Document:

<PAGE>

                                                                    EXHIBIT 10.6

                     AMENDED AND RESTATED RIGHTS AGREEMENT

     This Amended and Restated Rights Agreement (this "Rights Agreement") is
made as of December 2, 1999 by and among Netpliance, Inc. (the "Corporation"),
and the holders of the Corporation's Series B Convertible Preferred Stock
("Series B Preferred") and Series C Convertible Preferred Stock ("Series C
Preferred" and together with the Series B Preferred, the "Shares"). The holders
of the Series B Preferred and Series C Preferred are referred to collectively
herein as the "Holders".

     WHEREAS, the Corporation has previously issued and sold the Series B
Preferred to Watershed Capital I, L.P., a Holder ("Watershed"); and

     WHEREAS, the Corporation now wishes to issue and sell the Series C
Preferred to Watershed and to John F. McHale ("McHale"); and

     WHEREAS, in connection with the issuance and sale of the Series B Preferred
and the Series C Preferred and in consideration for the Corporation's sale of
Shares pursuant to the Purchase Agreements relating to the sale of the Series B
Preferred and the Series C Preferred, the Corporation agreed to grant certain
rights to the Holders as set forth in this Rights Agreement.

     NOW, THEREFORE, the parties hereby agree as follows:

1.  Information Rights.

     1.1 Delivery of Financial Statements. The Corporation shall deliver to
each Holder, so long as such Holder holds at least ninety percent (90%) of the
Shares originally purchased by such Holder:

        (a) as soon as practicable after the end of each fiscal year, but in any
event within ninety (90) days thereafter, audited, consolidated balance sheets
and statements of operations and cash flow for such fiscal year, prepared in
accordance with generally accepted accounting principles (other than for
accompanying notes) and setting forth in each case in comparative form the
figures for the previous fiscal year;

        (b) within forty-five (45) days of the end of each fiscal quarter of the
Corporation, an unaudited statement of operations and balance sheet for and as
of the end of such quarter, in reasonable detail and prepared in accordance with
GAAP, subject to year end audit adjustments and the absence of footnotes; and

         (c) within thirty (30) days of the end of each calendar month, an
unaudited statement of operations and balance sheet for and as of the end of
such month, in reasonable detail and prepared in accordance with GAAP, subject
to adjustments and the absence of footnotes.

     1.2 Termination of Information Rights.  The covenants set forth in
Section 1.1 shall terminate as to each Holder and be of no further force and
effect upon the consummation of the
<PAGE>

sale of securities pursuant to a registration statement filed by the Corporation
under the Securities Act of 1933, as amended (the "Securities Act"), in
connection with the initial firm commitment underwritten offering of its
securities to the general public at a price per share of at least $9.00 and with
gross proceeds to the Corporation of at least $15,000,000 (a "Qualifying Public
Offering").

2.   Preemptive Rights.   Subject to the terms and conditions specified in this
Section 2, the Corporation hereby grants to each Holder, a preemptive right with
respect to future sales by the Corporation of its New Securities (as defined in
Section 2.4 (a)).

     2.1  In the event the Corporation proposes to issue New Securities, it
shall give each Holder written notice (the "Notice") of its intention stating
(i) a description of the New Securities it proposes to issue, (ii) the number of
shares of New Securities it proposes to offer, (iii) the price per share at
which, and other terms on which, it proposes to offer such New Securities and
(iv) the number of shares that such Holder has the right to purchase under this
Section 1.3, based on Holder's Percentage (as defined in Section 2.4(b)).

     2.2  Within ten (10) days after the Notice is given (in accordance with
Section 2.2), each Holder may elect to purchase, at the price specified in the
Notice, up to the number of shares of the New Securities proposed to be issued
equal to Holder's Percentage.  An election to purchase shall be made in writing
and must be given to the Corporation within such ten (10) day period (in
accordance with Section 6.2).  The closing of the sale of New Securities by the
Corporation to a Holder upon exercise of its rights under this Section 2 shall
take place simultaneously with the closing of the sale of New Securities to
third parties.

     2.3  The Corporation shall have ninety (90) days after the last date on
which Holders' preemptive right lapsed to enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within forty-five (45) days from the execution thereof) to sell the New
Securities which such Holder did not elect to purchase under this Section 2, at
or above the price and upon terms not materially more favorable to the Holders
of such securities than the terms specified in the initial Notice given in
connection with such sale.  In the event the Corporation has not entered into an
agreement to sell the New Securities within such ninety (90) day period (or sold
and issued New Securities in accordance with the foregoing within forty-five
(45) days from the date of such agreement), the Corporation shall not thereafter
issue or sell any New Securities without first offering such New Securities to
Holders in the manner provided in this Section 2.

     2.4  (a)  "New Securities" shall mean any shares of, or securities
     convertible into or exercisable for any shares of, any class of the
     Corporation's capital stock; provided that "New Securities" does not
     include: (A) securities issued pursuant to the acquisition of another
     business entity by the Corporation by merger, purchase of substantially all
     of the assets of such entity, or other reorganization whereby the
     Corporation owns not less than a majority of the voting power of such
     entity; (B) shares of the Corporation's Series D Preferred Stock (if and
     when such Series D Preferred Stock is designated, issued, and placed as
     described in the Private Placement Memorandum of the Corporation dated
     November 15, 1999, the "Series D Preferred") or options or warrants to
     purchase shares of the Corporation's Common Stock, and the shares of Common
     Stock issuable upon

                                       2
<PAGE>

     exercise of such options or warrants, issued pursuant to any arrangement
     approved by the Board of Directors to employees, officers and directors of,
     or consultants, advisors or other persons performing services for, the
     Corporation, or issuable upon conversion of the Corporation's Series A
     Preferred Stock (the "Series A Preferred"), the Series B Preferred, Series
     C Preferred or Series D Preferred, and; (C) shares of the Corporation's
     Common Stock issued in connection with any stock split, stock dividend or
     recapitalization of the Corporation; or (D) shares of the Corporation's
     Common Stock issued upon exercise of warrants, options or convertible
     securities if the issuance of such warrants, options or convertible
     securities was a result of the exercise of the preemptive right granted
     under this Section 2 or was subject to the preemptive right granted under
     this Section 2.

          (b) The applicable "Percentage" for each Holder shall be the number of
     shares of New Securities calculated by dividing (i) the total number of
     shares of Common Stock owned by such Holder (assuming conversion of all
     outstanding shares of Series A Preferred, Series B Preferred, and Series C
     Preferred and other convertible securities and exercise of all outstanding
     options and warrants) by (ii) the total number of shares of Common Stock
     outstanding at the time the Notice is given (assuming conversion of all
     outstanding shares of Series A Preferred, Series B Preferred and Series C
     Preferred and any other convertible securities and exercise of all
     outstanding options and warrants).

     2.5  The preemptive right granted under this Section 2 may only be assigned
by a Holder upon prior written consent of the Corporation to such transfer.

     2.6  The preemptive right granted under this Section 2 shall not apply to
and shall expire upon the consummation of the Corporation's sale of its Common
Stock in a Qualifying Public Offering.

     3.  Composition of Board of Directors.  The holders of a majority of the
outstanding shares of Series B Preferred shall have the right, so long as
Watershed holds at least 100,000 shares of Series B Preferred, to elect or cause
to be elected to the Corporation's Board of Directors one (1) director (the
"Watershed Director") designated by such holders of a majority of the
outstanding shares of Series B Preferred.  The right under this Section 3 to
designate the Watershed Director shall expire upon the consummation of the
Corporation's sale of its Common Stock in a Qualifying Public Offering.

     4.  Market Standoff.  Following the effective date of a registration
statement of the Corporation filed under the Securities Act, for the duration
specified by and to the extent requested by the Corporation or an underwriter of
the Corporation's securities, but in no event for a period in excess of 180
days, each Holder covenants and agrees it shall not directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of the Shares or
any other securities of the Corporation acquired by such Holder; and each Holder
agrees to execute an agreement to such effect if and when requested by the
Corporation. In order to enforce the foregoing covenant, the Corporation may
impose stop-transfer instructions with respect to the securities of a Holder
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.

                                       3
<PAGE>

5.  Registration Rights.  The Corporation covenants and agrees as follows:

     5.1  Definitions.  For purposes of this Section 5:

        (a) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended ("the
Act"), and the declaration or ordering of effectiveness of such registration
statement or document;

        (b) The term "Registrable Securities" means the Common Stock, (i)
issuable or issued upon conversion of the Series C Preferred Stock issued
pursuant to the Stock Purchase Agreement of even date herewith ("Purchase
Agreement"), (ii) issuable or issued upon conversion of the Series B Convertible
Preferred Stock of the Corporation ("Series B Preferred") issued to Watershed
pursuant to that certain Stock Purchase Agreement dated October 1, 1999 (the
"Series B Purchase Agreement"), and (iii) any Common Stock of the Corporation
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such Series B Preferred or Series C
Preferred, excluding in all cases, however, (i) any Registrable Securities sold
by a person in a transaction in which such person's rights under this Section 5
are not assigned, or (ii) any Registrable Securities sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction;

        (c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities;

        (d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 5.13 hereof; and

        (e) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the Securities and Exchange Commission (the "SEC") which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Corporation with the SEC.

     5.2  Request for Registration.

        (a) If the Corporation shall receive at any time after six (6) months
after the effective date of the first registration statement for a public
offering of securities of the Corporation (other than a registration statement
relating either to the sale of securities to employees of the Corporation
pursuant to a stock option, stock purchase or similar plan or a SEC Rule 145
transaction) (the "Initial Registration"), a written request from Watershed that
the Corporation file a registration statement under the Act covering the
registration of at least 40% of the Registrable Securities (or a lesser amount
of Registrable Securities provided that the offering price to the public exceeds
$10,000,000), then the Corporation shall, subject to the limitations of Section
5.2(b) and as set for the below, use its commercially reasonable efforts to
effect as soon as practicable the registration under the Act of all Registrable
Securities which

                                       4
<PAGE>

Watershed requests to be registered within ninety (90) days; provided, however,
that the Corporation shall not be obligated to take any action to effect any
such registration, qualification or compliance pursuant to this Section 5.2(a):

          (i) During the period starting with the date sixty (60) days prior to
the Corporation's estimated date of filing of, and ending on the date 120 days
immediately following the effective date of, any registration statement
pertaining to securities of the Corporation (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), provided that the Corporation is actively employing in good faith
commercially reasonable efforts to cause such registration statement to become
effective;

          (ii) After the Corporation has effected one registration pursuant to
this Section 5.2(a), and such registration has been declared or ordered
effective; and

          (iii)  If the Corporation shall furnish to Watershed a certificate
signed by the President of the Corporation stating that in the good faith
judgment of the Board of Directors it would be seriously detrimental to the
Corporation or its shareholders to file a registration statement at such time,
then the Corporation's obligation to use its commercially reasonable efforts to
register, qualify or comply under this Section 5.2(a) shall be deferred for a
period not to exceed 180 days from the date of receipt of written request from
Watershed;

and further provided, however, that upon receipt by the Corporation of the
written request of Watershed to file any registration statement pursuant to this
Section 5.2, the Corporation shall promptly give written notice of such
registration to any other holders of the capital stock of the Corporation having
rights to register their holdings at such time as the Corporation shall file or
cause to be filed a registration statement with respect to any of its
securities, and such holders shall have at least twenty (20) days after mailing
of such written notice by the Corporation to request that the Corporation cause
the Shares or other shares of capital stock to be registered under the Act.

          (b) If Watershed, in initiating the registration request hereunder,
intends to distribute the Registrable Securities covered by its request by means
of an underwriting, it shall so advise the Corporation as a part of its request
made pursuant to this Section 5.2 and the Corporation shall include such
information in the written notice referred to in Section 5.2(a).  In such event,
the right of Watershed to include such Registrable Securities in such
registration shall be conditioned upon Watershed's participation in such
underwriting and the inclusion of such Registrable Securities in the
underwriting.  If Watershed proposes to distribute its securities through such
underwriting, Watershed shall (together with the Corporation as provided in
Section 5.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Corporation.
Notwithstanding any other provision of this Section 5.2, if the underwriter
advises the Company that marketing factors require a limitation of the number of
shares to be underwritten, then the number of shares that may be included in the
underwriting shall be allocated pro rata among all holders of shares to be
underwritten; provided, however, that any holder of the Corporation's Series D
Convertible Preferred Stock, if and when designated and issued, shall receive
priority over the Holders as to registration, placement, allocation and
otherwise in the event of such limitations of the number of shares to be
underwritten.

                                       5
<PAGE>

     5.3  Corporation Registration.  If (but without any obligation to do so)
the Corporation proposes to register any of its stock or other securities under
the Act in connection with the public offering of such securities solely for
cash (other than a registration relating solely to the sale of securities to
participants in a Corporation stock plan, or a registration on any form which
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of the Registrable
Securities), the Corporation shall, at such time, promptly give each Holder
written notice of such registration.  Upon the written request of a Holder given
within ten (10) days after mailing of written notice by the Corporation, the
Corporation shall, subject to the provisions of Section 5.9, use commercially
reasonable efforts to cause to be registered under the Act all of the
Registrable Securities that such Holder has requested to be registered.

     5.4.  Registration on Form S-3.  At any time after the Corporation becomes
eligible to file a Form S-3, the holders of 25% or more of the Registrable
Securities may request the Company, in writing, to effect the registration on
Form S-3, of all or such portion of the Registrable Shares as the Holder or
Holders shall specify, provided that the value of the Registrable Securities to
be offered is at least $1,000,000 on the date of the request by such holders of
Registrable Securities.  If the holders initiating the registration intend to
distribute the Registrable Shares in an underwritten offering, they shall so
advise the Corporation in their request. The Corporation shall, as expeditiously
as possible, use its commercially reasonable efforts to effect the registration
on Form S-3 of all Registrable Shares that the Corporation has been so requested
to register; provided, however, that registrations under this Section 5.4 shall
not be deemed as demands for registration or registrations pursuant to Section
5.2 or Section 5.3; and further provided, however, that the Corporation shall
not be obligated to take any action to effect any such registration,
qualification or compliance pursuant to this Section 5.4:

     (a) After the Corporation has effected one registration statement on Form
S-3 during the current calendar year;

     (b) After the Corporation has effected two registrations pursuant to this
Section 5.4; and

     (c)  Within six months after the effective date of any other Registration
Statement of the Company.

     Upon receipt by the Corporation of the written request of a Holder to file
any registration statement pursuant to this Section 5.3, the Corporation shall
promptly give written notice of such registration to the Holders of the Shares,
and to any other holders of the capital stock of the Corporation having rights
to register their holdings at such time as the Corporation shall file or cause
to be filed a registration statement with respect to any of its securities, and
such holders shall have at least twenty (20) days after mailing of such written
notice by the Corporation to request that the Corporation cause the Shares or
other shares of capital stock to be registered under the Act.  Holders of the
Corporation's Series D Convertible Preferred Stock, if and when designated and
issued, shall receive priority over the Holders as to registration, placement,
allocation and otherwise in the event of any limitations of the number of shares
to be registered on Form S-3.

                                       6
<PAGE>

     5.5  Obligations of the Corporation.  Whenever required under this Section
5 to effect the registration of any Registrable Securities, the Corporation
shall, as expeditiously as reasonably possible:

          (a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its commercially reasonable
efforts to cause such registration statement to become effective, and, upon the
request of a Holder, keep such registration statement effective for the earlier
of ninety (90) days or until the distribution described in the Registration
Statement has been completed.

          (b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.

          (c) Furnish to Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as it may reasonably request in order to
facilitate the disposition of Registrable Securities owned by it.

          (d) Use its commercially reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by a Holder, provided that the Corporation shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.

          (e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering.  Any Holder, if
participating in such underwriting, shall also enter into and perform its
obligations under such an agreement.

          (f) Notify Holders if covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the
Act of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing.

     5.6  Furnish Information.  It shall be a condition precedent to the
obligations of the Corporation to take any action pursuant to this Section 5
with respect to the Registrable Securities of a Holder that such Holder shall
furnish to the Corporation such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.

     5.7  Expenses of Demand Registration.  All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 5.2, including (without limitation) all
registration, filing and qualification

                                       7
<PAGE>

fees, printers' and accounting fees, fees and disbursements of counsel for the
Corporation, and the reasonable fees and disbursements of one counsel for the
Holders collectively (not to exceed $10,000 in the aggregate) shall be borne by
the Corporation; provided, however, that the Corporation shall not be required
to pay for any expenses of any registration proceeding begun pursuant to Section
5.2 if the registration request is subsequently withdrawn at the request of a
Holder (in which case such Holder shall bear such expenses), unless such Holder
agrees to forfeit its right to the demand registration pursuant to Section 5.2.

     5.8  Expenses of Corporation Registration.  The Corporation shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 5.3 for Holders, including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto, and the reasonable fees and disbursements of
one counsel for the Holders collectively (not to exceed $10,000 in the
aggregate), but excluding underwriting discounts and commissions relating to
Registrable Securities.

     5.9  Underwriting Requirements.  In connection with any offering involving
an underwriting of shares being issued by the Corporation, the Corporation shall
not be required under Section 5.3 to include any of the Holders' securities in
such underwriting unless it accepts the terms of the underwriting as agreed upon
between the Corporation and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as will
not, in the opinion of the underwriters, jeopardize the success of the offering
by the Corporation.  If the underwriters advise the Corporation that marketing
factors require a limitation of the number of shares to be underwritten, then
the number of shares that may be included in the underwriting shall be allocated
first to the Corporation, which shall have priority as to registration,
placement, allocation and otherwise in such event, and then pro rata among all
other holders of shares to be underwritten; provided, however, that any holder
of the Corporation's Series D Convertible Preferred Stock, if and when
designated and issued, shall receive priority over any Holder as to
registration, placement, allocation and otherwise in the event of such
limitations of the number of shares to be underwritten.  For purposes of
apportionment, Holders and any selling shareholder which is a partnership or
corporation, the partners, retired partners and shareholders of such Holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling shareholder," and any pro rata reduction with respect to such
"selling shareholder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "selling shareholder," as defined in this sentence.

     The Corporation shall have the right to include shares now or hereafter
owned by the Corporation's officers and employee directors that are not already,
by virtue of this Agreement, deemed Registrable Securities (the "Management
Shares") in any registration pursuant to Section 5.3.  If Management Shares are
included in a registration pursuant to Section 5.3, each holder of Management
Shares will be deemed a "Holder" for purposes of this Section 5 only.

     5.10  Delay of Registration.  Holders shall not have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 5.

                                       8
<PAGE>

     5.11  Indemnification.  In the event any Registrable Securities are
included in a registration statement under this Section 5:

          (a) To the extent permitted by law, the Corporation will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls a Holder or underwriter within the
meaning of the Act or the Securities Exchange Act of 1934, amended (the "1934
Act"), against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Corporation of the Act, the 1934 Act, any
state securities law or any rule or regulation promulgated under the Act, the
1934 Act or any state securities law; and the Corporation will pay to a Holder,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 5.11(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Corporation, nor shall the
Corporation be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with information
furnished for use in connection with such registration by a Holder or
controlling person.

          (b) To the extent permitted by law, each Holder, severally and not
jointly, will indemnify and hold harmless the Corporation, each of its
directors, each of its officers who has signed the registration statement, each
person, if any, who controls the Corporation within the meaning of the Act, any
underwriter, any other shareholder selling securities in such registration
statement and any controlling person of any such underwriter or other
shareholder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent that such Violation occurs
in reliance upon and in conformity with information furnished by such Holder for
use in connection with such registration; and such Holder will pay, as incurred,
any legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 5.11(b), in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 5.11(b) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of such
Holder, which consent shall not be unreasonably withheld; and further provided,
that, in no event shall any indemnity under this Section 5.11(b) exceed the net
proceeds from the offering received by such Holder.

                                       9
<PAGE>

          (c) Promptly after receipt by an indemnified party under this Section
5.11 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 5.11, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof if (a) the indemnifying party
acknowledge its obligation to indemnify the indemnified party for any losses,
damages or liabilities resulting from such claim and provide reasonable evidence
to the indemnified party of its financial ability to satisfy such obligation;
(b) the claim does not seek to impose any liability or obligation on the
indemnified party other than for money damages; and (c) the claim does not
relate to the indemnified party's relationship with its customers or employees.
If such conditions are satisfied and the indemnifying party elects to assume and
control the defense of a claim, then (i) the indemnified party will not be
liable for any settlement of such claim effected without the consent of the
indemnified party, which consent will not be unreasonably withheld; and (ii) the
indemnifying party may settle such claim without the consent of the indemnified
party; provided, however, that an indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 5.11, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 5.11.

          (d) If the indemnification provided for in this Section 5.11 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; provided, that, in no event shall any contribution by a Holder
under this Section 5.11(d) exceed the net proceeds from the offering received by
a Holder, except in the case of willful fraud by a Holder.  The relative fault
of the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.

          (e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.

                                       10
<PAGE>

          (f) The obligations of the Corporation and Holders under this Section
5.11 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 5, and otherwise.

     5.12  Reports Under Securities Exchange Act of 1934.  With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit Holders to
sell securities of the Corporation to the public without registration or
pursuant to a registration on Form S-3, the Corporation agrees to use
commercially reasonable efforts to:

          (a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after the effective date of
the first registration statement filed by the Corporation for the offering of
its securities to the general public;

          (b) file with the SEC in a timely manner all reports and other
documents required of the Corporation under the Act and the 1934 Act; and

          (c) furnish to Holders, so long as any Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Corporation
that it has complied with the reporting requirements of SEC Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by the Corporation), the Act and the 1934 Act (at any time after
it has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Corporation and such other reports and documents so filed by the
Corporation, and (iii) such other information as may be reasonably requested in
availing a Holder of any rule or regulation of the SEC which permits the selling
of any such securities without registration or pursuant to such form.

     5.13  Termination of Registration Rights.  A Holder shall not be entitled
to exercise any right provided for in this Section 5 when such Holder can sell
all of such Holder's Registrable Securities in a ninety (90) day period pursuant
to Rule 144 promulgated under the Act.

     5.14   Subordination.  All of Holders' rights with respect to registration
under any provision of this Section 5 shall be subordinate to the rights of any
Holder of the Corporation's Series D Convertible Preferred Stock, if and when
designated and issued.

6.  Miscellaneous Provisions.

     6.1  Waivers and Amendments.  Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Corporation and each Holder.  Any amendment or waiver
effected in accordance with this Section 6.1 shall be binding upon Holders and
the Corporation.

     6.2  Notices.  All notices and other communications required or permitted
hereunder shall be in writing and, except as otherwise noted herein, shall be
deemed effectively given upon personal delivery, delivery by nationally
recognized courier or upon deposit with the United States Post Office, (by first
class mail, postage prepaid) addressed as follows:

                                       11
<PAGE>

               (a)  if to the Corporation, to:

                    Netpliance, Inc.
                    7600A N. Capital of Texas Highway
                    Austin, Texas 78731
                    Attention:  Jim Cahill, Vice President and General Counsel
                    Fax:  (512) 493-8499

               with a copy to:

                    Hughes & Luce, L.L.P.
                    1717 Main Street, Suite 2800
                    Dallas, Texas 75201
                    Attention:  R. Clayton Mulford
                    Fax:  (214) 939-5849

               (b)  if to Watershed, to:

                    Watershed Capital I, LP
                    650 Castro Street, Suite 200
                    Mountain View, California 94041
                    Attention:  David S. Lundeen
                    Fax:  (650) 404-9425

               with a copy to:

                    Gail E. Papermaster
                    Attorney at Law
                    701 Brazos, Suite 500
                    Austin, Texas 78701
                    Fax:  (512) 320-5711

               (c)  if to McHale, to:

                    John F. McHale
                    111 Congress Avenue
                    Austin, Texas  78701

or to such other address as the party to whom notice is to be given may have
furnished to the other in writing in accordance with the provisions of this
Section 6.2.  Any such notice or communication shall be deemed to have been
received: (i) in the case of telecopy or personal delivery, on the date of such
delivery; (ii) in the case of nationally-recognized overnight courier, on the
next business day after the date sent; and (iii) if by registered or certified
mail, on the third business day following the date postmarked.

                                       12
<PAGE>

     6.3  Descriptive Headings.  The descriptive headings herein have been
inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provisions hereof.

     6.4  Governing Law.  This Agreement shall be governed by and interpreted
under the laws of the State of Texas as applied to agreements among Texas
residents, made and to be performed entirely within the State of Texas.

     6.5  Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument, but only one of which
need be produced.

     6.6  Expenses.  If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorney's fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.

     6.7  Successors and Assigns.  Except as otherwise expressly provided in
this Agreement, this Agreement shall benefit and bind the successors, assigns,
heirs, executors and administrators of the parties to this Agreement.

     6.8  Entire Agreement.  This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter of this Agreement.

     6.9  Separability; Severability.  Unless expressly provided in this
Agreement, the rights of each Holder under this Agreement are several rights,
not rights jointly held with any other Holders.  Any invalidity, illegality or
limitation on the enforceability of this Agreement with respect to any Holder
shall not affect the validity, legality or enforceability of this Agreement with
respect to the other Holders.  If any provision of this Agreement is judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not be affected or impaired.

     6.10 Stock Splits.  All references to numbers of shares in this Agreement
shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization of shares by the Corporation occurring
after the date of this Agreement.

           [THE REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY.]

                                       13
<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Rights Agreement on the
day and year first set forth above.

                              NETPLIANCE, INC.

                              By:__________________________________________
                              Name:   Kent Savage
                              Title:  President and Chief Executive Officer

                              WATERSHED CAPITAL I, L.P.

                              By:  Watershed Capital G.P. I, L.P.
                                    Its General Partner

                                    By:  Watershed Capital G.P. I, L.L.C.,
                                         Its General Partner

                                         By:_______________________________
                                            David S. Lundeen,
                                            Managing Member

                              _____________________________________________
                              John F. McHale

                                       14<PAGE>

                                                                    EXHIBIT 10.7

                             EMPLOYMENT AGREEMENT

          This Employment Agreement (the "Agreement") is made as of February 1,
1999, by and between Shbang! Inc., a Texas corporation (the "Company"), and Kent
Savage ("Employee").

          WHEREAS, the Company desires to obtain the services of Employee, and
Employee desires to provide services to the Company, in accordance with the
terms and conditions of this Agreement;

          NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Employee agree as
follows.

          1.  Employment.  Effective on the Effective Date (as defined in
Section 2) and subject to the terms and conditions of this Agreement, the
Company agrees to employ Employee as its Chief Executive Officer and President,
and Employee agrees to perform the duties associated with that position
diligently and to the reasonable satisfaction of the Company's President and
Board of Directors.  From the Effective Date until termination of this
Agreement, Employee will devote his full business time, attention and energies
to the business of the Company.  Employee will report to the Board of Directors
of the Company and will comply with the policies and guidelines established by
the Company's Board of Directors from time to time.

          2.  Term and Termination.  Employee will be employed under this
Agreement for an initial term of two years (the "Initial Term"), beginning on
the date of the Agreement (the "Effective Date").  This Agreement shall renew
for successive one year periods after the completion of the Initial Term unless
either party gives written notice of termination at least 30 days prior to the
expiration of the Initial Term or any renewal term.  Notwithstanding the
foregoing, either party may terminate this Agreement at any time, with or
without cause, by giving 30 days written notice of termination to the other
party, and upon termination, neither party will have any continuing obligation
to the other party, except as follows: (a) if the Company terminates this
Agreement without Cause (as defined below) prior to the end of the first year of
the Initial Term, then the Company will be obligated to continue paying
Employee's base salary and employee benefits pursuant to Section 4 hereof for a
period of six (6) months after such termination; and (b) the provisions of
Sections 5, 6 and 7 hereof will survive any termination of this Agreement for
any reason in accordance with their terms.  As used in this Agreement,
termination for "Cause" shall mean any termination of Employee for (a) refusal
to perform duties assigned, or disobedience of orders and directives issued to
Employee; (b) violation of any rule or regulation of which Employee has notice
and that may be established from time to time for the conduct of the Company's
business, (c) unlawful misconduct by Employee, including, without limitation,
the commission of an act of fraud or embezzlement against the Company or
commission of a crime involving moral turpitude, (d) consistent willful
misconduct or negligence in performing Employee's duties hereunder, (e) breach
of fiduciary duty in connection with Employee's employment by the Company or (f)
a breach of any of the terms of this Agreement.

          3.  Compensation.  Beginning on the Effective Date and thereafter
during the term of Employee's employment, the Company will pay Employee a base
salary at the rate of

                                       1
<PAGE>

$195,000 per year, payable biweekly or semi-monthly in accordance with the
payroll practices of the Company in effect from time to time. Such base salary
shall be subject to review and potential adjustment annually, in accordance with
the compensation policies of the Company in effect from time to time. Employee
shall also, during the term of his employment hereunder, be eligible for an
annual discretionary incentive bonus of up to 15% of Employee's base salary,
such bonus to be awarded in the discretion of the Company in accordance with the
bonus policies established by the Company from time to time. All of Employee's
compensation under this Agreement will be subject to deduction and withholding
authorized or required by applicable law.

          4.  Employee Benefits.  Beginning on the Effective Date and thereafter
during the term of this Agreement, the Company will provide to Employee such
fringe benefits, perquisites, vacation and other benefits that the Company
provides to its similarly situated employees.  The Company will reimburse
Employee for reasonable out-of-pocket business expenses incurred and documented
in accordance with the policies of the Company in effect from time to time.

          5.  Assignment of Intellectual Property Rights.

               (a) In consideration of the Company's agreement to employ
     Employee and the receipt by the Employee of Confidential Information,
     Employee hereby assigns to the Company all of his rights in all
     Intellectual Property which Employee makes or conceives, whether as a sole
     inventor or as a joint inventor, whether made within or outside working
     hours or upon the premises of the Company or elsewhere, during Employee's
     employment with the Company, its subsidiaries or affiliates.  This
     assignment shall not apply to Intellectual Property that Employee has an
     obligation to assign to a former employer. "Intellectual Property" means
     any information of a technical and/or business nature such as ideas,
     discoveries, inventions, trade secrets, know-how, and writings and other
     works of authorship which relate in any manner to the actual or anticipated
     business or research and development of the Company, its subsidiaries or
     affiliates.

               (b) During and subsequent to Employee's employment, upon the
     request and at the expense of the Company or its nominee and for no
     additional personal remuneration, Employee agrees to execute any instrument
     which the Company considers necessary to secure for or maintain for the
     benefit of the Company adequate patent and other property rights in the
     United States and all foreign countries with respect to any Intellectual
     Property.  Employee also agrees to assist the Company as required to draft
     said instruments and to obtain and enforce said rights.

               (c) Employee agrees to promptly disclose to the Company any
     Intellectual Property when conceived or made by Employee, in whole or in
     part, and to make and maintain adequate and current records thereof.  Upon
     the termination of Employee's employment for any reason, Employee agrees to
     promptly turn over to the Company all models, prototypes, drawings,
     records, documents, and the like in Employee's possession or under
     Employee's control, whether prepared by Employee or others, relating to

                                       2
<PAGE>

     Intellectual Property, and any other work done for the Company related
     thereto.  Employee acknowledges that all such items are the sole property
     of the Company.

               (d) Employee agrees that any Intellectual Property disclosed by
     Employee within one (1) year following termination of Employee's employment
     for any reason shall be the sole property of the Company unless and until
     finally determined by a court of competent jurisdiction to have been made
     or conceived after the termination of Employee's employment.

          6.  Confidential Information.

               (a) In the course of performing services for the Company under
     this Agreement, Employee may receive or have access to commercially
     valuable, confidential or proprietary information.  "Confidential
     Information" means all confidential information, whether oral or written,
     now or hereafter developed, acquired or used by the Company and relating to
     the business of the Company that is not generally known to others in the
     Company's area of business, including without limitation (to the extent
     confidential) (i) any trade secrets, work product, processes, analyses,
     know-how, software and hardware development information or other
     Intellectual Property of the Company; (ii) the Company's advertising,
     product development, strategic and business plans and information; (iii)
     customer lists and prices at which the Company has sold or offered to sell
     its products or services; and (iv) the Company's financial statements and
     other financial information.

               (b) Employee acknowledges and agrees that the Confidential
     Information (to the extent it can be owned) is and will be the sole and
     exclusive property of the Company.  Employee will not use any Confidential
     Information for his own benefit or disclose any Confidential Information to
     any third party (except in the course of performing his authorized duties
     for the Company under this Agreement), either during or subsequent to his
     employment with the Company. Upon termination of his employment with the
     Company, Employee will promptly deliver to the Company all documents,
     computer disks and other computer storage devices and other papers and
     materials (including all copies thereof in whatever form) containing or
     incorporating any Confidential Information or otherwise relating in any way
     to the Company's business that are in his possession or under his control.
     Employee also agrees not to disclose to the Company any Confidential
     Information belonging to others.

          7.  Restrictive Covenant.  For purposes hereof, the "Noncompetition
Period" will begin on the Effective Date and end eighteen (18) months after the
date Employee's employment with the Company is terminated for any reason.  In
consideration of the Company's agreement to employ Employee and the receipt by
the Employee of Confidential Information, Employee hereby agrees that, during
the Noncompetition Period, he will not (except in the course of performing his
authorized duties for the Company under this Agreement), directly or indirectly,
on his own behalf or as an officer, director, employee, consultant or other
agent of, or as a stockholder, partner or other investor in, any person or
entity (other than the Company or its affiliates):

                                       3
<PAGE>

               (a) engage in any business conducted by the Company, its
     subsidiaries or affiliates and any business competitive with the business
     conducted by the Company, its subsidiaries or affiliates (collectively a
     "Competing Business") within any geographic area in which the Company, its
     subsidiaries or affiliates conducts any business, or in which businesses
     competitive with the businesses of the Company, its subsidiaries or
     affiliates are conducted (the "Territory"), or give advice or lend credit,
     money or Employee's reputation to any natural person or entity engaged in
     or establishing a Competing Business in the Territory or;

               (b) directly or indirectly influence or attempt to influence any
     customer, potential customer, supplier or accounts of the Company, its
     subsidiaries or affiliates located within the Territory to purchase, sell
     or lease goods or services related to a Competing Business other than from
     or to the Company; or

               (c) solicit, encourage, or take any other action which is
     intended, directly or indirectly, to induce any other employee of the
     Company to terminate his or her employment with the Company, or interfere
     in any manner with the contractual or employment relationship between the
     Company and any other employees of the Company, or hire or attempt to hire
     any former employee of the Company whose termination from employment has
     been effective for ninety (90) days or less;

provided, that the foregoing will not apply to any investment in publicly traded
securities constituting less than 5% of the outstanding securities in such
class.  For purposes of this Agreement, the term "affiliate" means with respect
to any person or entity any other person or entity controlling, controlled by or
under common control with such person or entity.

          8.  Enforcement.

               (a) Employee represents to the Company that he is willing and
     able to engage in businesses other than a Competing Business within the
     Territory and that enforcement of the restrictions set forth in Section 7
     would not be unduly burdensome to Employee.  The Company and Employee
     acknowledge and agree that the restrictions set forth in Section 7 are
     reasonable as to time, geographic area and scope of activity and do not
     impose a greater restraint than is necessary to protect the goodwill and
     other business interests of the Company, and Employee agrees that the
     Company is justified in believing the foregoing.

               (b) If the provisions of Section 7 are found by a court of
     competent jurisdiction to contain unreasonable or unnecessary limitations
     as to time, geographical area or scope of activity, then such court is
     hereby directed to reform such provisions to the minimum extent necessary
     to cause the limitations contained therein as to time, geographical area
     and scope of activity to be reasonable and enforceable.

               (c) Employee acknowledges and agrees that the Company would be
     irreparably harmed by any violation of Employee's obligations under
     Sections 5, 6 and 7 hereof and

                                       4
<PAGE>

     that, in addition to all other rights or remedies available at law or in
     equity, the Company will be entitled to injunctive and other equitable
     relief to prevent or enjoin any such violation. If Employee violates
     Section 7, the period of time during which the provisions thereof are
     applicable will automatically be extended for a period of time equal to the
     time that Employee began such violation until such violation permanently
     ceases.

          9.  No Obligation to Third Party.  Employee represents and warrants
that Employee is not under any obligation to any person or other third party and
does not have any other interest which is inconsistent or in conflict with this
Agreement, or which would prevent, limit, or impair Employee's performance of
any of the covenants hereunder or Employee's duties as an employee of the
Company.

          10.  Entire Agreement.  This Agreement embody the complete agreement
of the parties with respect to the subject matter hereof and supersedes any
prior written, or prior or contemporaneous oral, understandings or agreements
between the parties that related in any way to the subject matter hereof.  This
Agreement may be amended only in writing executed by the Company and Employee.

          11.  Binding Effect.  This Agreement shall be binding upon and inure
to the benefit of the respective heirs, executors, administrators, legal
representatives and successors of the Company and Employee.

          12.  Notice.  Any notice required or permitted under this Agreement
must be in writing and will be deemed to have been given when delivered
personally, by telecopy or by overnight courier service or three days after
being sent by mail, postage prepaid, to (a) if to the Company, to the Company's
principal place of business, or (b) if to Employee, to his residence or to his
latest address then contained in the Company's records (or to such changed
address as such person may subsequently give notice of in accordance herewith).

          13.  GOVERNING LAW.  THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH SUBSTANTIVE LAWS OF TEXAS, WITHOUT GIVING
EFFECT TO ANY CONFLICTS OF LAW, RULE OR PRINCIPLE THAT MIGHT REQUIRE THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

                                       5
<PAGE>

          IN WITNESS WHEREOF, the Company and Employee have executed and
delivered this Agreement as of the date first above written.

                              SHBANG! INC.

                              By:____________________________________________
                              Name:  Kent Savage
                              Title: President and Chief Executive Officer

                              _______________________________________________
                              Name:  KENT SAVAGE

                                       6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00000-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00000-of-00352.parquet"}]]