NHANCEMENT TECHNOLOGIES INC, PRE 14A, 2001-01-12

NHANCEMENT TECHNOLOGIES INC
PRE 14A, 2001-01-12
COMPUTER INTEGRATED SYSTEMS DESIGN

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]

Check the appropriate box:

[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12

NHANCEMENT TECHNOLOGIES INC.
-------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:___________

(2) Aggregate number of securities to which transaction applies:______________

(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):____________________________________

(4) Proposed maximum aggregate value of transaction:__________________________

(5) Total fee paid:___________________________________________________________

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:___________________________________________________

(2) Form, Schedule or Registration Statement No.:_____________________________

(3) Filing Party:_____________________________________________________________

(4) Date Filed:_______________________________________________________________

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[NHANCEMENT TECHNOLOGIES INC. LOGO]

6663 Owens Drive
Pleasanton, California 94588

January 31, 2001

To Our Stockholders:

You are cordially invited to attend the annual meeting of stockholders
of NHancement Technologies Inc. The annual meeting will be held on Friday, March
16, 2001 at 10:00 a.m. Pacific Standard Time, at the Four Points Sheraton Hotel
located at 5115 Hopyard Road, Pleasanton, CA 94588.

At the annual meeting, you will be asked to elect six (6) directors,
amend the Company's Certificate of Incorporation to increase the number of
authorized shares of common stock, amend the Company's Certificate of
Incorporation to change the name of the Company, approve an Employee Stock
Purchase Plan, and ratify the appointment of PricewaterhouseCoopers LLP as
our independent certified public accountants for the fiscal year ending
September 30, 2001.

We hope you will be able to attend the annual meeting on March 16, 2001
for a report on the status of the Company's business and performance during the
fiscal year ended September 30, 2000. There will also be an opportunity for
stockholders to ask questions. Whether or not you plan to attend the meeting,
please sign and return the enclosed proxy card to ensure your representation at
the meeting.

Very truly yours,

/s/ Douglas S. Zorn
-------------------------------------
Douglas S. Zorn,
Chief Executive Officer and President
NHancement Technologies Inc.

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NHANCEMENT TECHNOLOGIES INC.

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 16, 2001

TO OUR STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
NHancement Technologies Inc., a Delaware corporation (the "Company"), will be
held on March 16, 2001 at 10:00 a.m. Pacific Standard Time, at the Sheraton Four
Points Hotel located at 5115 Hopyard Road, Pleasanton, CA 94588 for the
following purposes:

1. ELECTION OF DIRECTORS. To elect six (6) directors to the Company's
board of directors to hold office until the next annual meeting of stockholders,
or until their respective successors shall be duly elected and qualified.

2. APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION. To consider
and vote upon a proposal to approve an amendment to the Company's Amended and
Restated Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), increasing the number of authorized shares of common stock, par
value $0.01 per share, of the Company from 20,000,000 shares of common stock to
40,000,000 shares of common stock.

3. APPROVAL OF COMPANY NAME CHANGE. To consider and vote upon a proposal to
approve an amendment to the Certificate of Incorporation changing the corporate
name of the Company to "Appiant Technologies, Inc."

4. APPROVAL OF AN EMPLOYEE STOCK PURCHASE PLAN. To consider and vote upon a
proposal to approve the adoption of an Employee Stock Purchase Plan under which
all employees of the Company will be entitled to purchase shares of the
Company's common stock.

5. RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS. To ratify the
appointment of PricewaterhouseCoopers LLP as the Company's independent certified
public accountants for the Company's fiscal year ending September 30, 2001.

6. OTHER BUSINESS. To transact such other business as may properly come
before the annual meeting or any adjournment thereof.

The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.

[Continued on Next Page]

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The board of directors has fixed the close of business on January 19,
2001, as the record date for determining those stockholders entitled to notice
of, and to vote at, the annual meeting and any adjournment thereof. Only
stockholders of record at the close of business on that date will be entitled to
notice of, and to vote at, the annual meeting.

By Order of the Board of Directors,

/s/ Douglas S. Zorn
-------------------------------------
Douglas S. Zorn,
Chief Executive Officer and President

Pleasanton, California
January 31, 2001

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WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
URGED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE PROVIDED TO ENSURE YOUR
REPRESENTATION AND THE PRESENCE OF A QUORUM AT THE ANNUAL MEETING. IF YOU
SEND IN YOUR PROXY CARD AND THEN DECIDE TO ATTEND THE ANNUAL MEETING TO VOTE
YOUR SHARES IN PERSON, YOU MAY STILL DO SO. YOUR PROXY IS REVOCABLE IN
ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE PROXY STATEMENT.
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NHANCEMENT TECHNOLOGIES INC.
6663 OWENS DRIVE
PLEASANTON, CALIFORNIA 94588

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

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 16, 2001

GENERAL INFORMATION

This proxy statement is furnished to stockholders of NHancement
Technologies Inc., a Delaware corporation (the "Company"), in connection with
the solicitation by our board of directors of proxies in the accompanying form
for use in voting at our annual meeting of stockholders to be held on Friday,
March 16, 2001, at 10:00 a.m. Pacific Standard Time, at the Sheraton Four Points
Hotel located at 5115 Hopyard Road, Pleasanton, CA 94588, and any adjournment or
postponement thereof. The shares represented by the proxies received, properly
marked, dated, executed and not revoked will be voted at the annual meeting for
the proposals set forth in the accompanying notice of annual meeting of
stockholders.

PURPOSES OF THE ANNUAL MEETING

At the annual meeting, our stockholders will consider and vote upon the
following matters:

1. ELECTION OF DIRECTORS. To elect six (6) directors to our board of
directors to hold office until the next annual meeting of stockholders, or until
their respective successors shall be duly elected and qualified.

3. APPROVAL OF COMPANY NAME CHANGE. To consider and vote upon a proposal to
approve an amendment to our Certificate of Incorporation changing the corporate
name of our Company to "Appiant Technologies, Inc."

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6. OTHER BUSINESS. To transact such other business as may properly come
before the annual meeting or any adjournment thereof.

Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth herein)
will be voted (a) for the election of the respective nominees for director named
below and (b) in favor of all other proposals described in the Notice of Annual
Meeting. In the event a stockholder specifies a different choice by means of the
enclosed proxy, his shares will be voted in accordance with the specification so
made.

REVOCABILITY OF PROXIES

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is exercised by delivering to us (to the
attention of John R. Zavoli, our Secretary) a written notice of revocation or a
duly executed proxy bearing a later date, or by attending the annual meeting and
voting in person. Our principal executive offices are located at 6663 Owens
Drive, Pleasanton, California 94588 and our telephone number is (925) 251-3200.

SOLICITATION AND VOTING PROCEDURES

The proxy statement and the enclosed proxy card are being mailed to the
stockholders on or about January 31, 2001. This proxy statement and the
accompanying proxy card are for the use by the stockholders.

Our Bylaws provide that no less than one-third of all of the shares
entitled to vote, whether present in person or represented by proxy, shall
constitute a quorum for the transaction of business at the meeting. Shares
represented by proxies that reflect abstentions and broker non-votes (i.e.,
votes not cast by a broker or other record holder in "street" or nominee name
solely because such record holder does not have discretionary authority to vote
on the matter) will be counted toward the presence of a quorum.

All expenses in connection with the solicitation of proxies will be
borne by the Company. These costs will include the expense of preparing and
mailing proxy materials for the annual meeting and reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the annual meeting to beneficial owners of
our common stock. We may conduct further solicitation personally, by
telephone or by facsimile through our officers, directors and regular
employees, none of whom will receive additional compensation for assisting
with the solicitation.

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SHARES ENTITLED TO VOTE AND REQUIRED VOTE

Our outstanding common stock and Series B Preferred Stock, which we
refer to as "preferred stock," constitute the only classes of securities
entitled to notice of, or to vote at, the annual meeting. Stockholders of
record of the common stock and of the preferred stock at the close of
business on January 19, 2001 are entitled to notice of, and to vote at, the
annual meeting. On that date, there were 12,837,790 shares of our common
stock and 86,620 shares of preferred stock issued and outstanding. Each share
of common stock entitles the holder to one (1) vote on each matter which may
come before a meeting of the stockholders. Each share of preferred stock
entitles the holder to one (1) vote for each share of common stock into which
such preferred stock could then be converted. See -- "Certain Relationships
and Related Transactions -- Preferred Stock Issuance."

Prior to the annual meeting, we will select one or more inspectors of
election for the annual meeting. Such inspector(s) shall determine the number of
shares represented at the annual meeting, the existence of a quorum and the
validity and effect of proxies, and shall receive, count and tabulate ballots
and votes and determine the results thereof. Such inspector(s) may be assisted
by an automated system administered by our share transfer agent to tabulate
votes cast by proxy at the annual meeting, and one of our officers, duly
appointed by the board of directors, will tabulate votes cast in person at the
annual meeting.

The directors (Proposal 1) will be elected by a plurality of all the
votes cast at the annual meeting. Accordingly, abstentions as to the election
of directors will not affect the election of the candidates receiving the
plurality of votes. The approval of the amendment to our Certificate of
Incorporation to increase the number of authorized shares of common stock
(Proposal 2) and to change the name of the Company to "Appiant Technologies,
Inc." (Proposal 3) will require the affirmative vote of a majority of the
outstanding shares of common stock and preferred stock, on an as-converted
basis, entitled to vote at the annual meeting. The approval of the adoption
of an Employee Stock Purchase Plan (Proposal 4) and the ratification of the
independent certified public accountants for the fiscal year ending September
30, 2001 (Proposal 5) will require the affirmative vote of a majority of all
the outstanding shares present or represented and entitled to vote at the
annual meeting.

Abstentions are treated as shares present or represented and entitled to
vote for the purposes of determining whether a matter has been approved by
the stockholders and therefore have the same effect as negative votes. Broker
non-votes and shares as to which proxy authority has been withheld with
respect to any matter are not deemed to be entitled to vote for purposes of
determining whether stockholder approval of that matter has been obtained.
Accordingly, as to Proposals 4 and 5, whose approval requires the affirmative
vote of a majority of the shares present and entitled to vote, broker
non-votes and shares as to which proxy authority has been withheld shall have
no effect.

If less than a quorum, one-third of the shares entitled to vote, are
represented at the annual meeting, the chairman of the meeting may adjourn the
annual meeting to another date, time or place until a quorum is present. Notice
need not be given of the new date, time or place if the new date, time or place
is announced at the annual meeting before an adjournment is taken and such new
date is within thirty (30) days of the original meeting date.

The shares represented by properly executed proxy cards will be voted at
the annual meeting as indicated or, if no instructions are given, in favor of
Proposals 1, 2, 3, 4, and 5. We do not presently know of any other business
that may come before the annual meeting.

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

At the annual meeting, six (6) directors are to be elected to hold
office until the annual meeting of stockholders to be held in 2002 or until
their successors have been elected and qualified. The six nominees for
election as directors are listed below. Each nominee is currently a member of
our board of directors. The persons named in the enclosed proxy card have
advised us that, unless otherwise directed on the proxy card, they intend to
vote FOR the election of the nominees. Should any nominee become unable or
unwilling to accept nomination or election for any reason, persons named in
the enclosed proxy card may vote for a substitute nominee designated by the
board of directors. We have no reason to believe the nominees named will be
unable or unwilling to serve if elected.

The persons nominated as directors, their current position with the
Company and their ages as of January 19, 2001 are as follows:

<TABLE>
<CAPTION>
NOMINEES AGE POSITION
<S> <C> <C>
Douglas S. Zorn 51 Chairman of the Board, Chief Executive
Officer, President

L. Thomas Baldwin III 45 Director

Allen F. Jacobson 74 Director

Ram V. Mani 42 Director, Chief Technology Officer and
President of the Company's Software Group

Robert J. Schmier 52 Director

N. Bruce Walko 60 Director
</TABLE>

DOUGLAS S. ZORN. Mr. Zorn has been our Chairman of the Board, Chief
Executive Officer and President since May 2000. Mr. Zorn served as Executive
Vice President, Chief Financial Officer, Secretary and a Director of the Company
since our incorporation in October 1996 until May 2000. Mr. Zorn served as
Executive Vice President, Secretary and Treasurer, and Chief Financial and
Operating Officer of BioFactors, Inc. from December 1993 until February 1997 and
as a Director from June 1994 until February 1997.

L. THOMAS BALDWIN III. Mr. Baldwin has been a Director of the Company
since December 2000. Mr. Baldwin is a prominent bond trader and investor. For
more than the past five years, he has been Chairman of Baldwin Group Ltd., a
parent company of various investment and financial services businesses. He has
been a member of the Chicago Board of Trade, serving on its Executive Committee;
as Chairman of the Advisory Subcommittee of the CPO/CTA Committee; and as
Chairman of the

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Regulatory Compliance Subcommittee for Reg. 320.15 and 320.16 of the Exchange
Relations Group. Mr. Baldwin also served as Vice Chairman of the T-Bond Pit
Committee.

ALLEN F. JACOBSON. Mr. Jacobson has been a Director of our Company
since August 2000. Mr. Jacobson is a former Chairman and Chief Executive Officer
of 3M Corporation, where he had a distinguished career that spanned over 40
years. Mr. Jacobson has also served on the board of directors of Mobil
Corporation, Silicon Graphics, Sara Lee Corporation, Potlatch Corporation,
Alliant Techsystems, Inc., and US West.

RAM V. MANI. Mr. Mani joined the Company in June 1999 as our Chief
Technology Officer and President of the NHancement Technologies Software Group.
Mr. Mani has been a Director of our Company since February 2000. Prior to
joining our Company, Mr. Mani had been an independent software consultant for
more than ten years for such companies as Voicemail International Inc., Atari
Corp., Verbatim Corp., National Semiconductors Inc. and other high technology
companies. From 1983 to 1999, Mr. Mani was the founder, President and Chief
Executive Officer of Eastern Systems Technology, Inc., a developer of
communications software, all of whose assets were acquired by our Company in
August 1999.

ROBERT J. SCHMIER. Mr. Schmier has been a Director of our Company since
January 1999. Mr. Schmier has been the President of Schmier & Feurring
Properties, Inc. since 1981, and the President of Schmier & Feurring Realty,
Inc. since 1985. These companies are involved in real estate development,
leasing and property management of shopping centers and office buildings in Palm
Beach County, Florida.

N. BRUCE WALKO. Mr. Walko has been a Director of our Company since
January 1999. Mr. Walko has been the President of Cyberfast Systems, Inc., a
company involved in international voice over internet protocol, since November
1999. Previously, Mr. Walko served as Southeast Regional General Manager for
NextWave Telecom Inc. from 1994 until 1997. Mr. Walko was instrumental in the
development of new technology telecommunication for NextWave and also for McCaw
Cellular Inc. (now AT&T Wireless).

REQUIRED VOTE

THE AFFIRMATIVE VOTE OF A PLURALITY OF ALL THE VOTES CAST AT THE ANNUAL
MEETING IS REQUIRED TO ELECT DIRECTORS.

THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES NAMED ABOVE.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

Our board of directors held a total of 14 meetings during the fiscal
year ended September 30, 2000. During the fiscal year ended September 30, 2000,
no director attended fewer than 75% of the

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number of meetings of the board of directors and each committee of the board of
directors of which he was a member held during the period he served on the board
of directors.

The only committees of our board of directors are the Audit Committee
and the Compensation Committee. The board of directors does not have a
Nominating or similar committee.

The Audit Committee of our board of directors consists of Messrs.
Jacobson, Schmier and Walko. The Audit Committee met on one occasion during the
fiscal year ended September 30, 2000.

The Compensation Committee of our board of directors consists of
Messrs. Baldwin, Schmier and Walko. The Compensation Committee reviews and
approves the compensation of our executive officers and administers our Equity
Incentive Plan. The Compensation Committee met on one occasion during the fiscal
year ended September 30, 2000.

COMPENSATION OF DIRECTORS

Except as described below, our directors are not separately compensated
for serving on the board of directors. Directors are reimbursed for reasonable
travel-related expenses for attendance at meetings.

At the time of his or her appointment to the board of directors, each
newly appointed non-employee director is granted warrants to purchase 50,000
shares of common stock at an exercise price equal to the closing price of the
common stock on The NASDAQ Small Cap Market on the last business day prior to
such appointment. Such warrants have a duration of one year from the date of
grant.

In August 2000, in connection with the appointment of Mr. Allen F.
Jacobson to our board of directors, the Company granted to Mr. Jacobson a
one-year warrant to purchase 50,000 shares of common stock at an exercise price
of $9.1875 per share.

In consideration of a warrant grant to Mr. L. Thomas Baldwin III in
July 2000 for financial-related services provided to the Company, Mr. Baldwin
agreed to forego the one-year warrant to purchase 50,000 shares of common
stock that he would have otherwise received in connection with his
appointment to our board of directors in December 2000.

Under the terms of our Equity Plan, each non-employee director is
entitled to receive non-qualified stock options to acquire 2,400 shares of
common stock for each full fiscal year that such director shall serve on the
board of directors. Each option granted shall be granted within 30 days
following the date of the annual meeting of our stockholders for the relevant
year. Messrs. Walko and Schmier, both non-employee directors who served on the
board of directors for the entire fiscal year ended September 30, 2000, will be
entitled to such options.

COMPENSATION COMMITTEE, INSIDER PARTICIPATION AND INTERLOCKS

None of the members of our Compensation Committee was or is an officer
or employee of our Company. No interlocking relationship exists between our
directors or Compensation Committee and the board of directors or compensation
committee of any other company, nor has such an interlocking relationship
existed in the past.

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PROPOSAL 2

AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO INCREASE
THE AUTHORIZED SHARES OF COMMON STOCK
FROM 20,000,000 SHARES TO 40,000,000 SHARES

Our Certificate of Incorporation, as amended and currently in effect
(the "Certificate"), provides that the Company is authorized to issue two (2)
classes of stock, consisting of 20,000,000 shares designated common stock, $0.01
par value per share, and 2,000,000 shares designated preferred stock, $0.01 par
value per share.

Our board of directors has authorized an amendment, subject to
stockholder approval, to increase the authorized number of shares of common
stock by 20,000,000 shares to a total of 40,000,000 shares. Under the
proposed amendment, Article 4 of the Certificate would be amended to read as
follows:

"4.1 Authorized Shares. The total number of shares
which the Corporation is authorized to issue is forty-two
million (42,000,000) shares of which forty million
(40,000,000) shares shall be common stock, par value $0.01 per
share, and two million (2,000,000) shares shall be preferred
stock, par value $0.01 per share."

Our stockholders are being asked to approve the amendment to the
Certificate. In the Annual Meeting of Shareholders held on July 17, 2000
covering our fiscal year 1999 (the "1999 Shareholder Meeting,"), the Company
sought approval to increase the authorized number of shares of common stock from
20,000,000 to 40,000,000. Although a majority of shares present and entitled to
vote at the 1999 Shareholder Meeting were voted to approve the increase in the
shares authorized, a majority of the total shares issued and outstanding and
entitled to vote were not voted for the proposal as required under Delaware law.
Accordingly, the Company is seeking approval to increase the authorized shares
at this meeting.

The authorized but unissued shares of common stock would be available
for issuance from time to time for such purposes and for such consideration as
our board of directors may determine to be appropriate without further action by
our stockholders, except for those instances in which applicable law or NASDAQ
rules require stockholder approval.

Of the 20,000,000 currently authorized shares of common stock,
12,837,790 shares were issued and outstanding as of January 19, 2001 and an
aggregate of approximately 4,000,000 shares were reserved for issuance upon
exercise of options outstanding and available under our stock option plans.
In addition, the Company's outstanding Series B Preferred Stock may be
converted at any time into shares of common stock of the Company at a
conversion price equal to the lower of (i) $13.50 per share or (ii) 90% of
the average closing bid prices for the 10 days prior to such conversion;
provided, that such price shall not be less than $10.00 per share. Assuming
conversion at the $10.00 conversion price, the Series B Preferred Stock is
convertible into 866,200 shares of common stock.

PURPOSE AND EFFECT OF THE AMENDMENT

Our board of directors believes that it is in the best interests of the
Company and our stockholders to increase the number of authorized shares of
common stock in order to have additional authorized but unissued shares
available to meet business needs as they arise without the expense and delay of
a special meeting of stockholders. For example, such shares may be issued in the
event our board of directors determines that it is necessary or appropriate to
authorize a future stock dividend or stock split, to raise additional capital,
to acquire another corporation or its business or assets, to establish a
strategic relationship with a corporate partner or to issue shares under
management incentive or employee benefit plans.

Our board of directors has not authorized or taken any action with
respect to the issuance of any such shares and has no present agreement,
arrangement or understanding with respect to the issuance of any such shares.
Our board of directors, however, does anticipate that shares likely will be
issued in connection with a capital raising transaction, although no specific
transaction has been identified.

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If the amendment to the Certificate of Incorporation is approved by the
stockholders, our board of directors does not intend to solicit further
stockholder approval prior to the issuance of any additional shares of common
stock, except as may be required by applicable law or NASDAQ rules. The increase
in authorized common stock will not have any immediate effect on the rights of
existing stockholders. To the extent that the additional authorized shares are
issued in the future, they will decrease the existing stockholders' percentage
equity ownership of the Company. Holders of our securities have no statutory
preemptive rights with respect to issuance of common stock.

POTENTIAL ANTI-TAKEOVER EFFECT

The increase in the authorized number of shares of common stock and
the subsequent issuance of such shares could have the effect of delaying or
preventing a change in control of our Company without further action by our
stockholders. Shares of authorized and unissued common stock could (within
the limits imposed by applicable law) be issued in one or more transactions
that would make a change in control of our Company more difficult, and
therefore less likely. Any such issuance of additional stock could have the
effect of diluting the earnings per share and book value per share of
outstanding shares of common stock, and such additional shares could be used
to dilute the stock ownership or voting rights of a person seeking to obtain
control of our Company. By potentially discouraging initiation of any such
unsolicited takeover attempt, the proposed amendment may limit the
opportunity for our stockholders to dispose of their shares at the higher
price generally available in takeover attempts or that may be available under
a merger proposal. The proposed amendment may have the effect of permitting
our management, including our current board of directors, to retain its
position, and place it in a better position to resist changes that
stockholders may wish to make if they are dissatisfied with the conduct of
our business. However, our board of directors is not aware of any attempt to
take control of our Company and has not presented this proposal with the
intent that it be utilized as a type of anti-takeover device.

DISSENTERS' RIGHTS

There are no dissenters' rights under Delaware General Corporation Law
when a company increases its authorized shares of common stock.

REQUIRED VOTE

THE AFFIRMATIVE VOTE OF A MAJORITY OF ALL OUTSTANDING COMMON STOCK AND
PREFERRED STOCK, ON AN AS-CONVERTED BASIS, ENTITLED TO VOTE AT THE ANNUAL
MEETING IS REQUIRED TO RATIFY THE FOREGOING PROPOSAL.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
AMENDMENT TO THE CERTIFICATE OF INCORPORATION INCREASING THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK.

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PROPOSAL 3

AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO
CHANGE THE NAME OF THE COMPANY TO
"APPIANT TECHNOLOGIES, INC."

Our board of directors has approved and recommends that our
stockholders approve a proposal to change the name of the Company to "Appiant
Technologies, Inc." The amendment will be accomplished by amending our
Certificate of Incorporation. The board of directors has determined that the
name change is in the best interests of the Company and our stockholders as a
powerful new name reflecting the Company's new business model for providing
hosted, carrier-grade, internet protocol-based unified communications and
unified information applications.

If the amendment is adopted, Article 1 of our Certificate of
Incorporation would be amended to read as follows:

"The name of the Corporation is Appiant Technologies, Inc."

In addition, all other references to our corporate name in our
Certificate of Incorporation would be changed to "Appiant Technologies, Inc."
The approval of the name change will not affect in any way the validity of
currently outstanding stock certificates and will not require our stockholders
to surrender or exchange any stock certificates that they currently hold.

REQUIRED VOTE

THE AFFIRMATIVE VOTE OF A MAJORITY OF ALL OUTSTANDING COMMON STOCK AND
PREFERRED STOCK, ON AN AS-CONVERTED BASIS, ENTITLED TO VOTE AT THE ANNUAL
MEETING IS REQUIRED TO RATIFY THE FOREGOING PROPOSAL.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
AMENDMENT TO THE CERTIFICATE OF INCORPORATION CHANGING THE NAME OF THE COMPANY
TO "APPIANT TECHNOLOGIES, INC."

<PAGE>

PROPOSAL 4

APPROVAL OF AN EMPLOYEE STOCK PURCHASE PLAN

Our stockholders are being asked to approve the action of the board of
directors in adopting an Employee Stock Purchase Plan, which we refer to as the
"ESPP." The purpose of the adoption of the ESPP is to provide employees of the
Company and its designated subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions, and to thereby
encourage employees to share in the ownership of the Company.

NEW PLAN BENEFITS

No transactions will be made under the ESPP unless and until the ESPP
is approved by the stockholders at the annual meeting. The number of purchases,
if any, to be made after approval of the ESPP to specific employees or groups
thereof, cannot currently be determined.

REQUIRED VOTE

THE AFFIRMATIVE VOTE OF A MAJORITY OF ALL THE VOTES CAST AT THE ANNUAL
MEETING IS REQUIRED TO RATIFY THE FOREGOING PROPOSAL.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
EMPLOYEE STOCK PURCHASE PLAN.

A general description of the principal terms of the ESPP as proposed is
set forth below. This description is qualified in its entirety by the terms of
the ESPP, a copy of which is attached to this Proxy Statement as APPENDIX A and
is incorporated by reference herein.

GENERAL DESCRIPTION

In December 2000, the Board of Directors of the Company adopted the
ESPP, subject to the approval of stockholders at the Annual Meeting. The purpose
of the ESPP is to provide employees of the Company and its designated
subsidiaries with an opportunity to purchase Common Stock of the Company through
accumulated payroll deductions. It is the intention of the Company to have the
ESPP qualify as an "Employee Stock Purchase Plan" under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). The provisions of the
ESPP, accordingly, shall be construed so as to extend and limit participation in
a manner consistent with the requirements of that section of the Code.

If adopted, an aggregate of 1,500,000 shares of the Company's Common
Stock will be reserved for issuance under the ESPP and available for purchase
thereunder, subject to adjustment in the event of a stock split, stock dividend
or other similar change in the Common Stock or the capital structure of the

10
<PAGE>

Company. The ESPP provides for annual increases in the number of shares of
common stock subject to the plan equal to the lesser of (a) 1,250,000 shares,
(b) the number of shares equal to 3% of the total number of shares outstanding,
or (c) a lesser number of shares as determined by the compensation committee.

SUMMARY OF EMPLOYEE STOCK PURCHASE PLAN

ADMINISTRATION. The ESPP shall be administered by the Board of
Directors of the Company or a committee of the Board appointed by the Board,
which we refer to as the Plan Administrator. The Plan Administrator shall have
full and exclusive discretionary authority to construe, interpret and apply the
terms of the ESPP, and to determine eligibility.

ELIGIBILITY. All full-time employees of the Company and designated
subsidiaries whose customary employment is for more than five (5) months in any
calendar year and more than 20 hours per week are eligible to participate in the
ESPP. Employees subject to rules or laws of a foreign jurisdiction that prohibit
or make impractical the participation of such employees in the ESPP are not
eligible to participate. Employees who have completed fewer than three (3) days
of service with the Company also are not eligible to participate.

In addition, no employee will be granted an option under the ESPP (i)
if, immediately after the grant, such employee, taking into account stock owned
by any other person whose stock would be attributed to such employee pursuant to
section 424(d) of the Code, would own stock and/or hold outstanding options to
purchase stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company, or (ii) which permits the
employee's rights to purchase stock under all employee stock purchase plans of
the Company to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) worth of stock, determined at the fair market value of the shares at
the time such option is granted, for each calendar year in which such option is
outstanding at any time.

PURCHASE OF SHARES. The ESPP designates Offer Periods, Purchase Periods
and Exercise Dates. Offer Periods are generally overlapping periods of
approximately twenty four (24) months. The initial Offer Period will initiate on
a date specified by the Plan Administrator and will end on the date determined
by the Plan Administrator at the commencement of the initial Offer Period.
Thereafter, additional Offer Periods will commence each February 15 and August
15. Purchase Periods are generally six (6) month periods and the initial
Purchase Period will initiate on a date specified by the Plan Administrator and
will end on the date determined by the Plan Administrator at the commencement of
the initial Offer Period. Thereafter, Purchase Periods will commence each
February 15 and August 15. Exercise Dates are the last day of each Purchase
Period.

The price per share at which shares of Common Stock are to be purchased
under the ESPP during any Offer Period is the lesser of (a) eighty-five percent
(85%) of the fair market value of the Common Stock on the first day of the Offer
Period or (b) eighty-five percent (85%) of the fair market value of the Common
Stock on the Exercise Date (the last day of an Offer or Purchase Period, as
applicable). No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be carried over to the next Purchase Period or Offer Period,
whichever applies, or returned to the participant, if the participant withdraws
from the ESPP.

Payroll deductions may range from one percent (1%) to fifteen
percent (15%) in whole percentage increments of an employee's regular base
pay, including overtime, bonuses, and commissions. The maximum number of
shares of common stock that any employee may purchase under our ESPP during
an Offer Period is 1,200 shares and during a Purchase Period is 300 shares.
Notwithstanding the

11
<PAGE>

foregoing, to the extent necessary to comply with Section 423(b)(8) of the
Code, a participant's payroll deductions may be decreased to zero percent (0%).

NONTRANSFERABILITY OF OPTIONS. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the ESPP may be assigned, transferred, pledged or
otherwise disposed of in any way other than by will, the laws of descent and
distribution or by designation to a beneficiary as provided in the ESPP by the
participant.

ADJUSTMENTS. In the event any change, such as a stock split or
dividend, is made in the Company's capitalization which results in an increase
or decrease in the number of outstanding shares of Common Stock without receipt
of consideration by the Company, an appropriate adjustment shall be made in the
number of shares under the ESPP and the price per share covered by each
outstanding option.

AMENDMENT AND TERMINATION OF THE EMPLOYEE STOCK PURCHASE PLAN. The Plan
Administrator may amend the ESPP at any time or from time to time or may
terminate the ESPP without approval of the stockholders; provided, however, that
shareholder approval is required for any amendment to the ESPP for which
shareholder approval would be required under applicable law, as in effect at the
time. However, no action by the Plan Administrator or stockholders may alter or
impair any option previously granted under the ESPP without the consent of
affected participants. In any event, the ESPP shall terminate twenty (20) years
from the date on which the ESPP becomes effective.

CERTAIN FEDERAL INCOME TAX INFORMATION

A participant who disposes of any shares received pursuant to the ESPP
within two years after the enrollment date, which is the first day of the Offer
Period during which the participant purchased such shares or within one year
after the exercise date, which is the date such shares were purchased (a
"disqualifying disposition"), the participant will be treated for federal income
tax purposes as having received ordinary income at the time of such
disqualifying disposition in an amount equal to the excess of the fair market
value of the shares at the time such shares were delivered to the participant
over the price which the participant paid for the shares. A participant who
disposes of any shares received pursuant to the ESPP at any time after the
expiration of the 2-year and 1-year holding periods described above, will be
treated for federal income tax purposes as having received income only at the
time of such disposition, and that such income will be taxed as ordinary income
only to the extent of an amount equal to the lesser of (1) the excess of the
fair market value of the shares at the time of such disposition over the
purchase price which the participant paid for the shares, or (2) fifteen percent
(15%) of the fair market value of the shares on the first day of the Purchase
Period. The remainder of the gain, if any, recognized on such disposition will
be taxed as capital gain.

The Company will be entitled to a tax deduction in the same amount as
the ordinary income recognized by an optionee in the event of a disqualifying
disposition with respect to shares acquired upon exercise of an option.
Otherwise, the Company will not be entitled to a tax deduction with respect to
the optionee's disposition of the purchased shares.

The foregoing summary of the federal income tax consequences of ESPP
transactions is based upon federal income tax laws in effect on the date of this
proxy statement. This summary does not purport to be complete, and does not
discuss foreign, state or local tax consequences.

12
<PAGE>

PROPOSAL 5

RATIFICATION OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

On September 6, 2000, our board of directors appointed and approved
PricewaterhouseCoopers LLP to replace BDO Seidman LLP as the independent
certified public accountants for the Company. Our board of directors has
appointed PricewaterhouseCoopers LLP to serve as independent certified public
accountants for the fiscal year ending September 30, 2001. In the event that
ratification of this selection of certified public accountants is not approved
by a majority of the shares voting at the annual meeting in person or by proxy,
management will reconsider its future selection of certified public accountants.

REQUIRED VOTE

THE AFFIRMATIVE VOTE OF A MAJORITY OF ALL THE VOTES CAST AT THE ANNUAL
MEETING IS REQUIRED TO RATIFY THE FOREGOING PROPOSAL.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF ITS APPOINTMENT
OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING SEPTEMBER 30, 2001.

13
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to our
executive officers and directors as of January 19, 2001:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Douglas S. Zorn 51 Chief Executive Officer, President
and Chairman of the Board

Richard Ferdman 39 Chief Information Officer

Richard G. Glover 49 Chief Marketing Officer

James S. Han 51 Managing Director of Infotel
Subsidiary

Ram V. Mani 42 Chief Technology Officer, President
of the Company's Software Group, and
Director

Kenneth G. Murray 44 Chief Operating Officer

John R. Zavoli 41 Chief Financial Officer, General
Counsel and Corporate Secretary

L. Thomas Baldwin III (1) 45 Director

Allen F. Jacobson(2) 74 Director

Robert J. Schmier(1)(2) 52 Director

N. Bruce Walko(1)(2) 60 Director
</TABLE>
-------------------------------------------
(1) Member of Compensation Committee
(2) Member of Audit Committee

DOUGLAS S. ZORN. Mr. Zorn has been our President, Chief Executive
Officer and Chairman of the Board since May 2000. Mr. Zorn served as Executive
Vice President, Chief Financial Officer, Secretary and a Director of the Company
since our incorporation in October 1996 until May 2000. From December 1993 until
February 1997, Mr. Zorn served in various positions at BioFactors, Inc., most
recently as a Director.

14
<PAGE>

RICHARD FERDMAN. Mr. Ferdman has been our Chief Information Officer
since September 2000. Prior to joining our Company, Mr. Ferdman served as a
Director of IT and IS for such companies as Abilizer Solutions and Productopia
Inc., and served as a Manager of IT for such companies as BHP IT and Pacific
Tech Consulting. From August 1991 until November 1996, Mr. Ferdman served as a
Manager at Clorox Company.

RICHARD G. GLOVER. Mr. Glover has been our Chief Marketing Officer
since December 1999. Prior to joining our Company, Mr. Glover served as Chief
Executive Officer and President of Triad Marketing from 1991 until it was
acquired by our Company in December 1999.

JAMES S. HAN. Mr. Han has been our Managing Director of Infotel
Technologies Pte Ltd, our subsidiary in Singapore since January 1999.
Previously, Mr. Han served as Director of Sales of Infotel from August 1984
until December 1998.

RAM V. MANI. Mr. Mani joined the Company in June 1999 as our Chief
Technology Officer and President of the NHancement Technologies Software Group.
Mr. Mani has been a Director of our Company since February, 2000. Prior to
joining the Company, Mr. Mani had been an independent software consultant for
more than ten years for such companies as Voicemail International Inc., Atari
Corp., Verbatim Corp., National Semiconductors Inc. and other high technology
companies. From 1983 to 1999, Mr. Mani was the founder, President and Chief
Executive Officer of Eastern Systems Technology, Inc., a developer of
communications software, all of whose assets were acquired by our Company in
August 1999.

KENNETH G. MURRAY. Mr. Murray joined the Company in May 2000 as our
Executive Vice President of Sales, and in November 2000 was appointed as Chief
Operating Officer. Prior to joining the Company, Mr. Murray held various
positions with Hewlett Packard from 1978 until May 2000.

ROBERT J. SCHMIER. Mr. Schmier has been a Director of our Company since
January 1999. Since 1981, Mr. Schmier has been the President of Schmier &
Feurring Properties, Inc. and since 1985, the President of Schmier & Feurring
Realty, Inc. The companies are involved in real estate development, leasing and
property management of shopping centers and office buildings in Palm Beach
County, Florida.

15
<PAGE>

development of new technology telecommunication for NextWave and also for McCaw
Cellular Inc. (now AT&T Wireless).

JOHN R. ZAVOLI. Mr. Zavoli has been our Chief Financial Officer,
General Counsel and Corporate Secretary since May 2000. Prior to joining our
Company, Mr. Zavoli was a partner with PricewaterhouseCoopers LLP from January
1999 until May 2000, and a director from August 1997 until December 1998. From
June 1994 until July 1997, Mr. Zavoli served as Director of Taxes and Tax
Counsel for Madge Networks N.V. He previously served in various financial and
legal roles for Waste Management International PLC and Digital Equipment
Corporation in the United States, Asia and Europe.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information with respect to the
beneficial ownership of the Company's common stock and preferred stock as of
January 19, 2001 by:

(i) each person who is known by the Company to beneficially own 5% or
more of the Company's outstanding common stock,

(ii) our Chief Executive Officer and each of the other "Named Executive
Officers" (as defined below in "Executive Compensation--Summary Compensation
Table"),

(iii) each director and nominee for director of the Company, and

(iv) all directors and executive officers of the Company as a group.

Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants or issuable upon
conversion of preferred stock held by that person that are currently
exercisable or exercisable (or convertible) within 60 days of January 19,
2001 are deemed outstanding. Percentage of beneficial ownership of common
stock as of January 19, 2001 is based upon 12,837,790 outstanding shares of
common stock. Percentage of beneficial ownership of preferred stock as of
January 19, 2001 is based upon 86,620 outstanding shares of preferred stock.
To our knowledge, except as set forth in the footnotes to this table and
subject to applicable community property laws, each person named in the table
has sole voting and investment power with respect to the shares set forth
opposite such person's name.

The Company is not aware of any beneficial owner of more than 5% of the
outstanding common stock other than as set forth in the following table.

16
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED PERCENT OF CLASS
---------------------------------- ----------------------------
OFFICERS AND
DIRECTORS(1) COMMON PREFERRED COMMON PREFERRED
----------------------- -------------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
Douglas S. Zorn 547,937 (2) -- 4.1% --
Chairman of the Board, Chief Executive Officer and
President

L. Thomas Baldwin III, Director 3,806,334 (3) 35,000 28.2% 40.4%

Allen F. Jacobson, Director 112,725 (4) -- * --

Ram V. Mani 410,250 (5) -- 3.2% --
Chief Technology Officer, President of the Company's
Software Group, and Director

Robert J. Schmier, Director 157,350 (6) 2,135 1.2% 2.5%

N. Bruce Walko, Director 71,000 (7) -- * --

Richard Glover 483,750 -- 3.8% --
Chief Marketing Officer

James Han 42,282 -- * --
Managing Director of Infotel Subsidiary

Kenneth G. Murray -- -- -- --
Chief Operating Officer

John R. Zavoli -- -- -- --
Chief Financial Officer, General Counsel and
Corporate Secretary

All officers, directors and proposed directors 5,633,628 37,135 39.9% 42.9%
as a group (11 persons) (8)

5% OR GREATER HOLDERS OF COMMON STOCK

James S. Gillespie 730,565 (9) 1,350 5.6% 1.6%
774 Mays Blvd., Suite 10
Incline Village, NV 89451
</TABLE>
------------------
* Less than 1%.

(1) Each beneficial owner for whom an address is not listed has an address
c/o NHancement Technologies Inc., 6663 Owens Drive, Pleasanton,
California 94588.

(2) Represents 139,437 shares of common stock, vested options to purchase
308,500 shares of common stock, and immediately exercisable warrants to
purchase 100,000 shares of common stock.

17
<PAGE>

(3) Represents 3,156,334 shares of common stock, immediately exercisable
warrants to purchase 300,000 shares of common stock, and 35,000 shares of
Series B Preferred Stock convertible at any time into not more than
350,000 shares of Common stock. Irrevocable trusts for Mr. Baldwin's
three children have purchased $105,000 each of Series B Preferred Stock.
Mr. Baldwin disclaims beneficial ownership of these securities.

(4) Represents 62,725 shares of common stock and immediately exercisable
warrants to purchase 50,000 shares of common stock.

(5) Represents shares jointly owned by Mr. Mani and his wife.

(6) Represents 61,000 shares of common stock, 2,135 shares of Series B
Preferred Stock convertible at any time into not more than 21,350 shares
of common stock, vested options to purchase 25,000 shares of common stock
and immediately exercisable warrants to purchase 50,000 shares of common
stock.

(7) Represents vested options to purchase 21,000 shares of common stock and
immediately exercisable warrants to purchase 50,000 shares of common
stock.

(8) Represents 4,357,778 shares of common stock, vested options to purchase
354,500 shares of common stock, immediately exercisable warrants to
purchase 550,000 shares of common stock and 37,135 shares of Series B
Preferred Stock convertible at any time into not more than 371,350 shares
of common stock.

(9) Represents 517,065 shares of common stock, 1,350 shares of Series B
Preferred Stock convertible at any time into not more than 13,500 shares
of common stock and immediately exercisable warrants to purchase 200,000
shares of common stock.

18
<PAGE>

EXECUTIVE COMPENSATION AND RELATED INFORMATION

SUMMARY COMPENSATION TABLE

The following table sets forth certain information concerning
compensation paid during the last three (3) fiscal years to (i) our Chief
Executive Officer and (ii) other most highly compensated executive officers at
September 30, 2000, whose aggregate cash compensation exceeded $100,000 during
the fiscal year ended September 30, 2000 (collectively, the "Named Executive
Officers").

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
----------------------------------- ---------------------------------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($) OPTIONS (#)
------------ ------------ ------------- -------------- -------------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas S. Zorn, 2000 $172,500 $193,883 $13,163 (2) 200,000 (3)
Chairman of the 1999 168,750 -- -- 308,500 (4)
Board, Chief 1998 (1) 106,250 -- -- --
Executive Officer
and President

Richard G. Glover, 2000 (5) $127,500 -- 6,375 (6) 50,000 (3)
Chief Marketing
Officer

James Han, 2000(7) 153,228 12,774 -- 50,000 (3)
Managing Director of 1999(7) 143,335 62,601 -- --
Infotel Subsidiary 1998(7) 145,198 22,407 -- --

Ram V. Mani, 2000 146,634 -- 9,311 (8) 50,000 (3)
Chief Technology 1999 (9) 62,500 -- 421 (10) 155,000 (11)
Officer, Director
</TABLE>

(1) Represents the nine-month period ended September 30, 1998.

(2) Automobile lease paid for by the Company.

(3) Options granted July 27, 2000 with an exercise price of $8.75 per share

(4) Options granted February 2, 1999 with an exercise price of $1.125 per
share. Mr. Zorn was originally granted options on 325,000 shares and
voluntarily relinquished options on 16,500 shares in July 2000.

(5) Represents the nine-month period from Mr. Glover's hiring date of
December 10, 1999 through September 30, 2000.

(6) Automobile lease paid for by the Company.

(7) Amounts in the table are converted from Singapore dollars.

(8) Automobile lease paid for by the Company in the amount of $8,300 and life
insurance in the amount of $1,011.

(9) Represents the three-month period from Mr. Mani's hiring date of June
1999 through September 30, 1999.

(10) Life insurance paid for by the Company.

(11) Options granted August 23, 1999 with an exercise price of $2.125 per
share. Mr. Mani was originally granted options on 175,000 shares and
voluntarily relinquished options on 20,000 shares in July 2000.

19
<PAGE>

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information for each of our
Named Executive Officers concerning stock options granted to them during the
fiscal year ended September 30, 2000:

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATE OF STOCK
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERMS(3)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL YEAR (1) ($/SHR) (2) DATE 5%($) 10%($)
---------- ----------------- ------------------ ---------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Douglas S. Zorn 200,000 8.5% $8.75 7/27/2010 $2,850,000 $4,540,000

Richard G. Glover 50,000 2.1 8.75 7/27/2010 712,500 1,135,000

James Han 50,000 2.1 8.75 7/27/2010 712,500 1,135,000

Ram V. Mani 50,000 2.1 8.75 7/27/2010 712,500 1,135,000
</TABLE>

(1) Based on 2,344,000 options granted during the fiscal year ended September
30, 2000.

(2) The exercise price was deemed to be equal to 100% of the fair market
value on the date immediately preceding the date of the grant, as
determined by the closing price as reported on The NASDAQ Small Cap
Market.

(3) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately
prior to the expiration of their terms, assuming the specified compounded
rates of appreciation on the Company's common stock over the term of the
options. Actual gains, if any, on stock option exercise are dependent
upon a number of factors, including the future performance of the common
stock, overall stock market conditions, and the timing of option
exercises, if any. There can be no assurance that amounts reflected in
this table will be achieved.

20
<PAGE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

The following table sets forth certain information concerning exercises
of stock options during the fiscal year ended September 30, 2000 by each of our
Named Executive Officers and the number and value of unexercised options held by
each of our Named Executive Officers on September 30, 2000. None of our Named
Executive Officers exercised any options in fiscal year ended September 30,
2000.

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SECURITIES UNDERLYING OPTIONS IN-THE-MONEY OPTIONS AT
AT SEPTEMBER 30, 2000 (#) SEPTEMBER 30, 2000 (1) ($)
----------------------------------- ---------------------------------
UNEXER UNEXER
NAME EXERCISABLE -CISABLE EXERCISABLE -CISABLE
------- ----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Douglas S. Zorn 308,500 (2) 200,000 (3) $4,897,437 $1,650,000

Richard G. Glover -- 50,000 (3) -- 412,500

James S. Han -- 50,000 (3) -- 412,500

Ram V. Mani -- 205,000 (4) -- 2 ,718,125
</TABLE>

(1) Value of "in-the-money" stock options represents the positive spread
between the exercise price of stock options and the fair market value for
our common stock on September 30, 2000 based on a closing price on
September 29, 2000 of $17.00 per share.

(2) Exercise price is $1.125 per share.

(3) Exercise price is $8.75 per share.

(4) Represents options to purchase 155,000 shares at a price of $2.125 per
share and 50,000 shares at a price of $8.75 per share.

21
<PAGE>

REPORT OF THE COMPENSATION COMMITTEE

Notwithstanding anything to the contrary set forth in any of our
previous filings under the Securities Act of 1933, as amended, or the Securities
and Exchange Act of 1934, as amended, that might incorporate future filings,
including this proxy statement, in whole or in part, the following report shall
not be deemed to be incorporated by reference into any such filings.

The Compensation Committee of the board of directors was formed in July
2000 and consists of Messrs. Baldwin, Schmier and Walko. Decisions concerning
the compensation of our executive officers are made by the Compensation
Committee and reviewed by the full board of directors (excluding any interested
director).

EXECUTIVE OFFICER COMPENSATION PROGRAM

The objectives of the executive officer compensation program are to
attract, retain, motivate and reward key personnel who possess the necessary
leadership and management skills, through competitive base salary, annual cash
bonus incentives, long term incentive compensation in the form of stock options,
and various benefits, including medical and life insurance plans.

The executive compensation policies of the Compensation Committee are
intended to combine competitive levels of compensations and rewards for above
average performance and to align relative compensation with the achievements of
key business objectives, optimal satisfaction of customers and maximization of
stockholder value. The Compensation Committee believes that stock ownership by
management is beneficial in aligning management and stockholder interest,
thereby enhancing stockholder value.

BASE SALARIES. Salaries for our executive officers are determined
primarily on the basis of the executive officer's responsibility, general salary
practices of peer companies and the officer's individual qualifications and
experience. The base salaries are reviewed annually and may be adjusted by the
Compensation Committee in accordance with certain criteria which include
individual performance, the functions performed by the executive officer, the
scope of the executive officer's on-going duties, general changes in the
compensation peer group in which we compete for executive talent, and our
financial performance generally. The weight given to each such factor by the
Compensation Committee may vary from individual to individual.

INCENTIVE BONUSES. The Compensation Committee believes that a cash
incentive bonus plan can serve to motivate our executive officers and management
to address annual performance goals, using more immediate measures for
performance than those reflected in the appreciation in value of stock options.
The bonus amounts are based upon recommendations by management and a subjective
consideration of factors including such officer's level of responsibility,
individual performance, contributions to our success and our financial
performance generally.

STOCK OPTION GRANTS. Stock options may be granted to executive officers
and other employees under the Equity Incentive Plan. Because of the direct
relationship between the value of an option and the stock price, the
Compensation Committee believes that options motivate executive officers to
manage the Company in a manner that is consistent with stockholder interests.
Stock option grants are intended to focus the attention of the recipient on our
long-term performance which we believe results in improved stockholder value,
and to retain the services of the executive officers in a competitive job market
by providing significant long-term earning potential. To this end, stock options
generally vest and become fully exercisable over a four-year period. The
principal factors considered in granting stock options to executive officers of
the Company are prior performance, level of responsibility, other compensation
and

22
<PAGE>

the executive officer's ability to influence our long-term growth and
profitability. However, the Equity Incentive Plan does not provide any
quantitative method for weighing these factors, and a decision to grant an award
is primarily based on a subjective evaluation of the past as well as future
anticipated performance.

OTHER COMPENSATION PLANS. We have adopted certain general employee
benefit plans in which executive officers are permitted to participate on parity
with other employees. We also provide a 401(k) deferred compensation pension
plan. Benefits under these general plans are indirectly tied to the Company's
performance.

DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Internal Revenue
Code ("IRC") disallows a deduction by the Company for compensation exceeding
$1.0 million paid to certain executive officers, excluding, among other things,
performance based compensation. Because the compensation to the executive
officers has not approached this limitation, the Compensation Committee has not
had to use any of the available exemptions from the deduction limit. The
Compensation Committee remains aware of the IRC Section 162(m) limitations and
will address the issue of deductibility when and if circumstances warrant the
use of such exemptions.

CHIEF EXECUTIVE OFFICER COMPENSATION

The compensation of our Chief Executive Officer is reviewed annually on
the same basis as discussed above for all executive officers. Mr. Zorn's base
salary for the fiscal year ended September 30, 2000 was $180,000. In September
2000, the Compensation Committee conducted a survey of executive compensation in
Bay Area companies of similar size. Based on that survey, the Compensation
Committee determined that compensation of our executives was significantly below
market levels for persons in comparable positions in comparable companies. At
its meeting of October 19, 2000, the Compensation Committee recommended upward
adjustment of executive compensation packages to a more competitive level,
effective as of October 1, 2000. Pursuant to that recommendation, Mr. Zorn's
salary was increased to $300,000 per annum with a maximum bonus potential of
$150,000.

MEMBERS OF THE COMPENSATION COMMITTEE

L. Thomas Baldwin III
Robert Schmier
Bruce Walko

23
<PAGE>

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the board of directors consists of Messrs.
Jacobson, Schmier and Walko. Each of the members of the Audit Committee is
independent (as defined under the NASDAQ's listing standards).

The primary function of the Audit Committee is to assist the board of
directors in fulfilling its oversight responsibilities by reviewing financial
reports and other financial information provided by the Company to any
governmental body or the public, the Company's systems of internal controls
regarding finance, accounting, legal compliance and ethics that management and
the board of directors have established, and the Company's auditing, accounting
and financial reporting processes generally. The Audit Committee annually
recommends to the board of directors the appointment of a firm of independent
auditors to audit the financial statements of the Company and meets with such
personnel of the Company to review the scope and the results of the annual
audit, the amount of audit fees, the Company's internal accounting controls, the
Company's financial statements contained in the Company's internal accounting
controls, the Company's financial statements contained in the Company's Annual
Report to our stockholders and other related matters. A more detailed
description of the functions of the Audit Committee can be found in the
Company's Audit Committee Charter, a copy of which is attached to this Proxy
Statement as APPENDIX B.

The Audit Committee has reviewed and discussed with management the
financial statements for fiscal year 2000 audited by PricewaterhouseCoopers LLP,
the Company's independent certified public accountants. The Audit Committee has
discussed with PricewaterhouseCoopers LLP various matters related to the
financial statements, including those matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standards, AU 380). The Audit Committee
has also received the written disclosures and the letter from
PricewaterhouseCoopers LLP required by Independence Standards Board Standard No.
1 (Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committee), and has discussed with PricewaterhouseCoopers LLP its
independence. Based upon such review and discussions, the Audit Committee
recommended to the board of directors that the audited financial statements be
included in the Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 2000 for filing with the Securities and Exchange Commission.

The Audit Committee and the board of directors also have recommended,
subject to stockholder approval, the selection of PricewaterhouseCoopers LLP as
our independent certified public accountants for fiscal year ending September
30, 2001.

MEMBERS OF THE AUDIT COMMITTEE

Robert J. Schmier, Chairman
Alan Jacobson
N. Bruce Walko

<PAGE>

STOCK PERFORMANCE GRAPH

The following graph compares the percentage change in the cumulative
shareholder return on the Company's common stock from the date of the Company's
initial public offering (February 4, 1997) through the end of December 29, 2000
with the percentage change in the cumulative total return for The Nasdaq
National Market (U.S. Companies). The comparison assumes $100 was invested at
the time of our initial public offering in our Common stock and in the foregoing
index and assumes the reinvestment of dividends, if any. The comparisons in the
graph are provided in response to disclosure requirements of the Securities and
Exchange Commission and are not intended to forecast or be indicative of future
performance of our common stock.

[GRAPH OF HISTORICAL STOCK PERFORMANCE]

The following table sets forth the date points used in preparing the
Performance Graph:

<TABLE>
<CAPTION>
NHancement
Dates Technologies Inc. Nasdaq Stock Market - U.S.
----- ----------------- --------------------------
<S> <C> <C>
02/04/97 100 100

02/28/97 97 95

03/28/97 98 89

04/30/97 94 91

05/30/97 89 101

06/30/97 89 105

07/31/97 95 116
</TABLE>

25
<PAGE>

<TABLE>
<CAPTION>
NHancement
Dates Technologies Inc. Nasdaq Stock Market - U.S.
----- ----------------- --------------------------
<S> <C> <C>
08/29/97 83 115

09/30/97 89 122

10/31/97 75 115

11/28/97 57 116

12/31/97 63 114

01/30/98 90 117

02/27/98 79 128

03/31/98 62 133

04/30/98 62 135

05/29/98 52 129

06/30/98 53 137

07/31/98 48 136

08/31/98 34 109

09/30/98 21 123

10/30/98 29 128

11/30/98 22 141

12/31/98 16 159

01/29/99 21 182

02/26/99 29 166

03/31/99 44 178

04/30/99 31 184

05/31/99 25 179

06/30/99 35 195
</TABLE>

26
<PAGE>

<TABLE>
<CAPTION>
NHancement
Dates Technologies Inc. Nasdaq Stock Market - U.S.
----- ----------------- --------------------------
<S> <C> <C>
07/30/99 56 191

08/31/99 46 199

09/30/99 38 199

10/29/99 33 215

11/30/99 38 242

12/31/99 122 295

01/31/00 229 286

02/29/00 292 340

03/31/00 440 331

04/28/00 435 280

05/31/00 444 246

06/30/00 338 287

07/31/00 260 273

08/31/00 362 305

09/29/00 432 266

10/31/00 641 244

11/30/00 337 188

12/29/00 125 179
</TABLE>

27
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PREFERRED STOCK ISSUANCES

In October 2000, we issued shares of Series B Preferred Stock in a
private sale to accredited investors at a purchase price of $100 per share. The
Series B Preferred Stock may be converted into shares of common stock at a
conversion price equal to the lower of (i) $13.50 per share or (ii) 90% of the
average closing bid prices for the 10 days prior to such conversion; provided,
that such price shall not be less than $10.00 per share. We sold shares of
Series B Preferred Stock to the following officers, directors or beneficial
owners of more than 5% of our outstanding common stock:

Number of Shares of
Name Series B Preferred Stock
------ -------------------------------
<S> <C>
L. Thomas Baldwin III 35,000

Robert J. Schmier 2,135

James S. Gillespie 1,350
</TABLE>

In addition, irrevocable trusts for Mr. Baldwin's three children have
purchased 1,050 shares of Series B Preferred Stock. Mr. Baldwin disclaims
beneficial ownership of these shares.

We believe that the shares sold in transactions described above were
sold at fair market value and the terms were no less favorable to us than we
could have obtained or did obtain from unaffiliated third parties.

WARRANT ISSUANCES

Effective July 27, 2000, we issued a one-year warrant for the
purchase of 300,000 shares of our common stock at an exercise price of $6.00
per share to Mr. L. Thomas Baldwin III, who was not a director at the time,
for financial-related services rendered to the Company. In consideration of
this previous warrant grant, Mr. Baldwin agreed to forego the one-year
warrant to purchase 50,000 shares of common stock that he would have
otherwise received upon his appointment to the board of directors in December
2000.

In August 8, 2000, in connection with the appointment of Mr. Allen F.
Jacobson to our board of directors, we issued a one-year warrant for the
purchase of 50,000 shares of our common stock at an exercise price of $9.1875
per share. See -- "Election of Directors -- Compensation of Directors."

CONVERTIBLE DEBENTURE ISSUANCES

On May 19, 2000, we entered into a convertible debentures purchase
agreement with certain investors in the aggregate principal amount of
$5,850,000. Mr. Allen Jacobson, a director of the Company, purchased $100,000 of
the convertible debentures. On June 15, 2000, we amended certain terms of the
convertible debentures. The convertible debentures were set to mature on May 30,
2001 with interest to accrue at 8% per annum from the date such convertible
debentures were issued until the earlier of conversion into shares of our common
stock or May 30, 2001, payable quarterly in arrears commencing July 1, 2000. The
convertible debentures were convertible by the holder into shares of our common
stock at any time prior to the close of business on May 30, 2001. All of the
debentures were converted into shares of common stock prior to September 30,
2000. On September 14, 2000, Mr. Jacobson acquired 12,725 shares of our common
stock by converting all of his convertible debentures.

28
<PAGE>

EMPLOYMENT AGREEMENTS

The Company has a three-year employment agreement with Douglas S. Zorn,
as Chairman of the board of directors, President and Chief Executive Officer of
the Company which will expire in January 2002, and two-year employment
agreements with Ram V. Mani, as Chief Technology Officer of the Company, and
Richard Glover as Chief Marketing Officer of the Company, which will expire in
August 2001 and December 2001, respectively. The base salaries of Messrs. Zorn,
Mani and Glover may be adjusted from time to time by mutual agreement between
each such officer and the board of directors. The base salaries for the calendar
year 2000 of Messrs. Zorn, Mani and Glover were $180,000, $150,000 and $170,000,
respectively. The base salaries for the calendar year 2001 for Messrs. Zorn,
Mani and Glover are $300,000, $175,000 and $175,000, respectively.

The employment agreements provide, subject to their terms, for an
annual bonus to be paid to Messrs. Zorn, Mani and Glover pursuant to a written
bonus plan to be approved by our board of directors. The employment agreements
provide that Messrs. Zorn, Mani and Glover are entitled to reasonable expense
reimbursements, four weeks paid vacation per year and participation in any of
the Company's benefit and deferred compensation plans.

The employment agreements also provide for payments in the event of
termination prior to the end of the term, as follows: if Mr. Zorn or Mr.
Glover is terminated without cause, then his base salary will be paid for the
greater of two (2) years or the balance of the term and he will receive a
bonus for each such year equal to his average bonus for the two (2) preceding
years. If Mr. Mani is terminated without cause, he will receive his base
salary for six (6) months. If any of Messrs. Zorn, Mani or Glover are
terminated upon a change of control, then compensation equal to two (2) times
the sum of the base salary plus average bonus will be paid to each of them
for one (1) year. In the event of termination (except termination without
cause), Messrs. Zorn, Mani and Glover are subject to two-year non-competition
agreements.

STOCKHOLDER PROPOSALS

REQUIREMENTS FOR STOCKHOLDER PROPOSALS TO BE CONSIDERED FOR INCLUSION IN OUR
PROXY MATERIALS

Stockholder proposals that are to be considered for inclusion in the proxy
materials of the Company for its annual meeting of stockholders in 2002 must be
received by the Company in writing by October 3, 2001 (to the attention of the
Company's Secretary). A stockholder's notice to the Secretary of the Company
must set forth as to each matter the stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of the stockholder proposing
such business, (iii) the class and number of shares of the Company which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business. Such proposals must comply with the requirements
as to the form and substance established by applicable law and regulations in
order to be included in the Proxy statement.

OTHER MATTERS

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our directors, executive officers and holders of more
than 10% percent of our equity securities

29
<PAGE>

(collectively, "Reporting Persons") to file reports of beneficial ownership and
changes in ownership of our equity securities with the Securities and Exchange
Commission. Reporting Persons are required to furnish the Company with copies of
all Section 16(a) forms they file.

To our knowledge, based solely on review of the copies of such reports
furnished to the Company or written representations from certain Reporting
Persons that no other reports were required, we believe that during fiscal year
2000, all Reporting Persons complied with all applicable filing requirements
except that (a) Mr. Allen F. Jacobson, a non-employee director of the Company,
was granted warrants to purchase 50,000 shares of our common stock in August
2000 and filed a report in December 2000, (b) Mr. John Zavoli, our Chief
Financial Officer, was granted options to purchase 175,000 shares of common
stock of the Company in May 2000 and filed a report in December 2000, and (c)
Mr. Ken Murray, our Chief Operating Officer, was granted options to purchase
300,000 shares of common stock of the Company in July 2000 and filed a report in
December 2000.

OTHER MATTERS

The Company knows of no other matters to be submitted to the annual
meeting. If any other matters properly come before the annual meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares at the
direction of our board of directors.

It is important that your stock be represented at the meeting,
regardless of the number of shares which you hold. You are, therefore, urged to
execute and return the accompanying proxy in the envelope which has been
enclosed, at your earliest convenience.

By Order of the Board of Directors,

/s/ Douglas S. Zorn
-------------------------------------
Douglas S. Zorn,
Chief Executive Officer and President
NHANCEMENT TECHNOLOGIES INC.

Pleasanton, California
January 31, 2001

<PAGE>

NHANCEMENT TECHNOLOGIES INC.
ANNUAL MEETING OF STOCKHOLDERS

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF NHANCEMENT TECHNOLOGIES INC.

The undersigned hereby appoints Douglas S. Zorn and John R. Zavoli to
act jointly or alone, as Proxies, with full power to appoint a substitute, to
represent and to vote, with all the powers the undersigned would have if
personally present, all the shares of common stock, $0.01 par value per share,
of NHancement Technologies Inc. held of record by the undersigned on January 19,
2001 at the annual meeting of stockholders to be held on March 16, 2001, at
10:00 a.m. Pacific Standard Time or any adjournment or adjournments thereof.

PROPOSAL 1. ELECTION of six (6) directors of the Company to serve
until the 2001 Annual Meeting of Stockholders.

(1) Douglas S. Zorn (4) Ram V. Mani
(2) L. Thomas Baldwin III (5) Robert J. Schmier
(3) Allen F. Jacobson (6) N. Bruce Walko

[ ] FOR ALL THE NOMINEES LISTED ABOVE [ ] WITHHOLD AUTHORITY

[ ] _________________________________________________
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE

PROPOSAL 2. APPROVAL of proposal to amend the Amended and Restated
Certificate of Incorporation increasing the number of authorized shares of
common stock from 20,000,000 shares to 40,000,000 shares.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

PROPOSAL 3. APPROVAL of proposal to amend the Amended and Restated
Certificate of Incorporation changing the name of the Company to "Appiant
Technologies, Inc."

[ ] FOR [ ] AGAINST [ ] ABSTAIN

PROPOSAL 4. APPROVAL of proposal to adopt an Employee Stock Purchase
Plan.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

PROPOSAL 5. APPROVAL of proposal to ratify the appointment of
PricewaterhouseCoopers LLP, as the Company's independent certified public
accountants for the Company's fiscal year ending September 30, 2001.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

[Continued on Next Page]

<PAGE>

PROPOSAL 6. To transact such other business as may properly come before
the meeting or any adjournment thereof.

In their discretion, the Proxies are authorized to vote upon other
business as may come before the meeting. This proxy, when properly executed,
will be voted in the manner directed herein by the undersigned stockholder. If
no direction is made, the Proxy will be voted FOR Proposals 1, 2, 3, 4, 5 and
6.

Date: _______________________, 2001

___________________________________________
(Signature)

PLEASE SIGN HERE

Please date this proxy and sign your name
exactly as it appears hereon.

Where there is more than one owner, each
should sign. When signing as an agent,
attorney, administrator, executor, guardian,
or trustee, please add your title as such.
If executed by a corporation, the proxy
should be signed by a duly authorized
officer who should indicate his office.

PLEASE DATE, SIGN, AND MAIL THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.

<PAGE>

APPENDIX A
TO PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
NHANCEMENT TECHNOLOGIES INC.
EMPLOYEE STOCK PURCHASE PLAN

The following constitute the provisions of the 2001 Employee Stock
Purchase Plan of Appiant Technologies, Inc.

1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Code. The provisions of the Plan, accordingly, shall be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.

2. DEFINITIONS. As used herein, the following definitions shall
apply:

(a) "ADMINISTRATOR" means either the Board or a committee of
the Board that is responsible for the administration of the Plan as is
designated from time to time by resolution of the Board.

(b) "APPLICABLE LAWS" means the legal requirements relating
to the administration of employee stock purchase plans, if any, under applicable
provisions of federal securities laws, state corporate and securities laws, the
Code, the rules of any applicable stock exchange or national market system, and
the rules of any foreign jurisdiction applicable to participation in the Plan by
residents therein.

(d) "CHANGE IN CONTROL" means a change in ownership or
control of the Company effected through the direct or indirect acquisition by
any person or related group of persons (other than an acquisition from or by the
Company or by a Company-sponsored employee benefit plan or by a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of
the Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities.

(e) "CODE" means the Internal Revenue Code of 1986, as
amended.

(f) "COMMON STOCK" means the common stock of the Company.

(g) "COMPANY" means Appiant Technologies, Inc., a
Delaware corporation.

(h) "COMPENSATION" means an Employee's base salary,
overtime, commissions, and cash bonuses from the Company or one or more
Designated Subsidiaries, including such amounts of base salary, overtime,
commissions and cash bonuses, as are deferred by the Employee (i) under a
qualified cash or deferred arrangement described in Section 401(k) of the
<PAGE>

Code, or (ii) to a plan qualified under Section 125 of the Code. Compensation
does not include reimbursements or other expense allowances, fringe benefits
(cash or non-cash), moving expenses, deferred compensation, contributions (other
than contributions described in the first sentence) made on the Employee's
behalf by the Company or one or more or Designated Subsidiaries under any
employee benefit or welfare plan now or hereafter established, and any other
payments not specifically referenced in the first sentence.

(i) "CORPORATE TRANSACTION" means any of the following
transactions:

(1) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated;

(2) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with complete liquidation
or dissolution of the Company;

(3) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding securities
are transferred to a person or persons different from those who held such
securities immediately prior to such merger; or

(4) acquisition by any person or related group of
persons (other than the Company or by a Company-sponsored employee benefit plan)
of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act)
of securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities (whether or not in a
transaction also constituting a Change in Control), but excluding any such
transaction that the Administrator determines shall not be a Corporate
Transaction

(j) "DESIGNATED SUBSIDIARIES" means the Subsidiaries which
have been designated by the Administrator from time to time as eligible to
participate in the Plan.

(k) "EFFECTIVE DATE" means the date the Administrator deems
appropriate to commence the first Offer Period. However, should any Designated
Subsidiary become a participating company in the Plan after such date, then such
entity shall designate a separate Effective Date with respect to its
employee-participants.

(l) "EMPLOYEE" means any individual, including an officer or
director, who is an employee of the Company or a Designated Subsidiary for
purposes of Section 423 of the Code. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the individual's employer.
Where the period of leave exceeds ninety (90) days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the ninety-first (91st) day of
such leave, for purposes of determining eligibility to participate in the Plan.

(m) "ENROLLMENT DATE" means the first day of each Offer
Period.
<PAGE>

(n) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.

(o) "EXERCISE DATE" means the last day of each Purchase
Period.

(p) "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined as follows:

(1) Where there exists a public market for the Common
Stock, the Fair Market Value shall be (A) the closing price for a share of
Common Stock for the last market trading day prior to the time of the
determination (or, if no closing price was reported on that date, on the last
trading date on which a closing price was reported) on the stock exchange
determined by the Administrator to be the primary market for the Common Stock or
the Nasdaq National Market, whichever is applicable or (B) if the Common Stock
is not traded on any such exchange or national market system, the average of the
closing bid and asked prices of a share of Common Stock on the Nasdaq Small Cap
Market for the day prior to the time of the determination (or, if no such prices
were reported on that date, on the last date on which such prices were
reported), in each case, as reported in THE WALL STREET JOURNAL or such other
source as the Administrator deems reliable; or

(2) In the absence of an established market of the type
described in (1), above, for the Common Stock, the Fair Market Value thereof
shall be determined by the Administrator in good faith.

(q) "OFFER PERIOD" means an Offer Period established
pursuant to Section 4 hereof.

(r) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

(s) "PARTICIPANT" means an Employee of the Company or
Designated Parent or Subsidiary who is actively participating in the Plan.

(t) "PLAN" means this Employee Stock Purchase Plan.

(u) "PURCHASE PERIOD" means a period of approximately six
months, commencing on February 15 and August 15 of each year and terminating on
the next following August 14 or February 14, respectively; provided, however,
that the first Purchase Period shall commence on the Effective Date and shall
end on the date determined by the Administrator at the commencement of the first
Purchase Period.

(v) "PURCHASE PRICE" shall mean an amount equal to 85% of
the Fair Market Value of a share of Common Stock on the Enrollment Date or on
the Exercise Date, whichever is lower.

(w) "RESERVES" means the sum of the number of shares of
Common Stock covered by each option under the Plan which have not yet been
exercised and the number of shares of Common Stock which have been authorized
for issuance under the Plan but not yet placed under option.
<PAGE>

(x) "SUBSIDIARY" means a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.

3. ELIGIBILITY.

(a) GENERAL. Any individual who is an Employee on a given
Enrollment Date shall be eligible to participate in the Plan for the Offer
Period commencing with such Enrollment Date.

(b) LIMITATIONS ON GRANT AND ACCRUAL. Any provisions of the
Plan to the contrary notwithstanding, no Employee shall be granted an option
under the Plan (i) if, immediately after the grant, such Employee (taking into
account stock owned by any other person whose stock would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own stock and/or hold
outstanding options to purchase stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or of any Parent or Subsidiary, or (ii) which permits the Employee's rights to
purchase stock under all employee stock purchase plans of the Company and its
Parents or Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand
Dollars ($25,000) worth of stock (determined at the Fair Market Value of the
shares at the time such option is granted) for each calendar year in which such
option is outstanding at any time. The determination of the accrual of the right
to purchase stock shall be made in accordance with Section 423(b)(8) of the Code
and the regulations thereunder.

(c) OTHER LIMITS ON ELIGIBILITY. Notwithstanding Subsection
(a), above, the following Employees shall not be eligible to participate in the
Plan for any relevant Offer Period: (i) Employees whose customary employment is
20 hours or less per week; (ii) Employees whose customary employment is for not
more than 5 months in any calendar year; (iii) Employees who have been employed
for fewer than 3 business days; and (iv) Employees who are subject to rules or
laws of a foreign jurisdiction that prohibit or make impractical the
participation of such Employees in the Plan.

4. OFFER PERIODS.

(a) The Plan shall be implemented through overlapping or
consecutive Offer Periods until such time as (i) the maximum number of shares of
Common Stock available for issuance under the Plan shall have been purchased or
(ii) the Plan shall have been sooner terminated in accordance with Section 19
hereof. The maximum duration of an Offer Period shall be twenty-seven (27)
months. Initially, the Plan shall be implemented through overlapping Offer
Periods of twenty-four (24) months' duration commencing each February 15 and
August 15 following the Effective Date (except that the initial Offer Period
shall commence on the Effective Date and shall end on the date determined by the
Administrator at the commencement of the initial Offer Period).

(b) A Participant shall be granted a separate option for
each Offer Period in which he or she participates. The option shall be granted
on the Enrollment Date and shall be automatically exercised in successive
installments on the Exercise Dates ending within the Offer Period.
<PAGE>

(c) If on the first day of any Purchase Period in an Offer
Period in which a Participant is participating, the Fair Market Value of the
Common Stock is less than the Fair Market Value of the Common Stock on the
Enrollment Date of the Offer Period (after taking into account any adjustment
during the Offer Period pursuant to Section 18(a)), the Offer Period shall be
terminated automatically and the Participant shall be enrolled automatically in
the new Offer Period which has its first Purchase Period commencing on that
date, provided the Participant is eligible to participate in the Plan on that
date and has not elected to terminate participation in the Plan.

(d) Except as specifically provided herein, the acquisition
of Common Stock through participation in the Plan for any Offer Period shall
neither limit nor require the acquisition of Common Stock by a Participant in
any subsequent Offer Period.

5. PARTICIPATION.

(a) An eligible Employee may become a Participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Appendix A to this Plan and filing it with the designated payroll
office of the Company at least three (3) business days prior to the Enrollment
Date for the Offer Period in which such participation will commence, unless a
later time for filing the subscription agreement is set by the Administrator for
all eligible Employees with respect to a given Offer Period.

(b) Payroll deductions for a Participant shall commence with
the first partial or full payroll period beginning on the Enrollment Date and
shall end on the last complete payroll period during the Offer Period, unless
sooner terminated by the Participant as provided in Section 10.

6. PAYROLL DEDUCTIONS.

(a) At the time a Participant files a subscription
agreement, the Participant shall elect to have payroll deductions made during
the Offer Period in amounts between one percent (1%) and not exceeding fifteen
percent (15%) of the Compensation which the Participant receives during the
Offer Period.

(b) All payroll deductions made for a Participant shall be
credited to the Participant's account under the Plan and will be withheld in
whole percentages only. A Participant may not make any additional payments into
such account.

(c) A Participant may discontinue participation in the Plan
as provided in Section 10, or may increase or decrease the rate of payroll
deductions during the Offer Period by completing and filing with the Company a
change of status notice in the form of Appendix B to this Plan authorizing an
increase or decrease in the payroll deduction rate. Any increase or decrease in
the rate of a Participant's payroll deductions shall be effective with the first
full payroll period commencing three (3) business days after the Company's
receipt of the change of status notice unless the Company elects to process a
given change in participation more quickly. A Participant's subscription
agreement (as modified by any change of status notice) shall remain in effect
for successive Offer Periods unless terminated as provided in Section 10. The
<PAGE>

Administrator shall be authorized to limit the number of payroll deduction rate
changes during any Offer Period.

(d) Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code and Section 3(b) herein, a
Participant's payroll deductions shall be decreased to 0%. Payroll deductions
shall recommence at the rate provided in such Participant's subscription
agreement, as amended, at the time when permitted under Section 423(b)(8) of the
Code and Section 3(b) herein, unless such participation is sooner terminated by
the Participant as provided in Section 10.

7. GRANT OF OPTION. On the Enrollment Date, each Participant shall
be granted an option to purchase (at the applicable Purchase Price) one thousand
two hundred (1,200) shares of the Common Stock, subject to adjustment as
provided in Section 18 hereof; provided (i) that such option shall be subject to
the limitations set forth in Sections 3(b), 6 and 12 hereof, and (ii) the
maximum number of shares of Common Stock a Participant shall be permitted to
purchase in any Purchase Period shall be three hundred (300) shares, subject to
adjustment as provided in Section 18 hereof. Exercise of the option shall occur
as provided in Section 8, unless the Participant has withdrawn pursuant to
Section 10, and the option, to the extent not exercised, shall expire on the
last day of the Offer Period.

8. EXERCISE OF OPTION. Unless a Participant withdraws from the Plan
as provided in Section 10, below, the Participant's option for the purchase of
shares will be exercised automatically on each Exercise Date, by applying the
accumulated payroll deductions in the Participant's account to purchase the
number of full shares subject to the option by dividing such Participant's
payroll deductions accumulated prior to such Exercise Date and retained in the
Participant's account as of the Exercise Date by the applicable Purchase Price.
No fractional shares will be purchased; any payroll deductions accumulated in a
Participant's account which are not sufficient to purchase a full share shall be
carried over to the next Purchase Period or Offer Period, whichever applies, or
returned to the Participant, if the Participant withdraws from the Plan.
Notwithstanding the foregoing, any amount remaining in a Participant's account
following the purchase of shares on the Exercise Date due to the application of
Section 423(b)(8) of the Code or Section 7, above, shall be returned to the
Participant and shall not be carried over to the next Offer Period or Purchase
Period. During a Participant's lifetime, a Participant's option to purchase
shares hereunder is exercisable only by the Participant.

9. DELIVERY. Upon receipt of a request from a Participant after
each Exercise Date on which a purchase of shares occurs, the Company shall
arrange the delivery to such Participant, as promptly as practicable, of a
certificate representing the shares purchased upon exercise of the Participant's
option.

10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.

(a) A Participant may either (i) withdraw all but not less
than all the payroll deductions credited to the Participant's account and not
yet used to exercise the Participant's option under the Plan or (ii) terminate
future payroll deductions, but allow accumulated payroll deductions to be used
to exercise the Participant's option under the Plan at any time by giving
written notice to the Company in the form of Appendix B to this Plan. If the
Participant elects
<PAGE>

withdrawal alternative (i) described above, all of the Participant's payroll
deductions credited to the Participant's account will be paid to such
Participant as promptly as practicable after receipt of notice of withdrawal,
such Participant's option for the Offer Period will be automatically terminated,
and no further payroll deductions for the purchase of shares will be made during
the Offer Period. If the Participant elects withdrawal alternative (ii)
described above, no further payroll deductions for the purchase of shares will
be made during the Offer Period, all of the Participant's payroll deductions
credited to the Participant's account will be applied to the exercise of the
Participant's option on the next Exercise Date, and after such Exercise Date,
such Participant's option for the Offer Period will be automatically terminated.
If a Participant withdraws from an Offer Period, payroll deductions will not
resume at the beginning of the succeeding Offer Period unless the Participant
delivers to the Company a new subscription agreement.

(b) Upon termination of a Participant's employment
relationship (as described in Section 2(k)) at a time more than three (3) months
from the next scheduled Exercise Date, the payroll deductions credited to such
Participant's account during the Offer Period but not yet used to exercise the
option will be returned to such Participant or, in the case of his/her death, to
the person or persons entitled thereto under Section 14, and such Participant's
option will be automatically terminated. Upon termination of a Participant's
employment relationship (as described in Section 2(k)) within three (3) months
of the next scheduled Exercise Date, the payroll deductions credited to such
Participant's account during the Offer Period but not yet used to exercise the
option will be applied to the purchase of Common Stock on the next Exercise
Date, unless the Participant (or in the case of the Participant's death, the
person or persons entitled to the Participant's account balance under Section
14) withdraws from the Plan by submitting a change of status notice in
accordance with subsection (a) of this Section 10. In such a case, no further
payroll deductions will be credited to the Participant's account following the
Participant's termination of employment and the Participant's option under the
Plan will be automatically terminated after the purchase of Common Stock on the
next scheduled Exercise Date.

11. INTEREST. No interest shall accrue on the payroll deductions
credited to a Participant's account under the Plan.

12. STOCK.

(a) Subject to adjustment upon changes in capitalization of
the Company as provided in Section 18, the maximum number of shares of Common
Stock which shall be made available for sale under the Plan shall be 1,500,000
shares, plus an annual increase to be added on the first day of the Company's
fiscal year beginning in 2002 equal to the lesser of (i) 1,250,000 shares, (ii)
three percent (3%) of the outstanding shares of Common Stock on such date, or
(iii) a lesser number of shares determined by the Administrator. If the
Administrator determines that on a given Exercise Date the number of shares with
respect to which options are to be exercised may exceed (x) the number of shares
then available for sale under the Plan or (y) the number of shares available for
sale under the Plan on the Enrollment Date(s) of one or more of the Offer
Periods in which such Exercise Date is to occur, the Administrator may make a
pro rata allocation of the shares remaining available for purchase on such
Enrollment Dates or Exercise Date, as applicable, in as uniform a manner as
shall be practicable and as it shall
<PAGE>

determine to be equitable, and shall either continue all Offer Periods then in
effect or terminate any one or more Offer Periods then in effect pursuant to
Section 19, below.

(b) A Participant will have no interest or voting right in
shares covered by the Participant's option until such shares are actually
purchased on the Participant's behalf in accordance with the applicable
provisions of the Plan. No adjustment shall be made for dividends, distributions
or other rights for which the record date is prior to the date of such purchase.

(c) Shares to be delivered to a Participant under the Plan
will be registered in the name of the Participant or in the name of the
Participant and his or her spouse.

13. ADMINISTRATION. The Plan shall be administered by the
Administrator which shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Administrator shall, to the full extent
permitted by Applicable Law, be final and binding upon all persons.

14. DESIGNATION OF BENEFICIARY.

(a) Each Participant will file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
Participant's account under the Plan in the event of such Participant's death.
If a Participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.

(b) Such designation of beneficiary may be changed by the
Participant (and the Participant's spouse, if any) at any time by written
notice. In the event of the death of a Participant and in the absence of a
beneficiary validly designated under the Plan who is living (or in existence) at
the time of such Participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the Participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Administrator), the Administrator shall deliver such shares and/or cash to
the spouse (or domestic partner, as determined by the Administrator) of the
Participant, or if no spouse (or domestic partner) is known to the
Administrator, then to the issue of the Participant, such distribution to be
made per stirpes (by right of representation), or if no issue are known to the
Administrator, then to the heirs at law of the Participant determined in
accordance with Section 27.

15. TRANSFERABILITY. Neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14 hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Administrator may treat such act as an election to
withdraw funds from an Offer Period in accordance with Section 10.

16. USE OF FUNDS. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
<PAGE>

17. REPORTS. Individual accounts will be maintained for each
Participant in the Plan. Statements of account will be given to Participants at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.

18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE
TRANSACTIONS.

(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to
any required action by the stockholders of the Company, the Reserves, the
Purchase Price, the maximum number of shares that may be purchased in any Offer
Period or Purchase Period, as well as any other terms that the Administrator
determines require adjustment shall be proportionately adjusted for (i) any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, (ii) any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company, or (iii) as the Administrator may determine in its
discretion, any other transaction with respect to Common Stock to which Section
424(a) of the Code applies; provided, however that conversion of any convertible
securities of the Company shall not be deemed to have been "effected without
receipt of consideration." Such adjustment shall be made by the Administrator
and its determination shall be final, binding and conclusive. Except as the
Administrator determines, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
Reserves and the Purchase Price.

(b) CORPORATE TRANSACTIONS. In the event of a proposed
Corporate Transaction, each option under the Plan shall be assumed by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Administrator determines, in the exercise of its sole discretion and
in lieu of such assumption, to shorten the Offer Period then in progress by
setting a new Exercise Date (the "New Exercise Date"). If the Administrator
shortens the Offer Period then in progress in lieu of assumption in the event of
a Corporate Transaction, the Administrator shall notify each Participant in
writing, at least ten (10) days prior to the New Exercise Date, that the
Exercise Date for the Participant's option has been changed to the New Exercise
Date and that the Participant's option will be exercised automatically on the
New Exercise Date, unless prior to such date the Participant has withdrawn from
the Offer Period as provided in Section 10. For purposes of this Subsection, an
option granted under the Plan shall be deemed to be assumed if, in connection
with the Corporate Transaction, the option is replaced with a comparable option
with respect to shares of capital stock of the successor corporation or Parent
thereof. The determination of option comparability shall be made by the
Administrator prior to the Corporate Transaction and its determination shall be
final, binding and conclusive on all persons.

19. AMENDMENT OR TERMINATION.

(a) The Administrator may at any time and for any reason
terminate or amend the Plan. Except as provided in Section 18, no such
termination can affect options previously granted, provided that the Plan or any
one or more Offer Periods may be terminated by the Administrator on any Exercise
Date or by the Administrator establishing a new Exercise Date with respect to
any Offer Period and/or any Purchase Period then in progress if the
Administrator
<PAGE>

determines that the termination of the Plan or such one ore more Offer Periods
is in the best interests of the Company and its stockholders. Except as provided
in Section 18 and this Section 19, no amendment may make any change in any
option theretofore granted which adversely affects the rights of any Participant
without the consent of affected Participants. To the extent necessary to comply
with Section 423 of the Code (or any successor rule or provision or any other
Applicable Law), the Company shall obtain stockholder approval in such a manner
and to such a degree as required.

(b) Without stockholder consent and without regard to
whether any Participant rights may be considered to have been "adversely
affected," the Administrator shall be entitled to limit the frequency and/or
number of changes in the amount withheld during Offer Periods, change the length
of Purchase Periods within any Offer Period, determine the length of any future
Offer Period, determine whether future Offer Periods shall be consecutive or
overlapping, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, establish additional terms, conditions, rules
or procedures to accommodate the rules or laws of applicable foreign
jurisdictions, permit payroll withholding in excess of the amount designated by
a Participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
Participant properly correspond with amounts withheld from the Participant's
Compensation, and establish such other limitations or procedures as the
Administrator determines in its sole discretion advisable and which are
consistent with the Plan.

20. NOTICES. All notices or other communications by a Participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Administrator at the
location, or by the person, designated by the Administrator for the receipt
thereof.

21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all Applicable
Laws and shall be further subject to the approval of counsel for the Company
with respect to such compliance. As a condition to the exercise of an option,
the Company may require the Participant to represent and warrant at the time of
any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned Applicable Laws. In addition, no options shall be exercised
or shares issued hereunder before the Plan shall have been approved by
stockholders of the Company as provided in Section 23.

22. TERM OF PLAN. The Plan shall become effective upon the earlier
to occur of its adoption by the Board or its approval by the stockholders of the
Company. It shall continue in effect for a term of twenty (20) years unless
sooner terminated under Section 19.

23. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject
to approval by the stockholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such stockholder approval shall be
obtained in the degree and manner required under Applicable Laws.
<PAGE>

24. NO EMPLOYMENT RIGHTS. The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the Company or
a Designated Parent or Subsidiary, and it shall not be deemed to interfere in
any way with such employer's right to terminate, or otherwise modify, an
employee's employment at any time.

25. NO EFFECT ON RETIREMENT AND OTHER BENEFIT PLANS. Except as
specifically provided in a retirement or other benefit plan of the Company or a
Designated Parent or Subsidiary, participation in the Plan shall not be deemed
compensation for purposes of computing benefits or contributions under any
retirement plan of the Company or a Designated Parent or Subsidiary, and shall
not affect any benefits under any other benefit plan of any kind or any benefit
plan subsequently instituted under which the availability or amount of benefits
is related to level of compensation. The Plan is not a "Retirement Plan" or
"Welfare Plan" under the Employee Retirement Income Security Act of 1974, as
amended.

26. EFFECT OF PLAN. The provisions of the Plan shall, in accordance
with its terms, be binding upon, and inure to the benefit of, all successors of
each Participant, including, without limitation, such Participant's estate and
the executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such
Participant.

27. GOVERNING LAW. The Plan is to be construed in accordance with
and governed by the internal laws of the State of California (as permitted by
Section 1646.5 of the California Civil Code, or any similar successor provision)
without giving effect to any choice of law rule that would cause the application
of the laws of any jurisdiction other than the internal laws of the State of
California to the rights and duties of the parties, except to the extent the
internal laws of the State of California are superseded by the laws of the
United States. Should any provision of the Plan be determined by a court of law
to be illegal or unenforceable, the other provisions shall nevertheless remain
effective and shall remain enforceable.

28. DISPUTE RESOLUTION. The provisions of this Section 28 (and as
restated in the Subscription Agreement) shall be the exclusive means of
resolving disputes arising out of or relating to the Plan. The Company and the
Participant, or their respective successors (the "parties"), shall attempt in
good faith to resolve any disputes arising out of or relating to the Plan by
negotiation between individuals who have authority to settle the controversy.
Negotiations shall be commenced by either party by notice of a written statement
of the party's position and the name and title of the individual who will
represent the party. Within thirty (30) days of the written notification, the
parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, to resolve the dispute. If the dispute
has not been resolved by negotiation, the parties agree that any suit, action,
or proceeding arising out of or relating to the Plan shall be brought in the
United States District Court for the Northern District of California (or should
such court lack jurisdiction to hear such action, suit or proceeding, in a
California state court in the County of Alameda) and that the parties shall
submit to the jurisdiction of such court. The parties irrevocably waive, to the
fullest extent permitted by law, any objection the party may have to the laying
of venue for any such suit, action or proceeding brought in such court. THE
PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY
<PAGE>

HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any
one or more provisions of this Section 28 shall for any reason be held invalid
or unenforceable, it is the specific intent of the parties that such provisions
shall be modified to the minimum extent necessary to make it or its application
valid and enforceable.
<PAGE>

APPENDIX B
TO PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
NHANCEMENT TECHNOLOGIES INC.
AUDIT COMMITTEE CHARTER

PURPOSE

The Audit Committee (the "Committee") is a committee of the Board of
Directors. Its primary function is to assist the Board of Directors in
fulfilling its oversight responsibilities by reviewing:

(1) The financial reports and other financial information provided by
the Company to any governmental body or the public.

(2) The Company's system of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board of
Directors have established.

(3) The audit efforts of the Company's independent accountants, who are
accountable to the Audit Committee and to the entire Board of Directors.

(4) The Company's auditing, accounting and financial reporting
processes generally.

COMMITTEE MEMBERSHIP

The Committee shall consist of at least three (3) directors appointed
annually by the Board of Directors. The Board of Directors shall have the power
at any time to change the membership of the committee and to fill vacancies.
Each member of the Committee shall be an independent director as defined in The
Nasdaq Stock Market listing standards or by another relevant listing authority
from time to time. Each members of the Committee shall have no relationship to
the Company or management that, in the opinion of the Board of Directors, would
interfere with the exercise of his or her independent judgment as a committee
member. Each member of the Committee shall have a basic understanding of finance
and accounting practices, and at least one member of the Committee must have
accounting or related financial management expertise as the foregoing
qualifications are interpreted by the Board of Directors in its business
judgment.

RESPONSIBILITIES AND DUTIES

The Audit Committee shall:

(1) Review and update this Charter at least annually or more frequently
as conditions dictate.

(2) Recommend to the Board of Directors the independent accountant to
be nominated, approve the compensation of the independent accountant, and review
and approve the discharge of the independent accountant.

(3) Confirm and assure the independence of the independent accountant,
including insuring receipt of an ISB-1 letter from the independent account as
required by Independence Standards Board Standard No. 1 and a review of
management consulting services and related fees provided by the independent
accountant.
<PAGE>

(4) Inquire of management and the independent accountant about
significant risks or exposures and assess the steps management has taken to
minimize such risk to the Company.

(5) Consider, in consultation with the independent accountant, the
audit scope and plan of the independent accountant.

(6) Review on a continuing basis:

(a) The adequacy of the Company's system of internal controls,
including activities, organizational structure and qualifications of
the Company's internal audit function.

(b) The Company's financial accounting and reporting
processes.

(c) Any related significant findings and recommendations of
the independent accountant together with management's responses
thereto.

(7) Review with management and the independent accountant at the
completion of the annual examination:

(a) The Company's annual financial statements and related
footnotes.

(b) The independent accountant's audit of the financial
statements and their report thereon.

(d) Any significant changes to the Company's auditing and
accounting principles and practices.

(e) Any serious disputes or difficulties with management
encountered during the course of the audit.

(f) Other matters related to the conduct of the audit which
are to be communicated to the Committee under generally accepted
auditing standards and Statement of Accounting Standards No. 61
(Codification of Statements on Auditing Standards, AU 380).

(8) Review prior to release documents containing the Company's
financial statements filed with the Securities and Exchange Commission or
otherwise distributed to consider whether the information contained in these
documents is consistent with the information in the financial statements.

(9) Review prior to release the interim financial reports filed with
the Securities and Exchange Commission or otherwise distributed.

(10) Oversee compliance with the requirements of the Securities and
Exchange Commission for disclosure of independent auditor's services and Audit
Committee members and activities.

(11) Provide oversight and review of the Company's asset management
policies, including an annual review of the Company's investment policies and
performance for cash and short-term investments.
<PAGE>

(12) Review policies and procedures with respect to officers' expense
accounts and perquisites, including their use of corporate assets, and consider
the results of any review of these areas by the independent accountant.

(13) Review of related party transactions for potential conflicts of
interest.

(14) Review legal and regulatory matters that may have a material
impact on the financial statements, related Company compliance policies, and
programs and reports received from regulators.

(15) Provide the opportunity to meet with the independent accountant
and management in separate executive sessions to discuss any matters that the
Committee or the other party believes should be discussed privately with the
Committee.

(16) Review periodically Company policy statements to determine
adherence to the Company's code of conduct or core values, and legal
requirements.

(17) Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy statement.

(18) Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities. The Committee shall be empowered to
retain independent counsel and other professionals to assist in the conduct of
any investigation.

(19) Prepare minutes of all Committee meetings and activities and
submit such minutes, including any recommendations as the Committee may deem
appropriate, to the Board of Directors.