Document:

Exhibit 10.1

                                MERGER AGREEMENT

                                  BY AND AMONG

                   CHAMELEON COMMUNICATIONS TECHNOLOGY, INC.,

                              SECURED MOBILE, INC.,

                             SECURED SERVICES, INC.

                                       AND

                     SECURED MOBILE, INC., AS PAYING AGENT.

                               DATED JUNE __, 2005

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                                MERGER AGREEMENT

         THIS MERGER AGREEMENT (the "AGREEMENT") is made and entered into this
__th day of June __, 2005 among SECURED SERVICES, INC., a Delaware corporation
("BUYER"); Secured Mobile, Inc., a Delaware Corporation and wholly owned
Subsidiary of Buyer ("TRANSITORY SUBSIDIARY"); Chameleon Communications
Technology, Inc., a Delaware corporation ("CHAMELEON" or "TARGET") and, with
respect to ss.2(f) and ss.8 only, Transitory Subsidiary as Paying Agent (the
"PAYING AGENT"). Buyer, Transitory Subsidiary and Chameleon are referred to
collectively herein as the "PARTIES."

                                    RECITALS

         This Agreement contemplates a transaction in which Buyer will acquire
all of Chameleon's outstanding stock for convertible preferred stock, cash and
debentures through a merger of Chameleon with and into Transitory Subsidiary.

         Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.

         1.       DEFINITIONS.

          "ACQUISITION PROPOSAL" means any inquiry, proposal or offer relating
to (i) any merger or consolidation, any sale, transfer or exclusive license of
substantial assets of Chameleon, or similar transactions involving Chameleon, or
(ii) any sales or issuances by Chameleon of any capital stock, debt or options,
warrants or other rights with respect thereto (including in a financing
transaction or by way of a tender offer or an exchange offer), other than
issuances of stock options in the Ordinary Course of Business, debt incurred in
ordinary course of business, and issuances of capital stock upon exercise of
stock options and warrants.

         "AFFILIATE" has the meaning set forth in Rule 12b(2) of the regulations
promulgated under the Securities Exchange Act.

         "AFFILIATED GROUP" means any affiliated group within the meaning of
Code ss.1504(a).

          "AGGREGATE A-1 PREFERENCE AMOUNT" means the sum of (a) the number of
shares of Series A-1 Preferred outstanding immediately prior to the Effective
Time multiplied by $0.3335, plus, in the case of Queen Anne Square LLC only, (b)
the aggregate amount of accrued dividends with respect to the shares of Series
A-1 Preferred Stock outstanding immediately prior to the Effective Time.

         "AGGREGATE A-2 PREFERENCE AMOUNT" means the number of shares of Series
A-2 Preferred outstanding immediately prior to the Effective Time multiplied by
$0.3335.

         "AGGREGATE STOCK CONSIDERATION AMOUNT" means the product of (A) the
Aggregate Stock Consideration Number times (B) the Buyer 20-Day Price.

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         "AGGREGATE STOCK CONSIDERATION NUMBER" means the quotient of (A)
$4,940,000 divided by (B) Buyer 10-Day Price times 1.125.

         "ANCILLARY AGREEMENTS" means the (A) Stockholder Representation
Statement and Transfer Restriction Agreement and (B) Investor Rights Agreement.

         "BUYER" has the meaning set forth in the preface above.

         "BUYER 10-DAY PRICE" means the product of (A) the average of the VWAP
over the ten (10) consecutive trading day period ending on the last trading day
preceding the Closing Date times (B) 1,000.

         "BUYER 20-DAY PRICE" means the product of (A) the average of the
closing bid prices in the over-the-counter market of the Common Stock of Buyer
over the twenty (20) consecutive trading day period ending on the second trading
day preceding the Closing Date times (B) 1,000.

         "BUYER NOTE" means a promissory note of Buyer in the form attached
hereto as EXHIBIT A.

         "BUYER PREFERRED STOCK" means the shares of Preferred Stock of Buyer,
par value $.0001 per share, having the rights and preferences and privileges
described in EXHIBIT B hereto.

         "BUYER-OWNED SHARE" means any Target Share that Buyer or Transitory
Subsidiary owns beneficially.

         "BUYER RESTRICTED SHARES" means the Buyer Preferred Stock to be issued
to the holders of Notes and Preferred Shares in accordance with ss.2, which
shall have the same rights and preferences and restrictions, including but not
limited to pari passu registration rights and comparable warrant coverage,
lock-up and sale restrictions, as the most favorably treated equity securities
issued by Buyer to purchasers of Buyer Preferred Stock in equity financing
transactions between the date of this Agreement and the Closing, including any
equity financing transactions that close concurrently with the Merger.

          "CASH CONSIDERATION AMOUNT" means, with respect to an Outstanding
Preferred Share, the products of (A) the Consideration Allocation Amount for
such share times (B) the quotient of (1) $1,000,000 divided by (2) Maximum
Payment Value.

         "CERTIFICATE OF MERGER" has the meaning set forth in ss.2(c) below.

         "CHAMELEON NOTE" means all promissory notes of Chameleon that are
outstanding immediately prior to the Effective Time and which provide for a 3
times payment at the Closing.

         "CHAMELEON WARRANT" means any warrant to purchase Chameleon capital
stock outstanding as of immediately prior to the Effective, to the extent not
exercised as of immediately prior to the Effective Time.

         "CLOSING" has the meaning set forth in ss.2(c) below.

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         "CLOSING DATE" has the meaning set forth in ss.2(c) below.

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

         "COMMON STOCK EQUIVALENTS" means any securities of Buyer or any of its
subsidiaries which would entitle the holder thereof to acquire at any time,
directly or indirectly, common stock of Buyer or one of its subsidiaries,
including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, directly
or indirectly, common stock of Buyer or any of its subsidiaries.

         "CONSIDERATION ALLOCATION AMOUNT" means with respect to an Outstanding
Preferred Share the product of (A) the Distributable Consideration Amount times
(B) the quotient of (1) that Share's Preference Amount divided by (2) the sum of
the Aggregate A-1 Preference Amount plus the Aggregate A-2 Preference Amount.

         "DEBENTURE INVESTORS" has the meaning set forth in ss.6(b)(xii) below.

         "DELAWARE LAW" means the General Corporation Law of the State of
Delaware, as amended.

         "DISCLOSURE SCHEDULE" has the meaning set forth in ss.3 below.

         "DISSENTING SHARE" means any Target Share held of record by any
stockholder who or that has exercised his, her, or its appraisal rights under
the Delaware Law.

         "DISTRIBUTABLE CONSIDERATION AMOUNT" means Maximum Payment Value minus
the Target Notes Amount.

         "EFFECTIVE TIME" has the meaning set forth in ss.2(d)(i) below.

         "EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement that is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement that is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.

         "EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
ss.3(2).

         "EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
ss.3(1).

         "ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, and all common law concerning public health and
safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes,

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chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.

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

         "ERISA AFFILIATE" means each entity which is treated as a single
employer with Chameleon for purposes of Code ss.414(b), (c), (m), or (o).

         "FINANCIAL STATEMENT" has the meaning set forth in ss.3(g) below.

         "GAAP" means United States generally accepted accounting principles as
in effect from time to time.

         "INTELLECTUAL PROPERTY" means all intellectual property, regardless of
form, including without limitation: (1) published and unpublished works of
authorship, including without limitation audiovisual works, collective works,
computer programs, compilations, databases, derivative works, literary works,
maskworks, and sound recordings ("WORKS OF AUTHORSHIP"); (2) inventions and
discoveries, including without limitation articles of manufacture, business
methods, compositions of matter, improvements, machines, methods, and processes
and new uses for any of the preceding items ("INVENTIONS"); (3) words, names,
symbols, devices, designs, and other designations, and combinations of the
preceding items, used to identify or distinguish a business, good, group,
product, or service or to indicate a form of certification, including without
limitation logos, product designs, and product features ("TRADEMARKS"); and (4)
Confidential Information.

         "INTELLECTUAL PROPERTY RIGHTS" means all rights in, arising out of, or
associated with Intellectual Property in any jurisdiction, including without
limitation: (1) rights in, arising out of, or associated with Works of
Authorship, including without limitation rights in maskworks and databases and
rights granted under the Copyright Act ("COPYRIGHTS"); (2) rights in, arising
out of, or associated with Inventions, including without limitation rights
granted under the Patent Act ("PATENT RIGHTS"); (3) rights in, arising out of,
or associated with Trademarks, including without limitation rights granted under
the Lanham Act ("TRADEMARK RIGHTS"); (4) rights in, arising out of, or
associated with Confidential Information, including without limitation rights
granted under the Uniform Trade Secrets Act ("TRADE SECRET RIGHTS"); (5) rights
in, arising out of, or associated with a person's name, voice, signature,
photograph, or likeness, including without limitation rights of personality,
privacy, and publicity ("PERSONALITY RIGHTS"); (6) rights of attribution and
integrity and other moral rights of an author ("MORAL RIGHTS"); and (7) rights
in, arising out of, or associated with domain names ("DOMAIN NAME RIGHTS").

         "INVESTOR RIGHTS AGREEMENT" shall mean the agreement providing for
registration rights for Buyer Common Stock issuable upon conversion of Buyer
Preferred Stock and Note Conversion Shares issued hereunder in substantially the
form attached hereto as EXHIBIT C.

         "KNOWLEDGE" means, with respect to Buyer or Chameleon, the actual
knowledge of any officer or director of Buyer or Chameleon, as applicable.

         "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means any effect
or change that would be materially adverse to the business, assets, condition
(financial or otherwise), operating

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results or operations of such Party, taken as a whole, or to the ability of such
Party to consummate timely the transactions contemplated hereby; provided,
however, that the term shall not include any such change, event, circumstance,
condition or effect that directly results from: (A) changes in general economic
conditions (provided that such changes do not affect such entity
disproportionately as compared to such entity's competitors); (B) changes
affecting the industry generally in which such entity operates (provided that
such changes do not affect such entity disproportionately as compared to such
entity's competitors); (C) the execution, announcement, pendency or consummation
of the transactions contemplated by this Agreement or (D) the taking of any
action contemplated by this Agreement or consented to in writing by the Buyer.

         "MAXIMUM PAYMENT VALUE" means $2,000,000 plus the Aggregate Stock
Consideration Amount.

         "MERGER" has the meaning set forth in ss.2(a) below.

         "MERGER CONSIDERATION" means the Cash, shares of Buyer Preferred Stock
and Buyer Notes issued by Buyer in exchange for the Outstanding Preferred Shares
pursuant to the Merger.

         "MIDSUMMER" has the meaning set forth in ss.6(b)(xii) below.

          "MOST RECENT BALANCE SHEET" means the balance sheet contained within
the Financial Statements.

         "MOST RECENT FISCAL YEAR END" has the meaning set forth in ss.3(g)
below.

         "MULTIEMPLOYER PLAN" has the meaning set forth in ERISA ss.3(37).

         "NOTE CONSIDERATION AMOUNT" means, with respect to a Preferred Share,
the Product of (A) the Consideration Allocation Amount for such share times (B)
the quotient of (1) $1,000,000 divided by (2) the Maximum Payment Value.

         "ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).

         "OUTSTANDING PREFERRED SHARE" means a share of Series A-1 Preferred or
Series A-2 Preferred that is issued and outstanding as of immediately prior to
the Effective Time.

         "PARTY" has the meaning set forth in the preface above.

         "PAYING AGENT" has the meaning set forth in ss.2(f) below.

         "PAYMENT FUND" has the meaning set forth in ss.2(f) below.

         "PBGC" means the Pension Benefit Guaranty Corporation.

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         "PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).

         "PREFERENCE AMOUNT" means, with respect to an Outstanding Preferred
Share, the sum of $0.3335 (as appropriately adjusted for any stock split,
dividend, combination or other recapitalization) plus the accrued but unpaid
dividends payable with respect to such share, unless the right to receive such
dividends has been waived, as of immediately prior to the Closing, pursuant to,
Chameleon's certificate of incorporation in effect immediately prior to the
Closing.

         "PREFERRED SHARES" means the Series A-1 Preferred and the Series A-2
Preferred.

         "PROXY MATERIALS" means the materials distributed by Chameleon to its
stockholders pursuant to ss.5(b).

         "RELEASE AGREEMENT" shall mean a Release Agreement in the form attached
hereto as EXHIBIT D signed by each holder of Preferred Shares and Chameleon
Notes.

         "REPORTABLE EVENT" has the meaning set forth in ERISA ss.4043.

         "SEC" means the U.S. Securities and Exchange Commission.

         "SECURITIES ACT" means the Securities Act of 1933, as amended.

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

         "SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.

          "SERIES A-1 PREFERRED" means the Series A-1 Participating Convertible
Preferred Stock of Chameleon.

         "SERIES A-2 PREFERRED" means the Series A-2 Participating Convertible
Preferred Stock of Chameleon.

         "STOCK CONSIDERATION AMOUNT" means, with respect to a Preferred Share,
the quotient of (A) the product of (1) the Consideration Allocation Amount for
such share times (2) the quotient of the Aggregate Stock Consideration Amount
divided by the Maximum Payment Value, divided by (B) the Buyer 20-Day Price.

         "STOCKHOLDER REPRESENTATION STATEMENT AND TRANSFER RESTRICTION
AGREEMENT" shall mean the agreement by and among Buyer and certain stockholders
of Chameleon in substantially the form attached hereto as EXHIBIT E.

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         "SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.

         "SUPERIOR PROPOSAL" means any unsolicited, bona fide written proposal
made by a third party to acquire more than 50% of the equity securities or more
than 50% of the assets of Chameleon, pursuant to a tender or exchange offer, a
merger, a consolidation or a sale of its assets, on terms which the Board of
Directors or any special committee thereof determines in its good faith judgment
to be more favorable from a financial point of view to the holders of Target
Shares than the transactions contemplated by this Agreement.

         "SURVIVING CORPORATION" has the meaning set forth in ss.2(a) below.

         "TARGET" has the meaning set forth in the preface above.

         "TARGET NOTES AMOUNT" means the outstanding principal and accrued
interest, as of immediately prior to the Closing, multiplied by 3, with respect
to all Chameleon Notes.

         "TARGET SHARES" means shares of the Common Stock and Preferred Stock,
par value $.001 per share, of Chameleon outstanding immediately prior to the
Effective Time.

         "TARGET STOCKHOLDER" means any Person who or that holds any Target
Shares.

         "TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.

         "TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

         "TRADING MARKET" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the OTC
Bulletin Board, the Nasdaq SmallCap Market, the American Stock Exchange, the New
York Stock Exchange or the Nasdaq National Market.

         "TRANSITORY SUBSIDIARY" has the meaning set forth in the preface above.

         "VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on a Trading Market, the daily volume weighted average price of the Common Stock
for such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg Financial L.P.
(based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Trading Market and if
prices for the

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Common Stock are then quoted on the OTC Bulletin Board, the volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted
on the OTC Bulletin Board and if prices for the Common Stock are then reported
in the "Pink Sheets" published by the Pink Sheets, LLC (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (d) in all
other cases, the fair market value of a share of Common Stock as determined by
an independent appraiser selected in good faith by Buyer.

         2.       BASIC TRANSACTION.

                  (a) MERGER. On and subject to the terms and conditions of this
Agreement, Chameleon will merge with and into Transitory Subsidiary (the
"MERGER") at the Effective Time. Transitory Subsidiary shall be the corporation
surviving the Merger (the "SURVIVING CORPORATION").

                  (b) CLOSING. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall take place at the offices of Morse,
Zelnick, Rose & Lander LLP, in New York, New York, commencing at 9:00 a.m. local
time on the [first] business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date as the
Parties may mutually determine (the "CLOSING DATE").

                  (c) ACTIONS AT CLOSING. At the Closing, (i) Chameleon will
deliver to Buyer and Transitory Subsidiary the various certificates,
instruments, and documents referred to in ss.6(a) below, (ii) Buyer and
Transitory Subsidiary will deliver to Chameleon the various certificates,
instruments, and documents referred to in ss.6(b) below, (iii) Chameleon and
Transitory Subsidiary will file with the Secretary of State of the State of
Delaware a Certificate of Merger in the form attached hereto as EXHIBIT F (the
"CERTIFICATE OF MERGER"), and (iv) Buyer will deliver the Payment Fund to the
Paying Agent in the manner provided below in this ss.2.

                  (d) EFFECT OF MERGER.

                           (i) GENERAL. The Merger shall become effective at the
time a properly executed Certificate of Merger effecting the Merger conforming
to the requirements of the applicable provisions of Delaware Law is filed with
the Secretary of State of the State of Delaware by Chameleon and Transitory
Subsidiary (the "EFFECTIVE TIME"). The Merger shall have the effect set forth in
the Delaware Law. Surviving Corporation may, at any time after the Effective
Time, take any action (including executing and delivering any document) in the
name and on behalf of either Chameleon or Transitory Subsidiary in order to
carry out and effectuate the transactions contemplated by this Agreement.

                           (ii) CERTIFICATE OF INCORPORATION. The certificate of
incorporation of Surviving Corporation shall be the certificate of incorporation
of Transitory Subsidiary immediately prior to the Effective Time.

                           (iii) BYLAWS. The bylaws of Surviving Corporation
shall be the bylaws of Transitory Subsidiary immediately prior to the Effective
Time.

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                           (iv) DIRECTORS AND OFFICERS. The directors and
officers of Surviving Corporation shall be the directors and officers of
Transitory Subsidiary immediately prior to the Effective Time (retaining their
respective positions and terms of office).

                           (v) PAYMENT OF NOTES. As soon as practicable
following the Effective Time, subject to the terms and conditions set forth in
this Agreement, each outstanding Chameleon Note shall be paid in full from the
Maximum Payment Value, with such payments to be made, with respect to each
Chameleon Note, with a combination of cash, Buyer Notes and Buyer Preferred
Stock in the same proportions as such different forms of consideration are to be
paid in respect of each Outstanding Preferred Share pursuant to ss.2(d)(vi).

                           (vi) CONVERSION OF TARGET SHARES. At and as of the
Effective Time, subject to the conditions set forth in this Agreement and other
than shares to be cancelled in accordance with ss.2(e) and Dissenting Shares,
each Target Share issued and outstanding immediately prior to the Effective Time
shall be converted into a right to receive the following:

                                    (A) Each Outstanding Preferred Share shall
be converted into the right to receive the following:

                                        a)   An amount of cash equal to the Cash
                                             Consideration Amount;

                                        b)   A Buyer Note in the principal
                                             amount of the Note Consideration
                                             Amount; and

                                        c)   A number of shares of Buyer
                                             Preferred Stock equal to the Stock
                                             Consideration Amount.

                                    (B) Each share of Common Stock of Chameleon
outstanding immediately prior to the Effective Time shall be cancelled and
extinguished, and no cash or other consideration shall be delivered in exchange
therefor. No surrender of the stock certificate representing such shares of
Common Stock of Chameleon shall be required to effect the cancellation and
extinguishment of such shares.

                           (vii) CONVERSION OF TRANSITORY SUBSIDIARY'S CAPITAL
STOCK. At and as of the Effective Time, each share of Transitory Subsidiary's
common stock, $0.01 par value per share, shall remain outstanding as one share
of Surviving Corporation's common stock, $0.01 par value per share.

                           (viii) BUYER-OWNED SHARES. At and as of the Effective
Time, each Buyer-owned Share shall be cancelled.

                           (ix) NO FRACTIONAL CONSIDERATION. No fractional
shares of Buyer Preferred Stock will be issued in connection with the Merger,
but in lieu thereof each holder of a Chameleon Note or Preferred Share who would
otherwise be entitled to receive a fraction of a share of Buyer Preferred Stock
(after aggregating all fractional shares of Buyer Preferred Stock to be received
by such holder at that time) will receive from Buyer an amount of cash (rounded
to the nearest whole

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cent) equal to the Buyer 20-Day Price multiplied by the fraction of a share of
Buyer Preferred Stock to which such holder would otherwise be entitled. The
parties acknowledge that any payment of cash consideration in lieu of issuing
fractional shares provided for herein was not separately bargained for
consideration, but merely represents a mechanical rounding off for purposes of
simplifying the corporate and accounting complexities that would otherwise be
caused by the issuance of fractional shares. In the event a holder of a
Chameleon Note or Preferred Share would otherwise be entitled to receive a
fraction of a cent or a Buyer Note in a Principal Amount (after aggregating all
fractional cents and fractional amounts of principal under Buyer Notes to be
received by such holder at that time), such fractional cents and fractional
amounts of principal shall be rounded down to the nearest whole cent of cash and
the nearest whole cent of principal, as applicable.

                           (x) STOCK OPTIONS AND WARRANTS.

                                    (A) STOCK OPTIONS. At and as of the
Effective Time, all options outstanding immediately prior to the Effective Time
under Chameleon's 2002 Stock Option Plan (the "COMPANY STOCK OPTION PLAN"), and
any other stock option or compensation plan or other arrangement or agreement of
the Company pursuant to which Chameleon has granted any options to purchase
Chameleon Common Stock (all such stock options, collectively, the "COMPANY STOCK
OPTIONS"), whether or not vested, shall fully accelerate and be terminated and
extinguished upon the Effective Time, and the holders of such Company Stock
Options shall have no further rights with respect to such Company Stock Options.

                                    (B) WARRANTS. At and as of the Effective
Time, all Chameleon Warrants outstanding immediately prior to the Effective
Time, whether or not vested, shall fully accelerate and be terminated and
extinguished upon the Effective Time, and the holders of such Chameleon Warrants
shall have no further rights with respect to such Chameleon Warrants.

                  (e) DISSENTING SHARES. If, in connection with the Merger,
holders of capital stock of Chameleon are entitled to appraisal rights pursuant
to Delaware Law, any Dissenting Shares shall not be converted into a right to
receive shares of Buyer Preferred Stock, cash and Buyer Notes as provided in
ss.2(d) but shall be converted into the right to receive such consideration as
may be determined to be due with respect to such Dissenting Shares pursuant to
Delaware Law. Each holder of Dissenting Shares who, pursuant to the provisions
of Delaware Law, becomes entitled to payment of the fair value of such shares
shall receive payment therefor in accordance with Delaware Law (but only after
the value therefor shall have been agreed upon or finally determined pursuant to
Delaware Law). In the event that any Target Stockholder fails to make an
effective demand for payment or fails to perfect its appraisal rights as to its
Target Shares or any Dissenting Shares shall otherwise lose their status as
Dissenting Shares, then any such shares shall immediately be converted into the
right to receive the consideration issuable pursuant to ss.2 in respect of such
shares as if such shares had never been Dissenting Shares, and Buyer shall issue
and deliver to the holder thereof, at (or as promptly as reasonably practicable
after) the applicable time or times specified in ss.2(f), following the
satisfaction of the applicable conditions set forth in ss.2(f), the shares of
Buyer Preferred Stock, cash and Buyer Notes, without interest thereon, to which
such Target Stockholder would have been entitled under ss.2(d) with respect to
such shares, subject to the provisions of ss.2(d)(ix) (regarding the

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delivery of cash in lieu of any fractional shares) and ss.2(f) (regarding the
withholding of the Payment Fund).

                  (f) PAYMENT PROCEDURE.

                           (i) Immediately after the Effective Time, (A) Buyer
will furnish Surviving Corporation (the "PAYING AGENT") a corpus (the "PAYMENT
FUND") consisting of cash, Buyer Preferred Stock and Buyer Notes sufficient in
the aggregate for the Paying Agent to make full payment of the Maximum Payment
Value to the holders of all of the outstanding Preferred Shares (other than any
Dissenting Shares and Buyer-owned Shares) and (B) Buyer will cause the Paying
Agent to deliver to each holder of Outstanding Preferred Shares the Cash
Consideration Amount, the Note Consideration Amount and the Stock Consideration
Amount against the surrender of the certificates that represented his, her, or
its Preferred Shares. No interest will accrue or be paid to the holder of any
outstanding Preferred Shares.

                           (ii) Buyer shall pay all charges and expenses of the
Paying Agent.

                           (iii) In the event that any certificates representing
Preferred Shares shall have been lost, stolen or destroyed, the Paying Agent
shall pay in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, the cash, Buyer
Preferred Stock and Buyer Notes into which the Preferred Shares represented by
such certificates were converted pursuant to ss.2(d).

                  (g) CLOSING OF TRANSFER RECORDS. After the close of business
on the Closing Date, transfers of Target Shares outstanding prior to the
Effective Time shall not be made on the stock transfer books of Surviving
Corporation.

                  (h) SECURITIES ACT COMPLIANCE; REGISTRATION; SECURITIES ACT
EXEMPTION. The Buyer Preferred Stock to be issued pursuant to this Agreement
will not be registered under the Securities Act in reliance on the exemptions
from the registration requirements of Section 5 of the Securities Act set forth
in Section 4(2) and Section 3(a)(11) thereof. Prior to the Closing Date, each
holder of Chameleon Preferred Stock shall have provided Buyer such
representations, warranties, certifications and additional information as Buyer
may reasonably request to ensure the availability of such exemptions from the
registration requirements of the Securities Act.

                  (i) INVESTOR RIGHTS AGREEMENT. The Buyer Common Stock issuable
upon conversion of Buyer Preferred Stock and Buyer Notes will have certain
registration rights pursuant to the Investor Rights Agreement, attached hereto
as EXHIBIT C.

                  (j) BUYER RESTRICTED SHARES. Each certificate representing
Buyer Restricted Shares will be imprinted with a legend set forth below.

                  THE SHARES COVERED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
                  INVESTMENT PURPOSES ONLY AND MAY NOT BE SOLD, TRANSFERRED OR
                  OTHERWISE DISPOSED OF UNTIL (I) A REGISTRATION STATEMENT UNDER
                  THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") SHALL HAVE
                  BECOME EFFECTIVE WITH RESPECT THERETO OR

                                      -11-
<PAGE>

                  (II) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL
                  REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
                  REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH
                  SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE
                  STATE SECURITIES LAWS.

         Subject to the Letter of Transmittal, each holder desiring to transfer
Buyer Restricted Shares issued in accordance with this Agreement first must
furnish the Buyer with (i) a written opinion reasonably satisfactory to the
Buyer in form and substance from counsel reasonably satisfactory to the Buyer by
reason of experience to the effect that the holder may transfer the Buyer
Restricted Shares as desired without registration under the Securities Act;
provided that such opinion shall not be required in connection with transfers
without consideration to any of such holder's Affiliates; and (ii) a written
undertaking executed by the desired transferee reasonably satisfactory to the
Buyer in form and substance agreeing to be bound by the restrictions on transfer
contained herein.

                  (k) QUALIFICATION AS A REORGANIZATION. The Parties intend that
the Merger qualify as a "reorganization" within the meaning of Section 368(a) of
the Code, and that this Agreement shall be, and is hereby, adopted as a "plan of
reorganization" for purposes of Section 368(a) of the Code.

         3. CHAMELEON'S REPRESENTATIONS AND WARRANTIES. Chameleon represents and
warrants to the Buyer that the statements contained in this ss.3 are true and
correct as of the date of this Agreement, except as set forth in the disclosure
letter delivered by the Chameleon to the Buyer on the date hereof and initialed
by the Parties (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this ss.3; PROVIDED that disclosure under one paragraph shall be
deemed to be disclosed under such other paragraphs where it is reasonably
apparent that such disclosure is applicable from the content of such disclosure.

                  (a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER.
Chameleon is a corporation duly organized, validly existing, and in good
standing under the laws of Delaware. Chameleon is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a Material Adverse Effect on Chameleon. Chameleon has full corporate power
and authority to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it. ss.3(a) of the Disclosure Schedule
lists the directors and officers of Chameleon.

                  (b) CAPITALIZATION. The entire authorized capital stock of
Chameleon consists of 31,000,000 shares of Common Stock, par value $.001 per
share, 20,000,000 shares of Preferred Stock, par value $.001 per share, which is
divided into two series: 13,400,000 shares of Series A-1 Participating
Convertible Preferred Stock and 6,600,000 shares of Series A-2 Participating
Convertible Preferred Stock. Of the authorized capital stock, 7,675,000 shares
of Common Stock, 4,631,645 shares of Series A-1 Preferred and 4,545,890 shares
of Series A-2 Preferred are issued and outstanding. All of the issued and
outstanding shares of Chameleon Common Stock, Series A-1 Preferred and Series
A-2 Preferred have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record by the respective entities as set forth in
ss.3(b) of the Disclosure Schedule. ss.3(b) of the Disclosure Schedule lists all
outstanding or authorized options, warrants,

                                      -12-
<PAGE>

purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require Chameleon to issue, sell, or
otherwise cause to become outstanding any of its capital stock. Other than as
listed in ss.3(b) of the Disclosure Schedule, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
Chameleon to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to
Chameleon. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of Chameleon.

                  (c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) subject to obtaining the approval of Chameleon's stockholders, violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which Chameleon is subject or any provision of the charter
or bylaws of Chameleon or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Chameleon is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets), except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, failure to give notice, or Security
Interest would not have a Material Adverse Effect on Chameleon or on the ability
of the Parties to consummate the transactions contemplated by this Agreement.
Except for the filing of the Certificate of Merger, Chameleon is not required to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, except where the
failure to give notice, to file, or to obtain any authorization, consent, or
approval would not have a Material Adverse Effect on Chameleon or on the ability
of the Parties to consummate the transactions contemplated by this Agreement.

                  (d) BROKERS' FEES. Chameleon does not have any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.

                  (e) TITLE TO ASSETS. Chameleon has good and marketable title
to, or a valid leasehold interest in, the properties and assets used by it,
located on its premises, or shown on the Most Recent Balance Sheet or acquired
after the date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet.

                  (f) SUBSIDIARIES. Chameleon has no Subsidiaries.

                  (g) FINANCIAL STATEMENTS. Attached as SCHEDULE G to the
Disclosure Schedule are the unaudited balance sheets (the "MOST RECENT BALANCE
SHEET") and statements of income, and cash flow as of and for the fiscal years
ended December 31, 2003 and 2004 (the "MOST RECENT FISCAL YEAR END"), and for
the quarter ending March 31, 2005 (the "MOST RECENT QUARTER") for Chameleon (the

                                      -13-
<PAGE>

"FINANCIAL STATEMENTS"). The Financial Statements (including the notes thereto)
present fairly in all material respects the financial condition of Chameleon as
of such dates, are correct and complete, in all material respects, and are
consistent with the books and records of Chameleon. The books of account and
other financial records of Chameleon are complete and correct in all material
respects and represent actual, bona fide transactions and accurately and fairly
reflect in all material respects the basis for the Financial Statements.

                  (h) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since
the Most Recent Fiscal Year End, there has not been any Material Adverse Change
in the business, financial condition, operations, results of operations, or
future prospects of Chameleon. Without limiting the generality of the foregoing,
since that date:

                           (i) Chameleon has not sold, leased, transferred, or
assigned any material assets, tangible or intangible, outside the Ordinary
Course of Business;

                           (ii) Chameleon has not entered into any material
agreement, contract, lease, or license outside the Ordinary Course of Business;

                           (iii) no party (including Chameleon) has accelerated,
terminated, made material modifications to, or canceled any material agreement,
contract, lease, or license to which Chameleon is a party or by which it is
bound;

                           (iv) Chameleon has not imposed any Security Interest
upon any of its assets, tangible or intangible;

                           (v) Chameleon has not made any material capital
expenditures outside the Ordinary Course of Business;

                           (vi) Chameleon has not made any material capital
investment in, or any material loan to, any other Person outside the Ordinary
Course of Business;

                           (vii) Chameleon has not created, incurred, assumed,
or guaranteed more than $25,000 in aggregate indebtedness for borrowed money and
capitalized lease obligations;

                           (viii) Chameleon has not granted any license or
sublicense of any material rights under or with respect to any Intellectual
Property, except licenses in the Ordinary Course of Business;

                           (ix) there has been no change made or authorized in
the charter or bylaws of Chameleon;

                           (x) Chameleon has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or exercise)
any of its capital stock except for issuances to service providers in the
Ordinary Course of Business;

                                      -14-
<PAGE>

                           (xi) Chameleon has not declared, set aside, or paid
any dividend or made any distribution with respect to its capital stock (whether
in cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock, except pursuant to Chameleon repurchase rights arising upon
termination of an individual's status as an employee, director or consultant;

                           (xii) Chameleon has not experienced any material
damage, destruction, or loss (whether or not covered by insurance) to its
property;

                           (xiii) Chameleon has not made any loan to, or entered
into any other transaction with, any of its directors, officers, and employees,
except in the Ordinary Course of Business;

                           (xiv) Chameleon has not entered into any employment
contract (other than offer letters and option agreements with service providers
in the Ordinary Course of Business) or collective bargaining agreement, written
or oral, or modified the terms of any existing such contract or agreement,
except in the Ordinary Course of Business;

                           (xv) Chameleon has not granted any increase in the
base compensation of any of its directors, officers, and employees, except in
the Ordinary Course of Business;

                           (xvi) Chameleon has not adopted, amended, modified,
or terminated any bonus, profit sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan), except as required by applicable law;

                           (xvii) Chameleon has not committed to any of the
foregoing.

                  (i) UNDISCLOSED LIABILITIES. Chameleon does not have any
material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due, including any liability for
taxes) that would be required by GAAP to be reflected on, or reserved against
in, a balance sheet of Chameleon or in the notes thereto, except for (i)
liabilities or obligations disclosed in the Financial Statements, (ii)
liabilities or obligations which have arisen after the Most Recent Fiscal Year
End in the Ordinary Course of Business and (iii) liabilities or obligations
incurred in connection with this Agreement and the transactions contemplated
hereby.

                  (j) LEGAL COMPLIANCE. Chameleon has complied with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any failure so to
comply, except where the failure to comply would not have a Material Adverse
Effect on Chameleon.

                  (k) TAX MATTERS.

                           (i) Chameleon has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all material
respects. All Taxes owed by Chameleon

                                      -15-
<PAGE>

(whether or not shown on any Tax Return) have been paid. Chameleon is not the
beneficiary of any extension of time within which to file any Tax Return. No
written claim has ever been made by an authority in a jurisdiction where
Chameleon does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction. There are no Security Interests on any of the assets of
Chameleon that arose in connection with any failure (or alleged failure) to pay
any Tax.

                           (ii) Chameleon has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder, or other third
party.

                           (iii) There is no material dispute or claim
concerning any Tax liability of Chameleon either (A) claimed or raised by any
authority in writing or (B) as to which any of the directors or officers of
Chameleon has Knowledge based upon personal contact with any agent of such
authority.

                           (iv) Chameleon has made available to the Buyer
correct and complete copies of all Tax Returns, examination reports, and
statements of deficiencies assessed against, or agreed to by Chameleon since
December 31, 2001. Chameleon has not waived any statute of limitations in
respect of income Taxes or agreed to any extension of time with respect to an
income Tax assessment or deficiency.

                           (v) Chameleon has not made any material payments, is
not obligated to make any material payments, or is not a party to any agreement
that under certain circumstances could obligate it to make any material payments
that will not be deductible under Code ss. 280G.

                           (vi) Chameleon is not a party to any tax allocation
or sharing agreement.

                           (vii) Chameleon (A) has not been a member of an
Affiliated Group filing a consolidated federal income Tax Return or (B) does not
have any liability for the taxes of any Person under Reg. ss.1.1502 6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.

                           (viii) The unpaid Taxes of Chameleon did not, as of
the Most Recent Fiscal Year End, exceed by any material amount the reserve for
Tax liability (rather than any reserve for deferred taxes established to reflect
timing differences between book and tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto). Chameleon has not
incurred any liability for Taxes since the Most Recent Fiscal Year End other
than in the Ordinary Course of Business.

                  (l) REAL PROPERTY.

                           (i) Chameleon does not own any real property.

                           (ii) ss.3(l)(ii) of the Disclosure Schedule lists and
describes briefly all real property leased or subleased to Chameleon. With
respect to each material lease and sublease listed in ss.3(l)(ii) of the
Disclosure Schedule:

                                      -16-
<PAGE>

                                    (A) the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect in all material respects,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by the effect of general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).

                                    (B) Chameleon and the other party to the
lease or sublease are not, to Chameleon's Knowledge, in material breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a material breach or default, to Chameleon's Knowledge, by Chameleon
or the other party, or permit termination, modification, or acceleration
thereunder, to Chameleon's Knowledge, by the other party or by Chameleon.

                                    (C) To Chameleon's Knowledge, no party to
the lease or sublease has repudiated any material provision thereof.

                                    (D) There are no material disputes,
forbearance programs, or to Chameleon's Knowledge, oral agreements in effect as
to the lease or sublease.

                                    (E) Chameleon has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold.

                                    (F) All facilities leased or subleased
thereunder have received all material approvals of governmental authorities
(including material licenses and permits) required in connection with the
operation thereof, and have been operated and maintained in accordance with
applicable laws, rules, and regulations in all material respects.

                  (m) INTELLECTUAL PROPERTY.]

                           (i) To the Knowledge of Chameleon, Chameleon owns or
possesses sufficient Intellectual Property Rights to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary for its
business as presently conducted. Each item of Intellectual Property owned or
used by Chameleon immediately prior to the Closing hereunder will be owned or
available for use by Chameleon on identical terms and conditions immediately
subsequent to the Closing hereunder. Chameleon has taken commercially reasonable
actions to maintain and protect each item of Intellectual Property that it owns
or uses.

                           (ii) To the Knowledge of Chameleon, Chameleon has not
interfered with, infringed upon, misappropriated, or violated any material
Intellectual Property Rights of third parties in any material respect. None of
the directors and officers of Chameleon has ever received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Chameleon must license
or refrain from using any Intellectual Property Rights of any third party). To
the Knowledge of Chameleon, no third party has interfered with, infringed upon,
misappropriated, or violated any material Intellectual Property Rights of
Chameleon in any material respect.

                           (iii) ss.3(m)(iii) of the Disclosure Schedule
identifies all exclusive licenses and rights to Chameleon's Intellectual
Property Rights granted by Chameleon.

                                      -17-
<PAGE>

                           (iv) To the Knowledge of Chameleon, Chameleon owns
all Intellectual Property Rights that Chameleon claims to own ("CHAMELEON
INTELLECTUAL PROPERTY RIGHTS"). Chameleon does not know of any third parties
that claim to own any Chameleon Intellectual Property Rights.

                           (v) Chameleon Intellectual Property Rights are not
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge that impairs the validity or enforceability of any Chameleon Intellectual
Property Rights.

                           (vi) No action, suit, proceeding, hearing, charge,
complaint, claim, or demand is pending or, to the Knowledge of Chameleon, is
threatened which challenges the legality, validity, enforceability, use, or
ownership of any Chameleon Intellectual Property Rights.

                           (vii) ss.3(m)(vii) of the Disclosure Schedule
identifies each material item of Intellectual Property that any third party owns
and that Chameleon uses in, uses as a developer tool or technology in
developing, incorporates into or distributes with its products pursuant to
license, sublicense, agreement, or permission, other than software that is
available "off the shelf" (collectively, "MATERIAL IN-LICENSES"). With respect
to each Material In-License:

                                    (A) each Material In-License is legal,
valid, binding, enforceable, and in full force and effect in all material
respects;

                                    (B) no party to a Material In-License is (to
Chameleon's Knowledge with respect to parties other than Chameleon) in material
breach or default, and to the Knowledge of Chameleon no event has occurred which
with notice or lapse of time would constitute a material breach or default or
permit termination, modification, or acceleration thereunder;

                                    (C) no party to a Material In-License has
repudiated any material provision thereof.

                  (n) TANGIBLE ASSETS. The machinery and equipment, and other
  tangible assets that Chameleon owns or leases and that are material to
Chameleon's business are free from material defects (patent and latent), have
been maintained in accordance with normal industry practice, and are in good
operating condition and repair (subject to normal wear and tear), except as
would not have a Material Adverse Effect on Chameleon's business.

                  (o) CONTRACTS. ss.3(o) of the Disclosure Schedule lists the
following contracts and other agreements to which Chameleon is a party as of the
date of this Agreement:

                           (i) any agreement (or group of related agreements)
for the lease of personal property to or from any Person providing for lease
payments in excess of $25,000 per annum;

                           (ii) any agreement (or group of related agreements)
for the purchase or sale of supplies, products, or other personal property, or
for the furnishing or receipt of services, the performance of which will extend
over a period of more than one year (unless terminable in less than

                                      -18-
<PAGE>

one year without material penalty) or involve consideration in excess of $25,000
(unless terminable without payment of $25,000 of consideration and without
material penalty);

                           (iii) any agreement concerning a partnership or joint
venture;

                           (iv) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of $25,000 or
under which it has imposed a Security Interest on any of its assets, tangible or
intangible;

                           (v) any material agreement concerning noncompetition;

                           (vi) any material agreement with any of the directors
or officers of Chameleon or any of their Affiliates other than stock option
agreements;

                           (vii) any collective bargaining agreement;

                           (viii) any agreement for the employment of any
individual on a full time, part time, consulting, or other basis or providing
material severance benefits (other than offer letters providing for at-will
employment with no material additional obligations on the part of Chameleon and
other than consulting or contractor agreements entered into in the Ordinary
Course of Business on terms customary in the industry);

                           (ix) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and employees;

                           (x) any agreement under which the consequences of a
default or termination would have a Material Adverse Effect on Chameleon; or

                           (xi) any other agreement (or group of related
agreements) the performance of which involves consideration in excess of
$25,000.

With respect to each such agreement: (A) the agreement is legal, valid, binding
and enforceable with respect to Chameleon, and to Chameleon's Knowledge, with
respect to the other party, and, to Chameleon's Knowledge, in full force and
effect in all material respects, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by the
effect of general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law); (B) Chameleon, and to
Chameleon's Knowledge, the other party is not in material breach or default,
and, to Chameleon's Knowledge, no event has occurred which with notice or lapse
of time would constitute a material breach or default, or permit termination,
modification, or acceleration, under the agreement; and (C) Chameleon, and to
Chameleon's Knowledge, the other party has not repudiated any material provision
of the agreement.

                  (p) INSURANCE. Chameleon has in effect insurance policies
providing property, casualty, liability, and other coverage in form and amount
customary for similarly situated businesses.

                                      -19-
<PAGE>

                  (q) LITIGATION. ss.3(q) of the Disclosure Schedule sets forth
each instance in which Chameleon (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of Chameleon, is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or quasi
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.

                  (r) BOOKS AND RECORDS. The minute books of Chameleon contain
accurate and complete records in all material respects of all meetings held of,
and corporate action taken by, the shareholders, the board of directors and
committees of the board of directors of Chameleon. All material corporate
records requested by Buyer for review have been delivered or made available to
Buyer.

                  (s) EMPLOYEES. Chameleon is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strike or material
grievance, claim of unfair labor practices, or other collective bargaining
dispute within the past three years. Chameleon has not committed any material
unfair labor practice. Chameleon has no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of Chameleon.

                  (t) EMPLOYEE BENEFITS.

                           (i) ss.3(t) of the Disclosure Schedule lists each
Employee Benefit Plan that Chameleon maintains or to which it contributes or has
any obligation to contribute or has or may have any liability or obligation.

                                    (A) Each such Employee Benefit Plan (and
each related trust, insurance contract, or fund) complies in form and in
operation in all material respects with its terms and the applicable
requirements of ERISA, the Code, and other applicable laws.

                                    (B) All contributions (including all
employer contributions and employee salary reduction contributions) which are
due have been paid to each such Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any period ending on or before
the Closing Date which are not yet due have been paid to each such Employee
Pension Benefit Plan or properly accrued in accordance with the past custom and
practice of Chameleon. All premiums or other payments otherwise due for all
periods ending on or before the Closing Date have been paid with respect to each
such Employee Benefit Plan which is an Employee Welfare Benefit Plan.

                                    (C) Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan meets the requirements of a "qualified plan"
under Code ss.401(a), has received a favorable determination or opinion letter
from the Internal Revenue Service that it is a "qualified plan," and Chameleon
is not aware of any facts or circumstances that could result in the revocation
of such determination or opinion letter.

                                    (D) The market value of assets under each
such Employee Benefit Plan which is an Employee Pension Benefit Plan (other than
any Multiemployer Plan) equals or exceeds

                                      -20-
<PAGE>

the present value of all vested and nonvested liabilities thereunder determined
in accordance with PBGC methods, factors, and assumptions applicable to an
Employee Pension Benefit Plan terminating on the date for determination.

                                    (E) Chameleon has delivered or made
available to the Buyer correct and complete copies of the plan documents and
summary plan descriptions, the most recent determination or opinion letter, as
applicable, received from the Internal Revenue Service, the three most recent
Form 5500 Annual Report, and all related trust agreements, insurance contracts,
and other funding agreements which implement each such Employee Benefit Plan.

                           (ii) With respect to each Employee Benefit Plan that
Chameleon and any ERISA Affiliate maintains or ever has maintained or to which
any of them contributes, ever has contributed, or ever has been required to
contribute:

                                    (A) No such Employee Benefit Plan which is
an Employee Pension Benefit Plan (other than any Multiemployer Plan) has been
completely or partially terminated or been the subject of a Reportable Event as
to which notices would be required to be filed with the PBGC. No proceeding by
the PBGC to terminate any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or, to the Knowledge of Chameleon,
threatened.

                                    (B) There have been no Prohibited
Transactions with respect to any such Employee Benefit Plan. Chameleon has no
material liability for material breach of fiduciary duty or any other material
failure to act or comply in connection with the administration or investment of
the assets of any such Employee Benefit Plan. No action, suit, proceeding,
hearing, or investigation with respect to the administration or the investment
of the assets of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the Knowledge of any of the directors and officers
of Chameleon, threatened.

                                    (C) Chameleon has not incurred any material
liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA (including any withdrawal
liability as defined in ERISA ss.4201) or under the Code with respect to any
such Employee Benefit Plan which is an Employee Pension Benefit Plan.

                  (u) GUARANTIES. Chameleon is not a guarantor or otherwise is
responsible for any liability or obligation (including indebtedness) of any
other Person.

                  (v) ENVIRONMENT, HEALTH, AND SAFETY MATTERS.

                           (i) To Chameleon's Knowledge, Chameleon is in
compliance, in each case in all material respects, with all Environmental,
Health, and Safety Requirements.

                           (ii) To Chameleon's Knowledge, Chameleon has not
received any written or oral notice, report or other information regarding any
actual or alleged material violation of Environmental, Health, and Safety
Requirements, or any material liabilities or potential material liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise), including
any material

                                      -21-
<PAGE>

investigatory, remedial or corrective obligations, relating to any of them or
its facilities arising under Environmental, Health, and Safety Requirements.

                  (w) CERTAIN BUSINESS RELATIONSHIPS WITH CHAMELEON. None of the
directors or officers or their Affiliates has been involved as a party in any
material business arrangement or relationship with Chameleon within the past 12
months, and none of the directors or officers or their Affiliates owns any
material asset, tangible or intangible, which is used in the business of
Chameleon.

         4. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to Chameleon that the statements contained in this ss.4 are correct,
except as set forth in the disclosure letter delivered by the Buyer to Chameleon
on the date hereof and initialed by the Parties (the "BUYER DISCLOSURE
SCHEDULE"). The Buyer Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this ss.4;
PROVIDED that disclosure under one paragraph shall be deemed to be disclosed
under such other paragraphs where it is reasonably apparent that such disclosure
is applicable from the content of such disclosure.

                  (a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of
Buyer and Transitory Subsidiary is a corporation duly organized, validly
existing, and in good standing under the laws of Delaware. Buyer is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the lack of such
qualification would not have a Material Adverse Effect on the condition,
operations, results of operations, or future prospects of Buyer. Buyer has full
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. ss.4(a) of the Buyer
Disclosure Schedule lists the directors and officers of Buyer. Transitory
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities and
has conducted its operations only as contemplated by this Agreement.

                  (b) CAPITALIZATION OF BUYER. Since March 31, 2005, Buyer has
not issued any capital stock, other than pursuant to the exercise of employee
stock options under the Company's stock option plans, the issuance of shares of
Common Stock to employees pursuant to Buyer's employee stock purchase plan and
pursuant to the conversion or exercise of outstanding Common Stock Equivalents.
Except as set forth in the previous sentence, the capitalization of Buyer as of
March 31, 2005 is as set forth in its Quarterly Report on Form 10-Q filed with
the Commission on May 23, 2005. Except as set forth in the documents included in
the Buyer Disclosure Package and as a result of the purchase and sale of the
Securities, there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Buyer
capital stock, or contracts, commitments, understandings or arrangements by
which the Buyer or any of its subsidiaries is or may become bound to issue
additional shares of capital stock or Common Stock Equivalents. The issuance of
the shares of Buyer Preferred Stock will not obligate Buyer to issue shares of
capital stock or other securities to any Person (other than the holders of
Outstanding Preferred Shares) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or reset price
under such securities. All of the outstanding shares of capital stock of Buyer
are validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and

                                      -22-
<PAGE>

none of such outstanding shares was issued in violation of any preemptive rights
or similar rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder, the Board of Directors of Buyer or others
is required for the issuance and sale of the shares of Buyer Preferred Stock.
There are no stockholders agreements, voting agreements or other similar
agreements with respect to the Company's capital stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the Company's
stockholders.

                  (c) CAPITALIZATION OF TRANSITORY SUB. The authorized capital
stock of Transitory Subsidiary consists of 100 shares of Transitory Subsidiary
Common Stock, all of which are issued and outstanding on the date hereof and
will be issued and outstanding as of the Closing Date. All of the outstanding
shares of the capital stock of Transitory Subsidiary are duly authorized,
validly issued, fully paid, and non-assessable, and are owned by Buyer.

                  (d) The Company has reserved from its duly authorized capital
stock the maximum number of shares of Common Stock issuable upon conversion of
the Buyer Preferred Stock to be issued pursuant to this Agreement. As of the
Closing the Buyer shall have reserved from its duly authorized capital stock the
maximum number of shares of Buyer Preferred Stock issuable upon conversion of
the Buyer Notes (the "NOTES CONVERSION SHARES") to be issued pursuant to this
Agreement, and shall have reserved from its duly authorized capital stock the
maximum number of shares of Buyer Common Stock issuable upon conversion of the
Notes Conversion Shares.

                  (e) Each of Buyer and Transitory Subsidiary has full power and
authority (including full corporate or other entity power and authority) to
execute and deliver this Agreement and to perform its obligations hereunder,
including consummation of the Merger. The execution and delivery of each of this
Agreement and the Ancillary Agreements by Buyer and the Transitory Subsidiary
and the consummation by them of the transactions contemplated thereby have been
duly authorized by all necessary action on the part of the Company and the
Transitory Subsidiary and their respective boards of directors and stockholders
and no further action is required by Buyer or the Transitory Subsidiary in
connection therewith. This Agreement and the Ancillary Agreements constitute the
valid and legally binding obligation of each of Buyer and Transitory Subsidiary,
enforceable in accordance with their respective terms and conditions.

                  (f) Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which either Buyer or Transitory Subsidiary is subject or any provision
of the charter, bylaws, or other governing documents of either Buyer or
Transitory Subsidiary or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
either Buyer or Transitory Subsidiary is a party or by which it is bound or to
which any of its assets is subject, except where the violation, conflict,
breach, default, acceleration, termination, modification, cancellation, or
failure to give notice would not have a Material Adverse Effect on Buyer or
Transitory Subsidiary or on the ability of the Parties to consummate the
transactions contemplated by this Agreement. Other than in connection with the
provisions of the Delaware Law, the Securities Exchange Act, the Securities Act,
and the state securities laws, neither Buyer nor

                                      -23-
<PAGE>

Transitory Subsidiary needs to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement, except where the failure to give notice, to file, or to obtain
any authorization, consent, or approval would not have a Material Adverse Effect
on Buyer or Transitory Subsidiary or on the ability of the Parties to consummate
the transactions contemplated by this Agreement. No vote of the stockholders of
Buyer is required by law, Buyer's organizational documents or otherwise in order
for Buyer to consummate the Merger and the transactions contemplated hereby.

                  (g) None of the information that Buyer and Transitory
Subsidiary will supply specifically for use in the Proxy Materials will contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they will be made, not misleading.

                  (h) Buyer and Transitory Subsidiary do not have any liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.

                  (i) AUTHORIZATION OF SHARES. The shares of Buyer Preferred
Stock to be issued in the Merger, when issued in accordance with the provisions
of this Agreement (and the Note Conversion Shares when issued in accordance with
the provisions of the Buyer Notes), will be duly authorized, validly issued,
fully paid and nonassessable, and will not be subject to preemptive rights
created by statute, the Buyer's certificate of incorporation or bylaws, or any
contract or agreement to which the Buyer is a party or bound. The shares of
Buyer Preferred Stock to be issued in the Merger, when issued in accordance with
the provisions of this Agreement, will have the rights and preferences and
privileges and restrictions set forth in EXHIBIT B hereto and will have the same
rights and preferences and restrictions, including but not limited to pari passu
registration rights and warrant coverage, lock-up and sale restrictions, as the
most favorably treated securities issued by Buyer to purchasers of Buyer
Preferred Stock in equity financing transactions between the date of this
Agreement and the Closing, including any equity financing transactions that
close concurrently with the Merger.

                  (j) Chameleon acknowledges on behalf of holders of Outstanding
Preferred Shares that Buyer has made available to Chameleon an investor
disclosure package consisting of Buyer's annual reports on Form 10-KSB for the
fiscal years ended December 31, 2003 and 2004, all quarterly reports on Form
10-QSB and reports on Form 8-K and amendments thereto filed by Buyer with the
SEC since December 31, 2003 and up to the date hereof, if any, any proxy
materials distributed to Buyer's stockholders since December 31, 2003 and up to
the date hereof, in each case excluding any exhibits or attachments thereto (the
"BUYER DISCLOSURE PACKAGE"). The documents in the Buyer Disclosure Package (a)
conformed, as of the dates of their respective filing with the SEC, in all
material respects, to the requirements of the Securities Act and the Exchange
Act, and (b) when taken together, do not, as of their respective filing dates,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Buyer, including the notes thereto, included in the documents in
the Buyer Disclosure Package fairly and accurately represented, in all material
respects, the consolidated financial condition of Buyer as of their respective
dates and Buyer's consolidated results of operations for the

                                      -24-
<PAGE>

respective periods specified therein are in conformity with GAAP (except as may
be indicated in the notes thereto or, in the case of unaudited statements
included in quarterly reports on Form 10-QSB, as permitted by Form 10-QSB of the
SEC, and subject, in the case of unaudited statements, to normal, immaterial
year end audit adjustments). Buyer has filed all reports, schedules, forms,
statements and other documents required to be filed by it under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by reference therein,
being collectively referred to herein as the "SEC REPORTS") on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension.

                  (k) SARBANES-OXLEY; INTERNAL ACCOUNTING CONTROLS. Buyer is in
material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which
are applicable to it as of the Closing Date. Buyer and the Subsidiaries maintain
a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Buyer has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for Buyer and designed
such disclosure controls and procedures to ensure that material information
relating to Buyer, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which Buyer's most recently filed periodic report under the Exchange Act, as the
case may be, is being prepared. Buyer's certifying officers have evaluated the
effectiveness of Buyer's disclosure controls and procedures as of the date prior
to the filing date of the most recently filed periodic report under the Exchange
Act (such date, the "EVALUATION DATE"). Buyer presented in its most recently
filed periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in Buyer's internal controls (as such term is
defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to Buyer's
Knowledge, in other factors that could significantly affect Buyer's internal
controls.

                  (l) LISTING AND MAINTENANCE REQUIREMENTS. Buyer's Common Stock
is registered pursuant to Section 12(g) of the Exchange Act, and Buyer has taken
no action designed to, or which to its knowledge is likely to have the effect
of, terminating the registration of the Common Stock under the Exchange Act nor
has Buyer received any notification that the Commission is contemplating
terminating such registration. Buyer has not, in the 12 months preceding the
date hereof, received notice from any Trading Market on which the Common Stock
is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market.
"TRADING MARKET" means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American
Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the
Nasdaq SmallCap Market.

                                      -25-
<PAGE>

                  (m) COMPLIANCE. Neither Buyer nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
Buyer or any Subsidiary under), nor has Buyer or any Subsidiary received notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
applicable to its business except in each case of clause (i), (ii) and (iii) as
could not have a Material Adverse Effect.

                  (n) LITIGATION. Except as disclosed in the Buyer Disclosure
Schedule, (a) there is no action, suit, proceeding, hearing, or investigation
("ACTION") of, in, or before any court or quasi judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator or mediator, nor, to the knowledge of Buyer, has any such Action been
overtly threatened, and (b) there is no judgment, decree, injunction, rule or
order of any court or quasi judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator or mediator
outstanding against Buyer, except where such Action (if determined adversely to
Buyer) or such judgment, decree, injunction, rule or order would not have a
Material Adverse Effect on Buyer or on Buyer's or Transitory Subsidiary's
ability to consummate the Merger or to perform their respective obligations
under this Agreement or the Investor Rights Agreement. Except as set forth under
the heading "Legal Proceedings" in the Company's most recently filed 10-KSB or
10-QSB, neither the Company nor any Subsidiary, nor any director or officer
thereof, is or has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty, and there has not been, and to the knowledge of the Company,
there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.

                  (o) INTELLECTUAL PROPERTY.

                           (i) To the Knowledge of Buyer, Buyer owns or
possesses sufficient Intellectual Property Rights to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary for its
business as presently conducted. Each item of Intellectual Property owned or
used by Buyer immediately prior to the Closing hereunder will be owned or
available for use by the Buyer on identical terms and conditions immediately
subsequent to the Closing hereunder. Buyer has taken commercially reasonable
actions to maintain and protect each item of Intellectual Property that it owns
or uses.

                           (ii) To the Knowledge of Buyer, Buyer has not
interfered with, infringed upon, misappropriated, or violated any material
Intellectual Property Rights of third parties in any material respect. None of
the directors and officers of Buyer has ever received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Buyer must license or
refrain from using any Intellectual Property Rights of any third party). To the
Knowledge of Buyer, no third party has interfered with,

                                      -26-
<PAGE>

infringed upon, misappropriated, or violated any material Intellectual Property
Rights of Buyer in any material respect.

                  (p) NO MATERIAL ADVERSE EFFECT. Since the date of the latest
audited financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports, (i) there has been no event,
occurrence or development that has had or that could reasonably be expected to
result in a Material Adverse Effect with respect to Buyer, (ii) Buyer has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in Buyer's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) Buyer has not altered its method of accounting,
(iv) Buyer has not declared or made any dividend or distribution of cash or
other property to its stockholders or purchased, redeemed or made any agreements
to purchase or redeem any shares of its capital stock and (v) Buyer has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Buyer stock option plans. Buyer does not have pending
before the Commission any request for confidential treatment of information.

                  (q) NO MATERIAL ADVERSE CHANGE. Since December 31, 2004, there
has been no Material Adverse Change to Buyer.

         5. PRE CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.

                  (a) GENERAL. Each of the Parties will use his or its
reasonable best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in ss.6 below).

                  (b) REGULATORY MATTERS AND APPROVALS. Each of the Parties will
give any notices to, make any filings with, and use its reasonable best efforts
to obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in 3(c) and
4(d) above. As promptly as practicable after the execution of this Agreement,
Chameleon shall submit this Agreement and the transactions contemplated hereby
to its stockholders for approval and adoption as provided by Delaware Law and
Chameleon's Certificate of Incorporation and Bylaws.

                  (c) OPERATION OF BUSINESS. Chameleon will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing, Chameleon
will not (i) declare, set aside, or pay any dividend or make any distribution
with respect to its capital stock or redeem, purchase, or otherwise acquire any
of its capital stock, or issue any capital stock except in connection with the
exercise of options or warrants outstanding as of the date of this Agreement or
pursuant to Chameleon repurchase rights arising upon termination of an
individual's status as an employee, director or consultant, or (ii) otherwise
engage in any practice, take any action, or enter into any transaction of the
sort described in ss.3(h) above, other than ss.3(h)(iii), ss.3(h)(x),
ss.3(h)(xii) or ss.3(h)(xvi).

                                      -27-
<PAGE>

                  (d) PRESERVATION OF BUSINESS. Chameleon will keep its business
and properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.

                  (e) ACCESS. Chameleon will permit representatives of the Buyer
to have reasonable access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of Chameleon, to all premises,
properties, personnel, books, records (including tax records), contracts, and
documents of or pertaining to Chameleon. The Buyer will treat and hold as such
any Confidential Information it receives from Chameleon in the course of the
reviews contemplated by this ss.5(e), will not use any of the Confidential
Information except in connection with this Agreement, and, if this Agreement is
terminated for any reason whatsoever, will return to Chameleon all tangible
embodiments (and all copies) of the Confidential Information which are in its
possession. The Parties acknowledge that the Non-disclosure agreement dated
November 30, 2004 among the parties is still in effect.

                  (f) NOTICE OF DEVELOPMENTS. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of his or its own representations and warranties in ss.3 and ss.4
above. No disclosure by any Party pursuant to this ss.5(f), however, shall be
deemed to amend or supplement the Disclosure Schedule or the Buyer Disclosure
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.

                  (g) INDEMNIFICATION OF DIRECTORS AND OFFICERS. If the Merger
is consummated, then until the sixth anniversary of the Effective Time, Buyer
will cause the Surviving Corporation to fulfill and honor in all respects the
obligations of Chameleon to its directors and officers as of immediately prior
to the Effective Time (the "TARGET INDEMNIFIED PARTIES") pursuant to any
indemnification agreements or any indemnification provisions under Chameleon's
Certificate of Incorporation or Bylaws as in effect on the date of this
Agreement (the "TARGET INDEMNIFICATION PROVISIONS"). In connection therewith
Buyer shall advance expenses to the Target Indemnified Parties as incurred to
the fullest extent provided for under the Target Indemnification Provisions,
provided the person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification. Any claims for indemnification made under this
ss.5(g) on or prior to the sixth anniversary of the Effective Time of the Merger
shall survive such anniversary until the final resolution thereof.

                  (h) DIRECTORS AND OFFICERS INSURANCE. For a period of six (6)
years after the Effective Time, Buyer shall cause the Surviving Corporation to
maintain in effect the existing directors' and officers' liability insurance
policy placed and administered through the Company's current insurance broker (a
copy of which has been made available to the Buyer) covering the Target
Indemnified Parties with coverage in amount and scope at least as favorable to
such persons as the Company's existing coverage.

                  (i) EXCLUSIVITY. Chameleon will not (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of Chameleon (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in

                                      -28-
<PAGE>

any other manner any effort or attempt by any Person to do or seek any of the
foregoing. Notwithstanding the foregoing, Chameleon may to the extent required
by the fiduciary obligations of the Board of Directors of the Company or any
committee thereof, as determined in good faith by the Board of Directors of the
Company or any such committee, after consultation with its outside counsel, in
response to a bona fide, unsolicited Acquisition Proposal made or received after
the date of this Agreement (including, without limitation, an Acquisition
Proposal received from a person with whom the Company had discussions or to whom
the Company furnished information prior to the date hereof) that the Board of
Directors of the Company or any committee determines in good faith after
consultation with its outside counsel and its financial advisors is a Superior
Proposal (as defined below), in each case that did not follow a breach by the
Company of this ss.5(i), (x) furnish information with respect to Chameleon to
the person and its representatives making such Acquisition Proposal pursuant to
a customary confidentiality agreement, (y) participate in discussions or
negotiations with such person and its representatives regarding any Acquisition
Proposal, and (z) terminate this Agreement pursuant to, and subject to the
provisions of, ss.5(i).

                  (j) INCENTIVE PLAN PAYMENTS. Pursuant to the terms of the
Chameleon Management Incentive Plan dated December 22, 2004, the Chameleon
Management Incentive Award Agreement dated December 23, 2004, as amended January
27, 2005, the Chameleon Key Employee Incentive Plan dated December 22, 2004, the
several Chameleon Key Employee Incentive Agreements dated December 23, 2004 and
subsequent discussions between Buyer and Chameleon, upon the Closing, Buyer
agrees to make the following payments: (i) $80,000 in cash and $60,000 in Buyer
Preferred Stock (which stock will be subtracted from the Aggregate Stock
Consideration Amount) to Dale Quick and (ii) $55,000 in cash to certain
individuals who, prior to the Closing, were employees of Chameleon.

                  (k) EMPLOYMENT MATTERS. As of and following the Closing Date,
Buyer will permit employees of Chameleon and each of its subsidiaries who
continue employment with Buyer or any of its subsidiaries following the Closing
Date ("CONTINUING EMPLOYEES"), and, as applicable, their eligible dependents, to
participate in employee welfare benefit plans, programs or policies (including,
without limitation, any vacation, sick, personal time off plans or programs) of
Buyer and any plan of Buyer intended to qualify within the meaning of Section
401(a) of the Code on terms no less favorable than those provided to similarly
situated employees of Buyer or its subsidiaries; provided further that (i) each
such Continuing Employee will receive credit for purposes of eligibility to
participate and vesting under such for years of service with Chameleon (or any
of its subsidiaries) prior to the Closing Date, and (ii) Buyer will cause any
and all pre-existing condition limitations, eligibility waiting periods and
evidence of insurability requirements under any group health plans of Buyer in
which such employees and their eligible dependents will participate to be waived
and will provide credit for any co-payments and deductibles prior to the Closing
Date for purposes of satisfying any applicable deductible out-of-pocket or
similar requirements under any such plans that may apply after the Closing Date.

                  (l) Buyer and Chameleon shall take all actions reasonably
necessary to cause the issuance of Buyer Preferred Stock and Buyer Notes in
connection with the Merger to qualify for a valid exemption from the
registration requirements of the Securities Act as a valid private placement
under Rule 506 of Regulation D under the Securities Act.

                                      -29-
<PAGE>

                  (m) Chameleon shall deliver to Buyer and the Paying Agent a
spreadsheet (the "SPREADSHEET") substantially in the form attached hereto as
EXHIBIT G, which spreadsheet shall be certified as complete and correct by the
President of Chameleon as of the Closing and which shall include, among other
things, as of the Closing, all holders of Chameleon capital stock and Chameleon
Notes, the number of shares of Chameleon capital stock and principal and accrued
interest under Chameleon Notes held by such persons (including the respective
certificate numbers), the Merger Consideration to be paid to each holder of
Outstanding Preferred Stock and the amount of consideration to be paid to the
holders of Chameleon Notes. The Company shall deliver the Spreadsheet three
Business Days prior to the Closing Date.

                  (n) Chameleon has engaged an accounting firm, Peterson
Sullivan PLLC, which firm is acceptable to Buyer's auditors, to prepare the
following financial statements and deliver them to Buyer within thirty (30) days
following the Closing Date: audited balance sheets and statements of income,
changes in stockholders' equity and cash flow as of and for the fiscal years
ended December 31, 2003 and 2004.

                  (o) WARRANT COVERAGE. At the Closing, Buyer will issue to each
holder of Outstanding Preferred Share(s) and/or Chameleon Note(s), a warrant in
substantially the form attached hereto as EXHIBIT H, to purchase a number of
shares of common stock of Buyer equal to the product of (i) forty thousand
percent (40,000%) of the number of shares of Buyer Preferred Stock that each
such holder is entitled to receive pursuant to Section 2 hereof times (ii)
1.125.

         6. CONDITIONS TO OBLIGATION TO CLOSE.

                  (a) CONDITIONS TO BUYER'S AND TRANSITORY SUBSIDIARY'S
OBLIGATION. The obligation of each of Buyer and Transitory Subsidiary to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:

                           (i) this Agreement and the Merger shall have received
the requisite approval of Chameleon's stockholders (on an as-converted basis);

                           (ii) Chameleon shall have procured all of the
third-party consents specified in 5(b) above or required under any of its
material contracts;

                           (iii) the representations and warranties set forth in
ss. 3 above shall be true and correct at and as of the Closing Date, except (i)
to the extent such representations and warranties are made as of a particular
date, in which case such representations and warranties shall be true and
correct as of such date, (ii) for changes contemplated by this Agreement, or
(iii) where the failure to be true and correct when taken as a whole has not had
a Material Adverse Effect on Chameleon;

                           (iv) Chameleon shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing,
except to the extent that such covenants are qualified by the term material, or
contain terms such as Material Adverse Effect or Material Adverse Change, in
which case Chameleon shall have performed and complied with all of such
covenants (as so written, including the term material or Material Adverse Effect
or Material Adverse Change) in all respects through the Closing;

                                      -30-
<PAGE>

                           (v) there shall not be any judgment, order, decree,
stipulation, injunction, or charge in effect that would (A) prevent consummation
of any of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) adversely affect the right of Surviving Corporation to own
the former assets or to operate the former business of Chameleon;

                           (vi) Chameleon shall have delivered to Buyer a
certificate to the effect that each of the conditions specified above in
6(a)(i)-(v) is satisfied in all respects;

                           (vii) the Parties shall have received all
authorizations, consents, and approvals of governments and governmental agencies
referred to in 3(c) and 4(d) above;

                           (viii) Each individual receiving Buyer Preferred
Stock in connection with the Merger and pursuant to the terms of this Agreement
shall have completed and delivered to Buyer a form of the Stockholder
Representation Statement and Transfer Restriction Agreement, in substantially
the form attached hereto as EXHIBIT E;

                           (ix) Each holder of Preferred Shares and Chameleon

Notes shall have executed and delivered to Buyer a form of Release Agreement,
attached hereto as EXHIBIT D;

                           (x) Buyer shall have received from counsel to
Chameleon an opinion in substance as set forth in EXHIBIT I attached hereto,
subject to customary form, qualifications and assumptions, addressed to Buyer,
and dated as of the Closing Date;

                           (xi) Chameleon has engaged an accounting firm,
Peterson Sullivan PLLC, which firm is acceptable to Buyer's auditors, to prepare
the following financial statements and deliver them to Buyer within thirty (30)
days following the Closing Date: audited balance sheets and statements of
income, changes in stockholders' equity and cash flow as of and for the fiscal
years ended December 31, 2003 and 2004.

Buyer may waive any condition specified in this 6(a) if it executes a writing so
stating at or prior to the Closing.

                  (b) CONDITIONS TO CHAMELEON'S OBLIGATION. The obligation of
Chameleon to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:

                           (i) Buyer shall have procured all of the third-party
consents specified in 5(b) above or required under any of its material
contracts;

                           (ii) the representations and warranties set forth in
ss.4 above shall be true and correct in all material respects at and as of the
Closing Date, except (i) to the extent such representations and warranties are
made as of a particular date, in which case such representations and warranties
shall be true and correct as of such date, (ii) for changes contemplated by this
Agreement, or (iii) where the failure to be true and correct when taken as a
whole has not had a Material Adverse Effect on Buyer;

                                      -31-
<PAGE>

                           (iii) Buyer shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing,
except to the extent that such covenants are qualified by the term material, or
contain terms such as Material Adverse Effect or Material Adverse Change, in
which case Buyer shall have performed and complied with all of such covenants
(as so written, including the term material or Material Adverse Effect or
Material Adverse Change) in all respects through the Closing;

                           (iv) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) adversely affect the right of Surviving Corporation
to own the former assets, to operate the former business of Chameleon, or (D)
there shall not be any judgment, order, decree, stipulation, injunction, or
charge in effect preventing consummation of any of the transactions contemplated
by this Agreement;

                           (v) Buyer shall have delivered to Chameleon a
certificate to the effect that each of the conditions specified above in
6(b)(i)-(iv) is satisfied in all respects;

                           (vi) this Agreement and the Merger shall have
received the Requisite Target Stockholder Approval;

                           (vii) the Parties shall have received all
authorizations, consents, and approvals of governments and governmental agencies
referred to in 3(d) and 4(d) above;

                           (viii) Chameleon shall have received from counsel to
Buyer an opinion in form and substance as set forth in EXHIBIT J attached
hereto, subject to customary form, qualifications and assumptions, addressed to
Chameleon, and dated as of the Closing Date;

                           (ix) Buyer shall have executed and delivered to
Chameleon and each holder of Outstanding Preferred Stock and Chameleon Notes an
Investor Rights Agreement in the form attached hereto as EXHIBIT C;

                           (x) all actions to be taken by Buyer in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to Chameleon;

                           (xi) Buyer shall have paid all legal fees of Wilson
Sonsini Goodrich & Rosati, Professional Corporation, counsel to Chameleon,
incurred in connection with the Merger and all transactions contemplated hereby;

                           (xii) Buyer shall have paid all legal fees of one
counsel to Toucan Capital Fund II, L.P. and NextPoint Partners L.P. and their
Affiliates incurred in connection with the Merger and all transactions
contemplated hereby, not to exceed $10,000.

                                      -32-
<PAGE>

                           (xiii) Buyer shall have paid all fees of Peterson
Sullivan PLLC, auditors of Chameleon, incurred in connection with the Merger and
all transactions contemplated hereby, incurred as of the date hereof;

                           (xiv) Buyer, Midsummer and certain other parties
(together with Midsummer, the "DEBENTURE INVESTORS") shall have consummated the
purchase by the Debenture Investors of $7,000,000 of debentures from Buyer.

Chameleon may waive any condition specified in this 6(b) if it executes a
writing so stating at or prior to the Closing.

         7. TAX MATTERS. Each of the Parties agrees not to take any action (or
fail to take any action), either prior to or following the Closing, that would
reasonably be expected to cause the Merger to fail to qualify as a
"reorganization" within the meaning of Section 368(a) of the Code and the
regulations thereunder. None of the Parties shall take any position on any
federal, state or local income or franchise tax return, or take any other tax
reporting position, that is inconsistent with the treatment of the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code.

         8. TERMINATION.

                  (a) TERMINATION OF AGREEMENT. Either of the Parties may
terminate this Agreement with the prior authorization of its board of directors
(whether before or after stockholder approval) as provided below:

                           (i) the Parties may terminate this Agreement by
mutual written consent at any time prior to the Effective Time;

                           (ii) Buyer may terminate this Agreement by giving
written notice to Chameleon at any time prior to the Effective Time (A) in the
event Chameleon has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Buyer has notified
Chameleon of the breach, and the breach has continued without cure for a period
of 15 business days after the notice of breach or (B) if the Closing shall not
have occurred on or before June 30, 2005, by reason of the failure of any
condition precedent under 6(a) hereof (unless the failure results primarily from
Buyer breaching any representation, warranty, or covenant contained in this
Agreement);

                           (iii) Chameleon may terminate this Agreement by
giving written notice to Buyer at any time prior to the Effective Time (A) in
the event Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Chameleon has notified
Buyer of the breach, and the breach has continued without cure for a period of
15 business days after the notice of breach, (B) if the Closing shall not have
occurred on or before June 30, 2005, by reason of the failure of any condition
precedent under ss.6(b) hereof (unless the failure results primarily from
Chameleon breaching any representation, warranty, or covenant contained in this
Agreement) or (C) in order to enter into a letter of intent or definitive
acquisition agreement providing for a Superior Proposal promptly following the
termination of this Agreement, if the Board of Directors of the Company (or any
committee thereof) in response to such Superior

                                      -33-
<PAGE>

Proposal that did not follow a breach of ss.5(h) determines in good faith after
consultation with its outside counsel, that its fiduciary obligations require it
to terminate this Agreement;

                           (iv) Chameleon may terminate this Agreement by giving
written notice to Buyer in the event that this Agreement and the Merger fail to
receive the Requisite Target Stockholder Approval within 15 business days of
circulation of the Proxy Materials.

                  (b) EFFECT OF TERMINATION. If any Party terminates this
Agreement pursuant to 7(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, however, that
the confidentiality provisions contained in 5(e) above shall survive any such
termination. If the Parties terminate this Agreement pursuant to ss.7(a)(i)
above, all rights and obligations of the Parties hereunder shall terminate
without any liability of any Party to any other Party (except for any liability
of any Party then in breach). The provisions contained in ss.5(e), ss.7 and ss.9
shall survive termination in any event.

         9. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of Chameleon contained in ss.3 above shall
terminate upon the Closing hereunder. All of the representations and warranties
of the Buyer and Transitory Subsidiary contained in ss.4 above shall terminate
upon the Closing.

         10. MISCELLANEOUS.

                  (a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of the Buyer and Chameleon; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly traded securities (in which
case the disclosing Party will use its reasonable best efforts to advise the
other Parties prior to making the disclosure).

                  (b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; provided, however, that (a) the
provisions of ss. 4 (including with respect to any breach of any representation
or warranty contained in such ss.4 and ss.5(j)) are intended for the benefit of
Chameleon, (b) the provisions of ss.5(g) and ss.5(h) are intended for the
benefit of the Target Indemnified Parties and (c) the provisions of ss.5(i) are
intended for the benefit of the Key Employees.

                  (c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof. Specifically, but not exclusively, the Letter of Intent
(the "LOI") dated January 24, 2005 among the Parties shall be terminated as of
the date hereof, and any fees incurred pursuant to the LOI are hereby waived.

                                      -34-
<PAGE>

                  (d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Buyer and Chameleon; provided, however, that the Buyer
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).

                  (e) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.

                  (f) HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

                  (g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:

                           IF TO CHAMELEON:

                           Chameleon Communication Technology, Inc.
                           200 West Mercer Street
                           Suite 403
                           Seattle, WA 98119
                           Attention: Dale Quick

                           COPY TO:

                           Wilson Sonsini Goodrich & Rosati
                           701 Fifth Avenue, Suite 5100
                           Seattle, WA 98104-7036
                           Attention:  Craig Sherman, Esq.
                                       Christian Montegut, Esq.

                           IF TO THE BUYER:

                           Secured Services, Inc.
                           110 William St., 14th Floor
                           New York, NY 10038
                           Attention: President

                                      -35-
<PAGE>

                           COPY TO:

                           Cohen Mohr LLP 1
                           420 Beverly Road, Suite 380
                           McLean, VA 22101
                           Attention: Daniel H. DuVal, Esq.

Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.

                  (h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Delaware without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.

                  (i) AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and Chameleon. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.

                  (j) SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.

                  (k) EXPENSES. Buyer will agree to assume reasonable and
customary expenses incurred by Chameleon (including legal fees, audit fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.

                  (l) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.

                  (m) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.

                                      -36-
<PAGE>

                  (n) Resolution of Disputes.

                           (i) Any dispute, claim or controversy (a "DISPUTE")
between Buyer or its affiliates on one hand and Chameleon or any of its
affiliates or shareholders, on the other hand, arising under or relating to this
Agreement or the Ancillary Agreements the parties shall attempt in good faith to
resolve the Dispute and, if such Dispute is not resolved within twenty (20)
business says after the initiation of such attempts, either Buyer or Chameleon
may demand arbitration of the Dispute unless the amount of the damage or loss is
at issue in pending litigation with a third party, in which event arbitration
shall not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the Dispute shall be settled by
arbitration conducted by three arbitrators. Buyer and Chameleon shall each
select one arbitrator, and the two arbitrators so selected shall select a third
arbitrator. The arbitrators shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery while allowing the
parties an opportunity, adequate in the sole judgment of the arbitrators, to
discover relevant information from the opposing parties about the subject matter
of the Dispute. The arbitrators shall rule upon motions to compel or limit
discovery and shall have the authority to impose sanctions, including attorneys'
fees and costs, to the extent as a court of competent law or equity, should the
arbitrators determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of a majority of the three arbitrators as to the
validity and amount of any claim shall be binding and conclusive upon the
parties to this Agreement. Such decision shall be written and shall be supported
by written findings of fact and conclusions which shall set forth the award,
judgment, decree or order awarded by the arbitrators.

                           (ii) Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in New York, New York under the rules then in effect
of the American Arbitration Association.

                  (o) SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.

                                      -37-
<PAGE>

         IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.

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

SECURED SERVICES, INC.                CHAMELEON COMMUNICATIONS
                                      TECHNOLOGY, INC.
By: __________________________
                                      By: __________________________
Name:
                                      Name:
Title:
                                      Title:
--------------------------------------------------------------------------------

SECURED MOBILE, INC.

By: __________________________

Name:

Title:
--------------------------------------------------------------------------------

                                      -38-
<PAGE>

                                    EXHIBITS

Exhibit A: Form of Buyer Note

Exhibit B: Preferred Term Sheet

Exhibit C: Form of Investor Rights Agreement

Exhibit D: Form of Release Agreement

Exhibit E: Form of Stockholder Representation Statement and Transfer Restriction
           Agreement

Exhibit F: Certificate of Merger

Exhibit G: Form of Spreadsheet

Exhibit H: Form of Buyer Warrant

Exhibit I: Form of Legal Opinion Issued by Legal Counsel of Chameleon to Buyer

Exhibit J: Form of Legal Opinion Issued by Legal Counsel of Buyer to Chameleon

                                      -39-
<PAGE>

                                    EXHIBIT A

                               Form of Buyer Note

                                      -40-
<PAGE>

                                    EXHIBIT B

                              Preferred Term Sheet

                                      -41-
<PAGE>

                                    EXHIBIT C

                        Form of Investor Rights Agreement

                                      -42-
<PAGE>

                                    EXHIBIT D

                            Form of Release Agreement

                                      -43-
<PAGE>

                                    EXHIBIT E

 Form of Stockholder Representation Statement and Transfer Restriction Agreement

                                      -44-
<PAGE>

                                    EXHIBIT F

                              Certificate of Merger

                                      -45-
<PAGE>

                                    EXHIBIT G

                               Form of Spreadsheet

                                      -46-
<PAGE>

                                    EXHIBIT H

                              Form of Buyer Warrant

                                      -47-
<PAGE>

                                    EXHIBIT I

       Form of Legal Opinion Issued by Legal Counsel of Chameleon to Buyer

                                      -48-
<PAGE>

                                    EXHIBIT J

       Form of Legal Opinion Issued by Legal Counsel of Buyer to Chameleon

                                      -49-SECURITIES PURCHASE AGREEMENT

     This Securities  Purchase  Agreement (this "AGREEMENT") is dated as of June
13, 2005 among Secured Services,  Inc., a Delaware  corporation (the "COMPANY"),
and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "PURCHASER" and collectively the "PURCHASERS").

     WHEREAS,  subject to the terms and  conditions  set forth in this Agreement
and  pursuant to Section  4(2) of the  Securities  Act of 1933,  as amended (the
"SECURITIES  ACT") and Rule 506 promulgated  thereunder,  the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase  from the Company,  securities  of the Company as more fully
described in this Agreement.

     NOW, THEREFORE,  IN CONSIDERATION of the mutual covenants contained in this
Agreement,  and for  other  good and  valuable  consideration  the  receipt  and
adequacy of which are hereby acknowledged,  the Company and each Purchaser agree
as follows:

                                   ARTICLE I.
                                   DEFINITIONS

     1.1   DEFINITIONS. In  addition  to the  terms  defined  elsewhere  in this
Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein),  and (b) the
following terms have the meanings indicated in this Section 1.1:

           "ACTION"  shall  have  the  meaning  ascribed to such term in Section
     3.1(j).

           "AFFILIATE" means any Person that, directly or indirectly through one
     or more  intermediaries,  controls or is  controlled  by or is under common
     control with a Person,  as such terms are used in and construed  under Rule
     144 under the Securities  Act. With respect to a Purchaser,  any investment
     fund or managed  account  that is managed on a  discretionary  basis by the
     same investment manager as such Purchaser will be deemed to be an Affiliate
     of such Purchaser.

           "CLOSING"  means  the  closing  of  the  purchase  and  sale  of  the
     Securities pursuant to Section 2.1.

           "CLOSING  DATE" means  the  Trading  Day when all of the  Transaction
     Documents  have been  executed  and  delivered  by the  applicable  parties
     thereto, and all conditions precedent to (i) the Purchasers' obligations to
     pay the Subscription  Amount and (ii) the Company's  obligations to deliver
     the Securities have been satisfied or waived.

           "COMMISSION" means the Securities and Exchange Commission.

<PAGE>

           "COMMON  STOCK"  means the  common  stock of the  Company,  par value
     $0.0001  per  share,  and any other  class of  securities  into  which such
     securities may hereafter have been reclassified or changed into.

           "COMMON STOCK EQUIVALENTS" means any securities of the Company or the
     Subsidiaries  which would entitle the holder thereof to acquire at any time
     Common Stock,  including,  without limitation,  any debt,  preferred stock,
     rights,  options,  warrants  or  other  instrument  that  is  at  any  time
     convertible into or exercisable or exchangeable for, or otherwise  entitles
     the holder thereof to receive, Common Stock.

           "COMPANY COUNSEL"  means  Morse,   Zelnick,   Rose  &  Lander,   LLP.

           "CONVERSION PRICE"  shall  have the  meaning ascribed to such term in
     the Debentures.

           "CUSTODIAL  AGENT" shall have the meaning set forth in the  Custodial
     Agreement.

           "CUSTODIAL  AGREEMENT"   shall  mean  the   Custodial   Agreement  in
     substantially   the  form  of  EXHIBIT  E  hereto  executed  and  delivered
     contemporaneously with this Agreement.

           "DEBENTURES"  means, the 7.5% Convertible  Debentures due, subject to
     the terms therein,  three years from their date of issuance,  issued by the
     Company to the Purchasers hereunder, in the form of EXHIBIT A.

           "DISCLOSURE SCHEDULES"  shall  have  the  meaning  ascribed  to  such
     term in Section 3.1.

           "EFFECTIVE  DATE"  means the  date  that  the  initial   Registration
     Statement  filed  by  the  Company  pursuant  to  the  Registration  Rights
     Agreement is first declared effective by the Commission.

           "EVALUATION DATE"  shall have the  meaning  ascribed  to such term in
     Section 3.1(r).

           "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
     and the rules and regulations promulgated thereunder.

           "EXEMPT ISSUANCE" means the issuance of (a) shares of Common Stock or
     options to key employees, consultants, officers or directors of the Company
     pursuant to any stock or option plan or other compensatory arrangement duly
     adopted by a majority of the non-employee members of the Board of Directors
     of the Company or a majority of the members of a committee of  non-employee
     directors  established for such purpose;  PROVIDED,  HOWEVER,  issuances to
     such  consultants of the Company and for the purpose of other  compensatory
     arrangements  shall not exceed,  in the  aggregate,  250,000  shares per 12
     month period,  subject to adjustment  for reverse and forward stock splits,
     stock dividends,  stock combinations and other similar  transactions of the
     Common Stock, (b) securities upon the exercise or exchange of or conversion

                                       2
<PAGE>

     of  any  Securities  issued  hereunder  and/or  securities  exercisable  or
     exchangeable  for or  convertible  into shares of Common  Stock  issued and
     outstanding on the date of this  Agreement,  provided that such  securities
     have not been  amended  since the date of this  Agreement  to increase  the
     number  of  such  securities  or to  decrease  the  exercise,  exchange  or
     conversion price of any such securities,  (c) securities issued pursuant to
     acquisitions  or strategic  transactions,  provided any such issuance shall
     only be to a Person  which  is,  itself or  through  its  subsidiaries,  an
     operating  company  in a  business  synergistic  with the  business  of the
     Company  and in which the  Company  receives  benefits  in  addition to the
     investment  of  funds,  but shall not  include a  transaction  in which the
     Company is issuing securities  primarily for the purpose of raising capital
     or to an entity whose primary  business is investing in securities  and (d)
     up to, in the  aggregate,  250,000  shares per 12 month period,  subject to
     adjustment  for reverse and forward stock splits,  stock  dividends,  stock
     combinations and other similar  transactions of the Common Stock, of Common
     Stock to key officers,  employees or consultants of acquisition  targets of
     the Company in consideration  for the extension of or entry into employment
     agreements.

           "FW"  means  Feldman  Weinstein  LLP  with  offices  located  at  420
     Lexington Avenue, Suite 2620, New York, New York 10170-0002.

           "GAAP"  shall  have the  meaning  ascribed  to  such term in  Section
      3.1(h).

           "INTELLECTUAL PROPERTY RIGHTS"  shall  have  the  meaning ascribed to
     such term in Section 3.1(o).

           "LEGEND REMOVAL DATE" shall have the meaning ascribed to such term in
     Section 4.1(c).

           "LIENS"  means a lien, charge, security  interest, encumbrance, right
     of first refusal, preemptive right or other restriction.

           "MARKET PRICE" shall mean $1.06597, the average of the each of the 10
     VWAPs immediately prior to the date hereof.

           "MATERIAL ADVERSE EFFECT"  shall  have the  meaning  assigned to such
     term in Section 3.1(b).

           "MATERIAL PERMITS"  shall have the  meaning  ascribed to such term in
     Section 3.1(m).

           "MAXIMUM RATE"  shall  have  the  meaning  ascribed  to  such term in
     Section 5.17.

           "PARTICIPATION  MAXIMUM" shall have the meaning ascribed to such term
     in Section 4.13.

           "PERSON" means an  individual  or  corporation,  partnership,  trust,
     incorporated  or  unincorporated   association,   joint  venture,   limited
     liability  company,  joint  stock  company,  government  (or an  agency  or
     subdivision thereof) or other entity of any kind.

                                       3
<PAGE>

           "PRE-NOTICE" shall have the meaning  ascribed to such term in Section
     4.13.

           "PROCEEDING"   means   an   action,  claim,  suit,  investigation  or
     proceeding (including,  without  limitation,  an  investigation  or partial
     proceeding, such as a deposition), whether commenced or threatened.

           "PURCHASER PARTY"  shall have the  meaning  ascribed  to such term in
     Section 4.11.

           "REGISTRATION  RIGHTS   AGREEMENT"  means  the  Registration   Rights
     Agreement,  dated the date hereof, among the Company and the Purchasers, in
     the form of EXHIBIT B attached hereto.

           "REGISTRATION  STATEMENT" means a registration  statement meeting the
     requirements  set forth in the  Registration  Rights Agreement and covering
     the resale of the  Underlying  Shares by each  Purchaser as provided for in
     the Registration Rights Agreement.

           "REQUIRED APPROVALS"  shall have the meaning ascribed to such term in
     Section 3.1(e).

           "REQUIRED MINIMUM"  means, as of  any  date,  the  maximum  aggregate
     number of shares of Common Stock then issued or potentially issuable in the
     future  pursuant to the  Transaction  Documents,  including any  Underlying
     Shares  issuable  upon  exercise or  conversion in full of all Warrants and
     Debentures  (including  Underlying Shares issuable as payment of interest),
     ignoring any conversion or exercise limits set forth therein,  and assuming
     that  the  Conversion  Price  is at all  times  on and  after  the  date of
     determination  75%  of  the  then  Conversion  Price  on  the  Trading  Day
     immediately prior to the date of determination.

           "RULE 144" means Rule 144 promulgated by the  Commission  pursuant to
     the  Securities  Act, as such Rule may be amended from time to time, or any
     similar  rule or  regulation  hereafter  adopted by the  Commission  having
     substantially the same effect as such Rule.

           "SEC REPORTS" shall have the meaning ascribed to such term in Section
     3.1(h).

           "SECURITIES"  means the Debentures, the Warrants,  the Warrant Shares
     and the Underlying Shares.

           "SECURITIES ACT" means the Securities Act of 1933, as amended.

           "SHORT SALES" shall  include all "short sales" as defined in Rule 200
     of Regulation SHO under the Exchange Act.

           "SUBSCRIPTION AMOUNT"  means,  as to each  Purchaser,  the  aggregate
     amount  to be paid for  Debentures  and  Warrants  purchased  hereunder  as
     specified  below  such  Purchaser's  name  on the  signature  page  of this
     Agreement and next to the heading  "Subscription  Amount", in United States
     Dollars and in immediately available funds.

                                       4
<PAGE>

           "SUBSEQUENT FINANCING"  shall  have the meaning ascribed to such term
     in Section 4.13.

           "SUBSEQUENT FINANCING NOTICE" shall have the meaning ascribed to such
     term in Section 4.13.

           "SUBSIDIARY" means  any  subsidiary  of the  Company  as set forth on
     SCHEDULE 3.1(A).

           "TRADING DAY"  means a day on which the  Common  Stock is traded on a
     Trading Market

           "TRADING MARKET" means the following  markets or  exchanges on  which
     the Common  Stock is listed or quoted for trading on the date in  question:
     the Nasdaq SmallCap Market, the American Stock Exchange, the New York Stock
     Exchange, the Nasdaq National Market or the OTC Bulletin Board.

           "TRANSACTION  DOCUMENTS"  means this Agreement,  the  Debentures, the
     Warrants,  the Registration  Rights Agreement,  the Custodial Agreement and
     any  other  documents  or  agreements   executed  in  connection  with  the
     transactions contemplated hereunder.

           "UNDERLYING  SHARES" means  the  shares of Common  Stock  issued  and
     issuable  upon  conversion  of the  Debentures  and  upon  exercise  of the
     Warrants and issued and issuable in lieu of the cash payment of interest on
     the Debentures in accordance with the terms of the Debentures.

           "VWAP" means, for any date, the price  determined by the first of the
     following  clauses that applies:  (a) if the Common Stock is then listed or
     quoted on a Trading Market,  the daily volume weighted average price of the
     Common Stock for such date (or the nearest  preceding  date) on the primary
     Trading  Market  on which  the  Common  Stock is then  listed  or quoted as
     reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m.
     EST to 4:02 p.m.  Eastern Time) using the VAP  function;  (b) if the Common
     Stock is not then listed or quoted on the Trading  Market and if prices for
     the Common Stock are then  reported in the "Pink  Sheets"  published by the
     Pink Sheets,  LLC (or a similar  organization  or agency  succeeding to its
     functions of reporting prices),  the most recent bid price per share of the
     Common Stock so reported;  or (c) in all other cases, the fair market value
     of  a   share   of   Common   Stock   as   determined   by   a   nationally
     recognized-independent  appraiser  selected  in good  faith  by  Purchasers
     holding a majority  of the Stated  Value of the shares of  Debentures  then
     outstanding.

           "WARRANTS" means collectively the Common Stock purchase  warrants, in
     the form of  EXHIBIT  C  delivered  to the  Purchasers  at the  Closing  in
     accordance with Section 2.2(a) hereof,  which Warrants shall be exercisable
     immediately and have a term of exercise equal to four years.

           "WARRANT  SHARES"  means  the  shares of Common Stock  issuable  upon
     exercise of the Warrants.

                                       5
<PAGE>

                                  ARTICLE II.
                                PURCHASE AND SALE

     2.1  CLOSING.  On the  Closing  Date,  upon the  terms and  subject  to the
conditions set forth herein,  concurrent with the execution and delivery of this
Agreement by the parties hereto,  the Company agrees to sell, and each Purchaser
agrees to purchase in the aggregate, severally and not jointly, up to $7,000,000
principal amount of the Debentures.  Each Purchaser shall deliver to the Company
via wire  transfer or a certified  check  immediately  available  funds equal to
their Subscription  Amount and the Company shall deliver to each Purchaser their
respective  Debenture and Warrants as determined  pursuant to Section 2.2(a) and
the  other  items  set  forth in  Section  2.2  issuable  at the  Closing.  Upon
satisfaction  of the  conditions  set forth in Sections 2.2 and 2.3, the Closing
shall occur at the offices of the Custodial Agent, or such other location as the
parties shall mutually agree.

     2.2  DELIVERIES.

          a)   On the Closing  Date,  the Company  shall  deliver or cause to be
               delivered to the Custodial  Agent with respect to each  Purchaser
               the following:

               (i)     this Agreement duly executed by the Company;

               (ii)    a  legal  opinion  of  Company  Counsel,  in the  form of
                       EXHIBIT D attached hereto;

               (iii)   a  Debenture  with  a  principal  amount  equal  to  such
                       Purchaser's  Subscription Amount,  registered in the name
                       of such Purchaser;

               (iv)    a Warrant  registered  in the name of such  Purchaser  to
                       purchase  up to a number of shares of Common  Stock equal
                       to 40% of such Purchaser's Subscription Amount divided by
                       the  Market  Price,  with  an  exercise  price  equal  to
                       $1.2791, subject to adjustment therein;

               (v)     the  Registration  Rights  Agreement duly executed by the
                       Company;

               (vi)    a  Lock-up   Agreement  from  each  holder  of  Series  B
                       Preferred Stock of the Corporation,  in the form attached
                       hereto as EXHIBIT F, which  agreement shall be binding on
                       successors  and  assigns,  pursuant  to which  each  such
                       holder  agrees  not to  convert,  exchange  the  Series B
                       Preferred Stock into Common Stock as further set forth in
                       such Agreement; and

               (vii)   the Custodial Agreement duly executed by the Company.

          b)   On the Closing Date,  each Purchaser shall deliver or cause to be
               delivered to the Custodial Agent the following:

                                       6
<PAGE>

               (i)     this Agreement duly executed by such Purchaser;

               (ii)    such Purchaser's  Subscription Amount by wire transfer to
                       the account of the Custodial Agent;

               (iii)   the Custodial  Agreement duly executed by such Purchaser;
                       and

               (iv)    the  Registration  Rights Agreement duly executed by such
                       Purchaser.

     2.3  CLOSING CONDITIONS.

          a)   The  obligations of the Company  hereunder in connection with the
               Closing are subject to the following conditions being met:

               (i)     the  accuracy in all material  respects  when made and on
                       the Closing Date of the representations and warranties of
                       the Purchasers contained herein;

               (ii)    all   obligations,   covenants  and   agreements  of  the
                       Purchasers  required to be  performed  at or prior to the
                       Closing Date shall have been performed; and

               (iii)   the delivery by the  Purchasers of the items set forth in
                       Section 2.2(b) of this Agreement.

          b)   The  respective   obligations  of  the  Purchasers  hereunder  in
               connection   with  the  Closing  are  subject  to  the  following
               conditions being met:

               (i)     the accuracy in all material respects on the Closing Date
                       of the  representations  and  warranties  of the  Company
                       contained herein;

               (ii)    all obligations,  covenants and agreements of the Company
                       required to be  performed at or prior to the Closing Date
                       shall have been performed;

               (iii)   the  delivery  by the  Company  of the items set forth in
                       Section 2.2(a) of this Agreement;

               (iv)    there  shall have been no  Material  Adverse  Effect with
                       respect to the Company since the date hereof;

               (v)     the Company shall have  consummated  and completed to the
                       reasonable   satisfaction   of   each   Purchaser,    the
                       acquisition  of  all  of the  stock/assets  of  Chameleon
                       Communications Technology, Inc. (the "CHAMELEON MERGER");

                                       7
<PAGE>

               (vi)    the Company  shall have  consummated  the  issuance of $5
                       million  of the  Company's  Series B  Preferred  Stock in
                       accordance with the Chameleon Merger; and

               (vii)   from the date hereof to the Closing Date,  trading in the
                       Common  Stock  shall  not  have  been  suspended  by  the
                       Commission  (except  for any  suspension  of  trading  of
                       limited   duration  agreed  to  by  the  Company,   which
                       suspension  shall be  terminated  prior to the  Closing),
                       and,  at any time prior to the Closing  Date,  trading in
                       securities  generally as reported by Bloomberg  Financial
                       Markets  shall not have been  suspended  or  limited,  or
                       minimum  prices  shall  not  have  been   established  on
                       securities whose trades are reported by such service,  or
                       on any  Trading  Market,  nor shall a banking  moratorium
                       have been  declared  either by the  United  States or New
                       York State  authorities nor shall there have occurred any
                       material  outbreak or escalation of  hostilities or other
                       national or  international  calamity of such magnitude in
                       its effect  on, or any  material  adverse  change in, any
                       financial  market which,  in each case, in the reasonable
                       judgment of each  Purchaser,  makes it  impracticable  or
                       inadvisable to purchase the Debentures at the Closing.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

     3.1  REPRESENTATIONS  AND  WARRANTIES  OF THE COMPANY.  Except as set forth
under the  corresponding  section of the disclosure  schedules  delivered to the
Purchasers  concurrently herewith (the "DISCLOSURE  SCHEDULES") which Disclosure
Schedules  shall  be  deemed  a  part  hereof,  the  Company  hereby  makes  the
representations and warranties set forth below to each Purchaser.

          (a) SUBSIDIARIES.  All of the direct and indirect  subsidiaries of the
     Company are set forth on SCHEDULE  3.1(A).  The Company  owns,  directly or
     indirectly,  all of the capital  stock or other  equity  interests  of each
     Subsidiary free and clear of any Liens,  and all the issued and outstanding
     shares of capital stock of each Subsidiary are validly issued and are fully
     paid, non-assessable and free of preemptive and similar rights to subscribe
     for or  purchase  securities.  If the  Company  has no  subsidiaries,  then
     references  in the  Transaction  Documents  to  the  Subsidiaries  will  be
     disregarded.

          (b)  ORGANIZATION  AND  QUALIFICATION.  The  Company  and  each of the
     Subsidiaries is an entity duly incorporated or otherwise organized, validly
     existing and in good  standing  under the laws of the  jurisdiction  of its
     incorporation or organization (as applicable), with the requisite power and
     authority  to own and use its  properties  and  assets  and to carry on its
     business as currently conducted.  Neither the Company nor any Subsidiary is
     in  violation  or  default  of  any  of the  provisions  of its  respective
     certificate or articles of incorporation, bylaws or other organizational or

                                       8
<PAGE>

     charter  documents.  Each  of the  Company  and  the  Subsidiaries  is duly
     qualified  to  conduct  business  and  is in  good  standing  as a  foreign
     corporation or other entity in each jurisdiction in which the nature of the
     business  conducted  or  property  owned  by it  makes  such  qualification
     necessary, except where the failure to be so qualified or in good standing,
     as the case may be, could not have or  reasonably  be expected to result in
     (i) a material adverse effect on the legality,  validity or  enforceability
     of any Transaction Document,  (ii) a material adverse effect on the results
     of  operations,  assets,  business,  prospects or condition  (financial  or
     otherwise) of the Company and the Subsidiaries,  taken as a whole, or (iii)
     a  material  adverse  effect on the  Company's  ability  to  perform in any
     material  respect on a timely basis its  obligations  under any Transaction
     Document (any of (i), (ii) or (iii),  a "MATERIAL  ADVERSE  EFFECT") and no
     Proceeding has been instituted in any such jurisdiction revoking,  limiting
     or  curtailing  or  seeking  to  revoke,  limit or  curtail  such power and
     authority or qualification.

          (c)  AUTHORIZATION;   ENFORCEMENT.   The  Company  has  the  requisite
     corporate  power  and  authority  to  enter  into  and  to  consummate  the
     transactions   contemplated  by  each  of  the  Transaction  Documents  and
     otherwise  to carry  out its  obligations  hereunder  and  thereunder.  The
     execution and delivery of each of the Transaction  Documents by the Company
     and the  consummation by it of the transactions  contemplated  thereby have
     been duly authorized by all necessary action on the part of the Company and
     no further action is required by the Company, its board of directors or its
     stockholders  in connection  therewith  other than in  connection  with the
     Required  Approvals.  Each Transaction  Document has been (or upon delivery
     will have been)  duly  executed  by the  Company  and,  when  delivered  in
     accordance with the terms hereof and thereof, will constitute the valid and
     binding  obligation  of the  Company  enforceable  against  the  Company in
     accordance  with its terms except (i) as limited by applicable  bankruptcy,
     insolvency,   reorganization,   moratorium   and  other   laws  of  general
     application  affecting  enforcement of creditors' rights generally and (ii)
     as limited by laws relating to the  availability  of specific  performance,
     injunctive relief or other equitable remedies.

          (d)  NO CONFLICTS.  The  execution,  delivery and  performance  of the
     Transaction Documents by the Company and the consummation by the Company of
     the other transactions contemplated hereby and thereby do not and will not:
     (i)  conflict  with  or  violate  any  provision  of the  Company's  or any
     Subsidiary's  certificate  or  articles of  incorporation,  bylaws or other
     organizational or charter documents, or (ii) conflict with, or constitute a
     default (or an event that with notice or lapse of time or both would become
     a  default)  under,  result  in the  creation  of any Lien  upon any of the
     properties  or assets of the Company or any  Subsidiary,  or give to others
     any rights of termination, amendment, acceleration or cancellation (with or
     without notice, lapse of time or both) of, any agreement,  credit facility,
     debt or other  instrument  (evidencing  a  Company  or  Subsidiary  debt or
     otherwise) or other understanding to which the Company or any Subsidiary is
     a party or by which any property or asset of the Company or any  Subsidiary
     is bound or affected, or (iii) subject to the Required Approvals,  conflict
     with  or  result  in a  violation  of any  law,  rule,  regulation,  order,
     judgment,   injunction,  decree  or  other  restriction  of  any  court  or
     governmental  authority  to which the  Company or a  Subsidiary  is subject
     (including federal and state securities laws and regulations),  or by which
     any property or asset of the Company or a Subsidiary  is bound or affected;
     except in the case of each of  clauses  (ii) and  (iii),  such as could not
     have or reasonably be expected to result in a Material Adverse Effect.

                                       9
<PAGE>

          (e) FILINGS,  CONSENTS AND  APPROVALS.  The Company is not required to
     obtain any consent, waiver,  authorization or order of, give any notice to,
     or make any filing or registration with, any court or other federal, state,
     local or other  governmental  authority or other Person in connection  with
     the execution,  delivery and  performance by the Company of the Transaction
     Documents,  other than (i) filings  required  pursuant to Section 4.6, (ii)
     the filing with the  Commission of the  Registration  Statement,  (iii) the
     notice and/or  application(s)  to each  applicable  Trading  Market for the
     issuance  and sale of the  Debentures  and  Warrants and the listing of the
     Underlying  Shares for  trading  thereon  in the time and  manner  required
     thereby and (iv) the filing of Form D with the  Commission and such filings
     as  are  required  to  be  made  under  applicable  state  securities  laws
     (collectively, the "REQUIRED APPROVALS").

          (f) ISSUANCE OF THE  SECURITIES.  The Securities  are duly  authorized
     and, when issued and paid for in accordance with the applicable Transaction
     Documents,  will be duly and validly issued,  fully paid and nonassessable,
     free and clear of all Liens imposed by the Company other than  restrictions
     on transfer  provided  for in the  Transaction  Documents.  The  Underlying
     Shares,  when  issued  in  accordance  with the  terms  of the  Transaction
     Documents,  will be validly issued, fully paid and nonassessable,  free and
     clear of all Liens  imposed by the Company.  The Company has reserved  from
     its duly  authorized  capital  stock a number of shares of Common Stock for
     issuance of the Underlying Shares at least equal to the Required Minimum on
     the date hereof.

          (g) CAPITALIZATION.  The capitalization of the Company is as set forth
     on SCHEDULE 3.1(G).  The Company has not issued any capital stock since its
     most recently  filed  periodic  report under the Exchange  Act,  other than
     pursuant to the  exercise of employee  stock  options  under the  Company's
     stock  option  plans,  the  issuance of shares of Common Stock to employees
     pursuant to the Company's  employee stock purchase plan and pursuant to the
     conversion or exercise of outstanding Common Stock  Equivalents.  No Person
     has any right of first refusal,  preemptive right,  right of participation,
     or any similar right to participate in the transactions contemplated by the
     Transaction  Documents.  Except as a result of the purchase and sale of the
     Securities,  there are no outstanding options,  warrants,  script rights to
     subscribe to, calls or commitments of any character whatsoever relating to,
     or  securities,  rights or obligations  convertible  into or exercisable or
     exchangeable  for,  or giving  any  Person  any right to  subscribe  for or
     acquire,   any  shares  of  Common  Stock,   or   contracts,   commitments,
     understandings or arrangements by which the Company or any Subsidiary is or
     may become bound to issue additional shares of Common Stock or Common Stock
     Equivalents.  The issuance and sale of the Securities will not obligate the
     Company to issue shares of Common Stock or other  securities  to any Person
     (other than the Purchasers) and will not result in a right of any holder of
     Company  securities to adjust the exercise,  conversion,  exchange or reset
     price under such securities. All of the outstanding shares of capital stock
     of the Company are validly issued, fully paid and nonassessable,  have been
     issued in compliance with all federal and state  securities  laws, and none
     of such outstanding shares was issued in violation of any preemptive rights
     or similar  rights to  subscribe  for or  purchase  securities.  No further
     approval or authorization of any stockholder, the Board of Directors of the
     Company or others is required for the issuance and sale of the  Securities.
     There are no stockholders  agreements,  voting  agreements or other similar
     agreements with respect to the Company's capital stock to which the Company
     is a party or, to the knowledge of the Company, between or among any of the
     Company's stockholders.

                                       10
<PAGE>

          (h) SEC  REPORTS;  FINANCIAL  STATEMENTS.  The  Company  has filed all
     reports,  schedules,  forms,  statements and other documents required to be
     filed  by it under  the  Securities  Act and the  Exchange  Act,  including
     pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the
     date hereof (or such  shorter  period as the Company was required by law to
     file such  material)  (the  foregoing  materials,  including  the  exhibits
     thereto and documents incorporated by reference therein, being collectively
     referred to herein as the "SEC  REPORTS") on a timely basis or has received
     a valid extension of such time of filing and has filed any such SEC Reports
     prior to the  expiration  of any  such  extension.  As of their  respective
     dates,  the  SEC  Reports  complied  in  all  material  respects  with  the
     requirements  of the  Securities Act and the Exchange Act and the rules and
     regulations of the Commission promulgated  thereunder,  and none of the SEC
     Reports,  when filed,  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 the light of the circumstances
     under which they were made, not misleading. The financial statements of the
     Company  included in the SEC Reports  comply in all material  respects with
     applicable  accounting  requirements  and the rules and  regulations of the
     Commission  with respect  thereto as in effect at the time of filing.  Such
     financial  statements  have been prepared in accordance  with United States
     generally  accepted  accounting  principles  applied on a consistent  basis
     during  the  periods  involved  ("GAAP"),  except as may ---- be  otherwise
     specified in such financial statements or the notes thereto and except that
     unaudited  financial  statements may not contain all footnotes  required by
     GAAP, and fairly present in all material respects the financial position of
     the  Company  and its  consolidated  subsidiaries  as of and for the  dates
     thereof and the results of  operations  and cash flows for the periods then
     ended, subject, in the case of unaudited statements, to normal, immaterial,
     year-end audit adjustments.

          (i) MATERIAL  CHANGES.  Since the date of the latest audited financial
     statements  included  within  the  SEC  Reports,   except  as  specifically
     disclosed in the SEC Reports,  (i) there has been no event,  occurrence  or
     development  that has had or that could reasonably be expected to result in
     a  Material  Adverse  Effect,   (ii)  the  Company  has  not  incurred  any
     liabilities  (contingent  or otherwise)  other than (A) trade  payables and
     accrued  expenses  incurred in the ordinary  course of business  consistent
     with past practice and (B)  liabilities not required to be reflected in the
     Company's financial statements pursuant to GAAP or required to be disclosed
     in filings made with the Commission,  (iii) the Company has not altered its
     method  of  accounting,  (iv)  the  Company  has not  declared  or made any
     dividend or distribution  of cash or other property to its  stockholders or
     purchased, redeemed or made any agreements to purchase or redeem any shares
     of its  capital  stock  and  (v) the  Company  has not  issued  any  equity
     securities  to any  officer,  director  or  Affiliate,  except  pursuant to
     existing  Company  stock  option  plans.  The Company does not have pending
     before  the   Commission   any  request  for   confidential   treatment  of
     information.

                                       11
<PAGE>

          (j)  LITIGATION.   There  is  no  action,  suit,  inquiry,  notice  of
     violation,  proceeding or investigation pending or, to the knowledge of the
     Company, threatened against or affecting the Company, any Subsidiary or any
     of  their  respective  properties  before  or  by  any  court,  arbitrator,
     governmental or  administrative  agency or regulatory  authority  (federal,
     state,  county,  local or foreign)  (collectively,  an "ACTION")  which (i)
     adversely affects or challenges the legality, validity or enforceability of
     any of the Transaction  Documents or the Securities or (ii) could, if there
     were an unfavorable decision, have or reasonably be expected to result in a
     Material  Adverse Effect.  Neither the Company nor any Subsidiary,  nor any
     director  or  officer  thereof,  is or has been the  subject  of any Action
     involving  a claim of  violation  of or  liability  under  federal or state
     securities laws or a claim of breach of fiduciary duty. There has not been,
     and to the knowledge of the Company,  there is not pending or contemplated,
     any investigation by the Commission involving the Company or any current or
     former  director or officer of the Company.  The  Commission has not issued
     any  stop  order  or  other  order  suspending  the  effectiveness  of  any
     registration  statement  filed by the Company or any  Subsidiary  under the
     Exchange Act or the Securities Act.

          (k)  LABOR RELATIONS.  No  material  labor  dispute  exists or, to the
     knowledge of the Company,  is imminent with respect to any of the employees
     of the Company  which could  reasonably be expected to result in a Material
     Adverse Effect.

          (l)  COMPLIANCE.  Neither  the Company  nor any  Subsidiary  (i) is in
     default  under or in violation  of (and no event has occurred  that has not
     been waived that,  with notice or lapse of time or both,  would result in a
     default by the Company or any Subsidiary under), nor has the Company or any
     Subsidiary  received  notice of a claim that it is in default under or that
     it is in violation of, any indenture, loan or credit agreement or any other
     agreement or instrument to which it is a party or by which it or any of its
     properties  is bound  (whether or not such  default or  violation  has been
     waived),  (ii) is in  violation  of any order of any court,  arbitrator  or
     governmental  body,  or (iii) is or has been in  violation  of any statute,
     rule  or  regulation  of  any  governmental  authority,  including  without
     limitation  all foreign,  federal,  state and local laws  applicable to its
     business except in each case as could not have a Material Adverse Effect.

          (m)  REGULATORY PERMITS. The Company and the Subsidiaries  possess all
     certificates, authorizations and permits issued by the appropriate federal,
     state, local or foreign regulatory  authorities  necessary to conduct their
     respective  businesses  as described  in the SEC Reports,  except where the
     failure to possess such permits could not have or reasonably be expected to
     result in a Material Adverse Effect ("MATERIAL  PERMITS"),  and neither the
     Company nor any Subsidiary has received any notice of proceedings  relating
     to the revocation or modification of any Material Permit.

                                       12
<PAGE>

          (n) TITLE TO ASSETS.  The Company and the  Subsidiaries  have good and
     marketable  title in fee simple to all real property  owned by them that is
     material to the business of the Company and the  Subsidiaries  and good and
     marketable title in all personal property owned by them that is material to
     the  business of the Company  and the  Subsidiaries,  in each case free and
     clear of all Liens,  except for Liens as do not materially affect the value
     of such  property  and do not  materially  interfere  with the use made and
     proposed to be made of such  property  by the Company and the  Subsidiaries
     and Liens for the payment of federal,  state or other taxes, the payment of
     which is neither delinquent nor subject to penalties. Any real property and
     facilities held under lease by the Company and the Subsidiaries are held by
     them under valid,  subsisting and  enforceable  leases of which the Company
     and the Subsidiaries are in compliance.

          (o) PATENTS AND TRADEMARKS.  The Company and the Subsidiaries have, or
     have rights to use, all patents, patent applications, trademarks, trademark
     applications,  service marks, trade names,  copyrights,  licenses and other
     similar  rights  necessary  or material  for use in  connection  with their
     respective businesses as described in the SEC Reports and which the failure
     to so  have  could  have  a  Material  Adverse  Effect  (collectively,  the
     "INTELLECTUAL PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has
     received a written notice that the Intellectual Property Rights used by the
     Company or any  Subsidiary  violates  or  infringes  upon the rights of any
     Person.  To the knowledge of the Company,  all such  Intellectual  Property
     Rights are  enforceable  and there is no existing  infringement  by another
     Person of any of the Intellectual Property Rights of others.

          (p)  INSURANCE.  The  Company  and the  Subsidiaries  are  insured  by
     insurers of  recognized  financial  responsibility  against such losses and
     risks and in such amounts as are prudent and customary in the businesses in
     which the Company and the  Subsidiaries  are  engaged,  including,  but not
     limited to, directors and officers insurance coverage at least equal to the
     aggregate  Subscription Amount. To the best knowledge of the Company,  such
     insurance  contracts  and policies are accurate and  complete.  Neither the
     Company nor any  Subsidiary  has any reason to believe  that it will not be
     able to renew its  existing  insurance  coverage as and when such  coverage
     expires or to obtain  similar  coverage  from  similar  insurers  as may be
     necessary to continue its business without a significant increase in cost.

          (q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set forth in
     the SEC  Reports,  none of the officers or directors of the Company and, to
     the  knowledge  of the  Company,  none of the  employees  of the Company is
     presently a party to any  transaction  with the  Company or any  Subsidiary
     (other than for services as employees,  officers and directors),  including
     any contract,  agreement or other arrangement  providing for the furnishing
     of services to or by, providing for rental of real or personal  property to
     or from, or otherwise  requiring payments to or from any officer,  director
     or such employee or, to the  knowledge of the Company,  any entity in which
     any officer,  director,  or any such employee has a substantial interest or
     is an  officer,  director,  trustee or  partner,  in each case in excess of
     $60,000  other  than (i) for  payment  of  salary  or  consulting  fees for
     services  rendered,  (ii)  reimbursement for expenses incurred on behalf of
     the Company and (iii) for other employee  benefits,  including stock option
     agreements under any stock option plan of the Company.

                                       13
<PAGE>

          (r)  SARBANES-OXLEY; INTERNAL ACCOUNTING  CONTROLS.  The Company is in
     material  compliance with all provisions of the  Sarbanes-Oxley Act of 2002
     which are  applicable  to it as of the  Closing  Date.  The Company and the
     Subsidiaries  maintain a system of internal  accounting controls sufficient
     to provide  reasonable  assurance  that (i)  transactions  are  executed in
     accordance  with  management's  general or  specific  authorizations,  (ii)
     transactions  are recorded as necessary to permit  preparation of financial
     statements in conformity  with GAAP and to maintain  asset  accountability,
     (iii) access to assets is permitted  only in accordance  with  management's
     general or specific authorization, and (iv) the recorded accountability for
     assets is compared  with the existing  assets at  reasonable  intervals and
     appropriate  action is taken with respect to any  differences.  The Company
     has established  disclosure controls and procedures (as defined in Exchange
     Act Rules  13a-15(e)  and  15d-15(e))  for the  Company and  designed  such
     disclosure  controls and  procedures  to ensure that  material  information
     relating to the Company,  including its Subsidiaries,  is made known to the
     certifying  officers by others within those entities,  particularly  during
     the period in which the Company's most recently filed periodic report under
     the  Exchange  Act, as the case may be, is being  prepared.  The  Company's
     certifying  officers  have  evaluated  the  effectiveness  of the Company's
     controls and procedures as of the date prior to the filing date of the most
     recently  filed  periodic  report under the  Exchange  Act (such date,  the
     "EVALUATION  DATE").  The  Company  presented  in its most  recently  filed
     periodic  report under the Exchange Act the  conclusions  of the certifying
     officers about the effectiveness of the disclosure  controls and procedures
     based on their  evaluations as of the Evaluation Date. Since the Evaluation
     Date,  there have been no  significant  changes in the  Company's  internal
     controls  (as such term is defined in Item 307(b) of  Regulation  S-K under
     the Exchange  Act) or, to the  knowledge of the Company,  in other  factors
     that could significantly affect the Company's internal controls.

          (s)  CERTAIN FEES. No brokerage or finder's fees or commissions are or
     will  be  payable  by the  Company  to any  broker,  financial  advisor  or
     consultant,  finder,  placement  agent,  investment  banker,  bank or other
     Person with respect to the  transactions  contemplated  by the  Transaction
     Documents. The Purchasers shall have no obligation with respect to any fees
     or with  respect to any claims  made by or on behalf of other  Persons  for
     fees of a type  contemplated  in this Section that may be due in connection
     with the transactions contemplated by the Transaction Documents.

          (t)  PRIVATE  PLACEMENT.  Assuming  the  accuracy  of  the  Purchasers
     representations  and warranties  set forth in Section 3.2, no  registration
     under  the  Securities  Act is  required  for  the  offer  and  sale of the
     Securities by the Company to the  Purchasers as  contemplated  hereby.  The
     issuance and sale of the Securities hereunder does not contravene the rules
     and regulations of the Trading Market.

          (u)  INVESTMENT  COMPANY.  The Company is not, and is not an Affiliate
     of, and immediately  after receipt of payment for the Securities,  will not
     be or be an Affiliate of, an "investment company" within the meaning of the
     Investment  Company Act of 1940, as amended.  The Company shall conduct its
     business in a manner so that it will not become  subject to the  Investment
     Company Act.

                                       14
<PAGE>

          (v)  REGISTRATION RIGHTS. Other than each of the Purchasers, no Person
     has any right to cause the  Company  to effect the  registration  under the
     Securities Act of any securities of the Company.

          (w)  LISTING AND MAINTENANCE REQUIREMENTS.  The Company's Common Stock
     is  registered  pursuant  to Section  12(g) of the  Exchange  Act,  and the
     Company  has taken no action  designed  to,  or which to its  knowledge  is
     likely to have the effect of,  terminating  the  registration of the Common
     Stock under the Exchange Act nor has the Company  received any notification
     that the Commission is  contemplating  terminating such  registration.  The
     Company  has not,  in the 12 months  preceding  the date  hereof,  received
     notice  from any  Trading  Market on which the Common  Stock is or has been
     listed or quoted to the effect that the Company is not in  compliance  with
     the listing or maintenance requirements of such Trading Market. The Company
     is, and has no reason to believe that it will not in the foreseeable future
     continue  to be,  in  compliance  with all  such  listing  and  maintenance
     requirements.

          (x)  APPLICATION OF TAKEOVER PROTECTIONS. The Company and its Board of
     Directors  have  taken all  necessary  action,  if any,  in order to render
     inapplicable any control share acquisition,  business  combination,  poison
     pill (including any distribution under a rights agreement) or other similar
     anti-takeover  provision under the Company's  Certificate of  Incorporation
     (or similar  charter  documents) or the laws of its state of  incorporation
     that is or could become  applicable  to the  Purchasers  as a result of the
     Purchasers and the Company fulfilling their obligations or exercising their
     rights under the Transaction  Documents,  including without limitation as a
     result of the  Company's  issuance of the  Securities  and the  Purchasers'
     ownership of the Securities.

          (y)  DISCLOSURE.  The Company  confirms  that neither it nor any other
     Person  acting on its behalf has  provided any of the  Purchasers  or their
     agents or counsel with any information that constitutes or might constitute
     material,  nonpublic information. The Company understands and confirms that
     the Purchasers will rely on the foregoing  representations and covenants in
     effecting  transactions  in  securities  of  the  Company.  All  disclosure
     provided to the  Purchasers  regarding  the  Company,  its business and the
     transactions  contemplated  hereby,  including the Disclosure  Schedules to
     this  Agreement,  furnished  by or on behalf of the Company with respect to
     the  representations  and warranties  made herein are true and correct with
     respect to such  representations  and  warranties  and do not  contain  any
     untrue  statement  of a material  fact or omit to state any  material  fact
     necessary in order to make the  statements  made  therein,  in light of the
     circumstances  under  which they were made,  not  misleading.  The  Company
     acknowledges   and  agrees  that  no  Purchaser   makes  or  has  made  any
     representations or warranties with respect to the transactions contemplated
     hereby other than those specifically set forth in Section 3.2 hereof.

                                       15
<PAGE>

          (z)  NO INTEGRATED OFFERING.  Assuming the accuracy of the Purchasers'
     representations  and  warranties  set forth in  Section  3.2,  neither  the
     Company,  nor any of its affiliates,  nor any Person acting on its or their
     behalf  has,  directly  or  indirectly,  made  any  offers  or sales of any
     security or solicited any offers to buy any security,  under  circumstances
     that would cause this  offering of the  Securities  to be  integrated  with
     prior  offerings by the Company for purposes of the  Securities  Act or any
     applicable shareholder approval provisions,  including, without limitation,
     under the rules and  regulations  of any Trading Market on which any of the
     securities of the Company are listed or designated.

          (aa) SOLVENCY.  Based on the financial  condition of the Company as of
     the Closing Date after  giving  effect to the receipt by the Company of the
     proceeds  from the sale of the  Securities  hereunder and excluding for the
     purposes of this  representation,  the obligations of the Company under the
     Debentures, (i) the Company's fair saleable value of its assets exceeds the
     amount that will be  required to be paid on or in respect of the  Company's
     existing  debts  and  other   liabilities   (including   known   contingent
     liabilities)  as they mature;  (ii) the Company's  assets do not constitute
     unreasonably  small capital to carry on its business for the current fiscal
     year as now conducted and as proposed to be conducted including its capital
     needs  taking  into  account the  particular  capital  requirements  of the
     business conducted by the Company,  and projected capital  requirements and
     capital  availability  thereof;  and  (iii)  the  current  cash flow of the
     Company,  together with the proceeds the Company would receive,  were it to
     liquidate all of its assets, after taking into account all anticipated uses
     of the cash, would be sufficient to pay all amounts on or in respect of its
     debt when such amounts are required to be paid. The Company does not intend
     to incur debts beyond its ability to pay such debts as they mature  (taking
     into  account the timing and amounts of cash to be payable on or in respect
     of its debt).  The Company has no knowledge  of any facts or  circumstances
     which  lead  it  to  believe  that  it  will  file  for  reorganization  or
     liquidation under the bankruptcy or reorganization laws of any jurisdiction
     within one year from the Closing Date.  The SEC Reports set forth as of the
     dates thereof all  outstanding  secured and unsecured  Indebtedness  of the
     Company or any  Subsidiary,  or for which the Company or any Subsidiary has
     commitments. For the purposes of this Agreement,  "INDEBTEDNESS" shall mean
     (a) any liabilities for borrowed money or amounts owed in excess of $50,000
     (other  than trade  accounts  payable  incurred in the  ordinary  course of
     business),   (b)  all  guaranties,   endorsements   and  other   contingent
     obligations in respect of Indebtedness  of others,  whether or not the same
     are or should be reflected  in the  Company's  balance  sheet (or the notes
     thereto),  except  guaranties by endorsement of negotiable  instruments for
     deposit or collection  or similar  transactions  in the ordinary  course of
     business;  and (c) the  present  value of any lease  payments  in excess of
     $50,000 due under leases  required to be  capitalized  in  accordance  with
     GAAP.  Neither the Company nor any Subsidiary is in default with respect to
     any Indebtedness.

          (bb) TAX STATUS. Except for matters that would not, individually or in
     the  aggregate,  have or  reasonably  be  expected  to result in a Material
     Adverse  Effect,  the Company and each  Subsidiary  has filed all necessary
     federal, state and foreign income and franchise tax returns and has paid or
     accrued all taxes shown as due thereon, and the Company has no knowledge of
     a tax deficiency which has been asserted or threatened  against the Company
     or any Subsidiary.

                                       16
<PAGE>

          (cc) NO  GENERAL  SOLICITATION.  Neither  the  Company  nor any person
     acting on behalf of the Company  has offered or sold any of the  Securities
     by any form of general solicitation or general advertising. The Company has
     offered  the  Securities  for sale only to the  Purchasers,  certain  other
     "accredited  investors" within the meaning of Rule 501 under the Securities
     Act and to certain employees and related parties under Regulation S.

          (dd) FOREIGN  CORRUPT  PRACTICES.  Neither  the  Company,  nor  to the
     knowledge of the Company, any agent or other person acting on behalf of the
     Company,  has (i)  directly  or  indirectly,  used any funds  for  unlawful
     contributions,  gifts,  entertainment or other unlawful expenses related to
     foreign or domestic political  activity,  (ii) made any unlawful payment to
     foreign or domestic government  officials or employees or to any foreign or
     domestic  political parties or campaigns from corporate funds, (iii) failed
     to  disclose  fully any  contribution  made by the  Company (or made by any
     person  acting on its  behalf of which the  Company  is aware)  which is in
     violation of law, or (iv) violated in any material respect any provision of
     the Foreign Corrupt Practices Act of 1977, as amended.

          (ee) ACCOUNTANTS.  The Company's accountants are set forth on SCHEDULE
     3.1(EE) of the Disclosure Schedule.  To the knowledge of the Company,  such
     accountants,  who the Company  expects  will  express  their  opinion  with
     respect to the financial  statements to be included in the Company's Annual
     Report on Form 10-KSB for the year ended December 31, 2004 are a registered
     public accounting firm as required by the Securities Act.

          (ff) SENIORITY.  As  of the Closing  Date,  no  indebtedness  or other
     equity of the  Company  is senior to the  Debentures  in right of  payment,
     whether with respect to interest or upon  liquidation  or  dissolution,  or
     otherwise,  other than  indebtedness  secured by  purchase  money  security
     interests  (which is senior only as to underlying  assets covered  thereby)
     and capital  lease  obligations  (which is senior  only as to the  property
     covered thereby).

          (gg) NO  DISAGREEMENTS  WITH  ACCOUNTANTS  AND  LAWYERS.  There are no
     disagreements of any kind presently existing, or reasonably  anticipated by
     the Company to arise,  between  the  accountants  and  lawyers  formerly or
     presently  employed by the Company and the Company is current  with respect
     to any fees owed to its accountants and lawyers.

          (hh) ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF SECURITIES.  The
     Company  acknowledges  and  agrees  that each of the  Purchasers  is acting
     solely in the  capacity of an arm's  length  purchaser  with respect to the
     Transaction Documents and the transactions contemplated hereby. The Company
     further  acknowledges that no Purchaser is acting as a financial advisor or
     fiduciary of the Company (or in any similar  capacity) with respect to this
     Agreement and the transactions  contemplated hereby and any advice given by
     any  Purchaser  or any of their  respective  representatives  or  agents in
     connection with this Agreement and the transactions  contemplated hereby is
     merely  incidental  to the  Purchasers'  purchase  of the  Securities.  The
     Company further represents to each Purchaser that the Company's decision to
     enter  into  this  Agreement  has  been  based  solely  on the  independent
     evaluation of the transactions  contemplated  hereby by the Company and its
     representatives.

                                       17
<PAGE>

          (ii) ACKNOWLEDGEMENT REGARDING PURCHASERS' TRADING ACTIVITY.  Anything
     in this  Agreement  or  elsewhere  herein to the  contrary  notwithstanding
     (except for Section 4.16 hereof and Section  3.2(f)),  it is understood and
     agreed by the  Company (i) that none of the  Purchasers  have been asked to
     agree, nor has any Purchaser  agreed, to desist from purchasing or selling,
     long and/or short,  securities of the Company,  or "derivative"  securities
     based on securities issued by the Company or to hold the Securities for any
     specified term; (ii) that past or future open market or other  transactions
     by any  Purchaser,  including  Short  Sales,  and  specifically  including,
     without  limitation,  Short Sales or "derivative"  transactions,  before or
     after the closing of this or future  private  placement  transactions,  may
     negatively  impact  the  market  price  of  the  Company's  publicly-traded
     securities;  (iii) that any Purchaser,  and counter parties in "derivative"
     transactions  to  which  any  such  Purchaser  is  a  party,   directly  or
     indirectly,  presently may have a "short" position in the Common Stock, and
     (iv) that each Purchaser shall not be deemed to have any  affiliation  with
     or  control  over  any  arm's  length  counter-party  in  any  "derivative"
     transaction.  The Company further understands and acknowledges that (a) one
     or more Purchasers may engage in hedging activities at various times during
     the  period  that  the  Securities  are  outstanding,   including,  without
     limitation,  during the  periods  that the value of the  Underlying  Shares
     deliverable  with respect to Securities  are being  determined and (b) such
     hedging  activities  (if  any)  could  reduce  the  value  of the  existing
     stockholders'  equity  interests  in the Company at and after the time that
     the hedging activities are being conducted.  The Company  acknowledges that
     such aforementioned hedging activities do not constitute a breach of any of
     the Transaction Documents.

          (jj) MANIPULATION OF PRICE.  The Company has not, and to its knowledge
     no one acting on its behalf has,  (i) taken,  directly or  indirectly,  any
     action designed to cause or to result in the  stabilization or manipulation
     of the price of any  security  of the  Company  to  facilitate  the sale or
     resale of any of the Securities,  (ii) sold, bid for,  purchased,  or, paid
     any compensation for soliciting  purchases of, any of the Securities (other
     than for the placement agent's placement of the Securities),  or (iii) paid
     or agreed to pay to any person any compensation  for soliciting  another to
     purchase any other securities of the Company.

     3.2  REPRESENTATIONS  AND  WARRANTIES  OF THE  PURCHASERS.  Each  Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

          (a)  ORGANIZATION;   AUTHORITY.  Such  Purchaser  is  an  entity  duly
     organized,  validly  existing  and in good  standing  under the laws of the
     jurisdiction of its organization with full right,  corporate or partnership
     power  and  authority  to enter  into and to  consummate  the  transactions
     contemplated  by the  Transaction  Documents and otherwise to carry out its

                                       18
<PAGE>
     obligations   hereunder  and  thereunder.   The  execution,   delivery  and
     performance  by such  Purchaser of the  transactions  contemplated  by this
     Agreement have been duly  authorized by all necessary  corporate or similar
     action on the part of such Purchaser. Each Transaction Document to which it
     is a party has been duly executed by such Purchaser,  and when delivered by
     such  Purchaser in accordance  with the terms hereof,  will  constitute the
     valid and legally binding obligation of such Purchaser, enforceable against
     it in accordance with its terms, except (i) as limited by general equitable
     principles   and   applicable   bankruptcy,   insolvency,   reorganization,
     moratorium and other laws of general application  affecting  enforcement of
     creditors'  rights  generally,  (ii) as  limited  by laws  relating  to the
     availability of specific performance,  injunctive relief or other equitable
     remedies and (iii) insofar as indemnification  and contribution  provisions
     may be limited by applicable law.

          (b)  OWN ACCOUNT. Such Purchaser  understands  that the Securities are
     "restricted  securities" and have not been registered  under the Securities
     Act or any applicable  state securities law and is acquiring the Securities
     as principal for its own account and not with a view to or for distributing
     or  reselling  such  Securities  or any part  thereof in  violation  of the
     Securities  Act or any  applicable  state  securities  law,  has no present
     intention  of  distributing  any of such  Securities  in  violation  of the
     Securities  Act  or  any  applicable   state  securities  law  and  has  no
     arrangement  or  understanding   with  any  other  persons   regarding  the
     distribution  of such  Securities  (this  representation  and  warranty not
     limiting  such  Purchaser's  right to sell the  Securities  pursuant to the
     Registration  Statement or otherwise in compliance with applicable  federal
     and  state  securities  laws) in  violation  of the  Securities  Act or any
     applicable state securities law. Such Purchaser is acquiring the Securities
     hereunder in the ordinary  course of its business.  Such Purchaser does not
     have any  agreement  or  understanding,  directly or  indirectly,  with any
     Person to distribute any of the Securities.

          (c)  PURCHASER  STATUS.  At the time such  Purchaser  was  offered the
     Securities, it was, and at the date hereof it is, and on each date on which
     it  exercises  any  Warrants  or  converts  any  Debentures  it  will be an
     "accredited investor" as defined in Rule 501(a)(1),  (a)(2), (a)(3), (a)(7)
     or (a)(8) under the  Securities  Act. Such  Purchaser is not required to be
     registered as a broker-dealer under Section 15 of the Exchange Act.

          (d)  EXPERIENCE OF SUCH  PURCHASER.  Such  Purchaser,  either alone or
     together with its representatives,  has such knowledge,  sophistication and
     experience  in  business  and  financial  matters  so as to be  capable  of
     evaluating  the  merits  and  risks of the  prospective  investment  in the
     Securities,  and has so evaluated the merits and risks of such  investment.
     Such  Purchaser is able to bear the economic  risk of an  investment in the
     Securities  and, at the present  time, is able to afford a complete loss of
     such investment.

          (e)  GENERAL  SOLICITATION.  Such  Purchaser  is  not  purchasing  the
     Securities  as a result  of any  advertisement,  article,  notice  or other
     communication regarding the Securities published in any newspaper, magazine
     or similar media or broadcast over  television or radio or presented at any
     seminar or any other general solicitation or general advertisement.

                                       19
<PAGE>

          (f)  SHORT SALES AND CONFIDENTIALITY  PRIOR TO THE DATE HEREOF.  Other
     than  the  transaction  contemplated  hereunder,  such  Purchaser  has  not
     directly or indirectly,  nor has any Person acting on behalf of or pursuant
     to  any  understanding  with  such  Purchaser,  executed  any  disposition,
     including Short Sales (but not including the location and/or reservation of
     borrowable shares of Common Stock), in the securities of the Company during
     the period  commencing from the earlier of the time that such Purchaser (i)
     first  [signed  NDA - need  date] and (ii)  received  a term sheet from the
     Company  or any  other  Person  setting  forth  the  material  terms of the
     transactions  contemplated  hereunder  until the date  hereof  ("DISCUSSION
     TIME"). Notwithstanding the foregoing, in the case of a Purchaser that is a
     multi-managed investment vehicle whereby separate portfolio managers manage
     separate  portions of such  Purchaser's  assets and the portfolio  managers
     have no direct knowledge of the investment  decisions made by the portfolio
     managers   managing  other  portions  of  such  Purchaser's   assets,   the
     representation set forth above shall only apply with respect to the portion
     of  assets  managed  by the  portfolio  manager  that  made the  investment
     decision to purchase the Securities  covered by this Agreement.  Other than
     to other Persons party to this Agreement, such Purchaser has maintained the
     confidentiality  of all  disclosures  made to it in  connection  with  this
     transaction (including the existence and terms of this transaction).

          The Company  acknowledges and agrees that each Purchaser does not make
     or has not made any  representations  or  warranties  with  respect  to the
     transactions contemplated hereby other than those specifically set forth in
     this Section 3.2.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

     4.1  TRANSFER RESTRICTIONS.

          (a)  The Securities  may only be disposed of in compliance  with state
     and federal  securities laws. In connection with any transfer of Securities
     other than pursuant to an effective  registration statement or Rule 144, to
     the Company or to an  affiliate  of a  Purchaser  or in  connection  with a
     pledge as  contemplated  in Section  4.1(b),  the  Company  may require the
     transferor thereof to provide to the Company an opinion of counsel selected
     by the transferor and  reasonably  acceptable to the Company,  the form and
     substance of which opinion shall be reasonably satisfactory to the Company,
     to the effect  that such  transfer  does not require  registration  of such
     transferred  Securities  under  the  Securities  Act.  As  a  condition  of
     transfer,  any such  transferee  shall  agree in writing to be bound by the
     terms of this Agreement and shall have the rights of a Purchaser under this
     Agreement and the Registration Rights Agreement.

          (b)  The Purchasers agree to the imprinting, so long as is required by
     this Section 4.1(b),  of a legend on any of the Securities in the following
     form:

                                       20
<PAGE>

     [NEITHER] THESE  SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES
     ARE [EXERCISABLE]  [CONVERTIBLE]]  HAVE BEEN REGISTERED WITH THE SECURITIES
     AND  EXCHANGE  COMMISSION  OR THE  SECURITIES  COMMISSION  OF ANY  STATE IN
     RELIANCE UPON AN EXEMPTION  FROM  REGISTRATION  UNDER THE SECURITIES ACT OF
     1933,  AS AMENDED (THE  "SECURITIES  ACT"),  AND,  ACCORDINGLY,  MAY NOT BE
     OFFERED OR SOLD EXCEPT  PURSUANT  TO AN  EFFECTIVE  REGISTRATION  STATEMENT
     UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE  EXEMPTION FROM, OR IN
     A  TRANSACTION  NOT  SUBJECT  TO,  THE  REGISTRATION  REQUIREMENTS  OF  THE
     SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE  STATE  SECURITIES LAWS AS
     EVIDENCED BY A LEGAL  OPINION OF COUNSEL TO THE  TRANSFEROR TO SUCH EFFECT,
     THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
     SECURITIES  AND THE SECURITIES  ISSUABLE UPON EXERCISE OF THESE  SECURITIES
     MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
     SECURED BY SUCH SECURITIES.

          The Company  acknowledges and agrees that a Purchaser may from time to
     time  pledge  pursuant to a bona fide margin  agreement  with a  registered
     broker-dealer or grant a security interest in some or all of the Securities
     to a financial  institution that is an "accredited  investor" as defined in
     Rule  501(a)  under the  Securities  Act and who  agrees to be bound by the
     provisions of this Agreement and the Registration  Rights Agreement and, if
     required under the terms of such  arrangement,  such Purchaser may transfer
     pledged or secured  Securities to the pledgees or secured  parties.  Such a
     pledge or  transfer  would not be subject to approval of the Company and no
     legal  opinion of legal  counsel of the pledgee,  secured  party or pledgor
     shall be required in  connection  therewith.  Further,  no notice  shall be
     required  of such  pledge.  At the  appropriate  Purchaser's  expense,  the
     Company will execute and deliver such reasonable documentation as a pledgee
     or secured party of Securities may reasonably  request in connection with a
     pledge or transfer of the  Securities,  including,  if the  Securities  are
     subject to registration pursuant to the Registration Rights Agreement,  the
     preparation  and filing of any required  prospectus  supplement  under Rule
     424(b)(3)  under the  Securities Act or other  applicable  provision of the
     Securities  Act to  appropriately  amend the list of  Selling  Stockholders
     thereunder.

          (c)  Certificates  evidencing the Underlying  Shares shall not contain
     any legend  (including the legend set forth in Section 4.1(b) hereof):  (i)
     while a  registration  statement  (including  the  Registration  Statement)
     covering the resale of such security is effective under the Securities Act,
     or (ii) following any sale of such Underlying  Shares pursuant to Rule 144,
     or (iii) if such Underlying Shares are eligible for sale under Rule 144(k),
     or (iv) if such legend is not required under applicable requirements of the
     Securities  Act  (including  judicial  interpretations  and  pronouncements
     issued by the staff of the Commission). The Company shall cause its counsel
     to issue a legal opinion to the Company's transfer agent promptly after the
     Effective  Date if required by the Company's  transfer  agent to effect the
     removal of the legend  hereunder.  If all or any portion of a Debenture  or
     Warrant is converted or exercised (as  applicable)  at a time when there is
     an effective  registration  statement to cover the resale of the Underlying
     Shares,  or if such  Underlying  Shares may be sold under Rule 144(k) or if
     such legend is not otherwise required under applicable  requirements of the

                                       21
<PAGE>
     Securities  Act  (including  judicial  interpretations  thereof)  then such
     Underlying  Shares shall be issued free of all legends.  The Company agrees
     that  following  the  Effective  Date or at such time as such  legend is no
     longer  required  under this Section  4.1(c),  it will, no later than three
     Trading  Days  following  the delivery by a Purchaser to the Company or the
     Company's transfer agent of a certificate  representing  Underlying Shares,
     as  applicable,  issued with a restrictive  legend (such third Trading Day,
     the  "LEGEND  REMOVAL  DATE"),  deliver  or cause to be  delivered  to such
     Purchaser  a  certificate  representing  such  shares that is free from all
     restrictive and other legends. The Company may not make any notation on its
     records or give  instructions  to any  transfer  agent of the Company  that
     enlarge  the   restrictions   on  transfer  set  forth  in  this   Section.
     Certificates  for Securities  subject to legend removal  hereunder shall be
     transmitted  by the  transfer  agent of the  Company to the  Purchasers  by
     crediting the account of the  Purchaser's  prime broker with the Depository
     Trust Company System.

          (d)  In addition to such  Purchaser's  other  available  remedies, the
     Company shall pay to a Purchaser,  in cash, as partial  liquidated  damages
     and not as a penalty,  for each $2,000 of  Underlying  Shares (based on the
     VWAP of the Common Stock on the date such  Securities  are submitted to the
     Company's  transfer agent) delivered for removal of the restrictive  legend
     and subject to Section  4.1(c),  $10 per Trading Day (increasing to $20 per
     Trading  Day 5 Trading  Days after such  damages  have begun to accrue) for
     each Trading Day after the second Trading Day after the Legend Removal Date
     until such certificate is delivered without a legend.  Nothing herein shall
     limit such  Purchaser's  right to pursue  actual  damages for the Company's
     failure to deliver certificates  representing any Securities as required by
     the  Transaction  Documents,  and such  Purchaser  shall  have the right to
     pursue all remedies available to it at law or in equity including,  without
     limitation, a decree of specific performance and/or injunctive relief.

          (e)  Each  Purchaser,   severally  and  not  jointly  with  the  other
     Purchasers,  agrees  that  the  removal  of  the  restrictive  legend  from
     certificates  representing  Securities  as set forth in this Section 4.1 is
     predicated  upon the Company's  reliance  that the Purchaser  will sell any
     Securities  pursuant  to  either  the  registration   requirements  of  the
     Securities Act, including any applicable prospectus delivery  requirements,
     or an exemption therefrom.

          (f)  Until the one year anniversary of the Effective Date, the Company
     shall not undertake a reverse or forward stock split or reclassification of
     the Common  Stock  without  the prior  written  consent  of the  Purchasers
     holding a majority in principal amount outstanding of the Debentures.

     4.2 ACKNOWLEDGMENT OF DILUTION.  The Company acknowledges that the issuance
of the  Securities  may result in dilution of the  outstanding  shares of Common
Stock,  which dilution may be substantial under certain market  conditions.  The
Company  further   acknowledges  that  its  obligations  under  the  Transaction
Documents,  including without  limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not  subject  to any  right  of  set  off,  counterclaim,  delay  or  reduction,
regardless  of the effect of any such dilution or any claim the Company may have
against any Purchaser and  regardless of the dilutive  effect that such issuance
may have on the ownership of the other stockholders of the Company.

                                       22
<PAGE>

     4.3  FURNISHING OF INFORMATION.  As long as any Purchaser owns  Securities,
the  Company  covenants  to use its best  efforts  to  timely  file  (or  obtain
extensions in respect  thereof and file within the applicable  grace period) all
reports  required to be filed by the Company  after the date hereof  pursuant to
the Exchange Act. As long as any Purchaser  owns  Securities,  if the Company is
not required to file reports  pursuant to the Exchange  Act, it will prepare and
furnish to the  Purchasers and make publicly  available in accordance  with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144.  The Company  further  covenants  that it will take such further
action as any holder of Securities  may  reasonably  request,  all to the extent
required from time to time to enable such Person to sell such Securities without
registration  under the  Securities  Act within the limitation of the exemptions
provided by Rule 144.

     4.4  INTEGRATION.  The  Company  shall not sell,  offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the  Securities  in a manner that would  require the  registration  under the
Securities  Act of the sale of the Securities to the Purchasers or that would be
integrated  with the offer or sale of the  Securities  for purposes of the rules
and regulations of any Trading Market.

     4.5  CONVERSION  AND  EXERCISE  PROCEDURES.  The form of Notice of Exercise
included in the  Warrants and the form of Notice of  Conversion  included in the
Debentures set forth the totality of the  procedures  required of the Purchasers
in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures.  The Company shall honor
exercises of the Warrants and  conversions  of the  Debentures and shall deliver
Underlying Shares in accordance with the terms,  conditions and time periods set
forth in the Transaction Documents.

     4.6  SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall, by 8:30 a.m.
Eastern  time on the  Trading Day  following  the date  hereof,  issue a Current
Report on Form 8-K,  reasonably  acceptable  to each  Purchaser  disclosing  the
material terms of the  transactions  contemplated  hereby,  and shall attach the
Transaction Documents thereto. The Company and each Purchaser shall consult with
each other in issuing any other press releases with respect to the  transactions
contemplated  hereby,  and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company,  with respect to any press release of any Purchaser,  or
without the prior consent of each  Purchaser,  with respect to any press release
of the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide  the  other  party  with  prior  notice  of  such  public  statement  or
communication.  Notwithstanding  the  foregoing,  the Company shall not publicly
disclose the name of any Purchaser,  or include the name of any Purchaser in any
filing with the Commission or any regulatory  agency or Trading Market,  without
the prior written consent of such  Purchaser,  except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading  Market  regulations,  in which case the Company shall provide
the Purchasers  with prior notice of such  disclosure  permitted under subclause
(i) or (ii).

                                       23
<PAGE>

     4.7  SHAREHOLDER  RIGHTS  PLAN.  No claim will be made or  enforced  by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring  Person" under any  shareholder  rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the  provisions of any such plan or  arrangement,  by
virtue of  receiving  Securities  under the  Transaction  Documents or under any
other  agreement  between  the  Company and the  Purchasers.  The Company  shall
conduct  its  business  in a manner so that it will not  become  subject  to the
Investment Company Act.

     4.8  NON-PUBLIC  INFORMATION. The Company covenants and agrees that neither
it nor any other Person  acting on its behalf will provide any  Purchaser or its
agents or counsel with any  information  that the Company  believes  constitutes
material non-public information,  unless prior thereto such Purchaser shall have
executed  a written  agreement  regarding  the  confidentiality  and use of such
information.  The Company  understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

     4.9  USE OF PROCEEDS. Except as set forth on SCHEDULE 4.9 attached  hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital  purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade  payables in the ordinary  course of
the  Company's  business  and prior  practices),  to redeem any Common  Stock or
Common Stock Equivalents or to settle any outstanding litigation.  Additionally,
the  Company  shall not use the net  proceeds  raised  hereunder  to redeem  any
securities of any  Subsidiary in excess of (a)  $1,000,000,  at the Closing,  to
NextPoint  Partners,  L.P. and (b)  $1,000,000 at the time of the release of the
Secured Proceeds (as defined in the Custodial Agreement).

     4.10 REIMBURSEMENT.  If  any Purchaser  becomes involved in any capacity in
any  Proceeding  by or against  any Person who is a  stockholder  of the Company
(except as a result of sales, pledges,  margin sales and similar transactions by
such Purchaser to or with any current  stockholder),  solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses  (including
the cost of any  investigation  preparation and travel in connection  therewith)
incurred  in  connection   therewith,   as  such  expenses  are  incurred.   The
reimbursement  obligations  of the  Company  under  this  paragraph  shall be in
addition to any  liability  which the Company may otherwise  have,  shall extend
upon the same terms and  conditions to any  Affiliates of the Purchasers who are
actually  named in such  action,  proceeding  or  investigation,  and  partners,
directors,  agents,  employees and controlling persons (if any), as the case may
be, of the  Purchasers  and any such  Affiliate,  and shall be binding  upon and
inure  to  the  benefit  of  any   successors,   assigns,   heirs  and  personal
representatives  of the Company,  the  Purchasers and any such Affiliate and any
such Person.  The Company also agrees that neither the  Purchasers  nor any such
Affiliates,  partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company  solely as a result of acquiring  the  Securities  under
this Agreement.

                                       24
<PAGE>

     4.11 INDEMNIFICATION  OF  PURCHASERS.  Subject  to the  provisions  of this
Section  4.11,  the Company will  indemnify  and hold the  Purchasers  and their
directors,  officers,  shareholders,  members,  partners,  employees  and agents
(each,  a  "PURCHASER  PARTY")  harmless  from any and all losses,  liabilities,
obligations,  claims, contingencies,  damages, costs and expenses, including all
judgments,  amounts paid in settlements,  court costs and reasonable  attorneys'
fees and costs of  investigation  that any such  Purchaser  Party may  suffer or
incur  as  a  result  of  or   relating   to  (a)  any  breach  of  any  of  the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other  Transaction  Documents  or (b) any action  instituted
against  a  Purchaser,  or any of them or their  respective  Affiliates,  by any
stockholder  of the  Company who is not an  Affiliate  of such  Purchaser,  with
respect to any of the  transactions  contemplated by the  Transaction  Documents
(unless such action is based upon a breach of such Purchaser's  representations,
warranties or covenants  under the  Transaction  Documents or any  agreements or
understandings  such  Purchaser  may  have  with  any  such  stockholder  or any
violations by the Purchaser of state or federal  securities  laws or any conduct
by such Purchaser which constitutes fraud, gross negligence,  willful misconduct
or  malfeasance).  If any action shall be brought against any Purchaser Party in
respect  of which  indemnity  may be sought  pursuant  to this  Agreement,  such
Purchaser  Party shall promptly  notify the Company in writing,  and the Company
shall  have the right to assume  the  defense  thereof  with  counsel of its own
choosing. Any Purchaser Party shall have the right to employ separate counsel in
any  such  action  and  participate  in the  defense  thereof,  but the fees and
expenses of such counsel shall be at the expense of such Purchaser  Party except
to the extent that (i) the employment  thereof has been specifically  authorized
by the Company in writing, (ii) the Company has failed after a reasonable period
of time to assume  such  defense  and to employ  counsel or (iii) in such action
there is,  in the  reasonable  opinion  of such  separate  counsel,  a  material
conflict  on any  material  issue  between  the  position of the Company and the
position  of such  Purchaser  Party.  The  Company  will  not be  liable  to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party
effected  without  the  Company's  prior  written  consent,  which  shall not be
unreasonably  withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party's
breach of any of the representations,  warranties,  covenants or agreements made
by the  Purchasers  in this  Agreement  or in the other  Transaction  Documents.
Without limiting a Purchaser's other available  remedies at law or equity, in no
event shall the liability of the Company to a Purchaser  hereunder be greater in
amount than such Purchaser's Subscription Amount.

     4.12 RESERVATION AND LISTING OF SECURITIES.

          (a)  The Company  shall  maintain a reserve  from its duly  authorized
     shares of Common Stock for issuance  pursuant to the Transaction  Documents
     in such amount as may be required to fulfill its  obligations in full under
     the Transaction Documents.

          (b)  If, on any date,  the  number of  authorized  but  unissued  (and
     otherwise  unreserved)  shares  of Common  Stock is less than the  Required
     Minimum on such date,  then the Board of Directors of the Company shall use
     commercially  reasonable  efforts  to amend the  Company's  certificate  or
     articles of incorporation to increase the number of authorized but unissued
     shares of Common  Stock to at least the Required  Minimum at such time,  as
     soon as  possible  and in any event not later  than the 75th day after such
     date.

                                       25
<PAGE>

          (c)  The Company  shall,  if  applicable:  (i) in the time and  manner
     required by the Trading  Market,  prepare and file with such Trading Market
     an additional  shares  listing  application  covering a number of shares of
     Common  Stock at least  equal to the  Required  Minimum on the date of such
     application,  (ii) take all steps  necessary to cause such shares of Common
     Stock to be approved for listing on the Trading  Market as soon as possible
     thereafter,  (iii) provide to the Purchasers evidence of such listing,  and
     (iv)  maintain  the listing of such Common Stock on any date at least equal
     to the  Required  Minimum  on such date on such  Trading  Market or another
     Trading Market.

     4.13 PARTICIPATION IN FUTURE FINANCING.

          (a)  From the date hereof until the date that is the Debentures are no
     longer  outstanding,  upon  any  financing  by  the  Company  or any of its
     Subsidiaries  of Common Stock or Common Stock  Equivalents  (a  "SUBSEQUENT
     FINANCING"), each Purchaser shall have the right to participate in up to an
     amount of the Subsequent Financing equal to the such amount that would keep
     such Purchaser's  ownership in the Company,  including for purposes of such
     calculation,  shares of Common  Stock  underlying  fully  paid  convertible
     derivatives  of the Company,  including  the  Debentures  and excluding the
     shares of Common Stock underlying derivative securities of the Company that
     require  cash  payments by the  holders  thereof  for  exercise,  after the
     Subsequent  Financing  equal to such  Purchaser's  ownership in the Company
     immediately prior to Subsequent Financing (the "PARTICIPATION MAXIMUM").

          (b)  At least 5 Trading  Days prior to the closing  of the  Subsequent
     Financing,  the Company shall deliver to each Purchaser a written notice of
     its  intention  to  effect a  Subsequent  Financing  ("PRE-NOTICE"),  which
     Pre-Notice  shall ask such  Purchaser  if it wants to review the details of
     such financing (such additional notice, a "SUBSEQUENT  FINANCING  NOTICE").
     Upon the request of a Purchaser, and only upon a request by such Purchaser,
     for a Subsequent Financing Notice, the Company shall promptly, but no later
     than 1 Trading  Day after  such  request,  deliver a  Subsequent  Financing
     Notice to such Purchaser. The Subsequent Financing Notice shall describe in
     reasonable  detail the proposed  terms of such  Subsequent  Financing,  the
     amount of proceeds intended to be raised  thereunder,  the Person with whom
     such Subsequent Financing is proposed to be effected, and attached to which
     shall be a term sheet or similar document relating thereto.

          (c)  Any   Purchaser  desiring  to  participate  in  such   Subsequent
     Financing must provide written notice to the Company by not later than 5:30
     p.m.  (New  York  City  time)  on the  5th  Trading  Day  after  all of the
     Purchasers  have received the  Pre-Notice  that the Purchaser is willing to
     participate  in the  Subsequent  Financing,  the amount of the  Purchaser's
     participation,  and that the Purchaser has such funds ready,  willing,  and
     available for investment on the terms set forth in the Subsequent Financing
     Notice.  If the Company  receives no notice from a Purchaser as of such 5th
     Trading Day,  such  Purchaser  shall be deemed to have notified the Company
     that it does not elect to participate.

                                       26
<PAGE>

          (d)  If by 5:30 p.m. (New York City time) on the 5th Trading Day after
     all of the Purchasers  have received the Pre-Notice,  notifications  by the
     Purchasers of their willingness to participate in the Subsequent  Financing
     (or to cause their  designees to  participate)  is, in the aggregate,  less
     than the total  amount of the  Subsequent  Financing,  then the Company may
     effect the remaining portion of such Subsequent  Financing on the terms and
     to the Persons set forth in the Subsequent Financing Notice.

          (e)  The Company must provide the Purchasers  with a second Subsequent
     Financing  Notice,  and  the  Purchasers  will  again  have  the  right  of
     participation  set forth  above in this  Section  4.13,  if the  Subsequent
     Financing  subject  to  the  initial  Subsequent  Financing  Notice  is not
     consummated  for any  reason  on the  terms  set  forth in such  Subsequent
     Financing  Notice  within 60  Trading  Days  after the date of the  initial
     Subsequent Financing Notice.

          (f)  Notwithstanding  the foregoing, this Section 4.13 shall not apply
     in respect of an Exempt Issuance.

     4.14 SUBSEQUENT EQUITY SALES.

          (a)  From the date hereof  until 90 days  after  the  Effective  Date,
     neither the Company nor any  Subsidiary  shall issue shares of Common Stock
     or Common Stock Equivalents; PROVIDED, HOWEVER, the 90 day period set forth
     in this  Section  4.14 shall be  extended  for the  number of Trading  Days
     during such period in which (i) trading in the Common Stock is suspended by
     any Trading Market,  or (ii) following the Effective Date, the Registration
     Statement is not effective or the prospectus  included in the  Registration
     Statement  may  not be  used  by  the  Purchasers  for  the  resale  of the
     Underlying Shares.

          (b)  From the date hereof until such time as no Purchaser holds any of
     the Securities,  the Company shall be prohibited from effecting or entering
     into an agreement to effect any Subsequent  Financing involving a "Variable
     Rate  Transaction".  The term  "VARIABLE  RATE  TRANSACTION"  shall  mean a
     transaction  in which  the  Company  issues or sells (i) any debt or equity
     securities that are convertible  into,  exchangeable or exercisable for, or
     include the right to receive  additional  shares of Common Stock either (A)
     at a  conversion,  exercise or  exchange  rate or other price that is based
     upon and/or varies with the trading  prices of or quotations for the shares
     of Common  Stock at any time  after the  initial  issuance  of such debt or
     equity  securities,  or (B) with a conversion,  exercise or exchange  price
     that is  subject  to being  reset at some  future  date  after the  initial
     issuance  of such  debt  or  equity  security  or upon  the  occurrence  of
     specified  or  contingent  events  directly  or  indirectly  related to the
     business of the  Company or the market for the Common  Stock or (ii) enters
     into any  agreement,  including,  but not  limited  to, an  equity  line of
     credit,  whereby  the Company may sell  securities  at a future  determined
     price.

          (c)  Notwithstanding the foregoing,  this Section 4.14 shall not apply
     in respect of an Exempt Issuance,  except that no Variable Rate Transaction
     shall be an Exempt Issuance.

                                       27
<PAGE>

          4.15 EQUAL TREATMENT OF PURCHASERS.  No consideration shall be offered
     or paid to any person to amend or consent  to a waiver or  modification  of
     any  provision  of  any  of  the  Transaction  Documents  unless  the  same
     consideration  is also  offered to all of the  parties  to the  Transaction
     Documents.  Further, the Company shall not make any payment of principal or
     interest on the  Debentures  in amounts which are  disproportionate  to the
     respective   principal  amounts   outstanding  on  the  Debentures  at  any
     applicable time. For clarification  purposes,  this provision constitutes a
     separate  right  granted to each  Purchaser  by the Company and  negotiated
     separately by each Purchaser,  and is intended to treat for the Company the
     Debenture  holders as a class and shall not in any way be  construed as the
     Purchasers  acting in concert or as a group with  respect to the  purchase,
     disposition or voting of Securities or otherwise.

          4.16 SHORT  SALES AND  CONFIDENTIALITY  AFTER THE  DATE  HEREOF.  Each
     Purchaser  severally  and not jointly with the other  Purchasers  covenants
     that neither it nor any affiliates  acting on its behalf or pursuant to any
     understanding  with it will execute any Short Sales during the period after
     the  Discussion  Time  and  ending  at  the  time  that  the   transactions
     contemplated by this Agreement are first publicly announced as described in
     Section  4.6.  Each  Purchaser,  severally  and not jointly  with the other
     Purchasers, covenants that until such time as the transactions contemplated
     by this  Agreement  are  publicly  disclosed by the Company as described in
     Section 4.6, such  Purchaser  will  maintain,  the  confidentiality  of all
     disclosures made to it in connection with this  transaction  (including the
     existence and terms of this  transaction).  Each Purchaser  understands and
     acknowledges,  severally and not jointly with any other Purchaser, that the
     Commission  currently  takes the position  that  coverage of short sales of
     shares of the Common Stock "against the box" prior to the Effective Date of
     the Registration  Statement with the Securities is a violation of Section 5
     of the Securities  Act, as set forth in Item 65, Section 5 under Section A,
     of the Manual of Publicly Available Telephone  Interpretations,  dated July
     1997,  compiled by the Office of Chief  Counsel,  Division  of  Corporation
     Finance.   Notwithstanding   the   foregoing,   no   Purchaser   makes  any
     representation,  warranty  or  covenant  hereby  that it will not engage in
     Short  Sales in the  securities  of the  Company  after  the time  that the
     transactions contemplated by this Agreement are first publicly announced as
     described in Section 4.6.  Notwithstanding the foregoing,  in the case of a
     Purchaser  that is a  multi-managed  investment  vehicle  whereby  separate
     portfolio  managers manage separate portions of such Purchaser's assets and
     the portfolio managers have no direct knowledge of the investment decisions
     made by the portfolio  managers managing other portions of such Purchaser's
     assets,  the  covenant set forth above shall only apply with respect to the
     portion of assets managed by the portfolio manager that made the investment
     decision to purchase the Securities covered by this Agreement.

                                   ARTICLE V.
                                  MISCELLANEOUS

          5.1  TERMINATION.  This Agreement may be terminated by any Purchaser,
     as to such  Purchaser's  obligations  hereunder only and without any effect
     whatsoever on the obligations between the Company and the other Purchasers,
     by  written  notice  to the  other  parties,  if the  Closing  has not been
     consummated  on or before June 30, 2005;  PROVIDED,  HOWEVER,  that no such
     termination will affect the right of any party to sue for any breach by the
     other party (or parties).

                                       28
<PAGE>

          5.2  FEES AND EXPENSES.  At the  Closing,  the  Company  has agreed to
     reimburse  Midsummer  Capital,  LLC  ("MIDSUMMER")  up to $40,000,  for its
     actual, reasonable, out-of-pocket legal fees and expenses, $20,000 of which
     has been paid prior to the Closing  Date.  Except as expressly set forth in
     the  Transaction  Documents to the contrary,  each party shall pay the fees
     and expenses of its advisers,  counsel,  accountants and other experts,  if
     any,  and all  other  expenses  incurred  by  such  party  incident  to the
     negotiation,  preparation,  execution,  delivery  and  performance  of this
     Agreement.  The Company shall pay all transfer agent fees,  stamp taxes and
     other  taxes and  duties  levied in  connection  with the  delivery  of any
     Securities.

          5.3 ENTIRE  AGREEMENT.  The Transaction  Documents,  together with the
     exhibits and schedules  thereto,  contain the entire  understanding  of the
     parties with respect to the subject  matter  hereof and supersede all prior
     agreements  and  understandings,  oral or  written,  with  respect  to such
     matters,   which  the  parties  acknowledge  have  been  merged  into  such
     documents, exhibits and schedules.

          5.4  NOTICES.   Any  and  all  notices  or   other  communications  or
     deliveries  required  or  permitted  to be provided  hereunder  shall be in
     writing and shall be deemed given and  effective on the earliest of (a) the
     date of  transmission,  if such notice or  communication  is delivered  via
     facsimile at the facsimile number set forth on the signature pages attached
     hereto  prior to 5:30 p.m.  (New York City time) on a Trading  Day, (b) the
     next  Trading  Day  after  the  date of  transmission,  if such  notice  or
     communication  is delivered via facsimile at the facsimile number set forth
     on the signature  pages attached  hereto on a day that is not a Trading Day
     or later than 5:30 p.m.  (New York City time) on any Trading  Day,  (c) the
     2nd Trading Day following the date of mailing,  if sent by U.S.  nationally
     recognized  overnight  courier  service,  or (d) upon actual receipt by the
     party to whom such  notice is  required  to be given.  The address for such
     notices and  communications  shall be as set forth on the  signature  pages
     attached hereto.

          5.5  AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
     or  amended  except  in a  written  instrument  signed,  in the  case of an
     amendment,  by the Company and each  Purchaser or, in the case of a waiver,
     by the party  against  whom  enforcement  of any such waiver is sought.  No
     waiver  of  any  default  with  respect  to  any  provision,  condition  or
     requirement of this Agreement shall be deemed to be a continuing  waiver in
     the future or a waiver of any  subsequent  default or a waiver of any other
     provision, condition or requirement hereof, nor shall any delay or omission
     of either  party to exercise any right  hereunder in any manner  impair the
     exercise of any such right.

          5.6  HEADINGS. The headings  herein are for  convenience  only, do not
     constitute  a part of this  Agreement  and  shall not be deemed to limit or
     affect any of the  provisions  hereof.  The language used in this Agreement
     will be deemed to be the  language  chosen by the parties to express  their
     mutual intent, and no rules of strict  construction will be applied against
     any party.

          5.7  SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon and
     inure to the  benefit of the  parties and their  successors  and  permitted
     assigns.  The  Company  may not  assign  this  Agreement  or any  rights or
     obligations  hereunder without the prior written consent of each Purchaser,
     which consent shall not be unreasonably  withheld. Any Purchaser may assign
     any or all of its rights  under this  Agreement  to any Person to whom such
     Purchaser  assigns or transfers any  Securities,  provided such  transferee
     agrees in writing to be bound, with respect to the transferred  Securities,
     by the provisions hereof that apply to the "Purchasers".

                                       29
<PAGE>

          5.8  NO THIRD-PARTY BENEFICIARIES.  This Agreement is intended for the
     benefit of the parties hereto and their respective successors and permitted
     assigns  and is not for the  benefit  of, nor may any  provision  hereof be
     enforced by, any other  Person,  except as  otherwise  set forth in Section
     4.11.

          5.9  GOVERNING  LAW.  All  questions   concerning  the   construction,
     validity, enforcement and interpretation of the Transaction Documents shall
     be governed by and construed  and enforced in accordance  with the internal
     laws  of the  State  of New  York,  without  regard  to the  principles  of
     conflicts  of law  thereof.  Each party  agrees that all legal  proceedings
     concerning the interpretations, enforcement and defense of the transactions
     contemplated by this Agreement and any other Transaction Documents (whether
     brought  against a party hereto or its  respective  affiliates,  directors,
     officers, shareholders, employees or agents) shall be commenced exclusively
     in the state and federal courts sitting in the City of New York. Each party
     hereby irrevocably  submits to the exclusive  jurisdiction of the state and
     federal  courts  sitting in the City of New York,  borough of Manhattan for
     the adjudication of any dispute hereunder or in connection herewith or with
     any transaction  contemplated  hereby or discussed  herein  (including with
     respect to the enforcement of any of the Transaction Documents), and hereby
     irrevocably  waives,  and  agrees  not to  assert  in any  suit,  action or
     proceeding, any claim that it is not personally subject to the jurisdiction
     of any such  court,  that such suit,  action or  proceeding  is improper or
     inconvenient  venue for such  proceeding.  Each  party  hereby  irrevocably
     waives personal  service of process and consents to process being served in
     any  such  suit,  action  or  proceeding  by  mailing  a copy  thereof  via
     registered  or  certified  mail or  overnight  delivery  (with  evidence of
     delivery)  to such party at the  address in effect for  notices to it under
     this  Agreement  and agrees that such  service  shall  constitute  good and
     sufficient service of process and notice thereof.  Nothing contained herein
     shall  be  deemed  to limit in any way any  right to serve  process  in any
     manner  permitted by law. The parties hereby waive all rights to a trial by
     jury. If either party shall commence an action or proceeding to enforce any
     provisions of the Transaction Documents,  then the prevailing party in such
     action  or  proceeding  shall be  reimbursed  by the  other  party  for its
     attorneys'   fees  and  other  costs  and   expenses   incurred   with  the
     investigation, preparation and prosecution of such action or proceeding.

          5.10 SURVIVAL.  The  representations  and warranties  contained herein
     shall survive the Closing and the delivery,  exercise and/or  conversion of
     the Securities, as applicable for the applicable statue of limitations.

          5.11 EXECUTION.   This  Agreement  may be  executed  in  two  or  more
     counterparts,  all of which when taken together shall be considered one and
     the same agreement and shall become effective when  counterparts  have been
     signed by each party and delivered to the other party, it being  understood
     that both parties need not sign the same counterpart. In the event that any
     signature  is delivered by facsimile  transmission,  such  signature  shall
     create a valid and binding  obligation of the party  executing (or on whose
     behalf such  signature  is  executed)  with the same force and effect as if
     such facsimile signature page were an original thereof.

                                       30
<PAGE>

          5.12 SEVERABILITY.  If  any provision of this  Agreement is held to be
     invalid or unenforceable in any respect, the validity and enforceability of
     the remaining  terms and provisions of this Agreement  shall not in any way
     be affected or impaired  thereby and the parties will attempt to agree upon
     a valid and enforceable provision that is a reasonable substitute therefor,
     and upon so agreeing,  shall incorporate such substitute  provision in this
     Agreement.

          5.13 RESCISSION AND WITHDRAWAL RIGHT.  Notwithstanding anything to the
     contrary  contained in (and without limiting any similar provisions of) the
     Transaction Documents,  whenever any Purchaser exercises a right, election,
     demand or option  under a  Transaction  Document  and the Company  does not
     timely perform its related obligations within the periods therein provided,
     then such Purchaser may rescind or withdraw,  in its sole  discretion  from
     time to time upon  written  notice to the  Company,  any  relevant  notice,
     demand or  election  in whole or in part  without  prejudice  to its future
     actions and rights;  PROVIDED,  HOWEVER,  in the case of a rescission  of a
     conversion of a Debenture or exercise of a Warrant,  the Purchaser shall be
     required to return any shares of Common Stock subject to any such rescinded
     conversion or exercise notice.

          5.14 REPLACEMENT  OF  SECURITIES.  If any  certificate  or  instrument
     evidencing  any  Securities is mutilated,  lost,  stolen or destroyed,  the
     Company shall issue or cause to be issued in exchange and  substitution for
     and upon cancellation  thereof, or in lieu of and substitution  therefor, a
     new certificate or instrument, but only upon receipt of evidence reasonably
     satisfactory  to the  Company  of  such  loss,  theft  or  destruction  and
     customary and reasonable indemnity, if requested.  The applicants for a new
     certificate  or  instrument  under  such  circumstances  shall also pay any
     reasonable   third-party   costs  associated  with  the  issuance  of  such
     replacement Securities.

          5.15 REMEDIES.  In  addition to being  entitled to exercise all rights
     provided herein or granted by law, including  recovery of damages,  each of
     the  Purchasers  and the Company  will be entitled to specific  performance
     under the Transaction  Documents.  The parties agree that monetary  damages
     may not be  adequate  compensation  for any loss  incurred by reason of any
     breach of obligations described in the foregoing sentence and hereby agrees
     to waive in any action for specific  performance of any such obligation the
     defense that a remedy at law would be adequate.

          5.16 PAYMENT SET ASIDE. To the extent that the Company makes a payment
     or payments to any  Purchaser  pursuant  to any  Transaction  Document or a
     Purchaser enforces or exercises its rights thereunder,  and such payment or
     payments  or the  proceeds  of such  enforcement  or  exercise  or any part
     thereof  are  subsequently  invalidated,   declared  to  be  fraudulent  or
     preferential, set aside, recovered from, disgorged by or are required to be
     refunded,  repaid or otherwise restored to the Company, a trustee, receiver
     or any other  person  under any law  (including,  without  limitation,  any
     bankruptcy  law,  state or federal law,  common law or  equitable  cause of
     action),  then to the extent of any such restoration the obligation or part
     thereof originally  intended to be satisfied shall be revived and continued
     in full  force  and  effect  as if such  payment  had not been made or such
     enforcement or setoff had not occurred.

                                       31
<PAGE>

          5.17 USURY.  To the extent it may  lawfully do so, the Company  hereby
     agrees not to insist upon or plead or in any manner  whatsoever  claim, and
     will  resist any and all  efforts to be  compelled  to take the  benefit or
     advantage of, usury laws wherever enacted,  now or at any time hereafter in
     force,  in  connection  with any claim,  action or  proceeding  that may be
     brought by any  Purchaser in order to enforce any right or remedy under any
     Transaction  Document.   Notwithstanding  any  provision  to  the  contrary
     contained in any Transaction  Document, it is expressly agreed and provided
     that the total liability of the Company under the Transaction Documents for
     payments in the nature of interest shall not exceed the maximum lawful rate
     authorized under applicable law (the "MAXIMUM RATE"), and, without limiting
     the foregoing,  in no event shall any rate of interest or default interest,
     or both of them,  when  aggregated  with any  other  sums in the  nature of
     interest  that the Company may be  obligated  to pay under the  Transaction
     Documents  exceed  such  Maximum  Rate.  It is agreed  that if the  maximum
     contract rate of interest  allowed by law and applicable to the Transaction
     Documents is increased or decreased by statute or any official governmental
     action  subsequent  to the date hereof,  the new maximum  contract  rate of
     interest  allowed  by  law  will  be the  Maximum  Rate  applicable  to the
     Transaction  Documents  from  the  effective  date  forward,   unless  such
     application  is precluded  by  applicable  law. If under any  circumstances
     whatsoever,  interest in excess of the Maximum  Rate is paid by the Company
     to any Purchaser with respect to indebtedness  evidenced by the Transaction
     Documents,  such excess  shall be applied by such  Purchaser  to the unpaid
     principal  balance of any such  indebtedness or be refunded to the Company,
     the manner of handling such excess to be at such Purchaser's election.

          5.18 INDEPENDENT  NATURE OF  PURCHASERS'  OBLIGATIONS AND RIGHTS.  The
     obligations of each Purchaser  under any  Transaction  Document are several
     and not joint with the obligations of any other Purchaser, and no Purchaser
     shall be responsible in any way for the  performance of the  obligations of
     any other  Purchaser  under any  Transaction  Document.  Nothing  contained
     herein or in any Transaction Document, and no action taken by any Purchaser
     pursuant  thereto,  shall be  deemed  to  constitute  the  Purchasers  as a
     partnership,  an association,  a joint venture or any other kind of entity,
     or  create a  presumption  that the  Purchasers  are in any way  acting  in
     concert or as a group with respect to such  obligations or the transactions
     contemplated by the Transaction Documents. Each Purchaser shall be entitled
     to  independently  protect  and  enforce  its  rights,   including  without
     limitation  the rights  arising out of this  Agreement  or out of the other
     Transaction  Documents,  and  it  shall  not be  necessary  for  any  other
     Purchaser to be joined as an additional  party in any  proceeding  for such
     purpose.  Each  Purchaser has been  represented  by its own separate  legal
     counsel in their review and negotiation of the Transaction  Documents.  For
     reasons of administrative convenience only, Purchasers and their respective
     counsel have chosen to communicate with the Company through FW. FW does not
     represent all of the Purchasers but only Midsummer. The Company has elected
     to provide all Purchasers with the same terms and Transaction Documents for
     the convenience of the Company and not because it was required or requested
     to do so by the Purchasers.

          5.19 LIQUIDATED DAMAGES. The Company's  obligations to pay any partial
     liquidated  damages or other amounts owing under the Transaction  Documents
     is a continuing obligation of the Company and shall not terminate until all
     unpaid  partial  liquidated  damages  and  other  amounts  have  been  paid
     notwithstanding  the fact that the instrument or security pursuant to which
     such partial  liquidated damages or other amounts are due and payable shall
     have been canceled.

                                       32
<PAGE>

          5.20 CONSTRUCTION.  The  parties  agree that each of them and/or their
     respective  counsel  has  reviewed  and had an  opportunity  to revise  the
     Transaction  Documents and,  therefore,  the normal rule of construction to
     the effect that any  ambiguities  are to be resolved  against the  drafting
     party  shall  not be  employed  in the  interpretation  of the  Transaction
     Documents or any amendments hereto.

                            (SIGNATURE PAGES FOLLOW)

                                       33
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

SECURED SERVICES, INC.                          ADDRESS FOR NOTICE:
                                                -------------------

By:________________________________________     110 Williams Street, 14th Floor,
     Name:                                      New York, NY 10038
     Title:

With a copy to (which shall not constitute notice):

Morse, Zelnick, Rose & Lander LLP
ATTN: Stephen Zelnick, Esq.
405 Park Avenue, Suite 1401
New York, New York 10022

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       34
<PAGE>

        [PURCHASER SIGNATURE PAGES TO SSVC SECURITIES PURCHASE AGREEMENT]

     IN WITNESS WHEREOF,  the undersigned  have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Purchaser: _____________________________________________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: ________________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Email Address of Purchaser:_____________________________________________________

Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as above):

Subscription Amount:
Warrant Shares:
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       35

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