Executed Version

                          SECURITIES PURCHASE AGREEMENT

                  This SECURITIES PURCHASE AGREEMENT, dated as of March 23, 2000
(this "Agreement"),  by and between IFS International Holdings, Inc., a Delaware
corporation,  with principal executive offices located at Rensselaer  Technology
Park,  300 Jordan Rd., Troy, NY 12180 (the  "Company"),  and The Shaar Fund Ltd.
("Buyer").

                  WHEREAS,  Buyer desires to purchase from the Company,  and the
Company  desires to issue and sell to Buyer,  upon the terms and  subject to the
conditions of this  Agreement,  (i) 200,000 shares of the Company's  Series B 5%
Convertible  Preferred  Stock,  par value  $0.001 per share  (collectively,  the
"Preferred  Shares"),  and  (ii)  Common  Stock  Purchase  Warrants  in the form
attached  hereto as Exhibit A to  purchase  200,000  shares of Common  Stock (as
defined below) (collectively, the "Warrants");

                  WHEREAS,  upon the  terms  and  subject  to the  designations,
preferences and rights set forth in the Company's  Certificate of Designation of
Series B 5% Convertible Preferred Stock in the form attached hereto as Exhibit B
(the  "Certificate of  Designation"),  the Preferred Shares are convertible into
shares of the Company's  common  stock,  par value $0.001 per share (the "Common
Stock"); and

                  WHEREAS,  the  Warrants,  upon the  terms and  subject  to the
conditions specified in the Warrants,  will be exercisable for a period of three
years;

                  NOW,  THEREFORE,  in  consideration  of the  premises  and the
mutual covenants  contained herein, the parties hereto,  intending to be legally
bound,  hereby agree as follows:  I.  PURCHASE AND SALE OF PREFERRED  SHARES AND
WARRANTS A. Transaction.  Buyer hereby agrees to purchase from the Company,  and
the  Company  has  offered  and  hereby  agrees  to issue and sell to Buyer in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities  Act of 1933, as amended (the  "Securities  Act"),  the Preferred
Shares and the Warrants to purchase  200,000 shares of Common Stock. B. Purchase
Price;  Form of Payment.  The purchase  price for the  Preferred  Shares and the
Warrants to be purchased by Buyer  hereunder  shall be $2,000,000 (the "Purchase
Price").  Simultaneously  with the execution of this Agreement,  Buyer shall pay
the Purchase Price by wire transfer of immediately available funds to the escrow
agent (the "Escrow  Agent")  identified in those certain Escrow  Instructions of
even date herewith, a copy of which is attached hereto as Exhibit C (the "Escrow
Instructions"). Simultaneously with the execution of this Agreement, the Company
shall  deliver one or more duly  authorized,  issued and  executed  certificates
(I/N/O  Buyer or, if the Company  otherwise  has been  notified,  I/N/O  Buyer's
nominee)  evidencing  the  Preferred  Shares  and the  Warrants  which  Buyer is
purchasing,  to the Escrow Agent or its designated depository.  By executing and
delivering  this  Agreement,  Buyer and the Company each hereby agree to observe
the  terms  and  conditions  of  the  Escrow  Instructions,  all  of  which  are
incorporated herein by reference as if fully set forth herein.

C. Method of Payment. Payment into escrow of the Purchase Price shall be made as
set forth in the Escrow Instructions.

II. BUYER'S REPRESENTATIONS AND WARRANTIES

                  Buyer represents and warrants to and covenants and agrees with
the Company as follows:

A. Buyer is purchasing  the  Preferred  Shares,  the Warrants,  the Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares"), the Common Stock,
if any,  issuable in payment of dividends on the Preferred Shares (the "Dividend
Shares"),  and the Common Stock  issuable  upon  conversion or redemption of the
Preferred Shares (the "Conversion  Shares" and,  collectively with the Preferred
Shares,  the  Warrants,   the  Warrant  Shares  and  the  Dividend  Shares,  the
"Securities") for its own account,  for investment  purposes only and not with a
view towards or in connection  with the public sale or  distribution  thereof in
violation of the Securities Act.

B.  Buyer is (i) an  "accredited  investor"  within  the  meaning of Rule 501 of
Regulation D under the Securities Act, (ii) experienced in making investments of
the kind  contemplated  by this  Agreement,  (iii)  capable,  by  reason  of its
business and financial  experience,  of evaluating the relative merits and risks
of an  investment  in the  Securities,  and (iv) able to afford  the loss of its
investment in the Securities.

C. Buyer  understands  that the  Securities  are being  offered  and sold by the
Company in reliance on an exemption from the  registration  requirements  of the
Securities Act and equivalent state securities and "blue sky" laws, and that the
Company is relying upon the accuracy of, and Buyer's  compliance  with,  Buyer's
representations,  warranties  and  covenants  set  forth  in this  Agreement  to
determine the  availability  of such  exemption and the  eligibility of Buyer to
purchase the Securities;  D. Buyer understands that the Securities have not been
approved  or  disapproved  by  the  Securities  and  Exchange   Commission  (the
"Commission") or any state securities commission.

E. This Agreement has been duly and validly  authorized,  executed and delivered
by Buyer and is a valid and binding agreement of Buyer enforceable against it in
accordance  with  its  terms,  subject  to  applicable  bankruptcy,  insolvency,
fraudulent  conveyance,  reorganization,  moratorium  and similar laws affecting
creditors'  rights and remedies  generally and except as rights to indemnity and
contribution  may be limited by federal or state  securities  laws or the public
policy  underlying such laws. F. Neither Buyer nor its affiliates nor any person
acting on its or their behalf has the intention of entering, or will enter into,
prior to the closing, any put option, short position or other similar instrument
or position with respect to the Common  Stock,  and neither Buyer nor any of its
affiliates  nor any person  acting on its or their  behalf  will use at any time
shares of Common  Stock  acquired  pursuant to this  Agreement to settle any put
option,  short  position or other  similar  instrument or position that may have
been entered into prior to the execution of this Agreement.

III.  THE COMPANY'S REPRESENTATIONS

                  The Company represents and warrants to Buyer that:
A.       Capitalization.
1.       The  authorized  capital stock of the Company  consists  solely of: (x)
         50,000,000 shares of Common Stock, of which 3,945,546 shares are issued
         and  outstanding  on the date  hereof;  and (y)  25,000,000  shares  of
         preferred stock, of which no shares are issued and  outstanding.  As of
         the date hereof,  the Company has outstanding stock options to purchase
         1,817,697  shares of Common Stock and warrants  outstanding to purchase
         4,946,037  shares of Common Stock.  The exercise price for each of such
         outstanding  options and warrants is  accurately  set forth on Schedule
         III.A.1. hereto.

2.       The Conversion  Shares, the Dividend Shares and the Warrant Shares have
         been duly and  validly  authorized  and  reserved  for  issuance by the
         Company,  and when issued by the Company upon conversion of, or in lieu
         of cash  dividends  on, the  Preferred  Shares and on  exercise  of the
         Warrants will be duly and validly issued,  fully paid and nonassessable
         and will not subject the holder thereof to personal liability by reason
         of being such holder.

3.       Except  as  disclosed  on  Schedule  III.A.3.   hereto,  there  are  no
         preemptive,  subscription,  "call,"  right  of first  refusal  or other
         similar  rights to acquire any  capital  stock of the Company or any of
         its  Subsidiaries  or other voting  securities of the Company that have
         been  issued or granted to any person and no other  obligations  of the
         Company or any of its  Subsidiaries  to issue,  grant,  extend or enter
         into  any  security,   option,  warrant,   "call,"  right,  commitment,
         agreement,  arrangement  or  undertaking  with  respect to any of their
         respective capital stock.

4.       Schedule  III.A.4.  hereto lists  all the  subsidiaries  of the Company
         (the "Subsidiaries"). Except as disclosed  on Schedule III.A.4. hereto,
         the Company  does not own  or  control,  directly  or  indirectly,  any
         interest  in any  other  corporation,  partnership,  limited  liability
         company,  unincorporated business organization,  association, trust  or
         other business entity.

5.       The Company has delivered to Buyer  complete and correct  copies of the
         Certificate of Incorporation and the By-Laws of each of the Company and
         the  Subsidiaries,  in  each  case  as  amended  to the  date  of  this
         Agreement.  Except as set forth on Schedule  III.A.5.,  the Company has
         delivered to Buyer true and complete copies of all minutes of the Board
         of Directors of the Company (the "Board of  Directors")  since March 1,
         1997.

B.       Organization; Reporting Company Status.
1.       Each  of  the  Company  and  the  Subsidiaries  is a  corporation  duly
         organized,  validly existing and in good standing under the laws of the
         state or jurisdiction in which it is incorporated and is duly qualified
         as a foreign  corporation in all  jurisdictions in which the failure so
         to qualify  would  reasonably  be expected  to have a material  adverse
         effect on the business, properties,  prospects, condition (financial or
         otherwise) or results of operations of the Company and the Subsidiaries
         taken  as a whole  or on the  consummation  of any of the  transactions
         contemplated by this Agreement (a "Material Adverse Effect").

2.       The Company has  registered  the Common Stock pursuant to Section 12 of
         the Securities  Exchange Act of 1934, as amended (the "Exchange  Act").
         The Common  Stock is listed and  traded on the Nasdaq  SmallCap  Market
         ("Nasdaq") and the Company has not received any notice  regarding,  and
         to  its  knowledge   there  is  no  threat  of,  the   termination   or
         discontinuance of the eligibility of the Common Stock for such listing.

C.  Authorization.  The Company (i) has duly and validly authorized and reserved
for issuance  1,000,000 shares of Common Stock, which is a number sufficient for
the conversion of and the payment of dividends (in lieu of cash payments) on the
200,000  Preferred  Shares and the exercise of the Warrants in full, and (ii) at
all times  from and after the date  hereof  shall  have a  sufficient  number of
shares of Common Stock duly and validly  authorized and reserved for issuance to
satisfy the conversion of Preferred Shares, the payment of dividends (in lieu of
cash payments) on the Preferred Shares and the exercise of the Warrants in full.
The Company understands and acknowledges the potentially  dilutive effect on the
Common  Stock of the  issuance  of the  Preferred  Shares and of the  Conversion
Shares,  the Dividend  Shares and the Warrant Shares upon the conversion of, and
payment of dividends on, the Preferred  Shares and the exercise of the Warrants,
respectively.  The Company  further  acknowledges  that its  obligation to issue
Conversion  Shares upon  conversion of the Preferred  Shares and Warrant  Shares
upon exercise of the Warrants in accordance with this Agreement, the Certificate
of Designation and the Warrants is absolute and unconditional  regardless of the
dilutive effect that such issuance may have on the ownership  interests of other
stockholders  of the Company and  notwithstanding  the  commencement of any case
under 11  U.S.C.  ss.  101 et seq.  (the  "Bankruptcy  Code").  In the event the
Company is a debtor under the Bankruptcy  Code, the Company hereby waives to the
fullest  extent  permitted any rights to relief it may have under 11 U.S.C.  ss.
362 in respect of the conversion of the Preferred Shares and the exercise of the
Warrants.  The  Company  agrees,  without  cost or expense to Buyer,  to take or
consent to any and all action necessary to effectuate relief under 11 U.S.C. ss.
362.  Schedule  III.C.  hereto  sets  forth (i) all  issuances  and sales by the
Company  since  April  30,  1999 of its  capital  stock,  and  other  securities
convertible  into or  exercisable  or  exchangeable  for  capital  stock  of the
Company,  (ii) the amount of such securities  sold,  including the amount of any
underlying shares of capital stock, (iii) the purchaser thereof, (iv) the amount
paid therefor,  and (v) the material terms of all  outstanding  capital stock of
the Company (other than the Common Stock).

D.  Authority;  Validity  and  Enforceability.  The  Company  has the  requisite
corporate  power and authority to file, and perform its obligations  under,  the
Certificate  of  Designation  and to enter into the  Documents  (as  hereinafter
defined)  and to  perform  all  of  its  obligations  hereunder  and  thereunder
(including  the  issuance,  sale and delivery to Buyer of the  Securities).  The
execution,  delivery and  performance  by the Company of the  Documents  and the
consummation by the Company of the transactions  contemplated hereby and thereby
(including,  without  limitation,  the filing of the  Certificate of Designation
with the Delaware  Secretary of State's  office,  the issuance of the  Preferred
Shares and the Warrants and the  issuance  and  reservation  for issuance of the
Conversion  Shares,  the Dividend  Shares and the Warrant Shares) have been duly
and validly  authorized  by all  necessary  corporate  action on the part of the
Company.  Each of the Documents has been duly and validly executed and delivered
by the Company and the  Certificate of Designation  has been duly filed with the
Delaware  Secretary  of  State's  office  by  the  Company,  and  each  Document
constitutes a valid and binding obligation of the Company enforceable against it
in  accordance  with its terms,  subject to applicable  bankruptcy,  insolvency,
fraudulent  conveyance,  reorganization,  moratorium  and similar laws affecting
creditors'  rights and remedies  generally and except as rights to indemnity and
contribution  may be limited by federal or state  securities  laws or the public
policy  underlying  such  laws.  The  Securities  have  been  duly  and  validly
authorized  for issuance by the Company and,  when executed and delivered by the
Company,  will be valid  and  binding  obligations  of the  Company  enforceable
against it in accordance  with their terms,  subject to  applicable  bankruptcy,
insolvency, fraudulent conveyance,  reorganization,  moratorium and similar laws
affecting  creditors'  rights  and  remedies  generally.  For  purposes  of this
Agreement, the term "Documents" means (i) this Agreement;  (ii) the Registration
Rights  Agreement of even date herewith between the Company and Buyer, a copy of
which is annexed  hereto as  Exhibit D (the  "Registration  Rights  Agreement");
(iii) the  Certificate  of  Designation;  (iv) the Warrants;  and (v) the Escrow
Instructions.

E. Validity of Issuance of the Securities. The Preferred Shares and the Warrants
as of the Closing Date, and the Conversion  Shares,  the Dividend Shares and the
Warrant  Shares  upon their  issuance  in  accordance  with the  Certificate  of
Designation  and  the  Warrants,   respectively,  will  be  validly  issued  and
outstanding,  fully paid and  nonassessable,  and not subject to any  preemptive
rights,  rights of first refusal,  tag-along rights,  drag-along rights or other
similar rights.

F. Non-contravention.  Except as set forth on Schedule III.F., the execution and
delivery by the Company of the Documents,  the issuance of the  Securities,  and
the consummation by the Company of the other  transactions  contemplated  hereby
and thereby,  including,  without  limitation,  the filing of the Certificate of
Designation  with  the  Delaware  Secretary  of  State's  office,  do  not,  and
compliance  with the provisions of this Agreement and other  Documents will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse  of  time,  or both)  under,  or give  rise to a right of  termination,
cancellation  or  acceleration  of any obligation or loss of a material  benefit
under, or result in the creation of any Lien (as defined in Section III.V.) upon
any of the properties or assets of the Company or any of its Subsidiaries under,
or result in the  termination of, or require that any consent be obtained or any
notice be given with respect to, (i) the Certificate of Incorporation or By-Laws
of the Company or the comparable  charter or organizational  documents of any of
its  Subsidiaries,  (ii) any loan or credit  agreement,  note,  bond,  mortgage,
indenture,  lease, contract or other agreement,  instrument or permit applicable
to the Company or any of its  Subsidiaries  or their  respective  properties  or
assets,  or (iii) any Law (as defined in Section  III.N.)  applicable to, or any
judgment,  decree or order of any court or government  body having  jurisdiction
over,  the  Company  or any  of its  Subsidiaries  or  any of  their  respective
properties or assets.

G. Approvals.  No  authorization,  approval or consent of any court or public or
governmental  authority  is  required  to be  obtained  by the  Company  for the
issuance and sale of the  Preferred  Shares or the  Warrants (or the  Conversion
Shares,  the Dividend Shares or Warrant Shares) to Buyer as contemplated by this
Agreement,  except  such  authorizations,  approvals  and  consents as have been
obtained by the Company prior to the date hereof.

H.  Commission  Filings.  The Company  has  properly  and timely  filed with the
Commission all reports, proxy statements,  forms and other documents required to
be filed with the Commission under the Securities Act and the Exchange Act since
March 1, 1997 (the "Commission Filings").  As of their respective dates, (i) the
Commission  Filings  complied in all material  respects with the requirements of
the  Securities  Act or the Exchange  Act, as the case may be, and the rules and
regulations  of  the  Commission   promulgated  thereunder  applicable  to  such
Commission  Filings,  and (ii) none of the Commission  Filings  contained at the
time of its filing any untrue statement of a material fact or omitted to state a
material  fact  required to be stated  therein or necessary in order to make the
statements  therein,  in light of the circumstances  under which they were made,
not  misleading.  The  financial  statements  of  the  Company  included  in the
Commission Filings, as of the dates of such documents, were true and complete in
all material respects and complied with applicable  accounting  requirements and
the published rules and regulations of the Commission with respect thereto, were
prepared in accordance  with  generally  accepted  accounting  principles in the
United States ("GAAP") (except in the case of unaudited  statements permitted by
Form 10-Q under the  Exchange  Act)  applied on a  consistent  basis  during the
periods  involved  (except as may be indicated in the notes  thereto) and fairly
presented  the   consolidated   financial   position  of  the  Company  and  its
Subsidiaries  as of the dates  thereof  and the  consolidated  results  of their
operations  and cash flows for the periods then ended  (subject,  in the case of
unaudited statements, to normal year-end audit adjustments that in the aggregate
are not material and to any other adjustment described therein).

I.  Absence of Certain  Changes.  Since the  Balance  Sheet Date (as  defined in
Section III.M.),  there has not occurred any change, event or development in the
business, financial condition, prospects or results of operations of the Company
and the  Subsidiaries,  there has not existed any condition having or reasonably
likely to have a Material  Adverse Effect,  and the Company and the Subsidiaries
have conducted their respective businesses only in the ordinary course.

J. Full  Disclosure.  There is no fact known to the Company  (other than general
economic or industry conditions known to the public generally) that has not been
fully  disclosed  in writing to Buyer that (i)  reasonably  could be expected to
have a  Material  Adverse  Effect  or  (ii)  reasonably  could  be  expected  to
materially  and  adversely  affect  the  ability of the  Company to perform  its
obligations pursuant to the Documents.

K. Absence of Litigation.  Except as set forth on Schedule III.K., there are (i)
no suits,  actions or  proceedings  pending or, to the knowledge of the Company,
threatened  against the Company or any of its Subsidiaries,  (ii) no complaints,
lawsuits,  charges or other  proceedings  pending  or, to the  knowledge  of the
Company,  threatened  in any  forum by or on  behalf  of any  present  or former
employee of the Company or any of its Subsidiaries, any applicant for employment
or classes of the foregoing  alleging breach of any express or implied  contract
of  employment,  any  applicable  law governing  employment  or the  termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment  relationship,  and (iii) no judgments,  decrees,  injunctions or
orders  of any court or other  governmental  entity  or  arbitrator  outstanding
against the Company or any Subsidiary.

L.  Absence of Events of  Default.  Except as set forth in Schedule  III.L.,  no
"Event of  Default"  (as defined in any  agreement  or  instrument  to which the
Company  is a party) and no event  which,  with  notice,  lapse of time or both,
would  constitute  an Event of Default  (as so  defined),  has  occurred  and is
continuing.

M. Financial Statements;  No Undisclosed Liabilities.  The Company has delivered
to Buyer  true and  complete  copies  of the (i)  audited  balance  sheet of the
Company and the Subsidiaries as at April 30, 1999, 1998 and 1997,  respectively,
and the related audited  statements of income,  changes in stockholders'  equity
and cash flows for the three fiscal  years ended April 30,  1999,  1998 and 1997
including  the related notes and schedules  thereto and (ii)  unaudited  balance
sheets of the Company and the Subsidiaries and the statements of income, changes
in  stockholders'  equity  and cash  flows as at the end of and for each  fiscal
quarter  ended since April 30, 1999  including  the related  notes and schedules
thereto,   all  certified  by  the  chief  financial   officer  of  the  Company
(collectively,  the "Financial Statements"), and all management letters, if any,
from the  Company's  independent  auditors  relating  to the dates  and  periods
covered  by the  Financial  Statements.  Each  of the  Financial  Statements  is
complete and correct in all material  respects,  has been prepared in accordance
with GAAP (subject, in the case of the interim Financial  Statements,  to normal
year end  adjustments  and the absence of  footnotes),  and fairly  presents the
financial  position,  results of operations  and cash flows of the Company as at
the dates and for the  periods  indicated.  For  purposes  hereof,  the  audited
balance sheet of the Company as at April 30, 1999 is hereinafter  referred to as
the  "Balance  Sheet"  and  April 30,  1999 is  hereinafter  referred  to as the
"Balance  Sheet  Date".  The  Company  has  no   indebtedness,   obligations  or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether  due or to  become  due),  which was not fully  reflected  in,  reserved
against or  otherwise  described  in the Balance  Sheet or the notes  thereto or
incurred in the ordinary  course of business  consistent with the Company's past
practices since the Balance Sheet Date.

N. Compliance with Laws; Permits. Each of the Company and its Subsidiaries is in
compliance with all laws,  rules,  regulations,  codes,  ordinances and statutes
(collectively,  "Laws") applicable to it or to the conduct of its business.  The
Company possesses all material  permits,  approvals,  authorizations,  licenses,
certificates and consents from all public and governmental authorities which are
necessary to conduct its business.

O. Related Party  Transactions.  Except as set forth on Schedule III.O.  hereto,
neither the Company nor any of its officers,  directors or "Affiliates" (as such
term is defined in Rule 12b-2 under the Exchange  Act) nor any family  member of
any  officer,  director or Affiliate of the Company has borrowed any moneys from
or has outstanding any indebtedness or other similar  obligations to the Company
or any of the  Subsidiaries.  Except as set  forth on  Schedule  III.O.  hereto,
neither the Company nor any of its  officers,  directors or  Affiliates  nor any
family member of any officer,  director or Affiliate of the Company (i) owns any
direct or  indirect  interest  constituting  more than a 1% equity  (or  similar
profit  participation)  interest  in, or  controls  or is a  director,  officer,
partner,  member or employee of, or consultant or lender to or borrower from, or
has the right to  participate  in the profits of, any person or entity  which is
(x) a competitor,  supplier,  customer,  landlord, tenant, creditor or debtor of
the Company or any Subsidiary, (y) engaged in a business related to the business
of the Company or any  Subsidiary,  or (z) a participant  in any  transaction to
which  the  Company  or any  Subsidiary  is a party  or  (ii) is a party  to any
contract,  agreement,  commitment or other  arrangement  with the Company or any
Subsidiary.

P. Insurance.  Each of the Company and the Subsidiaries  maintains  property and
casualty,  general  liability,  workers'  compensation,   environmental  hazard,
personal injury and other similar types of insurance with financially  sound and
reputable  insurers that is adequate and consistent with industry  standards and
the  Company's  historical  claims  experience.  None  of  the  Company  or  the
Subsidiaries  has received  notice from,  and none of them has  knowledge of any
threat by, any insurer (that has issued any  insurance  policy to the Company or
any  Subsidiary)  that such insurer  intends to deny  coverage  under or cancel,
discontinue or not renew any insurance policy presently in force.

Q.  Securities  Law Matters.  Assuming the accuracy of the  representations  and
warranties  of Buyer set forth in Article  II hereof,  the offer and sale by the
Company of the  Securities is exempt from (i) the  registration  and  prospectus
delivery requirements of the Securities Act and the rules and regulations of the
Commission thereunder and (ii) the registration and/or qualification  provisions
of all applicable  state  securities and "blue sky" laws. Other than pursuant to
an effective  registration  statement  under the Securities Act, the Company has
not issued,  offered or sold the Preferred  Shares or any shares of Common Stock
(including for this purpose any securities of the same or a similar class as the
Preferred  Shares  or  Common  Stock,  or any  securities  convertible  into  or
exchangeable or exercisable for the Preferred Shares or Common Stock or any such
other  securities)  within the one-year  period next  preceding the date hereof,
except as  disclosed  on  Schedule  III.Q.  hereto,  and the  Company  shall not
directly or indirectly take, and shall not permit any of its directors, officers
or Affiliates  directly or indirectly to take,  any action  (including,  without
limitation, any offering or sale to any person or entity of the Preferred Shares
or shares of Common  Stock)  which  will make  unavailable  the  exemption  from
Securities Act  registration  being relied upon by the Company for the offer and
sale to Buyer of the  Preferred  Shares  and the  Warrants  (and the  Conversion
Shares,  the Dividend  Shares and the Warrant  Shares) as  contemplated  by this
Agreement.  No form of  general  solicitation  or  advertising  has been used or
authorized  by the Company or any of its  officers,  directors or  Affiliates in
connection with the offer or sale of the Preferred  Shares and the Warrants (and
the  Conversion   Shares,  the  Dividend  Shares  and  the  Warrant  Shares)  as
contemplated  by this Agreement or any other agreement to which the Company is a
party. R. Environmental Matters.

                  Except as set forth on Schedule III.R. hereto:

     1.   The Company,  the Subsidiaries and their respective  operations are in
          compliance  with all  applicable  Environmental  Laws and all  permits
          (including terms, conditions, and limitations therein) issued pursuant
          to Environmental Laws or otherwise;

     2.   Each of the Company and the  Subsidiaries  has all permits,  licenses,
          waivers,  exceptions,  and  exemptions  required  under all applicable
          Environmental Laws necessary to operate its business;

     3.   None  of  the  Company  or the  Subsidiaries  is  the  subject  of any
          outstanding  written  order  of or  agreement  with  any  governmental
          authority or person respecting (i) Environmental Laws or permits, (ii)
          Remedial  Action  or  (iii)  any  Release  or  threatened  Release  of
          Hazardous Materials;

     4.   None of the  Company or the  Subsidiaries  has  received  any  written
          communication   alleging   that  it  may  be  in   violation   of  any
          Environmental  Law or any permit issued pursuant to any  Environmental
          Law, or may have any liability under any Environmental Law;

     5.   None of the Company or the Subsidiaries has any liability,  contingent
          or otherwise,  in connection  with any presence,  treatment,  storage,
          disposal  or Release of any  Hazardous  Materials  whether on property
          owned or  operated  by the  Company or any  Subsidiary  or property of
          third  parties,  and  none  of the  Company  or the  Subsidiaries  has
          transported,   or  arranged  for   transportation  of,  any  Hazardous
          Materials for treatment or disposal on any property;

     6.   There are no investigations of the business,  operations, or currently
          or previously owned, operated or leased property of the Company or any
          Subsidiary pending or threatened which could lead to the imposition of
          any case or liability pursuant to any Environmental Law;

     7.   There is not located at any of the properties owned or operated by the
          Company or any  Subsidiary  any (A)  underground  storage  tanks,  (B)
          asbestos-containing    material    or   (C)    equipment    containing
          polychlorinated biphenyls;

     8.   Each of the Company  and the  Subsidiaries  has  provided to Buyer all
          environmentally  related  assessments,   audits,   studies,   reports,
          analyses,  and results of investigations that have been performed with
          respect to the  currently  or  previously  owned,  leased or  operated
          properties or activities of the Company and such Subsidiaries;

     9.   There are no liens arising under or pursuant to any  Environmental Law
          on any real property owned,  operated, or leased by the Company or any
          Subsidiary, and no action of any governmental authority has been taken
          or, to the  knowledge  of the  Company,  is in process of being  taken
          which could subject any of such properties to such liens,  and none of
          the Company or the Subsidiaries has been or is expected to be required
          to place  any  notice  or  restriction  relating  to the  presence  of
          Hazardous Material at any real property owned,  operated, or leased by
          it in any deed to such property;

     10.  Neither the Company nor any of the  Subsidiaries  owns,  operates,  or
          leases any hazardous waste generation, treatment, storage, or disposal
          facility,  as such terms are used  pursuant to the RCRA and related or
          analogous state,  local, or foreign law. None of the properties owned,
          operated,  or leased by the Company,  any of the  Subsidiaries  or any
          predecessor  thereof are now, or were in the past, used in any part as
          a dump,  landfill,  or disposal site, and neither the Company,  any of
          the  Subsidiaries  nor any  predecessor  of any of them has filled any
          wetlands;

     11.  The purchase  that is the subject of this  Agreement  will not require
          any governmental  approvals under Environmental Laws,  including those
          that are  triggered  by  sales  or  transfers  of  businesses  or real
          property,  including,  as  examples  and without  limitation,  the New
          Jersey  Industrial Site Recovery Act, N.J. Stat.  13:1K-7 et seq., and
          the Connecticut  Transfer of  Establishments  Act, Conn. Gen. Stat.ss.
          22a-134 et seq.;

     12.  There  is no  currently  existing  requirement  or  requirement  to be
          imposed in the future by any Environmental Law or Environmental Permit
          which  could  result  in  the  incurrence  of a  cost  that  could  be
          reasonably expected to have a Material Adverse Effect; and

13.      Each of the Company and each of the Subsidiaries has disclosed to Buyer
         all  other  acts or  conditions  that  could  result  in any  costs  or
         liabilities under Environmental Laws.

                  For purposes of this Section III.R.:

                  "Environmental Law" means any foreign, federal, state or local
statute,  regulation,  ordinance, or common law as now or hereafter in effect in
any way relating to the  protection  of human  health,  safety or welfare or the
environment  including,  without  limitation,  the  Comprehensive  Environmental
Response, Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Resource  Conservation and Recovery Act ("RCRA"),  the Clean Water Act,
the Clean Air Act, the Toxic  Substances  Control Act, the Federal  Insecticide,
Fungicide,  and Rodenticide Act and the Occupational  Safety and Health Act, and
the regulations promulgated pursuant to any of them;

                  "Hazardous  Material"  means  any  substance  that is  listed,
classified or regulated pursuant to any Environmental Law, including  petroleum,
gasoline, and any other petroleum product,  by-product,  fraction or derivative,
asbestos or  asbestos-containing  material,  lead-containing  paint,  water,  or
plumbing, polychlorinated biphenyls, radioactive materials and radon;

                  "Release"  means any placement,  release,  spill,  filtration,
emission, leaking, pumping, injection, deposit, disposal, discharge,  dispersal,
migration,  or leaching to, through, or under the indoor or outdoor environment,
or into, through, under, or out of any property; and

                  "Remedial  Action"  means any action to (x) clean up,  remove,
remediate, treat or in any other way address any Hazardous Material; (y) prevent
or contain the Release of any  Hazardous  Material;  or (z) perform  studies and
investigations  or  post-remedial  monitoring and care in relation to (x) or (y)
above.

S. Labor Matters.  Neither the Company nor any of the  Subsidiaries  is party to
any  labor  or  collective  bargaining  agreement,  and  there  are no  labor or
collective  bargaining  agreements which pertain to any employees of the Company
or any Subsidiary.  No employees of the Company or any of the  Subsidiaries  are
represented  by any labor  organization  and none of such  employees  has made a
pending demand for recognition,  and there are no representation  proceedings or
petitions  seeking a  representation  proceeding  presently  pending  or, to the
Company's knowledge,  threatened to be brought or filed, with the National Labor
Relations  Board or  other  labor  relations  tribunal.  There is no  organizing
activity  involving  the Company or any  Subsidiary  pending or to the Company's
knowledge,  threatened  by any labor  organization  or group of employees of the
Company or any of the  Subsidiaries.  There are no (i) strikes,  work stoppages,
slowdowns,  lockouts or arbitrations or (ii) material  grievances or other labor
disputes  pending or, to the  knowledge  of the Company,  threatened  against or
involving  the  Company or any of the  Subsidiaries.  There are no unfair  labor
practice charges,  grievances or complaints  pending or, to the knowledge of the
Company, threatened by or on behalf of any employee or group of employees of the
Company or any of the Subsidiaries.

T. ERISA Matters. All Plans maintained by the Company or any of its Subsidiaries
and  ERISA   Affiliates  are  listed  in  Schedule  III.T.  and  copies  of  all
documentation  relating to such Plans (including,  but not limited to, copies of
written Plans,  written  descriptions of oral Plans,  summary plan descriptions,
trust agreements,  the three most recent annual returns, employee communications
and IRS  determination  letters)  have been  delivered to or made  available for
review by the Buyer. Each Plan has at all times been maintained and administered
in all material  respects in accordance  with its terms and the  requirements of
applicable law,  including ERISA and the Code, and each Plan intended to qualify
under  section  401(a) of the Code has at all times since its  adoption  been so
qualified,  and each trust  which forms a part of any such plan has at all times
since its adoption been tax-exempt under section 501(a) of the Code. The Company
and each of its  Subsidiaries  and ERISA  Affiliates  are in  compliance  in all
material  respects with all provisions of ERISA  applicable to it. No Reportable
Event has occurred,  been waived or exists as to which the Company or any of its
Subsidiaries  and ERISA  Affiliates was required to file a report with the PBGC,
and the present value of all liabilities under each Pension Plan (based on those
assumptions  used to fund such Plans) listed in Schedule  III.T.  did not, as of
the most recent annual  valuation date applicable  thereto,  exceed the value of
the assets of such Pension Plan. None of the Company, its Subsidiaries and ERISA
Affiliates  has  incurred,  or  reasonably  expects  to  incur,  any  Withdrawal
Liability  with  respect  to any  Multi-employer  Plan  that  could  result in a
Material  Adverse  Effect.  None of the  Company,  its  Subsidiaries  and  ERISA
Affiliates  has received any  notification  that any  Multi-employer  Plan is in
reorganization  or has been terminated  within the meaning of Title IV of ERISA,
and no  Multi-employer  Plan is reasonably  expected to be in  reorganization or
termination  where such  reorganization  or  termination  has  resulted or could
reasonably be expected to result in increases to the  contributions  required to
be made to such Plan or otherwise. No direct,  contingent or secondary liability
has been  incurred  or is  expected  to be incurred by the Company or any of its
Subsidiaries  under Title IV of ERISA to any party with respect to any Plan,  or
with respect to any other Plan presently or heretofore maintained or contributed
to by any ERISA  Affiliate.  Neither the Company nor any of its Subsidiaries and
ERISA  Affiliates  has incurred any liability for any tax imposed under sections
4971 through 4980B of the Code or civil liability under section 502(i) or (l) of
ERISA.  No suit,  action or other  litigation  or any other  claim  which  could
reasonably  be  expected  to result in a  material  liability  or expense to the
Company or any of its  Subsidiaries or ERISA  Affiliates  (excluding  claims for
benefits  incurred in the ordinary  course of plan  activities) has been brought
or, to the knowledge of the Company,  threatened  against or with respect to any
Plan and there are no facts or circumstances  known to the Company or any of its
Subsidiaries or ERISA  Affiliates that could reasonably be expected to give rise
to any such suit,  action or other  litigation.  All contributions to Plans that
were  required  to be made under such  Plans  have been made,  and all  benefits
accrued under any unfunded Plan have been paid, accrued or otherwise  adequately
reserved in accordance with GAAP, all of which accruals under unfunded Plans are
as disclosed in Schedule  III.T.,  and the Company,  its  Subsidiaries and ERISA
Affiliates have each performed all material obligations required to be performed
under all Plans.  The execution,  delivery and performance of this Agreement and
the other Documents and the consummation of the transactions contemplated hereby
and thereby  (including,  without  limitation,  the offer, issue and sale by the
Company,  and the purchase by the Buyer, of the Preferred Shares, the Conversion
Shares,  the Warrants,  the Warrant Shares and Dividend Shares) will not involve
any  "prohibited  transaction"  within  the  meaning  of ERISA or the Code  with
respect to any Plan.

                  As used in this Agreement:

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

                  "ERISA" means the Employee  Retirement  Income Security Act of
1974, or any successor statute, together with the regulations thereunder, as the
same may be amended from time to time.

                  "ERISA  Affiliate" means any trade or business (whether or not
incorporated) that was, is or hereafter may become, a member of a group of which
the Company is a member and which is treated as a single  employer under section
414 of the Code.

                  "Multi-employer  Plan" means a multi-employer  plan as defined
in  section  4001(a)(3)  of ERISA to which the  Company  or any ERISA  Affiliate
(other than one considered an ERISA Affiliate only pursuant to subsection (m) or
(o) of section  414 of the Code) is making or  accruing  an  obligation  to make
contributions, or has within any of the preceding six plan years made or accrued
an obligation to make contributions.

                  "PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.

                  "Pension   Plan"  means  any   pension   plan  (other  than  a
Multi-employer  Plan)  subject to the  provision of Title IV of ERISA or section
412 of the Code that is  maintained  for  employees of the Company or any of its
Subsidiaries, or any ERISA Affiliate.

                  "Plan"  means  any  bonus,  incentive  compensation,  deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership,  stock  appreciation  rights,  phantom stock, leave of absence,
layoff,  vacation,  day or dependent  care,  legal  services,  cafeteria,  life,
health,  accident,  disability,   workmen's  compensation  or  other  insurance,
severance,  separation  or other  employee  benefit  plan,  practice,  policy or
arrangement of any kind,  whether written or oral, or whether for the benefit of
a single individual or more than one individual  including,  but not limited to,
any  "employee  benefit  plan"  within the  meaning  of  section  3(3) of ERISA,
including any Pension Plan.

     "Reportable Event" means any reportable event as defined in section 4043(b)
of ERISA or the regulations issued thereunder with respect to a Plan.

     "Withdrawal Liability" means liability to a Multi-employer Plan as a result
of a complete or partial withdrawal from such Multi-employer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA. U. Tax Matters.

     1.   The Company has filed all material Tax Returns which it is required to
          file under applicable Laws; all such Tax Returns are true and accurate
          in all material respects and have been prepared in compliance with all
          applicable  Laws;  the  Company has paid all Taxes due and owing by it
          (whether  or not such Taxes are  required to be shown on a Tax Return)
          and has withheld and paid over to the appropriate  taxing  authorities
          all Taxes which it is required to withhold  from amounts paid or owing
          to any employee,  stockholder,  creditor or other third  parties;  and
          since the Balance Sheet Date,  the charges,  accruals and reserves for
          Taxes with  respect  to the  Company  (including  any  provisions  for
          deferred  income  taxes)  reflected  on the books of the  Company  are
          adequate  to cover any Tax  liabilities  of the Company if its current
          tax year were treated as ending on the date hereof.

     2.   No claim has been made by a taxing  authority in a jurisdiction  where
          the Company  does not file tax  returns  that the Company is or may be
          subject  to  taxation  by such  jurisdiction.  There  are no  foreign,
          federal,  state or local tax  audits  or  administrative  or  judicial
          proceedings pending or being conducted with respect to the Company; no
          information  related to Tax matters has been requested by any foreign,
          federal,  state or local taxing  authority;  and,  except as disclosed
          above,  no  written  notice  indicating  an intent to open an audit or
          other  review  has been  received  by the  Company  from any  foreign,
          federal,  state or  local  taxing  authority.  There  are no  material
          unresolved questions or claims concerning the Company's Tax liability.
          The Company (A) has not executed or entered  into a closing  agreement
          pursuant  to  section  7121 of the Code or any  predecessor  provision
          thereof or any similar  provision  of state,  local or foreign law; or
          (B) has not agreed to or is required to make any adjustments  pursuant
          to section 481(a) of the Code or any similar provision of state, local
          or foreign law by reason of a change in accounting method initiated by
          the Company or any of its  subsidiaries  or has any knowledge that the
          IRS has proposed any such  adjustment or change in accounting  method,
          or has any application  pending with any taxing  authority  requesting
          permission  for any changes in  accounting  methods that relate to the
          business  or  operations  of the  Company.  The Company has not been a
          United States real property holding  corporation within the meaning of
          section  897(c)(2) of the Code during the applicable  period specified
          in section 897(c)(1)(A)(ii) of the Code.

     3.   The Company has not made an election under section 341(f) of the Code.
          The Company is not liable for the Taxes of another  person that is not
          a subsidiary of the Company under (A) Treas. Reg. Section 1.1502-6 (or
          comparable  provisions  of  state,  local or  foreign  law),  (B) as a
          transferee  or  successor,   (C)  by  contract  or  indemnity  or  (D)
          otherwise.  The Company is not a party to any tax  sharing  agreement.
          The  Company  has not  made any  payments,  is not  obligated  to make
          payments and is not a party to an agreement  that could obligate it to
          make any payments that would not be  deductible  under section 280G of
          the Code.

                  As used in this Agreement:

                  "IRS" means the United States Internal Revenue Service.

                  "Tax" or "Taxes" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem,  franchise,  profits, sales or use,
transfer, registration, excise, utility, environmental,  communications, real or
personal property,  capital stock, license,  payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum,  estimated and other taxes of any kind whatsoever  (including,  without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.

                  "Tax Return"  means any return,  information  report or filing
with respect to Taxes,  including any schedules  attached  thereto and including
any amendment thereof. V. Property. Except as set forth on Schedule III.V., each
of the Company and the  Subsidiaries has good and marketable title to all of its
assets and properties material to the conduct of its business, free and clear of
any  liens,  pledges,   security  interests,   claims,   encumbrances  or  other
restrictions of any kind (collectively,  "Liens"). With respect to any assets or
properties it leases, each of the Company and its Subsidiaries holds a valid and
subsisting  leasehold  interest  therein,  free and  clear of any  Liens,  is in
compliance,  in all material  respects,  with the terms of the applicable lease,
and enjoys  peaceful and  undisturbed  possession  under such lease.  All of the
assets and properties of the Company and its  Subsidiaries  that are material to
the conduct of business as presently conducted or as proposed to be conducted by
it are in good  operating  condition  and repair.  The  inventory of each of the
Company  and its  Subsidiaries  is in good and  marketable  condition,  does not
include  any  material  quantity of items  which are  obsolete,  damaged or slow
moving,  and is salable  (or may be leased) in the normal  course of business as
currently  conducted  by it.  W.  Intellectual  Property.  The  Company  owns or
possesses   adequate  and  enforceable   rights  to  use  all  patents,   patent
applications,  trademarks,  trademark applications,  trade names, service marks,
copyrights, copyright applications,  licenses, know-how (including trade secrets
and  other   unpatented   and/or   unpatentable   proprietary  or   confidential
information,  systems or procedures)  and other similar  rights and  proprietary
knowledge  (collectively,  "Intangibles")  necessary  for  the  conduct  of  its
business as now being conducted  including,  but not limited to, those described
on Schedule III.W.  hereto.  Except as set forth on Schedule III.W,  the Company
has all right,  title and interest in all of the Intangibles,  free and clear of
any and all Liens.  The Company is not  infringing  upon or in conflict with any
right of any other person with respect to any  Intangibles.  Except as disclosed
on Schedule III.W.  hereto,  (i) no claims have been asserted by any individual,
partnership,  corporation,  unincorporated organization or association,  limited
liability company,  trust or other entity (collectively,  a "Person") contesting
the  validity,  enforceability,  use or  ownership of any  Intangibles,  and the
Company  has no  knowledge  of any basis for such  claim,  and (ii)  neither the
Company  nor  the   Subsidiaries   has  any   knowledge   of   infringement   or
misappropriation  of the  Intangibles  by any third  party.  X.  Contracts.  All
contracts,   agreements,  notes,  instruments,   franchises,  leases,  licenses,
commitments,  arrangements  or  understandings,  written or oral  (collectively,
"Contracts")  which are material to the business and  operations  of the Company
and the  Subsidiaries are in full force and effect and constitute  legal,  valid
and binding  obligations  of the Company and the  Subsidiaries  and, to the best
knowledge  of the  Company,  the other  parties  thereto;  the  Company  and the
Subsidiaries  and,  to the best  knowledge  of the  Company,  each  other  party
thereto,  have performed in all material respects all obligations required to be
performed  by them under the  Contracts,  and no material  violation  or default
exists in respect  thereof,  nor any event that with notice or lapse of time, or
both,  would  constitute a default  thereof,  on the part of the Company and the
Subsidiaries or, to the best knowledge of the Company,  any other party thereto;
none of the  Contracts  is  currently  being  renegotiated;  and  the  validity,
effectiveness and continuation of all Contracts will not be materially adversely
affected by the  transactions  contemplated by this Agreement.  Y.  Registration
Rights.  Except as set forth on Schedule  III.Y.,  no Person has,  and as of the
Closing  (as  defined  in  Article  VII),  no Person  shall  have,  any  demand,
"piggy-back"  or other  rights to cause  the  Company  to file any  registration
statement  under the  Securities  Act,  relating to any of its  securities or to
participate in any such registration statement. Z. Dividends. The timely payment
of  dividends  on the  Preferred  Shares  as  specified  in the  Certificate  of
Designation is not prohibited by the Certificate of  Incorporation or By-Laws of
the Company or any agreement,  Contract,  document or other undertaking to which
the Company or any of the Subsidiaries is a party.

AA.  Investment  Company Act. Neither the Company nor any of the Subsidiaries is
an  "investment  company"  within the meaning of the  Investment  Company Act of
1940, as amended (the  "Investment  Company Act"), nor is the Company nor any of
the Subsidiaries directly or indirectly controlled by or acting on behalf of any
Person which is an  "investment  company"  within the meaning of the  Investment
Company Act.

BB. Business Plan. Any business  information of the Company previously submitted
to Buyer in any form, including the projections  contained therein, was prepared
by the  senior  management  of the  Company  in  good  faith  and  is  based  on
assumptions that the Company  believes are reasonable.  The Company is not aware
of any fact or  condition  that could  reasonably  be  expected to result in the
Company not achieving the results described in such business plan.

CC. Year 2000  Compliance.  The Company has reviewed its products,  business and
operations  that  could  be  adversely   affected  by  the  risk  that  computer
applications  used  by  the  Company  and  the  Subsidiaries  may be  unable  to
recognize, and properly perform date-sensitive functions involving,  dates prior
to and after December 31, 1999 (the "Year 2000 Problem").  The Company  believes
its internal  information and business  systems will be able to perform properly
date-sensitive  functions  for all dates  before and after  January 1, 2000.  In
addition,  the Company has surveyed  those  vendors,  suppliers  and other third
parties  (collectively,  the "Outside Parties") with which the Company or any of
the  Subsidiaries  do business and whose failure to adequately  address the Year
2000 Problem could  reasonably be expected to adversely  affect the business and
operations  of  the  Company  or  any  of  the  Subsidiaries.   Based  upon  the
aforementioned internal review and surveys of the Outside Parties as of the date
of this  Agreement,  the Year  2000  Problem  has not  resulted  in,  and is not
reasonably expected to have, a Material Adverse Effect.

DD. Internal Controls and Procedures.  The Company maintains  accurate books and
records and internal accounting controls that provide reasonable  assurance that
(i) all transactions to which the Company or each of the Subsidiaries is a party
or  by  which  its   properties   are  bound  are  executed  with   management's
authorization;  (ii)  the  reported  accountability  of the  Company's  and  the
Subsidiaries'  assets is compared  with  existing  assets at regular  intervals;
(iii) access to the Company's and the Subsidiaries'  assets is permitted only in
accordance with management's  authorization;  and (iv) all transactions to which
any of the Company and the  Subsidiaries  is a party or by which its  properties
are bound are  recorded as  necessary  to permit  preparation  of the  financial
statements of the Company in accordance with GAAP.

EE. Payments and Contributions.  Neither the Company nor any of its Subsidiaries
nor  any of  their  respective  directors,  officers  or,  to  their  respective
knowledge,  other  employees  has (i) used any  company  funds for any  unlawful
contribution,   endorsement,  gift,  entertainment  or  other  unlawful  expense
relating  to  political  activity;  (ii) made any  direct or  indirect  unlawful
payment of company  funds to any  foreign or  domestic  government  official  or
employee,  (iii)  violated or is in  violation  of any  provision of the Foreign
Corrupt  Practices  Act of 1977,  as  amended;  or (iv) made any bribe,  rebate,
payoff, influence payment,  kickback or other similar payment to any person with
respect to Company matters.

FF. No Misrepresentation. No representation or warranty of the Company contained
in this Agreement or any of the other Documents,  any schedule, annex or exhibit
hereto or thereto or any agreement,  instrument or certificate  furnished by the
Company to Buyer pursuant to this Agreement  contains any untrue  statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. GG. Finder's Fee. There
is no finder's fee, brokerage  commission or like payment in connection with the
transactions  contemplated  by this  Agreement  for  which  Buyer is  liable  or
responsible.

IV.   CERTAIN COVENANTS AND ACKNOWLEDGMENTS

A.  Restrictive  Legend.  Buyer  acknowledges  and agrees  that,  upon  issuance
pursuant to this  Agreement,  the Securities  (including  any Dividends  Shares,
Conversion Shares or the Warrant Shares) shall have endorsed thereon a legend in
substantially  the  following  form  (and a  stop-transfer  order  may be placed
against transfer of the Preferred Shares,  the Warrant Shares and the Conversion
Shares until such legend has been removed):

         "THESE  SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
         1933, AS AMENDED (THE "SECURITIES  ACT"), OR THE SECURITIES LAWS OF ANY
         STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE
         REGISTRATION  REQUIREMENTS  OF THE SECURITIES ACT AND SUCH LAWS.  THESE
         SECURITIES  MAY  NOT BE  SOLD  OR  TRANSFERRED  EXCEPT  PURSUANT  TO AN
         EFFECTIVE  REGISTRATION  STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
         TO AN AVAILABLE  EXEMPTION FROM THE  REGISTRATION  REQUIREMENTS  OF THE
         SECURITIES ACT OR SUCH OTHER LAWS."

B. Filings.  The Company shall make all necessary  Commission  Filings and "blue
sky" filings  required to be made by the Company in connection  with the sale of
the Securities to Buyer as required by all applicable  Laws, and shall provide a
copy thereof to Buyer promptly after such filing.

C. Reporting Status.  So long as Buyer  beneficially owns any of the Securities,
the Company  shall  timely file all reports  required to be filed by it with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act.

D. Use of  Proceeds.  The Company  shall use the  proceeds  from the sale of the
Securities (net of amounts paid by the Company for Buyer's  out-of-pocket  costs
and expenses,  whether or not  accounted for or incurred in connection  with the
transactions   contemplated   by  this   Agreement   (including   the  fees  and
disbursements  of Buyer's legal  counsel),  and finder's fees in connection with
such sale) solely for general corporate and working capital purposes.

E.  Listing.  Except to the extent the Company lists its Common Stock on The New
York Stock  Exchange or The Nasdaq  National  Market,  the Company shall use its
best  efforts to  maintain  its  listing of the Common  Stock on Nasdaq.  If the
Common Stock is delisted  from Nasdaq,  the Company will use its best efforts to
list the  Common  Stock on the  most  liquid  national  securities  exchange  or
quotation system that the Common Stock is qualified to be listed on.

F. Reserved  Conversion Shares. The Company at all times from and after the date
hereof  shall  have such  number of shares  of  Common  Stock  duly and  validly
authorized  and reserved for issuance as shall be sufficient  for the conversion
in full of,  and the  payment of  dividends  on,  the  Preferred  Shares and the
exercise in full of the Warrants.

G. Right of First Refusal.  If, during the period  commencing on the date hereof
and ending  three  years after the  Closing  Date (the  "Right of First  Refusal
Period"),  the Company should propose (the  "Proposal") to issue Common Stock or
securities convertible into Common Stock at a price less than the Current Market
Price (as defined in the Certificate of  Designation),  or debt at less than par
value or having an  effective  annual  interest  rate in excess of 9.9%  (each a
"Right of First Refusal Security" and collectively,  the "Right of First Refusal
Securities"),  in each  case on the  date  of  issuance  the  Company  shall  be
obligated to offer such Right of First Refusal  Securities to Buyer on the terms
set forth in the Proposal (the "Offer") and Buyer shall have the right,  but not
the  obligation,  to accept such Offer on such terms.  The Company shall provide
written  notice to Buyer of any  Proposal,  setting  forth in full the terms and
conditions  thereof,  and Buyer  shall then have 10  business  days to accept or
reject the Offer in writing.  If the Company  issues any Right of First  Refusal
Securities  during  the Right of First  Refusal  Period but fails to: (i) notify
Buyer of the  Proposal,  (ii)  offer  Buyer  the  opportunity  to  complete  the
transaction as set forth in the Proposal,  or (iii) enter into and consummate an
agreement to issue such Right of First Refusal  Securities to Buyer on the terms
and  conditions  set forth in the Proposal,  after Buyer has accepted the Offer,
then the Company shall pay to Buyer, as liquidated  damages,  an amount equal to
10% of the amount paid to the Company for the Right of First Refusal Securities.
The  foregoing  Right of First  Refusal  is and  shall be senior in right to any
other  right of  first  refusal  issued  by the  Company  to any  other  Person.
Notwithstanding  the provisions of this Section IV.G, the right of first refusal
specified in this Section IV.G shall not apply to any  transaction  with respect
to which  Commonwealth  Associates  acts as placement  agent so long as Buyer is
informed of the existence and terms of any such  transaction  and Buyer is given
reasonable opportunity to participate in such transaction.

H.  Information.  Each of the parties hereto  acknowledges and agrees that Buyer
shall not be provided  with,  nor be given  access to, any  material  non-public
information relating to the Company or any of the Subsidiaries.

I.  Exemption  from  Investment  Company  Act.  The  Company  shall  conduct its
business, and shall cause the Subsidiaries to conduct their businesses,  in such
a manner that neither the Company nor any Subsidiary shall become an "investment
company" within the meaning of the Investment Company Act.

J.  Accounting  and Reserves.  The Company shall maintain a standard and uniform
system of  accounting  and shall keep proper  books and records and  accounts in
which full, true and correct entries shall be made of its  transactions,  all in
accordance  with GAAP applied on a  consistent  basis  through all periods,  and
shall  set  aside on such  books  for each  fiscal  year all such  reserves  for
depreciation,  obsolescence,  amortization,  bad  debts and  other  purposes  in
connection with its operations as are required by such principles so applied.

K.  Transactions  with  Affiliates.  Except  with  respect  to  the  payment  of
compensation  in the form of base pay,  bonus,  or the  granting  of  options or
warrants to  officers,  directors,  or  employees  of the  Company,  neither the
Company nor any of its Subsidiaries  shall,  directly or indirectly,  enter into
any  transaction  or  agreement  with  any  stockholder,  officer,  director  or
Affiliate of the Company or family member of any officer,  director or Affiliate
of the Company, unless the transaction or agreement is (i) reviewed and approved
by a majority of Disinterested Directors (as defined below) and (ii) on terms no
less favorable to the Company or the applicable Subsidiary than those obtainable
from a non-affiliated  person. A "Disinterested  Director" shall mean a director
of the Company who is not and has not been an officer or employee of the Company
and who is not a member of the family of,  controlled by or under common control
with, any such officer or employee.

L.  Issuances  of  Additional   Convertible   Preferred  Shares  or  Convertible
Debentures.  So long as Buyer beneficially owns any of the Preferred Shares, the
Company  shall  not  issue  any  additional   convertible   preferred  stock  or
convertible  debt securities,  in each case,  convertible into Common Stock at a
floating  conversion  price,  without  the prior  written  consent of Buyer.  M.
Certain  Restrictions.  So long as any  Preferred  Shares  are  outstanding,  no
dividends shall be declared or paid or set apart for payment nor shall any other
distribution  be  declared  or made upon  Junior  Securities  (as defined in the
Certificate  of  Designation),  nor shall any  Junior  Securities  be  redeemed,
purchased  or otherwise  acquired  (other than a  redemption,  purchase or other
acquisition of shares of Common Stock made for purposes of an employee incentive
or  benefit  plan  (including  a  stock  option  plan)  of  the  Company  or any
Subsidiary,  for any consideration by the Company,  directly or indirectly,  nor
shall  any  moneys  be paid to or made  available  for a  sinking  fund  for the
redemption of any shares of any such stock.

N.  Transfer  Agent.  If requested by Buyer,  the Company shall replace the then
Transfer Agent for the Common Stock with a Transfer Agent designated by Buyer.

O. Schedules.  The Company will deliver to Buyer a full set of Schedules to this
Agreement,  in a form  reasonably  satisfactory  to the Buyer,  on or before the
close of business on March 31, 2000.

V.   TRANSFER AGENT INSTRUCTIONS

A.  The  Company  undertakes  and  agrees  that no  instruction  other  than the
instructions  referred  to  in  this  Article  V  and  customary  stop  transfer
instructions  prior to the registration and sale of the Common Stock pursuant to
an  effective  Securities  Act  registration  statement  shall  be  given to its
transfer agent for the Common Stock and that the Conversion Shares, the Dividend
Shares and the Warrant  Shares  shall  otherwise be freely  transferable  on the
books  and  records  of  the  Company  as and to the  extent  provided  in  this
Agreement,  the  Registration  Rights  Agreement  and  applicable  law.  Nothing
contained in this Section V.A. shall affect in any way Buyer's  obligations  and
agreement  to comply  with all  applicable  securities  laws upon resale of such
Common  Stock.  If, at any time,  Buyer  provides the Company with an opinion of
counsel  reasonably  satisfactory to the Company that registration of the resale
by Buyer of such Common Stock is not required  under the Securities Act and that
the removal of  restrictive  legends is  permitted  under  applicable  law,  the
Company shall permit the transfer of such Common Stock and promptly instruct the
Company's  transfer  agent to issue one or more  certificates  for Common  Stock
without any restrictive  legends endorsed thereon.

B. Buyer shall have the right to convert the Preferred  Shares by telecopying an
executed and completed  Notice of Conversion  (as defined in the  Certificate of
Designation)  to the  Company.  Each  date on which a Notice  of  Conversion  is
telecopied  to and  received by the Company in  accordance  with the  provisions
hereof  shall be deemed a  Conversion  Date (as  defined in the  Certificate  of
Designation).  The Company shall transmit the certificates evidencing the shares
of Common Stock issuable upon conversion of any Preferred  Shares (together with
certificates  evidencing  any Preferred  Shares not being so converted) to Buyer
via express courier, by electronic  transfer or otherwise,  within five business
days after  receipt by the Company of the Notice of  Conversion  (the  "Delivery
Date").  Within 30 days after Buyer  delivers  the Notice of  Conversion  to the
Company,  Buyer  shall  deliver to the  Company a  certificate  or  certificates
evidencing the Preferred Shares being converted.

C. Buyer shall have the right to  purchase  shares of Common  Stock  pursuant to
exercise  of the  Warrants  in  accordance  with  its  applicable  terms  of the
Warrants.  The last date that the  Company may  deliver  shares of Common  Stock
issuable  upon any  exercise of  Warrants is referred to herein as the  "Warrant
Delivery Date." D. The Company  understands  that a delay in the issuance of the
shares of Common  Stock  issuable  in lieu of cash  dividends  on the  Preferred
Shares  or upon the  conversion  of the  Preferred  Shares  or  exercise  of the
Warrants  beyond the  applicable  Dividend  Payment  Due Date (as defined in the
Certificate of Designation), Delivery Date or Warrant Delivery Date could result
in economic loss to Buyer.  As compensation to Buyer for such loss (and not as a
penalty),  the Company  agrees to pay to Buyer for late issuance of Common Stock
issuable in lieu of cash dividends on the Preferred Shares or upon conversion of
the  Preferred  Shares  or  exercise  of the  Warrants  in  accordance  with the
following  schedule  (where  "No.  Business  Days" is  defined  as the number of
business days beyond five days from the Dividend  Payment Due Date, the Delivery
Date or the Warrant Delivery Date, as applicable):

                               Compensation For Each 10 Shares
                              of Preferred Shares Not Converted

                               Timely or 500 Shares of Common
                                Stock Issuable In Payment of
                                Dividends or Upon Exercise of

     No. Business Days           Warrants Not Issued Timely

           1                               $   25
           2                                   50
           3                                   75
           4                                  100
           5                                  125
           6                                  150
           7                                  175
           8                                  200
           9                                  225
           10                                 250
       more than 10         $250 + $100 for each Business Day
                            Late beyond 10 days

The Company shall pay to Buyer the compensation  described above by the transfer
of immediately  available funds upon Buyer's demand.  Nothing herein shall limit
Buyer's  right to pursue actual  damages for the Company's  failure to issue and
deliver  Common Stock to Buyer.  In addition to any other  remedies which may be
available  to Buyer,  in the event the  Company  fails for any reason to deliver
such  shares of Common  Stock  within  five  business  days  after the  relevant
Dividend  Payment  Due  Date,   Delivery  Date  or  Warrant  Delivery  Date,  as
applicable, Buyer shall be entitled to rescind the relevant Notice of Conversion
or exercise of  Warrants  by  delivering  a notice to such effect to the Company
whereupon  the Company  and Buyer  shall each be  restored  to their  respective
original positions immediately prior to delivery of such Notice of Conversion on
delivery.

--------------------------------------------------------------------------------
VI.  DELIVERY INSTRUCTIONS

     The  Securities  shall be  delivered  by the  Company to the  Escrow  Agent
pursuant to Section  I.B.  hereof on a  "delivery-against-payment  basis" at the
Closing.

VII. CLOSING DATE

     The date and time  (the  "Closing  Date") of the  issuance  and sale of the
Preferred  Shares and the Warrants (the  "Closing")  shall be the date hereof or
such other date as shall be mutually  agreed upon in writing.  The  issuance and
sale of the  Securities  shall occur on the  Closing  Date at the offices of the
Escrow Agent.  Notwithstanding  anything to the contrary  contained herein,  the
Escrow  Agent shall not be  authorized  to release to the  Company the  Purchase
Price or to Buyer the  certificate(s)  (I/N/O  Buyer or I/N/O  Buyer's  nominee)
evidencing  the  Securities  being  purchased by Buyer unless the conditions set
forth in Sections VIII.C. and IX.H. hereof have been satisfied.

VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS

     Buyer  understands that the Company's  obligation to sell the Securities on
the Closing Date to Buyer pursuant to this Agreement is conditioned upon:

A. Delivery by Buyer to the Escrow Agent of the Purchase Price;

B. The accuracy on the Closing Date of the  representations  and  warranties  of
Buyer  contained  in this  Agreement  as if made on the Closing Date (except for
representations  and warranties  which, by their express terms,  speak as of and
relate to a specified  date, in which case such accuracy shall be measured as of
such specified date) and the performance by Buyer in all material respects on or
before the Closing Date of all covenants and  agreements of Buyer required to be
performed by it pursuant to this Agreement on or before the Closing Date; and

C. There  shall not be in effect any Law or order,  ruling,  judgment or writ of
any  court  or  public  or  governmental  authority  restraining,  enjoining  or
otherwise prohibiting any of the transactions contemplated by this Agreement.

IX. CONDITIONS TO BUYER'S OBLIGATIONS

                  The Company  understands  that Buyer's  obligation to purchase
the  Securities  on the Closing Date pursuant to this  Agreement is  conditioned
upon:

A.  Delivery  by the  Company  to Buyer of  evidence  that  the  Certificate  of
Designation has been filed and is effective;

B.  Delivery  by the  Company  to the Escrow  Agent of one or more  certificates
(I/N/O Buyer or I/N/O Buyer's nominee) evidencing the Securities to be purchased
by Buyer pursuant to this Agreement;

C. The accuracy on the Closing Date of the representations and warranties of the
Company  contained in this  Agreement as if made on the Closing Date (except for
representations  and warranties  which, by their express terms,  speak as of and
relate to a specified  date, in which case such accuracy shall be measured as of
such  specified  date) and the  performance by the Company in all respects on or
before the Closing Date of all covenants and agreements of the Company  required
to be performed by it pursuant to this  Agreement on or before the Closing Date,
all of which shall be confirmed to Buyer by delivery of the  certificate  of the
chief executive officer of the Company to that effect;

D. Buyer  having  received  an opinion of  counsel  for the  Company,  dated the
Closing Date, in form, scope and substance  reasonably  satisfactory to Buyer as
to the matters set forth in Annex A;

E.  There not having  occurred  (i) any  general  suspension  of trading  in, or
limitation  on  prices  listed  for,  the  Common  Stock  on  Nasdaq,  (ii)  the
declaration of a banking  moratorium or any suspension of payments in respect of
banks in the United States,  (iii) the commencement of a war, armed  hostilities
or other international or national calamity directly or indirectly involving the
United States or any of its territories,  protectorates or possessions,  or (iv)
in the case of the foregoing existing at the date of this Agreement,  a material
acceleration or worsening thereof;

F.  There not  having  occurred  any event or  development,  and there  being in
existence no condition,  having or which reasonably and foreseeably could have a
Material Adverse Effect;

G. The  Company  shall  have  delivered  to Buyer  (as  provided  in the  Escrow
Instructions) reimbursement of Buyer's out-of-pocket costs and expenses, whether
or  not  accounted  for  or  incurred  in  connection   with  the   transactions
contemplated by this Agreement  (including the fees and disbursements of Buyer's
legal counsel), of $40,000;

H. There shall not be in effect any Law, order, ruling,  judgment or writ of any
court or public or governmental  authority  restraining,  enjoining or otherwise
prohibiting any of the transactions contemplated by this Agreement;

I. Delivery by the Company of irrevocable instructions to the Company's transfer
agent to reserve 1,000,000 shares of Common Stock for issuance of the Conversion
Shares and the Warrant Shares;

J. The Company  shall have  obtained  all  consents,  approvals  or waivers from
governmental authorities and third persons necessary for the execution, delivery
and performance of the Documents and the transactions  contemplated thereby, all
without material cost to the Company; and


K. Buyer shall have received such additional documents,  certificates,  payment,
assignments,  transfers  and  other  delivers,  as it or its legal  counsel  may
reasonably  request  and as are  customary  to effect a closing  of the  matters
herein contemplated.

X.  TERMINATION

A. Termination by Mutual Written  Consent.  This Agreement may be terminated and
the transactions contemplated hereby may be abandoned, for any reason and at any
time prior to the Closing Date, by the mutual written consent of the Company and
Buyer.

B. Termination by the Company or Buyer. This Agreement may be terminated and the
transactions  contemplated  hereby may be  abandoned by action of the Company or
Buyer if (i) the Closing shall not have  occurred at or prior to 5:00 p.m.,  New
York  City  time,  on March 28,  2000 (the  "Latest  Closing  Date");  provided,
however,  that the right to terminate  this  Agreement  pursuant to this Section
X.B.  shall not be  available  to any party whose  failure to fulfill any of its
obligations  under this  Agreement  has been the cause of or has resulted in the
failure  of the  Closing  to occur at or before  such  time and date;  provided,
further, however, that if the Closing shall not have occurred on or prior to the
Latest  Closing Date,  the Closing may only occur after the Latest  Closing Date
with the written consent of Buyer.

C.  Termination by Buyer.  This Agreement may be terminated and the transactions
contemplated  hereby may be  abandoned by Buyer at any time prior to the Closing
Date,  if (i) the Company  shall have failed to comply with any of its covenants
or agreements  contained in this Agreement,  (ii) there shall have been a breach
by the Company of any  representation  or warranty made by it in this Agreement,
(iii) there shall have occurred any event or  development,  or there shall be in
existence any condition,  having or reasonably likely to have a Material Adverse
Effect or (iv) the Company shall have failed to satisfy the conditions  provided
in Article IX hereof.

D.  Termination  by the  Company.  This  Agreement  may be  terminated  and  the
transactions  contemplated  hereby may be  abandoned  by the Company at any time
prior to the Closing  Date, if (i) Buyer shall have failed to comply with any of
its covenants or agreements contained in this Agreement or (ii) there shall have
been a breach  by Buyer of any  representation  or  warranty  made by it in this
Agreement.

E. Effect of  Termination.  In the event of the  termination  of this  Agreement
pursuant to this Article X, this Agreement shall thereafter become void and have
no effect,  and no party hereto shall have any  liability or  obligation  to any
other party hereto in respect of this  Agreement,  except that the provisions of
Article XI, this Section X.E and Section X.F shall survive any such termination;
provided,  however, that no party shall be released from any liability hereunder
if this  Agreement  is  terminated  and  the  transactions  contemplated  hereby
abandoned  by  reason  of (i)  willful  failure  of such  party to  perform  its
obligations  hereunder or (ii) any  misrepresentation  made by such party of any
matter set forth herein.

F. Fees and Expenses of  Termination.  If this  Agreement is terminated  for any
reason,   the  Company  shall  promptly  reimburse  Buyer  for  all  of  Buyer's
out-of-pocket  costs and expenses  incurred in connection with the  transactions
contemplated  by this  Agreement  and the other  Documents  (including,  without
limitation, the fees and disbursements of Buyer's legal counsel).

XI. SURVIVAL; INDEMNIFICATION

A. The representations, warranties and covenants made by each of the Company and
Buyer in this Agreement, the annexes,  schedules and exhibits hereto and in each
instrument,  agreement  and  certificate  entered  into  and  delivered  by them
pursuant to this Agreement shall survive the Closing and the consummation of the
transactions  contemplated  hereby. In the event of a breach or violation of any
of such  representations,  warranties  or  covenants,  the  party  to whom  such
representations,  warranties  or covenants  have been made shall have all rights
and remedies for such breach or violation  available to it under the  provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation  made by or on  behalf  of such  party on or prior to the  Closing
Date.

B. The  Company  hereby  agrees  to  indemnify  and  hold  harmless  Buyer,  its
Affiliates  and their  respective  officers,  directors,  partners  and  members
(collectively,  the "Buyer  Indemnitees")  from and  against any and all losses,
claims,   damages,   judgments,   penalties,    liabilities   and   deficiencies
(collectively,  "Losses") and agrees to reimburse Buyer  Indemnitees for all out
of-pocket expenses  (including the fees and expenses of legal counsel),  in each
case promptly as incurred by Buyer  Indemnitees and to the extent arising out of
or in connection with:

     1.  any  misrepresentation,  omission  of  fact  or  breach  of  any of the
     Company's  representations or warranties contained in this Agreement or the
     other Documents, or the annexes, schedules or exhibits hereto or thereto or
     any instrument,  agreement or certificate  entered into or delivered by the
     Company pursuant to this Agreement or the other Documents;

     2. any failure by the Company to perform in any material respect any of its
     covenants,  agreements,  undertakings  or  obligations  set  forth  in this
     Agreement  or  the  other  Documents  or  any  instrument,  certificate  or
     agreement  entered  into  or  delivered  by the  Company  pursuant  to this
     Agreement or the other Documents;

     3. the purchase of the Preferred Shares and the Warrants, the conversion of
     the Preferred  Shares and the exercise of the Warrants and the consummation
     of the transactions contemplated by this Agreement and the other Documents,
     the use of any of the  proceeds of the Purchase  Price by the Company,  the
     purchase or ownership of any or all of the  Securities,  the performance by
     the parties hereto of their respective  obligations hereunder and under the
     Documents  or  any  claim,   litigation,   investigation,   proceedings  or
     governmental action relating to any of the foregoing,  whether or not Buyer
     is a party thereto; or

     4. resales of the Common Shares by Buyer in the manner and as  contemplated
     by this Agreement and the Registration Rights Agreement.

C.  Buyer  hereby  agrees  to  indemnify  and hold  harmless  the  Company,  its
Affiliates  and their  respective  officers,  directors,  partners  and  members
(collectively,  the "Company  Indemnitees") from and against any and all Losses,
and agrees to reimburse the Company  Indemnitees for all out-of-pocket  expenses
(including  the fees and  expenses of legal  counsel)  in each case  promptly as
incurred  by the  Company  Indemnitees  and to the extent  arising  out of or in
connection with:

     1. any  misrepresentation,  omission  of fact or breach  of any of  Buyer's
     representations  or  warranties  contained  in this  Agreement or the other
     Documents,  or the annexes,  schedules or exhibits hereto or thereto or any
     instrument,  agreement  or  certificate  entered into or delivered by Buyer
     pursuant to this Agreement or the other Documents; or

     2. any  failure  by Buyer to  perform in any  material  respect  any of its
     covenants,  agreements,  undertakings  or  obligations  set  forth  in this
     Agreement  or  the  other  Documents  or  any  instrument,  certificate  or
     agreement  entered into or delivered by Buyer pursuant to this Agreement or
     the other Documents.

D.  Promptly  after  receipt  by either  party  hereto  seeking  indemnification
pursuant to this Article XI (an  "Indemnified  Party") of written  notice of any
investigation,   claim,   proceeding   or  other  action  in  respect  of  which
indemnification  is being  sought  (each,  a  "Claim"),  the  Indemnified  Party
promptly  shall notify the party against whom  indemnification  pursuant to this
Article  XI is being  sought  (the  "Indemnifying  Party")  of the  commencement
thereof;  but the omission so to notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party except
to the extent that the Indemnifying Party is materially  prejudiced and forfeits
substantive rights or defenses by reason of such failure. In connection with any
Claim as to which  both the  Indemnifying  Party and the  Indemnified  Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding  the assumption of the defense of any Claim by the  Indemnifying
Party,  the  Indemnified  Party  shall have the right to employ  separate  legal
counsel and to  participate in the defense of such Claim,  and the  Indemnifying
Party shall bear the reasonable fees,  out-of-pocket  costs and expenses of such
separate  legal  counsel  to the  Indemnified  Party if (and only  if):  (x) the
Indemnifying Party shall have agreed to pay such fees,  out-of-pocket  costs and
expenses,  (y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal  counsel would not be  appropriate  due to actual or, as
reasonably  determined by legal counsel to the  Indemnified  Party,  potentially
differing  interests  between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying  Party,
or (z) the  Indemnifying  Party  shall  have  failed  to  employ  legal  counsel
reasonably  satisfactory to the Indemnified  Party within a reasonable period of
time after notice of the  commencement of such Claim.  If the Indemnified  Party
employs  separate  legal  counsel in  circumstances  other than as  described in
clauses  (x),  (y) or (z)  above,  the fees,  costs and  expenses  of such legal
counsel shall be borne exclusively by the Indemnified Party.  Except as provided
above,  the  Indemnifying  Party shall not, in connection  with any Claim in the
same jurisdiction,  be liable for the fees and expenses of more than one firm of
legal  counsel  for the  Indemnified  Party  (together  with  appropriate  local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or  compromise  any Claim or consent to the entry of any judgment  that does not
include an unconditional  release of the Indemnified  Party from all liabilities
with  respect to such  Claim or  judgment.

E. In the event one party hereunder should have a claim for indemnification that
does  not  involve  a claim or  demand  being  asserted  by a third  party,  the
Indemnified   Party   promptly  shall  deliver  notice  of  such  claim  to  the
Indemnifying  Party. If the Indemnified  Party disputes the claim,  such dispute
shall  be  resolved  by  mutual  agreement  of the  Indemnified  Party  and  the
Indemnifying  Party or by binding  arbitration  conducted in accordance with the
procedures and rules of the American Arbitration Association.  Judgment upon any
award rendered by any arbitrators  may be entered in any court having  competent
jurisdiction thereof.

XII. GOVERNING LAW

                  This  Agreement  shall  be  governed  by  and  interpreted  in
accordance with the laws of the State of New York, without

regard to the conflicts of law principles of such state.

XIII. SUBMISSION TO JURISDICTION

                  Each  of  the  parties   hereto   consents  to  the  exclusive
jurisdiction  of the federal  courts whose  districts  encompass any part of the
City of New York or the state  courts of the  State of New York  sitting  in the
City of New York in connection with any dispute arising under this Agreement and
the other Documents.  Each party hereto hereby  irrevocably and  unconditionally
waives,  to the  fullest  extent it may  effectively  do so,  any  defense of an
inconvenient  forum or  improper  venue to the  maintenance  of such  action  or
proceeding  in any such  court and any right of  jurisdiction  on account of its
place  of   residence   or  domicile.   Each  party   hereto   irrevocably   and
unconditionally  consents  to the  service  of any and all  process  in any such
action or  proceeding in such courts by the mailing of copies of such process by
certified or  registered  airmail at its address  specified in Article XIX. Each
party hereto agrees that a final judgment in any such action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.

XIV. WAIVER OF JURY TRIAL

                  TO THE FULLEST  EXTENT  PERMITTED BY LAW,  EACH OF THE PARTIES
HERETO HEREBY  KNOWINGLY,  VOLUNTARILY AND  INTENTIONALLY  WAIVES ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS.  EACH PARTY HERETO (i)
CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES,  AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION,  SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS  AGREEMENT  BY, AMONG OTHER  THINGS,  THE
MUTUAL WAIVERS AND CERTIFICATIONS HEREIN. XV. COUNTERPARTS; EXECUTION

     This  Agreement  may be executed in any number of  counterparts  and by the
different  parties  hereto  on  separate  counterparts,  each of  which  when so
executed and  delivered  shall be an original,  but all the  counterparts  shall
together  constitute one and the same  instrument.  A facsimile  transmission of
this signed Agreement shall be legal and binding on all parties hereto.

XVI. HEADINGS

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

XVII. SEVERABILITY

                  In the event any one or more of the  provisions  contained  in
this  Agreement or in the other  Documents  should be held  invalid,  illegal or
unenforceable in any respect,  the validity,  legality and enforceability of the
remaining  provisions  contained  herein  or  therein  shall  not in any  way be
affected  or  impaired  thereby.   The  parties  shall  endeavor  in  good-faith
negotiations to replace the invalid,  illegal or  unenforceable  provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.

XVIII. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS

                  This  Agreement  and  the  Documents   constitute  the  entire
agreement  among  the  parties  pertaining  to the  subject  matter  hereof  and
supersede all prior  agreements,  understandings,  negotiations and discussions,
whether oral or written, of the parties.  No supplement,  modification or waiver
of this Agreement shall be binding unless executed in writing by all parties. No
waiver  of any of the  provisions  of this  Agreement  shall be  deemed or shall
constitute a waiver of any other provision hereof (whether or not similar),  nor
shall such waiver  constitute a continuing  waiver  unless  otherwise  expressly
provided.

XIX.   NOTICES

                  Except as may be  otherwise  provided  herein,  any  notice or
other  communication  or delivery  required or permitted  hereunder  shall be in
writing and shall be delivered  personally  or sent by certified  mail,  postage
prepaid, or by a nationally  recognized  overnight courier service, and shall be
deemed given when so delivered  personally or by overnight courier service,  or,
if mailed,  three (3) days after the date of deposit in the United States mails,
as follows:

                  A.       if to the Company, to:

                           IFS International Holdings, Inc.
                           Rensselaer Technology Park
                           300 Jordan Rd.
                           Troy, NY 12180
                           Attention:
                           (518) 283-7900
                           [                        ] (Fax)
                            ------------------------

                           with a copy to:

                           Parker Duryee Rosoff & Haft
                           529 Fifth Avenue
                           New York, NY 10017
                           Attention:  Michael D. DiGiovanna, Esq.
                           (212) 599-0500
                           (212) 972-9487 (Fax)

                  B.       if to Buyer, to:

                           The Shaar Fund Ltd.
                           c/o Levinson Capital Management
                           2 World Trade Center, Suite 1820
                           New York, NY 10048
                           Attention:  Samuel Levinson
                           (212) 432-7711
                           (212) 432-7771 (Fax)

                           with a copy to:

                           Cadwalader, Wickersham & Taft
                           100 Maiden Lane
                           New York, NY 10038
                           Attention:  Dennis J. Block, Esq.
                           (212) 504-5555
                           (212) 504-5557 (Fax)

                  C.       if to the Escrow Agent, to:

                           Cadwalader, Wickersham & Taft
                           100 Maiden Lane
                           New York, NY 10038
                           Attention:  Dennis J. Block, Esq.
                           (212) 504-5555
                           (212) 504-5557 (Fax)

The  Company,  Buyer or the Escrow  Agent may change  the  foregoing  address by
notice given pursuant to this Article XIX.

XX. CONFIDENTIALITY

                  Each of the Company and Buyer agrees to keep  confidential and
not to  disclose  to or use for the benefit of any third party the terms of this
Agreement  or any other  information  which at any time is  communicated  by the
other  party as being  confidential  without the prior  written  approval of the
other  party;  provided,  however,  that  this  provision  shall  not  apply  to
information  which,  at the time of  disclosure,  is already  part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation,  pursuant to Item 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).

XXI.  ASSIGNMENT

                  This  Agreement  shall  not be  assignable  by  either  of the
parties  hereto prior to the Closing  without the prior  written  consent of the
other party,  and any attempted  assignment  contrary to the  provisions  hereby
shall be null and void; provided,  however, that Buyer may assign its rights and
obligations hereunder, in whole or in part, to any Affiliate of Buyer.

                                                       [SIGNATURE PAGE FOLLOWS.]




<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have duly  executed and delivered
this Agreement on the date first above written.


                               IFS INTERNATIONAL HOLDINGS, INC.


                                                          By:
                                      Name:

                                     Title:

                               THE SHAAR FUND LTD.

                                                          By:
                                      Name:

                                     Title:


<PAGE>



                                                                       EXHIBIT A

                         COMMON STOCK PURCHASE WARRANTS





                                                                       EXHIBIT B

                           Certificate of Designation




                                                                       EXHIBIT C

                               Escrow Instructions




                                                                       EXHIBIT D

                          Registration Rights Agreement




                                                               SCHEDULE III.A.1.

                     EXERCISE PRICES OF OPTIONS AND WARRANTS





                                                               SCHEDULE III.A.3.

      preemptive, subscription, "call," RIGHT OF FIRST REFUSAL or similar rights




                                                               SCHEDULE III.A.4.

                                  Subsidiaries




                                                               SCHEDULE III.A.5.

                                     MINUTES


                                                                 SCHEDULE III.C.


                        issuances and sales of securities




                                                                 SCHEDULE III.F.

                                  CONTRAVENTION



                                                                 SCHEDULE III.K.

                                   LITIGATION




                                                                 SCHEDULE III.L.

                                EVENTS OF DEFAULT




                                                                 SCHEDULE III.O.

                           Related Party Transactions



                                                                 SCHEDULE III.Q.

                             Securities Law Matters




                                                                 SCHEDULE III.R.

                              Environmental Matters




                                                                 SCHEDULE III.T.

                                  Erisa Matters



                                                                 SCHEDULE III.V.

                                    Property




                                                                 SCHEDULE III.W.

                              Intellectual ProperTy



                                                                 SCHEDULE III.Y.

                               REGISTRATION RIGHTS


<PAGE>

                                                                         ANNEX A
                                 form of opinion

1.  The  Company  has  been  duly  incorporated  and is  validly  existing  as a
corporation in good standing under the laws of the State of __________,  is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions  where the Company owns or leases properties or conducts business,
except for  jurisdictions  in which the  failure to so qualify  would not have a
Material Adverse Effect, and has all requisite  corporate power and authority to
own its  properties  and conduct its  business as  described  in the  Commission
Filings.

2. The authorized  capital stock of the Company consists of __________ shares of
Common Stock,  par value $_____ per share (the "Common  Stock"),  and __________
shares of Preferred  Stock, par value $_____ per share. 3. When delivered to you
or upon your  order  against  payment of the agreed  consideration  therefor  in
accordance  with the  provisions of the Documents,  the Securities  will be duly
authorized and validly issued, fully paid and nonassessable.  4. The Company has
the requisite  corporate  power and authority to enter into the Documents and to
sell and deliver the  Securities  as  described  in the  Documents;  each of the
Documents has been duly and validly authorized by all necessary corporate action
by the Company;  each of the  Documents  has been duly and validly  executed and
delivered by and on behalf of the Company, and is valid and binding agreement of
the Company,  enforceable in accordance with its terms, except as enforceability
may  be  limited  by  general  equitable  principles,   bankruptcy,  insolvency,
fraudulent  conveyance,  reorganization,  moratorium  or  other  laws  affecting
creditors rights generally.

5. Except as set forth on the Schedules to the  Securities  Purchase  Agreement,
the execution and delivery by the Company of the Documents,  the issuance of the
Securities,  and the  consummation  by the  Company  of the  other  transactions
contemplated  thereby,   including,   without  limitation,  the  filing  of  the
Certificate of Designation  with the Delaware  Secretary of State's  office,  do
not, and  compliance  with the  provisions of the Documents  will not,  conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or result in
the creation of any Lien upon any of the  properties or assets of the Company or
any of its Subsidiaries  under, or result in the termination of, or require that
any  consent  be  obtained  or any  notice be given  with  respect  to,  (i) the
Certificate of Incorporation or By-Laws of the Company or the comparable charter
or organizational documents of any of its Subsidiaries,  (ii) any loan or credit
agreement, note, bond, mortgage,  indenture, lease, contract or other agreement,
instrument  or permit  known to us and  applicable  to the Company or any of its
Subsidiaries  or  their  respective  properties  or  assets,  or  (iii)  any Law
applicable to, or, to the best of our knowledge,  any judgment,  decree or order
of any court or government body having  jurisdiction over, the Company or any of
its Subsidiaries or any of their respective properties or assets. To the best of
our knowledge, no consent, approval, authorization, order, registration, filing,
qualification,   license  or  permit  of  or  with  any  court  or  any  public,
governmental or regulatory  agency or body having  jurisdiction over the Company
or any of its properties or assets is required for the  execution,  delivery and
performance by the Company of the Documents or the  consummation  by the Company
of the transactions contemplated thereby.

6. When issued,  the Preferred Shares and the Warrants shall be duly authorized,
validly  issued,  fully  paid  and  nonassessable,  and  free  and  clear of all
encumbrances  and  restrictions,  except for restrictions on transfer imposed by
applicable  securities  laws. The Conversion  Shares and Warrant Shares issuable
upon  conversion  or exercise,  respectively,  of the  Preferred  Shares and the
Warrants,  respectively, will be duly authorized, validly issued, fully paid and
nonassessable,  and free and clear of all encumbrances and restrictions,  except
for restrictions on transfer imposed by applicable securities laws.

7. Based on Buyer's representations  contained in this Agreement,  the offer and
sale of the Preferred  Shares and the Warrants are exempt from the  registration
requirements of the Securities Act. 8. To the best of our knowledge,  other than
as  described  in the  Commission  Filings,  there are no  outstanding  options,
warrants or other securities exercisable or convertible into Common Stock of the
Company.

9. There is no action, suit, claim, inquiry or investigation  pending or, to the
best  of  our  knowledge,  threatened  by or  before  any  court  or  public  or
governmental authority which, if determined adversely to the Company, would have
a Material  Adverse Effect.  10. Neither the Company nor any of its subsidiaries
is, or will be after the consummation of the  transactions  contemplated by this
Agreement  and the other  Documents and the use of the proceeds from the sale of
the  Securities,  an  "investment  company"  or  an  entity  "controlled"  by an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.