasonable control of the
defaulting party including, without limitation, labor disputes, inclement
weather, default of a common carrier, acts of embargo or of the acts of God.

(e) Integration. This Agreement supersedes all proposals, oral or
written, and all communications between the parties relating to the subject
matter hereof, except for the First Agreement. This Agreement may be modified
only by a writing signed by both parties.

(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.

(g) In the case of the failure of either party to fulfill any of
its obligations hereunder, the other party shall have the right to cancel and
terminate this Agreement by giving sixty (60) days written notice of its
intention so to do and specifying the alleged failure, providing, however, that
if there has been no such failure or such obligations are fulfilled during such
sixty (60) day period, then such notice of cancellation shall be null and void;
otherwise, this Agreement shall be considered as canceled after the expiration
of said sixty (60) day period.

(h) In the event of any adjudication or bankruptcy, appointment on
a receiver by any court of competent jurisdiction, assignment for the benefit of
creditors, or levy of execution directly involving said CSI this Agreement may
be terminated at the option of STI by giving CSI five (5) days written notice of
his intention so to do.

(i) Should this Agreement be canceled or terminated as provided
herein, CSI shall not be relieved of liability for payment of royalty or license
fees due STI which accrued prior to the effective date of such cancellation or
termination.

(j) Arbitration. Any dispute relating to the interpretation or
performance of this Agreement shall be resolved at the request of either party
through binding arbitration. Arbitration shall be conducted in the City of Los
Angeles, California, in accordance with the prevailing rules of the

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<PAGE> 12
American Arbitration Association. Judgment upon any award by the arbitrators may
be entered in the state or federal Court having jurisdiction. In the event of
litigation or arbitration under this Agreement, the prevailing party in any such
dispute shall be entitled to an award of cost of suit including investigative
cost and reasonable attorneys fees and costs as shall be determined by the
Court.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as indicated below.

SYSTEMS TECHNOLOGY, INC., a
California corporation

By /s/ IRV ASHKENAS
------------------------------------
Its Vice President
-----------------------------------

COGNITIVE SYSTEMS, INC., a
California corporation

By /s/ MARK SILVERMAN
------------------------------------
Its President
-----------------------------------

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<PAGE> 13
EXHIBIT A

MARKET SEGMENTS

1. Public Transportation

2. Trucking

3. Utilities

4. Military

5. Aerospace

6. HAZMAT

7. Law enforcement

8. Fire fighters

9. Hospitals

10. Construction

11. Security

12. Banking/Securities

13. Manufacturing

14. Service Industries

-13-
<PAGE> 14
May 19, 1994

Mr. Wade Allen
President
Systems Technology, Inc.
13766 S. Hawthorne Blvd.
Hawthorne, CA 90250

RE: Addendum to the License Agreement dated November 24, 1988 between
System Controls, Inc. ("STI") and Performance Factor, Inc. ("PFI"),
formerly Cognitive Systems, Inc. (CSI)

ADDENDUM TO LICENSE AGREEMENT

This addendum deletes the original PARAGRAPH 2. TERM in its entirety and
replaces it with the following:

PARAGRAPH 2. TERM. "This agreement shall commence on the date hereof and
continue for an initial period of five (5) years. The term of the Agreement may
be extended by PFI for three (3) periods of five years each by written notice
given to STI in the manner provided in paragraph 14 of this agreement at any
time prior to the expiration of the previous period."

All other terms and conditions in the Agreement remain unchanged.

Agreed, Accepted and Agreed,

/s/ MARK SILVERMAN /s/ WADE ALLEN
Mark Silverman Wade Allen
President President
Performance Factors, Inc. Systems Technology, Inc.
<PAGE> 15
PART OF
EXHIBIT 10.5

SECOND ADDENDUM TO LICENSE AGREEMENT

THIS SECOND ADDENDUM TO LICENSE AGREEMENT (this "Addendum") is
entered into as of November 18, 1996, by and between SYSTEMS TECHNOLOGY INC., a
California corporation ("STI"), and BIOFACTORS, INC., a Delaware corporation
(formerly known as Cognitive Systems, Inc.) ("BFI"), and amends that certain
License Agreement dated November 24, 1988, by and between STI and BFI (the
"License Agreement").

WHEREAS, the parties now desire to amend the License
Agreement.

NOW THEREFORE, in consideration of the above and the following
mutual covenants and agreements, the parties agree as follows:

1. Definitions. Unless otherwise defined herein,
capitalized terms shall have the meanings given such terms in the License
Agreement.

2. Amendments.

a. All references to "Cognitive Systems, Inc.,"
or to "CSI," wherever they appear in the License Agreement, shall be amended to
read "BioFactors, Inc." or "BFI," respectively.

b. Section 1.b of the License Agreement shall be
amended in its entirety, as follows:

"1.b Sublicenses and Assignment.

(1) STI also grants to BFI the right to
issue sublicenses during the term of this Agreement, as
follows:

(i) Any agreement concerning any
such sublicense (a "Sublicense Agreement") shall
include all of the rights and obligations due STI
under the terms of this Agreement and shall provide
for an initial payment to BFI (the "Initial
Sublicense Fee") in a minimum amount of $250,000 and
an on-going royalty of 8.5% of gross contract revenue
of the sublicensee derived from products or services
containing the Property or the Technology (the
"Sublicense Royalty") (the "Standard Sublicense
Terms").

(ii) Any deviation from these
Standard Sublicense Terms must be approved, in
writing, by STI. In the event STI withholds such
approval, BFI, at its discretion, may either refuse
to enter into the Sublicense Agreement, or may
execute the non-conforming Sublicense Agreement, in
which case BFI shall be obligated to pay to STI the
STI Sublicense Payments, pursuant to Section 1.d(2)
hereof.
<PAGE> 16
(iii) Within sixty (60) days of
executing any Sublicense Agreement, BFI shall provide
STI with a copy of such Sublicense Agreement.

(2) This Agreement may be assigned by
BFI to one of its subsidiaries or affiliates; provided, that
such subsidiary or affiliate shall be bound by all the terms
and conditions of this Agreement."

c. Section 1.d of the License Agreement shall be amended
in its entirety, as follows:

"1.d Royalty

(1) BFI Contract Royalty. Within sixty
(60) days following the conclusion of each calendar quarter,
commencing with the first calendar quarter end after the date
of this Agreement, BFI shall pay to STI a royalty (the "BFI
Contract Royalty") of eight and one-half percent (8.5%) on the
gross contract revenue received by BFI derived from
CTT-related impairment testing products and services provided
by BFI to its customers ("Users") utilizing the Property
("Gross Contract Revenue"); provided, that: (a) STI is not
entitled to receive the BFI Contract Royalty on CTT testing
conducted for calibration, experimental or other non revenue
generating purposes, and (b) STI is not entitled to receive
the BFI Contract Royalty on revenues derived from
installation, maintenance or any other revenues not directly
derived from CTT impairment testing of employees of Users
utilizing the Property.

(2) BFI Sublicense Royalty. Within sixty
(60) days following the conclusion of each calendar quarter,
commencing with the calendar quarter ending after the date of
any Sublicense Agreement, BFI shall pay to STI a royalty (the
"BFI Sublicense Royalty"), as follows:

(i) BFI shall pay to STI a royalty
of eight and one-half percent (8.5%) on up to
$250,000 of the Initial Sublicense Fee received in
respect of such Sublicense Agreement and a royalty of
fifty percent (50%) of any Initial Sublicense Fee
amount in excess of $250,000; and

(ii) BFI shall pay to STI one half
(1/2) of the Sublicense Royalty received in respect
of such Sublicense Agreement; provided, that in the
event the Sublicense Agreement provides for payment
to BFI of a Sublicense Royalty of less than 8.5%,
then BFI shall pay to STI a royalty of 4.25% of gross
contract revenue of the sublicensee derived from
products or services containing the Property or the
Technology."

d. Section 3 of the License Agreement shall be amended
in its entirety, as follows:

-2-
<PAGE> 17
"3. Accounting.

a. Records. BFI shall maintain accurate
records concerning CTT-related impairment testing products and
services provided to its customers (the "Records"). STI or
its agent, upon seven days prior written notice to BFI, shall
have the right to inspect the Records during normal business
hours at BFI's place of business. STI agrees to execute, or
require its agent to execute, a reasonable non-disclosure
agreement obligating STI and its agent not to disclose
confidential information of BFI.

b. Fee Statements. Each payment of the
BFI Contract Royalty and the BFI Sublicense Royalty shall be
accompanied by a statement (the "Fee Statement") setting forth
the following:

(1) The amount of all Gross
Contract Revenue for the quarter and the computation
of the BFI Contract Royalty due to STI;

(2) The amount of any Initial
Sublicense Fee paid to BFI during the quarter and
Sublicense Royalty paid to BFI during the quarter;
and the computation of the BFI Sublicense Royalty due
to STI.

b. Due Date. Payments with respect to
each Fee Statement shall be due and payable within thirty (30)
days of the date of such statement.

e. Section 4 of the License Agreement shall be amended
in its entirety, as follows:

"4. Minimum Payment.

During each three-year period, commencing
with the three-year period beginning on January 1, 1997, BFI
shall make payments to STI under this Agreement in a minimum
aggregate amount of One Hundred Fifty Thousand Dollars
($150,000) (the "Minimum Payment"). For purposes of
calculating whether the Minimum Payment obligation has been
met, the following shall be included: (a) all BFI Contract
Royalty and BFI Sublicense Royalty payments made pursuant to
Section 1.d hereof, (b) one-half (1/2) of all Technical
Assistance Fees paid pursuant to Section 6 hereof, and (c)
such additional payments as BFI may make to STI to fulfill
this Minimum Payment obligation. If, at the end of any
three-year period, STI shall have determined that the Minimum
Payment has not been paid, then STI shall notify BFI in
writing of the deficient amount (the "Deficient Amount") and
BFI shall have 30 days from the date of such notice in which
to pay the Deficient Amount. If, after such 30-day period,
BFI shall not have paid the Deficient Amount, then STI, at its
option, may convert the exclusive license granted in Section
1.a hereof to a non-exclusive license."

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<PAGE> 18
f. Section 6.a of the License Agreement shall be amended
in its entirety, as follows:

"6.a Technical Assistance Fees. STI shall be
entitled to bill BFI on a time and materials basis, at its
standard hourly rate, for the labor cost and material cost
expended in maintaining the Software or providing BFI with any
technical assistance referred to in this Section 6 and in
Section 9 hereof ("Technical Assistance Fees"); provided,
however, that STI shall not be entitled to bill BFI for time
and labor costs spent on correcting errors or defects in the
Software. All Technical Assistance Fees shall be estimated by
STI and agreed upon in writing by BFI before STI performs
services in connection with any project. STI shall provide a
monthly statement of Technical Assistance Fees which itemizes
all time and material expenditures on a project by project
basis."

g. Section 14 of the License Agreement shall be amended
by replacing the CSI address for BFI, as follows:

If to BFI:
BIOFACTORS, INC.
1746 Cole Boulevard, Suite 265
Golden, Colorado 80401
Attn: Chief Operating Officer
cc: General Counsel

3. SportsTrac License. The parties hereby agree that,
with respect to that certain Sublicense Agreement (the "SportsTrac Agreement")
dated as of August 30, 1995, by and between BFI and SportsTrac, Inc.
("SportsTrac") (f/k/a Bogart, Inc.), notwithstanding the amendments of Section
2 hereof, BFI shall pay to STI a royalty of: (a) eight and one-half percent
(8.5%) on $500,000 of the Initial Sublicense Fee paid to BFI by SportsTrac (it
being understood and agreed by the parties that the remaining $500,000 of the
Initial Sublicense Fee paid to BFI by SportsTrac was in consideration of
products and services of BFI not directly related to the Property), and (b)
one-half (1/2) of the Sublicense Royalty (as defined in Section 2 hereof)
received in respect of the SportsTrac Agreement. The parties further agree
that the royalty paid to STI in respect of the Initial Sublicense Fee paid by
SportsTrac shall not be included for purposes of calculating the Minimum
Payment for the initial three-year pursuant to Section 4 of the License
Agreement.

4. Construction of Waiver. The License Agreement shall
be deemed amended only to the extent set forth herein and remains in full force
and effect.

5. Counterparts. This Addendum may be executed in any
number of counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument.

[The remainder of this page intentionally left blank.]

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<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this Second
Addendum to License Agreement to be duly executed as of the day and year first
above written.

SYSTEMS TECHNOLOGY, INC.,
a California corporation

By: /s/ Wade Allen
---------------------------------
Name: Wade Allen
Title: President

BIOFACTORS, INC.,
a Delaware corporation

By: /s/ Esmond T. Goei
---------------------------------
Esmond T. Goei, President and
Chief Executive Officer

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<PAGE> 1
Exhibit 10.7

BIOFACTORS, INC.

SECURED NOTE AND WARRANT PURCHASE AGREEMENT

December 1, 1994

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale of the Notes......................................................................... 1

1.1 Sale and Issuance of the Notes.............................................................. 1
1.2 Closing..................................................................................... 1

2. Maturity............................................................................................... 2

3. Warrants............................................................................................... 2

3.1 Issue at Closing............................................................................ 2
3.2 Warrant Adjustments......................................................................... 2
3.3 Purchase Price.............................................................................. 2

4. Security Agreement..................................................................................... 2

5. Registration and Other Rights.......................................................................... 3

6. Representations and Warranties of the Company.......................................................... 3

6.1 Organization, Good Standing, Qualification and
Corporate Power............................................................................. 3
6.2 Capitalization.............................................................................. 3
6.3 Subsidiaries................................................................................ 4
6.4 Authorization............................................................................... 4
6.5 Valid Issuance of Notes, Warrants and Common
Stock....................................................................................... 4
6.6 Financial Statements........................................................................ 4
6.7 Governmental Consents....................................................................... 4
6.8 Litigation.................................................................................. 5
6.9 Patents and Trademarks...................................................................... 5
6.10 Compliance with Other Instruments........................................................... 5

7. Representations and Warranties of the Purchasers....................................................... 6

7.1 Authorization............................................................................... 6
7.2 Purchase Entirely for Own Account........................................................... 6
7.3 Restricted Securities....................................................................... 6
7.4 Accredited Purchaser Status................................................................. 6
7.5 Overseas Purchasers......................................................................... 6
7.6 Further Limitations on Disposition.......................................................... 7
7.7 Legends..................................................................................... 7

8. Conditions of Purchaser's Obligations at Closing....................................................... 8

8.1 Representations and Warranties.............................................................. 8
8.2 Performance................................................................................. 8
8.3 Compliance Certificate...................................................................... 8
8.4 Secretary's Certificate..................................................................... 8
8.5 Qualifications.............................................................................. 8
</TABLE>

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<PAGE> 3

<TABLE>
<S> <C> <C>
8.6 Consents and Waivers........................................................................ 8
8.7 Rights Agreement............................................................................ 8
8.8 Security Agreement.......................................................................... 9

9. Miscellaneous.......................................................................................... 9

9.1 Survival of Warranties...................................................................... 9
9.2 Successors and Assigns...................................................................... 9
9.3 Governing Law............................................................................... 9
9.4 Counterparts................................................................................ 9
9.5 Titles and Subtitles........................................................................ 9
9.6 Notices..................................................................................... 9
9.7 Entire Agreement; Amendments and Waivers.................................................... 10
9.8 Severability................................................................................ 10
</TABLE>

SCHEDULES AND EXHIBITS

SCHEDULE A Schedule of Purchasers

SCHEDULE B Schedule of Exceptions

EXHIBIT A Form of Secured Promissory Note

EXHIBIT B Form of Warrant

EXHIBIT C Form of Security Agreement

EXHIBIT D Form of First Amendment to Investors' Rights
Agreement

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<PAGE> 4

SECURED NOTE AND WARRANT PURCHASE AGREEMENT

THIS SECURED NOTE AND WARRANT PURCHASE AGREEMENT (this
"Agreement") is made as of the 1st day of December, 1994, by and between
BioFactors, Inc., a Delaware corporation (the "Company"), and the purchasers
listed on Schedule A hereto (referred to herein, singly, as a "Purchaser" and,
collectively, as the "Purchasers").

THE PARTIES HEREBY AGREE AS FOLLOWS:

1. Purchase and Sale of the Notes.

1.1 Sale and Issuance of the Notes.

(a) The Company has authorized the issuance
to the Purchasers of the Company's Secured Promissory Notes in the form set
forth in Exhibit A hereto (collectively, the "Notes" and each, individually, a
"Note") in the aggregate principal amount of up to $750,000.

(b) Subject to the terms and conditions of
this Agreement, each Purchaser agrees, severally, but not jointly, to purchase
at the Closing (as defined below), and the Company agrees to sell and issue to
each Purchaser at the Closing, a Note in the principal amount set forth opposite
each Purchaser's name on the Schedule of Purchasers attached hereto as Schedule
A at a purchase price equal to the original principal amount of such Note.

1.2 Closing. The initial purchase and sale of the
Notes shall take place at 10:00 a.m. on December 1, 1994, at the offices of
Davis, Graham & Stubbs, L.L.C., 370 Seventeenth Street, Denver, Colorado, or at
such other date, time and place as shall be designated by the Company (the
"Closing"). At or promptly after the Closing, the Company shall deliver to such
Purchaser the Note that such Purchaser is purchasing against receipt of either
(a) a wire transfer of the purchase price to an account designated by the
Company not less than two (2) business days prior to the date of the Closing, or
(b) evidence of cancellation of indebtedness of the Company to the Purchaser in
an amount equal to or greater than the purchase price. If the Notes issued or
sold at the Closing represent, in the aggregate, less than the entire amount of
principal authorized as set forth in Section 1.1(a), the Company may issue
additional Notes at one or more subsequent closings held within sixty (60) days
of the Closing. Upon execution of counterpart signature pages to each of this
Agreement, the Rights Agreement (as defined below) and the Security Agreement
(as defined below), any additional purchaser purchasing a Note at any such
subsequent closing shall

<PAGE> 5

be added to Schedule A and shall be deemed to be a Purchaser for purposes of
this Agreement.

2. Maturity. The Notes shall mature and become due and payable
in full at the close of business on the date which is 180 days after the
Closing.

3. Warrants. The Company has authorized the issuance of
warrants, the form of which is attached hereto as Exhibit B (the "Warrants"), to
purchase (subject to the succeeding sentence) up to an aggregate of 250,000
shares of the Common Stock of the Company at a purchase price of $3.00 per share
(the "Exercise Price"). The Company also has authorized the adjustment of the
Exercise Price and the aggregate number of shares of Common Stock issuable upon
exercise of the Warrants in the manner set forth in Section 3.2.

3.1 Issue at Closing. At the Closing, and at any
subsequent closing, the Company shall issue to each Purchaser purchasing a Note
against receipt of the Purchase Price (as defined in Section 3.3), a Warrant to
purchase (subject to adjustment pursuant to Section 3.2) such number of shares
of Common Stock as is derived by dividing by $3.00 the principal amount of the
Note so purchased by such Purchaser. The initial number of shares for which each
Purchaser's Warrant is exercisable is set forth opposite such Purchaser's name
on Schedule A.

3.2 Warrant Adjustments. If the offering price (on an
as-converted-to Common Stock basis) of securities issued in the Company's next
offering of Common Stock (or securities convertible into or exchangeable for
Common Stock) (the "Next Financing Price") is less than $4.00 per share, then
(a) the aggregate number of shares of Common Stock issuable upon exercise of the
Warrants shall be adjusted to equal the quotient obtained by dividing $750,000
by seventy-five percent (75%) of the Next Financing Price, (b) the number of
shares of Common Stock issuable upon exercise of each Warrant shall be adjusted
to equal the quotient obtained by dividing the initial principal amount of the
Note so purchased by such Purchaser by seventy-five percent (75%) of the Next
Financing Price and (c) the Exercise Price shall be adjusted so as to equal
seventy-five percent (75%) of the Next Financing Price.

3.3 Purchase Price. The purchase price for each
Warrant shall equal $.01 per share of Common Stock for which such Warrant is
exercisable (the "Purchase Price"), which is hereby agreed to be the fair market
value of such Warrant.

4. Security Agreement. The Company's obligations under the
Notes shall be secured by a security agreement between the Company and the
Purchasers in the form attached hereto as Exhibit C (the "Security Agreement").

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<PAGE> 6

5. Registration and Other Rights. Upon the amendment of the
Investors' Rights Agreement dated as of June 1, 1994, by and between the Company
and the holders of the Company's Series A Convertible Preferred Stock identified
therein (the "Rights Agreement"), to be effected by the First Amendment to
Investors' Rights Agreement attached hereto as Exhibit D (the "Amendment to
Rights Agreement"), the Purchasers will become parties to the Rights Agreement,
as so amended, and the shares of Common Stock issuable upon the exercise of the
Warrants shall become subject thereto.

6. Representations and Warranties of the Company. The Company
hereby represents and warrants to each Purchaser that, except for the exceptions
set forth on the Schedule of Exceptions attached hereto as Schedule B and
furnished to each Purchaser, which exceptions shall be deemed to be
representations and warranties as if made hereunder:

6.1 Organization, Good Standing, Qualification and
Corporate Power.

(a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted. The Company is duly
qualified to transact business, and is in good standing in each jurisdiction in
which the failure so to qualify would have a material adverse effect on its
business or properties.

(b) The Company has all requisite legal and
corporate power to execute and deliver this Agreement, the Security Agreement,
the Amendment to Rights Agreement, to issue and sell the Notes hereunder, and to
issue the Warrants hereunder and the Common Stock issuable upon exercise of such
Warrants, and to carry out and perform its obligations under the terms of this
Agreement, the Notes, the Security Agreement, the Rights Agreement and the
Warrants.

6.2 Capitalization.

(a) The authorized capital of the Company
consists of (i) Ten million (10,000,000) shares of Preferred Stock, par value
$.01 per share (the "Preferred Stock"), of which three million, five hundred
thousand (3,500,000) shares have been designated "Series A Convertible Preferred
Stock" (the "Series A Preferred Stock"), of which 2,052,407 shares are issued
and outstanding and (ii) Ten million (10,000,000) shares of Common Stock, par
value $.01 per share (the "Common Stock"), of which 77,389 shares are issued and
outstanding.

(b) Warrants to purchase a total of 263,938
shares of Common Stock, and options to purchase a total of 759,488 shares of
Common Stock, are currently outstanding. The

-3-

<PAGE> 7

Company has reserved 2,052,407 shares of Common Stock for issuance upon
conversion of the Series A Preferred Stock, 263,938 shares of Common Stock for
issuance upon exercise of outstanding warrants and 759,488 shares of Common
Stock for issuance upon exercise of outstanding options.

6.3 Subsidiaries. The Company does not presently own
or control, directly or indirectly, any interest in any other corporation,
association, or other business entity.

6.4 Authorization. This Agreement, the Notes, the
Security Agreement, the Amendment to Rights Agreement and the Warrants have been
duly authorized, executed and delivered by the Company and constitute the legal,
valid and binding obligations of the Company, enforceable in accordance with
their respective terms.

6.5 Valid Issuance of Notes, Warrants and Common
Stock. The issuance, sale and delivery of the Notes, and the issuance and
delivery of the Warrants, have been duly authorized by all required corporate
action on the part of the Company, and when issued, sold, and delivered in
accordance with the terms hereof and thereof for the consideration expressed
herein and therein, will be duly and validly issued, fully paid and
non-assessable and, based in part upon the representations and warranties of the
Purchasers in this Agreement, will be issued in compliance with all applicable
federal and state securities laws. The Common Stock issuable upon Exercise of
the Warrants has been duly and validly reserved for issuance and, upon issuance
in accordance with the terms of the Warrants, shall be duly and validly issued,
fully paid, and non-assessable, and issued in compliance with all applicable
securities laws, as presently in effect, of the United States and each of the
states whose securities laws govern the issuance of any of the Warrants
hereunder. The Warrants (and the Common Stock issuable upon exercise thereof)
will be free and clear from any liens or encumbrances other than those created
by, or imposed upon, the holders thereof through no action of the Company;
provided, however, that the Warrants (and the Common Stock issuable upon
exercise thereof) be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein.

6.6 Financial Statements. The Company has delivered
to each Purchaser its unaudited balance sheet and unaudited statements of
operations and cash flows as of August 31, 1994 (the "Financial Statements").
The Financial Statements fairly present the financial condition and results of
operations of the Company as of the date and during the period indicated
therein.

6.7 Governmental Consents. Except as listed on
Schedule B, no consent, approval, order, or authorization of, or registration,
qualification, designation, declaration or filing with, any United States
federal, state or local governmental

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<PAGE> 8
authority on the part of the Company is required in connection with the
consummation of the transactions contemplated by this Agreement.

6.8 Litigation. Except as described on Schedule B
hereto, (a) there is no action, suit, proceeding, or investigation pending or to
the Company's knowledge currently threatened against the Company (nor, to the
Company's knowledge, is there any reasonable basis therefor) which questions the
validity of this Agreement, the Notes, the Warrants, the Amendment to Rights
Agreement or the Security Agreement, or the right of the Company to enter into
such agreements or instruments, or to consummate the transactions contemplated
hereby or thereby, or which would, if adversely determined, result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs, or prospects of the Company, financially or otherwise, or
any change in the current equity ownership of the Company, including, without
limitation, actions pending or threatened involving the prior employment of any
of the Company's employees, their use in connection with the Company's business
of any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers; (b)
the Company is not a party or subject to the provisions of any order, writ,
injunction, judgment, or decree of any court or government agency or
instrumentality; and (c) there is no action, suit, proceeding or investigation
by the Company currently pending or which the Company intends to initiate.

6.9 Patents and Trademarks. The Company has
sufficient title and ownership, or other rights to, all patents, trademarks,
service marks, trade names, copyrights, trade secrets, information, proprietary
rights, and processes necessary for its business as now conducted. Except as
shown on Schedule B, there are no outstanding options, licenses, or agreements
of any kind relating to the foregoing, nor is the Company bound by or a party to
any options, licenses, or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights, and processes of any other person or entity.
The Company has not received any communications or claims alleging that the
Company has violated or, by conducting its business as proposed, would violate,
any of the patents, trademarks, service marks, trade names, copyrights, or trade
secrets or other proprietary rights of any other person or entity.

6.10 Compliance with Other Instruments. Except as
noted in Schedule B hereto, the Company is not in violation or default of any
provisions of its Certificate of Incorporation or Bylaws or of any instrument,
judgment, order, writ, decree, or contract to which it is a party or by which it
is bound or, to its knowledge, of any provision of federal or state statute,
rule or regulation, license, or permit applicable to the Company, the

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<PAGE> 9

violation or default of which would have a material adverse effect on the
Company. The execution, delivery, and performance of this Agreement, the Notes,
the Security Agreement, the Warrants and the Amendment to Rights Agreement and
the consummation of the transactions contemplated hereby and thereby will not
result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree, or contract or an
event which results in the creation of any lien, charge, or encumbrance upon
any assets of the Company. The Company does not have any knowledge of any
termination or material breach or anticipated termination or material breach by
the other parties to any material contract or commitment to which it is a party
or to which any of its assets is subject.

7. Representations and Warranties of the Purchasers. Each
Purchaser severally, but not jointly, hereby represents and warrants to the
Company that:

7.1 Authorization. Each of this Agreement, the
Security Agreement and the Rights Agreement (as amended) has been duly executed
and delivered by such Purchaser and constitutes the Purchaser's valid and
legally binding obligations, enforceable in accordance with their terms. Each
Purchaser represents that he or it has full power and authority to enter into
this Agreement, the Security Agreement and the Rights Agreement.

7.2 Purchase Entirely for Own Account. The Note and
the Warrant to be received by such Purchaser pursuant to the terms hereof and
the Common Stock issuable upon exercise of the Warrant (collectively, the
"Securities") will be acquired for investment for such Purchaser's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and such Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the same.

7.3 Restricted Securities. Such Purchaser understands
that the Securities he or it is receiving hereunder are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act"), only in certain limited circumstances.

7.4 Accredited Purchaser Status. Each Purchaser
represents and warrants that he or it is an "Accredited Investor" within the
meaning of Rule 501(a) of Regulation D, promulgated under the Act.

7.5 Overseas Purchasers. If such Purchaser's
principal address as set forth on Schedule A is a location

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<PAGE> 10

outside of the United States of America and its territories, and such Purchaser
is not an Accredited Investor, such Purchaser (an "Overseas Purchaser"):

(a) is not a U.S. person (as defined in
Securities Act Rule 902(o)) and is not acquiring the Note or the Warrant
hereunder for the account or benefit of any U.S. person;

(b) will resell the Note or the Warrant (or
Common Stock issued upon exercise of the Warrant) acquired hereunder only (i) in
accordance with the provisions of Regulation S promulgated under the Securities
Act (ii) pursuant to an effective registration statement under the Securities
Act, or (iii) pursuant to an available exemption from registration under the
Securities Act, and only in compliance with the terms and provisions of this
Agreement;

(c) will not offer or sell the Note or the
Warrant (or Common Stock issuable upon exercise of the Warrant) acquired
hereunder to a U.S. person or to or for the account or benefit of a U.S. person
prior to the expiration of the one-year period after the date of the Closing at
which such Purchaser acquired such Note or Warrant.

7.6 Further Limitations on Disposition. Without in
any way limiting the representations set forth above, such Purchaser further
agrees not to make any disposition of the Note or the Warrant (or the Common
Stock issuable upon the exercise of the Warrant) unless there is then in effect
a registration statement under the Act covering such proposed disposition and
such disposition is made in accordance with such registration statement; or such
Purchaser shall have notified the Company of the proposed disposition and shall
have furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and, if reasonably requested by the Company, such
Purchaser shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of such shares under the Act. It is agreed that the Company will
not require opinions of counsel for transactions made pursuant to Rule 144
except if reasonably requested by the Company.

7.7 Legends. It is understood that the Notes and the
Warrants may bear one or all of the following legends:

(a) "THESE SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 PROMULGATED UNDER SUCH ACT."

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<PAGE> 11

(b) Any legend required by the laws of the
State of Delaware or applicable state securities laws.

8. Conditions of Purchaser's Obligations at Closing. The
obligations of each Purchaser under subsection 1.1(b) of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions, the waiver of which shall not be effective against any Purchaser who
does not consent in writing thereto:

8.1 Representations and Warranties. The represen-
tations and warranties of the Company contained in Section 6 shall be true on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of the date of the Closing.

8.2 Performance. The Company shall have performed and
complied with all agreements, obligations, and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.

8.3 Compliance Certificate. The President or
Treasurer of the Company shall deliver to each Purchaser who so requests at the
Closing a certificate certifying that the relevant conditions specified in
Sections 8.1 and 8.2 have been fulfilled.

8.4 Secretary's Certificate. The Secretary of the
Company shall deliver to each Purchaser who so requests at the Closing a
certificate certifying: (a) that attached thereto is a true and complete copy of
the Bylaws of the Company as then in effect; (b) that attached thereto is a true
and complete copy of all resolutions adopted by the Board of Directors of the
Company authorizing the transactions contemplated hereby; (c) that attached to
thereto is a true and correct copy of the Company's Certificate of Incorporation
as then in effect; and (d) to the incumbency and specimen signatures of each
officer of the Company executing this Agreement and the other agreements,
instruments and certificates contemplated hereby.

8.5 Qualifications. The Company shall have obtained
all necessary Blue Sky law permits and qualifications, or secured exemptions
therefrom, required by any state for the offer and sale of the Notes and the
issuance of the Warrants (and the sale and issuance of any Common Stock issuable
upon exercise of the Warrants).

8.6 Consents and Waivers. The Company shall have
obtained any and all consents and waivers necessary or appropriate for
consummation of the transactions contemplated by this Agreement.

8.7 Rights Agreement. The Company, the Purchasers and
such parties to the Rights Agreement as are

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<PAGE> 12

required to effect amendment thereof in accordance with its terms shall have
executed and delivered the Amendment to the Rights Agreement.

8.8 Security Agreement. The Company and the
Purchasers shall have executed and delivered the Security Agreement.

9. Miscellaneous.

9.1 Survival of Warranties. The warranties,
representations, and covenants of the Company and the Purchasers contained in or
made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing and shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of the Purchasers or the
Company.

9.2 Successors and Assigns. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.

9.3 Governing Law. This Agreement shall be governed
by and construed under the laws of the State of Colorado, disregarding any
Colorado principles of conflicts of laws that would otherwise provide for the
application of the substantive laws of another jurisdiction.

9.4 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same Agreement.

9.5 Titles and Subtitles. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.

9.6 Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given upon personal delivery to the party to be notified
or four (4) days after deposit with the United States Post Office or air courier
in the case of non-U.S. Purchasers, by registered or certified mail, postage
prepaid and addressed to the party to be notified at the address indicated for
such party on the signature page hereof, or at such other address as such party
may designate by ten (10) days' advance written notice to the other parties.

-9-

<PAGE> 13

9.7 Entire Agreement; Amendments and Waivers. This
Agreement, the Notes, the Warrants and the Security Agreement constitute the
full and entire understanding and agreement between the parties with regard to
the subject matter hereof. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the debt
represented by the Notes then outstanding. Any amendment or waiver effected in
accordance with this Section 9.7 shall be binding upon each holder of any
securities acquired under this Agreement at the time outstanding (including
securities for which any such securities are exercisable), each future holder of
all such securities, and the Company.

9.8 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.

IN WITNESS WHEREOF, the parties have executed this Secured
Note and Warrant Purchase Agreement as of the date first above written.

BIOFACTORS, INC.

By: /s/ ESMOND T. GOEI
----------------------------------
Title: President
--------------------------------
Address: 1726 Cole Blvd., Suite 150
Golden, Colorado 80401
Attention: Douglas S. Zorn

-10-

<PAGE> 14

SIGNATURE PAGE TO BIOFACTORS, INC.
SECURED NOTE AND WARRANT PURCHASE AGREEMENT

Purchaser:

Purchaser: Admiral Capital Corporation,
as Trustee

Purchaser: AFRO-ASIA (DIGITAL ONE) PTE LTD.

Purchaser:

By: /s/ BRIAN BAYNES
----------------------------------------
Name: Brian Baynes
--------------------------------------
Title:
-------------------------------------
Address: 48 So Sella Street
Singapore 1545

Purchaser:

By: /s/ JOE BOYERSMITH
----------------------------------------
Name: Joe Boyersmith
--------------------------------------
Title:
-------------------------------------
Address:

Purchaser:

By: /s/ JERRY G. BRASSFIELD
----------------------------------------
Name: Jerry G. Brassfield
--------------------------------------
Title:
-------------------------------------
Address:

Purchaser:

By: /s/ WILLIAM KREHM
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address:

Purchaser:

By: /s/ GOH CHENG CHUA
----------------------------------------
Name: Goh Cheng Chua
--------------------------------------
Title:
-------------------------------------
Address: 137 Sunset Way
#07-21 Gatehouse
Singapore 2159

Purchaser:

By: /s/ ESMOND T. GOEI
----------------------------------------
Name: Esmond T. Goei
--------------------------------------
Title: Self
-------------------------------------
Address: c/o BioFactors Inc.

Purchaser:

By: /s/ KAYWE TJIO
----------------------------------------
Name: Kaywe Tjio
--------------------------------------
Title: F Leonaris Trust Ltd.
-------------------------------------
Address:

Purchaser:

By:
----------------------------------------
Name: Philip Lim Seng Choong
--------------------------------------
Title:
-------------------------------------
Address: 39 Lorong Chong Knoon Lin 2
68000 Ampang
Selangor
Malaysia

Purchaser:

By: /s/ DAVIDS NAGELBERG/RONALD I. HELLER
----------------------------------------
Name: Davids Nagelberg/Ronald I. Heller
--------------------------------------
Title: Partners
-------------------------------------
Address: 7 Ethan Allen Court
Orangeburg, NY 10962

Purchaser:

By: /s/ E. STANTON MCKEE
----------------------------------------
Name: E. Stanton McKee
--------------------------------------
Title:
-------------------------------------
Address: 1225 Godetia Dr.
Woodside, CA 94062

Purchaser:

By: /s/ CATHERINE KNOLL MILBURN
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address:

Purchaser:

By: /s/ MICHAEL E. MYERS
----------------------------------------
Name: Michael E. Myers
--------------------------------------
Title: VP Product Management & Development
-------------------------------------
Address:

Purchaser:
For and on behalf of Proto Company Limited

By: /s/ MICHEAL H. HORNE
----------------------------------------
Name: Micheal H. Horne
--------------------------------------
Title: Authorised Signatory
-------------------------------------
Address: 1601 Wing On Centre
111 Connaught Road
Central
Hong Kong

Purchaser:

By: /s/ SOON KIAN LEE
----------------------------------------
Name: Soon Kian Lee
--------------------------------------
Title:
-------------------------------------
Address:

Purchaser:

By: /s/ MICHAEL TAN KIAH TECK
----------------------------------------
Name: Michael Tan Kiah Teck
--------------------------------------
Title:
-------------------------------------
Address:

Purchaser: Walnut Capital Corp.

By: /s/ BURTON W. KANTER
----------------------------------------
Name: Burton W. Kanter
--------------------------------------
Title: President
-------------------------------------
Address:

Purchaser:

By: /s/ TERRY D. WATSON
----------------------------------------
Name: Terry D. Watson
--------------------------------------
Title:
-------------------------------------
Address: 129 Hason Ct.
Boulder, CO 90301

Purchaser:

By: /s/ RICHARD H. WILLIAMS
----------------------------------------
Name: Richard H. Williams
--------------------------------------
Title:
-------------------------------------
Address: P.O. Box 4281
721 Incline Village, NV 89450

Purchaser:

By: /s/ R. H. WILLIAMS
----------------------------------------
Name: R. H. Williams
--------------------------------------
Title:
-------------------------------------
Address: P.O. Box 4281
721 Indine Village, NV 89450

Purchaser:

By: /s/ LAURENCE ZAYU MOH
----------------------------------------
Name: Laurence Zayu Moh
--------------------------------------
Title: Director
-------------------------------------
Address:

Purchaser:

By: /s/ DOUGLAS S. ZORN
----------------------------------------
Name: Douglas S. Zorn
--------------------------------------
Title: Self
-------------------------------------
Address: 33 Golden Eagle Ln.
Littleton, CO 80127

Purchaser:

By: /s/ GEORGE F. WINDSOR
----------------------------------------
Name: George F. Windsor
--------------------------------------
Title: Lawyer
-------------------------------------
Address: 101-111 Prince of Wales Drive
Ottowa ON KZC3TZ
Canada

-11-

<PAGE> 15

Schedule A

SCHEDULE OF PURCHASERS

NO. OF SHARES
PRINCIPAL FOR WHICH
NAME OF AMOUNT OF PURCHASE WARRANT
PURCHASER NOTE PRICE EXERCISABLE
- --------- ---- ----- -----------

SA-1

<PAGE> 16

FIRST AMENDMENT TO SECURED NOTE
AND WARRANT PURCHASE AGREEMENT

This First Amendment to Secured Note and Warrant Purchase
Agreement (this "Amendment") is entered into as of this ___ day of July, 1995,
by and among BioFactors, Inc., a Delaware corporation (the "Company") and the
parties named on the signature pages hereto (all of such parties other than the
Company, collectively, the "Majority Noteholders").

WHEREAS, the Majority Noteholders are holders of Secured
Promissory Notes ("Notes") and warrants to purchase the Company's Common Stock
(the "Warrants") issued pursuant to that certain Secured Note and Warrant
Purchase Agreement (the "Note Agreement") dated as of December 1, 1994, by and
among the Company and the Purchasers named on Schedule 1 thereto, and,
collectively, are the holders of Notes representing in excess of fifty percent
of the aggregate principal amount of all the Notes outstanding as of the date
hereof;

WHEREAS, the Company has entered into a Subscription Agreement
of even date by and among the Company and certain parties (the "New
Noteholders") providing for the purchase of the Company's units (the "Units"),
each Unit consisting of $50,000 secured promissory note of the Company (a "New
Note" and collectively, the "New Notes") and a warrant to purchase 50,000 shares
of the Company's Common Stock (a "Warrant" and collectively the "Warrants") (the
offering and sale of such Unites being hereinafter referred to as the "Bridge
Financing");

WHEREAS, in order to induce the New Noteholders to purchase
the Units and as a condition precedent to such purchases, the Company is
required to enter into this Amendment providing for the extension of the
maturity of the Notes; and

WHEREAS, the Company and the Majority Noteholders desire to
amend the Note Agreement to provide for an extension of the maturity date of the
Notes it being acknowledged that the closing of the Bridge financing will be of
substantial benefit to the Company and the Majority Noteholders;

NOW THEREFORE, the parties hereby agree as follows:

1. Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings given such terms in the Note Agreement.

2. Amendment.

(a) Effective immediately prior to the closing of the
Bridge Financing, pursuant to Section 9.7 of the Note Agreement, Section 2 of
the Note Agreement is amended in its entirety to read as follows:

<PAGE> 17

"The Notes shall mature and become due and payable as follows:
(i) all accrued and unpaid interest shall be due and payable
upon the closing of the Bridge Financing (as defined herein)
and (ii) fifty percent (50%) of the original principal amount
shall be due and payable together with accrued interest on
April 15, 1996 and the remaining fifty percent (50%) shall
be due and payable, together with accrued interest, on
August 15, 1996."

(b) Effective immediately prior to the closing of the
Bridge Financing, pursuant to Section 9.7 of the Note Agreement, each of the
Notes is hereby amended by substituting the following for the first sentence of
the second paragraph of each of the Notes:

"Principal and accrued interest under this Note shall be due
and payable as follows: (i) all accrued and unpaid interest
hereunder shall be due and payable upon the closing of the
Company's secured bridge note offering, described in that
certain Term Sheet dated July 17, 1995; (ii) fifty percent
(50%) of the original principal amount hereunder shall be due
and payable together with accrued interest, on April 15, 1996,
and the remaining fifty percent (50%) of the original
principal amount hereunder shall be due and payable, together
with accrued interest, on August 15, 1996."

(c) It shall be a condition subsequent to the
effectiveness of the foregoing amendments that all interest accrued to the date
of closing of the Bridge Financing on the Notes shall be paid in full within
five (5) business days after such closing.

3. Conversion. Effective immediately prior to the Closing of
the Bridge Financing, each of the Warrants shall be cancelled, and the Company
shall issue to each holder of Notes a new warrant substantially in the form of
Exhibit A hereto and exercisable for one (1) share of the Company's Common Stock
for each One Dollar in original principal amount of the Notes held by such
holder.

4. Consent to Bigelow Transaction. The Majority Noteholders
hereby consent to (i) the Company's license of certain of its technology to
Bigelow Ventures, Inc., substantially on the terms set forth in the letter of
intent dated July 14, 1995, a copy of which has been provided to each of the
undersigned Majority Noteholders, and (iii) the Company's execution, delivery
and performance of definitive agreements effecting such letter of intent.

5. Miscellaneous.

(a) Construction of Waiver. The Note Agreement shall
be deemed amended only to the extent set forth herein and remains in full force
and effect.

(b) Counterparts. This Amendment may be executed in
any number of counterparts, each of which when so executed and delivered shall
be an original, but all of which together shall constitute one and the same
instrument.

-2-

<PAGE> 18

IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Secured Note and Warrant Purchase Agreement to be duly executed as
of the day and year first above written.

BIOFACTORS, INC.

By: /s/ ESMOND T. GOEI
-----------------------------------------
Title: President and CEO
--------------------------------------

-3-

<PAGE> 19

SIGNATURE PAGE TO THE
FIRST AMENDMENT TO SECURED NOTE AND WARRANT PURCHASE AGREEMENT

------------------------------
(Name of Noteholder)

By:
---------------------------
Name:
-------------------------
Title:
------------------------
Investors who signed:

/s/ George F. Adam, Jr.
/s/ Afro-Asia (Digital One) Pte. Ltd.
by Tan Chin Hoon, Director
/s/ Brian Baynes
/s/ Jerry G. Brassfield
/s/ William H. Brehm
/s/ Joseph Boyersmith
/s/ Chai Cheng Huan
/s/ Esmond T. Goei
/s/ Goh Cheng Chua
/s/ Jon D. Gruber
/s/ David E. Hart, Trustee of Hart
Revocable Trust
/s/ Brian Higgins
/s/ Kan Chui Peng
/s/ Leonaris Trust Ltd. by Kayloe Tjio
/s/ Lim Philip Seng Choong
/s/ E. Stanton McKee
/s/ Catherine Milburn
/s/ Soon Kian Lee
/s/ Elliot Steinberg
/s/ Michael Tan Kiah Teck
/s/ Terry D. Watson
/s/ R. H. Williams
/s/ George F. Windsor
/s/ Douglas S. Zorn
/s/ Christina Tom Lay Yan
/s/ Illegible

-4-

<PAGE> 20

AMENDMENT TO SECURED NOTE
AND WARRANT PURCHASE AGREEMENT

This Amendment to Secured Note and Warrant Purchase Agreement
(this "Amendment") is entered into as of the 1st day of December, 1995, by and
among BioFactors, Inc., a Delaware corporation (the "Company") and the parties
named on the signature pages hereto (all of such parties other than the Company,
collectively, the "Majority Noteholders") and amends that certain Secured Note
and Warrant Purchase Agreement dated as of December 1, 1994, by and among the
Company and the Purchasers named therein (the "Note Agreement").

WHEREAS, the Majority Noteholders are the holders of Secured
Promissory Notes (the "Notes") and warrants to purchase the Company's Common
Stock (the "Warrants") issued pursuant to the Note Agreement, which Notes are
secured by that certain Security Agreement dated as of December 1, 1994 by and
among the Debtor and the Secured Parties named therein (the "Security
Agreement"), and, collectively, are the holders of Notes representing in excess
of fifty percent of the aggregate principal amount of all the Notes outstanding
as of the date hereof and, as such, being "Majority Secured Parties" pursuant to
Section 2 of the Security Agreement;

WHEREAS, the Company has entered into a Secured Note and Stock
Purchase Agreement of even date herewith, by and among the Company and the
Purchasers named therein (the "Bridge Noteholders") providing for the purchase
of the Company's secured promissory notes in an original principal amount of
$350,000 (the "Bridge Notes") and 35,000 shares of the Company's common stock,
$0.01 par value per share (the "Bridge Shares") (the offering and sale of such
Bridge Notes and Bridge Shares being hereinafter referred to as the "Bridge
Financing");

WHEREAS, in order to induce the Bridge Noteholders to purchase
the Bridge Notes and Bridge Shares and as a condition precedent to such
purchases, the Company is required to enter into this Amendment providing for
(i) a waiver of the current default on the Notes, (ii) the extension of the
maturity of the Notes, (iii) the consent of the Majority Noteholders to the
mandatory conversion of the Notes into the Whale Notes (as defined herein), and
(iv) the consent of the Majority Noteholders to the creation of a prior security
interest in certain collateral in favor of the Bridge Noteholders; and

WHEREAS, the Company and the Majority Noteholders desire to
waive the current default on the Notes, to amend the Note Agreement to provide
for an extension of the maturity date of the Notes, and to consent to the
creation of the security interest in favor of the Bridge Noteholders and to the
mandatory conversion of the Notes into the Whale Notes, it being acknowledged
that the closing of the Bridge Financing will be of substantial benefit to the
Company and the Majority Noteholders;

NOW THEREFORE, the parties hereby agree as follows:

1. Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings given such terms in the Note Agreement.

2. Waiver. The Majority Noteholders hereby agree to waive the
current default on the Notes and to extend the maturity date thereof as set
forth herein.

<PAGE> 21

3. Amendment. Pursuant to Section 9.7 of the Note Agreement,
Section 2 of the Note Agreement is hereby amended in its entirety to read as
follows:

"The Notes shall mature and become due and payable in full
together will all accrued interest at the close of business on
July 31, 1996."

4. Consent to Mandatory Conversion. The Majority Noteholders
hereby agree that upon the closing of a private placement (the "Whale
Transaction") of the Company's secured promissory notes (the "Whale Notes") for
which Whale Securities Co., LP is acting as placement agent, (a) all accrued
interest on the Notes shall be paid, and (b) all of the outstanding principal
amount and accrued interest on the Notes shall be converted into the Whale Notes
on the same terms and conditions as may be offered to the investors in the Whale
Transaction.

5. Consent to Prior Lien. The Majority Noteholders hereby
consent to (a) the Company's pledge and grant to the Bridge Noteholders of a
security interest in that certain Promissory Note in the original principal
amount of $950,000, dated August 30, 1995, between Bogart International
Associates, Inc., the "Maker" thereof, and the Company, and any proceeds
therefrom (the "Pledged Collateral"), and (b) the Company's execution, delivery
and performance of that certain Pledge and Security Agreement of even date
herewith, by and among the Company and the Bridge Noteholders (the "Bridge
Security Agreement"), a copy of which has been provided to each of the
undersigned Majority Noteholders; it being understood and agreed by the Company
and the Majority Noteholders that the security interest created by the Bridge
Security Agreement shall have a first and prior lien on the Pledged Collateral,
prior to the lien created by the Security Agreement.

6. Miscellaneous.

(a) Construction of Waiver. The Note Agreement shall
be deemed amended only to the extent set forth herein and remains in full force
and effect.

-2-

<PAGE> 22

IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to Secured Note and Warrant Purchase Agreement to be duly executed as
of the day and year first above written.

BIOFACTORS, INC.

By: /s/ ESMOND T. GOEI
---------------------------
Title: President
------------------------

-3-

<PAGE> 23

SIGNATURE PAGE TO THE
AMENDMENT TO SECURED NOTE AND WARRANT PURCHASE AGREEMENT

------------------------------
(Name of Noteholder)

By:
---------------------------
Name:
-------------------------
Title:
------------------------

/s/ George F. Adam, Jr.
/s/ Admiral Capital Corporation as
Trustee by Gary L. Nemetz,
President
/s/ Afro-Asia (Digital One) Pte. Ltd.
by Tan Chin Hoon, Director
/s/ Brian Baynes
/s/ Joseph Boyersmith
/s/ Jerry G. Brassfield
/s/ William H. Brehm
/s/ Chai Cheng Huan
/s/ Esmond T. Goei
/s/ Goh Cheng Chua
/s/ David E. Hart, Trustee of the
Hart Revocable Trust
/s/ Leonaris Trust Ltd.
by Kayloe Tjio, Director
/s/ Philip Lim Seng Choong
/s/ E. Stanton McKee
/s/ Catherine Milburn
/s/ Michael E. Myers
/s/ Soon Kian Lee
/s/ Michael Tan Kiah Teck
/s/ Terry D. Watson
/s/ R. H. Williams
/s/ Zayucel Ltd. by Laurence Zayu
Moh, Director
/s/ Douglas S. Zorn

-4-

<PAGE> 24

THIRD AMENDMENT TO SECURED NOTE
AND WARRANT PURCHASE AGREEMENT

THIS THIRD AMENDMENT TO SECURED NOTE AND WARRANT PURCHASE
AGREEMENT (this "Amendment") is entered into as of the 1st day of March, 1996,
by and among BioFactors, Inc., a Delaware corporation (the "Company") and the
parties named on the signature pages hereto (all of such parties other than the
Company, collectively, the "Majority Noteholders") and amends that certain
Secured Note and Warrant Purchase Agreement dated as of December 1, 1994, by and
among the Company and the Purchasers named therein, as such agreement has from
time to time been amended (as amended, the "Note Agreement").

WHEREAS, the Majority Noteholders are the holders of the
Secured Promissory Notes (the "Notes") and warrants to purchase the Company's
Common Stock (the "Warrants") issued pursuant to the Note Agreement, and,
collectively, are the holders of Notes representing in excess of fifty percent
of the aggregate principal amount of all the Notes outstanding as of the date
hereof and, pursuant to Section 9.7 of the Note Agreement can bind each holder
of Notes or Warrants outstanding as of the date of this Amendment;

WHEREAS, the Company has entered into a letter of intent with
Joseph Stevens & Company, L.P. ("Joseph Stevens"), providing for the placement
by Joseph Stevens of certain bridge notes to be issued by the Company (the
"Joseph Stevens Bridge") and the underwriting of the Company's IPO (as defined
herein) (together, the"Underwriting");

WHEREAS, as a condition precedent to the Underwriting, the
Company is required to enter into this Amendment providing for the consent of
the Majority Noteholders to (a) the mandatory partial conversion of the Notes
into Common Stock, (b) the waiver of certain Warrant adjustments and (c) certain
other amendments to the Note Agreement; and

WHEREAS, the Company and the Majority Noteholders desire to
enter into this Amendment, it being acknowledged that the Underwriting will be
of substantial benefit to the Company and the Majority Noteholders.

NOW THEREFORE, in consideration of the above and the following
mutual covenants and consideration, the parties hereby agree as follows:

1. Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings given such terms in the Note Agreement.

2. Maturity Date Extension. The Majority Noteholders hereby
agree to amend Section 2 of the Note Agreement to extend the maturity date of
the Notes to the earlier of (i) April 1, 1997 or (ii) a date one year after the
closing of the Joseph Stevens Bridge.

<PAGE> 25

3. Waiver and Termination. The Majority Noteholders hereby
agree to waive: (i) defaults, if any, on the Notes occurring prior to the Date
hereof; and (ii) Warrant adjustments, if any, pursuant to Section 3.2 of the
Note Agreement arising from any issuances of securities by the Company through
the date hereof. In addition, the Note Agreement is hereby amended by deleting
Section 3.2 in its entirety.

4. Principal Payment. The Company hereby agrees that upon the
closing of the underwritten initial public offering of the Company's securities
under the Securities Act of 1933 resulting in gross proceeds of at least
$5,000,000 (the "IPO"), the Company shall pay to the holders of the Notes all
accrued interest thereon and an aggregate amount of Four Hundred Fifty Thousand
Dollars ($450,000) of the outstanding principal thereof, such principal amount
to be paid pro rata in proportion to the respective outstanding principal
amounts of the Notes.

5. Conversion, Shares, Registration.

a. Consent to Mandatory Conversion. The Majority
Noteholders hereby agree that, upon the closing of the IPO, the remaining
aggregate outstanding principal of the Notes (Three Hundred Thousand Dollars
($300,000)) shall be automatically converted into Common Stock of the Company,
$0.01 par value per share (the "Common Stock") at a conversion price equal to
the price at which the Company's Common Stock is sold to the public in the IPO.

b. Issuance of Additional Shares. The Company hereby
agrees that upon the closing of the IPO, and the conversion of the Notes
pursuant to Section 5(a) hereof, the Company shall, for no additional
consideration, issue and deliver to each holder of Notes, two-tenths (0.2) of a
fully paid and nonassessable share (subject to adjustment for stock splits and
combinations affecting such shares) of its Common Stock for each One Dollar
($1.00) in original principal amount of such holder's Notes.

c. Registration, Lockup. Each of the holders of the
Notes shall be entitled to receive a certificate representing that number of
fully-paid and non-assessable shares of the Company's Common Stock issued
pursuant to Section 5(a) and (b) hereof upon surrender or delivery to the
Company of (i) such Note, accompanied by a proper assignment thereof to the
Company or in blank, (ii) surrender of such holder's Warrant, accompanied by
such an assignment, (iii) execution and delivery of a counterpart of a
Subscription and Registration Rights Agreement, in the form attached as EXHIBIT
A hereto, which provides for customary piggyback registration rights for the
shares of Company Common Stock issued pursuant to Sections 5 and 6 hereof, as
well as a "lockup" of the holder's shares of Common Stock and such other
provisions required by the underwriters of the Company's IPO (iv) a duly
executed U.C.C. termination statement terminating such holder's security
interest in the Company's assets, and (v) such other documents or instruments as
may reasonably be requested by the Company. No fractional shares of Common Stock
shall so be issued. Instead, the number of shares of Common Stock otherwise
issuable will be rounded up to the next whole share.

-2-

<PAGE> 26

6. Construction of Waiver. The Note Agreement shall be deemed
amended only to the extent set forth herein and remains in full force and
effect.

Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this THIRD
AMENDMENT TO SECURED NOTE AND WARRANT PURCHASE AGREEMENT to be duly executed as
of the day and year first above written.

BIOFACTORS, INC.

By: /s/ ESMOND T. GOEI
---------------------------
Title: PRESIDENT AND CEO
------------------------

-3-

<PAGE> 27

SIGNATURE PAGE TO THE THIRD AMENDMENT TO
SECURED NOTE AND WARRANT PURCHASE AGREEMENT

------------------------------
(Name of Noteholder)

By:
---------------------------
Name:
-------------------------
Title:
------------------------

/s/ George F. Adam, Jr.
/s/ Admiral Capital Corporation By
Gary L. Nemetz, President
/s/ Afro-Asia (Digital One) Pte. Ltd.
by Tan Chin Hoon, Director
/s/ Brian Baynes
/s/ Joe Boyersmith
/s/ Jerry G. Brassfield
/s/ William H. Brehm
/s/ Chai Cheng Huan
/s/ Esmond T. Goei
/s/ David E. Hart, Trustee of the Hart
Revocable Trust
/s/ Leonaris Trust Ltd.
by Kayloe Tjio, Director
/s/ Philip Lim Seng Choong
/s/ Catherine Milburn
/s/ Soon Kian Lee
/s/ Michael Tan Kiah Teck
/s/ Terry D. Watson
/s/ R. H. Williams
/s/ George F. Windsor
/s/ Douglas S. Zorn

-4-

<PAGE> 28

BIOFACTORS, INC.
FOURTH AMENDMENT TO
SECURED NOTE AND WARRANT PURCHASE AGREEMENT

THIS FOURTH AMENDMENT TO SECURED NOTE AND WARRANT PURCHASE
AGREEMENT (this "Amendment") is entered into as of the 1st day of October, 1996,
by and among BioFactors, Inc., a Delaware corporation ("BioFactors" or the
"Company") and the parties named on the signature pages hereto (all of such
parties other than the Company, collectively, the "Majority Holders") and amends
that certain Secured Note and Warrant Purchase Agreement dated as of December 1,
1994, by and among the Company and the Purchasers named therein, as previously
amended (the "Note Agreement").

RECITALS

WHEREAS, the Majority Holders are the holders of secured
promissory notes of the Company (the "Notes") and shares (the "Shares") of
common stock of the Company (the "Common Stock"), $0.01 par value per share,
issued pursuant to the Note Agreement and, collectively, are the holders of
Notes representing in excess of fifty percent of the aggregate principal amount
of all the Notes outstanding as of the date hereof and, pursuant to Section 9.7
of the Note Agreement, can bind each holder of Notes or Shares outstanding as of
the date of this Agreement;

WHEREAS, the Company has entered into a letter of intent with
Chatfield Dean & Co. ("Chatfield Dean"), providing for underwriting and
financial advisory services (the "Underwriting");

WHEREAS, as a condition precedent to the Underwriting, the
Company is required to enter into a definitive agreement with Voice Plus, Inc.,
a California corporation ("Voice Plus"), for the formation of a holding company
("Registrant") and the merger of each of BioFactors (the "BFI Merger") and Voice
Plus with and into separate, wholly-owned subsidiaries of Registrant,
concurrently with Chatfield Dean's Underwriting of the initial public offering
of Registrant's securities pursuant to a registration statement filed under the
Securities Act of 1933 (the "IPO");

WHEREAS, upon the consummation of the BFI Merger, the
Company's stockholders, including the Majority Holders, are to receive shares of
common stock of Registrant ("Registrant Common Stock") in exchange for the
BioFactors Common Stock held by them in a three-for-four (three shares of
Registrant Common Stock for every four shares of BioFactors Common Stock)
conversion, or such other ratio as Chatfield Dean may determine is necessary;

WHEREAS, as a further condition precedent to the Underwriting,
the Company is required to enter into agreements amending the terms of
outstanding securities including, in particular, this Amendment providing for
the consent of the Majority Holders (a) to effect the mandatory conversion at
the IPO of all of the outstanding principal of and accrued interest on the Notes
into Registrant Common Stock, (b) to amend and coordinate the registration
rights granted in connection with the Shares and certain other shares of its
Common Stock and securities convertible into or exercisable for its Common
Stock, and (c) to effect certain other amendments to the Note Agreement;

WHEREAS, as consideration for the agreements herein, the
Company will cause Registrant to issue warrants to holders of the Notes; and

<PAGE> 29

WHEREAS, the Company and the Majority Holders desire to enter
into this Amendment to facilitate the Underwriting, it being acknowledged that
the Underwriting will be of substantial benefit to the Company and to the
Majority Holders.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the
following mutual covenants and agreements, the parties hereby agree as follows:

1. Definitions.

a. "Shares" shall mean the shares of Company Common
Stock issued pursuant to Section 5.b of the Third Amendment to the Secured Note
and Warrant Purchase Agreement dated as of March 1, 1996 by and among the
Company and the Majority Noteholders named therein (the "Third Amendment").

b. All capitalized terms used herein and not
otherwise defined shall have the meanings given such terms in the Note
Agreement.

2. Amendments. The Majority Holders hereby agree to amend the
Note Agreement as follows:

a. Warrants. Section 3 is hereby deleted in its
entirety, it being understood and acknowledged by the parties hereto that the
Purchasers agreed pursuant to the Third Amendment to cancel the Warrants, that
the Shares were issued in June 1996 and, accordingly, that the Warrants were
cancelled at that time.

b. Automatic Conversion. Section 5.a of the Third
Amendment is hereby deleted and superseded in its entirety. A new Section 3 is
hereby added to the Note Agreement, as follows:

"3. Automatic Conversion upon IPO. In the event the IPO
(defined below) is consummated prior to the maturity date set
forth in Section 2, the outstanding principal amount of the
Notes and all accrued interest thereon, calculated through the
IPO closing date, shall be converted into common stock of
Registrant (defined below) at a conversion price equal to the
price per share to the public in the IPO (the "IPO Price"). In
connection with such conversion, no fractional shares of
common stock shall be issued; instead, the number of shares of
common stock otherwise issuable will be rounded up to the next
whole share."

c. Registration Rights. Sections 5.b and 5.c of the
Third Amendment and Addendum A (which set forth the former registration rights)
are hereby deleted and superseded in their entirety. Section 5 of the Note
Agreement is hereby amended in its entirety, as follows:

"5. Planned Initial Public Offering; Registration Rights.

(a) The term "IPO" as used herein shall mean the
proposed initial public offering of the Company's securities,
or the securities of a

-2-

<PAGE> 30

holding company formed to hold the capital stock of
BioFactors (such entity, whether the Company or a holding
company, being referred to herein as, the "Registrant"),
pursuant to an effective registration statement filed under
the Securities Act of 1933, as amended. The undersigned
understands and agrees that there can be no assurances that a
registration statement will be filed or, if filed, will be
declared effective by the Securities and Exchange Commission
(the "Commission") or, if the registration statement is
declared effective by the Commission, that the Registrant
will be able to consummate such IPO.

(b) Registration Rights. Upon the execution of the
Registration Rights Agreement, substantially in the form
attached hereto as EXHIBIT B (the "Rights Agreement"), the
Purchasers will become parties to the Rights Agreement and the
Shares, and any shares of common stock issuable upon the
exercise or conversion of any securities issued pursuant to
this Agreement, shall become subject thereto."

3. Automatic Conversion. The Majority Holders hereby consent
to the automatic conversion upon the consummation of the IPO of the outstanding
principal amount of and all accrued interest on the Notes, at a conversion price
and calculated as set forth in Section 3 of the Note Agreement as amended
hereby, into Registrant Common Stock.

4. Issuance of New Warrants. In consideration of the
agreements herein, the Company hereby agrees that, upon the closing of the IPO
and the conversion of the principal of and all accrued interest on the Notes,
the Company shall, for no additional monetary consideration, cause the
Registrant to issue and deliver to each holder of Notes, a warrant to purchase
fifty (50) shares of Registrant Common Stock for each One Thousand Dollars
($1,000) in original principal amount of such holder's Notes at an exercise
price equal to 120% of the IPO Price (the "New Warrants").

5. Proxy. The undersigned hereby irrevocably appoints Esmond
Goei as the undersigned's attorney and proxy, with full power of substitution,
to vote or to consent in writing in lieu of a vote or meeting with respect to
all of the Shares held by the undersigned which the undersigned is entitled to
vote at any meeting of stockholders (whether annual or special and whether or
not an adjourned meeting) of the Company, or pursuant to written action taken in
lieu of any such meeting or otherwise, in such manner as to cause the BFI Merger
and any agreement effecting the BFI Merger to be approved. This proxy is
irrevocable, is coupled with an interest sufficient in law to support an
irrevocable proxy and is granted in consideration of and as an inducement to
cause the Company to issue the New Warrants. In connection with giving this
proxy, the undersigned understands and agrees that the BFI Merger effectively
will cause a reverse split of the Company's capital stock in that every four (4)
shares of BioFactors Common Stock issued and outstanding or held in treasury
immediately prior to the effective time of the BFI Merger shall, automatically
and without any action of the part of the respective holders thereof, be
converted into approximately three (3) shares of common stock of Registrant (or
such other number of shares as Chatfield Dean and the Company shall determine).

6. Construction of Waiver. The Note Agreement shall be deemed
amended only to the extent set forth herein and remains in full force and
effect.

-3-

<PAGE> 31

7. Counterparts. This Amendment may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument.

[The remainder of this page intentionally left blank.]

-4-

<PAGE> 32

IN WITNESS WHEREOF, the parties hereto have caused this FOURTH
AMENDMENT TO SECURED NOTE AND WARRANT PURCHASE AGREEMENT to be duly executed as
of the day and year first above written.

BIOFACTORS, INC.

By: /s/ ESMOND T. GOEI
--------------------------------

Title: President and CEO
-----------------------------

HOLDER:

-----------------------------------
(Signature)

-----------------------------------
(Print Name)

/s/ George F. Adam
/s/ Admiral Capital Corporation by Gary
L. Nemetz, President
/s/ Afro-Asia (Digital One) Pte. Ltd. by
Tan Chin Hoon, Director
/s/ Joseph Boyersmith
/s/ Jerry G. Brassfield
/s/ Chai Cheng Huan
/s/ Esmond T. Goei
/s/ Jon D. Gruber
/s/ David E. Hart, Trustee
/s/ Brian Higgins
/s/ Philip Lim
/s/ Catherine Milburn
/s/ Laurence Zayu Moh
/s/ Michael Tan Kiah Teck
/s/ Terry D. Watson
/s/ R. H. Williams
/s/ Douglas S. Zorn

-5-

<PAGE> 33

AMENDED AND RESTATED SECURITY AGREEMENT

This AMENDED AND RESTATED SECURITY AGREEMENT (this
"Agreement") is entered into as of the day of July, 1995, by and among
BIOFACTORS, INC., a Delaware corporation, having its principal offices at 1746
Cole Blvd., Suite 265, Golden, Colorado 80401 (the "Debtor"), the parties
identified on Schedule A (the "Existing Holders") and the parties identified on
Schedule B hereto (the "New Holders") (each party identified on Schedule A and
Schedule B, as such Schedules may be amended from time to time, being,
individually, a "Secured Party" and, collectively, the "Secured Parties").
Unless otherwise provided, defined terms shall have the meanings given in the
Subscription Agreement.

RECITALS

A. The Debtor has entered into a Subscription Agreement of
even date herewith (the "Subscription Agreement"), by and among the Debtor and
the Purchasers as named therein (herein referred to as the "New Holders")
providing, subject to the terms and conditions thereof, for the purchase and
sale of the Company's Units, (consisting of a Note and a Warrant as defined in
the Subscription Agreement).

B. The Debtor entered into a Secured Note and Warrant Purchase
Agreement dated as of December 1, 1994, by and among the Debtor and the Existing
Holders (the "Existing Note Agreement") providing for the purchase and sale of
the Debtors secured promissory notes (the "Existing Notes"). The Existing
Notes are secured by a Security Agreement dated as of December 1, 1994, by and
between the Debtor and the Existing Holders (the "Existing Security
Agreement") to secure the payment of all of the Debtor's indebtedness and
performance of all of the Debtor's obligations under the Existing Note
Agreement and the Existing Notes.

C. In order to induce the New Holders to purchase the Units,
and as a condition precedent to such purchases, the Company is required to enter
into this Agreement with the Existing Holders amending certain provisions of the
Existing Security Agreement and adding the New Holders as parties thereto.

NOW, THEREFORE, in consideration of the foregoing and of the
following mutual covenants and agreements, the Existing Holders and the Debtor
hereby modify, supersede, amend in its entirety and restate the Existing
Security Agreement as provided herein, it being understood and agreed by the
Company, the Existing Holders and the New Holders that the obligations of the
Company under the Existing Note Agreement and the Existing Security Agreement on
the date hereof are continuing obligations, and that the security interests
established pursuant to the Existing Security

-1-
<PAGE> 34
Agreement are continuing security interests and shall not be terminated hereby
or modified except as expressly provided herein or in documents or instruments
executed and delivered pursuant hereto and thereto; and, in consideration of
the foregoing and the following mutual covenants and agreements, the New
Holders and the Company hereby agree as follows:

AGREEMENT

1. Security Interest. Debtor hereby grants to the Secured
Parties a security interest in the following personal property of the Debtor,
wherever located, whether such property is now owned or existing or is hereafter
acquired or arising, and any and all additions, substitutions, accessions,
proceeds and products thereto and thereof (the "Collateral"):

(a) all accounts, contract rights and chattel paper
(as such terms are defined in the Uniform Commercial Code, C.R.S. Section
4-1-101 et seq. (the "U.C.C."); and

(b) all inventory (including raw materials, work in
process and finished goods); and

(c) all tangible and intangible personal property and
fixtures (including goods, machinery, equipment, motor vehicles, furniture and
fixtures), documents, instruments, and general intangibles (as such terms are
defined in the U.C.C.); and

(d) all goodwill, trade secrets, computer programs,
customer lists, trade names, trademarks and patents, all books and records
relating to the conduct of Debtor's business, including, without limitation,
those relating to accounts, and all deposit accounts maintained by the Debtor
with any bank, trust company, investment firm or fund, or any similar
institution or organization, and all tax refunds of every kind and nature.

2. Continuing Security Interest, Priority of Lien. It is
understood and agreed by the Debtor, the Existing Holders and the New Holders
that the obligations of the Debtor owed to the Existing Holders under the
Existing Security Agreement on the date hereof are continuing obligations, that
the security interests established pursuant to the Existing Security Agreement
(the "Existing Security Interests") are continuing security interests and shall
not be terminated hereby or modified except as expressly provided herein or in
documents or instruments executed and delivered pursuant hereto, and that the
security interests of the Existing Holders in the Collateral shall be pari passu
with, and shall not be prior to, the security interests of the New Holders in
the Collateral.

-2-

<PAGE> 35

3. Majority Secured Parties. The Term "Majority Secured
Parties" shall mean, at any given time, the holders of Notes representing in
excess of fifty percent (50%) of the aggregate principal amount of the Notes
then outstanding.

4. Debtor's Covenants and Warranties. Debtor hereby warrants
and covenants that:

(a) Locations of Debtor and Collateral. The Debtor's
principal office and principal place of business is located at the Debtor's
address set forth in the preamble hereof, and the records relating to Debtor's
accounts are kept at the Debtor's address set forth in the preamble hereof. The
Collateral will be kept at the various locations listed on Schedule C hereto and
will not be removed from such locations until such time as written consent to a
change in location is obtained from the Majority Secured Parties, except that
the Debtor may move, relocate or sell inventory or other Collateral in the
ordinary course of business and certain items of equipment in non-material
amounts and for the fair market value of such items without the prior consent of
the Secured Parties.

(b) Absence of Liens. Except for the Existing
Security Interest, the security interest granted hereby and the security
interests in certain Collateral as set forth on Schedule D, Debtor is the owner
of the Collateral free from all encumbrances and will defend the Collateral
against the claims and demands of all persons other than persons holding the
liens and security interests described on Schedule D. Debtor will not pledge,
mortgage or create or suffer to exist a security interest in the Collateral,
other than purchase money security interests, in favor of any person other than
the Secured Parties.

(c) Inspections and Further Assurances. Debtor shall
at all reasonable times and from time to time allow the Representative(s) (as
defined herein) to examine or inspect the Collateral and make extracts from
Debtor's books and records and to arrange for verification of any accounts
receivable constituting Collateral under reasonable procedures, directly with
account debtors or by other methods, and shall do, make, execute and deliver all
such additional and further acts, things, deeds, assurances and instruments as
the Representative(s) may require more completely to vest in and assure to the
Secured Parties their rights hereunder or in any of the Collateral.

(d) Insurance, Use of Collateral and Payment of
Taxes. Debtor will keep the Collateral at all times insured against fire,
including so-called extended coverage, theft, and, in the case of any motor
vehicle, collision. Debtor will use the Collateral solely for business purposes,
will keep the Collateral in good order and repair, and will not use the same in
violation of law or any policy of insurance thereon. Debtor will pay promptly
when due all taxes and assessments upon the Collateral or for its use.

-3-

<PAGE> 36

5. Covenants of the Secured Parties. The Secured Parties,
jointly and severally, hereby covenant and agree that they will at all times act
in a reasonable manner with respect to the enforcement or exercise of any rights
of either or any of the Secured Parties hereunder and under the Notes and the
Subscription Agreement.

6. Representatives.

(a) Except as otherwise provided in this Agreement
and the Subscription Agreement, any action taken in furtherance or exercise of
any rights granted hereunder and under the Notes and the Subscription Agreement
will be taken by one or more, but not more than three, representatives selected
from time to time by the Majority Secured Parties (the "Representative(s)"),
who shall act on behalf of, and shall have authority to bind, all of the
Secured Parties. Whenever the appointments of two or more Representatives are
effective concurrently, any action taken, to be effective on behalf of and
binding upon the Secured Parties, shall require the joint action of at least
two of such Representatives;

(b) The Majority Secured Parties will give notice to
the Debtor of the identity and address of any Representative(s) promptly upon
their selection of such Representative(s);

(c) The appointment of any Representative(s) shall,
as to each of them, be effective until (i) any of them resigns by written notice
given to the Company and the undersigned Majority Secured Parties, (ii) any of
them is removed by Secured Parties then constituting Majority Secured Parties in
accordance with the Security Agreement, or (iii) the date on which they have
taken all actions on behalf of the Secured Parties necessary under applicable
law to release the security interest in the Collateral (as defined in the
Security Agreement), whichever first occurs;

(d) The Majority Secured Parties agree that if any
Representative resigns or is removed prior to the date referenced in Subsection
(c), they will cooperate to appoint a replacement Representative as soon
thereafter as practicable; and

(e) The Representative(s) shall incur no liability to
the Company or the Secured Parties as a result of the performance of their duty
as Representatives, except for liabilities arising out of their gross
negligence, willful acts or omissions or their material breach of the Security
Agreement or the Subscription Agreement. The Company shall indemnify and hold
the Representative(s) harmless from and against all liabilities, including
damages, expenses and attorneys' fees, arising from the performance of their
obligations as Representatives, except to the extent such liabilities arise
from their gross negligence, willful acts or omissions or their material breach
of the Security Agreement or the Subscription Agreement.

-4-

<PAGE> 37

7. Default. The occurrence of any of the following events or
conditions shall constitute an event of default ("Event of Default") hereunder
and under the Subscription Agreement and each of the Notes:

(a) the failure of Debtor to pay all outstanding
principal and accrued interest under any Note within ten (10) days after the
Maturity Date, as it may be extended in accordance with the Subscription
Agreement;

(b) any representation or warranty of the Debtor to
any Secured Party, whether contained in this Agreement, the Subscription
Agreement or any other document or instrument executed in connection with the
purchase of the Notes, proving false or erroneous in any material respect at
the time any such representation or warranty was made;

(c) loss, theft, material damage, destruction, sale
(other than inventory or other Collateral in the ordinary course of business or
in non-material amounts and for fair market value) or encumbrance of or to the
Collateral (other than purchase money security interests), or the making of any
levy thereon or seizure or attachment thereof by legal process;

(d) the institution of bankruptcy, reorganization,
liquidation, receivership or similar proceedings by or against the Debtor.

8. Rights upon Default. Upon the occurrence of an Event of
Default, the Majority Secured Parties may by written notice to the Debtor
declare all of the Obligations to be immediately due and payable, and the
Secured Parties shall then have, in addition to all other rights and remedies,
the rights and remedies of a secured party under the U.C.C., including without
limitation thereof, the right to take possession of the Collateral. Debtor will
upon demand make the Collateral available to the Representative(s) at a place
and time designated by the Representative(s) which is mutually and reasonably
convenient. The Secured Parties will give Debtor at least ten days' prior
written notice (such notice being acknowledged hereby as reasonable) at the
address set forth in the Preamble hereof (or such other address as the Debtor
shall have specified to the Secured Parties in writing) of the time and place of
any public sale of the Collateral or of the time after which any private sale
thereof is to be made. From the proceeds of the sale, the Secured Parties shall
be entitled to retain (a) its reasonable expenses of retaking, holding,
preparing for sale and selling the Collateral, including reasonable attorneys'
fees incurred by it in connection herewith, with such sale or with the
collection or enforcement of the Debt, and (b) all sums secured hereby, in such
order of preference as the Secured Parties may determine.

9. Termination. This Agreement and all covenants hereunder
shall terminate, as to each Secured Party, on the date the Obligations to such
Secured Party are paid in full. Upon such termination the Secured Parties shall
release the Collateral from the security interest granted hereby and shall take
all actions as the Debtor reasonably may request to effect and evidence such
release.

-5-

<PAGE> 38

10. Assigns. This Agreement shall be binding upon and inure to
the benefit of the respective heirs, executors, administrators, legal
representatives, successors and assigns of the parties hereto.

11. Entire Agreement; Amendment. This Agreement, the
Subscription Agreement and the Notes constitute the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof. Subject to Section 9, any term of this Agreement and the Notes
may be amended and the observance of any term hereof or thereof or any Event of
Default may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Debtor
and the Majority Secured Parties. Any amendment or waiver effected in
accordance with this Section 10 shall be binding (only as to Notes at the time
outstanding) upon each Secured Party and the Debtor.

12. Assignment. A Secured Party may transfer and assign his or
its Note (being an Existing Note in the case of the Existing Holders and a New
Note in the case of the New Holders) only in the manner set forth in the
Existing Note Agreement and the Subscription Agreement, respectively, and, upon
any such assignment, may assign such Secured Party's rights and obligations
under this Agreement to the assignee, who shall thereupon have all of the rights
and liabilities of such Secured Party.

13. Governing Law, Effect of Agreement. This Agreement and all
rights and obligations hereunder, including matters of construction, validity
and performance, shall be governed by the laws of the State of Colorado.

IN WITNESS WHEREOF, the parties hereto have executed this
Security Agreement as of the date first above written.

DEBTOR:

BIOFACTORS, INC.

By: /s/ ESMOND T. GOEI
---------------------------
Name: Esmond T. Goei
-------------------------
Title: President and CEO
------------------------

-6-

<PAGE> 39
SIGNATURE PAGE
BIOFACTORS, INC.
AMENDED AND RESTATED SECURITY AGREEMENT

SECURED PARTY:

By: /s/ George F. Adam, Jr.
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------

SECURED PARTY: AFRO-ASIA (DIGITAL ONE) PTE LTD.

By: /s/ TAN CHIN HOON
----------------------------------------
Name: Tan Chin Hoon (Director)
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ WILLIAM H. KREHM
----------------------------------------
Name: William H. Krehm
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ CHAI CHENG HUAN
----------------------------------------
Name: Chai Cheng Huan
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ ESMOND T. GOEI
----------------------------------------
Name: Esmond Goei
--------------------------------------
Title: Self
-------------------------------------

SECURED PARTY:

By: /s/ JON D. GRUBER
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ BRIAN HIGGINS
----------------------------------------
Name: Brian Higgins
--------------------------------------
Title:
-------------------------------------

SECURED PARTY: LEONARIS TRUST LTD.

By: /s/ KAYLOE TJIO
----------------------------------------
Name: Kayloe Tjio
--------------------------------------
Title: Director
-------------------------------------

SECURED PARTY:

By: /s/ PHILIP LIM SENG CHOONG
----------------------------------------
Name: Philip Lim Seng Choong
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ STAN MCKEE
----------------------------------------
Name: Stan McKee
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ CATHERINE MILBURN
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ SOON KIAN LEE
----------------------------------------
Name: Soon Kian Lee
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ ELLIOT STEINBERG
----------------------------------------
Name: Elliot Steinberg
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ CHRISTINA TAMLAY YAN
----------------------------------------
Name: Christina Tamlay Yan
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ MICHAEL TAN KIAH TECK
----------------------------------------
Name: Michael Tan Kiah Teck
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ TERRY D. WATSON
----------------------------------------
Name: Terry D. Watson
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ R. H. WILLIAMS
----------------------------------------
Name: R. H. Williams
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ George F. Windsor
----------------------------------------
Name: George F. Windsor
--------------------------------------
Title:
-------------------------------------

SECURED PARTY:

By: /s/ DOUGLAS S. ZORN
----------------------------------------
Name: Douglas S. Zorn
--------------------------------------
Title: Self
-------------------------------------

-7-
<PAGE> 40

BIOFACTORS, INC.
AMENDED AND RESTATED SECURITY AGREEMENT

SCHEDULE A

SCHEDULE OF EXISTING HOLDERS
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
EXISTING NOTE
NAME OF HOLDER (AS AMENDED)
- -------------- ------------
<S> <C>
Adam Jr., George, F $ 80,000
Afro-Asia Pte. Ltd. 15,000
Baynes, Brian 24,362
Boyersmith, Joseph 2,000
Brehm, William 30,000
Chai, Cheng Huan 25,000
Goei, Esmond 30,000
Goh, Chang Chua 30,000
Gruber, Jon 5,000
Hart, David E. 14,010
Higgins, Brian 10,000
Leonaris Trust Ltd. 25,000
Lim, Philip Seng Choong 12,181
McKee, Stan 12,800
Meyers, Michael 25,000
Milburn, Catherine Knoll 5,000
Moh, Lawrence 100,000
Nemetz, Gary 100,000
Proto Company 50,000
Silverman, Marc 10,000
Soon, Kian Lee 14,284
Steinberg, Elliot 35,000
Tan, Michael Kiah Teck -
Walnut Capital 35,000
Watson, Terry 5,000
Williams, Richard 25,000
Zorn, Douglas 30,000
--------
TOTAL $749,637
--------
</TABLE>

A-1

<PAGE> 41

BIOFACTORS, INC.
AMENDED AND RESTATED SECURITY AGREEMENT

SCHEDULE B

SCHEDULE OF NEW HOLDERS

NAME OF HOLDER PRINCIPAL AMOUNT OF
- -------------- NEW NOTE
--------

B-1

<PAGE> 42

BIOFACTORS, INC.
AMENDED AND RESTATED SECURITY AGREEMENT

SCHEDULE C

LOCATIONS OF COLLATERAL

All of the Collateral (or documents evidencing intangibles constituting
Collateral) is located at 1746 Cole Blvd., Suite 265, Golden, Colorado 80401

C-1

<PAGE> 43

BIOFACTORS, INC.
AMENDED AND RESTATED SECURITY AGREEMENT

SCHEDULE D

OTHER SECURITY INTERESTS IN COLLATERAL

None.

D-1

<PAGE> 44

BIOFACTORS, INC

SECURED PROMISSORY NOTE

$ December __, 1994
------------------------------

FOR VALUE RECEIVED, the undersigned, BIOFACTORS, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of _________
___________, or registered assigns at such place as the holder of this Note may
from time to time designate in writing, the principal sum, or portion thereof,
of ______________________ ($_________) remaining outstanding, and to pay
interest on the unpaid balance of said principal from the date hereof until
payment in full at the rate of twelve percent (12%) per annum.

Principal and accrued interest under this Note shall be due
and payable in full on May 30, 1995. Interest shall be calculated on the basis
of a 365-day year for the actual number of days elapsed. The Company may prepay
this Note, with the consent of the holder of this Note, by paying the entire
outstanding principal balance hereof together with all accrued interest.

This Note is the Maker's "Note" and is issued pursuant to and
entitled to the benefit of that certain Secured Note and Warrant Purchase
Agreement dated as of December 1, 1994, between Maker and the Purchasers named
therein (the "Agreement"), as the same may be amended, modified or supplemented
from time to time. Capitalized terms used herein without definition shall have
the meanings set forth in the Agreement.

Principal and interest payments hereunder shall be made in
money of the United States of America, lawful at such times for the satisfaction
of public and private debts.

This Note is a registered Note and is transferable only by
surrender thereof at the principal offices of the Company, duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of this Note or his attorney duly authorized in writing. Transfers are
subject to the restrictions set forth in the Agreement.

This Note is secured by a certain Security Agreement of even
date herewith by and between the Maker and parties named therein. Upon the
occurrence of an Event of Default (as defined in the Security Agreement), the
unpaid balance of the principal amount of this Note may become due, or may be
declared to be, due and payable in the manner, upon the conditions and with the
effect provided in the Security Agreement.

<PAGE> 45

Maker hereby waives diligence, presentment, demand, protest
and notice of any kind whatsoever. Maker promises to pay costs of collection and
reasonable attorneys' fees if default is made in the payment of this Note, or in
the terms and provisions of the Agreement. The right to plead any and all
statutes of limitation as a defense to this Note or to any agreement to pay the
same, is hereby expressly waived by the undersigned to the full extent permitted
by law.

This Note, the Agreement and the Security Agreement shall be
governed by and construed in accordance with the laws of the State of Colorado.

IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed as of the ____ day of ________, 1994.

MAKER:

BIOFACTORS, INC.

By:
-----------------------------------------------
Douglas S. Zorn
Its: Vice President of Finance/Secretary
and Chief Financial Officer

(Corporate Seal)

-2-

<PAGE> 1
Exhibit 10.8

BIOFACTORS, INC.

SECURED NOTE AND STOCK PURCHASE AGREEMENT

As of DECEMBER 1, 1995

<PAGE> 2
BIOFACTORS, INC.
SECURED NOTE AND STOCK PURCHASE AGREEMENT
DECEMBER 1, 1995

Table of Contents

Page
----

1. Purchase, Sale and Terms of the Notes............................ 1
1.1 Sale and Issuance of the Notes........................ 1
1.2 Closing............................................... 1
1.3 Subsequent Closings................................... 1

2. Maturity......................................................... 2

3. Conversion Rights................................................ 2

4. Common Stock..................................................... 2
4.1 Sale, Issuance and Price of Common Stock.............. 2
4.2 Registration Rights................................... 2

5. Security Agreement............................................... 2

6. Certain Tax Consequences......................................... 2

8. Conditions of Purchaser's Obligations at Closing................. 5
8.1 Performance........................................... 5
8.2 Qualifications........................................ 5
8.3 Consents and Waivers.................................. 5
8.4 Security Agreement.................................... 5

9. Miscellaneous.................................................... 5
9.1 Survival of Warranties................................ 5
9.2 Successors and Assigns................................ 6
9.3 Governing Law......................................... 6
9.4 Counterparts.......................................... 6
9.5 Titles and Subtitles.................................. 6
9.6 Notices............................................... 6
9.7 Entire Agreement; Amendments and Waivers.............. 6
9.8 Severability.......................................... 6

-i-

<PAGE> 3
SCHEDULES

SCHEDULE A Schedule of New Purchasers

EXHIBITS

EXHIBIT A Form of Secured Promissory Note

EXHIBIT B Form of Pledge and Security Agreement

-ii-

<PAGE> 4
SECURED NOTE AND STOCK PURCHASE AGREEMENT

THIS SECURED NOTE AND STOCK PURCHASE AGREEMENT dated as of December 1,
1995 (this "Agreement"), is by and among the purchasers listed on Schedule A
hereto (as such Schedule may be amended from time to time, individually a
"Purchaser" and collectively the "Purchasers"), and BioFactors, Inc., a Delaware
corporation (the "Company").

NOW, THEREFORE, in consideration of the following mutual covenants and
agreements, the Purchasers and the Company hereby agree as follows:

AGREEMENT

1. Purchase, Sale and Terms of the Notes.

1.1 Sale and Issuance of the Notes.

(a) The Company has authorized the issuance and sale to the
Purchasers of the Company's secured promissory notes in the maximum aggregate
original principal amount of up to $350,000, bearing interest at the rate of 10%
per annum (computed on the basis of a 365-day year for the actual number of days
elapsed), substantially in the form set forth in Exhibit A hereto (herein
referred to individually as a "Note" and collectively as the "Notes," which
terms shall also include any notes delivered in exchange or replacement
therefor).

(b) Subject to the terms and conditions of this Agreement, each
Purchaser agrees, severally, but not jointly, to purchase at the Closing (as
defined below), and the Company agrees to sell and issue to each Purchaser at
the Closing, a Note in the principal amount set forth opposite each such
Purchaser's name on the Schedule of Purchasers attached hereto as Schedule A at
a purchase price equal to the original principal amount of such Note.

1.2 Closing. The initial purchase and sale of the Notes shall take
place at 10:00 a.m. on December 8, 1995, at the offices of Davis, Graham &
Stubbs, L.L.C., 370 Seventeenth Street, Denver, Colorado, or at such other date,
time and place as shall be designated by the Company (the "Closing," which term
also shall include any subsequent closing pursuant to the provisions of Section
1.3). At or promptly after the Closing, the Company will execute and deliver
Notes, each dated the date of the Closing and payable to the order of the
respective Purchasers, in the respective principal amounts set forth on Schedule
A, against delivery of the full purchase price for the Notes by wire transfer of
the purchase price to an account designated in writing by the Company.

1.3 Subsequent Closings. If the Notes issued or sold at the Closing
represent, in the aggregate, less than the maximum aggregate original principal
amount as set forth in Section 1.1(a), the Company may issue additional Notes at
one or more subsequent closings held within thirty (30) days of the Closing;
provided, however, that the Company, in its sole discretion, at any time after
the initial Closing, may terminate this offering and accept no additional
purchases. Upon execution of counterpart signature pages to each of this
Agreement and the Security Agreement (as

-1-

<PAGE> 5
defined herein), any additional purchaser purchasing a Note at any such
subsequent closing shall be added to Schedule A and shall be deemed to be a
Purchaser for purposes of this Agreement. The date of the final purchase and
sale of the Notes shall be referred to herein as the "Final Closing."

2. Maturity. Unless previously converted pursuant to Section 3 hereof,
the Notes shall mature and become due and payable in full at the close of
business on March 31, 1996.

3. Conversion Rights. The Notes are subject to either mandatory or
voluntary conversion upon the occurrence of certain events as provided in the
Notes.

4. Common Stock.

4.1 Sale, Issuance and Price of Common Stock.

(a) The Company has authorized the issuance and sale to the
Purchasers of a maximum aggregate of 35,000 shares of the Company's common
stock, $.01 par value per share (the "Shares").

(b) At the Closing, and at any subsequent closing up to and
including the Final Closing, the Company shall issue to each Purchaser
purchasing a Note against receipt of the Purchase Price (as defined in Section
4.1(c)), the number of shares of Common Stock set forth opposite such
Purchaser's name on Schedule A.

(c) The purchase price for the Shares shall be $.01 per share
(the "Purchase Price"), which is hereby agreed to be the fair market value of
such Shares.

4.2 Registration Rights. The Company covenants and agrees to
enter into, with each of the Purchasers, a registration rights agreement
substantially in the form of the registration rights agreement to be entered
into by it in connection with the Whale Transaction, which agreement shall
provide for the registration under the Act (as defined below) of the resale of
the Shares by the Purchasers, subject to the conditions and limitations of such
agreement. As to any Purchaser, the Company's obligation to enter into such
agreement shall be conditioned upon such Purchaser's execution and delivery of a
counterpart copy of such agreement, which will provide for a "lock-up" of the
Purchaser's Shares and such other customary provisions as may be required by
Whale.

5. Security Agreement. Upon the execution of the Pledge and Security
Agreement of even date herewith, by and among the Company and the Holders named
therein, attached hereto as Exhibit C (the "Security Agreement"), the Purchasers
will become parties to the Security Agreement and the Company's obligations
under the Notes shall be secured thereby.

6. Certain Tax Consequences. Each Purchaser hereby acknowledges that
for federal income tax purposes he or it is purchasing investment units
consisting of a Note and Shares and that the allocation of consideration made
herein between the Note and the Shares shall be binding upon each Purchaser
unless such Purchaser explicitly discloses on its tax return that it is making a
different allocation. It is further understood that such allocation does not
bind the Internal Revenue Service, and in the event the fair market value of
the Shares is determined to be greater than the Purchase Price of

-2-

<PAGE> 6
the Shares set forth in Section 4.1(c), the cost basis of the Notes would have
to be reduced by the amount of such excess and the Notes would be deemed to be
issued at a discount. Individual cash basis holders of Notes would then report
the difference between the allocated cost of the Notes and the aggregate
principal and interest received as ordinary income upon payment of the Notes.
Gain on the sale or exchange of a discounted Note would be ordinary income up
to the accrued portion of the discount and interest. Other Note holders would
be subject to the rules under Internal Revenue Code Sections 1281-1283
regarding the ratable accrual of the discount and interest on short-term
obligations.

7. Representations and Warranties of the Purchasers. Each Purchaser
severally, but not jointly, hereby represents and warrants to the Company that:

7.1 Such Purchaser is aware that the investment in the Note and
the Shares involves a high degree of risk.

7.2 Such Purchaser understands and acknowledges that there is no
assurance as to the future performance of the Company.

7.3 Such Purchaser understands and acknowledges that there may be
certain adverse tax consequences to him or it in connection with his or its
purchase of the Note and the Shares (including but not limited to the tax
consequences described in Section 6), that the Company is not giving and has not
given any advice on the tax consequences of the investment and that the Company
has advised all Purchasers to seek the advice of their own experts in such areas
prior to making this investment.

7.4 Each of this Agreement and the Security Agreement has been duly
executed and delivered by such Purchaser and constitutes the Purchaser's valid
and legally binding obligation, enforceable in accordance with its terms. Each
Purchaser represents that he or it has full power and authority to enter into
this Agreement and the Security Agreement.

7.5 The Confidential Investor Questionnaire being delivered by the
Purchaser to the Company simultaneously herewith is true, complete and correct
in all material respects; and the Purchaser understands that the Company has
determined that the exemption of the Note and the Shares from the registration
provisions of the Securities Act pursuant to Regulation D thereof, which is
available for non-public offerings, is applicable to the offer and sale of the
Note and the Shares, and that such determination is based in part upon the
representations, warranties and agreements made by the Purchaser herein and in
the Confidential Investor Questionnaire.

7.6 The Note and the Shares to be received by such Purchaser
pursuant to the terms hereof, and the Whale Note or Alternative Note to be
received by such Purchaser upon conversion of the Note (collectively, the
"Securities"), will be acquired for investment for such Purchaser's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and such Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the same.

-3-

<PAGE> 7
7.7 Such Purchaser understands that the Securities he or it is
receiving hereunder are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances.

7.8 Each Purchaser represents and warrants that he or it has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the Notes and the Shares and
has obtained, in his or its own judgment, sufficient information from the
Company to evaluate the merits and risks of an investment in the Company. Each
Purchaser further represents and warrants that he or it has not utilized any
person as a purchaser representative as such term is defined in Regulation D in
connection with evaluating such merits and risks, but rather has relied solely
upon his or its own investigation in making a decision to invest in the Company.

7.9 No representations or warranties have been made to the
Purchaser by the Company or any of its directors, agents, employees or
affiliates; and in entering into this transaction the Purchaser is not relying
upon any information other than that obtained as the result of independent
investigations, if any, by the Purchaser.

7.10 Each Purchaser represents and warrants that he or it has had a
reasonable opportunity to ask questions and to receive satisfactory answers
concerning the offering and other matters pertaining to his or its investment
and all such questions have been answered to the Purchaser's full satisfaction;
the Purchaser further represents and warrants that he or it has had reasonable
opportunity to obtain all the information he or it considers necessary or
appropriate for deciding whether to purchase the Note and the Shares.

7.11 Each Purchaser represents and warrants that he or it is an
"accredited investor" within the meaning of Rule 501(a) of Regulation D,
promulgated under the Act.

7.12 The address set forth below is the Purchaser's true and correct
domicile, and the Purchaser has no present intention of becoming a resident of
any other state or jurisdiction.

7.13 Without in any way limiting the representations set forth
above, such Purchaser further agrees not to make any disposition of the
Securities unless there is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or such Purchaser shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition, and, if
reasonably requested by the Company, such Purchaser shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except if reasonably requested by the Company.

-4-

<PAGE> 8
7.14 It is understood that the Securities may bear one or all of the
following legends:

(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THEY MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 PROMULGATED UNDER SUCH ACT."

(b) Any legend required by the laws of the State of Delaware or
applicable state securities laws.

8. Conditions of Purchaser's Obligations at Closing. The obligations of
each Purchaser under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Purchaser who does not
consent in writing thereto:

8.1 Performance. The Company shall have performed and complied with
all agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.

8.2 Qualifications. The Company shall have obtained all necessary
Blue Sky law permits and qualifications, or secured exemptions therefrom,
required by any state for the offer and sale of the Notes and the Shares.

8.3 Consents and Waivers. The Company shall have obtained any and
all consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement. The parties expressly acknowledge
that, as a condition to closing, a majority of the holders of the Company's
secured promissory notes issued pursuant to that certain Secured Note and
Warrant Purchase Agreement dated as of December 1, 1994, between the Company and
the Purchaser's named therein, as amended, and secured by that certain Security
Agreement dated as of December 1, 1994 between the Company and the Holders named
therein, shall have consented to the creation of a prior lien on the assets of
the Company pledged pursuant to the Security Agreement.

8.4 Security Agreement. The Company and the Purchasers shall have
executed and delivered the Security Agreement.

9. Miscellaneous.

9.1 Survival of Warranties. The warranties, representations, and
covenants of the Company and the Purchasers contained in or made pursuant to
this Agreement shall survive the

-5-

<PAGE> 9
execution and delivery of this Agreement and the Closing and shall in no way be
affected by any investigation of the subject matter thereof made by or on
behalf of the Purchasers or the Company.

9.2 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

9.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Colorado, disregarding any Colorado
principles of conflicts of laws that otherwise would provide for the application
of the substantive laws of another jurisdiction.

9.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.

9.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

9.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or four (4)
days after deposit with the United States Post Office or air courier in the case
of non-U.S. Purchasers, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.

9.7 Entire Agreement; Amendments and Waivers. This Agreement, the
Notes and the Security Agreement constitute the full and entire understanding
and agreement between the parties with regard to the subject matter hereof. Any
term of this Agreement or the Notes may be amended and the observance of any
term of this Agreement or the Notes may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the debt
represented by the Notes then outstanding. Any amendment or waiver effected in
accordance with this Section 9.7 shall be binding upon each holder of any
securities acquired under this Agreement at the time outstanding (including
securities for which any such securities are convertible or exercisable), each
future holder of all such securities, and the Company.

9.8 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.

[The remainder of this page is intentionally left blank]

-6-

<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Secured
Note and Stock Purchase Agreement as of the date first above written.

BIOFACTORS, INC.

By: /s/ ESMOND T. GOEI
-----------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
Address: 1746 Cole Blvd., Suite 265
Golden, Colorado 80401
Attn: President

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<PAGE> 11
Signature Page
Biofactors, Inc.
Secured Note and Stock Purchase Agreement
Dated December 1, 1995

PURCHASER:
By: /s/ LEONARD J. ADAMS
-------------------------------------
Name: LEONARD J. ADAMS
-----------------------------------
Title:
----------------------------------
Address: 363 Brookline St.
Newton Centre, MA 02159

Amount Subscribed for $50,000

PURCHASER:

By: /s/ STUART ELFLAND
-------------------------------------
Name: STUART ELFLAND
-----------------------------------
Title:
----------------------------------
Address: 19 Beverly Rd.
Brookline, MA 02167

Amount Subscribed for $50,000

PURCHASER:

By: /s/ ROBERT GILMAN
-------------------------------------
Name: ROBERT GILMAN
-----------------------------------
Title:
----------------------------------
Address: 505 Tadmore Ct.
SCHAUMBURG, IL 60194

Amount Subscribed for $75,000

PURCHASER:

By: /s/ JACK HIRSCHFIELD
-------------------------------------
Name: JACK HIRSCHFIELD
-----------------------------------
Title:
----------------------------------
Address: 144 New York Ave.
Freeport, NY 11520

Amount Subscribed for $12,500

PURCHASER:

By: /s/ MICHAEL KUBIN, /s/ NICHOLE KUBIN
-------------------------------------
Name: MICHAEL & NICHOLE KUBIN
-----------------------------------
Title:
----------------------------------
Address: 1155 Park Ave. #One
New York, NY 10128

Amount Subscribed for $37,500

PURCHASER:

By: /s/ WAYNE SAKER
-------------------------------------
Name: WAYNE SAKER
-----------------------------------
Title:
----------------------------------
Address: 6500 (Illegible) Blvd., #318
St. Petersburg, FL 22701

Amount Subscribed for $50,000

PURCHASER:

SAGAX FUND II, LTD.

Amount Subscribed for $

By: /s/ (NOT LEGIBLE)
-------------------------------------
Name: (Not Legible)
-----------------------------------
Title:
----------------------------------
Address: 48 Par-La-Ville Rd., Suite 464
Hamilton, HM11 BERMUDA

Amount Subscribed for $50,000

-8-

<PAGE> 12
Schedule A

Biofactors, Inc.
Secured Note and Stock Purchase Agreement
Dated December 1, 1995

SCHEDULE OF PURCHASERS

PRINCIPAL
NAME OF AMOUNT OF NO. OF SHARES OF
PURCHASER NOTE COMMON STOCK

SA-1

<PAGE> 13

BIOFACTORS, INC.
FIRST AMENDMENT TO
SECURED NOTE AND STOCK PURCHASE AGREEMENT

This FIRST AMENDMENT TO SECURED NOTE AND STOCK PURCHASE
AGREEMENT (this "Amendment") is entered into as of March 22, 1996, by and among
BioFactors, Inc., a Delaware corporation (the "Company") and the parties named
on the signature pages hereto (all of such parties other than the Company,
collectively, the "Majority Noteholders") and amends that certain Secured Note
and Stock Purchase Agreement dated as of December 1, 1995, by and among the
Company and the Purchasers named therein (the "Note Agreement").

WHEREAS, the Majority Noteholders are the holders of the
secured promissory notes (the "Notes") issued pursuant to the Note Agreement
and, collectively, are the holders of Notes representing in excess of fifty
percent of the aggregate principal amount of all the Notes outstanding as of
the date hereof and, pursuant to Section 9.7 of the Note Agreement, can bind
each holder of the Notes outstanding as of the date of this Agreement;

WHEREAS, the Company has entered into a letter of intent with
Joseph Stevens & Company, L.P. ("Joseph Stevens") pursuant to which Joseph
Stevens has agreed to underwrite the Company's IPO and to place promissory
notes of the Company having a minimum aggregate principal amount of $500,000
(the "Joseph Stevens Bridge"); and

WHEREAS, it being acknowledged that the placement of the
Joseph Stevens Bridge and the subsequent underwriting of the IPO will be of
substantial benefit to the Company and the Majority Noteholders, the Company
and the Majority Noteholders desire to enter into this Amendment to extend the
maturity date of the Notes to accommodate the placement of the Joseph Stevens
Bridge, to conform the repayment terms of the Notes consistent with the terms
of the notes issued in connection with the Joseph Stevens Bridge (the "Joseph
Stevens Notes") and to terminate the security interest of the Notes, all in
consideration for the issuance of additional shares of common stock of the
Company.

NOW THEREFORE, in consideration of the above and the following
mutual covenants and agreements, the parties agree as follows:

1. Definitions. Unless otherwise defined herein,
capitalized terms shall have the meanings given such terms in the Note
Agreement.

2. Amendments. The Majority Noteholders hereby agree to
amend the Note Agreement as follows:

a. Definitions. The term "Whale Transaction"
shall be replaced wherever it appears by the term "Joseph Stevens Bridge" which
term shall have the following meaning: the placement by Joseph Stevens of the
Company's promissory notes having a minimum aggregate principal amount of
$500,000.

b. Maturity Date. Section 2 is amended in its
entirety as follows:

"2. Maturity. Unless the Joseph Stevens Bridge
shall have been previously consummated, in which event the provisions
of Section 3 shall supersede the provisions of this Section 2, the
Notes shall mature and become due and payable in full at the close of
business on June 30, 1996."

<PAGE> 14
c. Repayment Terms. Section 3 is amended in its
entirety as follows:

"3. Repayment Terms. Upon the closing of the
Joseph Stevens Bridge, the repayment terms of the Notes issued
hereunder shall automatically conform to the repayment terms of the
notes issued in connection with the Joseph Stevens Bridge (the "Joseph
Stevens Notes"), as follows: the Notes shall mature and become due and
payable in full on the earlier of (i) one year from the date of
issuance of the Joseph Stevens Notes or (ii) the consummation of a
financing in which the Company receives gross proceeds of at least
$1,500,000."

3. Release of Pledged Collateral. The Majority
Noteholders hereby agree, upon the closing of the Joseph Stevens Bridge, to
release and terminate the security interest in that certain Promissory Note
(the "Bogart Note") in the original principal amount of $950,000, dated August
30, 1995, between Bogart International Associates, Inc., the "Maker" thereof,
and the Company and any proceeds therefrom (the "Pledged Collateral"), granted
and delivered pursuant to that certain Pledge and Security Agreement (the
"Security Agreement"), dated as of December 1, 1995, by and among the Company
and the Secured Parties named therein. The Majority Noteholders further agree
to cause John Black, as Representative of the Secured Parties and holder of the
Bogart Note on behalf of the Secured Parties pursuant to Section 8 of the
Security Agreement, to deliver the Bogart Note to the Company as promptly as
possible upon the Representative's receipt of notice from the Company of the
closing of the Joseph Stevens Bridge and to cause the Representative to take
all such other actions on behalf of the Secured Parties as may be necessary
under applicable law to release the security interest in the Pledged
Collateral.

4. Issuance of Shares. In consideration of the
foregoing, the Company hereby agrees that, upon the closing of the Joseph
Stevens Bridge and the receipt by the Company of (i) the Bogart Note, together
with a statement by the Representative in form and substance satisfactory to
the Company that a complete release of the Pledged Collateral has been
effected, and (ii) subscription and registration rights agreements executed by
each of the holders of the Notes, the Company shall, for no additional
consideration, issue and deliver to each such holder, two-tenths (0.2) of a
fully-paid and nonassessable share of its Common Stock (subject to adjustment
for stock splits and combinations affecting such shares) for each One Dollar
($1.00) in original principal amount of such holder's Notes. All such shares
shall have the benefit of, and be subject to the conditions and limitations of,
the registration rights agreement described in Section 4.2 of the Note
Agreement.

5. Construction of Waiver. The Note Agreement shall be
deemed amended only to the extent set forth herein and remains in full force
and effect.

6. Counterparts. This Amendment may be executed in any
number of counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument.

(The remainder of this pace intentionally left blank.)

- 2 -
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Secured Note and Stock Purchase Agreement to be duly executed as
of the day and year first above written.

BIOFACTORS, INC.

By: /s/ Esmond T. Goei
------------------------------
Title: President and CEO

- 3 -
<PAGE> 16
SIGNATURE PAGE TO FIRST AMENDMENT TO
SECURED NOTE AND STOCK PURCHASE AGREEMENT

/s/ LEONARD J. ADAMS
----------------------------------------
Name of Noteholder

/s/ STUART ELFLAND
----------------------------------------
Name of Noteholder

/s/ ROBERT GILMAN
----------------------------------------
Name of Noteholder

/s/ JACK HIRSCHFIELD
----------------------------------------
Name of Noteholder

/s/ NICOLE KUBIN, MICHAEL KUBIN
----------------------------------------
Name of Noteholder

SAGAX FUND II LTD

/s/ [NOT LEGIBLE]
----------------------------------------
Name of Noteholder

/s/ WAYNE SAKER
----------------------------------------
Name of Noteholder

<PAGE> 17
BIOFACTORS, INC.
SECOND AMENDMENT TO
SECURED NOTE AND STOCK PURCHASE AGREEMENT

This SECOND AMENDMENT TO SECURED NOTE AND STOCK PURCHASE
AGREEMENT (this "Amendment") is entered into as of July 1, 1996, by and among
BioFactors, Inc., a Delaware corporation (the "Company") and the parties named
on the signature pages hereto (all of such parties other than the Company,
collectively, the "Majority Noteholders") and amends that certain Secured Note
and Stock Purchase Agreement dated as of December 1, 1995, as amended, by and
among the Company and the Purchasers named therein (the "Note Agreement").

WHEREAS, in order to induce the customers of Joseph Stevens to
purchase the notes and warrants comprising the Joseph Stevens Bridge, and as a
condition precedent to such purchases, the Company is required to enter into
this Amendment providing for (i) a waiver of the current default on the Notes
and (ii) the extension of the maturity of the Notes; and

WHEREAS, the Company and the Majority Noteholders desire to
waive the current default on the Notes and to amend the Note Agreement to
provide for an extension of the maturity date of the Noted, it being
acknowledged that the closing of the Joseph Stevens Bridge will be of
substantial benefit to the Company and the Majority Noteholders;

NOW THEREFORE, in consideration of the above and the following
mutual covenants and agreements, the parties agree as follows:

1. Definitions. Unless otherwise defined herein,
capitalized terms shall have the meanings given such terms in the Note
Agreement.

2. Waiver. The Majority Noteholders hereby agree to
waive the current default on the Notes and to extend the maturity date thereof
as set forth herein.

3. Amendment. Section 2 is amended as follows: the term
"June 30, 1996" shall be replaced by the term "November 30, 1996."

4. Construction of Waiver. The Note Agreement shall be
deemed amended only to the extent set forth herein and remains in full force
and effect.

<PAGE> 18

5. Counterparts. This Amendment may be executed in any
number of counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to Secured Note and Stock Purchase Agreement to be duly executed as
of the day and year first above written.

BIOFACTORS, INC.

By: /s/ Esmond T. Goei
-------------------------------------
Esmond T. Goei
Title: President and
Chief Executive Officer

- 2 -
<PAGE> 19
SIGNATURE PAGE TO SECOND AMENDMENT TO
SECURED NOTE AND STOCK PURCHASE AGREEMENT

/s/ LEONARD J. ADAMS
----------------------------------------
Leonard J. Adams

/s/ STUART ELFLAND
----------------------------------------
Stuart Elfland

/s/ ROBERT D. GILMAN
----------------------------------------
Robert D. Gilman

/s/ JACK HIRSCHFIELD
----------------------------------------
Jack Hirschfield

/s/ NICOLE KUBIN
----------------------------------------
Nicole Kubin

/s/ WAYNE SAKER
----------------------------------------
Wayne Saker

- 3 -
<PAGE> 20
BIOFACTORS, INC.
THIRD AMENDMENT
SECURED NOTE AND STOCK PURCHASE AGREEMENT

THIS THIRD AMENDMENT TO SECURED NOTE AND STOCK PURCHASE
AGREEMENT (this "Amendment") is entered into as of the 1st day of October,
1996, by and among BioFactors, Inc. a Delaware corporation ("BioFactors" or the
"Company") and the parties named on the signature pages hereto (all of such
parties other than the Company, collectively, the "Majority Holders") and
amends that certain Secured Note and Stock Purchase Agreement dated as of
December 1, 1995, by and among the Company and the Purchasers named therein, as
previously amended (the "Note Agreement").

RECITALS

WHEREAS, the Company has entered into a letter of intent with
Chatfield Dean & Co. ("Chatfield Dean"), providing for underwriting and
financial advisory services (the "Underwriting");

WHEREAS, as a condition precedent to the Underwriting, the
Company is required to enter into a definitive agreement with Voice Plus, Inc.,
a California corporation ("Voice Plus"), for the formation of a holding company
("Registrant") and the merger of each of BioFactors (the "BFI Merger") and
Voice Plus with and into separate, wholly-owned subsidiaries of Registrant,
concurrently with Chatfield Dean's Underwriting of the initial public offering
of Registrant's securities pursuant to a registration statement filed under the
Securities Act of 1933 (the "IPO");

WHEREAS, upon the consummation of the BFI Merger, the
Company's stockholders, including the Majority Holders, are to receive shares
of common stock of Registrant ("Registrant Common Stock") in exchange for the
BioFactors Common Stock held by them in a three-for-four (three shares of
common stock of Registrant for every four shares of BioFactors Common Stock)
conversion, or such other ratio as Chatfield Dean may determine is necessary;

WHEREAS, as a further condition precedent to the Underwriting,
the Company is required to enter into agreements amending the terms of
outstanding securities including, in particular, this Amendment providing for
the consent of the Majority Holders (a) to extend the Maturity date of the
Notes to provide additional time to accomplish the IPO, (b) to effect the
mandatory conversion at the IPO of all accrued interest on the Notes into
common stock of Registrant, (c) to amend and coordinate the registration rights
granted in connection with the Shares and certain other shares of its Common
Stock and securities convertible into or exercisable for its Common Stock, and
(d) to effect certain other amendments to the Note Agreement;

- 1 -
<PAGE> 21
WHEREAS, as consideration for the agreements herein, the
Company will cause Registrant to issue warrants to holders of the Notes; and

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the
following mutual covenants and agreements, the parties hereby agree as follows:

1. Definitions. All capitalized terms used herein and
not otherwise defined shall have the meanings given such terms in the Note
Agreement.

2. Amendments. The Majority Holders hereby agree to
amend the Note Agreement as follows:

a. Maturity Date Extension. Section 2 of the
Note Agreement is hereby amended in its entirety, as follows:

"2. Maturity Date. The Notes shall mature and become due and
payable in full at the close of business on March 31, 1997
(the "Maturity Date")."

b. Prepayment and Conversion of Accrued
Interest. Section 3 of the Note Agreement is hereby amended in its entirety,
as follows:

"3. Prepayment and Conversion of Accrued Interest. In
the event the IPO (defined below) is consummated prior to the
Maturity Date, the principal of the Notes shall be paid in
full within five business days of the receipt by Registrant
(defined below) of the proceeds of the IPO and all accrued
interest on the Notes calculated through the IPO closing date
shall be converted into common stock of Registrant at a
conversion price equal to the price per share to the public in
the IPO (the "IPO Price"). In connection with such
conversion, no fractional shares of common stock shall be
issued; instead, the number of shares of common stock
otherwise issuable will be rounded up to the next whole
share."

c. Registration Rights. Addendum A (which set
forth the former registration rights) is hereby deleted in its entirety.
Section 4.2 of the Note Agreement is hereby amended in its entirety, as
follows:

"4.2 Planned Initial Public Offering: Registration Rights.

- 2 -
<PAGE> 22
herein as, the "Registrant"), pursuant to an effective
registration statement under the Securities Act of 1933, as
amended. The undersigned understands and agrees that there
can be no assurances that a registration statement will be
filed or, if filed, will be declared effective by the
Securities and Exchange Commission (the "Commission") or, if
the registration statement is declared effective by the
Commission, that the Registrant will be able to consummate
such IPO.

d. Security Interest. Section 5 is hereby
deleted in its entirety, it being understood that the security interest of the
Purchasers has terminated.

3. Automatic Conversion. The Majority Holders hereby
consent to the automatic conversion upon the consummation of the IPO of all
accrued interest on the Notes, at a conversion price and calculated as set
forth in Section 3 of the Note Agreement, into common stock of the Registrant.

4. Issuance of Additional Warrants. In consideration of
the agreements herein, the Company hereby agrees that, upon the closing of the
IP0, the payment of the principal of the Notes and the conversion of the
accrued interest thereon, the Company shall, for no additional monetary
consideration, cause the Registrant to issue and deliver to each holder of
Notes, a warrant to purchase seventy-five (75) shares of Registrant common
stock (the "Warrant Shares") for each One Thousand Dollars ($1,000) in original
principal amount of such holder's Notes at an exercise price equal to 120% of
the IPO Price (the "Warrants").

5. Termination of Security Interest and Agreement. The
Majority Holders hereby acknowledge that the security interest in the Bogart
Note has been terminated and the Pledged Collateral released. Accordingly, the
Majority Holders hereby terminate that certain Pledge and Security Agreement
dated as December 1 1995, as subsequently amended, by and among the Company and
the Secured Parties named therein (being also the parties to the Note
Agreement).

6. Proxy. The undersigned hereby irrevocably appoints
John Black as the undersigned's attorney and proxy, with full power of
substitution, to vote or to consent in writing in lieu of a vote or meeting
with respect to all of the Shares held by the undersigned which the undersigned
is entitled to vote at any meeting of stockholders (whether annual or special
and whether or not an adjourned meeting) of the Company, or pursuant to written
action taken in lieu of any such meeting or otherwise, in such manner as to
cause the BFI Merger and any agreement effecting the BFI Merger to be approved.
This proxy is irrevocable, is coupled with an interest sufficient in law to
support an irrevocable proxy and is granted in consideration of and as an
inducement to cause the Company to issue the Warrants. In connection with
giving this proxy, the undersigned understands and agrees that the BFI Merger
effectively will cause a reverse split of the Company's capital stock in that
every four (4) shares of BioFactors Common Stock issued and outstanding or held
in treasury

- 3 -
<PAGE> 23
immediately prior to the effective time of the BFI Merger shall, automatically
and without any action of the part of the respective holders thereof, be
converted into approximately three (3) shares of Registrant Common Stock (or
such other number of shares as Chatfield Dean and the Company shall determine).

7. Construction of Waiver. The Note Agreement shall be
deemed amended only to the extent set forth herein and remains in full force
and effect.

8. Counterparts. This Amendment may be executed in any
number of counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument.

(The remainder of this page intentionally left blank.)

- 4 -
<PAGE> 24

IN WITNESS WHEREOF, the parties hereto have caused this THIRD
AMENDMENT TO SECURED NOTE AND STOCK PURCHASE AGREEMENT to be duly executed as
of the day and year first above written.

BIOFACTORS, INC.

By: /s/ Esmond T. Goei
------------------------------
Title: President and CEO

HOLDER:

/s/ Robert Gilman
---------------------------------
(Signature)

Robert Gilman
---------------------------------
(Print Name)

/s/ Jack Hirschfield
---------------------------------
(Signature)

Jack Hirschfield
---------------------------------
(Print Name)

/s/ Stuart Elfland
---------------------------------
(Signature)

Stuart Elfland
---------------------------------
(Print Name)

/s/ Wayne Saker
---------------------------------
(Signature)

Wayne Saker
---------------------------------
(Print Name)

/s/ Nicole Kubin
---------------------------------
(Signature)

Nicole Kubin
---------------------------------
(Print Name)

- 5 -
<PAGE> 25

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144
PROMULGATED UNDER THE ACT.

BIOFACTORS, INC

SECURED PROMISSORY NOTE

$________________ No. ____

December __, 1995

FOR VALUE RECEIVED, the undersigned, BIOFACTORS, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of
_______________________, or registered assigns ("Holder") at such place as the
Holder may from time to time designate in writing, the principal sum of
_____________________________ THOUSAND DOLLARS ($______________), and to pay
simple interest on the unpaid balance of said principal from the date hereof
through maturity at the rate of ten percent (10%) per annum.

1. Maturity.

(a) Principal and accrued interest under this
Note shall be due and payable at the close of business on March 31, 1996 (the
"Maturity Date"). If payment of the principal amount hereof or interest accrued
thereon is not made within five (5) days of the Maturity Date, then interest
shall accrue on such unpaid amount from the date of nonpayment to the date of
payment at the rate of 18% per annum thereafter. Interest shall be calculated on
the basis of a 365-day year for the actual number of days elapsed.

(b) Principal and interest payments hereunder
shall be made in money of the United States of America, lawful at such times for
the satisfaction of public and private debts.

-1-

<PAGE> 26
2. Prepayment. The Company may prepay this note in whole at
any time, or in part from time to time, without penalty or premium, upon thirty
(30) days' written notice to the holder. Each partial prepayment shall first be
applied to interest accrued through the date of prepayment and then to
principal.

3. Note Agreement. This Note is the Maker's "Note" and is
issued pursuant to and entitled to the benefit of that certain Secured Note and
Warrant Purchase Agreement dated as of December 1, 1995, between Maker and the
Purchasers named therein, as the same may be amended, modified or supplemented
from time to time as permitted thereby (the Note Agreement"). Capitalized terms
used herein without definition shall have the meanings set forth in the Note
Agreement.

4. Registered Note. This Note is a registered Note and is
transferable only by surrender thereof at the principal offices of the Company,
duly endorsed or accompanied by a written instrument of transfer duly executed
by the registered holder of this Note or his attorney duly authorized in
writing. The Maker may treat the person whose name appears in the Note register
as the owner hereof for the purpose of receiving payment as herein provided.
Transfers are subject to the restrictions set forth in the Note Agreement.

5. Conversion Rights. Prior to the Maturity Date, this Note
is subject to conversion as follows:

(a) Mandatory Conversion. Upon the closing of a private
placement (the "Whale Transaction") of the Company's secured promissory notes
(the "Whale Notes") for which Whale Securities Co., LP ("Whale") is acting as
placement Agent, all of the outstanding principal amount and accrued interest on
the Notes shall be converted into the Whale Notes on the same terms and
conditions as may be offered to the investors in the Whale Transaction.

(b) Voluntary Conversion. In the event the Whale
Transaction is not consummated and the Company consummates a private placement
of its promissory notes with or without the assistance of another placement
agent (the "Alternate Notes"), all or any part of the outstanding principal
amount and accrued interest on any Note may, at the option of the holder
thereof, be converted into the Alternate Notes on the same terms and conditions
as may be offered to the investors in such private placement.

6. Security Agreement; Default. This Note is secured by a
certain Pledge and Security Agreement dated as of December 1, 1995, by and
between the Maker and the Secured Parties named therein, as the same may be
amended, modified or supplemented from time to time as permitted thereby (the
"Security Agreement"). Upon the occurrence of an Event of Default (as defined in
the Security Agreement), the unpaid balance of the principal amount of this Note
may become due, or may be declared to be, due and payable in the manner, upon
the conditions and with the effect provided in the Security Agreement.

7. Waiver of Demand, Protest, etc. Maker hereby waives
diligence, presentment, demand, protest and notice of any kind whatsoever. Maker
promises to pay costs of collection and reasonable attorneys' fees if default is
made in the payment of this Note, or in the terms and provisions

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<PAGE> 27
of the Security Agreement. The right to plead any and all statutes of
limitation as a defense to this Note or to any agreement to pay the same, is
hereby expressly waived by the undersigned to the full extent permitted by law.

8. Notice. Any notice required or permitted hereunder shall
be given in accordance with the Note Agreement.

9. Governing Law. THE MAKER AND THE HOLDER AGREE THAT THIS
NOTE AND THE LEGAL RELATIONS BETWEEN THE MAKER AND THE HOLDER, AND ALL RIGHTS
AND OBLIGATIONS HEREUNDER, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY, AND
PERFORMANCE, SHALL BE GOVERNED BY AND INTERPRETED, CONSTRUED, APPLIED, AND
ENFORCED IN ACCORDANCE WITH THE LAW OF THE STATE OF COLORADO WITHOUT REFERENCE
TO THE LAW OF ANOTHER JURISDICTION.

IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed as of the ____ day of December, 1995.

MAKER:

BIOFACTORS, INC.

By: ___________________________
Douglas S. Zorn
Its: Vice President and
Secretary

(Corporate Seal)

-3-

<PAGE> 1

EXHIBIT 10.9

BIOFACTORS, INC.
UNSECURED NOTE AND STOCK PURCHASE AGREEMENT
AS OF FEBRUARY 1, 1996

<PAGE> 2
BIOFACTORS, INC.
UNSECURED NOTE AND STOCK PURCHASE AGREEMENT
FEBRUARY 1, 1996

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
1. Purchase, Sale and Terms of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Subsequent Closings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2. Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

3. Repayment Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

4. Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.1 Sale, Issuance and Price of Common Stock . . . . . . . . . . . . . . . . . . . . . 2
4.2 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

5. Certain Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

6. Representations and Warranties of the Purchasers . . . . . . . . . . . . . . . . . . . . . 3

7. Conditions of Purchaser's Obligations at Closing . . . . . . . . . . . . . . . . . . . . . 5
7.1 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.2 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.3 Consents and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.4 Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

8. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.1 Survival of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.5 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.7 Entire Agreement, Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 7
8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>

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<PAGE> 3
UNSECURED NOTE AND STOCK PURCHASE AGREEMENT

THIS UNSECURED NOTE AND STOCK PURCHASE AGREEMENT dated as of February
1, 1996 (this "Agreement"), is by and among the purchasers listed on Schedule A
hereto (as such Schedule may be amended from time to time, individually a
"Purchaser" and collectively the "Purchasers"), and BioFactors, Inc., a
Delaware corporation (the "Company").

NOW, THEREFORE, in consideration of the following mutual covenants and
agreements, the Purchasers and the Company hereby agree as follows:

AGREEMENT

1. Purchase, Sale and Terms of the Notes.

1.1 Sale and Issuance of the Notes.

(a) The Company has authorized the issuance and
sale to the Purchasers of the Company's unsecured promissory notes in the
maximum aggregate original principal amount of up to $250,000, bearing interest
at the rate of 10% per annum (computed on the basis of a 365-day year for the
actual number of days elapsed), substantially in the form set forth in Exhibit
A hereto (herein referred to individually as a "Note" and collectively as the
"Notes," which terms shall also include any notes delivered in exchange or
replacement therefor).

(b) Subject to the terms and conditions of this
Agreement, each Purchaser agrees, severally, but not jointly, to purchase at
the Closing (as defined below), and the Company agrees to sell and issue to
each Purchaser at the Closing, a Note in the principal amount set forth
opposite each such Purchaser's name on the Schedule of Purchasers attached
hereto as Schedule A at a purchase price equal to the original principal amount
of such Note.

1.2 Closing. The initial purchase and sale of the Notes
shall take place at 10:00 a.m. on February 21, 1996, at the offices of Freeborn
& Peters, L.L.C., 950 Seventeenth Street, Denver, Colorado, or at such other
date, time and place as shall be designated by the Company (the "Closing,"
which term also shall include any subsequent closing pursuant to the provisions
of Section 1.3). At or promptly after the Closing, the Company will execute and
deliver Notes, each dated the date of the Closing and payable to the order of
the respective Purchasers, in the respective principal amounts set forth on
Schedule A, against delivery of the full purchase price for the Notes by wire
transfer of the purchase price to an account designated in writing by the
Company.

1.3 Subsequent Closings. If the Notes issued or sold at
the Closing represent, in the aggregate, less than the maximum aggregate
original principal amount as set forth in Section 1.1(a), the Company may issue
additional Notes at one or more subsequent closings held within thirty (30)
days of the Closing; provided, however, that the Company, in its sole
discretion, at any time after the initial Closing, may terminate this offering
and accept no additional purchases. Upon execution of counterpart signature
pages to each of this Agreement (as defined herein), any additional

<PAGE> 4
purchaser purchasing a Note at any such subsequent closing shall be added to
Schedule A and shall be deemed to be a Purchaser for purposes of this
Agreement. The date of the final purchase and sale of the Notes shall be
referred to herein as the "Final Closing."

2. Maturity. Unless previously converted pursuant to Section 3
hereof, the Notes shall mature and become due and payable in full at the close
of business on March 31, 1996.

3. Repayment Rights. The Notes are subject to mandatory
adjustment of their repayment terms to be identical to the repayment terms of
the Underwriter bridge, upon the completion of the Underwriter bridge.

4. Common Stock.

4.1 Sale, Issuance and Price of Common Stock.

(a) The Company has authorized the issuance and
sale to the Purchasers of a maximum aggregate of 75,000 shares of the Company's
common stock, $.01 par value per share (the "Shares").

(b) At the Closing, and at any subsequent closing
up to and including the Final Closing, the Company shall issue to each
Purchaser purchasing a Note against receipt of the Purchase Price (as defined
in Section 4.1(c)), the number of shares of Common Stock set forth opposite
such Purchaser's name on Schedule A.

(c) The purchase price for the Shares shall be
$.01 per share (the "Purchase Price"), which is hereby agreed to be the fair
market value of such Shares.

4.2 Registration Rights. The Company covenants and
agrees to enter into, with each of the Purchasers, a registration rights
agreement substantially in the form of the registration rights agreement to be
entered into by it in connection with the Underwriter Transaction, which
agreement shall provide for the registration under the Act (as defined below)
of the resale of the Shares by the Purchasers, subject to the conditions and
limitations of such agreement. As to any Purchaser, the Company's obligation
to enter into such agreement shall be conditioned upon such Purchaser's
execution and delivery of a counterpart copy of such agreement, which will
provide for a "lock-up" of the Purchaser's Shares and such other customary
provisions as may be required by the Underwriter.

5. Certain Tax Consequences. Each Purchaser hereby acknowledges
that for federal income tax purposes he or it is purchasing investment units
consisting of a Note and Shares and that the allocation of consideration made
herein between the Note and the Shares shall be binding upon each Purchaser
unless such Purchaser explicitly discloses on its tax return that it is making
a different allocation. It is further understood that such allocation does not
bind the Internal Revenue Service, and in the event the fair market value of
the Shares is determined to be greater than the Purchase Price of the Shares
set forth in Section 4.1(c), the cost basis of the Notes would have to be
reduced by the amount of such excess and the Notes would be deemed to be issued
at a discount. Individual cash basis holders of Notes would then report the
difference between the allocated cost of the Notes and the aggregate principal
and interest received as ordinary income upon payment of the Notes. Gain on the

-2-
<PAGE> 5
sale or exchange of a discounted Note would be ordinary income up to the
accrued portion of the discount and interest. Other Note holders would be
subject to the rules under Internal Revenue Code Sections 1281-1283 regarding
the ratable accrual of the discount and interest on short-term obligations.

6. Representations and Warranties of the Purchasers. Each
Purchaser severally, but not jointly, hereby represents and warrants to the
Company that:

6.1 Such Purchaser is aware that the investment in the
Note and the Shares involves a high degree of risk.

6.2 Such Purchaser understands and acknowledges that
there is no assurance as to the future performance of the Company.

6.3 Such Purchaser understands and acknowledges that
there may be certain adverse tax consequences to him or it in connection with
his or its purchase of the Note and the Shares (including but not limited to
the tax consequences described in Section 5), that the Company is not giving
and has not given any advice on the tax consequences of the investment and that
the Company has advised all Purchasers to seek the advice of their own experts
in such areas prior to making this investment.

6.4 This Agreement has been duly executed and delivered
by such Purchaser and constitutes the Purchaser's valid and legally binding
obligation, enforceable in accordance with its terms. Each Purchaser
represents that he or it has full power and authority to enter into this
Agreement.

6.5 The Confidential Investor Questionnaire being
delivered by the Purchaser to the Company simultaneously herewith
is true, complete and correct in all material respects; and the Purchaser
understands that the Company has determined that the exemption of the Note and
the Shares from the registration provisions of the Securities Act pursuant to
Regulation D thereof, which is available for non-public offerings, is
applicable to the offer and sale of the Note and the Shares, and that such
determination is based in part upon the representations, warranties and
agreements made by the Purchaser herein and in the Confidential Investor
Questionnaire.

6.6 The Note and the Shares to be received by such
Purchaser pursuant to the terms hereof, and will be acquired for investment for
such Purchaser's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and such Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same.

6.7 Such Purchaser understands that the Securities he or it is
receiving hereunder are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances.

-3-
<PAGE> 6
6.8 Each Purchaser represents and warrants that he or it
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of an investment in the Notes and
the Shares and has obtained, in his or its own judgment, sufficient information
from the Company to evaluate the merits and risks of an investment in the
Company. Each Purchaser further represents and warrants that he or it has not
utilized any person as a purchaser representative as such term is defined in
Regulation D in connection with evaluating such merits and risks, but rather
has relied solely upon his or its own investigation in making a decision to
invest in the Company.

6.9 No representations or warranties have been made to
the Purchaser by the Company or any of its directors, agents, employees or
affiliates; and in entering into this transaction the Purchaser is not relying
upon any information other than that obtained as the result of independent
investigations, if any, by the Purchaser.

6.10 Each Purchaser represents and warrants that he or it
has had a reasonable opportunity to ask questions and to receive satisfactory
answers concerning the offering and other matters pertaining to his or its
investment and all such questions have been answered to the Purchaser's full
satisfaction; the Purchaser further represents and warrants that he or it has
had reasonable opportunity to obtain all the information he or it considers
necessary or appropriate for deciding whether to purchase the Note and the
Shares.

6.11 Each Purchaser represents and warrants that he or it
is an "accredited investor" within the meaning of Rule 501(a) of Regulation D,
promulgated under the Act.

6.12 The address set forth below is the Purchaser's true
and correct domicile, and the Purchaser has no present intention of becoming a
resident of any other state or jurisdiction.

6.13 Without in any way limiting the representations set
forth above, such Purchaser further agrees not to make any disposition of the
Securities unless there is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or such Purchaser shall have
notified the Company of the proposed disposition and shall have furnished the
Company with a statement of the circumstances surrounding the proposed
disposition, and, if reasonably requested by the Company, such Purchaser shall
have furnished the Company with an opinion of counsel, reasonably satisfactory
to the Company, that such disposition will not require registration of such
shares under the Act. It is agreed that the Company will not require opinions
of counsel for transactions made pursuant to Rule 144 except if reasonably
requested by the Company.

6.14 It is understood that the Securities may bear one or
all of the following legends:

-4-
<PAGE> 7
RESPECT TO THE SECURITIES UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 PROMULGATED
UNDER SUCH ACT."

(b) Any legend required by the laws of the State
of Delaware or applicable state securities laws.

7. Conditions of Purchaser's Obligations at Closing. The
obligations of each Purchaser under subsection 1.1(b) of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions, the waiver of which shall not be effective against any Purchaser
who does not consent in writing thereto:

7.1 Performance. The Company shall have performed and
complied with all agreements, obligations, and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.

7.2 Qualifications. The Company shall have obtained all
necessary Blue Sky law permits and qualifications, or secured exemptions
therefrom, required by any state for the offer and sale of the Notes and the
Shares.

7.3 Consents and Waivers. The Company shall have
obtained any and all consents and waivers necessary or appropriate for
consummation of the transactions contemplated by this Agreement.

8. Miscellaneous.

8.1 Survival of Warranties. The warranties,
representations and covenants of the Company and the Purchasers contained in or
made pursuant to this Agreement shall survive the execution and delivery of
this Agreement and the Closing and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Purchasers or the Company.

8.2 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement

8.3 Governing Law. This Agreement shall be governed by
and construed under the laws of the State of Colorado, disregarding any
Colorado principles of conflicts of laws that otherwise would provide for the
application of the substantive laws of another jurisdiction.

8.4 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same Agreement.

-5-
<PAGE> 8
8.5 Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

8.6 Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given upon personal delivery to the party to be notified
or four (4) days after deposit with the United States Post Office or air
courier in the case of non-U.S. Purchasers, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.

8.7 Entire Agreement, Amendments and Waivers. This
Agreement and the Notes constitute the full and entire understanding and
agreement between the parties with regard to the subject matter hereof. Any
term of this Agreement or the Notes may be amended and the observance of any
term of this Agreement or the Notes may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the debt
represented by the Notes then outstanding. Any amendment or waiver effected in
accordance with this Section 9.7 shall be binding upon each holder of any
securities acquired under this Agreement at the time outstanding (including
securities for which any such securities are convertible or exercisable), each
future holder of all such securities, and the Company.

8.8 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.

(The remainder of this page is intentionally left blank)

-6-
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Unsecured Note and
Stock Purchase Agreement as of the date first above written.

BIOFACTORS, INC.

By: /s/ Esmond T. Goei
----------------------------------------
Esmond T. Goei
President & CEO

Address: 1746 Cole Blvd., Suite 265
Golden, Colorado 80401
Attn: President

-7-

<PAGE> 10
Signature Page
BioFactors, Inc.
Unsecured Note and Stock Purchase Agreement
Dated February 1, 1996

PURCHASER:

By: /s/ Andrew Dunlea
----------------------------------------
Andrew Dunlea
Andrew & Mary Dunlea

Address: 9 Jeanne Ct.
Carmel, NY 10512

Amount Subscribed for $50,000

PURCHASER:

By: /s/ John W. Heilshorn
----------------------------------------
John Heilshorn
Individual Investor

Address: 300 E 75th St 24K
NY, NY 10022

Amount Subscribed for $50,000.00

PURCHASER:

By: /s/ Ming Hsu
----------------------------------------
Ming Hsu

Address: 1036 Echo Dr.
Los Altos, CA 94024

Amount Subscribed for $25,000

PURCHASER:

By: /s/ Ram Iyengar
----------------------------------------
Ram Iyengar

Address: 1 Lexington Circle
Matawan, NJ 07747

Amount Subscribed for $25,000.00

PURCHASER:

By:
----------------------------------------
Albert E. Paladino

Address: 12 Wachusett Rd.
Chestnut Hill, MA 02167

Amount Subscribed for $10,000.00

PURCHASER:

By: /s/ Dale S. Scheck
----------------------------------------
Dale S. Scheck

Address: 3936 Raintree Ln
Northbrook, Illinois 60062

Amount Subscribed for $ 25,000.00

PURCHASER:

By: /s/ Bernard & Barbara Schwartz
----------------------------------------
Bernard & Barbara

Address: 270-20V Grand Central Pkwy
Floral Park, NY 11005

Amount Subscribed for $30,000.00

PURCHASER:

By: /s/ Wayne M. Twarilosz
----------------------------------------
Wayne M. Twarilosz

Address: 2329 N. Greenview
Chicago, IL 60614

Amount Subscribed for $25,000.00

PURCHASER:

By: /s/ Allen Visconti
----------------------------------------
Allen Visconti

Address: 2080 E. 67th St.
Brooklyn, NY 11224

Amount Subscribed for $25,000.00

PURCHASER:

By: /s/ Santanu Das
----------------------------------------
Santanu Das

Address: 14 Hunter Ridge
Monroe, CT 06468

Amount Subscribed for $25,000.00

-8-

<PAGE> 11
BIOFACTORS, INC.
FIRST AMENDMENT TO
UNSECURED NOTE AND STOCK PURCHASE AGREEMENT

This FIRST AMENDMENT TO UNSECURED NOTE AND STOCK PURCHASE AGREEMENT
(this "Amendment") is entered into as of March 22, 1996, by and among
BioFactors, Inc., a Delaware corporation (the "Company") and the parties named
on the signature pages hereto (all of such parties other than the Company,
collectively, the "Majority Noteholders") and amends that certain Unsecured
Note and Stock Purchase Agreement dated as of February 1, 1996, by and among
the Company and the Purchasers named therein (the "Note Agreement").

WHEREAS, the Majority Noteholders are the holders of the unsecured
promissory notes (the "Notes") issued pursuant to the Note Agreement and,
collectively, are the holders of Notes representing in excess of fifty percent
of the aggregate principal amount of all the Notes outstanding as of the date
hereof and, pursuant to Section 8.7 of the Note Agreement, can bind each holder
of the Notes outstanding as of the date of this Agreement;

WHEREAS, pursuant to the Note Agreement, the repayment terms of the
Notes automatically adjust to conform to the terms of the Company's bridge
notes placed by the underwriter of the Company's initial public offering of its
common stock (the "IPO");

WHEREAS, the Company has entered into a letter of intent with Joseph
Stevens & Company, L.P. ("Joseph Stevens") pursuant to which Joseph Stevens has
agreed to underwrite the Company's IPO and to place the Company's promissory
notes having a minimum aggregate principal amount of $500,000 (the "Joseph
Stevens Bridge"); and

WHEREAS, it being acknowledged that the placement of the Joseph
Stevens Bridge and the subsequent underwriting of the IPO will be of
substantial benefit to the Company and the Majority Noteholders, the Company
and the majority Noteholders desire to enter into this Amendment to extend the
maturity date of the Notes to accommodate the placement of the Joseph Stevens
Bridge and to acknowledge the conformance of the repayment terms of the Notes
consistent with the terms of the notes issued in connection with the Joseph
Stevens Bridge (the "Joseph Stevens Notes").

NOW THEREFORE, in consideration of the above and the following mutual
covenants and agreements, the parties agree as follows:

1. Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings given such terms in the Note Agreement.

2. Amendments. The Majority Noteholders hereby agree to amend
the Note Agreement as follows:

a. Definitions. The term "Underwriter Bridge" shall be
replaced wherever it appears by the term "Joseph Stevens Bridge" which term
shall have the following meaning: the placement by Joseph Stevens of the
Company's promissory notes having a minimum aggregate principal amount of
$500,000.

-9-
<PAGE> 12

b. Authorized Issuance. Section 1.1(a) is amended by
replacing $250,000 with $300,000, such amount being the authorized aggregate
original principal amount of Notes issued pursuant to the Note Agreement and
Section 4.1(a) is amended by replacing 75,000 with 90,000, such amount being
the authorized amount of Shares issued.

c. Maturity Date Extension. Section 2 is amended in its
entirety as follows:

"2. Maturity. Unless the Joseph Stevens Bridge shall
have been previously consummated, in which event the provisions of
Section 3 shall supersede the provisions of this Section 2, the Notes
shall mature and become due and payable in full at the close of
business on June 30, 1996."

3. Acknowledgment of Repayment Terms. The parties hereby agree
that Section 3 of the Note Agreement shall be construed as pertaining to the
Joseph Stevens Bridge and that upon the closing of the Joseph Stevens Bridge
the Notes shall mature and become due and payable in full on the earlier of (i)
one year from the date of issuance of the Joseph Stevens Notes or (ii) the
consummation of a financing in which the Company receives gross proceeds of at
least $1,500,000.

4. Construction of Waiver. The Note Agreement shall be deemed
amended only to the extent set forth herein and remains in full force and
effect.

5. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument.

(The remainder of this page intentionally left blank.)

-10-
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Unsecured Note and Stock Purchase Agreement to be duly executed as
of the day and year first above written.

BIOFACTORS, INC.

By: /s/ Esmond T. Goei
------------------------------
Esmond T. Goei
Title: President & CEO

-11-
<PAGE> 14
Signature Page to First Amendment to Unsecured Note
and Stock Purchase Agreement

By: /s/ Barbara Dallas
------------------------------
Name of Noteholder
Name: Barbara Dallas
Title:

By: /s/ Ming Hsu
------------------------------
Name of Noteholder
Name: Ming Hsu
Title:

By: /s/ John W. Heilshorn
3/24/96
------------------------------
Name of Noteholder
Name: John W. Heilshorn
Title:

By: /s/ Ram Iyengar
------------------------------
Name of Noteholder
Name: Ram Iyengar
Title:

By: /s/ Charles L. Lewis
------------------------------
Name of Noteholder
Name: Charles L. Lewis
Title:

By: /s/ Albert E. Paladino
3/21/96
------------------------------
Name of Noteholder
Name: Albert E. Paladino
Title:

By: /s/ Dale Scheck
------------------------------
Name of Noteholder
Name: Dale Scheck
Title:

By: /s/ Barbara Schwartz and
/s/ Bernard Schwartz
------------------------------
Name of Noteholder
Name: Barbara Schwartz and
Bernard Schwartz
Title: Joint

By: /s/ Wayne W. Twarilosz
------------------------------
Name of Noteholder
Name: Wayne W. Twarilosz
Title:

By: /s/ Allen Visconti
------------------------------
Name of Noteholder
Name: Allen Visconti
Title:

<PAGE> 15
BIOFACTORS, INC.
SECOND AMENDMENT TO
UNSECURED NOTE AND STOCK PURCHASE AGREEMENT

This SECOND AMENDMENT TO UNSECURED NOTE AND STOCK PURCHASE AGREEMENT
(this "Amendment") is entered into as of July 1, 1996, by and among BioFactors,
Inc., a Delaware corporation (the "Company") and the parties named on the
signature pages hereto (all of such parties other than the Company,
collectively, the "Majority Noteholders") and amends that certain Unsecured
Note and Stock Purchase Agreement dated as of February 1, 1996, as amended, by
and among the Company and the Purchasers named therein (the "Note Agreement").

WHEREAS, the Majority Noteholders are the holders of the secured
promissory notes (the "Notes") issued pursuant to the Note Agreement and,
collectively, are the holders of Notes representing in excess of fifty percent
of the aggregate principal amount of all the Notes outstanding as of the date
hereof and, pursuant to Section 9.7 of the Note Agreement, can bind each holder
of the Notes outstanding as of the date of this Agreement;

WHEREAS, the Company has entered into a letter of intent with Joseph
Stevens & Company, L.P. ("Joseph Stevens") pursuant to which Joseph Stevens has
agreed to underwrite the Company's IPO and to place promissory notes of the
Company having a minimum aggregate principal amount of $500,000 and warrants to
purchase common stock of the Company (the "Joseph Stevens Bridge"); and

WHEREAS, the Company and the Majority Noteholders desire to waive the
current default on the Notes and to amend the Note Agreement to provide for an
extension of the maturity date of the Noted, it being acknowledged that the
closing of the Joseph Stevens Bridge will be of substantial benefit to the
Company and the Majority Noteholders;

NOW THEREFORE, in consideration of the above and the following mutual
covenants and agreements, the parties agree as follows:

1. Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings given such terms in the Note Agreement.

2. Waiver. The Majority Noteholders hereby agree to waive the
current default on the Notes and to extend the maturity date thereof as set
forth herein.

3. Amendment. Section 2 is amended as follows: the term "June
30, 1996" shall be replaced by the term "November 30, 1996."

4. Construction of Waiver. The Note Agreement shall be deemed
amended only to the extent set forth herein and remains in full force and
effect.

-12-
<PAGE> 16
5. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to Unsecured Note and Stock Purchase Agreement to be duly executed as
of the day and year first above written.

BIOFACTORS, INC.

By: /s/ Esmond T. Goei
---------------------------------
Esmond T. Goei
Title: President and Chief Executive
Officer

-13-
<PAGE> 17
SIGNATURE PAGE TO SECOND AMENDMENT TO
UNSECURED NOTE AND STOCK PURCHASE AGREEMENT

/s/ Barbara Dallas
------------------------------------------------
Barbara Dallas

/s/ Santanu Das
------------------------------------------------
Santanu Das

/s/ Andrew Dunlea
------------------------------------------------
Andrew Dunlea

/s/ John W. Heilshorn, Jr.
------------------------------------------------
John W. Heilshorn, Jr.

/s/ Ming Hsu
------------------------------------------------
Ming Hsu

/s/ Charles L. Lewis, M.D.
------------------------------------------------
Charles L. Lewis, M.D.

/s/ Albert E. Paladino
------------------------------------------------
Albert E. Paladino

/s/ Dale Scott Scheck
------------------------------------------------
Dale Scott Scheck

BERNARD SCHWARTZ AND BARBARA
SCHWARTZ AS JOINT TENANTS

/s/ Bernard Schwartz
------------------------------------------------
Bernard Schwartz

/s/ Barbara Schwartz
------------------------------------------------
Barbara Schwartz

/s/ Allen Visconti
------------------------------------------------
Allen Visconti

-14-
<PAGE> 18

BIOFACTORS, INC.
THIRD AMENDMENT TO
UNSECURED NOTE AND STOCK PURCHASE AGREEMENT

THIS THIRD AMENDMENT TO UNSECURED NOTE AND STOCK PURCHASE AGREEMENT
(this "Amendment") is entered into as of the 1st day of October, 1996, by and
among BioFactors, Inc., a Delaware corporation ("BioFactors" or the "Company")
and the parties named on the signature pages hereto (all of such parties other
than the Company, collectively, the "Majority Holders") and amends that certain
Unecured Note and Stock Purchase Agreement dated as of February 1, 1996, by and
among the Company and the Purchasers named therein, as previously amended (the
"Note Agreement").

RECITALS

WHEREAS, the Majority Holders are the holders of unsecured promissory
notes of the Company (the "Notes") and shares (the "Shares") of common stock of
the Company (the "Common Stock"), $0.01 par value per share, issued pursuant to
the Note Agreement and, collectively, are the holders of Notes representing in
excess of fifty percent of the aggregate principal amount of all the Notes
outstanding as of the date hereof and, pursuant to Section 8.7 of the Note
Agreement, can bind each holder of Notes or Shares outstanding as of the date of
this Agreement;

WHEREAS, the Company has entered into a letter of intent with Chatfield
Dean & Co. ("Chatfield Dean"), providing for underwriting and financial advisory
services (the "Underwriting");

WHEREAS, as a condition precedent to the Underwriting, the Company is
required to enter into a definitive agreement with Voice Plus, Inc., a
California corporation ("Voice Plus"), for the formation of a holding company
("Registrant") and the merger of each of BioFactors (the "BFI Merger") and Voice
Plus with and into separate, wholly-owned subsidiaries of Registrant,
concurrently with Chatfield Dean's Underwriting of the initial public offering
of Registrant's securities pursuant to a registration statement filed under the
Securities Act of 1933 (the "IPO");

WHEREAS, upon the consummation of the BFI Merger, the Company's
stockholders, including the Majority Holders, are to receive shares of common
stock of Registrant ("Registrant Common Stock") in exchange for the BioFactors
Common Stock held by them in a three-for-four (three shares of common stock of
Registrant for every four shares of BioFactors Common Stock) conversion, or such
other ratio as Chatfield Dean may determine is necessary;

WHEREAS, as a further condition precedent to the Underwriting, the
Company is required to enter into agreements amending the terms of outstanding
securities including, in particular, this Amendment providing for the consent of
the Majority Holders (a) to extend the Maturity date of the Notes to provide
additional time to accomplish the IPO, (b) to effect the mandatory conversion at
the IPO of all accrued interest on the Notes into common stock of Registrant,
(c) to amend and coordinate the registration rights granted in connection with
the Shares and certain other shares of its Common Stock and securities
convertible into or exercisable for its Common Stock, and (d) to effect certain
other amendments to the Note Agreement;
<PAGE> 19
WHEREAS, as consideration for the agreements herein, the Company will
cause Registrant to issue warrants to holders of the Notes; and

WHEREAS, the Company and the Majority Holders desire to enter into this
Amendment to facilitate the Underwriting, it being acknowledged that the
Underwriting will be of substantial benefit to the Company and to the Majority
Holders.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the following
mutual covenants and agreements, the parties hereby agree as follows:

10. Definitions. All capitalized terms used herein and not otherwise
defined shall have the meanings given such terms in the Note Agreement.

11. Amendments. The Majority Holders hereby agree to amend the Note
Agreement as follows:

a. Authorized Issuance. Section 1.1(a) is amended by replacing
$300,000 with $315,000, such amount being the authorized aggregate original
principal amount of Notes issued pursuant to the Note Agreement and Section
4.1(a) is amended by replacing 90,000 with 94,500, such amount being the
authorized amount of Shares issued.

b. Maturity Date Extension. Section 2 of the Note Agreement is
hereby amended in its entirety, as follows:

"2. Maturity Date. The Notes shall mature and become due and payable in
full at the close of business on March 31, 1997 (the "Maturity Date")."

c. Prepayment and Conversion of Accrued Interest. Section 3 of the
Note Agreement is hereby amended in its entirety, as follows:

"3. Prepayment and Conversion of Accrued Interest. In the event the IPO
(defined below) is consummated prior to the Maturity Date, the
principal of the Notes shall be paid in full within five business days
of the receipt by Registrant (defined below) of the proceeds of the IPO
and all accrued interest on the Notes calculated through the IPO
closing date shall be converted into common stock of Registrant at a
conversion price equal to the price per share to the public in the IPO
(the "IPO Price"). In connection with such conversion, no fractional
shares of common stock shall be issued; instead, the number of shares
of common stock otherwise issuable will be rounded up to the next whole
share."

d. Registration Rights. Addendum A (which set forth the former
registration rights) is hereby deleted in its entirety. Section 4.2 of the Note
Agreement is hereby amended in its entirety, as follows:

-2-
<PAGE> 20
"4.2 Planned Initial Public Offering; Registration Rights.

(a) The term "IPO" as used herein shall mean the proposed initial
public offering of the Company's securities, or the securities of a
holding company formed to hold the capital stock of BioFactors (such
entity, whether the Company or a holding company, being referred to
herein as, the "Registrant"), pursuant to an effective registration
statement filed under the Securities Act of 1933, as amended. The
undersigned understands and agrees that there can be no assurances that
a registration statement will be filed or, if filed, will be declared
effective by the Securities and Exchange Commission (the "Commission")
or, if the registration statement is declared effective by the
Commission, that the Registrant will be able to consummate such IPO.

(b) Registration Rights. Upon the execution of the Registration
Rights Agreement, substantially in the form attached hereto as EXHIBIT
B (the "Rights Agreement"), the Purchasers will become parties to the
Rights Agreement and the Shares, and any shares of common stock
issuable upon the the exercise or conversion of any securities issued
pursuant to this Agreement, shall become subject thereto."

3. Automatic Conversion. The Majority Holders hereby consent to the
automatic conversion upon the consummation of the IPO of all accrued interest on
the Notes, at a conversion price and calculated as set forth in Section 3 of the
Note Agreement, into common stock of the Registrant.

4. Issuance of Additional Warrants. In consideration of the agreements
herein, the Company hereby agrees that, upon the closing of the IPO, the payment
of the principal of the Notes and the conversion of the accrued interest
thereon, the Company shall, for no additional monetary consideration, cause the
Registrant to issue and deliver to each holder of Notes, a warrant to purchase
seventy-five (75) shares of Registrant common stock (the "Warrant Shares") for
each One Thousand Dollars ($1,000) in original principal amount of such holder's
Notes at an exercise price equal to 120% of the IPO Price (the "Warrants").

5. Proxy. The undersigned hereby irrevocably appoints John Black as
the undersigned's attorney and proxy, with full power of substitution, to vote
or to consent in writing in lieu of a vote or meeting with respect to all of the
Shares held by the undersigned which the undersigned is entitled to vote at any
meeting of stockholders (whether annual or special and whether or not an
adjourned meeting) of the Company, or pursuant to written action taken in lieu
of any such meeting or otherwise, in such manner as to cause the BFI Merger and
any agreement effecting the BFI Merger to be approved. This proxy is
irrevocable, is coupled with an interest sufficient in law to support an
irrevocable proxy and is granted in consideration of and as an inducement to
cause the Company to issue the Warrants. In connection with giving this proxy,
the undersigned understands and agrees that the BFI Merger effectively will
cause a reverse split of the Company's capital stock in that every four (4)
shares of BioFactors Common Stock issued and outstanding or held in treasury
immediately prior to the effective time of the BFI Merger shall, automatically
and without any action of the part of the respective holders thereof, be
converted into approximately three shares of Registrant Common Stock (or such
other number of shares as Chatfield Dean and the Company shall determine).

-3-
<PAGE> 21
6. Construction of Waiver. The Note Agreement shall be deemed amended
only to the extent set forth herein and remains in full force and effect.

7. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument.

[The remainder of this page intentionally left blank.]

-4-
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this THIRD AMENDMENT
TO UNSECURED NOTE AND STOCK PURCHASE AGREEMENT to be duly executed as of the day
and year first above written.

BIOFACTORS, INC.

By: /s/ Esmond T. Goei
----------------------------------------
Esmond T. Goei
Title: President & CEO

HOLDER:

/s/ Santanu Das
--------------------------------------------
(Signature)
Santanu Das
--------------------------------------------
(Print Name)

/s/ John Heilshorn
--------------------------------------------
(Signature)
John Heilshorn
--------------------------------------------
(Print Name)

/s/ Dale S. Scheck
--------------------------------------------
(Signature)
Dale S. Scheck
--------------------------------------------
(Print Name)

BERNARD SCHWARTZ AND BARBARA SCHWARTZ AS
JOINT TENANTS

/s/ Bernard Schwartz
--------------------------------------------
(Signature)
Bernard Schwartz
--------------------------------------------
(Print Name)

/s/ Barbara Schwartz
--------------------------------------------
(Signature)
Barbara Schwartz
--------------------------------------------
(Print Name)

/s/ Allen Visconti
--------------------------------------------
(Signature)
Allen Visconti
--------------------------------------------
(Print Name)

/s/ Charles L. Lewis
--------------------------------------------
(Signature)
Charles L. Lewis
--------------------------------------------
(Print Name)

/s/ Barbara Dallas
--------------------------------------------
(Signature)
Barbara Dallas
--------------------------------------------
(Print Name)

/s/ Ming Hsu
--------------------------------------------
(Signature)
Ming Hsu
--------------------------------------------
(Print Name)

/s/ Ram Mengar
--------------------------------------------
(Signature)
Ram Mengar
--------------------------------------------
(Print Name)

/s/ Albert E. Paladino
--------------------------------------------
(Signature)
Albert E. Paladino
--------------------------------------------
(Print Name)

/s/ Wayne M. Twarilosz
--------------------------------------------
(Signature)
Wayne M. Twarilosz
--------------------------------------------
(Print Name)

-5-
<PAGE> 23
EXHIBIT A

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144
PROMULGATED UNDER THE ACT.

BIOFACTORS, INC.
UNSECURED PROMISSORY NOTE

$__________ No. ________
February 1, 1996

FOR VALUE RECEIVED, the undersigned, BIOFACTORS, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of
______________, or registered assigns ("Holder") at such place as the Holder
may from time to time designate in writing, the principal sum of
____________________ THOUSAND DOLLARS ($___________), and to pay simple
interest on the unpaid balance of said principal from the date hereof through
maturity at the rate of ten percent (10%) per annum.

1. Maturity.

(a) Principal and accrued interest under this
Note shall be due and payable at the Maturity Date. If payment of the principal
amount hereof or interest accrued thereon is not made within five (5) days of
the Maturity Date, then interest shall accrue on such unpaid amount from the
date of nonpayment to the date of payment at the rate of 18% per annum
thereafter. Interest shall be calculated on the basis of a 365-day year for the
actual number of days elapsed.

(b) Principal and interest payments hereunder
shall be made in money of the United States of America, lawful at such times
for the satisfaction of public and private debts.

2. Prepayment. The Company may prepay this note in
whole at any time, or in part from time to time, without penalty or premium,
upon thirty (30) days' written notice to the Holder. Each partial prepayment
shall first be applied to interest accrued through the date of prepayment and
then to principal.

-15-
<PAGE> 24
3. Note Agreement. This Note is the Maker's "Note" and
is issued pursuant to and entitled to the benefit of that certain Unsecured
Note and Stock Purchase Agreement dated as of February 1, 1996, between Maker
and the Purchasers named therein, as the same may be amended, modified or
supplemented from time to time as permitted thereby (as amended, the "Note
Agreement"). Capitalized terms used herein without definition shall have the
meaning set forth in the Note Agreement.

4. Registered Note. This Note is a registered Note and
is transferable only by surrender thereof at the principal offices of the
Company, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of this Note or his attorney duly authorized
in writing. The Maker may treat the person whose name appears in the Note
register as the owner hereof for the purpose of receiving payment as herein
provided. Transfers are subject to the restrictions set forth in the Note
Agreement.

5. Repayment Rights. Pursuant to paragraph 3 of the
Note Agreement.

6. Waiver of Demand, Protest, etc. Maker hereby waives
diligence, presentment, demand, protest and notice of any kind whatsoever.
Maker promises to pay costs of collection and reasonable attorneys' fees if
default is made in the payment of this Note. The right to plead any and all
statutes of limitation as a defense to this Note or to any agreement to pay the
same, is hereby expressly waived by the undersigned to the full extent
permitted by law.

7. Notice. Any notice required or permitted hereunder
shall be given in accordance with the Note Agreement.

Governing Law. THE MAKER AND THE HOLDER AGREE THAT
THIS NOTE AND THE LEGAL RELATIONS BETWEEN THE MAKER AND THE HOLDER, AND ALL
RIGHTS AND OBLIGATIONS HEREUNDER, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY,
AND PERFORMANCE, SHALL BE GOVERNED BY AND INTERPRETED, CONSTRUED, APPLIED, AND
ENFORCED IN ACCORDANCE WITH THE LAW OF THE STATE OF COLORADO WITHOUT REFERENCE
TO THE LAW OF ANOTHER JURISDICTION.

IN WITNESS WHEREOF, the undersigned has caused this note to be
executed as this ________ day of February, 1996.

MAKER:

BIOFACTORS, INC.

(Corporate Seal) By:
------------------------------------
Douglas Zorn
Its: Vice President and Secretary

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<PAGE> 1
Exhibit 10.10

BIOFACTORS, INC.
UNIT SUBSCRIPTION AGREEMENT

BioFactors, Inc.
1746 Cole Boulevard
Suite 265
Golden, CO 80401

Ladies and Gentlemen:

1. Purchase and Sale of the Units. The Company has authorized
the issuance and sale of up to 10 Units to the purchasers hereunder
(individually, a "Purchaser," and collectively, the "Purchasers") pursuant to
the terms of the offer set forth in this Unit Subscription Agreement (this
"Agreement") dated as of May 17, 1996.

1.1 Description of the Units. Each Unit shall
consist of:

(a) a promissory note of the Company in
the principal amount of Fifty Thousand Dollars ($50,000), bearing simple
interest at the rate of 10% per annum from the Closing (as defined below)
(computed on the basis of a 360-day year consisting of twelve 30-day months),
substantially in the form set forth in Exhibit A hereto (herein referred to
individually as a "Note" and collectively as the "Notes," which terms shall also
include any notes delivered in exchange or replacement therefor). The Notes
shall mature and the principal and all accrued interest payable thereon shall
become due and payable in full upon the earlier of (i) the closing of the
Company's proposed initial public offering of its securities with gross proceeds
of at least $5,000,000 ("IPO"), as defined below, or (ii) at the close of
business on September 30, 1996. The terms of the Notes may be amended by
Purchasers holding more than 50% of the aggregate outstanding principal amount
of the Notes.

(b) fifteen thousand (15,000) shares of
the Company's common stock, $0.01 par value per share ("Common Stock") (herein
referred to individually as a "Share" and collectively as the "Shares") (a Note
and the Shares being, a "Unit"). The purchase price shall equal $0.50 per Share
(a total of $7,500 per Unit), which is hereby agreed to be the fair market value
per share of such Common Stock.

1.2 Agreement to Purchase. Subject to the terms
and conditions of this Agreement, each Purchaser agrees, severally, but not
jointly, to purchase at the Closing, and the Company agrees to sell and issue to
each Purchaser at the Closing, Units as set forth opposite each such Purchaser's
name on the Schedule of Purchasers attached hereto as Schedule A at the
purchase price set forth thereon.

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<PAGE> 2

1.3 Acceptance or Rejection.

(a) The undersigned understands and agrees that the
Company reserves the right to reject this subscription for the Units in whole or
part in any order, if, in its reasonable judgment, it deems such action in the
best interest of the Company, at any time prior to the Closing, notwithstanding
prior receipt by the undersigned of notice of acceptance of the undersigned's
subscription.

(b) The undersigned understands and agrees that the
subscriptions may be revoked provided that written notice of revocation is sent
by certified or registered mail, return receipt requested, and is received by
the Company at least two business days prior to the Closing.

(c) In the event of rejection of this subscription, or in
the event the sale of the Units subscribed for by the undersigned is not
consummated by the Company for any reason (in which event this Subscription
Agreement shall be deemed to be rejected), this Subscription Agreement and any
other agreement entered into between the undersigned and the Company relating to
this subscription shall thereafter have no force or effect and the Company shall
promptly return or cause to be returned to the undersigned the purchase price
remitted to the Company by the undersigned, without interest thereon or
deduction therefrom, in exchange for the Units.

1.4 Closings.

(a) The initial closing of this offering shall take place
at 10:00 a.m., Denver time, on May 17, 1996, (or such other date as the Company
may establish) at the offices of Davis, Graham & Stubbs, LLP, 370 Seventeenth
Street, Suite 4700, Denver, Colorado, or at such other date, time and place as
shall be designated by the Company (the "Closing," which term also shall include
any subsequent closing described below). At or promptly after the Closing, the
Company will execute and deliver the Notes and the certificates evidencing the
Shares, each dated the date of the Closing, to the Purchasers, in the respective
principal amounts set forth on Schedule A, against delivery by the Purchasers of
the full purchase price for the Units by wire transfer of the purchase price to
the account designated by the Company not less than two (2) business days prior
to the date of the Closing. The initial Closing is not contingent on a minimum
number of Units being subscribed for.

(b) If fewer than 10 Units are sold at the initial Closing,
the Company may issue additional Units at one or more subsequent closings held
on or before July 31, 1996, which date may be extended by the Company, without
notice to the Purchasers, for an additional period not to exceed 30 days. Upon
execution of counterpart signature pages to this Agreement any additional
purchaser purchasing Units at any such subsequent closing shall be added to
Schedule A and shall be deemed to be a Purchaser for purposes of this
Agreement. The date of the final purchase and sale of the Notes shall be
referred to herein as the "Final Closing.

2. Acceptance or Rejection of Subscription. The Company reserves the
right to reject any subscription for the Units, in whole or in part, at any time
prior to the Closing, if the Company deems such action to be in its best
interests. In the event of rejection, any subscription

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<PAGE> 3

moneys tendered shall be returned to the Purchaser and this Agreement with
respect to such Purchaser shall have no force and effect.

3. Planned Initial Public Offering: Lock-Up; Registration Rights.

3.1 IPO. The term "IPO" as used herein shall mean the proposed initial
public offering of the Company's securities with gross proceeds of at least
$5,000,000 pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "Act"). There can be no assurances that a
registration statement ("Registration Statement") will be filed or, if filed,
will be declared effective by the Securities and Exchange Commission (the
"Commission") or, if the Registration Statement is declared effective by the
Commission, that the Company will be able to consummate such IPO.

3.2 Lock-Up. Notwithstanding Section 3.3 below, to facilitate the
closing of the IPO, the undersigned hereby agrees that the Shares may not
directly or indirectly be sold, offered for sale, assigned, hypothecated,
pledged, transferred, distributed or otherwise disposed of for a period
beginning on the date of the Closing and ending eighteen (18) months after the
Effective Date (the "Holding Period"), unless the managing underwriter of the
IPO, in its sole discretion, agrees to the sale of all or part of such
securities at an earlier date. The undersigned further consents to the placing
of legends and stop-transfer orders with the Transfer Agent of the Company's
securities with respect to any of such securities registered in the name of the
undersigned or beneficially owned by the undersigned. The parties hereto agree
that the managing underwriter is intended to be a third-party beneficiary of
this Subscription Agreement and that no modification of the "lock-up" provisions
contained in this Section 3.2 may be made without the prior written consent of
the managing underwriter. The undersigned further agrees to execute any
standalone lock-up agreement as may be requested by the managing underwriter.

3.3 Piggyback Registration. Subject to Section 3.2, at any time
commencing 12 months after the date of issuance of the Units and expiring two
years thereafter, if (but without any obligation to do so) the Company proposes
to register any of its stock or other securities under the Act, in connection
with the public offering of such securities (other than in connection with a
merger, acquisition or exchange offer on Form S-4, a registration relating
solely to the sale of securities to participants in a Company stock plan, a
registration relating solely to a Rule 145 transaction or pursuant to Form S-8
or successor forms), the Company will give each Purchaser written notice by
registered or certified mail at least thirty (30) days prior to the filing of
each such registration statement, to the holder(s) of the Shares, of such
registration. Upon the written request of any Purchaser given within ten (10)
days after receipt of such notice by the Purchaser of his desire to include any
Shares in such proposed registration statement, the Company shall afford such
Purchasers the opportunity to have any such Shares registered under the
registration statement.

Notwithstanding the provisions of this Section 3.3, the following
conditions shall apply:

(a) The Company shall have the right at any time after it shall have
given written notice pursuant to this Section 3.3 (irrespective of whether a
written request for inclusion of any such securities shall have been made) to
elect not to file any such proposed

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<PAGE> 4

registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.

(b) If any registration pursuant to this Section 3.4 shall be
underwritten in whole or in part, the Company may require that the Shares
requested for inclusion be included in the underwriting on the same terms and
conditions as the securities otherwise being sold through the underwriter(s).

(c) If the managing underwriter in an underwritten public offering of
securities shall advise the Company in writing that inclusion of some or all of
the Shares would, in such managing underwriter's opinion, materially interfere
with the proposed distribution of the securities to be offered by, the Company,
in respect of which registration was originally to be effected, then the number
of Shares to be included in the registration statement may be reduced pro rata
(by the number of shares) among the holders of Shares requesting registration or
excluded in their entirety, if so required by the underwriter, in which event,
the Company will give priority for inclusion in such registration statement (i)
first, to shares of Common Stock the Company proposes to sell, if any, (ii)
second, to shares of Common Stock requested to be included by holders of
securities subject to that certain Investors' Rights Agreement dated as of June
1, 1994, by and among the Company and the Investors named therein, as amended,
and to securities held by the managing underwriter and/or Joseph Stevens &
Company, L.P. ("Joseph Stevens"), if any, (iii) third, to shares of Common Stock
requested to be included by holders of securities issued pursuant to that
certain Secured Note and Warrant Purchase Agreement dated as of December 1,
1994, by and among the Company and the Purchasers named therein, as amended, and
(iv) fourth, to the Shares requested to be included and securities requested to
be included by Pari Passu Holders, pro rata among the holders of such securities
on the basis of the number of shares held. "Part Passu Holders" shall mean (A)
holders of securities issued pursuant to that certain Secured Note and Stock
Purchase Agreement dated as of December 1, 1995 by and among the Company and the
Purchasers named therein, as amended, (B) holders of securities issued pursuant
to that certain Unsecured Note and Stock Purchase Agreement dated as of February
1, 1996 by and among the Company and the Purchasers named therein, as amended
and (C) holders, if any, of registrable securities issued pursuant to a bridge
financing in an amount equal to or greater than $500, 000, for which the
managing underwriter and/or Joseph Stevens acted as placement agent.

(d) No Purchaser shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 3.3.

3.4 COVENANTS WITH RESPECT TO REGISTRATION. Whenever required under
Section 3.3 to effect the registration of any Shares:

(a) The Company shall prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as, in the opinion of
counsel to the Company, may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.

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<PAGE> 5

(b) Before filing any registration statement or any amendment thereto
that includes any Shares, the Company shall furnish to the holders of the shares
to be included in such registration statement copies of the sections in the
registration statement that includes information relating to the holders of the
Shares for their review and comment and each holder of Shares agrees that he or
it shall provide the Company and the managing underwriter, if any, with all
information regarding the holder of the Shares that is reasonably requested to
be included in the registration statement.

(c) The Company shall furnish to such Purchasers such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Shares owned by them.

(d) The Company shall use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Purchasers; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Act.

(e) If requested by the managing underwriter in the event of any
underwritten public offering, the Company shall enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering. Each Purchaser participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.

(f) The Company shall notify each Purchaser, at any time when a
prospectus is required to be delivered under the Act, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing.

(g) The Company shall cause all such securities registered pursuant
hereto to be listed on each securities exchange or automated inter-dealer
quotation system on which similar securities issued by the Company are then
listed.

(h) It shall be a condition precedent to the obligations of the Company
to take any action pursuant to Section 3.3 with respect to the Shares of any
selling Purchaser that such Purchaser shall furnish to the Company such
information regarding itself, the securities held by it, and the intended method
of disposition of such securities as shall be required to effect the
registration of such Purchaser's securities.

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<PAGE> 6

printers' and accounting fees, fees and disbursements of counsel for the
Company (but not including any fees and expenses of counsel or other
professionals retained by the Purchasers) shall be borne by the Company.

3.5 Indemnification.

(a) Indemnification of Holder of Shares. In the event that the Company
registers any of the Shares under the Act, the Company will indemnify and hold
harmless Purchaser from and against any and all losses, claims, damages,
expenses or liabilities to which he becomes subject under the Act and, except as
hereinafter provided, will reimburse Purchaser for any legal or other expenses,
if any, reasonably incurred by him in connection with investigating or defending
any actions, whether or not resulting in any liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the registration statement, in any preliminary prospectus or in the prospectus
(or the registration statement or prospectus as from time to time amended or
supplemented by the Company) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein not misleading, unless (i)
such untrue statement or omission was made in such registration statement,
preliminary prospectus or prospectus in reliance upon and in conformity with
information furnished in writing to the Company in connection therewith by
Purchaser expressly for use therein or (ii) such violation arises from the
failure of Purchaser to comply with any legal requirement applicable to him to
deliver a copy of the prospectus or any supplements or amendments thereto after
the Company has furnished Purchaser with a sufficient number of copies of the
same. Promptly after receipt by Purchaser of notice of the commencement of any
action in respect of which indemnity may be sought from the Company, Purchaser
shall notify the Company in writing of the commencement thereof and, subject to
the provisions hereinafter stated, the Company shall assume the defense of such
action (including the employment of counsel selected by the Company, who shall
be counsel reasonably satisfactory to Purchaser), and the payment of expenses
insofar as such action shall relate to any alleged liability of which indemnity
may be sought against the Company. Purchaser shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
Company. The Company shall not be required to indemnify any person for any
settlement of any such action effected without the Company's prior written
consent. The Company shall not, except with the approval of each party being
indemnified under this Section, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to the parties being so indemnified of a
release from all liability in respect to such claim or litigation.

(b) Indemnification of the Company. In the event that the Company
registers any of the Shares under the Act, Purchaser will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the registration statement, each underwriter of the Shares so registered
(including any broker or dealer through whom the shares may be sold) and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act from and against any losses, claims, damages, expenses or liabilities, joint
or several, to which they become or any of them may become subject under the act
and, except as hereinafter provided, will reimburse the Company, and each such
director, officer, underwriter or

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<PAGE> 7
controlling person for any legal or other expenses reasonably incurred by them
or any of them in connection with investigating or defending any actions
whether or not resulting in any liability, insofar as such losses, claims,
damages, expenses, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in
the registration statement or in any preliminary prospectus or prospectus (as
from time to time amended or supplemented) or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading, but only insofar as any such statement or omission was made in
reliance upon and in conformity with information furnished in writing to the
Company in connection therewith by Purchaser expressly for use therein.
Promptly after receipt of notice of the commencement of any action in respect
of which indemnity may be sought against Purchaser, the Company will notify
Purchaser in writing of the commencement thereof, and Purchaser shall, subject
to the provisions hereinafter stated, assume the defense of such action
(including the employment of Purchaser, who shall be counsel reasonably
satisfactory to the Company) and the payment of expenses insofar relate to the
alleged liability in respect of which indemnity may be sought against
Purchaser. The Company and officer, underwriter or controlling person to employ
separate counsel in any such action the defense thereof, but the fees and
expenses of such counsel shall not be at the expense of Purchaser. Purchaser
shall not be required to indemnify any person for any settlement of any such
action effected without Purchaser's consent.

3.6 No Transfer. The registration rights granted by Section 3.3 hereof
shall not be transferable or assumable without the Company's prior written
consent. Any purported transfer or assignment in violation of this provision
shall be void.

4. Representations and Warranties of the Purchasers. Each Purchaser
severally, but not jointly, hereby represents and warrants to, and agrees with,
the Company that:

4.1 Such Purchaser is aware that the investment in the Units involves a
high degree of risk of loss of his or its entire investment.

4.2 Such Purchaser has received the unaudited balance sheets of the
Company as of December 31 1995 and the unaudited income statement for the year
ended December 31, 1995 (the "Financial Statements"), and understands and
acknowledges that there is no assurance as to the future performance of the
Company.

4.3 Such Purchaser understands and acknowledges that there may be
certain adverse tax consequences to him or it in connection with his or its
purchase of the Units (including, but not limited to, the tax consequences
described in Section 6) that the Company is not giving and has not given any
advice on the tax consequences of the investment and that the Company has
advised all Purchasers to seek the advice of their own experts in such areas
prior to making this investment.

4.4 This Agreement has been duly executed and delivered by such
Purchaser and constitutes the Purchaser's valid and legally binding obligations.
enforceable in accordance with its terms. Each Purchaser represents that he or
it has full power and authority to enter into this Agreement.

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<PAGE> 8
4.5 The Confidential Investor Questionnaire being delivered by the
Purchaser to the Company simultaneously herewith is true, complete and correct
in all material respects, and the Purchaser understands that the Company has
determined that the exemption of the Units from the registration provisions of
the Securities Act pursuant to Regulation D thereof, which is available for
non-public offerings, is applicable to the offer and sale of the Units, and
that such determination is based in part upon the representations, warranties
and agreements made by the Purchaser herein and in the Subscriber's
Confidential Investor Questionnaire.

4.6 The Note and the Shares to be received by such Purchaser pursuant
to the terms hereof (collectively. the "Securities"), will be acquired for
investment for such Purchaser's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and such
Purchaser has no present intention of selling, granting any participation in or
otherwise distributing the same. Notwithstanding such representations, the
undersigned realizes that the basis for the exemption may not be present if the
undersigned has in mind merely acquiring the Securities for a fixed or
determined period in the future. or for a market rise or for sale if the market
does not rise. The undersigned does not have any such intention.

4.7 Such Purchaser understands that the Securities he or it is
receiving hereunder are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances, in particular, the Securities may not be sold pursuant to Rule
144 promulgated under the Act ("Rule 144") unless all of the conditions of Rule
144 are met. The undersigned also understands that, except as otherwise provided
herein and in the certificates for the Shares, the Company is under no
obligation to register the Units or any of the components of the Units on his or
its behalf or to assist him or it in complying with any exemption from
registration under the Securities Act or applicable state securities laws. The
undersigned further understands that sales or transfers of the Units and the
components of the Units are further restricted by state securities laws and the
provisions of this Agreement.

4.8 The undersigned's overall commitment to investments which are not
readily marketable is not disproportionate to the undersigned's net worth and an
investment in the Units will not cause such overall commitment to become
excessive.

4.9 The undersigned is not relying on the Company, or its affiliates,
with respect to economic considerations involved in this investment. The
undersigned represents and warrants that he or it has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of an investment in the Units and has obtained, in his or its
own judgment, sufficient information from the Company to evaluate the merits and
risks of an investment in the Company. The undersigned further represents and
warrants that he or it has not utilized any person as a purchaser
representative as such term is defined in Regulation D in connection with
evaluating such merits and risks, but rather has relied solely upon his or its
own investigation in making a decision to invest in the Company.

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<PAGE> 9

4.10 No representations or warranties have been made to the Purchaser
by the Company or any of its directors, agents, employees or affiliates; and in
entering into this transaction the Purchaser is not relying upon any
information other than that contained in the Financial Statements and the
results of independent investigations, if any, by the Purchaser.

4.11 The undersigned represents and warrants that he or it has had a
reasonable opportunity to ask questions and to receive satisfactory answers
concerning the offering and other matters pertaining to his or its investment
and all such questions have been answered to the Purchaser's full satisfaction;
the Purchaser further represents and warrants that he or it has had reasonable
opportunity to obtain all the information he or it considers necessary or
appropriate for deciding whether to purchase the Units.

4.12 The undersigned represents and warrants that he or it is an
"Accredited Investor" within the meaning of Rule 501 (a) of Regulation D,
promulgated under the Act.

4.13 The address set forth on the signature page hereto is the
Purchaser's true and correct domicile, and the Purchaser has no present
intention of becoming a resident of any other state or jurisdiction.

4.14 Without in any way limiting the representations set forth above,
such Purchaser further agrees not to make any disposition of the Securities
unless there is then in effect a registration statement under the Act covering
such proposed disposition and such disposition is made in accordance with such
registration statement; or such Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition, and, if reasonably
requested by the Company, such Purchaser shall have furnished the Company with
an opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Act. It is
agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except if reasonably requested by the Company.

4.15 It is understood that the Securities may bear one or all of the
following legends:

(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, ASSIGNED OR
TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAWS PURSUANT
TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, BUT ONLY
UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO
THE CORPORATION, OR OTHER OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION
THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF
THE SECURITIES ACT, AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES
LAW.

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<PAGE> 10

(b) Any legend required by the laws of the State of Delaware or
applicable state securities laws.

5. Conditions of Purchaser's Obligations at Closing. The obligations
of each Purchaser under subsection 1.2 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Purchaser who does not
consent in writing thereto:

5.1 Performance. The Company shall have performed and complied with all
agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with, and shall have obtained all necessary
consents, approvals and waivers as are necessary or appropriate for consummation
of the transactions contemplated by this Agreement, on or before the Closing.

(b) Qualifications. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Units.

6. Certain Tax Consequences. Each Purchaser hereby acknowledges that
for federal income tax purposes the purchase price of each Unit is required to
be allocated between the Note and the Shares, that the amount allocable to the
Note will be less than the principal amount of the Note, and that the allocation
of consideration made herein between the Note and the Shares (being $42,500 and
$7,500, respectively, per Unit) shall be binding upon each Purchaser unless such
Purchaser explicitly discloses on its tax return that it is making a different
allocation. It is further understood that such allocation does not bind the
Internal Revenue Service ("IRS"), and in the event the IRS determines that the
fair market value of the Shares is greater than the Purchase Price of the Shares
set forth in Section 1.1(b), the cost basis of the Note would have to be reduced
by the amount of such excess and the Note would be deemed to be issued at a
further discount. Individual cash basis holders of Notes must report the
difference between the allocated cost of the Notes and the aggregate principal
and interest received as ordinary income upon payment of the Notes. Other Note
holders are subject to the rules under Internal Revenue Code Sections 1281-1283
regarding the ratable accrual of the discount and interest on short-term
obligations. Gain on the sale or exchange of a discounted Note will be ordinary
income up to the accrued portion of the discount and interest.

7. Indemnity. The undersigned agrees to indemnify and hold harmless
the Company, its officers and directors, employees and its affiliates and each
other person, if any, who controls any thereof, against any loss, liability,
claim, damage and expense whatsoever (including, but not limited to, any and
all expenses whatsoever reasonably incurred in investigating, preparing or
defending against any litigation commenced or threatened or any claim
whatsoever) arising out of or based upon any false representation or warranty
or breach or failure by the undersigned to comply with any covenant or
agreement made by the undersigned herein or in any other document furnished by
the undersigned to any of the foregoing in connection with this transaction.

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<PAGE> 11

8. Miscellaneous.

8.1 Survival of Warranties. The warranties, representations,
and covenants of the Company and the Purchasers contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Purchasers or the Company.

8.2 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.

8.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Colorado, disregarding any Colorado
principles of conflicts of laws that otherwise would provide for the application
of the substantive laws of another jurisdiction.

8.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.

8.5 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

8.6 Notices. Unless otherwise provided, all notices, offers,
acceptances and any other acts required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal
delivery to the party to be notified, upon receipted delivery by facsimile
transmission, one (1) day after deposit with Federal Express or similar air
courier, two (2) days in the case of non-U.S. purchasers, or four (4) days
after deposit with the United States Post Office, by registered or certified
mail, postage prepaid, and addressed to the party to be notified at the address
indicated below for such party, or at such other address as such party may
designate by ten (10) days' advance written notice to the other, as follows:

Purchaser: At the address designated on the appropriate
signature page of this Agreement.

The Company: BioFactors, Inc.
1746 Cole Boulevard, Suite 265
Golden, CO 80401
Attn: General Counsel
Fax: 303-271-9493

-11-
<PAGE> 12

8.7 Entire Agreement; Amendments and Waivers. This Agreement
and the Notes constitute the full and entire understanding and agreement between
the parties with regard to the subject matter hereof and thereof. Any term of
this Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the holders of Notes representing a majority of the aggregate principal
amount of all of the Notes then outstanding. Any amendment or waiver effected in
accordance with this Section 8.7 shall be binding upon each holder of any
securities acquired under this Agreement at the time outstanding (including
securities, if any, for which any such securities are convertible or
exercisable), each future holder of all such securities, and the Company.

8.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

-12-

<PAGE> 13
BIOFACTORS, INC.
UNIT SUBSCRIPTION AGREEMENT
MAY 17, 1996

ALL SUBSCRIBERS MUST COMPLETE THIS PAGE

IN WITNESS WHEREOF, the undersigned has executed this
Agreement on the ___________ day of _________________, 1996.

___________________ x $50,000 Per Unit = $______________
Units Subscribed For Purchase Price

Manner in which Title is to be held (Please Check One):

Purchase Price

1. Individual

2. Joint Tenants with Right
of Survivorship

3. Community Property

4. Tenants in Common

5. Corporation/Partnership/
Limited Liability Company

6. IRA

7. Trust/Estate/Pension or
Profit Sharing Plan
Date Opened:____________

8. As a Custodian for
_________________________
Under the Uniform Gift to
Minors Act of the State
of ______________________

9. Married with Separate
Property

10. Keogh

11. Tenants by the Entirety

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

IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.
INDIVIDUAL SUBSCRIBERS MUST COMPLETE PAGES 14 AND 15.
SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE PAGES 16 AND 17.

<PAGE> 14
BIOFACTORS, INC.
UNIT SUBSCRIPTION AGREEMENT
MAY 17, 1996

EXECUTION BY NATURAL PERSONS

- --------------------------------------------------------------------------------
Exact Name in Which Title is to be Held

Name (Please Print) Name of Additional Purchaser

Residence: Number and Street Address of Additional
Purchaser

City, State and Zip Code City, State and Zip Code

Social Security Number Social Security Number

/s/ ALAN GRODKO
----------------------------
Alan Grodko

/s/ JEFFREY GRODKO
----------------------------
Jeffrey Grodko

/s/ MORRIS HUSARSKY
----------------------------
Morris Husarsky

/s/ EDUARDO J. SABAL
----------------------------
Eduardo J. Sabal
Attorney-in-fact for
Juana Elsaca Sauc

(Signature) (Signature of Additional
Purchaser)

ACCEPTED this __________ day of _________________, 1996, on behalf of the
Company.

BIOFACTORS, INC.

By: /s/ ESMOND T. GOEI
----------------------------------
Name: Esmond T. Goei
Title: President and CEO

<PAGE> 15
BIOFACTORS, INC.
UNIT SUBSCRIPTION AGREEMENT
MAY 17, 1996

ACKNOWLEDGMENT FOR INDIVIDUAL

State of New York )
) ss.:
County of New York )

The foregoing instrument was acknowledged before me this
28th day of May, 1996, by Irwin M. Gross.

/s/ IRWIN M. GROSS
-----------------------------
[SEAL] Notary Public

My commission expires: Residing at:

March 25, 1997 [NOTARY STAMP]
- --------------------------------- -----------------------------
<PAGE> 16
BIOFACTORS, INC.
UNIT SUBSCRIPTION AGREEMENT
MAY 17, 1996

ACKNOWLEDGMENT FOR INDIVIDUAL

State of New York )
) ss.:
County of New York )

The foregoing instrument was acknowledged before me this
28th day of May, 1996, by Irwin M. Gross.

/s/ IRWIN M. GROSS
-----------------------------
[SEAL] Notary Public

My commission expires: Residing at:

March 25, 1997 [NOTARY STAMP]
- --------------------------------- -----------------------------
<PAGE> 17
BIOFACTORS, INC.
UNIT SUBSCRIPTION AGREEMENT
MAY 17, 1996

ACKNOWLEDGMENT FOR INDIVIDUAL

State of New York )
) ss.:
County of New York )

The foregoing instrument was acknowledged before me this
28th day of May, 1996, by Irwin M. Gross.

/s/ IRWIN M. GROSS
-----------------------------
[SEAL] Notary Public

My commission expires: Residing at:

March 25, 1997 [NOTARY STAMP]
- --------------------------------- -----------------------------
<PAGE> 18
BIOFACTORS, INC.
UNIT SUBSCRIPTION AGREEMENT
MAY 17, 1996

ACKNOWLEDGMENT FOR INDIVIDUAL

State of Nevada )
) ss.:
County of Clark )

The foregoing instrument was acknowledged before me this
15th day of May, 1996, by Eduardo Sabal.
as Attorney-In-Fact for
Juana Elsaca Saud

/s/ ELENA ALLRED
-----------------------------
[SEAL] Notary Public

My commission expires: Residing at:

5/1/98 Las Vegas, Nevada
- --------------------------------- -----------------------------

[NOTARY STAMP]

<PAGE> 19
BIOFACTORS, INC.
UNIT SUBSCRIPTION AGREEMENT
MAY 17, 1996

EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY
(Corporation, Partnership, Trust, Etc.)

- --------------------------------------------------------------------------------
Name of Entity (Please Print)

Date of Incorporation or Organization:

State of Principal Offices:

Federal Taxpayer Identification

Heleric Trading Ltd.

By: /s/ LESTER SLOANE
-------------------------
Name: Lester Sloane
Title: Vice President

Milchman Family Partners, Inc.

By: /s/ ERNEST MILCHMAN
-------------------------
Name: Ernest Milchman
Title: President

[seal]

(If Entity is a Corporation)

Address

Taxpayer Identification Number

ACCEPTED this _____ day of _________________,1996, on behalf
of the Company.

BIOFACTORS, INC,

By:

Name:
Title:

<PAGE> 20
BIOFACTORS, INC.
UNIT SUBSCRIPTION AGREEMENT
MAY 17, 1996

ACKNOWLEDGMENT FOR CORPORATION OR OTHER ENTITY

State of New York )
) ss.:
County of Bronx )

The foregoing instrument was acknowledged before me this
29th day of May, 1996, by Ernest Milchman, an officer of Milchman Family
Partners, Inc., a New York corporation.

[SEAL] GLORIA R. GORDON Gloria R. Gordon
COMMISSIONER OF DEEDS --------------------------
CITY OF NEW YORK NO. 3-2034 Notary Public
COMM. EXPIRES JULY 1, 1996

My Commission expires: Residing at:

Yonkers, N.Y.
- ------------------------------------

<PAGE> 21
BIOFACTORS, INC.
UNIT SUBSCRIPTION AGREEMENT
MAY 17, 1996

ACKNOWLEDGMENT FOR CORPORATION OR OTHER ENTITY

State of New York )
) ss.:
County of Queens )

The foregoing instrument was acknowledged before me this
12th day of June, 1996, by Lester Slone, a Vice President of Heleric Trading
Ltd., a New York corporation.

[SEAL] /s/ PAUL SILITSKY
--------------------------------
Notary Public

My Commission expires: Residing at:

3/30/97
- ------------------------------------ ---------------------------------

PAUL SILITSKY
NOTARY PUBLIC STATE OF NEW YORK
NO. 41-4743355
Qualified in Queen's County
Comission Expires March 30, 1997
<PAGE> 22
BIOFACTORS, INC.
UNIT SUBSCRIPTION AGREEMENT
MAY 17, 1996

SCHEDULE A

SCHEDULE OF PURCHASERS

<TABLE>
<CAPTION>
============================================================
NAME OF PURCHASER PRINCIPAL AMOUNT NO. OF SHARES OF
OF NOTE COMMON STOCK
- ------------------------------------------------------------
<S> <C> <C>
Juana Elsaca Saud $75,000.00 22,500
- ------------------------------------------------------------
Alan Grodko $50,000.00 15,000
- ------------------------------------------------------------
Jeffrey Grodko $50,000.00 15,000
- ------------------------------------------------------------
Morris Husarsky $50,000.00 15,000
- ------------------------------------------------------------
Milchman Family $50,000.00 15,000
Partners, Inc.
- ------------------------------------------------------------
Heleric Trading, $25,000.00 7,500
Ltd.
============================================================
</TABLE>
<PAGE> 23

BIOFACTORS, INC.
FIRST AMENDMENT TO
UNIT SUBSCRIPTION AGREEMENT

THIS FIRST AMENDMENT TO UNIT SUBSCRIPTION AGREEMENT (this
"Amendment") is entered into as of the 1st day of October, 1996, by and among
BioFactors, Inc., a Delaware corporation ("BioFactors" or the "Company") and the
parties named on the signature pages hereto (all of such parties other than the
Company, collectively, the "Majority Holders") and amends that certain Unit
Subscription Agreement dated as of May 17, 1996, by and among the Company and
the Purchasers named therein (the "Unit Agreement").

RECITALS

WHEREAS, the Majority Holders are the holders of unsecured
promissory notes of the Company (the "Notes") and shares (the "Shares") of
common stock of the Company (the "Common Stock"), $0.01 par value per share,
issued pursuant to the Unit Agreement and, collectively, are the holders of
Notes representing in excess of fifty percent of the aggregate principal amount
of all the Notes outstanding as of the date hereof and, pursuant to Section 8.7
of the Unit Agreement, can bind each holder of Notes or Shares outstanding as of
the date of this Agreement;

WHEREAS, the Company has entered into a letter of intent with
Chatfield Dean & Co. ("Chatfield Dean"), providing for underwriting and
financial advisory services (the "Underwriting");

WHEREAS, as a condition precedent to the Underwriting, the
Company is required to enter into a definitive agreement with Voice Plus, Inc.,
a California corporation ("Voice Plus"), for the formation of a holding company
("Registrant") and the merger of each of BioFactors (the "BFI Merger") and Voice
Plus with and into separate, wholly-owned subsidiaries of Registrant,
concurrently with Chatfield Dean's Underwriting of the initial public offering
of Registrant's securities pursuant to a registration statement filed under the
Securities Act of 1933 (the "IPO");

WHEREAS, upon the consummation of the BFI Merger, the
Company's stockholders, including the Majority Holders, are to receive shares of
common stock of Registrant ("Registrant Common Stock") in exchange for the
BioFactors Common Stock held by them in a three-for-four (three shares of common
stock of Registrant for every four shares of BioFactors Common Stock)
conversion, or such other ratio as Chatfield Dean may determine is necessary;

WHEREAS, as a further condition precedent to the Underwriting,
the Company is required to enter into agreements amending the terms of
outstanding securities including, in particular, this Amendment providing for
the consent of the Majority Holders (a) to extend the Maturity date of the Notes
to provide additional time to accomplish the IPO, (b) to effect the mandatory
conversion at the IPO of all accrued interest on the Notes into common stock of
Registrant, (c) to amend and coordinate the registration rights granted in
connection with the Shares and certain other shares of its Common Stock and
securities convertible into or exercisable for its Common Stock, and (d) to
effect certain other amendments to the Unit Agreement;

WHEREAS, as consideration for the agreements herein, the
Company will cause Registrant to issue warrants to holders of the Notes; and

-1-

<PAGE> 24
WHEREAS, the Company and the Majority Holders desire to enter
into this Amendment to facilitate the Underwriting, it being acknowledged that
the Underwriting will be of substantial benefit to the Company and to the
Majority Holders.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the
following mutual covenants and agreements, the parties hereby agree as follows:

1. Definitions. All capitalized terms used herein and
not otherwise defined shall have the meanings given such terms in the Unit
Agreement.

2. Amendments. The Majority Holders hereby agree to
amend the Unit Agreement as follows:

(a) Maturity Date Extension; Conversion of
Accrued Interest. Section 1.1(a) of the Unit Agreement is hereby amended in its
entirety, as follows:

"1.1(a) a promissory note of the Company in the principal
amount of Fifty Thousand Dollars ($50,000), bearing simple
interest at the rate of 10% per annum from the Closing
(computed on the basis of a 360-day year consisting of twelve
30-day months), substantially in the form set forth in EXHIBIT
A hereto (herein referred to individually as a "Note" and
collectively as the "Notes," which terms shall also include
any notes delivered in exchange or replacement therefor). The
Note shall mature and the principal and all accrued interest
thereon shall become due and payable in full at the close of
business on March 31, 1997; provided, however, that in the
event the IPO (defined below) is consummated prior to the
Maturity Date, the principal of the Notes shall be paid in
full within five business days of the receipt by Registrant
(defined below) of the proceeds of the IPO and all accrued
interest on the Notes calculated through the IPO closing date
shall be converted into common stock of Registrant at a
conversion price equal to the price per share to the public in
the IPO (the "IPO Price"). In connection with such conversion,
no fractional shares of common stock shall be issued; instead,
the number of shares of common stock otherwise issuable will
be rounded up to the next whole share."

(b) Registration Rights. Section 3 of the Unit
Agreement is hereby amended in its entirety, as follows:

"3. Planned Initial Public Offering; Registration Rights.

3.1 Initial Public Offering. The term "IPO" as used
herein shall mean the proposed initial public offering of the
Company's securities, or the securities of a holding company
formed to hold the capital stock of BioFactors (such entity,
whether the Company or a holding company, being referred to
herein as, the "Registrant" and the Common Stock of such
entity being "Registrant Common Stock"), pursuant to an
effective registration statement filed under the Securities

-2-

<PAGE> 25

Act of 1933, as amended. The undersigned understands and
agrees that there can be no assurances that a registration
statement will be filed or, if filed, will be declared
effective by the Securities and Exchange Commission (the
"Commission") or, if the registration statement is declared
effective by the Commission, that Registrant will be able to
consummate such IPO.

3.2 Registration Rights. Upon the execution of the
Registration Rights Agreement, substantially in the form
attached hereto as EXHIBIT B (the "Rights Agreement"), the
Purchasers will become parties to the Rights Agreement and the
Shares, and any shares of common stock issuable upon the the
exercise or conversion of any securities issued pursuant to
this Agreement, shall become subject thereto."

3. Waiver, The Majority Holders hereby agree to waive
defaults, if any, on the Notes occurring prior to the Date hereof.

4. Automatic Conversion. The Majority Holders hereby
consent to the automatic conversion upon the consummation of the IPO of all
accrued interest on the Notes, at a conversion price and calculated as set forth
in Section 1.1(a) of the Unit Agreement, into Common Stock of Registrant.

5. Issuance of Additional Warrants. In consideration of
the agreements herein, the Company hereby agrees that, upon the closing of the
IPO, the payment of the principal of the Notes and the conversion of the accrued
interest thereon, the Company shall, for no additional monetary consideration,
cause Registrant to issue and deliver to each holder of Notes, a warrant to
purchase seventy-five (75) shares of Registrant Common Stock for each One
Thousand Dollars ($1,000) in original principal amount of such holder's Notes at
an exercise price equal to 120% of the IPO Price (the "Warrants").

6. Proxy. The undersigned hereby irrevocably appoints
John Black as the undersigned's attorney and proxy, with full power of
substitution, to vote or to consent in writing in lieu of a vote or meeting with
respect to all of the Shares held by the undersigned which the undersigned is
entitled to vote at any meeting of stockholders (whether annual or special and
whether or not an adjourned meeting) of the Company, or pursuant to written
action taken in lieu of any such meeting or otherwise, in such manner as to
cause the BFI Merger and any agreement effecting the BFI Merger to be approved.
This proxy is irrevocable, is coupled with an interest sufficient in law to
support an irrevocable proxy and is granted in consideration of and as an
inducement to cause the Company to issue the Warrants. In connection with giving
this proxy, the undersigned understands and agrees that the Merger effectively
will cause a reverse split of the Company's capital stock in that every four (4)
shares of BioFactors Common Stock issued and outstanding or held in treasury
immediately prior to the effective time of the BFI Merger shall, automatically
and without any action of the part of the respective holders thereof, be
converted into approximately three (3) shares of Registrant Common Stock (or
such other number of shares as Chatfield Dean and the Company shall determine).

7. Construction of Waiver. The Unit Agreement shall be
deemed amended only to the extent set forth herein and remains in full force and
effect.

-3-

<PAGE> 26

8. Counterparts. This Amendment may be executed in any
number of counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument.

[The remainder of this page intentionally left blank.]

-4-
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this FIRST
AMENDMENT TO UNIT SUBSCRIPTION AGREEMENT to be duly executed as of the day and
year first above written.

BIOFACTORS, INC.

By: /s/ ESMOND T. GOEI
----------------------------------------------
Esmond T. Goei, President & CEO

HOLDER:
(Individual)

/s/ ALAN GRODKO
--------------------------------------------------
(Signature)

Alan Grodko
--------------------------------------------------
(Print Name)

/s/ Jeffrey Grodko
--------------------------------------------------
(Signature)

Jeffrey Grodko
--------------------------------------------------
(Print Name)

/s/ MORRIS HUARSKY
--------------------------------------------------
(Signature)

Morris Huarsky
--------------------------------------------------
(Print Name)

/s/ EDUARDO J. SABAL
--------------------------------------------------
(Signature)

Eduardo J. Sabal, Attorney-in-Fact for
Juana Elsaca Sauc

HOLDER:
(Entity)

Heleric Trading, LtO.
------------------------------------------------
(Print name of entity)

By: /s/ LESTER SLOANE
---------------------------------------------
(Signature of officer or other authorized person)

Title: V.P.
------------------------------------------

Milchman Family Partners, Inc.
------------------------------------------------
(Print name of entity)

By: /s/ ERNEST MILCHMAN
---------------------------------------------
(Signature of officer or other authorized person)

Title: President
------------------------------------------

-5-
<PAGE> 28

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAWS PURSUANT TO A SPECIFIC
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, BUT ONLY UPON A HOLDER
HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE CORPORATION,
OR OTHER OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT THE PROPOSED
DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT,
AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAW."

BIOFACTORS, INC.
PROMISSORY NOTE

$_______________ No.______
May ________, 1996

FOR VALUE RECEIVED, the undersigned, BIOFACTORS, INC., a
Delaware corporation ("Maker"), hereby promises to pay to the order of
___________________, or registered assigns ("Holder") at such place as the
Holder may from time to time designate in writing, the principal sum of
________________ THOUSAND DOLLARS ($___________), and to pay simple interest on
the unpaid balance of said principal from the date hereof through maturity at
the rate of ten percent (10%) per annum.

1. Maturity.

(a) Principal and accrued interest under this
Note shall be due and payable at the Maturity Date as set forth in the Unit
Agreement (defined below).

(b) Principal and interest payments hereunder
shall be made in money of the United States of America, lawful at such times for
the satisfaction of public and private debts.

2. Prepayment. The Company may prepay this Note in whole
at any time, or in part from time to time, without penalty or premium, upon
thirty (30) days' written notice to the Holder. Each partial prepayment shall
first be applied to interest accrued through the date of prepayment and then to
principal.

3. Unit Agreement. This Note is the Maker's "Note" and
is issued pursuant to and is subject to and entitled to the benefit
of that certain Unit Subscription Agreement dated as of May 17, 1996, between
Maker and the Purchasers named therein, as the same may be amended, modified or
supplemented from time to time as permitted thereby (as amended, the "Unit
Agreement"). Capitalized terms used herein without definition shall have the
meaning set forth in the Unit Agreement.

-1-

<PAGE> 29

6. Waiver of Demand, Protest, etc. Maker hereby waives
diligence, presentment, demand, protest and notice of any kind whatsoever. Maker
promises to pay costs of collection and reasonable attorneys' fees if default is
made in the payment of this Note. The right to plead any and all statutes of
limitation as a defense to this Note or to any agreement to pay the same, is
hereby expressly waived by the undersigned to the full extent permitted by law.

7. Notice. Any notice required or permitted hereunder shall be
given in accordance with the Unit Agreement.

8. Governing Law. THE MAKER AND THE HOLDER AGREE THAT THIS
NOTE AND THE LEGAL RELATIONS BETWEEN THE MAKER AND THE HOLDER, AND ALL RIGHTS
AND OBLIGATIONS HEREUNDER, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY, AND
PERFORMANCE, SHALL BE GOVERNED BY AND INTERPRETED, CONSTRUED, APPLIED, AND
ENFORCED IN ACCORDANCE WITH THE LAW OF THE STATE OF COLORADO WITHOUT REFERENCE
TO THE LAW OF ANOTHER JURISDICTION.

IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed as of this __________ day of _______________, 1996.

MAKER: BIOFACTORS, INC.

By:

Name:

-2-

<PAGE> 1
Exhibit 10.17

DENVER WEST

OFFICE BUILDING LEASE

INDEX

<TABLE>
<CAPTION>
1. PREMISES PAGE
<S> <C>
1. 1 Description 3
1. 2 Work of Improvement 3
1. 3 Net Rentable Area 3

2. TERM

2. 1 Term 3
2. 2 Delay in Commencement 3
2. 3 Acknowledgement of Commencement Date 3

3. RENT 4

4. SECURITY DEPOSIT 4-5

5. TAX AND BUILDING OPERATING COST INCREASES

5. 1 Definitions 5
a. Base Year 5
b. Building Operating Costs 5
5. 2 Tenant's Share 5
5. 3 Base Year Operating Costs 6
5. 4 New Taxes 6

6. USE

6. 1 Use 7
6. 2 Suitability 7
6. 3 Uses Prohibited 7-8

7. SERVICE AND UTILITIES

7. 1 Landlord's Obligations 8
7. 2 Tenant's Obligations 8
7. 3 Tenant's Additional Requirement 8
7. 4 Non-Liability 8-9

8. MAINTENANCE & REPAIR: ALTERATIONS & ADDITIONS

8. 1 Maintenance and Repairs 9
a. Landlord's Obligations 9
b. Tenant's Obligations 9
c. Compliance with Law 10
8. 2 Alterations and Additions 10

9. ENTRY BY LANDLORD 11

10. LIENS 11

11. INDEMNITY 11

11. 1 Indemnity 11-12
11. 2 Exemption of Landlord 12

12. INSURANCE

12. 1 Coverage 12
12. 2 Insurance Policies 12-13
12. 3 Waiver of Subrogation 13
12. 4 With Landlord's Consent 13

</TABLE>

PLEASE INITIAL
LANDLORD ________
-1- TENANT __________
<PAGE> 2
<TABLE>
<S> <C>
13. DAMAGE OR DESTRUCTION

13. 1 Partial Damage - Insured 13
13. 2 Partial Damage - Uninsured 13-14
13. 3 Total Destruction 14
13. 4 Damage Near End of Term 14
13. 5 Landlord's Obligations 14

14. CONDEMNATION 14-15

15. ASSIGNMENT AND SUBLETTING

15. 1 Landlord's Consent Required 15
15. 2 Reasonable Consent 15-16
15. 3 No Release of Tenant 16
15. 4 Attorney's Fees 16

16. SUBORDINATION

16. 1 Subordination 16-17
16. 2 Subordination Agreements 17
16. 3 Quiet Enjoyment 17
16. 4 Attornment 17

17. DEFAULT: REMEDIES

17. 1 Default 17
17. 2 Remedies 18
17. 3 Late Charges 18-19
17. 4 Default by Landlord 19

18. RELOCATION OF PREMISES

18. 1 Conditions 19
18. 2 Notice 19
18. 3 Rejection by Tenant of Relocation 19-20

19. MISCELLANEOUS

19. 1 Estoppel Certificate 20
19. 2 Transfer of Landlord's Interest 20
19. 3 Captions; Attachments; Defined Terms 20-21
19. 4 Entire Agreement 21
19. 5 Severability 21
19. 6 Costs of Suit 21
19. 7 Time; Joint and Several Liability 21
19. 8 Binding Effect; Choice of Law 21
19. 9 Waiver 21-22
19.10 Surrender of Premises 22
19.11 Holding Over 22
19.12 Signs 22
19.13 Reasonable Consent 22
19.14 Rules and Regulations 22
19.15 Injury/Illness 22
19.16 Notices 23
19.17 Corporate Authority 23
19.18 ADA Compliance 23-24

20. FINANCIAL STATEMENTS 24

Signature Page 24

EXHIBIT "A" - Floor Plate of Leased Premises 25
EXHIBIT "B" - Tenant Finish Schedule 26
EXHIBIT "C" - Rules & Regulations 27-31
EXHIBIT "D" - Planned Development Zoning Restrictions 32
EXHIBIT "E" - Base Year Building Operating Costs 33
</TABLE>

PLEASE INITIAL
LANDLORD ________
-2- TENANT __________
<PAGE> 3
DENVER WEST

OFFICE BUILDING LEASE

THIS LEASE is entered into effective the 1st day of January, 1996,
by and between DENVER WEST OFFICE BUILDING NO. 21 VENTURE (hereinafter
"Landlord") and BIOFACTORS, INC., A DELAWARE CORPORATION (hereinafter "Tenant").

For and in consideration of the rental and of the covenants and agreements
hereinafter set forth to be kept and performed by the Tenant, Landlord hereby
leases to Tenant and Tenant hereby leases from Landlord the Premises herein
described for the term, at the rental and subject to and upon all of the terms,
covenants and agreements.

1. PREMISES

1. 1 DESCRIPTION. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord those certain Premises (hereinafter "Premises")
crosshatched on Exhibit A containing approximately 3,257 square feet of net
rentable area on the 2nd floor of that certain office building known as Denver
West Office Building No. 21, and more particularly described as Suite 265, 1746
Cole Boulevard, Golden, Colorado 80401, said office building hereinafter
referred to as "Building."

1. 2 WORK OF IMPROVEMENT. The obligations of Landlord and Tenant
to perform the work and supply the necessary materials and labor to prepare the
Premises for occupancy are set forth in detail in Exhibits A and B attached
hereto and incorporated herein by reference. Landlord and Tenant shall expend
all funds and do all acts required of them in Exhibit B and Landlord shall have
the work performed promptly and diligently in a good and workmanlike manner.
Landlord shall coordinate such construction with Contractor and Tenant, upon
occupancy and acceptance of such improvements, and upon receipt of an invoice
for such work, Tenant will pay Tenant costs as itemized in Exhibit B.

1.3 NET RENTABLE AREA: The rentable area is computed by measuring
to the inside glass line of permanent outer Building walls to the corridor side
of public corridors and/or other permanent partitions and to the center of
partitions which separate the adjoining rentable areas, with no deductions for
columns and projections necessary to the Building structure. In Buildings so
equipped, balconies and/or private patios are included in the Net Rentable
Area. In multi-tenant Buildings, common corridors and toilets, air conditioning
rooms, fan rooms, janitorial closets, electrical and telephone closets and any
other areas within and exclusively serving that Building are considered common
area and for purposes of this Section shall be allocated pro rata to the
Tenants of the Building.

2. TERM

2. 1 TERM. The Term of this Lease shall commence January 1, 1996
and end December 31, 1998 unless sooner terminated pursuant to this Lease.

2. 2 DELAY IN COMMENCEMENT. Tenant agrees that in the event of the
inability of Landlord for any reason to deliver possession of the Premises to
Tenant on the commencement date set forth in Section 2.1, Landlord shall not be
liable for any damage thereby nor shall such inability affect the validity of
this Lease or the obligations of Tenant hereunder, but in such case Tenant shall
not be obligated to pay rent or other monetary sums until possession of the
Premises is tendered to Tenant; provided

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that if the delay of possession exceeds sixty (60) days, then the expiration
date of the term of the Lease shall be extended by the period of time computed
from the scheduled commencement date to the date possession is tendered. In the
event Landlord shall not have delivered possession of the Premises within six
(6) months from the scheduled commencement date, then Tenant at its option, to
be exercised within thirty (30) days after the end of said six (6) months
period, may terminate this Lease and upon Landlord's return of any monies
previously deposited by Tenant, the parties shall have no further rights or
liabilities toward each other.

2. 3 ACKNOWLEDGEMENT OF COMMENCEMENT DATE. In the event the
commencement date of the term of the Lease is other than as provided in Section
2.1, then Landlord and Tenant shall execute a written acknowledgement of the
date of commencement and shall attach it to the Lease as an amendment to the
Lease.

3. RENT

Rent shall be calculated on a basis of $9.24 per square foot per
year base rent plus $5.76 per square foot per year estimated Building Operating
Costs for the Base Year.

Tenant shall pay to Landlord as rent for the Premises in advance on the first
day of each calendar month of the term of this Lease without deduction, offset,
prior notice or demand, in lawful money of the United States, the sum of Four
Thousand Seventy One and 25/100 Dollars ($4,071.25). If the commencement date is
not the first day of the month, or if the Lease termination date is not the
last day of the month, a pro rata monthly installment shall be paid at the then
current rate for the fractional month during which the Lease commences and/or
terminates.

Tenant shall pay to Landlord the above amount, including in the case of Building
Operating Costs, Landlord's reasonable estimate of Tenant's Share of Building
Operating Costs, as rent for the Premises in advance on the first day of each
calendar month of the term of this Lease without deduction, offset, prior notice
or demand, in lawful money of the United States. Landlord's estimate of Tenant's
Share of the Building Operating Costs shall be provided to Tenant in writing
prior to the period for which each such estimate is applicable. Each such
estimate shall continue to be used for the purpose of computing the month's rent
amount until Landlord provides Tenant with a new estimate. If the commencement
date is not the first day of the month, or if the lease termination date is not
the last day of the month, a pro rata monthly installment shall be payable at
the then current rate for the fractional month during which the lease commences
and/or terminates.

Concurrently with Tenant's execution of this Lease, Tenant shall pay to Landlord
the sum of Four Thousand Seventy One and 25/100 Dollars ($4,071.25), as rent for
the period from January 1, 1996 through January 31, 1996.

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5. TAX AND BUILDING OPERATING COST INCREASES

5. 1 DEFINITIONS. For purposes of this Section, the following
terms are herein defined:

a. Base Year: Calendar Year, 1996. See Exhibit E.

b. Building Operating Costs: All costs and expenses of ownership,
operation and maintenance of the Building (excluding depreciation on the
Building, all amounts paid on loans of Landlord, and expenses capitalized for
federal income tax purposes) including by way of illustration but not limited
to: real and personal property taxes and assessments and any tax in addition to
or in lieu thereof, other than taxes covered by Section 5.4, whether assessed
against Landlord or Tenant or collected by Landlord or both; utilities;
supplies; insurance; license; permit and inspection fees; cost of services of
independent contractors; property management fees; cost of compensation
(including employment taxes and fringe benefits) of all persons who perform
regular and recurring duties connected with day-to-day operation, maintenance
and repair of the Building, its equipment and the walks, malls and landscaped
areas; a pro rata share of the maintenance and operating expense related to
common: greenbelt areas, kitchen and conference areas, health and recreation
facilities, telecommunication services, postal facilities, etc., of the Denver
West Office Park; also including janitorial, trash removal, gardening, security,
parking, operating engineer, elevator, painting, plumbing, electrical,
carpentry, heating, ventilation, air conditioning, window washing, signage and
advertising (but excluding persons performing services not uniformly available
to or performed for substantially all Building tenants), reserves for
replacement, and rental expenses or a reasonable allowance for depreciation of
personal property used in the maintenance, operation and repair of the Building.
Landlord shall use its best efforts to minimize any increase in Building
Operating Costs, consistent, however, with operation of the Building as a
first-class office building.

5. 2 TENANT'S SHARE. Tenant's Share of the Building Operating
Costs shall be calculated in two parts: the first part shall be a calculation
based upon those Operating Costs attributable to leased space within the
Building; and the second part shall be a calculation based upon those Operating
Costs attributable to the Building as a whole, regardless of occupancy. The
first calculation shall be the ratio of the Net Rentable Area of the Premises,
leased or occupied, whichever is greater, to the total occupied Net Rentable
Area of the Building multiplied by the operating costs attributable to the
occupied Net Rentable Area of
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the Building. Operating Costs attributable to leased space may include, by way
of illustration, but not limited to: Management Fees, Janitorial Contracts,
other Janitorial, Water and Sewer, Trash Removal and Janitorial Supplies.

The second calculation shall be the ratio of the Net Rentable Area of the
Premises to the total available Net Rentable Area of the Building, regardless of
occupancy multiplied by the operating costs attributable to the total available
Net Rentable Area of the Building. Operating Costs attributable to the total
available Net Rentable Area of the Building may include, by way of illustration,
but are not limited to: Property Taxes, Gas, Electricity, Common Area
Maintenance, Plumbing, Security Service, Landscape Maintenance, Reserve for
Replacement, Insurance, Electrical Repairs, Snow Removal, Parking Lot and
Sidewalks Maintenance, Elevator Maintenance, Pest Control Licenses and Fees,
Equipment Leases, Roof and Gutter Repairs, Painting and Staining, Door and Lock
Repairs, and all or a portion of Mechanical Repairs, and General Repairs.

5.3 BASE YEAR BUILDING OPERATING COSTS. Within one hundred twenty
(120) days after the end of the Base Year, Landlord shall use its best efforts
to furnish to Tenant a written statement showing, in reasonable detail, actual
Building Operating Costs for the Base Year and setting forth Tenant's pro rata
share thereof. If Tenant's share of actual Building Operating Costs for Base
Year exceeds the estimate of Tenant's share which was used to determine the Base
Year rent as described in Exhibit E, Tenant shall pay such difference, if any,
to Landlord within thirty (30) days after receipt of statement.

If Tenant desires at its own expense to audit the statement of such actual
building operating costs and supporting records and data, Tenant shall cause
such audit to commence within thirty (30) days following delivery of such
statement to Tenant and to be completed within thirty (30) days thereafter. If
Tenant does not so audit, then such statement shall be deemed to be conclusively
accepted by Tenant and Tenant shall have no right thereafter to question or
examine the same.

Subsequent Year Building Operating Costs. Within one hundred twenty (120) days
after the end of each calendar year following the Base Year, Landlord shall use
its best efforts to furnish Tenant a written statement showing, in reasonable
detail, actual Building Operating Costs for the calendar year just ended and
setting forth Tenant's pro rata share thereof and setting forth Tenant's
additional estimated rent obligation therefor for the current calendar year. (It
is understood that the determination of this estimated obligation will be made
by Landlord based on the Building Operating Costs for the calendar year just
ended). If Tenant's share of Building Operating Costs for the calendar year just
ended exceeds the estimate of Tenant's share which was used to determine that
year's rent, Tenant shall pay such difference to Landlord within thirty (30)
days after receipt of statement. If Tenant's share of Building Operating Costs
for the calendar year just ended is less than the estimate of Tenant's share
which was used to determine that years rent, Landlord shall pay such difference
to Tenant within thirty (30) days after receipt of statement.

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5. 4 NEW TAXES. In addition to rent and other charges to be paid
by Tenant hereunder, Tenant shall reimburse to Landlord, within thirty (30) days
of receipt of a demand therefor, any and all taxes payable by Landlord (other
than net income taxes) whether or not now customary or within the contemplation
of the parties hereto: (a) upon, allocable to, or measured by the area of the
Premises or on the rent payable hereunder, including without limitation any
gross income tax or excise tax levied by the State, any political subdivision
thereof, City or Federal Government with respect to the receipt of such rent;
or (b) upon or with respect to the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises or
any portion thereof; or (c) upon or measured by the value of Tenant's personal
property equipment or fixtures located in the Premises; or (d) upon this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Premises. Tenant agrees to pay, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon Tenant's equipment, furniture, fixtures and other
personal property located on the Premises. For the purpose of determining said
amount, figures supplied by the County Assessor as to the amount so assessed or
any changed value resulting from protests of the tax shall be conclusive.
Tenant shall comply with provisions of any law, ordinance or rule of the taxing
authorities which require Tenant to file a report of Tenant's property located
on the Premises.

5.5 EXCLUSIONS FROM OPERATING EXPENSES. The following items are
excluded from Building operating expenses:

1) Repairs or other work occasioned by (I) fire, windstorm, or
other casualty of the type which Landlord has insured (to the extent that
Landlord has received insurance proceeds and provided that the amount of any
deductible paid by Landlord shall be included in basic costs), or (II) the
exercise of the right of eminent domain (to the extent that such repairs or
other work are covered by the proceeds of the award, if any, received by
Landlord);

2) Leasing commissions, brochures, marketing supplies, attorney's
fees, costs, and disbursements and other expenses incurred in connection with
negotiation of leases with prospective tenants;

3) Rental concessions granted to specific tenants and expenses
incurred in renovating or otherwise improving or decorating, painting, or
redecorating space for specific tenants, other than ordinary repairs and
maintenance provided to all tenants;

4) Landlord's costs of electricity and other services sold or
provided to tenants in the building and for which Landlord is entitled to be
reimbursed by such tenants as separate additional charge or rental over and
above the base rental or additional base rental payable under the lease with
such tenant;

5) Overhead and profit increment paid to subsidiaries or other
affiliates of Landlord for services on or to the property, building and/or
premises to the extent only that the costs of such services exceed the
competitive cost for such services rendered by persons or entities of similar
skill, competence, and experience;

6) All items (including repairs) and services requested by tenant
or other tenants for which tenant or other tenants pay directly to third parties
or for which tenant or other tenants reimburse Landlord;

7) Advertising and promotional expenditures;

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8) Costs incurred in connection with the sale, financing,
refinancing, mortgaging or sale of the building or property, including brokerage
commissions, attorney's and accountant's fees, closing costs, title insurance
premiums, transfer taxes and interest charges;

9) Costs, fines, interest, penalties, legal fees or costs of
litigation incurred due to the late payments of taxes, utility bills and other
costs incurred by Landlord's failure to make such payments when due unless such
failure is due to Landlord's good faith and reasonable efforts in contesting the
amount of such payments;

10) Costs incurred by Landlord for trustee's fees, partnership
organizational expenses and accounting fees to the extent relating to Landlord's
general corporate overhead and general administrative expenses;

11) Any penalties or liquidated damages that Landlord pays to
Tenant under this lease or to any other tenants in the development under their
respective leases;

12) Attorney's fees, costs and disbursements and other expenses
incurred in connection with negotiations or disputes with tenants or other
occupants of the building or with prospective tenants (other than attorney's
fees, costs and disbursements and other expenses incurred by Landlord in seeking
to enforce building rules and regulations).

6. USE

6. 1 USE. The Premises shall be used and occupied by Tenant for
general office, non-laboratory research and storage purposes and for no other
purpose without the prior written consent of Landlord.

6. 2 SUITABILITY. Tenant acknowledges that neither Landlord nor
any agent of Landlord has made any representation or warranty with respect to
the Premises or the Building or with respect to the suitability of either for
the conduct of Tenant's business, nor has Landlord agreed to undertake any
modification, alteration or improvement to the Premises except as provided in
this Lease. The taking of possession of the Premises by Tenant shall
conclusively establish that the Premises and the Building were at such time in
satisfactory condition unless within thirty (30) days after such date Tenant
shall give Landlord written notice specifying in reasonable detail the respects
in which the Premises or the Building were not in satisfactory condition, in
which event Landlord shall promptly remedy such defects.

6. 3 USES PROHIBITED.

(a) Tenant shall not do or permit anything to be done in or about
the Premises nor bring or keep anything therein which will in any way increase
the existing rate or affect any fire or other insurance upon the Building or any
of its contents (unless Tenant shall pay an increased premium as a result of
such use or acts), or cause a cancellation of any insurance policy covering said
Building or any part thereof or any of its contents, nor shall Tenant sell or
permit to be kept, used or sold in or about said Premises any articles which may
be prohibited by a standard form policy of fire insurance.

(b) Tenant shall not do or permit anything to be done in or about
the Premises which will in any way obstruct or interfere with the rights of
other tenants or occupants of the Building or injure or annoy them or use or
allow the Premises to be used for any unlawful or objectionable purpose, nor
shall Tenant cause, maintain

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or permit any nuisance in or about the Premises. Tenant shall not commit or
suffer to be committed any waste in or upon the Premises.

(c) Tenant shall not knowingly use the Premises or knowingly
permit anything to be done in or about the Premises which will in any way
conflict with any law, statute, ordinance or governmental rule or regulation or
requirement of duly constituted public authorities now in force or which may
hereafter be enacted or promulgated. Tenant shall at its sole cost and expense
promptly comply with all laws, statutes, ordinances and governmental rules,
regulations or requirements now in force or which may be in force hereafter and
with the requirements of any board of fire underwriters or other similar body
now or hereafter constituted relating to or affecting the condition, use or
occupancy of the Premises, excluding structural changes not relating to or
affecting the condition, use or occupancy of the Premises, or not related or
afforded by Tenant's improvements or acts. The final judgment of any court of
competent jurisdiction or the admission of Tenant, in any action against Tenant,
whether Landlord be a party thereto or not, that Tenant has violated any law,
statute, ordinances and governmental rules, regulations or requirements now in
force or which may be in force hereafter and with the requirements of any board
of fire underwriters or other similar body now or hereafter constituted relating
to or affecting the condition, use or occupancy of the Premises, excluding
structural changes not relating to or affecting the condition, use or occupancy
of the Premises, or not related or afforded by Tenant's improvement or acts,
shall be conclusive of the fact as between Landlord and Tenant.

7. SERVICE AND UTILITIES

7. 1 LANDLORD'S OBLIGATIONS. Landlord agrees to furnish (subject
to Section 5 of the Lease) to the Premises during reasonable hours of generally
recognized business days, to be determined by Landlord and subject to the Rules
and Regulations of the Building, water, gas and electricity suitable for the
intended use of the Premises, heat and air conditioning required in Landlord's
reasonable judgment for the comfortable use and occupancy of the Premises,
scavenger, janitorial and window washing service and elevator service. Such
utilities and elevator service shall be available on a 24 hour, 7 day basis upon
Tenant's request if Tenant shall pay to Landlord the extra costs of providing
such services. Landlord shall also maintain and keep lighted the common stairs,
entries and toilet rooms in the Building.

7. 2 TENANT'S OBLIGATIONS. Tenant shall pay for, prior to
delinquency, all telephone and all other materials and services, not expressly
required to be paid by Landlord, which may be furnished to or used in, on or
about the Premises during the term of this Lease.

7.3 TENANT'S ADDITIONAL REQUIREMENT.

(a) Tenant will not, without the written consent of Landlord, use
any apparatus or device in the Premises, including but without limitation
thereto, electronic data processing machines, punch card machines and machines
using current in excess of 110 volts, which will in any way increase the amount
of electricity or water usually furnished or supplied for use of the Premises as
general office space; nor connect with electric current, except through existing
electrical outlets in the Premises, or water pipes, any apparatus or device, for
the purpose of using electric current or water.

(b) If Tenant shall require water or electric current in excess
of that usually furnished or supplied for use of the Premises as general office
space, Tenant shall first procure the consent of Landlord for the use thereof,
which consent Landlord may
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refuse and Landlord may cause a water meter or electric current meter to be
installed in the Premises, so as to measure the amount of water and electric
current consumed for any such other use. The cost of such meters and of
installation, maintenance and repair thereof shall be paid for by Tenant and
Tenant agrees to pay Landlord promptly upon demand by Landlord for all such
water and electric current consumed as shown by said meters, at the rates
charged for such services by the supplier of that service, as the case may be,
furnishing the same, plus any additional expense incurred in keeping account of
the water and electric current so consumed.

(c) Wherever heat generating machines or equipment are used in
the Premises which affect the temperature otherwise maintained by the air
conditioning system, Landlord reserves the right to install supplementary air
conditioning units in the Premises and the cost thereof, including the cost of
installation, operation and maintenance thereof, shall be paid by Tenant to
Landlord upon demand by Landlord.

7. 4 NON-LIABILITY. Landlord shall not be liable for, and Tenant
shall not be entitled to, any abatement or reduction of rent by reason of
Landlord's failure to furnish any of the foregoing when such failure is caused
by accidents, breakage, repairs, strikes, lockouts or other labor disturbances
or labor disputes of any character, or by any other cause similar or dissimilar,
beyond the reasonable control of Landlord. Landlord shall not be liable under
any circumstances for loss of or injury to property, however occurring, through
or in connection with or incidental to failure to furnish any of the foregoing,
unless due to the negligent or intentional acts or omission to act of Landlord,
his agents, employees or invitees.

8. MAINTENANCE AND REPAIRS

8. 1 MAINTENANCE AND REPAIRS

(a) Landlord's Obligations. Landlord shall maintain in good
order, condition and repair the Building and all portions of the Premises not
the obligation of Tenant or any other Tenant in the Building.

(b) Tenant's Obligation.

(i) Tenant at Tenant's sole cost and expense, except for
services furnished by Landlord pursuant to Section 7 hereof, shall maintain the
Premises in good order, condition and repair including the interior surfaces of
the ceilings, walls and floors, all doors, all plumbing pipes, electrical
wiring, switches, fixtures and special items in excess of Building standard
furnishings, and equipment installed by or at the expense of Tenant.

(ii) Upon the expiration or earlier termination of this
Lease, Tenant shall surrender the Premises in the same condition as received,
ordinary wear and tear excepted, and shall promptly remove or cause to be
removed at Tenant's expense from the Premises and the Building any signs,
notices and displays placed by Tenant, and all articles of personal property,
all business and trade fixtures, machinery, equipment, furniture and movable
partitions owned by Tenant and installed by Tenant at its expense.

(iii) Tenant agrees to repair any damage to the Premises
or the Building caused by or in connection with the removal (whether or not such
removal is requested by Landlord) of any articles of personal property, business
or trade fixtures, machinery, equipment, furniture, movable partitions,
alterations, improvements or additions, including without limitation thereto,
repairing the floor and patching and painting the walls where
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required by Landlord to Landlord's reasonable satisfaction, all at Tenant's
sole cost and expense. Tenant shall indemnify the Landlord against any loss or
liability resulting from failure or delay by Tenant in so surrendering the
Premises, including without limitation any claims made by any succeeding tenant
founded on such failure or delay.

(iv) In the event Tenant fails to maintain the Premises
in good order, condition and repair, Landlord shall give Tenant written notice
to do such acts as are reasonably required to so maintain the Premises. In the
event Tenant fails to promptly commence such work and diligently prosecute it to
completion, then Landlord shall have the right to do such acts and expend such
funds at the expense of Tenant as are reasonably required to perform such work.
Any amount so expended by Landlord shall be paid by Tenant promptly after demand
with interest at eighteen percent (18%) per annum from the date of such work.
Landlord shall have no liability to Tenant for any damage, inconvenience or
interference with the use of the Premises by Tenant as a result of performing
any such work.

(c) Compliance with Law. Landlord and Tenant shall each do all
acts required to comply with all applicable laws, ordinances, regulations and
rules of any public authority relating to their respective maintenance
obligations as set forth herein.

8. 2 ALTERATIONS AND ADDITIONS

(a) Tenant shall make no alterations, additions or improvements
to the Premises or any part thereof other than as specified in this Lease,
without obtaining the prior written consent of Landlord. Such consent shall not
be unreasonably withheld, but will be contingent upon submission to and approval
by Landlord of plans and specifications and contractor. If Tenant makes any
alterations, additions or modifications, then Landlord at its option and in its
sole discretion may accept and retain all or any part of those alterations,
additions or modifications or require Tenant to remove the same in whole or in
part and to repair or restore at Tenant's expense the Premises to the same
condition as they were in at the time they were accepted by Tenant. Landlord's
decision regarding acceptance or restoration shall be conveyed to Tenant in
writing at the time of Tenant's request for alterations, additions or
improvements. Tenant hereby expressly waives any argument Tenant may have or
make, that Landlord consented to, or waived its right or is estopped by reason
of actual or constructive knowledge to object to or challenge, any alteration,
addition or modification made without such prior written consent.

(b) Landlord may impose as a condition to the aforesaid consent
such requirements as Landlord may deem necessary in its sole discretion,
including without limitation thereto, the manner in which the work is done, a
right of approval of the contractor by whom the work is to be performed, and the
times during which it is to be accomplished.

(c) All alterations, additions or improvements shall at the
expiration or earlier termination of the Lease become the property of Landlord
and remain upon and be surrendered with the Premises, unless Landlord elects
prior to the termination or earlier expiration of this Lease to require Tenant
to restore the Premises pursuant to Paragraph 8.2(a) above or to remove promptly
upon the termination or earlier expiration of this Lease all or certain
specified alterations, additions or improvements made to the Premises, and to
repair any damage to the Premises from such removal. Tenant shall indemnify the
Landlord against any loss or liability resulting from delay by Tenant in so
surrendering the

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Premises, including without limitation any claims made by any succeeding tenant
founded on such delay above.

(d) All articles of personal property and all business and trade
fixtures, all movable machinery, equipment, furniture and partitions (excluding
items affixed to walls, ceilings, or floors) owned by Tenant and installed by
Tenant at its expense in the Premises shall be and remain the property of
Tenant, and must be removed by Tenant at Tenant's expense upon the termination
or earlier expiration of this Lease. Tenant shall reimburse Landlord upon demand
for the cost of any loss, liability or damage caused by or resulting from such
removal or from failure to so remove.

9. ENTRY BY LANDLORD

Landlord reserves and shall at reasonable times have the right to
enter the Premises to inspect the same, to supply janitor service and any other
service to be provided by Landlord to Tenant hereunder, to submit said Premises
to prospective purchasers or tenants, to post notices of non-responsibility and
"for lease" signs, and to alter, improve or repair the Premises and any portion
of the Building without abatement of rent, and may for that purpose erect
scaffolding and other necessary structures where reasonably required by the
character of the work to be performed, always providing that the entrance to the
Premises shall not be blocked thereby, and further providing that the business
of Tenant shall not be interfered with unreasonably. Tenant hereby waives any
claim for damages for any injury or inconvenience to or interference with
Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and
any other loss occasioned thereby. For each of the aforesaid purposes, Landlord
shall at all times retain a key with which to unlock all of the doors in, upon
and about the Premises, excluding Tenant's vaults and safes, and Landlord shall
have the right to use any and all means which Landlord may deem proper to open
said doors in an emergency, in order to obtain entry to the Premises and any
entry to the Premises obtained by Landlord by any of said means, or otherwise
shall not under any circumstances be construed or deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant
from the Premises or any portion thereof.

10. LIENS

Tenant shall keep the Premises and any Building of which the
Premises are a part free from any bona fide and valid liens arising out of work
performed, materials furnished, or obligations incurred by Tenant and shall
indemnify, hold harmless and defend Landlord from any liens and encumbrances
arising out of any work performed or materials furnished by or at the direction
of Tenant. In the event that Tenant shall not, within twenty (20) days
following the notice of any such lien, cause such lien to be released of record
by payment or posting of proper bond, Landlord shall

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have, in addition to all other remedies provided herein and by law, the right,
but no obligation to cause the same to be released by such means as it shall
deem proper, including payment of the claim giving rise to such lien. All such
sums paid by Landlord and all expenses incurred by it in connection therewith
including attorney's fees and costs shall be payable to Landlord by Tenant on
demand with interest at the rate of eighteen percent (18%) per annum. Landlord
shall have the right at all times to post and keep posted on the Premises any
notices permitted or required by Law, or which Landlord shall deem proper, for
the protection of Landlord and the Premises, any other party having an interest
therein, from mechanics' and materialmen's liens, and Tenant shall give to
Landlord at least ten (10) business days prior written notice of the expected
date of commencement of any work relating to alterations or additions to the
Premises. Tenant shall have at all times the right to contest any lien or
encumbrance arising out of work performed or materials furnished by or at the
direction of Tenant.

11. INDEMNITY

11. 1 INDEMNITY. Landlord and Tenant shall indemnify and hold
each other harmless from and defend each other against any and all claims of
liability for any injury or damage to any person or property whatsoever; (1)
occurring in, on or about the Premises or any part thereof; and (2) occurring
in, on or about any facilities (including, without prejudice to the generality
of the term "facilities," rest rooms, elevators, stairways, passageways,
hallways and parking areas), the use of which Tenant may have in conjunction
with other Tenants of the Building, when such injury or damage is caused in
part or in whole by the act, neglect, fault or omission of any duty with
respect to the same by Tenant, its agents, contractors, employees or invitees.
Landlord and Tenant shall further indemnify and hold each other harmless from
and against any and all claims arising from any breach or default in the
performance of any obligation on the other's part to be performed under the
terms of this Lease, or arising from any act or negligence of the other, or any
of its agents, contractors, employees and from and against all costs,
attorney's fees, expenses and liabilities incurred in the defense of any such
claim or any action or proceeding brought thereon. In case any action or
proceeding be brought against Landlord or Tenant by reason of any such claim,
Landlord or Tenant, upon notice from the other shall defend the same at its own
expense by counsel reasonably satisfactory to the other, provided, however,
that Landlord or Tenant shall not be liable for damage or injury occasioned by
the negligence or intentional acts of the other and its designated invitees,
agents or employees unless covered by insurance Landlord or Tenant is required
to provide.

Tenant, as a material part of the consideration of Landlord, hereby assumes all
risk of damage to Tenant's property or injury to persons in, upon or about the
Premises from any cause and Tenant hereby waives all claims in respect thereof
against Landlord, except where such damage or injury is due to the negligence of
Landlord, his agents, employees or invitees.

11. 2 EXEMPTION OF LANDLORD. Landlord shall not be liable for
injury or damage which may be sustained by the person, goods, wares, merchandise
or property of Tenant, its employees, invitees, or customers, or any other
person in or about the Premises caused by or resulting from fire, steam,
electricity, gas, water or rain, which may leak or flow from or into any part of
the Premises, or from the breakage, leakage, destruction, or other defects of
the pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures of the same, whether the damage be injury from conditions arising upon
the Premises or upon other portions of the

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Building of which the Premises are a part, or from other sources, except where
such injury or damage is due to the negligent or intentional acts, or omission
to act, of Landlord, his agents, contractors, employees or invitees. Landlord
shall not be liable for any damages arising from acts of neglect of any other
Tenant of the Building.

12. INSURANCE

12. 1 COVERAGE. Tenant shall, at all times during the term of this
Lease, and as its own cost and expense procure and continue in force the
following insurance coverage:

(a) Bodily Injury and Property Damage Liability insurance with a
combined single limit for bodily injury and property damage of not less than
$1,000,000.

(b) Fire and Extended Coverage Insurance, including vandalism and
malicious mischief coverage, in an amount equal to the full replacement value of
all fixtures, furniture and improvements installed by or at the expense of
Tenant.

12. 2 INSURANCE POLICIES. The aforementioned minimum limits of
policies shall in no event limit the liability of Tenant hereunder. The
aforesaid insurance shall name Landlord as an additional insured. Said
insurance shall be with companies having a rating of not less than a Class A+ in
"Best's Key Rating Guide". Tenant shall furnish from the insurance companies or
cause the insurance companies to furnish certificates of coverage. No such
policy shall be cancelable or subject to reduction of coverage or other
modifications or cancellation except after thirty (30) days prior notice in
writing to Landlord by the insurer. All such policies shall be written as
primary policies, not contributing with and not in excess of the coverage which
Landlord may carry. Tenant shall, at least twenty (20) days prior to the
expiration of such policies, furnish Landlord with renewals or binders. Tenant
agrees that if Tenant does not take out and maintain such insurance, Landlord
may (but shall not be required to) procure said insurance on Tenant's behalf and
charge Tenant the premium together with a twenty-five percent (25%) handling
charge, payable upon demand. Tenant shall have the right to provide such
insurance coverage pursuant to blanket policies obtained by Tenant provided such
blanket policies expressly afford coverage to the Premises and to Tenant as
required by this Lease.

12. 3 WAIVER OF SUBROGATION. Landlord and Tenant each hereby waive
any and all rights of recovery against the other or against the officers,
employees, agents and representatives of the other, on account of loss or damage
occasioned to such waiving party or its property or the property of others under
its control to the extent that such loss or damage is insured against in any
fire and extended coverage insurance policy which either party may have in force
at the time of such loss or damage. Tenant shall, upon obtaining the policies of
insurance required under this Lease, give notice to the insurance carrier or
carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.

12. 4 With Landlord's consent, the Tenant may elect to be a self
insurer of the losses mentioned in this section and in such event hereby waives
any claim against Landlord for any damage or casualty normally covered by such
fire and extended coverage insurance.

13. DAMAGE OR DESTRUCTION

13. 1 PARTIAL DAMAGE - INSURED. In the event the Premises or the
Building are damaged by any casualty which is covered under fire and extended
coverage insurance carried by Landlord, then

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Landlord shall restore such damage provided insurance proceeds are available to
pay eighty percent (80%) or more of the cost of restoration and provided such
restoration can be completed within sixty (60) days after the commencement of
the work in the opinion of a registered architect or engineer appointed by
Landlord. In such event this Lease shall continue in full force and effect,
except that Tenant shall be entitled to a proportionate reduction of rent while
such restoration takes place, such proportionate reduction to be based upon the
extent to which the restoration efforts interfere with Tenant's business in the
Premises.

13. 2 PARTIAL DAMAGE - UNINSURED. In the event the Premises or the
Building are damaged by a risk not covered by Landlord's insurance or the
proceeds of available insurance are less than eighty percent (80%) of the cost
of restoration, or if the restoration cannot be accomplished within sixty (60)
days after the commencement of work in the opinion of the registered architect
or engineer appointed by Landlord, then Landlord shall have the option either to
(1) repair or restore such damage, this Lease continuing in full force and
effect, but the rent to be proportionately abated as hereinabove provided, or
(2) give notice to Tenant at any time within thirty (30) days after such damage
terminating this Lease as of a date to be specified in such notice, which date
shall be not less than thirty (30) nor more than sixty (60) days after giving
such notice. In the event of the giving of such notice, this Lease shall expire
and all interest of Tenant in the Premises shall terminate on such date so
specified in such notice and the rent, reduced by any proportionate reduction
based upon the extent, if any, to which said damage interfered with the use and
occupancy of Tenant, shall be paid to the date of such termination. Landlord
agrees to refund to the Tenant any rent theretofore paid in advance for any
period of time subsequent to such date.

13. 3 TOTAL DESTRUCTION. In the event the Premises are totally
destroyed or the Premises cannot be restored as required herein under applicable
laws and regulations, notwithstanding the availability of insurance proceeds,
this Lease shall be terminated effective thirty (30) days after the date of the
damage.

13. 4 DAMAGE NEAR END OF THE TERM. Notwithstanding anything to the
contrary contained in this Section 13, Landlord shall not have any obligation
whatsoever to repair, reconstruct or restore the Premises when the damage
resulting from any casualty covered under this Section 13 occurs during the last
two (2) months of the term of this Lease or any extension thereof.

13. 5 LANDLORD'S OBLIGATIONS. The Landlord shall not be required
to repair any injury or damage by fire or other cause, or to make any
restoration or replacement of any panelling, decorations, partitions, railings,
floor covering, office fixtures or any other improvements or property installed
in the Premises by Tenant or at the direct or indirect expense of Tenant.
Tenant shall be required to restore or replace same in the event of damage.
Except for abatement of rent, if any, Tenant shall have no claim against
Landlord for any damage suffered by reason of any such damage, destruction,
repair or restoration; nor shall Tenant have the right to terminate this Lease
as the result of any statutory provision now or hereafter in effect pertaining
to the damage and destruction of the Premises or the Building, except as
expressly provided herein.

14. CONDEMNATION

If all or any part of the Premises shall be taken or appropriated
for public or quasi-public use by right of eminent domain with or without
litigation or transferred by agreement in connection with such public or
quasi-public use, either party
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hereto shall have the right at its option exercisable within thirty (30) days
of receipt of notice of such taking to terminate this Lease as of the date
possession is taken by the condemning authority, provided, however, that before
Tenant may terminate this Lease by reason of taking or appropriation as
provided hereinabove, such taking or appropriation shall be of such an extent
and nature as to substantially handicap, impede or impair Tenant's use of the
Premises. If any part of the Building other than the Premises shall be so taken
or appropriated Landlord shall have the right at its option to terminate the
Lease. No award for any partial or entire taking shall be apportioned, and
Tenant hereby assigns to Landlord any award which may be made in such taking or
condemnation, together with any and all rights of Tenant now or hereafter
arising in or to the same or any part thereof; provided, however, that nothing
contained herein shall be deemed to give Landlord any interest in or require
Tenant to assign to Landlord any award made to Tenant for the taking of
personal property and fixtures belonging to Tenant and/or for the interruption
of or damage to Tenant's business and/or for Tenant's unamortized cost of
leasehold improvements and any sums prepaid by Tenant. In the event of a
partial taking which does not result in a termination of this Lease, rent shall
be abated in the proportion which the part of the Premises so made unusable
bears to rented area of the Premises immediately prior to the taking. No
temporary taking of the Premises and/or of Tenant's rights therein or under
this Lease shall terminate the Lease or give Tenant any right to any abatement
of rent thereunder; any award made to Tenant by reason of any such temporary
taking shall belong entirely to Tenant and Landlord shall not be entitled to
share therein.

15. ASSIGNMENT AND SUBLETTING

15. 1 LANDLORD'S CONSENT REQUIRED. Tenant shall not assign,
transfer, mortgage, pledge, hypothecate or encumber this Lease or any interest
therein, and shall not sublet the Premises or any part hereof, without the prior
written consent of Landlord and any attempt to do so without such consent being
first had and obtained shall be wholly void and shall constitute a breach of
this Lease.

15. 2 REASONABLE CONSENT. If Tenant complies with the following
conditions, and the proposed subtenant meets the normal leasing criteria of
Landlord, Landlord shall not unreasonably withhold its consent to the subletting
of the Premises or any portion thereof or the assignment of this Lease. Tenant
shall submit in writing to Landlord (a) the name and legal composition of the
proposed subtenant or assignee; and (b) such reasonable financial information as
Landlord may request concerning the proposed subtenant or assignee; (c) a
written attornment agreement satisfactory to Landlord from the proposed
subtenant or assignee. Nothing herein shall prevent the Tenant from assigning
the Lease to a parent, subsidiary or affiliated corporation meeting Landlord's
normal leasing criteria, from adding, subtracting or changing partners or from
incorporating. Notwithstanding that Tenant has complied with the foregoing
conditions, that the proposed assignee, transferee or sublessee meets the normal
leasing criteria of Landlord, and that Landlord has no reasonable objections to
the material or information submitted by Tenant, Landlord may at anytime within
thirty (30) days after receipt of Tenant's request for Landlord's consent to a
proposed assignment, transfer or subletting, elect in writing to terminate this
Lease as respects the part of the Premises covered by the proposed assignment,
transfer or subletting; provided however, that this obligation of Tenant and
right reserved to Landlord shall not apply to a subletting by Tenant to a
parent, subsidiary or affiliated corporation meeting Landlord's normal leasing
criteria; and further provided that if Tenant elects to lease additional space
in the Building of which the Premises are a part, but Tenant does not need

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the entire amount of such additional space at the time of such election and
wishes to sublet some or all of such additional space until Tenant does have a
need for all of such additional space, Landlord agrees to waive the preceding
right to terminate with respect to such subletting on the condition that
Landlord, or a party designated by Landlord, is engaged by Tenant to handle
such subletting, and on the further condition that Tenant shall pay to Landlord
as additional rent under this Lease, that amount of rent and other
considerations received by Tenant in excess of the reasonable costs and
expenses of such subletting which costs and expenses shall include any
commissions or fees charged by Landlord or the party designated by Landlord, to
handle such subletting, any costs of installation, remodeling or removal of
tenant finish improvements, the rent owed to Landlord on such space and any
related and reasonable subletting expenses incurred and paid by Tenant such as
attorneys fees and brokerage commissions. If no such sublease is available, or
if the rental and other considerations received by Tenant are less than the
total of such costs and expenses, Tenant shall be solely responsible for such
deficiency and shall continue to be responsible to pay the Landlord the rent on
such space. In connection with the handling of such subletting by Landlord, or
the party designated by Landlord, the commissions or fees charged for such
service shall not exceed the rate or fees then being charged for such services
to other property owners in the Denver West Office Park and this subletting
shall be pursued with reasonable diligence and shall be given an equal priority
to other subleasing of comparable space in the Denver West Office Park then
being handled by Landlord or the party designated the Landlord. The term of
such sublease shall be for a period equal to the time Tenant is unable to fully
utilize such space but for a sublease term of a minimum of twelve months. If
Tenant wishes a sublease to be with a particular party, Tenant may propose such
sublessee to Landlord, or the party designated by Landlord, and if the proposed
sublessee meets such reasonable subleasing requirements as Landlord then
requires of sublessees or subtenants in the Denver West Office Park, the
sublease shall be entered into with the proposed sublessee.

15. 3 NO RELEASE OF TENANT. No consent by Landlord to any
assignment or subletting by Tenant shall relieve Tenant of any obligation to be
performed by Tenant under this Lease, whether occurring before or after such
consent, assignment or subletting. The consent by Landlord to any assignment or
subletting shall not relieve Tenant from the obligation to obtain Landlord's
express written consent to any other assignment or subletting. The acceptance of
rent by Landlord from any other person shall not be deemed to be a waiver by
Landlord of any provision of this Lease or to be a consent to any assignment,
subletting or other transfer. Consent to one assignment, subletting or other
transfer shall not be deemed to constitute consent to any subsequent assignment,
subletting or other transfer.

15. 4 ATTORNEY'S FEES. In the event Landlord shall consent to a
sublease or assignment under this Section 15, Tenant shall pay Landlord's
reasonable attorney's fees not to exceed Five Hundred Dollars ($500.00) incurred
in connection with giving such consent.

16. SUBORDINATION

16. 1 SUBORDINATION. This Lease at Landlord's option shall be
subject and subordinate to all ground or underlying leases which now exist or
may hereafter be executed affecting the Premises or land upon which the Premises
are situated or both, and to the lien of any first mortgages or first deeds of
trust in any amount or amounts whatsoever now or hereafter placed on or against
the land or improvements or either thereof, of which the Premises are a part, or
on or against Landlord's interest or estate therein, or

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on or against any ground or underlying lease without the necessity of the
execution and delivery of any further instruments on the part of Tenant to
effectuate such subordination. If the holder of any mortgage, trust or ground
lease shall elect to have this Lease prior to the lien of its mortgage, deed of
trust or ground lease, and shall give written notice thereof to Tenant, this
Lease shall be deemed prior to such mortgage, deed of trust or ground lease,
whether this Lease is dated prior or subsequent to the date of said mortgage,
deed of trust, or ground lease or the date of the recording thereof, provided
that Tenant's right under this Lease shall remain in effect so long as Tenant
is not in default.

16. 2 SUBORDINATION AGREEMENTS. Tenant covenants and agrees to
execute and deliver upon demand without charge therefor, such further
instruments evidencing such subordination of this Lease to such ground or
underlying leases and to the lien of any such mortgages or deeds of trust as may
be required by Landlord. Tenant hereby appoints Landlord as Tenant's
attorney-in-fact, irrevocably, to execute and deliver any such agreements,
instruments, releases or other documents.

16. 3 QUIET ENJOYMENT. Landlord covenants and agrees with Tenant
that upon Tenant paying rent and other monetary sums due under the Lease,
performing its covenants and conditions under the Lease and upon Tenant
recognizing any future purchaser as Landlord pursuant hereto, Tenant shall and
may peaceably and quietly have, hold and enjoy the Premises for the term,
subject, however, to the terms of the Lease.

16. 4 ATTORNMENT. In the event any proceedings are brought for
default under ground or any underlying lease or in the event of foreclosure or
the exercise of the power of sale under any mortgage or deed of trust made by
the Landlord covering the Premises, the Tenant shall attorn to the purchaser
upon any such foreclosure or sale and recognize such purchaser as the Landlord
under this Lease, provided said purchaser expressly agrees in writing to be
bound by the terms of the Lease.

17. DEFAULT: REMEDIES

17. 1 DEFAULT. The occurrence of any of the following shall
constitute a material default and breach of this Lease by Tenant:

(a) Any failure by Tenant to pay the rent or any other monetary
sums required to be paid hereunder (where such failure continues for five (5)
business days after written notice by Landlord to Tenant);

(b) The abandonment of the Premises by Tenant;

(c) A failure by Tenant to observe and perform any other provision
of this Lease to be observed by Tenant, where such failure continues for ten
(10) days after written notice thereof, by Landlord to Tenant; provided,
however, that if the nature of the default is such that the same cannot
reasonably be cured within said ten (10) day period, Tenant shall not be deemed
to be in default if Tenant shall within such period commence such cure and
thereafter diligently prosecute the same to completion.

(d) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; the filing by or against Tenant of a
petition to have Tenant adjudged a bankrupt or of a petition for reorganization
or arrangement under any law relating to bankruptcy [unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days];
the appointment of a trustee or receiver to take possession of substantially

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all of Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where possession is not restored to Tenant within thirty (30) days; or
the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease,
where such seizure is not discharged within thirty (30) days.

17.2 REMEDIES. In the event of any such material default or breach
by Tenant, Landlord may, at any time thereafter without limiting Landlord in the
exercise of any right or remedy at law or in equity which Landlord may have by
reason of such default or breach:

(a) Maintain this Lease in full force and effect and recover the
rent and other monetary charges as they become due, without terminating Tenant's
right to possession irrespective of whether Tenant shall have abandoned the
Premises. In the event Landlord elects not to terminate the Lease, Landlord
shall have the right to attempt to re-let the Premises at such rent and upon
such conditions and for such a term, and to do all acts necessary to maintain
or preserve the Premises as Landlord deems reasonable and necessary without
being deemed to have elected to terminate the Lease, including removal of all
persons and property from the Premises; such property may be removed and stored
in a public warehouse or elsewhere at the cost of and for the account of
Tenant. In the event any such re-letting occurs, this Lease shall terminate
automatically upon the new Tenant taking possession of the Premises.
Notwithstanding that Landlord fails to elect to terminate the Lease initially,
Landlord at any time during the term of this Lease may elect to terminate this
Lease by virtue of such previous default of Tenant.

(b) Terminate Tenant's right to possession by any lawful means, in
which case this Lease shall terminate and Tenant shall immediately surrender
possession of the Premises to Landlord. In such event Landlord shall be entitled
to recover from Tenant all damages incurred by Landlord by reason of Tenant's
default; including without limitation thereto, the following: (i) the worth at
the time of award of any unpaid rent which has been earned at the time of such
termination; plus (ii) the worth at the time of the award of the amount by which
the unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that is proved could have been
reasonably avoided; plus (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that is proved could be reasonably
avoided; plus (iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform his obligations of
this Lease including, but not limited to, rent and other monetary charges as
they become due, attorney's fees, costs to re-let and remodel the Premises,
costs of regaining possession, real estate brokers' commissions and interest on
all such sums accruing at a maximum lawful rate from the date of default until
paid in full or which in the ordinary course of events would be likely to result
therefrom; plus (v) at Landlord's election, such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by applicable
State law. Upon any such re-entry Landlord shall have the right to make any
reasonable repairs, alterations or modifications to the Premises which Landlord
in its sole discretion deems reasonable and necessary. As used in (i) above, the
"worth at the time of award" is computed by allowing interest at the rate of
prime rate plus three percent (3%) from the date of default. As used in (ii) and
(iii) the "worth at the time of award" is computed by discounting such amount at
the discount rate of the U.S. Federal Reserve Bank at the time of award plus one
percent (1%). The term "rent" as used in this section 17, shall be deemed to be
and to mean the rent to be paid pursuant to

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Section 3 and all other monetary sums required to be paid by Tenant pursuant to
the terms of the Lease.

17. 3 LATE CHARGES. Tenant hereby acknowledges that late payment
by Tenant to Landlord of rent and other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord or Landlord's designee within five (5) days after
such amount shall be due, Tenant shall pay to Landlord a late charge equal to
three and three quarters percent (3.75%) of such overdue amount each and every
month (or any portion thereof) until said late payment is paid in full. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the cost Landlord will incur by reason of late payment by Tenant.
Acceptance of such late charge by Landlord shall in no event constitute a waiver
of Tenant's default with respect to such overdue amount nor prevent Landlord
from exercising any of the other rights and remedies granted hereunder.

17. 4 DEFAULT BY LANDLORD. Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within a reasonable
time, but in no event later than thirty (30) days after written notice by Tenant
to Landlord and to the holder of any first mortgage or deed of trust covering
the Premises whose name and address shall have theretofore been furnished to
Tenant in writing, specifying wherein Landlord has failed to perform such
obligations provided, however, that if the nature of Landlord's obligations is
such that more than thirty (30) days are required for performance, then Landlord
shall not be in default if Landlord commences performance within such thirty-day
period and thereafter diligently prosecutes the same to completion.

18. RELOCATION OF PREMISES

18. 1 CONDITIONS. For the purpose of maintaining an economical and
proper distribution of Tenants throughout the buildings acceptable to Landlord,
Landlord shall have the right from time to time during the term of this Lease to
relocate the Premises on the following terms and conditions:

(a) The rented and usable areas of the new location in the
building are of equal size to the existing location (subject to a variation of
up to ten percent (10%) provided the amount of rent payable under this Lease is
not increased;

(b) If the then prevailing rental rate for the new location is
less than the amount being paid for the existing location, the rent shall be
reduced to equal the then prevailing rent for the new location;

(c) Landlord shall pay the cost of providing tenant improvements
in the new location comparable to the tenant improvements in the existing
location;

(d) Landlord shall pay the expenses reasonably incurred by Tenant
in connection with such substitution of Premises, including but not limited to
costs of moving, building signage, telephone relocation and reasonable
quantities of new stationery.

18. 2 NOTICE. Landlord shall deliver to Tenant written notice of
Landlord's election to relocate the Premises, specifying the new location and
the amount of rent payable therefor at least

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thirty days (30) prior to the date the relocation is to be effective.

18.3 REJECTION BY TENANT OF RELOCATION. If the relocation of the
Premises is not acceptable to Tenant, Tenant shall so notify Landlord in writing
within ten (10) days of Notice. Tenant and Landlord shall each have the right
(by delivering written notice to the other) to terminate this Lease effective no
later than sixty (60) days after delivery of said written notice.

19. MISCELLANEOUS

19. 1 ESTOPPEL CERTIFICATE.

(a) Both Landlord and Tenant shall at any time, upon not less than
ten (10) days prior written notice execute, acknowledge and deliver to the other
party a statement in writing (i) certifying that this Lease is unmodified and in
full force and effect (or, if modified stating the nature of such modification
and certifying that this Lease, as so modified, is in full force and effect) and
the date to which the rent and other charges are paid in advance, if any, and
(ii) acknowledging that there are not, to their knowledge, any uncured defaults
on the part of the other party hereunder or specifying such defaults if any are
claimed. Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises.

(b) Tenant's or Landlord's failure to deliver such statement
within such time shall be conclusive upon such respective parties (i) that this
Lease is in full force and effect, without modification except as may be
represented by Landlord, (ii) that there are no uncured defaults in Landlord's
performance, and (iii) that not more than one month's rent has been paid in
advance.

(c) If Landlord desires to finance or refinance the Building, or
any part thereof, Tenant hereby agrees to deliver to any lender designated by
Landlord such financial statements of Tenant as may be reasonably required by
such lender. Such statements shall include the past three years' financial
statements of Tenant. All such financial statements shall be received by
Landlord and Lender in confidence and shall be used only for the purposes herein
set forth.

19. 2 TRANSFER OF LANDLORD'S INTEREST. In the event of a sale or
conveyance by Landlord of Landlord's interest in the Premises or the Building
other than a transfer for security purposes only, Landlord shall be relieved
after the date specified in any such notice of transfer of all obligations and
liabilities accruing thereafter on the part of Landlord, provided that any funds
in the hands of Landlord at the time of transfer in which Tenant has an
interest, shall be delivered to the successor of Landlord. This Lease shall not
be affected by any such sale and Tenant agrees to attorney to the purchaser or
assignee provided all Landlord's obligations hereunder are assumed in writing by
the transferee.

19. 3 CAPTIONS: ATTACHMENTS: DEFINED TERMS

(a) The captions of the paragraphs of the Lease are for
convenience only and shall not be deemed to be relevant in resolving any
questions of interpretation or construction of any section of this Lease.

(b) Exhibits attached hereto, and addenda and schedules initialed
by the parties, are deemed by attachment to constitute part of this Lease and
are incorporated herein.

(c) The words "Landlord" and "Tenant," herein, shall include the
plural as well as the singular. Words used in neuter gender
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include the masculine and feminine and words in the masculine or feminine
gender include the neuter. If there be more than one Landlord or Tenant, the
obligations hereunder imposed upon Landlord or Tenant shall be joint and
several; as to a Tenant which consists of a husband and wife, the obligations
shall extend individually to their sole and separate property. The term
"Landlord" shall mean only the owner or owners at the time in question of the
fee title or a tenant's interest in a ground lease of the land underlying the
Building. The obligations contained in this Lease to be performed by Landlord
shall be binding on Landlord's successor's and assigns only during their
respective periods of ownership.

19. 4 ENTIRE AGREEMENT. This instrument along with any exhibits
and attachments hereto constitutes the entire agreement between Landlord and
Tenant relative to the Premises and this Agreement and the exhibits and
attachments may be altered, amended or revoked only by an instrument in writing
signed by both Landlord and Tenant. Landlord and Tenant agree hereby that all
prior or contemporaneous oral agreements between and among themselves and their
agents or representatives relative to the leasing of the Premises are merged in
or revoked by the Agreement.

19. 5 SEVERABILITY. If any term or provision of this Lease shall,
to any extent, be determined by a court of competent jurisdiction to be invalid
or unenforceable, the remainder of this Lease shall not be affected thereby, and
each term and provision of this Lease shall be valid and be enforceable to the
fullest extent permitted by Law.

19. 6 COSTS OF SUIT.

(a) If Tenant or Landlord shall bring any action for any relief
against the other, declaratory or otherwise, arising out of this Lease,
including any suit by Landlord for the recovery of rent or possession of the
Premises, the losing party shall pay the successful party a reasonable sum for
attorneys' fees which shall be deemed to have accrued on the commencement of
such action and shall be paid whether or not such action is prosecuted to
judgment.

(b) Should Landlord or Tenant, without fault on the other, be
named a defendant in any litigation brought by any third party, Landlord or
Tenant covenant to save and hold each other harmless from any judgment rendered
against itself, and all costs and expenses, including reasonable attorneys'
fees, incurred by Landlord or Tenant in connection with such litigation.

19. 7 TIME; JOINT AND SEVERAL LIABILITY. Time is of the essence of
this Lease and each and every provision hereof, except as the conditions
relating to the delivery of possession of the Premises to Tenant. All the terms,
covenants and conditions contained in this Lease to be performed by either
party, if such party shall consist of more than one person or organization,
shall be deemed to be joint and several, and all rights and remedies of the
parties shall be cumulative and nonexclusive of any other remedy at law or in
equity.

19. 8 BINDING EFFECT; CHOICE OF LAW. The parties hereto agree that
all provisions hereof are to be construed as both covenants and conditions as
though the words importing such covenants and conditions were used in each
separate paragraph hereof. Subject to any provisions hereof restricting
assignment or subletting by Tenant all of the provisions hereof shall bind and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State of Colorado.

19. 9 WAIVER. No covenant, term or condition or the breach thereof
shall be deemed waived, except by written consent of

PLEASE INITIAL
LANDLORD ________
-22- TENANT __________

<PAGE> 23

the party against whom the waiver is claimed, and any waiver or the breach of
any covenant, term or condition shall not be deemed to be a waiver of any
preceding or succeeding breach of the same or any other covenant, term or
condition. Acceptance by Landlord of any performance by Tenant after the time
the same shall have become due shall not constitute a waiver by Landlord of the
breach or default of any covenant, term or condition unless otherwise expressly
agreed to by Landlord in writing.

19.10 SURRENDER OF PREMISES. The voluntary or other surrender of
this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger,
and shall, at the option of the Landlord terminate all or any existing subleases
or subtenancies, or may, at the option of Landlord, operate as an assignment to
it of any or all such subleases or subtenancies.

19.11 HOLDING OVER. If Tenant remains in possession of all or any
part of the Premises after the expiration of the term hereof, without the
expressed written consent of Landlord, such tenancy shall be from month to month
only, and not a renewal hereof or an extension for any further term, and in such
case, rent and other monetary sums due hereunder shall be equal to one and one
half times the highest monthly rate provided for herein and at the time
specified in this Lease and such month to month tenancy shall be subject to
every other term, covenant and agreement contained herein.

19.12 SIGNS.

(a) Tenant shall not place or permit to be placed in or upon the
Premises, where visible from outside the Premises, or outside the Premises or
any part of the Building any signs, notices, drapes, shutters, blinds or
displays of any type without the prior written consent of Landlord.

(b) Landlord reserves the right in Landlord's sole discretion to
place and locate on the roof, exterior of the Building, and in any area of the
Building not leased to Tenant such signs, notices, displays and similar items as
Landlord deems appropriate in the proper operation of the Building. Landlord
will be bound by the signage restrictions imposed by Jefferson County, Colorado
under the terms of Landlord's "Planned Development Zoning." Such restrictions
are attached as Exhibit D.

19.13 REASONABLE CONSENT. Except as limited elsewhere in this
Lease, wherever in this Lease Landlord or Tenant is required to give its consent
or approval to any action on the part of the other, such consent or approval
shall not be unreasonably withheld. In the event of failure to give any such
consent, the other party shall be entitled to specific performance at law and
shall have such other remedies as are reserved to it under this Lease, but in no
event shall Landlord or Tenant be responsible in monetary damages for failure to
give consent unless said consent is withheld maliciously or in bad faith.

19.14 RULES AND REGULATIONS. Tenant and Tenant's agents, servants,
employees, visitors, and licensees shall observe and comply fully and
faithfully with all reasonable and nondiscriminatory rules and regulations
adopted by Landlord for the care, protection, cleanliness and operation of the
Building and its Tenants including those annexed to this Lease as Exhibit C and
any modification or addition thereto adopted by Landlord, provided Landlord
shall give written notice thereof to Tenant. Landlord shall not be responsible
to Tenant for the non-performance by any other tenant or occupant of the
Building of any of said rules and regulations. All Tenants are also expected to
comply with applicable OSHA and EPA regulations.

PLEASE INITIAL
LANDLORD ________
-23- TENANT __________

<PAGE> 24

19.15 INJURY/ILLNESS. Tenants are required to report any
facilities-related injury or illness to the Denver West Property Management
office within 24 hours of Tenant's knowledge of the accident or onset of
illness.

19.16 NOTICES. All notices or demands of any kind required or
desired to be given by Landlord or Tenant hereunder shall be in writing and
shall be deemed delivered Ninety-six (96) hours after depositing the notice or
demand in the United States mail, certified or registered, postage prepaid,
addressed to the Landlord or Tenant respectively at the addresses set forth
after their signatures at the end of this Lease.

19.17 CORPORATE AUTHORITY. If Tenant is a corporation, each
individual executing this Lease on behalf of said corporation represents and
warrants that he is duly authorized to execute and deliver this Lease on behalf
of said corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the By-Laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.

19.18 ADA (AMERICANS WITH DISABILITIES ACT) COMPLIANCE. Landlord
shall be responsible for compliance with Title III of the Americans with
Disabilities Act of 1990, 42 U.S.C. 12181 et seq and its regulations,
(collectively, the "ADA") (i) as to the design and construction of exterior
common areas (e.g. sidewalks and parking areas) and (ii) with respect to the
initial design and construction by Landlord of Landlord's work (as defined in
Section 1.2, WORK OF IMPROVEMENT, and as more particularly described in Exhibit
"B" hereto). Tenant shall be responsible for compliance with the ADA in all
other respects concerning the use and occupancy of the Premises, which
compliance shall include, without limitation (i) provision for full and equal
enjoyment of the goods, services, facilities, privileges, advantages or
accommodations of the Premises as contemplated by and to the extent required by
the ADA (ii) compliance relating to requirements under the ADA or amendments
thereto arising after the date of this Lease and (iii) compliance relating to
the design, layout, renovation, redecorating, refurbishment, alteration, or
improvement to the Premises made or requested by Tenant at any time following
completion of the Landlord's Work. Tenant shall indemnify, protect, defend and
save Landlord and Landlord's agent harmless with regard to any non-compliance
or alleged non-compliance by Tenant with any law, order, ordinance, regulation,
permit, license or other governmental matter in any way relating to the conduct
of Tenant's business or profession in the Premises. If Landlord or Landlord's
Agent is named as a defendant or a responsible party with respect to any
alleged violation or non-compliance by Tenant as aforesaid, Landlord or
Landlord's Agent, as the case may be, also may require, by notice to Tenant,
that the matters or conduct giving rise thereto be discontinued by Tenant
unless and until the alleged violation or non-compliance is resolved in
Tenant's favor.

20. FINANCIAL STATEMENTS

Tenant hereby agrees to deliver to Landlord within ten (10) days
of written notice such financial statements of Tenant as may be requested from
time to time by Landlord. Such statements shall include at least the Balance
Sheet, Income Statement and Statement of Changes in Financial Position for the
most current month end, year to date and prior year end certified by an officer
of the corporation to be an accurate representation of the financial condition
of Tenant.

PLEASE INITIAL
LANDLORD ________
-24- TENANT __________

<PAGE> 25

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease in multiple
counterparts, each of which shall have the force and effect of an original.

TENANT:

BIOFACTORS, INC., A DELAWARE CORPORATION

By: /s/ DOUGLAS S. ZORN Date:
-------------------------------------
Douglas S. Zorn
Vice President/Finance &
Chief Financial Officer

Witness: /s/ [ILLEGIBLE]
--------------------------------
1746 Cole Boulevard
Suite 265
Golden, Colorado 80401

LANDLORD:

Denver West Office Building No. 21 Venture

By: Denver West Management, Inc.

By:/s/ GREG C. STEVINSON Date:
-------------------------------------
Greg C. Stevinson, President

1546 Cole Boulevard
Suite 220
Golden, Colorado 80401

This Lease has been prepared for submission to your attorney who will review the
document and assist you to determine whether your legal rights are adequately
protected. The Landlord is not authorized to give legal or tax advice; no
representation or recommendation is made by the Landlord or its agents or
employees as to the legal sufficiency, legal effect or tax consequences of this
document or any transaction relating thereto. These are questions for your
attorney with whom you should consult before signing this document.

PLEASE INITIAL
LANDLORD ________
-25- TENANT __________

<PAGE> 26
EXHIBIT "A"

TO DENVER WEST OFFICE BUILDING LEASE DATED JANUARY 1, 1996

Between

DENVER WEST OFFICE BUILDING NO. 21 VENTURE

And

BIOFACTORS, INC., A DELAWARE CORPORATION

FLOOR PLATE OF LEASED PREMISES

PLEASE INITIAL
LANDLORD ________
-26- TENANT __________

<PAGE> 27
EXHIBIT "B"

TO DENVER WEST OFFICE BUILDING LEASE DATED JANUARY 1, 1996

Between

DENVER WEST OFFICE BUILDING NO. 21 VENTURE

and

BIOFACTORS, INC., A DELAWARE CORPORATION

TENANT FINISH SCHEDULE

The space will be leased on an "As Is" basis.

Landlord has provided keys, signs and parking for Tenant.

PLEASE INITIAL
LANDLORD ________
-27- TENANT __________

<PAGE> 28
EXHIBIT "C"

TO DENVER WEST OFFICE BUILDING LEASE

RULES AND REGULATIONS

1. No signs, placard, picture, advertisement, name or notices shall be
inscribed, displayed or printed or affixed on or to any part of the outside or
inside of the Building or the Premises without the prior written consent of
Landlord and Landlord shall have the right to remove any such sign, placard,
picture, advertisement, name or notice without notice to and at the expense of
Tenant. All approved signs or lettering on doors shall be printed, painted,
affixed or inscribed by a person approved by Landlord. Landlord shall not place
anything or allow anything to be placed near the glass of any window, door,
partition or wall which may appear unsightly from outside the Premises;
provided, however, that Landlord is to furnish and install a Building standard
window drapery at all exterior windows.

2. The directory of the Building will be provided exclusively for the display of
the name and location of the Tenant only and Landlord reserves the right to
exclude any other names therefrom.

3. The sidewalks, hall, passages, exits, entrances, elevators and stairways
shall not be obstructed by bicycles, or other vehicles, of any of the tenants or
used by them for any purpose other than for ingress to and egress from their
respective Premises. The halls, passages, exits, entrances, elevators,
stairways, boiler room and roof are not for the use of the general public and
the Landlord shall in all cases retain the right to control and prevent access
thereto by all persons whose presence in the judgment of the Landlord shall be
prejudicial to the safety, character, reputation and interests of the Building
and its tenants, provided that nothing therein contained shall be construed to
prevent such access to persons with whom the tenants normally deal in the
ordinary course of Tenant's business unless such persons are engaged in illegal
activities. No Tenant and no employees or invitees of any Tenant shall go upon
the roof of the Building nor into the boiler room.

4. The Tenant shall not alter any lock or install any new or additional locks or
any bolts on any door of the Premises without written consent of the Landlord.
If the Landlord shall give its consent, the Tenant shall in each case furnish
the Landlord with a key for any such lock. Each Tenant must, upon the
termination of Tenancy, return to the Landlord all keys furnished to such
Tenant, and in the event of the loss of any keys, such Tenant shall pay to the
Landlord the cost of replacing the same or of changing the lock or locks opened
by such lost key if Landlord shall deem it necessary to make such change.
Tenant shall not duplicate any keys obtained from Landlord.

5. The toilet rooms, urinals, wash bowls and other apparatus shall not be used
for any purpose other than that for which they were constructed and no foreign
substance of any kind whatsoever shall be thrown 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 employees or invitees shall have caused it.
All coffee grounds and other similar substances shall be disposed of only in the
automatic waste disposals provided in the Building. All coffee pots and other
similar equipment and appliances shall be cleaned, washed, filled or emptied
only in the stainless steel sinks provided for that purpose and not in the
restrooms or any other area.

PLEASE INITIAL
LANDLORD ________
-28- TENANT __________

<PAGE> 29
6. Tenant shall not overload the floor of the Premises, or mark, drive nails,
screw or drill into the partitions, woodwork, walls, ceilings, floors or plaster
or in any way deface the Premises or any part thereof without the written
consent of Landlord and any such damage or injury caused by Tenant, its agents
and employees, shall be paid for by Tenant. No boring, cutting or stringing of
wires or laying of linoleum or other similar floor coverings shall be permitted
except with the prior written consent of the Landlord and as the Landlord may
direct. Under no circumstances shall Tenant penetrate the floor without the
prior written consent of Landlord.

7. No furniture, freight or equipment of any kind shall be brought into the
Building without the consent of Landlord and all moving of the same into or out
of the Building shall be done at such time and in such manner as Landlord shall
designate. Landlord shall have the right to prescribe the weight, size and
position of all safes and other heavy equipment brought into the Building and
also the times and manner of moving the same in and out of the Building. Safes
or other heavy objects shall, if considered necessary by Landlord, stand on wood
strips of such thickness as is necessary to properly distribute the weight.
Landlord will not be responsible for loss or damage to any such safe or property
from any cause and all damage done to the Building by the moving or maintaining
any such safe or other property shall be repaired at the expense of the Tenant.
There shall not be used, in any space, or in the public halls of the Building,
either by any tenant or others, any hand trucks except those equipped with
rubber tires and side guards.

8. Tenant shall not employ any person or persons other than the janitor of
Landlord for the purpose of cleaning the Premises unless otherwise agreed to by
Landlord. Except with the written consent of Landlord, no person or persons
other than those approved by Landlord shall be permitted to enter the Building
for the purpose of cleaning the same. Tenant shall not cause any unnecessary
labor by reason of Tenant's carelessness or indifference in the preservation of
good order and cleanliness. Landlord shall in no way be responsible to any
Tenant for any loss of property on the Premises, however occurring, or for any
damage done to the effects of any Tenant by the janitor or any other employee or
any other person. Janitorial service shall include ordinary dusting and cleaning
by the janitor assigned to such work and shall not include cleaning of carpets,
rugs or upholstery except normal vacuuming, or moving of furniture and other
special services. Janitorial service will not be furnished on nights when rooms
are occupied after 7:00 PM. The janitor may at all times keep a pass key and
shall be allowed admittance to the leased Premises.

9. Tenant shall not use, keep or permit to be used or kept any noxious gas or
similar substances in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to the Landlord 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 animals, fish or birds be brought in or kept in or about the Premises
of the Building. No Tenant shall make or permit to be made any unseemly or
disturbing noises or disturb or interfere with occupants of this or neighboring
Buildings or Premises or those having business with them whether by the use of
any musical instrument, radio phonograph, unusual noise, or in any other way. No
Tenant shall throw anything out of doors or down the passageways.

PLEASE INITIAL
LANDLORD ________
-29- TENANT __________

<PAGE> 30
10. The Premises shall not be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the use of the Premises
for general office purposes. Unless otherwise specifically provided in a lease,
no Tenant shall occupy or permit any portion of his Premises to be occupied as
an office for a public stenographer or typist, or for the manufacture or sale of
liquor, narcotics, or tobacco in any form, or as a medical office, or as a
barber shop or manicure shop. No Tenant shall advertise for laborers giving an
address at the Premises. The Premises shall not be used for lodging or sleeping
or for any illegal purposes.

11. Tenant shall not use or keep in the Premises or the Building any kerosene,
gasoline or inflammable or combustible fluid or material, or use any method of
heating or air conditioning other than that supplied by Landlord.

12. Landlord will direct electricians as to where and how telephone and
electrical wires are to be introduced. No boring or cutting for wires will be
allowed without the consent of Landlord. The location of telephones, call boxes
and other office equipment affixed to the Premises shall be subject to the
approval of Landlord.

13. No Tenant shall lay linoleum, tile, carpet or other similar floor covering
so that the same shall be affixed to the floor of the Premises in any manner
except as approved by the Landlord. The expense of repairing any damage
resulting from a violation of this rule or removal of any floor covering shall
be borne by the Tenant by whom, or by whose contractors employees or invitees,
the damage shall have been caused. Tenant shall use chair pads in all carpeted
areas under moveable chairs. Tenant shall use plastic protection on walls
surrounding all copy machines to prevent marring or staining of walls. Such
protection shall not be glued, nailed, screwed, etc. to the walls.

14. No furniture, packages, supplies, equipment or merchandise will be received
in the Building or carried up or down in the elevators, except between such
hours and in such elevators as shall be designated by Landlord. Tenant shall
cause its movers or moving company to use only the loading facilities and
elevator designated by Landlord. In the event Tenant's movers damage the
elevator or any other part of the Building, Tenant shall forthwith pay to
Landlord the amount required to repair said damage.

15. On Saturdays, Sundays, legal holidays and on other days between the hours of
6:00 p.m. and 7:00 a.m. the following day, access to the Building, or to the
halls, corridors, elevators or stairways in the Building, or to the Premises may
be refused unless the person seeking access is known to the person or employee
of the Building in charge and has a pass or is properly identified. The
Landlord shall in no case be liable for damages for any error with regard to
the admission to or exclusion from the Building of any person. In case of
invasion, mob, riot, public excitement, or other commotion, the Landlord
reserves the right to prevent access to the Building during the continuance of
the same by closing the doors or otherwise, for the safety of the Tenants and
protection of property in the Building and the Building. Landlord reserves the
right to close and keep locked all entrance and exit doors of the Building on
Saturdays, Sundays, legal holidays, and on other days between the hours of 6:00
p.m. and 7:00 a.m., and during such further hours as Landlord may deem
advisable for the adequate protection of said Building and the property of its
Tenants.

PLEASE INITIAL
LANDLORD ________
-30- TENANT __________

<PAGE> 31
16. Tenant shall see that the doors of the Premises are closed and securely
locked before leaving the Building and must observe strict care and caution that
all water faucets or water apparatus are entirely shut off before Tenant or
Tenant's employees leave the Building, and that all electricity shall likewise
be carefully shut off, so as to prevent waste or damage, and for any default or
carelessness Tenant shall make good all injuries sustained by other tenants or
occupants or the Building or Tenant.

17. Landlord reserves the right to exclude or expel from the Building any person
who, in the judgment of Landlord, is intoxicated or under the influence of
liquor or drugs, or who shall in any manner do any act in violation of any of
the rules and regulations of the Building.

18. The requirements of Tenant will be attended to only upon application at the
Office of the Building. Employees of Landlord shall not perform any work or do
anything outside of their regular duties unless under special instructions from
the Landlord, and no employee will admit any person (Tenant or otherwise) to any
office without specific instructions from the Landlord.

19. No vending machine or machines of any description shall be installed,
maintained or operated upon the Premises without the written consent of the
Landlord.

20. If required by governmental authority to do so, Landlord shall have the
right, exercisable without notice and without liability to Tenant, to change the
name and the street address of the Building of which the Premises are a part.

21. Tenant agrees that it shall comply with all fire and security regulations
that may be issued from time to time by Landlord and Tenant also shall provide
Landlord with the name of a designated responsible employee to represent Tenant
in all matters pertaining to such fire or security regulations.

22. Tenant shall not disturb, solicit or canvass any occupant of the Building
and shall cooperate to prevent the same.

23. Without the written consent of Landlord, Tenant shall not use the name of
the Building in connection with or in promoting or advertising the business of
Tenant except as Tenant's address.

24. Landlord shall furnish heating and air conditioning during the hours of
7:00 a.m. to 6:00 p.m. Monday through Friday, and 7:00 a.m. to 12:00 noon on
Saturday, except for holidays. In the event Tenant requires heating and air
conditioning during off hours, Sundays or holidays, Landlord, upon 48-hour
advance written notice from Tenant, shall provide such services at a rate to be
agreed upon in writing with the Tenant prior to furnishing same. The
after-hours rate for HVAC is $25.00 per hour.

25. Tenant shall not permit any contractor or other person making any
alterations, additions or installations within the Premises to use the hallways,
lobby or corridors as storage or work areas without the prior written consent of
Landlord. Tenant shall be liable for the expense of any additional cleaning or
other maintenance required to be performed by Landlord as a result of the
transportation of storage of materials or work performed within the Building by
or for the Tenant.

26. No window shades, blinds, screens or draperies will be attached or detached
by Tenant without Landlord's prior written consent. No obstructions shall be
placed, hung, or affixed in front of the windows or doors without prior written
consent of Landlord. No awnings shall be permitted on any part of the Premises.
Tenant agrees to abide by Landlord's rules with respect

PLEASE INITIAL
LANDLORD ________
-31- TENANT __________

<PAGE> 32

to maintaining uniform curtains, draperies, and/or linings at all windows and
hallways so that the Building will present a uniform exterior appearance.
Cleaning of draperies shall be Tenant's responsibility whether such items are
furnished by Landlord or Tenant, and Tenant shall insure that such work is
accomplished from time to time as is needed to maintain a first-class
appearance.

27. Landlord shall at all times have the right, by its officers or agents, to
enter the demised Premises to inspect and examine the same.

28. Landlord reserves the right by written notice to Tenant, to rescind, alter
or waive any rule or regulation at any time prescribed for the Building when, in
Landlord's judgment, it is necessary, desirable or proper for the best interest
of the Building and its Tenants.

29. Should damage to Building plants occur due, in whole or in part, to Tenant,
its agents, employees, contractors, invitees, etc. negligence (for example, but
not limited to movers keeping the Building entry doors open on cold days), the
replacement cost of said plant(s) will be the responsibility of Tenant.

30. All keys must be ordered through Landlord. Keys for any door in the Building
or Premises may be duplicated only by Landlord.

31. No smoking is allowed in any public area of the Building pursuant to
Jefferson County No Smoking Ord. Chap. 5.43. Smoking is permitted only in areas
designated by Landlord.

PLEASE INITIAL
LANDLORD ________
-32- TENANT __________

<PAGE> 33
EXHIBIT "D"

TO DENVER WEST OFFICE BUILDING LEASE

PLANNED DEVELOPMENT ZONING RESTRICTIONS

1. Direction signs of two square feet or less may be erected as needed.

2. One sign identifying "permitted use" shall be permitted on each activity
area.

3. One advertising sign identifying the company, product or service provided
shall also be permitted.

4. The total square footage of sign letter space permitted under Paragraphs 2
and 3 above, and any one Activity Area shall not exceed a total of fifty (50)
square feet.

5. Maximum height of any attached sign shall not exceed the actual height of the
Building. The maximum height of a free standing sign shall not exceed ten feet.

6. Flashing or moving signs are not permitted.

7. All proposed drawings for signs to be erected, including details of design,
materials, locations, size, height, color and lighting shall be subject to prior
written approval of the Architectural Control Committee.

8. The provisions with respect to signs contained herein shall not apply to
signs identifying the Office Park Segment of Denver West, not to temporary signs
related to construction, sale, or lease of land or buildings, provided that such
temporary signs are approved in writing for a definite time period by the
Architectural Control Committee.

PLEASE INITIAL
LANDLORD ________
-33- TENANT __________

<PAGE> 34
EXHIBIT "E"

TO DENVER WEST OFFICE BUILDING LEASE DATED JANUARY 1, 1996

Between

DENVER WEST OFFICE BUILDING NO. 21 VENTURE

And

BIOFACTORS, INC., A DELAWARE CORPORATION

BASE YEAR OPERATING COSTS

Base Year Building Operating Costs will not be available until the Building has
been operated through December 31st of the Base Year. Accordingly, for purposes
of Paragraph 5 of this Lease, it is hereby agreed between the parties that the
rent has been computed using an estimated expense rate of $5.76 per square foot
per year for the Base Year.

Landlord and Tenant agree for purposes of Paragraph 5.2 of this Lease that the
Building Net Rentable Area has been estimated at 68,803 square feet. Each year
after completion of all Tenant Finish and other modifications within the
Building, this figure may be adjusted from time to time based upon the actual
Net Rentable Area within the Building as modified.

PLEASE INITIAL
LANDLORD ________
-34- TENANT __________

<PAGE> 1
Exhibit 10.19

L E A S E

39899 BALENTINE DRIVE

NEWARK, CA 94560

LESSOR:

AJ Partners Limited Partnership
- -------------------------------

LESSEE:

Voice Plus, Inc.
a California Corporation

MANAGED BY:

Draper and Kramer of California, Incorporated
- ---------------------------------------------
39899 Balentine Drive
- ---------------------
Newark, CA 94560
- -----------------
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
1. BASIC LEASE TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. TERM; POSSESSION; SURRENDER . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

4. ADDITIONAL RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

4.1 Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Time of Payment . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Time of Payment; Records and Inspection . . . . . . . . . . . . 7
4.3 Consumer Price Index . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Escalation . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Definition . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Other Elements of Additional Rent . . . . . . . . . . . . . . . . . . . 8
4.5 Late Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

5. SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

6. CONSTRUCTION; ALTERNATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

6.1 Initial Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Alteration; Lessee's Work . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Removal or Retention of Alterations . . . . . . . . . . . . . . . . . . 9

7. HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

8. USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

8.1 Basic Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.2 Specific Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

9. LESSEE'S TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

9.1 Taxes On Lessee or its Property . . . . . . . . . . . . . . . . . . . . 10
9.2 Certain Reimbursement of Lessor . . . . . . . . . . . . . . . . . . . . 11

10. CONDITION OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

11. BUILDING SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

11.1 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.2 Excess Usage by Lessee . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.3 Public Facilities; Cleaning and Janitorial . . . . . . . . . . . . . . . 12
11.4 Addition Work or Service; Cost as Additional Rent . . . . . . . . . . . 12
11.5 No Warranty; Waiver of Lessor's Liability . . . . . . . . . . . . . . . 12

12. ASSIGNMENT AND SUBLETTING; CHANGE IN OWNERSHIP OF LESSEE . . . . . . . . . . . . 12

12.1 Lessor's Consent Required . . . . . . . . . . . . . . . . . . . . . . . 12
(a) Effect of Unapproved Sublet . . . . . . . . . . . . . . . . . . 12
</TABLE>
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<TABLE>
<S> <C> C>
(b) Certain Effects of Consent . . . . . . . . . . . . . . . . . . 13
12.2 Lessor's Right to Terminate . . . . . . . . . . . . . . . . . . . . . . 13
12.3 Change in Ownership of Lessee . . . . . . . . . . . . . . . . . . . . . 13
(a) Corporation or Partnership . . . . . . . . . . . . . . . . . . 13
(b) Proprietorship . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Notice to Lessor . . . . . . . . . . . . . . . . . . . . . . . 14

13. CARE OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

13.1 Lessee's Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13.2 Lessor's Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

14. RIGHTS RESERVED TO LESSOR . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

15. DAMAGE TO PROPERTY; INJURY TO PERSON; INSURANCE . . . . . . . . . . . . . . . . 15

15.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15.2 Waiver of Certain Claims . . . . . . . . . . . . . . . . . . . . . . . . 16
15.3 Lessee's Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15.4 Personalty; Leasehold Improvements . . . . . . . . . . . . . . . . . . . 16

16. FIRE OR CASUALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

16.1 Repair; Termination of Lease . . . . . . . . . . . . . . . . . . . . . . 16
16.2 Lessee's Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

17. ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

18. CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

18.1 Substantial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
18.2 Insubstantial Taking . . . . . . . . . . . . . . . . . . . . . . . . . . 17
18.3 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

19. ABANDONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

20. SALE BY LESSOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

21. MUTUAL RELEASE; WAIVER OF SUBROGATION . . . . . . . . . . . . . . . . . . . . . 18

22. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

22.1 Effect of Waivers and Consents . . . . . . . . . . . . . . . . . . . . . 18
22.2 Certain Waivers by Lessee . . . . . . . . . . . . . . . . . . . . . . . 19

23. ESTOPPEL CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

23.1 Obligation to Provide Certificate . . . . . . . . . . . . . . . . . . . 19
23.2 Effect of Failure to Provide . . . . . . . . . . . . . . . . . . . . . . 19

24. INTEREST ON PAST DUE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . 19

25. DEFAULTS; REMEDIES; EARLY TERMINATION . . . . . . . . . . . . . . . . . . . . . 19

25.1 Default Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
25.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Reletting . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . 21
25.3 Re-entry: Authorities and Effects . . . . . . . . . . . . . . . . . . . 21
25.4 Additional Remedies: Termination; Costs . . . . . . . . . . . . . . . . 21
(a) Termination; Damages . . . . . . . . . . . . . . . . . . . . . 21
(b) Recovery of Costs and Expenses . . . . . . . . . . . . . . . . 21
</TABLE>
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<TABLE>
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26. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

27. INABILITY TO PERFORM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

28. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

29. SUBSTITUTE OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

30. BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

31. EXCULPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

32. SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

33. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

EXHIBIT A -- Site Plan of Project

EXHIBIT B -- Location of Premises

EXHIBIT B1 -- Floor Plan of Premises

EXHIBIT C -- Rules and Regulations

EXHIBIT D -- Acknowledgement of Lease Commencement
</TABLE>
<PAGE> 5
OFFICE LEASE

Located at 39899 Balentine Drive
Newark, CA 94560
(hereinafter referred to as the "Building")

THIS LEASE, made this 20th day of October 1994 by and between

AJ Partners Limited Partnership("Lessor");

and

Voice Plus, Inc., a California Corporation, having its principal place of
business at:

39899 Balentine, Drive, Suite 350
Newark, CA 94560 ("Lessee")

WITNESSETH: That,

Lessor hereby leases to Lessee and the Lessee hereby leases from the
Lessor the Premises described herein for the term, the rent, and subject to the
covenants and conditions herein set forth:

1. BASIC LEASE TERMS

This Paragraph 1 contains the basic Lease terms agreed to between
Lessor and Lessee and referred to elsewhere in this Lease. Each reference in
this Lease to any of the basic Lease terms shall be construed to incorporate
all the terms provided herein under each such basic Lease term:

1.1 Project

The Building (including the Premises) together with the land upon
which it is located and all improvements on such land, the legal
description of which is set forth on Exhibit A annexed hereto (the
"Project").

1.2 Premises; Rentable and Usable Area

(a) Premises. The Premises shall be and mean Suite 350 located on
the third floor of the building as designated on the plan
attached hereto as Exhibit B.

(b) Rentable Area. Lessor and Lessee conclusively and finally
agree that the Premises consist of 6,091 rentable square feet
(the "Rentable Area").

1.3 Initial Rentable Area of the Project:

109,626 square feet

Lessor's Initials /s/ RJL
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Lessee's Initials /s/ JG
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1.4 Base Rent

(a) Base Annual Rent: $13.20 per square foot.

(b) Base Monthly Rent: Six Thousand Seven Hundred Dollars and Ten
Cents ($6,700.10) per month for Months One through Twenty
Seven.

1.5 Additional Rent

(a) Base Tax Amount: $(included in base operating amount) per
rentable square foot per year.

(b) Base Operating Amount: $6.02 per rentable square foot per
year.

(d) CPI Percentage: Not applicable.

1.6 Term

The term ("Term") of this Lease shall be for twenty seven (27) months
and shall commence (the "Commencement Date") at 12:01 a.m. on November
1, 1994, or such earlier time and date as Lessor permits Lessee to
take possession of the Premises, and shall conclude at 11:59 p.m. on
January 31, 1997, (the "Expiration Date").

1.7 Use

The Premises shall be used as general business offices and for related
uses, specifically telephone and voice mail systems sales, marketing,
and general administration, and for no other purpose whatsoever.

1.8 Security Deposit: Prior security deposit of $6,461.00

1.9 Insurance

(a) Comprehensive General Liability: One Million Dollars
($1,000,000.00) per occurrence.

(b) Property Damage: One Million Dollars ($1,000,000.00) per
occurrence.

(d) Bodily Injury: One Million Dollars ($1,000,000.00) per
person, One Million Dollars ($1,000,000.00) per occurrence.

1.10 Lessor's Broker: Draper and Kramer of California, Inc.

Lessee's Broker: None.

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Lessee's Initials /s/ JG
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<PAGE> 7

1.11 Lessor's Mailing Address

Draper and Kramer of California, Incorporated
as Manager for AJ Partners Limited Partnership
39899 Balentine Drive
Newark, CA 94560

1.12 Rent

The term "Rent" means Base Rent and Additional Rent, collectively.

1.13 Interest on Past Due Obligation: ten percent (10%) per annum.

1.14 Miscellaneous:

(a) Lessor to improve the premises in accordance with the
preliminary space plan attached hereto as Exhibit B1. Lessor,
at its sole cost, to improve the premises as follows:

a. Demo front storage room & one wall to the
existing cafe;
b. New carpet in reception area, open office
area, and new conference room;
c. Move demising wall to include three (3)
more window offices from adjacent space;
d. Add sink (with lower cabinets), install
new door and new partition wall to new
cafe area;
e. Patch walls and paint walls in the
reception, open office, new conference
room, and new cafe area only;
f. Patch and shampoo carpets;
g. Add double doors to entry way, however, one
leaf shall be inactive and just cosmetic.
h. Remove (illegible) in hallway.

The above improvements shall not exceed an allowance of
$30,000.00; any unused portion of the allowance shall not be
credited back as free rent or reduced rent. Lessee shall be
required to do their own moving. Other than the above
referenced improvements, Lessee to take the premises in "as
is" condition.

(b) In consideration for this Lease, Lessor shall reduce the lease
rate from $15.60 to $13.20 psf/year for the original premises
consisting of 4,970 square feet for the period from February
1, 1994 through October 31, 1994.

Also in consideration for this Lease, Lessee's Base Operating
Amount shall be $6.02 psf/year for the original premises
consisting of 4,970 rentable square feet for the period from
February 1, 1994 through October 31, 1994.

Lessor's Initials /s/ RJL
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Lessee's Initials /s/ JG
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<PAGE> 8
2. TERM; POSSESSION

2.1 Term

The Term of this Lease is as specified in Paragraph 1 hereof.

2.2 Possession

If the Lessor shall be unable to give possession of the Premises on
the Commencement Date for any reason whatsoever (including, but not
limited to, the Premises not being ready for occupancy), the Lessor
(and its employees, agents and contractors) shall not be subject to
any liability for the failure to give possession on said date. Under
such circumstances, unless the delay is the fault of the Lessee (which
fault shall include, but not be limited to, Lessee's failure to
provide Lessor with plans and specifications relating to any
alteration of the Premises in a timely manner) the Rent shall not
commence until the Premises are available for occupancy by the Lessee,
and no such failure to give possession on the date of commencement of
the Term shall in any wise affect the validity of this Lease or the
obligations of the Lessee hereunder, nor shall same be construed in
any wise to extend the term of this Lease. If, at the Lessee's
request, the Lessor shall make the Premises available to the Lessee
prior to the date of commencement of the Term for the purpose of
decorating, furnishing and equipping the Premises, the use of the
Premises for such work shall not create a landlord-tenant relationship
between the parties nor constitute occupancy of the Premises within
the meaning of the next sentence or of Paragraph 2.2. hereof, but the
provisions of this Lease concerning indemnification, insurance and
waiver of claims shall apply. If, with the consent of the Lessor, the
Lessee shall enter into occupancy of the Premises to do business
therein prior to the date of commencement of the Term, all provisions
of this Lease shall apply and the Rent shall accrue and be payable
from the date of occupancy and the Term shall then commence.

2.3 Surrender of Premises; Repair; Removal of Effects

Upon the termination or expiration of this Lease and the Term hereby
created or upon the termination of Lessee's right of possession,
whether by lapse of time or at the option of Lessor by exercise of
default remedies or elsewise, Lessee will at once surrender possession
of the Premises to Lessor in good order, repair and condition,
ordinary wear excepted, and remove all effects therefrom. Without
limiting the generality of the foregoing, Lessee agrees to remove, at
the termination of this Lease, the items of personal property to which
Lessee is entitled under Paragraph 6.3 hereof. All damage to the
Premises or the Project arising out of Lessee's moving or property in
or out of the Building or Project, including damage to floors due to
overloading, shall be fully repaired at Lessee's sole cost and
expense. If Lessee shall fail or refuse to remove all such property
from the Premises, Lessee shall be conclusively presumed to have
abandoned the same, and the title thereto shall thereupon, at Lessor's
option upon written notice to Lessee of Lessor's exercise of such
option, pass to Lessor without any cost either by set off, credit
allowance or otherwise, and Lessor may, at its option as defined under
this section, accept the title to such property, or, at Lessee's
expense, (a) remove the same or any part thereof in any manner that
Lessor shall choose and (b) store the same without incurring liability
to Lessee or any other person.

3. BASE RENT

Lessee shall pay Lessor the Base Monthly Rent in lawful money of the
United States which shall be legal tender at the time of payment, in advance on
the first day of each calendar month during the Term (or earlier as
contemplated by Paragraph 2.2 hereof), at Lessor's Mailing Address (as set
forth in Paragraph 1) or at such other place as Lessor may from time to time so
designate in writing, except that the first month's rent shall be paid upon the
execution hereof. Rent shall be paid, in every instance, without notice,
deduction or setoff. The installment of rent payable for any portion, less
than all, of a calendar month shall be a pro rata portion of the Rent payable
for a full calendar month.

Lessor's Initials /s/ RJL
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Lessee's Initials /s/ JG
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<PAGE> 9
4. ADDITIONAL RENT

4.1 Real Estate Taxes

Lessee shall pay to Lessor, as Additional Rent, in addition to Base
Rent and other amounts due Lessor, an amount (the "Tax Contribution")
equal to the product of: (1) the Rentable Area of the Premises;
multiplied by (2) the amount by which Taxes Per Foot exceeds the Base
Tax Amount.

(a) Definitions

(i) "Taxes Per Foot" means Taxes divided by the Total
Rentable Area of the Project (being Initial Rentable
Area of the Project increased or reduced by any
additions or deletions of rentable area to or from
the Project);

(ii) "Taxes" means and includes:

(1) all real estate taxes and assessment (whether
general or special), sewer rents, rates and
charges, transit taxes, rent tax (as
hereinafter defined), and any other federal,
state or local governmental charge, tax or
the like, general, special, ordinary or
extraordinary, which may now or hereafter be
levied or assessed against or in connection
with the Project or any element thereof, or
with respect to the ownership, leasing,
management control or operation thereof,
including state equalization factors, if any;

(2) ad valorem or other taxes for or upon
Lessor's personal property used in, on,
around or in conjunction with the Project;

(3) any taxes or the like which shall be levied
in lieu of any of the above stated taxes,
including, but not limited to, any tax,
assessment, levy or charge on rents received
from the Project or any portion thereof, or a
charge, fee, or a tax on Lessor which is
otherwise related to the Project, or an
income or franchise tax;

(4) any assessment, special assessments or
installments thereof (including interest on
such installments) against the Project which
shall be required to be, or may be, paid
during the calendar year in respect to which
Taxes are being determined, provided,
however, the amount of special assessments to
be included shall be limited to the amount of
the installment (plus any interest payable
thereon) of such special assessment which
would have been required to have been paid
during such year if the Lessor had elected to
have such special assessment paid over the
maximum period of time permitted by law; and

(5) the fees and costs associated with contesting
the foregoing (including, but not to be
limited to, such expenses as related to
seeking or obtaining reductions in and
refunds of Taxes, including but not limited
to the expenses of contesting the amount or
validity of any taxes, charges or
assessments, including, but not limited to,
appraisers' fees, experts' fees and other
costs incurred without regard to the tax year
involved, such expense to be applicable to
the year in which such charges are incurred).

(iii) "Rent Tax" means and includes any excise, sales or
transaction privilege tax imposed or levied by any
government or government

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<PAGE> 10
agency upon Lessor as a result of Lessor's receipt of
any payment from Lessee, and also means and includes
any tax or other charge based in whole or in part
upon the value of this Lease, or upon receipt,
payment or right to collect Rent hereunder; provided,
however, there is excluded herefrom any tax, charge,
assessment or the like which is imposed in lieu of
real estate taxes and other ad valorem taxes.

(b) Time of Payment

Lessee shall pay the Tax Contribution to Lessor with respect
to each calendar year in monthly installments at the same time
and place as installments of Base Monthly Rent are to be paid,
in an amount estimated from time to time by Lessor by a
written notice to Lessee. Upon receipt by Lessor of all bills
for Taxes attributable to a calendar year, Lessor shall
furnish Lessee with a written statement of the actual Tax
Contribution for such calendar year. If the total amount paid
by Lessee during any calendar year of the Term is less than
the actual Tax Contribution due from Lessee for such calendar
year as shown on such statement, Lessee shall pay the
deficiency to Lessor within fifteen (15) days after demand
there for by Lessor. If the total amount paid by Lessee
during any such calendar year exceeds the actual Tax
Contribution due from Lessee for such calendar year, such
excess shall be credited against payments hereunder next due.
If no such payments are next due, such excess shall be
refunded by Lessor. The amount of any refund of Taxes
received by Lessor shall be credited against Taxes for the
year in which such refund is received.

4.2 Operating Expenses

Lessee shall pay to Lessor, as Additional rent, in addition to Base
Rent and other amounts due Lessor, an amount (the "Operating
Contribution") equal to the product of: (1) the Rentable Area of the
Premises multiplied by (2) the amount by which Operating Expenses Per
Foot exceeds the Base Operating Amount.

(a) Definitions

(i) "Operating Expenses Per foot" means Operating
Expenses divided by the Total Rentable Area of the
Project (being the Initial Rentable Area increase or
reduced by any additions or deletions of rentable
area to or from the Project).

(ii) "Operating Expenses" means and includes all costs and
expenses incurred or paid by or on behalf of Lessor
with respect to the operation, maintenance, repair,
or replacement of the Project (except same relating
to the premises of individual tenants when the
expense is reimbursed to Lessor by the tenant or an
insurer) including, but not limited to, the
following: the cost of electricity (except
electricity used in the Premises or in other demised
premises, if the cost thereof is billed directly to
Lessee and the tenants of such other demised
premises), all utilities, steam, water, fuel,
heating, lighting, air-conditioning, window cleaning,
janitorial service, security service; all insurance
(including, but not limited to, fire, extended
coverage, liability, workman's compensation, rent
loss, elevator, any other insurance carried in good
faith by Lessor and applicable to the Project),
painting (but not painting of the space of individual
tenant), uniforms, supplies, sundries, and sales or
use taxes on supplies or services; costs of
compensation, wages, salaries and so-called fringe
benefits (including Social Security taxes,
unemployment insurance taxes, cost for providing
coverage for disability benefits, cost of any
pensions, hospitalization, welfare or retirement
plans) of all persons engaged in the operation,
maintenance and repair of the Project, or any other
similar or like expenses incurred under the
provisions of any collective bargaining agreement, or
any other cost or expense which Lessor pays

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<PAGE> 11
or incurs to provide benefits for employees so
engaged in the operation, maintenance and repair of
the Project; the charges of any agent or independent
contractor who, under contract with Lessor or its
representatives, does any of the work of operating,
maintaining or repairing of the Project; management
fees; legal and accounting expenses; or any other
expense or charge, whether or not hereinbefore
mentioned, which in accordance with generally
accepted management principles would be considered as
an expense of maintaining, operating, or repairing
the Project. If any Operating Expense, though paid
in one year, relates to more than one calendar year,
at the option of Lessor, such expense may be
proportionately allocated among such related calendar
years.

Operating Expenses shall also include the cost, as
reasonable amortized by the Lessor, of any capital
improvements made after completion of initial
construction of any improvements in the Project which
reduces other Operating Expenses, but in an amount
not to exceed such reduction for the relevant year.
For purposes of determining Operating Expenses for
any year, if the entire Rentable Area shall not have
been occupied for any part of the year, Operating
Expenses shall include the amount of such expenses
that would reasonably have been incurred had the
entire Rentable Area been occupied.

Operating Expenses shall not include franchise or
income taxes imposed on the Lessor, except to the
extent hereinbefore provided, nor the cost to the
Lessor of any work or service performed in any
instance for any tenant (including the Lessee) at the
cost of such tenant. Installations of capital
improvements for individual tenants within their
demised premises is not to be included in Operating
Expenses.

If Lessor makes any capital improvement during the
term of this Lease in order to comply with safety or
any other requirements of any federal, state or local
law or governmental regulation, then the reasonable
annual amortization of the cost of such improvement
(with reasonable interest thereon) shall be deemed an
Operating Expense in each of the calendar years
during which such amortization occurs.

(b) Time of Payment; Records and Inspection

(i) Payment. Lessee shall pay the Operating Contribution
to Lessor with respect to each calendar year in
monthly installments at the same time and place as
Base Monthly Rent is to be paid, in an amount
reasonably estimated from time to time by Lessor by a
written notice to Lessee. As promptly as practicable
following the close of each calendar year, Lessor
shall deliver to Lessee a certificate specifying, in
reasonable detail, the amount of Operating Expenses
for such calendar year; Lessee shall pay any
deficiency to Lessor as shown by such certificate
within fifteen (15) days after receipt thereof. If
the total amount paid by Lessee during any calendar
year exceeds the actual Operating Contribution due
from Lessee for such calendar year, such excess shall
be credited against payments next due hereunder. If
no such payments are next due, such excess shall be
refunded by Lessor.

(ii) Records and Inspection. Lessor shall cause to be
kept books and records with an appropriate system of
accounts and accounting practices consistently
maintained. Lessee shall have the right for sixty
(60) days after receipt of the certificate, during
normal business hours after reasonable notice, to
inspect records pertinent to Lessor's calculations
and Lessor shall make all pertinent bills and the
like available for Lessee's inspection. The
certificate of Lessor shall constitute a
determination which is final and conclusive on both
Lessor or Lessee,

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unless Lessee asserts in a writing addressed to
Lessor specified error(s) in Lessor's certificate
within sixty (60) days after delivery thereof.

4.3 Consumer Price Index Escalation INTENTIONALLY DELETED

4.4 Other elements of Additional Rent

All costs and expenses which Lessee assumes or agrees to pay to Lessor
pursuant to this Lease shall be deemed Additional Rent and shall be
paid to Lessor without any deduction or set-off whatsoever. In the
event of non- payment of such cost and expenses, Lessor shall have all
the rights and remedies herein provided for in case of non-payment of
Rent.

4.5 Late Payment

Any remedies for non-payment of Rent notwithstanding, if the monthly
payment of Rent is not received by Lessor on or before the fifth (5th)
day of the month for which such Rent is due, or if any other payment
due Lessor by Lessee is not received by Lessor on or before the
(illegible) (illegible) day of the month following the month in which
Lessee was invoiced, a service charge of ten percent (10%) of such
past due amount shall become due and payable in addition to such
amounts owed under this Lease.

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5. SECURITY DEPOSIT

Lessee has deposited with Lessor the sum of set forth in Paragraph 1
as a Security Deposit to secure the full and faithful performance of every
provision of this Lease to be performed by Lessee. If Lessee defaults with
respect to any provision of this Lease, including, but not limited to, the
provisions relating to the payment of Rent or any other sum, or for the payment
of any other amount which Lessor may spend or become obligated to spend by
reason of Lessee's default or to compensate Lessor for any other loss or damage
which Lessor may suffer by reason of Lessee's default, Lessor may use, apply or
retain the Security Deposit, or any portion thereof, to reimburse or compensate
itself or cure such default. If any portion of said deposit is so used or
applied, Lessee shall, within five (5) days after written demand therefor,
deposit cash with Lessor in an amount sufficient to restore the security
deposit to its original amount and Lessee's failure to do so shall be a
material breach of this Lease. Lessor shall not be required to keep this
security deposit separate from its general funds and Lessee shall not be
entitle to interest on such deposit. If Lessee shall fully and faithfully
perform every provision of this Lease to be performed by it, the security
deposit or an balance thereof shall be returned to Lessee (or, at Lessor's
option, to the last assignee of Lessee's interests hereunder) at the expiration
of the Lease term.

6. CONSTRUCTION; ALTERNATIONS

6.1 Initial Construction

Lessor agrees to cause the Premises to be completed or modified (the
"Work") in accordance with the plans, specifications and agreements
approved by both parties, which are attached to and made a part of
this Lease. Lessor will not be obliged to construct or install at its
expense any improvements or facilities of any kind other than those
called for on the attached specifications and agreements. Lessor
agrees to commence and complete the Work with reasonable diligence.

6.2 Alternation; Lessee's Work

Lessee shall make no alterations, modifications, additions or
improvements (including initial tenant improvements) to the Premises
without the prior written consent of Lessor, which consent shall not
be unreasonably withheld. Lessor may impose, as a condition of such
consent, such requirements as Lessor in its sole discretion may deem
reasonable or desirable, including, without limiting the generality of
the foregoing, requirements as to the manner in which, the time or
times at which, and the contractor by whom such work shall be done,
insurance and bonding standards, and advance waivers of lien.

6.3 Removal or Retention of Alterations and Additions

All alterations, additions, improvements, modification, fixtures,
partitions, counter, railings, wall coverings, window treatments and
the like shall become or remain the property of Lessor and shall be
surrendered with the Premises, as a part thereof, at the end of the
term hereof, except that the Lessor may, by written notice to Lessee
given at least thirty (30) days prior to the end of the Term, require
Lessee to remove any or all partitions, alterations, additions,
improvements, modifications, fixtures, counters, railings, wall
coverings, window treatments and the like installed by or for Lessee,
and to repair any damage to the Premises from such removal.

7. HOLDING OVER

If the Lessee retains possession of the Premises or any part thereof
after the expiration of the Term or termination of the Lease or of Lessee's
right to possession of the Premises, the Lessee shall pay the Lessor monthly
rent at one hundred fifty percent (150%) of the monthly rate (including, but
not limited to, Base Rent, Tax Contribution and Operating Contribution) payable
by Lessee with respect to the last full calendar month prior to such

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expiration or termination for the time the Lessee thus remains in possession
and, in addition thereto, shall pay the Lessor for all damages, consequential
as well as direct, sustained by reason of the Lessee's retention of possession.
The provision of this Paragraph do not exclude the Lessor's rights of re-entry
or any other right hereunder, it being expressly understood that a hold over is
a material breach of this Lease.

8. USE

8.1 Basic Use

Lessee shall use and occupy the Premises for the purposes set forth in
Paragraph 1 hereof and for no other purpose.

8.2 Specific Matters

Lessee shall:

(i) Not use or permit upon the Premises anything that
would invalidate any policies of insurance now or
hereafter carried on the Project or that will
increase the rate of insurance on the Premises or on
the Project;

(ii) Pay all extra insurance premiums which may be caused
by the use which Lessee shall make of the Premises;

(iii) Not use or permit upon the Premises anything that may
be dangerous to life or limb:

(iv) Not in any manner deface or injure the Building, the
Project or any part thereof or overload any floor of
the Premises;

(v) Not do anything or permit anything to be done upon
the Premises in any way tending to create a nuisance,
or tending to disturb any other lessee in the
Building or the occupants of neighboring property, or
tending to injure the reputation of the Project;

(vi) Comply with all governmental, health and police
requirements and regulations respecting the Premises
and the Project;

(vii) Not use the Premises for lodging or sleeping purposes
or for any immoral or illegal purpose, nor conduct or
permit to be conducted upon the Premises any activity
contrary to any of the laws of the United States of
America or of the state in which the Project is
located or which is contrary to the ordinances of the
municipality in which the Project is located nor
commit or suffer to be committed any waste upon the
Premises or the Project.

(viii) Not take or permit to be taken or fail to take any
action which permits or causes any mechanic's lien or
other lien, charge or order for money to be filed
against Lessor, all or any portion of the Premises or
all or any portion of the Project.

(ix) Not exhibit, sell or offer for sale on the Premises,
in the Building or on the Project any article or
thing without the advance consent of Lessor.

(x) Abide by the Rules and Regulations of the Project, as
same may exist from time to time or be amended by
Lessor, the current Rules and Regulations being
appended hereto as Exhibit C.

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9. LESSEE'S TAXES

9.1 Taxes on Lessee or its Property

Lessee shall pay, prior to delinquency, all taxes assessed against or
levied upon Lessee's fixtures, furnishings, equipment and other
personal property located in or upon the Premises. Lessee shall cause
said fixtures, furnishings, equipment and other personal property to
be assessed and billed separately from the Lessor, Project or
Premises. In the event any or all of Lessee's fixtures, furnishings
or equipment and other personal property shall be assessed and taxed
with said Project or Premises or to Lessor, Lessee shall pay to Lessor
its share of such taxes within fifteen (15) days after delivery to
Lessee by Lessor of a statement in writing setting forth the amount of
such taxes applicable to Lessee's personal property.

9.2 Certain Reimbursements of Lessor

Lessee shall, simultaneously with the payment of any sums required
hereunder, reimburse Lessor for any excise, sales or transaction
privilege tax imposed or levied by any government or governmental
agency upon Lessor as a result of Lessor's receipt of any such
payment.

10. CONDITION OF PREMISES

Lessee's taking possession shall be conclusive evidence as against the
Lessee that the Premises were in good order and satisfactory condition when
Lessee took possession. No promise of Lessor to alter, remodel or improve the
Premises or the Building and no representation respecting the condition of the
Premises or the Building have been made by Lessor to Lessee, other than as may
be contained herein or in a separate rider or work letter attached hereto and
made a part hereof.

11. BUILDING SERVICES

11.1 Utilities

Lessor agrees to furnish to the Premises during reasonable hours of
generally recognized business days, to be determined by Lessor, and
subject to the Rules and Regulations, water, heat, electricity, air
conditioning, and any other customary utilities required, in Lessor's
sole judgment, for the comfortable use and occupation of the Premises.
Lessor (and its employees and agents) shall not be liable for, and
Lessee shall not be entitled to, any abatement or reduction of Rent by
reason of Lessor's failure to furnish any of the forgoing when such
failure is due to any cause beyond the reasonable control of Lessor.
Lessor (and its employees and agents) shall not be liable, under any
circumstances, for loss, however occurring, through or in connection
with or incidental to failure to furnish any of the foregoing,
regardless of the reason for such failure; it is understood that
Lessee shall carry insurance against these risks with waiver of
subrogation in favor of Lessor (and its employees and agents). Lessor
may cause any utility to be separately metered and to be billed
directly to Lessee; in such instance, Lessee shall promptly pay all
utility bills when due.

11.2 Excess Usage by Lessee

Lessee will not, without the written consent of Lessor, use any
apparatus or device in the Premises, including, but without limitation
thereto, electronic data processing machines, punch card machines and
machines using current in excess of 110 volts, which will in any way
increase the amount of electricity, water, heat, ventilation, cooling
or other utilities, which would otherwise be furnished or supplied for
use of the Premises as general office space; nor connect with
electrical current (except through existing electrical outlets in the
Premises) or water pipes, any apparatus or device for

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the purposes of using electric current, water or other utilities. If
consumption of electricity, water, heat, air conditioning or other
utilities by Lessee exceeds or can be expected to exceed that required
for normal office use as specified, or should Lessee request the use
of this service at other than the normal operating hours, Lessor
reserves the right to charge for such service. Lessor reserves the
right, at Lessor's sole discretion, to separately assess an extra
monthly charge against Lessee (which shall be Additional Rent) in an
amount which, in Lessor's reasonable judgement, compensates for such
excess usage. If Lessee refuses to pay upon demand of Lessor such
extra monthly charge, such refusal shall constitute a breach of the
obligation to pay Rent under this Lease and shall entitle Lessor to
the rights hereinafter granted for such breach and to cease provision
of such utility service beyond normal requirements. Whenever heat
generating machines or equipment are used in the Premises which affect
the temperature otherwise maintained by the air conditioning system,
Lessor reserves the right to install supplementary air conditioning
units in the Premises, and the cost thereof, including the cost of
installation and the cost of operation and maintenance thereof, shall
be paid by Lessee to Lessor upon demand by Lessor as Additional Rent.

11.3 Public Facilities; Cleaning and Janitorial Service

Lessor shall provide public restroom supplies, public area lamp
replacement, window washing with reasonable frequency, and janitor and
cleaning services to the Premises with reasonable frequency during the
times and in the manner that such janitor services are customarily
furnished in general office buildings in the area.

11.4 Additional Work or Service; Cost as Additional Rent

Should Lessee require any additional work or service, other than
services described above or supplied other tenants of the Building
without separate or additional charge, Lessor may, on terms to be
agreed and upon reasonable advance notice by Lessee, furnish such
additional service and Lessee agrees to pay the Lessor as Additional
Rent such charges as may be agreed on, but in no event at a charge
less than Lessor's actual cost plus overhead for the additional
services provided, it being agreed that the cost to the Lessor of such
additional services shall be excluded from Operating Expense.

11.5 No Warranty; Waiver of Lessor's Liability

It is understood that Lessor doers not warrant that any of the
services referred to above, or any other services which Lessor may
supply, will be free from interruption. Lessee acknowledges that any
one or more of such services may be suspended by reason of operation
of law, mechanical breakdown, or other causes beyond the reasonable
control of Lessor, including, but not limited to, acts of God, acts of
civil disobedience or strikes. No such interruption or discontinuance
of service shall be deemed an eviction or disturbance of Lessee's use
and possession of the Premises, or any part thereof, * or render
Lessor (and its employees and agents) liable to Lessee for damages by
abatement of rent or otherwise, or relieve Lessee from performance of
Lessee's obligation under this Lease.

See * on page 12a.

12. ASSIGNMENT AND SUBLETTING; CHANGE IN OWNERSHIP OF LESSEE

12.1 Lessor's Consent Required

Lessee shall not, either voluntarily or by operation of law, sell,
assign, hypothecate or transfer this Lease, or sublet the Premises or
any part thereof, or permit the Premises or any part thereof to be
occupied by anyone other than Lessee or Lessee's employees, without
the prior written consent of Lessor in each instance. Lessor's
consent shall not be unreasonably withheld; provided, however, that
the proposed assignee or sublessee must be reasonably satisfactory to
Lessor as to credit and character and must occupy the Premises for
office purposes consistent with Paragraph

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11.5 --

No Warranty; Waiver of Lessor's Liability

* except that such interruption shall continue to be unabated for
thirty (30) days or more and Lessor has not taken reasonable steps to
cure such deficiency, Lessor shall consider a partial abatement of
rental due by Lessee to the extent of a reasonably beneficial use of
the premises as determined solely by Lessor.

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8 of this Lease and Lessor's commitments to other tenants. Lessee
shall notify Lessor's of its intent to assign or sublet in writing and
shall provide Lessor with a copy of the proposed sublease or
assignment and with any information requested by Lessor; Lessor shall
inform Lessee of its decision within thirty (30) days after receipt of
such notice and all requested information.

(a) Effect of Unapproved Assignment or Sublet

Any sale, assignment, mortgage, transfer or subletting of this
Lease or the Premises which is not in compliance with the
provisions of this Paragraph 12 shall be a material breach of
this Lease and shall, at Lessor's option, be void and without
effect; with respect thereto Lessor shall have all remedies
for default, including, but not limited to, the right to
terminate this Lease.

(b) Certain Effects of Consent

The consent by Lessor to any assignment or subletting shall
not be construed as relieving Lessee or any assignee or
sublessee from obtaining the express written consent of Lessor
to any further assignment or subletting or as releasing Lessee
from any liability or obligation hereunder (including, but not
limited to, the obligation to pay Rent), whether or not then
accrued; further, any sublessee or assignee shall be bound by
all of the terms and conditions of this Lease (including, but
not limited to, this Paragraph 12).

12.2 Lessor's Right to Terminate

The Lessor reserves the right, should the Lessee request such
assignment or subletting, to release the Lessee from the terms and
provisions of this Lease and the Lessor shall have thirty (30) days to
make such determination. Should the Lessor exercise this right, then
the Lease shall terminate as set forth in Paragraph 2.3 as of the date
notice is given the Lessee.

12.3 Change in Ownership of Lessee

(a) Corporation or Partnership; Lessor's Right to Terminate

If Lessee is a corporation or partnership and if the ownership
thereof shall materially change at any time or from time to
time during the term of this Lease from the present
composition of same, or if a substantial portion of the assets
of Lessee shall be sold, assigned or transferred with or
without a specific assignment of this Lease, or, if Lessee
shall merge or consolidate with any firm or corporation,
Lessor, at its option, may, by giving sixty (60) days prior
written notice to Lessee, declare such change a breach of this
Lease subject to the remedies provided for breach in Paragraph
25 hereof.

(i) Corporation

Ownership of a corporation shall be deemed to have
materially changed if a number of its shares of any
class or series which constitute thirty-three percent
(33%) of the number thereof outstanding from time to
time shall be transferred by either the owners
thereof or by the corporation, and such transfer or
shares shall not first have been approved in advance
in writing by Lessor (which approval will not be
unreasonably withheld).

(ii) Partnership

Partnership ownership shall be deemed to have
materially changed if one-third or more of the
partners or if persons or entities holding one-third
or more of the partnership interests have changed at
any time during the Term of this Lease, or one or
more general partners of a

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limited partnership have changed at any time during
the Term hereof and such change has not been approved
in advance in writing by Lessor (which approval will
not be unreasonably withheld).

(b) Proprietorship; Landlord's Right to Terminate

If Lessee is a sole proprietorship, Lessor shall have the
option, without prejudice to the remedies available to it
hereunder or otherwise, to terminate this Lease in the event
of Lessee's incapacity or death upon sixty (60) days' prior
written notice to Lessee or his legal representative. If the
ownership shall change or a new party or person acquires an
interest without Lessor's prior written consent (which will
not be unreasonably withheld), such shall be a breach of this
Lease and subject to the remedies set forth in Paragraph 25
hereof.

Lessee shall immediately give written notice to Lessor of any
change in ownership contemplated by this Paragraph 12.3.

13. CARE OF PREMISES

13.1 Lessee's Repairs

Lessee, at Lessee's own expense, shall take good care of the Premises
and shall be responsible for the repair of all damage to the Premises
(including, but not limited to, leasehold improvements, fixtures,
carpeting and wall coverings) and the Project, and shall replace or
repair all damaged or broken fixtures, lamps, ballasts, glass and
appurtenance which are made necessary as a result of any use, misuse,
neglect or negligence of Lessee, its employees, agents or invitees.
Lessor shall effect such repairs, and Lessee shall pay Lessor the cost
thereof, as Additional Rent, upon being billed for same, or Lessor
shall have the right to deduct the same from the Security Deposit held
by Lessor. Lessor may, but shall not be required to, enter the
Premises at all reasonable times to make any repairs as Lessor shall
desire or deem necessary to the Premises or to the Building of which
the Premises form a part or to any equipment in or servicing such
Building or as Lessor may be required to do by the order or decree of
any court or by any other governmental authority.

13.2 Lessor's Repairs

Except as otherwise provided herein, Lessor shall repair and maintain
the Building (including the plumbing, heating, air conditioning and
electrical systems), grounds, common areas, facilities and other
elements of the Project, the cost of such being Operating Expenses.
Lessor shall not be liable for any failure to make any repairs or to
perform any maintenance unless written notice of the need for such
repairs or maintenance is given to Lessor by Lessee, and unless Lessor
then fails to commence such repairs or perform such maintenance within
a reasonable period of time and thereafter fails to use due diligence
in so doing. Except as provided in Paragraph 16 hereof, there shall
be no abatement of rent and no liability of Lessor (and its employees
and agents) by reason of any entry to or interference with Lessee's
business arising from the making of any repairs or effectuation of any
maintenance in or to any portion of the Building or the Premises or
the Project or in or to fixtures, appurtenances and equipment therein
or thereon. Lessee waives the right to make repairs at Lessor's
expense under any provision of statutory or common law now or
thereafter in effect.

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14. RIGHT RESERVED TO LESSOR

Lessor has, and shall retain, all rights with respect to the Premises,
Building and Project not expressly granted to Lessee hereunder; such rights
are, and shall be, exercisable without notice and without liability to Lessee
for damage or injury to property, person or business and without effecting an
eviction, constructive or actual, or disturbance of Lessee's use or possession
or giving rise to any claims for set off or abatement of Rent. Such rights
include, but are not limited to, the following:

(i) To change the Building's name or street address.

(ii) To install, affix and maintain any and all signs on the
exterior, interior and/or roof of the Building.

(iii) To designate and/or approve, prior to installation, all types
of window shares, blinds, drapes, awnings, window ventilators
and other similar equipment and control all internal lighting,
that may be visible from the exterior lobbies, hallways or
other common areas.

(iv) To show the Premises to prospective tenants at reasonable
hours and if vacated by Lessee, to prepare the Premises for
reoccupancy.

(v) To retain at all times, and to use in appropriate instances,
keys to all doors within and into the Premises. No lock shall
be changed and no new lock shall be installed without the
prior written consent of Lessor.

(vi) To decorate and to make repairs, alterations, additions or
improvements, whether structural or otherwise, in and about
the Building or in any part thereof and for such purposes to
enter upon the Premises and, during the continuance of any
such work, to temporarily close doors, entryways, public space
and corridors in the Building and to interrupt or temporarily
suspend obligations hereunder so long as the Premises are
reasonable accessible.

(vii) To have and retain a paramount title to the Premises, free and
clear of any act of Lessee purporting to burden or encumber
it.

(viii) To grant or deny to anyone the right to conduct any business
or render any services in or to the Building or the Project,
provided such exclusive right shall not operate to exclude
Lessee from the use expressly permitted herein.

(ix) To require all furniture and similar items to be moved into
and/or out of the Building and Premises only at such times and
in such manner as Lessor shall direct in writing. Movements
of Lessee's property into or out of the Building and within
the Building are entirely at the risk and responsibility of
Lessee, and Lessor reserves the right to require permits
before allowing any such property to be moved into or out of
the Building.

(x) To approve or disapprove in writing the placing of vending or
dispensing machines of any kind in or about the Premises.

(xi) To have access for Lessor and other tenants of the Building or
the Project to any mail chutes located on the Premises
according to the rules of the United States Post Office.

(xii) To close the Building after regular working hours and on
Saturday, Sunday and legal holidays, subject, however, to
Lessee's right to admittance under such regulations as Lessor
may prescribe from time to time.

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15. DAMAGE TO PROPERTY; INJURY TO PERSONS; INSURANCE

15.1 Indemnification

Lessee shall, and does hereby agree to indemnify and hold Lessor and
its employees and agents harmless from any and all loss, cost,
liability, damage or claims arising from Lessee's use of the Premises
or the conduct of its business or from any activity, work or thing
done, permitted or suffered by Lessee (or any of its employees, agents
or invitees) in or about the Premises or the Project, and shall
further indemnify and hold Lessor and its employees and agents
harmless from any and all loss, cost, liability, damage or claims
arising from any breach or default in the performance of any
obligation on Lessee's part to be performed under the terms of this
Lease, or arising from any act, failure to act or negligence of
Lessee, or any of its agents or employees, and from all costs,
attorneys' fees, expenses and liabilities incurred as a result of any
such claim or any action or proceeding brought thereon; and in case
any action or proceeding be brought against Lessor or its employees
and agents by reason of any such claim, Lessee, upon notice from
Lessor, shall defend the same at Lessee's expense by counsel
satisfactory to Lessor. Lessee, as a material part of the
consideration to Lessor, hereby assumes all risk of damage to property
or injury to persons, in, upon, or about the Premises from any cause
which does not result solely and directly from the negligence of
Lessor, and Lessee hereby waives all claims in respect thereof against
Lessor and agrees to carry insurance sufficient to protect against all
such claims (with waiver of subrogation in Lessor's favor).

15.2 Waiver of Certain Claims

Lessor and its employees and agents or anyone authorized to act for
Lessor shall not be liable for any damage to property entrusted to
employees of Lessor, Lessor's agent or the Project, nor for loss of or
damage to any property by theft or otherwise, nor for any injury or
damage to persons or property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak from
any part of the Building or from the pipes, appliances or plumbing
works therein, or from the roof, street or subsurface, or from any
other place resulting from dampness or any other cause whatsoever
which does not result solely and directly from the negligence of
Lessor. Lessor or its agents shall not be liable for interference
with the natural light, nor shall Lessor be liable for any latent
defect in the Premises or in the Building. Lessee shall give prompt
notice to Lessor of any fire, accident or defect discovered within the
Premises or the Building.

15.3 Lessee's Insurance

Lessee agrees to carry at its own expense throughout the term of the
Lease, insuring both Lessor (and its employees and agents) and Lessee,
comprehensive public liability insurance and such other insurance
specified in Paragraph 1 hereof, all of which shall be in the amounts
specified in Paragraph 1, insurance customarily carried by entities in
businesses similar to that of Lessee in customary amounts for the size
of Lessee's business, and such other insurances as Lessor may
reasonably request; all insurance shall be placed with insurance
companies approved by Lessor. Lessee shall deliver a Certificates of
Insurance to Lessor prior to the date of occupancy of the Premises and
said insurance policy shall list and protect Lessor and Lessee as
their interests may appear and shall contain an endorsement stating
that the insurer agrees to give no less than thirty (30) days' prior
written notice to Lessor in the event of modification or cancellation
thereof.

15.4 Personalty; Leasehold Improvements

Lessee shall carry insurance for the full replacement value of its
personal property and leasehold improvements, trade fixtures and the
like; Lessor (and its employees and agents) shall be a named or
additional insured on all such policies.

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16. FIRE OR CASUALTY

16.1 Repair; Termination

If the Premises or the Building (including machinery and equipment
used in its operation) or the Project is wholly or partially destroyed
or damaged by fire or other casualty which is covered by the usual
form of fire and extended coverage insurance, and if such destruction
or damage is not caused by the act or neglect of Lessee, its agents or
servants, then Lessor shall be obligated to repair and restore the
same with reasonable promptness, unless Lessor elects to terminate
this Lease as hereinafter set forth. In the event the Premises or the
Building or the Project is wholly or partially destroyed or damaged as
a result of any cause, other than the perils covered by the usual form
of fire and extended coverage insurance, or in the event the Premises
or the Building or the Project is destroyed or damaged by any fire or
casualty to the extent of not less than twenty-five percent (25%) of
the replacement cost thereof, then Lessor shall have the option to
terminate this Lease by giving notice to Lessee within sixty (60) days
after the occurrence of such damage or destruction. If Lessor does
not terminate this Lease as provided above, it shall proceed to
complete the necessary restoration or repairs with reasonable
diligence and this Lease shall continue in full force and effect;
provided, however, that if any destruction or damage not caused by the
act or neglect of Lessee, its agents or servant, renders the Premises
untenantable, and if this Lease is not terminated as provided herein
by reason of such damage or destruction, then Rent shall abate during
the period beginning with the date of such destruction or damage and
ending with the date when the Premises are again rendered tenantable
by an amount bearing the same ratio to the total amount of Rent due
for such period that the untenantable portion of the Premises bears to
the entire Premises.

16.2 Lessee's Property

Lessor shall in no event be obligated to repair any injury or damage
by fire or other cause or to make any repairs or replacements of any
items, improvements, alternations, modifications or the like installed
or effected by or for Lessee or at its expense.

17. ACCESS

Lessor, and any one authorized by Lessor, shall have the right to
enter the Premises at all reasonable times for the purpose of examining or
inspecting the same, showing the same to prospective purchasers or lessees of
the Premises, Project or Building, and making such alterations, repairs,
improvements or additions to the Premises or to the Project or Building of
which they are a part as Lessor may deem necessary or desirable. If Lessee
shall not personally be present to open and permit an entry into the Premises
at any time when such entry by Lessor is necessary or permitted hereunder,
Lessor may enter by means of a master key or may enter forcibly, without
liability to Lessee except for any failure to exercise due care of Lessee's
property, and without breaching the terms of this Lease.

18. CONDEMNATION

18.1 Substantial Taking

If all or any part of the Premises or the Project is permanently taken
or condemned by any competent authority for any public use or purpose
(including a deed given in lieu of condemnation), or if any adjacent
property or street is so taken or is improved, and such taking,
condemnation or improvements renders the Premises substantially
untenantable, this Lease shall terminate as of the date title vests in
such authority or such improvements is completed, and Base Rent and
Additional Rent shall be apportioned as of such date.

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18.2 Insubstantial Taking

If any part of the Premises or the Project is taken or condemned for
any public use or purpose (including a deed given in lieu of
condemnation), or if any adjacent property or street is so taken or is
improved, and this Lease is not terminated pursuant to Paragraph 18.1
hereof, Lessor, upon receipt and to the extent of the award in
condemnation or proceeds of sale, shall make necessary repairs and
restoration (exclusive of leasehold improvements and personal property
installed by Lessee) to restore the Premises remaining to as near its
former condition as circumstances will permit, and to the Project to
the extent necessary to constitute the portion of same not so taken or
condemned as a complete architectural unit. In the event of any
taking or condemnation described in this Paragraph 18.2, the Rentable
Area of the Premises stated in Paragraph 1 hereof and the Rentable
Area of the Project as specified in this Lease, shall, for the period
of such taking, be reduced, respectively, for all purposes under this
Lease (including the calculation of Rent) by the number of square feet
of rentable area of the Premises, if any, and the Project, if any, so
taken or condemned.

18.3 Compensation

Lessor shall be entitled to receive the entire price or award from any
such sale, taking or condemnation without any payment to Lessee, and
Lessee hereby assigns to Lessor all of Lessee's interest, if any, in
such award; provided, however, Lessee shall have the right separately
to pursue against the condemning authority award in respect of the
loss, if any, to leasehold improvements paid for by Lessee without any
credit or allowance from Landlord and the expense of relocation.

19. ABANDONMENT

Lessee shall not vacate or abandon the Premises at any time during the
Term, and if Lessee shall abandon, vacate or surrender said Premises or be
dispossessed by process of law or otherwise, any personal property belonging to
Lessee and left in the Premises shall be conclusively presumed to be abandoned
and may be kept or disposed of by Lessor as provided in Paragraph 2.3 and
Paragraph 7 hereof. Any such vacation, abandonment, surrender or dispossession
shall be a material breach of this Lease, and Lessor shall have all remedies
set forth herein or otherwise available at law, equity or elsewise with respect
thereto. The Premises shall be deem "abandoned" as defined in Paragraph 25.1
(i).

20. SALE BY LESSOR

In the event of a sale or conveyance by Lessor of the Project, the
Premises or the Building, the same shall operate to release Lessor from any
future liability upon or with respect to this Lease and any of the covenants or
conditions, express or implied, herein contained in favor of Lessee, and in
such event Lessee agrees to look solely to the successor in interest of Lessor
in and to this Lease with respect to such matters and the performance of
Lessor's obligations hereunder. This Lease shall not be affected by any such
sale, and Lessee agrees to attorn to such successor in interest. If any
security deposit has been made by Lessee hereunder, Lessor may transfer such
security deposit to such successor in interest and thereupon Lessor shall be
discharged from any further liability in reference thereto.

21. MUTUAL RELEASE; WAIVER OF SUBROGATION

Lessor and Lessee each hereby release the other, and the management
agent of the Project, from any and all liability or responsibility for any
direct or consequential loss, injury or damage to the Premises, its contents,
caused by fire or any other casualty, during the Term of this Lease, even if
such fire or other casualty may have been caused by the negligence (but not the
willful act) of the other party or one for whom such party may be responsible.
Inasmuch as the above mutual waivers will preclude the assignment of any
aforesaid claim by way of subrogation (or otherwise) to an insurance company
(or any other

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person), each party hereto agrees if required by said policies to give to each
insurance company which has issued to it fire and other property insurance,
written notice of the terms of said mutual waivers, and to have said insurance
policies properly endorsed, if necessary, to prevent the invalidation of said
insurance coverage by reason of said waivers.

22. WAIVER

22.1 Effect of Waivers and Consents

No waiver by Lessor of any provision of this Lease or any breach by
Lessee hereunder shall be deemed to be a waiver of any other provision
hereof, or of any subsequent breach by Lessee of the same or any other
provision. Lessor's consent to or approval of any act by Lessee
requiring Lessor's consent or approval shall not be deemed to render
unnecessary the obtaining of Lessor's consent to or approval of any
subsequent act of Lessee whether or not similar to the act so
consented to or approved. No act done by Lessor or anyone authorized
by Lessor during the term of this Lease shall be deemed an acceptance
of a surrender of the Premises, and no agreement to accept such
surrender shall be valid unless in writing and signed by Lessor. No
agent or employee of Lessor or of any entity authorized by Lessor
shall have any power to accept the keys to the Premises prior to the
termination of this Lease, and the delivery of the keys to any such
employee or agent shall not operate as a termination of the Lease or a
surrender of the Premises.

22.2 Certain Waivers by Lessee

Except as provided in Paragraph 25 relating to Lessor's remedies,
Lessee hereby expressly waives the service of any notice of intention
to terminate this Lease or to re-enter the Premises and waives the
service of any demand for payment of rent or for possession and waives
the service of any other notice or demand prescribed by any statue or
other law.

23. ESTOPPEL CERTIFICATE

23.1 Obligation to Provide Certificate

Lessee shall, at any time and from time to time, upon not less than
ten (10) days prior written notice from Lessor, execute, acknowledge
and deliver to Lessor a statement in writing (i) certifying that this
Lease is unmodified and in full force and effect (or if modified,
stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the dates to
which the rental and other charges are paid in advance, if any; (ii)
acknowledging that there are not, to Lessee's knowledge, any uncured
defaults on the part of Lessor hereunder, or specifying such default
if they are claimed. Any such statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of the
real property of which the Premises are a part.

23.2 Effect of Failure to Provide

Lessee's failure to deliver such statement within such time shall be
conclusive upon Lessee (i) that this Lease is in full force and
effect, without modification except as may be represented by Lessor,
(ii) that there are no uncured defaults in Lessor's performance, (iii)
that no rental has been paid in advance, and (iv) that any other
matters submitted for verification are true. Lessee's failure to
provide such statement within the specified time shall be a material
breach of this Lease.

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24. INTEREST ON PAST DUE OBLIGATIONS

Any amount due from Lessee to Lessor hereunder which is not paid when
due shall bear interest at the rate specified in Paragraph 1 hereof (or if none
is so specified at the rate of one and one half percent (1-1/2%) per month)
from the due date until paid, unless otherwise specifically provided herein,
but the payment of such interest shall not excuse or cure any default by Lessee
under this Lease.

If the interest rate specified in this Lease is higher than the rate
permitted by law, the interest rate is hereby decreased to the maximum legal
interest rate permitted by law.

25. DEFAULT; REMEDIES; EARLY TERMINATION

25.1 Defaults Defined

The occurrence of any one or more of the following events shall
constitute a material default ("Default") and breach of this Lease by
Lessee:

(i) The vacating, surrender or abandonment of the
Premises by Lessee or dispossession by process of law
or otherwise. Lessee shall be deemed to "abandoned"
the Premises for all purposes of this Paragraph 25 in
the event Lessee shall not use the Premises in the
conduct of its business for ten (10) or more
consecutive business days, unless Lessee is prevented
from doing so by fire, act of God, casualty or other
cause (other than financial or business causes)
beyond Lessee's reasonable control; such non-use of
the Premises shall not be deemed an abandonment
thereof if Lessee continues to pay Rent unless the
Premises are on the ground floor.

(ii) The failure of Lessee to make any payment of Rent or
any other payment required to be made by Lessee
hereunder, as and when due, where such failure shall
continue for a period of five (5) days after written
notice thereof from Lessor to Lessee.

(iii) The failure by Lessee to observe or perform any of
the covenants, conditions or provisions of this Lease
to be observed or performed by Lessee, other than
described above, where such failure shall continue
for a period of fifteen (15) days after written
notice thereof from Lessor to Lessee.

(iv) The making by Lessee of any general assignment, or
general arrangement for the benefit of creditors; the
filing by or against Lessee of a petition to have
Lessee adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating
to bankruptcy (unless, in the case of a petition
filed against Lessee, the same is dismissed within
sixty (60) days; the appointment of a trustee or
receiver to take possession of substantially all of
Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where possession is
not restored to Lessee within thirty (30) days; or
the attachment, execution or other judicial seizure
of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease
where such seizure is not discharged within thirty
(30) days.

25.2 Remedies

(a) In General

In the event of any Default by Lessee, at any time thereafter,
and without limiting Lessor in the exercise of any other right
or remedy which Lessor may have by reason of such default or
breach, Lessor may: (i) without terminating

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the Lease or Lessee's right to possession of the Premises,
hold Lessee responsible for all terms of this Lease and all
damages (including, but not limited to, consequential damages)
resulting from the Default, (ii) terminate Lessee's right to
possession of the Premises and re-enter the Premises with or
without terminating this Lease and hold Lessee responsible for
all terms of this Lease and all damages (including, but not
limited to, consequential damages) resulting from the Default;
(iii) distrain for Rent; or (iv) pursue any other remedy at
law, in equity, by statue or elsewhere available. In the
event that Lessor elects to terminate Lessee's right to
possession of the Premises, Lessee shall surrender the
Premises as specified in Paragraph 2.3 hereof.

(b) Reletting

Lessor shall have no obligation to attempt to relet. Upon
re-entering the Premises, Lessor may relet the Premises or any
part thereof (but giving priority to the letting of other
available space in the Project) for such term, on such
conditions and at such rental as Lessor may deem advisable
with the right to make alterations and repairs to the
Premises. Should Lessor elect to relet, rental received by
Lessor from reletting shall be applied in this order: first,
to any indebtedness other than rent due under this Lease;
second, to the payment of any costs of such reletting; third,
to the payment of the cost of any alteration and repairs to
the Premises; fourth, to the payment of Rent due and unpaid
under this Lease; and the remainder, if any, shall be held by
Lessor and applied in payment of future Rent as the same
becomes due and payable under this Lease. Should rentals
received from such reletting during any month be less than
that agreed to be paid during that month by Lessee under this
Lease, then Lessee immediately shall pay and be liable for
such deficiency to Lessor.

In the event of any violation or attempted violation of this
Lease or of any of the terms, covenants or provisions hereof
by Lessee, Lessor shall be entitled to equitable relief
(including but not limited to, restraint by injunction)
without waiting for such violation or attempted violation to
become a Default.

25.3 Re-entry; Authorities and Effects

Upon any re-entry pursuant hereto, Lessor may remove therefrom all
personal property, fixtures, signs and other property, and such
property may be removed and stored in any place for the account and at
the expense and risk of Lessee. Lessee hereby waives all claims for
damages which may be caused by the re-entry of Lessor and taking
possession of the Premises, or the removing or storage of the property
as herein provided, and will save Lessor harmless from any loss, cost
or damages occasioned thereby, and no such re-entry shall be
considered or construed to be forcible entry or detainer.

No such re-entry or taking possession by Lessor shall be
construed as an election on its part to terminate this Lease unless a
written notice of such intention is given to Lessee.

25.4 Additional Remedies; Termination; Costs

(a) Termination; Damages

At any time that as Default exists, and notwithstanding any
reletting without termination or other action Lessor may have
taken in relation to such Default, Lessor may elect to
terminate this Lease; such election shall be effected by
written notice to Lessee. Should Lessor at any time terminate
this Lease for any Default, in addition to any other remedy
Lessor may have, Lessor may recover from Lessee all damages
Lessor may incur by reason of such breach,

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including, without limitation, consequential damages, the cost
of recovering the Premises and the present worth (at the time
of such termination) of the Rent and charges equivalent to
rent as reserved in this Lease for the remainder of the Term.

(b) Recovery of Costs and Expenses

Lessee shall reimburse Lessor for all costs and expenses
(including, but not limited to, reasonable attorneys' fees)
incurred by Lessor in conjunction with the enforcement of the
terms of this Lease and the exercise of any remedies.

26. NOTICES

All notices to be given by one party to the other under this Lease
shall be in writing, mailed or delivered to each as follows:

(a) To Lessor at the Mailing Address specified in
Paragraph 1 hereof.

(b) To Lessee at either the Premises or its principal
place of business as specified above.

Such addresses may be changed by written notice to the other party.
Mailed notices shall be sent by United States certified or registered mail,
postage prepaid. Such notices shall be deemed to have been given upon posting
in the United States mail.

27. INABILITY TO PERFORM

This Lease and the obligations of Lessee hereunder shall not be
affected or impaired because Lessor is unable to fulfill any of its obligations
hereunder or is delayed in doing so, if such inability or delay is caused by
reason of any strike, other labor dispute, or other cause beyond the reasonable
control of Lessor.

28. SUBORDINATION

Lessor expressly reserves the right, at any time or from time to time,
to place liens and encumbrances on and against the Premises and the Project,
superior in lien and effect to this Lease and the estate created hereby;
provided, however, that any such lien or encumbrancer shall provide that the
holder thereof will recognize Lessee's rights hereunder, notwithstanding any
foreclosure of such lien or encumbrance.

If Lessor's interest in the Property is acquired by any ground Lessor,
beneficiary under a Deed of Trust, mortgagee, or purchaser at a foreclosure
sale, Lessee shall attorn to the transferee of or successor to Lessor's
interest in the Property and recognize such transferee or successor as Lessor
under the Lease. Tenant waives the protection of any statute or rule of law
which gives, or purports to give, Lessee any right to terminate this Lease or
surrender possession of the Property upon the transfer of Lessor's interest.

29. SUBSTITUTION OF PREMISES

Lessor may, at its election, upon thirty (30) days' written notice to
Lessee of its desire to do so, exclude the specified leased Premises from the
Lease and substitute other premises (which will, thereafter, be the "Premises")
within the Project therefor, upon the following terms and conditions:

(a) The substituted premises shall contain approximately the same
square footage as the specified leased Premises, without
increase of rental and shall be usable for Lessee's purpose.

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(b) Any and all costs necessary or incidental to Lessee's move to
the substituted premises shall be at the sole cost and expense
of Lessor and free of all cost and expense to Lessee.

(c) Upon the expiration of thirty (30) days after such written
notice to Lessee, the substituted premises shall be considered
the leased Premises described in the Lease, for all uses and
purposes, as though originally leased unto Lessee at the time
of the execution and delivery of this Lease, and the specified
leased Premises shall be considered excluded from the Lease.

Lessee's failure to cooperate and to move to the substitute premises
in a timely and orderly fashion shall be a material breach hereof and shall be
deemed to be a holdover of the Premises.

30. BROKERAGE

Lessee represents and warrants that it has dealt with no broker, agent
or other person in connection with this transaction except as identified in
Paragraph 1 hereof and that no broker, agent or other person brought about this
transaction, other than the Broker identified in Paragraph 1, and Lessee agrees
to indemnify and hold Lessor harmless from and against any claim by any other
broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with or for Lessee with regard to this
leasing transaction. The provisions of this Paragraph shall survive the
termination of this Lease.

31. EXCULPATION

Neither Lessor nor any present or future general or limited partner of
Lessor, or its or their assigns, nor their respective partners, agents,
officers, or employees, shall have any personal liability of any kind or
nature, for or by reason of any matter or thing whatsoever, under or in
connection with this Lease. Lessee shall look solely to the Project for
satisfaction of any claim against Lessor or arising under this Lease. The
limitation of liability provided in this Paragraph is in addition, and not in
limitation of, any applicable limitation on liability provided by law or by any
other contract, agreement or instrument.

32. SECURITY

Lessor has no obligation or responsibility whatsoever to provide or
oversee security or security services for the Premises, the Building or the
Project; but Lessor may, in its sole discretion, provide security or retain a
security service. Lessee (for itself, its employees and agents and any person
claiming through Lessee) hereby releases Lessor and Lessor's employees, agents
and manager from, and waives any and all claims for loss of or damage to person
or property sustained by Lessee (or any employees or agents, or any persons
claiming through Lessee) or by any occupant of the Project, Building or the
Premises or any part thereof relating to, resulting from or in any way deriving
from the effectiveness, sufficiency, insufficiency or absence of security or
security services for or with respect to the Premises, the Building or the
Project.

32. MISCELLANEOUS

(a) All rights and remedies of Lessor under this Lease shall be
cumulative and none shall exclude any other rights and
remedies allowed by law.

(b) The provisions hereof shall apply without regard to the number
or gender of words and expressions unused herein.

(c) Each of the provisions of this Lease, shall extend to and
shall, as the case may require, bind or inure to the benefit,
not only of Lessor and of Lessee, but

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also their respective heirs, legal representatives, successors
and assigns, provided this clause shall not permit any
assignment contrary to the provisions of Paragraph 12 hereof.

(d) Submission of this instrument for examination shall not bind
Lessor in any manner, and no lease or obligation of Lessor
shall arise until this instrument is signed and delivered by
Lessor and Lessee.

(e) No rights to light or air over the property, whether belonging
to Lessor or any other person, are granted to Lessee by this
Lease.

(f) Lessor shall not be responsible to Lessee for the
nonperformance by any other tenant or occupant of the Building
of any of the Rules and Regulations established by the Lessor
for the Building.

(g) Clauses, plats and riders, if any, signed by Lessor and Lessee
and endorsed on or affixed to this Lease are a part hereof.

(h) Time is of the essence with respect to the performance of
every provision of this Lease in which time of performance is
a factor.

(i) The paragraph captions contained in this Lease are for
convenience only and shall not be considered in the
construction or interpretation of any provision hereof.

(j) This Lease contains all of the agreements of the parties
hereto with respect to any matter covered or mentioned in this
Lease, and no prior agreement or understanding pertaining to
any such matter shall be effective for any purpose. No
provision of this Lease may be amended or added to except by
an agreement in writing signed by the parties hereto or their
respective successors in interest.

(k) This Lease shall be governed by and controlled pursuant to the
laws of the state in which the Project is located.

(l) No receipt of money by the Lessor from the Lessee after the
termination of this Lease or Lessee's right to occupancy of
the Premises, or after the service of any notice, or after the
commencement of any suit, or after final judgment for
possession of the Premises shall reinstate, continue or extend
the term of this Lease or affect any such notice, demand or
suit or imply consent for any action for which Lessor's
consent is required.

(m) This Lease shall not be recorded without the consent of
Lessor.

(n) In the absence of fraud, no person, firm or corporation, or
the heirs, legal representative, successors and assigns,
respectively thereof, executing this Lease as agent shall ever
be deemed or held individually liable hereunder for any reason
or cause whatsoever.

(o) In the event of variation or discrepancy, the Lessor's
original copy of the Lease shall control.

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(p) If because of any act or omission of Lessee, its employees,
agents, contractors, or subcontractors, any mechanic's lien or
other lien, charge or order for the payment of money shall be
filed against Lessor, or against all or any portion of the
Premises or the Building of which the Premises are a part or
the Project, Lessee shall, at its own cost and expense, cause
the same to be discharged of record or give the Lessor a
surety bond of at least 200% of the lien, within thirty (30)
days after the filing thereof, and Lessee shall indemnify and
save harmless Lessor, its employees and agents against and
from all costs, liabilities, suits, penalties, claims and
demands, including reasonable attorneys' fees resulting
therefrom.

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year as set forth above.

LESSOR: LESSEE:

AJ PARTNERS LIMITED PARTNERSHIP VOICE PLUS, INC.
a California Corporation
By: Draper and Kramer of California, Inc.
a California Corporation
Its: Manager

/s/ Richard J. Loeber /s/ James Gillespie
- -------------------------------------------- ------------------------

By: Richard J. Loeber By: James Gillespie
Its: Vice President Its: President

/s/ Lawrence A. Cohen
- --------------------------------------------

By: Lawrence A. Cohen
Its: Senior Vice President

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EXHIBIT A
SITE PLAN OF PROJECT

[MAP]

GROUND LEVEL Building plans, elevations and
FLOORPLAN AND site plan layouts are subject
PARKING AREAS to change without notice.

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EXHIBIT B
LOCATION OF PREMISES

39899 BALENTINE DRIVE
NEWARK, CA 94560

[FLOORPLAN]

Third Level [ ] Each square foot equals 5 ft per
side or 25 sq. ft
Floorplan

Building plans, elevations and site plan lay
outs are subject to change without notice.

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EXHIBIT B1
FLOOR PLAN OF PREMISES

[FLOOR PLAN]

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

FLOOR PLAN - SUITE 350 VOICE PLUS EXPANSION DATE
9-13-94

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

HALLENBECK CHAMORRO & ASSOCIATES BALENTINE PARK
A R C H I T E C T U R E NEWARK, CA
2415 Mariner Square Dr. Alameda, CA 94501 (510) 523-9121
- --------------------------------------------------------------------------------

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EXHIBIT C
RULES AND REGULATIONS

BALENTINE PARK
39899 Balentine Drive
Newark, CA 94560

It is agreed that the following rules and regulations shall be and are hereby
made a part of this Lease, and the Tenant agrees that its employees and agents,
or any other permitted by the Tenant to occupy or enter said premises, will at
all times abide by said rules and regulations and that a default in the
performance and observance thereof shall operate the same as any other defaults
herein:

1. The sidewalks, entries, passages, stairways, and elevators
shall not be obstructed by the Tenant, or its agents, or used
by them for any purpose other than ingress and egress to and
from their offices.

2. (a) Furniture, equipment or supplies shall be moved in or
out of the building, only upon the elevator
designated by the Landlord (if the building is so
equipped), and then only during such hours and in
such manner as may be prescribed by the Landlord.
The designated time for moving shall be Saturdays
8:00 A.M. to 12:00 Noon or weekdays after 5:30 p.m.

(b) No safe or article, the weight of which may
constitute a hazard or danger to the building or its
equipment shall be moved into the premises.

(c) Safes and other equipment, the weight of which is not
excessive, shall be moved into, from, or about the
building only during such hours and in such manner as
shall be prescribed by the Landlord, and the Landlord
shall have the right to designate the location of
such articles in the space hereby demised.

3. Tenant shall not place any movable objects including antennas,
outdoor furniture, etc., in the parking areas, landscaped
area, or other areas outside of said premises, or on the roof
of said premises.

4. No auction, public or private, will be permitted.

5. The light through transoms and glass partition opening into
the halls and other parts of the building shall not be
obstructed in any way by the Tenant. Tenant shall not place
any signs, posters, or lettering on any exterior glass or door
except for signage as provided by LESSOR.

6. Water closets and other water fixtures shall not be used for
any purpose other than that for which the same are intended,
and any damage resulting to the same from misuse on the part
of the Tenant, its agents, or employees, shall be paid for by
the Tenant. No person shall waste water by tying back or
wedging the faucets, or in any other manner.

7. No animal shall be allowed in the offices, halls, corridors,
and elevators in the building.

8. Bicycles or other vehicles shall not be permitted in the
offices, halls, corridors, and elevators in the building, nor
shall any obstruction of sidewalks or entrances of the
building by such be permitted. Bicycles shall be parked in
racks provided.

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<PAGE> 35
EXHIBIT C
RULES AND REGULATIONS

9. No person shall disturb the occupants of this or adjoining
building or premises by the use of any radio or musical
instrument or by the making of loud or improper noise.

10. The Tenant shall not allow anything to be placed on the inside
or outside window ledges of the building, nor shall anything
be thrown by the Tenant, its agents, or employees, out of the
windows or doors, or down the corridors, elevator shafts, or
skylights of the building.

11. No additional lock or locks shall be placed by the Tenant on
any door in the building unless written consent of the
Landlord shall first have been obtained. A reasonable number
of keys to the demised premises and to the toilet rooms will
be furnished by the Landlord, and neither the Tenant, its
agents, or employees, shall have any duplicate key made. At
the termination of this tenancy, the tenant shall promptly
return to the Landlord all keys to offices, toilet rooms, or
vaults.

12. If the Tenant desires telegraphic, telephonic, or other
electric connections, Landlord or its agent will direct the
electrician as to where and how the wires may be introduced,
and without such direction, no boring or cutting of wires will
be permitted. Any such installation and connection shall be
made at Tenant's expense.

13. No awnings shall be placed over the windows except by the
consent of the Landlord.

14. The Tenant shall not install or operate any steam or gas
engine or boiler, or carry on any mechanical business, in the
demised premises. The use of oil, gas or inflammable liquids
for heating, lighting, or any other purpose is expressly
prohibited. Explosives or other articles deemed extra
hazardous shall not be brought in to the building.

15. Any painting or decorating as may be agreed to be done by and
at the expense of the Landlord shall be done during regular
working hours; should the Tenant desire such work done on
Saturdays, Sundays, holidays, or outside of regular working
hours, the Tenant shall pay for the extra cost thereof.

16. The Tenant shall not mark upon, paint signs upon, cut, drill
into, drive nails or screws into, or in any way deface the
walls, ceiling, partitions or floors of the demised premises
or of the building, and any defacement, damage, or injury
caused by the Tenant, its agents, or employees, shall be paid
for by the Tenant.

17. The Landlord reserves the right to make such other and further
reasonable rules and regulations as in its judgment may from
time to time be needful and desirable for the safety, care,
and cleanliness of the premises and for the preservation of
good order therein.

18. Lessee shall not use the name of the building in connection
with or in promoting or advertising the business of Lessee
except as to Lessee's address. Lessor shall have the right to
prohibit the use of the name of the project or other publicity
by Lessee which in Lessor's opinion tends to impair the
reputation of the project or its desirability for the other
Lessees. Lessees will refrain from or discontinue such
publicity upon notification by Lessor.

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<PAGE> 36
EXHIBIT C
RULES AND REGULATIONS

19. Lessee shall not disturb, solicit, or canvass any occupant of
the project and shall cooperate to prevent the same.

20. The leased premises shall not be used for lodging, sleeping,
or cooking (except by means of microwave oven, hot plate and
the like) or for any immoral or illegal purpose or for any
purpose that will damage the premises or the reputation
thereof or for any purpose other than that specified in the
lease covering the premises.

21. The parking areas within the office park complex shall be used
solely for purposes of passenger vehicle parking, and for
vehicular and pedestrian ingress and egress during normal
office hours only, and for no other purpose. Carwashing and
automotive work is strictly prohibited. The parking of
trucks, trailers, recreational vehicles and campers is
specifically prohibited. No vehicle of any type shall be
stored in the parking areas at any time. In the event that a
vehicle is disabled, it shall be removed with 48 hours. There
shall be no "for sale" or other advertising signs on or about
any parked vehicle. All vehicles shall be parked in the
designated parking areas in conformation with all signs and
other markings.

22. Lessee shall not use, keep, or permit to be used or kept, any
foul or noxious gas or substance in the premises, or permit or
suffer the premises to be occupied or used in a manner
offensive or objectionable to Lessor or other occupants of the
building by reason of noise, odor, and/or vibrations, or
interfere in any way with other Lessees or those having
business therein, nor shall any animals or birds be brought in
or kept in or about the premises of the project. Lessee shall
maintain the leased premises free from mice, bugs, and ants
attracted by food, water, or storage materials. Lessor is
responsible for maintaining the outside area.

23. Lessor reserves the right to exclude or expel from the complex
any person who in the judgment of the Lessor is intoxicated or
under the influence of liquor or drugs or who shall in any
manner do any act in violation of the Rules and Regulations of
the said project.

24. All entrance doors in the complex shall be closed and securely
locked when the premises are not in use, and all doors opening
to public corridors shall be kept closed except for normal
ingress and egress. Lessee must observe strict care and
caution that all water faucets and any other apparatus is shut
off before Lessee or Lessee's employees leave the premises and
that all electricity, gas, etc., shall likewise be carefully
shut off as to prevent waste or damage.

25. Employees of Lessor shall not perform any work or do anything
outside of their regular duties unless under special
instruction from Lessor. Lessee shall give Lessor prompt
notice of any defects in the water, sewage, gas pipes,
electrical lights and fixture, heating apparatus, or any other
service equipment.

26. Normal hours for the office building to be open and HVAC to
operate are 7:00 a.m. to 6:00 p.m., Mondays through Fridays
and 8:00 a.m. to 12:00 Noon Saturdays, legal holidays
excluded.

27. The Health Club is an amenity offered for the exclusive use of
the Tenant and their employees at the Office Complex. No
guests shall be allowed without the consent of the Lessor.

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<PAGE> 37
EXHIBIT C
RULES AND REGULATIONS

28. The Health Club will be open from 7:00 a.m. to 7:00 p.m.,
Mondays through Fridays; closed on Saturdays and Sundays.

29. The use of the equipment in the Health Club is at your own
risk.

30. The Health Club or the Lessor shall not be responsible or
liable for articles lost or stolen in the locker rooms or in
the lockers or for personal injuries. Items may not be left
in the locker room overnight.

31. In the event of any disagreements and conflicts regarding the
use of any of the Health Club facilities, decisions will be
made by the Lessor and all such decisions will be final.

32. Smoking is not permitted inside the building; that includes
the common areas of the building, i.e. the lobby, hallways,
restrooms, stairwells, elevators, mail room and fitness
center.

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<PAGE> 38
EXHIBIT C
RULES AND REGULATIONS

MOVING POLICY
39899 BALENTINE DRIVE
NEWARK, CA 94560

The following rules pertain to moving furniture equipment, and supplies in and
out of the building.

ANY MOVERS THAT DO NOT ADHERE TO THE FOLLOWING RULES WILL NOT BE
ALLOWED TO ENTER THE PREMISES OR WILL BE REQUIRED TO DISCONTINUE THE
MOVE.

1. Clean masonite sections will be used as runners on all finished floor
areas where heavy furniture or equipment is being moved with wheel or
skid type dollies. The masonite must be at least one fourth inch
thick, 4' x 8' wide sheets in elevator lobbies and corridors, and 32"
wide sheets through doors and in Tenant space. All sections of
masonite must be taped or overlapped to prohibit sliding.

2. The mover must provide and install protective coverings on all walls,
door facings, elevator cabs, and other areas along the route to be
followed during the move. These areas will be inspected for damage
after the move.

3. Any damage to the building or fixtures caused by the move will be
repaired or paid for by the moving company.

4. Only the service elevator will be used for the movement of furniture,
equipment, and supplies unless prior written approval to use
additional elevators has been granted by the Landlord.

5. Move ins of large quantities of furniture, equipment or supplies must
be accomplished after 6 p.m. on weekdays, on weekends or holidays, or,
with prior approval.

6. The moving company must make arrangements with the Building Management
Office for use of the elevator for each move. A firm arrival time
will be established. Penalties can be established for delays.

7. Generally, the moving company will be required to remove all boxes,
trash, etc., when leaving the building. Any materials left behind
will be disposed of and charges for this disposal will be sent to the
moving company.

Prior arrangements can be established.

8. The moving company must carry insurance including, but not to be less
than, the following:.

a. Workmen's Compensation in statutory limit for the State of
California, with employee's liability, bodily injury, personal
injury, and property damage. Liability insurance in
comprehensive general liability form and certificate
evidencing same shall be furnished to Landlord before moving
any items into the building. In addition, the moving company
must agree to protect, indemnify, and save Landlord harmless
from and against all claims, demands and causes of action of
every kind in character arising in favor of moving company's
employees, Landlord's employees or other third parties on
account

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<PAGE> 39
EXHIBIT C
RULES AND REGULATIONS

of bodily injury, personal injury, death or damage to property
in any way resulting from willful or negligent acts or
omissions of moving company, its agents, employees
representatives, or subcontractors. The moving company shall
be responsible for all damages and losses sustained by them to
their tools and equipment utilized in the performance of all
work thereunder.

b. Comprehensive General Liability insurance policy shall include
coverage for hazards of premises -- operation, elevators,
products, and completed operations and including personal
injury coverage part and contractual liability coverage part
designating the assumptions of liability under performance of
the act of moving. Property damage insurance shall be in
broad form, including completed operations.

c. Each moving company moving supplies, furniture, and/or
equipment through this building shall secure and present to
the Property Manager a certificate reflecting these coverage
at least seventy-two (72) hours before the move takes place.

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<PAGE> 40
EXHIBIT D
ACKNOWLEDGEMENT OF LEASE COMMENCEMENT

This Acknowledgement is executed as of _____ day of November 1994 with
reference to that certain Lease Agreement ("Lease") dated October 20, 1994, by
and between AJ PARTNERS LIMITED PARTNERSHIP ("Lessor") and VOICE PLUS, INC.
("Lessee").

Lessor and Lessee hereby acknowledge and agree as follows:

1. That the Lessee accepted possession of the Demised Premises
(as described in said Lease) on November 1, 1994, and
acknowledge that the premises are as represented by Lessor and
in good order, condition and repair; and that the
improvements, if any required to be constructed for Lessee by
Lessor under this Lease, have been so constructed and are
satisfactorily completed in all respects.

2. That all conditions of said Lease to be performed by Lessor
prerequisite to the full effectiveness of said Lease have been
satisfied and that Lessor has fulfilled all of its duties of
an inducement nature.

3. The Commencement Date under the said Lease is November 1,
1994. The Termination Date under the said Lease is January
31, 1997, subject to any applicable provisions of the Lease
for extension or early termination thereof.

4. That said Lease is in full force and effect and that the same
represents the entire agreement between Lessor and Lessee
concerning said Lease.

5. That there are no existing defenses which Lessee has against
the enforcement of said Lease by Lessor and no offsets or
credits against rentals.

6. That the minimum rental obligations of said Lease is presently
in effect and that all rents, charges and other obligations on
the part of the Lessee under said Lease commenced to accrue on
November 1, 1994.

7. That the undersigned Lessee has no notice of prior assignment,
hypothecation or pledge of said Lease or of rents thereunder.

LESSOR: LESSEE:

AJ PARTNERS LIMITED PARTNERSHIP VOICE PLUS, INC.

By: Draper and Kramer of California, Inc.
a California Corporation
Its: Manager

/s/ Richard J. Loeber /s/ James Gillespie
- -------------------------------------------- ---------------------------

By: Richard J. Loeber By: James Gillespie
Its: Vice President Its: President

/s/ Lawrence A. Cohen
- --------------------------------------------
By: Lawrence A. Cohen
Its: Senior Vice President

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Page 7

<PAGE> 1
Exhibit 10.20

AGREEMENT

This agreement supersedes the similar agreement dated September 15, 1995, and
is being entered into as of the 16th day of October, 1995, by and among
BioFactors, Inc., a Delaware Corporation (the "Company"), Burton Kanter and
Elliot Steinberg, investors in BioFactors, Inc. and members of its Board of
Directors. In consideration of your waiving the present default on the
unsecured loans to you and your affiliates totaling $54,450 and $237,660 of
principal and $17,723.86 and $63,473.30 in accumulated interest as of June 30,
1995 for Burton Kanter and Elliot Steinberg, respectively and for agreeing to
convert the principal amounts of such notes into Common Stock at the IPO and
for re-scheduling payment of all principal and accrued interest until the
earlier of the IPO or December 31, 1996 and, finally agreeing to leave
individually your last $10,000 investment in the existing Bridge (it being
agreed that no other Bridge Investor's notes will be prepaid at this time), and
to induce your continuing service as directors, we agree to the following:

1. Burton Kanter and Elliot Steinberg will each receive 75,000 new
options with an exercise price of $2.50 per share or 125,000
options with an exercise price of $5.00 per share, whichever you
prefer. The option agreement shall contain a provision that the
options will be fully transferable. Half of these options are to
be vested and the remaining fifty percent shall vest in one year.
The option become fully vested if the optionee is requested to
resign as a member of the Board of Directors prior to the vesting
date, for other his own misconduct. The Company, Burton Kanter
and Elliott Steinberg will execute and deliver the Company's
standard form option agreement, with appropriate changes to
reflect the terms herein.

2. You both agree that the principal portion of your unsecured notes
shall, without the need for further action on your part, be
converted into Common Stock upon the closing of the Company's
initial underwritten public offering at the per share price in
the IPO. The shares will be subject to a lock-up period of 12
months and you agree to execute and deliver such form of lock-up
agreement as you may be requested by the underwriter. If the IPO
has not taken place by December 31, 1996, all outstanding
principal and accrued interest shall be payable on that date.

3. Interest on your unsecured debt shall be re-computed on an
annually compounded basis from inception and will be due on or
before the revised maturity date of the underlying debt.

4. You both agree to waive the current default on your unsecured
notes, which due dates were fifty percent on June 30, 1995 and
fifty percent on December 31, 1995.
5. We will transfer to you for no additional monetary consideration
all BFI's or Management's rights to invest in the sports entity
with the exception of any rights held by Marc Silverman, as to
which we cannot make a commitment, and one-half of the
<PAGE> 2
AGREEMENT
October 16, 1995
Page 2

Company's 7-1/2% warrants in the sports entity will be sold to
each of you for $1.00, it being agreed that such rights and
warrants have no determinable value at present.

6. As Directors you each will receive fees of $2,000 per month plus
reasonable out-of-pocket expenses in connection with your duties
as Board members.

PLEASE INDICATE YOUR PREFERENCE AS TO THE OPTIONS OFFERED HEREBY, BY INITIALING
NEXT TO YOUR CHOICE:

Burton Kanter: X Option to purchase 75,000 shares of Common Stock at
--- an exercise price of $2.50 per share.

--- Option to purchase 125,000 shares of Common Stock at
an exercise price of $5.00 per share.

Elliot Steinberg: X Option to purchase 75,000 shares of Common Stock at
--- an exercise price of $2.50 per share.

--- Option to purchase 125,000 shares of Common Stock at
an exercise price of $5.00 per share.

If you are in agreement with the foregoing, please return a signed counterpart
copy of this letter to the undersigned by facsimile no later than 7:00 PM
(Mountain Time) today. Should you fail to do so, the foregoing offer is void..

AGREED TO: AGREED AND ACCEPTED:

BIOFACTORS, INC.

/s/ Douglas S. Zorn /s/ Burton Kanter (by fEGS)
- ----------------------------------- -------------------------------------
Douglas S. Zorn Burton Kanter
Executive Vice President & COO
October 16, 1995 10/16/95
-----------
Date

AGREED AND ACCEPTED:

/s/ Elliot Steinberg
-------------------------------------
Elliot Steinberg
10/16/95
----------------
Date
<PAGE> 3
AMENDMENT

This Amendment (this "Amendment") is entered into as of July
16, 1996, by and among BioFactors, Inc., a Delaware corporation (the
"Company"), Esmond Goei, Douglas Zorn, Burton Kanter and Elliot Steinberg and
amends that certain Agreement (the "Agreement") dated October 16, 1995, by and
among the Company, Burton Kanter and Elliot Steinberg (the "original parties").
A true and correct copy of the Agreement is attached hereto and made a part
hereof.

In consideration of the mutual promises contained herein, the
parties agree as follows:

1. Amendments. The original parties hereby agree to amend the
Agreement as follows:

a. Paragraph 1 of the Agreement is amended in its
entirety as

"1. The Company will grant to each of Burton Kanter and
Elliot Steinberg 75,000 options with an exercise price of
$0.50 per share. The option agreements shall contain a
provision that the options will be fully transferable, which
in the case of the options granted to Mr. Kanter have been
transferred. Half of these options shall vest immediately and
the remaining fifty percent shall vest on the earlier of one
year from the date of grant or the grantee's resignation from
the Company's Board of Directors for reasons other than his
own misconduct. The Company, Burton Kanter and Elliot
Steinberg will execute and deliver the Company's standard form
option agreement with appropriate changes to reflect the terms
herein."

b. Paragraph 2 of the Agreement is amended in its
entirety as follows:

"2. The Parties hereby agree that the principal of the
Company's unsecured notes held by Elliot Steinberg (being
$247,660 principal amount) and by Walnut Capital, an affiliate
of Burton Kanter (being $54,850 principal amount) (the
"Unsecured Debt") shall be paid in full from the proceeds of
the underwritten initial public offering of the Company's
common stock (the "IPO"). If the IPO has not taken place by
December 31, 1996, all outstanding principal and accrued
interest shall be payable on that date."

c. Paragraph 3 of the Agreement is amended in its
entirety as follows:

"3. Interest on the Unsecured Debt shall be recomputed on
an annually compounded basis from inception and shall be due
on the earlier of the consummation of the IPO or the revised
maturity date (being December 31, 1996)."

d. Paragraph 6 of the Agreement is amended in its
entirety as follows:

"6. As of October 16, 1996, Messrs. Kanter and Steinberg
each will receive fees of $2,000 per month plus reasonable
out-of-pocket expenses in connection with their duties as
Directors of the Company, payment of which shall be deferred
until the earlier of a bridge financing placed by Joseph
Stevens & Company LP or October 31, 1996; provided, that such
fees shall

-1-
<PAGE> 4
terminate immediately upon such Director's resignation from
the Board; further provided that as of July 16, 1996, such
fees shall terminate and after that date Mr. Kanter shall be
compensated pursuant to the fee schedule established for
non-employee Directors, being $1,000 per Board meeting at
which personal attendance is required and $250 per telephonic
Board meeting or and committee meeting not part of, or
immediately preceding or following a scheduled board meeting,
which fee schedule shall take effect upon the consummation of
the IPO."

e. A new Paragraph 7 is added as follows:

"7. The Company will issue to each of Messrs. Kanter and
Steinberg, 25,000 fully-paid, non- assessable shares of its
Common Stock as supplemental fees for their extraordinary
services as Directors of the Company during 1995."

f. A new Paragraph 8 is added as follows:

"8. Burton Kanter and Elliot Steinberg each hereby agree
to lock up any shares of common stock of the Company,
including the shares of common stock of the Company issuable
upon the exercise of any options or warrants now or hereafter
held by them, for the period and pursuant to the other terms
and conditions set forth in the form of lock-up agreement
attached hereto and/or any future lock-up agreement in favor
of an alternate underwriter of the Company's securities (an
"Alternate Lock-up"), provided the duration of such Alternate
Lock-up is less than or equal to the duration of the form of
lock-up agreement attached hereto or such Alternate Lock-up
has been signed by at least 90% of the Company's other
stockholders, and to execute and deliver such form of lock-up
agreement concurrent with the execution of this Amendment.
Burton Kanter and Elliot Steinberg each further agree to cause
each of their affiliates (in the case of Burton Kanter, being
Walnut Capital Corporation and Antigua International Trust
Ltd. as Trustee for Three B Burton Trust, and in the case of
Elliot Steinberg, being W.S. Ventures) to agree to lock up any
shares of common stock of the Company now or hereafter owned
by such affiliates, including the shares of common stock of
the Company issuable to them upon the exercise of any options
or warrants now or hereafter held by them, for the period and
pursuant to the other terms and conditions set forth in the
form of lock-up agreement attached hereto and/or any future
lock-up agreement in favor of an alternate underwriter of the
Company's securities (an "Alternate Lock-up"), provided the
duration of such Alternate Lock-up is less than or equal to
the duration of the form of lock-up agreement attached hereto
or such Alternate Lock-up has been signed by at least 90% of
the Company's other stockholders, and to cause each such
affiliate to execute and deliver such form of lock-up
agreement concurrent with the execution of this Amendment
(collectively, together with the lock-ups being delivered by
Messrs. Kanter and Steinberg , the "Lock-ups")."

-2-
<PAGE> 5
2. Release.

a. The Company, Douglas
Zorn and Esmond Goei for themselves and for their successors, representatives,
assigns, and agents, hereby completely, unconditionally, and forever release,
acquit and discharge Burton Kanter and Elliot Steinberg, and their respective
heirs, successors, representatives, current and former employees, assigns and
agents, of and from any and all actions, causes of action, debts, claims,
demands, liabilities, losses, and damages of every kind and nature relating to
the Agreement and this Amendment. Notwithstanding the foregoing, nothing
contained herein shall constitute a release of Burton Kanter or Elliot
Steinberg from the previous provisions of this Agreement.

b. Burton Kanter and
Elliot Steinberg for themselves and for their respective affiliates,
successors, representatives, assigns, and agents, hereby completely,
unconditionally, and forever release, acquit and discharge the Company, Douglas
Zorn and Esmond Goei, and their respective officers, directors, heirs,
successors, representatives, current and former employees, assign and agents,
of and from any and all actions, causes of action, debts, claims, demands,
liabilities, losses, and damages of every kind and nature relating to the
Agreement and this Amendment. Notwithstanding the foregoing, nothing contained
herein shall constitute a release of the Company, Douglas Zorn and Esmond Goei
from the provisions of this Agreement.

3. Resignation. Elliot Steinberg hereby agrees to tender his resignation
from the Company's Board of Directors concurrent with the execution of
this Amendment, which resignation shall be effective as of the date
hereof (the "Resignation").

4. Governing Law. The parties hereto agree that this agreement will be
construed and enforced in accordance with the laws of the State of
Colorado.

5. Construction of Waiver. The Agreement shall be deemed amended only to
the extent set forth herein and remains in full force and effect.

6. Counterparts. This Amendment may be executed in any number of
counterparts, by original or facsimile signature, each of which when so
executed and delivered shall be an original, but all of which together
shall constitute one and the same instrument.

7. Deadline. This Amendment shall be null and void unless fully executed
and, together with the Lock-ups and the Resignation, received in the
offices of the Company by 10:00 a.m. (mountain time) Tuesday, July 23,
1996.

[The rest of this page is intentionally left blank.]

-3-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to Agreement to be duly executed as of the day and year first above
written.

BIOFACTORS, INC.

By:/s/ Esmond Goei
-------------------------------------
President and Chief Executive Officer

/s/ Burton Kanter
-------------------------------------
Burton Kanter

/s/ Elliot Steinberg
-------------------------------------
Elliot Steinberg

/s/ Esmond Goei
-------------------------------------
Esmond Goei

/s/ Douglas Zorn
-------------------------------------
Douglas Zorn

-4-

<PAGE> 1
Exhibit 10.21

STOCKHOLDER AGREEMENT

THIS STOCKHOLDER AGREEMENT (this "Agreement") dated as of October 25,
1996, is by and between JAMES GILLESPIE, an individual resident in Nevada and
the sole stockholder of VPI (as hereinafter defined) ("Stockholder") and
NHANCEMENT TECHNOLOGIES INC., a Delaware corporation ("Parent").

RECITALS

WHEREAS, concurrently herewith, Parent, VPI Acquisition Corporation, a
wholly owned subsidiary of Parent ("Merger Subcontractor"), Stockholder and
Voice Plus, Inc., a California corporation ("VPI"), are entering into an
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which, and
subject to the terms and conditions contained therein, Parent will exchange,
together with other consideration, its common stock, $0.01 par value per share
("Parent Common Stock"), for all of the issued and outstanding capital stock of
VPI (the "VPI Common Stock"), and whereupon Merger Subcontractor will be merged
with and into VPI (the "Merger");

WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has required that Stockholder (being the sole stockholder of
VPI) enter into, and Stockholder has agreed to enter into, this Agreement;

WHEREAS, the Board of Directors of Parent has, prior to the execution of
the Merger Agreement and this Agreement, approved the Merger, the Merger
Agreement and this Agreement; and

WHEREAS, Parent and Merger Subcontractor will enter into the Merger
Agreement in part in reliance on Stockholder's representations, warranties and
agreements set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, it is agreed as follows:

1. Agreement to Support Merger. For the period of time (the
"Executory Period") from the date hereof until the Effective Time (as defined
in the Merger Agreement), Stockholder agrees, subject to the terms of Section 2
hereof, to vote any and all shares of VPI Common Stock, $1.00 par value per
Share, held by Stockholder, being 91,000 shares (the
<PAGE> 2
"Shares"), in favor of the Merger and against any other "Change of Control."
"Change of Control" will mean any action or agreement that would impede,
interfere with, delay, postpone or attempt to discourage the Merger including,
but not limited to, (a) any extraordinary corporate transaction (other than the
Merger), such as a merger, other business combination, reorganization or
liquidation involving VPI, (b) a sale or transfer of a material amount of
assets of VPI or any of its subsidiaries, (c) any change in the management or
board of directors of VPI, except as otherwise agreed to in writing by Parent,
or (d) any material change in the present capitalization of VPI.

2. Condition to Stockholder's Obligations. The obligations of the
parties to perform under this Agreement upon its execution and thereafter shall
be subject to the additional condition that there shall be no preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction in effect which prohibits (i) this Agreement, or (ii) the Merger.
Stockholder and Parent agree not to seek any such injunction or order and agree
that they will oppose and will seek the immediate lifting of any such
injunction or order.

3. Representations, Warranties and Covenants of Stockholder.
Stockholder represents, warrants and covenants to Parent as follows:

3.1 Ownership of Shares. On the date hereof, the Shares are
all of the shares of VPI Common Stock currently beneficially and of record
owned by Stockholder. Stockholder does not have any rights to acquire any
additional shares of VPI Common Stock. Stockholder currently has, and at the
closing of the Merger will have, good, valid and marketable title to the
Shares, free and clear of all liens, encumbrances, restrictions, options,
warrants, rights to purchase and claims of every kind (other than the
encumbrances created by this Agreement and other than restrictions on transfer
under applicable Federal and State securities laws).

3.2 Power; Binding Agreement. Stockholder has the full legal
right, power and authority to enter into and perform all of Stockholder's
obligations under this Agreement.

3.3 Investment Representations. In connection with the
issuance by Parent of shares of Parent Common Stock in exchange for the Shares
in accordance with the Merger Agreement, Stockholder hereby represents and
warrants to Parent as follows:

(a) Stockholder has had a reasonable opportunity to ask
questions of and receive answers from Parent concerning Parent and all such
questions, if any, have been answered to the full satisfaction of Stockholder;
Stockholder has received all the information he considers necessary or
appropriate for deciding whether to enter into the Merger Agreement and this
Agreement;

(b) Stockholder has such knowledge and expertise in
financial and business matters that Stockholder is capable of evaluating the
merits and risks involved in an investment in the shares of Parent Common
Stock;

-2-
<PAGE> 3
(c) Stockholder understands that Parent has determined
that the exemption from the registration provisions of the Securities Act,
pursuant to Regulation D thereof, which is available for non-public offerings,
is applicable to the offer and sale of the shares of Parent Common Stock based,
in part, upon the representations, warranties and agreements made by
Stockholder herein and in Stockholder's Confidential Investor Questionnaire,
previously delivered to Parent, which is true, correct and complete.

(d) Stockholder is acquiring the shares of Parent
Common Stock for investment purposes only, solely for the account of
Stockholder (and not as a nominee or agent), and not with a view towards the
resale or distribution of any part thereof, and Stockholder has no present
intention of selling, granting any participation in, or otherwise distributing
the same and shall not sell the shares of the Parent Common Stock;

(e) Stockholder is an "accredited investor," as such
term is defined in Rule 501(a) of the Securities Act, as indicated in the
Confidential Investor Questionnaire;

(f) Stockholder is able to bear the economic risk of
its investment in the Parent Common Stock and can afford a complete loss of
such investment; and

(g) Subject to the provisions of Sections 3.4 and 3.5
hereof, Stockholder shall provide written notice to Parent, not less than 15
days prior to the intended date of any disposition of the shares of Parent
Common Stock, specifying the number of shares of Parent Common Stock
Stockholder proposes to transfer, unless such shares of the Parent Common Stock
have become registered under the Securities Act.

3.4 Transfer Restrictions on VPI Common Stock. Stockholder
agrees with, and covenants to, Parent and Merger Subcontractor as follows:

(a) Stockholder shall not transfer (which terms shall
include, without limitation, for the purposes of this Agreement, any sale,
gift, pledge, alienation, assignment or other disposition, directly or
indirectly, by operation of law, in connection with any merger or otherwise
(collectively, a "Transfer")), or consent to any Transfer of, any or all of the
Shares or any interest therein, except pursuant to the Merger;

(b) Stockholder shall not enter into any contract,
option or other agreement or understanding with respect to any Transfer of any
or all of the Shares or any interest therein;

(c) Stockholder shall not grant any proxy, power of
attorney or other authorization in or with respect to the Shares, except for
this Agreement; and

(d) Stockholder shall not deposit the Shares into a
voting trust or enter into a voting agreement or arrangement with respect to
the Shares.

-3-
<PAGE> 4
3.5 Transfer Restrictions on Parent Common Stock. Stockholder
is familiar with Rule 144 and Rule 145 of the Rules and Regulations of the
Securities and Exchange Commission (the "SEC") under the Securities Act and
understands the resale limitations imposed thereby and by the Securities Act.
Stockholder represents, warrants and covenants as follows:

(a) Stockholder understands that the shares of Parent
Common Stock received pursuant to the Merger have not been registered under the
Securities Act or the securities laws of any state, based upon an exemption
from such registration requirements for nonpublic offerings pursuant to
Regulation D of the Securities Act and applicable state securities laws;

(b) Stockholder understands that the shares of Parent
Common Stock received pursuant to the Merger are and will be "restricted
securities" as said term is defined in Rule 144 of the Securities Act and
further understands that Stockholder may be deemed to be an affiliate of VPI at
the time the Merger is submitted for a vote of the stockholders of VPI;

(c) Stockholder understands and agrees that the shares
of Parent Common Stock received pursuant to the Merger may be sold or otherwise
transferred by Stockholder only (i) pursuant to an effective registration
statement under the Securities Act, either pursuant to the Registration Rights
Agreement attached as EXHIBIT D to the Merger Agreement (the "Registration
Rights Agreement") or otherwise, (ii) subject to receipt of an opinion of
counsel satisfactory to Parent that such a Transfer is permissible under the
Securities Act and is in conformity with the volume, manner of sale and other
limitations of Rule 145 promulgated by the SEC under the Securities Act, (iii)
pursuant to a no-action letter or interpretation from the staff of the SEC (as
defined in the Merger Agreement) that such Transfer is permissible under the
Securities Act, or (iv) pursuant to another valid exemption under the
Securities Act such as Rule 144.

(d) Stockholder understands and agrees that, other than
as set forth in the Registration Rights Agreement, Parent is under no
obligation to register the shares of Parent Common Stock under the Securities
Act or any state securities laws, or to take any action to make any exemption
from any such registration provisions available;

(e) Stockholder understands and agrees that stop
transfer instructions will be given to Parent's transfer agent with respect to
the shares of Parent Common Stock to be received by Stockholder pursuant to the
Merger and that there will be placed on the certificates representing such
shares, or any substitutions therefor, one or more of the following legends:

(i) THESE SHARES WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH
THE TERMS OF SUCH RULE AND STOCKHOLDER AGREEMENT BETWEEN THE
ORIGINAL HOLDER OF SUCH SHARES AND NHANCEMENT TECHNOLOGIES, INC.
(THE

-4-
<PAGE> 5
"CORPORATION"), A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF THE CORPORATION.

(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY STATE SECURITIES LAWS. NEITHER SUCH SHARES NOR ANY
PORTION THEREOF OR INTEREST THEREIN MAY BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS
REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND THE
CORPORATION SHALL HAVE RECEIVED EVIDENCE OF SUCH EXEMPTION
SATISFACTORY TO THE CORPORATION (WHICH MAY INCLUDE, AMONG OTHER
THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION).

(iii) Any legend required by the laws of the State of
Delaware or applicable state securities laws.

It being understood and agreed that the legends set forth above shall be
removed upon surrender of certificates bearing such legend by delivery of
substitute certificates without such legend if Stockholder shall have delivered
to Parent an opinion of counsel, in form and substance reasonably satisfactory
to Parent, to the effect that (i) the sale or disposition of the shares
represented by the surrendered certificates may be effected without
registration of the offering, sale and delivery of such shares under the
Securities Act, and (ii) the shares to be so transferred may be publicly
offered, sold and delivered by the transferee thereof without compliance with
the registration provisions of the Securities Act.

4. Termination. This Agreement will terminate (a) when Parent and
Stockholder mutually consent in writing to terminate this Agreement or (b) upon
the termination of the Merger Agreement pursuant to Article 10 of the Merger
Agreement. Termination of this Agreement pursuant to this Section 4 will
terminate all obligations of the parties hereunder except for the obligations
set forth in the provisions relating to expenses.

5. Expenses. Each party hereto will pay all of its expenses in
connection with the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of its counsel and other advisers (it
being acknowledged that Stockholder's expenses may be paid or reimbursed by
VPI).

6. Certain Covenants of Parent. Parent agrees to use its reasonable
best efforts to consummate the IPO (as defined in the Merger Agreement)
pursuant to the terms, and subject to the conditions, contained in the Merger
Agreement and to provide Stockholder the rights set forth in the Registration
Rights Agreement.

7. Notices. All notices or other communications required or
permitted hereunder shall be in writing (except as otherwise provided herein)
and shall be deemed duly

-5-
<PAGE> 6
given when received by delivery in person, sent by automatic receipted
facsimile transmission, telex or telegram, or sent by certified mail, same day
or overnight courier service, postage prepaid, return receipt requested,
addressed as follows:

If to Parent or Merger Subcontractor:
Nhancement Technologies, Inc.
1746 Cole Blvd., Suite 265
Golden, CO 80401
Attention: General Counsel
Fax: (303) 271-9493
Phone: (303) 271-0505

If to Stockholder to:
James Gillespie
198 Country Club Drive
Incline Village, Nevada 89451
Fax: (702) 833-4588
Phone: (702) 833-3522

8. Entire Agreement; Amendment. This Agreement, together with the
documents expressly referred to herein, constitute the entire agreement among
the parties hereto with respect to the subject matter contained herein and
supersede all prior agreements and understanding among the parties with respect
to such subject matter. This Agreement may not be modified, amended, altered or
supplemented except by a written instrument duly executed by the parties
hereto.

9. Assigns; Assignment. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by, the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties.

10. Governing Law. This Agreement, and all matters relating hereto,
shall be governed by, and constituted in accordance with the laws of the State
of Colorado without giving effect to the principles of conflicts of laws
thereof.

11. Certain Events. Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Shares and shall be binding upon any
person or entity to which legal or beneficial ownership of the Shares shall
pass, whether by operation of law or otherwise, including without limitation,
Stockholder's heirs, guardians, administrators or successors. In the event of
any stock split, stock dividend, merger, reorganization, recapitalization or
other change in the capital structure of VPI affecting the Shares, or the
acquisition of additional shares of VPI Common Stock or other voting securities
of VPI by Stockholder, the number of Shares shall be adjusted appropriately and
this Agreement and the obligations hereunder shall attach to any

-6-
<PAGE> 7
additional shares of VPI Common Stock or other voting securities of VPI issued
to or acquired by Stockholder.

12. Stockholder Capacity. Stockholder is executing this Agreement
solely in his capacity as the record and beneficial owner of the Shares and not
in his capacity as a director of VPI. The parties hereto acknowledge and agree
that none of the provisions herein set forth shall be deemed to restrict or
limit any fiduciary duty the undersigned, or any partner of the undersigned or
any of their respective affiliates, may have as a member of the Board of
Directors or executive officer of VPI, or as counsel to VPI; provided, that no
such duty shall excuse the undersigned from his obligation as a stockholder of
VPI to vote the Shares, to the extent that they may be so voted, as herein
provided and to otherwise comply with the terms and conditions of this
Agreement.

13. Enforcement. Stockholder agrees that irreparable damage would
occur, and that Parent and Merger Subcontractor would not have any adequate
remedy at law, in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that Parent and Merger Subcontractor shall
be entitled to an injunction or injunctions to prevent breaches or threatened
breaches by Stockholder or VPI of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Colorado or in Colorado state court, this being in
addition to any other remedy to which Parent and/or Merger Subcontractor may be
entitled at law or in equity. In addition, each of the parties hereto
irrevocably and unconditionally (i) consents to be subject to the personal
jurisdiction of any federal court located in the State of Colorado or any
Colorado state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat the personal jurisdiction of such courts by
motion or other request for leave from any such court, (iii) agrees that such
party shall not bring any action relating to this Agreement or any of the
transactions contemplated hereby in any court other than a federal court
sitting in the State of Colorado or a Colorado state court and (iv) that
service of process may also be made on such party by prepaid certified mail
with a proof of mailing receipt validated by the United States Postal Service
constituting evidence of valid service, and that service made pursuant to (iv)
above shall have the same legal force and effect as if served upon such party
personally within the State of Colorado.

[The remainder of this page intentionally left blank.]

-7-
<PAGE> 8
IN WITNESS WHEREOF, Parent has caused this Agreement to be executed by
its duly authorized officer and Stockholder has executed this Agreement as of
the date and year first above written.

PARENT:

NHANCEMENT TECHNOLOGIES, INC.

By: /s/ Esmond T. Goei
--------------------------
Name: Esmond T. Goei
------------------------
Title: President & CEO
-----------------------

STOCKHOLDER:

/s/ James Gillespie
-----------------------------
James Gillespie

-8-

<PAGE> 1

EXHIBIT 10.22

NHANCEMENT TECHNOLOGIES INC.
(FORMERLY BIOFACTORS, INC.)

1997 MANAGEMENT AND COMPANY
PERFORMANCE BONUS PLAN
<PAGE> 2
1997 Management & Company Performance Bonus Plan

OBJECTIVES

Objectives to be served by the NHancement Technologies Inc. (the "Company" or
"NTI") annual cash incentive compensation plan (the "Plan") include the
following:

o Motivate key managers to focus on the company's financial performance,
specifically operating income and revenue achieved compared to the
business plan.
o Reward key managers with significant upside bonus potential in the
event the Company meets and exceeds challenging plan targets.
o Reward contributions based on the manager's own individual performance
and on the manager meeting specific objectives.

PLAN DESIGN

With these basic objectives in mind, the Plan incorporates the following key
features:

o The Plan has three levels of participation, as defined below. The
levels generally correspond with organizational and responsibility
levels. Higher participation levels offer greater bonus opportunity.
o The company's annual net operating income and revenue achieved versus
plan targets will determine the percentage of annual base salary to be
paid out as a bonus. This percentage will be different across the
three participation levels but will be the same for each participant
in a particular level.
o This bonus percentage may be increased or decreased on an individual
basis, within parameters described below, based on an assessment of
the participant's performance.
o The maximum bonus that may be earned is 200% of eligible base salary.

PLAN PARTICIPATION AND RESPONSIBILITY LEVELS

The Plan's participating positions are described below. Participation in the
Plan at Level II is based on a combination of reporting relationship,
management level, and recommendation by an executive. An employee must hold an
approved Plan position to participate in the Plan. The following positions
will participate in the Plan at the responsibility level indicated:

Level Participating Position(s)
CEO/COO Chief Executive Officer/Chief Operating Officer
Level I Senior Vice Presidents
Level II Managers reporting to Level I participants who are recommended
for participation by a Level I executive, not including those
managers participating in other incentive plans such as sales
compensation plans.

________________________________________________________________________________
1997 MANAGEMENT & COMPANY PERFORMANCE BONUS PLAN Page 1
<PAGE> 3
The Compensation Committee of the Board of Directors will approve the
participating positions in the Plan, based on recommendations by the Company's
Chief Executive Officer and Chief Operating Officer. The Company's CEO and COO
will have the discretion to add or remove employees from the Plan, if the
employees move into or leave positions previously approved by the Compensation
Committee. Participants and targeted bonus amounts will be set at the
beginning of the fiscal year. Targeted bonus amounts will be based on 100%
achievement of Plan performance targets.

o If an employee leaves a Plan position but stays with the company in a
non-Plan position, he or she will participate in the Plan only for
each full quarter worked in the Plan position.
o Likewise, if an employee moves into a Plan position from a non-Plan
position during the year, he or she will participate in the Plan only
for full quarters worked in the Plan position.
o Finally, an individual must work at NTI for at least one full
financial quarter to participate in the Plan and must be employed by
NTI at the time bonus checks are distributed in order to receive a
bonus under the Plan.

DEFINITIONS

o "Operating Income" For "planned," budgeted net
operating income plus budgeted
management bonuses per the 1997 NTI
and Divisional Operating Plan. For
"actual," NTI and Divisional audited
net operating income plus actual
accrued management bonus expense.

o "Total Revenues" For "planned," budgeted total
revenues per the 1997 NTI Operating
Plan. For "actual," NTI and
Divisional audited net revenues
(total revenues less returns and
allowances).

o "Payout Table" A table mapping the percentage
achievement of planned net operating
income and revenue to a percentage
of eligible base salary to be earned
as a bonus.

o "Bonus Percentage" The percentage of eligible base
salary earned as a bonus, obtained
from the Payout Table. The Bonus
Percentage may be interpolated or
extrapolated from the Payout Table
as necessary.

o "Performance Factor" A factor to be applied to the
individual's Bonus Target to
increase or decrease the bonus
payout.

* The factor is discretionary and
is based on a subjective evaluation of
the participant's performance for the
year.
* The factor may range from 0 to 1.5,
meaning that the bonus payout may be
eliminated or increased.
* The factor may be fractional and may be
greater or lower than 1.0. It is
expected that the Performance Factor
will be 1.0 for most participants.

________________________________________________________________________________
1997 MANAGEMENT & COMPANY PERFORMANCE BONUS PLAN Page 2
<PAGE> 4
o "Eligible Base Salary" The participant's annual base salary
rate at the end of the year, applied
over the entire year. The eligible
base salary rate does not include:

* Stipend, premium, or salary supplement
* Mileage, per diem, or benefits payments
* Incentive or bonus pay
* Commissions
* Pay associated with carrying an
electronic pager
* Salary for quarters for which the
participant is not eligible

PAYOUT TABLES

For corporate participants, bonuses are based on individual and corporate
revenue and profit targets only. For participants with divisional
responsibilities, bonuses are based 75% on achieving divisional targets and 25%
on overall corporate goals. Bonus Percentages will be extracted from the
Payout Tables below. The tables will determine Bonus Percentages from actual
audited consolidated financial results achieved, using interpolations or
extrapolations as necessary. No bonuses will be earned if net operating income
or revenue achievement falls below the minimum levels shown on the tables. The
minimum hurdles for payouts is achievement of 75% of budgeted operating income
and 75% of budgeted revenues. The Bonus Percentage determined will apply to
each participant.

<TABLE>
<CAPTION>
BONUS Actual % of Planned Operating Income*
LEVELS
<S> <C> <C> <C> <C> <C> <C>
75% 90% 100% 120% 140%
---------------------------------------------------
75% 0% 60% 75% 90% 105%
---------------------------------------------------
Actual 90% 45% 70% 90% 108% 126%
% of ---------------------------------------------------
Planned 100% 50% 80% 100% 120% 140%
Total ---------------------------------------------------
Revenues 120% 60% 90% 100% 120% 140%
---------------------------------------------------
140% 70% 90% 100% 120% 140%
---------------------------------------------------
</TABLE>
*payout percentages cannot exceed actual income as a percentage
of planned income.

The Bonus Percentages will be interpolated within these tables for financial
results that fall between the major increments shown. Above 140% net operating
income and/or revenue achievement, the Bonus Percentages will be extrapolated.

________________________________________________________________________________
1997 MANAGEMENT & COMPANY PERFORMANCE BONUS PLAN Page 3
<PAGE> 5
PERFORMANCE FACTOR

A performance factor may be used to increase or decrease the Plan participant's
bonus payout based on a subjective assessment of the individual's performance
and contributions over the course of the year. This factor is discretionary in
nature, but should be correlative to the individual's performance level as
assessed in January. The factor may vary between 0 and 1.5 and may be
fractional. It is anticipated that performance factors will be tightly
distributed around 1.0.

<TABLE>
<CAPTION>
Individual Performance -) -) -) -) -) -) Targeted Performance -) -) -) -) -)
<S> <C> <C> <C>
Performance Factor 0.0 1.0 1.5
</TABLE>

As part of the Plan administration, a performance appraisal will be completed
for each Plan participant by the end of January. This annual performance
evaluation is the only appraisal required for the Plan participant.

o The Company's Chief Executive Officer and Chief Operating Officer will
be evaluated by the Compensation Committee of the Board of Directors
by the end of February.

o The Chief Executive Officer and Chief Operating Officer will evaluate
their direct-report Plan participants by January 31st.

o The managers included in the Plan who are not direct reports to the
Chief Executive Officer or Chief Operating Officer will be evaluated
by the appropriate Senior Vice President by January 31st.

BONUS PAYMENTS

The individual participant's performance factor will be multiplied by his or
her Targeted Bonus Amount, as determined by NTI's financial performance and the
Payout Tables, to determine a final amount to be paid out as a bonus. The
final bonus payout will be limited to a maximum of 200% of the participant's
targeted bonus amount.

The maximum aggregate bonus that NTI may award to all eligible individuals
covered under the Plan is limited to 10% of the net income of NTI, calculated
after tax liabilities and Plan payments.

Staff members who are assigned to different responsibility levels during the
year will have their bonuses calculated based on the quarters assigned to each
responsibility level. Likewise, any staff member who is added to the Plan
after January 1st will have his or her bonus calculated on a prorated basis,
based on full quarters worked while on the Plan.

Estimated bonuses payable will be accrued throughout the year in proportion to
planned revenue and operating income. Adjustments in accruals will be made
periodically to reflect actual performance relative to plan. 100% of bonuses
earned will be paid as soon as practicable following publication of audited
financial statements for the year and approval of recommended bonuses by the
Compensation Committee of the Board of Directors. Estimated federal income
taxes of at least 28% and other required payroll taxes will be withheld.

________________________________________________________________________________
1997 MANAGEMENT & COMPANY PERFORMANCE BONUS PLAN Page 4
<PAGE> 6
PAYMENT IN EVENT OF DEATH

Any payment actually payable under this Plan but which is unpaid at the time of
a participant's death shall be paid to the participant's estate. Payments to
the estate of a deceased participant shall be made in a lump sum as soon as is
administratively feasible.

GENERAL PROVISIONS

o The Plan is effective for the period from January 1, 1997 to December
31, 1997. The Plan can be amended or terminated at any time by action
of the Compensation Committee of the Board of Directors.

o Should operating income or revenues fall below 75% of target for the
year, the Board of Directors, in its discretion, may make special
bonus payments to Plan participants.

o Managers included in the Plan must be active employees of NTI on the
date that bonuses are paid to receive a bonus.

o The Plan is not a contract between the Company and any employee.
Nothing contained in the Plan gives any employee the right to be
retained in the employ of the Company, or interferes with the right of
the Company to terminate the employment of any employee at any time
without regard to the effect that such termination may have on any
opportunities under the Plan.

________________________________________________________________________________
1997 MANAGEMENT & COMPANY PERFORMANCE BONUS PLAN Page 5

<PAGE> 1
EXHIBIT 21

SUBSIDIARIES OF NHANCEMENT TECHNOLOGIES INC.

BIOFACTORS, INC.
VOICE PLUS, INC.

<PAGE> 1

CONSENT OF INDEPENDENT AUDITORS

NHancement Technologies Inc.
(formerly BioFactors, Inc.)
Golden, Colorado

We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form SB-2 of our report dated April 19, 1996, except
for Notes 10 and 11 which are as of November 5, 1996, relating to the financial
statements of NHancement Technologies Inc. and of our report dated April 19,
1996, except for Notes 10 and 11 which are as of November 26, 1996, relating to
the financial statements of Voice Plus, Inc., both of which are contained in
that Prospectus. Our report on NHancement Technologies Inc. contains an
explanatory paragraph regarding the Company's ability to continue as a going
concern.

We also consent to the reference to us under the caption "Experts" in the
Prospectus.

/s/ BDO Seidman, LLP

San Francisco, California

December 19, 1996

<PAGE> 1

CONSENT OF INDEPENDENT AUDITORS

NHancement Technologies, Inc.
formerly BioFactors, Inc.
Golden, Colorado

We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form SB-2 of our report dated October 30, 1996,
relating to the financial statements of Cossey-Capozzi, Inc., which are
contained in that Prospectus.

We also consent to the reference to us under the caption "Experts" in the
Prospectus.

/s/ Meredith, Cardozo & Lanz LLP

San Jose, California

December 19, 1996

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 AND
THE COMPANY'S INTERIM UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> SEP-30-1996 DEC-31-1995
<CASH> 83 171
<SECURITIES> 0 0
<RECEIVABLES> 44 725
<ALLOWANCES> 15 10
<INVENTORY> 13 14
<CURRENT-ASSETS> 300 931
<PP&E> 137 124
<DEPRECIATION> 93 66
<TOTAL-ASSETS> 344 990
<CURRENT-LIABILITIES> 3,401 2,424
<BONDS> 0 0
0 0
0 0
<COMMON> 6 1
<OTHER-SE> (3,063) (2,207)
<TOTAL-LIABILITY-AND-EQUITY> 344 990
<SALES> 757 451
<TOTAL-REVENUES> 757 451
<CGS> 108 186
<TOTAL-COSTS> 1,515 1,070
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 437 519
<INCOME-PRETAX> (1,195) (1,139)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,195) (1,139)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,195) (1,139)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>