Document:

CERTIFICATE OF DESIGNATIONS
                     OF RIGHTS, PREFERENCES, PRIVILEGES AND
                            RESTRICTIONS OF SERIES B
                         CONVERTIBLE PREFERRED STOCK OF
                                ADATOM.COM, INC.

         Adatom.com,  Inc., a corporation  organized  and existing  under and by
virtue  of  the   General   Corporation   Law  of  the  State  of   Delaware(the
"Corporation"),  in accordance  with the provisions of Section  151(g)  thereof,
DOES HEREBY CERTIFY that, by unanimous  written  consent in lieu of a meeting of
the Board of Directors of the Corporation dated September 22, 2000:

         FIRST:  The  following  resolution  was duly adopted  by  the Board  of
Directors of the Corporation:

         RESOLVED,  that pursuant to Article  Fourth of the Amended and Restated
Certificate  of  Incorporation  of  the  Corporation,  there  be and  hereby  is
authorized  and created one series of  Preferred  Stock,  hereby  designated  as
Series B  Convertible  Preferred  Stock to consist of one  thousand  one hundred
(1,200)  shares,  with a par value $0.01 per share and a stated  value of $1,000
per share (the  "Stated  Value"),  and that the  designations,  preferences  and
relative,  participating,  optional or other rights of the Series B  Convertible
Preferred Stock (the "Series B Preferred Stock") and qualifications, limitations
or restrictions thereof, shall be as follows:

                                    ARTICLE 1
                                   DEFINITIONS

         SECTION 1.1  Definitions.  The terms  defined in this Article  whenever
used in this Certificate of Designations have the following respective meanings:

                  "ADDITIONAL  CAPITAL  SHARES"  has the  meaning  set  forth in
Section 5.1(c).

                  "AFFILIATE"  has  the  meaning  ascribed  to such term in Rule
12b-2 under the Securities Exchange Act of 1934, as amended.

                  "ADDITIONAL AMOUNT" means the result of the following formula:
[(0.06)(N/365)($1,000)],  where N means the number of days from,  but  excluding
the Issue Date through and  including (1) the  Conversion  Date for the Series B
Preferred Stock for which conversion is being elected, or (2) such other date of
determination, as the case may be.

                  "BUSINESS DAY" means a day other than Saturday,  Sunday or any
day on  which  banks  located  in the  State of  California  are  authorized  or
obligated to close.

                  "CAPITAL  SHARES" means the Common Shares and any other shares
of any  other  class  or  series  of  common  stock,  whether  now or  hereafter
authorized  and however  designated,

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which have the right to participate in the  distribution  of earnings and assets
upon dissolution, liquidation or winding-up) of the Corporation.

                  "CLOSING  DATE" has the  meaning  set forth in the  Securities
Purchase Agreement.

                  "CLOSING  PRICE" per share of Common  Stock  means the closing
bid price as reported on the  Principal  Market for the Trading Day  immediately
preceding the Closing Date.

                  "COMMON  SHARES"  or  "COMMON  STOCK"  means  shares of common
stock, $0.01 par value, of the Corporation.

                  "COMMON STOCK ISSUED AT  CONVERSION"  when used with reference
to the  securities  issuable upon  conversion  of the Series B Preferred  Stock,
means all Common Shares now or hereafter outstanding and securities of any other
class or series into which the Series B  Preferred  Stock  hereafter  shall have
been  changed or  substituted,  whether  now or  hereafter  created  and however
designated.

                  "CONVERSION AMOUNT" has the meaning set forth in Section 5.1.

                  "CONVERSION DATE" means any day on which all or any portion of
shares of the Series B  Preferred  Stock is  converted  in  accordance  with the
provisions hereof.

                  "CONVERSION NOTICE" has the meaning set forth in Section 5.2.

                  "CONVERSION  PRICE"  means  on any date of  determination  the
applicable  price for the conversion of shares of Series B Preferred  Stock into
Common Shares on such day as set forth in Section 5.1.

                  "CONVERSION  RATIO"  on any date  means  determination  of the
applicable  percentage of the Market Price for  conversion of shares of Series B
Preferred Stock into Common Shares on such day as set forth in Section 5.1.

                  "CORPORATION" means Adatom.com, Inc., a Delaware  corporation,
and any successor or resulting corporation by way of merger, consolidation, sale
or  exchange  of  all or  substantially  all of  the  Corporation's  assets,  or
otherwise.

                  "CURRENT MARKET PRICE" on any date of determination  means the
closing bid price of a Common  Share on such day as  reported  on the  Principal
Market.

                  "EFFECTIVE  DATE"  means the date upon which the  Registration
Statement,  as  defined  in  the  Registration  Rights  Agreement,  is  declared
effective by the SEC.

                  "HOLDER"  means  the  persons   signatory  to  the  Securities
Purchase Agreement (other than the Corporation),  any successor thereto,  or any
Person to whom the  Series B  Preferred  Stock is  subsequently  transferred  in
accordance with the provisions hereof.

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<PAGE>

                  "ISSUE  DATE" means the date upon which the shares of Series B
Preferred  Stock being sold pursuant to the  Securities  Purchase  Agreement are
issued.

                  "MARKET  DISRUPTION  EVENT"  means any event that results in a
material suspension or limitation of trading of Common Shares on the NASDAQ.

                  "MARKET PRICE" on any given date shall mean the average of the
two lowest  closing bid prices of the Common  Stock on the  Principal  Market as
reported by Bloomberg L.P. for any Valuation Period.

                  "MAXIMUM  CONVERSION  PRICE"  has the  meaning  set  forth  in
Section 5.1.

                  "OUTSTANDING"  when used with  reference  to Common  Shares or
Capital Shares  (collectively,  "Shares"),  means, on any date of determination,
all issued and  outstanding  Shares,  and includes  all such Shares  issuable in
respect of outstanding warrants, options, scrip or any certificates representing
fractional  interests in such Shares;  provided,  however,  that any such Shares
directly or indirectly owned or held by or for the account of the Corporation or
any Subsidiary of the Corporation shall not be deemed "Outstanding" for purposes
hereof.

                  "PERSON" means an individual, a corporation, a partnership, an
association,   a  limited  liability   company,   an   unincorporated   business
organization,  a trust or other entity or  organization,  and any  government or
political subdivision or any agency or instrumentality thereof.

                  "PRINCIPAL  MARKET" shall mean the NASDAQ National Market, the
NASDAQ  SmallCap  Market,  the  American  Stock  Exchange,  the New  York  Stock
Exchange,  or the OTC Bulletin  Board,  whichever  is at the time the  principal
trading exchange or market for the Common Stock.

                  "REGISTRATION    RIGHTS    AGREEMENT"   means   that   certain
Registration  Rights  Agreement  related to the Series B Preferred Stock between
the  Corporation  and the other  persons  signatory to the  Securities  Purchase
Agreement.

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

                  "SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and  regulations  of the SEC  thereunder,  all as in effect at the
time.

                  "SECURITIES  PURCHASE AGREEMENT" means that certain Securities
Purchase  Agreement  related  to  the  Series  B  Preferred  Stock  between  the
Corporation and the other persons signatory thereto.

                                       3

<PAGE>

                  "SERIES B  PREFERRED  STOCK"  means the  Series B  Convertible
Preferred  Stock of the  Corporation or such other  convertible  Preferred Stock
exchanged therefor as provided in Section 2.1.

                  "SUBSIDIARY"  means any  entity of which  securities  or other
ownership  interests  having  ordinary  voting  power to elect a majority of the
board of directors  or other  persons  performing  similar  functions  are owned
directly or indirectly by the Corporation.

                  "TRADING  DAY" means any day on which  purchases  and sales of
securities authorized for quotation on the Principal Market are reported thereon
and on which no Market Disruption Event has occurred.

                  "VALUATION EVENT" has the meaning set forth in Section 5.1.

                  "VALUATION   PERIOD"   means  the  ten   Trading   Day  period
immediately preceding the Conversion Date.

                   All  references to "cash" or "$" herein means currency of the
United States of America.

                                    ARTICLE 2
                                      RANK

                  The  Series B  Preferred  Stock  shall  rank (i)  prior to the
Common  Stock;  (ii)  prior  to any  class or  series  of  capital  stock of the
Corporation hereafter created other than "Pari Passu Securities"  (collectively,
with the Common Stock, "Junior Securities"); and (iii) pari passu with any class
or series of capital stock of the  Corporation  hereafter  created  specifically
ranking on parity with the Series B Preferred Stock ("Pari Passu Securities").

                                    ARTICLE 3
                                    DIVIDENDS

                  No holder of Series B  Preferred  Stock  shall be  entitled to
receive any dividends.

                                    ARTICLE 4
                             LIQUIDATION PREFERENCE

                  (a) If  the Corporation shall commence a  voluntary case under
the Federal bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency  or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver,  liquidator,
assignee,  custodian,  trustee,  sequestrator (or other similar official) of the
Corporation or of any  substantial  part of its property,  or make an assignment
for the benefit of its  creditors,  or admit in writing its inability to pay its
debts

                                       4

<PAGE>

generally  as they  become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having  jurisdiction in the premises
in an involuntary case under the Federal bankruptcy laws or any other applicable
Federal  or  state  bankruptcy,  insolvency  or  similar  law  resulting  in the
appointment   of  a  receiver,   liquidator,   assignee,   custodian,   trustee,
sequestrator  (or  other  similar   official)  of  the  Corporation  or  of  any
substantial  part of its property,  or ordering the winding up or liquidation of
its affairs,  and any such decree or order shall be unstayed and in effect for a
period of thirty (30)  consecutive  days and, on account of any such event,  the
Corporation  shall liquidate,  dissolve or wind up, or if the Corporation  shall
otherwise  liquidate,  dissolve or wind up (each such event being  considered  a
"Liquidation Event"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation upon liquidation,  dissolution or winding up
unless prior thereto, the holders of shares of Series B Preferred Stock, subject
to Article 4, shall have  received  the  Liquidation  Preference  (as defined in
subparagraph(c)  of this  Article  4) with  respect to each  share.  If upon the
occurrence  of  a  Liquidation   Event,  the  assets  and  funds  available  for
distribution  among the holders of the Series B  Preferred  Stock and holders of
any class or series of capital stock  ranking on a parity as to preference  upon
liquidation ("Pari Passu Securities") with the Series B Preferred Stock shall be
insufficient to permit the payment to such holders of the  preferential  amounts
payable  thereon,  then the entire assets and funds of the  Corporation  legally
available for  distribution  to the Series B Preferred  Stock and the Pari Passu
Securities  shall be distributed  ratably among such shares in proportion to the
ratio that the  Liquidation  Preference  payable on each such share bears to the
aggregate liquidation preference payable on all such shares.

                  (b) At the  option of each  Holder,  the sale,  conveyance  of
disposition of all or substantially  all of the assets of the  Corporation,  the
effectuation   by  the  Corporation  of  a  transaction  or  series  of  related
transactions  in which more than 50% of the voting power of the  Corporation  is
disposed of, or the consolidation,  merger or other business  combination of the
Corporation with or into any other Person (as defined below) or Persons when the
Corporation is not the survivor shall be deemed to be a liquidation, dissolution
or winding up of the  Corporation  pursuant  to which the  Corporation  shall be
required  to  distribute,  upon  consummation  of and as a  condition  to,  such
transaction an amount equal to the  Liquidation  Preference with respect to each
outstanding  share of Series B Preferred Stock in accordance with and subject to
the terms of this  Article 4;  provided,  that all holders of Series B Preferred
Stock shall be deemed to elect the option set forth above if at least a majority
in  interest  of such  holders  elect  such  option.  "Person"  shall  mean  any
individual,  corporation,  limited liability company, partnership,  association,
trust or other entity or organization.

                  (c) For purposes  hereof,  the  "Liquidation  Preference" with
respect to a share of the Series B Preferred Stock shall mean an amount equal to
the sum of (i) the Stated Value thereof, plus (ii) the Additional Amount.

                  (d) The Series B  Preferred  Stock shall rank on a parity with
the Corporation's Series A Convertible Preferred Stock as to the distribution of
the assets of the Corporation upon liquidation, dissolution or winding up of the
Corporation.

                                       5

<PAGE>

                                    ARTICLE 5
                     CONVERSION OF SERIES B PREFERRED STOCK

         SECTION  5.1  Conversion;  Conversion  Price.  Subject  to  the  terms,
conditions  and  restrictions  of this  Section 5, at the option of the  Holder,
commencing  on the Issue  Date,  the shares of Series B  Preferred  Stock may be
converted  into Common  Shares  (calculated  as to each such  conversion  to the
nearest 1/100th of a share),  equal to the sum of the Additional  Amount and the
Stated Value of such share or shares of Series B Preferred Stock (such sum being
hereinafter  referred  to as the  "Conversion  Amount"),  divided  by the Market
Price,  after  discounting  the Market Price by 15% to determine the  conversion
price (the "Conversion  Price");  provided that in no event shall the Conversion
Price be greater than 115% of the Market  Price on the Issue Date (the  "Maximum
Conversion  Price").  The  right of each  holder to  convert  shares of Series B
Preferred  Stock into shares of Common Stock is subject to the  limitations  set
forth in Sections 5.10 and 5.11 below, and for the purpose of complying with the
limitation in Section 5.11,  shall be prorated among the original  purchasers of
the  shares  of Series B  Preferred  Stock  (the  "Initial  Holders")  and their
transferees, if any, based upon the number of shares of Series B Preferred Stock
purchased by the Initial Purchasers.

         Within two (2) Business Days of the  occurrence  of a Valuation  Event,
the  Corporation  shall send  notice  (the  "Valuation  Event  Notice")  of such
occurrence  to the Holder.  Notwithstanding  anything to the contrary  contained
herein, if a Valuation Event occurs during any Valuation Period, a new Valuation
Period shall begin on the Trading Day  immediately  following the  occurrence of
such Valuation Event and end on the Conversion Date; provided, further, that the
Holder may, in its  discretion,  postpone such  Conversion Date to a Trading Day
which is no more than three (3) Trading Days after the  occurrence of the latest
Valuation Event by delivering a notification  to the Corporation  within two (2)
Business  Days of the receipt of the Valuation  Event Notice.  In the event that
the Holder  deems the  Valuation  Period to be other than the three (3)  Trading
Days  immediately  prior to the  Conversion  Date, the Holder shall give written
notice of such fact to the Corporation in the related  Conversion  Notice at the
time of conversion.

         For purposes of this  Section  5.1, a  "Valuation  Event" shall mean an
event in which the  Corporation at any time during a Valuation  Period takes any
of the following actions:

         (a)      subdivides or combines its Capital Shares;

         (b)      makes any distribution of its Capital Shares;

         (c)      issues any additional Capital Shares (the "Additional  Capital
Shares"), otherwise than as provided in the foregoing Sections 5.1(a) and 5.1(b)
above,  at a price per share less, or for other  consideration  lower,  than the
Current Market Price in effect  immediately prior to such issuances,  or without
consideration, except for issuances under employee benefit plans consistent with
those presently in effect and issuances under  presently  outstanding  warrants,
options or convertible  securities,  to officers,  directors or employees of the
Company, or otherwise under the Company's stock option plans;

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<PAGE>

         (d)      issues any  warrants, options or other rights to subscribe for
or  purchase  any  Additional  Capital  Shares and the price per share for which
Additional  Capital  Shares may at any time  thereafter be issuable  pursuant to
such  warrants,  options or other rights  shall be less than the Current  Market
Price in effect immediately prior to such issuance;

         (e)      issues  any  securities   convertible   into  or  exchangeable
or  exercisable  for Capital  Shares and the  consideration  per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to the
terms of such convertible,  exchangeable or exercisable securities shall be less
than the Current Market Price in effect immediately prior to such issuance;

         (f)      makes  a   distribution   of   its   assets  or  evidences  of
indebtedness  to the holders of its Capital  Shares as a dividend in liquidation
or by way of  return of  capital  or other  than as a  dividend  payable  out of
earnings  or  surplus  legally  available  for the  payment of  dividends  under
applicable law or any  distribution  to such holders made in respect of the sale
of all or substantially  all of the  Corporation's  assets (other than under the
circumstances provided for in the foregoing Sections 5.1(a) through 5.1(e)); or

         (g)      takes any action affecting the number  of Outstanding  Capital
Shares,  other than an action described in any of the foregoing  Sections 5.1(a)
through 5.1(f),  inclusive,  which in the opinion of the Corporation's  Board of
Directors,  determined in good faith,  would have a material adverse effect upon
the rights of the Holder at the time of a conversion of the Preferred Stock.

         SECTION 5.2 Exercise of  Conversion  Privilege.  (a)  Conversion of the
                     ----------------------------------
Series B Preferred Stock may be exercised, in whole or in part, by the Holder by
telecopying  an executed and completed  notice of conversion in the form annexed
hereto as Annex I (the  "Conversion  Notice") to the  Corporation.  Each date on
which a Conversion  Notice is telecopied to and received by the  Corporation  in
accordance with the provisions of this Section 5.2 shall constitute a Conversion
Date.  The  Corporation  shall convert the Preferred  Stock and issue the Common
Stock Issued at Conversion  effective as of the Conversion  Date at the time set
forth in the Conversion  Notice. The Conversion Notice also shall state the name
or names  (with  addresses)  of the persons who are to become the holders of the
Common Stock Issued at Conversion in connection  with such  conversion.  If such
conversion  will  result in the  conversion  of all of such  holder's  shares of
Series B  Preferred  Stock  the  Holder  shall  deliver  the  shares of Series B
Preferred  Stock to the  Corporation by express courier within 30 days following
the date on which the telecopied  Conversion  Notice has been transmitted to the
Corporation.  Upon surrender for conversion,  the Series B Preferred Stock shall
be accompanied by a proper  assignment  hereof to the Corporation or be endorsed
in blank. As promptly as practicable  after the receipt of the Conversion Notice
as  aforesaid,  but in any event not more than  three  Business  Days  after the
Corporation's receipt of such Conversion Notice, the Corporation shall (i) issue
the Common Stock issued at Conversion in accordance  with the provisions of this
Article 5, and (ii) cause to be mailed for delivery by overnight  courier to the
Holder a certificate or certificate(s)  representing the number of Common Shares
to which the Holder is  entitled  by virtue of such  conversion,  together  with
cash, as provided in Section 5.3, in respect of any fraction of a Share issuable
upon such conversion.  Holder shall indemnify the Corporation for any damages to
third

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<PAGE>

parties as a result of a claim by such third party to ownership of the Preferred
Stock  converted  prior to the  receipt of the Series B  Preferred  Stock by the
Corporation.  Such conversion  shall be deemed to have been effected at the time
at which the Conversion Notice indicates so long as the Series B Preferred Stock
shall have been surrendered, if required, as aforesaid at such time, and at such
time the rights of the Holder of the Series B Preferred  Stock,  as such,  shall
cease and the Person and Persons in whose name or names the Common  Stock Issued
at  Conversion  shall be  issuable  shall be deemed to have become the holder or
holders of record of the  Common  Shares  represented  thereby.  The  Conversion
Notice  shall  constitute  a contract  between  the Holder and the  Corporation,
whereby the Holder shall be deemed to subscribe  for the number of Common Shares
which it will be entitled to receive  upon such  conversion  and, in payment and
satisfaction  of such  subscription  (and for any cash adjustment to which it is
entitled pursuant to Section 5.4), to surrender the Series B Preferred Stock and
to release the Corporation from all liability thereon.

         (b)      If, at any time (i) the  Corporation challenges,  disputes  or
denies the right of the Holder  hereof to effect the  conversion of the Series B
Preferred  Stock into  Common  Shares or  otherwise  dishonors  or  rejects  any
Conversion Notice delivered in accordance with this Section 5.2 (other than with
respect  to the  calculation  of the  number of  Common  Shares  covered  by the
Conversion  Notice) or (ii) any third party  commences any lawsuit or proceeding
or  otherwise  asserts  any claim  before  any  court or public or  governmental
authority  which seeks to  challenge,  deny,  enjoin,  limit,  modify,  delay or
dispute the right of the Holder hereof to effect the  conversion of the Series B
Preferred  Stock into Common  Shares,  then the Holder shall have the right,  by
written notice to the Corporation, to require the Corporation to promptly redeem
the Series B Preferred Stock for cash at a redemption price equal to one hundred
and forty  percent  (140%) of the  Conversion  Amount of the shares sought to be
converted by the holder that are the subject of such  injunction (the "Mandatory
Purchase  Amount").  Under  any  of  the  circumstances  set  forth  above,  the
Corporation  shall be  responsible  for the payment of all costs and expenses of
the Holder,  including reasonable legal fees and expenses,  as and when incurred
in disputing  any such action or pursuing its rights  hereunder  (in addition to
any other rights of the Holder).

         (c)      The  Holder  shall  be  entitled  to  exercise its  conversion
privilege  notwithstanding  the commencement of any case under 11 U.S.C. ss. 101
et seq. (the  "Bankruptcy  Code").In the event the Corporation is a debtor under
the  Bankruptcy  Code,  the  Corporation  hereby  waives to the  fullest  extent
permitted any rights to relief it may have under 11 U.S.C. ss. 362 in respect of
the holder's conversion privilege.  The Corporation hereby waives to the fullest
extent  permitted  any rights to relief it may have  under 11 U.S.C.  ss. 362 in
respect of the  conversion  of the Series B  Convertible  Preferred  Stock.  The
Corporation  agrees,  without cost or expense the Holder,  to take or consent to
any and all action necessary to effectuate relief under 11 U.S.C. ss. 362.

         SECTION 5.3  Fractional  Shares.  No fractional  Common Shares or scrip
                      ------------------
representing  fractional  Common  Shares shall be issued upon  conversion of the
Series  B  Preferred  Stock.  Instead  of any  fractional  Common  Shares  which
otherwise would be issuable upon conversion of the Series B Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction.

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<PAGE>

         SECTION 5.4 Reclassification,  Consolidation, Merger or Mandatory Share
                     -----------------------------------------------------------
Exchange; Adjustments for Splits, Combinations. (a) At any time while the Series
----------------------------------------------
B Preferred  Stock  remains  outstanding  and any shares  thereof  have not been
converted,  in case of any  reclassification  or  change of  Outstanding  Common
Shares  issuable upon  conversion of the Series B Preferred  Stock (other than a
change in par value, or from par value to no par value per share, or from no par
value per share to par value or as a result of a subdivision  or  combination of
outstanding securities issuable upon conversion of the Series B Preferred Stock)
or in case of any  consolidation,  merger or  mandatory  share  exchange  of the
Corporation with or into another  corporation  (other than a merger or mandatory
share exchange with another corporation in which the Corporation is a continuing
corporation and which does not result in any  reclassification or change,  other
than a change in par value, or from par value to no par value per share, or from
no par  value  per  share to par  value,  or as a  result  of a  subdivision  or
combination  of  Outstanding  Common  Shares  upon  conversion  of the  Series B
Preferred Stock), or in the case of any sale or transfer to another  corporation
of the  property  of the  Corporation  as an  entirety  or  substantially  as an
entirety,   the  Corporation,   or  such  successor,   resulting  or  purchasing
corporation,  as the case  may be,  shall,  without  payment  of any  additional
consideration  therefor,  execute a new Series B Preferred  Stock providing that
the Holder  shall have the right to convert  such new Series B  Preferred  Stock
(upon terms and conditions not less favorable to the Holder than those in effect
pursuant to the Series B Preferred Stock) and to receive upon such exercise,  in
lieu of each Common Share  theretofore  issuable upon conversion of the Series B
Preferred Stock, the kind and amount of shares of stock, other securities, money
or  property  receivable  upon  such  reclassification,  change,  consolidation,
merger,  mandatory share exchange,  sale or transfer by the holder of one Common
Share issuable upon  conversion of the Series B Preferred Stock had the Series B
Preferred  Stock  been  converted  immediately  prior to such  reclassification,
change, consolidation, merger, mandatory share exchange or sale or transfer. The
provisions   of  this   Section  5.4  shall   similarly   apply  to   successive
reclassifications,  changes, consolidations,  mergers, mandatory share exchanges
and sales and transfers.

         (b)      The Conversion  Price and  the number  of Common  Shares  into
which the Series B Preferred  Stock shall be  convertible  shall be adjusted for
stock splits, combinations, or other similar events. Additionally, an adjustment
will be made in the case of an  exchange  of  Common  Shares,  consolidation  or
merger of the  Corporation  with or into another  corporation  or sale of all or
substantially all of the assets of the Corporation in order to enable the holder
of Series B  Preferred  Stock to  acquire  the kind and the  number of shares of
stock or other  securities  or property  receivable in such event by a holder of
the number of Common  Shares  that might  otherwise  have been  issued  upon the
conversion of the Series B Preferred  Stock.  No  adjustment  to the  Conversion
Price will be made for dividends (other than stock  dividends),  if any, paid on
the Common Shares.

         SECTION 5.5 Adjustments to Conversion  Ratio. For so long as any shares
                     --------------------------------
of the Series B  Preferred  Stock are  outstanding,  if after the Issue Date the
Corporation  issues and sells (A) Common Shares at a purchase  price on the date
of issuance  thereof that is lower than the Conversion Price at such date, other
than with respect to the exercise of options, warrants or convertible securities
outstanding  on the Issue Date or with respect to the Warrants or on  conversion
of the Series B  Preferred  (B)  warrants  or  options  with an  exercise  price
representing  a

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<PAGE>

percentage  of the Current  Market  Price with an exercise  price on the date of
issuance of the warrants or options that is lower than the  Conversion  Price at
such date,  except for  employee  stock  option  agreements  or stock  incentive
agreements of the Corporation,  or (C) convertible,  exchangeable or exercisable
securities  with a right to exchange at lower than the  Conversion  Price on the
Issue Date, as  applicable,  of such  convertible,  exchangeable  or exercisable
securities, except, in each case, for stock option agreements or stock incentive
agreements,  then the  Conversion  Ratio shall be reduced to equal the lowest of
any such lower rates since the most recently  received  Conversion  Notice,  and
such  Adjusted  Conversion  Price shall apply to any future  Conversion  Notices
received by the Corporation.  The Adjusted Conversion Price as it may exist from
time to time shall not apply  retroactively  to any shares of Series B Preferred
Stock converted prior to the implementation of such Adjusted Conversion Price.

         SECTION  5.6  Optional   Redemption.   At  any  time  after  the  first
                       ---------------------
anniversary of the Issue Date,  the  Corporation,  upon notice  delivered to the
Holder as provided in Section 5.7, may redeem the Series B Preferred  Stock (but
only with  respect to such  shares as to which the  Holder  has not  theretofore
furnished a Conversion  Notice in compliance  with Section 5.2), at a price (the
"Optional  Redemption  Price") equal to the greater of (i) the sum of $1,400 and
the  Additional  Amount per share of such Series B Preferred  Stock and (ii) the
Market  Price of the Common  Stock into which such  shares of Series B Preferred
Stock could be converted on the date of such notice.

         SECTION 5.7 Notice of Redemption.  (a)Notice of redemption  pursuant to
                     --------------------
Section 5.6 shall be provided  by the  Corporation  to the Holder in writing (by
registered mail or overnight  courier at the Holder's last address  appearing in
the Corporation's security registry) not less than ten (10) nor more than thirty
(30) days prior to the dated stipulated by the Corporation for the redemption of
the Series B Preferred Stock (the "Redemption Date"), which notice shall specify
the Redemption Date and refer to Section 5.6 and this Section 5.7.

         (b)      Upon receipt of  the Redemption  Notice, the recipient thereof
shall have the option,  at its sole  election,  to specify  what  portion of the
Series B Preferred Stock called for redemption in the Redemption Notice shall be
redeemed as provided in Section 5.6 or converted into Common Stock in the manner
provided in Section  5.1. If the holder of the Series B Preferred  Stock  called
for redemption elects to convert any of such shares,  then such conversion shall
take place on the Conversion Date specified by the holder, but in no event after
the Redemption Date, in accordance with the terms of Section 5.1.

         SECTION 5.8 Surrender of Preferred  Stock.  Upon any  redemption of the
                     -----------------------------
Series B  Preferred  Stock  pursuant to Sections  5.6 or 5.7,  the Holder  shall
either  deliver the Series B Preferred  Stock by hand to the  Corporation at its
principal  executive  offices or surrender the same to the  Corporation  at such
address by express courier.  Payment of the Optional  Redemption Price specified
in Section 5.6 shall be made by the Corporation to the Holder against receipt of
the Series B Preferred  Stock (as provided in this Section 5.8) by wire transfer
of immediately available funds to such account(s) as the Holder shall specify to
the Corporation.  If payment of such redemption price is not made in full by the
Mandatory Redemption Date or the Redemption

                                       10

Date,  as the case may be, the Holder  shall again have the right to convert the
Series B Preferred Stock as provided in Article 5 hereof.

         SECTION 5.9  Mandatory  Conversion.  On the fourth  anniversary  of the
                      ---------------------
Issue Date (the "Mandatory  Conversion Date"), the Corporation shall convert all
Series B  Preferred  Stock  outstanding,  together  with the  Additional  Amount
thereon,  at the Conversion Price or, at the option of the Corporation,  buy out
all such  holders  (including  the  Additional  Amount on the shares of Series B
Preferred  Stock then  outstanding)  in cash, at the then  effective  Conversion
Price.  Notwithstanding the previous sentence, unless the Corporation shall have
obtained the approval of its voting  stockholders to such issuance in accordance
with the rules of the NASDAQ or such other stock market as the Corporation shall
be required to comply  with,  the  Corporation  shall not issue shares of Common
Stock upon conversion of any shares of Series B Preferred Stock if such issuance
of Common Stock,  when added to the number of shares of Common Stock  previously
issued  by the  Corporation  (i)  upon  conversion  of  shares  of the  Series B
Preferred  Stock and (ii) upon exercise of the Warrants  issued  pursuant to the
terms of the Securities Purchase Agreement, would equal or exceed twenty percent
(20%) of the  number of shares of the  Corporation's  Common  Stock  which  were
issued and outstanding on the Closing Date (the "Maximum Issuance  Amount").  In
the event that a Mandatory  Conversion  would require the  Corporation  to issue
shares of Common Stock equal to or in excess of the Maximum Issuance Amount, the
Corporation shall complete such Mandatory Conversion by (i) converting shares of
Series B Preferred Stock which would result in the Corporation issuing shares of
Common  Stock  equal  to one less  than an  amount  which  would  result  in the
Corporation  issuing  shares  equal  to the  maximum  Issuance  Amount  and (ii)
redeeming  the remaining  shares of Series B Preferred  Stock in cash at a price
equal to the Optional Redemption Price.

         SECTION 5.10  Compliance with Section 13(d).  Notwithstanding  anything
                       -----------------------------
herein to the contrary,  except on the  Mandatory  Conversion  Date,  the Holder
shall not have the right,  and the  Company  shall not have the  obligation,  to
convert all or any portion of the Series B Preferred  Stock if and to the extent
that the issuance to the Holder of shares of Common  Stock upon such  conversion
would result in the Holder being deemed the  "beneficial  owner" of more than 5%
of the then  outstanding  shares of Common  Stock  within the meaning of Section
13(d)  of the  Securities  Exchange  Act of  1934,  as  amended,  and the  rules
promulgated  thereunder.  If any court of competent jurisdiction shall determine
that the  foregoing  limitation  is  ineffective  to prevent a Holder from being
deemed the beneficial  owner of more than 5% of the then  outstanding  shares of
Common Stock,  then the Corporation shall redeem so many of such Holder's shares
(the "Redemption  Shares") of Series B Preferred Stock as are necessary to cause
such  Holder to be deemed the  beneficial  owner of not more than 5% of the then
outstanding  shares  of Common  Stock.  Upon  such  determination  by a court of
competent  jurisdiction,  the Redemption  Shares shall  immediately  and without
further  action be deemed  returned  to the status of  authorized  but  unissued
shares of Series B Preferred  Stock and the Holder  shall have no interest in or
rights under such Redemption  Shares.  Such redemption  shall be for cash at the
Optional Redemption Price.

         SECTION 5.11 Stockholder  Approval.  Unless the Corporation  shall have
                      ---------------------
obtained the approval of its voting  stockholders to such issuance in accordance
with the rules of the

                                       11

NASDAQ or such other stock market as the Corporation shall be required to comply
with, the Corporation  shall not issue shares of Common Stock upon conversion of
any shares of Series B Preferred  Stock, if such issuance of Common Stock,  when
added  to the  number  of  shares  of  Common  Stock  previously  issued  by the
Corporation  (i) upon  conversion of shares of the Series B Preferred  Stock and
(ii)  upon  exercise  of  the  Warrants  issued  pursuant  to the  terms  of the
Securities Purchase Agreement, would equal or exceed twenty percent (20%) of the
number of  shares of the  Corporation's  Common  Stock  which  were  issued  and
outstanding on the Closing Date (the "Maximum Issuance Amount"). If in the event
of the  circumstances  provided in the preceding  sentence,  a properly executed
Conversion  Notice is  received  by the  Corporation  which  would  require  the
Corporation to issue shares of Common Stock equal to or in excess of the Maximum
Issuance  Amount,  the Corporation  shall honor such  conversion  request by (i)
converting  the  number  of shares of  Series B  Preferred  Stock  stated in the
Conversion  Notice  not in  excess  of the  Maximum  Issuance  Amount  and  (ii)
redeeming  the  number  of  shares of  Series B  Preferred  Stock  stated in the
Conversion  Notice equal to or in excess of the Maximum  Issuance Amount in cash
at the Optional Redemption Price of the shares of Series B Preferred Stock to be
so redeemed.

         SECTION 5.12 Notice of Certain Events. In the case of the occurrence of
                      ------------------------
any event described in  subparagraphs  (a), (b) or (f) of Section 5.1 or Section
5.4 of this  Certificate  of  Designations,  the  Corporation  shall cause to be
mailed to the Holder of the Series B Preferred  Stock at its last  address as it
appears in the Corporation's  security registry, at least twenty (20) days prior
to the applicable  record,  effective or expiration date  hereinafter  specified
(or,  if such  twenty  (20) days  notice  is not  practicable,  at the  earliest
practicable  date prior to any such record,  effective or  expiration  date),  a
notice  stating (x) the date on which a record is to be taken for the purpose of
such  dividend,  distribution,  issuance  or  granting  of  rights,  options  or
warrants, or if a record is not to be taken, the date as of which the holders of
record  of  Series  B  Preferred   Stock  to  be  entitled  to  such   dividend,
distribution,  issuance  or granting  of rights,  options or warrants  are to be
determined  or (y)  the  date on  which  such  reclassification,  consolidation,
merger,  sale, transfer,  dissolution,  liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of record
of Series B  Preferred  Stock will be  entitled  to  exchange  their  shares for
securities,  cash or other  property  deliverable  upon  such  reclassification,
consolidation, merger, sale transfer, dissolution, liquidation or winding-up.

                                    ARTICLE 6
                                  VOTING RIGHTS

         Holders of the Series B Preferred Stock have no voting power, except as
otherwise  provided by the Delaware  General  Corporation Law ("DGCL"),  in this
Article 6, and in Article 7 below.

         Notwithstanding the above, the Corporation shall provide each Holder of
Series  B  Preferred  Stock  with  prior  notification  of  any  meeting  of the
stockholders  (and  copies  of proxy  materials  and other  information  sent to
stockholders).  In the event of any taking by the Corporation of a record of its
stockholders  for the purpose of  determining  stockholders  who are

                                       12

<PAGE>

entitled to receive payment of any dividend or other distribution,  any right to
subscribe  for,  purchase  or  otherwise  acquire  (including  by way of merger,
consolidation  or  recapitalization)  any  share  of  any  class  or  any  other
securities  or property,  or to receive any other  right,  or for the purpose of
determining  stockholders  who  are  entitled  to vote in  connection  with  any
proposed  liquidation,  dissolution  or  winding  up  of  the  Corporation,  the
Corporation  shall mail a notice to each Holder, at least thirty (30) days prior
to (or such shorter  period that the  Corporation  first  becomes  aware of) the
consummation of the transaction or event,  whichever is earlier), of the date on
which  any  such  action  is to be  taken  for the  purpose  of  such  dividend,
distribution,  right or other event, and a brief statement  regarding the amount
and character of such dividend, distribution, right or other event to the extent
known at such time.

         To the extent that under the DGCL the vote of the holders of the Series
B  Preferred  Stock,  voting  separately  as a class or  series  applicable,  is
required to authorize a given action of the Corporation, the affirmative vote or
consent  of the  holders  of at least a  majority  of the shares of the Series B
Preferred Stock  represented at a duly held meeting at which a quorum is present
or by  written  consent of the  holders of a majority  of the shares of Series B
Preferred  Stock  (except as  otherwise  may be  required  under the DGCL) shall
constitute  the  approval of such  action by the class.  Holders of the Series B
Preferred  Stock  shall be  entitled  to notice of all  stockholder  meetings or
written  consents (and copies of proxy materials and other  information  sent to
stockholders) with respect to which they would be entitled to vote, which notice
would be provided pursuant to the Corporation's bylaws and the DGCL.

                                    ARTICLE 7
                              PROTECTIVE PROVISIONS

         So long as shares  of Series B  Preferred  Stock are  outstanding,  the
Corporation  shall not, without first obtaining the approval (by vote or written
consent,  as  provided  by the DGCL) of the  holders of at least 85% of the then
outstanding shares of Series B Preferred Stock:

         (a)      alter or change the rights, preferences or privileges  of  the
Series B Preferred Stock;

         (b)      create  any  new class  or  series  of  capital stock having a
preference  over the Series B Preferred  Stock as to distribution of assets upon
liquidation,  dissolution or winding up of the Corporation ("Senior Securities")
or  alter  or  change  the  rights,  preferences  or  privileges  of any  Senior
Securities so as to affect adversely the Series B Preferred Stock;

         (c)      increase the authorized number of shares of Series B Preferred
Stock; or

         (d)      do any  act or  thing not authorized or contemplated  by  this
Certificate  of  Designations  which would  result in taxation of the holders of
shares of the Series B Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any  comparable  provision of the Internal  Revenue
Code as hereafter from time to time amended).

                                       13

<PAGE>

         In the event holders of at least 85% of the then outstanding  shares of
Series B Preferred  Stock agree to allow the  Corporation to alter or change the
rights,  preferences  or privileges  of the shares of Series B Preferred  Stock,
pursuant to subsection (a) above, so as to affect the Series B Preferred  Stock,
then the Corporation  will deliver notice of such approved change to the holders
of the Series B Preferred  Stock that did not agree to such alteration or change
(the  "Dissenting  Holders") and  Dissenting  Holders shall have the right for a
period of thirty (30) days to convert  pursuant to the terms of this Certificate
of  Designations as they exist prior to such alteration or change or continue to
hold their shares of Series B Preferred Stock.

                                    ARTICLE 8
                                  MISCELLANEOUS

         SECTION 8.1  Loss, Theft,  Destruction of Preferred Stock. Upon receipt
                     ---------------------------------------------
of evidence  satisfactory to the Corporation of the loss, theft,  destruction or
mutilation  of shares of Series B  Preferred  Stock and, in the case of any such
loss,  theft or  destruction,  upon receipt of indemnity or security  reasonably
satisfactory to the Corporation,  or, in the case of any such  mutilation,  upon
surrender and  cancellation  of the Series B Preferred  Stock,  the  Corporation
shall  make,  issue and  deliver,  in lieu of such lost,  stolen,  destroyed  or
mutilated  shares of Series B Preferred  Stock, new shares of Series B Preferred
Stock of like tenor.  The Series B Preferred  Stock shall be held and owned upon
the express condition that the provisions of this Section 8.1 are exclusive with
respect to the  replacement  of mutilated,  destroyed,  lost or stolen shares of
Series B  Preferred  Stock  and shall  preclude  any and all  other  rights  and
remedies notwithstanding any law or statute existing or hereafter enacted to the
contrary  with respect to the  replacement  of negotiable  instruments  or other
securities without the surrender thereof.

         SECTION 8.2  Who Deemed Absolute  Owner.  The  Corporation may deem the
                      --------------------------
Person in whose name the Series B Preferred  Stock shall be registered  upon the
registry books of the Corporation to be, and may treat it as, the absolute owner
of the Series B Preferred  Stock for the purpose of the conversion of the Series
B Preferred Stock and for all other purposes,  and the Corporation  shall not be
affected by any notice to the contrary.  All such  payments and such  conversion
shall be valid and effectual to satisfy and  discharge  the  liability  upon the
Series  B  Preferred  Stock  to the  extent  of the  sum or  sums so paid or the
conversion so made.

         SECTION  8.3 Register.  The  Corporation  shall  keep at its  principal
                      --------
office a register in which the Corporation shall provide for the registration of
the Series B Preferred Stock.  Upon any transfer of the Series B Preferred Stock
in accordance with the provisions  hereof,  the Corporation  shall register such
transfer on the Series B Preferred Stock register.

         The  Corporation  may  deem the  person  in  whose  name  the  Series B
Preferred  Stock shall be registered  upon the registry books of the Corporation
to be, and may treat it as, the absolute  owner of the Series B Preferred  Stock
for the purpose of the  conversion  of the Series B Preferred  Stock and for all
other purposes,  and the Corporation  shall not be affected by any notice to the
contrary.  All such  conversions  shall be valid and  effective  to satisfy  and
discharge the liability  upon the Series B Preferred  Stock to the extent of the
conversion or conversions so made.

                                       14

<PAGE>

         SECTION 8.4  Reservation of Stock. The  Corporation, upon the effective
                      --------------------
date of this Certificate of Designations,  has a sufficient  number of shares of
Common  Stock  available  to reserve for  issuance  upon the  conversion  of all
outstanding shares of Series B Preferred Stock, including the Additional Amount,
at an  assumed  Conversion  Price of $0.25.  The  Corporation  will at all times
reserve and keep  available out of its authorized  Common Stock,  solely for the
purpose of issuance upon the  conversion  of Series B Preferred  Stock as herein
provided,  such number of shares of Common Stock as shall then be issuable  upon
the  conversion  of all  outstanding  shares of Series B  Preferred  Stock.  The
Corporation  covenants  that all shares of Common Stock which shall be so issued
shall be duly and validly issued, fully paid and non-assessable. The Corporation
will take all such action as may be so taken without violation of any applicable
law or regulation,  or of any  requirement of any national  securities  exchange
upon  which  the  Common  Stock may be  listed  to have a  sufficient  number of
authorized but unissued  shares of Common Stock to issue upon  conversion of the
Series B Preferred Stock. The Corporation will not take any action which results
in any  adjustment  of the  conversion  rights if the total  number of shares of
Common Stock issued and issuable after such action upon conversion of the Series
B Preferred  Stock would  exceed the total number of shares of Common Stock then
authorized by the Corporation's Certificate of Incorporation, as amended.

         SECTION 8.5  Withholding. To the extent required by applicable law, the
                      -----------
Corporation  may  withhold  amounts  for or on account  of any taxes  imposed or
levied by or on behalf of any  taxing  authority  in the  United  States  having
jurisdiction  over the Corporation from any payments made pursuant to the Series
B Preferred Stock.

         SECTION 8.6  Headings.  The  headings of  the  Articles and Sections of
                      --------
this  Certificate of Designations  are inserted for convenience  only and do not
constitute a part of this Certificate of Designations.

         IN WITNESS  WHEREOF,  the  Corporation  has caused this  Certificate of
Designations  to be signed by its duly  authorized  officers on this 22nd day of
September, 2000.

                                                   ADATOM.COM, INC.

                                                   By:/s/RICHARD S. BARTON
                                                      ------------------------
                                                      Name:  Richard S. Barton
                                                      Title: President and CEO

                                                   By:/s/MICHAEL M. WHEELER
                                                      -------------------------
                                                      Name:  Michael M. Wheeler
                                                      Title:    Controller

                                       15

<PAGE>

                                                                         ANNEX I

                           [FORM OF CONVERSION NOTICE]

TO:
         ----------------------------

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

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

         The undersigned owner of this Series B Convertible Preferred Stock (the
"Series B Preferred  Stock")  issued by  Adatom.com,  Inc.  (the  "Corporation")
hereby irrevocably  exercises its option to convert _______ shares of the Series
B  Preferred  Stock into  shares of the  common  stock,  $.01 par value,  of the
Corporation ("Common Stock"), in accordance with the terms of the Certificate of
Designations.  The undersigned  hereby  instructs the Corporation to convert the
number of shares of the Series B Preferred  Stock specified above into Shares of
Common Stock Issued at Conversion in accordance with the provisions of Article 5
of the  Certificate of  Designations.  The  undersigned  directs that the Common
Stock issuable and certificates therefor deliverable upon conversion, the Series
B Preferred Stock  recertificated,  if any, not being surrendered for conversion
hereby,  together  with any check in payment for  fractional  Common  Stock,  be
issued in the name of and delivered to the  undersigned  unless a different name
has been indicated below. All capitalized terms used and not defined herein have
the respective meanings assigned to them in the Certificate of Designations.

Dated:
      ----------------

----------------------------
          Signature

         Fill in for registration of Series B Preferred Stock:

Please print name and address (including zip code number):

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

---------------------------------SECURITIES PURCHASE AGREEMENT

         SECURITIES  PURCHASE  AGREEMENT dated as of September 27, 2000, between
Adatom.com,  Inc.,  a Delaware  corporation  with  principal  executive  offices
located at 920  Hillview  Court,  Suite  160,  Milpitas,  California  95035 (the
"Company"), and the persons signatory hereto (the "Buyers").

                              W I T N E S S E T H:
                              -------------------

         WHEREAS,  Buyers desires to purchase from the Company,  and the Company
desires  to issue and sell to the  Buyers,  upon the terms  and  subject  to the
conditions of this Agreement, (i) 1,200 shares of Series B Convertible Preferred
Stock, $0.01 par value (the "Preferred Stock"),  having the rights,  preferences
and  privileges  set  forth  in  the  Certificate  of  Designations  of  Rights,
Preferences,  Privileges and  Restrictions  of Series B Preferred Stock attached
hereto as ANNEX I (the "Certificate of Designations"), (ii) warrants to purchase
an aggregate of 545,450 shares (the  "Warrants")  of the Company's  common stock
$0.01 par value (the  "Common  Stock"),  272,725  Warrants in the form  attached
hereto as Annex II-A  ("Class A  Warrants")  and  272,725  Warrants  in the form
attached hereto as Annex II-B ("Class B Warrants").

         WHEREAS,  upon the terms and subject to the conditions set forth in the
Certificate of  Designations,  the Preferred Stock is convertible into shares of
Common Stock;

         WHEREAS, the Warrants,  upon the terms and subject to the conditions in
the  Warrants,  will for a period of five (5) years be  exercisable  to purchase
545,450 shares of Common Stock;

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

         I.       PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS

         A.       TRANSACTION.  Each  Buyer hereby  agrees  to purchase from the
Company,  and the Company  hereby  agrees to issue and sell to each Buyer,  in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities  Act of 1933, as amended (the  "Securities  Act"),  the number of
shares of Preferred Stock and Warrants set forth on the signature page hereof.

         B.       PURCHASE  PRICE; FORM OF  PAYMENT.  The purchase price for the
Preferred  Stock and Warrants to be purchased by Buyer  hereunder shall be equal
to one thousand  dollars  ($1,000) times the number of shares of Preferred Stock
purchased (the "Purchase Price"). Each Buyer shall pay the Purchase Price on the
date hereof by wire transfer of immediately  available funds to the escrow agent
(the "Escrow  Agent")  identified in those certain Escrow  Instructions  of even
date  herewith,  a copy of which is  attached  hereto as ANNEX III (the  "Escrow
Instructions").

         Simultaneously  against  receipt  by the Escrow  Agent of the  Purchase
Price,  the  Company  shall  deliver  one or more duly  authorized,  issued  and
executed  certificates  (I/N/O  Buyer  or,  if the  Company  otherwise  has been
notified, I/N/O Buyer's nominee) evidencing the Securities,  to the Escrow Agent
or its designated depository. By executing and delivering this Agreement,  Buyer
and the Company each

<PAGE>

hereby agrees to observe the terms and  conditions  of the Escrow  Instructions,
all of which are incorporated herein by reference as if fully set forth herein.

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

                            Transfer Online Escrow 1
                            227 S W Pine, Suite 300
                            Portland, Oregon 97204
                            Account # 370591005548
                            For the account of Adatom.com

Simultaneously  with the  execution of this  Agreement,  the Buyer shall deposit
with the Escrow Agent the Purchase  Price and the Company shall deposit with the
Escrow Agent the Securities.

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

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

         A.       Buyer is purchasing the Preferred  Stock,  the  Warrants,  the
Common Stock  issuable upon exercise of the Warrants (the "Warrant  Shares") and
the shares of Common Stock  issuable upon  conversion  of the  Preferred  Stock,
including  payment of the Additional  Amounts,  as defined in the Certificate of
Designations  (the  "Conversion  Shares" and,  collectively  with the  Preferred
Stock,  the  Warrants  and the Warrant  Shares,  the  "Securities")  for its own
account,  for  investment  purposes  only  and  not  with a view  towards  or in
connection  with the public sale or  distribution  thereof in  violation  of the
Securities Act.

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

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

         D.       Buyer  has  been  furnished  with  or  provided  access to all
materials relating to the business, financial position and results of operations
of the Company,  and all other materials requested by Buyer to enable it to make
an informed investment decision with respect to the Securities.

         E.       Buyer  acknowledges  that it has been furnished with,  or  had
access to through the EDGAR system of the  Securities  and  Exchange  Commission
(the "SEC"), copies of the Company's Annual Report on Form 10-KSB for the fiscal
year ended  December  31, 1999 and all other  reports and  documents  heretofore
filed by the Company with the SEC pursuant to the Securities Act and the

                                       2

Securities Exchange Act of 1934, as amended (the "Exchange Act"), since December
31, 1999 (collectively the "SEC Filings").

         F.       Buyer  acknowledges that in making its  decision  to  purchase
the  Securities  it has been given an  opportunity  to ask  questions  of and to
receive answers from the Company's executive officers,  directors and management
personnel  concerning the terms and  conditions of the private  placement of the
Securities by the Company.

         G.       Buyer  understands  that   the   Securities  have   not   been
approved or disapproved by the SEC or any state  securities  commission and that
the  foregoing  authorities  have not reviewed any documents or  instruments  in
connection  with  the  offer  and  sale to it of the  Securities  and  have  not
confirmed  or  determined  the  adequacy or accuracy  of any such  documents  or
instruments.

         H.       This  Agreement has been duly and validly authorized, executed
and delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against it in  accordance  with its terms,  subject  to  applicable  bankruptcy,
insolvency, fraudulent conveyance,  reorganization,  moratorium and similar laws
affecting creditors' rights and remedies generally.

         I.       Neither  Buyer nor its  affiliates,  nor  any person acting on
its or their behalf, has the intention of entering, or will enter into, prior to
the  closing,  or has entered  within the past 30 days,  any put  option,  short
position or other  similar  instrument  or position  with  respect to the Common
Stock and neither Buyer nor any of its affiliates,  nor any person acting on its
or their behalf,  will use at any time shares of Common Stock acquired  pursuant
to this  Agreement  to settle any put option,  short  position or other  similar
instrument or position that may have been entered into prior to the execution of
this Agreement.

         III.     COMPANY'S REPRESENTATIONS

         The Company  represents  and warrants to Buyer that except as disclosed
on Schedule III hereto:

         A.  CAPITALIZATION.  1. The  authorized  capital  stock of the  Company
consists of 50,000,000  shares of Common Stock, of which  17,617,506  shares are
outstanding  on the date hereof and  5,000,000  shares of preferred  stock,  par
value $0.01,  of which 195 shares of Series A  Convertible  Preferred  Stock are
outstanding  on the date  hereof.  All of the issued and  outstanding  shares of
Common Stock and Preferred  Stock have been duly  authorized  and validly issued
and are fully paid and  non-assessable.  As of the date hereof,  the Company has
outstanding  stock options and warrants to purchase  7,585,952  shares of Common
Stock as set forth on Schedule III.A.  The Conversion  Shares and Warrant Shares
have been duly and validly  authorized and reserved for issuance by the Company,
and  when  issued  by  the  Company  upon  conversion  of the  Preferred  Shares
(including  payment of the Additional  Amount),  or on exercise of the Warrants,
will be duly and  validly  issued,  fully paid and  non-assessable  and will not
subject the holder thereof to personal liability by reason of being such holder.
There are no preemptive, subscription, "call" or other similar rights to acquire
the Common Stock (including the Conversion  Shares and Warrant Shares) that have
been issued or granted to any person.

         2.       The  Company  does not  have  any  subsidiaries  and does  not
own or control,  directly or indirectly,  any interest in any other corporation,
partnership,  limited liability company,  unincorporated  business organization,
association, trust or other business entity.

                                       3

<PAGE>

         B.       ORGANIZATION; REPORTING COMPANY STATUS.
         1.       The Company is a corporation duly organized,  validly existing
and in good standing under the laws of its  jurisdiction of organization  and is
duly  qualified  as a  foreign  corporation  in all  jurisdictions  in which the
failure to so qualify  would have a  material  adverse  effect on the  business,
properties,   prospects,  condition  (financial  or  otherwise)  or  results  of
operations  of the  Company or on the  consummation  of any of the  transactions
contemplated by this Agreement (a "Material Adverse Effect").

         2.       The  Company  has  registered   the  Common  Stock pursuant to
Section 12 of the Exchange Act and has timely filed with the SEC all reports and
information  required to be filed by it pursuant  to all  reporting  obligations
under  Section  13(a) or  15(d),  as  applicable,  of the  Exchange  Act for the
12-month  period  immediately  preceding  the date  hereof.  The Common Stock is
listed and traded on the NASDAQ SmallCap  Market  ("NASDAQ") and the Company has
not received any notice  regarding,  and to its knowledge there is no threat, of
the  termination or  discontinuance  of the  eligibility of the Common Stock for
such listing.

         C.       AUTHORIZED SHARES. The Company has duly and validly authorized
and reserved for issuance  shares of Common Stock  sufficient  in number for the
conversion of the Preferred  Stock (assuming for purposes of this Section III.C.
a Conversion  Price (as defined in the Certificate of  Designations) of $.25 and
the exercise of the  Warrants.  The Company  understands  and  acknowledges  the
potentially  dilutive  effect  to  the  Common  Stock  of  the  issuance  of the
Conversion  Shares upon conversion of the Preferred Stock and the Warrant Shares
upon  exercise  of the  Warrants.  The  Company  further  acknowledges  that its
obligation to issue Conversion Shares upon conversion of the Preferred Stock and
Warrant  Shares upon exercise of the Warrants in accordance  with this Agreement
is  absolute  and  unconditional  regardless  of the  dilutive  effect that such
issuance  may  have on the  ownership  interests  of other  stockholders  of the
Company, notwithstanding the commencement of any case under 11 U.S.C. ss. 101 et
seq.  (the  "Bankruptcy  Code").  In the event the Company is a debtor under the
Bankruptcy  Code, the Company hereby waives to the fullest extent  permitted any
rights  to  relief  it may have  under  11  U.S.C.  ss.  362 in  respect  of the
conversion of the Preferred Stock and the exercise of the Warrants.  The Company
agrees,  without cost or expense to the Buyer, to take or consent to any and all
action necessary to effectuate relief under 11 U.S.C. ss. 362.

         D.       AUTHORITY;  VALIDITY  AND  ENFORCEABILITY.   The  Company  has
the requisite  corporate power and authority to enter into this  Agreement,  the
Certificate of  Designations,  the  Registration  Rights  Agreement of even date
herewith  between the Company  and Buyer,  a copy of which is annexed  hereto as
Annex IV (the  "Registration  Rights Agreement") and the Warrants and to perform
all of its obligations  hereunder and thereunder  (including the issuance,  sale
and  delivery  to  Buyer  of  the  Securities).  The  execution,   delivery  and
performance by the Company of this Agreement,  the Certificate of  Designations,
the Warrants and the Registration Rights Agreement,  and the consummation by the
Company of the transactions contemplated hereby and thereby (the issuance of the
Preferred  Stock,  the Warrants and the issuance and reservation for issuance of
the  Conversion  Shares and Warrant  Shares),  has been duly  authorized  by all
necessary  corporate action on the part of the Company and no further consent or
authorization  of the  Company  or its Board of  Directors  or  stockholders  is
required,  except to the extent  stockholder  approval is required  under NASDAQ
rules. Each of this Agreement, the Certificate of Designations, the Warrants and
the  Registration  Rights Agreement has been duly validly executed and delivered
by the Company and each instrument constitutes a valid and binding obligation of
the Company  enforceable  against it in  accordance  with its terms,  subject to
applicable  bankruptcy,   insolvency,  fraudulent  conveyance,   reorganization,
moratorium and similar laws affecting creditors,  rights and remedies generally.
The Securities have been duly and validly authorized for issuance by the Company
and,  when  executed and  delivered  by the  Company,  will be valid and binding
obligations of the Company

                                       4

<PAGE>

enforceable  against it in  accordance  with their terms,  subject to applicable
bankruptcy,  insolvency, fraudulent conveyance,  reorganization,  moratorium and
similar laws affecting creditors' rights and remedies generally.

         E.       NON-CONTRAVENTION. The execution and delivery  by the  Company
of this  Agreement,  the  Certificate  of  Designations,  the  Warrants  and the
Registration  Rights  Agreement,  the  issuance  of  the  Securities,   and  the
consummation by the Company of the other  transactions  contemplated  hereby and
thereby,  do not and will not conflict with or result in a breach by the Company
of any of the terms or  provisions  of,  or  constitute  a default  (or an event
which, with notice, lapse of time or both, would constitute a default) under (i)
the Amended and Restated Certificate of Incorporation or by-laws of the Company,
(ii) except for such conflict, breach or default which would not have a Material
Adverse  Effect,  any  indenture,  mortgage,  deed of trust  or  other  material
agreement  or  instrument  to which  the  Company  is a party or by which  their
respective  properties or assets are bound, or (iii) any law, rule,  regulation,
decree,  judgment  or order of any  court or public  or  governmental  authority
having  jurisdiction  over the  Company or any of the  Company's  properties  or
assets,  nor is the Company  otherwise  in  violation  of,  conflict  with or in
default under any of the foregoing,  except for such conflict, breach or default
which would not have a Material Adverse Affect.

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

         G.       SEC FILINGS.  None of  the  SEC  Filings contained at the time
they were filed any untrue  statement of a material fact or omitted to state any
material fact required to be stated  therein or necessary to make the statements
made  therein,  in light of the  circumstances  under which they were made,  not
misleading.  The  Company  has not  provided  to  Buyer  any  information  that,
according to applicable  law,  rule or  regulation,  should have been  disclosed
publicly  prior to the date  hereof  by the  Company,  but which has not been so
disclosed.

         H.       ABSENCE OF CERTAIN CHANGES.  Except as  disclosed  in  the SEC
Filings or the Financial Statements (as defined in Section III.L. hereto), since
the Balance  Sheet Date (as defined in Section  III.L.),  there has not occurred
any change, event or development in the business, financial condition, prospects
or results of operations of the Company, and there has not existed any condition
having or reasonably likely to have, a Material Adverse Effect.

         I.       FULL DISCLOSURE. There is no fact known to the Company  (other
than general economic or industry conditions known to the public generally) that
has not been fully  disclosed in writing to the Buyer that (i) reasonably  would
be  expected  to have a  Material  Adverse  Effect or (ii)  reasonably  would be
expected  to  materially  and  adversely  affect the  ability of the  Company to
perform  its  obligations  pursuant  to  this  Agreement,   the  Certificate  of
Designations, the Warrants or the Registration Rights Agreement.

         J.       ABSENCE OF LITIGATION.  There  is  no  action,  suit,   claim,
proceeding,  inquiry or  investigation  pending or, to the Company's  knowledge,
threatened, by or before any court or public or governmental authority which, if
determined adversely to the Company, would have a Material Adverse Effect.

                                       5

<PAGE>

         K.       ABSENCE  OF  EVENTS  OF  DEFAULT.   No "Event of Default"  (as
defined in any  agreement or  instrument to which the Company is a party) and no
event which,  with notice,  lapse of time or both,  would constitute an Event of
Default (as so  defined),  has occurred  and is  continuing,  which could have a
Material Adverse Effect.

         L.       FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES.  The Company
has delivered or made available to Buyer true and complete copies of its audited
balance  sheet as at December  31, 1999 and the related  audited  statements  of
operations  and cash flows for the fiscal year ended December 31, 1999 including
the related notes and schedules thereto as well as the same unaudited  financial
statements as of and for the six month period ended June 30, 2000 (collectively,
the  "Financial  Statements"),  and all  management  letters,  if any,  from the
Company's  independent auditors relating to the dates and periods covered by the
Financial  Statements.  Each of the  Financial  Statements  has been prepared in
accordance with United States General Accepted  Accounting  Principles  ("GAAP")
(subject,  in the case of the interim Financial  Statements,  to normal year end
adjustments  and the absence of footnotes) and in conformity  with the practices
consistently  applied by the  Company  without  modification  of the  accounting
principles  used in the preparation  thereof,  and fairly presents the financial
position,  results of  operations  and cash flows of the Company as at the dates
and for the periods indicated. For purposes hereof, the audited balance sheet of
the Company as at December 31, 1999 is  hereinafter  referred to as the "Balance
Sheet" and December 31, 1999 is  hereinafter  referred to as the "Balance  Sheet
Date". The Company has no  indebtedness,  obligations or liabilities of any kind
(whether  accrued,  absolute,  contingent  or  otherwise,  and whether due or to
become due) that would have been required to be reflected in,  reserved  against
or  otherwise  described  in the  Balance  Sheet  or in  the  notes  thereto  in
accordance  with GAAP,  which was not fully  reflected in,  reserved  against or
otherwise  described  in the  Balance  Sheet  or the  notes  thereto  or was not
incurred in the ordinary  course of business  consistent with the Company's past
practices since the Balance Sheet Date.

         M.       COMPLIANCE WITH LAWS; PERMITS.  The Company  is in  compliance
with all laws, rules, regulations,  codes, ordinances and statutes (collectively
"Laws")  applicable  to it or to the  conduct of its  business,  except for such
non-compliance  which  would not have a Material  Adverse  Effect.  The  Company
possesses all permits,  approvals,  authorizations,  licenses,  certificates and
consents  from all public and  governmental  authorities  which are necessary to
conduct  its  business,  except for those the  absence of which would not have a
Material Adverse Effect.

         N.       RELATED  PARTY  TRANSACTIONS.  Neither the  Company nor any of
its officers,  directors or "Affiliates"  (as such term is defined in Rule 12b-2
under the  Exchange  Act) has borrowed  any moneys from or has  outstanding  any
indebtedness  or other similar  obligations to the Company.  Neither the Company
nor any of its officers, directors or Affiliates (i) owns any direct or indirect
interest  constituting  more  than  a one  percent  equity  (or  similar  profit
participation)  interest  in, or controls or is a  director,  officer,  partner,
member or employee of, or  consultant  to or lender to or borrower  from, or has
the right to  participate in the profits of, any person or entity which is (x) a
competitor,  supplier,  customer,  landlord,  tenant,  creditor or debtor of the
Company,  (y) engaged in a business  related to the business of the Company , or
(z) a participant in any transaction to which the Company is a party (other than
in the  ordinary  course of the  Company's  business)  or (ii) is a party to any
contract, agreement, commitment or other arrangement with the Company.

         O.       INSURANCE.   The  Company  maintains  property  and  casualty,
general  liability and workers'  compensation,  insurance with financially sound
and reputable  insurers  that is adequate in light of the  Company's  historical
claims  experience.  The  Company  has  not  received  notice  from,  and has no
knowledge of any threat by, any insurer (that has issued any insurance policy to
the Company) that such

                                       6

insurer  intends to deny coverage under or cancel,  discontinue or not renew any
insurance policy presently in force.

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

         Q.       ENVIRONMENTAL MATTERS. 1. The operations of the Company are in
material  compliance  with all  applicable  Environmental  Laws and all  permits
issued pursuant to Environmental Laws or otherwise;

         2.       to its knowledge, the Company has obtained or applied  for all
material permits required under all applicable  Environmental  Laws necessary to
operate their respective businesses;

         3.       to  its  knowledge, the  Company  is  not  the subject  of any
outstanding  written  order of and the  Company is not a party to any  agreement
with, any governmental  authority or person respecting (i)  Environmental  Laws,
(ii)  Remedial  Action or (iii) any Release or  threatened  Release of Hazardous
Materials;

         4.       the Company has not received, since the October 14, 1999,  any
written communication  alleging that it may be in violation of any Environmental
Law or any permit  issued  pursuant  to any  Environmental  Law, or may have any
liability under any Environmental Law;

         5.       to  its  knowledge,  the  Company  does  not  have any current
contingent  liability in connection with any Release of any Hazardous  Materials
into the indoor or outdoor environment (whether on-site or off-site);

         6.       to the Company's knowledge, there are no investigations of the
business,  operations,  or currently  or  previously  owned,  operated or leased
property of the Company pending or threatened which could lead to the imposition
of any liability pursuant to any Environmental Law;

         7.       to  its  knowledge,   there  is  not  located  at  any  of the
properties   of  the   Company   any  (A)   underground   storage   tanks,   (B)
asbestos-containing   material  or  (C)  equipment  containing   polychlorinated
biphenyls; and,

                                       7

<PAGE>

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

         For purposes of this Section III.Q.:

         "Environmental Law"  means   any  federal,  state  or  local   statute,
         -------------------
regulation,  ordinance,  or rule of common law as now or  hereafter in effect in
any way relating to the protection of human health and safety or the environment
including,   without  limitation,  the  Comprehensive   Environmental  Response,
Compensation  and  Liability  Act (42  U.S.C.ss.9601  et  seq.),  the  Hazardous
                                                      --------
Materials  Transportation  Act (49 U.S.C.  App.ss.1801  et seg.),  the  Resource
                                                        -------
Conservation  and Recovery Act (42  U.S.C.ss.6901  et seq.), the Clean Water Act
(33  U.S.C.ss.1251 et seg.),  the Clean Air Act (42  U.S.C.ss.7401 et seg.), the
                   -------                                         -------
Toxic   Substances   Control  Act  (15   U.S.C.ss.2601  et  seg.),  the  Federal
                                                        --------
Insecticide,  Fungicide,  and Rodenticide Act (7 U.S.C.ss.136 et seq.),  and the
                                                              -------
Occupational   Safety  and  Health  Act  (29  U.S.C.ss.651  et  seg.),  and  the
                                                            --------
regulations promulgated pursuant thereto.

         "Hazardous  Material"  means any substance,  material or waste which is
         ---------------------
regulated  by the  United  States or any state or local  governmental  authority
including, without limitation, petroleum and its by-products,  asbestos, and any
material  or  substance  which is defined  as a  "hazardous  waste,"  "hazardous
substance,"  "hazardous  material,"  "restricted  hazardous waste,"  "industrial
waste,"  "solid  waste,"  "contaminant,"  "pollutant,"  "toxic  waste"  or toxic
substance" under any provision of any Environmental Law;

         "Release"  means any release,  spill,  filtration,  emission,  leaking,
         ---------
pumping, injection,  deposit, disposal,  discharge,  dispersal, or leaching into
the indoor or outdoor environment,  or into or out of any property, in each case
in violation of any Environmental law.

         "Remedial  Action" means all actions to (x) clean up, remove,  treat or
         ------------------
in any other way address any Hazardous Material;  (y) prevent the Release of any
Hazardous Material in violation of any Environmental law so it does not endanger
or  threaten  to  endanger  public  health or  welfare  or the indoor or outdoor
environment;   or  (z)  perform   pre-remedial  studies  and  investigations  or
post-remedial monitoring and care.

         R.       LABOR  MATTERS.   The  Company  is  not  party to any labor or
collective  bargaining agreement and there are no labor or collective bargaining
agreements  which  pertain to  employees  of the  Company.  No  employees of the
Company are represented by any labor organization and none of such employees has
made  a  pending  demand  for  recognition,  and  there  are  no  representation
proceedings or petitions seeking a representation  proceeding  presently pending
or, to the  Company's  knowledge,  threatened  to be brought or filed,  with the
National Labor Relations Board or other labor  relations  tribunal.  There is no
organizing  activity  involving  the  Company  or  pending  or to the  Company's
knowledge,  threatened  by any labor  organization  or group of employees of the
Company.  There are no (i)  strikes,  work  stoppages,  slowdowns,  lockouts  or
arbitrations or (ii) material  grievances or other labor disputes pending or, to
the knowledge of the Company, threatened against or involving the Company. There
are no unfair labor practice  charges,  grievances or complaints  pending or, to
the  knowledge  of the  Company,  threatened  by or on behalf of any employee or
group of employees of the Company.

         S.       ERISA  MATTERS. The Company  and its ERISA  Affiliates  are in
compliance in all material  respects with all provisions of ERISA  applicable to
it.  Neither  the  Company  nor  any  ERISA

                                       8

<PAGE>

Affiliate maintains, contributes, maintained or contributed to a plan subject to
the provisions of Title IV of ERISA or Section 412 of the Internal Revenue Code.

         For purposes of this Section III.S.:

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

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

         T.       TAX MATTERS. 1. The Company has filed all Tax Returns which it
is  required  to file under  applicable  Laws,  except  for such Tax  Returns in
respect  of which the  failure to so file does not and could not have a Material
Adverse  Effect;  all such Tax  Returns are true and  accurate  in all  material
respects and have been  prepared in compliance  with all  applicable  Laws;  the
Company  has paid all Taxes due and owing by it  (whether  or not such Taxes are
required  to be shown on a Tax Return)  and have  withheld  and paid over to the
appropriate  taxing  authorities  all Taxes which they are  required to withhold
from amounts paid or owing to any employee, stockholder, creditor or other third
parties;  and since  December 31, 1999,  the charges,  accruals and reserves for
Taxes with respect to the Company  (including any provisions for deferred income
taxes)  reflected  on the books of the  Company  are  adequate  to cover any Tax
liabilities of the Company if its current tax year were treated as ending on the
date hereof.

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

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

                                       9

agreement  that  could  obligate  it to make  any  payments  that  would  not be
deductible under ss. 28OG of the Internal Revenue Code.

         For purposes of this Section III.T.:

         "IRS" means the United States Internal Revenue Service.
         -----

         "Tax" or "Taxes" means federal, state, county, local, foreign, or other
         ----------------
income, gross receipts, ad valorem, franchise,  profits, sales or use, transfer,
registration, excise, utility, environmental,  communications,  real or personal
property,   capital  stock,   license,   payroll,  wage  or  other  withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum,  estimated and other taxes of any kind whatsoever  (including,  without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.

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

         U.       PROPERTY.  The  Company  does  not own any real property.  The
Company has good and marketable title to all personal property owned by it, free
and  clear  of  all  liens,  encumbrances  and  defects  except  such  as do not
materially  affect the value of such  property and do not  materially  interfere
with the use made and proposed to be made of such  property by the Company;  and
any real property and  buildings  held under lease by the Company are held by it
under valid,  subsisting and enforceable  leases with such exceptions as are not
material and do not interfere  with the use made and proposed to be made of such
property and buildings by the Company.

         V.       INTELLECTUAL  PROPERTY. The Company owns or possesses adequate
and  enforceable  rights to use all patents,  patent  applications,  trademarks,
trademark  applications,  trade  names,  service  marks,  copyrights,  copyright
applications,  licenses,  know-how (including trade secrets and other unpatented
and/or  unpatentable  proprietary  or  confidential   information,   systems  or
procedures)  and other similar rights and proprietary  knowledge  (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted.
To the Company's  knowledge,  the Company is not infringing  upon or in conflict
with any right of any other  person with respect to any  Intangibles.  No claims
have been asserted by any person to the ownership or use of any  Intangibles and
the Company has no knowledge of any basis for such claim.

         W.       INTERNAL  CONTROLS  AND  PROCEDURES.   The  Company  maintains
accurate  books and records  and  internal  accounting  controls  which  provide
reasonable  assurance that (i) all  transactions to which the Company is a party
or  by  which  its   properties   are  bound  are  executed  with   management's
authorization;  (ii) the  reported  accountability  of the  Company's  assets is
compared  with  existing  assets  at  regular  intervals;  (iii)  access  to the
Company's   assets  is   permitted   only  in   accordance   with   management's
authorization;  and (iv) all  transactions to which the Company is a party or by
which its properties  are bound are recorded as necessary to permit  preparation
of the financial  statements of the Company in  accordance  with U.S.  generally
accepted accounting principles.

         X.       PAYMENTS  AND  CONTRIBUTIONS.  Neither the  Company nor any of
its directors,  officers or, to its knowledge,  other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political  activity;  (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or domestic government
official or employee;  (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977,

                                       10

<PAGE>

as amended; or (iv) made any bribe, rebate, payoff, influence payment,  kickback
or other similar payment to any person with respect to Company matters.

         Y.       NO MISREPRESENTATION.  No  representation  or  warranty of the
Company  contained in this Agreement,  any schedule,  annex or exhibit hereto or
any  agreement,  instrument  or  certificate  furnished  by the Company to Buyer
pursuant to this Agreement,  contains any untrue statement of a material fact or
omits to state a material  fact  required to be stated  therein or  necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

         Z.       RIGHT OF FIRST REFUSAL.  Except  as provided in Section IV.K.,
the  Company  has not  granted  any right of first  refusal to any  person  with
respect to the  issuance of the  Preferred  Stock,  Common  Stock or  securities
convertible into Common Stock.

         IV.      CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

         A.       RESTRICTIVE LEGEND. Buyer acknowledges and  agrees that,  upon
issuance  pursuant to this  Agreement,  the Securities (and any shares of Common
Stock issued upon  conversion  of the  Preferred  Stock or upon  exercise of the
Warrants) shall have endorsed  thereon a legend in  substantially  the following
form (and a stop-transfer  order may be placed against transfer of the Preferred
Stock and the Conversion Shares:

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

         B.       FILINGS.  The  Company  shall  make  all  necessary  SEC   and
"blue sky"  filings  required to be made by the Company in  connection  with the
sale of the  Securities  to the Buyer as required by all  applicable  Laws,  and
shall provide a copy thereof to the Buyer promptly after such filing.

         C.       REPORTING STATUS. So long as  the Buyer beneficially owns  any
of the  Securities,  the Company  shall use its best efforts to file all reports
required  to be filed by it with the SEC  pursuant to Section 13 or 15(d) of the
Exchange Act.

         D.       LISTING.  So  long  as  the Buyer beneficially owns any of the
Securities,  except to the extent the Company  lists its Common Stock on The New
York Stock  Exchange,  the Company  shall use its best  efforts to maintain  its
listing of the Common Stock on the NASDAQ.

         E.       RESERVED  CONVERSION  SHARES. Subject to Section 5.11  of  the
Certificate  of  Designations  and  Section  2(d)  of  the  Registration  Rights
Agreement,  the Company at all times from and after the date hereof shall have a
sufficient  number of shares of Common  Stock duly and  validly  authorized  and
reserved  for  issuance to satisfy the  conversion,  in full,  of the  Preferred
Stock, including payment of the Additional Amount (assuming for purposes of this
Section  IV.E.,  a  Conversion  Price of $0.25),  and upon the  exercise  of the
Warrants.

                                       11

         F.       REGISTRATION RIGHTS AGREEMENT.  The  Company  shall  cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof.

         G.       NOTICE OF CERTAIN EVENTS AFFECTING  REGISTRATION.  The Company
will  immediately  notify the Buyer upon the  occurrence of any of the following
events in respect of a registration  statement or related  prospectus in respect
of an offering  of the  Securities;  (i)  receipt of any request for  additional
information  by the SEC or any other  federal  or state  governmental  authority
during the period of effectiveness of the Registration  Statement to be supplied
by  amendments  or  supplements  to  the   registration   statement  or  related
prospectus;  (ii)  the  issuance  by the  SEC  or any  other  federal  or  state
governmental  authority of any stop order  suspending the  effectiveness  of the
Registration  Statement or the initiation of any  proceedings  for that purpose;
(iii)  receipt  of  any  notification  with  respect  to the  suspension  of the
qualification or exemption from  qualification of any of the Securities for sale
in any  jurisdiction or the initiation or threatening of any proceeding for such
purpose;  (iv) the happening of any event that makes any  statement  made in the
Registration  Statement or related  prospectus or any document  incorporated  or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration  Statement,  related
prospectus or documents so that, in the case of the Registration  Statement,  it
will not contain any untrue  statement  of a material  fact or omit to state any
material fact required to be stated  therein or necessary to make the statements
therein not misleading,  and that in the case of the related prospectus, it will
not  contain  any  untrue  statement  of a  material  fact or omit to state  any
material fact required to be stated  therein or necessary to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the  Registration  Statement would be appropriate;  and the Company
will  promptly make  available to Buyer any such  supplement or amendment to the
related prospectus.

         H.       CONSOLIDATION;  MERGER.  The  Company  shall  not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another  entity (a  "Consolidation  Event")  unless the  resulting  successor or
acquiring  entity  (if not the  Company)  assumes by  written  instrument  or by
operation of law the  obligation to deliver to Buyer such shares of stock and/or
securities as Buyer is entitled to receive pursuant to this Agreement.

         I.       ISSUANCE OF PREFERRED  SHARES AND WARRANT  SHARES. The sale of
the Preferred  Stock and the issuance of the Warrant Shares pursuant to exercise
of the Warrant and the Conversion  Shares upon conversion of the Preferred Stock
shall be made in accordance with the provisions and requirements of Section 4(2)
of Regulation D and any applicable  state securities law. The Company shall make
all necessary  SEC and "blue sky" filings  required to be made by the Company in
connection  with  the  sale  of the  Securities  to  Buyer  as  required  by all
applicable  Laws,  and shall provide a copy thereof to Buyer promptly after such
filing.

         J.       LIMITATION ON FUTURE FINANCING.   The  Company  agrees that it
will not enter into any  financing  at a discount to Market Price (as defined in
the Certificate of Designations)  which contains  dividend,  interest,  payment,
liquidation,  redemption,  exchange,  conversion  or similar  terms which may be
calculated  by  formulas  based  in  part on the  varying  market  price  of the
Company's  securities (a "Variable Rate Financing"),  other than under a private
equity line of credit  with J. E.  Matthews,  LLC for not less than  $5,000,000,
which provides for the issuance of convertible exchangeable term notes and other
than any  equity  line of  credit  with any  other  investor  for not less  than
$5,000,000 (an "Equity Line Financing"), until (i) six months from the effective
date of the Registration Statement, or (ii) Astor

                                       12

<PAGE>

Capital,  Inc., as agent for Buyer,  gives written  approval for such additional
financing;   provided,  however,  anything  to  the  contrary  appearing  herein
notwithstanding,  neither this Section nor any other  provision  hereof shall be
construed to restrict or prohibit the Company's right to  restructure,  amend or
modify any financing facility existing on the date hereof.

         K.       RIGHT OF FIRST  REFUSAL.  Except for Variable Rate  Financings
and Equity Line Financings,  the Company shall not enter into any financing at a
discount  to Market  Price with  Persons  other  than the Buyers (a  "Restricted
Financing")  during  the  period  commencing  on the date  hereof and ending six
months  after the  effective  date of the  Registration  Statement,  unless  the
Company shall first have satisfied its obligations under this Section IV.K.

                  (a)      If the  Company  receives  a written  offer  from any
                           Person or group of Persons other than the Buyers, the
                           Company  shall  give the  Buyers a written  notice of
                           such offer  stating  the type,  terms,  and  purchase
                           price  of the  securities  offered  as  part  of such
                           Restricted Financing and the other material terms and
                           conditions of the proposed  Restricted  Financing and
                           attaching a copy of the offer signed by the Person or
                           Persons making such offer.

                  (b)      The Buyers  shall have the right to  purchase  all or
                           any part of the  securities  offered  as part of such
                           Restricted Financing on the same terms and conditions
                           as are set  forth in the  Company's  written  notice.
                           Each Buyer may  exercise  its right to purchase  such
                           securities by giving a written  notice of exercise to
                           the  Company  within  three  Trading  Days after such
                           Buyer's receipt of the Company's  notice.  Each Buyer
                           shall have the right to purchase such  securities pro
                           rata  in  accordance  with  their  investment  in the
                           Company as a result of their  purchase  of  Preferred
                           Stock  under  this  Agreement.  Each  Buyer  may also
                           notify the Company that it will purchase its pro rata
                           share of any such  securities  not  purchased  by the
                           other Buyers.

                  (c)      If the Buyers shall not have  exercised  their rights
                           to purchase all of such securities,  then the Company
                           shall  have  the  right to sell  all  securities  not
                           subscribed  by the  Buyers  on  the  same  terms  and
                           conditions  as  those  set  forth  in  the  Company's
                           notice.  If the Company  shall not have sold all such
                           securities within 30 days after the expiration of the
                           three Trading Day period in paragraph (b) above, then
                           the Company shall not sell any such securities unless
                           it first offers to sell such securities to the Buyers
                           in accordance  with the  procedures set forth in this
                           Section IV.K.

         V.       TRANSFER AGENT INSTRUCTIONS.

         A.       The  Company  undertakes  and agrees that no instruction other
than the instructions  referred to in this Section V and customary stop transfer
instructions  prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement will be given to its transfer
agent for the Common Stock and that the Common Stock issuable upon conversion of
the Preferred Stock,  including the payment of the Additional  Amount,  and upon
exercise of the Warrants otherwise shall be freely transferable on the books and
records of the  Company as and to the extent  provided  in this  Agreement,  the
Registration  Rights  Agreement and applicable  law.  Nothing  contained in this
Section V.A. shall affect in any way Buyer's obligations and agreement to comply
with all applicable

                                       13

<PAGE>

securities  laws  upon  resale of such  Common  Stock.  If,  at any time,  Buyer
provides the Company with an opinion of counsel  reasonably  satisfactory to the
Company  that  registration  of the resale by Buyer of such Common  Stock is not
required under the Securities Act and that the removal of restrictive legends is
permitted  under  applicable  law, the Company shall permit the transfer of such
Common Stock and, promptly instruct the Company's transfer agent to issue one or
more  certificates  for Common Stock without any  restrictive  legends  endorsed
thereon.

         B.       The  Company  shall  permit  Buyer  to  exercise  its right to
convert the Preferred  Stock by telecopying an executed and completed  Notice of
Conversion  to the  Company.  Each  date on  which a  Notice  of  Conversion  is
telecopied  to and  received by the Company in  accordance  with the  provisions
hereof  shall be deemed a  Conversion  Date.  The  Company  shall  transmit  the
certificates  evidencing the shares of Common Stock issuable upon  conversion of
any Preferred Stock (together with  certificates  evidencing any Preferred Stock
not being so converted) to Buyer via express courier,  by electronic transfer or
otherwise, within three business days after receipt by the Company of the Notice
of Conversion  (the  "Delivery  Date").  Within 30 days after Buyer delivers the
Notice of  Conversion  to the  Company,  Buyer shall  deliver to the Company the
Preferred  Stock  being  converted.  Buyer shall  indemnify  the Company for any
damages to third parties as a result of a claim by such third party to ownership
of the Preferred  Stock converted prior to receipt of the Preferred Stock by the
Company.

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

         D.       The Company  understands  that a delay in the issuance of  the
shares of Common Stock  issuable  upon the  conversion  of the  Preferred  Stock
(including  the  payment  of the  Additional  Amount)  or upon  exercise  of the
Warrants  beyond the  applicable  Delivery  Date or Warrant  Delivery Date could
result in economic loss to Buyer.  As  compensation  to Buyer for such loss (and
not as a  penalty),  the  Company  agrees to pay to Buyer for late  issuance  of
Common Stock issuable upon  conversion of the Preferred Stock or exercise of the
Warrants in accordance with the following schedule (where "No. Business Days" is
defined as the number of business  days beyond  three (3) days from the Delivery
Date or the Warrant Delivery Date, as applicable):

                                       14

<PAGE>

                                                 Compensation For Each
                                                 5 Shares of Preferred
                                                  Stock Not Converted
                                              Timely or Shares of Common
                                             Stock Issuable Upon Exercise
                                                 of Each 250 Warrants
         No. Business Days                         Not Issued Timely
         -----------------                         -----------------

                        1                            $ 100
                        2                            $ 200
                        3                            $ 300
                        4                            $ 400
                        5                            $ 500
                        6                            $ 600
                        7                            $ 700
                        8                            $ 800
                        9                            $ 900
                       10                            $1000
             more than 10                            $ 200 for each
                                                     Business Day Late
                                                     beyond 10 days

The Company shall pay to Buyer the compensation  described above by the transfer
of immediately  available funds upon Buyer's demand.  Nothing herein shall limit
Buyer's  right to pursue actual  damages for the Company's  failure to issue and
deliver  Common Stock to Buyer  (which  actual  damages  shall be reduced by the
amount  of any  compensation  paid by the  Company  as  described  above in this
Section  V.D.),  and in addition to any other remedies which may be available to
Buyer,  in the event the Company fails for any reason to effect delivery of such
shares of Common Stock  within five  business  days after the relevant  Delivery
Date or the Warrant  Delivery  Date, as  applicable,  Buyer shall be entitled to
rescind the relevant  Notice of Conversion or exercise of Warrants by delivering
a notice to such  effect to the  Company  whereupon  the Company and Buyer shall
each be restored to their respective  original  positions  immediately  prior to
delivery  of such  Notice of  Conversion  on  delivery.  The Company may pay the
compensation described above in additional shares of Common Stock based upon the
Market Price (as defined in the  Certificate of  Designations)  as determined on
the date of payment.

         E.       Upon the execution and delivery hereof, the Company is issuing
to the transfer agent for its Common Stock (and to any substitute or replacement
transfer  agent for its Common Stock upon the Company's  appointment of any such
substitute  or  replacement   transfer  agent)  instructions   relating  to  the
Securities. Such instructions shall be irrevocable by the Company from and after
the date hereof or from and after the issuance thereof to any such substitute or
replacement  transfer agent,  as the case may be, except as otherwise  expressly
provided in the Registration  Rights Agreement.  It is the intent and purpose of
such instructions,  to require the transfer agent for the Common Stock from time
to time upon transfer of Securities  by Buyer to issue  certificates  evidencing
such  Registrable  Securities  free of legends and without  consultation  by the
transfer  agent with the  Company or its  counsel  and  without the need for any
further advice or instruction or  documentation to the transfer agent by or from
the Company or its counsel or Buyer.

                                       15

<PAGE>

         VI.      DELIVERY INSTRUCTIONS.

         The   Securities   shall   be   delivered   by   the   Company   on   a
"delivery-against-payment basis" at the Closing.

         VII.     CLOSING DATE.

         The date and time of the issuance and sale of the Preferred Shares (the
"Closing  Date")  shall be the date  hereof or such  other as shall be  mutually
agreed upon in writing.  The issuance and sale of the Securities  shall occur on
the Closing Date at the offices of the Escrow Agent.

         VIII.    CONDITIONS TO THE COMPANY'S OBLIGATIONS.

         The  Buyer  understands  that  the  Company's  obligation  to sell  the
Securities  on  the  Closing  Date  to  Buyer  pursuant  to  this  Agreement  is
conditioned upon:

         A.       Delivery by Buyer of the Purchase Price;

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

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

         IX.      CONDITIONS TO BUYER'S OBLIGATIONS.

         The  Company  understands  that  Buyer's  obligation  to  purchase  the
Securities on the Closing Date pursuant to this Agreement is conditioned upon:

         A.       Delivery  by  the  Company  of one or more certificates (I/N/O
Buyer)  evidencing  the  Securities  to be purchased  by Buyer  pursuant to this
Agreement;

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

         C.       Buyer  having  received an opinion of counsel for the Company,
dated the Closing Date, in form, scope and substance reasonably  satisfactory to
the Buyer.

         D.       There  not  having  occurred  (i)  any  general  suspension of
 trading in,
or  limitation  on prices  listed for, the Common Stock on the NASDAQ,  (ii) the
declaration of a banking  moratorium or

                                       16

<PAGE>

any suspension of payments in respect of banks in the United  States,  (iii) the
commencement  of a war,  armed  hostilities or other  international  or national
calamity  directly  or  indirectly  involving  the  United  States or any of its
territories,  protectorates or possessions, or (iv) in the case of the foregoing
existing at the date of this  Agreement,  a material  acceleration  or worsening
thereof.

         E.       There not having occurred any event or development,  and there
being in existence no  condition,  having or which  reasonably  and  foreseeably
would have a Material Adverse Effect.

         F.       The Company shall  have delivered  to Buyer  reimbursement  of
Buyer's  out-of-pocket  costs  and  expenses  incurred  in  connection  with the
transactions  contemplated by the Preferred Stock and this Agreement  (including
the fees and  disbursements  of legal counsel,  which is being held in escrow by
the Escrow Agent).

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

         H.       Delivery of Irrevocable Instructions to the Transfer Agent.

         X.       TERMINATION.

         A.       TERMINATION BY MUTUAL WRITTEN CONSENT.  This  Agreement may be
terminated and the transactions  contemplated  hereby may be abandoned,  for any
reason and at any time prior to the Closing Date, by the mutual written  consent
of the Company and Buyer.

         B.       TERMINATION BY THE COMPANY OR  BUYER.  This Agreement  may  be
terminated and the transactions  contemplated  hereby may be abandoned by action
of the Company or Buyer if (i) the Closing  shall not have  occurred at or prior
to 5:00 p.m., New York City time, on September 30, 2000; provided, however, that
the right to terminate this Agreement  pursuant to this Article X.B(i) shall not
be available to any party whose failure to fulfill any of its obligations  under
this  Agreement  has been the cause of or resulted in the failure of the Closing
to occur  at or  before  such  time and  date or (ii)  any  court or  public  or
governmental authority shall have issued an order, ruling,  judgment or writ, or
there  shall  be  in  effect  any  Law,  restraining,   enjoining  or  otherwise
prohibiting  the  consummation of any of the  transactions  contemplated by this
Agreement.

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

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

                                       17

<PAGE>

         XI.      SURVIVAL; INDEMNIFICATION.

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

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

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

                  2.  any failure by the  Company  to  perform  in any  material
         respect any of its covenants,  agreements,  undertakings or obligations
         set forth in this Agreement, the annexes,  schedules or exhibits hereto
         or any instrument,  agreement or certificate  entered into or delivered
         by the Company pursuant to this Agreement.

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

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

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

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

                                       18

<PAGE>

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

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

                                       19

<PAGE>

         XII. GOVERNING LAW: MISCELLANEOUS.

         This Agreement  shall be governed by and interpreted in accordance with
the laws of the State of  California,  without  regard to the  conflicts  of law
principles of such state.  Each of the parties  consents to the  jurisdiction of
the  federal  courts  whose  districts  encompass  any  part of the  City of San
Francisco or the state courts of the State of California  sitting in the City of
San Francisco in connection  with any dispute  arising under this  Agreement and
hereby waives, to the maximum extent permitted by law, any objection,  including
any  objection  based on  forum  non  conveniens,  to the  bringing  of any such
proceeding  in such  jurisdictions.  A  facsimile  transmission  of this  signed
Agreement shall be legal and binding on all parties  hereto.  This Agreement may
be  signed  in one or more  counterparts,  each of  which  shall  be  deemed  an
original.  The headings of this  Agreement are for  convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.  If any
provision  of  this  Agreement  shall  be  invalid  or   unenforceable   in  any
jurisdiction,  such invalidity or unenforceability shall not affect the validity
or  enforceability  of the  remainder  of  this  Agreement  or the  validity  or
enforceability of this Agreement in any other  jurisdiction.  This Agreement may
be amended only by an  instrument  in writing  signed by the party to be charged
with   enforcement.   This  Agreement   supersedes  all  prior   agreements  and
understandings  among the  parties  hereto with  respect to the  subject  matter
hereof.

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

         (1)      if to the Company, to:

                  Adatom.com, Inc.
                  920 Hillview Court, Suite 160
                  Milpitas, California 95305
                  Attention: Richard Barton

                  with a copy to:

                  Henry D. Evans, Jr., Esq.
                  McCutchen, Doyle, Brown & Enersen, LLP
                  3 Embarcadero Center
                  San Francisco, California 94111-4067

         (2)      if to Buyer, to the address set forth on the signature page
                  hereof.

         with a copy to:

                  Snow Becker Krauss P.C.
                  605 Third Avenue
                  New York, New York 10158
                  Attention: Mark Orenstein, Esq.

The Company or Buyer may change the foregoing  address by notice given  pursuant
to this Section XVIII.

                                       20

<PAGE>

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

         XV.      ASSIGNMENT. This Agreement shall  not be  assignable by either
of the parties hereto prior to the Closing  without the prior written consent of
the other party, and any attempted  assignment contrary to the provisions hereby
shall be null and void; provided,  however, that Buyer may assign its rights and
                        --------   -------
obligations  hereunder,  in whole  or in part,  to any  affiliate  of Buyer  who
furnishes to the Company the representations and warranties set forth in Section
II hereof and otherwise agrees to be bound by the terms of this Agreement.

         XVI.     BROKERS.  Each  of the  parties  hereto represents that it has
had no dealings in connection  with this  transaction  with any finder or broker
who will demand  payment of any fee or commission  from the other party,  except
for Astor Capital who is the agent of the Company and whose fee shall be paid by
the Company. The Company on the one hand, and Buyer, on the other hand, agree to
indemnify  the  other  against  and hold  the  other  harmless  from any and all
liabilities  to any person  claiming  brokerage  commissions or finder's fees on
account  of  services   purported  to  have  been  rendered  on  behalf  of  the
indemnifying  party  in  connection  with  this  Agreement  or the  transactions
contemplated hereby.

                                       21

<PAGE>

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

                                       ADATOM.COM, INC.

                                       By:/s/RICHARD S. BARTON
                                          ------------------------------------
                                          Name:  Richard S. Barton
                                          Title: President and CEO

                        BUYER

                                       Name:Alborz Select Opportunities Fund

                                       By:/s/Ali Moussavi
                                          ------------------------------------
                                          Name:  Ali Moussavi
                                          Title:    Investment Manager

                        BUYER

                                       Name:Yasser Moustaffa
                                            ----------------------------------

                                       By:/s/Yasser Moustaffa
                                          ------------------------------------
                                          Name:
                                          Title:

                        BUYER

                                       Name:Target Growth Fund Ltd.
                                            ----------------------------------

                                       By:/s/George Stedman
                                          ------------------------------------
                                          Name: George Stedman
                                          Title:  President

                        BUYER

                                       Name:IIG Equity Opportunities Fund Ltd.
                                            ----------------------------------

                                       22

<PAGE>

                                       By:/s/Thomas LaVecchia
                                          ------------------------------------
                                          Name: Thomas LaVecchia
                                          Title:   Senior Director

                        BUYER

                                       Name:/s/Alain Salem
                                            ----------------------------------

                                       By:Alain Salem
                                          ------------------------------------
                                          Name:  Alain Salem
                                          Title:

                        BUYER

                                       Name:/s/Pietro Gattini
                                            ----------------------------------

                                       By:
                                          ------------------------------------
                                          Name: Pietro Gattini
                                          Title:

                        BUYER

                                       Name:/s/Magnolia Drive Investment Corp.
                                          ------------------------------------

                                       By:/s/Jacques Tizabi
                                          ------------------------------------
                                          Name: Jacques Tizabi
                                          Title:   President

Jurisdiction of Incorporation:

Address:

                           --------------------
                           --------------------
Telephone No.              --------------------
Fax No.                    --------------------
e-mail                     --------------------

                                       23

<PAGE>

Amount of Investment:

Number of Preferred Shares to be Purchased:

Number of Class A Warrants to be Purchased:

Number of Class B Warrants to be Purchased:

                                       24

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