Document:

EXHIBIT 3

                          SECURITIES PURCHASE AGREEMENT

                  SECURITIES  PURCHASE AGREEMENT dated as of April 7, 2000 (this
"Agreement"),  by and between Computer  Outsourcing  Services,  Inc., a Delaware
corporation  (the  "Company"),  each of the  purchasers  set forth on Schedule A
attached hereto (each a "Purchaser" and collectively "Purchasers").

                              W I T N E S S E T H:

          WHEREAS, the Company proposes, subject to the terms and conditions set
forth herein,  to issue and sell to Purchasers  157,377 shares (the "Shares") of
its 8% Series A Cumulative Convertible  Participating Preferred Stock, par value
$0.01 per share (the "Series A Preferred Stock"),  together with Series A Common
Stock  Warrants (the  "Warrants")  to purchase an aggregate of 2,531,926  shares
(the  "Warrant  Shares")  of common  stock,  par value  $0.01 per share,  of the
Company (the "Common Stock"), to be issued upon exercise of the Warrants;

          WHEREAS,  Purchaser  desires,  subject to the terms and conditions set
forth herein, to purchase such Series A Preferred Stock from the Company; and

          WHEREAS,  the  parties  intend  that the  proceeds  of the sale of the
Securities will be used to fund the business plan of Infocrossing;

          NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows.

                                    ARTICLE I

                                   DEFINITIONS

          (a) As used in this  Agreement,  the  following  terms  shall have the
following meanings:

          "Affiliate"  means,  with  respect  to any  Person,  any other  Person
directly or indirectly  controlling,  controlled by, or under direct or indirect
common control with, such Person. For the purposes of this definition, "control"
when used with  respect to any Person  means the power to direct the  management
and  policies  of such  Person,  directly  or  indirectly,  whether  through the
ownership  of  voting  securities,  by  contract  or  otherwise;  and the  terms
"controlling" and "controlled" have meanings correlative to the foregoing.

          "Applicable Law" means (a) any United States federal,  state, local or
foreign law, statute,  rule,  regulation,  order,  writ,  injunction,  judgment,
decree or  permit  of any  Governmental  Authority  and (b) any rule or  listing
requirement of any applicable  national stock exchange or listing requirement of
any national  stock  exchange or Commission  recognized  trading market on which
securities  issued  by the  Company  or any of the  Subsidiaries  are  listed or
quoted.

          "Business Day" means any day other than a Saturday, a Sunday, or a day
when  banks  in The  City of New York are  authorized  by  Applicable  Law to be
closed.

          "Capital  Stock"  means  (i)  with  respect  to any  Person  that is a
corporation,  any and all  shares,  interests,  participations,  rights or other
equivalents (however designated) of corporate stock and (ii) with respect to any
other Person, any and all partnership or other equity interests of such Person.

          "Certificate of  Designation"  means the Certificate of Designation of
the Powers,  Preferences  and Other Special  Rights and  Qualifications  thereof
relating to the Series A Preferred Stock, in the form attached hereto as Exhibit
A.

          "Code" means the Internal  Revenue Code of 1986,  as amended from time
to time, and the regulations promulgated and rulings issued thereunder.

          "Commission"   means  the  United  States   Securities   and  Exchange
Commission.

          "Commission  Filings" means all reports,  registration  statements and
other filings filed by the Company with the Commission (and all notes,  exhibits
and schedules thereto and all documents incorporated by reference therein).

          "Company  Disclosure  Schedule"  shall  mean  the  Company  disclosure
schedule delivered by the Purchaser concurrently with the date hereof.

          "Company  Stockholders'  Meeting"  means  the  annual  meeting  of the
Company to be held on or about May 5, 2000, in connection  with the vote of such
stockholders.

          "Confidential Information" shall mean any and all secret, confidential
or  proprietary  technical  and  non-technical  information,  knowledge  or data
regarding  the business,  affairs,  products and accounts of the Company and its
Subsidiaries;  provided, however, that any information disclosed by a disclosing
party  will  be  considered  "Confidential  Information"  of such  party  by the
receiving party only if such information (a) if provided as information fixed in
a tangible medium of expression,  is conspicuously designated as "Confidential",
"Proprietary"  or  some  similar  designation,  or (b) if  provided  orally,  is
identified as  confidential  at the time of disclosure  and confirmed in writing
within thirty (30) days of disclosure.  Notwithstanding anything to the contrary
contained herein,  "Confidential Information" shall not include any information,
knowledge  or data which (a) was in the public  domain at or  subsequent  to the
time such portion was  communicated  to the  receiving  party by the  disclosing
party  through  no fault  of the  receiving  party,  (b) was  rightfully  in the
receiving  party's  possession  free  of  any  obligation  of  confidence  at or
subsequent to the time such portion was  communicated  to the receiving party by
the disclosing  party, (c) was developed by employees or agents of the receiving
party independently of and without reference to any information  communicated to
the receiving  party by the disclosing  party,  or (d) was  communicated  by the
disclosing  party to an  unaffiliated  third  party  free of any  obligation  of
confidence.

          "Contract"  means  any  contract,  lease,  loan  agreement,  mortgage,
security agreement,  trust indenture, note, bond, instrument, or other agreement
or arrangement (whether written or oral).

          "Conversion Shares" means the shares of Common Stock issuable upon the
conversion of the Series A Preferred  Stock in accordance  with the terms of the
Certificate of Designation.

          "DB Capital" shall mean DB Capital Investors, L.P., a Delaware limited
partnership.

          "ERISA" means the Employee  Retirement Income Security Act of 1974, as
amended, and all regulations promulgated  thereunder,  as in effect from time to
time.

          "Equity  Documents"  means this  Agreement,  the  Registration  Rights
Agreement,  the  Certificate  of  Designation,  the  Warrant  Agreement  and the
Stockholders Agreement.

          "Exchange  Act" means the  Securities  Exchange  Act of 1934,  and the
rules and regulations of the Commission promulgated thereunder.

          "GAAP" means United States generally accepted  accounting  principles,
consistently applied.

          "Governmental  Authority"  means (i) any  foreign,  Federal,  state or
local  court  or  governmental  or  regulatory  agency  or  authority,  (ii) any
arbitration board, tribunal or mediator and (iii) any national stock exchange or
Commission  recognized  trading market on which securities issued by the Company
or any of the Subsidiaries are listed or quoted.

          "HSR Act" means the  Hart-Scott-Rodino  Antitrust  Improvements Act of
1976, as amended, and applicable rules and regulations.

          "Infocrossing" shall mean, Infocrossing,  Inc., a Delaware corporation
and a wholly owned Subsidiary of the Company.

          "Lien" means any mortgage,  pledge,  lien,  security interest,  claim,
restriction, charge or encumbrance of any kind.

          "Management  Stockholders"  means the individuals listed on Schedule A
to the Stockholders Agreement, as of the Closing Date.

          "Material  Adverse  Effect"  means a  material  adverse  effect on the
condition (financial or otherwise),  business,  properties, assets, liabilities,
operations,   results  of  operations  or  prospects  of  the  Company  and  the
Subsidiaries, taken as a whole.

          "Permitted  Transferee"  means,  with  respect  to  Purchaser,  or any
Permitted  Transferee of Purchaser,  any Purchaser  Affiliate or an Affiliate of
such holder or any  successor  in  interest  of any of them,  whether by merger,
consolidation,  dissolution,  liquidation, or otherwise, provided, however, that
each  Permitted  Transferee  must  agree  in  writing  pursuant  to a  Permitted
Transferee  Agreement,  in accordance  with the provisions of Section 6.5, to be
bound by the terms, and subject to the conditions, of this Agreement to the same
extent, and in the same manner, as Purchaser prior to the transfer of any Shares
to such Permitted Transferee; and provided, further, that the transfer of Shares
from such  Purchaser to such  Permitted  Transferee  is in  compliance  with all
applicable securities laws.

          "Person"  means  any  individual,  partnership,  corporation,  limited
liability  company,  joint venture,  association,  joint-stock  company,  trust,
unincorporated  organization,  government  or  agency or  political  subdivision
thereof, or other entity.

          "Proxy  Statement"  means the proxy statement and form of proxy mailed
to  the  Company's  Stockholders  on  February  28,  2000,  as  supplemented  by
Supplement and as otherwise supplemented from time to time.

          "Purchaser  Affiliate"  means (a) any direct or indirect holder of any
equity  interests  or  securities  in  Purchaser  (whether  limited  or  general
partners,  members,  stockholders or otherwise), (b) any Affiliate of Purchaser,
(c) any director,  officer, employee,  representative or agent of (i) Purchaser,
(ii) any  Affiliate  of  Purchaser  or (iii) any holder of equity  interests  or
securities  referred  to in clause (a) above or (d) any person who is a "control
person" of  Purchaser,  as defined  under  Section 15 of the  Securities  Act or
Section 20 of the Exchange Act.

          "Registration   Rights   Agreement"  means  the  Registration   Rights
Agreement, to be dated as of the Closing Date, to be entered into by and between
the Company and Purchaser, in the form attached hereto as Exhibit B.

          "Securities" shall mean, collectively, the Shares and the Warrants.

          "Securities  Act" means the  Securities Act of 1933, and the rules and
regulations of the Commission promulgated thereunder.

          "Series A  Preferred  Stock"  has the  meaning  set forth in the first
recital to this  Agreement.  The Series A Preferred  Stock has the  designation,
powers, preferences and rights, and qualifications, limitations and restrictions
thereof set forth in the Certificate of Designation.

          "subsidiary"  means,  with respect to any Person (i) a  corporation  a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such Person,
by a subsidiary of such Person,  or by such Person and one or more  subsidiaries
of such Person,  (ii) a partnership in which such Person or a subsidiary of such
Person is, at the date of  determination,  a general partner of such partnership
and has the power to direct the policies and  management of such  partnership or
(iii) any other  Person  (other  than a  corporation)  in which such  Person,  a
subsidiary  of such Person or such Person and one or more  subsidiaries  of such
Person, directly or indirectly, at the date of determination thereof, has (A) at
least a  majority  ownership  interest  or (B) the power to elect or direct  the
election of a majority of the directors or other governing body of such Person.

          "Subsidiary" means a subsidiary of the Company.

          "Transactions" means the transactions  contemplated by this Agreement.

          "Warrant Agreement" means the Warrant Agreement, to be dated as of the
Closing  Date,  to be entered  into by and  between  the  Company  and the party
thereto, in the form attached hereto as Exhibit C.

          "Warrantholders"   means  the  warrantholders  party  to  the  Warrant
Agreement.

          (b) As used in this  Agreement,  the  following  terms  shall have the
meanings given thereto in the Sections set forth opposite such terms:

        Term                                             Section

        Agreement                                        Preamble
        Closing                                          2.2
        Closing Date                                     2.2
        Common Stock                                     First Recital
        Company                                          Preamble
        Company Property                                 3.18
        DGCL                                             3.2(d)
        Employees                                        3.12(a)
        Employee Benefit Plans                           3.12(a)
        Environmental Claims                             3.18
        Environmental Law                                3.18
        Governmental Licenses                            3.10
        Hazardous Materials                              3.18
        Immigration Laws                                 3.12(i)
        Indemnified Party                                8.1(c)
        indemnified person                               8.1(b)
        Indemnifying Party                               8.1(c)
        Information                                      3.8
        Intellectual Property                            3.11
        Issuance                                         2.1
        Kennedy-Wilson Credit Facility                   3.14
        KW Securities                                    2.1(b)
        Losses                                           8.1(b)
        Material Contracts                               3.15
        Notices                                          8.2
        Permitted Liens                                  3.14
        Permitted Transferee Agreement                   6.5
        Projections                                      3.8
        Purchaser or Purchasers                          Preamble
        Release                                          3.18
        Shares                                           First Recital
        Share Transfer                                   6.5
        Stockholders Agreement                           2.2(d)
        Supplement                                       5.14(b)
        Tax                                              3.13(f)
        Tax Controversy                                  3.13(c)
        Tax Return                                       3.13
        URL                                              3.11
        Warrants                                         First Recital
        Warrant Shares                                   First Recital

                                   ARTICLE II

                                SALE AND PURCHASE

          SECTION 2.1. Agreement to Sell and to Purchase; Purchase Price. (a) On
the Closing Date,  and upon the terms and subject to the conditions set forth in
this  Agreement,  the Company shall issue and sell to  Purchaser,  and Purchaser
shall  purchase  from the  Company,  the  Securities  set  forth  opposite  such
Purchaser's  name on  Schedule  A  attached  hereto  (the  "Issuance"),  for the
aggregate  purchase price set forth opposite such Purchaser's name on Schedule A
attached hereto.

          (b) In lieu of repaying  the  indebtedness  under the  Kennedy  Wilson
Credit Facility in accordance with Section 7.2(n) of this Agreement, the Company
may issue additional  Securities (the "KW Securities") in amounts to be approved
by the Purchasers,  such approval not to be unreasonably  withheld,  in exchange
for all outstanding  notes and other  securities  issued pursuant to the Kennedy
Wilson Credit Facility or any related  agreements or  understandings;  provided,
however, that upon the consummation of such exchange, the Company,  Infocrossing
and its  Subsidiaries  shall have no further  obligation or liability in respect
of, or in  relation  to, the  Kennedy  Wilson  Credit  Facility  or any  related
agreements or  understandings  (other than obligations or liabilities in respect
of the KW Securities).  The terms of any exchange  agreement entered into by the
Company  in  order  to give  effect  to this  Section  2.1(b)  shall  be no more
favorable  to the  holders  of  indebtedness  under the  Kennedy  Wilson  Credit
Facility  than the terms of this  Agreement  are to the  Purchasers  and, in any
event, shall be subject to the reasonable  consent of the Purchasers,  not to be
unreasonably withheld.

          SECTION 2.2.  Closing.  Subject to the  satisfaction  or waiver of the
conditions set forth in this Agreement,  the purchase and sale of the Securities
hereunder (the "Closing") shall take place at 10:00 p.m. at the offices of White
& Case LLP, counsel to Purchaser,  at 1155 Avenue of the Americas, New York, New
York, on the date which is three Business Days after the conditions set forth in
Article  VII have been  satisfied  or on such  other date as the  parties  shall
mutually agree upon (the "Closing Date").

          At the Closing:

          (a) each Purchaser shall deliver:

               (i) against delivery of certificates  representing the Securities
     being purchased by such Purchaser  pursuant to Section 2.1, an amount equal
     to the aggregate purchase price of such Securities as set forth on Schedule
     A attached hereto via wire transfer of immediately  available funds to such
     bank  account as the Company  shall  designate  not later than two Business
     Days prior to the Closing Date; and

               (ii) a copy of the Registration Rights Agreement executed by such
     Purchaser.

               (iii) a copy of the Warrant Agreement executed by such Purchaser.

          (b) The Company shall deliver to Purchasers:

               (i) against  payment of the purchase  price therefor as set forth
     opposite  such  Purchaser's  name on  Schedule  A  attached  hereto,  (A) a
     certificate or certificates representing the Shares being purchased by such
     Purchaser  pursuant to Section 2.1,  which shall be in definitive  form and
     registered in the name of such  Purchaser or its nominee or designee and in
     a single certificate or in such other denominations as such Purchaser shall
     request not later than two Business  Days prior to the Closing Date and (B)
     a certificate or  certificates  for the Warrants  registered in the name of
     such Purchaser or the nominee or designee and in a single certificate or in
     such other denominations as such Purchaser shall request not later than two
     Business Days prior to the Closing Date;

               (ii) an  opinion of counsel  to the  Company,  dated the  Closing
     Date, covering such matters as are customarily covered by such opinions, in
     form and substance acceptable to Purchasers;

               (iii) an officer's  certificate of the Company as contemplated by
     Section 7.2(f);

               (iv) a certificate of the secretary of the Company  setting forth
     (A) a copy of the  Certificate  of  Incorporation  of the  Company  and all
     amendments  thereto  (including,  without  limitation,  the  Certificate of
     Designation)  as in effect on the date hereof and on the  Closing  Date all
     certified by the Secretary of State of the State of Delaware, (B) a copy of
     the  by-laws  of the  Company,  as in effect on the date  hereof and on the
     Closing Date, (C) copies of all resolutions of the Company  authorizing the
     Transactions;  and (D) an  incumbency  certificate  setting forth the name,
     title and  authorized  signature  of each  officer of the  Company who will
     execute documents in connection with the transaction contemplated hereby;

               (v) a  certificate  of the Secretary of each  Subsidiary  setting
     forth (A) a copy of the  Certificate of  Incorporation  or similar  organic
     document of such Subsidiary,  together with all amendments  thereof,  as in
     effect on the date hereof and on the Closing Date,  in each case  certified
     by the  Secretary  of State or similar  authority  of the  jurisdiction  of
     incorporation of such Subsidiary and (B) the by-laws,  operating  agreement
     or any similar document of such Subsidiary;

               (vi) a long-form  good  standing  certificate  of the Company and
     each  Subsidiary  issued by the Secretary of State of the relevant state of
     organization;

               (vii) a copy of the Registration Rights Agreement executed by the
     Company and Zach Lonstein; and

               (viii) a copy of the Warrant Agreement executed by the Company.

          (c) The  Company  shall  deliver to DB  Capital  (or its  designee)  a
transaction  fee equal to  $1,200,000  in  immediately  available  funds by wire
transfer to an account  designated by Purchaser at least two Business Days prior
to the Closing Date.

          (d) The Company shall deliver to Purchasers the Stockholders Agreement
in the form of Exhibit D hereto,  executed  by the  Company  and the  Management
Stockholders (the "Stockholders Agreement").

          (e) The Company shall deliver to Purchasers evidence of the payment of
all costs and expenses of  Purchasers  required to be  reimbursed by the Company
pursuant to Section 8.10 hereof.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES
                                 OF THE COMPANY

          The Company  hereby  represents  and warrants to each Purchaser on the
date hereof and on and as of the Closing Date as follows:

          SECTION  3.1.   Organization  and  Standing.   Each  of  the  Company,
Infocrossing and the other Subsidiaries is duly organized,  validly existing and
in good  standing  under  the  laws of its  state of  incorporation  and has all
requisite corporate power and authority to own, lease and operate its properties
and  assets and to carry on its  business  as it is now being  conducted  and as
proposed  to be  conducted.  Each of the  Company,  Infocrossing  and the  other
Subsidiaries is duly qualified to transact business as a foreign corporation and
is in  good  standing  in  each  jurisdiction  in  which  the  character  of the
properties  owned or  leased  by it or the  nature of its  business  makes  such
qualification  necessary,  except for any such  failures  to so qualify or be in
good standing that would not,  individually  or in the aggregate,  reasonably be
expected  to have a Material  Adverse  Effect.  The  Company  has  delivered  to
Purchasers   true  and  complete   copies  of  the  Company's   Certificate   of
Incorporation,  as amended to date, and by-laws, as in effect on the date hereof
and the certificates of incorporation,  by-laws or other similar  organizational
documents of Infocrossing and its other  Subsidiaries,  in each case, as amended
through the date hereof.

          SECTION 3.2.  Capital  Stock;  Warrants.  (a) As of April 4, 2000, the
authorized Capital Stock of the Company consists solely of (i) 10,000,000 shares
of Common Stock, of which  5,009,487  shares are issued and  outstanding,  5,608
shares are held in treasury and  1,160,100  are  reserved for issuance  upon the
exercise of outstanding warrants,  options and other convertible or exchangeable
securities  (other than the Securities),  and (ii) 1,000,000 shares of preferred
stock, par value $0.01 per share, of which,  prior to the issuance of the Shares
on the  Closing  Date as  contemplated  by this  Agreement,  no shares have been
designated and no shares are issued or outstanding.  As of the Closing Date, the
authorized  Capital Stock of the Company will consist  solely of (i)  50,000,000
shares of Common Stock, of which 5,009,487 shares will be issued and outstanding
(assuming no additional exercises of existing stock options),  5,608 shares will
be held in  treasury  and  1,509,600  will be  reserved  for  issuance  upon the
exercise of outstanding warrants,  options and other convertible or exchangeable
securities  (other than the Securities),  and (ii) 3,000,000 shares of preferred
stock,  par value $0.01 per share of which,  prior to the issuance of the Shares
on such date, as contemplated by this Agreement, no Shares will be designated or
outstanding.  Each share of Capital Stock of the Company that will be issued and
outstanding immediately following the Closing,  including without limitation the
Shares,  will  be  duly  authorized  and  validly  issued  and  fully  paid  and
nonassessable,  and the  issuance  thereof  will not have  been  subject  to any
preemptive rights or made in violation of any Applicable Law.

          (b)  Except as set forth on  Schedule  3.2 of the  Company  Disclosure
Schedule,  as of the date of this  Agreement,  there are and on the Closing Date
there  will be (i) no  outstanding  options,  warrants,  agreements,  conversion
rights,  exchange rights,  preemptive rights or other rights (whether contingent
or not) to subscribe for,  purchase or acquire any issued or unissued  shares of
Capital Stock of the Company or any Subsidiary,  and (ii) no restrictions  upon,
or  Contracts or  understandings  of the Company or any  Subsidiary,  or, to the
knowledge of the Company,  Contracts or understandings of any other Person, with
respect to, the voting or transfer of any shares of Capital Stock of the Company
or any Subsidiary. Infocrossing is a wholly owned subsidiary of the Company.

          (c) The  Conversion  Shares  have been  duly  authorized  and  validly
reserved  for  issuance  in  contemplation  of the  conversion  of the  Series A
Preferred  Stock and, when issued and delivered in accordance  with the terms of
the Certificate of Designation,  will have been validly issued and will be fully
paid and  nonassessable,  and the issuance thereof will not have been subject to
any preemptive rights or made in violation of any Applicable Law.

          (d) The holders of the Series A Preferred  Stock will,  upon  issuance
thereof, have the rights set forth in the Certificate of Designation (subject to
the  limitations  and  qualifications  set forth  therein  and under the General
Corporation Law of the State of Delaware (the "DGCL")).

          (e) The Warrants  have been duly  authorized  by the Company and, when
issued  and  delivered  by the  Company  in  accordance  with the  terms of this
Agreement and the Warrant  Agreement will  constitute  valid and legally binding
obligations of the Company, enforceable in accordance with their terms.

          (f) The  Warrant  Shares  have been duly and  validly  authorized  and
validly  reserved for issuance in  contemplation of the exercise of the Warrants
and,  when  issued and  delivered  in  accordance  with the terms of the Warrant
Agreement,  will be  validly  issued,  fully  paid and  non-assessable,  and the
issuance thereof will not have been subject to any pre-emptive rights or made in
violation of Applicable Law.

          SECTION  3.3.  Authorization;  Enforceability.  The  Company  has  all
necessary  power and authority to execute,  deliver and perform its  obligations
under  each of the  Equity  Documents,  and has taken all  action  necessary  to
authorize the execution,  delivery and  performance by it of each of such Equity
Documents and to  consummate  the Issuance.  No other  corporate or  stockholder
proceeding  (other  than  the  approval  of  the  stockholders  of  the  Company
contemplated  by Section  5.14) on the part of the Company is necessary for such
authorization,  execution,  delivery  and  consummation.  The  Company  has duly
executed and delivered this Agreement and, at the Closing, the Company will have
duly  executed and delivered  each of the other Equity  Documents to be executed
and delivered at or prior to Closing.  This Agreement  constitutes,  and each of
the other Equity  Documents,  when executed and  delivered by the Company,  will
constitute,  a legal, valid and binding  obligation of the Company,  enforceable
against the Company in accordance with its terms.

          SECTION 3.4. No Violation;  Consents. (a) The execution,  delivery and
performance by the Company of each of the Equity  Documents and the consummation
by the Company of the  Issuance do not and will not  contravene  any  Applicable
Law. Except as set forth on Schedule 3.4 of the Company Disclosure Schedule, the
execution,  delivery  and  performance  by the  Company  of each  of the  Equity
Documents and the consummation of the Issuance (i) will not (A) violate,  result
in a breach of or  constitute  (with or  without  due notice or lapse of time or
both) a  default  (or give  rise to any right of  termination,  cancellation  or
acceleration) under any Contract to which the Company, Infocrossing or any other
Subsidiary  is a party or by which the Company,  Infocrossing  or any other such
Subsidiary  is bound or to which any of its assets is subject,  or (B) result in
the  creation or  imposition  of any Lien upon any of the assets of the Company,
Infocrossing or any other Subsidiary, except for any such violations,  breaches,
defaults or Liens that would not,  individually or in the aggregate,  reasonably
be expected to have a Material  Adverse Effect or have a material adverse effect
on the  ability  of the  Company  to perform  its  obligations  under the Equity
Documents  and (ii) will not  conflict  with or  violate  any  provision  of the
certificate  of  incorporation  or by-laws or other  governing  documents of the
Company, Infocrossing or the other Subsidiaries.

          (b) Except for (i) the filings by the Company, if any, required by the
HSR Act, (ii) applicable  filings,  if any,  required by applicable  federal and
state  securities laws and (iii) filing of the  Certificate of Designation  with
the  Secretary of State of the State of Delaware,  in each case,  which shall be
made (to the extent  required)  on or prior to the  Closing  Date,  no  consent,
authorization  or order of, or filing or  registration  with,  any  Governmental
Authority  or other Person is required to be obtained or made by the Company for
the execution, delivery and performance of this Agreement or the consummation by
the Company of the Issuance,  or for the execution,  delivery and performance by
the  Company of the Equity  Documents,  except  where the failure to obtain such
consents, authorizations or orders, or make such filings or registrations, would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse  Effect or a material  adverse  effect on the  ability of the Company to
perform its obligations under the Equity Documents.

          SECTION 3.5. Commission Filings; Financial Statements. (a) The Company
has  timely  filed all  reports,  registration  statements  and  other  filings,
together  with any  amendments or  supplements  required to be made with respect
thereto,  that it has been  required  to file  with  the  Commission  under  the
Securities Act and the Exchange Act. As of the respective  dates of their filing
with the Commission,  the Commission  Filings complied in all material  respects
with the  applicable  provisions of the  Securities Act and the Exchange Act and
did not  contain  any untrue  statement  of a  material  fact or omit to state a
material fact required to be stated  therein or necessary to make the statements
made therein,  in the light of the circumstances under which they were made, not
misleading.

          (b) Each of the historical  consolidated  financial  statements of the
Company  (including  any related notes or schedules)  included in the Commission
Filings  was  prepared  in  accordance  with GAAP  (except  as may be  disclosed
therein),  and complied in all material  respects with the rules and regulations
of the Commission.  Such financial  statements  fairly present the  consolidated
financial  position of the Company and the  Subsidiaries as of the dates thereof
and  the  consolidated  results  of  operations,   cash  flows  and  changes  in
stockholders'  equity for the periods  then ended  (subject,  in the case of the
unaudited  interim financial  statements,  to normal,  recurring  year-end audit
adjustments).  Except as set forth or reflected in the Commission  Filings filed
prior  to the date  hereof,  the  Company  does  not  have  any  liabilities  or
obligations of any nature (whether accrued, absolute, contingent,  unasserted or
otherwise)  that  individually  or in the aggregate  would be expected to have a
Material Adverse Effect.

          SECTION 3.6.  Absence of Certain  Changes.  Except as disclosed in the
Commission  Filings  filed prior to the date  hereof or on  Schedule  3.6 of the
Company Disclosure Schedule,  since October 31, 1999, there has not been (i) any
event,  occurrence or development of a state of  circumstances  or facts (or the
failure of any of the  foregoing to occur) that has had, or would  reasonably be
expected to have (a) a Material  Adverse Effect or (b) a material adverse effect
on the ability of the Company to perform its obligations under this Agreement or
the Equity Documents;  (ii) the businesses of the Company,  Infocrossing and the
other  Subsidiaries  have been  conducted  only in the  ordinary  course;  (iii)
neither the Company,  Infocrossing or any of the other Subsidiaries has incurred
any material  liabilities  (direct,  contingent  or otherwise) or engaged in any
material  transaction  or entered  into any  material  agreement  outside of the
ordinary  course of  business,  except  that on January  26,  2000,  the Company
entered into the Kennedy-Wilson Credit Facility; (iv) the Company,  Infocrossing
and its other Subsidiaries have not increased the compensation of any officer or
director or granted any general salary or benefits  increase,  other than in the
ordinary course of business;  (v) neither the Company,  Infocrossing  nor any of
the other  Subsidiaries  has taken any action referred to in Section 5.1, except
as permitted  thereby and,  except that on January 26, 2000, the Company entered
into the  Kennedy-Wilson  Credit  Facility;  (vi) there has been no declaration,
setting  aside or payment of any  dividend or  distribution  with respect to any
Capital Stock of the Company;  or (vii) there has been no change by the Company,
Infocrossing or the other  Subsidiaries in accounting  principles,  practices or
methods.

          SECTION 3.7. Private Offering. The offer and sale of the Securities is
exempt  from  the  registration  and  prospectus  delivery  requirements  of the
Securities  Act.  Neither the  Company,  nor anyone  acting on behalf of it, has
offered or sold or will offer or sell any securities,  or has taken or will take
any other action (including,  without limitation, any offering of any securities
of the Company under circumstances that would require, under the Securities Act,
the  integration  of such  offering  with the  offering and sale of the Shares),
which  would  subject  the  Issuance  to  the  registration  provisions  of  the
Securities Act.

          SECTION 3.8. Provided Information.  All written information (excluding
information of a general economic nature and financial  projections)  concerning
the Company,  Infocrossing and the other  Subsidiaries and the Transactions (the
"Information")  that has been or will be prepared by or on behalf of the Company
or any of the  Company's  authorized  representatives  and that has been made or
will be made available to Purchaser or any of their  authorized  representatives
in connection with the Issuance,  when taken as a whole,  was or will be, at the
time made available,  correct in all material  respects and did not or will not,
at the time made available,  contain any untrue  statement of a material fact or
omit to  state a  material  fact  necessary  in  order  to make  the  statements
contained therein not misleading in light of the circumstances  under which such
statements  are  made.  All  financial   projections   concerning  the  Company,
Infocrossing and the Issuance (the  "Projections") that have been prepared by or
on behalf of the Company or any of the Company's authorized  representatives and
that  have  been or will be made  available  to the  Purchasers  or any of their
authorized representatives in connection with the Issuance have been, and at the
time made available will be, reasonably  prepared on a basis reflecting the best
currently  available  estimates and judgments of the Company's  management as to
the  future  financial  performance  of the  Company,  Infocrossing,  the  other
Subsidiaries and the individual business segments thereof.

          SECTION 3.9. Litigation. Except as disclosed in the Commission Filings
or as set forth in Schedule 3.9, there is no action, suit,  proceeding at law or
in equity,  or any arbitration or any  administrative  or other proceeding by or
before  (or  to  the  knowledge  of  the  Company  any   investigation  by)  any
Governmental  Authority,  pending,  or, to the best  knowledge  of the  Company,
threatened,  against or affecting the Company,  Infocrossing or any of its other
Subsidiaries,  or any of their  properties or rights which could have a Material
Adverse  Effect or would be  reasonably  likely to prevent or  materially  delay
consummation  of the  Transactions.  There are no such suits,  actions,  claims,
proceedings  or  investigations  pending or, to the  knowledge  of the  Company,
threatened,  seeking to prevent or challenging the transactions  contemplated by
this Agreement. Except as disclosed in the Commission Filings filed prior to the
date hereof, neither the Company, Infocrossing nor any of its other Subsidiaries
is subject to any judgment, order or decree entered in any lawsuit or proceeding
which  could  have a material  adverse  effect on the  ability  of the  Company,
Infocrossing  or any other  Subsidiary  to conduct  its  business  as  presently
conducted  or  contemplated  to be conducted  or would be  reasonably  likely to
prevent or materially delay consummation of the Transactions.

          SECTION 3.10. Permits and Licenses. The Company,  Infocrossing and the
other Subsidiaries have obtained all governmental permits, licenses,  franchises
and  authorizations  required  for  the  Company,  Infocrossing  and  the  other
Subsidiaries  to conduct  their  respective  businesses  as currently  conducted
(collectively,  "Governmental Licenses"),  except for those of which the failure
to obtain  would not have a Material  Adverse  Effect or  prevent or  materially
delay the consummation of the  Transactions;  the Company,  Infocrossing and the
other  Subsidiaries,  except where the failure to so comply would not, singly or
in the aggregate,  reasonably be expected to (i) have a Material  Adverse Effect
or (ii) prevent or materially delay the consummation of the Transactions, are in
compliance with the terms and conditions of all such Governmental  Licenses; all
of the Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such Governmental
Licenses to be in full force and effect would not  reasonably be expected to (i)
have a  Material  Adverse  Effect,  or (ii)  prevent  or  materially  delay  the
consummation of the Transactions;  and neither the Company, Infocrossing nor any
of the other Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly or in
the  aggregate,  if the subject of an unfavorable  decision,  ruling or finding,
would  reasonably  be  expected  to (i) have a Material  Adverse  Effect or (ii)
prevent or materially delay the consummation of the  Transactions.  There exists
no reason or cause that could justify the variation, suspension, cancellation or
termination of any such Governmental Licenses held by the Company,  Infocrossing
or any of the other  Subsidiaries  with  respect to the current or  contemplated
operation  of  their  respective   businesses,   which  variation,   suspension,
cancellation or termination  could reasonably be expected to (i) have a Material
Adverse  Effect or (ii)  prevent or  materially  delay the  consummation  of the
Transactions.

          SECTION  3.11.  Intellectual  Property,  etc. In the  operation of its
business the Company,  Infocrossing  any the other  Subsidiaries  have used, and
currently  use,  domestic  and  foreign  patents,  patent  applications,  patent
licenses,   software  licenses,  know-how  licenses,  trade  names,  trademarks,
copyrights,  unpatented inventions,  service marks, trademark  registrations and
applications,   service   mark   registrations   and   applications,   copyright
registrations and applications,  uniform resource  locators  ("URLs"),  Internet
domain names, trade secrets and other  confidential and proprietary  information
(collectively  the  "Intellectual  Property").  Schedule  3.11  of  the  Company
Disclosure  Schedule  contains an accurate and complete list of all Intellectual
Property which is of material importance to the operation of the business of the
Company,  Infocrossing  or any  of  the  other  Subsidiaries.  Unless  otherwise
indicated  in  the  Commission  Filings  or on  Schedule  3.11  of  the  Company
Disclosure Schedule,  the Company (or the Subsidiary  indicated) owns the entire
right,  title and interest in and to the  Intellectual  Property  listed on such
Schedule 3.11 of the Company Disclosure Schedule (including, without limitation,
the  exclusive  right to sue and  license  the same) free and clear of any Liens
(and without  obligation  to pay any royalty or other fee with respect  thereto)
and each item constituting  part of the Intellectual  Property which is owned by
the Company, Infocrossing or any other Subsidiary and listed on Schedule 3.11 of
the Company  Disclosure  Schedule has been, to the extent  indicated in Schedule
3.11 of the Company  Disclosure  Schedule,  duly  registered  with,  filed in or
issued by, as the case may be, the United States Patent and Trademark  Office or
such other government  entities,  domestic or foreign,  or a duly accredited and
appropriate  domain name  registrar,  as are  indicated in Schedule  3.11 of the
Company Disclosure Schedule and such registrations, filings and issuances remain
in full force and effect.  Neither the Company's,  Infocrossing's  or any of the
other  Subsidiaries' use or practice of the Intellectual  Property infringes any
other Person's  rights thereto.  No Intellectual  Property set forth on Schedule
3.11 of the  Company  Disclosure  Schedule  has  been  canceled,  abandoned,  or
otherwise  terminated and all renewal fees (if  applicable)  in respect  thereof
have been duly paid. Except as stated in Schedule 3.11 of the Company Disclosure
Schedule,  there  are  no  pending  or to the  best  knowledge  of the  Company,
threatened  proceedings or litigation or other adverse claims  affecting or with
respect to the  Intellectual  Property  listed on  Schedule  3.11 of the Company
Disclosure Schedule.  Schedule 3.11 of the Company Disclosure Schedule lists all
notices or claims currently pending or received by the Company,  Infocrossing or
any of its  other  Subsidiaries  during  the  past two  years  which  claim,  as
applicable,  infringement,  contributory  infringement,  inducement to infringe,
misappropriation,  misuse or breach by the Company,  Infocrossing  or any of its
other Subsidiaries with respect to any Intellectual  Property or license thereof
and,  except as set forth on Schedule 3.11 of the Company  Disclosure  Schedule,
there is, to the knowledge of the Company,  no  reasonable  basis upon which any
such claim may be asserted.  To the best  knowledge  of the  Company,  except as
indicated  on Schedule  3.11 of the Company  Disclosure  Schedule,  no Person is
infringing, misappropriating or misusing any of the Intellectual Property.

          SECTION 3.12.  Employee  Benefit  Plans and  Employment  Matters.  (a)
Schedule  3.12 of the  Company  Disclosure  Schedule  sets  forth as of the date
hereof a true and complete list of each  "employee  benefit plan" (as defined in
Section 3(3) of ERISA) of the Company,  Infocrossing and its other  Subsidiaries
in  which  current  or  former  employees,  agents,  directors,  or  independent
contractors of the Company, Infocrossing or its other Subsidiaries ("Employees")
participate or pursuant to which the Company or any of its Subsidiaries may have
a liability  with respect to Employees  (each,  an "Employee  Plan").  Except as
disclosed  in  the  Commission  Filings  or on  Schedule  3.12  of  the  Company
Disclosure  Schedule,  neither the  Company,  Infocrossing  nor any of its other
Subsidiaries has any commitment to establish any additional Employee Plans or to
modify or change  materially  any existing  Employee  Plan. The Company has made
available  to  Purchaser  with  respect to each  Employee  Plan:  (i) a true and
complete copy of all written documents  comprising such Employee Plan (including
amendments and individual  agreements  relating thereto) or, if there is no such
written  document,  an accurate and complete  description of such Employee Plan;
and (ii) the most recent financial statements, if any.

          (b)  Each  Employee  Plan  has  been  established  and  maintained  in
substantial  compliance  with its terms and the  requirements  of all Applicable
Law, and all  contributions  required to be made to the Employee Plans have been
made in a timely fashion.

          (c) Each Employee Plan which is intended to be "qualified"  within the
meaning of Section  401(a) of the Code has  received a  favorable  determination
letter or opinion letter from the Internal Revenue Service and, to the Company's
knowledge,  no event has occurred and no condition exists which could reasonably
be  expected to result in the  revocation  of any such  determination  letter or
opinion letter

          (d)  Neither  the  Company,  Infocrossing  nor  any  other  Subsidiary
currently  maintains  or  contributes  to,  or  has at any  time  maintained  or
contributed  to or been  obligated  to  contribute  to,  any  plan,  program  or
arrangement  covered by Title IV of ERISA or subject to Section  412 of the Code
or Section 302 of ERISA.

          (e) Neither the Company,  Infocrossing nor any other Subsidiary,  nor,
to the  Company's  knowledge,  any  other  "disqualified  person"  or  "party in
interest"  (as defined in Section  4975(e)(2)  of the Code and Section  3(14) of
ERISA,  respectively)  has engaged in any  transactions  in connection  with any
Employee Plan that could reasonably be expected to result in the imposition of a
material penalty pursuant to Section 502 of ERISA,  material damages pursuant to
Section 409 of ERISA or a material tax pursuant to Section 4975 of the Code.

          (f) Except as set forth in the Commission  Filings or on Schedule 3.12
of the Company  Disclosure  Schedule,  none of the  execution or delivery of the
Equity Documents or the consummation of the transactions  contemplated hereby or
thereby  (either  alone or together with any  additional or subsequent  events),
constitutes an event under any Employee Plan,  loan to, or individual  agreement
or contract with, an Employee that may result in any material  payment  (whether
of severance pay or otherwise), restriction or limitation upon the assets of any
Employee  Plan,  acceleration  of payment or  vesting,  increase  in benefits or
compensation,  or  required  funding,  with  respect  to  any  Employee,  or the
forgiveness of any loan or other commitment of any Employees.

          (g)   There   are  no   actions,   suits,   arbitrations,   inquiries,
investigations  or other  proceedings  (other than routine  claims for benefits)
pending or, to the Company's knowledge, threatened, with respect to any Employee
Plan,  except for any of the foregoing  that do not and would not  reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.

          (h) No amounts  paid or payable by the  Company,  Infocrossing  or any
other Subsidiary to or with respect to any Employee  (including any such amounts
that may be  payable as a result of the  execution  and  delivery  of the Equity
Documents  or  the  consummation  of the  transactions  contemplated  hereby  or
thereby)  will fail to be  deductible  for  United  States  federal  income  tax
purposes by reason of Section 280G of the Code,  except as would not  reasonably
be expected, individually or in the aggregate to have a Material Adverse Effect.

          (i) the  Company,  Infocrossing  and  the  other  Subsidiaries  are in
compliance  in all  material  respects  with the  terms  and  provisions  of the
Immigration  Reform  and  Control  Act of  1986,  as  amended,  and all  related
regulations  promulgated  thereunder (the "Immigration  Laws").  With respect to
each employee of the Company, Infocrossing and the other Subsidiaries,  for whom
compliance with the Immigration Laws is required,  the Company has supplied,  or
shall supply prior to the Closing Date, to Purchaser  such  employee's  Form I-9
(Employment Eligibility  Verification Form) and all other records,  documents or
other papers which are  retained  with the Form I-9 by the employer  pursuant to
the Immigration Laws. The Company,  Infocrossing and the other Subsidiaries have
never been the  subject  of any  inspection  or  investigation  relating  to its
compliance with or violation of the Immigration Laws, nor have they been warned,
fined or  otherwise  penalized  by reason of any such failure to comply with the
Immigration  Laws,  nor is  any  such  proceeding  pending  or to the  Company's
knowledge, threatened.

          (j) Except as set forth in the Commission  Filings or on Schedule 3.12
of the Company  Disclosure  Schedule,  the Company,  Infocrossing  and the other
Subsidiaries are in compliance in all material respects with all Applicable Laws
respecting employment and employment  practices,  terms and conditions and wages
and hours.

          SECTION  3.13.  Taxes.  Except  as set forth on  Schedule  3.13 of the
Company Disclosure Schedule:

          (a) The Company,  Infocrossing and the other  Subsidiaries have timely
filed or caused to be timely filed all income Tax Returns and all material other
United States federal,  state, county, local and foreign Tax Returns required to
be filed by or with respect to them. Such Tax Returns have accurately  reflected
all liability for Taxes of the Company,  Infocrossing and the other Subsidiaries
for the periods  covered  thereby.  All Taxes have been paid in full on a timely
basis other than (1) Taxes which individually or, together with all other unpaid
Taxes,  are immaterial,  or (2) Taxes which are being contested in good faith by
appropriate proceedings,  diligently pursued, and which have been fully reserved
on the balance sheet of the Company. The amount of the liability of the Company,
Infocrossing and the other  Subsidiaries for unpaid Taxes for all periods ending
on or before October 31, 1999, does not, in the aggregate,  exceed the amount of
the current liability accrual for Taxes (including  reserves for deferred Taxes)
reflected  on the  Company's  October  31,  1999  balance  sheet;  and all Taxes
liabilities of the Company,  Infocrossing and the other  Subsidiaries since such
time have been  incurred in the  ordinary  course of  business  of the  Company,
Infocrossing or the other Subsidiaries, as the case may be; and all material Tax
liabilities  since such time have been set forth on the books and records of the
Company,  Infocrossing or another Subsidiary,  as the case may be, and disclosed
to Purchaser prior to the date hereof.

          (b) There are no material Tax  assessments  or  adjustments  that have
been asserted  against the Company,  Infocrossing or the other  Subsidiaries for
any period.

          (c) There are no audits,  examinations,  actions, suits,  proceedings,
investigations,  claims  or  assessments  pending  or, to the  knowledge  of the
Company,  threatened,  against  the  Company,  Infocrossing  or any of the other
Subsidiaries for any alleged deficiency in any Tax (a "Tax Controversy") and the
Company  has not been  notified  of any  proposed  Tax  Controversy  against the
Company,  Infocrossing  or any  of  the  other  Subsidiaries  (other  than a Tax
Controversy set forth on Schedule 3.13 of the Company Disclosure  Schedule which
is  being  contested  in  good  faith).  There  are  no  "deferred  intercompany
transactions" or "intercompany  transactions"  the gain or loss in which has not
yet been taken into account under the consolidated  return Treasury  Regulations
currently or previously in effect. Neither the Company,  Infocrossing nor any of
the other  Subsidiaries have been included in any  "consolidated,"  "unitary" or
"combined"  Tax  Return  provided  for under the law of the United  States,  any
foreign  jurisdiction  or any state or  locality  with  respect to Taxes for any
taxable period for which the statute of limitations has not expired. The Company
has  delivered to Purchaser  correct and  complete  copies of all United  States
federal,  state,  and foreign  income Tax Returns (to the extent filed as of the
date  hereof  or, if not  filed,  correct  and  complete  copies  of  extensions
thereof),  examination reports,  statements of deficiencies  assessed against or
agreed to by the  Company  and any of its  Subsidiaries,  or any  other  similar
correspondence from a taxing authority, relating to taxable years 1997, 1998 and
1999.

          (d)  There  are no liens  for  Taxes  on the  assets  of the  Company,
Infocrossing  or any of the other  Subsidiaries,  except for statutory liens for
current Taxes not yet due and payable.

          (e)  (i)  Neither  the  Company,  Infocrossing  nor  any of the  other
Subsidiaries  has entered into an agreement or waiver or been requested to enter
into an agreement or waiver extending any statute of limitations relating to the
payment or collection of Taxes of the Company,  Infocrossing or any of the other
Subsidiaries.

          (ii) All Taxes  which the  Company,  Infocrossing  or any of the other
Subsidiaries  is (or was)  required by law to  withhold  or collect  (other than
immaterial  amounts) have been duly withheld or collected,  and have been timely
paid over to the proper authorities to the extent due and payable.

          (iii) No  claim  has  ever  been  made by any  taxing  authority  in a
jurisdiction  where the Company,  Infocrossing or any of the other  Subsidiaries
does not file Tax Returns  that the  Company,  Infocrossing  or any of the other
Subsidiaries is or may be subject to taxation by that jurisdiction.

          (iv) There are no tax sharing, allocation,  indemnification or similar
agreements  in  effect  as  between  the  Company,  Infocrossing  or  the  other
Subsidiaries or any  predecessor or affiliate  thereof and any other party under
which the Company,  Infocrossing,  any other  Subsidiary,  or Purchaser could be
liable for Taxes or other claims of any third party.

          (v)  Neither  the   Company,   Infocrossing   nor  any  of  the  other
Subsidiaries has applied for, been granted,  or agreed to any accounting  method
change for which it will be required to take into account any  adjustment  under
Section  481  of  the  Code  or  any  similar  provision  of  the  Code  or  the
corresponding tax laws of any nation, state or locality.

          (vi) No  election  under  Section  341(f) of the Code has been made or
shall be made prior to the Closing  Date to treat the Company,  Infocrossing  or
any of the other Subsidiaries as a consenting corporation, as defined in Section
341 of the Code.

          (vii)  Neither  the  Company,   Infocrossing  nor  any  of  the  other
Subsidiaries  is a party  to any  agreement  that  would  require  the  Company,
Infocrossing  or any of its  Subsidiaries  or any affiliate  thereof to make any
payment  that would  constitute  an "excess  parachute  payment" for purposes of
Sections 280G and 4999 of the Code.

          (viii)  Neither  the  Company,  Infocrossing  nor  any  of  the  other
Subsidiaries is a "United States real property holding  corporation"  within the
meaning of Section 897(c)(2) of the Code.

          (f) For  purposes of this  Agreement,  the term "Tax" means any United
States federal,  state, county or local, or foreign or provincial income,  gross
receipts,  profits, capital gains, capital stock, occupation,  severance, stamp,
withholding,  property,  sales, use,  license,  excise,  franchise,  employment,
payroll, value added,  alternative or added minimum, ad valorem or transfer tax,
or any  other  tax,  levy,  custom,  duty  or  governmental  fee or  other  like
assessment  or charge of any kind  whatsoever  (whether  payable  directly or by
withholding  and whether or not requiring the filing of a Tax Return),  together
with all estimated taxes, deficiency assessments,  additions to tax, interest or
penalties imposed by any Governmental Authority, and shall include any liability
for  such  amounts  as a  result  either  of  being  a  member  of  a  combined,
consolidated,  unitary or  affiliated  group or of a  contractual  obligation to
indemnify  any person or other  entity.  The term "Tax  Return"  means a report,
return or other information  (including any attached schedules or any amendments
to such report, return or other information) required to be supplied to or filed
with  any  Governmental   Authority  with  respect  to  any  Tax,  including  an
information return, claim for refund, amended return or declaration or estimated
Tax.

          SECTION 3.14. Title to Assets.  The Company,  Infocrossing and each of
the other  Subsidiaries  has good,  valid and marketable title to (i) all of its
material tangible properties and assets (real and personal),  including, without
limitation,  all the properties and assets reflected in the consolidated balance
sheet as of October 31, 1999 except as indicated in the notes thereto and except
for  properties  and assets  reflected in the  consolidated  balance sheet as of
October 31, 1999 which have been sold or  otherwise  disposed of in the ordinary
course of business  after such date,  and (ii) all the tangible  properties  and
assets  purchased by the Company and any of its  Subsidiaries  since October 31,
1999 except for such  properties  and assets  which have been sold or  otherwise
disposed of in the ordinary course of business; in each case subject to no Lien,
except for Permitted Liens. "Permitted Liens" means: (i) Liens for Taxes not yet
due or  payable;  (ii)  Liens  reflected  in the  Commission  Filings  and Liens
pursuant  to the Loan and  Security  Agreement  by and among  Infocrossing,  the
Company, and Kennedy-Wilson,  Inc., and Cahill, Warnock Strategic Partners Fund,
L.P.,   and   Strategic   Associates,   L.P.,   dated   January  26,  2000  (the
"Kennedy-Wilson  Credit  Facility");  (iii) Liens imposed by applicable  law and
incurred in the  ordinary  course of business  for  obligations  not yet due and
payable  to  laborers,   materialmen   and  the  like;  (iv)  zoning  and  other
restrictions,  variances, covenants, rights-of-way,  encumbrances, easements and
or other minor  irregularities of title,  none of which,  individually or in the
aggregate, would reasonably be expected to have a material adverse effect on the
value  of any of the real  property  of the  Company,  or  would  impair  in any
material  respect the ability of the Company or the relevant  Subsidiary  of the
Company to sell such  property for its current use; (v) with respect to items of
personal property, unperfected purchase money security interests existing in the
ordinary  course of business  without the execution of a security  agreement and
(vi) other Liens which,  individually or in the aggregate,  would not reasonably
be expected to have a Material Adverse Effect.

          SECTION  3.15.  Contracts.  Schedule  3.15 of the  Company  Disclosure
Schedule sets forth the following oral or written contracts and other agreements
to which the Company, Infocrossing or any of the other Subsidiaries is a party:

               (a) any agreement (or group of related agreements,  with the same
     third party or any of its  Affiliates)  for the lease of personal  property
     providing  for lease  payments  in excess of One Hundred  Thousand  Dollars
     ($100,000) per annum;

               (b) any  agreement  (or  group  of  related  agreements)  for the
     purchase or sale of supplies,  products or other personal property,  or for
     the  furnishing or receipt of services,  the  performance  of which involve
     consideration  in excess of Fifty  Thousand  Dollars  ($50,000) for any one
     such  agreement (or Two Hundred Fifty Thousand  Dollars  ($250,000) for any
     group of related agreements) per annum; provided, however, that this clause
     (b) shall not include any employment  agreement included pursuant to clause
     (e) below or  excluded  from  clause  (e)  below by virtue of the  monetary
     threshold set forth therein;

               (c) any agreement concerning a partnership or joint venture;

               (d) any agreement (or group of related agreements,  with the same
     third party or any of its Affiliates) under which the Company, Infocrossing
     or any  of the  other  Subsidiaries  has  created,  incurred,  assumed,  or
     guaranteed any  indebtedness  for borrowed money, or any capitalized  lease
     obligation,  in excess of Fifty  Thousand  Dollars  ($50,000)  per annum or
     under which it has imposed a Lien on any of its material  assets,  tangible
     or intangible;

               (e) any agreement  with an employee of the Company,  Infocrossing
     or any of the other Subsidiaries,  providing for a base salary per annum in
     excess of One Hundred Thousand Dollars ($100,000);

               (f) any other agreement (or group of related  agreements with the
     same third  party)  the  performance  of which  involves  consideration  or
     obligations valued in excess of Fifty Thousand Dollars ($50,000) per annum;
     provided,  however,  that this clause (f) shall not include any  employment
     agreement  excluded  from  clause  (e)  above  by  virtue  of the  monetary
     threshold set forth therein;

               (g) any agreement (or group of related  agreements  with the same
     third party or any of its Affiliates) in respect of any loan or advance to,
     or investment  in, any other Person,  or any  commitment to make any of the
     foregoing, by the Company,  Infocrossing, or any of the Subsidiaries, in an
     amount in excess of Fifty Thousand Dollars ($50,000)  excluding loans among
     the Company and its wholly owned Subsidiaries;

               (h) any agreement,  indenture or other  instrument which contains
     restrictions on the Company's,  Infocrossing's  or the other  Subsidiaries'
     ability to pay dividends or otherwise  make  distributions  with respect to
     their Capital Stock;

               (i) any agreement, contract or commitment limiting the ability of
     the  Company,  Infocrossing  or any other  Subsidiary  to compete  with any
     Person or engage in any line of business;

               (j) any  agreement,  contract or  commitment  with any  Affiliate
     (other than a wholly owned Subsidiary) of the Company; and

               (k) any other  material  agreement,  contract or  commitment  not
     entered into in the ordinary course of business.

          The foregoing  are referred to hereafter as the "Material  Contracts".
With respect to the Material Contracts,  except as set forth in Schedule 3.15 of
the Company  Disclosure  Schedule:  (i) all are in full force and  effect;  (ii)
neither the Company,  Infocrossing nor any of the other Subsidiaries and, to the
Company's  knowledge,  no other party thereto,  is in breach or default,  and no
event has occurred which with notice or lapse of time would  constitute a breach
or default, or permit termination, modification, or acceleration, under any such
Material Contract; (iii) neither the Company,  Infocrossing nor any of the other
Subsidiaries  has  assigned  any of its rights or  obligations  under any of the
Material  Contracts;  and (iv) neither the Company,  Infocrossing nor any of the
other  Subsidiaries  has  received any  outstanding  notice of  cancellation  or
termination in connection with any of them.

          SECTION  3.16.  Insurance.  The  Company,  Infocrossing  and the other
Subsidiaries  have obtained and  maintained  in full force and effect  insurance
(including  director's  and officer's  insurance)  with  insurance  companies or
associations in such amounts, on such terms and covering such risks as disclosed
in Schedule 3.16 of the Company Disclosure Schedule.

          SECTION 3.17. Investment Company. None of the Company, Infocrossing or
the  other  Subsidiaries  will  be an  "investment  company"  or  "promoter"  or
"principal  underwriter" for an "investment  company," as such terms are defined
in the Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.

          SECTION 3.18. Environmental Laws and Regulations.  Except as set forth
in  the  Commission  Filings  or on  Schedule  3.18  of the  Company  Disclosure
Schedule,  (a) Hazardous  Materials  have not at any time been  generated,  use,
treated or stored on, or transported to or from, any Company Property or, to the
knowledge  of the  Company,  any  property  adjoining or adjacent to any Company
Property, (b) Hazardous Materials have not at any time been released or disposed
of on any Company  Property or, to the  knowledge  of the Company,  any property
adjoining or adjacent to any Company Property, (c) the Company, Infocrossing and
each of the other  Subsidiaries are in compliance in all material  respects with
all  Environmental  Laws and the  requirements  of any permits issued under such
Environmental Laws with respect to any Company Property,  (d) there are no past,
pending  or  threatened  material  Environmental  Claims  against  the  Company,
Infocrossing or any of the other Subsidiaries or any Company Property, (e) there
are no facts or circumstances,  conditions or occurrences  regarding any Company
Property or, to the knowledge of the Company, any property adjoining or adjacent
to any Company  Property,  that could  reasonably be anticipated (A) to form the
basis of a material Environmental Claim against the Company, Infocrossing or any
of the other  Subsidiaries or any Company  Property or (B) to cause such Company
Property to be subject to any material restrictions on its ownership, occupancy,
use or  transferability  under any Environmental  Law, and (f) there are not now
and  never  have been any  underground  storage  tanks  located  on any  Company
Property  or, to the  knowledge of the  Company,  on any  property  adjoining or
adjacent to any Company Property.

          For purposes of this  Agreement,  the  following  terms shall have the
following  meanings:   (A)  "Company  Property"  means  any  real  property  and
improvements  owned or leased by the Company,  Infocrossing  or any of the other
Subsidiaries;  (B)  "Hazardous  Materials"  means (i) any petroleum or petroleum
products,  radioactive  materials,  asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain  dielectric fluid containing levels of  polychlorinated  biphenyls,  and
radon gas; (ii) any chemicals, materials or substances defined as or included in
the  definition  of  "hazardous   substances,"  "hazardous  wastes,"  "hazardous
materials,"  "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances,"  "toxic  pollutants,"  or  words  of  similar  import,   under  any
applicable  Environmental  Law;  and  (iii)  any  other  chemical,  material  or
substance,  exposure  to  which  is  prohibited,  limited  or  regulated  by any
governmental  authority;  (C)  "Environmental  Law" means any federal,  state or
local statute, law, rule, regulation,  ordinance,  code or rule of common law in
effect and in each case as amended as of the date hereof and Closing  Date,  and
any judicial or administrative  interpretation thereof applicable to the Company
or its operations or property as of the date hereof and Closing Date,  including
any judicial or administrative  order,  consent decree or judgment,  relating to
the  environment,  health,  safety or  Hazardous  Materials,  including  without
limitation the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, 42 U.S.C.ss. 9601 et -- seq.; the Resource Conservation
and Recovery  Act, as amended,  42  U.S.C.ss.  6901 et seq.;  the Federal  Water
Pollution  Control  Act,  as  amended,  33  U.S.C.ss.  1251 et seq.;  the  Toxic
Substances  Control  Act,  15  U.S.C.ss.  2601 et seq.;  the Clean  Air Act,  42
U.S.C.ss.  7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.ss. 3808 et seq.;
and (D) "Environmental  Claims" means any and all administrative,  regulatory or
judicial actions,  suits,  demands,  demand letters,  claims,  liens, notices of
noncompliance   or   violation,   investigations   or   proceedings   under  any
Environmental  Law or any permit  issued under any such  Environmental  Law (for
purposes of this subclause (D), "Claims"),  including without limitation (i) any
and all  Claims by  governmental  or  regulatory  authorities  for  enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable  Environmental  Law and (ii) any and all  Claims by any  third  party
seeking damages, contribution,  indemnification,  cost recovery, compensation or
injunctive  relief  resulting from  Hazardous  Materials or arising from alleged
injury  or  threat of injury  to  health,  safety  or the  environment;  and (E)
"Release" means disposing, discharging,  injecting, spilling, leaking, leaching,
dumping, emitting,  escaping, emptying or seeping into or upon any land or water
or air, or otherwise entering into the environment.

          SECTION 3.19. State Takeover  Statutes.  The Board of Directors of the
Company has approved the Transactions and the Equity Documents and such approval
is  sufficient  to  render  inapplicable  to the  Transactions  and  the  Equity
Documents the provisions of Section 203 of the DGCL.

          SECTION 3.20. Brokers and Finders.  No agent,  broker,  Person or firm
acting on behalf of the Company is, or will be, entitled to any fee,  commission
or broker's or finder's fees from any of the parties hereto,  or from any Person
controlling,  controlled  by, or under  common  control  with any of the parties
hereto,   in  connection  with  this  Agreement  or  any  of  the   transactions
contemplated hereby.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES
                                OF EACH PURCHASER

          Each  Purchaser  hereby  severally,  and not jointly,  represents  and
warrants to the Company,  as to itself and as to no other person, as of the date
hereof and as of the Closing Date as follows:

          SECTION  4.1.  Organization;   Authorization;   Enforceability.   Such
Purchaser is duly  organized,  validly  existing and in good standing  under the
laws of the  jurisdiction  of its  organization  and has all requisite power and
authority to own its properties and assets and to carry on its business as it is
now being  conducted and as currently  proposed to be conducted.  Such Purchaser
has the power to execute,  deliver and perform its obligations under each of the
Equity  Documents  to which it is a party and has taken all action  necessary to
authorize the execution, delivery and performance by it of such Equity Documents
and to consummate the  transactions  contemplated  hereby and thereby.  No other
proceedings on the part of such Purchaser are necessary for such  authorization,
execution,  delivery and  consummation.  Such  Purchaser  has duly  executed and
delivered  this  Agreement  and, at the Closing,  such  Purchaser will have duly
executed and  delivered  each of the other  Equity  Documents to be executed and
delivered at or prior to Closing.  This Agreement  constitutes,  and each of the
other Equity  Documents to which such  Purchaser is a party,  when  executed and
delivered  by such  Purchaser,  will  constitute,  a legal,  valid  and  binding
obligation of such Purchaser.

          SECTION 4.2. Private  Placement.  (a) Such Purchaser  understands that
(i) the  offering and sale of the  Securities  in the Issuance by the Company is
intended to be exempt from  registration  under the  Securities  Act pursuant to
Section  4(2)  thereof and (ii) there is no existing  public or other market for
the Securities.

          (b) Such  Purchaser  (either  alone or together with its advisors) has
sufficient  knowledge and experience in financial and business  matters so as to
be  capable  of  evaluating  the  merits  and  risks  of its  investment  in the
Securities and is capable of bearing the economic risks of such investment.

          (c)  Such  Purchaser  is  acquiring  the  Securities  to  be  acquired
hereunder (and will acquire the Conversion  Shares and the Warrants  Shares) for
its own  account,  for  investment  and not with a view to the public  resale or
distribution thereof, in violation of any securities law.

          (d) Such Purchaser understands that the Securities will be issued in a
transaction  exempt from the registration or  qualification  requirements of the
Securities Act and applicable  state  securities  laws, and that such securities
must be held indefinitely unless a subsequent  disposition thereof is registered
or  qualified  under the  Securities  Act and such  laws or is exempt  from such
registration or qualification.

          (e) Such  Purchaser (A) has been furnished with or has had full access
to all of the information that it considers  necessary or appropriate to make an
informed  investment  decision  with respect to the  Securities  and that it has
requested  from  the  Company,  (B)  has  had an  opportunity  to  discuss  with
management  of the Company the intended  business and  financial  affairs of the
Company  and to obtain  information  (to the extent the Company  possessed  such
information  or  could  acquire  it  without  unreasonable  effort  or  expense)
necessary  to verify any  information  furnished to it or to which it had access
and (C) can  bear  the  economic  risk of (x) an  investment  in the  Securities
indefinitely  and (y) a total  loss in  respect  of such  investment,  has  such
knowledge and experience in business and financial matters so as to enable it to
understand  and  evaluate  the  risks of and form an  investment  decision  with
respect to its  investment in the  Securities and to protect its own interest in
connection with such  investment;  it being understood that nothing set forth in
this  Section  4.2(e)  shall  affect the  representations,  warranties  or other
obligations of the Company, or the rights and remedies of such Purchaser,  under
this Agreement in any way whatsoever.

          SECTION 4.3. No Violation;  Consents. (a) The execution,  delivery and
performance by such  Purchaser of each of the Equity  Documents to which it is a
party and the  consummation  of the  Transactions do not and will not contravene
any Applicable Law. The execution, delivery and performance by such Purchaser of
each of the Equity  Documents to which it is a party and the consummation of the
Transactions contemplated therein (i) will not violate, result in a breach of or
constitute  (with or without  due notice or lapse of time or both) a default (or
give rise to any right of termination,  cancellation or acceleration)  under any
Contract to which such Purchaser is party or by which such Purchaser is bound or
to which any of its assets is subject, except for any such violations,  breaches
or defaults  that would not,  individually  or in the  aggregate,  reasonably be
expected to have a material  adverse  effect on the ability of such Purchaser to
perform its obligations under this Agreement, and (ii) will not conflict with or
violate any provision of the  certificate of  incorporation  or by-laws or other
governing documents of such Purchaser.

          (b) Except for (i) the filings by such Purchaser,  if any, required by
the HSR Act, and (ii) applicable  filings,  if any, with the Commission pursuant
to the Exchange Act, in each case,  which shall be made (to the extent required)
on or prior to the  Closing  Date,  no  consent,  authorization  or order of, or
filing or  registration  with,  any  Governmental  Authority  or other Person is
required to be obtained or made by such  Purchaser for the  execution,  delivery
and  performance  of any of the Equity  Documents  to which it is a party or the
consummation of any of the transactions  contemplated therein,  except where the
failure to obtain such consents,  authorizations or orders, or make such filings
or  registrations,  would not,  individually or in the aggregate,  reasonably be
expected to have a material  adverse  effect on the ability of such Purchaser to
perform its obligations under this Agreement.

                                    ARTICLE V

                            COVENANTS OF THE COMPANY

          SECTION 5.1. Operation of Business. The Company agrees that, except as
permitted,  required or specifically contemplated by, or otherwise described in,
this  Agreement  or the other  Equity  Documents  or  otherwise  consented to or
approved  in writing by  Purchasers  during  the period  commencing  on the date
hereof and ending on the Closing Date:

               (a) The Company,  Infocrossing and each of the other Subsidiaries
     will conduct their  respective  operations only according to their ordinary
     and usual  course of business  consistent  with past  practice and will use
     their reasonable best efforts to preserve intact their respective  business
     organization,  keep  available the services of their officers and employees
     and  maintain   satisfactory   relationships  with  licensors,   suppliers,
     distributors,   clients,   joint  venture   partners,   and  others  having
     significant business relationships with them;

               (b) Each of the Company,  Infocrossing and the other Subsidiaries
     shall:

               (i) operate its business in all material respects in the ordinary
          course and in compliance with Applicable Laws;

               (ii) not adopt  any  amendment  (other  than the  Certificate  of
          Designation)  to  its  Certificate  of  Incorporation  or  by-laws  or
          comparable  organizational  documents,  except as  contemplated in the
          proposed Certificate of Amendment attached hereto as Exhibit E;

               (iii)  not  split,  combine  or  reclassify  any  shares  of  the
          Company's Capital Stock;

               (iv) not declare or pay any dividend or distribution  (whether in
          cash,  stock or property) in respect of its Capital  Stock or increase
          the number of shares  subject to any stock  incentive  or option  plan
          with respect to the Capital Stock of the Company,  Infocrossing or any
          Subsidiary;

               (v) not take any action,  or  knowingly  omit to take any action,
          that would, or that would reasonably be expected to, result in (A) any
          of the  representations  and  warranties  of the  Company set forth in
          Article  III  becoming  untrue  or (B)  any of the  conditions  to the
          obligations of Purchasers set forth in Section 7.2 not being satisfied
          or  (C)  the  triggering  of  any  of  the  anti-dilution  adjustments
          contained in the Certificate of Designation  (had such  Certificate of
          Designation been in effect);

               (vi) not issue or sell any  shares of its  Capital  Stock  (other
          than  in   connection   with  the  exercise  of  options  or  warrants
          outstanding  on the date  hereof) or any of its other  securities,  or
          issue any securities convertible into, or options,  warrants or rights
          to purchase or subscribe to, or enter into any arrangement or contract
          with  respect to the  issuance  or sale of, any shares of its  Capital
          Stock or any of its other securities, or make any other changes in its
          capital structure;

               (vii) not acquire (by merger,  consolidation,  or  acquisition of
          stock or assets) any  corporation,  partnership  or other  business or
          division thereof;

               (viii) not, except to the extent required under existing employee
          and director benefit plans, agreements or arrangements as in effect on
          the  date of this  Agreement,  increase  the  compensation  or  fringe
          benefits of any of its  directors,  officers or employees,  except for
          increases in salary or wages of employees of the Company, Infocrossing
          or the other  Subsidiaries  who are not officers of the Company in the
          ordinary course of business in accordance with past practice, or grant
          any severance or  termination  pay not  currently  required to be paid
          under  existing   severance   plans  or  enter  into  any  employment,
          consulting or severance  agreement or arrangement  with any present or
          former  director,  officer or other  employee of the Company or any of
          its  Subsidiaries,  or  establish,  adopt,  enter  into  or  amend  or
          terminate any collective  bargaining,  bonus, profit sharing,  thrift,
          compensation,  stock option,  restricted stock,  pension,  retirement,
          deferred  compensation,  employment,  termination,  severance or other
          plan, agreement, trust, fund, policy or arrangement for the benefit of
          any directors, officers or employees;

               (ix)  not  adopt  a plan  of  complete  or  partial  liquidation,
          dissolution, merger, consolidation, restructuring, recapitalization or
          other reorganization of the Company,  Infocrossing or any of the other
          Subsidiaries;

               (x) incur any  material  liability  for Taxes  other  than in the
          ordinary  course of business;  or enter into any settlement or closing
          agreement  with a taxing  authority  that  materially  affects  or may
          materially  affect the tax liability of the Company,  Infocrossing  or
          any of the other Subsidiaries; or

               (xi) not enter into any  agreement or commitment to do any of the
          foregoing.

                  SECTION  5.2.  Access to Books and  Records.  (a) The  Company
shall  afford  to   Purchasers   and   Purchasers'   accountants,   counsel  and
representatives  full access during normal business hours  throughout the period
prior to the Closing Date (or the earlier termination of this Agreement pursuant
to Section 8.4) to all its properties, books, Contracts, commitments and records
(including,  but not limited to, tax returns)  and,  during such period,  shall,
upon request, furnish promptly to Purchasers (i) a copy of each report, schedule
and other document filed or received by any of them pursuant to the requirements
of Federal or state  securities laws and (ii) all other  information  concerning
its business,  properties and personnel as Purchasers  may  reasonably  request,
provided  that no  investigation  or receipt  of  information  pursuant  to this
Section 5.2 shall affect any representation, warranty or other obligation of the
Company  or the  rights  and  remedies  and  conditions  to the  obligations  of
Purchasers.

          (b) The Company shall  supplement the  Information and the Projections
from  time to time  until  the  Closing  Date so that  the  representations  and
warranties in Section 3.8 shall remain correct,  but no such supplement shall be
given  effect for purposes of  determining  whether the Company has breached any
representations or warranties for purposes of Section 7.2 and Section 8.1.

          SECTION 5.3.  Agreement to Take Necessary and Desirable  Actions.  The
Company shall (a) subject to the  satisfaction  of the  conditions  set forth in
Section 7.1,  execute and deliver the Equity Documents and such other documents,
certificates,  agreements and other writings and (b) take such other actions, in
each case, as may be necessary or reasonably requested by any Purchaser in order
to consummate  or implement  the Issuance in  accordance  with the terms of this
Agreement.

          SECTION 5.4.  Compliance  with  Conditions.  The Company shall use its
reasonable best efforts to cause all conditions  precedent to the obligations of
the Company and  Purchasers to be  satisfied.  Upon the terms and subject to the
conditions of this  Agreement,  the Company will use its reasonable best efforts
to take,  or cause to be taken,  all  action,  and do, or cause to be done,  all
things  necessary,  proper  or  advisable  consistent  with  Applicable  Law  to
consummate and make effective in the most  expeditious  manner  practicable  the
Issuance in accordance with the terms of this Agreement.

          SECTION 5.5. HSR Act  Notification.  To the extent required by the HSR
Act,  the Company  shall,  to the extent it has not already done so, (a) file or
cause to be filed,  as promptly as practicable  after the execution and delivery
of this  Agreement,  with the United  States  Federal Trade  Commission  and the
Antitrust  Division of the United States Department of Justice,  all reports and
other  documents  required  to be filed by it under the HSR Act  concerning  the
transactions  contemplated  hereby and (b)  promptly  comply with or cause to be
complied with any requests by the United States Federal Trade  Commission or the
Antitrust  Division of the United States  Department  of Justice for  additional
information  concerning  such  transactions,  in each  case so that the  waiting
period  applicable to this Agreement and the  transactions  contemplated  hereby
under the HSR Act shall expire as soon as  practicable  after the  execution and
delivery of this Agreement. The Company agrees to request, and to cooperate with
Purchasers in requesting,  early  termination  of any applicable  waiting period
under the HSR Act.

          SECTION  5.6.  Consents and  Approvals.  The Company (a) shall use its
reasonable   best   efforts  to  obtain   all   necessary   consents,   waivers,
authorizations  and approvals of all  Governmental  Authorities and of all other
Persons  required in connection with the execution,  delivery and performance of
the  Equity  Documents  or  the  consummation  of the  Issuance  and  (b)  shall
diligently  assist and  cooperate  with  Purchaser in  preparing  and filing all
documents  required to be submitted by Purchasers to any Governmental  Authority
in connection with the Issuance (which assistance and cooperation shall include,
without limitation,  timely furnishing to Purchasers all information  concerning
the Company,  Infocrossing and the other Subsidiaries that counsel to Purchasers
determines  is required to be included in such  documents or would be helpful in
obtaining any such required consent, waiver, authorization or approval).

          SECTION   5.7.    Reservation   of   Shares.    The   Company   shall:

               (i) cause to be authorized  and reserve and keep available at all
     times during which any of the Shares and Warrants remain outstanding,  free
     from  preemptive  rights,  out of its  treasury  stock  or  authorized  but
     unissued  shares of  Capital  Stock,  or both,  solely  for the  purpose of
     effecting  the  conversion  of the Shares  and/or  exercise of the Warrants
     pursuant  to the terms of the  Certificate  of  Designation  or the Warrant
     Agreement, as the case may be, sufficient shares of Common Stock to provide
     for the issuance of the maximum number of shares  issuable upon  conversion
     of outstanding Shares and Warrants;

               (ii) issue and cause the transfer agent to deliver such shares of
     Common Stock as required upon  conversion of the Shares and/or the exercise
     of the  Warrants,  and take all actions  necessary  to ensure that all such
     shares  will,  when issued and paid for pursuant to the  conversion  of the
     Shares and/or exercise of the Warrants,  be duly and validly issued,  fully
     paid and nonassessable; and

               (iii) if any shares of Common  Stock  reserved for the purpose of
     issuance  upon  conversion  of the Shares  and/or  exercise of the Warrants
     require  registration with or approval of any Governmental  Authority under
     any  Applicable  Law before such shares may be validly issued or delivered,
     secure such registration or approval, as the case may be, and maintain such
     registration or approval in effect so long as so required.

          SECTION 5.8. Use of Proceeds.  The Company shall use the proceeds from
the Issuance to finance the execution of the  Infocrossing,  Inc.  business plan
and to repay the indebtedness under the Kennedy-Wilson Credit Facility.

          SECTION  5.9.  Filing  of  Certificate  of  Designation.  Prior to the
Issuance,  the  Company  shall  file the  Certificate  of  Designation  with the
Secretary  of State of the State of Delaware  pursuant to Section  151(g) of the
DGCL.

          SECTION  5.10.   Listing  of  Shares.  The  Company  shall  cause  the
Conversion Shares and the Warrant Shares to be listed or otherwise  eligible for
trading on the NASDAQ National  Market System or such other national  securities
exchange on which  constitutes the principal  trading U.S. market for the Common
Stock.

          SECTION 5.11. Periodic  Information.  For so long as the Shares or any
Conversion  Shares or Warrant Shares are  outstanding the Company shall file all
reports  required  to be filed by the Company  under  Section 13 or 15(d) of the
Exchange Act and shall  provide the holders of the  Securities,  the  Conversion
Shares and the Warrant Shares and prospective purchasers of such shares with the
information specified in Rule 144A(d) under the Securities Act.

          SECTION  5.12.  Legends.  So  long  as  applicable,  each  certificate
representing  any portion of the Shares,  the  Conversion  Shares or the Warrant
Shares shall be stamped or otherwise  imprinted  with a legend in the  following
form (in  addition to any legend  required  under  applicable  state  securities
laws):

          "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
          RESTRICTIONS  AGAINST  TRANSFER SET FORTH IN A STOCKHOLDERS  AGREEMENT
          DATED AS OF MAY __, 2000,  AS MAY BE AMENDED FROM TIME TO TIME. A COPY
          OF SUCH  STOCKHOLDERS  AGREEMENT  HAS BEEN  FILED IN THE OFFICE OF THE
          COMPANY  LOCATED  AT 2 CHRISTIE  HEIGHTS  STREET,  LEONIA,  NEW JERSEY
          07605, WHERE THE SAME MAY BE INSPECTED DAILY DURING BUSINESS HOURS.

          THE SHARES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN REGISTERED
          UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
          THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH SHARES MAY
          NOT BE OFFERED, SOLD, TRANSFERRED,  PLEDGED, HYPOTHECATED OR OTHERWISE
          DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OTHER THAN PURSUANT TO
          AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS."

After the above  requirement  for a legend is no longer  applicable  because the
Shares are freely  transferable  under the  Securities  Act,  the Company  shall
remove such legend upon request from a holder of such Shares, if outside counsel
for such holder  reasonably  determines  that the  transfer of such Shares is no
longer  restricted  by the  Securities  Act and outside  counsel for the Company
reasonably concurs in such determination.

          SECTION 5.13. Directors and Officers Insurance;  Indemnification.  For
so long as Purchaser holds any Shares, the Company shall maintain directors' and
officers'  insurance with policy limits and deductibles at least as favorable to
the beneficiaries of such insurance as are currently maintained and otherwise on
terms  reasonably  comparable  to the coverage  maintained by the Company on the
date hereof,  such insurance to be maintained  with an insurer with an A.M. Best
financial  strength rating of "A" or better.  For so long as Purchaser holds any
Shares, the Company shall indemnify the Company's  directors and officers to the
fullest extent permitted under the DGCL and shall enter into all such agreements
and use its best efforts to obtain any necessary  amendments to its  Certificate
of Incorporation or by-laws to give effect to this Section 5.13.

          SECTION  5.14.   Stockholders'  Approval;  Proxy  Statement.  (a)  The
Company,  acting  through its Board of  Directors,  shall,  in  accordance  with
Applicable Law, take all such action as is necessary or appropriate to submit to
the  stockholders  of  the  Company  at  the  Company  Stockholders'  Meeting  a
resolution  approving the issuance of the Securities and the other Transactions.
The Company agrees that it shall use its reasonable best efforts to solicit from
its  stockholders  proxies,  and  shall  take all  other  action  necessary  and
advisable,  to secure the vote of its stockholders required by Applicable Law to
obtain the approval of this  Agreement  and will include in the Proxy  Statement
supplement  described  below the  recommendation  of its Board of Directors that
holders  of Common  Stock  approve  and adopt the  resolutions  authorizing  the
issuance of the Securities and the Transactions.

          (b) (i) As promptly as practicable,  the Company will prepare and file
a supplement (the  "Supplement")  to the Proxy Statement with the Commission and
will use its best  efforts to  respond  to any  comments  of the  Commission  in
connection  therewith  and to furnish  all  information  required to prepare the
Supplement.  The  Company  will  cause  the  Supplement  to  be  mailed  to  the
stockholders of the Company and, if necessary,  after the Supplement  shall have
been so mailed,  promptly circulate amended,  supplemental or supplemented proxy
material and, if required in connection therewith, resolicit proxies.

          (ii) To the extent  necessary to distribute the Supplement and solicit
proxies  in favor of the  resolutions  described  therein or to  otherwise  give
effect to this Section 5.14, the Company will postpone the Company Stockholders'
Meeting.

                                   ARTICLE VI

                           COVENANTS OF EACH PURCHASER

          SECTION 6.1. Agreement to Take Necessary and Desirable  Actions.  Each
Purchaser  shall (a) subject to the  satisfaction of the conditions set forth in
Section 7.2,  execute and deliver each of the Equity  Documents to which it is a
party and such other documents, certificates,  agreements and other writings and
(b) take  such  other  actions  as may be  reasonably  necessary,  desirable  or
requested by the Company in order to  consummate  or  implement  the Issuance to
such Purchaser in accordance with the terms of this Agreement.

          SECTION 6.2. Compliance with Conditions;  Best Efforts. Each Purchaser
will use its  reasonable  best efforts to cause all of the  obligations  imposed
upon it in this  Agreement to be duly complied with, and to cause all conditions
precedent to the  obligations of the Company and such Purchaser to be satisfied.
Upon the terms and subject to the conditions of this  Agreement,  each Purchaser
will use its reasonable best efforts to take, or cause to be taken,  all action,
and to do,  or cause to be done,  all  things  necessary,  proper  or  advisable
consistent  with  applicable  law to consummate  and make  effective in the most
expeditious manner practicable the Issuance to such Purchaser in accordance with
the terms of this Agreement.

          SECTION 6.3. HSR Act  Notification.  To the extent required by the HSR
Act, each Purchaser  shall, if it has not already done so, (a) use  commercially
reasonable  efforts to file or cause to be filed,  as  promptly  as  practicable
after the  execution  and  delivery of this  Agreement,  with the United  States
Federal  Trade  Commission  and the  Antitrust  Division  of the  United  States
Department of Justice,  all reports and other documents  required to be filed by
it under the HSR Act concerning the transactions contemplated hereby and (b) use
commercially  reasonable efforts to promptly comply with or cause to be complied
with any requests by the United States Federal Trade Commission or the Antitrust
Division of the United States  Department of Justice for additional  information
concerning such  transactions in each case so that the waiting period applicable
to this  Agreement and the  transactions  contemplated  hereby under the HSR Act
shall expire as soon as  practicable  after the  execution  and delivery of this
Agreement.  Each Purchaser agrees to request,  and to cooperate with the Company
in requesting,  early termination of any applicable waiting period under the HSR
Act.

          SECTION 6.4. Consents and Approvals.  Each Purchaser (a) shall use its
reasonable   best   efforts  to  obtain   all   necessary   consents,   waivers,
authorizations  and  approvals  of all  Governmental  Authorities  other than as
expressly  set forth in  Section  6.3  regarding  the HSR Act,  and of all other
Persons  required in connection with the execution,  delivery and performance of
this  Agreement or the  consummation  of the Issuance to such  Purchaser and (b)
shall  assist  and  cooperate  with the  Company  in  preparing  and  filing all
documents required to be submitted by the Company to any Governmental  Authority
in connection with such  Transactions  (which  assistance and cooperation  shall
include,  without  limitation,  timely furnishing to the Company all information
concerning such Purchaser that counsel to the Company  reasonably  determines is
required to be included in such  documents or would be helpful in obtaining  any
such required consent, waiver, authorization or approval).

          SECTION 6.5. Restrictions on Transfer.  Each Purchaser shall not sell,
assign, transfer,  pledge,  hypothecate,  deposit in a voting trust or otherwise
dispose of any portion of the Securities,  the Conversion  Shares or the Warrant
Shares (any such disposition, a "Share Transfer"), other than (a) to a Permitted
Transferee  of such  Purchaser  that has agreed in writing  (each,  a "Permitted
Transferee  Agreement")  to be bound by the terms and provisions of this Section
6.5 to the same extent  that such  Purchaser  would be bound if it  beneficially
owned the Securities  transferred to such Permitted Transferee or (b) (i) in any
transaction  in  compliance  with  Rule  144  under  the  Securities  Act or any
successor rule or regulation, (ii) in a transaction exempt from the registration
requirements  of  the  Securities  Act  or  (iii)  pursuant  to  a  registration
statement.  Such  Purchaser  shall  promptly  notify  the  Company  of any Share
Transfer to a Permitted  Transferee of such Purchaser,  which notification shall
include a Permitted  Transferee  Agreement executed by each Permitted Transferee
of such Purchaser to whom any Securities have been transferred.

                                   ARTICLE VII

                         CONDITIONS PRECEDENT TO CLOSING

          SECTION 7.1. Conditions to the Company's Obligations.  The obligations
of the  Company  with  respect to  Purchasers  required to be  performed  on the
Closing Date shall be subject to the  satisfaction  or waiver in writing,  at or
prior to the Closing, of the following conditions:

               (a)  The   representations   and  warranties  of  each  Purchaser
     contained  in this  Agreement  which are  qualified  by any  "materiality",
     "material  adverse  effect"  or any  similar  qualifier  shall  be true and
     correct in all  respects and the  representations  and  warranties  of such
     Purchaser  which  are not so  qualified  shall be true and  correct  in all
     material  respect,  in each case on and as of the date hereof and on and as
     of the Closing Date, as if made on and as of the Closing Date.

               (b) Each Purchaser shall have performed in all material  respects
     all obligations and agreements,  and complied in all material respects with
     all covenants contained in this Agreement to be performed and complied with
     by such Purchaser at or prior to the Closing Date.

               (c) No  provision of any  Applicable  Law,  injunction,  order or
     decree of any  Governmental  Entity shall be in effect which has the effect
     of making the Transactions  illegal or shall otherwise restrain or prohibit
     the consummation of the Transactions.

               (d) Any applicable  waiting period under the HSR Act with respect
     to the purchase by such Purchaser shall have expired or been terminated.

          SECTION 7.2. Conditions to Purchaser's Obligations. The obligations of
Purchaser  required to be  performed on the Closing Date shall be subject to the
satisfaction or waiver in writing,  at or prior to the Closing, of the following
conditions:

               (a) The  representations  and warranties of the Company contained
     in this  Agreement  which are  qualified  by any  "materiality",  "material
     adverse  effect" or any similar  qualifier shall be true and correct in all
     respects and the  representations  and  warranties of the Company which are
     not so  qualified  shall be true and correct in all material  respects,  in
     each case on and as of the date hereof and on and as of the  Closing  Date,
     as if made on and as of the Closing Date.

               (b) The Company shall have performed in all material respects all
     of its obligations, agreements and covenants contained in this Agreement to
     be performed and complied with at or prior to the Closing Date.

               (c) No  provision of any  Applicable  Law,  injunction,  order or
     decree of any  Governmental  Entity shall be in effect which has the effect
     of making the Transactions  illegal or shall otherwise restrain or prohibit
     the consummation of the Transactions.

               (d) The Company shall have filed the  Certificate  of Designation
     with the Secretary of State of the State of Delaware and the Certificate of
     Designation shall have been accepted for filing.

               (e) Any applicable  waiting period under the HSR Act with respect
     to the purchase by Purchaser shall have expired or been terminated.

               (f) The Company  shall have  delivered to Purchaser a certificate
     executed by it or on its behalf by duly  authorized  representative,  dated
     the Closing  Date, to the effect that each of the  conditions  specified in
     paragraph  (a)  through  (e) and  (l)(i)  of  this  Section  7.2  has  been
     satisfied.

               (g) The  Company  and  Zach  Lonstein  shall  have  executed  and
     delivered the Registration Rights Agreement.

               (h) The Company  shall have  executed and  delivered  the Warrant
     Agreement.

               (i)  The  Company  and the  Management  Stockholders  shall  have
     executed and delivered the Stockholders Agreement.

               (j)  Purchasers  shall have received an opinion of counsel to the
     Company,  dated the Closing Date, and addressed to Purchasers,  in form and
     substance reasonably acceptable to Purchasers.

               (k) Each Purchaser shall have received certificates  representing
     the Shares and the Warrants  purchased by such Purchaser  concurrently with
     the  Company's  receipt of the  purchase  price  payable in respect of such
     Securities.

               (l) there shall not have  occurred  (i) any event,  circumstance,
     condition,  fact,  effect or other matter which has had or could reasonably
     be  expected  to  have a  material  adverse  effect  (x)  on the  condition
     (financial  or  otherwise),   business,  properties,  assets,  liabilities,
     operations,  results of  operations  or  prospects  of the  Company and the
     Subsidiaries, taken as a whole or (y) on the ability of the Company and the
     Subsidiaries  to perform on a timely  basis any material  obligation  under
     this Agreement or to consummate the Issuance  contemplated  hereby; or (ii)
     any material disruption of or material adverse change in financial, banking
     or equity or debt capital market conditions.

               (m) The  stockholders  of the  Company  shall have  approved  the
     issuance of the Securities and the other transactions  contemplated by this
     Agreement.

               (n) The  indebtedness  of the  Company  under the  Kennedy-Wilson
     Credit  Facility shall have been either (x) exchanged for the KW Securities
     pursuant  to  Section  2.1(b) or (y)  repaid in full,  and any  options  or
     warrants on securities of the Company or Infocrossing  issued in connection
     therewith shall have been surrendered, unexercised, for cancellation.

               (o) All  outstanding  options and warrants (other than options or
     warrants  issued in relation  to the Kennedy  Wilson  Credit  Facility)  on
     securities of Infocrossing,  Inc. shall have been converted into options or
     warrants on Common Stock on terms reasonably satisfactory to Purchasers.

               (p) At the  Closing,  the  Company  shall  have  issued  and sold
     Securities with a purchase price not less than $60,000,000  pursuant to the
     terms of this Agreement.

                                  ARTICLE VIII

                                  MISCELLANEOUS

          SECTION  8.1.  Survival;  Indemnification.  (a)  All  representations,
warranties  and  covenants  contained in this  Agreement  or in any  certificate
delivered in connection with the Closing shall survive the Closing for 18 months
(except (i) covenants  that are required to be performed  after the Closing Date
and the representations contained in Sections 3.1, 3.2, 3.3 and 3.4, which shall
survive  indefinitely  and (ii)  representations  and  warranties  contained  in
Section 3.13,  which shall survive for the  applicable  statute of  limitation).
Notwithstanding the foregoing,  with respect to claims asserted pursuant to this
Section 8.1 before the expiration of the applicable  representation or warranty,
such  claims  shall  survive  until the date  they are  finally  adjudicated  or
otherwise resolved.

          (b) The Company agrees to indemnify and hold harmless Purchaser,  each
Purchaser  Affiliate  and  each  of  their  respective  representatives,  heirs,
successors  and assigns (each an  "indemnified  person") on an after-tax  basis,
from and  against  (and to  reimburse  each  indemnified  person as the same are
incurred) any and all losses  (including,  but not limited to, impairment of the
value of the  Securities as of the date such loss first becomes  known)  claims,
damages, liabilities,  costs and expenses (collectively,  "Losses") to which any
indemnified  person may become subject or which any indemnified person may incur
based  upon,  arising  out  of,  or in  connection  with  (i) a  breach  of  any
representation or warranty of this Agreement by the Company,  (ii) any breach of
any  covenant or agreement  contained  herein by the Company or (iii) any claim,
litigation,  investigation  or proceeding  brought by or on behalf of any Person
other  than  the  Company  relating  to  the  Issuance,  and to  reimburse  each
indemnified  person upon demand for any reasonable legal or other reasonable out
of pocket expenses incurred in connection with investigating or defending any of
the  foregoing,  provided (A) the Company  shall have no obligation to indemnify
any  indemnified   person  for  any  Loss  resulting  from  any  breach  of  any
representation or warranty hereunder (other than  representations and warranties
contained in Sections  3.1, 3.2,  3.3, 3.4 or 3.13,  which shall be  indemnified
from the first dollar of Loss) unless and until the aggregate amount of all such
Losses exceeds  $1,000,000  (and then only to the extent of such excess) and (B)
the maximum  amount  indemnifiable  to  indemnified  persons for breaches of the
representations  or  warranties  contained  in this  Agreement  shall not exceed
$60,000,000.

          (c) If a Person  entitled  to  indemnity  hereunder  (an  "Indemnified
Party") asserts that the Company (the "Indemnifying Party") has become obligated
to the  Indemnified  Party pursuant to Section 8.1(b),  or if any suit,  action,
investigation,  claim or proceeding is begun,  made or instituted as a result of
which the  Indemnifying  Party may become  obligated  to the  Indemnified  Party
hereunder,  the Indemnified  Party shall notify the Indemnifying  Party promptly
and shall cooperate with the  Indemnifying  Party, at the  Indemnifying  Party's
expense, to the extent reasonably  necessary for the resolution of such claim or
in the defense of such suit,  action or proceedings,  including making available
any  information,  documents  and things in the  possession  of the  Indemnified
Party.   Notwithstanding  the  foregoing  notice   requirement,   the  right  to
indemnification hereunder shall not be affected by any failure to give, or delay
in giving,  notice unless,  and only to the extent that, the rights and remedies
of the Indemnifying Party shall have been actually and materially  prejudiced as
a result of such failure or delay.

          (d) In fulfilling  its  obligations  under this Section 8.1, after the
Indemnifying  Party has provided each Indemnified Party with a written notice of
its acceptance of liability under this Section 8.1, as between such  Indemnified
Party and the Indemnifying Party, the Indemnifying Party shall have the right to
investigate, defend, settle or otherwise handle, with the aforesaid cooperation,
any claim, suit, action or proceeding brought by a third party in such manner as
the Indemnifying  Party may in its sole discretion  reasonably deem appropriate;
provided, that (i) counsel retained by the Indemnifying Party is satisfactory to
the Indemnified  Party and (ii) the  Indemnifying  Party will not consent to any
settlement  or entry of judgment  imposing  any  obligations  on any other party
hereto other than financial obligations for which such party will be indemnified
hereunder,  unless such party has  consented  in writing to such  settlement  or
judgment  (which  consent may be given or withheld in its sole  discretion)  and
(iii) the  Indemnifying  Party will not  consent to any  settlement  or entry of
judgment unless, in connection therewith,  the Indemnifying Party obtains a full
and  unconditional  release of the  Indemnified  Party from all  liability  with
respect to such suit, action, investigation claim or proceeding. Notwithstanding
the Indemnifying Party's election to assume the defense or investigation of such
claim,  action or  proceeding,  the  Indemnified  Party  shall have the right to
employ separate  counsel and to participate in the defense or  investigation  of
such claim, action or proceeding, which participation shall be at the expense of
the Indemnifying Party, if (i) on the advice of counsel to the Indemnified Party
use of counsel of the Indemnifying Party's choice could be expected to give rise
to a material conflict of interest,  (ii) the Indemnifying  Party shall not have
employed counsel  reasonably  satisfactory to the Indemnified Party to represent
the Indemnified  Party within a reasonable time after notice of the assertion of
any such claim or  institution  of any such action or  proceeding,  (iii) if the
Indemnifying  Party shall  authorize the  Indemnified  Party to employ  separate
counsel  at the  Indemnifying  Party's  expense or (iv) such  action  shall seek
relief other than monetary damages against the Indemnified Party.

          (e) The  Company and the  Purchasers  agree that any payment of Losses
made  hereunder  will be  treated  by the  parties  on their tax  returns  as an
adjustment to the Purchase  Price.  If,  notwithstanding  such  treatment by the
parties,  a final  determination with respect to the Indemnified Party or any of
its  affiliates  causes any such payment not to be treated as an  adjustment  to
Purchase  Price,  then the  Indemnifying  Party shall  indemnify the Indemnified
Party for any taxes payable by the Indemnified Party or any subsidiary by reason
of the receipt of such  payment  (including  any  payments  under this  8.1(e)),
determined  at an assumed  marginal  tax rate equal to the highest  marginal tax
rate then in effect for corporate taxpayers in the relevant jurisdiction.

          (f) The obligations of the  Indemnifying  Party under this Section 8.1
shall survive the transfer,  redemption  or  conversion of the  Securities,  the
Warrant  Shares and the Common  Stock  issued  upon the  conversion  or exercise
thereof,  or the closing or termination of any Equity  Document.  The agreements
contained  in this  Section 8.1 shall be in addition to any other  rights of the
Indemnified  Party against the  Indemnifying  Party or others.  The Indemnifying
Party consents to personal  jurisdiction,  service and venue in any court in the
continental  United  States in which  any claim  subject  to this  Agreement  is
brought by any Indemnified Party.

          (g) All  obligations of the Purchasers  hereunder shall be several and
not joint. If any Purchaser fails to purchase Securities  hereunder or otherwise
defaults on any liability or obligation under this Agreement, no other Purchaser
will have any obligation to purchase any such Securities or take or refrain from
taking any action on account of such defaulting Purchaser.

          SECTION  8.2.  Notices.  All  notices,  demands,  requests,  consents,
approvals  or  other  communications   (collectively,   "Notices")  required  or
permitted  to be given  hereunder  or  which  are  given  with  respect  to this
Agreement  shall be in writing  and shall be  personally  served,  delivered  by
reputable  air courier  service with charges  prepaid,  or  transmitted  by hand
delivery, telegram, telex or facsimile, addressed as set forth below, or to such
other  address  as such party  shall have  specified  most  recently  by written
notice.  Notice shall be deemed given on the date of service or  transmission if
personally  served  or  transmitted  by  telegram,  telex or  facsimile.  Notice
otherwise sent as provided herein shall be deemed given on the next business day
following  delivery of such notice to a reputable air courier  service.  Notices
shall be delivered as follows:

                  If to the Company:

                           Computer Outsourcing Services, Inc.
                           2 Christie Heights Street
                           Leonia, New Jersey 07605
                           Attn:    Nicholas J. Letizia,
                                    Chief Financial Officer
                           Telephone:  (201) 840-8717
                           Fax:  (201) 840-7126

                  with a copy to:

                           Robinson & Cole LLP
                           695 E. Main St.
                           Stamford, CT 06904
                           Attn: Richard Krantz, Esq.
                           Telephone:  (203) 462-7505
                           Fax:  (203) 462-7599

                  if to any Purchaser, to such Purchaser at its address as set
                  forth on Schedule A:

                  with a copy to:

                           White & Case LLP
                           1155 Avenue of the Americas
                           New York, New York 10036
                           Attn:  S. Ward Atterbury, Esq.
                           Telephone:  (212) 819-8389
                           Fax:  (212) 354-8113

          SECTION  8.3.  Governing  Law.  This  Agreement  shall be governed by,
interpreted under, and construed in accordance with the laws of the State of New
York,  regardless  of the laws that  might  otherwise  govern  under  applicable
principles of conflicts of law thereof.

          SECTION 8.4.  Termination.  (a) This  Agreement  may be  terminated as
between the Company and  Purchaser  (i) at any time prior to the Closing Date by
mutual written agreement of the Company and Purchaser, (ii) if the Closing shall
not  have  occurred  on or prior to May 31,  2000,  by  either  the  Company  or
Purchaser,  at any time after May 31, 2000, provided that the right to terminate
this Agreement under this Section 8.4(a)(ii) shall not be available to any party
whose failure to fulfill any obligation under this Agreement was the cause of or
resulted in the failure of the Closing to occur on or before such date, (iii) if
any Governmental Authority shall have issued a nonappealable final order, decree
or  ruling  or  taken  any  other  action  having  the  effect  of   permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement,  by either the Company or Purchaser,  (iv) if either the Company
or Purchaser  shall have  breached any of its  material  obligations  under this
Agreement,  by the non-breaching  party, or (v) if an event described in Section
7.2(l) shall have occurred,  by Purchaser.  Any party desiring to terminate this
Agreement pursuant to clauses 8.4(a)(ii), (iii), (iv) or (v) shall promptly give
notice of such termination to the other party.

          (b) If this  Agreement  is  terminated  as  between  the  Company  and
Purchaser,  as permitted by Section 8.4(a),  such  termination  shall be without
liability  of  any  party  (or  any  stockholder,  director,  officer,  partner,
employee,  agent, consultant or representative of such party) to any other party
to this  Agreement;  provided,  that if such  termination  shall result from the
willful (a) failure of any party to fulfill a condition  to the  performance  of
the  obligations  of the other party,  (b) failure to perform a covenant of this
Agreement  or (c) breach by any party hereto of any  representation  or warranty
contained herein,  such failing or breaching party shall be fully liable for any
and all  losses  incurred  or  suffered  by the other  party as a result of such
failure or breach.  The  provisions  of Sections  8.2,  8.3,  this  Section 8.4,
Sections 8.5, 8.8, 8.10,  8.11,  8.12, 8.13, 8.14, 8.16, 8.18 and 8.19 and shall
survive any termination hereof pursuant to Section 8.4(a).

          (c) If (x) the  stockholders  of the Company do not, by May 31,  2000,
ratify the issuance of the Securities,  this Agreement and the  Transactions and
(y) this  Agreement  is  hereafter  terminated,  the  Company  shall  pay to the
Purchaser an amount equal to all documented out-of-pocket expenses paid to third
parties in connection with this Agreement and the Transactions.

          SECTION 8.5.  Entire  Agreement.  As between the Company and Purchaser
this Agreement and the Equity Documents  (including all agreements  entered into
pursuant  hereto and  thereto and all  certificates  and  instruments  delivered
pursuant hereto and thereto) constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements,  representations,   understandings,   negotiations  and  discussions
between the parties, whether oral or written, with respect to the subject matter
hereof.

          SECTION 8.6. Modifications and Amendments. No amendment,  modification
or termination  of this Agreement as between the Company and Purchaser  shall be
binding unless executed in writing by the Company and Purchaser  intending to be
bound thereby.

          SECTION 8.7.  Waivers and Extensions.  Any party to this Agreement may
waive any condition,  right,  breach or default that such party has the right to
waive, provided that such waiver will not be effective against the waiving party
unless it is in writing,  is signed by such party,  and  specifically  refers to
this  Agreement.  Waivers  may be made in advance or after the right  waived has
arisen  or the  breach  or  default  waived  has  occurred.  Any  waiver  may be
conditional.  No  waiver of any  breach of any  agreement  or  provision  herein
contained shall be deemed a waiver of any preceding or succeeding breach thereof
nor of any other agreement or provision herein contained. No waiver or extension
of time for  performance of any  obligations or acts shall be deemed a waiver or
extension of the time for performance of any other obligations or acts.

          SECTION 8.8.  Titles and Headings.  Titles and headings of sections of
this Agreement are for convenience only and shall not affect the construction of
any provision of this Agreement.

          SECTION  8.9.  Exhibits  and  Schedules.  Each  of  the  exhibits  and
schedules  referred to herein and  attached  hereto is an integral  part of this
Agreement and is incorporated herein by reference.

          SECTION 8.10. Expenses.  All costs and expenses incurred in connection
with this Agreement  shall be paid by the party  incurring such cost or expense;
provided,  however,  that (a) the  Company  shall pay the filing fee  payable in
respect of any HSR filing,  and (b) the Company shall  reimburse the  Purchasers
for all  expenses of  Purchasers  (including  the  expenses of White & Case LLP,
counsel to the Purchasers,  and such other consultants and advisors) incurred in
connection  with the  Transactions;  provided,  that the  Company  shall  not be
required to reimburse the Purchasers for more than $225,000 in expenses.

          SECTION  8.11.  Press  Releases and Public  Announcements.  All public
announcements or disclosures relating to the Issuance or this Agreement shall be
made only if mutually agreed upon by the Company and  Purchasers,  except to the
extent such  disclosure  is, in the opinion of counsel,  required by  Applicable
Law,  provided that (a) any such required  disclosure shall only be made, to the
extent consistent with Applicable Law and (b) no such announcement or disclosure
(except  as  required  by  Applicable  Law)  shall  identify  Purchaser  without
Purchaser's prior consent.

          SECTION 8.12. Assignment; No Third Party Beneficiaries. This Agreement
and  the  rights,  duties  and  obligations  hereunder  may not be  assigned  or
delegated by the Company without the prior written consent of Purchaser, and may
not  assigned or  delegated by Purchaser  without the  Company's  prior  written
consent  except  that  Purchaser  may  assign  any  or all  of  its  rights  and
obligations  under  this  Agreement  to any one or more of its  Affiliates.  Any
assignment or delegation of rights,  duties or obligations hereunder made by the
Company without the prior written consent of Purchaser,  shall be void and of no
effect. This Agreement and the provisions hereof shall be binding upon and shall
inure to the benefit of each of the parties and their respective  successors and
permitted  assigns.  This  Agreement  is not  intended  to confer  any rights or
benefits on any Persons other than the parties  hereto,  except as expressly set
forth in Section 5.2, Section 8.1, this Section 8.12 or Section 8.18.

          SECTION 8.13. Severability.  This Agreement shall be deemed severable,
and the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or  enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision,  the parties  hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or  unenforceable
provision as may be possible and be valid and enforceable.

          SECTION  8.14.  Counterparts.   This  Agreement  may  be  executed  in
counterparts,  each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.

          SECTION  8.15.  Further   Assurances.   As  between  the  Company  and
Purchaser,  each party hereto, upon the request of any other party hereto, shall
do all such further acts and execute,  acknowledge  and deliver all such further
instruments  and  documents  as may be  necessary  or desirable to carry out the
transactions  contemplated  by this  Agreement,  including,  in the  case of the
Company,  such acts,  instruments and documents as may be necessary or desirable
to convey and transfer to Purchaser the Shares to be purchased by it hereunder.

          SECTION 8.16. Remedies Cumulative.  The remedies provided herein shall
be  cumulative  and shall not preclude the  assertion by any party hereto of any
other rights or the seeking of any remedies against the other party hereto.

          SECTION 8.17. Specific Performance.  The parties hereto agree that the
remedy at law for any breach of this  Agreement may be  inadequate,  and that as
between  the  Company  and  Purchaser  any  party  by  whom  this  Agreement  is
enforceable  shall be entitled to specific  performance in addition to any other
appropriate relief or remedy. Such party may, in its sole discretion, apply to a
court of competent  jurisdiction for specific  performance or injunctive or such
other  relief as such court may deem just and  proper in order to  enforce  this
Agreement as between the Company and Purchaser, or prevent any violation hereof,
and, to the extent  permitted by applicable as between the Company and Purchaser
law, each party waives any objection to the imposition of such relief.

          SECTION 8.18. No Purchaser Affiliate Liability. No Purchaser Affiliate
shall have any liability or  obligation  of any nature  whatsoever in connection
with or under this Agreement or the transactions  contemplated  hereby,  and the
Company  hereby  waives  and  releases  all  claims  of any such  liability  and
obligation,  it being  understood  that no such  Person  or entity  (other  than
Purchaser)  shall  be  liable  for or in  respect  of this  Agreement  with  the
transactions contemplated hereby.

          SECTION 8.19.  Confidentiality.  (a) Each of the parties hereto agrees
that it will not (i) use,  disseminate,  or in any way disclose any Confidential
Information  disclosed to it by the other party hereto,  to any person,  firm or
business, except to the extent necessary (x) in the case of Purchaser, to manage
its investment  (including any sale of all or any portion thereof), to discharge
its  fiduciary or  regulatory  obligations  or for any other  purpose  which the
Company may  hereafter  authorize in writing and (y) in the case of the Company,
in order to discharge any  fiduciary or  regulatory  obligation or for any other
purpose which the Purchaser may hereafter  authorize in writing, or (ii) use any
Confidential  Information  of the other party for its own benefit or the benefit
of any third  party.  Each of the  parties,  agrees that such it shall treat all
Confidential  Information received from the other party, with the same degree of
care as the receiving party accords to its own Confidential Information,  but in
no case less than reasonable care.

          (b)  Notwithstanding   anything  to  the  contrary  contained  in  the
immediately  preceding  paragraph (a) the  disclosure by any party hereto of any
Confidential  Information of the other party (i) to any Affiliate of such party,
or to any officer, director, employee, agent, representative,  attorney or other
advisor of such party or any Affiliate of such party,  who agrees to be bound by
the  provisions  of  this  Section  8.19,   (ii)  to  any  foreign  or  domestic
governmental  or  quasi-governmental  regulatory  authority  including  with out
limitation,  the Federal Reserve Bank of New York or any stock exchange or other
self-regulatory  organization  having  jurisdiction  over such  party,  (iii) in
response  to an  order  by a court or other  governmental  body,  (iv)  which is
otherwise  required  by  applicable  law or  regulation  (including  any rule or
regulation  of any stock  exchange or automated  quotation  system on which such
party is listed or traded or (v) which is  necessary  or  advisable to establish
the rights of either party under this Agreement, shall not be considered to be a
breach of this Agreement by the party making such disclosure; provided, however,
such the party required to make such disclosure  pursuant to clause (iii),  (iv)
or (v) hereof shall provide  written notice thereof to the party which owns such
Confidential  Information  to enable  such party to seek a  protective  order or
otherwise prevent such disclosure of its Confidential Information.

          SECTION 8.20. Tax Matters.  Except as required by applicable  law, the
Company and  Purchaser  agree to treat the Shares as stock other than  preferred
stock for all relevant income tax purposes.

<PAGE>

                           [SIGNATURE PAGES TO FOLLOW]

<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

                                        COMPUTER OUTSOURCING SERVICES, INC.

                                        By  /s/Zach Lonstein
                                            --------------------
                                            Name:   Zach Lonstein
                                            Title:  Chief Executive Officer

DB CAPITAL INVESTORS, L.P.,

         By:   DB CAPITAL PARTNERS, L.P.,
               its General Partner

         By:   DB CAPITAL PARTNERS, INC.,
               its General Partner

By   /s/Frank Schiff
     ---------------------
     Name:    Frank Schiff
     Title:   Managing Director

SANDLER CAPITAL PARTNERS IV, L.P.

         By:  Sandler Investment Partners, L.P.,
              General Partner

         By:  Sandler Capital Management,
              General Partner

         By:  MJDM Corp., a General
              Partner

By   /s/David C. Lee
     ---------------------
     Name:    David C. Lee
     Title:   Attorney-in-Fact

SANDLER CAPITAL PARTNERS IV FTE, L.P.

         By:  Sandler Investment Partners, L.P.,
              General Partner

         By:  Sandler Capital Management,
              General Partner

         By:  MJDM Corp., a General
              Partner

By  /s/David C. Lee
  ------------------------
  Name:    David C. Lee
  Title:   Attorney-in-Fact

SANDLER INTERNET PARTNERS, L.P.

         By:  Sandler Investment Partners, L.P.,
              General Partner

         By:  Sandler Capital Management,
              General Partner

         By:  MJDM Corp., a General
              Partner

By /s/David C. Lee
  ---------------------------
  Name:    David C. Lee
  Title:   Attorney-in-Fact

<PAGE>

SANDLER CO-INVESTMENT PARTNERS, L.P.

         By:  Sandler Investment Partners, L.P.,
              General Partner

         By:  Sandler Capital Management,
              General Partner

         By:  MJDM Corp., a General
              Partner

By   /s/David C. Lee
  -------------------------------
  Name:    David C. Lee
  Title:   Attorney-in-Fact

<PAGE>

                                                                      Schedule A

<TABLE>
                                   PURCHASERS
<CAPTION>

-------------------------------- --------------------------------- ---------------- -------------- -------------------

           Purchaser                         Address                  Series A        Warrants       Purchase Price
                                                                   Preferred Stock
-------------------------------- --------------------------------- ---------------- -------------- -------------------
<S>                               <C>                               <C>               <C>            <C>

-------------------------------- --------------------------------- ---------------- -------------- -------------------

DB Capital Investors, L.P.       130 Liberty Street, 25th Fl.         78,688.5        1,265,963       $30,000,000
                                 New York, NY 10006
                                 Attn.: Tyler T. Zachem,
                                           Managing Director
-------------------------------- --------------------------------- ---------------- -------------- -------------------
-------------------------------- --------------------------------- ---------------- -------------- -------------------

Sandler Capital Partners IV,     767 Fifth Avenue, 45th Fl.           48,605.9         781,985        $18,531,000
L.P.                             New York, NY 10153
                                 Attn.: David C. Lee,
                                           Managing Director
-------------------------------- --------------------------------- ---------------- -------------- -------------------
-------------------------------- --------------------------------- ---------------- -------------- -------------------

Sandler Capital Partners IV      767 Fifth Avenue, 45th Fl.           19,853.1         319,402        $ 7,569,000
FTE, L.P.                        New York, NY 10153
                                 Attn.: David C. Lee,
                                          Managing Director
-------------------------------- --------------------------------- ---------------- -------------- -------------------
-------------------------------- --------------------------------- ---------------- -------------- -------------------

Sandler Internet Partners, L.P.  767 Fifth Avenue, 45th Fl.            5,245.9          84,398        $ 2,000,000
                                 New York, NY 10153
                                 Attn.: David C. Lee,
                                          Managing Director
-------------------------------- --------------------------------- ---------------- -------------- -------------------
-------------------------------- --------------------------------- ---------------- -------------- -------------------

Sandler Co-Investment            767 Fifth Avenue, 45th Fl.            4,983.6           80,178       $ 1,900,000
Partners, L.P.                   New York, NY 10153                    -------        ---------       -----------
                                 Attn.: David C. Lee,
                                        Managing Director
-------------------------------- --------------------------------- ---------------- -------------- -------------------
-------------------------------- --------------------------------- ---------------- -------------- -------------------

Total                                                                  157,377        2,531,926       $60,000,000
                                                                       =======        =========       ===========

-------------------------------- --------------------------------- ---------------- -------------- -------------------
</TABLE>EXHIBIT 4

          This REGISTRATION  RIGHTS AGREEMENT (the  "Agreement"),  is made as of
May 10,  2000,  by and among  Computer  Outsourcing  Services,  Inc., a Delaware
corporation,  (the  "Company"),  DB Capital  Investors,  L.P.  (the  "Initial DB
Holder"),  Sandler Capital Partners V, L.P.,  Sandler Internet  Partners,  L.P.,
Sandler Co-Investment Partners,  L.P., Price Family Limited Partners and Benake,
L.P. (each an "Initial Sandler Holder" and,  collectively,  the "Initial Sandler
Holders") and Zach Lonstein, a resident of the State of New York ("Lonstein").

                              W I T N E S S E T H:

          WHEREAS,  the Company and the Initial  Holders have entered  into,  or
have been assigned an interest in, a Securities  Purchase  Agreement dated April
7, 2000 (the "Securities Purchase Agreement"); and

          WHEREAS,  pursuant to the terms of the Securities  Purchase Agreement,
the Initial  Holders have  purchased,  or have been assigned an interest in, (x)
157,377  shares  (the  "Shares")  of  the 8%  Series  A  Cumulative  Convertible
Participating  Preferred Stock of the Company (the "Series A Preferred  Stock"),
which such Shares are initially  convertible into 1,573,770 shares of the Common
Stock,  par value $.01 per share, of the Company  ("Common  Stock"),  subject to
adjustment in accordance with the terms of the Series A Preferred Stock, and (y)
Series A Common Stock Warrants (the "Warrants") to purchase, initially 2,531,926
shares of Common Stock,  subject to  adjustment in accordance  with the terms of
the Warrants; and

          WHEREAS,  Lonstein is the holder of  1,673,349  shares of Common Stock
(the "Lonstein Shares"); and

          WHEREAS,  Lonstein  has  granted  the  Initial  Holders an option (the
"Option") to purchase up to 750,000  shares of Common Stock  currently  owned by
Lonstein; and

          WHEREAS,   it  is  a  condition   precedent  to  the  closing  of  the
transactions  contemplated in the Securities Purchase Agreement that the parties
hereto execute and deliver this Agreement.

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

                                    ARTICLE I

                                   DEFINITIONS

          Section 1.01  Definitions.  Terms defined in the  Securities  Purchase
Agreement are used herein as therein defined. In addition,  the following terms,
as used herein, have the following meanings:

          "Agreement" has the meaning set forth in the preamble.

          "Commission" means the Securities and Exchange Commission.

          "Common  Stock"  has the  meaning  set  forth  in the  second  recital

          "Company" has the meaning set forth in the preamble.

          "Conversion  Shares"  means  all  shares  of  Common  Stock  or  other
securities  issued  upon  the  conversion  of the  Series A  Preferred  Stock in
accordance with its terms.

          "Demand  Registration"  means a registration  under the Securities Act
requested in accordance with Section 2.01.

          "DB  Holders"  means the  Initial DB Holder,  its direct and  indirect
successors and assigns and any direct or indirect  transferee of any Registrable
Securities initially held by the Initial DB Holder.

          "Excluded Holders" has the meaning set forth in Section 2.01(f).

          "Holders"  shall mean the  Lonstein  Holders,  the DB Holders  and the
Sandler Holders.

          "Indemnified Party" has the meaning set forth in Section 4.03.

          "Indemnifying Party" has the meaning set forth in Section 4.03.

          "Initial DB Holder" has the meaning set forth in the preamble.

          "Initial  Sandler  Holder"  and  "Initial  Sandler  Holders"  have the
meaning set forth in the preamble.

          "Initial  Holders" means the Initial DB Holder and the Initial Sandler
Holders.

          "Lonstein" has the meaning set forth in the preamble.

          "Lonstein  Holders"  means  Lonstein,  his direct and indirect  heirs,
successors and assigns and any direct or indirect  transferee of any Registrable
Securities initially held by Lonstein.

          "Lonstein Shares" has the meaning set forth in the third recital.

          "Losses" has the meaning set forth in Section 4.01.

          "Material  Adverse  Effect"  has the  meaning  set  forth  in  Section
2.01(f).

          "Option" has the meaning set forth in the fourth recital.

          "Option  Shares" means any shares of Common Stock or other  securities
issued upon the exercise of the Option.

          "Piggyback Registration" has the meaning set forth in Section 2.02.

          "Registrable  Common Stock" means the Conversion  Shares,  the Warrant
Shares and the Option Shares, in each case,  together with any additional shares
of Common Stock or other securities issued in respect thereof in connection with
any  stock  split,  stock  dividend,  merger,  consolidation,  reclassification,
recapitalization or similar event with respect to such shares of Common Stock.

          "Registrable  DB  Securities"  means  (a)  any  Registrable  Series  A
Preferred  Stock  purchased by any DB Holder on the Closing  Date or  thereafter
acquired,  (b) any  Registrable  Common Stock acquired by any DB Holder upon the
conversion  of any  Registrable  Series A Preferred  Stock,  the exercise of any
Registrable Warrants or the exercise of the Option, (c) any Registrable Warrants
purchased by any DB Holder on the Closing Date or thereafter  acquired,  and (d)
any  securities  of the Company or any successor  entity into which  Registrable
Common Stock,  Registrable  Warrants or Registrable Series A Preferred Stock may
hereafter  be  reclassified,   converted  or  changed.   As  to  any  particular
Registrable  DB  Securities,  such  securities  shall cease to be Registrable DB
Securities  upon  the  earlier  to occur of (i) a  registration  statement  with
respect to the sale of such  securities  shall have become  effective  under the
Securities  Act and such  securities  shall  have been  disposed  of under  such
registration  statement in accordance  with the plan of  distribution  set forth
therein;  (ii) such securities shall have been transferred pursuant to Rule 144;
(iii) such securities shall have been otherwise  transferred or disposed of, and
new  certificates  therefor not bearing a legend  restricting  further  transfer
shall have been  delivered  by the  Company,  and  subsequent  transfer  of such
securities shall not require  registration or qualification under the Securities
Act or any similar state law then in force, or (iv) such  securities  shall have
ceased to be outstanding.

          "Registrable  Lonstein  Securities"  means the Lonstein  Shares (other
than any Lonstein  Shares  subject to the Option),  together with any additional
shares  of  Common  Stock or other  securities  issued  in  respect  thereof  in
connection  with  any  stock  split,  stock  dividend,  merger,   consolidation,
reclassification,  recapitalization or similar event with respect to such shares
of Common Stock.  As to any particular  Registrable  Lonstein  Securities,  such
securities shall cease to be Registrable Lonstein Securities upon the earlier to
occur  of (i) a  registration  statement  with  respect  to  the  sale  of  such
securities  shall  have  become  effective  under  the  Securities  Act and such
securities  shall have been  disposed of under such  registration  statement  in
accordance with the plan of distribution set forth therein; (ii) such securities
shall have been  transferred  pursuant to Rule 144; (iii) such securities  shall
have been otherwise  transferred or disposed of, and new  certificates  therefor
not bearing a legend  restricting  further transfer shall have been delivered by
the  Company,  and  subsequent  transfer  of such  securities  shall not require
registration or qualification  under the Securities Act or any similar state law
then in force, or (iv) such securities shall have ceased to be outstanding.

          "Registrable  Sandler  Securities" means (a) any Registrable  Series A
Preferred  Stock  purchased  by any  Sandler  Holder  on  the  Closing  Date  or
thereafter  acquired,  (b) any Registrable  Common Stock acquired by any Sandler
Holders upon the conversion of any  Registrable  Series A Preferred  Stock,  the
exercise  of any  Registrable  Warrants or the  exercise of the Option,  (c) any
Registrable  Warrants  purchased  by any Sandler  Holder on the Closing  Date or
thereafter  acquired,  and (d) any  securities  of the Company or any  successor
entity into which Registrable Common Stock,  Registrable Warrants or Registrable
Series A Preferred Stock may hereafter be reclassified, converted or changed. As
to any particular Registrable Sandler Securities, such securities shall cease to
be  Registrable   Sandler  Securities  upon  the  earlier  to  occur  of  (i)  a
registration  statement with respect to the sale of such  securities  shall have
become  effective under the Securities Act and such  securities  shall have been
disposed of under such  registration  statement in  accordance  with the plan of
distribution set forth therein; (ii) such securities shall have been transferred
pursuant  to  Rule  144;  (iii)  such  securities   shall  have  been  otherwise
transferred or disposed of, and new  certificates  therefor not bearing a legend
restricting  further  transfer  shall have been  delivered by the  Company,  and
subsequent  transfer  of such  securities  shall  not  require  registration  or
qualification  under the  Securities Act or any similar state law then in force,
or (iv) such securities shall have ceased to be outstanding.

          "Registrable Series A Preferred Stock" means the Shares, together with
any additional  shares of Series A Preferred Stock or other securities issued in
respect thereof (other than any Conversion  Shares) in connection with any stock
split, stock dividend, merger, consolidation, reclassification, recapitalization
or similar event with respect to such Shares.

          "Registrable  Securities"  means the  Registrable DB  Securities,  the
Registrable Sandler Securities and the Registrable Lonstein Securities.

          "Registrable Warrants" means the Warrants,  together with any Warrants
or other securities issued in respect thereof (other than any Warrant Shares) in
connection  with  any  stock  split,  stock  dividend,  merger,   consolidation,
reclassification,  recapitalization  or  similar  event  with  respect  to  such
Warrants.

          "Requesting   Holders"   means  the   Holders   requesting   a  Demand
Registration,  and shall include parties deemed "Requesting Holders" pursuant to
Sections 2.01(a)(v), (vi) and (vii).

          "Rule 144" means Rule 144 (or any  successor  rule of similar  effect)
promulgated under the Securities Act.

          "Sandler Holders" means the Initial Sandler Holders,  their direct and
indirect  successors  and assigns and any direct or indirect  transferee  of any
Registrable Securities initially held by any Initial Sandler Holder.

          "Securities Purchase Agreement" has the meaning set forth in the first
recital.

          "Selling   Holder"  means  any  Holder  who  is  selling   Registrable
Securities pursuant to a public offering registered hereunder.

          "Series A  Preferred  Stock" has the  meaning  set forth in the second
recital.

          "Shares" has the meaning set forth in the second recital.

          "Shelf  Registration"  means a Demand  Registration  which is effected
pursuant to Rule 415 under the Securities Act.

          "Underwriter"  means a securities dealer who purchases any Registrable
Securities as principal in connection with a Demand  Registration or a Piggyback
Registration and not as part of such dealer's market-making activities.

          "Warrants" has the meaning set forth in the second recital.

          "Warrant  Shares" means all shares of Common Stock or other securities
issued upon the exercise of the Warrants.

          Section  1.02  Internal  References.   Unless  the  context  indicates
otherwise,  references to Articles,  Sections and paragraphs  shall refer to the
corresponding  articles,   sections  and  paragraphs  in  this  Agreement,   and
references  to the  parties  shall mean the parties to the  Securities  Purchase
Agreement.

                                   ARTICLE II

                               REGISTRATION RIGHTS

          Section 2.01 Demand  Registration.  (a) (i) Holders of not less than a
majority of the  Registrable DB Securities  may make up to two written  requests
for a Demand  Registration  (of which such  Demand  Registrations,  one may be a
Shelf  Registration) of all or any part of the Registrable DB Securities held by
such DB Holders;  provided that (A) no such Demand Registration may be requested
by the DB Holders prior to the first  anniversary  of the Closing Date,  and (B)
the DB Holders shall not be entitled to a Demand  Registration  if, during the 6
months preceding such request,  the Holders have requested a Demand Registration
(unless such Demand Registration was preempted pursuant to Section 2.01(e)).

          (ii)  Holders of not less than a majority of the  Registrable  Sandler
Securities  may make up to two written  requests for a Demand  Registration  (of
which such Demand Registrations,  one may be a Shelf Registration) of all or any
part  of the  Registrable  Sandler  Securities  held by  such  Sandler  Holders;
provided  that (A) no such Demand  Registration  may be requested by the Sandler
Holders prior to the first  anniversary of the Closing Date, and (B) the Sandler
Holders shall not be entitled to a Demand  Registration  if, during the 6 months
preceding such request, the Holders have requested a Demand Registration (unless
such Demand Registration was preempted pursuant to Section 2.01(e)).

          (iii) Holders of not less than a majority of the Registrable  Lonstein
Securities may make up to two written requests for a Demand  Registration of all
or any  part of the  Registrable  Lonstein  Securities  held  by  such  Lonstein
Holders;  provided that (A) no such Demand  Registration may be requested by the
Lonstein  Holders prior to the second  anniversary  of the Closing Date, and (B)
the DB Holders shall not be entitled to a Demand  Registration  if, during the 6
months preceding such request,  the Holders have requested a Demand Registration
(unless such Demand Registration was preempted pursuant to Section 2.01(e)).

          (iv) Any request for a Demand  Registration will specify the aggregate
number of shares of Registrable Securities proposed to be sold by the Requesting
Holders and will also specify the intended  method of disposition  thereof.  Any
such request for a Demand  Registration  shall specify whether such registration
will  be a  Shelf  Registration.  For so long as the  Initial  DB  Holder  holds
Registrable DB Securities, no Demand Registration made by any DB Holder shall be
a Shelf  Registration  without the consent of the Initial DB Holder. For so long
as the Initial Sandler Holders hold Registrable  Sandler  Securities,  no Demand
Registration  made by any Sandler Holder shall be a Shelf  Registration  without
the  consent of a  majority  in  interest  of the  Initial  Sandler  Holders.  A
registration  will  not  count  as a Demand  Registration  until  it has  become
effective.  If the Requesting  Holders withdraw or do not pursue the request for
the Demand  Registration (in each of the foregoing cases,  provided that at such
time the Company is in compliance in all material  respects with its obligations
under this  Agreement),  then such Demand  Registration  shall be deemed to have
been  effected,  provided that (i) if, the Demand  Registration  does not become
effective  because a material  adverse  change has  occurred,  or is  reasonably
likely  to  occur,  in  the  condition   (financial  or  otherwise),   business,
properties, assets, liabilities,  operations or prospects of the Company and its
subsidiaries taken as a whole subsequent to the date of the written request made
by the Requesting  Holders or (ii) if, after the Demand  Registration has become
effective,  an offering of Registrable  Securities pursuant to a registration is
interfered with by any stop order, injunction,  or other order or requirement of
the  Commission  or  other   governmental   agency  or  court  then  the  Demand
Registration  shall not be deemed to have been  effected and will not count as a
Demand Registration.

          (v) Upon receipt of any request for a Demand  Registration  by Holders
of not less than a majority  of the  Registrable  DB  Securities  held by the DB
Holders, the Company shall promptly (but in any event within ten (10) days) give
written notice of such proposed Demand  Registration  to all other Holders,  and
subject to Section 2.01(f),  all such Holders shall have the right,  exercisable
by written notice to the Company within twenty (20) days of their receipt of the
Company's notice,  to elect to include in such Demand  Registration such portion
of their Registrable Securities as they may request. All such Holders requesting
to have  their  Registrable  Securities  included  in a Demand  Registration  in
accordance  with the  preceding  sentence  shall  be  deemed  to be  "Requesting
Holders" for purposes of this Section 2.01;  provided  that any Sandler  Holders
and any  Lonstein  Holders  shall not be deemed to be  "Requesting  Holders" for
purposes of Section 2.01(c).

          (vi) Upon receipt of any request for a Demand  Registration by Holders
of not less than a majority of the  Registrable  Sandler  Securities held by the
Sandler  Holders,  the Company shall  promptly (but in any event within ten (10)
days) give written  notice of such  proposed  Demand  Registration  to all other
Holders,  and subject to Section 2.01(f), all such Holders shall have the right,
exercisable  by written  notice to the Company  within twenty (20) days of their
receipt of the Company's notice, to elect to include in such Demand Registration
such  portion of their  Registrable  Securities  as they may  request.  All such
Holders  requesting to have their  Registrable  Securities  included in a Demand
Registration  in accordance  with the preceding  sentence  shall be deemed to be
"Requesting  Holders" for purposes of this Section  2.01;  provided  that any DB
Holders and any Lonstein Holders shall not be deemed to be "Requesting  Holders"
for purposes of Section 2.01(c).

          (vii) Upon receipt of any request for a Demand Registration by Holders
of a  majority  of the  Registrable  Lonstein  Securities  held by the  Lonstein
Holders, the Company shall promptly (but in any event within ten (10) days) give
written notice of such proposed Demand  Registration  to all other Holders,  and
subject to Section 2.01(f),  all such Holders shall have the right,  exercisable
by written notice to the Company within twenty (20) days of their receipt of the
Company's notice,  to elect to include in such Demand  Registration such portion
of their Registrable Securities as they may request. All such Holders requesting
to have  their  Registrable  Securities  included  in a Demand  Registration  in
accordance  with the  preceding  sentence  shall  be  deemed  to be  "Requesting
Holders" for purposes of this Section 2.01; provided that any DB Holders and any
Sandler  Holders shall not be deemed to be "Requesting  Holders" for purposes of
Section 2.01(c).

          (b) In the event that the Requesting Holders withdraw or do not pursue
a request for a Demand  Registration  and,  pursuant to Section  2.01(a) hereof,
such  Demand  Registration  is deemed to have been  effected,  the  Holders  may
reacquire  such  Demand  Registration  (such that the  withdrawal  or failure to
pursue a  request  will not  count as a Demand  Registration  hereunder)  if the
Selling  Holders  reimburse  the Company for any and all  Registration  Expenses
actually  incurred by the Company in  connection  with such request for a Demand
Registration.

          (c)  If  the  Requesting  Holders  so  elect,  the  offering  of  such
Registrable Securities pursuant to such Demand Registration shall be in the form
of a "firm  commitment"  underwritten  offering.  A majority  in interest of the
Requesting Holders shall have the right to select the managing  Underwriters and
any additional investment bankers and managers to be used in connection with any
offering  under this Section  2.01,  subject to the  Company's  approval,  which
approval shall not be unreasonably withheld.

          (d) The  Requesting  Holders  will  inform the Company of the time and
manner of any disposition of Registrable  Securities (which may be pursuant to a
Shelf  Registration),  and agree to take reasonable action to cooperate with the
Company in effecting the disposition of the  Registrable  Securities in a manner
that does not  unreasonably  disrupt  the public  trading  market for the Common
Stock.

          (e)  The  Company  shall  have  the  right  for up to 180  days in any
consecutive  360 day period to delay or suspend any Demand  Registration  in the
event that the Board determines,  in good faith, that it is in the best interest
of the  Company  for the  Company to  proceed  with its own  offering  of equity
securities. The Company may so proceed by delivering written notice (within five
business  days  after  the  Company  has  received  a  request  for such  Demand
Registration)  of such  intention  to the  Selling  Holder  indicating  that the
Company has identified a specific  business need and use for the proceeds of the
sale of such  securities  and the Company shall use its best efforts to effect a
primary  registration  within 60 days of such  notice.  In the  ensuing  primary
registration,  the Holders will have such piggyback  registration  rights as are
set forth in Section 2.02 hereof.  Upon the Company's  preemption of a requested
Demand Registration,  such requested registration will not count as the Holders'
Demand Registration.  The Company may exercise the right to preempt only once in
any 360-day period.  Notwithstanding  anything to the contrary contained herein,
during any 360-day  period the Company  shall not exercise its right to preempt,
delay or postpone the filing or  effectiveness  of any  registration  statement,
pre- or post-effective amendment or supplement or prospectus supplement pursuant
to this  Section  2.01(e),  the first  proviso  to Section  3.01(a),  or Section
3.01(b) for more than 180 days in the aggregate for all such  provisions  during
any period of 360 consecutive days.

          (f) Priority on Demand Registrations. No securities to be sold for the
account of any Person  (including  the Company)  other than a Requesting  Holder
shall be included in a Demand  Registration  unless the managing  Underwriter or
Underwriters shall advise the Company and the Requesting Holders in writing that
the inclusion of such  securities  will not materially and adversely  affect the
price, distribution or timing of the offering (a "Material Adverse Effect"). Any
additional  securities to be included in a Demand Registration  pursuant to this
Section 2.01(f) shall be included in such Demand Registration in accordance with
their relative  rights.  Furthermore,  in the event the managing  Underwriter or
Underwriters  shall advise the Company or the Requesting Holders that even after
exclusion of all securities of other Persons (including the Company) pursuant to
the  immediately  preceding  sentence,  the  amount  of  Registrable  Securities
proposed to be included in such Demand  Registration  by  Requesting  Holders is
sufficiently   large  to  cause  a  Material  Adverse  Effect,  the  Registrable
Securities of the Requesting Holders to be included in such Demand  Registration
shall equal the number of shares  which the Company and the  Requesting  Holders
are so advised can be sold in such offering  without a Material  Adverse  Effect
and such shares shall be allocated pro rata among the Requesting  Holders on the
basis of the number of Registrable  Securities  requested to be included in such
registration  by each such Requesting  Holder;  provided,  however,  that if any
Registrable   Securities  requested  to  be  registered  pursuant  to  a  Demand
Registration under Section 2.01 are excluded from registration  hereunder,  then
the Holder(s) having shares excluded  ("Excluded  Holders") shall have the right
to withdraw all, or any part, of their shares from such registration;  provided,
further,  that if less than 80% of the  Registrable  Securities  requested to be
included  in such  Demand  Registration  are  actually  included  therein,  such
registration  will not  count  as a Demand  Registration  for  purposes  of this
Section 2.01.

          Section 2.02  Piggyback  Registration.  (a) If the Company at any time
proposes to file a registration  statement under the Securities Act with respect
to an offering of  securities  for its own account or for the account of another
Person  (other  than a  registration  statement  on  Form  S-4 or  S-8  (or  any
substitute  form that may be adopted by the  Commission) and other than a Demand
Registration hereunder),  the Company shall give written notice of such proposed
filing to the  Holders at the  address  set forth in the share  register  of the
Company  as soon as  reasonably  practicable  (but in no event less than 15 days
before the anticipated date on which such  registration will be first filed with
the Commission),  undertaking to provide each Holder the opportunity to register
on the same terms and conditions such number and type of Registrable  Securities
as such Holder may request (a "Piggyback  Registration").  Each Holder will have
ten business  days after  receipt of any such notice to notify the Company as to
whether it wishes to participate in a Piggyback Registration (which notice shall
not be deemed to be a request for a Demand Registration); provided that should a
Holder fail to provide  timely  notice to the Company,  such Holder will forfeit
any rights to  participate  in the Piggyback  Registration  with respect to such
proposed  offering.  In the event that the  registration  statement  is filed on
behalf of a Person other than the Company, the Company will use its best efforts
to have the  shares of  Registrable  Securities  that the  Holders  wish to sell
included in the  registration  statement.  If the Company shall determine in its
sole discretion not to register or to delay the proposed  offering,  the Company
shall provide written notice of such determination to the Holders and (i) in the
case of a determination not to effect the proposed offering,  shall thereupon be
relieved of the obligation to register such Registrable Securities in connection
therewith, and (ii) in the case of a determination to delay a proposed offering,
shall thereupon be permitted to delay  registering such  Registrable  Securities
for the same period as the delay in respect of the proposed offering. As between
the Company and the Selling Holders, the Company shall be entitled to select the
Underwriters in connection with any Piggyback Registration.

          (b) Priority on Piggyback Registrations. If the Registrable Securities
requested to be included in the Piggyback Registration by any Holder differ from
the type of securities proposed to be registered by the Company and the managing
Underwriter  advises  the  Company  that  due  solely  to such  differences  the
inclusion of such Registrable  Securities would cause a Material Adverse Effect,
then (i) the number of such  Holders'  Registrable  Securities to be included in
the Piggyback  Registration  shall be reduced to an amount which, in the opinion
of the managing  Underwriter,  would  eliminate such Material  Adverse Effect or
(ii) if no such  reduction  would,  in the opinion of the managing  Underwriter,
eliminate such Material Adverse Effect, then the Company shall have the right to
exclude  all such  Registrable  Securities  from  such  Piggyback  Registration,
provided that no other  securities of such type are included and offered for the
account  of any  other  Person  in  such  Piggyback  Registration.  Any  partial
reduction in number of  Registrable  Securities  of any Holder to be included in
the Piggyback  Registration  pursuant to clause (i) of the immediately preceding
sentence  shall be  effected  pro rata based on the ratio  which  such  Holder's
requested shares bears to the total number of shares requested to be included in
such Piggyback  Registration  by all Persons other than the Company who have the
contractual  right to request that their shares be included in such registration
statement  and  who  have  requested  that  their  shares  be  included.  If the
Registrable  Securities  requested to be included in the registration  statement
are of the same type as the securities  being  registered by the Company and the
managing  Underwriter advises the Company that the inclusion of such Registrable
Securities would cause a Material Adverse Effect,  the Company will be obligated
to include in such registration  statement,  as to each Holder only a portion of
the shares such Holder has requested be registered equal to the ratio which such
Holder's  requested  shares bears to the total number of shares  requested to be
included in such registration  statement by all Persons who have the contractual
right to request  that their shares be included in such  registration  statement
and who have requested  their shares be included;  provided,  however,  that the
provisions  of this  sentence  shall not be  applicable to the Person or Persons
initiating  such   registration   statement.   If  the  Company   initiated  the
registration,  then  the  Company  may  include  all of its  securities  in such
registration  statement before any such Holder's  requested shares are included.
If another security holder initiated the registration,  then the Company may not
include  any of  its  securities  in  such  registration  statement  unless  all
Registrable Securities requested to be included in the registration statement by
all Holders are included in such registration  statement.  If as a result of the
provisions  of this Section  2.02(b) any Holder shall not be entitled to include
all Registrable  Securities in a registration  that such Holder has requested to
be so  included,  such  Holder may  withdraw  such  Holder's  request to include
Registrable   Securities   in  such   registration   statement   prior   to  its
effectiveness.

                                   ARTICLE III

                             REGISTRATION PROCEDURES

          Section 3.01 Filings; Information. In connection with the registration
of Registrable  Securities pursuant to Section 2.01 and Section 2.02 hereof, the
Company will use its best efforts to effect the registration of such Registrable
Securities as promptly as is reasonably practicable,  and in connection with any
such request:

               (a) The Company  will  expeditiously  prepare and file as soon as
     practicable  (but in any  event  within  60  days)  with the  Commission  a
     registration statement on any form for which the Company then qualifies and
     which counsel for the Company shall deem  appropriate and available for the
     sale  of  the  Registrable   Securities  to  be  registered  thereunder  in
     accordance with the intended method of  distribution  thereof,  and use its
     reasonable  best  efforts  to cause such filed  registration  statement  to
     become and remain  effective  (i) with  respect to any Demand  Registration
     (other  than a Shelf  Registration)  or  Piggyback  Registration,  for such
     period,  not to exceed 120 days, as may be  reasonably  necessary to effect
     the sale of such securities and (ii) with respect to a Shelf  Registration,
     until the earlier of the sale of all Registrable  Securities thereunder and
     the  end of the  36th  calendar  month  from  the  time  the  second  Shelf
     Registration becomes effective;  provided that if the Company shall furnish
     to the Selling  Holder a certificate  signed by the  Company's  Chairman or
     President  stating that the Company's  Board of Directors has determined in
     good faith that it would be detrimental or otherwise disadvantageous to the
     Company or its shareholders  for such a registration  statement to be filed
     as  expeditiously  as possible  because the sale of Registrable  Securities
     covered by such registration  statement or the disclosure of information in
     any related prospectus or prospectus  supplement would materially interfere
     with any  acquisition,  financing or other  material  event or  transaction
     which is then intended or the public  disclosure of which at the time would
     be  materially  prejudicial  to the  Company,  the Company may postpone the
     filing or  effectiveness  of a  registration  statement for a period of not
     more than 180 days; provided,  further, that the Company shall not exercise
     its right to  preempt,  delay or  postpone  any  registration  pursuant  to
     Section  2.01(e),  the first  proviso to this Section  3.01(a),  or Section
     3.01(b)  for more than 180 days in the  aggregate  for all such  provisions
     during any period of 360  consecutive  days;  provided,  further,  that the
     Company  may  exercise  its rights  under  Section  3.01(a)  only once with
     respect to any particular registration statement; and provided further that
     if (i) the effective date of any registration statement filed pursuant to a
     Demand Registration would otherwise be at least 45 calendar days, but fewer
     than 90 calendar days, after the end of the Company's fiscal year, and (ii)
     the  Securities  Act  requires  the  Company to include  audited  financial
     statements  of the Company as of the end of such fiscal  year,  the Company
     may delay the effectiveness of such registration  statement for such period
     as is  reasonably  necessary  to  include  therein  its  audited  financial
     statements for such fiscal year.

               (b) Anything in this  Agreement to the contrary  notwithstanding,
     it is understood  and agreed that the Company shall not be required to keep
     any Shelf  Registration  effective  or useable  for offers and sales of the
     Registrable  Securities,  file  a  post  effective  amendment  to  a  Shelf
     Registration  statement or prospectus  supplement or to supplement or amend
     any registration  statement, if the Company is then involved in discussions
     concerning,  or otherwise engaged in, any material financing or investment,
     acquisition or divestiture  transaction or other material business purpose,
     if the Company  determines  in good faith that the making of such a filing,
     supplement or amendment at such time would interfere with such  transaction
     or purpose.  The Company  shall  promptly  give the Holders of  Registrable
     Securities  written  notice  of  such  postponement  containing  a  general
     statement of the reasons for such  postponement and an approximation of the
     anticipated  delay.  Upon receipt by a Holder of Registrable  Securities of
     notice of an event of the kind  described  in this  Section  3.01(b),  such
     Holder shall forthwith discontinue such Holder's disposition of Registrable
     Securities until such Holder's receipt of notice from the Company that such
     disposition  may continue  and of any  supplemented  or amended  prospectus
     indicated  in  such  notice.   Notwithstanding  anything  to  the  contrary
     contained  herein,  the Company shall not be entitled to preempt,  delay or
     postpone the filing or effectiveness of any registration statement, pre- or
     post-effective  amendment or  supplement to any  registration  statement or
     prospectus  supplement  pursuant to Section  2.01(e),  the first proviso of
     Section  3.01(a),  or this  Section  3.01(b)  for more than 180 days in the
     aggregate  for all such  provisions  during any  period of 360  consecutive
     days.

               (c) Before filing a  registration  statement or prospectus or any
     amendments or supplements  thereto, the Company will furnish to any Selling
     Holder and to the applicable managing Underwriters, if any, draft copies of
     all such  documents  proposed to be filed at least ten (10)  business  days
     prior thereto,  which documents will be subject to the reasonable review of
     such Selling Holders,  the applicable  managing  Underwriters,  if any, and
     their respective counsel, agents and representatives,  and the Company will
     not file any registration  statement or amendment thereto or any prospectus
     or  any  supplement  thereto  (including  such  documents  incorporated  by
     reference)  to which any Selling  Holder or  Underwriter  shall  reasonably
     object;

               (d) Notify the Selling Holders  requesting such  registration and
     (if requested) confirm such advice in writing, as soon as practicable after
     notice  thereof  is  received  by the  Company  (i) when  the  registration
     statement or any amendment thereto has been filed or becomes effective, the
     prospectus or any amendment or supplement to the prospectus has been filed,
     (ii) of any request by the  Commission for amendments or supplements to the
     registration  statement or the  prospectus or for  additional  information,
     (iii) if at any time the  representations  and  warranties  of the  Company
     contemplated  by Section  5.01 cease to be true and correct and (iv) of the
     receipt by the Company of any  notification  with respect to the suspension
     of the qualification of the Registrable  Securities for offering or sale in
     any  jurisdiction  or the  initiation or  threatening of any proceeding for
     such purpose;

               (e) After the filing of the registration  statement,  the Company
     will promptly notify the Selling  Holders of any stop order issued,  or, to
     the Company's knowledge, threatened to be issued, by the Commission and use
     its best efforts to prevent the entry of such stop order or to remove it if
     entered.

               (f)  prepare  and  file  with  the  Commission  such  amendments,
     post-effective  amendments and supplements to such  registration  statement
     and the prospectus used in connection therewith as may be necessary to keep
     such  registration  statement  effective  for a period of not less than 120
     days (or such shorter  period  which will  terminate  when all  Registrable
     Securities  covered  by  such  registration  statement  have  been  sold or
     withdrawn,  but  not  prior  to the  expiration  of the  applicable  period
     referred to in Section 4(3) of the Securities Act and Rule 174  thereunder,
     if  applicable),  cause the prospectus to be  supplemented  by any required
     prospectus supplement,  and as so supplemented to be filed pursuant to Rule
     424 under  the  Securities  Act,  and  comply  with the  provisions  of the
     Securities Act with respect to the disposition of all securities covered by
     such  registration  statement  during  such period in  accordance  with the
     intended  methods of disposition  by the Selling  Holders set forth in such
     registration statement;

               (g) furnish to each Selling Holder  requesting such  registration
     and the managing  Underwriter,  if any, without charge, one signed copy and
     such  number of  conformed  copies  of such  registration  statement,  each
     amendment  and  supplement   thereto,   the  prospectus  included  in  such
     registration  statement  (including  each  preliminary  prospectus) and any
     amendments or supplements thereto, any documents  incorporated by reference
     therein  and such  other  documents  as any  such  Selling  Holder  or such
     managing  Underwriter  may  reasonably  request in order to facilitate  the
     disposition of the  Registrable  Securities (it being  understood  that the
     Company  consents to the use of the prospectus  (including the  preliminary
     prospectus)  and any amendment or supplement  thereto by the Selling Holder
     requesting  such  registration  and the  managing  Underwriter,  if any, in
     connection with the offering and sale of the Registrable Securities covered
     by the prospectus or any amendment or supplement thereto);

               (h) The  Company  will  use  its  best  efforts  to  qualify  the
     Registrable  Securities  for offer and sale under such other  securities or
     blue sky laws of such  jurisdictions  in the United  States as the  Selling
     Holders  reasonably  request;  keep each such registration or qualification
     (or  exemption  therefrom)  effective  during  the  period  in  which  such
     registration statement is required to be kept effective; and do any and all
     other acts and things  which may be  reasonably  necessary  or advisable to
     enable each Selling Holder to consummate the disposition of the Registrable
     Securities  owned by such Selling  Holder in such  jurisdictions;  provided
     that the Company  will not be required to qualify  generally to do business
     in any jurisdiction where it would not otherwise be required to qualify but
     for this  paragraph  3.01(h),  (ii) subject  itself to taxation in any such
     jurisdiction  or (iii)  consent to  general  service of process in any such
     jurisdiction.

               (i) The Company  will as promptly  as is  practicable  notify the
     Selling Holders,  at any time when a prospectus relating to the sale of the
     Registrable  Securities  is  required  by law  to be  delivered  under  the
     Securities Act, of the occurrence of any event requiring the preparation of
     a  supplement  or  amendment  to such  prospectus  so that,  as  thereafter
     delivered to the purchasers of such Registrable Securities, such prospectus
     will not contain an untrue  statement  of a material  fact or omit to state
     any material  fact  required to be stated  therein or necessary to make the
     statements therein, in the light of the circumstances under which they were
     made, not misleading and promptly make available to the Selling Holders and
     to the Underwriters  any such supplement or amendment.  Upon receipt of any
     notice  of  the  occurrence  of any  event  of the  kind  described  in the
     preceding  sentence,  Selling Holders will forthwith  discontinue the offer
     and sale of Registrable  Securities pursuant to the registration  statement
     covering such  Registrable  Securities until receipt by the Selling Holders
     and  the  Underwriters  of the  copies  of  such  supplemented  or  amended
     prospectus  and, if so directed by the  Company,  the Selling  Holders will
     deliver to the Company all copies, other than permanent file copies then in
     the possession of Selling Holders,  of the most recent prospectus  covering
     such Registrable  Securities at the time of receipt of such notice.  In the
     event the Company  shall give such  notice,  the Company  shall  extend the
     period  during  which  such  registration  statement  shall  be  maintained
     effective  as  provided  in  Section  3.01(a)  hereof by the number of days
     during the period from and  including the date of the giving of such notice
     to the date when the Company  shall make  available to the Selling  Holders
     such supplemented or amended prospectus.

               (j) The Company will enter into customary  agreements  (including
     an   underwriting   agreement  in  customary  form,   including   customary
     representations,  warranties,  covenants,  conditions and  indemnities) and
     take such other  actions as are  required or  reasonably  requested  by the
     Selling  Holders  or the  managing  Underwriter  in  order to  expedite  or
     facilitate the sale of such Registrable Securities.

               (k) At the  request  of any  Underwriter  in  connection  with an
     underwritten  offering  the  Company  will  furnish an opinion of  counsel,
     addressed  to the  Underwriters,  covering  such  customary  matters as the
     managing  Underwriter  may reasonably  request and (ii) a comfort letter or
     comfort letters (and updates thereof) from the Company's independent public
     accountants covering such customary matters as the managing Underwriter may
     reasonably request.

               (l) If  requested  by the  managing  Underwriter  or any  Selling
     Holder, the Company shall promptly  incorporate in a prospectus  supplement
     or post effective amendment such information as the managing Underwriter or
     any Selling Holder reasonably  requests to be included  therein,  including
     without limitation,  with respect to the Registrable  Securities being sold
     by such  Selling  Holder,  the  purchase  price being paid  therefor by the
     Underwriters  and with  respect  to any  other  terms  of the  underwritten
     offering of the  Registrable  Securities to be sold in such  offering,  and
     promptly make all required  filings of such  prospectus  supplement or post
     effective amendment.

               (m) The Company shall  promptly make  available for inspection by
     any Selling Holder or Underwriter participating in any disposition pursuant
     to any registration statement, and any attorney,  accountant or other agent
     or representative  retained by any such Selling Holder or Underwriter,  all
     financial and other records,  pertinent  corporate documents and properties
     of the Company, as shall be reasonably necessary to enable them to exercise
     their due  diligence  responsibility,  and cause  the  Company's  officers,
     directors  and  employees to supply all  information  requested by any such
     Selling  Holder  or  Underwriter  in  connection  with  such   registration
     statement.

               (n) The Company shall cause the Registrable  Securities  included
     in any registration statement to be (A) listed on each securities exchange,
     if any, on which similar  securities issued by the Company are then listed,
     or (B) authorized to be quoted and/or listed (to the extent  applicable) on
     the Nasdaq National Market if the Registrable Securities so qualify.

               (o) The  Company  shall  provide a CUSIP  number,  registrar  and
     transfer agent for the Registrable  Securities included in any registration
     statement not later than the effective date of such registration statement.

               (p) The Company shall cooperate with each Selling Holder and each
     Underwriter participating in the disposition of such Registrable Securities
     and their respective  counsel in connection with any filings required to be
     made with the National Association of Securities Dealers, Inc.

               (q) The Company  shall during the period when the  prospectus  is
     required  to be  delivered  under the  Securities  Act,  promptly  file all
     documents  required  to be filed with the  Commission  pursuant to Sections
     13(a), 13(c), 14 or 15(d) of the Exchange Act.

               (r) The Company  will make  generally  available  to its security
     holders, as soon as reasonably practicable,  an earnings statement covering
     a period of 12 months,  beginning  within three months after the  effective
     date of the registration statement,  which earnings statement shall satisfy
     the  provisions  of Section 11(a) of the  Securities  Act and the rules and
     regulations of the Commission thereunder.

               (s) The  Company  will use its  best  efforts  to cause  all such
     Registrable  Securities  and, in the event of a public offering of Series A
     Preferred  Stock,  the Series A  Preferred  Stock  (subject  to  applicable
     listing  requirements),  to be listed on each securities exchange or quoted
     on each  inter-dealer  quotation  system on which the Common  Stock is then
     listed or quoted.

          The Company may require Selling Holders promptly to furnish in writing
to the Company such  information  regarding  such Selling  Holders,  the plan of
distribution  of the  Registrable  Securities  and other  information  as may be
legally required in connection with such registration.

          Section  3.02  Registration   Expenses.   The  Company  will  pay  all
registration  expenses  of the  Selling  Holders in  connection  with any Demand
and/or Piggyback Registrations including but not limited to (i) registration and
filing fees with the  Commission  and the  National  Association  of  Securities
Dealers,  Inc., (ii) fees and expenses of compliance with securities or blue sky
laws (including  reasonable fees and disbursements of counsel in connection with
blue sky qualifications of the Registrable Securities), (iii) printing expenses,
(iv) fees and expenses  incurred in connection  with the listing or quotation of
the Registrable Securities,  (v) fees and expenses of counsel to the Company and
the reasonable fees and expenses of independent certified public accountants for
the Company  (including fees and expenses  associated with the special audits or
the delivery of comfort  letters),  (vi) the reasonable fees and expenses of any
additional experts retained by the Company in connection with such registration,
(vii) all  roadshow  costs and  expenses  not paid by the  Underwriters,  (viii)
rating  agency  fees and (ix) fees and  expenses  of counsel  to the  holders of
Registrable Securities.

          The Company will not be required to pay for any underwriting discounts
and commissions attributable to the sale of Registrable Securities.

                                   ARTICLE IV

                        INDEMNIFICATION AND CONTRIBUTION

          Section 4.01  Indemnification  by the Company.  The Company  agrees to
indemnify and hold harmless,  to the fullest extent permitted by applicable law,
each Selling Holder and its Affiliates and their respective officers, directors,
partners, stockholders,  members, employees, agents and representatives and each
Person (if any) which  controls a Selling  Holder  within the  meaning of either
Section 15 of the  Securities  Act or Section 20 of the Exchange  Act,  from and
against any and all losses,  claims,  damages,  liabilities,  costs and expenses
(including attorneys, fees) (collectively,  "Losses") caused by, arising out of,
resulting from or related to any untrue statement or alleged untrue statement of
a material fact contained in any registration statement,  preliminary prospectus
or prospectus relating to the Registrable Securities (as amended or supplemented
from time to time),  or caused by any  omission  or  alleged  omission  to state
therein a material fact  required to be stated  therein or necessary to make the
statements  therein not misleading,  except insofar as such Losses are caused by
or  contained  in or based  upon any  information  furnished  in  writing to the
Company by or on behalf of such Selling Holder or any Underwriter  expressly for
use  therein  (which  was not  subsequently  corrected  in  writing  prior to or
concurrently with the sale of Registrable Securities to the Person asserting the
Loss) or by the Selling  Holder's  failure to deliver a copy of the registration
statement or  prospectus  or any  amendments  or  supplements  thereto after the
Company has  furnished the Selling  Holder with copies of the same.  The Company
also agrees to indemnify any Underwriters of the Registrable  Securities,  their
officers  and  directors  and each  person who  controls  such  Underwriters  on
substantially  the same  basis  as that of the  indemnification  of the  Selling
Holders  provided in this  Section  4.01.  Notwithstanding  the  foregoing,  the
Company  shall have no  obligation  to indemnify  under this Section 4.01 to the
extent any such Losses  have been  finally and  non-appealably  determined  by a
court of competent  jurisdiction  to have  resulted  from a Selling  Holder's or
Underwriter's willful misconduct or gross negligence.

          Section 4.02  Indemnification by Selling Holders.  The Selling Holders
agree to  indemnify  and hold  harmless,  to the  fullest  extent  permitted  by
applicable  law, the Company and its Affiliates and their  respective  officers,
directors,    partners,    stockholders,    members,   employees,   agents   and
representatives  and each Person (if any) which  controls the Company within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act,  from and against any and all Losses caused by,  arising out of,  resulting
from or  related to any  untrue  statement  or  alleged  untrue  statement  of a
material fact contained in any registration statement, preliminary prospectus or
prospectus  relating to the Registrable  Securities  (supplemented  from time to
time) or any  preliminary  prospectus,  or caused  by any  omission  or  alleged
omission  to state  therein a material  fact  required  to be stated  therein or
necessary to make the  statements  therein not  misleading,  but only insofar as
such  Losses  are  caused  by or  contained  in or based  upon  any  information
furnished  in writing to the Company by or on behalf of such  Selling  Holder or
any Underwriter expressly for use therein (which was not subsequently  corrected
in writing prior to or concurrently  with the sale of Registrable  Securities to
the Person  asserting  the Loss).  Notwithstanding  the  foregoing,  the Selling
Holder  shall have no  obligation  to  indemnify  under this Section 4.02 to the
extent that any such Losses have been finally and non-appealably determined by a
court of competent  jurisdiction  to have resulted  from the  Company's  willful
misconduct or gross negligence.

          Section  4.03  Conduct  of  Indemnification  Proceedings.  In case any
proceeding  (including any  governmental  investigation)  shall be instituted or
threatened  involving  any Person in respect  of which  indemnity  may be sought
pursuant to Section 4.01 or Section 4.02, such Person (the "Indemnified  Party")
shall promptly  notify the Person against whom such indemnity may be sought (the
"Indemnifying  Party") in writing (it being  understood that the failure to give
such notice shall not relieve any Indemnifying Party from any liability which it
may have hereunder except to the extent the  Indemnifying  Party is actually and
materially  prejudiced by such  failure) and the  Indemnifying  Party,  upon the
request of the Indemnified Party,  shall retain counsel reasonably  satisfactory
to such  Indemnified  Party to represent  such  Indemnified  Party and any other
Persons the  Indemnifying  Party may designate in such  proceeding and shall pay
the fees and  disbursements of such counsel related to such  proceeding.  If the
Indemnifying  Party does not elect  within 15 days  after  receipt of the notice
required hereby to assume the defense of any proceeding,  the Indemnified  Party
may assume such  defense  with  counsel of its choice at the cost and expense of
the Indemnifying  Party. In any such proceeding where the Indemnifying Party has
assumed the defense,  any  Indemnified  Party shall have the right to retain its
own counsel and  participate  in the defense,  but the fees and expenses of such
counsel  shall  be at the  expense  of such  Indemnified  Party  unless  (i) the
Indemnifying  Party and the Indemnified  Party shall have mutually agreed to the
retention  of such  counsel  or (ii) the named  parties  to any such  proceeding
(including any impleaded  parties)  include both the  Indemnified  Party and the
Indemnifying  Party and, in the opinion of counsel  for the  Indemnified  Party,
representation of both parties by the same counsel would be inappropriate due to
actual or potential  conflicting  interests between them or there exist defenses
available to the Indemnified  Party which are not available to the  Indemnifying
Party.  It is understood  that the  Indemnifying  Party shall not, in connection
with any proceeding or related  proceedings in the same jurisdiction,  be liable
for the fees and  expenses  of more  than one  separate  firm of  attorneys  (in
addition to any local  counsel for each such  jurisdiction)  at any time for all
such  Indemnified  Parties,  and  that  all  such  fees  and  expenses  shall be
reimbursed as they are  incurred.  In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by the Indemnified
Parties. The Indemnifying Party shall not settle any claim or proceeding without
the  written  consent of the  Indemnified  Party,  unless  such  settlement  (x)
requires no relief or penalty other than the payment of money damages,  (y) does
not require any Indemnified  Party to admit  culpability or fault in any respect
and (z)  contains  a full and  complete  release of the  Indemnified  Party with
respect to all matters  arising  from the facts  giving  rise to the  underlying
claim  or  proceeding.  The  Indemnifying  Party  shall  not be  liable  for any
settlement  of any  proceeding  effected  without  its written  consent,  but if
settled with such consent (not to be  unreasonably  withheld),  or if there be a
final judgment for the plaintiff,  the  Indemnifying  Party shall  indemnify and
hold  harmless such  Indemnified  Parties from and against any loss or liability
(to the extent stated above) by reason of such settlement or judgment.

          Section 4.04 Contribution. If the indemnification provided for in this
Article IV is unavailable  to an  Indemnified  Party in respect of any Losses in
respect  of  which  indemnity  is to  be  provided  hereunder,  then  each  such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall to the
fullest extent permitted by law contribute to the amount paid or payable by such
Indemnified  Party  as a  result  of  such  Losses  in  such  proportion  as  is
appropriate to reflect the relative  fault of such party in connection  with the
statements  or  omissions  that  resulted in such  Losses,  as well as any other
relevant  equitable  considerations.  The relative  fault of the  Company,  each
Selling Holder and the  Underwriters  shall be determined by reference to, among
other things,  whether the untrue or alleged untrue statement of a material fact
or the  omission  or  alleged  omission  to state a  material  fact  relates  to
information supplied by such party and the parties' relative intent,  knowledge,
access to  information  and  opportunity to correct or prevent such statement or
omission.

          The Company and each Selling  Holder  agrees that it would not be just
and equitable if  contribution  pursuant to this Section 4.04 were determined by
pro rata  allocation  (even if the  Underwriters  were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount  paid or payable  by an  Indemnified  Party as a result of the Losses
referred to in the immediately  preceding  paragraph shall be deemed to include,
subject  to the  limitations  set  forth  above,  any  legal or  other  expenses
reasonably  incurred by such Indemnified Party in connection with  investigating
or defending any such action or claim.  Notwithstanding  the  provisions of this
Article IV, no Selling  Holder shall be required to indemnify  for or contribute
any amount in excess of the  amount by which the net  proceeds  of the  offering
received by such  Selling  Holder  exceeds the amount of any damages  which such
Selling  Holder has  otherwise  been required to pay by reason of such untrue or
alleged untrue  statement or omission or alleged  omission.  No person guilty of
fraudulent  misrepresentation  (within  the  meaning  of  Section  11(f)  of the
Securities  Act) shall be entitled to  contribution  from any Person who was not
guilty of such fraudulent misrepresentation.

                                    ARTICLE V

                                  MISCELLANEOUS

          Section 5.01  Participation in Underwritten  Registrations.  No Person
may participate in any underwritten  registered offering contemplated  hereunder
unless such Person (a) agrees to sell its  securities  on the basis  provided in
any  underwriting  arrangements  approved by the Persons  entitled  hereunder to
approve such arrangements, (b) completes and executes all questionnaires, powers
of attorney,  custody  arrangements,  indemnities,  underwriting  agreements and
other  documents  reasonably  required  under  the  terms  of such  underwriting
arrangements and this Agreement and (c) furnishes in writing to the Company such
information  regarding such Person,  the plan of distribution of the Registrable
Securities and other information as the Company may from time to time request or
as may be legally  required  in  connection  with such  registration;  provided,
however,  that no such Person shall be required to make any  representations  or
warranties in connection with any such registration  other than  representations
and  warranties  as to (i) such  Person's  ownership  of his or its  Registrable
Securities  to be sold or  transferred  free and clear of all liens,  claims and
encumbrances, (ii) such Person's power and authority to effect such transfer and
(iii) such matters  pertaining  to  compliance  with  securities  laws as may be
reasonably  requested;  provided further,  however,  that the obligation of such
Person  to  indemnify  pursuant  to any such  underwriting  agreements  shall be
several,  not  joint  and  several,   among  such  Persons  selling  Registrable
Securities,  and the liability of each such Person will be in proportion to, and
limited  to,  the net  amount  received  by such  Person  from  the sale of such
Person's Registrable Securities pursuant to such registration.

          Section  5.02 Rule 144.  The Company  covenants  that it will file any
reports required to be filed by it under the Securities Act and the Exchange Act
and that it will take such further action as the Holders may reasonably  request
to the  extent  required  from  time to  time  to  enable  the  Holders  to sell
Registrable  Securities without registration under the Securities Act within the
limitation of the exemptions  provided by Rule 144 under the Securities  Act, as
such Rule may be amended from time to time,  or any similar  rule or  regulation
hereafter adopted by the Commission. Upon the request of any Holder, the Company
will  deliver to such Holder a written  statement  as to whether it has complied
with such reporting requirements.

          Section 5.03 Holdback Agreements.  Each Holder agrees, in the event of
an  underwritten  offering  for the account of the  Company not to offer,  sell,
contract to sell or  otherwise  dispose of any  Registrable  Securities,  or any
securities  convertible into or exchangeable or exercisable for such securities,
including any sale pursuant to Rule 144 under the Securities Act (except as part
of such underwritten offering),  during the 14 days prior to, and during the 120
day period  (or such  lesser  period as the lead or  managing  underwriters  may
require) beginning on, the effective date of the registration statement for such
underwritten  offering (or, in the case of an offering  pursuant to an effective
shelf  registration  statement  pursuant to Rule 415,  the pricing date for such
underwritten offering).

          Section 5.04 Termination.  The registration  rights granted under this
Agreement  will  terminate  at  such  time  as  there  shall  no  longer  be any
Registrable Securities.

          Section 5.05  Amendments,  Waivers,  Etc.  This  Agreement  may not be
amended,  waived or otherwise  modified or terminated except by an instrument in
writing signed by the Company and Holders of at least 66-2/3% of the Registrable
Securities then held by all Holders, if the amendment is to be effective against
the Holders.

          Section 5.06  Counterparts.  This  Agreement may be executed in one or
more counterparts,  all of which shall be considered one and the same agreement.
Each party need not sign the same counterpart.

          Section 5.07 Entire Agreement.  This Agreement  constitutes the entire
agreement and supersedes all prior agreements and  understandings,  both written
and oral, among the parties with respect to the subject matter hereof.

          Section 5.08 Governing  Law. This Agreement  shall be governed by, and
construed in accordance  with,  the laws of the State of New York  regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof.

          Section 5.09  Assignment of  Registration  Rights.  Each Holder of the
Registrable  Securities  may  assign  all or any part of its  rights  under this
Agreement  to any person to whom such Holder  sells,  transfers  or assigns such
Registrable  Securities.  In the event that the Holder  shall  assign its rights
pursuant to this Agreement in connection  with the transfer of less than all its
Registrable Securities,  the Holder shall also retain his rights with respect to
its remaining Registrable Securities.

          Section 5.10 Specific  Performance.  The Company  agrees that monetary
damages would not be adequate  compensation for any loss incurred by the Holders
by reason of any breach by it of the  provisions  of this  Agreement  and hereby
agrees that the Holders, in addition to any remedies which they may have at law,
including  monetary  damages,  will  be  entitled  to  the  remedy  of  specific
performance.

          Section  5.11 No Superior  Registration  Rights.  The Company will not
grant  registration  rights  superior to those of the  Holders  pursuant to this
Agreement.

<PAGE>

          IN WITNESS  WHEREOF,  the  Company  and The  Holders  have caused this
Agreement to be signed on its behalf by its officer thereunto duly authorized as
of the date first written above.

                        COMPUTER OUTSOURCING SERVICES, INC.

                            By  /s/Zach Lonstein
                              -----------------------------------
                              Name:  Zach Lonstein
                              Title: Chief Executive Officer

                        DB CAPITAL INVESTORS, L.P.

                            By: DB Capital Partners, L.P.,
                                  its General Partner

                            By: DB Capital Partners, Inc.,
                                  its General Partner

                           By /s/Frank Schiff
                             -----------------------------------
                             Name:  Frank Schiff
                             Title: Managing Director

                        SANDLER CAPITAL PARTNERS V, L.P.

                           By:   Sandler Investment Partners, L.P.,
                                 General Partner

                           By:   Sandler Capital Management,
                                 General Partner

                           By:   MJDM Corp., a General Partner

                           By /s/Ed Grinacoff
                             -----------------------------------
                             Name:  Ed Grinacoff
                             Title: Managing Director

<PAGE>

                           SANDLER INTERNET PARTNERS, L.P.

                           By:   Sandler Investment Partners, L.P.,
                                 General Partner

                           By:   Sandler Capital Management,
                                 General Partner

                           By:   MJDM Corp., a General Partner

                           By /s/Ed Grinacoff
                             ------------------------------------
                             Name:  Ed Grinacoff
                             Title: Managing Director

                        SANDLER CO-INVESTMENT PARTNERS, L.P.

                           By:    Sandler Investment Partners, L.P.,
                                  General Partner

                           By:    Sandler Capital Management,
                                  General Partner

                           By:    MJDM Corp., a General Partner

                           By /s/Ed Grinacoff
                             -------------------------------------
                             Name:  Ed Grinacoff
                             Title: Managing Director

                         PRICE FAMILY LIMITED PARTNERS

                          By   /s/Michael Price
                            --------------------------------------
                            Name:  Michael Price
                            Title: General Partner

<PAGE>

                          BENAKE, L.P.

                           By /s/ Lynn Forester
                             --------------------------------------
                             Name:  Lynn Forester
                             Title: General Partner

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