Document:

EXHIBIT 10.12

                            ASSET PURCHASE AGREEMENT

         This Asset Purchase Agreement (the "Agreement") is effective as of
December 13, 1999, by and among Dreamcatcher Franchise Corporation ("Buyer"), a
Minnesota corporation, Dreamcatcher Learning Centers, Inc. ("Seller"), a
Colorado corporation, and Margo W. Barnhart and Jerald L. Barnhart ("Seller's
Shareholders").

RECITALS:

         A. Seller owns the trademarks "Dreamcatcher Learning Centers" and
Dreamcatcher Direct Instruction Centers(SM). Seller also operates three
Dreamcatcher Learning Centers franchises at the following locations: (i) 427
Main Street, Windsor, CO 80550, (ii) 200 East Monroe, Fort Collins, CO 80526,
and (iii) 1990 59th Avenue, Greeley, CO 80634 (collectively, the "Business").

         B. The parties mutually desire that Seller shall sell to Buyer, and
Buyer shall purchase from Seller, substantially all of Seller's assets upon the
terms and subject to the conditions set forth in this Agreement.

         C. Contemporaneous with the consummation of the transaction
contemplated in this Agreement, Buyer is purchasing the assets of Dreamcatcher
Franchise Corporation ("DFC"), the Franchisor of Dreamcatcher Learning Centers.

AGREEMENT:

         For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree to the terms set forth
below.

1.       PURCHASE OF ASSETS; LIMITED ASSUMPTION OF LIABILITIES

         1.1. Purchase of Assets. Subject to the terms and conditions in this
Agreement, Seller agrees on the Closing Date (as defined in Section 7.1) to
assign, sell, transfer, convey, and deliver to Buyer, and Buyer agrees on the
Closing Date to purchase from Seller, substantially all of Seller's assets
(excepting only the assets specifically identified as "Excluded Assets" in
Section 1.2 below), wherever the same may be located (collectively referred to
as the "Purchased Assets"), including, without limitation, the following assets.

                  1.1.1. All furniture, equipment, inventory, supplies,
including those items described in Exhibit 1.1.1 hereto.

                  1.1.2. All trade fixtures and leasehold improvements.

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                  1.1.3. All records, whether tangible or intangible (e.g.,
stored electronically), including, business records and files, marketing
materials, customer and prospect lists, and records relating to pricing,
customers, and suppliers.

                  1.1.4. All intangible property, goodwill, claims of Seller
against third parties, know-how, technology, trade secrets, processes, design
rights, computer programs, software license rights, web pages, domain names,
rights to all telephone and facsimile numbers of Seller, Seller's corporate
name, assumed names, trademarks, servicemarks, copyrights, other intellectual
property rights, together with applications, goodwill and claims associated
therewith.

                  1.1.5. All licenses, permits, approvals, governmental or
otherwise, including the licenses and permits identified on Exhibit 1.1.5 hereto
(the "Licenses and Permits").

                  1.1.6. All contract rights, including those related to the
contracts identified on Exhibit 1.1.6 hereto ("Assumed Contracts").
Notwithstanding anything in this Agreement to the contrary, this Agreement shall
not constitute an assignment of any Assumed Contract if an attempted assignment
thereof, without the consent of a third party thereto, would constitute a breach
thereof or in any way adversely affect the rights of Seller or Buyer thereunder.
If a necessary consent to assignment of an Assumed Contract is not obtained, or
if any attempt at an assignment thereof would be ineffective or would affect the
rights of Seller or Buyer thereunder so that Buyer would not in fact receive all
such rights, Seller shall cooperate with Buyer to the extent necessary to
provide for Buyer the benefits under such Assumed Contract, including
enforcement for the benefit of Buyer of any and all rights of Seller against a
third party thereto arising out of the breach or cancellation by such third
party or otherwise.

                  1.1.7. Prepaid assets and deposits which Buyer will obtain the
benefit of after the Closing (the "Prepaid Assets and Deposits"), including
those identified on Exhibit 1.1.7 hereto.

                  1.1.8. All accounts receivable, notes receivable and other
rights to payments, including those identified in the aging on Exhibit 1.1.8
hereto (the "Receivables").

                  1.1.9. Cash and cash equivalents as of the Closing Date.

                  1.1.10. Any other tangible and intangible property used in the
Business of whatever type.

         1.2. Excluded Assets. Seller does not sell, any of the following assets
("Excluded Assets").

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                  1.2.1. Property used by the Business under a lease arrangement
which is not listed on Exhibit 1.1.6 and any contracts identified on Exhibit
1.1.6 for which necessary consents to assignment by Seller to Buyer have not
been obtained as of the Closing Date and under which Buyer will not equitably
receive the benefits ("Excluded Contracts").

                  1.2.2. Corporate record book and tax returns provided tax
returns and related work papers shall be made available for review and copying
by Buyer.

                  1.2.3. Artwork personally owned by Seller's Shareholders which
is not included in Seller's Financial Statements.

         1.3. Assumption of Liabilities. Except as set forth in subsections
1.3.1 and 1.3.2 below (the "Assumed Liabilities"), Buyer shall not assume any
liabilities, obligations or undertakings of Seller of any kind or nature
whatsoever, whether fixed or contingent, known or unknown, determined or
determinable, due or not yet due. Without limiting the generality of the
foregoing and except as otherwise provided for in this Agreement, Buyer
specifically disclaims assumption of: (a) any liabilities or obligations with
respect to taxes, negligence, strict liability, product liability, or breach of
warranty claims asserted with regard to Seller's operation prior to the Closing
Date; (b) any liabilities and obligations growing out of or relating to
relationships and dealings of Seller with competitors, customers, suppliers,
brokers, brokered printing, licensees, employees (including workers compensation
claims), or any other action or inaction of Seller or its predecessors in
interest; (c) any liability for sales or use taxes arising out of the sale of
any of the Purchased Assets under this Agreement.

                  1.3.1. Liabilities. On the Closing Date, Buyer assumes the
liabilities of Seller specifically listed on Exhibit 1.3.1 but only to those
creditors identified by name and only in the amount stated.

                  1.3.2. Assumed Contracts and Equitably Assumed Contracts. On
the Closing Date, Buyer assumes Seller's obligations under the Assumed Contracts
that relate to benefits Buyer receives after the Closing but not obligations or
liabilities that relate to benefits received prior to the Closing Date unless
such liability is specifically identified on Exhibit 1.3.1.

2.       PURCHASE PRICE: PAYMENT; ALLOCATION

         2.1. Purchase Price. The purchase price ("Purchase Price") for the
Purchased Assets and the performance by Seller and Seller's Shareholders of
their obligations under this Agreement shall be the sum of the following:

04.07.1  Buyer's assumption of Assumed Liabilities;

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                  2.1.2. A payment of Seventy-Five Thousand Dollars ($75,000)
when (or if) the number of Dreamcatcher Learning Centers franchises then
operating equals each of the following levels subject to a maximum cumulative
payment of Three Hundred Seventy-Five Thousand Dollars ($375,000) provided such
obligation ceases eight (8) years after the Closing Date.

                  Number of Stores                   Cumulative Payment
                  ----------------                   ------------------
                         25                                $75,000
                         50                               $150,000
                        100                               $225,000
                        150                               $300,000
                        200                               $375,000

                  Stores must be producing revenue at the time to be counted
                  (e.g., stores that once produced revenue but have since closed
                  are not counted after the date of closure).

         2.2. Allocation of Purchase Price. The Purchase Price is hereby
allocated among the Purchased Assets as set forth in Exhibit 2.2. The parties
agree to report this transaction for tax purposes in accordance with the
allocations set forth in Exhibit 2.2. Buyer and Seller shall file all tax
returns, including Internal Revenue Form 8594, in accordance with the allocation
set forth on Exhibit 2.2.

3.       REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER'S SHAREHOLDERS

         Seller and Seller's Shareholders, jointly and severally, make the
following representations and warranties to Buyer with the intention that Buyer
may rely upon the same and acknowledge that the same shall be true as of the
Closing Date (as if made at the Closing) and shall survive the Closing of this
transaction.

         3.1. Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado, has all
requisite corporate power and authority, corporate and otherwise, to own its
properties and assets and conduct the Business.

         3.2. Authority. Seller has all requisite power and authority to
execute, perform and carry out the provisions of this Agreement. Seller has
taken all requisite corporate action authorizing and empowering Seller to enter
into this Agreement and to consummate the transactions contemplated in this
Agreement. Seller is qualified to do business and in good standing as a foreign
corporation in all states in which qualification is required by the nature of
its business.

         3.3. Seller's Shareholders. The Seller's Shareholders own one hundred
percent (100%) of the issued and outstanding stock of Seller.

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         3.4. Financial Statements.

                  3.4.1. Financial Statements. Seller has furnished Buyer a true
and complete copy of its (i) 1997 and 1998 tax returns, and (ii) balance sheets
and statements of income for its partial fiscal year ending October 31, 1999,
copies of which are attached hereto as Exhibit 3.4.1 (collectively the
"Financial Statements"). The Financial Statements fairly present and will fairly
present in all material respects the financial condition of Seller as of the
represented dates thereof and the results of Seller's operations for the periods
covered thereby. For purposes of this Agreement, the Financial Statements shall
be deemed to include any notes thereto.

                  3.4.2. Seller's Books and Records. Seller's books of account
and records (including customer files, employment records and tax records) are
complete, and accurate in all material respects.

                  3.4.3. No Adverse Changes. Since the date of the most recent
Financial Statements, there has not occurred or arisen (whether or not in the
ordinary course of business): (i) any material adverse change in the financial
condition, prospects, or operations of the Business, (ii) any change in Seller's
accounting methods or practices, (iii) any sale or transfer of any asset or any
amendment of any agreement of Seller except in the ordinary course of business,
(iv) any loss of or damage to the Purchased Assets due to abuse, misuse, fire or
other casualty, (v) any labor trouble, (vi) any reasonably foreseeable increase
in operating costs of the Business not commensurate with increased production,
(vii) any warranty or liability claims or losses, or (viii) any other event or
condition known or suspected by Seller or Seller's Shareholders to have occurred
or to exist which, singly or in the aggregate, materially and adversely affect
or may affect the Purchased Assets or the Business.

         3.5. Tax Reports, Returns and Payment. Seller has timely filed all
federal and applicable state, local, and foreign tax or assessment reports and
returns of every kind required to be filed by them, including, without
limitation, income tax, sales and use tax, real estate tax, personal property
tax and unemployment tax. Seller has duly paid all taxes and other charges
(including interest and penalties) due to or claimed to be due by any taxing
authorities except for those specifically identified by type and amount as
Assumed Liabilities. True and correct copies of the reports and returns filed by
Seller during the last three (3) tax years have been made available to Buyer.
Where required, timely estimated payments or installment payments of tax
liabilities have been made to all governmental agencies in amounts sufficient to
avoid underpayment penalties or late payment penalties applicable thereto,
except amounts (including penalties, interest and late fees) as are specifically
identified by type and amount as Assumed Liabilities. During the three (3) years
preceding the Closing Date, Seller has not been subjected to or received any
notice that Seller will be subject to investigation, examination or audit by
governmental authorities. Seller is not subject to any current pending action or
investigation and no unexpired waiver of an applicable statute of limitations is
outstanding with respect to Seller.

         3.6. Title to Assets. The Purchased Assets constitute all property used
in the conduct of the Business as now conducted. Seller is the owner of the
Purchased Assets. Seller holds title to the Purchased Assets free and clear of
all liens, charges, encumbrances or third party claims or

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interests of any kind whatsoever, except liens for Assumed Liabilities. All of
the Purchased Assets are located at the premises identified in Exhibit 3.11.

         3.7. Personal Property. All tangible personal property included in the
Purchased Assets is in reasonable repair and operating condition. Seller hereby
assigns to Buyer as of the Closing Date any and all warranties covering such
property existing as of the Closing Date. All intangible personal property
included within the Purchased Assets is owned by Seller and does not infringe
the rights of any third parties.

         3.8. Inventory. The inventory included in the Purchased Assets is in
good, merchantable and saleable in the ordinary course of business and is of a
quality, quantity and mix consistent with Seller's past business practices and
the demands of its customers. The supplies included in the Purchased Assets are
in good, usable condition.

         3.9. Receivables. All of Seller's accounts receivable have arisen from
bona fide and actual sales of goods in the ordinary course of the Business. All
of the Receivables are collectible, and there are no defenses, offsets, or
counterclaims threatened or pending with respect to thereto.

         3.10. Licenses and Permits. The Licenses and Permits constitute all of
the licenses, permits, and approvals, governmental or otherwise, necessary for
Seller to conduct the Business where it is currently conducted. All of the
Licenses and Permits are transferable to Buyer. The Licenses and Permits are
valid and in good standing and Seller has not received any notice that they will
lapse or be terminated by action of any governmental authority or otherwise.

         3.11. Real Property. Exhibit 3.11 contains an accurate and complete
list of all real property owned, leased, subject to an option, purchase
agreement or otherwise used within the prior three (3) years or is currently
planned to be used in the Business (the "Real Property"). Except as may be
otherwise set forth in Exhibit 3.11, the Real Property is usable for its current
uses without violating any federal, state, local or other governmental building,
zoning, health, safety, platting, subdivision or other law, ordinance or
regulation, or any applicable private restriction, and such use is a legal
conforming use. Seller has not received any formal or informal notice of the
initiation or any condemnation or eminent domain proceeding with respect to the
Real Property, and has neither made nor received an offer of sale in lieu
thereof.

         3.12. Agreements, Contracts and Commitments. Exhibit 1.1.6 contains an
accurate and complete list of all verbal and written agreements, contracts,
leases, commitments and warranties to which Seller is a party. Except as
specifically set forth therein, all such contracts, commitments or other
arrangements (i) are in ful1 force and effect and have not been amended, (ii)
are not subject to any default and no event is existing which, with notice or
lapse of time, or both, will constitute a default thereunder, and (iii) are not
subject to any default and the transaction as contemplated by this Agreement,
with notice or lapse of time, or both, will not constitute an default
thereunder.

         3.13. Copies of Contracts; Terms and Binding Effect. True, complete and
correct copies of all written contracts, commitments, understandings, and other
documents referred to in the

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Exhibits have been delivered to Buyer or attached to the Exhibits where required
by this Agreement; there are no amendments to or modifications of, or agreements
of the parties relating to, any such contracts, commitments, and understandings
which have not been delivered to Buyer; and to the knowledge of Seller or
Seller's Shareholders, each such contract, commitment, or understanding, as
amended, is considered valid and binding on the parties to it in accordance with
its respective terms, and the transaction contemplated by this Agreement will
not result in the violation or breach of any such material contract, commitment,
or understanding.

         3.14. Contracts with Related Parties. Except as specifically identified
on Exhibit 1.1.6, there are no agreements or contracts between Seller and any
of its employees, agents, officers, directors, shareholders, or entities which
any of them control.

         3.15 Employee Plans.

                  3.15.1. Existence of Plans. Exhibit 3.15.1 is an accurate and
complete list of all Employee Plans of Seller. "Employee Plans" means any
pension, retirement, disability, medical, dental, or other health insurance
plan, life insurance or other death benefit plan, profit sharing, deferred
compensation, stock option, bonus or other incentive plan, vacation benefit
plan, severance plan, or other employee benefit plan or arrangements including,
without limitation, any "pension plan" as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any
"welfare plan" as defined in Section 3(1) of ERDA, whether or not any of the
foregoing is funded, (i) to which Seller is a party or by which Seller is bound;
or (ii) with respect to which Seller has made any payments or contributions
since January 1, 1996, or may otherwise have any liability (including any such
plan or other arrangement formerly maintained by Seller or to which Seller
contributed or had an obligation to contribute).

                  3.15.2. Administration of Employee Plans. Each Employee Plan
in existence has been consistently administered in accordance with its terms and
provisions and as amended in accordance with the terms and provisions of ERISA
and the Internal Revenue Code of 1954, as amended (the "Code"), to the extent
applicable, and is in material compliance with the applicable provisions of
ERISA, the Code and state law; each of such Employee Plans that is intended to
be a "qualified" plan meets the applicable requirements for qualification under
Section 401(a), and exemption under Section 501(a), of the Code; each of such
Employee Plans has not at any time engaged in any "prohibited transaction"
within the meaning of Section 4975 of the Code or Section 406 of ERISA which is
nonexempt under the applicable provisions of ERISA or the Code or an
administrative exemption; no funding deficiency exists with respect to any of
such Employee Plans within the meaning of Section 412 of the Code or Part 3 of
ERISA; all proper and accurate federal and state returns, reports and other
filings with respect to each of such Employee Plans has been timely filed and
any amounts shown thereon to be due and payable has been paid in full; none of
such Employee Plans is a multi-employer plan with the meaning of Section 414(f)
of the Code and the regulations thereunder and Section 3(37)(D) of ERISA and the
regulations thereunder; each of such Employee Plans that is subject to the
continuation of coverage or conversion provisions of Sections 601-608 of ERISA
and the regulations thereunder, Section 4980B of the Code and the regulations
thereunder or the law of any state is in compliance therewith; and no fiduciary
of any such Employee Plan has committed a breach of fiduciary duty in violation
of ERISA.

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                  3.15.3. Absence of Certain Events Respecting Employee Plans.
Since January 1, 1998, Seller has not instituted or agreed to institute any new
Employee Plan, or made or agreed to make any change in any Employee Plan.

         3.16. Union and Employment Contracts and Other Employment Matters.

                  3.16.1. Seller is not a party to any formal or informal
collective bargaining agreement or any other written employment agreement, nor
is Seller a party to any other contract or understanding (oral or written) that
contains any severance pay liabilities or obligations, except for accrued,
unused vacation pay or accrued and unused sick leave pay. All of Seller's
employee benefits are outlined in the employee handbook, a true and complete
copy of which has been provided to Buyer.

                  3.16.2. Seller has no, and on the Closing Date will not have,
any obligations to Seller's directors, officers, employees or agents other than
obligations arising in the ordinary course of business on account of wages,
salaries and commissions for prior services performed or business produced.

                  3.16.3. During the last three (3) years Seller has experienced
no work stoppages, walkouts or strikes or attempts by its employees to organize
a union.

                  3.16.4. There have been no employee or ex-employee lawsuits or
claims, or any claims of unfair labor practices or the like, in the past three
(3) years.

         3.17. Employee Information.

                  3.17.1. Employee List. Exhibit 3.17.1 hereto is an accurate
and complete list of the names, positions, titles, salary rates and years of
service for all employees of Seller who provide services to the Business,
together with summary of the bonuses, additional compensation and other employee
benefits, if any, paid or payable to such persons as of the date of this
Agreement.

                  3.17.2. Terminated Employees. Exhibit 3.17.2 hereto is a true
and accurate list of all employees of Seller whose employment has terminated
either voluntarily or involuntarily in the twelve (12) month period preceding
the Closing Date. No claims have been made or to the knowledge of the Seller or
Seller's Shareholders threatened against Seller by any former or present
employee based on employment discrimination, wrongful discharge, or any other
circumstance relating to or arising from the employment relationship with
Seller.

                  3.17.3. Employee Expenses. Except as otherwise provided for in
this Agreement, all amounts due to the employees of Seller through the Closing
Date for commissions, salary, wages, fringe benefits (except as stated in
Section 1.3.1), pension benefits, including cash bonuses accrued through the
Closing Date and all employment taxes incurred thereon, will be promptly paid by
Seller after the Closing.

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                  3.17.4. Compliance with Employment Laws. Seller has materially
complied with all applicable federal and state laws relating to the employment
of labor, including the provisions thereof relating to wages, hours, collective
bargaining and the payment of withholding and social security taxes, and is not
liable for any arrears of wages, or any tax or penalties, for failure to comply
with any of the foregoing.

         3.18. Significant Customers/Suppliers. Exhibit 3.18 identifies all
customers of Seller that individually account for over five percent (5%) of
Seller's revenues during the current and preceding fiscal year. Exhibit 3.18
also identifies all suppliers of Seller that individually account for over five
percent (5%) of Seller's material purchases during the current fiscal year and
the fiscal year ending prior to the date of this Agreement. Except as disclosed
in Exhibit 3.18, neither Seller nor Seller's Shareholders have any information
indicating that any significant customers or suppliers of Seller intends to
cease doing business with Seller or materially alter the amount of business they
do with Seller.

         3.19. Insurance. Seller has maintained the insurance identified on
Exhibit 3.19 for the period stated on Exhibit 3.19 and will maintain such
insurance through the Closing Date. Insurance claims submitted within the three
(3) years prior to the Closing Date are identified on Exhibit 3.19 (including a
summary of workers compensation claims identifying the worker, nature of injury,
date of injury, and current status).

         3.20. Litigation and Related Matters. Except as disclosed on Exhibit
3.20, there is no pending or, to Seller's or Seller's Shareholders' knowledge,
threatened litigation, proceeding, or investigation against Seller nor is Seller
subject to any existing judgment, order, decree, or other action affecting
Seller, the operation of the Business or the Purchased Assets, or which would
prevent, impede, or make illegal the consummation of the transactions
contemplated in this Agreement to the knowledge of Seller or Seller's
Shareholders. No basis exists for any warranty, nonconformity or product
liability claims with regard to products sold by the Business and no claims
therefor have been received within the prior one year period. No legal actions
have been commenced against Seller within the three years prior to the Closing
Date.

         3.21. Compliance with Laws. Seller has materially complied, and is in
material compliance, with applicable laws, statutes, orders, rules, regulations
and requirements promulgated by governmental or other authorities relating to
Seller (including, without limitation, tax, employment, ERISA, licensing,
environmental, OSHA, and unlawful payments to domestic or foreign governmental
officials). Seller has not received any notification of any asserted past or
present violation in connection with the conduct of any of the Businesses of any
law, ordinance or regulation. Seller has not received any notice of an alleged
violation of law, statute, order, rule, regulation or requirement promulgated by
governmental or other authorities, and has not received any complaint, inquiry,
request for information from any governmental entity or any notification that it
is under investigation.

         3.22. Breaches of Contracts; Required Consents. Neither the execution
and delivery of this Agreement by Seller nor compliance by Seller with the terms
and provisions of this Agreement will (a) conflict with or result in a breach
of (i) any of the terms, conditions or provisions of the Articles of
Incorporation, Bylaws or other governing instruments of Seller, (ii)

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any judgment, order, decree or ruling to which the Seller or Seller's
Shareholders are a party, (iii) any injunction of any court or governmental
authority to which either of them is subject, or (iv) any agreement, contract or
commitment which is material to the Business or to Seller's financial condition;
or (b) require the affirmative consent or approval of any third party except as
disclosed in Exhibit 1.1.6.

         3.23. Intellectual Property. All right, title and interest in and to
all intellectual property that is necessary to or used in the Business as
presently conducted or proposed to be conducted or in the production of Seller's
products ("Seller's Intellectual Property") is owned by or licensed exclusively
to, without royalties, fees or commissions, Seller, free and clear of any liens
or encumbrances. Neither the Intellectual Property nor any of Seller's products
or services infringes, misuses, or conflicts with the rights of others. Seller's
Intellectual Property is valid and has not been challenged in any judicial or
administrative proceeding. Neither any of Seller's Shareholders nor any employee
or consultant of Seller (or the employer of any such consultant) has any rights
in or to any of the Seller's Intellectual Property. All of Seller's Intellectual
Property that is registered is listed on Exhibit 3.23 and has the status
indicated therein and all applications are still pending in good standing and
have not been abandoned. Seller has not failed to take any necessary steps or
appropriate actions to record its interests, or protect its rights, in Seller's
Intellectual Property. No person nor such person's business nor any of its
products has infringed, misused, misappropriated or conflicted with Seller's
Intellectual Property or currently is infringing, misusing, misappropriating or
conflicting with such rights.

         3.24. Cash Locations. Exhibit 3.24 contains a complete list of all of
Seller's bank accounts, savings accounts, certificates of deposit, mutual funds
and other accounts, safe deposit boxes, together with identification of persons
authorized to withdraw or deal with the same.

         3.25. Year 2000 Compliance. The Purchased Assets and Business are Year
2000 Compliant. "Year 2000 Compliant" means that means that functioning,
processing and performing in a correct and timely manner will be unaffected when
dealing with time/date data across multiple millennium and century boundaries.

         3.26. Binding Obligation. This Agreement constitutes the legal, valid
and binding obligation of Seller and Seller's Shareholders in accordance with
the terms hereof. Neither Seller nor Seller's Shareholders is subject to any
charter, mortgage, lien, lease, agreement, contract, instrument, law, rule,
regulation, order, judgment or decree, or any other restriction of any kind or
character, which would prevent the consummation of the transactions contemplated
in this Agreement.

         3.27. Completeness of Disclosures. None of the representations or
warranties made by Seller and Seller's Shareholders in this Agreement or the
Exhibits, and no written statement, certificate or Exhibit furnished or to be
furnished by or on behalf of Seller or Seller's Shareholders to Buyer or its
agents pursuant hereto, or in connection with the transaction contemplated by
this Agreement, contains or will contain any untrue statement of a material fact
or omits or will omit any material fact the omission of which would be
misleading. The Exhibits to this Agreement, where provided by or on behalf of
Seller, completely and correctly present the information required by this
Agreement to be set forth in them.

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4.       REPRESENTATIONS AND WARRANTIES OF BUYER

         Buyer makes the following representations and warranties to Seller with
the intention that Seller may rely upon the same, and acknowledges that the same
shall be true as of the Closing Date (as if made at the Closing) and shall
survive the Closing of this transaction.

         4.1. Organization. Buyer is a corporation, duly organized, validly
existing in good standing under the laws of the State of Minnesota, and has all
requisite corporate power and authority to own its properties and conduct the
business in which it is presently engaged.

         4.2. Authority. Buyer has all requisite power and authority to execute,
perform and carry out the provisions of this Agreement. Buyer has taken all
requisite action authorizing and empowering Buyer to enter into this Agreement
and to consummate the transactions contemplated in this Agreement.

          4.3. Breaches of Contracts; Required Consents. Neither the execution
and delivery of this Agreement by Buyer, nor compliance by Buyer with the terms
and provisions of this Agreement, will (a) conflict with or result in a breach
of: (i) any of the terms, conditions or provisions of the Articles of
Incorporation and Bylaws or other governing instruments of Buyer, (ii) any
judgment, order, decree or ruling to which the Buyer is a party, (iii) any
injunction of any court or governmental authority to which it is subject, or
(iv) any agreement, contract or commitment listed on any Exhibit hereto and
which is material to the financial condition of Buyer; or (b) require the
affirmative consent or approval of any third party.

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         4.4. Binding Obligation. This Agreement constitutes the legal, valid
and binding obligation of Buyer in accordance with the terms hereof. Buyer is
not subject to any charter, mortgage, lien, lease, agreement, contract,
instrument, law, rule, regulation, order, judgment or decree, or any other
restriction of any kind or character, which would prevent the consummation of
the transactions contemplated in this Agreement.

5.       CERTAIN COVENANTS AND AGREEMENTS

         5.1. Preserve Accuracy of Representations and Warranties. Seller and
Seller's Shareholders shall refrain from taking any action, except with the
prior written consent of Buyer, which would render any representation, warranty
or agreement of Seller and Seller's Shareholders in this Agreement inaccurate or
breached as of the Closing. At all times prior to the Closing, Seller and
Seller's Shareholders will promptly inform Buyer in writing with respect to any
matters that arise after the date of this Agreement which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in the Exhibits.

         5.2. Access to Information. During the period prior to the Closing,
Seller shall give to Buyer and its attorneys, accountants and other authorized
representatives, full access to all of the property, books, contracts,
commitments and records of Seller and shall furnish to them during such period
all such information concerning the Business and the Purchased Assets as they
reasonably may request.

         5.3. Approvals and Consents. Seller shall use its best efforts to
obtain all approvals and consents to transfer the Purchased Assets to Buyer,
except such approvals required to assign obligations solely for the payment of
money which are included within the Assumed Liabilities. Seller agrees to
consult with Buyer, and Buyer agrees to cooperate with Seller, in connection
with Seller obtaining such approvals and consents.

         5.4. Restrictions. Seller and Seller's Shareholders represent and
covenant that since January 1, 1999 and during the period from the date of this
Agreement to the Closing (except as Buyer otherwise has consented in writing):

                  5.4.1. Seller's has conducted and will conduct the Business
only in the usual and ordinary manner.

                  5.4.2. Seller has and will timely pay and discharge all bills
and monetary obligations and timely and properly performed all of its
obligations and commitments under all existing contracts and agreements
pertaining to or affecting Seller.

                                       12
<PAGE>

                  5.4.3. Seller and Seller's Shareholders have used and shall
continue to use their reasonable business efforts to preserve the Business and
the Purchased Assets and to keep available to Buyer the services of Seller's
present employees, and not to impair relationships with suppliers, customers and
others having business relations with the Seller; provided, Seller shall consult
with Buyer and obtain Buyer's written consent prior to committing to material
obligations to be assumed by Buyer.

         5.5. Risk of Loss. Prior to completion of the Closing, the risk of loss
or destruction to any of Seller's assets shall be that of Seller. Seller shall
replace such damaged or destroyed Purchased Assets with similar assets of equal
value and shall use any insurance proceeds received for such damage to make such
replacements. Buyer shall be permitted to terminate this Agreement in the event
of any material event of damage or destruction to any of the Purchased Assets
prior to the Closing.

         5.6. Non-Solicitation. Seller, Seller's Shareholders, and their
representatives, will not, directly or indirectly discuss or negotiate with any
person (other than Buyer), encourage the submission of inquiries, proposals or
offers from any person (other than Buyer), or otherwise provide information to
any other person, with respect to the sale of any of Seller's rights in the
Business or Purchased Assets or an investment in Seller (whether by merger, sale
of stock, or otherwise), other than the sale of product or services in the
ordinary course of business. Seller and Seller's Shareholders agree to promptly
disclose to Buyer any inquiries by parties that indicate interest in discussing
a potential purchase, merger or other acquisition of the assets of the Business
or any stock of any of Seller's Shareholders.

6.       CONDITIONS OF CLOSING: ABANDONMENT OF TRANSACTION

         6.1. Conditions to Obligations of Buyer to Proceed on the Closing Date.
The obligations of Buyer to proceed on the Closing Date shall be subject (at its
discretion) to the satisfaction, on or prior to the Closing, of all of the
following conditions:

                  6.1.1. Truth of Representations and Warranties and Compliance
with Obligations. The representations and warranties of Seller and the Seller's
Shareholders in this Agreement shall be true in all material respects on the
Closing Date with the same effect as though made at such time. Seller and the
Seller's Shareholders shall have complied with all of their covenants and
agreements in this Agreement to be performed prior to Closing.

                  6.1.2. Review of Business. A review by Buyer of the Business,
with full cooperation of Seller, shall have been completed with results
satisfactory to Buyer, in Buyer's sole discretion.

                  6.1.3. Closing DFC Asset Purchase. Buyer purchases
substantially all of the assets of DFC.

                                       13
<PAGE>

         6.2. Conditions to Obligation of Seller to Proceed on the Closing Date.
The obligation of Seller to proceed on the Closing Date shall be subject (at its
discretion) to the satisfaction, on or before the Closing, of the following
conditions:

                  6.2.1. Truth of Representations and Warranties and Compliance
with Obligations. The representations and warranties of Buyer in this Agreement
contained shall be true in all material respects on the Closing Date with the
same effect as though made at such time. Buyer shall have performed all material
obligations and complied with all covenants and agreements in this Agreement to
be performed prior to Closing.

         6.3. Absence of Exhibits. The parties hereby acknowledge that as of the
date of Buyer's execution of this Agreement certain exhibits required under this
Agreement are not attached hereto and/or will need to be updated. Seller
acknowledges that Buyer, in executing this Agreement, is relying on the absence
of any materially adverse information which may be disclosed upon delivery of
any of the required exhibits or any documents referenced therein. Buyer reserves
the right to cancel this Agreement if Buyer reasonably determines that
materially adverse information is added to the exhibits or any documents after
the date of this Agreement.

7.       CLOSING

         7.1. Closing. The closing of the transaction contemplated by this
Agreement shall be held at 15155 Technology Drive, Eden Prairie, MN 55344, on
January 5, 2000, at 10:00 a.m. local time, or at such other date or time as the
parties may mutually agree upon in writing. The consummation of the transaction
contemplated by this Agreement shall be effective as 12:01 a.m. on January 5,
2000 and such date and time shall be deemed the "Closing" and "Closing Date."

         7.2. Documents to be Delivered by Seller and Seller's Shareholders.
Seller and Seller's Shareholders agree to deliver the following documents, duly
executed as appropriate, to Buyer at the Closing:

                  7.2.1. All certificates, schedules, exhibits, and attachments
in completed form and specifying the information required by the provisions of
this Agreement.

                  7.2.2. An opinion of counsel from Seller's counsel as to the
Seller's authority to enter into this Agreement and that the Agreement is a
legally binding obligation of Seller.

                  7.2.3. Appropriate documentation for filing changing the name
of Seller's corporation and such documentation reasonably requested by Buyer
permitting Buyer to use Seller's name.

                  7.2.4. Documentation transferring Seller's Intellectual
Property that is registered.

                  7.2.5. Such other documents as Buyer may reasonably request
for the purpose of assigning, transferring, granting, conveying, and confirming
to Buyer or reducing to its

                                       14
<PAGE>

possession, any and all assets, property and rights to be conveyed and
transferred by this Agreement.

         7.3. Documents Delivered by Buyer. Buyer agrees to deliver the
following documents, duly executed as appropriate, to Seller at the Closing:

                  7.3.1. Employment Agreements in the form of Exhibit 8.5 for
Seller's Shareholders.

                  7.3.2. Such other documents as Seller reasonably may request
to carry out the transactions contemplated under this Agreement.

8.       POST CLOSING COVENANTS AND OBLIGATIONS

         8.1. Further Documents and Assurances. At any time and from time to
time after the Closing Date, each party shall, upon request of another party,
execute, acknowledge and deliver all such further and other assurances and
documents, and will take such action consistent with the terms of this
Agreement, as may be reasonably requested to carry out the transactions
contemplated by this Agreement and to permit each party to enjoy its rights and
benefits under this Agreement.

         8.2. Restrictive Covenant.

                  8.2.1. Noncompete Covenant. Seller and Seller's Shareholders
covenant and agree that for a period of five (5) years after the Closing Date,
they will not engage in any business which competes with the Business in the
United States (the "Territory"). This covenant of noncompetition shall be
interpreted to prohibit, without limiting the generality of the foregoing,
Seller and Seller's Shareholders from serving as a shareholder, partner,
director, officer, employee, agent of or independent contractor to, any person
or entity which directly or indirectly competes in the Territory with Seller's
instructional learning business or other instructional learning businesses,
including Sylvan Learning Systems and Huntington Learning Centers, or conspire
with others to do so.

                  8.2.2. Interference with the Business. For a period of five
(5) years after the Closing Date, Seller and Seller's Shareholders covenant and
agree not to directly or indirectly attempt to divert or interfere with Buyer's
conduct of the Business or the Business's relationships with its customers,
employees, suppliers or other person with which it does business.

                  8.2.3. Derogatory Statements. Seller and Seller's Shareholders
covenant and agree that neither of them will disparage, vilify, slander 01:
defame Buyer, or their employees or business practices.

                                       15
<PAGE>

                  8.2.4. Injunctive Relief and Reasonableness. Seller and
Seller's Shareholders stipulate and agree that the remedy at law for breach of
the covenant in the subsections of Section 8.2 would be inadequate and that
Buyer shall be entitled to injunctive relief to enforce such covenants. Seller
and Seller's Shareholders further stipulate and agree that the prohibitions
contained in Section 8.2.1 are reasonable as to time and area, and Seller and
Seller's Shareholders specifically waive any objection to the reasonableness of
said prohibitions. In the event that a provision of this Agreement is held
invalid by a court of competent jurisdiction, the remaining provisions shall
nonetheless be enforceable in accordance with their terms. Further, in the event
that any provision is held to be overbroad as written, such provision shall be
deemed amended to narrow its application to the extent necessary to make the
provision enforceable according to applicable law and shall be enforced as
amended. Damages and injunctive relief shall not be considered alternative
remedies.

         8.3. Confidentiality. Seller and Seller's Shareholders shall hold in
strictest confidence and not disclose or use any confidential information
relating to the Business, except for disclosure of confidential information of
the Business to Buyer in connection with the transaction contemplated by this
Agreement.

         8.4. Payment of Debts and Liabilities. Seller shall pay all of its
liabilities and debts which have arisen on or prior to the Closing Date as they
become due and payable, except for Assumed Liabilities and amounts which Seller
contests in good faith for which it maintains an adequate reserve.

         8.5. Employment of Seller's Shareholders. Buyer agrees to offer
employment to each of Seller's Shareholders pursuant to the form of Employment
Agreement attached hereto as Exhibit 8.5.

         8.6. Lease. Seller and Seller's Shareholders shall make the existing
learning space at 427 Main St., Windsor, Co 80550, Suites E-2, F&G, available
without charge on an as needed basis in order for Buyer to complete the existing
commitments to Seller's customers relating to that location.

9.       INDEMNIFICATION

         9.1. Indemnification by Seller and Seller's Shareholders. Seller and
Seller's Shareholders, jointly and severally, shall indemnify and hold Buyer
harmless at all times from and after the date of this Agreement, against and in
respect of all damages, losses, costs and expenses (including reasonable
attorneys' fees) which Buyer may suffer or incur in connection with any of the
following matters:

                  9.1.1. Any claim, demand, action or proceeding asserted by a
creditor of Seller under the provisions of any applicable Bulk Transfer Act or
asserted by any other person respecting any liabilities of Seller which are not
expressly assumed by Buyer under this Agreement.

                                       16
<PAGE>

                  9.1.2. The breach by Seller or Seller's Shareholders of any of
their representations, warranties or covenants in this Agreement.

         9.2. Indemnification by Buyer. Buyer shall indemnify and hold Seller
harmless at all times from and after the date of this Agreement, against and in
respect of all losses, damages, costs and expenses (including reasonable
attorneys' fees) which Seller may suffer or incur in connection with any of the
following matters:

                  9.2.1. Any claim, demand, action or proceeding asserted by a
creditor of Buyer respecting any liabilities of Buyer.

                  9.2.2. The breach by Buyer of any of Buyer's representations,
warranties or covenants in this Agreement.

         9.3. Set off. In the event Seller or Seller's Shareholders fails to pay
when due any claim Buyer may have for indemnification pursuant to Section 9.1,
or otherwise, Buyer may, in addition to any other remedies to which Buyer may be
entitled, set-off an amount equal to Buyer's claim against the amounts otherwise
owed by Buyer to Seller.

10.      GENERAL

         10.1. Waiver of Compliance. The parties hereby waive compliance with
the provisions of any applicable bulk transfer act. Seller and Seller's
Shareholders hereby jointly and severally agree to indemnify and hold Buyer
harmless from any damages, losses or expenses (including reasonable attorney
fees) suffered by Buyer from any claims which may be asserted against Buyer by
creditors of Seller which result from such noncompliance.

         10.2 Counterparts and Facsimile. This Agreement may be executed in
counterparts and by different parties on different counterparts with the same
effect as if the signatures thereto were on the same instrument. This Agreement
shall be effective and binding upon all parties to this Agreement at such time
as all parties have executed a counterpart of this Agreement. The parties hereby
agree that a facsimile copy of this Agreement will be deemed an original for all
purposes, and each party hereby waives the necessity of providing the original
copy of this Agreement to bind the other.

         10.3 Notice. Any notice required or permitted to be given under this
Agreement shall be deemed to have been duly delivered: (i) when received if
delivered by hand or telegram; (ii) the same day if delivery by facsimile sent
no later than 4:00 p.m. (receiver's time) on a business day provided
transmission is evidenced by a written confirmation from sender's facsimile
machine; (iii) the next business day if sent by facsimile on a non-business day
or after 4:00 p.m. (receiver's time) on a business day provided transmission is
evidenced by a written confirmation from sender's facsimile machine; (iv) one
(1) business day after placement with a reputable overnight carrier for next
morning delivery provided recipient must sign for receipt; or (v) four (4)
business days after depositing if placed in the U.S. mails for delivery by
registered or certified mail, return receipt requested, postage prepaid and
addressed to the appropriate party at the

                                       17
<PAGE>

address set forth below. If a party changes its address or facsimile number, it
shall notify the other part of such different address or facsimile number
pursuant to the provisions of this Section.

Buyer and IPI:                                     with copy to:

         IPI/Dreamcatcher Franchise Corporation    Thomas B. Archbold
         15 155 Technology Drive                   Fredrikson & Byron, P.A.
         Eden Prairie, MN 55344                    1100 International Centre
         Attn: President                           Minneapolis, MN 55402
         Tele: 612-95-6246                         Tele: 612-347-712
         Fax: 612-975-6262                         Fax: 612-347-7077

Seller and Seller's Shareholders:                  with copy to:

         Margo W. Barnhart                         Perry S. Nissler
         34711 WCR 23                              VNAV
         Windsor, CO 80550                         1600 Stout Street, Suite 1100
         Tele: 970-427-1326                        Denver, CO 80202
         Fax: 970-686-1086                         Tele: 303-534-4499
                                                   Fax: 303-893-8332

         10.4 Headings and Construction. The descriptive headings of the several
Articles and Sections of this Agreement and of the several Exhibits to this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement. This Agreement shall not be construed against either party since each
party has negotiated its provisions and contributed to its drafting.

         10.5. Benefit. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties to this Agreement or
their respective successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement. Buyer shall be permitted to
assign its rights and obligations under this Agreement.

         10.6. Costs and Expenses. Each party hereto shall bear its own costs
and expenses (including, but not limited to, its accountants' and attorneys'
fees) in connection with the performance of its obligations under this
Agreement. Seller's transactional expenses shall not be assumed by Buyer unless
specifically identified by provider and amount within the Assumed Liabilities.
No party to this Agreement retained the services of a broker in connection with
the transaction contemplated by this Agreement.

                                       18
<PAGE>

         10.7. Invalidity or Unenforceable Nature. Subject to the provisions in
Section 8.2.4 of this Agreement, in the event that any provision or part thereof
is deemed to be invalid, illegal or unenforceable for any reason, then the
parties to this Agreement hereby mutually acknowledge and agree that it is their
intention to have any such invalid, illegal or unenforceable provision or part
thereof be deleted from this Agreement as if it had never been included in this
Agreement, so that the remainder of this Agreement is valid, binding and
enforceable in accordance with its terms.

         10.8. Choice of Law. This Agreement, and the respective rights of the
parties under this Agreement, shall be governed and construed by the laws of the
State of Minnesota, without application of any choice of law considerations.

         10.9. Entire Agreement, Modification and Waiver. This Agreement,
together with the Exhibits and the related written agreements specifically
referred to in this Agreement, represents the only agreement among the parties
concerning the subject matter hereof and supersedes all prior agreements,
whether written or oral, relating thereto except any agreements regarding
confidentiality between the parties. No purported amendment, modification or
waiver of any provision hereof shall be binding unless set forth in a written
document signed by all parties (in the case of amendments or modifications) or
by the party to be charged thereby (in the case of waivers). Any waiver shall be
limited to the provision hereof and the circumstance or event specifically made
subject thereto and shall not be deemed a waiver of any other term hereof or of
the same circumstance or event upon any recurrence thereof.

2319880-6 12/13/99

                                       19
<PAGE>

         Each of the parties hereto has caused this Asset Purchase Agreement to
be executed in the appropriate manner and agrees to be legally bound by the
terms hereof.

BUYER:                DREAMCATCHER FRANCHISE CORPORATION

By /s/ (ILLEGIBLE)
   ------------------------------------
   Its President
       --------------------------------

SELLER:               DREAMCATCHER LEARNING CENTERS, INC.

By /s/ Margo W. Barnhart
   ------------------------------------
   Its President
       --------------------------------

SELLER'S SHAREHOLDERS

/s/ Margo W. Barnhart
---------------------------------------
Margo W. Barnhart

/s/ Jerald L. Barnhart
---------------------------------------
Jerald L. Barnhart

                                       20
<PAGE>

                                    EXHIBITS

Exhibits
--------

1.1.1             Fixed Assets
1.1.5             Licenses and Permits
1.1.6             Assumed Contracts
1.1.7             Prepaid Assets and Deposits
1.1.8             Receivables
1.3.1             Liabilities
2.2               Allocation of Purchase Price
3.4.1             Seller's Financial Statements
3.11              Real Property
3.15.1            Employee Plans
3.17.1            Employee List
3.17.2            Terminated Employees
3.18              Significant Customers/Suppliers
3.19              Insurance
3.20              Litigation/Claims
3.23              Intellectual Property
3.24              Cash Locations
8.5               Employment Agreement Form

                                       21
<PAGE>

                                  EXHIBIT 1.1.1

                                  Fixed Assets

Inventory                             Ft. Collins    Greeley    Windsor    Total
---------                             -----------    -------    -------    -----
Computer System w/Printer                  1            1          1         3
Office Desk                                1            2          1         4
Desk Chair                                 1            2          2         5
Phone                                      1            2          1         4
Fax Machine                                1            1          0         2
Photocopy Machine                          1            1          0         2
TV/VCR Combo                               1            1          0         2
Reception Area Chairs w/Arms               5            0          0         5
3-Piece Sectional Sofa                     0            1          0         1
Reception Area Table                       1            1          0         2
Table Lamp                                 1            0          0         1
Credenza (Steel)                           0            2          0         2
Small Book Shelf (reception area)          1            0          2         3
2' x 4' Instructional Tables               6            8          0        14
Larger Instructional Tables                0            1          1         2
Blue Stackable Chairs                      4            0          6        10
Instructional chairs (Padded w/arms)      13           12          6        31
4-Drawer Steel Filing Cabinet              1            0          1         2
2-Drawer Steel Filing Cabinet              1            1          1         3
Storage Units w/Doors                      2            2          0         4
Rolling Stand                              1            1          0         2
Microwave Oven                             1            1          0         2
Small Cube Refrigerator                    1            1          0         2
Electric Pencil Sharpener                  1            1          1         3
Vacuum Cleaner                             1            1          1         3
Student Desk                               2            0          4         6
Dividers                                   7           13          0        20
Set of DI Instructional Materials          1            1          1         3
Complete Testing Kit                       1            1          1         3
Set of Window Signs                        1            1          1         3
Credit Card Manual Swipe Machine           1            1          1         3
Large Artificial Tree in Basket            1            0          1         2
Large Lighted Sign                         1            1          0         2
Large Unlighted Sign                       0            0          1         1

                                       22
<PAGE>

                                  EXHIBIT 1.1.6

                                Assumed Contracts

REAL ESTATE LEASES
------------------

Lessor:                     TNT Investments
                            1990 - 59th Ave.
                            Greeley, CO 80634
Term:                       60 mos.
First Payment:              12/l/97
Last Payment:               11/01/02
MO. Pmt.:                   $1,100 (escalates yearly)
Mos. Remaining:             36
Renewal Option:             5 yr. Option (120 days notice)
Comments:                   Base rate renegotiated upon renewal. Lease can be
                            assigned with Lessor's approval.

Lessor:                     Everwest
                            200 East Monroe
                            Fort Collins, CO 80525
                            875 Sq. Ft.
Term:                       60 mos.
First Payment:              06/l/97
Last Payment:               05/01/02
MO. Pmt.:                   $1,079 (escalates yearly)
Mos. Remaining:             30
Renewal Option:             None
Comments:                   Lease can be assigned with Lessor's approval. 60-day
                            notice.

NOT assuming existing lease of 427 Main St., Windsor, Co 80550, Suites E-2, F&G.

                                       23
<PAGE>

                                  EXHIBIT 1.1.7

                           Prepaid Assets and Deposits

                                                                     Balance
                                                                    10/31/99
                                                                    --------

Security Deposits                                                  $3,486.01

Monroe NC Electric Deposit                                            106.70

Eaton Bank Account                                                  5,253.89

Eaton Bank Payroll Account                                            127.68

Bank of Colorado - Front Range                                          1.25

                                       24
<PAGE>

                                  EXHIBIT 1.1.8

                                   Receivables

Accounts receivable aging is as of December 9, 1999 is attached and will be
updated weekly until the Closing.

Note Receivable from Kay Thomson and Karen Brown in the original principal
amount of $10,000, with only two payments of $888.49 remaining due to each of
them.

                                       25
<PAGE>

                                  EXHIBIT 1.1.8

                                   Receivables

Dreamcatcher Direct Instruction                                     Receipts Due
                                                           Report Date: 12/09/99

Windsor, CO                     Total Accounts Receivable:            $ 1,968.78
Fort Collins, CO                Total Accounts Receivable:              5,463.13
Greeley, CO                     Total Accounts Receivable:              4,254.50
                                                                      ----------
                                     Total Due                        $11,686.41
                                                                      ==========

                                       26
<PAGE>

                                  EXHIBIT 1.3.1

                                   Liabilities

                                                                   Balance Due
                                                                      10-31-99
                                                                      --------
U.S. Bank                                                           $68,015.88
McGraw Hill                                                           6,000.00
Phillips Photocopy                                                      515.00
Tax Deposits (with estimated 15% penalty)                            21,620.53
Miscellaneous  Smaller  Debt  (Refund of lessons,
$1,902.50; DDIC mugs $295.69; Phone $206.35)                          2,404.54
                                                                   $299,529.84
                                                                   ===========

*Upon the mutual agreement of Buyer and Seller, the liabilities may include
Seller's obligations to provide Seller's employees paid vacation days and/or
paid sick leave (list employee, hours/days, and dollar value as of the Closing
Date). Buyer shall give credit to the employees identified in the amounts set
forth (in hours and dollars equivalents). Buyer has no obligation to hire any of
Seller's employees under any conditions and will only agree to permit such
vacation and sick pay liabilities to be included within the Assumed Liabilities
at Buyer's sole discretion.

                                       27
<PAGE>

                                   EXHIBIT 2.2

                          Allocation of Purchase Price*

Accounts Receivable                                           Actual
Inventory                                                     Actual
Prepaids                                                      Actual
Fixed Assets                                                  Up to $
                                                                     -----------
Intellectual Property/Intangibles
      Other than Goodwill                                     Up to $
                                                                     -----------
Goodwill                                                      Balance (if any)

The payment due pursuant to Section 2.1.3 shall included when paid.

                                       28
<PAGE>

                                  EXHIBIT 3.4.1

                              Financial Statements

Unaudited balance sheet and statement of income as of and for the period ending
October 31, 1999.

Tax returns for 1997 and 1998

                                       29
<PAGE>

                                  EXHIBIT 3.4.1

                          Seller's Financial Statements

                                       DLC
                                  Balance Sheet
                                October 31, 1999

                                     ASSETS

Current Assets
     Eaton Bank Account                        $   5,253.89
     Eaton Bank-Payroll Account                      127.68
     Bank of Colorado-Front Range                      1.25
     Accounts Receivable                         (22,357.64)
     Employee Advances                              (749.50)
                                               ------------

     Total Current Assets                                         (17,724.32)

Property and Equipment
     Photocopy Machine                             3,815.99
     Signs                                         2,877.89
     Furniture & Fixtures                         19,881.73
     Furniture & Fixtures                          1,387.54
     Furniture & Fixtures                            460.57
     Furniture & Fixtures                            106.65
     Accumulated Depreciation                    (22,227.00)
     Ed. Materials (Permanent)                    14,023.96
                                               ------------

     Total Property and Equipment                                  20,327.33

Other Assets
     Security Deposits                             3,486.01
     Monroe NC Electric Deposit                      106.70
     Due from DFC                                  5,895.37
                                               ------------

     Total Other Assets                                             9,488.08
                                                                ------------

Total Assets                                                    $  12,091.09
                                                                ============

                     Unaudited--For Management Purposes Only

                                       30
<PAGE>

                                  EXHIBIT 3.4.1

                          Seller's Financial Statements

                                       DLC
                                  Balance Sheet
                                October 31, 1999

                             LIABILITIES AND CAPITAL

Current Liabilities
     Fed/FICA Payable                          $  11,398.07
     State W/H Payable                             1,726.46
     Futa/Suta Payable                              (415.13)
                                               ------------

     Total Current Liabilities                                     12,709.40

Long-Term Liabilities
     Line of Credit--U.S. Bank                    67,402.01
     N/P Dreamcatcher Franchise                   99,736.00
     Deposit from Franchise                       44,752.44
     Note Payable Officer                         44,874.09
                                               ------------

     Total Long-Term Liabilities                                  256,764.54
                                                                ------------

     Total Liabilities                                            269,473.94

Capital
     Common Stock                                 40,600.00
     Retained Earnings                          (219,895.94)
     Net Income                                  (78,086.91)
                                               ------------

     Total Capital                                               (257,382.85)
                                                                ------------

Total Liabilities & Capital                                     $  12,091.09
                                                                ============

                     Unaudited--For Management Purposes Only

                                       31
<PAGE>

                                  EXHIBIT 3.4.1

                          Seller's Financial Statements

                                       DLC
                                Income Statement
                   For the Ten Months Ending October 31, 1999

<TABLE>
<CAPTION>
                                    Current               Year to Date
                                     Month
<S>                              <C>           <C>        <C>           <C>
Revenues
     Lessons-W                     1,204.00      13.45      20,807.00     18.23
     Lessons-G                     2,886.00      32.25      40,015.50     35.05
     Lessons-FC                    4,129.00      46.14      45,956.00     40.25
     Testing-W                       265.00       2.96       1,072.50      0.94
     Testing-G                       480.00       5.36       2,592.50      2.27
     Testing-FC                      222.50       2.49       1,842.50      1.61
     Finance Charge-W                  0.00       0.00          37.54      0.03
     Credits-W                      (120.00)     (1.34)       (120.00)    (0.11)
     Credits-G                      (117.00)     (1.31)       (117.00)    (0.10)
     Other Income-Books, etc.          0.00       0.00       3,000.00      2.63
     Refunds-Loveland                  0.00       0.00        (922.00)    (0.81)
                               ------------               -----------

     Total Revenues                8,949.50      100.0     114,164.54     100.0
                               ------------               -----------
Cost of Sales
     Rent-Windsor                   (500.00)     (5.59)     (8,500.00)    (7.45)
     Rent-Greeley                 (1,000.00)    (11.17)     (9,000.00)    (7.88)
     Rent-Fort Collins            (1,000.79)    (11.18)    (10,412.74)    (9.12)
     Salaries-Windsor             (5,831.50)    (65.16)    (59,082.48)   (51.75)
     Salaries-Greeley             (1,945.61)    (21.74)    (22,004.75)   (19.27)
     Salaries-Fort Collins        (1,378.33)    (15.40)    (15,109.13)   (13.23)

     Total Cost of Sales         (11,656.23)   (130.24)   (124,109.10)  (108.71)
                               ------------               -----------

     Gross Profit                 (2,706.73)    (30.24)     (9,944.56)    (8.71)
                               ------------               -----------
</TABLE>

                                       32
<PAGE>

                                  EXHIBIT 3.4.1

                          Seller's Financial Statements

                                       DLC
                                Income Statement
                   For the Ten Months Ending October 31, 1999

<TABLE>
<CAPTION>
                                             Current                    Year to Date
                                              Month
<S>                                       <C>              <C>          <C>               <C>
Expenses
     Advertising                                0.00         0.00         (2,218.98)       (1.94)
     Advertising-Windsor                        0.00         0.00            (91.00)       (0.08)
     Advertising-Greeley                        0.00         0.00           (308.15)       (0.27)
     Advertising-Fort Collins                   0.00         0.00         (1,352.95)       (1.19)
     Auto Expense                            (662.37)       (7.40)        (6,018.02)       (5.27)
     Bank Service Charges                    (118.11)       (1.32)        (1,965.17)       (1.72)
     Contributions                              0.00         0.00           (100.00)       (0.09)
     Dues & Subscriptions                    (126.00)       (1.41)          (459.30)       (0.40)
     Dues & Subscriptions-Greeley               0.00         0.00            (55.00)       (0.05)
     Dues & Subscriptions-Fort Collins          0.00         0.00            (55.00)       (0.05)
     Educational Materials                      0.00         0.00         (3,000.00)       (2.63)
     Utilities-Greeley                          0.00         0.00           (871.87)       (0.76)
     Utilities-Fort Collins                     0.00         0.00           (603.11)       (0.53)
     Insurance-Auto                             0.00         0.00         (1,076.60)       (0.94)
     Insurance-Health                           0.00         0.00        (18,794.49)      (16.46)
     Insurance-General                          0.00         0.00         (2,310.50)       (2.02)
     Insurance-Windsor                        190.07         2.12          1,447.47         1.27
     Insurance-Greeley                          0.00         0.00             60.48         0.05
     Insurance-Fort Collins                     0.00         0.00            290.05         0.25
     Insurance-Life                          (339.15)       (3.79)          (646.44)       (0.57)
     Interest Expense                           0.00         0.00         (4,700.11)       (4.12)
     Legal & Accounting                      (162.20)       (1.81)          (435.20)       (0.38)
     Miscellaneous Expense                   (931.95)      (10.41)        (3,494.03)       (3.06)
     Meals                                      0.00         0.00           (106.40)       (0.09)
     Office Expense                          (199.02)       (2.22)          (931.12)       (0.82)
     Office Expense-Windsor                   (65.14)       (0.73)          (638.30)       (0.56)
     Office Expense-Greeley                     0.00         0.00           (150.16)       (0.13)
     Office Expense-Fort Collins                0.00         0.00           (158.04)       (0.14)
     Postage Expense                         (232.65)       (2.60)          (435.60)       (0.38)
     Payroll Service Expense                    0.00         0.00           (267.85)       (0.23)
     Repairs & Maintenance                      0.00         0.00           (125.00)       (0.11)
     Supplies Expense                           0.00         0.00           (515.15)       (0.45)
     Supplies Expense-Windsor                   0.00         0.00            (12.06)       (0.01)
</TABLE>

                                       33
<PAGE>

<TABLE>
<S>                                       <C>              <C>          <C>               <C>
     Supplies Expense-Greeley                 (31.62)       (0.35)          (415.05)       (0.36)
     Supplies Expense-Fort Collins              0.00         0.00            (60.78)       (0.05)
     Taxes, Payroll-Windsor                  (442.50)       (4.94)        (4,481.58)       (3.93)
     Taxes, Payroll-Greeley                  (142.46)       (1.59)        (1,680.82)       (1.47)
     Taxes, Payroll-Fort Collins             (101.55)       (1.13)        (1,106.42)       (0.97)
     Futa-Windsor                              (0.25)        0.00           (224.74)       (0.20)
     Futa-Greeley                              (2.10)       (0.02)          (107.57)       (0.09)
     Futa-Fort Collins                        (10.62)       (0.12)          (115.72)       (0.10)
     Suta-Windsor                              (2.41)       (0.03)           (91.48)       (0.08)
     Suta-Greeley                              (0.53)       (0.01)           (42.03)       (0.04)
     Suta-Fort Collins                         (2.65)       (0.03)           (34.77)       (0.03)
     Telephone Expense                       (189.64)       (2.12)          (671.51)       (0.59)
     Telephone Expense-Windsor                  0.00         0.00         (4,660.82)       (4.08)
     Telephone Expense-Greeley                  0.00         0.00           (498.32)       (0.44)
     Telephone Expense-Fort Collins             0.00         0.00         (1,302.52)       (1.14)
     Travel & Entertainment                     0.00         0.00           (497.75)       (0.44)
     Fines & Penalties                          0.00         0.00         (1,050.18)       (0.92)
     Other Income                               0.00         0.00           (485.45)       (0.43)
     Independence Academy                       0.00         0.00           (517.24)       (0.45)
                                         -----------                    -----------

Total Expenses                             (3,572.85)      (39.92)       (68,142.35)      (59.69)
                                         -----------                    -----------
Net Income                                $(6,279.58)      (70.17)      $(78,086.91)      (68.40)
                                         ===========                    ===========
</TABLE>

                          For Management Purposes Only

                                       34
<PAGE>

                                 EXHIBIT 3.15.1

                                 EMPLOYEE PLANS

PLAN DESCRIPTIONS

MEDICAL PLAN           Company pays 100% of the employees health insurance
                       premiums and 0% of Spouse/dependents coverage.
DENTAL PLAN            Paid 100% by employee.
CAFETERIA 125 PLAN     Company administers the plan. There is no corporate
                       contribution.
LIFE INSURANCE         All full-time employees are eligible for $10,000 of life
                       insurance paid by the Company.
PAID VACATION          One day per month of employment for the first year. One
                       and one-half days per month of employment for years 2-5.
                       Two days per month of employment for subsequent years.
                       Days are added at the first of the year, but are prorated
                       down to the termination date.
PAID SICK TIME         Half-day per month of employment. Days are added at the
                       beginning of the year. Unused days are not paid at
                       termination.

<TABLE>
<CAPTION>
----------------------- -------------- ------------ ------------- --------------- ------------- -------------
                                                                                    Vacation      Sick Time
                                                                                     Accrued       Accrued
         Name              Medical *     Dental *     125Plan *     Life Ins. *     (in days)     (in days)
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
<S>                      <C>           <C>          <C>           <C>             <C>           <C>
Barnhart, Jerry (1)            X            X                            X            52.25          20.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Barnhart, Margo (1)            X            X                            X            52.25          26.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Budzynski, Mathew (1)          X                                         X             8.25           5.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Childs, Lori (1)               X            X             X              X
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Fitzgerald, Kathleen (1)                                                              -1.75           0.63
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Godson, Sylvia
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Hughes, Louise
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Kerr, Kristin (1)              X            X             X              X            41.25          11.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Kirkwood, Andrea
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Lopez, Davin
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Macfarlane, Ruth
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Parsons, Suzi (1)              X            X             X              X
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Schmitz, Sarah
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Shields, Karen (1)             X                                         X
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Wyndelts, Amy
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
</TABLE>

* (X = enrolled)
(1) These individuals perform services for both Dreamcatcher Learning, Inc. and
Dreamcatcher Franchise Corporation (DFC). The accrued vacation and sick time
represent amounts effective as of December 13, 1999 for both organizations.

                                       35
<PAGE>

                                  EXHIBIT 3.11

                                  Real Property

NOT assuming existing lease of 427 Main St., Windsor, Co 80550, Suites E-2, F&G.

                                       36
<PAGE>

                                 EXHIBIT 3.17.1

                                  EMPLOYEE LIST

<TABLE>
<CAPTION>
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ ------------
           NAME                POSITION         DATE OF      STATUS      HOURLY      MONTHLY       BONUS       ADD'L.
                                                 HIRE        FT/PT       RATES       SALARY                     COMP.
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
<S>                         <C>              <C>           <C>         <C>         <C>          <C>          <C>
Barnhart, Jerry (1)         Owner                  1/1/95      FT                     - 0 -        - 0 -          ****
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Barnhart, Margo (1)         Owner                  1/1/95      FT                     - 0 -        - 0 -          ****
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Budzynski, Mathew (1)       Director-Greeley       7/1/98      FT                    $1,900      Eligible*
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Childs, Lori (1)            Admin./               9/15/99      PT        $7.50-                    - 0 -
                            Instructor                                   $9.50
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Fitzgerald, Kathleen (1)    Director-Fort         11/8/99      FT                    $1,800      Eligible*
                            Collins
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Godson, Sylvia              Instructor                                   $10.50                    - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Hughes, Louise              Instructor                                   $10.50                    - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Kerr, Kristin (1)           Franchisee             3/1/96      FT                    $2,500        - 0 -            **
                            Training
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Kirkwood, Andrea            Instructor                                   $10.50                    - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Lopez, Davin                Instructor                                   $10.50                    - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Macfarlane, Ruth            Instructor                                   $10.50                    - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Parsons, Suzi (1)           Director-              6/1/97      PT                    $1,200        - 0 -
                            Windsor
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Schmitz, Sarah              Instructor                                   $10.50                    - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Shields, Karen (1)          Accountant             9/1/97      FT                    $2,100        - 0 -           ***
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
Wyndelts, Amy               Instructor                                   $10.50                    - 0 -
--------------------------- ---------------- ------------- ----------- ----------- ------------ ------------ -----------
</TABLE>

(1) These individuals perform services for both Dreamcatcher Learning, Inc. and
    Dreamcatcher Franchise Corporation (DFC).
* Bonus Plan: For Full-Time Managers / Directors
    o  Paid $4 per hour of instruction delivered over 50 hrs. per week
    o  Paid $6 per hour of instruction delivered over 75 hrs. per week
    o  Paid $10 per hour of instruction delivered over 100 hrs. per week
** Automobile/Insurance; Master's Program at UNC (books/tuition); Stock in DFC
   (900 shares)
*** Stock in DFC (900 shares)
**** Automobile/Insurance; Additional Life Insurance

                                       37
<PAGE>

                                 EXHIBIT 3.17.2

                              TERMINATED EMPLOYEES

<TABLE>
<CAPTION>
---------------------- ------------------------------ --------------------- -------------------------
                                                                                  MONTH/YEAR OF
           NAME                    POSITION                 LOCATION               TERMINATION
---------------------- ------------------------------ --------------------- -------------------------
<S>                    <C>                            <C>                   <C>
Barnhart, Bonni        Asst. Director/Instructor          Fort Collins                 8/99
---------------------- ------------------------------ --------------------- -------------------------
Broude, Jennifer       Instructor                         Fort Collins                 5/99
---------------------- ------------------------------ --------------------- -------------------------
Butcher, Shelley       Instructor                         Fort Collins                 10/98
---------------------- ------------------------------ --------------------- -------------------------
Gunn, Kristy           Instructor                         Fort Collins                 9/98
---------------------- ------------------------------ --------------------- -------------------------
Hawkins, Karen         Center Director                      Greeley                    8/98
---------------------- ------------------------------ --------------------- -------------------------
Linn, Andrea           Instructor                           Windsor                    8/99
---------------------- ------------------------------ --------------------- -------------------------
McCord, Denise         Instructor                           Windsor                    7/99
---------------------- ------------------------------ --------------------- -------------------------
Mesbergen, Iris        Instructor/Office Asst.              Windsor                    9/99
---------------------- ------------------------------ --------------------- -------------------------
Moline, Melissa        Instructor                         Fort Collins                 1/99
---------------------- ------------------------------ --------------------- -------------------------
Winsett, Beverly       Instructor                         Fort Collins                 9/99
---------------------- ------------------------------ --------------------- -------------------------
</TABLE>

                                       38
<PAGE>

                                  EXHIBIT 3.18

                         Significant Customer/Suppliers

SRA/MCGRAW-HILL -- Instructional Materials (Teacher Presentation Books,
                   Workbooks, Textbooks)

COREN PRINTING -- Printing company (i.e., brochures, business cards, etc.)

SIGN-A-RAMA -- Sign Designer

ST. PAUL INSURANCE -- Insurance

PHILLIPS PHOTOCOPY -- Service photocopy machine

PSYCHOLOGICAL CORPORATION -- Test Materials

AMERICAN GUIDANCE SERVICES -- Test Materials

SAXON -- Higher Mathematics Instructional Materials

Currently we have no written or oral distribution agreements with our suppliers.

                                       39
<PAGE>

                                  EXHIBIT 3.19
                                    Insurance
                          Dreamcatcher Learning Centers

                           Dreamcatcher Franchise Corp

                                 427 Main Street
                                Windsor, CO 80550
                          St. Paul Fire & Marine Ins Co
                              Policy No. CKO8307077
                         Effective 03/01/98 to 03/01/99

                            COMMERCIAL PACKAGE POLICY
                               SECTION I--PROPERTY

Location #1:  427 Main Street, Suites A-E, J & K, Windsor, CO 80550
-----------

     Business Personal Property: Special Causes of Loss Form including theft,
     Replacement Cost, subject to a $250 deductible and 90% Coinsurance.
     LIMIT:  $5,000

     Business Income: Special Causes of Loss Form including theft, subject to a
     $250 deductible and 100 Coinsurance.
     LIMIT:  $50,000

Location #2:  3835 W. 10th Street, #100H, Greeley, CO 80631
-----------

     Business Personal Property: Special Causes of Loss Form including theft,
     Replacement Cost, subject to a $250 deductible and 90% Coinsurance.
     LIMIT:  $5,000

     Business Income: Special Causes of Loss Form including theft, subject to a
     $250 deductible and 100 Coinsurance.
     LIMIT:  $50,000

Location #3:  343 W. Drake Road, #115, Fort Collins, CO 80526
-----------

     Business Personal Property: Special Causes of Loss Form including theft,
     Replacement Cost, subject to a $250 deductible and 90% Coinsurance.
     LIMIT:  $5,000

     Business Income: Special Causes of Loss Form including theft, subject to a
     $250 deductible and 100 Coinsurance.
     LIMIT:  $50,000

                                       40
<PAGE>

                          Dreamcatcher Learning Centers

                           Dreamcatcher Franchise Corp

                              SECTION II--LIABILITY

General Liability:  Occurrence Form

LIMITS:      $1,000,000     General Aggregate
             $1,000,000     Products/Completed Operations Aggregate
               $500,000     Personal & Advertising Injury
               $500,000     Each Occurrence
               $100,000     Premises Damage Limit
                 $5,000     Medical Expense (Any One Person)

Auto Liability Protection:  Hired/Non-Owned Autos

LIMITS:      $1,000,000     Each Accident

TOTAL ANNUAL PREMIUM $2,500.00

                        SECTION V--COVERAGES NOT INCLUDED

                             1.  Building
                             2.  Scheduled Autos
                             3.  Flood/Surface Water
                             4.  Boiler & Machinery
                             5.  Workers' Compensation
                             6.  Life & Health

DISCLAIMER: THE STATEMENTS MADE RELATING TO COVERAGE IN THIS SUMMARY ARE BRIEF
DESCRIPTIONS FOR YOUR REVIEW ONLY. FOR THE ACTUAL NATURE AND INTENT OF COVERAGE,
PLEASE REFER TO YOUR POLICY.

                                       41
<PAGE>

                                  EXHIBIT 3.20

                               Litigation/Claims

No written or oral claims are outstanding and, to the best knowledge of
shareholders, no claims are pending.

                                       42
<PAGE>

                                  EXHIBIT 3.23

                         Seller's Intellectual Property

Dreamcatcher Learning Centers, Inc. and design

         U.S. Service Mark Registration Date: October 15, 1996
         U.S. Service Mark Registration No.: 2,008,150

Dreamcatcher Learning Centers

         Colorado Registration Date: October 16, 1998

                                       43
<PAGE>

                                  EXHIBIT 3.24

                                 Cash Locations

Eaton Bank
2700 47th Avenue
Greeley, CO 80634
(970) 339-3456

         Dreamcatcher Franchise Corporation Operating Account
         Account #0201015320

         Dreamcatcher Franchise Corporation Line of Credit
         Account #912246

         Dreamcatcher Learning Centers Operating Account
         Account #0201013747

         Dreamcatcher Learning Centers Payroll Account
         Account #0201013754

US Bank
301 E. Horsetooth Road
Fort Collins, CO 80525
l-800-872-2657

         Dreamcatcher Learning Centers Line of Credit
         Account #30300112125050998

                                       44
<PAGE>

                                   EXHIBIT 8.5

                              Employment Agreement

         This Employment Agreement (this "Agreement"), dated January 5, 2000, is
entered into between Margo W. Barnhart [JERALD L. BARNHART] ("Employee") and
Dreamcatcher Franchise Corporation, a Minnesota corporation (the "Company").

RECITALS:

         A. Employee is a shareholder of Dreamcatcher Learning Centers, Inc.
("DLC") and Dreamcatcher Franchise Corporation "DFC"), a Colorado corporation.
The Company is purchasing substantially all of the assets of DLC and DFC
pursuant to the terms of Asset Purchase Agreements (the "Purchase Agreements").
As a condition to the Purchase Agreements, the Company and Employee agree to
enter into this Agreement.

         B. Employee understands that Employee is being employed in a position
of trust and confidence and will have access to, become familiar with, and
contribute to the confidential information and trade secrets of the Company,
including those purchased in the Purchase Agreements. In addition, as part of
Employee's duties, Employee may develop and maintain close working relationships
with the Company's customers and suppliers.

         C. Employee understands that as a condition of Employee's employment,
Employee must protect this information and these relationships and use them for
the Company's benefit only, not for Employee's own or another's benefit.
Employee understands that this Agreement is intended to protect the business
that the Company has purchased and will build. If Employee violates any part of
this Agreement, it will seriously harm the Company's business and cause damage
that will be impossible to measure.

AGREEMENT:

         Employee wishes to be employed by the Company in a capacity in which
Employee may receive and/or contribute to confidential information and work with
the Company's customers and suppliers. In consideration of Employee's employment
with the Company, the Company's purchase of DLC and DLA, the opportunity to have
access to and contribute to the Company's confidential information and goodwill
and other valuable consideration, Employee agrees to the terms set forth below.

         1. Employment. Effective as of January 5, 2000, the Company agrees to
employ Employee in the capacity of Vice President of the Company and Employee
accepts such employment with the Company subject to the terms and conditions of
this Agreement.

         2. Term of Employment. Employee's employment under this Agreement shall
commence as of January 5,2000, and shall continue for a period of two (2) years
unless terminated earlier in accordance with the terms of this Agreement (the
"Employment Period").

                                       45
<PAGE>

         3. Duties of Employee. Employee agrees to devote Employee's full-time
efforts to serve the Company faithfully and to the best of Employee's ability.
Employee shall perform such services as are reasonably assigned by the Company
from time to time. Employee shall be subject to and comply with the Company's
policies as they exist from time to time, including but not limited to those
identified in the Company's employee handbook. In case of a conflict between any
such policy and this Agreement, the terms of this Agreement shall control.

         4. Compensation.

                  4.1. Salary. The Company shall pay Employee an annual salary
of Seventy-Five Thousand Dollars ($75,000).

                  4.2. Stock Options. Pursuant to the Company's Long-Term
Incentive Plan, the Company shall issue Employee incentive stock options to
acquire up to Ten Thousand (10,000) shares of IPI's common stock in the form of
the Incentive Stock Option Agreement attached as an Exhibit 4.2 hereto. The
exercise price shall be the greater of (i) Four Dollars ($4.00) per share, or
(ii) the closing price of the stock on the business day immediately preceding
the closing date of the Purchase Agreements.

                  4.3. Employee Benefits. Employee shall be eligible to receive
those benefits offered by the Company from time to time to its employees
generally, subject to the terms and conditions of such benefit plans or
programs. Employee agrees that the Company shall have the right, in its sole
discretion, to add to, modify, reduce or discontinue such benefits.

                  4.4. Payroll Practices and Withholding. All compensation paid
to Employee shall be remitted in accordance with the Company's customary payroll
practices in effect from time to time and subject to any ordinary deductions and
withholding required by law.

                                       46
<PAGE>

         5. Confidential Information.

                  5.1. Definition. For purposes of this Agreement, "Confidential
Information" means any information or compilation of information, not generally
known, that relates to the Company's existing or reasonably foreseeable
business, including, but not limited to, trade secrets, operating procedures,
customer lists, customer information, supplier information, pricing, marketing
plans and proposals. "Confidential Information" does not include any information
which is generally known by the public.

                  5.2. Nondisclosure. During the Employment Period and at all
times thereafter, Employee shall hold in strictest of confidence and will never,
without prior written authorization of the Company, disclose, furnish,
communicate, make accessible to any person or use in any way Confidential
Information for Employee's own or another's benefit or permit the same to be
used in competition with the Company. Employee agrees to refrain from any acts
or omissions that would reduce the value of the Confidential Information to the
Company.

                  5.3. Return of Confidential Information. If either the Company
or Employee terminates Employee's employment with the Company, Employee agrees
to immediately return to the Company all tangible evidence of Confidential
Information that was conceived or generated by Employee or that came into
Employee's possession, including, without limitation, contact lists, rolodexes,
business cards, manuals, books, records, drawings, forms, letters, agreements,
memorandums, notes, note books, reports, data or copies thereof. Employee
acknowledges that all Confidential Information is and shall remain the exclusive
property of the Company.

                                       47
<PAGE>

         6. Restrictive Covenants.

                  6.1. Full-Time Efforts. During Employee's employment with the
Company, Employee shall be employed as a full-time employee and agrees to devote
Employee's full work time, energy, and best efforts to furthering the Company's
business. Employee shall not engage in any other business activity, including
but not limited to outside employment or consulting, without the Company's
written consent. Employee shall not take part in any activity that would, in the
Company's sole discretion, conflict with the Company's interests.

                  6.2. Noncompetition. During Employee's employment with the
Company and for a period of three (3) years immediately thereafter, Employee
shall not, anywhere in the United States, engage in any business, directly or
indirectly, as an officer, director, employee, owner, proprietor, joint
venturer, agent, trustee, advisor, consultant, principal, partner or as a five
percent (5%) or more shareholder, which to any extent competes with DLC's
instructional learning business or other instructional learning businesses,
including Sylvan Learning Systems and Huntington Learning Centers, or conspire
with others to do so.

                  6.3. Interference. During Employee's employment with the
Company and for a period of three (3) years immediately thereafter, Employee
will not either directly or indirectly, (i) employ or solicit any person
employed by the Company to leave their employment with the Company, or (ii)
attempt to divert or interfere with the relationships of the Company with
existing or likely future customers, suppliers, contractors, or other persons
with which the Company does or has a reasonable expectation of doing business.

                  6.4. Derogatory Statements. The Company and Employee covenant
and agree not to disparage, slander, defame or vilify the other, or their
employees or business practices as applicable.

         7. Intellectual Property.

                  7.1. Copyrights. Employee agrees that any documents, computer
software, artwork or other work of authorship ("Works") prepared by Employee for
Company's benefit or at its request, shall be considered "work made for hire"
within the meaning of U.S. Copyright law and that all such Works shall belong to
the Company. Employee hereby assigns to the Company all of Employee's right,
title and interest in and to all such Works. Employee agrees to disclose such
Works and agrees to assist Company by executing any such documents or
applications as may be useful to evidence such ownership of such Works by the
Company.

                  7.2. Inventions. "Invention" means any invention, discovery,
design, improvement, or idea, whether patentable or copyrightable or not, and
whether or not shown or described in writing or reduced to practice.

                                       48
<PAGE>

                           7.2.1. Disclosure. Employee shall promptly and fully
disclose in writing to the Company, and will hold in trust for Company's sole
right and benefit, any Invention (as defined below) that Employee, during the
period Employee is employed by the Company and for one year thereafter, makes,
conceives, or reduces to practice or causes to be made, conceived, or reduced to
practice, either alone or in conjunction with others, that (i) relates to any
subject matter pertaining to Employee's employment; (ii) relates to or is
directly or indirectly connected with the Company's business, products,
processes, or Confidential Information; or (iii) involves the use of any of the
Company's time, material, or facility.

                           7.2.2. Records/Assignment. Employee will keep
accurate, complete, and timely records for such Inventions, which records shall
be the Company's property and shall not be removed from the Company's premises.
Employee hereby assigns to the Company all of Employee's right, title, and
interest in and to all such Inventions and, upon the Company's request, Employee
shall execute, verify, and delivery to the Company such documents, including
without limitation, assignments and patent applications, and shall perform such
other acts, including, without limitation, appearing as a witness in any action
brought in connection with this Agreement that is necessary to enable the
Company to obtain the sole right, title, and benefit to all such Inventions.

                           7.2.3. Excluded Inventions. Notwithstanding anything
to the contrary, the Company agrees and Employee is hereby notified that the
above agreements in this Section to assign Inventions to the Company do not
apply to any Invention for which no equipment, supplies, facility, or
Confidential Information of the Company's was used, which was developed entirely
on Employee's own time, and neither (a) relates either (i) directly to the
Company's business; or (ii) to the Company's actual or demonstrably anticipated
research or development; or (b) results directly or indirectly from any work
performed by Employee for the Company.

         8. Termination. Notwithstanding anything to the contrary in this
Agreement, Employee's employment with the Company shall automatically terminate
upon Employee's death.

                  8.1. "Cause" Termination. The Company may terminate Employee's
employment with the Company for "Cause" upon the occurrence of any of the
following events:

                                       49
<PAGE>

                           8.1.1. Nonperformance. Employee engages in (i) acts
or omissions of negligence or gross misconduct in the performance of duties to
the Company; (ii) repeated unexplained or unjustified absences from the Company;
or (iii) a willful violation of any federal or state statute. In the event any
act or omission of negligence or gross misconduct referred to above is curable,
the Company shall give written notice of such negligence or gross misconduct and
ten (10) days to cure it unless such failure is the second failure (whether or
not the first failure was cured) of the same nature within six, months, in which
case termination may be immediate without application of a cure period.

                           8.1.2. Criminal Action. Employee is convicted of or
enters a plea of guilty or nolo contendere to any felony or gross misdemeanor or
the entry of any final civil judgment against Employee in connection with any
allegation against Employee of fraud, misrepresentation, misappropriation of
property, or any other intentional tort.

                           8.1.3. Dishonesty. Employee materially impairs the
Company's goodwill or the goodwill associated with the Company's products or in
the event of gross misconduct, dishonesty or disloyalty on the part of Employee.

                  8.2. Termination During Employment Period Without Cause. If
the Company terminates Employee's employment during the Employment Period (as
defined above) without "Cause," Employee shall be paid as damages all
compensation due to Employee for the remaining term of the Agreement, and
Employee shall not be required to mitigate Employee's damages with respect to
the payment of such amount. Such amount will be paid at the regular intervals to
which Employee would have been entitled to such compensation had Employee
remained employed for the remainder of the Employment Period, which payment
shall be in lieu or any other remedies that Employee is entitled as a result of
such termination. This provision shall not be construed to affect the validity
of any non-competition or non-disclosure covenant contained either in the
Employment Agreement or in the Purchase Agreements.

                  8.3. Termination of Employment. Immediately upon termination
of Employee's employment pursuant to Section 8, Employee shall have no further
right to compensation, benefits, or payments of any kind (including but not
limited to payment from the Company for unused vacation) except compensation and
benefits actually earned through Employee's last day of employment.

                                       50
<PAGE>

         9. General Provisions.

                  9.1. Remedies. If Employee violates or threatens to violate
any provision in Article 5, 6 or 7 of this Agreement, the Company shall be
entitled to injunctive relief, in addition to any other remedies allowed to the
Company by law or equity, and to collect from Employee its reasonable attorneys'
fees and costs incurred in bringing any action against Employee or otherwise
enforcing the terms of this Agreement.

                  9.2. Severability and Interpretation. If a court rules that
any part of this Agreement is not enforceable, the parties agree that part of
the Agreement shall be modified by the court to make it enforceable to the
maximum extent possible. If that part cannot be modified, that part of the
Agreement may be severed and the other parts of the Agreement shall nonetheless
be enforced in accordance with their terms.

                  9.3. Understandings. Employee acknowledges and agrees that the
Company informed Employee, as part of the offer of employment and before
Employee accepted employment, that restrictive covenants and confidentiality
provisions would be required as part of the terms and conditions of Employee's
employment. Employee agrees that the restrictions contained in this Agreement
are reasonable, shall not impair Employee's ability to find other employment,
and shall survive the termination of Employee's employment. Employee agrees that
the restrictions contained in this Agreement shall apply to Employee no matter
how Employee's employment terminates (including but not limited to voluntary or
involuntary termination or expiration of the Employment Period) and regardless
of whether Employee's termination is voluntary or involuntary.

                  9.4. Modifications and Waivers. No purported amendment,
modification or waiver of any provision of this Agreement shall be binding
unless set forth in a written document signed by both parties (in the case of
amendments or modifications) or by the party to be charged thereby (in the case
of waivers). Any waiver shall be limited to the circumstance or event
specifically referenced in the written waiver document and shall not be deemed a
waiver of any other term of this Agreement or of the same circumstance or event
upon any recurrence thereof.

                  9.5. Choice of Law. This Agreement, and the respective rights
of the parties under this Agreement, shall be governed and construed by the laws
of the State of Minnesota, without application of any choice of law
considerations.

                  9.6. Subsequent Employment. Employee agrees to inform any
subsequent employer who competes or may compete with the Company of the
existence of this Agreement and Employee's ongoing obligations hereunder.
Employee also agrees to immediately notify the Company of such employment. The
Company shall have the right to provide a copy of this Agreement to any future
employer of Employee.

                                       51
<PAGE>

                  9.7. Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes any and all prior or
contemporaneous oral or written understandings relating to the subject matter
hereof.

         This Agreement constitutes the legal, valid and binding obligation of
each of the undersigned parties.

Margo W. Barnhart [JERALD L. BARNHART

DREAMCATCHER FRANCHISE CORPORATION
By
   ------------------------------
   Its
       --------------------------

                                       52
<PAGE>

                                   EXHIBIT 4.2

                        Incentive Stock Option Agreement
                                    IPI, INC.
                          1994 LONG-TERM INCENTIVE PLAN

                        INCENTIVE STOCK OPTION AGREEMENT

OPTIONEE: MARGO W. BARNHART           GRANT DATE:
                                                 -------------------------------
                                      NUMBER OF OPTION SHARES:            10,000
                                                              ------------------
                                      OPTION PRICE PER SHARE:
                                                             -------------------
                                      EXPIRATION DATE:
                                                      --------------------------

         The Committee administering the IPI, Inc. 1994 Long-Term Incentive Plan
(the "Plan") has, on the Grant Date set forth above, authorized the grant to you
of the following stock option:

         1. You are hereby granted the right and option to purchase, on the
terms and conditions hereinafter set forth, all or any part of the aggregate
number of shares set forth above (the "Option Shares") of the common stock, $.01
par value, of IPI, Inc. (the "Common Stock"), at the Option Price per share set
forth above.

         2. This option is irrevocable and is intended to conform in all
respects with the Plan, a copy of which has been supplied to you, and the
provisions of which are incorporated in this Agreement by this reference. This
option is intended to qualify as an "Incentive Stock Option" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to
the extent that the fair market value of the Option Shares (determined as of the
Grant Date) with respect to which this option becomes exercisable for the first
time in any calendar year does not exceed $100,000.

         3. This option may be exercised from time to time with respect to any
number of whole Option Shares, up to the aggregate number of Option Shares set
forth above, except that:

                  a. it shall not be exercisable prior to the first anniversary
of the Grant Date;

                  b. it shall become exercisable with respect to 20% of the
Option Shares on the first anniversary of the Grant Date, with respect to an
additional 20% of the Option Shares on each of second, third, fourth, and fifth
anniversaries of the Grant Date; and

                  c. it shall expire and become nonexercisable on the Expiration
Date set forth above or on any earlier date specified in paragraphs 4 or 5.

                                       53
<PAGE>

         4. If your employment with the Company and its Affiliates is terminated
for cause, this option shall immediately expire and become nonexercisable with
respect to all Option Shares not previously purchased. For the purposes of this
Agreement, "cause" means dishonesty, willful misconduct, or conviction of a
crime involving, in each case, the property of the Company or any Affiliate, or
the performance of your duties with the Company or any Affiliate. For the
purposes of this Agreement, the term "Affiliate" means any corporation which, at
the relevant time, is a "parent corporation" or a "subsidiary corporation" of
the Company, as such terms are defined in Sections 425 (e) and (f) of the Code,
respectively.

         5. If your employment with the Company and its Affiliates terminates
for any reason not specified in paragraph 4, this option shall immediately
expire and become nonexercisable as to any Option Shares with respect to which
it was not, exercisable on the date your employment terminated, but it shall
remain exercisable as to any remaining Option Shares until the first to occur of
the following:

                  a. the expiration of three months from the date on which your
employment terminates (except that if you die during such three-month period, it
shall remain exercisable for the period specified in subparagraph (b) below);

                  b. the expiration of 12 months following the date of your
death; or

                  c. the Expiration Date set forth above.

                  For the purposes of this Agreement, your employment with the
Company and its Affiliates will be deemed to have terminated if you are on a
leave or absence for more than 90 days, unless (and only for as long as) your
right to reemployment with the Company or an Affiliate is guaranteed by statute
or contract.

         6. This option may be exercised by written notice delivered to the
Secretary of the Company, which notice shall specify the number of whole Option
Shares to be purchased and the purchase price to be paid therefor. The date of
delivery of such written notice shall be the date of exercise. Such notice shall
be accompanied by:

                  a. cash or a bank check payable to the Company in the amount
of the purchase price;

                  b. certificates for shares of Common Stock endorsed in blank
and having a fair market value as of the date of exercise which, in the
determination of the Committee, is not less than the purchase price; or

                  c. a combination of certificates for shares of Common Stock
and cash (or a bank check) having a combined value as of the date of exercise
which, in the determination of the Committee, is not less than the purchase
price;

                                       54
<PAGE>

provided, that certificates for shares of Common Stock which were acquired
through the exercise of incentive stock options may not be delivered in payment
of the purchase price unless the shares have been held by the optionee for at
least six months prior to the date of exercise.

         7. The Company may postpone the issuance and delivery of the Option
Shares upon any exercise of this option until the compliance with applicable
requirements of any securities exchange or system on which the shares of the
Company of the same class have been listed and the completion of such
registration or other qualification of such shares under and the compliance with
other applicable provisions of any State or Federal securities law, rule or
regulation as the Committee may determine to be necessary or advisable. Nothing
herein contained shall be deemed to require the Company to file or amend a
registration statement under the Securities Act.

         8. This option shall not be assignable or transferable by you, other
than by will or by the laws of descent and distribution, and shall be
exercisable during your lifetime only by you. If all or any part of this option
remains exercisable after your death, it may be exercised by the personal
representative of your estate or by any person who acquires the right to
exercise it by bequest, inheritance, or otherwise by reason of your death.

         9. Nothing in this Agreement confers any right on you to continue in
the employ of the Company or of any of its Affiliates, or affects in any way the
right of the Company or its Affiliates to terminate your employment at any time,
with or without cause, subject to the terms of any employment agreement between
you and the Company or its Affiliates.

         10. This Agreement shall be binding upon and inure to the benefit of,
any successor or successors to all or substantially all of the business or
assets of the Company.

         11. This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of the State of Minnesota.

                                       55
<PAGE>

                  In order to evidence the grant of this option, please execute
the extra copy of this Agreement in the space provided and return the same to
the Company, whereupon this Agreement and the copy so signed and returned by you
shall constitute a binding option agreement between us.

IPI, INC.

By:
    -------------------------------------

                  I hereby acknowledge that I have received and carefully read
all of the provisions of the Plan and this Agreement, and agree to be bound by
this Agreement.

Signature:
           ------------------------------
           Margo W. Barnhart

                                       56
<PAGE>

                                CLOSING DOCUMENT

Pursuant to a purchase agreement signed December 13, 1999 by the undersigned
parties, such parties agree that the attached exhibits have been appropriately
updated for the closing of such agreement. The attached exhibits supersede the
exhibits contained within the December 13, 1999 document.

BUYER:
IPI, INC.                                  DREAMCATCHER FRANCHISE CORPORATION

By: /s/ (ILLEGIBLE)                        By: /s/ (ILLEGIBLE)
    -------------------------------            -------------------------------

Its: CEO                                   Its: President
     ------------------------------             ------------------------------

Dated: 1/5/2000                            Dated: 1/5/2000
       ----------------------------               ----------------------------

SELLER:
DREAMCATCHER LEARNING CENTERS, INC.

By: /s/ Margo W. Barnhart
    -------------------------------
Its: President/CEO
     ------------------------------

SELLER SHAREHOLDERS:

/s/ Margo W. Barnhart                      /s/ Jerald L. Barnhart
-----------------------------------        -----------------------------------
Margo W. Barnhart                          Jerald L. Barnhart

Dated: 1-5-2000                            Dated: 1-5-2000
       ----------------------------               ----------------------------

                                       57
<PAGE>

                                EXHIBITS LISTING

1.1.7     Prepaid Assets and Deposits
1.1.8     Receivables
1.3.1     Liabilities
2.2       Allocation of Purchase Price
3.4.1     Sellers' Financial Statements, as of 12/31/99
3.15.1    Employee Plans
3.17.1    Employee List
3.17.2    Terminated Employees

                                       58
<PAGE>

                                 EXHIBIT 1.1.8

                                   Receivables

Dreamcatcher Direct Instruction                                     Receipts Due
                                                         Report Date: 01/05/2000

Windsor, CO                        Total Accounts Receivable:         $ 4,426.98
Fort Collins, CO                   Total Accounts Receivable:           4,617.50
Greeley, CO                        Total Accounts Receivable:           1,765.78
                                                                      ----------
                                         Total Due                    $11,686.41
                                                                      ==========

                                       59
<PAGE>

                                  EXHIBIT 1.1.7

                           Prepaid Assets and Deposits

                                                                     Balance
                                                                    1/5/2000
                                                                    --------

Security Deposits                                                  $1,800.00

Monroe NC Electric Deposit                                              0.00

Eaton Bank Account                                                    100.00

Eaton Bank Payroll Account                                              0.00

Bank of Colorado - Front Range                                          1.25

                                       60
<PAGE>

                                  EXHIBIT 1.1.8

                                   Receivables

Accounts receivable aging is as of December 9, 1999 is attached and will be
updated weekly until the Closing.

                                       61
<PAGE>

                                  EXHIBIT 1.3.1

                                   Liabilities

U.S. Bank                                                          $68,015.88
McGraw Hill                                                          6,000.00
Phillips Photocopy                                                     515.00
Tax Deposits (with estimated 15% penalty)                           21,620.53
                                                                   ----------
                                                                   $96,815.69
                                                                   ==========

*Upon the mutual agreement of Buyer and Seller, the liabilities may include
Seller's obligations to provide Seller's employees paid vacation days and/or
paid sick leave (list employee, hours/days, and dollar value as of the Closing
Date). Buyer has no obligation to hire any of Seller's employees under any
conditions and will only agree to permit such vacation and sick pay liabilities
to be included within the Assumed Liabilities at Buyer's sole discretion.

Liabilities assumed by Buyer pursuant to this Exhibit 1.3.1 and Exhibit 1.3.1 to
the Asset Purchase Agreement between Dreamcatcher Franchise Corporation, a
Colorado corporation, and Dreamcatcher Franchise Corporation, a Minnesota
corporation, may not exceed $395,000. To the extent liabilities identified on
such Exhibits do exceed $395,000, Buyer may elect which of such liabilities
Buyer is assuming and limit such aggregate amount to $395,000.

                                       62
<PAGE>

                                   EXHIBIT 2.2

                          Allocation of Purchase Price

Accounts Receivable                               Actual             $101.25
Inventory/Educational Materials                   Actual           10,810.26
Prepaids                                          Actual           14,023.96
Fixed Assets                                      Up to $           6,303.37
                                                         -------------------
Intellectual Property/Intangibles
      Other than Goodwill                         Up to $          25,000.00
                                                         -------------------
Goodwill                                          Balance (if any)
                                                                  $38,776.85
                                                                  ----------

         Total                                                    $96,815.69
                                                                  ==========

                                       63
<PAGE>

                                  EXHIBIT 3.4.1

                          Seller's Financial Statements

                                       DLC
                                  Balance Sheet
                                December 31, 1999

                                     ASSETS

Current Assets
     Eaton Bank Account                        $  2,430.26
     Eaton Bank-Payroll Account                     130.13
     Bank of Colorado-Front Range                     1.25
     Accounts Receivable                         (6,436.02)
     Employee Advances                             (749.50)
                                               -----------

     Total Current Assets                                         (4,623.88)

Property and Equipment
     Photocopy Machine                            3,815.99
     Signs                                        2,877.89
     Furniture & Fixtures                        19,881.73
     Furniture & Fixtures                         1,387.54
     Furniture & Fixtures                           460.57
     Furniture & Fixtures                           106.65
     Accumulated Depreciation                   (22,227.00)
     Ed. Materials (Permanent)                   14,023.96
                                               -----------

     Total Property and Equipment                                 20,327.33

Other Assets
     Note for Loveland Franchise                 (8,884.47)
     Security Deposits                            3,486.01
     Monroe NC Electric Deposit                     106.70
     Due from DFC                                 5,895.37
                                               -----------

     Total Other Assets                                              603.61
                                                               ------------

Total Assets                                                   $  16,307.06
                                                               ============

                     Unaudited--For Management Purposes Only

                                       64
<PAGE>

                                  EXHIBIT 3.4.1

                          Seller's Financial Statements

                                       DLC
                                  Balance Sheet
                                December 31, 1999

                             LIABILITIES AND CAPITAL

Current Liabilities
     Fed/FICA Payable                         $  16,233.86
     State W/H Payable                            2,338.46
     Futa/Suta Payable                             (355.27)
                                              ------------

     Total Current Liabilities                                    18,217.05

Long-Term Liabilities
     Line of Credit--U.S. Bank                   68,680.16
     N/P Dreamcatcher Franchise                  99,736.00
     Deposit from Franchise                      55,462.54
     Note Payable Officer                        43,216.09
                                              ------------

     Total Long-Term Liabilities                                 267,094.79
                                                               ------------

     Total Liabilities                                           285,311.84

Capital
     Common Stock                                40,600.00
     Retained Earnings                         (219,895.94)
     Net Income                                 (89,708.84)
                                              ------------

     Total Capital                                              (269,004.78)
                                                               ------------

Total Liabilities & Capital                                    $  16,307.06
                                                               ============

                     Unaudited--For Management Purposes Only

                                       65
<PAGE>

                                  EXHLBIT 3.4.1

                          Seller's Financial Statements

                                       DLC
                                Income Statement
                 For the Twelve Months Ending December 31, 1999

<TABLE>
<CAPTION>
                                    Current                Year to Date
                                     Month
<S>                                <C>           <C>        <C>             <C>
Revenues
     Lessons-W                        821.00      11.15      22,991.00       17.73
     Lessons-G                      2,848.00      38.67      45,750.50       35.28
     Lessons-FC                     3,079.25      41.80      52,841.25       40.75
     Testing-W                        390.00       5.29       1,747.50        1.35
     Testing-G                        285.00       3.87       2,975.00        2.29
     Testing-FC                        62.50       0.85       2,002.50        1.54
     Finance Charge-W                   0.00       0.00          37.54        0.03
     Credits-W                       (120.00)     (1.63)       (240.00)      (0.19)
     Credits-G                          0.00       0.00        (507.00)      (0.39)
     Other Income-Books, etc.           0.00       0.00       3,000.00        2.31
     Refunds-Loveland                   0.00       0.00        (922.00)      (0.71)
                                 -----------               -----------

     Total Revenues                 7,365.75      100.0     129,676.29       100.0
                                 -----------               -----------
Cost of Sales
     Rent-Windsor                    (500.00)     (6.79)    (10,000.00)      (7.71)
     Rent-Greeley                  (1,000.00)    (13.58)    (11,000.00)      (8.48)
     Rent-Fort Collins             (1,037.25)    (14.08)    (12,523.70)      (9.66)
     Salaries-Windsor              (6,602.50)    (89.64)    (71,484.98)     (55.13)
     Salaries-Greeley              (2,156.50)    (29.28)    (26,233.75)     (20.23)
     Salaries-Fort Collins         (2,149.25)    (29.18)    (19,057.13)     (14.70)

     Total Cost of Sales          (13,445.50)   (182.54)   (150,299.56)    (115.90)
                                 -----------               -----------

     Gross Profit                  (6,079.75)    (82.54)    (20,623.27)     (15.90)
                                 -----------               -----------
</TABLE>

                                       66
<PAGE>

                                  EXHLBIT 3.4.1

                          Seller's Financial Statements

                                       DLC
                                Income Statement
                 For the Twelve Months Ending December 31, 1999

<TABLE>
<CAPTION>
                                              Current                     Year to Date
                                               Month
<S>                                        <C>                <C>         <C>               <C>
Expenses
     Advertising                                540.00         7.33         (1,878.98)       (1.45)
     Advertising-Windsor                          0.00         0.00            (91.00)       (0.07)
     Advertising-Greeley                          0.00         0.00           (308.15)       (0.24)
     Advertising-Fort Collins                     0.00         0.00         (1,352.95)       (1.04)
     Travel                                       0.00         0.00           (516.00)       (0.40)
     Auto Expense                            (1,270.81)      (17.25)        (8,120.83)       (6.26)
     Bank Service Charges                       (74.57)       (1.01)        (2,148.16)       (1.66)
     Contributions                                0.00         0.00           (100.00)       (0.08)
     Dues & Subscriptions                         0.99         0.00           (582.28)       (0.45)
     Dues & Subscriptions-Greeley                 0.00         0.00            (55.00)       (0.04)
     Dues & Subscriptions-Fort Collins            0.00         0.00            (55.00)       (0.04)
     Educational Materials                        0.00         0.00         (3,000.00)       (2.31)
     Utilities                                 (195.06)       (2.65)          (195.06)       (0.15)
     Utilities-Greeley                         (345.60)       (4.69)        (1,255.16)       (0.97)
     Utilities-Fort Collins                    (132.45)       (1.80)          (799.38)       (0.62)
     Insurance-Auto                            (549.70)       (7.46)        (1,970.30)       (1.52)
     Insurance-Health                         5,655.11        76.78        (14,939.11)      (11.52)
     Insurance-General                          792.07        10.75            213.93        (1.71)
     Insurance-Windsor                            0.00         0.00          1,637.54         1.26
     Insurance-Greeley                            0.00         0.00             60.48         0.05
     Insurance-Fort Collins                       0.00         0.00            290.05         0.25
     Insurance-Life                               0.00         0.00            753.22        (0.58)
     Interest Expense                        (1,278.15)      (17.35)         (5978.26)       (4.61)
     Legal & Accounting                           0.00         0.00           (435.20)       (0.34)
     Miscellaneous Expense                    2,120.00        28.78         (1,574.03)       (1.21)
     Meals                                        0.00         0.00           (120.72)       (0.09)
     Office Expense                           2,228.23        30.25            403.73         0.31
     Office Expense-Windsor                     (57.93)       (0.79)          (696.23)       (0.54)
     Office Expense-Greeley                       0.00         0.00           (150.16)       (0.12)
     Office Expense-Fort Collins                (24.07)       (0.33)          (182.11)       (0.14)
     Postage Expense                              0.00         0.00           (267.85)       (0.21)
     Payroll Service Expense                      0.00         0.00           (267.85)       (0.23)
     Rent Expense-Loveland                      400.00         5.43            400.00         0.31
</TABLE>

                                       67
<PAGE>

<TABLE>
<S>                                        <C>                <C>         <C>               <C>
     Repairs & Maintenance                        0.00         0.00           (125.00)       (0.10)
     Supplies Expense                             0.00         0.00           (515.15)       (0.40)
     Supplies Expense-Windsor                     0.00         0.00            (12.06)       (0.01)
     Supplies Expense-Greeley                     0.00         0.00           (518.03)       (0.40)
     Supplies Expense-Fort Collins                0.00         0.00            (60.78)       (0.05)
     Taxes, Payroll                             224.22         3.04            224.22         0.17
     Taxes, Payroll-Windsor                    (490.01)       (6.65)        (5,411.67)       (4.17)
     Taxes, Payroll-Greeley                    (164.97)       (2.24)        (2,004.34)       (1.55)
     Taxes, Payroll-Fort Collins               (164.41)       (2.23)        (1,408.43)       (1.09)
     Futa-Windsor                                (5.23)       (0.07)          (229.97)       (0.18)
     Futa-Greeley                                (4.45)       (0.06)          (115.80)       (0.09)
     Futa-Fort Collins                          (17.19)       (0.23)          (147.30)       (0.11)
     Suta-Windsor                                (2.52)       (0.03)           (96.35)       (0.07)
     Suta-Greeley                                (1.11)       (0.02)           (44.09)       (0.03)
     Suta-Fort Collins                           (4.30)       (0.06)           (42.67)       (0.03)
     Telephone Expense                          396.86         5.39           (274.65)       (0.21)
     Telephone Expense-Windsor                    0.00         0.00         (5,335.55)       (4.11)
     Telephone Expense-Greeley                    0.00         0.00           (602.83)       (0.46)
     Telephone Expense-Fort Collins               0.00         0.00         (1,611.64)       (1.24)
     Training Expense                             0.00         0.00           (380.00)       (0.29)
     Travel & Entertainment                       0.00         0.00           (497.75)       (0.38)
     Fines & Penalties                            0.00         0.00         (1,050.18)       (0.81)
     Other Income                                 0.00         0.00           (485.45)       (0.37)
     Independence Academy                         0.00         0.00           (913.64)       (0.70)
                                           -----------                    -----------

Total Expenses                                7,573.96       102.83        (69,085.57)      (53.28)
                                           -----------                    -----------
Net Income                                 $  1,494.21        20.29       $(89,708.84)      (69.18)
                                           ===========                    ===========
</TABLE>

                          For Management Purposes Only

                                       68
<PAGE>

                                 EXHIBIT 3.15.1

                                 EMPLOYEE PLANS

PLAN DESCRIPTIONS

MEDICAL PLAN          Company pays 100% of the employees health insurance
                      premiums and 0% of Spouse/dependents coverage.
DENTAL PLAN           Paid 100% by employee.
CAFETERIA 125 PLAN    Company administers the plan. There is no corporate
                      contribution.
LIFE INSURANCE        All full-time employees are eligible for $10,000 of life
                      insurance paid by the Company.
PAID VACATION         One day per month of employment for the first year. One
                      and one-half days per month of employment for years 2-5.
                      Two days per month of employment for subsequent years.
                      Days are added at the first of the year, but are prorated
                      down to the termination date.
PAID SICK TIME        Half-day per month of employment. Days are added at the
                      beginning of the year. Unused days are not paid at
                      termination.

<TABLE>
<CAPTION>
----------------------- -------------- ------------ ------------- --------------- ------------- -------------
                                                                                    Vacation      Sick Time
                                                                                     Accrued       Accrued
         Name              Medical *     Dental *     125Plan *     Life Ins. *     (in days)     (in days)
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
<S>                      <C>           <C>          <C>           <C>             <C>           <C>
Barnhart, Jerry (1)           X             X                           X             52.25         20.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Barnhart, Margo (1)           X             X                           X             52.25         26.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Budzynski, Mathew (1)         X                                         X              5.00          5.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Fitzgerald, Kathleen (1)                                                               0.00          0.63
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Godson, Sylvia
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Hughes, Louise
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Kerr, Kristin (1)             X             X            X              X             41.25         11.75
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Kirkwood, Andrea
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Lopez, Davin
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Macfarlane, Ruth
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Parsons, Suzi (1)             X             X            X              X
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Schmitz, Sarah
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
Wyndelts, Amy
------------------------ ------------- ------------ ------------- --------------- ------------- -------------
</TABLE>

* (X = enrolled)
(1) These individuals perform services for both Dreamcatcher Learning, Inc. and
Dreamcatcher Franchise Corporation (DFC). The accrued vacation and sick time
represent amounts effective as of December 13, 1999 for both organizations.

                                       69
<PAGE>

                                 EXHIBIT 3.17.1

                                  EMPLOYEE LIST

<TABLE>
<CAPTION>
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
           NAME                  POSITION       DATE OF      STATUS       HOURLY     MONTHLY       BONUS       ADD'L.
                                                  HIRE       FT/PT        RATES      SALARY                     COMP.
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
<S>                          <C>              <C>         <C>          <C>         <C>          <C>          <C>
Barnhart, Jerry (1)          Owner                1/1/95      FT                      - 0 -        - 0 -          ****
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
Barnhart, Margo (1)          Owner                1/1/95      FT                      - 0 -        - 0 -          ****
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
Budzynski, Mathew (1)        Director-Greeley     7/1/98      FT                     $1,900      Eligible*
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
Fitzgerald, Kathleen (1)     Director-Fort       11/8/99      FT                     $1,800      Eligible*
                             Collins
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
Godson, Sylvia               Instructor                                  $10.50                    - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
Gunn, Kristy                 Office Mgr.          1/6/00      PT                     $1,000        - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
Hughes, Louise               Instructor                                  $10.50                    - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
Kerr, Kristin (1)            Franchisee           3/1/96      FT                     $2,500        - 0 -            **
                             Training
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
Kirkwood, Andrea             Instructor                                  $10.50                    - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
Lopez, Davin                 Instructor                                  $10.50                    - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
Macfarlane, Ruth             Instructor                                  $10.50                    - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
Parsons, Suzi (1)            Director-            6/1/97      PT                     $1,200        - 0 -
                             Windsor
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
Schmitz, Sarah               Instructor                                  $10.50                    - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
Wyndelts, Amy                Instructor                                  $10.50                    - 0 -
---------------------------- ---------------- ----------- ------------ ----------- ------------ ------------ ------------
</TABLE>

(1) These individuals perform services for both Dreamcatcher Learning, Inc. and
    Dreamcatcher Franchise Corporation (DFC).
* Bonus Plan: For Full-Time Managers / Directors
    o  Paid $4 per hour of instruction delivered over 50 hrs. per week
    o  Paid $6 per hour of instruction delivered over 75 hrs. per week
    o  Paid $10 per hour of instruction delivered over 100 hrs. per week
** Automobile/Insurance; Master's Program at UNC (books/tuition); Stock in DFC
   (900 shares)
*** Stock in DFC (900 shares)
**** Automobile/Insurance; Additional Life Insurance

                                       70
<PAGE>

                                 EXHIBIT 3.17.2

                              TERMINATED EMPLOYEES

<TABLE>
<CAPTION>
------------------------ ------------------------------ --------------------- ---------------------
                                                                                  MONTH/YEAR OF
           NAME                      POSITION                 LOCATION             TERMINATION
------------------------ ------------------------------ --------------------- ---------------------
<S>                      <C>                            <C>                   <C>
Barnhart, Bonni          Asst. Director/Instructor          Fort Collins              8/99
------------------------ ------------------------------ --------------------- ---------------------
Broude, Jennifer         Instructor                         Fort Collins              5/99
------------------------ ------------------------------ --------------------- ---------------------
Butcher, Shelley         Instructor                         Fort Collins              10/98
------------------------ ------------------------------ --------------------- ---------------------
Childs, Lori             Admin./Instructor                    Windsor                 12/99
------------------------ ------------------------------ --------------------- ---------------------
Gunn, Kristy             Instructor                         Fort Collins              9/98
------------------------ ------------------------------ --------------------- ---------------------
Hawkins, Karen           Center Director                      Greeley                 8/98
------------------------ ------------------------------ --------------------- ---------------------
Linn, Andrea             Instructor                           Windsor                 8/99
------------------------ ------------------------------ --------------------- ---------------------
McCord, Denise           Instructor                           Windsor                 7/99
------------------------ ------------------------------ --------------------- ---------------------
Mesbergen, Iris          Instructor/Office Asst.              Windsor                 9/99
------------------------ ------------------------------ --------------------- ---------------------
Moline, Melissa          Instructor                         Fort Collins              1/99
------------------------ ------------------------------ --------------------- ---------------------
Shields, Karen           Accountant                           Windsor                 12/99
------------------------ ------------------------------ --------------------- ---------------------
Winsett, Beverly         Instructor                         Fort Collins              9/99
------------------------ ------------------------------ --------------------- ---------------------
</TABLE>

                                       71<PAGE>

                                                                   EXHIBIT 10.35

                               License Agreement

This Agreement made as of this 21st day of  December, 2000 ("Effective Date") by
and between Genencor International, Inc., a Delaware corporation with its
principal place of business at 925 Page Mill Road, Palo Alto, CA 94304 ("GCOR")
and Protein Polymer Technologies, Inc., a Delaware corporation with its
principal place of business at 10655 Sorrento Valley Road, San Diego, CA 92121
("PPT").

WHEREAS, PPT has developed certain technology, know-how and intellectual
property relating to recombinant, repetitive unit proteins and peptides and is
willing to license said technology, know-how and intellectual property to GCOR;

WHEREAS, GCOR desires to obtain an exclusive license to said technology, know-
how and intellectual property relating to recombinant, repetitive unit proteins
and peptides from PPT;

WHEREAS, PPT and GCOR have entered into a Confidential Disclosure Agreement,
Effective Date August 2, 1999, as amended, pursuant to which the parties have
been discussing terms and conditions for a license and now wish to conclude such
a transaction;

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

                            Article I - Definitions

The following definitions shall control the construction of each of the
following terms wherever they appear in this Agreement:

1.1  "Additional Application Fields" shall mean the use of a Licensed Product in
     any application within the Field but outside the specific Application
     Fields enumerated in Section 1.2.

1.2  "Application Fields" shall mean the use of a Licensed Product(s) in the
     following (i) production or processing of **; (ii) **; (iii) industrial **;
     (iv) **; (v) ** technology; (vi) ** devices; or (vii) ** materials.

1.3  "Confidential Information" shall mean all information of either party
     related to Licensed Rights or a Licensed Product or otherwise designated as
     confidential by the disclosing party ("Discloser") which the Discloser
     provides to the other party ("Recipient") in accordance with the terms of
     this Agreement, in writing and designated as confidential or, if originally
     disclosed orally or otherwise, is reduced to writing marked as confidential
     and provided to the Recipient within thirty (30) days of the disclosure.

1.4  "Core Product" shall mean one or more Licensed Products characterized by
     substantially similar repeat units arranged in a defined sequence.  A
     single Core Product therefore would encompass for example the following
     repeat units:  A-B-A-A-B-C and A-B-A'-A-B-C (where the amino acid sequence
     of repeat unit A' is substantially similar to the amino acid sequence of
     repeat unit A).

1.5  "Date of First Commercial Sale (DFCS)" shall mean in respect of each
     Licensed Product the first arm's length transaction with a willing buyer
     for the sale of such Licensed Product into the market place for commercial
     uses by GCOR or its sublicensee.

** Material is confidential and has been omitted and filed separately with the
Securities and Exchange Commission.
                                       1
<PAGE>

1.6  "Field" shall mean the research, development, production and/or sale of
     products or processes incorporating Licensed Patents or Licensed Know-How
     for any and all applications including but not limited to the Application
     Fields but excluding those applications that are subject to regulation in
     the United States under the Food, Drug and Cosmetics Act, the Medical
     Devices Act and any amendments or updates thereto (these regulated
     applications hereinafter referred to as the "Health Care Field").

1.7  "Licensed Know-How" shall mean any proprietary and confidential know-how
     owned or controlled by PPT on the Effective Date, including technical data,
     experimental results,  techniques, methods, technology, processes, recipes
     and written materials related to recombinant, repetitive unit proteins and
     peptides as well as gene construction, protein polymer and corresponding
     DNA sequences, polymer production systems, acceptor vectors, plasmids,
     polymer gene and gene monomers, maps and DNA sequences for all plasmid
     constructs, host production cells, fermentation and recovery/purification
     protocols, and applications or use data of such proteins and protein
     polymers.

1.8  "Licensed Patents" shall mean patent applications owned or controlled by
     PPT as of the Effective Date as listed in Exhibit 1.8 attached hereto and
     any patents issued on any such patent applications and including any
     reissued patents, re-examined patents, divisions, renewals, continuations
     and continuations in part, substitutions, extensions or foreign
     counterparts thereof.

1.9  "Licensed Products" shall mean any product or process derived by,
     expressed, made or produced using the Licensed Rights within an Application
     Field or Additional Application Field.

1.10 "Licensed Rights" shall mean collectively PPT's Licensed Patents and
     Licensed Know-How.

1.11 "Net Sales" shall mean with respect to a Licensed Product, the ** or its
     subsidiaries (on a **) to unrelated third parties for a Licensed Product,
     less:

**

** Material is confidential and has been omitted and filed separately with the
Securities and Exchange Commission.

                                       2
<PAGE>

1.12    **

1.13    **

1.14    **

                         Article II - Grant of License

2.1  Subject to GCOR's compliance with the terms and conditions of this
     Agreement, for a period of eighteen (18) months from the Effective Date
     (the "Initial Grant Period") PPT hereby grants to GCOR a worldwide,
     royalty-bearing (in accordance with Article III below), exclusive (except
     as to pre-existing rights to license granted within the Field as specified
     in Exhibit 2.1 attached hereto) and sublicenseable (in accordance with
     Section 2.2 below) right and license to practice the Licensed Patents and
     Licensed Know-How to make, have made, use, promote, market, distribute,
     import and sell Licensed Products within the Field.  Provided further that:

** Material is confidential and has been omitted and filed separately with the
Securities and Exchange Commission.
                                       3
<PAGE>

     (a)  Upon expiration of the Initial Grant Period for the remainder of the
          term of this Agreement, GCOR's exclusive license will automatically
          convert to a worldwide, royalty-bearing (in accordance with Article
          III below), exclusive and sublicenseable (in accordance with Section
          2.2 below) right and license to practice the Licensed Patents and
          Licensed Know-How to make, have made, use, promote, market,
          distribute, import and sell Licensed Products within the Application
          Fields and, beginning on the date of addition to the license in
          accordance with Section 2.1(b), any Additional Application Fields
          added at any time during the term of this Agreement, subject to the
          provisions of Section 3.2 and Article V of this Agreement.
     (b)  At any time during the term of this Agreement GCOR shall have the
          option to expand the Application Fields to include Additional
          Application Fields (the "Option").  To exercise its Option GCOR shall
          provide PPT written notice of its intent to initiate, either on its
          own or with a third party, a program for the development of Licensed
          Product in a specified Additional Application Field.  GCOR shall not
          have the right to exercise such Option without the prior written
          approval of PPT, which approval shall not be untimely or unreasonably
          withheld.  Upon such approval by PPT, the specified Additional
          Application Field shall be included within GCOR's exclusive license.
          Should GCOR fail to initiate a development program within the
          specified Additional Application Field within twelve (12) months from
          approval by PPT, GCOR's right and license to said Additional
          Application Field shall lapse.
      (c) Furthermore, during the term of this Agreement PPT hereby grants GCOR
          a right of first refusal for the development, manufacture, use and
          sale of product(s) developed using the Licensed Rights for any use
          within the Field and outside the Application Field(s) and any approved
          Additional Application Field(s) included within GCOR's exclusive
          license pursuant to Section 2.1(b). Subject to GCOR's right of first
          refusal, in the event PPT identifies a product opportunity for
          development within the Field and outside the Application Fields(s) and
          any approved Additional Application Field(s), PPT shall prior to
          initiating such development itself or with a third party through a
          license, collaboration or otherwise provide GCOR the opportunity to
          develop the product. PPT shall do so by providing GCOR with a written
          offer that  shall include, at a minimum a description of the proposed
          product and applications and such other information as may be
          reasonably available and may be necessary for GCOR to evaluate such
          product opportunity. GCOR shall accept or decline the offer within
          forty-five (45) days of its receipt of the offer. If GCOR accepts the
          offer the product and application field shall become subject to the
          terms and conditions of this Agreement.  Likewise, subject to GCOR's
          right of first refusal, if a third party should approach PPT
          requesting a license or collaboration to develop a product within the
          Field and outside the Application Field(s) and any approved Additional
          Application Field(s), PPT shall provide GCOR with a written offer that
          shall include at a minimum, (i) a description of the proposed product
          and application; (ii) the proposed license or collaboration structure
          with respect to such product and applications; and (iii) any other
          applicable material terms or conditions.  GCOR shall accept or decline
          the offer within forty-five (45) calendar days after receipt of such
          offer. A failure to respond shall be a decline of the offer.

2.2  GCOR shall have the right to sublicense its exclusive right and license to
     practice the Licensed Patents and Licensed Know-How except to the extent
     such relate to gene construction and polymer production technology without
     PPT's prior approval. GCOR shall also have the right to sublicense or
     otherwise transfer its exclusive right and license to practice the Licensed
     Patents and Licensed Know-How related to gene construction and polymer
     production technology to third parties as necessary for the
     commercialization of

                                       4
<PAGE>

     Licensed Products subject to PPT's approval which approval shall not be
     unreasonably withheld. GCOR shall be responsible for compliance by
     sublicensees with the terms and provisions of this Agreement.

2.3  PPT retains all rights to the Licensed Rights not expressly granted to GCOR
     pursuant to this Agreement. Subject only to the rights granted to GCOR
     pursuant to this Agreement, title to the Licensed Rights shall at all times
     after the initial grant paeriod remain with PPT.  Subject to GCOR's Option
     and right of first refusal pursuant to Section 2.1(b) and (c) respectively,
     PPT shall at all times have the right to freely use the Licensed Rights
     outside of the Application Field or Additional Application Fields, as
     applicable. In addition, PPT, in its sole discretion, shall have the right
     to use or license the Licensed Rights to any third parties for uses in the
     Health Care Field. Periodically and at least one time per year the parties
     will meet and discuss their respective efforts with the Licensed Rights
     including any modifications, enhancements and improvements to the Licensed
     Rights ("Improvements") which have been made by either party.  To the
     extent that GCOR makes any Improvements which may be useful in the Health
     Care Field, the parties will discuss and agree on how to commercialize such
     Improvements in the Health Care Field.

                        Article III - Fees and Royalties

3.1  Upfront Payment.  Within fifteen (15) days of the Effective Date, GCOR
     ----------------
     shall pay PPT a lump sum non-refundable payment of Seven Hundred and Fifty
     Thousand US Dollars ($750,000).

3.2  Milestone Payments.  In consideration of PPT entering into this Agreement
     -------------------
     and the right and licenses granted to GCOR hereunder, during the term of
     this Agreement, GCOR will pay PPT certain milestone payments (the
     "Milestone Payments") as detailed below:

     **

3.3  Royalties.  Prior to commercialization of any Licensed Product GCOR and PPT
     ---------
     shall in good faith agree on the applicable PPT Intellectual Property Class
     (Class I-IV) of the Core Product embodied in the proposed Licensed Product.
     For each Royalty Payment due under this Agreement: (i) the weighted average
     selling price of Licensed Product will be determined, which together with
     the PPT Intellectual Property Class determination results in a Selling
     Price Multiplier; and (ii) actual annual Net Sales of each Licensed Product
     will be determined and summed to yield the Core Product Net Sales, which
     together with the PPT Intellectual

** Material is confidential and has been omitted and filed separately with the
Securities and Exchange Commission.
                                       5
<PAGE>

     Property Class determination results in a Net Sales Multiplier. For
     illustrative purposes only, a hypothetical determination of the weighted
     average selling price for Licensed Product and Core Product Net Sales are
     set forth in Exhibit 3.3.

     (a)  Royalties on GCOR Sales of Licensed Product.  Taking each of these
          -------------------------------------------
          factors into consideration the Net Effective Royalty Rate payable by
          GCOR on Net Sales of a Licensed Product will be calculated using the
          following formula:

          Net Effective Royalty Rate=(royalty rate for applicable PPT
          Intellectual Property Class) X (Selling Price Multiplier) X (Net Sales
          Multiplier).

          The Net Effective Royalty Rate for each Licensed Product will be
          multiplied by GCOR's Net Sales of the Licensed Product to calculate
          the royalty payable to PPT.  For illustrative purposes only,
          hypothetical calculations of Net Effective Royalty Rates are set forth
          in Exhibit 3.3(a).

     (b)  Royalties for Third Party Sales of Licensed Product.  In the event a
          ---------------------------------------------------
          third party licensee sells Licensed Product the Net Effective Royalty
          Rate shall be calculated in the same manner as detailed in section 3.3
          (a), however rather than multiplying the Net Effective Royalty Rate by
          GCOR's Net Sales, the Net Effective Royalty Rate shall be multiplied
          by GCOR's share or interest in the Licensed Product or the Licensed
          Product-related revenue from the third parties' sales of Licensed
          Product.

3.4  Third Party Royalty Obligations.  Except as provided in Section 3.4(a)
     --------------------------------
     below, GCOR's total royalty rate for a Licensed Product will not exceed **.
     Accordingly if the manufacture, use or sale of a Licensed Product requires
     one or more license(s) to third party intellectual property in addition to
     PPT Licensed Rights, PPT's Net Effective Royalty Rate shall be reduced by
     the royalty rate due by GCOR to said third party(s) so that GCOR's total
     royalty rate does not exceed **.

     (a)  **

                        Article IV- Payments and Reports

4.1  Net Sales Records; Reports.  GCOR shall keep complete and correct records
     ---------------------------
     of Net Sales of Licensed Products sold by GCOR for a period of three (3)
     years after the making of a royalty payment under this Agreement. Annually,
     GCOR will provide PPT a report summarizing any susblicensing arrangements,
     joint ventures, strategic alliances or other partnering arrangements and
     any third party activity relating to the Licensed Rights.

4.2  Royalty Payments for GCOR sales.  Royalty payments shall be made within
     --------------------------------
     thirty (30) days of the end of each calendar quarter during the term of
     this Agreement.  Accordingly, royalty payments under this Agreement shall
     become due and payable on each April 30, July 31, October 31 and January 31
     for the preceding quarter.  Royalties for the first three (3) quarters will
     be pro-rated based on projected annual Net Sales.  At the end of the
     calendar year when actual annual Net Sales information is available, GCOR
     will adjust up or down the fourth quarter payment to reconcile projected
     Net Sales and actual Net Sales and the royalties due. Payment shall be
     accompanied by a report showing the gross receipts from sales of Licensed
     Products less the deductions permitted in Section 1.11 and the resulting
     Net Sales used in the

** Material is confidential and has been omitted and filed separately with the
Securities and Exchange Commission.
                                       6
<PAGE>

     computation of the royalty payments as well as any reductions in the
     royalty obligation of GCOR pursuant to Section 3.4.

4.3  Payments for Third Party Sales.  If product revenue is generated by GCOR's
     -------------------------------
     sublicensee's sale of Licensed Product or the sale of Licensed Product by
     any other entity including, without limitation, pursuant to a joint
     venture, strategic alliance or other partnering arrangement, rather than
     GCOR's direct sale of such Licensed Product, and GCOR therefore receives
     its revenue or any other form of payment based on any third party's
     product-related revenue, then GCOR shall keep complete and correct records
     of payments received by it based on product-related revenues.

4.4  Currency and Exchange Rates.  GCOR shall make all payments to PPT under
     ----------------------------
     this Agreement in US Dollars and to a bank account to be designated by PPT.
     Net Sales shall be calculated on the basis of the rates of exchange as
     quoted by the Wall Street Journal (US Edition) using the weighted average
                   -------------------
     exchange rate of the calendar year royalty period in which the
     corresponding sales of Licensed Product were made.

4.5  Audit.  GCOR shall allow PPT to appoint a firm of independent certified
     -----
     public accountants to whom GCOR has no reasonable objection.  GCOR shall
     give such accountants access, during ordinary business hours and subject to
     a reasonable advance notice, to such books, records and personnel of GCOR
     as are necessary to verify the accuracy of any royalty or equivalent
     payment made or payable under the Agreement. Such access shall be granted
     no more than once in a calendar year, at PPT's request and expense. The
     independent certified accountants will be under a confidentiality
     obligation to GCOR to disclose to PPT in its report only the amount of
     royalties payable under the Agreement. If the results of any such audit
     reveal a net underpayment by GCOR to PPT of amounts due pursuant to this
     Agreement, then GCOR shall within thirty (30) calendar days of receipt of
     notice by GCOR of such underpayment pay to PPT (i) the amount of such
     underpayment plus interest accrued at the lower of (a) the rate of prime
     rate plus one percent (1%) per annum and (b) the highest rate allowed by
     applicable law and (ii) the reasonable costs and expenses incurred by PPT
     in connection with such audit.  If the results of such audit reveal a net
     overpayment by GCOR to PPT of any amounts due pursuant to this Agreement,
     then GCOR shall receive a credit in the amount of such overpayment against
     any royalty payments due to PPT.

                            Article V - **

5.1  GCOR's ** license as granted in Article III will ** license subject to
     Section 5.2 hereof if GCOR fails to make a combined Minimum Payment arising
     from either (i) Milestone Payments and Royalties but excluding the Seven
     Hundred and Fifty Thousand US Dollars ($750,000) upfront fee; or (ii) a
     lump sum payment to PPT as follows:
     **

** Material is confidential and has been omitted and filed separately with the
Securities and Exchange Commission.

                                       7
<PAGE>

5.2  If GCOR fails to make the combined Minimum Payments in the time periods set
     forth whether through Milestone Payments and Royalties or lump sum payments
     in the relevant time period specified in Section 5.1 (a)-(c) then GCOR's **
     license shall be ** license to develop, make, have made, use, promote,
     import and sell Licensed Products, the development of which has already
     been initiated, in the applicable Application Fields and Additional
     Application Fields .

                        Article VI - Technology Transfer

6.1  Promptly after the Effective Date PPT shall transfer the Licensed Know-How
     to GCOR as specified in that certain letter dated December 21, 2000 from
     PPT to GCOR.  In consideration of the fees paid by GCOR this transfer shall
     be free of additional charge and shall include costs incurred by PPT
     associated with up to three (3) days of consultation by PPT research and
     development personnel to enable the effective and efficient transfer of the
     Licensed Know How to GCOR.  In addition to the initial transfer, GCOR may
     request at its expense additional consulting from PPT personnel up to an
     additional five (5) days.  GCOR will bear reasonable and customary
     consultation fees for any such additional consulting requested.

                             Article VII - Warrants

7.1  PPT shall grant warrants to GCOR pursuant to definitive warrant agreements
     attached hereto ** as follows:

     (a)  Stock warrants for shares of PPT common stock valued at Five Hundred
          Thousand US Dollars  ($500,000) **

     (b)  Stock warrants for shares of PPT common stock valued at Five Hundred
          Thousand US Dollars ($500,000) **

       Article VIII - Representations and Warranties and Indemnification

8.1  Representation and Warranties By PPT.  PPT represents and warrants to GCOR
     -------------------------------------
     that:
     (a)  it has the authority to enter into this Agreement;
     (b)  it owns the Licensed Rights and/or has the right to grant to GCOR the
          license granted under Article II hereof and that said licenses do not
          conflict with or violate the terms of any agreement between PPT and
          any third party;
     (c)  there is no ongoing administrative or judicial proceeding contesting
          the inventorship, ownership, validity or enforceability of any element
          of the Licensed Rights nor has there been any such administrative or
          judicial proceeding in the past;

** Material is confidential and has bee omitted and filed separately with the
Securities and Exchange Commission.

                                       8
<PAGE>

     (d)  it has not as of the Effective Date, granted the right to license the
          Licensed Rights to any third party in the licensed Field except as
          disclosed in Exhibit 2.1; and
     (e)  PPT has no third party agreements which would be violated by the
          disclosure or transfer to GCOR of Licensed Know-How.

8.2  Representations and Warranties By GCOR.  GCOR represents and warrants to
     ---------------------------------------
     PPT that:

     (a)  GCOR has the authority to enter into this Agreement;
     (b)  this Agreement does not conflict with the terms of any other agreement
          to which it is subject; and
     (c)  GCOR is in compliance with: (i) all laws applicable to the purchase,
          storage, transport, labeling, distribution or commercialization by it
          of the Licensed Product, Licensed Know-How and Licensed Patents; (ii)
          the U.S. Export Administration laws and regulations and shall not
          export or re-export any technical data or intellectual property, or
          the direct products of such technical data or intellectual property,
          or Licensed Product to any prohibited country listed in the U.S.
          Export Administration Regulations unless properly authorized to do so
          by the U.S. government.

8.3  Indemnification by PPT.  PPT shall defend, indemnify and hold GCOR harmless
     -----------------------
     against any liability, damage, cost or expense, including reasonable legal
     fees arising out of or resulting from:  (i) PPT's breach of a material term
     of this Agreement; (ii) PPT's breach of any representation or warranty set
     forth in Section 8.1; and (iii) any third person claim(s) or suit(s) made
     or brought against GCOR to the extent such liability arises out of or
     relates to PPT's gross negligence or willful misconduct with regard to the
     licenses granted herein by PPT to GCOR or the transfer of Licensed Know-How
     hereunder by PPT.

8.4  Indemnification by GCOR.  GCOR shall defend, indemnify and hold PPT
     ------------------------
     harmless against any liability, damage, cost or expense, including
     reasonable legal fees arising out of or resulting from:  (i) GCOR's breach
     of a material term of this Agreement; (ii) GCOR's breach of any
     representation or warranty set forth in Section 8.2; and (iii) any third
     person claim(s) or suit(s) made or brought against PPT to the extent such
     liability arises out of or relates to GCOR's manufacture, use or sale of
     Licensed Products or use of the PPT Licensed Rights, except to the extent
     such liability is the result of PPT's gross negligence or willful
     misconduct.

8.5  Notice and Cooperation.  If either party receives notice of any claim or of
     ----------------------
     the commencement of any action, administrative or legal proceeding, or
     investigation as to which the indemnity provided for in Section 8.3 or 8.4
     hereof may apply:

     (a)  the party seeking indemnification shall notify the indemnifying party
          of such fact within fourteen (14) days at the address noted in Section
          13.7; provided that the failure to so notify shall not release an
          indemnifying party of its obligations hereunder unless such failure
          shall be materially detrimental to the defense of any such action,
          proceeding or investigation; and
     (b)  the party seeking indemnification shall cooperate with and assist the
          indemnifying party and its representatives in the investigation and
          defense of any claim and/or suit for which indemnification is
          provided.

8.6  Defense and Settlement.  The indemnifying party shall control the defense
     -----------------------
     of any claim and/or suit for which indemnification is provided under this
     Article VIII.  This agreement of

                                       9
<PAGE>

     indemnity shall not be valid as to any settlement of a claim or suit or
     offer of settlement or compromise without the prior written approval of the
     indemnifying party.

8.7  Limitation on Damages.  Notwithstanding any provision in this Agreement to
     ----------------------
     the contrary, in no event will PPT or GCOR be liable for special,
     exemplary, incidental or consequential damages or for damages of any kind
     based upon the loss of revenue or anticipated profits.

                      Article IX - Collaboration Agreement

9.1  Collaboration Agreement.  At any time within three (3) years of the
     ------------------------
     Effective Date of the Agreement at GCOR's request and discretion, it may
     notify PPT of its intent to enter a subsequent funded research and
     development collaboration agreement with PPT (the "Collaboration"). If GCOR
     provides timely notice to PPT and the parties commence such a Collaboration
     no sooner than the second year of the License Agreement, then PPT shall
     make personnel available for funded research and development of up to Five
     Hundred Thousand US Dollars ($500,000) over a twelve (12) month funding
     period. Any such Collaboration shall be memorialized in a definitive
     agreement including a work plan detailing the efforts to be undertaken in
     the program as well as terms and conditions for GCOR's funding and such
     other terms and conditions as the parties mutually agree upon. All
     intellectual property rights arising from such a Collaboration shall be
     licensed to GCOR under reasonable terms and conditions and in no event
     under terms less favorable than those included herein. Furthermore said
     terms and conditions shall take into consideration GCOR's funding of the
     Collaboration. Notwithstanding the foregoing, PPT shall have no obligation
     whatsoever to enter into the Collaboration if GCOR is in breach of any
     provision of this Agreement.

          Article X - Patent Maintenance, Prosecution and Enforcement

10.1 PPT, at its expense, shall use commercially reasonable efforts to
     prosecute and maintain the Licensed Patents only in **. PPT will provide
     GCOR an update on the status of all Licensed Patents periodically (not to
     exceed two times per calendar year) upon GCOR's reasonable request.

10.2 In the event that GCOR provides PPT with written notice of and evidence
     establishing a substantial case of infringement of a Licensed Patent by a
     third party with a product similar to a Licensed Product which infringing
     product is made, used or sold using Licensed Rights, PPT may at its sole
     discretion within thirty (30) days of receipt of such notice and evidence
     take action it deems appropriate to abate such infringement.  If PPT elects
     to take action against such infringement, at GCOR's discretion it may
     advance to PPT one-half of the total costs and expenses related to such
     action and in return receive a credit against royalty payments due PPT for
     all such advanced amounts.  In addition, GCOR shall render all reasonable
     assistance in connection therewith including being named as a party, if
     necessary.  In such an event, GCOR shall have the right to be represented
     in that action by counsel of its own choice and at GCOR's expense.

     If PPT fails to take action against such infringement or possible
     infringement, GCOR to the extent allowable by law shall have the right at
     its sole discretion to take any necessary action against such infringement
     or possible infringement.  In no event shall GCOR settle or abate such
     infringement by granting any rights to Licensed Patents without the prior
     written consent of PPT. If GCOR elects to take action against such
     infringement, PPT shall render all reasonable assistance to GCOR, at PPT's
     cost and expense in connection therewith including being named as a party,
     if necessary.  In such event, PPT shall have the right to be

** Material is confidential and has been omitted and filed separately with the
Securities and Exchange Commission.

                                       10
<PAGE>

     represented by counsel of its own choice and at PPT's expense.
     Alternatively, at its sole discretion, PPT may assign to GCOR all of its
     right, title and interest in the relevant Licensed Patent(s).

     The party enforcing any Licensed Patent shall bear the cost and shall have
     the right to any sum recovered in such proceedings in proportion to its
     costs in such proceeding.

                          Article XI - Confidentiality

11.1 In consideration of disclosure by either of the parties to the other party
     of Confidential Information, the Recipient undertakes for the term of this
     Agreement and five (5) years thereafter to treat received information as
     strictly secret and therefore not to disclose it to any third party (except
     reliable employees and affiliates and sublicensees under similar secrecy
     obligations), and to make no commercial use of it except for the purposes
     of this Agreement or except as otherwise specifically provided for herein.
     This obligation does not apply to:

     (a)  information which, at the time of disclosure, is already in the public
          domain;

     (b)  information which, after disclosure, becomes a part of the public
          domain by publication through no violation of this Agreement;

     (c)  information which the Recipient is able to prove by competent written
          evidence to have been in the Recipient's possession prior to any
          disclosure by the Discloser;

     (d)  information which is hereafter lawfully disclosed by a third party to
          the Recipient, which third party did not acquire the information under
          a still effective obligation of confidentiality to the Discloser; and

     (e)  information which is independently developed by or for a party.

11.2 Press Release.  Neither party shall issue any public statement concerning
     -------------
     the existence or terms of this Agreement or any activities related hereto
     without consulting and agreeing with the other party on the nature, text
     and timing of such public statement.  However, each party may disclose this
     Agreement or any activities related hereto without the other party's
     approval if such approval has been requested but not received within forty-
     eight (48) hours and such party concludes, after consulting with its legal
     advisors, that it is required by law or regulatory or listing agency to
     disclose the transaction or part thereof.  Furthermore, GCOR shall be free
     to disclose through a press release or otherwise any third party
     transaction(s) it concludes relating to the Licensed Rights without PPT's
     approval.  GCOR will endeavor but is not obligated to provide PPT with
     prior notice of such proposed disclosure and to acknowledge PPT as GCOR's
     licensor of the Licensed Rights.

                        Article XII - Term & Termination

12.1 Term.  This Agreement shall commence on the Effective Date and shall
     ----
     continue until expiry of the last remaining Licensed Patent, unless earlier
     terminated in accordance with this Article XII.

12.2  Termination.  Either party hereto shall have the right, by notice in
      -----------
     writing, to terminate this Agreement:

                                       11
<PAGE>

     (a)  in the event that the other party is in default or breach of any
          material covenant, undertaking or obligation to be performed by that
          party hereunder including but not limited to (i) breach of the license
          terms under Article II such as use of the Licensed Rights outside the
          Field, (ii) breach of any of the payment provisions under Article III,
          (iii) breach of the representation and warranties under Article VIII,
          (iv) breach of confidentiality undertakings under Article XI, and such
          default or breach is not corrected or cured within for a non-monetary
          breach sixty (60) days after written notice thereof has been given by
          the non-defaulting party or for a monetary breach thirty (30) days
          after written notice thereof has been given by the non-defaulting
          party; or
     (b)  in the event that the other party shall enter into any arrangement or
          composition with its creditors, or enter or be put into voluntary or
          compulsory liquidation (except for the purpose of any reorganization
          reasonably acceptable to the other party), or have its business
          enjoined into receivership by executive or judicial authorities.

12.3 GCOR shall be ** .Upon termination of this Agreement, GCOR shall
     immediately destroy and certify such destruction in writing to PPT, or
     return to PPT, all materials provided by PPT to GCOR under this Agreement,
     including, without limitation, all materials related to Licensed Know-How,
     Licensed Patents and Licensed Products.

12.4 Any termination under this Article shall be without prejudice to the rights
     of either party against the other then accruing or otherwise accrued under
     the Agreement.

12.5 Expiration of this Agreement pursuant to Section 12.1 or termination of
     this Agreement pursuant to Section 12.2 or 12.3 shall terminate all
     outstanding obligations and liabilities between PPT and GCOR arising from
     this Agreement except:

          (a) obligations to pay royalties and other sums accruing hereunder up
              to the day of such termination;

          (b) the right to complete the manufacture and sale of Licensed
              Products which qualify as "work in progress" under generally
              accepted cost accounting standards or which are in stock at the
              date of termination, and the obligation to pay royalties on Net
              Sales of such Licensed Products;

          (c) obligations for record keeping and accounting reports for so long
              as Licensed Product is sold pursuant to this Agreement;

          (d) PPT's right to inspect books and records as in Section 4.5;

          (e) Representations and warranties and indemnity under Article VIII
              shall survive for a period of three (3) years after the date of
              expiration or termination of this Agreement;

          (f) Any cause of action or claim of GCOR and sublicensees or PPT
              accrued or to accrue because of any breach or default by the other
              party hereunder;

          (g) The confidentiality provisions of Article XI;

** Materials is confidential and has veen omitted and filed seperately
with the securities and Exchange Commission.

                                       12
<PAGE>

          (h) All other terms, provisions, representation, rights and
              obligations contained in this Agreement that by their sense and
              context are intended to survive until performance thereof by
              either or both parties.

                    Article XIII - Miscellaneous Provisions

13.1 Force Majeure.  Each of the parties hereto shall be excused from the
     -------------
performance of its obligations hereunder and shall not be liable for damages to
the other in the event that such performance is prevented by circumstances
beyond its effective control.  Such excuse from performance shall continue for
as long as the condition responsible for such excuse continues and for a period
of thirty (30) days thereafter, provided that if such excuse continues for a
period of one hundred and eighty (180) days, the party whose performance is not
being prevented shall be entitled to withdraw from this Agreement.  For the
purpose of this Agreement circumstances beyond the effective control of the
party which excuse said party from performance shall include, without
limitation, acts of God, enactments, regulations or laws of any government,
injunctions or judgment of any court, war, civil commotion, destruction of
facility or materials by fire, earthquake, storm or other casualty, labor
disturbances and failure of public utilities or common carrier.

13.2 Non-Solicitation. As a material inducement to PPT executing, delivering
     ----------------
     and performing this Agreement, for a period of ** after the Effective Date
     GCOR agrees that it will not (i) solicit or attempt to solicit any employee
     of PPT to terminate his or her employment with PPT, or (ii) employ or
     solicit employment elsewhere of any employee or consultant of PPT, in each
     case without the prior written consent of PPT.

13.3   Independent Contractors.  Nothing in this Agreement is intended or shall
       -----------------------
be deemed to constitute a partnership, agency, employment or joint venture
relationship between the parties.  All activities by the parties hereunder shall
be performed by the parties as independent parties.  Neither party shall incur
any debts or make any commitment for or on behalf of the other party except to
the extent, if at all, specifically provided herein or subsequently agreed upon.

13.4.  Limitation On Assignment.  Except as provided herein, neither party may
       ------------------------
assign this Agreement nor any interest or obligation hereunder except with the
prior written consent of the other party, which consent shall not be
unreasonably or untimely withheld.  Either party may assign this Agreement in
connection with the sale or transfer of all or substantially all of its business
to which this Agreement relates without consent but with timely notice.  Any
permitted assignee shall assume all of the obligations of its assignor under
this Agreement.

13.5 Amendments of Agreement.  This Agreement may be amended or modified or one
     -----------------------
or more provisions hereof waived only by a written instrument signed by both
parties.

13.6 Severability.  In the event that any one or more of the provisions of this
     ------------
Agreement should for any reason be held by any court or authority having
jurisdiction over this Agreement and the parties to be invalid, illegal or
unenforceable, such provisions shall be deleted in such jurisdiction; elsewhere
this Agreement shall not be affected.

13.7 Article Headings.  The section headings contained in this Agreement are for
     ----------------
convenience only and are to be of no force or effect in construing and
interpreting this Agreement.

13.8 Notices.  Any notice, report, request, approval, payment, consent or other
     -------
communication required or permitted to be given under this Agreement shall be in
writing and shall for all purposes

** Materials is confidential and has been omitted and filed seperately
with the securities and Exchange Commission.

                                       13
<PAGE>

be deemed to be fully given and received, if delivered in person or sent by
registered mail, postage prepaid or by facsimile transmission to the respective
parties at the following addresses:

               If to PPT:     Protein Polymer Technologies, Inc.
                              10655 Sorrento Valley Road
                              San Diego, CA 92121
                              Telefax: 858-558-6477
                              Attention: President

          If to Genencor:    Genencor International, Inc.
                             925 Page Mill Road
                             Palo Alto, CA 94304
                             Telefax:   650-845-6507
                             Attention: Senior Vice President
                                       Commercial & Legal Affairs

Either party may change its address for the purpose of this Agreement by giving
the other party written notice of its new address.

13.9 Arbitration of Disputes.  Excepting only actions and claims relating to
     -----------------------
actions commenced by a third party against PPT or GCOR (including, without
limitation, for injuries caused by a Licensed Product or in respect to a
trademark or patent infringement claim), any controversy or claim arising out of
or relating to the terms and conditions of this Agreement, or the decision to
agree upon these terms, or the breach thereof, including questions of validity
or termination hereof, shall be settled exclusively by arbitration in accordance
with the rules of the American Arbitration Association. If such controversy or
claim relates to patent validity then the Patent Arbitration Rules of the AAA
shall apply; otherwise the Commercial Arbitration Rules of the AAA shall apply.
     There shall be one (1) arbitrator to be mutually agreed upon by the parties
and to be selected from the Regional Panel of Distinguished Neutrals or such
other source as the parties agree. If the parties are unable to agree upon such
an arbitrator who is willing to serve within forty-five (45) days of receipt of
the demand by the other party, then the AAA shall appoint an arbitrator willing
to serve from the stated panel, or if no such panel exists, then from an
appropriate AAA panel. It shall be the duty of the arbitrator to set dates for
preparation and hearing of any dispute and to expedite the resolution of such
dispute.

     The requirements for arbitration are as follows:

     (a)  The arbitration shall be held in the City of Los Angeles, State of
          California, U.S.A. and the arbitrator shall apply the substantive law
          of California except that the interpretation and enforcement of this
          arbitration provision shall be governed by the Federal Arbitration
          Act;

     (b)  The arbitrator shall permit and facilitate discovery, which will be
          conducted in accordance with the Federal Rules of Civil Procedure,
          taking into account the needs of the parties and the desirability of
          making discovery expeditious and cost-effective;

     (c)  The arbitrator will set a discovery schedule with which the parties
          will comply and attend depositions if requested by either party;

                                       14
<PAGE>

     (d)  The arbitrator will entertain such presentation of sworn testimony or
          evidence, written briefs and/or oral argument as the parties may wish
          to present, but no testimony or exhibits will be admissible unless the
          adverse party was afforded an opportunity to examine such witness and
          to inspect and copy such exhibits during the pre-hearing discovery
          phase;

     (e)  The arbitrator shall among his other powers and authorities,
          have the power and authority to award interim or preliminary relief;
     (f)  The arbitrator shall not be empowered to award either party
          exemplary, consequential or punitive damages and the parties shall be
          deemed to have waived any right to such damages;
     (g)  A qualified court reporter will record and transcribe the
          proceeding;
     (h)  The decision of the arbitrator will be in writing and judgment
          upon the award by the arbitrator may be entered in any court having
          jurisdiction thereof;
     (i)  Prompt handling and disposal of the issue is important.
          Accordingly, the arbitrator will be instructed to assume adequate
          managerial initiative and control over discovery and other aspects of
          the proceeding to schedule discovery and other activities for
          substantially continuous work, thereby expediting the arbitration as
          much as is deemed reasonable to him, but in all events to effect a
          final award within 365 days of the arbitrator's selection or
          appointment.
     (j)  The proceedings shall be confidential and the arbitrator shall
          issue appropriate protective orders to safeguard both parties'
          confidential information.
     (k)  The fees of the arbitrator and the AAA shall be paid as
          designated by the arbitrator or, if he shall not so designate, they
          shall be split equally between the parties.

13.10  Non-Waiver For Failure To Enforce Compliance.  The express or implied
       --------------------------------------------
waiver by either party of a breach of any provision of this Agreement shall not
constitute a continuing waiver of other breaches of the same or other provisions
of this Agreement.

13.11  Applicable Law.  This Agreement shall be construed and interpreted in
       --------------
accordance with the laws of the State of California.

                                       15
<PAGE>

13.12  Authority To Sign; Counterparts.  Each person signing below and each
       -------------------------------
       party on whose behalf such person executes this Agreement warrants that
       he, she or it as the case may be, has the authority to enter into this
       Agreement. This Agreement may be executed in one or more counterparts,
       each of which is an original but all of which, taken together, shall
       constitute one and the same instrument.

13.13  Cumulative Rights.  The parties' rights under this Agreement are
       ------------------
       cumulative and non-exclusive and no exercise or enforcement by either
       of the parties of any right or remedy hereunder shall preclude the
       exercise or enforcement by either party of any other right or remedy
       hereunder or which either party is entitled by law to enforce.

13.14  Marking.  To the extent reasonably feasible GCOR agrees to mark all
       --------
       Licensed Product(s) made, used or sold under the terms of this
       Agreement, or their containers, in accordance with applicable patent
       marking laws.

IN WITNESS WHEREOF, this License Agreement has been entered into on the
Effective Date.

                         GENENCOR INTERNATIONAL, INC.

Date:  12/21/00            By:           /S/
       --------                ----------------------
                         Name:  Stuart L. Melton
                                ----------------
                         Title: Senior Vice President
                                ---------------------

                         PROTEIN POLYMER TECHNOLOGIES, INC.

Date:  12/21/00            By:           /S/
       --------                ----------------
                         Name:  John E. Flowers
                                ---------------
                         Title: Vice President
                                --------------

                                       16
<PAGE>

                                  Exhibit 1.8

                                Licensed Patents

<TABLE>
<CAPTION>
  U.S. Patent No.                            Title                            Issue
                                                                               Date
<C>                  <S>                                                    <C>
  **
</TABLE>

** Material is confidential and has been omitted and filed separately with the
Securities and Exchange Commission.

                                       17
<PAGE>

                             Exhibit 1.8 Continued

                                Licensed Patents

<TABLE>
<CAPTION>
  U.S. Patent No.                            Title                            Issue
                                                                              Date
<S>                  <C>                                                    <C>
**

** Material is confidential and has been omitted and filed separately with the
Securities and Exchange Commission.
</TABLE>

                                       18
<PAGE>

                                  Exhibit 2.1

     **

     **

2.   Proteinaceous polymers containing the amino acid sequences RGD or IKVAV
(defined by standard single letter amino acid designations) useful in promoting
cell culture, including derivatives and coated products thereof, for in vitro
cell attachment and culture and/or for use under the limitations of a For
Research Use Only label, where the use is based upon the cellular receptor
binding activity of the RGD or IKVAV amino acid sequence, including uses for:
(i) screening of drugs and other bioactive materials; (ii) quality control and
other analytical applications in research and/or development; and (iii) quality
control and other analytical applications in the manufacture of other products.

** Material is confidential and has been omitted and filed seperately with the
Securities and Exchange Commission.
                                       19
<PAGE>

                                Exhibit 3.2(b-c)

**

** Material is confidential and has been omitted and filed seperately with the
   Securities and Exchange Commission.

                                       20
<PAGE>

                                                                  Exhibit 3.3(a)

                                     [**]

** Material is confidential and has been omitted and filed separately with the
Securities and Exchange Commission.

                                       21
<PAGE>

                                     [**]

** Material is confidential and has been omitted and filed separately with the
Securities and Exchange Commission.

                                      22

<PAGE>

                                Exhibit 3.3(a)

                                     [**]

** Material is confidential and has been omitted and filed separately with the
Securities and Exchange Commission.

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