Exhibit 10.55

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                          AGREEMENT AND PLAN OF MERGER

                                  by and among

                          NEOMEDIA TECHNOLOGIES, INC.,

                        NEOMEDIA TELECOM SERVICES, INC.,

                                       and

                               BSD SOFTWARE, INC.


                          Dated as of December 21, 2004

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                                TABLE OF CONTENTS

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ARTICLE 1. DEFINITIONS............................................................................................1

   1.1.     Defined Terms.........................................................................................1
   1.2.     Interpretation Provisions............................................................................11

ARTICLE 2. THE MERGER............................................................................................11

   2.1.     The Merger...........................................................................................11
   2.2.     Effective Time.......................................................................................11
   2.3.     Effect of the Merger.................................................................................12
   2.4.     Certificate of Incorporation; Bylaws.................................................................12
   2.5.     Directors and Officers...............................................................................12
   2.6.     The Merger Consideration; Effect on Outstanding Securities of the Company............................12
   2.7.     Dissenting Shares....................................................................................13
   2.8.     Exchange Procedures..................................................................................13
   2.9.     No Further Ownership Rights in Company Common Stock..................................................14
   2.10.    Lost, Stolen or Destroyed Certificates...............................................................14
   2.11.    Taking of Necessary Action; Further Action...........................................................14
   2.12.    Tax Treatment........................................................................................14

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MAJOR STOCKHOLDERS..................................14

   3.1.     Organization of the Company..........................................................................15
   3.2.     Capitalization of the Company........................................................................15
   3.3.     Stockholders' Agreements, etc........................................................................16
   3.4.     Authorization........................................................................................16
   3.5.     Officers and Directors...............................................................................16
   3.6.     Bank Accounts........................................................................................16
   3.7.     Subsidiaries.........................................................................................16
   3.8.     Real Property........................................................................................17
   3.9.     Personal Property....................................................................................18
   3.10.    Environmental Matters................................................................................19
   3.11.    Contracts............................................................................................20
   3.12.    No Conflict or Violation; Consents...................................................................21
   3.13.    Permits..............................................................................................22
   3.14.    SEC Reports; Financial Statements; Books and Records.................................................22
   3.15.    Absence of Certain Changes or Events.................................................................23
   3.16.    Liabilities..........................................................................................25
   3.17.    Litigation...........................................................................................26
   3.18.    Labor Matters........................................................................................26
   3.19.    Employee Benefit Plans...............................................................................27
   3.20.    Transactions with Related Parties....................................................................29
   3.21.    Compliance with Law..................................................................................29
   3.22.    Intellectual Property................................................................................29
   3.23.    Tax Matters..........................................................................................33
   3.24.    Insurance............................................................................................35
   3.25.    Brokers; Transaction Costs...........................................................................36
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                                TABLE OF CONTENTS
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   3.26.    No Other Agreements to Sell the Company or the Assets................................................36
   3.27.    Accounts Receivable..................................................................................36
   3.28.    Inventory............................................................................................36
   3.29.    Product Warranty.....................................................................................37
   3.30.    Board Recommendation.................................................................................37
   3.31.    Material Misstatements or Omissions..................................................................37

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB................................................37

   4.1.     Organization.........................................................................................38
   4.2.     Capitalization of Buyer..............................................................................38
   4.3.     Authorization........................................................................................38
   4.4.     SEC Reports; Financial Statements; Books and Records.................................................39
   4.5.     No Conflicts.........................................................................................40
   4.6.     Approvals............................................................................................40
   4.7.     Merger Consideration.................................................................................40
   4.8.     Brokers' and Finders' Fees...........................................................................40
   4.9.     Board Approval; No Stockholder Approval Required.....................................................40

ARTICLE 5. CONDUCT PRIOR TO THE EFFECTIVE TIME...................................................................40

   5.1.     Conduct of Business of the Company...................................................................40
   5.2.     No Solicitation......................................................................................42

ARTICLE 6. ADDITIONAL COVENANTS..................................................................................44

   6.1.     Special Meeting; Board Recommendation................................................................44
   6.2.     Voting Agreements....................................................................................45
   6.3.     Access to Information................................................................................45
   6.4.     Confidentiality......................................................................................45
   6.5.     Expenses.............................................................................................45
   6.6.     Public Disclosure....................................................................................46
   6.7.     Commercially Reasonable Efforts......................................................................46
   6.8.     Notification of Certain Matters......................................................................46
   6.9.     Company Repurchases..................................................................................46
   6.10.    Proprietary Rights...................................................................................46
   6.11.    Tax Matters..........................................................................................47
   6.12.    SEC Filings..........................................................................................48
   6.13.    Stockholder Litigation...............................................................................48
   6.14.    Indemnification......................................................................................48
   6.15.    Company Options......................................................................................49

ARTICLE 7. CONDITIONS TO THE MERGER..............................................................................49

   7.1.     Conditions to Obligations of Each Party to Effect the Merger.........................................49
   7.2.     Additional Conditions to Obligations of the Company..................................................49
   7.3.     Additional Conditions to the Obligations of Buyer....................................................50

ARTICLE 8. TERMINATION...........................................................................................52

   8.1.     Termination..........................................................................................52
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   8.2.     Termination by Buyer.................................................................................52
   8.3.     Termination by the Company...........................................................................53
   8.4.     Procedure for Termination............................................................................53
   8.5.     Effect of Termination................................................................................54
   8.6.     Extension; Waiver....................................................................................54

ARTICLE 9. MISCELLANEOUS PROVISIONS..............................................................................54

   9.1.     Notices..............................................................................................54
   9.2.     Entire Agreement.....................................................................................55
   9.3.     Further Assurances; Post-Closing Cooperation.........................................................55
   9.4.     Amendment; Waiver....................................................................................55
   9.5.     Third Party Beneficiaries............................................................................56
   9.6.     Opportunity to Hire Counsel; Role of Kirkpatrick & Lockhart LLP......................................56
   9.7.     No Assignment; Binding Effect........................................................................56
   9.8.     Headings.............................................................................................56
   9.9.     Invalid Provisions...................................................................................56
   9.10.    Governing Law........................................................................................56
   9.11.    Arbitration..........................................................................................56
   9.12.    Remedies Cumulative..................................................................................57
   9.13.    Construction.........................................................................................57
   9.14.    Counterparts.........................................................................................57
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                                      iii
<PAGE>

                                TABLE OF EXHIBITS

Exhibit A                  Form of Voting Agreement
Exhibit B                  Form of Certificate of Merger
Exhibit C                  Form of Buyer Compliance Certificate
Exhibit D                  Form of Company Compliance Certificate


                                       iv
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                                       60

                                        1

                          AGREEMENT AND PLAN OF MERGER

      THIS  AGREEMENT  AND PLAN OF MERGER,  dated as of  December  21, 2004 (the
"Agreement"),   is  by  and  among  NEOMEDIA  TECHNOLOGIES,   INC.,  a  Delaware
corporation ("Buyer"),  NEOMEDIA TELECOM SERVICES, INC, a Nevada corporation and
wholly-owned  subsidiary of Buyer  ("Merger  Sub"),  and BSD  SOFTWARE,  INC., a
Florida corporation (the "Company").

                                    RECITALS:

      A. The respective Boards of Directors of Buyer, Merger Sub and the Company
have  determined  that  it is  advisable  and in the  best  interests  of  their
respective stockholders to effect the acquisition of the Company pursuant to the
terms and subject to the conditions set forth herein.

      B. In furtherance of such  acquisition,  the Boards of Directors of Buyer,
Merger Sub and the Company have each approved the merger of the Company with and
into Merger Sub (the "Merger"), upon the terms and subject to the conditions set
forth herein, in accordance with the applicable provisions of the Nevada Revised
Statutes (the "NRS" or "Nevada Law").

      C. In connection with the execution of this Agreement,  Guy Fietz, Sun Tzu
Trust, Inc., and Trans Research Trust (collectively,  the "Major  Stockholders")
shall have executed and delivered to Buyer,  concurrently with the execution and
delivery of this Agreement by the parties hereto, a Voting Agreement in the form
attached hereto as Exhibit A.

      E. Pursuant to the Merger,  each outstanding share of Company Common Stock
will be  converted  solely into the right to shares of Buyer  Common  Stock,  as
provided in Section 2.6 herein, upon the terms and subject to the conditions set
forth herein.

                                   AGREEMENT:

      NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and  agreements  herein  contained,  and  intending to be legally  bound hereby,
Buyer, Merger Sub and the Company hereby agree as follows:

                                   ARTICLE 1.
                                   DEFINITIONS

      1.1. Defined Terms. As used in this Agreement,  the terms below shall have
the following meanings:

      "Acquisition Proposal" has the meaning set forth in Section 5.2(c).

      "Actions"  means,  collectively,   any  action,  order  writ,  injunction,
judgment  or  decree  outstanding  or  claim,  suit,   litigation,   proceeding,
investigation or dispute.


                                       1
<PAGE>

      "Affiliate"  of a  Person  means  any  other  Person  which,  directly  or
indirectly,  controls,  is controlled by, or is under common control with,  such
Person.  The term "control"  (including,  with  correlative  meaning,  the terms
"controlled  by" and "under common control  with"),  as used with respect to any
Person, means the possession,  directly or indirectly, of the power to direct or
cause the  direction of the  management  and  policies of such  Person,  whether
through the ownership of voting securities, by contract or otherwise.

      "Agreement" has the meaning set forth in the preamble.

      "Approval"   means   any   approval,   authorization,   consent,   permit,
qualification or registration,  or any waiver of any of the foregoing,  required
to  be  obtained  from  or  made  with,  or  any  notice,   statement  or  other
communication  required to be filed with or delivered  to, any  Governmental  or
Regulatory Authority or any other Person.

      "Assets"  means  the  right,  title  and  interest  of any  Person  in its
properties,  assets and rights of any kind, whether tangible or intangible, real
or personal,  including without  limitation the right, title and interest in the
following:  all  Contracts and Contract  Rights;  all  machinery,  equipment and
computer hardware; all inventory; all Books and Records; all Proprietary Rights;
all Permits;  all return and other  rights under or pursuant to all  warranties,
representations  and  guarantees  made by suppliers  and other third  parties in
connection  with the Assets or  services  furnished  to such  Person;  all cash,
accounts receivable, deposits and prepaid expenses; and all goodwill.

      "Balance  Sheet" means the balance  sheet of the Company as of the Balance
Sheet Date which constitutes a portion of the Financial Statements.

      "Balance Sheet Date" means July 31, 2004.

      "Benefit Arrangement" means any employment, consulting, severance or other
similar  contract,  arrangement  or  policy  (written  or oral)  and each  plan,
arrangement,  program,  agreement or commitment  (written or oral) providing for
insurance   coverage   (including,    without   limitation,   any   self-insured
arrangements),   workers'   compensation,   disability  benefits,   supplemental
unemployment benefits,  vacation benefits,  retirement benefits, life, health or
accident benefits  (including,  without  limitation,  any "voluntary  employees'
beneficiary  association" as defined in Section  501(c)(9) of the Code providing
for the same or other  benefits) or for deferred  compensation,  profit-sharing,
bonuses,  stock options,  stock  appreciation  rights,  stock purchases or other
forms of incentive  compensation or post-retirement  insurance,  compensation or
benefits which (a) is not a Welfare Plan,  Pension Plan or  Multiemployer  Plan,
(b) is entered into,  maintained,  contributed  to or required to be contributed
to, as the case may be, by the  Company  or any  Subsidiary  or under  which the
Company or any Subsidiary  may incur any liability,  and (c) covers any Employee
or former Employee.

      "Books and Records" means (a) all product,  business and marketing  plans,
sales and  promotional  literature  and  artwork  relating  to the Assets of the
Company or the  Company  Subsidiary  or the  Business,  (b) all books,  records,
lists,  ledgers,  financial data, files,  reports,  Tax Returns and related work
papers and letters from  accountants,  budgets,  pricing  guidelines,  journals,
deeds,  title  policies,  minute  books,  stock  certificates  and books,  stock
transfer  ledgers,  Contracts,  product  and design  manuals,  plans,  drawings,
technical  manuals and operating records of every kind relating to the Assets of
the Company or the Company  Subsidiary  or the Business  (including  records and
lists of customers,  distributors,  suppliers and personnel), computer files and
programs  (including data  processing  files and records),  retrieval  programs,
operating  data and plans  and  environmental  studies  and  plans,  and (c) all
telephone  and fax  numbers  used in the  Business,  and in  each  case  whether
maintained  as hard copy or stored in computer  memory and whether  owned by the
Company or its Affiliates.


                                       2
<PAGE>

      "Business" means the business and operations of the Company.

      "Business  Combination" means, with respect to any Person, (i) any merger,
consolidation  or other  business  combination  to which such Person is a party,
(ii) any sale,  dividend,  split or other  disposition  of any capital  stock or
other equity interests of such Person (except for issuances of common stock upon
conversion of preferred stock  outstanding on the date hereof or the exercise of
options or warrants  outstanding on the date hereof or issued in accordance with
the  covenants  of this  Agreement),  (iii) any tender  offer  (including a self
tender),   exchange   offer,   recapitalization,   restructuring,   liquidation,
dissolution or similar or extraordinary transaction,  (iv) any sale, dividend or
other  disposition  of all or a material  portion  of the Assets of such  Person
(including by way of exclusive  license or joint  venture  formation) or (v) the
entering into of any agreement or  understanding,  the granting of any rights or
options,  or  the  acquiescence  of  such  Person,  with  respect  to any of the
foregoing.

      "Business Day" means a day other than Saturday, Sunday or any day on which
banks located in the State of Florida are authorized or obligated to close.

      "Buyer" has the meaning set forth in the preamble.

      "Buyer Expense Notice" has the meaning set forth in Section 8.5(b).

      "Buyer Transaction Expenses" has the meaning set forth in Section 8.5(b).

      "Certificate of Merger" has the meaning set forth in Section 2.2.

      "Certificates" has the meaning set forth in Section 2.8.

      "Closing" has the meaning set forth in Section 2.1(b).

      "Closing Date" means the date of the Closing.

      "COBRA" has the meaning set forth in Section 3.19(f).

      "Code" means the Internal Revenue Code of 1986, as amended.

      "Common Merger Consideration" means the amount equal to the fraction,  the
numerator of which is the Merger  Consideration  and the denominator of which is
the  aggregate  number of shares of  Company  Common  Stock  outstanding  at the
Effective Time.

      "Company" has the meaning set forth in the preamble.


                                       3
<PAGE>

      "Company Balance Sheet" has the meaning set forth in Section 3.14(b).

      "Company Common Stock" means the Common Stock, par value $0.001 per share,
of the Company.

      "Company  Financial  Statements"  has the  meaning  set  forth in  Section
3.14(b).

      "Company  Material Adverse Effect" or "Company Material Adverse Change" or
a similar phrase means (a) any change,  circumstance or effect that individually
or in the aggregate with all other  changes,  circumstances  and effects,  is or
would  be  reasonably  likely  to be  materially  adverse  to (i) the  business,
operations,  assets,  properties  (whether tangible or intangible),  liabilities
(taken as a whole), condition (financial or otherwise), results of operations or
prospects, of the Company and the Company Subsidiary,  taken as a whole, or (ii)
the right or  ability  of the  Company  to  consummate  any of the  transactions
contemplated  hereby or (b) any event or  condition  which,  with the passage of
time,  the  giving or  receipt  of  notice,  would  reasonably  be  expected  to
constitute  a "Material  Adverse  Effect" on or "Material  Adverse  Change" with
respect to the Company and the Company Subsidiary, taken as a whole.

      "Company Negative Vote" has the meaning set forth in Section 8.1(d).

      "Company Options" means options to purchase shares of Company Common Stock
issued  by the  Company  (including,  but not  limited  to,  options  issued  to
Employees).

      "Company  Proprietary  Right" shall mean any Proprietary Right that is (i)
owned by,  (ii)  licensed  to, or (iii) was  developed  or created by or for the
Company or the Company Subsidiary.

      "Company Registered  Proprietary Rights" means all Registered  Proprietary
Rights  owned by,  filed in the name of,  assigned to or applied by or for,  the
Company or the Company Subsidiary.

      "Company  Restricted Stock" means shares of Company Common Stock which are
subject to a repurchase option by the Company.

      "Company SEC Reports" has the meaning set forth in Section 3.14(a).

      "Company  Shares" means (i) all shares of Company  Common Stock issued and
outstanding  immediately  prior  to the  Effective  Time,  (ii) all  vested  and
unvested  Company  Options  issued  and  outstanding  immediately  prior  to the
Effective  Time, and (iii) any other  securities  convertible  into or otherwise
exercisable  or  exchangeable  for Company  Common Stock issued and  outstanding
immediately prior to the Effective Time.

      "Company Special Meeting" has the meaning set forth in Section 6.1(a).

      "Company  Stockholder"  means each holder of Company  Common  Stock at the
Effective Time.


                                       4
<PAGE>

      "Company  Subsidiary"  means  Triton  Global  Business  Services,  Inc., a
Canadian company,  and Triton Global  Communications,  Inc., an Alberta,  Canada
company.

      "Consents"  means any and all Permits and any and all consents,  approvals
or waivers from third  parties that are  required  for the  consummation  of the
transactions contemplated by this Agreement.

      "Contract Rights" means all rights and obligations under the Contracts.

      "Contracts" means all agreements,  contracts,  leases (whether for real or
personal  property),  purchase orders,  undertakings,  covenants not to compete,
employment  agreements,   confidentiality  agreements,   licenses,  instruments,
obligations and commitments to which a Person is a party or by which a Person or
any of its Assets are bound or affected, whether written or oral.

      "Default"  means (a) a breach of or default  under any  Contract,  (b) the
occurrence  of an event that with the passage of time or the giving of notice or
both would  constitute  a breach of or  default  under any  Contract  or (c) the
occurrence of an event that with or without the passage of time or the giving of
notice or both  would  give  rise to a right of  termination,  renegotiation  or
acceleration under any Contract.

      "DGCL" or "Delaware Law" has the meaning set forth in the recitals.

      "Disclosure Schedules" has the meaning set forth in Article 3.

      "Dissenting Shares" has the meaning set forth in Section 2.7(a).

      "Effective Time" has the meaning set forth in Section 2.2.

      "Employee  Plans"  means all Benefit  Arrangements,  Multiemployer  Plans,
Pension Plans and Welfare Plans.

      "Employees" means all officers and directors of the Company or the Company
Subsidiary and all other Persons  employed by the Company on a full or part-time
basis, together with all Persons retained as "independent contractors" as of the
relevant date.

      "Employment Agreements" has the meaning set forth in Section 7.3(i).

      "Encumbrance" means any claim, lien, pledge, option, charge, easement, tax
assessment,   security  interest,   deed  of  trust,   mortgage,   right-of-way,
encroachment,   building  or  use  restriction,   conditional  sales  agreement,
encumbrance or other right of third  parties,  whether  voluntarily  incurred or
arising by  operation  of law,  and  includes  any  agreement to give any of the
foregoing  in the  future,  and any  contingent  sale or other  title  retention
agreement or lease in the nature thereof.

      "Environmental  Claims"  means all notices of  violation,  liens,  claims,
demands  and  Action  or  Proceedings  arising  directly  or  indirectly  out of
Environmental Conditions or Environmental Laws.


                                       5
<PAGE>

      "Environmental  Conditions" means the state of the environment,  including
natural resources (e.g., flora and fauna),  soil,  surface water,  ground water,
any present or potential  drinking  water supply,  subsurface  strata or ambient
air,  relating  to or  arising  out of the use,  handling,  storage,  treatment,
recycling,  generation,  transportation,  release,  spilling,  leaking, pumping,
pouring, emptying, discharging, injecting, escaping, leaching, disposal, dumping
or  threatened  release of  Hazardous  Substances  by the  Company or any of its
predecessors   or  successors  in  interest,   or  by  its  respective   agents,
representatives,  Employees  or  independent  contractors  when  acting  in such
capacity on behalf of the Company. With respect to Environmental Claims by third
parties,  Environmental  Conditions  also  include  the  exposure  of persons to
Hazardous Substances at the work place or the exposure of persons or property to
Hazardous  Substances  migrating from or otherwise  emanating from or located on
property owned or occupied by the Company.

      "Environmental  Laws" means all applicable U.S. federal,  state,  district
and local laws, all rules or regulations promulgated thereunder, and all orders,
consent  orders,   judgments,   notices,   permits  or  demand  letters  issued,
promulgated or entered pursuant thereto,  relating to pollution or protection of
the environment  (including,  without  limitation,  ambient air,  surface water,
ground  water,  land  surface,   or  subsurface  strata),   including,   without
limitation, (a) laws relating to emissions,  discharges,  releases or threatened
releases of pollutants, contaminants, chemicals, industrial materials, wastes or
other   substances   into  the   environment   and  (b)  laws  relating  to  the
identification,   generation,   manufacture,   processing,   distribution,  use,
treatment,   storage,  disposal,   recovery,  transport  or  other  handling  of
pollutants,  contaminants,  chemicals,  industrial  materials,  wastes  or other
substances.   Environmental  Laws  shall  include,   without   limitation,   the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"),  the Toxic Substances Control Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and Recovery
Act, as amended  ("RCRA"),  the Clean Water Act, as amended,  the Safe  Drinking
Water Act, as amended,  the Clean Air Act, as amended,  and all  analogous  laws
promulgated  or  issued  by  any  state  or  other  Governmental  or  Regulatory
Authority.

      "Environmental  Reports" means any and all written analyses,  summaries or
explanations,  in the  possession  or  control  of the  Company  or the  Company
Subsidiary,  prepared  for  the  purpose  of  analyzing  or  assessing  (a)  any
Environmental  Conditions  in, on or about the  properties of the Company or the
Company Subsidiary or (b) the Company's or the Company  Subsidiary's  compliance
with Environmental Laws.

      "ERISA"  means the Employee  Retirement  Income  Security Act of 1974,  as
amended.

      "ERISA  Affiliate" means any entity which is (or at any relevant time was)
a member of a "controlled  group of  corporations"  with, under "common control"
with, or a member of an "affiliated  service group" with, or otherwise  required
to be aggregated  with, the Company as set forth in Section 414(b),  (c), (m) or
(o) of the Code.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended.


                                       6
<PAGE>

      "Facilities" means all plants, offices,  manufacturing facilities, stores,
warehouses,   administration   buildings  and  all  real  property  and  related
facilities leased by the Company or the Company Subsidiary, all as identified or
listed on Disclosure Schedule 3.8(b).

      "GAAP" means generally  accepted  accounting  principles as applied in the
United States.

      "Governmental  or  Regulatory   Authority"  means  any  court,   tribunal,
arbitrator,  authority, agency, bureau, board, commission,  department, ministry
or a branch thereof, official or other instrumentality of the United States, any
foreign  country or any domestic or foreign  state,  province,  county,  city or
other political subdivision.

      "Hazardous  Substances"  means all  pollutants,  contaminants,  chemicals,
wastes, and any other carcinogenic,  ignitable,  corrosive,  reactive,  toxic or
otherwise hazardous  substances or materials (whether solids,  liquids or gases)
subject to regulation, control or remediation under Environmental Laws.

      "Key Employee" means Guy Fietz.

      "Law" or "Laws" means any law,  statute,  order,  decree,  consent decree,
judgment,  rule, regulation,  ordinance or other pronouncement having the effect
of law whether in the United  States,  any foreign  country,  or any domestic or
foreign  state,   county,  city  or  other  political   subdivision  or  of  any
Governmental or Regulatory Authority.

      "Lease"  means a real  property  lease or a personal  property  lease,  as
applicable.

      "Leased Property" has the meaning set forth in Section 3.8(b).

      "Letter of Intent" means that certain non-binding Letter of Intent between
Buyer and the Company dated as of December 9, 2003.

      "Liability"  means  any  direct  or  indirect   liability,   indebtedness,
obligation,  commitment,  expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued,  absolute,  contingent,  matured,
unmatured, liquidated, unliquidated, known or unknown.

      "License"  means any  Contract  that  grants a Person  the right to use or
otherwise  enjoy  the  benefits  of any  Proprietary  Right  (including  without
limitation any covenants not to sue with respect to any Proprietary Right).

      "Major Stockholders" has the meaning set forth in the preamble.

      "Merger" has the meaning set forth in the preamble.

      "Merger Consideration" means the number of shares of Buyer Common Stock to
be  issued  to the  shareholders  of the  Company  in  exchange  for  all of the
outstanding shares of Company Common Stock. The number of shares of Buyer Common
Stock to be issued to the  shareholders of the Company shall be equal to (i) the
product of the aggregate number of shares of Company Common Stock outstanding at
the  Effective  Time  multiplied  by 0.07,  (ii) divided by the Volume  Weighted
Average Price per share of the common stock of the Buyer on the NASDAQ  Bulletin
Board market for the five trading days immediately preceding the Effective Time.


                                       7
<PAGE>

      "Merger Sub" has the meaning set forth in the preamble.

      "Multiemployer Plan" means any "multiemployer plan," as defined in Section
4001(a)(3)  or 3(37) of ERISA,  which  (a) the  Company  or any ERISA  Affiliate
contributes  to or is required to contribute  to, or, after  September 25, 1980,
contributed  to or was required to contribute  to, or under which the Company or
any ERISA  Affiliate  may incur any  liability  and (b) covers any  Employee  or
former Employee or any ERISA Affiliate.

      "NRS" or "Nevada Law" has the meaning set forth in the recitals.

      "Option"   with  respect  to  any  Person  means  any   security,   right,
subscription,  warrant,  option,  "phantom" stock right or other Contract (other
than such  Person's  preferred  stock)  that gives the right to (a)  purchase or
otherwise  receive  or be issued any  shares of  capital  stock or other  equity
interests  of such  Person  or any  security  of any  kind  convertible  into or
exchangeable  or  exercisable  for any shares of capital  stock or other  equity
interests  of such Person or (b) receive any  benefits or rights  similar to any
rights  enjoyed by or accruing to the holder of shares of capital stock or other
equity interests of such Person.

      "Order" means any writ, judgment,  decree,  injunction or similar order of
any Governmental or Regulatory  Authority (in each such case whether preliminary
or final).

      "Outside Date" has the meaning set forth in Section 8.1(b).

      "Pension  Plan" means any  "employee  pension  benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) the Company or
any ERISA  Affiliate  maintains,  administers,  contributes to or is required to
contribute  to,  or,  within  the five (5)  years  prior  to the  Closing  Date,
maintained,  administered,  contributed  to or was required to contribute to, or
under  which  the  Company  or any  ERISA  Affiliate  may  incur  any  liability
(including,  without  limitation,  any contingent  liability) and (b) covers any
Employee or former Employee or any ERISA Affiliate.

      "Permits"   means   all   licenses,   permits,   franchises,    approvals,
authorizations,  consents  or  orders  of, or  filings  with,  any  governmental
authority, whether foreign, federal, national, state or local, necessary for the
past,  present or anticipated  conduct or operation of the Business or ownership
of the Assets of any Person.

      "Permitted Encumbrances" means (a) statutory liens of landlords,  liens of
carriers,  warehousepersons,  mechanics and material persons, and purchase money
liens  incurred in the ordinary  course of business for sums (i) not yet due and
payable,  or (ii) being  contested  in good faith,  if, in either such case,  an
adequate  reserve  shall  have been made  therefor  in such  Person's  financial
statements,  (b) liens  incurred or deposits  made in  connection  with workers'
compensation,  unemployment insurance and other similar types of social security
programs or to secure the performance of tenders, statutory obligations,  surety
and appeal bonds, bids, leases, government contracts,  performance and return of
money  bonds and similar  obligations,  in each case in the  ordinary  course of
business,   consistent  with  past  practice,   (c)  easements,   rights-of-way,
restrictions and other similar charges or  encumbrances,  in each case, which do
not  interfere  with the  ordinary  conduct of  business  of the Company and the
Company  Subsidiary and do not materially detract from the value of the property
upon which such encumbrance  exists,  and (d) liens securing taxes,  assessments
and governmental charges not yet due and payable.


                                       8
<PAGE>

      "Person"  means any person or  entity,  whether  an  individual,  trustee,
corporation,   limited   liability   company,   general   partnership,   limited
partnership,  trust, unincorporated  organization,  business association,  firm,
joint venture, governmental agency or authority or any similar entity.

      "Potential Acquiror" has the meaning set forth in Section 5.2(a).

      "Proprietary  Rights"  means  all (a) U.S.  and  foreign  patents,  patent
applications,  patent  disclosures  and  improvements  thereto,  including petty
patents and  utility  models and  applications  therefor,  (b) U.S.  and foreign
trademarks,  service marks, trade dress,  logos, trade names and corporate names
and the goodwill  associated  therewith and  registrations  and applications for
registration  thereof,  (c) U.S. and foreign  copyrights and  registrations  and
applications for registration thereof, (d) U.S. and foreign mask work rights and
registrations  and applications for  registration  thereof,  (e) rights in Trade
Secrets,  (f) domain name  registrations,  (g) other proprietary rights, and (h)
licenses granting any rights with respect to any of the foregoing.

      "Proxy Statement" has the meaning set forth in Section 6.1(b).

      "PTO" shall mean the United States Patent and Trademark Office.

      "Registered   Proprietary   Rights"   shall   mean  all   United   States,
international and foreign: (a) issued patents and patent applications (including
provisional   applications),   (b)  registered   trademarks  and   servicemarks,
applications   to   register   trademarks   and   servicemarks,    intent-to-use
applications, other registrations or applications to trademarks or servicemarks,
(c) registered copyrights and applications for copyright  registration,  (d) any
mask work  registrations  and  applications to register mask works,  and (e) any
other  Proprietary  Right that is the  subject of an  application,  certificate,
filing,  registration  or other document  issued by, filed with, or recorded by,
any state, government or other public legal authority.

      "Related  Party"  means  (a)  any of the  Company's  officers,  directors,
stockholders and any officers,  directors,  partners, associates or relatives of
such officers,  directors and stockholders,  (b) any Person in which the Company
or any  stockholder or any  Affiliate,  associate or relative of any such Person
has any direct or indirect  interest,  and (c) any direct or indirect trustee or
beneficiary of any stockholder.

      "Representative"  of any Person  means any  officer,  director,  Employee,
stockholder,   attorney,  principal,  investment  advisors,  accountant,  agent,
Affiliate, or other representative of such Person.

      "SEC" means the Securities and Exchange Commission.

      "Securities  Act" means the  Securities  Act of 1933, as amended,  and the
rules and regulations promulgated thereunder.


                                       9
<PAGE>

      "Subsidiary"  means  any  Person  in which the  Company  or Buyer,  as the
context  requires,  directly or indirectly  through  Subsidiaries  or otherwise,
beneficially  owns at least 50% of either the equity  interest in, or the voting
control of, such Person, whether or not existing on the date hereof.

      "Superior Proposal" has the meaning set forth in Section 5.2(d).

      "Surviving Corporation" has the meaning set forth in Section 2.1(a).

      "Tax" or  "Taxes"  means any (i)  federal,  state,  local or  foreign  net
income,  gross income, gross receipts,  license,  payroll,  employment,  excise,
severance, stamp, occupation, premium, windfall profits, environmental,  customs
duties,  capital  stock,  franchise,  profits,  withholding,   social  security,
unemployment,   disability,   real  property,  personal  property,  sales,  use,
transfer,  registration,  value added, alternative or add-on minimum, estimated,
or  other  tax of any kind  whatsoever,  including  any  interest,  penalty,  or
addition thereto, whether disputed or not, and (ii) any liability of the Company
or the Company Subsidiary imposed by law for the payment of amounts described in
clause  (i) on  another  Person,  including  as a result of being a  transferee,
successor or a member of an affiliated, consolidated, combined or unitary group.

      "Tax Liability" means a Liability for any Tax.

      "Tax Return" means any return,  declaration,  report, claim for refund, or
information  return or statement  relating to Taxes,  including  any schedule or
attachment  thereto,  and  including any  amendment  thereof,  and including any
elections,  rulings and requests for rulings and other correspondence to or from
any Governmental Authority dealing with Taxes.

      "Third Party Expenses" has the meaning set forth in Section 6.5.

      "to the knowledge" or "knowledge" of a party (or similar phrases) means to
the extent of matters  which are  actually  known by such party and when used in
respect of the Company or the Company Subsidiary, the term "to the knowledge" or
"knowledge" shall mean the matters which are known or reasonably should be known
by Guy Fietz, or Gordon Ellison after due inquiry.

      "Trade  Secrets"  means  all  trade  secrets  and  confidential   business
information  (including  ideas,  formulas,  compositions,   inventions  (whether
patentable or  unpatentable  and whether or not reduced to practice),  know-how,
research  and  development  information,   software,  drawings,  specifications,
designs,  plans,  proposals,  technical data,  copyrightable  works,  financial,
marketing  and  business  data,  pricing  and  cost  information,  business  and
marketing plans, mailing and e-mail lists, and customer and supplier mailing and
e-mail lists and information), in each case which are not generally known to the
public.

      "Voting Agreement" means a Voting Agreement in the form attached hereto as
Exhibit A, dated the date hereof,  executed and delivered to Buyer by each Major
Stockholder.

      "Welfare  Plan" means any  "employee  welfare  benefit plan" as defined in
Section 3(1) of ERISA,  which (a) the Company or any ERISA Affiliate  maintains,
administers,  contributes to or is required to contribute to, or under which the
Company  or any ERISA  Affiliate  may incur any  liability  and (b)  covers  any
Employee or former Employee or any ERISA Affiliate.


                                       10
<PAGE>

      1.2. Interpretation Provisions.

            (a) The  words  "hereof,"  "herein"  and  "hereunder"  and  words of
similar  import when used in this  Agreement  refer to this Agreement as a whole
and not to any particular  provision of this  Agreement,  and article,  section,
schedule  and  exhibit   references  are  to  this  Agreement  unless  otherwise
specified.  The  meaning of defined  terms  shall be equally  applicable  to the
singular  and  plural  forms of the  defined  terms.  The  terms  "include"  and
"including" are not limiting and mean "including without limitation."

            (b)  References  to agreements  and other  documents are also to all
subsequent amendments and other modifications thereto.

            (c) References to statutes shall include all regulations promulgated
thereunder  and  references  to statutes or  regulations  shall be  construed as
including all statutory and  regulatory  provisions  consolidating,  amending or
replacing the statute or regulation.

            (d) The schedules and exhibits to this Agreement are a material part
hereof and shall be treated as part of this Agreement.

                                   ARTICLE 2.
                                   THE MERGER

      2.1. The Merger.

            (a) The Merger.  At the Effective Time, and on the terms and subject
to the  conditions of this  Agreement and the DGCL,  the Company shall be merged
with and into Merger Sub, the separate corporate  existence of the Company shall
cease, and Merger Sub shall continue as the surviving  corporation.  Merger Sub,
as the surviving corporation after the Merger, is hereinafter sometimes referred
to as the "Surviving Corporation."

            (b)  Closing.  Unless  this  Agreement  shall  have been  terminated
pursuant  to Section  8.1,  and  subject to the  satisfaction  (or to the extent
permitted,  the  waiver) of the  conditions  set forth in  Articles 6 and 7, the
closing of the transactions  contemplated by this Agreement (the "Closing") will
take place (i) at the offices of  Kirkpatrick & Lockhart LLP, 201 South Biscayne
Boulevard,  Miami  Center  Suite  2000,  Miami,  Florida  33131,  as promptly as
practicable (and in any event within three (3) business days) after satisfaction
(or to the extent permitted, the waiver) of the conditions set forth in Articles
6 and 7 or (ii) at such other  time,  date or place as Buyer and the Company may
mutually agree.

      2.2. Effective Time. As promptly as practicable after the satisfaction (or
to the extent  permitted,  the waiver) of the conditions set forth in Articles 6
and 7, and provided  that this  Agreement  has not been  terminated  pursuant to
Section 9.1,  the parties  hereto  shall cause the Merger to be  consummated  by
executing and filing a certificate of merger, in substantially the form attached
hereto  as  Exhibit  B,  with the  Secretary  of State of the State of Nevada as
required by, and executed in  accordance  with the relevant  provisions  of, the
DGCL (the  "Certificate of Merger"),  the time of acceptance by the Secretary of
State of Nevada of such  filing  or such  later  time as may be agreed to by the
parties and set forth in the  Certificate  of Merger being referred to herein as
the "Effective Time".


                                       11
<PAGE>

      2.3. Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as  provided  in this  Agreement,  the  Certificate  of Merger  and the
applicable  provisions  of the DGCL.  Without  limiting  the  generality  of the
foregoing, and subject thereto, at the Effective Time, all the property,  rights
privileges,  powers,  franchises of the Company and the Merger Sub shall vest in
the Surviving Corporation,  and all debts, liabilities and duties of the Company
and the  Merger  Sub shall  become  the  debts,  liabilities  and  duties of the
Surviving Corporation.

      2.4. Certificate of Incorporation; Bylaws.

            (a) At the Effective Time, the Certificate of  Incorporation  of the
Merger Sub as attached to the  Certificate of Merger shall be the Certificate of
Incorporation  of the  Surviving  Corporation,  until duly amended in accordance
with applicable law.

            (b) At the  Effective  Time,  the  Bylaws of the Merger  Sub,  as in
effect  immediately  prior to the  Effective  Time,  shall be the  Bylaws of the
Surviving   Corporation   until  thereafter  duly  amended  in  accordance  with
applicable law, the Certificate of  Incorporation  of the Surviving  Corporation
and such Bylaws.

      2.5. Directors and Officers. The directors of Merger Sub immediately prior
to  the  Effective  Time  shall  be  the  initial  directors  of  the  Surviving
Corporation,  each  to  hold  office  in  accordance  with  the  Certificate  of
Incorporation and Bylaws of the Surviving  Corporation,  and the officers of the
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly  elected  or  appointed  and  qualified  in  the  manner  provided  in  the
Certificate  of  Incorporation  and Bylaws of the Surviving  Corporation  and in
accordance with applicable law. The Company shall cause each or any director and
officer of the Company to tender his or her  resignation  prior to the Effective
Time, with each such resignation to be effective as of the Effective Time.

      2.6. The Merger  Consideration;  Effect on  Outstanding  Securities of the
Company.  On the terms and subject to the conditions of this  Agreement,  at the
Effective  Time,  by virtue of the Merger and  without any action on the part of
Buyer,  the Company or the holder of any Company  Shares,  the  following  shall
occur:

            (a) Conversion of Company Common Stock. Each share of Company Common
Stock issued and  outstanding  immediately  prior to the Effective  Time will be
canceled  and  extinguished,  and each share of Company  Common  Stock  which is
issued and outstanding  immediately  prior to the Effective Time (other than any
Dissenting Shares (as provided in Section 2.7)) shall be automatically converted
into  solely the right to receive in shares of Buyer  Common  Stock,  the Common
Merger Consideration.

            (b)  Cancellation  of  Company-Owned  Stock.  Each  share of Company
Common Stock owned by the Company or the Company Subsidiary immediately prior to
the Effective Time shall be automatically  canceled and extinguished without any
exchange thereof and without any further action on the part of Buyer, Merger Sub
or the Company.

            (c) Company  Options.  Immediately  prior to the Effective Time, all
outstanding  Company  Options shall become fully vested and  exercisable and all
repurchase  rights with  respect to Company  Restricted  Stock will  lapse.  Any
Company Options not exercised prior to the Effective Time will be  automatically
terminated.


                                       12
<PAGE>

            (d) Common Stock of Merger Sub. Each stock certificate of Merger Sub
evidencing  ownership  of any  shares of common  stock of the  Merger  Sub shall
continue to evidence  ownership of such shares of capital stock of the Surviving
Corporation.

      2.7. Dissenting Shares.

            (a)  Notwithstanding  anything in this  Agreement  to the  contrary,
shares of Company Common Stock  outstanding  immediately  prior to the Effective
Time and held by a holder  who has not voted in favor of the  Merger and who has
demanded  appraisal for such shares in accordance with Florida Law  ("Dissenting
Shares")  shall not be  converted  into a right to  receive  the  Common  Merger
Consideration  unless and until such  holder  fails to perfect or  withdraws  or
otherwise loses such holder's right to appraisal.  A holder of Dissenting Shares
shall be entitled to receive  payment of the  appraisal  value of such shares of
Company  Common Stock held by such holder in accordance  with the  provisions of
Section 607 of the Florida Business  Corporation Act unless, after the Effective
Time,  such holder fails to perfect or withdraws or loses such holder's right to
appraisal,  in which  case  such  shares  shall be  treated  as if they had been
converted as of the  Effective  Time into the right to receive the Common Merger
Consideration.

            (b) The Company shall give Buyer (i) prompt notice of its receipt of
any  written  demands  for  appraisal  of any  shares of Company  Common  Stock,
withdrawals of such demands,  and any other  instruments  relating to the Merger
served  pursuant  to  Canadian  Law and  received  by the  Company  and (ii) the
opportunity to participate in all  negotiations  and proceedings with respect to
demands for appraisal under Canadian Law. The Company shall not, except with the
prior  written  consent of Buyer or as may be  required  under  applicable  law,
voluntarily  make any  payment  with  respect to any demands  for  appraisal  of
Company Common Stock or offer to settle or settle any such demands.

      2.8. Exchange Procedures.

            (a) Exchange Procedures.  As soon as practicable after the Effective
Time,  Buyer shall cause to be mailed to each holder of record of a  certificate
or  certificates  which  immediately  prior to the  Effective  Time  represented
Company  Common Stock (the  "Certificates")  and which shares of Company  Common
Stock are  exchanged  for and  represent  the right to  receive a portion of the
Merger  Consideration  pursuant to Section 2.6, (i) a letter of  transmittal  in
customary form (which shall specify that delivery shall be effected, and risk of
loss and  title to the  Certificates  shall  pass,  only  upon  delivery  of the
Certificates to the Transfer Agent and shall be in such form and have such other
provisions as Buyer may  reasonably  specify) and (ii)  instructions  for use in
effecting  the  surrender of the  Certificates  in exchange for the  appropriate
portion of the Merger Consideration pursuant to Section 2.6. Upon surrender of a
Certificate  for  cancellation  to the Transfer  Agent or to such other agent or
agents as may be appointed by Buyer,  together with such letter of  transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the holder of such Certificate shall be entitled to receive in exchange therefor
the shares of Buyer  Common  Stock to which such holder is entitled  pursuant to
Section  2.6,  and the  Certificate  so  surrendered  shall be  canceled.  Until
surrendered,  each  outstanding  Certificate  that, prior to the Effective Time,
represented  Company  Shares will be deemed from and after the Effective Time to
evidence the ownership of the portion of the Merger Consideration as provided in
Section 2.6 without any interest thereon.


                                       13
<PAGE>

      2.9. No Further  Ownership  Rights in Company Common Stock. The portion of
the Merger  Consideration  issued upon the  surrender  for exchange of shares of
Company Common Stock in accordance with the terms hereof shall be deemed to have
been  paid in full  satisfaction  of all  rights  pertaining  to such  shares of
Company Common Stock, and there shall be no further registration of transfers on
the  records  of the  Company  of shares of  Company  Common  Stock  which  were
outstanding  immediately  prior to the Effective  Time.  If, after the Effective
Time,  Certificates  are presented to the Surviving  Corporation for any reason,
they shall be canceled and exchanged as provided in this Article 2.

      2.10.  Lost,   Stolen  or  Destroyed   Certificates.   In  the  event  any
certificates  evidencing  shares of Company  Common  Stock shall have been lost,
stolen or destroyed,  Buyer shall cause the Transfer Agent to pay the portion of
the Merger  Consideration  applicable  to such shares in exchange for such lost,
stolen or destroyed  Certificates,  upon the making of an affidavit of that fact
by the holder thereof;  provided,  however, that Buyer or Transfer Agent may, in
their discretion and as a condition precedent to the issuance of shares of Buyer
Common  Stock  thereof,  require  the owner of such  lost,  stolen or  destroyed
Certificates to provide an indemnity with respect to the Certificates alleged to
have been lost, stolen or destroyed.

      2.11.  Taking of Necessary Action;  Further Action.  If, at any time after
the Effective  Time,  any further  action is necessary or desirable to carry out
the purposes of this  Agreement  and or to vest the Surviving  Corporation  with
full right, title and possession to all assets,  property,  rights,  privileges,
powers  and  franchises  of the  Company,  the  officers  and  directors  of the
Surviving  Corporation and the Buyer are fully  authorized to take, and will use
their reasonable efforts to take, all lawful and reasonable action.

      2.12. Tax Treatment. The Merger shall constitute a non-taxable transaction
under the Code.

                                   ARTICLE 3.
      REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MAJOR STOCKHOLDERS

      As an inducement of Buyer to enter into this Agreement, the Company hereby
makes   the   following   representations   and   warranties   to  Buyer   which
representations  and warranties  are, as of the date hereof,  and will be, as of
the Closing  Date,  true and correct,  except as otherwise  set forth in written
disclosure  schedules of the Company (the "Disclosure  Schedules")  delivered to
Buyer  prior  to the  date  hereof,  a copy of which  is  attached  hereto.  The
Disclosure  Schedules are numbered to correspond to the various sections of this
Article 3 setting forth certain exceptions to the representations and warranties
contained in this  Article 3 and certain  other  information  called for by this
Agreement.


                                       14
<PAGE>

      3.1.  Organization  of the  Company.  The  Company is a  corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Florida,  with all  requisite  corporate  power and  authority  to  conduct  the
Business as it is presently  being conducted and to own or lease, as applicable,
the Assets owned or leased by it. The Company  Subsidiary is a corporation  duly
organized,  validly existing and in good standing under the laws of Canada. Each
of the Company and the Company  Subsidiary is duly qualified to do business as a
foreign  corporation and is in good standing in each jurisdiction the failure to
be so  qualified  would  constitute  a Company  Material  Adverse  Effect.  Each
jurisdiction in which the Company and the Company Subsidiary are qualified to do
business as a foreign corporation is set forth in Disclosure Schedule 3.1.

      3.2. Capitalization of the Company.

            (a) Authorized Capitalization. As of the date of this Agreement, the
authorized  capitalization  of the Company consists of (i) 50,000,000  shares of
common stock, par value $.001 per share, of which  32,060,897  shares are issued
and outstanding and (ii) 5,000,000  shares of undesignated  preferred stock, par
value $.001 per share, none of which are issued and outstanding. The Company has
no  other  capital  stock  authorized,  issued  or  outstanding.  There  are  no
outstanding   or  authorized   stock   appreciation,   phantom   stock,   profit
participation,  or similar  rights with respect to the Company.  With respect to
any Company  Common Stock that has been issued  subject to a right of repurchase
on the part of the  Company,  Disclosure  Schedule  3.2(a) sets forth the holder
thereof,  the number and type of  securities  covered  thereby,  and the vesting
schedule thereof (including a description of the circumstances  under which such
vesting schedule can or will be accelerated).

            (b) Company Options and Warrants.  As of the date of this Agreement,
750,000  shares of Company  Common  Stock are  reserved  for  issuance  upon the
exercise of outstanding  Company Options and 1,000,000  shares of Company Common
Stock are  reserved  for  issuance  upon the  exercise  of  outstanding  Company
Warrants. All of the Company Options have been validly granted under the Company
Common Stock Plan. Disclosure Schedule 3.2(b) sets forth the name of each holder
of Company  Options,  as well as the number of Company Options held by each such
holder, the number of shares of Company Common Stock for which each such Company
Option is  exercisable  (both vested and  unvested),  and the price per share of
Company Common Stock for which each such Company Option is exercisable  (without
taking into account whether or not such Company Option is in fact exercisable on
the date hereof).  The Company has previously provided to Buyer true and correct
copies of all option agreements governing Company Options.

            (c) No  Other  Capital  Stock,  Options,  Warrants.  Except  for the
Company Options referred to above, there are no outstanding  Options,  warrants,
convertible  securities  or rights of any kind to purchase or otherwise  acquire
any shares of capital  stock or other  securities  of the Company or the Company
Subsidiary.  No debt  securities  of the Company or the Company  Subsidiary  are
issued and outstanding.

            (d) The Company is directly or indirectly  the record and beneficial
owner  of all of the  outstanding  shares  of  capital  stock  or  other  equity
interests  of the  Company  Subsidiary.  All  of  such  shares  have  been  duly
authorized  and are  validly  issued,  fully  paid,  nonassessable  and  free of
preemptive  rights with  respect  thereto and are owned by the Company  free and
clear of any claim, lien or encumbrance of any kind with respect thereto.  There
are no proxies or voting  agreements with respect to such shares,  and there are
not any existing options,  warrants,  calls,  subscriptions,  or other rights or
other agreements or commitments obligating the Company or the Company Subsidiary
to issue,  transfer or sell any shares of capital stock or any other  securities
convertible into,  exercisable for, or evidencing the right to subscribe for any
shares of the Company  Subsidiary.  The Company does not directly or  indirectly
own any interest in any Person except the Company Subsidiary.


                                       15
<PAGE>

            (e) Valid Issuances.  All outstanding shares of Company Common Stock
are, and any shares of Company  Common Stock issued upon exercise of any Company
Option or Company Warrant will be, validly issued, fully paid and non-assessable
and not subject to any  preemptive  or similar  rights  created by statute,  the
Company's  Certificate of Incorporation or Bylaws, or any Contract.  The Company
Options have been,  and the shares of Company Common Stock have been or will be,
issued  in  compliance  with  all  federal,  state  and  foreign  corporate  and
securities laws.

      3.3.  Stockholders'  Agreements,  etc. Neither the Company nor the Company
Subsidiary is a party or subject to any agreement or understanding,  and, to the
Company's knowledge, there is no Contract,  arrangement or understanding between
or among any Persons,  which affects,  restricts or relates to voting, giving of
written consents,  dividend rights or  transferability of shares with respect to
the  Company  Common  Stock,  including  without  limitation  any  voting  trust
agreement or proxy.

      3.4.  Authorization.  The Company has all  necessary  corporate  power and
authority to enter into this Agreement and to perform its obligations  hereunder
and,  assuming  the  approval of the adoption of the Merger by a majority of the
outstanding shares of Company Common Stock at the Company Special Meeting or any
adjournment or postponement thereof, has taken all corporate action necessary to
consummate the transactions  contemplated  hereby.  This Agreement has been duly
executed and delivered by the Company, and this Agreement is a valid and binding
obligation of the Company,  enforceable  against the Company in accordance  with
its  terms,  except  that  enforceability  may be  limited  by  (a)  bankruptcy,
insolvency,  reorganization,  moratorium  or other  similar laws  relating to or
affecting  the  rights  of  creditors  or  (b)  general   principles  of  equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).

      3.5.  Officers  and  Directors.  Disclosure  Schedule 3.5 contains a true,
correct and complete  list of all the officers and  directors of the Company and
the Company Subsidiary.

      3.6. Bank Accounts.  Disclosure Schedule 3.6 contains a list of all of the
Company's and the Company  Subsidiary's  bank  accounts,  safe deposit boxes and
persons authorized to draw thereon or have access thereto.

      3.7. Subsidiaries.  The Company has no Subsidiaries other than the Company
Subsidiary.  Neither the Company nor the Company  Subsidiary owns any or has any
obligations,  whether conditional or otherwise, to purchase any equity interests
in any other entity.


                                       16
<PAGE>

      3.8. Real Property.

            (a) Company-Owned Real Property. Neither the Company nor the Company
Subsidiary owns any real property.

            (b) Leased Real Property.  Disclosure Schedule 3.8(b) sets forth and
describes  briefly all Leases pursuant to which Facilities are leased,  occupied
or used by the Company or the Company  Subsidiary (as lessee),  true and correct
copies of which  have  been  delivered  to Buyer.  The  Company  or the  Company
Subsidiary  has good and valid  leasehold  title to,  and  enjoys  peaceful  and
undisturbed  possession  of, all leased  property  described in such Leases (the
"Leased  Property"),  free and clear of any and all Encumbrances  other than any
Permitted  Encumbrances  which  would not  permit the  termination  of the Lease
therefor by the lessor.  With  respect to each Leased  Property (i) there are no
pending  or,  to  the  knowledge  of the  Company,  threatened  condemnation  or
administrative  proceedings  relating to, or any pending or  threatened  Actions
relating to, the Company's or the Company  Subsidiary's  leasehold  interests in
such Leased  Property  or any  portion  thereof,  (ii) to the  knowledge  of the
Company, no third party has entered into any sublease,  license,  option, right,
concession or other agreement or arrangement,  written or oral,  granting to any
person the right to use or occupy such Leased Property or any portion thereof or
interest therein,  except in connection with a Permitted Encumbrance,  and (iii)
neither  the  Company  nor the Company  Subsidiary  has  received  notice of any
pending or threatened  special  assessment  relating to such Leased  Property or
otherwise  has any  knowledge of any pending or  threatened  special  assessment
relating thereto.

      With respect to each Lease listed on Disclosure Schedule 3.8(b), (i) there
has been no breach or default  under any such Lease by the Company,  the Company
Subsidiary  or, to the  knowledge of the Company,  by any other party,  (ii) the
execution,  delivery and  performance of this Agreement and the  consummation of
the transactions contemplated hereby will not cause a material default under any
such Lease, (iii) such Lease is a valid and binding obligation of the lessor, is
in full force and effect with respect to and is  enforceable  against the lessor
in  accordance  with  its  terms,  and  will  continue  to  be  legal,  binding,
enforceable,  valid,  and in full force and effect on identical  terms following
the consummation of the transactions  contemplated  hereby,  (iv) no party is in
breach or default  and no action has been  taken by the  Company or the  Company
Subsidiary,  and no event has  occurred  which,  with notice or lapse of time or
both, would permit termination,  modification or acceleration by a party thereto
other than the  Company or the  Company  Subsidiary  without  the consent of the
Company or the Company Subsidiary, as the case may be, under any such Lease that
is  material  to the  Company  or the  Company  Subsidiary,  (v)  no  party  has
repudiated any term thereof or threatened to terminate,  cancel or not renew any
such Lease,  (vi) neither the Company nor the Company  Subsidiary  has assigned,
transferred,  conveyed,  mortgaged or encumbered any interest  therein or in any
leased  property  subject thereto (or any portion  thereof),  (vii) there are no
disputes, oral agreements,  or forbearance programs in effect as to the lease or
sublease,  (viii)  with  respect  to  each  sublease,  the  representations  and
warranties set forth in subsections (i) through (vii) above are true and correct
with respect to the underlying  Lease,  (ix) neither the Company nor the Company
Subsidiary has assigned,  transferred,  conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold, and (x) all Facilities
leased or  subleased  thereunder  have  received all  approvals of  governmental
authorities  (including  licenses and permits)  required in connection  with the
operation  thereof and have been  operated and  maintained  in  accordance  with
applicable laws, rules, and regulations.


                                       17
<PAGE>

      3.9. Personal Property.

            (a) General.  The Company or the Company  Subsidiary  owns or leases
all  personal  property  Assets  necessary  for the  conduct of the  Business as
presently  conducted,  and such personal  property Assets (taken as a whole) (i)
are free from material defects (patent and latent), (ii) have been maintained in
accordance  with  normal  industry  practice,  and (iii)  are in such  operating
condition  and  repair as is  appropriate  for the  conduct of the  Business  as
presently conducted.

            (b) Owned Personal  Property.  The Company or the Company Subsidiary
has good and marketable title to all such personal property used by it, free and
clear  of any and all  Encumbrances  other  than  Permitted  Encumbrances.  With
respect  to each  such  item of  personal  property  (i)  there  are no  Leases,
subleases,  licenses, options, rights, concessions or other agreements,  written
or oral,  granting  to any party or parties  the right of use of any  portion of
such item of personal property,  (ii) there are no outstanding options or rights
of first  refusal  in favor of any  other  party to  purchase  any such  item of
personal property or any portion thereof or interest therein and (iii) there are
no  parties  (other  than the  Company  or the  Company  Subsidiary)  who are in
possession of or who are using any such item of personal property.

            (c) Leased Personal Property.  Other than Personal Property owned by
the Company or the Company Subsidiary, the Company or the Company Subsidiary has
good and valid leasehold title to all of the tangible  personal  property Assets
used by the  Company or the  Company  Subsidiary,  free and clear of any and all
Encumbrances  other  than  Permitted  Encumbrances  which  would not  permit the
termination of the lease therefor by the lessor. Disclosure Schedule 3.9(c) sets
forth all Leases for personal property.

      With respect to each Lease listed on Disclosure Schedule 3.9(c), (i) there
has been no breach or  default  under  such Lease by the  Company,  the  Company
Subsidiary or by any other party,  (ii) the execution,  delivery and performance
of this Agreement and the consummation of the transactions  contemplated  hereby
will not cause (with or without  notice and with or without the passage of time)
a  default  under  any such  Lease,  (iii)  such  Lease is a valid  and  binding
obligation  of the  applicable  lessor,  is in  full  force  and  effect  and is
enforceable  by the Company or the Company  Subsidiary  in  accordance  with its
terms,  (iv) no action has been taken by the Company or the  Company  Subsidiary
and no event has  occurred  which,  with notice or lapse of time or both,  would
permit  termination,  modification or acceleration by a party thereto other than
by the Company or the Company  Subsidiary  without the consent of the Company or
the  Company  Subsidiary,  (v) no  party  has  repudiated  any term  thereof  or
threatened  to terminate,  cancel or not renew any such Lease,  and (vi) neither
the Company nor the Company  Subsidiary  has  assigned,  transferred,  conveyed,
mortgaged or encumbered any interest  therein or in any leased property  subject
thereto (or any portion thereof).


                                       18
<PAGE>

      3.10. Environmental Matters.

            (a)  Compliance.  The  Company  and the  Company  Subsidiary  are in
compliance with all  Environmental  Laws,  including,  without  limitation,  all
Permits required thereunder to conduct the Business as currently being conducted
or proposed to be conducted.  All such Permits are listed on Disclosure Schedule
3.10(a).  Neither the Company nor the Company Subsidiary has received any notice
to the effect that (i) it is not in compliance  with, or is in violation of, any
such  Environmental  Laws or Permits  required  thereunder or (ii) any currently
existing  circumstances  are  reasonably  likely to  result in a failure  of the
Company to comply with, or a violation by the Company or the Company  Subsidiary
of, any such Environmental Laws or Permits required thereunder.

            (b) Environmental Claims. There are no existing or, to the knowledge
of the  Company,  threatened  Environmental  Claims  against  the Company or the
Company Subsidiary.  Neither the Company nor the Company Subsidiary has received
any  notification of any allegation of any actual,  or potential  responsibility
for,  or any  inquiry  or  investigation  regarding,  any  disposal,  release or
threatened  release at any  location of any  Hazardous  Substance  generated  or
transported by the Company or the Company Subsidiary.

            (c) Hazardous  Substances.  To the knowledge of the Company,  (i) no
underground  tank  or  other  underground   storage   receptacle  for  Hazardous
Substances is currently  located on the Facilities,  and (ii) there have been no
releases of any Hazardous  Substances from any such  underground tank or related
piping.  There  have been no  releases  (i.e.,  any past or  present  releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing, or dumping) of Hazardous Substances in quantities
exceeding  the  reportable  quantities as defined under federal or state law on,
upon or into the Facilities other than those  authorized by  Environmental  Laws
including,  without limitation, the Permits required thereunder. In addition, to
the  knowledge  of the  Company,  (i)  there  have  been  no  such  releases  by
predecessors  of the Company or the Company  Subsidiary  and (ii) no releases in
quantities exceeding the reportable quantities as defined under federal or state
law on, upon, or into any real property in the immediate  vicinity of any of the
real  properties  of the  Company  or the  Company  Subsidiary  other than those
authorized  by   Environmental   Laws  which,   through  soil  or  ground  water
contamination, may have come to be located on the properties of the Company.

            (d) Environmental  Indemnities.  Neither the Company nor the Company
Subsidiary is a party, whether as a direct signatory or as successor,  assign or
third-party  beneficiary,  or otherwise  bound,  to any Lease or other  Contract
(excluding insurance policies disclosed on the Disclosure Schedules) under which
the  Company or the  Company  Subsidiary  is  obligated  by or  entitled  to the
benefits   of,   directly   or   indirectly,   any   representation,   warranty,
indemnification,   covenant,   restriction  or  other   undertaking   concerning
Environmental  Conditions.  Neither the Company nor the Company  Subsidiary  has
released any other person from any claim under any  Environmental  Law or waived
any rights concerning any Environmental Condition.

            (e)  Environmental  Reports.  Complete  and  accurate  copies of the
Environmental  Reports,  as well as all  other  written  environmental  reports,
audits or  assessments  which have been  conducted,  either by the Company,  the
Company  Subsidiary  or any  person  engaged  by  the  Company  or  the  Company
Subsidiary  for such  purpose,  at any facility  owned or formerly  owned by the
Company or the Company Subsidiary have been made available to Buyer.


                                       19
<PAGE>

      3.11. Contracts.

            (a) Disclosure.  Disclosure  Schedule  3.11(a) sets forth a complete
and  accurate  list of all of the  Contracts to which the Company or the Company
Subsidiary is a party of the following categories:

                  (i) Contracts not made in the ordinary course of business;

                  (ii) License  agreements  or royalty  agreements,  whether the
Company  or the  Company  Subsidiary  is the  licensor  or  licensee  thereunder
(excluding  licenses that are commonly  available on standard  commercial terms,
such as software "shrink-wrap" licenses);

                  (iii)  Non-disclosure  agreements  (whether the Company or the
Company Subsidiary is the beneficiary or the obligated party thereunder);

                  (iv)  Contracts or  commitments  (including  groups of related
Contracts or commitments)  involving future expenditures or Liabilities,  actual
or  potential,  in  excess of  $25,000.00  after  the date  hereof or  otherwise
material to the Business or the Assets of the Company or the Company Subsidiary;

                  (v)   Contracts   or   commitments   relating  to   commission
arrangements with others that are material to the Business;

                  (vi) Employment  contracts,  consulting  contracts,  severance
agreements,   "stay-bonus"   agreements  and  similar  arrangements,   including
Contracts (A) to employ or terminate  executive  officers or other personnel and
other  contracts with present or former  officers or directors of the Company or
the  Company  Subsidiary  or (B) that  will  result  in the  payment  by, or the
creation of any Liability of the Company, the Company Subsidiary or Buyer to pay
any severance, termination, "golden parachute," or other similar payments to any
present or former personnel following  termination of employment or otherwise as
a result of the consummation of the transactions contemplated by this Agreement;

                  (vii) Indemnification agreements;

                  (viii)  Promissory  notes,  loans,   agreements,   indentures,
evidences of indebtedness,  letters of credit,  guarantees, or other instruments
relating  to an  obligation  to pay money,  whether  the  Company or the Company
Subsidiary  shall be the  borrower,  lender or guarantor  thereunder  (excluding
credit provided by the Company or the Company  Subsidiary in the ordinary course
of business to purchasers of its products and  obligations to pay vendors in the
ordinary course of business and consistent with past practice);

                  (ix) Contracts  containing  covenants  limiting the freedom of
the  Company,  the Company  Subsidiary,  or any officer,  director,  Employee or
Affiliate  of the  Company or the  Company  Subsidiary  to engage in any line of
business or compete with any Person that relates  directly or  indirectly to the
Business;


                                       20
<PAGE>

                  (x) Any Contract with the federal,  state or local  government
or any agency or department thereof;

                  (xi) Any Contract or other arrangement with a Related Party;

                  (xii) Leases of real or personal property (including groups of
related Leases) involving annual payments of more than $25,000.00;

                  (xiii) Contracts or commitments  (including  groups of related
Contracts  or   commitments)   for  the  purchase  or  sale  of  raw  materials,
commodities,  supplies,  products,  or  other  personal  property,  or  for  the
furnishing or receipt of services,  the  performance of which will extend over a
period of more than six  months,  result in a loss to the Company or the Company
Subsidiary, or involve consideration in excess of $25,000.00;

                  (xiv)  Contracts or  commitments  concerning a partnership  or
joint venture; and

                  (xv) Any other  Contract  under  which the  consequences  of a
default  by any party or  termination  would  reasonably  be  expected  to have,
individually or in the aggregate, a Company Material Adverse Effect.

      Complete and accurate copies of all of the Contracts  listed on Disclosure
Schedule  3.11,  including all  amendments and  supplements  thereto,  have been
provided to Buyer. There are no oral Contracts.

            (b) Absence of Defaults. All of the Contracts are valid, binding and
enforceable  in  accordance  with their  terms,  with no material  existing  (or
threatened in writing) Default or dispute. The Company or the Company Subsidiary
has fulfilled,  or is in a position to take all action necessary to enable it to
fulfill when due, all of its material  obligations under each of such Contracts.
All parties to such  Contracts  have complied in all material  respects with the
provisions thereof, no party is in Default thereunder and no notice of any claim
of Default has been given to the Company or the Company Subsidiary.

      3.12. No Conflict or Violation; Consents.

            (a)  None  of  the  execution,   delivery  or  performance  of  this
Agreement,  the  consummation  of  the  transactions  contemplated  hereby,  nor
compliance by the Company with any of the provisions hereof, will (a) violate or
conflict  with any  provision of the  governing  documents of the Company or the
Company  Subsidiary,  (b) violate,  conflict  with,  or result in a breach of or
constitute a default (with or without  notice or the passage of time) under,  or
result in the  termination  of, or accelerate  the  performance  required by, or
result in a right to terminate, accelerate, modify or cancel under, or require a
notice or consent under, or result in the creation of any  Encumbrance  upon any
of its respective Assets under, any Contract, Lease, License, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of indebtedness,
security  interest  or other  arrangement  to which the  Company or the  Company
Subsidiary is a party or by which the Company or the Company Subsidiary is bound
or to which any of its respective Assets are subject, (c) violate any applicable
Regulation  or Order or (d) impose any  Encumbrance  on any of the Assets of the
Company or the Company Subsidiary or the Business.


                                       21
<PAGE>

            (b)  No  notices  to,  declaration,  filing  or  registration  with,
approvals or Consents of, or assignments by, any Persons (including any federal,
national,  state  or  local  governmental  or  administrative  authorities)  are
necessary  to be  made  or  obtained  by the  Company  in  connection  with  the
execution,  delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.

      3.13. Permits.  Disclosure Schedule 3.13 sets forth a complete list of all
material  Permits held by the Company and the Company  Subsidiary,  all of which
are as of the date hereof in full force and effect.  The Company and the Company
Subsidiary  have, and at all times have had, all material Permits required under
any  applicable  Regulation in the operation of the Business or in the ownership
of the Assets of the Company or the Company Subsidiary,  and own or possess such
Permits free and clear of all Encumbrances.  Neither the Company nor the Company
Subsidiary is in default, and neither the Company nor the Company Subsidiary has
received  any notice of any claim of default  with  respect to any such  Permit.
Except as otherwise  governed by law,  all such  Permits are  renewable by their
terms or in the ordinary course of business  without the need to comply with any
special qualification procedures or to pay any amounts other than routine filing
fees and will not be adversely  affected by the  completion of the  transactions
contemplated by this Agreement.

      3.14. SEC Reports; Financial Statements; Books and Records.

            (a) SEC  Reports.  The Company  has filed with the SEC all  required
forms, reports, registration statements and documents required to be filed by it
with the SEC (collectively, all such forms, reports, registration statements and
documents filed since January 1, 2001 are referred to herein as the "Company SEC
Reports").  All of the Company SEC Reports  complied as to form,  when filed, in
all material  respects with the applicable  provisions of the Securities Act and
the Exchange Act.  Accurate and complete  copies of the Company SEC Reports have
been made available to Buyer.  As of their  respective  dates or, in the case of
registration statements,  their effective dates (or, if amended or superseded by
a filing prior to the date of this Agreement,  then on the date of such filing),
the  Company SEC Reports  (including  all  exhibits  and  schedules  thereto and
documents  incorporated  by  reference  therein)  did  not  contain  any  untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated  therein or necessary  to make the  statements  therein,  in light of the
circumstances  under which they were made, not misleading.  The Company has been
advised by each of its current  officers and directors that each such person and
such  persons'  Affiliates  have  complied  with all filing  requirements  under
Section 13 and Section 16(a) of the Exchange Act. Each certification included in
the  Company  SEC  Reports  pursuant  to  Section  302  or  Section  906  of the
Sarbanes-Oxley Act of 2002 was accurate when made.

            (b)  Financial   Statements.   Each  of  the  financial   statements
(including,  in each case, any related notes  thereto)  contained in the Company
SEC Reports (the "Company Financial Statements"), (x) was prepared in accordance
with GAAP and (y) fairly  presented the financial  position of Company as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods  indicated,  consistent  with the books and records of the
Company,  except that the unaudited  interim  financial  statements  were or are
subject  to  normal  year-end  adjustments.  The  balance  sheet of the  Company
contained  in the  Company's  Form  10-KSB for the year  ended July 31,  2004 is
hereinafter referred to as the "Company Balance Sheet."


                                       22
<PAGE>

            (c) Internal Controls;  Disclosure Controls. The Company maintains a
system of internal  accounting  controls and disclosure  controls and procedures
sufficient to provide  reasonable  assurance that (i)  transactions are executed
with management's authorization,  (ii) transactions are recorded as necessary to
permit  preparation  of  financial  statements  in  accordance  with GAAP and to
maintain  accountability for assets, (iii) access to assets is permitted only in
accordance with management's authorization, (iv) the recorded accountability for
assets is compared with existing assets at reasonable  intervals and appropriate
action is taken with respect to any  differences  and (v)  material  information
concerning the Company is publicly disseminated in a timely manner.

            (d) Books and Records.  The Books and Records, in reasonable detail,
accurately  and fairly  reflect in all material  respects the  activities of the
Company, the Company Subsidiary and the Business and have been provided to Buyer
or made available for its inspection.

            (e) All  Accounts  Recorded.  Neither  the  Company  nor the Company
Subsidiary has engaged in any  transaction,  maintained any bank account or used
any corporate funds except for  transactions,  bank accounts or funds which have
been and are reflected in the Books and Records.

            (f)  Corporate  Records.  The stock  records and minute books of the
Company and the Company  Subsidiary that have been made available to Buyer fully
reflect all minutes of  meetings,  resolutions  and other  material  actions and
proceedings  of the  stockholders  and  board of  directors  and all  committees
thereof,  all  issuances,  transfers  and  redemptions  of capital  stock of the
Company and the Company Subsidiary and contain true, correct and complete copies
of their respective  Certificate of Incorporation  and Bylaws and all amendments
thereto through the date hereof.

      3.15. Absence of Certain Changes or Events.  Since the Balance Sheet Date,
the Company and the Company  Subsidiary  have conducted the Business only in the
ordinary course consistent with past practice and there has not been any:

            (a) Company Material Adverse Change;

            (b) failure to operate the Business in the ordinary  course so as to
use all commercially  reasonable  efforts to preserve the Business intact and to
preserve the continued  services of the Employees and the goodwill of suppliers,
customers and others having  business  relations with the Company or the Company
Subsidiary;

            (c) resignation or termination of any officer,  director or manager,
or any increase in the rate of compensation  payable or to become payable by the
Company or the Company Subsidiary to any officer,  director or Representative of
the  Company  or the  Company  Subsidiary  (other  than  standard  increases  in
connection  with  general,  regularly-scheduled  reviews  consistent  with  past
practice), including the making of any loan to, or the payment, grant or accrual
of any bonus, incentive compensation, service award or other similar benefit to,
any such Person;


                                       23
<PAGE>

            (d) any payment,  loan or advance of any amount to or in respect of,
or the sale,  transfer or lease of any  properties or the Assets to, or entering
into of any Contract  with,  any Related Party except  regular  compensation  to
Employees;

            (e) sale, assignment, license, transfer or Encumbrance of any of the
Assets of the Company or the Company Subsidiary,  tangible or intangible, singly
or in the  aggregate,  other than sales of products and services  involving less
than  $25,000.00  in the ordinary  course of business and  consistent  with past
practice;

            (f)  new  Contracts  (or  series  of  related  new  Contracts),   or
extensions,  modifications,  terminations,  accelerations  or renewals  thereof,
except for Contracts  involving less than $25,000.00  entered into,  modified or
terminated in the ordinary course of business and consistent with past practice;

            (g) actual or threatened (i)  termination  of any material  customer
account or group of accounts or actual or (ii)  material  reduction in purchases
or royalties  payable by any such  customer or  occurrence  of any event that is
likely to result in any such termination or reduction;

            (h) disposition or lapsing of any Proprietary  Rights of the Company
or the Company  Subsidiary,  in whole or in part, or any disclosure of any trade
secret, process or know-how to any Person not an Employee;

            (i) change in accounting  methods or practices by the Company or the
Company Subsidiary;

            (j)  revaluation by the Company or the Company  Subsidiary of any of
their respective  Assets,  including  writing off or establishing  reserves with
respect  to  inventory,  notes or  accounts  receivable  (other  than for  which
adequate reserves have been previously established);

            (k)  damage,   destruction  or  loss  (whether  or  not  covered  by
insurance)  adversely affecting the Assets, the Business or the prospects of the
Company or the Company Subsidiary;

            (l)  declaration,  setting  aside  or  payment  of any  dividend  or
distribution  in  respect of any  capital  stock of the  Company or the  Company
Subsidiary  or any  redemption,  purchase  or other  acquisition  of any  equity
securities of the Company or the Company Subsidiary;

            (m)  issuance  or  reservation  for  issuance  by the Company or the
Company Subsidiary of, or commitment of it to issue or reserve for issuance, any
shares of capital stock or other equity  securities or obligations or securities
convertible  into or  exchangeable  for shares of capital  stock or other equity
securities;


                                       24
<PAGE>

            (n) increase,  decrease or  reclassification of the capital stock of
the Company or the Company Subsidiary;

            (o) amendment of the Certificate of  Incorporation  or Bylaws of the
Company or the Company Subsidiary;

            (p) capital  expenditure  or execution of any lease or any incurring
of  liability  therefor  by the  Company  in one or more  related  transactions,
involving payments or obligations in excess of $25,000.00 in the aggregate;

            (q)  failure to pay any  obligation  of the  Company or the  Company
Subsidiary when due;

            (r)  cancellation  of any  indebtedness  or waiver of any  rights of
substantial  value to the  Company  or the  Company  Subsidiary,  except  in the
ordinary course of business and consistent with past practice;

            (s)  indebtedness  incurred  or  guaranteed  by the  Company  or the
Company  Subsidiary for borrowed money or any commitment to borrow money entered
into by the Company or the Company Subsidiary, or any loans made or agreed to be
made by the Company or the Company Subsidiary;

            (t)  liability  incurred by the  Company or the  Company  Subsidiary
except in the ordinary course of business and consistent with past practice,  or
any increase or change in any  assumptions  underlying or methods of calculating
any bad debt, contingency or other reserves;

            (u) payment,  discharge or  satisfaction  of any  Liabilities of the
Company  or  the  Company  Subsidiary  other  than  the  payment,  discharge  or
satisfaction  in the  ordinary  course  of  business  and  consistent  with past
practice  of  Liabilities  as  reflected  or reserved  against in the  Financial
Statements or incurred in the ordinary  course of business and  consistent  with
past practice since the Balance Sheet Date;

            (v)  acquisition  of any equity  interest in any other Person by the
Company or the Company Subsidiary; or

            (w) agreement by the Company or the Company  Subsidiary  directly or
indirectly to do any of the foregoing.

      3.16. Liabilities.  Neither the Company nor the Company Subsidiary has any
Liabilities (absolute,  accrued, contingent or otherwise) except (i) Liabilities
which are reflected and properly  reserved against in the Financial  Statements,
(ii) Liabilities incurred after the Balance Sheet Date in the ordinary course of
business and consistent with past practice (iii)  Liabilities  arising under the
Contracts  (other  than  obligations  which are  required to be  reflected  on a
balance sheet prepared in accordance with GAAP) set forth on Disclosure Schedule
3.11 and (iv)  Liabilities  set forth on Disclosure  Schedule 3.16.  None of the
Liabilities  described  in this  Section 3.16 relates to any breach of Contract,
breach of warranty,  tort,  infringement or violation of law or arose out of any
Action.


                                       25
<PAGE>

      3.17.  Litigation.  There is no Action  pending or  threatened  or, to the
knowledge of the Company,  anticipated (i) against, relating to or affecting the
Company or the  Company  Subsidiary,  or any of the Assets of the Company or the
Company  Subsidiary  or any of the officers and  directors of the Company or the
Company  Subsidiary,  (ii) which seeks to enjoin or obtain damages in respect of
the transactions contemplated hereby or (iii) which seeks to prevent the Company
from consummating the transactions contemplated hereby. None of such Actions, if
adversely  determined  against  the  Company,  the  Company  Subsidiary,   their
respective  directors or  officers,  or any other  Person  could  reasonably  be
expected  to  result  in a loss  to the  Company  and  the  Company  Subsidiary,
individually or in the aggregate, in excess of $25,000.00. There is no basis for
any Action,  which if  adversely  determined  against the  Company,  the Company
Subsidiary,  their respective  directors or officers,  or any other Person could
reasonably  be expected to result in a loss to the Company,  individually  or in
the  aggregate,  in excess of  $25,000.00.  There are  presently no  outstanding
judgments,  decrees or orders of any court or any governmental or administrative
agency against or affecting the Company, the Company Subsidiary, the Business or
any of the Assets of the Company or the Company Subsidiary.  Disclosure Schedule
3.17  contains a complete and accurate  description  of all Actions to which the
Company or the Company Subsidiary has been a party or which relate to any of the
Assets of the Company or the Company  Subsidiary or the Company's or the Company
Subsidiary's  officers or  directors  as such,  or any such  Actions  which were
settled  prior to the  institution  of formal  proceedings,  other than  Actions
brought by the Company or the Company  Subsidiary  for collection of monies owed
in the ordinary course of business.

      3.18. Labor Matters.

            (a)  General.  Neither the Company nor the Company  Subsidiary  is a
party to any  labor  agreement  with  respect  to its  Employees  with any labor
organization,  group  or  association.  No  petition  for  certification  as the
exclusive bargaining  representative for any of the Employees is pending. To the
Company's  knowledge,  no union organizing activity has occurred with respect to
the Employees in the past two years. There is no unfair labor practice charge or
complaint   against  the  Company   pending   before  any  domestic  or  foreign
governmental  agency  arising out of the  Company's or the Company  Subsidiary's
activities,  and the Company has no knowledge of any facts or information  which
would give rise thereto;  there is no labor strike or labor disturbance  pending
or  threatened  against  the  Company  or  the  Company  Subsidiary,  nor is any
grievance  currently being asserted  against it; and neither the Company nor the
Company  Subsidiary has  experienced a work stoppage or other labor  difficulty.
There are no material  controversies pending or to the knowledge of the Company,
threatened between the Company or the Company Subsidiary and the Employees,  and
the Company has no knowledge of any facts which could  reasonably  result in any
such controversy.  To the knowledge of the Company, no executive,  Key Employee,
or group of Employees has any plans to terminate  employment with the Company or
the Company Subsidiary.

            (b) Compliance. Each of the Company and the Company Subsidiary is in
material  compliance with all applicable Laws respecting  employment  practices,
terms  and  conditions  of  employment,   wages  and  hours,   equal  employment
opportunity,  and the payment of social  security  and similar  taxes and is not
engaged in any unfair labor practice. The Company has no knowledge of any claims
for past due  wages or any  penalties  for  failure  to  comply  with any of the
foregoing.


                                       26
<PAGE>

            (c)  Severance  Obligations.  Neither  the  Company  nor the Company
Subsidiary has entered into any severance,  "stay-bonus" or similar  arrangement
in respect of any present or former  Employee that will result in any obligation
(absolute or  contingent)  of Buyer or the Company or the Company  Subsidiary to
make any  payment to any present or former  Employee  following  termination  of
employment  or  upon  consummation  of the  transactions  contemplated  by  this
Agreement (whether or not employment is continued for any specified period after
the Effective  Time).  Neither the execution and delivery of this  Agreement nor
the  consummation  of the  transactions  contemplated  hereby will result in the
acceleration  or vesting of any other rights of any Person to benefits under any
Employee Plans.

            (d) Highly  Compensated  Employees.  Attached  hereto as  Disclosure
Schedule  3.18(d)  is a list of the names of all  present  Employees  with total
compensation  exceeding  $100,000.00  in 2003  and  their  current  compensation
payable by the Company or the Company Subsidiary.  Notwithstanding any provision
of this  Agreement  or any  Disclosure  Schedule  to the  contrary,  the Company
represents  that  from  and  after  the  Effective  Time  no  benefit  or  other
compensation is payable to any Person identified on Disclosure  Schedule 3.18(d)
upon the voluntary  resignation of such Person from employment with Buyer or the
Company or the Company Subsidiary as a result of the Merger.

      3.19. Employee Benefit Plans.

            (a) There are no, and since the  formation  of the  Company  and the
Company  Subsidiary,  there have been no,  Employee  Plans  which  cover or have
covered  Employees  or  under  which  the  Company  has  contributed  or has any
obligation  to  contribute  or with  respect to which the  Company  may have any
liability. With respect to each Employee Plan, the Company has delivered or made
available to Buyer a true,  complete and correct copy of (i) such  Employee Plan
(or,  if not  written,  a written  summary of its  material  terms) and the most
recent summary plan  description,  if any,  related to such Employee Plan,  (ii)
each trust  agreement or other  funding  arrangement  relating to such  Employee
Plan, and (iii) the most recent actuarial report or financial statement relating
to such Employee  Plan. The Company and the Company  Subsidiary  have no, and to
the knowledge of Company,  no other person or entity has, any express or implied
obligation,  whether legally enforceable or not, to modify,  change or terminate
any  Employee  Plan,  other  than  with  respect  to a  modification,  change or
termination required by ERISA or the Code.

            (b)  Compliance.  Each  Employee Plan has been  administered  in all
material  respects  in  accordance  with  its  terms  and all  applicable  laws,
including  ERISA and the Code, and  contributions  required to be made under the
terms of any of such Employee  Plans as of the date of this  Agreement have been
timely made or, if not yet due, have been properly  reflected on the most recent
consolidated  balance  sheet filed or  incorporated  by reference in the Company
Financial  Statements prior to the date of this Agreement.  With respect to such
Employee  Plans,  no event has  occurred and there exists no condition or set of
circumstances  in connection with which Company or the Company  Subsidiary could
be  subject  to  any  material   liability   (other  than  for  routine  benefit
liabilities) under the terms of, or with respect to, such Employee Plans, ERISA,
the Code or any other applicable Law.


                                       27
<PAGE>

            (c)  Qualification.  The  Company on behalf of itself and each ERISA
Affiliate  hereby  represents  that: (i) each Employee Plan which is intended to
qualify  under  Section  401(a),  Section  401(k),  Section  401(m)  or  Section
4975(e)(7)  of the Code has received a favorable  determination  letter from the
IRS as to its qualified  status,  and each trust  established in connection with
any such  Employee  Plan which is  intended  to be exempt  from  federal  income
taxation under Section 501(a) of the Code is so exempt, and no fact or event has
occurred that could adversely  affect the qualified  status of any such Employee
Plan or the exempt  status of any such trust and (ii) each  Employee Plan can be
amended,  terminated  or  otherwise  discontinued  after the  Effective  Time in
accordance  with its terms,  without  liability  (other than (A)  liability  for
ordinary  administrative  expenses  typically incurred in a termination event or
(B) if the  Employee  Plan is a  Pension  Plan  subject  to Part 2 of Title I of
ERISA,  liability for the accrued benefits of the Pension Plan as of the date of
such termination to the extent that either there are sufficient assets set aside
in the Pension  Plan's trust or insurance  contract to satisfy such liability or
such  liability is reflected on the most recent  balance  sheet  included in the
Company  Financial  Statements  prior to the date of this  Agreement).  No suit,
administrative  proceeding,  action or other litigation has been brought,  or is
threatened,  against or with respect to any such  Employee  Plan,  including any
audit or inquiry by the IRS or United  States  Department  of Labor  (other than
routine benefits claims by Employee Plan participants or beneficiaries).

            (d) Title IV Pension Plans. No Employee Plan is a Multiemployer Plan
or other Pension Plan subject to Title IV of ERISA,  and neither the Company nor
any  ERISA  Affiliate  has  sponsored  or  contributed  to or been  required  to
contribute to a Multiemployer  Plan or other Pension Plan subject to Title IV of
ERISA.  No  material  liability  under  Title IV of ERISA has been  incurred  by
Company  or any ERISA  Affiliate  that has not been  satisfied  in full,  and no
condition exists that presents a material risk to Company or any ERISA Affiliate
of incurring or being subject (whether  primarily,  jointly or secondarily) to a
material  liability  thereunder.  None of the  assets  of  Company  or any ERISA
Affiliate is, or may  reasonably be expected to become,  the subject of any lien
arising under ERISA or Section  412(n) of the Code.  Neither the Company nor any
ERISA  Affiliate has any liability for unpaid  contributions  to a Multiemployer
Plan under Section 515 of ERISA.

            (e) Funding Deficiency.  With respect to each Pension Plan set forth
on Disclosure  Schedule 3.19 that is subject to Title IV or Part 3 of Title I of
ERISA or Section 412 of the Code, (i) no reportable event (within the meaning of
Section  4043 of ERISA,  other than an event that is not required to be reported
before or within 30 days of such  event) has  occurred  or is expected to occur,
(ii) there was not an  accumulated  funding  deficiency  (within  the meaning of
Section 302 of ERISA or Section 412 of the Code),  whether or not waived,  as of
the most recently  ended plan year of such Pension  Plan;  and (iii) there is no
"unfunded  benefit  liability"  (within  the meaning of Section  4001(a)(18)  of
ERISA).

            (f) Retiree Welfare Benefits; COBRA and HIPAA. Except as required by
Law, no Employee Plan provides any of the following  retiree or  post-employment
benefits to any person:  medical,  disability or life insurance benefits. To the
extent it is applicable,  the Company is in compliance with (i) the requirements
of  the  applicable  health  care  continuation  and  notice  provisions  of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and
the regulations (including proposed regulations, if any) thereunder and (ii) the
applicable  requirements of the Health Insurance  Portability and Accountability
Act of 1996, as amended,  and the regulations  (including proposed  regulations)
thereunder.


                                       28
<PAGE>

            (g) Deductibility of Payments. There is no contract, agreement, plan
or arrangement  covering any Employee or former  Employee that,  individually or
collectively,  requires the payment by the Company or the Company  Subsidiary of
any amount (i) that is not deductible under Section 162(a)(1),  162(m) or 404 of
the Code or (ii) that is an "excess parachute  payment" pursuant to Section 280G
of the Code.

            (h)  Fiduciary  Duties and  Prohibited  Transactions.  No prohibited
transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) has
occurred  that  involves the assets of any Employee  Plan for which no exemption
exists under Section 408 of ERISA and Section  4975(c)(2) or (d) of the Code and
is reasonably  likely to subject the Company,  the Company  Subsidiary or any of
their  employees,  directors  or  officers  to the tax or penalty on  prohibited
transactions  imposed by Section  4975 of the Code or the  sanctions  imposed on
prohibited  transactions  under  Title I of ERISA.  Neither  the Company nor the
Company Subsidiary has violated or has participated with a fiduciary (as defined
in Section  3(21) of ERISA) of a Welfare  Plan or Pension Plan in a violation of
Part 4 of Title I,  Subtitle B of ERISA with  respect to any such plan,  and the
Company has not been assessed any civil penalty under Section 502(l) of ERISA.

            (i) No  Adoption.  Neither the Company nor any ERISA  Affiliate  has
announced to their  employees,  former  employees,  consultants  or directors an
intention to create,  or otherwise  created,  a legally  binding  commitment  to
adopt,  change  or  terminate  any  Employee  Plan  which is  intended  to cover
Employees or former Employees.

      3.20. Transactions with Related Parties. No Related Party has (a) borrowed
from or loaned to the Company money or other  property which has not been repaid
or returned,  (b) any  contractual  relationship  or other claims,  express,  or
implied, of any kind whatsoever against the Company or the Company Subsidiary or
(c) any interest in any property used by the Company or the Company Subsidiary.

      3.21.  Compliance  with Law. The Company and the Company  Subsidiary  have
conducted  the  Business  in  compliance  with all  applicable  Laws and Orders.
Neither the Company nor the Company  Subsidiary  has  received any notice to the
effect that,  or has  otherwise  been advised  that,  the Company or the Company
Subsidiary  is not in compliance  with any such Laws or Orders,  and the Company
has no reason to anticipate that any existing circumstances are likely to result
in any material violation of any of the foregoing.

      3.22. Intellectual Property.

            (a)  Disclosure   Schedule  3.22(a)  lists  all  Company  Registered
Proprietary Rights (including all Company Registered  Proprietary Rights and all
trademarks and service marks that the Company or the Company Subsidiary has used
with the intent of creating or benefiting from any common law rights relating to
such marks) and lists any  proceedings or actions  pending as of the date hereof
before any court or tribunal (including the PTO or equivalent authority anywhere
in the world) related to any of the Company Registered Proprietary Rights.


                                       29
<PAGE>

            (b) The Company or the Company  Subsidiary has all requisite  right,
title and  interest  in or valid  and  enforceable  rights  under  Contracts  or
Licenses  to use all  Company  Proprietary  Rights  used by the  Company  or the
Company  Subsidiary  or  necessary  to the conduct of the  Business as presently
conducted.  Each item of  Company  Proprietary  Rights,  including  all  Company
Registered  Proprietary Rights listed on Disclosure  Schedule 3.22(b),  is owned
exclusively by the Company (excluding Proprietary Rights licensed to the Company
under any License) and is free and clear of any  Encumbrances).  The Company (i)
owns  exclusively  all  trademarks,  service  marks and trade  names used by the
Company or the Company Subsidiary in connection with the operation or conduct of
the Business,  including the sale of any products or technology or the provision
of any  services by the Company or the Company  Subsidiary,  provided,  however,
that the Company or the Company Subsidiary may use trademarks, service marks and
trade names of third  parties  which are  licensed to the Company or the Company
Subsidiary,  and (ii) owns exclusively,  and have good title to, all copyrighted
works that are the  Company's  products  or other works of  authorship  that the
Company  otherwise  purports  to own;  provided,  however,  that such  works may
incorporate copyrighted works or works of authorship,  trademarks or trade names
of third parties which are licensed to the Company or are in the public domain.

            (c) To the extent  that any  Company  Proprietary  Rights  have been
developed  or created by any Person  other than the  Company,  the Company has a
written  agreement  with such  Person with  respect  thereto and the Company has
either  (i)  obtained  ownership  of,  and is the  exclusive  owner of, all such
Proprietary Rights by operation of law or by valid assignment of any such rights
or (ii) has obtained a License under or to such Proprietary Rights.

            (d) Neither the Company nor the Company  Subsidiary has  transferred
ownership of or granted any License of or other right to use or  authorized  the
retention of any rights to use, any Proprietary  Rights that are or were Company
Proprietary Rights, to any other Person.

            (e) The Company  Proprietary  Rights  constitute all the Proprietary
Rights  necessary or desirable to the conduct of the Business as it currently is
conducted or as  reasonably  contemplated  to be conducted,  including,  without
limitation, the design, development,  distribution, marketing, manufacture, use,
import,  license,  and sale of the  products,  technology  and  services  of the
Company   (including   products,   technology,   or  services   currently  under
development).  Each  of the  Company  Proprietary  Rights  owned  or used by the
Company or the Company Subsidiary immediately prior to the Closing will be owned
or available for use by the Company or the Company Subsidiary on identical terms
and conditions  immediately subsequent to the Closing. The Company has taken all
necessary and desirable  action to maintain and protect each item of the Company
Proprietary Rights that it or the Company Subsidiary owns or uses.

            (f)  Disclosure  Schedule  3.22(f)  lists all Contracts and Licenses
(including all inbound Licenses) to which the Company or the Company  Subsidiary
is a party with  respect to any  Proprietary  Rights.  No Person  other than the
Company or the Company  Subsidiary has ownership rights to improvements  made by
the Company or the  Company  Subsidiary  in  Proprietary  Rights  which has been
licensed to the Company or the Company Subsidiary.


                                       30
<PAGE>

            (g) Disclosure  Schedule  3.22(g) lists all Contracts,  Licenses and
agreements  between the Company or the Company  Subsidiary  and any other Person
wherein  or whereby  the  Company or the  Company  Subsidiary  has agreed to, or
assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless,
guaranty or otherwise  assume or incur any  obligation or Liability or provide a
right of rescission with respect to the infringement or  misappropriation by the
Company,  the Company  Subsidiary or such other Person of the Proprietary Rights
of any Person other than the Company or the Company Subsidiary.

            (h) To the  knowledge of the Company,  the operation of the Business
as currently  conducted or as presently proposed to be conducted,  including the
Company's  design,  development,  use,  import,  manufacture  and  sale  of  the
products,  technology or services  (including  products,  technology or services
currently under  development) of the Company or the Company  Subsidiary does not
infringe or  misappropriate  the Proprietary  Rights of any Person,  violate the
rights of any Person (including  rights to privacy or publicity),  or constitute
unfair  competition or an unfair trade  practice  under any applicable  Law, and
neither  the Company nor the Company  Subsidiary  has  received  notice from any
Person claiming that such operation or any act,  product,  technology or service
(including products,  technology or services currently under development) of the
Company  infringes or  misappropriates  the Proprietary  Rights of any Person or
constitutes  unfair  competition or trade practices under any applicable Law. To
the extent that the Company has received  any notice  related to the above or is
aware of any pending,  anticipated,  or threatened Action against the Company or
the Company  Subsidiary  relating to  infringement  or  misappropriation  of the
Proprietary  Rights of any  Person,  the  Company  has  conducted,  prior to the
Closing Date, a complete and accurate  investigation of any alleged infringement
or misappropriation.  Based on the complete and accurate investigation, there is
no basis for any Action  against the Company or the Company  Subsidiary  and any
judgment,  order, or determination from such Action will have no material impact
on the operation of the Business as currently conducted or as presently proposed
to be conducted,  including  the Company's  design,  development,  use,  import,
manufacture  and  sale  of  the  products,  technology  or  services  (including
products,  technology or services  currently under  development) of the Company.
These representations are in addition to those of Section 3.17 of this Agreement
or any other provision hereof.

            (i) Each item of Company Registered  Proprietary Rights is valid and
subsisting, and all necessary registration,  maintenance,  renewal fees, annuity
fees and taxes due through the date of this  Agreement in  connection  with such
Registered  Proprietary  Rights have been paid and all  necessary  documents and
certificates in connection with such Company Registered  Proprietary Rights have
been filed with the relevant patent,  copyright,  trademark or other authorities
in the  United  States or  foreign  jurisdictions,  as the case may be,  for the
purposes of maintaining such Registered Proprietary Rights.  Disclosure Schedule
3.22(i)  lists all  actions  that must be taken by the  Company  or the  Company
Subsidiary  within 180 days from the date hereof,  including  the payment of any
registration, maintenance, renewal fees, annuity fees and taxes or the filing of
any documents,  applications  or  certificates  for the purposes of maintaining,
perfecting or preserving or renewing any Company Registered  Proprietary Rights.
The Company has not registered the copyright with the U.S.  Copyright Office for
the latest  version of each product or  technology of the Company or the Company
Subsidiary that  constitutes or includes a  copyrightable  work. In each case in
which the  Company or the  Company  Subsidiary  has  acquired  ownership  of any
Proprietary  Rights from any Person,  the Company or the Company  Subsidiary has
obtained a valid and enforceable  assignment  sufficient to irrevocably transfer
all rights in such Proprietary  Rights (including the right to seek damages with
respect to such Proprietary Rights) to the Company or the Company Subsidiary, to
the maximum extent required to protect the Company's or the Company Subsidiary's
ownership  interests  in and to  such  Proprietary  Rights  in  accordance  with
applicable  Laws,  the Company has recorded  each such  assignment of Registered
Proprietary  Rights with the  relevant  Governmental  or  Regulatory  Authority,
including the PTO, the U.S. Copyright Office, or their respective equivalents in
any relevant foreign jurisdiction, as the case may be.


                                       31
<PAGE>

            (j) There are no  Contracts  or Licenses  between the Company or the
Company  Subsidiary  and any other  Person with  respect to Company  Proprietary
Rights  under which there is any claim (or facts that may  reasonably  lead to a
claim) known to the Company regarding the scope of such Contract or License,  or
performance  under such  Contract  or  License,  including  with  respect to any
payments to be made or received by the Company thereunder.

            (k) To the  knowledge of the  Company,  no Person is  infringing  or
misappropriating any Company Proprietary Rights.

            (l) The  Company  has taken  all  commercially  reasonable  steps to
protect its rights in confidential  information and trade secrets of the Company
and the Company Subsidiary or provided by any other Person to the Company or the
Company  Subsidiary subject to a duty of  confidentiality.  Without limiting the
generality of the foregoing,  the Company has, and enforces,  a policy requiring
each Employee,  consultant  and  independent  contractor to execute  proprietary
information,  confidentiality and invention and copyright assignment agreements,
and all current and former Employees, consultants and independent contractors of
the  Company  and the Company  Subsidiary  have  executed  such  agreements,  as
applicable.  Forms of all such  agreements  have been  provided to Buyer or made
available to Buyer for review.

            (m) No Company Proprietary Rights or product,  technology or service
of the Company is subject to any Order or Action or Proceeding  that  restricts,
or that is reasonably  expected to restrict in any manner,  the use, transfer or
licensing  of any Company  Proprietary  Rights by the Company or that may affect
the validity, use or enforceability of such Company Proprietary Rights.

            (n) Neither this Agreement nor any transactions contemplated by this
Agreement  will result in Buyer  granting any rights or licenses with respect to
the Proprietary  Rights of Buyer to any Person pursuant to any Contract to which
the  Company  or the  Company  Subsidiary  is a party or by  which  any of their
respective Assets are bound.

            (o)  Disclosure  Schedule  3.22(o)  sets  forth  a list  of (x)  all
software  which is material to the Business and which the Company or the Company
Subsidiary has licensed from any third party which is used by the Company or the
Company  Subsidiary in the Company products or otherwise in their businesses and
(y) a list of all "freeware" and "shareware"  incorporated  into any product now
shipped by the  Company or the Company  Subsidiary.  The Company and the Company
Subsidiary have all rights necessary to the use of such software, "freeware" and
"shareware."


                                       32
<PAGE>

            (p) The Company has taken all  necessary  and  appropriate  steps to
protect and preserve  ownership of Company  Proprietary  Rights. The Company has
secured  valid  written  assignments  from all  consultants  and  Employees  who
contributed to the creation or development of the Company Proprietary Rights. In
the event that the  consultant  is  concurrently  employed by the Company or the
Company  Subsidiary and a third party, the Company has taken additional steps to
ensure that any Company  Proprietary  Rights developed by such a consultant does
not belong to the third  party or  conflict  with the third  party's  employment
agreement such steps include, but are not limited to, ensuring that all research
and  development  work  performed by such a consultant are performed only on the
Company's or the Company Subsidiary's facilities and only using the Company's or
the Company Subsidiary's resources.

      3.23. Tax Matters.

            (a) Filing of Tax  Returns.  The Company and the Company  Subsidiary
have timely filed with the appropriate taxing authorities and in the proper form
all Tax Returns  required to be filed.  The Tax Returns  filed are  complete and
accurate.  All Taxes due and payable by the  Company or the  Company  Subsidiary
(whether or not shown on any Tax Return) have been paid. Neither the Company nor
the Company  Subsidiary has applied for or received any extension of time within
which to file any Tax Return,  other than for Tax Returns that have already been
filed.  No claim has ever been made by an authority in a jurisdiction  where the
Company or the Company  Subsidiary does not file Tax Returns that the Company or
the Company Subsidiary is or may be subject to taxation by that jurisdiction.

            (b)  Payment  of Taxes.  The  unpaid  Taxes of the  Company  and the
Company Subsidiary (i) did not, as of the Balance Sheet Date, exceed the reserve
for Tax  Liability  (excluding  any reserve for deferred  Taxes  established  to
reflect timing differences between book and Tax income) set forth on the face of
the balance  sheets  contained in the Financial  Statements  (rather than in any
notes thereto), and (ii) will not exceed that reserve as adjusted for operations
and transactions through the Closing Date in accordance with the past custom and
practice of the Company and the Company  Subsidiary  in filing their  respective
Tax Returns.

            (c)  Audits,  Investigations  or  Claims.  To the  knowledge  of the
Company, no deficiencies for Taxes of the Company or the Company Subsidiary have
been  claimed,  proposed  or  assessed  by  any  taxing  or  other  governmental
authority. There are no pending or, to the knowledge of the Company,  threatened
audits, assessments or other Actions for or relating to any Liability in respect
of Taxes of the  Company  or the  Company  Subsidiary,  and there are no matters
under  discussion with any  governmental  authorities,  or known to the Company,
with respect to Taxes that are likely to result in an  additional  Liability for
Taxes with respect to the Company or the Company Subsidiary.  Audits of federal,
state,  local and foreign Tax Returns by the relevant  taxing  authorities  have
been  completed  for the periods set forth on Disclosure  Schedule  3.23(c) and,
except  as set  forth in such  Disclosure  Schedule,  none of the  Company,  the
Company  Subsidiary  and their  predecessors  have been notified that any taxing
authority intends to audit a Tax Return for any other period.

            (d) Copies of Tax Returns,  Waivers and Extensions.  The Company has
delivered to Buyer  complete and accurate  copies of federal,  state,  local and
foreign  Tax  Returns  of  the  Company,   the  Company   Subsidiary  and  their
predecessors  for the years ended December 31, 2000, 2001 and 2002, and complete
and accurate  copies of all  examination  reports and statements of deficiencies
assessed  against or agreed to by the Company or any predecessor  since December
31, 1996.  None of the Company,  the Company  Subsidiary or any  predecessor has
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.


                                       33
<PAGE>

            (e) Liens.  There are no Encumbrances for Taxes other than Permitted
Encumbrances on any of the Assets of the Company or the Company Subsidiary.

            (f) Tax Elections. All elections with respect to Taxes affecting the
Company,  the Company  Subsidiary or their Assets, as of the date hereof are set
forth on Disclosure Schedule 3.23(f).

            (g) Prior  Affiliated  Groups.  Neither  the Company nor the Company
Subsidiary is or has ever been a member of an affiliated  group of  corporations
within the meaning of Section  1504 of the Code or of any group that has filed a
combined consolidated or unitary state or local return.

            (h)  Tax  Sharing  Agreements.  None  of the  Company,  the  Company
Subsidiary,  their  respective  Assets or the Business are, or will be after the
Effective  Time,  bound  by  any  Tax-sharing   agreement  (including  indemnity
arrangements)  or similar  arrangements.  Neither  the  Company  nor the Company
Subsidiary  has assumed the  liability of any other Person for Taxes by contract
or course of dealing.

            (i)  Partnerships,  Single Member LLCs,  CFCs and PHCs.  Neither the
Company  nor the  Company  Subsidiary  (i) is a partner  for Tax  purposes  with
respect to any joint  venture,  partnership,  or other  arrangement  or contract
which is treated as a partnership  for Tax  purposes,  (ii) owns a single member
limited liability company which is treated as a disregarded  entity,  (iii) is a
stockholder of a "controlled  foreign  corporation" as defined in Section 957 of
the Code (or any similar provision of state, local or foreign law) and (iv) is a
"personal holding company" as defined in Section 542 of the Code (or any similar
provision of state, local or foreign law).

            (j) No  Withholding.  The Company and the  Company  Subsidiary  have
withheld  and  paid  all  Taxes  required  to have  been  withheld  and  paid in
connection with amounts paid or owing to any Employee,  independent  contractor,
creditor, stockholder or other third party.

            (k) FIRPTA. Neither the Company nor the Company Subsidiary is or has
ever been a United States real property holding  corporation  within the meaning
of Section  897(c)(2)  of the Code during the  applicable  period  specified  in
section 897(c)(1)(A)(ii) of the Code.

            (l)  International  Boycott.  Neither  the  Company  nor the Company
Subsidiary has ever  participated  in or is  participating  in an  international
boycott within the meaning of Section 999 of the Code.

            (m)  Permanent  Establishment.  Neither  the Company nor the Company
Subsidiary has or has had a permanent  establishment in any foreign country,  as
defined in any applicable Tax treaty or convention  between the United States of
America and such foreign country.


                                       34
<PAGE>

            (n) Other  Agreements.  Except as set forth on  Disclosure  Schedule
3.23(n),  (i)  there are no Tax  rulings,  requests  for  rulings,  or  "closing
agreements" relating to the Company or the Company Subsidiary which could affect
the Company's or the Company Subsidiary's liability for Tax for any period after
the Closing Date, (ii) as a result of any closing agreement, neither the Company
nor the Company Subsidiary will be required to include any item of income in, or
exclude any item of deduction  from, any taxable period ending after the Closing
Date,  and (iii) as a result of a change in  accounting  method for a Tax period
beginning  on or before the  Closing  Date,  neither the Company nor the Company
Subsidiary  will be required to include any adjustment in taxable income for any
Tax period ending after the Closing Date.

            (o) Other Taxes. No transaction  contemplated by this Agreement will
be subject to any stock transfer Tax,  sales Tax, use Tax, real estate  transfer
or gains Tax, or other similar Tax.

            (p)  Acceleration  of  Severance  or Other  Business.  No  severance
payment or other  benefit,  and no  acceleration  of the vesting of any options,
payments or other benefits, will be accelerated,  as a direct or indirect result
of the transactions contemplated by this Agreement.

      3.24.  Insurance.  Disclosure  Schedule  3.24  sets  forth  the  following
information  with  respect to each  insurance  policy or  binders  of  insurance
(including  policies  providing  property,  casualty,  liability,  and  workers'
compensation  coverage and bond and surety arrangements) to which the Company or
the Company  Subsidiary  has been a party,  a named  insured,  or otherwise  the
beneficiary of coverage at any time within the past two years:

            (a) the name, address, and telephone number of the agent;

            (b) the name of the insurer,  the name of the policyholder,  and the
name of each covered insured;

            (c) the policy number and the period of coverage;

            (d) the scope  (including  an indication of whether the coverage was
on a claims made, occurrence or other basis) and amount (including a description
of how deductibles and ceilings are calculated and operate) of coverage; and

            (e) a description of any  retroactive  premium  adjustments or other
loss-sharing arrangements.

      With respect to each such  insurance  policy or binder:  (i) the policy is
legal,  valid,  binding,  enforceable,  and in full force and  effect;  (ii) the
policy will continue to be legal, valid, binding, enforceable, and in full force
and effect on identical  terms following the  consummation  of the  transactions
contemplated  hereby;  (iii) none of the Company,  the Company Subsidiary or any
other party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices),  and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default,  or
permit termination, modification, or acceleration, under the policy, and (iv) no
party  to  the  policy  has   repudiated  any  provision   thereof.   Since  its
incorporation,  each of the Company and the Company  Subsidiary has been covered
by insurance in scope and amount  customary and reasonable for the businesses in
which it has engaged during the aforementioned period.  Disclosure Schedule 3.24
describes any self-insurance  arrangements  affecting the Company or the Company
Subsidiary.  There are no facts known to the Company upon which an insurer might
reasonably be justified in reducing or denying  coverage or increasing  premiums
on existing  policies or binders.  There are no outstanding  unpaid claims under
any such  policies or binders.  Such  policies and binders are in full force and
effect  on the date  hereof  and shall be kept in full  force and  effect by the
Company through the Closing Date.


                                       35
<PAGE>

      3.25.  Brokers;  Transaction  Costs.  Neither  the Company nor the Company
Subsidiary  has entered  into and will not enter into any  contract,  agreement,
arrangement or understanding with any Person which will result in the obligation
of Buyer,  the  Company  or the  Company  Subsidiary  to pay any  finder's  fee,
brokerage commission,  legal, accounting,  or similar payment in connection with
the transactions contemplated hereby.

      3.26. No Other  Agreements to Sell the Company or the Assets.  Neither the
Company  nor the  Company  Subsidiary  has any  legal  obligation,  absolute  or
contingent, to any other Person to sell the Assets of the Company or the Company
Subsidiary  (other than inventory in the ordinary course of business) or to sell
any  capital  stock of the Company or the  Company  Subsidiary  or to effect any
merger,  consolidation  or other  reorganization  of the  Company or the Company
Subsidiary or to enter into any agreement with respect thereto,  except pursuant
to the Company Options and this Agreement.

      3.27. Accounts Receivable.  All Accounts Receivable of the Company and the
Company  Subsidiary that are reflected on the Balance Sheet or on the accounting
records of the Company as of the Closing Date represent or will represent  valid
obligations  arising from sales actually made or services actually  performed in
the ordinary course of business of the Company. Unless paid prior to the Closing
Date, such Accounts Receivable are or will be as of the Closing Date collectible
net of an  appropriate  reserve shown on the Balance Sheet or on the  accounting
records of the Company as of the Closing  Date (which  reserves are adequate and
calculated  consistent  with past  practice).  Each of such Accounts  Receivable
either has been or will be  collected in full,  without any set-off,  within one
hundred  twenty  (120)  days  after  the day on which it first  becomes  due and
payable. There is no contest, claim, or right of set-off under any Contract with
any  obligor of any  Accounts  Receivable  relating to the amount or validity of
such  Accounts  Receivable.  Disclosure  Schedule  3.27  contains a complete and
accurate  list of all Accounts  Receivable  as of the date of the hereof,  which
list sets forth the aging of such Accounts Receivable.

      3.28. Inventory.  All inventory of the Company and the Company Subsidiary,
whether or not  reflected in the Balance Sheet or on the  accounting  records of
the Company or the Company  Subsidiary  as of the Closing  Date  (accounted  for
consistent  with past  practice),  consists of a quality and quantity usable and
salable in the ordinary  course of business of the Company,  except for obsolete
items and items of below-standard quality, all of which have been written off or
written down to net  realizable  value in the Balance Sheet or on the accounting
records  of the  Company  as of the  Closing  Date,  as the  case  may  be.  The
quantities of each item of inventory are not  excessive,  but are  reasonable in
the present  circumstances  of the Company.  The Company has good and marketable
title to the inventories free and clear of all Encumbrances.  The inventories do
not include any material  amount of  inventory  that is  slow-moving,  obsolete,
excess,  damaged or otherwise not merchantable or returnable by vendors for full
credit.


                                       36
<PAGE>

      3.29.  Product  Warranty.  Each product  manufactured,  sold,  leased,  or
delivered by the Company or the Company  Subsidiary has been in conformity  with
all applicable  contractual  commitments and all express and implied warranties,
and neither the Company nor the Company  Subsidiary has any Liability (and there
is no basis  for any  present  or  future  action,  suit,  proceeding,  hearing,
investigation,  charge,  complaint,  claim, or demand against any of them giving
rise to any  Liability)  for  replacement  or repair  thereof or other damage in
connection  therewith,  subject only to the reserve for product  warranty claims
set forth on the face of the Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company. No product manufactured,  sold, leased,
or  delivered  by the  Company  or the  Company  Subsidiary  is  subject  to any
guaranty,  warranty, or other indemnity beyond the applicable standard terms and
conditions  of sale or lease.  The  Company  has  previously  provided  to Buyer
complete and accurate  copies of the standard  terms and  conditions  of sale or
lease  for  the  Company  and  the  Company  Subsidiary  (containing  applicable
guaranty, warranty, and indemnity provisions).

      3.30. Board Recommendation.  The board of directors of the Company has, by
unanimous  written  consent dated November 29, 2004,  (i) approved,  adopted and
declared  advisable this Agreement,  (ii) determined that this Agreement is fair
to and in the best  interests  of the  stockholders  of the  Company  and  (iii)
resolved  to  recommend  approval  of the  adoption  of  this  Agreement  to the
stockholders of the Company.  The Company has taken any and all action necessary
to exempt the  execution,  delivery and  performance  of this Agreement from the
restrictions  on  "business  combinations"  set  forth in the  Florida  Business
Corporations Act.

      3.31.   Material   Misstatements  or  Omissions.   No  representations  or
warranties  by  the  Company  in  this   Agreement   (including  all  schedules,
certificates and exhibits hereto) contains or will contain at the Effective Time
any  untrue  statement  of a material  fact,  or omits or will omit to state any
material fact  necessary to make the statements or facts  contained  therein not
misleading.  In addition,  the other document,  written information,  statement,
certificate or schedule  heretofore or  hereinafter  furnished by the Company or
any of its  Representatives  to  Buyer  or  Merger  Sub in  connection  with the
transactions   contemplated  by  this  Agreement,  or  mailed  or  delivered  to
stockholders  of the Company in connection  with  soliciting the approval of the
adoption of this Agreement by the stockholders of the Company,  taken as a whole
do not contain or will not contain any untrue  statement of a material  fact, or
do not omit or will not at the  Effective  Time omit to state any material  fact
necessary to make the statements or facts contained therein not misleading.

                                   ARTICLE 4.
             REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB

      As an  inducement of the Company to enter into this  Agreement,  Buyer and
the  Merger  Sub  represent  and  warrant  to  the  Company  as  follows,  which
representations  and warranties  are, as of the date hereof,  and will be, as of
the Closing Date, true and correct:


                                       37
<PAGE>

      4.1. Organization. Buyer is a corporation duly organized, validly existing
and in good  standing  under the laws of the State of Delaware.  Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Nevada.  Merger Sub has not engaged in any business  (other than
in connection  with this  Agreement and the  transactions  contemplated  hereby)
since the date of its incorporation.  Merger sub is a wholly-owned subsidiary of
Buyer.

      4.2. Capitalization of Buyer.

            (a) Authorized Capitalization. As of the date of this Agreement, the
authorized  capitalization  of Buyer  consists  of (i)  1,000,000,000  shares of
common stock, par value $0.01 per share, of which 367,735,954  shares are issued
and outstanding and (ii) 25,000,000 shares of undesignated  preferred stock, par
value $0.01 per share,  none of which are issued and  outstanding.  Buyer has no
other capital stock authorized, issued or outstanding.  There are no outstanding
or authorized  stock  appreciation,  phantom  stock,  profit  participation,  or
similar  rights with  respect to Buyer.  With  respect to any Buyer Common Stock
that  has  been  issued  subject  to a right  of  repurchase  on the part of the
Company,  Disclosure  Schedule 4.2(a) sets forth the holder thereof,  the number
and  type of  securities  covered  thereby,  and the  vesting  schedule  thereof
(including a description of the circumstances  under which such vesting schedule
can or will be accelerated).

            (b) No Other Capital Stock, Options, Warrants. Except as provided in
the Buyer SEC Reports  (as defined  below and in  Disclosure  Schedule  4.2(b)),
there are no outstanding Options, warrants,  convertible securities or rights of
any kind to purchase or otherwise  acquire any shares of capital  stock or other
securities of Buyer.

            (c) Buyer is directly or indirectly the record and beneficial  owner
of all of the outstanding  shares of capital stock or other equity  interests of
Merger Sub. All of such shares have been duly authorized and are validly issued,
fully paid, nonassessable and free of preemptive rights with respect thereto and
are owned by Buyer free and clear of any claim,  lien or encumbrance of any kind
with respect thereto.  There are no proxies or voting agreements with respect to
such  shares,  and  there  are  not  any  existing  options,   warrants,  calls,
subscriptions,  or other rights or other  agreements or  commitments  obligating
Buyer to  issue,  transfer  or sell any  shares  of  capital  stock or any other
securities  convertible  into,  exercisable  for,  or  evidencing  the  right to
subscribe for any shares of Merger Sub.

      4.3.  Authorization.  Each of  Buyer  and  Merger  Sub  has all  necessary
corporate  power and authority to enter into this  Agreement  and,  assuming the
approval of the  adoption of this  Agreement by the sole  stockholder  of Merger
Sub, has taken all action necessary to consummate the transactions  contemplated
hereby and to perform its respective obligations  hereunder.  This Agreement has
been duly  executed  and  delivered  by each of Buyer and Merger  Sub,  and this
Agreement  is a valid and  binding  obligation  of each of Buyer and  Merger Sub
enforceable  against each of Buyer and Merger Sub in accordance  with its terms,
except  that  enforceability  may  be  limited  by (a)  bankruptcy,  insolvency,
reorganization,  moratorium  or other  similar laws relating to or affecting the
rights of creditors or (b) general  principles of equity  (regardless of whether
enforceability is considered in a proceeding at law or in equity).


                                       38
<PAGE>

      4.4. SEC Reports; Financial Statements; Books and Records.

            (a) SEC Reports.  Buyer has filed with the SEC all  required  forms,
reports,  registration  statements and documents required to be filed by it with
the SEC  (collectively,  all such forms,  reports,  registration  statements and
documents  filed since  January 1, 2001 are referred to herein as the "Buyer SEC
Reports").  All of the Buyer SEC Reports complied as to form, when filed, in all
material  respects with the applicable  provisions of the Securities Act and the
Exchange  Act.  Accurate and complete  copies of the Buyer SEC Reports have been
made available to the Company.  As of their  respective dates or, in the case of
registration statements,  their effective dates (or, if amended or superseded by
a filing prior to the date of this Agreement,  then on the date of such filing),
the  Buyer SEC  Reports  (including  all  exhibits  and  schedules  thereto  and
documents  incorporated  by  reference  therein)  did  not  contain  any  untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated  therein or necessary  to make the  statements  therein,  in light of the
circumstances under which they were made, not misleading. Buyer has been advised
by each of its current  officers  and  directors  that each such person and such
persons'  Affiliates have complied with all filing requirements under Section 13
and Section 16(a) of the Exchange Act. Each certification  included in the Buyer
SEC Reports pursuant to Section 302 or Section 906 of the  Sarbanes-Oxley Act of
2002 was accurate when made.

            (b)  Financial   Statements.   Each  of  the  financial   statements
(including,  in each case, any related notes thereto) contained in the Buyer SEC
Reports (the "Buyer Financial Statements"),  (x) was prepared in accordance with
GAAP  and (y)  fairly  presented  the  financial  position  of  Buyer  as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods  indicated,  consistent  with the books and records of the
Buyer,  except  that the  unaudited  interim  financial  statements  were or are
subject to normal year-end adjustments. The balance sheet of the Buyer contained
in the Buyer's Form 10-KSB for the year ended  December 31, 2003 is  hereinafter
referred to as the "Buyer Balance Sheet."

            (c) Internal Controls; Disclosure Controls. Buyer maintains a system
of  internal   accounting   controls  and  disclosure  controls  and  procedures
sufficient to provide  reasonable  assurance that (i)  transactions are executed
with management's authorization,  (ii) transactions are recorded as necessary to
permit  preparation  of  financial  statements  in  accordance  with GAAP and to
maintain  accountability for assets, (iii) access to assets is permitted only in
accordance with management's authorization, (iv) the recorded accountability for
assets is compared with existing assets at reasonable  intervals and appropriate
action is taken with respect to any  differences  and (v)  material  information
concerning Buyer is publicly disseminated in a timely manner.

            (d) Books and Records.  The Books and Records, in reasonable detail,
accurately and fairly  reflect in all material  respects the activities of Buyer
and have been provided to the Company or made available for its inspection.

            (e) All Accounts Recorded. Buyer has not engaged in any transaction,
maintained any bank account or used any corporate funds except for transactions,
bank  accounts  or funds  which  have  been and are  reflected  in its books and
records.


                                       39
<PAGE>

      4.5. No Conflicts.  The execution and delivery by each of Buyer and Merger
Sub of this Agreement does not, and the performance by each Buyer and Merger Sub
of its obligations under this Agreement and the consummation of the transactions
contemplated hereby do not and will not:

            (a)  conflict  with or result in a violation or breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or Bylaws of
Buyer or Merger Sub; or

            (b)  conflict  with or result in a violation or breach of any Law or
Order applicable to Buyer or Merger Sub.

      4.6.  Approvals.  Other  than the  filing of the  Certificate  of  Merger,
together with the required officers' certificates, and such consents, approvals,
orders,  authorizations,  registrations,  declarations  and  filings  as  may be
required under state or federal  securities  laws, if any, there are no material
Approvals of  Governmental  or Regulatory  Authorities  relating to the business
conducted  by Buyer or Merger Sub  required  to be given to or obtained by Buyer
from  any  Governmental  or  Regulatory   Authorities  in  connection  with  the
consummation of the transactions contemplated by this Agreement.

      4.7.  Merger  Consideration.  Buyer  currently has  available,  and at the
Effective Time of the Merger will continue to have  available,  sufficient  cash
and cash  equivalents  to  enable  it to  perform  its  obligations  under  this
Agreement.

      4.8.  Brokers'  and  Finders'  Fees.  Neither  Buyer  nor  Merger  Sub has
incurred,  nor will they  incur,  directly  or  indirectly,  any  liability  for
brokerage  or finders'  fees or agents'  commissions  or any similar  charges in
connection with this Agreement or any transactions contemplated hereby.

      4.9. Board  Approval;  No  Stockholder  Approval  Required.  The boards of
directors of Buyer and Merger Sub have approved  this  Agreement and the Merger.
The  stockholders of Buyer are not required to adopt this  Agreement.  Buyer, as
the sole stockholder of Merger Sub, shall adopt this Agreement immediately after
the execution and delivery of this Agreement by the parties hereto.

                                   ARTICLE 5.
                       CONDUCT PRIOR TO THE EFFECTIVE TIME

      5.1.  Conduct of Business of the Company.  Except as  otherwise  expressly
contemplated by this Agreement or as consented to by Buyer in writing,  from the
date hereof through the Closing,  the Company shall, and shall cause the Company
Subsidiary  to,  (a)  operate  the  Business  solely in the  ordinary  course of
business  and in  accordance  with  past  practice  and (b) not take any  action
inconsistent  with this  Agreement or the  consummation  of the Merger.  Without
limiting the generality of the foregoing, except as specifically contemplated by
this  Agreement or as consented to by Buyer in writing,  the Company  shall not,
and shall cause the Company Subsidiary not to:

            (a) incur any indebtedness for borrowed money, or assume, guarantee,
endorse, or otherwise become responsible for obligations of any other Person;


                                       40
<PAGE>

            (b) issue  (except  pursuant to the exercise of the Company  Options
outstanding on the date of this  Agreement) or commit to issue any shares of its
capital stock or any other securities or any securities  convertible into shares
of its capital stock or any other securities, including, without limitation, any
options to acquire capital stock, accelerate the vesting of any Company Options,
or reserve for issuance additional shares;

            (c)  declare,  pay or incur any  obligation  to pay any  dividend or
distribution  on its capital stock or declare,  make or incur any  obligation to
make any distribution or redemption with respect to capital stock;

            (d) make any change to the Company's Certificate of Incorporation or
Bylaws or the Company Subsidiary's charter documents;

            (e)  mortgage,  pledge or  otherwise  encumber  any  Assets or sell,
transfer,  license or  otherwise  dispose  of any Assets  except for the sale or
disposition  of inventory  to  customers in the ordinary  course of business and
consistent with past practice;

            (f)  cancel,  release or assign any  indebtedness  owed to it or any
claims or rights held by it;

            (g) make any  investment or commitment of a capital nature either by
purchase of stock or securities,  contributions to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person;

            (h)  terminate any Contract  listed on  Disclosure  Schedule 3.11 or
make any change in any such Contract;

            (i) without the written consent of Buyer, which consent shall not be
unreasonably  withheld,  (i) enter into or modify any employment Contract,  (ii)
pay any  compensation to or for any Employee,  officer or director other than in
the ordinary course of business and pursuant to employment arrangements existing
as of the date of this Agreement, (iii) pay or agree to pay any bonus, incentive
compensation,  service award,  severance,  "stay bonus" or other like benefit or
(iv) enter into or modify any other material Employee Plan;

            (j) enter into or modify any  Contract or other  arrangement  with a
Related Party;

            (k) make any  change  in any  method  of  accounting  or  accounting
practice;

            (l) fail to comply with all material  Laws  applicable to the Assets
of the Company or the Company  Subsidiary and the Business  consistent with past
practices;

            (m) fail to use its commercially  reasonable efforts to (i) maintain
the Business,  (ii) maintain existing  relationships with material suppliers and
customers of the Company and others having  business  dealings with the Company,
and  (iii)  otherwise  preserve  the  goodwill  of the  Business  so  that  such
relationships and goodwill will be preserved on and after the Closing Date;


                                       41
<PAGE>

            (n) make or change any election in respect of Taxes, adopt or change
any  material  accounting  method  in  respect  of  Taxes,  enter  into  any Tax
allocation agreement,  Tax sharing agreement, Tax indemnity agreement or closing
agreement, settle or compromise any claim, notice, audit report or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;

            (o) commence any Action or Proceeding;

            (p) take any action that would cause any  representation or warranty
of the Company in this Agreement to be or become untrue in any material respect;

            (q) knowingly  take any other actions that would prevent the Company
from performing or cause the Company not to perform its agreements and covenants
hereunder; or

            (r) directly or indirectly  take,  agree to take or otherwise permit
to occur any of the actions described in Sections 5.1(a) through 5.1(q).

      5.2. No Solicitation.

            (a) The Company  shall not,  and shall cause the Company  Subsidiary
and its Representatives not to: (i) initiate, solicit or encourage,  directly or
indirectly,  any inquiries or the making of any proposal that  constitutes or is
reasonably  likely to lead to any  Acquisition  Proposal  (as defined in Section
5.2(c) hereof), (ii) engage in negotiations or discussions (other than to advise
as to the existence of the  restrictions set forth in this Section 5.2) with, or
furnish any  information  or data to, any third party relating to an Acquisition
Proposal,  or (iii) enter into any  agreement  with  respect to any  Acquisition
Proposal or approve any Acquisition  Proposal.  Notwithstanding  anything to the
contrary  contained  in  this  Section  5.2 or in any  other  provision  of this
Agreement,   the  Company  and  its   Representatives  (i)  may  participate  in
discussions  or  negotiations  with or furnish  information  to any third  party
making an unsolicited  Acquisition Proposal (a "Potential  Acquiror") or approve
an  unsolicited  Acquisition  Proposal if (x) neither the Company nor any of its
Representatives  has  violated  the  provisions  of this Section 5.2 and (y) the
board  determines in good faith with advice from its financial  advisor that the
Potential Acquiror submitting such Acquisition Proposal is reasonably capable of
consummating such Acquisition  Proposal,  and the board determines in good faith
after  receiving  advice  from its  financial  advisor,  that  such  Acquisition
Proposal  is  reasonably  likely to lead to a Superior  Proposal  (as defined in
Section 5.2(d)  hereof).  Prior to furnishing  any  non-public  information to a
Potential  Acquiror,  the  Company  shall  enter  into an  agreement  with  such
Potential Acquiror  containing  confidentiality,  standstill and nonsolicitation
provisions  at  least  as  favorable  to the  Company  as  the  confidentiality,
standstill and nonsolicitation  provisions of the Confidentiality  Agreement and
the Letter of Intent.  In the event that the Company shall  determine to provide
any information as described  above,  or shall receive any Acquisition  Proposal
(or any material amendment to an Acquisition Proposal previously  received),  it
shall promptly,  and in any event within 24 hours, inform Buyer in writing as to
that fact and shall  furnish  to Buyer the  identity  of the  recipient  of such
information to be provided  and/or the Potential  Acquiror and the terms of such
Acquisition Proposal (or material amendment).


                                       42
<PAGE>

            (b)  Except  as  provided  in this  Section  5.2(b),  the  board  of
directors of the Company shall recommend to the  stockholders of the Company the
adoption of this Agreement.  The board of directors of the Company shall not (i)
withdraw or modify or propose to withdraw  or modify,  in any manner  adverse to
Buyer, its approval and recommendation of the adoption of this Agreement or (ii)
approve or  recommend,  or propose to  approve  or  recommend,  any  Acquisition
Proposal  unless,  in each case, the board has (x) determined in good faith that
the failure to take such action would be inconsistent with the board's fiduciary
duties under applicable law and (y) gives at least five (5) business days' prior
written  notice to Buyer of its  determination  under clause (x) of this Section
5.2(b).

            (c) For purposes of this  Agreement,  "Acquisition  Proposal"  shall
mean any bona fide  proposal,  whether in writing or otherwise,  made by a third
party to:

                  (i) acquire beneficial  ownership (as defined under Rule 13d-3
of the  Exchange  Act) of all or a material  portion of the  business of, or any
material equity interest in, the Company or the Company Subsidiary pursuant to a
merger,  consolidation or other business combination,  sale of shares of capital
stock,  sale of assets,  tender offer or exchange  offer or similar  transaction
involving the Company or the Company Subsidiary; or

                  (ii) acquire, lease, exchange, transfer, license or dispose of
(other  than in the  ordinary  course of  business),  a material  portion of the
Company's Proprietary Rights.

Each of (i) or (ii) above shall include any single or multi-step  transaction or
series of related  transactions  which is structured  to permit any  transaction
described therein.

            (d) The  term  "Superior  Proposal"  means a bona  fide  Acquisition
Proposal for all of the Company Common Stock (or all or substantially all of the
assets  of the  Company),  made in  writing  and  not  initiated,  solicited  or
encouraged in violation of Section 5.2(a) of this Agreement,  on terms which the
board of directors of the Company  determines in good faith to be more favorable
to Company and the  stockholders  of the Company  than the Merger  (based on the
advice of the Company's  financial  advisor that the value of the  consideration
provided  for in such  proposal is  superior  to the value of the  consideration
provided for in the Merger),  for which financing,  to the extent  required,  is
then committed.

            (e) The  Company  shall not  terminate,  amend,  modify or waive any
provision  of  any  confidentiality  or  standstill  agreement  relating  to  an
Acquisition Proposal to which it or the Company Subsidiary is a party.


                                       43
<PAGE>

                                   ARTICLE 6.
                              ADDITIONAL COVENANTS

      6.1. Special Meeting; Board Recommendation.

            (a) In order to obtain stockholder  approval of this Agreement,  the
Company, acting through its board of directors, shall duly call, give notice of,
convene and hold a special  meeting of the  stockholders  of the Company for the
purpose  of  considering  and  voting on the  adoption  of this  Agreement  (the
"Company Special Meeting") or shall obtain the written consent of the holders of
a majority of the issued and  outstanding  shares of common stock of the Company
approving this Agreement and the transactions  provided for herein.  The Company
Special Meeting shall be held, or the shareholder  written consent obtained,  as
soon as practicable after the execution of this Agreement.  Without limiting the
generality of the  foregoing,  the Company's  obligations  pursuant to the first
sentence of this Section  6.1(a) shall not be affected by (i) the  commencement,
public  proposal,  public  disclosure  or  communication  to the  Company of any
Acquisition  Proposal or (ii) the  withdrawal  or  modification  by the board of
directors  of the Company or any  committee  of such board of  directors  of the
recommendation of this Agreement or the Merger.

            (b)  As  promptly  as  practicable   after  the  execution  of  this
Agreement, the Company shall prepare and file with the SEC a preliminary form of
the proxy statement for the Company Special Meeting (the "Proxy  Statement") or,
if a written consent of shareholders is obtained, an Information  Statement.  As
promptly as practicable  following  receipt of SEC comments on such  preliminary
Proxy Statement or Information  Statement,  the Company shall prepare a response
to such  comments.  The Company shall provide  drafts of the Proxy  Statement or
Information  Statement  and any  response  letter to Buyer,  and Buyer  shall be
entitled to review and comment on all such drafts.  Neither the Proxy Statement,
the  Information  Statement nor any such response letter shall be filed with the
SEC  without  the  consent of Buyer,  which  consent  shall not be  unreasonably
withheld.  Upon  resolution of all comments or expiration of any waiting period,
the Company shall mail the definitive  Proxy Statement or Information  Statement
to the stockholders of the Company as of the record date for the Company Special
Meeting or such date designated in the Information Statement.  The Company shall
use all commercially  reasonable efforts to have the preliminary Proxy Statement
or Information  Statement  cleared by the SEC as promptly as practicable.  Buyer
and the Company shall promptly furnish to each other all  information,  and take
such  other  actions  (including,  without  limitation,  using all  commercially
reasonable  efforts  to  provide  any  required  consents  of  their  respective
independent  auditors),  as may  reasonably be requested in connection  with any
action by any of them in connection with the preceding sentences of this Section
6.1(b). Promptly after execution of this Agreement,  Buyer and the Company shall
cooperate  to  prepare  and file with the SEC a  combined  Proxy  Statement  (or
Information  Statement)  and  Registration  Statement on Form S-4 by which Buyer
shall register the shares of Buyer Common Stock to be issued to the shareholders
of the  Company  in the  transaction.  Buyer  and  the  Company  shall  use  all
commercially  reasonable  efforts to have the  Registration  Statement  declared
effective by the SEC as promptly as practicable.


                                       44
<PAGE>

            (c) Subject to Section  5.2(b),  the Proxy  Statement or Information
Statement  shall  contain the  recommendation  of the board of  directors of the
Company in favor of the adoption of this Agreement.

      6.2.  Voting  Agreements.  Contemporaneously  with the  execution  of this
Agreement,  each of the Major  Stockholders  have entered into Voting Agreements
with Buyer (in the form of Exhibit A attached hereto) with respect to the voting
of their  Company  Common Stock and which Voting  Agreements  prohibit the Major
Stockholders  from selling or  transferring  their Company Common Stock prior to
the Effective Time.

      6.3.  Access to  Information.  Between the date of this  Agreement and the
earlier  of the  Effective  Time  or the  termination  of this  Agreement,  upon
reasonable notice the Company shall (i) give Buyer and its officers,  employees,
accountants,  counsel,  financing  sources and other agents and  representatives
reasonable  access to all buildings,  offices,  and other  facilities and to all
Books and Records of the Company and the Company Subsidiary,  whether located on
the  premises of the Company or at another  location;  (ii) permit Buyer to make
such  inspections  as it may  reasonably  require;  (iii) cause its  officers to
furnish Buyer such  financial,  operating,  technical and product data and other
information  with  respect  to the  Business  and  Assets of the  Company or the
Company  Subsidiary  as Buyer from time to time may request,  including  without
limitation, financial statements and schedules; (iv) allow Buyer the opportunity
to interview  such  Employees and other  personnel and Affiliates of the Company
and the Company Subsidiary as Buyer may reasonably  request;  and (v) assist and
cooperate with Buyer in the development of integration plans for  implementation
by Buyer and the Surviving  Corporation  following the Effective Time; provided,
however,  that no investigation  pursuant to this Section 6.3 shall affect or be
deemed to modify any representation or warranty made by the Company herein.

      6.4. Confidentiality. Each of the parties hereto hereby agrees to keep the
information or knowledge obtained in any investigation  pursuant to Section 6.3,
or  pursuant  to  the  negotiation  and  execution  of  this  Agreement  or  the
effectuation of the transactions  contemplated hereby,  confidential;  provided,
however,  that the foregoing  shall not apply to information or knowledge  which
(a) a party can demonstrate was already  lawfully in its possession prior to the
disclosure  thereof by the other party, (b) is generally known to the public and
did not become so known  through  any  violation  of Law,  or a  confidentiality
agreement or other contractual, legal or fiduciary obligation of confidentiality
of the disclosing party or any other party with respect to such information, (c)
became known to the public through no fault of such party, (d) is later lawfully
acquired by such party without  confidentiality  restrictions from other sources
not bound by  applicable  confidentiality  restrictions,  (e) is  required to be
disclosed  by order  of  court or  Governmental  or  Regulatory  Authority  with
subpoena  powers  (provided  that such party shall have provided the other party
with  prior  notice  of  such  order  and an  opportunity  to  object  or seek a
protective order and take any other available  action) or (f) which is disclosed
without  obligation of confidentiality in the course of any Action or Proceeding
between any of the parties hereto.

      6.5.  Expenses.  All fees and  expenses  incurred in  connection  with the
proposed Merger, including all legal, accounting, financial advisory, consulting
and all other  fees and  expenses  of third  parties  ("Third  Party  Expenses")
incurred by a party in connection with the  negotiation and  effectuation of the
terms and conditions of this Agreement and the transactions contemplated hereby,
shall  be the  obligation  of the  respective  party  incurring  such  fees  and
expenses.


                                       45
<PAGE>

      6.6. Public  Disclosure.  Except as required by law (including federal and
state  securities  laws),  or as may be  reasonably  necessary  to complete  the
Merger,  no party hereto shall  disclose the existence of, or any subject matter
of, or the terms and  conditions  of, this  Agreement  to any third party (other
than a party's  financial and legal advisors)  without the prior written consent
of the other (which  shall not be  unreasonably  withheld or delayed),  and each
party is  responsible  for preventing  disclosure by such party's  financial and
legal  advisors.  The parties will mutually  reasonably  agree to the timing and
content of any announcements, press releases or public statements concerning the
proposed Merger.

      6.7.  Commercially  Reasonable  Efforts.  The  Company and Buyer shall use
commercially  reasonable  efforts to take, or cause to be taken, all actions and
do, or cause to be done, all things necessary, proper and appropriate under this
Agreement,   applicable  laws,  and  applicable   regulations  to  complete  the
transactions contemplated by this Agreement,  including without limitation,  (a)
obtain all  Approvals  and Consents  under any of the  Contracts and under other
agreements as may be required in connection with the Merger (including those set
forth  in  Disclosure   Schedule  3.12),   (b)  to  obtain  all  Approvals  from
Governmental or Regulatory  Authorities  including,  without  limitation,  using
commercially reasonable efforts to obtain all necessary governmental and private
party consents,  approvals or waivers, provided, however, that no party shall be
obligated to make a material  payment of money as a condition  to obtaining  any
such Approval or Consent other than filing fees and other reasonably anticipated
costs and  expenses.  Buyer and the Company  shall  provide each other with such
assistance and information as is reasonably required to obtain such Approvals as
set forth in Disclosure Schedule 3.12.

      6.8. Notification of Certain Matters. The Company shall give prompt notice
to  Buyer,  and Buyer  shall  give  prompt  notice  to the  Company,  of (a) the
occurrence or  non-occurrence  of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company or Buyer,
respectively, contained in this Agreement to be untrue or inaccurate at or prior
to the Closing Date and (b) any failure of the Company or Buyer, as the case may
be, to comply  with or  satisfy  any  covenant,  condition  or  agreement  to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice  pursuant to this Section 6.8 shall not limit or otherwise  affect
any remedies available to the party receiving such notice.

      6.9. Company Repurchases. The Company will exercise any rights that mature
between the date hereof and the  Effective  Time to repurchase  any  outstanding
shares of Company Common Stock at the price at which such shares were issued.

      6.10.  Proprietary  Rights.  The Company shall give Buyer prompt notice of
that any Person shall have (i) commenced,  or shall have notified the Company or
the Company  Subsidiary that it intends to commence,  an Action or Proceeding or
(ii) provided the Company or the Company  Subsidiary with notice, in either case
which  allege(s)  that any of the  Proprietary  Rights,  including  the  Company
Proprietary  Rights,  presently  embodied,  or proposed to be  embodied,  in the
Company's or the Company  Subsidiary's  products or utilized in Company-designed
or modified  development tools (including standard cells) or design environments
infringes or otherwise violates the intellectual property rights of such Person,
is available for  licensing  from a potential  licensor  providing the notice or
otherwise alleges that the Company or the Company  Subsidiary does not otherwise


                                       46
<PAGE>

own or have the right to exploit such Proprietary Rights,  including the Company
Proprietary  Rights.  The Company shall take commercially  reasonable actions to
maintain,  perfect, preserve or renew the Company Registered Proprietary Rights,
including,  without  limitation,  the payment of any registration,  maintenance,
renewal  fees,   annuity  fees  and  taxes  or  the  filing  of  any  documents,
applications  or  certificates  related  thereto,  and to  promptly  respond and
prepare  to  respond  to  all  requests,   related  to  the  Company  Registered
Proprietary Rights, received from Governmental or Regulatory Authorities. At the
Closing,  the Company will notify Buyer of all  material  actions  which must be
taken  within the 180 days  following  the  Closing and which are  necessary  to
maintain,  perfect, preserve or renew the Company Registered Proprietary Rights,
including the payment of any registration,  maintenance,  renewal fees,  annuity
fees and taxes or the  filing of any  documents,  applications  or  certificates
related thereto.

      6.11. Tax Matters.

            (a) Tax Periods  Ending on or before the Closing  Date.  Buyer shall
prepare or cause to be  prepared  and file or cause to be filed all Tax  Returns
for the Company and the Company Subsidiary for all periods ending on or prior to
the  Closing  Date which are  required  to be filed  (taking  into  account  all
extensions properly obtained) after the Closing Date.

            (b) Tax Periods  Beginning Before and Ending After the Closing Date.
Buyer shall  prepare or cause to be  prepared  and file or cause to be filed any
Tax Returns of the Company for Tax periods  which begin  before the Closing Date
and end after the Closing Date.

            (c)  Refunds.  Any Tax refunds of the Company  that are  received by
Buyer or the  Company  and any  amounts  credited  against Tax of the Company to
which  Buyer or the  Company  become  entitled,  that  relate to Tax  periods or
portions  thereof  ending on or before the Closing Date shall be for the account
of the Buyer.

            (d) Tax  Elections.  Neither the Company nor the Company  Subsidiary
shall make or change any election or method of accounting  with respect to Taxes
or settle or  compromise  any  material  Tax  Liability or refund after the date
hereof  without  Buyer's  prior  written  consent  (which  consent  shall not be
unreasonably withheld).

            (e) FIRPTA  Certificate.  The Company shall have delivered to Buyer,
not more than 20 days before the Closing  Date, a statement in  accordance  with
Treasury Regulations Section  1.1445-2(c)(3) and 1.897-2(h)  certifying that the
Company  is not,  and has not  been,  a "United  States  real  property  holding
corporation" for purposes of Sections 897 and 1445 of the Code. In addition, the
Company  shall  have  delivered  to  Buyer  on the  Closing  Date a copy  of the
notification  to the IRS,  prepared  in  accordance  with  Treasury  Regulations
Section 1.897-2(h)(2), of delivery of the statement referred to in the preceding
sentence,  signed by a responsible corporate officer of the Company. The Company
acknowledges that Buyer may cause the Company to file such notification with the
IRS on or after the Closing Date.


                                       47
<PAGE>

            (f) Carrybacks. Any net operating losses or similar Tax attribute of
the Company or the Company  Subsidiary  is an asset of the Company that (subject
to any  applicable  limitations  imposed  by law) is  being  acquired  by  Buyer
pursuant to the Merger, and neither the Company nor the Company Subsidiary shall
elect to carry back any such Tax attributes to prior years of the Company or the
Company  Subsidiary  or otherwise act so as to limit the ability of Buyer to use
such attributes subsequent to the Merger.

      6.12.  SEC Filings.  The Company  will deliver  promptly to Buyer true and
complete copies of each report, registration statement or statement mailed by it
to its  stockholder  generally  or  filed  by it with  the  SEC,  in  each  case
subsequent  to the date  hereof  and prior to the  Effective  Time.  As of their
respective dates, such reports,  including the consolidated financial statements
included therein, and statements  (excluding any information therein provided by
Buyer or the Merger Sub, as to which the Company makes no  representation)  will
not contain any untrue  statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements  therein,
in light of the circumstances under which they are made, not misleading and will
comply in all material respects with all applicable requirements of law. Each of
the  consolidated  financial  statements  (including,  in each case, any related
notes  thereto)  contained in such  reports,  (a) shall comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto,  (b) shall be prepared in
accordance  with GAAP  applied on a  consistent  basis  throughout  the  periods
involved  (except as may be  indicated  in the notes  thereto or, in the case of
unaudited interim financial  statements,  as may be permitted by the SEC on Form
10-QSB under the Exchange  Act) and (c) shall  fairly  present the  consolidated
financial  position  of  the  Company  and  the  Company  Subsidiary  as at  the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods  indicated,  except that the unaudited  interim  financial
statements were or are subject to normal year-end adjustments.

      6.13.  Stockholder  Litigation.  The  Company  and  Buyer  agree  that  in
connection  with any third party or derivative  litigation  which may be brought
against  the  Company,  the Company  Subsidiary  or their  respective  directors
relating to the transactions  contemplated  hereby, the Company will keep Buyer,
and  any  counsel  which  Buyer  may  retain,  informed  of the  course  of such
litigation,  to the  extent  Buyer is not  otherwise  a party  thereto,  and the
Company agrees that it will consult with Buyer prior to entering into settlement
or  compromise  of any  such  stockholder  litigation;  provided  that  no  such
settlement  or  compromise  will be entered into without  Buyer's  prior written
consent (which consent or denial of consent shall not be unreasonably delayed).

      6.14. Indemnification.  The certificate of incorporation and bylaws of the
Surviving   Corporation   shall   contain  the   provisions   with   respect  to
indemnification  set forth in the certificate of incorporation and bylaws of the
Company as of the date hereof,  which provisions shall not be amended,  repealed
or otherwise  modified for a period of six years from the Effective  Time in any
manner that would  adversely  affect the rights  thereunder of individuals  who,
immediately  prior to the  Effective  Time,  were  directors and officers of the
Company,  unless such modification is required by law. The Surviving Corporation
will  honor  and  fulfill   the   obligations   of  the   Company   pursuant  to
indemnification agreements with the Company's officers and directors existing as
of the date hereof.


                                       48
<PAGE>

      6.15. Company Options. At or prior to the Closing, the Company shall cause
all agreements  evidencing Company Options to be amended, in a manner reasonably
satisfactory to Buyer,  to the extent  necessary to provide for the treatment of
such Company Options in the Merger as contemplated by this Agreement.

      6.16.  Within a reasonable  period of time after the Effective Time, Buyer
shall make an offer to  purchase  all of the  shares of common  stock of Company
Subsidiary  (excluding  any  shares  owned by Buyer or any  affiliate  of Buyer)
outstanding  as of the Effective  Time, at a price and on terms set by Buyer and
in  Buyer's  sole  discretion.  Such  offer  shall  be made in  accordance  with
applicable  state and federal laws and regulations of the United States,  and to
the extent applicable, of Canada.

                                   ARTICLE 7.
                            CONDITIONS TO THE MERGER

      7.1.  Conditions to  Obligations  of Each Party to Effect the Merger.  The
respective  obligations  of each  party to this  Agreement  to effect the Merger
shall be subject to the satisfaction or mutual waiver at or prior to the Closing
of the following conditions:

            (a)  Governmental  and  Regulatory  Approvals.  Approvals  from  any
Governmental or Regulatory  Authority (if any) necessary for consummation of the
transactions contemplated hereby shall have been timely obtained.

            (b)  No  Injunctions  or  Regulatory  Restraints;   Illegality.   No
temporary restraining order,  preliminary or permanent injunction or other Order
issued by any court of competent  jurisdiction  or  Governmental  or  Regulatory
Authority or other legal or regulatory  restraint or prohibition  preventing the
consummation  of the Merger  shall be in effect;  nor shall  there be any action
taken, or any Law or Order enacted,  entered,  enforced or deemed  applicable to
the Merger or the other transactions contemplated by the terms of this Agreement
that  would  prohibit  the  consummation  of the  Merger or which  would  permit
consummation  of the Merger only if certain  divestitures  were made or if Buyer
were to agree to limitations on its business activities or operations.

            (c) Legal Proceedings. No Governmental or Regulatory Authority shall
have  notified  either  party  to  this  Agreement  that  such  Governmental  or
Regulatory Authority intends to commence proceedings to restrain or prohibit the
transactions  contemplated hereby or force rescission,  unless such Governmental
or Regulatory  Authority shall have withdrawn such notice and abandoned any such
proceedings prior to the time which otherwise would have been the Closing.

      7.2. Additional  Conditions to Obligations of the Company.  The obligation
of the Company to consummate the Merger and the other transactions  contemplated
by this  Agreement  shall  be  subject  to the  satisfaction  at or prior to the
Closing of each of the  following  conditions,  any of which may be  waived,  in
writing, exclusively by the Company:

            (a)   Representations   and  Warranties.   The  representations  and
warranties of Buyer  contained in this Agreement shall have been accurate in all
respects as of the date of this  Agreement and shall be accurate in all respects
as of the Closing Date as if made on and as of the Closing Date.


                                       49
<PAGE>

            (b) Performance. Buyer shall have performed and complied with in all
material  respects  each  agreement,  covenant and  obligation  required by this
Agreement  to be so  performed  or  complied  with by the Buyer at or before the
Closing Date.

            (c) Buyer  Certificate.  Buyer shall have delivered to the Company a
certificate, dated the Closing Date and executed by an authorized officer of the
Buyer, substantially in the form set forth in Exhibit C hereto.

            (d) Dissenting Shares. Not more than 5% of the outstanding shares of
the Company common stock shall be Dissenting Shares.

            (e) Registration  Effective.  The Registration  Statement respecting
the shares of Buyer  Common Stock to be issued in the  transaction  provided for
herein shall have been declared effective.

      7.3. Additional  Conditions to the Obligations of Buyer. The obligation of
Buyer to consummate the Merger and the other  transactions  contemplated by this
Agreement  shall be subject to the  satisfaction  at or prior to the  Closing of
each of the  following  conditions,  any of which  may be  waived,  in  writing,
exclusively by Buyer:

            (a)   Representations   and  Warranties.   The  representations  and
warranties of the Company  contained in this Agreement  shall have been accurate
in all  respects as of the date of this  Agreement  and shall be accurate in all
respects  as of the  Closing  Date  as if made  on and as of the  Closing  Date,
provided,  that all  "Company  Material  Adverse  Effect" or  "Company  Material
Adverse Change" qualifications,  other materiality qualifications, and knowledge
qualifications  contained  in  such  representations  and  warranties  shall  be
disregarded in determining the accuracy of the representation and warranties.

            (b) Performance.  The Company shall have performed and complied with
in all material  respects each  agreement,  covenant and obligation  required by
this  Agreement to be so performed or complied  with by the Company on or before
the Closing Date.

            (c) Company Certificate. The Company shall have delivered to Buyer a
certificate,  dated the Closing  Date and  executed by the  President  and Chief
Executive Officer of the Company, substantially in the form set forth in Exhibit
D.

            (d)  Stockholder  Approval.  The  adoption of this  Agreement by the
requisite  holders of the outstanding  shares of Company Common Stock shall have
been obtained at the Company  Special Meeting or any adjournment or postponement
thereof or by written consent as permitted by law.

            (e)  Liabilities  of  the  Company.   The  Company  shall  not  have
liabilities in an amount greater than Five Million Dollars (US $5,000,000.00) as
of the Balance Sheet Date and as of the Closing Date.


                                       50
<PAGE>

            (f) Assets of the  Company.  The  Company  shall  have  Assets in an
amount  equal to or greater  than  Eight  Hundred  Fifty  Thousand  Dollars  (US
$850,000) as of the Balance Sheet Date and as of the Closing Date.

            (g) Issued  Company  Common  Stock.  The  Company  shall not have in
excess of 35,000,000 shares of Company Common Stock issued and outstanding as of
the Closing Date.

            (h) Termination of the Company's Employment Agreements.  The Company
shall  have  terminated  prior  to the  Closing  Date  any  and  all  employment
agreements,   severance   agreements,   "golden  parachute"  provisions  of  any
agreements,   and/or  any  other   agreements  that  would  entitle  any  person
compensation or payment pursuant to the termination of such person's  employment
or a change of control in the Company.

            (i) Consents and Approvals. All consents, approvals,  notifications,
disclosures,  filings  and  registrations  listed  or  required  to be listed in
Disclosure  Schedule 3.12 of the Disclosure Schedule shall have been obtained or
made.

            (j) Actions.  No Action shall be pending or  threatened  relating in
any way to this Agreement or the transactions contemplated herein.

            (k)  Dissenting   Shares.  Not  more  than  5%  of  the  issued  and
outstanding shares of Company Common Stock shall be Dissenting Shares.

            (l)  Key  Employees.   Each  of  the  Key  Employees   shall  remain
continuously  employed by the Company on  substantially  the same terms and with
substantially  the same  responsibilities  as on the date hereof and the Company
shall have no  knowledge  that any of the Key  Employees  has any  intention  to
terminate their employment with the Surviving Corporation

            (m) Company Options. All agreements evidencing Company Options shall
have been amended,  in a manner reasonably  satisfactory to Buyer, to the extent
necessary to provide for the treatment of such Company  Options in the Merger as
contemplated by this Agreement.

            (n) Section  280G.  The Company,  the Company  Stockholders  and any
person who is a "disqualified  individual" (as defined in Section 280G(c) of the
Code and the proposed Treasury Regulations  promulgated thereunder) with respect
to the Company shall have taken any and all actions necessary to provide that no
payment or  acceleration  of any right to benefits  or payment  pursuant to this
Agreement,  any Employee Plan,  Contract or any other plan or arrangement  shall
constitute  an  "excess  parachute   payment"  within  the  meaning  of  Section
280G(b)(1).  Buyer and the Company each  acknowledge and agree that such actions
may  include,  but are not  necessarily  limited to, the approval by the Company
Stockholders of the right to receive or retain such payments or benefits,  which
approval satisfies the requirements of Section 280G(b)(5)(B) of the Code and the
proposed Treasury Regulations promulgated thereunder.

            (o) FIRPTA  Certificate.  Buyer shall have no actual  knowledge  and
shall not have  received  a notice  pursuant  to  Treasury  Regulations  Section
1.445-4 that the statement  delivered by the Company pursuant to Section 6.11(g)
is false.


                                       51
<PAGE>

                                   ARTICLE 8.
                                   TERMINATION

      8.1.  Termination.  This Agreement may be terminated and the Merger may be
abandoned  any time prior to the  Effective  Time,  whether  before or after the
adoption of this Agreement by the stockholders of the Company:

            (a) by mutual written  consent of the parties duly authorized by the
boards of directors of the Company and Merger Sub;

            (b) by either Buyer or the Company if the Merger shall not have been
consummated on or before March 31, 2005 (the "Outside Date"),  which date may be
extended by mutual consent of the parties hereto;  provided,  however,  that the
party seeking to terminate this  Agreement  pursuant to this clause 8.1(b) shall
not have breached in any material  respect its obligations  under this Agreement
in any  manner  that  shall  have  proximately  contributed  to the  failure  to
consummate the Merger on or before such date;

            (c) by either  Buyer or the  Company  if (i) any law shall have been
enacted,  entered or  promulgated  prohibiting  the  consummation  of the Merger
substantially  on the terms  contemplated  hereby  or (ii) a court of  competent
jurisdiction  or other  Government  Entity  shall have issued an order,  decree,
ruling  or  injunction,  or  taken  any  other  action,  having  the  effect  of
permanently   restraining,   enjoining  or  otherwise   prohibiting  the  Merger
substantially on the terms contemplated hereby, and such order, decree,  ruling,
injunction  or other action shall have become  final;  provided,  that the party
seeking to terminate this  Agreement  pursuant to this Section 8.1(c) shall have
used its reasonable  commercial efforts to remove such order, decree,  ruling or
injunction; or

            (d) by either Buyer or the Company if the adoption of this Agreement
by a majority of the outstanding  shares of Company Common Stock is not obtained
at the Company Special  Meeting or any  adjournment or  postponement  thereof (a
"Company  Negative  Vote") or by written consent of the holders of the requisite
number of shares of Company common stock.

      8.2. Termination by Buyer. This Agreement may be terminated and the Merger
may be abandoned any time prior to the Effective  Time,  whether before or after
adoption of this Agreement by the stockholders of the Company, by Buyer, if:

            (a) The Company shall have failed to comply in any material  respect
with  any of the  covenants  or  agreements  contained  in any  Section  of this
Agreement  to be complied  with or  performed by the Company at or prior to such
date of  termination;  provided,  however,  that if such failure or failures are
capable of being cured prior to the  Effective  Time,  such  failure or failures
shall not have been cured within  thirty (30) days of delivery to the Company of
written notice of such failure or failures;

            (b)  there  exists a breach or  breaches  of any  representation  or
warranty  of the  Company  contained  in this  Agreement  such that the  closing
condition set forth in Section 7.3(a) would not be satisfied; provided, however,
that if such  breach  or  breaches  are  capable  of  being  cured  prior to the
Effective  Time, such breach or breaches shall not have been cured within thirty
(30) days of  delivery  to the  Company  of  written  notice  of such  breach or
breaches; or


                                       52
<PAGE>

            (c) (i) the board of directors of the Company fails to recommend the
adoption of this  Agreement to the  stockholders  of the Company,  or withdraws,
amends  or  modifies  in a manner  adverse  to Buyer its  recommendation  to the
stockholders of the Company for adoption of this Agreement,  (ii) a tender offer
(to which Rule 14e-2(a)  applies) for any of the  outstanding  shares of capital
stock of the Company is  commenced  prior to the Company  Special  Meeting,  and
within the time  required by Rule  14e-2(a)  under the Exchange Act the board of
directors of the Company  fails to recommend  against  acceptance of such tender
offer,  or takes no position  with respect to such tender  offer,  or states its
inability  to take a position  with  respect  to such  tender  offer,  (iii) the
Company  or its board of  directors  takes  any  position  (including  making no
recommendation or stating an inability to make a recommendation) with respect to
any Acquisition  Proposal other than a recommendation to reject such Acquisition
Proposal,  (iv) the board of directors of the Company resolves (which resolution
shall  not  modify,  limit  or  impair  the  Company's  obligations  under  this
Agreement) to accept, accepts or recommends to the stockholders of the Company a
Superior Proposal, or (v) the board of directors of the Company resolves to take
any of the foregoing actions.

      8.3. Termination by the Company.  This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
adoption of this Agreement by the stockholders of the Company,  by action of the
board of directors of the Company, if:

            (a) Buyer or Merger Sub shall have failed to comply in any  material
respect with any of the covenants or agreements contained in any Section of this
Agreement to be complied with or performed by Buyer or Merger Sub at or prior to
such date of termination;  provided,  however,  that if such failure or failures
are capable of being cured prior to the Effective Time, such failure or failures
shall not have been  cured  within  thirty  (30)  days of  delivery  to Buyer of
written notice of such failure or failures; or

            (b)  there  exists a breach or  breaches  of any  representation  or
warranty  of Buyer or  Merger  Sub  contained  in this  Agreement  such that the
Closing condition set forth in Section 7.2(a) would not be satisfied;  provided,
however, that if such breach or breaches are capable of being cured prior to the
Effective  Time,  such breach or breaches  shall not be cured within thirty (30)
days of delivery to Buyer of written notice of such breach or breaches.

            (c) In accordance with Section 5.2(b), the board of directors of the
Company  accepts or  recommends  to the  stockholders  of the Company a Superior
Proposal  or  resolves to do so,  provided  that the  Company has given  written
notice of such Superior  Proposal as required under Section 5.2(b) and Buyer has
not made a proposal which is reasonably  equivalent  from the perspective of the
stockholders  of the  Company  within  seventy-two  (72)  hours of such  written
notice.

      8.4.  Procedure  for  Termination.  In order to terminate  this  Agreement
pursuant to this Article VIII, a Party shall provide  written  notice thereof to
the other Parties.


                                       53
<PAGE>

      8.5. Effect of Termination.

            (a) In the event of termination  of this Agreement  pursuant to this
Article  VIII,  no Party (or any of its  directors or  officers)  shall have any
liability or further obligation under this Agreement to any other Party,  except
as provided in this Section 8.5 and except that nothing herein shall relieve any
Party from liability for breach of this Agreement.

      8.6.  Extension;  Waiver At any time prior to the Effective Time, Buyer or
the Company  may,  to the extent  legally  allowed,  (a) extend the time for the
performance of any of the  obligations of the other party hereto,  (b) waive any
inaccuracies in the  representations and warranties made to such party contained
herein or in any document  delivered  pursuant hereto,  and (c) waive compliance
with any of the  agreements,  covenants  or  conditions  for the benefit of such
party contained herein.  Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.

                                   ARTICLE 9.
                            MISCELLANEOUS PROVISIONS

      9.1. Notices.  All notices,  requests and other  communications  hereunder
must be in writing and will be deemed to have been duly given only if  delivered
personally  against  written  receipt  or  by  facsimile   transmission  against
facsimile confirmation or mailed by internationally recognized overnight courier
prepaid, to the parties at the following addresses or facsimile numbers:

If prior to the Closing, to the Company: BSD Software, Inc.
                                         8500 Macleod Trail, S.E., Suite 300E
                                         Calgary, Alberta
                                         Canada T2H 2N1
                                         Attention: Guy Fietz, President
                                         Facsimile No. (403) 257-7090
                                         Telephone No.: (403) 259-7580

With a copy to:                          Merrick & Klimek PC
                                         33 N. LaSalle Street
                                         Sute 2200
                                         Chicago, IL 60605
                                         Attention: Stephen M. Merrick
                                         Facsimile No.: 312-284-1521
                                         Telephone No. 312-284-1520


                                       54
<PAGE>

If to Buyer or Merger Sub or, if after   NeoMedia Technologies, Inc.
the Closing, to the Surviving            2201 Second Street, Suite 402
Corporation:                             Fort Myers, Florida 33901
                                         Attention: Charles T. Jensen
                                         Facsimile No.: (239) 337-3668
                                         Telephone No.: (239) 337-3434

With a copy to:                          Kirkpatrick & Lockhart LLP
                                         Miami Center - 20th Floor
                                         201 South Biscayne Boulevard
                                         Miami, Florida 33131-2399
                                         Attention: Clayton Parker, Esq.
                                         Facsimile No.: (305) 358-7095
                                         Telephone No.: (305) 539-3306

      All such notices,  requests and other communications will (a) if delivered
personally  to the address as provided in this Section 9.1, be deemed given upon
delivery,  (b) if delivered by facsimile transmission to the facsimile number as
provided  for in this  Section  9.1, be deemed  given upon  receipt of facsimile
confirmation,  (c) if  delivered  by mail in the manner  described  above to the
address as provided  for in this  Section 9.1, be deemed given on the earlier of
the third Business Day following mailing or upon receipt and (d) if delivered by
overnight  courier to the  address as provided  in this  Section  9.1, be deemed
given on the earlier of the second  Business Day following the date sent by such
overnight  courier or upon  receipt  (in each case  regardless  of whether  such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered  pursuant to this Section 9.1). Any party
from time to time may change its address,  facsimile number or other information
for the purpose of notices to that party by giving notice specifying such change
to the other party hereto.

      9.2.  Entire  Agreement.  This  Agreement  and the Exhibits and  Schedules
hereto,  including  the  Company  Disclosure  Schedule,  constitute  the  entire
Agreement  among the  parties  with  respect to the  subject  matter  hereof and
supersede all prior agreements and understandings,  both written and oral, among
the  parties  with  respect  to  the  subject  matter  hereof,  except  for  the
Confidentiality  Agreement,  which  shall  continue in full force and effect and
shall  survive any  termination  of this  Agreement or the Closing in accordance
with its terms.

      9.3. Further  Assurances;  Post-Closing  Cooperation.  At any time or from
time to time after the  Closing,  the parties  shall  execute and deliver to the
other party such other  documents and  instruments,  provide such  materials and
information  and take  such  other  actions  as the other  party may  reasonably
request to  consummate  the  transactions  contemplated  by this  Agreement  and
otherwise  to cause  the other  party to  fulfill  its  obligations  under  this
Agreement and the  transactions  contemplated  hereby.  Each party agrees to use
commercially  reasonable  efforts to cause the conditions to its  obligations to
consummate the Merger to be satisfied.

      9.4. Amendment;  Waiver.  Subject to applicable law, this Agreement may be
amended by the  parties  hereto at any time by  execution  of an  instrument  in
writing signed on behalf of each of Buyer, Merger Sub and the Company.  Any term
or  condition of this  Agreement  may be waived at any time by the party that is
entitled to the benefit  thereof,  but no such waiver shall be effective  unless
set forth in a written  instrument  duly  executed  by or on behalf of the party
waiving such term or condition.  No waiver by any party of any term or condition
of this  Agreement,  in any one or more  instances,  shall  be  deemed  to be or
construed  as a  waiver  of the  same or any  other  term or  condition  of this
Agreement on any future occasion.


                                       55
<PAGE>

      9.5. Third Party Beneficiaries. The terms and provisions of this Agreement
are intended  solely for the benefit of each party  hereto and their  respective
successors or permitted  assigns,  and it is not the intention of the parties to
confer  third-party  beneficiary  rights, and this Agreement does not confer any
such rights, upon any other Person,  other than any Person entitled to indemnity
under Section 6.14,  and each such person shall be a third-party  beneficiary of
the provisions set forth in Section 6.14.

      9.6. Opportunity to Hire Counsel;  Role of Kirkpatrick & Lockhart LLP. The
Company  acknowledges that it has been advised and has been given an opportunity
to hire counsel with respect to this Agreement and the transactions contemplated
hereby.  The Company  further  acknowledges  that the law firm of  Kirkpatrick &
Lockhart LLP has solely represented buyer and Merger Sub in connection with this
Agreement and the transactions contemplated hereby and no other person.

      9.7. No Assignment;  Binding Effect. Neither this Agreement nor any right,
interest  or  obligation  hereunder  may be  assigned  (by  operation  of law or
otherwise) by any party without the prior written consent of the other party and
any  attempt to do so will be void.  Subject  to the  preceding  sentence,  this
Agreement is binding upon,  inures to the benefit of and is  enforceable  by the
parties hereto and their respective successors and assigns.

      9.8.  Headings.  The headings and table of contents used in this Agreement
have been inserted for  convenience of reference only and do not define or limit
the provisions hereof.

      9.9. Invalid Provisions.  If any provision of this Agreement is held to be
illegal,  invalid or  unenforceable  under any present or future Law, and if the
rights or  obligations  of any party  hereto  under this  Agreement  will not be
materially  and adversely  affected  thereby,  (a) such  provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or  unenforceable  provision had never comprised a part hereof,  (c) the
remaining  provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal,  invalid or  unenforceable  provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision,  there  will be added  automatically  as a part of this  Agreement  a
legal,  valid and  enforceable  provision  as similar in terms to such  illegal,
invalid or unenforceable provision as may be possible.

      9.10.  Governing Law. This Agreement  shall be construed,  interpreted and
the rights of the parties determined in accordance with the laws of the State of
Delaware.

      9.11.  Arbitration.  Any and all disputes or controversies  arising out of
this Agreement shall be finally  settled by arbitration  conducted in Florida in
accordance with the then existing rules of the American Arbitration Association,
and judgment upon the award  rendered by the  arbitrators  may be entered in any
court having jurisdiction thereof;  provided,  that nothing in this Section 9.10
shall  prevent a party from  applying to a court of  competent  jurisdiction  to
obtain temporary relief pending  resolution of the dispute through  arbitration.
The  parties  hereby  agree that  service  of any  notices in the course of such
arbitration at their respective  addresses as provided for in Section 9.10 shall
be valid and sufficient.


                                       56
<PAGE>

      9.12.  Remedies  Cumulative.  Except as otherwise provided herein, any and
all remedies herein expressly  conferred upon a party will be deemed  cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.

      9.13.  Construction.  The parties  hereto agree that this Agreement is the
product of negotiation  between  sophisticated  parties and individuals,  all of
whom  were  represented  by  counsel,  and  each of whom had an  opportunity  to
participate in and did  participate  in, the drafting of each provision  hereof.
Accordingly,  ambiguities  in this  Agreement,  if any,  shall not be  construed
strictly or in favor of or against any party  hereto but rather shall be given a
fair  and  reasonable   construction  without  regard  to  the  rule  of  contra
preferentum.

      9.14.  Counterparts.  This  Agreement  may be  executed  in any  number of
counterparts,  each of  which  will be  deemed  an  original,  but all of  which
together will constitute one and the same instrument.

                                   * * * * * *


                                       57
<PAGE>

      IN WITNESS  WHEREOF,  Buyer,  Merger Sub and the Company  have caused this
Agreement to be signed by their duly authorized  representatives,  all as of the
date first written above.


                                NEOMEDIA TECHNOLOGIES, INC.

                                By: /s/ Charles T. Jensen
                                    ---------------------
                                Name: Charles T. Jensen
                                      -----------------
                                Title: President, CEO, COO & Director
                                       ------------------------------


                                NEOMEDIA TELECOM SERVICES, INC.

                                By: /s/ David A. Dodge
                                    ------------------
                                Name: David A. Dodge
                                      --------------
                                Title: Secretary and Treasurer
                                       -----------------------


                                BSD SOFTWARE, INC.

                                By: /s/ Guy Fietz
                                    -------------
                                Name: Guy Fietz
                                      ---------
                                Title: President and Chief Executive Officer
                                       -------------------------------------


                                       58