SETTLEMENT AGREEMENT

      This  settlement  agreement  ("Agreement")  is made as of this 14th day of
August, 2001, by and among (i) Log On America,  Inc. ("LOA"), (ii) Credit Suisse
First Boston Corporation  ("CSFBC") and (iii) Marshall Capital Management,  Inc.
("MCM").

      WHEREAS,  LOA and MCM are parties to (A) a Securities  Purchase Agreement,
dated as of February 23, 2000 (the "Series A Purchase  Agreement"),  pursuant to
which  LOA  issued  and  sold to MCM (i)  shares  of its  Series  A  Convertible
Preferred  Stock  (the  "Series  A  Stock")  in  accordance  with the terms of a
Certificate   of   Designations,   Preferences   and  Rights   (the   "Series  A
Certificate"),  and (ii) Warrant (the "Series A Warrant")  entitling  the holder
thereof to purchase  shares of the Company's  common stock (the "Common  Stock")
and (B) a  Registration  Rights  Agreement,  dated as of February  23, 2000 (the
"Series A Registration Agreement")(the Series A Purchase Agreement, the Series A
Certificate,  the certificate(s)  representing  shares of Series A Stock held by
MCM, the Series A Warrant,  and the Series A Registration  Rights  Agreement are
collectively referred to herein as the "Series A Transaction Documents");

      WHEREAS,  LOA sued MCM and others in the action Log On  America,  Inc.  v.
Promethean Asset Management, LLC, 00 Civ. 6218 (RMB)(the "Initial Action");

      WHEREAS,  LOA sued CSFBC in the action  Log on  America v.  Credit  Suisse
First Boston Corporation, 01 Civ. 0272 (RMB)(MHD) ("Second Action"); and

      WHEREAS  LOA,  CSFBC,  and MCM  desire  to  resolve  the  disputes  raised
respectively between LOA and MCM in the Initial Action and between LOA and CSFBC
in the Second  Action and in all other  respects  resolve  any and all  disputes
between LOA and both CSFBC and MCM;

      NOW,  THEREFORE,  for and in  consideration  of the  mutual  promises  and
covenants hereinafter set forth, and for other good and valuable  consideration,
the receipt


                                       1
<PAGE>

and sufficiency of which are hereby acknowledged,  the parties hereto, intending
to be legally bound, agree as follows:

      1. At or about the time that this  Agreement is executed and  delivered by
the  parties  hereto,  LOA will  execute (a) a  stipulation  of  dismissal  with
prejudice of the entire Second Action in the form attached  hereto as Exhibit A;
and (b) a notice of dismissal  with  prejudice of the Initial Action with regard
to MCM in the form attached hereto as Exhibit B, and will deliver such documents
into  escrow  with  counsel  for CSFBC  and MCM,  Solomon,  Zauderer,  Ellenhom,
Frischer & Sharp ("Solomon,  Zauderer"). Upon payment of the amount described in
paragraph 2 below, Solomon,  Zauderer may release such stipulation and notice to
CSFBC and MCM, and CSFBC and MCM thereafter may file such stipulation and notice
without any further notice to LOA.

      2. CSFBC shall pay the amount of $3.25  million to LOA by wire transfer or
check within five (5) business days following the execution and delivery of this
Agreement by the parties.

      3. Upon tender by CSFBC of the amount  described in paragraph 2 above, and
the delivery by MCM of(i)  certificate(s)  representing 7,500 shares of Series A
Stock for cancellation and (ii) the Series A Warrant for cancellation, LOA shall
(i) issue and  deliver to MCM 7,500  shares of a new series of  preferred  stock
(the "Series B Stock")  pursuant to a Certificate of  Designations,  Preferences
and Rights in the form  attached  hereto as Exhibit C (the "Series B Certificate
of  Designation");  (ii)  execute  and  deliver  to  MCM a  registration  rights
agreement in the form attached  hereto as Exhibit D (the "Series B  Registration
Rights Agreement"), covering the registration of the resale by MCM of the Common
Stock  issuable  upon  conversion  of the Series B Stock;  and (iii) execute and
deliver to MCM the exchange  agreement in the form attached  hereto as Exhibit E
(the "Exchange  Agreement") pursuant to which MCM will exchange (a) 7,500 shares
of Series A Stock held by MCM and (b) the Series A Warrant  for 7,500  shares of
Series B stock.  Prior to the  issuance  of the Series B Stock to MCM,  LOA will
file the Series B Certificate of Designation  with the Secretary of State of the
State of Delaware


                                       2
<PAGE>

and deliver a file-stamped copy thereof to MCM. The Series B Stock, the Exchange
Agreement, the Series B Certificate of Designation and the Series B Registration
Rights  Agreement  are  collectively   referred  to  herein  as  the  "Series  B
Transaction Documents".

      4. Simultaneously with LOAs actions under paragraph 3 above, MCM shall (i)
execute the Series B Registration Rights Agreement and Exchange  Agreement,  and
(ii)  deliver to LOA (a) the 7,500  shares of Series A Stock held by MCM and (b)
the Series A Warrant.

      5. Upon the due  issuance  and delivery of 7,500 shares of Series B Stock,
and the execution and delivery of the Series B Registration Rights Agreement, to
MCM pursuant to paragraph 3 above,  LOA and MCM's rights and  obligations  under
the  Series A  Transaction  Documents  and shares of Series A Stock and Series A
Warrant held by MCM, will be extinguished and of no further force or effect.

      6. Effective upon (i) receipt by LOA of the payment described in paragraph
2 above, (ii) the ordering by the Court (as defined below) of the stipulation of
dismissal and Notice and Order of Dismissal  described in paragraph 1; (iii) the
issuance  and delivery of Series B Stock  described in paragraph 3 to MCM;  (iv)
the execution  and delivery of the Series B  Registration  Rights  Agreement and
Exchange Agreement by LOA and MCM; (v) delivery of certificates for 7,500 shares
of  Series A Stock by MCM to LOA for  cancellation;  and  (vi)  delivery  of the
Series A  Warrant  by MCM to LOA for  cancellation  (clauses  (i) -- (vi)  being
referred to as the "Release  Conditions"),  LOA, and its parents,  subsidiaries,
affiliates, officers, directors, agents, employees, representatives,  record and
beneficial  security  holders,  successors and assigns,  ("LOA Parties")  hereby
fully release and forever  discharge both CSFBC, and its parents,  subsidiaries,
affiliates, officers, directors, agents, employees, representatives,  record and
beneficial  security holders,  successors and assigns ("CSFBC Parties") and MCM,
and  its  parents,  subsidiaries,   affiliates,   officers,  directors,  agents,
employees,  representatives,  record and beneficial security holders, successors
and assigns  ("MCM  Parties") of and from any and all claims,  demands,  duties,
obligations, liabilities, rights, damages (including exemplary


                                       3
<PAGE>

or punitive damages) or causes of action, whether known or unknown, at law or in
equity, contingent or matured, in contract or in tort, that the LOA Parties have
ever had, or ever may have,  in any way arising out of any event,  circumstance,
act or omission  from the  beginning of the world to the date of this  Agreement
including without limitation those arising from,  relating to, or concerning (i)
all claims  and causes of action  asserted  in the  Complaint  filed in both the
Initial Action and the Second Action or (ii) the Series A Transaction  Documents
and the Series A Stock and Warrant ("Released Claims");  provided, however, that
such release  shall not apply to any  obligation  that any MCM Party may have at
any time under the Series B Transaction Documents or shares of Series B stock or
herein.

      7.  Effective  upon  satisfaction  of the  Release  Conditions,  the CSFBC
Parties and the MCM Parties  hereby fully release and forever  discharge the LOA
Parties  of  and  from  any  and  all  claims,  demands,  duties,   obligations,
liabilities, rights, damages (including exemplary or punitive damages) or causes
of action, whether known or unknown, at law or in equity, contingent or matured,
in contract or in tort, that the CSFBC Parties or the MCM Parties have ever had,
or ever may have,  in any way  arising  out of any event,  circumstance,  act or
omission from the beginning of the world to the date of this Agreement including
without limitation those arising from, relating to, or concerning (i) all claims
and causes of action  asserted in the Complaint filed in both the Initial Action
and the Second Action or (ii) the Series A Transaction  Documents and the Series
A Stock; provided, however, that such release shall not apply to any obligations
that any LOA Party may have at any time under the Series B Transaction Documents
or shares of Series B stock or herein.

      8.  Nothing  contained  herein  shall be deemed in anyway to  release  any
claims asserted  against  Promethean  Asset Management LLC, HFTP Investment LLC,
Fisher  Capital  Ltd.,  Wingate  Capital  Ltd. and Citadel  Limited  Partnership
(collectively  the  "Preferred  Investors")  from any  claims  that LOA may have
against  the  Preferred  Investors,  including  but not  limited  to the  claims
asserted by LOA in the Initial Action and, the Preferred  Investors shall not be
third-party beneficiaries under this agreement.


                                       4
<PAGE>

      9. The United States District Court for the Southern  District of New York
(the "Court") shall retain jurisdiction to enforce the terms of this settlement.
This  Agreement  is to be governed by the laws of the State of New York  without
giving  effect  to any  provision  thereof  that  would  allow  or  require  the
application of the laws of any other jurisdiction.

      10. It is the  intention  of the parties to this  Agreement to relieve the
CSFBC  Parties  and the MCM  Parties,  and each of them,  from  any  claims  for
contribution  or  indemnity  to any other  person or entity  arising  out of the
Released  Claims.  Therefore,  the LOA  Parties  agree that they will  reduce or
credit,  against any  judgment or  settlement  that they may obtain  against any
person or entity,  an amount equal to the full amount of any judgment  that such
person may at any time obtain or have obtained against the CSFBC Parties and the
MCM Parties,  or any of them, on any claim, for contribution or indemnification,
that relates to or arises out of any Released Claims. LOA shall take such action
as may be  reasonably  required to assure the  effectuation  of the reduction of
judgment as provided for herein.

      11. Each party  hereto,  and each person  signing  this  Agreement  or any
Series B Transaction  Document and any other documents related thereto on behalf
of such party,  represents  and warrants that it, he or she, as the case may be,
has full authority to do so. By signing this  Agreement,  each party  represents
and warrants that no other person, partnership,  creditor, or entity, affiliated
with or acting at the  direction of, in concert with or on behalf of such party,
has or has had any  interest in the claims,  demands,  obligations  or causes of
action  referred  to in the  Agreement  and such  party  has the sole  right and
exclusive  authority  to execute  this  Agreement  and the Series B  Transaction
Documents and has not transferred,  conveyed or otherwise disposed of any of the
claims, demands, obligations, or causes of action referred to herein.

      12. This  Agreement and the Series B Transaction  Documents  represent the
entire  agreement  between the parties  concerning the subject matter hereof and
supersedes


                                       5
<PAGE>

all prior  agreements and  understandings  (whether written or oral) between the
parties on any and all such issues.  This  Agreement is intended to be a binding
agreement  between  the parties  and shall not be  changed,  modified,  amended,
extended,  terminated,  waived or  discharged  except by an agreement in writing
signed by all parties hereto. This Agreement may be signed in counterparts.

      13. Each of the parties has participated in the drafting of this Agreement
after  consulting  with counsel.  Accordingly,  no party shall maintain that the
language of this Agreement should be construed in any way by reason of the other
party's putative role as the drafter of the agreement.

      14. Except as expressly set forth herein,  neither party has relied on any
representations made by the other party in reaching this Agreement.

      15. This Agreement shall be binding on, and shall inure to the benefit of,
the parties and their respective legal representatives, successor and assigns.

      16. The parties  hereto agree to sign such other and further  documents as
may be necessary to give effect to this Agreement.

      17. All actions  provided for herein shall be deemed to have been effected
simultaneously.

      18. Nothing contained herein  constitutes an admission of liability by any
party, and each party expressly denies any such liability.


                                       6
<PAGE>

      19. The  parties  agree to cause any and all direct or  indirect  parents,
divisions,  subsidiaries,  affiliates,  employees, agents, representatives,  and
attorneys to abide by the terms of this Agreement.

Dated:   August 14, 2001

GAFNER & SHORE, LLP                  SOLOMON, ZAUDERER, ELLENIIORN
                                       FRISCHER & SHARP By:

By: /s/ Mark A. Berman               By: /s/ Michael S. Lazaroff
   -----------------------               -------------------------
   Steven J. Shore                       Harry Frischer
   Mark A. Berman                        Michael S. Lazaroff
360 Lexington Avenue                 45 Rockefeller Plaza
New York, New York 10017             New York, New York 10111
(212) 922-9250                       (212) 956-3700
(212) 922-9335 (Fax)                 (212) 956-4068 (Fax)

Attorneys for                        Attorneys for Credit Suisse First Boston
Log On America, Inc.                 Corporation and Marshall Capital
                                     Management, Inc.


<PAGE>

                                                                       Exhibit C

                    CERTIFICATE OF DESIGNATIONS, PREFERENCES
               AND RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK
                                       OF
                              LOG ON AMERICA, INC.

      Log On America, Inc. (the "Company"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify,
that, pursuant to authority conferred upon the Board of Directors of the Company
by the Certificate of Incorporation, as amended, of the Company, and pursuant to
Section 151 of the General  Corporation Law of the State of Delaware,  the Board
of  Directors  of the Company at a meeting duly held,  adopted  resolutions  (i)
authorizing a series of the Company's previously authorized preferred stock, par
value $0.01 per share, and (ii) providing for the designations,  preferences and
relative,  participating,  optional  or other  rights,  and the  qualifications,
limitations or  restrictions  thereof,  of Seven  Thousand Five Hundred  (7,500)
shares of Series B Convertible Preferred Stock of the Company, as follows:

      RESOLVED, that the Company is authorized to issue 7,500 shares of Series B
Convertible Preferred Stock (the "Series B Shares"),  par value $0.01 per share,
which  shall have the  following  powers,  designations,  preferences  and other
special rights:

      (1)   Dividends. The Series B Shares shall not bear any dividends.

      (2)   Distribution of Assets Upon Liquidation.

            (a)  Upon  the  occurrence  of  (x)  any  insolvency  or  bankruptcy
proceedings, or any receivership,  liquidation,  reorganization or other similar
proceedings  in  connection  therewith,  commenced  by  the  Company  or by  its
creditors,  as such, or relating to its assets or (y) the  dissolution  or other
winding  up of the  Company  whether  total or  partial,  whether  voluntary  or
involuntary and whether or not involving  insolvency or bankruptcy  proceedings,
or (z) any  assignment  for the benefit of  creditors or any  marshaling  of the
material  assets or material  liabilities  of the Company  (each, a "Liquidation
Event"),  no  distribution  shall be made to the holders of any shares of Junior
Securities unless,  following the payment of preferential  amounts on all Senior
Securities, each holder of a Series B Share shall have received the Stated Value
with respect to each Series B Share then held by such holder.  In the event that
upon the  occurrence  of a  Liquidation  Event,  and  following  the  payment of
preferential  amounts  on  all  Senior  Securities,  the  assets  available  for
distribution to the holders of the Series B Shares and the holders of Pari Passu
Securities  are  insufficient  to pay the  aggregate  Stated Value  payable with
respect to the Preferred  Shares and the aggregate  preferential  amount payable
with respect to such Pari Passu Securities,  the remaining assets of the Company
shall be  distributed  ratably  among the Series B Shares and the shares of Pari
Passu Securities in proportion to the ratio that the preferential amount payable
on each such share (which shall be the Stated Value


<PAGE>

in the  case of a Series B Share)  bears to the  aggregate  preferential  amount
payable on all such shares.

            (b) After the  payment  of any  preferential  amounts  on all Senior
Securities  and payment of the full Stated  Value with  respect to each Series B
Share and the  preferential  amounts payable on any Pari Passu  Securities,  the
remaining  assets of the Company  legally  available for  distribution,  if any,
shall be  distributed  ratably to the  holders of the Junior  Securities  of the
Company.

            (c) For purposes hereof, the following terms shall have the meanings
indicated:

                  (i)  "Junior  Securities"  means  the  Common  Stock  and  all
securities  of the Company or any of it s  subsidiaries  that are not Pari Passu
Securities or Senior Securities as defined below.

                  (ii) "Pari Passu  Securities"  means those  securities  of the
Company or any of its subsidiaries outstanding on the Closing Date that by their
terms are pari passu with the Series B Shares; and

                  (iii) "Senior  Securities" means any indebtedness  incurred by
the Company and the Company's  Series A Convertible  Preferred  Stock, par value
$0.01 per share.

      (3) Voting  Rights.  The holders of record of Series B Shares shall not be
entitled to any voting rights except as required by law.

      (4)  Conversion  of  Preferred  Shares.  The  Series  B  Shares  shall  be
convertible on the terms and conditions set forth in this Section 4.

            (a) Certain  Defined  Terms.  For  purposes of this  Certificate  of
Designations, the following terms shall have the following meanings:

                  (i)  "Issuance  Date"  means,  with  respect to each  Series B
Share,  the date of issuance of the  applicable  Series B Share  pursuant to the
Exchange Agreement.

                  (ii)  "Exchange   Agreement"   means  that  certain   exchange
agreement between the Company and Marshall Capital Management, Inc., pursuant to
the terms of which the Series B Shares are originally issued.

                  (iii) "Stated Value" means $1,000.

                  (iv) "Business Day" means any day other than Saturday,  Sunday
or other day on which commercial banks in the city of New York are authorized or
required by law to remain closed.


                                       2
<PAGE>

            (b)  Holder's  Conversion  Rights.  Each  Series  B Share  shall  be
convertible,  at the option of the holder thereof,  at any time and from time to
time, and without the payment of additional consideration by the holder thereof,
into such number of shares of Common Stock equal to the Stated Value  divided by
the  Conversion  Price (as defined  below) in effect at the time of  conversion.
Such Conversion Price shall be subject to adjustment as provided below.

            (c) Holder's  Delivery  Requirements.  Before any holder of Series B
Shares  shall be  entitled to convert  such  shares  into share of Common  Stock
pursuant to this Section 4, the holder of such Series B Shares  shall  surrender
the  certificate  or  certificates  representing  such  Series  B  Shares,  duly
endorsed,  at the principal  executive  office of the Company or of any transfer
agent for the Series B Shares,  and shall give written  notice to the Company at
its principal  executive office of the election to convert such shares of Series
B Shares and the names or names in which the  certificate  or  certificates  for
shares of Common  Stock are to be issued.  The Company  shall,  on or before the
third  Business Day  following  delivery of such notice and the  certificate  or
certificates representing such Series B Shares, issue and deliver to such holder
of Series B Shares,  or to the nominee or nominees  thereof,  a  certificate  or
certificates for the number of shares of Common Stock to which such holder shall
be entitled.  Conversion  under this Section 4 shall be deemed to have been made
and the person or persons  entitled to receive  shares of Common Stock  issuable
upon the  conversion  shall be treated for all purposes as the record  holder or
holders  of such  shares  of  Common  Stock  immediately  prior to the  close of
business on the date of such  surrender of the Series B Shares to be  converted.
In the event the number of Series B Shares  represented  by the  certificate  or
certificates  surrendered  pursuant to this  Section  4(c) exceeds the number of
shares converted,  the Company shall, upon such conversion,  execute and deliver
to the  holder a new  certificate  or  certificates  for the  number of Series B
Shares represented by the certificate or certificates  surrendered which are not
converted.

            (d) No Fractional Shares. No fractional shares of Common Stock shall
be issued upon conversion of Series B Shares;  instead,  the Company shall round
such fraction of a share of Common Stock up or down to the nearest whole number.

            (e)  Conversion  Price.  Each Series B Share shall be convertible in
accordance with Section 4(b) above, into the number of shares of Common Stock as
is determined by dividing the Stated Value by the Conversion Price (as described
below). The "Conversion Price" shall be $4.50, subject to Section 4(f) below.

            (f) Adjustments for Stock Dividends,  Subdivisions,  Combinations or
Consolidation  of Common Stock.  In the event the  outstanding  shares of Common
Stock shall be subdivided (by stock  dividend,  stock split or otherwise) into a
greater number of shares of Common Stock,  the  Conversion  Price then in effect
shall,   concurrently   with  the   effectiveness   of  such   subdivision,   be
proportionately  decreased.  In the event the outstanding shares of Common Stock
shall be combined or  consolidated  (by  reclassification  or otherwise)  into a
lesser number of shares of Common  Stock,  the  Conversion  Price then in effect
shall,   concurrently   with  the   effectiveness   of  such   combination,   or
consolidation, be proportionately increased.


                                       3
<PAGE>

            (g) In the event any Series B Shares shall be converted  pursuant to
this Section 4 or otherwise  reacquired by the Company,  the shares so converted
or  reacquired  shall be  canceled,  may not be  reissued as Series B Shares and
shall revert back to authorized but undesignated shares of Preferred Stock.

      (5)  Reservation of Shares.  The Company shall, so long as any of Series B
Shares are  outstanding,  reserve and keep  available out of its  authorized but
unissued shares of Common Stock,  for the purpose of effecting the conversion of
Series B Shares,  such number of its authorized  shares of Common Stock as shall
from time to time be  sufficient  to effect the  conversion  of all  outstanding
shares of Series B Shares.

      (6) Vote to Change Terms of Preferred Shares.  The affirmative vote of the
holders of at least  two-thirds  (2/3) of the Series B Shares  then  outstanding
shall  be  required  in order to  amend,  alter,  change  or  repeal  any of the
provisions of this Certificate of Designation.

      (7) Lost or Stolen  Certificates.  Upon receipt by the Company of evidence
reasonably  satisfactory  to the  Company  of the loss,  theft,  destruction  or
mutilation of any certificate representing the Series B Shares, and, in the case
of loss, theft or destruction,  of any indemnification undertaking by the holder
to the Company in customary form and, in the case of mutilation,  upon surrender
and cancellation of the certificate, the Company shall execute and deliver a new
preferred  stock  certificate  of like tenor and date;  provided,  however,  the
Company shall not be obligated to re-issue  preferred stock  certificates if the
holder  contemporaneously  requests  the Company to convert such Series B Shares
into Common Stock.

      (8) Specific Shall Not Limit General:  Construction. No specific provision
contained in this  Certificate  of  Designations  shall limit or modify any more
general provision  contained herein.  This Certificate of Designations  shall be
deemed to be jointly  drafted by the Company and all the initial  holders of the
Series B Shares and shall not be  construed  against  any person as the  drafter
hereof.

      (9)  Notice.  Whenever  notice is  required  to be given  pursuant to this
Certificate of Designations, unless otherwise provided herein, such notice shall
be given in accordance with Section 7(f) of the Exchange Agreement.


                                       4
<PAGE>

      IN  WITNESS   WHEREOF,   the  Company  has  caused  this   Certificate  of
Designations  to be signed by David Paolo,  its President,  as of the ___ day of
August 2001.

                                                     LOG ON AMERICA, INC.

                                                     By: _______________________
                                                         Name: David Paolo
                                                               President


                                       5
<PAGE>

                                                                       Exhibit D

                          REGISTRATION RIGHTS AGREEMENT

      REGISTRATION RIGHTS AGREEMENT (this  "Agreement"),  dated as of August __,
2001,  by and  between  LOG ON  AMERICA,  INC.,  a  Delaware  corporation,  with
headquarters located at One Cookson Place,  Providence,  Rhode Island 02903 (the
"Company"), and MARSHALL CAPITAL MANAGEMENT, INC., a Delaware corporation,  with
offices at 11 Madison Avenue, New York, New York 10010 ("Marshall").

      WHEREAS:

      A. In connection  with the Settlement  Agreement by and among the Company,
Marshall and Credit Suisse First Boston  Corporation dated as of August 14, 2001
(the "Settlement Agreement") and the Exchange Agreement by and among the parties
hereto of even date herewith (the "Exchange Agreement"), the Company has agreed,
upon the terms and subject to the conditions of the Exchange Agreement, to issue
to Marshall 7,500 shares of the Company's Series B Convertible  Preferred Stock,
par value $0.01 per share (the  "Preferred  Shares"),  which will be convertible
into shares (as  converted,  the  "Conversion  Shares") of the Company's  common
stock,  par value $0.01 per share (the "Common  Stock"),  in accordance with the
terms of the Company's  Certificate of  Designations,  Preferences and Rights of
the Series B Convertible Preferred Stock (the "Certificate of Designations").

      B. To induce Marshall to execute and deliver the Settlement  Agreement and
the Exchange Agreement,  the Company has agreed to provide certain  registration
rights  under  the  Securities  Act of  1933,  as  amended,  and the  rules  and
regulations  thereunder,  or any similar  successor statute  (collectively,  the
"1933 Act"), and applicable state securities laws.

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

      1. DEFINITIONS.

            As used in this  Agreement,  the  following  terms  shall  have  the
following meanings:

            a. "Investor"  means Marshall and any transferee or assignee thereof
to whom  Marshall  assigns  its rights  under this  Agreement  and who agrees to
become bound by the provisions of this Agreement in accordance with Section 9.

            b. "Person" means a corporation,  a limited  liability  company,  an
association,  a partnership,  an  organization,  a business,  an  individual,  a
governmental or political subdivision thereof or a governmental agency.


<PAGE>

            c.  "Register,"   "registered,"  and   "registration"   refer  to  a
registration   effected  by  preparing  and  filing  one  or  more  Registration
Statements  (as defined  below) in compliance  with the 1933 Act and pursuant to
Rule 415  under  the 1933  Act or any  successor  rule  providing  for  offering
securities on a continuous or delayed basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").

            d.  "Registrable  Securities" means (i) the Conversion Shares issued
or issuable  upon  conversion of the  Preferred  Shares,  and (ii) any shares of
capital  stock issued or issuable with respect to the  Conversion  Shares or the
Preferred   Shares   as  a  result   of  any  stock   split,   stock   dividend,
recapitalization, exchange or similar event or otherwise.

            e.  "Registration  Statement"  means  a  registration  statement  or
registration  statements  of the  Company  filed  under  the 1933  Act  covering
Registrable Securities.

      2. REGISTRATION.

            a.  Registration.  The  Company  shall  prepare,  and,  as  soon  as
practicable  but in no event later than 60 days  following  the Closing Date, as
such term is defined in the Exchange  Agreement  (the "Filing  Deadline"),  file
with the SEC a Registration Statement or Registration  Statements (as necessary)
on Form S-3 covering  the resale of all of the  Registrable  Securities.  In the
event that Form S-3 is unavailable  for such a  registration,  the Company shall
use such other form as is available for such a  registration.  The Company shall
use its  best  efforts  to  cause  the  Registration  Statement  to be  declared
effective by the SEC as soon as practicable.

            b.  Allocation  of  Registrable  Securities.  The initial  number of
Registrable  Securities included in any Registration Statement and each increase
in the number of Registrable  Securities included therein shall be allocated pro
rata among the Investors  based on the number of Registrable  Securities held by
each  Investor at the time the  Registration  Statement  covering  such  initial
number of Registrable  Securities or increase  thereof is declared  effective by
the SEC. In the event that an Investor sells or otherwise  transfers any of such
Person's Registrable  Securities,  each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable  Securities included in such
Registration Statement for such transferor.  Any shares of Common Stock included
in a  Registration  Statement  and which  remain  allocated  to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement
shall be allocated to the remaining  Investors,  pro rata based on the number of
Registrable  Securities  then held by such  Investors  which are covered by such
Registration Statement.

            c. Sufficient Number of Shares  Registered.  In the event the number
of shares  available  under a Registration  Statement  filed pursuant to Section
2(a) is  insufficient  to cover all of the  Registrable  Securities  which  such
Registration  Statement is required to cover or an Investor's  allocated portion
of the Registrable  Securities pursuant to Section 2(b), the Company shall amend
the Registration  Statement,  or file a new Registration Statement (on the short
form available therefor,  if applicable),  or both, so as to cover at least 100%
of such  Registrable  Securities,  in each  case,  as soon as  practicable.  The
Company  shall  use  it  best  efforts  to  cause  such  amendment   and/or  new
Registration  Statement to become effective as soon as practicable following the
filing thereof.


                                       2
<PAGE>

      3. RELATED OBLIGATIONS.

      At such time as the Company is obligated to file a Registration  Statement
with the SEC  pursuant to Sections  2(a) or 2(c),  the Company will use its best
efforts to effect the  registration of the Registrable  Securities in accordance
with the intended  method of  disposition  thereof and,  pursuant  thereto,  the
Company shall have the following obligations:

            a. The  Company  shall  promptly  prepare  and  file  with the SEC a
Registration Statement with respect to the applicable Registrable Securities (as
soon as practicable but in no event later than the applicable  Filing  Deadline)
and use its best efforts to cause such  Registration  Statement  relating to the
Registrable  Securities to become  effective as soon as  practicable  after such
filing. The Company shall keep each Registration Statement effective pursuant to
Rule  415 at all  times  until  the  earlier  of (i) the  date as of  which  the
Investors  may  sell  all  of  the  Registrable   Securities   covered  by  such
Registration Statement without restriction pursuant to Rule 144, Rule 145 or any
other available  exemption,  each  promulgated  under the 1933 Act (or successor
thereto)  or any  other  available  exemption  or (ii)  the  date on  which  the
Investors  shall  have  sold  all the  Registrable  Securities  covered  by such
Registration Statement (the "Registration Period"), which Registration Statement
(including  any  amendments or supplements  thereto and  prospectuses  contained
therein),  to the  knowledge  of the  Company,  shall  not  contain  any  untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated  therein,  or necessary to make the statements  therein,  in light of the
circumstances in which they were made, not misleading.

            b. The Company shall  prepare and file with the SEC such  amendments
(including   post-effective   amendments)  and  supplements  to  a  Registration
Statement  and  the  prospectus  used  in  connection  with  such   Registration
Statement,  which  prospectus  is to be filed  pursuant to Rule 424  promulgated
under the 1933 Act,  as may be  necessary  to keep such  Registration  Statement
effective at all times during the Registration  Period, and, during such period,
comply with the  provisions of the 1933 Act with respect to the  disposition  of
all Registrable Securities of the Company covered by such Registration Statement
until such time as all of such  Registrable  Securities shall have been disposed
of in  accordance  with the  intended  methods of  disposition  by the seller or
sellers  thereof  as set forth in such  Registration  Statement.  In the case of
amendments and supplements to a Registration  Statement which are required to be
filed  pursuant to this Agreement  (including  pursuant to this Section 3(b)) by
reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any
analogous  report under the  Securities  Exchange  Act of 1934,  as amended (the
"1934 Act"), the Company shall have  incorporated  such report by reference into
the  Registration  Statement,  if applicable,  or shall file such  amendments or
supplements  with the SEC on the same day on which the 1934 Act  report is filed
which  created  the  requirement  for the  Company  to amend or  supplement  the
Registration Statement.

            c. The Company  shall  furnish to each  Investor  whose  Registrable
Securities  are included in any  Registration  Statement,  without  charge,  (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
such Registration  Statement and any amendment(s)  thereto,  including financial
statements and schedules,  all documents incorporated therein by reference,  all
exhibits and each  preliminary  prospectus,  (ii) upon the  effectiveness of any
such Registration Statement,  ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may


                                       3
<PAGE>

reasonably  request)  and (iii) such other  documents,  including  copies of any
preliminary or final  prospectus,  as such Investor may reasonably  request from
time  to  time  in  order  to  facilitate  the  disposition  of the  Registrable
Securities owned by such Investor.

            d. The  Company  shall  use its best  efforts  to (i)  register  and
qualify the  Registrable  Securities  covered by a Registration  Statement under
such other  securities  or "blue sky" laws of such  jurisdictions  in the United
States as any Investor  reasonably  requests  and as required,  (ii) prepare and
file  in  those  jurisdictions,   such  amendments   (including   post-effective
amendments) and supplements to such  registrations and  qualifications as may be
necessary to maintain the effectiveness  thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations
and  qualifications in effect at all times during the Registration  Period,  and
(iv) take all other  actions  reasonably  necessary  or advisable to qualify the
Registrable Securities for sale in such jurisdictions;  provided,  however, that
the  Company  shall not be required in  connection  therewith  or as a condition
thereto to (w) make any change to its certificate of  incorporation  or by-laws,
(x) qualify to do business in any  jurisdiction  where it would not otherwise be
required to qualify but for this  Section  3(d),  (y) subject  itself to general
taxation in any such  jurisdiction,  or (z) file a general consent to service of
process  in any such  jurisdiction.  The  Company  shall  promptly  notify  each
Investor who holds  Registrable  Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threat of any proceeding for such purpose.

            e. As promptly as practicable  after becoming aware of such event or
development,  the Company shall notify each Investor in writing of the happening
of any event as a result  of which the  prospectus  included  in a  Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated  therein or necessary to
make the statements therein, in light of the circumstances under which they were
made,  not  misleading  (provided that in no event shall such notice contain any
material, nonpublic information), and promptly prepare a supplement or amendment
to such Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such  supplement  or amendment  to each  Investor (or
such  other  number of copies as such  Investor  may  reasonably  request).  The
Company  shall  also  promptly  notify  each  Investor  in  writing  (i)  when a
prospectus or any  prospectus  supplement or  post-effective  amendment has been
filed,  and when a Registration  Statement or any  post-effective  amendment has
become  effective,  (ii) of any request by the SEC for amendments or supplements
to a Registration  Statement or related prospectus or related  information,  and
(iii) of the Company's reasonable  determination that a post-effective amendment
to a Registration Statement would be appropriate.

            f. The  Company  shall use its  reasonable  efforts to  prevent  the
issuance  of  any  stop  order  or  other   suspension  of  effectiveness  of  a
Registration  Statement,  or the suspension of the  qualification  of any of the
Registrable  Securities for sale in any jurisdiction within the United States of
America and, if such an order or suspension is issued,  to obtain the withdrawal
of such order or suspension at the earliest  possible  moment and to notify each
Investor  who holds  Registrable  Securities  being sold of the issuance of such
order  and the  resolution  thereof  or its  receipt  of  actual  notice  of the
initiation or threat of any proceeding for such purpose.


                                       4
<PAGE>

            g. The Company shall hold in confidence  and not make any disclosure
of  information  concerning  an  Investor  provided  to the  Company  unless (i)
disclosure  of such  information  is  necessary  to comply with federal or state
securities  laws, (ii) the disclosure of such  information is necessary to avoid
or correct a misstatement or omission in any Registration  Statement,  (iii) the
release of such  information  is ordered  pursuant to a subpoena or other final,
non-appealable   order  from  a  court  or   governmental   body  of   competent
jurisdiction,  (iv) such  information  has been made generally  available to the
public other than by  disclosure  in  violation  of this  Agreement or any other
agreement,  or (v)  consented to by such  Investor.  The Company  agrees that it
shall, upon learning that disclosure of such information  concerning an Investor
is sought in or by a court or  governmental  body of competent  jurisdiction  or
through other means,  give prompt written notice to such Investor and allow such
Investor,  at the Investor's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

            h.  The  Company  shall   cooperate  with  the  Investors  who  hold
Registrable  Securities  being  offered  and,  to  the  extent  applicable,   to
facilitate the timely  preparation and delivery of certificates (not bearing any
restrictive  legend)  representing  the  Registrable  Securities  to be  offered
pursuant to a Registration  Statement and enable such certificates to be in such
denominations  or amounts,  as the case may be, as the Investors may  reasonably
request and registered in such names as the Investors may request.

            i. The Company  shall  otherwise use its best efforts to comply with
all  applicable  rules  and  regulations  of the  SEC  in  connection  with  any
registration hereunder.

            j. Within two (2) business days after a Registration Statement which
covers  applicable  Registrable  Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the  transfer  agent  for such  Registrable  Securities  (with  copies to the
Investors  whose  Registrable  Securities  are  included  in  such  Registration
Statement)  confirmation  that such  Registration  Statement  has been  declared
effective by the SEC in the form attached hereto as Exhibit A.

            k. Notwithstanding  anything to the contrary in Section 3(e), at any
time after the applicable  Registration Statement has been declared effective by
the SEC, the Company may delay the disclosure of material non-public information
concerning the Company,  the disclosure of which at the time is not, in the good
faith  opinion of the Board of Directors of the Company and its counsel,  in the
best  interest  of the Company  and,  in the opinion of counsel to the  Company,
otherwise required (a "Grace Period");  provided,  however, that no Grace Period
shall  exceed 15  consecutive  days and  during  any 365 day  period  such Grace
Periods shall not exceed an aggregate of 30 days.

      4. OBLIGATIONS OF THE INVESTORS.

            a. At least  seven (7) days  prior to the first  anticipated  filing
date of the  Registration  Statement,  the Company shall notify each Investor in
writing  of the  information  the  Company  reasonably  requires  from each such
Investor  if such  Investor  elects to have any of such  Investor's  Registrable
Securities  included  in such  Registration  Statement.  It shall be a condition
precedent  to the  obligations  of the  Company  to  complete  the  registration
pursuant to this  Agreement  with  respect to the  Registrable  Securities  of a
particular Investor that such Investor shall furnish to


                                       5
<PAGE>

the Company such information  regarding itself, the Registrable  Securities held
by it and the intended method of disposition of the Registrable  Securities held
by it as shall  be  reasonably  required  to  effect  the  registration  of such
Registrable  Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.

            b. Each Investor by such  Investor's  acceptance of the  Registrable
Securities  agrees to cooperate with the Company as reasonably  requested by the
Company  in  connection  with the  preparation  and  filing of any  Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such  Investor's  election  to  exclude  all  of  such  Investor's   Registrable
Securities from such Registration Statement.

            c. Each  Investor  agrees that,  upon receipt of any notice from the
Company of the  happening of any event of the kind  described in Section 3(f) or
the  first  sentence  of  3(e),  such  Investor  will  immediately   discontinue
disposition of Registrable Securities pursuant to any Registration  Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the  supplemented or amended  prospectus  contemplated by Section 3(f) or the
first sentence of 3(e).  Notwithstanding  anything to the contrary,  the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee  of an  Investor  in  accordance  with the  terms  of the  Securities
Purchase  Agreement in connection  with any sale of Registrable  Securities with
respect to which an Investor  has entered  into a contract for sale prior to the
Investor's receipt of a notice from the Company of the happening of any event of
the kind  described in Section 3(f) or the first  sentence of 3(e) and for which
the Investor has not yet settled.

      5. EXPENSES OF REGISTRATION.

            All  reasonable   expenses,   other  than  underwriting   discounts,
commissions  and  transfer  taxes  incurred in  connection  with  registrations,
filings or  qualifications  pursuant  to  Sections 2 and 3,  including,  without
limitation,  all registration,  listing and  qualifications  fees,  printers and
accounting fees shall be paid by the Company.

      6. INDEMNIFICATION.

            In  the  event  any   Registrable   Securities  are  included  in  a
Registration Statement under this Agreement:

            a. To the fullest  extent  permitted by law, the Company  will,  and
hereby does, indemnify,  hold harmless and defend each Investor,  the directors,
officers, partners,  employees, agents,  representatives of, and each Person, if
any, who  controls  any Investor  within the meaning of the 1933 Act or 1934 Act
(each,  an  "Indemnified  Person"),   against  any  losses,   claims,   damages,
liabilities,  judgments, fines, penalties, charges, costs, reasonable attorneys'
fees, amounts paid in settlement or expenses,  joint or several,  (collectively,
"Claims") incurred in investigating,  preparing or defending any action,  claim,
suit, inquiry,  proceeding,  investigation or appeal taken from the foregoing by
or before any court or governmental,  administrative or other regulatory agency,
body or the SEC,  whether  pending or threatened,  whether or not an indemnified
party is or may be a party thereto ("Indemnified Damages"), to which any of them
may become subject  insofar as such Claims (or actions or  proceedings,  whether
commenced or threatened, in respect thereof) arise out of or are


                                       6
<PAGE>

based upon: (i) any untrue  statement or alleged untrue  statement of a material
fact in a Registration  Statement or any post-effective  amendment thereto or in
any filing made in connection with the  qualification  of the offering under the
securities  or other "blue sky" laws of any  jurisdiction  in which  Registrable
Securities are offered ("Blue Sky Filing"),  or the omission or alleged omission
to state a material fact required to be stated  therein or necessary to make the
statements  therein not misleading,  (ii) any untrue statement or alleged untrue
statement of a material  fact  contained in any  preliminary  prospectus if used
prior to the effective date of such Registration  Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement  thereto with the SEC) or the omission or alleged omission
to state  therein  any  material  fact  necessary  to make the  statements  made
therein,  in light of the circumstances  under which the statements therein were
made, not misleading or (iii) any violation or alleged  violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable  Securities pursuant to a Registration Statement (the
matters  in  the  foregoing  clauses  (i)  through  (iii)  being,  collectively,
"Violations").   The  Company  shall  reimburse  the  Investors  and  each  such
underwriter  or controlling  person,  promptly as such expenses are incurred and
are due and payable,  for any legal fees or  disbursements  or other  reasonable
expenses incurred by them in connection with investigating or defending any such
Claim.   Notwithstanding   anything  to  the  contrary   contained  herein,  the
indemnification agreement contained in this Section 6(a): (i) shall not apply to
a Claim by an Indemnified  Person arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information  furnished in writing
to the Company by such  Indemnified  Person expressly for use in connection with
the preparation of the Registration  Statement or any such amendment  thereof or
supplement  thereto;  (ii) shall not be  available  to the extent  such Claim is
based on a failure of the  Investor to deliver or to cause to be  delivered  the
prospectus  made  available by the Company,  if such  prospectus was timely made
available by the Company  pursuant to Section 3(c); and (iii) shall not apply to
amounts paid in settlement of any Claim if such  settlement is effected  without
the prior written consent of the Company, which consent will not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation  made by or on behalf of the Indemnified  Person and shall survive
the transfer of the Registrable  Securities by the Investors pursuant to Section
9.

            b. In  connection  with  any  Registration  Statement  in  which  an
Investor  is  participating,  each such  Investor  agrees to  severally  and not
jointly indemnify,  hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company,  the  directors,  officers,
partners,  employees,  agents,  representatives of, and each Person, if any, who
controls any  Investor  within the meaning of the 1933 Act or the 1934 Act (each
an "Indemnified  Party"),  against any Claim or Indemnified Damages to which any
of them may  become  subject,  under  the 1933 Act,  the 1934 Act or  otherwise,
insofar as such Claim or Indemnified  Damages arise out of or are based upon any
Violation,  in each  case to the  extent,  and  only to the  extent,  that  such
Violation  occurs in reliance  upon and in conformity  with written  information
furnished to the Company by such Investor  expressly for use in connection  with
such  Registration  Statement;  and, subject to Section 6(d), such Investor will
reimburse any legal or other expenses  reasonably incurred by them in connection
with  investigating  or defending any such Claim;  provided,  however,  that the
indemnity  agreement  contained  in this  Section  6(b) and the  agreement  with
respect to  contribution  contained in Section 7 shall not apply to amounts paid
in  settlement  of any Claim if such  settlement  is effected  without the prior
written consent of such Investor, which consent will not be unreasonably


                                       7
<PAGE>

withheld;  provided,  further,  however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as does
not  exceed  the net  proceeds  to such  Investor  as a  result  of the  sale of
Registrable Securities pursuant to such Registration  Statement.  Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on  behalf of such  Indemnified  Party and shall  survive  the  transfer  of the
Registrable  Securities by the Investors pursuant to Section 9.  Notwithstanding
anything  to  the  contrary  contained  herein,  the  indemnification  agreement
contained in this Section 6(b) with respect to any prospectus shall not inure to
the  benefit of any  Indemnified  Party if the untrue  statement  or omission of
material fact  contained in the prospectus was corrected and such new prospectus
was delivered to each Investor prior to such Investor's use of the prospectus to
which the Claim relates.

            c. Promptly  after receipt by an  Indemnified  Person or Indemnified
Party  under  this  Section  6 of notice of the  commencement  of any  action or
proceeding  (including any governmental action or proceeding) involving a Claim,
such  Indemnified  Person or  Indemnified  Party  shall,  if a Claim in  respect
thereof is to be made  against  any  indemnifying  party  under this  Section 6,
deliver to the indemnifying party a written notice of the commencement  thereof,
and the  indemnifying  party shall have the right to participate in, and, to the
extent the indemnifying  party so desires,  jointly with any other  indemnifying
party similarly  noticed,  to assume control of the defense thereof with counsel
mutually  satisfactory to the indemnifying  party and the Indemnified  Person or
the  Indemnified  Party,  as  the  case  may  be;  provided,  however,  that  an
Indemnified  Person or Indemnified  Party shall have the right to retain its own
counsel  with the fees  and  expenses  of not  more  than one  counsel  for such
Indemnified  Person or Indemnified  Party to be paid by the indemnifying  party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation  by such counsel of the Indemnified  Person or Indemnified  Party
and the  indemnifying  party would be  inappropriate  due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party  represented  by such counsel in such  proceeding.  The  Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection  with any  negotiation  or defense of any such action or claim by the
indemnifying  party and shall furnish to the indemnifying  party all information
reasonably  available  to the  Indemnified  Party or  Indemnified  Person  which
relates  to such  action  or  claim.  The  indemnifying  party  shall  keep  the
Indemnified  Party or  Indemnified  Person fully apprised at all times as to the
status of the defense or any settlement  negotiations  with respect thereto.  No
indemnifying  party shall be liable for any  settlement of any action,  claim or
proceeding effected without its prior written consent,  provided,  however, that
the indemnifying party shall not unreasonably  withhold,  delay or condition its
consent.  No indemnifying party shall,  without the prior written consent of the
Indemnified  Party or  Indemnified  Person,  consent to entry of any judgment or
enter into any  settlement  or other  compromise  which  does not  include as an
unconditional  term  thereof  the giving by the  claimant or  plaintiff  to such
Indemnified  Party or  Indemnified  Person of a release  from all  liability  in
respect to such claim or litigation.  Following  indemnification as provided for
hereunder,  the  indemnifying  party  shall be  subrogated  to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations  relating to the matter for which indemnification has been made.
The  failure  to  deliver  written  notice to the  indemnifying  party  within a
reasonable  time of the  commencement  of any such action shall not relieve such
indemnifying  party of any liability to the  Indemnified  Person or  Indemnified
Party under this Section 6, except to the extent that the indemnifying  party is
prejudiced in its ability to defend such action.


                                       8
<PAGE>

            d. The  indemnification  required by this Section 6 shall be made by
periodic  payments of the amount thereof during the course of the  investigation
or defense, as and when bills are received or Indemnified Damages are incurred.

            e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the  indemnifying  party or others,  and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

      7. CONTRIBUTION.

            To the  extent  any  indemnification  by an  indemnifying  party  is
prohibited or limited by law, the indemnifying  party agrees to make the maximum
contribution  with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable  Securities guilty of fraudulent  misrepresentation
(within  the  meaning of Section  11(f) of the 1933 Act)  shall be  entitled  to
contribution  from any seller of  Registrable  Securities  who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds  received by
such seller from the sale of such Registrable Securities.

      8. REPORTS UNDER THE 1934 ACT.

            With a view to making  available  to the  Investors  the benefits of
Rule 144 promulgated  under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the  Investors to sell  securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:

            a. make and keep public  information  available,  as those terms are
understood and defined in Rule 144; and

            b.  file  with the SEC in a timely  manner  all  reports  and  other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such  requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144.

      9. ASSIGNMENT OF REGISTRATION RIGHTS.

            The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable  Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights,  and a copy of such  agreement is furnished to the Company within a
reasonable time after such assignment;  (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such  transferee or assignee,  and (b) the  securities  with
respect to which such  registration  rights are being  transferred  or assigned;
(iii) immediately  following such transfer or assignment the further disposition
of such  securities by the  transferee or assignee is restricted  under the 1933
Act


                                       9
<PAGE>

and applicable  state  securities  laws;  (iv) at or before the time the Company
receives the written  notice  contemplated  by clause (ii) of this  sentence the
transferee or assignee  agrees in writing with the Company to be bound by all of
the provisions  contained herein;  and (v) such transfer shall have been made in
accordance  with  the  applicable   requirements  of  the  Securities   Purchase
Agreement.

      10. AMENDMENT OF REGISTRATION RIGHTS.

            Provisions  of this  Agreement  may be  amended  and 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 Company
and the  Investors  who hold at least a majority of the  Registrable  Securities
(assuming  full  conversion  of the Preferred  Shares).  Any amendment or waiver
effected in accordance  with this Section 10 shall be binding upon each Investor
and the Company.

      11. MISCELLANEOUS.

            a. A Person  is  deemed  to be a holder  of  Registrable  Securities
whenever  such  Person  owns or is  deemed  to own of  record  such  Registrable
Securities.  If  the  Company  receives  conflicting  instructions,  notices  or
elections  from  two or  more  Persons  with  respect  to the  same  Registrable
Securities,  the  Company  shall act upon the basis of  instructions,  notice or
election received from the registered owner of such Registrable Securities.

            b. Any notices,  consents,  waivers or other communications required
or  permitted to be given under the terms of this  Agreement  must be in writing
and will be deemed to have been  delivered:  (i) upon  receipt,  when  delivered
personally;  (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending  party);  or (iii) one  business  day after  deposit  with a  nationally
recognized  overnight  delivery service,  in each case properly addressed to the
party to  receive  the  same.  The  addresses  and  facsimile  numbers  for such
communications shall be to the address es and facsimile numbers set forth in the
Securities Purchase Agreement.  Written confirmation of receipt (A) given by the
recipient  of  such  notice,  consent,   waiver  or  other  communication,   (B)
mechanically  or  electronically  generated  by the sender's  facsimile  machine
containing the time, date,  recipient facsimile number and an image of the first
page of such  transmission  or (C)  provided by a courier or  overnight  courier
service shall be rebuttable  evidence of personal service,  receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

            c.  Failure of any party to exercise  any right or remedy under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

            d. The  corporate  laws of the State of  Delaware  shall  govern all
issues  concerning  the relative  rights of the Company and the Investors as its
stockholders.  All  other  questions  concerning  the  construction,   validity,
enforcement  and  interpretation  of this  Agreement  shall be  governed  by the
internal laws of the State of New York,  without  giving effect to any choice of
law or conflict of law  provision  or rule  (whether of the State of New York or
any other  jurisdiction)  that would  cause the  application  of the laws of any
jurisdiction other than the State of New York. Each


                                       10
<PAGE>

party hereby irrevocably submits to the exclusive  jurisdiction of the state and
federal  courts sitting in the City of New York,  borough of Manhattan,  for the
adjudication  of any dispute  hereunder  or in  connection  herewith or with any
transaction  contemplated  hereby or discussed  herein,  and hereby  irrevocably
waives,  and agrees not to assert in any suit,  action or proceeding,  any claim
that it is not personally  subject to the  jurisdiction of any such court,  that
such suit, action or proceeding is brought in an inconvenient  forum or that the
venue of such suit,  action or proceeding  is improper.  In the event that there
should be federal  jurisdiction,  the  parties  agree that they shall  refer the
matter to the Honorable  Richard M. Berman of the Southern  District of New York
as a "relater matter." Each party hereby  irrevocably waives personal service of
process  and  consents  to  process  being  served in any such  suit,  action or
proceeding  by  mailing a copy  thereof to such  party at the  address  for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient  service of process and notice  thereof.  Nothing  contained
herein  shall be deemed to limit in any way any  right to serve  process  in any
manner  permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction  or the  validity  or  enforceability  of  any  provision  of  this
Agreement in any other jurisdiction.

            e. This Agreement,  the Settlement Agreement, the Exchange Agreement
and the  Certificate of Designations  constitute the entire  agreement among the
parties hereto with respect to the subject matter hereof and thereof.  There are
no  restrictions,  promises,  warranties or  undertakings,  other than those set
forth or  referred  to  herein  and  therein.  This  Agreement,  the  Settlement
Agreement,  the Exchange Agreement and the Certificate of Designations supersede
all prior agreements and understandings among the parties hereto with respect to
the subject matter hereof and thereof.

            f. Subject to the  requirements  of Section 9, this Agreement  shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.

            g. The headings in this  Agreement are for  convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

            h. This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall  constitute one and the
same agreement.  This Agreement,  once executed by a party,  may be delivered to
the other party hereto by  facsimile  transmission  of a copy of this  Agreement
bearing the signature of the party so delivering this Agreement.

            i.  Each  party  shall  do and  perform,  or  cause  to be done  and
performed,  all such further acts and things,  and shall execute and deliver all
such other  agreements,  certificates,  instruments and documents,  as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

            j. All consents and other determinations to be made by the Investors
pursuant to this Agreement  shall be made,  unless  otherwise  specified in this
Agreement, by Investors holding


                                       11
<PAGE>

a majority of the Registrable Securities,  determined as if all of the Preferred
Shares then  outstanding  have been converted into or exercised for  Registrable
Securities.

            k.  This  Agreement  shall be deemed to be  jointly  drafted  by the
Company  and  Marshall  and shall not be  construed  against  any  person as the
drafter hereof.

            l. This  Agreement is intended for the benefit of the parties hereto
and  their  respective  permitted  successors  and  assigns,  and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

                            [signature page follows]


                                       12
<PAGE>

      IN WITNESS  WHEREOF,  the parties  have caused  this  Registration  Rights
Agreement to be duly executed as of day and year first above written.

COMPANY:                                                MARSHALL:
--------                                                ---------

LOG ON AMERICA, INC.                                    MARSHALL CAPITAL
                                                        MANAGEMENT, INC.

By: ___________________                                  By: ___________________
    Name:  David Paolo                                       Name:  Allan Weine
    Title: President                                         Title: President


                                       13
<PAGE>

                                                                       EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

[TRANSFER AGENT]
Attn: ___________________________________________

                            Re: Log On America, Inc.

Ladies and Gentlemen:

      We are  counsel  to Log On  America,  Inc.,  a Delaware  corporation  (the
"Company"),  and have  represented  the Company in connection  with that certain
Exchange  Agreement (the "Exchange  Agreement")  entered into by and between the
Company and Marshall Capital  Management,  Inc. (the "Holder") pursuant to which
the Company  issued to the Holder shares of its Series B  Convertible  Preferred
Stock,  par value $0.01 per share (the  "Preferred  Shares"),  convertible  into
shares of the  Company's  common  stock,  par value $0.01 per share (the "Common
Stock"). Pursuant to the Exchange Agreement, the Company also has entered into a
Registration  Rights  Agreement  with  the  Holder  (the  "Registration   Rights
Agreement")  pursuant  to which the  Company  agreed,  among  other  things,  to
register  the  Registrable  Securities  (as defined in the  Registration  Rights
Agreement), including the shares of Common Stock issuable upon conversion of the
Preferred Shares, under the Securities Act of 1933, as amended (the "1933 Act").
In  connection  with the Company's  obligations  under the  Registration  Rights
Agreement,  on ____________ ____, the Company filed a Registration  Statement on
Form S-3 (File No.  333-_____________)  (the "Registration  Statement") with the
Securities  and  Exchange  Commission  (the "SEC")  relating to the  Registrable
Securities which names the Holder as a selling stockholder thereunder.

      In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by  telephone  that the SEC has entered an order  declaring
the  Registration  Statement  effective  under  the 1933 Act at  [ENTER  TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,  after
telephonic  inquiry  of a  member  of the  SEC's  staff,  that  any  stop  order
suspending its  effectiveness  has been issued or that any  proceedings for that
purpose  are  pending  before,  or  threatened  by, the SEC and the  Registrable
Securities  are  available  for  resale  under  the  1933  Act  pursuant  to the
Registration Statement.

                                                        Very truly yours,

                                                        [ISSUER'S COUNSEL]

                                                        By: ____________________

cc:   Marshall Capital Management, Inc.


<PAGE>

                                                                       Exhibit E

                               EXCHANGE AGREEMENT

      EXCHANGE AGREEMENT (this "Agreement"), dated as of August __, 2001, by and
between Log On America,  Inc., a Delaware corporation,  with headquarters at One
Cookson  Place,  Providence,  Rhode Island 02903 (the  "Company"),  and Marshall
Capital  Management,  Inc., a Delaware  corporation,  with offices at 11 Madison
Avenue, New York, New York 10010 ("Marshall").

      WHEREAS:

      A. The Company and Marshall are executing,  delivering and performing this
Agreement in reliance upon the exemption from securities  registration  afforded
by Section 3(a)(9) of the Securities Act of 1933, as amended (the "1933 Act");

      B. The Company has  authorized  the  following new series of its preferred
stock, par value $0.01 per share:  the Company's Series B Convertible  Preferred
Stock (the  "Preferred  Stock"),  which shall be convertible  into shares of the
Company's  common  stock,  par value  $0.01 per share (the  "Common  Stock") (as
converted,  the  "Conversion  Shares"),  in  accordance  with  the  terms of the
Company's  Certificate of Designations,  Preferences and Rights of the Preferred
Stock,  substantially in the form attached hereto as Exhibit A (the "Certificate
of Designations");

      C. The  Company  and  Marshall  are  parties  to that  certain  Settlement
Agreement,  dated August 14, 2001 (the "Settlement Agreement"),  pursuant to the
terms of which,  inter  alia,  (a) the  Company is required to issue to Marshall
7,500 shares of the Preferred  Stock (the "Preferred  Shares"),  in exchange for
(b) 7,500 shares of the  Company's  Series A  Convertible  Preferred  Stock (the
"Series A Stock") held by Marshall and the warrant to acquire  297,102 shares of
Common Stock (the "Warrant") held by Marshall,  which, upon such exchange,  will
be cancelled; and

      D. Pursuant to the terms of the  Settlement  Agreement,  contemporaneously
with the  execution  and  delivery of this  Agreement,  the  parties  hereto are
executing and delivering a Registration  Rights  Agreement  substantially in the
form attached hereto as Exhibit B (the "Registration Rights Agreement") pursuant
to which the Company has agreed to provide certain registration rights under the
1933 Act and the rules and regulations  promulgated  thereunder,  and applicable
state securities law.

      NOW,  THEREFORE,  for good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby acknowledged,  the Company and Marshall agree as
follows:

      1. EXCHANGE OF PREFERRED SHARES.


<PAGE>

            a. Issuance of Preferred  Shares.  Subject to the  satisfaction  (or
waiver) of the conditions set forth in Sections 5 and 6 below, the Company shall
issue and deliver to Marshall in exchange for 7,500 shares of the Series A Stock
and the Warrant,  and Marshall  shall  accept from the Company  7,500  Preferred
Shares at the closing (the "Closing").

            b.  Closing  Date.   The  date  and  time  of  the  closing  of  the
transactions  contemplated  hereby (the "Closing  Date") shall be at 10:00 a.m.,
Eastern  Time,  on or before August 21, 2001,  subject to the  satisfaction  (or
waiver)  of the  conditions  set forth in  Sections 5 and 6 below (or such other
date as is mutually  agreed to by the Company and  Marshall).  The Closing shall
occur on the  Closing  Date at the  offices to be  mutually  agreed  upon by the
parties.

      2. MARSHALL'S REPRESENTATIONS AND WARRANTIES.

            Marshall represents and warrants that:

            a.  Investment  Purpose.  Marshall  (i) is acquiring  the  Preferred
Shares and (ii) upon  conversion  of the  Preferred  Shares,  will  acquire  the
Conversion Shares issuable upon conversion thereof (the Preferred Shares and the
Conversion Shares collectively are referred to herein as the "Securities"),  for
its own account for investment  only and not with a view towards,  or for resale
in connection with, the public sale or distribution thereof,  except pursuant to
sales registered or exempted under the 1933 Act; provided,  however,  subject to
Section 4(d) below, that by making the representations  herein Marshall does not
agree to hold the Securities for any minimum or specific term.

            b. Accredited Investor Status.  Marshall is an "accredited investor"
as that term is defined in Rule 501(a)(3) of Regulation D.

            c. Reliance on Exemptions.  Marshall understands that the Securities
are being issued to it in reliance on specific  exemptions from the registration
requirements of the United States federal and state securities laws and that the
Company  is  relying  in part upon the truth and  accuracy  of,  and  Marshall's
compliance with, the representations,  warranties,  agreements,  acknowledgments
and  understandings  of  Marshall  set forth  herein in order to  determine  the
availability  of such  exemptions and the eligibility of Marshall to acquire the
Securities.

            d.  Information.  Marshall  and  its  advisors,  if any,  have  been
furnished with all materials  relating to the business,  finances and operations
of the Company and  materials  relating to the offer and sale of the  Securities
which have been requested by Marshall.  Marshall and its advisors,  if any, have
been  afforded  the  opportunity  to  ask  questions  of the  Company.  Marshall
understands  that its  investment  in the  Securities  involves a high degree of
risk.  Marshall  has  sought  such  accounting,  legal and tax  advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.


                                       2
<PAGE>

            e. No  Governmental  Review.  Marshall  understands  that no  United
States federal or state agency or any other  government or  governmental  agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness  or  suitability  of the  investment  in the  Securities  nor have such
authorities  passed  upon  or  endorsed  the  merits  of  the  offering  of  the
Securities.

            f. Transfer or Resale.  Marshall understands that except as provided
in the Registration  Rights Agreement:  (i) the Securities have not been and are
not being  registered  under the 1933 Act or any state  securities laws, and may
not be offered for sale, sold,  assigned or transferred  unless (A) subsequently
registered  thereunder  or (B) Marshall  shall have  delivered to the Company an
opinion of counsel, in a form acceptable to the Company's counsel, to the effect
that such Securities to be sold,  assigned or transferred may be sold,  assigned
or transferred pursuant to an exemption from such registration;  or (C) Marshall
provides the Company with reasonable assurance that such Securities can be sold,
assigned or transferred  pursuant to Rule 144 promulgated under the 1933 Act, as
amended,  (or a  successor  rule  thereto)  ("Rule  144");  (ii) any sale of the
Securities  made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable,  any resale of the
Securities  under  circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require  compliance  with some other  exemption under the 1933
Act or the rules and  regulations of the  Securities  Exchange  Commission  (the
"SEC")  thereunder;  and (iii) neither the Company nor any other person is under
any  obligation  to  register  the  Securities  under  the 1933 Act or any state
securities  laws or to comply  with the terms and  conditions  of any  exemption
thereunder.  Notwithstanding  the  foregoing,  the  Securities may be pledged in
connection  with a bona  fide  margin  account  or  other  loan  secured  by the
securities.

            g. Legends.  Marshall  understands  that the  certificates  or other
instruments representing the Preferred Shares and until such time as the sale of
the Conversion Shares have been registered under the 1933 Act as contemplated by
the  Registration  Rights  Agreement,  the stock  certificates  representing the
Conversion Shares, except as set forth below, shall bear a restrictive legend in
substantially  the  following  form  (and a  stop-transfer  order  may be placed
against transfer of such stock certificates):

      THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN REGISTERED
      UNDER  THE  SECURITIES  ACT OF  1933,  AS  AMENDED,  OR  APPLICABLE  STATE
      SECURITIES  LAWS.  THE  SECURITIES  MAY NOT BE  OFFERED  FOR  SALE,  SOLD,
      TRANSFERRED   OR  ASSIGNED   (I)  IN  THE  ABSENCE  OF  (A)  AN  EFFECTIVE
      REGISTRATION  STATEMENT FOR THE  SECURITIES  UNDER THE  SECURITIES  ACT OF
      1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF
      COUNSEL, IN A FORM ACCEPTABLE TO THE COMPANY'S COUNSEL,  THAT REGISTRATION
      IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II)
      UNLESS  SOLD  PURSUANT  TO RULE 144 UNDER  SAID ACT.  NOTWITHSTANDING  THE
      FOREGOING,


                                       3
<PAGE>

      THE  SECURITIES  MAY BE  PLEDGED  IN  CONNECTION  WITH A BONA FIDE  MARGIN
      ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.

The legend  set forth  above  shall be removed  and the  Company  shall  issue a
certificate without such legend to the holder of the Securities upon which it is
stamped,  if,  unless  otherwise  required by state  securities  laws,  (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale transaction, such holder provides the Company with an opinion of counsel,
in a form acceptable to the Company's counsel, to the effect that a public sale,
assignment or transfer of the Securities may be made without  registration under
the 1933  Act,  or (iii)  such  holder  provides  the  Company  with  reasonable
assurances  that the  Securities  can be sold  pursuant  to Rule 144 without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately  sold.  Marshall  acknowledges,  covenants and agrees to
sell Securities  represented by a certificate(s)  from which the legend has been
removed only pursuant to (i) a registration  statement  effective under the 1933
Act or (ii)  advice of counsel  to  Marshall  that such sale is exempt  from the
registration requirements of Section 5 of the 1933 Act.

            h.  Authorization;   Enforcement;   Validity.  This  Agreement,  the
Settlement  Agreement and the  Registration  Rights Agreement have been duly and
validly  authorized,  executed and delivered on behalf of Marshall and are valid
and binding  agreements of Marshall  enforceable  against Marshall in accordance
with their terms,  subject as to enforceability to general  principles of equity
and  to   applicable   bankruptcy,   insolvency,   reorganization,   moratorium,
liquidation  and other  similar laws  relating to, or affecting  generally,  the
enforcement of applicable creditors' rights and remedies.

            i.  Series  A  Stock;  Warrant.  Marshall  owns  in  the  aggregate,
beneficially and of record, 7,500 shares of Series A Stock and the Warrant, free
and  clear  of all  liens,  claims  and  rights,  and  has not  sold,  assigned,
transferred,  pledged or  hypothecated  any such  shares of Series A Stock,  the
Warrant or any of its rights thereunder.

      3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

            The Company represents and warrants to Marshall that:

            a.  Organization  and Standing.  The Company is a  corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Delaware.  The  Company is  qualified  as a foreign  corporation  and is in good
standing in each jurisdiction in which the conduct of its business or the assets
and properties owned or leased by it require such  qualification,  except to the
extent that the failure to qualify would not reasonably be expected to result in
a  material  adverse  effect on the  financial  condition,  operations,  assets,
business, prospects or properties of the Company, taken as a whole.

            b.  Authorization;  Enforcement;  Validity.  (i) The Company has the
requisite  corporate  power and  authority  to enter  into this  Agreement,  the
Settlement Agreement, the Registration Rights


                                       4
<PAGE>

Agreement and each of the other agreements entered into by the parties hereto in
connection with the transactions  contemplated by this Agreement  (collectively,
the "Transaction Documents"), and to issue the Securities in accordance with the
terms hereof and thereof,  (ii) the  execution  and delivery of the  Transaction
Documents and the execution and filing of the Certificate of Designations by the
Company and the consummation by it of the transactions  contemplated  hereby and
thereby,  including without  limitation the issuance of the Preferred Shares and
the reservation for issuance and the issuance of the Conversion  Shares issuable
upon conversion thereof,  have been duly authorized and unanimously  approved by
the Company's Board of Directors, (iii) this Agreement, the Settlement Agreement
and the  Registration  Rights Agreement have been duly executed and delivered by
the  Company,  (iv) the  Transaction  Documents,  upon  execution  and  delivery
thereof,  will  constitute  the valid and  binding  obligations  of the  Company
enforceable  against the Company in accordance with their terms,  except as such
enforceability  may be  limited by general  principles  of equity or  applicable
bankruptcy, insolvency, reorganization,  moratorium, liquidation or similar laws
relating to, or affecting  generally,  the enforcement of creditors'  rights and
remedies,  and (v) prior to the Closing Date, the  Certificate  of  Designations
will have been filed with the  Secretary  of State of the State of Delaware  and
will be in full force and effect,  enforceable against the Company in accordance
with its terms and shall not have been  amended  unless in  compliance  with its
terms.

            c. Issuance of Securities.  The Preferred Shares are duly authorized
and,  upon issuance in  accordance  with the terms hereof,  shall be (i) validly
issued,  fully  paid and  non-assessable,  (ii) free from all  taxes,  liens and
charges with respect to the issue  thereof and (iii)  entitled to the rights and
preferences set forth in the Certificate of  Designations.  1,666,667  shares of
Common Stock (subject to adjustment pursuant to the Company's covenant set forth
in Section 4(b) below) have been duly  authorized and reserved for issuance upon
conversion  of the Preferred  Shares.  Upon  conversion  in accordance  with the
Certificate of Designations, the Conversion Shares will be validly issued, fully
paid and nonassessable  and free from all taxes,  liens and charges with respect
to the issue thereof,  with the holders being entitled to all rights accorded to
a holder of Common  Stock.  The  issuance  by the Company of the  Securities  is
exempt from registration  under the 1933 Act, assuming that the  representations
and  warranties  of Marshall  contained  in Section 2 are true and correct as to
factual matters.

      4. COVENANTS.

            a. Best  Efforts.  Each party  shall use its best  efforts to timely
satisfy each of the  conditions  to be satisfied by it as provided in Sections 5
and 6 of this Agreement.

            b.  Reservation  of  Shares.  The  Company  shall  take  all  action
necessary  to at all times have  authorized,  and  reserved  for the  purpose of
issuance,  no less than 100% of the number of shares of Common  Stock  needed to
provide for the  issuance of the shares of Common Stock upon  conversion  of all
outstanding Preferred Shares (without regard to any limitations on conversions).

            c.  Restriction  on Short  Sales.  Marshall  agrees  that during the
period  beginning on the Closing Date and ending on but excluding the earlier of
the first date on which Marshall no


                                       5
<PAGE>

longer holds any Preferred  Shares,  neither  Marshall nor any of its affiliates
acting under  Marshall's  direction or control  shall engage in any  transaction
constituting a "short sale" (as defined in Rule 3b-3 of the Securities  Exchange
Act of 1934, as amended) of the Common Stock.

            d.  Volume  Limitations.  Marshall  agrees  that  during  the period
beginning  on the Closing Date and ending on the first  anniversary  date of the
Closing Date, neither Marshall nor any of its affiliates acting under Marshall's
direction or control shall sell more than 140,000  shares of Common Stock during
any thirty day period. In the event the outstanding shares of Common Stock shall
be  subdivided  (by stock  dividend,  stock split or  otherwise)  into a greater
number of  shares  of Common  Stock or shall be  combined  or  consolidated  (by
reclassification  or otherwise)  into a lesser number of shares of Common Stock,
the  number of shares of Common  Stock  allowed to be sold by  Marshall  and its
affiliates  pursuant to this Section 4(d) shall be proportionately  increased or
decreased, as the case may be.

            e. The parties  acknowledge and agree that for purposes of Rule 144,
the  holding  period  for the  Preferred  Shares  and,  upon  conversion  of the
Preferred Shares, the Conversion Shares shall be deemed to have commenced on the
date on which the shares of Series A Stock were issued to Marshall.

            f. Marshall's Deliveries at Closing.  Subject to the satisfaction of
the  conditions  set forth in Section 6,  Marshall will on or before the Closing
(i) surrender (A) the certificate or certificates  representing the 7,500 shares
of  the  Series  A  Stock,  and  (B)  the  Warrant,  each  to  the  Company  for
cancellation; and (ii) execute and deliver the Settlement Agreement.

      5. CONDITIONS TO THE COMPANY'S OBLIGATION TO EXCHANGE.

            The  obligation  of the  Company  to issue the  Preferred  Shares to
Marshall at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following  conditions,  provided that these  conditions are
for the  Company's  sole benefit and may be waived by the Company at any time in
its sole discretion by providing Marshall with prior written notice thereof:

            (a) Marshall shall have executed each of the  Transaction  Documents
to which it is a party and delivered the same to the Company.

            (b) Marshall shall have delivered to the Company (A) the certificate
or certificates  representing 7,500 shares of Series A Stock and (B) the Warrant
for cancellation.

            (c) The representations and warranties of Marshall shall be true and
correct as of the date when made and as of the  Closing  Date as though  made at
that time (except for representations and warranties that speak as of a specific
date), and Marshall shall have performed, satisfied and complied in all material
respects  with  the  covenants,   agreements  and  conditions  required  by  the
Transaction Documents to be performed, satisfied or complied with by Marshall at
or prior to the Closing Date.


                                       6
<PAGE>

            (e) Credit  Suisse First Boston shall have  delivered to the Company
the sum of  $3,250,000  via wire  transfer to such account as  designated by the
Company.

      6. CONDITIONS TO MARSHALL'S OBLIGATION TO EXCHANGE.

            The  obligation  of  Marshall  to  exchange  the  shares of Series A
Preferred  Stock and the  Warrant  for the  Preferred  Shares at the  Closing is
subject to the  satisfaction,  at or before  the  Closing  Date,  of each of the
following  conditions,  provided that these  conditions are for Marshall's  sole
benefit  and may be waived by  Marshall  at any time in its sole  discretion  by
providing the Company with prior written notice thereof:

            (a)  The  Company  shall  have  executed  each  of  the  Transaction
Documents and delivered the same to Marshall.

            (b) The Certificate of  Designations  shall have been filed with the
Secretary  of State of the State of Delaware,  and a copy  thereof  certified by
such Secretary of State shall have been delivered to Marshall.

            (c) The  representations and warranties of the Company shall be true
and correct as of the date when made and as of the  Closing  Date as though made
at that time  (except  for  representations  and  warranties  that speak as of a
specific date) and the Company shall have  performed,  satisfied and complied in
all material respects with the covenants,  agreements and conditions required by
the  Transaction  Documents to be  performed,  satisfied or complied with by the
Company at or prior to the Closing Date.

            (d) The Company  shall have  executed and  delivered to Marshall the
stock certificate for the Preferred Shares (in such  denominations as such Buyer
shall request) being acquired by Marshall at the Closing.

            (e) The Board of  Directors  of the Company  shall have  adopted the
resolutions  consistent  with Section  3(b)(ii) above and the Company shall have
provided Marshall with reasonable evidence thereof.

            (f) As of the Closing  Date,  the Company shall have reserved out of
its  authorized and unissued  Common Stock,  solely for the purpose of effecting
the conversion of the Preferred Shares, 1,666,667 shares of Common Stock.

      7. GOVERNING LAW; MISCELLANEOUS.

            a. Governing Law;  Jurisdiction.  The corporate laws of the State of
Delaware shall govern all issues  concerning the relative  rights of the Company
and its stockholders. All other questions concerning the construction, validity,
enforcement  and  interpretation  of this  Agreement  shall be  governed  by the
internal laws of the State of New York, without giving effect to any choice


                                       7
<PAGE>

of law or conflict of law provision or rule (whether of the State of New York or
any other  jurisdictions)  that would cause the  application  of the laws of any
jurisdictions  other than the State of New York.  Each party hereby  irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York,  borough of Manhattan  (including the Honorable Richard M.
Berman of the  Southern  District  of New  York),  for the  adjudication  of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein,  and hereby  irrevocably  waives,  and agrees not to
assert in any suit,  action or  proceeding,  any claim that it is not personally
subject  to the  jurisdiction  of any such  court,  that  such  suit,  action or
proceeding is brought in an  inconvenient  forum or that the venue of such suit,
action or proceeding is improper.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or  proceeding  by mailing a copy  thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient  service of process and notice  thereof.  Nothing  contained
herein  shall be deemed to limit in any way any  right to serve  process  in any
manner permitted by law.

            b.  Counterparts.  This  Agreement  may be  executed  in two or more
identical  counterparts,  all of  which  shall  be  considered  one and the same
agreement and shall become effective when  counterparts have been signed by each
party and  delivered to the other  party;  provided  that a facsimile  signature
shall be  considered  due  execution  and shall be  binding  upon the  signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

            c. Headings.  The headings of this Agreement are for  convenience of
reference  and shall not form part of, or affect  the  interpretation  of,  this
Agreement.

            d. Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction,  such invalidity or unenforceability shall
not affect the validity or  enforceability of the remainder of this Agreement in
that  jurisdiction  or the validity or  enforceability  of any provision of this
Agreement in any other jurisdiction.

            e. Entire Agreement;  Amendments. This Agreement,  together with the
Settlement Agreement and the Registration Rights Agreement, supersedes all other
prior oral or written agreements between Marshall, the Company, their affiliates
and persons acting on their behalf with respect to the matters discussed herein,
and this  Agreement and the  instruments  referenced  herein  contain the entire
understanding  of the parties  with  respect to the matters  covered  herein and
therein and,  except as  specifically  set forth herein or therein,  neither the
Company  nor  any  Buyer  makes  any  representation,   warranty,   covenant  or
undertaking  with respect to such  matters.  No  provision  hereof may be waived
other  than by an  instrument  in  writing  signed  by the  party  against  whom
enforcement is sought.

            f. Notices. Any notices,  consents,  waivers or other communications
required or permitted to be given under the terms of this  Agreement  must be in
writing  and will be deemed  to have  been  delivered:  (i) upon  receipt,  when
delivered personally; (ii) upon receipt, when sent by


                                       8
<PAGE>

facsimile   (provided   confirmation   of   transmission   is   mechanically  or
electronically  generated and kept on file by the sending  party);  or (iii) one
business  day after  deposit  with a nationally  recognized  overnight  delivery
service,  in each case properly  addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:

      If to the Company:

            Log On America, Inc.
            One Cookson Place
            Providence, Rhode Island 02903
            Telephone:                (401) 453-6100
            Facsimile:                (401) 459-6222
            Attention:                David R. Paolo

      With a copy to:

            Silverman, Chernis, Shin & Byrne, P.C.
            381 Park Avenue South, Suite 1601
            New York, New York 10016
            Telephone:                (212) 779-8600
            Facsimile:                (212) 779-8858
            Attention:                Peter Silverman, Esq.

            Ganfer & Shore, LLP
            360 Lexington Avenue
            New York, New York 10017
            Telephone:                (212) 922-9250
            Facsimile:                (212) 922-9335
            Attention:                Steven J. Shore, Esq.

      If to Marshall:

            Marshall Capital Management, Inc.
            c/o Credit Suisse First Boston
            11 Madison Avenue, 7th Floor
            New York, New York 10010
            Telephone:                (212) 325-0038
            Facsimile:                (212) 325-6519
            Facsimile:                (312) 750-1031
            Attention:                Allan Weine

      With a copy to:


                                       9
<PAGE>

            Solomon, Zauderer, Ellenhorn, Frischer & Sharp
            45 Rockefeller Plaza
            New York, New York 10111
            Telephone:                (212) 956-3700
            Facsimile:                (212) 956-4068
            Attention:                Robert Mazzeo, Esq.

or at such other address and/or facsimile number and/or to the attention of such
other person as the  recipient  party has  specified by written  notice given to
each other party five days prior to the  effectiveness  of such change.  Written
confirmation  of receipt (A) given by the  recipient  of such  notice,  consent,
waiver or other communication,  (B) mechanically or electronically  generated by
the sender's  facsimile machine containing the time, date,  recipient  facsimile
number and an image of the first page of such  transmission or (C) provided by a
nationally recognized overnight delivery service shall be rebuttable evidence of
personal service,  receipt by facsimile or receipt from a nationally  recognized
overnight  delivery  service in accordance with clause (i), (ii) or (iii) above,
respectively.

            g. Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Preferred Shares.

            h. No Third Party Beneficiaries.  This Agreement is intended for the
benefit of the parties  hereto and their  respective  permitted  successors  and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

            i. Further Assurances.  Each party shall do and perform, or cause to
be done and performed,  all such further acts and things,  and shall execute and
deliver all such other agreements,  certificates,  instruments and documents, as
the other  party may  reasonably  request  in order to carry out the  intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

            j. No  Strict  Construction.  This  Agreement  shall be deemed to be
jointly  drafted by the Company and Marshall and shall not be construed  against
any person as the drafter hereof.

                            [signature page follows]


                                       10
<PAGE>

      IN WITNESS  WHEREOF,  Marshall and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.

COMPANY:                                                MARSHALL:
--------                                                ---------

LOG ON AMERICA, INC.                                    MARSHALL CAPITAL
                                                        MANAGEMENT, INC.

By: ____________________                                By: ____________________
    Name:  David Paolo                                      Name:  Allan Weine
    Title: President                                        Title: President


                                       11