EMPLOYMENT AGREEMENT



                  THIS EMPLOYMENT AGREEMENT, dated as of the 1st day of
November, 1999 (the "Agreement"),  between Computer Outsourcing Services, Inc.,
a Delaware corporation (the "Company"), and Zach Lonstein ("Executive");

                  WHEREAS, the Company and Executive are currently parties to an
Employment Agreement dated as of January 1, 1995 (the "Old Employment
Agreement");

                  WHEREAS, the Company and Executive desire to terminate the Old
Employment Agreement as of the date hereof and enter into a new employment
agreement; and

                  WHEREAS, the Company and the Executive now desire to enter
into the Agreement, in order to memorialize the terms and conditions of
Executive's relationship with the Company.

                  NOW,  THEREFORE,  in consideration of the premises and mutual
covenants herein set forth, the parties hereto agree as follows:

1.       Termination of Old Employment Agreement; Employment;
         Election to Board of Directors.
         ----------------------------------------------------

(1)      The Old Employment Agreement is hereby terminated.

(2)      The Company  hereby  employs  Executive  to render  services as the
         Chairman of the Board and Chief  Executive  Officer of the Company.

(3)      During the Term of this Agreement (as hereinafter defined), the Company
         shall nominate the Executive to serve as a member of the Board of
         Directors of the Company and the Company's Chairman of the Board to be
         elected at each annual meeting of stockholders of the Company (and any
         special meeting of stockholders at which directors are to be elected)
         held during each year of the Term of this Agreement.

2.       Position and Duties.
         -------------------

1.

<PAGE>



                                       -5-
249832.4
         The Executive shall have such responsibilities, perform such duties and
have such authorities as is consistent with his position as the Chairman of the
Board and Chief Executive Officer of the Company, reporting to, and subject only
to the direction and control, of the Board of Directors of the Company (the
"Board"). Executive hereby accepts such employment and agrees to render his
services (unless prevented by sickness, injury or other incapacity) fully,
faithfully, and to the best of his ability. Executive's services shall be
exclusive to the Company, except that Executive may engage in charitable and
community activities and give attention to his outside investment interests so
long as such activities do not interfere with the performance of his duties
hereunder. Executive may also serve as a member of the board of directors of
other unaffiliated corporations so long as Executive's service on such boards of
directors does not interfere with the ability of Executive to perform his duties
hereunder.

3.       Place of Employment.
         -------------------

         The Company agrees that Executive will be located, and will render such
services (subject to necessary and appropriate business related travel), at the
Company's offices in Leonia, New Jersey.

4.       Term.
         ----

         The term of Executive's employment with the Company under this
Agreement shall be for a continuous period of three (3) years (the "Term"). The
Term shall initially commence on November 1, 1999 and end on October 31, 2002,
but at the end of each day beginning with October 31, 2001, the Term shall
automatically be extended by one additional day unless the Company or the
Executive shall give written notice to the other of his or its intention, as the
case may be, not to extend the Term; it being the intention of the parties that
the Term of Executive's employment shall at all times after October 31, 2001
have an unexpired Term of one (1) year unless either party has theretofore given
written notice in accordance herewith.

5.       Compensation and Benefits.
         -------------------------

(1)      Base Salary. During the first year of the Agreement, the Company shall
         pay to the Executive a base salary (the "Base Salary") of $375,000. For
         each year thereafter during the Term, the Executive's Base Salary shall
         be increased by an amount equal to the greater of (i) five percent (5%)
         or (ii) as the compensation committee of the Board shall otherwise
         determine, and the Base Salary as thereafter increased shall be the
         Base Salary for all purposes of this Agreement. Once established at any
         specified rate, the Executive's Base Salary shall not be reduced. The
         Base Salary shall be payable to the Executive in installments on the
         Company's normal payroll dates, but not less frequently than twice a
         month.

(2)      Bonus. During each year of the Term, the Executive shall be entitled to
         a bonus (the "Bonus") of the greater of (i) up to one hundred percent
         (100%) of the Executive's then Base Salary, or (ii) as the compensation
         committee of the Board shall otherwise determine, in either case such
         bonus shall be based upon parameters to be determined by the
         compensation committee of the Board during each year of the Term. The
         Bonus as determined for each year during the Term shall be paid to
         Executive not later than ninety (90) days following the end of such
         year.

(1)

<PAGE>


(3)      Withholding Taxes.  Payments of Base Salary and Bonus shall be subject
         to all withholding taxes.

(4)      Options. Subject and pursuant to the terms and conditions of the
         Company's 1992 Stock Option and Stock Appreciation Rights Plan (the
         "Plan"), the Company agrees to promptly cause to be granted to the
         Executive the right and option to purchase up to 150,000 shares of
         common stock (the "Options") of the Company, par value $.01 per share
         ("Common Stock"), to be issued as provided in the Plan. All such
         Options shall be non-qualified stock options, shall have a term of ten
         (10) years from the date of grant, shall be exercisable for at least
         one (1) year after the date of the Executive's termination of
         employment with the Company for any reason, other than Cause (as
         hereinafter defined), and shall be exercisable at a price equal to the
         Fair Market Value (as defined in the Plan) on November 1, 1999, the
         date of grant. Options to purchase 50,000 shares of Common Stock shall
         vest immediately on the date of grant and Options to purchase the
         remaining 100,000 shares of Common Stock shall vest at the rate of
         4,167 shares of Common Stock per month at the beginning of each month
         during the first two (2) years of the Term.

6.       Executive Benefits.
         ------------------

(1)      Vacation and Other Leave. Executive shall be entitled to at least six
         (6) weeks paid vacation, and such other holiday, sick leave, personal
         days and other "leave" benefits commensurate with his position as a
         senior executive officer of the Company and in accordance with the
         Company's regular policies in effect prior to the date hereof with
         respect to the Executive.

(2)      Group Medical, Life and Disability Insurance. During the Term of this
         Agreement, Executive shall be entitled to participate, at the Company's
         expense, in all of the Company's group health, life and (subject to
         Section 6(e)) disability insurance plans generally provided to its
         senior executives from time to time and shall be entitled to
         participate at the Company's expense in any other benefit plans that
         may become generally available to executives and employees of the
         Company; provided, that Executive and his immediate family shall be
         covered by the Company's health plan during the Executive's lifetime.

(3)      Pension and Profit Sharing Plans. During the Term of this Agreement,
         Executive shall be entitled to participate, at the Company's expense,
         in all pension, profit sharing and retirement plans now existing or
         hereafter established by the Company for senior executives (to the
         extent permitted by the terms of each such plan); provided, that such
         plans will remain in effect only for so long as the Board deems it to
         be in the best interest of the Company to do so.

(1)

<PAGE>


(4)      Life Insurance. The Company shall be exclusively responsible for
         maintaining a life insurance policy in the amount of $2 million with
         respect to the Executive where the Company (and/or its lenders by
         collateral assignment) is the beneficiary with respect to $1 million
         and the beneficiary or beneficiaries with respect to the other $1
         million shall be designated by the Executive. Executive shall reimburse
         the Company for the premiums relating to $1 million of such coverage.
         Executive hereby consents to the maintenance by the Company of such
         life insurance policies and agrees to cooperate with the Company in
         obtaining such policies by completing necessary applications and
         submitting to necessary medical examinations.

(5)      Additional Benefits. During the Term, Executive shall also be entitled,
         at the expense of the Company, to all other benefits provided to him
         during the Company's fiscal year ended October 31, 1999, including,
         without limitation, a disability insurance policy with respect to
         Executive with terms, coverage and benefits at least equal to the
         policy then in effect.

7.       Expenses; Requisites.
         --------------------

(1)      Reimbursement; Vouchers. The Company shall reimburse Executive for all
         reasonable business expenses incurred by Executive in connection with
         his employment hereunder. The Executive shall submit to the Company
         such vouchers or expense statements satisfactorily evidencing such
         expenses as may be reasonably requested by the Company.

(2)      Automobile. The Company shall, during the Term, provide Executive with
         the use of a current model automobile owned or leased by the Company of
         the same or equivalent type and class as currently provided and the
         Company shall pay for and/or reimburse Executive for all maintenance
         and repairs thereon as well as for gasoline, tolls and parking expenses
         for business use of such automobile for the Company, upon submission of
         such documentation as may be reasonably required by the Company.

(3)      Office; Telephone. Executive shall be furnished with office facilities
         and services suitable to his position as the Chairman of the Board and
         Chief Executive Officer of the Company, as well as at the Company's
         expense, business use of cellular telephone(s), beeper(s) and a second
         telephone line at Executive's residence.

(4)      Health Club.  The Company shall  purchase  membership,  at a reasonable
         rate,  for Executive at a health club of  Executive's choice and pay
         related expenses.

8.       Confidentiality; Non-Solicitation.
         ---------------------------------

1.

<PAGE>


(1)      During the Term of this Agreement and for two (2) years after the last
         day of the Term of this Agreement, Executive shall not use for
         competitive purposes, or divulge to any other person, firm or
         corporation (otherwise than in furtherance of the business purposes of
         the Company, or any of its subsidiary or affiliated companies), any
         confidential information of the Company. "Confidential Information"
         shall mean information contained in the current and potential customer
         lists, marketing and business plans and financial records of the
         Company, and specifications of proprietary products under development
         and not yet marketed or sold by the Company; provided, that
         confidential information shall not include (and the restrictions of
         this Section 8(a) shall not apply to) any information which: (i) is at
         the time of disclosure, part of the public domain or thereafter through
         no action of Executive in violation of this Agreement, becomes a part
         of the public domain or is generally known in the computer outsourcing
         industry through no violation of this Agreement; (ii) information which
         has been publicly disclosed by the Company or any parent, subsidiary or
         affiliated corporation in public announcements, press releases or in
         publicly available governmental filings; or (iii) is required to be
         disclosed by court order or compliance with governmental requirements
         or legal process.

(2)      During the Term of this Agreement, Executive shall not, on behalf of
         himself or any other person, firm or entity (i) solicit any person
         employed by the Company or any of its subsidiaries at the time of
         Executive's termination, for employment by Executive or any other
         person, firm or entity or (ii) solicit any client of the Company or any
         of its subsidiaries at or prior to the time of Executive's termination
         for the provision of computer outsourcing services by any person, firm
         or entity other than the Company and its subsidiaries.

(3)      Executive agrees that damages at law would not be an adequate remedy
         for violation of the covenants set forth in this Section 8 by
         Executive, and he therefore agrees that these covenants may be
         specifically enforced against him in any court of competent
         jurisdiction.

9.       Termination.
         -----------

         (a)      Death,  Disability,  Expiration of Term.  Executive's
         employment  under this Agreement shall terminate upon the death or
         Disability (as hereinafter defined) of Executive or upon the expiration
         of the Term as provided herein.



<PAGE>


(1)      Cause. The Board may terminate the Executive's employment for Cause.
         For purposes of this Agreement, the Board shall have "Cause" if: (A)
         the Executive is convicted of a felony; (B) the Executive willfully and
         continually fails to substantially perform his duties hereunder (other
         than as a result of incapacity due to physical or mental injury or
         illness), after the Board delivers a written demand for substantial
         performance to the Executive that specifies the manner in which the
         Board believes the Executive has failed substantially to perform his
         duties hereunder and the Executive shall not have corrected such
         failure within fourteen (14) business days (or, if such failure cannot
         be corrected immediately, commenced and is diligently pursuing the
         correction of such failure) after his receipt of such demand; or (C)
         the Executive engages in willful misconduct in the performance of his
         duties hereunder that is demonstrably and materially injurious to the
         Company. No action, or failure to act, by the Executive shall be
         considered "willful" if it is done by the Executive in good faith and
         with the reasonable belief that his action or omission was in the best
         interest of the Company.

(2)      Termination by the Executive for Good Reason. The Executive shall have
         the right to terminate his employment with the Company at any time for
         Good Reason by giving the Company notice in accordance with paragraph
         (e) below. Good Reason shall mean any of the following: (i) removal or
         failure of the Executive to continue as Chairman of the Board and Chief
         Executive Officer, (ii) a material diminution in the nature or scope of
         Executive's duties or responsibilities or the assignment of any duties
         or responsibilities materially inconsistent with his position as
         Chairman of the Board and Chief Executive Officer, (iii) the relocation
         of the Company's principal executive officer to a location more than 25
         miles from its current location, or (iv) the failure of the Company,
         after five (5) days notice, to comply with any of the terms contained
         in Section 5 or Section 6 of the Agreement.

(3)      Notice of Termination. Any termination of the Executive's employment by
         the Company or by the Executive (other than pursuant to paragraph (a)
         above) shall be communicated by a written notice to the other party.
         For purposes of this Agreement, a "Notice of Termination" shall mean a
         notice which shall indicate the specific provision in this Agreement
         relied upon and shall set forth in reasonable detail the facts and
         circumstances claimed to provide a basis for termination of the
         Executive's employment under the provision so indicated. Any purported
         termination not satisfying the requirements of this subsection (d)
         shall not be effective.

(4)      Date of Termination. "Date of Termination" shall mean (i) if the
         Executive's employment is terminated by his death, the date of his
         death, or by reason of his Disability, the date all of the conditions
         to constitute a Disability have occurred, or, if upon expiration of the
         Term, the last day of the Term, (ii) if the Executive's employment is
         terminated for Cause, the date specified in the Notice of Termination,
         and (iii) if the Executive's employment is terminated by Executive for
         Good Reason, the date which is seven (7) days after the date on which
         the Notice of Termination is given.

(5)      Disability. For purposes of this Agreement, "Disability" shall mean if,
         due to illness or injury, Executive has been unable to perform his
         duties for a continuous period of six (6) consecutive months or more,
         and the Board determines in good faith that Executive has become
         totally disabled (which shall include a certificate from a reputable,
         licensed medical doctor having expertise in the disability to which
         Executive is subject, that Executive has become totally and permanently
         disabled and is not likely to be able to resume his duties to the
         Company for a period of at least an additional six (6) months.

(1)

<PAGE>


10.      Compensation and Benefits upon Termination.
         ------------------------------------------

                  (a) Death, Disability or Expiration of Term. Upon the
         termination of Executive's employment because of (i) Executive's death,
         Executive's estate shall be entitled to receive two times his Base
         Salary, (ii) Executive's Disability, Executive shall be entitled to
         receive two times his Base Salary plus all disability benefits or (iii)
         the expiration of the Term, Executive shall be entitled to receive his
         Base Salary through the Date of Termination and in each event outlined
         in (i), (ii) and (iii), a pro rata portion (based upon the number of
         days elapsed in the year to the Date of Termination) of such bonus, if
         any, as the Board shall reasonably determine would have been payable to
         Executive in respect of the fiscal year in which Executive's employment
         terminates, such payments in all such events to be paid within thirty
         (30) days of the Date of Termination.

(1)      Cause. Upon the termination of Executive's Employment for Cause or upon
         termination by Executive without Good Reason, Executive shall be
         entitled to receive on the Date of Termination only his accrued and
         unpaid Base Salary to the Date of Termination.

(2)      Early Termination. Upon the termination of Executive's employment by
         Executive for Good Reason, the Executive shall be entitled to receive
         in his sole discretion either in a lump sum on the first day of the
         month following the Date of Termination or in equal monthly
         installments commencing with the month immediately following the month
         of the Date of Termination his Base Salary for two (2) years after the
         Date of Termination plus, a prorated portion (based upon the number of
         days elapsed in the fiscal year to the Date of Termination) of his
         Bonus for the fiscal year in which the Notice of Termination shall have
         been given, computed on the assumption that the Company's actual
         performance equals one hundred percent (100%) of targeted performance
         for such year; provided, however that regardless of any proration,
         Executive shall be entitled to receive at least one-half of the Bonus
         Executive would have received for the entire fiscal year in which
         Executive's employment was terminated had Executive's employment not
         been terminated. In addition, notwithstanding any provision in any
         option agreement to the contrary, ten (10) days before the Date of
         Termination, any unexercisable stock options shall become exercisable,
         and the restrictions on any restricted stock shall lapse. Further, the
         period of performance for any performance-related units or awards for
         which the performance period has not expired, shall be deemed to have
         expired at the end of the month preceding the Date of Termination, and
         Executive shall be entitled to receive the value of such units or
         awards at the end of such month on the basis of an equitable prorating
         of the performance period, performance targets and award amounts.

(3)      Other Benefits. In addition to the foregoing, upon termination of
         Executive's employment for any reason whatsoever (including Cause),
         Executive shall receive such other benefits, if any, as may be provided
         to him under the terms of any employee benefit, incentive, option,
         stock award and other plans or programs of the Company in which he may
         be, or have been, a participant.

(1)

<PAGE>


(4)      No Mitigation. The Executive shall have no obligation to take any
         action to mitigate or offset any amounts payable by the Company
         pursuant to this Section 10 by seeking other employment or otherwise,
         nor shall the amount of any payment provided for in this Agreement be
         reduced by any compensation earned by the Executive as the result of
         employment by another employer after the date of termination of the
         Executive's employment or otherwise.

(5)      Continuation of Agreement Provisions. The termination of the
         Executive's employment for any reason whatsoever shall not operate to
         terminate this Agreement as an entirety or to adversely affect the
         respective continuing rights and obligations of the parties under
         Sections 8, 11, 12 and 16 of this Agreement, all of which shall survive
         the effective date of such termination of employment in accordance with
         their respective terms.

11.      Merger or Reorganization.
         ------------------------

         This Agreement shall not be terminated by the voluntary or involuntary
dissolution of the Company or by any merger or consolidation where the Company
is not the surviving or resulting corporation, or upon any transfer of all or
substantially all of the assets of the Company. In the event of any such merger
or consolidation or transfer of assets, the provisions of this Agreement shall
be binding and shall inure to the benefit of the surviving or resulting
corporation or the corporation to which such assets shall be transferred, and
the Company shall require the successor to the Company as the Executive's
employer (whether such succession is direct or indirect, by purchase, merger,
consolidation or otherwise, to all or a substantial portion of the business
and/or assets of the Company) to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, the term "Company" shall mean the Company as hereinbefore defined and
any successor to all or a substantial portion of its business and/or assets as
aforesaid.

12.      Arbitration.
         -----------

1.

<PAGE>


         Any controversy or claim arising out of or relating to this Agreement,
the breach thereof or the coverage of this arbitration provision shall be
settled by arbitration which shall be in accordance with the Commercial
Arbitration Rules of the American Arbitration Association as such rules shall be
in effect on the date of delivery of demand for arbitration. The arbitration of
such issues, including the determination of the amount of any damages suffered
by either party hereto by reason of the acts or omissions of the other, shall be
to the exclusion of any court of law. The decision of the arbitrators or a
majority of them shall be final and binding on both parties and their respective
heirs, executors, administrators, successors and assigns. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction. There shall be three arbitrators, one to be chosen directly by
each party at will and the third arbitrator to be selected by the two
arbitrators so chosen. Each party shall pay the fees of the arbitrator selected
by him and of his own attorneys and the expenses of his witnesses and all other
expenses connected with the presentation of his case. All other costs of the
arbitration, including the cost of the third arbitrator, the record or
transcripts thereof, if any, administrative fees, and all other fees and costs
shall be borne by the Company.

         Nothing contained herein shall be construed or interpreted to preclude
the Company prior to, or pending the resolution of, any matter subject to
arbitration from seeking injunctive relief in any court for any breach or
threatened breach of any of the Executive's agreements in Section 8 hereof.

13.      Non-Assignability.
         -----------------

         The obligations of Executive hereunder are personal and may not be
assigned or transferred in any manner whatsoever, nor are such obligations
subject to involuntary alienation, assignment or transfer.

14.      Amendment.
         ---------

         This Agreement contains the entire agreement of the parties. It may not
be changed orally but only by a written agreement executed by both of the
parties hereto.

15.      Notices.
         -------

         All notices which a party is required or may desire to give to the
other party under or in connection with this Agreement shall be sufficient if
given by addressing same to the other party as follows:

                           If to Executive to:

                                    Zach Lonstein
                                    910 Fifth Avenue
                                    New York, New York 10021

                           If to the Company to:

                                    Computer Outsourcing Services, Inc.
                                    2 Christie Heights Street
                                    Leonia, New Jersey 07605
                                    Attention:       Secretary

or at such other place as may be designed in writing by like notice. Any notice
shall be deemed to have been delivered when addressed as required herein and
deposited, postage prepaid, in the United States Mail.



<PAGE>


16.      Indemnification.
         ---------------

         The Company will indemnify the Executive (and his legal
representatives, heirs, estate or other successors) to the fullest extent
permitted (including payment of expenses in advance of final disposition of any
proceeding) by the laws of the jurisdiction of the incorporation of the Company
as in effect at the time of the subject act or omission, or by the certificate
of incorporation and by-laws of the Company as in effect at such time or on the
date of this Agreement, or by the terms of any indemnification agreement between
the Company and the Executive, whichever affords or afforded greatest protection
to the Executive, and the Executive shall be entitled to the protection of any
insurance policies the Company may elect to maintain generally for the benefit
of its directors and officers (and to the extent the Company maintains such an
insurance policy or policies, the Executive shall be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a person serving or having served in the positions and
offices in which the Executive is serving or has served), against all costs,
charges and expenses whatsoever incurred or sustained by him (or his legal
representatives, heirs, estate or other successors) at the time such costs,
charges and expenses are incurred or sustained, in connection with any action,
suit or proceeding to which he (or his legal representatives, heirs, estate or
other successors) may be made a party by reason of his being or having been a
director, officer or employee of the Company or any subsidiary, or by reason of
his serving or having served any other enterprise as a director, officer or
employee at the request of the Company or any subsidiary.

17.      Waiver, Modification.
         --------------------

         No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by the Executive and the Company. No waiver by either party at any time of any
breach by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver or
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.

18.      Severability.
         ------------

         The various Sections of this Agreement are severable, and if any
Sections or an identifiable part thereof is held to be invalid or unenforceable
by any court of competent jurisdiction, then such invalidity or unenforceability
shall not affect the validity or enforceability of the remaining Sections or
identifiable parts thereof in this Agreement, and the parties hereto agree that
the portion so held invalid, unenforceable or void shall, if possible, be deemed
amended or reduced in scope, or otherwise be stricken from this Agreement, to
the extent required for the purposes of the validity and enforcement hereof.



<PAGE>


19.      Choice of Law.
         -------------

         This Agreement shall be governed by the laws of the State of New
Jersey, without reference to such State's conflict of law rules.

20.      Entire Agreement.
         ----------------

         This Agreement sets forth the entire agreement between the parties with
respect to the subject matter hereof and supersedes any and all prior agreements
between the Company and the Executive, whether written or oral, relating to any
or all matters covered by, and contained or otherwise dealt with, in this
Agreement. No agreements or representations, oral or otherwise, express or
implied, have been made by either party with respect to the subject matter of
this Agreement, unless set forth expressly in this Agreement.

21.      Beneficiaries; References.
         -------------------------

         The Executive shall be entitled to select (and change, to the extent
permitted under any applicable law) a beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following the Executive's death,
and may change such election by giving the Company written notice thereof. In
the event of the Executive's death, Disability or a judicial determination of
his incompetence, all references in the Agreement to the Executive shall be
deemed, where appropriate, to refer to his beneficiary, estate or other legal
representative.

                  IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date hereinabove set forth.


                                     COMPUTER OUTSOURCING SERVICES, INC.

                                     By:              /s/
                                    -----------------------------------------
                                     Name:      ZACH LONSTEIN