October 22, 1997



Augment Systems, Inc.
2 Robbins Road
Westford, MA 01886-4113

Attention:        Duane Mayo
                  Chief Financial Officer

Gentlemen:

         This letter agreement (the "Agreement") confirms our understanding that
Augment  Systems,  Inc. (which together with its  subsidiaries and affiliates is
hereinafter  referred  to as  the  "Company")  has  engaged  Oscar  Gruss  & Son
Incorporated  ("Gruss") to act as exclusive agent to the Company for a period of
six months  commencing upon your acceptance of this Agreement in connection with
a  private   placement  of  between  $5  and  $10  million  of  securities  (the
"Securities")  (the "Proposed  Financing") on a reasonable best efforts basis on
terms satisfactory to the Company.

         Our  services  to the  Company  will  include:  (i)  assistance  in the
preparation of the Company's Offering Materials described below; (ii) assistance
in  structuring  the Proposed  Financing and its terms;  (iii)  identifying  and
contacting  selected  qualified  purchasers (the  "Purchasers")  of the Proposed
Financing  and  furnishing  them,  on behalf of the Company,  with copies of the
Offering  Materials;  and (iv)  negotiating  under your  guidance the  financial
aspects  of  the  Proposed  Financing.  Gruss'  undertaking  is  subject  to our
continued  satisfaction  with the results of our ongoing review of the Company's
business and affairs.

         As compensation for the services to be provided by Gruss hereunder, the
Company agrees to pay to Gruss (i) a cash fee equal to 10% of the gross proceeds
of the Proposed  Financing (the "Success  Fee"),  (ii) a retainer fee of $10,000
upon the  execution  of this  Agreement  and $30,000 upon the receipt of interim
funding,  such fee to be credited against the Success Fee, and (iii) warrants to
purchase a number of shares of common stock equal to 10% of the number of shares
sold  (or  10% of the  number  of  underlying  common  shares  in the  case of a
convertible  security)  in the  Proposed  Financing,  which  warrants  shall  be
exercisable  for a period of four years from the date of the Proposed  Financing
at a price  per  share  equal  to 165% of the  price of the  shares  sold in the
Proposed Financing,  and shall contain typical provisions  concerning demand and
piggyback registration rights. Said warrants shall be payable upon the execution
of  commitment  letters or  purchase  agreements  between  the  Company  and the
Purchasers,  and shall be paid at the closing  (the  "Closing")  of the Proposed
Financing. In addition, the Company shall pay to Gruss an expense allowance on a
non-accountable  basis  equal  to 3% of  the  gross  proceeds  of  the  Proposed
Financing.  In the event the  Proposed  Financing is not  consummated,  then the
Company shall promptly  reimburse  Gruss for all  out-of-pocket  expenses (e.g.,
telephone, telecopier, facsimile, messenger, 








Augment Systems, Inc.
October 22, 1997
Page 2

copying,  mail and  courier  expenses)  and for all travel and other  reasonable
expenses  incurred by it or its employees or agents in connection  with services
rendered hereunder, including expenses incurred by counsel. In the event that up
to $1 million of the Proposed Financing is placed with an investor identified by
the  Company,  then the cash fee  described in (i) above shall be reduced to 5%,
but all other terms of compensation shall remain the same.

         The Company acknowledges and agrees that Gruss has been retained solely
to provide the advice or services set forth in this  Agreement.  Gruss shall act
as an  independent  contractor,  and any  duties  of  Gruss  arising  out of its
engagement  hereunder  shall be owed  solely to the  Company.  As Gruss  will be
acting  on  your  behalf  in  such  capacity,  it is  our  firm  practice  to be
indemnified in connection  with  engagements of this type and the Company agrees
to the  indemnification and other obligations as set forth in Schedule I hereto,
which Schedule is an integral part hereof.

         It shall be the  Company's  obligation  to bear all of its  expenses in
connection  with the  Proposed  Financing,  including,  but not  limited to, the
following:  filing fees, legal, business and environmental investigatory matters
and expenses,  printing costs,  postage and mailing expenses with respect to the
transmission  of the Offering  Materials,  registrar  and  transfer  agent fees,
issuer's and placement  agent's counsel) and accounting fees, issue and transfer
taxes, if any, and Blue Sky counsel fees and expenses.  It is agreed that Gruss'
outside  counsel  shall perform the required  Blue Sky legal  services.  In this
connection, Blue Sky applications shall be made in such states and jurisdictions
as shall be requested by Gruss.

         Please note that Gruss is a full  service  securities  firm  engaged in
securities  trading and brokerage  activities,  as well as providing  investment
banking and financial advisory  services.  In the ordinary course of our trading
and brokerage  activities,  Gruss or its affiliates may at any time hold long or
short  positions,  and may trade or otherwise  effect  transactions,  for its or
their  accounts or on the accounts of  customers,  in equity  securities  of the
Company or other  entities  that may be involved in the Proposed  Financing.  We
recognize our responsibility for compliance with Federal laws in connection with
any such activities.

         The Company  will  prepare and furnish  Gruss with a private  placement
memorandum  (which,  together with the appendices  and exhibits  thereto and any
amendments  or  supplements  thereto,  is herein  referred  to as the  "Offering
Materials") relating to the Proposed Financing.  The Company authorizes Gruss to
transmit  the  Offering  Materials  to  prospective  Purchasers  of the Proposed
Financing, and represents and warrants that the Offering Materials, at all times
through the Closing, will not contain any untrue statement of a material fact or
omit to state any material  fact  required to be stated  therein or necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not  misleading.  The Company will not,  without first obtaining
Gruss' approval,  contact or solicit potential financing sources with respect to
the Proposed Financing and all inquiries and offers received by the Company with
respect  thereto  shall be referred to Gruss.  The Company will also cause to be
furnished to Gruss at the Closing  copies  (addressed  to Gruss if requested) of
such agreements,  opinions,  certificates  and other documents  delivered at the
Closing  as Gruss may  reasonably  request  including,  without  limitation,  an
opinion of Company  counsel to the effect that the  placement of the  Securities
was exempt from registration under the Securities Act.







Augment Systems, Inc.
October 22, 1997
Page 3

          The Company will also make  available to Gruss all financial and other
information  concerning its business and  operations and the Proposed  Financing
which  Gruss  reasonably  requests  and will  provide  access  to the  Company's
officers, directors, employees, independent accountants and legal counsel. Gruss
shall be entitled to rely without  investigation  upon all  information  that is
available from public sources as well as all other information supplied to it by
or on behalf of the Company or its other  advisors  and shall not in any respect
be responsible  for the accuracy or  completeness  of, or have any obligation to
verify, the same or to conduct any appraisal of assets. To the extent consistent
with  legal  requirements  and  except as  otherwise  set forth in the  Offering
Materials,  all  information  given  to Gruss by the  Company,  unless  publicly
available or otherwise  available to Gruss without  restriction or breach of any
confidentiality agreement ("Confidential Information"), will be held by Gruss in
confidence  and will not be  disclosed  to anyone  other than Gruss'  agents and
advisors without the Company's prior approval or used for any purpose other than
those  referred to in this  Agreement;  provided that nothing  herein shall,  in
itself,  prevent Gruss from engaging in future transactions  involving companies
in a similar industry to the Company or, provided no Confidential Information is
directly used in connection  with such  engagement,  be deemed to violate any of
the terms hereof.

         Any  advice,  written  or  oral,  provided  by Gruss  pursuant  to this
Agreement will be treated by the Company as confidential, will be solely for the
information  and  assistance  of the  Company in  connection  with the  Proposed
Financing  and may not be quoted,  nor will any such advice or the name of Gruss
be referred to, in any report, document, release or other communication, whether
written  (including,  without  limitation,  the  Offering  Materials)  or  oral,
prepared,  issued or  transmitted  by the  Company or any  affiliate,  director,
officer,  employee,  agent or  representative of any thereof,  without,  in each
instance, Gruss' prior written consent.

         The Company has not taken,  and will not take, any action,  directly or
indirectly,  so as to cause the  transactions  contemplated by this Agreement to
fail to be entitled to exemption  under  Section 4(2) of the  Securities  Act of
1933, as amended.

         During the term of Gruss'  engagement  hereunder,  Gruss shall have the
exclusive right (but not the  obligation) (i) to act as managing  underwriter in
the event that the Company  determines  to make a public  offering of any of its
securities  and (ii) if the Company  determines  to engage a financial  or other
investment  banking advisor in connection with any acquisition or disposition of
any  subsidiary,  assets or securities,  to act as such  exclusive  financial or
investment banking advisor. In either of such events, the Company and Gruss will
enter  into  a  customary   underwriting  agreement  or  engagement  letter,  as
applicable,  containing customary terms and conditions and in form and substance
acceptable to Gruss and its counsel.

         Upon completion of the Proposed Financing, the Company grants Gruss the
right of first refusal  through  December 31, 1998 to provide or arrange for any
future financings  including the role of lead manager for any public offering of
the Company,  placement  agent for any private  placement  of the  Company,  and
investment banking advisor in any merger and acquisition transaction. During the
12 month  period  ending  December  31, 1999 Gruss  shall have the same  rights,
except that in the event of a public offering of securities of the Company, then
Gruss  shall  have the  right of first  refusal  to act as  co-manager,  and its
compensation as co-manager shall not be less that 40% of the total  compensation
payable to the managing  underwriters of such public  offering.  Gruss will have








Augment Systems, Inc.
October 22, 1997
Page 4

such exclusive right until Gruss has stated to the Company in writing that Gruss
will not  provide  or  arrange  for any such  financing  or  services.  If Gruss
provides any such additional  services,  the Company and Gruss will enter into a
separate agreement to be mutually agreed upon, including provision of additional
fees.

         This  Agreement may be terminated by either the Company or Gruss at any
time upon receipt of written notice to that effect by the other party.  Upon the
expiration or  termination of this  Agreement,  Gruss will be entitled to prompt
reimbursement  of all its  out-of-pocket  expenses as described above. If at any
time prior to 6 months after the termination or expiration of this Agreement the
Company  consummates  a financing,  including the Proposed  Financing,  with any
party, Gruss will be entitled to 50% of the compensation  described in the third
paragraph  of this  Agreement.If  at any  time  prior  to 18  months  after  the
termination or expiration of this Agreement, the Company consummates a financing
transaction,   including  the  Proposed  Financing,  with  any  party  contacted
regarding the Proposed  Financing during the term of our engagement,  Gruss will
be  entitled  to  payment  in full of the  compensation  described  in the third
paragraph  of this  Agreement.  In the  event  that the  Proposed  Financing  is
completed  pursuant to this  Agreement,  then the  preceeding  two sentences are
void. Promptly following any termination or expiration of this Agreement,  Gruss
will provide the Company with written  notice of the parties  contacted by Gruss
regarding the Proposed Financing during the term of our engagement.  The Company
further agrees that it will not enter into any financing  transaction  described
in this paragraph  unless,  prior to or  simultaneously  with such  transaction,
adequate provision is made with respect to the payment of all amounts payable to
Gruss hereunder. The indemnity and other provisions contained in Schedule I will
also remain operative and in full force and effect  regardless of any expiration
or termination of this Agreement.

         This Agreement shall not give rise to any express or implied commitment
by Gruss to purchase or place any securities of the Company.

         This  Agreement  including  Schedule I hereto  incorporates  the entire
understanding of the parties and supersedes all previous  agreements relating to
the subject  matter  hereof and shall be governed by, and construed and enforced
in accordance  with, the laws of the State of New York.  This Agreement shall be
binding upon and inure to the benefit of the Company,  Gruss,  each  Indemnified
Person (as  defined in Schedule I hereto) and their  respective  successors  and
assigns.






Augment Systems, Inc.
October 22, 1997
Page 5

         After reviewing this Agreement, please confirm that the foregoing is in
accordance  with your  understanding  by signing and  returning the duplicate of
this letter attached hereto, whereupon it shall be our binding Agreement.

                                                Very truly yours,

                                                Oscar Gruss & Son Incorporated


                                                By:  /s/ Stephen McGrath
                                                     ------------------------
                                                     Stephen McGrath
                                                     Managing Director


Accepted and agreed to 
this 22nd day of October, 1997.


By:  /s/ Duane Mayo
     ----------------------------
     Duane Mayo
     Chief Financial Officer
     Augment Systems, Inc.







                                   SCHEDULE I

         This  Schedule  I is a part of and is  incorporated  into that  certain
Agreement  (together,  the  "Agreement")  dated  October 22, 1997 by and between
Augment  Systems,  Inc.  (the  "Company");  and Oscar  Gruss & Son  Incorporated
("Gruss ").

         The Company will indemnify and hold harmless Gruss, its affiliates, and
the  respective  directors,  officers,  agents  and  employees  of Gruss and its
affiliates (Gruss and each such entity or person, an "Indemnified  Person") from
and against any losses, claims, damages, judgments, assessments, costs and other
liabilities  (collectively  "Liabilities"),  and will reimburse each Indemnified
Person for all fees and expenses  (including the reasonable fees and expenses of
counsel)  (collectively,  "Expenses")  as they are  incurred  in  investigating,
preparing,  pursuing or defending any claim, action, proceeding or investigation
(collectively,  "Actions"),  (i) caused by, or arising  out of or in  connection
with,  any untrue  statement  or alleged  untrue  statement  of a material  fact
contained  in the  Offering  Materials  (including  any  amendments  thereof and
supplements  thereto) or by any omission or alleged  omission to state therein a
material  fact  necessary  to make  the  statements  therein,  in  light  of the
circumstances  under  which they were made,  not  misleading  (other than untrue
statements or alleged untrue  statements  in, or omissions or alleged  omissions
from,  information  relating to an Indemnified Person furnished in writing by or
on  behalf  of  such  Indemnified  Person  expressly  for  use in  the  Offering
Materials)  or (ii)  otherwise  arising out of or in  connection  with advice or
services  rendered or to be rendered by any Indemnified  Person pursuant to this
Agreement,  the  transactions  contemplated  hereby or any Indemnified  Person's
actions  or  inactions  in  connection   with  any  such  advice,   services  or
transactions;  provided  that, in the case of clause (ii) only, the Company will
not be responsible  for any  Liabilities or Expenses of any  Indemnified  Person
that are determined by a judgment of a court of competent  jurisdiction which is
no longer subject to appeal or further review to have resulted  solely from such
Indemnified  Person's gross negligence or willful  misconduct in connection with
any of the advice, actions, inactions or services referred to above. The Company
also agrees to reimburse  each  Indemnified  Person for all Expenses as they are
incurred in connection  with enforcing such  Indemnified  Person's  rights under
this Agreement  (including,  without limitation,  its rights under this Schedule
I).

         Upon  receipt by an  Indemnified  Person of actual  notice of an Action
against such  Indemnified  Person with respect to which  indemnity may be sought
under this Agreement,  such Indemnified Person shall promptly notify the Company
in writing; provided that failure so to notify the Company shall not relieve the
Company  from any  liability  which  the  Company  may have on  account  of this
indemnity  or  otherwise,  except to the  extent  the  Company  shall  have been
materially prejudiced by such failure. The Company shall, if requested by Gruss,
assume the  defense  of any such  Action  including  the  employment  of counsel
reasonably satisfactory to Gruss. Any Indemnified Person shall have the right to
employ  separate  counsel in any such  action  and  participate  in the  defense
thereof,  but the fees and expenses of such  counsel  shall be at the expense of
such Indemnified  Person,  unless: (i) the Company has failed promptly to assume
the  defense  and employ  counsel or (ii) the named  parties to any such  Action
(including  any  impleaded  parties)  include  such  Indemnified  Person and the
Company,  and such  Indemnified  Person  shall have been advised by counsel that
there may be one or more legal defenses available to it which are different from
or in addition to those  available  to the  Company;  provided  that the Company
shall not in such event be  responsible  hereunder  for the fees and expenses of
more than one firm of separate counsel in connection with any Action in the same
jurisdiction,  in addition to any local counsel. The Company shall not be liable
for any  settlement of any Action  effected  without its written  consent (which
shall not be unreasonably  withheld). In addition, the Company will not, without
prior written  consent of Gruss , settle,  compromise or consent to the entry of
any judgment in or otherwise seek to terminate any pending or threatened  Action
in respect of which  indemnification  or  contribution  may be sought  hereunder
(whether  or  not  any  Indemnified  Person  is a  party  thereto)  unless  such

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settlement, compromise, consent or termination includes an unconditional release
of each Indemnified Person from all Liabilities arising out of such Action.

         In the event that the foregoing  indemnity is judicially  determined to
be unavailable to an Indemnified Person (other than in accordance with the terms
hereof),  the Company shall  contribute to the  Liabilities and Expenses paid or
payable by such  Indemnified  Person in such  proportion  as is  appropriate  to
reflect (i) the relative  benefits to the Company and its  shareholders,  on the
one hand, and to Gruss,  on the other hand, of the matters  contemplated by this
Agreement or (ii) if the allocation provided by the immediately preceding clause
is not permitted by the applicable law, not only such relative benefits but also
the relative  fault of the  Company,  on the one hand,  and Gruss,  on the other
hand, in connection  with the matters as to which such  Liabilities  or Expenses
relate, as well as any other relevant equitable considerations; provided that in
no event shall the Company  contribute less than the amount  necessary to ensure
that  all  Indemnified  Persons,  in the  aggregate,  are  not  liable  for  any
Liabilities  and Expenses in excess of the amount of fees  actually  received by
Gruss pursuant to this Agreement.  For purposes of this paragraph,  the relative
benefits to the Company and its shareholders,  on the one hand, and to Gruss, on
the other hand, of the matters contemplated by this Agreement shall be deemed to
be in the same proportion as (a) the total value paid or contemplated to be paid
or received  or  contemplated  to be  received  by the Company or the  Company's
shareholders,  as the case may be, in the transaction or  transactions  that are
within  the scope of this  Agreement,  whether  or not any such  transaction  is
consummated,  bears  to (b) the  fees  paid or to be paid to  Gruss  under  this
Agreement.

         The  Company  also  agrees that no  Indemnified  Person  shall have any
liability (whether direct or indirect,  in contract or tort or otherwise) to the
Company for or in connection with advice or services  rendered or to be rendered
by  any  Indemnified  Person  pursuant  to  this  Agreement,   the  transactions
contemplated  hereby  or  any  Indemnified  Person's  actions  or  inactions  in
connection with any such advice, services or transactions except for Liabilities
(and related  Expenses) of the Company  that are  determined  by a judgment of a
court of competent  jurisdiction which is no longer subject to appeal or further
review  to  have  resulted  primarily  from  such  Indemnified   Person's  gross
negligence or willful  misconduct in connection  with any such advice,  actions,
inactions or services.

         If any term,  provision,  covenant  or  restriction  contained  in this
Schedule I is held by a court of competent jurisdiction or other authority to be
invalid, void,  unenforceable or against its regulatory policy, the remainder of
the terms,  provisions,  covenants and restrictions  contained in this Agreement
shall remain in full force and effect and shall in no way be affected,  impaired
or invalidated.

         The  reimbursement,  indemnity  and  contribution  obligations  of  the
Company set forth herein shall apply to any  modification  of this Agreement and
shall remain in full force and effect  regardless of any  termination of, or the
completion of any  Indemnified  Person's  services under or in connection  with,
this Agreement.

Accepted and agreed to 
this 22nd day of October, 1997.


By:     /s/ Duane Mayo
        -----------------------
        Duane Mayo
        Chief Financial Officer
        Augment Systems, Inc.


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