Document:

EXHIBIT 4.6

                                                                  EXECUTION COPY

                            STOCK PURCHASE AGREEMENT

         This STOCK PURCHASE AGREEMENT (this  "Agreement"),  dated as of May 12,
2000, among SMARTSERV ONLINE,  INC., a Delaware  corporation (the "Company") and
the investors listed on Schedule A hereto  (collectively,  the "Investors",  and
each,  individually,  an  "Investor").  The term "Investor" as used herein shall
further include any Affiliate or member of an Affiliated  Group of such Investor
and any permitted transferee of any such Investor.

                                    RECITALS:
                                    ---------

         In  consideration  of the mutual  covenants  and  agreements  set forth
herein  and  for  other  good  and  valuable  consideration,   the  receipt  and
sufficiency of which are hereby acknowledged,  and intending to be legally bound
hereby, the parties agree as follows:

                                    ARTICLE I

                           PURCHASE AND SALE OF SHARES
                           ---------------------------

         Section 1.1 Purchase and Sale.  The Company  hereby agrees to issue and
sell to each Investor and, subject to all of the terms and conditions hereof and
in  reliance  on the  representations  and  warranties  set forth or referred to
herein,  each  Investor  severally  agrees  to  purchase  such  number of shares
(collectively,  the "Purchased Shares") of the Common Stock, par value $0.01 per
share, of the Company  ("Common  Stock") as is equal to the result obtained when
the aggregate  purchase  price (as to each  Investor,  the  "Aggregate  Purchase
Price") being paid by each such Investor (as set forth opposite such  Investor's
name on Schedule A hereto) is divided by the "Per Share Purchase Price" (as such
term is defined in Section 1.2, below) therefor.  The term "Purchased Shares" as
used in this  Agreement  also  includes any  securities  issued or issuable with
respect to the original  Purchased  Shares upon the  occurrence of an Adjustment
Event and any  securities  into which any of the original  Purchased  Shares are
converted  or  convertible,  directly  or  indirectly,  or for  which any of the
original Purchased Shares are exchanged or exchangeable, directly or indirectly.

         Section 1.2  Purchase  Price.  The  purchase  price per share (the "Per
Share  Purchase  Price") to be paid at Closing by the  Investors for each of the
Purchased Shares shall be equal to $49.50 per share of Common Stock (as adjusted
from time to time on the occurrence of an Adjustment  Event  occurring after the
execution hereof and at or before Closing).

         Section  1.3  Closing.  The  purchase  and sale of the shares of Common
Stock  constituting  the Investment will take place at a closing (the "Closing")
at the offices of Bingham Dana LLP,  counsel to TecCapital,  at 399 Park Avenue,
New York,  New York 10022,  at 10:00 A.M. on May 12, 2000.  The date and time of
Closing are referred to herein as the "Closing Date."

                                   ARTICLE II

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY
                  ---------------------------------------------

         The Company represents and warrants to the Investors as follows,  which
representations and warranties are true as of the date hereof and as of Closing:

         Section 2.1 Corporate  Organization.  The Company is a corporation duly
incorporated,

<PAGE>

validly  existing and  subsisting  under the laws of the State of Delaware.  The
Company has all  requisite  power and  authority  to own,  operate and lease its
properties  and to conduct its business as currently  conducted.  The Company is
duly  qualified  or  licensed  to do  business  and is in good  standing in each
jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such licensing or qualification, except to the extent that the
failure to be so qualified or licensed would not have a Material  Adverse Effect
(as defined  below).  The Company has  delivered to the  Investors  complete and
correct  copies of its Amended and Restated  Certificate  of  Incorporation  and
By-laws,  as in effect on the date hereof. As used in this Agreement,  "Material
Adverse  Effect" means any event,  circumstance,  change,  development or effect
which  individually or in the aggregate could have a material  adverse effect on
the  business,  properties,  operations,  condition  (financial  or  otherwise),
assets, liabilities,  earnings or results of operations of the Company or on the
transactions contemplated hereby.

         Section 2.2  Subsidiaries.  The Company does not directly or indirectly
own  any  equity  or  similar  interest,  or any  interest  convertible  into or
exchangeable  or  exercisable  for  any  equity  or  similar  interest,  in  any
corporation,  partnership,  limited  liability  company,  joint venture or other
business association, entity or person.

         Section 2.3 Authorization. The Company has all requisite power and full
legal right to execute and deliver this Agreement and the Ancillary  Agreements,
and to perform all of its  obligations  hereunder  and  thereunder in accordance
with the respective  terms hereof and thereof.  This Agreement and the Ancillary
Agreements and the transactions  contemplated  hereby and thereby have been duly
approved and authorized by all requisite corporate and shareholder action on the
part of the Company,  and this Agreement has been duly executed and delivered by
the Company and constitutes, and each of the Ancillary Agreements, when executed
and delivered by the Company at the Closing,  will constitute,  a legal,  valid,
and binding obligation of the Company, enforceable against it in accordance with
its respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization,  moratorium, liquidation or similar laws
relating  to the  enforcement  of  creditors'  rights and  remedies  or by other
equitable  principles  of general  application.  The  execution,  delivery,  and
performance  by the Company of this  Agreement and the  Ancillary  Agreements in
accordance with their  respective  terms, and the consummation by the Company of
the  transactions  contemplated  hereby or  thereby,  will not  result  (with or
without  the  giving of  notice  or the lapse of time or both) in any  conflict,
violation,  breach, or default, or the creation of any Lien, or the termination,
acceleration,  vesting, or modification of any right or obligation,  under or in
respect  of (x)  the  charter  documents  or  by-laws  of the  Company,  (y) any
judgment,  decree, order, statute,  rule, or regulation binding on or applicable
to the Company,  or (z) any  agreement or  instrument  to which the Company is a
party or by which it or any of its assets is or are bound.

         Section 2.4 Capitalization.  (a) Immediately prior to the Closing,  not
giving  effect to the sale and  purchase of the  Purchased  Shares or any of the
other Acquired Securities provided for in this Agreement, the authorized and the
outstanding capital stock of the Company (on a Fully Diluted Basis including all
Derivative  Securities)  will be as set forth in Schedule  2.4(a),  and all such
outstanding shares of capital stock will be owned (of record) by the persons and
in the amounts there  indicated.  All such  outstanding  shares of capital stock
will be duly authorized, validly issued, fully paid, and nonassessable, and will
have been issued free and clear of Liens. No adjustment has previously been made
(or should have been made) nor will any  adjustment  be required to be made as a
result of the Company's  issuance of the  Purchased  Shares to the rate at which
any shares of any class of the equity securities of the Company,  subscriptions,
options,  warrants, calls, commitments or agreements or Derivative Securities of
the Company are  convertible  into or  exercisable  for shares of Common  Stock,
Derivative  Securities  or shares of other equity  securities of the Company (by
reason of any "anti-dilution" provisions or agreements or otherwise).

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                  (b) Except as set forth on Schedule  2.4(b),  the Company does
not have, is not bound by, and has no obligation to grant or enter into, any (i)
outstanding subscriptions,  options, warrants, calls, commitments, or agreements
of any  character  calling  for it to issue,  deliver,  or sell,  or cause to be
issued,  delivered,  or sold,  any shares of its capital  stock,  any membership
interests  or any other  equity  security,  or any  securities  described in the
following  clause,  or (ii) securities  convertible  into,  exchangeable for, or
representing  the right to subscribe  for,  purchase,  or otherwise  acquire any
shares of its  capital  stock,  any  membership  interests  or any other  equity
security.

                  (c) Except as set forth in  Schedule  2.4(c),  the Company (i)
has no outstanding obligations, contractual or otherwise, to repurchase, redeem,
or otherwise  acquire any shares of capital stock or other equity  securities of
the Company,  (ii) is not a party to or bound by, and has no  knowledge  of, any
agreement or  instrument  relating to the voting of any of its  securities,  and
(iii) is not a party to or bound by any agreement or instrument  under which any
person has the right to require it to effect,  or to include any securities held
by such person in, any registration under the Securities Act. There are no other
agreements,  contracts, instruments or documents to which the Company is a party
or of which it has  knowledge,  except as set forth in  Schedule  2.4(c),  which
govern or affect in any way the rights of the holders of  securities,  including
any class of capital stock, of the Company.

                  (d)      Intentionally left blank.

                  (e) All of the  outstanding  shares of capital stock and other
securities  of the Company were  offered,  issued,  and sold,  and the Purchased
Shares and other Acquired  Securities  have been offered and at the Closing will
be issued and sold, in compliance with (i) all applicable  preemptive or similar
rights of all persons,  and (ii) assuming the  truthfulness  and accuracy of the
representations  made by the  Investors  in  Section  3 hereof,  all  applicable
provisions of the Securities Act and the rules and regulations  thereunder,  and
all applicable state  securities laws and the rules and regulations  thereunder.
No person has any valid right to rescind  any  purchase of any shares of capital
stock or other securities of the Company.

                  (f) The Purchased  Shares and other Acquired  Securities being
issued and sold by the Company  hereunder shall,  upon issuance  pursuant to the
terms  hereof,   be  duly  authorized  and  validly   issued,   fully  paid  and
non-assessable  and free and clear of any  Lien,  security  interest,  option or
other charge or encumbrance.  The Common Stock issuable upon the exercise of the
Compensation  Warrants  (if any) shall be duly  authorized  and validly  issued,
fully paid and non-assessable and free and clear of any Lien, security interest,
option or other charge or encumbrance.  The issuance of the Purchased Shares and
other  Acquired  Securities  are not and will not be subject to any  pre-emptive
rights or  similar  rights  with  respect  to such  Purchased  Shares  and other
Acquired Securities.

         Section 2.5 Financial Statements.  The Company has previously delivered
to the  Investors  complete and correct  copies of its audited  balance  sheets,
statements of income and statements of cash flows as at and for the fiscal years
ended June 30, 1998 and 1999 and unaudited balance sheets, statements of income,
changes in  stockholders'equity  and cash flows as at and for the six (6) months
ended December 31, 1999. All such  financial  statements  were prepared from the
books  and  records  of the  Company,  in  conformity  with  GAAP  applied  on a
consistent  basis (except in the case of unaudited  interim  statements,  to the
extent  they  may  not  include   footnotes  or  may  be  condensed  or  summary
statements),  are complete and correct,  contain  provisions for all significant
accruals  or  contingencies  and fairly and  accurately  present  the  financial
position of the Company as of the  respective  dates  thereof and the results of
operations and cash flows of the Company for the periods shown therein. No event
has occurred and nothing has come to the attention of the Company since the date
of the Balance Sheet (as defined  below) that would indicate that such financial
statements are not true and correct as of the date hereof nor has there been any
change in the  condition of the Company since the date of the Balance Sheet

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<PAGE>

that would individually,  or in the aggregate with other events, have a Material
Adverse  Effect upon the  business,  financial  condition  or  prospects  of the
Company.

         Section 2.6 No  Undisclosed  or Contingent  Liabilities.  Except as set
forth in Schedule  2.6, the Company has no  liabilities  or  obligations  of any
nature (whether absolute, accrued, contingent or otherwise and whether due or to
become due) which are not fully  reflected  or  reserved  against on the balance
sheet as of December 31, 1999  (including  the footnotes and schedules  thereto,
the  "Balance  Sheet") in  accordance  with GAAP,  except  for  liabilities  and
obligations incurred in the ordinary course of business and consistent with past
practice  since the date thereof nor has there been any change in the  condition
of the Company since the date of the Balance Sheet that would  individually,  or
in the aggregate  with other  events,  have a Material  Adverse  Effect upon the
business, financial condition or prospects of the Company.

         Section 2.7 SEC Documents.  The Company has delivered or made available
to the Investors true and complete copies of all documents (the "SEC Documents")
filed by the Company with the  Securities and Exchange  Commission  (the "SEC").
The SEC Documents  comply in all material  respects with the requirements of the
Securities  Act of 1933,  as amended (the  "Securities  Act") or the  Securities
Exchange Act of 1934, as amended (the "Exchange  Act"),  as the case may be, and
rules and  regulations  of the SEC  promulgated  thereunder  and none of the SEC
Documents  contain any untrue  statement  of a material  fact or omit to state a
material  fact  required to be stated  therein or necessary in order to make the
statements  therein,  in light of the circumstances  under which they were made,
not  misleading.  The financial  statements  of the Company  included in the SEC
Documents comply as to form in all material respects with applicable  accounting
requirements  and the  published  rules  and  regulations  of the  SEC or  other
applicable rules and regulations with respect thereto.  The Company has effected
all  filings  required by the  Securities  Act,  Exchange  Act and the rules and
regulations promulgated by the SEC thereunder.

         Section  2.8  Absence  of Certain  Changes.  (a) Except as set forth on
Schedule 2.8 or otherwise disclosed in the SEC Documents,  since the date of the
Balance  Sheet,  the Company has  conducted  its  business  only in the ordinary
course and consistent with past practice, and has not:

                  (b) suffered any Material Adverse Effect;

                  (c) materially  increased,  or  experienced  any change in any
assumptions  underlying or methods of calculating,  any bad debt, contingency or
other reserves;

                  (d) paid,  discharged or satisfied any claims,  liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and consistent with
past practice of liabilities  and obligations  reflected or reserved  against in
the Balance Sheet or incurred in the ordinary  course of business and consistent
with past practice since the date of the Balance Sheet;

                  (e)  permitted or allowed any of its assets to be subjected to
any mortgage,  pledge,  lien,  security  interest,  encumbrance,  restriction or
charge of any kind;

                  (f) incurred any  indebtedness  not in the ordinary  course of
business or executed any guarantees on behalf of any person;

                  (g) canceled any material debts or waived any claims or rights
of substantial value;

                  (h) sold,  transferred  or  otherwise  disposed  of any of its
properties or assets,  except in the ordinary  course of business and consistent
with past practice;

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<PAGE>

                  (i)  granted  any  general  increase  in the  compensation  of
employees  (including any such increase pursuant to any bonus,  pension,  profit
sharing or other plan or commitment) or any increase in the compensation payable
or to  become  payable  to  any  employee,  other  than  such  increases  as are
consistent  with the  Company's  past  practice  or  required  by  agreement  or
understanding  disclosed to the Investors;  or experienced  any material loss of
personnel of the Company,  material  change in the terms and  conditions  of the
employment of the Company's key  personnel,  or any labor trouble  involving the
Company;  or entered  into any  written  employment  agreement  with any Company
employee;

                  (j) made any capital  expenditure  or commitment for additions
to its  property,  equipment  or  intangible  capital  assets  other than in the
ordinary course of business and consistent with past practice;

                  (k) made any change in any method of  accounting or accounting
practice or failed to maintain  its books,  accounts and records in the ordinary
course of business and consistent with past practice;

                  (l) failed to maintain any properties or material equipment in
good operating condition and repair, ordinary wear and tear excepted;

                  (m) failed to maintain  in full force and effect all  existing
policies of  insurance  at least at such levels as were in effect  prior to such
date or canceled  any such  insurance or taken or failed to take any action that
would  enable the insurers  under such  policies to avoid  liability  for claims
arising out of occurrences prior to the Closing;

                  (n) entered into any  transaction  or made or entered into any
material  contract or commitment,  except in the ordinary course of business and
consistent with past practice, or terminated or amended any material contract or
commitment;

                  (o) taken any action or experienced any development that could
have a Material  Adverse  Effect on its  business  organization  or its  current
relationships  with its employees or others having business  relationships  with
it;

                  (p)  declared,  paid or set aside for payment any  dividend or
other  distribution  in respect of its capital  stock or redeemed,  purchased or
otherwise acquired,  directly or indirectly,  any shares of its capital stock or
other securities;

                  (q)  amended  its  Amended   and   Restated   Certificate   of
Incorporation or By-laws; or

                  (r)  agreed in  writing or  otherwise  taken any  action  with
respect to any of the matters described in this Section 2.8.

         Section 2.9 No  Violation.  Neither the  execution and delivery of this
Agreement,  the Lock-Up Agreement, or any of the other Ancillary Agreements,  by
the Company nor the performance by the Company of its  obligations  hereunder or
thereunder  will:  (i) conflict with or result in any breach of any provision of
its Amended and Restated Certificate of Incorporation or By-laws, (ii) result in
a violation or breach of, or constitute  (with or without due notice or lapse of
time or both) a default or give rise to any lien or encumbrance on the Company's
properties or assets or any right of  termination,  cancellation or acceleration
under any of the terms or conditions  of any note,  bond,  mortgage,  indenture,
license,  agreement or other  instrument or obligation to which the Company is a
party or by which it or any of its properties or assets may be bound, or require
the consent of any person, or (iii) violate any statute, law,

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rule,  regulation,  writ,  injunction,  judgment,  order or decree of any court,
administrative agency or governmental authority binding on the Company or any of
its properties or assets.

         Section 2.10  Compliance  with Applicable Law. The Company is currently
in compliance with all applicable laws (whether statutory or otherwise),  rules,
regulations,  orders,  ordinances,  judgments,  decrees, writs, requirements and
injunctions   of   all   governmental   authorities,   agencies,   courts,   and
administrative  tribunals,  except for such noncompliance that, individually and
in the aggregate, would not have a Material Adverse Effect.

         Section 2.11 Licenses and Permits.  The Company has and maintains,  and
Schedule 2.11 sets forth a complete and correct list of, all  licenses,  permits
and other authorizations from all governmental  authorities as are necessary for
the conduct of its business as presently  conducted  or in  connection  with the
ownership or use of its properties,  except for any such licenses,  permits, and
other  authorizations,  the failure to obtain or maintain which in effect,  both
singly or in the aggregate,  has not had and could not reasonably be expected to
have a  Material  Adverse  Effect,  and all of  which  (except  as  specifically
described  in  Schedule  2.11)  are in full  force and  effect  in all  material
respects.

         Section 2.12 Governmental Consents.  Except for the filing of any forms
required under the federal securities laws (including any registration statement
under the Securities Act required to be filed by the Company under Sections 4.18
or 4.19,  below,  but not including any other  registration  statement under the
Securities  Act) and any  filings  required  under  state  "blue sky"  laws,  no
consent,  approval or authorization  of, or declaration,  filing or registration
with,  any  governmental  or  regulatory  authority  is  required  to be made or
obtained by the Company in  connection  with the  execution and delivery of this
Agreement, the Lock-Up Agreement or any of the other Ancillary Agreements by the
Company or the  performance  by the  Company of its  obligations  hereunder  and
thereunder  (including  without  limitation  issuance  of any  of  the  Acquired
Securities as and when required to be issued  pursuant to the terms hereof or of
any of the Ancillary Agreements), or the continued conduct by the Company of its
present business after Closing.

         Section 2.13 Taxes.  Except as set forth on Schedule  2.13, the Company
has filed all Tax (as  hereinafter  defined)  reports  and  returns  that it was
required to file.  All such reports and returns were correct and complete in all
material  respects.  All Taxes owed by the Company  (whether or not shown on any
report  or  return)  have been  paid or,  if not yet due,  appropriate  accruals
therefor  as  required  under  GAAP have been  made on the  Company's  financial
records and on the financial  statements  described in Section 2.5. No claim has
ever been made by a taxing  authority in a  jurisdiction  where the Company does
not pay Tax or file tax  returns  that the Company is or may be subject to Taxes
assessed by such jurisdiction.  There are no Liens for Taxes (other than current
Taxes not yet due and payable) on the assets of the Company. There is no action,
suit,  investigation,  liability,  taxing  authority  proceeding,  or audit with
respect to any Tax now in  progress,  pending,  or to the best of the  Company's
knowledge,  threatened,  against  or with  respect  to the  Company,  whether in
respect of any Tax reports and returns that were not filed in a timely manner or
for any other reason.  No deficiency or proposed  adjustment in respect of Taxes
that has not been settled or otherwise resolved has been asserted or assessed by
any taxing  authority  against the  Company.  The Company has not  consented  to
extend  the time in which any Tax may be  assessed  or  collected  by any taxing
authority.  The Company has not  requested  or been  granted an extension of the
time for filing any Tax Return to a date on or after the  occurrence of Closing.
The Company has never been a member of any  Affiliated  Group,  or filed or been
included in a combined,  consolidated, or unitary tax return. The Company is not
a party  to or bound  by any tax  sharing  or  allocation  agreement  or has any
current or potential  contractual  obligation to indemnify any other person with
respect to Taxes.  The Company has withheld and paid all Taxes  required to have
been  withheld  and paid by it in  connection  with amounts paid or owing to any
employee,  creditor,  independent  contractor,  or other Person. As used in this
Section  2.13,  the terms "Taxes" and "Tax" mean all federal,  state,  local and

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foreign taxes, including, without limitation, income, unemployment, withholding,
payroll, social security, real property,  personal property,  excise, sales, use
and franchise taxes, levies, assessments, duties, licenses and registration fees
and  charges  of  any  nature  whatsoever,  including  interest,  penalties  and
additions with respect thereto and any interest in respect of such additions and
penalties.

         Section 2.14 Litigation,  Orders. Except as set forth on Schedule 2.14,
there are no claims,  actions, suits,  proceedings,  investigations or inquiries
pending before any court,  arbitrator or governmental or regulatory  official or
office,  or, to the knowledge of the Company,  threatened,  against or affecting
the Company or its assets or  questioning  the validity of this  Agreement,  the
Lock-Up  Agreement or any of the other Ancillary  Agreements,  the  transactions
contemplated hereby or thereby or any action taken or to be taken by the Company
pursuant to this Agreement,  the Lock-Up Agreement or any of the other Ancillary
Agreements,  at law or in equity.  The Company is not subject to any unsatisfied
judgment or any order or decree entered in any lawsuit or proceeding.

         Section 2.15 Title to  Properties;  Encumbrances.  The Company does not
own any real property and,  except as set forth on Schedule 2.15, does not lease
any real property other than its offices located at One Station Place, Stamford,
Connecticut  06902.  Except as set forth on Schedule 2.15, the Company has title
to all of its  properties  and assets  free and clear of all liens,  charges and
encumbrances,  except  liens for taxes not yet due and payable and such liens or
other  imperfections  of title, if any, that do not materially  detract from the
value of or  interfere  with the present use of the property  affected  thereby.
There is no existing  default or event of default (or event which with notice or
lapse of time,  or both,  would  constitute a default) by the Company or, to the
Company's  knowledge,  by the other party  thereto  under any lease  pursuant to
which the Company leases real or personal  property.  The Company is not nor has
it been in violation in any material respect of any applicable statute,  law, or
regulation relating to occupational health or safety, and no charge,  complaint,
action, suit, proceeding, hearing,  investigation,  claim, demand, or notice has
been filed or commenced  against or received by it alleging any failure by it to
comply  with any such  statute,  law,  or  regulation,  nor is there  any  basis
therefor  known to the Company.  To the  Company's  knowledge,  none of the real
properties  presently  owned,  leased,  or  operated  by the  Company,  nor  any
leasehold  improvements  thereto,  nor any  business  conducted  by the  Company
thereon,  are in violation of any  applicable  land use or zoning  requirements,
including without limitation any building line or use or occupancy  restriction,
any public utility or other easement, any limitation,  condition, or covenant of
record, or any zoning or building law, code, or ordinance,  where such violation
would have a Material  Adverse  Effect.  The Company is not  presently,  and has
never been, in violation of any judgment,  decree,  order, statute, law, permit,
license,  rule, or regulation  pertaining to  environmental  matters,  including
without  limitation  those  arising  under any  Environmental  Laws,  nor has it
received any written  notice  alleging any such  violation.  The Company has not
received any notice or request for information  from any third party,  including
without limitation any federal, state, or local governmental authority, (i) that
it has  been  identified  by  the  EPA or  any  state  environmental  regulatory
authority as a potentially responsible party under CERCLA with respect to a site
listed on the National  Priorities List, 40 C.F.R. Part 300 Appendix B, or under
any  equivalent  state  law;  (ii)  that any  Hazardous  Substances  that it has
generated,  transported,  or  disposed of have been found at any site at which a
federal,  state,  or local  agency or other  third  party has  conducted  or has
ordered it to conduct a remedial investigation, removal or other response action
pursuant to any Environmental Law; or (iii) that it is or may be in violation of
any  environmental  laws or is or will or may be a  named  party  to any  claim,
action,  cause of  action,  complaint,  or legal  or  administrative  proceeding
arising out of any third party's  incurrence  of Damages in connection  with the
release (within the meaning of CERCLA) of any Hazardous  Substances or any other
environmental matters. No circumstances exist of which the Company is aware that
could  reasonably  be  expected  to give rise to any such  notice or request for
information or to any Damages.

         Section 2.16 Contracts and Commitments. Except as set forth on Schedule
2.16,  the Company is not a party or subject to or bound by (whether  written or
oral) nor has it committed to enter into in the

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future:

                  (a) any plan or contract  providing for collective  bargaining
or any similar obligations, or any contract or agreement with any labor union;

                  (b) any  contract,  lease or agreement,  including  marketing,
co-branding,  programming and license agreements, creating any obligation of the
Company to pay to any third  party  $50,000 in any one year  period or more with
respect to any single such contract or agreement or which is otherwise  material
and not entered into in the ordinary course of business;

                  (c) any contract or agreement for the sale, license,  lease or
disposition of products or services in excess of $50,000 in any one year period;

                  (d) any contract  containing  covenants directly or explicitly
limiting  the  freedom of the Company to compete in any line of business or with
any person or entity;

                  (e)      any license agreement (as licensor or licensee);

                  (f) any joint venture, partnership, manufacturing, development
or supply agreement;

                  (g) any royalty,  dividend or similar arrangement based on the
sales volume of the Company;

                  (h)      any acquisition, merger or similar agreement;

                  (i)  any   agreement   requiring   it  to   purchase   all  or
substantially all of its requirements for a particular product or service from a
particular supplier or suppliers,  or requiring it to supply all of a particular
customer's or customers' requirements for a certain service or product;

                  (j)  agreement  or other  commitment  pursuant to which it has
agreed to indemnify or hold harmless any other person;

                  (k) (i) employment agreement,  (ii) consulting  agreement,  or
(iii) agreement  providing for severance  payments or other additional rights or
benefits  (whether or not  optional) in the event of the sale or other change in
control of it;

                  (l)   agreement   with  any   current  or  former   Affiliate,
stockholder,  officer, director, employee, or consultant of the Company, or with
any person in which any such Affiliate has an interest;

                  (m)      joint venture, partnership or teaming agreement;

                  (n)  agreement  with any  domestic  or foreign  government  or
agency or executive  office thereof or any subcontract  between it and any third
party  relating  to a contract  between  such third  party and any  domestic  or
foreign government or agency or executive office thereof;

                  (o) agreement  imposing  non-competition  or exclusive dealing
obligations on it;

                  (p)  agreement  with  respect  to the  confidentiality  of the
Company's Proprietary Information (as described in Section 2.20 hereof), and the
assignment  to the Company of any and all rights  employees of the Company might
have to acquire  with respect to  technology,  inventions,  developments,  etc.,
developed in connection with this employment with the Company; and

                                       8
<PAGE>

                  (q) agreement the performance of which is reasonably likely to
result in a loss to it.

The Company has delivered or caused to be delivered to the Investors correct and
complete  copies (or written  summaries of the material terms of oral agreements
or  understandings)  of each  agreement,  instrument,  and commitment  listed in
Schedule 2.16,  each as amended to date. Each such  agreement,  instrument,  and
commitment is a valid, binding and enforceable obligation of the Company and, to
the Company's  knowledge,  of the other party or parties thereto, and is in full
force and effect.  The Company is not nor, to the  Company's  knowledge,  is any
other party thereto, (nor, to the Company's knowledge, is the Company considered
by any other party thereto to be) in breach of or noncompliance with any term of
any such agreement, instrument, or commitment (nor is there any basis for any of
the foregoing),  except for any breaches or noncompliances that singly or in the
aggregate  would not have a Material  Adverse  Effect.  No claim,  change order,
request for  equitable  adjustment,  or request for  contract  price or schedule
adjustment,  between the Company and any supplier or  customer,  relating to any
agreement,  instrument,  or commitment listed in Schedule 2.16 is pending or, to
the  Company's  knowledge,  threatened,  nor is there  any  basis for any of the
foregoing.  No  agreement,  instrument,  or  commitment  listed in Schedule 2.16
includes or incorporates any provision, the effect of which may be to enlarge or
accelerate any of the obligations of the Company or to give additional rights to
any  other  party  thereto,  or will  terminate,  lapse,  or in any other way be
affected, by reason of the transactions contemplated by this Agreement.

         Section  2.17  Intellectual  Property.  (a)  Schedule  2.17  lists  all
patents,  patent  applications,  trademarks,  trade names, service marks, logos,
copyrights,  and licenses used in or necessary to the Company's  business as now
being conducted or as proposed to be conducted (collectively,  and together with
any technology,  know-how,  trade secrets,  processes,  formulas, and techniques
used in or necessary to the Company's business, "Proprietary Information").  The
Company  owns,  or is  licensed  or  otherwise  has the  full  and  unrestricted
exclusive  right to use,  without  the  payment of  royalties  or other  further
consideration,  all Proprietary Information,  and no other intellectual property
rights, privileges,  licenses,  contracts, or other agreements,  instruments, or
evidences of interests are necessary to or used in the conduct of its business.

                  (b) In any instance where the Company's  rights to Proprietary
Information  arise under a license or similar agreement (other than for software
programs  that have not been  customized  for its  use),  this is  indicated  in
Schedule  2.17 and  such  rights  are,  to the best  knowledge  of the  Company,
licensed exclusively to it except as indicated in Schedule 2.17. No other person
has  an  interest  in or  right  or  license  to  use  any  of  the  Proprietary
Information.  To the best of the Company's  knowledge,  none of the  Proprietary
Information  is being  infringed  by others,  or is  subject to any  outstanding
order, decree, judgment, or stipulation.  No litigation (or other proceedings in
or  before  any  court  or  other  governmental,   adjudicatory,   arbitral,  or
administrative  body) relating to the Proprietary  Information is pending or, to
the  Company's  knowledge,  threatened,  nor,  to  the  best  of  the  Company's
knowledge, is there any basis for any such litigation or proceeding. The Company
maintains adequate and sufficient  security measures for the preservation of the
secrecy and proprietary nature of the Proprietary Information.

                  (c) (i)  Neither  the  Company  nor any of its  employees  has
infringed or made unlawful use of, or is, to the Company's knowledge, infringing
or making unlawful use of, any  proprietary or  confidential  information of any
Person,  including without limitation any former employer of any past or present
employee or consultant of the Company;  and (ii) the activities of the Company's
employees in connection  with their  employment do not violate any agreements or
arrangements  that  any such  employees  or  consultants  have  with any  former
employer or any other Person.  No litigation (or other  proceedings in or before
any court or other governmental, adjudicatory, arbitral, or administrative body)
charging the Company with infringement or unlawful use of any patent, trademark,
copyright, or other proprietary right is pending or, to the Company's knowledge,
threatened; nor is there any basis for any

                                       9
<PAGE>

such litigation or proceeding.

                  (d) No  officer,  director,  employee,  or  consultant  of the
Company is presently obligated under or bound by any agreement or instrument, or
any judgment,  decree, or order of any court of administrative  agency, that (i)
conflicts or may conflict with his or her agreements and  obligations to use his
or her best efforts to promote the interests of the Company,  (ii)  conflicts or
may  conflict  with the  business  or  operations  of the  Company as  presently
conducted or as proposed to be conducted, or (iii) restricts or may restrict the
use or disclosure of any information that may be useful to the Company.

         Section  2.18  Insurance.  Schedule  2.18 lists the  policies of theft,
fire, liability, worker's compensation,  life, property and casualty, directors'
and officers', and other insurance owned or held by the Company and the basis on
which such policies provide coverage (i.e., an incurrence or claims-made basis).
Such policies of insurance  are  maintained  with, to the best  knowledge of the
Company,   financially  sound  and  reputable  insurance  companies,  funds,  or
underwriters, are of the kinds and cover such risks, and are in such amounts and
with such  deductibles and exclusions,  as are consistent with prudent  business
practice. All such policies are, and at all times since the respective dates set
forth in Schedule 2.18, have been, in full force and effect,  are sufficient for
compliance  in all respects by the Company with all  requirements  of law and of
all  agreements  to which it is a party,  provide  that they will remain in full
force and effect  through the  respective  dates set forth in Schedule 2.18, and
will not terminate or lapse or otherwise be affected in any way by reason of the
transactions contemplated hereby.

         Section  2.19  Key-Man  Insurance.  The Company has in force and is the
sole  beneficiary  of key-man  life  insurance  policies on the lives of each of
Messrs. Sebastian E. Cassetta and Mario F. Rossi in the amount of $1,000,000 and
$500,000, respectively.

         Section 2.20  Potential  Conflicts of Interest.  Except as set forth on
Schedule  2.20,  there  are  no  loans,  leases,   agreements,   understandings,
commitments  or  other  continuing  transactions  between  the  Company  and any
officer, director or five percent stockholder of the Company or any person known
by the Company to be related by blood or marriage to, or directly or  indirectly
through one or more  intermediaries,  to control,  be controlled by, or be under
common  control  with,  any of the  foregoing  persons.  Except  as set forth on
Schedule 2.20, neither the Company nor, to the knowledge of the Company,  any of
its officers,  directors,  or employees,  (i) owns, directly or indirectly,  any
interest (excepting passive holdings for investment purposes of not more than 1%
of the  securities of any other  publicly held and traded  company) in, or is an
officer, director,  employee, or consultant of, any person that is a competitor,
lessor,  lessee,  customer,  or supplier of the Company;  (ii) owns, directly or
indirectly,  any  interest in any  tangible or  intangible  property  used in or
necessary to the  business of the  Company;  or (iii) has any cause of action or
other claim whatsoever  against the Company,  or owes any amount to the Company,
except  for  claims in the  ordinary  course of  business,  such as for  accrued
vacation pay, accrued benefits under employee benefit plans, and similar matters
and agreements or under any employment agreements.

         Section  2.21  Investment  Company.  The Company is not an  "investment
company"  as such term is  defined in the  Investment  Company  Act of 1940,  as
amended,  and will not be an investment company under such Act upon consummation
of the  transactions  contemplated  hereby or after giving  effect to the use of
proceeds from the purchase of the Purchased Shares.

         Section  2.22  Securities  Laws.  The offer,  sale and  issuance of the
Purchased Shares and other Acquired  Securities without  registration  (assuming
the accuracy of the  representations  and  warranties  made by the  Investors in
Section 3.1 hereof) will not violate the Securities Act, or any applicable state
securities or "blue sky" laws. None of the Company, its affiliates or any person
acting  on its  behalf  has  engaged  in any  form of  general  solicitation  or
advertising  (as defined in Rule 502(c) of the Securities Act)

                                       10
<PAGE>

or  engaged  in any  action  that  would  require  the  registration  under  the
Securities  Act of the offering  and sale of the Common  Stock  pursuant to this
Agreement.

         Section  2.23  Investment  Banking;  Brokerage.  Except as set forth on
Schedule  2.23,  there are no claims  for  investment  banking  fees,  brokerage
commissions,  finder's fees or similar  compensation  (exclusive of professional
fees  to  attorneys  and   accountants)  in  connection  with  the  transactions
contemplated  by this Agreement based on any arrangement or agreement made by or
on behalf of the Company or any of its affiliates.

         Section 2.24  Disclosure.  The  representations  and warranties made or
contained  in  this  Agreement,  the  schedules  and  exhibits  hereto  and  the
certificates and statements  executed or delivered in connection herewith do not
contain any untrue statement of a material fact or omit to state a material fact
required   to  be  stated   therein   or   necessary   in  order  to  make  such
representations,  warranties  or other  material  not  misleading.  No event has
occurred  and nothing  material  has come to the  attention  of the Company that
would indicate that any of such  information  (together with any written updates
or other written  information  furnished by the Company) is not true and correct
in all material respects as of the date hereof.  Except as set forth on Schedule
2.24, there are no facts known to the Company that are reasonably likely to have
a Material Adverse Effect and that have not been  specifically  disclosed herein
or in a schedule furnished herewith,  other than economic  conditions  generally
affecting the industry in which the Company is engaged.

         Section  2.25 Labor  Relations.  The  Company is in  compliance  in all
material  respects  with  all  applicable  federal  and  state  laws  respecting
employment and employment practices,  terms and conditions of employment,  wages
and hours, and nondiscrimination in employment, and is not engaged in any unfair
labor  practice.  There is no charge  pending  or, to the best of the  Company's
knowledge,  threatened,  against or with respect to the Company before any court
or agency and alleging  unlawful  discrimination  in employment  practices,  and
there is no charge of or  proceeding  with regard to any unfair  labor  practice
against the Company pending before the National Labor Relations Board.  There is
no labor  strike,  dispute,  slow-down,  or work  stoppage  pending  or,  to the
Company's  knowledge,  threatened against or involving the Company.  None of the
employees of the Company is covered by any collective bargaining agreement,  and
no such collective  bargaining  agreement is currently being negotiated.  No one
has petitioned and, to the Company's knowledge,  no one is now petitioning,  for
union  representation  of any  employees  of the  Company.  The  Company has not
experienced any work stoppage or other material labor difficulty.

         Section 2.26  Employee  Benefit  Plans.  (a)  Identification  of Plans.
Except for the arrangements set forth in Schedule 2.26, the Company does not now
maintain or contribute to any pension,  profit-sharing,  deferred  compensation,
bonus, stock option,  share appreciation right,  severance,  group or individual
health,  dental,  medical,  life insurance,  survivor benefit,  or similar plan,
policy or  arrangement,  whether  formal or  informal,  for the  benefit  of any
director,  officer,  consultant,  or employee of any of them,  whether active or
terminated;  nor has it ever maintained or contributed to any such plan, policy,
or arrangement that was subject to ERISA.  Each of the arrangements set forth in
Schedule 2.26 is herein referred to as an "Employee Benefit Plan."

                  (b) Compliance with Terms and Law. Each Employee  Benefit Plan
is and has been  maintained and operated in compliance in all material  respects
with the terms of such plan and with the requirements  prescribed  (whether as a
matter of substantive law or as necessary to secure  favorable tax treatment) by
any and all statutes,  governmental,  or court orders, or governmental  rules or
regulations in effect from time to time,  including but not limited to ERISA and
the Code,  and  applicable  to such plan.  Each  Employee  Benefit  Plan that is
intended to qualify under Section 401(a) of the Code is so qualified.

                                       11
<PAGE>

                  (c) Absence of Certain Events and Arrangements.

                           (1)  There  is  no  pending  or,  to  the   Company's
knowledge,  threatened,  legal action, proceeding, or investigation,  other than
routine  claims for  benefits,  concerning  any Employee  Benefit  Plan,  or any
fiduciary or service  provider  thereof and there is no basis for any such legal
action or proceeding.

                           (2) No  Employee  Benefit  Plan,  nor  any  party  in
interest in respect thereof has engaged in a prohibited  transaction  that could
subject the Company,  directly or indirectly,  to liability under Section 409 or
502(i) of ERISA or Section 4975 of the Code.

                           (3) No communication,  report, or disclosure has been
made that, at the time made, did not accurately reflect the terms and operations
of any Employee Benefit Plan.

                           (4)  No  Employee   Benefit  Plan  provides   welfare
benefits   subsequent  to  termination  of  employment  to  employees  or  their
beneficiaries  (except to the extent required by applicable state insurance laws
and Title I, Part 6 of ERISA or by contract with such employee).

                           (5) The Company has not  undertaken  to maintain  any
Employee  Benefit  Plan for any  specific  period  of time and each such plan is
terminable  at the  sole  discretion  of  the  Company,  subject  only  to  such
constraints as may imposed by applicable law.

                           (6) No Employee  Benefit Plan is maintained  pursuant
to a  collective  bargaining  agreement or is or has been subject to the minimum
funding requirements of Section 302 of ERISA or Section 412 of the Code.

                  (d) Funding of Certain  Plans.  With respect to each  Employee
Benefit  Plan for  which a  separate  fund of  assets  is or is  required  to be
maintained,  full payment has been made of all amounts that,  under the terms of
each such plan, it is required to have paid as  contributions to that plan as of
the end of such plan's most recently ended year.

         Section  2.27  Employment  of  Officers,  Employees.  The  Company  has
delivered to the Investors (a) a list setting forth the name and current  annual
salary and other  compensation  payable by the Company to each of its employees,
which list is true,  accurate and correct as of the date of this Agreement,  and
(b) a list  setting  forth the names of  positions  and/or  persons  the Company
intends to fill and/or hire within thirty (30) days of the Closing.

         Section 2.28 Real  Property  Holding  Corporation.  The Company  hereby
represents  that it is not a "United States real property  holding  corporation"
within  the  meaning  of  Section  897 of the Code,  as  amended,  and  Treasury
Regulation ss.1.897-2.

         Section 2.29 Foreign  Corrupt  Practices Act. The Company has not taken
any action  which  would  cause it to be in  violation  of the  Foreign  Corrupt
Practices Act of 1977, as amended,  or any rules or regulations  thereunder.  To
the  Company's  knowledge,  there is not now,  and  there has  never  been,  any
employment  by the Company of, or  beneficial  ownership  in the Company by, any
governmental or political official in any country in the world.

         Section 2.30 Disclosure.  No  representation or warranty by the Company
in this  Agreement,  in any  schedule  to this  Agreement,  or in the  Ancillary
Agreements,  contains or will contain any untrue statement of a material fact or
omits or will omit to state a  material  fact  required  to be stated  herein or
therein or  necessary  to make the  statements  contained  herein or therein not
false or misleading.  There is

                                       12
<PAGE>

no fact or circumstance relating specifically to the current business operations
or  condition of the Company  that could  reasonably  be expected to result in a
Material Adverse Effect that is not disclosed in a Schedule attached hereto.

         Section 2.31  Negotiations  with Hewlett  Packard.  Attached  hereto as
Schedule 2.31 is a summary of the current status of negotiations between Hewlett
Packard and the Company as to the contemplated strategic alliance between them.

         Section 2.32 Nasdaq NMS Relisting.  Attached hereto as Schedule 2.32 is
a summary of the  current  prospects  of the  Company  for listing on the Nasdaq
National Markets System.

                                   ARTICLE III

                 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
                 -----------------------------------------------

         Section 3.1  Representations  and Warranties.  Each Investor represents
severally as to itself only that (each of which  representations  and warranties
are true as of the date hereof and as of Closing):

                  (a) It has all requisite power and full legal right to execute
and deliver  this  Agreement,  the  Lock-Up  Agreement  and the other  Ancillary
Agreements to which it is a party and to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement, the Lock-Up Agreement,
and the performance by it of its obligations hereunder and thereunder, have been
duly  authorized  by it, and no other  proceeding  therefor on the part of it is
required. This Agreement,  the Lock-Up Agreement and each of the other Ancillary
Agreements  to which it is a party have been duly  executed and  delivered by it
and constitute the valid and binding  obligations of it, enforceable  against it
in accordance with its terms,  except as such  enforceability  may be limited by
applicable bankruptcy,  insolvency,  reorganization,  moratorium, liquidation or
similar laws relating to the enforcement of creditors' rights and remedies or by
other equitable principles of general application.  The execution,  delivery and
performance by it of this  Agreement and the Ancillary  Agreements in accordance
with their  respective  terms,  and the  consummation by it of the  transactions
contemplated  hereby or thereby,  will not result (with or without the giving of
notice  or the lapse of time or both) in any  conflict,  violation,  breach,  or
default, under or in respect of its charter documents or by-laws.

                  (b) It is  purchasing  the shares of Common  Stock for its own
account  for  investment  only and not with a view to or for sale in  connection
with the distribution  thereof,  except for sales contemplated by Sections 4.18,
4.19 or 7.10, below, or otherwise in compliance with applicable securities laws.

                  (c) It has such  knowledge  and  experience  in financial  and
business  matters that it is capable of  evaluating  the merits and risks of the
investment  contemplated  by this  Agreement  and making an informed  investment
decision with respect thereto.

                  (d) It is an "accredited  investor" as such term is defined in
Rule 501 under the Securities Act.

                  (e) It has had the  opportunity  to ask  questions and receive
answers  concerning  the terms and  conditions  of the  offering  of  securities
purchased hereunder, as well as the opportunity to obtain additional information
necessary to verify the accuracy of  information  furnished in  connection  with
such offering  that the Company  possesses or can acquire  without  unreasonable
effort or expense.

                                       13
<PAGE>

                  (f) It  understands  that the shares of Common  Stock have not
been registered  under the Securities Act or any state  securities laws, and may
not be transferred unless subsequently  registered  thereunder or pursuant to an
exemption from registration, and that a legend indicating such restrictions will
be placed on the certificates representing such shares.

                  (g) There are no claims for investment banking fees, brokerage
commissions, finder's fees or similar compensation (other than professional fees
to attorneys and accountants) in connection with the  transactions  contemplated
by  this  Agreement,  the  Lock-Up  Agreement  or  any of  the  other  Ancillary
Agreements based on any arrangement or agreement made by or on behalf of it.

                  (h) Neither the  execution  and delivery of this  Agreement or
the Lock-Up  Agreement or any of the other  Ancillary  Agreements  by it nor the
performance by it of its obligations  hereunder or thereunder will: (i) conflict
with  or  result  in  any  breach  of  any  provision  of  its   Certificate  of
Incorporation  or By-laws or  similar  formation  or  governance  documents,  if
applicable,  or (ii) constitute  (with or without due notice or lapse of time or
both) a default or give rise to any lien or  encumbrance  on any of its material
properties or assets or any right of  termination,  cancellation or acceleration
under any of the terms or  conditions  of any  material  note,  bond,  mortgage,
indenture, license, agreement or other instrument or obligation to which it is a
party or by which it or any of its material  properties  or assets may be bound,
or (iii) violate any statute, law, rule, regulation, writ, injunction, judgment,
order or decree of any court,  administrative  agency or governmental  authority
binding on it or any of its material properties or assets.

                  (i)  Except  for  filings  required  under  federal  or  state
securities  laws,  no consent,  approval or  authorization  of, or  declaration,
filing or  registration  with,  any  governmental  or  regulatory  authority  is
required to be made or  obtained  by it in  connection  with the  execution  and
delivery  of  this  Agreement  or the  Lock-Up  Agreement  or  any of the  other
Ancillary  Agreements  by  it,  or  the  performance  by it of  its  obligations
hereunder and thereunder.

                  (j)  There  are  no  claims,  actions,   suits,   proceedings,
investigations or inquiries pending before any court, arbitrator or governmental
or  regulatory  official  or office,  or, to the  knowledge  of it,  threatened,
against or  affecting it which  question  the validity of this  Agreement or the
Lock-Up  Agreement or any of the other Ancillary  Agreements,  the  transactions
contemplated hereby or thereby or any action taken or to be taken by it pursuant
to  this  Agreement  or the  Lock-Up  Agreement  or any of the  other  Ancillary
Agreements, at law or in equity.

                                   ARTICLE IV

                   COVENANTS OF THE COMPANY AND THE INVESTORS
                   ------------------------------------------

         Section 4.1 Rights to Attend Meetings. The Company will call and hold a
meeting of its Board of Directors at least once each fiscal quarter. For so long
as TecCapital (in the aggregate with its Affiliate(s)) continues to own at least
ten percent  (10%) of the number of  Purchased  Shares  acquired  by  TecCapital
pursuant to this  Agreement (as such number is adjusted from time to time on the
occurrence  of an  Adjustment  Event),  (i) the Company will give  TecCapital at
least five business days' prior written notice of the time,  place,  and subject
matter of each  quarterly  meeting,  at least two business  days' prior  written
notice of any other proposed meeting,  and reasonable prior notice of any action
by written consent of the Board of Directors of the Company,  such notice in all
cases to include  true and  complete  copies of all  documents  furnished to any
director in  connection  with such  meeting or consent,  and (ii) one officer or
authorized  representative  of  TecCapital  will be  entitled  to  attend  as an
observer at any such meeting or, if a meeting is held by  telephone  conference,
to participate  therein for the purpose of listening thereto;

                                       14
<PAGE>

provided that the observer  rights granted to TecCapital  under this Section 4.1
shall  apply  only if  TecCapital  shall  not be  represented  on the  Board  of
Directors of the Company.

         Section 4.2 Insurance.  The Company shall keep its insurable properties
insured,  upon reasonable  business  terms,  by financially  sound and reputable
insurers,  against  liability  and the  perils of  casualty,  fire and  extended
coverage in amounts of coverage at least equal to those  customarily  maintained
by companies of similar size in the same or similar business as the Company. The
Company shall also maintain with such insurers  insurance  against other hazards
and risks and  liability to persons and property to the extent and in the manner
customary for companies of similar size engaged in the same or similar business.
The  Company  shall  also  maintain  key-man  insurance  on the lives of each of
Messrs.  Sebastian E. Cassetta and Mario F. Rossi,  as long as they are employed
by the Company.

         Section 4.3 Conduct of Business.  The Company  shall keep in full force
and effect its  corporate  existence,  rights,  franchises  and all  Proprietary
Information rights and licenses.  The Company shall maintain all properties used
or useful in the  conduct of its  business  in good  repair,  working  order and
condition, ordinary wear and tear excepted, as necessary to permit such business
to be properly and advantageously conducted. The undersigned shareholders of the
Company shall not do and the Company shall not do, or suffer the  occurrence of,
any act which would (i) impair or prevent the Company  from  complying  with its
obligations  hereunder  or under any of the  Ancillary  Agreements,  or (ii) the
Investors from receiving the economic benefit of the  transactions  contemplated
hereby or by any of the  Ancillary  Agreements,  or (iii) cause or authorize the
creation or issuance of any  securities  or class of  securities  of the Company
with rights as to  liquidation,  dividends,  redemption or  registration  rights
senior to those of the Investor Securities or Acquired Securities, or (iv) amend
the  charter,  by-laws or other  constitutive  documents  of the  Company to the
detriment of the rights of the Investors hereunder or under any of the Ancillary
Agreements, or (v) obligate itself to do any of the foregoing.

         Section 4.4 Payment of Taxes,  Compliance  with Laws,  Etc. The Company
shall pay and discharge all lawful Taxes,  assessments and governmental  charges
or levies imposed upon it or its income or property before the occurrence of any
default,  as well as all lawful claims for labor,  materials and supplies which,
if not paid when due,  might  become a lien or charge  upon its  property or any
part thereof;  provided,  however, that the Company shall not be required to pay
and discharge  any such Tax,  assessment,  charge,  levy or claim so long as the
validity  thereof is being contested by the Company in good faith by appropriate
proceedings.  The  Company  shall  comply  in all  material  respects  with  all
applicable laws and regulations in the conduct of its business. The Company will
comply in all material respects with (a) its charter documents and by-laws,  (b)
all judgments,  decrees, orders, statutes,  rules, and regulations binding on or
applicable to the Company or its business or  properties,  and (c) any agreement
or instrument to which it is a party or by which it or any of its properties are
subject (including,  without limitation,  the Ancillary  Agreements).  If at any
time any authorization,  consent, approval, permit, or license from any officer,
agency, or  instrumentality  of any government  becomes necessary or required in
order that the Company may fulfill any of its obligations hereunder, the Company
will promptly take or cause to be taken all necessary  steps within its power to
obtain such authorization,  consent, approval, permit, or license and will, upon
written request, promptly furnish each such holder with evidence thereof.

         Section 4.5 SEC Filings.  The Company  shall  provide to the  Investors
copies of all filings made with the SEC as and when they are made.

         Section 4.6 Inspection. The Company shall, upon reasonable prior notice
from an Investor to the  Company,  permit an Investor  who  continues  to own at
least ten percent (10%) of the  Purchased  Shares (as adjusted from time to time
on the occurrence of an Adjustment  Event)  acquired by it pursuant to the terms
hereof  and its  authorized  representatives  to visit  and  inspect  any of the
properties  of the  Company,

                                       15
<PAGE>

including  its books of account  and make  copies  thereof,  and to discuss  its
affairs,   finances  and  accounts  with  its  senior  executive   officers  and
independent  accountants,  all at such  reasonable  times  as may be  reasonably
requested  (provided  that such  investigation  shall not be  disruptive  to the
conduct of the Company's business) and at the Investor's expense.

         Section 4.7 Preemptive Rights. (a) Participation Rights. Subject to the
exclusions  set forth in Section  4.7(c),  below,  and to the  provisions of the
following  sentence in this Section 4.7(a), if at any time after the Closing the
Company authorizes the offer,  issuance,  or sale, or offers, issues or sells to
any Person (the "Offeree") any shares of Common Stock,  Derivative Securities or
other  securities  of the  Company  (whether  as newly  issued  shares  or other
securities or from the Company's  treasury) in an offering not registered  under
the Securities Act, the Company will first offer to sell, by written notice,  to
each Investor a portion (such  holder's  "Portion") of such shares or securities
authorized to be offered,  issued or sold, or proposed to be offered,  issued or
sold equal to the product  obtained by multiplying (i) the number of such shares
or  securities  authorized  to be  offered,  issued or sold,  or  proposed to be
offered,  issued or sold,  by (ii) the  quotient  obtained by  dividing  (A) the
number of shares of Common Stock held by such Investor  (including  for purposes
hereof any such shares (x) issuable but not issued to such Investor by operation
of Section  4.8,  below,  and (y)  issuable to such  Investor on exercise of any
Compensation  Warrant(s) (if any) issued or issuable to such  Investor),  by (B)
the  aggregate  number of shares of Common  Stock issued and  outstanding  (on a
Fully Diluted Basis) as of such date.

                           (b)  Procedure.  Each  Investor will be entitled (but
not obligated) to purchase,  simultaneously  with the closing of the acquisition
of such Company  securities by an Offeree,  all or part of such holder's Portion
at the same price and on the same terms as such  stock or  securities  are to be
offered to the Offeree.  The Company may sell so much,  and only so much, of any
Portion as to which no Investors, having been offered the right to purchase such
Portion in  accordance  with all of the  provisions  of this Section  4.7,  have
exercised such purchase rights, to the Offeree at the same price and on the same
terms as those  offered  to such  holder,  provided,  that if the  whole of such
holder's  Portion of such  securities is not sold to the Offeree  within 60 days
following the lapse of the 10-day  exercise  period  provided to the  Investors,
such  unsold  securities  will once  again be  subject  to the  purchase  rights
hereunder.  If shares of Common Stock or Derivative Securities are authorized to
be issued and sold by the  Company for  services,  property,  or other  non-cash
consideration,  each Investor will be allowed to  participate  in such issue and
sale by substituting  cash in the amount of the fair market value, per share, of
such non-cash consideration.

                           (c)  Excluded  Transactions.   The  prohibitions  and
rights provided in this Section 4.7 will not apply to Excluded Transactions.

                           (d) The preemptive  rights granted under this Section
4.7  shall  expire  upon,  and  shall  not be  applicable  with  respect  to, an
underwritten  public offering of the Company's equity  securities  pursuant to a
registration  statement filed with, and declared effective by, the SEC under the
Securities Act.

         Section 4.8 Anti-Dilution Adjustments.  (a) If the Company shall issue,
or shall be deemed to issue,  any New Securities,  then the Company shall, as an
adjustment  to the Per Share  Purchase  Price paid by each of the  Investors for
each of the  Purchased  Shares  acquired at Closing  and without any  additional
consideration  being due  therefor,  simultaneously  with any such  issuance  or
deemed issuance,  issue to each holder of Investor Securities a number of shares
of  Common  Stock  ("Top-Up  Shares")  equal  to  the  difference   obtained  in
subtracting  from (y) the  product  obtained  by  multiplying  (i) the number of
shares of Investor  Securities held by such holder,  by (ii) the Applicable Rate
(determined as provided in Section  4.8(b),  below),  (z) the number of Investor
Securities  held by such  holder  immediately  prior to such  issuance of Top-Up
Shares. As used herein, the term "Investor Securities" shall mean, collectively,
the

                                       16
<PAGE>

Purchased Shares,  any other Acquired  Securities and any securities  (including
without limitation any Top-Up Shares) issued in respect thereof.

         (b)  Applicable  Rate.  The  "Applicable  Rate"  applicable to Investor
Securities at any time shall equal the quotient obtained by dividing (A) the sum
of (I) $49.50 (as adjusted on the occurrence of an Adjustment Event),  plus (II)
an amount  equal to all accrued but unpaid  dividends  on each share of Investor
Securities,  if any, by (B) the Applicable  Value then in effect,  calculated as
hereinafter provided.

         (c) Applicable  Conversion  Values.  The  "Applicable  Value" in effect
initially,  and until  first (and  subsequently)  adjusted  in  accordance  with
Section 4(e) hereof, shall be equal to $49.50.

         (d)      Intentionally left blank.

         (e)      Adjustments for Dilutive Issues.

                  (i) Except as otherwise provided below in this Section 4.8(e),
if at any time while  there are any shares of Investor  Securities  outstanding,
(x) the  Company  issues or is deemed to issue any  additional  shares of Common
Stock at a Net  Consideration  Per Share (as hereinafter  defined) less than the
Applicable  Value  in  effect  immediately  prior  to such  issuance  or  deemed
issuance,  and (y) any such issuance or deemed  issuance does not  constitute an
Excluded Transaction,  then and in each such case, such Applicable Value will be
adjusted to equal the result of the following formula:

   New Applicable Value           =                 (P1 x Q1) + (P2 x Q2)
                                                    ---------------------
                                                          (Q1 + Q2)

         where:

P1 = the Applicable Value in effect immediately prior to such issuance or deemed
issuance of additional shares of Common Stock;

Q1 = the  aggregate  number of shares of  Common  Stock  outstanding  (including
shares of Common Stock  issuable upon  conversion of all  outstanding  shares of
preferred stock and the conversion,  exchange and/or exercise of all outstanding
warrants, options and other convertible securities and/or Derivative Securities,
each  to  the  extent  then  convertible,   exchangeable   and/or   exercisable)
immediately  prior to such issuance or deemed  issuance of additional  shares of
Common Stock;

P2 = the Net  Consideration  Per Share (as hereinafter  defined) received by the
Company for the shares of Common Stock issued and/or deemed issued in respect of
such issuance of additional shares of Common Stock; and

Q2 = the number of shares of Common Stock issued and/or deemed issued in respect
of such issuance or deemed issuance of additional shares of Common Stock.

         For  purposes  of  this  Section  4.8(e),  if a  part  or  all  of  the
consideration  received by the Company in connection with the issuance or deemed
issuance of shares of Common Stock or the issuance or deemed  issuance of any of
the securities described below in paragraph (ii) of this Section 4.8(e) consists
of property other than cash, such consideration shall be deemed to have the same
value as is recorded on the books of the Company with respect to receipt of such
property so long as such recorded  value was  determined  reasonably and in good
faith  and with due care by the Board of  Directors  of the  Company,  and shall
otherwise be deemed to have a value equal to its fair market value.

                                       17
<PAGE>

         The Applicable  Value,  as so reduced,  shall be further reduced in the
same  manner upon the  happening  of any  successive  event or events that cause
reduction under this Section 4.8(e)(i).

                  (ii) For purposes of this Section 4.8(e),  the issuance of any
Derivative Securities shall be deemed an issuance of shares of Common Stock with
respect to Section  4.8(e)(i)(A) and with respect to Section 4.8(e)(i)(B) if the
Net Consideration Per Share (as defined in Section 4.8(e)(ii)(A) and (B) hereof)
that may be  received  by the  Company  for such  Common  Stock is less than the
Applicable Value in effect  immediately prior to the time of such issuance,  and
except as hereinafter  provided,  an adjustment in the Applicable Value shall be
made upon each such issuance of Derivative  Securities in the manner provided in
Section  4.8(e)(i)(A)  and (B), as  appropriate,  as if such deemed Common Stock
were  issued  for  such  Net  Consideration  Per  Share.  No  adjustment  of the
Applicable  Value shall be made under this  Section  4.8(e) upon the issuance of
any  additional  shares of  Common  Stock  that are  issued  upon the  exercise,
conversion,  or exchange of any Derivative Securities if any such adjustment was
previously made upon the issuance of such Derivative Securities.  Any adjustment
of the  Applicable  Value  with  respect  to this  Section  4.8(e)(ii)  shall be
disregarded  if, as, and to the extent that the Derivative  Securities that gave
rise to such adjustment expire or are canceled without having been exercised, so
that the  Applicable  Value  effective  immediately  upon such  cancellation  or
expiration shall be equal to the Applicable Value that otherwise would have been
in  effect  immediately  prior to the time of the  issuance  of the  expired  or
canceled Derivative Securities, with such additional adjustments as subsequently
would  have  been made to that  Applicable  Value had the  expired  or  canceled
Derivative  Securities  not been  issued.  In the  event  that the  terms of any
Derivative  Securities  previously issued by the Company are changed (whether by
their terms or for any other reason,  including without limitation,  as a result
of the  effects of any  anti-dilution  adjustments  contained  therein) so as to
lower the Net  Consideration  Per Share payable with respect thereto (whether or
not the  issuance  of such  Derivative  Securities  originally  gave  rise to an
adjustment of the Applicable Value), the Applicable Value shall be recomputed as
of the date of such change,  so that the Applicable Value effective  immediately
upon such change shall be equal to the Applicable Value in effect at the time of
the issuance of the Derivative  Securities subject to such change,  adjusted for
the issuance thereof in accordance with the terms thereof after giving effect to
such change,  and with such additional  adjustments as  subsequently  would have
been made to that Applicable Value had the Derivative  Securities been issued on
such  changed  terms.  For  purposes  of  this  Section   4.8(e)(ii),   the  Net
Consideration  Per Share that may be received by the Company shall be determined
as follows:

                           (A) "Net  Consideration  Per  Share"  shall  mean the
         amount equal to the total amount of consideration,  if any, received by
         the Company for the issuance of such  Derivative  Securities  or Common
         Stock, as the case may be, plus, in the case of Derivative  Securities,
         the minimum amount of additional consideration,  if any, payable to the
         Company upon exercise,  conversion,  and/or exchange thereof for shares
         of Common Stock, divided by the number of shares of Common Stock issued
         or the maximum number of shares of Common Stock that would be issued if
         all such Derivative Securities were exercised or converted, as the case
         may be.

                           (B) The  Net  Consideration  Per  Share  that  may be
         received by the Company  shall be determined in each instance as of the
         date of issuance of Derivative  Securities or Common Stock, as the case
         may be, without giving effect to any possible future price  adjustments
         or  rate  adjustments  that  may be  applicable  with  respect  to such
         Derivative  Securities  and which are  contingent  upon future  events;
         provided, that in the case of an adjustment to be made as a result of a
         change in terms of such Derivative  Securities,  including such changes
         as  may  result  from  the  effects  of any  anti-dilution  adjustments
         contained therein,  the Net Consideration Per Share shall be determined
         as of the date of such change.

         (f)      Intentionally Left Blank.

                                       18
<PAGE>

         (g)      Intentionally Left Blank.

         (h)  Certificate  as to  Adjustments.  In each case of an adjustment or
readjustment  of the  Applicable  Rate,  the Company will promptly  furnish each
holder  of  Investor  Securities  with a  certificate,  prepared  by  the  chief
financial officer of the Company,  showing such adjustment or readjustment,  and
stating in detail the facts upon which such adjustment or readjustment is based.

         (i) Fractional  Shares.  No fractional  shares of Common Stock or scrip
representing  fractional  shares  shall be  issued  upon  issuance  of shares of
Investor Securities. Instead of any fractional shares of Common Stock that would
otherwise be issuable  upon any issuance of shares of Investor  Securities,  the
Company  shall pay to the holder of the shares of Investor  Securities  that are
required to be issued a cash adjustment in respect of such fraction in an amount
equal to the same  fraction  of the market  price per share of Common  Stock (as
determined in a manner  reasonably  prescribed by the Board of Directors) at the
close of business on the applicable Conversion Date.

         (j)      Intentionally Left Blank.

         (k) Expiration of Antidilution  Protections.  Notwithstanding any other
provisions hereof, the anti-dilution  protective  provisions of this Section 4.8
shall  terminate upon the occurrence of all of the following:  (i) the Purchased
Shares shall have been registered  with the SEC and a registration  statement in
respect of the  Purchased  Shares  shall be in effect and the  Purchased  Shares
shall have been accepted for trading upon the Nasdaq National Market System; and
(ii) four (4) calendar  months shall have elapsed  since the  expiration  of the
Lock Up Agreements and any restrictions on the sale or other  disposition of any
Acquired Securities set forth therein;  and (iii) TecCapital (or, as applicable,
a transferee  of  TecCapital  to which  TecCapital  has  transferred  its rights
hereunder  pursuant to Section 7.10,  below) shall no longer own or be deemed to
own, in the aggregate with any  Affiliate(s)  thereof (or, as  applicable,  of a
transferee  of  TecCapital  to  which  TecCapital  has  transferred  its  rights
hereunder  pursuant to Section 7.10,  below), a number of shares of Common Stock
equal,  on a Fully Diluted  Basis,  to fifty percent  (50.00%) (as adjusted from
time to time on the  occurrence of an  Adjustment  Event) of all of the Acquired
Securities  from time to time  acquired by  TecCapital  (and/or any Affiliate of
TecCapital) pursuant to this Agreement or any of the Ancillary Agreements.

         Section 4.9 Appointment of Board Member. For so long as (i) TecCapital,
any Affiliate of TecCapital,  or any other permitted  transferees and assigns of
TecCapital  shall continue to own, in the aggregate,  not less than 66.6% of the
aggregate number of Purchased Shares purchased by it pursuant to this Agreement,
and (ii) a majority  of the equity  interests  of  TecCapital  are not held by a
direct competitor of the Company,  TecCapital shall be entitled to designate one
(1) member of the Company's Board of Directors (the "TecCapital Director").  The
Company  agrees to take  such  actions  as are  necessary,  and the  undersigned
shareholders  of the Company  agree to exercise the voting  rights of any equity
securities issued by the Company and held by them, so as to elect the TecCapital
Director (and any successor  designated  from time to time by TecCapital) to the
Board of Directors of the Company.

         Section 4.10 Consent  Rights.  For so long as the  Investors  and their
Affiliate(s) in the aggregate own at least 30% of the number of shares of Common
Stock  (subject  to  adjustment  from  time  to  time  on the  occurrence  of an
Adjustment Event) purchased  hereunder,  without the prior consent of a majority
in interest of the  Investors,  the Company  shall not issue  equity  securities
senior to those  purchased by the Investors  under this  Agreement or effectuate
any  amendment  to its Amended and  Restated  Certificate  of  Incorporation  or
By-laws that may adversely affect the rights of the Investors.

         Section 4.11 Further  Assurances.  The Company and each Investor  shall
execute and deliver,  or cause to be executed  and  delivered,  such  additional
instruments  and other  documents  and shall  take

                                       19
<PAGE>

such further  actions as the Company or the  Investors,  as the case may be, may
reasonably require to effectuate,  carry out and comply with all of the terms of
this Agreement,  the Lock-Up Agreement,  the other Ancillary  Agreements and the
transactions contemplated hereby and thereby.

         Section 4.12  Investments.  The Company will not have  outstanding,  or
acquire  or  commit  itself  to  acquire  or hold,  any  investment  except  (a)
investments in corporations,  limited liability companies, partnerships or other
entities made in the ordinary course of the Company's business,  (b) investments
in marketable  direct  obligations  issued or guaranteed by the United States of
America  that  mature  within one year from the date of  acquisition  thereof or
which are subject to a repurchase agreement, exercisable within ninety (90) days
from the date of acquisition  of such  agreement,  with any  commercial  bank or
trust company incorporated under the laws of the United States of America or any
State thereof or the District of Columbia,  (c) investments in commercial  paper
maturing within one year from the date of acquisition thereof and having, at the
date  of  acquisition  thereof,  the  highest  rating  obtainable  from  Moody's
Investors  Service,  Inc. or Standard & Poor's  Corporation,  (d) investments in
bankers'  acceptances  eligible  for  rediscount  under  Federal  Reserve  Board
requirements  accepted by any  commercial  bank or trust company  referred to in
clause (b)  hereof,  (e)  investments  in deposits  or  certificates  of deposit
maturing  within  one year from the date of  acquisition  thereof  issued by any
commercial  bank or trust  company  referred  to in clause (b) hereof and having
capital and surplus of at least $500,000,000, (f) investments in certificates of
deposit issued by banks organized under the laws of any other jurisdiction, each
having  combined  capital  and  surplus of not less than  $500,000,000,  and (g)
investments  in money market  funds,  so long as  consistent  with the Company's
internal investment policy.

         Section 4.13 Employee  Benefit Plans. The Company will take all actions
necessary to maintain,  fund, and  administer its Employee  Benefit Plans in all
material respects in accordance with applicable federal, state, and local law.

         Section  4.14  Compensation  of  Officers  and Senior  Management.  The
compensation  of all  officers and senior  management  of the Company will be as
determined from time to time by the Compensation Committee (if any) of the Board
of Directors.

         Section 4.15  Reservation of Shares;  Compliance with Securities  Laws.
The Company will at all times reserve the appropriate number of shares of Common
Stock  solely for the purpose of  issuance  upon  exercise  of the  Compensation
Warrants (if any).  The Company  will file within the required  time periods all
filings,  notices and other documents  required by applicable  federal and state
securities  laws  in  connection  with  the  transactions  contemplated  by this
Agreement.

         Section 4.16 Senior Management and Employee  Non-Disclosure  Agreement.
The Company  will at all times  ensure that (a) each  employee,  including  each
member of senior  management,  has  executed  and  delivered  to the Company the
standard form agreement (approved by the non-management members of the Company's
Board  of  Directors)  with  respect  to the  confidentiality  of the  Company's
proprietary  and  confidential  information and the assignment to the Company of
any  and all  rights  each  employee  might  have or  acquire  with  respect  to
technology, inventions, developments, etc., developed in connection with his/her
employment  with  the  Company,  and (b) each  member  of the  Company's  senior
management  and  certain  other  key  employees,  in each  case  that the  Chief
Executive  Officer and the Chief  Operating  Officer  shall have  determined  is
appropriate,  has  executed  and  delivered  to the  Company a  confidentiality,
non-disclosure,  inventions  assignment and non-competition and non-solicitation
agreement approved by the non-management members of the Board of Directors.

         Section  4.17 U.S.  Real  Property  Holding  Corporation.  The  Company
covenants  that it will  operate  in a manner  such  that it will  not  become a
"United  States real property  holding  corporation"  as

                                       20
<PAGE>

that term is defined in Section  897(c)(2) of the Internal Revenue Code of 1986,
as amended  ("USRPHC"),  and the regulations  thereunder.  The Company agrees to
make  determinations  as to its  status  as a USRPHC,  and will file  statements
concerning those determinations with the Internal Revenue Service, in the manner
and at the  times  required  under  Reg.  1.897-2(h),  or any  supplementary  or
successor provision thereto.  Within 30 days of a request from an Investor,  the
Company  will  inform  the  requesting  party,  in the  manner set forth in Reg.
1.897-2(h) or any  supplementary or successor  provision  thereto,  whether that
party's  interest  in the Company  constitutes  a United  States  real  property
interest (within the meaning of Internal Revenue Code Section  897(c)(1) and the
regulations  thereunder)  and whether the Company has  provided to the  Internal
Revenue Service all required notices as to its USRPHC status.

         Section 4.18 Registration Requirements.

                  (a) The Company shall on or before the 45th calendar day after
the Closing Date (the "Filing Due Date"),  (i) file with the SEC a  registration
statement on Form SB-2 or other  appropriate  form (together with any prospectus
included  therein,  a  "Registration  Statement")  pursuant  to Rule  415 of the
Securities  Act in order to register with the SEC the  continuous  resale by the
Investors,  from time to time, of all  Purchased  Shares that may be acquired by
the Investors, whether through the Nasdaq National Market System (the "NNMS") or
the facilities of any national  securities exchange on which the Common Stock is
then  traded,  or  in  privately-negotiated   transactions,  and  (ii)  file  an
application for listing (a "Listing  Application")  of such Purchased  Shares on
the NNMS or any other nationally  recognized  securities exchange  (collectively
with the NNMS, the "Exchange").  The Company shall use its best efforts to cause
(x) such  Registration  Statement  to be declared  effective by the SEC, and (y)
such Listing  Application to be accepted and declared effective by the Exchange,
in each case on or before  the 120th  day  after  the  Closing  Date;  provided,
however,  that if  (aa)  the SEC  shall  not  have  declared  such  Registration
Statement  effective,  or (bb) the Exchange shall not have accepted and declared
effective  such Listing  Application,  each on or before the 120th day after the
Closing  Date,  then the  Company  shall  issue a  Compensation  Warrant to each
Investor on the 121st day (the  "Compensation  Trigger  Date") after the Closing
Date  and,  thereafter,  an  additional  Compensation  Warrant  on  each  30-day
anniversary of such  Compensation  Trigger Date for so long as the SEC shall not
have declared such  Registration  Statement  effective and/or the Exchange shall
not have accepted and declared effective such Listing  Application.  The Company
shall  further be required  pursuant to the  provisions  of this Section 4.18 to
file  Registration  Statement(s)  and Listing  Application(s)  in respect of any
Top-Up  Shares on or before the 45th calendar day after the issuance (or, if any
of such  securities  were not  issued,  the date on which such  securities  were
required to be issued) of any such  Top-Up  Shares to any  Investors;  provided,
however,  that in any such case the  Filing  Due Date  shall be the  forty-fifth
(45th) calendar day, and the Compensation  Trigger Date shall be the one hundred
and  twenty-first  (121st)  calendar  day,  following the date on which any such
Top-Up  Shares were  issued,  or required to be issued,  to the  Investors.  The
Company further agrees to provide unlimited  piggyback  registration rights with
respect to any shares  issued (or required to be issued) (if any) on exercise of
any  Compensation  Warrant(s) (if any). Each Investor agrees to furnish promptly
to the  Company in writing  all  information  required  for  preparation  of any
Registration  Statement or thereafter required from time to time to be disclosed
in order to make the  information  previously  furnished  to the Company by such
holder not misleading.

                  (b) If at any time  following  the  filing  of a  Registration
Statement  by the  Company,  the Company  shall  qualify to file a  registration
statement on Form S-3 under the Securities Act, the Company shall  thereafter be
entitled to replace any Form SB-2 registration  statement referred to in Section
4.18(a) above with a  registration  statement on Form S-3 that has been declared
effective by the SEC. Any such Form S-3 used to replace a Form SB-2  pursuant to
this Section  4.18(b),  together with any prospectus  included in such Form S-3,
shall thereafter be referred to as a "Registration  Statement" and any Form SB-2
that is so replaced  shall cease to be referred to by that term for  purposes of
this Agreement.

                                       21
<PAGE>

                  (c) The  Company  shall  pay  all  Registration  Expenses  (as
defined below) in connection with any registration,  qualification or compliance
hereunder,  and each Investor shall pay all Selling  Expenses (as defined below)
and other  expenses that are not  Registration  Expenses  relating to the Common
Stock resold by such Investor.  "Registration Expenses" shall mean all expenses,
except for  Selling  Expenses,  incurred by the  Company in  complying  with the
registration  provisions herein described,  including  without  limitation,  all
registration, qualification and filing fees (including all SEC and Nasdaq fees),
printing  expenses,  escrow  fees,  fees and  disbursements  of counsel  for the
Company and for any underwriter (unless paid by such underwriter), blue sky fees
and expenses,  the expense of any special audits  incident to or required by any
such  registration  and the reasonable fees and  disbursements of one counsel to
all selling Investors.  "Selling Expenses" shall mean only selling  commissions,
underwriting  discounts and stock transfer taxes  applicable to the Common Stock
sold by each Investor and all fees and disbursements of counsel for any Investor
(which  counsel,  if any,  shall be additional to the one counsel to all selling
Investors referenced in the preceding sentence).

                  (d) In the case of the  registration  effected  by the Company
pursuant to these registration provisions, the Company will use its best efforts
to:

                           (1) keep such registration  statement on Form SB-2 or
Form S-3 effective  until the earlier of (A) the second  anniversary of the date
on which such Registration Statement first becomes effective, (B) the date as of
which all of the Acquired  Securities  have been  resold,  or (C) the time as of
which all of the Common Stock held by the  Investors  can be sold within a given
three-month period without compliance with the registration  requirements of the
Securities Act pursuant to Rule 144;

                           (2) prepare and file with the SEC such amendments and
supplements to any Registration  Statement and the prospectus used in connection
therewith as may be necessary to comply with the  provisions  of the  Securities
Act  with  respect  to  the  disposition  of  all  securities  covered  by  such
Registration Statement;

                           (3)  furnish  such number of  prospectuses  and other
documents  incident  thereto,  including  any  amendment of or supplement to the
prospectus, as a Investor from time to time may reasonably request;

                           (4) cause all Common  Stock  registered  as described
herein to be listed on each  securities  exchange  and quoted on each  quotation
service on which the common equity  securities of the Company are then listed or
quoted;

                           (5) provide a transfer  agent and  registrar  for all
Common  Stock  registered  pursuant to any  Registration  Statement  and a CUSIP
number for all such Common Stock;

                           (6) otherwise use its best efforts promptly to comply
with all applicable rules and regulations of the SEC;

                           (7) file the  documents  required  of the Company and
otherwise use its best efforts promptly to obtain,  if applicable,  and maintain
requisite  blue sky  clearance  in (A) all  jurisdictions  in  which  any of the
Acquired  Securities are originally  sold, and (B) all other states specified in
writing by a  Investor,  provided as to clause  (B),  however,  that the Company
shall not be required to qualify to do business or consent to service of process
in any state in which it is not now so qualified or has not so consented; and

                           (8)  with  respect  to  the  initial  filing  of  any
Registration Statement as of the date of declaration of effectiveness, obtain an
opinion of counsel to the Company in customary form and

                                       22
<PAGE>

reasonably  acceptable  to each  Investor  addressed  to each  Investor  selling
registrable securities pursuant to the Registration Statement. The Company shall
use its best efforts to be listed on the NNMS market and  maintain  such listing
unless listed on another national exchange.

                  (e) The Company  shall furnish to each Investor upon request a
reasonable  number  of  copies  of  the  prospectus  and a  supplement  to or an
amendment of such  prospectus  as may be necessary  in order to  facilitate  the
public sale or other  disposition  of all or any of the Common Stock held by the
Investor.

                  (f)  With a view to  making  available  to the  Investors  the
benefits of Rule 144 and any other rule or regulation of the SEC that may at any
time permit a Investor to sell Common Stock to the public  without  registration
or pursuant to registration,  the Company  covenants and agrees to: (i) make and
keep public information available,  as those terms are understood and defined in
Rule 144, until the earlier of (A) the second anniversary of the Closing Date or
(B) the date as of which all of the Acquired  Securities shall have been resold;
(ii) file  with the SEC in a timely  manner  all  reports  and  other  documents
required  of the  Company  under the  Exchange  Act;  and (iii)  furnish  to any
Investor upon request, as long as the Investor owns any Acquired Securities, (A)
a written  statement  by the Company  that it has  complied  with the  reporting
requirements  of the  Exchange  Act,  (B) a copy of the most  recent  annual  or
quarterly  report  of the  Company,  and (C) such  other  information  as may be
reasonably requested in order to avail any Investor of any rule or regulation of
the SEC that  permits  the  selling  of any  such  Acquired  Securities  without
registration.

                  (g) The Company may, at any time, refuse to permit an Investor
to  resell  any  Acquired  Securities  pursuant  to  a  Registration  Statement;
provided, however, that in order to exercise this right at any time, the Company
must  deliver a  certificate  in  writing to the  Investors,  signed by a senior
executive  officer of the Company,  to the effect that suspension of the sale of
shares under the Registration  Statement until such time as the Company can make
an appropriate filing with the SEC is necessary in the good faith  determination
of the Company's Board of Directors  because a sale pursuant to the Registration
Statement,  in its then current form, would be reasonably likely to constitute a
violation  of the federal  securities  laws,  which  certificate  shall  specify
whether  such  filing is  required to correct  information  in the  Registration
Statement which was incorrect when included  therein (a "Corrective  Filing") or
to update or supplement the  information  therein to reflect new  information (a
"Supplemental Filing"). In such an event, the Company shall use its best efforts
to amend the  Registration  Statement  if necessary  and take all other  actions
necessary to allow such sale under the federal securities laws, and shall notify
the  Investors  promptly  after it has  determined  that  such  sale has  become
permissible under the federal  securities laws.  Notwithstanding  the foregoing,
the Company  shall not be  entitled  to exercise  its right to suspend any sales
under the Registration  Statement for a Corrective Filing more than one (1) time
in any twelve (12) month  period,  and the Company shall use its best efforts to
limit any period  during which such  Registration  Statement  may be  withdrawn,
whether for a Corrective  Filing or a  Supplemental  Filing,  to a period not in
excess of thirty (30) days;  provided,  that all officers  and  directors of the
Company,  and any other  Persons  to whom the  Company  has  given  registration
rights, also agree to suspend the sales of any of the Company's securities owned
by such Person during any such period in the case of a Supplemental  Filing, and
pursuant to such Registration Statement, in the case of a Corrective Filing.

         4.19     Indemnification and Contribution.

                  (a) The Company  agrees to indemnify  and hold  harmless  each
Investor and its officers, directors,  controlling persons and affiliates (each,
an  "Investor  Indemnitee")from  and  against  any  losses,  claims,  damages or
liabilities  (or  actions  or  proceedings  in  respect  thereof)  to which such
Investor  Indemnitee may become  subject  (under the Securities  Act, state law,
common law or otherwise) insofar as such losses,  claims, damages or liabilities
(or actions or proceedings in respect  thereof) arise out of, or are

                                       23
<PAGE>

based upon, any untrue statement of a material fact contained in, or omission of
a material fact from, any Registration Statement, or arise out of any failure by
the Company to fulfill any undertaking included in any Registration Statement or
this  Agreement,  and the Company  will,  as incurred,  reimburse  such Investor
Indemnitee for any legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim; provided,
however,  that the  Company  shall not be liable in any such case to the  extent
that such loss,  claim,  damage or liability arises out of, or is based upon, an
untrue  statement  made in such  Registration  Statement in reliance upon and in
conformity with information  furnished to the Company in writing by or on behalf
of  such  Investor  Indemnitee  specifically  for  use in  preparation  of  such
Registration Statement.  The Company will reimburse each Investor Indemnitee for
any legal (but only in respect of one counsel to all  Investor  Indemnitees)  or
other expenses reasonably incurred and documented in investigating, defending or
preparing to defend any such action,  proceeding  or claim  notwithstanding  the
absence of a judicial  determination as to the propriety and  enforceability  of
the obligations  under this section and the possibility that such payments might
later be held to be improper,  provided,  that to the extent any such payment is
ultimately  held to be  improper,  the persons  receiving  such  payments  shall
promptly refund them.

                  (b)  Each  Investor,  severally  and not  jointly,  agrees  to
indemnify and hold harmless the Company and its officers, directors, controlling
persons  and  affiliates  (each,  a "Company  Indemnitee")  from and against any
losses,  claims,  damages or  liabilities  (or actions or proceedings in respect
thereof) to which any such  Company  Indemnitee  may become  subject  (under the
Securities  Act,  state law,  common law or  otherwise)  insofar as such losses,
claims,  damages or liabilities  (or actions or proceedings in respect  thereof)
arise out of, or are based upon, an untrue  statement made in such  Registration
Statement in reliance upon and in conformity with  information  furnished to the
Company  in  writing by or on behalf of such  Investor  specifically  for use in
preparation of such Registration Statement;  provided, however, that no Investor
shall be  liable  in any such  case for any  untrue  statement  included  in any
Prospectus which statement has been corrected,  in writing, by such Investor and
delivered to the Company before the sale from which such loss occurred and in no
event shall any  Investor be liable for any amount in excess of the net proceeds
received  for the  sale  of its  Common  Stock  pursuant  to  such  Registration
Statement.

                  (c)  Promptly  after  receipt by any  indemnified  person of a
notice of a claim or the  beginning of any action in respect of which  indemnity
is to be sought against an  indemnifying  person  pursuant to this Section 4.19,
such indemnified person shall notify the indemnifying  person in writing of such
claim or of the  commencement  of such action,  and,  subject to the  provisions
hereinafter  stated,  in case  any  such  action  shall be  brought  against  an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying  person shall be entitled to participate  therein,  and, to the
extent  that it  shall  wish,  to  assume  the  defense  thereof,  with  counsel
reasonably  satisfactory  to the  indemnified  person.  After  notice  from  the
indemnifying  person to such  indemnified  person of the  indemnifying  person's
election to assume the defense  thereof,  the  indemnifying  person shall not be
liable to such indemnified person for any legal expenses  subsequently  incurred
by such  indemnified  person in connection with the defense  thereof;  provided,
however,  that if there exists or shall exist a conflict of interest  that would
make it inappropriate in the reasonable  judgment of the indemnified  person for
the same counsel to represent both the indemnified  person and such indemnifying
person or any affiliate or associate  thereof,  the indemnified  person shall be
entitled to retain its own counsel at the expense of such indemnifying person.

                  (d) If the  indemnification  provided for in this Section 4.19
is unavailable to or  insufficient  to hold harmless an indemnified  party under
subsection  (a) or (b)  hereof in  respect  of any  losses,  claims,  damages or
liabilities (or actions or proceedings in respect thereof)  referred to therein,
then each  indemnifying  party shall contribute to the amount paid or payable by
such  indemnified  party  as  a  result  of  such  losses,  claims,  damages  or
liabilities (or actions in respect thereof) in such proportion as is

                                       24
<PAGE>

appropriate to reflect the relative fault of the Company on the one hand and the
Investors on the other in  connection  with the  statements  or omissions  which
resulted in such losses,  claims,  damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable  considerations.  The relative
fault shall be  determined  by  reference  to, among other  things,  whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or an Investor on the other and the  parties'  relative  intent,
knowledge,  access to  information  and  opportunity  to correct or prevent such
statement or omission.  The Company and the Investors agree that it would not be
just  and  equitable  if  contribution  pursuant  to this  subsection  (d)  were
determined by pro rata  allocation  (even if the  Investors  were treated as one
entity for such  purpose) or by any other  method of  allocation  which does not
take  account  of  the  equitable  considerations  referred  to  above  in  this
subsection  (d). The amount paid or payable by an indemnified  party as a result
of the losses,  claims,  damages, or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses  reasonably incurred by such indemnified party in connection with
investigating  or  defending  any such  action  or  claim.  Notwithstanding  the
provisions of this  subsection  (d), no Investor shall be required to contribute
any amount in excess of the amount,  if any, by which the amount received by the
Investor  from the sale of the Common Stock to which such loss  relates  exceeds
the amount of any damages which such Investor has otherwise been required to pay
by reason of such  untrue or alleged  untrue  statement  or  omission or alleged
omission. 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.  The
Investors'  obligations  in this  subsection  (d) to  contribute  are several in
proportion to their respective sales of Common Stock.

                                    ARTICLE V

                               CLOSING CONDITIONS
                               ------------------

         Section  5.1  Investor  Closing  Conditions.   The  obligation  of  the
Investors  to  consummate  the  transactions  contemplated  hereby is subject to
satisfaction  or  waiver  of each of the  following  conditions  at or  prior to
Closing:

                           (a) Secretary's  Certificate.  The Company shall have
delivered to the Investors a certificate of the Secretary of the Company,  dated
as of the Closing Date,  certifying:  (i) the adoption by the Company's Board of
Directors of attached resolutions authorizing, among other things, the execution
and  delivery  of  this  Agreement  and  the  consummation  of the  transactions
contemplated  hereby,  (ii) the incumbency and signatures of the officers of the
Company  executing  this  Agreement  and the other  agreements  and  instruments
contemplated  hereby, (iii) the attached copies of the bylaws and certificate of
incorporation  of the Company,  and (iv) the attached copy of a  certificate  of
good  standing,  issued by the Delaware  Secretary of State,  and dated no later
than 10 days prior to Closing.

                           (b)      Intentionally Left Blank.

                           (c)  Lock-Up   Agreement.   The  Company  shall  have
executed  and  delivered  the  Lock-Up  Agreement  substantially  in the form of
Exhibit 5.1(c) hereto (the "Lock Up Agreement").

                           (d)  Tag  Along  Agreement.   Messrs.   Sebastian  E.
Cassetta  and Mario F. Rossi shall have  executed  and  delivered  the Tag Along
Agreement  substantially  in the form of Exhibit  5.1(d)  hereto (the "Tag Along
Agreement").

                                       25
<PAGE>

                           (e) Wire  Transfer  Instructions.  The Company  shall
have provided to each of the Investors  written wire transfer  instructions with
respect  to the  portion  of the  Aggregate  Purchase  Price  being paid by each
Investor at Closing.

                           (f)  Stock  Certificates.   The  Company  shall  have
delivered to each  Investor a  certificate  representing  the  Purchased  Shares
acquired by such Investor pursuant to the terms hereof.

                           (g)  Closing  Certificate.  The  Company  shall  have
delivered to the Investors a certificate of an authorized officer of the Company
certifying that the  representations  and warranties of the Company contained in
this  Agreement,  the  Lock-Up  Agreement  and in each  certificate  or document
delivered by the Company to the  Investors in connection  with the  transactions
contemplated hereby and thereby are true and correct in all material respects on
and as of the date of this  Agreement and the Company  shall have  performed all
obligations  and  complied  in  all  material   respects  with  all  agreements,
undertakings,  covenants and conditions  required  hereunder or thereunder to be
performed by it prior to the Closing.

                           (h)  Opinion of  Counsel.  The  Investors  shall have
received at the Closing  from Parker  Chapin,  LLP,  counsel to the  Company,  a
favorable  written  opinion  dated as of the Closing  Date which shall be to the
effect set forth in Exhibit 5.1(h) hereto.

                           (i) No  Injunction.  There shall not be in effect any
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby.

                           (j) Appointment of Board Members. Charles Klotz shall
have been appointed to the Board of Directors of the Company.

                           (k) Aggregate  Equity  Investment.  The Company shall
have obtained at least an aggregate of $17.5 million from the sale of the Common
Stock.

         Section 5.2 Company Closing  Conditions.  The obligation of the Company
to  consummate  the   transactions   contemplated   hereby  is  subject  to  the
satisfaction  or  waiver  of each of the  following  conditions  at or  prior to
Closing:

                           (a) Payment of Purchase Price.  Each of the Investors
shall tender payment by wire transfer of that portion of the Aggregate  Purchase
Price being paid by such Investor at Closing.

                           (b) No  Injunction.  There shall not be in effect any
order, decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits consummation of the transactions contemplated hereby.

                           (c)  Lock-Up  Agreement.  The  Investors  shall  have
executed and delivered the Lock-Up Agreement.

                                   ARTICLE VI

                                   DEFINITIONS
                                   -----------

         Section 6.1 Certain Defined Terms.  For all purposes of this Agreement,
the  following  terms shall have the meanings set forth or  cross-referenced  in
this Section 6:

                                       26
<PAGE>

         "Acquired  Securities" means (i) the Purchased Shares,  (ii) any Top-Up
Shares (if any) issued and/or issuable  pursuant to the terms hereof,  (iii) any
Compensation  Warrants  (if any) issued  and/or  issuable  pursuant to the terms
hereof,  (iv) any shares of Common  Stock (if any)  issued  and/or  issuable  on
exercise of the  Compensation  Warrants (if any), and (v) any securities  issued
and/or  issuable in respect of any of the  foregoing  upon the  occurrence of an
Adjustment Event or upon exercise or conversion of any of the foregoing.

         "Adjustment  Event" means the  occurrence of any of the following  with
respect to the Company  and/or any relevant  class of its equity  securities:  a
stock  dividend,  stock split,  exchange,  combination  or division of shares or
other   equity   interests,    recapitalization,    reclassification,    merger,
consolidation, reorganization, or the like.

         "Affiliate" means any other person directly or indirectly  controlling,
controlled  by, or under direct or indirect  common  control with any referenced
person and  includes  without  limitation,  (a) any  Person  who is an  officer,
director,  or direct or  indirect  beneficial  holder of at least 5% of the then
outstanding  capital  stock  of any  referenced  Person,  and any of the  Family
Members of any such Person,  (b) any Person of which a referenced  Person and/or
its Affiliates (as defined in clause (a) above), directly or indirectly,  either
beneficially  own(s) at least 5% of the then  outstanding  equity  securities or
constitute(s) at least a 5% equity  participant,  (c) in the case of a specified
Person who is an individual,  Family Members of such Person, and (d) in the case
of the  Investors,  any entities for which an Investor or any of its  Affiliates
serve as general partner and/or investment adviser or in a similar capacity, and
all mutual  funds or other  pooled  investment  vehicles or  entities  under the
control or  management  of such  Investor or the general  partner or  investment
adviser  thereof,  or any Affiliate of any of them, or any  Affiliates of any of
the foregoing.

         "Affiliated  Group" has the meaning  given to it in Section 1504 of the
Code, and in addition includes any analogous combined,  consolidated, or unitary
group, as defined under any applicable state, local, or foreign income Tax law.

         "Ancillary  Agreements" means the Lock-Up  Agreement,  the Compensation
Warrant(s)  (if any) issued from time to time pursuant to the terms hereof,  and
any other  agreement or document  delivered or executed in connection  with this
Agreement or the transactions contemplated hereby.

         "CERCLA" means the Comprehensive  Environmental Response,  Compensation
and Liability Act of 1980, as amended.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Compensation Warrants" shall mean a warrant, substantially in the form
of Exhibit 4.18 hereto,  exercisable for cash or by cashless exercise  (reducing
the numbers of shares  received) for a number of shares of Common Stock equal to
ten percent (10%) of the aggregate  number of Purchased  Shares  acquired by the
warrant  holder (in the aggregate with its  Affiliate(s))  pursuant to the terms
hereof at an  exercise  price per share of Common  Stock  issuable  on  exercise
thereof  equal to seventy  percent  (70%) of the  average  trading  price of the
Common Stock over the 5 trading days immediately  prior to the issue date of the
warrant (in each case,  as adjusted  from time to time on the  occurrence  of an
Adjustment  Event) for a period of 2 years from the issue date and providing for
piggyback  registration  rights for shares  issuable  on  exercise  of each such
Compensation Warrant.

         "Damages" means all damages,  losses, claims, demands,  actions, causes
of action, suits, litigations,  arbitrations,  liabilities, costs, and expenses,
including  without  limitation  court costs and the fees and expenses of counsel
and experts.

                                       27
<PAGE>

         "Derivative  Securities"  means  (i) all  shares  of  stock  and  other
securities that are convertible into or exchangeable for shares of Common Stock,
and (ii) all options,  warrants,  and other  rights to acquire  shares of Common
Stock or any class of stock or other security or securities  convertible into or
exchangeable for shares of Common Stock or any class of stock or other security.

         "Environmental Laws" means, collectively, the Resource Conservation and
Recovery Act, CERCLA, the Superfund  Amendments and Reauthorization Act of 1986,
the Federal  Clean Water Act, the Federal  Clean Air Act,  the Toxic  Substances
Control Act, and any and all state or local statutes,  regulations,  ordinances,
orders, and decrees relating to health, safety, or the environment, each, as the
case may be, as amended.

         "Excluded  Transactions"  means  (i) the  issuance  of shares of Common
Stock by the Company on the  occurrence of an Adjustment  Event;  (ii) issuances
(other than  issuances  described in clause  (iii)  below) of stock,  options or
warrants  from time to time after the date hereof to employees,  consultants  or
directors,  so long as all of such issuances do not exceed, in the aggregate and
on a Fully-Diluted  Basis, 208,308 shares of Common Stock (as such number may be
adjusted  from time to time on the  occurrence of an  Adjustment  Event);  (iii)
issuances  upon the exercise of currently  outstanding  options and warrants set
forth on Schedule 2.4 hereto, so long as all of such issuances, in the aggregate
and on a Fully Diluted Basis, do not exceed 5,446,916 shares of Common Stock (as
such number may be adjusted from time to time on the occurrence of an Adjustment
Event).

         "Family  Members"  means,  as applied to any  individual,  any  parent,
spouse, child, spouse of a child, brother or sister of the individual,  and each
trust created for the benefit of one or more of such persons and each  custodian
of a property of one or more such persons and the estate of any such persons.

         "Fully  Diluted  Basis"  means  that the  relevant  calculation  of the
ownership or percentage  ownership (as  applicable)  of any Person of the equity
securities of the Company shall be performed as if (i) all Derivative Securities
have been  exercised  or  converted,  as the case may be,  into shares of Common
Stock of the Company, and (ii) all shares of preferred stock or any other series
of equity  securities  of the Company shall have been  converted  into shares of
Common Stock of the Company.

         "GAAP" means  generally  accepted  accounting  principles  that are (i)
consistent  with  the  principles   promulgated  or  adopted  by  the  Financial
Accounting  Standards  Board  and  its  predecessors,  (ii)  applied  on a basis
consistent  with  prior  periods,  and (iii)  such  that,  insofar as the use of
accounting principles is pertinent,  a certified public accountant could deliver
an  unqualified  opinion  with  respect to  financial  statements  in which such
principles have been properly applied.

         "Hazardous  Substances"  means,  collectively,  any hazardous waste, as
defined by 42 U.S.C.  ss.  6903(5),  any  hazardous  substances as defined by 42
U.S.C.  ss.  9601(14),  any pollutant or contaminant as defined by 42 U.S.C. ss.
9601(33),  or any toxic substance,  methane gas, oil, or hazardous  materials or
other chemicals or substances regulated by any Environmental Laws.

         "Liens" means any and all liens, claims, mortgages, security interests,
charges,  encumbrances, and restrictions on transfer of any kind, except: (i) in
the case of references to securities,  any of the same arising under  applicable
securities  laws solely by reason of the fact that such  securities  were issued
pursuant to  exemptions  from  registration  under such  securities  laws or are
subject  to the  Lock Up  Agreement,  (ii)  real  estate  taxes  not yet due and
payable, and (iii) any

                                       28
<PAGE>

lien in favor  of any  landlord  for  unpaid  rent,  additional  rent,  or other
charges,  which lien is created  by statute or under any lease  under  which the
Company or any of its Subsidiaries is lessee.

         "Person"  or "person"  (regardless  of whether  capitalized)  means any
natural  person,  entity,  or  association,  including  without  limitation  any
corporation,  partnership,  limited liability company,  government (or agency or
subdivision thereof), trust, joint venture, or proprietorship.

         "Subsidiary" or "Subsidiaries"  means, with respect to any person,  any
corporation  a majority  (by number of votes) of the  outstanding  shares of any
class  or  classes  of  which  are at the  time  owned  by such  person  or by a
Subsidiary of such person, if the holders of the shares of such class or classes
(a) are ordinarily,  in the absence of  contingencies,  entitled to vote for the
election  of  a  majority  of  the  directors  (or  persons  performing  similar
functions)  of the  issuer  thereof,  even  though the right so to vote has been
suspended  by the  happening  of  such a  contingency,  or (b)  are at the  time
entitled,  as such  holders,  to vote  for the  election  of a  majority  of the
directors  (or persons  performing  similar  functions)  of the issuer  thereof,
whether  or not the right so to vote  exists by  reason  of the  happening  of a
contingency.

         "TecCapital" means TecCapital, Ltd., a Bermuda corporation.

         Section 6.2 Terms Defined  Elsewhere.  The following  terms are defined
herein in the sections identified below:

                  TERM                               SECTION
                  ----                               -------

         Aggregate Purchase Price                    1.1
         Agreement                                   Preamble
         Applicable Rate                             4.8(b)
         Applicable Value                            4.8(c)
         Balance Sheet                               2.6
         Closing                                     1.3
         Closing Date                                1.3
         Common Stock                                1.1
         Company                                     Preamble
         Compensation Trigger Date                   4.18(a)
         Corrective Filing                           4.18(g)
         Employee Benefit Plan                       2.26
         Exchange                                    4.18(a)
         Exchange Act                                2.7
         Extraordinary Common Stock Event            4.8(d)
         Filing Due Date                             4.18(a)
         Investor                                    Preamble
         Investor Securities                         4.8(a)
         Listing Application                         4.18(a)
         Lock-Up Agreement                           5.1(c)
         Material Adverse Effect                     2.1
         Net Consideration Per Share                 4.8(e)(ii)(A)
         NNMS                                        4.18(a)
         Offeree                                     4.7(a)
         Per Share Purchase Price                    1.2
         Proprietary Information                     2.17
         Purchased Shares                            1.1
         Registration Expenses                       4.18(c)

                                       29
<PAGE>

         Registration Statement                      4.18(a)
         SEC                                         2.7
         SEC Documents                               2.7
         Securities Act                              2.7
         Selling Expenses                            4.18(c)
         Supplemental Filing                         4.18(g)
         Tag Along Agreement                         5.1(d)
         Tax                                         2.13
         TecCapital Director                         4.9
         Top-Up Shares                               4.8(a)

                                   ARTICLE VII

                                  MISCELLANEOUS
                                  -------------

         Section 7.1 Amendments,  Waivers and Consents. For the purposes of this
Agreement and all  agreements  executed  pursuant  hereto,  no course of dealing
between  the  Company  and the  Investors  and no delay on the part of any party
hereto in  exercising  any rights  hereunder or  thereunder  shall  operate as a
waiver of the rights hereof or thereof. No provision hereof may be waived except
by a written instrument signed by the party so waiving such provision; provided,
however,  that  changes in or additions  to, and any consents  required by, this
Agreement may be made, and compliance with any covenant,  condition or provision
set forth herein may be omitted or waived  (either  generally or in a particular
instance and either  retroactively or prospectively) by the consent of Investors
holding, in the aggregate,  ___% of the Purchased Shares being acquired pursuant
to the terms hereof.  Except as expressly provided in the preceding sentence, no
supplement or modification of this Agreement shall be binding unless executed in
writing by each party to be bound thereby.

         Section 7.2 Governing  Law;  Jurisdiction;  Venue etc.  This  Agreement
shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York,  without  giving effect to the principles of conflicts of
law  thereof.  The state and federal  courts of the State of New York located in
New York County shall have  exclusive  jurisdiction  to hear and  determine  any
claims or disputes  between the Investors and the other party or parties  hereto
pertaining   directly  or  indirectly  to  this  Agreement  and  all  documents,
instruments and agreements  executed  pursuant hereto,  or to any matter arising
therefrom  (unless  otherwise  expressly  provided for  therein);  the exclusive
choice of forum set forth in this  Section  7.2 shall not be deemed to  preclude
the  enforcement  of any  judgment  obtained  in such forum or the taking of any
action to enforce  the same in any other  appropriate  jurisdiction.  All of the
parties  hereto  waive all rights to trial by jury in any  action or  proceeding
instituted  by any party against any other party arising out of, on or by reason
of this agreement or the documents and transactions contemplated herein.

         Section 7.3 Headings.  The descriptive  headings in this Agreement have
been inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction or interpretation of any provision thereof or hereof.

         Section 7.4 Counterparts. This Agreement may be executed simultaneously
in any number of  counterparts,  each of which when so  executed  and  delivered
shall  be  taken  to  be an  original;  but  such  counterparts  shall  together
constitute but one and the same document.

         Section 7.5 Notices and Demands. Any notice or demand which is required
or  provided  to be given  under  this  Agreement  shall be  deemed to have been
sufficiently  given  and  received  for all  purposes  when  delivered  by hand,
telecopy,  or nationally  recognized  overnight courier,  or five (5) days

                                       30
<PAGE>

after being sent by certified or registered  mail,  postage and charges prepaid,
return receipt requested, to the following addresses:

                  If to the Company:

                    One Station Place
                    Stamford, Connecticut 06902
                    Attn:   Sebastian E. Cassetta, Chief Executive Officer
                    Facsimile:  (203) 353-5962

                    With a copy to:

                    Parker Chapin LLP
                    The Chrysler Building
                    405 Lexington Avenue
                    New York, New York 10174
                    Attn:  Michael J. Shef, Esq.
                    Facsimile:  (212) 704-6288

                    If to the Investors:

                    To their respective addresses set forth on Schedule A.

                    With a copy to:

                    Bingham Dana LLP
                    150 Federal Street
                    Boston, MA 02110
                    Attn:  Roger D. Feldman, Esq.
                    Facsimile:  (617) 951-8736

         Section 7.6  Severability.  Whenever  possible,  each provision of this
Agreement  shall be  interpreted  in such a manner as to be effective  and valid
under  applicable  law, but if any provision of this  Agreement  shall be deemed
prohibited  or invalid  under  such  applicable  law,  such  provision  shall be
ineffective  to  the  extent  of  such  prohibition  or  invalidity,   and  such
prohibition  or invalidity  shall not invalidate the remainder of such provision
or the other  provisions  of this  Agreement,  provided,  however,  that no such
severability shall be effective if it materially changes the economic benefit of
this Agreement to any party.

         Section  7.7  Integration.  This  Agreement,  including  the  exhibits,
documents and instruments referred to herein or therein,  constitutes the entire
agreement,  and supersedes any other prior agreements and  understandings,  both
written and oral, among the parties with respect to the subject matter hereof.

         Section 7.8  Publicity.  The Company and the  Investors  shall have the
right to  approve  before  issuance  any  press  releases  or any  other  public
statements  sought  to be made by the other  with  respect  to the  transactions
contemplated  hereby,  except for any  disclosures  required in connection  with
obtaining any consents to the transactions  contemplated by this Agreement.  The
Company  shall  have the  right to  issue  any  press  release  or other  public
statement in connection with the transaction  contemplated hereby, excluding the
identity of the Investors,  without the prior consent of the Investors,  but may
disclose  the  identity  of the  Investors  upon  prior  written  consent of the
Investors, which shall not be unreasonably withheld.

                                       31
<PAGE>

         Section 7.9  Expenses.  The Company  and the  Investors  will each bear
their own costs and expenses and those of their  respective  advisors related to
the transactions herein contemplated; provided that up to an aggregate amount of
$15,000 of legal fees and expenses of the Investors relating to the transactions
herein  contemplated,  will be paid by the  Company at the  Closing and that the
Company  will  further  pay any costs  and  expenses  required  by it to be paid
pursuant to the terms of Sections 4.18 and 4.19, above.

         Section 7.10 Assignment.  (a) The Company may not assign this Agreement
or its rights and obligations hereunder.

                  (b)  Notwithstanding  the provisions of the Lock-Up Agreement,
any other of the  Ancillary  Agreements,  or any other  provision  hereof,  this
Agreement and the rights and obligations  hereunder and the Purchased Shares and
all other Acquired Securities may be transferred by each of the Investors in its
sole  discretion  at any  time,  in  whole or in part,  to any  Affiliate(s)  or
Affiliated  Group(s) of the  transferor,  without the consent of any other party
thereto.

                  (c) Without  prejudice  to any of the rights of the  Investors
under Section 7.10(b),  above, and notwithstanding any other provision hereof or
of any of the  Ancillary  Agreements  other  than  the Lock Up  Agreement,  this
Agreement  and any  and  all  the  rights  and  obligations  hereunder,  and the
Purchased Shares and all other Acquired  Securities,  may also be transferred by
each of the  Investors in its sole  discretion at any time, in whole or in part,
to any Person or entity as and when permitted  pursuant to the terms of the Lock
Up Agreement.

                  (d) Notwithstanding the other provisions of this Section 7.10,
no Person  acquiring  any Acquired  Securities  in a trade on an Exchange  shall
receive the benefit of any of the  covenants  set forth in this  Agreement as an
assignee thereof.

                  (e)  Subject  to clause  (d),  immediately  above,  any Person
acquiring  any  Acquired  Securities  and/or  rights of an  Investor  under this
Agreement  shall  constitute an Investor for purposes of this  Agreement and any
reference to an Investor in this Agreement shall also refer to any such Person.

         Section 7.11 Equitable  Relief.  Each of the parties  acknowledges that
any breach by such party of his, her, or its  obligations  under this  Agreement
would  cause  substantial  and  irreparable  damage  to one or more of the other
parties  and  that  money  damages  would  be  an  inadequate  remedy  therefor.
Accordingly,  each party  agrees  that the other  parties or any of them will be
entitled to an injunction,  specific performance,  and/or other equitable relief
to prevent the breach of such obligations.

         Section 7.12  Aggregation  of  Interests.  For purposes of  determining
whether,  for any  provision  hereof,  the  number of  shares  of Common  Stock,
Purchased Shares, Investor Securities or other securities of the Company held by
any Investor or permitted transferee(s) of such Investor is sufficient to meet a
required  threshold,  such Investor or permitted  transferee(s) (as the case may
be)  shall be deemed to hold the  number  of shares of Common  Stock,  Purchased
Shares,  Acquired Securities or other securities of the Company, as the case may
be, as are held by such  Investor  and its  Affiliate(s)  and/or  members of its
Affiliated Group(s) (as the case may be).

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       32
<PAGE>

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

                                      SMARTSERV ONLINE, INC.

                                      By:______________________________________
                                      Name:
                                      Title:

INVESTORS:                            TECCAPITAL, LTD.
---------

                                      By:_______________________________________
                                      Name:     Charles R. Klotz
                                      Title:    Director

                                      THE ABERNATHY GROUP

                                      By:_______________________________________
                                      Name:
                                      Title:

                                      CONSECO EQUITY FUND
                                      By:  CONSECO CAPITAL MANAGEMENT, INC.

                                      By:_______________________________________
                                      Name:
                                      Title:

CERTAIN STOCKHOLDERS:
--------------------

                                      ------------------------------------------
                                      Sebastian E. Cassetta

                                      ------------------------------------------
                                      Mario F. Rossi

                                       33
<PAGE>

<TABLE>
<CAPTION>
                                                                       Exhibit A
                                                                       ---------

          Investor        Number of Purchased Shares   Aggregate Purchase Price
          --------        --------------------------   ------------------------
<S>                                 <C>                     <C>
      TecCapital, Ltd.              303,030                 $15,000,000.00
     The Abernathy Group            20,202                   $1,000,000.00
     Conseco Equity Fund            30,303                   $1,500,000.00
                                                            --------------
            TOTAL                   353,535                 $17,500,000.00
</TABLE>

                                       341999 STOCK OPTION PLAN

                                       OF

                             SMARTSERV ONLINE, INC.

1.  PURPOSES OF THE PLAN.  This stock  option  plan (the  "Plan") is designed to
provide an incentive to key employees  (including directors and officers who are
key  employees)  and to  consultants  and  directors  who are not  employees  of
SmartServ Online,  Inc., a Delaware  corporation (the "Company"),  or any of its
Subsidiaries (as defined in Paragraph 19), and to offer an additional inducement
in obtaining  the services of such  persons.  The Plan provides for the grant of
nonqualified  stock options which do not qualify as  "incentive  stock  options"
within the  meaning of Section  422 of the  Internal  Revenue  Code of 1986,  as
amended (the "Code").

2. STOCK  SUBJECT TO THE PLAN.  Subject to the  provisions  of Paragraph 12, the
aggregate  number of shares of common  stock,  $.01 par value per share,  of the
Company  ("Common  Stock") for which options may be granted under the Plan shall
not exceed  400,000.  Such shares of Common Stock may, in the  discretion of the
Board of Directors of the Company (the "Board of Directors"),  consist either in
whole or in part of authorized but unissued  shares of Common Stock or shares of
Common Stock held in the treasury of the Company.  Subject to the  provisions of
Paragraph  13, any  shares of Common  Stock  subject to an option  which for any
reason expires, is canceled or is terminated unexercised or which ceases for any
reason to be  exercisable  shall  again  become  available  for the  granting of
options  under the Plan.  The Company  shall at all times during the term of the
Plan reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of the Plan.

3.  ADMINISTRATION OF THE PLAN. The Plan shall be administered by a committee of
the  Board of  Directors  (the  "Committee")  consisting  of not  less  than two
directors;   provided,  however,  that,  with  respect  to  options  granted  to
Non-Employee  Directors  (as  defined  in  Paragraph  19),  the  Plan  shall  be
administered  by the Board of Directors (any  reference  herein to the Committee
shall refer to Board of Directors  where the context so  requires).  During such
time as the Company has a class of equity securities registered under Section 12
of the Securities  Exchange Act of 1934, as amended (the "Act"),  each member of
the  Committee  shall be a  "non-employee  director"  within the meaning of Rule
16b-3 (as the same may be in effect  and  interpreted  from time to time,  "Rule
16b-3").  A majority of the members of the Committee shall  constitute a quorum,
and the acts of a majority  of the  members  present  at any  meeting at which a
quorum is present,  and any acts  approved  in writing by all members  without a
meeting, shall be the acts of the Committee.

         Subject to the express provisions of the Plan, the Committee shall have
the  authority,  in its sole  discretion:  to determine  those key employees who
shall be granted  options,  the consultants who shall be granted options and the
Non-Employee  Directors  who shall be

                                      -1-
<PAGE>

granted options;  the times when options shall be granted;  the number of shares
of Common Stock to be subject to each option;  the term of each option; the date
each option shall become exercisable;  whether an option shall be exercisable in
whole, in part or in installments and, if in installments,  the number of shares
of Common  Stock to be subject to each  installment,  whether  the  installments
shall be cumulative,  the date each installment shall become exercisable and the
term of each  installment;  whether to  accelerate  the date of  exercise of any
option or  installment;  whether  shares of Common  Stock may be issued upon the
exercise  of an  option  as  partly  paid and,  if so,  the  dates  when  future
installments  of the  exercise  price  shall  become due and the amounts of such
installments;  the  exercise  price of each  option;  the form of payment of the
exercise price;  whether to restrict the sale or other disposition of the shares
of Common Stock  acquired upon the exercise of an option and, if so,  whether to
waive any such  restriction;  whether  to  subject  the  exercise  of all or any
portion of an option to the  fulfillment  of  contingencies  as specified in the
contract  referred  to in  Paragraph  11  (the  "Contract"),  including  without
limitation,  contingencies  relating to entering  into a covenant not to compete
with the Company,  any of its  Subsidiaries or a Parent (as defined in Paragraph
19), to financial  objectives  for the  Company,  any of its  Subsidiaries  or a
Parent,  a division of any of the foregoing,  a product line or other  category,
and/or the period of continued  employment of the optionee with the Company, any
of its  Subsidiaries or a Parent,  and to determine  whether such  contingencies
have been met; whether an optionee is Disabled (as defined in Paragraph 19); the
amount, if any, necessary to satisfy the Company's  obligation to withhold taxes
or other amounts;  the fair market value of a share of Common Stock; to construe
the  respective  Contracts and the Plan;  with the consent of the  optionee,  to
cancel or modify an option,  provided,  that the modified provision is permitted
to be  included  in an  option  granted  under  the  Plan  on  the  date  of the
modification;  to prescribe, amend and rescind rules and regulations relating to
the Plan; to approve any provision  which under Rule 16b-3 requires  approval by
the Board of Directors of the Company, a committee of Non-Employee  Directors or
the  stockholders  of the Company in order to be exempt under Rule 16b-3 (unless
otherwise  specifically  provided herein);  and to make all other determinations
necessary or advisable for  administering  the Plan.  Any  controversy  or claim
arising out of or relating to the Plan, any option granted under the Plan or any
Contract  shall  be  determined  unilaterally  by  the  Committee  in  its  sole
discretion.  The  determinations  of the Committee on the matters referred to in
this  Paragraph 3 shall be conclusive  and binding on the parties.  No member or
former member of the Committee shall be liable for any action, failure to act or
determination  made  in good  faith  with  respect  to the  Plan  or any  option
hereunder.

4.  ELIGIBILITY;  GRANTS.  The  Committee  may from  time to  time,  in its sole
discretion,  consistent  with the  purposes  of the Plan,  grant  options to key
employees (including officers and directors who are key employees),  consultants
and  Non-Employee  Directors  of the  Company or any of its  Subsidiaries.  Such
options  granted  shall  cover  such  number of  shares  of Common  Stock as the
Committee may determine,  in its sole discretion;  provided,  however,  that the
maximum  number of shares  subject  to  options  that may be  granted to any key
employee  during any calendar year under the Plan (the "162(m)  Maximum")  shall
not exceed 125,000 shares.

5.  EXERCISE  PRICE.  The exercise  price  of  the shares  of Common Stock under
each option shall be determined by the Committee in its sole discretion.

                                      -2-
<PAGE>

         The fair  market  value of a share of Common  Stock on any day shall be
(a) if the  principal  market  for the  Common  Stock is a  national  securities
exchange, the average of the highest and lowest sales prices per share of Common
Stock on such day as reported by such exchange or on a composite tape reflecting
transactions on such exchange,  (b) if the principal market for the Common Stock
is not a national  securities  exchange  and the  Common  Stock is quoted on The
Nasdaq Stock Market  ("Nasdaq"),  and (i) if actual sales price  information  is
available  with  respect to the Common  Stock,  the  average of the  highest and
lowest sales prices per share of Common Stock on such day on Nasdaq,  or (ii) if
such  information  is not  available,  the average of the highest bid and lowest
asked  prices  per share of Common  Stock on such day on  Nasdaq,  or (c) if the
principal market for the Common Stock is not a national  securities exchange and
the Common  Stock is not quoted on Nasdaq,  the  average of the  highest bid and
lowest asked prices per share of Common Stock on such day as reported on the OTC
Bulletin  Board  Service or by  National  Quotation  Bureau,  Incorporated  or a
comparable service; provided,  however, that if clauses (a), (b) and (c) of this
Paragraph are all inapplicable,  or if no trades have been made or no quotes are
available  for such day,  the fair  market  value of the Common  Stock  shall be
determined by the Board by any method  consistent  with  applicable  regulations
adopted by the Treasury Department relating to stock options.

6. TERM.  The  term of each option  granted  pursuant to the Plan shall be such
term as is  established by the Committee, in its sole discretion.

7. EXERCISE.  An option (or any part or installment thereof), to the extent then
exercisable,  shall be exercised by giving  written notice to the Company at its
principal office stating which option is being exercised,  specifying the number
of  shares of  Common  Stock as to which  such  option  is being  exercised  and
accompanied  by payment in full of the aggregate  exercise price therefor (a) in
cash or by  certified  check or (b) if the  applicable  Contract  permits,  with
previously acquired shares of Common Stock having an aggregate fair market value
on the date of exercise (determined in accordance with Paragraph 5) equal to the
aggregate exercise price of all options being exercised, or with any combination
of cash,  certified  check or shares of Common  Stock.  The Company shall not be
required to issue any shares of Common  Stock  pursuant to any such option until
all required payments, including any required withholding, have been made.

         The  Committee  may,  in its sole  discretion,  permit  payment  of the
exercise  price of an option by delivery by the optionee of a properly  executed
notice,  together  with  a copy  of his  irrevocable  instructions  to a  broker
acceptable  to the  Committee  to deliver  promptly to the Company the amount of
sale or loan  proceeds  sufficient  to pay such  exercise  price.  In connection
therewith, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.

         A person  entitled  to receive  Common  Stock upon the  exercise  of an
option shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock  certificate  to him for such
shares;  provided,  however,  that until such stock  certificate is issued,  any
optionee  using  previously  acquired  shares of Common  Stock in  payment of an
option  exercise price shall  continue to have the rights of a stockholder  with
respect to such previously acquired shares.

                                      -3-
<PAGE>

         In no case may a fraction of a share of Common  Stock be  purchased  or
issued under the Plan.

8. TERMINATION OF RELATIONSHIP. Except as may otherwise be expressly provided in
the applicable  Contract,  any option granted to an employee or consultant whose
relationship  with the Company,  its Parent and  Subsidiaries has terminated for
any reason  (other than as a result of the death or  Disability of the optionee)
may  exercise  such  option,  to the  extent  exercisable  on the  date  of such
termination, at any time within three months after the date of termination,  but
not  thereafter  and in no event after the date the option would  otherwise have
expired;  provided,  however, that if such relationship is terminated either (a)
for  cause,  or (b)  without  the  consent of the  Company,  such  option  shall
terminate immediately.

         For the  purposes  of the Plan,  an  employment  relationship  shall be
deemed to exist between an individual  and a corporation  if, at the time of the
determination,  the individual was an employee of such  corporation for purposes
of Section  422(a) of the Code. As a result,  an  individual  on military,  sick
leave or other bona fide leave of absence  shall  continue to be  considered  an
employee  for  purposes of the Plan during such leave if the period of the leave
does not exceed 90 days,  or, if longer,  so long as the  individual's  right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute  or by  contract.  If the  period  of  leave  exceeds  90  days  and the
individual's right to re-employment is not guaranteed by statute or by contract,
the employment  relationship  shall be deemed to have terminated on the 91st day
of such leave.

         Except  as may  otherwise  be  expressly  provided  in  the  applicable
Contract,  options granted to a key employee or consultant  under the Plan shall
not be  affected  by any  change in the  status of the  optionee  so long as the
optionee continues to be an employee of, or a consultant to, the Company, or any
of the  Subsidiaries  or a Parent  (regardless of having changed from one to the
other or having been transferred from one corporation to another).

         Except as otherwise  provided in the  applicable  Contract,  any option
granted to a Non-Employee Director shall not be affected by the optionee ceasing
to be a director of the Company or becoming an employee  of, or  consultant  to,
the Company, any of its Subsidiaries or a Parent; provided, however, that if (a)
he is  terminated  as a director  of the Company  for cause,  such option  shall
terminate immediately,  or (b) he ceases to be a director of the Company because
he is not nominated by the Board of Directors for reelection as a director, such
option  may be  exercised  at any time  within  one year after he ceases to be a
director of the Company,  but not  thereafter and in no event after the date the
option otherwise would have expired.

         Nothing  in the Plan or in any  option  granted  under  the Plan  shall
confer  on any  optionee  any  right  to  continue  in the  employ  of,  or as a
consultant  to,  the  Company,  any of its  Subsidiaries  or a  Parent,  or as a
director of the Company,  or interfere in any way with any right of the Company,
any of its  Subsidiaries  or a Parent  or the  stockholders  of the  Company  to
terminate  the  optionee's  relationship  at any time for any reason  whatsoever
without liability to the Company, any of its Subsidiaries or a Parent.

                                      -4-
<PAGE>

9. DEATH OR  DISABILITY  OF AN  OPTIONEE.  Except as may  otherwise be expressly
provided in the  applicable  Contract,  if an optionee who is an employee of, or
consultant to, the Company,  any of its  Subsidiaries or a Parent dies (a) while
he is such an  employee  or  consultant,  (b)  within  three  months  after  the
termination  of such  relationship  (unless  such  termination  was for cause or
without  the  consent  of the  Company)  or (c) within  one year  following  the
termination of such relationship by reason of his Disability,  his option may be
exercised,  to the extent  exercisable  on the date of his  death,  by his Legal
Representative  (as defined in  Paragraph  19) at any time within one year after
his death,  but not  thereafter  and in no event after the date the option would
otherwise have expired.

         Except  as may  otherwise  be  expressly  provided  in  the  applicable
Contract,  any optionee whose  relationship as an employee of, or consultant to,
the  Company,  its  Parent and  Subsidiaries  has  terminated  by reason of such
optionee's  Disability may exercise his option,  to the extent  exercisable upon
the effective date of such  termination,  at any time within one year after such
date,  but not  thereafter  and in no event  after  the date  the  option  would
otherwise have expired.

         The term of an option granted to a  Non-Employee  Director shall not be
affected by the death or Disability of the optionee. If an optionee holding such
an option dies during the term of such  option,  the option may be  exercised at
any time during its term by his Legal Representative.

10.  COMPLIANCE  WITH  SECURITIES  LAWS. The Committee may require,  in its sole
discretion,  as a  condition  to the  exercise  of any option  that either (a) a
Registration  Statement  under  the  Securities  Act of 1933,  as  amended  (the
"Securities  Act"), with respect to the shares of Common Stock to be issued upon
such  exercise  shall be effective  and current at the time of exercise,  or (b)
there  is an  exemption  from  registration  under  the  Securities  Act for the
issuance of the shares of Common Stock upon such exercise.  Nothing herein shall
be construed as requiring the Company to register  shares  subject to any option
under the  Securities  Act or to keep any  Registration  Statement  effective or
current.

         The Committee may require,  in its sole  discretion,  as a condition to
the exercise of any option that the optionee  execute and deliver to the Company
his representations and warranties, in form, substance and scope satisfactory to
the  Committee,  which the Committee  determines  are necessary or convenient to
facilitate the perfection of an exemption from the registration  requirements of
the Securities Act, applicable state securities laws or other legal requirement,
including  without  limitation  that (a) the shares of Common Stock to be issued
upon the  exercise of the option are being  acquired by the optionee for his own
account,  for investment  only and not with a view to the resale or distribution
thereof, and (b) any subsequent resale or distribution of shares of Common Stock
by such  optionee  will be made only  pursuant to (i) a  Registration  Statement
under the  Securities  Act which is  effective  and current  with respect to the
shares of  Common  Stock  being  sold,  or (ii) a  specific  exemption  from the
registration requirements of the Securities Act, but in claiming such exemption,
the  optionee  shall prior to any offer of sale or sale of such shares of Common
Stock  provide  the  Company  with  a  favorable   written  opinion  of  counsel
satisfactory to the Company,  in form,  substance and scope  satisfactory to the
Company,  as to the  applicability  of such  exemption to the  proposed  sale or
distribution.

                                      -5-
<PAGE>

         In addition, if at any time the Committee shall determine,  in its sole
discretion,  that the  listing or  qualification  of the shares of Common  Stock
subject  to  such  option  on any  securities  exchange,  Nasdaq  or  under  any
applicable law, or the consent or approval of any governmental  regulatory body,
is necessary or desirable as a condition to, or in connection with, the granting
of an option or the issuance of shares of Common Stock  thereunder,  such option
may not be  exercised  in whole or in part unless such  listing,  qualification,
consent or approval  shall have been effected or obtained free of any conditions
not acceptable to the Committee.

11.  STOCK OPTION  CONTRACTS.  Each option shall be evidenced by an  appropriate
Contract  which shall be duly executed  by the  Company  and  the  optionee,
and  shall  contain  such  terms,  provisions  and  conditions  not inconsistent
herewith as may be determined by the Committee.

12.  ADJUSTMENTS  UPON  CHANGES  IN  COMMON  STOCK.  Notwithstanding  any  other
provision  of the  Plan,  in the  event of a stock  dividend,  recapitalization,
merger in which the Company is the surviving  corporation,  spin-off,  split-up,
combination  or exchange of shares or the like which  results in a change in the
number or kind of shares of Common Stock which is outstanding  immediately prior
to such event,  the aggregate number and kind of shares subject to the Plan, the
aggregate number and kind of shares subject to each  outstanding  option and the
exercise price thereof,  and the number and kind of shares subject to the 162(m)
Maximum  shall  be  appropriately  adjusted  by the  Board of  Directors,  whose
determination  shall be conclusive and binding on all parties.  Such  adjustment
may provide for the  elimination of fractional  shares which might  otherwise be
subject to options without payment therefor.

         All outstanding  options shall become  immediately  exercisable in full
upon the  occurrence  of a "Change in Control".  For this  purpose,  a Change in
Control  shall be deemed to have  occurred if (a) there has occurred a change in
control as the term  "control"  is defined in Rule 12b-2  promulgated  under the
Act;  (b) when any  "person"  (as such term is defined in  Sections  3(a)(9) and
13(d)(3) of the Act),  except for an employee stock  ownership  trust (or any of
the trustees thereof),  becomes a beneficial owner,  directly or indirectly,  of
securities  of the  Company  representing  15% or  more  of the  Company's  then
outstanding  securities  having the right to vote on the election of  directors,
unless the transaction in which such person becomes such a beneficial  owner was
approved by a vote of at least  two-thirds of the directors then still in office
who were  directors  before such  transaction  was  consummated;  (c) during any
period of not more than two consecutive years,  individuals who at the beginning
of such period  constitute  the Board of Directors,  and any new director  whose
election by the Board or nomination  for election by the Company's  stockholders
was approved by a vote of at least  two-thirds  of the  directors  then still in
office  who were  either  directors  at the  beginning  of the  period  or whose
election or  nomination  for election  was  previously  approved,  cease for any
reason to constitute  at least 51% of the entire Board of Directors;  (d) when a
majority  of  the  directors  elected  at  any  annual  or  special  meeting  of
stockholders  (or by written  consent in lieu of a meeting) are not  individuals
nominated by the Company's incumbent Board of Directors; (e) if the stockholders
of the Company approve a merger or  consolidation  of the Company with any other
corporation,  other than a merger or  consolidation  which  would  result in the
holders  of voting  securities  of the  Company  outstanding  immediately  prior
thereto  being the  holders  of at least  80% of the  voting

                                      -6-
<PAGE>

securities of the surviving entity outstanding  immediately after such merger or
consolidation; (f) if the stockholders of the Company approve a plan of complete
liquidation of the Company; or (g) if the stockholders of the Company approve an
agreement  for  the  sale  or  disposition  of all or  substantially  all of the
Company's assets.

13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by the Board of
Directors  on October 13,  1999.  No option may be granted  under the Plan after
October  12,  2009.  The Board of  Directors,  without  further  approval of the
Company's stockholders,  may at any time suspend or terminate the Plan, in whole
or in  part,  or  amend  it from  time to time in such  respects  as it may deem
advisable;  provided,  however, that no amendment shall be effective without the
requisite prior or subsequent  stockholder  approval which would make any change
for which applicable law or regulatory authority requires stockholder  approval.
No termination,  suspension or amendment of the Plan shall,  without the consent
of the holder of an existing and outstanding option affected thereby,  adversely
affect his rights under such option.  The power of the Committee to construe and
administer  any  options  granted  under the Plan  prior to the  termination  or
suspension of the Plan  nevertheless  shall continue  after such  termination or
during such suspension.

14.  NON-TRANSFERABILITY  OF OPTIONS.  No option granted under the Plan shall be
transferable otherwise than by will or the laws of descent and distribution, and
options  may be  exercised,  during the  lifetime of the  optionee,  only by the
optionee  or his Legal  Representatives.  Except to the extent  provided  above,
options may not be assigned,  transferred,  pledged, hypothecated or disposed of
in any way (whether by operation of law or  otherwise)  and shall not be subject
to execution,  attachment or similar process, and any such attempted assignment,
transfer, pledge,  hypothecation or disposition shall be null and void ab initio
and of no force or effect.

15.  WITHHOLDING  TAXES.  The Company may withhold (a) cash,  (b) subject to any
limitations  under Rule 16b-3,  shares of Common Stock to be issued with respect
thereto having an aggregate  fair market value on the exercise date  (determined
in accordance  with Paragraph 5), or (c) any combination  thereof,  in an amount
equal to the amount which the  Committee  determines is necessary to satisfy the
Company's obligation to withhold Federal,  state and local income taxes or other
amounts  incurred  by  reason  of  the  grant  or  exercise  of an  option,  its
disposition,  or the  disposition  of the  underlying  shares of  Common  Stock.
Alternatively,  the Company  may  require the holder to pay to the Company  such
amount, in cash, promptly upon demand.

16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend or legends
upon the  certificates  for shares of Common  Stock  issued upon  exercise of an
option  under the Plan and may issue such "stop  transfer"  instructions  to its
transfer agent in respect of such shares as it determines, in its discretion, to
be  necessary  or  appropriate  to (a) prevent a violation  of, or to perfect an
exemption  from,  the  registration  requirements  of the Securities Act and any
applicable state securities laws, or (b) implement the provisions of the Plan or
any  agreement  between the Company and the optionee with respect to such shares
of Common Stock.

                                      -7-
<PAGE>

         The Company  shall pay all issuance  taxes with respect to the issuance
of shares of Common Stock upon the exercise of an option granted under the Plan,
as well as all fees and expenses incurred by the Company in connection with such
issuance.

17.   USE OF PROCEEDS.  The cash  proceeds  from the sale of shares of Common
Stock  pursuant to the exercise of options under the Plan shall be added to the
general funds of the Company and used for such  corporate  purposes as the Board
of Directors may determine.

18.   SUBSTITUTIONS   AND   ASSUMPTIONS   OF  OPTIONS  OF  CERTAIN   CONSTITUENT
CORPORATIONS.  Anything in this Plan to the contrary notwithstanding,  the Board
of Directors may, without further approval by the  stockholders,  substitute new
options for prior options of a Constituent  Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.

19.   DEFINITIONS.  For purposes  of  the  Plan, the  following terms shall be
defined as set forth below:

                  (a)   Constituent    Corporation.    The   term   "Constituent
Corporation"  shall mean any corporation which engages with the Company,  any of
its  Subsidiaries  or a Parent in a transaction  to which Section  424(a) of the
Code applies, or any Parent or any Subsidiary of such corporation.

                  (b) Disability.  The term "Disability"  shall mean a permanent
and total disability within the meaning of Section 22(e)(3) of the Code.

                  (c)  Legal  Representative.  The term  "Legal  Representative"
shall  mean  the  executor,  administrator  or other  person  who at the time is
entitled by law to exercise the rights of a deceased or  incapacitated  optionee
with respect to an option granted under the Plan.

                  (d) Non-Employee  Director.  The term "Non-Employee  Director"
shall mean a person who is a director  of the  Company but who is not a salaried
employee of the Company or any of its Subsidiaries.

                  (e) Parent.  The term "Parent" shall have the same  definition
as "parent corporation" in Section 424(e) of the Code.

                  (f)  Subsidiary.  The term  "Subsidiary"  shall  have the same
definition as "subsidiary corporation" in Section 424(f) of the Code.

20.   GOVERNING LAW;  CONSTRUCTION.  The Plan,  such options as may be granted
hereunder  and  all related   matters  shall  be governed by, and  construed in
accordance  with,   the  laws   of the State  of   Delaware,  without  regard to
conflict of law provisions.

         Neither the Plan nor any Contract  shall be  construed  or  interpreted
with any  presumption  against the Company by reason of the Company  causing the
Plan  or  Contract  to  be

                                      -8-
<PAGE>

drafted.  Whenever from the context it appears  appropriate,  any term stated in
either the  singular or plural shall  include the  singular and plural,  and any
term  stated in the  masculine,  feminine  or neuter  gender  shall  include the
masculine, feminine and neuter.

21.   PARTIAL  INVALIDITY.  The invalidity,  illegality or unenforceability of
any provision in the Plan or any Contract shall not affect the validity,
legality or enforceability of any other provision,  all of which shall be valid,
legal and enforceable to the fullest extent permitted by applicable law.

22.  STOCKHOLDER  APPROVAL.  The Plan shall not be subject  to  approval  by the
Company's stockholders.

                                      -9-

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