Document:

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                                                                     EXHIBIT 4.3
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                         REGISTRATION RIGHTS AGREEMENT

                                 By and Among

                  THE PRINCIPAL SHAREHOLDERS (DEFINED HEREIN)

                                      and

                            FLOTEK INDUSTRIES INC.

                -----------------------------------------------
                          Common Stock, no par value
                -----------------------------------------------

                          Dated as of April 30, 2000

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                               TABLE OF CONTENTS

<TABLE>
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1.  Registration under Securities Act, Etc.............................................................    1
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    1.1    Registration on Request.....................................................................    1
           -----------------------
    1.2    Piggy-Back Registration.....................................................................    3
           -----------------------
    1.3    Registration Procedures.....................................................................    4
           -----------------------
    1.4    Underwritten Offerings......................................................................    6
           ----------------------
    1.5    Preparation; Reasonable Investigation.......................................................    7
           -------------------------------------
    1.6    Qualification to Obligations under Registration Covenants...................................    7
           ---------------------------------------------------------
    1.7    Indemnification.............................................................................    8
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2.  Definitions........................................................................................   11
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3.  Rule 144 and Rule 144A.............................................................................   12
    ----------------------
4.  Amendments and Waivers.............................................................................   12
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5.  Nominees for Beneficial Owners.....................................................................   12
    ------------------------------
6.  Notices............................................................................................   13
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7.  Assignment.........................................................................................   13
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8.  Calculation of Percentage Interests in Registrable Securities......................................   13
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9.  No Inconsistent Agreements.........................................................................   13
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10. Remedies...........................................................................................   13
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11. Severability.......................................................................................   13
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12. Entire Agreement...................................................................................   14
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13. Descriptive Headings...............................................................................   14
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14. Governing Law......................................................................................   14
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15. Counterparts; Partial Execution....................................................................   14
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16. Term...............................................................................................   14
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17. Supersession of Existing Registration Rights Agreements............................................   14
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</TABLE>
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          REGISTRATION RIGHTS AGREEMENT, dated as of April 30, 2000, between
Flotek Industries Inc, an Alberta corporation (the "Company"), and each of the
parties identified on Schedule A hereto (the "Principal Stockholders").

          Capitalized terms used herein but not otherwise defined shall have the
meanings given them in Section 2. All Dollar amounts referred to herein are US
Dollars, unless otherwise noted.

          1.   Registration under Securities Act, Etc.
               --------------------------------------

               1.1  Registration on Request.
                    -----------------------

                    (a)  Request. At any time, or from time to time, upon the
                         -------
written request of one or more of the Principal Shareholders holding 25% or more
of the Registrable Securities (the "Initiating Holders") that the Company
either, as directed by the Initiating Holders, (i) effect the registration under
the Securities Act or (ii) file a prospectus (which for the purposes of this
agreement shall include a statement of material facts or short form prospectus)
for the purpose of qualifying for distribution in British Columbia or Ontario
pursuant to Applicable Canadian Securities Laws (any such registration or
prospectus filing being hereinafter referred to as a "registration," and any
such registration statement or prospectus being hereinafter referred to as a
"registration statement") of all or part of such Initiating Holders' Registrable
Securities, the Company promptly will give written notice of such requested
registration to all of the other Principal Shareholders, and thereupon the
Company will use reasonable efforts to effect, at the earliest possible date,
the registration under the Securities Act or the Applicable Canadian Securities
Laws, as directed by the Initiating Holders in their request, of (i) the
Registrable Securities which the Company has been so requested to register by
such Initiating Holders, and (ii) all other Registrable Securities which the
Company has been requested to register by the other Principal Shareholders (such
holders together with the Initiating Holders hereinafter are referred to as the
"Selling Holders") by written request given to the Company within 30 days after
the giving of such written notice by the Company, all to the extent requisite to
permit the disposition of the Registrable Securities so to be registered.

                    (b)  Registration of Other Securities. Whenever the Company
                         --------------------------------
shall effect a registration pursuant to this Section 1.1, no securities other
than Registrable Securities held by Principal Shareholders shall be included
among the securities covered by such registration unless Selling Holders of
greater than 51% of the Registrable Securities to be included in such
registration shall have consented in writing to the inclusion of such other
securities, which consent shall not be unreasonably withheld or delayed,
provided, however, that no such other securities shall be included in such
registration to the extent that such inclusion would reduce the number of
Registrable Securities in such registration that any Selling Holder has
requested be included therein.

                    (c)  Registration Statement Form. Registrations under this
                         ---------------------------
Section 1.1 shall be on such appropriate registration form of the Commission or
the form required under Applicable Canadian Securities Laws, as the case may be,
as shall be reasonably selected by the Company.
<PAGE>

                    (d)  Effective Registration Statement. A registration
                         --------------------------------
requested pursuant to this Section 1.1 shall not be deemed to have been effected
unless a registration statement with respect thereto has become effective and
remained effective in compliance with the provisions of the Securities Act or
Applicable Canadian Securities Laws, as the case may be, with respect to the
disposition of all Registrable Securities covered by such registration statement
for a period of at least 90 days.

                    (e)  Selection of Underwriters. The underwriter or
                         -------------------------
underwriters of each underwritten offering of the Registrable Securities so to
be registered shall be selected by the Selling Holders of at least 50% of the
Registrable Securities to be included in such registration and shall be
reasonably acceptable to the Company.

                    (f)  Priority in Requested Registration. If the managing
                         ----------------------------------
underwriter of an underwritten offering shall advise the Company in writing (and
the Company shall so advise each Selling Holder of Registrable Securities
requesting registration of such advice) that, in its opinion, the number of
securities requested to be included in such registration is sufficiently large
to materially adversely affect the success of the offering, the Company, except
as provided in the following sentence, will include in such registration, to the
extent of the number and type which the Company is so advised can be sold in
such offering, Registrable Securities requested to be included in such
registration on the following basis:

            (i)     first, pro rata among the Initiating Holders; and

            (ii)    second, pro rata among the other Selling Holders.

As used herein, the term "pro rata" among a particular group of shareholders
shall mean allocated among such shareholders proportionally, on the basis of the
number of Registrable Securities held by each shareholder in such group as
compared to the total number of Registrable Securities held by all shareholders
in such group. To the extent that all of the Registrable Securities of Selling
Holders so requested to be registered are excluded from the offering, the
holders of such Registrable Securities shall be deemed not to have used a demand
registration pursuant to this Section 1.1.

                    (g)  Limitations on Registration on Request. Notwithstanding
                         --------------------------------------
anything in this Section 1.1 to the contrary, the Company shall not be required
to take any action to file a registration statement pursuant to this Section
1.1:

            (i)     within 120 days following the effective date of any
        registered offering of the Company's securities;

            (ii)    with respect to any offering having an aggregate sales price
        (before deduction of underwriting discounts and expenses of sale) of
        less than $500,000;
<PAGE>

            (iii) with respect to any offering having an aggregate sales price
        (before deduction of underwriting discounts and expenses of sale) of
        more than $10,000,000 unless such offering is firmly underwritten; or

            (iv)  after (A) the Principal Shareholders collectively hold fewer
        than 100,000 shares of Registrable Securities, or (B) the expiration of
        the term of this Agreement.

                  (h)   Expenses. The Company will pay all Registration Expenses
                        --------
in connection with any registration requested pursuant to this Section 1.1.

        1.2      Piggy-Back Registration.
                 -----------------------

                 (a)   Right to Include Registrable Securities. If the Company
                       ---------------------------------------
at any time proposes to file a registration statement to register any of its
securities of the same class as the Registrable Securities under the Securities
Act or the Applicable Canadian Securities Laws (except for a registration
statement or prospectus filed in connection with an employee benefit plan, a
transaction relating to a merger or business combination, a transaction relating
to an exchange offer, a transaction relating to an acquisition of assets or
securities, or a transaction otherwise described in Rule 145 of the Securities
Act), whether or not for sale for its own account, it will each such time give
prompt written notice to all holders of Registrable Securities of its intention
to do so and of such holders' rights under this Section 1.2. Upon the written
request of any such holder (a "Requesting Holder") (which request shall specify
the amount of Registrable Securities intended to be disposed of by such
Requesting Holder) made as promptly as practicable and in any event within 20
days after the receipt of any such notice (15 days if the Company states in such
written notice or gives telephonic notice to all registered holders of
Registrable Securities, with written confirmation to follow promptly thereafter,
stating that (i) such registration will be on Form S-3 and (ii) such shorter
period of time is required because of a planned filing date), the Company will
use reasonable efforts to effect the registration or file the prospectus under
the Securities Act or the Applicable Canadian Securities Laws, as the case may
be, of all Registrable Securities which the Company has been so requested to
register by the Requesting Holders thereof. No registration effected under this
Section 1.2 shall relieve the Company of its obligation to effect any
registration upon request under Section 1.1.

                 (b)   Priority in Incidental Registrations. If the managing
                       ------------------------------------
underwriter of any underwritten offering shall deliver a written opinion to the
holders of Registrable Securities that the total amount of Registrable
Securities requested to be included in such registration would have a material
adverse effect on such offering then the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in (or during the time of) such offering, first, all securities proposed by
the Company to be sold for its own account, and second, such Registrable
Securities requested to be included in such registration pursuant to this
Agreement, pro rata among Requesting Holders; provided that if securities are
being offered for the account of other persons or entities as well as the
Company, such reduction shall not represent a greater fraction of the number of
securities intended to be offered by holders of Registrable Securities than the
fraction of similar reductions imposed on such other persons or entities over
the amount of securities they intended to offer.

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<PAGE>

                    (c)  Expenses. The Company will pay all Registration
                         --------
Expenses in connection with any registration effected pursuant to this Section
1.2.

            1.3     Registration Procedures. If and whenever the Company is
                    -----------------------
required to effect the registration of any Registrable Securities under the
Securities Act or the Applicable Canadian Securities Laws as provided in
Sections 1.1 and 1.2. the Company will, as expeditiously as possible, use
reasonable efforts to:

                    (i)   prepare and (within 120 days after the end of the
            period within which requests for registration may be given to the
            Company or in any event as soon thereafter as practicable) file with
            the Commission or the Canadian Securities Regulators the requisite
            registration statement to effect such registration and thereafter
            use reasonable efforts to cause such registration statement to
            become effective;

                    (ii)  prepare and file with the Commission or the Canadian
            Securities Regulators such amendments and supplements to such
            registration statement and the prospectus used in connection
            therewith as may be necessary to keep such registration statement
            effective and to comply with the provisions of the Securities Act or
            the Applicable Canadian Securities Laws, as the case may be, with
            respect to the disposition of all Registrable Securities covered by
            such registration statement for a period of at least 90 days;

                    (iii) furnish to each seller of Registrable Securities
            covered by such registration statement, such number of conformed
            copies of such registration statement and of each such amendment and
            supplement thereto (in each case including all exhibits), such
            number of copies of the prospectus contained in such registration
            statement (including each preliminary prospectus and any summary
            prospectus) and any other prospectus filed under Rule 424 under the
            Securities Act, in conformity with the requirements of the
            Securities Act or the Applicable Canadian Securities Laws, as the
            case may be, and such other documents, as such seller may reasonably
            request;

                     (iv) register or qualify all Registrable Securities and
            other securities covered by any registration statement under the
            Securities Act, under Applicable Canadian Securities Laws, under
            such other securities or blue sky laws of such States of the United
            States of America where an exemption is not available and as the
            sellers of Registrable Securities covered by such registration
            statement shall reasonably request; keep such registration or
            qualification in effect for so long as such registration statement
            remains in effect; and take any other action which may be reasonably
            necessary or advisable to enable such sellers to consummate the
            disposition in such jurisdictions of the securities to be sold by
            such sellers, except that (x) the Company shall not for any such
            purpose be required to qualify generally to do business as a foreign
            corporation in any jurisdiction wherein it would not but for the
            requirements of this subdivision (iv) be obligated to be so

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            qualified or to consent to general service of process in any such
            jurisdiction and (y) the Company shall not be required to register
            or qualify Registrable Securities in any state or province where
            such qualification or registration would place an undue burden on
            the Company or which would require that the Company consent or agree
            to restrictions, covenants, or qualifications which the Company
            deems unacceptable;

                 (v)   cause all Registrable Securities covered by such
            registration statement to be registered with or approved by such
            other federal, provincial or state governmental agencies or
            authorities as may be necessary in the opinion of counsel to the
            Company and counsel to the underwriters to enable the seller or
            sellers thereof to consummate the disposition of such Registrable
            Securities;

                 (vi)  furnish at the effective date of such registration
            statement and, if applicable, the date of the closing under the
            underwriting agreement, to each seller of Registrable Securities,
            and each such seller's underwriters, a signed counterpart of (x) an
            opinion of counsel for the Company, dated the effective date of such
            registration statement and (y) a "comfort" letter signed by the
            independent public accountants who have certified the Company's
            financial statements included or incorporated by reference in such
            registration statement, covering substantially the same matters with
            respect to such registration statement (and the prospectus included
            therein) and, in the case of the accountants' comfort letter, with
            respect to events subsequent to the date of such financial
            statements, as are customarily covered in opinions of issuer's
            counsel and in accountants' comfort letters delivered to the
            underwriters in underwritten public offerings of securities and, in
            the case of the accountants' comfort letter, such other financial
            matters, and, in the case of the legal opinion, such other legal
            matters, as the sellers of the Registrable Securities covered by
            such registration statement, or the underwriters, may reasonably
            request;

                 (vii) notify each seller of Registrable Securities covered by
            such registration statement at any time when a prospectus relating
            thereto is required to be delivered under the Securities Act or the
            Applicable Canadian Securities Laws, upon discovery that, or upon
            the happening of any event as a result of which, the prospectus
            included in such registration statement, as then in effect, includes
            an untrue statement of a material fact or omits to state any
            material fact required to be stated therein or necessary to make the
            statements therein not misleading, in the light of the circumstances
            under which they were made, and at the request of any such seller
            promptly prepare and furnish to it a reasonable number of copies of
            a supplement to or an amendment of such prospectus as may be
            necessary so that, as thereafter delivered to the purchasers of such
            securities, such prospectus shall not include an untrue statement of
            a material fact or omit to state a material fact required to be
            stated therein or necessary to make the statements therein not
            misleading in the light of the circumstances under which they were
            made;

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<PAGE>

                 (viii)  otherwise comply with all applicable rules and
            regulations of the Commission and the Canadian Securities
            Regulators, and, if required, make available to its security
            holders, as soon as reasonably practicable, an earnings statement
            covering the period of at least twelve months, but not more than
            eighteen months, beginning with the first full calendar month after
            the effective date of such registration statement, which earnings
            statement shall satisfy the provisions of Section 11(a) of the
            Securities Act and Rule 158 promulgated thereunder, and promptly
            furnish to each such seller of Registrable Securities a copy of any
            amendment or supplement to such registration statement or
            prospectus;

                 (ix)    keep each Selling Holder and each Requesting Holder
            advised in writing as to the initiation and progress of any
            registration under Section 1.1 or 1.2 hereunder, as the case may be;

                 (x)     provide and cause to be maintained a transfer agent and
            registrar (which, in each case, may be the Company) for all
            Registrable Securities covered by such registration statement from
            and after a date not later than the effective date of such
            registration; and

                 (xi)    list all Registrable Securities covered by such
            registration statement on any securities exchange on which
            Registrable Securities of the same class and, if applicable, series,
            covered by such registration statement are then listed or on the
            Nasdaq Stock Market ("Nasdaq") if the Registrable Securities are
            reported on Nasdaq.

The Company may require each seller of Registrable Securities, as to which any
registration is being effected, to furnish the Company such information
regarding such seller and the distribution of such securities, as required by
law or the Commission or the Canadian Securities Regulators, or which the
Company's counsel otherwise deems appropriate.

            Each holder of Registrable Securities agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in subdivision (vii) of this Section 1.3 , such holder will forthwith
discontinue such holder's disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until such
holder's receipt of the copies of the supplemented or amended prospectus
contemplated by subdivision (vii) of this Section 1.3 and, if so directed by the
Company, will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in such holder's possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice.

            1.4   Underwritten Offerings.
                  ----------------------

                  (a)   Requested Underwritten Offerings. If requested by the
                        --------------------------------
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 1.1, the Company will use all
reasonable efforts to enter into

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<PAGE>

an underwriting agreement with such underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to each such
holder and the underwriters and to contain such representations and warranties
by the Company aand such other terms as are generally prevailing in agreement of
that type, including, without limitation, indemnities to the effect and to the
extent provided in Section 1.7. The holders of the Registrable Securities
negotiation of the underwriting agreement. Such holders of Registrable
Securities to be sold by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that any or all of the
representations and warranties by, and all other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable the Company or
the underwriters other than representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution or any other representations required by applicable law.

          (b)   Incidental Underwritten Offerings. If the Company proposes to
                ---------------------------------
register any of its securities under the Securities Act or the Applicable
Canadian Securities Laws as contemplated by Section 1.2 and such securities are
to be distributed by or through one or more underwriters, the Company will, if
requested by any Requesting Holder of Registrable Securities, use reasonable
efforts to arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such Requesting Holder among the securities
of the Company to be distributed by such underwriters. The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters and may,
at their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any such
Requesting Holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
Requesting Holder, such Requesting Holder's Registrable Securities and such
Requesting Holder's intended method of distribution or any other representations
required by applicable law.

     1.5  Preparation; Reasonable Investigation. In connection with the
          -------------------------------------
preparation and filing of each registration statement under the Securities Act
or the Applicable Canadian Securities Laws pursuant to this Agreement, the
Company (i) shall give the holders of Registrable Securities registered under
such registration statement, their underwriters, if any, and their respective
counsel and accountants the reasonable opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission or the Canadian Securities Regulators, and each
amendment thereof or supplement thereto, and (ii) shall promptly notify the
registered holders of Registrable Securities and their counsel of any stop order
issued or threatened by the Commission or any Canadian Securities

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<PAGE>

Regulators and take all reasonable actions required to prevent the entry of such
stop order or to remove it if entered.

          1.6   Qualification to Obligations under Registration Covenants. The
                ---------------------------------------------------------
Company shall be entitled to postpone for a reasonable period of time (but not
exceeding 120 days) the filing of any registration statement otherwise required
to be prepared and filed by it pursuant to Section 1.1 if (i) the Company
determines, in its reasonable judgment, that such registration and offering
would interfere with any financing, acquisition, corporate reorganization or
other material transaction involving the Company or any of its affiliates or
(ii) the Company is in possession of information concerning it or its business
and affairs, the public disclosure of which would have a material adverse effect
on the Company and which the Company has determined it is not legally obligated
to disclose, and the Company promptly gives the holders of Registrable
Securities requesting registration thereof pursuant to Section 1.1 written
notice of such determination, containing a general statement of the reasons for
such postponement and an approximation of the anticipated delay. If the Company
shall so postpone the filing of a registration statement, Initiating Holders
requesting registration thereof pursuant to Section 1.1 shall have the right to
withdraw the request for registration by giving written notice to the Company
within 30 days after receipt of the notice of postponement and, in the event of
such withdrawal, such request shall not be counted for purposes of the requests
for registration to which holders of Registrable Securities are entitled
pursuant to Section 1.1 hereof.

          1.7   Indemnification.
                ---------------

                (a)  Indemnification by the Company. The Company will, and
                     ------------------------------
hereby does, indemnify and hold harmless, in the case of any registration
statement filed pursuant to Section 1.1 or 1.2, each seller of any Registrable
Securities covered by such registration statement and each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such seller or any such underwriter
within the meaning of the Securities Act or the Applicable Canadian Securities
Laws, and their respective directors, officers, partners, employees and
affiliates against any losses, claims, damages or liabilities, joint or several,
to which such seller or underwriter or any such director, officer, partner,
employee, affiliate or controlling person may become subject under the
Securities Act or the Applicable Canadian Securities Laws or otherwise,
including, without limitation, the reasonable fees and expenses of legal
counsel, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act or the Applicable Canadian
Securities Laws, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and the Company will
reimburse such seller or underwriter and each such director, officer, partner,
employee, affiliate and controlling Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided, that the Company
                                                   --------
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in

                                       8
<PAGE>

respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of such seller or underwriter, as the case may be,
specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any such director, officer, employee,
affiliate, partner or controlling person and shall survive the transfer of such
securities by such seller.

                    (b)  Indemnification by the Sellers. As a condition to
                         ------------------------------
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking satisfactory to it from the prospective
seller of such Registrable Securities, to indemnify and hold harmless the
Company, and each director of the Company, each officer of the Company and each
other Person, if any, who participates as an underwriter in the offering or sale
of such securities and each other Person who controls the Company or any such
underwriter within the meaning of the Securities Act or the Applicable Canadian
Securities Laws, and their respective directors, officers, partners, employees
and affiliates, against any losses, claims, damages or liabilities, joint or
several, to which such person may become subject under the Securities Act or the
Applicable Canadian Securities Laws or otherwise, including, without limitation,
the reasonable fees and expenses of legal counsel, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act or the Applicable Canadian Securities Laws, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, and to reimburse such person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; but only to the extent that
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of such seller, specifically stating that it is for use
in the preparation thereof; provided, however, that the liability of such
indemnifying party under this Section 1.7(b) shall be limited to the amount of
proceeds received by such indemnifying party in the offering giving rise to such
liability. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such seller.

                    (c)  Notices of Claims, etc. Within ten days of receipt by
                         ----------------------
an indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 1.7,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the

                                       9
<PAGE>

latter of the commencement of such action; provided, however, that the failure
                                           --------  -------
of any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 1.7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof, provided, however, that if the
                                               --------  -------
indemnified party reasonably believes it is advisable for it to be represented
by separate counsel because there exists a conflict of interest between its
interests and those of the indemnifying party with respect to such claim, or
there exist defenses available to such indemnified party which may not be
available to the indemnifying party, or if the indemnifying party shall fail to
assume responsibility for such defense, the indemnified party may retain counsel
satisfactory to it and the indemnifying party shall pay all reasonable fees and
expenses of such counsel. No indemnifying party shall be liable for any
settlement of any action or proceeding effected without its written consent. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation or which requires action by the indemnified party.

                    (d)  Contribution. If the indemnification provided for in
                         ------------
this Section 1.7 shall for any reason be held by a court to be unavailable to an
indemnified party under subparagraph (a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under subparagraph (a) or (b) hereof, the indemnified
party and the indemnifying party under subparagraph (a) or (b) hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as is appropriate to reflect the relative fault of
the Company and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claim, damage or liability,
or action in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company and such prospective sellers from the offering of the securities
covered by such registration statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Such prospective sellers' obligations to
contribute as provided in this subparagraph (d) are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld or delayed.

                                      10
<PAGE>

                    (e)  Other Indemnification. Indemnification and contribution
                         ---------------------
similar to that specified in the preceding subdivisions of this Section 1.7
(with appropriate modifications) shall be given by the Company and each seller
of Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law or provincial law or
any regulation of any governmental authority other than the Securities Act or
the Applicable Canadian Securities Laws.

                    (f)  Indemnification Payments. The indemnification and
                         ------------------------
contribution required by this Section 1.7 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.

               2.   Definitions. As used herein, unless the context otherwise
                    -----------
requires, the following terms have the following respective meanings:

               "Affiliate" means, with respect to any person, any other person
                ---------
that directly or indirectly controls or is controlled by or is under common
control with such person.

               "Applicable Canadian Securities Laws" means the securities acts
                -----------------------------------
or similar statutes in effect in each of British Columbia and Ontario, Canada,
and having application to the Company or any transaction or proposed transaction
to which the Company is a party, as they may be amended or replaced from time to
time, and includes the regulations and rules promulgated thereunder, and further
includes all policies, rules and mandatory guidelines imposed by The Vancouver
Stock Exchange, The Toronto Stock Exchange or any other securities exchange on
which the securities of the Company are, at any relevant time, posted for
trading.

               "Canadian Securities Regulators" means the Securities Commissions
                ------------------------------
or similar regulatory authorities having jurisdiction in each of British
Columbia and Ontario, Canada, and further includes The Vancouver Stock Exchange,
The Toronto Stock Exchange or any other securities exchange on which the
securities of the Company are, at any relevant time, posted for trading.

               "Commission" means the Securities and Exchange Commission or any
                ----------
other federal agency at the time administering the Securities Act.

               "Exchange Act" means the Securities Exchange Act of 1934, as
                ------------
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include a reference to the comparable section, if any, of any such similar
federal statute.

               "Initiating Holder" is defined in Section 1.1.
                -----------------

               "Person" means any individual, corporation, partnership, trust,
                ------
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.

                                      11
<PAGE>

               "Registrable Securities" means (i) the shares of Common Stock
                ----------------------
owned on the date hereof by the parties hereto or issued or issuable to the
parties hereto pursuant to the exercise of options (whether or not presently or
then exercisable) or warrants or the conversion of convertible securities owned
by them, or which they have the right to acquire pursuant to that certain
Securities Purchase and Exchange Agreement of even date herewith, on the date
hereof, and (ii) any Related Registrable Securities. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (a) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act or the Applicable Canadian
Securities Laws and such securities shall have been disposed of in accordance
with such registration statement, (b) they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act, (c) they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent public distribution of them shall not require
registration of them under the Securities Act, or (d) they shall have ceased to
be outstanding. All references to percentages of Registrable Securities shall be
calculated pursuant to Section 8.

               "Registration Expenses" means all expenses incident to the
                ---------------------
Company's performance of or compliance with Section 1, including, without
limitation, all registration, filing and NASD fees, all fees and expenses of
complying with securities or blue sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses, the fees and disbursements
of counsel for the Company and of its independent public accountants, including
the expenses of "cold comfort" letters required by or incident to such
performance and compliance, and any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (excluding any underwriting
discounts or commissions with respect to the Registrable Securities or any other
fee measured by the number or amount of Registrable Securities).

               "Related Registrable Securities" means any securities of the
                ------------------------------
Company issued or issuable with respect to the securities by way of a dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise.

               "Requesting Holder" is defined in Section 1.2.
                -----------------

               "Securities Act" means the Securities Act of 1933, or any
                --------------
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a reference to
the comparable section, if any, of any such similar statute.

               "Selling Holder" is defined in Section 1.1.
                --------------

               3.   Rule 144 and Rule 144A. Upon the request of any holder of
                    ----------------------
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with the requirements of Rules 144 or
144A under the Securities Act.

                                      12
<PAGE>

               4.   Amendments and Waivers. This Agreement may be amended with
                    ----------------------
the written consent of the Company and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to such amendment,
action or omission to act, of each holder or holders of the Registrable
Securities affected by such amendment, action or omission to act.

               5.   Nominees for Beneficial Owners. In the event that any
                    ------------------------------
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by any holder or holders of Registrable
Securities contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances and
evidence reasonably satisfactory to it of such owner's beneficial ownership of
such Registrable Securities.

               6.   Notices. All notices, demands and other communications to
                    -------
any party hereto provided for or permitted hereunder shall be made in writing
and shall be by registered or certified first-class mail, return receipt
requested, telex, telegram, telecopier, reputable courier service or personal
delivery, addressed to it in the manner set forth on the signature page hereto,
or at such other address as it shall have furnished to the other parties hereto
in writing. All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being sent by reputable courier service; three business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; and when receipt is acknowledged, if telecopied.

               7.   Assignment. This Agreement shall be binding upon and inure
                    ----------
to the benefit of and be enforceable by the parties hereto and, with respect to
the Company, its respective successors and assigns and, with respect to each
other party hereto, any holder who is an affiliate or successor entity to such
party or a transferee therefrom of any Registrable Securities, subject to the
provisions respecting the minimum numbers of percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein. The parties hereto, other than the
Company (and not any other holder of Registrable Securities or any other
Person), shall be permitted, in connection with a transfer or disposition of
Registrable Securities, to eliminate or impose conditions or constraints on the
ability of the transferee, as a holder of Registrable Securities, to request a
registration pursuant to Sections 1.1 and 1.2 and shall provide the Company with
copies of such conditions or constraints and the identity of such transferees.

               8.   Calculation of Percentage Interests in Registrable
                    --------------------------------------------------
Securities. For purposes of this Agreement, all references to a percentage of
----------
the Registrable Securities shall be calculated based upon the number of shares
of Registrable Securities outstanding or issuable pursuant to outstanding
options (whether or not presently or then exercisable), warrants or convertible
securities at the time such calculation is made.

                                      13
<PAGE>

               9.   No Inconsistent Agreements. The Company will not hereafter
                    ---------------------------
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement.

               10.  Remedies. Each party hereto and each holder of Registrable
                    --------
securities is entitled to exercise all rights granted by law, including recovery
of damages; such rights not to extend to incidental or consequential damages.

               11.  Severability. In the event that any one or more of the
                    ------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
Purchaser shall be enforceable to the fullest extent permitted by law.

               12.  Entire Agreement. This Agreement is intended by the parties
                    ----------------
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement supersedes all prior agreements and
understandings between the Company and any of the Principal Stockholders with
respect to the registration of any Company securities under applicable
securities laws.

               13.  Descriptive Headings. The descriptive headings of the
                    --------------------
several sections and paragraphs of this Agreement are inserted for reference
only and shall not limit or otherwise affect the meaning hereof.

               14.  Governing Law. This Agreement shall be construed and
                    -------------
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of Texas applicable to agreements made and to be performed
entirely within such State.

               15.  Counterparts; Partial Execution. This Agreement may be
                    -------------------------------
executed in any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument. This Agreement shall be fully enforceable against the Company by any
Principal Shareholder who is a signatory hereto regardless of whether any other
Principal Shareholder is also a signatory hereto.

               16.  Term. This Agreement shall be effective for the period
                    ----
commencing on the date hereof and expiring on the date six years from the date
hereof.

               17.  Supersession of Existing Registration Rights Agreements.
                    -------------------------------------------------------
This Agreement supersedes in their entirety any and all currently existing
agreements between the Company and any of the Principal Stockholders with
respect to the registration of any Company securities under applicable
securities laws.

        [The remainder of this page has intentionally been left blank]

                                      14
<PAGE>

               IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.

                                       FLOTEK INDUSTRIES, INC.

                                       By:______________________________________
                                          Jerry D. Dumas, Sr., President and CEO

                                       TOSI, L.P.

                                       By:   Pitman Property Corp., a Texas
                                             corporation, General Partner

                                             By:________________________________
                                               J. W. Beavers, Jr., President

                                       CHISHOLM ENERGY PARTNERS, L.L.C.

                                       By:______________________________________
                                       John W. Chisholm, Managing Director

                                       _________________________________________
                                       William R. Ziegler, an individual

                                       _________________________________________
                                       Thomas H. O'Neill, Jr., an individual

                                       _________________________________________
                                       James Wadsworth, an individual

                                      15
<PAGE>

                                          ______________________________________
                                          Oliver W. Robertson, an individual

                                          ______________________________________
                                          Paul Atanasio, an individual

                                          ______________________________________
                                          Charles E. Murphy, an individual

                                          ______________________________________
                                          John Dalrymple, an individual

                                          Springfield Trading S.A.

                                          By____________________________________
                                          Name:
                                          Title:

                                          ______________________________________
                                          Jeffrey R. Freedman, an individual

                                          ______________________________________
                                          Arvind Sanger, an individual

                                          ______________________________________
                                          Nancy Naples O'Neill, an individual

                                      16
<PAGE>

                                       _________________________________________
                                       Richard H. Jukes, an individual

                                       SMITH FAMILY 1999 PARTNERSHIP LTD

                                       By:______________________________________
                                             James H. Smith, Co-Trustee

                                       By:______________________________________
                                             Joyce B. Smith, Co-Trustee

                                       HINCKLEY BROOK, INC.

                                       By:______________________________________
                                             Jerry Dumas, President

                                       SAXTON RIVER CORPORATION

                                       By:______________________________________
                                             Jerry Dumas, President

                                       NOW Ventures, LLC

                                       By:______________________________________
                                           Thomas H. O'Neill, Jr., Managing
                                           Member

                                       _________________________________________
                                       [Tom Bandy], an individual

                                      17
<PAGE>

                                       _________________________________________
                                       Steven A. Webster, an individual

                                       Marlin Investors, L.L.C.

                                       By_______________________________________
                                       William R. Ziegler, Managing Member

                                       _________________________________________
                                       Charles A. Dickinson, Jr.

                                      18NOTE PURCHASE AGREEMENT

                       EFFECTIVE AS OF SEPTEMBER 28, 2000

                                 BY AND BETWEEN

                             SMARTSERV ONLINE, INC.

                                       AND

                             HEWLETT-PACKARD COMPANY

<PAGE>
<TABLE>
<CAPTION>

                                TABLE OF CONTENTS

<S>                                                                                               <C>
1.       Note......................................................................................1
         ----

2.       Representation and Warranties of the Company..............................................1
         --------------------------------------------

3.       Representations and Warranties of HP......................................................8
         ------------------------------------

4.       Conditions to Closings....................................................................9
         ----------------------

5.       Covenants................................................................................11
         ---------

6.       Miscellaneous............................................................................12
         -------------
</TABLE>

Schedule 1        Disclosure Schedule
Exhibit A         Form of Legal Opinion of Company Counsel

<PAGE>

                             NOTE PURCHASE AGREEMENT

         This Note  Purchase  Agreement  ("Agreement")  is  entered  into and is
effective  as of September  28, 2000 by and between  SmartServ  Online,  Inc., a
Delaware  corporation (the "Company"),  and Hewlett-Packard  Company, a Delaware
corporation ("HP").

                                    RECITALS

         WHEREAS,  on the terms and subject to the  conditions set forth herein,
HP is  willing to  advance  $20,000,000  (Twenty  Million)  U.S.  Dollars to the
Company,  and the  Company is  willing  to execute in favor of HP a  convertible
secured promissory note in the principal amount of $20,000,000  (Twenty Million)
U.S. Dollars (the "Note").

         NOW, THEREFORE,  in consideration of the promises and  representations,
warranties,  covenants  and  conditions  set forth  below,  the parties  hereto,
intending to be legally bound, hereby agree as follows:

1.       Note.
         ----

         (a)      Issuance and Delivery of the Note.

                  (i)      At the Closing (as defined below),  the Company shall
                           issue the Note to HP.

                  (ii)     The  issuance  of the  Note  shall  take  place  at a
                           closing to be held at such place and time and on such
                           date (the  "Closing  Date") as the Company and HP may
                           determine (the "Closing"). At the Closing the Company
                           will  deliver  to HP the  Note.  Any Loans to be made
                           hereunder by wire  transfer  shall be made to account
                           number  031-1177901 in the name of the Company at The
                           Chase Manhattan Bank, ABA number  021000021,  or such
                           other  account of which the  Company may advise HP in
                           writing. The Note shall be registered in HP's name in
                           the Company's records.

         (b)      Security.  The  obligations  evidenced  by the  Note  shall be
                  secured as provided in the Note.

2.  Representation  and  Warranties of the Company.  The Company  represents and
warrants  to HP  that,  as of  the  date  hereof,  except  as  disclosed  in the
Disclosure Schedule in the form of Schedule 1 attached hereto:

                                      -1-
<PAGE>

         (a)      Due  Incorporation,  Qualification,  etc. The Company is (i) a
                  corporation  duly  organized,  validly  existing  and in  good
                  standing under the laws of its jurisdiction of  incorporation;
                  and (ii) is duly  qualified,  licensed to do  business  and in
                  good standing as a foreign  corporation  in each  jurisdiction
                  where  the  failure  to  be so  qualified  or  licensed  could
                  reasonably  be expected to have a material  adverse  effect on
                  the Company and its subsidiaries taken as a whole.

         (b)      Capitalization.  The  Company's  total  authorized  and issued
                  capitalization is as set forth on the Disclosure Schedule. All
                  of the outstanding  equity securities of the Company have been
                  duly  authorized  and  are  validly  issued,  fully  paid  and
                  nonassessable.  Except as expressly  referenced in the Note or
                  in the Disclosure  Schedule,  there are as of the date of this
                  Agreement,  no options,  warrants or rights to purchase equity
                  securities  authorized,  issued  or  outstanding,  nor  is the
                  Company  obligated  in any other manner to issue shares of its
                  equity  securities.  The  Disclosure  Schedule sets forth with
                  respect  to such  options,  warrants  and  other  rights,  the
                  exercise  price  and  maturity   date.   Except  as  expressly
                  referenced   in  the   Disclosure   Schedule,   there  are  no
                  restrictions  on the  transfer  of  equity  securities  of the
                  Company, other than those imposed by the Company's Certificate
                  of Incorporation and Bylaws as of the date hereof, or relevant
                  state and federal securities laws, and no holder of any equity
                  security of the Company is entitled to  preemptive  or similar
                  statutory or contractual rights. All outstanding securities of
                  the Company  were  issued in  compliance  with all  applicable
                  federal  and  state  securities  laws.   Except  as  expressly
                  referenced in the Disclosure Schedule, no person or entity has
                  the right to demand or other  rights to cause the  Company  to
                  file any  registration  statement  under the Securities Act of
                  1933,  as amended  (the  "Securities  Act"),  relating  to any
                  equity securities of the Company presently outstanding or that
                  may be subsequently issued, or any right to participate in any
                  registration statement.

         (c)      Subsidiaries.  The  Disclosure  Statement  sets forth (i) each
                  corporation,   association,  partnership,  or  other  business
                  entity  which  the  Company  owns  or  controls,  directly  or
                  indirectly, (ii) the Company's percentage of ownership of such
                  business  entity and (iii) the  jurisdiction  under which such
                  business entity is organized.

         (d)      Authority;   Enforceability.   The  execution,   delivery  and
                  performance  by the Company of each  Transaction  Document (as
                  defined  below)  and the  consummation  by the  Company of the
                  transaction  contemplated  thereby (i) are within the power of
                  the  Company,  and  (ii)  have  been  duly  authorized  by all
                  necessary actions on the part of the Company. Each

                                      -2-
<PAGE>

                  Transaction  Document  executed,  or to be  executed,  by  the
                  Company has been,  or will be, duly  executed and delivered by
                  the  Company and  constitutes,  or will  constitute,  a legal,
                  valid  and  binding  obligation  of the  Company,  enforceable
                  against the Company in accordance  with its terms,  excepts as
                  limited  by  bankruptcy,  insolvency  or other laws of general
                  application  relating  to  or  affecting  the  enforcement  of
                  creditors' rights generally and general  principles of equity.
                  The  shares  of the  Company's  common  stock,  issuable  upon
                  conversion of the Note,  when issued in  compliance  with this
                  Agreement  and the  Note  (the  "Underlying  Stock"),  will be
                  validly issued,  fully paid and nonassessable and will be free
                  of  any  liens  or  encumbrances,  other  than  any  liens  or
                  encumbrances  created by or imposed  upon HP through no action
                  of the Company;  provided,  however, that the Underlying Stock
                  will be subject to  restrictions  on transfer under federal or
                  state securities  laws.  Except as set forth in the Disclosure
                  Schedule,   the  Underlying   Stock  is  not  subject  to  any
                  preemptive rights or rights of first refusal.

         (e)      Non-Contravention.  The  execution and delivery by the Company
                  of  the   Transaction   Documents  and  the   performance  and
                  consummation of the transactions  contemplated  thereby do not
                  and will not (i) violate the Certificate of  Incorporation  or
                  Bylaws of the Company or any judgment,  order,  writ,  decree,
                  statute,  rule or regulation  applicable to the Company;  (ii)
                  violate  any  provision  of, or  result  in the  breach or the
                  acceleration  of, or entitle  any other  person to  accelerate
                  (whether after the giving of notice or lapse of time or both),
                  any mortgage, indenture,  agreement, instrument or contract to
                  which the Company is a party or by which it is bound; or (iii)
                  result  in the  creation  or  imposition  of any lien upon any
                  property, asset or revenue of the Company (other than any lien
                  in favor  of HP) or the  suspension,  revocation,  impairment,
                  forfeiture,  or  nonrenewal of any material  permit,  license,
                  authorization  or  approval  applicable  to the  Company,  its
                  business or operations, or any of its assets or properties.

         (f)      Approvals. No consent, approval, order or authorization of, or
                  registration,  declaration  or  filing  with any  governmental
                  authority  or  other  person  or  entity  (including   without
                  limitation  the  shareholders  of any  person  or  entity)  is
                  required in connection  with the execution and delivery of the
                  Transaction   Documents   executed  by  the  Company  and  the
                  performance and consummation of the transactions  contemplated
                  thereby.

         (g)      Financial Statements; Operating Plan.

                  (i)      The balance sheet of the Company as at the end of the
                           last fiscal

                                      -3-
<PAGE>

                           year,  and statements of income and cash flows of the
                           Company for such year (the  "Financial  Statements"),
                           which have been delivered to HP, (A) were prepared in
                           accordance   with   generally   accepted   accounting
                           principles  ("GAAP");  (B) are in accordance with the
                           books and  records  of the  Company,  which have been
                           maintained   in   accordance   with   good   business
                           practices;  and  (C)  fairly  present  the  financial
                           position  of the  Company  as of the dates  presented
                           therein  and the  income  for the  periods  presented
                           therein.   The  Financial  Statements  set  forth  in
                           reasonable detail the Company's  accounting policies,
                           principles and methods,  and there has been no change
                           thereof  since  June  30,  2000,  except  as  may  be
                           required  by  GAAP.   Except  as  set  forth  in  the
                           Financial  Statements,  the Company has no contingent
                           obligations, liability for taxes or other outstanding
                           obligations  which should have been reflected in such
                           financial  statements,  which  are  material  in  the
                           aggregate  and of which the Company is aware,  except
                           as incurred in the ordinary  course of business after
                           June 30, 2000.  Except as disclosed in the  Financial
                           Statements,  the  Company  has  not  capitalized  any
                           software development costs.

                  (ii)     The  Company  has  delivered  to HP true and  correct
                           information regarding its operating plan as of August
                           15,  2000.  The   projections   and   forward-looking
                           statements made by the Company in such operating plan
                           (the "Projections") were prepared in good faith based
                           on estimates and assumptions  believed by the Company
                           to be  reasonable  based  on  current  circumstances.
                           Actual  results  during  the  period  covered  by the
                           Projections may differ  materially and adversely from
                           the projected results and such Projections should not
                           be  regarded as a  representation  or warranty by the
                           Company that the projected results will be achieved.

         (h)      Absence  of   Changes.   Since  the  date  of  the   Financial
                  Statements, there has not been to the Company's knowledge:

                                      -4-
<PAGE>

                  (i)      Any  change  in the  assets,  liabilities,  financial
                           condition  or  operations  of the  Company  from that
                           reflected  in the  Financial  Statements,  other than
                           changes in the ordinary  course of business,  none of
                           which  individually or in the aggregate has had or is
                           expected  to have a material  adverse  effect on such
                           assets,    liabilities,    financial   condition   or
                           operations of the Company;

                  (ii)     Any material change in the contingent  obligations of
                           the   Company  by  way  of   guaranty,   endorsement,
                           indemnity, warranty or otherwise;

                  (iii)    Any  damage,  destruction  or  loss,  whether  or not
                           covered  by  insurance,   materially   and  adversely
                           affecting  the  properties,   business  or  financial
                           condition of the Company;

                  (iv)     Any waiver by the Company of a valuable right or of a
                           material debt owed to it;

                  (v)      Any direct or  indirect  loans made by the Company to
                           any shareholder, employee, officer or director of the
                           Company,  other than  advances  made in the  ordinary
                           course of business;

                  (vi)     Any material change in any  compensation  arrangement
                           or agreement with any employee,  officer, director or
                           shareholder;

                  (vii)    Any  declaration  or payment of any dividend or other
                           distribution of the assets of the Company;

                  (viii)   Any debt,  obligation or liability incurred,  assumed
                           or  guaranteed  by  the  Company,  except  those  for
                           immaterial   amounts  and  for  current   liabilities
                           incurred in the ordinary course of business;

                  (ix)     Any sale,  assignment  or  transfer  of any  patents,
                           trademarks,   copyrights,   trade  secrets  or  other
                           intangible assets; or

                  (x)      Any  change in any  material  agreement  to which the
                           Company  is a party or by  which  it is  bound  which
                           materially   and  adversely   affects  the  business,
                           assets,    liabilities,    financial   condition   or
                           operations  of the  Company,  including  compensation
                           agreements with the Company's employees.

         (i)      Title.  The Company owns and has good and marketable  title in
                  fee

                                      -5-
<PAGE>

                  simple absolute to, or a valid  leasehold  interest in, all of
                  its real  properties  and good title to all personal  property
                  included in its other  assets and  properties  as reflected in
                  the Financial  Statements  (except those assets and properties
                  disposed of in the ordinary  course of business since the date
                  of such Financial  Statements)  and all respective  assets and
                  properties   acquired  by  the   Company  and  the   Company's
                  subsidiaries  since such date (except those disposed of in the
                  ordinary  course of business).  Such assets and properties are
                  subject to no lien,  except for Permitted Liens (as defined in
                  the Note).

         (j)      Resignation/Termination  of Key  Officers.  There  has been no
                  resignation  or  termination of employment of any key officer,
                  consultant  or  employee  of the  Company  since June 30, 2000
                  other than the  resignation  of Evan Sohn,  Vice  President  -
                  Business  Development,  and the  Company  does not know of the
                  impending resignation or termination of employment of any such
                  key officer,  consultant or employee that if consummated would
                  have a materially adverse affect on its business.

         (k)      Material Liabilities.  The Company has no material liabilities
                  or obligations, absolute or contingent (individually or in the
                  aggregate),  except (i) the  liabilities  and  obligations set
                  forth in the Financial  Statements,  and (ii)  liabilities and
                  obligations which have been incurred in the ordinary course of
                  business since June 30, 2000.

         (l)      Patents and Other Intangible Assets.

                  (i)      The  Company  owns  or has  the  right  to  use,  all
                           patents,  trademarks,  service  marks,  trade  names,
                           copyrights   (and   licenses   with  respect  to  the
                           foregoing) used in the conduct of its business. There
                           are no  pending  or  threatened  claims  against  the
                           Company  alleging  that the conduct of the  Company's
                           business  infringes upon or otherwise  conflicts with
                           the right or  claimed  right of any  person  under or
                           with respect to any of the foregoing.  The Company is
                           not  obligated or under any  liability  whatsoever to
                           make  any  payments  by way  of  royalties,  fees  or
                           otherwise  to any  owner  of,  licensor  of or  other
                           claimant  to  any  patent,  trademark,   trade  name,
                           copyright or other intangible  asset, with respect to
                           the use thereof in connection with the conduct of its
                           business or otherwise except with respect to licenses
                           undertaken  by the Company in the ordinary  course of
                           business.  Except in the ordinary course of business,
                           the Company has not granted any licenses with respect
                           to its  business as now  conducted or as now proposed
                           to conduct.

                                      -6-
<PAGE>

                  (ii)     The  Company  owns or has the  right to use all trade
                           secrets,  including  know-how,  inventions,  designs,
                           processes  and   technical   data  required  for  the
                           development,  operation  and sale of all products and
                           services  sold  and  now  proposed  to be sold by the
                           Company,  free and  clear of any  rights  of liens or
                           claims of others.

                  (iii)    The  Company  has  not  received  any   communication
                           alleging   that  the  Company  has  violated  or,  by
                           conducting its business as currently  conducted or as
                           proposed in its  business  plan,  a copy of which has
                           been provided to HP, would violate or infringe in any
                           way any of the patents,  trademarks,  service  marks,
                           trade  names,  copyrights,  trade  secrets  or  other
                           proprietary  rights or  processes of any other person
                           or entity.

                  (iv)     The  Company   has   obtained   confidentiality   and
                           non-disclosure  agreements  from  its  key  employees
                           regarding its intellectual property and trade secrets
                           (the  "Non-Disclosure  Agreement")  pursuant  to  the
                           terms of a form  Non-Disclosure  Agreement  which has
                           previously   been   provided  to  HP.  There  are  no
                           Non-Disclosure  Agreements which differ substantially
                           from the form Non-Disclosure Agreement.

         (m)      Securities  Law  Compliance.  Subject to the  accuracy of HP's
                  representations  and warranties in Section 3 below, the offer,
                  sale and issuance of the Note to be issued in conformity  with
                  this Agreement and the issuance of the  Underlying  Stock upon
                  conversion of the Note constitute transactions exempt from the
                  registration  requirements  of Section 5 of the Securities Act
                  and all applicable state securities laws.

         (n)      Litigation.  There  are  no  actions,  suits,  proceedings  or
                  investigations   pending  or,  to  the  Company's   knowledge,
                  threatened  against the Company or its  properties  before any
                  court or governmental agency.

         (o)      No Brokers or Finders. The Company has not incurred,  and will
                  not incur,  directly or indirectly,  as a result of any action
                  taken or permitted to be taken by the Company,  any  liability
                  for  brokerage  or  finders'  fees or agents'  commissions  or
                  similar   charges  in   connection   with  the  execution  and
                  performance  of  this  Agreement  or  any  other   Transaction
                  Document.

         (p)      Security  Interest.  The security  interests created under the
                  Note create a valid and enforceable  security  interest in the
                  Collateral  (as  defined in

                                      -7-
<PAGE>

                  the Note),  and upon the filing of UCC-1 financing  statements
                  in  Connecticut  and New York HP will have a perfected,  first
                  priority  security  interest  in the  Collateral  that  may be
                  perfected by filing a financing statement.

         (q)      Conversion of the Note.  The principal and interest  under the
                  Note are convertible  into the capital stock of the Company as
                  provided under the terms of the Note.

         (r)      Disclosure.  This Agreement with the Disclosure Schedule,  the
                  Note, the  Registration  Rights  Agreement dated September 28,
                  2000 by and between HP and the  Company,  the UCC-1  financing
                  statements and other documents executed in connection with the
                  Note (collectively,  the "Transaction Documents"),  when taken
                  as a whole, do not contain any untrue  statement of a material
                  fact or omit to state a material  fact  necessary  in order to
                  make the statements contained herein or therein not misleading
                  in light of the circumstances under which they were made.

3.  Representations  and  Warranties  of HP. HP  represents  and warrants to the
Company that:

         (a)      Authority.  The execution,  delivery and  performance by HP of
                  each  Transaction  Document and the  consummation by HP of the
                  transactions  contemplated  thereby are within the power of HP
                  and have been duly authorized by all necessary  actions on the
                  part  of HP.  Each  Transaction  Document  executed,  or to be
                  executed,  by HP has  been  or  will  be,  duly  executed  and
                  delivered by HP and constitutes,  or will constitute, a legal,
                  valid and binding obligation of HP, enforceable  against HP in
                  accordance  with its terms,  except as limited by  bankruptcy,
                  insolvency or other laws of general application relating to or
                  affecting the enforcement of creditors'  rights  generally and
                  general principles of equity.

         (b)      Securities Law  Investment  Representations.  HP  acknowledges
                  that the Note and the Underlying  Stock have not been and will
                  not be registered  under the Securities Act, or the securities
                  laws  of  any  state  of  the  United   States  or  any  other
                  jurisdiction,  and  except,  with  respect  to the  Underlying
                  Stock, as provided in the Registration  Rights  Agreement,  HP
                  has no right to require such  registration.  HP is  purchasing
                  the Note and the  Underlying  Stock for HP's own  account  for
                  investment  and not for the  interest of any other  person and
                  not for  resale  to  others  or with a view to or for  sale in
                  connection  with  any  distribution   thereof.   HP  has  such
                  knowledge and experience in financial and business  matters so
                  as

                                      -8-
<PAGE>

                  to be  capable  of  evaluating  the  merits  and  risks of its
                  investment  and to bear the economic  risk of such  investment
                  for an indefinite period of time. HP is an Accredited Investor
                  (as  that  term  is  defined  in  Rule  501  of  Regulation  D
                  promulgated  under the Securities  Act). HP will not resell or
                  otherwise  dispose of the Note or any interest  therein or the
                  Underlying  Stock at any time unless (i) such  securities  are
                  subsequently   registered   under  the   Securities   Act  and
                  appropriate  state  securities laws, or (ii) an exemption from
                  registration  is available and, if the Company  requests,  the
                  Company receives an opinion of counsel reasonably satisfactory
                  to it that  such  exemption  is  available,  and  the  written
                  approval  of  the  Company  to any  transfer  has  first  been
                  obtained.

4.       Conditions to Closings.

         (a)      Conditions  of HP to Closing.  HP's  obligation  hereunder  to
                  advance  funds to the Company is subject to the  satisfaction,
                  on or  prior  to  the  Closing  Date,  of  all  the  following
                  conditions,  any of which may be waived in whole or in part by
                  HP:

                  (i)      Representations and Warranties;  Covenants; Officer's
                           Certificate; Opinion of Counsel.

                           (A)      The  representations  and warranties made by
                                    the   Company   herein   or  in  any   other
                                    Transaction   Document  shall  be  true  and
                                    correct as of the Closing Date.

                           (B)      The  Company   shall  have   performed   all
                                    covenants  set  forth  in  the   Transaction
                                    Documents  required to be performed prior to
                                    the Closing.

                           (C)      A duly  authorized  officer  of the  Company
                                    shall have  executed  and  delivered to HP a
                                    certificate,  dated the Closing  Date,  with
                                    respect   to   the   satisfaction   of   the
                                    conditions set forth herein.

                           (D)      HP shall have received an opinion of counsel
                                    to the Company regarding the  enforceability
                                    and due  authorization  of the  transactions
                                    contemplated by the Transaction Documents in
                                    substantially  the form  attached  hereto as
                                    Exhibit A.

                  (ii)     Transaction  Documents.  The Company  shall have duly
                           executed and delivered to HP the following documents:

                                      -9-
<PAGE>

                           (A)      This Agreement;

                           (B)      The Note;

                           (C)      The Registration Rights Agreement;

                           (D)      UCC-1   financing   statements   and   other
                                    documents  and  instruments   which  HP  may
                                    reasonably  request to perfect its  security
                                    interest in the collateral  described in the
                                    Note; and

                           (E)      Such  landlord  waivers and similar  waivers
                                    from owners and lessees of properties  where
                                    Collateral is located, as may be required by
                                    HP.

                  (iii)    Corporate Documents. The Company shall have delivered
                           to HP each of the following:

                           (A)      The  Certificate  of  Incorporation  of  the
                                    Company, certified as of a recent date prior
                                    to the Closing Date by the  Secretary of the
                                    State of Delaware;

                           (B)      A Certificate  of Good Standing with respect
                                    to the  Company,  certified  as of a  recent
                                    date  prior  to  the  Closing  Date  by  the
                                    Secretary of the State of Delaware;

                           (C)      A  certificate   of  the  Secretary  of  the
                                    Company,  dated the Closing Date, certifying
                                    that (1) the Certificate of Incorporation of
                                    the Company, delivered to HP pursuant to the
                                    terms  hereof,  is in full  force and effect
                                    and  has  not  been  amended,  supplemented,
                                    revoked or  repealed  since the date of such
                                    certification;  (2)  attached  thereto  is a
                                    true and  correct  copy of the Bylaws of the
                                    Company  as in effect on the  Closing  Date;
                                    (3)  attached  thereto is a true and correct
                                    copy  of  resolutions  duly  adopted  by the
                                    Board   of    Directors   of   the   Company
                                    authorizing  the  execution,  delivery,  and
                                    performance by the Company of this Agreement
                                    and the other Transaction  Documents and the
                                    consummation     of     the     transactions
                                    contemplated  hereby  and  thereby;  and (4)
                                    there are no proceedings for the dissolution
                                    or  liquidation  of the  Company  that  have
                                    commenced   or,  to  the  knowledge  of  the
                                    Company, been threatened.

                                      -10-
<PAGE>

         (b)      The Company  Conditions to Closing.  The Company's  obligation
                  hereunder  to  accept  the  advance  of the  funds  from HP is
                  subject to  satisfaction,  on or prior to the Closing Date, of
                  all of the following conditions, any of which may be waived in
                  whole or part by the Company:

                  (i)      Representations and Warranties; Covenants; Documents.

                           (A)      The  representations  and warranties made by
                                    HP  herein  and in the  Registration  Rights
                                    Agreement  shall be true and  correct  as of
                                    the Closing Date.

                           (B)      HP shall have  performed  all  covenants set
                                    forth  in  this  Agreement  required  to  be
                                    performed prior to the Closing.

                           (C)      HP shall have duly executed and delivered to
                                    the Company this Agreement.

5.       Covenants.

         (a)      Financial  Statements.  The Company will furnish the following
                  reports to HP for so long as any amounts are outstanding under
                  the Note and until conversion of the Note by HP:

                  (i)      Annual.  As soon as practicable after the end of each
                           fiscal year of the  Company,  and in any event within
                           ninety (90) days  thereafter or at such later date as
                           financial   statements   such  are  filed   with  the
                           Securities  and  Exchange   Commission   pursuant  to
                           appropriate  extensions,a  consolidated balance sheet
                           of the  Company and its  subsidiaries,  if any, as of
                           the end of such fiscal year and  statements of income
                           and  cash  flows  of the  Company  for  such  period,
                           prepared in accordance with GAAP consistently applied
                           and setting  forth in each case in  comparative  form
                           the  figures for the  previous  fiscal  year,  all in
                           reasonable  detail  and  certified  by the  Company's
                           independent  public  accountants,  currently  Ernst &
                           Young LLP, and  reasonably  acceptable  to HP; and as
                           soon as practicable after the end of each fiscal year
                           of the  Company,  and in any event  within sixty (60)
                           days  thereafter  a  financial  plan,  including  and
                           operating  budget  and  business  plan for the fiscal
                           year which just began.

                  (ii)     Quarterly.  As soon as  practicable  after the end of
                           the  first,  second  and third  quarterly  accounting
                           periods in each  fiscal year of the  Company,  and in
                           any  event  within  thirty  (45) days  thereafter,  a
                           consolidated  balance  sheet of the  Company  and its

                                      -11-
<PAGE>

                           subsidiaries, if any, as of the end of each quarterly
                           period,  and  consolidated  statements  of income and
                           cash flows of the  Company and its  subsidiaries,  if
                           any, for such period and for the current  fiscal year
                           to date,  prepared in  accordance  with GAAP  (except
                           that  such  financial  statements  need  not  contain
                           footnotes required by GAAP or normal year-end closing
                           adjustments),  all in reasonable detail and certified
                           by the chief financial officer of the Company.

                  (iii)    Information  Provided to Shareholders.  Promptly upon
                           the  mailing  thereof  to  the  shareholders  of  the
                           Company, copies of all financial statements,  reports
                           and proxy statements so mailed.

                  (iv)     Securities Filings. Promptly upon the filing thereof,
                           copies of all reports on Forms 10-KSB, 10-QSB and 8-K
                           (or their  equivalents)  which the Company shall have
                           filed with the Securities and Exchange Commission.

                  (v)      Other  Information.  Such  other  information  as  HP
                           reasonably requests.

6.       Miscellaneous.

         (a)      Confidentiality.  From and after the date  hereof,  each of HP
                  and the Company shall receive confidential  information of the
                  other  party.  For  purposes  hereof,  the  party,  disclosing
                  confidential  information shall be designated  "Discloser" and
                  the  party  receiving  such  information  shall be  designated
                  "Recipient".  Except with Discloser's  prior written approval,
                  and except as HP reasonably  determines  to be necessary  with
                  any  foreclosure  of its  security  interests  under the Note,
                  Recipient   shall   keep  all  of   Discloser's   confidential
                  information  confidential  and shall use such information only
                  for the  furtherance  of  business  relationships  between the
                  parties.  Recipient  shall  protect  Discloser's  confidential
                  information by using the same degree of care, but no less than
                  a reasonable  degree of care, to prevent the unauthorized use,
                  dissemination,  or  publication  of  Discloser's  confidential
                  information as Recipient uses to protect its own  confidential
                  information of a like nature.  Information shall not be deemed
                  confidential  if it (i)  is or  becomes  a  matter  of  public
                  knowledge  through no fault of  Recipient;  (ii) is rightfully
                  received by  Recipient  from a third  party  without a duty of
                  confidentiality; (iii) is disclosed under operation of law; or
                  (iv) is independently developed by Recipient. Recipient agrees
                  that Discloser is entitled,  in addition to any other remedies
                  available  to it either  at law or in  equity,  to  injunctive
                  relief  restraining  Recipient from violation of

                                      -12-
<PAGE>

                  the foregoing restrictions.

         (b)      Waivers and Amendments.  No provision of this Agreement may be
                  amended or modified without the written consent of the Company
                  and HP. No provision of this  Agreement  may be waived  unless
                  such  waiver  is in  writing  and  then  only  to  the  extent
                  specifically  set  forth  in  such  writing.   A  waiver  with
                  reference to one event shall not be construed as continuing or
                  as a  bar  to  or  waiver  of  any  right  or  remedy  as to a
                  subsequent event.

         (c)      Governing Law. This  Agreement and all actions  arising out of
                  or in connection  with this Agreement shall be governed by and
                  construed  in  accordance  with  the  laws  of  the  State  of
                  Delaware, without regard to the conflicts of law provisions of
                  the State of Delaware or of any other state.

         (d)      Waiver  of  Jury  Trial.   HP  and  the  Company  each  hereby
                  irrevocably  waives  any and all right to trial by jury in any
                  legal proceeding  arising out of or relating to this Agreement
                  or the transactions  contemplated  hereby,  whether the claims
                  raised in such  proceeding  are based on  contract,  tort,  or
                  otherwise.

         (e)      Survival. The representations and warranties made herein shall
                  survive the execution and delivery of this Agreement.

         (f)      Successors and Assigns. Subject to the restriction on transfer
                  described in Section 8(g) below, the rights and obligations of
                  the  Company and HP shall be binding  upon and  benefit  their
                  respective successors,  assigned, heirs,  administrators,  and
                  transferees.

         (g)      Assignment by HP and the Company.  Neither the Note nor any of
                  the rights,  interests or obligations  thereunder or hereunder
                  or under any other  Transaction  Document may be assigned,  by
                  operation  of law or  otherwise,  in whole or in part,  by the
                  Company without the prior written consent of HP (except in the
                  case  of the  Company  to a  successor  entity  pursuant  to a
                  migratory merger to another state).

         (h)      Entire Agreement.  This Agreement,  together with the Note and
                  the  other  Transaction  Documents,  constitute  the  full and
                  entire  understanding  and agreement  between the parties with
                  regard to the subjects hereof and thereof.

         (i)      Notices. Any notice,  request, or other communication required
                  or permitted hereunder shall be in writing and shall be deemed
                  to have

                                      -13-
<PAGE>

                  been  duly  given  on  the  date  of  delivery  if  personally
                  delivered,  on the  date of being  faxed if sent by  confirmed
                  fax,  on the first  business  day after  being sent if sent by
                  recognized  overnight  courier,  and on the third business day
                  after being mailed if sent by  registered  or certified  mail,
                  postage  prepaid,  addressed (i) if to HP to:  Hewlett-Packard
                  Company,  333 Logue  Avenue,  MS32,  Mountain  View, CA 94043,
                  Attention: General Manager, fax number, (650)919-8013;  with a
                  copy to Hewlett-Packard  Company, 3000 Hanover Street, MS20BQ,
                  Palo Alto, CA 94304,  Attention  General  Counsel,  fax number
                  (650)857-4392, or (ii) if to the Company to: SmartServ Online,
                  Inc., One Station Place, Stamford, CT 06902, Attention:  Chief
                  financial    Officer    and   General    Counsel,    facsimile
                  (203)353-5962.

         (j)      Expenses.  Each party shall bear and pay its own legal fees in
                  connection   with  the   negotiation  and  execution  of  this
                  Agreement and the other Transaction Documents.

         (k)      Severability  of  this  Agreement.  If any  provision  of this
                  agreement  shall  be  judicially  determined  to  be  invalid,
                  illegal  or   unenforceable,   the   validity,   legality  and
                  enforceability  of the remaining  provisions  shall not in any
                  way be affected or impaired thereby.

         (l)      Counterparts.  This Agreement may be executed in any number of
                  counterparts,  each of which shall be an  original  but all of
                  which together shall be deemed to constitute one instrument.

                                      -14-
<PAGE>

         IN WITNESS  WHEREOF,  each of the parties has caused this Note Purchase
Agreement   to  be  duly   executed  and   delivered  by  its  duly   authorized
representative as of the date first written above.

HEWLETT-PACKARD COMPANY                      SMARTSERV ONLINE, INC.

By: /s/ Craig A. White
     ---------------------------
Name:  Craig A. White                        By: /s/ Thomas W. Haller
     ---------------------------                ---------------------------
Title: Vice President & GM                   Name:   Thomas W. Haller
     ---------------------------                ---------------------------
                                             Title:  Vice President, Chief
                                                     Accounting Officer

                                      -15-
<PAGE>

                                   SCHEDULE 1

                               Disclosure Schedule

                                      -16-
<PAGE>

                                    EXHIBIT A

                               OPINION OF COUNSEL

                                       The Chrysler Building
                                       405 Lexington Avenue, New York, NY  10174
                                       (212) 704-6000 Fax (212) 704-6288

                                                              September 28, 2000

Hewlett-Packard Company
Financing & Complements Group
333 Logue Avenue
Mountain View, CA 94043

                  RE:      SMARTSERV ONLINE, INC.

Ladies and Gentlemen:

                  We have acted as counsel to SmartServ Online, Inc., a Delaware
corporation (the "COMPANY"), in connection with (i) its issuance and sale to you
of that certain  Convertible  Secured  U.S.  $20,000,000  Promissory  Note dated
September  28,  2000  (the  "NOTE"),  pursuant  to that  certain  Note  Purchase
Agreement  between  the  Company  and you dated as of  September  28,  2000 (the
"PURCHASE  AGREEMENT"),  and that certain  Registration Rights Agreement between
the Company and you dated as of  September  28, 2000 (the  "REGISTRATION  RIGHTS
AGREEMENT"),   all  of  which   collectively  are  referred  to  herein  as  the
("TRANSACTION DOCUMENTS") and (ii) the transactions contemplated therein.

                  This opinion is being rendered to you in  satisfaction  of the
closing  conditions  set forth in  Section  4(a)(i) of the  Purchase  Agreement.
Capitalized  terms used herein and not otherwise  defined  herein shall have the
respective  meanings  assigned to such terms in the  Purchase  Agreement  or the
NYUCC (as hereinafter defined),  as applicable.  This opinion is intended solely
for the  information  of the  addressee and no one else is entitled to rely upon
it.  In any  event,  no part of this  opinion  may be  incorporated,  quoted  or
otherwise  referred to in any other document or  communication  or filed with or
otherwise  furnished to any  governmental  authority or other person without our
prior written  consent,  except that our prior written  consent is not needed to
furnish a copy of this opinion:  (a) in connection with any proceedings relating
to the Transaction Documents or the enforcement thereof, (b) to your accountants
and  counsel,   (c)  pursuant  to  judicial   process  or  government  order  or
requirement,  or (d) in the closing binders and other appropriate collections of
closing documents for the transaction.

                  In rendering the opinions  expressed  below,  we have examined
originals  or copies of (i) the  Purchase  Agreement  and the other  Transaction
Documents,  (ii) the UCC  financing  statements  and  attachments  executed  and
delivered  for filing with the  Secretary of State of the State of  Connecticut,
the Secretary of State of the State of New York and the County Clerk of New York
County (the "FINANCING  STATEMENTS"),  (iii) the Company's  Amended and Restated
Certificate  of   Incorporation,   as  amended  to  date  (the  "CERTIFICATE  OF
Incorporation"), as certified by the Secretary of State of the State of Delaware
on September 25, , 2000, (iv) the Company's By-laws, as amended (the "BY-LAWS"),
as certified by the Secretary of the Company on the date hereof (the Certificate
of Incorporation and the By-Laws, collectively, the ("GOVERNING DOCUMENTS"), (v)
resolutions  adopted by the Company's Board of Directors in a Unanimous  Written
Consent of the Board of Directors of the Company dated as of September 15, 2000,
authorizing  execution and delivery of the Purchase Agreement,  the Note and the
Registration Rights Agreement and consummation of the transactions  contemplated
thereby,  as certified by the Secretary of the Company on the date hereof (items
(iii),  (iv)  and  (v)  may  be  referred  to  collectively  as  the

<PAGE>

                                      -2-
                                                              September 28, 2000

"CORPORATE  DOCUMENTS"),  (vi)  a  certificate  from  Thomas  W.  Haller,  Chief
Accounting  Officer and Richard D. Kerschner,  Secretary,  to us (the "OFFICERS'
CERTIFICATE"),  (vii) the agreements,  indentures and other instruments to which
the  Company  is a  party  or by  which  it is  bound,  identified  to us in the
Officers' Certificate as a material agreement (the "MATERIAL  AGREEMENTS"),  and
(viii) Court and governmental orders, writs,  judgments and decrees specifically
directed to the Company and  identified  to us in the Officers'  Certificate  as
applicable  to the  Company  (the  "COURT  ORDERS").  In  rendering  the opinion
regarding  the valid  existence and good standing of the Company in the State of
Delaware and the good standing of the Company in the State of Connecticut,  each
contained  in  paragraph  (1) below,  we have relied  solely upon good  standing
certificates  issued by the  Secretary of State of the State of Delaware and the
Secretary  of State of the  State  of  Connecticut  on  September  18,  2000 and
September  25, 2000,  respectively.  In rendering  the opinion in paragraph  (2)
below,  in  addition  to the  representations  of the  Company  in the  Purchase
Agreement and  telephone  conversations  with the transfer  agent for the Common
Stock of the Company,  we have relied  solely upon  resolutions  of the Board of
Directors  of the Company or excerpts  from the minutes of meetings of the Board
of Directors  of the Company  furnished to us by officers of the Company and the
representations  of such  officers  that the  authorizations  reflected  therein
remained  in full  force  and  effect  on the  date of  issuance  of the  shares
authorized  for  issuance  therein,  that  the  full  purchase  price  or  other
consideration  payable as provided  for in such  resolutions  and  excerpts  was
received by the Company,  that  anti-dilution  adjustments made to determine the
number of shares of Common  Stock  issued  upon the  exercise or  conversion  of
warrants,  options and the like were  properly made and that no shares of Common
Stock have been issued since the Company's  initial public  offering as to which
we have not rendered an opinion to the Company's transfer agent.

                  We have also made such examination of applicable  statutes and
regulations  currently in effect as we deemed necessary under customary practice
to enable us to render this Opinion Letter.  In such examination we have assumed
the  genuineness  of all  signatures,  the  legal  capacity  of  all  individual
signatories,  the factual accuracy of all documents submitted to us as originals
and the conformity with the original documents of all documents  submitted to us
as  copies  whether  or not  certified.  Except as  expressly  set forth in this
opinion,  we have not undertaken any independent  investigation,  examination or
inquiry to confirm or determine the existence or absence of any facts,  searched
any of the books,  records or files of the Company,  searched any internal file,
court  file,  public  record or other  information  collection,  or  examined or
reviewed any communication,  instrument,  agreement,  document,  file, financial
statement,  tax return,  minute,  record,  lien, or other item. The  Transaction
Documents, Financing Statements, Corporate Documents, Material Agreements, Court
Orders and UCC  Searches  (as  hereinafter  defined) are the only items of their
respective types reviewed by us in connection with or covered by this opinion.

                  Where  reference is made in this opinion to matters  within or
to our knowledge, or to facts or circumstances known to us or which have come to
our attention,  such reference means the actual knowledge,  without  independent
review or verification,  of those attorneys currently in our firm who have given
substantive  attention to the  preparation  and  negotiation of the  Transaction
Documents.  By actual knowledge,  we mean the conscious awareness of information
about either fact or law  (depending  upon usage) of any such  attorney  without
undertaking  any  investigation  to  determine  the  existence or absence of any
facts, either within our firm or otherwise,  recognizing that what is "known" at
one time may not be in the mind or may be forgotten altogether at another time.

                  For purposes of this opinion: (a) "NYUCC" shall mean Article 9
of the Uniform  Commercial  Code of the State of New York  (excluding  any other
statutes  referenced  therein and the effect  thereof),  as  currently in effect
(which does not include the currently  proposed  Revised UCC Article 9); and (b)
"UCC" shall mean the  Uniform  Commercial  Code  (excluding  any other  statutes
referenced  and the  effect  thereof),  as  currently  in effect in any state or
district  of the United  States of America  (which in the case of the UCC of any
state or district  other than New Yorkwe have assumed (with your consent) is the
same as the NYUCC (aside from our Limited CNUCC Review as hereinafter  defined),
as more fully described below).

<PAGE>

                                      -3-
                                                              September 28, 2000

                  We express no opinion respecting any Transaction  Document, or
any right,  power,  privilege,  remedy or interest  intended or  purported to be
created thereunder,  insofar as any term or provision thereof (a) may be limited
(i) by applicable  bankruptcy,  insolvency,  moratorium,  fraudulent conveyance,
reorganization or other laws or judicial decisions affecting any rights, powers,
privileges,  remedies and  interests of  creditors  generally,  (ii) by rules or
principles of equity or public policy  affecting the  enforcement of obligations
generally, whether at law, in equity or otherwise including (without limitation)
those  pertaining  to  materiality,   good  faith,   fair  dealing,   diligence,
reasonableness,  unconscionability,  impossibility of performance, redemption or
other cure, suretyship rights or defenses,  waiver, laches, estoppel or judicial
deference,  or (iii) by the exercise of the discretionary powers of any court or
other authority before which may be brought any proceeding  seeking equitable or
other remedies, including, without limitation, specific performance,  injunctive
relief,  indemnification,  subrogation  and  contribution,  (b)  conflicts or is
inconsistent with any term or provision of any other Transaction Document or any
UCC financing  statement,  or (c)  purportedly  grants to a party,  or permits a
party to exercise  or  otherwise  enforce or pursue,  specific  rights,  powers,
privileges,  remedies or interests in a manner  impermissible under or otherwise
inconsistent  with applicable laws or public policy from time to time in effect,
including (without limitation) agreements to agree,  reformation,  severability,
exculpations  and  indemnifications,  penalties,  waivers,  releases,  powers of
attorney  and  collateral  disposition,   election  of  remedies,   non-judicial
remedies,  "time is of the essence" clauses,  and statutes of limitation waivers
or limit. Without limiting the foregoing,  with respect to the opinion expressed
in paragraph no. (4) of this Opinion  Letter,  we express no opinion  insofar as
the  enforceability of the  indemnification  and contribution  provisions in the
Registration  Rights  Agreement  may be limited by federal and state  securities
laws and the policies underlying such laws.

                  We have not examined  title to any asset or property or any of
the  books,  records  and files of the  Company  pertaining  thereto,  which may
include  invoices,  bills of sale and  other  documents  that may  evidence  the
purchase,  ownership or disposition  of such assets or  properties,  nor have we
examined any item of inventory,  equipment or other tangible  assets or property
of the Company.  We have assumed (with your consent) that each of the assets and
properties  of the Company (i)  exists,  (ii) is owned and (except as  otherwise
noted  below where the  relevant  security  interest  may be  perfected  only by
possession  of the item or  corresponding  document of title)  possessed  by the
Company,  and to or in which it has good and  sufficient  title and has "rights"
within the meaning of Section  9-203 of the NYUCC (or any provision of any other
relevant  UCC to the same  effect) and (iii) is located  where  represented  and
conforms to the descriptions in the Purchase Agreement.

                  We  have  commissioned   searches   respecting  UCC  financing
statement filings with the officials in the jurisdictions of Connecticut and New
York listed in Schedule A hereto through the indicated  search dates  respecting
the Company  (collectively,  the "UCC  SEARCHES").  Each of the UCC Searches was
conducted  by an  independent  firm not under our  control or  supervision.  Our
opinion (if any) with respect to, or to the extent affected by, the existence or
absence of any financing statement, mortgage, security interest, lease, license,
lien,  encumbrance,  adverse  claim,  interest  or other  condition,  defect  or
impairment of title or ownership  (each an "ADVERSE  CONDITION") is based solely
upon the UCC  Searches  and the factual  information  contained  in the Purchase
Agreement  and  the  schedules  thereto  or the  Officers'  Certificate  and the
schedules  thereto.  We have  assumed  (with  your  consent)  that the names and
addresses of the parties used in the UCC Searches and the jurisdictions searched
were complete and correct, the UCC Searches are sufficient and would disclose no
additional  Adverse  Condition if updated through the date of this opinion,  and
neither  party  to  the  Purchase   Agreement  has  any  knowledge   (actual  or
constructive) of any Adverse Condition, any other claim,  counterclaim,  defense
or other  condition,  defect or  impairment  of  rights,  or any  action,  suit,
litigation,  arbitration,  investigation  or other  proceeding not  specifically
disclosed in the UCC Searches,  the Purchase  Agreement or the schedules thereto
or this opinion.

                  To the  extent  our  opinions  below  relate to the  creation,
existence,  legality,  validity, binding effect,  enforceability,  perfection or
priority of any security interest or other lien, or to any

<PAGE>

                                      -4-
                                                              September 28, 2000

Transaction  Document  insofar as it pertains to any security  interest or other
lien,  our opinions are limited to: (a) the  security  interests  granted by the
Company  under  the Note  (excluding  (i)  fixtures,  (ii)  general  intangibles
consisting  of the  Company's  equipment  and  real  estate  leases,  and  (iii)
copyrights,  patents,  trademarks  and rights and  interests  therein)  in which
security  interests are governed by and perfectible under the NYUCC or any other
relevant UCC  (subject to our  assumptions  respecting  the UCCs of other states
below) by the filing of financing statements or by possession (collectively, the
"UCC COLLATERAL");  and (b) the UCC Proceeds (as hereinafter  defined).  We have
assumed (with your consent) that the Note reasonably identifies the intended UCC
Collateral. To the extent the UCC Collateral may be perfected under the NYUCC or
other relevant UCC by the filing of financing  statements,  we have assumed that
the Financing Statements  (including  attachments) (i) properly name the secured
party  and give an  address  from  which  information  concerning  the  security
interest may be obtained from such secured  party,  (ii)  properly  indicate the
type, or describe each of the items, of the intended UCC  Collateral,  (iii) are
sufficient  in form and content and satisfy all formal  requirements  for filing
under the  applicable  UCC (other than the NYUCC and based solely on the Limited
CNUCC Review (as hereinafter  defined) the Connecticut  UCC), and (iv) as of the
date of this opinion  will have been duly and timely filed with the  Secretaries
of State of the States of  Connecticut  and New York and the County Clerk of New
York County of the State of New York in the form executed and delivered.

                  To the extent the  security  interests  described  in the Note
consist of  proceeds,  our  opinions are limited to proceeds as defined in NYUCC
Section 9-306(1) from other UCC Collateral perfected as described above that are
either (i) identifiable  cash proceeds in which you have  permanently  perfected
your security  interests by possession within the applicable period of temporary
perfection,  if any, and (ii) non-cash proceeds if perfectable  solely by filing
in the  jurisdictions in which the UCC financing  statements have been filed and
such proceeds are sufficiently described in such statements (collectively,  "UCC
PROCEEDS").  Please note, however,  that "software" is not a recognized UCC type
of collateral under the current NYUCC, and interest and similar payments may not
be "proceeds"  under the NYUCC or any other relevant UCC. Please also note there
are various  provisions of applicable law under which security  interests in the
UCC Collateral or UCC Proceeds  (collectively,  the  "COLLATERAL") in the future
may  lapse or  otherwise  become  or be held  unenforceable  or  junior to other
security interests (through the action of a pledgor, the operation of applicable
law or otherwise).

                  We express no opinion  whatsoever with respect to: title to or
use of any  asset  or  property;  the  applicable  laws  of  any  county,  town,
municipality or other local or special political subdivision;  or the absence of
any security  interests or other liens or  encumbrances  (whether as part of our
opinions respecting the general  enforceability of any Transaction Document, the
absence of required approvals or filings, conflicting agreements, indentures and
other  instruments  to which the  Company is a party or by which the  Company is
bound or  otherwise),  other than  insofar as such liens may be subsumed  within
Material  Agreements and subject to our express  opinion in paragraph no. 7(iii)
below.  We express no opinion as to the legality,  validity,  binding  effect or
enforceability  of any  provision of any  Transaction  Document that purports to
select or create any  governing  law, any  jurisdiction  or venue other than New
York or any U.S. Federal court  jurisdiction or venue in any jurisdiction  where
the requisite  federal  requirements  have not been met.  Except for our express
opinions in  paragraph  no. (9) of this  Opinion  Letter,  we express no opinion
whatsoever with respect to the creation,  existence,  permissibility,  legality,
validity, binding effect, enforceability, perfection or priority of any security
interest or other lien or  encumbrance  purported to be created or assumed under
any Transaction Document or the absence of any security interests or other liens
or  encumbrances  (whether  as  part  of our  opinions  respecting  the  general
enforceability of the Transaction  Documents,  the absence of required approvals
or filings,  conflicting Material Agreements or Court Orders, or otherwise).  We
express  no opinion  whatsoever  as to any  matter  assumed  by us, any  factual
information  provided to us or any other matter  except as  expressly  set forth
herein.  We express no opinion  whatsoever as to "Revised Article 9" of the UCC,
as approved  by the  American  Law  Institute  and the  National  Conference  of
Commissioners  on Uniform State Laws, which has yet to be adopted as part of the
NYUCC.  We note,  however,  that Revised  Article

<PAGE>
                                      -5-

                                                              September 28, 2000

9 has been adopted in Delaware  (among other places) and introduced this year in
the New York  legislature.  We express no opinion with regard to any  applicable
Blue Sky laws.

                  We have assumed that: (i)  Hewlett-Packard  Company ("HP") (a)
is duly organized,  validly existing and in good standing in its jurisdiction of
organization  and is qualified to do business and licensed in each  jurisdiction
necessary to its  performance or enforcement of the Transaction  Documents,  (b)
has full corporate  power and authority and has been duly authorized to execute,
deliver and perform its  obligations  under the Transaction  Documents,  (c) has
satisfied all legal  requirements  applicable  to it to the extent  necessary to
make the  Transaction  Documents  enforceable by or against it, (d) is acting on
behalf of itself as  principal  and (e) is  properly  identified  with its true,
complete and correct  legal name,  jurisdiction  of  organization  and principal
place of business;  (ii) the  Transaction  Documents have been duly executed and
delivered  by HP and  are  the  legal,  valid  and  binding  obligations  of HP,
enforceable as written against HP in accordance with their  respective terms and
provisions;  (iii)  each  certificate,  report or other  document  issued by any
governmental  official,  office or agency concerning any person, asset, property
or status  is, and all public  records  (including  their  proper  indexing  and
filing) are, accurate,  complete,  authentic and current and remain so as of the
date   hereof;   (iv)   there  has  not  been  any   mutual   mistake  of  fact,
misunderstanding,  fraud,  duress or undue  influence,  and the  conduct  of the
parties to the  Transaction  Documents has complied with any requirement of good
faith,  fair  dealing  and  conscionability;  (v) there are no  written  or oral
agreements or  understandings  not known to us that would define,  supplement or
qualify any term or provision of the Transaction  Documents;  (vi) no party will
in the future  take any  action  (including  a  decision  not to act) that would
result in any violation of applicable law or constitute any violation or default
under any other Transaction Document,  Corporate Document, Material Agreement or
Court Order (1) if such action is not specifically required (including,  without
limitation,  any action that is prohibited or permissible) under any Transaction
Document,  or (2) if more  than one  action  can  accomplish  the same  specific
requirement  or result  under a  Transaction  Document  and at least one of them
would not result in any such  violation  or  default;  and (vii) the  conditions
precedent  to the  effectiveness  of the  Transaction  Documents  have been duly
satisfied or waived. The assumptions and qualifications expressly stated in this
Opinion  Letter are in addition to (and not in lieu or limitation of) any others
presumed by customary usage.

                  As to any facts relevant to the opinions  expressed  below, we
have  relied  upon  certificates  and written  and/or  oral  representations  of
officers of the Company (including the  representations of the Company set forth
in  the   Transaction   Documents)   and  public   officials   as  well  as  the
representations  made by HP in the  Transaction  Documents  and  the  Disclosure
Schedule to the Note Purchase Agreement (the "DISCLOSURE SCHEDULE"). We have not
conducted  any  independent  inquiry or  investigation  of any matter  except as
otherwise expressly set forth herein.

                  Our opinions are limited to the date hereof,  and we do not in
any event  undertake  to advise you of any facts or  circumstances  occurring or
coming to our attention or any changes in applicable  law subsequent to the date
hereof.  Whenever any opinion of ours refers to or includes the  performance  of
any obligation or the issuance of any  instrument or certificate  after the date
hereof,  it is  based  on our  assumption  that:  (i)  all  relevant  facts  and
circumstances  will be the same at such future time as we believe  them to be on
the date hereof  (except as noted in the next clause (ii);  (ii) each party will
have taken all future or further actions necessary or appropriate thereto; (iii)
no  relevant  liens,  filings,  approvals,  permits or  similar  items will have
expired or otherwise adversely changed and (iv) no changes will have occurred in
the Purchase Agreement,  any other Transaction Document, any Corporate Document,
Material Agreement or Court Order, or any other relevant  documents,  applicable
law, trade usage or course of dealings.

                  We  call to  your  attention  the  fact  that  we are  counsel
admitted  to practice  only in the State of New York,  and we do not express any
opinion with respect to the applicable  laws, or the effect or  applicability of
the laws,  of any  jurisdiction  other than those of the State of New York,  the
General  Corporation  Law of the State of Delaware  and the Federal  laws of the
United States of

<PAGE>

                                      -6-

                                                              September 28, 2000

America.  We note that the Transaction  Documents  purport to be governed by the
applicable  laws of the State of Delaware and that UCC financing  statements are
to be filed in  jurisdictions  other  than New York.  For the  purposes  of this
opinion,  however,  we have (i) briefly  reviewed the text of Sections 9-401 and
9-402 of the  Connecticut  UCC as published in the online  version of Westlaw as
posted on September  25,  2000,  but we have not  reviewed  the  annotations  or
statutory  history thereof or any regulatory,  case law or other  interpretation
thereof, or any description, section or other cross reference or other reference
thereon (the "LIMITED CNUCC REVIEW"), and (ii) we have assumed with your consent
(and without independent investigation, even though we have reason to believe it
may not be the case,  except for the  provisions  reviewed in our Limited  CNUCC
Review) that the applicable  law of the State of Delaware  (other than the DGCL)
and State of Connecticut is the same as the applicable  laws of the State of New
York,  including the NYUCC (other than the express UCC provisions subject to our
Limited CNUCC Review.

                  Based  upon the  foregoing  and  subject  to the  assumptions,
limitations,  qualifications and exceptions stated herein, we are of the opinion
that as of the date hereof:

                  (1) The Company is a corporation  incorporated  and is validly
existing  as a  corporation  in good  standing  under  the laws of the  State of
Delaware and has the requisite corporate power and authority to own or lease its
properties  (as such  properties  are known to us, based solely on the Officers'
Certificate)  and to conduct its business as, to our knowledge  (based solely on
the  Officers'  Certificate),  it is  presently  conducted.  The Company is duly
qualified  or  registered  to  transact  business  and is in good  standing as a
foreign corporation in the State of Connecticut.

                  (2) The  authorized  capital  stock of the  Company  is as set
forth in the Disclosure Schedule. Except as provided in the Disclosure Schedule,
there  are  (i)  no  outstanding  warrants,   options,   conversion  privileges,
preemptive  rights or other  rights or  agreements  known to us to  purchase  or
otherwise acquire or issue any equity securities of the Company from it pursuant
to any of the  Governing  Documents  or any  Material  Agreement  other than the
Transaction Documents, and (ii) to our knowledge no restrictions upon the voting
or transfer of any shares of capital stock of the Company pursuant to any of the
Governing  Documents  or any  Material  Agreement  other  than  the  Transaction
Documents.

                  (3)  The  Company  has  the  requisite   corporate  power  and
authority to execute,  deliver and perform its obligations under the Transaction
Documents,  to issue and sell the Note pursuant to the Purchase Agreement and to
perform its obligations  thereunder,  including the issuance and delivery of the
shares of capital stock of the Company that may be issued upon conversion of the
Note, in whole or in part (the "CONVERSION SHARES").

                  (4)  Each  of  the   Transaction   Documents   has  been  duly
authorized,  executed and delivered by the Company, and is the legally valid and
binding obligation of the Company, enforceable against the Company in accordance
with its respective terms and provisions.

                  (5) The Board of Directors of the Company has duly  authorized
the issuance of the Conversion  Shares upon  conversion of the Note, in whole or
in part, in accordance  with the respective  terms  thereof,  and such number of
Conversion  Shares as may be required to be issued upon  conversion  of the Note
has been duly reserved for issuance by the Company.  The Conversion Shares, when
issued,  sold and delivered in  accordance  with the terms and fully paid for by
delivery to the Company of the consideration expressed in the Note, will be duly
and  validly  issued,  fully  paid and  nonassessable,  and not  subject  to any
preemptive rights under the Corporate Documents.

                  (6) Based upon the  representations  contained in Section 3 of
the Purchase Agreement, (i) the offer, sale, issuance and delivery to you of the
Note in  accordance  with the  terms  and  provisions  of the Note and  Purchase
Agreement,  constitute transactions exempt from the registration requirements of
the Securities Act of 1933, as amended,  and (ii) assuming the conversion of the
Notes in accordance  with their terms and  provisions and no commission or other

<PAGE>

                                      -7-

                                                              September 28, 2000

remuneration  is paid or  given  directly  or  indirectly  for  soliciting  such
exchange,  the  Conversion  Shares will have been issued and delivered to you in
transactions exempt from the registration  requirements of the Securities Act of
1933, as amended.

                  (7) The  execution  and  delivery  of each of the  Transaction
Documents  by the Company,  the  issuance  and sale of the Note  pursuant to the
Purchase  Agreement and the performance by the Company of its obligations  under
the Transaction  Documents (including the issuance of the Conversion Shares upon
the conversion thereof),  will not result in (i) the violation by the Company of
its Governing  Documents,  (ii) the violation by the Company of any law, rule or
regulation of the United States or the State of New York or the Delaware General
Corporation  Law (other than federal  securities  laws,  which are  specifically
addressed  elsewhere  herein) or (iii) the  breach by the  Company of any of the
Material  Agreements  or Court Orders  provided  that we express no opinion with
respect  to any real  estate  lease of the  Company or  statutory  or common law
landlord's lien.

                  (8) Except for the filing of the Financing Statements,  to our
knowledge, no consent, approval,  authorization or order of, or filing with, any
governmental or public authority is required as a condition  precedent to, or in
connection  with,  the due  and  valid  execution  and  delivery  of each of the
Transaction Documents by the Company, the issuance and sale of the Note pursuant
to the Purchase  Agreement or the  performance by the Company of the Transaction
Documents, except such consents, approvals, authorizations, orders or filings as
have been obtained or made or as are required under federal and state securities
laws;  provided,  that the opinion contained in this paragraph does not apply to
the  applicability  of  the  federal  securities  laws  to the  issuance  of the
Conversion Securities (which is covered solely by paragraph no. (6) above).

                  The Financing Statements are in an appropriate form for filing
in the office of the  Secretary of State of the State of New York and the County
Clerk of New York County,  and based  solely on our Limited  CNUCC  Review,  the
Secretary of State of the State of  Connecticut.  Valid security  interests have
been granted in the UCC Collateral pursuant to the Note, enforceable against the
Company in accordance with their respective terms and provisions;  to the extent
such  Collateral  may be perfected  under the NYUCC or other relevant UCC by the
filing  of  financing  statements,  then upon the due and  timely  filing of the
Financing  Statements  respecting the Company with the Secretary of State of the
State of New York and the County Clerk of New York  County,  and based solely on
our Limited  CNUCC Review,  the Secretary of State of the State of  Connecticut,
those  security  interests  will be perfected in such  Collateral  to the extent
described  in  those   statements   and  located  or  deemed   located  in  such
jurisdictions.

                  This opinion letter is limited to the matters expressly stated
herein,  and no  opinion  is  inferred  or may be  implied  beyond  the  matters
expressly stated herein.

                                                               Very truly yours,

                                                            /s/PARKER CHAPIN LLP
                                                               PARKER CHAPIN LLP

<PAGE>

                                      -8-
                                                              September 28, 2000

                                   SCHEDULE A

Secretary of State of the State of Connecticut, through 9/21/2000

Secretary of State of the State of New York, through 9/26/2000

County Clerk of New York County, through 8/29/2000

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