Exhibit 10.1



                          SECURITIES PURCHASE AGREEMENT

         SECURITIES PURCHASE AGREEMENT (this  "Agreement"),  dated as of May 19,
2003, among SMARTSERV ONLINE,  INC., a Delaware  corporation (the "Company") and
the investors listed on Exhibit A hereto, as the same may be hereafter  amended,
(collectively, the "Investors", and each, individually, an "Investor").

                                    RECITALS:

         In  consideration  of the mutual  covenants  and  agreements  set forth
herein  and  for  other  good  and  valuable  consideration,   the  receipt  and
sufficiency of which are hereby acknowledged,  and intending to be legally bound
hereby, the parties agree as follows:

                                    ARTICLE I

                           PURCHASE AND SALE OF UNITS

         Section 1.1 Purchase and Sale.  The Company  hereby agrees to issue and
sell to each Investor and, subject to all of the terms and conditions hereof and
in  reliance  on the  representations  and  warranties  set forth or referred to
herein,  each  Investor  severally  agrees  to  purchase  such  number  of units
(collectively,  the "Purchased  Units") as is equal to the result  obtained when
the aggregate  purchase  price (as to each  Investor,  the  "Aggregate  Purchase
Price") being paid by each such Investor (as set forth opposite such  Investor's
name on Exhibit A hereto) is divided by the "Per Unit  Purchase  Price" (as such
term is defined in Section 1.2 below),  up to a maximum of 15  Purchased  Units.
Each Purchased Unit shall consist of a $100,000  convertible  debenture  (each a
"Debenture",  and collectively the "Debentures"),  the form of which is attached
hereto as Exhibit B, and a warrant  (each a  "Warrant",  and  collectively,  the
"Warrants")  to purchase  200,000  shares of Common  Stock,  par value $0.01 per
share, of the Company ("Common Stock"),  the form of which is attached hereto as
Exhibit C.

         Section 1.2 Purchase Price.  The purchase price per Purchased Unit (the
"Per Unit Purchase Price") is $100,000.

         Section 1.3 Closing. At such time as there are Investors purchasing 3.5
Purchased  Units  (the  "First  Investors"),  there  shall be a closing  for the
purchase and sale of such Purchased  Units (the "First  Closing") at the offices
of Jenkens & Gilchrist Parker Chapin LLP,  counsel to the Company,  at such time
and date as is mutually agreed upon by the Company and the First  Investors,  or
at such other  place as is  mutually  agreed  upon by the  Company and the First
Investors.  Subsequent  to the  First  Closing,  there  shall  be  one  or  more
subsequent closings for the purchase and sale of any additional  Purchased Units
(each a "Subsequent  Closing";  and  collectively  with the First  Closing,  the
"Closings") at the offices of Jenkens & Gilchrist Parker Chapin LLP at such time
and date as is mutually agreed upon by the Company and the Investors  purchasing
Purchased Units at each Subsequent Closing (the "Subsequent  Investors"),  or at
such other  place as is mutually  agreed upon by the Company and the  Subsequent
Investors.  The date and time of the First Closing and each  Subsequent  Closing
are referred to herein as the "First Closing Date" and the  "Subsequent  Closing
Date", respectively.


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                                   ARTICLE II

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company represents and warrants to the Investors as follows,  which
representations  and  warranties  are true as of the date  hereof  and as of the
First Closing Date and each Subsequent Closing Date:

         Section 2.1 Corporate  Organization.  The Company is a corporation duly
incorporated,  validly  existing and  subsisting  under the laws of the State of
Delaware.  The Company has all requisite power and authority to own, operate and
lease its  properties  and to conduct its business as currently  conducted.  The
Company is duly  qualified or licensed to do business and is in good standing in
each  jurisdiction  in which its ownership or leasing of property or the conduct
of its business requires such licensing or  qualification,  except to the extent
that the  failure  to be so  qualified  or  licensed  would not have a  Material
Adverse  Effect (as defined  below).  The Company has delivered to the Investors
complete  and  correct  copies  of  its  Amended  and  Restated  Certificate  of
Incorporation and By-laws, as in effect on the date hereof,  copies of which are
attached  hereto as  Exhibit  D. As used in this  Agreement,  "Material  Adverse
Effect" means any event,  circumstance or development  which  individually or in
the aggregate could have a material adverse effect on the business,  properties,
operations, condition (financial or otherwise), assets, liabilities, tradability
of the Common  Stock  (excluding  a failure of the  Company to meet the  minimum
stockholders'   equity  requirement   contained  in  Rule  4310  of  the  Nasdaq
Marketplace Rules based on the  stockholders'  equity reflected in the Company's
Form 10-KSB for the fiscal year ended December 31, 2002), earnings or results of
operations of the Company or on the transactions contemplated hereby.

         Section  2.2  Subsidiaries.  Except as set forth in Schedule  2.2,  the
Company does not directly or indirectly own any equity or similar  interest,  or
any interest  convertible  into or exchangeable or exercisable for any equity or
similar interest,  in any corporation,  partnership,  limited liability company,
joint venture or other business association, entity or person.

         Section 2.3 Authorization. The Company has all requisite power and full
legal right to execute and deliver this Agreement and the Ancillary  Agreements,
and to perform all of its  obligations  hereunder  and  thereunder in accordance
with the respective  terms hereof and thereof.  This Agreement and the Ancillary
Agreements and the transactions  contemplated  hereby and thereby have been duly
approved and  authorized  by all requisite  corporate  action on the part of the
Company,  and this Agreement has been duly executed and delivered by the Company
and  constitutes,  and  each of the  Ancillary  Agreements,  when  executed  and
delivered by the Company at the Closings,  will constitute,  a legal, valid, and
binding obligation of the Company, enforceable against it in accordance with its
respective  terms,  except as such  enforceability  may be limited by applicable
bankruptcy, insolvency, reorganization,  moratorium, liquidation or similar laws
relating  to the  enforcement  of  creditors'  rights and  remedies  or by other
equitable  principles  of general  application.  The  execution,  delivery,  and
performance  by the Company of this  Agreement and the  Ancillary  Agreements in
accordance with their  respective  terms, and the consummation by the Company of
the  transactions  contemplated  hereby or  thereby,  will not  result  (with or
without  the  giving of  notice  or the lapse of time or both) in any  conflict,
violation,  breach, or default, or the creation of any Lien, or the termination,
acceleration,  vesting, or modification of any right or obligation,  under or in
respect of (x) the Amended and Restated  Certificate of Incorporation or By-laws
of the Company, (y) any judgment,  decree,  order,  statute,  rule or regulation
binding on or applicable  to the Company,  or (z) any agreement or instrument to
which  the  Company  is a party or by which  it or any of its  assets  is or are
bound.

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         Section 2.4 Capitalization. (a) Immediately prior to the First Closing,
not  giving  effect  to the  sale  and  purchase  of the  Purchased  Units,  the
authorized and the outstanding  capital stock of the Company (on a Fully Diluted
Basis including all Derivative Securities) will be as set forth in Schedule 2.4.
All such outstanding  shares of capital stock will be duly  authorized,  validly
issued, fully paid, and nonassessable,  and will have been issued free and clear
of Liens. Except as set forth in Schedule 2.4, no adjustment has previously been
made (or should have been made) nor will any  adjustment  be required to be made
as a result of the  Company's  issuance  of the  Purchased  Units to the rate at
which  any  shares  of  any  class  of the  equity  securities  of the  Company,
subscriptions, options, warrants, calls, commitments or agreements or Derivative
Securities  of the Company are  convertible  into or  exercisable  for shares of
Common Stock,  Derivative Securities or shares of other equity securities of the
Company  (by  reason  of  any   "anti-dilution"   provisions  or  agreements  or
otherwise).

                  (b) Except as set forth on Schedule  2.4, the Company does not
have,  is not  bound  by,  and has no  obligation  to grant or enter  into,  any
outstanding subscriptions,  options, warrants, calls, commitments, or agreements
of any  character  calling  for it to issue,  deliver,  or sell,  or cause to be
issued,  delivered,  or sold, any shares of its capital stock,  any other equity
security, or any securities convertible into,  exchangeable for, or representing
the right to subscribe  for,  purchase,  or otherwise  acquire any shares of its
capital stock or any other equity security.

                  (c) Except as set forth in Schedule  2.4,  the Company (i) has
no outstanding obligations,  contractual or otherwise, to repurchase, redeem, or
otherwise  acquire any shares of capital stock or other equity securities of the
Company, (ii) is not a party to or bound by any agreement or instrument relating
to the voting of any of its securities,  and (iii) is not a party to or bound by
any agreement or  instrument  under which any person has the right to require it
to effect, or to include any securities held by such person in, any registration
under the Securities Act (as defined in Section 2.7).

                  (d) All of the  Purchased  Units have been  offered and at the
Closings  will be  issued  and  sold,  in  compliance  with  (i) all  applicable
preemptive or similar rights of all persons,  and (ii) assuming the truthfulness
and accuracy of the  representations  made by the Investors in Section 3 hereof,
all applicable  provisions of the  Securities Act and the rules and  regulations
thereunder,  and  all  applicable  state  securities  laws  and  the  rules  and
regulations thereunder and other applicable securities laws and regulations.

                  (e) The Purchased  Units (which,  for purposes of this Section
2.4(e)  shall be deemed to include  all  shares of Common  Stock  issuable  upon
conversion  of the  Debentures  and all  shares of Common  Stock  issuable  upon
exercise of the  Warrants)  shall,  upon  issuance  pursuant to the terms hereof
and/or the terms of the  Debentures,  as the case may be, be duly authorized and
validly issued,  fully paid and  non-assessable  and free and clear of any Lien,
security  interest,  option  or  other  charge  or  encumbrance  and free of all
preemptive and other third party rights.

         Section 2.5 Financial Statements.  The Company has previously delivered
to the  Investors,  or made the Investors  aware of how to obtain,  complete and
correct  copies  of  its  audited  balance  sheets,  statements  of  income  and
statements of cash flows as of and for the fiscal years ended December 31, 2002,
2001 and 2000.  All such financial  statements  were prepared from the books and
records of the Company,  in conformity with GAAP applied on a consistent  basis,
are complete and correct,  contain  provisions for all  significant  accruals or
contingencies  and fairly and accurately  present the financial  position of the
Company as of the  respective  dates thereof and the results of  operations  and
cash flows of the Company for the periods shown  therein.  No event has occurred
and  nothing  has come to the  attention  of the  Company  since the date of the
Balance  Sheet (as  defined  below)  that  would  indicate  that such  financial
statements are not true and correct as of the date hereof.

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<PAGE>

         Section 2.6 No  Undisclosed  or Contingent  Liabilities.  Except as set
forth in Schedule  2.6, the Company has no  liabilities  or  obligations  of any
nature (whether absolute, accrued, contingent or otherwise and whether due or to
become due) which are not fully  reflected  or  reserved  against on the balance
sheet as of December 31, 2002  (including  the footnotes and schedules  thereto,
the  "Balance  Sheet") in  accordance  with GAAP,  except  for  liabilities  and
obligations incurred in the ordinary course of business and consistent with past
practice since the date thereof.

         Section 2.7 SEC Documents.  The Company has delivered to the Investors,
or made the Investors  aware of how to obtain,  true and complete  copies of all
documents filed by the Company with the Securities and Exchange  Commission (the
"SEC") (such documents,  the "SEC  Documents").  The SEC Documents comply in all
material  respects  with the  requirements  of the  Securities  Act of 1933,  as
amended  (the  "Securities  Act") or the  Securities  Exchange  Act of 1934,  as
amended (the "Exchange  Act"),  as the case may be, and rules and regulations of
the SEC promulgated  thereunder and none of the SEC Documents contain any untrue
statement  of a material  fact or omit 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 SEC Documents comply as to form in all
material  respects with  applicable  accounting  requirements  and the published
rules and regulations of the SEC or other  applicable rules and regulations with
respect thereto. The Company has effected all filings required by the Securities
Act,  Exchange  Act  and  the  rules  and  regulations  promulgated  by the  SEC
thereunder  and has made all such  filings on a timely  basis within the last 12
months, except as set forth in Schedule 2.7.

         Section 2.8 Absence of Certain Changes. Except as set forth on Schedule
2.8 or otherwise  disclosed in the SEC Documents,  since the date of the Balance
Sheet,  the Company has conducted  its business only in the ordinary  course and
consistent with past practice, and has not:

                  (a) suffered any Material Adverse Effect;

                  (b) materially  increased,  or  experienced  any change in any
assumptions  underlying or methods of calculating,  any bad debt, contingency or
other reserves;

                  (c) paid,  discharged or satisfied any claims,  liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and consistent with
past practice of liabilities  and obligations  reflected or reserved  against in
the Balance Sheet or incurred in the ordinary  course of business and consistent
with past practice since the date of the Balance Sheet;

                  (d)  permitted or allowed any of its assets to be subjected to
any Lien of any kind;

                  (e) incurred any  indebtedness  not in the ordinary  course of
business or executed any guarantees on behalf of any person;

                  (f) canceled any material debts or waived any claims or rights
of substantial value;

                  (g) sold,  transferred  or  otherwise  disposed  of any of its
properties or assets,  except in the ordinary  course of business and consistent
with past practice;

                  (h)  granted  any  general  increase  in the  compensation  of
employees  (including any such increase pursuant to any bonus,  pension,  profit
sharing  or  other  plan  or  commitment),  other  than  such  increases  as are
consistent  with the  Company's  past  practice  or  required  by  agreement  or
understanding  disclosed to the Investors;  or experienced  any material loss of

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<PAGE>

personnel of the Company,  material  change in the terms and  conditions  of the
employment of the Company's key  personnel,  loss of any of the five most highly
compensated  employees  of the Company or entered  into any  written  employment
agreement with any Company employee;

                  (i) made any capital  expenditure  or commitment for additions
to its  property,  equipment  or  intangible  capital  assets  other than in the
ordinary course of business and consistent with past practice;

                  (j) made any change in any method of  accounting or accounting
practice,  changed  accountants  or auditors  or failed to  maintain  its books,
accounts and records in the ordinary course of business and consistent with past
practice;

                  (k) failed to maintain any material properties or equipment in
good operating condition and repair, ordinary wear and tear excepted;

                  (l) entered into any  transaction  or made or entered into any
material  contract or commitment,  except in the ordinary course of business and
consistent with past practice, or terminated or amended any material contract or
commitment;

                  (m)  declared,  paid or set aside for payment any  dividend or
other  distribution  in respect of its capital  stock or redeemed,  purchased or
otherwise acquired,  directly or indirectly,  any shares of its capital stock or
other securities;

                  (n)  amended  its  Amended   and   Restated   Certificate   of
Incorporation or By-laws;

                  (o) taken,  suffered,  or  permitted  any action  which  would
render untrue any of the  representations  or  warranties of the Company  herein
contained,  and not  omitted to take any  action,  the  omission  of which would
render untrue any such representation or warranty; or

                  (p) agreed in writing or  otherwise  committed to take actions
in  furtherance  of, or otherwise  taken,  any action with respect to any of the
matters described in this Section 2.8.

         Section 2.9 No  Violation.  Neither the  execution and delivery of this
Agreement or any of the Ancillary  Agreements by the Company nor the performance
by the Company of its  obligations  hereunder or thereunder  will:  (i) conflict
with or result in any  breach  of any  provision  of its  Amended  and  Restated
Certificate of  Incorporation  or By-laws,  (ii) result in a violation or breach
of,  or  constitute  (with or  without  due  notice  or lapse of time or both) a
default or give rise to any Lien on the  Company's  properties  or assets or any
right of termination,  cancellation  or  acceleration  under any of the terms or
conditions of any note, bond, mortgage,  indenture,  license, agreement or other
instrument  or  obligation to which the Company is a party or by which it or any
of its material properties or assets may be bound, or require the consent of any
person,  (iii) violate any statute,  law, rule,  regulation,  writ,  injunction,
judgment,  order or decree of any court,  administrative  agency or governmental
authority  binding on the Company or any of its  properties  or assets,  or (iv)
violate any provision  (including those requiring the furnishing of notice prior
to the taking of specific actions) of the Nasdaq Marketplace Rules (or the rules
of any other  marketplace  on which the Common Stock of the Company is listed or
quoted).

         Section 2.10  Compliance  with Applicable Law. The Company is currently
in compliance with all applicable laws (whether statutory or otherwise),  rules,
regulations,  orders,  ordinances,  judgments,  decrees, writs, requirements and
injunctions   of   all   governmental   authorities,   agencies,   courts,   and
administrative  tribunals,  except for such noncompliance that, individually and
in the aggregate,  would not have a Material Adverse Effect. The Company has not
received any notice or request for information from any federal, state, or local
governmental  authority  (i)  that  the  Company  has  been  identified  by  the

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Environmental  Protection Agency or any state environmental regulatory authority
as a potentially responsible party under CERCLA with respect to a site listed on
the  National  Priorities  List,  40 C.F.R.  Part 300  Appendix  B, or under any
equivalent  state  law;  or  (ii)  that  it is or  may  be in  violation  of any
Environmental  Laws or is or will or may be a named party to any claim,  action,
cause of action, complaint or legal or administrative  proceeding arising out of
any third party's  incurrence of Damages in  connection  with any  environmental
matters.

         Section 2.11  Licenses and Permits.  The Company has and  maintains all
licenses,  permits and other authorizations from all governmental authorities as
are  necessary  for the conduct of its  business as  presently  conducted  or in
connection  with the  ownership or use of its  properties,  except for licenses,
permits  and other  authorizations  that the  failure to obtain or  maintain  in
effect, either singly or in the aggregate,  has not had and could not reasonably
be expected to have a Material Adverse Effect.

         Section 2.12 Governmental Consents.  Except for the filing of any forms
required under the federal securities laws (including any registration statement
under  the  Securities  Act  required  to be  filed  by the  Company  under  the
Registration  Rights  Agreement) and any filings required under state "blue sky"
laws,  no  consent,  approval or  authorization  of, or  declaration,  filing or
registration  with, any  governmental or regulatory  authority is required to be
made or obtained by the Company in connection with the execution and delivery of
this  Agreement  or any of  the  Ancillary  Agreements  by  the  Company  or the
performance by the Company of its obligations  hereunder and thereunder,  or the
continued conduct by the Company of its present business after the Closings.

         Section 2.13 Taxes.  Except as set forth in Schedule  2.13, the Company
has filed all Tax (as  hereinafter  defined)  reports  and  returns  that it was
required to file.  All such reports and returns were correct and complete in all
material  respects.  All Taxes owed by the Company  (whether or not shown on any
report  or  return)  have been  paid or,  if not yet due,  appropriate  accruals
therefor  as  required  under  GAAP have been  made on the  Company's  financial
records and on the financial  statements  described in Section 2.5. No claim has
been made by a taxing authority in a jurisdiction where the Company does not pay
Tax or file tax returns that the Company is or may be subject to Taxes  assessed
by such jurisdiction. There are no Liens for Taxes (other than current Taxes not
yet due and  payable) on the assets of the  Company.  There is no action,  suit,
investigation,  liability, taxing authority proceeding, or audit with respect to
any Tax now in progress,  pending or, to the  Company's  knowledge,  threatened,
against or with  respect to the  Company,  whether in respect of any Tax reports
and returns that were not filed in a timely manner or for any other  reason.  No
deficiency or proposed  adjustment in respect of Taxes that has not been settled
or  otherwise  resolved  has been  asserted or assessed by any taxing  authority
against the Company which is not accrued on the Balance  Sheet.  The Company has
not  consented  to extend the time in which any Tax may be assessed or collected
by any taxing  authority.  As used in this Section  2.13,  the terms "Taxes" and
"Tax" mean all  federal,  state,  local and foreign  taxes,  including,  without
limitation,  income, unemployment,  withholding,  payroll, social security, real
property,  personal property,  excise,  sales, use and franchise taxes,  levies,
assessments,  duties,  licenses and registration  fees and charges of any nature
whatsoever, including interest, penalties and additions with respect thereto and
any interest in respect of such additions and penalties.

         Section 2.14 Litigation. Except as set forth in Schedule 2.14 or in the
Company's  annual  report on Form 10-KSB for the fiscal year ended  December 31,
2002, there is no action, suit or proceeding pending or, to the knowledge of the
Company,  threatened against the Company,  before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable  likelihood
of a  decision  which  could  have a Material  Adverse  Effect on the  business,
condition  (financial  or  otherwise),  operations,  performance,  properties or
prospects of the Company or which  challenges  the validity of this Agreement or
any Ancillary Agreement.


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         Section  2.15 Title to  Properties.  The Company  does not own any real
property.  Except as set forth on Schedule 2.15, the Company has title to all of
its properties and assets free and clear of all Liens, charges and encumbrances,
except  Liens  for  taxes  not yet due and  payable  and  such  Liens  or  other
imperfections of title, if any, that do not materially detract from the value of
or interfere with the present use of the property affected thereby.  There is no
existing  default or event of default  (or event  which with  notice or lapse of
time,  or both,  would  constitute  a default)  by the  Company  under any lease
pursuant to which the Company leases real or personal property.

         Section 2.16 Contracts and Commitments. Except as set forth in Schedule
2.16,  the Company is not a party or subject to or bound by (whether  written or
oral), nor has it committed to enter into in the future:

                  (a) any agreement,  which, in the future, would lead to (i) an
acquisition,  merger or similar transaction with respect to the Company, or (ii)
a debt or equity  financing for the Company  (other than this  Agreement and the
Ancillary Agreements);

                  (b)  any   agreement   requiring   it  to   purchase   all  or
substantially all of its requirements for a particular product or service from a
particular supplier or suppliers,  or requiring it to supply all of a particular
customer's or customers' requirements for a certain service or product;

                  (c) any  agreement  with  any  current  or  former  Affiliate,
officer  or  director  of the  Company,  or with any  person  in which  any such
Affiliate has an interest; and

                  (d) any agreement  with any domestic or foreign  government or
agency or executive  office thereof or any subcontract  between it and any third
party  relating  to a contract  between  such third  party and any  domestic  or
foreign government or agency or executive office thereof.

         Section  2.17   Intellectual   Property.   (a)  All   patents,   patent
applications,  trademarks,  trade names, service marks, logos and copyrights and
other intellectual property used in or material to the Company's business as now
being conducted or as proposed to be conducted (collectively,  and together with
any technology,  know-how,  trade secrets,  processes,  formulas, and techniques
used in or material to the Company's  business,  "Proprietary  Information") are
either owned or licensed by the Company.

                  (b) To  the  Company's  knowledge,  none  of  the  Proprietary
Information  is being  infringed  by others,  or is  subject to any  outstanding
order, decree, judgment, or stipulation.  No litigation (or other proceedings in
or  before  any  court  or  other  governmental,   adjudicatory,   arbitral,  or
administrative  body) relating to the Proprietary  Information is pending or, to
the Company's knowledge,  threatened,  nor, to the Company's knowledge, is there
any basis for any such litigation or proceeding.

                  (c) To the  Company's  knowledge,  it is not  infringing on or
making  unlawful  use  of  any  intellectual  property  or  any  proprietary  or
confidential  information of any Person.  No litigation (or other proceedings in
or  before  any  court  or  other  governmental,   adjudicatory,   arbitral,  or
administrative  body) charging the Company with  infringement or unlawful use of
any patent,  trademark,  copyright, or other proprietary right is pending or, to
the Company's knowledge,  threatened;  nor, to the Company's knowledge, is there
any basis for any such litigation or proceeding.

         Section  2.18  Insurance.  Except as set forth on  Schedule  2.18,  the
Company  maintains  policies of insurance with, to the knowledge of the Company,
financially  sound and reputable  insurance  companies,  funds, or underwriters,
which are of the kinds and which cover such risks,  and are in such  amounts and
with such  deductibles and exclusions,  as are consistent with prudent  business
practice for similarly situated businesses in the Company's business.  Except as
set forth on Schedule 2.18, all such policies are in full force and effect,  are

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sufficient for  compliance in all respects by the Company with all  requirements
of law and of all  agreements  to which it is a party and will not  terminate or
lapse  or  otherwise  be  affected  in any  way by  reason  of the  transactions
contemplated hereby.

         Section  2.19  Investment  Company.  The Company is not an  "investment
company"  as such term is  defined in the  Investment  Company  Act of 1940,  as
amended,  and will not be an investment company under such Act upon consummation
of the  transactions  contemplated  hereby or after giving  effect to the use of
proceeds from the purchase of the Purchased Units.

         Section  2.20  Securities  Laws.  The offer,  sale and  issuance of the
Purchased   Units   without   registration   (assuming   the   accuracy  of  the
representations and warranties made by the Investors in Section 3.1 hereof) will
not violate the Securities Act, or any applicable state securities or "blue sky"
laws or other applicable laws. None of the Company, its affiliates or any person
acting  on its  behalf  has  engaged  in any  form of  general  solicitation  or
advertising  (as defined in Rule 502(c) of the Securities Act) or engaged in any
action  that would  require the  registration  under the  Securities  Act of the
offering and sale of the Purchased Units pursuant to this Agreement.

         Section  2.21  Investment  Banking;  Brokerage.  Except as set forth on
Schedule  2.21,  there are no claims  for  investment  banking  fees,  brokerage
commissions,  finder's fees or similar  compensation  (exclusive of professional
fees  to  attorneys  and   accountants)  in  connection  with  the  transactions
contemplated  by this Agreement based on any arrangement or agreement made by or
on behalf of the Company or any of its Affiliates.

         Section  2.22 Labor  Relations.  There is no charge  pending or, to the
Company's knowledge,  threatened,  against or with respect to the Company before
any  court  or  agency  and  alleging  unlawful   discrimination  in  employment
practices,  and there is no charge of or  proceeding  with  regard to any unfair
labor practice  against the Company  pending before the National Labor Relations
Board. There is no labor strike,  dispute,  slow-down,  or work stoppage pending
or, to the  Company's  knowledge,  threatened  against or involving the Company.
None of the  employees  of the Company is covered by any  collective  bargaining
agreement,  and no such  collective  bargaining  agreement  is  currently  being
negotiated. No one has petitioned and, to the Company's knowledge, no one is now
petitioning,  for union  representation  of any  employees of the  Company.  The
Company believes its relationships with its employees is satisfactory.

         Section 2.23  Disclosure.  The Company confirms that neither it nor, to
its  knowledge,  any other  person  acting on its behalf has provided any of the
Investors or their agents or counsel with any  information  that  constitutes or
might constitute material,  nonpublic  information.  The Company understands and
confirms  that  the  Investors  may  rely on the  foregoing  representations  in
effecting  transactions in securities of the Company. All disclosure provided to
the  Investors  regarding  the  Company,   its  business  and  the  transactions
contemplated hereby, including the schedules to this Agreement,  furnished by or
on behalf of the Company with respect to the representations and warranties made
herein are true and correct with respect to such  representations and warranties
and do not contain any untrue  statement of a material fact or omit to state any
material fact necessary in order to make the statements  made therein,  in light
of the  circumstances  under which they were made, not  misleading.  The Company
acknowledges  and agrees that no Investor makes or has made any  representations
or warranties with respect to the  transactions  contemplated  hereby other than
those specifically set forth in Section 3.

         Section  2.24  Internal  Accounting  Controls.  Except  as set forth in
Schedule  2.24, the Company and its  subsidiaries  maintain a system of internal
accounting  controls  sufficient  to  provide  reasonable   assurance  that  (i)
transactions  are executed in accordance with  management's  general or specific
authorizations,   (ii)   transactions   are  recorded  as  necessary  to  permit

                                       8
<PAGE>

preparation  of financial  statements  in  conformity  with  generally  accepted
accounting  principles  and to maintain  asset  accountability,  (iii) access to
assets is permitted  only in accordance  with  management's  general or specific
authorization,  and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any  differences.  There are no  disagreements  of any kind presently
existing,  or  reasonably  anticipated  by the  Company  to arise,  between  the
accountants and lawyers formerly or presently employed by the Company that could
reasonably  be  expected  to delay the filing or  processing  of a  registration
statement  with the SEC.  The Company has  established  disclosure  controls and
procedures  (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Company
and designed  such  disclosure  controls and  procedures to ensure that material
information relating to the Company,  including its subsidiaries,  is made known
to the certifying officers by others within those entities,  particularly during
the period in which the Company's Form 10-KSB or 10-QSB,  as the case may be, is
being   prepared.   The  Company's   certifying   officers  have  evaluated  the
effectiveness  of the Company's  controls and  procedures as of a date within 90
days prior to the filing date of the Form 10-KSB for the year ended December 31,
2002 (such date,  the  "Evaluation  Date").  The Company  presented  in the Form
10-KSB for the year ended  December 31, 2002 the  conclusions  of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no  significant  changes in the Company's  internal  controls (as such
term is defined in Item 307(b) of Regulation  S-B under the Exchange Act) or, to
the Company's  knowledge,  in other factors that could significantly  affect the
Company's internal controls.



                                   ARTICLE III

                 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

         Section 3.1  Representations  and Warranties.  Each Investor represents
severally as to himself only that (each of which  representations and warranties
are true as of the date hereof and as of the Closing  (either the First  Closing
or any Subsequent Closing) in which such Investor participates):

                  (a) He has all requisite power and full legal right to execute
and deliver this  Agreement and the Ancillary  Agreements to which he is a party
and to carry out his  obligations  hereunder and  thereunder.  The execution and
delivery of this  Agreement and the Ancillary  Agreements to which he is a party
and the  performance by him of his obligations  hereunder and  thereunder,  have
been duly  authorized  by him, and no other  proceeding  therefor on his part is
required.  This Agreement and each of the Ancillary  Agreements to which he is a
party have been duly executed and delivered by him and  constitute his valid and
binding  obligations,  enforceable  against  him in  accordance  with its terms,
except  as  such  enforceability  may  be  limited  by  applicable   bankruptcy,
insolvency, reorganization,  moratorium, liquidation or similar laws relating to
the  enforcement  of  creditors'  rights  and  remedies  or by  other  equitable
principles of general application.

                  (b) He is purchasing  the Purchased  Units for his own account
for investment only and not with a present view to the distribution thereof.

                  (c) He has such  knowledge  and  experience  in financial  and
business  matters that he is capable of  evaluating  the merits and risks of the
investment  contemplated  by this  Agreement  and making an informed  investment
decision with respect thereto.

                  (d) He is an "accredited  investor" as such term is defined in
Rule 501 under the  Securities  Act, and that he has  truthfully  filled out the
questionnaire  attached hereto as Exhibit E. Such Investor  understands that the
Company is relying on the information contained in such questionnaire.


                                       9
<PAGE>

                  (e) He has had the  opportunity  to ask  questions and receive
answers  concerning  the terms and  conditions  of the  offering  of  securities
purchased hereunder, as well as the opportunity to obtain additional information
necessary to verify the accuracy of  information  furnished in  connection  with
such offering  that the Company  possesses or can acquire  without  unreasonable
effort or expense.

                  (f) He  understands  that the  Purchased  Units  have not been
registered under the Securities Act or any state securities laws, and may not be
transferred  unless  subsequently   registered  thereunder  or  pursuant  to  an
exemption from registration, and that a legend indicating such restrictions will
be placed on the certificates representing the Warrants and the Debentures.

                  (g) There are no claims for investment banking fees, brokerage
commissions, finder's fees or similar compensation (other than professional fees
to attorneys and accountants) in connection with the  transactions  contemplated
by this Agreement or any of the Ancillary Agreements based on any arrangement or
agreement made by or on behalf of him.

                  (h) Neither the  execution  and delivery of this  Agreement or
any  of the  Ancillary  Agreements  by him  nor  the  performance  by him of his
obligations  hereunder or thereunder  will: (i) constitute  (with or without due
notice  or  lapse  of  time or  both) a  default  or  give  rise to any  lien or
encumbrance  on any  of his  material  properties  or  assets  or any  right  of
termination,  cancellation or acceleration  under any of the terms or conditions
of any material note, bond,  mortgage,  indenture,  license,  agreement or other
instrument  or  obligation  to  which he is a party or by which he or any of his
material properties or assets may be bound, or (ii) to his knowledge violate any
statute, law, rule, regulation,  writ, injunction,  judgment, order or decree of
any court, administrative agency or governmental authority binding on him or any
of his material properties or assets.

                  (i)  Except  for  filings  required  under  federal  or  state
securities laws, to his knowledge, no consent,  approval or authorization of, or
declaration,  filing  or  registration  with,  any  governmental  or  regulatory
authority  is  required to be made or  obtained  by him in  connection  with the
execution and delivery of this  Agreement or any of the Ancillary  Agreements by
him, or the performance by him of his obligations hereunder and thereunder.

                  (j)  There  are  no  claims,  actions,   suits,   proceedings,
investigations or inquiries pending before any court, arbitrator or governmental
or regulatory official or office, or, to his knowledge,  threatened,  against or
affecting  him which  question  the  validity  of this  Agreement  or any of the
Ancillary  Agreements,  the transactions  contemplated  hereby or thereby or any
action  taken or to be taken by him  pursuant  to this  Agreement  or any of the
Ancillary Agreements, at law or in equity.

                  (k) Except as set forth on Schedule  3.1, to his  knowledge he
is not an Affiliate of any other Investor.

                  (l) He  has  adequate  means  of  providing  for  his  current
financial needs and foreseeable  contingencies  and has no need for liquidity of
the investment in the Units for an indefinite period of time.

                  (m) He is aware  that an  investment  in the Units  involves a
number of very  significant  risks and has  carefully  read and  considered  the
information set forth herein and in the Company's  disclosure  schedules annexed
hereto,  including  the risk that the Common Stock is subject to delisting  from
the Nasdaq SmallCap Market.

                                       10
<PAGE>


                                   ARTICLE IV

                   COVENANTS OF THE COMPANY AND THE INVESTORS

         Section 4.1 Further  Assurances.  The Company and each  Investor  shall
execute  and  deliver,  or cause to be executed  and  delivered  each  Ancillary
Agreement to be executed and  delivered by it or him. The Company  shall execute
and  deliver,  or cause  to be  executed  and  delivered,  all  such  additional
instruments  and other  documents  and shall  take such  further  actions as the
Investors may reasonably require to effectuate, carry out and comply with all of
the terms of this  Agreement,  the  Ancillary  Agreements  and the  transactions
contemplated hereby and thereby.

         Section 4.2 Reservation of Shares; Compliance with Securities Laws. The
Company  will at all times  reserve the  appropriate  number of shares of Common
Stock  solely for the purpose of issuance  upon  exercise  of the  Warrants  and
conversion  of the  Debentures.  The Company will file within the required  time
periods all filings,  notices and other documents required by applicable federal
and state  securities laws in connection with the  transactions  contemplated by
this Agreement.

         Section 4.3 Non-Public  Information.  The Company  covenants and agrees
that  neither it nor any other  Person  acting on its behalf  will  provide  any
Investor or its agents or counsel with any information that the Company believes
constitutes material non-public information,  unless prior thereto such Investor
shall have executed a written agreement regarding the confidentiality and use of
such information.  The Company understands and confirms that each Investor shall
be relying on the foregoing covenant in effecting  transactions in securities of
the Company.

         Section 4.4 Future Financings. From the date hereof until the date that
all Debentures  have been fully paid or converted,  the Company shall not effect
an equity  financing (a  "Subsequent  Financing") at a price per share less than
the then applicable  Conversion Price (as defined in the Debenture),  unless the
Company  receives the prior written consent for such issuance from the Investors
holding at least 51% of the principal balance of the Debenture then outstanding,
provided,  however,  that if  Investors  holding  at least 51% of the  principal
balance of the Debentures  then  outstanding  do not consent to such  Subsequent
Financing,  the Company may prepay the  Debentures on five business days advance
written notice by paying to each  Debenture  holder the  outstanding  principal,
accrued  interest  and an amount  equal to 10% of the  principal  amount of such
Debenture.

         Section 4.5 Inter-Creditor  Agreement. Each Investor hereby agrees that
the  payment  of all  amounts  due  under  the  Debentures  shall be  shared  in
proportion to the amount owed to each Investor  pursuant to their Debenture.  To
the  extent  that any  Investor  receives a  Debenture  payment in excess of the
payment amount due to such Investor pursuant to such Investor's  Debenture,  the
other Investors  shall  immediately be notified and such excess amounts shall be
paid to such parties on a pro-rata  basis. If an Event of Default (as defined in
the Debentures)  occurs under any Debenture and any Investor  collects  proceeds
pursuant to its rights  hereunder and under the Debentures,  the other Investors
shall be  immediately  notified and such proceeds shall be shared with the other
Investors  on a pro-rata  basis.  To the  extent  that any  Investor  receives a
payment that is in excess of its pro-rata portion of the payment received by all
Investors,  such  excess  payment  shall be  deemed  to be held in trust by such
Investor on behalf of the other Investors.

                                       11

<PAGE>

                                    ARTICLE V

                               CLOSING CONDITIONS

         Section  5.1  Investor  Closing  Conditions.   The  obligation  of  the
Investors  to  consummate  the  transactions  contemplated  hereby is subject to
satisfaction  or waiver of each of the  following  conditions at or prior to the
First Closing and any Subsequent Closing:

                           (a) Secretary's  Certificate.  The Company shall have
delivered to the Investors a certificate of the Secretary of the Company,  dated
as of the First Closing Date or any  Subsequent  Closing  Date,  as  applicable,
certifying:  (i) the  adoption by the  Company's  Board of Directors of attached
resolutions authorizing,  among other things, the execution and delivery of this
Agreement and the Ancillary  Agreements and the consummation of the transactions
contemplated  herein,  and (ii) the incumbency and signatures of the officers of
the Company  executing this  Agreement,  the Ancillary  Agreements and the other
agreements and instruments contemplated herein.

                           (b) Certificates. The Company shall have delivered to
each Investor certificates  evidencing the Warrant and the Debenture acquired by
such  Investor  pursuant  to  the  terms  hereof,  each  duly  executed  by  the
appropriate Company officers.

                           (c)  Closing  Certificate.  The  Company  shall  have
delivered to the Investors a certificate of an authorized officer of the Company
certifying that the  representations  and warranties of the Company contained in
this Agreement and in each  certificate or document  delivered by the Company to
the  Investors  in  connection  with the  transactions  contemplated  hereby and
thereby are true and correct  when made on the date hereof and shall be true and
correct in all  material  respects  on and as of the First  Closing  Date or any
Subsequent  Closing Date, as  applicable,  as though made on and as of such date
and the  Company  shall have  performed  all  obligations  and  complied  in all
material  respects with all agreements,  undertakings,  covenants and conditions
required  hereunder  or  thereunder  to be  performed  by it prior to the  First
Closing or any Subsequent Closing, as applicable.

                           (d)  Opinion of  Counsel.  The  Investors  shall have
received at the Closings from Jenkens & Gilchrist  Parker Chapin LLP, counsel to
the Company,  a favorable  written opinion dated as of the First Closing Date or
any Subsequent Closing Date, as applicable,  which shall be in the form attached
hereto as Exhibit F hereto.

         Section 5.2  Company  Closing  Conditions  for the First  Closing.  The
obligation of the Company to consummate the transactions  contemplated hereby at
the First  Closing is subject to the  Company  having  received  payment by wire
transfer or check payable to the order of the Company of $350,000 at or prior to
the First Closing.

         Section 5.3 Company  Closing  Conditions for Subsequent  Closings.  The
obligation of the Company to consummate the transactions  contemplated hereby at
each Subsequent  Closing is subject to the satisfaction or waiver of each of the
following conditions at or prior to such Subsequent Closing:

                           (a) Payment of Purchase Price. The Company shall have
received  payment by wire  transfer or check payable to the order of the Company
for the balance of the Purchased Units being purchased by the Investors.

                           (b) First Closing. The First Closing shall have taken
place.

         Section 5.4 Mutual  Closing  Condition  for the First  Closing and each
Subsequent  Closing.  The  obligation  of  the  Company  and  the  Investors  to
consummate  the  transactions  contemplated  hereby at the First  Closing or any
Subsequent  Closing  is  subject  to the  satisfaction  or waiver of each of the
following conditions at or prior to the First Closing or any Subsequent Closing:

                                       12
<PAGE>

                           (a) Injunctions. There not being in effect any order,
decree  or  injunction  of a court or  agency of  competent  jurisdiction  which
enjoins or prohibits consummation of the transactions contemplated hereby.

                           (b) Last Closing  Date.  No Closing  shall take place
after June 25, 2003.


                                   ARTICLE VI

                                   DEFINITIONS

         Section 6.1 Certain Defined Terms.  For all purposes of this Agreement,
the  following  terms shall have the meanings set forth or  cross-referenced  in
this Section 6:

         "Affiliate" means any other person directly or indirectly  controlling,
controlled  by, or under direct or indirect  common  control with any referenced
person and  includes  without  limitation,  (a) any  Person  who is an  officer,
director,  or direct or  indirect  beneficial  holder of at least 5% of the then
outstanding  capital  stock  of any  referenced  Person,  and any of the  Family
Members of any such Person,  (b) any Person of which a referenced  Person and/or
its Affiliates (as defined in clause (a) above), directly or indirectly,  either
beneficially  own(s) at least 5% of the then  outstanding  equity  securities or
constitute(s) at least a 5% equity  participant,  (c) in the case of a specified
Person who is an individual,  Family Members of such Person, and (d) in the case
of the  Investors,  any entities for which an Investor or any of its  Affiliates
serve as general partner and/or investment adviser or in a similar capacity, and
all mutual  funds or other  pooled  investment  vehicles or  entities  under the
control or  management  of such  Investor or the general  partner or  investment
adviser  thereof,  or any Affiliate of any of them, or any  Affiliates of any of
the foregoing.

         "Affiliated  Group" has the meaning  given to it in Section 1504 of the
Code, and in addition includes any analogous combined,  consolidated, or unitary
group, as defined under any applicable state, local, or foreign income Tax law.

         "Ancillary Agreements" means the Warrants, Debentures, the Registration
Rights  Agreement and any other  agreement or document  delivered or executed in
connection with this Agreement or the transactions contemplated hereby.

         "CERCLA" means the Comprehensive  Environmental Response,  Compensation
and Liability Act of 1980, as amended.

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

         "Damages" means all damages,  losses, claims, demands,  actions, causes
of action, suits, litigations,  arbitrations,  liabilities, costs, and expenses,
including  without  limitation  court costs and the fees and expenses of counsel
and experts.

         "Derivative  Securities"  means  (i) all  shares  of  stock  and  other
securities that are convertible into or exchangeable for shares of Common Stock,
and (ii) all options,  warrants,  and other  rights to acquire  shares of Common
Stock or any class of stock or other security or securities  convertible into or
exchangeable for shares of Common Stock or any class of stock or other security.


                                       13
<PAGE>

         "Environmental Laws" means, collectively, the Resource Conservation and
Recovery Act, CERCLA, the Superfund  Amendments and Reauthorization Act of 1986,
the Federal  Clean Water Act, the Federal  Clean Air Act,  the Toxic  Substances
Control Act, and any and all state or local statutes,  regulations,  ordinances,
orders, and decrees relating to health, safety, or the environment, each, as the
case may be, as amended.

         "Family  Members"  means,  as applied to any  individual,  any  parent,
spouse, child, spouse of a child, brother or sister of the individual,  and each
trust,  limited  partnership or limited  liability company created primarily for
the benefit of one or more of such  persons and each  custodian of a property of
one or more such persons and the personal  representative  or estate of any such
persons.

         "Fully  Diluted  Basis"  means  that the  relevant  calculation  of the
ownership or percentage  ownership (as  applicable)  of any Person of the equity
securities of the Company shall be performed as if (i) all Derivative Securities
have been  exercised  or  converted,  as the case may be,  into shares of Common
Stock of the Company, and (ii) all shares of preferred stock or any other series
of equity  securities  of the Company shall have been  converted  into shares of
Common Stock of the Company.

         "GAAP" means  generally  accepted  accounting  principles in the United
States that are (i) consistent with the principles promulgated or adopted by the
Financial  Accounting  Standards Board and its  predecessors,  (ii) applied on a
basis consistent with prior periods,  and (iii) such that, insofar as the use of
accounting principles is pertinent,  a certified public accountant could deliver
an  unqualified  opinion  with  respect to  financial  statements  in which such
principles have been properly applied.

         "Liens" means any and all liens, claims, mortgages, security interests,
charges,  encumbrances, and restrictions on transfer of any kind, except: (i) in
the case of references to securities,  any of the same arising under  applicable
securities  laws solely by reason of the fact that such  securities  were issued
pursuant to exemptions from  registration  under such securities laws, (ii) real
estate  taxes  not yet due and  payable,  and  (iii)  any  lien in  favor of any
landlord for unpaid  rent,  additional  rent,  or other  charges,  which lien is
created  by  statute or under any lease  under  which the  Company or any of its
Subsidiaries  is lessee,  unless  the  Company  is given  written  notice of the
imposition of any such lien described in this clause (iii).

         "Person"  or "person"  (regardless  of whether  capitalized)  means any
natural  person,  entity,  or  association,  including  without  limitation  any
corporation,  partnership,  limited liability company,  government (or agency or
subdivision thereof), trust, joint venture or proprietorship.

         "Registration Rights Agreement" means the Registration Rights Agreement
dated  as of  the  First  Closing  Date  or  any  Subsequent  Closing  Date,  as
applicable,  by and among the Company and the  Investors  participating  in such
closing, in the form attached hereto as Exhibit G.

         "Subsidiary" or "Subsidiaries"  means, with respect to any person,  any
corporation  a majority  (by number of votes) of the  outstanding  shares of any
class  or  classes  of  which  are at the  time  owned  by such  person  or by a
Subsidiary of such person, if the holders of the shares of such class or classes
(a) are ordinarily,  in the absence of  contingencies,  entitled to vote for the
election  of  a  majority  of  the  directors  (or  persons  performing  similar
functions)  of the  issuer  thereof,  even  though the right so to vote has been
suspended  by the  happening  of  such a  contingency,  or (b)  are at the  time
entitled,  as such  holders,  to vote  for the  election  of a  majority  of the
directors  (or persons  performing  similar  functions)  of the issuer  thereof,
whether  or not the right so to vote  exists by  reason  of the  happening  of a
contingency.

                                       14
<PAGE>

         "Trading Day" means a day on which the  Company's  Common Stock is able
to be traded on the Nasdaq SmallCap Market.

         Section 6.2 Terms Defined  Elsewhere.  The following  terms are defined
herein in the sections identified below:

                  Term                               Section

         Aggregate Purchase Price                    1.1
         Agreement                                   Preamble
         Balance Sheet                               2.6
         Closings                                    1.3
         Common Stock                                1.1
         Company                                     Preamble
         Debenture and Debentures                    1.1
         Evaluation Date                             2.24
         Exchange Act                                2.7
         First Closing                               1.3
         First Closing Date                          1.3
         First Investors                             1.3
         Investor                                    Preamble
         Material Adverse Effect                     2.1
         Per Unit Purchase Price                     1.2
         Proprietary Information                     2.17
         Purchased Units                             1.1
         SEC                                         2.7
         SEC Documents                               2.7
         Subsequent Closing                          1.3
         Subsequent Closing Date                     1.3
         Subsequent Investors                        1.3
         Securities Act                              2.7
         Tax                                         2.13
         Warrant                                     1.1
         Warrants                                    1.1


                                   ARTICLE VII

                                  MISCELLANEOUS

         Section 7.1 Independent  Nature of Purchasers'  Obligations and Rights.
The Company acknowledges each of the following: The obligations of each Investor
participating in this transaction are several and not joint with the obligations
of any other  Investor,  and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor.  Nothing  contained herein
or in any other agreement, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership,  an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Investors  are in any way acting in concert or as a "group"  (within the meaning
of Sections 13 and 16 of the Exchange Act and any rules promulgated thereunder),
in each case with respect to such obligations or the  transactions  contemplated
hereunder.  Each Investor shall be entitled to independently protect and enforce
its  rights,  including  without  limitation  the  rights  arising  out of  this
Agreement or out of the other agreements  relating to this  transaction,  and it
shall not be  necessary  for any other  Investor  to be joined as an  additional

                                       15
<PAGE>

party in any proceeding for such purpose.  Each Investor has been represented by
its own separate  legal  counsel (or has chosen not to be  represented  by legal
counsel)  in its  review  and  negotiation  of this  agreement  and the  related
transaction documents. The Company has elected to provide various Investors with
the same terms and agreements for the convenience of the Company and not because
it was required or requested to do so by the Investors.


         Section 7.2 Waivers and  Consents.  For the purposes of this  Agreement
and all agreements  executed  pursuant hereto,  no course of dealing between the
Company  and the  Investors  and no  delay on the part of any  party  hereto  in
exercising any rights  hereunder or thereunder  shall operate as a waiver of the
rights hereof or thereof.  No provision hereof may be waived except by a written
instrument signed by the party so waiving such provision.

         Section 7.3 Governing  Law;  Jurisdiction;  Venue etc.  This  Agreement
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware,  without  giving effect to the principles of conflicts of
law  thereof.  The state and federal  courts of the State of New York located in
New York County shall have  exclusive  jurisdiction  to hear and  determine  any
claims or disputes  between the Investors and the other party or parties  hereto
pertaining   directly  or  indirectly  to  this  Agreement  and  all  documents,
instruments and agreements  executed  pursuant hereto,  or to any matter arising
therefrom  (unless  otherwise  expressly  provided for  therein);  the exclusive
choice of forum set forth in this  Section  7.3 shall not be deemed to  preclude
the  enforcement  of any  judgment  obtained  in such forum or the taking of any
action to enforce  the same in any other  appropriate  jurisdiction.  All of the
parties  hereto  waive all rights to trial by jury in any  action or  proceeding
instituted  by any party against any other party arising out of, on or by reason
of this Agreement or the documents and transactions contemplated herein.

         Section 7.4 Headings.  The descriptive  headings in this Agreement have
been inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction or interpretation of any provision thereof or hereof.

         Section 7.5 Counterparts. This Agreement may be executed simultaneously
in any number of  counterparts,  each of which when so  executed  and  delivered
shall  be  taken  to  be an  original;  but  such  counterparts  shall  together
constitute but one and the same document.

         Section 7.6 Notices and Demands. Any notice or demand which is required
or  provided  to be given  under  this  Agreement  shall be  deemed to have been
sufficiently  given and received for all purposes  when  delivered by hand or by
telecopy that has been confirmed as received by 5:00 P.M. on a business day, one
(1) business day after being sent by nationally  recognized overnight courier or
received by telecopy after 5:00 P.M. on any day, or five (5) business days after
being sent by certified or registered mail, postage and charges prepaid,  return
receipt requested, to the following addresses:

                  If to the Company:

                                    SmartServ Online, Inc.
                                    One Station Place
                                    Stamford, Connecticut 06902
                                    Attn:   Chief Financial Officer
                                    Facsimile:  (203) 353-5984


                                       16
<PAGE>

                           With a copy to:

                                    SmartServ Online, Inc.
                                    One Station Place
                                    Stamford, Connecticut 06902
                                    Attn:   General Counsel
                                    Facsimile:  (203) 353-5984

                           And:

                                    Jenkens & Gilchrist Parker Chapin LLP
                                    The Chrysler Building
                                    405 Lexington Avenue
                                    New York, New York 10174
                                    Attn:  Michael J. Shef, Esq.
                                    Facsimile:  (212) 704-6288

                  If to the Investors:

                                    To their  respective  addresses set forth on
                                    Exhibit A.


         Section 7.7  Severability.  Whenever  possible,  each provision of this
Agreement  shall be  interpreted  in such a manner as to be effective  and valid
under  applicable  law, but if any provision of this  Agreement  shall be deemed
prohibited  or invalid  under  such  applicable  law,  such  provision  shall be
ineffective  to  the  extent  of  such  prohibition  or  invalidity,   and  such
prohibition  or invalidity  shall not invalidate the remainder of such provision
or the other  provisions  of this  Agreement,  provided,  however,  that no such
severability shall be effective if it materially changes the economic benefit of
this Agreement to any party.

         Section  7.8  Integration.  This  Agreement,  including  the  exhibits,
documents and instruments referred to herein or therein,  constitutes the entire
agreement,  and supersedes any other prior agreements and  understandings,  both
written and oral, among the parties with respect to the subject matter hereof.

         Section 7.9  Publicity.  The Company and the  Investors  shall have the
right to approve  before  issuance  of any press  releases  or any other  public
statements  is sought to be made by the other with  respect to the  transactions
contemplated  hereby,  except for any  disclosures  required in connection  with
obtaining any consents to the transactions  contemplated by this Agreement.  The
Company  shall  have the  right to  issue  any  press  release  or other  public
statement in connection with the transaction  contemplated hereby, excluding the
identity of the Investors,  without the prior consent of the Investors,  but may
disclose  the  identity  of the  Investors  upon  prior  written  consent of the
Investors, which shall not be unreasonably withheld. The Company shall also have
the right to file this Agreement and the Ancillary Agreements with the SEC under
the  Securities  Act or the Exchange Act if required by such acts or regulations
thereunder.

         Section 7.10  Expenses.  The Company and the  Investors  will each bear
their own costs and expenses and those of their  respective  advisors related to
the transactions herein contemplated.

         Section 7.11 Assignment.  (a) The Company may not assign this Agreement
or its rights and obligations hereunder.

                  (b) The rights and  obligations  hereunder  and the  Purchased
Units (or a component  thereof) may be  transferred  by each of the Investors in
its sole discretion at any time, in whole or in part, to (i) any Affiliate(s) or

                                       17
<PAGE>

Affiliated  Group(s) of the  transferor or (ii) with the consent of the Company,
which shall not be unreasonably  withheld,  delayed,  or conditioned,  any party
that is an "accredited  investor" (as such term is defined in Rule 501 under the
Securities Act), without the consent of any other party thereto.

                  (c) Notwithstanding the other provisions of this Section 7.11,
no Person acquiring any Common Stock in a public trade shall receive the benefit
of any of the covenants set forth in this Agreement as an assignee thereof.

                  (d)  Subject  to clause  (c)  immediately  above,  any  Person
acquiring,  in a manner  permitted by this  Agreement,  any Units (or components
thereof) and/or rights of an Investor under this Agreement  shall  constitute an
Investor for purposes of this Agreement and any reference to an Investor in this
Agreement shall also refer to any such Person.

         Section 7.12 Equitable  Relief.  Each of the parties  acknowledges that
any breach by such party of his  obligations  under this  Agreement  would cause
substantial and irreparable  damage to one or more of the other parties and that
money damages would be an inadequate  remedy therefor.  Accordingly,  each party
agrees that the other parties or any of them will be entitled to an  injunction,
specific performance and/or other equitable relief to prevent the breach of such
obligations.

         Section 7.13 Usage.  All pronouns and any  variations  thereof refer to
the  masculine,  feminine  or neuter,  singular  or plural,  as the  context may
require.  All terms defined in this  Agreement in their singular or plural forms
have  correlative  meanings when used herein in their plural or singular  forms,
respectively.

         Section  7.14  Facsimile  Signatures.  A  facsimile  signature  on this
Agreement or an original  signature  delivered by facsimile  shall be considered
the same as an original.

                  [Remainder of page intentionally left blank]




                                       18
<PAGE>



         IN WITNESS  WHEREOF,  the parties have caused this Securities  Purchase
Agreement to be duly  executed and  delivered as of the day and year first above
written.  EXECUTION  OF THIS  AGREEMENT  BY ANY  INVESTOR  SHALL  BE  DEEMED  TO
CONSTITUTE EXECUTION OF THE REGISTRATION RIGHTS AGREEMENT BY SUCH INVESTOR.

                                          SMARTSERV ONLINE, INC.


                                          By:_________________________________
                                             Name:
                                             Title:

INVESTORS:
                             If an individual:

                                          ____________________________________
                                          Name:


                             If an entity:

                                          Name of Entity:_____________________


                                          By:_________________________________
                                             Name:
                                             Title:






                                       19
<PAGE>


Exhibit A

First Investors:
<TABLE>
<CAPTION>

             Name and Address                     Number of Purchased Units             Aggregate Purchase Price
             ----------------                     -------------------------             ------------------------
<S>                                                          <C>                                 <C>

Golden Gate Ventures                                         0.5                                 50,000
11 Darius Ct.
Dix Hills, NY 11746
------------------------------------------- --------------------------------------- ----------------------------------
Spencer Trask Private Equity Fund I LP                       0.2                                 20,000
535 Madison Avenue - 18th Fl
New York, NY 10022
------------------------------------------- --------------------------------------- ----------------------------------
Spencer Trask Private Equity Fund II LP                      0.2                                 20,000
535 Madison Avenue - 18th Fl
New York, NY 10022
------------------------------------------- --------------------------------------- ----------------------------------
Spencer Trask Private Equity Fund III LLC                    0.2                                 20,000
535 Madison Avenue - 18th Fl
New York, NY 10022
------------------------------------------- --------------------------------------- ----------------------------------
Jonathan D. Fleisig                                          1.0                                 100,000
11 North End Ave, Ste 1321
New York, NY 10282
------------------------------------------- --------------------------------------- ----------------------------------
Spencer Trask Investment Partners LLC                        0.88                                88,000
535 Madison Avenue - 18th Fl
New York, NY 10022
------------------------------------------- --------------------------------------- ----------------------------------
Elisha Rothman                                               0.5                                 50,000
225 W.83rd St #11-1
New York, NY 10024
------------------------------------------- --------------------------------------- ----------------------------------
Adam K. Stern                                                0.1                                 10,000
535 Madison Avenue - 18th Fl
New York, NY 10022
------------------------------------------- --------------------------------------- ----------------------------------

</TABLE>


                                       20
<PAGE>


Exhibit A continued:

<TABLE>
<CAPTION>

Subsequent Investors:

             Name and Address                     Number of Purchased Units             Aggregate Purchase Price

<S>          <C>                                  <C>                                   <C>


</TABLE>


















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