Document:

Exhibit 10.2

                      DESIGNATIONS, PREFERENCES AND RIGHTS
                                       OF
               SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK
                                       OF
                                   THCG, INC.

                            I. DESIGNATION AND AMOUNT

         The designation  (this  "Certificate of  Designation")  of this series,
which  consists  of 5000 shares of  Preferred  Stock of THCG,  Inc.,  a Delaware
corporation (the "Company"), is the Series A Convertible Participating Preferred
Stock (the "Preferred Stock") and the stated value shall be One Thousand Dollars
($1,000.00) per share (the "Face Amount").

                                  II. DIVIDENDS

         The Preferred Stock will bear no dividends.

                            III. CERTAIN DEFINITIONS

         For purposes of this  Certificate of  Designation,  the following terms
shall have the following meanings:

         A.  "Aggregate  Purchase Price" shall have the meaning set forth in the
Securities  Purchase  Agreement,  dated as of August 1,  2000,  by and among the
Company and the other signatories thereto (the "Securities Purchase Agreement").

         B. "Bankruptcy Event" shall mean any one or more of the following:  (i)
the commencement of any voluntary  proceeding by the Company seeking entry of an
order for relief under Title 11 of the United States Code or seeking any similar
or equivalent relief under any other applicable  federal or state law concerning
bankruptcy, insolvency, creditors' rights or any similar law; (ii) the making by
the  Company of a general  assignment  for the benefit of its  creditors  or any
portion of them; (iii) the commencement of any involuntary proceeding respecting
the Company  seeking entry of an order for relief  against the Company in a case
under Title 11 of the United  States  Code or seeking any similar or  equivalent
relief under any other  applicable  federal or state law concerning  bankruptcy,
insolvency, creditors' rights or any similar law that is not dismissed within 90
days of commencement;  (iv) entry of a decree or order respecting the Company by
a court having competent jurisdiction,  which decree or order (x) results in the
appointment of a receiver,  liquidator,  assignee, examiner, custodian, trustee,

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sequestrator (or other similar  official) for the Company or for any substantial
part of its  property or (y) orders the winding  up,  liquidation,  dissolution,
reorganization, arrangement, adjustment, or composition of the Company or any of
its debts; (v) the appointment,  whether or not voluntarily by the Company, of a
receiver,  liquidator,  assignee, examiner, custodian, trustee, sequestrator (or
other  similar  official)  for the  Company or for any  substantial  part of its
property; (vi) the failure by the Company to pay, or its admission in writing of
its inability to pay, its debts generally as they become due; (vii) the exercise
by any creditor of any right in connection  with an interest of such creditor in
any substantial part of the Company's property,  including,  without limitation,
foreclosure upon all or any such part of the Company's  property,  replevin,  or
the  exercise of any rights or remedies  provided  under the Uniform  Commercial
Code with regard thereto; (viii) the making of, or the sending of a notice of, a
bulk  transfer  by the  Company;  (ix) the  calling by the  Company of a general
meeting  of its  creditors;  and (x) the  consent  by the  Company to any of the
actions,  appointments,  or proceedings  described herein.  For purposes of this
paragraph, the "Company" shall also refer to any material subsidiary thereof.

         C.  "Closing  Date" shall have the meaning set forth in the  Securities
Purchase Agreement.

         D.  "Closing Bid Price"  means,  for any  security as of any date,  the
closing  bid price of such  security  on the  principal  securities  exchange or
trading  market where such security is listed or traded as reported by Bloomberg
Financial  Markets or a  comparable  reporting  service of  national  reputation
selected by the Company and reasonably acceptable to Holders (as defined herein)
of a  majority  of the  aggregate  principal  amount  represented  by  the  then
outstanding  Preferred Stock (with the consent, not to be unreasonably  withheld
or  delayed,  of the Initial  Holder (as defined  herein) so long as the Initial
Holder  continues  to own  Preferred  Stock)  ("Majority  Holders") if Bloomberg
Financial  Markets is not then  reporting  closing  bid prices of such  security
("Bloomberg"),  or if the foregoing does not apply, the last reported sale price
of such security in the over-the-counter market on the electronic bulletin board
of such security as reported by Bloomberg,  or, if no sale price is reported for
such security by  Bloomberg,  the average of the bid prices of all market makers
for such  security as reported in the "pink  sheets" by the  National  Quotation
Bureau,  Inc. If the Closing Bid Price cannot be calculated for such security on
such date on any of the foregoing  bases, the Closing Bid Price of such security
on such date  shall be the fair  market  value as  reasonably  determined  by an
investment banking firm selected by the Company and reasonably acceptable to the
Majority Holders, with the costs of such appraisal to be borne by the Company.

         E.  "Conversion  Date" means,  for any Optional  Conversion (as defined
herein),  the date  specified  in the notice of  conversion  attached  hereto as
Exhibit A (the "Notice of Conversion"),  or if no date is specified therein, the
date the Notice of  Conversion  is faxed or otherwise  delivered to the Company;
provided,  however,  that the Conversion  Date shall not be prior to the date of
delivery of the Notice of Conversion  and any Notice of Conversion  delivered to
the Company on a day which is not a business day shall be deemed delivered as of
the next following business day.

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         F.  "Conversion  Price" means,  with respect to any Conversion Date (i)
prior to the  earlier  of (x) the date on which a  Material  Adverse  Change (as
defined below) occurs, and (y) the date which is one hundred and fifty one (151)
days after the Closing Date, the Fixed Conversion Price (as defined herein); and
(ii) from and after the earlier of such dates, the lower of the Fixed Conversion
Price and the Variable  Conversion Price (as defined herein),  each as in effect
as of such date, subject to adjustment as provided herein.

         G. "Fixed Conversion Price" means $5.039. The Fixed Conversion Price is
subject to adjustment as provided herein.

         H.  "Liquidity  Conditions"  means all shares of Common Stock  issuable
upon conversion of all outstanding  shares of Preferred Stock,  upon exercise of
all outstanding  Warrants (as defined in the Securities  Purchase Agreement) (in
each case,  without  giving effect to any  limitation on conversion or exercise)
(i) are then authorized and reserved for issuance, (ii) have been registered for
resale in an  appropriate  and an  effective  registration  statement  under the
Securities  Act of 1933,  as  amended  (the  "Securities  Act"),  available  for
immediate  use by the Holder and  qualified  or exempt  under  applicable  state
securities  laws so that the holder thereof may  immediately  thereafter  resell
such shares of Common  Stock,  (iii) are listed for trading on any of the Nasdaq
National Market or the New York Stock Exchange.

         I. "Market Price," as of any date, means the average of the Closing Bid
Prices for the shares of Common Stock for the ten (10) trading days  immediately
preceding,  but not including,  such date; provided,  however, that in no event,
shall  the  Market  Price be  greater  than  the  Closing  Bid  Price on the day
immediately preceding the determination date.

         J.  "Material  Adverse  Change"  means any change  which has a material
adverse effect on the business, operations,  properties, financial condition, or
operating  results  of the  Company  and  its  subsidiaries  taken  as a  whole;
provided,  however,  a Material  Adverse  Change  shall not  include (i) adverse
general economic  conditions,  (ii) adverse general industry  conditions,  (iii)
adverse  changes  resulting  solely from a decline in the price of the Company's
Common Stock or (iv)  fluctuations in the market value of securities held by the
Company or any of its subsidiaries.

         K. "Premium" means $1000 x (N/365) x R, where

                  N =      the  number of days  from the  Closing  Date to,  and
                           including, the Conversion Date and,

                  R =      0.10

         Premium is payable  quarterly on the last business day of each calendar
quarter and except as provided in Section IV.G(i)  hereof,  the Premium shall be
paid in cash  prior  to the  date on  which  the  Registration  Statement  filed
pursuant to Section 2.1 of the Registration  Rights Agreement (the "Registration
Statement")  is  declared  effective  and  thereafter,  if  and so  long  as

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the Liquidity  Conditions are satisfied and the Company has delivered all shares
free from any  restrictive  legend to the extent  required  under the Securities
Purchase  Agreement  (except to the extent  Purchaser  has not been damaged by a
failure  to  so  deliver  by  the  Company  or,  if  damaged,   has  been  fully
compensated),  by issuance of shares of Common Stock (at a price per share equal
to the  Market  Price on the date on which the  Premium  is paid) or  additional
shares  of  Preferred  Stock  of Face  Amount  equal to the  Premium,  provided,
however,  R shall be 0.08  from and  after  the date on which  the  Registration
Statement is declared  effective,  if such date is within one hundred (100) days
after the Closing Date.

         L.  "Purchaser" and  "Purchasers"  shall have the meanings set forth in
the  Securities  Purchase  Agreement and "Holder" and "Holders" mean the initial
holder of the Preferred  Stock (the  "Initial  Holder") and its  successors  and
assigns as permitted under this Certificate of Designation.

         M.  "Registration  Rights  Agreement"  means  the  Registration  Rights
Agreement referred to in the Securities Purchase Agreement.

         N. "Variable  Conversion  Price" means,  with respect to any applicable
Conversion  Date,  ninety percent (90%) of the average of the Closing Bid Prices
on the five (5) days which  constitute the lowest  five-consecutive  day average
Closing Bid Price of the  Company's  Common  Stock  during the  twenty-two  (22)
consecutive  trading  days  immediately  preceding,   but  not  including,   the
Conversion  Date (subject to equitable  adjustment  for any stock splits,  stock
dividends,  reclassifications  or similar  events  during  such  twenty two (22)
trading-day period), subject to further adjustment, if any, as provided herein.

                                 IV. CONVERSION

         A.  Conversion at the Option of the Holder.  Subject to the limitations
on  conversions  contained  in  Section  IV.G,  each  Holder  may,  at any  time
immediately  following the Closing and from time to time thereafter  convert (an
"Optional Conversion") any or all of its shares of Preferred Stock into a number
of fully paid and  non-assessable  shares of Common Stock  determined,  for each
share of Preferred  Stock so to be converted,  in accordance  with the following
formula:

                     (Premium (accrued but unpaid) + $1000)
              -----------------------------------------------------
                                Conversion Price

         B. Mechanics of Conversion.  In order to effect an Optional Conversion,
a Holder (a "Converting  Holder") shall fax (or otherwise deliver) a copy of the
fully executed Notice of Conversion to the Company.  Upon receipt by the Company
of a facsimile  copy of a Notice of  Conversion  from a Converting  Holder,  the
Company shall immediately send, via facsimile,  a confirmation to the Converting
Holder stating that the Notice of Conversion  has been  received,  the date upon
which the Company expects to deliver the Common Stock upon conversion

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(assuming  proper delivery of  certificate(s)  representing the Preferred Stock)
and the name and telephone  number of a contact person at the Company  regarding
the conversion.  Promptly following the faxing (or other delivery) of the Notice
of  Conversion,  the Holder shall  surrender or cause to be  surrendered  to the
Company the  certificates  representing the Preferred Stock being converted (the
"Preferred Stock  Certificates")  and a copy of the Notice of Conversion (or, in
lieu thereof, materials contemplated by Section XIV.B, if applicable).

         C.  Delivery of Common Stock Upon  Conversion.  Subject to Section IV.F
hereof,  upon the delivery of a Notice of Conversion,  the Company shall as soon
as practicable,  but in any event no later than the later of (a) the day that is
three business days  following the  Conversion  Date and (b) the day that is the
first  business  day  following  the date of surrender  of the  Preferred  Stock
Certificates (or satisfaction of the provisions of Section XIV.B, if applicable)
(the "Delivery  Period"),  issue and deliver to the Converting Holder (or at its
direction) (x) that number of shares of Common Stock issuable upon conversion of
such  shares  of  Preferred   Stock  being   converted  and  (y)  a  certificate
representing  the number of shares of Preferred  Stock not being  converted,  if
any.  Delivery  under this Section IV. C may be made  personally or by reputable
overnight  courier.  The person or persons  entitled to receive shares of Common
Stock  issuable  upon such  conversion  shall be treated for all purposes as the
record holder of such shares at the close of business on the Conversion Date and
such shares shall be issued and outstanding as of such date.

         D. Taxes.  The Company shall pay any and all taxes (other than transfer
or income  taxes) which may be imposed with respect to the issuance and delivery
of the shares of Common Stock upon the conversion of the Preferred Stock.

         E. No Fractional Shares. No fractional shares of Common Stock are to be
issued upon the  conversion  of Preferred  Stock,  but the Company shall instead
round up to the next whole  number  the  number of shares of Common  Stock to be
issued upon such conversion.

         F.  Conversion  Disputes.  In the case of any dispute with respect to a
conversion,  the Company  shall  promptly  issue such number of shares of Common
Stock as are not disputed in accordance  with Sections IV.A and IV.C hereof.  If
such dispute only involves the calculation of the Conversion  Price, the Company
shall submit the disputed  calculations  to an  independent  accounting  firm of
national standing (reasonably acceptable to the Converting Holder) via facsimile
within  two (2)  business  days of  receipt  of the  Notice of  Conversion.  The
accountant shall audit the calculations and notify the Company and the Holder of
the results no later than five (5)  business  days from the date it receives the
disputed calculations.  The accountant's calculation shall be deemed conclusive,
absent manifest error.  As soon as possible  thereafter,  the Company shall then
issue the  appropriate  number of shares  of  Common  Stock in  accordance  with
Sections IV.A and IV.C hereof.

         G.  Limitations on  Conversions.  The conversion of shares of Preferred
Stock shall be subject to the following  limitations  (each of which limitations
shall be applied independently):

<PAGE>

                  (i) Cap Amount.  In no event shall the total  number of shares
of Common Stock issued upon conversion of the Preferred  Stock exceed  2,529,568
shares (the "Cap Amount").  A Holder's allocable portion of the Cap Amount shall
be applied to the  Preferred  Stock held by it on the basis set forth in Section
XIV(C).  Conversions of partial shares of Preferred  Stock shall be permitted to
reach a Holder's  allocable  portion of the Cap Amount. In the event the Company
is prohibited  from issuing  shares of Common Stock as a result of the operation
of this  subparagraph  (i), the Company  shall,  within  thirty (30) days of the
conversion  which results in a Holder reaching its allocable  portion of the Cap
Amount,  redeem all shares of  Preferred  Stock held by such Holder which may no
longer  be  converted  due  to  the  operation  of  this  subparagraph  (i) at a
redemption  price equal to $1.00 for all such shares of  Preferred  Stock in the
aggregate.

                  (ii) No Five Percent Holders.  Notwithstanding anything to the
contrary  contained  herein,  the Preferred  Stock shall not be convertible by a
Holder to the extent  (but only to the  extent)  that,  if  convertible  by such
Holder,  such Holder would  beneficially  own in excess of 4.9% of the shares of
Common Stock. For the purposes of this paragraph,  beneficial  ownership and all
determinations and calculations,  including without limitation,  with respect to
calculations  of percentage  ownership,  shall be determined in accordance  with
Section 13(d) of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act"), and Regulation 13D and G thereunder. For clarification, it is expressly a
term of this Certificate of Designation  that the limitations  contained in this
Section shall apply to each successor Holder.

         H. Required Conversions

                    (i) At  Maturity.  Subject to the  limitations  set forth in
Section IV.G and provided the Liquidity  Conditions are satisfied and, except to
the extent  Purchaser has not been damaged by such a failure or if damaged,  has
been fully compensated  therefor,  the Company has issued shares of Common Stock
free of restrictive legends as required under the Securities Purchase Agreement,
each share of Preferred Stock  outstanding on the third (3rd) anniversary of the
Closing  Date (the  "Maturity  Date")  (and any  accrued  and unpaid  Conversion
Default  Payments (as defined  herein)),  automatically  shall be converted into
shares of Common Stock on such date in accordance  with the  conversion  formula
set forth in Section IV.A (the "Required Conversion at Maturity"),  except as to
any  Holder  who  elects  otherwise  in the event  that a  Bankruptcy  Event has
occurred and is continuing.  If a Required  Conversion at Maturity  occurs,  the
Company and the Holders shall follow the  applicable  conversion  procedures set
forth in this Article IV; provided,  however,  that a Notice of Conversion shall
be deemed to be delivered to the Company on the Maturity Date. In the event that
the limitations set forth in this clause (i) or in Section IV.G (ii) prevent the
conversion of all of the Preferred  Stock on the Maturity Date, any  unconverted
Preferred Stock shall continue to be subject to Required  Conversion at Maturity
as set forth in this Section IV.H at such time as the  limitations  set forth in
this clause (i) or in Section  IV.G (ii) do not prevent  such  conversion  for a
period of at least twenty (20) consecutive trading days. Each share of Preferred
Stock  which  as a  result  of  the  limitations  of  Section  IV.G(ii)  remains
unconverted at the Maturity Date,  shall remain fully  convertible in accordance
with this  Certificate  of  Designation  until such time as the  limitations  of
Section  IV.G(ii) no

<PAGE>

longer prevent such  conversion and such share is in fact converted  pursuant to
this Section.  Notwithstanding  anything to the contrary  contained herein, if a
conversion  of any shares of Preferred  Stock at the Maturity Date is prohibited
as a result of the Cap  Amount,  the  Company  shall  redeem all such  shares of
Preferred  Stock held by a Holder  which can no longer be  converted  due to the
operation  of the Cap  Amount  for a  redemption  price  equal  to  $1.00 in the
aggregate.

                    (ii) Forced Conversion.  Provided (a) the Company has timely
honored all Notices of Conversion,  except to the extent  Purchaser has not been
damaged by such a failure or, if damaged,  has been fully compensated  therefor,
(b) all of the Common Stock issuable upon  conversion of the Preferred Stock (at
the time of delivery of the Forced  Conversion Notice (as defined below) and for
each day  thereafter  through the Effective  Time of the Forced  Conversion  (as
defined herein)) is covered by an effective Registration Statement, (c) all such
Common  Stock can be sold  pursuant  thereto at all times during the period from
the date  which is twenty  (20)  trading  days prior to  delivery  of the Forced
Conversion  Notice  until  the  date on which  such  Forced  Conversion  becomes
effective  (the  "Effective  Time of the  Forced  Conversion"),  (d)  all  other
Liquidity  Conditions  (as defined in Article III hereof) are then satisfied and
have been satisfied for the twenty (20) immediately preceding business days, (e)
the  Company has not failed to remove a legend at the  request of  Purchaser  as
required under the Securities Purchase Agreement, except to the extent Purchaser
has not been damaged by such a failure or if damaged, has been fully compensated
therefor,  (f) the  Company  is not  then in  violation  of any of its  material
obligations under the Securities  Purchase  Agreement,  the Registration  Rights
Agreement,  the Warrants or the terms of the Preferred  Stock (which  violations
remain  uncured),  and (g) the Closing Bid Price of the Common Stock for each of
the ten (10)  consecutive  trading  days  preceding  the  delivery of the Forced
Conversion   Notice  is  greater  than  two  hundred   percent   (200%)  of  the
then-effective  Fixed Conversion  Price, the Company may, by notice delivered to
the Holders (the "Forced Conversion Notice"),  cause each share of the Preferred
Stock  outstanding  on the date  which is ten (10) days after  delivery  of such
notice to be automatically converted into shares of Common Stock on such date in
accordance  with the conversion  formula set forth in Section IV. A (the "Forced
Conversion"),  except as to any Holder who elects  otherwise in the event that a
Bankruptcy Event has occurred and is continuing.

         I. Electronic Transmission. In lieu of delivering physical certificates
representing the Common Stock issuable upon  conversion,  provided the Company's
transfer agent is  participating  in the Depository  Trust Company  ("DTC") Fast
Automated  Securities  Transfer program (the "FAST Program"),  upon request of a
Holder,  the Company shall use its reasonable best efforts to cause its transfer
agent to  electronically  transmit the Common Stock issuable upon  conversion to
the Holder by  crediting  the account of Holder's  prime broker with DTC through
its Deposit  Withdrawal  Agent  Commission  system.  The  Company  shall use its
reasonable  best  efforts  to  participate  in  an  electronic  delivery  system
reasonably  acceptable to Holder within twelve (12) months from the date of this
Agreement.

               V. RESERVATION OF AUTHORIZED SHARES OF COMMON STOCK

<PAGE>

         On the Closing Date and  thereafter,  the Company shall have authorized
and  reserved  and keep  available  for issuance not less than the Cap Amount of
shares of Common Stock  (subject to equitable  adjustment  for any stock splits,
stock dividends, reclassification or similar events and subject to reduction for
the number of shares of Common Stock  issued upon  conversion  of the  Preferred
Stock and upon the exercise of the Warrants) (the "Reserved  Amount") solely for
the purpose of effecting the  conversion of the  Preferred  Stock.  The Reserved
Amount shall be allocated among the Holders as provided in Section XIV (C).

                           VI. INTENTIONALLY OMITTED.

              VII. FAILURE TO SATISFY CONVERSIONS OR REMOVE LEGENDS

         A. Conversion Default Payments. If, at any time, (x) a Holder submits a
Notice of  Conversion  (or is deemed to submit such  notice  pursuant to Section
IV.H) and the Company  fails for any reason  (other than because  such  issuance
would exceed such Holder's  allocated portion of the Cap Amount) to deliver,  on
or prior to the  expiration  of the Delivery  Period for such  conversion,  such
number of shares of Common  Stock to which  such  Holder is  entitled  upon such
conversion  or (y) the  Company  provides  notice  (including  by way of  public
announcement)  to any Holder at any time of its intention not to issue shares of
Common Stock upon exercise by any Holder of its conversion  rights in accordance
with the terms of the Preferred  Stock (other than because such  issuance  would
exceed  such  Holder's  allocated  portion of the Cap Amount) or (z) the Company
fails to deliver certificates  representing Common Stock to the Holder free from
any  restrictive  legend to the extent  required under the  Securities  Purchase
Agreement  (each of (x),  (y) and (z)  being a  "Conversion  Default")  and such
Conversion  Default is not fully cured within three (3) days  following the date
of the Conversion Default,  then the Company shall pay to such Holder damages in
an amount  equal to the product of (A) the Damages  Amount times (B) D times (C)
 .01, where:

         "D" means the number of days  beginning  and  including the date of the
Conversion  Default  through and  including  the Cure Date with  respect to such
Conversion Default;

         "Damages  Amount"  means the Face  Amount of the  Preferred  Stock with
respect to which such Conversion  Default occurred plus all Premium (accrued and
unpaid) thereon as of the first day of the Conversion Default.

         "Cure Date" means (i) with respect to a Conversion Default described in
clause (x) of its definition, the date the Company effects the conversion of the
shares of Preferred  Stock  submitted for  conversion (or such earlier date that
the Purchaser voids the conversion as provided  herein),  (ii) with respect to a
Conversion  Default  described  in clause  (y) of its  definition,  the date the
Company  effects the conversion of the shares of Preferred  Stock  submitted for
conversion  (or such earlier date that the  Purchaser  voids the  conversion  as
provided  herein) and (iii) with  respect to a Conversion  Default  described in
clause  (z) of its  definition,  the  date  the  Company  delivers  certificates
representing  the shares of Common  Stock as a result of such  conversion,  free

<PAGE>

from any  restrictive  legend  pursuant to the terms of the Securities  Purchase
Agreement.

         The  payments  to which a Holder  shall be  entitled  pursuant  to this
Section  VII.A are  referred to herein as  "Conversion  Default  Payments."  All
Conversion  Default Payments shall be paid in cash within ten (10) business days
of a Holder's  demand  therefore  (which demand may be made at any time and from
time to time).

         B. Intentionally omitted.

         C. Certain Prohibited  Announcements.  Notwithstanding  anything to the
contrary  contained in this Article VII, the Company shall not provide notice to
any  Holder,  including  by way of  public  announcement,  at any  time,  of its
intention  not to issue shares of Common Stock to any Holder upon  conversion in
accordance with the terms of this Certificate of Designation (other than because
such issuance would exceed such Holder's allocated portion of the Cap Amount).

         D. Registration Failure and Registration  Suspension.  If the aggregate
duration of all Registration  Failures and/or Registration  Suspensions (each as
defined in the Registration Rights Agreement) is greater than one hundred eighty
(180) days,  then,  beginning with the 180th day, for each subsequent day that a
Registration  Failure or Registration  Suspension is in effect, then the Company
shall,  in lieu of additional  payments  under  Section 2.3 of the  Registration
Rights Agreement, pay to each Holder of Preferred Stock damages in the amount of
1% of the aggregate Face Amount of Preferred  Stock held by such Holder for each
such subsequent day; provided, however, (a) no payment shall be due with respect
to any day  which  is more  than two  years  after  the  Closing  Date;  (b) the
aggregate  payments made under this Section VII D to any Holder shall not exceed
the Face Amount of the  Preferred  Stock held by such Holder;  (c) any amount of
Conversion  Shares (as  defined in the  Securities  Purchase  Agreement)  that a
Holder may sell pursuant to Rule 144 as of the time of calculation  shall not be
included in  calculating  the aggregate  Face Amount of Preferred  Stock held by
such Holder;  (d) any Preferred Stock held by a Holder that has been canceled or
retired  shall not be  included  in  calculating  the  aggregate  Face Amount of
Preferred Stock held by such Holder,  and (e) days that a Permitted Blackout (as
defined in the Registration  Rights  Agreement)  exists shall not be included as
Registration  Failures or Registration  Suspensions for purposes of this Section
VII D. All such cash  payments  shall be made within ten (10) days of a Holder's
demand therefor, which demand may be made at any time and from time to time.

                      VIII. REDEMPTION AT COMPANY'S OPTION

         A. Redemption at Company's Option.

                  (i) Provided (a) the Company has timely honored all Notices of
Conversion,  except  to the  extent  Purchaser  has not been  damaged  by such a
failure  or, if damaged,  has been fully  compensated  therefor,  (b) all of the
Common Stock  issuable upon  conversion  of the Preferred  Stock (at the time of
delivery of the Optional  Redemption Notice and for each day

<PAGE>

thereafter  through the Effective Time of Redemption) is covered by an effective
Registration Statement,  (c) the resale of all such Common Stock can be effected
pursuant  thereto at all times  during the period  from the date which is twenty
(20) trading days prior to delivery of the Optional  Redemption Notice until the
Effective  Time of  Redemption  (as  defined  herein),  (d) all other  Liquidity
Conditions  (as defined in Article III hereof) are then  satisfied and have been
satisfied for the twenty (20) immediately  preceding  business days, and (f) the
Company  has not  failed to remove a legend at the  request  of a  Purchaser  if
required to do so under the Securities Purchase Agreement,  except to the extent
Purchaser has not been damaged by such a failure or, if damaged,  has been fully
compensated therefor  ("Redemption  Conditions") and provided the Company is not
then in  violation  of any of its  material  obligations  under  the  Securities
Purchase  Agreement,  the Registration  Rights  Agreements,  the Warrants or the
terms of the Preferred Stock (which violations remain uncured), then the Company
shall have the right  pursuant to Section  VIII .A(ii)  below to redeem for cash
("Redemption at Company's  Election") all the then  outstanding  Preferred Stock
for the Optional  Redemption  Amount (as herein  defined),  which right shall be
exercisable by delivery of an Optional  Redemption Notice (as defined herein) in
accordance   with  the   procedures   set  forth  in   Section   VIII.C   below.
Notwithstanding the delivery of an Optional Redemption Notice, the Holders shall
have the right to convert up to and including the Effective Time of Redemption.

         The  "Optional  Redemption  Amount  " with  respect  to any  Holder  of
Preferred Stock under this clause means, if the Effective Time of the Redemption
is (a) on or prior to the date which is ninety (90) days after the Closing Date,
the greater of (x) one hundred and ten percent  (110%) of the Face Amount of the
Preferred  Stock held by such Holder which is subject to redemption plus accrued
but unpaid  Premium plus any other amounts due with respect  thereto and (y) the
Benefit of the Bargain (as defined  herein);  (b) after the ninetieth (90th) day
but on or before the one hundred  eightieth  (180th) day  following  the Closing
Date, the greater of (x) one hundred  fifteen  percent (115%) of the Face Amount
of the Preferred  Stock held by such Holder which is subject to redemption  plus
accrued but unpaid  Premium plus any other amounts due with respect  thereto and
(y) the Benefit of Bargain; and (c) after the one hundred and eightieth (180th )
day following the Closing Date,  the greater of (x) one hundred  twenty  percent
(120%) of the Face Amount of the  Preferred  Stock held by such Holder  which is
subject to redemption plus accrued but unpaid Premium plus any other amounts due
with  respect  thereto  and (y) the  Benefit of  Bargain.  The  "Benefit  of the
Bargain"  means  (i) the  number of  Conversion  Shares  issuable  upon the full
conversion  pursuant  to  Section  IV.  A of  the  Preferred  Stock  subject  to
redemption  (without regard to any limitations on conversion herein or elsewhere
contained,  other than the Cap  Amount)  times (ii) the Closing Bid Price on the
trading  day  immediately  before  the  Effective  Time of  Redemption  less the
Conversion Price on such date.

         B. Limitations on Optional  Redemption.  The Company may not deliver an
Optional  Redemption  Notice for a redemption for cash unless such redemption is
with respect to all  then-outstanding  shares of Preferred  Stock and unless the
Company  has  ("Funding  Availability"):  (a) the full  amount  of the  Optional
Redemption Amount in cash, available in a demand or other immediately  available
account in a bank or similar financial institution; or (b) immediately available
credit facilities,  in the full amount of the Optional Redemption Amount in cash
with a

<PAGE>

bank or similar  financial  institution  (or  binding  commitment  letters  with
respect thereto which  commitment  letters shall be subject only to commercially
reasonable  conditions to closing as to which the  Company's  Board of Directors
has made a good faith business judgment will be fulfilled to permit consummation
of the redemption hereunder);  or (c) an agreement with a standby underwriter or
qualified  buyer  ready,  willing  and  able to  purchase  from  the  Company  a
sufficient  face  amount or  number of shares or any debt or equity  securities,
subject to the limitations  contained in the Securities  Purchase  Agreement and
herein,  to provide net proceeds in the full amount of the  Optional  Redemption
Amount;  or (d) a combination  of the items set forth in the  preceding  clauses
(a), (b) and (c),  aggregating the full amount of the Optional Redemption Amount
in cash.  Any  Optional  Redemption  Notice  delivered  in  accordance  with the
foregoing  shall be  accompanied  by a statement  executed by a duly  authorized
officer of the Company certifying that the Company has Funding  Availability and
by other  appropriate  documentation as evidence of the other provisions of this
Section.

         C.  Mechanics  of Optional  Redemption.  The Company  shall  effect the
Redemption at Company's  Election under this Article VIII by delivering  written
notice thereof (the "Optional Redemption Notice") on a business day (the "Notice
Date") that is at least ten (10) days, and not more than thirty (30) days, prior
to the date on which such redemption is to become effective (the "Effective Time
of  Redemption")  to each  Holder  at its  address  appearing  in the  Company's
register  for  the  Preferred  Stock.  An  Optional  Redemption  Notice  may  be
personally  served or delivered by reputable  overnight  courier or by confirmed
telecopy,  and shall be deemed  delivered at the time and date of receipt (which
shall include telephone line facsimile transmission).  Once the Company has made
such an Election, it is irrevocable and binding,  unless revocation is consented
to by all Holders.

         D.  Payment of Optional  Redemption  Amount.  The  Optional  Redemption
Amount shall be paid to each Holder on the third (3rd)  business  day  following
the Effective Time of Redemption, provided that the Preferred Stock certificates
are properly tendered.

         E. Failure to Pay. If the Company fails to pay, when due and owing, any
Optional  Redemption Amount,  then each Holder entitled to receive such Optional
Redemption  Amount shall have the right,  at any time and from time to time,  to
require the Company,  upon written notice, to immediately convert (in accordance
with the terms of and subject to the limitations contained in Article IV) any or
all of the shares of  Preferred  Stock  which are the subject of  Redemption  at
Company's  Election  into  shares  of  Common  Stock at the  lower of the  Fixed
Conversion  Price and the lowest  Conversion  Price in effect  during the 90 day
period  beginning on the date after the  Effective  Time of  Redemption.  In the
event of such a default,  any future right to effect a  Redemption  at Company's
Election  would be  forfeited.  Notwithstanding  the  foregoing,  the  preceding
provisions  of this  paragraph  shall not apply if the  failure to pay is caused
solely by  inadvertent  mistakes on the part of the  Company  and/or its agents;
provided,  however,  in no  event  shall  any  failure  to  pay  caused  by  any
inadvertent mistakes last for more than two (2) business days.

<PAGE>

                                    IX. RANK

         All  outstanding  shares of the Preferred Stock shall rank (i) prior to
the Common Stock;  (ii) prior to any other class of capital stock of the Company
now outstanding and prior to any class or series of capital stock of the Company
hereafter created (unless such class or series of capital stock specifically, by
its terms,  ranks senior to or pari passu with the Preferred Stock to the extent
permitted  by  Article  XIII)  (collectively,  with the  Common  Stock,  "Junior
Securities");  (iii) pari passu with any class or series of capital stock of the
Company  hereafter  created to the extent  permitted by Article  XIII;  and (iv)
junior to any class or series of capital stock of the Company  hereafter created
to the extent  permitted by Article  XIII; in each case as to dividends or as to
distribution  of assets  upon  liquidation,  dissolution  or  winding  up of the
Company, whether voluntary or involuntary.

                            X. LIQUIDATION PREFERENCE

         A.  Liquidation of the Company.  If a Bankruptcy Event shall occur and,
on account of any such event, the Company shall liquidate,  dissolve or wind up,
or if the Company shall otherwise liquidate, dissolve or wind up (a "Liquidation
Event"),  no distribution  shall be made to the Holders of any shares of capital
stock  of  the  Company  (other  than  Senior   Securities)  upon   liquidation,
dissolution  or winding up unless prior  thereto the Holders shall have received
the  Liquidation  Preference  (as herein  defined)  with  respect to each share;
provided,  however, that, upon the occurrence of a Liquidation Event, the assets
and funds available for distribution among the Holders and holders of Pari Passu
Securities  shall be  insufficient  to permit the payment to such Holders of the
preferential  amounts payable  thereon,  then the entire assets and funds of the
Company legally  available for  distribution to the 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. Certain Acts Not a  Liquidation.  The purchase or  redemption by the
Company of stock of any class,  in any manner  permitted by law,  shall not, for
the purposes hereof, be regarded as a liquidation,  dissolution or winding up of
the Company. Neither the consolidation or merger of the Company with or into any
other entity nor the sale or transfer by the Company of less than  substantially
all of its assets shall, for the purposes hereof, be deemed to be a liquidation,
dissolution or winding up of the Company.

         C. Definition of Liquidation Preference.  The "Liquidation  Preference"
with  respect to a share of  Preferred  Stock means an amount  equal to the Face
Amount  thereof  plus the accrued but unpaid  Premium and other  amounts  unpaid
hereunder, including without limitation Redemption Amounts, with respect thereto
plus any other  amounts that may be due from the Company  with  respect  thereto
through the date of final distribution.  The Liquidation Preference with respect
to any Pari  Passu  Securities  shall  be as set  forth  in the  certificate  of
incorporation of the Company.

<PAGE>

          XI. ADJUSTMENTS TO THE CONVERSION PRICE; CERTAIN PROTECTIONS

         Subject to Section IV. G(i), the  Conversion  Price shall be subject to
adjustment from time to time as follows:

         A. Stock Splits,  Stock Dividends,  Etc. If at any time on or after the
Closing Date, the number of outstanding shares of Common Stock is increased by a
stock split,  stock  dividend,  combination,  reclassification  or other similar
event, the Fixed Conversion Price shall be proportionately  adjusted,  or if the
number of  outstanding  shares of Common Stock is  decreased by a reverse  stock
split,  combination or  reclassification  of shares, or other similar event, the
Fixed   Conversion   Price  and  the   Variable   Conversion   Price   shall  be
proportionately  adjusted. In such event, the Company shall notify the Company's
transfer agent of such change on or before the effective date thereof.

         B.       Intentionally omitted.

         C. Major  Transactions.  (i) If the Company  shall with the approval of
its Board of Directors consolidate or merge with any other corporation or entity
(other than a  consolidation  or merger in which the Company is the surviving or
continuing entity and either its capital stock is unchanged and unissued in such
transaction or such capital stock is issued,  which  issuance,  in the aggregate
with all other such  issuances  during the 180-day  period ending on the date on
which such  transaction  is publicly  disclosed,  does not exceed twenty percent
(20%) of the Common Stock),  or there shall occur any share exchange pursuant to
which all of the  outstanding  shares of Common Stock are  converted  into other
securities or property,  or there shall occur any other such reclassification or
change of the outstanding  shares of Common Stock, or the Company shall sell all
or  substantially  all of its  assets  (each  of the  foregoing  being a  "Major
Transaction"),  then each Holder shall  thereafter be entitled to, at its option
exercised  by written  notice to the  Company  given not more than five (5) days
prior to the consummation of such transaction,  either (a) in the event that the
Common Stock remains  outstanding  or holders of Common Stock receive any common
stock or substantially  similar equity interest,  in each of the foregoing cases
which is publicly  traded,  retain its Preferred  Stock and such Preferred Stock
shall  continue  to apply to such  Common  Stock or shall  apply,  as  nearly as
practicable,  to such other common stock or equity interest, as the case may be,
or (b) regardless of whether (a) applies, receive consideration, in exchange for
each share of Preferred Stock held by it, equal to the greater of, as determined
in the sole  discretion  of such  Holder:  (i) the  number of shares of stock or
securities  or  property  (including  cash)  of the  Company,  or of the  entity
resulting from such Major Transaction (the "Major  Transaction  Consideration"),
to which a holder  of the  number  of shares  of  Common  Stock  delivered  upon
conversion of such shares of Preferred  Stock would have been entitled upon such
Major  Transaction  had the Holder  exercised its right of  conversion  (without
regard to any limitations on conversion herein or elsewhere contained other than
the Cap Amount) on the trading date immediately  preceding the effective date of
such Major Transaction and had such Common Stock been issued and outstanding and
had such Holder  been the holder of record of such  Common  Stock at the time of
the consummation of such Major Transaction,  and (ii) one hundred percent (100%)
of the Face Amount plus  accrued and unpaid  Premium of such shares of

<PAGE>

Preferred Stock in cash; and the Company shall make lawful provision therefor as
a part of such Major  Transaction  and shall cause the issuer of any security in
such transaction  which  constitutes  Registrable  Securities (as defined in the
Registration Rights Agreement) under the Registration Rights Agreement to assume
all of the Company's obligations thereunder.

         (ii)  In  the  event  that  the  Company  shall  publicly   propose  to
consolidate or merge with any other corporation in a transaction in which common
stock  of  the  surviving  corporation  or the  parent  thereof  (the  "Exchange
Securities")  is issued to the holders of Common  Stock in such  transaction  in
exchange for all such Common Stock, and (a) the Exchange Securities are publicly
traded on the NASDAQ  National Market or the New York Stock Exchange on the date
such proposed  transaction is publicly  disclosed and remain so traded following
consummation  of such  transaction,  (b) the average daily trading volume of the
Exchange  Securities  during the 45 trading day period  beginning on the date on
which such  transaction  is publicly  disclosed  is equal to or greater than the
average  daily  trading  volume of the Common  Stock  during the 45 trading  day
period ending on the date on which such transaction is publicly  disclosed,  (c)
the historical 45 trading day volatility of the Exchange  Securities  during the
period beginning on the date on which such transaction is publicly  disclosed is
equal to or  greater  than the 45 trading  day  volatility  of the Common  Stock
during the 45 trading day period ending on the date on which such transaction is
publicly  disclosed  and (d) the  market  capitalization  of the  issuer  of the
Exchange Securities,  based on the last sale price of the Exchange Securities on
the date which is 45 trading  days after the date on which such  transaction  is
publicly disclosed, is equal to or greater than the market capitalization of the
Company on the date  immediately  before the date on which such  transaction  is
publicly  disclosed  (in each case,  with respect to the  foregoing  clauses (a)
through  (d), as reported by  Bloomberg  or a  comparable  reporting  service of
national  reputation  selected by the Company and  reasonably  acceptable to the
Majority Holders if Bloomberg is not then reporting  closing sale prices of such
security),  then the  provisions  of clause (b) of paragraph (i) above shall not
apply.

         (iii) In the event  that the  Company  shall,  in a Major  Transaction,
consolidate  or merge with any other  corporation  in a transaction in which the
Company is the  survivor  and less than 40% of the Common  Stock of the  Company
will have been  issued,  in the  aggregate,  in all  transactions  described  in
paragraph  (i) above during the 180-day  period  ending on the date on which the
transaction is publicly disclosed, the provisions of clause (b) of paragraph (i)
above shall not apply to the extent  that each of the  following  conditions  is
satisfied:  (a) the Common Stock remains  publicly traded on the NASDAQ National
Market,  (b) the average daily trading  volume of the Common Stock during the 45
trading day period  beginning on the date on which such  transaction is publicly
disclosed is equal to or greater than the average  daily  trading  volume of the
Common Stock  during the 45 trading day period  ending on the date on which such
transaction is publicly disclosed,  (c) the historical 45 trading day volatility
of the Company's  Common Stock during the period  beginning on the date on which
such  transaction  is  publicly  disclosed  is equal to or  greater  than the 45
trading  day  volatility  of the Common  Stock  during the 45 trading day period
ending on the date on which such transaction is publicly disclosed,  and (d) the
market capitalization of the Company, based on the last sale price of the Common
Stock on the  date  which  is 45  trading  days  after  the  date on which  such
transaction  is  publicly  disclosed

<PAGE>

is equal to or greater than the market capitalization of the Company on the date
immediately  before the date on which such transaction is publicly disclosed (in
each case, with respect to the foregoing clauses (a) through (d), as reported by
Bloomberg).

         (iv) No sooner than ten (10) days nor later than five (5) days prior to
the  consummation  of  a  Major  Transaction,   but  not  prior  to  the  public
announcement of such Major Transaction, the Company shall deliver written notice
("Notice  of  Major  Transaction")  to  each  Holder,   which  Notice  of  Major
Transaction  shall be deemed to have been  delivered  one (1) business day after
the Company's sending such notice by telecopy (provided that the Company sends a
confirming  copy of such  notice on the same day by  overnight  courier) of such
Notice of Major Transaction. Such Notice of Major Transaction shall indicate the
amount and type of the Major Transaction  Consideration  which such Holder would
receive  under this Section.  If the Major  Transaction  Consideration  does not
consist  entirely of United  States  currency,  such Holder may elect to receive
United States currency in an amount equal to the value of the Major  Transaction
Consideration  in lieu of the  Major  Transaction  Consideration  by  delivering
notice of such  election  to the Company  within  five (5) days of the  Holder's
receipt of the Notice of Major Transaction.

         D. Adjustment Due to Distribution. If the Company shall declare or make
any  distribution  of its assets (or rights to acquire its assets) to holders of
any class of Common Stock as a partial liquidating dividend, by way of return of
capital or otherwise  (including any dividend or  distribution  to the Company's
shareholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary)  (a  "Distribution")  at any time after the date hereof,  then the
Holders  will  be  entitled  to  receive,  upon  the  terms  applicable  to such
Distribution, the amount of such assets (or rights) which each Holder could have
acquired if such Holder had held the number of shares of Common Stock acquirable
upon  complete  conversion  of  the  Preferred  Stock  (without  regard  to  any
limitations on conversion or exercise herein or elsewhere contained) immediately
before the date on which a record is taken for determining shareholders entitled
to such  Distribution,  or if no such record is taken,  the date as of which the
record  holders of Common  Stock are to be  determined  to be  entitled  to such
Distribution.

         E. (i) Issuance of Common  Stock at a Price below the Fixed  Conversion
Price. Except as otherwise provided in Section A or C of this Article or in this
Section E, if, at any time after the Closing Date,  the Company issues or sells,
or in  accordance  with Section  E(iii)  hereof is deemed to have issued or sold
(except (a) as consideration in connection with an acquisition by the Company of
any  business or assets,  regarding  which the  Company has  obtained a fairness
opinion from a nationally  recognized investment banking firm or regarding which
an  appropriate  officer of the Company has certified to the Purchaser  that the
board of  directors of the Company has  determined  in its  reasonable  business
judgment  that the Company has received in such  transaction  the fair value for
the shares issued therefor,  (b) as consideration  for services  provided to the
Company,  (I) the issuances of which have been committed by the Company prior to
the Closing Date and such  commitments  have been  disclosed to the Purchaser in
the schedules delivered pursuant to the Securities  Purchase Agreement,  or (II)
the  issuances  of which are  committed by the Company  after the Closing  Date,
provided, however, that services provided

<PAGE>

pursuant  to this clause  (II) shall not exceed  $200,000 in value and  services
provided  under this clause (b) in the  aggregate  shall not exceed  $500,000 in
value,  (c)  pursuant to the  exercise,  conversion  or exchange of  Convertible
Securities (as defined  herein) of the Company issued and  outstanding as of the
Closing Date (as defined in the  Securities  Purchase  Agreement)  in accordance
with the terms of such  Convertible  Securities  as of such  date,  (d) upon the
exercise  of the  Warrant  issued to the Holder  under the  Securities  Purchase
Agreement,  (e) to the Purchasers  pursuant to the Securities Purchase Agreement
or  conversion  of  Preferred  Stock,  (f) pursuant to any stock  option,  stock
purchase or restricted stock plan of the Company covering employees, consultants
and/or   non-employee   directors  (and  any  amendment  thereof  or  any  award
thereunder, provided any such amendment does not reduce any exercise price to an
amount  below $5.00 per share),  so long as the issuance of such stock or option
(other than to non-employee directors) is approved by a committee of independent
directors of the Company,  (g) pursuant to strategic  investments  from industry
participants,  the  primary  purpose  of each of which  is not to  raise  equity
capital,  (h) to  Ladenburg  Thalmann  pursuant  to a  warrant  to be  issued in
connection  with the closing of the  transaction  contemplated by the Securities
Purchase Agreement,  (i) in a fully distributed  underwritten public offering or
(j) under the terms of the April 11,  2000  acquisition  by the  Company of Giza
Group),  any shares of Common Stock for no  consideration or for a consideration
per share less than the then current  Fixed  Conversion  Price,  then  effective
immediately  upon such issuance,  the Fixed Conversion Price will be adjusted to
be equal to the  consideration  per share  received,  or  deemed to be  received
pursuant to this Section XIII E, in such issuance.

                (ii) Issuance of Common Stock at a Price below the Market Price.
Except as otherwise  provided in Section A, C or E (i) of this  Article,  if, at
any time after the Closing Date, the Company  issues or sells,  or in accordance
with  Section  E(iii)  hereof is deemed to have  issued or sold  (except  (a) as
consideration  in connection  with an acquisition by the Company of any business
or assets,  regarding  which the Company has obtained a fairness  opinion from a
nationally  recognized investment banking firm or regarding which an appropriate
officer  of the  Company  has  certified  to the  Purchaser  that  the  board of
directors of the Company has determined in its reasonable business judgment that
the  Company  has  received  in such  transaction  the fair value for the shares
issued therefor,  (b) as consideration for services provided to the Company, (I)
the  issuances of which have been  committed by the Company prior to the Closing
Date and such  commitments have been disclosed to the Purchaser in the schedules
delivered pursuant to the Securities Purchase  Agreement,  or (II) the issuances
of which are committed by the Company after the Closing Date, provided, however,
that services provided pursuant to this clause (II) shall not exceed $200,000 in
value and services  provided  under this clause (b) in the  aggregate  shall not
exceed $500,000 in value,  (c) pursuant to the exercise,  conversion or exchange
of  Convertible  Securities  (as  defined  herein)  of the  Company  issued  and
outstanding  as of the  Closing  Date (as  defined  in the  Securities  Purchase
Agreement) in  accordance  with the terms of such  Convertible  Securities as of
such date,  (d) upon the exercise of the Warrant  issued to the Holder under the
Securities Purchase Agreement,  (e) to the Purchasers pursuant to the Securities
Purchase  Agreement,  (f)  pursuant  to any  stock  option,  stock  purchase  or
restricted  stock plan of the Company  covering  employees,  consultants  and/or
non-employee  directors  (and any  amendment  thereof  or any award  thereunder,
provided  any such  amendment

<PAGE>

does not reduce any exercise price to an amount below $5.00 per share),  so long
as the  issuance  of  such  stock  or  option  is  approved  by a  committee  of
independent directors of the Company, (g) pursuant to strategic investments from
industry  participants,  the  primary  purpose  of each of which is not to raise
equity capital,  (h) to Ladenburg Thalmann pursuant to a warrant to be issued in
connection  with the closing of the  transaction  contemplated by the Securities
Purchase Agreement,  (i) in a fully distributed  underwritten public offering or
(j) under the terms of the April 11,  2000  acquisition  by the  Company of Giza
Group),  any shares of Common Stock for no  consideration or for a consideration
per share less than the then current Market Price (a "Dilutive Issuance"),  then
effective  immediately  upon the Dilutive  Issuance,  the Fixed Conversion Price
will be adjusted in accordance with the following formula:

                  E' = (E) (O + P/M) / (CSDO)

                  where:

                  E'       =        the adjusted Fixed Conversion Price
                  E        =        the then current Fixed Conversion Price;
                  M        =        the then current Market Price;
                  O        =        the   number  of  shares  of  Common   Stock
                                    outstanding   immediately   prior   to   the
                                    Dilutive Issuance;
                  P        =        the aggregate  consideration,  calculated as
                                    set forth in Section E(iii) hereof, received
                                    by the Company upon such Dilutive  Issuance;
                                    and
                  CSDO     =        the total  number of shares of Common  Stock
                                    Deemed   Outstanding   (as  herein  defined)
                                    immediately after the Dilutive Issuance.

Notwithstanding  anything to the contrary in this Section  E(ii),  no adjustment
shall be made under this Section E(ii) to the Fixed  Conversion  Price if shares
of Common Stock are issued or sold or, in accordance with Section E(iii) hereof,
are deemed to be issued or sold by the Company, for a consideration per share in
excess of 125% of the then effective Fixed Conversion Price.

                (iii) Effect on Fixed  Conversion  Price of Certain Events.  For
purposes of determining the adjusted Fixed  Conversion  Price under Section E(i)
or E(ii) hereof, the following will be applicable:

                      (a)  Issuance of Rights or Options.  If the Company in any
manner  issues  or  grants  any  warrants,  rights or  options,  whether  or not
immediately  exercisable,  to subscribe for or to purchase Common Stock or other
securities  exercisable,  convertible  into or  exchangeable  for  Common  Stock
("Convertible  Securities  "), but not to include  the grant or  exercise of any
stock or options which may hereafter be granted or exercised  under any employee
or Director benefit plan of the Company now existing or to be implemented in the
future  (so long as the  issuance  of such stock or  options  is  approved  by a
committee of independent  directors of the Company) (such  warrants,  rights and
options to purchase  Common  Stock or  Convertible  Securities  are  hereinafter
referred to as  "Options"),  and the price per share for which  Common

<PAGE>

Stock is  issuable  upon the  exercise  of such  Options is less than the Market
Price on the date of issuance ("Below Market  Options"),  then the maximum total
number of shares of Common  Stock  issuable  upon the exercise of all such Below
Market Options  (assuming  full exercise,  conversion or exchange of Convertible
Securities, if applicable) will, as of the date of the issuance or grant of such
Below Market  Options,  be deemed to be outstanding  and to have been issued and
sold by the Company  for such price per share.  For  purposes  of the  preceding
sentence,  the  price per share for  which  Common  Stock is  issuable  upon the
exercise of such Below Market  Options is  determined  by dividing (i) the total
amount,  if any,  received or receivable by the Company as consideration for the
issuance or granting of such Below Market  Options,  plus the minimum  aggregate
amount of  additional  consideration,  if any,  payable to the Company  upon the
exercise of all such Below  Market  Options,  plus,  in the case of  Convertible
Securities issuable upon the exercise of such Below Market Options,  the minimum
aggregate  amount  of  additional   consideration  payable  upon  the  exercise,
conversion or exchange  thereof at the time such  Convertible  Securities  first
become  exercisable,  convertible  or  exchangeable,  by (ii) the maximum  total
number of shares of Common  Stock  issuable  upon the exercise of all such Below
Market  Options  (assuming  full  conversion  of  Convertible   Securities,   if
applicable).  No further  adjustment to the Fixed  Conversion Price will be made
upon the actual  issuance of such Common  Stock upon the  exercise of such Below
Market  Options or upon the  exercise,  conversion  or exchange  of  Convertible
Securities issuable upon exercise of such Below Market Options.

                      (b) Issuance of Convertible Securities.

                           1) If the  Company in any manner  issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable  upon the exercise of Options) and the price per share for
which Common Stock is issuable  upon such  exercise,  conversion or exchange (as
determined  pursuant to Section  E(iii)(b)(2)  if  applicable)  is less than the
Market Price on the date of issuance, then the maximum total number of shares of
Common Stock  issuable  upon the  exercise,  conversion  or exchange of all such
Convertible  Securities will, as of the date of the issuance of such Convertible
Securities,  be deemed to be outstanding and to have been issued and sold by the
Company for such price per share.  For the purposes of the  preceding  sentence,
the  price per share for which  Common  Stock is  issuable  upon such  exercise,
conversion or exchange is  determined by dividing (i) the total amount,  if any,
received or receivable by the Company as consideration  for the issuance or sale
of all  such  Convertible  Securities,  plus the  minimum  aggregate  amount  of
additional  consideration,  if any,  payable to the Company  upon the  exercise,
conversion or exchange  thereof at the time such  Convertible  Securities  first
become  exercisable,  convertible  or  exchangeable,  by (ii) the maximum  total
number of shares of Common  Stock  issuable  upon the  exercise,  conversion  or
exchange of all such Convertible Securities.  No further adjustment to the Fixed
Conversion  Price will be made upon the actual  issuances  of such Common  Stock
upon exercise, conversion or exchange of such Convertible Securities.

                           2) If the  Company in any manner  issues or sells any
Convertible  Securities  with a  fluctuating  conversion  or  exercise  price or
exchange  ratio (a

<PAGE>

"Variable Rate Convertible Security"), then the price per share for which Common
Stock is issuable upon such exercise, conversion or exchange for purposes of the
calculation  contemplated  by  Section  E(iii)(b)(1)  shall be  deemed to be the
lowest price per share which would be  applicable  assuming that (1) all holding
period  and other  conditions  to any  discount  or  adjustment  to the price of
exercise,  conversion  or  exchange  (including,   without  limitation,  resets)
contained in such Convertible  Security have been satisfied,  and (2) the Market
Price on the date of  issuance  of such  Convertible  Security  was eighty  five
percent  (85%) of the Market Price on such date (the  "Assumed  Variable  Market
Price").

                      (c) Change in Option Price or Conversion Rate.  Except for
the grant or exercise of any stock or options  which may hereafter be granted or
exercised  under any  employee  or  Director  benefit  plan of the  Company  now
existing or to be  implemented  in the future,  so long as the  issuance of such
stock or options is approved  by a committee  of  independent  directors  of the
Company,  if there  is a change  at any  time in (i) the  amount  of  additional
consideration  payable to the Company upon the exercise of any Options; (ii) the
amount of  additional  consideration,  if any,  payable to the Company  upon the
exercise,  conversion or exchange or any  Convertible  Securities;  or (iii) the
rate at which any Convertible  Securities are  convertible  into or exchangeable
for Common  Stock  (other  than  under or by reason of  provisions  designed  to
protect against  dilution),  the Fixed Conversion Price in effect at the time of
such change will be  readjusted to the Fixed  Conversion  Price which would have
been in effect at such time had such  Options or  Convertible  Securities  still
outstanding  provided  for such  changed  additional  consideration  or  changed
conversion  rate, as the case may be, at the time initially  granted,  issued or
sold.

                      (d)   Treatment   of  Expired   Options  and   Unexercised
Convertible  Securities.  If, in any case,  the total number of shares of Common
Stock  issuable  upon  exercise of any Options or upon  exercise,  conversion or
exchange of any Convertible Securities is not, in fact, issued and the rights to
exercise  such  option or to  exercise,  convert or  exchange  such  Convertible
Securities shall have expired or terminated,  the Fixed Conversion Price then in
effect will be readjusted to the Fixed Conversion Price which would have been in
effect  at the  time of such  expiration  or  termination  had such  Options  or
Convertible  Securities,  to the extent  outstanding  immediately  prior to such
expiration or termination  (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been issued.

                      (e) Calculation of Consideration  Received.  If any Common
Stock, Options or Convertible  Securities are issued,  granted or sold for cash,
the consideration received therefor for purposes of this Designation will be the
amount  received  by  the  Company  therefor,  before  deduction  of  reasonable
commissions,  underwriting  discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock,  Options or Convertible  Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the  consideration  other than cash  received  by the  Company  will be the fair
market value of such consideration  except where such consideration  consists of
freely-tradeable  securities, in which case the amount of

<PAGE>

consideration received by the Company will be the Market Price thereof as of the
date of receipt. In case any Common Stock, Options or Convertible Securities are
issued in connection  with any merger or  consolidation  in which the Company is
the surviving  corporation,  the amount of consideration therefor will be deemed
to be the fair market  value of such  portion of the net assets and  business of
the non-surviving  corporation as is attributable to such Common Stock,  Options
or  Convertible  Securities,  as the case may be. The fair  market  value of any
consideration other than cash or securities will be determined in the good faith
reasonable business judgment of the Board of Directors.

                      (f) Exceptions to Adjustment of Fixed Conversion Price. No
adjustment  to the Fixed  Conversion  Price  will be made (i) upon  issuance  of
Common Stock as  consideration  in connection with an acquisition by the Company
of any business or assets,  regarding  which the Company has obtained a fairness
opinion from a nationally  recognized investment banking firm or regarding which
an  appropriate  officer of the Company has certified to the Purchaser  that the
board of  directors of the Company has  determined  in its  reasonable  business
judgment  that the Company has received in such  transaction  the fair value for
the shares issued therefor;  (ii) upon issuance of Common Stock as consideration
for  services  provided to the  Company,  (I) the  issuances  of which have been
committed  by the Company  prior to the Closing Date and such  commitments  have
been  disclosed to the  Purchaser  in the  schedules  delivered  pursuant to the
Securities Purchase  Agreement,  or (II) the issuances of which are committed by
the Company after the Closing Date,  provided,  however,  that services provided
pursuant  to this clause  (II) shall not exceed  $200,000 in value and  services
provided  under this clause (ii) in the aggregate  shall not exceed  $500,000 in
value;  (iii)  upon  the  exercise  of  any  warrants,  options  or  convertible
securities  issued and  outstanding  on the date hereof in  accordance  with the
terms of such  securities as of such date;  (iv) upon  issuances of Common Stock
pursuant to any stock option,  stock  purchase or  restricted  stock plan of the
Company covering employees,  consultants and/or non-employee  directors (and any
amendment thereof or any award thereunder,  provided any such amendment does not
reduce any exercise  price to an amount  below $5.00 per share),  so long as the
issuance  of such stock or option  (other  than to  non-employee  directors)  is
approved by a committee of  independent  directors of the Company,  (v) upon the
issuance of the Conversion Shares or the Warrant Shares in accordance with terms
of the Securities Purchase Agreement;  (vi) upon the exercise of the Warrant and
conversion of the Preferred Stock;  (vii) upon issuance of Common Stock pursuant
to strategic investments from industry participants, the primary purpose of each
of which is not to raise equity capital, (viii) upon issuance of Common Stock to
Ladenburg  Thalmann  pursuant to a warrant to be issued in  connection  with the
closing of the transaction  contemplated by the Securities  Purchase  Agreement,
(ix) in a fully distributed  underwritten public offering or (x) under the terms
of the April 11, 2000 acquisition by the Company of Giza Group.

         F. Intentionally omitted.

         G. Purchase Rights. If the Company issues any Convertible Securities or
rights to purchase stock, warrants,  securities or other property (the "Purchase
Rights") pro rata to the record  holders of any class of Common Stock,  then the
Holders will be entitled to acquire,  upon

<PAGE>

the terms  applicable to such Purchase  Rights,  the aggregate  Purchase  Rights
which each  Holder  could have  acquired  if such  Holder had held the number of
shares of Common Stock  acquirable  upon  complete  conversion  of its Preferred
Stock (without  regard to any  limitations  on conversion or exercise  herein or
elsewhere contained)  immediately before the date on which a record is taken for
the grant,  issuance or sale of such Purchase  Rights,  or, if no such record is
taken,  the date as of which  the  record  holders  of  Common  Stock  are to be
determined for the grants, issue or sale of such Purchase Rights.

         H.       Intentionally omitted.

         I. Notices of  Adjustment.  Upon the  occurrence of each  adjustment or
readjustment  pursuant to this  Article XI, the Company,  at its expense,  shall
promptly compute such adjustment or readjustment and prepare and furnish to each
Holder a certificate  setting forth such adjustment or readjustment  and showing
in reasonable  detail the facts upon which such  adjustment or  readjustment  is
based.  The Company shall,  upon the written  request at any time of any Holder,
furnish to such Holder a like  certificate  setting forth (i) such adjustment or
readjustment,  (ii) the  Conversion  Price at the time in  effect  and (iii) the
number of shares of Common Stock and the amount,  if any, of other securities or
property which at the time would be received upon conversion of Preferred Stock.

         J.  Delisting.  In the event  that the Common  Stock of the  Company is
suspended  from trading or is no longer listed (and  authorized)  for trading on
Nasdaq National Market (a  "Delisting"),  the Company shall use its best efforts
(subject to good faith business judgment) to cause the Common Stock to be listed
for trading on the Nasdaq  National  Market or the New York Stock  Exchange,  as
applicable.  If the Company does not use its best efforts (subject to good faith
business judgment) to cause the listing of the Common Shares,  each Holder shall
be  entitled  to (i)  receive an amount  equal to any  losses,  damages,  costs,
expenses, and liabilities arising out of, relating to, or incurred in connection
with the  Delisting  and (ii) require the Company to purchase any or all (at any
time and from time to time) Preferred Stock then held by Holder,  at a price per
share equal to one hundred  percent  (100%) of the Face Amount plus  accrued and
unpaid Premium of such share of Preferred Stock.

         K. Key Officer and Director  Transfers.  If any Key Officer (as defined
below) or Insider  Director (as defined  below) (in each case,  or any member of
his/her  family or any trust or other  entity  for the  benefit of any member of
his/her family,  or any of his affiliates under federal  securities law), during
the period  beginning on the Closing Date and ending on the date that is six (6)
months after the Registration  Statement required pursuant to Section 2.1 of the
Registration  Rights Agreement is declared effective  (provided that such period
shall be extended to the extent of any  Registration  Suspension  (as defined in
the  Registration  Rights  Agreement)) (the "Transfer  Period"),  and while such
person is a Key Officer or Insider  Director,  directly or  indirectly,  offers,
sells,  transfers,  assigns,  pledges,  or  otherwise  disposes of any shares of
Common  Stock,  or any  securities  directly or indirectly  convertible  into or
exercisable or exchangeable  for, or warrants,  options or rights to purchase or
acquire shares of Common Stock (all such  securities,  "Options") or enters into
any agreement,  contract,  arrangement or understanding with respect to any such

<PAGE>

offer,  sale,  transfer,  assignment,  pledge or other disposition of any Common
Stock or Options or provides or files any public notice,  including  pursuant to
Rule 144 of the Securities  Act, of a bona fide intent to dispose of a specified
amount of Common Stock or Options (an "Executive Transfer"), then the Conversion
Price for each such Executive  Transfer shall be reduced by twenty percent (20%)
of that amount otherwise  calculated pursuant hereto;  provided,  however that a
Key Officer or Insider  Director  (and all such  entities for the benefit of any
members of his/her family,  and all such affiliates,  collectively)  may sell in
the  aggregate  during the portion of the  Transfer  Period  which is  following
effectiveness of such  Registration  Statement up to ten percent (10%) of his or
her total  holdings of Common Stock on a fully diluted basis as of July 31, 2000
without  triggering the adjustments of this Section.  Any inadvertent  Executive
Transfer in excess of such 10% limit shall not trigger the adjustments described
in this Section XI. K if such Transfer is reversed or offset  promptly after the
discovery  thereof.  For purposes of this Section,  Key Officers  shall mean the
individuals  listed on Schedule 8.2(a) of the Securities  Purchase Agreement and
any  person who  assumes or  performs  the duties of any other Key  Officer  and
Insider  Directors  shall  mean  individuals  listed in  Schedule  8.2(b) of the
Securities  Purchase  Agreement.  For  purposes  of  clarification,  and without
implication  that the  contrary  would  otherwise be true,  each such  Executive
Transfer  during  the  Transfer  Period  shall  result  in a  reduction  of  the
Conversion  Price  by  20%  and  such  reductions,  in  addition  to  any  other
adjustments to the Conversion Price pursuant to this Certificate of Designation,
shall be cumulative.  For example,  if a Key Officer makes an Executive Transfer
when the Conversion  Price is $10.00,  the Conversion  Price would be reduced to
$8.00.  If the Common Stock  subsequently  undergoes a  two-for-one  split,  the
Conversion  Price would be reduced to $4.00.  If,  subsequent to the split,  the
same or another Key Officer makes an Executive  Transfer,  the Conversion  Price
would be  further  reduced  to $3.20.  Notwithstanding  the  foregoing,  any Key
Officer or Insider  Director shall be entitled to make  Permitted  Transfers (as
defined  below)  without  limitation  and any  Permitted  Transfer  shall not be
included in any  computation  of the 10%  limitation  set forth in the preceding
paragraph. The term "Permitted Transfer" shall mean (i) any assignment,  gift or
other  transfer  to any child,  spouse or other  family  member or trust for the
benefit  of any family  member,  provided  that  further  transfers  by any such
transferees shall continue to be subject to this Section XI. K; or (ii) any bona
fide gift to any charitable organization.

                               XII. VOTING RIGHTS

         The holders of Preferred  Stock shall have no voting power  whatsoever,
except as otherwise provided by applicable law.

         Notwithstanding  the above,  the Company shall provide each Holder with
prior  notification  of any  meeting of the  stockholders  (and  copies of proxy
materials and all other information sent to stockholders).  If the Company takes
a  record  of its  stockholders  for the  purpose  of  determining  stockholders
entitled to (a) 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

<PAGE>

property,  or to receive any other right,  or (b) to vote in connection with any
proposed sale, lease or conveyance of all or substantially  all of the assets of
the Company, or any proposed merger, consolidation,  liquidation, dissolution or
winding up of the Company,  the Company  shall fax a notice to each  Holder,  at
least ten (10) days prior to the record date specified therein (or ten (10) days
prior to the consummation of the transaction or event, whichever is earlier, but
in no event earlier than public announcement of such proposed  transaction),  of
the date on which any such  record is to be taken for the  purpose of such vote,
dividend,  distribution,  right or other event, and a brief statement  regarding
the amount and character of such vote,  dividend,  distribution,  right or other
event to the extent known at such time.

         To the extent that under  applicable law the vote of the holders of the
Preferred  Stock,  voting  separately as a class or series,  as  applicable,  is
required to  authorize a given action of the Company,  the  affirmative  vote or
consent of the  Holders of at least a  majority  of the shares of the  Preferred
Stock  represented  at a duly held  meeting  at which a quorum is  present or by
written consent of the Majority  Holders (except as otherwise may be required by
applicable  law) shall  constitute  the  approval of such action by the class or
series.  To the extent that under applicable law Holders are entitled to vote on
a matter with holders of Common Stock,  voting together as one class, each share
of Preferred Stock shall be entitled to a number of votes equal to the number of
shares of Common Stock into which it is then convertible  (without giving effect
to any limitation on conversion with respect thereto, other than the Cap Amount)
using the record date for the taking of such vote of stockholders as the date as
of which the Conversion Price is calculated.

                           XIII. PROTECTION PROVISIONS

         The Company  shall not,  without  first  obtaining  the approval of the
Holders of two-thirds  (2/3) of the Preferred Stock then  outstanding  (but with
respect to (c) and (d) hereof,  such approval is necessary  only so long as five
hundred  thousand  dollars  ($500,000)  Face Amount of Preferred  Stock  remains
outstanding) : (a) alter or change the terms of the Preferred  Stock; (b) create
or issue,  or alter or change the terms of, any capital stock or other equity or
equity-linked  securities of the Company so as to affect adversely the Preferred
Stock;  (c) increase the  authorized  number of shares of Preferred  Stock;  (d)
redeem,  or  declare  or  pay  any  dividend  or  distribution  on,  any  Junior
Securities, except repurchases of stock held by service providers to the Company
upon  termination  of  service,  and except  redemptions  effected  with  Junior
Securities  (subject to the limitations  contained  herein and in the Securities
Purchase  Agreement);  or (e) do any act or thing not authorized or contemplated
by this  Certificate  of  Designations  which would result in any taxation  with
respect to the 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 (or otherwise  suffer to exist any taxation
as a  result  of such  section  or  provision).  The  Company  shall  not  issue
additional  shares of Preferred  Stock except to effect the purchase and sale to
the Purchasers (as defined in the Securities  Purchase  Agreement) in accordance
with the Securities  Purchase  Agreement and as contemplated by the Registration
Rights Agreement.

<PAGE>

                               XIV. MISCELLANEOUS

         A.  Cancellation  of Preferred  Stock. If any shares of Preferred Stock
are converted or redeemed  pursuant to Article IV, the shares so converted shall
be canceled,  shall return to the status of  authorized  but unissued  preferred
stock of no  designated  series,  and shall not be  issuable  by the  Company as
Preferred Stock.

         B. Lost or Stolen  Certificates.  Upon  receipt  by the  Company of (i)
evidence of the loss,  theft,  destruction or mutilation of any Preferred  Stock
Certificate(s)  and  (ii) (y) in the case of  loss,  theft  or  destruction,  of
indemnity  reasonably  satisfactory  to the  Company,  or (z)  in  the  case  of
mutilation,   upon   surrender  and   cancellation   of  the   Preferred   Stock
Certificate(s),  the Company  shall  execute and  deliver  new  Preferred  Stock
Certificate(s)  of like  tenor  and  date.  However,  the  Company  shall not be
obligated to reissue such lost or stolen Preferred Stock  Certificate(s)  if the
Holder  contemporaneously  requests the Company to convert all of such Preferred
Stock.

         C. Allocation of Cap Amount and Reserved Amount. The initial Cap Amount
and  initial  Reserved  Amount  shall be  allocated  to the  Holders in the same
proportion as the number of shares of Common Stock to which each Holder would be
entitled if all Preferred  Stock held by such Holder were converted bears to the
aggregate  number  of  shares of  Common  Stock to which  all  Holders  would be
entitled if all  Preferred  Stock held by the Holders  were  converted  (without
giving effect to any  limitation  on  conversion  or  exercise).  In the event a
Holder shall sell or otherwise transfer any of such Holder's shares of Preferred
Stock,   each  transferee  shall  be  allocated  a  pro  rata  portion  of  such
transferor's  Cap Amount and Reserved  Amount.  Any portion of the Cap Amount or
Reserved  Amount which remains  allocated to any person or entity which does not
hold any Preferred  Stock shall be allocated to the  remaining  Holders pro rata
based on (x) the  number  of  shares  of  Common  Stock to which  they  would be
entitled if all Preferred  Stock then held by such Holders were  converted as of
the date of determination (in each case of the foregoing,  without giving effect
to any limitation on conversion).

         D. Statements of Available  Shares.  The Company shall promptly deliver
to each Holder a written report  notifying the Holders of any  occurrence  which
prohibits the Company from issuing Common Stock upon any conversion. Such report
shall also specify (i) the total number of shares of Preferred Stock outstanding
as of the date of the  request,  (ii) the total number of shares of Common Stock
issued upon all  conversions of Preferred Stock through the date of the request,
(iii) the total number of shares of Common Stock which are reserved for issuance
upon conversion of the Preferred  Stock as of the date of the request,  and (iv)
the total number of shares of Common Stock which may thereafter be issued by the
Company upon  conversion of the Preferred  Stock before the Company would exceed
the Cap Amount and  Reserved  Amount.  Upon  request of any Holder,  the Company
shall promptly  confirm for such Holder that  sufficient  shares of Common Stock
are reserved for issuance upon conversion of such Holder's Preferred Stock as of
the date of the request.

         E. Payment of Cash; Defaults.  Whenever the Company is required to make
any cash

<PAGE>

payment to a Holder  under this  Certificate  of  Designation  (as a  Conversion
Default  Payment,  Redemption  Amount or otherwise),  such cash payment shall be
made to the  Holder by the  method ( by  certified  or  cashier's  check or wire
transfer of immediately available funds) elected by such Holder. If such payment
is not  delivered  when due (any such  amount not paid when due being a "Default
Amount")  such  Holder  shall  thereafter  be entitled to interest on the unpaid
amount at a per annum  rate equal to the lower of twelve  percent  (12%) and the
highest  interest rate  permitted by applicable law until such amount is paid in
full to the Holder.

         F. Status as Stockholder.  Upon submission of a Notice of Conversion by
a Holder of  Preferred  Stock and the  occurrence  of the  Conversion  Date with
respect  thereto,  the shares  covered  thereby shall be deemed  converted  into
shares of Common  Stock and the  Holder's  rights as a Holder of such  converted
shares of Preferred Stock shall cease and terminate, excepting only the right to
receive  certificates  for such  shares  of  Common  Stock  and to any  remedies
provided  herein or  otherwise  available  at law or in  equity  to such  Holder
because of a failure by the Company to comply with the terms of this Certificate
of  Designation.  Notwithstanding  the  foregoing,  if a Holder has not received
certificates  for all shares of Common Stock prior to the tenth (10th)  business
day after the expiration of the Delivery  Period with respect to a conversion of
Preferred  Stock for any reason,  then  (unless the Holder  otherwise  elects to
retain its  status as a holder of Common  Stock)  the  Holder  shall  regain the
rights of a holder of Preferred Stock with respect to such unconverted shares of
Preferred  Stock and the  Company  shall,  as soon as  practicable,  return such
unconverted  shares to the Holder.  In all cases, the Holder shall retain all of
its rights and remedies (including, without limitation, (i) the right to receive
Conversion  Default  Payments  pursuant to Section VII.A to the extent  required
thereby for such Conversion  Default and any subsequent  Conversion  Default and
(ii) the right with respect to conversions in accordance  with Section XIV.E, to
the extent applicable) for the Company's failure to convert Preferred Stock.

         G.  Remedies,   Characterizations,   Other  Obligations,  Breaches  and
Injunctive  Relief.  The remedies  provided in this  Certificate  of Designation
shall be cumulative and in addition to all other remedies  available  under this
Certificate of Designation,  at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to actual damages for any failure by
the  Company  to  comply  with the  terms  of this  Certificate  of  Designation
(including,  without limitation, damages incurred to effect "cover" of shares of
Common Stock issuable upon  conversion of the Preferred  Stock hereunder but not
received in accordance  with the terms  hereof).  The Company  covenants to each
Holder that there shall be no characterization  concerning this instrument other
than as fully  consistent  with the express terms  hereof.  Amounts set forth or
provided for herein with respect to payments,  conversion  and the like (and the
computation  thereof)  shall be the amounts to be received by the Holder  hereof
and shall not,  except as  expressly  provided  herein,  be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations  hereunder will cause irreparable harm to
the  holders of  Preferred  Stock and that the remedy at law for any such breach
may be inadequate.  The Company  therefore agrees that, in the event of any such
breach or threatened breach,  the Holders

<PAGE>

shall be entitled, in addition to all other available remedies, to an injunction
restraining  any breach,  without the  necessity  of showing  economic  loss and
without any bond or other security being required.

         H.  Specific  Shall  Not  Limit  General;   Construction.  No  specific
provision contained in this Certificate of Designation shall limit or modify any
more general provision  contained  herein. As used herein,  the word "including"
shall be deemed to mean  "including,  without  limitation."  This Certificate of
Designation  shall be  deemed  to be  jointly  drafted  by the  Company  and all
Purchasers and shall not be construed against any person as the drafter hereof.

         I. Failure or Indulgence Not Waiver. No failure or delay on the part of
a Holder in the  exercise  of any  power,  right or  privilege  hereunder  shall
operate as a waiver  thereof,  nor shall any single or partial  exercise  of any
such power,  right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.

         J. Ratable  Payments.  All payments and prepayments made by the Company
with respect to the  Preferred  Stock shall be made ratably among all Holders of
Preferred Stock in accordance with the Face Amount of such Preferred Stock.

         K.  Assignment.  No Holder may assign any  Preferred  Stock without the
prior written consent of the Company.  Notwithstanding  the foregoing,  a Holder
may  transfer  any or all of its  Preferred  Stock  without  the  consent of the
Company  (x) to any of its  "affiliates",  as that  term is  defined  under  the
Exchange  Act, or (y) after the date which is five (5) months  after the Closing
Date,  to any person who receives at least  one-eighth  of the  Preferred  Stock
purchased by the Initial Holder under the Securities Purchase Agreement, so long
as such transferee is an accredited investor and such permitted transferee shall
be  subject  to the  provisions  of  this  Certificate  of  Designation  and the
Securities Purchase Agreement,  including, without limitation, this Section XIV.
K. In addition, the Preferred Stock may be pledged, and all rights of the Holder
under this  Certificate of Designation may be assigned,  without further consent
of the  Company,  to a bona fide  pledgee,  subject  to the  provisions  of this
Certificate of Designation  and the Securities  Purchase  Agreement,  including,
without  limitation,  this Section XIV. K.

<PAGE>

         IN WITNESS  WHEREOF,  the undersigned  authorized  officer has executed
this Certificate the 2nd day of August, 2000.

                                       THCG, INC.
                                       By:____________________________
                                       Name: _________________________
                                       Title: ________________________

<PAGE>

EXHIBIT A

                              NOTICE OF CONVERSION

The undersigned hereby irrevocably elects to convert (the "Conversion") the Face
Amount of the Series A Preferred Stock (the "Preferred  Stock") set forth below,
plus all accrued and unpaid Premium relating thereto (each defined term used but
not  defined  in this  notice  shall  have  the  meaning  assigned  to it in the
Designation,  Preferences  and  Rights  of  Series A  Convertible  Participating
Preferred Stock of THCG, Inc. (the "Certificate of  Designation")),  into shares
of common stock ("Common Stock") of THCG, Inc. (the "Company")  according to the
conditions of the Certificate of  Designation,  as of the date written below. If
securities are to be issued in the name of a person other than the  undersigned,
the undersigned will pay all transfer taxes payable with respect thereto. No fee
will be charged to the Holder for any conversion except as provided herein.

The  undersigned  covenants that all offers and sales by the  undersigned of the
securities  issuable to the undersigned  upon conversion of this Preferred Stock
shall be made pursuant to  registration of the Common Stock under the Securities
Act  of  1933,  as  amended  (the  "Act"),  or  pursuant  to an  exemption  from
registration under the Act.

In the event of partial exercise,  please reissue an appropriate certificate for
the balance of shares of Preferred Stock which shall not have been converted.

                                    Date of Conversion:
                                    Applicable Conversion Price:
                                    Face Amount of Preferred Stock:
                                    Number of Shares of Common Stock
                                    to be issued upon conversion:

                                    Signature:

                                    Name:

                                    Address:

                                    Fax Number (for confirmation):Exhibit 10.3

                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION  RIGHTS AGREEMENT (this  "Agreement"),  is made as of
August 2, 2000, by and among THCG, Inc., a Delaware corporation (the "Company"),
with principal  executive office located at 650 Madison Avenue,  21st Floor, New
York, NY 10022,  and Castle Creek  Technology  Partners LLC, an Illinois limited
liability company (the "Initial Purchaser").

                                    RECITALS

         A. In connection with the Securities  Purchase  Agreement dated of even
date  herewith  by and  between  the  Company  and the  Initial  Purchaser  (the
"Securities  Purchase  Agreement"),  the Company has agreed,  upon the terms and
subject to the conditions  contained  therein,  to issue and sell to the Initial
Purchaser  (i)  an  amount  of the  Company's  Series  A  Preferred  Stock  (the
"Preferred  Stock") which is  convertible  into shares of the  Company's  Common
Stock,  $.01 par value (the "Common  Stock") and (ii) a warrant (the  "Warrant")
entitling  the holder  thereof to purchase  the number of shares  (the  "Warrant
Shares")  of  Common  Stock as set forth  therein.  The  shares of Common  Stock
issuable  upon  conversion of or otherwise  pursuant to the Preferred  Stock are
referred to herein as the "Conversion Shares." The Preferred Stock, the Warrant,
the Conversion Shares and the Warrant Shares are collectively referred to herein
as the "Securities."

         B.  To  induce  the  Initial  Purchaser  to  execute  and  deliver  the
Securities  Purchase  Agreement,  the  Company  has  agreed to  provide  certain
registration rights under the Securities Act of 1933, as amended,  and the rules
and regulations thereunder, or any similar successor statute (collectively,  the
"Securities Act"), and applicable state securities laws.

                                   AGREEMENTS

         NOW  THEREFORE,  in  consideration  of  the  premises  and  the  mutual
covenants  contained  herein  and other  good and  valuable  consideration,  the
receipt and  sufficiency of which are hereby  acknowledged,  the Company and the
Initial Purchaser hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

         1.1 Definitions.  As used in this Agreement,  the following terms shall
have the following meanings:

                           (a) "Purchasers"  means the Initial Purchaser and any
permitted  transferees  or assignees who agree to become bound by the provisions
of this Agreement in accordance with Article IX hereof.

<PAGE>

                           (b)  "register,"   "registered,"  and  "registration"
refer  to a  registration  effected  by  preparing  and  filing  a  Registration
Statement or Statements in compliance  with the  Securities  Act and pursuant to
Rule 415 under the  Securities  Act or any successor rule providing for offering
securities on a continuous  basis ("Rule 415"),  and the declaration or ordering
of effectiveness of such Registration  Statement by the United States Securities
and Exchange Commission (the "SEC").

                           (c)  "Registrable  Securities"  means the  Conversion
Shares  (including any Conversion Shares issuable with respect to payments under
the  terms of the  Preferred  Stock)  issued or  issuable  with  respect  to the
Preferred  Stock,  the Warrant  Shares  issued or issuable  with  respect to the
Warrant  (without  regard to any  limitations on conversion or exercise) and any
shares of capital  stock or other  securities  issued or issuable,  from time to
time (with any adjustments),  on or in exchange for or otherwise with respect to
the Conversion Shares or the Warrant Shares or any other Registrable Securities.

                           (d)  "Registration  Statement"  means a  registration
statement of the Company under the  Securities Act pursuant to the provisions of
this Agreement.

         1.2 Capitalized Terms.  Capitalized terms used herein and not otherwise
defined  herein shall have the  respective  meanings set forth in the Securities
Purchase Agreement.

                                   ARTICLE II
                                  REGISTRATION

         2.1 Mandatory Registration.  The Company shall prepare and file as soon
as practicable  (but in any event on or prior to twenty (20) business days after
the date of the  Closing)  with  the SEC a  Registration  Statement  on Form S-3
covering  the resale of all of the  Registrable  Securities  issuable  upon full
conversion  of the Preferred  Stock and full exercise of the Warrants  purchased
and sold at the Closing,  without  regard to any limitation on any conversion or
exercise,  but  limited  to the Cap Amount (as  defined  in the  Certificate  of
Designation)  with respect to the Preferred Stock.  The  Registration  Statement
(and each amendment or supplement thereto,  and each request for acceleration of
effectiveness  thereof)  shall be  provided to (and  subject to the  approval of
(which  approval  shall not be  unreasonably  withheld or  denied))  the Initial
Purchaser  and its  counsel.  If the  Initial  Purchaser  and its counsel do not
approve such documents within five (5) business days, the Registration  Deadline
(as set forth in Section  2.3) shall be extended for the number of days by which
the time to grant such  approval  exceeds  five (5)  business  days prior to its
filing  or other  submission.  The  Company  shall  also  prepare  and file such
amendments  to  registration   statements  and  such   additional   registration
statements as may from time to time be required by this Agreement.

         2.2      Intentionally omitted.

         2.3      Payments by the Company.

<PAGE>

         (a) The Company  shall use its best  efforts to cause the  Registration
Statement  required  to be filed  pursuant  to  Section  2.1  hereof  to  become
effective  as soon as  practicable,  but in no event  later  than the  ninetieth
(90th) day (120 days if  reviewed in writing by the SEC)  following  the Closing
Date. If such Registration  Statement is not effective by the 90th day following
the Closing Date, the Company shall thereafter  continue to use its best efforts
to cause such Registration  Statement to become  effective.  If the Registration
Statement  covering  the  Registrable  Securities  required  to be  filed by the
Company  pursuant to Section 2.1 hereof is not declared  effective by the SEC on
or  before  the  applicable   Registration   Deadline  (as  defined  herein)  (a
"Registration  Failure"),  or if  after  such  Registration  Statement  has been
declared  effective by the SEC, sales of all the Registrable  Securities covered
thereby cannot be made pursuant to such  Registration  Statement (by reason of a
stop order,  the Company's  failure to update the  registration  statement,  the
failure of any  post-effective  amendment  to the  registration  statement to be
promptly  declared  effective  or any other  reason  outside  the control of the
Purchasers) (a "Registration  Suspension"),  then the Company will make payments
to the  Purchasers  in such  amounts  and at such  times as shall be  determined
pursuant  to  this  Section  2.3,  as  partial  relief  for the  damages  to the
Purchasers  by reason of any such delay in or reduction of their ability to sell
the  Registrable  Securities  (which  remedy shall not be exclusive of any other
remedies available at law or in equity); provided,  however, that if the Company
establishes that it has used its best efforts, as required  hereunder,  acted in
good faith and has not acted or failed to act in a negligent or reckless manner,
then this remedy  shall be exclusive  of other  remedies  available at law or in
equity,  other than the remedies set forth in Section VII. D of the  Certificate
of Designation.  For purposes hereof, the "Registration Deadline" shall mean the
ninetieth  (90th) day  following  the Closing  Date or, if the SEC reviews  such
Registration  Statement,  the one hundred  twentieth  (120th) day  following the
Closing Date.

         (b) In the event of a  Registration  Failure,  the Company shall pay to
the Purchasers an amount equal to (A) the  Multiplier (as defined  herein) times
(B) the  Funded  Amount  (as  defined  below)  times  (C) the  number  of months
(prorated  per day for partial  months)  following the  applicable  Registration
Deadline prior to the date the applicable  Registration Statement filed pursuant
to Section 2.1 or Section 3.2 is declared effective by the SEC. In addition,  in
the event of a Registration Suspension,  the Company shall pay to the Purchasers
an amount equal to (D) the Multiplier  times (E) the Funded Amount times (F) the
number of months  (prorated  per day for  partial  months)  from (x) the date on
which sales of all the  Registrable  Securities  first cannot be made to (y) the
date on which  sales  of all  such  Registrable  Securities  can  again be made;
Amounts  to be paid  pursuant  to this  Section  2.3  shall  be paid pro rata to
Purchasers  based upon the number of Conversion  Shares and Warrant Shares owned
by them  (including,  for these purposes,  Conversion  Shares issuable upon full
conversion of the Preferred Stock and Warrant Shares issuable upon full exercise
of the Warrant by each Purchaser, in each case without regard to any limitations
upon exercise and conversion  contained therein) and shall be paid in cash. Such
payments  shall be made  within  five (5) days after the end of each period that
gives rise to such  obligation,  provided  that, if any such period  extends for
more than thirty (30) days, payments shall be made for each such thirty (30) day
period within five (5) days after the end of such thirty (30) day period.

<PAGE>

         (c) For any given date,  the  "Multiplier"  shall mean,  (i) during the
first thirty days following the  Registration  Deadline  during which there is a
Registration  Failure or a Registration  Suspension,  0.015,  and (ii) after the
thirtieth day of a Registration Failure or Registration  Suspension,  0.02. With
respect to any given  Registration  Statement,  the  "Funded  Amount"  means the
aggregate  purchase price of the Preferred Stock and the Warrant relating to the
Common Stock  registered (or to be registered) on such  Registration  Statement.
Notwithstanding the foregoing, a Registration Suspension effected by the Company
pursuant to a Permitted  Blackout  shall not give rise to an  obligation to make
such payments.  For purposes hereof,  "Permitted Blackout" shall mean the period
of any Registration Suspension which is caused by (a) a good faith determination
by the Company's  Board of Directors that it would (because of the existence of,
or in reasonable anticipation of, any acquisition or corporate reorganization or
other  transaction,  financing  activity,  stock repurchase or other development
involving  the  Company or any  subsidiary,  or the  unavailability  for reasons
substantially beyond the Company's control of any required financial statements,
or any other event or  condition of similar  significance  to the Company or any
subsidiary) be materially  disadvantageous  for the Company to proceed with such
Registration  Statement;  provided,  however, that (i) no more than two (2) such
Permitted Blackouts may be imposed pursuant to this clause (a) during any period
of twelve (12) consecutive  months;  and (ii) the aggregate duration of all such
Permitted Blackouts pursuant to this clause (a) during any period of twelve (12)
consecutive  months shall be no more than thirty (30)  business  days,  or (b) a
determination by a nationally recognized underwriting firm which is the managing
underwriter(s) of an underwritten public offering for the account of the Company
and other  stockholders  that, in such  underwriter(s)'  judgment,  marketing or
other factors  dictate such  Registration  Suspension is necessary to facilitate
public  distribution;  provided,  however,  that (i) no Registration  Suspension
shall be a  Permitted  Blackout  under  this  clause (b) unless on the date such
Registration  Suspension commences,  each of the conditions set forth in clauses
(a) through (g) of Section IV. H (ii) of the  Certificate  of  Designation  with
respect to the Preferred Stock is satisfied; (ii) the duration of such Permitted
Blackouts pursuant to this clause (b) shall be no more than thirty (30) business
days in any 12 month  period;  and  (iii) if the  Company  exercises  any of its
rights  pursuant to any of Section IV. H(ii) of such  Certificate of Designation
or Section  8(g) of the  Warrant,  then no  Registration  Suspension  during the
thirty (30) business day period  beginning on the  Effective  Time of the Forced
Conversion  (as defined in the  Certificate  of  Designation)  or the Redemption
Effective  Time (as  defined  in the  Warrant),  as the case may be,  shall be a
Permitted Blackout pursuant to this clause (b).

         2.4 Piggy-Back  Registrations  . If at any time prior to the expiration
of the  Registration  Period (as  hereinafter  defined)  (except any time during
which the Registration  Statement filed pursuant to Section 2.1 is effective and
there is no Registration Suspension in effect with respect thereto), the Company
shall file with the SEC a Registration Statement relating to an offering for its
own  account or the  account of others  (other  than any GSCP Entity (as defined
below)) under the Securities Act of any of its equity  securities (other than on
Form S-4 or Form S-8 or their then equivalents  relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity  securities  issuable in connection  with stock option or other  employee
benefit plans), then the Company shall send to each Purchaser who has a right

<PAGE>

to have Registrable  Securities covered by a Registration  Statement pursuant to
this Agreement written notice of such  determination and, if within fifteen (15)
days after the date of such notice,  such Purchaser shall so request in writing,
the Company shall include in such Registration  Statement all or any part of the
Registrable Securities such Purchaser requests to be registered, except that if,
in  connection  with any  underwritten  public  offering  for the account of the
Company the managing  underwriter(s)  thereof  shall impose a limitation  on the
number of  shares of Common  Stock  which may be  included  in the  Registration
Statement because, in such underwriter(s)' judgment,  marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such  Registration  Statement only such
limited  portion  of the  Registrable  Securities  with  respect  to which  such
Purchaser has requested inclusion hereunder as the underwriter shall permit. Any
exclusion of Registrable  Securities shall be made pro rata among the Purchasers
seeking  to  include  Registrable  Securities,  in  proportion  to the number of
Registrable  Securities  sought to be  included  by such  Purchasers;  provided,
however,  that the Company shall not exclude any Registrable  Securities  unless
the Company has first excluded all outstanding securities,  the holders of which
are not entitled to inclusion of such securities in such Registration  Statement
or are not entitled to pro rata inclusion with the Registrable  Securities;  and
provided,  further,  however,  that,  after  giving  effect  to the  immediately
preceding  proviso,  any exclusion of Registrable  Securities  shall be made pro
rata  with  holders  of  other  securities  having  the  right to  include  such
securities  in the  Registration  Statement  (other than  securities  offered by
Greenwich Street Capital Partners II L. P., GSCP Offshore Fund, L.P.,  Greenwich
Fund, L. P.,  Greenwich Street Employees Fund, L.P. and TRV Executive Fund, L.P.
and their  transferees  (each, a "GSCP Entity")  exercising  rights  pursuant to
section 4 of that certain  Registration Rights Agreement dated November 1, 1999,
as amended from time to time,  which shall have  priority  over all  Registrable
Securities hereunder).  No right to registration of Registrable Securities under
this  Section 2.4 shall be construed to limit any  registration  required  under
Section 2.1 or 3.2 hereof.  If an offering in connection  with which a Purchaser
is entitled to registration under this Section 2.4 is an underwritten  offering,
then  each  Purchaser  whose   Registrable   Securities  are  included  in  such
Registration  Statement shall, unless otherwise agreed by the Company, offer and
sell such  Registrable  Securities in an  underwritten  offering  using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and  conditions as other shares of Common Stock  included in such
underwritten  offering.  So long as a  Registration  Statement is effective  and
immediately  available for use so that all of the Registrable  Securities may be
sold in reliance thereon, the provisions of this Section shall not apply.

         2.5 Eligibility for Form S-3. The Company  represents and warrants that
it is  currently  eligible  to  register  the resale of the  Conversion  Shares,
Warrant  Shares  and  all   Registrable   Securities  by  the  Purchasers  on  a
Registration  Statement on Form S-3 under the  Securities Act for the account of
Purchasers  (and not for or on behalf of  Company).  The Company  shall file all
reports  required to be filed by the Company with the SEC in a timely manner and
take all other actions which may be required so as to maintain such  eligibility
for the use of Form S-3.

<PAGE>

                                   ARTICLE III
                           OBLIGATIONS OF THE COMPANY

In connection with the registration of the Registrable  Securities,  the Company
shall  have  the  following   obligations,   including   with  respect  to  each
Registration Statement required to be filed hereunder:

         3.1 Subject to the provisions of Section 2.1 hereof,  the Company shall
prepare  promptly and file with the SEC the Registration  Statement  required by
Section  2.1,  and cause such  Registration  Statement  relating to  Registrable
Securities to become  effective as soon as  practicable  after such filing,  and
keep the Registration  Statement  effective pursuant to Rule 415 and immediately
available for use at all times until such date as is the earlier of (i) the date
on which all of the  Registrable  Securities  have  been  sold  (and no  further
Registrable  Securities  may be issued in the future) and (ii) the date on which
all of the Registrable  Securities (in the reasonable  opinion of counsel to the
Company addressed to the Initial Purchaser, and upon which the Initial Purchaser
shall be  entitled  to  rely)  may be  immediately  sold to the  public  without
registration and without restriction as to the number of Registrable  Securities
to be  sold,  whether  pursuant  to Rule  144 or  otherwise  (the  "Registration
Period").  The Registration  Statement  (including any amendments or supplements
thereto and  prospectuses  contained  therein and all documents  incorporated by
reference  therein) shall not contain any untrue statement of a material fact or
omit to state a material  fact  required to be stated  therein,  or necessary to
make the statements therein not misleading.

         3.2 The Company  shall  prepare  and file with the SEC such  amendments
(including   post-effective   amendments)  and  supplements  to  a  Registration
Statement and the prospectus used in connection with the Registration  Statement
as may be necessary to keep the Registration Statement effective and immediately
available for use at all times during the Registration Period.

         3.3 The  Company  shall  furnish to each  Purchaser  whose  Registrable
Securities are included in the Registration  Statement and its legal counsel (a)
promptly  after the same is prepared  and publicly  distributed,  filed with the
SEC, or received by the Company, one copy of the Registration  Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto,  and, in the case of the Registration  Statement referred
to in Section 2.1 hereof,  each letter written by or on behalf of the Company to
the SEC or the staff of the SEC, and each item of correspondence from the SEC or
the  staff of the SEC,  in each case  relating  to such  Registration  Statement
(other than any portion,  if any,  thereof which contains  information for which
the Company has sought confidential treatment), and (b) such number of copies of
a  prospectus,  including  a  preliminary  prospectus,  and all  amendments  and
supplements  thereto and such other  documents as such  Purchaser may reasonably
request in order to facilitate  the  disposition of the  Registrable  Securities
owned (or to be owned) by such Purchaser.

         3.4  The  Company  shall  (a)  register  and  qualify  the  Registrable
Securities  covered by the Registration  Statement under securities laws of such
jurisdictions  in the United States as the

<PAGE>

Purchaser  who  holds (or has the right to hold)  Registrable  Securities  being
offered reasonably  requests,  (b) prepare and file in those  jurisdictions such
amendments  (including  post-effective   amendments)  and  supplements  to  such
registrations   and   qualifications   as  may  be  necessary  to  maintain  the
effectiveness  thereof and availability for use during the Registration  Period,
(c) take such other actions as may be necessary to maintain  such  registrations
and  qualifications in effect at all times during the Registration  Period,  and
(d) take all other  actions  reasonably  necessary  or  advisable to qualify the
Registrable Securities for sale in such jurisdictions;  provided,  however, that
the  Company  shall not be required in  connection  therewith  or as a condition
thereto to (i)  qualify to do business  in any  jurisdiction  where it would not
otherwise be required to qualify but for this Section 3.4,  (ii) subject  itself
to general  taxation in any such  jurisdiction,  (iii) file a general consent to
service  of  process  in any such  jurisdiction,  or (iv) make any change in its
charter or  by-laws,  which in any case the board of  directors  of the  Company
determines  to be  contrary  to the  best  interests  of  the  Company  and  its
stockholders.

         3.5 In the event of an offering pursuant to a Registration Statement or
any  amendment or  supplement  thereto  under  Section 2.1 or Section 3.2 hereof
which is proposed  to be an  underwritten  public  offering,  the Company  shall
select the managing  underwriter(s) for the offering,  which shall be reasonably
acceptable to the  Purchasers,  and the Company shall enter into and perform its
obligations  under an  underwriting  agreement,  in usual  and  customary  form,
including,  without  limitation,   customary  indemnification  and  contribution
obligations, with the underwriters of such offering.

         3.6 As soon as  practicable  after  becoming  aware of such event,  the
Company shall notify (by telephone and also by facsimile and reputable overnight
courier) each Purchaser who holds Registrable  Securities being sold pursuant to
the  Registration  Statement of the happening of any event, of which the Company
has knowledge,  as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated  therein or necessary to
make the  statements  therein,  in light of the  circumstances  under  which the
statement is made,  not  misleading.  Subject to the  provisions  of Section 2.3
hereof,  the Company  shall use its best efforts as soon as possible (but in any
event  within  thirty (30) days) to prepare a  supplement  or  amendment  to the
Registration  Statement (and make all required  filings with the SEC) to correct
such untrue  statement or omission,  and the Company shall  simultaneously  (and
thereafter  as  requested)  deliver such number of copies of such  supplement or
amendment (or other applicable document) to each Purchaser as such Purchaser may
request in writing.

         3.7 The Company shall use  commercially  reasonable  efforts to prevent
the  issuance  of any stop  order  or other  suspension  of  effectiveness  of a
Registration  Statement,  and,  if  such an  order  is  issued,  to  obtain  the
withdrawal of such order at the earliest  practicable time and the Company shall
immediately notify by facsimile each Purchaser (at the facsimile number for such
Purchaser  set  forth  on the  signature  page  hereto)  who  holds  Registrable
Securities being sold pursuant to the  Registration  Statement (or, in the event
of an underwritten  offering, the managing underwriters) of the issuance of such
order and the resolution thereof.

         3.8 The Company shall make generally  available to its security holders
as soon as

<PAGE>

practical,  but not later  than  ninety  (90) days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the Securities Act) covering a twelve-month  period beginning not
later than the first day of the  Company's  fiscal  quarter next  following  the
effective date of the Registration Statement.

         3.9      Intentionally omitted.

         3.10  The  Company  shall  make  available  for  inspection  by (i) any
Purchaser, (ii) any underwriter participating in any disposition pursuant to the
Registration  Statement,   (iii)  attorneys  and  accountants  retained  by  any
Purchaser, and (iv) attorneys retained by such underwriters  (collectively,  the
"Inspectors") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively,  the "Records"), as shall
be  reasonably  deemed  necessary  by each  Inspector  and cause  the  Company's
officers,  directors and employees to supply all information which any Inspector
may reasonably  request;  provided,  however,  that each Inspector shall hold in
confidence  and shall not make any  disclosure  (except to a  Purchaser)  of any
Record or other  information  which the Company  determines  in good faith to be
confidential,  and of which  determination  the  Inspectors  are so  notified in
writing,  unless (a) the  disclosure  of such  Records is  necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required to be disclosed in such  Registration  Statement to permit Purchaser to
sell under  such  Registration  Statement,  (b) the  release of such  Records is
ordered pursuant to a subpoena or other order from a court or government body of
competent  jurisdiction,  or is otherwise  required by  applicable  law or legal
process or (c) the information in such Records has been made generally available
to the  public  other  than by  disclosure  in  violation  of this or any  other
agreement (to the knowledge of the relevant Purchaser). The Company shall not be
required  to  disclose  any  confidential  information  in such  Records  to any
Inspector   until  and  unless   such   Inspector   shall  have   entered   into
confidentiality agreements (in form and reasonable substance satisfactory to the
Company)  with the Company with respect  thereto,  substantially  in the form of
this Section  3.11.  Each  Purchaser  agrees that it shall,  upon  learning that
disclosure  of such Records is sought in or by a court or  governmental  body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the  Company,  at its  expense,  to  undertake  appropriate  action to
prevent  disclosure of, or to obtain a protective  order for, the Records deemed
confidential.  Nothing herein shall be deemed to limit a Purchaser's  ability to
sell Registrable Securities in a manner which is consistent with applicable laws
and regulations.

         3.11 The Company shall hold in confidence  and not make any  disclosure
of  information  concerning  a  Purchaser  provided  to the  Company  unless (a)
disclosure  of such  information  is  necessary  to comply with federal or state
securities laws, (b) the disclosure of such information is necessary to avoid or
correct a  misstatement  or  omission  in any  Registration  Statement,  (c) the
release of such  information  is ordered  pursuant  to a subpoena or other order
from a court or  governmental  body of  competent  jurisdiction  or is otherwise
required by applicable law or legal process,  (d) such information has been made
generally  available to the public other than by disclosure in violation of this
or any other agreement (to the knowledge of the Company),  or (e) such Purchaser
consents to the form and content of any such disclosure.

<PAGE>

The  Company  agrees  that it  shall,  upon  learning  that  disclosure  of such
information  concerning a Purchaser  is sought in or by a court or  governmental
body of competent  jurisdiction  or through  other means,  give prompt notice to
such Purchaser prior to making such disclosure,  and allow the Purchaser, at its
expense, to undertake  appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.

         3.12 From and after  Closing,  the Company  shall cause the listing and
the  continuation  of listing of all the  Registrable  Securities  on the Nasdaq
National Market System or the New York Stock Exchange, and cause the Registrable
Securities  to be  quoted  or  listed  on each  additional  national  securities
exchange  or  quotation  system  upon which the Common  Stock is then  listed or
quoted.

         3.13 The Company shall provide a transfer  agent and  registrar,  which
may be a single  entity,  for the  Registrable  Securities  not  later  than the
effective date of the Registration Statement.

         3.14  The  Company  shall   cooperate  with  the  Purchasers  who  hold
Registrable   Securities   being  offered  and  the  managing   underwriter   or
underwriters,  if any, to  facilitate  the timely  preparation  and  delivery of
certificates  (not bearing any  restrictive  legends)  representing  Registrable
Securities  offered  pursuant  to the  Registration  Statement  and enable  such
certificates to be in such denominations or amounts,  as the case may be, as the
managing  underwriter or underwriters,  if any, or the Purchasers may reasonably
request  and   registered  in  such  names  as  the  managing   underwriter   or
underwriters,  if any,  or the  Purchasers  may  request,  and,  within  one (1)
business  day  after  a  Registration   Statement  which  includes   Registrable
Securities  is ordered  effective  by the SEC,  the  Company  shall  cause legal
counsel  selected  by the  Company to  deliver,  to the  transfer  agent for the
Registrable   Securities  (with  copies  to  the  Purchasers  whose  Registrable
Securities  are  included in such  Registration  Statement),  an opinion of such
counsel in the form attached hereto as Exhibit 1.

         3.15 At the  request  of any  Purchaser,  the  Company  shall  promptly
prepare  and  file  with  the  SEC  such  amendments  (including  post-effective
amendments) and supplements to a Registration  Statement and the prospectus used
in connection  with the  Registration  Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.

         3.16     Intentionally omitted.

         3.17 The Company  shall take all such other actions as any Purchaser or
the underwriters,  if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities.

         3.18 From and after the date of this Agreement,  the Company shall not,
and shall not agree to,  allow the  holders  of any  securities  of the  Company
(other than Purchasers with respect to Registrable Securities) to include any of
their  securities in any  Registration  Statement or any

<PAGE>

amendment or  supplement  thereto  under  Section 2.1 or 3.2 hereof  without the
consent of the Initial Purchaser,  subject to the existing  registration  rights
granted by the  Company,  which are listed on the  Schedules  to the  Securities
Purchase Agreement.

         3.19  The  Registration  Statement  shall  state  that it  covers  such
indeterminate  number of additional shares as may be issuable upon conversion of
the  Preferred  Stock or exercise of the Warrant to prevent  dilution  resulting
from stock splits, stock dividends and other similar transactions.

                                   ARTICLE IV
                          OBLIGATIONS OF THE PURCHASERS

In  connection  with  the  registration  of  the  Registrable  Securities,  each
Purchaser shall have the following obligations:

         4.1 Purchaser shall furnish to the Company such  information  regarding
itself,  the  Registrable  Securities  held by it and  the  intended  method  of
disposition  of the  Registrable  Securities  held by it as shall be required to
effect  the  registration  of such  Registrable  Securities.  At least  five (5)
business  days prior to the first  anticipated  filing date of the  Registration
Statement,  the Company  shall  notify each  Purchaser  of the  information  the
Company requires from each such Purchaser.

         4.2 Each Purchaser,  by such Purchaser's  acceptance of the Registrable
Securities,  agrees to cooperate with the Company as reasonably requested by the
Company  in  connection  with the  preparation  and  filing of the  Registration
Statements hereunder,  unless such Purchaser has notified the Company in writing
of such  Purchaser's  election  to exclude all of such  Purchaser's  Registrable
Securities from the Registration Statement.

         4.3 Each  Purchaser  whose  Registrable  Securities  are  included in a
Registration  Statement understands that the Securities Act may require delivery
of a prospectus relating thereto in connection with any sale thereof pursuant to
such  Registration  Statement,  and each such  Purchaser  shall  comply with the
applicable  prospectus delivery requirements of the Securities Act in connection
with any such sale and shall sell such Registrable Securities in accordance with
the plan of distribution described in such Registration Statement.

         4.4      Intentionally omitted.

         4.5 Each Purchaser agrees that, upon receipt of written notice from the
Company of the  happening  of any event of the kind  described  in  Section  3.6
hereof or the  commencement  of a  Registration  Suspension  under  Section  2.3
hereof, such Purchaser will immediately  discontinue  disposition of Registrable
Securities  pursuant to the  Registration  Statement  covering such  Registrable
Securities until such  Purchaser's  receipt of the copies of the supplemented or
amended  prospectus  contemplated  by Section 3.6 or advice that a supplement or
amendment  is not  required,  or  receipt of notice of the  termination  of such
Registration Suspension, as the case

<PAGE>

may be, and, if so directed by the Company,  such Purchaser shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction)  all copies in such  Purchaser's  possession  (other
than a limited number of permanent file copies), of the prospectus covering such
Registrable   Securities  current  at  the  time  of  receipt  of  such  notice.
Purchaser's obligations under this paragraph shall in no way limit the Company's
obligations  under this Agreement or Purchaser's  rights or remedies against the
Company  with respect to any breach or  threatened  breach by the Company of any
such obligations.

         4.6 Without  limiting a  Purchaser's  rights  under  Section 2.1 or 3.2
hereof, no Purchaser may participate in any underwritten  distribution hereunder
unless such Purchaser (a) agrees to sell such Purchaser's Registrable Securities
on the basis provided in any underwriting agreements in usual and customary form
entered into by the Company  pursuant to Section 3.5 hereof,  (b)  completes and
executes  all  questionnaires,  powers of  attorney,  indemnities,  underwriting
agreements  and  other  documents  reasonably  required  under the terms of such
underwriting  arrangements,  and (c)  agrees  to pay its pro  rata  share of all
underwriting  discounts  and  commissions  and any  expenses  in excess of those
payable by the Company  pursuant to Article V hereof.  Without  implication that
the contrary would otherwise be true, it is expressly understood and agreed that
no  Purchaser  shall  be  required  to  participate  in  any  such  underwritten
distribution.

                                    ARTICLE V
                            EXPENSES OF REGISTRATION

All expenses,  other than  underwriting  discounts and commissions,  incurred in
connection with registrations, filings or qualifications pursuant to Articles II
and  III,  including,   without  limitation,   all  registration,   listing  and
qualification  fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, shall be borne by the Company.

                                   ARTICLE VI
                                 INDEMNIFICATION

In the event any Registrable Securities are included in a Registration Statement
under this Agreement:

         6.1 To the extent  permitted by law, the Company will  indemnify,  hold
harmless and defend (a) each  Purchaser who holds such  Registrable  Securities,
(b) each underwriter of Registrable Securities and (c) the directors,  officers,
partners,  members,  employees,  agents and persons  who  control any  Purchaser
within the  meaning of  Section  15 of the  Securities  Act or Section 20 of the
Exchange  Act, if any,  (each,  an  "Indemnified  Person"),  against any losses,
claims, damages,  liabilities or expenses (collectively,  together with actions,
proceedings or inquiries whether or not in any court,  before any administrative
body or by any regulatory or self-regulatory organization,  whether commenced or
threatened,  in  respect  thereof,  "Claims  ") to which any of them may  become
subject  insofar as such Claims  arise out of or are based upon:  (i) any untrue
statement  or alleged  untrue  statement  of a material  fact in a  Registration
Statement or

<PAGE>

the omission or alleged omission to state therein a material fact required to be
stated or necessary to make the statements  therein not misleading,  or (ii) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary  prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented,  if
the Company files any amendment  thereof or supplement  thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein,  in light of the circumstances under which the
statements  therein were made,  not  misleading  (the  matters in the  foregoing
clauses  (i) and (ii) being,  collectively,  "Violations").  The  Company  shall
reimburse each such Indemnified  Person,  promptly as such expenses are incurred
and are due and  payable,  for any  reasonable  legal  fees or other  reasonable
expenses incurred by them in connection with investigating or defending any such
Claim.   Notwithstanding   anything  to  the  contrary   contained  herein,  the
indemnification  agreement contained in this Section 6.1: (x) shall not apply to
an  Indemnified  Person with  respect to a Claim  arising out of or based upon a
Violation  which  occurs in reliance  upon and in  conformity  with  information
furnished in writing to the Company by such Indemnified Person expressly for use
in the  Registration  Statement  or any such  amendment  thereof  or  supplement
thereto;  (y) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected  without the prior written consent of the Company,  which
consent  shall  not be  unreasonably  withheld;  and  (z)  with  respect  to any
preliminary prospectus, shall not inure to the benefit of any Indemnified Person
if  the  untrue  statement  or  omission  of  material  fact  contained  in  the
preliminary  prospectus  was corrected on a timely basis in the  prospectus,  as
then  amended or  supplemented,  if such  corrected  prospectus  was timely made
available  by the Company  pursuant to Section 3.3 hereof,  and the  Indemnified
Person was promptly advised in writing not to use the incorrect prospectus prior
to  the  use  giving  rise  to  a  Violation   and  such   Indemnified   Person,
notwithstanding  such advice, used it. Such indemnity shall remain in full force
and  effect  regardless  of  any  investigation  made  by or on  behalf  of  the
Indemnified Person and shall survive the transfer of the Registrable  Securities
by a Purchaser pursuant to Article IX.

         6.2 In connection with any Registration  Statement in which a Purchaser
is  participating,  each such Purchaser  agrees to indemnify,  hold harmless and
defend,  to the same extent and in the same manner set forth in Section 6.1, the
Company, each of its directors,  each of its officers who signs the Registration
Statement,  its employees,  agents and persons,  if any, who control the Company
within the  meaning of  Section  15 of the  Securities  Act or Section 20 of the
Exchange  Act,  and any other  stockholder  selling  securities  pursuant to the
Registration Statement,  together with its directors,  officers and members, any
underwriter,  and any person who controls such stockholder or underwriter within
the meaning of the  Securities  Act or the  Exchange  Act (such an  "Indemnified
Party"),  against any Claim to which any of them may become subject,  insofar as
such  Claim  arises  out of or is based  upon a  Violation,  in each case to the
extent (and only to the extent) that such Violation  occurs in reliance upon and
in  conformity  with  written  information  furnished  to the  Company  by  such
Purchaser expressly for use in connection with such Registration Statement;  and
such  Purchaser  will  reimburse any such  Indemnified  Party  (promptly as such
expenses are incurred and are due and payable) for any  reasonable  legal fee or
other reasonable  expenses incurred by them in connection with  investigating or
defending  any such  Claim;  provided,  however,  that the  indemnity  agreement

<PAGE>

contained in this Section 6.2 shall not apply to amounts paid in  settlement  of
any Claim if such  settlement is effected  without the prior written  consent of
such  Purchaser,  which consent shall not be  unreasonably  withheld;  provided,
further,  however,  that a  Purchaser  shall  be  liable  under  this  Agreement
(including  this  Section 6.2 and Article  VII) for only that amount as does not
exceed the net proceeds  actually  received by such Purchaser as a result of the
sale of Registrable  Securities  pursuant to such Registration  Statement.  Such
indemnity shall remain in full force and effect  regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the   Registrable   Securities   by  a   Purchaser   pursuant   to  Article  IX.
Notwithstanding  anything to the contrary contained herein, the  indemnification
agreement  contained  in  this  Section  6.2  with  respect  to any  preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the  preliminary  prospectus
was  corrected  on a  timely  basis  in  the  prospectus,  as  then  amended  or
supplemented,  and the Indemnified  Party was required,  but failed,  to utilize
such corrected prospectus.

         6.3 Promptly  after  receipt by an  Indemnified  Person or  Indemnified
Party  under  this  Article  VI of  notice  of the  commencement  of any  action
(including any  governmental  action),  such  Indemnified  Person or Indemnified
Party  shall,  if a  Claim  in  respect  thereof  is  to  be  made  against  any
indemnifying  party under this Article VI, 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
control  of the  defense  thereof  with  counsel  mutually  satisfactory  to the
indemnifying  party and the Indemnified  Person or the Indemnified Party, as the
case may be; provided,  however,  that such indemnifying  party shall diligently
pursue such  defense and that such  indemnifying  party shall not be entitled to
assume such defense and an Indemnified  Person or  Indemnified  Party shall have
the right to retain its own counsel with the reasonable  fees and expenses to be
paid by the  indemnifying  party, if the  representation  by such counsel of the
Indemnified  Person or  Indemnified  Party and the  indemnifying  party would be
inappropriate  due to actual or  potential  conflicts  of  interest as to all or
certain discrete issues between such Indemnified Person or Indemnified Party and
any other party  represented by such counsel in such proceeding or the actual or
potential  defendants  in, or  targets  of,  any such  action  include  both the
Indemnified Person and an Indemnified  Party; and provided further,  that if the
Indemnified  Party  and  any  such  Indemnified   Person  or  Indemnified  Party
reasonably  determine  that  there  may be  legal  defenses  available  to  such
Indemnified  Person or Indemnified Party which are different from or in addition
to those available to such indemnifying  party, the indemnifying party shall not
be entitled to assume  control of such  different  or  additional  defense.  The
indemnifying  party  shall  pay for  only one  separate  legal  counsel  for the
Indemnified Persons or the Indemnified  Parties,  as applicable,  and such legal
counsel shall be selected by Purchasers  holding a  majority-in-interest  of the
Registrable Securities included in the Registration Statement to which the Claim
relates  (with the approval of each Initial  Purchaser  which holds  Registrable
Securities  included in such  Registration  Statement),  if the  Purchasers  are
entitled to  indemnification  hereunder,  or by the  Company,  if the Company is
entitled to  indemnification  hereunder,  as applicable.  The failure to deliver
written  notice  to the  indemnifying  party  within  a  reasonable  time of the
commencement of any such

<PAGE>

action  shall  not  relieve  such  indemnifying  party of any  liability  to the
Indemnified  Person or  Indemnified  Party under this Article VI,  except to the
extent  that the  indemnifying  party is actually  prejudiced  in its ability to
defend such  action.  The  indemnification  required by this Article VI shall be
made by  periodic  payments  of the  amount  thereof  during  the  course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.

                                   ARTICLE VII
                                  CONTRIBUTION

To the extent any  indemnification  by an  indemnifying  party is  prohibited or
limited by law, the indemnifying  party agrees to make the maximum  contribution
with respect to any amounts for which it would otherwise be liable under Article
VI hereof to the fullest extent permitted by law; provided, however, that (i) no
person  guilty of  fraudulent  misrepresentation  (within the meaning of Section
11(f) of the Securities Act) shall be entitled to  contribution  from any person
of   Registrable   Securities   who  was   not   guilty   of   such   fraudulent
misrepresentation,  and (ii) contribution  (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable  Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.

                                  ARTICLE VIII
                         REPORTS UNDER THE EXCHANGE ACT

With a view to making  available  to the  Purchasers  the  benefits  of Rule 144
promulgated  under the Securities Act or any other similar rule or regulation of
the SEC that may at any time permit the  Purchasers  to sell  securities  of the
Company to the public without  registration  ("Rule 144"), the Company agrees to
so long as such  Purchaser  holds  Preferred  Stock,  the Warrant or Registrable
Securities :

         8.1 File with the SEC in a timely  manner  and make and keep  available
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the Company remains subject to such requirements
(it being  understood that nothing herein shall limit the Company's  obligations
under  Section  4.3 of the  Securities  Purchase  Agreement)  and the filing and
availability  of such reports and other documents is required for the applicable
provisions of Rule 144; and

         8.2 Furnish to each  Purchaser  promptly  upon  request,  (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144,  the  Securities  Act and the  Exchange  Act,  (ii) a copy of the most
recent  annual or  quarterly  report of the Company  and such other  reports and
documents so filed by the Company,  and (iii) such other  information  as may be
reasonably  requested to permit the Purchasers to sell such securities  pursuant
to Rule 144 without registration.

<PAGE>

                                   ARTICLE IX
                        ASSIGNMENT OF REGISTRATION RIGHTS

         The rights of the Purchasers hereunder, including the right to have the
Company register  Registrable  Securities  pursuant to this Agreement,  shall be
automatically assigned by each Purchaser to any transferee of all or any portion
of the  Preferred  Stock if: (a) the  transferee  (which shall be an  accredited
investor as defined in  Regulation  D under the  Securities  Act) is a permitted
transferee  under  Section XIV. K of the  Certificate  of  Designation,  (b) the
transferring  Purchaser  agrees in writing  with the  transferee  or assignee to
assign such  rights,  and a copy of such  agreement  is furnished to the Company
within a reasonable  time after such  assignment,  (c) the Company is,  within a
reasonable time after such transfer or assignment, furnished with written notice
of (i) the  name  and  address  of such  transferee  or  assignee,  and (ii) the
securities with respect to which such registration  rights are being transferred
or assigned, (d) following such transfer or assignment,  the further disposition
of such  securities  by the  transferee  or  assignee  is  restricted  under the
Securities  Act or applicable  state  securities  laws, and (e) at or before the
time the Company  receives the written notice  contemplated by clause (c)(ii) of
this sentence,  the transferee or assignee  agrees in writing for the benefit of
the Company to be bound by all of the provisions contained herein. The rights of
a Purchaser hereunder with respect to any Registrable Securities not transferred
(and not represented by Preferred Stock or the Warrant transferred) shall not be
assigned  by  virtue  of  the  transfer  of  other  Registrable   Securities  or
transferred  Preferred  Stock  or the  Warrant  representing  other  Registrable
Securities. Any such transferee who succeeds to rights hereunder shall be deemed
to have a separate agreement with the Company independent of this Agreement.

                                    ARTICLE X
                        AMENDMENT OF REGISTRATION RIGHTS

Provisions of this  Agreement may be amended and the  observance  thereof may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with written consent of the Company and the Purchasers then
holding at least two thirds of the Registrable  Securities.  In the event of the
assignment  of rights  hereunder  pursuant to Article IX, the Company  shall not
take any action pursuant to such assignment  rights that would adversely  affect
any Purchaser's rights hereunder without such Purchaser's consent.

                                   ARTICLE XI
                                  MISCELLANEOUS

         11.1 A person  or  entity  is  deemed  to be a holder  (or a holder  in
interest)  of  Registrable  Securities  whenever  such  person or entity owns of
record such Registrable  Securities (or the Preferred Stock or the Warrant which
may be converted into or exercised for Registrable  Securities).  If the Company
receives conflicting instructions, notices or elections from two or more persons
or entities with respect to the same Registrable  Securities,  the Company shall
act upon  the  basis of  instructions,  notice  or  election  received  from the
registered  owner of such  Registrable  Securities  (or  Preferred  Stock or the
Warrant, as the case may be).

<PAGE>

         11.2 Any notices  herein  required or permitted to be given shall be in
writing  and  may  be   personally   served  or   delivered  by  courier  or  by
machine-generated  confirmed telecopy, and shall be deemed delivered at the time
and date of receipt (which shall include telephone line facsimile transmission).
The addresses for such communications shall be:

                  If to the Company:

                           THCG, Inc.
                           650 Madison Avenue, 21st Floor
                           New York, NY 10022
                           Telecopy: (212)223-0161
                           Attention: Adi Raviv

                           with a copy to:

                           Kramer Levin Naftalis & Frankel LLP
                           919 Third Avenue
                           New York NY 10022
                           Telecopy: (212)715-8000
                           Attention: Peter S. Kolevzon, Esq.

If to any  Purchaser at such address as such  Purchaser  shall have  provided in
writing to the Company,  or at such other address,  telecopy  number or person's
attention as any as each such party furnishes by notice given in accordance with
this Section 11.2.

         11.3  Failure of any party to exercise  any right or remedy  under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

         11.4 This  Agreement  shall be governed by and  construed in accordance
with the laws of the State of New York  applicable  to contracts  made and to be
performed in the State of New York. The Company and each  Purchaser  irrevocably
consent to the  jurisdiction  of the federal  courts located in the State of New
York and the state  courts of the State of New York located in the County of New
York in the  State  of New York in any suit or  proceeding  based on or  arising
under this Agreement and  irrevocably  agrees that all claims in respect of such
suit or  proceeding  may be  determined  in such  courts.  The  Company and each
Purchaser  irrevocably  waive  the  defense  of an  inconvenient  forum  to  the
maintenance  of such suit or  proceeding.  The parties hereto further agree that
service of process upon the parties  hereto  mailed by first class mail shall be
deemed in every respect effective service of process upon each such party in any
such suit or  proceeding.  Nothing  herein shall affect either  party's right to
serve  process in any other manner  permitted  by law. The parties  hereto agree
that a final  non-appealable  judgment in any such suit or  proceeding  shall be
conclusive and may be enforced in other  jurisdictions  by suit on such judgment

<PAGE>

or in any other lawful manner.

         11.5  This  Agreement,   the  Preferred  Stock,  the  Warrant  and  the
Securities Purchase Agreement  (including all schedules and exhibits thereto and
all certificates and opinions required thereby)  constitute the entire agreement
among the parties  hereto with respect to the subject matter hereof and thereof.
There are no  restrictions,  promises,  warranties or  undertakings,  other than
those set forth or referred to herein and therein. This Agreement, the Preferred
Stock,  the Warrant and the Securities  Purchase  Agreement  supersede all prior
agreements  and  understandings  among the parties  hereto  with  respect to the
subject matter hereof and thereof.

         11.6 Subject to the  requirements of Article IX hereof,  this Agreement
shall inure to the benefit of and be binding upon the  successors and assigns of
each of the parties hereto.  Notwithstanding  anything to the contrary contained
herein,  including,  without  limitation,  Article IX, the rights of a Purchaser
hereunder  shall be assignable to and  exercisable by a bona fide pledgee of the
Registrable  Securities,  provided  that  the  pledgee  shall  be  bound by this
Agreement.

         11.7 The headings in this  Agreement are for  convenience  of reference
only and shall not limit or otherwise affect the meaning hereof.

         11.8 This Agreement may be executed in two or more  counterparts,  each
of which shall be deemed an original but all of which shall  constitute  one and
the same agreement.  This Agreement,  once executed by a party, may be delivered
to the other party hereto, by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

         11.9  Each  party  shall  do and  perform,  or  cause  to be  done  and
performed,  all such further acts and things,  and shall execute and deliver all
such other  agreements,  certificates,  instruments and documents,  as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

         11.10 Intentionally omitted.

         11.11 In the event  Purchaser  shall sell or otherwise  transfer any of
such  Purchaser's  Registrable  Securities as permitted under Article IX hereof,
each  transferee  shall  be  allocated  a pro  rata  portion  of the  number  of
Registrable Securities included on a Registration Statement for such transferor,
subject to any filing under federal and state  securities law required to effect
such allocation.

         11.12  If  any  provision  of  this  Agreement   shall  be  invalid  or
unenforceable, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement.

                                      * * *

<PAGE>

         IN WITNESS  WHEREOF,  the parties have caused this Agreement to be duly
executed as of the date first above written.

                                       COMPANY:

                                       THCG, Inc.

                                       By:
                                       Name:
                                       Title:

<PAGE>

INITIAL PURCHASER:

CASTLE CREEK TECHNOLOGY PARTNERS LLC

By: Castle Creek Partners, L.L.C.
Its: Investment Manager

By:
Name: Michael L. Spolan
Title:

Address:          77 W. Wacker Drive, Suite 4040
                  Chicago, Illinois 60601
                  Facsimile: (312)499-6999

Copy to:

                  Altheimer & Gray
                  10 S. Wacker Drive Ste. 4000
                  Chicago, Illinois 60606
                  Facsimile: (312)715-4800
                  Attn:    Michael H. Altman, Esq.

<PAGE>

                                                                       EXHIBIT 1
                                                                 to Registration
                                                                Rights Agreement

                                     [Date]

[Name and address
of transfer agent]

                        RE: THCG, INC.

Ladies and Gentlemen:

         We are counsel to THCG,  Inc., a Delaware  corporation (the "Company"),
and we understand that [Name of Purchaser] (the "Holder") has purchased from the
Company an amount of the  Company's  Series A  Preferred  Stock (the  "Preferred
Stock")  convertible into shares of the Company's common stock,  $0.01 per share
(the  "Common  Stock") and warrant to purchase  the Common  Stock of the Company
(the  "Warrant").  The  Preferred  Stock and Warrant was purchased by the Holder
pursuant to a Securities Purchase Agreement,  dated as of August 1, 2000, by and
among the Company and the signatories  thereto (the "Agreement").  Pursuant to a
Registration  Rights  Agreement,  dated as of August 2,  2000,  by and among the
Company and the signatories thereto (the "Registration  Rights Agreement"),  the
Company agreed with the Holder,  among other things, to register the Registrable
Securities (as that term is defined in the Registration  Rights Agreement) under
the Securities Act of 1933, as amended (the  "Securities  Act"),  upon the terms
provided in the Registration Rights Agreement.  In connection with the Company's
obligations  under the  Registration  Rights  Agreement,  on ____, __, 2000, the
Company filed a  Registration  Statement on Form S-3 (File No. 333-  __________)
(the "Registration  Statement") with the Securities and Exchange Commission (the
"SEC")  relating  to the  Registrable  Securities,  which  names the Holder as a
selling stockholder thereunder.

         [Other customary  introductory and scope of examination  language to be
inserted]

         Based  on the  foregoing,  we are of the  opinion  that the sale of the
Registrable  Securities by the holders  thereof in accordance  with the "Plan of
Distribution"  described in the Registration Statement has been registered under
the Securities Act.

         [Other appropriate  customary language reasonably  acceptable to holder
to be included.]

                                               Very truly yours,

cc:  [Name of Purchaser]

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