EXHIBIT 10.1


                            ASSET PURCHASE AGREEMENT

                                      AMONG

                        DIGITAL DESCRIPTOR SYSTEMS, INC.,


                     CGM APPLIED SECURITY TECHNOLOGIES, INC.

                                       AND

                          CGM SECURITY SOLUTIONS, INC.



                          Dated as of February 25, 2005


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                                TABLE OF CONTENTS

Section                                                                     Page
-------                                                                     ----

ARTICLE I SALE AND PURCHASE OF ASSETS..........................................1
   1.1    Sale of Assets.......................................................1
   1.2    Excluded Assets......................................................2
   1.3    Assumed Liabilities; Excluded Liabilities; Employees.................2
   1.4    Purchase Price; Adjustment; Payment..................................3
   1.5    Purchase Price Allocation............................................3
   1.6    Records and Contracts................................................4
   1.7    Further Assurances...................................................4
   1.8    Sales and Transfer Taxes.............................................4

ARTICLE II CLOSING AND TERMINATION.............................................4
   2.1    Closing Date.........................................................4
   2.2    Termination of Agreement.............................................4
   2.3    Procedure Upon Termination...........................................5
   2.4    Effect of Termination................................................5


ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER.......................5
   3.1    Organization and Good Standing.......................................5
   3.2    Authorization of Agreement...........................................5
   3.3    Capitalization.......................................................6
   3.4    No Subsidiaries......................................................6
   3.5    Corporate Records....................................................6
   3.6    Conflicts; Consents of Third Parties.................................6
   3.7    Ownership and Transfer of Assets.....................................7
   3.8    Financial Statements.................................................7
   3.9    No Undisclosed Liabilities...........................................7
   3.10   Absence of Certain Developments......................................7
   3.11   Taxes................................................................9
   3.12   Real Property.......................................................10
   3.13   Tangible Personal Property..........................................11
   3.14   Intangible Property.................................................12
   3.15   Material Contracts..................................................12
   3.16   Employee Benefits...................................................13
   3.17   Labor...............................................................15
   3.18   Litigation..........................................................15
   3.19   Compliance with Laws; Permits.......................................16
   3.20   Environmental Matters...............................................16
   3.21   Insurance...........................................................17
   3.22   Inventories; Receivables; Payables..................................17
   3.23   Customers and Suppliers.............................................17
   3.24   Banks...............................................................17
   3.25   Gross Sales.........................................................17
   3.26    No Misrepresentations..............................................18
   3.27   Financial Advisors. ................................................18
   3.28   Investment Intention................................................18
   3.29   Accredited Investor.................................................18


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   3.30   Patriot Act.........................................................18


ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER.........................19
   4.1    Organization and Good Standing......................................19
   4.2    Authorization of Agreement..........................................19
   4.3    Conflicts; Consents of Third Parties................................20
   4.4    Litigation..........................................................22
   4.5    Financial Advisors..................................................21
   4.6     Patriot Act........................................................22

ARTICLE VI COVENANTS..........................................................22
   5.1    Access to Information...............................................22
   5.2    Conduct of the Business Pending the Closing.........................23
   5.3    Consents............................................................25
   5.4    Other Actions.......................................................25
   5.5    No Solicitation.....................................................25
   5.6    Preservation of Records.............................................25
   5.7    Publicity...........................................................26
   5.8    Use of Name.........................................................26
   5.9    Environmental Matters...............................................26
   5.10   Non-Competition Agreements..........................................26
   5.11   Financial Statements................................................26

ARTICLE VI CONDITIONS TO CLOSING..............................................27
   6.1    Conditions Precedent to Obligations of Parent.......................27
   6.2    Conditions Precedent to Obligations of the Seller...................28

ARTICLE VII DOCUMENTS TO BE DELIVERED.........................................29
   7.1    Documents to be Delivered by the Seller.............................29
   7.2    Documents to be Delivered by the Parent.............................29

ARTICLE VIII INDEMNIFICATION..................................................30
   8.1    Non-Tax Indemnification.............................................30
   8.2    Limitations on Indemnification for Breaches of
            Representations and Warranties....................................31
   8.3    Non-Tax Indemnification Procedures..................................32


ARTICLE IX MISCELLANEOUS......................................................29
   9.1    Payment of Sales, Use or Similar Taxes..............................29
   9.2    Survival of Representations and Warranties..........................33
   9.3    Expenses............................................................33
   9.4    Specific Performance................................................33
   9.5    Further Assurances..................................................33
   9.6    Submission to Jurisdiction; Consent to Service of Process...........33
   9.7    Table of Contents and Headings......................................34
   9.8    Notices.............................................................34
   9.9    Severability........................................................35
   9.10   Binding Effect; Assignment..........................................35


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                            ASSET PURCHASE AGREEMENT


      ASSET PURCHASE AGREEMENT, dated as of February 25, 2005 (the "Agreement"),
between Digital Descriptor Systems,  Inc., a corporation existing under the laws
of  Delaware  (the  "Parent"),  CGM  Applied  Security  Technologies,   Inc.,  a
corporation existing under the laws of Delaware and a wholly owned subsidiary of
the Parent  ("Acquisition  Sub") and CGM Security  Solutions,  Inc., a privately
held Florida corporation (the "Seller").


                              W I T N E S S E T H:
                              - - - - - - - - - -

      WHEREAS,  subject to the terms and  conditions  hereof,  Seller desires to
sell,  transfer and assign to Acquisition  Sub, and  Acquisition  Sub desires to
purchase from Seller, all of the properties,  rights and assets constituting the
business of Seller (the "Business"); and

      WHEREAS,  simultaneous  with the execution and delivery of this Agreement,
the Parent and Acquisition Sum shall execute and deliver to the Seller a secured
convertible  promissory note (the "Note"),  a security  agreement (the "Security
Agreement"),  and  intellectual  property  security  agreement (the "IP Security
Agreement", and together with the Security Agreement, the "Security Agreements")
and an employment agreement for the major shareholder of Seller (the "Employment
Agreement"), all as more specifically described below.

      NOW, THEREFORE,  in consideration of the premises and the mutual covenants
and agreements hereinafter contained, the parties hereby agree as follows:


                                   ARTICLE I
                          PURCHASE AND SALE OF ASSETS.

      1.1 Sale of Assets. Seller agrees to sell, assign, transfer and deliver to
Acquisition  Sub, and  Acquisition  Sub agrees to purchase  from Seller,  all of
Seller's right,  title and interest in and to all of the properties,  assets and
business  of  the  Business,  of  every  kind  and  description,   tangible  and
intangible,  real,  personal or mixed, and wherever  located,  but excluding the
Excluded Assets, including, without limitation, the following:

         (a) Equipment. All improvements and all other fixed assets,  equipment,
furniture,  fixtures, leasehold improvements located within the Seller's offices
located at 223 Churchill  Avenue,  Somerset,  New Jersey 08873 and at 55 LaSalle
Street,  Staten Island, New York 10303, parts,  accessories,  inventory,  office
materials, software, supplies and other tangible personal property of every kind
and description  owned by Seller and used or held for use in connection with the
Business, all as set forth on Schedule 1.1(a) attached hereto ("Equipment");

         (b)  Contracts.  All of the rights of Seller  under,  and  interest  of
Seller  in and to,  all  contracts  relating  to the  Business  (other  than the
Excluded  Contracts),  a true,  correct and complete list of which  contracts is
attached hereto as Schedule 1.1(b) ("Contracts");

         (c)  Intellectual  Property.  All  of  Seller's  Intellectual  Property
relating to the Business, as set forth on Schedule 1.1(c) attached hereto;


<PAGE>

         (d)  Goodwill.  All of the goodwill of Seller in, and the going concern
value of, the Business, and all of the business and customer lists and accounts,
proprietary  information,  marketing  materials and trade secrets related to the
Business; and

         (e) Records. All of Seller's customer logs, location files and records,
and other business files and records, in each case relating to the Business.

      The Equipment,  Contracts,  Intellectual Property,  Goodwill,  Records and
business of Seller  being sold to and  purchased by  Acquisition  Sub under this
Section 1.1 are referred to herein collectively as the "Assets."

      1.2 Excluded Assets.  There shall be excluded from the Assets and retained
by Seller, the following assets (the "Excluded Assets"):

         (a)  Accounts   Receivable;   Other  Assets.  All  accounts  receivable
generated by the  Business and work in process  prior to the date of the Closing
of this Agreement, all assets identified on Schedule 1.2(a) attached hereto, and
all other assets of Seller which are not used or held for use in connection with
the Business or otherwise  necessary to the operation of the Business,  provided
however,  Acquisition  Sub shall charge CGM a cost of $100 per man hour plus any
costs  associated  with materials  needed to be purchased by Acquisition  Sub to
convert the work in process to finished goods;


         (b)   Corporate   Records.   All  of  Seller's   corporate   and  other
organizational records;

         (c) Cash.  Cash on hand,  exclusive of cash  reserves  associated  with
undelivered service; and

         (d)  Judgments.  All awards granted by the court in favor of the Seller
against (i) Ron Busch and (ii) Molecuwire.

         1.3 Assumed Liabilities; Excluded Liabilities; Employees.
              ----------------------------------------------------

         (a) Assumed  Liabilities.  Acquisition Sub shall accept and assume, and
shall  become  and be fully  liable  and  responsible  for,  and  other  than as
expressly  set  forth  herein   Seller  shall  have  no  further   liability  or
responsibility  for or with respect to, (i) liabilities and obligations  arising
out of events  occurring on and after the date of the Closing of this  Agreement
related to  Acquisition  Sub's  ownership  of the Assets and  Acquisition  Sub's
operation  of the  Business  after  the  Closing  of this  Agreement;  (ii)  all
obligations  and  liabilities of Seller which are to be performed after the date
hereof arising under the Contracts;  and, including but not limited to (iii) the
liabilities  identified on Schedule 1.3(a) attached  hereto  (collectively,  the
"Assumed Liabilities"). The assumption of the Assumed Liabilities by Acquisition
Sub hereunder  shall not enlarge any rights of third parties under  contracts or
arrangements  with  Parent or Seller or any of their  respective  affiliates  or
subsidiaries,  except,  however, if such enlarged rights are provided for in any
Contract  assumed or arise out of events  occurring  on or after the  Closing of
this Agreement.

         (b) Excluded  Liabilities.  It is expressly understood that, except for
the Assumed Liabilities,  Acquisition Sub shall not assume, pay or be liable for
any liability or obligation of Seller of any kind or nature at any time existing
or asserted,  whether,  known,  unknown,  fixed,  contingent or  otherwise,  not
specifically  assumed herein by Parent or Acquisition  Sub,  including,  without
limitation, the judgment awarded to Coronet Paper on December 21, 2001 ("Coronet
Paper  Judgment")   against  Seller  and  Erik  Hoffer,  as  Seller's  President
("Seller's Stockholder"), and any liability or obligation relating to, resulting


                                       2
<PAGE>

from or  arising  out of (i) the  Excluded  Assets,  (ii) the  employees  of the
Business or (iii) any fact existing or event  occurring prior to, or relating to
the operation of the Business prior to, the date hereof.


         (c) Employees, Wages and Benefits.
             ------------------------------


                            (i) Seller  shall  terminate or  reassign all of its
         employees  related to the  Business  effective  as of the  Closing  and
         neither Parent nor Acquisition Sub shall assume or have any obligations
         or  liabilities  with respect to such  employees or such  terminations,
         including, without limitation, any severance obligation.

                  (i) Parent and Acquisition Sub specifically reserve the right,
         on or after  the date  hereof,  to employ  or  reject  any of  Seller's
         employees  or other  applicants  in its sole and  absolute  discretion.
         nothing  in this  Agreement  shall  be  construed  as a  commitment  or
         obligation of Parent to accept for  employment,  or otherwise  continue
         the employment of, any of Seller's employees,  and no employee shall be
         a third-party beneficiary of this Agreement.

                  (ii) Seller shall pay all wages,  salaries,  commissions,  and
         the cost of all fringe  benefits  provided to its employees which shall
         have  become due for work  performed  as of and  through the Closing of
         this Agreement and Seller shall collect and pay all Taxes in respect of
         such wages, salaries, commissions and benefits.


                  (iii) Seller  acknowledges  and agrees that neither Parent nor
         Acquisition  Sub shall acquire any rights or interests of Seller in, or
         assume or have any  obligations  or  liabilities  of Seller under,  any
         benefit plans maintained by Seller, or for the benefit of any employees
         of Seller, including, without limitation,  obligations for severance or
         vacation accrued but not taken.

         1.4      Purchase Price; Adjustment; Payment.
                  ------------------------------------

                            (a) Purchase Price. In  consideration of the sale by
         Seller to Acquisition Sub of the Assets,  and subject to the assumption
         by Acquisition Sub of the Assumed  Liabilities and  satisfaction of the
         conditions contained herein, Parent shall pay to Seller an amount equal
         to Five Million Dollars ($5,000,000), which amount shall be adjusted in
         accordance with Section 1.4(b).

                            (b)      Payment of Purchase Price. The Purchase
         Price will be paid as follows:


                      Closing  Payment.  On the date  hereof,  the Parent  shall
deliver to the  Seller  (i) a  non-refundable  payment  of  $1,500,000  via wire
transfer of immediately available funds into an account designated by the Seller
and (ii) a $3,500,000 2.86% Secured Convertible  Promissory Note,  substantially
in the form attached hereto as Exhibit A (the "Note").

      1.5 Purchase Price Allocation.  Parent,  Acquisition Sub and Seller hereby
agree on the  allocation  of the  Purchase  Price as set forth on  Schedule  1.5
attached hereto.  Such allocation shall be binding upon Parent,  Acquisition Sub
and Seller for all purposes (including financial accounting purposes,  financial
and regulatory reporting purposes and tax purposes). Parent, Acquisition Sub and
Seller each further  agrees to file its Federal income tax returns and its other
tax returns reflecting such allocation, Form 8594 and any other reports required
by Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code").


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<PAGE>

      1.6 Records and Contracts.  Seller shall deliver to Parent and Acquisition
Sub  all of the  Contracts,  with  such  assignments  thereof  and  consents  to
assignments  as are necessary to assure Parent and  Acquisition  Sub of the full
benefit of the same. Seller shall also deliver to Parent and Acquisition Sub all
of Seller's files and records constituting Assets.

      1.7  Further  Assurances.  Seller  shall,  from  time  to time  after  the
consummation of the transactions  contemplated  herein, at the request of Parent
or  Acquisition  Sub and  without  further  consideration,  execute  and deliver
further  instruments  of transfer and  assignment  and take such other action as
Parent or Acquisition Sub may reasonably  require to more  effectively  transfer
and assign to, and vest in, Parent or Acquisition  Sub the Assets free and clear
of all Liens.

      1.8 Sales and  Transfer  Taxes.  All sales,  transfer,  use,  recordation,
documentary,  stamp,  excise taxes,  personal  property  taxes,  fees and duties
(including  any real estate  transfer  taxes) under  applicable  law incurred in
connection with this Agreement or the transactions  contemplated  hereby will be
borne and paid by Parent.


                                   ARTICLE II
                             CLOSING AND TERMINATION

      2.1 Closing Date.
           ------------

      Subject to the  satisfaction  of the  conditions set forth in Sections 6.1
and 6.2  hereof  (or the  waiver  thereof  by the party  entitled  to waive that
condition),  the closing of the sale and purchase of the Assets  provided for in
Section 1.1 hereof (the "Closing")  shall take place at the offices of Sichenzia
Ross Friedman  Ference located at 1605 Avenue of the Americas,  21st Floor,  New
York,  NY 10018 (or at such other place as the parties may designate in writing)
on February  ___,  2005,  or on such other date as the Seller and the Parent may
designate in writing. The date on which the Closing shall be held is referred to
in this Agreement as the "Closing Date".


      2.2 Termination of Agreement.
          -------------------------

      This Agreement may be terminated prior to the Closing as follows:

      (a) at the  election of the Seller or the Parent on or after  December 31,
2004,  if the Closing  shall not have  occurred by the close of business on such
date,  provided  that  the  terminating  party is not in  default  of any of its
obligations hereunder;

      (b) by mutual written consent of the Seller and the Parent; or

      (c) by the  Seller  or the  Parent  if there  shall  be in  effect a final
nonappealable  order of a court,  government or  governmental  agency or body of
competent   jurisdiction   ("Governmental   Body")  of  competent   jurisdiction
restraining,   enjoining  or  otherwise  prohibiting  the  consummation  of  the
transactions  contemplated hereby; it being agreed that the parties hereto shall
promptly appeal any adverse determination which is not nonappealable (and pursue
such appeal with reasonable diligence).


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<PAGE>

      2.3 Procedure Upon Termination.
          ---------------------------

      In the event of termination  and  abandonment by the Parent or the Seller,
or both, pursuant to Section 2.2 hereof,  written notice thereof shall forthwith
be given to the other party or parties, and this Agreement shall terminate,  and
the purchase of the Assets hereunder shall be abandoned,  without further action
by the Parent or the Seller.  If this Agreement is terminated as provided herein
each party shall redeliver all documents,  work papers and other material of any
other  party  relating  to the  transactions  contemplated  hereby,  whether  so
obtained before or after the execution hereof, to the party furnishing the same.

      2.4 Effect of Termination.
          ----------------------

      In the event that this Agreement is validly terminated as provided herein,
then each of the  parties  shall be  relieved  of their  duties and  obligations
arising  under  this  Agreement  after  the  date of such  termination  and such
termination  shall be without  liability  to the Parent  the  Seller;  provided,
however,  that the  obligations  of the  parties set forth in Section 9.4 hereof
shall survive any such termination and shall be enforceable hereunder; provided,
further,  however,  that nothing in this Section 2.4 shall relieve the Parent or
the Seller of any liability for a breach of this Agreement.

                                  ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE SELLER



      The Seller and the Seller's  Stockholder,  as listed on the signature page
hereto (the "Seller's  Shareholder")  jointly and severally hereby represent and
warrant to the Parent and Acquisition Sub that:

      3.1 Organization and Good Standing.
          -------------------------------

      The Seller is a corporation  duly organized,  validly existing and in good
standing under the laws of the  jurisdiction of its  incorporation  as set forth
above and has all  requisite  corporate  power and  authority to own,  lease and
operate its properties and to carry on its business as now conducted. The Seller
is duly qualified or authorized to do business as a foreign  corporation  and is
in good standing under the laws of each  jurisdiction in which it owns or leases
real property and each other  jurisdiction  in which the conduct of its business
or the ownership of its properties requires such qualification or authorization,
except where failure to be so qualified would not have a material adverse effect
on the  business,  assets or financial  condition of the Seller taken as a whole
("Material Adverse Effect").

      3.2 Authorization of Agreement.
          ---------------------------

      The  Seller has all  requisite  power,  authority  and legal  capacity  to
execute and deliver  this  Agreement,  and each other  agreement,  document,  or
instrument or  certificate  contemplated  by this Agreement or to be executed by
the Seller in connection with the consummation of the transactions  contemplated
by this Agreement (together with this Agreement, the "Seller Documents"), and to
consummate the transactions  contemplated hereby and thereby. This Agreement has
been, and each of the Seller Documents will be at or prior to the Closing,  duly
and  validly  executed  and  delivered  by the  Seller  and  (assuming  the  due
authorization,  execution and delivery by the other parties  hereto and thereto)
this Agreement  constitutes,  and each of the Seller  Documents when so executed
and delivered  will  constitute,  legal,  valid and binding  obligations  of the
Seller,  enforceable  against  the Seller in  accordance  with their  respective
terms, subject to applicable bankruptcy, insolvency, reorganization,  moratorium


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<PAGE>

and  similar  laws  affecting  creditors'  rights and  remedies  generally,  and
subject,  as to  enforceability,  to general  principles  of  equity,  including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).

      3.3 Capitalization.
          ---------------

      The  authorized  capital  stock of the  Seller  consists  of 100 shares of
common Stock, no par value (the "Common  Stock").  As of the date hereof,  there
are 62.5 shares of Common Stock issued and  outstanding  and no shares of Common
Stock  are  held  by the  Seller  as  treasury  stock.  All of  the  issued  and
outstanding  shares of Common  Stock were duly  authorized  for issuance and are
validly issued, fully paid and non-assessable.

      3.4 No Subsidiaries.
          ----------------

      The Seller has no subsidiaries.

      3.5 Corporate Records.
          ------------------

      (a) The Seller has  delivered  to the  Parent  and  Acquisition  Sub true,
correct and complete  copies of its certificate of  incorporation  (certified by
the  Secretary  of State of  Florida  and  by-laws  (certified  by the  Seller's
secretary, assistant secretary or other appropriate officer) of the Seller.

      (b) The minute books of the Seller previously made available to the Parent
contain complete and accurate records of all meetings and accurately reflect all
other corporate  action of the  stockholders  and board of directors  (including
committees  thereof)  of the  Seller.  The  stock  certificate  books  and stock
transfer ledgers of the Seller previously made available to the Parent are true,
correct and complete. All stock transfer taxes levied or payable with respect to
all  transfers  of shares of the Seller  prior to the date hereof have been paid
and appropriate transfer tax stamps affixed.

      3.6 Conflicts; Consents of Third Parties.
          -------------------------------------

      Except as set forth in Schedule 3.6 hereof:

      (a) The  execution  and delivery by the Seller of this  Agreement  and the
Seller Documents,  the consummation of the transactions  contemplated  hereby or
thereby,  or  compliance  by the  Seller  with any of the  provisions  hereof or
thereof will (i) conflict with, or result in the breach of, any provision of the
certificate  of  incorporation  or by-laws of the Seller;  (ii)  conflict  with,
violate,  result in the breach or termination  of, or constitute a default under
any note, bond, mortgage,  indenture,  license, agreement or other instrument or
obligation  to which  the  Seller  is a party or by which  any of them or any of
their respective properties or assets is bound; (iii) violate any statute, rule,
regulation,  order or decree of any governmental  body or authority by which the
Seller is bound;  or (iv) result in the creation of any Lien upon the properties
or assets of the Seller  except,  in case of clauses (ii),  (iii) and (iv),  for
such  violations,  breaches  or defaults  as would not,  individually  or in the
aggregate, have a Material Adverse Effect.

      (b) No consent,  waiver,  approval,  order, permit or authorization of, or
declaration or filing with, or notification to, any person or Governmental  Body
is  required  on the part of the  Seller,  the  Seller  in  connection  with the
execution  and  delivery  of this  Agreement  or the  Seller  Documents,  or the
compliance by the Seller as the case may be, with any of the  provisions  hereof
or thereof.

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<PAGE>

      3.7 Ownership and Transfer of Assets.
           --------------------------------

      The Seller is the record and  beneficial  owner of the Assets,  and except
for the judgment  awarded to Coronet  Paper on December 21, 2001 against  Seller
and Erik Hoffer, as Seller's President, the Assets are free and clear of any and
all Liens.  The Seller has the corporate power and authority to sell,  transfer,
assign and deliver such Assets as provided in this Agreement,  and such delivery
will convey to the  Acquisition  Sub good and  marketable  title to such Assets,
free and clear of any and all  Liens,  except as they may be  encumbered  by the
aforementioned judgment.

      3.8 Financial Statements.
          ---------------------

      The  Seller  has  delivered  to  the  Parent  copies  of (i)  the  audited
consolidated  balance  sheets of the  Seller  as at  December  31,  2003 and the
related  audited  consolidated  statements  of income  and of cash  flows of the
Seller for the year then ended and (ii) the unaudited but reviewed  consolidated
balance  sheet  of  the  Seller  as  at  September  30,  2004  and  the  related
consolidated  statements  of  income  and  cash  flows  of the  Seller  for  the
nine-month period then ended (such audited and unaudited  statements,  including
the  related  notes  and  schedules  thereto,  are  referred  to  herein  as the
"Financial  Statements").  Each of the Financial  Statements is, and the Closing
Date Balance Sheet (as defined in Section 5.11) when delivered will be, complete
and correct in all material  respects,  will be prepared in accordance with GAAP
(subject to normal year-end adjustments in the case of the unaudited statements)
and in conformity with the practices  consistently applied by the Seller without
modification of the accounting principles used in the preparation thereof and or
will present fairly the financial position, results of operations and cash flows
of the Seller as at the dates and for the periods indicated.

      For the purposes hereof, the unaudited but reviewed  consolidated  balance
sheet of the Seller as at  September  30, 2004 is  referred  to as the  "Balance
Sheet" and September 30, 2004 is referred to as the "Balance Sheet Date".

      3.9 No Undisclosed Liabilities.
          ---------------------------

      The Seller has no  indebtedness,  obligations  or  liabilities of any kind
(whether  accrued,  absolute,  contingent  or  otherwise,  and whether due or to
become due) that would have been required to be reflected in,  reserved  against
or  otherwise  described  on the  Balance  Sheet  or in  the  notes  thereto  in
accordance  with GAAP  which was not fully  reflected  in,  reserved  against or
otherwise  described  in the  Balance  Sheet  or the  notes  thereto  or was not
incurred in the ordinary course of business  consistent with past practice since
the Balance Sheet Date.

      3.10 Absence of Certain Developments.
           --------------------------------

      Except as  expressly  contemplated  by this  Agreement  or as set forth on
Schedule  3.10,  since the Balance  Sheet Date and  continuing  through the date
hereof:


      (i) there has not been any Material  Adverse Change nor has there occurred
any event which is reasonably likely to result in a Material Adverse Change;

      (ii) there has not been any damage,  destruction  or loss,  whether or not
covered by  insurance,  with  respect to the  property  and assets of the Seller
having a  replacement  cost of more than $50,000 for any single loss or $125,000
for all such losses;


                                       7
<PAGE>

      (iii) there has not been any declaration,  setting aside or payment of any
dividend or other  distribution in respect of any shares of capital stock of the
Seller or any repurchase,  redemption or other  acquisition by the Seller of any
outstanding  shares of capital stock or other  securities of, or other ownership
interest in, the Seller;

      (iv)  except for the  bonuses  paid to the major  shareholder  and certain
employees of the Seller in 2004,  the Seller has not awarded or paid any bonuses
to employees of the Seller with respect to the fiscal year ended 2004, except to
the extent accrued on the Balance Sheet or entered into any employment, deferred
compensation, severance or similar agreement (nor amended any such agreement) or
agreed to increase the compensation payable or to become payable by it to any of
the Seller's directors, officers, employees, agents or representatives or agreed
to  increase  the  coverage  or  benefits  available  under any  severance  pay,
termination  pay,  vacation  pay,  company  awards,   salary   continuation  for
disability,  sick  leave,  deferred  compensation,   bonus  or  other  incentive
compensation,  insurance,  pension or other  employee  benefit plan,  payment or
arrangement made to, for or with such directors,  officers, employees, agents or
representatives  (other than normal increases in the ordinary course of business
consistent  with past practice and that in the aggregate  have not resulted in a
material increase in the benefits or compensation expense of the Seller);

      (v) there  has not been any  change by the  Seller  in  accounting  or Tax
reporting principles, methods or policies;

      (vi) the  Seller has not  entered  into any  transaction  or  Contract  or
conducted its business other than in the ordinary  course  consistent  with past
practice;

      (vii) the Seller  has not failed to  promptly  pay and  discharge  current
liabilities except where disputed in good faith by appropriate proceedings;

      (viii)  the  Seller   has  not  made  any  loans,   advances   or  capital
contributions to, or investments in, any Affiliate of Seller or paid any fees or
expenses to the Seller's Stockholder or any Affiliate of the Seller;

      (ix) the Seller has not mortgaged, pledged or subjected to any Lien any of
its assets,  or acquired any assets or sold,  assigned,  transferred,  conveyed,
leased or  otherwise  disposed  of any assets of the  Seller,  except for assets
mortgaged,  pledged  or  subjected  to any  Lien,  acquired  or sold,  assigned,
transferred, conveyed, leased or otherwise disposed of in the ordinary course of
business consistent with past practice;

      (x) the Seller  has not  discharged  or  satisfied  any Lien,  or paid any
obligation or liability (fixed or contingent),  except in the ordinary course of
business consistent with past practice and which, in the aggregate, would not be
material to the Seller;

      (xi) the  Seller  has not  canceled  or  compromised  any debt or claim or
amended, canceled, terminated,  relinquished, waived or released any Contract or
right except in the ordinary  course of business  consistent  with past practice


                                       8
<PAGE>

      (xii)  the  Seller  has  not  made  or   committed  to  make  any  capital
expenditures   or  capital   additions  or  betterments  in  excess  of  $10,000
individually  or  $100,000 in the  aggregate  except in the  ordinary  course of
business consistent with past practice and which, in the aggregate, would not be
material to the Seller;

      (xiii) except with respect to its settlement of the  outstanding  judgment
of Coronet  Paper,  the Seller has not  instituted or settled any material legal
proceeding; and

      (xiv) the Seller has not agreed to do anything  set forth in this  Section
3.10.

      3.11 Taxes.
           -----

      (a)  Except as set forth on  Schedule  3.11,  to the best of the  Seller's
knowledge,  (A) all Tax  returns  required  to be filed by or on  behalf  of the
Seller  have  been  properly  prepared  and  duly  and  timely  filed  with  the
appropriate  taxing  authorities in all  jurisdictions in which such Tax returns
are required to be filed (after giving effect to any valid extensions of time in
which to make such  filings),  and all such Tax returns were true,  complete and
correct in all material  respects;  (B) all Taxes payable by or on behalf of the
Seller or in respect of its  income,  assets or  operations  have been fully and
timely paid, [and adequate  reserves or accruals for Taxes have been provided in
the Closing Date Balance  Sheet with respect to any period for which Tax Returns
have not yet been filed or for which Taxes are not yet due and  owing];  and (C)
the Seller has not executed or filed with the IRS or any other taxing  authority
any agreement,  waiver or other document or arrangement  extending or having the
effect of extending the period for assessment or collection of Taxes (including,
but not  limited  to, any  applicable  statute of  limitation),  and no power of
attorney  with respect to any Tax matter is  currently in force.  "Tax or Taxes"
means all federal,  state, local or other taxes or similar governmental charges,
fees, levies or assessments.

      (b) The Seller has complied in all material  respects with all  applicable
laws (as defined in Section 3.19), rules and regulations relating to the payment
and  withholding  of Taxes  and has  duly  and  timely  withheld  from  employee
salaries,  wages and  other  compensation  and has paid over to the  appropriate
taxing  authorities all amounts required to be so withheld and paid over for all
periods under all Laws.

      (c) Parent has received complete copies of (A) all federal,  state,  local
and  foreign  income or  franchise  Tax  Returns of the Seller  relating  to the
taxable periods since 2002 and (B) any audit report issued within the last three
years relating to any material Taxes due from or with respect to the its income,
assets or operations. All income and franchise Tax returns filed by or on behalf
of the Seller for the taxable years ended on the  respective  dates set forth on
Schedule 3.11 have been examined by the relevant taxing authority or the statute
of limitations with respect to such Tax Returns has expired.

      (d)  Schedule  3.11 lists all  material  types of Taxes paid and  material
types of Tax returns filed by or on behalf of the Seller. Except as set forth on
Schedule  3.11, no claim has been made by a taxing  authority in a  jurisdiction
where the Seller does not file Tax Returns  such that it is or may be subject to
taxation by that jurisdiction.

      (e) Except as set forth on Schedule  3.11,  all  deficiencies  asserted or
assessments  made as a result of any examinations by the IRS or any other taxing
authority  of the Tax Returns of or covering or  including  the Seller have been
fully  paid,  and there  are no other  audits or  investigations  by any  taxing
authority in progress,  nor has the Seller  received any written notice from any
taxing authority that it intends to conduct such an audit or  investigation.  No
issue has been raised in writing by a federal,  state,  local or foreign  taxing
authority in any current or prior examination  which, by application of the same


                                       9
<PAGE>

or similar  principles,  could  reasonably  be  expected to result in a proposed
deficiency for any subsequent taxable period.

      (f)  Except  as set  forth on 3.11,  the  Seller  has (A)  filed a consent
pursuant to Section  341(f) of the Code or agreed to have  Section  341(f)(2) of
the Code apply to any  disposition  of a  subsection  (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by the Seller,  (B) agreed to or
is required to make any  adjustments  pursuant to Section  481(a) of the Code or
any similar  provision  of state,  local or foreign law by reason of a change in
accounting method initiated by the Seller or has any knowledge that the Internal
Revenue Service ("IRS") has proposed any such adjustment or change in accounting
method,  or has any  application  pending with any taxing  authority  requesting
permission for any changes in accounting  methods that relate to the business or
operations  of the  Seller,  (C)  executed or entered  into a closing  agreement
pursuant to Section 7121 of the Code or any predecessor provision thereof or any
similar provision of state,  local or foreign law with respect to the Seller, or
(D) requested  any extension of time within which to file any Tax Return,  which
Tax Return has since not been filed.

      (g) No property owned by the Seller is (i) property required to be treated
as being owned by another Person pursuant to the provisions of Section 168(f)(8)
of the Internal Revenue Code of 1954, as amended and in effect immediately prior
to the enactment of the Tax Reform Act of 1986, (ii) constitutes "tax-exempt use
property"  within  the  meaning  of  Section  168(h)(1)  of the Code or (iii) is
"tax-exempt bond financed  property" within the meaning of Section 168(g) of the
Code.

      (h) The Seller is not a foreign  person within the meaning of Section 1445
of the Code.

      (i) The Seller is not a party to any tax sharing or similar  agreement  or
arrangement  (whether  or not  written)  pursuant  to  which  it will  have  any
obligation to make any payments after the Closing.

      (j) There is no  contract,  agreement,  plan or  arrangement  covering any
person that, individually or collectively, could give rise to the payment of any
amount that would not be  deductible  by the  Parent,  the  Affiliates  or their
respective affiliates by reason of Section 280G of the Code, or would constitute
compensation  in excess of the  limitation  set forth in  Section  162(m) of the
Code.

      (k) The Seller is not subject to any private  letter  ruling of the IRS or
comparable rulings of other taxing authorities.

      (l)  There are no liens as a result of any  unpaid  Taxes  upon any of the
assets of the Seller.

      (m) Except as set forth on Schedule  3.11,  the Seller has no elections in
effect for federal  income tax purposes  under Sections 108, 168, 338, 441, 463,
472, 1017, 1033 or 4977 of the code..

      (n) The  Seller  has never  owned any  Subsidiaries  and has never  been a
member of any consolidated, combined or affiliated group of corporations for any
Tax purposes.

      3.12 Real Property.
           --------------

      (a) Schedule  3.12(a) sets forth a complete  list of (i) all real property
and  interests in real  property  owned in fee by the Seller  (individually,  an
"Owned Property" and collectively,  the "Owned  Properties"),  and (ii) all real
property and interests in real property leased by the Seller, or an affiliate of
the  Seller  (individually,  a "Real  Property  Lease"  and the real  properties
specified in such leases, together with the Owned Properties,  being referred to
herein


                                       10
<PAGE>

individually as a "Seller Property" and collectively as the "Seller Properties")
as lessee or lessor. The Seller has good and marketable fee title to all Owned
Property, free and clear of all Liens of any nature whatsoever except (A) Liens
set forth on Schedule 3.12(a) and (B) Permitted Exceptions. The Seller Property
constitutes all interests in real property currently used or currently held for
use in connection with the business of the Seller and which are necessary for
the continued operation of the business of the Seller as the business is
currently conducted. The Seller has a valid and enforceable leasehold interest
under each of the Real Property Leases, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and Seller has not received any written notice
of any default or event that with notice or lapse of time, or both, would
constitute a default by the Seller under any of the Real Property Leases. All of
the Seller Property, buildings, fixtures and improvements thereon owned or
leased by the Seller are in good operating condition and repair (subject to
normal wear and tear). The Seller has delivered or otherwise made available to
the Parent true, correct and complete copies of (i) all deeds, title reports and
surveys for the Owned Properties and (ii) the Real Property Leases, together
with all amendments, modifications or supplements, if any, thereto.


      (b) The Seller has all material  certificates  of occupancy and Permits of
any  Governmental  Body necessary or useful for the current use and operation of
each  Seller  Property,  and the Seller  has fully  complied  with all  material
conditions of the Permits  applicable  to it. No default or violation,  or event
that with the lapse of time or giving of notice or both  would  become a default
or violation, has occurred in the due observance of any Permit.

      (c) There  does not  exist any  actual  or, to the best  knowledge  of the
Seller,  threatened or contemplated  condemnation or eminent domain  proceedings
that  affect any Seller  Property  or any part  thereof,  and the Seller has not
received any notice,  oral or written, of the intention of any Governmental Body
or other Person to take or use all or any part thereof.

      (d) The Seller has not  received  any written  notice  from any  insurance
company that has issued a policy with respect to any Seller  Property  requiring
performance  of any  structural or other repairs or  alterations  to such Seller
Property.

      (e) The Seller does not own or hold, and is not obligated under or a party
to, any option,  right of first refusal or other  contractual right to purchase,
acquire,  sell,  assign or dispose of any real estate or any portion  thereof or
interest therein.

      3.13 Tangible Personal Property.
           ---------------------------

      (a) Schedule 3.13(a) sets forth all leases of personal property ("Personal
Property  Leases")  involving  annual payments in excess of $10,000  relating to
personal property used in the business of the Seller or to which the Seller is a
party or by which the  properties  or assets of the Seller is bound.  The Seller
has  delivered or  otherwise  made  available  to the Parent  true,  correct and
complete copies of the Personal  Property Leases,  together with all amendments,
modifications or supplements thereto.

      (b) The Seller has a valid  leasehold  interest under each of the Personal
Property  Leases under which it is a lessee,  subject to applicable  bankruptcy,
insolvency,  reorganization,  moratorium and similar laws  affecting  creditors'
rights and remedies  generally  and subject,  as to  enforceability,  to general
principles  of  equity  (regardless  of  whether  enforcement  is  sought  in  a
proceeding  at law or in  equity),  and there is no default  under any  Personal
Property  Lease by the Seller or, to the best  knowledge  of the Seller,  by any


                                       11
<PAGE>

other party  thereto,  and no event has occurred  that with the lapse of time or
the giving of notice or both would constitute a default thereunder.

      (c) The  Seller  has good  and  marketable  title  to all of the  items of
tangible  personal  property  reflected in the Balance  Sheet (except as sold or
disposed of  subsequent  to the date thereof in the ordinary  course of business
consistent with past  practice),  free and clear of any and all liens other than
as set forth on  Schedule  3.13.  All such items of tangible  personal  property
which,  individually  or in the aggregate,  are material to the operation of the
business of the Seller are in good condition and in a state of good  maintenance
and repair  (ordinary  wear and tear excepted) and are suitable for the purposes
used.

      (d) All of the items of  tangible  personal  property  used by the  Seller
under the Personal  Property  Leases are in good condition and repair  (ordinary
wear and tear excepted) and are suitable for the purposes used.

      3.14 Intangible Property.
           --------------------

      Schedule  3.14  contains  a  complete  and  correct  list of each  patent,
trademark, trade name, service mark and copyright owned or used by the Seller as
well as all registrations  thereof and pending applications  therefor,  and each
license or other  agreement  relating  thereto.  Except as set forth on Schedule
3.14,  each of the  foregoing  is owned by the party  shown on such  Schedule as
owning  the  same,  free and clear of all  mortgages,  claims,  liens,  security
interests,  charges and encumbrances and is in good standing and not the subject
of any challenge. There have been no claims made and the Seller has not received
any notice or otherwise knows or has reason to believe that any of the foregoing
is  invalid  or  conflicts  with the  asserted  rights  of  others.  The  Seller
possesses,   owns  or  licenses  all  patents,  patent  licenses,  trade  names,
trademarks,  service  marks,  brand marks,  brand names,  copyrights,  know-how,
formulate and other  proprietary  and trade rights  necessary for the conduct of
its business as now conducted,  not subject to any  restrictions and without any
known  conflict  with the rights of others and has not  forfeited  or  otherwise
relinquished any such patent,  patent license,  trade name,  trademark,  service
mark,  brand  mark,  brand  name,  copyright,   know-how,   formulate  or  other
proprietary  right necessary for the conduct of its business as conducted on the
date  hereof.  The Seller is not under any  obligation  to pay any  royalties or
similar  payments  in  connection  with any  license to any  Affiliate  thereof.
"Affiliate"  means,  with respect to any person,  any other  person  directly or
indirectly  controlling,  controlled by or under common control with such person
and for purposes of individuals, Affiliates would include an individual's spouse
and minor children.

      3.15 Material Contracts.
           -------------------

      Schedule  3.15 sets  forth  all of the  following  Contracts  to which the
Seller  is a  party  or  by  which  it is  bound  (collectively,  the  "Material
Contracts"):  (i) Contracts with any current  officer or director of the Seller;
(ii) Contracts with any labor union or association  representing any employee of
the Seller;  (iii) Contracts pursuant to which any party is required to purchase
or sell a stated portion of its requirements or output from or to another party;
(iv) Contracts for the sale of any of the assets of the Seller other than in the
ordinary  course of business or for the grant to any person of any  preferential
rights to  purchase  any of its  assets;  (v)  joint  venture  agreements;  (vi)
material Contracts containing covenants of the Seller not to compete in any line
of  business or with any person in any  geographical  area or  covenants  of any
other  person not to compete  with the Seller in any line of  business or in any
geographical  area; (vii) Contracts relating to the acquisition by the Seller of
any  operating  business  or the  capital  stock  of any  other  person;  (viii)
Contracts relating to the borrowing of money; or (ix) any other Contracts, other
than Real Property  Leases,  which involve the expenditure of more than $200,000
in the aggregate or $50,000  annually or require  performance  by any party more
than one year  from the date  hereof.  There  have been  made  available  to the


                                       12
<PAGE>

Parent, its affiliates and their representatives true and complete copies of all
of the  Material  Contracts.  Except as set forth on Schedule  3.15,  all of the
Material Contracts and other agreements are in full force and effect and are the
legal,  valid and binding  obligation of the Seller,  enforceable  against it in
accordance  with  its  terms,  subject  to  applicable  bankruptcy,  insolvency,
reorganization,  moratorium  and similar laws  affecting  creditors'  rights and
remedies generally and subject,  as to enforceability,  to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).  Except as set forth on Schedule  3.15, the Seller is not in default in
any material respect under any Material Contracts,  nor, to the knowledge of the
Seller, is any other party to any Material Contract in default thereunder in any
material respect.

      3.16 Employee Benefits.
           ------------------

      (a)  Schedule  3.16(a)  sets forth a complete  and correct list of (i) all
"employee benefit plans", as defined in Section 3(3) of the Employee  Retirement
Income Security Act of 1974, as amended  ("ERISA"),  and any other pension plans
or employee  benefit  arrangements,  programs or payroll  practices  (including,
without  limitation,   severance  pay,  vacation  pay,  company  awards,  salary
continuation  for disability,  sick leave,  retirement,  deferred  compensation,
bonus or other incentive compensation,  stock purchase arrangements or policies,
hospitalization,  medical  insurance,  life insurance and scholarship  programs)
maintained by the Seller or to which the Seller  contributes  or is obligated to
contribute thereunder with respect to employees of the Seller ("Employee Benefit
Plans") and (ii) all  "employee  pension  plans",  as defined in Section 3(2) of
ERISA,  maintained  by the  Seller  or any  trade or  business  (whether  or not
incorporated)  which  are  under  control,  or  which  are  treated  as a single
employer,  with Seller  under  Section  414(b),  (c),  (m) or (o) of the ("ERISA
Affiliate")  or to which the  Seller or any ERISA  Affiliate  contributed  or is
obligated to contribute  thereunder ("Pension Plans").  Schedule 3.16(a) clearly
identifies, in separate categories, Employee Benefit Plans or Pension Plans that
are (i) subject to Section 4063 and 4064 of ERISA ("Multiple  Employer  Plans"),
(ii)   multiemployer   plans  (as  defined  in  Section   4001(a)(3)  of  ERISA)
("Multiemployer  Plans") or (iii) "benefit plans", within the meaning of Section
5000(b)(1) of the Code providing  continuing  benefits after the  termination of
employment  (other than as  required  by Section  4980B of the Code or Part 6 of
Title  I of  ERISA  and at the  former  employee's  or  his  beneficiary's  sole
expense).


      (b) The Seller will not have any withdrawal or other liability (contingent
or otherwise) under Title IV of ERISA with respect to any Multiple Employer Plan
or  Multiemployer  Plan if Seller had not sold the Assets to Acquisition  Sub at
the Closing in accordance with the terms of this Agreement.


      (c) Each of the  Employee  Benefit  Plans and  Pension  Plans  intended to
qualify  under  Section 401 of the Code  ("Qualified  Plans") so qualify and the
trusts maintained  thereto are exempt from federal income taxation under Section
501 of the Code,  and,  except as  disclosed  on Schedule  3.16(c),  nothing has
occurred  with  respect to the  operation of any such plan which could cause the
loss of such  qualification  or exemption or the  imposition  of any  liability,
penalty or tax under ERISA or the Code.

      (d) All  contributions and premiums required by Law or by the terms of any
Employee  Benefit Plan or Pension Plan which are defined  benefit plans or money
purchase plans or any agreement  relating thereto have been timely made (without
regard to any  waivers  granted  with  respect  thereto)  to any funds or trusts
established  thereunder or in connection  therewith,  and no accumulated funding
deficiencies exist in any of such plans subject to Section 412 of the Code.


                                       13
<PAGE>

      (e) The benefit  liabilities,  as defined in Section 4001(a)(16) of ERISA,
of each of the Employee  Benefit  Plans and Pension Plans subject to Title IV of
ERISA using the actuarial  assumptions that would be used by the Pension Benefit
Guaranty  Corporation  (the "PBGC") in the event it terminated each such plan do
not  exceed  the  fair  market  value  of the  assets  of each  such  plan.  The
liabilities of each Employee  Benefit Plan that has been terminated or otherwise
wound up, have been fully discharged in full compliance with applicable Law.

      (f)  There has been no  "reportable  event"  as that  term is  defined  in
Section 4043 of ERISA and the regulations  thereunder with respect to any of the
Employee Benefit Plans or Pension Plans subject to Title IV of ERISA which would
require the giving of notice, or any event requiring notice to be provided under
Section 4041(c)(3)(C) or 4063(a) of ERISA.

      (g) There has been no  violation  of ERISA  with  respect to the filing of
applicable returns, reports, documents and notices regarding any of the Employee
Benefit  Plans or Pension  Plans with the Secretary of Labor or the Secretary of
the Treasury or the furnishing of such notices or documents to the  participants
or beneficiaries of the Employee Benefit Plans or Pension Plans.

      (h) True,  correct and complete  copies of the following  documents,  with
respect to each of the Employee Benefit Plans and Pension Plans (as applicable),
have been delivered to the Parent (A) any plans and related trust documents, and
all amendments thereto,  (B) the most recent Forms 5500 for the past three years
and schedules  thereto,  (C) the most recent financial  statements and actuarial
valuations  for the past  three  years,  (D) the most  recent  Internal  Revenue
Service  determination  letter,  (E) the most recent  summary plan  descriptions
(including  letters  or other  documents  updating  such  descriptions)  and (F)
written  descriptions  of all  non-written  agreements  relating to the Employee
Benefit Plans and Pension Plans.

      (i) There are no pending  Legal  Proceedings  which have been  asserted or
instituted  against any of the  Employee  Benefit  Plans or Pension  Plans,  the
assets  of any  such  plans or the  Seller,  or the  plan  administrator  or any
fiduciary of the  Employee  Benefit  Plans or Pension  Plans with respect to the
operation of such plans (other than routine,  uncontested  benefit claims),  and
there  are no facts or  circumstances  which  could  form the basis for any such
Legal Proceeding.


      (j) (A) Each of the  Employee  Benefit  Plans and  Pension  Plans has been
maintained,  in all  material  respects,  in  accordance  with its terms and all
provisions of applicable  Law, and; (B) all amendments  and actions  required to
bring each of the Employee  Benefit Plans and Pension  Plans into  conformity in
all material  respects with all of the applicable  provisions of ERISA and other
applicable  Laws  have  been  made or  taken  except  to the  extent  that  such
amendments  or actions are not  required by law to be made or taken until a date
after the Closing Date and are disclosed on Schedule 3.16(j).


      (k) The Seller and any ERISA  Affiliate  which maintains a "benefits plan"
within the meaning of Section 5000(b)(1) of ERISA, have complied with the notice
and continuation  requirements of Section 4980B of the Code or Part 6 of Title I
of ERISA and the applicable regulations thereunder.

      (l) None of the Seller,  any ERISA Affiliate or any  organization to which
any is a successor  or parent  corporation,  has divested any business or entity
maintaining or sponsoring a defined benefit pension plan having unfunded benefit
liabilities  (within the meaning of Section 4001(a)(18) of ERISA) or transferred
any such plan to any person other than the Seller or any ERISA Affiliate  during
the five-year period ending on the Closing Date.

                                       14
<PAGE>

      (m)  Neither  the  Seller  nor any "party in  interest"  or  "disqualified
person" with respect to the Employee  Benefit Plans or Pension Plans has engaged
in a "prohibited  transaction" within the meaning of Section 4975 of the Code or
Section 406 of ERISA.

      (n) Neither the Seller nor any ERISA Affiliate has terminated any Employee
Benefit  Plan or Pension  Plan  subject to Title IV of ERISA,  or  incurred  any
outstanding  liability  under  Section  4062 of  ERISA  to the  Pension  Benefit
Guaranty Corporation or to a trustee appointed under Section 4042 of ERISA.

      (o)  Neither  the  execution  and  delivery  of  this  Agreement  nor  the
consummation  of the  transactions  contemplated  hereby  will (i) result in any
payment  becoming due to any employee of the Seller;  (ii) increase any benefits
otherwise  payable  under any Employee  Benefit Plan or Pension  Plan;  or (iii)
result  in the  acceleration  of the  time of  payment  or  vesting  of any such
benefits.

      (p) No stock or other  security  issued  by Seller  forms or has  formed a
material part of the assets of any Employee Benefit Plan or Pension Plan.

      3.17 Labor.
           ------

      (a) Except as set forth on  Schedule  3.17(a),  the Seller is not party to
any  labor  or  collective  bargaining  agreement  and  there  are no  labor  or
collective  bargaining  agreements which pertain to employees of the Seller. The
Seller has delivered or otherwise made available to the Parent true, correct and
complete  copies  of the labor or  collective  bargaining  agreements  listed on
Schedule  3.17(a),  together with all amendments,  modifications  or supplements
thereto.

      (b) Except as set forth on Schedule  3.17(b),  no  employees of the Seller
are  represented by any labor  organization.  No labor  organization or group of
employees of the Seller has made a pending demand for recognition, and there are
no representation  proceedings or petitions seeking a representation  proceeding
presently  pending or, to the best  knowledge  of the Seller,  threatened  to be
brought  or  filed,  with the  National  Labor  Relations  Board or other  labor
relations tribunal. There is no organizing activity involving the Seller pending
or, to the best knowledge of the Seller, threatened by any labor organization or
group of employees of the Seller.

      (c) There are no (i)  strikes,  work  stoppages,  slowdowns,  lockouts  or
arbitrations or (ii) material  grievances or other labor disputes pending or, to
the best  knowledge of the Seller,  threatened  against or involving the Seller.
There are no unfair labor practice charges, grievances or complaints pending or,
to the best knowledge of the Seller,  threatened by or on behalf of any employee
or group of employees of the Seller.

      3.18 Litigation.
           -----------

      Except  as  set  forth  in  Schedule  3.18,  there  is  no  suit,  action,
proceeding,  investigation,  claim or order  pending or, to the knowledge of the
Seller,  overtly  threatened  against  the  Seller (or to the  knowledge  of the
Seller,  pending or  threatened,  against any of the officers,  directors or key
employees of the Seller with respect to their  business  activities on behalf of
the Seller,  or to which the Seller is  otherwise a party,  which,  if adversely
determined,  would have a Material  Adverse Effect,  before any court, or before
any governmental department, commission, board, agency, or instrumentality;  nor
to the  knowledge  of the  Seller  is there  any  reasonable  basis for any such
action, proceeding, or investigation. The Seller is not subject to any judgment,
order or decree of any court or  governmental  agency  except to the  extent the
same are not  reasonably  likely to have a  Material  Adverse  Effect and is not
engaged in any legal action to recover  monies due it,  except as may be pending


                                       15
<PAGE>

or  instituted  by Seller  to  collect  accounts  receivable  and are  otherwise
Excluded Assets under this Agreement, or for damages sustained by it.


      3.19 Compliance with Laws; Permits.
           ------------------------------

      (a) The  Seller  is in  compliance  with  all  federal,  state  and  local
statutes, laws, rules, regulations, orders and ordinances ("Laws") applicable to
it or to the conduct of its business or operations or the use of its  properties
(including any leased properties) and assets, except for such non-compliances as
would not, individually or in the aggregate, have a Material Adverse Effect. The
Seller has all governmental  permits and approvals from state,  federal or local
authorities which are required for it to operate its business,  except for those
the  absence  of which  would  not,  individually  or in the  aggregate,  have a
Material Adverse Effect.

      3.20 Environmental Matters.
           ----------------------

      Except as set forth on Schedule 3.20 hereto:

      (a) the  operations  of the Seller are in compliance  with all  applicable
laws promulgated by any governmental entity which prohibit,  regulate or control
any hazardous material or hazardous material activity ("Environmental Laws") and
all permits issued pursuant to Environmental Laws or otherwise;

      (b)  except as to the  operation  of a certain  "oxidizer"  located at the
Seller's  Staten  Island  business  premises  (the  "Oxidizer"),  the Seller has
obtained all permits required under all applicable  Environmental Laws necessary
to operate its business;

      (c) the Seller is not the  subject  of any  outstanding  written  order or
Contract with any governmental  authority or person respecting (i) Environmental
Laws,  (ii)  Remedial  Action or (iii) any  release or  threatened  release of a
Hazardous Material ("Release");

      (d) the Seller has not received any written communication  alleging either
or both that it may be in  violation  of any  Environmental  Law,  or any permit
issued  pursuant  to  Environmental  Law,  or may have any  liability  under any
Environmental Law;

      (e)  the  Seller  does  not  have  any  current  contingent  liability  in
connection  with any  Release  into the indoor or outdoor  environment  (whether
on-site or off-site);

      (f) there are no investigations of the business,  operations, or currently
or  previously  owned,  operated  or leased  property  of the Seller  pending or
threatened  which  could lead to the  imposition  of any  liability  pursuant to
Environmental Law;

      (g) there is not  located at any of the  properties  of the Seller any (i)
underground storage tanks, (ii) asbestos-containing  material or (iii) equipment
containing polychlorinated biphenyls; and,

      (h) the Seller has  provided  to the  Parent all  environmentally  related
audits, studies, reports, analyses, and results of investigations that have been
performed with respect to the currently or previously owned,  leased or operated
properties of the Seller.


                                       16
<PAGE>

      3.21 Insurance.
           ----------

      Schedule  3.21 sets forth a complete and accurate  list of all policies of
insurance  of any kind or nature  covering  the Seller or any of its  employees,
properties  or  assets,  including,   without  limitation,   policies  of  life,
disability,  fire,  theft,  workers  compensation,  employee  fidelity and other
casualty  and  liability  insurance.  All such  policies  are in full  force and
effect,  and,  to the  Seller's  knowledge,  it is in default  of any  provision
thereof,  except  for  such  defaults  as  would  not,  individually  or in  the
aggregate, have a Material Adverse Effect.

      3.22 Inventories; Receivables; Payables.
           -----------------------------------

      (a) The  inventories of the Seller are in good and  marketable  condition,
and are saleable in the ordinary course of business. Adequate reserves have been
reflected  in the  Balance  Sheet  for  shorts,  drops,  off-cuts,  obsolete  or
otherwise  unusable  inventory,  which  reserves  were  calculated  in a  manner
consistent with past practice and in accordance with GAAP consistently applied.

      (b) All  accounts  receivable  of the Seller  have  arisen  from bona fide
transactions in the ordinary  course of business  consistent with past practice.
All accounts  receivable  of the Seller  reflected on the Balance Sheet are good
and collectible at the aggregate recorded amounts thereof, net of any applicable
reserve for returns or doubtful accounts reflected  thereon,  which reserves are
adequate and were  calculated in a manner  consistent  with past practice and in
accordance with GAAP consistently applied. All accounts receivable arising after
the  Balance  Sheet  Date are good and  collectible  at the  aggregate  recorded
amounts thereof, net of any applicable reserve for returns or doubtful accounts,
which reserves are adequate and were calculated in a manner consistent with past
practice and in accordance with GAAP consistently applied.

      (c) All accounts  payable of the Seller  reflected in the Balance Sheet or
arising after the date thereof are the result of bona fide  transactions  in the
ordinary course of business and have been paid or are not yet due and payable.

      3.23 Customers and Suppliers.
           ------------------------

      Schedule  3.23 sets forth a list of the twenty (20) largest  customers and
the twenty  (20)  largest  suppliers  of the  Seller,  as measured by the dollar
amount of purchases therefrom or thereby,  during each of the fiscal years ended
2003 and 2002,  showing the  approximate  total sales by the Seller to each such
customer  and the  approximate  total  purchases  by the  Seller  from each such
supplier,  during such period.  Since September 30, 2004, there has not been any
material  adverse  change in the  business  relationship  of the Seller with any
customer or supplier listed on Schedule 3.23.

      3.24 Banks.
           -----

      Schedule  3.24  contains  a  complete  and  correct  list of the names and
locations of all banks in which the Seller has  accounts or safe  deposit  boxes
and the  names of all  persons  authorized  to draw  thereon  or to have  access
thereto.  Except  as set forth on  Schedule  3.24,  no  person  holds a power of
attorney to act on behalf of the Seller.

                                       17
<PAGE>

      3.25 Gross Sales.
           ------------

      The gross sales for fiscal  year 2004 of Seller  shall be equal to no less
than $4.03  million.  In the event gross sales for the fiscal year 2004 are less
than $4.03 million,  determined in accordance with GAAP,  consistently  applied,
the sole result and legal consequence shall be an adjustment to the terms of the
Note,  pursuant  to the  terms set forth  therein,  and there  shall be no legal
consequence or other effect on any of the terms or provisions of this Agreement,
including  but not  limited to the  non-refundable  character  and amount of the
closing payment of Section 1.4(b)(i).

      3.26 No Misrepresentations.
           ----------------------

      No representation or warranty of the Seller contained in this Agreement or
in any schedule  hereto or in any certificate or other  instrument  furnished by
the  Seller to the  Parent or  Acquisition  Sub  pursuant  to the terms  hereof,
contains any untrue  statement  of a material  fact or omits to state a material
fact  necessary  to  make  the  statements   contained  herein  or  therein  not
misleading.

      3.27 Financial Advisors.
           -------------------

      Except for R&M  Financial  Associates,  no Person has acted,  directly  or
indirectly,  as a  broker,  finder  or  financial  advisor  for  the  Seller  in
connection with the transactions contemplated by this Agreement and no Person is
entitled to any fee or commission or like payment in respect thereof.

      3.28 Investment Intention.
           ---------------------

      In the event the Seller  determines  to convert a portion of the Note into
shares of common  stock of the  Parent  ("Shares"),  the Seller  represents  and
warrants  that it is acquiring  the Shares for its own account,  for  investment
purposes only and not with a view to the  distribution  (as such term is used in
Section 2(11) of the Securities Act of 1933, as amended (the  "Securities  Act")
thereof.  The Seller  understands that the Shares have not been registered under
the Securities Act and cannot be sold unless  subsequently  registered under the
Securities Act or an exemption from such registration is available.

      3.29 Accredited Investor.
           --------------------

      The Seller is an "accredited  investor"  within the meaning of Rule 501 of
the Securities Act of 1933, as amended. The Seller is in a financial position to
hold the Shares and is able to bear the economic  risk and  withstand a complete
loss of the Seller's  investment in the Shares.  The Seller  recognizes that the
Shares involve a high degree of risk. The Seller is a sophisticated investor, is
able to fend for itself in the transaction  contemplated by this Agreement,  and
has such  knowledge and  experience  in financial and business  matters that the
Seller  is  capable  of  evaluating  the  merits  and  risks of the  prospective
investment in the Shares.

      3.30 Patriot Act.
           ------------

      The Seller  certifies  that,  to the best of the Seller's  knowledge,  the
Seller has not been designated,  and is not owned or controlled, by a "suspected
terrorist" as defined in Executive Order 13224.  The Seller hereby  acknowledges
that the  Parent  seeks to comply  with all  applicable  Laws  concerning  money
laundering and related activities.  In furtherance of those efforts,  the Seller
hereby  represents,  warrants and agrees that:  (i) none of the cash or property
owned by the  Seller  has been or shall be  derived  from,  or  related  to, any
activity  that  is  deemed  criminal  under  United  States  law;  and  (ii)  no
contribution  or payment by the Seller has, and this  Agreement  will not, cause
the Seller to be in violation of the United  States Bank Secrecy Act, the United


                                       18
<PAGE>

States  International  Money Laundering Control Act of 1986 or the United States
International  Money Laundering  Abatement and  Anti-Terrorist  Financing Act of
2001.

                                   ARTICLE IV
          REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB

      The Parent and the  Acquisition  Sub jointly and  severally  represent and
warrant to the Seller and Seller's Shareholder that:

      4.1 Organization and Good Standing.
          -------------------------------

      (a) The Parent is a corporation  duly organized,  validly  existing and in
good  standing  under the laws of the State of  Delaware  and has all  requisite
corporate  power and authority to own,  lease and operate its  properties and to
carry  on its  business  as now  conducted.  The  Parent  is duly  qualified  or
authorized to do business as a foreign corporation and is in good standing under
the laws of each  jurisdiction in which it owns or leases real property and each
other  jurisdiction in which the conduct of its business or the ownership of its
properties requires such qualification or authorization, except where failure to
be so qualified would not have a material adverse effect on the business, assets
or financial condition of the Parent taken as a whole ; and

      (b)  Acquisition  Sub  is a  corporation  duly  incorporated  and  validly
existing  and in good  standing  under the laws of the State of  Delaware,  is a
wholly owned subsidiary of the Parent and has all requisite  corporate power and
authority to own,  lease and operate its properties and to carry on its business
as now conducted. As of the Closing of this Agreement,  Acquisition Sub shall be
duly qualified or authorized to do business as a foreign  corporation  and shall
be in good standing under the laws of the States of New York and New Jersey.

      4.2 Authorization of Agreement.
          ---------------------------

The Parent and the  Acquisition  Sub have full corporate  power and authority to
execute and deliver this  Agreement,  the Note, the Security  Agreement,  the IP
Security  Agreement  and the  Employment  Agreement  and each  other  agreement,
document,  instrument or  certificate  contemplated  by this  Agreement or to be
executed by the Parent and Acquisition  Sub in connection with the  consummation
of  the  transactions   contemplated  hereby  and  thereby  (together  with  the
Employment   Agreement,   the  "Parent   Documents"),   and  to  consummate  the
transactions  contemplated  hereby and  thereby.  The  execution,  delivery  and
performance by the Parent and  Acquisition Sub of this Agreement and each Parent
Document have been duly authorized by all necessary  corporate  action on behalf
of the Parent and  Acquisition  Sub. This  Agreement  has been,  and each Parent
Document will be at or prior to the Closing,  duly executed and delivered by the
Parent and Acquisition Sub, and (assuming the due  authorization,  execution and
delivery by the other parties  hereto and thereto) this  Agreement  constitutes,
and each Parent Document when so executed and delivered will constitute,  legal,
valid and binding  obligations of the Parent and  Acquisition  Sub,  enforceable
against  the Parent and  Acquisition  Sub in  accordance  with their  respective
terms, subject to applicable bankruptcy, insolvency, reorganization,  moratorium
and  similar  laws  affecting  creditors'  rights and  remedies  generally,  and
subject,  as to  enforceability,  to general  principles  of  equity,  including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).


                                       19
<PAGE>

      4.3 Capitalization.
          ---------------

      (a) As of the date  hereof,  the  authorized  capital  stock of the Parent
consists  of (i)  9,999,000,000  shares of Common  Stock,  of which  210,716,359
shares are issued and  outstanding,  4,000,000  shares are reserved for issuance
pursuant to the  Parent's  stock  option  plans;  and (ii)  1,000,000  shares of
preferred  stock, of which no shares are issued and  outstanding.  Following the
Parent's  contemplated  one-for 100 reverse stock split, there will be 2,107,164
shares of Common Stock and no shares of preferred stock  outstanding and, except
as set forth on Schedule 4.3, no shares shall be reserved for issuance  pursuant
to outstanding debentures,  options,  warrants,  scrip, rights to subscribe for,
puts,  calls,  rights of first refusal,  agreements,  understandings,  claims or
other  commitments  or  rights  of any  character  whatsoever  relating  to,  or
securities or rights  convertible into or exchangeable for any shares of capital
stock of the Parent or any of its  Subsidiaries,  or  arrangements  by which the
Parent or any of its  Subsidiaries  is or may become  bound to issue  additional
shares of capital  stock of the Parent or any of its  Subsidiaries.  All of such
outstanding  shares  of  capital  stock  are,  or upon  issuance  will be,  duly
authorized, validly issued, fully paid and nonassessable. Except as set forth on
Schedule 4.3, no shares of capital stock of the Parent are subject to preemptive
rights or any other  similar  rights of the  shareholders  of the  Parent or any
liens or  encumbrances  imposed  through  the  actions  or failure to act of the
Parent.

      (b) As of the Closing, the authorized capital stock of the Acquisition Sub
consists of 200 shares of common Stock, no par value (the "Common Stock"). As of
the date of the Closing,(i) there shall be 200 shares of Common Stock issued and
outstanding,  all of which  shall be owned by the Parent,  and;  (ii) all of the
issued and  outstanding  shares of Common Stock shall have been duly  authorized
for issuance and validly issued,  fully paid and  non-assessable.  Except as set
forth on Schedule 4.3 and as of the Closing,  no shares of capital  stock of the
Acquisition  Sub shall be  subject  to  preemptive  rights or any other  similar
rights of the  shareholders  or debtors of the Parent or the Acquisition Sub nor
to any liens or  encumbrances  imposed  through the actions or failure to act of
the Parent or Acquisition Sub.

      4.4 Subsidiaries.
          -------------

      Except for the Acquisition Sub, the Parent has no subsidiaries.

      4.5 Corporate Records.
          ------------------

      The Parent and the  Acquisition  Sub have  delivered  to the Seller  true,
correct and complete copies of their certificates of incorporation (certified by
the  Secretary  of  the  State  of  Delaware)  and  by-laws  (certified  by  the
secretaries,  assistant secretaries or other appropriate officers) of the Parent
and the Acquisition Sub, respectively.

      4.6 Conflicts; Consents of Third Parties.
        ---------------------------------------

      (a) Except as set forth on Schedule 4.6 hereto,  neither of the execution,
delivery  and  performance  by the  Parent  or  Acquisition  Sub  of the  Parent
Documents,  nor the compliance by the Parent and the Acquisition Sub with any of
the provisions hereof or thereof will (i) conflict with, or result in the breach
of, any provision of the certificate of  incorporation or by-laws of the Parent,
(ii) conflict  with,  violate,  result in the breach of, or constitute a default
under  any  note,  bond,  mortgage,   indenture,  license,  agreement  or  other
obligation to which the Parent Acquisition Sub is a party or by which the Parent
or its  properties  or assets  are bound or (iii)  violate  any  statute,  rule,
regulation,  order or decree of any governmental  body or authority by which the
Parent Acquisition Sub is bound,  except, in the case of clauses (ii) and (iii),
for such violations,  breaches or defaults as would not,  individually or in the
aggregate, have a material adverse effect on the business,  properties,  results
of operations,  prospects, conditions (financial or otherwise) of the Parent and
its subsidiaries, taken as a whole.


                                       21
<PAGE>


      (b) No consent,  waiver,  approval,  order, permit or authorization of, or
declaration or filing with, or notification to, any Person or Governmental  Body
is required on the part of the Parent or Acquisition  Sub in connection with the
execution  and  delivery  of  this  Agreement  or the  Parent  Documents  or the
compliance by Parent or  Acquisition  Sub with any of the  provisions  hereof or
thereof.

      4.7 SEC Documents and Financial Statements
          --------------------------------------

      Except as disclosed in Schedule 4.7, since January 1, 2004, the Parent has
timely  filed all  reports,  schedules,  forms  statements  and other  documents
required to be filed by it with the SEC pursuant to the  reporting  requirements
of the Securities  Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits  included  therein and
financial statements and schedules thereto and documents (other than exhibits to
such documents) incorporated by reference therein, being hereinafter referred to
herein as the `SEC Documents").  As of their respective dates, the SEC Documents
complied in all material  respects with the requirements of the 1934 Act and the
rules and  regulations of the SEC promulgated  thereunder  applicable to the SEC
Documents,  and none of the SEC Documents,  at the time they were filed with the
SEC,  contained  any untrue  statement of a material  fact or omitted to state a
material  fact  required to be stated  therein or necessary in order to make the
statements  therein,  in light of the circumstances  under which they were made,
not misleading. None of the statements made in any such SEC Documents is, or has
been,  required to be amended or updated under  applicable  law (except for such
statements as have been amended or updated in subsequent  filings prior the date
hereof).  As of their respective dates, the financial  statements of the Company
included in the SEC Documents  complied as to form in all material respects with
applicable  accounting  requirements  and the published rules and regulations of
the SEC with  respect  thereto.  Such final  statements  have been  prepared  in
accordance  with  United  States  generally  accepted   accounting   principles,
consistently  applied,  during  the  periods  involved  (except  (i)  as  may be
otherwise  indicated in such financial  statements or the notes thereto, or (ii)
in the case of unaudited interim statements,  to the extent they may not include
footnotes or may be condensed or summary  statements)  and fairly present in all
material  respects the  consolidated  financial  position of the Company and its
consolidated  Subsidiaries as of the dates thereof and the consolidated  results
of their  operations and cash flows for the periods then ended (subject,  in the
case of unaudited statements,  to normal year-end audit adjustments).  Except as
set  forth  in the  financial  statements  of the  Company  included  in the SEC
Documents, the Company has no liabilities,  contingent or otherwise,  other than
(i)  liabilities  incurred  in the  ordinary  course of business  subsequent  to
December 31, 2003 and (ii) obligations under contracts and commitments  incurred
in the ordinary  course of business and not required  under  generally  accepted
accounting  principles  to be reflected  in such  financial  statements,  which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company.

      4.8 Litigation
          ----------

      There are no Legal  Proceedings  pending or, to the best  knowledge of the
Parent,  threatened  that are  reasonably  likely to prohibit  or  restrain  the
ability of the Parent or  Acquisition  Sub to enter into this  Agreement and the
Parent Documents, consummate or perform the transactions contemplated hereby.

      4.9 Permits; Compliance.
          --------------------

      The  Parent  and or the  Acquisition  Sub,  as the case may be:  (i) is in
possession  of  all  franchises,  grants,  authorizations,   licenses,  permits,
easements, variances, exemptions,  consents, certificates,  approvals and orders
necessary to own,  lease and operate its properties and to carry on its business
as it is now being conducted (collectively,  the "Parent Permits"), except where
the  failure  would not have a  material  adverse  effect and there is no action
pending or, to the knowledge of the Parent,  threatened  regarding suspension or


                                       21
<PAGE>

cancellation of any of the Parent Permits, and; (ii) is not in conflict with, or
in default or  violation  of,  any of the  Parent  Permits,  except for any such
conflicts, defaults or violations which, individually or in the aggregate, would
not reasonably be expected to have a material adverse effect. Since December 31,
2004,  the Parent has not  received  any  notification  with respect to possible
conflicts,  defaults  or  violations  of  applicable  laws,  except for  notices
relating  to  possible  conflicts,  defaults  or  violations,  which  conflicts,
defaults or violations would not have a material adverse effect.

      4.10 Financial Advisors.
           -------------------

      No person  has  acted,  directly  or  indirectly,  as a broker,  finder or
financial   advisor  for  the  Parent  in  connection   with  the   transactions
contemplated  by  this  Agreement  and no  person  is  entitled  to  any  fee or
commission or like payment in respect thereof.

      4.11 No Misrepresentations.
           ----------------------

      No  representation  or  warranty  of the  Parent  or the  Acquisition  Sub
contained in this Agreement or in any schedule  hereto or in any  certificate or
other  instrument  furnished by the Parent or the  Acquisition Sub to the Seller
pursuant to the terms hereof,  contains any untrue  statement of a material fact
or omits to state a material  fact  necessary to make the  statements  contained
herein or therein not misleading.

      4.12 Patriot Act.
           ------------

      The Parent  certifies  that,  to the best of the Parent's  knowledge,  the
Parent has not been designated,  and is not owned or controlled, by a "suspected
terrorist" as defined in Executive Order 13224.  The Parent hereby  acknowledges
that the  Seller  seeks to comply  with all  applicable  Laws  concerning  money
laundering and related activities.  In furtherance of those efforts,  the Parent
hereby  represents,  warrants and agrees that:  (i) none of the cash or property
owned by the  Seller  has been or shall be  derived  from,  or  related  to, any
activity  that  is  deemed  criminal  under  United  States  law;  and  (ii)  no
contribution  or payment by the Parent has, and this  Agreement  will not, cause
the Parent to be in violation of the United  States Bank Secrecy Act, the United
States  International  Money Laundering Control Act of 1986 or the United States
International  Money Laundering  Abatement and  Anti-Terrorist  Financing Act of
2001.


                                    ARTICLE V
                                    COVENANTS

      5.1 Access to Information.
          ----------------------

      The Seller  agrees that,  prior to the Closing  Date,  the Parent shall be
entitled,  through  its  officers,  employees  and  representatives  (including,
without  limitation,   its  legal  advisors  and  accountants),   to  make  such
investigation  of the  properties,  businesses  and operations of the Seller and
such examination of the books,  records and financial condition of the Seller as
it  reasonably  requests  and to make  extracts  and  copies  of such  books and
records.  Any such  investigation  and  examination  shall be  conducted  during
regular business hours and under reasonable circumstances,  and the Seller shall
cooperate fully therein.  No  investigation  by the Parent prior to or after the
date of this  Agreement  shall  diminish or obviate any of the  representations,
warranties,  covenants  or  agreements  of the  Seller  contained  in the Seller
Documents.  In order  that the  Parent  may have full  opportunity  to make such
physical, business, accounting and legal review, examination or investigation as


                                       22
<PAGE>

it may reasonably  request of the affairs of the Seller,  Seller shall cause its
officers,  employees,  consultants,  agents,  accountants,  attorneys  and other
representatives to cooperate fully with such  representatives in connection with
such review and examination.

      5.2 Conduct of the Business Pending the Closing.
          -------------------------------------------

      (a) Except as otherwise  expressly  contemplated by this Agreement or with
the prior written consent of the Parent, the Seller shall:

         (i) conduct its business only in the ordinary  course  consistent  with
past practice;

         (ii)  use  its  best  efforts  to (A)  preserve  its  present  business
operations,  organization  (including,  without  limitation,  management and the
sales force) and goodwill and (B) preserve its present relationship with Persons
having business dealings with it;

         (iii)  maintain (A) all of its assets and  properties  in their current
condition,  ordinary wear and tear  excepted and (B)  insurance  upon all of its
properties  and assets in such amounts and of such kinds  com-parable to that in
effect on the date of this Agreement;

         (iv) (A)  maintain  its books,  accounts  and  records in the  ordinary
course of  business  consistent  with past  practices,  (B)  continue to collect
accounts  receivable and pay accounts payable  utilizing  normal  procedures and
without  discounting or  accelerating  payment of such accounts,  and (C) comply
with all contractual and other obligations applicable to its operation; and

         (v) comply in all material  respects with applicable  Laws,  including,
without limitation, Environmental Laws.

      (b) Except as otherwise  expressly  contemplated by this Agreement or with
the prior written consent of the Parent, the Seller shall not:

         (i) declare,  set aside, make or pay any dividend or other distribution
in respect of its capital stock or repurchase,  redeem or otherwise  acquire any
outstanding  shares  of the  capital  stock or  other  securities  of,  or other
ownership interests in it;

         (ii)  transfer,  issue,  sell or dispose  of any shares of its  capital
stock or other securities or grant options,  warrants,  calls or other rights to
purchase or otherwise acquire shares of its capital stock or other securities;

         (iii)  effect any  recapitalization,  reclassification,  stock split or
like change in the capitalization;

         (iv) amend its certificate of incorporation or by-laws;

         (v) (A) materially  increase the annual level of compensation of any of
its employee, (B) increase the annual level of compensation payable or to become
payable by the it to any of its  executive  officers,  (C) grant any  unusual or
extraordinary  bonus,  benefit or other direct or indirect  compensation  to any
employee,  director or consultant,  other than in the ordinary course consistent
with past  practice  and in such  amounts as are fully  reserved  against in the
Financial Statements,  (D) increase the coverage or benefits available under any
(or create any new)  severance  pay,  termination  pay,  vacation  pay,  company


                                       23
<PAGE>

awards, salary continuation for disability,  sick leave, deferred  compensation,
bonus or other  incentive  compensation,  insurance,  pension or other  employee
benefit  plan  or  arrangement  made  to,  for,  or with  any of its  directors,
officers,  employees,  agents or representatives or otherwise modify or amend or
terminate  any such  plan or  arrangement  or (E)  enter  into  any  employment,
deferred  compensation,   severance,  consulting,   non-competition  or  similar
agreement  (or  amend any such  agreement)  involving  a  director,  officer  or
employee of the Seller in his or her capacity as a director, officer or employee
of the Seller;

         (vi) except for trade payables and for  indebtedness for borrowed money
incurred in the ordinary  course of business and consistent  with past practice,
borrow  monies  for any  reason  or  draw  down on any  line of  credit  or debt
obligation,  or become the guarantor,  surety,  endorser or otherwise liable for
any debt, obligation or liability (contingent or otherwise) of any other Person;

         (vii)  subject to any Lien  (except  for liens  that do not  materially
impair the use of the property subject thereto in their respective businesses as
presently  conducted),  any of its  properties  or assets  (whether  tangible or
intangible);

         (viii)  acquire  any  material  properties  or assets or sell,  assign,
transfer,  convey,  lease or otherwise dispose of any of its material properties
or assets  (except for fair  consideration  in the  ordinary  course of business
consistent  with past  practice)  except,  with  respect to the items  listed on
Schedule 5.2(b)(viii) hereto, as previously consented to by the Parent;

         (ix) except with respect to the recent  settlement of the Coronet Paper
judgment,  cancel  or  compromise  any debt or claim  or  waive or  release  any
material right except in the ordinary  course of business  consistent  with past
practice;

         (x) enter into any  commitment  for capital  expenditures  in excess of
$10,000 for any individual  commitment  and $100,000 for all  commitments in the
aggregate;

         (xi) enter into, modify or terminate any labor or collective bargaining
agreement or, through negotiation or otherwise, make any commitment or incur any
liability to any labor organization with respect to it;

         (xii)  introduce  any material  change with  respect to its  operation,
including any material  change in the types,  nature,  composition or quality of
its products or services,  experience any material change in any contribution of
its product lines to its revenues or net income,  or, other than in the ordinary
course of business, make any change in product specifications or prices or terms
of distributions of such products;

         (xiii)  enter into any  transaction  or make or enter into any Contract
which by  reason  of its size or  otherwise  is not in the  ordinary  course  of
business consistent with past practice;

         (xiv)  enter into or agree to enter  into any  merger or  consolidation
with,  any  corporation  or other entity,  and not engage in any new business or
invest in, make a loan, advance or capital contribution to, or otherwise acquire
the securities of any other Person;
         (xv) except for  transfers of cash  pursuant to normal cash  management
practices,  make any investments in or loans to, or pay any fees or expenses to,
or enter into or modify any Contract with any Affiliate; or

                                       24
<PAGE>

         (xvi) agree to do anything  prohibited  by this Section 5.2 or anything
which would make any of the representations and warranties of the Seller in this
Agreement or the Seller Documents untrue or incorrect in any material respect as
of any time through and including the Effective Time.

      5.3 Consents.
          --------

      The Seller shall use its best efforts, and the Parent shall cooperate with
the  Seller,  to  obtain  at the  earliest  practicable  date all  consents  and
approvals   required  to  consummate  the  transactions   contemplated  by  this
Agreement, including, without limitation, the consents and approvals referred to
in Section 3.5(b)  hereof;  provided,  however,  that neither the Seller nor the
Parent shall be obligated to pay any  consideration  therefor to any third party
from whom consent or approval is requested.

      5.4 Other Actions.
          -------------

      Each of the Seller,  Parent and Acquisition Sub shall use its best efforts
to (i) take all actions  necessary or appropriate to consummate the transactions
contemplated  by this  Agreement and (ii) cause the  fulfillment at the earliest
practicable  date of all of the  conditions to their  respective  obligations to
consummate the transactions contemplated by this Agreement.

      5.5 No Solicitation.
          ----------------

      The Seller  will not,  and will not cause or permit any of its  directors,
officers,    employees,    representatives   or   agents   (collectively,    the
"Representatives")   to,  directly  or  indirectly,   (i)  discuss,   negotiate,
undertake,  authorize,  recommend, propose or enter into, either as the proposed
surviving,  merged, acquiring or acquired corporation, any transaction involving
a merger,  consolidation,  business combination,  purchase or disposition of any
amount of the assets or capital stock or other equity  interest in it other than
the transactions contemplated by this Agreement (an "Acquisition  Transaction"),
(ii) facilitate,  encourage,  solicit or initiate  discussions,  negotiations or
submissions  of  proposals or offers in respect of an  Acquisition  Transaction,
(iii)  furnish  or  cause  to be  furnished,  to  any  Person,  any  information
concerning its business, operations,  properties or assets in connection with an
Acquisition Transaction,  or (iv) otherwise cooperate in any way with, or assist
or participate in,  facilitate or encourage,  any effort or attempt by any other
Person to do or seek any of the foregoing.  The Seller will inform the Parent in
writing immediately following the receipt by the Seller or any Representative of
any proposal or inquiry in respect of any Acquisition Transaction.

      5.6 Preservation of Records.
          ------------------------

      Subject to Section  8.4(e)  hereof  (relating to the  preservation  of Tax
records),  the Seller,  the Parent and  Acquisition  Sub agree that each of them
shall  preserve  and keep the records held by it relating to the business of the
Seller  for a period of three  years from the  Closing  Date and shall make such
records and personnel  available to the other as may be  reasonably  required by
such party in  connection  with,  among other things,  any insurance  claims by,
legal  proceedings  against or governmental  investigations  of the Seller,  the
Parent or Acquisition  Sub or any of their  Affiliates or in order to enable the
Seller,   the  Parent  or  Acquisition  Sub  to  comply  with  their  respective
obligations  under  this  Agreement,  the  Employment  Agreement  and each other
agreement,  document or instrument  contemplated hereby or thereby. In the event
the Seller,  the Parent or Acquisition  Sub wishes to destroy such records after
that time,  such party shall first give ninety (90) days prior written notice to
the other and such other party  shall have the right at its option and  expense,
upon prior  written  notice  given to such party  within  that  ninety  (90) day


                                       25
<PAGE>

period,  to take  possession of the records  within one hundred and eighty (180)
days after the date of such notice.

      5.7 Publicity.
          ---------

      Neither the  Seller,  the Parent nor the  Acquisition  Sub shall issue any
press  release  or  public   announcement   concerning  this  Agreement  or  the
transactions contemplated hereby without obtaining the prior written approval of
the other party  hereto,  which  approval will not be  unreasonably  withheld or
delayed, unless, in the sole judgment of the Parent or the Seller, disclosure is
otherwise  required by applicable  Law or by the  applicable  rules of any stock
exchange on which the Parent or the Seller lists  securities,  provided that, to
the extent  required by applicable Law, the party intending to make such release
shall use its best efforts  consistent  with such applicable Law to consult with
the other party with respect to the text thereof.

      5.8 Use of Name.
          -----------

      The Seller hereby agrees that upon the  consummation  of the  transactions
contemplated hereby, the Parent and Acquisition Sub shall have the sole right to
the use of the name "CGM Security Solutions" and the Seller shall not, and shall
not  cause  or  permit  any  Affiliate  to use  such  name or any  variation  or
simulation thereof.

      5.9 Environmental Matters.
          ----------------------

      (a) The Seller shall permit the Parent and Acquisition Sub to conduct such
investigations  (including  investigations  known as  "Phase I" and  "Phase  II"
environmental audits) of the environmental conditions of the Seller's properties
and facilities as Parent and Acquisition  Sub, in their sole  discretion,  shall
deem  necessary.  Such  investigations  shall  be  conducted  in a  manner  that
minimizes the disruption of the operations of the Seller.

      (b) Seller shall promptly file all materials required under  Environmental
Laws (including,  without  limitation,  foreign or state property transfer laws)
and all requests required for the issuance,  transfer or reissuance to Parent of
Permits necessary to conduct the Seller's business prior to the Closing Date.

      5.10 Parent Documents.
           -----------------

      The Parent,  Acquisition Sub and the Seller hereby agree that, on or prior
to the  Closing  Date,  (i) the Parent and  Acquisition  Sub shall  execute  and
deliver to the  Seller the Note  substantially  in the form  attached  hereto as
Exhibit A, the Security  Agreement  substantially in the form attached hereto as
Exhibit  B and the IP  Security  Agreement  substantially  in the form  attached
hereto as Exhibit C, and to the Seller  Shareholder,  the Employment  Agreement,
substantially  in the  form  attached  hereto  as  Exhibit  D  (the  "Employment
Agreement"),  and;  (ii) the Seller  shall  cause its  Seller's  Shareholder  to
execute and deliver to Parent and Acquisition Sub the Employment Agreement.


                                       26
<PAGE>

      5.11 Financial Statements.
           ---------------------

      The Seller  shall  cooperate  with the Parent to provide  all  information
required for the completion of audited financial  statements of the Seller to be
prepared and delivered no later than 60 days from the Closing Date (the "Closing
Date Balance Sheet").

      5.12 Corporate Existence.
           --------------------

      So long as the Note  delivered  by Parent  and  Acquisition  Sub to Seller
remains unpaid and  outstanding,  the Parent and  Acquisition Sub shall maintain
their respective corporate existence and shall not sell all or substantially all
of their respective assets,  except in the event of a merger or consolidation or
sale of all or  substantially  all of  their  assets,  where  the  surviving  or
successor entity in such transaction  assumes the Parent's and Acquisition Sub's
obligations hereunder as well as under the Note and other Parent Documents.

      5.13 So long as the Note delivered by Parent and Acquisition Sub to Seller
remains  unpaid and  outstanding,  the Parent and  Acquisition  Sub shall notify
Seller in writing within five (5) days' of Parent's or Acquisition Sub's receipt
of any verbal or written  notice that either or both are in default or in breach
of any term or provision of any debt  instrument of any nature  whatsoever  that
could result in any material impairment of Seller's rights under this Agreement,
the Note or the Security Agreements.

                                   ARTICLE VI
                              CONDITIONS TO CLOSING

      6.1 Conditions Precedent to Obligations of Parent and Acquisition Sub.
          -----------------------------------------------------------------

      The  obligation  of the  Parent  and  Acquisition  Sub to  consummate  the
transactions contemplated by this Agreement is subject to the fulfillment, on or
prior to the Closing Date, of each of the  following  conditions  (any or all of
which may be waived by the Parent in whole or in part to the extent permitted by
applicable Law):

      (a) all  representations  and  warranties of the Seller  contained  herein
shall be true and correct as of the date hereof;

      (b) all  representations  and  warranties of the Seller  contained  herein
qualified as to materiality shall be true and correct,  and the  representations
and  warranties of the Seller  contained  herein not qualified as to materiality
shall be true and  correct in all  material  respects,  at and as of the Closing
Date with the same effect as though those  representations  and  warranties  had
been made again at and as of that time;

      (c) the Seller shall have performed and complied in all material  respects
with all obligations and covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date;

      (d) the Parent  shall have been  furnished  with  certificates  (dated the
Closing date and in form and substance  reasonably  satisfactory  to the Parent)
executed  by the  Seller  certifying  as to the  fulfillment  of the  conditions
specified in Sections 6.1(a), 6.1(b) and 6.1(c) hereof;

      (e) the Parent shall have obtained all consents and waivers referred to in
Section  4.3  hereof  with  respect  to the  transactions  contemplated  by this
Agreement and the Parent Documents;

      (f) there shall not have been or occurred any Material Adverse Change;

                                       27
<PAGE>

      (g) the Seller shall have obtained all consents and waivers referred to in
Section 3.5  hereof,  in a form  reasonably  satisfactory  to the  Parent,  with
respect  to the  transactions  contemplated  by this  Agreement  and the  Seller
Documents;

      (h) no Legal Proceedings shall have been instituted or threatened or claim
or demand made against the Seller or the Parent  seeking to restrain or prohibit
or to  obtain  substantial  damages  with  respect  to the  consummation  of the
transactions  contemplated hereby, and there shall not be in effect any order by
a  Governmental  Body  of  competent  jurisdiction  restraining,   enjoining  or
otherwise prohibiting the consummation of the transactions contemplated hereby;

      (i) Seller's  Stockholder shall have entered into an employment  agreement
with the Parent.

      (j)  the  Parent's  investigation  of  environmental   conditions  at  the
properties   and   facilities   of  the  Seller  shall  not  have  revealed  any
circumstances  which could reasonably result in (1) the criminal  prosecution of
Seller or any employee of Seller under Environmental Laws, (2) any suspension or
closure of  operations  at the  Seller's  properties  or  facilities  or (3) any
liabilities  arising  under  Environmental  Laws which,  individually  or in the
aggregate, could reasonably give rise to a Material Adverse Effect;

      (k) Seller shall have obtained the issuance, reissuance or transfer of all
Permits required under  Environmental Laws for the Parent and Acquisition Sub to
conduct the operations of the Seller's business as of the Closing Date; and

      (l) Seller shall have satisfied all property transfer requirements arising
under Environmental Laws.

      6.2 Conditions Precedent to Obligations of the Seller.
          -------------------------------------------------

      The obligations of the Seller to consummate the transactions  contemplated
by this  Agreement  are subject to the  fulfillment,  prior to or on the Closing
Date, of each of the following  conditions (any or all of which may be waived by
the Seller in whole or in part to the extent permitted by applicable law):

      (a) all  representations  and warranties of the Parent and Acquisition Sub
contained herein shall be true and correct as of the date hereof;

      (b) all  representations  and warranties of the Parent and Acquisition Sub
contained herein qualified as to materiality shall be true and correct,  and all
representations  and  warranties  of the Parent and  Acquisition  Sub  contained
herein not qualified as to materiality shall be true and correct in all material
respects,  at and as of the Closing  Date with the same  effect as though  those
representations and warranties had been made again at and as of that date;

      (c) the Parent and  Acquisition  Sub shall have  performed and complied in
all  material  respects  with all  obligations  and  covenants  required by this
Agreement to be performed or complied with by Parent and  Acquisition  Sub on or
prior to the Closing Date;

      (d) the Seller  shall have been  furnished  with  certificates  (dated the
Closing Date and in form and substance  reasonably  satisfactory  to the Seller)
executed  by the Chief  Executive  Officer  and Chief  Financial  Officer of the
Parent  and  the  Acquisition  Sub  certifying  as to  the  fulfillment  of  the


                                       28
<PAGE>

conditions  specified in Sections 6.2(a),  6.2(b) and 6.2(c), and resolutions of
the Board of  Directors  of the  Parent  and  Acquisition  Sub  authorizing  the
acquisition of the Seller;

      (e)  there  shall not be in effect  any  order by a  Governmental  Body of
competent  jurisdiction  restraining,  enjoining  or otherwise  prohibiting  the
consummation of the transactions contemplated hereby;

      (f) the Parent and  Acquisition Sub shall have entered into the Employment
Agreement with Seller's Stockholder; and

      (g) the  Acquisition  Sub and the  Seller  shall  have  entered  into  the
Security Agreements,  dated as of the date of the Closing, pursuant to which the
Acquisition  Sub shall  have  granted a security  interest  to the Seller in the
Assets secondary to the interests of the Original Secured Parties (as defined in
the Security Agreements), and the Parent and Acquisition Sub shall have executed
and delivered to the Seller the Note.

                                  ARTICLE VII
                            DOCUMENTS TO BE DELIVERED

      7.1 Documents to be Delivered by the Seller.
          ---------------------------------------

      At the Closing, the Seller shall deliver, or cause to be delivered, to the
Parent and Acquisition Sub the following:

      (a) the  opinion of Joseph  Tomasek,  special  counsel to the  Seller,  in
substantially the form of Exhibit E hereto;

      (b) copies of all  consents  and  waivers  referred  to in Section  6.1(g)
hereof;

      (c) Employment  Agreement,  substantially in the form of Exhibit D hereto,
duly executed by Seller's Stockholder; and

      (d)  such  other  documents  as  the  Parent  and  Acquisition  Sub  shall
reasonably request.


      7.2 Documents to be Delivered by the Parent and Acquisition Sub.
          -----------------------------------------------------------

      At the Closing,  the Parent  and/or  Acquisition  Sub shall deliver to the
Seller the following

      (a) evidence of the wire transfer referred to in Section 1.4(b)(i) hereof;

      (b) the certificates and resolutions referred to in Section 6.2(d) hereof;

      (c) the Note, the Security  Agreement,  the IP Security  Agreement and the
Employment Agreement, all in substantially the forms attached hereto as Exhibits
A, B, C and D, respectively;

      (d) the opinion of Sichenzia  Ross  Friedman  Ference LLP,  counsel to the
Parent and Acquisition Sub, in substantially the form of Exhibit F hereto;

                                       29
<PAGE>

      (e) the  letter  agreement,  dated  the date  hereof,  signed  by  Parent,
Acquisition Sub and the "Investors"  identified  therein,  in substantially  the
form attached hereto as Exhibit G; and

      (e) such other documents as the Sellers shall reasonably request.

                                  ARTICLE VIII
                                 INDEMNIFICATION

      8.1 Indemnification.
          ----------------

      (a) Subject to Section 8.2 hereof, the Seller and the Seller's Stockholder
hereby agree to jointly and severally indemnify and hold the Parent, Acquisition
Sub and their respective directors,  officers,  employees,  Affiliates,  agents,
successors and assigns (collectively, the "Parent Indemnified Parties") harmless
from and against:

         (i) any and all  liabilities of the Seller and Seller's  Stockholder of
every kind,  nature and  description,  absolute  or  contingent,  including  the
Coronet Paper Judgment and any other lawsuits or judgments against Seller and/or
Seller's  Stockholder,  arising  from the  Business  prior to the  Closing  Date
hereof,  existing as against the Seller prior to and  including the Closing Date
or  thereafter  coming  into  being or  arising  by reason of any state of facts
existing,  or any  transaction  entered  into,  on or prior to the Closing Date,
except to the extent that the same have been fully provided for (and accrued and
applied as a liability)  in the Closing Date Balance  Sheet or were  incurred in
the ordinary  course of business  between the Balance Sheet Date and the Closing
Date;

         (ii)  subject  to  Section  9.3,  any  and  all  losses,   liabilities,
obligations,  damages,  costs  and  expenses  based  upon,  attributable  to  or
resulting from the failure of any  representation  or warranty of the Seller set
forth in Section 3 hereof, or any  representation  or warranty  contained in any
certificate  delivered by or on behalf of the Seller pursuant to this Agreement,
to be true and correct in all respects as of the date made;

         (iii) any and all losses, liabilities,  obligations, damages, costs and
expenses  based  upon,  attributable  to or  resulting  from the  breach  of any
covenant or other agreement on the part of the Seller under this Agreement;

         (iv) any and all losses  (including any loss of use of Seller  Property
or  any  of  the  tangible  personal  property  of  the  Seller),   liabilities,
obligations, claims, damages, costs and expenses arising from:

            (A)  any  failure  of  any  of the  representations  and  warranties
      contained  in Section 3.20 of this  Agreement,  or any  representation  or
      warranty  with  respect  to   environmental   matters   contained  in  any
      certificate  delivered  by or on behalf  of the  Seller  pursuant  to this
      Agreement,  to have been true and  correct in all  respects as of the date
      made;

            (B) any  Release  in, on, at, or from the  Seller  Properties  which
      occurred,  or resulted from  operations  occurring,  as of or prior to the
      Closing;

            (C) any tort  liability to third parties as a result of any Releases
      or from exposure to Hazardous Materials arising from any Releases as of or
      prior to the Closing;

                                       30
<PAGE>

            (D)  notification or designation  under any  Environmental  Law as a
      potentially  responsible party for onsite or offsite disposal of Hazardous
      Materials,  which disposal occurred as of or prior to the Closing,  or the
      listing of any Purchased Asset on the CERCLA  National  Priorities List or
      any  similar  list  under  any  Environmental  Law as a result  of  onsite
      disposal of Hazardous Materials as of or prior to the Closing;

            (E)  any  fines  or  penalties  with  respect  to any  violation  of
      Environmental Law occurring as of or prior to the Closing; and

            (F) any costs or fees associated with obtaining any required permits
      for the  Oxidizer and any other  environmental  permits as required by the
      State of New York, and

         (v) any and all notices, actions, suits, proceedings,  claims, demands,
assessments,  judgments, costs, penalties and expenses, including attorneys' and
other professionals' fees and disbursements (collectively,  "Expenses") incident
to any and all losses,  liabilities,  obligations,  damages,  costs and expenses
with  respect to which  indemnification  is  provided  hereunder  (collectively,
"Losses").

      (b)  Subject to Section  8.2,  Parent and  Acquisition  Sub hereby  agree,
jointly  and  severally,  to  indemnify  and hold the Seller  and its  officers,
directors, employees,  Affiliates, agents, successors and assigns as well as the
Seller's Stockholder  (collectively,  the "Seller Indemnified Parties") harmless
from and against:

         (i)  subject  to  Section  9.3,   any  and  all  losses,   liabilities,
obligations,  damages,  costs  and  expenses  based  upon,  attributable  to  or
resulting  from the failure of any  representation  or warranty of the Parent or
Acquisition Sub set forth in Section 4 hereof, or any representation or warranty
contained  in  any  certificate  delivered  by or on  behalf  of the  Parent  or
Acquisition  Sub  pursuant  to this  Agreement,  to be true and  correct  in all
respects as of the date made;


         (ii) any and all  liabilities of the Parent or the  Acquisition  Sub of
any kind, nature an description,  absolute or contingent, including any lawsuits
or judgments  against the Parent or  Acquisition  Sub prior to and including the
Closing Date or  thereafter  coming into being or arising by reason of any state
of facts existing,  or any transaction  entered into, on or prior to the Closing
Date ;

         (iii)  any  and  all,  liabilities,  obligations,  damages,  costs  and
expenses  based  upon,  attributable  to or  resulting  from the  breach  of any
covenant or other  agreement on the part of the Parent and Acquisition Sub under
this Agreement; and

         (iv) any and all Expenses incident to any and all losses,  liabilities,
obligations,  damages,  costs and expenses with respect to which indemnification
is provided hereunder.

      8.2 Limitations on  Indemnification  for Breaches of  Representations  and
          ----------------------------------------------------------------------
                Warranties.
                -----------

      An  indemnifying   party  shall  not  have  any  liability  under  Section
8.1(a)(ii) or Section 8.1(b)(i) hereof unless the aggregate amount of Losses and
Expenses to the indemnified parties finally determined to arise thereunder based
upon,  attributable  to or resulting from the failure of any  representation  or
warranty to be true and correct,  other than the  representations and warranties
set forth in Sections  3.7,  3.11,  3.16,  3.20,  3.28,  4.6,  4.7, 4.8 and 5.12
hereof,  exceeds  $15,000 (the  "Basket") and, in such event,  the  indemnifying
party shall be required to pay the entire  amount of such Losses and Expenses in
excess of $15,000 (the "Deductible").


                                       31
<PAGE>

      8.3 Indemnification Procedures.
          ---------------------------

      (a) In the event that any Legal  Proceedings  shall be  instituted or that
any claim or demand  ("Claim")  shall be  asserted  by any  Person in respect of
which payment may be sought under Section 8.1 hereof  (regardless  of the Basket
or the Deductible referred to above), the indemnified party shall reasonably and
promptly  cause  written  notice of the  assertion  of any Claim of which it has
knowledge which is covered by this indemnity to be forwarded to the indemnifying
party.  The  indemnifying  party  shall have the right,  at its sole  option and
expense,  to be represented  by counsel of its choice,  which must be reasonably
satisfactory to the indemnified party, and to defend against,  negotiate, settle
or otherwise deal with any Claim which relates to any Losses indemnified against
hereunder. If the indemnifying party elects to defend against, negotiate, settle
or otherwise deal with any Claim which relates to any Losses indemnified against
hereunder,  it shall within five (5) days (or sooner, if the nature of the Claim
so  requires)  notify  the  indemnified  party of its  intent  to do so.  If the
indemnifying party elects not to defend against,  negotiate, settle or otherwise
deal with any Claim which relates to any Losses  indemnified  against hereunder,
fails to notify the  indemnified  party of its  election  as herein  provided or
contests its obligation to indemnify the indemnified party for such Losses under
this Agreement, the indemnified party may defend against,  negotiate,  settle or
otherwise deal with such Claim. If the indemnified party defends any Claim, then
the indemnifying party shall reimburse the indemnified party for the Expenses of
defending  such Claim upon  submission of periodic  bills.  If the  indemnifying
party  shall  assume  the  defense  of any  Claim,  the  indemnified  party  may
participate,  at his or its own expense, in the defense of such Claim; provided,
however,  that such  indemnified  party shall be entitled to  participate in any
such defense with separate counsel at the expense of the indemnifying  party if,
(i) so  requested  by the  indemnifying  party  to  participate  or  (ii) in the
reasonable  opinion of counsel to the indemnified party, a conflict or potential
conflict exists between the indemnified  party and the  indemnifying  party that
would make such separate representation  advisable; and provided,  further, that
the  indemnifying  party  shall  not be  required  to pay for more than one such
counsel for all indemnified  parties in connection  with any Claim.  The parties
hereto agree to cooperate  fully with each other in connection with the defense,
negotiation or settlement of any such Claim.

      (b) After any final judgment or award shall have been rendered by a court,
arbitration  board or  administrative  agency of competent  jurisdiction and the
expiration of the time in which to appeal therefrom,  or a settlement shall have
been consummated, or the indemnified party and the indemnifying party shall have
arrived at a mutually binding  agreement with respect to a Claim hereunder,  the
indemnified party shall forward to the indemnifying party notice of any sums due
and owing by the  indemnifying  party pursuant to this Agreement with respect to
such matter and the indemnifying  party shall be required to pay all of the sums
so due and  owing to the  indemnified  party  by wire  transfer  of  immediately
available funds within 10 business days after the date of such notice.

      (c) The failure of the indemnified  party to give reasonably prompt notice
of any Claim  shall not  release,  waive or  otherwise  affect the  indemnifying
party's  obligations  with  respect  thereto  except  to  the  extent  that  the
indemnifying party can demonstrate actual loss and prejudice as a result of such
failure.


                                       32
<PAGE>

                                   ARTICLE IX
                                  MISCELLANEOUS

      9.1 Payment of Sales, Use or Similar Taxes.
          --------------------------------------

      All sales, use, transfer,  intangible,  recordation,  documentary stamp or
similar Taxes or charges, of any nature whatsoever,  applicable to, or resulting
from, the  transactions  contemplated  by this  Agreement  shall be borne by the
Seller

      9.2 Survival of Representations and Warranties.
          -------------------------------------------

      The parties  hereto hereby agree that the  representations  and warranties
contained  in this  Agreement  or in any  certificate,  document  or  instrument
delivered in  connection  herewith,  shall survive the execution and delivery of
this Agreement, and the Closing hereunder,  regardless of any investigation made
by the  parties  hereto;  provided,  however,  that any claims or  actions  with
respect  thereto  (other than claims for  indemnifications  with  respect to the
representation and warranties contained in Sections 3.7, 3.11, 3.16, 3.20, 3.27,
4.6,  4.7, 4.8, and 5.12 which shall  survive for periods  coterminous  with any
applicable statutes of limitation) shall terminate unless within thirty-six (36)
months  after the  Closing  Date  written  notice of such claims is given to the
Seller,  the Parent  and/or  the  Acquisition  Sub,  as the case may be, or such
actions are commenced.

      9.3 Expenses.
          --------

      Except as otherwise provided in this Agreement, the Seller, the Parent and
Acquisition Sub shall each bear its own expenses incurred in connection with the
negotiation and execution of this Agreement and each other  agreement,  document
and  instrument  contemplated  by this  Agreement  and the  consummation  of the
transactions contemplated hereby and thereby.

      9.4 Specific Performance.
          ---------------------

      The Seller acknowledges and agrees that the breach of this Agreement would
cause  irreparable  damage to the Parent and Acquisition Sub and that the Parent
and  Acquisition  Sub will not have an adequate  remedy at law.  Therefore,  the
obligations of the Seller under this Agreement,  including;  without limitation,
the Seller's  obligation to sell the Assets to the Parent and  Acquisition  Sub,
shall be enforceable by a decree of specific  performance issued by any court of
competent jurisdiction, and appropriate injunctive relief may be applied for and
granted in connection therewith. Such remedies shall, however, be cumulative and
not exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.

      9.5 Further Assurances.
          -------------------

      The  Seller,  the Parent and  Acquisition  Sub each  agrees to execute and
deliver such other  documents or agreements and to take such other action as may
be reasonably  necessary or desirable for the  implementation  of this Agreement
and the consummation of the transactions contemplated hereby.

      9.6 Submission to Jurisdiction; Consent to Service of Process.
           ---------------------------------------------------------

      (a) The parties  hereto  hereby  irrevocably  submit to the  non-exclusive
jurisdiction  of any federal or state court located within the State of New York
over any dispute  arising out of or  relating  to this  Agreement  or any of the
transactions contemplated hereby, except, however, any dispute arising out of or
relating to the Employment  Agreement  where consent to the  jurisdiction of the
courts of New Jersey is provided for therein and in which cases this Section 9.6
shall not apply,  and each party  hereby  irrevocably  agrees that all claims in
respect of such dispute or any suit,  action  proceeding  related thereto may be
heard and determined in such courts.  The parties hereby  irrevocably  waive, to
the fullest extent permitted by applicable Law, any objection which they may now
or  hereafter  have to the laying of venue of any such  dispute  brought in such


                                       33
<PAGE>

court or any defense of inconvenient  forum for the maintenance of such dispute.
Each of the parties  hereto  agrees  that a judgment in any such  dispute may be
enforced in other  jurisdictions  by suit on the judgment or in any other manner
provided by law.

      (b) Each of the parties hereto hereby  consents to process being served by
any party to this Agreement in any suit,  action or proceeding by the mailing of
a copy thereof in accordance with the provisions of Section 9.11.

      (c) Entire Agreement;  Amendments and Waivers.  This Agreement  (including
the schedules  and exhibits  hereto)  represents  the entire  understanding  and
agreement  between the parties  hereto with respect to the subject matter hereof
and can be amended,  supplemented  or changed,  and any provision  hereof can be
waived,  only by written  instrument making specific reference to this Agreement
signed by the party against whom enforcement of any such amendment,  supplement,
modification  or waiver is sought.  No action taken pursuant to this  Agreement,
including  without  limitation,  any investigation by or on behalf of any party,
shall be  deemed to  constitute  a waiver by the  party  taking  such  action of
compliance with any  representation,  warranty,  covenant or agreement contained
herein.  The  waiver by any party  hereto of a breach of any  provision  of this
Agreement shall not operate or be construed as a further or continuing waiver of
such breach or as a waiver of any other or subsequent  breach. No failure on the
part of any party to exercise,  and no delay in exercising,  any right, power or
remedy  hereunder  shall  operate as a waiver  thereof,  nor shall any single or
partial exercise of such right, power or remedy by such party preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
All  remedies  hereunder  are  cumulative  and are not  exclusive  of any  other
remedies provided by law.

      (d) Governing  Law. This  Agreement  shall be governed by and construed in
accordance with the laws of the State of New York.

      9.7 Table of Contents and Headings.
          -------------------------------

      The table of contents  and  section  headings  of this  Agreement  are for
reference  purposes  only and are to be given no effect in the  construction  or
interpretation of this Agreement.

      9.8 Notices.
          --------

      All  notices and other  communications  under this  Agreement  shall be in
writing  and  shall be  deemed  given  when  delivered  personally  or mailed by
certified  mail,  return  receipt  requested,  to the parties (and shall also be
transmitted  by  facsimile  to the  Persons  receiving  copies  thereof)  at the
following  addresses (or to such other address as a party may have  specified by
notice given to the other party pursuant to this provision):


If to Parent or Acquisition Sub:    Digital Descriptor Systems, Inc.
                                    2150 Highway 35, Suite 250
                                    Sea Girt, New Jersey 08750
                                    Attention:    President and Chief Executive
                                                  Officer
                                    Telephone:  (732) 359-0260
                                    Facsimile:   (732) 359-0265


With copy to:                       Sichenzia Ross Friedman Ference LLP
                                    1065 Avenue of the Americas
                                    New York, New York 10018
                                    Attention:  Gregory Sichenzia, Esq.
                                    Telephone:  (212) 930-9700
                                    Facsimile:  (212) 930-9725


                                       34
<PAGE>

If to Seller:

                                    Mr. Erik Hoffer
                                    24156 Yacht Club Blvd.
                                    Punta Gorda, Florida 33955
                                    Tel: 941-575-0971
                                    Fax: 941-575-0971

With a copy to:                     Joseph J. Tomasek, Esq.
                                    77 North Bridge Street
                                    Somerville, New Jersey 08876
                                    Telephone:  (908) 429-0030
                                    Facsimile:  (908) 429-0040

      9.9 Severability.
          -------------

      If any  provision  of this  Agreement  is  invalid or  unenforceable,  the
balance of this Agreement shall remain in effect.

      9.10 Binding Effect; Assignment.
           ---------------------------

      This  Agreement  shall be  binding  upon and inure to the  benefit  of the
parties and their respective  successors and permitted assigns.  Nothing in this
Agreement shall create or be deemed to create any third party beneficiary rights
in any person or entity not a party to this Agreement  except as provided below.
No assignment of this Agreement or of any rights or obligations hereunder may be
made by either the Seller or the Parent or the  Acquisition Sub (by operation of
law or otherwise)  without the prior written consent of the other parties hereto
and any attempted assignment without the required consents shall be void.


                                       35
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the day and year first above written.


                       DIGITAL DESCRIPTOR SYSTEMS, INC.


                       By:  /s/ Anthony Shupin
                            -------------------------------------
                            Anthony Shupin
                            Chief Executive Officer and President


                       CGM APPLIED SECURITY TECHNOLOGIES, INC.


                       By:  /s/ Anthony Shupin
                            -------------------------------------
                            Anthony Shupin
                            Chief Executive Officer and President


                       CGM SECURITY SOLUTIONS, INC.


                       By:  /s/ Erik Hoffer
                            -------------------------------------
                            Erik Hoffer
                            Chief Executive Officer and President


                     /s/ Erik Hoffer
                     --------------------------------------------
                     Erik Hoffer,
                     Solely with respect to Articles III and VIII