Exhibit 10.18


                           STATMON TECHNOLOGIES CORP.

                 NOTE PURCHASE AND SHAREHOLDER RIGHTS AGREEMENT

         This Note Purchase and Shareholder  Rights Agreement (the  "AGREEMENT")
is dated as of November 3rd, 2000 by and among (i) Statmon Technologies Corp., a
Delaware Corporation, with its main office at 114 North Doheny Drive, Suite 201,
Los Angeles,  CA 90048 (the "COMPANY"),  (ii) John Hoff (the  "Purchaser"),  and
(iii) the  Significant  Holders and this Agreement  shall be effective as of the
date of execution hereof by the above named parties.

                                    RECITALS

      A.    In  connection  with the moneys the  Purchaser  has advanced and has
            agreed to advance  the Company  (as  reflected  in Section 2 below),
            such  advancement made to aid the Company in its initial and ongoing
            operating costs, the Parties have agreed to the terms and conditions
            described herein; and

      B.    the  Company  has agreed to execute  the  attached  Promissory  Note
            (Exhibit  B)("Promissory  Note") and the  attached  Trademark/Patent
            Security Agreement (Exhibit  C)("Trademark  Security Agreement") and
            to sell  and  issue to  Purchaser  the  Shares  of  Common  Stock as
            described in Sections 1 and 3.

                                    AGREEMENT

         NOW,  THEREFORE,  in consideration of the promises and mutual covenants
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency  of which are hereby  acknowledged,  the Company  and the  Purchaser
hereby agree as follows:

         1.       CERTAIN DEFINITIONS.  As used in this Agreement, the following
terms shall have the following respective meanings:

                  "COMMISSION"  means the Securities and Exchange  Commission or
any other Federal agency at the time administering the Securities Act.

                  "COMMON STOCK" means the common stock,  $0.00001 par value, of
the  Company and any  securities  which may replace  such common  stock,  due to
reorganization or any other reason.

                  "EXCHANGE ACT" means the  Securities  Exchange Act of 1934, as
amended, or any similar federal rule or statute and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.

<PAGE>

                  "HOLDER"  means  the  Purchaser  and one  holding  Registrable
Securities,  or any person  holding  Registrable  Securities  to whom the rights
under this  Agreement  have been  transferred  in  accordance  with Section 5.10
hereof.

                  "REGISTRABLE  SECURITIES" means (i) Shares and (ii) any Common
Stock  of the  Company  issued  or  issuable  in  respect  of  Shares  upon  any
conversion,  stock split,  stock dividend,  recapitalization,  or similar event;
provided,  however,  that  securities  shall  only  be  treated  as  Registrable
Securities if and so long as they have not been registered or sold to or through
a  broker  or  dealer  or  underwriter  in a  public  distribution  or a  public
securities transaction.

                  The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to
a  registration  effected by preparing  and filing a  registration  statement in
compliance  with the  Securities  Act,  and the  declaration  or ordering of the
effectiveness of such registration statement by the Commission.

                  "REGISTRATION  EXPENSES"  shall mean all  expenses,  except as
otherwise  stated in the  definition  of  "Selling  Expenses",  incurred  by the
Company in complying  with Sections 5.1, 5.2 and 5.3 hereof,  including  without
limitation, all registration,  qualification and filing fees, printing expenses,
escrow fees, fees and  disbursements  of counsel for the Company and one special
counsel to the  selling  stockholders  (up to a maximum  amount of  $25,000  per
registration),  blue sky fees and  expenses,  the expense of any special  audits
incident to or required by any such registration (but excluding the compensation
of regular  employees  of the  Company  which  shall be paid in any event by the
Company).

                  "RESTRICTED  SECURITIES"  shall  mean  the  securities  of the
Company required to bear the legends set forth in Section 4 hereof.

                  "SECURITIES  ACT" shall mean the  Securities  Act of 1933,  as
amended, or any similar federal rule or statute and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.

                  "SELLING  EXPENSES"  shall  mean all  underwriting  discounts,
selling  commissions  and stock  transfer  taxes  applicable  to the  securities
registered  by the  Holders  and,  except  as set  forth  in the  definition  of
"Registration  Expenses", all fees and disbursements of separate counsel for any
Holder.

                  "Shares"  means  250,000  shares of Common Stock issued by the
Company to Purchaser pursuant to Section 3 hereof.

         2.       MANNER OF PURCHASER CONTRIBUTION.

                  Purchaser  will lend to the  Company  up to  $250,000  for the
purposes  detailed on the attached budget  (Exhibit D) in the following  manner:
Purchaser will wire to the Company, on or about the 30th of September and on the
27th of each month of November and  December,  2000,  amounts  called for by the
attached budget,  but in any event not to exceed the category and monthly limits
there listed and less any money previously forwarded during that respective


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<PAGE>

month.  Certain sums during a particular  month may be needed before the 27th of
said month.  In this case,  Purchaser  will pay for such expenses  (again not to
exceed category and monthly limits  established in the attached  budget) as they
become due and in such manner as he chooses.  Also, travel  arrangements  called
for by said budget will be arranged by a travel agent  approved by Purchaser and
travel  expenses  will be paid by any  method  chosen  by  Purchaser.  All  such
payments will be deducted from that month's contribution as explained above.

         3.       SHARES ISSUED.

                  The Company  will,  promptly  following  the execution of this
Agreement,  issue to Purchaser  250,000  shares of Common  Stock (the  "Shares")
which Shares shall upon issuance be fully paid and  non-assignable.  The Company
represents and warrants that on issuance the Shares will represent  6.17% of the
equity securities of the Company,  on a fully-diluted  basis after giving effect
to the sale and issuance of $4.0 Million of preferred  stock of the Company,  as
disclosed to the Purchaser by the Company.

         4.       RESTRICTIVE  LEGEND.  The Purchaser  acknowledges  and accepts
that the Shares are being issued to him without  registration  under  federal or
applicable state  securities  laws, and that the  certificates  representing the
Shares or any other  securities  issued in respect of the Shares  upon any stock
split, stock dividend, recapitalization, merger, or similar event, shall (unless
otherwise  permitted by the provisions below) be stamped or otherwise  imprinted
with legends in  substantially  the  following  form (in addition to any legends
required by agreement or by applicable state securities laws):

         THE  SHARES  REPRESENTED  BY THIS  CERTIFICATE  HAVE  NOT BEEN
         REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  OR
         THE  SECURITIES  LAWS OF ANY STATE OR OTHER  JURISDICTION  AND
         HAVE BEEN ACQUIRED FOR  INVESTMENT  AND NOT WITH A VIEW TO, OR
         IN CONNECTION  WITH, THE SALE OR  DISTRIBUTION  THEREOF.  SUCH
         SHARES GENERALLY MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
         OF SUCH REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF
         COUNSEL REASONABLY  ACCEPTABLE TO IT STATING THAT SUCH SALE OR
         TRANSFER  IS  EXEMPT  FROM  THE  REGISTRATION  AND  PROSPECTUS
         DELIVERY  REQUIREMENTS  OF SAID ACT AND ANY  APPLICABLE  STATE
         SECURITIES LAWS.

                  The Purchaser consents to the Company making a notation on its
records and giving  instructions  to any transfer  agent of its capital stock in
order to implement the restrictions on transfer established in this Agreement.


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<PAGE>

         5.       REGISTRATION.

                  5.1. REQUESTED REGISTRATION.

                           (a)  Request  for  Registration.  In case the Company
shall  receive  from  Purchaser a written  request  that the Company  effect any
registration with respect to shares of Registrable Securities,  the Company will
as soon as practicable,  use its best efforts to effect such  registration(s) as
part  of a  firm  commitment  underwritten  public  offering  with  underwriters
reasonably  acceptable  to the  Purchaser  and the Company  (including,  without
limitation, appropriate qualification under applicable state securities laws and
appropriate  compliance with applicable  regulations issued under the Securities
Act  and  any  other  governmental  requirements  or  regulations)  as may be so
requested and as would permit or facilitate the sale and  distribution of all or
such portion of such  Registrable  Securities  as are specified in such request,
within 20 days after the date of such written notice from the Company.

         Notwithstanding  the  foregoing,  the Company shall not be obligated to
take any action to effect or  complete  any such  registration  pursuant to this
Section 5.1:

                                            (A)  Prior  to  the  earlier  of (i)
January 1, 2003 and (ii) six months after the  effective  date of the  Company's
first registered public offering of its Common Stock;

                                            (B)  Unless the  aggregate  offering
price of all Registrable Securities sought to be registered by all Holders would
exceed $1,000,000;

                                            (C) During the period  starting with
the date thirty (30) days prior to the  Company's  estimated  date of filing of,
and ending on the date six (6) months  immediately  following the effective date
of, any  registration  statement  pertaining to securities of the Company (other
than a registration  of securities in a transaction  under Rule 145  promulgated
under the Securities Act or with respect to an employee benefit plan),  provided
that the Company is actively  employing in good faith all reasonable  efforts to
cause such registration statement to become effective;

                                            (D) After the Company has  completed
two registrations pursuant to this subparagraph 5.1(a); or

                                            (E) If the Company  shall furnish to
the Purchaser a certificate signed by the President of the Company stating that,
because it is necessary for the Company to consummate a pending transaction,  in
the good  faith  judgment  of the  Board  of  Directors  it  would be  seriously
detrimental to the Company or its stockholders  for a registration  statement to
be filed in the near future.  In such case, the Company's  obligation to use its
best efforts to register,  qualify or comply under this Section 5.1(a) shall be
deferred  for a period  not to exceed 90 days  from the date of  receipt  of the
written  request  from the Holders,  provided  that the Company may not exercise
this deferral right more than once per twelve month period.


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<PAGE>

                           (b) Subject to the foregoing clauses (A) through (E),
the  Company  shall  file a  registration  statement  covering  the  Registrable
Securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Purchaser.

                           (c)  Underwriting.  In the  event  of a  registration
pursuant to Section  5.1,  the Company  shall  advise the Holders as part of the
notice  given  pursuant  to  Section  5.2(a)(i)  that the right of any Holder to
registration  pursuant to Section 5.1 shall be  conditioned  upon such  Holder's
participation in the underwriting arrangements required by this Section 5.1, and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent requested shall be limited to the extent provided herein.

         The Company  shall,  together with all Holders  proposing to distribute
their securities through such underwriting, enter into an underwriting agreement
in customary form with the managing  underwriter  selected for such underwriting
by a  majority  in  interest  of the  Initiating  Holders,  but  subject  to the
Company's  reasonable  approval.  Notwithstanding  any other  provision  of this
Section  5.1, if the  managing  underwriter  advises the Holders in writing that
marketing   factors  require  a  limitation  of  the  number  of  shares  to  be
underwritten,  then the  Company  shall so advise all holders  requesting  to be
included  in the  registration  and  underwriting  and the  number  of shares of
Registrable Securities that may be included in the registration and underwriting
shall  be  allocated  among  all  Holders  requesting  to  be  included  in  the
registration  and underwriting in proportion,  as nearly as practicable,  to the
respective amounts of Registrable  Securities held by them at the time of filing
the  registration   statement.  No  Registrable  Securities  excluded  from  the
underwriting  by  reason  of the  underwriter's  marketing  limitation  shall be
included  in  such  registration.   If  any  Holder  of  Registrable  Securities
disapproves of the terms of the underwriting,  such person may elect to withdraw
therefrom by written notice to the Company.  If other selling  shareholders  who
are  not  Qualified  Holders  (hereinafter   defined)  request  registration  of
securities in the proposed  offering,  the Company will reduce or eliminate such
other selling  shareholders'  securities  before any reduction or elimination of
Registrable Securities to be included in such registration.  The Term "Qualified
Holders"  shall mean (i) the Purchaser or (ii) the  Purchaser's  successors  and
assigns to whom  registration  rights under this agreement have been assigned or
transferred in accordance with Section 5.10 hereof.

                  5.2. COMPANY REGISTRATION.

                           (a)  Notice of  Registration.  If at any time or from
time  to  time  the  Company  shall  determine  to  register  any of its  equity
securities,  either  for its own  account  or the  account  of a Holder or other
holders, other than (i) a registration relating solely to employee benefit plans
or  (ii)  a  registration  relating  solely  to a  transaction  under  Rule  145
promulgated under the Securities Act, the Company will:

                                    (i)  promptly  give to  Purchaser  and  each
other Holder written notice thereof; and

                                    (ii) include in such  registration  (and any
related  qualifications  including  compliance  with Blue Sky laws),  and in any
underwriting involved therein, all the


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<PAGE>

Registrable Securities specified in a written request or requests,  delivered to
the  Company  within 20 days  after  the date of such  written  notice  from the
Company, by any Holder.

                           (b)  Underwriting.  If the  registration of which the
Company  gives  notice  is  for  a  registered  public  offering   involving  an
underwriting,  the Company  shall so advise the Holders as a part of the written
notice  given  pursuant to Section  5.2(a)(i).  In such event,  the right of any
Holder to  registration  pursuant to Section 5.2 shall be conditioned  upon such
Holder's  participation  in such  underwriting  and the inclusion of Registrable
Securities in the underwriting shall be limited to the extent provided herein.

                           All Holders  proposing to distribute their securities
through such underwriting shall (together with the Company and the other Holders
distributing  their  securities   through  such  underwriting)   enter  into  an
underwriting  agreement in customary form with the managing underwriter selected
for such  underwriting  by the Company.  Notwithstanding  any other provision of
this Section 5.2, if the managing underwriter  determines that marketing factors
require a limitation  of the number of shares to be  underwritten,  the managing
underwriter  may  limit  the  Registrable  Securities  to be  included  in  such
registration to an amount no less than the lesser of (i) 20% of all shares to be
included in such  offering or (ii) 75% of the  Registrable  Securities  that had
been proposed by the Holders to be included in such  offering,  provided that if
other selling shareholders who are not Qualified Holders (as defined above) have
requested  registration of securities in the proposed offering, the Company will
reduce or  eliminate  such other  selling  shareholders'  securities  before any
reduction  or  elimination  of  Registrable  Securities  to be  included in such
registration.  The Company shall so advise all Holders requesting to be included
in the  registration  and  underwriting  and the number of shares of Registrable
Securities that may be included in the registration  and  underwriting  shall be
allocated  among all the Holders  requesting to be included in the  registration
and  underwriting  in proportion,  as nearly as  practicable,  to the respective
amounts  of  Registrable  Securities  held  by them at the  time of  filing  the
registration  statement.  If any  Holder  disapproves  of the  terms of any such
underwriting,  such person may elect to withdraw  therefrom by written notice to
the Company.

                           (c)  Right to  Terminate  Registration.  The  Company
shall have the right to terminate or withdraw any  registration  initiated by it
under this Section 5.2 prior to the effectiveness of such  registration  whether
or not any Holder has elected to include  securities  in such  registration  and
shall give notice to each Holder who has elected to include  securities  in such
registration as soon as practicable after such termination or withdrawal.

                  5.3. REGISTRATION ON FORM S-3.

                           (a)  Request  for  Registration.  In case the Company
shall  receive  from  Purchaser  a  written  request  that  the  Company  file a
registration  statement  on Form S-3 (or any  successor  form to Form S-3) for a
public offering of shares of the  Registrable  Securities the aggregate price to
the public of which, net of underwriting discounts and commissions, would exceed
$1,000,000, and the Company is a registrant entitled to use Form S-3 to register
the Registrable  Securities for such an offering, the Company shall use its best
efforts to cause such  Registrable  Securities to be registered for the offering
on such form and to cause such


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<PAGE>

Registrable  Securities to be qualified in such  jurisdictions as such Holder or
Holders may reasonably request; provided, however, that the Company shall not be
required to effect more than two  registrations  pursuant to this Section 5.3 in
any twelve (12) month period. If such offer is to be an underwritten  offer, the
underwriters  must be  acceptable  to both the  Purchaser  and the Company.  The
Company  shall  inform  the  Purchaser  and any other  Holders  of the  proposed
registration and offer them upon at least 20 days written notice the opportunity
to participate.  In the event the  registration is proposed to be part of a firm
commitment  underwritten public offering,  the substantive provisions of Section
5.1(c)  shall be  applicable  to each such  registration  initiated  under  this
Section 5.3.

                           (b) Notwithstanding the foregoing, the Company  shall
not be obligated to take any action pursuant to this Section 5.3:

                                    (i) If the Company,  within twenty (20) days
of the receipt of the request of the  Purchaser,  gives  notice of its bona fide
intention to effect the filing of a  registration  statement with the Commission
within ninety (90) days of receipt of such request (other than with respect to a
registration  statement  relating to a  transaction  under Rule 145  promulgated
under  the  Securities  Act,  an  offering  solely  to  employees  or any  other
registration  which  is not  appropriate  for the  registration  of  Registrable
Securities); or

                                    (ii)  During  the period  starting  with the
date thirty (30) days prior to the  Company's  estimated  date of filing of, and
ending on the date six (6) months  immediately  following the effective date of,
any registration statement pertaining to securities of the Company (other than a
registration of securities in a transaction under Rule 145 promulgated under the
Securities Act or with respect to an employee  benefit plan),  provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective.

                  5.4. SUBSEQUENT REGISTRATION RIGHTS.

                           (a) Without the consent of any holder of  Registrable
Securities  hereunder,  the Company may grant to any holder of securities of the
Company issued subsequently to the Registrable  Securities,  registration rights
on a pari passu basis with the rights granted the Purchaser  hereunder or rights
which are entirely inferior and subordinate to those granted hereunder.

                           (b) The  Company  shall not enter into any  agreement
granting  any holder or  prospective  holder of any  securities  of the  Company
registration rights superior to the rights granted the Purchaser.

                  5.5.  EXPENSES  OF  REGISTRATION.  All  Registration  Expenses
incurred in connection with all  registrations  pursuant to this Section 5 shall
be borne by the Company. Selling Expenses, other than underwriting discounts and
selling  commissions,  relating  to  securities  registered  on  behalf  of  the
Purchaser  (with the  limitation  that Purchaser is limited to one counsel and a
$10,000 cap will apply to attorneys  fees) and all other  registration  expenses
shall be borne by the Company.


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<PAGE>

                  5.6. REGISTRATION PROCEDURES. In the case of each registration
effected by the Company  pursuant to this Agreement,  the Company will keep each
Holder  advised in writing as to the initiation of such  registration  and as to
the completion thereof. The Company will:

                           (a)  prepare and file with the  Commission  within 90
days after the receipt of request for registration,  a registration statement on
any appropriate form under the Securities Act, which form shall be available for
sale of the  Registrable  Securities in accordance  with the intended  method or
methods  of  distribution  thereof  and use  its  best  efforts  to  cause  such
registration  statement  to become  effective;  provided  that  before  filing a
registration  statement or prospectus or any amendment or  supplements  thereto,
including  documents  incorporated  by reference after the initial filing of any
registration  statement,  the  Company  will  furnish  to  the  Holders  of  the
Registrable   Securities   covered   by   such   registration   statement   (the
"PARTICIPATING  HOLDERS")  and the  underwriters  copies  of all such  documents
provided  to be filed,  which  documents  will be  subject to the review of such
Holders and underwriters (it being  acknowledged that if Holder does not respond
with comments thereto within 10 days, Holder shall be deemed to have approved of
such documents as presented);

                           (b)  prepare  and  file  with  the  Commission   such
amendments and post-effective amendments to the registration statement as may be
necessary to keep such registration  statement effective for a reasonable period
not to exceed 180 days;  cause the related  prospectus to be supplemented by any
required prospectus  supplement,  and as so supplemented to be filed pursuant to
Rule 424 under  the  Securities  Act;  and  comply  with the  provisions  of the
Securities Act with respect to the disposition of all securities covered by such
registration  statement  during  such  period in  accordance  with the  intended
methods of  disposition  by the sellers  thereof set forth in such  registration
statement or supplement to such prospectus;

                           (c) notify the Participating Holders and the managing
underwriters promptly, and (if requested by any such person) confirm such advice
in writing, of the following:  when a prospectus or any prospectus supplement or
post-effective  amendment  has been filed,  and with  respect to a  registration
statement or any post-effective  amendment,  when the same has become effective;
of any request by the Commission for amendments or supplements to a registration
statement or related prospectus or for additional  information;  of the issuance
by  the  Commission  of  any  stop  order  suspending  the  effectiveness  of  a
registration statement or the initiation of any proceedings for that purpose; of
the receipt by the Company of any notification with respect to the suspension of
the  qualification  of  any  of  the  Registrable  Securities  for  sale  in any
jurisdiction  or the  initiation  or  threatening  of any  proceeding  for  such
purpose;  and of the  happening  of any  event  that  makes any  statement  of a
material  fact  made  in  the  registration  statement,  the  prospectus  or any
documents  incorporated therein by reference untrue or which requires the making
of any changes in the  registration  statement so that they will not contain any
untrue  statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;

                           (d) make reasonable  efforts to obtain the withdrawal
of any order  suspending the  effectiveness  of a registration  statement at the
earliest possible moment;


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<PAGE>

                           (e)  if   reasonably   requested   by  the   managing
underwriters,  promptly incorporate in a prospectus supplement or post-effective
amendment such  information as the managing  underwriters  believe (on advice of
counsel)  should be included  therein as required by applicable  law relating to
such sale of Registrable Securities, including, without limitation,  information
with respect to the purchase price being paid for the Registrable  Securities by
such  underwriters  and with respect to any other terms of the  underwritten (or
"best-efforts"  underwritten)  offering;  and make all required  filings of such
prospectus  supplement  or  post-effective  amendment as soon as notified of the
matters to be  incorporated  in such  prospectus  supplement  or  post-effective
amendment;

                           (f)  furnish to each  managing  underwriter,  without
charge,  at  least  one  signed  copy  of the  registration  statement  and  any
post-effective amendment,  including financial statements and any schedules, all
documents  incorporated  therein by reference and all exhibits  (including those
incorporated by reference);

                           (g)  deliver  to each  Participating  Holder  and the
underwriters  without  charge,  as many copies of the prospectus or prospectuses
(including each preliminary  prospectus and any amendment or supplement thereto)
as such persons may reasonably request;  the Company consents to the use of such
prospectus  and  of  any  amendment  or  supplement   thereto  by  each  of  the
Participating  Holders and the  underwriters in connection with the offering and
sale of the Registrable  Securities  covered by such prospectus or any amendment
or supplement thereto;

                           (h) prior to any public  offering of the  Registrable
Securities,  cooperate with the Participating Holders, the underwriters, if any,
and their  respective  counsel in  connection  with and use its best  efforts to
effect the  registration or  qualification  of such  Registrable  Securities for
offer  and sale  under  the  securities  or Blue Sky laws of such  jurisdictions
within the United  States as any  selling  Participating  Holder or  underwriter
reasonably  requests in writing,  keep each such  registration or  qualification
effective during the period such  registration  statement is required to be kept
effective  and do any and all  other  acts or  things  reasonably  necessary  or
advisable to enable the  disposition in such  jurisdictions  of the  Registrable
Securities covered by the applicable registration  statement;  provided that the
Company will not be required to qualify to do business in any jurisdiction where
it is not then so  qualified  or to take any  action  which  would  subject  the
Company to general service of process in any jurisdiction where it is not at the
time so subject;

                           (i) use its best  efforts  to cause  the  Registrable
Securities  covered by the  applicable  registration  statement to be registered
with or approved by such other  governmental  agencies or authorities within the
United States as may be necessary to enable the seller or sellers thereof or the
underwriters to consummate the disposition of such Registrable Securities;

                           (j)   as   necessary,   prepare   a   supplement   or
post-effective  amendment to the  applicable  registration  statement or related
prospectus or any documents  incorporated therein by reference or file any other
required  document so that,  as  thereafter  delivered to the  purchasers of the
Registrable  Securities being sold thereunder,  such prospectus will not contain
an untrue


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<PAGE>

statement  of a material  fact or omit to state any material  fact  necessary to
make the statements therein not misleading;

                                (k)  use  its  best   efforts   to   cause   all
Registrable  Securities  covered by the  registration  statement to be listed on
each  securities  exchange,  if any, on which similar  securities  issued by the
Company are then listed;

                                (l) enter into such  agreements  (including,  an
underwriting  agreement) and take all such other action  reasonably  required in
connection  therewith in order to expedite or facilitate the  disposition of the
Registrable Securities;

                                (m) provide a transfer  agent and  registrar for
the   Registrable   Securities  not  later  than  the  effective  date  of  such
registration statement;

                                (n) make available for inspection by one or more
representatives of the Participating  Holders, any underwriter  participating in
any disposition  pursuant to such  registration,  and any attorney or accountant
retained by such Participating  Holders or underwriter,  all financial and other
records,  pertinent corporate documents and properties of the Company, and cause
the  Company's  officers,  directors  and  employees  to supply all  information
reasonably requested by any such representatives, in connection with such; and

                                (o)  otherwise  use its best  efforts  to comply
with all applicable federal and state regulations; and take such other action as
may be reasonably  necessary to or advisable to enable each Participating Holder
and each underwriter to consummate the sale or disposition in such  jurisdiction
or jurisdictions  in which any such  Participating  Holder or underwriter  shall
have required that the Registrable Securities be sold.

Except as  otherwise  provided  herein,  the Company  shall have sole control in
connection with the preparation,  filing, withdrawal, amendment or supplementing
of  each  registration   statement  the  selection  of  underwriters,   and  the
distribution  of  any  preliminary   prospectus  included  in  the  registration
statement,  and may include  within the coverage  thereof  additional  shares of
Common Stock or other  securities  for its own account or for the account of one
or more of its  other  security  holders.  The  Company  may  require  that each
Participating Holder furnish in writing to the Company such information required
for the  distribution  of the  Common  Stock and such other  information  as may
otherwise be required by the Securities Act to be included in such  registration
statement.

                  5.7. Indemnification.

                                (a) The Company will indemnify,  defend and hold
harmless each Holder, each of its officers and directors and partners,  and each
person  controlling  such  Holder  within  the  meaning  of  Section  15 of  the
Securities Act, with respect to which registration has been effected pursuant to
this Agreement, against all expenses, claims, losses, damages or liabilities (or
actions  in  respect  thereof),  including  any of  the  foregoing  incurred  in
settlement of any litigation,  commenced or threatened,  arising out of or based
on any untrue  statement  (or  alleged  untrue  statement)  of a  material  fact
contained in any registration statement, prospectus,


                                       10
<PAGE>

offering  circular or other  document,  or any amendment or supplement  thereto,
incident  to any  such  registration,  or  based  on any  omission  (or  alleged
omission)  to state  therein a material  fact  required to be stated  therein or
necessary to make the statements therein, in light of the circumstances in which
they  were  made,  not  misleading,  or  any  violation  by the  Company  of the
Securities  Act,  the  Exchange  Act,  state  securities  laws  or any  rule  or
regulation  promulgated  under such laws applicable to the Company in connection
with any such  registration,  and the Company will  reimburse  each such Holder,
each of its officers and directors, and each person controlling such Holder, for
any legal and any other  expenses  reasonably  incurred,  as such  expenses  are
incurred,  in  connection  with  investigating,  preparing or defending any such
claim, loss, damage,  liability or action, provided that the Company will not be
liable in any such case (i) for amounts paid in settlement without the Company's
consent (which shall not be unreasonably  withheld),  or (ii) to the extent that
any such claim, loss, damage,  liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue  statement or omission,  made
in reliance upon and in  conformity  with written  information  furnished to the
Company by an instrument duly executed by such Holder or controlling person, and
stated to be specifically for use therein; provided, however, that the foregoing
indemnity  agreement is subject to the condition that,  insofar as it relates to
any such  untrue  statement,  alleged  untrue  statement,  omission  or  alleged
omission  made in a preliminary  prospectus  on file with the  Commission at the
time the  registration  statement  becomes  effective or the amended  prospectus
filed with the Commission pursuant to Rule 424(b) (the "FINAL PROSPECTUS"), such
indemnity  agreement shall not inure to the benefit of any Holder, if due to the
fault of such Holder a copy of the Final  Prospectus  was not  furnished  to the
person  asserting the loss,  liability,  claim or damage at or prior to the time
such action is required by the Securities Act, and if the Final Prospectus would
have cured the defect giving rise to the loss, liability, claim or damage.

                           (b) Each Holder will, if Registrable  Securities held
by such Holder are included in the securities as to which such  registration  is
being effected,  indemnify the Company, each of its directors and officers,  and
each person who  controls  the  Company  within the meaning of Section 15 of the
Securities Act, against all claims,  losses, damages and liabilities (or actions
in respect  thereof) arising out of or based on any untrue statement (or alleged
untrue  statement)  of a  material  fact  contained  in  any  such  registration
statement,  prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading,  or any violation by
the Holder of the Securities Act, the Exchange Act, state securities laws or any
rule or regulation  promulgated  under such laws  applicable to the Holder,  and
will  reimburse  the Company,  such other  Holders,  such  directors,  officers,
persons,  underwriters  or control  persons for any legal or any other  expenses
reasonably  incurred,   as  such  expenses  are  incurred,  in  connection  with
investigating or defending any such claim,  loss,  damage,  liability or action,
but in the case of the Company or the other Holders or their officers, directors
or  controlling  persons,  only to the extent  that such  untrue  statement  (or
alleged  untrue  statement)  or omission  (or alleged  omission) is made in such
registration  statement,  prospectus,  offering  circular  or other  document in
reliance upon and in  conformity  with  information  furnished to the Company by
such  Holder  in  writing  and  stated  to  be  specifically  for  use  therein.
Notwithstanding the foregoing,  (i) no indemnifying Holder will be liable in any
such case for amounts paid in  settlement  without such  Holder's  prior written
consent (which shall not be  unreasonably  withheld),  and (ii) the liability of
each Holder


                                       11
<PAGE>

under this  subsection  5.7(b)  shall be  limited to an amount  equal to the net
proceeds received by such Holder for the shares sold by such Holder, unless such
liability arises out of or is based on willful misconduct by such Holder.

                           (c) Each party entitled to indemnification under this
Section 5.7 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide   indemnification   (the  "INDEMNIFYING   PARTY")  promptly  after  such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought,  and shall  permit the  Indemnifying  Party to assume the defense of any
such claim or any litigation resulting therefrom,  provided that counsel for the
Indemnifying  Party,  who shall conduct the defense of such claim or litigation,
shall  be  approved  by  the   Indemnified   Party  (whose  approval  shall  not
unreasonably  be withheld),  and the  Indemnified  Party may participate in such
defense at such party's  expense,  and provided  further that the failure of any
Indemnified  Party to give  notice as  provided  herein  shall not  relieve  the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further,  that the Indemnifying  Party shall not
assume the  defense  for  matters as to which there is a conflict of interest or
there are separate and different defenses. No Indemnifying Party, in the defense
of any  such  claim or  litigation,  shall,  except  with  the  consent  of each
Indemnified Party (whose consent shall not be unreasonably withheld), consent to
entry of any judgment or enter into any settlement  which does not include as an
unconditional  term  thereof  the giving by the  claimant or  plaintiff  to such
Indemnified  Party of a release  from all  liability in respect to such claim or
litigation.

                           (d) In connection  with each  registration  statement
relating to the  disposition  of Registrable  Securities if the  indemnification
provided for in subsection (i) hereof is  unavailable  to an  Indemnified  Party
thereunder in respect to any losses,  claims, damages or liabilities referred to
therein,  then the Company shall in lieu of indemnifying such Indemnified Party,
contribute to the amount paid or payable by such  Indemnified  Party as a result
of such losses, claims, damages or liabilities.  The amount to be contributed by
the  Company  hereunder  shall be an amount  which is in the same  proportionate
relationship to the total amount of such losses,  claims, damages or liabilities
as the total net proceeds from the offering (before  deducting  expenses) of the
Registrable  Securities  bears  to the  total  price  to the  public  (including
underwriters'  discounts)  for  the  offering  of  securities  covered  by  such
registration.

                  5.8.   INFORMATION  BY  HOLDER.  The  Holders  of  Registrable
Securities  included in any registration shall furnish to the Company in writing
such information  regarding such Holder or Holders,  the Registrable  Securities
held by them and the  distribution  proposed  by such  Holder or  Holders as the
Company may request in writing and as shall be required in  connection  with any
registration referred to in this Agreement.

                  5.9. RULE 144 REPORTING.  With a view to making  available the
benefits of certain rules and  regulations  of the  Commission  which may at any
time  permit  the  sale  of the  Restricted  Securities  to the  public  without
registration,  after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use all reasonable efforts to:


                                       12
<PAGE>

                           (a) Make and keep public  information  available,  as
those  terms  are  understood  and  defined  in Rule 144  promulgated  under the
Securities  Act, at all times after the effective date that the Company  becomes
subject to the reporting requirements of the Securities Act or the Exchange Act;

                           (b) File with the  Commission  in a timely manner all
reports and other documents required of the Company under the Securities Act and
the  Exchange  Act (at any time  after it has become  subject to such  reporting
requirements); and

                           (c)  So  long  as  a  Holder   owns  any   Restricted
Securities,  to furnish to the Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of said Rule
144  promulgated  under the  Securities Act (at any time after 90 days after the
effective date of the first  registration  statement filed by the Company for an
offering of its  securities  to the general  public),  a copy of the most recent
annual or quarterly report of the Company,  and such other reports and documents
of the  Company  and  other  information  in  the  possession  of or  reasonably
obtainable  by the  Company  as the Holder may  reasonably  request in  availing
itself of any rule or regulation of the  Commission  allowing the Holder to sell
any such securities without registration.

                  5.10. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register  securities  granted Holders under Sections 5.1, 5.2 and 5.3
may be assigned to a transferee  or assignee in  connection  with any  permitted
transfer or assignment of  Registrable  Securities by the Purchaser  (and by any
other Holder) Holder  provided that: (i) such transfer is otherwise  effected in
accordance with applicable securities laws and the terms of this Agreement, (ii)
such  assignee or  transferee  acquires  (A) at least 25% (as adjusted for stock
splits,  stock  dividends,  stock  combinations and the like) of the Registrable
Securities,  or (B) all of the Registrable Securities owned by the Holder, (iii)
written notice is promptly given to the Company, and (iv) such transferee agrees
in writing to be bound by the provisions of this Agreement.  Notwithstanding the
foregoing,  the  rights to cause  the  Company  to  register  securities  may be
assigned without compliance with item (ii) above to (x) any constituent  partner
(or retired partner),  member or shareholder of a Holder which is a partnership,
limited  liability  company or  corporation,  or an  affiliate  (as such term is
defined in Rule 405 of the Securities Act) of such Holder or (y) a family member
or trust for the  benefit of a Holder who is an  individual,  or a trust for the
benefit of a family member of such a Holder or the Holder's estate.

                 5.11.  TERMINATION OF REGISTRATION  RIGHTS.  The rights granted
pursuant to Sections 5.1, 5.2 and 5.3 of this Agreement  shall  terminate on the
date  that is  three  years  after  the  effective  date of the  Company's  firm
commitment  initial public offering of shares of Common Stock or when Holder can
act under 144(k) in order to sell all of Holder's shares, if earlier.

                 5.12.  SUCCESSORS.  The  Company  shall not be sold to or merge
into another entity unless the entity  surviving the sale or merger shall assume
all of the Company's obligations under this Article 5.

        6. COVENANTS OF THE COMPANY; The Company hereby covenants and agrees, so
long as there is any remaining  balance owed to Purchaser  under the  Promissory
Note (except as


                                       13
<PAGE>

to 6.8 which  covenant will remain after the purchaser is paid in full under the
Promissory Note), as follows:

                  6.1. FINANCIAL INFORMATION.

                           (a) The Company will provide the following reports to
each Purchaser:

                                    (i) As soon as practicable  after the end of
the fiscal year ending December 31, 2000 and each fiscal year thereafter, and in
any event  within 90 days after the end of each such fiscal  year,  consolidated
balance  sheets of the  Company and its  subsidiaries,  if any, as of the end of
such fiscal year, and  consolidated  statements of operations  and  consolidated
statements  of cash  flows  and  stockholders'  equity  of the  Company  and its
subsidiaries,  if any,  for such year,  prepared in  accordance  with  generally
accepted  accounting  principles applied on a consistent basis and setting forth
in each case in comparative  form the figures for the previous  fiscal year, all
in reasonable detail and audited by independent  public  accountants of national
standing  selected by the  Company,  and a  capitalization  table in  reasonable
detail for such fiscal year; and

                                    (ii) As soon as practicable after the end of
each month and in any event within 30 days  thereafter,  a consolidated  balance
sheet of the Company and its subsidiaries,  if any, as of the end of each month,
and consolidated  statements of operations of the Company and its  subsidiaries,
if any,  for such  period and for the current  fiscal year to date,  prepared in
accordance   with  generally   accepted   accounting   principles   (other  than
accompanying notes) applied on a consistent basis,  subject to changes resulting
from  year-end  audit  adjustments,  in  reasonable  detail  and  signed  by the
principal  financial or accounting officer of the Company.

                                    (b) The Company  will  provide the following
reports to each Purchaser:

                                    (iii) Prior to the  beginning of each fiscal
year,  commencing with the fiscal year beginning  January 1, 2001, a budget on a
monthly  basis as adopted by the  Company's  Board of  Directors  for the fiscal
year; and

                                    (iv)   Promptly   after    transmission   or
occurrence,  and in any event within 10 days thereof, (A) copies of all material
written  communications  by the  Company to its  shareholders  or the  financial
community  generally,  to  its  accountants  and  business  consultants,  or  to
governmental agencies or authorities, (B) copies of reports filed by the Company
or, if the  report  relates  to the  Company,  by its  officers,  directors  and
representatives with the Commission or any stock exchange, and (C) notice of any
event which may  reasonably be expected to have a significant  material  adverse
effect on the  Company's  business  prospects  or  financial  condition  or such
Purchaser's investment in the Company.

                  6.2. PROMPT PAYMENT OF TAXES,  ETC. The Company will promptly
pay and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes,  assessments and governmental  charges and levies imposed upon the
income, profits,  property or business of the Company;  provided,  however, that
any such tax, assessment, charge or levy need


                                       14
<PAGE>

not be paid if the  validity  thereof  shall  be  contested  in  good  faith  by
appropriate  proceedings  and if the  Company  shall have set aside on its books
adequate reserves with respect thereto.

                  6.3.  MAINTENANCE OF PROPERTIES  AND LEASES.  The Company will
keep its properties in good repair, working order and condition, reasonable wear
and tear excepted;  and the Company will comply with the material  provisions of
all leases to which it is a party under which it occupies property if the breach
of any such  lease  would  have a  material  and  adverse  effect on  condition,
financial or otherwise, of the Company.

                  6.4. INSURANCE.  The Company will keep its assets which are of
an insurable  character  insured by  financially  sound and  reputable  insurers
against loss or damage by fire,  explosion and other risks  customarily  insured
against by companies  in the  Company's  line of business,  and the Company will
maintain, with financially sound and reputable insurers, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner customary for companies in similar businesses similarly situated.

                  6.5. KEY PERSON LIFE INSURANCE. The Company has as of the date
hereof or shall within 90 days of the date hereof use its best efforts to obtain
from financially sound and reputable insurers term life insurance on the life of
Peter  Upfold  in the  amount  of  $1,000,000.  The  Company  will  cause  to be
maintained such term life insurance until the Obligations are paid in full. Such
policies shall name the Company as loss payee and shall not be cancelable by the
Company without prior approval of the Board of Directors.

                  6.6. COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES.
The  Company  shall  duly  observe  and  conform  to all valid  requirements  of
governmental  authorities  relating  to the  conduct of its  business  or to its
assets or properties.

                  6.7.  MAINTENANCE  OF CORPORATE  EXISTENCE.  The Company shall
maintain in full force and effect its corporate existence, rights and franchises
and  all  licenses  and  rights  in  or to  the  licenses,  patents,  processes,
trademarks, trade names or copyrights owned or possessed by it and deemed by the
Company to be necessary to the conduct of its business.

                  6.8.   BOARD  OF   DIRECTORS.   The  Company  shall  take  all
appropriate  actions to fix and maintain a Board of  Directors of five  persons,
unless the Board shall otherwise determine.  The Purchaser, if he desires, shall
be a member of the Board of Directors.

                  6.9.  TRANSACTIONS  WITH  AFFILIATES.  The Company  shall not,
without the approval of the Purchaser, engage in any loans, leases, contracts or
other transactions with any director, officer or key employee of the Company, or
any member of such person's  immediate  family, on terms less favorable than the
Company would obtain in a transaction with an unrelated party, determined by the
Board of Directors.

                  6.10. USE OF PROCEEDS. The Company shall use the proceeds that
it  receives  under this  Agreement  substantially  as  indicated  on the budget
attached hereto (Exhibit D) except with the prior written consent of Purchaser.


                                       15
<PAGE>

                  6.11.  LIMITATION ON ISSUANCES OF ADDITIONAL  SHARES.  Without
the prior written  consent of the  Purchaser,  the Company will not authorize or
issue any shares of its capital stock.

                  6.12.  LIMITATION ON DIVIDENDS AND DISTRIBUTIONS.  Without the
prior written consent of the Purchaser,  the Company will not (a) declare or pay
any dividends (cash or otherwise) on its Common Stock, (b) otherwise declare any
other  type of  distributions,  or (c)  repurchase  or redeem  any shares of its
stock.

                  6.13. RESTRICTIONS OF LOANS. Until the Obligations are paid in
full, without the prior written consent of the Purchaser,  the Company shall not
(a) make or permit any direct or indirect  subsidiary  to make loans or advances
of funds whatsoever,  even to a wholly-owned subsidiary of the Company, (b) make
loans or advances of funds to any employee,  or (c) take or permit any direct or
indirect subsidiary to take any loans whatsoever.

                  6.14.  LIMITATIONS OF GUARANTEES.  Without the written consent
of the  Purchaser,  the  Company  shall not,  and shall not permit any direct or
indirect  subsidiary to, guarantee the indebtedness of another person or entity,
other than guaranties of the indebtedness of the Company or a direct or indirect
subsidiary  of the  Company,  if such  indebtedness  is incurred in the ordinary
course of such subsidiary's business.

                  6.15. LIMITATION ON MERGER, SALE OF ASSETS.  Without the prior
written  consent of the  Purchaser,  the Company shall not merge,  and shall not
permit any direct or indirect  subsidiary to, merge or consolidate  with or into
another entity or sell (or permit any direct or indirect subsidiary to sell) any
of its  assets,  including  but not  limited to its  technology,  outside of the
ordinary course of business.

                  6.16.  LIMITATION ON  INVESTMENTS.  Until the  Obligations are
paid in full,  without the written  consent of the Purchaser,  the Company shall
not own or permit  any  direct or  indirect  subsidiary,  to own any part of any
third party.

                  6.17. LIMITATION ON LIENS, MANAGEMENT COMPENSATION AND CAPITAL
EXPENDITURES. Without the Puchaser's written approval, the Company shall not:

                           (a) Mortgage, pledge, or grant a security interest in
any of the assets of the Company,  including but not limited to its  technology,
nor permit any subsidiary to do the same in respect of any of its assets; or

                           (b)  Increase   compensation  to  management  of  the
Company  above the levels of  compensation  as they existed prior to the time of
execution  hereof  and as  represented  by the  Company to  Purchaser  (it being
acknowledged  by  Purchaser  that  Purchaser  will  consider  in good  faith any
reasonable request and any resulting approval,  if given, may be made orally for
purposes of this subparagraph 6.17(b) only); or

                           (c) Make any capital  expenditures in excess of those
identified  in  the  Company's  budget  attached  hereto  and  submitted  to the
Purchaser.


                                       16
<PAGE>

                  6.18.  TRANSFER  OF RIGHTS.  The rights  granted  pursuant  to
Section  6.1(a)  and  (b)  may be  assigned  to any  transferee,  other  than a
competitor or potential  competitor of the Company (as reasonably  determined by
the Company's Board of Directors) so long as such transferee  agrees in writing,
acknowledges  and agrees  that  certain  information  obtained  pursuant to this
Section 6 may be  considered  nonpublic  information  and will be  maintained in
confidence  by such  Purchaser  or  transferee  and will not be utilized by such
Purchaser or transferee in connection  with  purchases or sales of the Company's
securities  except in compliance  with applicable  state and Federal  securities
laws.

         7.       CO-SALE RIGHTS.

                           (a)  Generally.  Except  as set out in  Section  7(c)
hereof,  in the event that a major or  significant  shareholder  receives a bona
fide offer from any person or entity to purchase  any of his or her Stock,  such
shareholder  (the  "SELLING  SHAREHOLDER")  shall  give  notice  (the  "TRANSFER
NOTICE") to the Purchasers (the "OFFEREE  HOLDERS") of his intention to transfer
such  shares,  describing  the number of shares of  Significant  Holders'  Stock
proposed to be  transferred  (the "OFFERED  SHARES"),  the  percentage  that the
Offered Shares are of all such  Significant  Holders' Stock before giving effect
to  the  transfer   contemplated  by  the  Transfer   Notice  (the   "APPLICABLE
PERCENTAGE"),  the identity of the proposed transferee (the "Buyer"),  the price
and terms upon which he proposes to make such transfer,  the aggregate number of
shares  of  Conversion  Stock  then  held or  issuable  upon  conversion  of all
outstanding  shares  of  Preferred  Stock  held  by all  Offeree  Holders  (such
aggregate number is herein referred to as the "HOLDERS' SHARES"), and the number
of Eligible Shares.  As used herein,  "ELIGIBLE SHARES" means the product of (x)
the number of Holders' Shares multiplied by (y) the Applicable  Percentage.  The
Selling  Shareholder  shall advise the Buyer of the co-sale  rights  provided by
this  Section  7, and  inquire  of the Buyer  whether  the Buyer is  willing  to
purchase  a number of shares  equal to the sum of the  Offered  Shares  plus the
Eligible Shares, and shall advise the Offeree Holders of the Buyer's response in
the Transfer Notice.

                                Subject to the provisions of this Section 7, the
Selling Shareholder shall have the right to sell Offered Shares to the Buyer and
the Offeree Holders (as a group) shall have the right to sell Eligible Shares to
the Buyer,  each in the ratio that the aggregate number of Holders' Shares bears
to all such  Significant  Holders' Stock (in each case as determined at the date
of the Transfer Notice), until all shares which the Buyer is willing to purchase
have been purchased from the Holders' Shares and the Eligible  Shares  according
to the  foregoing  ratio.  By way of example,  if the Selling  Shareholder  owns
60,000 shares of Significant Holders' Stock and the number of Eligible Shares is
48,000, the aforementioned  ratio would be 6.0 to 4.8. If the Buyer were willing
to purchase 20,000 shares, the Selling  Shareholder would have the right to sell
6.0 shares of Significant  Holders' Stock for every 4.8 Eligible Shares that the
Offeree  Holders  (as a group)  have the right to sell,  until a total of 20,000
shares are  allocated  to the Buyer as between the Selling  Shareholder  and the
Offeree  Holders (as a group).  If any Offeree  Holder elects not to sell any or
all of the  Holders'  Shares  that  such  Offeree  Holder  has the right to sell
hereunder,  the other Offeree  Holders who elect to sell shall have the right to
sell such  additional  number of Holders'  Shares as may be required to sell the
full number of Eligible  Shares  stated in the Transfer  Note.  Such  additional
Holders' Shares may be sold by each of such other Offeree


                                       17
<PAGE>

Holders in accordance with their pro rata share (hereinafter defined).

                                    Within  fifteen (15) days after  delivery of
the Transfer  Notice,  each Offeree Holder may elect to sell up to such person's
pro rata share (as defined  herein) of the  Eligible  Shares to be  allocated as
described  above.  An Offeree  Holder shall make such election to sell by giving
written  notice  thereof  to the  Significant  Holder and the  Secretary  of the
Company.  Prior to the sale to the Buyer,  each  electing  Offeree  Holder shall
tender to the Secretary of the Company a certificate  representing the shares to
be sold, properly endorsed for transfer,  with written  instructions to transfer
the shares to the  transferee  described in the Transfer  Notice upon receipt of
payment  for such shares from such  transferee  for the benefit of such  Offeree
Holder. The Selling  Shareholder shall instruct the Buyer to deliver payment for
the shares to be purchased by such  transferee  to the Secretary of the Company,
who shall  transmit  such  payment to the  Selling  Shareholder  and the Offeree
Holders in payment  for the shares  sold by each.  For the purpose of the rights
set forth in this Section 7(a),  the "pro rata share" of an Offeree Holder shall
be equal to the  quotient  obtained  when the number of Holders'  Shares held by
such  Offeree  Holder is divided by the number of  Holders'  Shares  held by all
Offeree Holders at the date of the Transfer Notice.

                           (b) Sale After Notice.  To the extent the  Purchasers
decline to exercise the co-sale  right as allowed by this  Section,  the Selling
Shareholder may, within ninety (90) days after the date on which the Purchasers'
co-sale rights lapsed,  transfer some or all of the  Significant  Holders' Stock
which were the  subject of the  Transfer  Notice at a price and on terms no less
favorable to the transferees than specified in the Transfer Notice.  Significant
Holders' Stock  transferred in accordance  with the provisions of this Section 7
shall no longer be subject to the restrictions on Significant Holders' Stock set
forth in this  Section 7. After the  expiration  of said ninety (90) day period,
the Selling Shareholder shall not transfer any of his Significant Holders' Stock
without first complying with the provisions of Section 7(a).

                           (c) Exempt  Transfers.  Any  transfer of  Significant
Holders'  Stock  without  consideration  to a family  member of the  Significant
Holder or a trust or custodian  for the benefit of the  Significant  Holder or a
family member of the  Significant  Holder shall not be subject to the provisions
of this Section 7, provided that the transferee agrees in writing to be bound by
the provisions of this Section 7 with respect to any subsequent transfer of such
shares.

                           (d)  Transferability.  The rights  granted under this
Section  7 may not be  assigned  except  for  (i) a  transaction  involving  the
distribution without consideration of shares of Common Stock held by a Purchaser
to its constituent  partners (or retired  partners),  members or shareholders in
proportion  to their  ownership  interests in such holder or (ii) in  connection
with a transfer of Preferred  Stock and  Conversion  Stock by the holder whereby
such transferee acquires all of such securities held by the Purchaser.

                           (e)   Termination.   The  rights  of  the  Purchasers
pursuant to this Section 7 shall not apply to any offering of capital stock made
pursuant to a  registration  statement and shall  terminate and be of no further
force or effect upon the closing of the Company's initial public offering of its
Common Stock  pursuant to a  registration  statement  declared  effective by the
Commission.


                                       18
<PAGE>

                            (f)    Restrictive    Legend.    Each    certificate
representing the stock subject to this co-sale  restriction  shall be stamped or
otherwise  imprinted  with a legend  in  substantially  the  following  form (in
addition to any legends  required by agreement or by applicable state securities
laws):

         TRANSFER  OF THE SHARES  REPRESENTED  BY THIS  CERTIFICATE  IS
         SUBJECT  TO  CERTAIN  CO-SALE   PROVISIONS  SET  FORTH  IN  AN
         AGREEMENT  BETWEEN THE HOLDER,  THE ISSUER,  AND CERTAIN OTHER
         HOLDERS  OF  STOCK  OF THE  ISSUER,  A COPY  OF  WHICH  MAY BE
         OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.

         8. BOARD OF  DIRECTORS.  Each  Significant  Holder  and each  Purchaser
hereby  agrees to vote his shares of the Company's  voting  securities in such a
manner as to effect  election as members of the Company's  board of directors as
provided for in Section 6.8 hereof.

         9. RIGHT TO PARTICIPATE IN FUTURE OFFERINGS.

         The Company hereby grants the Purchaser the right to participate in all
future offerings by the Company of its equity securities  (including  securities
which by their terms are convertible or exchangeable for such equity  securities
(hereinafter called "Derivative Securities")),  and the Purchaser shall have the
right in connection with any such offering to purchase,  for his own account and
on such terms and conditions as are made  available to other  purchasers of such
equity securities,  such number of shares (assuming full conversion and exchange
of  all  outstanding  Derivative  Securities)  as is  necessary  to  enable  the
Purchaser  to own 6.17% (or the  Appropriate  Percentage  if  greater as defined
below) of the outstanding equity of the Company on any date of determination, on
a fully diluted basis.

         Appropriate Percentage is defined as the percentage ownership Purchaser
has just prior to any such future  offerings.  By way of explanation,  the 6.17%
represents  Purchasers $250,000 investment compared to the total invested amount
after giving  effect to the  contemplated  $4.0  Million next round  investment.
Should the next round  contemplated  investment bring in less than $4.0 Million,
the  Appropriate  Percentage  would  be the  greater  number  as  calculated  by
Purchaser's  investment  ($250,000)  divided by the total amount invested in the
company after said next round. Purchaser's right to participate in each offering
after the contemplated  one mentioned would be to the extent enabling  Purchaser
to own the Appropriate  Percentage of the Company (as may be  recalculated  each
time there is a new financing). Should the initial contemplated investment bring
more than $4.0 Million,  Purchaser's  percentage  ownership would necessarily be
less but Purchaser's  lowest limit for purposes under this section 9 at any time
is set at 6.17%. Purchaser's right hereunder would not cease in future offerings
if Purchaser elected not to participate in any prior offerings.  Notwithstanding
the  foregoing,   Purchaser's   continuing  right  under  this  Section  9  will
immediately cease after the completion of an initial public offering.


                                       19
<PAGE>

         10.  AMENDMENT.  Except as otherwise  provided above,  any provision of
this  Agreement may be amended or the  observance  thereof may be waived (either
generally   or  in  a   particular   instance   and  either   retroactively   or
prospectively), only with the written consent of the.

         11.  GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of California  without regard to conflict of laws
provisions.

         12. ENTIRE  AGREEMENT.  This Agreement  constitutes the full and entire
understanding  and Agreement  among the parties  regarding the matters set forth
herein.  Except as otherwise  expressly  provided herein,  the provisions hereof
shall  inure to the  benefit of, and be binding  upon the  successors,  assigns,
heirs, executors and administrators of the parties hereto.

         13.  NOTICES,  ETC.  All notices and other  communications  required or
permitted  hereunder  shall be in writing and shall be mailed by  registered  or
certified  mail,   postage   prepaid,   or  otherwise   delivered  by  facsimile
transmission, by hand or by messenger, addressed:

                           (a) if to the Purchaser,  at  Purchaser's  address as
set forth in  Exhibit  A, or at such  other  address  as  Purchaser  shall  have
furnished to the Company with copies to:

                                Bryan Cave LLP
                                Two North Central Avenue, Suite 2200
                                Phoenix, Arizona 85004-4406
                                Attn: Joseph P. Richardson
                                Fax: (602) 364-7070

                                And to

                                Lawrence Smith
                                30872 Driftwood Dr.
                                Laguna Beach, CA 92651

                           (b) if to the  Company,  to the  address as listed in
the  opening  paragraph  or at such  other  address  as the  Company  shall have
furnished to the Holders, with a copy to:

                                Aaron Grunfeld
                                Resch, Polster, Alpert & Berger, LLP
                                10390 Santa Monica Boulevard, Fourth Floor
                                Los Angeles, CA 90025-5058

                 Each such notice or other  communication shall for all purposes
of this Agreement be treated as effective or having been given when delivered if
delivered  personally,  if sent by facsimile,  the first  business day after the
date of confirmation that the facsimile has been successfully transmitted to the
facsimile number for the party notified,  or, if sent by mail, at the earlier of
its  receipt  or 72 hours  after  the same has  been  deposited  in a  regularly
maintained  receptacle for the deposit of the United States mail,  addressed and
mailed as aforesaid.


                                       20
<PAGE>

         14.  SUCCESSORS AND ASSIGNS.  This Agreement  shall be binding upon and
inure to the benefit of the parties hereto and their  respective  successors and
assigns.

         15.  COUNTERPARTS.  This  Agreement  may be  executed  in any number of
counterparts,  each of which  shall be an  original,  but all of which  together
shall constitute one instrument.

         16. EFFECTIVE DATE. This Agreement shall be effective upon execution by
both parties ("EFFECTIVE DATE").


                                       21
<PAGE>

        IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as
of the date first set forth above.

"THE COMPANY"

STATMON TECHNOLOGIES CORP.,
a Delaware corporation


By: /s/ Geoffrey P. Talbot
    -------------------------------
    Geoffrey P. Talbot, President


"SIGNIFICANT HOLDERS"


By: /s/ Peter J. Upfold
    -------------------------------


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


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


  [Counterpart signature page to Statmon Technologies Corp. Note Purchase and
                         Shareholder Rights Agreement]


                                       22
<PAGE>


"THE PURCHASER"

/s/ John Hoff
-----------------------------------
John Hoff



  [Counterpart Signature page to Statmon Technologies Corp. Note Purchase and
                         Shareholder Rights Agreement]


                                       23
<PAGE>

                                    EXHIBIT A

    (To the Statmon Technologies Corp. Note Purchase and Shareholder Rights
                                   Agreement)


                               SCHEDULE OF HOLDERS


"THE SIGNIFICANT HOLDERS"                                 SHARES OF COMMON STOCK
-------------------------                                 ----------------------
Peter J. Upfold                                                  1,200,000
Geoffrey P. Talbot                                                 800,000



"THE PURCHASER"

NAME AND ADDRESS                  PHONE               FAX          $ COMMITMENT
----------------               ------------      -------------     ------------
John Hoff                      310-450-4825                          $250,000
2408 32nd St.
Santa Monica, CA 90405

<PAGE>

                                    EXHIBIT B

    (To the Statmon Technologies Corp. Note Purchase and Shareholder Rights
                                   Agreement)


                                 PROMISSORY NOTE


                                       2
<PAGE>

                      PROMISSORY NOTE DUE SEPTEMBER 8, 2001
                    OR SUCH ACCELERATED DUE DATE AS PROVIDED
                            FOR IN SECTION 1 HEREIN.

Amount - $250,000                                        Date: September 8, 2000

Statmon  Technologies  Corp.,  a Delaware  Corporation  (hereinafter  called the
"Company"),  for value received,  hereby promises to pay to John Hoff, 2408 32nd
Street,  Santa Monica, CA 90405 or registered assigns (the "Payee" or "Holder"),
on the 8th day of September,  2001 (the "Due Date") or such accelerated due date
as described in Section 1 hereof,  the principal amount of two hundred and fifty
thousand  ($250,000)  dollars,  plus interest at 10% per annum  (computed on the
basis of a 360-day year  comprised of 12 thirty day months) from the date hereof
through the Due Date (or through  Accelerated  Due Date if payment is  triggered
pursuant to Paragraph 1 below).  Interest  will continue to accrue if payment is
not timely made in  accordance  with the terms of this Note.  The  principal and
interest hereof is payable by wire transfer  pursuant to wire instructions to be
provided  by Payee to  Company,  in  lawful  currency  of the  United  States of
America.

    1.  ACCELERATED DUE DATE; MANDATORY  PRE-PAYMENT.  Anything contained herein
        to the contrary notwithstanding,  the full principal amount of this Note
        and any accrued but unpaid  interest  shall become due and payable prior
        to the Due Date otherwise  provided for herein,  and shall be and become
        due and payable on a date (the "Accelerated Due Date") which is ten (10)
        days  following the closing of any  transaction  involving the Company's
        issuance of equity or debt securities or any  collateralized  borrowings
        in which the Company shall have received,  prior to the Due Date,  gross
        proceeds of not less than $750,000 (the "Financing Transaction").

    2.  RESTRICTIONS  ON TRANSFER.  This Note may not be transferred or assigned
        unless  a  Registration   Statement  with  respect   thereto  under  the
        Securities  Act of  1933,  as  amended  (the  "Act"),  is at the time in
        effect,  or transfer or assignment is in accordance with and pursuant to
        an  exemption  from  the  registration  requirements  of the Act and the
        transfer or assignment is in compliance with state securities laws.

    3.  BINDING  EFFECT.  The Company  agrees that the  provisions  of this Note
        shall  bind and shall  inure to the  benefit of the  parties  hereto and
        their successors and assigns.  Company agrees that the rights granted to
        the Holder  pursuant to this Note shall  accrue to any  endorsee of this
        Note who is lawfully in possession of this Note.

    4.  AMENDMENT  AND  WAIVER.  The terms of this Note may not be  modified  or
        amended unless such  modification  or amendment is in writing and signed
        by the  Holder. No  delay  or  omission  on the  part of the  Holder  in
        exercising  any right or remedy to enforce this Note shall  operate as a
        waiver of such right or remedy  under this Note.  No waiver by Holder of
        any right or remedy  shall be  effective  unless in  writing  and signed
        by the  Holder,  and no such  waiver  on one or more  occasions shall be
        construed  as a waiver on any other  occasion.  The  Company  waives any
        right it has to a jury trial and waives presentment,  notice and protest
        and all other  demands  and  notices in  connection  with the  delivery,
        acceptance, performance, default or

                                     1 of 2


<PAGE>

        enforcement  of this  Note and  agrees to any  extension  of the time of
        payment or other indulgence  permitted by the Holder and to the addition
        or release of any other party or person primarily or secondarily  liable
        for the payment of this Note.

    5.  INTEREST.  Ten percent  (10%) APR as stated above and payable in full at
        time of repayment. Interest on any amount not paid which due will accrue
        interest  at the rate of 15% per annum,  from the date due  through  the
        date of payment.

    6.  COMMUNICATIONS.  All  notices  and  other  communications  provided  for
        hereunder  or under the Notes  shall be in  writing,  and, if to Holder,
        shall be delivered or mailed by certified  mail addressed to you at your
        address as shown above or as you may otherwise  designate to the Company
        in writing  and,  if to the  Company,  shall be  delivered  or mailed by
        certified  mail to the Company at 114 N. Doheny  Drive,  Suite 201,  Los
        Angeles,  CA 99048 or to such other address as the Company may designate
        to Holder in  writing.  Alt such  notices  shall be  deemed  given  when
        received.

    7.  COSTS AND  RIGHTS.  The  Company  promises  to pay the  Holder all costs
        (including  but not  limited to  reasonable  attorneys'  fees and costs)
        incurred  by the  Holder  of this Note in  collecting  any  amounts  due
        hereunder,  whether or not  litigation is commenced.  The Company agrees
        that the  Holder  shall  have the rights  and  remedies  available  to a
        creditors  under,  and that this Note shall be construed  in  accordance
        with,  the laws of the  State of  California  without  reference  to the
        choice of law principles thereof.

    8.  CALIFORNIA  LAW AND  JURISDICTION.  This  Note  shall  be  construed  in
        accordance  with and  governed  by the laws of the  State of  California
        without  regard to principles of conflicts of law. The Company  consents
        to the personal  jurisdiction  of the state or federal courts located in
        Los Angeles, California for proceedings in respect of this Note.

    9.  HEADINGS.  The  headings of the  sections of this Note are  inserted for
        convenience only and do not affect the meaning of such section.

IN WITNESS WHEREOF, STATMON TECHNOLOGIES CORP. has caused this Note to be signed
in its corporate name by a duly authorized  officer and to be dated the date and
year first above written.


STATMON TECHNOLOGIES CORP.


/s/ Geoffrey P. Talbot
----------------------------
Geoffrey P. Talbot
Chief Executive Officer


                                     2 of 2


<PAGE>

                                    EXHIBIT C

    (To the Statmon Technologies Corp. Note Purchase and Shareholder Rights
                                   Agreement)


                       TRADEMARK/PATENT SECURITY AGREEMENT


                                        3
<PAGE>


                          TRADEMARK SECURITY AGREEMENT

         THIS  AGREEMENT  ("Agreement")  is made this 3rd day of November,  2000
between Statmon  Technologies Corp., a Delaware Corporation having its principal
place of business at 114 North Doheny  Drive,  Suite 201, Los Angeles,  CA 90048
(the  "Company"),  and John Hoff, 2408 32nd St., Santa Monica CA 90405 (together
with his successors and assigns, "Lender").

                                   WITNESSETH

         WHEREAS,  the Company desires to obtain loans from Lender pursuant to a
Note Purchase and Shareholder Rights Agreement and Promissory Note dated of even
date herewith,  by and between the Company and Lender (hereinafter  referred to,
together with all riders,  exhibits,  schedules and amendments  thereto,  as the
"Note Purchase Agreement"); and

         WHEREAS, Lender is willing to make loans to the Company as specified in
the Note Agreement, provided the Company executes this Agreement;

         NOW, THEREFORE, in consideration of moneys lent under the Note Purchase
Agreement,  other valuable consideration including the promises made in the Note
Purchase  Agreement,  and Ten Dollars  ($10.00),  the receipt and sufficiency of
which is acknowledged by the Company, the Company agrees with Lender as follows:

         1. Unless otherwise  defined herein,  all capitalized terms used herein
shall have the meanings ascribed to them in the Note Purchase Agreement.

         2. To secure the  payment of all amounts  owed under the Note  Purchase
Agreement  (such amounts owed  hereinafter  referred to as  "Obligations"),  the
Company hereby grants to Lender a continuing  security interest in and lien upon
all of the right,  title and interest of the Company in the following  property,
whether  now  owned  or  existing  or  hereafter  acquired  (collectively,   the
"Collateral");

                  a. all trademarks,  trade names, trademark registrations,  and
trademark applications,  and all renewals thereof,  patents, patent applications
and patent  registrations and copyrights,  copyright  applications and copyright
registrations,  including,  without  limitation,  all those listed on Schedule A
attached  hereto and made a part hereof (as the same may be amended from time to
time),  together  with all such  named  items  which are  hereafter  adopted  or
acquired by the Company,  including without limitation all New Marks (as defined
below),  as well as the goodwill of the Company's  business  connected  with and
symbolized by such named items and all rights  corresponding  thereto throughout
the world (hereinafter collectively referred to as the "Marks");

                  b.  all  income,  royalties,  damages,  and  payments  now  or
hereafter  due  or  payable  with  respect  to  the  Marks,  including,  without
limitation, damages and payments for past or future infringements thereof; and

                  c. all Proceeds of the  foregoing.  "Proceeds"  shall have the
meaning assigned to it under Section 9-306 of the Code (as defined below).

<PAGE>

         3. The Company represents and warrants to Lender that:

                  a.  each  of the  registrations  for the  Marks  as  shown  on
Schedule A is subsisting and has not been adjudged invalid or unenforceable.

                  b. upon filing of this  Agreement in the United  States Patent
and  Trademark  office   (hereinafter   "USPTO")  against  each  U.S.  Trademark
registration  and  pending  application,  and  the  filing  of  UCC-1  Financing
Statement in compliance  with the Uniform  Commercial Code ("Code") as in effect
in the  State(s) of  California  covering all general  intangibles  now owned or
hereafter  acquired by the Company,  Lender will have legal, valid and perfected
lien upon and security  interest in the Collateral (other than foreign trademark
registrations and trademark  applications),  enforceable against the Company and
all third persons in accordance with its terms;

                  c. the  Company  is not aware of any claim that the use of any
of the Marks does or may violate the rights of any third person; and

                  d. the Company  has the  unqualified right to enter into this
Agreement and to perform its terms.

         4.  The  Term of this  Agreement  will be from  the  date of  execution
through the date the Obligations are paid in full to Lender by Company  pursuant
to the Note Purchase  Agreement,  dated of even date herewith,  (the "Term"), at
which time the rights  granted  herein will lapse and Lender will cooperate with
Company in  releasing  Lender's  security  interests in the Marks by signing and
delivering  any document or taking any act  necessary to effect the intention of
this Agreement (all at Company expense).

         5. The Company covenants and agrees with Lender that:

                  a. The Company owns all beneficial and ownership rights, title
and  interest  in and to all of the  Marks,  including  without  limitation  all
applications and registrations listed on Schedule A, and the rights conferred by
those applications and registrations.

                  b.  Except  for the  interests  of  licenses  under  Permitted
Licenses (as hereinafter  defined),  the Company is and will remain the sole and
exclusive  owner,  of  the  entire  right,  title  and  interest  in  and to the
Collateral,  and will keep the same,  unless with the prior  written  consent of
Lender, free and clear of any liens,  charges,  claims, rights and encumbrances,
including, without limitation,  pledges, assignments,  licenses, registered user
agreements and covenants by the Company not to sue third persons;

                  c. The  Company  will  maintain  the  quality of the  products
associated  with the Marks,  at a level at least  consistent with or better than
the quality at the time of this  Agreement,  and will provide Lender at Lender's
request  quarterly with a certificate to that effect,  executed by an officer of
the Company;
                  d. The  Company  will not lower the  quality  of the  products
associated with the Marks without Lender's prior written consent;

                  e. The  Company  has used,  and will  continue  to use for the
duration of this Agreement, required statutory notice in connection with its use
of the Marks; and


                                       7
<PAGE>

                 f. The  Company  shall not  abandon  any of the  Marks  without
Lender's prior written consent,  including,  without  limitation,  by failure to
file an affidavit of use with the USPTO during the sixth year of a United States
registration as required by law.  Company will not do any act, or omit to do any
act, whereby the Marks or any registration or application  appurtenant  thereto,
may become abandoned,  invalidated,  unenforceable,  avoided, avoidable, or will
otherwise  diminish in value, and shall notify Lender immediately if it knows of
any  reason or has  reason to know of any ground  under  which  this  result may
occur.  The  Company  shall take  appropriate  action at its expense to halt any
known material infringement of the Marks and shall properly exercise its duty to
properly control its licensees in connection with any Permitted Licenses.

         6. The  Company  hereby  grants to Lender and  Lender's  employees  and
agents,  the right to visit upon  reasonable  advance  notice (which in no event
will  exceed  two  business  days) the  Company's  plants and  facilities  which
manufacture,  inspect  or store  products  sold  under  any of the  Marks and to
inspect the products and quality control records  relating thereto at reasonable
times  during  regular  business  hours  provided  that no more than four Lender
representatives  may be present  during any  The  Company  shall do any and all
acts  reasonably  required  by Lender to ensure the  Company's  compliance  with
paragraph 5(c) of this Agreement.

         7. Through the end of the Term as defined above,  the Company shall not
sell the Marks,  grant or assign any  security  or other  interest in any of the
Marks,  or enter into any  license  agreement  with  respect to any of the Marks
other than Permitted  Licenses unless the proceeds  thereof are used in whole or
in part to pay in full the  Obligations.  As used  herein,  the term  "Permitted
Licenses"  shall mean and include such  licenses as the company shall enter into
which are on a  commercially  reasonable  and an arms  length  basis  subject to
Lender's  security  interest or which Lender may hereafter approve in writing in
its sole  discretion.  The Company  shall give to Lender  written  notice within
fifteen (15) days of the Company's entering into a Permitted License,  the Marks
to be the  subject of such  license,  and the terms of such  license,  and shall
provide Lender with a copy of the duly executed license agreement promptly after
execution thereof by the Company and the licensee.

         8. If,  before the end of the Term,  the Company shall obtain rights to
any new trademarks,  trade names, copyrights,  or patents or any applications or
registrations thereto,  whether registered or at common law, or become the owner
of or  entitled  to  the  benefit  of  any  such  applications  or  registration
(collectively,  the "New  Marks"),  the  provisions  of paragraph 2 hereof shall
automatically  apply to such New Marks and such New  Marks  shall  automatically
become included in the definition of Marks. The Company shall give Lender prompt
notice of any  application  to register any New Mark, or the  acquisition of any
registration for any New Mark in the United States or worldwide, in writing, but
in no event  later than sixty (60) days after the filing of the  application  or
the acquisition of the registration of such New Mark; and shall periodically

<PAGE>

update  Schedule A and provide a copy to the Lender of any  applications  or for
registration of New Marks in the United States or elsewhere in the world.

         9. The Company  authorizes  Lender to modify this Agreement by amending
Schedule A to include any future trademarks and trademark applications which are
or become Marks under Paragraph 2 or Paragraph 8 hereof.

         10. The Company  agrees to execute  and deliver to Lender such  further
papers and to do such other acts as may be  reasonably  necessary  and proper to
accomplish the purposes of this  Agreement,  including  without  limitation,  in
order to perfect or continue the perfection of Lender's security interest in all
of the  Collateral.  At any time and from time to time, upon the written request
of Lender,  Company will promptly and duly, execute and deliver any and all such
further  instruments  and documents  and take such further  action as Lender may
reasonably  deem  desirable in obtaining the full benefits of this Agreement and
of the rights and powers herein  granted,  including,  without  limitation,  the
filing of any financing or continuation  statements  under the Code with respect
to the  liens  and  security  interests  granted  hereby.  Company  also  hereby
authorizes  Lender to file any such financing or continuation  statement without
the signature of the Company to the extent  permitted by applicable  law. If any
amount  payable under or in connection  with any of the  Collateral  shall be or
become  evidenced  by any  promissory  note or other  instrument,  such  note or
instrument  shall be promptly  pledged to Lender  hereunder,  duly endorsed in a
manner reasonably satisfactory to Lender.

          11. Upon or after the occurrence of an Event of Default,  Lender shall
have,  in addition to all other rights and remedies  given it by this  Agreement
and the Note Purchase  Agreement,  all rights and remedies under  applicable law
and all rights and remedies of a secured party under the Uniform Commercial Code
as adopted and then in force in the State of  California.  Without  limiting the
generality of the foregoing,  Lender may immediately,  without notice or demand,
each of which the Company hereby waives,  collect  directly any payments due the
Company in respect of the Collateral,  including without limitation the right of
the Lender under any Permitted Licenses,  to file any claim or to take any other
action  or  proceeding  in any  court  of  law or  equity  or  otherwise  deemed
appropriate  by Lender for the purpose of collecting any and all such moneys due
under any Permitted License, whenever payable. Additionally, the Lender pursuant
to the Code may sell at public or private sale or otherwise realize from time to
time upon all or any of the  Collateral.  Upon the occurrence and continuance of
an Event of Default the Lender may also (A)  commence and  prosecute  any suits,
actions  or  proceedings  at  law  or  in  equity  in  any  court  of  competent
jurisdiction  to collect the  Collateral  or any part thereof and to enforce any
other  right in  respect  of any  Collateral;  (B)  defend  any suit,  action or
proceeding described above and, in connection therewith, to give such discharges
or releases as Lender may deem appropriate; and (D) generally to sell, transfer,
pledge,  make any  agreement  with respect to or otherwise  deal with any of the
Collateral  as fully and  completely  as though  Lender were the absolute  owner
thereof  for all  purposes,  and to do, at  Lender's  option all acts and things
which Lender deems reasonable and necessary to protect, preserve or realize upon
the Collateral and Lender's

<PAGE>

security interest therein, in order to effect the intent of this Agreement,  all
as fully and  effectively  as Company  might do. The Company  hereby agrees that
fifteen (15) days written notice to the Company of any public or private sale or
other disposition of any of the Collateral shall be reasonable notice; provided,
however, that no notice shall be required hereunder if not otherwise required by
applicable  law.  At any such  sale or  disposition,  Lender  may to the  extent
permitted by law,  purchase the whole or any part of the Collateral  sold,  free
from any right of redemption on the part of the Company, which right the Company
hereby waives and releases.  After  deducting  from the proceeds of such sale or
other  disposition of the Collateral all reasonable costs and expenses  incurred
by Lender in enforcing its rights hereunder (including,  without limitation, all
brokers'  fees,  auctioneers'  fees  and  reasonable  attorneys'  fees  actually
incurred),  Lender shall apply the remainder of such proceeds to the Obligations
in such order and manner as Lender in its sole  discretion  may  determine.  All
payments  received by Company under or in connection  with any of the Collateral
shall be held by Company in trust for  Lender,  shall be  segregated  from other
funds of Company and shall forthwith upon receipt by Company,  be turned over to
Lender,  in the same form as  received by Company  (duly  indorsed by Company to
Lender,  if  required)  and such  payments so received by Lender  (whether  from
Company or otherwise) may, in the sole  discretion of Lender,  be held by Lender
as collateral  security for,  and/or then or at any time  thereafter  applied in
whole or in part by Lender  against all or any part of, the  Obligations in such
order as Lender shall elect. Any remainder of the proceeds after payment in full
of the Obligations  shall be paid over to the Company.  If any deficiency  shall
arise,  the Company and each guarantor of the  Obligations  shall remain jointly
and severally liable to Lender therefore.

          12. The Company hereby  irrevocably  makes,  constitutes  and appoints
Lender and any officer or agent of Lender as Lender may select,  with full power
of substitution,  as the Company's true and lawful  attorney-in-fact,  with full
power to do any or all of the  following if an Event of Default  shall occur and
be  continuing:  to endorse the Company's name on all  applications,  documents,
papers and  instruments  necessary  for Lender to use the Marks,  or to grant or
issue any exclusive or  nonexclusive  license under the  Trademarks to any other
person or entity, or to assign, pledge, convey or otherwise transfer title in or
dispose of the  Collateral  to any other  person or entity.  The Company  hereby
ratifies all that such attorney  shall lawfully do or cause to be done by virtue
hereof. This power of attorney shall be irrevocable until all of the Obligations
shall have been satisfied in full. The powers  conferred on Lender hereunder are
solely to protect its interests in the  Collateral and shall not impose any duty
upon it to  exercise  any such  powers.  Lender  shall be  accountable  only for
amounts that it actually receives as a result of the exercise of such powers and
neither it nor any of its  officers,  directors,  employees  or agents  shall be
responsible to Company for any act or failure to act, except for its own willful
misconduct.

          13. Any and all fees, costs and expenses,  of whatever kind or nature,
including  attorneys'  fees and legal expenses,  actually  incurred by Lender in
connection with the filing or recording of any documents (including all taxes in
connection  therewith) in public offices, the payment or discharge of any taxes,
counsel  fees,   maintenance   fees,   encumbrances  or  otherwise   protecting,
maintaining,  or preserving the  Collateral,  or in defending or prosecuting any
actions or proceedings arising out of or related to the

<PAGE>

Collateral,  shall be borne and paid by the  Company (it being the intent of the
Company and Lender that the Company shall be responsible  for the payment of all
sums, fees, costs and expenses,  including, without limitation, all governmental
fees with  respect to the  Marks)  or, if paid by  Lender,  shall be paid by the
Company  promptly  on demand by Lender  and until so paid  shall be added to the
principal  amount of the  Obligations  and shall bear  interest  at the rate per
annum in effect from time to time under the Promissory Note attached to the Note
Purchase Agreement. The Company assumes all responsibility and liability arising
from the use of the Marks, and Company hereby indemnifies,  will defend and will
hold Lender harmless from and against any claim,  suit, loss,  damage or expense
(including  reasonable  attorneys' fees) arising out of Company's  operations of
its business from the use of the Marks.

         14. The Company shall use its best efforts to detect any  infringers of
the Marks and shall  notify  Lender in writing of  infringements  detected.  The
Company shall have the duty, through counsel reasonably acceptable to Lender, to
prosecute  diligently  any trademark  application of the Marks pending as of the
date of this Agreement or thereafter until the Obligations  shall have been paid
in full,  to make  application  for  registration  in the  USPTO  or  equivalent
governmental  office outside the United States of registrable  but  unregistered
Marks in such jurisdictions,  for such goods and services,  and at such times as
the Company deems  necessary in its reasonable  business  judgment,  to file and
prosecute  opposition and cancellation  proceedings as are deemed reasonable and
necessary in the Company's  reasonable business judgment,  to file and prosecute
lawsuits  to enforce the Marks as are deemed  reasonable  and  necessary  in the
Company's  reasonable  business  judgment,  and to do any and all acts which are
deemed  necessary  or desirable by Lender to preserve and maintain all rights in
the Marks.  Any  expenses  incurred  in  connection  with such  applications  or
proceedings shall be borne by the Company.

          15. Lender shall have the right, but shall in no way be obligated,  to
defend any suit or counterclaim in its own name in order to defend the Marks and
any  license  hereunder,  in which event the  Company  shall,  at the request of
Lender,  do any and all lawful  acts and  execute  any and all proper  documents
required by Lender in aid of such defense and the Company shall  promptly,  upon
demand,  reimburse and indemnify  Lender for all costs and expenses  incurred by
Lender in the exercise of its rights under this paragraph 15.

          16.  If the  Company  fails  to  comply  with  any of its  obligations
hereunder,  to the extent  permitted by applicable  law, Lender may do so in the
Company's  name or in  Lender's  name,  but at the  Company's  expense,  and the
Company  agrees  to  reimburse  Lender  in  full  for  all  expenses,  including
reasonable  attorneys'  fees  incurred by Lender in  prosecuting,  defending  or
maintaining the Marks or Lender's interest therein pursuant to this Agreement.

<PAGE>

         17. No course of  dealing  between  the  Company  and  Lender,  nor any
failure to exercise,  nor any delay in  exercising,  on the part of Lender,  any
right,  power or privilege  hereunder or under the Note Purchase Agreement shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right, power or privilege  hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.

         18. All of Lender's rights and remedies with respect to the Collateral,
whether  established hereby or by the Note Purchase  Agreement,  or by any other
agreements  or by law shall be  cumulative  and may be exercised  singularly  or
concurrently.

         19. The provisions of this  Agreement are severable,  and if any clause
or  provision  is held  invalid  and  unenforceable  in  whole or in part in any
jurisdiction,  then such invalidity or  unenforceability  shall affect only such
clause or provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such clause or provision in any other  jurisdiction,  or any other
clause or provision of this Agreement in any jurisdiction.

         20. Any  notice to Lender  shall be deemed to have been duly given five
days from when deposited in the mail, first class, postage prepaid, addressed to
Lender at the address listed in the opening  paragraph or other address given to
the Company by Lender.  Any notice to Company  hereunder shall be deemed to have
been duly given 5 days from when  deposited  in the mail,  first  class  postage
prepaid,  addressed  to Company at the  address  specified  in the  introductory
paragraph of this Agreement.

         21. This Agreement is subject to modification  only by a writing signed
by the parties hereto except as provided in paragraph 9 hereof.

         22. The  benefits  and  burdens of this  Agreement  shall  inure to the
benefit of and be binding upon the successors and assigns of Lender and upon the
successors  of the Company.  The Company shall not assign its rights or delegate
its duties hereunder without the prior written consent of Lender.

         23.  Time is of the  essence  of this  Agreement.  No person or entity,
other than the parties  hereto,  shall be deemed to be a  beneficiary  hereof or
have the right to enforce any of the provisions of this Agreement.

         24. This  Agreement has been  negotiated  executed and delivered at and
shall be  deemed  to have  been  made in  California.  This  Agreement  shall be
governed by and construed in  accordance  with the internal laws of the State of
California  and Company  agrees to submit to the  jurisdiction  of the courts of
California.

<PAGE>

                          THE UNITED STATES OF AMERICA

                                     [SEAL]

                           CERTIFICATE OF REGISTRATION
                               PRINCIPAL REGISTER


         THE MARK SHOWN IN THIS  CERTIFICATE  HAS BEEN  REGISTERED IN THE UNITED
STATES PATENT AND TRADEMARK OFFICE TO THE NAMED REGISTRANT.

         THE RECORDS OF THE UNITED STATES PATENT AND TRADEMARK  OFFICE SLOW THAT
AN APPLICATION FOR  REGISTRATION OF THE MARK SHOWN IN THIS CERTIFICATE WAS FILED
IN THE  OFFICE;  THAT THE  APPLICATION  WAS  EXAMINED  AND  DETERMINED  TO BE IN
COMPLIANCE WITH THE REQUIREMENTS OF THE LAW AND WITH THE REGULATIONS  PRESCRIBED
BY THE  COMMISSIONER  OF  PATENTS  AND  TRADEMARKS;  AND THAT THE  APPLICANT  IS
ENTITLED TO REGISTRATION OF THE MARK UNDER THE TRADEMARK ACT OF 1946, AS AMENDED

         A COPY OF THE MARK AND PERTINENT DATA FROM THE  APPLICATION ARE PART OF
THIS CERTIFICATE.

          THIS  REGISTRATION  SHALL  REMAIN IN FORCE FOR TEN (10) YEARS,  UNLESS
TERMINATED  EARLIER AS  PROVIDED  BY LAW,  AND  SUBJECT TO  COMPLIANCE  WITH THE
PROVISIONS OF SECTION 8 OF THE TRADEMARK ACT OF 1946, AS AMENDED.


                                          /s/ Q. Todd Dickinson

                                          COMMISSIONER OF PATENTS AND TRADEMARKS

<PAGE>

INT. CL.: 9
PRIOR U.S. CLS.: 21, 23, 26, 36 AND 38
                                                              Reg. No. 2,328,149

UNITED STATES PATENT AND TRADEMARK OFFICE               REGISTERED MAR. 14, 2000
--------------------------------------------------------------------------------

                                    TRADEMARK
                               PRINCIPAL REGISTER


                                     STATMON


STATMON  DEVELOPMENTS  PTY.  LIMITED        COMPUTER  NETWORK  OR BY  MEANS OF A
  (AUSTRALIA CORPORATION)                   COMPACT DISK. IN CLASS 9 (U.S.  CLS.
41 CULLEN STREET                            21, 23, 26, 36 AND 38).
LANE  COVE,  NEW SOUTH  WALES  2066,
  AUSTRALIA                                      FIRST   USE    6-22-1998;    IN
                                            COMMERCE 6-22-1998.
     FOR:  COMPUTER SOFTWARE FOR USE
IN MONITORING  THE EQUIPMENT  STATUS             SER. NO.75-520,161, FILED
OF  BROADCASTER   TRANSMITTER  SITES        7-16-1998.
THAT MAY BE DOWNLOADED FROM A GLOBAL
                                            ELIZABETH   J.   WINTER,   EXAMINING
                                              ATTORNEY


<PAGE>

   [SEAL]
                            Certificate of registration
 AUSTRALIA                         of trade mark
                                                                      No. 766927
Commonwealth                   Trade Marks Act 1995
of Australia




I, ROSS WILSON, Registrar of Trade Marks, hereby certify-

that the trade mark  represented  on this certificate  has been  registered as a
Trade Mark,  No. 766927 in the Register of Trade Marks for a period of ten years
commencing 9 July 1998 and that Statmon Developments Pty Ltd of 41 Cullen Street
LANE COVE NSW 2066  AUSTRALIA has been entered in the Register of Trade Marks as
the owner of the trade mark.

The trade mark is registered for the following goods and/or services:

Data processing equipment and computers being goods in class 9

                                  THE SCHEDULE

                                     STATMON



                                        GIVEN UNDER MY HAND AND THE SEAL OF THE
                                           TRADE MARKS OFFICE ON 14 MAY 1999
[COMMONWEALTH OF AUSTRALIA
   TRADE MARKS OFFICE                               /s/ ROSS WILSON
         SEAL]
                                                      ROSS WILSON
                                               REGISTRAR OF TRADE MARKS


<PAGE>

     IN WITNESS the execution  hereof under seal on the day and year first above
written.


                                            Statmon Technologies Corp.
                                            A Delaware Corporation

                                            /s/ Geoffrey P. Talbot
                                            -----------------------------
                                            Geoffrey P. Talbot
                                            Chief Executive Officer


                                            /s/ John Hoff
                                            -----------------------------
                                            John Hoff

<PAGE>

                                    EXHIBIT D

    (To the Statmon Technologies Corp. Note Purchase and Shareholder Rights
                                   Agreement)


                                     BUDGET



                                       4
<PAGE>

STATMON TECHNOLOGIES CORP.
USE OF PROCEEDS

<TABLE>
<CAPTION>
                                                                         September        October          November
                                                                        ----------      ----------       ----------
                                                        Total              Budget          Budget           Budget
                                                      ----------        -------------------------------------------
<S>                                                   <C>               <C>              <C>              <C>
Software         MSDN Universal Subscription            2,499.00          2,499.00            0.00             0.00
                 DevPartner Studio                      1,249.00          1,249.00            0.00             0.00
                 Measurement Studio                       995.00            995.00            0.00             0.00
                 IPWorks ActiveX Edition                  345.00            345.00            0.00             0.00
                 Windows 2000 Professional                289.95            289.95            0.00             0.00
                 MallMax                                  599.00            599.00            0.00             0.00
                 Quickbooks Pro                           199.00            199.00            0.00             0.00
                                                      ----------        -------------------------------------------
                                                        6,175.95          6,175.95            0.00             0.00

HARDWARE         Pocket PC (x4)                         2,400.00          2,400.00            0.00             0.00
                 Videquip Units (x10)                   7,500.00          7,500.00            0.00             0.00
                 Notebooks (x4)                        14,000.00         14,000.00            0.00             0.00
                 Xerox Phaser 850 Color Printer         2,499.00          2,499.00            0.00             0.00
                 Development Machine (x2)               5,000.00          5,000.00            0.00             0.00
                 Misc                                       0.00              0.00            0.00             0.00
                 Web Server                             2,000.00          2,000.00            0.00             0.00
                                                      ----------        -------------------------------------------
                                                       33,399.00         33,399.00            0.00             0.00

PAYABLES         Videquip Units (x10)                   7,390.50          7,390.50            0.00             0.00
                 Triad                                  5,000.00          5,000.00            0.00             0.00
                 Pacific DataCom                          800.00            800.00            0.00             0.00
                 Westwood Computers                       200.00            200.00            0.00             0.00
                                                      ----------        -------------------------------------------
                                                       13,390.50         13,390.50            0.00             0.00

SALES/MARKETING
                 Airfare (10 flights/mth.)             15,000.00          5,000.00        5,000.00         5,000.00
                 Meals, Hotel, Rental Car               7,000.00          2,500.00        2,500.00         2,000.00
                 Business development                   3,000.00          1,000.00        1,000.00         1,000.00
                 Sales Collaterals/Stationary           8,000.00          8,000.00            0.00             0.00
                 Publicity                              4,000.00          1,500.00        1,500.00         1,000.00
                 Marketing (shipping/mailers)          10,000.00          3,500.00        3,500.00         3,000.00
                 Telephone                              6,000.00          2,000.00        2,000.00         2,000.00
                                                      ----------        -------------------------------------------
                                                       53,000.00         23,500.00       15,500.00        14,000.00

MISC             Short-Term Loan Repayment             25,000.00         25,000.00            0.00             0.00
                 Offering Legal Fees                   50,000.00         30,000.00       20,000.00             0.00
                 Audit/Accounting                      20,000.00              0.00       20,000.00             0.00
                 Travel/Accomodation/Ent               30,000.00         10,000.00       10,000.00        10,000.00
                                                      ----------        -------------------------------------------
                                                      125,000.00         65,000.00       50,000.00        10,000.00

                 Working Capital                       18,000.00          6,000.00        6,000.00         6,000.00
                                                      ----------        -------------------------------------------

                 TOTAL                                248,965.45        147,465.45       71,500.00        30,000.00
                                                      ==========        ===========================================
</TABLE>