EXHIBIT 10.51

                          SECURITIES PURCHASE AGREEMENT


     THIS  SECURITIES  PURCHASE  AGREEMENT,  dated as of  November 5, 1999 (this
"Agreement"),  by and between  Compositech  Ltd., a Delaware  corporation,  with
principal executive offices located at 120 Ricefield Lane,  Hauppauge,  New York
11788 (the "Company"), and The Shaar Fund Ltd. ("Buyer").

     WHEREAS,  Buyer  desires to  purchase  from the  Company,  and the  Company
desires to issue and sell to Buyer, upon the terms and subject to the conditions
of this  Agreement,  (i) 54,000 shares of the Company's  Series C 8% Convertible
Preferred  Stock,  par  value  $0.01  per share  (collectively,  the  "Preferred
Shares"), and (ii) Common Stock Purchase Warrants in the form attached hereto as
Exhibit  A to  purchase  75,000  shares  of  Common  Stock  (as  defined  below)
(collectively, the "Warrants");

     WHEREAS,  upon the terms and subject to the  designations,  preferences and
rights set forth in the  Company's  Certificate  of  Designation  of Series C 8%
Convertible  Preferred  Stock in the form  attached  hereto  as  Exhibit  B (the
"Certificate of Designation"),  the Preferred Shares are convertible into shares
of the Company's  common stock,  par value $0.01 per share (the "Common Stock");
and

     WHEREAS,  the  Warrants,  upon the  terms  and  subject  to the  conditions
specified in the Warrants, will be exercisable for a period of five years

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
contained  herein,  the parties  hereto,  intending to be legally bound,  hereby
agree as follows:

              I. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS

     A. Transaction.  Buyer hereby agrees to purchase from the Company,  and the
Company  has  offered  and  hereby  agrees  to  issue  and  sell to  Buyer  in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities  Act of 1933, as amended (the  "Securities  Act"),  the Preferred
Shares and the Warrants.

     B.  Purchase  Price;  Form of  Payment.  The total  purchase  price for the
Preferred  Shares and the Warrants to be purchased by Buyer  hereunder  shall be
$540,000 (the  "Purchase  Price").  Subject to the terms and  conditions of this
Agreement and those certain Escrow Instructions of even date herewith, a copy of
which is attached hereto as Exhibit C (the "Escrow  Instructions"),  Buyer shall
pay to the  Company  $540,000  minus the  deductions  as set forth in the Escrow
Instructions  (the  "Purchase  Price") at the date and time of the  issuance and
sale by the Company of the Preferred  Shares and the Warrants (the "Closing") by
wire transfer of  immediately  available  funds to the escrow agent (the "Escrow
Agent") identified in the Escrow Instructions. Simultaneously with the execution
of this  Agreement,  the  Company  shall  deliver  to the  Escrow  Agent  or its
designated  depository  one  or  more  duly  authorized,   issued  and  executed

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certificates (I/N/O Buyer or, if the Company otherwise has been notified,  I/N/O
Buyer's nominee) evidencing the Preferred Shares and the Warrants.  By executing
and  delivering  this  Agreement,  Buyer and the Company  each hereby  agrees to
observe the terms and  conditions of the Escrow  Instructions,  all of which are
incorporated herein by reference as if fully set forth herein.

     C. Method of Payment.  Payment into escrow of the  Purchase  Price shall be
made by wire transfer of immediately available funds to:

                  The Bank of New York
                  48 Wall Street
                  New York, NY  10038
                  ABA No.:                     021000018
                  For the Account of:          Cadwalader, Wickersham & Taft
                                               Trust Account IOLA Fund
                  Account No.:                 0902061070

               II. BUYER'S REPRESENTATIONS, WARRANTIES; ACCESS TO
                     INFORMATION; INDEPENDENT INVESTIGATION

     Buyer  represents and warrants to and covenants and agrees with the Company
as follows:

     A. Buyer is purchasing the Preferred Shares, the Warrants, the Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares"), the Common Stock,
if any,  issuable in payment of dividends on the Preferred Shares (the "Dividend
Shares"),  and the Common Stock  issuable  upon  conversion or redemption of the
Preferred Shares (the "Conversion  Shares" and,  collectively with the Preferred
Shares,  the  Warrants,   the  Warrant  Shares  and  the  Dividend  Shares,  the
"Securities") for its own account,  for investment  purposes only and not with a
view towards or in connection  with the public sale or  distribution  thereof in
violation of the Securities Act.

     B. Buyer is (i) an "accredited  investor" within the meaning of Rule 501 of
Regulation D under the Securities Act, (ii) experienced in making investments of
the kind  contemplated  by this  Agreement,  (iii)  capable,  by  reason  of its
business and financial  experience,  of evaluating the relative merits and risks
of an  investment  in the  Securities,  and (iv) able to afford  the loss of its
investment in the Securities.

     C. Buyer  understands that the Securities are being offered and sold by the
Company in reliance on an exemption from the  registration  requirements  of the
Securities Act and equivalent state securities and "blue sky" laws, and that the
Company is relying upon the accuracy of, and Buyer's  compliance  with,  Buyer's
representations,  warranties  and  covenants  set  forth  in this  Agreement  to
determine the  availability  of such  exemption and the  eligibility of Buyer to
purchase the Securities;



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<PAGE>

     D.  Buyer  understands  that  the  Securities  have not  been  approved  or
disapproved by the Securities and Exchange  Commission (the "Commission") or any
state securities commission.

     E.  This  Agreement  has been duly and  validly  authorized,  executed  and
delivered  by Buyer and is a valid and binding  agreement  of Buyer  enforceable
against it in  accordance  with its terms,  subject  to  applicable  bankruptcy,
insolvency, fraudulent conveyance,  reorganization,  moratorium and similar laws
affecting  creditors'  rights  and  remedies  generally  and except as rights to
indemnity and contribution may be limited by federal or state securities laws or
the public policy underlying such laws.

     F. Neither Buyer nor its  affiliates  nor any person acting on its or their
behalf has the intention of entering,  or will enter into, prior to the closing,
any put option,  short  position or other  similar  instrument  or position with
respect to the Common Stock and neither Buyer nor any of its  affiliates nor any
person acting on its or their behalf will use at any time shares of Common Stock
acquired pursuant to this Agreement to settle any put option,  short position or
other  similar  instrument  or position that may have been entered into prior to
the execution of this Agreement.

III. THE COMPANY'S REPRESENTATIONS

     The Company represents and warrants to Buyer that:

     A. Capitalization.

          1. The  authorized  capital  stock of the Company  consists  solely of
     54,714,161  shares of capital stock: (i) 50,000,000 shares of Common Stock,
     of which  16,711,056  shares are issued and outstanding on the date hereof;
     (ii) 714,161  shares of Series A  Convertible  Preferred  Stock,  $3.00 par
     value per share,  of which 442,662 shares are issued and outstanding on the
     date hereof;  (iii) 220 shares of 7% Series B Convertible  Preferred Stock,
     $0.01 par value per share,  stated  value  $10,000  per share,  of which no
     shares are issued and  outstanding on the date hereof;  (iv) 200,000 shares
     of Series C  Convertible  Preferred  Stock,  $0.01 par value per share,  of
     which no shares are  issued and  outstanding  on the date  hereof;  and (v)
     3,799,780  shares of undesignated  preferred  stock, of which no shares are
     issued and outstanding.  As of the date hereof, the Company has outstanding
     stock options to purchase  1,981,879 shares of Common Stock and warrants to
     purchase  7,089,867  shares  of  Common  Stock.  Schedule  III.A.1.  hereto
     specifies  the  exercise  prices for each of such  outstanding  options and
     warrants.

          2. The  Preferred  Shares  have been duly and validly  authorized  and
     reserved for issuance by the Company, and, when issued by the Company, will
     be duly and  validly  issued,  fully  paid and  nonassessable  and will not
     subject the holder  thereof to personal  liability  by reason of being such
     holder.  The Conversion  Shares, the Dividend Shares and the Warrant Shares
     have been duly and validly  authorized  and  reserved  for  issuance by the
     Company,  and, when issued by the Company upon conversion of, or in lieu of
     accrued  dividends on, the Preferred Shares and on exercise of the Warrants
     will be


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<PAGE>

     duly and validly issued,  fully paid and nonassessable and will not subject
     the holder thereof to personal liability by reason of being such holder.

          3. Except as disclosed on Schedule  III.A.3  there are no  preemptive,
     subscription,  "call," right of first  refusal or other  similar  rights to
     acquire any  capital  stock of the  Company or any of its  Subsidiaries  or
     other voting  securities of the Company that have been issued or granted to
     any  person  or  any  other  obligations  of  the  Company  or  any  of the
     subsidiaries of the Company (the "Subsidiaries") to issue, grant, extend or
     enter  into any  security,  option,  warrant,  "call,"  right,  commitment,
     agreement,  arrangement  or  undertaking  with  respect  to  any  of  their
     respective capital stock.

          4.  Schedule  III.A.4.  hereto lists all the  Subsidiaries.  Except as
     disclosed on Schedule III.A.4. hereto, the Company does not own or control,
     directly or indirectly, any interest in any other corporation, partnership,
     limited   liability   company,    unincorporated   business   organization,
     association, trust or other business entity.

          5. The Company has delivered to Buyer  complete and correct  copies of
     the  Restated  Certificate  of  Incorporation,  as  amended  to  date  (the
     "Certificate  of  Incorporation"),  and the  By-Laws of the Company and the
     Subsidiaries, in each case as amended to the date of this Agreement. Except
     as set forth on Schedule  III.A.4,  the Company has delivered to Buyer true
     and complete copies of all minutes of the Board of Directors of the Company
     (the "Board of Directors") since October 1, 1996.

     B. Organization; Reporting Company Status.

          1. Each of the Company and each of the  Subsidiaries  is a corporation
     duly organized, validly existing and in good standing under the laws of the
     state of jurisdiction in which it is incorporated  and is duly qualified as
     a foreign  corporation  in all  jurisdictions  in which the  failure  to so
     qualify would  reasonably be expected to have a material  adverse effect on
     the business, properties,  prospects, condition (financial or otherwise) or
     results of operations of the Company and the Subsidiaries  taken as a whole
     or on the  consummation  of any of the  transactions  contemplated  by this
     Agreement (a "Material Adverse Effect").

          2. The Company has  registered the Common Stock pursuant to Section 12
     of the Securities  Exchange Act of 1934, as amended (the  "Exchange  Act").
     The  Common  Stock is listed  and  traded  on the  Nasdaq  SmallCap  Market
     ("Nasdaq")  and the Company has not received any notice  regarding,  and to
     its knowledge there is no threat of, the termination or  discontinuance  of
     the eligibility of the Common Stock for such listing.

     C.  Authorization.  The  Company (i) has duly and  validly  authorized  and
reserved for issuance 2,000,000 shares of Common Stock, sufficient in number for
the conversion of and the payment of dividends (in lieu of cash payments) on the
Preferred  Shares and the exercise of the  Warrants,  and (ii) at all times from
and after the date  hereof  shall have a  sufficient  number of shares of Common
Stock duly and  validly  authorized  and  reserved  for  issuance to


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<PAGE>

satisfy the conversion of Preferred Shares, the payment of dividends (in lieu of
cash  payments) on the Preferred  Shares and the exercise of the  Warrants.  The
Company  understands and  acknowledges  the  potentially  dilutive effect on the
Common Stock of the issuance of the Preferred Shares, the Conversion Shares, the
Dividend  Shares and the Warrant  Shares upon the  conversion of, and payment of
dividends  on,  the   Preferred   Shares  and  the  exercise  of  the  Warrants,
respectively.  The Company  further  acknowledges  that its  obligation to issue
Conversion  Shares upon  conversion of the Preferred  Shares and Warrant  Shares
upon exercise of the Warrants in accordance with this Agreement, the Certificate
of Designation and the Warrants is absolute and unconditional  regardless of the
dilutive effect that such issuance may have on the ownership  interests of other
stockholders  of the Company and  notwithstanding  the  commencement of any case
under 11  U.S.C.  ss.  101 et seq.  (the  "Bankruptcy  Code").  In the event the
Company is a debtor under the Bankruptcy  Code, the Company hereby waives to the
fullest  extent  permitted any rights to relief it may have under 11 U.S.C.  ss.
362 in respect of the conversion of the Preferred Shares and the exercise of the
Warrants.  The  Company  agrees,  without  cost or expense to Buyer,  to take or
consent to any and all action necessary to effectuate relief under 11 U.S.C. ss.
362.  Schedule  III.C.  hereto  sets  forth (i) all  issuances  and sales by the
Company  since  December  31, 1998 of its capital  stock,  and other  securities
convertible,  exercisable or exchangeable for capital stock of the Company, (ii)
the amount of such securities sold,  including any underlying  shares of capital
stock, (iii) the purchaser thereof,  (iv) the amount paid therefor,  and (v) the
material terms of all  outstanding  capital stock of the Company (other than the
Common Stock).

     D. Authority;  Validity and  Enforceability.  The Company has the requisite
corporate  power and  authority  to file and perform its  obligations  under the
Certificate  of  Designation  and to enter into the  Documents  (as  hereinafter
defined),  and to  perform  all  of its  obligations  hereunder  and  thereunder
(including  the  issuance,  sale and delivery to Buyer of the  Securities).  The
execution,  delivery and  performance by the Company of the  Documents,  and the
consummation by the Company of the transactions  contemplated hereby and thereby
(including,  without  limitation,  the filing of the  Certificate of Designation
with the Delaware  Secretary of State's  office,  the issuance of the  Preferred
Shares and the Warrants and the  issuance  and  reservation  for issuance of the
Conversion Shares,  the Dividend Shares and the Warrant Shares),  have been duly
authorized by all necessary corporate action on the part of the Company. Each of
the  Documents  has been duly and validly  executed and delivered by the Company
and the  Certificate  of  Designation  has been  duly  filed  with the  Delaware
Secretary of State's office by the Company and each Document constitutes a valid
and binding obligation of the Company  enforceable against it in accordance with
its terms, subject to applicable bankruptcy,  insolvency, fraudulent conveyance,
reorganization,  moratorium  and similar laws  affecting  creditors'  rights and
remedies  generally  and except as rights to indemnity and  contribution  may be
limited by federal or state securities laws or the public policy underlying such
laws. The Securities  have been duly and validly  authorized for issuance by the
Company  and,  when  executed and  delivered  by the Company,  will be valid and
binding  obligations of the Company  enforceable  against it in accordance  with
their  terms,   subject  to  applicable   bankruptcy,   insolvency,   fraudulent
conveyance,  reorganization,  moratorium and similar laws  affecting  creditors'
rights  and  remedies  generally.  For  purposes  of this  Agreement,  the  term
"Documents" means (i) this Agreement;  (ii) the Registration Rights Agreement of
even date  herewith  between the  Company and Buyer,  a copy of


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which is annexed  hereto as  Exhibit D (the  "Registration  Rights  Agreement");
(iii) the  Certificate  of  Designation;  (iv) the Warrants;  and (v) the Escrow
Instructions.

     E. Validity of Issuance of the Securities.  The Preferred  Shares as of the
Closing Date (as defined below),  the Conversion  Shares and the Dividend Shares
upon their issuance in accordance with the  Certificate of Designation,  and the
Warrant  Shares upon  exercise  of the  Warrants,  respectively,  are or will be
validly issued and outstanding, fully paid and nonassessable, and not subject to
any preemptive  rights,  rights of first refusal,  tag-along rights,  drag-along
rights or other similar rights.  The Warrants as of the Closing Date are or will
be validly issued.

     F.  Non-contravention.  Except as set forth on Schedule III.F.  hereto, the
execution  and  delivery by the Company of the  Documents,  the  issuance of the
Securities,  and the  consummation  by the  Company  of the  other  transactions
contemplated hereby and thereby,  including,  without limitation,  the filing of
the Certificate of Designation with the Delaware Secretary of State's office, do
not, and compliance  with the  provisions of this Agreement and other  Documents
will not,  conflict  with,  or result in any  violation  of, or default (with or
without  notice  or lapse of time,  or both)  under,  or give rise to a right of
termination,  cancellation  or  acceleration  of any  obligation  or  loss  of a
material benefit under, or result in the creation of any Lien (as defined below)
upon any of the  properties or assets of the Company or any of its  Subsidiaries
under,  or result in the termination of, or require that any consent be obtained
or any notice be given with respect to, (i) the Certificate of  Incorporation or
By-Laws of the Company or the comparable charter or organizational  documents of
any of its  Subsidiaries,  (ii)  any  loan  or  credit  agreement,  note,  bond,
mortgage,  indenture,  lease, contract or other agreement,  instrument or permit
applicable  to  the  Company  or any of its  Subsidiaries  or  their  respective
properties  or assets,  or (iii) any Law (as defined  below)  applicable  to the
Company or any of its Subsidiaries or their respective properties or assets.

     G. Approvals. No authorization,  approval or consent of any court or public
or  governmental  authority  is  required  to be obtained by the Company for the
issuance and sale of the Preferred  Shares or the Warrants  (and the  Conversion
Shares,  the Dividend Shares or Warrant Shares) to Buyer as contemplated by this
Agreement,  except such  authorizations,  approvals  and consents that have been
obtained by the Company prior to the date hereof.

     H. Commission  Filings.  The Company has properly and timely filed with the
Commission all reports, proxy statements,  forms and other documents required to
be filed with the Commission under the Securities Act and the Exchange Act since
August 1, 1996 (the "Commission Filings"). As of their respective dates, (i) the
Commission  Filings  complied in all material  respects with the requirements of
the  Securities  Act, or the Exchange Act, as the case may be, and the rules and
regulations  of  the  Commission   promulgated  thereunder  applicable  to  such
Commission  Filings,  and (ii) none of the Commission  Filings  contained at the
time of their filing any untrue statement of a material fact or omitted to state
a material fact required to be stated  therein or necessary in order to make the
statements  therein,  in light of the circumstances  under which they were made,
not  misleading.  The  financial  statements  of  the  Company  included  in the
Commission Filings, as of the dates of such documents, were true and complete in
all material respects and complied with applicable  accounting  requirements and
the published rules


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<PAGE>

and  regulations of the Commission with respect  thereto,  have been prepared in
accordance with generally  accepted  accounting  principles in the United States
("GAAP") (except in the case of the unaudited  statements,  as permitted by Form
10-QSB under the Exchange Act) applied on a consistent  basis during the periods
involved  (except as may be indicated in the notes thereto) and fairly presented
the  consolidated  financial  position of the Company and its Subsidiaries as of
the dates  thereof and the  consolidated  results of their  operations  and cash
flows for the periods then ended (subject,  in the case of unaudited statements,
to normal year-end audit  adjustments that in the aggregate are not material and
to any other adjustment described therein).

     I. Absence of Certain Changes.  Since the Balance Sheet Date (as defined in
Section III.M.),  there has not occurred any change, event or development in the
business, financial condition, prospects or results of operations of the Company
and the  Subsidiaries,  there has not existed any condition having or reasonably
likely to have a Material  Adverse Effect,  and the Company and the Subsidiaries
have conducted their respective businesses only in the ordinary course.

     J. Full  Disclosure.  There is no fact  known to the  Company  (other  than
general economic or industry  conditions known to the public generally) that has
not been  fully  disclosed  in writing  to Buyer  that (i)  reasonably  could be
expected to have a Material  Adverse Effect or (ii) reasonably could be expected
to  materially  and  adversely  affect the ability of the Company to perform its
obligations pursuant to the Documents.

     K. Absence of Litigation.  Except as set forth on Schedule III.K, there are
(i) no  suits,  actions  or  proceedings  pending  or, to the  knowledge  of the
Company,  threatened  against  the Company or any of its  Subsidiaries,  (ii) no
complaints,  lawsuits, charges or other proceedings pending or, to the knowledge
of the Company, threatened in any forum by or on behalf of any present or former
employee of the Company or any of its Subsidiaries, any applicant for employment
or classes of the foregoing  alleging breach of any express or implied  contract
of  employment,  any  applicable  law governing  employment  or the  termination
thereof or other discriminatory, wrongful or tortuous conduct in connection with
the  employment  relationship,  or (iii) no judgments,  decrees,  injunctions or
orders  of any court or other  governmental  entity  or  arbitrator  outstanding
against the Company or any Subsidiary.

     L. Absence of Events of Default.  Except as set forth in Schedule III.L, no
"Event of  Default"  (as defined in any  agreement  or  instrument  to which the
Company  is a party) and no event  which,  with  notice,  lapse of time or both,
would  constitute  an Event of Default  (as so  defined),  has  occurred  and is
continuing.

     M.  Financial  Statements;  No  Undisclosed  Liabilities.  The  Company has
delivered to Buyer true and complete  copies of the (i) audited balance sheet of
the Company and the  Subsidiaries as at December 31, 1997 and December 31, 1998,
respectively,   and  the  related  audited  statements  of  income,  changes  in
stockholders'  equity and cash flows for the three fiscal  years ended  December
31, 1996,  1997 and 1998  including the related notes and schedules  thereto and
(ii)  unaudited  balance  sheets of the  Company  and the  Subsidiaries  and the
statements of income,  changes in  stockholders'  equity and cash flows for each
fiscal  quarter  ended since  December 31, 1998  including the related notes and
schedules,  all  certified  by  the  chief  financial


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officer of the  Company  (collectively,  the  "Financial  Statements"),  and all
management letters, if any, from the Company's  independent auditors relating to
the dates and periods covered by the Financial Statements. Each of the Financial
Statements is complete and correct in all material  respects,  has been prepared
in  accordance  with  GAAP  (subject,  in  the  case  of the  interim  Financial
Statements,  to normal year end adjustments  and the absence of footnotes),  and
fairly presents the financial position,  results of operations and cash flows of
the Company as at the dates and for the periods indicated.  For purposes hereof,
the audited  balance sheet of the Company as at December 31, 1998 is hereinafter
referred to as the "Balance Sheet" and December 31, 1998 is hereinafter referred
to as the "Balance Sheet Date". The Company has no indebtedness,  obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether  due or to  become  due),  which was not fully  reflected  in,  reserved
against or otherwise  described in the Balance Sheet or the notes thereto or was
not incurred in the ordinary  course of business  consistent  with the Company's
past practices since the Balance Sheet Date.

     N.  Compliance  with Laws;  Permits.  Each of the  Company  and each of its
Subsidiaries   is  in  compliance  and  has  complied  with  all  laws,   rules,
regulations, codes, ordinances and statutes (collectively, "Laws") applicable to
it or to the  conduct  of its  business.  The  Company  possesses  all  material
permits, approvals, authorizations, licenses, certificates and consents from all
public and governmental authorities which are necessary to conduct its business.

     O.  Related  Party  Transactions.  Except as set forth on  Schedule  III.O.
hereto,  neither the Company nor any of its officers,  directors or "Affiliates"
(as such term is defined in Rule 12b-2  under the  Exchange  Act) nor any family
member of any  officer,  director or  Affiliate  of the Company has borrowed any
moneys from or has outstanding any indebtedness or other similar  obligations to
the Company or any of the  Subsidiaries.  Except as set forth on Schedule III.O.
hereto, neither the Company nor any of its officers, directors or Affiliates nor
any family member of any officer,  director or Affiliate of the Company (i) owns
any direct or indirect  interest  constituting more than a 1% equity (or similar
profit  participation)  interest  in, or  controls  or is a  director,  officer,
partner,  member or employee of, or consultant to or lender to or borrower from,
or has the right to participate in the profits of, any person or entity which is
(x) a competitor,  supplier,  customer,  landlord, tenant, creditor or debtor of
the Company or any Subsidiary, (y) engaged in a business related to the business
of the Company or any  Subsidiary,  or (z) a participant  in any  transaction to
which  the  Company  or any  Subsidiary  is a party  or  (ii) is a party  to any
contract,  agreement,  commitment or other  arrangement  with the Company or any
Subsidiary with a total purchase price above $25,000.

     P. Insurance.  Each of the Company and each of the  Subsidiaries  maintains
property and casualty, general liability,  workers' compensation,  environmental
hazard,  personal  injury and other similar types of insurance with  financially
sound  and  reputable  insurers  that  is  adequate,  consistent  with  industry
standards and the Company's  historical claims  experience.  Each of the Company
and each of the  Subsidiaries has not received notice from, and has no knowledge
of any threat  by, any  insurer  (that has  issued any  insurance  policy to the
Company or the Subsidiaries) that such insurer intends to deny coverage under or
cancel, discontinue or not renew any insurance policy presently in force.



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     Q. Securities Law Matters. Assuming the accuracy of the representations and
warranties  of Buyer set forth in Section  II hereof,  the offer and sale by the
Company of the  Securities is exempt from (i) the  registration  and  prospectus
delivery requirements of the Securities Act and the rules and regulations of the
Commission thereunder and (ii) the registration and/or qualification  provisions
of all applicable  state  securities and "blue sky" laws. Other than pursuant to
an effective  registration  statement  under the Securities Act, the Company has
not issued,  offered or sold the Preferred  Shares or any shares of Common Stock
(including for this purpose any securities of the same or a similar class as the
Preferred  Shares  or  Common  Stock,  or any  securities  convertible  into  or
exchangeable or exercisable for the Preferred Shares or Common Stock or any such
other securities) within the one-year next preceding the date hereof,  except as
disclosed  on Schedule  III.Q.  hereto,  and the Company  shall not  directly or
indirectly  take,  and  shall  not  permit  any of its  directors,  officers  or
Affiliates  directly  or  indirectly  to take,  any action  (including,  without
limitation, any offering or sale to any person or entity of the Preferred Shares
or  shares  of Common  Stock),  so as to make  unavailable  the  exemption  from
Securities Act  registration  being relied upon by the Company for the offer and
sale to Buyer of the  Preferred  Shares  and the  Warrants  (and the  Conversion
Shares,  the Dividend  Shares and the Warrant  Shares) as  contemplated  by this
Agreement.  No form of  general  solicitation  or  advertising  has been used or
authorized  by the Company or any of its  officers,  directors or  Affiliates in
connection with the offer or sale of the Preferred  Shares and the Warrants (and
the  Conversion   Shares,  the  Dividend  Shares  and  the  Warrant  Shares)  as
contemplated  by this Agreement or any other agreement to which the Company is a
party.

     R. Environmental Matters.

     Except as set forth on Schedule III.R. hereto:

          1. The Company,  the Subsidiaries and their respective  operations are
     in  compliance  with all  applicable  Environmental  Laws  and all  permits
     (including terms,  conditions,  and limitations therein) issued pursuant to
     Environmental Laws or otherwise.

          2. Each of the Company and the Subsidiaries has all permits, licenses,
     waivers,   exceptions,   and  exemptions   required  under  all  applicable
     Environmental Laws necessary to operate its business.

          3. None of the  Company  or the  Subsidiaries  is the  subject  of any
     outstanding  written order of or agreement with any governmental  authority
     or person  respecting  (i)  Environmental  Laws or permits,  (ii)  Remedial
     Action or (iii) any Release or threatened Release of Hazardous Materials.

          4. None of the Company or the  Subsidiaries  has  received any written
     communication   alleging  that  it  is  or  may  be  in  violation  of  any
     Environmental Law or any permit issued pursuant to any  Environmental  Law,
     or may have any liability under any Environmental Law.

          5.  None  of  the  Company  or the  Subsidiaries  has  any  liability,
     contingent  or  otherwise,  in  connection  with any  presence,  treatment,
     storage, disposal or


                                      -9-
<PAGE>

     Release of any Hazardous Materials whether on property owned or operated by
     the Company and the Subsidiaries or property of third parties,  and none of
     the  Company  or  the  Subsidiaries   has  transported,   or  arranged  for
     transportation of, any Hazardous Materials for treatment or disposal of any
     property.

          6.  There  are no  investigations  of  the  business,  operations,  or
     currently or previously  owned,  operated or leased property of the Company
     or any of the  Subsidiaries  pending or threatened  which could lead to the
     imposition of any case or liability pursuant to any Environmental Law.

          7. There is not located at any of the properties  owned or operated by
     the Company or any of the  Subsidiaries  any (A) underground  storage tank,
     (B)    asbestos-containing    material   or   (C)   equipment    containing
     polychlorinated biphenyls.

          8. Each of the Company and the  Subsidiaries has provided to Buyer all
     environmentally related assessments,  audits, studies,  reports,  analyses,
     and results of investigations  that have been performed with respect to the
     currently or previously owned,  leased or operated properties or activities
     of the Company and the Subsidiaries.

          9. There are no liens arising  under or pursuant to any  Environmental
     Law on any real property owned,  operated,  or leased by the Company or any
     of the Subsidiaries,  and no action of any governmental  authority has been
     taken or, to the  knowledge  of the  Company,  is in process of being taken
     which could subject any of such  properties to such liens,  and none of the
     Company or any of the  Subsidiaries  is or has been expected to be required
     to place any notice or  restriction  relating to the  presence of Hazardous
     Material at any real property owned,  operated, or leased by it in any deed
     to such property.

          10. Neither the Company nor any of the Subsidiaries owns,  operates or
     leases any hazardous  waste  generation,  treatment,  storage,  or disposal
     facility,  as such  terms  are used  pursuant  to the RCRA and  related  or
     analogous  state,  local,  or foreign law.  None of the  properties  owned,
     operated,  or leased by the Company, the Subsidiaries or any predecessor of
     any of them is now, or to the  knowledge of the  Company,  was in the past,
     used  in any  part as a dump,  landfill,  or  disposal  site,  and  neither
     Company,  the  Subsidiaries  nor any  predecessor  of them has  filled  any
     wetlands.

          11.  The  purchase  that is the  subject  of this  Agreement  will not
     require any  governmental  approvals under  Environmental  Laws,  including
     those  that are  triggered  by sales or  transfers  of  businesses  or real
     property,  including,  as examples and without  limitation,  the New Jersey
     Industrial  Site  Recovery  Act,  N.J.  Stat.  13:1K-7  et  seq.,  and  the
     Connecticut Transfer of Establishments Act, Conn. Gen. Stat. ss. 22a-134 et
     seq.

          12. There is no currently existing requirement or, to the knowledge of
     the Company,  requirement to be imposed in the future by any  Environmental
     Law or Environmental  Permit which could result in the incurrence of a cost
     that could be reasonably expected to have a Material Adverse Effect.



                                      -10-
<PAGE>

          13. Each of the Company and each of the  Subsidiaries has disclosed to
     Buyer  all  other  acts or  conditions  that  could  result in any costs or
     liabilities under Environmental Laws.

     For purposes of this Section III.R.:

     "Environmental  Law" means any foreign,  federal,  state or local  statute,
regulation,  ordinance,  or common law as now or  hereafter in effect in any way
relating  to  the  protection  of  human  health,  safety  or  welfare,  or  the
environment  including,  without  limitation,  the  Comprehensive  Environmental
Response, Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Resource  Conservation and Recovery Act ("RCRA"),  the Clean Water Act,
the Clean Air Act, the Toxic  Substances  Control Act, the Federal  Insecticide,
Fungicide,  and Rodenticide Act, and the Occupational Safety and Health Act, and
the regulations promulgated pursuant thereto.

     "Hazardous  Material"  means any  substance  that is listed,  classified or
regulated pursuant to any Environmental Law, including petroleum,  gasoline, and
any other petroleum  product,  by-product,  fraction or derivative,  asbestos or
asbestos-containing   material,   lead-containing  paint,  water,  or  plumbing,
polychlorinated biphenyls, radioactive materials and radon.

     "Release"  means  any  placement,  release,  spill,  filtration,  emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, migration,
or leaching to, through,  or under the indoor or outdoor  environment,  or into,
through, under, or out of any property.

     "Remedial  Action"  means all actions to (x) clean up,  remove,  remediate,
treat or in any other way address any Hazardous Material; (y) prevent or contain
the Release of any Hazardous Material; or (z) perform studies and investigations
or post-remedial monitoring and care in relation to (x) and (y) above.

     S. Labor Matters.  Neither the Company nor any of the Subsidiaries is party
to any  labor or  collective  bargaining  agreement  and  there  are no labor or
collective  bargaining  agreements which pertain to employees of the Company. No
employees  of the  Company  or the  Subsidiaries  are  represented  by any labor
organization  and  none  of  such  employees  has  made  a  pending  demand  for
recognition,  and there are no representation proceedings or petitions seeking a
representation  proceeding  presently  pending or, to the  Company's  knowledge,
threatened to be brought or filed,  with the National Labor  Relations  Board or
other labor relations  tribunal.  There is no organizing  activity involving the
Company or the Subsidiaries pending or to the Company's knowledge, threatened by
any labor organization or group of employees of the Company or the Subsidiaries.
There are no (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or
(ii) material grievances or other labor disputes pending or, to the knowledge of
the Company,  threatened  against or involving the Company or the  Subsidiaries.
There are no unfair labor practice charges, grievances or complaints pending or,
to the  knowledge of the Company,  threatened by or on behalf of any employee or
group of employees of the Company or the Subsidiaries.



                                      -11-
<PAGE>

     T. ERISA Matters. All Plans maintained by the Company, its Subsidiaries and
ERISA Affiliates are listed in Schedule III.T.  and copies of all  documentation
relating to such Plans (including,  but not limited to, copies of written Plans,
written descriptions of oral Plans, summary plan descriptions, trust agreements,
the  three  most  recent  annual  returns,   employee   communications  and  IRS
determination  letters) have been  delivered or made available for review by the
Buyer.  Each Plan has at all  times  been  maintained  and  administered  in all
material  respects  in  accordance  with  its  terms  and  the  requirements  of
applicable law,  including ERISA and the Code, and each Plan intended to qualify
under  Section  401(a) of the Code has at all times since its  adoption  been so
qualified,  and each trust  which forms a part of any such plan has at all times
since its  adoption  been  tax-exempt  under  Section  501(a)  of the Code.  The
Company,  its  Subsidiaries  and its ERISA  Affiliates  are in compliance in all
material  respects with all provisions of ERISA  applicable to it. No Reportable
Event  has  occurred,  been  waived  or  exists  as to which  the  Company,  its
Subsidiaries or any ERISA Affiliate was required to file a report with the PBGC,
and the present value of all liabilities under each Pension Plan (based on those
assumptions  used to fund such Plans) listed in Schedule  III.T.  did not, as of
the most recent annual  valuation date applicable  thereto,  exceed the value of
the assets of such Pension Plan. None of the Company,  its Subsidiaries or ERISA
Affiliates  has  incurred,  or  reasonably  expects  to  incur,  any  Withdrawal
Liability  with  respect  to any  Multi-employer  Plan  that  could  result in a
Material  Adverse  Effect.  None  of the  Company,  its  Subsidiaries  or  ERISA
Affiliates  has received any  notification  that any  Multi-employer  Plan is in
reorganization  or has been terminated  within the meaning of Title IV of ERISA,
and no  Multi-employer  Plan is reasonably  expected to be in  reorganization or
termination  where such  reorganization  or  termination  has  resulted or could
reasonably be expected to result in increases to the  contributions  required to
be made to such Plan or otherwise. No direct,  contingent or secondary liability
has  been  incurred  or is  expected  to be  incurred  by  the  Company  or  its
Subsidiaries  under Title IV of ERISA to any party with respect to any Plan,  or
with respect to any other Plan presently or heretofore maintained or contributed
to by any ERISA  Affiliate.  Neither the  Company,  its  Subsidiaries,  or ERISA
Affiliate  has incurred any  liability  for any tax imposed  under  section 4971
through  4980B of the Code or civil  liability  under  section  502(i) or (l) of
ERISA.  No suit,  action or other  litigation  (excluding  claims  for  benefits
incurred in the  ordinary  course of plan  activities  and any other claim which
could reasonably be expected to result in a material liability or expense to the
Company,  its  Subsidiaries  or ERISA  Affiliates)  has been  brought or, to the
knowledge  of the  Company,  threatened  against or with respect to any Plan and
there are no facts or  circumstances  known to the Company,  its Subsidiaries or
ERISA  Affiliates  that could  reasonably  be  expected to give rise to any such
suit, action or other litigation.  All contributions to Plans that were required
to be made under such Plans have been made,  and all benefits  accrued under any
unfunded  Plan have been  paid,  accrued or  otherwise  adequately  reserved  in
accordance  with  GAAP,  all of  which  accruals  under  unfunded  Plans  are as
disclosed  in Schedule  III.T.,  and the  Company,  its  Subsidiaries  and ERISA
Affiliates have each performed all material obligations required to be performed
under all Plans.  The execution,  delivery and performance of this Agreement and
other Documents and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the offer, issue and sale by the Company
and its  Subsidiaries,  and the purchase by the Buyer, of the Preferred  Shares,
the Conversion  Shares,  the Warrants,  the Warrant Shares and Dividend  Shares)
will not involve any "prohibited transaction" within the meaning of ERISA or the
Code with respect to any Plan.



                                      -12-
<PAGE>

     For purposes of this Section III.T.:

     "ERISA" means the Employee  Retirement  Income Security Act of 1974, or any
successor statute,  together with the regulations thereunder, as the same may be
amended from time to time.

     "ERISA Affiliate" means any trade or business (whether or not incorporated)
that was, is or hereafter  may become,  a member of a group of which the Company
is a member and which is treated as a single  employer  under Section 414 of the
Internal Revenue Code of 1986, as amended (the "Code").

     "Multi-employer  Plan"  means a  multi-employer  plan as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate  (other than one
considered an ERISA  Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Code) is making or accruing an obligation to make  contributions,  or
has within any of the  preceding six plan years made or accrued an obligation to
make contributions.

     "PBGC"  means the  Pension  Benefit  Guaranty  Corporation  referred to and
defined in ERISA or any successor thereto.

     "Plan"  means any bonus,  incentive  compensation,  deferred  compensation,
pension,  profit  sharing,  retirement,  stock  purchase,  stock  option,  stock
ownership,  stock appreciation rights, phantom stock, leave of absence,  layoff,
vacation,  day or dependent  care,  legal  services,  cafeteria,  life,  health,
accident,  disability,  workmen's  compensation or other  insurance,  severance,
separation or other employee  benefit plan,  practice,  policy or arrangement of
any kind,  whether  written  or oral,  or  whether  for the  benefit of a single
individual  or more than one  individual  including,  but not  limited  to,  any
"employee  benefit plan" within the meaning of Section 3(3) of ERISA,  including
any Pension Plan.

     "Pension  Plan" means any pension plan (other than a  Multi-employer  Plan)
subject to the provision of Title IV of ERISA or Section 412 of the Code that is
maintained  for  employees  of the  Company,  its  Subsidiaries,  or  any  ERISA
Affiliate.

     "Reportable Event" means any reportable event as defined in Section 4043(b)
of ERISA or the regulations issued thereunder with respect to a Plan

     "Withdrawal Liability" means liability to a Multi-employer Plan as a result
of a complete or partial withdrawal from such Multi-employer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.

     U. Tax Matters.

          1. The Company has filed all material Tax Returns which it is required
     to file under  applicable  Laws; all such Tax Returns are true and accurate
     in all material  respects  and have been  prepared in  compliance  with all
     applicable  Laws;  the  Company  has paid  all  Taxes  due and  owing by it
     (whether  or not such Taxes are  required  to be shown on a Tax Return) and
     has withheld and paid over to the appropriate  taxing authorities all


                                      -13-
<PAGE>

     Taxes which it is required to withhold  from  amounts  paid or owing to any
     employee,  stockholder,  creditor  or other  third  parties;  and since the
     Balance  Sheet Date,  the  charges,  accruals  and  reserves for Taxes with
     respect to the Company (including any provisions for deferred income taxes)
     reflected  on the  books of the  Company  are  adequate  to  cover  any Tax
     liabilities  of the Company if its current tax year were  treated as ending
     on the date hereof.

          2. No claim  has been  made by a taxing  authority  in a  jurisdiction
     where the Company does not file tax returns that such corporation is or may
     be subject to taxation by that jurisdiction. There are no foreign, federal,
     state or local tax audits or administrative or judicial proceedings pending
     or being conducted with respect to the Company;  no information  related to
     Tax matters has been  requested  by any  foreign,  federal,  state or local
     taxing  authority;  and,  except as  disclosed  above,  no  written  notice
     indicating  an intent to open an audit or other review has been received by
     the Company from any  foreign,  federal,  state or local taxing  authority.
     There  are no  material  unresolved  questions  or  claims  concerning  the
     Company's Tax liability. The Company (A) has not executed or entered into a
     closing  agreement  pursuant to Section 7121 of the Code or any predecessor
     provision thereof or any similar provision of state,  local or foreign law;
     or (B) has not agreed to or is required to make any adjustments pursuant to
     Section  481(a) of the Code or any  similar  provision  of state,  local or
     foreign law by reason of a change in  accounting  method  initiated  by the
     Company or any of its  subsidiaries  or has any knowledge  that the IRS has
     proposed any such  adjustment  or change in accounting  method,  or has any
     application pending with any taxing authority requesting permission for any
     changes in accounting  methods that relate to the business or operations of
     the Company. The Company has not been a United States real property holding
     corporation  within the meaning of Section 897(c)(2) of the Code during the
     applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

          3. The Company has not made an election  under  Section  341(f) of the
     Code. The Company is not liable for the Taxes of another person that is not
     a subsidiary  of the Company  under (A) Treas.  Reg.  Section  1.1502-6 (or
     comparable  provisions of state, local or foreign law), (B) as a transferee
     or successor, (C) by contract or indemnity or (D) otherwise. The Company is
     not a party to any tax  sharing  agreement.  The  Company  has not made any
     payments,  is not  obligated  to make  payments  and is not a  party  to an
     agreement  that could  obligate it to make any  payments  that would not be
     deductible under Section 280G of the Code.

     For purposes of this Section III.U.:

     "IRS" means the United States Internal Revenue Service.

     "Tax" or "Taxes" means federal,  state,  county,  local,  foreign, or other
income, gross receipts, ad valorem, franchise,  profits, sales or use, transfer,
registration, excise, utility, environmental,  communications,  real or personal
property,   capital  stock,   license,   payroll,  wage  or  other  withholding,
employment, social security, severance, stamp, occupation, alternative or add-


                                      -14-
<PAGE>

on minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.

     "Tax Return" means any return, information report or filing with respect to
Taxes,  including  any  schedules  attached  thereto and including any amendment
thereof.

     V. Property. Except as set forth on Schedule III.V, each of the Company and
each of the  Subsidiaries has good and marketable title to all of its assets and
properties material to the conduct of its business, free and clear of any liens,
pledges, security interests,  claims,  encumbrances or other restrictions of any
kind  (collectively,  "Liens").  With  respect  to any assets or  properties  it
leases,  each of the Company and its  Subsidiaries  holds a valid and subsisting
leasehold  interest therein,  free and clear of any Liens, is in compliance,  in
all  material  respects,  with the terms of the  applicable  lease,  and  enjoys
peaceful  and  undisturbed  possession  under such lease.  All of the assets and
properties of the Company and its Subsidiaries  that are material to the conduct
of business as  presently  conducted or as proposed to be conducted by it are in
good  operating  condition  and  repair.  The  inventory  of the Company and its
Subsidiaries is in good and marketable condition,  does not include any material
quantity of items which are obsolete, damaged or slow moving, and is salable (or
may be leased) in the normal course of business as currently conducted by it.

     W. Intellectual  Property.  The Company and the Subsidiaries own or possess
adequate  and  enforceable  rights  to use  all  patents,  patent  applications,
trademarks,  trademark  applications,  trade names,  service marks,  copyrights,
copyright  applications,  licenses,  know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,  systems
or procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles")  necessary  for the  conduct  of their  businesses  as now  being
conducted  including,  but not limited to, those  described  on Schedule  III.W.
hereto.  Except as set forth on Schedule III.W, the Company and the Subsidiaries
have all right, title and interest in all of the Intangibles,  free and clear of
any and all Liens.  The Company and the  Subsidiaries are not infringing upon or
in conflict with any right of any other person with respect to any  Intangibles.
Except as disclosed on Schedule III.W.  hereto, (i) no claims have been asserted
by any  individual,  partnership,  corporation,  unincorporated  organization or
association,  limited liability company, trust or other entity (collectively,  a
"Person")  contesting  the  validity,  enforceability,  use or  ownership of any
Intangibles, and the Company and the Subsidiaries have no knowledge of any basis
for such claim, and (ii) neither the Company nor any of the Subsidiaries has any
knowledge of  infringement or  misappropriation  of the Intangibles by any third
party.

     X. Contracts. All contracts,  agreements,  notes, instruments,  franchises,
leases, licenses,  commitments,  arrangements or understanding,  written or oral
(collectively, "Contracts") which are material to the business and operations of
the Company  and the  Subsidiaries  are in full force and effect and  constitute
legal, valid and binding obligations of the Company and the Subsidiaries and, to
the best knowledge of the Company,  the other parties  thereto;  the Company and
the  Subsidiaries  and, to the best  knowledge of the Company,  each other party
thereto,  have performed in all material respects all obligations required to be
performed  by them under the  Contracts,  and no material  violation  or default
exists in respect  thereof,  nor any event that with notice or lapse of time, or
both,  would  constitute a default


                                      -15-
<PAGE>

thereof,  on the  part of the  Company  and the  Subsidiaries  or,  to the  best
knowledge  of the  Company,  any  other  party  thereto;  except as set forth on
Schedule III.X., none of the Contracts is currently being renegotiated;  and the
validity, effectiveness and continuation of all Contracts will not be materially
adversely affected by the transactions contemplated by this Agreement.

     Y.  Registration  Rights.  Except as set forth on Schedule III.Y, no Person
has, and as of the Closing, no Person shall have, demand,  "piggy-back" or other
rights  to cause  the  Company  to file any  registration  statement  under  the
Securities Act,  relating to any of its securities or to participate in any such
registration statement.

     Z.  Dividends.  The timely payment of dividends on the Preferred  Shares as
specified in the Certificate of Designation is not prohibited by the Certificate
of Incorporation or By-Laws of the Company or any agreement, contract, documents
or other undertaking to which the Company or any of the Subsidiaries is a party.

     AA. Investment Company Act. Neither the Company nor any of the Subsidiaries
is an "investment  company" within the meaning of the Investment  Company Act of
1940, as amended (the  "Investment  Company Act"), nor is the Company nor any of
the Subsidiaries directly or indirectly controlled by or acting on behalf of any
Person which is an  "investment  company"  within the meaning of the  Investment
Company Act.

     BB.  Business  Plan.  Any business  information  of the Company  previously
submitted to Buyer in any form, including the projections contained therein, was
prepared by the senior  management  of the Company in good faith and is based on
assumptions that the Company  believes are reasonable.  The Company is not aware
of any fact or  condition  that could  reasonably  be  expected to result in the
Company not achieving the results described in such business plan.

     CC. Year 2000 Compliance.  The Company is currently reviewing its products,
business  and  operations  that  could be  adversely  affected  by the risk that
computer  applications used by the Company and the Subsidiaries may be unable to
recognize and properly perform date-sensitive functions involving dates prior to
and after December 31, 1999 (the "Year 2000 Problem").  The Company believes its
internal  information  and  business  systems  will be able to perform  properly
date-sensitive  functions  for all dates  before and after  January 1, 2000.  In
addition, the Company is currently surveying those vendors,  suppliers and other
third parties  (collectively,  the "Outside Parties") with which the Company and
the  Subsidiaries  do business and whose failure to adequately  address the Year
2000 Problem could  reasonably be expected to adversely  affect the business and
operations of the Company and the  Subsidiaries.  Based upon the  aforementioned
internal  review  and  surveys  of the  Outside  Parties  as of the date of this
Agreement,  the Year 2000  Problem has not  resulted  in, and is not  reasonably
expected to have, a Material Adverse Effect.

     DD. Internal Controls and Procedures.  The Company maintains accurate books
and records and internal accounting  controls that provide reasonable  assurance
that (i) all  transactions to which the Company or each of the Subsidiaries is a
party or by which  its  properties  are  bound are  executed  with  management's
authorization;  (ii)  the  reported  accountability  of the  Company's  and  the
Subsidiaries'  assets is compared  with  existing  assets at regular  intervals;
(iii)


                                      -16-
<PAGE>

access  to the  Company's  and the  Subsidiaries'  assets is  permitted  only in
accordance with management's  authorization;  and (iv) all transactions to which
each of the Company and the  Subsidiaries  is a party or by which its properties
are bound are  recorded as  necessary  to permit  preparation  of the  financial
statements of the Company in accordance with GAAP.

     EE.  Payments  and  Contributions.  Neither  the  Company  nor  any  of its
Subsidiaries  nor any of  their  respective  directors,  officers  or,  to their
respective  knowledge,  other  employees  has (i) used any company funds for any
unlawful  contribution,  endorsement,  gift,  entertainment  or  other  unlawful
expense  relating  to  political  activity;  (ii) made any  direct  or  indirect
unlawful payment of company funds to any foreign or domestic government official
or employee,  (iii)  violated or is in violation of any provision of the Foreign
Corrupt  Practices  Act of 1977,  as  amended;  or (iv) made any bribe,  rebate,
payoff, influence payment,  kickback or other similar payment to any person with
respect to the company matters.

     FF. No  Misrepresentation.  No  representation  or  warranty of the Company
contained  in this  Agreement,  any  schedule,  annex or  exhibit  hereto or any
agreement,  instrument or certificate furnished by the Company to Buyer pursuant
to this Agreement,  contains any untrue statement of a material fact or omits to
state a material  fact  required to be stated  therein or  necessary to make the
statements therein, not misleading.

     GG. Finder's Fee. There are no finder's fee,  brokerage  commission or like
payment in connection with the  transactions  contemplated by this Agreement for
which Buyer is liable or responsible.

                    IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS

     A. Restrictive  Legend.  Buyer  acknowledges and agrees that, upon issuance
pursuant to this  Agreement,  the Securities  (including  any Dividends  Shares,
Conversion Shares or the Warrant Shares) shall have endorsed thereon a legend in
substantially  the  following  form  (and a  stop-transfer  order  may be placed
against transfer of the Preferred Shares,  the Warrant Shares and the Conversion
Shares until such legend has been removed):

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

     B. Filings.  The Company shall make all  necessary  Commission  Filings and
"blue sky"  filings  required to be made by the Company in  connection  with the
sale of the


                                      -17-
<PAGE>

Securities to Buyer as required by all applicable Laws, and shall provide a copy
thereof to Buyer promptly after such filing.

     C.  Reporting  Status.  So  long  as  Buyer  beneficially  owns  any of the
Securities, the Company shall timely file all reports required to be filed by it
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.

     D. Use of Proceeds. The Company shall use the net proceeds from the sale of
the Preferred Shares and the Warrants (excluding amounts paid by the Company for
Buyer's  out-of-pocket  costs  and  expenses  whether  or not  accounted  for or
incurred in connection  with the  transactions  contemplated  by this  Agreement
(including  the fees and  disbursements  of Buyer's legal  counsel))  solely for
working capital purposes.

     E. Listing.  Except to the extent the Company lists its Common Stock on The
New York Stock Exchange or the Nasdaq National Market, the Company shall use its
best  efforts to  maintain  its  listing of the Common  Stock on Nasdaq.  If the
Common Stock is delisted  from Nasdaq,  the Company will use its best efforts to
list the Common  Stock as  promptly  as  possible  on the most  liquid  national
securities exchange or quotation system that the Common Stock is qualified to be
listed on.

     F. Reserved  Conversion Shares. The Company at all times from and after the
date hereof  shall have such  number of shares of Common  Stock duly and validly
authorized  and reserved for issuance as shall be sufficient  for the conversion
in full of,  and the  payment of  dividends  on,  the  Preferred  Shares and the
exercise in full of the Warrants.

     G. Right of First  Refusal.  If,  during the period  commencing on the date
hereof  and ending  three  years  after the  Closing  Date (the  "Right of First
Refusal  Period"),  the Company should propose (the  "Proposal") to issue Common
Stock or  securities  convertible  into  Common  Stock at a price  less than the
Current Market Price (as defined in the Certificate of Designation),  or debt at
less than par value or having an  effective  annual  interest  rate in excess of
9.9% (each a "Right of First Refusal Security" and  collectively,  the "Right of
First Refusal Securities"), in each case the Company shall be obligated to offer
such Right of First  Refusal  Securities  to Buyer on the terms set forth in the
Proposal (the "Offer") and Buyer shall have the right,  but not the  obligation,
to accept  such  Offer on such  terms.  At least 15  business  days prior to the
issuance of any Right of First  Refusal  Securities,  the Company  shall provide
written  notice to Buyer of any  Proposal,  setting  forth in full the terms and
conditions  thereof,  and Buyer  shall then have 10  business  days to accept or
reject the Offer in writing.  If the Company  issues any Right of First  Refusal
Securities  during  the Right of First  Refusal  Period but fails to: (i) notify
Buyer of the  Proposal,  (ii)  offer  Buyer  the  opportunity  to  complete  the
transaction as set forth in the Proposal,  or (iii) enter into and consummate an
agreement to issue such Right of First Refusal  Securities to Buyer on the terms
and  conditions  set forth in the Proposal,  after Buyer has accepted the Offer,
then the Company shall pay to Buyer, as liquidated  damages,  an amount equal to
10% of the amount paid to the Company for the Right of First Refusal Securities.
The  foregoing  Right of First  Refusal  is and  shall be senior in right to any
other right of first refusal issued by the Company to any other Person.



                                      -18-
<PAGE>

     H.  Information.  Each of the parties hereto  acknowledges  and agrees that
Buyer  shall  not be  provided  with,  nor be  given  access  to,  any  material
non-public information relating to the Company and the Subsidiaries.

     I.  Exemption  from  Investment  Company Act. The Company shall conduct its
business,  and shall cause the  Subsidiaries to conduct their  businesses,  in a
manner  so  that  neither  the  Company  nor  any  Subsidiary  shall  become  an
"investment company" within the meaning of the Investment Company Act.

     J.  Accounting  and  Reserves.  The Company  shall  maintain a standard and
uniform  system of  accounting  and shall  keep  proper  books and  records  and
accounts  in  which  full,  true  and  correct  entries  shall  be  made  of its
transactions,  all in accordance with GAAP applied on a consistent basis through
all  periods,  and shall set aside on such books for each  fiscal  year all such
proper  reserves for  depreciation,  obsolescence,  amortization,  bad debts and
other  purposes  in  connection  with its  operations  as are  required  by such
principles so applied.

     K.  Transactions  with  Affiliates.  Neither  the  Company  nor  any of its
Subsidiaries  shall,  directly  or  indirectly,  enter into any  transaction  or
agreement with any stockholder,  officer director or Affiliate of the Company or
family member of any officer,  director or Affiliate of the Company,  unless the
transaction  or  agreement  is  (i)  reviewed  and  approved  by a  majority  of
Disinterested  Directors (as defined  below) and (ii) on terms no less favorable
to the  Company  or the  applicable  Subsidiary  than  those  obtainable  from a
non-affiliated  person. A "Disinterested  Director" shall mean an individual who
is not and who has not been an officer or employee of the Company and who is not
a member of the family of,  controlled by or under common control with, any such
officer or employee.

     L.  Issuances of Additional  Convertible  Preferred  Shares or  Convertible
Debentures.  So long as Buyer beneficially owns any of the Preferred Shares, the
Company  shall  not  issue  any  additional   convertible   preferred  stock  or
convertible  debt securities,  in each case,  convertible into Common Stock at a
floating conversion price, without the prior written consent of Buyer.

     M. Certain Restriction. So long as any Preferred Shares are outstanding, no
dividends  shall  be  declared  or  paid  or set  apart  for  payment  or  other
distribution  declared  or  made  upon  Junior  Securities  (as  defined  in the
Certificate  of  Designation),  nor shall any  Junior  Securities  be  redeemed,
purchased  or otherwise  acquired  (other than a  redemption,  purchase or other
acquisition of shares of Common Stock made for purposes of an employee incentive
or  benefit  plan  (including  a  stock  option  plan)  of  the  Company  or any
Subsidiary,  for any  consideration  (or any moneys be paid to or made available
for a sinking  fund for the  redemption  of any shares of any such stock) by the
Company, directly or indirectly.

     N. Restrictions on the Sale of Preferred Shares.  The Company covenants and
agrees not to issue and sell/or  transfer any shares of Series C 8%  Convertible
Preferred Stock to any person other than Buyer.



                                      -19-
<PAGE>

                         V. TRANSFER AGENT INSTRUCTIONS

     A. The Company  undertakes  and agrees that no  instruction  other than the
instructions  referred  to  in  this  Section  V  and  customary  stop  transfer
instructions  prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement will be given to its transfer
agent for the Common Stock and that the Conversion  Shares,  the Dividend Shares
and the Warrant Shares  otherwise shall be freely  transferable on the books and
records of the  Company as and to the extent  provided  in this  Agreement,  the
Registration  Rights  Agreement and applicable  law.  Nothing  contained in this
Section V.A. shall affect in any way Buyer's obligations and agreement to comply
with all applicable securities laws upon resale of such Common Stock. If, at any
time,  Buyer  provides  the  Company  with  an  opinion  of  counsel  reasonably
satisfactory  to the Company  that  registration  of the resale by Buyer of such
Common Stock is not required  under the  Securities  Act and that the removal of
restrictive  legends is permitted under applicable law, the Company shall permit
the transfer of such Common Stock and, promptly instruct the Company's  transfer
agent to issue one or more certificates for Common Stock without any restrictive
legends endorsed thereon.

     B.  Buyer  shall  have  the  right  to  convert  the  Preferred  Shares  by
telecopying  an executed and completed  Notice of Conversion  (as defined in the
Certificate  of  Designation)  to the  Company.  Each  date on which a Notice of
Conversion is  telecopied to and received by the Company in accordance  with the
provisions  hereof  shall  be  deemed  a  Conversion  Date  (as  defined  in the
Certificate  of  Designation).  The  Company  shall  transmit  the  certificates
evidencing the shares of Common Stock issuable upon  conversion of any Preferred
Shares (together with certificates  evidencing any Preferred Shares not being so
converted) to Buyer via express  courier,  by electronic  transfer or otherwise,
within  five  business  days  after  receipt  by the  Company  of the  Notice of
Conversion (the "Delivery Date"). Within 30 days after Buyer delivers the Notice
of Conversion  to the Company,  Buyer shall deliver to the Company the Preferred
Shares being converted.

     C. Buyer shall have the right to purchase  shares of Common Stock  pursuant
to  exercise of the  Warrants in  accordance  with its  applicable  terms of the
Warrants.  The last date that the  Company may  deliver  shares of Common  Stock
issuable  upon any  exercise of  Warrants is referred to herein as the  "Warrant
Delivery Date."

     D. The Company  understands  that a delay in the  issuance of the shares of
Common Stock  issuable in lieu of cash dividends on the Preferred  Shares,  upon
the  conversion of the Preferred  Shares or exercise of the Warrants  beyond the
applicable  Dividend  Payment  Due  Date  (as  defined  in  the  Certificate  of
Designation),  Delivery  Date or Warrant  Delivery Date could result in economic
loss to Buyer.  As  compensation  to Buyer for such loss (and not as a penalty),
the Company agrees to pay to Buyer for late issuance of Common Stock issuable in
lieu of cash dividends on the Preferred Shares, upon conversion of the Preferred
Shares or exercise of the Warrants in  accordance  with the  following  schedule
(where "No. Business Days" is defined as the number of business days beyond five
days from the  Dividend  Payment  Due Date,  the  Delivery  Date or the  Warrant
Delivery Date, as applicable):



                                      -20-
<PAGE>

     No. Business Days         Compensation For Each 10 Shares
     -----------------        of Preferred Shares Not Converted
                               Timely or 500 Shares of Common
                                Stock Issuable In Payment of
                                Dividends or Upon Exercise of
                                 Warrants Not Issued Timely
                                 --------------------------

           1                               $   25
           2                                   50
           3                                   75
           4                                  100
           5                                  125
           6                                  150
           7                                  175
           8                                  200
           9                                  225
           10                                 250
       more than 10         $250 + $100 for each Business Day
                            Late beyond 10 days

The Company shall pay to Buyer the compensation  described above by the transfer
of immediately  available funds upon Buyer's demand.  Nothing herein shall limit
Buyer's  right to pursue actual  damages for the Company's  failure to issue and
deliver  Common Stock to Buyer,  and in addition to any other remedies which may
be available to Buyer,  in the event the Company  fails for any reason to effect
delivery of such shares of Common  Stock  within  five  business  days after the
relevant  Dividend  Payment Due Date, the Delivery Date or the Warrant  Delivery
Date, as applicable,  Buyer shall be entitled to rescind the relevant  Notice of
Conversion  or exercise of Warrants by delivering a notice to such effect to the
Company  whereupon  the  Company  and  Buyer  shall  each be  restored  to their
respective  original  positions  immediately prior to delivery of such Notice of
Conversion on delivery.

                            VI. DELIVERY INSTRUCTIONS

     The Preferred  Shares and the Warrants shall be delivered by the Company to
the Escrow Agent pursuant to Section I.B. hereof at the Closing.

                         VII. CLOSING AND CLOSING DATES

     A. Closing.  The date and time (the "Closing Date") of the Closing shall be
the date hereof or such other date as shall be mutually agreed upon in writing.

     B. Place of the Closing. The Closing shall occur on the Closing Date at the
offices of the Escrow Agent.

     C.  Obligations  of  the  Escrow  Agent.  Notwithstanding  anything  to the
contrary  contained herein,  the Escrow Agent shall not be authorized to release
to the Company the


                                      -21-
<PAGE>

Purchase  Price and to Buyer the  certificate(s)  (I/N/O Buyer or I/N/O  Buyer's
nominee)   evidencing  the  Securities  being  purchased  by  Buyer  unless  the
conditions set forth herein have been satisfied.

          VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT THE CLOSING

     Buyer  understands  that the  Company's  obligation  to sell to  Buyer  the
Preferred Shares and the Warrants on the Closing Date is conditioned upon:

     A. Delivery by Buyer to the Escrow Agent of the Purchase Price;

     B. The accuracy on the Closing Date of the  representations  and warranties
of Buyer  contained in this Agreement as if made on the Closing Date (except for
representations  and warranties  which, by their express terms,  speak as of and
relate to a specified  date, in which case such accuracy shall be measured as of
such specified date) and the performance by Buyer in all material respects on or
before the Closing Date of all covenants and  agreements of Buyer required to be
performed by it pursuant to this Agreement on or before the Closing Date; and

     C. There shall not be in effect any Law or order, ruling,  judgment or writ
of any court or public  or  governmental  authority  restraining,  enjoining  or
otherwise prohibiting any of the transactions contemplated by this Agreement.

              IX. CONDITIONS TO BUYER'S OBLIGATIONS AT THE CLOSING

     The Company  understands that Buyer's  obligation to purchase the Preferred
Shares and the Warrants on the Closing Date is conditioned upon:

     A.  Delivery by the Company to Buyer of evidence  that the  Certificate  of
Designation has been filed and is effective.

     B. Delivery by the Company to the Escrow Agent of one or more  certificates
(I/N/O Buyer or I/N/O Buyer's  nominee)  evidencing the Preferred Shares and the
Warrants to be purchased by Buyer pursuant to this Agreement;

     C. The accuracy on the Closing Date of the  representations  and warranties
of the  Company  contained  in this  Agreement  as if made on the  Closing  Date
(except for  representations and warranties which, by their express terms, speak
as of and  relate to a  specified  date,  in which case such  accuracy  shall be
measured as of such  specified  date) and the  performance by the Company in all
respects on or before the Closing Date of all  covenants  and  agreements of the
Company  required to be performed by it pursuant to this  Agreement on or before
the  Closing  Date,  all of which  shall  be  confirmed  to  Buyer by the  chief
executive officer of the Company by delivery of the certificate to that effect;

     D. Buyer having  received an opinion of counsel for the Company,  dated the
Closing Date, in form, scope and substance  reasonably  satisfactory to Buyer as
to the matters set forth in Annex A;



                                      -22-
<PAGE>

     E. There not having  occurred (i) any general  suspension of trading in, or
limitation  on  prices  listed  for,  the  Common  Stock  on  Nasdaq,  (ii)  the
declaration of a banking  moratorium or any suspension of payments in respect of
banks in the United States,  (iii) the commencement of a war, armed  hostilities
or other international or national calamity directly or indirectly involving the
United States or any of its territories,  protectorates or possessions,  or (iv)
in the case of the foregoing existing at the date of this Agreement,  a material
acceleration or worsening thereof;

     F. There not having occurred any event or  development,  and there being in
existence no condition,  having or which reasonably and foreseeable could have a
Material Adverse Effect;

     G. The Company  shall have  delivered  to Buyer (as  provided in the Escrow
Instructions)  reimbursement of Buyer's out-of-pocket costs and expenses whether
or  not  accounted  for  or  incurred  in  connection   with  the   transactions
contemplated by this Agreement  (including the fees and disbursements of Buyer's
legal counsel) of $40,000;

     H. There shall not be in effect any Law or order, ruling,  judgment or writ
of any court or public  or  governmental  authority  restraining,  enjoining  or
otherwise prohibiting any of the transactions contemplated by this Agreement;

     I.  Delivery by the Company of  irrevocable  instructions  to the Company's
transfer agent to reserve  2,000,000  shares of Common Stock for issuance of the
Conversion Shares, the Dividend Shares and the Warrant Shares;

     J. The Company shall have obtained all consents,  approvals or waivers from
governmental authorities and third persons necessary for the execution, delivery
and performance of the Documents and the transactions  contemplated thereby, all
without material cost to the Company; and

     K. Buyer  shall have  received  such  additional  documents,  certificates,
payment,  assignments,  transfers and other delivers, as it or its legal counsel
may  reasonably  request and as are customary to effect a closing of the matters
herein contemplated.

                                 X. TERMINATION

     A. Termination by Mutual Written Consent.  This Agreement may be terminated
and the transactions contemplated hereby may be abandoned, for any reason and at
any time prior to the Closing Date, by the mutual written consent of the Company
and Buyer.

     B.  Termination  by the Company or Buyer.  This Agreement may be terminated
and the  transactions  contemplated  hereby  may be  abandoned  by action of the
Company or Buyer if (i) the Closing  shall not have occurred at or prior to 5:00
p.m.,  New York City time,  on November  8, 1999 (the  "Latest  Closing  Date");
provided,  however,  that the right to terminate this Agreement pursuant to this
Section X.B. shall not be available to any party whose failure to fulfill any of
its  obligations  under this  Agreement has been the cause of or has resulted in

                                      -23-
<PAGE>

the failure of the  Closing to occur at or before such time and date;  provided,
further, however, that if the Closing shall not have occurred on or prior to the
Latest  Closing Date,  the Closing may only occur after the Latest  Closing Date
with the written consent of Buyer.

     C.  Termination  by  Buyer.  This  Agreement  may  be  terminated  and  the
transactions  contemplated hereby may be abandoned by Buyer at any time prior to
the Closing Date, if (i) the Company shall have failed to comply with any of its
covenants or agreements contained in this Agreement,  (ii) there shall have been
a breach by the Company with respect to any  representation  or warranty made by
it in this Agreement,  (iii) there shall have occurred any event or development,
or there shall be in existence any  condition,  having or  reasonably  likely to
have a Material  Adverse Effect or (iv) the Company shall have failed to satisfy
the conditions provided in Section IX hereof.

     D.  Termination  by the Company.  This  Agreement may be terminated and the
transactions  contemplated  hereby may be  abandoned  by the Company at any time
prior to the Closing  Date, if (i) Buyer shall have failed to comply with any of
its covenants or agreements contained in this Agreement or (ii) there shall have
been a breach by Buyer with respect to any representation or warranty made by it
in this Agreement.

     E. Effect of Termination. In the event of the termination of this Agreement
pursuant to this Section X, this Agreement shall thereafter become void and have
no effect,  and no party hereto shall have any  liability or  obligation  to any
other party hereto in respect of this  Agreement,  except that the provisions of
Article XI and this Section X.E. shall survive any such  termination;  provided,
however,  that no party shall be released from any  liability  hereunder if this
Agreement is terminated and the  transactions  contemplated  hereby abandoned by
reason of (i) willful failure of such party to perform its obligations hereunder
or (ii) any misrepresentation made by such party of any matter set forth herein.

                          XI. SURVIVAL; INDEMNIFICATION

     A.  The  representations,  warranties  and  covenants  made  by each of the
Company and Buyer in this Agreement, the annexes,  schedules and exhibits hereto
and in each instrument,  agreement and certificate entered into and delivered by
them pursuant to this Agreement,  shall survive the Closing and the consummation
of the transactions  contemplated  hereby. In the event of a breach or violation
of any of such representations,  warranties or covenants, the party to whom such
representations,  warranties  or covenants  have been made shall have all rights
and remedies for such breach or violation  available to it under the  provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation  made by or on  behalf  of such  party on or prior to the  Closing
Date.

     B. The Company  hereby  agrees to indemnify and hold  harmless  Buyer,  its
Affiliates  and their  respective  officers,  directors,  partners  and  members
(collectively,  the "Buyer  Indemnitees"),  from and  against any and all losses
(except for losses  relating to the economic value of the investment of Buyer in
the  Company),   claims,   damages,   judgments,   penalties,   liabilities  and
deficiencies (collectively, "Losses"), and agrees to reimburse Buyer Indemnitees
for


                                      -24-
<PAGE>

all out of-pocket  expenses  (including the fees and expenses of legal counsel),
in each case promptly as incurred by Buyer Indemnitees and to the extent arising
out of or in connection with:

          1. any  misrepresentation,  omission  of fact or  breach of any of the
     Company's  representations or warranties contained in this Agreement or the
     other Documents, or the annexes, schedules or exhibits hereto or thereto or
     any instrument,  agreement or certificate  entered into or delivered by the
     Company pursuant to this Agreement or the other Documents;

          2.  the  purchase  of the  Preferred  Shares  and  the  Warrants,  the
     conversion  of the  Preferred  Shares,  the exercise of the  Warrants,  the
     consummation  of the  transactions  contemplated  by this Agreement and the
     other  Documents,  the use of any of the proceeds of the Purchase  Price by
     the Company, the purchase or ownership of any or all of the Securities, the
     performance by the parties hereto of their respective obligations hereunder
     and  under  the   Documents  or  any  claim,   litigation,   investigation,
     proceedings  or  governmental  action  relating  to any  of the  foregoing,
     whether or not Buyer is a party thereto; and

          3.  resales  of the  Common  Shares  by  Buyer  in the  manner  and as
     contemplated by this Agreement and the Registration Rights Agreement.

     C. Buyer hereby  agrees to  indemnify  and hold  harmless the Company,  its
Affiliates  and their  respective  officers,  directors,  partners  and  members
(collectively, the "Company Indemnitees"),  from and against any and all Losses,
and agrees to reimburse the Company  Indemnitees for all out-of-pocket  expenses
(including  the fees and expenses of legal  counsel),  in each case  promptly as
incurred  by the  Company  Indemnitees  and to the extent  arising  out of or in
connection with:

          1. any  misrepresentation,  omission  of  fact,  or  breach  of any of
     Buyer's  representations  or warranties  contained in this Agreement or the
     other Documents, or the annexes, schedules or exhibits hereto or thereto or
     any instrument, agreement or certificate entered into or delivered by Buyer
     pursuant to this Agreement or the other Documents; and

          2. any failure by Buyer to perform in any material  respect any of its
     covenants,  agreements,  undertakings  or  obligations  set  forth  in this
     Agreement  or  the  other  Documents  or  any  instrument,  certificate  or
     agreement  entered into or delivered by Buyer pursuant to this Agreement or
     the other Documents.

     D. Promptly  after receipt by either party hereto  seeking  indemnification
pursuant to this Section XI (an  "Indemnified  Party") of written  notice of any
investigation,   claim,   proceeding   or  other  action  in  respect  of  which
indemnification  is being  sought  (each,  a  "Claim"),  the  Indemnified  Party
promptly  shall notify the party against whom  indemnification  pursuant to this
Section  XI is being  sought  (the  "Indemnifying  Party")  of the  commencement
thereof;  but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party except
to the extent that the Indemnifying


                                      -25-
<PAGE>

Party is materially  prejudiced and forfeits  substantive rights and defenses by
reason  of such  failure.  In  connection  with any  Claim as to which  both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying Party
shall be entitled to assume the defense thereof.  Notwithstanding the assumption
of the defense of any Claim by the  Indemnifying  Party,  the Indemnified  Party
shall have the right to employ  separate legal counsel and to participate in the
defense of such Claim,  and the  Indemnifying  Party  shall bear the  reasonable
fees,  out-of-pocket  costs and expenses of such  separate  legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees,  out-of-pocket  costs and expenses,  (y) the Indemnified Party
and the Indemnifying  Party reasonably shall have concluded that  representation
of the Indemnified  Party and the  Indemnifying  Party by the same legal counsel
would not be  appropriate  due to actual or, as  reasonably  determined by legal
counsel to the Indemnified Party,  potentially  differing interests between such
parties in the conduct of the  defense of such  Claim,  or if there may be legal
defenses available to the Indemnified Party that are in addition to or disparate
from those available to the Indemnifying  Party, or (z) the  Indemnifying  Party
shall  have  failed to  employ  legal  counsel  reasonably  satisfactory  to the
Indemnified  Party  within a  reasonable  period  of time  after  notice  of the
commencement  of such Claim.  If the  Indemnified  Party employs  separate legal
counsel in  circumstances  other than as  described  in clauses  (x), (y) or (z)
above,  the fees,  costs  and  expenses  of such  legal  counsel  shall be borne
exclusively by the Indemnified Party. Except as provided above, the Indemnifying
Party  shall not,  in  connection  with any Claim in the same  jurisdiction,  be
liable for the fees and expenses of more than one firm of legal  counsel for the
Indemnified  Party (together with appropriate  local counsel).  The Indemnifying
Party shall not,  without the prior  written  consent of the  Indemnified  Party
(which  consent shall not  unreasonably  be withheld),  settle or compromise any
Claim or  consent  to the  entry  of any  judgment  that  does  not  include  an
unconditional release of the Indemnified Party from all liabilities with respect
to such Claim or judgment.

     E. In the event one party hereunder should have a claim for indemnification
that does not involve a claim or demand  being  asserted by a third  party,  the
Indemnified   Party   promptly  shall  deliver  notice  of  such  claim  to  the
Indemnifying  Party. If the Indemnified  Party disputes the claim,  such dispute
shall  be  resolved  by  mutual  agreement  of the  Indemnified  Party  and  the
Indemnifying  Party or by binding  arbitration  conducted in accordance with the
procedures and rules of the American Arbitration Association.  Judgment upon any
award rendered by any arbitrators  may be entered in any court having  competent
jurisdiction thereof.

                               XII. GOVERNING LAW

     This Agreement  shall be governed by and interpreted in accordance with the
laws of the State of New York, without regard to the conflicts of law principles
of such state.

                        XIII. SUBMISSION TO JURISDICTION

     Each of the parties hereto  consents to the exclusive  jurisdiction  of the
federal courts whose districts encompass any part of the City of New York or the
state  courts  of the  State  of New  York  sitting  in the  City of New York in
connection  with  any  dispute  arising  under  this  Agreement  and  the  other
Documents.  Each party hereto hereby irrevocably and unconditionally  waives, to
the fullest  extent it may  effectively  do so, any  defense of an


                                      -26-
<PAGE>

inconvenient  forum or  improper  venue to the  maintenance  of such  action  or
proceeding  in any such  court and any right of  jurisdiction  on account of its
place  of   residence   or  domicile.   Each  party   hereto   irrevocably   and
unconditionally  consents  to the  service  of any and all  process  in any such
action or  proceeding in such courts by the mailing of copies of such process by
certified or  registered  airmail at its address  specified in Section XIX. Each
party hereto agrees that a final judgment in any such action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.

                            XIV. WAIVER OF JURY TRIAL

     TO THE FULLEST  EXTENT  PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY,  VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY  CLAIM  OR  CAUSE  OF  ACTION  BASED  UPON OR  ARISING  OUT OF THIS
AGREEMENT  OR ANY OTHER  DOCUMENT OR ANY DEALINGS  BETWEEN THEM  RELATING TO THE
SUBJECT  MATTER OF THIS  AGREEMENT  AND OTHER  DOCUMENTS.  EACH PARTY HERETO (i)
CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES,  AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION,  SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS  AGREEMENT  BY, AMONG OTHER  THINGS,  THE
MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

                           XV. COUNTERPARTS; EXECUTION

     This  Agreement  may be executed in any number of  counterparts  and by the
different  parties  hereto  on  separate  counterparts,  each of  which  when so
executed and  delivered  shall be an original,  but all the  counterparts  shall
together  constitute one and the same  instrument.  A facsimile  transmission of
this signed Agreement shall be legal and binding on all parties hereto.

                                  XVI. HEADINGS

     The headings of this  Agreement are for  convenience of reference and shall
not form part of, or affect the interpretation of, this Agreement.

                               XVII. SEVERABILITY

     In the event any one or more of the provisions  contained in this Agreement
or in the other Documents  should be held invalid,  illegal or  unenforceable in
any  respect,  the  validity,  legality  and  enforceability  of  the  remaining
provisions  contained  herein or  therein  shall not in any way be  affected  or
impaired  thereby.  The parties  shall  endeavor in good-faith  negotiations  to
replace the invalid,  illegal or unenforceable  provisions with valid provisions
the economic  effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.



                                      -27-
<PAGE>

            XVIII. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS

     This Agreement and the Documents  constitute the entire agreement among the
parties  pertaining  to the  subject  matter  hereof  and  supersede  all  prior
agreements,  understandings,  negotiations  and  discussions,  whether  oral  or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by all parties.  No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other  provision  hereof  (whether  or not  similar),  nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.

                                  XIX. NOTICES

     Except  as  may  be  otherwise   provided  herein,   any  notice  or  other
communication  or delivery  required or permitted  hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally  recognized overnight courier service, and shall be deemed given
when so delivered  personally or by overnight  courier  service,  or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:

                  A.       if to the Company, to:

                           Compositech Ltd.
                           120 Ricefield Lane
                           Hauppauge, New York  11788
                           Attention:  Samuel Gross
                           (516) 436-5200
                           (516) 436-5203 (Fax)

                           with a copy to:

                           Patterson, Belknap, Webb & Tyler LLP
                           1133 Avenue of the Americas
                           New York, NY  10036
                           Attention:  Edward F. Cox, Esq.
                           (212) 336-2000
                           (212) 336-2222 (Fax)

                  B.       if to Buyer, to:

                           The Shaar Fund Ltd.
                           c/o Levinson Capital Management
                           2 World Trade Center, Suite 1820
                           New York, NY 10048
                           Attention:  Samuel Levinson
                           (212) 432-7711
                           (212) 432-7771 (Fax)



                                      -28-
<PAGE>

                           with a copy to:

                           Cadwalader, Wickersham & Taft
                           100 Maiden Lane
                           New York, NY 10038
                           Attention:  Dennis J. Block, Esq.
                           (212) 504-5555
                           (212) 504-5557 (Fax)

                  C.       if to the Escrow Agent, to:

                           Cadwalader, Wickersham & Taft
                           100 Maiden Lane
                           New York, NY 10038
                           Attention:  Dennis J. Block, Esq.
                           (212) 504-5555
                           (212) 504-5557 (Fax)

The  Company,  Buyer or the Escrow  Agent may change  the  foregoing  address by
notice given pursuant to this Section XIX.

                               XX. CONFIDENTIALITY

     Each of the  Company  and  Buyer  agrees  to keep  confidential  and not to
disclose  to or use for  the  benefit  of any  third  party  the  terms  of this
Agreement  or any other  information  which at any time is  communicated  by the
other  party as being  confidential  without the prior  written  approval of the
other  party;  provided,  however,  that  this  provision  shall  not  apply  to
information  which,  at the time of  disclosure,  is already  part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation,  pursuant to Item 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).

                                 XXI. ASSIGNMENT

     This  Agreement  shall not be  assignable  by either of the parties  hereto
prior to the Closing without the prior written  consent of the other party,  and
any attempted  assignment  contrary to the  provisions  hereby shall be null and
void;  provided,  however,  that Buyer may  assign  its  rights and  obligations
hereunder, in whole or in part, to any affiliate of Buyer.


                                      -29-
<PAGE>


     IN WITNESS  WHEREOF,  the parties  hereto have duly  executed and delivered
this Agreement on the date first above written.


                                        COMPOSITECH LTD.


                                        By:  /s/ Christopher F. Johnson
                                             --------------------------------
                                             Name: Christopher F. Johnson
                                             Title:  President and CEO


                                        THE SHAAR FUND LTD.


                                        By:  /s/ Samuel Levinson
                                             --------------------------------
                                             Name:  Samuel Levinson
                                             Title:  Managing Director



<PAGE>





                                                                     [SEE TAB 2]


                         COMMON STOCK PURCHASE WARRANTS



<PAGE>



                                                                     [SEE TAB 3]


                           CERTIFICATE OF DESIGNATION



<PAGE>



                                                                     [SEE TAB 6]


                               ESCROW INSTRUCTIONS



<PAGE>



                                                                     [SEE TAB 5]

                          REGISTRATION RIGHTS AGREEMENT



<PAGE>



                                                               SCHEDULE III.A.1.


                              OPTIONS AND WARRANTS



<PAGE>



                                                               SCHEDULE III.A.3.


               PREEMPTIVE, SUBSCRIPTION, "CALL" OR SIMILAR RIGHTS



<PAGE>



                                                               SCHEDULE III.A.4.


                                  SUBSIDIARIES



<PAGE>



                                                                 SCHEDULE III.C.


                        ISSUANCES AND SALES OF SECURITIES



<PAGE>



                                                                 SCHEDULE III.E.


                                NON-CONTRAVENTION

<PAGE>



                                                                 SCHEDULE III.K.

                                   LITIGATION



<PAGE>



                                                                 SCHEDULE III.L.

                                EVENTS OF DEFAULT



<PAGE>



                                                                 SCHEDULE III.O.

                           RELATED PARTY TRANSACTIONS



<PAGE>



                                                                 SCHEDULE III.Q.

                             SECURITIES LAW MATTERS



<PAGE>



                                                                 SCHEDULE III.R.


                              ENVIRONMENTAL MATTERS

<PAGE>




                                                                 SCHEDULE III.T.

                                  ERISA MATTERS



<PAGE>



                                                                 SCHEDULE III.V.

                                    PROPERTY


<PAGE>



                                                                 SCHEDULE III.W.

                              INTELLECTUAL PROPERTY


<PAGE>



                                                                 SCHEDULE III.X.


                                    CONTRACTS


<PAGE>



                                                                 SCHEDULE III.Y.

                               REGISTRATION RIGHTS


<PAGE>


                                                                         ANNEX A

                                 FORM OF OPINION

     1. The  Company  has been duly  incorporated  and is validly  existing as a
corporation in good standing under the laws of the State of __________,  is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions  where the Company owns or leases properties or conducts business,
except for  jurisdictions  in which the  failure to so qualify  would not have a
Material Adverse Effect, and has all requisite  corporate power and authority to
own its  properties  and conduct its  business as  described  in the  Commission
Filings.

     2. The  authorized  capital  stock of the Company  consists  of  __________
shares of Common  Stock,  par value $_____ per share (the "Common  Stock"),  and
__________ shares of Preferred Stock, par value $_____ per share.

     3. When  delivered to you or upon your order against  payment of the agreed
consideration  therefor in accordance with the provisions of the Documents,  the
Securities  will  be  duly  authorized  and  validly  issued,   fully  paid  and
nonassessable.

     4. The Company has the  requisite  corporate  power and  authority to enter
into the  Documents  and to sell and deliver the  Securities as described in the
Documents;  each of the  Documents  has been duly and validly  authorized by all
necessary  corporate action by the Company;  each of the Documents has been duly
and validly executed and delivered by and on behalf of the Company, and is valid
and binding agreement of the Company,  enforceable in accordance with its terms,
except  as  enforceability  may be  limited  by  general  equitable  principles,
bankruptcy,  insolvency,  fraudulent conveyance,  reorganization,  moratorium or
other laws affecting creditors rights generally.

     5. The executive,  delivery and performance of the Documents by the Company
and the performance of its obligations thereunder do not and will not constitute
a breach or violation  of any of the terms and  provisions  of, or  constitute a
default (or with notice, lapse of time or both would constitute a default) under
or conflict with or violate any provision of (i) the  Company's  certificate  of
incorporation or bylaws, (ii) any indenture,  mortgage, deed of trust, agreement
or other  instrument  known to us to which the Company is a party or by which it
or any of its  property is bound,  (iii) or, to the best of our  knowledge,  any
judgment,  decree or order of any court or governmental body having jurisdiction
over  the  Company  or any of its  property.  To the best of our  knowledge,  no
consent, approval,  authorization,  order, registration,  filing, qualification,
license or permit of or with any court or any public, governmental or regulatory
agency or body having  jurisdiction over the Company or any of its properties or
assets is required for the execution, delivery and performance by the Company of
the  Documents  or  the   consummation  by  the  Company  of  the   transactions
contemplated thereby.



<PAGE>

     6.  When  issued,  the  Preferred  Shares  and the  Warrants  shall be duly
authorized, validly issued, fully paid and nonassessable,  and free and clear of
all encumbrances and  restrictions,  except for restrictions on transfer imposed
by applicable securities laws. The Conversion Shares and Warrant Shares issuable
upon  conversion  or exercise,  respectively,  of the  Preferred  Shares and the
Warrants,  respectively, will be duly authorized, validly issued, fully paid and
nonassessable,  and free and clear of all encumbrances and restrictions,  except
for restrictions on transfer imposed by applicable securities laws.

     7. Based on Buyer's representations  contained in this Agreement, the offer
and  sale  of the  Preferred  Shares  and  the  Warrants  are  exempt  from  the
registration requirements of the Securities Act.

     8. To the best of our knowledge,  other than as described in the Commission
Filings,  there  are  no  outstanding  options,  warrants  or  other  securities
exercisable or convertible into Common Stock of the Company.

     9. There is no action, suit, claim, inquiry or investigation pending or, to
the best of our  knowledge,  threatened  by or  before  any  court or  public or
governmental authority which, if determined adversely to the Company, would have
a Material Adverse Effect.

     10.  Neither the Company nor any of its  subsidiaries  is, or will be after
the  consummation  of the  transactions  contemplated  by this Agreement and the
other Documents and the use of the proceeds from the sale of the Securities,  an
"investment  company" or an entity  "controlled" by an "investment  company," as
such terms are defined in the Investment Company Act of 1940, as amended.


                                       -2-