SECURITIES PURCHASE AGREEMENT


                                among


                             MEDPLUS, INC.


                                 and


                 THE SEVERAL PURCHASERS NAMED IN EXHIBIT 1.01




                       Dated as of April 30, 1999








                            TABLE OF CONTENTS

                                                                 
Page
ARTICLE I - PURCHASE, SALE AND TERMS OF NOTES AND WARRANTS       1
1.01  The Notes                                                  1
1.02  The Preferred Shares                                       2
1.03  The Warrants                                               2
1.04  Purchase and Sale of Notes, Preferred Shares and Warrants  2
1.05  Payments and Endorsements                                  3
1.06  Redemptions                                                3
1.07  Payment on Non-Business Days                               3
1.08  Registration, etc.                                         3
1.09  Transfer and Exchange of Notes                             4
1.10  Replacement of Notes                                       4
1.11  Subordination                                              4
1.12  Acceleration                                               4

ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY       5
2.01  Organization, Qualifications and Corporate Power           5
2.02  Authorization of Agreements, Etc.                          6
2.03  Validity                                                   6
2.04  Authorized Capital Stock                                   6
2.05  Company SEC Reports and Financial Statements               7
2.06  Events Subsequent to the Balance Sheet Date                8
2.07  Litigation; Compliance with Law                            9
2.08  Proprietary Information of Third Parties                   9
2.09  Patents, Trademarks, Etc.                                  9
2.10  Title to Properties                                       10
2.11  Leasehold Interests                                       10
2.12  [Reserved]                                                10
2.13  Taxes                                                     10
2.14  Other Agreements                                          11
2.15  Loans and Advances                                        12
2.16  Assumptions, Guaranties, Etc. of Indebtedness of Other 
      Persons                                                   13
2.17  Significant Customers and Suppliers                       13
2.18  Governmental Approvals                                    13
2.19  Disclosure                                                13
2.20  Offering of the Notes, Preferred Shares and Warrants      13
2.21  Brokers                                                   14
2.22  Transactions With Affiliates                              14
2.23  Employees                                                 14
2.24  U.S. Real Property Holding Corporation                    14
2.25  Environmental Protection                                  14
2.26  ERISA                                                     15
2.27  Foreign Corrupt Practices Act                             16
2.28  Federal Reserve Regulations                               16

ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS  16

ARTICLE IV - CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS AND 
THE COMPANY          

4.01  Conditions to the Obligations of the Purchasers           17
4.02  Conditions to the Obligations of the Purchasers           17

ARTICLE V - COVENANTS OF THE COMPANY                            20
5.01  Information                                               20
5.02  Reserve for Conversion Shares and Warrant Shares.         21
5.03  Restrictive Agreements Prohibited                         22
5.04  Use of Proceeds                                           22
5.05  Activities of Subsidiaries                                22
5.06  U.S. Real Property Interest Statement                     22
5.07  International Investment Survey Act of 1976               23
5.08  Consolidation, Merger of Disposition of Assets            23
5.09  Election of Directors                                     23
5.10  No Merger, Consolidation, etc                             24
5.11  Opinion Regarding Subsidiaries                            24
5.12  Termination of Covenants                                  24

ARTICLE VI EVENTS OF DEFAULT                                    24
6.01.  Events of Default                                        24
6.02.  Annulment of Defaults                                    25

ARTICLE VII COVENANTS OF THE MANAGING SHAREHOLDER               26
7.01  Tag-Along Rights                                          27
7.02  Termination                                               28

ARTICLE VIII - MISCELLANEOUS                                    28
8.01  Expenses                                                  28
8.02  Survival of Agreements                                    28
8.03  Brokerage                                                 28
8.04  Parties in Interest                                       28
8.05  Notices                                                   28
8.06  Governing Law                                             29
8.07  Entire Agreement                                          29
8.08  Counterparts                                              29
8.09  Amendments                                                29          
8.10  Severability                                              29
8.11  Titles and Subtitles                                      29
8.12  Indemnification                                           30
8.13  Remedies Cumulative                                       30
8.14  Remedies Not Waived                                       30

INDEX TO EXHIBITS

EXHIBIT 1.01           Purchasers
EXHIBIT 1.01a          Form of Subordinated Note
EXHIBIT 1.02           Charter and All Amendments thereto
EXHIBIT 1.03           Form of Warrant
EXHIBIT 2.01           Form of Registration Rights Agreement
EXHIBIT 2.23           Form of Employee Nondisclosure and 
Developments
                       Agreement
EXHIBIT 4.02           Form of Company Counsel Opinion
EXHIBIT 4.02A          Shareholders to Deliver Proxies
EXHIBIT 4.02B          Form of Proxy



MedPlus, Inc.
8805 Governor's Hill Drive, Suite 100
Cincinnati, OH 45249


As of April 30, 1999

To:  The Persons listed on Exhibit 1.01 hereto

     Re:  Subordinated Notes due 2004, Series A Preferred Stock 
and
          Series A Preferred Stock Purchase Warrants

Ladies and Gentlemen:

MedPlus, Inc., an Ohio corporation (the "Company"), hereby agrees 
with the Persons listed on Exhibit 1.01 hereto (each, a 
"Purchaser" and collectively, the "Purchasers") as follows:


                                ARTICLE I

                   PURCHASE, SALE AND TERMS OF NOTES AND WARRANTS

1.01  The Notes.  The Company has authorized the issuance and sale 
of the Company's Subordinated Notes, due 2004, in the original 
aggregate principal amount of $2,000,000 to the Purchasers in the 
respective amounts set forth in Exhibit 1.01 hereto.  The 
Subordinated Notes shall be substantially in the form set forth in 
Exhibit 1.01A hereto and are herein referred to individually as a 
"Note" and collectively as the "Notes", which terms shall also 
include any notes delivered in exchange or replacement therefor.  
The Notes shall provide that if the Preferred Share and Warrant 
Closing (as defined below) has not occurred prior to July 30, 
1999, then (i) the entire amount of principal and interest which 
remains unpaid shall become due and payable as of November 28, 
1999, (ii) the Company shall immediately issue, for no additional 
consideration, to the holders of the Notes that number of shares 
of the Company's Common Stock, no par value (the "Common Stock"), 
as is equal in the aggregate to ten percent (10%) of the aggregate 
number of issued and outstanding shares of Common Stock, on a 
fully diluted basis, as of such date and (iii) on December 31, 
1999 and on the last day of each calendar month thereafter, if any 
amount of principal or interest under the Notes remains 
outstanding on such date, the Company shall issue, for no 
additional consideration, to the holders of the Notes that number 
of shares of the Common Stock as is equal to two percent (2%) of 
the aggregate number of issued and outstanding shares of Common 
Stock on a Fully Diluted basis, as of such date, up to a maximum 
of 19.9% of the Common Stock on a Fully Diluted basis.  The Notes 
will provide that that Company will issue, and the Company 
covenants to issue, on the Preferred Share and Warrant Closing 
Date (as defined below) to the Purchasers warrants in the form 
attached thereto as Exhibit A to purchase shares of Series A 
Convertible Preferred Stock (as defined below), unless the 
Preferred Share and Warrant Closing Date does not occur prior to 
July 30, 1999, in which event the Company will issue on July 30, 
1999 to the Purchasers warrants in the form attached thereto as 
Exhibit B to purchase shares of Common Stock.  Any warrants issued 
or issuable pursuant to the Notes are referred to herein as the 
"Note Warrants", any shares of Common Stock issued or issuable 
upon exercise of any Note Warrants are referred to herein as the 
"Note Warrant Common Shares", and any shares of Series A 
Convertible Preferred Stock issued or issuable upon exercise of 
any Note Warrants are referred to herein as the "Note Warrant 
Preferred Shares".

1.02          The Preferred Shares.  Subject to shareholder 
approval, the Company has also authorized the issuance and sale of 
an aggregate of 2,371,815 shares (the "Preferred Shares") of a 
Series A Convertible Preferred Stock, $.01 per share (the "Series 
A Convertible Preferred Stock") at a purchase price of $1.729 per 
share to the Purchasers in the respective amounts set forth in 
Exhibit 1.01 hereto.  The designation, rights, preferences and 
other terms and conditions relating to the Series A Convertible 
Preferred Stock shall be as set forth on Exhibit 1.02 hereto.

1.03  The Warrants.  Subject to shareholder approval, the Company 
has also authorized the issuance and sale of the Company's 
Series A Convertible Preferred Stock Purchase Warrants (the 
"Purchase Warrants") for the purchase (subject to adjustment as 
provided therein) of 759,562 shares (the "Purchase Warrant Shares" 
and together with the Note Warrant Preferred Shares, the "Warrant 
Shares") of the Company's Series A Convertible Preferred Stock to 
the Purchasers in the respective amounts set forth in Exhibit 1.01 
hereto.  The Purchase Warrants shall be substantially in the form 
set forth in Exhibit 1.03 hereto and are herein referred to, 
together with the Note Warrants, individually as a "Warrant" and 
collectively as the "Warrants", which terms shall also include any 
warrants delivered in exchange or replacement therefor.  

1.04  Purchase and Sale of Notes, Preferred Shares and Warrants.  

  (a) The Note Closing.  The Company agrees to issue and sell to 
the Purchasers, and, subject to and in reliance upon the 
representations, warranties, terms and conditions of this 
Agreement, the Purchasers, severally but not jointly, agree to 
purchase, the Notes in the original principal amount set forth 
opposite their respective names on Exhibit 1.01.  Such purchase 
and sale shall take place at a closing (the "Note Closing") to be 
held at the offices of Testa, Hurwitz & Thibeault, LLP, 125 High 
Street, Boston, Massachusetts, on April 30, 1999 at 10:00 A.M., or 
on such other date and at such time as may be mutually agreed upon 
(such date and time being called the "Note Closing Date").  At the 
Note Closing, the Company will issue and deliver a Note payable to 
the order of each Purchaser against payment of the full purchase 
price therefor (indicated on Exhibit 1.01 under the column headed 
"Amount of Subordinated Notes to be Purchased" opposite such 
Purchaser's name) by (i) wire transfer of immediately available 
funds to an account designated by the Company, (ii) a check 
payable to the order of the Company or its assignees, or (iii) any 
combination of (i) and (ii) above.

  (b) The Preferred Share and Warrant Closing.  Provided that the 
shareholders of the Company approve the transactions contemplated 
by this Agreement prior to July 30, 1999, and subject to the terms 
and conditions contained herein, the Company agrees to issue and 
sell to the Purchasers, and, subject to and in reliance upon the 
representations, warranties, terms and conditions of this 
Agreement, the Purchasers, severally but not jointly, agree to 
purchase the number of Preferred Shares and Purchase Warrants set 
forth opposite the name of such Purchaser under the headings 
"Number of Preferred Shares to be Purchased" and "Number of 
Purchase Warrants to be Purchased", respectively, on Exhibit 1.01 
hereto.  Such purchase and sale shall take place at a closing (the 
"Preferred Share and Warrant Closing") at the offices of Testa, 
Hurwitz & Thibeault, LLP, 125 High Street, Boston, Massachusetts 
at 10:00 a.m. on the later of June 18, 1999 (assuming satisfaction 
of the conditions in Article IV by such date) or on the date that 
is five business days after satisfaction of the conditions in 
Article IV but before July 30, 1999 or at such other time or place 
as the Company and the Purchasers may agree in writing (such date 
and time being called the "Preferred Share and Warrant Closing 
Date").  If the Preferred Share and Warrant Closing has not 
occurred prior to July 30, 1999, this Agreement may be terminated 
by the Purchasers upon notice to the Company.  At the Preferred 
Share and Warrant Closing, the Company shall issue and deliver to 
each Purchaser a stock certificate or certificates, registered in 
the name of such Purchaser, representing the Preferred Shares 
being purchased by it at the Closing, and a Purchase Warrant or 
Purchase Warrants, registered in the name of such Purchaser, 
representing the number of Purchase Warrant Shares covered by the 
Purchase Warrants being purchased by it at the Preferred Share and 
Warrant Closing.  At the Preferred Share and Warrant Closing the 
Company will issue and deliver the stock certificate or 
certificates and Purchase Warrants as aforesaid against payment by 
each Purchaser of the full purchase price therefor (equal to the 
amount set forth opposite the name of such Purchaser under the 
heading "Aggregate Purchase Price for Preferred Shares and 
Purchase Warrants" on Exhibit 1.01) by (i) wire transfer of 
immediately available funds to an account designated by the 
Company, (ii) check payable to the order of the Company or its 
designees, or (iii) any combination of (i) and (ii) above.

   (c) Allocation of Purchase Price.  The Company and the 
Purchasers, having adverse interests and as a result of arm's 
length bargaining, agree that (i) neither the Purchasers nor any 
of their respective affiliates or associates have rendered or 
agreed to render any services to the Company in connection with 
this Agreement or the issuance of the Notes, Preferred Shares and 
Warrants; (ii) the Warrants are not being issued as compensation; 
and (iii) for federal income tax purposes, the fair market value 
of the Notes and the Note Warrants is $1,895,000 and $105,000, 
respectively.  Upon the issuance of the Preferred Shares and the 
Purchase Warrants, the parties agree to work in good faith to 
allocate the purchase price with respect to the Preferred Shares 
and the Purchase Warrants.

1.05  Payments and Endorsements.  Payments of principal, interest 
and premium, if any, on the Notes, shall be made directly by check 
duly mailed or delivered to the Purchaser at its address referred 
to in Exhibit 1.01 hereof, without any presentment or notation of 
payment, provided that prior to any transfer of any Note, the 
holder of record shall endorse on such Note a record of the date 
to which interest has been paid and all payments made on account 
of principal of such Note.  

1.06  Redemptions.

  (a) Optional Redemptions Without Premium.  Subject to Section 
1.12, the Company may redeem, without premium, the Notes in whole 
together with interest due.  

  (b)          Notice of Redemptions; Pro rata Redemptions.  
Notice of any optional redemptions pursuant to subsection 1.06(a) 
shall be given to all registered holders of the Notes at least ten 
(10) business days prior to the date of such redemption.  Each 
redemption of Notes pursuant to subsection 1.06(a) shall be made 
so that the Notes then held by each holder shall be redeemed in a 
principal amount which shall bear the same ratio to the total 
principal amount of Notes being redeemed as the principal amount 
of Notes then held by such holder bears to the aggregate principal 
amount of the Notes then outstanding.  

1.07  Payment on Non-Business Days.  Whenever any payment to be 
made shall be due on a Saturday, Sunday or a public holiday under 
the laws of the State of Ohio, such payment may be made on the 
next succeeding business day, and such extension of time shall in 
such case be included in the computation of payment of interest 
due.  

1.08  Registration, etc..  The Company shall maintain at its 
principal office a register of the Notes and shall record therein 
the names and addresses of the registered holders of the Notes, 
the address to which notices are to be sent and the address to 
which payments are to be made as designated by the registered 
holder if other than the address of the holder, and the 
particulars of all transfers, exchanges and replacements of Notes.  
No transfer of a Note shall be valid unless made on such register 
for the registered holder or his executors or administrators or 
his or their duly appointed attorney, upon surrender therefor for 
exchange as hereinafter provided, accompanied by an instrument in 
writing, in form and execution reasonably satisfactory to the 
Company.  Each Note issued hereunder, whether originally or upon 
transfer, exchange or replacement of a Note or Notes, shall be 
registered on the date of execution thereof by the Company and 
shall be dated the date to which interest has been paid on such 
Notes or Note.  The registered holder of a Note shall be that 
Person in whose name the Note has been so registered by the 
Company.  A registered holder shall be deemed the owner of a Note 
for all purposes of this Agreement and, subject to the provisions 
hereof, shall be entitled to the principal, premium, if any, and 
interest evidenced by such Note free from all equities or rights 
of setoff or counterclaim between the Company and the transferor 
of such registered holder or any previous registered holder of 
such Note.  

1.09  Transfer and Exchange of Notes.  The registered holder of 
any Note or Notes may, prior to maturity or prepayment thereof, 
surrender such Note or Notes at the principal office of the 
Company for transfer or exchange.  Within a reasonable time after 
notice to the Company from a registered holder of its intention to 
make such exchange and without expense (other than transfer taxes, 
if any) to such registered holder, the Company shall issue in 
exchange therefor another Note or Notes, in such denominations as 
requested by the registered holder, for the same aggregate 
principal amount as the unpaid principal amount of the Note or 
Notes so surrendered and having the same maturity and rate of 
interest, containing the same provisions and subject to the same 
terms and conditions as the Note or Notes so surrendered.  Each 
new Note shall be made payable to such Person or Persons, or 
registered assigns, as the registered holder of such surrendered 
Note or Notes may designate, and such transfer or exchange shall 
be made in such a manner that no gain or loss of principal or 
interest shall result therefrom.  

1.10  Replacement of Notes.  Upon receipt of evidence satisfactory 
to the Company of the loss, theft, destruction or mutilation of 
any Note and, if requested in the case of any such loss, theft or 
destruction, upon delivery of an indemnity bond or other agreement 
or security reasonably satisfactory to the Company, or, in the 
case of any such mutilation, upon surrender and cancellation of 
such Note, the Company will issue a new Note, of like tenor and 
amount and dated the date to which interest has been paid, in lieu 
of such lost, stolen, destroyed or mutilated Note; provided, 
however, if any Note of which a Purchaser is the registered holder 
is lost, stolen or destroyed, the affidavit of the registered 
holder setting forth the circumstances with respect to such loss, 
theft or destruction shall be accepted as satisfactory evidence 
thereof, and no indemnification bond or other security shall be 
required as a condition to the execution and delivery by the 
Company of a new Note in replacement of such lost, stolen or 
destroyed Note other than the registered holder's written 
agreement to indemnify the Company.  

          1.11  Subordination.  The indebtedness evidenced by the 
Notes and the rights and remedies of the Purchasers under this 
Agreement shall be subordinate and junior to (i) certain 
indebtedness of the Company to Provident Bank (the "Bank") in the 
manner and to the extent provided in the Subordination Agreement 
of even date herewith by and among the Bank, the Company and the 
Purchasers purchasing Notes hereunder, and (ii) Senior Debt.

1.12  Acceleration.  If, prior to July 30, 1999, the shareholders 
of the Company have not approved (i) the adoption of this 
Agreement and the transactions contemplated hereby as required by 
the Ohio Control Share Acquisition Act, the Articles of 
Incorporation and Code of Regulations of the Company and the rules 
of the Nasdaq National Market, and (ii) the amendment of the 
Company's Articles of Incorporation so that such Articles of 
Incorporation shall read as set forth in Exhibit 1.02 hereto, then 
(A) the entire amount of principal and interest which remains 
unpaid under the Notes shall become due and payable as of November 
28, 1999, (B) the Company shall immediately issue, for no 
additional consideration, to the holders of the Notes that number 
of shares of the Common Stock as is equal in the aggregate to ten 
percent (10%) of the aggregate number of issued and outstanding 
shares of Common Stock, on a fully diluted basis, as of such date, 
and (C) on December 31, 1999 and on the last day of each calendar 
month, if any amount of principal or interest under the Notes 
remains outstanding on such date, the Company shall issue, for no 
additional consideration, to the holders of the Notes that number 
of shares of the Common Stock as is equal to two percent (2%) of 
the aggregate number of issued and outstanding shares of Common 
Stock on a Fully Diluted basis, as of such date, up to a maximum 
of 19.9% of the Common Stock on a Fully Diluted basis.

                                 ARTICLE II

                REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          The Company represents and warrants to the Purchasers 
that, except as set forth in the Disclosure Schedule attached 
hereto (which Disclosure Schedule makes explicit reference to the 
particular representation or warranty as to which exception is 
taken, which in each case shall constitute the sole representation 
and warranty as to which such exception shall apply, unless it is 
reasonably evident to the Purchasers that an exception applies to 
one or more other representations or warranties) or as set forth 
in the Company SEC Reports (as defined below):

          2.01  Organization, Qualifications and Corporate Power.  

  (a)          The Company is a corporation duly incorporated, 
validly existing and in good standing under the laws of the State 
of Ohio and is duly licensed or qualified to transact business as 
a foreign corporation and is in good standing in each jurisdiction 
in which the nature of the business transacted by it or the 
character of the properties owned or leased by it requires such 
licensing or qualification.  The Company has the corporate power 
and authority to own and hold its properties and to carry on its 
business as now conducted and as proposed to be conducted, and 
subject to the approval of the shareholders of the Company as 
described herein, to execute, deliver and perform this Agreement, 
the Registration Rights Agreement with the Purchasers in the form 
attached as Exhibit 2.01 (the "Registration Rights Agreement" and 
together with this Agreement and any documents or agreements 
ancillary to this Agreement, the "Transaction Documents"), to 
issue, sell and deliver the Notes, the Preferred Shares, the 
Warrants, the Note Warrant Common Shares and the Warrant Shares, 
to perform the terms of the Notes and the Warrants and to issue 
and deliver the Note Warrant Common Shares and the shares of 
Common Stock issuable upon conversion of the Preferred Shares and 
Warrant Shares (the "Conversion Shares").

  (b)          Schedule 2.01 to the Disclosure Schedule contains a 
list of all subsidiaries of the Company.  Except for such 
subsidiaries, the Company does not (i) own of record or 
beneficially, directly or indirectly, (A) any shares of capital 
stock or securities convertible into capital stock of any other 
corporation or (B) any participating interest in any partnership, 
joint venture or other non-corporate business enterprise or (ii) 
control, directly or indirectly, any other entity.  Each of the 
subsidiaries is a corporation duly incorporated, validly existing 
and in good standing under the laws of its respective jurisdiction 
of incorporation and is duly licensed or qualified to transact 
business as a foreign corporation and is in good standing in each 
jurisdiction in which the nature of the business transacted by it 
or the character of the properties owned or leased by it requires 
such licensing or qualification.  Each of the subsidiaries has the 
corporate power and authority to own and hold its properties and 
to carry on its business as now conducted and as proposed to be 
conducted.  Except as set forth on Schedule 2.01(b) to the 
Disclosure Schedule, all of the outstanding shares of capital 
stock of each of the subsidiaries are owned beneficially and of 
record by the Company, one of its other subsidiaries, or any 
combination of the Company and/or one or more of its other 
subsidiaries, in each case free and clear of any liens, charges, 
restrictions, claims or encumbrances of any nature whatsoever; and 
there are no outstanding subscriptions, warrants, options, 
convertible securities, or other rights (contingent or other) 
pursuant to which any of the subsidiaries is or may become 
obligated to issue any shares of its capital stock to any person 
other than the Company or one of the other subsidiaries.  As used 
in Sections 2.06 through 2.09, 2.11 through 2.17, 2.21 and 2.22 
through 2.28 inclusive, the term "Company" shall mean the Company 
and each of the subsidiaries.

          2.02  Authorization of Agreements, Etc.  

  (a)          Subject to the approval of the shareholders of the 
Company as described herein, the execution and delivery by the 
Company of the Transaction Documents, the performance by the 
Company of its obligations thereunder, the issuance, sale and 
delivery of the Notes, the Preferred Shares, the Warrants, the 
Note Warrant Common Shares and the Warrant Shares, the performance 
by the Company of its obligations under the Notes and the 
Warrants, and the issuance and delivery of the Conversion Shares 
have been duly authorized by all requisite corporate action and 
will not violate any provision of law, any order of any court or 
other agency of government, the Articles of Incorporation of the 
Company, as amended (the "Charter") or the Code of Regulations of 
the Company, as amended, or any provision of any indenture, 
agreement or other instrument to which the Company, any of its 
subsidiaries or any of their respective properties or assets is 
bound, or conflict with, result in a breach of or constitute (with 
due notice or lapse of time or both) a default under any such 
indenture, agreement or other instrument, or result in the 
creation or imposition of any lien, charge, restriction, claim or 
encumbrance of any nature whatsoever upon any of the properties or 
assets of the Company or any of its subsidiaries.  

  (b)          The Note Warrant Common Shares and, subject to the 
approval of the shareholders of the Company as described herein, 
the Preferred Shares and Warrant Shares have been duly authorized 
and, when issued in accordance with this Agreement or the 
Warrants, as appropriate, will be validly issued, fully paid and 
nonassessable shares of Common Stock or Series A Convertible 
Preferred Stock, as the case may be, with no personal liability 
attaching to the ownership thereof and will be free and clear of 
all liens, charges, restrictions, claims and encumbrances imposed 
by or through the Company except as set forth in the Registration 
Rights Agreement.  The Warrants, when issued in accordance with 
this Agreement, will be free and clear of all liens, charges, 
restrictions, claims and encumbrances imposed by or through the 
Company except as set forth in the Warrants.  The Note Warrant 
Common Shares have been and the Warrant Shares will have been duly 
reserved for issuance upon exercise of the Warrants.  The 
Conversion Shares will have been duly reserved for issuance upon 
conversion of the Notes, Preferred Shares and Warrant Shares and, 
when so issued, will be duly authorized, validly issued, fully 
paid and nonassessable shares of Common Stock with no personal 
liability attaching to the ownership thereof and will be free and 
clear of all liens, charges, restrictions, claims and encumbrances 
imposed by or through the Company except as set forth in the 
Registration Rights Agreement.  Neither the issuance, sale or 
delivery of the Notes, Preferred Shares, Warrants, Note Warrant 
Common Shares or Warrant Shares nor the issuance or delivery of 
the Conversion Shares is subject to any preemptive right of 
shareholders of the Company or to any right of first refusal or 
other right in favor of any person.

          2.03  Validity.  Subject to the approval of the 
shareholders of the Company as described herein, this Agreement 
has been duly executed and delivered by the Company and 
constitutes the legal, valid and binding obligation of the 
Company, enforceable in accordance with its terms.  The Notes, 
Warrants and the remaining Transaction Documents, when executed 
and delivered in accordance with this Agreement, will constitute 
the legal, valid and binding obligations of the Company, 
enforceable in accordance with their respective terms. 

          2.04  Authorized Capital Stock.  Subject to the approval 
of the shareholders of the Company as described herein, the 
authorized capital stock of the Company as of the Preferred Share 
and Warrant Closing Date shall consist of (i) 5,000,000 shares of 
Preferred Stock, $.01 par value (the "Preferred Stock"), all of 
which shares have been designated Series A Convertible Preferred 
Stock, and (ii) 15,000,000 shares of Common Stock.  As of 
April 27, 1999, 6,055,269 shares of Common Stock will be validly 
issued and outstanding, fully paid and nonassessable with no 
personal liability attaching to the ownership thereof and no 
shares of Preferred Stock will have been issued.  Immediately 
prior to the Preferred Share and Warrant Closing, no shares of 
Preferred Stock will have been issued.  As of the date hereof, 
200,000 shares of Common Stock are held in treasury.  As of the 
date hereof, the holders of subscriptions, warrants, options, 
convertible securities, and other rights (contingent or other) to 
purchase or otherwise acquire equity securities of the Company, 
and the number of shares of Common Stock and the number of such 
subscriptions, warrants, options, convertible securities, and 
other such rights held by each, are as set forth in Schedule 2.04 
of the Disclosure Schedule.  The designations, powers, 
preferences, rights, qualifications, limitations and restrictions 
in respect of each class and series of authorized capital stock of 
the Company are as set forth in the Charter, a copy of which is 
attached as Exhibit 1.02, and all such designations, powers, 
preferences, rights, qualifications, limitations and restrictions 
are valid, binding and enforceable and in accordance with all 
applicable laws.  Except as set forth in the Schedule 2.04 of the 
Disclosure Schedule, (i) no subscription, warrant, option, 
convertible security, or other right (contingent or other) to 
purchase or otherwise acquire equity securities of the Company is 
authorized or outstanding and (ii) there is no commitment by the 
Company to issue shares, subscriptions, warrants, options, 
convertible securities, or other such rights or to distribute to 
holders of any of its equity securities any evidence of 
indebtedness or asset.  Except as provided for in the Charter or 
as set forth in Schedule 2.04 of the Disclosure Schedule, the 
Company has no obligation (contingent or other) to purchase, 
redeem or otherwise acquire any of its equity securities or any 
interest therein or to pay any dividend or make any other 
distribution in respect thereof.  Except as set forth on Schedule 
2.04 of the Disclosure Schedule to the best of the Company's 
knowledge there are no voting trusts or agreements, shareholders' 
agreements, pledge agreements, buy-sell agreements, rights of 
first refusal, preemptive rights or proxies relating to any 
securities of the Company or any of its subsidiaries (whether or 
not the Company or any of its subsidiaries is a party thereto).  
All of the outstanding securities of the Company were issued in 
compliance with all applicable Federal and state securities laws.  

          2.05  Company SEC Reports and Financial Statements. 

            (a)          The Company has made available to 
Purchasers true and complete copies of all periodic reports, 
statements and other documents that the Company has filed with the 
SEC under the Exchange Act since January 31, 1995, and the Form S-
B2 Registration Statement (File 33-77896C) and the Form S-1 
Registration Statement (File 33-98696) (the "Registration 
Statements") filed under the Securities Act (collectively, the 
"Company SEC Reports"), each in the form (including exhibits and 
any amendments thereto) required to be filed with the SEC.  As of 
their respective dates, each of the Company's SEC Reports (i) 
complied in all respects with all applicable requirements of the 
Securities Act and the Exchange Act, and the rules and regulations 
promulgated thereunder, respectively, (ii) were filed in a timely 
manner, and (iii) did not contain any untrue statement of a 
material fact or omit to state a material fact required to be 
stated therein or necessary in order to make the statements 
therein, in light of the circumstances under which they were made, 
not misleading.  None of the subsidiaries is required to file any 
forms, reports or other documents with the SEC.

                      (b)          Each of the audited 
consolidated financial statements of the Company (including any 
related notes and schedules thereto) included (or incorporated by 
reference) in its Quarterly Report on Form 10-QSB for the quarter 
ended October 31, 1998, its Annual Report on Form 10-KSB for the 
fiscal year ended January 31, 1999 (when filed) or the 
Registration Statement, is accurate and complete and fairly 
presents, in conformity with generally accepted accounting 
principles ("GAAP") applied on a consistent basis throughout the 
periods involved (except as may be noted therein), and in 
conformity with the SEC's regulations, the consolidated financial 
position of the Company and its consolidated subsidiaries as of 
its date and the consolidated results of operations and changes in 
financial position for the period then ended.

                      (c)          Except as and to the extent set 
forth (or incorporated by reference) in any Registration Statement 
or the Company's Quarterly Report on Form 10-QSB for the quarter 
ended October 31, 1998 (the "Balance Sheet Date"), none of  the 
Company or any of its subsidiaries has incurred any liability or 
obligation of any nature whatsoever (whether due or to become due, 
accrued, fixed, contingent, liquidated, unliquidated or otherwise) 
that would be required by GAAP to be accrued on, reflected on, or 
reserved against it, on a consolidated balance sheet (the "Balance 
Sheet") (or in the applicable notes thereto) of the Company or any 
of its subsidiaries prepared in accordance with GAAP consistently 
applied as of the date and for the period required.

          2.06  Events Subsequent to the Balance Sheet Date.  
Except as set forth on Schedule 2.06 of the Disclosure Schedule, 
since January 31, 1999, the Company has not (i) issued any stock, 
bond or other corporate security, (ii) borrowed any amount or 
incurred or become subject to any liability (absolute, accrued or 
contingent), except current liabilities incurred and liabilities 
under contracts entered into in the ordinary course of business, 
(iii) discharged or satisfied any lien or encumbrance or incurred 
or paid any obligation or liability (absolute, accrued or 
contingent) other than current liabilities shown on the Balance 
Sheet and current liabilities incurred since the Balance Sheet 
Date in the ordinary course of business, (iv) declared or made any 
payment or distribution to shareholders or purchased or redeemed 
any share of its capital stock or other security, (v) mortgaged, 
pledged, encumbered or subjected to lien any of its assets, 
tangible or intangible, other than liens of current real property 
taxes not yet due and payable, (vi) sold, assigned or transferred 
any of its tangible assets except in the ordinary course of 
business, or cancelled any debt or claim, (vii) sold, assigned, 
transferred or granted any exclusive license with respect to any 
patent, trademark, trade name, service mark, copyright, trade 
secret or other intangible asset, (viii) suffered any loss of 
property or waived any right of substantial value whether or not 
in the ordinary course of business, (ix) made any change in 
officer compensation except in the ordinary course of business and 
consistent with past practice, (x) made any material change in the 
manner of business or operations of the Company, (xi) entered into 
any transaction except in the ordinary course of business or as 
otherwise contemplated hereby or (xii) entered into any commitment 
(contingent or otherwise) to do any of the foregoing.  

          2.07  Litigation; Compliance with Law.  Except as set 
forth on Schedule 2.07 of the Disclosure Schedule, there is no 
(i) action, suit, claim, proceeding or investigation pending or, 
to the best of the Company's knowledge, threatened against or 
affecting the Company, at law or in equity, or before or by any 
Federal, state, municipal or other governmental department, com-
mission, board, bureau, agency or instrumentality, domestic or 
foreign, (ii) arbitration proceeding relating to the Company 
pending under collective bargaining agreements or otherwise or 
(iii) governmental inquiry pending or, to the best of the Com-
pany's knowledge, threatened against or affecting the Company 
(including without limitation any inquiry as to the qualification 
of the Company to hold or receive any license or permit), and 
there is no basis for any of the foregoing.  The Company has not 
received any opinion or memorandum or legal advice from legal 
counsel to the effect that it is exposed, from a legal standpoint, 
to any liability or disadvantage which may be material to its 
business, prospects, financial condition, operations, property or 
affairs.  The Company is not in default with respect to any order, 
writ, injunction or decree known to or served upon the Company of 
any court or of any Federal, state, municipal or other 
governmental department, commission, board, bureau, agency or 
instrumentality, domestic or foreign.  Except as set forth on 
Schedule 2.07 of the Disclosure Schedule, there is no action or 
suit by the Company pending, threatened or contemplated against 
others.  The Company has complied with all laws, rules, 
regulations and orders applicable to its business, operations, 
properties, assets, products and services, the Company has all 
necessary permits, licenses and other authorizations required to 
conduct its business as conducted and as proposed to be conducted, 
and the Company has been operating its business pursuant to and in 
compliance with the terms of all such permits, licenses and other 
authorizations.  There is no existing law, rule, regulation or 
order, and the Company after due inquiry is not aware of any 
proposed law, rule, regulation or order, whether Federal, state, 
county or local, which would prohibit or restrict the Company 
from, or otherwise materially adversely affect the Company in, 
conducting its business in any jurisdiction in which it is now 
conducting business or in which it proposes to conduct business.  

          2.08  Proprietary Information of Third Parties.  Except 
as set forth on Schedule 2.08 of the Disclosure Schedule, to the 
best of the Company's knowledge, no third party has claimed or has 
reason to claim that any person employed by or affiliated with the 
Company has (a) violated or may be violating any of the terms or 
conditions of his employment, non-competition or non-disclosure 
agreement with such third party, (b) disclosed or may be 
disclosing or utilized or may be utilizing any trade secret or 
proprietary information or documentation of such third party or 
(c) interfered or may be interfering in the employment relation-
ship between such third party and any of its present or former 
employees.  No third party has requested information from the 
Company which suggests that such a claim might be contemplated.  
To the best of the Company's knowledge, no person employed by or 
affiliated with the Company has employed or proposes to employ any 
trade secret or any information or documentation proprietary to 
any former employer, and to the best of the Company's knowledge, 
no person employed by or affiliated with the Company has violated 
any confidential relationship which such person may have had with 
any third party, in connection with the development, manufacture 
or sale of any product or proposed product or the development or 
sale of any service or proposed service of the Company, and the 
Company has no reason to believe there will be any such employment 
or violation.  To the best of the Company's knowledge, none of the 
execution or delivery of this Agreement, or the carrying on of the 
business of the Company as officers, employees or agents by any 
officer, director or key employee of the Company, or the conduct 
or proposed conduct of the business of the Company, will conflict 
with or result in a breach of the terms, conditions or provisions 
of or constitute a default under any contract, covenant or 
instrument under which any such person is obligated.  

          2.09  Patents, Trademarks, Etc.  Set forth in Schedule 
2.09 of the Disclosure Schedule is a list and brief description of 
all domestic and foreign patents, patent rights, patent 
applications, trademarks, trademark applications, service marks, 
service mark applications, trade names and copyrights, and all 
applications for such which are in the process of being prepared, 
owned by or registered in the name of the Company, or of which the 
Company is a licensor or licensee or in which the Company has any 
right, and in each case a brief description of the nature of such 
right.  The Company owns or possesses adequate licenses or other 
rights to use all patents, patent applications, trademarks, 
trademark applications, service marks, service mark applications, 
trade names, copyrights, manufacturing processes, formulae, trade 
secrets, customer lists and know how (collectively, "Intellectual 
Property") necessary or desirable to the conduct of its business 
as conducted and as proposed to be conducted, and no claim is 
pending or, to the best of the Company's knowledge, threatened to 
the effect that the operations of the Company infringe upon or 
conflict with the asserted rights of any other person under any 
Intellectual Property, and there is no basis for any such claim 
(whether or not pending or threatened).  No claim is pending or 
threatened to the effect that any such Intellectual Property owned 
or licensed by the Company, or which the Company otherwise has the 
right to use, is invalid or unenforceable by the Company, and 
there is no basis for any such claim (whether or not pending or 
threatened).  All prior art known to the Company which may be or 
may have been pertinent to the examination of any United States 
patent or patent application listed in Schedule 2.09 of the 
Disclosure Schedule has been cited to the United States Patent and 
Trademark Office.  To the best of the Company's knowledge, all 
technical information developed by and belonging to the Company 
which has not been patented has been kept confidential.  The 
Company has not granted or assigned to any other person or entity 
any right to manufacture, have manufactured, assemble or sell the 
products or proposed products or to provide the services or 
proposed services of the Company.  The Company is not aware that 
any other Person is using any of the Company's Intellectual 
Property without Company authorization.

          2.10  Title to Properties.  The Company and its sub-
sidiaries have good, clear and marketable title to their 
respective properties and assets reflected on the Balance Sheet or 
acquired by them since the Balance Sheet Date (other than 
properties and assets disposed of in the ordinary course of 
business since the Balance Sheet Date), and all such properties 
and assets are free and clear of mortgages, pledges, security 
interests, liens, charges, claims, restrictions and other 
encumbrances (including without limitation, easements and 
licenses), except for liens for or current taxes not yet due and 
payable and minor imperfections of title, if any, not material in 
nature or amount and not materially detracting from the value or 
impairing the use of the property subject thereto or impairing the 
operations or proposed operations of the Company and its 
subsidiaries, including without limitation, the ability of the 
Company and its subsidiaries to secure financing using such 
properties and assets as collateral.  To the best of the Company's 
knowledge after due inquiry, there are no condemnation, 
environmental, zoning or other land use regulation proceedings, 
either instituted or planned to be instituted, which would 
adversely affect the use or operation of the Company's and its 
subsidiaries' properties and assets for their respective intended 
uses and purposes, or the value of such properties, and neither 
the Company nor any subsidiary has received notice of any special 
assessment proceedings which would affect such properties and 
assets.

          2.11  Leasehold Interests.  Each lease or agreement to 
which the Company is a party under which it is a lessee of 
any property, real or personal, is a valid and subsisting 
agreement, duly authorized and entered into, without any default 
of the Company thereunder and, to the best of the Company's 
knowledge, without any default thereunder of any other party 
thereto.  No event has occurred and is continuing which, with due 
notice or lapse of time or both, would constitute a default or 
event of default by the Company under any such lease or agreement 
or, to the best of the Company's knowledge, by any other party 
thereto.  The Company's possession of such property has not been 
disturbed and, to the best of the Company's knowledge after due 
inquiry, no claim has been asserted against the Company adverse to 
its rights in such leasehold interests.  

          2.12  [Reserved]

          2.13  Taxes.  The Company has filed all tax returns, 
Federal, state, county and local, required to be filed by it, and 
the Company has paid all taxes shown to be due by such returns as 
well as all other taxes, assessments and governmental charges 
which have become due or payable, including without limitation all 
taxes which the Company is obligated to withhold from amounts 
owing to employees, creditors and third parties.  The Company has 
established adequate reserves for all taxes accrued but not yet 
payable.  All material tax elections of any type which the Company 
has made as of the date hereof are set forth in the financial 
statements referred to in Section 2.05.  The Federal income tax 
returns of the Company have never been audited by the Internal 
Revenue Service.  No deficiency assessment with respect to or 
proposed adjustment of the Company's Federal, state, county or 
local taxes is pending or, to the best of the Company's knowledge, 
threatened.  There is no tax lien (other than for current taxes 
not yet due and payable), whether imposed by any Federal, state, 
county or local taxing authority, outstanding against the assets, 
properties or business of the Company.  Neither the Company nor 
any of its present or former shareholders has ever filed an 
election pursuant to Section 1362 of the Internal Revenue Code of 
1986, as amended (the "Code"), that the Company be taxed as an S 
corporation.  As of the Note Closing Date and except as otherwise 
provided on Schedule 2.13 to the Disclosure Schedule, the 
Company's net operating losses for Federal income tax purposes, as 
set forth in the financial statements referred to in Section 2.05, 
are not subject to any limitations imposed by Section 382 of the 
Code and the full amount of such net operating losses are 
available to offset the taxable income of the Company for the 
current fiscal year and, to the extent not so used, succeeding 
fiscal years.  Consummation of the transactions contemplated by 
this Agreement or by any other agreement, understanding or 
commitment (contingent or otherwise) to which the Company is a 
party or by which it is otherwise bound will not have the effect 
of limiting the Company's ability to use such net operating losses 
in full to offset such taxable income, except to the extent that 
such use is limited as a result of any anti-dilution adjustments 
pursuant to the terms of the Series A Convertible Preferred Stock.

          2.14  Other Agreements.  The Company is not a party to 
or otherwise bound by any written or oral agreement, instrument, 
commitment or restriction which individually or, taking any 
related agreements, instruments, commitments or restrictions 
together, in the aggregate is material to or could materially 
adversely affect the business, prospects, financial condition, 
operations, property or affairs of the Company or any of the 
following which is material to or could materially adversely 
affect the business, prospects, financial condition, operations, 
property or affairs of the Company, whether written or oral:  

  (a)          distributor, dealer, manufacturer's representative 
or sales agency agreement which is not terminable on less than 
ninety (90) days' notice without cost or other liability to the 
Company (except for agreements which, in the aggregate, are not 
material to the business of the Company);  

  (b)          sales agreement which entitles any customer to a 
rebate or right of set-off, to return any product to the Company 
after acceptance thereof or to delay the acceptance thereof, or 
which varies in any material respect from the Company's standard 
form agreements;  

  (c)          agreement with any labor union (and, to the knowl-
edge of the Company, no organizational effort is being made with 
respect to any of its employees);  

  (d)          agreement with any supplier containing any 
provision permitting any party other than the Company to 
renegotiate the price or other terms, or containing any pay-back 
or other similar provision, upon the occurrence of a failure by 
the Company to meet its obligations under the agreement when due 
or the occurrence of any other event;  

  (e)          agreement for the future purchase of fixed assets 
or for the future purchase of materials, supplies or equipment in 
excess of its normal operating requirements;  

  (f)          agreement for the employment of any officer, 
employee or other person (whether of a legally binding nature or 
in the nature of informal understandings) on a full-time or 
consulting basis which is not terminable on notice without cost or 
other liability to the Company, except normal severance 
arrangements and accrued vacation pay;  

  (g)          bonus, pension, profit-sharing, retirement, hospi-
talization, insurance, stock purchase, stock option or other plan, 
agreement or understanding pursuant to which benefits are provided 
to any employee of the Company (other than an Employee Plan or 
group insurance plans which are not self-insured and are 
applicable to employees generally);  

  (h)          agreement relating to the borrowing of money or to 
the mortgaging or pledging of, or otherwise placing a lien or 
security interest on, any asset of the Company;  

  (i)          guaranty of any obligation for borrowed money or 
otherwise;  

  (j)          voting trust or agreement, shareholders' agreement, 
pledge agreement, buy-sell agreement or first refusal or pre-
emptive rights agreement relating to any securities of the 
Company;

  (k)          agreement, or group of related agreements with the 
same party or any group of affiliated parties, under which the 
Company has advanced or agreed to advance money or has agreed to 
lease any property as lessee or lessor;  

  (l)          agreement or obligation (contingent or otherwise) 
to issue, sell or otherwise distribute or to repurchase or 
otherwise acquire or retire any share of its capital stock or any 
of its other equity securities;  

  (m)          assignment, license or other agreement with respect 
to any form of intangible property;

  (n)          agreement under which it has granted any person any 
registration rights, other than the Registration Rights Agreement; 

  (o)          agreement under which it has limited or restricted 
its right to compete with any person in any respect;

  (p)          other agreement or group of related agreements with 
the same party involving more than $50,000 or continuing over a 
period of more than six months from the date or dates thereof 
(including renewals or extensions optional with another party), 
which agreement or group of agreements is not terminable by the 
Company without penalty upon notice of thirty (30) days or less, 
but excluding any agreement or group of agreements with a customer 
of the Company for the sale, lease or rental of the Company's 
products or services if such agreement or group of agreements was 
entered into by the Company in the ordinary course of business; or

  (q)          other agreement, instrument, commitment, plan or 
arrangement, a copy of which would be required to be filed with 
the Securities and Exchange Commission (the "Commission") as an 
exhibit to a registration statement on Form S-1 if the Company 
were registering securities under the Securities Act of 1933, as 
amended (the "Securities Act").  

The Company, and to the best of the Company's knowledge after due 
inquiry, each other party thereto have in all material respects 
performed all the obligations required to be performed by them to 
date (or each non-performing party has received a valid, 
enforceable and irrevocable written waiver with respect to its 
non-performance), have received no notice of default and are not 
in default (with due notice or lapse of time or both) under any 
agreement, instrument, commitment, plan or arrangement to which 
the Company is a party or by which it or its property may be 
bound.  The Company has no present expectation or intention of not 
fully performing all its obligations under each such agreement, 
instrument, commitment, plan or arrangement, and the Company has 
no knowledge of any breach or anticipated breach by the other 
party to any agreement, instrument, commitment, plan or 
arrangement to which the Company is a party.  The Company is in 
full compliance with all of the terms and provisions of its 
Charter and Code of Regulations, as amended.  

          2.15  Loans and Advances.  The Company does not have any 
outstanding loans or advances to any person and is not obligated 
to make any such loans or advances, except, in each case, for 
advances to employees of the Company in respect of reimbursable 
business expenses anticipated to be incurred by them in connection 
with their performance of services for the Company.

          2.16  Assumptions, Guaranties, Etc. of Indebtedness of 
Other Persons.  The Company has not assumed, guaranteed, endorsed 
or otherwise become directly or contingently liable on any 
indebtedness of any other person (including, without limitation, 
liability by way of agreement, contingent or otherwise, to 
purchase, to provide funds for payment, to supply funds to or 
otherwise invest in the debtor, or otherwise to assure the credi-
tor against loss), except for guaranties by endorsement of nego-
tiable instruments for deposit or collection in the ordinary 
course of business.

          2.17  Significant Customers and Suppliers.  No customer 
or supplier which was significant to the Company during the period 
covered by the financial statements referred to in Section 2.05 or 
which has been significant to the Company thereafter, has 
terminated, materially reduced or threatened to terminate or 
materially reduce its purchases from or provision of products or 
services to the Company, as the case may be.  

          2.18  Governmental Approvals.  Except for the filing of 
a Form 10b-17 with the Nasdaq Stock Market, subject to the accu-
racy of the representations and warranties of the Purchasers set 
forth in Article III, no registration or filing with, or consent 
or approval of or other action by, any Federal, state or other 
governmental agency or instrumentality is or will be necessary for 
the valid execution, delivery and performance by the Company of 
the Transaction Documents, the issuance, sale and delivery of the 
Notes, Preferred Shares, the Warrants, the Note Warrant Common 
Shares and the Warrant Shares, the performance by the Company of 
its obligations under the Notes, Warrants or, upon conversion of 
the Preferred Shares and the Warrant Shares, the issuance and 
delivery of the Conversion Shares, other than (i) filings pursuant 
to state securities laws (all of which filings have been made by 
the Company, other than those which are required to be made after 
the Preferred Share and Warrant Closing and which will be duly 
made on a timely basis) in connection with the sale of the Notes, 
Preferred Shares, the Warrants, the Note Warrant Common Shares and 
the Warrant Shares and (ii) with respect to the Registration 
Rights Agreement, the registration of the shares covered thereby 
with the Commission and filings pursuant to state securities laws.  

          2.19  Disclosure.  Neither this Agreement, nor any 
Schedule or Exhibit to this Agreement, nor any document furnished 
or made available to the Purchasers relating to this Agreement 
contains an untrue statement of a material fact or omits a 
material fact necessary to make the statements contained herein or 
therein not misleading.  None of the statements, documents, 
certificates or other items prepared or supplied by the Company 
with respect to the transactions contemplated hereby contains an 
untrue statement of a material fact or omits a material fact 
necessary to make the statements contained therein not misleading.  
There is no fact which the Company has not disclosed to the 
Purchasers and their counsel in writing and of which the Company 
is aware which materially and adversely affects or could 
materially and adversely affect the business, prospects, financial 
condition, operations, property or affairs of the Company or any 
of its subsidiaries.  The financial projections and other 
estimates contained in any documents furnished to the Purchasers 
were prepared by the Company based on the Company's experience in 
the industry and on assumptions of fact and opinion as to future 
events which the Company believed to be reasonable, but which the 
Company cannot and does not assure or guarantee the attainment of 
in any manner.  As of the date hereof no facts have come to the 
attention of the Company which would, in its opinion, require the 
Company to revise or amplify the assumptions underlying such 
projections and other estimates or the conclusions derived 
therefrom.  

          2.20  Offering of the Notes, Preferred Shares and 
Warrants.  Neither the Company nor any person authorized or 
employed by the Company as agent, broker, dealer or otherwise in 
connection with the offering or sale of the Notes, Preferred 
Shares and Warrants or any security of the Company similar to the 
Notes, Preferred Shares or Warrants has offered the Notes, 
Preferred Shares, Warrants or any such similar security for sale 
to, or solicited any offer to buy the Notes, Preferred Shares, 
Warrants or any such similar security from, or otherwise 
approached or negotiated with respect thereto with, any person or 
persons, and neither the Company nor any person acting on its 
behalf has taken or will take any other action (including, without 
limitation, any offer, issuance or sale of any security of the 
Company under circumstances which might require the integration of 
such security with the Notes, Preferred Shares or Warrants under 
the Securities Act or the rules and regulations of the Commission 
thereunder), in either case so as to subject the offering, 
issuance or sale of the Notes, Preferred Shares or Warrants to the 
registration provisions of the Securities Act.  

          2.21  Brokers.  Except for NatCity Investments, Inc., 
the fees of which are set forth on Schedule 2.21 to the Disclosure 
Schedule, the Company has no contract, arrangement or 
understanding with any broker, finder or similar agent with 
respect to the transactions contemplated by this Agreement.  

          2.22  Transactions With Affiliates.  Except as set forth 
on Schedule 2.22 of the Disclosure Schedule, no director, officer, 
employee or shareholder of the Company, or member of the family of 
any such person, or any corporation, partnership, trust or other 
entity in which any such person, or any member of the family of 
any such person, has a substantial interest or is an officer, 
director, trustee, partner or holder of more than 5% of the 
outstanding capital stock thereof, is a party to any transaction 
with the Company, including any contract, agreement or other 
arrangement providing for the employment of, furnishing of ser-
vices by, rental of real or personal property from or otherwise 
requiring payments to any such person or firm, other than 
employment-at-will arrangements in the ordinary course of business 
and for the payment by the Company of an amount in excess of 
$50,000 per annum.  

          2.23  Employees.  Each of the officers of the Company, 
each key employee and each other employee now employed by the 
Company who has access to confidential information of the Company 
has executed an Employee Nondisclosure and Developments Agreement 
substantially in the form of Exhibit 2.23A and Exhibit 2.23B 
(collectively, the "Employee Nondisclosure and Developments 
Agreements"), and such agreements are in full force and effect.  
No officer or key employee of the Company has advised the Company 
(orally or in writing) that he intends to terminate employment 
with the Company.  The Company has complied in all material 
respects with all applicable laws relating to the employment of 
labor, including provisions relating to wages, hours, equal 
opportunity, collective bargaining and the payment of Social 
Security and other taxes.

          2.24  U.S. Real Property Holding Corporation.  The 
Company is not now and has never been a "United States real prop-
erty holding corporation", as defined in Section 897(c)(2) of the 
Code and Section 1.897-2(b) of the Regulations promulgated by the 
Internal Revenue Service, and the Company has filed with the 
Internal Revenue Service all statements, if any, with its United 
States income tax returns which are required under Section 1.897-
2(h) of such Regulations.

          2.25  Environmental Protection.  The Company has not 
caused or allowed, or contracted with any party for, the 
generation, use, transportation, treatment, storage or disposal of 
any Hazardous Substances (as defined below) in connection with the 
operation of its business or otherwise.  The Company, the 
operation of its business, and any real property that the Company 
owns, leases or otherwise occupies or uses (the "Premises") are in 
compliance with all applicable Environmental Laws (as defined 
below) and orders or directives of any governmental authorities 
having jurisdiction under such Environmental Laws, including, 
without limitation, any Environmental Laws or orders or directives 
with respect to any cleanup or remediation of any release or 
threat of release of Hazardous Substances.  The Company has not 
received any citation, directive, letter or other communication, 
written or oral, or any notice of any proceeding, claim or 
lawsuit, from any person arising out of the ownership or 
occupation of the Premises, or the conduct of its operations, and 
the Company is not aware of any basis therefor.  The Company has 
obtained and is maintaining in full force and effect all necessary 
permits, licenses and approvals required by all Environmental Laws 
applicable to the Premises and the business operations conducted 
thereon (including operations conducted by tenants on the 
Premises), and is in compliance with all such permits, licenses 
and approvals.  The Company has not caused or allowed a release, 
or a threat of release, of any Hazardous Substance unto, at or 
near the Premises, and, to the best of the Company's knowledge, 
neither the Premises nor any property at or near the Premises has 
ever been subject to a release, or a threat of release, of any 
Hazardous Substance.  For the purposes of this Agreement, the term 
"Environmental Laws" shall mean any Federal, state or local law or 
ordinance or regulation pertaining to the protection of human 
health or the environment, including, without limitation, the 
Comprehensive Environmental Response, Compensation and Liability 
Act, 42 U.S.C. Sections 9601, et seq., the Emergency Planning and 
Community Right-to-Know Act, 42 U.S.C. Sections 11001, et seq., 
and the Resource Conservation and Recovery Act, 42 U.S.C. 
Sections 6901, et seq.  For purposes of this Agreement, the term 
"Hazardous Substances" shall include oil and petroleum products, 
asbestos, polychlorinated biphenyls, urea formaldehyde and any 
other materials classified as hazardous or toxic under any 
Environmental Laws.

          2.26  ERISA.

  (a)          Schedule 2.26 to the Disclosure Schedule lists and 
describes each Employee Plan that covers any employee of the 
Company.

  (b)          Schedule 2.26 to the Disclosure Schedule also 
includes a list of each Benefit Arrangement of the Company.

  (c)          No Employee Plan is a Multiemployer Plan and no 
Employee Plan is subject to Title IV of ERISA.  The Company and 
its Affiliates have not incurred, nor do they expect to incur, any 
liability under Title IV of ERISA arising in connection with the 
termination of any plan covered or previously covered by Title IV 
of ERISA.

  (d)          Except as set forth on Schedule 2.26 to the 
Disclosure Schedule, none of the Employee Plans or other 
arrangements listed on Schedule 2.26 to the Disclosure Schedule 
covers any non-United States employee or former employee of the 
Company.

  (e)          No "prohibited transaction," as defined in 
Section 406 of ERISA or Section 4975 of the Code, has occurred 
with respect to any Employee Plan.

  (f)          Except as set forth on Schedule 2.26 to the 
Disclosure Schedule, each Employee Plan which is intended to be 
qualified under Section 401(a) of the Code is so qualified and has 
been so qualified during the period from its adoption to date, and 
each trust forming a part thereof is exempt from tax pursuant to 
Section 501(a) of the Code.  Each Employee Plan has been 
maintained in compliance with its terms and with the requirements 
prescribed by any and all statutes, orders, rules and regulations, 
including but not limited to ERISA and the Code, which are 
applicable to such plan.

  (g)          Each Benefit Arrangement has been maintained in 
substantial compliance with its terms and with the requirements 
prescribed by any and all statutes, orders, rules and regulations 
which are applicable to such Employee Plan and Benefit 
Arrangement.

  (h)          All contributions and payments accrued under each 
Employee Plan and Benefit Arrangement, determined in accordance 
with prior funding and accrual practices, as adjusted to include 
proportional accruals for the period ending on the Note Closing 
Date and the period ending on the Preferred Share and Warrant 
Closing Date, will be discharged and paid on or prior to such date 
except to the extent reflected on the Balance Sheet.  Except as 
disclosed in writing to the Purchasers prior to the date hereof, 
there has been no amendment to, written interpretation of or 
announcement (whether or not written) by the Company or any of its 
ERISA Affiliates relating to, or change in employee participation 
or coverage under, any Employee Plan or Benefit Arrangement that 
would increase materially the expense of maintaining such Employee 
Plan or Benefit Arrangement above the level of the expense 
incurred in respect thereof for the fiscal year ended prior to the 
date hereof.

  (i)          There is no contract, agreement, plan or 
arrangement covering any employee or former employee of the 
Company that, individually or collectively, could give rise to the 
payment of any amount that would not be deductible pursuant to the 
terms of Section 280G of the Code.

  (j)          No tax under Section 4980B of the Code has been 
incurred in respect of any Employee Plan that is a group health 
plan, as defined in Section 5000(b)(1) of the Code.

  (k)          With respect to the employees and former employees 
of the Company, there are no employee post-retirement medical or 
health plans in effect, except as required by Section 4980B of the 
Code.

  (l)          No employee of the Company will become entitled to 
any bonus, retirement, severance or similar benefit or enhanced 
benefit solely as a result of the transactions contemplated 
hereby.

          2.27  Foreign Corrupt Practices Act.  The Company has 
not taken any action which would cause it to be in violation of 
the Foreign Corrupt Practices Act of 1977, as amended, or any 
rules and regulations thereunder.  To the best of the Company's 
knowledge after due inquiry, there is not now, and there has never 
been, any employment by the Company of, or beneficial ownership in 
the Company by, any governmental or political official in any 
country in the world.

          2.28  Federal Reserve Regulations.  The Company is not 
engaged in the business of extending credit for the purpose of 
purchasing or carrying margin securities (within the meaning of 
Regulation G of the Board of Governors of the Federal Reserve 
System), and no part of the proceeds of the Preferred Shares, 
Warrants, Note Warrant Common Shares or Warrant Shares will be 
used to purchase or carry any margin security or to extend credit 
to others for the purpose of purchasing or carrying any margin 
security or in any other manner which would involve a violation of 
any of the regulations of the Board of Governors of the Federal 
Reserve System.


                             ARTICLE III

                REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

          Each Purchaser severally represents and warrants to the 
Company that:  

  (a)          it is an "accredited investor" within the meaning 
of Rule 501 under the Securities Act and was not organized for the 
specific purpose of acquiring the Notes, Preferred Shares or 
Warrants;

  (b)          it has sufficient knowledge and experience in 
investing in companies similar to the Company in terms of the 
Company's stage of development so as to be able to evaluate the 
risks and merits of its investment in the Company and it is able 
financially to bear the risks thereof; 

  (c)          it has had an opportunity to discuss the Company's 
business, management and financial affairs with the Company's 
management and to review certain documents related to the Company;

  (d)          the Notes, Preferred Shares and Warrants being 
purchased by it are being acquired for its own account for the 
purpose of investment and not with a view to or for sale in 
connection with any distribution thereof; and

  (e)          it understands that (i) the Notes, Preferred 
Shares, Warrants, Warrant Shares and Conversion Shares have not 
been registered under the Securities Act by reason of their 
issuance in a transaction exempt from the registration 
requirements of the Securities Act pursuant to Section 4(2) 
thereof or Rule 505 or 506 promulgated under the Securities Act, 
(ii) the Notes, Preferred Shares, Warrants, the Note Warrant 
Common Shares, Warrant Shares and Conversion Shares must be held 
indefinitely unless a subsequent disposition thereof is registered 
under the Securities Act or is exempt from such registration, 
(iii) the Notes, Preferred Shares, Warrants, the Note Warrant 
Common Shares, Warrant Shares and Conversion Shares will bear a 
legend to such effect and (iv) the Company will make a notation on 
its transfer books to such effect.


                            ARTICLE IV

          CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS AND THE 
COMPANY

          4.01            Conditions to the Obligations of the 
Purchasers and the Company.  The obligation of each Purchaser to 
purchase and pay for the Preferred Shares and Warrants to be 
purchased by it at the Preferred Share and Warrant Closing, and 
the obligation of the Company to sell the Preferred Shares and 
Warrants at the Preferred Share and Warrant Closing, are subject 
to the satisfaction, on or before the Preferred Share and Warrant 
Closing Date, of the following condition:

                      (a)          Shareholder Approvals.  The 
Shareholders of the Company shall have approved (i) the adoption 
of this Agreement and the transactions contemplated hereby as 
required by the Ohio Control Share Acquisition Act, the Articles 
of Incorporation and Code of Regulations of the Company and the 
rules of the Nasdaq National Market, and (ii) the amendment of the 
Company's Articles of Incorporation so that such Articles of 
Incorporation shall read as set forth in Exhibit 1.02 hereto.

          4.02  Conditions to the Obligations of the Purchasers.  
The obligation of each Purchaser to purchase and pay for the Notes 
to be purchased by it at the Note Closing, and the obligation of 
each Purchaser to purchase and pay for the Preferred Shares and 
Purchase Warrants to be purchased by it at the Preferred Share and 
Warrant Closing, is in each case subject to the following 
conditions, any or all of which may be waived by the Purchasers:

  (a)          Representations and Warranties to be True and Cor-
rect.  The representations and warranties of the Company contained 
in Article II shall be true, complete and correct on and as of the 
Note Closing Date and the Preferred Share and Warrant Closing Date 
with the same effect as though such representations and warranties 
had been made on and as of such date, except to the extent such 
representations and warranties are by their express provisions 
made as of the date of this Agreement or another specified date, 
and the President and Treasurer of the Company shall have 
certified to such effect to the Purchasers in writing, on and as 
of each of the Note Closing Date and the Preferred Share and 
Warrant Closing Date.

  (b)          Performance.  The Company shall have performed and 
complied with all agreements contained herein required to be 
performed or complied with by it prior to or at the Note Closing 
Date and the Preferred Share and Warrant Closing Date, and the 
President and Treasurer of the Company shall have certified to the 
Purchasers in writing to such effect, on and as of each of the 
Note Closing Date and the Preferred Share and Warrant Purchase 
Date, and to the further effect that all of the conditions set 
forth in this Article IV have been satisfied as of such date.

  (c)          All Proceedings to be Satisfactory.  As of the Note 
Closing Date and the Preferred Share and Warrant Closing Date, all 
corporate and other proceedings to be taken by the Company in 
connection with the transactions contemplated hereby and all docu-
ments incident thereto shall be satisfactory in form and substance 
to the Purchasers and their counsel, and the Purchasers and their 
counsel shall have received all such counterpart originals or 
certified or other copies of such documents as they reasonably may 
request.

  (d)          Documentation at the Closings.  The Purchasers 
shall have received prior to or at (i) the Note Closing, and (ii)  
the Preferred Share and Warrant Closing, all of the following 
documents or instruments, or evidence of completion thereof, each 
in form and substance satisfactory to the Purchasers and their 
special counsel:

    (i)          At the Note Closing, an opinion of Dinsmore & 
Shohl LLP, counsel to the Company, dated the Note Closing Date, in 
form and scope satisfactory to the Purchasers and their counsel, 
substantially in the form attached hereto as Exhibit 4.02, and at 
the Preferred Share and Warrant Closing, an opinion of Dinsmore & 
Shohl LLP, counsel to the Company, dated the Preferred Share and 
Warrant Closing Date, in form and scope satisfactory to the 
Purchasers and their counsel.

    (ii)          (A) the Charter, certified as of a recent date 
by the Secretary of State of the State of Ohio, (B) a certificate 
of said Secretary dated as of a recent date as to the due 
incorporation and good standing of the Company, the payment of all 
excise taxes by the Company and listing all documents of the 
Company on file with said Secretary and (C) a certificate of the 
Secretary of State of the jurisdiction of incorporation of each of 
the Company's subsidiaries dated as of a recent date as to the due 
incorporation and good standing of such subsidiary;

    (iii)          a certificate of the Secretary or an Assistant 
Secretary of the Company dated, with respect to the Note Closing, 
the Note Closing Date, and with respect to the Preferred Share and 
Warrant Closing, the Preferred Share and Warrant Closing Date, and 
certifying:  (A) that attached thereto is a true and complete copy 
of the Code of Regulations of the Company as in effect on the date 
of such certification; (B) that attached thereto is a true and 
complete copy of all resolutions adopted by the Board of Directors 
or the shareholders of the Company authorizing the execution, 
delivery and performance of the Transaction Documents, the 
issuance, sale and delivery of the Notes, Preferred Shares and the 
Warrants, the performance of the Notes and Warrants, the 
reservation, issuance, sale and delivery of the Note Warrant 
Common Shares and the Warrant Shares and the reservation, issuance 
and delivery of the Conversion Shares, and that all such 
resolutions are in full force and effect and are all the 
resolutions adopted in connection with the transactions 
contemplated by the Transaction Documents; (C) that the Charter 
has not been amended since the date of the last amendment referred 
to in the certificate delivered pursuant to clause (i)(B) above; 
and (D) to the incumbency and specimen signature of each officer 
of the Company executing any of the Transaction Documents, the 
Notes, the Warrants or any of the stock certificates representing 
the Preferred Shares and any certificate or instrument furnished 
pursuant hereto, and a certification by another officer of the 
Company as to the incumbency and signature of the officer signing 
the certificate referred to in this clause (ii); and

    (iiii)          such additional supporting documents and other 
information with respect to the operations and affairs of the 
Company as the Purchasers or their counsel reasonably may request.

  (e)          Warrants.  With respect to the Preferred Share and 
Warrant Closing only, the Company shall have executed and 
delivered the Warrants.

  (f)          Registration Rights Agreement.  With respect to the 
Note Closing only, the Company shall have executed and delivered 
the Registration Rights Agreement.

  (g)          Charter.  With respect to the Preferred Share and 
Warrant Closing only, the Charter shall read in its entirety as 
set forth in Exhibit 1.02.

  (h)          Election of Directors.  With respect to the 
Preferred Share and Warrant Closing only, Edward L. Cahill and the 
second Purchaser Director, if designated as of such date, shall 
have been elected as Purchaser Directors pursuant to Section 5.09 
hereof and shall hold such positions as of the Preferred Share and 
Warrant Closing Date.

  (i)          Preemptive Rights.  With respect to the Note 
Closing only, all shareholders of the Company having any 
preemptive, first refusal or other rights with respect to the 
issuance of the Notes shall have irrevocably waived the same in 
writing.  With respect to the Preferred Share and Warrant Closing 
only, all shareholders of the Company having any preemptive, first 
refusal or other rights with respect to the issuance of the 
Preferred Shares, the Warrants, the Note Warrant Common Shares, 
the Warrant Shares or the Conversion Shares shall have irrevocably 
waived the same in writing.

  (j)          Fees of Purchasers' Counsel.  The Company shall 
have paid in accordance with Section 8.01 the fees and 
disbursements of Purchasers' counsel invoiced at each of the Note 
Closing and the Preferred Share and Warrant Closing.  

  (k)          Consents.  The Company shall have received the 
written consent of the Bank to the transactions contemplated 
hereby.

  (l)          Proxies.  With respect to the Note Closing only, 
each shareholder listed on Exhibit 4.02A shall have validly 
executed and delivered a proxy in the form attached hereto as 
Exhibit 4.02B.

  (m)          Bank Agreement.  The Company shall have entered 
into a, and there shall be no event of default existing with 
respect to such, definitive term loan agreement with a financial 
institution providing for the conversion of the Company's current 
indebtedness to the Bank of approximately $3.1 million into a 
revolving credit facility to the Company of no less than 
$2.25 million maturing no earlier than February 1, 2000.

  (n)          No Event of Default.  With respect to the Preferred 
Share and Warrant Closing only, there shall be no Event of Default 
existing.

  (o)          Shareholder Approvals.  With respect to the 
Preferred Share and Warrant Closing only, the shareholders of the 
Company shall have approved (i) the adoption of this Agreement and 
the transactions contemplated hereby as required by the Ohio 
Control Share Acquisition Act, the Articles of Incorporation and 
Code of Regulations of the Company and the rules of the Nasdaq 
National Market, and (ii) the amendment of the Company's Articles 
of Incorporation so that such Articles of Incorporation shall read 
as set forth in Exhibit 1.02 hereto.

All such documents shall be satisfactory in form and substance to 
the Purchasers and their counsel.


                             ARTICLE V

                     COVENANTS OF THE COMPANY

          The Company covenants and agrees with each of the 
Purchasers that:

5.01  Information.  Commencing on the Note Closing Date and 
continuing so long as any Notes, Preferred Shares, Warrant Shares, 
Note Warrant Common Shares or Conversion Shares remain outstanding 
(or such earlier time as provided below), the Company shall 
deliver to the Purchasers the information specified in this 
Section 5.01 unless (i) any such Purchaser at any time 
specifically requests that such information not be delivered to 
it, or (ii) any such Purchaser has assigned its interest in any 
Notes, Preferred Shares, Warrant Shares or Conversion Shares to a 
third party, in which case the Company shall deliver to such 
assignee the information specified in this Section 5.01 so long as 
such assignee, if not an Affiliate of a Purchaser, has executed a 
mutually acceptable agreement to maintain the confidentiality of 
the information so long as such information is not, or has not 
been, made available to the general public:

  (a)  Annual Financial Statements.  As soon as available, but in 
any event within one hundred twenty (120) days after the end of 
each fiscal year of the Company, a copy of the audited 
consolidated balance sheets of the Company and its subsidiaries as 
at the end of such fiscal year and the related audited 
consolidated statements of operations, shareholders' equity and 
cash flows of the Company and its subsidiaries for such fiscal 
year, all in reasonable detail and stating in comparative form the 
figures as at the end of and for the immediately preceding fiscal 
year, accompanied (in the case of the audited consolidated 
financial statements) by an opinion of an accounting firm of 
recognized national standing selected by the Company, which 
opinion shall state that such accounting firm's audit was 
conducted in accordance with generally accepted auditing 
standards.  All such financial statements shall be prepared in 
accordance with GAAP applied on a consistent basis throughout the 
periods reflected therein except as stated therein.

  (b)  Quarterly Financial Statements.  As soon as available, but 
in any event not later than forty-five (45) days after the end of 
each quarterly fiscal period (other than the last quarterly fiscal 
period in any fiscal year of the Company), the unaudited 
consolidated balance sheet of the Company and its subsidiaries as 
at the end of each such period and the related unaudited 
consolidated statements of income and cash flows of the Company 
and its subsidiaries for such period and for the elapsed period in 
such fiscal year, all in reasonable detail and stating in 
comparative form (i) the figures as of the end of and for the 
comparable periods of the preceding fiscal year and (ii) the 
figures reflected in the operating budget (if any) for such period 
as specified in the financial plan of the Company.  All such 
financial statements shall be prepared in accordance with GAAP 
applied on a consistent basis throughout the periods reflected 
therein except as stated therein.

  (c) Monthly Financial Statements.  Within thirty (30) days after 
the end of each month in each fiscal year (other than the last 
month in each fiscal year) a consolidated balance sheet of the 
Company and its subsidiaries, if any, and the related consolidated 
statements of income, shareholders' equity and cash flows, 
unaudited but prepared in accordance with generally accepted 
accounting principles and certified by the Chief Financial Officer 
of the Company, such consolidated balance sheet to be as of the 
end of such month and such consolidated statements of income, 
shareholders' equity and cash flows to be for such month and for 
the period from the beginning of the fiscal year to the end of 
such month, in each case with comparative statements for the prior 
fiscal year.

  (d) Material Litigation.  Within twenty (20) days after the 
Company learns of the commencement or written threat of 
commencement of any litigation or proceeding against the Company 
or any of its subsidiaries or any of their respective assets that 
could reasonably be expected to have a material effect, written 
notice of the nature and extent of such litigation or proceeding.

  (e) Material Agreements.  Within five (5) days after the 
expiration of the applicable cure period, if any, or if no such 
cure period exists within five (5) days after the receipt by the 
Company of written notice of a default by the Company or any of 
its subsidiaries under any material contract, agreement or 
document to which it is a party or by which it is bound, written 
notice of the nature and extent of such default.

  (f) Other Reports and Statements.  Promptly upon any 
distribution to its shareholders generally, to its directors or to 
the financial community of an annual report, quarterly report, 
proxy statement, registration statement or other similar report or 
communication, a copy of each such annual report, quarterly 
report, proxy statement, registration statement or other similar 
report or communication and promptly upon filing by the Company 
with the SEC or with The Nasdaq Stock Market, the National 
Association of Securities Dealers, Inc. or any national securities 
exchange or other market system of all regular and other reports 
or applications, a copy of each such report or application; and a 
copy of such report or statement and copies of all press releases 
and other statements made available generally by the Company to 
the public concerning material developments in the Company.

  (g) Accountants' Management Letters, Etc.  Promptly after 
receipt by the Company, copies of all accountants' management 
letters and all management and board responses to such letters, 
and copies of all certificates as to compliance, defaults, 
material adverse changes, material litigation or similar matters 
relating to the Company and its subsidiaries, which shall be 
prepared by the Company or its officers and delivered to the third 
parties.

  (h) Annual Budget.  Not later than the beginning of each fiscal 
year of the Company, a copy of a consolidated operating budget of 
the Company and its subsidiaries prepared by the Company for such 
fiscal year, which shall include at minimum a projected balance 
sheet and a projected statement of operations and cash flows for 
each month in such fiscal year.

  (i) Notices to Senior Lenders.  Copies of all notices, reports, 
certificates and other information furnished to the holders of 
Senior Debt or to any agent or representative to such holders, in 
each case promptly after the same are so furnished.

  (j) Other.  Promptly, from time to time, such other information 
regarding the business, prospects, financial condition, oper-
ations, property or affairs of the Company and its subsidiaries as 
such Purchaser reasonably may request.  

          5.02  Reserve for Conversion Shares and Warrant Shares.  
The Company shall at all times reserve and keep available out of 
its authorized but unissued shares of Common Stock, for the 
purpose of effecting the exercise of the Note Warrants and the 
conversion of the Preferred Shares and Warrant Shares and 
otherwise complying with the terms of this Agreement, such number 
of its duly authorized shares of Common Stock as shall be 
sufficient to effect the exercise of the Note Warrants and the 
conversion of the Preferred Shares from time to time outstanding 
and the Warrant Shares from time to time outstanding and issuable 
upon exercise of the Warrants, or otherwise to comply with the 
terms of this Agreement.  The Company shall at all times reserve 
and keep available out of its authorized but unissued shares of 
Series A Convertible Preferred Stock, for the purpose of effecting 
the exercise of the Warrants and otherwise complying with the 
terms of this Agreement, such number of its duly authorized shares 
of Series A Convertible Preferred Stock as shall be sufficient to 
effect the exercise of the Warrants from time to time outstanding, 
or otherwise to comply with the terms of this Agreement.  If at 
any time the number of authorized but unissued shares of Common 
Stock or Series A Convertible Preferred Stock shall not be 
sufficient to effect the exercise of the Note Warrants and the 
conversion of the Preferred Shares and Warrant Shares (assuming 
the exercise of all outstanding Warrants) or the exercise of the 
Warrants, as the case may be, or otherwise to comply with the 
terms of this Agreement, the Company will forthwith take such 
corporate action as may be necessary to increase its authorized 
but unissued shares of Common Stock or Series A Convertible 
Preferred Stock, as the case may be, to such number of shares as 
shall be sufficient for such purposes.  The Company will obtain 
any authorization, consent, approval or other action by or make 
any filing with any court or administrative body that may be 
required under applicable state securities laws in connection with 
the issuance of shares of Common Stock upon conversion of the 
Preferred Shares and Warrant Shares and shares of Series A 
Convertible Preferred Stock or Common Stock upon exercise of the 
Warrants.

          5.03  Restrictive Agreements Prohibited.  Neither the 
Company nor any of its subsidiaries shall become a party to any 
agreement which by its terms restricts the Company's performance 
of any of the Transaction Documents, the Notes, the Warrants or 
the Charter.  

          5.04  Use of Proceeds.  The Company shall use the 
proceeds from the sale of the Notes, Preferred Shares and Warrants 
solely to fund the continued market penetration of ChartMaxx and 
OptiMaxx and for working capital.  Without the prior written 
consent of the Purchasers, the Company shall not use more than an 
aggregate of $750,000 of the proceeds from the sale of the Notes, 
Preferred Shares and Warrants to finance the operations of any 
subsidiary of the Company.

          5.05  Activities of Subsidiaries.  The Company will not 
organize or acquire any entity that is a subsidiary unless such 
subsidiary is wholly-owned (directly or indirectly) by the 
Company.  The Company shall not permit any subsidiary to 
consolidate or merge into or with or sell or transfer all or 
substantially all its assets, except that any subsidiary may 
(i) consolidate or merge into or with or sell or transfer assets 
to any other subsidiary, or (ii) merge into or sell or transfer 
assets to the Company.  Without the prior written consent of the 
Purchasers, the Company shall not sell or otherwise transfer any 
shares of capital stock of any subsidiary, except to the Company 
or another subsidiary, or permit any subsidiary to issue, sell or 
otherwise transfer any shares of its capital stock or the capital 
stock of any subsidiary, except to the Company or another 
subsidiary, provided that DiaLogos Incorporated may issue and sell 
shares of its capital stock to existing shareholders of DiaLogos 
Incorporated and pursuant to the DiaLogos Incorporated 1999 Long 
Term Stock Incentive Plan so long as the ownership interest of the 
Company in DiaLogos Incorporated does not go below 58.5% on a 
fully diluted basis.  The Company shall not permit any subsidiary 
to purchase or set aside any sums for the purchase of, or pay any 
dividend or make any distribution on, any shares of its stock, 
except for dividends or other distributions payable to the Company 
or another subsidiary.  

          5.06  U.S. Real Property Interest Statement.  The 
Company shall provide prompt written notice to each Purchaser 
following any "determination date" (as defined in Treasury 
Regulation Section 1.897-2(c)(i)) on which the Company becomes a 
United States real property holding corporation.  In addition, 
upon a written request by any Purchaser, the Company shall provide 
such Purchaser with a written statement informing the Purchaser 
whether such Purchaser's interest in the Company constitutes a 
U.S. real property interest.  The Company's determination shall 
comply with the requirements of Treasury Regulation Section 1.897-
2(h)(1) or any successor regulation, and the Company shall provide 
timely notice to the Internal Revenue Service, in accordance with 
and to the extent required by Treasury Regulation Section 1.897-
2(h)(2) or any successor regulation, that such statement has been 
made.  The Company's written statement to any Purchaser shall be 
delivered to such Purchaser within ten (10) days of such 
Purchaser's written request therefor.  The Company's obligation to 
furnish a written statement pursuant to this Section 5.06 shall 
continue notwithstanding the fact that a class of the Company's 
stock may be regularly traded on an established securities market.

          5.07  International Investment Survey Act of 1976.  The 
Company shall use its best efforts to file on a timely basis all 
reports required of it under 22 U.S.C. Section 3104, or any 
similar statute, relating to a foreign person's direct or indirect 
investment in the Company.  

          5.08  Consolidation, Merger of Disposition of Assets.  
The Company will not consolidate with or merge with any other 
person or convey, transfer or lease substantially all of its 
assets in a single transaction or series of transactions to any 
person unless the Company shall have paid all outstanding 
principal and interest on the Notes and all interest that would 
have been due and payable on the Note had they been held to 
maturity.  The Company shall provide each holder of a Notes with 
written notice of such payment at least 30 business days in 
advance of any proposed transaction.

5.09  Election of Directors

  (a) Board of Directors.  The Company shall be governed by a 
Board of Directors consisting, as of the date hereof, of six 
members (each a "Director").  Without the consent of the Purchaser 
Directors (as hereinafter defined), the number of Directors 
constituting the full Board of Directors shall not be increased 
beyond nine; without the consent of the Company Directors (as 
hereinafter defined), the number of Directors constituting the 
full Board of Directors shall not be reduced below five.  Regular 
meetings of the Board shall be held at least four times per year, 
on a quarterly basis.

  (b) Nomination and Election of Directors.

    (i) The Purchasers shall have the right to nominate two 
Directors (each, a "Purchaser Director").

    (ii) The Company agrees that it shall cause the Board of 
Directors in office immediately prior to the Preferred Share and 
Warrant Closing to increase the size of the Board of Directors by 
two, and to elect the nominees designated by the Purchasers as 
Directors, to serve as Directors until their respective successors 
are elected and qualified.  The Board of Directors (other than the 
Purchaser Directors) shall have the right to nominate the 
directors other than the Purchaser Directors (each a "Company 
Director"), to serve until their respective successors are elected 
and qualified.  The initial Company Directors shall be the 
incumbent Board of Directors as of the date of the Preferred Share 
and Warrant Closing.  The initial Purchaser Directors shall be 
Edward L. Cahill and an individual to be designated after the date 
hereof by the Purchasers, subject to the approval of the Company, 
which approval shall not be unreasonably withheld or delayed.

  (c) Vacancy.  If any vacancy occurs in the Board of Directors 
because of the death, disability, resignation, retirement or 
removal of a Purchaser Director, then the Purchasers shall 
nominate a successor, and the Board of Directors shall vote to 
elect such successor to the Board, or if a vote of the 
shareholders of the Company is held, the Board of Directors shall 
recommend to the shareholders that such successor be elected to 
the Board of Directors.  If any vacancy occurs in the Board of 
Directors because of the death, disability, resignation, 
retirement or removal of a Company Director, then the Company 
Directors shall either (i) nominate a successor, and the Board of 
Directors shall vote to elect such successor to the board, or if a 
vote of the shareholders of the Company is held, the Board of 
Directors shall recommend to the shareholders that such successor 
be elected to the Board of Directors, or (ii) decide expressly not 
to fill such vacancy at such time.

          5.10  No Merger, Consolidation, etc.  The Company hereby 
agrees that between the date hereof and the Preferred Share and 
Warrant Closing Date, it shall not, and it shall not enter into a 
binding obligation or definitive agreement to, merge or 
consolidate the Company with another person, or sell, transfer or 
convey all or substantially all of the assets of the Company to 
another person.

          5.11  Opinion Regarding Subsidiaries.  The Company 
hereby agrees that it shall cause an opinion of Dinsmore & Shohl 
LLP, counsel to the Company, to be delivered to the Purchasers to 
the effect that all the outstanding shares of capital stock of 
each of the Company's subsidiaries have been duly authorized and 
are validly issued.

          5.12  Termination of Covenants.  The covenants set forth 
in Sections 5.06 and 5.07 shall terminate and be of no further 
force or effect as to each of the Purchasers when such Purchaser 
no longer holds any shares of capital stock or rights to acquire 
capital stock of the Company.  The covenant set forth in Section 
5.10 shall terminate and be of no further force or effect on the 
Preferred Share and Warrant Closing Date.  All of the other 
covenants set forth in this Article V shall terminate and be of no 
further force or effect as to each of the Purchasers when such 
Purchaser owns (i) no Notes, and (ii) less than 10% of the 
Preferred Shares which (A) such Purchaser purchased at the 
Preferred Share and Warrant Closing and (B) had the right to 
purchase pursuant to the Warrants (in each case, appropriately 
adjusted to reflect stock splits, stock dividends, combinations of 
shares and the like with respect to the Series A Convertible 
Preferred Stock).

                             ARTICLE VI

                          EVENTS OF DEFAULT

          6.01.  Events of Default.  If any of the following 
events ("Events of Default") shall occur and be continuing:  

                      (a)          The Company shall fail to pay 
any installment of principal of any of the Notes when due; or 

                      (b)          The Company shall fail to pay 
any interest or premium on any of the Notes when due and such 
failure shall continue for five (5) business days; or 

                      (c)          Any representation or warranty 
made by the Company in this Agreement or by the Company (or any 
officers of the Company) in any certificate, instrument or written 
statement contemplated by or made or delivered pursuant to or in 
connection with this Agreement, shall prove to have been incorrect 
when made in any material respect; or 

                      (d)          The Company, or any subsidiary 
shall fail to perform or observe any other term, covenant or 
agreement contained in this Agreement, the Notes, the Preferred 
Shares or the Warrants on its part to be performed or observed and 
any such failure remains unremedied for ten (10) business days 
after written notice thereof shall have been given to the Company 
by any registered holder thereof; or 

                      (e)          The Company or any subsidiary 
shall fail to pay any Indebtedness for borrowed money (other than 
as evidenced by the Notes) owing by the Company or such subsidiary 
(as the case may be), or any interest or premium thereon, when due 
(or, if permitted by the terms of the relevant document, within 
any applicable grace period), whether such Indebtedness shall 
become due by scheduled maturity, by required prepayment, by 
acceleration, by demand or otherwise, or shall fail to perform any 
term, covenant or agreement on its part to be performed under any 
agreement or instrument (other than this Agreement or the Notes) 
evidencing or securing or relating to any Indebtedness owing by 
the Company or any subsidiary, as the case may be, when required 
to be performed (or, if permitted by the terms of the relevant 
document, within any applicable grace period), if the effect of 
such failure to pay or perform is to accelerate, or to permit the 
holder or holders of such Indebtedness, or the trustee or trustees 
under any such agreement or instrument to accelerate, the maturity 
of such Indebtedness, unless such failure to pay or perform shall 
be waived by the holder or holders of such Indebtedness or such 
trustee or trustees; or 

                      (f)          The Company or any subsidiary 
shall be involved in financial difficulties as evidenced (i) by 
its admitting in writing its inability to pay its debts generally 
as they become due; (ii) by its commencement of a voluntary case 
under Title 11 of the United States Code as from time to time in 
effect, or by its authorizing, by appropriate proceedings of its 
Board of Directors or other governing body, the commencement of 
such a voluntary case; (iii) by its filing an answer or other 
pleading admitting or failing to deny the material allegations of 
a petition filed against it commencing an involuntary case under 
said Title 11, or seeking, consenting to or acquiescing in the 
relief therein provided, or by its failing to controvert timely 
the material allegations of any such petition; (iv) by the entry 
of an order for relief in any involuntary case commenced under 
said Title 11; (v) by its seeking relief as a debtor under any 
applicable law, other than said Title 11, of any jurisdiction 
relating to the liquidation or reorganization of debtors or to the 
modification or alteration of the rights of creditors, or by its 
consenting to or acquiescing in such relief; (vi) by the entry of 
an order by a court of competent jurisdiction (a) finding it to be 
bankrupt or insolvent, (b) ordering or approving its liquidation, 
reorganization or any modification or alteration of the rights of 
its creditors, or (c) assuming custody of, or appointing a 
receiver or other custodian for, all or a substantial part of its 
property; or (vii) by its making an assignment for the benefit of, 
or entering into a composition with, its creditors, or appointing 
or consenting to the appointment of a receiver or other custodian 
for all or a substantial part of its property; or 

                      (g)          Any judgment, writ, warrant of 
attachment or execution or similar process shall be issued or 
levied against a substantial part of the property of the Company 
or any subsidiary and such judgment, writ, or similar process 
shall not be released, vacated or fully bonded within sixty (60) 
days after its issue or levy; 

then, and in any such event, the Purchaser or any other holder of 
the Notes may, by notice to the Company, declare the entire unpaid 
principal amount of the Notes, all interest accrued and unpaid 
thereon and all other amounts payable under this Agreement to be 
forthwith due and payable, whereupon the Notes, all such accrued 
interest and all such amounts shall become and be forthwith due 
and payable (unless there shall have occurred an Event of Default 
under subsection 6.01(g) in which case all such amounts shall 
automatically become due and payable), without presentment, 
demand, protest or further notice of any kind, all of which are 
hereby expressly waived by the Company.

          6.02.  Annulment of Defaults.  Section 6.01 is subject 
to the condition that, if at any time after the principal of any 
of the Notes shall have become due and payable, and before any 
judgment or decree for the payment of the moneys so due, or any 
thereof, shall have been entered, all arrears of interest upon all 
the Notes and all other sums payable under the Notes and under 
this Agreement (except the principal of the Notes which by such 
declaration shall have become payable) shall have been duly paid, 
and every other default and Event of Default shall have been made 
good or cured, then and in every such case the holders of seventy-
five percent (75%) or more in principal amount of all Notes then 
outstanding may, by written instrument filed with the Company, 
rescind and annul such declaration and its consequences; but no 
such rescission or annulment shall extend to or affect any 
subsequent default or Event of Default or impair any right 
consequent thereon. 


                               ARTICLE VII

                    COVENANTS OF THE MANAGING SHAREHOLDER

          7.01  Tag-Along Rights.  For the purposes of this 
Section 7.01 only, the term "Shares" shall mean and include all 
voting securities of the Company now owned or hereafter acquired 
by either (i) the Managing Shareholder or (ii) the Purchasers 
prior to the termination of this Article VII.

                      (a)          The Managing Shareholder agrees 
that if he (a "Selling Shareholder") proposes to sell or transfer 
any of his Shares (the "Tag-Along Securities"), and the amount of 
such Tag-Along Securities together with all other Shares sold by 
Managing Shareholder after the date hereof exceeds 597,201, then 
such Selling Shareholder shall provide written notice (the "Tag-
Along Offer Notice") of such intent to the Purchasers in the 
manner set forth in this Section 7.01 (the date of receipt of such 
notice being the "Tag-Along Notice Date").  The Tag-Along Offer 
Notice shall identify the proposed transferee(s) (the "Tag-Along 
Purchaser"), the number of Tag-Along Securities proposed to be 
purchased by the Tag-Along Purchaser, the Tag-Along Ratio (as 
defined in Section 7.01(b)(i)), the consideration offered per Tag-
Along Security (the "Tag-Along Offer Price") and any other 
material terms and conditions of the proposed transfer (the 
"Tag-Along Offer") and, in the case of a Tag-Along Offer in which 
the Tag-Along Offer Price consists in part or in whole of 
consideration other than cash, such information relating to such 
consideration as the Purchasers may reasonably request in order to 
evaluate such non-cash consideration.  The Purchasers shall have 
the right, exercisable as set forth below, to accept the Tag-Along 
Offer to sell for up to the number of Shares determined pursuant 
to Section 7.01(b).  The Tag-Along Offer Price paid to any 
Purchaser shall be not less than the highest price paid per Tag-
Along Security to any Selling Shareholder, which shall include any 
payments to such Selling Shareholder for an agreement not to 
compete or any consulting or other similar fees payable to such 
Selling Shareholder (other than fees for actually anticipated 
future services).  Any Purchaser that wishes to accept the 
Tag-Along Offer shall, within 30 days after the Tag-Along Notice 
Date (the "Tag-Along Notice Period"), provide the Selling 
Shareholder with written notice (a "Tag-Along Acceptance Notice") 
specifying the number of Shares that the Purchaser wishes to sell, 
and shall simultaneously provide a copy of such Tag-Along 
Acceptance Notice to the Company.

          Not less than ten days prior to the proposed date of any 
sale pursuant to a Tag-Along Offer (the "Transfer Date"), which 
date may not be earlier than 20 days after the termination of the 
Tag-Along Notice Period, the Selling Shareholder shall notify the 
Company and the Purchasers of the Transfer Date.  Not less than 
three days prior to the Transfer Date, the participating 
Purchasers shall deliver to the Company in escrow (pending the 
consummation of the sale pursuant to the Tag-Along Offer) their 
duly endorsed certificates representing the Shares to be 
transferred by the participating Purchasers pursuant to the 
Tag-Along Offer, together with all other documents reasonably 
required by the Company and/or the Tag-Along Purchaser to be 
executed in connection with the sale of such Tag-Along Securities 
pursuant to the terms of the Tag-Along Offer; provided, that each 
participating Purchaser shall, as a condition to the sale of the 
Tag-Along Securities, have the right to receive all documentation 
(the "Transfer Documentation") from the Selling Shareholder 
relating to the sale of the Tag-Along Securities at least ten days 
prior to the consummation of such sale.  Any material change in 
the terms of the Tag-Along Offer (whether or not reflected in the 
Transfer Documentation) will require the submission of a new Tag-
Along Offer Notice and the recommencement of compliance with all 
of the other applicable provisions of this Section 7.01.

                      (b)          (i)          The Purchasers 
shall have the right to sell (and the Selling Shareholder shall 
reduce the number of its shares to be sold by a corresponding 
amount), pursuant to the Tag-Along Offer, a number of shares equal 
to the product of the total number of Tag-Along Securities offered 
to be purchased by the Tag-Along Purchaser as set forth in such 
Tag-Along Offer multiplied by a fraction (the "Tag-Along Ratio"), 
the numerator of which shall be the aggregate number of Shares 
owned by such Purchaser and the denominator of which shall be the 
aggregate number of Shares owned at that time by the Selling 
Shareholder and the participating Purchasers.

                                  (ii)          In no event may 
the Purchasers sell more than the total number of Shares specified 
in such Purchasers' Tag-Along Notice applicable to the relevant 
Tag-Along Offer.  If, at the termination of the Tag-Along Notice 
Period, any Purchaser shall not have accepted the Tag-Along Offer, 
the Purchaser will be deemed to have waived any and all of its 
rights under this Section 7.01 with respect to the sale of any of 
its Shares pursuant to such Tag-Along Offer.

                      (c)          The Selling Shareholder shall 
have 60 days from the conclusion of the Tag-Along Notice Period in 
which to consummate the sale contemplated by the Tag-Along Offer 
to the Tag-Along Purchaser at the price and on the terms contained 
in the Tag-Along Offer Notice.  If, at the end of such 60-day 
period, the Selling Shareholder has not completed the sale 
contemplated by the Tag-Along Offer Notice, the right of the 
Selling Shareholder to effect such sale shall terminate, and the 
Tag-Along Securities subject to such proposed sale shall again be 
subject to all the restrictions on sale or other disposition and 
other provisions contained in this Agreement.

                      (d)          Immediately after the 
consummation of the sale of the Tag-Along Securities pursuant to 
the Tag-Along Offer, the Selling Shareholder shall notify the 
participating Purchasers and the Company thereof, shall remit to 
each of the participating Purchasers their portion of the total 
sales price specified in the Tag-Along Offer Notice, and shall 
furnish such other evidence of such sale (including the time of 
completion) and the terms thereof as may be reasonably requested 
by the Purchasers.  The Company shall, upon being notified of the 
consummation of such sale, return to each participating Purchaser 
a new stock certificate, as the case may be, for the balance of 
the Shares not sold as part of the Tag-Along Securities, in 
accordance with each Purchasers instructions.

                      (e)          Notwithstanding anything 
contained in this Section 7.01, there shall be no liability on the 
part of a Selling Shareholder to any Purchaser if the sale of the 
Tag-Along Securities is not consummated for whatever reason.

                      (f)          No Purchaser shall be required 
to make any representation or warranty in connection with the Tag-
Along Offer other than as to such Purchaser's ownership and 
authority to sell, free of liens, claims and encumbrances, the 
Shares proposed to be sold by it.

          7.02  Termination.  The covenants set forth in this 
Article VII shall terminate and be of no further force or effect 
as to each Purchaser when such Purchaser no longer holds at least 
10% of the aggregate principal amount of the Notes, 10% of the 
Preferred Shares, 10% of the Warrant Shares or 10% of the 
Conversion Shares issuable thereon, purchased hereby.

                             ARTICLE VIII

                            MISCELLANEOUS

          8.01  Expenses.  Each party hereto will pay its own 
expenses in connection with the transactions contemplated hereby, 
whether or not such transactions shall be consummated, provided, 
however, that the Company shall pay the fees and disbursements of 
the Purchasers' special counsel, Testa, Hurwitz & Thibeault, LLP, 
up to a maximum of $75,000, in connection with such transactions 
and any subsequent amendment, waiver, consent or enforcement 
thereof. 

          8.02  Survival of Agreements.  All covenants, agree-
ments, representations and warranties made in any of the 
Transaction Documents or in the Notes or the Warrants or any 
certificate or instrument delivered to the Purchasers pursuant to 
or in connection with any of the Transaction Documents or the 
Notes or the Warrants, shall survive the execution and delivery of 
all of the Transaction Documents, the Notes and the Warrants, the 
issuance, sale and delivery of the Notes, Preferred Shares, the 
Warrants and the Warrant Shares, and the issuance and delivery of 
the Conversion Shares, and all statements contained in any 
certificate or other instrument delivered by the Company hereunder 
or thereunder or in connection herewith or therewith shall be 
deemed to constitute representations and warranties made by the 
Company.  

          8.03  Brokerage.  Each party hereto will indemnify and 
hold harmless the others against and in respect of any claim for 
brokerage or other commissions relative to this Agreement or to 
the transactions contemplated hereby, based in any way on 
agreements, arrangements or understandings made or claimed to have 
been made by such party with any third party.  

          8.04  Parties in Interest.  All representations, 
covenants and agreements contained in this Agreement by or on 
behalf of any of the parties hereto shall bind and inure to the 
benefit of the respective successors and assigns of the parties 
hereto whether so expressed or not.  Without limiting the gener-
ality of the foregoing, all representations, covenants and agree-
ments benefiting the Purchasers shall inure to the benefit of any 
and all subsequent holders from time to time of Preferred Shares, 
Warrants, Warrant Shares or Conversion Shares.  

          8.05  Notices.  All notices, requests, consents and 
other communications hereunder shall be in writing and shall be 
delivered in person, mailed by certified or registered mail, 
return receipt requested, or sent by telecopier or telex, 
addressed as follows: 

  (a)          if to the Company, at 8805 Governors Hill Drive, 
Suite 100, Cincinnati, Ohio 45249, Attention:  General Counsel, 
with a copy to Dinsmore & Shohl LLP, 255 Fifth Street, Suite 1900, 
Cincinnati, Ohio  45202, Attention:  Charles F. Hertlein, Jr., 
Esq.; and 

  (b)          if to any Purchaser, at the address of such Pur-
chaser set forth in Exhibit 1.01, with a copy to Testa, Hurwitz & 
Thibeault, LLP, 125 High Street, Boston, Massachusetts 02110, 
Attention:  Leslie E. Davis, Esq.; and 

  (c)          if to the Managing Shareholder, at 8805 Governors 
Hill Drive, Suite 100, Cincinnati, Ohio 45249, with a copy to 
Dinsmore & Shohl LLP, 255 Fifth Street, Suite 1900, Cincinnati, 
Ohio  45202, Attention: Charles F. Hertlein, Jr., Esq.;

or, in any such case, at such other address or addresses as shall 
have been furnished in writing by such party to the others.  

          8.06  Governing Law.  This Agreement shall be governed 
by and construed in accordance with the laws of the State of Ohio.

          8.07  Entire Agreement.  This Agreement, including the 
Schedules and Exhibits hereto, constitutes the sole and entire 
agreement of the parties with respect to the subject matter 
hereof.  All Schedules and Exhibits hereto are hereby incorporated 
herein by reference.

          8.08  Counterparts.  This Agreement may be executed in 
two or more counterparts, each of which shall be deemed an 
original, but all of which together shall constitute one and the 
same instrument.  

          8.09  Amendments.  This Agreement may not be amended or 
modified, and no provisions hereof may be waived, without the 
written consent of the Company and the holders of at least two-
thirds of the outstanding shares of Common Stock issued or issu-
able upon conversion of the Preferred Shares and Warrant Shares, 
taken as a group, and, with respect to Article VII only, with the 
consent of the Managing Shareholder.

          8.10  Severability.  If any provision of this Agreement 
shall be declared void or unenforceable by any judicial or 
administrative authority, the validity of any other provision and 
of the entire Agreement shall not be affected thereby.

          8.11  Titles and Subtitles.  The titles and subtitles 
used in this Agreement are for convenience only and are not to be 
considered in construing or interpreting any term or provision of 
this Agreement.

          8.12  Indemnification.  

  (a)  The Company agrees to indemnify and hold harmless the 
Purchasers and their affiliates, and their respective partners, 
co-investors, officers, directors, employees, agents, consultants, 
attorneys and advisers (each, an "Indemnified Party"), from and 
against any and all actual losses, claims, damages, liabilities, 
costs and expenses (including, without limitation, environmental 
liabilities, costs and expenses and all reasonable fees, expenses 
and disbursements of counsel), joint or several (hereinafter 
collectively referred to as a "Loss"), which may be incurred by or 
asserted or awarded against any Indemnified Party in connection 
with or in any manner arising out of or relating to any 
investigation, litigation or proceeding or the preparation of any 
defense with respect thereto, arising out of or in connection with 
or relating to this Agreement, the other Transaction Documents or 
the transactions contemplated hereby or thereby or any use made by 
the Company or proposal to be made by the Company with the 
proceeds of the Purchasers' purchase of the Notes, Preferred 
Shares, Warrant Shares and Conversion Shares pursuant to this 
Agreement, whether or not such investigation, litigation or 
proceeding is brought by the Company, any of its subsidiaries, 
shareholders or creditors, an Indemnified Party or any other 
person, whether or not any of the transactions contemplated by 
this Agreement or the other Transaction Documents are consummated, 
except to the extent such Loss is found in a final judgment by a 
court of competent jurisdiction to have resulted from such 
Indemnified Party's gross negligence or willful misconduct.  The 
Company agrees that no Indemnified Party shall have any liability 
(whether direct or indirect, in contract, tort or otherwise) to 
the Company or any of its subsidiaries, shareholders or creditors 
for or in connection with the transactions contemplated hereby, 
except to the extent such liability is found in a final judgment 
by a court of competent jurisdiction to have resulted from such 
Indemnified Party's gross negligence or willful misconduct but in 
no event shall an Indemnified Party be liable for punitive, 
exemplary or consequential damages.

  (b)  An Indemnified Party shall give written notice to the 
Company of any claim with respect to which it seeks 
indemnification promptly (but in no event later than within thirty 
(30) days) after the discovery by such parties of any matters 
giving arise to a claim for indemnification pursuant to Section 
8.12(a); provided that the failure of any Indemnified Party to 
give notice as provided herein shall not relieve the Company of 
its obligations under this Section 8.12, except to the extent that 
the Company is actually prejudiced by such failure to give notice.  
In case any such action or claim is brought against any 
Indemnified Party, the Company shall be entitled to participate in 
and, unless in the judgment of the Indemnified Party a conflict of 
interest between such Indemnified Party and the Company may exist 
in respect of such action or claim, to assume the defense thereof, 
with counsel reasonably satisfactory to the Indemnified Party and 
after notice from the Company to the Indemnified Party of its 
election so to assume the defense thereof.  If the Company elects 
in writing to assume the defense of such action or claim, and does 
so assume the defense of any such action or claim, the Company 
shall not be liable to such Indemnified Party for any legal or 
other expenses subsequently incurred by the latter in connection 
with the defense thereof other than reasonable costs of 
investigation.  In any event, unless and until the Company elects 
in writing to assume and does so assume the defense of any such 
action or claim the Indemnified Party's reasonable costs and 
expenses arising out of the defense, settlement or compromise of 
any such action or claim shall be Losses subject to 
indemnification hereunder.  If the Company elects to defend any 
such action or claim, then the Indemnified Party shall be entitled 
to participate in such defense with counsel of its choice at its 
sole cost and expense.  The Company shall not be liable for any 
settlement of any action or claim effected without its written 
consent.  Anything in this Section 8.12 to the contrary 
notwithstanding, the Company shall not, without the Indemnified 
Party's prior written consent, settle or compromise any claim or 
consent to entry of any judgment in respect thereof that imposes 
any future obligation on the Indemnified Party or that does not 
include, as an unconditional term thereof, the giving by the 
claimant or the plaintiff to the Indemnified Party, a release from 
all liability in respect of such claim.

8.13  Remedies Cumulative.  No remedy conferred in this Agreement 
or the other Transaction Documents is intended to be exclusive of 
any other remedy and each and every such remedy shall be 
cumulative and shall be in addition to every other remedy given 
hereunder or now or hereafter existing at law or in equity or 
otherwise.

8.14  Remedies Not Waived.  No course of dealing between the 
Company and any Purchaser and no delay or failure in exercising 
any rights hereunder or under any other Transaction Document shall 
operate as a waiver of any of the rights of any Purchaser.

          8.15  Certain Defined Terms.  As used in this Agreement, 
the following terms shall have the following meanings (such 
meanings to be equally applicable to both the singular and plural 
forms of the terms defined):  

  (a)          "Affiliate" shall mean, with respect to any person, 
(i) any person directly or indirectly controlling, controlled by, 
or under common control with such person, (ii) if such person is a 
partnership, any limited or general partner of such person, or any 
limited or general partner of a partner of such person, (iii) if 
such person is a limited liability company, any manager or member 
of such limited liability company, and (iv) any combination of any 
of the foregoing.

  (b)          "Benefit Arrangement" means each employment, 
severance or other similar contract, arrangement or policy 
(written or oral) and each plan or arrangement (written or oral) 
providing for severance benefits, insurance coverage (including 
any self-insured arrangements), workers' compensation, disability 
benefits, supplemental unemployment benefits, vacation benefits, 
retirement benefits or for deferred compensation, profit-sharing, 
bonuses, stock options, stock appreciation rights or other forms 
of incentive compensation or post-retirement insurance, 
compensation or benefits which (i) is not an Employee Plan and 
(ii) covers any employee or former employee of the Company.

  (c)          "Employee Plan" means each "employee benefit plan," 
as such term is defined in Section 3(3) of ERISA, that (A)(i) is 
subject to any provision of ERISA and (ii) is maintained or 
contributed to by the Company, or (B)(i) is subject to any 
provision of Title IV of ERISA and (ii) is maintained or 
contributed to by any of the Company's ERISA Affiliates.

  (d)          "ERISA" means the Employee Retirement Income 
Security Act of 1974, as amended.

  (e)          "ERISA Affiliate" of any entity means any other 
entity that, together with such entity, would be treated as a 
single employer under Section 414 of the Code.

  (f)          "Fully Diluted" shall mean including all 
outstanding options, warrants and securities exchangeable for or 
convertible into shares of Common Stock, and all commitments of 
the Company to issue any of the foregoing.

  (g)          "Lien" means mortgage, deed of trust, pledge, lien, 
security interest or other charge or encumbrance (including the 
lien or retained security title of a conditional vendor) of any 
nature.

  (h)          "Managing Shareholder" shall mean Richard A. 
Mahoney.

  (i)          "Multiemployer Plan" means each Employee Plan that 
is a multiemployer plan, as defined in Section 3(37) of ERISA.

  (j)          "person" shall mean an individual, corporation, 
trust, partnership, joint venture, unincorporated organization, 
government agency or any agency or political subdivision thereof, 
or other entity.

  (k)          "Senior Debt" means (i) all indebtedness of the 
Company for money borrowed from banks or institutional lenders, 
including any extensions, renewals, replacements or refinancings 
thereof, whether outstanding on the date hereof or hereafter 
created or incurred, which is not by its terms subordinate and 
junior to the Notes and which is disclosed in the Company SEC 
Reports or is permitted by this Agreement at the time it is 
created or incurred and (ii) all indebtedness of the Company for 
money borrowed and incurred to replace or refinance any of the 
indebtedness referred to in item (i) above, where the security 
securing such indebtedness is substantially the same security as 
that securing the indebtedness being refinanced.

(l)          "subsidiary" shall mean, as to the Company, any 
corporation of which more than 50% of the outstanding stock having 
ordinary voting power to elect a majority of the Board of 
Directors of such corporation (irrespective of whether or not at 
the time stock of any other class or classes of such corporation 
shall have or might have voting power by reason of the happening 
of any contingency) is at the time directly or indirectly owned by 
the Company, or by one or more of its subsidiaries, or by the 
Company and one or more of its subsidiaries.  



          IN WITNESS WHEREOF, the Company and the Purchasers have 
executed this Agreement as of the day and year first above 
written.  

                                             MEDPLUS, INC.



                                             By:__________________          

[Corporate Seal]                             Title:_______________

Attest:


___________________          
General Counsel


PURCHASERS:

CAHILL, WARNOCK STRATEGIC PARTNERS
   FUND, L.P.

By:          CAHILL, WARNOCK STRATEGIC PARTNERS, L.P.,
   its General Partner

By:_____________________

Title:__________________


STRATEGIC ASSOCIATES, L.P.

By:          CAHILL, WARNOCK & COMPANY, LLC,
   its General Partner

By:______________________

Title:___________________


DOUBLE BLACK DIAMOND II, LLC

By:_______________________

Title:____________________


MANAGING SHAREHOLDER:
(For the purposes of Articles VII and VIII only)

_____________________
Richard A. Mahoney


EXHIBIT 1.01

Purchasers
<TABLE><CAPTION>
                                                                                       Aggregate
                                                                                       Purchase Price
                                                                                       for Preferred
                            Amount of         Number of          Number of             Shares and
Name and Address            Notes             Preferred Shares   Preferred Shares      Purchase
of Purchaser                to be Purchased   to be Purchased    to be Purchased       Warrants
__________________________  ________________  _________________  ____________________  _______________
<S>                          <C>                   <C>                <C>              <C>
Cahill Warnock               $  1,895,000          2,192,494          703,995          $3,790,019.63
Strategic Partners, L.P.
c/o Cahill, Warnock
& Company, LLC
One South Street,
Suite 2150
Baltimore, MD  21202
Attn:  Edward L. Cahill          
                                          
Strategic Associates, L.P.        105,000            121,484           39,008             210,001.37
c/o Cahill, Warnock
& Company, LLC
One South Street,
Suite 2150
Baltimore, MD  21202
Attn:  Edward L. Cahill          
                                        
Double Black Diamond, II LLC            0             57,837           16,559              99,979.00
50 California
Street, Suite 3200
San Francisco, CA 94111
Attn:  Thomas G.McKinley       
                            ________________  _________________  ____________________  _______________    
             Total           $  2,000,000          2,371,815          759,562          $4,100,000.00

</TABLE>