STRUCTURED EQUITY LINE FLEXIBLE FINANCINGSM AGREEMENT

                                     between

                          CRIPPLE CREEK SECURITIES, LLC

                                       and

                             GRC INTERNATIONAL, INC.

                          Dated as of January 21, 1997

                   Amended and Restated as of August 26, 1998

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         STRUCTURED EQUITY LINE FLEXIBLE  FINANCING(SM)  AGREEMENT,  dated as of
January  21,  1997  and  amended  and  restated  as  of  August  26,  1998  (the
"Agreement"),  between Cripple Creek Securities, LLC (the "Investor"), a limited
liability  company  organized  and  existing  under  the  laws of the  State  of
Delaware,  and GRC  International,  Inc., a  corporation  organized and existing
under the laws of the State of Delaware (the "Company").

         WHEREAS,  the parties  desire  that,  upon the terms and subject to the
conditions  contained herein,  the Company shall issue to the Investor,  and the
Investor shall purchase from the Company,  from time to time as provided herein,
the Company's Common Stock, par value $.10 per share (the "Common Stock"), for a
maximum aggregate Purchase Price of $18,000,000 (the "Maximum Offering Amount");
and

         WHEREAS,  such investments will be made in reliance upon the provisions
of Section 4(2)  promulgated by the Securities and Exchange  Commission  ("SEC")
under the United  States  Securities  Act of 1933,  as amended (the  "Securities
Act"),  and/or upon such other exemption from the  registration  requirements of
the  Securities  Act as  may  be  available  with  respect  to any or all of the
investments in Common Stock to be made hereunder.

         NOW, THEREFORE, the parties hereto agree as follows:

                                    ARTICLE I

                               Certain Definitions

         Section 1.1 Additional Investment Amount". See Section 2.1(b)(iv).

         Section 1.2 "Additional  Purchase Date" shall mean, with respect to any
Investment  Period  for which the  Company  has  delivered  to the  Investor  an
Additional  Purchase  Notice,  any Trading Day during such Investment  Period on
which the Investor notifies the Company by delivery of an Investor Notice of its
election to purchase  all or a portion of the  Additional  Investment  Amount in
respect of such Investment Period.

         Section 1.3 "Additional Purchase Notice". See Section 2.1(b)(iv).

         Section 1.4       "Additional Warrant".  See Section 2.7(b)(ii).

         Section 1.5 "Cancellation  Notice" shall mean a notice delivered by the
Company in its sole and absolute  discretion  to the Investor with respect to an
Investment Period notifying the Investor that it is not required to purchase the
Minimum  Investment  Amount  and/or any  Additional  Investment  Amount for such
Investment Period.

         Section 1.6 "Closing" shall mean the  consummation of each purchase and
sale of Common Stock pursuant to Section 2.1.

         Section 1.7 "Closing  Date" shall mean,  with respect to each  purchase
and sale of Common  Stock  pursuant  to this  Agreement,  the third  Trading Day
following  Investor's  notice to the Company of its election to purchase  Common
Stock from the Company (as  extended  pursuant to Section  3.2(i))  provided all
conditions to the Closing have been satisfied.

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         Section 1.8  "Commitment  Period"  shall mean the period  commencing on
April 1, 1998 and  expiring on the  earliest to occur of (a) the election by the
Company to terminate the Investor's obligation to purchase Common Stock pursuant
to Section 10.4 herein,  (b) the date on which the Investor shall have purchased
Common  Stock  pursuant to this  Agreement  for an aggregate  Purchase  Price of
$18,000,000 or such lesser  maximum  purchase  amount as determined  pursuant to
Section  2.2(d),  (c) the date this Agreement is terminated  pursuant to Section
2.6 or (d) the date  occurring  forty-two  (42) months  (subject to extension as
provided by Section 2.2(b)) from the date of commencement of such period.

         Section 1.9        "Common Stock".  See introductory paragraphs.

         Section 1.10      "Condition Satisfaction Date".  See Section 3.2.

         Section 1.11 "Effective Date" shall mean January 30, 1997.

         Section 1.12 "Equity  Offering"  shall mean the issuance or sale by the
Company (a) in a registered public offering or (b) in a transaction  exempt from
or not subject to the  registration  requirements  of the  Securities Act of any
shares of Common Stock or securities  which are convertible into or exchangeable
for its Common Stock or any  warrants,  options or other rights to subscribe for
or purchase its Common Stock or any such convertible or exchangeable  securities
(other than securities  issued or issuable under the Company's present or future
employee,   officer,   director  or  consultant   stock  or  option  or  similar
equity-based compensation plans (collectively,  the "Compensation Plans")), upon
the conversion or exchange of convertible or exchangeable securities or upon the
exercise of warrants  (excluding  the Warrant and the  Additional  Warrant),  or
other  rights,  or upon the  issuance of any shares of Common  Stock issued upon
exercise of options,  conversion  or exchange  of  convertible  or  exchangeable
securities,  warrants or other rights  outstanding  on the date of execution and
delivery of this Agreement (other than the Additional Warrant) and listed in the
SEC Documents on file with the SEC as of the date of this Agreement  (other than
the  Warrant  and the  Additional  Warrant)  and other than (i) shares of Common
Stock  which  may  be  issued  upon  exercise  of  options   granted  under  the
Compensation  Plans,  (ii)  shares of  Common  Stock  which  may be issued  upon
exercise of the Warrant and the Additional Warrant, (iii) shares of Common Stock
or securities which are convertible into or exchangeable for Common Stock or any
warrants,  options or other rights to subscribe for or purchase  Common Stock or
any such convertible or exchangeable  securities  issued in strategic  corporate
partnering  transactions,  and (iv)  shares of Common  Stock which may be issued
upon conversion of convertible  debentures  issued on the date of this Agreement
(and exercise of warrants issued in connection therewith).

         Section 1.13 "Exchange Act" means the Securities  Exchange Act of 1934,
as amended.

         Section 1.14      "Floor Price".  See Section 2.2(b).

         Section 1.15 "Investment  Amount" shall mean the amount invested by the
Investor with respect to any Optional  Purchase Date as notified by the Investor
to the Company in accordance with Section 2.5(a) hereof, and with respect to any
Mandatory  Purchase  Date,  Additional  Purchase  Date or  Investor  Incremental
Purchase Date, as the case may be, as notified by the Investor to the Company in
accordance with Sections 2.5(b), (c) and (d), respectively,


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which Investment Amount shall be at least $100,000 and shall be in increments of
$50,000 in excess thereof.

         Section 1.16  "Investment  Period" shall mean each  three-month  period
(subject to extension as provided by Section  2.2(b))  commencing  on (a) in the
case of the first  Investment  Period,  the first Trading Day  subsequent to the
expiration  of the Optional  Purchase  Period and (b) in the case of  subsequent
Investment  Periods,  commencing on the Trading Day subsequent to the expiration
of the immediately preceding Investment Period.

         Section 1.17 "Investor Incremental Purchase". See Section 2.1(b)(iii).

         Section  1.18  "Investor  Incremental  Purchase  Date"  shall  mean any
Trading Day during  each  Investment  Period  with  respect to which a Mandatory
Purchase Notice has been given that the Investor in its sole  discretion  elects
by delivery of an Investor  Incremental  Purchase  Notice to purchase  shares of
Common Stock pursuant to an Investor Incremental Purchase.

         Section 1.19 "Investor Incremental Purchase Notice" shall mean a notice
delivered  by  the  Investor  to  the  Company,  notifying  the  Company  of the
Investor's election to purchase Common Stock pursuant to an Investor Incremental
Purchase.

         Section 1.20 "Investor Notice". See Section 2.5(e)(i).

         Section 1.21 "Mandatory  Purchase Date" shall mean, with respect to any
Investment  Period for which the  Company has  delivered  a  Mandatory  Purchase
Notice to the Investor,  any Trading Day during such Investment  Period on which
the  Investor  notifies  the Company by  delivery  of an Investor  Notice of its
election  to  purchase  all or a portion  of the  Minimum  Investment  Amount in
respect of such Investment Period.

         Section 1.22 "Mandatory Purchase Notice". See Section 2.5(b)(i).

         Section 1.23  "Mandatory  Purchase  Period" shall mean the aggregate of
all Investment Periods during the Commitment Period.

         Section 1.24  "Material  Adverse  Effect"  shall mean any effect on the
business,  operations,  properties,  prospects,  or  financial  condition of the
Company and which is  material  and adverse to the Company or to the Company and
such other  entities  controlled  by the  Company,  taken as a whole  and/or any
condition or situation  which would  prohibit or  otherwise  interfere  with the
ability of the  Company to enter into and  perform  its  obligations  under this
Agreement,  the  Registration  Rights  Agreement,  the Warrant or the Additional
Warrant.

         Section 1.25 "Maximum Offering Amount". See introductory paragraphs.

         Section 1.26 "Minimum Investment Amount". See Section 2.1(b)(ii).

         Section  1.27  "Minimum  Offering  Amount"  shall mean the  purchase of
Common  Stock of the Company by the Investor  for a minimum  aggregate  Purchase
Price of $5,000,000.

         Section  1.28 "NASD" shall mean the  National  Association  of Security
Dealers, Inc.

<PAGE>

         Section 1.29 "Optional Purchase Date" shall mean any Trading Day during
the Optional  Purchase Period that the Investor in its sole discretion elects by
delivery  of an  Optional  Purchase  Notice to  purchase  Common  Stock from the
Company.

         Section 1.30 "Optional Purchase Notice". See Section 2.5(a).

         Section  1.31  "Optional   Purchase   Period"  shall  mean  the  period
commencing  on April 1, 1998 and ending on September  30, 1998.  Notwithstanding
any other provision in this  Agreement,  the Investor shall make no purchases of
Common Stock during the Optional Purchase Period.

         Section 1.32 "Preliminary Purchase Notice." See Section 2.1(e).

         Section 1.33 "Principal Market" shall mean the New York Stock Exchange,
the American Stock Exchange, or the Nasdaq National Market,  whichever is at the
time the principal trading exchange or market for the Common Stock.

         Section 1.34 "Purchase Price". See Section 2.3.

         Section 1.35 "Registration Rights Agreement". See Section 2.7(c).

         Section 1.36 "Registration Statement". See Section 3.2(a).

         Section 1.37 "Revolving Credit Agreement". See Section 3.2(f).

         Section 1.38 "Securities Act". See introductory paragraphs.

         Section 1.39 "SEC". See introductory paragraphs.

         Section 1.40 "SEC Documents". See Section 5.2.

         Section 1.41 "Stock Price". See Section 2.3.

         Section 1.42 "Trading Day" shall mean any day during which the New York
Stock  Exchange  shall be open for business  and on which  trading of the Common
Stock on the Principal Market shall not have been suspended or limited.

         Section 1.43 "Value of Open Market Trading" with respect to any Trading
Day shall mean the product of the reported trading volume of the Common Stock on
the  Principal  Market  (in the case that the  Principal  Market is the New York
Stock Exchange or the American Stock  Exchange,  the reported  trading volume of
the Common Stock shall be the reported  traded volume on such exchange and shall
not be the composite trading volume and in the case that the Principal Market is
the Nasdaq  National  Market,  the reported  trading  volume shall be 50% of the
amount  reported) on any such day,  multiplied by the weighted  average  trading
price (by trading volume) of the Common Stock on such day (each as determined in
accordance with Section 12.4 hereof); provided,  however, that in the event that
the Company  consummates a registered  public  offering of Common Stock (whether
primary or secondary), the Trading Day on which such

<PAGE>

transaction is  consummated  shall be excluded from any  calculation  under this
Agreement based upon the Value of Open Market Trading.

         Section 1.44 "Warrant". See Section 2.7(a).

         Section 1.45 "Warrant Exercise Price". See Section 2.7(a).

         Section 1.46 "Warrant Shares". See Section 3.2(l).

                                   ARTICLE II

                        Purchase and Sale of Common Stock

         Section 2.1 Investments.

                  (a)  Subject  to the terms  and  conditions  set forth  herein
(including, without limitation, the provisions of Article III hereof) (i) during
the  Optional  Purchase  Period  the  Investor  may in  its  sole  and  absolute
discretion  from time to time direct the Company to issue to the  Investor,  and
the Company  shall be  obligated  to issue and sell to the  Investor,  shares of
Common Stock at the  Purchase  Price  determined  pursuant to Section 2.3 for an
aggregate  Purchase  Price of up to  $3,000,000  and (ii)  during the  Mandatory
Purchase Period,  the Company may in its sole and absolute  discretion from time
to time  elect to issue  and sell to the  Investor,  and the  Investor  shall be
obligated  to  purchase  from the  Company,  on such  Mandatory  Purchase  Date,
Mandatory Purchase Dates,  Additional Purchase Date or Additional Purchase Dates
as the  Investor  shall  elect,  shares of Common  Stock at the  Purchase  Price
determined pursuant to Section 2.3.

                  (b)  (i)  The  Investor  shall  have  the  right,  but not the
obligation,  at any time and from  time to time  during  the  Optional  Purchase
Period to purchase Common Stock from the Company for an aggregate Purchase Price
of up to  $3,000,000,  by  delivering  an Optional  Purchase  Notice or Optional
Purchase  Notices to the Company provided that (A) on the date of delivery of an
Optional Purchase Notice, the Stock Price shall not be below the Floor Price and
(B) on the Trading Day immediately preceding the date of delivery of an Optional
Purchase Notice all conditions provided in this Agreement for the delivery of an
Optional Purchase Notice are satisfied.  Each Optional Purchase Notice shall set
forth the Investment  Amount with respect to the Optional Purchase Date to which
it relates.

                    (ii) Subject to the terms and conditions of this  Agreement,
on or before the tenth (10th) day  preceding the  commencement  of an Investment
Period,  the Company may deliver a  Mandatory  Purchase  Notice to the  Investor
which shall  require the  Investor to purchase  shares of Common  Stock from the
Company  during  such  Investment  Period  for an  aggregate  Purchase  Price of
$1,500,000,  subject to the limitations  imposed by Section 2.2(a) (the "Minimum
Investment  Amount"),  provided  that on the date of delivery  of the  Mandatory
Purchase Notice and on the Trading Day immediately preceding the commencement of
such  Investment  Period  all  conditions  provided  in this  Agreement  for the
delivery of a Mandatory  Purchase  Notice are  satisfied.  A Mandatory  Purchase
Notice shall be  irrevocable  by the Company.  Upon  delivery of such  Mandatory
Purchase Notice, the Investor shall be obligated to purchase on the Closing Date
in respect of such  Mandatory  Purchase Date or Mandatory  Purchase Dates as the
Investor elects during the Investment Period to which such Mandatory

<PAGE>

Purchase Notice relates,  shares of Common Stock for an aggregate Purchase Price
equal to the Minimum  Investment  Amount. On each such Mandatory  Purchase Date,
the  Investor  shall  deliver to the Company an Investor  Notice which shall set
forth the Investment Amount.

                    (iii) Subject to the terms and conditions of this Agreement,
the Investor may, but is not obligated  to,  during any  Investment  Period with
respect to which a Mandatory Purchase Notice has been given,  purchase shares of
Common  Stock from the Company at any time and from time to time in its sole and
absolute  discretion  during such  Investment  Period for an aggregate  Purchase
Price (an  "Investor  Incremental  Purchase"),  provided  that (A) the aggregate
Purchase  Price for all  shares  of  Common  Stock to be  acquired  during  such
Investment  Period,   whether  pursuant  to  a  Mandatory  Purchase  Notice,  an
Additional Purchase Notice or an Investor Incremental Purchase Notice, shall not
exceed $3,000,000 and (B) the aggregate  Purchase Price for all shares of Common
Stock previously acquired by the Investor under this Agreement, whether pursuant
to a Mandatory  Purchase  Notice,  an Additional  Purchase Notice or an Investor
Incremental  Purchase Notice and to be acquired  during such  Investment  Period
shall not exceed the Minimum  Offering Amount unless  otherwise agreed to by the
Company in writing or unless the  Company  has  elected to sell to the  Investor
shares of Common  Stock in excess of the  Minimum  Offering  Amount as  provided
below. Any Investor  Incremental Purchase shall, at the Investor's option and in
its sole and absolute  discretion,  be credited  towards the Investor's  Minimum
Investment  Amount  for up to two  Investment  Periods  for  which  a  Mandatory
Purchase  Notice has been  given.  The  Investor  will notify the Company of its
intent to credit all or a portion of the  Investor  Incremental  Purchase at any
time prior to the end of an Investment Period with respect to which the Investor
elects to apply such credit.  At such time as the Investor  shall have  acquired
shares of Common  Stock under this  Agreement  for an aggregate  Purchase  Price
equal to at least the Minimum Offering Amount, the Investor shall no longer have
the right to effect an Investor Incremental  Purchase;  provided,  however, that
the  Investor  shall  continue  to  have  the  right  to  effect  such  Investor
Incremental  Purchase if the Company  allows the  Investor to do so by providing
its  written  consent.  At such time as the  Company  has elected to sell to the
Investor  shares of Common  Stock in excess of the  Minimum  Offering  Amount by
delivery of a Mandatory  Purchase  Notice to the Investor  following the sale by
the Company to the Investor of shares of Common Stock for an aggregate  Purchase
Price of at least the  Minimum  Offering  Amount or by  otherwise  advising  the
Investor  in  writing,  the  Investor's  right to  effect  Investor  Incremental
Purchases  shall be restored as provided in this  Subsection  2.1(b)(iii).  Each
Investor  Incremental Purchase Notice shall set forth the Investment Amount with
respect to the Investor Incremental Purchase Date to which it relates.

                    (iv) Subject to the terms and conditions of this  Agreement,
on or before the tenth (10th) day immediately  preceding the  commencement of an
Investment  Period,  the Company may  deliver a written  notice to the  Investor
(each such notice  hereinafter  referred to as an "Additional  Purchase Notice")
requiring  the Investor to purchase  shares of Common Stock from the Company (in
addition to the Minimum  Investment Amount) during such Investment Period for an
aggregate  Purchase  Price of up to  $1,500,000  (which must be in increments of
$50,000),  subject to the limitations imposed by Section 2.2(a) (the "Additional
Investment Amount"),  provided that (A) the average Value of Open Market Trading
for the prior twenty (20)  Trading  Days  preceding  and  excluding  the date of
commencement  of such  Investment  Period  was at  least  $500,000,  and (B) all
conditions precedent for delivery of an Additional Purchase Notice are satisfied
on the date of delivery of the  Additional  Purchase  Notice and the Trading Day
immediately  preceding the commencement of such Investment Period. An Additional
Purchase Notice shall be irrevocable by the Company. The Company may

<PAGE>

not deliver an Additional  Purchase Notice with respect to any Investment Period
unless it has also  delivered a Mandatory  Purchase  Notice with respect to such
Investment Period. Upon receipt of such Additional Purchase Notice, the Investor
shall be obligated to purchase on the Closing Date in respect of such Additional
Purchase Date or  Additional  Purchase  Dates as the Investor  elects during the
Investment  Period to which such Additional  Purchase Notice relates,  shares of
Common Stock for an aggregate Purchase Price equal to the Additional  Investment
Amount. On each such Additional  Purchase Date or Additional Purchase Dates, the
Investor  shall deliver to the Company an Investor  Notice which shall set forth
the Investment Amount.

                  (c)  Notwithstanding  anything  herein  to the  contrary,  the
Investor shall not be required or entitled to purchase shares of Common Stock to
the extent such  purchase  would  conflict  with the  provisions  of  Subsection
3.2(l)(i) herein.

                  (d) On the  Closing  Date in respect of an  Optional  Purchase
Date, Mandatory Purchase Date,  Additional Purchase Date or Investor Incremental
Purchase  Date,  the Company  shall sell to the Investor the number of shares of
Common Stock determined pursuant to Section 2.4(b); provided,  however, that the
Investor  shall not be required to  purchase  from the Company  shares of Common
Stock pursuant to the terms of this Agreement for an aggregate Purchase Price in
excess of the Maximum Offering Amount.

                  (e) On or  before  the  thirtieth  (30th)  day  preceding  the
commencement  of an  Investment  Period,  the  Company  agrees to deliver to the
Investor  written notice (which notice shall not be considered  legally  binding
for purposes of this Agreement) indicating the Company's intentions with respect
to the Mandatory Purchase Notice and Additional Purchase Notice, if any, for the
next succeeding Investment Period (the "Preliminary Purchase Notice");  provided
that, in no event shall such  Preliminary  Purchase Notice be a substitute for a
Mandatory  Purchase Notice or an Additional  Purchase Notice as required by this
Agreement.  The  Company  shall not deliver a  Mandatory  Purchase  Notice or an
Additional  Purchase  Notice for an  Investment  Period if the  Company  has not
delivered a  Preliminary  Purchase  Notice for such  Investment  Period.  If the
Company delivers a Preliminary Purchase Notice for an Investment Period but then
fails to deliver a Mandatory  Purchase  Notice or an Additional  Purchase Notice
for said  Investment  Period,  then the  Company  shall pay any  reasonable  due
diligence  expenses,  subject to the limitations set forth in Section 11.2, that
the Investor  incurred in anticipation  of the delivery of a Mandatory  Purchase
Notice or Additional Purchase Notice for said Investment Period.

         Section 2.2 Limitation on Investment Amount.

                  (a) Notwithstanding the obligation of the Investor to purchase
shares of Common Stock  pursuant to Section  2.1(b)(ii)  and (iv), the aggregate
Investment  Amount for any Investment  Period  (whether  pursuant to a Mandatory
Purchase Notice or an Additional  Purchase  Notice or any  combination  thereof)
shall not  exceed  the  lesser  of (i) the  amount  set  forth in the  Mandatory
Purchase Notice or Additional  Purchase Notice or any combination  thereof which
shall not exceed  $3,000,000,  (ii) an amount  equal to the product of (A) 8% of
the  average  daily  Value of Open  Market  Trading of the  Common  Stock on the
Principal  Market for each  Trading  Day on which the low  trading  price of the
Common  Stock on the  Principal  Market  is above  the Floor  Price  during  the
Investment  Period  immediately  preceding the Investment Period with respect to
which  a  Mandatory  Purchase  Notice  or  an  Additional  Purchase  Notice  (or
combination  thereof) is given times (B) the number of Trading Days on which the
low trading price of the

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Common  Stock  on the  Principal  Market  is  above  the  Floor  Price  in  such
immediately  preceding  Investment  Period  (rounded up to the next increment of
$50,000),  and (iii) an amount  equal to the  product  of (A) 8% of the  average
daily Value of Open Market  Trading of the Common Stock on the Principal  Market
for each  Trading Day on which the low trading  price of the Common Stock on the
Principal  Market is above the Floor  Price  during the  Investment  Period with
respect to which a Mandatory  Purchase  Notice or an Additional  Purchase Notice
(or a  combination  thereof)  was given times (B) the number of Trading  Days on
which the low trading price of the Common Stock on the Principal Market is above
the Floor Price in such  Investment  Period (rounded up to the next increment of
$50,000).  Notwithstanding  the limitations imposed by clauses (ii) and (iii) of
this Subsection  2.2(a) on the required  investment during any Investment Period
in respect of a Mandatory Purchase Notice or an Additional  Purchase Notice, the
Investor  shall be entitled to effect an Investor  Incremental  Purchase  during
such Investment Period in accordance with 2.1(b)(iii);  provided,  however, that
the  Investor  may not  effect an  Investor  Incremental  Purchase  during  such
Investment  Period until all Mandatory  Purchases and Additional  Purchases,  if
any, applicable to such Investment Period have been made.

                  (b) Notwithstanding anything to the contrary contained herein,
the  Investor  may not acquire any shares of Common  Stock  during the  Optional
Purchase  Period or any  Investment  Period  (whether  pursuant  to an  Optional
Purchase Notice, a Mandatory Purchase Notice,  Additional  Purchase Notice or an
Investor  Incremental  Purchase Notice) if the Stock Price during each and every
of the three (3) Trading Days prior to but excluding an Optional  Purchase Date,
a  Mandatory  Purchase  Date,  an  Additional   Purchase  Date  or  an  Investor
Incremental  Purchase  Date shall be below $4.00 per share (the "Floor  Price").
The  Investment  Period and the  Commitment  Period  shall be  extended by 1-1/2
Trading  Days  (rounded up to the next full  Trading  Day) for each  Trading Day
within such Investment Period during which Stock Price is below the Floor Price;
provided,  however,  that if  during  any  Investment  Period  during  which the
Investor is obligated to purchase Common Stock pursuant to a Mandatory  Purchase
Notice or an  Additional  Purchase  Notice,  the Stock  Price shall be below the
Floor Price for more than twenty (20) Trading Days,  (i) the  Investment  Period
and the  Commitment  Period  shall be extended by thirty (30) Trading Days only,
provided,  however,  that in no event shall the Commitment  Period extend beyond
forty-eight (48) months, (ii) the Investor shall not be required to purchase any
shares of Common Stock  during the  remainder  of the  Investment  Period (as so
extended),  regardless  of  its  obligation  to  purchase  Common  Stock  at the
commencement  of the Investment  Period and the number of shares of Common Stock
actually  purchased during such Investment  Period, and (iii) the Investor shall
have the option to  purchase  shares of Common  Stock on any  Trading  Day (such
purchase to constitute an Investor Incremental Purchase) within the remainder of
the  Investment  Period  provided that on such Trading Day the Stock Price shall
not be below the Floor Price.

                  (c) The  Investor  shall not  purchase  during any  Investment
Period  shares of  Common  Stock  from the  Company  in  excess of an  aggregate
Purchase Price of $3,000,000 without the Company's prior written consent.

                  (d) If during the Mandatory  Purchase Period the Company shall
deliver or shall have been deemed to deliver to the  Investor  more than six (6)
Cancellation  Notices (other than  Cancellations  Notices delivered  pursuant to
Section  2.5(c)(ii)),  the  Investor's  obligation to purchase  shares of Common
Stock up to the Maximum  Offering Amount shall be reduced by $1,500,000 for each
subsequent  Investment  Period  in  which  a  Cancellation  Notice  (other  than
Cancellation Notices delivered pursuant to Section 2.5(c)(ii)) is given.

<PAGE>

         Section 2.3  Determination  of Purchase  Price.  The purchase price per
share of the Company's  Common Stock (the "Purchase  Price") shall be 94% of the
low trading price of the Common Stock on the Principal Market,  during the three
(3) Trading Days prior to but excluding an Optional  Purchase  Date, a Mandatory
Purchase Date, an Additional Purchase Date or an Investor  Incremental  Purchase
Date, as the case may be;  provided,  however,  that if the low trading price is
below the Floor Price on any of such three (3) Trading  Days,  such  Trading Day
shall not be  considered in  determining  the Purchase  Price,  and the Purchase
Price shall be determined  solely be reference to the remaining  Trading Days in
such three (3) Trading Day period (the "Stock Price").

         Section 2.4

                  (a)  Closings.  On each  Closing  Date (i) the  Company  shall
deliver to the  Investor  one or more  certificates  representing  the number of
shares of Common Stock to be  purchased by the Investor  pursuant to Section 2.1
registered  in the name of the Investor or, at the  Investor's  option,  deposit
such certificate(s)  into such account or accounts previously  designated by the
Investor  and  (ii)  the  Investor  shall  deliver  to the  Company  the  amount
determined pursuant to Section 2.4(b) by federal funds wire transfer or transfer
of New York Clearing House funds to an account designated by the Company's Chief
Executive  Officer or Chief Financial  Officer or such other person as either of
them may designate in writing, on or before the Closing Date. In addition, on or
prior to the Closing  Date,  each of the Company and the Investor  shall deliver
all documents,  instruments and writings  required to be delivered or reasonably
requested by either of them pursuant to this Agreement in order to implement and
effect the transactions contemplated herein.

                  (b) Payment for the Common Stock Purchased by the Investor. On
the Closing Date, the Investor  shall pay to the Company the  Investment  Amount
(less any amounts  withheld  pursuant to Section 11.2) in such funds as provided
in 2.4(a),  and shall  receive  from the  Company the number of shares of Common
Stock  determined  by  dividing  the  Investment  Amount by the  Purchase  Price
(rounded to the nearest whole number of shares).

         Section 2.5 Mechanics of Notification.

                  (a) Delivery of Optional Purchase Notice. At any time and from
time to time during the  Optional  Purchase  Period,  the Investor may deliver a
written  notice to the Company (each such notice  hereinafter  referred to as an
"Optional Purchase Notice") setting forth the Investment Amount,  subject to the
limitations  imposed by  Sections  2.1 and  3.2(l)  herein,  which the  Investor
intends to purchase  from the Company.  The Investor may not deliver an Optional
Purchase Notice to the Company if the conditions set forth in Section  2.1(b)(i)
are not  satisfied  or if the events  described  in Section  2.6 occur,  or if a
dispute exists  between the Investor and the Company  pursuant to Section 3.3 or
if the conditions  set forth in Article III are not satisfied.  If such Optional
Purchase  Notice  does not  comply  with  Section  2.1(b)(i),  any of the events
described in Section 2.6 occur,  a dispute  exists  between the Investor and the
Company  pursuant to Section 3.3 or if the  conditions  set forth in Article III
are not satisfied,  on or after the date on which an Optional Purchase Notice is
given but prior to the closing of the transaction on the Closing Date associated
with such Optional Purchase Notice, such Optional Purchase Notice shall be null,
void and of no further force or effect.

<PAGE>

               (b) Delivery of Mandatory Purchase Notice.

                    (i) On or before the tenth (10th) day immediately  preceding
the  commencement of an Investment  Period,  the Chief Executive  Officer or the
Chief  Financial  Officer  (or such  other  person  as  designated  by either in
writing) of the Company may deliver a written  notice to the Investor (each such
notice  hereinafter  referred to as a "Mandatory  Purchase  Notice") which shall
require the Investor to purchase  shares of Common Stock from the Company for an
aggregate  Purchase Price of $1,500,000,  subject to the limitations  imposed by
Sections 2.1 and 3.2(l) herein. The Company may not deliver a Mandatory Purchase
Notice to the Investor if the conditions set forth in Section 2.1(b)(ii) are not
satisfied  or if the  events  described  in Section  2.6 occur,  or if a dispute
exists  between the Investor and the Company  pursuant to Section 3.3, or if the
conditions  set forth in Article III are not  satisfied.  If the  conditions set
forth in Section  2.1(b)(ii) are not satisfied,  any of the events  described in
Section  2.6 occur,  a dispute  exists  between  the  Investor  and the  Company
pursuant  to Section 3.3 or if the  conditions  set forth in Article III are not
satisfied,  on or after the date on which a Mandatory  Purchase  Notice is given
but prior to the closing of the  transaction on the Closing Date associated with
such Mandatory  Purchase Notice,  the Investor Notice relating to such Mandatory
Purchase  Notice shall be, at the option of the Investor,  null,  void and of no
further force or effect.

                    (ii) In the event the Company  intends  not to obligate  the
Investor to purchase Common Stock during an Investment  Period, on or before the
tenth (10th) day preceding  the  commencement  of such  Investment  Period,  the
Company shall deliver a Cancellation  Notice to the Investor.  Such Cancellation
Notice shall be irrevocable by the Company.

                    (iii) In the event the Company  fails to deliver a Mandatory
Purchase Notice or a Cancellation Notice pursuant to clause (b)(i) or (b)(ii) on
or before the tenth  (10th) day  preceding  the  commencement  of an  Investment
Period, the Company shall be deemed to have delivered a Cancellation Notice with
respect to such Investment Period.

               (c) Delivery of an Additional Purchase Notice.

                    (i) On or before the tenth (10th) day immediately  preceding
the  commencement of an Investment  Period,  the Chief Executive  Officer or the
Chief  Financial  Officer  (or such  other  person  as  designated  by either in
writing)  of the  Company  may  deliver  an  Additional  Purchase  Notice to the
Investor stating the Additional  Investment  Amount,  subject to the limitations
imposed by Sections 2.1 and 3.2(l) herein,  which the Investor shall be required
to purchase during such Investment Period (in addition to shares of Common Stock
which the  Investor  is required  to  purchase  pursuant to the  delivery by the
Company to the Investor of a Mandatory Purchase Notice).  An Additional Purchase
Notice may not be delivered if a Mandatory Purchase Notice is not delivered with
respect to the same Investment Period. The Company may not deliver an Additional
Purchase  Notice  to the  Investor  if  the  conditions  set  forth  in  Section
2.1(b)(iv) are not satisfied or if the events described in Section 2.6 occur, or
if a dispute  exists  between the Investor  and the Company  pursuant to Section
3.3, or if the  conditions  set forth in Article III are not  satisfied.  If the
conditions set forth in Section 2.1(b)(iv) are not satisfied,  any of the events
described in Section 2.6 occur,  a dispute  exists  between the Investor and the
Company  pursuant to Section 3.3 or if the  conditions  set forth in Article III
are not satisfied,  on or after the date on which an Additional  Purchase Notice
is given  but  prior to the  closing  of the  transaction  on the  Closing  Date
associated with such Additional Purchase Notice,

<PAGE>

such Additional  Purchase Notice shall be, at the option of the Investor,  null,
void and of no further force or effect.

                    (ii) In the event the  Company  intends to not  require  the
Investor to purchase  Common Stock during an  Investment  Period  pursuant to an
Additional  Purchase Notice, on or before the thirtieth (30th) day preceding the
commencement of such Investment Period, the Company shall deliver a Cancellation
Notice to the Investor. Such Cancellation Notice shall be irrevocable.

               (d) Delivery of an Investor Incremental  Purchase Notice.  During
any  Investment  Period with  respect to which the Company  delivers a Mandatory
Purchase  Notice the Investor may, in its sole and absolute  discretion,  at any
time and from time to time deliver an Investor  Incremental  Purchase  Notice to
the Company  stating the amount of the  Investor  Incremental  Purchase for that
Investment Period, subject to the limitations imposed by Section 2.1(b)(iii). If
any of the events  described in Section 2.6 occur,  a dispute exists between the
Investor and the Company  pursuant to Section 3.3 or if the conditions set forth
in  Article  III are not  satisfied,  on or after the date on which an  Investor
Incremental Purchase Notice is given but prior to the closing of the transaction
on the Closing Date associated with such Investor  Incremental  Purchase Notice,
such  Investor  Incremental  Purchase  Notice  shall  be,  at the  option of the
Investor, null, void and of no further force or effect.

               (e) Date of Delivery of an Optional  Purchase Notice, an Investor
Incremental  Purchase Notice an Investor Notice, a Mandatory Purchase Notice, an
Additional Purchase Notice or Other Notice.

                    (i) An Optional  Purchase  Notice,  an Investor  Incremental
Purchase  Notice,  and any other  notice  sent by the  Investor  to the  Company
notifying the Company of the Investor's  election to purchase Common Stock (each
an  "Investor  Notice") and any other notice sent by the Investor to the Company
shall be deemed to be  delivered  on the Trading Day it is received by facsimile
or  otherwise  by the Company if such notice is received  prior to 5:00 P.M. New
York time,  or on the  immediately  succeeding  Trading Day if it is received by
facsimile  or  otherwise  after  5:00  P.M.  New York  time (in  which  case the
provisions  of  Sections  2.1(b)  and  2.2(b)  must  be  satisfied  as  of  such
immediately succeeding Trading Day).

                    (ii) A Mandatory  Purchase Notice or an Additional  Purchase
Notice  shall be deemed to be  delivered  on the  Trading  Day it is received by
facsimile or otherwise by the Investor if such notice is received  prior to 5:00
P.M.  New York  time,  or on the  immediately  succeeding  Trading  Day if it is
received by facsimile  or otherwise  after 5:00 P.M. New York time or on any day
which is not a Trading Day (in which case the provisions of Sections  2.1(b) and
2.2(b) must be satisfied as of such immediately succeeding Trading Day).

         Section 2.6 Termination or Suspension of Investment Obligation.

               (a) The  Investor  shall not  purchase any shares of Common Stock
from the Company on any  Closing  Date nor may an  Optional  Purchase  Notice or
Additional Purchase Notice be delivered nor shall a Mandatory Purchase Notice be
delivered  at any time during the  Commitment  Period that there shall exist any
one or more of the  following:  (i) the withdrawal of the  effectiveness  of the
Registration  Statement,  (ii) the Company's failure to satisfy the requirements
of Section 3.2 or (iii) any failure or interruption  in the material  compliance
by the Company with the covenants  provided in Article VI. In the event that the
Company shall have delivered a Mandatory Purchase Notice or Additional  Purchase
Notice with respect to an Investment Period and one or more of the events listed
in clauses (i) through  (iii)  above exist at the time such  Mandatory  Purchase
Notice or  Additional  Purchase  Notice  is given but has not been  cured by the
Trading Day preceding the commencement of the Investment Period to which

<PAGE>

such notice relates, the Mandatory Purchase Notice or Additional Purchase Notice
shall  be void and of no  effect.  In the  event  that the  Company  shall  have
delivered a Mandatory Purchase Notice or Additional Purchase Notice with respect
to an  Investment  Period  and one or more of the events  listed in clauses  (i)
through (iii) above occur during the  Investment  Period,  the obligation of the
Investor to purchase shares of Common Stock during such Investment  Period shall
be reduced (but in no event shall such reduction result in a negative number) by
subtracting an amount  calculated by  multiplying  the amount which the Investor
would  otherwise be obligated to purchase by a fraction,  the numerator of which
shall be 1-1/2 times the number of Trading  Days within such  Investment  Period
that such event or events exist and the denominator of which shall be the number
of Trading Days within such Investment Period (without  adjustment for the Stock
Price  being  below  the  Floor  Price  pursuant  to  Section  2.2(b))  from the
Investor's  obligation  during such  Investment  Period.  If such event  remains
uncured for a period of greater than five (5) Trading Days or exists  during the
last five (5) Trading Days of the Investment Period, the remaining obligation of
the Investor to purchase shares of Common Stock pursuant to a Mandatory Purchase
Notice or an Additional  Purchase  Notice shall be canceled for the remainder of
the  Investment  Period.  If such  event  exists  on the last day  preceding  an
Investment  Period on which the Company may deliver a Mandatory  Purchase Notice
with respect of such Investment  Period, the Company shall have five (5) Trading
Days in which to cure, and if cured within such period,  the commencement of the
Investment  Period shall be postponed for such number of days during such period
as the event remained  uncured,  but in no event shall such Investment Period be
postponed for a period in excess of five (5) Trading Days.

               (b) The  obligation of the Investor to purchase  shares of Common
Stock  under  the  Agreement  may,  if the  Investor  in its sole  and  absolute
discretion so elects,  be terminated  (including  with respect to a Closing Date
which has not yet  occurred)  in the event that (i) there  shall  occur any stop
order or suspension of the  effectiveness of the  Registration  Statement or any
withdrawal of the  effectiveness  of the  Registration  Statement for any reason
other than as a result of subsequent corporate  developments which would require
the  Registration  Statement  to be amended  to  reflect  such event in order to
maintain its compliance  with the disclosure  requirements of the Securities Act
or (ii) the Company  shall at any time fail to comply with the  requirements  of
Sections  6.2,  6.3,  6.4,  6.5 or 6.6 and the  Company  shall fail to cure such
noncompliance  within (i) five (5) Trading Days after receipt of notice from the
Investor of its election to terminate this Agreement  provided that the Investor
has been  notified by the Company of such  noncompliance  within two (2) Trading
Days of the occurrence of such noncompliance or, if the noncompliance relates to
a failure of the  Company to comply  with the  provisions  of Section  6.5,  the
Investor  otherwise becomes aware of such noncompliance or (ii) otherwise within
five  (5)  Trading  Days  of the  occurrence  of such  noncompliance;  provided,
however,  that notwithstanding the foregoing,  the Investor may, in its sole and
absolute  discretion,  terminate  this  Agreement  if the Company  shall fail to
maintain the listing of the Common Stock on a Principal Market, or if trading of
the Common Stock on a Principal Market shall have been suspended for a period of
five (5) consecutive Trading Days.

         Section 2.7 Commitment Fee.

               (a) On the Effective Date, the Company will issue to the Investor
a warrant  exercisable by the Investor in its sole and absolute  discretion from
time to time within seven (7) years from the date of issuance (the "Warrant") to
purchase an aggregate of 125,000 shares of Common Stock at an exercise price per
share  equal to 140% of the  average of the  closing  sale  prices of the Common
Stock on the Principal Market for the period from and including January

<PAGE>

21, 1997 to and including January 29, 1997 (the "Warrant  Exercise Price").  The
Warrant shall provide that it shall not be exercisable on any date to the extent
that such exercise would limit the ability of the Investor to purchase shares of
Common Stock as a result of a Mandatory  Purchase Notice or Additional  Purchase
Notice pursuant to Section 2.1(c). The Warrant shall be delivered by the Company
to the Investor  upon  execution of this  Agreement by the parties  hereto,  and
shall not be  exercisable  by the Investor for a period of eighteen  (18) months
from the date of issuance; provided, however, that if (i) the Company declares a
record  date for a material  dividend or  distribution  in respect of the Common
Stock (in cash or securities or other assets,  other than Common Stock), (ii) if
at any time (A) there occurs any  consolidation or merger of the Company with or
into any other corporation or other entity or person (whether or not the Company
is the surviving corporation) or there occurs any other corporate reorganization
or  transaction or series of related  transactions,  and as a result thereof the
shareholders   of  the   Company   pursuant  to  such   merger,   consolidation,
reorganization  or other  transaction  own in the aggregate less than 50% of the
voting  power and common  equity of the  ultimate  parent  corporation  or other
transaction (B) the Company  transfers all or substantially all of the Company's
assets to another  corporation  or other entity or person or (iii) the Agreement
is terminated by the Investor  pursuant to Section 2.6, the Warrant shall become
immediately  exercisable  at a price  equal  to the  lesser  of (A) the  Warrant
Exercise Price or (B) if applicable,  80% of the Transaction  Value per share of
Common Stock.  The term  "Transaction  Value per share" means,  in the case of a
merger,  acquisition,   sale  of  Common  Stock,  sale  of  assets,  or  similar
transaction, the fair market value of the consideration to be received per share
of Common  Stock,  as evidenced by the average of the closing sale price for the
Common Stock during the ten (10) Trading Days following the announcement of such
definitive  agreement  and in the case of a material  dividend  or  distribution
(which  material  dividend  or  distribution  shall not include any grant of any
"poison  pill" that does not involve any increase in the  consideration  payable
thereunder upon  redemption of the "poison pill"),  the fair market value of the
dividend or distribution  per share of Common Stock to be received as determined
in good faith by the Company's Board of Directors; provided that if the dividend
or  distribution  is in the form of an instrument  that trades "when issued" the
fair market value thereof shall be determined by reference to the average of the
closing  sale price for such  instrument  in the when  issued  market (or in the
absence of a closing sale price, the average of the closing bid and asked price)
during the ten (10) Trading Days following such record date.

               (b) (i) The Company  shall  notify the  Investor in writing on or
before  April 1, 1999 as to  whether it intends to require or does not intend to
require the Investor to purchase Common Stock in excess of the Minimum  Offering
Amount through the remainder of the Commitment  Period. In the event the Company
fails to make such  notification,  the Company  shall be deemed to have notified
the Investor that it does not intend to require the Investor to purchase  Common
Stock in excess of the Minimum  Offering  Amount  through the  remainder  of the
Commitment Period.

                    (ii) In the event (A) the Company  elects on or before April
1,1999 to issue and sell to the  Investor  shares of Common Stock by delivery of
Mandatory  Purchase  Notices and  Additional  Purchase  Notices in excess of the
Minimum Offering  Amount,  or (B) the Company notifies the Investor on or before
April 1, 1999 that it intends to require  the  Investor  to  purchase  shares of
Common Stock in excess of the Minimum  Offering  Amount through the remainder of
the Commitment Period,  the Company shall issue to the Investor,  as of the date
of occurrence of the event  specified in clauses (A) or (B) above, an additional
warrant  exercisable  from time to time within  seven (7) years from the date of
issuance (an "Additional Warrant") to

<PAGE>

purchase an  aggregate  of 75,000  shares of Common  Stock at an exercise  price
equal to 140% of the closing sale price on the Principal Market of the Company's
Common  Stock on the date the  Additional  Warrant  is  issued.  The  Additional
Warrant shall provide that it shall not be exercisable on any date to the extent
that such exercise would limit the ability of the Investor to purchase shares of
Common Stock as a result of a Mandatory  Purchase Notice or Additional  Purchase
Notice pursuant to Section 2.1(c).  The Additional  Warrant shall be exercisable
by the Investor at such time as the Warrant becomes  exercisable  (provided that
if the Warrant  becomes  exercisable  prior to the  issuance  of the  Additional
Warrant, the Additional Warrant, when issued, shall be immediately exercisable).

               (c) The resale by the  Investor  of Common  Stock  issuable  upon
exercise of the Warrant as well as the Additional  Warrant shall be subject to a
registration rights agreement (the "Registration Rights Agreement") entered into
between the Company and the Investor on the date of execution of this Agreement.
Each of the Warrant and the  Additional  Warrant shall be  substantially  in the
form of Exhibit A hereto.


                                   ARTICLE III

              Conditions to Delivery of Optional Purchase Notices,
            Mandatory Purchase Notices, Additional Purchase Notices,
                            and Conditions to Closing

         Section 3.1  Conditions  Precedent to the  Obligation of the Company to
Issue and Sell Common Stock.  The  obligation  hereunder of the Company to issue
and sell Common Stock to the Investor incident to each Closing is subject to the
satisfaction,  at or before each such  Closing,  of each of the  conditions  set
forth below, which conditions cannot be waived without the prior written consent
of the Company and the Investor.

               (a) Accuracy of the Investor's Representation and Warranties. The
representations and warranties of the Investor set forth in this Agreement shall
be true and correct in all  material  respects as of the date of this  Agreement
and as of the date of each such Closing as though made at each such time.

               (b)  Performance  by  the  Investor.   The  Investor  shall  have
performed,  satisfied and complied in all material  respects with all covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Investor at or prior to such Closing; provided, further,
that the Investor shall have fully  performed its obligations to purchase shares
of Common  Stock  pursuant to Section 2.1 herein with  respect to the  preceding
Investment Period.

               (c) No Injunction. No statute, rule, regulation, executive order,
decree,  ruling or injunction shall have been enacted,  entered,  promulgated or
endorsed by any court or governmental authority of competent jurisdiction which,
in the  reasonable  opinion of the Company and its legal  counsel,  prohibits or
adversely affects any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced which may have the effect of prohibiting or
adversely affecting any of the transactions contemplated by this Agreement.

<PAGE>

         Section  3.2  Conditions  Precedent  to the  Right of the  Investor  to
Deliver an Optional Purchase Notice an Investor Incremental Purchase Notice, the
Right of the Company to Deliver a  Mandatory  Purchase  Notice or an  Additional
Purchase Notice and the Obligation of the Investor to Purchase Common Stock. The
right of the  Investor  to deliver an  Optional  Purchase  Notice,  an  Investor
Incremental  Purchase  Notice,  the right of the  Company to deliver a Mandatory
Purchase  Notice or an  Additional  Purchase  Notice and the  obligation  of the
Investor  hereunder to acquire and pay for Common Stock incident to a Closing is
subject to the  satisfaction,  on the date of delivery of such Optional Purchase
Notice,  Mandatory Purchase Notice or Additional Purchase Notice, as applicable,
and on the  applicable  Closing Date (each a "Condition  Satisfaction  Date") of
each of the following conditions,  which conditions cannot be waived without the
prior written consent of the Company and the Investor.

               (a)  Registration  of the Common  Stock with the SEC. The Company
shall  have  filed  with  the SEC a  registration  statement  on Form  S-3  (the
"Registration  Statement") for the registration of the resale by the Investor of
the Common Stock to be acquired  pursuant to this Agreement under the Securities
Act, which Registration Statement shall have been declared effective by the SEC.
Furthermore,  the Company shall have filed with the applicable states securities
commissions  such blue sky filings as shall have been requested by the Investor,
and any  required  filings  with the NASD or exchange or market where the Common
Stock is traded.  No stop order or suspension or withdrawal of the effectiveness
of or with respect to any registration  statement or any other suspension of the
use of any registration  statement or related  prospectus shall have been issued
by the SEC or any states securities commission during the Commitment Period, and
the Company shall be in  compliance  with the terms of the  Registration  Rights
Agreement.

               (b) Effective Registration Statement.  The Registration Statement
shall have  previously  become  effective  and shall  remain  effective  on each
Condition  Satisfaction  Date and (i) neither the Company nor the Investor shall
have  received  notice  that the SEC has issued or intends to issue a stop order
with  respect  to the  Registration  Statement  or that  the SEC  otherwise  has
suspended or withdrawn the effectiveness of the Registration  Statement,  either
temporarily or  permanently,  or intends or has threatened to do so, and (ii) no
other  suspension of the use of the  Registration  Statement or prospectus shall
exist.

               (c) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company as set forth in this Agreement and
the Registration Rights Agreement shall be true and correct as of each Condition
Satisfaction  Date as though made at each such time (except for  representations
and warranties  specifically  made as of a particular  date) with respect to all
periods,  and as to all events and  circumstances  occurring  or existing to and
including each Condition Satisfaction Date.

               (d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material  respects with all covenants,  agreements
and conditions  required by this Agreement and the Registration Rights Agreement
to be  performed,  satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.

               (e) No Injunction. No statute, rule, regulation, executive order,
decree,  ruling or injunction shall have been enacted,  entered,  promulgated or
endorsed by any court or governmental  authority of competent jurisdiction which
prohibits  or adversely  affects any of the  transactions  contemplated  by this
Agreement, and no proceeding shall have been commenced

<PAGE>

which may have the  effect of  prohibiting  or  adversely  affecting  any of the
transactions contemplated by this Agreement.

               (f) Adverse  Changes.  Since  September  30,1996 the date through
which the most  recent  quarterly  report of the  Company  on Form 10-Q has been
prepared  and  filed  with the  SEC,  a copy of  which  is  included  in the SEC
Documents,  except as  disclosed in SEC  Documents  or as publicly  disclosed in
Company  press  releases  subsequent  to such  date,  no event  which  had or is
reasonably  likely to have a Material  Adverse Effect has occurred.  The Company
has  received  and  delivered  to the  Investor the waiver of the default by the
Company of the minimum  Tangible  Net Worth  requirement  for the quarter  ended
December  31,1996 under the Amended and Restated  Revolving Credit and Term Loan
Facility,  dated as of February 12, 1996, by and among the Company,  SWL,  Inc.,
General  Research  Corporation  and Mercantile Safe Deposit & Trust Company (the
"Revolving Credit Agreement").

               (g) No Suspension of Trading In or Delisting of Common Stock. The
trading  of the  Common  Stock  shall not have been  suspended  by the SEC,  the
Principal  Market or the NASD and the Common Stock shall have been  approved for
listing or  quotation  on and shall not have been  delisted  from the  Principal
Market.  The issuance of shares of Common  Stock with respect to the  applicable
Closing, if any, shall not violate the shareholder approval  requirements of the
Principal Market.

               (h) Legal Opinions and Letters.  The Company shall have caused to
be delivered to the  Investor,  (i) within five (5) Trading Days of the delivery
of the first Mandatory Purchase Notice, (ii) as of a date subsequent to the date
of the  Company's  filing of any  quarterly  report on Form 10-Q (or the date by
which such  report is  required  to be filed)  after the  delivery  of the first
Mandatory  Purchase Notice,  (iii) as of a date subsequent to any date after the
delivery of the first Mandatory  Purchase Notice on which the Company announces,
whether on a preliminary  or definitive  basis,  its fourth quarter or full-year
financial  results,  (iv) to the extent provided by Section 3.3, and (v) as of a
date  within  five  (5)  Trading  Days  of a  Mandatory  Purchase  Notice  or an
Additional  Purchase  Notice,  as the case may be, a letter  from the  Company's
independent  counsel  containing the statements set forth in Exhibit B addressed
to the  Investor  stating,  inter  alia,  that  in  such  counsel's  belief  the
Registration  Statement (as may be amended, if applicable),  does not contain an
untrue  statement of material fact or omits a material fact required to make the
statements contained therein,  not misleading or that the underlying  prospectus
(if  applicable,  as so  amended  or  supplemented)  does not  contain an untrue
statement  of  material  fact or  omits a  material  fact  required  to make the
statements  contained therein,  in light of the circumstances in which they were
made, not misleading;  provided,  however,  that in the event that such a letter
cannot be delivered by the Company's  independent  counsel to the Investor,  the
Company shall promptly notify the Investor and promptly revise the  Registration
Statement,  and the Investor shall not deliver an Optional Purchase Notice,  and
the  Company  shall not  deliver a  Mandatory  Purchase  Notice,  an  Additional
Purchase Notice or, if an Optional Purchase Notice, a Mandatory  Purchase Notice
or an Additional Purchase Notice shall have been delivered in good faith without
knowledge by the Investor or the Company  that a letter of  independent  counsel
can not be delivered as required,  postpone such Closing Date for a period of up
to five (5) Trading Days until such letter is delivered to the Investor (or such
Closing shall otherwise be canceled).  In the event of such a postponement,  the
Purchase  Price of the Common Stock to be issued at such  Closing as  determined
pursuant of Section 2.3 shall be the lower of such Purchase  Price as calculated
as of the originally scheduled Closing Date or as of the actual Closing Date.

<PAGE>

               (i) Accountant's Letter.

                    (i) The Company  shall  engage its  independent  auditors to
perform  certain  agreed upon  procedures in accordance  with the  provisions of
Statement on Auditing Standards No. 72, as amended,  and report thereon as shall
have been reasonably requested by the Investor with respect to certain financial
information contained in the Registration  Statement and shall have delivered to
the  Investor,  (x) within  five (5) Trading  Days of the  delivery of the first
Mandatory  Purchase  Notice and (y) within ten (10)  Trading  Days of the filing
with  the SEC of each  SEC  Document  which  is  deemed  to be  incorporated  by
reference in the  Registration  Statement and is filed after the delivery of the
first Mandatory Purchase Notice, a report addressed to the Investor.

                    (ii) In the event that the  Investor  shall  have  requested
delivery of an "agreed  upon  procedures"  report  pursuant to Section  3.3, the
Company shall engage its  independent  auditors to perform  certain  agreed upon
procedures  and report  thereon as shall have been  reasonably  requested by the
Investor with respect to certain  financial  information  of the Company and the
Company  shall  deliver to the  Investor a copy of such report  addressed to the
Investor. In the event that the report required by this Section 3.2(i) cannot be
delivered  by  the  Company's  independent  auditors,   the  Company  shall,  if
necessary, promptly revise the Registration Statement and the Investor shall not
deliver an Optional Purchase Notice or an Investor  Incremental Purchase Notice,
and the Company shall not deliver a Mandatory  Purchase  Notice or an Additional
Purchase  Notice or, if an Optional  Purchase  Notice,  an Investor  Incremental
Purchase Notice shall have been delivered in good faith without knowledge by the
Investor  that a  report  of  the  Company's  independent  auditors  can  not be
delivered  as  required  or, if a  Mandatory  Purchase  Notice or an  Additional
Purchase Notice shall have been delivered in good faith without knowledge by the
Company  that a report  of its  independent  auditors  can not be  delivered  as
required, postpone such Closing Date for a period of up to five (5) Trading Days
until such a report is delivered (or such Closing shall  otherwise be canceled).
In the event of such a  postponement,  the Purchase Price of the Common Stock to
be issued at such  Closing as  determined  pursuant  to Section 2.3 shall be the
lower  of such  Purchase  Price as  calculated  as of the  originally  scheduled
Closing Date and as of the actual Closing Date.

               (j) Officer's  Certificate.  The Company shall have  delivered to
the Investor,  on each Closing Date, a certificate in substantially the form and
substance of Exhibit C hereto,  executed in either case by an executive  officer
of the Company and to the effect that all the  conditions  to such Closing shall
have been satisfied as at the date of each such certificate.

               (k)  Due  Diligence.  No  dispute  between  the  Company  and the
Investor  shall  exist  pursuant  to  Section  3.3  as to  the  adequacy  of the
disclosure contained in the Registration Statement.

               (l) Beneficial Ownership Limitation. On each Closing Date (i) the
additional shares of Common Stock then to be purchased by the Investor shall not
exceed the number of such shares which, when aggregated with all other shares of
Common Stock then owned by the Investor  pursuant to this Agreement and with the
shares of Common Stock beneficially or deemed beneficially owned by the Investor
pursuant to this  Agreement,  the Warrant  and the  Additional  Warrant (if then
issued and outstanding)  ("Warrant  Shares")  theretofore issued to the Investor
pursuant to Section 2.7, would result in the Investor or any

<PAGE>

affiliate  of the  Investor  beneficially  owning  more than 4.9% of all of such
Common Stock as would be  outstanding  on such Closing  Date,  as  determined in
accordance  with Section  13(d) of the Exchange Act and (ii) the Investor  shall
have received and been  reasonably  satisfied with such other  certificates  and
documents as shall have been  reasonably  requested by the Investor in order for
the Investor to confirm the Company's  satisfaction  of the conditions set forth
in this Section 3.2. For purposes of clause (i) of this Section  3.2(l),  in the
event that the amount of Common Stock  outstanding  as  determined in accordance
with  Section  13(d)  of  the  Exchange  Act  and  the  regulations  promulgated
thereunder is greater on a Closing Date than on the date upon which the Optional
Purchase Notice,  Mandatory Purchase Notice,  the Additional  Purchase Notice or
Investor Incremental Purchase Notice associated with such Closing Date is given,
the amount of Common  Stock  outstanding  on such  Closing Date shall govern for
purposes of  determining  whether the when  aggregating  all purchases of Common
Stock made pursuant to this Agreement  and, if any,  Warrant  Shares,  would own
more than 4.9% of the Common Stock following such Closing Date.

         Section 3.3 Due Diligence Review.  Prior to the delivery of an Optional
Purchase  Notice,  or after the  delivery of a Mandatory  Purchase  Notice or an
Additional  Purchase  Notice  pursuant to Section 2.5 herein,  the Company shall
make  available  for  inspection  and review by the  Investor,  advisors  to and
representatives  of the  Investor  (who  may or may not be  affiliated  with the
Investor and who are  reasonably  acceptable  to the Company),  any  underwriter
participating  in any  disposition  of Common  Stock on  behalf of the  Investor
pursuant to the  Registration  Statement,  any such  registration  statement  or
amendment  or  supplement  thereto or any blue sky,  NASD or other  filing,  all
financial and other  records,  all SEC Documents and other filings with the SEC,
and all other  corporate  documents  and  properties  of the  Company  as may be
reasonably  necessary  for the purpose of such review,  and cause the  Company's
officers,  directors  and  employees to supply all such  information  reasonably
requested by the Investor or any such representative,  advisor or underwriter in
connection with such Registration Statement (including,  without limitation,  in
response to all questions and other  inquiries  reasonably  made or submitted by
any of them),  prior to and from time to time after the filing and effectiveness
of the Registration  Statement for the sole purpose of enabling the Investor and
such representatives, advisors and underwriters and their respective accountants
and attorneys to conduct  initial and ongoing due diligence  with respect to the
Company and the accuracy of the Registration Statement.

         The Company shall not disclose non-public  information to the Investor,
advisors to or  representatives  of the Investor  unless prior to  disclosure of
such  information the Company  identifies such  information as being  non-public
information and provides the Investor,  such advisors and  representatives  with
the  opportunity to accept or refuse to accept such  non-public  information for
review. The Company may, as a condition to disclosing any non-public information
hereunder,  require the Investor's  advisors and representatives to enter into a
confidentiality  agreement  (including  an  agreement  with  such  advisors  and
representatives prohibiting them from trading in Common Stock during such period
of time as they are in possession of non-public  information) in form reasonably
satisfactory to the Company and the Investor.

         Nothing  herein  shall  require  the  Company  to  disclose  non-public
information to the Investor,  his advisors or  representatives,  and the Company
represents that it does not disseminate  non-public information to any investors
who purchase stock in the Company in a public offering,  to money managers or to
securities analysts, provided, however, that notwithstanding anything

<PAGE>

herein to the contrary,  the Company will, as hereinabove provided,  immediately
notify  the  advisors  and   representatives   of  the  Investor  and,  if  any,
underwriters,  of any event or the  existence of any  circumstance  (without any
obligation to disclose the specific event or  circumstance)  of which it becomes
aware,  constituting  non-public  information  (whether or not  requested of the
Company  specifically  or generally  during the course of due  diligence by such
persons or entities),  which, if not disclosed in the prospectus included in the
Registration  Statement  would  cause  such  prospectus  to  include a  material
misstatement  or to omit a material fact required to be stated  therein in order
to make the statements,  therein,  in light of the  circumstances  in which they
were made,  not  misleading.  Nothing  contained  in this  Section  3.3 shall be
construed to mean that such persons or entities other than the Investor (without
the written consent of the Investor prior to disclosure of such information) may
not obtain  non-public  information in the course of conducting due diligence in
accordance with the terms of this Agreement; provided, however, that in no event
shall the Investor's  advisors or  representatives  disclose to the Investor the
nature  of the  specific  event or  circumstances  constituting  any  non-public
information  discovered  by such  advisors or  representatives  in the course of
their due  diligence  (without  the  written  consent of the  Investor  prior to
disclosure of such  information).  The  Investor's  advisors or  representatives
shall make complete  disclosure  to the  Investor's  independent  counsel of all
events or circumstances  constituting  non-public information discovered by such
advisors or representatives in the course of their due diligence upon which such
advisors or  representatives  form the opinion that the  Registration  Statement
contains  an  untrue  statement  of a  material  fact or omits a  material  fact
required to be stated in the  Registration  Statement  or  necessary to make the
statements  contained  therein,  in the light of the circumstances in which they
were made,  not  misleading.  Upon receipt of such  disclosure,  the  Investor's
independent  counsel  shall consult with the  Company's  independent  counsel in
order  to  address  the  concern  raised  as  to  the  existence  of a  material
misstatement  or omission  and to discuss  appropriate  disclosure  with respect
thereto;  provided,  however,  that such  consultation  shall not constitute the
advice of the Company's  independent  counsel to the Investor as to the accuracy
of the  Registration  Statement  and related  prospectus In the event after such
consultation the Investor's  independent  counsel believes that the Registration
Statement  contains an untrue  statement or a material  fact or omits a material
fact  required to be stated in the  Registration  Statement or necessary to make
the statements  contained  therein,  in light of the circumstances in which they
were made, not misleading,  (a) the Company shall file with the SEC an amendment
to the  Registration  Statement  responsive to such alleged untrue  statement or
omission and provide the Investor, as promptly as practicable with copies of the
Registration Statement and related prospectus, as so amended, (b) if the Company
disputes the existence of any such material  misstatement  or omission,  (i) the
Company's  independent counsel shall provide the Investor's  independent counsel
with a letter  stating that nothing has come to their  attention that would lead
them to believe that the Registration Statement or the related prospectus, as of
the date of such  opinion  contains an untrue  statement  of a material  fact or
omits a material fact required to be stated in the Registration Statement or the
related  prospectus or necessary to make the statements  contained  therein,  in
light of the  circumstances  in which they were made, not misleading and (ii) in
the event the dispute  relates to the adequacy of financial  disclosure  and the
Investor shall  reasonably  request,  the Company's  independent  auditors shall
provide to the Company a letter  outlining the  performance of such "agreed upon
procedures"  as shall be  reasonably  requested  by the Investor and the Company
shall  provide the Investor  with a copy of such  letter,  or (c) if the Company
disputes the existence of any such material  misstatement  or omission,  and the
dispute  relates  to the  timing  of  disclosure  of a  material  event  and the
Company's  independent  counsel is unable to provide the opinion  referenced  in
clause (b)(i) above to the Investor,  then this Agreement shall be suspended for
a period of up to thirty

<PAGE>

(30)  days,  at the end of  which,  if the  dispute  still  exists  between  the
Company's  independent  counsel  and the  Investor's  independent  counsel,  the
Company  shall either (i) amend the  Registration  Statement as provided  above,
(ii) provide to the Investor the  Company's  independent  counsel  opinion and a
copy of the letter of the Company's  independent  auditors  referenced above, or
(iii) the obligation of the Investor to purchase shares of Common Stock pursuant
to this Agreement shall  terminate.  The Investor hereby agrees to hold harmless
the Company's  independent auditors from any liability that may arise out of the
delivery of an "agreed upon procedures" letter pursuant to clause (b)(ii) above.

                                   ARTICLE IV

                   Representations and Warranties of Investor

         The Investor represents and warrants to the Company as follows:

         Section 4.1 Intent.  The Investor is entering  into this  Agreement for
its own  account and the  Investor  has no present  arrangement  (whether or not
legally  binding) at any time to sell the Common  Stock to or through any person
or entity;  provided,  however,  that by making the representations  herein, the
Investor  does not  agree to hold the  Common  Stock  for any  minimum  or other
specific  term and reserves the right to dispose of the Common Stock at any time
in  accordance  with  federal  and  state  securities  laws  applicable  to such
disposition.

         Section 4.2  Sophisticated  Investor.  The Investor is a  sophisticated
investor (as described in Rule  506(b)(2)(ii) of Regulation D) and an accredited
investor  (as  defined  in Rule 501 of  Regulation  D),  and  Investor  has such
experience  in business and  financial  matters that it is capable of evaluating
the merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.

         Section 4.3  Authority.  This  Agreement has been duly  authorized  and
validly  executed  and  delivered  by the  Investor  and is a valid and  binding
agreement of the Investor  enforceable  against it in accordance with its terms,
subject to  applicable  bankruptcy,  insolvency  or similar laws relating to, or
affecting  generally the  enforcement of,  creditors'  rights and remedies or by
other equitable principles of general application.

         Section 4.4 No Brokers.  The  Investor  has taken no action which would
give rise to any claim by any person for brokerage commission,  finder's fees or
similar  payments by the Company  relating to this Agreement or the transactions
contemplated hereby.

         Section 4.5 Not an Affiliate. The Investor is not an officer,  director
or "affiliate"  (as that term is defined in Rule 405 of the  Securities  Act) of
the Company.

         Section  4.6  Organization  and  Standing.  The  Investor  is a limited
liability company duly organized,  validly existing,  and in good standing under
the laws of the State of Delaware.

         Section 4.7 Absence of  Conflicts.  The  execution and delivery of this
Agreement and any other document or instrument executed in connection  herewith,
and the consummation of the transactions  contemplated  thereby,  and compliance
with the  requirements  thereof,  will not  violate any law,  rule,  regulation,
order, writ, judgment, injunction, decree or award binding on

<PAGE>

the  Investor,  or the  provision of any  indenture,  instrument or agreement to
which the Investor is a party or is subject,  or by which the Investor or any of
its  assets  is  bound,  or  conflict  with or  constitute  a  material  default
thereunder,  or result in the creation or imposition of any lien pursuant to the
terms of any such indenture,  instrument or agreement, or constitute a breach of
any  fiduciary  duty owed by the  Investor  to any third  party,  or require the
approval  of any  third-party  (which  has not been  obtained)  pursuant  to any
material contract,  agreement,  instrument,  relationship or legal obligation to
which the  Investor  is subject  or to which any of its  assets,  operations  or
management may be subject.

         Section  4.8  Disclosure:  Access  to  Information.  The  Investor  has
received all documents,  records,  books and other information pertaining to the
Investor's  investment in the Company that have been  requested by the Investor.
The  Investor  further  acknowledges  that it  understands  that the  Company is
subject to the periodic  reporting  requirements  of the  Exchange  Act, and the
Investor  has  reviewed or received  copies of any such  reports  that have been
requested by it.

         Section 4.9 Manner of Sale. At no time was the Investor  presented with
or solicited by or through any leaflet,  public promotional meeting,  television
advertisement or any other form of general solicitation or advertising.

                                    ARTICLE V

                  Representations and Warranties of the Company

         The Company represents and warrants to the Investor as follows:

         Section 5.1 Company Status. The Company has registered its Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all  reporting  requirements  of the  Exchange  Act,  and the  Company  has
maintained all requirements for the continued listing or quotation of its Common
Stock,  and such Common  Stock is  currently  listed or quoted on the  Principal
Market.  As of August  26,  1998,  the  Principal  Market is the New York  Stock
Exchange, and the Company is eligible to use Form S-3 under the Securities Act.

         Section 5.2 Current Public  Information.  The Company has furnished the
Investor with true and correct copies of all  registration  statements,  reports
and  documents,   including  proxy  statements  (other  than  preliminary  proxy
statements),  filed  with  the SEC by or with  respect  to the  Company  through
November  14,1996.  All such  registration  statements,  reports and  documents,
together  with  those  registration  statements,  reports  and  documents  filed
pursuant to the  Securities  Act or Exchange Act  subsequent to the date of this
Agreement  (copies of which shall be supplied to the Investor) are  collectively
referred to herein as the "SEC Documents".

         Section  5.3 No  General  Solicitation  in Regard to this  Transaction.
Neither the Company nor any of its affiliates nor any  distributor or any person
acting on its or their behalf has  conducted any general  solicitation  (as that
term is used in Rule 502(c) of  Regulation  D) with respect to any of the Common
Stock,  nor have they made any offers or sales of any security or solicited  any
offers  to  buy  any  security  under  any  circumstances   that  would  require
registration of the Common Stock under the Securities Act.

<PAGE>

         Section 5.4 Valid Issuance of Common Stock. As of January 21, 1997, (a)
the Company has  authorized  capitalization  consisting of 30,000,000  shares of
Common  Stock,  par value $.10 per  share,  (b) the  Company  has  reserved  for
issuance  to  employees,   officers,   directors  or  consultants  approximately
1,900,000 shares of Common Stock, (c) there are issued and outstanding 9,642,557
shares of Common Stock,  of which 300,000 are held in treasury,  (d) the Company
has no other  outstanding  securities  convertible  into or exchangeable for its
Common  Stock or any  warrants,  options  or other  rights to  subscribe  for or
purchase its Common Stock or any such  convertible  or  exchangeable  securities
(other than securities under the Company's Compensation Plans and other than the
Company's  5%  Convertible  Debentures  due 2002) other than as described in the
documents filed with the SEC. All of the  outstanding  shares of Common Stock of
the Company have been duly and validly  authorized and issued and are fully paid
and  nonassessable,  upon issuance of the Common Stock, the Common Stock will be
duly and  validly  issued,  fully  paid and  nonassessable,  and the  holders of
outstanding  Common  Stock of the  Company  are not and shall not be entitled to
preemptive or other rights  afforded by the Company or other rights  afforded by
the  Company to  subscribe  for the  capital  stock or other  securities  of the
Company as a result of the sale of the Common Stock to the Investor hereunder.

         Section  5.5   Organization  and   Qualification.   The  Company  is  a
corporation  duly  incorporated  and existing in good standing under the laws of
the  State  of  Delaware  and  has  the  requisite  corporate  power  to own its
properties and to carry on its business as now being conducted.  The Company and
each  subsidiary,  if any,  is duly  qualified  as a foreign  corporation  to do
business and is in good  standing in every  jurisdiction  in which the nature of
the  business  conducted  or  property  owned  by it  makes  such  qualification
necessary,  other than those in which the failure so to qualify would not have a
Material Adverse Effect.

         Section  5.6  Authorization:  Enforcement.  (a)  The  Company  has  the
requisite corporate power and authority to enter into and perform this Agreement
and to issue the  Common  Stock,  the  Warrant  and the  Additional  Warrant  in
accordance  with the terms hereof and thereof,  (b) the execution,  issuance and
delivery of this  Agreement  by the Company  and the  consummation  by it of the
transactions  contemplated  hereby have been duly  authorized  by all  necessary
corporate  action and no further consent or  authorization of the Company or its
Board of  Directors or  stockholders  is required  (other than such  stockholder
approval as may be required by the standards  imposed on companies listed on the
New York Stock Exchange or other  Principal  Market on which the Common Stock is
traded with respect to  issuances by such  companies of greater than 20% of such
companies'  outstanding voting stock), (c) this Agreement has been duly executed
and delivered by the Company and  constitutes  valid and binding  obligations of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy,  insolvency,  or
similar laws relating to, or affecting  generally the enforcement of, creditors'
rights and remedies or by other equitable  principles of general application and
(d) the Common Stock issuable in accordance  with the terms of this Agreement or
upon exercise of the Warrant and the Additional Warrant will be duly and validly
issued, fully paid and nonassessable.

         Section 5.7  Corporate  Documents.  The Company has  furnished  or made
available to the Investor true and correct  copies of the Company's  Certificate
of   Incorporation,   as  amended   and  in  effect  on  the  date  hereof  (the
"Certificate"),  and the Company's By-Laws, as amended and in effect on the date
hereof (the "By-Laws").

<PAGE>

         Section 5.8 No Conflicts.  The execution,  delivery and  performance of
this  Agreement  by the  Company  and the  consummation  by the  Company  of the
transactions  contemplated hereby,  including without limitation the issuance of
Common  Stock,  the Warrant and the  Additional  Warrant do not and will not (a)
result in a violation of the Company's  Certificate of  Incorporation or By-Laws
or (b) except as otherwise  disclosed in Section 5.16 herein,  conflict with, or
constitute  a default  (or an event  which with  notice or lapse of time or both
would  become a default)  under,  or give to others  any rights of  termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its  subsidiaries  is a party,  or (c)
result in a  violation  of any  federal,  state,  local or  foreign  law,  rule,
regulation,  order,  judgment or decree (including  federal and state securities
laws and regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its  subsidiaries  is bound
or affected  (except for such  conflicts,  defaults,  terminations,  amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate,  have a Material  Adverse  Effect)  nor is the Company  otherwise  in
violation of,  conflict with or in default under any of the foregoing;  provided
that,  for  purposes  of the  Company's  representations  and  warranties  as to
violations of foreign law, rule or regulation  referenced in clause (iii),  such
representations  and  warranties  are  made  only to the  best of the  Company's
knowledge  insofar as the execution,  delivery and performance of this Agreement
by the  Company  and  the  consummation  by  the  Company  of  the  transactions
contemplated  hereby are or may be affected by the status of the Investor  under
or pursuant to any such foreign law,  rule or  regulation).  The business of the
Company is not being conducted in violation of any law,  ordinance or regulation
of any governmental  entity,  except for possible violations which either singly
or in the  aggregate  do not and will not have a Material  Adverse  Effect.  The
Company is not required under federal, state or local law, rule or regulation to
obtain  any  consent,   authorization  or  order  of,  or  make  any  filing  or
registration with, any court or governmental  agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or issue and sell
the Common Stock or the Warrant and the Additional  Warrants in accordance  with
the terms hereof (other than any SEC, NASD or state securities filings which may
be  required  to be made  by the  Company  subsequent  to any  Closing,  and any
registration  statement  which may be filed  pursuant  hereto and other than any
shareholder  approval required by the rules applicable to companies whose common
stock trades on the New York Stock Exchange or other Principal Market referenced
in Section 5.6);  provided that, for purposes of the representation made in this
sentence,  the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.

         Section 5.9 SEC Documents.  The Company has delivered or made available
to the  Investor  true and  complete  copies  of the SEC  Documents  (including,
without limitation,  proxy information and solicitation materials).  The Company
has not provided to the Investor any information which,  according to applicable
law, rule or regulation,  should have been disclosed  publicly prior to the date
hereof  by the  Company  but  which  has not  been  so  disclosed.  As of  their
respective  dates, the SEC Documents  complied in all material respects with the
requirements  of the Securities Act or the Exchange Act, as the case may be, and
rules and regulations of the SEC promulgated thereunder and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC  Documents  contained  any untrue  statement  of a  material  fact or
omitted to state a material fact  required to be stated  therein or necessary in
order to make the statements  therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the 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

<PAGE>

respect thereto. Such financial statements have been prepared in accordance with
generally  accepted  accounting  principles applied on a consistent basis during
the periods involved (except (a) as may be otherwise indicated in such financial
statements  or  the  notes  thereto  or (b) in the  case  of  unaudited  interim
statements,  to the extent they may not include footnotes or may be condensed or
summary  statements)  and fairly present in all material  respects the financial
position  of the Company as of the dates  thereof and the results of  operations
and cash flows for the periods  then ended  (subject,  in the case of  unaudited
statements, to normal year-end audit adjustments).

         Section 5.10 No Material Adverse Change.  Since September 30, 1996, the
date through which the most recent  quarterly report of the Company on Form 10-Q
has been prepared and filed with the SEC, a copy of which is included in the SEC
Documents, no Material Adverse Effect has occurred or exists with respect to the
Company or its subsidiaries,  except as disclosed in the SEC Documents or except
as otherwise publicly disclosed in Company press releases.

         Section  5.11  No   Undisclosed   Liabilities.   The  Company  and  its
subsidiaries  have  no  liabilities  or  obligations  not  disclosed  in the SEC
Documents or except as otherwise  publicly  disclosed in Company press releases,
other  than  those  incurred  in the  ordinary  course of the  Company's  or its
subsidiaries'   respective   businesses  since  September   30,1996  and  which,
individually  or in the aggregate,  do not or would not have a Material  Adverse
Effect on the Company and upon any of its subsidiaries taken as a whole.

         Section 5.12 No Undisclosed  Events or  Circumstances.  Since September
30, 1996,  no event or  circumstance  has occurred or exists with respect to the
Company  or  its  subsidiaries  or  their  respective  businesses,   properties,
prospects,  operations or financial condition, which, under applicable law, rule
or regulation,  requires  public  disclosure or  announcement  prior to the date
hereof by the Company but which has not been  disclosed in the SEC  Documents or
otherwise publicly disclosed in Company press releases.

         Section 5.13 No Integrated  Offering.  Neither the Company,  nor any of
its  affiliates,  nor any person acting on its or their behalf has,  directly or
indirectly,  made any offers or sales of any security or solicited any offers to
buy any security,  other than pursuant to this  Agreement,  under  circumstances
that would require  registration of the Common Stock under the Securities Act to
be issued under this Agreement.

         Section  5.14 No Brokers.  The Company has taken no action  which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Investor relating to this Agreement for the transactions
contemplated hereby.

         Section 5.15  Litigation  and Other  Proceedings.  Except as may be set
forth in the SEC Documents,  there are no lawsuits or proceedings  pending or to
the best knowledge of the Company threatened,  against the Company,  nor has the
Company received any written or oral notice of any such action, suit, proceeding
or  investigation,  which might have a Material Adverse Effect on the Company or
which might materially  adversely  affect the transactions  contemplated by this
Agreement.  Except as set forth in the SEC Documents no judgment,  order,  writ,
injunction  or decree or award has been  issued by or, so far as is known by the
Company,  requested of any court,  arbitrator or governmental agency which might
result in a Material  Adverse  Effect on the Company or which  might  materially
adversely affect the transactions contemplated by this Agreement.

<PAGE>

         Section  5.16 No  Violation  of  Covenants.  No  event of  default  has
occurred and is continuing  (or event which with lapse of time or notice or both
would constitute such an event) which has not otherwise been waived under any of
the revolving credit facilities or under any indenture, mortgage, deed of trust,
loan agreement or other  agreement or instrument for money borrowed or any other
material  agreement to which the Company or any of its subsidiaries is bound, or
to which any of the property or assets of the Company or any of its subsidiaries
is subject.  The Company shall have fifteen (15) Trading Days after the end of a
fiscal quarter during which to cure or obtain the waiver of any default that has
occurred  and is  continuing  during an  Investment  Period with  respect to the
minimum  Tangible Net Worth  covenant  under the terms of the  Revolving  Credit
Agreement,  and the Investor hereby  acknowledges  that the Company shall not be
deemed to be in default  under this  Agreement  for such period of fifteen  (15)
Trading Days after the end of a fiscal  quarter  during which the Company  cures
such default or obtains a waiver of such default.

         Section 5.17  Effectiveness of SEC Filings.  The SEC has not issued any
stop order or other  order  suspending  the  effectiveness  of any  registration
involving the securities of the Company or its subsidiaries.

                                   ARTICLE VI

                            Covenants of the Company

         Section 6.1  Registration  Rights.  The  Registration  Rights Agreement
shall  remain in full  force and  effect  and the  Company  shall  comply in all
respects with the terms thereof.

         Section 6.2  Reservation  of Common Stock.  As of the date hereof,  the
Company will reserve in each  Investment  Period 750,000 shares of Common Stock,
and the Company  shall  continue to reserve and keep  available  at all times in
each Investment Period,  free of preemptive  rights,  shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue shares of
its Common Stock incident to the Closings in such Investment Period and incident
to the exercise of the Warrant and the Additional Warrant issued hereunder; such
amount of shares of Common Stock to be reserved to be calculated  based upon the
minimum Purchase Price therefore under the terms of this Agreement, and assuming
the full  exercise  of the  Warrant and the  Additional  Warrant.  The number of
shares so reserved  from time to time,  as  theretofore  increased or reduced as
hereinafter provided,  may be reduced by the number of shares actually delivered
hereunder and the number of shares so reserved shall be increased to reflect (a)
potential  increases in the Common Stock which the Company may  thereafter be so
obligated to issue by reason of adjustments to the Purchase Price  therefore and
the issuance of the Warrant and each Additional Warrant and (b) stock splits and
stock dividends and distributions.

         Section  6.3 Listing of Common  Stock.  The  Company  hereby  agrees to
maintain the listing of the Common Stock on a Principal  Market,  and as soon as
practicable  to list the  additional  shares of Common Stock issuable under this
Agreement  (including Common Stock issuable upon exercise of the Warrant and the
Additional Warrant);  provided,  however, that notwithstanding  anything else in
this  Agreement to the contrary,  the Company shall have no obligation to list a
number of shares of Common  Stock in excess of 19.9% of the  number of shares of
Common  Stock  outstanding  before  the  listing;  provided  further,  that  the
limitations in

<PAGE>

this Section 6.3 on the  Company's  obligation to list its shares on a Principal
Market shall not affect the Company's  obligations  under Section  10.4(b).  The
Company further  agrees,  if the Company applies to have the Common Stock traded
on any other Principal  Market,  it will include in such  application the Common
Stock  issuable  under this  Agreement  (including  Common Stock  issuable  upon
exercise of the Warrant and the  Additional  Warrant),  and will take such other
action as is  necessary  or  desirable to cause the Common Stock to be listed on
such other Principal Market as promptly as possible.  The Investor shall have no
obligation  to purchase  Common Stock that is not listed on a Principal  Market.
The Company shall undertake its best efforts to obtain the shareholder  approval
referenced  in Section 5.6  required for the issuance of Common Stock under this
Agreement within such time period as shall not at any time preclude the Investor
from providing an Optional  Purchase Notice during the Optional Purchase Period,
or the  Company  from  providing a Mandatory  Purchase  Notice or an  Additional
Purchase Notice for the maximum Investment Amount during any Investment Period.

         Section 6.4  Exchange  Act  Registration.  The  Company  will cause its
Common Stock to continue to be  registered  under  Section 12(g) or 12(b) of the
Exchange  Act,  will  comply  in all  respects  with its  reporting  and  filing
obligations  under the  Exchange  Act,  and will not take any action or file any
document  (whether or not permitted by the Exchange Act or the rules thereunder)
to  terminate  or suspend  such  registration  or to  terminate  or suspend  its
reporting and filing  obligations  under the Exchange Act. The Company will take
all action to  continue  the  listing  and  trading  of its Common  Stock on the
Principal  Market and will comply in all respects with the Company's  reporting,
filing  and  other  obligations  under  the  bylaws or rules of the NASD and the
Principal Market.

         Section 6.5 Legends. The certificates evidencing the Common Stock to be
issued to the  Investor at each Closing and upon the exercise of the Warrant and
the Additional  Warrant (and otherwise as provided by Section 7.1) shall be free
of legends or stop transfer or other restrictions.

         Section  6.6  Corporate  Existence.  The  Company  will  take all steps
necessary to preserve and continue the corporate existence of the Company.

         Section 6.7 Additional  SEC Documents.  The Company will furnish to the
Investor, as and when the originals thereof are submitted to the SEC for filing,
copies of all SEC Documents so furnished or submitted to the SEC.

         Section 6.8 "Blackout Period".  The Company will immediately notify the
Investor  upon the  occurrence  of any of the  following  events in respect of a
registration  statement  or related  prospectus  in respect  of an  offering  of
securities  required to be registered  under this Agreement or the  Registration
Rights Agreement:  (a) receipt of any request for additional  information by the
SEC or any other federal or state  governmental  authority  during the period of
effectiveness of the registration statement for amendments or supplements to the
registration statement or related prospectus; (b) the issuance by the SEC or any
other federal or state  governmental  authority of any stop order suspending the
effectiveness of the registration statement or the initiation of any proceedings
for that purpose; (c) receipt of any notification with respect to the suspension
of the qualification or exemption from  qualification of any of such registrable
securities for sale in any  jurisdiction or the initiation or threatening of any
proceeding  for such  purpose;  (d) the  happening  of any event which makes any
statement  made in the  registration  statement  or  related  prospectus  or any
document incorporated or deemed to be

<PAGE>

incorporated  therein  by  reference  untrue in any  material  respect  or which
requires  the  making of any  changes  in the  registration  statement,  related
prospectus or documents so that, in the case of the registration  statement,  it
will not contain any untrue  statement  of a material  fact or omit to state any
material fact required to be stated  therein or necessary to make the statements
therein not misleading,  and that in the case of the related prospectus, it will
not  contain  any  untrue  statement  of a  material  fact or omit to state  any
material fact required to be stated  therein or necessary to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading; and (e) the Company's reasonable determination that a post-effective
amendment to the  registration  statement would be appropriate;  and the Company
will promptly make available to the Investor any such supplement or amendment to
the  related  prospectus.  The  Investor  shall not  deliver to the  Company any
Optional Purchase Notice,  and the Company shall not deliver to the Investor any
Mandatory Purchase Notice or Additional  Purchase Notice during the continuation
of any of the foregoing events.

         Section  6.9 Rule 153  Prospectus  Delivery.  The  Company  shall cause
copies  of the  prospectus  that  is part of the  Registration  Statement  to be
delivered to the Principal  Market so that the Investor may meet the  prospectus
delivery  requirements imposed by Section 5(b)(2) of the Securities Act of 1933,
as amended, through compliance by the Company with Rule 153 thereunder.

                                   ARTICLE VII

Legends and Delivery of Certificates, Investor Compliance and Investor Covenants

         Section 7.1 Legends and Delivery of  Certificates.  Each of the Warrant
and the Additional  Warrant and, unless  otherwise  provided  below,  the Common
Stock will bear the following legend (the "Legend"):

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

         In the event shares of Common Stock are issued incident to a Closing or
upon exercise of the Warrant or the Additional Warrant in circumstances pursuant
to which  shares of Common  Stock are either  required to bear the Legend or are
not to bear the Legend, such certificates (bearing or not bearing the Legend, as
appropriate)  shall be issued and  delivered  to the  Investor  or as  otherwise
directed by the  Investor on the  applicable  Closing Date or within two Trading
Days  of the  surrender  of the  Warrant  or  Additional  Warrant  for  exercise
(together with all other  documentation  required to be delivered to effect such
exercise), as applicable, in each case against payment therefor.

         The Company  shall  cause the  transfer  agent for the Common  Stock to
issue and deliver to the  Investor  or as  otherwise  directed by the  Investor,
shares of Common Stock not bearing the

<PAGE>

Legend,  during the following periods and under the following  circumstances and
without the need for any further advice or instruction or  documentation  to the
transfer agent by or from the Investor:

               (a)  At any  time  from  and  after  the  effective  date  of the
applicable registration  statement:  (i) incident to any Closing or the issuance
of any shares of Common Stock;  (ii) incident to the exercise of the Warrant and
the Additional Warrant; and (iii) upon any surrender of one or more certificates
evidencing Common Stock and which bear the Legend, to the extent  accompanied by
a notice  requesting  the  issuance  of new  certificates  free of the Legend to
replace  those  surrendered;  provided  that in  connection  with such event the
Investor  confirms  to the  transfer  agent that it intends to sell such  Common
Stock to a third party which is not an affiliate of the Company or the Investor,
and the Investor  agrees to redeliver such Common Stock to the transfer agent to
add the Legend in the event the Common Stock is not sold; and

               (b) At any  time  from  and  after  the  Closing  Date,  upon any
surrender of one or more certificates evidencing Common Stock and which bear the
Legend,  to the extent  accompanied  by a notice  requesting the issuance of new
certificates  free of the Legend to replace those  surrendered and containing or
also  accompanied  by  representations  that  (i) the  then  holder  thereof  is
permitted to dispose  thereof  pursuant to Rule 144(k) under the Securities Act,
(ii) such holder intends to effect the sale or other  disposition of such Common
Stock whether or not pursuant to the Registration  Statement,  to a purchaser or
purchasers  who will not be  subject  to the  registration  requirements  of the
Securities Act or (iii) such holder is not then subject to such requirements.

         Section 7.2 No Other Legend or Stock Transfer  Restrictions.  No Legend
has been or shall be placed on the share  certificates  representing  the Common
Stock and no  instructions  or stop transfers or other  restrictions on transfer
have been or shall be given to the Company's transfer agent with respect thereto
other than as expressly set forth in this Article VII.

         Section 7.3  Investor's  Compliance.  Nothing in this Article VII shall
affect in any way the Investor' s obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.

         Section 7.4 Covenants of the Investor.

                  (a) The  Investor  shall  not make any  offers or sales of the
Common  Stock  other  than  pursuant  to  a  registration  statement  under  the
Securities  Act or pursuant to an exemption from the  registration  requirements
thereof.   The  Investor  will  comply  with  applicable   prospectus   delivery
requirements  under the Securities Act;  provided,  that the Company complies to
the extent  applicable  with the mechanics for prospectus  delivery set forth in
Rule 153(a) under the Securities Act.

                  (b) The  Investor  covenants  and  agrees  that  it will  not,
directly or through any affiliate (i) create the lowest  reported sales price of
the Common  Stock on the  Principal  Market on any  Trading Day or (ii) offer to
sell shares of Common Stock at a price lower than the then  prevailing bid price
for the Common Stock on the Principal Market.

                  (c) The  Investor  shall limit its trading in shares of Common
Stock to trading on the Principal Market for the Common Stock for as long as the
Company maintains the listing

<PAGE>

of its Common Stock on a Principal Market; provided,  however, that the Investor
shall  not be  subject  to the  foregoing  limitation  if the  Company  does not
maintain the listing of its Common Stock on a Principal Market.

                  (d) The Investor covenants and agrees that it shall not retain
beneficial  ownership  of shares of Common Stock for the purpose of limiting the
Investor's obligation of purchase shares of Common Stock under this Agreement as
a result of the provisions of Section 2.1(c). The Investor further covenants and
agrees that it shall use its  reasonable  best  efforts to sell shares of Common
Stock to the extent  required such that the  limitations of Section 2.1(c) shall
not prevent the Investor  from  acquiring  shares of Common Stock  pursuant to a
Mandatory Purchase Notice or Additional Purchase Notice.

                                  ARTICLE VIII

                         Other Issuances of Common Stock

         Section 8.1 Equity Offering Adjustment to Purchase Price.

                  (a) In the event that during the Optional  Purchase  Period or
during an Investment Period the Company makes an Equity Offering and an Optional
Purchase Notice or a Mandatory  Purchase Notice (and Additional  Purchase Notice
or Investor  Incremental Purchase Notice, if applicable) has been delivered with
respect  to the  Optional  Purchase  Period  or  such  Investment  Period,  then
notwithstanding anything herein to the contrary, the purchase price per share of
Common Stock for any Investment  Amount made during the Optional Purchase Period
and such  Investment  Period prior to the  consummation  of the Equity  Offering
shall be the  lower of (a) the  lowest  effective  purchase  price  per share of
Common Stock  received by the Company in any such Equity  Offering,  and (b) the
price per share of Common Stock  determined  hereunder with respect to purchases
of Common  Stock  effected  by the  Investor  (whether  pursuant  to an Optional
Purchase Notice, a Mandatory  Purchase Notice, an Additional  Purchase Notice or
an Investor  Incremental Purchase Notice) during the Optional Purchase Period or
such Investment Period;

                  (b) Subsequent to  consummation  of the Equity  Offering,  the
Company's  obligation  to adjust the  purchase  price per share of Common  Stock
pursuant to 8.1(a) during the remainder of the Optional  Purchase  Period or any
Investment Period shall terminate.

         Section 8.2 Other  Adjustments to Purchase  Price and Floor Price.  The
daily  low  trading  price  of the  Common  Stock  for any  Trading  Day used to
calculate   the   Purchase   Price  and  the  Floor   Price  shall  be  adjusted
proportionally to reflect any stock splits, stock dividends,  reclassifications,
combinations and similar transactions involving the Company's Common Stock.

                                   ARTICLE IX

                  Choice of Law and Venue, Waiver of Jury Trial

         Section 9.1 Choice of Law:  Submission to Jurisdiction.  THIS AGREEMENT
SHALL BE CONSTRUED  UNDER THE LAWS OF THE STATE OF NEW YORK,  WITHOUT  REGARD TO
PRINCIPLES  OF CONFLICTS OF LAW OR CHOICE OF

<PAGE>

LAW. The parties hereby agree that all actions or proceedings  arising  directly
or indirectly from or in connection with this Agreement  shall, at the option of
either  party,  be litigated  only in the United States  District  Court for the
Southern District of New York located in New York County,  New York. The parties
consent to the  jurisdiction  and venue of the foregoing  court and consent that
any  process or notice of motion or other  application  to said court or a judge
thereof may be served  inside or outside  the State of New York or the  Southern
District of New York by registered mail, return receipt  requested,  directed to
the party for which it is intended  at its  address set forth in this  Agreement
(and service so made shall be deemed  complete  five (5) days after the same has
been posted as aforesaid) or by personal  service or in such other manner as may
be  permissible  under  the  rules of said  court.  The  parties  hereto  hereby
irrevocably waive any and all right to a trial by jury with respect to any legal
proceeding  arising  out of or relating to this  Agreement  or the  transactions
contemplated hereby.

                                    ARTICLE X

              Assignment: Entire Agreement, Amendment: Termination

         Section 10.1  Assignment.  Neither this Agreement nor any rights of the
Investor or the Company  hereunder  may be assigned by either party to any other
person.  Notwithstanding  the foregoing,  the Investor's  rights and obligations
under this  Agreement  may be assigned at any time,  in whole or in part, to (x)
any affiliate of the Investor  without any prior written  consent of the Company
or (y) to any other  person or  entity,  upon the prior  written  consent of the
Company,  which  consent  shall not to be  unreasonably  withheld (a  "Permitted
Transferee"), and the rights and obligation of the Investor under this Agreement
shall inure to the  benefit  of, and be  enforceable  by and  against,  any such
Permitted Transferee.

         Section  10.2  Entire  Agreement,   Amendment.   This  Agreement,   the
Registration Rights Agreement, and the other documents delivered pursuant hereto
constitute the full and entire  understanding  and agreement between the parties
with regard to the subjects hereof and thereof,  and no party shall be liable or
bound to any other  party in any manner by any  warranties,  representations  or
covenants except as specifically set forth in this Agreement or therein.  Except
as expressly  provided in this  Agreement,  neither this  Agreement nor any term
hereof may be amended, waived,  discharged or terminated other than by a written
instrument  signed by the party against whom  enforcement of any such amendment,
waiver, discharge or termination is sought.

         Section 10.3  Publicity.  The Company agrees that it will not disclose,
and  will not  include  in any  public  announcement,  the name of the  Investor
without  its  express  written  consent,  unless  and until such  disclosure  is
required by law or  applicable  regulation,  and then only to the extent of such
requirement.  Except as may be  required by law,  the  Company and the  Investor
shall  consult  with each other  before  issuing any press  release or otherwise
making any public  statements with respect to this Agreement and shall not issue
any  such  press  release  or make  any  such  public  statement  prior  to such
consultation.

         Section 10.4 Termination.

                  (a) If any of the events listed in Section  2.6(a)(i)  through
(a)(iv)  occur  and  remain  uncured  for a period  of either  (x)  twenty  (20)
consecutive Trading Days or (y) ninety (90) Trading Days in the aggregate in any
365-day period, the Investor may elect, in its sole and

<PAGE>

absolute  discretion,  to  terminate  this  Agreement.  The  Investor  may  also
terminate this Agreement pursuant to the provisions of Section 2.6(b).

                  (b) In the  event  this  Agreement  (x) is  terminated  by the
Investor pursuant to Section 10.4(a) or Section 2.6(b), (y) is terminated by the
Company  other than  following a breach by the Investor of any material  term or
provision of the  Agreement,  or (z) expires  following  the  conclusion  of the
period  described in Section  1.8(d),  prior to the Company having issued Common
Stock to the Investor  under this  Agreement for an aggregate  Purchase Price at
least  equal to the  Minimum  Offering  Amount,  the  Company  shall  pay to the
Investor, within thirty (30) days of such termination,  as liquidated damages an
amount in cash equal to $300,000 multiplied by a fraction the numerator of which
is equal to the difference between the Minimum Offering Amount and the aggregate
Purchase  Price  of  Common  Stock  purchased  under  this  Agreement  prior  to
termination and the denominator of which shall be the Minimum  Offering  Amount.
In the event the  Investor  shall have  purchased  Common Stock for an aggregate
Purchase  Price of at least the  Minimum  Offering  Amount  prior to the date of
termination, the Investor shall not be entitled to any damages or other remedies
under this Section 10.4(b).

                  (c) On or before  April 1, 1999,  the Company may, in its sole
discretion  and  without  being  subject to the  provisions  of Section  10.4(b)
hereof,  terminate the Investor's  obligation to purchase any Investment  Amount
for the remainder of the Commitment Period, provided,  however, that the Company
shall have sold to the Investor the Minimum Offering Amount.

                                   ARTICLE XI

                Notices. Etc.; Cost and Expenses; Indemnification

         Section 11.1 Notices. Etc. All notices,  demands,  requests,  consents,
approvals or other communications required or permitted to be given hereunder or
which are given with respect to this Agreement  shall be in writing and shall be
personally  served or deposited in the mail,  registered  or  certified,  return
receipt  requested,  postage  prepaid,  or delivered  by  reputable  air courier
service with charges prepaid, or transmitted by hand delivery,  telegram,  telex
or  facsimile,  addressed as set forth below,  or to such other  address as such
party  shall have  specified  most  recently  by written  notice:  (a) if to the
Company,  to: GRC  International,  Inc.,  1900 Gallows Road,  Vienna,  VA 22182;
Attention:  Chief Financial  Officer and General  Counsel,  Facsimile No.: (703)
448-6890,  with copies (which shall not constitute  notice) to: Arnold & Porter,
555 12th St. N.W., Washington, D.C. 20004; Attention: Steven L. Kaplan, Esq. and
Richard  E.  Baltz,  Esq.,  Facsimile  No.:  (202)  942-5999;  and (b) if to the
Investor,  to Cripple  Creek  Securities,  LLC, 40 West 57th St.,  15th Fl., New
York,  N.Y.  10019;  Attention:  Robert L. Chender,  Esq.,  Facsimile No.: (212)
698-0554. Notice shall be deemed given on the date of service or transmission if
personally  served  or  transmitted  by  telegram,  telex or  facsimile.  Notice
otherwise  sent as provided  herein shall be deemed given on the third  business
day following the date mailed or on the second  business day following  delivery
of such notice by a reputable air courier service.

         Section 11.2 Cost and Expenses.  The Company shall be  responsible  for
the Investor's  reasonable,  actual and allocable costs and expenses  (including
legal fees)  incurred in entering into this Agreement in an amount not exceeding
$45,000,  which  amounts  shall  be  paid  within  forty-five  (45)  days of the
Company's receipt of the applicable invoice or invoices as well as the

<PAGE>

Investor's reasonable,  actual and allocable costs and expenses (including legal
fees) incurred in connection  with the  performance of its initial due diligence
activities  relating to the  effectiveness of the  Registration  Statement in an
amount  of up to  $25,000.  The  Company  shall  also  be  responsible  for  any
reasonable,  actual and allocable  subsequent costs and expenses incurred by the
Investor in connection with matters set forth in Section 3.3 (including  without
limitation legal fees and fees of advisors and  representatives of the Investor)
in an amount not exceeding  $7,500 with respect to the Optional  Purchase Period
and each Investment Period,  which amounts may be netted by the Investor against
the amount of any payment  relating to the issuance of shares of Common Stock to
the Investor in connection  with any Closing.  In the event that with respect to
the conduct by the Investor of its due diligence  activities in connection  with
the effectiveness of the Registration Statement, the Optional Purchase Period or
any Investment  Period,  it incurs  reasonable,  actual and allocable  costs and
expenses  in  excess of the  amount  for which the  Company  is  responsible  to
reimburse  it, up to $5,000 of such  excess  costs and  expenses  may be carried
forward to be reimbursed by the Company  (within the limitation set forth above)
in connection with the Optional Purchase Period,  the first Investment Period or
the immediately succeeding Investment Period, as applicable.

         Section 11.3 Securities Law Indemnification.

               (a) Indemnification of Investor.  The Company agrees to indemnify
and hold  harmless  the  Investor  and each  person,  if any,  who  controls the
Investor within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act as follows:

                    (i) against any and all loss,  liability,  claim, damage and
expense  whatsoever,  as  incurred,  arising  out of any untrue  statement  of a
material fact or any alleged untrue  statement of material fact contained in the
Registration Statement (or any amendment thereto),  including any prospectus, or
in any offering  circular or other document,  as applicable,  or the omission or
alleged  omission  therefrom of a material fact required to be stated therein or
necessary to make the  statement  therein not  misleading  or arising out of any
untrue statement or alleged untrue statement of a material fact contained in any
prospectus (or any amendment or supplement thereto), or in any offering circular
or other document, as applicable,  or the omission or alleged omission therefrom
of a material fact  necessary in order to make the  statements  therein,  in the
light of the circumstances under which they were made, not misleading;

                    (ii) against any and all loss, liability,  claim, damage and
expense whatsoever,  as incurred,  to the extent of the aggregate amount paid in
settlement  of  any  litigation,  or  any  investigation  or  proceeding  by any
governmental  agency or body,  based upon any such untrue statement or omission,
or any such alleged  untrue  statement or omission;  provided  that  (subject to
Section  11.3(d) below) any such settlement is effected with the written consent
of the Company; and

                    (iii) against any and all expenses  whatsoever,  as incurred
(including  the fees and  disbursements  of  counsel  chosen  by the  Investor),
reasonably  incurred  in  investigating,  preparing  or  defending  against  any
litigation,  or any  investigation or proceeding by any  governmental  agency or
body,  commenced  or  threatened,  or any claim  whatsoever  based upon any such
untrue statement or omission,  or any such alleged untrue statement or omission,
to the  extent  that  any such  expense  is not paid  under  (i) or (ii)  above;
provided,  however,  that this indemnity  agreement shall not apply to any loss,
liability,  claim,  damage or expense to the  extent  arising  out of any untrue
statement or omission or alleged untrue statement or omission made in

<PAGE>

reliance  upon and in  conformity  with  written  information  furnished  to the
Company by the Investor expressly for use in the Registration  Statement (or any
amendment  thereto),  including any  prospectus  (or any amendment or supplement
thereto), or in any offering circular or other document, as applicable.

                  (b)  Indemnification  of  Company.   The  Investor  agrees  to
indemnify and hold harmless the Company its directors,  each of its officers who
signed the  Registration  Statement,  and each person,  if any, who controls the
Company  within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any and all loss, liability,  claim, damage and expense
described in the  indemnity  contained in  subsection  (a) of this  Section,  as
incurred,  but only with respect to untrue  statements or omissions,  or alleged
untrue  statements  or  omissions,  made in the  Registration  Statement (or any
amendment  thereto),  including any  prospectus  (or any amendment or supplement
thereto),  or in any offering  circular or other  document,  as  applicable,  in
reliance  upon and in  conformity  with  written  information  furnished  to the
Company by the Investor expressly for use in the Registration  Statement (or any
amendment or supplement  thereto) or in any offering circular or other document,
as applicable.

                  (c) Action against  Parties;  Notification.  Each  indemnified
party  shall  give  notice  as  promptly  as  reasonably   practicable  to  each
indemnifying  party of any  action  commenced  against  it in  respect  of which
indemnity  may be sought  hereunder,  but  failure to so notify an  indemnifying
party shall not relieve such indemnifying party from any liability  hereunder to
the extent it is not materially  prejudiced as a result thereof and in any event
shall not  relieve it from any  liability  which it may have  otherwise  than on
account of his indemnity agreement.  In the case of parties indemnified pursuant
to Section 11.3(a) above,  counsel to the indemnified  parties shall be selected
by the  Investor,  and in the case of parties  indemnified  pursuant  to Section
11.3(b)  above,  counsel to the  indemnified  parties  shall be  selected by the
Company. An indemnifying party may participate at its own expense in the defense
of any such action;  provided,  however,  that counsel to the indemnifying party
shall not (except with he consent of the  indemnified  party) also be counsel to
the indemnified party. In no event shall the indemnifying  parties be liable for
fees and  expenses of more than one counsel (in  addition to any local  counsel)
separate from their own counsel for all  indemnifies  parties in connection with
any  one  action  or  separate  but  similar  or  related  actions  in the  same
jurisdiction  arising out of the same general  allegations or circumstances.  No
indemnifying  party shall,  without the prior written consent of the indemnified
parties,  settle or  compromise  or  consent to the entry or any  judgment  with
respect  to  any  litigation,   or  any   investigation  or  proceeding  by  any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which  indemnification  or  contribution  could be sought  under this
Section or Section  11.4  hereof  (whether  or not the  indemnified  parties are
actual or potential  parties  thereto),  unless such  settlement,  compromise or
consent (i) includes an unconditional  release of each indemnifies part form all
liability arising out of such litigation,  investigation proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of an any indemnified party.

                  (d) Settlement without Consent if Failure to Reimburse.  If at
any time an  indemnified  party shall have  requested an  indemnifying  party to
reimburse  the  indemnified  party for the fees and  expenses of  counsel,  such
indemnifying  party  agrees  that it shall be liable for any  settlement  of the
nature contemplated by Section 11.3(a)(ii)  effected without its written consent
if (i) such  settlement  is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request,  (ii) such indemnifying party shall
have received

<PAGE>

notice of the terms of such settlement at least 30 days prior to such settlement
being entered into and (iii) such  indemnifying  party shall not have reimbursed
such indemnified party in accordance with such request prior to the date of such
settlement.

         Section  11.4  Contribution.  If the  indemnification  provided  for in
Section 11.3 hereof is for any reason  unavailable  to or  insufficient  to hold
harmless an  indemnified  party in respect of any losses,  liabilities,  claims,
damages or  expenses  referred  to herein,  then each  indemnifying  party shall
contribute to the aggregate amount of such losses, liabilities,  claims, damages
and  expenses  incurred  by such  indemnified  party,  as  incurred  (a) in such
proportion as is  appropriate to reflect the relative  benefits  received by the
Company on the one hand and the  Investor on the other hand from the offering of
the Common Stock pursuant to this Agreement or (b) if the allocation provided by
clause  (a) is not  permitted  by  applicable  law,  in  such  proportion  as is
appropriate to reflect not only the relative  benefits referred to in clause (a)
above  but also the  relative  fault of the  Company  on the one hand and of the
Investor on the other hand in connection  with the statements or omissions which
resulted in such losses,  liabilities,  claims,  damages or expenses, as well as
any other relevant equitable considerations.

         The relative  benefits  received by the Company on the one hand and the
Investor on the other hand in  connection  with the offering of the Common Stock
pursuant  to  this  Agreement  shall  be  deemed  to be in the  same  respective
proportions as the total proceeds from the offering of the Common Stock pursuant
to this  Agreement  received  by the  Company  from the  Investor  and the total
proceeds received by the Investor upon the sale of such Common Stock bear to the
aggregate public offering price.

         The  relative  fault of the Company on the one hand and the Investor on
the other hand shall be determined by reference to, among other things,  whether
any such untrue or alleged  untrue  statement of a material  fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Investor and the parties' relative intent,  knowledge,  access
to information and opportunity to correct or prevent such statement or omission.

         The  Company  and the  Investor  agree  that it  would  not be just and
equitable if  contribution  pursuant to this Section 11.4 were  determined  on a
pro-rata  allocation  or by any other method of  allocation  which does not take
account of the equitable  considerations referred to above in this Section 11.4.
The  aggregate  amount of losses,  liabilities,  claims,  damages  and  expenses
incurred by an  indemnified  party and  referred to above in this  Section  11.4
shall be deemed to include any legal or other  expenses  reasonably  incurred by
such  indemnified  party in  investigating,  preparing or defending  against any
litigation,  or any  investigation or proceeding by any  governmental  agency or
body,  commenced  or  threatened,  or any claim  whatsoever  based upon any such
untrue or alleged untrue statement or omission or alleged omission.

         Notwithstanding the provisions of this Section 11.4, the Investor shall
not be  required to  contribute  any amount in excess of the amount by which the
total price at which the Common  Stock  purchased by it and resold to the public
exceeds the amount of any damages which the Investor has otherwise been required
to pay by reason of any such untrue or alleged  untrue  statement or omission or
alleged omission.

<PAGE>

         No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution  from any
person who was not guilty of such fraudulent misrepresentation.

         For purposes of this Section  11.4,  each person,  if any, who controls
the Investor  within the meaning of Section 15 of the  Securities Act or Section
20 of the  Exchange  Act  shall  have the same  rights to  contribution  as such
Investor,  and each  director of the  Company,  each  officer of the Company who
signed the  Registration  Statement,  and each person,  if any, who controls the
Company  within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act shall have the same rights to contribution as the Company.

         Section 11.5 General  Indemnification.  Each party shall  indemnify the
other against any loss, cost or damages  (including  reasonable  attorney's fees
and   expenses)   incurred  as  a  result  of  such   parties'   breach  of  any
representation, warranty, covenant or agreement in this Agreement.

                                   ARTICLE XII

                                  Miscellaneous

         Section 12.1 Counterparts. This Agreement may be executed in any number
of counterparts, all of which together shall constitute one instrument.

         Section 12.2 Survival:  Severability. The representations,  warranties,
covenants  and  agreements  of the parties  hereto  shall  survive  each Closing
hereunder.  The indemnity and contribution agreements contained in Sections 11.3
and 11.4 hereof shall remain  operative and in full force and effect  regardless
of (a) any  termination of this Agreement or of the Commitment  Period,  (b) any
investigation  made by or on behalf of any indemnified  party or by or on behalf
of the Company,  and (c) the  consummation of the sale or successive  resales of
the Common Stock.  In the event that any provision of this Agreement  becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable or
void,  this  Agreement  shall  continue  in full force and effect  without  said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.

         Section 12.3 Title and Subtitles. The titles and subtitles used in this
Agreement  are  used  for  convenience  only  and  are not to be  considered  in
construing or interpreting this Agreement.

         Section  12.4  Reporting  Entity for the Common  Stock.  The  reporting
entity relied upon for the  determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this  Agreement
shall be Bloomberg or any other reputable pricing service chosen by the Investor
and reasonably acceptable to the Company.

         Section 12.5  Effectiveness  of the Agreement.  This Agreement shall be
effective as of the Effective  Date provided the Company shall have delivered on
such date fully executed versions of the Warrant,  the opinion(s) of counsel and
the  Registration  Rights  Agreement  and any  other  documents  required  to be
delivered  pursuant to the terms of this Agreement and shall have agreed by such
date to the final form of Exhibits to this Agreement.

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date hereof.


CRIPPLE CREEK SECURITIES, LLC               GRC INTERNATIONAL, INC.



By:                                         By:
   ---------------------------------            --------------------------------
   Name:                                        Name:
   Title:                                       Title: