Document:

EXHIBIT 4.3
                                   -----------

Form of Stock Option Agreement under the Hudson City Bancorp, Inc. 2000 Stock
Option Plan.

                            HUDSON CITY BANCORP, INC.
                             2000 STOCK OPTION PLAN
                             STOCK OPTION AGREEMENT
                             ----------------------

-----------------------------------                 ----------------------------
     NAME OF OPTIONEE                                   SOCIAL SECURITY NUMBER

--------------------------------------------------------------------------------
                                 STREET ADDRESS

---------------------     ---------------------             --------------------
      CITY                        STATE                          ZIP CODE

This Stock Option Agreement is intended to set forth the terms and conditions on
which a Stock Option has been granted under the Hudson City Bancorp, Inc. 2000
Stock Option Plan. Set forth below are the specific terms and conditions
applicable to this Stock Option. Attached as Exhibit A are its general terms and
conditions.

<TABLE>
<CAPTION>
=====================================================================================================
  Option Grant                     (A)           (B)             (C)            (D)         (E)
=====================================================================================================
<S>                             <C>            <C>            <C>            <C>          <C>
              Grant Date:       01/13/00       01/13/00       01/13/00       01/13/00     01/13/00
-----------------------------------------------------------------------------------------------------
Class of Optioned Shares*        Common         Common         Common         Common       Common
-----------------------------------------------------------------------------------------------------
  No. of Optioned Shares*
-----------------------------------------------------------------------------------------------------
Exercise Price Per Share*
-----------------------------------------------------------------------------------------------------
Option Type (ISO or NQSO)
-----------------------------------------------------------------------------------------------------
     VESTING
-----------------------------------------------------------------------------------------------------
  Earliest Exercise Date*       01/13/01       01/13/02       01/13/03       01/13/04     01/13/05
-----------------------------------------------------------------------------------------------------
  Option Expiration Date*       01/12/10       01/12/10       01/12/10       01/12/10     01/12/10
=====================================================================================================
</TABLE>

*SUBJECT TO ADJUSTMENT AS PROVIDED IN THE PLAN AND THE GENERAL TERMS AND
CONDITIONS.

By signing where indicated below, Hudson City Bancorp, Inc. (the "Company")
grants this Stock Option upon the specified terms and conditions, and the
Optionee acknowledges receipt of this Stock Option Agreement, including Exhibit
A, and agrees to observe and be bound by the terms and conditions set forth
herein and acknowledges receipt of a Prospectus dated January 20, 2000 for the
Hudson City Bancorp, Inc. 2000 Stock Option Plan.

HUDSON CITY BANCORP, INC.                    OPTIONEE

By
   ---------------------------------------   -----------------------------------
   NAME:
   TITLE: CHAIRMAN, COMPENSATION COMMITTEE

--------------------------------------------------------------------------------
INSTRUCTIONS: This page should be completed by or on behalf of the Compensation
Committee. Any blank space intentionally left blank should be crossed out. An
option grant consists of a number of optioned shares with uniform terms and
conditions. Where options are granted on the same date with varying terms and
conditions (for example, varying exercise prices or earliest exercise dates),
the options should be recorded as a series of grants each with its own uniform
terms and conditions.EXHIBIT 4.4
                                   -----------

Form of Restricted Stock Award Notice under the Hudson City Bancorp, Inc. 2000
Recognition and Retention Plan.

<PAGE>

                            HUDSON CITY BANCORP, INC.
                       2000 RECOGNITION AND RETENTION PLAN
                          RESTRICTED STOCK AWARD NOTICE
                          -----------------------------

------------------------------------------          ----------------------------
     NAME OF AWARD RECIPIENT                           SOCIAL SECURITY NUMBER

--------------------------------------------------------------------------------
                                 STREET ADDRESS

----------------------------------    -----------------       ------------------
             CITY                          STATE                    ZIP CODE

This Restricted Stock Award Notice is intended to set forth the terms and
conditions on which an Award has been granted under the Hudson City Bancorp,
Inc. 2000 Recognition and Retention Plan. Set forth below are the specific terms
and conditions applicable to this Award. Attached as Exhibit A are its general
terms and conditions.

<TABLE>
<CAPTION>
================================================================================================
Restricted Stock Award          (A)          (B)          (C)           (D)            (E)
================================================================================================
<S>                        <C>           <C>          <C>           <C>            <C>
          Effective Date   01/13/00      01/13/00     01/13/00      01/13/00       01/13/00
------------------------------------------------------------------------------------------------
        Class of Shares*    Common        Common       Common        Common         Common
------------------------------------------------------------------------------------------------
  No. of Awarded Shares*
------------------------------------------------------------------------------------------------
Type of Award (Escrow or
   Legended Certificate)
------------------------------------------------------------------------------------------------

           Vesting Date*   04/20/01      04/20/02     04/20/03      04/20/04       04/20/05
================================================================================================
</TABLE>

*SUBJECT TO ADJUSTMENT AS PROVIDED IN THE PLAN AND THE GENERAL TERMS AND
CONDITIONS.

By signing where indicated below, Hudson City Bancorp, Inc. (the "Company")
grants this Award upon the specified terms and conditions, and the Award
Recipient acknowledges receipt of this Restricted Stock Award Notice, including
Exhibit A, and agrees to observe and be bound by the terms and conditions set
forth herein and acknowledges receipt of a Prospectus dated January 21, 2000 for
the Hudson City Bancorp, Inc. 2000 Recognition and Retention Plan.

HUDSON CITY BANCORP, INC.                     AWARD RECIPIENT

By
   ---------------------------------------    ----------------------------------
   NAME:
   TITLE: CHAIRMAN, COMPENSATION COMMITTEE

INSTRUCTIONS: This page should be completed by or on behalf of the Compensation
Committee. Any blank space intentionally left blank should be crossed out. An
Award consists of shares granted with uniform terms and conditions. Where shares
granted under an Award are awarded on the same date with varying terms and
conditions (for example, varying vesting dates), the awards should be recorded
as a series of grants each with its own uniform terms and conditions.<PAGE>

                                 Exhibit 4.1(a)

                                      -35-
<PAGE>

                             SUBSCRIPTION AGREEMENT

         This SUBSCRIPTION AGREEMENT (the "Agreement"), dated as January 13,
2000, has been executed by the undersigned (individually, a "Subscriber" and
collectively, the "Subscribers") in connection with the offer and sale (the
"Offering") of (i) up to 30,000 shares of Series A Cumulative Convertible
Preferred Stock, par value $0.05 per share (the "Preferred Stock"), of Xceed,
Inc., a Delaware corporation (the "Company"), for a purchase price of $1,000 per
share, convertible into shares of common stock, par value $0.01 per share, of
the Company (the "Common Stock"), and possessing such other rights and
preferences as are set forth in the Certificate of Designation, Preferences and
Rights of the Preferred Stock, attached hereto as EXHIBIT A and filed with
Secretary of State of the State of Delaware on or prior to the date hereof (the
"Certificate"), and (ii) warrants (the "Warrants") to purchase an aggregate of
183,273 shares of Common Stock substantially in the form attached hereto as
EXHIBIT B. The solicitation of this Agreement and, if accepted by the Company,
the offer and sale of the Preferred Stock and the Warrants, are being made in
reliance upon the provisions of Regulation D ("Regulation D") promulgated by the
Securities and Exchange Commission (the "SEC") under the United States
Securities Act of 1933, as amended (the "Securities Act"). The shares of Common
Stock issuable upon conversion of the Preferred Stock (the "Underlying Common
Shares") and the shares of Common Stock issuable upon exercise of the Warrants
(the "Underlying Warrant Shares") are sometimes referred to in this Agreement as
the "Underlying Shares."

         Upon the terms and subject to the conditions set forth herein, the
Subscribers hereby, severally but not jointly, agree to purchase, and the
Company hereby agrees to issue and sell, up to 30,000 shares of Preferred Stock
and the Warrants at the aggregate purchase price set forth in Section 14 in the
name, number of shares of Preferred Stock and the Warrants set forth opposite
the name of each Subscriber on Schedule I attached hereto. In consideration of
the mutual promises, representations, warranties and conditions set forth
herein, and intending to be legally bound hereby, the Company and the
Subscribers hereby agree as follows:

1.       Agreement to Subscribe

 1.1     Purchase and Sale of Preferred Stock and Warrants. On the basis of the
         representations and warranties contained in this Agreement and subject
         to the terms and conditions hereinafter set forth, the Company shall
         issue and sell to each Subscriber and each Subscriber hereby subscribes
         for and shall purchase the specified number of shares of Preferred
         Stock and the specified number of Warrants set forth opposite the name
         of such Subscriber on Schedule I attached hereto for an aggregate
         purchase price of $1,000 for each share of Preferred Stock and related
         Warrants. The closing of the purchase of the shares of Preferred Stock
         and Warrants (the "Closing") shall occur on January 13, 2000 or such
         other date as may be agreed to in writing by the Company and the
         Subscribers (the "Closing Date"); provided that: (a) the aggregate
         purchase price for the subscriptions evidenced hereby shall have been
         delivered by the Subscribers to the Company or as otherwise agreed
         between the parties (in immediately available funds via a wire transfer
         pursuant to instructions previously delivered for such purpose); (b)
         the shares of Preferred Stock and the Warrants subscribed for hereby
         shall have been issued and delivered by the Company to the Subscribers
         or as otherwise agreed between the parties; and (c) all other
         conditions precedent to the obligations of the Subscribers and the
         Company to the Closing set forth herein shall have been satisfied or
         waived in writing.

1.2      Conditions Precedent to the Obligation of the Company at Closing. The
         obligation of the Company hereunder to issue and sell the shares of
         Preferred Stock to each Subscriber is subject to the satisfaction at or
         before the Closing of each of the conditions set forth below. Each of
         these conditions are for the Company's sole benefit and may be waived
         in writing by the Company with respect to any or all Subscribers at any
         time in its sole discretion.

         (a)      Accuracy of the Subscribers' Representations and Warranties.
                  The representations and warranties of each Subscriber shall be
                  true and correct as of the date when made and in all material
                  respects as of the Closing Date as though made at each time.

                                      -36-
<PAGE>

         (b)      Performance by the Subscribers. Each Subscriber shall have
                  performed, satisfied and complied in all material respects
                  with all covenants, agreements and conditions required by this
                  Agreement or any other Transaction Documents (as defined in
                  Section 1.3(j) hereof) to be performed, satisfied or complied
                  with by such Subscriber at or prior to the Closing.

         (c)      No Injunction. No statute, rule, regulation, executive order,
                  decree, ruling or injunction shall have been enacted, entered,
                  promulgated or endorsed by any court or governmental authority
                  of competent jurisdiction which prohibits or adversely effects
                  any of the transactions contemplated by this Agreement and the
                  other Transaction Documents, and no proceeding shall have been
                  commenced which may have the effect of prohibiting or
                  adversely affecting any of the transactions contemplated
                  hereby and thereby.

         (d)      Legal Investment. At the time of the Closing, the purchase of
                  the shares of Preferred Stock and the Warrants by the
                  Subscribers shall be legally permitted by all statutes, rules
                  and regulations to which each of the Subscribers and the
                  Company are subject.

1.3      Conditions Precedent to the Obligation of the Subscribers at Closing.
         The obligation of each of the Subscribers hereunder to acquire and pay
         for the shares of Preferred Stock and Warrants is subject to the
         satisfaction at or before the Closing of each of the conditions set
         forth below. Each of these conditions is for each Subscriber's sole
         benefit and may be waived in writing by each such Subscriber at any
         time in its sole discretion (any such waiver shall have effect only
         with respect to the waiving Subscriber).

         (a)      Accuracy of the Company's Representations and Warranties. The
                  representations and warranties of the Company shall be true
                  and correct as of the date when made and in all material
                  respects as of the Closing Date as though made at such time.

         (b)      Performance by the Company. The Company shall have performed,
                  satisfied and complied in all material respects with all
                  covenants, agreements and conditions required by this
                  Agreement or any of the other Transaction Documents to be
                  performed, satisfied or complied with by the Company at or
                  prior to the Closing.

         (c)      No Injunction. No statute, rule, regulation, executive order,
                  decree, ruling or injunction shall have been enacted, entered,
                  promulgated or endorsed by any court or governmental authority
                  of competent jurisdiction which prohibits or adversely effects
                  any of the transactions contemplated by this Agreement and the
                  other Transaction Documents, and no proceeding shall have been
                  commenced which may have the effect of prohibiting or
                  adversely affecting any of the transactions contemplated
                  hereby and thereby.

         (d)      Adverse Changes. For the period from August 31, 1999 until the
                  Closing Date, except as (i) publicly disclosed in the
                  Company's press releases or filings (the "Recent Exchange Act
                  Reports") pursuant to the Securities Exchange Act of 1934, as
                  amended (the "Exchange Act"), and (ii) set forth on Schedule
                  1.3(d) hereto (collectively, "Prior Public Disclosures"), no
                  event shall have occurred or be threatened to occur which has
                  had or is likely to have a Material Adverse Effect (as defined
                  in Section 3.6 hereof) on the Company.

         (e)      No Suspension of Trading in or Delisting of Common Stock. The
                  trading in the Common Stock shall not have been suspended by
                  the SEC or the National Association of Securities Dealers,
                  Inc. (the "NASD"); the Common Stock shall not have been
                  delisted from the Nasdaq National Market and the Company shall
                  not have received any notice of threatened or pending
                  proceedings for delisting the Common Stock from the Nasdaq
                  National Market; and trading in securities generally as
                  reported by the Nasdaq National Market shall not have been
                  suspended or limited or minimum prices shall not have been
                  established on securities whose trades are reported by the
                  Nasdaq National Market.

                                      -37-
<PAGE>

         (f)      Legal Opinion. The Company shall have delivered to the
                  Subscribers an opinion of Akin Gump Strauss Hauer & Feld,
                  L.L.P., counsel to the Company, substantially in the form of
                  EXHIBIT C annexed hereto, dated the Closing Date.

         (g)      Officer's Certificate. The Company shall have delivered to the
                  Subscribers a certificate in form and substance reasonably
                  satisfactory to the Subscribers, executed by an executive
                  officer of the Company, to the effect that all the conditions
                  to the Closing shall have been satisfied and that the
                  representations and warranties of the Company contained in the
                  Agreement are true and correct in all respects on and as of
                  the Closing Date with the same force and effect as though such
                  representations and warranties had been made on the date
                  hereof.

         (h)      Registration Rights Agreement. The Company shall have entered
                  into the Registration Rights Agreement with the Subscribers
                  (the "Registration Rights Agreement"), substantially in the
                  form of EXHIBIT D annexed hereto.

         (i)      Certificate of Designation. The Company shall have filed the
                  Certificate in accordance with the provisions hereof, the
                  Certificate shall have become effective and the Company shall
                  have delivered evidence thereof to the Subscribers.

         (j)      Reservation of Shares. On or prior to the Closing Date, the
                  Company shall have duly reserved the number of Underlying
                  Shares required by this Agreement, the Certificate, the
                  Registration Rights Agreement, and the Warrants (collectively,
                  the "Transaction Documents") to be reserved for issuance upon
                  conversion of the Preferred Stock and upon exercise of the
                  Warrants.

         (k)      Legal Investment. At the time of the Closing, the purchase of
                  the Preferred Stock and the Warrants by the Subscribers shall
                  be legally permitted by all statutes, rules and regulations to
                  which the Subscriber and the Company are subject.

         (l)      Warrants. The Company shall have executed and delivered to
                  each Subscriber its respective Warrants.

         (m)      Secretary's Certificate. The Company shall have delivered to
                  the Subscribers a certificate in form and substance reasonably
                  satisfactory to each Subscriber, executed by the secretary of
                  the Company, certifying as to the truth and accuracy of the
                  certificate of incorporation of the Company (the "Certificate
                  of Incorporation"), as in effect on the Closing Date, the
                  By-Laws of the Company, as in effect on the Closing Date, and
                  the resolutions duly adopted by the Board of Directors
                  authorizing and approving the execution and delivery of this
                  Agreement and the other Transaction Documents and the
                  consummation of the transactions contemplated hereby and
                  thereby.

         (n)      Nasdaq Filing. Pursuant to Rule 4310(c)(17) of The Nasdaq
                  Stock Market, Inc.'s Marketplace Rules, the Company shall have
                  filed a form with The Nasdaq Stock Market, Inc. designated by
                  The Nasdaq Stock Market, Inc. for the listing of the
                  Underlying Shares not later than required by The Nasdaq Stock
                  Market, Inc.

         (o)      Good Standing. On or prior to the Closing Date, the Company
                  shall have delivered to the Subscribers a long-form
                  certificate of good standing and tax status of the Company and
                  each of its subsidiaries, if any, certified as of a recent
                  date by the Secretary of State of the State of Delaware, and
                  from every jurisdiction in which the Company is qualified to
                  do business.

2.       Representations and Warranties of the Subscribers

         Each Subscriber, with respect only to itself, represents and warrants
to the Company that:

                                      -38-
<PAGE>

2.1      No Government Recommendation or Approval. The Subscriber understands
         that no federal or state agency or similar agency of any other country,
         has passed upon or made any recommendation or endorsement of the
         Company or of the Offering.

2.2      Intent. The Subscriber (i) is purchasing the Preferred Stock and the
         Warrants, (ii) upon conversion of the Preferred Stock, will acquire the
         Underlying Common Shares and (iii) upon exercise of the Warrants, will
         acquire the Underlying Warrant Shares (the Preferred Stock, the
         Warrants, the Underlying Common Shares and the Underlying Warrant
         Shares collectively are referred to herein as the "Securities") for its
         own account for investment purposes only and not with a present view
         toward resale or distribution and the Subscriber has no contract,
         agreement, undertaking or other arrangement to sell the Securities to
         or through any person or entity; provided, however, that by making the
         representation herein, the Subscriber does not agree, other than as may
         be required to be in compliance with applicable federal and state
         securities laws, to hold the Securities for any minimum or other
         specific term and reserves the right to dispose of the Securities at
         any time in accordance with federal and state securities laws. The
         Subscriber understands that the Securities must be held indefinitely
         unless such Securities are subsequently the subject of registration
         under the Securities Act or an exemption from the registration
         requirement of the Securities Act is available. The Subscriber has been
         advised or is aware of the provisions of Rule 144 promulgated under the
         Securities Act.

2.3      Sophisticated Investor. The Subscriber is an "accredited investor" (as
         defined in Rule 501 of Regulation D), and the Subscriber has such
         experience in business and financial matters that it is capable of
         evaluating the merits and risks of an investment in the Securities. The
         Subscriber acknowledges that the Securities are speculative and involve
         a high degree of risk.

2.4      Independent Investigation. The Subscriber, in making the decision to
         purchase the Securities, has relied upon an independent investigation
         made by it and/or its representatives and has not relied on any
         information or representations made by third parties or on any oral or
         written representations or assurances from the Company or any
         representative or agent of the Company other than the representations
         of the Company set forth herein, in the other Transaction Documents and
         in Prior Public Disclosures. The Subscriber has had a reasonable
         opportunity to ask questions of, and receive answers from, the Company
         concerning the Company, the Securities and the Offering. The Subscriber
         acknowledges that the price and terms of the Securities and the
         conversion and exercise prices of the Underlying Shares have been
         determined by negotiation based in substantial part on the market price
         for the Common Stock, and that it does not necessarily bear any
         relationship to the assets, book value or potential performance of the
         Company or any other recognized criteria of value. Neither such
         inquiries nor any other due diligence investigations conducted by such
         Subscriber, its representatives and advisors, if any, shall modify,
         amend or affect such Subscriber's right to rely on the Company's
         representations and warranties contained in Section 3 below.

2.5      Authority. This Agreement has been duly authorized and validly executed
         and delivered by the Subscriber and is a legal, valid and binding
         obligation of the Subscriber, enforceable against the Subscriber in
         accordance with its terms, except as such enforceability may be limited
         by applicable bankruptcy, insolvency, or similar laws relating to, or
         affecting generally the enforcement of, creditors' rights and remedies
         or by other equitable principles of general application.

2.6      No Legal Advice from Company. The Subscriber acknowledges that it has
         had sufficient and ample opportunity to review this Agreement and the
         other Transaction Documents and to evaluate the transactions
         contemplated herein and therein with its own legal counsel and
         investment and tax advisors. Except for any statements or
         representations of the Company made in this Agreement and the other
         Transaction Documents, the Subscriber is relying solely on its counsel
         and advisors and not on any statements or representations of the
         Company or any of its representatives or agents for legal, tax or
         investment advice with respect to this investment, the transactions
         contemplated by this Agreement and the other Transaction Documents or
         the securities laws of any jurisdiction.

                                      -39-
<PAGE>

2.7      No Brokers. The Subscriber has taken no action which would give rise to
         any claim by any person for brokerage commissions, finder's fees or
         similar payments by the Company relating to this Agreement or the
         transactions contemplated hereby.

2.8      Not an Affiliate. The Subscriber is not an officer, director or
         "affiliate" (as that term is defined in Rule 405 of Securities Act) of
         the Company.

2.9      Reliance on Representations and Warranties. The Subscriber understands
         that the Securities are being offered and sold to it in reliance on
         specific provisions of federal and state securities laws (including
         specifically, but without limitation, the provisions of Regulation D)
         and that the Company is relying upon the truth and accuracy of the
         representations, warranties, agreements, acknowledgments and
         understandings of the Subscriber set forth in this Agreement and the
         other Transaction Documents in order to determine the availability of
         such provisions.

2.10     No General Solicitation. The Subscribers acknowledges that the
         Securities were not offered or sold to the Subscriber by means of
         general solicitation, publicly disseminated advertisement or sales
         literature.

2.11     Information Provided by Subscribers. All of the information which the
         Subscriber has provided to the Company concerning such Subscriber, such
         Subscriber's financial condition/position and such Subscriber's
         knowledge of financial and business matters was correct and complete
         when provided and is correct and complete as of the date hereof. The
         Subscriber agrees that, to the extent required by applicable laws,
         rules and regulations, any information provided by the Subscriber may
         be disclosed by the Company. Each Subscriber further agrees, if
         requested by the Company or its representative, to provide bank and
         other references confirming the information provided by such
         Subscriber.

3.       Representations and Warranties of Company

         The Company represents and warrants to each Subscriber that:

3.1      Company Status. The Company has registered its Common Stock pursuant to
         Section 12(b) or 12(g) of the Exchange Act, is in full compliance with
         all reporting requirements of the Exchange Act, and the Company has
         maintained all requirements for the continued quotation of its Common
         Stock on the Nasdaq National Market, and such Common Stock is currently
         listed for trading on the Nasdaq National Market.

3.2      Current Public Information. The Recent Exchange Act Reports are the
         only filings made by the Company with the SEC pursuant to Sections
         13(a), 13(c), 14 or 15(d) of the Exchange Act since August 31, 1999.

3.3      No Directed Selling Efforts or General Solicitation in Regard to this
         Transaction. The Company has not conducted any general solicitation (as
         that term is used in Regulation D) with respect to the Securities, nor
         has it made any offers or sales of any security or solicited any offers
         to buy any security, under circumstances that would require
         registration of the Securities under the Securities Act.

3.4      Valid Issuance of Capital Stock. (a) The Company has an authorized
         capitalization consisting of 30,000,000 shares of Common Stock and
         1,000,000 shares of preferred stock, par value $0.05 per share. The
         Company has issued and outstanding on the date hereof 18,693,390 shares
         of Common Stock, of which zero shares are held in treasury. As of the
         date hereof, the Company has outstanding the following securities
         convertible into or exercisable or exchangeable for Common Stock (the
         "Derivative Securities"): (i) options to purchase 4,999,161 shares of
         Common Stock; and (ii) warrants to purchase 976,562 shares of Common
         Stock.

         (b) All of the issued shares of capital stock of the Company have been
         duly and validly authorized and issued and are fully paid and
         non-assessable. On or before the Closing Date, the authorized
         capitalization of the Company shall include the Preferred Stock and the
         Warrants; upon issuance and payment therefor in accordance with the
         Certificate, the shares of Preferred Stock shall be (i) validly
         authorized and issued, fully paid and non-assessable, (ii) free and
         clear from all taxes, liens and charges with respect to the

                                      -40-
<PAGE>

         issuance thereof and (iii) entitled to the rights and preferences set
         forth in the Certificate. The number of shares of Common Stock required
         hereunder and under the other Transaction Documents to be reserved for
         issuance upon conversion of the Preferred Stock and exercise of the
         Warrants (subject to adjustment pursuant to the Company's covenant set
         forth in Section 5.2 below) have been duly authorized and reserved for
         issuance. Upon conversion of the Preferred Stock and exercise of the
         Warrants, in each case, in accordance with the terms thereof, the
         Underlying Shares will be validly issued, fully paid and nonassessable
         and free from all taxes, liens and charges with respect to the issuance
         thereof, with the holders thereof being entitled to all rights accorded
         to holders of Common Stock. The holders of outstanding shares of
         capital stock of the Company are not and shall not be entitled to
         preemptive or other rights afforded by the Company to subscribe for the
         capital stock or other securities of the Company as a result of the
         sale of the Securities or the issuance of Underlying Shares upon the
         conversion or exercise thereof. The issuance by the Company of the
         Securities is exempt from registration under the Securities Act. The
         issuance by the Company of the Securities is being made in reliance
         upon the exemption from registration set forth in Rule 506 of
         Regulation D under the Securities Act and is only being made to
         "accredited investors" that meet the requirements of Rule 501(a) of
         Regulation D and similar exemptions under state law.

         (c) Other than as set forth in Section 3.4(a): (i) no shares of the
         Company's capital stock are subject to preemptive rights or any other
         similar rights or any liens or encumbrances suffered or permitted by
         the Company; (ii) there are no outstanding debt securities issued by
         the Company; (iii) there are no outstanding options, warrants, scrip,
         rights to subscribe to, calls or commitments of any character
         whatsoever relating to, or securities or rights convertible into, any
         shares of capital stock of the Company (or any subsidiary of the
         Company (each hereinafter referred to as a "Subsidiary" and
         collectively, the "Subsidiaries"), or contracts, commitments,
         understandings or arrangements by which the Company or any Subsidiary
         is or may become bound to issue additional shares of capital stock of
         the Company or any Subsidiary or options, warrants, scrip, rights to
         subscribe to, calls or commitments of any character whatsoever relating
         to, or securities or rights convertible into, any shares of capital
         stock of the Company or any Subsidiary; (iv) there are no agreements or
         arrangements under which the Company (or any Subsidiary) is obligated
         to register the sale of any of their securities under the Securities
         Act (except the Registration Rights Agreement); (v) there are no
         outstanding securities of the Company or any Subsidiary which contain
         any redemption or similar provisions, and there are no contracts,
         commitments, understandings or arrangements by which the Company or any
         Subsidiary is or may become bound to redeem a security of the Company
         or any Subsidiary; (vi) there are no securities or instruments
         containing anti-dilution or similar provisions that will be triggered
         by the issuance of the Securities as described in this Agreement; and
         (vii) the Company does not have any stock appreciation rights or
         "phantom stock" plans or agreements or any similar plan or agreement.

         (d) All of the authorized shares of capital stock of each Subsidiary
         are owned by the Company, free and clear of any lien, charge, security
         interest, encumbrance, adverse claim or other restriction, and all the
         issued and outstanding shares of capital stock of the Subsidiaries are
         validly issued and are fully paid, non-assessable and free of
         preemptive and similar rights. Except as set forth on Schedule 3.4(d)
         hereto, there are no outstanding agreements or commitments requiring
         the Company or any Subsidiary to issue capital stock or Derivative
         Securities.

3.5      Share Issuance. The number of shares of Common Stock issuable upon
         conversion of the Preferred Stock may increase substantially in certain
         circumstances, including, but not necessarily limited to, the
         circumstance wherein the trading price of the Common Stock declines
         prior to conversion of the Preferred Stock. The Company's executive
         officers and directors have studied and fully understand the nature of
         the Preferred Stock being sold hereby and recognize that they have a
         potentially dilutive effect. The Board of Directors of the Company has
         concluded, in its good faith business judgment, that such issuance is
         in the best interest of the Company. The Company specifically
         acknowledges that its obligation to issue the Underlying Common Shares
         upon conversion of the Preferred Stock is binding upon the Company and
         enforceable regardless of the dilution such issuance may have on the
         ownership interests of other stockholders of the Company.

                                      -41-
<PAGE>

3.6      Organization and Qualification. The Company is a corporation duly
         organized, validly existing and in good standing under the laws of the
         State of Delaware and has the requisite corporate power to own its
         properties and assets and to carry on its business as now being
         conducted. The Subsidiaries are listed on Schedule 3.6 hereto. Except
         as set forth on Schedule 3.6 hereto, the Company owns no securities
         other than the capital stock of the Subsidiaries. Each Subsidiary is a
         corporation duly organized, validly existing and in good standing under
         the laws of its respective state of organization, with the requisite
         corporate power to own its properties and assets and to carry on its
         business as now being conducted. The Company and each Subsidiary is
         duly qualified as a foreign corporation to do business and is in good
         standing in every jurisdiction in which the nature of the business
         conducted or property owned by it makes such qualification necessary
         other than those jurisdictions in which the failure so to qualify would
         not have a Material Adverse Effect. "Material Adverse Effect" means any
         material adverse effect on the business, operations, properties, cash
         flows, prospects or condition (financial or otherwise) of the Company
         and the Subsidiaries taken as a whole and any condition or situation
         which would prohibit or otherwise materially adversely interfere with
         the ability of the Company to enter into and perform its obligations
         under the Transaction Documents.

3.7      Authorization; Enforcement. (a) The Company has the requisite corporate
         power and authority to enter into and perform this Agreement and the
         other Transaction Documents, to issue the Preferred Stock in accordance
         with the terms hereof and thereof and to file and perform its
         obligations under the Certificate and its Certificate of Incorporation;
         (b) the execution and delivery of this Agreement and the other
         Transaction Documents, the issuance and delivery of the Preferred Stock
         and the Warrants, the filing of the Certificate by the Company and the
         consummation by the Company of the transactions contemplated hereby and
         thereby have been duly authorized by all necessary corporate action,
         and no further consent or authorization of the Company or its Board of
         Directors or stockholders is required; (c) this Agreement has been, and
         on or before the Closing Date each of the other Transaction Documents
         will be, duly executed and delivered by the Company and on the Closing
         Date, the Certificate will be duly filed and effective; and (d) this
         Agreement constitutes, and upon execution and delivery thereof, each of
         the other Transaction Documents shall constitute, legal, valid and
         binding obligations of the Company enforceable against the Company in
         accordance with their respective terms, except as such enforceability
         may be limited by applicable bankruptcy, insolvency, or similar laws
         relating to, or affecting generally the enforcement of, creditors'
         rights and remedies or by other equitable principles of general
         application.

3.8      Corporate Documents. The Company has furnished or made available to the
         Subscribers true, correct and complete copies of the Certificate of
         Incorporation, as in effect on the date hereof, and each Subsidiary's
         articles of incorporation, as in effect on the date hereof (each, a
         "Subsidiary Charter"), and the Company's and each Subsidiary's Bylaws,
         as in effect on the date hereof (the Certificate of Incorporation, the
         Certificate, each Subsidiary Charter, the Company's Bylaws and each
         Subsidiary's Bylaws are collectively referred to herein as the "Charter
         Documents"). Neither the Company nor any Subsidiary is in violation of
         any of the provisions of its Charter Documents.

3.9      No Conflicts. The execution, delivery and performance of this Agreement
         and the other Transaction Documents and consummation of the
         transactions contemplated hereby and thereby (including the issuance of
         the Preferred Stock and the Warrants, conversion of the Preferred
         Stock, exercise of the Warrants, issuance of the Underlying Shares upon
         conversion of the Preferred Stock and upon exercise of the Warrants and
         the filing of the Certificate) do not and will not: (i) result in a
         violation of the Charter Documents; or (ii) result in the creation of
         any lien, charge, security interest or encumbrance upon any of the
         assets of the Company or any Subsidiary pursuant to the terms or
         provisions of or, conflict with, or constitute a default (or an event
         which with notice or lapse of time or both would become a default)
         under, or give to others any rights of termination, amendment,
         acceleration or cancellation of, any agreement, indenture, credit
         facility or instrument to which the Company or any Subsidiary is a
         party, or result in a violation of any federal, state, local or foreign
         law, rule, regulation, order, judgment or decree (including federal and
         state securities laws and regulations) applicable to the Company or any
         Subsidiary or by which any property or asset of the Company or any
         Subsidiary is bound or affected, except, in the case of clause (ii),
         for such conflicts, defaults, terminations, amendments, accelerations,
         cancellations and violations as would not, individually or in the
         aggregate, have a Material Adverse Effect. The businesses of each of
         the Company and each Subsidiary are not being conducted in violation of
         any law, ordinance or regulations of

                                      -42-
<PAGE>

         any governmental entity, except for violations or potential violations
         which either individually or in the aggregate do not and will not have
         a Material Adverse Effect. The Company is not required under federal,
         state or local law, rule or regulation in the United States to obtain
         any consent, authorization or order of, or make any filing or
         registration with, any court or governmental or self-regulatory agency
         in order for it to execute, deliver or perform any of its obligations
         under this Agreement or the Registration Rights Agreement or issue and
         sell the Preferred Stock, the Warrants or the Underlying Common Shares
         in accordance with the terms hereof and thereof (other than any SEC,
         NASD, The Nasdaq Stock Market, Inc. or state securities filings which
         may be required to be made by the Company, any registration statement
         which may be filed pursuant hereto and the filing of the Certificate).

3.10     Exchange Act Reports. The Company has filed all reports required to be
         filed by it under the Exchange Act, including pursuant to Section 13(a)
         or 15(d) thereof, since August 31, 1995 (the foregoing materials being
         collectively referred to herein as the "Exchange Act Reports"). The
         Company has delivered or made available to the Subscribers true,
         correct and complete copies of the Exchange Act Reports (including,
         without limitation, proxy information and solicitation materials). The
         Company has not provided to the Subscribers any information which,
         according to applicable law, rule or regulation, should have been
         disclosed publicly by the Company but which has not been so disclosed.
         As of their respective dates, the Exchange Act Reports complied in all
         material respects with the requirements of the Exchange Act and the
         rules and regulations of the SEC promulgated thereunder and other
         applicable federal, state and local laws, rules and regulations, and
         none of the Exchange Act Reports contained any untrue statement of a
         material fact or omitted to state a material fact required to be stated
         therein or necessary in order to make the statements therein not
         misleading. The audited financial statements of the Company included in
         the Exchange Act Reports comply or will comply in all material respects
         as to form with applicable accounting requirements and the published
         rules and regulations of the SEC or other applicable rules and
         regulations with respect thereto. Such financial statements have been
         prepared in accordance with generally accepted accounting principles
         applied on a consistent basis during the periods involved (except (a)
         as may be otherwise indicated in such financial statements or the notes
         thereto or (b) in the case of unaudited interim statements, to the
         extent they may not include footnotes or may be condensed or summary
         statements) and fairly present (or will fairly present) in all material
         respects the consolidated financial position of the Company as of the
         dates thereof and the consolidated results of operations and cash flows
         for the periods then ended (subject, in the case of unaudited
         statements, to normal year-end audit adjustments). The Company has
         filed (including filing such documents by incorporation by reference)
         all agreements or documents to which the Company is a party that are
         required to be filed as exhibits to the Exchange Act Reports.

3.11     No Material Adverse Change. Since August 31, 1999, except as disclosed
         in the Prior Public Disclosures, no Material Adverse Effect has
         occurred or exists with respect to the Company and the Subsidiaries
         taken as a whole.

3.12     No Undisclosed Liabilities. The Company and the Subsidiaries have no
         liabilities or obligations not disclosed in the Exchange Act Reports,
         other than those incurred in the ordinary course of the Company's or
         such Subsidiary's respective businesses since August 31, 1999 and
         which, individually or in the aggregate, do not or would not have a
         Material Adverse Effect.

3.13     No Undisclosed Events or Circumstances. No event or circumstance has
         occurred or exists with respect to the Company or any Subsidiary or
         their respective business, operations, properties, prospects or
         condition (financial or otherwise), which, under applicable law, rule
         or regulation, requires public disclosure or announcement by the
         Company but which has not been so publicly announced or disclosed.

3.14     Application of Takeover Protections. The Company and its board of
         directors have taken all necessary action, if any, in order to render
         inapplicable any control share acquisition, business combination,
         poison pill (including any distribution under a rights agreement) or
         other similar anti-takeover provision under the Certificate of
         Incorporation or the laws of the State of Delaware which is or could
         become applicable to the Subscribers as a result of the Subscribers and
         the Company fulfilling their obligations under the Transaction
         Documents, including, without limitation, the Company's issuance of the
         Securities and the Subscribers' ownership of the Securities.

                                      -43-
<PAGE>

3.15     No Brokers. The Company has not taken any action which would give rise
         to a claim by any person for brokerage commissions, finder's fees or
         similar payments by any Subscriber relating to this Agreement or the
         transactions contemplated hereby.

3.16     Effectiveness of SEC Filings. The SEC has not issued any stop order or
         other order suspending the effectiveness of any registration statement
         filed by the Company or the Subsidiary under the Exchange Act or the
         Securities Act.

3.17     No Material Litigation Proceedings. Neither the Company nor any
         Subsidiary is a party to or the subject of any litigation, arbitration
         or other proceeding which, if adversely determined, would individually
         or in the aggregate have a Material Adverse Effect. There is no action,
         suit, proceeding or investigation pending, or, to the knowledge of the
         Company, threatened, against the Company or any Subsidiary before or by
         any court, regulatory body or administrative agency or any other
         governmental agency or body, domestic or foreign, or any action, suit,
         proceeding or investigation pending, or, to the knowledge of the
         Company, threatened, which in any such case challenges the validity of
         any action taken or to be taken by the Company or any Subsidiary
         pursuant to or in connection with this Agreement, the other Transaction
         Documents or the issuance of the Securities.

3.18     Compliance with Instruments, etc. Neither the Company nor any
         Subsidiary (or the manner in which any of them conducts its businesses)
         is in breach or violation of, or in default under, any term or
         provision of (i) its Charter Documents, (ii) any indenture, mortgage,
         deed of trust, voting trust agreement, stockholders agreement, note
         agreement or other agreement or instrument to which it is a party or by
         which it is or may be bound or to which any of its property or assets
         is or may be subject, or any indebtedness, the effect of which breach
         or default, individually or in the aggregate, would have a Material
         Adverse Effect, or (iii) any statute, judgment, decree, order, rule or
         regulation applicable to the Company or any Subsidiary or of any
         arbitrator, court, regulatory body, administrative agency or any other
         governmental agency or body, domestic or foreign, having jurisdiction
         over the Company or any Subsidiary or any of their respective
         activities, properties or assets and the effect of which breach or
         default, individually or in the aggregate, would have a Material
         Adverse Effect.

3.19     Intellectual Property.

         (a) Each of the Company and each Subsidiary has full and exclusive
         right, title and interest in and to, or license rights to, all patents,
         patent applications, registered or unregistered trademarks, service
         marks and trade names, registered or unregistered copyrights and
         applications therefor, licenses, approvals or governmental
         authorizations to conduct their business as now conducted, know-how,
         proprietary rights and processes, trade secrets, customer lists,
         methodologies (to the extent protectible), proprietary development and
         marketing information and know-how, inventions, inventors' notes (to
         the extent such notes exist), drawings, designs associated with the
         foregoing, and other confidential information (collectively,
         "Intellectual Property") relating to their respective businesses or
         otherwise used in or necessary for the proper conduct of their
         respective businesses, free and clear of all liens, security interests,
         claims and encumbrances of any nature; and (ii) neither the Company nor
         any Subsidiary has any obligation to any other person or entity with
         respect to the Intellectual Property or any product or process of the
         Company or any Subsidiary utilizing or embodying any Intellectual
         Property.

         (b) There is (i) no infringement, misuse or misappropriation of any
         Intellectual Property owned, licensed or controlled by any third party
         arising out of any product or process now being used, manufactured or
         distributed, or ever having been used, manufactured or distributed at
         any time previously, by or on behalf of the Company or the
         Subsidiaries, (ii) no pending or, to the knowledge of the Company,
         threatened claim or challenge of or proceeding for infringement, misuse
         or misappropriation of or interference with any Intellectual Property
         owned, licensed or controlled by any third party arising out of any
         product or process now being used, manufactured or distributed, or ever
         having been used, manufactured or distributed at any time previously,
         by or on behalf of the Company or the Subsidiaries, (iii) except as set
         forth in Schedule 3.22 hereto, no pending or threatened or potential
         claim, challenge or proceeding by the Company or any Subsidiary against
         any third party for infringement, misuse or misappropriation of or
         interference with any Intellectual Property owned, licensed or
         controlled by the

                                      -44-
<PAGE>

         Company or such Subsidiary or (iv) no notice or, to the knowledge of
         the Company, facts or information rendering any Intellectual Property
         owned, controlled or licensed by the Company or the Subsidiaries
         invalid or unenforceable, nor, to the knowledge of the Company, is
         there any allegation that any such Intellectual Property is invalid or
         unenforceable.

3.20     Material Contracts. All contracts to which the Company or any
         Subsidiary is a party or by which the Company or any Subsidiary is
         bound which are filed as or incorporated by reference as exhibits to
         the Exchange Act Reports (the "Material Contracts"), are valid, binding
         and enforceable in accordance with their terms (assuming the other
         parties thereto are bound) and are in full force and effect, except
         where such invalidity or unenforceability would not have a Material
         Adverse Effect. No payment default, breach or violation or alleged
         default by the Company or any Subsidiary exists under the Material
         Contracts.

3.21     Investment Company. The Company is not, and is not controlled by or
         under common control with an affiliate of, an "investment company"
         within the meaning of the Investment Company Act of 1940, as amended.

3.22     No Integration. Neither the Company nor any of its affiliates nor any
         person acting on the Company's behalf has, directly or indirectly, at
         any time within the past six (6) months made any offer or sale of any
         security or solicitation of any offer to buy any security under
         circumstances that would (i) eliminate the availability of the
         exemption from registration under Regulation D in connection with the
         offer and sale of the Securities as contemplated hereby; or (ii) cause
         the offering of the Securities pursuant to this Agreement to be
         integrated with prior offerings by the Company for purposes of the
         Securities Act or any applicable stockholder approval provisions,
         including, without limitation, under the rules and regulations of the
         NASD, as applicable.

3.23     Year 2000 Compliance. All computer hardware, software, databases,
         systems and other computer equipment (collectively, "Software") used by
         the Company or the Subsidiaries can be used during and after the
         calendar year 2000, and shall operate during each such time period,
         both on a stand-alone basis and when interacting or interoperating with
         third-party Software, without error relating to the processing,
         calculating, comparing, sequencing or other use of Date Data. "Date
         Data" is any data derived from or dependent upon the proper recognition
         by software or hardware of dates prior to or after the year 2000.

3.24     Form S-3 Eligible. The Company currently meets the requirements for use
         of Form S-3 under the Securities Act.

3.25     Disclosure. The written information with respect to the Company and the
         Subsidiaries heretofore provided and to be provided by the Company
         pursuant to this Agreement and the other Transaction Documents,
         including the schedules and exhibits hereto, and each of the
         agreements, documents, certificates and writings to be delivered to the
         Subscribers or their respective representatives at the Closing, do not
         and will not on the Closing Date contain any untrue statement of a
         material fact or omit to state a material fact required to be stated
         herein or therein or necessary in order to make the statements and
         writings contained herein and therein not false or misleading in the
         light of the circumstances under which they were made.

4.       Covenants of each Subscriber

4.1      Resales. No Subscriber shall make any offers or sales of the Securities
         other than pursuant to an effective registration statement under the
         Securities Act or pursuant to an exemption from registration under the
         Securities Act. Each Subscriber will comply with applicable prospectus
         delivery requirements.

5.       Covenants of the Company

5.1      Reservation of Common Stock. As of the Closing, the Company will
         reserve and the Company shall continue to reserve and keep available at
         all times, free of preemptive rights, shares of Common Stock in a
         number sufficient to enable the Company to satisfy one and one-half
         times the number of shares necessary

                                      -45-
<PAGE>

         to satisfy any obligation to issue shares of Common Stock upon
         conversion of the Preferred Stock as if all the Preferred Stock were
         converted as of the Closing at the then applicable conversion price and
         at all times thereafter, plus the number of additional shares of Common
         Stock as would be issued upon exercise of the Warrants. The number of
         shares so reserved may be reduced by the number of shares actually
         delivered pursuant to conversion of a portion of the Preferred Stock
         (provided that in no event shall the number of shares so reserved be
         less than one and one-half times the number required to satisfy the
         remaining conversion rights on the unconverted Preferred Stock) and the
         number of shares so reserved shall be increased to reflect stock splits
         and stock dividends and distributions.

5.2      Listing of Underlying Shares. The Company hereby agrees, promptly
         following the Closing, to take such action to cause the Underlying
         Shares to be quoted for trading on the Nasdaq National Market not later
         than the effective date of the registration statement relating to the
         Underlying Shares required to be filed pursuant to the terms of the
         Registration Rights Agreement (the "Registration Statement"). The
         Company further agrees, if the Company applies to have the Common Stock
         traded on any other principal stock exchange or market, that it will
         include in such application the Underlying Shares and will take such
         other action as is reasonably necessary to cause the Underlying Shares
         to be listed on such other exchange or market concurrently with any
         other Common Stock.

5.3      Exchange Act Registration. The Company will use its best efforts: (a)
         to cause its Common Stock to continue to be registered under Section
         12(b) or 12(g) of the Exchange Act; (b) to comply in all material
         respects with its reporting and filing obligations under the Exchange
         Act; and (c) not to take any action or file any document (whether or
         not permitted by the Exchange Act or the rules and regulations
         thereunder) to terminate or suspend such registration or to terminate
         or suspend its reporting and filing obligations under the Exchange Act.
         The Company will use its best efforts to continue the listing and
         trading of its Common Stock on the Nasdaq National Market and will use
         its best efforts to comply in all material respects with the Company's
         reporting, filing and other obligations under the bylaws or rules of
         the NASD and the Nasdaq National Market.

5.4      Legends. Except as provided in Section 6.1 below, the Underlying Shares
         and certificates evidencing the same shall at all times be free of
         legends, "stop transfers," "stock transfer restrictions" or other
         restrictions, upon the effectiveness of the Registration Statement.

5.5      Corporate Existence. So long as any Subscriber beneficially owns any
         Preferred Stock or Warrants, the Company shall maintain its corporate
         existence and shall not sell all or substantially all of the Company's
         assets, except in the event of a merger or consolidation or sale of all
         or substantially all of the Company's assets, where the surviving or
         successor entity in such transaction assumes the Company's obligations
         hereunder and under the other Transaction Documents; and (ii) is a
         publicly traded corporation on the New York Stock Exchange, the
         American Stock Exchange, the Nasdaq National Market or The Nasdaq
         SmallCap Market.

5.6      Transfer Agent Instructions. The Company covenants and agrees that,
         promptly following execution and delivery of this Agreement, it shall
         issue irrevocable instructions (the "Irrevocable Transfer Agent
         Instructions") to its transfer agent for the Common Stock, and any
         subsequent transfer agent, such instructions to be in form and
         substance reasonably acceptable to the Subscribers, to facilitate
         trades of the Underlying Shares and to permit the Subscribers to timely
         deliver within any applicable settlement period certificates
         representing such shares in connection with any transfer or disposition
         of the Underlying Shares. The Company further covenants and agrees
         that, except as otherwise required by law, no instruction, other than
         the Irrevocable Transfer Agent Instructions, will be given by the
         Company to its transfer agent and that the Underlying Shares shall
         otherwise be freely transferable on the books and records of the
         Company as and to the extent provided in this Agreement and the
         Registration Rights Agreement. Each of the Subscribers and the Company
         acknowledge and agree that their respective obligations pursuant to
         this Section 5.6 are subject to compliance by each of them with
         applicable securities laws. The Company covenants that it will use its
         best efforts to cause the Company's transfer agent to deliver
         certificates representing shares issued in connection with a transfer
         of Underlying Shares as promptly as practicable but in no event later
         than three (3) business days after delivery by a Subscriber of all
         required documentation in respect of such transfer to both the Transfer
         Agent and the Company as

                                      -46-
<PAGE>

         required pursuant to Paragraphs 7 and 8 of the Certificate. The Company
         acknowledges that a breach by it of its obligations hereunder will
         cause irreparable harm to the Subscribers by vitiating the intent and
         purpose of the transaction contemplated hereby. Accordingly, the
         Company acknowledges that the remedy at law for a breach of its
         obligations under this Section 5.6 will be inadequate and agrees, in
         the event of a breach or threatened breach by the Company of the
         provisions of this Section 5.6, that the Subscribers shall be entitled,
         in addition to all other available remedies, to an injunction
         restraining any breach and requiring immediate issuance and transfer,
         without the necessity of showing economic loss and without any bond or
         other security being required.

5.7      Use of Proceeds. The Company shall use all the proceeds of the Offering
         for general corporate purposes, including working capital and for the
         repayment of the Company's borrowings, provided that the Company shall
         not use the proceeds to redeem its equity or equity-equivalent
         securities. Pending application of the proceeds of the Offering in the
         manner permitted hereby, the Company will invest such proceeds in
         interest bearing accounts and/or short-term, investment grade interest
         bearing securities.

5.8      Rule 144A Information. The Company will (i) make available, upon
         request, to any holder of Securities and any prospective purchaser
         thereof designated by such a holder, upon the request of such holder or
         prospective purchaser, the information required to be provided to such
         holder or prospective purchaser by Rule 144A(d)(4) under the Securities
         Act and (ii) update such information from time to time in order to
         prevent such information from becoming false and misleading and will
         take such other actions as are reasonably necessary to ensure that the
         safe harbor exemption from the registration requirements of the
         Securities Act under Rule 144A is and will be available for resales of
         the Preferred Stock and the Warrants Shares conducted in accordance
         with Rule 144A.

5.9      Notice of Adverse Change. The Company will notify the Subscribers
         promptly (but in any event within seven days) after becoming aware of
         the existence of any condition or event which has had or is likely to
         have a Material Adverse Effect.

5.10     Dividends and Distributions. Until the delivery by the Company to the
         Subscribers of all of the shares of Common Stock issuable upon
         conversion of the Preferred Stock or all sums of cash upon redemption
         of the Preferred Stock, as applicable, such that after such delivery
         upon any such conversion or redemption no more than 10% of the
         Preferred Stock issued on the Closing Date remains outstanding, the
         Company shall not make or fix a record date for the determination of
         holders of Common Stock or other securities entitled to receive a
         dividend or other distribution (special or otherwise) or declare a cash
         dividend or other distribution payable in cash or property of the
         Company.

5.11     Filing of Current Report on Form 8-K. On or before the second business
         day following the Closing Date, the Company shall file with the SEC a
         Current Report on Form 8-K in a form reasonably acceptable to the
         Subscribers describing the terms of the transaction consummated at the
         Closing.

5.12     Form D. The Company agrees to file one or more Form D's with respect to
         the Offering as required under Regulation D and to provide a copy
         thereof to the Subscribers promptly upon request.

5.13     Integration. The Company shall not sell, offer for sale or solicit
         offers to buy or otherwise negotiate in respect of any security (as
         defined in Section 2 of the Securities Act) that would be integrated
         with the offer or sale of the Securities in a manner that would require
         the registration under the Securities Act of the sale of any or all of
         such Securities to any Subscriber.

5.14     Shareholder Approval. The Company shall provide each stockholder
         entitled to vote at a meeting of the stockholders of the Company, which
         meeting shall occur on or before the date which is 60 days after the
         Proxy Statement Triggering Date (as defined below) (the "Stockholder
         Meeting Deadline"), a proxy statement, which has been previously
         reviewed by the Subscribers and counsel of their choice, soliciting
         each such stockholder's affirmative vote at such stockholder meeting
         for approval of the Company's issuance of all of the Securities as
         described in this Agreement, and the Company shall use its best efforts
         to (i) solicit its stockholders' approval of such issuance of the
         Securities and (ii) cause the Board of Directors of the Company to
         recommend to the stockholders that they approve such proposal. A "Proxy

                                      -47-
<PAGE>

         Statement Triggering Date" shall mean the first date after the date of
         this Agreement on which the sum of (A) the number of Underlying Shares
         issued and (B) the number of Underlying Shares issuable upon conversion
         of all the outstanding shares of Preferred Stock based on the
         Conversion Price (as defined in the Certificate), and upon exercise of
         all the outstanding Warrants based on the Warrant Price (as defined in
         the Warrants) in effect on the date of such determination (without
         regard to any limitation upon the conversion of any shares of Preferred
         Stock or exercise of Warrants), equals or exceeds 15% of the number of
         shares of Common Stock issued and outstanding immediately prior to the
         Closing Date.

6.       Legends; Subsequent Transfer of Securities; Denominations

6.1      Legend. The Company shall issue one or more certificates evidencing the
         Preferred Stock and the Warrants in the name of each Subscriber and in
         such number of shares to be specified by such Subscriber prior to (or
         from time to time subsequent to) the Closing. The Preferred Stock, the
         Warrants and the Underlying Shares shall bear the following legend (the
         "Legend"):

                  THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
                  ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY
                  NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN
                  EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
                  SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT
                  TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.

         Following the effectiveness of the Registration Statement, the Company
         will issue certificates representing the Securities without the Legend
         to any transferee other than holders who are "affiliates" of the
         Company (as such term is defined under the Securities Act). In
         addition, the Company will issue certificates representing the
         Securities without the Legend, promptly upon request, if: (i) the
         holder thereof is permitted to dispose of Securities pursuant to Rule
         144 under the Securities Act; (ii) the Securities are sold to a
         purchaser or purchasers in a transaction exempt from registration under
         the Securities Act, as evidenced by an opinion of counsel to the
         transferor delivered and reasonably satisfactory to the Company; or
         (iii) the Securities are sold to a purchaser or purchasers pursuant to
         an effective registration statement and the prospectus delivery
         requirements under the Securities Act are met.

6.2      Subscriber's Compliance. Nothing in this Section 6 shall affect in any
         way the Subscribers' obligations and agreement to comply with all
         applicable securities laws upon resale of the Securities.

6A.      Payment Set Aside

         To the extent that the Company makes a payment or payments to any
         Subscriber hereunder or pursuant to the Registration Rights Agreement
         or the Certificate or any Subscriber enforces or exercises its rights
         hereunder or thereunder, and such payment or payments or the proceeds
         of such enforcement or exercise or any part thereof are subsequently
         invalidated, declared to be fraudulent or preferential, set aside,
         recovered from, disgorged by or are required to be refunded, repaid or
         otherwise restored to the Company, a trustee, receiver or any other
         person under any law (including, without limitation, any bankruptcy
         law, state or federal law, common law or equitable cause of action) by
         the court of competent jurisdiction in a final non-appealable judgment,
         then to the extent of any such restoration the obligation or part
         thereof originally intended to be satisfied shall be revived and
         continued in full force and effect as if such payment had not been made
         or such enforcement or set-off had not occurred.

7.       Governing Law; Jurisdiction

         This Agreement shall be governed by and construed and enforced in
         accordance with the laws of the State of Delaware, without regard to
         principles of conflicts of law or choice of law, except for matters
         arising under the Securities Act or the Exchange Act which matters
         shall be construed and interpreted in accordance with such laws. The
         Company and the Subscribers hereby agree that all

                                      -48-
<PAGE>

         actions or proceedings arising directly or indirectly from or in
         connection with this Agreement shall be litigated only in the Supreme
         Court of the State of Delaware or the United States District Court of
         Delaware located in New Castle County, Delaware. The Company and each
         Subscriber consents to the jurisdiction and venue of the foregoing
         courts and consent that any process or notice of motion or other
         application to either of said courts or a judge thereof may be served
         inside or outside the State of Delaware by registered mail, return
         receipt requested, directed to the such party at its address set forth
         in this Agreement (and service so made shall be deemed complete five
         (5) days after the same has been posted as aforesaid) or by personal
         service or in such other manner as may be permissible under the rules
         of said courts. The parties hereto hereby waive any right to a trial by
         jury in connection with any litigation pursuant to this Agreement and
         the transactions contemplated hereby.

8.       Assignment; Entire Agreement; Amendment

8.1      Assignment. Neither this Agreement nor any rights hereunder may be
         assigned by either party without the prior written consent of the other
         party hereto; provided, however, that the Company may assign its rights
         and obligations under this Agreement in connection with a transaction
         of the nature contemplated by Section 5.5 hereof and any Subscriber may
         assign its rights under this Agreement to an affiliate of such
         Subscriber who agrees to be bound by the terms hereof. To the extent
         that any party assigns this Agreement with the prior written consent of
         the other or any Subscriber assigns this Agreement as permitted herein
         to an affiliate of such Subscriber, the provisions of this Agreement,
         the Certificate and the Registration Rights Agreement shall inure to
         the benefit of, be binding upon, and be enforceable by and against any
         such assignee. Notwithstanding anything to the contrary contained
         herein or any other Transaction Document, any Subscriber shall be
         entitled to pledge the Securities in connection with a bona fide margin
         account or other loan secured by the Securities.

8.2      Entire Agreement; Amendment. This Agreement, the Certificate, the
         Registration Rights Agreement, the Warrants and the other documents
         delivered pursuant hereto and thereto constitute the full and entire
         understanding and agreement between the parties with regard to the
         subjects hereof and thereof, and no party shall be liable or bound to
         any other party in any manner by any warranties, representations or
         covenants except as specifically set forth in this Agreement or
         therein. Except as expressly provided in this Agreement, neither this
         Agreement nor any term hereof may be amended, waived, discharged or
         terminated other than by a written instrument signed by the party
         against whom enforcement of any such amendment, waiver, discharge or
         termination is sought.

9.       Publicity

         The Company and the Subscribers shall consult with each other in
         issuing any press releases or otherwise making public statements with
         respect to the transactions contemplated hereby and no party shall
         issue any such press release or otherwise make any such public
         statement without the prior written consent of the others, which
         consent shall not be unreasonably withheld or delayed, except that no
         prior consent shall be required if such disclosure is required by law
         or applicable law, to the extent a party determines in good faith that
         it is legally obligated to do so, in which such case the disclosing
         party shall provide the other parties with prior notice of such public
         statement. The Company shall not publicly or otherwise disclose the
         names of any of the Subscribers without each such Subscriber's prior
         written consent unless otherwise required by law, in which case the
         Company shall inform such Subscriber of such disclosure in writing
         prior to making such disclosure.

                                      -49-
<PAGE>

10.      Notices, Etc.; Expenses, Indemnity

10.1     Notices. Any notice, demand or request required or permitted to be
         given by either the Company or the Subscribers pursuant to the terms of
         this Agreement shall be in writing and shall be deemed given when
         delivered personally or by facsimile, with a hard copy to follow by two
         day courier, addressed to the parties at the addresses of the parties
         set forth on Schedule I hereto or such other address as a party may
         request by notifying the other in writing. Copies of all notices to a
         Subscriber shall be sent to its designee or representative.

10.2     Expenses. The Company shall reimburse the Subscribers for their
         respective reasonable expenses and fees in connection with this
         Agreement, which amount shall be withheld by the Subscribers from the
         purchase price, in an amount not to exceed an aggregate of $50,000.

10.3     Indemnification. Each party shall indemnify the other against any loss,
         cost or damages (including reasonable attorney's fees and expenses)
         incurred as a result of such parties' breach of any representation,
         warranty, covenant or agreement in this Agreement.

11.      Counterparts

         This Agreement may be executed in any number of counterparts, each of
         which shall be enforceable against the parties actually executing such
         counterparts, and all of which together shall constitute one
         instrument.

12.      Survival; Severability

         The representations, warranties, covenants and agreements of the
         parties hereto shall survive the Closing notwithstanding any due
         diligence investigation conducted by or on behalf of the Subscribers.
         In the event that any provision of this Agreement becomes or is
         declared by a court of competent jurisdiction to be illegal,
         unenforceable or void, this Agreement shall continue in full force and
         effect without said provision; provided that no such severability shall
         be effective if it materially changes the economic benefit of this
         Agreement to any party.

13.      Titles and Subtitles

         The titles and subtitles used in this Agreement are used for
         convenience only and are not to be considered in construing or
         interpreting this Agreement.

                  [Remainder of Page Intentionally Left Blank]

                                      -50-
<PAGE>

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

COMPANY:                                      SUBSCRIBERS:

XCEED, INC.                                   PECONIC FUND, LTD.

                                              By:  RAMIUS CAPITAL GROUP, LLC,
                                              Its:  Investment Advisor
By: /s/ Werner Haase
   -----------------------------------
      Name:  Werner Haase
      Title:  Chief Executive Officer     By: /s/ Jeffrey M. Solomon
                                             ------------------------------
                                                   Name: Jeffrey M. Solomon
                                                   Title: Managing Officer

                                           LEONARDO, L.P.

                                           By:  ANGELO, GORDON & CO., L.P.
                                           Its:  General Partner

                                           By:/s/ Michael L. Gordon
                                              ---------------------------------
                                                Name:  Michael L. Gordon
                                                Title:  Chief Operating Officer

                                           HTFP INVESTMENT L.L.C.

                                           By:  PROMETHEAN ASSET MANAGEMENT,
                                                L.L.C.
                                           Its:  Investment Manager

                                           By:/s/ James F. O'Brien, Jr.
                                              ----------------------------------
                                                Name:  James F. O'Brien, Jr.
                                                Title:  Managing Member

                                      -51-

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