Document:

Exhibit 10.2

EXECUTION COPY

                              AMENDED AND RESTATED

                       SHAREHOLDERS' AND RIGHTS AGREEMENT

         THIS  AMENDED AND RESTATED  SHAREHOLDERS'  AND RIGHTS  AGREEMENT  (this
"Agreement") is made and entered into as of this 21st day of December,  2000, by
and among SoftLock.com,  Inc., (the "Company"), a Delaware corporation,  and the
Shareholders  listed on Schedule I,  Schedule II , Schedule  III and Schedule IV
hereto.

                                   WITNESSETH:

         WHEREAS, the Shareholders listed on Schedule I hereto (each a "Series A
Shareholder" and  collectively the "Series A Shareholders")  have purchased from
the Company shares of Series A Preferred (as hereinafter defined); and

         WHEREAS,  the Shareholders listed on Schedule II hereto (each a "Series
B Shareholder" and collectively the "Series B Shareholders") have purchased from
the Company shares of Series B Preferred (as hereinafter defined); and

         WHEREAS, the Shareholders listed on Schedule III hereto (each a "Series
C Shareholder"  collectively  the "Series C  Shareholders" ) have agreed to and,
contemporaneously  with the execution of this Agreement,  will purchase from the
Company shares of Series C Preferred (as hereinafter defined); and

         WHEREAS,  the Shareholders listed on Schedule IV hereto (each a "Common
Shareholder"  collectively the "Common  Shareholders"  and collectively with the
Series A Shareholders,  Series B Shareholders  and the Series C Shareholders the
"Shareholders")  were,  prior  to the  date  hereof,  owners  of  shares  of the
Company's Common Stock; and

         WHEREAS,  the Shareholders and the Company have agreed to enter into an
agreement with respect to (i) the  procedures to be followed in connection  with
the election of Series A  representative  and a Series C  Representative  to the
Company's  Board of Directors,  (ii) certain  restrictions  upon the transfer by
each Common  Shareholder of shares of Common Stock,  (iii) certain  restrictions
upon the issuance by the Company of New Securities (as hereinafter defined), and
(iv) the rights to register  shares of Common Stock under the  Securities Act of
1933, as amended (the  "Securities  Act")  resulting  from the conversion of the
Series A Preferred;

         NOW,  THEREFORE,  in  consideration  of the  promises and of the mutual
covenants  and  agreements  hereinafter  set  forth,  and to induce the Series C
Shareholders to purchase the shares of Series C Preferred,  and in consideration
thereof, it is hereby covenanted and agreed as follows:

                                    SECTION I

                                   Definitions

         As used herein, the following terms shall have the respective  meanings
following such term:

         Adjustment   Event  shall  mean  any  stock   dividend,   stock  split,
combination or division of shares, recapitalization,  reclassification,  merger,
consolidation, reorganization, or the like.

         Affiliate shall mean, as to any Shareholder,  any other person directly
or indirectly  controlling,  controlled  by, or under direct or indirect  common
control with the Shareholder and includes without limitation, (i) any person who
is an officer,  director,  or direct or indirect  beneficial  holder of at least
five percent (5%) of the then  outstanding  capital stock of the Shareholder and
any of the Family  Members,  as defined  herein,  of any such  person,  (ii) any
person of which the Shareholder  and/or its Affiliates (as defined in clause (i)
above), directly or indirectly, either beneficially own(s) at least five percent
(5%) of the then outstanding  equity securities or constitute(s) at least a five
percent (5%) equity  participant,  (iii) in the case of a Shareholder  who is an
individual, Family Members of such person, and (iv) in the case of the Preferred
Shareholders,   any  entities  for  which  a  Purchaser,  its  general  partner,
investment  advisor or any person serving in a similar  capacity,  or any of its
Affiliates  serve as general partner and/or  investment  adviser or in a similar
capacity, and all mutual funds, hedge funds, or other pooled investment vehicles
or entities under the control or management of such Preferred Shareholder or the
general partner or investment adviser thereof,  or any Affiliate of any of them,
or any Affiliates of any of the foregoing.

                  For purposes  hereof,  Family Members means, as applied to any
                  individual,  any  parent,  spouse,  child,  spouse of a child,
                  brother or sister of the individual sharing the same household
                  as such individual,  and each trust created for the benefit of
                  one or more of such  persons and each  custodian of a property
                  of one or  more  such  persons  and  the  estate  of any  such
                  persons.

          Board shall mean the Board of Directors of the Company.

         Certificate  of  Incorporation  shall mean the  Company's  Amended  and
Restated Certificate of Incorporation, as amended from time to time.

         Commission  shall mean the  Securities  and Exchange  Commission or any
other federal agency at the time administering the Securities Act.

         Common  Group shall mean any Group that has a Common  Shareholder  as a
member thereof;  provided however, that the Company and SoftLock Services,  Inc.
shall not be considered a part of any Common Group.

          Common  Shareholders  shall mean the  persons  listed on  Schedule  IV
hereto.

          Common Stock shall mean the Company's  common  stock,  par value $0.01
per share.

         Equity Security shall mean any capital stock  (including the Common and
Preferred  Stock) of the  Company,  whether now  authorized  or not, and rights,
options,  warrants or rights to purchase  capital  stock,  and securities of any
type whatsoever  that are, or may become,  convertible  into capital stock;  the
number of shares of an Equity  Security  which is an option,  warrant,  right or
convertible security shall be the number of shares of such Equity Security which
would result upon the  immediate  exercise of such  option,  warrant or right of
conversion of such  convertible  security,  without  regard to when such option,
warrant or right may in fact be  exercised or such  convertible  security may in
fact be converted.

         Exchange  Act  shall  mean the  Securities  Exchange  Act of  1934,  as
amended, and any successor statute thereto.

         First Public Offering shall mean the first firm commitment underwritten
public  offering of the Company's  Common Stock occurring after the date of this
Agreement.

         Group shall mean:

                  (i)      in the case of any Shareholder who is an individual,
        such Shareholder or any Affiliate of such Shareholder;

                  (ii) in the case of any  Shareholder  which is a  partnership,
         (A) such  partnership and any of its limited or general  partners,  (B)
         any   corporation  or  other  business   organization   to  which  such
         partnership  shall sell all or substantially  all of its assets or with
         which it shall be merged or consolidated  and (C) any Affiliate of such
         partnership;

                  (iii) in the case of any  Shareholder  which is a corporation,
         (A) any such corporation,  its parent and any of such  corporation's or
         parent's   subsidiaries,   (B)  any   corporation   or  other  business
         organization to which such corporation  shall sell all or substantially
         all of its  assets  or with  which  it  shall  be  merged,  and (C) any
         Affiliate of such corporation;

                  (iv)  in  the  case  of any  Shareholder  which  is a  limited
         liability company or other business  organization not described in (ii)
         or (iii)  above,  (A) any such company or  organization,  any member or
         similar equity owner of such company or organization, and any person or
         entity controlling such company or organization or under common control
         with  such  company  or  organization,  (B)  any  corporation,  limited
         liability company or other business  organization to which such company
         or organization  shall sell all or  substantially  all of its assets or
         with which it shall be merged, and (C) any Affiliate of such company or
         organization; and

                  (v) in the case of any Shareholder  which is a trust,  (A) any
          grantor or  beneficiary  of such trust,  or (B) any  Affiliate of such
          grantor or beneficiary.

         New  Securities  shall mean any  Equity  Securities  hereafter  issued;
provided,  however,  that such term shall not include (i)  securities  purchased
under  the  Series A  Purchase  Agreement  by  Series A  Shareholders  listed on
Schedule I as of the date hereof and Series A Conversion  Shares and  securities
issuable  under the  warrants  to  purchase  1,964  shares of Series A Preferred
issued to SI Venture Fund II, L.P.; (ii) securities purchased under the Series B
Purchase Agreement by Series B Shareholders listed on Schedule II as of the date
hereof and Series B Conversion  Shares;  (iii)  securities  purchased  under the
Series C Purchase  Agreement,  the Series C  Conversion  Shares and the  Warrant
Shares (as defined in the Series C Purchase Agreement);  (iv) securities offered
to the public pursuant to a registration  statement filed in accordance with the
provisions of the Securities  Act; (v) securities  issued in connection with the
acquisition  of  another  corporation  by the  Company by  merger,  purchase  of
substantially  all assets or other  reorganization  whereby  the  Company or its
shareholders  immediately  prior to such acquisition  own, upon  consummation of
such acquisition,  greater than fifty percent (50%) of the voting power to elect
the directors of such  corporation;  (vi) securities  evidencing any borrowings,
direct or indirect, from financial institutions or other persons by the Company,
whether  or not  presently  authorized,  including  any type of loan or  payment
evidenced by any type of debt  instrument,  provided such securities do not have
equity features (such as warrants,  options or other rights to purchase  capital
stock)  and are  not  convertible  into  capital  stock  of the  Company;  (vii)
securities  issued or  issuable  to  employees,  officers  or  directors  of, or
consultants to, the Company  pursuant to the Company's 1998 Stock Option Plan or
the 1996 Stock Option Plan (collectively the "Plans"),  provided that the number
of  shares so  issued  or  issuable  shall  not  exceed  7,000,000  (subject  to
adjustment  upon the  occurrence of an Adjustment  Event in accordance  with the
Plan); (viii) securities issued to financial  institutions and leasing companies
in connection  with borrowing or lease  financing  arrangements  of the Company,
provided  that such  issuances  or grants are approved by the Board of Directors
and provided  further that the number of securities so issued or issuable  shall
not exceed 500,000  (subject to adjustment  upon the occurrence of an Adjustment
Event); (ix) securities issued to strategic partners or licensors, provided that
such  issuances or grants are  approved by the Board of  Directors  and provided
further  that the number of  securities  so issued or issuable  shall not exceed
1,500,000  (subject to adjustment  upon the occurrence of an Adjustment  Event);
and (x) Securities issued upon exercise of any warrant issued and outstanding as
of the date hereof.

         Preemptive  Share  shall  mean,  immediately  prior to any issue of New
Securities,  and as to each Preferred  Group, the percentage which expresses the
ratio  between  (i) the number of Equity  Securities  owned at such time by such
Preferred  Group  (assuming that all such Equity  Securities are fully converted
into the  Common  Stock),  and (ii) the  aggregate  number of Equity  Securities
(assuming all such Equity  Securities are fully converted  and/or exercised into
the Common Stock) outstanding at such time.

         Preferred  Group shall mean any Group that has a Preferred  Shareholder
as a member thereof.

         Preferred  Shareholder  shall mean any person listed on either Schedule
I, II or III hereto.

          Preferred Stock shall mean the Company's Series A Preferred,  Series B
Preferred and Series C Preferred.

         Pro Rata Share shall mean, at any time, as to each Preferred Group, the
percentage which expresses the ratio between (i) the number of Equity Securities
owned at such time by such Preferred Group (assuming that all Equity  Securities
owned by that  Preferred  Group are fully  converted  or  exercised  into Common
Stock), and (ii) the aggregate number of Equity Securities owned at such time by
all Preferred Groups (assuming that all Equity Securities owned by all Preferred
Groups are fully converted or exercised into Common Stock).

         Public  Float shall mean the  existence of a minimum  aggregate  market
value of at least  $100,000,000  for the  outstanding  equity  securities of the
Company that are registered  under the Exchange Act, and held by  non-Affiliates
of the Company, sustained for a ninety (90) day period.

         Qualified  Public Offering shall mean an underwritten  public offering,
pursuant  to an  effective  registration  statement  under  the  Securities  Act
covering the offer and sale of Common Stock for the account of the Company, on a
firm commitment basis, yielding aggregate proceeds to the Company of $20,000,000
at a public  offering  price per share of Common  Stock of $7.64 (but solely for
purposes of Section 3 of this Agreement,  $6.40)(subject  to adjustment upon the
occurrence of an Adjustment Event.

         Securities Act shall mean the  Securities Act of 1933, as amended,  and
any successor statute thereto.

         Sell,  as to any Equity  Security,  shall mean to sell, or in any other
way directly or indirectly transfer, assign,  distribute,  encumber or otherwise
dispose of such Equity Security, either voluntarily or involuntarily.

         Selling Group shall mean any Common Group  proposing to Sell any Equity
Security  and  which is  obligated  to  deliver a Notice  of  Intention  to Sell
pursuant to Section 3 hereof.

         Series A Conversion  Shares shall mean, at any time, (i) the issued and
outstanding shares of Series A Preferred (for purposes of calculating the number
of Series A Conversion Shares at any time, each such share shall be deemed to be
that number of shares of Common Stock or other  securities into which such share
is then convertible),  (ii) the shares of Common Stock issued upon conversion of
the issued and  outstanding  shares of Series A Preferred  owned by the Series A
Shareholders, and (iii) any securities issued or issuable directly or indirectly
in respect of the  aforesaid  shares of Common Stock or Series A  Preferred,  or
both, in payment of a dividend or in connection with an Adjustment Event.

         Series B Conversion  Shares shall mean, at any time, (i) the issued and
outstanding shares of Series B Preferred (for purposes of calculating the number
of Series B Conversion Shares at any time, each such share shall be deemed to be
that number of shares of Common Stock or other  securities into which such share
is then convertible),  (ii) the shares of Common Stock issued upon conversion of
the issued and  outstanding  shares of Series B Preferred  owned by the Series B
Shareholders, and (iii) any securities issued or issuable directly or indirectly
in respect of the  aforesaid  shares of Common Stock or Series B  Preferred,  or
both, in payment of a dividend or in connection with an Adjustment Event.

         Series C Conversion  Shares shall mean, at any time, (i) the issued and
outstanding  shares  of Series C  Preferred  and  shares  of Series C  Preferred
issuable  pursuant  to the  Warrants  (as  defined  in  the  Series  C  Purchase
Agreement) to purchase shares of Series C Preferred (for purposes of calculating
the number of Series C Conversion  Shares at any time,  each such share shall be
deemed to be that  number of shares  of Common  Stock or other  securities  into
which such share is then  convertible),  (ii) the shares of Common  Stock issued
upon conversion of the issued and outstanding shares of Series C Preferred owned
by the  Series C  Shareholders,  and (iii)  any  securities  issued or  issuable
directly or  indirectly  in respect of the  aforesaid  shares of Common Stock or
Series C Preferred,  or both, in payment of a dividend or in connection  with an
Adjustment Event.

         Series A Preferred shall mean the Company's  Series A Preferred  Stock,
par value $0.01 per share.

         Series B Preferred shall mean the Company's  Series B Preferred  Stock,
par value $0.01 per share.

         Series C Preferred shall mean the Company's  Series C Preferred  Stock,
par value $0.01 per share.

         Series A Purchase  Agreement  shall mean the Series A  Preferred  Stock
Purchase Agreement, dated as of December 30, 1999, and supplemented from time to
time among the Company, SoftLock Services, Inc. and the Series A Shareholders.

         Series B Purchase  Agreement  shall mean the Series B  Preferred  Stock
Purchase Agreement, dated as of February 10, 2000, and supplemented from time to
time among the Company, SoftLock Services, Inc. and the Series B Shareholders.

         Series C Purchase  Agreement  shall mean the Series C  Preferred  Stock
Purchase  Agreement of even date herewith among the Company,  SoftLock Services,
Inc. and the Series C Shareholders.

          Series A  Shareholder  shall  mean the  persons  listed on  Schedule I
hereto.

         Series B  Shareholder  shall mean the  persons  listed on  Schedule  II
hereto.

         Series C  Shareholder  shall mean the persons  listed on  Schedule  III
hereto.

         Shareholders  shall mean the persons listed on Schedules I, II, III and
IV hereto and shall  include  any other  party who  agrees in  writing  with the
parties  hereto to be bound by and to comply with all  applicable  provisions of
this Agreement.

         Tudor Entity or Tudor Entities means each of the following: Tudor
Private Equity Fund, L.P., Tudor Arbitrage Partners, L.P., Tudor BVI Futures,
Ltd.,  Raptor Global Fund,  L.P. Raptor Global Fund Ltd. and Raptor Global
Portfolio,  Ltd., or any funds or other investment  vehicles or entities of
which any of the foregoing  entities are Affiliates, or any Affiliate or Group
of Tudor Investment Corporation and/or Tudor Global Trading, Inc.

<PAGE>

                                    SECTION 2

                              Election of Directors

         Section 2.1.      Designation of Nominees.

(a) (i) Pursuant to the Certificate of Incorporation,  the holders of the Series
A  Preferred  shall have the right to elect one member of the Board  voting as a
class  separate from the holders of Common Stock (the "Series A  Director").  So
long as SI Venture Fund II, L.P. ("SI") shall continue to hold (with any members
of its Group) no less than thirty five  percent  (35%) of the shares of Series A
Preferred  initially acquired by it under the Series A Purchase Agreement (on an
as-converted basis), SI shall be entitled,  but shall be under no obligation to,
designate the Series A Director.  Initially, the Series A Director designated by
SI will be N. Adam Rin. The Series A Director  designated by SI shall be a Class
III director under Section 5.2 of the Certificate of Incorporation.  Pursuant to
the  Certificate of  Incorporation,  the holders of Series C Preferred  shall so
long as the  holders of Series C  Preferred  continue to own as a group not less
than 10% of the Series C  Preferred  owned by the Series C  Shareholders  on the
date  hereof,  have the right to elect one (1)  member of the Board  voting as a
class separate from the holders of Common Stock  ("Series C Director").  So long
as Apex Investment Fund IV, L.P.  ("Apex")  continues to own no less than 35% of
the shares of Series C  Preferred  initially  acquired  by it under the Series C
Purchase  Agreement,  Apex shall be entitled but shall be under no obligation to
designate the Series C Director.

                  (b) The Company hereby agrees to use its best efforts to cause
the Board of Directors to appoint a person designated by Ascent Venture Partners
III, L.P. ("Ascent") to serve as a Class II director upon the purchase of Series
A Preferred by Ascent  pursuant to the Series A Purchase  Agreement.  Initially,
this person shall be Leigh Michl.  Such person (also a "Series A Director") will
be elected  pursuant to a vote by the Preferred  Shareholders and the holders of
Common Stock, voting together as a single class of capital stock as set forth in
Sections 5(a) of the  Certificates of Designation for the Series A Preferred and
the  Series B  Preferred.  So long as Ascent  shall  continue  to hold (with any
members of its Group) no less than  thirty five  percent  (35%) of the shares of
Series A  Preferred  initially  acquired  by it  under  the  Series  A  Purchase
Agreement (on an  as-converted  basis),  Ascent shall be entitled,  but shall be
under no  obligation,  to  designate  the one (1)  nominee to be so elected as a
Class II director.

         (c) In the  event a  designation  is not made by SI,  Apex or Ascent in
accordance with this Section 2.1, unless  otherwise agreed by SI, Apex or Ascent
or unless SI,  Apex or Ascent has  notified  the  Company in writing  that it no
longer  wishes to have the right to  designate  one of the nominees for Series A
Director,  or Series C Director as applicable,  the Series A Shareholders or the
Series C Shareholders  as applicable  will use their best efforts to ensure that
such position on the Board shall be left vacant until nominees are so designated
but in no event longer than thirty (30) days. If SI, Apex or Ascent has notified
the Company in writing,  that it no longer  wishes to designate  the nominee for
Series A Director,  if SI Apex or Ascent  fails to  designate  a nominee  within
thirty  (30) days after the  position  becomes  vacant or if SI,  Apex or Ascent
shall no longer own thirty five percent  (35%) or more of the shares of Series A
Preferred or Series C Preferred as applicable initially acquired by it under the
Purchase  Agreement  (on an  as-converted  basis),  the nominee for the Series A
Director , or Series C Director as applicable, which should have been designated
by SI,  Apex or Ascent,  as the case may be,  shall be  designated  by  majority
action of the Series A Shareholders or Series C Shareholders as applicable.

         Section 2.2.      Voting for Nominees.

         Each Shareholder  agrees to vote the Equity  Securities held by it from
time to time for the nominees so designated  in  accordance  with Section 2.1 at
any annual meeting of  shareholders  of the Company at which any such nominee is
included on the slate of directors to be elected, and at any special meeting, of
shareholders  of the Company  called for the  election of directors at which any
such nominee is included on the slate of directors to be elected, in such manner
as may be required to elect such nominee.

         Section 2.3.      Obligations of Company.

         The  Company  agrees to use its best  efforts to cause the  nominees so
designated in accordance with Section 2.1 to be included in part of the slate of
directors  to be  recommended  to, and  elected by  shareholders,  at the annual
meeting of shareholders of the Company electing Class II and Class III directors
(or any  earlier  annual  meeting if any Series A Director  or Series C Director
then in office shall have died,  resigned or been  removed),  and at any special
meeting of  shareholders  of the Company  called for the  election of  directors
including the Class III directorship or Class II directorship held by a Series A
Director or Series C Director.

         Section 2.4.      Removal; Election of Successors.

         If (a) any Series A Director or Series C Director  elected  pursuant to
Section  2.1 is removed or (b) such a director  shall have  resigned or shall be
unable to serve,  then, in any such case, the Company and the Shareholders  will
use their best efforts to cause the Board of Directors to appoint a  replacement
Series A Director or Series C Director as  applicable  nominated  by SI, Apex or
Ascent,  to serve on the Board of  Directors  until the next  annual  meeting of
shareholders  and to include such person on the slate of directors to be elected
at such next annual  meeting.  At such  meeting each  Shareholder  shall vote to
accomplish  said result.  The  procedures set forth in this Section 2, including
Section 2.1, shall apply to the nomination and election of any replacement for a
Series A Director or Series C Director.  If  requested by SI, at the next annual
meeting of shareholders,  the Company will include on the agenda an amendment to
its Certificate of Incorporation  to permit the Series A Director  designated by
SI to be removed  with or without  cause by the Series A  Shareholders  only and
without the approval or concurrence of the holders of outstanding  shares of any
other class of voting stock.

         Section 2.5.      Proxy.

         If any Shareholder  shall refuse to vote the Equity  Securities held by
it as provided in any of the foregoing Sections of this Section 2 at any meeting
of shareholders  of the Company,  or shall refuse to give its written consent in
lieu of a meeting,  thereupon,  without further action by such Shareholder,  the
President  or any Vice  President  of the  Company  shall  be,  and  hereby  is,
irrevocably  constituted the  attorney-in-fact and proxy of such Shareholder for
the purpose of voting, and shall vote such shares at such meeting as provided in
the foregoing  Sections of this Section 2 or give such consent,  as the case may
be.

         Section 2.6       Audit and Compensation Committees.

         Except as otherwise  required by law or  regulation  including  but not
limited to the federal securities laws or requirements of any exchange or market
on which the Company's Equity Securities are listed or quoted from time to time,
the Company  shall,  by provision  of its By-laws or  otherwise,  establish  and
maintain a Compensation  Committee and an Audit  Committee of the Board.  For so
long as the  holders of Series A Preferred  Stock and Series C  Preferred  Stock
have the right to elect a  director  to the  Board,  the Audit  Committee  shall
consist  of at least two (2)  directors,  one of whom is the  Series A  Director
designated by Ascent (to the extent that Ascent continues to retain the right to
designate  such  director)  and the other of whom shall be the Series C Director
designated  by Apex  (to the  extent  Apex  continues  to  retain  the  right to
designate such  Director),  and the  Compensation  Committee shall consist of at
least two (2) directors,  one of whom is the Series A Director  designated by SI
(to the extent that SI continues to retain the right to designate such director)
and the other of whom shall be unaffiliated with management of the Company.

                                    SECTION 3

                  Restrictions on Transfer of Equity Securities
                                 by Shareholders

         Section 3.1.      Limitations.

         Each Common  Shareholder  hereby  agrees  that such Common  Shareholder
shall not at any time prior to the  completion of a Qualified  Public  Offering,
Sell any Equity Securities except:

                   (a)     by sale in accordance with this Section 3;

                  (b) by pledge which  creates a mere  security  interest in the
Equity  Securities,  provided that the pledgee thereof shall agree in writing in
advance  with the parties  hereto to be bound by and comply with all  applicable
provisions  of this  Agreement  to the same extent as if such  pledgee  were the
Common Shareholder making such pledge;

                  (c)  by  transfer  to  another  member  of its  Common  Group,
provided that the  transferee of such Equity  Securities  shall agree in writing
with  the  parties  hereto  to be  bound by and to  comply  with all  applicable
provisions of this Agreement and to be deemed a member of such Common Group; or

          (d) by sale as a part of a registered public offering of the Company's
securities in  accordance  with Section 7 of this  Agreement,  in which case the
transferee of such Equity  Securities  shall not be bound by, or entitled to the
benefits of, this Agreement.

         Section 3.2.      Procedures on Sale of Equity Securities.

         Except as otherwise expressly provided herein, each Common Shareholder,
and each member of its Common  Group  which  agrees to comply  herewith,  hereby
agrees that until the  completion of a Qualified  Public  Offering,  such Common
Shareholder  and the members of such Common  Shareholder's  Group shall not Sell
any Equity Securities except in accordance with the following procedures:

                  (a) The Selling  Group  shall  first  deliver to the Company a
written  Notice  of  Intention  to Sell  offering  to the  Company  such  Equity
Securities  owned by the Selling  Group at the  purchase  price and on the other
material  terms  specified  therein  at which  it  proposes  to Sell the  Equity
Securities.  The Company  shall have the right of first refusal and option for a
period of ten (10) days after delivery to the Company of the Notice of Intention
to Sell, to purchase all or any part of the Equity  Securities so offered at the
purchase price and on the other terms stated therein.  Such acceptance  shall be
made by  delivering a written  Notice of  Acceptance to the Selling Group within
the aforesaid ten (10) day period.

                  (b) In the event that the Company shall elect to purchase none
or less than all of the Equity  Securities  so offered,  the Selling Group shall
promptly deliver to each Preferred  Shareholder a written Notice of Intention to
Sell,  which shall be  irrevocable  for a period of ten (10) days after delivery
thereof,  offering  to each  Preferred  Group the  Equity  Securities  that were
offered to, and not purchased by, the Company, at the same purchase price and on
the same other terms,  whereupon each  Preferred  Group shall have the right and
option  for a  period  of  ten  (10)  days  after  delivery  to  each  Preferred
Shareholder  of the Notice of  Intention  to Sell,  to accept up to its Pro Rata
Share of the Equity  Securities  so offered  which are not so  purchased  by the
Company  at the  purchase  price and on the other  terms  stated  therein.  Such
acceptance  shall be made by  delivering a written  Notice of  Acceptance to the
Selling Group within the aforesaid ten (10) day period.

                  (c) If any  Preferred  Group  shall fail to  accept,  or shall
reject in writing,  the offer made pursuant to Section  3.2(b),  then,  upon the
earlier of the expiration of such ten (10) day period, or the receipt of Notices
of Acceptance or written rejections of such offer from all Preferred Groups, the
Selling Group's then remaining Equity Securities  formerly subject to such offer
shall be  reoffered  to all other  Preferred  Groups,  if any,  which shall have
accepted  their Pro Rata Share of such original  offer.  Such  subsequent  offer
shall be on the terms and  subject  to  acceptance  in the  manner  provided  in
Section 3.2(b), except that the Preferred Groups receiving such subsequent offer
shall have (i) the right and option to accept such offer with  respect to all of
the then remaining  Equity  Securities  subject  thereto pro rata, in accordance
with their respective Pro Rata Shares for a period of five (5) business days and
(ii) the  further  right and option to offer,  in any Notice of  Acceptance,  to
purchase any of such Equity  Securities not purchased by other Preferred Groups,
in which case such Equity  Securities not accepted by the other Preferred Groups
shall be deemed to have been  offered to and  accepted by the  Preferred  Groups
which have exercised their option under this clause (ii), pro rata in accordance
with their  respective  Pro Rata Shares,  and on the  above-described  terms and
conditions.

                  (d) The  closing of any sales of Equity  Securities  under the
terms of Section 3.2(a),  Section 3.2(b) and Section 3.2(c) shall be made at the
offices of the Company on a mutually  satisfactory  business day within fourteen
(14)  days  after  the  expiration  of  the  aforesaid   periods.   Delivery  of
certificates  or  other  instruments  evidencing  such  Equity  Securities  duly
endorsed for transfer to the Company or to members of the Preferred  Groups,  as
the case may be,  shall be made on such date  against  payment  of the  purchase
price therefor.

                  (e) Any  Preferred  Group  which does not  deliver a Notice of
Acceptance  during the ten (10) day period  referred to in Section 3.2(b) hereof
shall have the right  during  such ten (10) day period to deliver to the Selling
Group a Notice of  Intention  to  Participate.  The  Company  shall  compute the
proportion  of shares of Equity  Securities  available  for sale by the  Selling
Group to the  purchaser  thereof.  If, and to the extent the Selling Group is to
Sell all or part of the  remaining  Equity  Securities  covered by the Notice of
Intention  to Sell as  contemplated  by  Section  3.2(f)  hereof,  it shall be a
condition  of such sale that  each  Preferred  Group  delivering  the  Notice of
Intention  to  Participate  shall have the right to have a portion of its Equity
Securities  purchased by the purchaser of the Equity  Securities  covered by the
Notice of Intention to Sell, such portion to be equal to the product obtained by
multiplying (i) the aggregate number of Equity Securities to be purchased by the
purchaser by (ii) the "Ownership  Percentage" (as  hereinafter  defined) of such
Preferred  Group  giving a Notice of  Intention to  Participate.  The  Ownership
Percentage  for any Preferred  Group giving a Notice of Intention to Participate
shall be the percentage  figure which expresses the ratio between (i) the number
of Equity  Securities  desired to be sold by such  Preferred  Group and (ii) the
aggregate  of (a) the  number of  Equity  Securities  desired  to be sold by all
Preferred  Groups  delivering a Notice of Intention to  Participate  and (b) the
number of Equity  Securities to be sold by the Selling Group delivering a Notice
of Intention to Sell.  The sale of any Equity  Securities  by a Preferred  Group
pursuant to a Notice of Intention to  Participate  shall be subject to all terms
and  conditions  applicable to the sale by the Selling Group as set forth in the
Notice of Intention to Sell.

                  (f) If effective  acceptance shall not be received pursuant to
Section  3.2(a),  Section  3.2(b) and Section  3.2(c)  above with respect to all
Equity  Securities  offered for sale  pursuant to a Notice of Intention to Sell,
then  the  Selling  Group  may  sell  all or any  part of the  remaining  Equity
Securities so offered for sale at a price not less than the price,  and on terms
not more  favorable  to the  purchaser  thereof  than the  terms,  stated in the
original  Notice of Intention to Sell, at any time within ninety (90) days after
the  expiration of the last offer  required by Section 3.2(b) and Section 3.2(c)
above. In the event the remaining Equity  Securities are not sold by the Selling
Group during such ninety (90) day period, the right of the Selling Group to sell
such  remaining  Equity  Securities  shall  expire and the  obligations  of this
Section  3.2  shall be  reinstated;  provided,  however,  that in the  event the
Selling Group determines,  at any time during such ninety (90) day period,  that
the sale of all or any part of the remaining Equity  Securities on the terms set
forth in the Notice of Intention to Sell is  impractical,  the Selling Group can
terminate the offer and  reinstate  the  procedure  provided in this Section 3.2
without  waiting for the  expiration  of such ninety (90) day period or Series C
Shareholder or Series C Shareholder.

          (g)   Anything   contained   in  this   Section  12  to  the  contrary
notwithstanding, any purchaser or other transferee of Equity Securities pursuant
to this  Section  3.2 who is not a  Shareholder  but who is an  employee  of the
Company as of the date of the  purchase  or  transfer  shall agree in writing in
advance  with the parties  hereto to be bound by and comply with all  applicable
provisions of this Agreement and shall be deemed to be a Common  Shareholder for
all purposes of this Agreement.

          Section 3.3.     Expiration of Rights.

          At any time prior to the completion of a Qualified Public Offering,  a
 Common  Shareholder  shall not be required to comply with  Sections 3.1 and 3.2
 (a) with  respect  to the  Series A  Shareholders  if at such time the Series A
 Shareholders  in the aggregate have ceased to own at least ten percent (10%) of
 the shares of Series A Preferred  initially  acquired  by them  pursuant to the
 Series A Purchase  Agreement;  (b) with respect to the Series B Shareholders if
 at such time such Series B Shareholders  in the aggregate have ceased to own at
 least  fifteen  percent  (15%) of the  shares of Series B  Preferred  initially
 acquired by them pursuant to the Series B Purchase  Agreement  (whether through
 the  conversion  of such  shares  of  Series B  Preferred  to  Common  Stock or
 otherwise)  or (c) with  respect to the Series C  Shareholders  if at such time
 such Series C Shareholders in the aggregate have ceased to own at least fifteen
 percent  (15%) of the shares of Series C Preferred  initially  acquired by them
 pursuant to the Series C Purchase  Agreement (whether by the conversion of such
 shares of Series C Preferred or otherwise). Notwithstanding the foregoing, if a
 Preferred  Shareholder is a Series A Shareholder,  a Series B Shareholder and a
 Series C Shareholder or any combination  thereof,  the expiration of its rights
 under clause (a) above shall not affect its rights as a Series B Shareholder or
 Series C Shareholder to the extent such rights would otherwise be in effect and
 likewise,  the expiration of its rights under clause (b) above shall not affect
 its rights as a Series A Shareholder or Series C Shareholder to the extent such
 rights  would  otherwise  be in effect and the  expiration  of its rights under
 clause (c) shall not affect  its rights as a Series A  Shareholder  or Series B
 Shareholder to the extent such rights would otherwise be in effect.

          This  Section 3 is a recital  of the  terms  and  conditions  that are
 contained  in Section 3 of the Amended and  Restated  Shareholders'  and Rights
 Agreement dated as of February 10, 2000 (the "Pre-Existing Agreement") to which
 the Common  Shareholders are parties.  The Common  Shareholders remain bound by
 the terms of the Pre-Existing  Agreement and no terms of this Agreement will be
 construed to limit or reduce the obligations of the Common  Shareholders  under
 the Pre-Existing Agreement.

                                    SECTION 4

                      Sale of New Securities by the Company

         Except as  otherwise  expressly  provided  herein,  the Company  hereby
agrees that until (but not including)  the  consummation  of a Qualified  Public
Offering,  it shall not Sell any New  Securities  except in accordance  with the
following procedures:

                  (a)  The  Company  shall  first  deliver  to  each   Preferred
Shareholder a written  Notice of Intention to Sell,  which shall be  irrevocable
for a period of ten (10) days after delivery thereof, offering to each Preferred
Group the right to purchase up to its Preemptive Share of such New Securities at
the purchase price and on the terms  specified  therein.  Each  Preferred  Group
shall have the right and option, for such period of ten (10) days after delivery
to Preferred  Shareholders  of such Notice of Intention to Sell, to purchase all
or any part of the New Securities so offered up to its  Preemptive  Share at the
purchase price and on the terms stated therein. Such acceptance shall be made by
delivering a written  Notice of Acceptance  to the Company  within the aforesaid
ten (10) day period.

                  (b) If any  Preferred  Group  shall fail to  accept,  or shall
reject in writing,  the offer made  pursuant  to Section  4(a),  then,  upon the
earlier of the expiration of the aforesaid ten (10) day period or the receipt of
Notices of  Acceptance  or written  rejections  of such offer from all Preferred
Groups,  the then remaining New Securities  formerly subject to such offer shall
be reoffered to all other  Preferred  Groups,  if any, which shall have accepted
their Preemptive Share of such original offer. Such subsequent offer shall be on
the terms and subject to  acceptance  in the manner  provided  in Section  4(a),
except that the Preferred  Groups receiving such subsequent offer shall have (i)
the  right and  option to accept  such  offer  with  respect  to all of the then
remaining  New  Securities  subject  thereto pro rata in  accordance  with their
respective  Preemptive  Shares, for a period of five (5) business days, and (ii)
the further right and option to offer, in any Notice of Acceptance,  to purchase
any of such New Securities  not purchased by other  Preferred  Groups,  in which
case such New Securities not accepted by other Preferred  Groups shall be deemed
to have  been  offered  to and  accepted  by the  Preferred  Groups  which  have
exercised  their option under this clause (ii),  pro rata,  in  accordance  with
their  respective  Preemptive  Shares,  and on  the  above-described  terms  and
conditions.

                  (c) The closing of any sales of New Securities under the terms
of  Section  4(a)  shall be made at the  offices  of the  Company  on a mutually
satisfactory  business day within fourteen (14) days after the expiration of the
aforesaid periods. Delivery of certificates or other instruments evidencing such
New Securities duly endorsed for transfer to the Preferred Shareholders shall be
made on such date against payment of the purchase price therefor.

                  (d) If effective  acceptance shall not be received pursuant to
Section 4(a) above with respect to all New Securities  offered for sale pursuant
to a Notice of Intention  to Sell,  then the Company may sell all or any part of
the  remaining  New  Securities so offered for sale at a price not less than the
price,  and on terms not more favorable to the purchaser  thereof than the terms
stated in the  original  Notice of  Intention  to Sell,  at any time  within one
hundred  twenty (120) days after the expiration of the offer required by Section
4(a)  above.  In the  event the  remaining  New  Securities  are not sold by the
Company  during  such one  hundred  twenty  (120) day  period,  the right of the
Company to sell such remaining New Securities  shall expire and the  obligations
of this Section 4 shall be reinstated;  provided, however, that in the event the
Company determines, at any time during such one hundred twenty (120) day period,
that the sale of all or any part of the  remaining  New  Securities on the terms
set forth in the Notice of  Intention  to Sell is  impractical,  the Company can
terminate  the offer and  reinstate  the  procedure  provided in this  Section 4
without waiting for the expiration of such one hundred twenty (120) day period.

                                    SECTION 5

                  Transfer of Shares: Covenants of the Company

         Section 5.1.      Transfer by Shareholders.

         No  Shareholder  shall  sell,  assign,  transfer,  pledge,  encumber or
otherwise  dispose of,  whether by  operation  of law or  otherwise,  any Equity
Securities  unless any such  transfer is made to a transferee  who  concurrently
with or prior to such transfer  becomes a party to this  Agreement or unless the
Equity  Securities  are shares of Common  Stock sold  pursuant  to an  effective
registration statement.

         Section 5.2.      Registration of Transfer.

         The Company shall permit  registration of transfer of Equity Securities
held by a Shareholder  only in accordance with the terms of this Agreement.  Any
transfer  of  Equity  Securities  which is made in any  manner  contrary  to the
provisions  of this  Agreement  shall  be void and  shall  not be  effective  to
constitute  the  transferee  as a  shareholder  of the  Company  entitled to any
rights, benefits, and privileges as such.

         Section 5.3.      Legend.

         Each  certificate of Common Stock or Preferred  Stock and  certificates
representing  other Equity  Securities  of the Company,  held by a  Shareholder,
shall be stamped or otherwise  have  endorsed or  imprinted  thereon a legend in
substantially the following form:

         "The transfer of the shares  represented by this  certificate,  and the
rights of the  holder  hereof,  are  subject  to the terms and  conditions  of a
Amended and Restated  Shareholders' and Rights  Agreement,  dated as of December
21,  2000 (a copy of which  is on file  with  the  Company),  as the same may be
amended from time to time, and no transfer of the shares  represented  hereby or
of shares  issued in exchange  therefor  shall be valid or effective  unless the
terms and conditions of such Agreement have been fulfilled."

                                    SECTION 6

                                    Duration

         Section 6.1       Duration.

         The provisions of Sections 2, 3, 4 and 5 of this Agreement  shall be of
no further  force or effect  upon the closing of a  Qualified  Public  Offering.
Furthermore,  the Company  shall no longer be subject to provisions of Section 4
of this  Agreement  with  respect  to any Series B  Shareholder  or any Series C
Shareholder at such time as such Series B Shareholder or Series C Shareholder no
longer owns fifteen percent (15%) of the Series B Preferred  initially purchased
by it  pursuant  to the Series B Purchase  Agreement  or the Series C  Preferred
initially purchased by it pursuant to the Series C Purchase Agreement,  and if a
Shareholder  is both a Series B Shareholder  and a Series C Shareholder it shall
no longer be  entitled  to the  rights set forth in Section 4 only when it holds
less  than  15% of both the  Series  B  Preferred  and the  Series  C  Preferred
initially purchased.  In addition, the provisions of Section 7 of this Agreement
shall be of no further  force or effect upon (a) the date that is four (4) years
after the First Public Offering, or (b) as to a particular Series A Shareholder,
at such  earlier  time as such  Series  A  Shareholder  may  sell  all  Series A
Conversion  Shares  held by such  Series A  Shareholder  in any ninety  (90) day
period pursuant to Commission Rule 144; provided,  however,  that in the case of
either clause (a) or (b), there exists a Public Float at such time.

         Section 6.2       Calculation of Thresholds.

         For purposes of  determining  whether,  for any provision  hereof,  the
number  of  shares  of  Series A  Preferred  held by any  person  or  entity  is
sufficient to meet a required  threshold,  such person or entity shall be deemed
to hold the  number  of  shares of Series A  Preferred  held by its  Group.  For
purposes of determining  whether, for any provision hereof, the number of shares
of Series B  Preferred  held by any  person or  entity is  sufficient  to meet a
required threshold,  such person or entity shall be deemed to hold the number of
shares of Series B Preferred held by its Group  (including but not limited to in
the case of any Tudor Entity, any shares of Series B Preferred Stock held by any
other Tudor  Entity).  For purposes of  determining  whether,  for any provision
hereof,  the number of shares of Series C Preferred held by any person or entity
is  sufficient  to meet a required  threshold,  such  person or entity  shall be
deemed to hold the  number of  shares  of Series C  Preferred  held by its Group
(including  but not  limited to in the case of any Tudor  Entity,  any shares of
Series C Preferred Stock held by any other Tudor Entity).

                                    SECTION 7

                       Restrictions on Transferability of

Securities; Compliance with Securities Act

         Section 7.1       Certain Definitions.

         As used in this Section 7, the following terms shall have the following
respective meanings:

         "Restricted  Securities"  shall  mean  the  securities  of the  Company
required to bear or bearing the legend set forth in Section 7.2 hereof.

         "Registrable  Securities" shall mean, from time to time, (i) the Series
A Conversion  Shares, and (ii) any shares of Common Stock issued as dividends on
the shares of the Series A Preferred.

         The terms "register,"  "registered" and "registration" shall refer to a
         registration effected by preparing and filing a registration  statement
         in  compliance  with  the  Securities  Act  and  applicable  rules  and
         regulations  thereunder,  and the  effectiveness  of such  registration
         statement.

         "Registration Expenses" shall mean all expenses incurred by the Company
in  compliance  with  Sections  7.4,  7.5 and  7.6  hereof,  including,  without
limitation,  all  registration  and filing  fees,  printing  expenses,  fees and
disbursements of counsel for the Company and one special counsel for all Holders
chosen  by  the  Holders  of a  majority  of the  securities  included  in  such
registration,  blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular  employees  of the  Company,  which shall be paid in any event by the
Company).

         "Selling  Expenses"  shall  mean  all  underwriting  discounts,   stock
transfer  taxes and selling  commissions  applicable to the sale of  Registrable
Securities,  and all  fees and  disbursements  of  counsel  for any  Holder  not
specifically included in Registration Expenses.

         "Holder"  shall  mean any  holder  of  outstanding  shares  of Series A
Preferred or Registrable Securities.

         "Initiating  Holders"  shall mean any Series A  Shareholders  (or their
assignees  under  Section 7.13 hereof) who in the  aggregate  are Holders of not
less than twenty percent (20%) of the then outstanding  Registrable  Securities,
and,  after any other Holder or Holders  have joined in a request by  Initiating
Holders, shall include such other Holder or Holders.

          "Other  Shareholders"  shall  have the  meaning  set forth in  Section
7.4(b).

         Section 7.2       Restrictive Legend.

         Each certificate  representing (i) the shares of Series A Preferred, or
(ii) Series A Conversion Shares, or (iii) any other securities issued in respect
of the shares of Series A Preferred or the Series A Conversion Shares,  upon any
Adjustment  Event,  shall (unless  otherwise  permitted or unless the securities
evidenced by such  certificate  shall have been registered  under the Securities
Act) be  stamped  or  otherwise  imprinted  with a legend  substantially  in the
following  form (in  addition  to any legend  required  under  applicable  state
securities laws):

         THESE  SECURITIES HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF
         1933 OR APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED
         FOR SALE,  PLEDGED OR  HYPOTHECATED  IN THE  ABSENCE OF A  REGISTRATION
         STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN
         OPINION OF COUNSEL  SATISFACTORY TO THE COMPANY THAT SUCH  REGISTRATION
         IS NOT  REQUIRED  PURSUANT  TO A VALID  EXEMPTION  THEREFROM  UNDER THE
         SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS

         Upon  request  of a holder of such a  certificate,  the  Company  shall
remove the foregoing  legend from the  certificate or issue to such holder a new
certificate  therefor free of any transfer  legend,  if with such  request,  the
Company shall have received either the opinion  referred to in Section 7.3(i) or
the "no-action"  letter referred to in Section  7.3(ii),  to the effect that any
transfer by such holder of the securities evidenced by such certificate will not
violate the Securities Act and applicable state securities laws.

         Section 7.3       Notice of Proposed Transfers and Securities Act
Compliance.

                  The holder of  Restricted  Securities  by  acceptance  thereof
agrees to comply in all respects with the  provisions of this Section 7.3. Prior
to any  proposed  transfer  of  any  Restricted  Securities  (other  than  under
circumstances described in Sections 7.4, 7.5 and 7.6 hereof), the holder thereof
shall give written  notice to the Company of such  holder's  intention to effect
such transfer.  Each such notice shall describe the manner and  circumstances of
the proposed  transfer in sufficient  detail,  and shall be accompanied  (except
that transactions in compliance with Rule 144 may instead be accompanied by such
broker and seller representations reasonably requested by the Company to support
the  qualification  of the  transaction  under Rule 144) by either (i) a written
opinion of Hutchins, Wheeler & Dittmar or other legal counsel (including counsel
for the  holder  who  also  may be an  employee  of the  holder)  who  shall  be
reasonably satisfactory to the Company,  addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel,  to the effect that
the  proposed  transfer of the  Restricted  Securities  may be effected  without
registration  under the Securities Act and applicable  state securities laws, or
(ii)  a  "no-action"   letter  from  the  Commission  to  the  effect  that  the
distribution  of such  securities  without  registration  will not  result  in a
recommendation  by the staff of the Commission that action be taken with respect
thereto. Upon receipt by the Company of such notices and accompanying opinion or
"no-action" letter, if required,  the holder of such Restricted Securities shall
be entitled to transfer such Restricted  Securities in accordance with the terms
of  the  notice  delivered  by  the  holder  to the  Company.  Each  certificate
evidencing  the Restricted  Securities  transferred as above provided shall bear
the appropriate  restrictive legend set forth in Section 7.2 above,  except that
such  certificate  need not bear such  restrictive  legend if such  legend is no
longer  required in the  opinion of counsel or  "no-action"  letter  referred to
above is to the  further  effect  that such  legend is not  required in order to
establish  compliance  with any  provisions of the  Securities Act or applicable
state securities laws or if the transaction is made, to the Company's reasonable
satisfaction, in compliance with Rule 144.

         Section 7.4       Requested Registration.

                  (a) Request for Registration. If at any time after the earlier
of (x) two (2)  years  from the  initial  issuance  of the  shares  of  Series A
Preferred pursuant to the Series A Purchase Agreement, or (y) the closing of the
First Public  Offering,  the Company  shall  receive from  Initiating  Holders a
written request that the Company effect a registration  with respect to all or a
part of the Registrable Securities, the Company will, without limiting any other
rights under this Section 7:

                           (i)      promptly give written notice of the proposed
                   registration to all other Holders; and

                           (ii) as soon as  practicable,  use its diligent  best
                   efforts  to  effect  such  registration  (including,  without
                   limitation,   the  execution  of  an   undertaking   to  file
                   post-effective  amendments,  appropriate  qualification under
                   applicable  blue  sky or  other  state  securities  laws  and
                   appropriate  compliance  with applicable  regulations  issued
                   under the Securities Act) as may be so requested and as would
                   permit or facilitate the sale and distribution of all or such
                   portion of such  Registrable  Securities  as are specified in
                   such  request,  together  with  all or  such  portion  of the
                   Registrable  Securities  of any Holder or Holders  joining in
                   such request as are  specified in a written  request given by
                   such Holder or Holders  within ten (10) days after receipt of
                   such  written  notice  from the  Company;  provided  that the
                   Company  shall not be  obligated  to  effect,  or to take any
                   action to  effect,  any such  registration  pursuant  to this
                   Section 7.4:

                                            (A) after the Company has effected
                  one (1) such  registration  pursuant to this Section 7.4
                  and such  registration has been declared or ordered effective
                  and has remained in effect for one hundred twenty (120)
                  days thereafter; or

                                            (B) if the request for registration
                  does not request the registration of Registrable Securities
                  with a proposed public offering price of $10,000,000 or more;
                  or

                                            (C) If the Company shall  furnish to
                  such Holders a certificate  signed by the President of
                  the Company,  stating  that in the good faith  judgment of the
                  Board of the Company it would be seriously  detrimental to the
                  Company and its shareholders for such  Registration  Statement
                  to be filed at the date  filing  would be  required,  in which
                  case the Company shall have an  additional  period of not more
                  than thirty (30) days within  which to file such  registration
                  statement;  provided,  however, that the Company shall not use
                  this right more than once in any twelve (12) month period.

                  Subject  to  Section  7.4(a)(ii),  the  Company  shall  file a
registration   statement  on  Commission   Form  S-1  covering  the  Registrable
Securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Initiating Holders.

                  The  registration  statement  filed pursuant to the request of
the Initiating  Holders may,  subject to the provisions of Section 7.4(b) below,
include other  securities of the Company which are held by officers or directors
of the Company or which are held by parties  who, by virtue of  agreements  with
the Company, are entitled to include their securities in any such registration.

                  (b)  Underwriting.   If  the  Initiating   Holders  intend  to
distribute the  Registrable  Securities  covered by their request by means of an
underwriting,  they shall so advise the Company as a part of their  request made
pursuant to this Section 7.4 and the Company shall include such  information  in
the written  notice  referred to in Section  7.4(a)(i)  above.  The right of any
Holder to  registration  pursuant to this Section 7.4 shall be conditioned  upon
such  Holder's  participation  in such  underwriting  and the  inclusion of such
Holder's Registrable Securities in the underwriting,  (unless otherwise mutually
agreed by a majority in interest of the  Initiating  Holders and such Holder) to
the extent provided herein.

                  If  officers  or  directors  of  the  Company   holding  other
securities of the Company shall request  inclusion in any registration  pursuant
to this  Section  7.4,  or if  holders  of  securities  of the  Company  who are
entitled,  by contract  with the Company,  to have  securities  included in such
registration (the "Other Shareholders")  request such inclusion,  the Initiating
Holders shall, on behalf of all Holders, offer to include the securities of such
officers, directors and Other Shareholders in the underwriting and may condition
such offer on their  acceptance of all applicable  provisions of this Section 7.
The Company  shall  (together  with all Holders,  officers,  directors and Other
Shareholders proposing to distribute their securities through such underwriting)
enter into an underwriting  agreement in customary form with the  representative
of the underwriter or underwriters  selected for such underwriting by a majority
in interest of the Initiating Holders and reasonably acceptable to the Company.

                  Notwithstanding  any other  provision  of this Section 7.4, if
the  representative  of the underwriter or  underwriters  advises the Initiating
Holders  in  writing  that  marketing  factors  make it  advisable  to  impose a
limitation  on the number of shares to be  underwritten,  the  securities of the
Company (other than Registrable Securities) held by officers or directors of the
Company and by Other  Shareholders  shall be excluded from such  registration to
the extent so required by such  limitation  and if a limitation of the number of
shares is still required,  the Initiating Holders shall so advise all Holders of
Registrable Securities whose securities would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable  Securities that may be included
in the registration  and underwriting  shall be allocated among all such Holders
in  proportion,  as  nearly  as  practicable,   to  the  respective  amounts  of
Registrable  Securities  held  by  such  persons  at  the  time  of  filing  the
registration  statement.  No  Registrable  Securities  or any  other  securities
excluded  from  the  underwriting  by  reason  of  the  underwriter's  marketing
limitation shall be included in such registration.

                  If any Holder of Registrable Securities,  officer, director or
Other Shareholder above disapproves of the terms of the underwriting, such party
may  elect  to  withdraw  therefrom  by  written  notice  to  the  Company,  the
underwriter and the Initiating  Holders.  The securities so withdrawn shall also
be withdrawn from registration.

                  If the  underwriter  has not limited the number of Registrable
Securities or other securities to be  underwritten,  the Company may include its
securities for its own account in such registration if the underwriter so agrees
and if the number of  Registrable  Securities and other  securities  which would
otherwise  have been included in such  registration  and  underwriting  will not
thereby be limited.

          Section 7.5      Company Registration.

                  (a) Notice of Registration.  If the Company shall determine to
register  any of its  securities  either for its own account or the account of a
security  holder or holders  exercising  their  respective  demand  registration
rights,  other  than the  registration  statement  for the  Series  B  Preferred
required  by  Section  7.17(a)  of the  Series  B  Purchase  Agreement  and  the
registration statement for the Series C Preferred required by Section 7.17(a) of
the Series C Purchase  Agreement,  or a registration on Commission  Forms S-4 or
S-8,  or  a  registration  relating  solely  to  employee  benefit  plans,  or a
registration  relating  solely  to  a  Commission  Rule  145  transaction,  or a
registration on any registration form which does not permit secondary sales, the
Company will:

                  (i)      promptly give to each Holder  written  notice thereof
                           (which shall include a list of the  jurisdictions  in
                           which the Company  intends to attempt to qualify such
                           securities  under  the  applicable  blue sky or other
                           state securities laws); and

                  (ii)     include in such registration (and any related
                           qualification  under blue sky laws or other
                           compliance),  and in any  underwriting  involved
                           therein,  all the Registrable  Securities  specified
                           in a written request or requests, made by any Holder
                           within ten (10) days after  receipt of the  written
                           notice  from the Company described in clause (i)
                           above, except as set forth in Section 7.5(b) below;
                           provided,  however,  that if at any time after giving
                           written notice of its intention to register any
                           securities and prior to the effective date of the
                           registration  statement filed in connection with such
                           registration,  the Company shall determine
                           for any reason not to  register  or to delay
                           registration  of such  securities, the Company  may,
                           at its election,  give  written  notice  of such
                           determination  to each  Holder  of  Registrable
                           Securities  and, thereupon,  (A) in the case of a
                           determination  not to  register,  shall be relieved
                           of its  obligation  to register any  Registrable
                           Securities in connection with such  registration
                           (but not from its obligation to pay the  Registration
                           Expenses in connection  therewith)  and (B) in the
                           case of a  determination  to delay registering,
                           shall be permitted to delay registering any
                           Registrable Securities, for the same period as the
                           delay in registering such other securities.

         (b) Underwriting. If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company shall
so advise the Holders as part of the written  notice  given  pursuant to Section
7.5(a)(i).  In such event,  the right of any Holder to registration  pursuant to
Section  7.5 shall be  conditioned  upon  such  Holder's  participation  in such
underwriting  and the inclusion of such Holder's  Registrable  Securities in the
underwriting to the extent provided herein.  All Holders proposing to distribute
their  securities  through such  underwriting  shall (together with the Company,
directors and officers and the Other Shareholders  distributing their securities
through such  underwriting)  enter into an  underwriting  agreement in customary
form with the  underwriter  or  underwriters  selected for  underwriting  by the
Company.

                  Notwithstanding  any other  provision  of this Section 7.5, if
the underwriter  determines  that marketing  factors require a limitation on the
number  of  shares to be  underwritten,  the  underwriter  may  (subject  to the
allocation  priority  set  forth  below)  exclude  from  such  registration  and
underwriting some or all of the Registrable  Securities which would otherwise be
underwritten  pursuant  hereto.  The  Company  shall so advise  all  holders  of
securities requesting registration,  and the number of shares of securities that
are  entitled to be  included  in the  registration  and  underwriting  shall be
allocated in the following manner:  the number of shares that may be included in
the  registration  and  underwriting  on behalf of such  Holders,  directors and
officers and Other Shareholders shall be allocated among such Holders, directors
and officers and Other Shareholders in proportion, as nearly as practicable,  to
the respective  amounts of Registrable  Securities and other  securities held by
such  persons  at the  time of  filing  the  registration  statement;  provided,
however, that the underwriter's  limitation shall not apply to Holders unless it
also applies in the same  proportion to the  Company's  other  Shareholders.  In
addition,  the Company  hereby  covenants  and agrees not to grant  registration
rights  similar to those  contained  in Section 7.5 to any other party that will
provide  such party  with  preferential  terms and  conditions  with  respect to
underwriters' limitations.

                  If any  Holder  of  Registrable  Securities  or  any  officer,
director or Other Shareholder disapproves of the terms of any such underwriting,
such party may elect to withdraw  therefrom by written notice to the Company and
the  underwriter.  Any Registrable  Securities or other  securities  excluded or
withdrawn from such underwriting shall be withdrawn from such registration.

         Section 7.6       Registration on Form S-3.

         The  Company  shall take  reasonable  actions to qualify for the use of
Form S-3 or any comparable or successor  form or forms of the Commission  within
twelve (12)  months of its First  Public  Offering;  and to that end the Company
shall take reasonable  actions to register (whether or not required by law to do
so) the Common Stock under the Securities  Exchange Act of 1934, as amended (the
"Exchange  Act") in accordance with the provisions of the Exchange Act following
the effective date of the  registration  of Equity  Securities of the Company on
Form S-1. At any time when the Company is qualified  for the use of Form S-3, in
addition to the rights contained in the foregoing  provisions of this Section 7,
and provided that at such time the Holders continue to hold at least ten percent
(10%) of the Registrable  Securities  initially issuable to them upon conversion
of the shares of Series A Preferred  initially  acquired by them pursuant to the
Series A Purchase  Agreement,  the Holders of Registrable  Securities shall have
the right to request  registrations  on Form S-3 (by written request stating the
number of shares of  Registrable  Securities  to be disposed of and the intended
method of disposition of such shares by such Holder or Holders), subject only to
the following:

                  (i)      No request made under this Section 7.6 shall  require
                           a registration  statement requested therein to become
                           effective   prior  to  ninety  (90)  days  after  the
                           effective date of a registration  statement  filed by
                           the Company covering the First Public Offering; and

                  (ii)     The  Company  shall  not  be  required  to  effect  a
                           registration  pursuant to this Section 7.6 unless (A)
                           the Registrable Securities requested to be registered
                           pursuant to this  Section 7.6 have a proposed  public
                           offering  price  of  $500,000  or  more;  and (B) the
                           Company has not completed a registration  on Form S-3
                           within the preceding twelve (12) month period.

                  The Company  shall give  notice to all Holders of  Registrable
Securities of the receipt of a request for registration pursuant to this Section
7.6 and shall provide a reasonable  opportunity for other Holders to participate
in the  registration,  and, if the intended  method of disposition  specified as
aforesaid is an underwritten  public offering,  participation by the Company and
other holders of Common Stock shall be on the basis set forth in Section  7.4(b)
above. Subject to the foregoing, the Company will use its best efforts to effect
promptly the registration of all shares of Registrable Securities on Form S-3 to
the  extent  requested  by  the  Holder  or  Holders  thereof  for  purposes  of
disposition.

         Section 7.7       Expenses of Registration.

         The Company shall bear all Registration Expenses incurred in connection
with any  registration,  qualification and compliance by the Company pursuant to
Sections  7.4, 7.5 and 7.6 hereof.  All Selling  Expenses  shall be borne by the
holders of the  securities so registered  pro rata on the basis of the number of
their shares so registered.  Notwithstanding anything to the contrary above, the
Company  shall  not be  required  to pay for any  expenses  of any  registration
proceeding  under  Section  7.4  if the  registration  request  is  subsequently
withdrawn  at the request of the  Initiating  Holder or Holders of a majority of
the  Registrable  Securities  to  have  been  registered,  and  the  Holders  of
Registrable  Securities to have been registered shall bear all such expenses pro
rata  on the  basis  of the  Registrable  Securities  to have  been  registered.
Notwithstanding  the  preceding  sentence,  however,  (a) if at the  time of the
withdrawal,  the Holders  have  learned of a  materially  adverse  change in the
condition,  business or  prospects of the Company from that known to the Holders
at the time of their  request,  then the  Company  shall be required to pay said
expenses, and (b) the Holders electing to withdraw a registration may specify in
the notice of withdrawal  that the withdrawn  registration is to be treated as a
registration  declared effective and in effect for one hundred twenty (120) days
for purposes of determining  the number of  registrations  effected  pursuant to
Section 7.4, in which case the Company shall be required to pay said expenses.

         Section 7.8       Registration Procedures.

         In the case of each  registration  effected by the Company  pursuant to
this Section 7, the Company  will keep each Holder  advised in writing as to the
initiation of each  registration  and as to the  completion  thereof.  Except as
provided in Section 7.6, at its expense, the Company will:

                  (a) Keep  such  registration  effective  for a  period  of one
hundred  twenty  (120) days or until the Holder or Holders  have  completed  the
distribution described in the registration statement relating thereto, whichever
first  occurs;  provided,  however,  that such one hundred and twenty  (120) day
period  shall be  extended  for a period of time  equal to the period the Holder
refrains from selling any securities included in such registration in accordance
with the provisions of Section 7.14 hereof;

                  (b)      Furnish such number of prospectuses and other
documents incident thereto as a Holder from time to time may reasonably request;
and

                  (c)  Use  its  best   efforts  to   register  or  qualify  the
Registrable   Securities   under  the  securities  or  blue  sky  laws  of  such
jurisdictions  as any Holder may request;  provided,  however,  that the Company
shall not be obligated to register or qualify such Registrable Securities in any
particular  jurisdiction  in which the  Company  would be  required to execute a
general  consent to service  of  process in order to effect  such  registration,
qualification or compliance, unless the Company is already subject to service in
such  jurisdiction  and  except  as may be  required  by the  Securities  Act or
applicable rules or regulations thereunder; and

                  (d) To the extent  that the  Company's  Common  Stock has been
de-listed from the Nasdaq SmallCap Market, but again qualifies for such listing,
use its best  efforts to cause the Common  Stock to be  re-listed  on the Nasdaq
SmallCap Market, or if it qualifies for such listing, the Nasdaq National Market
System or other national securities exchange.

          Section 7.9      Indemnification and Contribution.

                         (a)        The Company,  with respect to each
registration,  qualification and compliance effected pursuant to
this  Section 7, will  indemnify  and hold  harmless  each  Holder,  each of its
officers,  directors and partners,  and each party controlling such Holder,  and
each underwriter,  if any, and each party who controls any underwriter,  against
all claims,  losses,  damages and  liabilities  (or actions in respect  thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any prospectus, offering circular or other document
(including  any  related  registration  statement,  notification  or  the  like)
incident to any such registration,  qualification or compliance, or based on 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,  or
any  violation by the Company of the  Securities  Act or any rule or  regulation
thereunder applicable to the Company and relating to action or inaction required
of the  Company  in  connection  with any such  registration,  qualification  or
compliance, and will reimburse each such Holder, each of its officers, directors
and partners,  and each party controlling such Holder, each such underwriter and
each  party  who  controls  any such  underwriter,  for any  legal and any other
expenses  reasonably  incurred in connection with investigating or defending any
such claim,  loss, damage,  liability or action,  provided that the Company will
not be liable  in any such case (i) to the  extent  that any such  claim,  loss,
damage,  liability or expense arises out of or is based on any untrue  statement
or omission  based solely upon written  information  furnished to the Company by
such Holder or  underwriter,  as the case may be, and stated to be  specifically
for use therein or (ii) to any particular Holder,  officer,  director or partner
or other party  controlling such Holder,  or underwriter or party controlling an
underwriter to the extent that any such claim,  loss, damage or liability arises
out of or is based upon any untrue  statement  or alleged  untrue  statement  or
omission  or  alleged  omission  made  in  any  final,  preliminary  or  summary
prospectus if such untrue  statement or alleged untrue  statement or omission or
alleged  omission is completely  corrected in an amendment or supplement to such
prospectus  provided to, and which the  relevant  Holder or  underwriter  or its
controlling  persons fails to deliver prior to or concurrently with the sales of
the Registrable  Securities to the person or entity asserting such claim,  loss,
damage or liability.

                  (b) Each Holder and Other  Shareholder  will,  if  Registrable
Securities  held by such party are included in the  securities  as to which such
registration,  qualification or compliance is being effected, indemnify and hold
harmless the Company,  each of its directors and officers and each  underwriter,
if any, of the Company's  securities  covered by such a registration  statement,
each party who controls the Company or such underwriter,  each other such Holder
and Other  Shareholder  and each of their  respective  officers,  directors  and
partners,  and each party controlling such Holder or Other Shareholder,  against
all claims,  losses,  damages and  liabilities  (or actions in respect  thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a  material  fact  contained  in any such  registration  statement,  prospectus,
offering  circular or other document,  or 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,  and will reimburse the Company and such
Holders,   Other   Shareholders,   directors,   officers,   partners,   parties,
underwriters or control  persons for any legal or any other expenses  reasonably
incurred in connection  with  investigating  or defending any such claim,  loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement,  prospectus, offering circular
or other  document  solely  in  reliance  upon and in  conformity  with  written
information  furnished  to the Company by such Holder or Other  Shareholder  and
stated  to  be  specifically  for  use  therein;  provided,  however,  that  the
obligations of such Holders and Other Shareholders hereunder shall be limited to
an amount  equal to the  proceeds  to each such Holder or Other  Shareholder  of
securities sold as contemplated herein.

                  (c) Each party entitled to indemnification  under this Section
7.9 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the  Indemnifying  Party to assume  the  defense of any such claim or any
litigation  resulting  therefrom,  provided  that  counsel for the  Indemnifying
Party,  who shall conduct the defense of such claim or any litigation  resulting
therefrom,  shall be approved by the Indemnified Party (whose approval shall not
unreasonably  be withheld),  and the  Indemnified  Party may participate in such
defense at such party's expense  (unless the  Indemnified  Party shall have been
advised by counsel  that actual or  potential  differing  interests  or defenses
exist or may exist between the Indemnifying  Party and the Indemnified Party, in
which case such expense shall be paid by the Indemnifying,  Party), and provided
further  that the  failure of any  Indemnified  Party to give notice as provided
herein shall not relieve the  Indemnifying  Party of its obligations  under this
Section 7 except to the extent  such  failure to give  notice  shall  materially
adversely  affect  the  Indemnifying  Party  in  the  defense  of any  claim  or
litigation.  No  Indemnifying  Party,  in the  defense  of  any  such  claim  or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement  which does not include as an
unconditional  term  thereof  the giving by the  claimant or  plaintiff  to such
Indemnified  Party of a release  from all  liability in respect to such claim or
litigation.  If the defense of any claim or resulting  litigation is not assumed
by the Indemnifying  Party,  the  Indemnifying  Party will not be subject to any
liability for any settlement made without its consent,  but such consent may not
be  unreasonably  withheld;  provided  that an  Indemnifying  Party shall not be
deemed  unreasonable  in  withholding  consent to any  settlement  involving the
imposition  of equitable  remedies or involving  the  imposition of any material
obligations  on such  Indemnifying  Party other than financial  obligations  for
which such Indemnified Party will be indemnified hereunder.

                  (d) In order to provide for just and equitable contribution to
joint  liability  under the  Securities  Act in any case in which either (i) any
holder of Restricted Securities  exercising rights under this Agreement,  or any
controlling  person  of any  such  holder,  makes  a claim  for  indemnification
pursuant to this Section 7.9 but it is judicially  determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to  appeal  or the  denial  of the  last  right  of  appeal)  that  such
indemnification  may not be enforced in such case  notwithstanding the fact that
this Section 7.9 provides for indemnification in such case, or (ii) contribution
under the  Securities Act may be required on the part of any such selling holder
or any such controlling  person in circumstances  for which  indemnification  is
provided  under this Section 7.9;  then,  and in each such case, the Company and
such  holder  will  contribute  to the  aggregate  losses,  claims,  damages  or
liabilities  to which they may be subject  (after  contribution  from others) in
such proportion so that such holder is responsible  for the portion  represented
by the percentage  that the public  offering price of its Restricted  Securities
offered by the registration  statement bears to the public offering price of all
securities  offered  by  such  registration   statement,   and  the  Company  is
responsible  for the remaining  portion;  provided,  however,  that, in any such
case,  (A) no such holder will be required to contribute any amount in excess of
the  public  offering  price of all such  Restricted  Securities  offered  by it
pursuant to such registration  statement;  and (B) no person or entity guilty of
fraudulent  misrepresentation  (within  the  meaning  of  Section  11(f)  of the
Securities Act) will be entitled to  contribution  from any person or entity who
was not guilty of such fraudulent misrepresentation.

         Section 7.10       Information by Holder.

         Each  Holder of  Registrable  Securities,  and each  Other  Shareholder
holding  securities  included in any registration,  shall furnish to the Company
such information  regarding such Holder or Other  Shareholder as the Company may
reasonably request in writing and as shall be reasonably  required in connection
with any registration,  qualification or compliance  referred to in this Section
7.

         Section 7.11      Limitations on Registration of Issues of Securities.

         From and after the date of this Agreement,  the Company shall not enter
into any agreement (other than the Series C Purchase  Agreement) with any holder
or  prospective  holder of any  securities of the Company  giving such holder or
prospective holder the right to require the Company to initiate any registration
of any  securities of the Company that would provide such holder or  prospective
holder with  registration  rights that are  inconsistent  with or more favorable
than the rights of the Holders set forth in this Section 7;  provided,  however,
that this  Section  7.11 shall not limit the right of the  Company to enter into
any agreements  with any holder or  prospective  holder of any securities of the
Company  giving  such  holder or  prospective  holder the right to  require  the
Company, upon any registration of any of its securities,  to include,  among the
securities  which the  Company  is then  registering,  securities  owned by such
holder and provided  further  that a majority of the Holders of the  Registrable
Securities  may waive  the  requirement  that the  Company  not  enter  into any
agreement  giving a holder of any securities of the Company the right to require
the Company to initiate  registration  of any securities of the Company.  Except
for the rights granted to the holders of the Series C Preferred under the Series
C  Purchase  Agreement,  any  right  given  by  the  Company  to any  holder  or
prospective   holder  of  the  Company's   securities  in  connection  with  the
registration  of  securities  shall  be  conditioned  such  that it shall be (i)
consistent  with the  provisions  of this  Section 7 and with the  rights of the
Holders  provided  in  this  Agreement,   and  (ii)  require  the  inclusion  of
Registrable   Securities   (within  the  meaning  of  this   Agreement)  in  any
registration required by any such holder or prospective holder on the same basis
as securities of Other Shareholders are required to be included in registrations
effected pursuant to Sections 7.4 and 7.5 of this Agreement.

         Section 7.12      Rule 144 Reporting.

         With a view to making  available  the  benefits  of  certain  rules and
regulations  of the  Commission,  which may  permit  the sale of the  Restricted
Securities to the public without registration, the Company agrees to:

                  (a)      Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act;

                  (b) Use its best  efforts  to file  with the  Commission  in a
timely manner all reports and other documents  required of the Company under the
Securities Act and the Exchange Act; and

                  (c) So long as a Series  A  Shareholder  owns  any  Restricted
Securities,  furnish  to the  Series A  Shareholders  forthwith  upon  request a
written  statement  by the  Company  as to its  compliance  with  the  reporting
requirements  of Rule 144 (at any time from and after ninety (90) days following
the effective date of the First Public Offering),  and of the Securities Act and
the Exchange  Act, a copy of the most recent  annual or quarterly  report of the
Company, and such other reports and documents so filed as a Series A Shareholder
may  reasonably  request in  availing  itself of any rule or  regulation  of the
Commission  allowing a Series A Shareholder to sell any such securities  without
registration.

         Section 7.13      Transfer of Registration Rights.

         The rights to cause the Company to register  securities  granted by the
Company  under this Section 7 may be assigned by any Holder to a  transferee  or
assignee,  provided that the Company is given  written  notice at the time of or
within a reasonable  time after said  transfer,  stating the name and address of
said transferee or assignee and identifying the securities with respect to which
such  registration  rights are being  assigned,  and  provided  further that the
transferee or assignee of such rights  assumes the  obligations of such Series A
Shareholder under this Section 7.

         Section 7.14      "Market Stand-Off" Agreement.

         Each Holder of  Registrable  Securities  agrees,  if  requested  by the
managing  underwriter of the First Public Offering or of any other  underwritten
offering in which part of the Registrable Securities are not sold, to enter into
an  agreement  pursuant  to which such  Holder  agrees not to sell or  otherwise
transfer  or dispose of any Common  Stock (or other  securities)  of the Company
held by it during a period  specified  by such  underwriter,  not to exceed  one
hundred  eighty (180) days  following  the  effective  date of the  registration
statement of the Company filed under the Securities  Act in connection  with the
First Public Offering or any subsequent underwritten offering, provided that all
Holders, Other Shareholders and officers and directors of the Company enter into
similar agreements.

         Such  agreement  shall  be in  writing  in a form  satisfactory  to the
Company and such underwriter.  The Company may impose stop-transfer instructions
with respect to the shares (or securities) subject to the foregoing  restriction
until the end of said period.

                                    SECTION 8

                            Miscellaneous Provisions

         Section 8.1.      Assignment of Rights.

         The provisions of this Agreement shall be binding upon and inure to the
benefit of any successor or assign of any party hereto.

         Section 8.2.      Duration of Agreement.

         Unless  sooner  terminated in  accordance  with the  provisions of this
Agreement,  the rights and obligations of each Shareholder  under this Agreement
shall  terminate as to such  Shareholder  when the Group of which it is a member
has  transferred  all Equity  Securities  owned by such Group in accordance with
this Agreement.

         Section 8.3.      Enforcement.

         The parties  hereto agree that the remedy at law for any breach of this
Agreement is inadequate and that should any dispute arise  concerning any matter
hereunder,  this  Agreement  shall be  enforceable  in a court of  equity  by an
injunction or a decree of specific performance. Such remedies shall, however, be
cumulative  and not  exclusive,  and shall be in addition to any other  remedies
that the parties hereto may have.

         Section 8.4.      Severability of Provisions.

         If any one or more  provisions  of this  Agreement  shall  be  declared
invalid  or   unenforceable,   the  same  shall  not  affect  the   validity  or
enforceability of any other provisions of this Agreement.

         Section 8.5. Amendments. Neither this Agreement nor any term hereof may
be amended,  waived,  discharged,  or terminated,  except by written  instrument
signed by the Company and Preferred Shareholders holding greater than two-thirds
(2/3)  of the  voting  Equity  Securities  held by the  Preferred  Shareholders;
provided,  however,  that (i) the  provisions  of  Section 2 may not be  amended
without the  consent of SI,  Ascent and Apex,  to the extent that the  amendment
affects  such  party's  right to  designate a director for election by any other
Shareholder,  (ii) the  provisions  of Section 3 may not be amended  without the
consent of Common  Shareholders  holding greater than fifty percent (50%) of the
voting Equity Securities held by the Common Shareholders;  (iii) the periods set
forth in Section 6 may not be  extended  without  the  consent of each and every
Shareholder;  (iv) this  Section may not be amended  without the consent of each
and every  Shareholder  and the Company;  (v) the obligations of any Shareholder
may not be increased  without the consent of such  Shareholder;  (vi) additional
Series  A  Shareholders  may be added to  Schedule  I from  time to time if such
Series  A  Shareholders  agree  in  writing  to be  bound  by the  terms of this
Agreement and are approved by SI; (vii) additional  Series B Shareholders may be
added to Schedule II from time to time if such  Series B  Shareholders  agree in
writing to be bound by the terms of this Agreement;  (viii)  additional Series C
Shareholders  may be added to  Schedule  III from time to time if such  Series C
Shareholders  agree in writing to be bound by the terms of this  Agreement;  and
(ix) the Company and the Series A  Shareholders  shall not be required to obtain
the  written  consent of any Series B  Shareholder  or Series C  Shareholder  to
amend,  waive,  discharge  or  terminate  the  provisions  of  Section 7 of this
Agreement.  Notwithstanding the foregoing, the execution of a joinder or similar
agreement  by which a  transferee  of a  Shareholder  agrees  to be bound by and
become a party to this  Agreement in the manner  contemplated  by this Agreement
shall not be deemed an amendment.

          Section 8.6.     Notices.

                  (a) All notices and other communications required or permitted
hereunder  shall be in writing  and  (unless  otherwise  expressly  provided  on
Schedule I, Schedule II,  Schedule III or Schedule IV attached  hereto) shall be
mailed by registered or certified mail, postage prepaid,  or delivered either by
hand or by  overnight  courier  or  messenger,  or sent via  telex,  telecopier,
computer mail or other electronic means,  addressed (i) if to a Shareholder,  as
indicated on Schedule I,  Schedule  II,  Schedule III or Schedule IV, or at such
other address as such  Shareholder  shall have furnished in writing to the party
initiating the notice or communication, or (ii) if to the Company, to Five Clock
Tower Place, Suite 440, Maynard,  Massachusetts  01754, or at such other address
as the  Company  shall have  furnished  in writing to the party  initiating  the
notice or communication.

                  (b) Any  notice  or  other  communications  so  addressed  and
mailed,  postage  prepaid,  by registered or certified mail (in each case,  with
return  receipt  requested)  shall be deemed to be  delivered  and given when so
mailed.  Any notice so addressed and otherwise  delivered  shall be deemed to be
given when actually received by the addressee.

          Section 8.7.     Governing Law.

          This Agreement  shall be construed in accordance  with, and the rights
of the parties shall be governed by, the laws of the State of Delaware.

          Section 8.8.     Entire Agreement.

          This Agreement does not supersede any previous  agreements between the
Company and holders of Common  Stock of the Company,  including  the Amended and
Restated  Shareholders'  and Rights  Agreements,  dated  February 10, 2000.  All
rights  and  obligations  of the  holders  of  Common  Stock  contained  in such
agreements  remain valid,  legal and binding.  Nothing herein contained shall be
construed to obligate the Shareholders to make any additional  investment in the
Company or to constitute the Shareholders as partners.

          Section 8.9.     Counterparts.

          This Agreement may be executed in counterparts,  each of which when so
executed and delivered shall  constitute a complete and original  instrument but
all of which together shall constitute one and the same agreement,  and it shall
not be necessary when making proof of this Agreement or any counterpart  thereof
to account for any other counterpart.

                            [Signature Page Follows]

<PAGE>

         IN WITNESS  WHEREOF,  each party hereto has caused this Agreement to be
signed by its duly authorized officer or partner,  as the case may be, as of the
date and year first above written.

<TABLE>

                                           <S>   <C>

                                            SOFTLOCK.COM, INC.

                                            By:_______________________________
                                            Name:
                                            Title:

                                            SI VENTURE FUND II, L.P.

                                            By: SI Venture Management 11, L.L.C.
                                                   General Partner

                                            By:_____________________________
                                                  its Managing Member

                                            APEX INVESTMENT FUND IV, L.P.

                                            By: Apex Management IV, L.L.C., General Partner

                                            By:______________________________

<PAGE>

                                            APEX STRATEGIC PARTNERS IV, LLC

                                            By: Apex Manage LLC, Manager

                                            By____________________________________

                                            RSA SECURITY, INC.

                                            By:___________________________________
                                            Its:

                                            RAPTOR GLOBAL PORTFOLIO, LTD.

                                            By: TUDOR INVESTMENT CORPORATION,
                                                  as Investment Advisor

                                            By:_____________________________________

                                            ALTAR ROCK FUND, L.P.

                                            By: Tudor Investment Corporation, as General Partner

                                            By:________________________________________

                                            ------------------------------------------
                                            Ronald A. Santella

                                            -------------------------------------------
                                            Anthony Kamin

<PAGE>

                                            RC CAPITAL, L.L.C.

                                            By: Ritchie Capital Investments, L.L.C., its manager

                                            By: Ritchie Capital Management, L.L.C., its manager

                                                     By: THR,Inc.

                                                     By:_______________________________

                                            RAM TRADING, LTD.

                                            By: Ritchie Capital Management, L.L.C., its investment
                                                     manager

                                                     By: THR, Inc.

                                                     By:_____________________________________

                                            RITCHIE CAPITAL MANAGEMENT, LLC

                                            By: THR, Inc.

                                                     By:_____________________________________

                                            ASCENT VENTURE PARTNERS 111, L.P.

                                            By: ASCENT VENTURE MANAGEMENT III, LLC, its General Partner

                                            By:_____________________________________________
</TABLE>Exhibit 10.3

NEITHER THIS WARRANT NOR THE SHARES  ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  APPLICABLE STATE
SECURITIES  LAWS, OR APPLICABLE LAWS OF ANY FOREIGN  JURISDICTION.  THIS WARRANT
AND THE SHARES  ISSUABLE  UPON  EXERCISE OF THIS WARRANT HAVE BEEN  ACQUIRED FOR
INVESTMENT  AND NOT WITH A VIEW TO  DISTRIBUTION  OR RESALE,  AND  NEITHER  THIS
WARRANT NOR THE SHARES  ISSUABLE  UPON  EXERCISE OF THIS  WARRANT CAN BE SOLD OR
TRANSFERRED  IN THE ABSENCE OF AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE
SECURITIES  ACT OF 1933, AS AMENDED,  AND IN THE ABSENCE OF COMPLIANCE  WITH ANY
APPLICABLE   STATE   SECURITIES   LAWS  AND  APPLICABLE   LAWS  OF  ANY  FOREIGN
JURISDICTION,  OR,  IF THE  CORPORATION  SO  REQUESTS,  AN  OPINION  OF  COUNSEL
SATISFACTORY TO THE CORPORATION,  ACTING  REASONABLY,  THAT SUCH REGISTRATION IS
NOT REQUIRED AND SUCH FOREIGN JURISDICTION LAWS HAVE BEEN SATISFIED.

                                                   Dated:  December 21, 2000

SOFTLOCK.COM, INC.

Preferred Stock Purchase Warrant

         THIS IS TO CERTIFY THAT, for value received,  [_________] (the "Initial
Warrant Holder") and its successors and permitted assigns are entitled,  subject
to the terms and  conditions  set forth below,  to purchase  from  SOFTLOCK.COM,
INC., a Delaware corporation (the  "Corporation"),  at any time and from time to
time after 9:00 A.M.,  Boston,  Massachusetts  time on the Initial Exercise Date
(as  defined  in  Section  1  below)  and on or  prior  to  5:00  P.M.,  Boston,
Massachusetts  time on the Expiration Date (as defined in Section 1 below),  all
or any  portion  of the  Warrant  Shares (as  defined in Section 1 below),  at a
purchase  price per share equal to the  Exercise  Price (as defined in Section 1
below).  The number and character of the Warrant  Shares and the Exercise  Price
are subject to adjustment as provided herein.

         This Preferred  Stock Purchase  Warrant (the  "Warrant")  evidences the
right of the Holder to purchase shares of Series C Preferred Stock issued by the
Corporation to the Purchasers (as defined in and pursuant to that certain Series
C Preferred Stock and Warrant  Purchase  Agreement,  dated as of the date hereof
(the "Stock Purchase  Agreement"),  by and among the Corporation and the persons
listed therein).

         1.       Definitions.  As used in this Warrant,  the  following
terms shall have the  respective  meanings set forth below or
elsewhere in this Warrant as referred to below:

         "Certificate  of  Incorporation"  shall mean the Amended  and  Restated
Certificate of Incorporation  of the  Corporation,  as amended from time to time
and including,  without  limitation,  the  Certificate of Designation of Powers,
Preferences and Rights of the Series C Preferred Stock.

         "Commission"  means  the  Securities  and  Exchange  Commission  or its
successor entity.

         "Common   Stock"   shall  mean  shares  of  the  Common  Stock  of  the
Corporation, $0.01 par value per share of the Corporation.

         "Corporation"  shall mean  SoftLock.com,  Inc.  and/or any Person  that
shall succeed to, or assume the obligations hereunder of, SoftLock.com, Inc.

         "Exercise Date" shall have the meaning set forth in Section 2.2 hereof.

         "Exercise  Price"  shall mean,  as of the Initial  Exercise  Date,  the
Initial Exercise Price and after the Initial Exercise Date, the Initial Exercise
Price as adjusted from time to time pursuant to the terms of this Warrant.

         "Expiration  Date" shall mean  December  21,  2005,  unless  terminated
earlier pursuant to Section 2.1(b) hereof.

         "Fair  Market  Value"  shall  mean (i) the last sale price per share of
Stock reported by Nasdaq SmallCap Market or any national  securities exchange on
which  such  Stock  is  quoted  or  listed,  as the  case  may be,  on the  date
immediately preceding the Exercise Date or, if no such sale price is reported on
such date, such price on the next preceding business day in which such price was
reported,  or (ii) if such  Stock is not at the time  quoted or listed by Nasdaq
SmallCap Market or on any national securities exchange,  the average of the last
reported  bid and asked  prices as reported  by The  National  Quotation  Bureau
Incorporated  or any similar  reputable  quotation and reporting  service on the
date immediately  preceding the Exercise Date or if no such bid and asked prices
are  reported on such date,  such price on the next  preceding  business  day on
which such prices were  reported,  provided  such date is not more than ten (10)
days prior to the  Exercise  Date or (iii) if such Stock is not quoted or listed
by Nasdaq SmallCap Market or on any national  securities exchange or reported on
a reputable quotation and reporting service within the ten (10) day period prior
to the  Exercise  Date,  the fair  market  value of a share  of such  Stock,  as
determined in good faith by the Board of Directors of the  Corporation and based
upon the fair market value of the  Corporation  as a whole,  on a going  concern
basis,  using  customary  and  appropriate  valuation  methods and the unaudited
financial  statements  for  the  most  recently  ended  fiscal  quarter  of  the
Corporation  in addition to the most  recent  fiscal year end audited  financial
statements of the  Corporation,  in each case, as filed with the  Commission and
not taking into account any discount for minority  ownership or  restrictions on
transfer of the capital stock of the Corporation, provided, however, that in the
event that the Stock covered by this Warrant is Series C Preferred Stock and not
Common Stock, the fair market value shall in all cases be determined pursuant to
clause  (iii)  and  shall  not in any  event be deemed to be less than the fixed
liquidation preference (including accrued dividends) payable on shares of Series
C Preferred Stock pursuant to the Certificate of Incorporation.

         "Holder" shall mean, as  applicable,  (i) the Initial  Warrant  Holder,
(ii) any successor of the Initial Warrant  Holder,  or (iii) any other holder of
record of this  Warrant  or any  portion  thereof  to whom this  Warrant  or any
portion thereof shall have been transferred in accordance with the provisions of
Section 9 hereof.

         "Initial Exercise Date" shall mean the date on which this Warrant first
becomes exercisable in accordance with the provisions of Section 2.1(b) hereof.

         "Initial Exercise Price" shall mean an amount equal to $191 per share.

         "Initial  Warrant Holder" shall have the meaning set forth in the first
paragraph of this Warrant.

         "Initial  Warrant  Shares" shall mean [__] shares of Series C Preferred
Stock.

         "Issue Date" shall mean the date hereof.

         "Person" shall mean an individual,  partnership,  corporation,  limited
liability company,  business trust, joint stock company,  trust,  unincorporated
association,  joint venture,  governmental authority or other entity of whatever
nature.

         "Preferred Stock" shall mean the Series A Preferred Stock, the Series B
Preferred,  the  Series C  Preferred  Stock and all other  capital  stock of the
Corporation   having  a  preference  on   dissolution   or  liquidation  of  the
Corporation.

         "Purchaser" shall have the meaning ascribed to it in the Stock Purchase
Agreement.

         "Qualified  Public  Offering" shall have the meaning  ascribed to it in
the Stock Purchase Agreement.

         "Registrable  Securities"  shall  mean all  shares of Stock that may be
acquired  by the Holder  through  any  exchange  or  conversion  of the Series C
Preferred Stock issuable upon exercise of this Warrant.

         "Registration  Statement"  means  any  registration  statement  of  the
Corporation  which  covers any of the  Registrable  Securities  pursuant  to the
provisions of the Stock Purchase Agreement, including the prospectus, amendments
and  supplements  to  such  registration  statement,   including  post-effective
amendments,  all  exhibits and all  material  incorporated  by reference in such
registration statement.

         "Securities Act" shall mean the Securities Act of 1933, as amended.

         "Series  A  Preferred  Stock"  shall  mean  the  Series  A  Convertible
Preferred Stock of the Corporation, $0.01 par value per share.

         "Series C  Certificate"  shall mean the  Certificate  of Designation of
Powers, Preferences and Rights of the Series C Preferred Stock.

         "Series  B  Preferred  Stock"  shall  mean  the  Series  B  Convertible
Preferred Stock of the Corporation, $0.01 par value per share.

         "Series  C  Preferred  Stock"  shall  mean  the  Series  C  Convertible
Preferred Stock of the Corporation, $0.01 par value per share.

         "Shareholders'  and Rights  Agreement"  shall mean that certain Amended
and Restated Shareholders' and Rights Agreement, dated as of the date hereof, by
and among the Corporation and the persons listed therein.

         "Stock" shall mean (i) Series C Preferred Stock,  (ii) capital stock of
the Corporation  (other than Series C Preferred Stock) or of any other Person or
any other  securities of the  Corporation or of any other Person that the Holder
is entitled to receive,  or receives,  upon exercise of this Warrant, in lieu of
or in  addition  to  Series  C  Preferred  Stock,  (iii)  capital  stock  of the
Corporation  (other than Series C Preferred Stock) or of any other Person or any
other securities of the Corporation or of any other Person that may be issued in
replacement   of,   substitution,   exchange   or   redemption   for,   or  upon
reclassification  or conversion of, Series C Preferred Stock or any other Stock,
in each case whether as a result of a reorganization,  reclassification, merger,
consolidation or sale of substantially all of the assets of the Corporation; and
(iv) in the  event of  automatic  conversion  of the  Series C  Preferred  Stock
pursuant to the Series C Certificate Common Stock of the Corporation as provided
in Section 4.3.

         "Stock  Purchase  Agreement"  shall have the  meaning  set forth in the
second paragraph of this Warrant.

         "Warrant"  shall have the meaning set forth in the second  paragraph of
this Warrant.

         "Warrant  Shares" shall mean at any time, the number and type of shares
of Stock purchasable hereunder,  which shall be the Initial Warrant Shares after
giving  effect to the  number of shares  of Stock  previously  purchased  by the
Holder  pursuant to any and all exercises of this Warrant prior to such time and
after giving  effect to all  adjustments  with respect to the number and type of
Warrant Shares purchasable hereunder as provided for herein, including,  without
limitation,  those set  forth in the  definition  of  "Stock"  and in  Section 4
hereof, prior to such time.

         2.       Exercise of Warrant; Vesting.

                  2.1(a)  Method  of  Exercise.  Subject  to and upon all of the
terms and  conditions  set forth in this Warrant  (including  the limitation set
forth in the next paragraph),  the Holder may exercise this Warrant, in whole or
in part with  respect to any Warrant  Shares,  at any time and from time to time
during the period  commencing  on the  Initial  Exercise  Date and ending on the
Expiration  Date, by giving prior  written  notice to the  Corporation  that the
Holder intends to exercise this Warrant (the "Exercise Notice"),  which Exercise
Notice  shall  indicate  the number of shares  for which the  Holder  intends to
exercise this Warrant,  and upon  presentation  and surrender of this Warrant to
the Corporation at its principal office,  together with (a) a properly completed
and  duly  executed  subscription  form,  in the  form  attached  hereto,  which
subscription  form shall  specify  the  number of Warrant  Shares for which this
Warrant is then being exercised, and (b) payment of the aggregate Exercise Price
payable  hereunder in respect of the number of Warrant  Shares  being  purchased
upon exercise of this Warrant. Payment of such aggregate Exercise Price shall be
made (i) in cash or by money order,  certified or bank  cashier's  check or wire
transfer (in each case in lawful currency of the United States of America), (ii)
cancellation of indebtedness owing from the Corporation to the Holder,  (iii) by
the Holder surrendering a number of Warrant Shares having a Fair Market Value on
the Exercise  Date equal to or greater than (but only if by a fractional  share)
the required  aggregate  Exercise  Price, in which case the Holder would receive
the number of Warrant  Shares to which it would  otherwise be entitled upon such
exercise,  less the surrendered  shares,  or (iv) any combination of the methods
described in the foregoing clauses (i), (i) and (iii).

                  2.1(b)   Exercisability.  This Warrant will become exercisable
in full on and as of 9:00 A.M., Boston,  Massachusetts
time, on the Issue Date ("Initial Exercise Date").

                  2.2  Effectiveness  of Exercise;  Ownership.  Each exercise of
this  Warrant by the Holder  shall be deemed to have been  effected  immediately
prior to the close of business on the date upon which all of the requirements of
Section 2.1 hereof with respect to such  exercise  shall have been complied with
in full (each such date, an "Exercise  Date".  On the  applicable  Exercise Date
with  respect to any  exercise of this  Warrant by the Holder,  the  Corporation
shall be deemed to have issued to the Holder,  and the Holder shall be deemed to
have  become  the  holder of record  and legal  owner of,  the number of Warrant
Shares being purchased upon such exercise of this Warrant,  notwithstanding that
the  stock  transfer  books of the  Corporation  shall  then be  closed  or that
certificates  representing  such number of Warrant Shares being  purchased shall
not then be actually delivered to the Holder.

                  2.3 Delivery of Stock  Certificates  on  Exercise.  As soon as
practicable after the exercise of this Warrant, and in any event within ten (10)
days  thereafter,  the  Corporation,  at its  expense,  and in  accordance  with
applicable securities laws, will cause to be issued in the name of and delivered
to the  Holder,  or as the  Holder  may direct  (subject  in all  cases,  to the
provisions of Section 9 hereof), a certificate or certificates for the number of
Warrant Shares  purchased by the Holder on such  exercise,  plus, in lieu of any
fractional share to which the Holder would otherwise be entitled,  cash equal to
such fraction multiplied by the Fair Market Value.

                  2.4 Shares to Be Fully  Paid and  Nonassessable.  All  Warrant
Shares issued upon the exercise of this Warrant shall be validly  issued,  fully
paid and nonassessable, free of all liens, taxes, charges and other encumbrances
or  restrictions  on sale (other than those set forth herein) and free and clear
of all preemptive rights.

                  2.5 Fractional  Shares. No fractional shares of Stock or scrip
representing  fractional  shares of Stock shall be issued  upon the  exercise of
this  Warrant.  With respect to any fraction of a share of Stock called for upon
any exercise hereof,  the Corporation shall make a cash payment to the Holder as
set forth in Section 2.3 hereof.

                  2.6  Issuance of New  Warrants;  Corporation  Acknowledgement.
Upon any partial exercise of this Warrant, the Corporation, at its expense, will
forthwith and, in any event, within ten (10) days after partial exercise,  issue
and deliver to the Holder a new warrant or warrants of like tenor, registered in
the name of the Holder,  exercisable,  in the aggregate,  for the balance of the
Warrant Shares.  Moreover, the Corporation shall, at the time of any exercise of
this  Warrant,  upon the  request of the  Holder,  acknowledge  in  writing  its
continuing  obligation  to afford to the  Holder  any rights to which the Holder
shall  continue  to be  entitled  after such  exercise  in  accordance  with the
provisions of this Warrant; provided,  however, that if the Holder shall fail to
make any such request,  such failure shall not affect the continuing  obligation
of the Corporation to afford to the Holder any such rights.

                  2.7 Payment of Taxes and Expenses.  The Corporation  shall pay
any recording,  filing,  stamp or similar tax which may be payable in respect of
any transfer  involved in the issuance of, and the  preparation  and delivery of
certificates (if applicable) representing, (i) any Warrant Shares purchased upon
exercise of this Warrant and/or (ii) new or replacement warrants in the Holder's
name or the name of any transferee. The Holder shall pay any transfer tax due as
a result of the transfer of all or any portion of this Warrant to a transferee.

                  2.8      Expiration.  This Warrant and the Holder's rights
hereunder,  to the extent not previously exercised,  shall expire as of 5:00
P.M., Boston, Massachusetts time, on the Expiration Date.

         3. Registration and Other Rights. The Holder of this Warrant shall have
the right to cause the  Corporation  to  register  any and all  Shares of Common
Stock  issuable upon  conversion of Warrant  Shares under the Securities Act and
under any blue sky or  securities  laws of any  jurisdictions  within the United
States, at the time and in the manner specified and as provided for in the Stock
Purchase Agreement.

         4.       Adjustments.

                  4.1      Adjustments for Stock Dividends, Subdivisions and
Combinations.

                           (a)     In the event that, at any time and from time
to time after the Issue Date,  the  Corporation  shall (i) issue any additional
shares of Stock as a dividend or  distribution  on its
outstanding Stock or options, warrants or other rights to purchase,  directly or
indirectly,  Stock as a dividend or  distribution  on its  outstanding  Stock or
securities  convertible,  directly  or  indirectly,  into Stock as a dividend or
distribution  on its  outstanding  Stock (other than shares of Stock issued upon
exchange, exercise or conversion of the Preferred Stock or upon exercise of this
Warrant),  (ii) subdivide its outstanding  shares of Stock into a greater number
of shares  of Stock or (iii)  combine  its  outstanding  shares of Stock  into a
smaller number of shares of Stock, then and in each such event, (x) the Exercise
Price shall,  simultaneously  with the  happening of such event,  be adjusted by
multiplying the then current Exercise Price by a fraction,  (A) the numerator of
which shall be the number of shares of Stock  outstanding  immediately  prior to
such event,  and (B) the  denominator  of which shall be the number of shares of
Stock  outstanding  immediately  after such event, each in accordance with their
terms,  and the product so obtained shall  thereafter be the Exercise Price then
in effect,  and (y) the number of Warrant Shares shall be adjusted by increasing
or decreasing, as the case may be, the number of shares of Stock included within
the Warrant Shares immediately prior to such event by the percentage increase or
decrease in the total number of shares of Stock  outstanding  immediately  after
such  event as  compared  to the total  number  of  shares of Stock  outstanding
immediately  prior to such event and the result so obtained  shall be the number
of Warrant Shares then in effect.

                           (b)    The Exercise  Price and the number of Warrant
Shares,  as so adjusted,  shall be readjusted in the
same manner upon the happening of any  successive  event or events  described in
this Section 4.1.

4.2 Adjustment for  Reorganization,  Consolidation or Merger. In the event that,
at any time or from time to time after the Issue Date, the Corporation shall (a)
effect a reorganization, (b) consolidate with or merge into any other Person, or
(c) sell or transfer all or  substantially  all of its  properties  or assets or
more than fifty  percent (50%) of the voting  capital  stock of the  Corporation
(whether issued and outstanding, newly issued, from treasury, or any combination
thereof) to any other Person  under any plan or  arrangement  contemplating  the
reorganization, consolidation or merger, sale or transfer, or dissolution of the
Corporation,  then,  in each such case,  the Holder,  upon the  exercise of this
Warrant as  provided  in Section 2 hereof at any time or from time to time after
the consummation of such  reorganization,  consolidation,  merger or sale or the
effective  date of such  dissolution  (subject to the  limitation  contained  in
Section 4.6, if applicable),  as the case may be, shall receive,  in lieu of the
Warrant Shares issuable on such exercise  immediately prior to such consummation
or such  effective  date, as the case may be, the Stock and property  (including
cash) to which the Holder would have been entitled upon the consummation of such
reorganization,  consolidation or merger, or sale or transfer,  or in connection
with such  dissolution,  as the case may be, if the Holder had so exercised this
Warrant  immediately  prior  thereto  (assuming the payment by the Holder of the
Exercise Price therefor as required  hereby in a form  permitted  hereby,  which
payment shall be included in the assets of the  Corporation  for the purposes of
determining the amount  available for  distribution),  all subject to successive
adjustments  thereafter  from time to time pursuant to, and in accordance  with,
the provisions of this Section 4.

4.3 Adjustments for Reclassifications.  If the Preferred Stock issuable upon the
exercise of this Warrant shall be changed into the same or a different number of
shares  of any  class(es)  or  series of  stock,  whether  by  reclassification,
automatic  conversion of the Series C Preferred  Stock  pursuant to the terms of
the Series C Certificate  or otherwise  (other than an adjustment  under Section
4.1 or a merger,  consolidation,  or sale of assets  provided for under  Section
4.2),  then and in each such  event,  the  Holder  hereof  shall  have the right
thereafter  to exercise  this Warrant for the kind and amount of shares of stock
and  other  securities  and  property  receivable  upon  such  reclassification,
automatic conversion or other change by holders of the number of shares of Stock
for   which   this   Warrant   was   exercisable   immediately   prior  to  such
reclassification,  or change,  all  subject to further  adjustment  as  provided
herein.

4.4 Distributions. In the event that, at any time or from time to time after the
Issue Date, the Corporation shall make or issue, or shall fix a record date from
the  determination of eligible holders entitled to receive,  a dividend or other
distribution  with respect to Stock  payable in (i) shares of its capital  stock
(other than a stock dividend provided for in Section 4.1), (ii) other securities
of the Corporation or any other Person,  (iii) evidences of indebtedness  issued
by the  Corporation  or any other Person,  (iv)  options,  warrants or rights to
subscribe for or purchase any of the foregoing,  or (v) assets  (excluding  cash
dividends) then, in each such case, the Holder of this Warrant shall receive, in
addition to the shares of Stock issuable upon the exercise of this Warrant prior
to such date, and without the payment of additional  consideration therefor, the
shares of capital stock,  other securities,  evidence of indebtedness,  options,
warrants  or other  rights or assets,  as the case may be, to which such  Holder
would have been  entitled  upon such date as if such Holder had  exercised  this
Warrant on the date hereof and had  thereafter,  during the period from the date
hereof  to and  including  the  date of the  actual  exercise  of this  Warrant,
retained  such  shares  and/or all other  additional  stock  available  to it as
aforesaid during such period,  giving effect to all adjustments pursuant to this
Section 4. The  Corporation  shall  reserve and set aside,  for the life of this
Warrant or until exercised in full, all such  distributions  to which the Holder
is entitled to receive pursuant to this Section 4.4.

4.5  Continuation of Terms.  Upon any  reorganization,  reclassification,  sale,
consolidation,  merger or other  transfer (and any  liquidation,  dissolution or
winding up of the Corporation  following any such transfer)  referred to in this
Section 4, this  Warrant  shall  continue in full force and effect and the terms
hereof shall be applicable to the shares of Stock and property  (including cash,
where  applicable)  receivable  upon the  exercise  of this  Warrant  after  the
consummation  of such  reorganization,  reclassification,  sale,  consolidation,
merger or other  transfer or the effective date of  liquidation,  dissolution or
winding up of the Corporation  following any such transfer,  as the case may be,
and shall be binding upon the issuer of any such Stock,  including,  in the case
of any such  transfer,  the Person  acquiring  all or  substantially  all of the
properties  or assets or more than fifty  percent  (50%) of the  voting  capital
stock of the Corporation  (whether issued and outstanding,  newly issued or from
treasury or any  combination  thereof),  whether or not such  Person  shall have
expressly assumed the terms of this Warrant.

4.6 Dissolution.  Subject to Section 4.5 hereof, in the event of any dissolution
of the  Corporation  following the transfer of all or  substantially  all of its
properties  or assets at any time after the Issue Date,  the  Corporation  shall
retain for a period of at least  ninety  (90) days after the  effective  date of
such  dissolution  the Stock and property  (including  cash,  where  applicable)
receivable  by the Holder  pursuant to Section 4.2 hereof upon  exercise of this
Warrant at any time after the effective date of such  dissolution  (assuming the
payment by the Holder of the  Exercise  Price  therefor as required  hereby in a
form permitted hereby).  If the Holder fails to exercise this Warrant within the
sixty (60) day period  following the effective  date of such  dissolution,  then
such Stock and property  (including cash, where applicable) shall be distributed
pro rata to those Persons who were  stockholders of record of the Corporation on
the effective date of such  dissolution  or as otherwise  required by law or the
Certificate of Incorporation of the Corporation.

4.7 Automatic Conversion.  In the event of an automatic conversion of the Series
C Preferred Stock into Common Stock,  the Exercise Price then in effect shall be
adjusted to an amount equal to the Exercise  Price then in effect divided by the
number of shares of Common Stock issuable upon conversion of one share of Series
C Preferred Stock in connection with such automatic conversion.

5. Officer's  Certificate as to  Adjustments.  In each case of any adjustment or
readjustment  in the number and kind of Warrant  Shares,  or property,  issuable
hereunder  from time to time, or the Exercise  Price,  the  Corporation,  at its
expense,  will  promptly  cause an officer of the  Corporation  to compute  such
adjustment  or  readjustment  in  accordance  with the terms of this Warrant and
prepare a certificate  setting forth such adjustment or readjustment and showing
the facts upon which such adjustment or  readjustment is based.  The Corporation
will forthwith send a copy of each such  certificate to the Holder in accordance
with Section 10.5 below.

6.       Notices of Record Date, Etc.  In the event of:

         (a) any taking by the  Corporation  of a record of the holders of Stock
for the purpose of determining  the holders  thereof who are entitled to receive
any shares of Stock as a dividend or other  distribution  or pursuant to a stock
split; or

         (b) any reorganization of the Corporation,  or any sale or transfer, in
a  single  transaction  or  a  series  of  related   transactions,   of  all  or
substantially  all the assets of the  Corporation  to, or the  consolidation  or
merger of the Corporation with or into, any other Person; or

         (c)      any voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation;

         (d)  any  sale,  in  a  single  transaction  or  a  series  of  related
transactions,  of more than  fifty  percent  (50%) of the  Corporation's  voting
capital stock (whether issued and outstanding,  newly issued, from treasury,  or
any combination thereof); or

         (e) any  automatic  conversion  of the  Series C  Preferred  Stock into
Common Stock pursuant to the Series C Certificate.

then and in each such event the  Corporation  will mail or cause to be mailed to
the Holder a notice  specifying  (i) the date on which any such  record is to be
taken for the purpose of such dividend, distribution or stock split, and stating
the amount and character of such dividend,  distribution or stock split, or (ii)
the date on which  any such  reorganization,  transfer,  consolidation,  merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed,  as of which the  holders  of record of any one or more  classes of
Stock  shall be entitled to exchange  their  shares of Stock for  securities  or
other property  deliverable  on such  reorganization,  transfer,  consolidation,
merger,  dissolution,  liquidation or winding-up, or (iii) the date on which any
such sale of more than fifty percent (50%) of the  Corporation's  voting capital
stock is to take place and the material terms thereof,  as the case may be. Such
notice  shall be mailed at least ten (10) days  prior to the date  specified  in
such notice on which any such action is to be taken.

7. Exchange of Warrant. Subject to the provisions of Section 9 hereof (if and to
the extent applicable),  this Warrant shall be exchangeable,  upon the surrender
hereof  by the  Holder  at the  principal  office  of the  Corporation,  for new
warrants of like tenor, each registered in the name of the Holder or in the name
of such other Persons as the Holder may direct.  Each of such new warrants shall
be  exercisable  for such number of Warrant  Shares as the Holder shall  direct,
provided that all of such new warrants shall  represent,  in the aggregate,  the
right to purchase  the same  number of Warrant  Shares and cash,  securities  or
other  property,  if any,  which may be purchased by the Holder upon exercise of
this Warrant at the time of its surrender.

8. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the
Corporation of the loss,  theft,  destruction or mutilation of this Warrant and,
in the case of any such loss, theft or destruction of this Warrant,  on delivery
of a customary  affidavit  of the Holder and an indemnity  agreement  or, in the
case of any such mutilation,  on surrender and cancellation of this Warrant, the
Corporation  at its expense  will execute and deliver,  in lieu  thereof,  a new
warrant of like tenor.

9.       Transfer Provisions, etc.

9.1      Legends.

                  (a) Each  certificate  representing  any Warrant Shares issued
upon exercise of this Warrant shall bear the following legend:

         "THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
         AS  AMENDED,  AND MAY BE  TRANSFERRED  ONLY  PURSUANT  TO AN  EFFECTIVE
         REGISTRATION  STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF
         1933, AS AMENDED,  OR IN ACCORDANCE  WITH AN APPLICABLE  EXEMPTION FROM
         THE  REGISTRATION  REQUIREMENTS  OF  THE  SECURITIES  ACT OF  1933,  AS
         AMENDED."

                  (b) Each  certificate  representing any shares of Stock issued
from time to time upon  exercise  of this  Warrant  shall  also bear any  legend
required under any applicable state securities or blue sky laws.

9.2  Mechanics of Transfer.  Any transfer of all or any portion of this Warrant,
or of any interest therein,  that is otherwise in compliance with applicable law
shall be  effected  by  surrendering  this  Warrant  to the  Corporation  at its
principal office,  together with (i) a duly executed form of assignment,  in the
form attached  hereto,  (ii) payment of any applicable  transfer taxes and (iii)
unless there is in effect a  registration  statement  under the  Securities  Act
covering the  proposed  transfer or the proposed  transfer is to  Affiliates  or
Affiliated Groups (as such terms are defined in the Stock Purchase Agreement) of
the Holder, if the Corporation so requests (except in transactions in compliance
with Rule 144) a written opinion of legal counsel reasonably satisfactory to the
Corporation  addressed to the Corporation and satisfactory in form and substance
to the Corporation's counsel, acting reasonably, to the effect that the proposed
transfer  of  the  Warrant  or  the  Warrant  Shares  may  be  effected  without
registration under the Securities Act. In the event of any such transfer of this
Warrant,  in whole,  the Corporation  shall issue a new warrant of like tenor to
the  transferee,  representing  the right to purchase the same number of Warrant
Shares, and cash,  securities or other property,  if any, which were purchasable
by the Holder upon exercise of this Warrant at the time of its transfer.  In the
event of any such  transfer of a portion of this  Warrant,  (i) the  Corporation
shall  issue a new  warrant of like tenor to the  transferee,  representing  the
right to purchase the same number of Warrant  Shares,  and cash,  securities  or
other  property,  if any, which were  purchasable by the Holder upon exercise of
the transferred portion of this Warrant at the time of such transfer,  and (iii)
the  Corporation  shall  issue  a new  warrant  of  like  tenor  to the  Holder,
representing  the right to  purchase  the  number of Warrant  Shares,  and cash,
securities or other property, if any, purchasable by the Holder upon exercise of
the  portion of this  Warrant not  transferred  to such  transferee.  Until this
Warrant or any portion  thereof is transferred on the books of the  Corporation,
the  Corporation may treat the Holder as the absolute holder of this Warrant and
all right,  title and interest  therein for all  purposes,  notwithstanding  any
notice to the contrary.

9.3 Restrictions on Transfer.  Subject to Section 9.2 hereof and compliance with
applicable  securities  laws,  this  Warrant,  and any portion  hereof,  and the
Warrant Shares may be  transferred  by the Holder in its sole  discretion at any
time and to any Person,  including without limitation transfers to Affiliates or
Affiliated  Groups (as such terms are defined in the Stock Purchase  Agreement),
without the consent of the Corporation.

10.      General.

                  10.1 Statement on Warrant.  Irrespective of any adjustments in
the  Exercise  Price or the number or kind of Warrant  Shares,  this Warrant may
continue to express  the same kind of Warrant  Shares as are stated on the front
page hereof.

                  10.2 Authorized Shares; Reservation of Shares for Issuance. At
all times while this Warrant is outstanding the  Corporation  shall maintain its
corporate  authority  to issue,  and shall  have  authorized  and  reserved  for
issuance upon exercise of this Warrant,  such number of shares of Stock as shall
be sufficient to perform its obligations under this Warrant (after giving effect
to any and all adjustments to the number and kind of Warrant Shares  purchasable
upon exercise of this Warrant).

                  10.3 No Impairment.  The Corporation will not, by amendment of
its  Certificate of  Incorporation  or through any  reorganization,  transfer of
assets, consolidation, merger, dissolution, issuance or sale of securities, sale
or other  transfer of any of its assets or  properties,  or any other  voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant,  but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such  action as may be  necessary  or
appropriate  in order to  protect  the rights of the  Holder  hereunder  against
impairment.  Without  limiting the generality of the foregoing,  the Corporation
(a) will not increase the par value of any shares of Stock  receivable  upon the
exercise of this Warrant above the amount payable therefor on such exercise, and
(b) will take all action that may be necessary or  appropriate in order that the
Corporation may validly and legally issue fully paid and nonassessable shares of
Stock on the exercise of this Warrant.

                  10.4  No  Rights  as  Stockholder.  The  Holder  shall  not be
entitled  to vote or to  receive  dividends  or to be deemed the holder of Stock
that may at any time be issuable  upon  exercise of this Warrant for any purpose
whatsoever,  nor shall anything contained herein be construed to confer upon the
Holder any of the rights of a stockholder  of the  Corporation  until the Holder
shall have  exercised  this Warrant and been issued Warrant Shares in accordance
with the provisions hereof.

                  10.5 Notices. All notices, demands, requests,  certificates or
other  communications under this Warrant shall be in writing and shall be either
mailed by certified mail,  postage prepaid,  in which case such notice,  demand,
request,  certificate or other communications shall be deemed to have been given
three (3) days after the date on which it is first  deposited  in the mails,  or
hand  delivered  or sent by  facsimile  transmission,  by  tested  or  otherwise
authenticated  telex or cable or by  private  expedited  courier  for  overnight
delivery  with  signature  required,  in each such case,  such  notice,  demand,
request,  certificate  or other  communications  being deemed to have been given
upon delivery or receipt, as the case may be:

     (i) if to the  Corporation,  SoftLock.com,  Inc.,  Five Clock Tower  Place,
Suite 440, Maynard, Massachusetts 01754, Attention:  President, or at such other
address as the Corporation may have furnished in writing to the Holder; and

     (ii) if to the  Holder,  at the  Holder's  address  appearing  in the books
maintained by the Corporation.

         10.6  Amendment  and  Waiver.  No  failure  or delay of the  Holder  in
exercising any power or right hereunder  shall operate as a waiver thereof,  nor
shall  any  single  or  partial  exercise  of any such  right or  power,  or any
abandonment  or  discontinuance  of steps  to  enforce  such a right  or  power,
preclude  any other or further  exercise  thereof or the  exercise  of any other
right or power.  The rights and  remedies of the Holder are  cumulative  and not
exclusive  of any  rights  or  remedies  which  it  would  otherwise  have.  The
provisions  of this  Warrant may be  amended,  modified or waived with (and only
with) the written consent of the Corporation and the Holder.

         10.7     Governing  Law. This Warrant shall be governed by, and
construed  and enforced in accordance  with,  the laws of the State of Delaware.

         10.8   Covenants  to  Bind   Successor  and  Assigns.   All  covenants,
stipulations,  promises and  agreements  in this Warrant shall be binding on and
inure to the  benefit of the  Corporation  and the  Holder and their  respective
successors, assigns and transferees, whether so expressed or not.

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

         10.10 Construction. The definitions of this Warrant shall apply equally
to both the  singular and the plural  forms of the terms  defined.  Wherever the
context may require,  any pronoun  shall  include the  corresponding  masculine,
feminine and neuter forms.  The section and  paragraph  headings used herein are
for  convenience of reference  only, are not part of this Warrant and are not to
affect the construction of or be taken into  consideration in interpreting  this
Warrant.

         10.11 Remedies.  The Holder,  in addition to being entitled to exercise
all rights granted by law,  including  recovery of damages,  will be entitled to
specific  performance of its rights under this Warrant.  The Corporation  agrees
that monetary  damages would not be adequate  compensation for any loss incurred
by reason of a breach by it of the  provisions of this Warrant and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate.  In any action or proceeding brought to enforce any provision
of this Warrant or where any provision  hereof is validly asserted as a defense,
the successful  party to such action or proceeding  shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.

         10.12 Counterparts; Delivery by Facsimile. This Warrant may be executed
in one or more counterparts,  each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. Delivery of this
Warrant may be effected by facsimile.

                  [Remainder of page intentionally left blank]

<PAGE>

         IN WITNESS  WHEREOF,  the  Corporation  has caused this Preferred Stock
Purchase  Warrant to be executed as an  instrument  under seal in its  corporate
name by one of its officers  thereunto  duly  authorized,  all as of the day and
year first above written.

                                          SOFTLOCK.COM, INC.

                                          By:______________________________

                                          Name:    Scott Griffith
                                          Title:   Chief Executive Officer

<PAGE>

                              FORM OF SUBSCRIPTION

                    (To be executed upon exercise of Warrant)

To:      SOFTLOCK.COM, INC.

         The  undersigned  hereby  irrevocably  elects to exercise  the right of
purchase  represented by the attached  Warrant for, and to exercise  thereunder,
______ shares of Series C Preferred Stock, $0.01 par value per share ("Preferred
Stock"),  of SoftLock.com,  Inc., a Delaware  corporation,  and tenders herewith
payment of  $____________,  representing  the aggregate  purchase price for such
shares based on the price per share  provided for in such Warrant.  Such payment
is being  made in  accordance  with  [Section  2.1(a)(i)]  [Section  2.1(a)(ii)]
[Section 2.1(a)(iii)] of the attached Warrant.

         Please issue a certificate or certificates for such shares of Preferred
Stock  in the  following  name or  names  and  denominations  and  deliver  such
certificate  or  certificates  to the  person or persons  listed  below at their
respective addresses set forth below:

Dated:  _____________, 2000                 _________________________________

                                            ---------------------------------
                                                     (Address)

         If said number of shares of Preferred Stock shall not be all the shares
of Preferred Stock issuable upon exercise of the attached Warrant, a new Warrant
is to be issued in the name of the undersigned for the balance remaining of such
shares of Preferred  Stock less any fraction of a share of Preferred  Stock paid
in cash.

Dated:_____________, 2000                   _________________________________
                                                     NOTE:  The above  signature
                                                     should  correspond  exactly
                                                     with  the  name on the face
                                                     of the attached  Warrant or
                                                     with   the   name   of  the
                                                     assignee  appearing  in the
                                                     assignment form below.

<PAGE>

                               FORM OF ASSIGNMENT

                   (To be executed upon assignment of Warrant)

         For  value  received,   ______________________________   hereby  sells,
assigns and transfers  unto  ______________  the attached  Warrant [____% of the
attached Warrant], together with all right, title and interest therein, and does
hereby  irrevocably   constitute  and  appoint   _______________________________
attorney to transfer said Warrant [said percentage of said Warrant] on the books
of SoftLock.com,  Inc., a Delaware corporation,  with full power of substitution
in the premises.

         If not  all of the  attached  Warrant  is to be so  transferred,  a new
Warrant is to be issued in the name of the  undersigned  for the balance of said
Warrant.

Dated:_______________, 2000                 _________________________________
                                            NOTE:  The above signature should
                                                   correspond exactly with the
                                                   name on the face of the
                                                   attached Warrant.

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