Document:

EXHIBIT 4.1

                                                                  EXECUTION COPY

                         COMMON STOCK PURCHASE AGREEMENT

         COMMON STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of December
21,  2001 by and  between  PURCHASEPRO.COM,  INC.,  a  Nevada  corporation  (the
"Company"),  and FUSION  CAPITAL  FUND II, LLC, an  Illinois  limited  liability
company (the "Buyer").  Capitalized  terms used herein and not otherwise defined
herein are defined in Section 10 hereof.

         WHEREAS:

         Subject to the terms and  conditions set forth in this  Agreement,  the
Company  wishes  to sell to the  Buyer,  and the  Buyer  wishes  to buy from the
Company,  up to Fifteen Million Dollars  ($15,000,000)  of the Company's  common
stock,  par value  $0.01 per share (the  "Common  Stock").  The shares of Common
Stock to be  purchased  hereunder  (excluding  Commitment  Shares as  defined in
Section 4(f) hereof) are referred to herein as the "Purchase Shares."

         NOW THEREFORE, the Company and the Buyer hereby agree as follows:

         1.       PURCHASE OF COMMON STOCK.

         Subject to the terms and  conditions  set forth in  Sections 6, 7 and 9
below,  the Company  hereby  agrees to sell to the Buyer,  and the Buyer  hereby
agrees to purchase from the Company, Purchase Shares as follows:

         (a) Commencement of Purchases of Common Stock. The purchase and sale of
Purchase  Shares  hereunder shall commence (the  "Commencement")  not later than
five (5) Trading  Days  following  the date of  satisfaction  (or waiver) of the
conditions  to the  Commencement  set forth in  Sections  6 and 7 below (or such
later date as is mutually  agreed to by the Company and Buyer) (the date of such
Commencement, the "Commencement Date").

         (b) Buyer's Purchase Rights and  Obligations.  Subject to the Company's
right to suspend  purchases  under  Section  1(d)(ii)  hereof,  the Buyer  shall
purchase Purchase Shares on each Trading Day during each Monthly Period equal to
the Daily Base  Amount at the  Purchase  Price.  Within one (1)  Trading  Day of
receipt of Purchase  Shares,  the Buyer shall pay to the Company an amount equal
to the Purchase  Amount with respect to such Purchase Shares as full payment for
the purchase of the Purchase Shares so received. The Company shall not issue any
fraction  of a share of Common  Stock upon any  purchase.  All  Purchase  Shares
(including  fractions  thereof)  issuable upon a purchase  under this  Agreement
shall be  aggregated  for purposes of  determining  whether the  purchase  would

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result in the issuance of a fraction of a share of Common  Stock.  If, after the
aforementioned  aggregation,  the  issuance  would  result in the  issuance of a
fraction of a share of Common Stock,  the Company shall round such fraction of a
share of Common Stock up or down to the nearest  whole share.  All payments made
under  this  Agreement  shall be made in lawful  money of the  United  States of
America by check or wire transfer of immediately available funds to such account
as the payee may from time to time  designate  by written  notice in  accordance
with the provisions of this Agreement.  Whenever any amount  expressed to be due
by the terms of this Agreement is due on any day which is not a Trading Day, the
same shall instead be due on the next succeeding day which is a Trading Day.

         (c)      Company's Right to Decrease or Increase the Daily Base Amount.

                  (i)  Company's  Right to Decrease the Daily Base  Amount.  The
         Company  shall always have the right at any time to decrease the amount
         of the Daily Base Amount by  delivering  written  notice (a "Daily Base
         Amount  Decrease  Notice") to the Buyer which notice shall  specify the
         new Daily Base  Amount.  The  decrease in the Daily Base  Amount  shall
         become  effective  one  Trading  Day after  receipt by the Buyer of the
         Daily Base Amount  Decrease  Notice.  Any  purchases by the Buyer which
         have a Purchase  Date on or prior to the first (1st)  Trading Day after
         receipt by the Buyer of a Daily Base  Amount  Decrease  Notice  must be
         honored by the Company as otherwise  provided  herein.  The decrease in
         the Daily Base Amount shall remain in effect until the Company delivers
         to the Buyer a Daily Base Amount Increase Notice (as defined below).

                  (ii)  Company's  Right to Increase the Daily Base Amount.  The
         Company  shall always have the right at any time to increase the amount
         of the  Daily  Base  Amount up to the  Original  Daily  Base  Amount by
         delivering  written  notice to the Buyer  stating the new amount of the
         Daily Base  Amount (a "Daily  Base  Amount  Increase  Notice").  If the
         Closing  Sale  Price  of the  Common  Stock  on  each of the  five  (5)
         consecutive  Trading  Days  immediately  prior to a Daily  Base  Amount
         Increase Notice is at least $4.00,  the Company shall have the right to
         deliver a Daily Base Amount  Increase Notice which increases the amount
         of the Daily Base Amount to any amount  above the  Original  Daily Base
         Amount.  A Daily Base Amount  Increase  Notice shall be  effective  one
         Trading Day after receipt by the Buyer.  Such increase in the amount of
         the Daily Base Amount  shall  continue in effect  until the delivery to
         the  Buyer of a Daily  Base  Amount  Decrease  Notice.  Notwithstanding
         anything  to the  contrary,  if the Daily Base Amount then in effect is
         greater than the  Original  Daily Base Amount and the Sale Price of the
         Common Stock  during any Trading Day is less than $4.00,  the amount of
         the Daily Base Amount shall be the  Original  Daily Base Amount or such
         lesser  amount as  specified  by the  Company  in a Daily  Base  Amount
         Decrease  Notice and any of the Buyer's  obligations to purchase shares
         of Common  Stock in excess of the  Original  Daily Base Amount shall be
         terminated.  Thereafter,  the  Company  shall  again  have the right to
         increase  the amount of the Daily Base  Amount to any amount  above the
         Original Daily Base Amount only if the Closing Sale Price of the Common
         Stock is at least $4.00 on each of five (5)  consecutive  Trading Days.
         Notwithstanding  the forgoing,  the Buyer shall  consider in good faith
         any request by the Company to increase the Daily Base Amount regardless
         of the Sale Price of the Common Stock.

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         (d)      Limitations on Purchases.

                  (i) Limitation on Beneficial Ownership.  The Company shall not
         effect any sale under this  Agreement  and the Buyer shall not have the
         right to purchase  shares of Common  Stock under this  Agreement to the
         extent that after giving  effect to such  purchase  the Buyer  together
         with its  affiliates  would  beneficially  own in excess of 4.9% of the
         outstanding  shares of the Common Stock  following such  purchase.  For
         purposes  hereof,  the  number of shares of Common  Stock  beneficially
         owned by the Buyer and its  affiliates or acquired by the Buyer and its
         affiliates,  as the case may be, shall  include the number of shares of
         Common  Stock  issuable  in  connection  with  a  purchase  under  this
         Agreement  with respect to which the  determination  is being made, but
         shall  exclude  the  number of shares of Common  Stock  which  would be
         issuable  upon (1) a purchase of the remaining  Available  Amount which
         has not been submitted for purchase,  and (2) exercise or conversion of
         the unexercised or unconverted  portion of any other  securities of the
         Company  (including,  without  limitation,  any warrants)  subject to a
         limitation  on  conversion  or  exercise  analogous  to the  limitation
         contained herein beneficially owned by the Buyer and its affiliates. If
         the 4.9%  limitation  is ever reached the Company shall have the option
         to increase such  limitation  to 9.9% by delivery of written  notice to
         the Buyer.  Thereafter,  if the 9.9%  limitation  is ever  reached this
         shall not effect or limit the Buyer's  obligation to purchase the Daily
         Base Amount as otherwise  provided in this  Agreement  (i.e.  the Buyer
         shall  continue to pay the Purchase  Price for Purchase  Shares but the
         Company  shall not  issue,  and the  Buyer  shall  not be  entitled  to
         receive, such applicable Purchase Shares until such time as, and to the
         extent that, the Buyer is below the 9.9%  limitation).  For purposes of
         this Section, in determining the number of outstanding shares of Common
         Stock the Buyer may rely on the number of outstanding  shares of Common
         Stock as reflected in (1) the  Company's  most recent Form 10-Q or Form
         10-K, as the case may be, (2) a more recent public  announcement by the
         Company or (3) any other  written  communication  by the Company or its
         transfer  agent  setting  forth the  number  of shares of Common  Stock
         outstanding.  Upon the reasonable written or oral request of the Buyer,
         the Company shall  promptly  confirm orally and in writing to the Buyer
         the number of shares of Common Stock then outstanding. In any case, the
         number of outstanding  shares of Common Stock shall be determined after
         giving effect to any purchases  under this Agreement by the Buyer since
         the date as of which such number of outstanding  shares of Common Stock
         was reported.  Except as otherwise  set forth  herein,  for purposes of
         this Section  1(d)(i),  beneficial  ownership  shall be  determined  in
         accordance  with Section 13(d) of the Securities  Exchange Act of 1934,
         as amended.

                  (ii) Company's Right to Suspend Purchases. The Company may, at
         any time, give written notice (a "Purchase  Suspension  Notice") to the
         Buyer  suspending  purchases of Purchase Shares by the Buyer under this
         Agreement.  The Purchase  Suspension Notice shall be effective only for

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         purchases  that have a Purchase  Date later  than one (1)  Trading  Day
         after  receipt of the  Purchase  Suspension  Notice by the  Buyer.  Any
         purchase by the Buyer that has a Purchase Date on or prior to the first
         (1st) Trading Day after  receipt by the Buyer of a Purchase  Suspension
         Notice  from the Company  must be honored by the  Company as  otherwise
         provided  herein.  Such purchase  suspension  shall  continue in effect
         until a revocation in writing by the Company,  at its sole  discretion.
         So long as a Purchase  Suspension Notice is in effect,  the Buyer shall
         not be obligated to purchase any Purchase Shares from the Company under
         Section 1 of this Agreement.

                  (iii) Purchase Price Floor. The Buyer shall not have the right
         or the obligation to purchase any Purchase  Shares under this Agreement
         in the event that the  Purchase  Price for any  purchases  of  Purchase
         Shares would be less than the Floor Price.  The Company may at any time
         give written notice (a "Floor Price Notice") to the Buyer increasing or
         decreasing  the Floor Price.  The Floor Price Notice shall be effective
         only for purchases that have a Purchase Date later than one (1) Trading
         Day after receipt of the Floor Price Notice by the Buyer.  Any purchase
         by the Buyer that has a Purchase  Date on or prior to the first Trading
         Day after  receipt of a Floor Price  Notice  from the  Company  must be
         honored by the Company as otherwise provided herein.

         (e) Records of Purchases. The Buyer and the Company shall each maintain
records  showing the remaining  Available  Amount at any give time and the dates
and  Purchase  Amounts  for each  purchase  or  shall  use  such  other  method,
reasonably satisfactory to the Buyer and the Company.

         (f) Taxes. The Company shall pay any and all transfer, stamp or similar
taxes that may be payable  with  respect to the  issuance  and  delivery  of any
shares of Common Stock to the Buyer made under of this Agreement.

         (g)  Compliance  with  Principal  Market  Rules.  The Company shall not
effect any sale under this  Agreement  and the Buyer shall not have the right to
purchase  shares of Common  Stock under this  Agreement to the extent that after
giving effect to such purchase the "Exchange Cap" shall be deemed to be reached.
The "Exchange Cap" shall be deemed to have been reached if, at any time prior to
the shareholders of the Company  approving the transaction  contemplated by this
Agreement,  upon a purchase under this  Agreement,  the Purchase Shares issuable
pursuant to such purchase would,  together with all Purchase  Shares  previously
issued under this Agreement,  exceed 19.9% of the  outstanding  shares of Common
Stock as of the date of this Agreement).  The Company may, but shall be under no
obligation to, request its shareholders to approve the transaction  contemplated
by this  Agreement.  The Company shall not be required or permitted to issue any
shares of Common Stock under this  Agreement if such  issuance  would breach the
Company's obligations under the rules or regulations of the Principal Market.

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         2.       BUYER'S REPRESENTATIONS AND WARRANTIES.

         The Buyer  represents  and  warrants to the Company that as of the date
hereof and as of the Commencement Date:

         (a) Investment  Purpose.  The Buyer is entering into this Agreement and
acquiring  the  Commitment  Shares,  (as defined in Section 4(f)  hereof)  (this
Agreement and the Commitment  Shares are collectively  referred to herein as the
"Securities"),  for its own  account  for  investment  only  and not with a view
towards,  or for resale in  connection  with,  the public  sale or  distribution
thereof;  provided however, by making the representations herein, the Buyer does
not agree to hold any of the Securities for any minimum or other specific term.

         (b) Accredited  Investor Status. The Buyer is an "accredited  investor"
as that term is defined in Rule 501(a)(3) of Regulation D.

         (c) Reliance on Exemptions.  The Buyer  understands that the Securities
are being  offered and sold to it in reliance  on specific  exemptions  from the
registration requirements of United States federal and state securities laws and
that the  Company  is relying  in part upon the truth and  accuracy  of, and the
Buyer's   compliance   with,  the   representations,   warranties,   agreements,
acknowledgments  and  understandings  of the Buyer set forth  herein in order to
determine the  availability  of such exemptions and the eligibility of the Buyer
to acquire the Securities.

         (d)  Information.  The  Buyer  has been  furnished  with all  materials
relating to the business,  finances and  operations of the Company and materials
relating  to the offer  and sale of the  Securities  that  have been  reasonably
requested by the Buyer,  including,  without  limitation,  the SEC Documents (as
defined in Section 3(f) hereof).  The Buyer  understands  that its investment in
the Securities involves a high degree of risk. The Buyer (i) is able to bear the
economic risk of an investment in the  Securities  including a total loss,  (ii)
has such knowledge and  experience in financial and business  matters that it is
capable of  evaluating  the merits and risks of the proposed  investment  in the
Securities  and (iii) has had an  opportunity  to ask  questions  of and receive
answers from the officers of the Company concerning the financial  condition and
business of the  Company  and others  matters  related to an  investment  in the
Securities.  Neither such  inquiries nor any other due diligence  investigations
conducted by the Buyer or its representatives  shall modify, amend or affect the
Buyer's right to rely on the Company's  representations and warranties contained
in Section 3 below. The Buyer has sought such  accounting,  legal and tax advice
as it has  considered  necessary to make an informed  investment  decision  with
respect to its acquisition of the Securities.

         (e) No Governmental Review. The Buyer understands that no United States
federal  or state  agency or any other  government  or  governmental  agency has
passed on or made any  recommendation  or  endorsement  of the Securities or the
fairness  or  suitability  of the  investment  in the  Securities  nor have such
authorities  passed  upon  or  endorsed  the  merits  of  the  offering  of  the
Securities.

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         (f) Transfer or Resale.  The Buyer  understands that except as provided
in the Registration  Rights  Agreement (as defined in Section 6(a) hereof):  (i)
the Securities have not been and are not being  registered under the 1933 Act or
any state securities  laws, and may not be offered for sale,  sold,  assigned or
transferred  unless (A) subsequently  registered  thereunder or (B) an exemption
exists  permitting such Securities to be sold,  assigned or transferred  without
such registration;  (ii) any sale of the Securities made in reliance on Rule 144
may be made only in accordance  with the terms of Rule 144 and further,  if Rule
144 is not applicable, any resale of the Securities under circumstances in which
the seller (or the person  through whom the sale is made) may be deemed to be an
underwriter  (as that term is  defined in the 1933 Act) may  require  compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder;  and (iii) neither the Company nor any other person is under any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder.

         (g)  Validity;  Enforcement.  This  Agreement has been duly and validly
authorized,  executed  and  delivered  on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable  against the Buyer in accordance with
its terms,  subject as to enforceability to general  principles of equity and to
applicable bankruptcy, insolvency,  reorganization,  moratorium, liquidation and
other  similar laws  relating to, or affecting  generally,  the  enforcement  of
applicable creditors' rights and remedies.

         (h) Residency. The Buyer is a resident of the State of Illinois.

         (i) No Prior Short  Selling.  The Buyer  represents and warrants to the
Company  that at no time  prior  to the  date of this  Agreement  has any of the
Buyer,  its agents,  associates,  representatives  or  affiliates  engaged in or
effected, in any manner whatsoever, directly or indirectly, any (i) "short sale"
(as such term is defined  in Rule 3b-3 of the 1934 Act) of the  Common  Stock or
(ii) hedging transaction, which establishes a net short position with respect to
the Common Stock.

         3.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company  represents  and  warrants to the Buyer that as of the date
hereof and as of the Commencement Date:

         (a) Organization and Qualification.  The Company and its "Subsidiaries"
(which for  purposes of this  Agreement  means any entity in which the  Company,
directly or indirectly, owns 50% or more of the voting stock or capital stock or
other similar  equity  interests)  are  corporations  duly organized and validly
existing in good standing under the laws of the  jurisdiction  in which they are
incorporated,  and have the requisite corporate power and authority to own their
properties  and to carry on their business as now being  conducted.  Each of the
Company and its  Subsidiaries  is duly qualified as a foreign  corporation to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business  conducted by it makes such qualification
necessary,  except to the extent  that the failure to be so  qualified  or be in

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good  standing  could not  reasonably  be  expected  to have a Material  Adverse
Effect. As used in this Agreement,  "Material Adverse Effect" means any material
adverse  effect on any of: (i) the  business,  properties,  assets,  operations,
results  of   operations   or  financial   condition  of  the  Company  and  its
Subsidiaries,  if any, taken as a whole, or (ii) the authority or ability of the
Company to perform its obligations  under the Transaction  Documents (as defined
in Section 3(b) hereof).  The Company has no Subsidiaries except as set forth on
Schedule 3(a).

         (b)  Authorization;  Enforcement;  Validity.  (i) The  Company  has the
requisite   corporate  power  and  authority  to  enter  into  and  perform  its
obligations  under this Agreement and to issue the Securities in accordance with
the terms hereof,  and shall have, as of the  Commencement  Date,  the requisite
corporate  power and authority to enter into and perform its  obligations  under
the  Registration  Rights Agreement (as defined in Section 6(a) hereof) and each
of the other agreements entered into by the parties on the Commencement Date and
attached hereto as exhibits to this Agreement  (collectively,  the  "Transaction
Documents"), and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Agreement by the Company and the
consummation by it of the transactions  contemplated  hereby,  including without
limitation,  the  issuance  of the  Commitment  Shares and the  reservation  for
issuance and the issuance of the Purchase  Shares and the Additional  Commitment
Shares issuable under this Agreement, have been duly authorized by the Company's
Board of Directors and no further  consent or  authorization  is required by the
Company,  its Board of  Directors  or its  shareholders  and the  execution  and
delivery of the Transaction  Documents (other than the Agreement) by the Company
and the  consummation of the transactions  contemplated  thereby shall be, as of
the  Commencement  Date, duly authorized by the Company's Board of Directors and
no further consent or authorization shall be required by the Company,  its Board
of Directors or its shareholders,  (iii) this Agreement has been, and each other
Transaction  Document  shall be on the  Commencement  Date,  duly  executed  and
delivered  by the Company and (iv) this  Agreement  constitutes,  and each other
Transaction  Document  upon  its  execution  on  behalf  of the  Company,  shall
constitute, the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general  principles of equity or applicable  bankruptcy,  insolvency,
reorganization,   moratorium,  liquidation  or  similar  laws  relating  to,  or
affecting generally, the enforcement of creditors' rights and remedies.

         (c) Capitalization. As of the date hereof, the authorized capital stock
of the Company  consists of (i) 190.000,000  shares of Common Stock, of which as
of the date hereof, 73,889,551 shares are issued and outstanding,  1,127,498 are
held as treasury shares, 23,500,000 shares are reserved for issuance pursuant to
the Company's stock option plans of which only  approximately  4,152,261  shares
remain  available  and  3,994,446  shares are issuable and reserved for issuance
pursuant  to  securities  (other  than  stock  options  issued  pursuant  to the
Company's stock option plans)  exercisable or  exchangeable  for, or convertible
into, shares of Common Stock and (ii) 5,000,000 shares of Preferred Stock, $.001
par value, of which as of the date hereof no shares are issued and  outstanding.
All of such  outstanding  shares have been, or upon  issuance  will be,  validly
issued and are fully paid and  nonassessable.  Except as  disclosed  in Schedule
3(c),  (i) no shares of the  Company's  capital  stock are subject to preemptive

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rights or any other  similar  rights or any liens or  encumbrances  suffered  or
permitted by the Company,  (ii) there are no outstanding debt securities,  (iii)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character  whatsoever relating to, or securities or rights
convertible  into,  any  shares of  capital  stock of the  Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the  Company  or  any of  its  Subsidiaries  is or may  become  bound  to  issue
additional  shares of capital stock of the Company or any of its Subsidiaries or
options,  warrants,  scrip,  rights to subscribe to, calls or commitments of any
character  whatsoever relating to, or securities or rights convertible into, any
shares of capital  stock of the Company or any of its  Subsidiaries,  (iv) there
are  no  agreements  or  arrangements  under  which  the  Company  or any of its
Subsidiaries is obligated to register the sale of any of their  securities under
the 1933 Act  (except  the  Registration  Rights  Agreement),  (v)  there are no
outstanding  securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions,  and there are no contracts,
commitments,  understandings  or arrangements by which the Company or any of its
Subsidiaries  is or may become  bound to redeem a security of the Company or any
of its  Subsidiaries,  (vi) there are no  securities or  instruments  containing
anti-dilution  or similar  provisions  that will be triggered by the issuance of
the  Securities  as described in this  Agreement  and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or any
similar  plan or  agreement.  The  Company has  furnished  to the Buyer true and
correct copies of the Company's Certificate of Incorporation,  as amended and as
in effect on the date  hereof  (the  "Certificate  of  Incorporation"),  and the
Company's  By-laws,  as  amended  and as in  effect  on  the  date  hereof  (the
"By-laws"),  and summaries of the terms of all  securities  convertible  into or
exercisable for Common Stock, if any, and copies of any documents containing the
material rights of the holders thereof in respect thereto.

         (d)  Issuance  of  Securities.  The  Commitment  Shares  have been duly
authorized  and,  upon  issuance  in  accordance  with  the  terms  hereof,  the
Commitment Shares shall be (i) validly issued, fully paid and non-assessable and
(ii) free from all taxes,  liens and charges with respect to the issue  thereof.
10,000,000  shares of Common  Stock have been duly  authorized  and reserved for
issuance  upon purchase  under this  Agreement.  300,000  shares of Common Stock
(subject  to  equitable  adjustment  for any  reorganization,  recapitalization,
non-cash  dividend,  stock split or other  similar  transaction)  have been duly
authorized  and  reserved  for  issuance  as  Additional  Commitment  Shares  in
accordance with Section 4(f) this Agreement. Upon issuance and payment therefore
in  accordance  with the terms and  conditions of this  Agreement,  the Purchase
Shares shall be validly issued,  fully paid and  nonassessable and free from all
taxes,  liens and charges  with respect to the issue  thereof,  with the holders
being entitled to all rights accorded to a holder of Common Stock.

         (e) No Conflicts.  Except as disclosed in Schedule 3(e), the execution,
delivery and  performance  of the  Transaction  Documents by the Company and the
consummation by the Company of the transactions  contemplated hereby and thereby
(including, without limitation, the reservation for issuance and issuance of the
Purchase  Shares)  will not (i)  result in a  violation  of the  Certificate  of
Incorporation,  any Certificate of  Designations,  Preferences and Rights of any
outstanding  series of  preferred  stock of the  Company or the  By-laws or (ii)
conflict  with,  or constitute a default (or an event which with notice or lapse

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of time or both would become a default)  under,  or give to others any rights of
termination,   amendment,   acceleration  or  cancellation  of,  any  agreement,
indenture or  instrument  to which the Company or any of its  Subsidiaries  is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree  (including  federal and state  securities  laws and  regulations and the
rules and regulations of the Principal  Market  applicable to the Company or any
of its  Subsidiaries) or by which any property or asset of the Company or any of
its Subsidiaries is bound or affected, except in the case of conflicts, defaults
and  violations  under clause (ii),  which could not  reasonably  be expected to
result in a Material  Adverse  Effect.  Except as  disclosed  in Schedule  3(e),
neither the Company nor its  Subsidiaries  is in  violation of any term of or in
default under its Certificate of Incorporation,  any Certificate of Designation,
Preferences  and  Rights of any  outstanding  series of  preferred  stock of the
Company or By-laws or their  organizational  charter or  by-laws,  respectively.
Except as  disclosed  in  Schedule  3(e),  neither  the  Company  nor any of its
Subsidiaries  is in violation of any term of or is in default under any material
contract, agreement, mortgage,  indebtedness,  indenture,  instrument, judgment,
decree or order or any statute,  rule or regulation applicable to the Company or
its  Subsidiaries,  except for possible  conflicts,  defaults,  terminations  or
amendments  which could not  reasonably  be expected to have a Material  Adverse
Effect. The business of the Company and its Subsidiaries is not being conducted,
and shall not be conducted,  in violation of any law,  ordinance,  regulation of
any governmental entity, except for possible violations, the sanctions for which
either individually or in the aggregate could not reasonably be expected to have
a Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required  under the 1933 Act or applicable  state  securities  laws,  the
Company is not  required to obtain any  consent,  authorization  or order of, or
make any filing or registration  with, any court or  governmental  agency or any
regulatory  or  self-regulatory  agency in order for it to  execute,  deliver or
perform  any  of its  obligations  under  or  contemplated  by  the  Transaction
Documents in accordance with the terms hereof or thereof. Except as disclosed in
Schedule 3(e), all consents,  authorizations,  orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence shall
be obtained or effected on or prior to the Commencement  Date.  Except as listed
in Schedule 3(e), the Company has received no notices or correspondence from the
Principal  Market since January 1, 2001. The Principal  Market has not commenced
delisting proceedings against the Company.

         (f)  SEC  Documents;  Financial  Statements.  Except  as  disclosed  in
Schedule 3(f),  since January 1, 2000, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act") (all of the foregoing, whether timely filed or
not,  filed  prior to the date  hereof and all  exhibits  included  therein  and
financial  statements  and  schedules  thereto  and  documents  incorporated  by
reference therein being hereinafter  referred to as the "SEC Documents").  As of
their  respective  dates (except as they have been correctly  amended),  the SEC
Documents  complied in all material  respects with the  requirements of the 1934
Act and the rules and regulations of the SEC promulgated  thereunder  applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC  (except as they may have been  properly  amended),  contained  any

                                       9
<PAGE>

untrue statement of a material fact or omitted to state a material fact required
to be stated  therein or necessary in order to make the statements  therein,  in
light of the  circumstances  under which they were made, not  misleading.  As of
their  respective  dates  (except  as they  have  been  properly  amended),  the
financial statements of the Company included in the SEC Documents complied as to
form in all material  respects with applicable  accounting  requirements and the
published rules and regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with generally  accepted  accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto or (ii)
in the case of  unaudited  interim  statements,  to the extent  they may exclude
footnotes or may be condensed or summary  statements)  and fairly present in all
material respects the financial  position of the Company as of the dates thereof
and the  results of its  operations  and cash flows for the  periods  then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).  Except as listed in Schedule  3(f),  the Company has  received no
notices or  correspondence  from the SEC since January 1, 2001.  The SEC has not
commenced enforcement proceedings against the Company or any of its affiliates.

         (g) Absence of Certain  Changes.  Except as disclosed in Schedule 3(g),
since  September  30,  2001,  there has been no material  adverse  change in the
business, properties,  operations,  financial condition or results of operations
of the Company or its  Subsidiaries.  The  Company has not taken any steps,  and
does not currently expect to take any steps, to seek protection  pursuant to any
bankruptcy  law  nor  does  the  Company  or any of its  Subsidiaries  have  any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.

         (h)  Absence  of  Litigation.  There is no  action,  suit,  proceeding,
inquiry  or  investigation  before or by any  court,  public  board,  government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's  Subsidiaries'  officers or directors in their capacities as such,
which is reasonably  likely to have a Material  Adverse Effect. A description of
each action, suit, proceeding,  inquiry or investigation before or by any court,
public board, government agency,  self-regulatory organization or body which, as
of the date of this  Agreement,  is pending or threatened in writing  against or
affecting the Company, the Common Stock or any of the Company's  Subsidiaries or
any of the  Company's or the  Company's  Subsidiaries'  officers or directors in
their capacities as such, is set forth in Schedule 3(h).

         (i) Acknowledgment  Regarding Buyer's Status. The Company  acknowledges
and  agrees  that the Buyer is acting  solely in the  capacity  of arm's  length
purchaser  with  respect  to the  Transaction  Documents  and  the  transactions
contemplated hereby and thereby. The Company further acknowledges that the Buyer
is not acting as a  financial  advisor or  fiduciary  of the  Company (or in any
similar capacity) with respect to the Transaction Documents and the transactions
contemplated  hereby and thereby and any advice given by the Buyer or any of its
representatives  or agents in connection with the Transaction  Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Securities. The Company further represents to the Buyer that the
Company's decision to enter into the Transaction Documents has been based solely
on the  independent  evaluation  by the  Company  and  its  representatives  and
advisors.

                                       10
<PAGE>

         (j) No  General  Solicitation.  Neither  the  Company,  nor  any of its
affiliates,  nor any person  acting on its or their  behalf,  has engaged in any
form of general  solicitation  or general  advertising  (within  the  meaning of
Regulation  D under  the 1933 Act) in  connection  with the offer or sale of the
Securities.

          (k) Dilutive Effect. The Company understands and acknowledges that the
number of Purchase Shares purchasable under this Agreement is not fixed and will
vary  depending on the Purchase  Price at which such shares are  purchased.  The
Company further  acknowledges that its obligation to issue Purchase Shares under
this Agreement in accordance  with the terms and  conditions  hereof is absolute
and unconditional  regardless of the dilutive effect that such issuance may have
on the ownership interests of other shareholders of the Company.

         (l) Intellectual  Property Rights. The Company and its Subsidiaries own
or possess  rights or  licenses to use all  material  trademarks,  trade  names,
service  marks,  service mark  registrations,  service  names,  patents,  patent
rights,    copyrights,    inventions,    licenses,    approvals,    governmental
authorizations,  trade secrets and rights  necessary to conduct their respective
businesses as now conducted.  Except as set forth on Schedule 3(l),  none of the
Company's  material  trademarks,   trade  names,  service  marks,  service  mark
registrations,  service names, patents, patent rights,  copyrights,  inventions,
licenses,   approvals,   government  authorizations,   trade  secrets  or  other
intellectual  property  rights have expired or terminated,  or, by the terms and
conditions thereof,  could expire or terminate within two years from the date of
this  Agreement.  The Company and its  Subsidiaries do not have any knowledge of
any infringement by the Company or its  Subsidiaries of any material  trademark,
trade name rights, patents,  patent rights,  copyrights,  inventions,  licenses,
service names, service marks, service mark registrations,  trade secret or other
similar  rights of others,  or of any such  development  of similar or identical
trade  secrets or technical  information  by others and,  except as set forth on
Schedule  3(l),  there is no claim,  action or proceeding  being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its  Subsidiaries  regarding  trademark,  trade name,  patents,  patent  rights,
invention,  copyright,  license,  service  names,  service  marks,  service mark
registrations,  trade secret or other  infringement,  which could  reasonably be
expected to have a Material Adverse Effect.

         (m)  Environmental  Laws. The Company and its  Subsidiaries  (i) are in
compliance with any and all applicable  foreign,  federal,  state and local laws
and  regulations  relating to the  protection  of human  health and safety,  the
environment  or  hazardous  or  toxic   substances  or  wastes,   pollutants  or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable  Environmental Laws to conduct
their  respective  businesses  and  (iii) are in  compliance  with all terms and
conditions of any such permit, license or approval, except where, in each of the
three  foregoing  clauses,  the  failure to so comply  could not  reasonably  be
expected to have, individually or in the aggregate, a Material Adverse Effect.

                                       11
<PAGE>

         (n) Title.  The Company and its  Subsidiaries  have good and marketable
title in fee simple to all real  property and good and  marketable  title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects  except  such  as are  described  in  Schedule  3(n)  or  such as do not
materially  affect the value of such property and do not interfere  with the use
made and  proposed  to be made of such  property  by the  Company and any of its
Subsidiaries.  Any real property and facilities  held under lease by the Company
and any of its  Subsidiaries  are  held  by them  under  valid,  subsisting  and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such  property and buildings by the
Company and its Subsidiaries.

         (o) Insurance.  The Company and each of its Subsidiaries are insured by
insurers of recognized  financial  responsibility  against such losses and risks
and in such  amounts as  management  of the  Company  believes to be prudent and
customary  in the  businesses  in which the  Company  and its  Subsidiaries  are
engaged.  Neither  the  Company  nor any such  Subsidiary  has been  refused any
insurance  coverage  sought or applied  for and neither the Company nor any such
Subsidiary  has any  reason  to  believe  that it will not be able to renew  its
existing  insurance  coverage  as and when such  coverage  expires  or to obtain
similar  coverage  from  similar  insurers as may be  necessary  to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise,  or the earnings,  business or operations of the Company
and its Subsidiaries, taken as a whole.

         (p) Regulatory  Permits.  The Company and its Subsidiaries  possess all
material  certificates,  authorizations  and permits  issued by the  appropriate
federal,  state or foreign  regulatory  authorities  necessary to conduct  their
respective  businesses,  and neither the  Company  nor any such  Subsidiary  has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

         (q) Tax Status.  The Company and each of its  Subsidiaries  has made or
filed all federal and state income and all other  material tax returns,  reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its  Subsidiaries  has set aside
on its books  provisions  reasonably  adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental  assessments and
charges  that are  material  in amount,  shown or  determined  to be due on such
returns,  reports and  declarations,  except those being contested in good faith
and has set aside on its books provision  reasonably adequate for the payment of
all taxes for periods  subsequent to the periods to which such returns,  reports
or declarations  apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any  jurisdiction,  and the officers of the
Company know of no basis for any such claim.

                                       12
<PAGE>

         (r) Transactions With Affiliates.  Except as set forth on Schedule 3(r)
and other than the grant or  exercise  of stock  options  disclosed  on Schedule
3(c), none of the officers,  directors, or employees of the Company is presently
a party to any transaction  with the Company or any of its  Subsidiaries  (other
than for services as employees, officers and directors), including any contract,
agreement or other  arrangement  providing for the  furnishing of services to or
by,  providing for rental of real or personal  property to or from, or otherwise
requiring payments to or from any officer,  director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any  officer,  director,  or any such  employee  has an  interest or is an
officer, director, trustee or partner.

         (s) Application of Takeover  Protections.  The Company and its board of
directors have taken or will take prior to the  Commencement  Date all necessary
action, if any, in order to render  inapplicable any control share  acquisition,
business  combination,  poison pill (including any  distribution  under a rights
agreement) or other similar  anti-takeover  provision  under the  Certificate of
Incorporation  or the laws of the state of its  incorporation  which is or could
become  applicable to the Buyer as a result of the transactions  contemplated by
this Agreement,  including,  without  limitation,  the Company's issuance of the
Securities and the Buyer's ownership of the Securities.

         (t) Foreign  Corrupt  Practices.  Neither the  Company,  nor any of its
Subsidiaries,  nor any director, officer, agent, employee or other person acting
on behalf of the  Company or any of its  Subsidiaries  has, in the course of its
actions  for, or on behalf of, the  Company,  used any  corporate  funds for any
unlawful contribution,  gift,  entertainment or other unlawful expenses relating
to  political  activity;  made any direct or  indirect  unlawful  payment to any
foreign or  domestic  government  official  or employee  from  corporate  funds;
violated  or is in  violation  of any  provision  of the  U.S.  Foreign  Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe,  rebate,  payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.

         4.       COVENANTS.

         (a) Filing of  Registration  Statement.  The Company  shall by no later
than June 1, 2002,  file a new  registration  statement  covering the sale of at
least  10,000,000  Purchase Shares and the Commitments  Share. The Buyer and its
counsel  shall have a  reasonable  opportunity  to review and comment  upon such
registration  statement  or  amendment to such  registration  statement  and any
related  prospectus  prior to its filing with the SEC.  Buyer shall  furnish all
information  reasonably  requested  by the Company for  inclusion  therein.  The
Company  shall use its best  efforts  to have  such  registration  statement  or
amendment declared effective by the SEC at the earliest possible date.

                                       13
<PAGE>

         (b) Blue Sky. The Company shall,  on or before the  Commencement  Date,
take such action, if any, as the Company shall reasonably determine is necessary
in order to obtain an exemption for or to qualify the Commitment  Shares and the
Purchase  Shares  for  sale  to the  Buyer  pursuant  to  this  Agreement  under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall  provide  evidence of any such action so taken to the Buyer on or prior to
the  Commencement  Date. The Company shall make all filings and reports relating
to the offer and sale of the Commitment  Shares and the Purchase Shares required
under  applicable  securities  or "Blue  Sky" laws of the  states of the  United
States following the Commencement Date.

         (c) Notice of Variable Priced Financing.  The Company agrees to provide
to the Buyer prior  written  notice  ("Equity  Financing  Notice") of any equity
financing  (including  any debt  financing  with an equity  component)  that the
Company intends to enter into involving the issuance of any equity securities of
the Company or any Subsidiary or securities  convertible or exchangeable into or
for  equity  securities  of  the  Company  or  any  Subsidiary  (including  debt
securities with an equity component) which, in any case (i) are convertible into
or exchangeable for an indeterminate  number of shares of common stock, (ii) are
convertible  into or exchangeable  for Common Stock at a price which varies with
the market price of the Common Stock,  (iii) directly or indirectly  provide for
any "re-set" or adjustment of the purchase  price,  conversion  rate or exercise
price  after the  issuance of the  security,  or (iv)  contain any  "make-whole"
provision  based upon,  directly or  indirectly,  the market price of the Common
Stock after the issuance of the security,  in each case,  other than  reasonable
and customary  anti-dilution  adjustments for issuance of shares of Common Stock
at a price  which is below the market  price of the Common  Stock.  Such  Equity
Financing  Notice shall be delivered to the Buyer five (5) Trading Days prior to
the Company entering into definitive  documentation  with respect to such equity
financing,  together  with  copies  of  all  proposed  definitive  documentation
relating to such equity financing.

         (d) Listing.  The Company  shall on or prior to the  Commencement  Date
secure the listing of all of the Purchase Shares and Commitment Shares upon each
national  securities exchange and automated quotation system, if any, upon which
shares of Common Stock are then listed  (subject to official notice of issuance)
and shall  maintain,  so long as any other  shares of Common  Stock  shall be so
listed, such listing of all such securities from time to time issuable under the
terms of the  Transaction  Documents.  The  Company  shall  maintain  the Common
Stock's authorization for quotation on the Principal Market. Neither the Company
nor any of its  Subsidiaries  shall  take any action  that  would be  reasonably
expected to result in the  delisting  or  suspension  of the Common Stock on the
Principal  Market.  The Company shall  promptly,  and in no event later than the
following  Trading  Day,  provide to the Buyer copies of any notices it receives
from the Principal  Market  regarding the  continued  eligibility  of the Common
Stock for listing on such automated quotation system or securities exchange. The
Company  shall pay all fees and  expenses  in  connection  with  satisfying  its
obligations under this Section.

                                       14
<PAGE>

         (e)  Limitation  on Short  Sales and  Hedging  Transactions.  The Buyer
agrees that  beginning on the date of this  Agreement  and ending on the date of
termination of this  Agreement as provided in Section  11(k),  the Buyer and its
agents,  representatives and affiliates shall not in any manner whatsoever enter
into or effect,  directly or  indirectly,  any (i) "short sale" (as such term is
defined  in Rule  3b-3  of the  1934  Act) of the  Common  Stock,  (ii)  hedging
transaction,  or (iii) any similar  transaction,  which  establishes a net short
position with respect to the Common Stock, (as such term is defined in Rule 3b-3
of the 1934 Act).

         (f) Issuance of  Commitment  Shares;  Limitation on Sales of Commitment
Shares.  Immediately  upon the  execution of this  Agreement,  the Company shall
issue to the Buyer  300,000  shares of Common  Stock  (the  "Initial  Commitment
Shares").  In connection  with each purchase of Purchase Shares  hereunder,  the
Company  agrees to issue to the Buyer a number  of shares of Common  Stock  (the
"Additional  Commitment Shares" and together with the Initial Commitment Shares,
the  "Commitment  Shares")  equal  to the  product  of (x)  300,000  and (y) the
Purchase Amount Fraction.  The "Purchase Amount Fraction" shall mean a fraction,
the  numerator  of which is the  Purchase  Amount  purchased  by the Buyer  with
respect to such  purchase of  Purchase  Shares and the  denominator  of which is
Fifteen Million Dollars ($15,000,000). The Additional Commitment Shares shall be
equitably adjusted for any reorganization,  recapitalization, non-cash dividend,
stock split or other similar transaction. The Initial Commitment Shares shall be
issued in  certificated  form and  (subject to Section 5 hereof)  shall bear the
following restrictive legend:

         "THE  SECURITIES   REPRESENTED  BY  THIS   CERTIFICATE  HAVE  NOT  BEEN
         REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR APPLICABLE
         STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
         AND MAY NOT BE OFFERED FOR SALE,  SOLD,  TRANSFERRED OR ASSIGNED IN THE
         ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
         THE SECURITIES ACT OF 1933, AS AMENDED,  OR APPLICABLE STATE SECURITIES
         LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY  ACCEPTABLE TO THE
         COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
         STATE  SECURITIES  LAWS OR UNLESS SOLD  PURSUANT TO RULE 144 UNDER SAID
         ACT."

           The Buyer  agrees  that the  Buyer  shall  not  transfer  or sell the
Commitment  Shares  until the earlier of 600 Trading  Days (30 Monthly  Periods)
from the  date  hereof  or date on which  this  Agreement  has been  terminated,
provided,  however,  that such  restrictions  shall not apply: (i) in connection
with any transfers to or among  affiliates (as defined in the 1934 Act), or (ii)
if an Event of Default has  occurred,  or any event which,  after notice  and/or
lapse of time,  would become an Event of Default,  including  any failure by the
Company to timely issue Purchase  Shares under this  Agreement.  Notwithstanding
the forgoing, the Buyer may transfer Commitment Shares to a third party in order
to settle a sale  made by the Buyer  where  the  Buyer  reasonably  expects  the
Company to deliver  Purchase Shares to the Buyer under this Agreement so long as
the Buyer  maintains  ownership of the same  overall  number of shares of Common
Stock by "replacing" the Commitment  Shares so transferred  with Purchase Shares
when the Purchase Shares are actually issued by the Company to the Buyer.

                                       15
<PAGE>

         (g) Expense Reimbursement.  As reimbursement of the Buyer's expenses in
connection with the transactions  contemplated hereby, the Company agrees to pay
to the Buyer,  immediately  upon the  execution  of this  Agreement,  the sum of
$20,000 as the expense  reimbursement  of the Investor's  expenses in connection
with consummation of the transaction,  including any due diligence  expenses and
legal fees.

          (h) Due Diligence.  The Buyer shall have the right,  from time to time
as the  Buyer  may  reasonably  deem  appropriate,  to  perform  reasonable  due
diligence  on the Company  during  normal  business  hours.  The Company and its
officers and employees shall  reasonably  cooperate with the Buyer in connection
with any reasonable request by the Buyer related to the Buyer's due diligence of
the Company.

         5.       TRANSFER AGENT INSTRUCTIONS.

         On the  Commencement  Date,  the Company  shall  cause any  restrictive
legend on the Initial  Commitment  Shares to be removed and all of the  Purchase
Shares and Additional Commitment Shares, to be issued under this Agreement shall
be issued without any restrictive  legend.  The Company shall issue  irrevocable
instructions to the Transfer Agent, and any subsequent  transfer agent, to issue
Purchase  Shares  in  the  name  of the  Buyer  for  the  Purchase  Shares  (the
"Irrevocable  Transfer Agent  Instructions").  The Company warrants to the Buyer
that no  instruction  other than the  Irrevocable  Transfer  Agent  Instructions
referred  to in this  Section 5, will be given by the  Company  to the  Transfer
Agent with respect to the Purchase Shares and that the Commitment Shares and the
Purchase Shares shall otherwise be freely  transferable on the books and records
of the  Company  as and to  the  extent  provided  in  this  Agreement  and  the
Registration  Rights Agreement  subject to the provisions of Section 4(f) in the
case of the Commitment Shares.

         6.       CONDITIONS TO THE COMPANY'S OBLIGATION TO COMMENCE
                  SALES OF SHARES OF COMMON STOCK.

         The  obligation  of the  Company  hereunder  to  commence  sales of the
Purchase  Shares  is  subject  to the  satisfaction  of  each  of the  following
conditions  on or before the  Commencement  Date (the date that sales begin) and
once such  conditions  have been  initially  satisfied,  there  shall not be any
ongoing  obligation  to  satisfy  such  conditions  after the  Commencement  has
occurred;  provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion by providing the
Buyer with prior written notice thereof:

         (a) The Buyer shall have executed each of the Transaction Documents and
delivered the same to the Company  including the  Registration  Rights Agreement
substantially  in the  form  of  Exhibit  A  hereto  (the  "Registration  Rights
Agreement").

                                       16
<PAGE>

         (b)  Subject  to  the  Company's   compliance   with  Section  4(a),  a
registration  statement covering the sale of all of the Commitment Shares and at
least  10,000,000  Purchase Shares shall have been declared  effective under the
1933 Act by the SEC and no stop order with respect to the Registration Statement
shall be pending or threatened by the SEC.

         (c) The  representations  and warranties of the Buyer shall be true and
correct  in  all  material  respects  as of the  date  when  made  and as of the
Commencement  Date as though made at that time (except for  representations  and
warranties  that  speak  as of a  specific  date),  and  the  Buyer  shall  have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Buyer at or prior to the Commencement Date.

         7.       CONDITIONS TO THE BUYER'S OBLIGATION TO COMMENCE
                  PURCHASES OF SHARES OF COMMON STOCK.

         The  obligation of the Buyer to commence  purchases of Purchase  Shares
under this  Agreement is subject to the  satisfaction  of each of the  following
conditions  on or before the  Commencement  Date (the date that sales begin) and
once such  conditions  have been  initially  satisfied,  there  shall not be any
ongoing  obligation  to  satisfy  such  conditions  after the  Commencement  has
occurred;  provided that these  conditions  are for the Buyer's sole benefit and
may be waived by the Buyer at any time in its sole  discretion  by providing the
Company with prior written notice thereof:

         (a) The Company shall have executed each of the  Transaction  Documents
and delivered the same to the Buyer including the Registration  Rights Agreement
substantially in the form of Exhibit A hereto.

         (b) The Company  shall have issued to the Buyer the Initial  Commitment
Shares and shall have removed any  restrictive  transfer legend from the Initial
Commitment Shares.

         (c) The Common Stock shall be authorized for quotation on the Principal
Market, trading in the Common Stock shall not have been within the last 365 days
suspended by the SEC or the  Principal  Market and the  Purchase  Shares and the
Commitment Shares shall be approved for listing upon the Principal Market.

         (d) The Buyer shall have received the opinions of the  Company's  legal
counsel dated as of the Commencement Date substantially in the form of Exhibit B
attached hereto.

         (e) The representations and warranties of the Company shall be true and
correct  in all  material  respects  (except  to the  extent  that  any of  such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such  representations  and warranties  shall be true and
correct  without further  qualification)  as of the date when made and as of the
Commencement  Date as though made at that time (except for  representations  and
warranties  that  speak  as of a  specific  date)  and the  Company  shall  have
performed, satisfied and complied with the covenants,  agreements and conditions

                                       17
<PAGE>

required by the  Transaction  Documents to be  performed,  satisfied or complied
with by the Company at or prior to the  Commencement  Date. The Buyer shall have
received a  certificate,  executed by the CEO,  President or CFO of the Company,
dated as of the Commencement  Date, to the foregoing effect in the form attached
hereto as Exhibit C.

         (f)  The  Board  of  Directors  of  the  Company   shall  have  adopted
resolutions  in the form  attached  hereto as  Exhibit D which  shall be in full
force  and  effect  without  any  amendment  or  supplement  thereto  as of  the
Commencement Date.

         (g) As of the Commencement Date, the Company shall have reserved out of
its  authorized  and  unissued  Common  Stock,  (A)  solely  for the  purpose of
effecting purchases of Purchase Shares hereunder,  at least 10,000,000 shares of
Common Stock and (B) as Additional  Commitment Shares in accordance with Section
4(f) hereof, 300,000 shares of Common Stock.

         (h) The Irrevocable Transfer Agent Instructions,  in form acceptable to
the Buyer  shall  have been  delivered  to and  acknowledged  in  writing by the
Company and the Company's Transfer Agent.

         (i) The  Company  shall  have  delivered  to the  Buyer  a  certificate
evidencing  the  incorporation  and good standing of the Company in the State of
Nevada  issued  by the  Secretary  of State of the  State of Nevada as of a date
within ten (10) Trading Days of the Commencement Date.

         (j) The Company shall have  delivered to the Buyer a certified  copy of
the Certificate of  Incorporation  as certified by the Secretary of State of the
State of Nevada within ten (10) Trading Days of the Commencement Date.

         (k) The  Company  shall  have  delivered  to the  Buyer  a  secretary's
certificate  executed  by  the  Secretary  of  the  Company,  dated  as  of  the
Commencement Date, in the form attached hereto as Exhibit E.

         (l) A registration statement covering the sale of all of the Commitment
Shares  and at  least  10,000,000  Purchase  Shares  shall  have  been  declared
effective  under the 1933 Act by the SEC and no stop order  with  respect to the
registration  statement  shall be pending or  threatened by the SEC. The Company
shall have  prepared and delivered to the Buyer a final form of prospectus to be
used by the Buyer in connection  with any sales of any Commitment  Shares or any
Purchase  Shares.  The Company shall have made all filings under all  applicable
federal and state  securities  laws  necessary to consummate the issuance of the
Commitment  Shares  and  the  Purchase  Shares  pursuant  to this  Agreement  in
compliance with such laws.

         (m) No Event of Default has occurred,  or any event which, after notice
and/or lapse of time, would become an Event of Default has occurred.

                                       18
<PAGE>

         (n) On or prior to the  Commencement  Date,  the Company shall take all
necessary action, if any, and such actions as reasonably requested by the Buyer,
in  order  to  render  inapplicable  any  control  share  acquisition,  business
combination,  shareholder rights plan or poison pill (including any distribution
under a rights  agreement) or other similar  anti-takeover  provision  under the
Certificate of Incorporation or the laws of the state of its incorporation which
is or could  become  applicable  to the  Buyer as a result  of the  transactions
contemplated by this Agreement,  including,  without  limitation,  the Company's
issuance of the Securities and the Buyer's ownership of the Securities.

         8.       INDEMNIFICATION.

         In  consideration  of  the  Buyer's   execution  and  delivery  of  the
Transaction  Documents and acquiring the Securities hereunder and in addition to
all of the Company's  other  obligations  under the Transaction  Documents,  the
Company shall defend, protect,  indemnify and hold harmless the Buyer and all of
its  affiliates,  shareholders,  officers,  directors,  employees  and direct or
indirect   investors  and  any  of  the  foregoing   person's  agents  or  other
representatives  (including,  without  limitation,  those retained in connection
with  the  transactions  contemplated  by  this  Agreement)  (collectively,  the
"Indemnitees")  from and against any and all actions,  causes of action,  suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith  (irrespective of whether any such Indemnitee is a party to
the  action  for which  indemnification  hereunder  is  sought),  and  including
reasonable  attorneys' fees and disbursements  (the "Indemnified  Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any  misrepresentation  or breach of any  representation or warranty made by the
Company in the  Transaction  Documents or any other  certificate,  instrument or
document  contemplated  hereby  or  thereby,  (b) any  breach  of any  covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action,  suit or claim brought or made against such  Indemnitee
and arising out of or resulting  from the  execution,  delivery,  performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby,  other than with respect to Indemnified
Liabilities  which  directly and primarily  result from the gross  negligence or
willful  misconduct  of  the  Indemnitee.  To  the  extent  that  the  foregoing
undertaking  by the Company  may be  unenforceable  for any reason,  the Company
shall make the maximum  contribution to the payment and  satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.

         9.       EVENTS OF DEFAULT.

         An "Event of Default"  shall be deemed to have  occurred at any time as
any of the following events occurs:

                                       19
<PAGE>

         (a) while any  registration  statement  is  required  to be  maintained
effective  pursuant  to the  terms of the  Registration  Rights  Agreement,  the
effectiveness of such registration  statement lapses for any reason  (including,
without limitation, the issuance of a stop order) or is unavailable to the Buyer
for sale of all of the  Registrable  Securities (as defined in the  Registration
Rights  Agreement)  in  accordance  with the  terms of the  Registration  Rights
Agreement,  and such lapse or unavailability  continues for a period of ten (10)
consecutive  Trading  Days or for more than an  aggregate of thirty (30) Trading
Days in any 365-day period;

         (b) the  suspension  from  trading or failure of the Common Stock to be
listed on the Principal Market for a period of ten (10) consecutive Trading Days
or for more than an aggregate of thirty (30) Trading Days in any 365-day period;

         (c) the  delisting  of the  Company's Common  Stock from  the Principal
Market;

         (d) the failure for any reason by the Transfer  Agent to issue Purchase
Shares to the Buyer within five (5) Trading Days after the  applicable  Purchase
Date which the Buyer is entitled to receive  (subject to the Company's  right to
cure such Event of Default upon 5 Trading Days' written notice from the Buyer to
the Company in respect thereof) ;

         (e) if at any time after the  Commencement  Date, the "Exchange Cap" is
reached (the  "Exchange Cap" shall be deemed to be reached at such time if, upon
submission  of a Purchase  Notice  under this  Agreement,  the  issuance of such
shares of Common  Stock would exceed that number of shares of Common Stock which
the Company may issue  under this  Agreement  without  breaching  the  Company's
obligations under the rules or regulations of the Principal Market);

         (f) the Company  breaches  any  representation,  warranty,  covenant or
other term or condition under any Transaction Document if such breach could have
a  Material  Adverse  Effect and  except,  in the case of a breach of a covenant
which is reasonably  curable,  only if such breach  continues for a period of at
least ten (10) Trading Days;

         (g)  any  payment   default  under  any  contract   whatsoever  or  any
acceleration  prior  to  maturity  of  any  mortgage,   indenture,  contract  or
instrument  under  which there may be issued or by which there may be secured or
evidenced  any  indebtedness  for money  borrowed  by the  Company  or for money
borrowed the  repayment  of which is  guaranteed  by the  Company,  whether such
indebtedness or guarantee now exists or shall be created hereafter,  which, with
respect to any such payment  default or  acceleration  prior to maturity,  is in
excess of $1,000,000,  provided however,  that with respect to any trade payable
incurred in the  ordinary  course,  no Event of Default  shall be deemed to have
occurred  until  an  adjudication  of such  default  is  entered  by a court  of
competent jurisdiction;

         (h) if any Person  commences a proceeding  against the Company pursuant
to or within the meaning of any Bankruptcy Law;

                                       20
<PAGE>

         (i) if the Company  pursuant to or within the meaning of any Bankruptcy
Law; (A) commences a voluntary  case,  (B) consents to the entry of an order for
relief against it in an involuntary  case, (C) consents to the  appointment of a
Custodian of it or for all or  substantially  all of its  property,  (D) makes a
general assignment for the benefit of its creditors,  (E) becomes insolvent,  or
(F) is generally unable to pay its debts as the same become due; or

         (j) a court of competent  jurisdiction  enters an order or decree under
any  Bankruptcy Law that (A) is for relief against the Company in an involuntary
case, (B) appoints a Custodian of the Company or for all or substantially all of
its property, or (C) orders the liquidation of the Company or any Subsidiary.

In addition  to any other  rights and  remedies  under  applicable  law and this
Agreement, including the Buyer termination rights under Section 11(k) hereof, so
long as an Event of Default  has  occurred  and is  continuing,  or if any event
which, after notice and/or lapse of time, would become an Event of Default,  has
occurred  and is  continuing,  or so long as the  Purchase  Price is  below  the
Purchase Price Floor, the Buyer shall not be obligated to purchase any shares of
Common Stock under this  Agreement.  If pursuant to or within the meaning of any
Bankruptcy Law, the Company commences a voluntary case or any Person commences a
proceeding  against the Company, a Custodian is appointed for the Company or for
all or  substantially  all of its  property,  or the  Company  makes  a  general
assignment for the benefit of its creditors,  (any of which would be an Event of
Default as described  in Sections  9(h),  9(i) and 9(j)  hereof) this  Agreement
shall  automatically  terminate  without any liability or payment to the Company
without  further  action or notice by any Person.  No such  termination  of this
Agreement  under  Section  11(k)(i)  shall  affect the  Company's or the Buyer's
obligations  under this  Agreement  with  respect to pending  purchases  and the
Company and the Buyer shall complete their  respective  obligations with respect
to any pending purchases under this Agreement.

         10.      CERTAIN DEFINED TERMS.

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

         (a)  "1933 Act" means the Securities Act of 1933, as amended.

         (b)  "Available   Amount"  means  initially   Fifteen  Million  Dollars
($15,000,000)  in the  aggregate  which  amount shall be reduced by the Purchase
Amount each time the Buyer purchases  shares of Common Stock pursuant to Section
1 hereof.

         (c) "Bankruptcy  Law" means Title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.

         (d) "Closing  Sale Price" means,  for any security as of any date,  the
last closing trade price for such  security on the Principal  Market as reported
by  Bloomberg,  or,  if the  Principal  Market is not the  principal  securities
exchange or trading  market for such  security,  the last closing trade price of
such security on the principal  securities exchange or trading market where such
security is listed or traded as reported by Bloomberg.

                                       21
<PAGE>

         (e) "Custodian" means any receiver,  trustee,  assignee,  liquidator or
similar official under any Bankruptcy Law.

         (f) "Daily Base Amount" means  initially  Twenty Five Thousand  Dollars
($25,000) per Trading Day,  which amount may be increased or decreased from time
to time pursuant to Section 1(c) hereof.

         (g) "Floor  Price"  means  initially  $0.75 per share of Common  Stock,
which amount may be increased of decreased from time to time pursuant to Section
1(d)(iii)  hereof,  except  that in no case  shall the Floor  Price be less than
$0.50 per share of Common Stock without the prior written consent of the Buyer.

         (h) "Maturity Date" means the date that is 600 Trading Days (30 Monthly
Periods) from the Commencement  Date which such date may be extended by up to an
additional Six (6) Monthly Periods by the Company,  in its sole  discretion,  by
written notice to the Buyer.

         (i)  "Monthly  Base  Amount"  means  Five  Hundred   Thousand   Dollars
($500,000) per Monthly Period.

         (j)   "Monthly  Period" means  each  successive 20  Trading  Day period
commencing  with the  Commencement Date.

         (k) "Original  Daily Base Amount"  means Twenty Five  Thousand  Dollars
($25,000) per Trading Day.

         (l)  "Person"  means an  individual  or entity  including  any  limited
liability  company, a partnership,  a joint venture, a corporation,  a trust, an
unincorporated  organization  and a  government  or  any  department  or  agency
thereof.

         (m) "Principal Market" means The Nasdaq National Market.

         (n) "Purchase  Amount" means the portion of the Available  Amount to be
purchased by the Buyer pursuant to Section 1 hereof.

         (o)  "Purchase  Date"  means the  actual  date that the Buyer is to buy
Purchase Shares pursuant to Section 1 hereof.

         (p) "Purchase Price" means, as of any date of  determination  the lower
of the  (A)  the  lowest  Sale  Price  of the  Common  Stock  on  such  date  of
determination  and (B) the  arithmetic  average of the three (3) lowest  Closing
Sale Prices for the Common  Stock during the ten (10)  consecutive  Trading Days
ending on the Trading Day immediately  preceding such date of determination  (to
be appropriately  adjusted for any  reorganization,  recapitalization,  non-cash
dividend, stock split or other similar transaction).

         (q) "Sale  Price"  means,  for any  security as of any date,  any trade
price for such security on the Principal Market as reported by Bloomberg, or, if
the Principal Market is not the principal  securities exchange or trading market
for such security,  the trade price of such security on the principal securities
exchange or trading  market where such  security is listed or traded as reported
by Bloomberg.

                                       22
<PAGE>

         (r) "SEC" means the United States Securities and Exchange Commission.

         (s) "Trading Day" means any day on which the  Principal  Market is open
for customary trading.

         11.      MISCELLANEOUS.

         (a) Governing Law; Jurisdiction;  Jury Trial. The corporate laws of the
State of Nevada shall govern all issues  concerning  the relative  rights of the
Company and its shareholders.  All other questions  concerning the construction,
validity,  enforcement  and  interpretation  of this  Agreement  and  the  other
Transaction  Documents  shall be governed by the  internal  laws of the State of
Illinois,  without  giving  effect  to any  choice  of law  or  conflict  of law
provision or rule (whether of the State of Illinois or any other  jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of  Illinois.  Each party  hereby  irrevocably  submits  to the  exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the  adjudication  of any  dispute  hereunder  or under  the  other  Transaction
Documents  or in  connection  herewith  or  therewith,  or with any  transaction
contemplated  hereby or discussed herein,  and hereby  irrevocably  waives,  and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or  proceeding  is  brought in an  inconvenient  forum or that the venue of such
suit,  action or proceeding is improper.  Each party hereby  irrevocably  waives
personal  service of process and  consents to process  being  served in any such
suit,  action or  proceeding  by  mailing a copy  thereof  to such  party at the
address for such notices to it under this Agreement and agrees that such service
shall  constitute  good and  sufficient  service of process and notice  thereof.
Nothing  contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,  A JURY TRIAL FOR THE ADJUDICATION
OF ANY  DISPUTE  HEREUNDER  OR IN  CONNECTION  HEREWITH  OR ARISING  OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

         (b)  Counterparts.  This  Agreement  may be  executed  in  two or  more
identical  counterparts,  all of  which  shall  be  considered  one and the same
agreement and shall become effective when  counterparts have been signed by each
party and  delivered to the other  party;  provided  that a facsimile  signature
shall be  considered  due  execution  and shall be  binding  upon the  signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

         (c) Headings.  The headings of this  Agreement are for  convenience  of
reference  and shall not form part of, or affect  the  interpretation  of,  this
Agreement.

         (d)  Severability.  If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction,  such invalidity or unenforceability shall
not affect the validity or  enforceability of the remainder of this Agreement in
that  jurisdiction  or the validity or  enforceability  of any provision of this
Agreement in any other jurisdiction.

                                       23
<PAGE>

         (e) Entire  Agreement;  Amendments.  With the  exception  of the Mutual
Nondisclosure  Agreement  between the parties dated as of October 10, 2001, this
Agreement  supersedes  all other  prior oral or written  agreements  between the
Buyer,  the Company,  their  affiliates  and persons acting on their behalf with
respect  to  the  matters  discussed  herein,  and  this  Agreement,  the  other
Transaction  Documents and the instruments  referenced herein contain the entire
understanding  of the parties  with  respect to the matters  covered  herein and
therein and,  except as  specifically  set forth herein or therein,  neither the
Company  nor  the  Buyer  makes  any  representation,   warranty,   covenant  or
undertaking with respect to such matters.  No provision of this Agreement may be
amended  other than by an  instrument  in writing  signed by the Company and the
Buyer,  and no  provision  hereof may be waived other than by an  instrument  in
writing signed by the party against whom enforcement is sought.

         (f) Notices.  Any notices,  consents,  waivers or other  communications
required or permitted to be given under the terms of this  Agreement  must be in
writing  and will be deemed  to have  been  delivered:  (i) upon  receipt,  when
delivered  personally;  (ii)  upon  receipt,  when sent by  facsimile  (provided
confirmation of transmission  is  mechanically or  electronically  generated and
kept on file by the sending party);  or (iii) one Trading Day after deposit with
a  nationally  recognized  overnight  delivery  service,  in each case  properly
addressed to the party to receive the same. The addresses and facsimile  numbers
for such communications shall be:

         If to the Company:
                  PurchasePro.com, Inc.
                  7710 W. Cheyenne Ave.
                  Las Vegas, NV 89129
                  Telephone:        702-316-7000
                  Facsimile:        702-316-7691
                  Attention:        Chief Financial Officer

         With a copy to:
                  Brobeck Phleger & Harrison LLP
                  12390 El Camino Real
                  San Diego, California 92139
                  Telephone:        858-720-2595
                  Facsimile:        858-720-2555
                  Attention:        Michael S. Kagnoff

         If to the Buyer:
                  Fusion Capital Fund II, LLC
                  222 Merchandise Mart Plaza, Suite 9-112
                  Chicago, IL 60654
                  Telephone:        312-644-6644
                  Facsimile:        312-644-6244
                  Attention:        Steven G. Martin

                                       24
<PAGE>

         If to the Transfer Agent:
                  ChaseMellon Shareholder Services
                  400 South Hope Street, 4th Floor
                  Los Angeles, CA 90071
                  Telephone:        213-553-9724
                  Facsimile:        213-553-9735
                  Attention:        Ray Torres

or at such other address and/or facsimile number and/or to the attention of such
other person as the  recipient  party has  specified by written  notice given to
each other  party  three (3)  Trading  Days prior to the  effectiveness  of such
change.  Written  confirmation  of receipt  (A) given by the  recipient  of such
notice,   consent,   waiver  or  other   communication,   (B)   mechanically  or
electronically  generated by the sender's facsimile machine containing the time,
date, and recipient facsimile number or (C) provided by a nationally  recognized
overnight  delivery service,  shall be rebuttable  evidence of personal service,
receipt by facsimile or receipt from a nationally  recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.

         (g)  Successors and Assigns.  This Agreement  shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
The  Company  shall not  assign  this  Agreement  or any  rights or  obligations
hereunder without the prior written consent of the Buyer, including by merger or
consolidation.
The Buyer may not assign its rights or obligations under this Agreement.

         (h) No Third Party  Beneficiaries.  This  Agreement is intended for the
benefit of the parties  hereto and their  respective  permitted  successors  and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

         (i)  Publicity.  The  Buyer  shall  have the  right to  approve  before
issuance  any press  releases  or any other  public  disclosure  (including  any
filings  with the SEC) with  respect to the  transactions  contemplated  hereby;
provided,  however,  that the  Company  shall be  entitled,  without  the  prior
approval  of any Buyer,  to make any press  release or other  public  disclosure
(including  any filings  with the SEC) with respect to such  transactions  as is
required  by  applicable  law and  regulations  (although  the  Buyer  shall  be
consulted  by the  Company in  connection  with any such press  release or other
public  disclosure  prior  to its  release  and  shall be  provided  with a copy
thereof).

         (j) Further Assurances. 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.

                                       25
<PAGE>

         (k) Termination. This Agreement may be terminated only as follows:

                  (i) By the Buyer any time an Event of Default  exists  without
         any  liability  or payment to the Company.  However,  if pursuant to or
         within the  meaning of any  Bankruptcy  Law,  the  Company  commences a
         voluntary  case  or any  Person  commences  a  proceeding  against  the
         Company,  a  Custodian  is  appointed  for  the  Company  or for all or
         substantially  all of its  property,  or the  Company  makes a  general
         assignment for the benefit of its creditors,  (any of which would be an
         Event of Default as described in Sections  9(h),  9(i) and 9(j) hereof)
         this Agreement shall  automatically  terminate without any liability or
         payment to the Company  without further action or notice by any Person.
         No such termination of this Agreement under this Section 11(k)(i) shall
         affect the Company's or the Buyer's  obligations  under this  Agreement
         with respect to pending  purchases  and the Company and the Buyer shall
         complete  their  respective  obligations  with  respect to any  pending
         purchases under this Agreement.

                  (ii)  In the  event  that  the  Commencement  shall  not  have
         occurred, the Company shall have the option to terminate this Agreement
         for any reason or for no reason  without  liability of any party to any
         other party.

                  (iii)  In the  event  that  the  Commencement  shall  not have
         occurred on or before  August 31,  2002,  due to the failure to satisfy
         the  conditions set forth in Sections 6 and 7 above with respect to the
         Commencement  (and the  nonbreaching  party's  failure  to  waive  such
         unsatisfied condition(s)), the nonbreaching party shall have the option
         to  terminate  this  Agreement at the close of business on such date or
         thereafter without liability of any party to any other party.

                  (iv) If by the Maturity Date (including any extension  thereof
         by the Company pursuant to Section 10(g) hereof), for any reason or for
         no reason the full  Available  Amount under this Agreement has not been
         purchased as provided for in Section 1 of this Agreement,  by the Buyer
         without any liability or payment to the Company.

                  (v) At any time after the Commencement Date, the Company shall
         have the option to terminate  this  Agreement  for any reason or for no
         reason by  delivering  notice (a "Company  Termination  Notice") to the
         Buyer  electing to terminate  this  Agreement  without any liability or
         payment to the  Buyer.  The  Company  Termination  Notice  shall not be
         effective  until one (1) Trading Day after it has been  received by the
         Buyer.

                  (vi) This Agreement shall automatically  terminate on the date
         that the Company sells and the Buyer purchases  Fifteen Million Dollars
         ($15,000,000) as provided  herein,  without any action or notice on the
         part of any party.

Except as set forth in Sections 11(k)(i) in respect of an Event of Default under
Sections 9(h),  9(i) and 9(j), and 11(k)(vi),  any termination of this Agreement
pursuant to this  Section  11(k)  shall be  effected by written  notice from the
Company to the Buyer,  or the Buyer to the Company,  as the case may be, setting
forth the basis for the termination  hereof. The  representations and warranties

                                       26
<PAGE>

of the  Company  and  the  Buyer  contained  in  Sections  2 and 3  hereof,  the
indemnification  provisions set forth in Section 8 hereof and the agreements and
covenants  set forth in Section  11,  shall  survive  the  Commencement  and any
termination of this Agreement. No termination of this Agreement shall affect the
Company's  or the  Buyer's  obligations  under this  Agreement  with  respect to
pending  purchases and the Company and the Buyer shall complete their respective
obligations with respect to any pending purchases under this Agreement.

         (l) No  Financial  Advisor,  Placement  Agent,  Broker or  Finder.  The
Company  represents  and  warrants  to the  Buyer  that it has not  engaged  any
financial  advisor,  placement  agent,  broker or finder in connection  with the
transactions  contemplated  hereby.  The Buyer  represents  and  warrants to the
Company that it has not engaged any financial advisor,  placement agent,  broker
or finder in connection with the transactions contemplated hereby.

         (m) No Strict Construction. The language used in this Agreement will be
deemed to be the language  chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

         (n) Remedies,  Other  Obligations,  Breaches and Injunctive Relief. The
Buyer's remedies  provided in this Agreement shall be cumulative and in addition
to all other remedies available to the Buyer under this Agreement,  at law or in
equity  (including  a decree of specific  performance  and/or  other  injunctive
relief),  no remedy of the Buyer  contained  herein  shall be deemed a waiver of
compliance  with the  provisions  giving rise to such remedy and nothing  herein
shall limit the Buyer's  right to pursue  actual  damages for any failure by the
Company to comply with the terms of this  Agreement.  The  Company  acknowledges
that a breach by it of its obligations  hereunder will cause irreparable harm to
the Buyer 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  Buyer  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.

         (o)  Changes to the Terms of this  Agreement.  This  Agreement  and any
provision  hereof may only be amended by an instrument in writing  signed by the
Company and the Buyer. The term "Agreement" and all reference  thereto,  as used
throughout this instrument,  shall mean this instrument as originally  executed,
or if later amended or supplemented, then as so amended or supplemented.

         (p) Enforcement Costs. If: (i) this Agreement is placed by the Buyer in
the hands of an attorney for enforcement or is enforced by the Buyer through any
legal proceeding;  or (ii) an attorney is retained to represent the Buyer in any
bankruptcy,   reorganization,   receivership  or  other  proceedings   affecting
creditors'  rights  and  involving  a claim  under this  Agreement;  or (iii) an
attorney is retained to represent the Buyer in any other proceedings  whatsoever
in connection with this  Agreement,  then the Company shall pay to the Buyer, as
incurred by the Buyer,  all reasonable costs and expenses  including  attorneys'
fees  incurred in  connection  therewith,  in addition to all other  amounts due
hereunder.

         (q)  Failure  or  Indulgence  Not  Waiver.  No  failure or delay 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.
                                    * * * * *

                                       27
<PAGE>

         IN WITNESS  WHEREOF,  the Buyer and the Company have caused this Common
Stock Purchase Agreement to be duly executed as of the date first written above.

                                       THE COMPANY:

                                       PURCHASEPRO.COM, INC.

                                       By:   /s/ Richard Clemmer
                                           ---------------------
                                           Name: Richard Clemmer
                                           Title: Chief Executive Officer

                                       BUYER:

                                       FUSION CAPITAL FUND II, LLC
                                       BY: FUSION CAPITAL PARTNERS, LLC
                                       BY: SGM HOLDINGS CORP.

                                       By:  /s/ Steven G. Martin
                                            ---------------------
                                            Name: Steven G. Martin
                                            Title: President

                                       28
<PAGE>

                                    SCHEDULES

Schedule 3(a)         Subsidiaries
Schedule 3(c)         Capitalization
Schedule 3(e)         Conflicts
Schedule 3(f)         1934 Act Filings
Schedule 3(g)         Material Changes
Schedule 3(h)         Litigation
Schedule 3(l)         Intellectual Property
Schedule 3(n)         Liens
Schedule 3(r)         Certain Transactions

                               EXHIBITS

Exhibit A             Form of Registration Rights Agreement
Exhibit B             Form of Company Counsel Opinion
Exhibit C             Form of Officer's Certificate
Exhibit D             Form of Resolutions of Board of Directors of the Company
Exhibit E             Form of Secretary's Certificate

                                       29
<PAGE>

                              DISCLOSURE SCHEDULES

                          Schedule 3(a) - Subsidiaries

                         Schedule 3(c) - Capitalization

                          Schedule 3(e) - No Conflicts

                        Schedule 3(f) - 1934 Act Filings

                   Schedule 3(g) - Absence of Certain Changes

                           Schedule 3(h) - Litigation

                  Schedule 3(l) - Intellectual Property Rights

                              Schedule 3(n) - Title

                  Schedule 3(r) - Transactions with Affiliates

                                       30
<PAGE>

                                    EXHIBIT A

                      FORM OF REGISTRATION RIGHTS AGREEMENT

[Sent separately]

                                       31
<PAGE>

                                    EXHIBIT B

                         FORM OF COMPANY COUNSEL OPINION

         Capitalized terms used herein but not defined herein,  have the meaning
set forth in the Common Stock Purchase  Agreement.  Based on the foregoing,  and
subject to the assumptions and  qualifications  set forth herein,  we are of the
opinion that:

                  1. The Company is a corporation  existing and in good standing
under the laws of the State of _______.  The Company is qualified to do business
as a foreign corporation and is in good standing in the States of ________.

                  2. The Company has the corporate power to execute and deliver,
and perform its obligations  under,  each Transaction  Document to which it is a
party.  The Company has the  corporate  power to conduct its business as, to the
best of our knowledge,  it is now  conducted,  and to own and use the properties
owned and used by it.

                  3. The execution,  delivery and  performance by the Company of
the  Transaction  Documents to which it is a party have been duly  authorized by
all  necessary  corporate  action on the part of the Company.  The execution and
delivery of the  Transaction  Documents by the Company,  the  performance of the
obligations  of  the  Company  thereunder  and  the  consummation  by it of  the
transactions  contemplated therein have been duly authorized and approved by the
Company's Board of Directors and no further  consent,  approval or authorization
of the  Company,  its Board of Directors or its  stockholders  is required.  The
Transaction  Documents  to which the Company is a party have been duly  executed
and  delivered by the Company and are the valid and binding  obligations  of the
Company,  enforceable  against the Company in accordance with their terms except
as such  enforceability  may be  limited  by  general  principles  of  equity or
applicable bankruptcy,  insolvency,  liquidation or similar laws relating to, or
affecting creditor's rights and remedies.

                  4. The execution,  delivery and  performance by the Company of
the Transaction  Documents,  the consummation by the Company of the transactions
contemplated thereby including the offering, sale and issuance of the Commitment
Shares,  and the Purchase  Shares in accordance with the terms and conditions of
the Common Stock Purchase  Agreement,  and fulfillment and compliance with terms
of the  Transaction  Documents,  does not and  shall  not:  (i)  conflict  with,
constitute a breach of or default (or an event which,  with the giving of notice
or  lapse of time or  both,  constitutes  or  could  constitute  a  breach  or a
default),  under  (a) the  Certificate  of  Incorporation  or the  Bylaws of the
Company,  (b) any  material  agreement,  note,  lease,  mortgage,  deed or other
material instrument to which to our knowledge the Company is a party or by which
the Company or any of its assets are bound,  (ii) result in any violation of any
statute,  law,  rule or regulation  applicable  to the Company,  or (iii) to our
knowledge,  violate any order,  writ,  injunction  or decree  applicable  to the
Company or any of its subsidiaries.

                                       32
<PAGE>

                  5. The issuance of the Purchase  Shares and Commitment  Shares
pursuant to the terms and conditions of the Transaction  Documents has been duly
authorized.  ________  shares of Common  Stock have been  properly  reserved for
issuance under the Common Stock Purchase Agreement.  When issued and paid for in
accordance with the Common Stock Purchase  Agreement,  the Purchase Shares shall
be validly issued, fully paid and non-assessable,  to our knowledge, free of all
taxes,  liens,  charges,  restrictions,  rights of first refusal and  preemptive
rights. ________ shares of Common Stock have been properly reserved for issuance
as Additional Commitment Shares under the Common Stock Purchase Agreement.  When
issued in accordance  with the Common Stock Purchase  Agreement,  the Additional
Commitment Shares shall be validly issued, fully paid and non-assessable, to our
knowledge,  free of all taxes,  liens,  charges,  restrictions,  rights of first
refusal and preemptive  rights. To our knowledge,  the execution and delivery of
the Registration  Rights Agreement do not, and the performance by the Company of
its  obligations  thereunder  shall  not,  give rise to any  rights of any other
person for the  registration  under the  Securities  Act of any shares of Common
Stock or other securities of the Company which have not been waived.

                  6. As of the date hereof,  the authorized capital stock of the
Company consists of _______ shares of common stock, par value $______ per share,
of which to our knowledge  __________ shares are issued and outstanding.  Except
as set forth on Schedule  3(c) of the Common Stock  Purchase  Agreement,  to our
knowledge,  there are no outstanding shares of capital stock or other securities
convertible  into or exchangeable or exercisable for shares of the capital stock
of the Company.

                  7.  Assuming  the  accuracy  of the  representations  and your
compliance  with the covenants  made by you in the  Transaction  Documents,  the
offering,  sale and  issuance of the  Commitment  Shares to you  pursuant to the
Transaction  Documents  is exempt from  registration  under the 1933 Act and the
securities laws and regulations of the State of _________.

                  8. Other than that which has been obtained and completed prior
to the date hereof, no authorization,  approval,  consent, filing or other order
of any federal or state governmental body,  regulatory agency, or stock exchange
or market, or any court, or, to our knowledge, any third party is required to be
obtained  by the Company to enter into and  perform  its  obligations  under the
Transaction  Documents or for the Company to issue and sell the Purchase  Shares
as contemplated by the Transaction Documents.

                  9. The Common Stock is registered pursuant to Section 12(g) of
the 1934 Act. To our  knowledge,  since January 1, 1999, the Company has been in
compliance with the reporting  requirements of the 1934 Act applicable to it. To
our  knowledge,  since January 1, 1999, the Company has not received any written
notice  from the  Principal  Market  stating  that the  Company  has not been in
compliance with any of the rules and regulations (including the requirements for
continued listing) of the Principal Market.

                                       33
<PAGE>

         We further  advise you that to our  knowledge,  except as  disclosed on
Schedule 3(h) in the Common Stock Purchase Agreement,  there is no action, suit,
proceeding,  inquiry or  investigation  before or by any court,  public board or
body, any governmental  agency, any stock exchange or market, or self-regulatory
organization, which has been threatened in writing or which is currently pending
against the Company,  any of its subsidiaries,  any officers or directors of the
Company or any of its  subsidiaries  or any of the  properties of the Company or
any of its subsidiaries.

         In  addition,  we  have  participated  in the  preparation  of the  SEC
Documents and the Registration  Statement (SEC File #________) covering the sale
of the Purchase  Shares,  the Commitment  Shares  including the prospectus dated
____________,  contained  therein and in  conferences  with  officers  and other
representatives  of the Company (including the Company's  independent  auditors)
during which the contents of the SEC Documents,  the Registration  Statement and
related  matters were  discussed and reviewed  and,  although we are not passing
upon and do not assume any  responsibility  for the  accuracy,  completeness  or
fairness of the  statements  contained in the SEC Documents or the  Registration
Statement,  on the basis of the information  that was developed in the course of
the  performance of the services  referred to above,  considered in the light of
our  understanding  of the  applicable  law,  nothing came to our attention that
caused us to believe that the SEC Documents or the Registration Statement (other
than  the  financial  statements  and  schedules  and the  other  financial  and
statistical  data  included  therein,  as to which we express no belief),  as of
their dates,  contained  any untrue  statement of a material  fact or omitted to
state any material fact  necessary in order to make the statements  therein,  in
the light of the circumstances under which they were made, not misleading.

                                       34
<PAGE>

                                    EXHIBIT C

                          FORM OF OFFICER'S CERTIFICATE

             This  Officer's  Certificate  ("Certificate")  is  being  delivered
pursuant to Section 7(e) of that certain Common Stock Purchase  Agreement  dated
as  of  _________,   ("Common  Stock  Purchase   Agreement"),   by  and  between
PURCHASEPRO.COM,  a Nevada corporation (the "Company"),  and FUSION CAPITAL FUND
II, LLC (the  "Buyer").  Terms used herein and not otherwise  defined shall have
the meanings ascribed to them in the Common Stock Purchase Agreement.

             The undersigned, ___________, ______________ of the Company, hereby
certifies as follows:

                  1. I am the ___________ of the Company and make the statements
          contained in this Certificate;

                  2. The  representations and warranties of the Company are true
         and correct in all material  respects (except to the extent that any of
         such   representations  and  warranties  is  already  qualified  as  to
         materiality  in Section 3 of the Common Stock  Purchase  Agreement,  in
         which case,  such  representations  and warranties are true and correct
         without further  qualification)  as of the date when made and as of the
         Commencement   Date  as   though   made  at  that  time   (except   for
         representations and warranties that speak as of a specific date);

                  3. The Company has  performed,  satisfied  and complied in all
         material respects with covenants, agreements and conditions required by
         the Transaction  Documents to be performed,  satisfied or complied with
         by the Company at or prior to the Commencement Date.

         IN WITNESS WHEREOF,  I have hereunder signed my name on this ___ day of
___________.

                                                  ----------------------
                                                  Name:
                                                  Title:

         The  undersigned  as  Secretary of  ________,  a ________  corporation,
hereby certifies that ___________ is the duly elected, appointed,  qualified and
acting  ________ of  _________  and that the  signature  appearing  above is his
genuine signature.

                                                     --------------------------
                                                     Secretary

                                       35
<PAGE>

                                    EXHIBIT D

                           FORM OF COMPANY RESOLUTIONS

         WHEREAS,  there  has  been  presented  to the  Board  of  Directors  of
____________, (the "Corporation") a draft of the Common Stock Purchase Agreement
(the "Purchase  Agreement") by and among the Corporation and Fusion Capital Fund
II,  LLC  ("Fusion"),  providing  for the  purchase  by Fusion of up to  Fifteen
Million Dollars  ($15,000,000) of the Corporation's common stock, par value $___
(the "Common Stock"); and

         WHEREAS,  after careful  consideration of the Purchase  Agreement,  the
documents  incident  thereto and other factors  deemed  relevant by the Board of
Directors, the Board of Directors has determined that it is advisable and in the
best interests of the Corporation to engage in to  transactions  contemplated by
the Purchase Agreement.

                              Transaction Documents

         RESOLVED, that the transactions described in the Purchase Agreement are
hereby    approved   and    ____________________________________________    (the
"Authorized  Officers")  are  severally  authorized  to execute  and deliver the
Purchase Agreement,  and any other agreements or documents  contemplated thereby
including,   without   limitation,   a   registration   rights   agreement  (the
"Registration  Rights  Agreement")  providing  for the sale of the shares of the
Company's Common Stock issuable in respect of the Purchase  Agreement) on behalf
of the Corporation,  with such amendments,  changes,  additions and deletions as
the Authorized Officers may deem to be appropriate and approve on behalf of, the
Corporation,  such approval to be conclusively  evidenced by the signature of an
Authorized Officer thereon; and

         FURTHER  RESOLVED,  that the terms and  provisions of the  Registration
Rights Agreement by and among the Corporation and Fusion are hereby approved and
the Authorized  Officers are authorized to execute and deliver the  Registration
Rights Agreement  (pursuant to the terms of the Purchase  Agreement),  with such
amendments,  changes, additions and deletions as the Authorized Officer may deem
appropriate  and  approve  on behalf of, an  Corporation,  such  approval  to be
conclusively evidenced by the signature of an Authorized Officer thereon; and

         FURTHER RESOLVED, that the terms and provisions of the Form of Transfer
Agent Instructions (the  "Instructions")  are hereby approved and the Authorized
Officers are authorized to execute and deliver the Instructions (pursuant to the
terms of the Purchase Agreement),  with such amendments,  changes, additions and
deletions as the Authorized  Officers may deem appropriate and approve on behalf
of, the Corporation, such approval to be conclusively evidenced by the signature
of an Authorized Officer thereon; and

                                       36
<PAGE>

                         Execution of Purchase Agreement

         FURTHER  RESOLVED,  that the Corporation be and it hereby is authorized
to execute the Purchase Agreement  providing for the purchase of common stock of
the Corporation having an aggregate value of up to $____________; and

                            Issuance of Common Stock

         FURTHER  RESOLVED,  that the Corporation is hereby  authorized to issue
the  Commitment  Shares (as defined in the Purchase  Agreement)  and that,  upon
issuance of the  Commitment  Shares  pursuant  to the  Purchase  Agreement,  the
Commitment  Shares  shall be duly  authorized,  validly  issued,  fully paid and
nonassessable with no personal liability attaching to the ownership thereof; and

         FURTHER   RESOLVED,   that  the  Corporation  shall  initially  reserve
__________  shares of Common Stock for issuance as Additional  Commitment Shares
under the Purchase Agreement.

         FURTHER  RESOLVED,  that the Corporation is hereby  authorized to issue
shares of Common  Stock upon the  purchase  of shares of Common  Stock up to the
available  amount  under the  Purchase  Agreement  (the  "Purchase  Shares")  in
accordance  with the terms of the Purchase  Agreement and that, upon issuance of
the Purchase Shares pursuant to the Purchase Agreement, the Purchase Shares will
be duly  authorized,  validly  issued,  fully  paid  and  nonassessable  with no
personal liability attaching to the ownership thereof; and

         FURTHER   RESOLVED,   that  the  Corporation  shall  initially  reserve
__________  shares of Common  Stock for  issuance as Purchase  Shares  under the
Purchase Agreement.

                             Registration Statement

         The  management of the  Corporation  has prepared an initial draft of a
Registration  Statement on Form ___ (the  "Registration  Statement") in order to
register the sale of the Purchase Shares,  the Commitment Shares  (collectively,
the "Shares"); and

         The Board of  Directors  has  determined  to approve  the  Registration
Statement and to authorize the  appropriate  officers of the Corporation to take
all such actions as they may deem appropriate to effect the offering; and

         NOW, THEREFORE,  BE IT RESOLVED, that the officers and directors of the
Corporation  be, and each of them hereby is,  authorized and directed,  with the
assistance of counsel and accountants for the Corporation,  to prepare,  execute
and file with the  Securities and Exchange  Commission  (the  "Commission")  the
Registration   Statement,   which   Registration   Statement   shall   be  filed
substantially in the form presented to the Board of Directors, with such changes
therein as the Chief Executive  Officer of the Corporation or any Vice President
of  the  Corporation  shall  deem  desirable  and in the  best  interest  of the
Corporation and its shareholders  (such officer's  execution  thereof  including
such changes shall be deemed to evidence conclusively such determination); and

                                       37
<PAGE>

         FURTHER RESOLVED,  that the officers of the Corporation be, and each of
them hereby is,  authorized  and  directed,  with the  assistance of counsel and
accountants  for  the  Corporation,  to  prepare,  execute  and  file  with  the
Commission all amendments,  including post-effective amendments, and supplements
to the  Registration  Statement,  and  all  certificates,  exhibits,  schedules,
documents and other instruments relating to the Registration  Statement, as such
officers  shall deem  necessary or  appropriate  (such  officer's  execution and
filing thereof shall be deemed to evidence conclusively such determination); and

         FURTHER RESOLVED,  that the execution of the Registration Statement and
of any amendments and  supplements  thereto by the officers and directors of the
Corporation  be,  and  the  same  hereby  is,  specifically   authorized  either
personally or by the Authorized  Officers as such  officer's or director's  true
and lawful attorneys-in-fact and agents; and

         FURTHER RESOLVED, that the Authorized Officers are hereby is designated
as "Agent for Service" of the  Corporation in connection  with the  Registration
Statement  and the  filing  thereof  with  the  Commission,  and the  Authorized
Officers hereby are,  authorized to receive  communications and notices from the
Commission with respect to the Registration Statement; and

         FURTHER RESOLVED,  that the officers of the Corporation be, and each of
them hereby is, authorized and directed to pay all fees, costs and expenses that
may  be  incurred  by  the  Corporation  in  connection  with  the  Registration
Statement; and

         FURTHER RESOLVED,  that it is desirable and in the best interest of the
Corporation  that the  Shares be  qualified  or  registered  for sale in various
states;  that the  officers of the  Corporation  be, and each of them hereby is,
authorized to determine the states in which appropriate action shall be taken to
qualify  or  register  for sale all or such part of the  Shares as they may deem
advisable;  that said  officers  be, and each of them hereby is,  authorized  to
perform  on  behalf  of the  Corporation  any and all such acts as they may deem
necessary or advisable in order to comply with the  applicable  laws of any such
states, and in connection therewith to execute and file all requisite papers and
documents,  including, but not limited to, applications,  reports, surety bonds,
irrevocable  consents,  appointments  of  attorneys  for  service of process and
resolutions; and the execution by such officers of any such paper or document or
the doing by them of any act in  connection  with the  foregoing  matters  shall
conclusively  establish  their  authority  therefor from the Corporation and the
approval and  ratification  by the  Corporation  of the papers and  documents so
executed and the actions so taken; and

         FURTHER  RESOLVED,  that if, in any state  where the  securities  to be
registered or qualified for sale to the public,  or where the  Corporation is to
be registered in connection with the public offering of the Shares, a prescribed
form of  resolution  or  resolutions  is  required to be adopted by the Board of
Directors,  each such  resolution  shall be  deemed  to have been and  hereby is
adopted,  and the Secretary is hereby  authorized to certify the adoption of all
such resolutions as though such resolutions were now presented to and adopted by
the Board of Directors; and

                                       38
<PAGE>

         FURTHER  RESOLVED,  that  the  officers  of the  Corporation  with  the
assistance of counsel be, and each of them hereby is, authorized and directed to
take all necessary  steps and do all other things  necessary and  appropriate to
effect the listing of the Shares on The Nasdaq National Market.

                               Approval of Actions

         RESOLVED, that, without limiting the foregoing, the Authorized Officers
are, and each of them hereby is, authorized and directed to proceed on behalf of
the Corporation  and to take all such steps as deemed  necessary or appropriate,
with the  advice  and  assistance  of  counsel,  to  cause  the  Corporation  to
consummate  the  agreements  referred to herein and to perform  its  obligations
under such agreements; and

         RESOLVED,  that the Authorized Officers be, and each of them hereby is,
authorized,  empowered  and  directed  on  behalf  of  and in  the  name  of the
Corporation,  to take or cause  to be taken  all  such  further  actions  and to
execute and  deliver or cause to be  executed  and  delivered  all such  further
agreements,   amendments,   documents,    certificates,    reports,   schedules,
applications,  notices,  letters and  undertakings and to incur and pay all such
fees and expenses as in their judgment  shall be necessary,  proper or desirable
to carry into  effect  the  purpose  and intent of any and all of the  foregoing
resolutions, and that all actions heretofore taken by any officer or director of
the  Corporation  in  connection  with  the  transactions  contemplated  by  the
agreements  described herein are hereby approved,  ratified and confirmed in all
respects.

                                       39
<PAGE>

                                    EXHIBIT E

                         FORM OF SECRETARY'S CERTIFICATE

         This  Secretary's   Certificate   ("Certificate")  is  being  delivered
pursuant to Section 7(k) of that certain Common Stock Purchase  Agreement  dated
as  of  __________,   ("Common  Stock  Purchase  Agreement"),   by  and  between
PURCHASEPRO.COM,  INC., a Nevada  corporation (the "Company") and FUSION CAPITAL
FUND II, LLC (the "Buyer"),  pursuant to which the Company may sell to the Buyer
up to Fifteen Million Dollars  ($15,000,000)  of the Company's Common Stock, par
value $_____ per share (the "Common Stock"). Terms used herein and not otherwise
defined  shall have the meanings  ascribed to them in the Common Stock  Purchase
Agreement.

The  undersigned,  ____________,  Secretary of the Company,  hereby certifies as
follows:

                  1. I am the  Secretary of the Company and make the  statements
         contained in this Secretary's Certificate.

                  2.  Attached  hereto  as  Exhibit  A and  Exhibit  B are true,
         correct and complete  copies of the  Company's  bylaws  ("Bylaws")  and
         Certificate  of  Incorporation  ("Articles"),  in each case, as amended
         through the date  hereof,  and no action has been taken by the Company,
         its directors, officers or shareholders, in contemplation of the filing
         of any  further  amendment  relating  to or  affecting  the  Bylaws  or
         Articles.

                  3. Attached hereto as Exhibit C are true, correct and complete
         copies of the resolutions duly adopted by the Board of Directors of the
         Company  on  _____________,  at which a quorum was  present  and acting
         throughout.  Such  resolutions  have  not  been  amended,  modified  or
         rescinded and remain in full force and effect and such  resolutions are
         the only  resolutions  adopted by the Company's Board of Directors,  or
         any committee  thereof,  or the shareholders of the Company relating to
         or affecting (i) the entering into and  performance of the Common Stock
         Purchase Agreement, or the issuance,  offering and sale of the Purchase
         Shares and the  Commitment  Shares and (ii) and the  performance of the
         Company  of  its  obligation   under  the   Transaction   Documents  as
         contemplated therein.

                  4. As of the date hereof, the authorized,  issued and reserved
         capital stock of the Company is as set forth on Exhibit D hereto.

                                       40
<PAGE>

                  IN WITNESS  WHEREOF,  I have hereunder  signed my name on this
___ day of ____________.

                                              -------------------------
                                                     Secretary

         The undersigned as ___________ of __________,  a ________  corporation,
hereby certifies that ____________ is the duly elected, appointed, qualified and
acting  Secretary of _________,  and that the signature  appearing  above is his
genuine signature.

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

                                       41<PAGE>
                                                                     EXHIBIT 4.1

                           PROBUSINESS SERVICES, INC.

                                       AND

                            WELLS FARGO BANK, MN N.A.

                                  RIGHTS AGENT

              AMENDED AND RESTATED PREFERRED STOCK RIGHTS AGREEMENT

                          DATED AS OF DECEMBER 19, 2001

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                              ----
<S>                                                                                                           <C>
Section 1.  Certain Definitions.................................................................................1

Section 2.  Appointment of Rights Agent.........................................................................7

Section 3.  Issuance of Rights Certificates.....................................................................7

Section 4.  Form of Rights Certificates.........................................................................9

Section 5.  Countersignature and Registration..................................................................10

Section 6.  Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated,
            Destroyed, Lost or Stolen Rights Certificates......................................................10

Section 7.  Exercise of Rights; Exercise Price; Expiration Date of Rights......................................11

Section 8.  Cancellation and Destruction of Rights Certificates................................................13

Section 9.  Reservation and Availability of Preferred Shares...................................................13

Section 10. Record Date........................................................................................15

Section 11. Adjustment of Exercise Price, Number of Shares or Number of Rights.................................15

Section 12. Certificate of Adjusted Exercise Price or Number of Shares.........................................21

Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power...............................22

Section 14. Fractional Rights and Fractional Shares............................................................25

Section 15. Rights of Action...................................................................................26

Section 16. Agreement of Rights Holders........................................................................27

Section 17. Rights Certificate Holder Not Deemed a Stockholder.................................................27

Section 18. Concerning the Rights Agent........................................................................27

Section 19. Merger or Consolidation or Change of Name of Rights Agent..........................................28

Section 20. Duties of Rights Agent.............................................................................29

Section 21. Change of Rights Agent.............................................................................31
</TABLE>

                                      -ii-
<PAGE>

                                TABLE OF CONTENTS
                                  (CONTINUED)
<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                              ----
<S>                                                                                                           <C>
Section 22. Issuance of New Rights Certificates................................................................31

Section 23. Redemption.........................................................................................32

Section 24. Exchange...........................................................................................33

Section 25. Notice of Certain Events...........................................................................34

Section 26. Notices............................................................................................35

Section 27. Supplements and Amendments.........................................................................35

Section 28. Successors.........................................................................................36

Section 29. Determinations and Actions by the Board of Directors, etc..........................................36

Section 30. Benefits of this Agreement.........................................................................36

Section 31. Severability.......................................................................................36

Section 32. Governing Law......................................................................................37

Section 33. Counterparts.......................................................................................37

Section 34. Descriptive Headings...............................................................................37
</TABLE>

EXHIBITS

Exhibit A      Form of Certificate of Designation

Exhibit B      Form of Rights Certificate

Exhibit C      Summary of Rights

                                     -iii-
<PAGE>

              AMENDED AND RESTATED PREFERRED STOCK RIGHTS AGREEMENT

        This Amended and Restated Preferred Stock Rights Agreement is dated as
of December 19, 2001, between ProBusiness Services, Inc., a Delaware
corporation, and Wells Fargo Bank, MN N.A., as rights agent (the "RIGHTS
AGENT").

        WHEREAS, the Company and the Rights Agent are parties to that certain
Rights Agreement entered into as of August 8, 2001 (the "PRIOR AGREEMENT");

        WHEREAS, on August 1, 2001 (the "RIGHTS DIVIDEND DECLARATION DATE"), the
Board of Directors of the Company authorized and declared a dividend of one
Preferred Share Purchase Right (a "RIGHT") for each Common Share (as hereinafter
defined) of the Company outstanding as of the Close of Business (as hereinafter
defined) on August 30, 2001 (the "RECORD DATE"), each Right representing the
right to purchase one one-thousandth (0.001) of a share of Series A
Participating Preferred Stock (as such number may be adjusted pursuant to the
provisions of this Agreement), having the rights, preferences and privileges set
forth in the form of Certificate of Designations of Rights, Preferences and
Privileges of Series A Participating Preferred Stock attached hereto as Exhibit
A, upon the terms and subject to the conditions herein set forth, and further
authorized and directed the issuance of one Right (as such number may be
adjusted pursuant to the provisions of this Agreement) with respect to each
Common Share that shall become outstanding between the Record Date and the
earlier of the Distribution Date and the Expiration Date (as such terms are
hereinafter defined), and in certain circumstances after the Distribution Date.

        WHEREAS, the Company has determined that, pursuant to Section 27 of the
Prior Agreement, the Prior Agreement may be amended and restated as set forth
herein without the approval of the holders of the Rights (as hereinafter
defined) and the Company wishes to amend and restate that Prior Agreement to
provide as follows.

        NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein set forth, the parties hereby agree as follows:

        Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:

                (a) "ACQUIRING PERSON" shall mean any Person, who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares then outstanding, but shall
not include the Company, any Subsidiary of the Company or any employee benefit
plan of the Company or of any Subsidiary of the Company, or any entity holding
Common Shares for or pursuant to the terms of any such plan; provided, however,
that General Atlantic Partners, LLC and its Affiliates and Associates (the "GAP
Entities") shall not be deemed an "Acquiring Person" until such time as the GAP
Entities shall be the Beneficial Owner of more than 26% of the Common Shares
then outstanding or until such time as any of the GAP Entities announce a tender
offer to acquire more than 26% of the Company's Common Stock (the

<PAGE>

"Limitations"). Notwithstanding the foregoing, no Person shall be deemed to be
an Acquiring Person as the result of an acquisition of Common Shares by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
of the Common Shares of the Company then outstanding, or with respect to the GAP
Entities, the GAP Entities increase such number of shares to more than 26% of
the Common Shares of the Company then outstanding; provided, however, that if a
Person shall become the Beneficial Owner of 15% or more of the Common Shares of
the Company then outstanding, or with respect to the GAP Entities, the GAP
Entities shall become the Beneficial Owner of more than 26% of the Common Shares
of the Company then outstanding, by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the Beneficial Owner of
any additional Common Shares of the Company (other than pursuant to a dividend
or distribution paid or made by the Company on the outstanding Common Shares in
Common Shares or pursuant to a split or subdivision of the outstanding Common
Shares), then such Person shall be deemed to be an Acquiring Person unless upon
becoming the Beneficial Owner of such additional Common Shares of the Company
such Person does not beneficially own 15% or more of the Common Shares of the
Company then outstanding, or with respect to the GAP Entities, the GAP Entities
do not beneficially own more than 26% of the Common Shares of the Company then
outstanding. Notwithstanding the foregoing, (i) if the Company's Board of
Directors determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently (including, without limitation,
because (A) such Person was unaware that it beneficially owned a percentage of
the Common Shares that would otherwise cause such Person to be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph (a),
or (B) such Person was aware of the extent of the Common Shares it beneficially
owned but had no actual knowledge of the consequences of such beneficial
ownership under this Agreement) and without any intention of changing or
influencing control of the Company, and if such Person divested or divests as
promptly as practicable a sufficient number of Common Shares so that such Person
would no longer be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be or
to have become an "Acquiring Person" for any purposes of this Agreement; and
(ii) if, as of the date hereof, any Person is the Beneficial Owner of 15% or
more of the Common Shares outstanding, or with respect to the GAP Entities, the
GAP Entities are the Beneficial Owner of more than 26% of the Common Shares
outstanding, such Person shall not be or become an "Acquiring Person," as
defined pursuant to the foregoing provisions of this paragraph (a), unless and
until such time as such Person shall become the Beneficial Owner of additional
Common Shares (other than pursuant to a dividend or distribution paid or made by
the Company on the outstanding Common Shares in Common Shares or pursuant to a
split or subdivision of the outstanding Common Shares), unless, upon becoming
the Beneficial Owner of such additional Common Shares, such Person is not then
the Beneficial Owner of 15% or more of the Common Shares then outstanding, or
with respect to the GAP Entities, the GAP Entities are not then the Beneficial
Owner of more than 26% of the Common Shares then outstanding.

                (b) "ADJUSTMENT FRACTION" shall have the meaning set forth in
Section 11(a)(i) hereof.

                                      -2-
<PAGE>

                (c) "AFFILIATE" and "ASSOCIATE" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this Agreement.

                (d) A Person shall be deemed the "BENEFICIAL OWNER" of and shall
be deemed to "BENEFICIALLY OWN" any securities:

                        (i) which such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly, for purposes of Section
13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or
successor law or regulation);

                        (ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than the Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed pursuant to this
Section 1(d)(ii)(A) to be the Beneficial Owner of, or to beneficially own, (1)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, or (2) securities
which a Person or any of such Person's Affiliates or Associates may be deemed to
have the right to acquire pursuant to any merger or other acquisition agreement
between the Company and such Person (or one or more of its Affiliates or
Associates) if such agreement has been approved by the Board of Directors of the
Company prior to there being an Acquiring Person; or (B) the right to vote
pursuant to any agreement, arrangement or understanding; provided, however, that
a Person shall not be deemed the Beneficial Owner of, or to beneficially own,
any security under this Section 1(d)(ii)(B) if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations of the Exchange Act and (2) is not also then reportable on Schedule
13D under the Exchange Act (or any comparable or successor report); or

                        (iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding, whether or not in writing (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent contemplated by the proviso to
Section 1(d)(ii)(B)) or disposing of any securities of the Company; provided,
however, that in no case shall an officer or director of the Company be deemed
(x) the Beneficial Owner of any securities beneficially owned by another officer
or director of the Company solely by reason of actions undertaken by such
persons in their capacity as officers or directors of the Company or (y) the
Beneficial Owner of securities held of record by the trustee of any employee
benefit plan of the Company or any Subsidiary of the Company for the benefit of
any employee of the Company or any Subsidiary of the Company, other

                                      -3-
<PAGE>

than the officer or director, by reason of any influence that such officer or
director may have over the voting of the securities held in the plan.

                (e) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.

                (f) "CLOSE OF BUSINESS" on any given date shall mean 5:00 P. M.,
New York time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York time, on the next succeeding
Business Day.

                (g) "COMMON SHARES" when used with reference to the Company
shall mean the shares of Common Stock of the Company, par value $0.001 per
share. Common Shares when used with reference to any Person other than the
Company shall mean the capital stock (or equity interest) with the greatest
voting power of such other Person or, if such other Person is a Subsidiary of
another Person, the Person or Persons which ultimately control such
first-mentioned Person.

                (h) "COMMON STOCK EQUIVALENTS" shall have the meaning set forth
in Section 11(a)(iii) hereof.

                (i) "COMPANY" shall mean ProBusiness Services, Inc., a Delaware
corporation, subject to the terms of Section 13(a)(iii)(C) hereof.

                (j) "CURRENT PER SHARE MARKET PRICE" of any security (a
"Security" for purposes of this definition), for all computations other than
those made pursuant to Section 11(a)(iii) hereof, shall mean the average of the
daily closing prices per share of such Security for the thirty (30) consecutive
Trading Days immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the Current Per Share Market Price
of any Security on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the ten (10) consecutive Trading
Days immediately prior to such date; provided, however, that in the event that
the Current Per Share Market Price of the Security is determined during a period
following the announcement by the issuer of such Security of (i) a dividend or
distribution on such Security payable in shares of such Security or securities
convertible into such shares or (ii) any subdivision, combination or
reclassification of such Security, and prior to the expiration of the applicable
thirty (30) Trading Day or ten (10) Trading Day period, after the ex-dividend
date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Current Per
Share Market Price shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities

                                      -4-
<PAGE>

exchange, the last sale price or, if such last sale price is not reported, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by Nasdaq or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Company. If on any such
date no market maker is making a market in the Security, the fair value of such
shares on such date as determined in good faith by the Board of Directors of the
Company shall be used. If the Preferred Shares are not publicly traded, the
Current Per Share Market Price of the Preferred Shares shall be conclusively
deemed to be (x) the Current Per Share Market Price of the Common Shares as
determined pursuant to this Section 1(j), as appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof, multiplied by (y) 1,000. If the Security is not publicly held or so
listed or traded, Current Per Share Market Price shall mean the fair value per
share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes.

                (k) "CURRENT VALUE" shall have the meaning set forth in Section
11(a)(iii) hereof.

                (l) "DISTRIBUTION DATE" shall mean the earlier of (i) the Close
of Business on the tenth day (or such later date as may be determined by action
of the Company's Board of Directors) after the Shares Acquisition Date (or, if
the tenth day after the Shares Acquisition Date occurs before the Record Date,
the Close of Business on the Record Date) or (ii) the Close of Business on the
tenth Business Day (or such later date as may be determined by action of the
Company's Board of Directors) after the date that a tender or exchange offer by
any Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan) is first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange
Act, if, assuming the successful consummation thereof, such Person would be an
Acquiring Person.

                (m) "EQUIVALENT SHARES" shall mean Preferred Shares and any
other class or series of capital stock of the Company which is entitled to the
same rights, privileges and preferences as the Preferred Shares.

                (n) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.

                (o) "EXCHANGE RATIO" shall have the meaning set forth in Section
24(a) hereof.

                (p) "EXERCISE PRICE" shall have the meaning set forth in Section
4(a) hereof.

                (q) "EXPIRATION DATE" shall mean the earliest to occur of: (i)
the Close of Business on the Final Expiration Date, (ii) the Redemption Date, or
(iii) the time at which the Board of Directors orders the exchange of the Rights
as provided in Section 24 hereof.

                (r) "FINAL EXPIRATION DATE" shall mean August 30, 2011.

                                      -5-
<PAGE>

                (s) "NASDAQ" shall mean The NASDAQ Stock Market, Inc.

                (t) "PERSON" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or otherwise) of such
entity.

                (u) "POST-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.

                (v) "PREFERRED SHARES" shall mean shares of Series A
Participating Preferred Stock, par value $0.001, of the Company.

                (w) "PRE-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.

                (x) "PRINCIPAL PARTY" shall have the meaning set forth in
Section 13(b) hereof.

                (y) "RECORD DATE" shall have the meaning set forth in the
recitals at the beginning of this Agreement.

                (z) "REDEMPTION DATE" shall have the meaning set forth in
Section 23(a) hereof.

                (aa) "REDEMPTION PRICE" shall have the meaning set forth in
Section 23(a) hereof.

                (bb) "RIGHTS AGENT" shall mean (i) Wells Fargo Bank, MN N.A.,
(ii) its successor or replacement as provided in Sections 19 and 21 hereof or
(iii) any additional Person appointed pursuant to Section 2 hereof.

                (cc) "RIGHTS CERTIFICATE" shall mean a certificate substantially
in the form attached hereto as Exhibit B.

                (dd) "RIGHTS DIVIDEND DECLARATION DATE" shall have the meaning
set forth in the recitals at the beginning of this Agreement.

                (ee) "SECTION 11(a)(ii) TRIGGER DATE" shall have the meaning set
forth in Section 11(a)(iii) hereof.

                (ff) "SECTION 13 EVENT" shall mean any event described in clause
(i), (ii) or (iii) of Section 13(a) hereof.

                (gg) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.

                (hh) "SHARES ACQUISITION DATE" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such; provided that, if such Person is determined not to have become an

                                      -6-
<PAGE>

Acquiring Person pursuant to Section 1(a) hereof, then no Shares Acquisition
Date shall be deemed to have occurred.

                (ii) "SPREAD" shall have the meaning set forth in Section
11(a)(iii) hereof.

                (jj) "SUBSIDIARY" of any Person shall mean any corporation or
other entity of which an amount of voting securities sufficient to elect a
majority of the directors or Persons having similar authority of such
corporation or other entity is beneficially owned, directly or indirectly, by
such Person, or any corporation or other entity otherwise controlled by such
Person.

                (kk) "SUBSTITUTION PERIOD" shall have the meaning set forth in
Section 11(a)(iii) hereof.

                (ll) "SUMMARY OF RIGHTS" shall mean a summary of this Agreement
substantially in the form attached hereto as Exhibit C.

                (mm) "TOTAL EXERCISE PRICE" shall have the meaning set forth in
Section 4(a) hereof.

                (nn) "TRADING DAY" shall mean a day on which the principal
national securities exchange on which a referenced security is listed or
admitted to trading is open for the transaction of business or, if a referenced
security is not listed or admitted to trading on any national securities
exchange, a Business Day.

                (oo) A "TRIGGERING EVENT" shall be deemed to have occurred upon
any Person becoming an Acquiring Person.

        Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable, upon ten (10) days' prior written notice to the Rights Agent. The
Rights Agent shall have no duty to supervise, and shall in no event be liable
for, the acts or omissions of any co-Rights Agent.

        Section 3. Issuance of Rights Certificates.

                (a) Until the Distribution Date, (i) the Rights will be
evidenced (subject to the provisions of Sections 3(b) and 3(c) hereof) by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Rights Certificates) and not by
separate Rights Certificates and (ii) the right to receive Rights Certificates
will be transferable only in connection with the transfer of Common Shares.
Until the earlier of the Distribution Date or the Expiration Date, the surrender
for transfer of certificates for Common Shares shall also constitute the
surrender for transfer of the Rights associated with the Common Shares
represented thereby. As

                                      -7-
<PAGE>

soon as practicable after the Distribution Date, the Company will prepare and
execute, the Rights Agent will countersign, and the Company will send or cause
to be sent (and the Rights Agent will, if requested, send) by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Rights Certificate evidencing one Right for each
Common Share so held, subject to adjustment as provided herein. In the event
that an adjustment in the number of Rights per Common Share has been made
pursuant to Section 11 hereof, then at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates and may be
transferred by the transfer of the Rights Certificates as permitted hereby,
separately and apart from any transfer of Common Shares, and the holders of such
Rights Certificates as listed in the records of the Company or any transfer
agent or registrar for the Rights shall be the record holders thereof.

                (b) On the Record Date or as soon as practicable thereafter, the
Company will send a copy of the Summary of Rights by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company's transfer agent and registrar. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Distribution Date,
the Rights will be evidenced by such certificates registered in the names of the
holders thereof together with the Summary of Rights.

                (c) Unless the Board of Directors by resolution adopted at or
before the time of the issuance of any Common Shares after the Record Date but
prior to the earlier of the Distribution Date or the Expiration Date (or, in
certain circumstances provided in Section 22 hereof, after the Distribution
Date) specifies to the contrary, Rights shall be issued in respect of all Common
Shares that are so issued, and Certificates representing such Common Shares
shall also be deemed to be certificates for Rights, and shall bear the following
legend:

        THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
        CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN PROBUSINESS
        SERVICES, INC. AND WELLS FARGO BANK, MN N.A., AS THE RIGHTS AGENT, DATED
        AS OF AUGUST 8, 2001, (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE
        HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE
        AT THE PRINCIPAL EXECUTIVE OFFICES OF PROBUSINESS SERVICES, INC. UNDER
        CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS
        WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE
        EVIDENCED BY THIS CERTIFICATE. PROBUSINESS SERVICES, INC. WILL MAIL TO
        THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT
        CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN
        CIRCUMSTANCES SET FORTH IN THE RIGHTS

                                      -8-
<PAGE>

        AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR
        BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS
        SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD
        BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME
        NULL AND VOID.

With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, the Rights associated
with the Common Shares represented by such certificates shall be evidenced by
such certificates alone, and the surrender for transfer of any such certificate
shall also constitute the transfer of the Rights associated with the Common
Shares represented thereby.

                (d) In the event that the Company purchases or acquires any
Common Shares after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Shares shall be deemed canceled and retired
so that the Company shall not be entitled to exercise any Rights associated with
the Common Shares which are no longer outstanding.

        Section 4. Form of Rights Certificates.

                (a) The Rights Certificates (and the forms of election to
purchase Common Shares and of assignment to be printed on the reverse thereof)
shall be substantially in the form of Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or a national market system, on which
the Rights may from time to time be listed or included, or to conform to usage.
Subject to the provisions of Section 11 and Section 22 hereof, the Rights
Certificates, whenever distributed, shall be dated as of the Record Date (or in
the case of Rights issued with respect to Common Shares issued by the Company
after the Record Date, as of the date of issuance of such Common Shares) and on
their face shall entitle the holders thereof to purchase such number of
one-thousandths of a Preferred Share as shall be set forth therein at the price
set forth therein (such exercise price per one one-thousandth of a Preferred
Share being hereinafter referred to as the "EXERCISE PRICE" and the aggregate
Exercise Price of all Preferred Shares issuable upon exercise of one Right being
hereinafter referred to as the "TOTAL EXERCISE PRICE"), but the number and type
of securities purchasable upon the exercise of each Right and the Exercise Price
shall be subject to adjustment as provided herein.

                (b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a Post-Event
Transferee, (iii) a Pre-Event Transferee or (iv) any subsequent transferee
receiving transferred Rights from a Post-Event Transferee or a Pre-Event
Transferee, either directly or through one or more intermediate transferees, and
any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or

                                      -9-
<PAGE>

adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:

        THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
        BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR
        AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
        DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE
        AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
        CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.

        Section 5. Countersignature and Registration.

                (a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its Chief
Financial Officer, its President or any Vice President, either manually or by
facsimile signature, and by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal (if any) or a facsimile thereof. The Rights
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Rights
Certificates on behalf of the Company had not ceased to be such officer of the
Company; and any Rights Certificate may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Rights Certificate,
shall be a proper officer of the Company to sign such Rights Certificate,
although at the date of the execution of this Rights Agreement any such person
was not such an officer.

                (b) Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its office designated for such purposes, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.

        Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

                (a) Subject to the provisions of Sections 7(e), 14 and 24
hereof, at any time after the Close of Business on the Distribution Date, and at
or prior to the Close of Business on the Expiration Date, any Rights Certificate
or Rights Certificates may be transferred, split up, combined or exchanged for
another Rights Certificate or Rights Certificates, entitling the registered
holder to purchase a like number of one-thousandths of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Rights

                                      -10-
<PAGE>

Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Rights Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or Rights
Certificates to be transferred, split up, combined or exchanged at the office of
the Rights Agent designated for such purpose. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Sections
7(e), 14 and 24 hereof, countersign and deliver to the person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.

                (b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.

        Section 7. Exercise of Rights; Exercise Price; Expiration Date of
Rights.

                (a) Subject to Sections 7(e), 23(b) and 24(b) hereof, the
registered holder of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date and prior to the Close of Business on the Expiration
Date by surrender of the Rights Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
office of the Rights Agent designated for such purpose, together with payment of
the Exercise Price for each one-thousandth of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets as the case may be) as
to which the Rights are exercised.

                (b) The Exercise Price for each one-thousandth of a Preferred
Share issuable pursuant to the exercise of a Right shall initially be One
Hundred Seventy Dollars ($ 170.00), shall be subject to adjustment from time to
time as provided in Sections 11 and 13 hereof and shall be payable in lawful
money of the United States of America in accordance with paragraph (c) below.

                (c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Exercise Price for the number of one-thousandths
of a Preferred Share (or, following a Triggering Event, other securities, cash
or other assets as the case may be) to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Rights
Certificate in accordance with

                                      -11-
<PAGE>

Section 9(e) hereof, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares (or make available, if the Rights Agent is the transfer agent for the
Preferred Shares) a certificate or certificates for the number of
one-thousandths of a Preferred Share (or, following a Triggering Event, other
securities, cash or other assets as the case may be) to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests or (B) if the Company shall have elected to deposit the total number of
one-thousandths of a Preferred Share (or, following a Triggering Event, other
securities, cash or other assets as the case may be) issuable upon exercise of
the Rights hereunder with a depository agent, requisition from the depository
agent depository receipts representing such number of one-thousandths of a
Preferred Share (or, following a Triggering Event, other securities, cash or
other assets as the case may be) as are to be purchased (in which case
certificates for the Preferred Shares (or, following a Triggering Event, other
securities, cash or other assets as the case may be) represented by such
receipts shall be deposited by the transfer agent with the depository agent) and
the Company hereby directs the depository agent to comply with such request,
(ii) when appropriate, requisition from the Company the amount of cash to be
paid in lieu of issuance of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depository receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt thereof, deliver such cash
to or upon the order of the registered holder of such Rights Certificate. The
payment of the Exercise Price (as such amount may be reduced (including to zero)
pursuant to Section 11(a)(iii) hereof) and an amount equal to any applicable
transfer tax required to be paid by the holder of such Rights Certificate in
accordance with Section 9(e) hereof, may be made in cash or by certified bank
check, cashier's check or bank draft payable to the order of the Company. In the
event that the Company is obligated to issue securities of the Company other
than Preferred Shares, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so that
such other securities, cash and/or other property are available for distribution
by the Rights Agent, if and when appropriate.

                (d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Rights
Certificate or to his or her duly authorized assigns, subject to the provisions
of Section 14 hereof.

                (e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Triggering Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such (a "POST-EVENT TRANSFEREE"), (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Company's Board of Directors has

                                      -12-
<PAGE>

determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e) (a "PRE-EVENT
TRANSFEREE") or (iv) any subsequent transferee receiving transferred Rights from
a Post-Event Transferee or a Pre-Event Transferee, either directly or through
one or more intermediate transferees, shall become null and void without any
further action and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or to any other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person or any of such Acquiring Person's Affiliates, Associates or
transferees hereunder.

                (f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall, in
addition to having complied with the requirements of Section 7(a), have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.

        Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any Rights Certificate purchased or acquired by the Company otherwise
than upon the exercise thereof. The Rights Agent shall deliver all canceled
Rights Certificates to the Company, or shall, at the written request of the
Company, and after any Securities and Exchange Commission required retention
period, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate evidencing the destruction thereof to the Company.

        Section 9. Reservation and Availability of Preferred Shares.

                (a) The Company covenants and agrees that it will use its best
efforts to cause to be reserved and kept available out of its authorized and
unissued Preferred Shares not reserved for another purpose (and, following the
occurrence of a Triggering Event, out of its authorized and unissued Common
Shares and/or other securities), the number of Preferred Shares (and, following
the occurrence of the Triggering Event, Common Shares and/or other securities)
that will be sufficient to permit the exercise in full of all outstanding
Rights.

                (b) If the Company shall hereafter list any of its Preferred
Shares on a national securities exchange, then so long as the Preferred Shares
(and, following the occurrence of a Triggering Event, Common Shares and/or other
securities) issuable and deliverable upon exercise of

                                      -13-
<PAGE>

the Rights may be listed on such exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable (but
only to the extent that it is reasonably likely that the Rights will be
exercised), all shares reserved for such issuance to be listed on such exchange
upon official notice of issuance upon such exercise.

                (c) The Company shall use its best efforts to (i) file, as soon
as practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights is described in Section 11(a)(ii) or Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act with respect to
the securities purchasable upon exercise of the Rights on an appropriate form,
(ii) cause such registration statement to become effective as soon as
practicable after such filing and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities and (B) the date of expiration of the
Rights. The Company may temporarily suspend, for a period not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating, and notify
the Rights Agent, that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement and notification to the Rights Agent
at such time as the suspension is no longer in effect. The Company will also
take such action as may be appropriate under, or to ensure compliance with, the
securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. Notwithstanding any provision of this Agreement to
the contrary, the Rights shall not be exercisable in any jurisdiction, unless
the requisite qualification in such jurisdiction shall have been obtained, or an
exemption therefrom shall be available, and until a registration statement has
been declared and remains effective.

                (d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares (or other
securities of the Company) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such securities (subject to payment of the
Exercise Price), be duly and validly authorized and issued and fully paid and
nonassessable.

                (e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the original issuance or delivery of the
Rights Certificates or of any Preferred Shares (or other securities of the
Company) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
or delivery of Rights Certificates to a person other than, or the issuance or
delivery of certificates or depository receipts for the Preferred Shares (or
other securities of the Company) in a name other than that of, the registered
holder of the Rights Certificate evidencing Rights surrendered for exercise or
to issue or to deliver any certificates or depository receipts for Preferred
Shares (or other securities of the Company) upon the exercise of any Rights
until any such tax shall have been paid (any such tax

                                      -14-
<PAGE>

being payable by the holder of such Rights Certificate at the time of surrender)
or until it has been established to the Company's satisfaction that no such tax
is due.

        Section 10. Record Date. Each Person in whose name any certificate for a
number of one-thousandths of a Preferred Share (or other securities of the
Company) is issued upon the exercise of Rights shall for all purposes be deemed
to have become the holder of record of Preferred Shares (or other securities of
the Company) represented thereby on, and such certificate shall be dated, the
date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Total Exercise Price with respect to which the
Rights have been exercised (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the transfer books of the Company are closed, such Person shall be deemed
to have become the record holder of such shares on, and such certificate shall
be dated, the next succeeding Business Day on which the transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a holder
of Preferred Shares (or other securities of the Company) for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.

        Section 11. Adjustment of Exercise Price, Number of Shares or Number of
Rights. The Exercise Price, the number and kind of shares or other property
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.

                (a) (i) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares (by reverse stock split or otherwise) into a
smaller number of Preferred Shares, or (D) issue any shares of its capital stock
in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, in each such event,
except as otherwise provided in this Section 11 and Section 7(e) hereof: (1) the
Exercise Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by dividing the Exercise Price in effect immediately prior to such time by a
fraction (the "ADJUSTMENT FRACTION"), the numerator of which shall be the total
number of Preferred Shares (or shares of capital stock issued in such
reclassification of the Preferred Shares) outstanding immediately following such
time and the denominator of which shall be the total number of Preferred Shares
outstanding immediately prior to such time; provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (2) the number of one-thousandths of a
Preferred Share (or share of such other capital stock) issuable upon the
exercise of each Right shall equal the number of one-thousandths of a Preferred
Share (or share of such other capital stock) as was issuable upon exercise of a
Right immediately prior to the

                                      -15-
<PAGE>

occurrence of the event described in clauses (A)-(D) of this Section 11(a)(i),
multiplied by the Adjustment Fraction; provided, however, that, no such
adjustment shall be made pursuant to this Section 11(a)(i) to the extent that
there shall have simultaneously occurred an event described in clause (A), (B),
(C) or (D) of Section 11(n) with a proportionate adjustment being made
thereunder. Each Common Share that shall become outstanding after an adjustment
has been made pursuant to this Section 11(a)(i) shall have associated with it
the number of Rights, exercisable at the Exercise Price and for the number of
one-thousandths of a Preferred Share (or shares of such other capital stock) as
one Common Share has associated with it immediately following the adjustment
made pursuant to this Section 11(a)(i).

                        (ii) Subject to Section 24 of this Agreement, in the
event that a Triggering Event shall have occurred, then promptly following such
Triggering Event each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive for each Right, upon exercise
thereof in accordance with the terms of this Agreement and payment of the
Exercise Price in effect immediately prior to the occurrence of the Triggering
Event, in lieu of a number of one-thousandths of a Preferred Share, such number
of Common Shares of the Company as shall equal the quotient obtained by dividing
(A) the product obtained by multiplying (1) the Exercise Price in effect
immediately prior to the occurrence of the Triggering Event by (2) the number of
one-thousandths of a Preferred Share for which a Right was exercisable (or would
have been exercisable if the Distribution Date had occurred) immediately prior
to the first occurrence of a Triggering Event, by (B) 50% of the Current Per
Share Market Price for Common Shares on the date of occurrence of the Triggering
Event; provided, however, that the Exercise Price and the number of Common
Shares of the Company so receivable upon exercise of a Right shall be subject to
further adjustment as appropriate in accordance with Section 11(e) hereof to
reflect any events occurring in respect of the Common Shares of the Company
after the occurrence of the Triggering Event.

                        (iii) In lieu of issuing Common Shares in accordance
with Section 11(a)(ii) hereof, the Company may, if the Company's Board of
Directors determines that such action is necessary or appropriate and not
contrary to the interest of holders of Rights and, in the event that the number
of Common Shares which are authorized by the Company's Certificate of
Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights are not sufficient to permit the exercise in
full of the Rights, or if any necessary regulatory approval for such issuance
has not been obtained by the Company, the Company shall: (A) determine the
excess of (1) the value of the Common Shares issuable upon the exercise of a
Right (the "CURRENT VALUE") over (2) the Exercise Price (such excess, the
"SPREAD") and (B) with respect to each Right, make adequate provision to
substitute for such Common Shares, upon exercise of the Rights, (1) cash, (2) a
reduction in the Exercise Price, (3) other equity securities of the Company
(including, without limitation, shares or units of shares of any series of
preferred stock which the Company's Board of Directors has deemed to have the
same value as Common Shares (such shares or units of shares of preferred stock
are herein called "COMMON STOCK EQUIVALENTS")), except to the extent that the
Company has not obtained any necessary stockholder or regulatory approval for
such issuance, (4) debt securities of the Company, except to the extent that the
Company has not obtained any necessary stockholder or regulatory approval for
such issuance, (5) other assets or (6) any combination of the foregoing, having
an aggregate value equal to the Current Value, where such

                                      -16-
<PAGE>

aggregate value has been determined by the Company's Board of Directors based
upon the advice of a nationally recognized investment banking firm selected by
the Company's Board of Directors; provided, however, that if the Company shall
not have made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the later of (x) the first occurrence of a
Triggering Event and (y) the date on which the Company's right of redemption
pursuant to Section 23(a) expires (the later of (x) and (y) being referred to
herein as the "SECTION 11(a)(ii) TRIGGER DATE"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Exercise Price, Common Shares (to the extent
available), except to the extent that the Company has not obtained any necessary
stockholder or regulatory approval for such issuance, and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the Spread. If
the Company's Board of Directors shall determine in good faith that it is likely
that sufficient additional Common Shares could be authorized for issuance upon
exercise in full of the Rights or that any necessary regulatory approval for
such issuance will be obtained, the thirty (30) day period set forth above may
be extended to the extent necessary, but not more than ninety (90) days after
the Section 11(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares or take
action to obtain such regulatory approval (such period, as it may be extended,
the "SUBSTITUTION PERIOD"). To the extent that the Company determines that some
action need be taken pursuant to the first and/or second sentences of this
Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights and (y)
may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares, to
take any action to obtain any required regulatory approval and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of the Common Shares shall be the Current Per Share Market Price of
the Common Shares on the Section 11(a)(ii) Trigger Date and the value of any
Common Stock Equivalent shall be deemed to have the same value as the Common
Shares on such date.

                (b) In case the Company shall, at any time after the date of
this Agreement, fix a record date for the issuance of rights, options or
warrants to all holders of Preferred Shares entitling such holders (for a period
expiring within forty-five (45) calendar days after such record date) to
subscribe for or purchase Preferred Shares or Equivalent Shares or securities
convertible into Preferred Shares or Equivalent Shares at a price per share (or
having a conversion price per share, if a security convertible into Preferred
Shares or Equivalent Shares) less than the then Current Per Share Market Price
of the Preferred Shares or Equivalent Shares on such record date, then, in each
such case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares and Equivalent Shares (if any) outstanding on such record date,
plus the number of Preferred Shares or Equivalent Shares, as the case may be,
which the aggregate offering price of the total number of Preferred Shares or
Equivalent Shares, as the case may be, to be offered or issued (and/or the
aggregate initial conversion price of the convertible securities to be offered
or issued) would purchase at such current market price, and the denominator

                                      -17-
<PAGE>

of which shall be the number of Preferred Shares and Equivalent Shares (if any)
outstanding on such record date, plus the number of additional Preferred Shares
or Equivalent Shares, as the case may be, to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Company's
Board of Directors, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent and the holders
of the Rights. Preferred Shares and Equivalent Shares owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights, options or warrants are
not so issued, the Exercise Price shall be adjusted to be the Exercise Price
which would then be in effect if such record date had not been fixed.

                (c) In case the Company shall, at any time after the date of
this Agreement, fix a record date for the making of a distribution to all
holders of the Preferred Shares or of any class or series of Equivalent Shares
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular quarterly cash
dividend, if any, or a dividend payable in Preferred Shares) or subscription
rights, options or warrants (excluding those referred to in Section 11(b)),
then, in each such case, the Exercise Price to be in effect after such record
date shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
Current Per Share Market Price of a Preferred Share or an Equivalent Share on
such record date, less the fair market value per Preferred Share or Equivalent
Share (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a Preferred
Share or Equivalent Share, as the case may be, and the denominator of which
shall be such Current Per Share Market Price of a Preferred Share or Equivalent
Share on such record date; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. Such adjustments shall be made successively whenever such
a record date is fixed, and in the event that such distribution is not so made,
the Exercise Price shall be adjusted to be the Exercise Price which would have
been in effect if such record date had not been fixed.

                (d) Anything herein to the contrary notwithstanding, no
adjustment in the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1.0%) of the Exercise
Price; provided, however, that any adjustments which by reason of this Section
11(d) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a Common
Share or other share or one hundred-thousandth of a Preferred Share, as the case
may be. Notwithstanding the first sentence of this

                                      -18-
<PAGE>

Section 11(d), any adjustment required by this Section 11 shall be made no later
than the earlier of (i) three (3) years from the date of the transaction which
requires such adjustment or (ii) the Expiration Date.

                (e) If as a result of an adjustment made pursuant to Section
11(a) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Shares, thereafter the number of such other shares so receivable upon
exercise of any Right and, if required, the Exercise Price thereof, shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Shares
contained in Sections 11(a), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j),
11(k) and 11(l), and the provisions of Sections 7, 9, 10, 13 and 14 with respect
to the Preferred Shares shall apply on like terms to any such other shares.

                (f) All Rights originally issued by the Company subsequent to
any adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.

                (g) Unless the Company shall have exercised its election as
provided in Section 11(h), upon each adjustment of the Exercise Price as a
result of the calculations made in Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Exercise Price, that number of Preferred
Shares (calculated to the nearest one hundred-thousandth of a share) obtained by
(i) multiplying (x) the number of Preferred Shares covered by a Right
immediately prior to this adjustment, by (y) the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price, and (ii) dividing
the product so obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price.

                (h) The Company may elect on or after the date of any adjustment
of the Exercise Price as a result of the calculations made in Section 11(b) or
(c) to adjust the number of Rights, in substitution for any adjustment in the
number of Preferred Shares purchasable upon the exercise of a Right. Each of the
Rights outstanding after such adjustment of the number of Rights shall be
exercisable for the number of one-thousandths of a Preferred Share for which a
Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest one hundred-thousandth) obtained by
dividing the Exercise Price in effect immediately prior to adjustment of the
Exercise Price by the Exercise Price in effect immediately after adjustment of
the Exercise Price. The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Exercise Price is adjusted or any day
thereafter, but, if any Rights Certificates have been issued, shall be at least
ten (10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(h), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date

                                      -19-
<PAGE>

Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Exercise Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.

                (i) Irrespective of any adjustment or change in the Exercise
Price or the number of Preferred Shares issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may continue
to express the Exercise Price per one one-thousandth of a Preferred Share and
the number of one-thousandths of a Preferred Share which were expressed in the
initial Rights Certificates issued hereunder.

                (j) Before taking any action that would cause an adjustment
reducing the Exercise Price below the par or stated value, if any, of the number
of one-thousandths of a Preferred Share issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue as
fully paid and nonassessable shares such number of one-thousandths of a
Preferred Share at such adjusted Exercise Price.

                (k) In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Exercise Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) upon the occurrence of the event requiring such
adjustment.

                (l) Anything in this Section 11 to the contrary notwithstanding,
prior to the Distribution Date, the Company shall be entitled to make such
reductions in the Exercise Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in its sole discretion
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred or Common Shares, (ii) issuance wholly for cash of
any Preferred or Common Shares at less than the current market price, (iii)
issuance wholly for cash of Preferred or Common Shares or securities which by
their terms are convertible into or exchangeable for Preferred or Common Shares,
(iv) stock dividends or (v) issuance of rights, options or warrants referred to
in this Section 11, hereafter made by the Company to holders of its Preferred or
Common Shares shall not be taxable to such stockholders.

                                      -20-
<PAGE>

                (m) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Sections 23, 24 or 27
hereof, take (or permit to be taken) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.

                (n) In the event that the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Common Shares payable in
Common Shares, (B) subdivide the outstanding Common Shares, (C) combine the
outstanding Common Shares (by reverse stock split or otherwise) into a smaller
number of Common Shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11(a) and Section 7(e) hereof: (1) each Common Share
(or shares of capital stock issued in such reclassification of the Common
Shares) outstanding immediately following such time shall have associated with
it the number of Rights as were associated with one Common Share immediately
prior to the occurrence of the event described in clauses (A)-(D) above; (2) the
Exercise Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by multiplying the Exercise Price in effect immediately prior to such time by a
fraction, the numerator of which shall be the total number of Common Shares
outstanding immediately prior to the event described in clauses (A)-(D) above,
and the denominator of which shall be the total number of Common Shares
outstanding immediately after such event; provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (3) the number of one-thousandths of a
Preferred Share (or shares of such other capital stock) issuable upon the
exercise of each Right outstanding after such event shall equal the number of
one-thousandths of a Preferred Share (or shares of such other capital stock) as
were issuable with respect to one Right immediately prior to such event. Each
Common Share that shall become outstanding after an adjustment has been made
pursuant to this Section 11(n) shall have associated with it the number of
Rights, exercisable at the Exercise Price and for the number of one-thousandths
of a Preferred Share (or shares of such other capital stock) as one Common Share
has associated with it immediately following the adjustment made pursuant to
this Section 11(n). If an event occurs which would require an adjustment under
both this Section 11(n) and Section 11(a)(ii) hereof, the adjustment provided
for in this Section 11(n) shall be in addition to, and shall be made prior to,
any adjustment required pursuant to Section 11(a)(ii) hereof.

        Section 12. Certificate of Adjusted Exercise Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Preferred Shares a copy of
such certificate and (c) mail a brief summary thereof to each holder of a Rights
Certificate in accordance with Section 26 hereof. Notwithstanding the foregoing
sentence, the failure of the Company to make such certification or give such
notice shall not affect the validity of such adjustment or the force or effect
of the requirement for such adjustment. The Rights Agent shall be

                                      -21-
<PAGE>

fully protected in relying on any such certificate and on any adjustment
contained therein and shall not be deemed to have knowledge of such adjustment
unless and until it shall have received such certificate.

        Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.

                (a) In the event that, following a Triggering Event, directly or
indirectly:

                        (i) the Company shall consolidate with, or merge with
and into, any other Person (other than a wholly-owned Subsidiary of the Company
in a transaction the principal purpose of which is to change the state of
incorporation of the Company and which complies with Section 11(m) hereof);

                        (ii) any Person shall consolidate with the Company, or
merge with and into the Company and the Company shall be the continuing or
surviving corporation of such consolidation or merger and, in connection with
such merger, all or part of the Common Shares shall be changed into or exchanged
for stock or other securities of any other person (or the Company); or

                        (iii) the Company shall sell or otherwise transfer (or
one or more of its Subsidiaries shall sell or otherwise transfer), in one or
more transactions, assets or earning power aggregating 50% or more of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company or one or more of its wholly
owned Subsidiaries in one or more transactions, each of which individually (and
together) complies with Section 11(m) hereof),

                                then, concurrent with and in each such case,

                                (A) each holder of a Right (except as provided
in Section 7(e) hereof) shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the Total Exercise Price applicable
immediately prior to the occurrence of the Section 13 Event in accordance with
the terms of this Agreement, such number of validly authorized and issued, fully
paid, nonassessable and freely tradeable Common Shares of the Principal Party
(as hereinafter defined), free of any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by
dividing such Total Exercise Price by an amount equal to fifty percent (50%) of
the Current Per Share Market Price of the Common Shares of such Principal Party
on the date of consummation of such Section 13 Event, provided, however, that
the Exercise Price and the number of Common Shares of such Principal Party so
receivable upon exercise of a Right shall be subject to further adjustment as
appropriate in accordance with Section 11(e) hereof;

                                (B) such Principal Party shall thereafter be
liable for, and shall assume, by virtue of such Section 13 Event, all the
obligations and duties of the Company pursuant to this Agreement;

                                      -22-
<PAGE>

                                (C) the term "Company" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event;

                                (D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
Common Shares) in connection with the consummation of any such transaction as
may be necessary to ensure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights; and

                                (E) upon the subsequent occurrence of any
consolidation, merger, sale or transfer of assets or other extraordinary
transaction in respect of such Principal Party, each holder of a Right shall
thereupon be entitled to receive, upon exercise of a Right and payment of the
Total Exercise Price as provided in this Section 13(a), such cash, shares,
rights, warrants and other property which such holder would have been entitled
to receive had such holder, at the time of such transaction, owned the Common
Shares of the Principal Party receivable upon the exercise of such Right
pursuant to this Section 13(a), and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with the
terms hereof for such cash, shares, rights, warrants and other property.

                                (F) For purposes hereof, the "earning power" of
the Company and its Subsidiaries shall be determined in good faith by the
Company's Board of Directors on the basis of the operating income of each
business operated by the Company and its Subsidiaries during the three fiscal
years preceding the date of such determination (or, in the case of any business
not operated by the Company or any Subsidiary during three full fiscal years
preceding such date, during the period such business was operated by the Company
or any Subsidiary).

                (b) For purposes of this Agreement, the term "PRINCIPAL PARTY"
shall mean:

                        (i) in the case of any transaction described in clause
(i) or (ii) of Section 13(a) hereof: (A) the Person that is the issuer of the
securities into which the Common Shares are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the Common
Shares of which have the greatest aggregate market value of shares outstanding,
or (B) if no securities are so issued, (x) the Person that is the other party to
the merger, if such Person survives said merger, or, if there is more than one
such Person, the Person the Common Shares of which have the greatest aggregate
market value of shares outstanding or (y) if the Person that is the other party
to the merger does not survive the merger, the Person that does survive the
merger (including the Company if it survives) or (z) the Person resulting from
the consolidation; and

                        (ii) in the case of any transaction described in clause
(iii) of Section 13(a) hereof, the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if more than one Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred and each such portion would, were it not for the other
equal portions, constitute the

                                      -23-
<PAGE>

greatest portion of the assets or earning power so transferred, or if the Person
receiving the greatest portion of the assets or earning power cannot be
determined, whichever of such Persons is the issuer of Common Shares having the
greatest aggregate market value of shares outstanding; provided, however, that
in any such case described in the foregoing clause (b)(i) or (b)(ii), if the
Common Shares of such Person are not at such time or have not been continuously
over the preceding 12-month period registered under Section 12 of the Exchange
Act, then (1) if such Person is a direct or indirect Subsidiary of another
Person the Common Shares of which are and have been so registered, the term
"Principal Party" shall refer to such other Person, or (2) if such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common Shares
of which are and have been so registered, the term "Principal Party" shall refer
to whichever of such Persons is the issuer of Common Shares having the greatest
aggregate market value of shares outstanding, or (3) if such Person is owned,
directly or indirectly, by a joint venture formed by two or more Persons that
are not owned, directly or indirectly by the same Person, the rules set forth in
clauses (1) and (2) above shall apply to each of the owners having an interest
in the venture as if the Person owned by the joint venture was a Subsidiary of
both or all of such joint venturers, and the Principal Party in each such case
shall bear the obligations set forth in this Section 13 in the same ratio as its
interest in such Person bears to the total of such interests.

                (c) The Company shall not consummate any Section 13 Event unless
the Principal Party shall have a sufficient number of authorized Common Shares
that have not been issued or reserved for issuance to permit the exercise in
full of the Rights in accordance with this Section 13 and unless prior thereto
the Company and such issuer shall have executed and delivered to the Rights
Agent a supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance with
Sections 13(a) and 13(b) hereof, that all rights of first refusal or preemptive
rights in respect of the issuance of Common Shares of such Principal Party upon
exercise of outstanding Rights have been waived, that there are no rights,
warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights and that such transaction shall not result in a default by such Principal
Party under this Agreement, and further providing that, as soon as practicable
after the date of such Section 13 Event, such Principal Party will:

                        (i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, use its best efforts to cause
such registration statement to become effective as soon as practicable after
such filing and use its best efforts to cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date, and similarly comply with applicable
state securities laws;

                        (ii) use its best efforts to list (or continue the
listing of) the Rights and the securities purchasable upon exercise of the
Rights on a national securities exchange or to meet the eligibility requirements
for quotation on Nasdaq and list (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on Nasdaq; and

                                      -24-
<PAGE>

                        (iii) deliver to holders of the Rights historical
financial statements for such Principal Party which comply in all respects with
the requirements for registration on Form 10 (or any successor form) under the
Exchange Act.

        In the event that at any time after the occurrence of a Triggering Event
some or all of the Rights shall not have been exercised at the time of a
transaction described in this Section 13, the Rights which have not theretofore
been exercised shall thereafter be exercisable in the manner described in
Section 13(a) (without taking into account any prior adjustment required by
Section 11(a)(ii)).

                (d) In case the "Principal Party" for purposes of Section 13(b)
hereof has provision in any of its authorized securities or in its certificate
of incorporation or by-laws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such Principal Party to
issue (other than to holders of Rights pursuant to Section 13 hereof), in
connection with, or as a consequence of, the consummation of a Section 13 Event,
Common Shares or Equivalent Shares of such Principal Party at less than the then
Current Per Share Market Price thereof or securities exercisable for, or
convertible into, Common Shares or Equivalent Shares of such Principal Party at
less than such then Current Per Share Market Price, or (ii) providing for any
special payment, tax or similar provision in connection with the issuance of the
Common Shares of such Principal Party pursuant to the provisions of Section 13
hereof, then, in such event, the Company hereby agrees with each holder of
Rights that it shall not consummate any such transaction unless prior thereto
the Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question
of such Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with or as a consequence of, the consummation of
the proposed transaction.

                (e) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, effect or permit to occur any Section 13
Event, if (i) at the time or immediately after such Section 13 Event there are
any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights, (ii) prior to,
simultaneously with or immediately after such Section 13 Event, the stockholders
of the Person who constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(b) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates or Associates or (iii)
the form or nature of organization of the Principal Party would preclude or
limit the exercisability of the Rights.

                (f) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.

        Section 14. Fractional Rights and Fractional Shares.

                (a) The Company shall not be required to issue fractions of
Rights or to distribute Rights Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Rights Certificates with regard to which such fractional Rights

                                      -25-
<PAGE>

would otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable, as determined pursuant to
the second sentence of Section 1(j) hereof.

                (b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions that are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions that are integral multiples of one one-thousandth of a Preferred
Share). Interests in fractions of Preferred Shares in integral multiples of one
one-thousandth of a Preferred Share may, at the election of the Company, be
evidenced by depository receipts, pursuant to an appropriate agreement between
the Company and a depository selected by it; provided, that such agreement shall
provide that the holders of such depository receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
the Preferred Shares represented by such depository receipts. In lieu of
fractional Preferred Shares that are not integral multiples of one
one-thousandth of a Preferred Share, the Company shall pay to the registered
holders of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of a Preferred Share. For purposes of this Section 14(b), the current
market value of a Preferred Share shall be (x) one thousand multiplied by (y)
the closing price of a Common Share (as determined pursuant to the second
sentence of Section 1(j) hereof) for the Trading Day immediately prior to the
date of such exercise.

                (c) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares upon the exercise or exchange of Rights. In lieu of such fractional
Common Shares, the Company shall pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of a Common
Share. For purposes of this Section 14(c), the current market value of a Common
Share shall be the closing price of a Common Share (as determined pursuant to
the second sentence of Section 1(j) hereof) for the Trading Day immediately
prior to the date of such exercise.

                (d) The holder of a Right by the acceptance of the Right
expressly waives his or her right to receive any fractional Rights or any
fractional shares (other than fractions that are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of a Right.

        Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent pursuant to
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his or

                                      -26-
<PAGE>

her right to exercise the Rights evidenced by such Rights Certificate in the
manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.

        Section 16. Agreement of Rights Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

                (a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;

                (b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed; and

                (c) subject to Sections 6(a) and 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name the Rights
Certificate (or, prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Shares certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary.

        Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose to be the holder of the Preferred Shares
or any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as specifically provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.

        Section 18. Concerning the Rights Agent.

                (a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The

                                      -27-
<PAGE>

Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability or expense, incurred without gross negligence, bad
faith or willful misconduct on the part of the Rights Agent, for anything done
or omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
against any claim of liability in the premises. In no event will the Rights
Agent be liable for special, indirect, incidental or consequential loss or
damage of any kind whatsoever, even if the Rights Agent has been advised of the
possibility of such loss or damage.

                (b) The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any
Rights Certificate or certificate for the Preferred Shares or Common Shares or
for other securities of the Company, instrument of assignment or transfer, power
of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document reasonably believed by it to
be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof.

        Section 19. Merger or Consolidation or Change of Name of Rights Agent.

                (a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.

                (b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

                                      -28-
<PAGE>

        Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:

                (a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.

                (b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of Current Per Share Market Price) be proved or established by
the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.

                (c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own gross negligence, bad faith or willful
misconduct.

                (d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.

                (e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
or any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Sections 3, 11, 13, 23 or 24, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Rights
Certificates after receipt by the Rights Agent of a certificate furnished
pursuant to Section 12 describing such change or adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any Preferred Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.

                (f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts,

                                      -29-
<PAGE>

instruments and assurances as may reasonably be required by the Rights Agent for
the carrying out or performing by the Rights Agent of the provisions of this
Agreement.

                (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for those
instructions. Any application by the Rights Agent for written instructions from
the Company may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under this Rights
Agreement and the date on and/or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any action
taken by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five (5) Business Days after the
date on which any officer of the Company actually receives such application,
unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking any such action (or the effective date in the case of an
omission), the Rights Agent shall have received written instructions in response
to such application specifying the action to be taken or omitted.

                (h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.

                (i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.

                (j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.

                (k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to

                                      -30-
<PAGE>

clause 1 and/or 2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise or transfer without first consulting
with the Company.

        Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Preferred Shares and the Common Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Preferred
Shares and the Common Shares by registered or certified mail, and to the holders
of the Rights Certificates by first-class mail. If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his or her Rights
Certificate for inspection by the Company), then the registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of any state of the United
States, in good standing, which is authorized under such laws to exercise
corporate trust or stockholder services powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $100
million. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Preferred
Shares and the Common Shares, and mail a notice thereof in writing to the
registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.

        Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Exercise Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (a) shall, with
respect to Common Shares so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement or upon the exercise,
conversion or exchange of other securities of the Company outstanding at the
date hereof or upon the exercise,

                                      -31-
<PAGE>

conversion or exchange of securities hereinafter issued by the Company and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Rights Certificate shall be issued and this sentence shall be
null and void ab initio if, and to the extent that, such issuance or this
sentence would create a significant risk of or result in material adverse tax
consequences to the Company or the Person to whom such Rights Certificate would
be issued or would create a significant risk of or result in such options' or
employee plans' or arrangements' failing to qualify for otherwise available
special tax treatment and (ii) no such Rights Certificate shall be issued if,
and to the extent that, appropriate adjustment shall otherwise have been made in
lieu of the issuance thereof.

        Section 23. Redemption.

                (a) The Company may, at its option and with the approval of the
Board of Directors, at any time prior to the Close of Business on the earlier of
(i) the fifth day following the Shares Acquisition Date (or such later date as
may be determined by action of the Company's Board of Directors and publicly
announced by the Company) and (ii) the Final Expiration Date, redeem all but not
less than all the then outstanding Rights at a redemption price of $0.001 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
herein referred to as the "REDEMPTION PRICE") and the Company may, at its
option, pay the Redemption Price either in Common Shares (based on the Current
Per Share Market Price thereof at the time of redemption) or cash. Such
redemption of the Rights by the Company may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish. The date on which the Board of Directors elects to
make the redemption effective shall be referred to as the "REDEMPTION DATE."

                (b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
The Company shall promptly give public notice of any such redemption; provided,
however, that the failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within ten (10) days after the action of
the Board of Directors ordering the redemption of the Rights, the Company shall
give notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section 24 hereof, and
other than in connection with the purchase of Common Shares prior to the
Distribution Date.

                                      -32-
<PAGE>

        Section 24. Exchange.

                (a) Subject to applicable laws, rules and regulations, and
subject to subsection 24(c) below, the Company may, at its option, by action of
the Board of Directors, at any time after the occurrence of a Triggering Event,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
7(e) hereof) for Common Shares at an exchange ratio of one Common Share per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "EXCHANGE RATIO"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the Common Shares then outstanding.

                (b) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection 24(a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall give public notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company shall mail a notice of any such exchange to all of
the holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Shares for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 7(e) hereof)
held by each holder of Rights.

                (c) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with Section 24(a), the Company
shall either take such action as may be necessary to authorize additional Common
Shares for issuance upon exchange of the Rights or alternatively, at the option
of a majority of the Board of Directors, with respect to each Right (i) pay cash
in an amount equal to the Current Value (as hereinafter defined), in lieu of
issuing Common Shares in exchange therefor, or (ii) issue debt or equity
securities or a combination thereof, having a value equal to the Current Value,
in lieu of issuing Common Shares in exchange for each such Right, where the
value of such securities shall be determined by a nationally recognized
investment banking firm selected by majority vote of the Board of Directors, or
(iii) deliver any combination of cash, property, Common Shares and/or other
securities having a value equal to the Current Value in exchange for each Right.
For purposes of this Section 24(c) only, the Current Value shall mean the
product of the Current Per Share Market Price of Common Shares on the date of
the occurrence of

                                      -33-
<PAGE>

the event described above in subparagraph (a), multiplied by the number of
Common Shares for which the Right otherwise would be exchangeable if there were
sufficient shares available. To the extent that the Company determines that some
action need be taken pursuant to clauses (i), (ii) or (iii) of this Section
24(c), the Board of Directors may temporarily suspend the exercisability of the
Rights for a period of up to sixty (60) days following the date on which the
event described in Section 24(a) shall have occurred, in order to seek any
authorization of additional Common Shares and/or to decide the appropriate form
of distribution to be made pursuant to the above provision and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended.

                (d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Common Shares would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Common Share (as
determined pursuant to the second sentence of Section 1(j) hereof).

                (e) The Company may, at its option, by majority vote of the
Board of Directors, at any time before any Person has become an Acquiring
Person, exchange all or part of the then outstanding Rights for rights of
substantially equivalent value, as determined reasonably and with good faith by
the Board of Directors based upon the advice of one or more nationally
recognized investment banking firms.

                (f) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection 24(e) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of rights in exchange therefor as has
been determined by the Board of Directors in accordance with subsection 24(e)
above. The Company shall give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company shall mail a notice of any
such exchange to all of the holders of such Rights at their last addresses as
they appear upon the registry books of the transfer agent for the Common Shares
of the Company. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Rights will be
effected.

        Section 25. Notice of Certain Events.

                (a) In case the Company shall propose to effect or permit to
occur any Triggering Event or Section 13 Event, the Company shall give notice
thereof to each holder of Rights in accordance with Section 26 hereof at least
twenty (20) days prior to occurrence of such Triggering Event or such Section 13
Event.

                (b) In case any Triggering Event or Section 13 Event shall
occur, then, in any such case, the Company shall as soon as practicable
thereafter give to each holder of a Rights

                                      -34-
<PAGE>

Certificate, in accordance with Section 26 hereof, a notice of the occurrence of
such event, which shall specify the event and the consequences of the event to
holders of Rights under Sections 11(a)(ii) and 13 hereof.

        Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:

                                    ProBusiness Services, Inc.
                                    4125 Hopyard Road
                                    Pleasanton, CA 94588
                                    Attn: Chief Financial Officer

                                    with a copy to:
                                    Wilson Sonsini Goodrich & Rosati
                                    Professional Corporation
                                    650 Page Mill Road
                                    Palo Alto, California 94304-1050
                                    Attention: Elizabeth R. Flint

        Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:

                                    Wells Fargo Bank, MN N.A.
                                    c/o Wells Fargo Shareowner Services
                                    161 N. Concord Exchange Street
                                    South St. Paul, MN 55075-1139
                                    Attention: Corporate Actions Department

Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.

        Section 27. Supplements and Amendments. Prior to the occurrence of a
Distribution Date, the Company may supplement or amend this Agreement in any
respect without the approval of any holders of Rights and the Rights Agent
shall, if the Company so directs, execute such supplement or amendment. From and
after the occurrence of a Distribution Date, the Company and the Rights Agent
may from time to time supplement or amend this Agreement without the approval of
any holders of Rights in order to (i) cure any ambiguity, (ii) correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) shorten or lengthen any time period
hereunder or (iv) to change or supplement the provisions

                                      -35-
<PAGE>

hereunder in any manner that the Company may deem necessary or desirable and
that shall not adversely affect the interests of the holders of Rights (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable or
(B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person). Upon the delivery of a certificate from an appropriate
officer of the Company that states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Prior to the Distribution Date, the interests of
the holders of Rights shall be deemed coincident with the interests of the
holders of Common Shares.

        Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

        Section 29. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares of which any Person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.
The Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power (i) to interpret the provisions of this
Agreement and (ii) to make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights Certificates and all other parties and
(y) not subject the Board to any liability to the holders of the Rights.

        Section 30. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Shares) any legal or equitable right, remedy or
claim pursuant to this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, the Common
Shares).

        Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in

                                      -36-
<PAGE>

full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the Close of Business on the
tenth day following the date of such determination by the Board of Directors.

        Section 32. Governing Law. This Agreement and each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.

        Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.

        Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

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

"COMPANY"                                   ProBusiness Services, Inc.

                                            By: /s/ THOMAS H. SINTON
                                               ---------------------------------

                                            Name: Thomas H. Sinton
                                                 -------------------------------

                                            Title: Chairman of the Board,
                                                   President and Chief Executive
                                                   Officer
                                                  ------------------------------

"RIGHTS AGENT"                              Wells Fargo Bank, MN N.A.

                                            By: /s/ JOHN BAKER
                                               ---------------------------------

                                            Name: John Baker
                                                 -------------------------------

                                            Title: Assistant Vice President
                                                  ------------------------------

                                      -37-
<PAGE>

                                    EXHIBIT A

                CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
                                AND PRIVILEGES OF
                     SERIES A PARTICIPATING PREFERRED STOCK
                          OF PROBUSINESS SERVICES, INC.

        The undersigned, Thomas H. Sinton, does hereby certify:

        1. That he is the duly elected and acting Executive Vice President,
Finance, Chief Financial Officer and Secretary of ProBusiness Services, Inc., a
Delaware corporation (the "CORPORATION").

        2. That pursuant to the authority conferred upon the Board of Directors
by the Amended and Restated Certificate of Incorporation of the said
Corporation, the said Board of Directors on August 1, 2001 adopted the following
resolution creating a series of 60,000 shares of Preferred Stock designated as
Series A Participating Preferred Stock:

        "RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation by the Amended and Restated Certificate of
Incorporation, the Board of Directors does hereby provide for the issue of a
series of Preferred Stock of the Corporation and does hereby fix and herein
state and express the designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions of such
series of Preferred Stock as follows:

        Section 1. Designation and Amount. The shares of such series shall be
designated as "SERIES A PARTICIPATING PREFERRED STOCK." The Series A
Participating Preferred Stock shall have a par value of $0.001 per share, and
the number of shares constituting such series shall be 60,000.

        Section 2. Proportional Adjustment. In the event that the Corporation
shall at any time after the issuance of any share or shares of Series A
Participating Preferred Stock (i) declare any dividend on Common Stock of the
Corporation ("COMMON STOCK") payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the Corporation shall
simultaneously effect a proportional adjustment to the number of outstanding
shares of Series A Participating Preferred Stock.

        Section 3. Dividends and Distributions.

                (a) Subject to the prior and superior right of the holders of
any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Participating Preferred Stock shall be entitled to
receive when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day
of February, May,

<PAGE>

August and November in each year (each such date being referred to herein as a
"QUARTERLY DIVIDEND PAYMENT DATE"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Participating Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Participating Preferred Stock.

                (b) The Corporation shall declare a dividend or distribution on
the Series A Participating Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).

                (c) Dividends shall begin to accrue on outstanding shares of
Series A Participating Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series A Participating
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Participating Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.

        Section 4. Voting Rights. The holders of shares of Series A
Participating Preferred Stock shall have the following voting rights:

                (a) Each share of Series A Participating Preferred Stock shall
entitle the holder thereof to 1,000 votes on all matters submitted to a vote of
the stockholders of the Corporation.

                (b) Except as otherwise provided herein or by law, the holders
of shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.

                (c) Except as required by law, the holders of Series A
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent

                                      -2-
<PAGE>

that they are entitled to vote with holders of Common Stock as set forth herein)
for taking any corporate action.

        Section 5. Certain Restrictions.

                (a) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series A Participating Preferred Stock as
required by Section 3 hereof.

                (b) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Participating Preferred Stock as provided
in Section 3 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not

                        (i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Participating Preferred Stock;

                        (ii) declare or pay dividends on, or make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock, except dividends paid ratably on the Series A Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;

                        (iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Participating Preferred
Stock;

                        (iv) purchase or otherwise acquire for consideration any
shares of Series A Participating Preferred Stock, or any shares of stock ranking
on a parity with the Series A Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.

                (c) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the

                                      -3-
<PAGE>

Corporation could, under paragraph (a) of this Section 5, purchase or otherwise
acquire such shares at such time and in such manner.

        Section 6. Reacquired Shares. Any shares of Series A Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and in the Restated Certificate of Incorporation, as then amended.

        Section 7. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Participating Preferred Stock shall be entitled to receive an aggregate amount
per share equal to 1,000 times the aggregate amount to be distributed per share
to holders of shares of Common Stock plus an amount equal to any accrued and
unpaid dividends on such shares of Series A Participating Preferred Stock.

        Section 8. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share equal to 1,000 times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
changed or exchanged.

        Section 9. No Redemption. The shares of Series A Participating Preferred
Stock shall not be redeemable.

        Section 10. Ranking. The Series A Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.

        Section 11. Amendment. The Restated Certificate of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preference or special rights of the Series A
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority of the outstanding shares of
Series A Participating Preferred Stock, voting separately as a series.

        Section 12. Fractional Shares. Series A Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Participating Preferred Stock.

                                      -4-
<PAGE>

        RESOLVED FURTHER, that the President or any Vice President of this
corporation be, and they hereby are, authorized and directed to prepare and file
a Certificate of Designation of Rights, Preferences and Privileges in accordance
with the foregoing resolution and the provisions of Delaware law and to take
such actions as they may deem necessary or appropriate to carry out the intent
of the foregoing resolution."

        I further declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Designation are true and correct of our own
knowledge.

        Executed at Pleasanton, California on August __, 2001.

                                           -------------------------------------
                                           Thomas H. Sinton
                                           President and Chief Executive Officer

                                      -5-
<PAGE>

                                    EXHIBIT B

                           FORM OF RIGHTS CERTIFICATE

Certificate No. R-                                              _________ Rights

       NOT EXERCISABLE AFTER THE EARLIER OF (i) AUGUST 30, 2011, (ii)
       THE DATE TERMINATED BY THE COMPANY OR (iii) THE DATE THE COMPANY
       EXCHANGES THE RIGHTS PURSUANT TO THE RIGHTS AGREEMENT. THE
       RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
       AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
       AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY
       OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
       ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
       AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME
       NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
       CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS
       OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
       ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
       AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
       REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
       SPECIFIED IN SECTION 7(e) OF SUCH RIGHTS AGREEMENT.](1)

                               RIGHTS CERTIFICATE

                           PROBUSINESS SERVICES, INC.

        This certifies that ______________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement dated as of August 8, 2001, (the "RIGHTS
AGREEMENT"), between ProBusiness Services, Inc., a Delaware corporation (the
"COMPANY"), and Wells Fargo Bank, MN N.A. (the "RIGHTS AGENT"), to purchase
from the Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 P.M., New York time, on
August 30, 2011 at the office of the Rights Agent designated for such purpose,
or at the office of its successor as Rights Agent, one one-thousandth

--------

(1) The portion of the legend in bracket shall be inserted only if applicable
and shall replace the preceding sentence.

<PAGE>

(1/1,000) of a fully paid and non-assessable share of Series A Participating
Preferred Stock, par value $0.001 per share (the "PREFERRED SHARES"), of the
Company, at an Exercise Price of $_____ per one-thousandth of a Preferred Share
(the "EXERCISE PRICE"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of one-thousandths of a Preferred Share which may be purchased upon
exercise hereof) set forth above are the number and Exercise Price as of August
30, 2001 based on the Preferred Shares as constituted at such date. As provided
in the Rights Agreement, the Exercise Price and the number and kind of Preferred
Shares or other securities which may be purchased upon the exercise of the
Rights evidenced by this Rights Certificate are subject to modification and
adjustment upon the happening of certain events.

                This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the principal
executive offices of the Company and the above-mentioned office of the Rights
Agent.

                Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Rights Certificate (i) may be redeemed by the Company, at its
option, at a redemption price of $0.001 per Right or (ii) may be exchanged by
the Company in whole or in part for Common Shares, substantially equivalent
rights or other consideration as determined by the Company.

                This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate amount of securities as the Rights evidenced by the
Rights Certificate or Rights Certificates surrendered shall have entitled such
holder to purchase. If this Rights Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Rights
Certificate or Rights Certificates for the number of whole Rights not exercised.

                No fractional portion of less than one one-thousandth of a
Preferred Share will be issued upon the exercise of any Right or Rights
evidenced hereby but in lieu thereof a cash payment will be made, as provided in
the Rights Agreement.

                No holder of this Rights Certificate, as such, shall be entitled
to vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise,

                                      -2-
<PAGE>
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.

        This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.

        WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of _______________, _____.

ATTEST:                                     ProBusiness Services, Inc.

                                            By:
----------------------------------             ---------------------------------
Secretary

                                            Its:
                                                --------------------------------
Countersigned:

Wells Fargo Bank, MN N.A.
as Rights Agent

By:
   --------------------------------

Its:
    -------------------------------

                                      -3-
<PAGE>

                   FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
               holder desires to transfer the Rights Certificate)

     FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto
________________________________________________________________________________
                 (Please print name and address of transferee)
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.

Dated: _______________, ____

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

Signature Medallion Guaranteed:

        Signatures must be guaranteed by an "Eligible Guarantor Institution"
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934.

<PAGE>

                                   CERTIFICATE

        The undersigned hereby certifies by checking the appropriate boxes that:

                (1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person, or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement);

                (2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of any such Person.

Dated: _______________, ____

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

Signature Medallion Guaranteed:

        Signatures must be guaranteed by an "Eligible Guarantor Institution"
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934.

<PAGE>

             FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED

                          FORM OF ELECTION TO PURCHASE

                      (To be executed if holder desires to
                        exercise the Rights Certificate)

To:___________________________

                  The undersigned hereby irrevocably elects to exercise
_________________________ Rights represented by this Rights Certificate to
purchase the number of one-thousandths of a Preferred Share issuable upon the
exercise of such Rights and requests that certificates for such number of
one-thousandths of a Preferred Share issued in the name of:

Please insert social security
or other identifying number

________________________________________________________________________________
                         (Please print name and address)
________________________________________________________________________________

If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:

Please insert social security
or other identifying number

________________________________________________________________________________
                         (Please print name and address)
________________________________________________________________________________

Dated: _______________, ____

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

Signature Medallion Guaranteed:

        Signatures must be guaranteed by an "Eligible Guarantor Institution"
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934.

<PAGE>

                                   CERTIFICATE

        The undersigned hereby certifies by checking the appropriate boxes that:

        (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement);

        (2) after due inquiry and to the best knowledge of the undersigned, it [
] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.

Dated: _______________, ____

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

Signature Medallion Guaranteed:

        Signatures must be guaranteed by an "Eligible Guarantor Institution"
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934.

<PAGE>

             FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED

                                     NOTICE

        The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.

<PAGE>

                                    EXHIBIT C

           SUMMARY OF THE AMENDED AND RESTATED STOCKHOLDER RIGHTS PLAN
                           PROBUSINESS SERVICES, INC.

        On August 1, 2001, the Board of Directors declared a dividend of one
Right for each share of Common Stock of ProBusiness Services, Inc. (the
"COMPANY") outstanding as of August 30, 2001 (the "RECORD DATE") and further
authorized the issuance of one Right for each Common Share that shall become
outstanding between the Record Date and the earlier of the Distribution Date and
the Expiration Date. On December 19, 2001, the Board of Directors determined
that it is in the best interest of the Company to amend and restate the
Preferred Stock Rights Agreement to provide as follows:

                                                   SUMMARY OF RIGHTS

DISTRIBUTION AND                The Board of Directors has declared a dividend
TRANSFER OF RIGHTS;             of one Right for each share of Common Stock of
RIGHTS CERTIFICATE:             ProBusiness Services, Inc. (the "COMPANY")
                                outstanding. Prior to the Distribution Date
                                referred to below, the Rights will be evidenced
                                by and trade with the certificates for the
                                Common Stock. After the Distribution Date, the
                                Company will mail Rights certificates to the
                                Company's stockholders and the Rights will
                                become transferable apart from the Common Stock.

DISTRIBUTION DATE:              Rights will separate from the Common Stock and
                                become exercisable following (a) the tenth day
                                (or such later date as may be determined by the
                                Company's Board of Directors) after a person or
                                group acquires beneficial ownership of 15% or
                                more of the Company's Common Stock or (b) the
                                tenth business day (or such later date as may be
                                determined by the Company's Board of Directors)
                                after a person or group announces a tender or
                                exchange offer, the consummation of which would
                                result in ownership by a person or group of 15%
                                or more of the Company's Common Stock. However,
                                with respect to General Atlantic Partners, LLC
                                and its affiliates and associates (the "GAP
                                Entities"), no Distribution Date will occur
                                until such time as the GAP Entities acquire
                                beneficial ownership of more than 26% of the
                                Company's Common Stock or any of the GAP
                                Entities announce a tender offer to acquire more
                                than 26% of the Company's Common Stock
                                (collectively, the "Limitations").

PREFERRED STOCK                 After the Distribution Date, each Right will
PURCHASABLE UPON                entitle the holder to purchase for $170 (the
EXERCISE OF RIGHTS:             "EXERCISE PRICE"), a fraction of a share of the
                                Company's Preferred Stock with economic terms
                                similar to that of one share of the Company's
                                Common Stock.

FLIP-IN:                        If an acquiror (an "ACQUIRING PERSON") obtains
                                15% or more of the Company's Common Stock, or
                                with respect to the GAP Entities, the GAP
                                Entities fail to comply with the Limitations,
                                then each Right (other than Rights owned by an
                                Acquiring Person or its affiliates) will entitle
                                the holder thereof to purchase, for the Exercise
                                Price, a number of shares of the Company's
                                Common Stock having a then-current market value
                                of twice the Exercise Price.

<PAGE>

FLIP-OVER:                      If, after an Acquiring Person obtains 15% or
                                more of the Company's Common Stock, or with
                                respect to the GAP Entities, the GAP Entities
                                fail to comply with the Limitations, (a) the
                                Company merges into another entity, (b) an
                                acquiring entity merges into the Company or (c)
                                the Company sells more than 50% of the Company's
                                assets or earning power, then each Right (other
                                than Rights owned by an Acquiring Person or its
                                affiliates) will entitle the holder thereof to
                                purchase, for the Exercise Price, a number of
                                shares of Common Stock of the person engaging in
                                the transaction having a then current market
                                value of twice the Exercise Price.

EXCHANGE PROVISION:             At any time after the date on which an Acquiring
                                Person obtains 15% or more of the Company's
                                Common Stock, or with respect to the GAP
                                Entities, the GAP Entities fail to comply with
                                the Limitations, and prior to the acquisition by
                                the Acquiring Person of 50% of the outstanding
                                Common Stock, a majority of the Board of
                                Directors and the Board of Directors of the
                                Company may exchange the Rights (other than
                                Rights owned by the Acquiring Person or its
                                affiliates), in whole or in part, for shares of
                                Common Stock of the Company at an exchange ratio
                                of one share of Common Stock per Right (subject
                                to adjustment).

REDEMPTION OF THE RIGHTS:       Rights will be redeemable at the Company's
                                option for $0.001 per Right at any time on or
                                prior to the fifth day (or such later date as
                                may be determined by the Company's Board of
                                Directors) after public announcement that a
                                Person has acquired beneficial ownership of 15%
                                or more of the Company's Common Stock, or with
                                respect to the GAP Entities, the GAP entities
                                fail to comply with the Limitations (the "SHARES
                                ACQUISITION DATE").

EXPIRATION OF THE RIGHTS:       The Rights expire on the earliest of (a) August
                                30, 2011 or (b) exchange or redemption of the
                                Rights as described above.

AMENDMENT OF TERMS OF RIGHTS:   The terms of the Rights and the Rights Agreement
                                may be amended in any respect without the
                                consent of the Rights holders on or prior to the
                                Distribution Date; thereafter, the terms of the
                                Rights and the Rights Agreement may be amended
                                without the consent of the Rights holders in
                                order to cure any ambiguities or to make changes
                                which do not adversely affect the interests of
                                Rights holders (other than the Acquiring
                                Person).

VOTING RIGHTS:                  Rights will not have any voting rights.

ANTI-DILUTION PROVISIONS:       Rights will have the benefit of certain
                                customary anti-dilution provisions.

TAXES:                          The Rights distribution should not be taxable
                                for federal income tax purposes. However,
                                following an event which renders the Rights
                                exercisable or upon redemption of the Rights,
                                stockholders may recognize taxable income.

The foregoing is a summary of certain principal terms of the Amended and
Restated Rights Agreement. It may be amended from time to time. A copy of the
Amended and Restated Rights Agreement has been filed with the Securities and
Exchange Commission as an exhibit to the Registration Statement on Form 8-A/A
on January 8, 2002. A copy of the Amended and Restated Rights Agreement is
available free of charge from the Company.

                                      -2-

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