Document:

Confidential Treatment is requested for portions of this document

                              EMPLOYMENT AGREEMENT

         This Employment Agreement ("Agreement") is made and entered into by and
between W. Donald Bell  ("Bell")  and Bell  Microproducts,  Inc.,  a  California
corporation ("Company"),  effective as of 7/1/99, and supersedes and replaces in
its entirety the  Employment  Agreement  between the parties dated  December 10,
1996.

                                   WITNESETH:

        WHEREAS,  Bell has been serving and  continues to serve as the Chairman,
President and Chief Executive Officer of Company; and

        WHEREAS, the parties wish to continue Bell's employment with Company for
a period of at least three years from the date of this Agreement and wish to set
forth the terms and conditions of that employment relationship in writing;

        NOW,  THEREFORE,  in consideration  of Bell's continued  employment with
Company, and other good and valuable consideration,  and in consideration of the
covenants  contained  herein,  the receipt and  sufficiency  of which are hereby
acknowledged, the parties do hereby agree and contract as follows:

         1.  Term  of  Employment.  Company  hereby  agrees  to  employ  Bell as
Chairman,  President and Chief Executive  Officer for the period commencing with
the date set forth above and ending on 12/31,  2002, unless Bell's employment is
terminated earlier pursuant to Paragraph 4 of this Agreement. After 12/31, 2002,
Bell's  employment with Company may be continued by mutual written  agreement of
the parties.

        2.  Duties.  Bell  accepts  employment  with  Company  as its  Chairman,
President  and Chief  Executive  Officer.  Bell  agrees to devote his full time,
attention  and best efforts to the  business  and affairs of the  Company.  Bell
shall perform all duties and responsibilities  commensurate with his position as
Chairman,  President and Chief Executive Officer and shall follow the reasonable
direction of the Board of Directors of the Company.  Company  agrees to nominate
Bell for election to Company's Board of Directors, and Bell agrees to serve, for
any period for which he is so elected, without additional compensation therefor.
Bell may serve on corporate,  civic or charitable boards or committees,  fulfill
speaking engagements and manage personal investments, so long as Company, in its
sole  discretion,  reasonably  determines that such activities do not interfere,
compete  with or  otherwise  pose a conflict  of  interest  with  respect to the
performance of Bell's duties and  responsibilities  under this  Agreement.  Bell
shall  comply with  Company's  policies and  procedures  as adopted from time to
time; provided, however, that to the extent any such policies and procedures are
inconsistent  with  this  Agreement,  the  provisions  of this  Agreement  shall
control.

<PAGE>

Confidential Treatment is requested for portions of this document.

        3.      Compensation and Benefits. During the term of this Agreement,
Bell shall receive the following compensation and benefits:

                a. Base  Salary.  Bell shall  receive a minimum  base  salary of
        $375,000 per year, less applicable withholding,  payable monthly or more
        frequently in accordance with Company's customary payroll practices. The
        Compensation  Committee of the Company's Board of Directors shall review
        Bell's base salary at least  annually  and may, in its sole  discretion,
        increase  the base salary  under its normal  compensation  policies  for
        executive officers.

                b. Annual Incentive Compensation.  Bell shall participate in any
        and all annual incentive  compensation plans,  including but not limited
        to the  Management  Incentive  Program,  which may be established by the
        Compensation  Committee  of Company's  Board of Directors  for the Chief
        Executive  Officer  from  time to time.  In no event  shall  any  annual
        incentive  compensation plans established by the Compensation  Committee
        for the Chief  Executive  Officer after the date set forth above be less
        favorable  than  the  annual  incentive   compensation  plans  currently
        maintained for the Chief Executive Officer as of such date.

        c.      EPS Enhancement Incentive

                (i)  Within  thirty  (30) days  following  the  issuance  of the
        audited  financial  statements  for the 1999 fiscal year and each fiscal
        year thereafter  until the termination of this Agreement,  Company shall
        pay  Bell a  lump-sum  cash  incentive  payment  (the  "EPS  Enhancement
        Incentive")  equal to (i) $5,000 for each $0.01 of Company's  annual net
        earnings  per share (as  hereinafter  defined)  over and above [ * ] per
        share,  plus (ii) $3,000 for each $.01 if  Company's  annual net earning
        per share (as hereinafter defined) over and above [ * ] per share.

                (ii) For  purposes of this  Paragraph 3(c), the term "annual net
        earning per shares for any fiscal year shall mean the net profits of the
        Company,  after the provision for income taxes, any extraordinary  items
        of profit or loss and the  computation  of any  payments  due under this
        Paragraph  3(c),  expressed on a fully  diluted  earning per share basis
        (based on the  weighted  average  number of shares of  Company's  Common
        Stock  outstanding  or  equivalent   thereto  or  otherwise  treated  as
        outstanding  during such annual fiscal  period),  computed in accordance
        with   generally   accepted    accounting    principles   by   Company's
        interdependent  public  accountants and as reported in Company's audited
        financial statements for such fiscal year. The [ * ] and [ * ] per share
        thresholds  stated herein shall be adjusted to reflect the effect of any
        stock   dividends  on,  or  stock  splits  or  reverse   splits  of,  or
        recapitalizations,   reclassifications  or  other  similar  transactions
        affecting  Company's  Common Stock which are declared or effected  after
        the date of this Agreement in the same manner as such  dividends,  stock
        splits or  transactions  have been  reflected in the annual net earnings
        per share in accordance with generally accepted

                                        2

<PAGE>

Confidential  Treatment is requested for portions of this document.

        accounting  principles  and as reported in Company's  audited  financial
        statements,  and  the  $5,000  and  $3,000  amounts  shall  be  adjusted
        consistent  with the  goals  of the EPS  Enhancement  Incentive  and the
        amount that would otherwise be payable without such adjustment  pursuant
        to Section 3(c).

                (iii) If, in any fiscal  year,  the total  compensation  paid to
        Bell would result in a violation of the  compensation  deduction  limits
        contained in Section  162(m) of the  Internal  Revenue Code of 1986 (the
        "Code"),  or  any  successor  provision,   and  the  regulations  issued
        thereunder, a portion of the EPS Enhancement Incentive shall be credited
        to a deferred compensation account and shall become due and payable upon
        the effective  date of Bell's  termination of employment for any reason.
        The portion credited to the deferred  compensation  account shall be the
        amount  necessary to avoid such  violation  of Code 162(m).  All amounts
        credited to the  deferred  compensation  account  shall be adjusted  for
        interest,  compounded  quarterly,  at the prime  interest rate quoted by
        Citicorp,  NA. from time to time,  beginning  with the date the deferred
        compensation  account is established  and  continuing  until all amounts
        have been paid in full.  Upon  Bell's  termination  of  employment,  the
        balance  of the  deferred  compensation  account  shall be paid in equal
        annual  installments  not to  exceed  $500,000  per year.  The  deferred
        compensation  account shall at all times be entirely  unfunded.  Neither
        Bell nor his successors shall have any interest in the assets of Company
        by reason of the right to receive the amounts  credited to the  deferred
        compensation  account,  and Bell shall have only the rights of a general
        unsecured creditor with respect thereto.

                d. Long-Term   Disability  Insurance.  Company agrees to pay all
        premiums required for long-term disability insurance which shall provide
        Bell  with  a  disability   benefit  equal  to  (60%)  of  Bell's  total
        compensation  if, as the result of Bell's  incapacity due to physical or
        mental  illness,  Bell is unable to perform his duties as President  and
        Chief Executive  Officer.  Company may, in its discretion,  provide such
        long-term disability insurance under its group policy.

                e. Business  Expenses.  Company will reimburse Bell for ordinary
        and necessary travel and other  out-of-pocket  expenses incurred by Bell
        in connection  with the  performance  of his duties,  provided that Bell
        promptly submits to Company receipts verifying such expenses.

                f.  Other   Employee   Benefits.   Bell  shall  be  eligible  to
        participate  in any and all other  employee  benefit  plans and programs
        offered by Company from time to time,  including but not limited to, any
        medical,  dental,  short-term  disability and life  insurance  coverage,
        stock option plans or retirement plans, in accordance with the terms and
        conditions of those benefit plans and programs and on a basis consistent
        with that  customarily  provided to  Company's  executive  officers.  In
        addition, Company shall continue to maintain all life insurance policies
        currently in effect as one of the effective date set forth above.

                                       3

<PAGE>

Confidential Treatment is requested for portions of this document.

                g. Vacation and Other  Absences.  Bell shall be entitled to paid
        vacations each year in accordance with Company's  then-current  vacation
        policy for executive officers. The rules relating to other absences from
        regular duties for holidays,  sick or disability leave, leave of absence
        without  pay,  or  for  other  reasons,  shall  be  the  same  as  those
        customarily provided to Company's executive officers.

        4.  Termination.  Unless  extended by mutual  written  agreement  of the
parties,  and except for the provisions hereof which are intended to survive for
other periods of time as specified  herein,  this Agreement  shall terminate (a)
upon the  expiration  date stated in Paragraph 1 December  31, 2002;  (b) at any
time upon mutual written  agreement of the parties;  (c) immediately upon Bell's
death;  (d) by the Company,  immediately and without prior written  notice,  for
"cause" (as defined in Section 5(c) below); or (e) by Bell or by Company for any
reason not  otherwise  covered by clauses  (a), (b), (c) or (d) herein,  with at
least  thirty  (30)  days'  written  notice to the  other.  Except as  otherwise
provided in  Paragraph  5, upon the  termination  of Bell's  employment  for any
reason,  Bell shall be entitled to receive his base salary through his last date
of employment,  any annual  incentive  employment,  the amounts  credited to the
deferred  compensation  account  described in Paragraph  3(c), any  unreimbursed
business  expenses  incurred  prior to such  termination  of employment and such
other employee  benefits to the extent  permitted by the applicable  policies or
plan documents or as required by law.

        5.      Severance Benefits.

                a.     Termination Without Cause or Involuntary Termination.  If
                Company  terminates  Bell's  employment  without cause or in the
                event of an  "involuntary  termination"  (as  defined in Section
                5(c) below) at any time during the term of this Agreement,  Bell
                shall  be  entitled  to  the  following   additional   severance
                benefits:

                                 (i) Base  Salary. Company shall continue to pay
                       Bell his then-current  base salary through the expiration
                       date  stated in  Paragraph  1, or such  later date as may
                       have been mutually agreed to in writing by the parties.

                                 (ii)   Benefits.   Company  shall  continue  to
                       provide, at no cost to Bell, medical, dental,  short-term
                       disability  and life insurance  benefits for Bell and his
                       dependents   through  the   expiration   date  stated  in
                       Paragraph 1, or such later date as may have been mutually
                       agreed to by the  parties,  at the same level of coverage
                       as  was  provided  to  Bell  immediately   prior  to  the
                       termination of his employment,  and shall continue to pay
                       all  premiums  required  for  the  long-term   disability
                       insurance  coverage  described in Paragraph  3(d) through
                       the expiration  date stated in Paragraph 1, or such later
                       date as may have been mutually  agreed to by the parties.
                       Confidential  Treatment is requested for portions of this
                       document.

                                       4

<PAGE>

         Company may, in its discretion,  provide the benefits  described herein
under the Company's group plans or under no less favorable  insurance  contracts
or  arrangements  secured  by  the  Company.  For  purposes  of  Title  X of the
Consolidated  Budget  Reconciliation  Act of  1985  ("COBRA"),  the  date of the
"qualifying  event" for Bell and his  dependents  shall be the  expiration  date
stated in Paragraph 1. Company's  obligations to provide the benefits  described
herein  shall cease if Bell and his  dependents  become  covered  under  another
employer's group medical, dental, short-term disability, long-term disability or
life  insurance  plans that  provide  Bell and his  dependents  with  comparable
benefits and levels of coverage.

                                 (iii) Portion of EPS Enhancement  Incentive for
                       Current  Fiscal  Year. Within  thirty (30) days after the
                       effective date of Bell's termination of employment,  Bell
                       shall  receive a lump-sum  cash  payment for a portion of
                       the EPS Enhancement  Incentive which he could have earned
                       for the fiscal year in which his  employment  terminates.
                       Such  portion  shall be based on the  cumulative  monthly
                       earning per share for such fiscal year through the end of
                       the month  coinciding  with or immediately  preceding the
                       effective  date of Bell's  termination  of  employment as
                       reported in Company's interim financial  statements.  For
                       purposes  of   determining   such   portion  of  the  EPS
                       Enhancement  Incentive,  the [ * ]  and [ * ]  thresholds
                       described  in  Paragraph  3(c) shall be pro rated for the
                       number  of  months  counted  in such  cumulative  monthly
                       earning  per share,  rounded  down to the  nearest  cent.
                       Exhibit  A sets  forth  an  example  of how the  payments
                       required   under  this  Paragraph   5(a)(iii)   shall  be
                       calculated,  but such Exhibit A shall not, in any manner,
                       limit the application of this Paragraph 5(a)(iii).

                                 (iv) Average    Annual  and   EPS   Enhancement
                       Incentives.  Within (30) days after the effective date of
                       Bell's  termination of  employment,  Bell shall receive a
                       lump-sum cash payment equal to three times the sum of (A)
                       the  monthly  average  of the EPS  Enhancement  Incentive
                       described  in  Paragraph  3(c) which Bell may have earned
                       for each fiscal year or portion  thereof  during the term
                       of this  Agreement,  including  the fiscal  year in which
                       Bell's  termination of employment  occurs,  multiplied by
                       twelve,  and (B) the monthly  average of all other annual
                       incentive  compensation described in paragraph 3(b) which
                       Bell may have  earned  for each  fiscal  year or  portion
                       thereof during the term of this Agreement,  including the
                       fiscal year in which  Bell's  termination  of  employment
                       occurs,  multiplied  by  twelve.  Exhibit A sets forth an
                       example of how the payments required under this Paragraph
                       4(a)(iv)  shall be  calculated,  but such Exhibit A shall
                       not,  in  any  manner,  limit  the  application  of  this
                       Paragraph 5(a)(iv).

                                 (v)     Acceleration    of    Stock    Options.
                       Notwithstanding  anything in the applicable  stock option
                       plan and successor plan, or stock option agreement to the
                       contrary,  upon the effective date of Bell's  termination
                       of employment, one hundred (100%) of the unvested portion
                       of any stock  option or  restricted  stock  award held by
                       Bell shall  automatically be accelerated in full so as to
                       become fully vested, subject to the restrictions relating
                       to "pooling-of-interests" accounting treatment

                                       5

<PAGE>

Confidential  Treatment is requested for portions of this document.

              contained  in  Section  3(a)(i)(3)  of  the  Management  Retention
              Agreement    entered   into   by   Bell   and   the   Company   on
              7/1, 1999, if applicable.

              b.  Termination  Upon  Disability.  If Bell's  employment with the
              Company is  terminated on account of disability at any time during
              the  term  of  this  Agreement,  Bell  shall  be  entitled  to the
              following additional benefits:

                  (i) Benefits. Company shall continue to provide, at no cost to
              Bell, medical, dental and life insurance benefits for Bell and his
              dependent as stated in Paragraph 1, or such later date as may have
              been  mutually  agreed  to by the  parties,  at the same  level of
              coverage as was provided to Bell  immediately  in writing prior to
              the termination of his employment.

        Company may, in its discretion,  provide the benefits  described  herein
under the Company's group plans or under no less favorable  insurance  contracts
or  arrangements  secured  by  the  Company.  For  purposes  of  Title  X of the
Consolidated  Budget  Reconciliation  Act of  1985  ("COBRA"),  the  date of the
"qualifying  event"  for  Bell  and  his  dependents  shall  be  the  end of the
twenty-four  month period following the effective date of Bell's  termination of
employment. Company's obligations to provide the benefits described herein shall
cease if Bell and his dependents  become covered under another  employer's group
medical,  dental or life  insurance  plans that provide Bell and his  dependents
with comparable benefits and levels of coverage.

                  (ii) Portion of EPS  Enhancement  Incentive for Current Fiscal
              Year.  Within thirty (30) days after the effective  date of Bell's
              termination  of  employment on accoupt of  disability,  Bell shall
              receive  a  lump-sum  cash  payment  for  a  portion  of  the  EPS
              Enhancement  Incentive  which he could have  earned for the fiscal
              year in which his  employment  terminates.  Such portion  shall be
              based on the cumulative  monthly earning per share for such fiscal
              year through the end of the month  coinciding  with or immediately
              preceding the effective date of Bell's  termination of employment,
              as  reported  in  Company's  interim  financial  statements.   For
              purposes  of  determining  such  portion  of the  EPS  Enhancement
              Incentive,  the [ * ] and [ * ]  thresholds described in Paragraph
              3(c) shall be pro rated for the  number of months  counted in such
              cumulative monthly earnings per share, rounded down to the nearest
              cent.

c. Definitions.

                  (i)  Cause.  "Cause"  shall  mean  (i)  any  act  of  personal
              dishonesty  taken  by Bell  in  connection  with  his  duties  and
              responsibilities  as  President  and Chief  Executive  Officer and
              intended to result in  substantial  personal  enrichment  of Bell,
              (ii) Bell's  conviction of a felony or (iii) a willful act by Bell
              which  constitutes  gross misconduct and which is injurious to the
              Company.

                                       6

<PAGE>

Confidential Treatment is requested for portions of this document.

                  (ii) Disability.  "Disability"  shall have the same meaning as
              set forth in the long-term  disability insurance contract referred
              to in Paragraph 3(d).

                  (iii) Involuntary Termination. "Involuntary termination" shall
              mean:

                       (A)  without  Bell's   express   written   consent,   the
              significant    reduction   of   Bell's   duties,    authority   or
              responsibilities,   relative   to   his   duties,   authority   or
              responsibilities as in effect immediately prior to such reduction,
              or the  assignment  to Bell of such reduced  duties,  authority or
              responsibilities;

                       (B) without Bell's express written consent, a substantial
              reduction,  without good business  reasons,  of the facilities and
              perquisites  (including  office space and  location)  available to
              Bell immediately prior to such reduction;

                       (C) a  reduction  by Company in Bell's  base salary as in
              effect immediately prior to such reduction;

                       (D) reduction by Company in the kind of level of employee
              benefits,   including   bonuses,   to  which  Bell  was   entitled
              immediately  prior to such  reduction  with the result that Bell's
              overall benefits package is significantly reduced; a material

                       (E) Bell's  relocation  to a facility or a location  more
              than thirty five (35) miles from  Bell's  then  present  location,
              without Bell's express written consent;

                       (F) any purported termination of Bell by Company which is
              not  effected  for  disability  or for  cause,  or  any  purported
              termination for which the grounds relied upon are not valid;

                       (G) the  failure of Company to obtain the  assumption  of
              this  Agreement  by any  successors  contemplated  in  Paragraph 8
              below; or

                       (H) any act or set of facts or circumstances which would,
              under  California  case law or stature  constitute a  constructive
              termination of Bell.

        6.  Covenant  Not to  Compete.  In  consideration  of Bell's  employment
hereunder and other good and valuable consideration, and in consideration of the
covenants  contained  herein,  the receipt and  sufficiency  of which are hereby
acknowledged, all of which are express payments for the obligations set forth in
this  Paragraph 6, Bell agrees that,  during his  employment and for a period of
two (2) years after the termination of the Agreement,  he will not,  directly or
indirectly, engage in (whether as an employee, consultant,  proprietor, partner,
director or  otherwise),  have any ownership  interest in, or participate in the
financing,  operation,

                                       7

<PAGE>

Confidential Treatment is requested for portions of this document.

management  or control of any firm,  corporation  or business that engages in or
intends to engage in business that is in direct  competition  with the Company's
principal  business (as defined and discussed in Company's  documents filed with
the Securities Exchange Commission);  provided,  however, that nothing contained
herein shall prevent Bell from owning or  purchasing  securities of any business
entity whose securities are regularly traded n any national  securities exchange
or in the  over-the-counter  market if such  ownership does not result in his or
his  affiliates'  owning directly or beneficially at any time  five percent (5%)
of the voting securities of any corporation engaged in any business  competitive
to the business then carried on by Company.

        7. Remedies.  The restriction  contained in paragraph 6 is necessary for
Company's  protection,  and any breach  thereof will cause  Company  irreparable
damage for which there is not adequate  remedy at law.  Bell agrees that, in the
event of such  breach,  Company  shall,  in addition to any other  remedy  which
Company may have at law or in equity,  be entitled  to seek such  equitable  and
injunctive  relief as may be available without the necessity of proving damages.
Company agrees that, in the event of a breach of this Agreement by Company, Bell
shall have all such remedies as may be available at law or in equity.

        8. Successors.

              a. Company's Successors.  Any successor to Company (whether direct
        or indirect and whether by purchase, merger, consolidation,  liquidation
        or otherwise) to all or substantially  all of Company's  business and/or
        assets  shall  assume the  obligations  under this  Agreement  and agree
        expressly to perform the  obligations  under this  Agreement in the same
        manner  obligations  in the absence of a  succession.  For all  purposes
        under this Agreement,  the term "Company" shall include any successor to
        the Company's  business  and/or  assets which  executes and delivers the
        assumption  agreement  contemplated  by this  Paragraph  8(a)  or  which
        becomes bound by the terms of this Agreement by operation of law.

              b. Employee's  Successors.  The terms of this agreement and all of
        Bell's  hereunder  shall inure to the benefit of, and be enforceable by,
        Bell's  personal or legal  representatives,  executors,  administrators,
        successors, heirs, distributees, devisees and legatees.

        9. Notice.  Notices and all other  communications  contemplated  by this
Agreement  shall be in writing  and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. In the case of Bell, mailed notices shall
be addressed to him at the home address which he most recently  communicated  to
Company in writing. In the case of Company, mailed notices shall be addressed to
its corporate  headquarters,  and all notices shall be directed to the attention
of its  Secretary.

                                       8

<PAGE>

Confidential  Treatment  is  requested  for portions of this document.

        10.  Coordination  of Agreements.  In the event of any conflict  between
this Agreement and the Management  Retention  Agreement entered into by Bell and
Company on 7/1/99, the terms of this Agreement shall control.

        11.  Miscellaneous Provisions.

              a. No Duty to Mitigate. Bell shall not be required to mitigate the
        amount of any payment contemplated by this Agreement, nor shall any such
        payment be reduced by any earning  that Bell may receive  from any other
        source.

              b.  Amendment;  Waiver.  No provision of this  Agreement  shall be
        modified,  waived  or  discharged  unless  the  modification,  waiver or
        discharge  is  agreed  to in  writing  and  signed  by  Bell  and  by an
        authorized  officer of Company  (other than  Bell).  No waiver by either
        party  of any  breach  of,  or of  compliance  with,  any  condition  or
        provision  of this  Agreement  by the other party shall be  considered a
        waiver of any other  condition or provision or of the same  condition or
        provision at any other time.

              c.   Whole   Agreement.   No   agreements,    representations   or
        understandings  (whether oral or written and whether express or implied)
        which are not  expressly set forth in this  Agreement  have been made or
        entered into by either party with respect to the subject  matter hereof.
        This Agreement supersedes in their entirety any prior or contemporaneous
        agreements,  whether written, oral, express, or implied, relation to the
        subject matter hereof.

              d. Governing Law. The validity,  interpretation,  construction and
        performance of this Agreement shall be governed by the laws of the State
        of California.

              e.  Severability.   The  invalidity  or  unenforceability  of  any
        provision or provisions of this Agreement  shall not affect the validity
        or enforceability  of any other provision hereof,  which shall remain in
        full force and effect.

              f. Withholding.  All payments made pursuant to this Agreement will
        be subject to the withholding of all applicable federal,  state or local
        income and employment taxes.

              g.  Counterparts.  This Agreement may be executed in counterparts,
        each of which  shall be deemed an  original,  but all of which  together
        will constitute one and the same instrument.

                                       9

<PAGE>

Confidential Treatment is requested for portions of this document.

         IN WITNESS WHEREOF,  the parties have executed this Agreement as of the
day and year set forth above.

COMPANY:                           BELL MICROPRODUCTS INC.

                                   Its:     Director E.J. Gelbock
                                       ----------------------------

                                   Dated:      7/12/99
                                         --------------------------

                                   /s/ W. Donald Bell
BELL:                              --------------------------------
                                   W. Donald Bell

                                   Dated:      6/30/99
                                         --------------------------

                                       10

<PAGE>

Confidential Treatment is requested for portions of this document.

                                   EXHIBIT A

        This Exhibit A sets forth an example of how the payments  required under
Paragraphs  5(a)(iii) and 5(a)(iv)  should be calculated,  but shall not, in any
manner, limit the application of such provisions.

        Example:  Assume that Bell is  terminated  on June 30,  1999.  Company's
earnings per share ("EPS") for FY 1999 are as follows:

           First Quarter   [*]
           Second Quarter  [*]
           Third Quarter   [*]
           Fourth Quarter  [*]

        During FY 1999, Bell earned the following incentive bonuses:

           First Quarter   [*]
           Second Quarter  [*]

           1. Paragraph 5(a)(iii)/EPS Enhancement Incentive for 1999.

           Cumulative Monthly EPS: [*]

           Pro Rata Threshold:     [*]

           EPS Enhancement
           Incentive for 1999:     [*]

           2. Paragraph 5(a)(Civ)/Average Annual and EPS Enhancement Incentives.

           (A)     EPS Enhancement Incentive

           Monthly Average EPS:    [*]     [*]

           Average Annual EPS:     [*]     [*]

           Three-Year Payout:      [*]     [*]

                                      A-1

<PAGE>

Confidential Treatment is requested for portions of this document.

           (B)     Other Incentive Bonuses:

           Monthly Average

           Incentive Bonus:        [*]

           Average Annual Bonus    [*]

           Three-Year Payout:      [*]

        Total Payout equals the sum of (A) and (B): [*]EXHIBIT 4.7

                                XIOX CORPORATION

                  STOCK PURCHASE AND INVESTOR RIGHTS AGREEMENT

     This Stock Purchase and Investor  Rights  Agreement  (this  "Agreement") is
made and entered into as of December 30, 1999, by and between Xiox  Corporation,
a  Delaware  corporation  (the  "Company"),  and each of the  persons  listed on
Exhibit A hereto, each of which is herein referred to as an "Investor."

                                    RECITALS

     WHEREAS,  the Company  desires to sell to each Investor,  and each Investor
desires to purchase from the Company,  shares of Series B Preferred  Stock,  par
value $.01 per share,  of the Company (the "Series B Preferred  Stock"),  on the
terms  and  conditions  set  forth in this  Agreement;  WHEREAS,  such  Series B
Preferred Stock will be convertible  into shares of the Common Stock,  par value
$.01 per  share,  of the  Company  (the  "Common  Stock");

     NOW,  THEREFORE,  in  consideration of the foregoing  recitals,  the mutual
promises hereinafter set forth, and other good and valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereto
agree as follows:

     VII. AGREEMENT TO PURCHASE AND SELL STOCK.

     Section 1.  Authorization.  As of the first Closing (as defined below), the
Company's Board of Directors (the "Board") will have authorized the issuance and
sale, pursuant to the terms and conditions of this Agreement, of up to 1,020,000
shares of Series B Preferred Stock, in one or more closings,  having the rights,
preferences,  privileges  and  restrictions  set  forth  in the  Certificate  of
Designations,  Preferences  and Other Rights of Series B Preferred  Stock in the
form attached hereto as Exhibit B (the "Certificate of Designations")  and up to
1,020,000  shares of Common Stock for issuance  upon  conversion of the Series B
Preferred Stock.

     Section 2. Agreement to Purchase and Sell Securities.  Subject to the terms
and  conditions  hereof,  the  Company  hereby  agrees to issue and sell to each
Investor and each Investor hereby agrees to acquire from the Company, the number
of shares of Series B Preferred Stock specified opposite each Investor's name on
Exhibit A hereto (collectively,  the "Purchased Shares") at a price per share in
cash equal to the Per Share Purchase Price (as defined below),  for an aggregate
cash  consideration  equal to such number of shares of Series B Preferred Stock,
multiplied by the Per Share Purchase Price. As used in this Agreement,  the "Per
Share Purchase Price" shall be equal to twenty dollars ($20.00). Exhibit A shall
be revised with respect to each Closing to reflect the identity of the Investors
and the  number of shares  purchased  by each  Investor  at each  Closing.  Each
Investor  participating in a Closing under this agreement shall be an "Investor"
within the meaning of this Agreement, and the shares of Series B Preferred Stock
purchased by such  Investors  shall be "Purchased  Shares" within the meaning of
this Agreement.

<PAGE>

     Section 3. Use of Proceeds.  The Company  intends to, and will  (subject to
modification  by Board  approval)  apply the net  proceeds  from the sale of the
Purchased  Shares for  corporate  purposes  disclosed  to the  Investors  by the
Company prior to the date hereof.

     VIII. CLOSING.

     Section 1. The purchase and sale of the  Purchased  Shares shall take place
at one or more closings  (each a "Closing").  At each Closing,  the Company will
deliver to each Investor certificates  representing the Purchased Shares against
delivery  to the  Company by each  Investor  of the  consideration  set forth in
Section 1(b) paid by wire  transfer of funds to the Company.  Closing  documents
may be delivered by facsimile  with original  signature  pages sent by overnight
courier.

     Section  2. The  Closings  shall  occur at the  offices  of Wilson  Sonsini
Goodrich  & Rosati,  650 Page Mill  Road,  Palo  Alto,  California  at 2:00 p.m.
Pacific  Daylight Time,  within three (3) business days after the conditions set
forth in Section 5 have been  satisfied,  or at such other time and place as the
Company and each Investor  mutually  agree upon.  All Closings shall occur on or
before February 29, 2000.

     IX. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The  Company  hereby  represents  and  warrants to each  Investor  that the
statements  in this Section 3 are true and  correct,  except as set forth in the
Disclosure  Letter  from the  Company  of even date  herewith  (the  "Disclosure
Letter")  or  disclosed  in the SEC  Documents  (as defined  below):

     Section 1. Organization Good Standing 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 all corporate  power and authority  required to
(a) carry on its  business  as  presently  conducted,  and (b)  enter  into this
Agreement  and the other  agreements,  instruments  and  documents  contemplated
hereby, and to consummate the transactions  contemplated hereby and thereby. The
Company is qualified to do business and is in good standing in each jurisdiction
in which the failure to so qualify would have a Material Adverse Effect. As used
in this Agreement, "Material Adverse Effect" means a material adverse effect on,
or a material  adverse  change in, or a group of such  effects on or changes in,
the business, operations, financial condition, results of operations, prospects,
assets or liabilities of the applicable party and its  subsidiaries,  taken as a
whole.

     Section 2.  Capitalization.  The  capitalization  of the  Company,  without
giving effect to the transactions contemplated by this Agreement, is as follows.
The  authorized  stock of the Company  consists of  50,000,000  shares of Common
Stock and 10,000,000  shares of Preferred  Stock, of which 1,907,989 shares have
been designated  Series A Preferred  Stock,  and 1,020,000 shares will have been
designated  Series B Preferred Stock prior to the first Closing.  As of November
30, 1999,  there were issued and outstanding  3,403,564  shares of Common Stock,
1,727,989  shares  of  Series A  Preferred  Stock,  and no  shares  of  Series B
Preferred  Stock.  All such shares of Common Stock and Preferred Stock have been
duly authorized,  and all such issued and outstanding shares of Common Stock and
Preferred Stock have been validly issued,  are fully paid and  nonassessable and

<PAGE>
are free and clear of all liens, claims and encumbrances,  other than any liens,
claims or  encumbrances  created by or imposed upon the holders  thereof.  As of
November 30, 1999, the Company has also reserved  900,000 shares of Common Stock
for issuance upon exercise of options granted to officers, directors,  employees
or  independent  contractors  or  affiliates  of the Company under the Company's
Restated  1984  Stock  Option  Plan and the  Company's  1994 Stock  Plan.  As of
November 30, 1999, of the 900,000  shares of Common Stock  reserved for issuance
upon exercise of options, 848,677 shares remained subject to outstanding options
with a weighted average  exercise price of  approximately  $11.21 per share, and
37,464 shares were reserved for future grant. All shares of Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments  pursuant to which they are issuable,  will be duly  authorized,
validly  issued,  fully  paid  and  nonassessable.  There  are no  other  equity
securities,  options,  warrants, calls, rights, commitments or agreements of any
character to which the Company is a party or by which it is bound obligating the
Company to issue,  deliver,  sell,  repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of the
Company or obligating the Company to grant, extend or enter into any such equity
security,  option,  warrant, call, right,  commitment or agreement.  The Company
does not have any  subsidiaries,  nor does the Company  own any  capital  stock,
assets  comprising  the  business  of,  obligations  of, or any  other  interest
(including,  without limitation,  any equity or partnership interest) in, or any
outstanding loan or advance to or from, any person or entity.

     Section  3. Due  Authorization.  All  corporate  action  on the part of the
Company,   its   officers,   directors  and   stockholders   necessary  for  the
authorization, execution, delivery of, and the performance of all obligations of
the Company under this Agreement, and the authorization,  issuance,  reservation
for issuance and delivery of all of the  Purchased  Shares being sold under this
Agreement,  has been taken, and this Agreement  constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its  terms,  except (a) as may be  limited  by (i)  applicable  bankruptcy,
insolvency,  reorganization or others laws of general application relating to or
affecting the enforcement of creditors'  rights generally and (ii) the effect of
rules of law governing the availability of equitable  remedies and (b) as rights
to indemnity or  contribution  may be limited under federal or state  securities
laws or by principles of public policy thereunder.

     Section 4. Valid Issuance of Stock.

          4.1 Valid  Issuance.  The  shares of  Series B  Preferred  Stock to be
issued pursuant to this Agreement,  and the shares of Common Stock issuable upon
conversion  thereof,  will  be,  upon  payment  therefor  by  each  Investor  in
accordance with this Agreement, or conversion in accordance with the Certificate
of Designations, duly authorized, validly issued, fully paid and non-assessable.

          4.2 Compliance with Securities  Laws.  Assuming the correctness of the
representations  made by each Investor in Section 4 hereof, the Purchased Shares
will be issued to each Investor in compliance  with  applicable  exemptions from
(i) the registration and prospectus delivery  requirements of the Securities Act
of 1933,  as  amended  (the  "Securities  Act")  and (ii) the  registration  and
<PAGE>
qualification  requirements  of all applicable  securities laws of the states of
the United States.

     Section  5.  Governmental   Consents.  No  consent,   approval,   order  or
authorization  of, or registration  qualification,  designation,  declaration or
filing with, any federal,  state or local governmental  authority on the part of
the Company is required in connection with the  consummation of the transactions
contemplated  by  this  Agreement,  except  for:  (i)  compliance  with  the HSR
Requirements  (as  defined  below)  that  may  be  required  for  the  voluntary
conversion of the Series B Preferred  Stock;  (ii) the filing of a Form 8-K with
the Securities and Exchange Commission ("SEC") following the Closing;  (iii) the
filing  of such  qualifications  or  filings  under the  Securities  Act and the
regulations  thereunder  and  all  applicable  state  securities  laws as may be
required in connection  with the  transactions  contemplated  by this Agreement;
(iv) the listing of the Common Stock  issuable  upon  conversion of the Series B
Preferred  Stock  on the  Nasdaq  SmallCap  Market  and  (v) the  filing  of the
Certificate  of  Designations  with  the  Secretary  of  State  of the  State of
Delaware.   All  such   qualifications   and  filings   will,  in  the  case  of
qualifications, be effective on the Closing and will, in the case of filings, be
made  within  the  time  prescribed  by  law.  As used  herein,  the  term  "HSR
Requirements"  means  compliance  with the filing and other  requirements of the
Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976,  as  amended  (the "HSR
Act").

     Section 6.  Non-Contravention.  The execution,  delivery and performance of
this  Agreement  by the  Company,  and the  consummation  by the  Company of the
transactions contemplated hereby, do not and will not (i) contravene or conflict
with the Certificate of Incorporation or Bylaws of the Company;  (ii) constitute
a violation of any provision of any federal, state, local or foreign law binding
upon or applicable to the Company;  or (iii) constitute a default or require any
consent  under,  give  rise  to  any  right  of  termination,   cancellation  or
acceleration  of, or to a loss of any  benefit to which the  Company is entitled
under, or result in the creation or imposition of any lien, claim or encumbrance
on any assets of the Company under, any contract to which the Company is a party
or any permit,  license or similar right relating to the Company or by which the
Company may be bound or affected  in such a manner as,  together  with all other
such matters, would have Material Adverse Effect.

     Section  7.  Litigation.  There  is no  action,  suit,  proceeding,  claim,
arbitration or investigation ("Action") pending or, to the best of the Company's
knowledge,  threatened:  (i) against the Company, its activities,  properties or
assets,  or any officer,  director or employee of the Company in connection with
such officer's,  director's or employee's relationship with, or actions taken on
behalf of, the Company,  that is  reasonably  likely to have a Material  Adverse
Effect, or (ii) that seeks to prevent,  enjoin,  alter or delay the transactions
contemplated by this Agreement.  The Company is not a party to or subject to the
provisions of any order,  writ,  injunction,  judgment or decree of any court or
government  agency or  instrumentality.  No Action by the  Company is  currently
pending nor does the Company  intend to initiate  any Action that is  reasonably
likely to have a Material Adverse Effect.

     Section 8. Compliance with Law and Charter Documents. The Company is not in
violation or default of any provisions of its  Certificate of  Incorporation  or
Bylaws, both as amended.  The Company has complied and is in compliance with all
applicable statutes, laws, rules, regulations and orders of the United States of
<PAGE>
America and all states thereof,  foreign countries and other governmental bodies
and agencies  having  jurisdiction  over the Company's  business or  properties,
except  for  any  violations  that  would  not,  either  individually  or in the
aggregate, have a Material Adverse Effect.

     Section 9. SEC Documents.

          9.1 Reports.  The Company has furnished to each Investor  prior to the
date  hereof  copies of its Annual  Report on Form 10-K SB for the  fiscal  year
ended December 31, 1998 ("Form 10-K"), its Quarterly Reports on Form 10-Q SB for
the fiscal  quarters  ended March 31, June 30, and September 30, 1999 (the "Form
10-Q's"),  and all other registration  statements,  reports and proxy statements
filed by the Company with the SEC on or after  December 31, 1998 (the Form 10-K,
the Form 10-Q's and such registration  statements,  reports and proxy statements
are  collectively  referred to herein as the "SEC  Documents").  Each of the SEC
Documents,  as of the respective  date thereof (or if amended or superseded by a
filing  prior to the closing  date of this  Agreement,  then on the date of such
filing),  did not, and each of the  registration  statements,  reports and proxy
statements  filed by the Company with the SEC after the date hereof and prior to
the Closing will not, as of the date thereof (or if amended or  superseded  by a
filing prior to the date of this  Agreement,  then on the date of such  filing),
contain any untrue statement of a material fact or omit to state a material fact
necessary  in  order  to make  the  statements  made  therein,  in  light of the
circumstances  under which they were made, not misleading.  The Company is not a
party to any material contract, agreement or other arrangement that was required
to have been filed as an Exhibit to the SEC Documents that was not so filed.

          9.2 Financial Statements.  The Company has provided each Investor with
copies of its audited financial statements (the "Audited Financial  Statements")
for the  fiscal  year ended  December  31,  1998,  and its  unaudited  financial
statements  for the  nine-month  period ended  September  30, 1999 (the "Balance
Sheet Date").  Since the Balance Sheet Date, the Company has duly filed with the
SEC all registration  statements,  reports and proxy  statements  required to be
filed by it under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the Securities Act. The audited and unaudited  consolidated financial
statements of the Company  included in the SEC Documents filed prior to the date
hereof  fairly  present,   in  conformity  with  generally  accepted  accounting
principles ("GAAP") (except, in the case of the Form 10-Q's, as may otherwise be
permitted by Form 10-Q)  applied on a consistent  basis (except as otherwise may
be stated in the notes  thereto),  the  consolidated  financial  position of the
Company  and its  consolidated  subsidiaries  as at the  dates  thereof  and the
consolidated  results of their  operations  and cash flows for the periods  then
ended  (subject to normal  year-end  audit  adjustments in the case of unaudited
interim financial statements).

     Section 10. Absence of Certain Changes Since Balance Sheet Date.  Since the
Balance  Sheet Date,  the  business  and  operations  of the  Company  have been
conducted in the ordinary course  consistent  with past practice,  and there has
not been:

          10.1 any  declaration,  setting  aside or payment of any  dividend  or
other  distribution  of the assets of the Company  with respect to any shares of
capital stock of the Company or any repurchase,  redemption or other acquisition
<PAGE>
by the Company or any subsidiary of the Company of any outstanding shares of the
Company's capital stock;

          10.2 any  damage,  destruction  or loss,  whether  or not  covered  by
insurance, except for such occurrences, individually and collectively, that have
not resulted, and are not expected to result, in a Material Adverse Effect;

          10.3 any waiver by the  Company  of a valuable  right or of a material
debt owed to it, except for such waivers,  individually and  collectively,  that
have not resulted and are not expected to result, in a Material Adverse Effect;

          10.4 any  material  change  or  amendment  to,  or any  waiver  of any
material right under a material  contract or arrangement by which the Company or
any of its  assets  or  properties  is bound or  subject,  except  for  changes,
amendments  or  waivers,  individually  and  collectively,  that  are  expressly
provided for or disclosed in this  Agreement or that have not resulted,  and are
not expected to result, in a Material Adverse Effect;

          10.5 any change by the Company in its accounting  principles,  methods
or practices or in the manner it keeps its accounting books and records,  except
any such change required by a change in GAAP; or

          10.6 any other event or  condition of any  character,  except for such
events and  conditions  that have not resulted,  and are not expected to result,
either individually or collectively, in a Material Adverse Effect.

     Section  11.  Invention  Assignment  and  Confidentiality  Agreement.  Each
employee and  consultant or  independent  contractor of the Company whose duties
include the development of products or Intellectual Property (as defined below),
and each former employee and consultant or independent  contractor  whose duties
included the development of products or Intellectual  Property, has entered into
and executed an invention assignment and confidentiality  agreement in customary
form or an employment or consulting agreement containing  substantially  similar
terms.

     Section 12. Intellectual Property.

          12.1  Ownership  or  Right  to  Use.  To the  best  of  the  Company's
knowledge,  the Company has sole title to and owns,  or is licensed or otherwise
possesses legally enforceable rights to use, all patents or patent applications,
software, know-how,  registered or unregistered trademarks and service marks and
any applications therefor,  registered or unregistered copyrights,  trade names,
and  any  applications   therefor,   trade  secrets  or  other  confidential  or
proprietary  information  ("Intellectual  Property")  necessary  to  enable  the
Company  to carry on its  business  as  currently  conducted,  except  where any
deficiency, or group of deficiencies, would not have a Material Adverse Effect.

          12.2  Licenses;  Other  Agreements.  The Company is not  currently the
licensee of any material  portion of the  Intellectual  Property of the Company.
There are not outstanding any licenses or agreements of any kind relating to any
Intellectual Property owned by the Company, except for agreements with customers
<PAGE>
of the Company entered into in the ordinary course of the Company's business and
other licenses and agreements that, collectively,  are not material. The Company
is not  obligated to pay any  royalties or other  payments to third parties with
respect to the marketing, sale, distribution, manufacture, license or use of any
Intellectual Property, except as the Company may be so obligated in the ordinary
course of its business,  as disclosed in the Company's SEC Documents (as defined
below) or where the aggregate  amount of such payments  could not  reasonably be
expected to be material.

          12.3 No  Infringement.  To the best of the  Company's  knowledge,  the
Company  has  not  violated  or  infringed  and is not  currently  violating  or
infringing,  and the Company has not received any  communications  alleging that
the Company (or any of its employees or consultants)  has violated or infringed,
any Intellectual  Property of any other person or entity, to the extent that any
such violation or infringement,  either  individually or together with all other
such violations and infringements, would have a Material Adverse Effect.

          12.4  Employees  and  Consultants.   To  the  best  of  the  Company's
knowledge,  no employee of or  consultant to the Company is in default under any
term  of  any  employment   contract,   agreement  or  arrangement  relating  to
Intellectual Property of the Company or any non-competition  arrangement,  other
contract or any restrictive  covenant  relating to the Intellectual  Property of
the Company,  where such default,  together with all other such defaults,  would
have a Material Adverse Effect. The Intellectual  Property of the Company (other
than any Intellectual Property duly acquired or licensed from third parties) was
developed  entirely by the employees of or consultants to the Company during the
time they were employed or retained by the Company, and to the best knowledge of
the  Company,  at no time during  conception  or  reduction  to practice of such
Intellectual  Property of the Company  were any such  employees  or  consultants
operating  under any grant from a government  entity or agency or subject to any
employment agreement or invention assignment or non-disclosure  agreement or any
other  obligation with a third party that would  materially and adversely affect
the  Company's  rights  in  the  Intellectual  Property  of  the  Company.  Such
Intellectual  Property of the Company  does not,  to the best  knowledge  of the
Company,  include any invention or other intellectual property of such employees
or  consultants  made  prior to the time  such  employees  or  consultants  were
employed  or  retained  by the  Company  nor any  intellectual  property  of any
previous employer of such employees or consultants nor the intellectual property
of any other person or entity.

     Section 13.  Registration  Rights.  Except as  provided in this  Agreement,
effective upon the Closing, the Company is not currently subject to any grant or
agreement  to grant to any  person or entity  any  rights  (including  piggyback
registration  rights) to have any securities of the Company  registered with the
SEC or registered or qualified with any other governmental authority.

     Section 14. Title to Property and Assets.  The properties and assets of the
Company  are  owned by the  Company  free and clear of all  mortgages,  deeds of
trust, liens, charges,  encumbrances and security interests except for statutory
liens for the payment of current  taxes that are not yet  delinquent  and liens,
encumbrances  and  security  interests  that  arise in the  ordinary  course  of
business and do not in any material  respect affect the properties and assets of
the Company.  With respect to the property and assets it leases,  the Company is
in compliance with such leases in all material respects.
<PAGE>
     Section 15. Tax  Matters.  The Company has filed all  material  tax returns
required  to be  filed,  which  returns  are true and  correct  in all  material
respects,  and the  Company  is not in default  in the  payment  of such  taxes,
including  penalties and interest,  assessments,  fees and other charges,  other
than those being  contested in good faith and for which  adequate  reserves have
been  provided or those  currently  payable  without  interest that were payable
pursuant to said returns or any assessments with respect thereto.

     Section 16. Full Disclosure.  The information  contained in this Agreement,
the  Disclosure  Letter and the SEC  Documents  with  respect  to the  business,
operations,  assets,  results  of  operations  and  financial  condition  of the
Company,  and the  transactions  contemplated  by this  Agreement , are true and
complete in all material  respects and do not omit to state any material fact or
facts  necessary  in  order  to make  the  statements  therein,  in light of the
circumstances under which they were made, not misleading.

     Section 17.  Finder's Fee. The Company neither is nor will be obligated for
any finder's or broker's fee or commission in connection with this transaction.

     Section 18. Year 2000 Compliance.  All of the Company's products (including
products currently under  development) are Year 2000 Compliant.  For purposes of
this Agreement, "Year 2000 Compliant" means, to the extent products are designed
to (i) record,  store,  process and calculate and present calendar dates falling
on and after January 1, 2000, and (ii) calculate any information dependent on or
relating  to such  dates,  they will do so in the same  manner and with the same
functionality,  data integrity, and performance as those products record, store,
process and calculate and present  calendar dates falling on and before December
31, 1999, and calculate any  information  dependent on or related to such dates.
None of the Company's material products will lose any functionality with respect
to the  introduction of records  containing dates falling on or after January 1,
2000.  All  of  the  Company's  internal  computer  systems,  including  without
limitation, its accounting systems, are Year 2000 Compliant.

     Section  19.  Small  Business  Concern.  The  Company is a "small  business
concern"  within the meaning of the federal  Small  Business  Investment  Act of
1958, as amended,  and the  regulations  thereunder,  and Part 121 of the United
States Code of Federal Regulations.  The information set forth on SBA Forms 480,
652D and 1031  furnished by the Company to the Investors that are Small Business
Investment  Companies  (each, an "SBIC") is complete and correct in all material
respects.  Furthermore,  as long as any SBIC is an investor in the Company,  the
Company will provide the SBIC any  information  that is reasonably  requested by
the  Small  Business  Administration  ("SBA").  The  Company  will  provide  SBA
examiners  access to its books and records for SBA audit  purposes in accordance
with ordinary SBA procedures.

     Section 20. Real Property  Holding  Corporation.  The Company is not a real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
<PAGE>
     X. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF EACH INVESTOR.

Each Investor hereby severally, and not jointly,  represents and warrants to the
Company, and agrees that:

     Section 1.  Organization Good Standing and  Qualification.  The Investor is
either

          1.1 a  corporation  duly  organized,  validly  existing  and  in  good
standing  under the laws of the state or nation  indicated  on Exhibit A and has
all  corporate  power and  authority  required  to (A) carry on its  business as
presently conducted, and (B) enter into this Agreement and the other agreements,
instruments   and  documents   contemplated   hereby,   and  to  consummate  the
transactions contemplated hereby and thereby, or

          1.2 a  partnership  duly  organized,  validly  existing  and  in  good
standing  under the laws of the state  indicated  on Exhibit A and has all power
and authority required to (A) carry on its business as presently conducted,  and
(B)  enter  into  this  Agreement  and the  other  agreements,  instruments  and
documents  contemplated hereby, and to consummate the transactions  contemplated
hereby and  thereby.  The  Investor is  qualified  to do business and is in good
standing in each  jurisdiction  in which the failure to so qualify  would have a
Material Adverse Effect.

     Section 2.  Authorization.  This Agreement has been duly  authorized by all
necessary  corporate or partnership  action,  as applicable,  on the part of the
Investor.  This Agreement  constitutes the Investor's  legal,  valid and binding
obligation,  enforceable in accordance with its terms,  except as may be limited
by (i)  applicable  bankruptcy,  insolvency,  reorganization  or  other  laws of
general  application  relating to or affecting  the  enforcement  of  creditors'
rights  generally and (ii) the effect of rules of law governing the availability
of equitable  remedies.  Each Investor  has, as  applicable,  full  corporate or
partnership power and authority to enter into this Agreement.

     Section  3.  Governmental   Consents.  No  consent,   approval,   order  or
authorization of, or registration,  qualification,  designation,  declaration or
filing with, any federal,  state or local governmental  authority on the part of
the Investor is required in connection with the consummation of the transactions
contemplated by this Agreement,  except for the filing of such qualifications or
filings  under  the  Securities  Act or the  Exchange  Act and  the  regulations
thereunder  and all  applicable  state  securities  laws as may be  required  in
connection  with  the  transactions  contemplated  by this  Agreement.  All such
qualifications and filings will, in the case of qualifications,  be effective on
the Closing and will, in the case of filings, be made within the time prescribed
by law.

     Section 4.  Non-Contravention.  The execution,  delivery and performance of
this  Agreement by the  Investor,  and the  consummation  by the Investor of the
transactions contemplated hereby, do not and will not (i) contravene or conflict
with the Certificate of Incorporation,  Bylaws, or the Partnership  Agreement or
comparable governing document, as applicable, of the Investor; (ii) constitute a
violation of any provision of any federal,  state,  local or foreign law binding
upon or applicable to the Investor; or (iii) constitute a default or require any
consent  under,  give  rise  to  any  right  of  termination,   cancellation  or
acceleration  of, or to a loss of any benefit to which the  Investor is entitled
under, or result in the creation or imposition of any lien, claim or encumbrance
on any assets of the  Investor  under,  any  contract to which the Investor is a
<PAGE>
party or any permit,  license or similar  right  relating to the  Investor or by
which the Investor may be bound or affected in such a manner as,  together  with
all other such matters, would have a Material Adverse Effect.

     Section 5. Litigation. There is no Action pending against the Investor that
seeks to prevent,  enjoin, alter or delay the transactions  contemplated by this
Agreement.

     Section 6. Purchase for Own Account.  The Purchased  Shares to be purchased
by the  Investor  are being  acquired  for  investment  for the  Investor's  own
account,  not as a nominee or agent, and not with a view to the public resale or
distribution  thereof within the meaning of the Securities Act, and the Investor
has no present intention of selling, granting any participation in, or otherwise
distributing  the same. The Investor also represents that it has not been formed
for the specific purpose of acquiring its Purchased Shares.

     Section  7.  Investment  Experience.  The  Investor  understands  that  its
purchase  of the  Purchased  Shares to be  purchased  by the  Investor  involves
substantial  risk.  The Investor has  experience as an investor in securities of
companies  and  acknowledges  that it is able to fend for  itself,  can bear the
economic risk of its  investment in the Purchased  Shares and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of this  investment in the Purchased  Shares and protecting
its own interests in connection with this investment.

     Section 8.  Accredited  Investor  Status.  The  Investor is an  "accredited
investor"  within the meaning of Regulation D promulgated  under the  Securities
Act.

     Section  9.  Restricted  Securities.  The  Investor  understands  that  the
Purchased  Shares  are  characterized  as  "restricted   securities"  under  the
Securities  Act,  inasmuch  as they are being  acquired  from the  Company  in a
transaction  not involving a public  offering and that under the  Securities Act
and  applicable  regulations  thereunder  such  securities may be resold without
registration under the Securities Act only in certain limited circumstances. The
Investor  is  familiar  with Rule 144 of the SEC, as  presently  in effect,  and
understands the resale limitations imposed thereby and by the Securities Act.

     Section 10.  Legends.  The Investor  agrees that the  certificates  for the
Purchased Shares shall bear the following legend:

     "The shares  represented by this certificate have not been registered under
the Securities Act of 1933 or with any state securities commission,  and may not
be  transferred  or disposed  of by the holder in the absence of a  registration
statement  which is effective  under the  Securities  Act of 1933 and applicable
state  laws  and  rules,  or,  unless,  immediately  prior  to the  time set for
transfer,  such transfer may be effected without violation of the Securities Act
of 1933 and other  applicable  state laws and rules."

     In addition,  the Investor  agrees that the Company may place stop transfer
orders  with  its  transfer  agents  with  respect  to  such  certificates.  The
appropriate  portion of the legend and the stop transfer  orders will be removed
promptly  upon  delivery  to  the  Company  of  such  satisfactory  evidence  as
reasonably  may be required  by the Company  that such legend or stop orders are
not required to ensure compliance with the Securities Act.
<PAGE>
     Section 11. Finder's Fee. The Investor neither is nor will be obligated for
any finder's or broker's fee or commission in connection with this transaction.

     XI. CONDITIONS TO EACH INVESTOR'S OBLIGATIONS AT CLOSING.

     Section 1. The  obligations of each Investor under Sections l and 2 of this
Agreement are subject to the fulfillment or waiver,  on or before the respective
Closing, of each of the following conditions:

          1.1  Representations  and Warranties True. Each of the representations
and warranties of the Company contained in Section 3 will be true and correct in
all material  respects on and as of the date hereof and on and as of the date of
the Closing,  except as set forth in the Disclosure Letter or the SEC Documents,
with the same effect as though such representations and warranties had been made
as of the Closing.

          1.2 Performance. The Company will have performed and complied with all
agreements,  obligations  and  conditions  contained in this  Agreement that are
required to be  performed or complied  with by it on or before the Closing,  and
will have  obtained  all  approvals,  consents and  qualifications  necessary to
complete the purchase and sale described herein.

          1.3 Securities Exemptions.  The offer and sale of the Purchased Shares
to each Investor pursuant to this Agreement will be exempt from the registration
requirements  of the Securities Act and the  registration  and/or  qualification
requirements of all applicable state securities laws.

          1.4 Proceedings and Documents.  All corporate and other proceedings in
connection with the  transactions  contemplated at the Closing and all documents
incident  thereto will be reasonably  satisfactory in form and substance to each
Investor,  and each Investor will have received all such  counterpart  originals
and certified or other copies of such  documents as it may  reasonably  request.
Such documents shall include but not be limited to the following:

          1.5 Certified  Charter  Documents.  A copy of (1) the  Certificate  of
Incorporation  certified  as of a  recent  date by the  Secretary  of  State  of
Delaware  as a  complete  and  correct  copy  thereof,  (2) the  Certificate  of
Designations certified as of a recent date by the Secretary of State of Delaware
and (3) the Bylaws of the Company (as amended  through the date of the  Closing)
certified by the  Secretary of the Company as a true and correct copy thereof as
of the Closing.

          1.6 Board  Resolutions.  A copy,  certified  by the  Secretary  of the
Company,  of the resolutions of the Board of Directors of the Company  providing
for the approval of this Agreement and the issuance of the Purchased  Shares and
the other matters contemplated hereby.

          1.7 Opinion of Company  Counsel.  Each  Investor will have received an
opinion  on behalf of the  Company,  dated as of the date of the  Closing,  from
Wilson Sonsini Goodrich & Rosati,  counsel to the Company,  in the form attached
as Exhibit C.
<PAGE>
          1.8 No  Material  Adverse  Effect.  Between  the date  hereof  and the
Closing, there shall not have occurred any Material Adverse Effect.

          1.9  Nasdaq  Requirements.   The  Company  shall  have  satisfied  all
requirements  of the Nasdaq Stock Market  Marketplace  Rules with respect to the
issuance of the Purchased Shares.

          1.10 Other Actions. The Company shall have executed such certificates,
agreements,  instruments  and other  documents,  and taken such other actions as
shall be customary or reasonably  requested by each Investor in connection  with
the transactions contemplated hereby.

     XII. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING.

The obligations of the Company to each Investor under this Agreement are subject
to the fulfillment or waiver, on or before the Closing, of each of the following
conditions:

     Section 1.  Representations  and Warranties True. The  representations  and
warranties of each  Investor  contained in Section 4 will be true and correct in
all material  respects on and as of the date hereof and on and as of the date of
the Closing.

     Section 2. Performance. Each Investor will have performed and complied with
all agreements,  obligations and conditions contained in this Agreement that are
required to be  performed  or  complied  with by it on or before the Closing and
will have  obtained  all  approvals,  consents and  qualifications  necessary to
complete the purchase and sale described herein.

     Section 3. Payment of Purchase Price.  Each Investor will have delivered to
the Company at the Closing the full purchase  price of the  Purchased  Shares as
specified in Section 1(b).

     Section  4.  Securities  Exemptions.  The offer  and sale of the  Purchased
Shares to each  Investor  pursuant  to this  Agreement  will be exempt  from the
registration  requirements  of the  Securities Act and the  registration  and/or
qualification requirements of all applicable state securities laws.

     Section 5. Proceedings and Documents.  All corporate and other  proceedings
in  connection  with  the  transactions  contemplated  at the  Closing  and  all
documents incident thereto will be reasonably satisfactory in form and substance
to the Company and to the  Company's  legal  counsel,  and the Company will have
received all such  counterpart  originals  and certified or other copies of such
documents as it may reasonably request.

     Section 6. Nasdaq  Requirements.  If required  by the Nasdaq  Stock  Market
Marketplace  Rules,  the  Company  shall  have  obtained  the  approval  of  its
shareholders to the issuance of the Purchased Shares.

     Section  7.  Other   Actions.   Each  Investor  shall  have  executed  such
certificates,  agreements, instruments and other documents, and taken such other
actions  as shall  be  customary  or  reasonably  requested  by the  Company  in
connection with the transactions contemplated hereby.
<PAGE>
     XIII. COVENANTS OF THE PARTIES.

     Section 1. Information Rights.

          1.1  Financial  Information.  The Company  covenants  and agrees that,
commencing on the Closing and  continuing for so long as each Investor holds any
Purchased Shares, the Company shall:

               (a) Annual Reports.  Furnish to each Investor promptly  following
the filing of such report with the SEC a copy of the Company's  Annual Report on
Form 10-K SB for each fiscal year,  which shall include a  consolidated  balance
sheet as of the end of such fiscal year, a consolidated  statement of income and
a consolidated  statement of cash flows of the Company and its  subsidiaries for
such year,  setting forth in each case in comparative  form the figures from the
Company's  previous  fiscal year,  all  prepared in  accordance  with  generally
accepted   accounting   principles  and  practices  and  audited  by  nationally
recognized  independent  certified public accountants.  In the event the Company
shall no longer be required to file Annual  Reports on Form 10-K SB, the Company
shall, within ninety (90) days following the end of each respective fiscal year,
deliver to each Investor a copy of such balance sheets, statements of income and
statements of cash flows, or such form that replaces Form 10-K SB.

               (b)  Quarterly   Reports.   Furnish  to  each  Investor  promptly
following  the  filing  of  such  report  with  the  SEC,  a copy of each of the
Company's  Quarterly Reports on Form 10-Q SB, which shall include a consolidated
balance  sheet  as of the end of the  respective  fiscal  quarter,  consolidated
statements  of income and  consolidated  statements of cash flows of the Company
and its subsidiaries for the respective fiscal quarter and for the year to-date,
setting forth in each case in  comparative  form the figures from the comparable
periods in the  Company's  immediately  preceding  fiscal year,  all prepared in
accordance with generally accepted accounting  principles and practices (except,
in the case of any Form 10-Q SB, as may otherwise be permitted by Form 10-Q SB),
but all of which may be  unaudited.  In the event the Company shall no longer be
required to file Quarterly  Reports on Form 10-Q SB, the Company  shall,  within
forty-five  (45) days  following  the end of each of the first  three (3) fiscal
quarters of each fiscal  year,  deliver to each  Investor a copy of such balance
sheets, statements of income and statements of cash flows.

          1.2 SEC Filings.  The Company shall deliver to each Investor copies of
each other  document  filed with the SEC on a  non-confidential  basis  promptly
following the filing of such document with the SEC.

     Section 2. Registration Rights.

          2.1 Definitions. For purposes of this Section 7(b):

               (a)  Registration.   The  terms  "register,"   "registered,"  and
"registration"  refer to a  registration  effected  by  preparing  and  filing a
registration  statement  in  compliance  with the  Securities  Act of  1933,  as
amended,   (the   "Securities   Act"),   and  the  declaration  or  ordering  of
effectiveness of such registration statement.
<PAGE>
               (b) Registrable  Securities.  The term  "Registrable  Securities"
means:  (x) the  Purchased  Shares and any shares of Common Stock of the Company
issued or issuable upon conversion of the Purchased  Shares,  and (y) any shares
of Common Stock of the Company or other  securities of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
that is issued as) a  dividend  or other  distribution  with  respect  to, or in
exchange  for or in  replacement  of,  any of the  securities  described  in the
immediately  preceding Clause (x).  Notwithstanding the foregoing,  "Registrable
Securities"  shall  exclude  any  Registrable  Securities  sold by a person in a
transaction  in  which  rights  under  this  Section  7(b) are not  assigned  in
accordance  with this Agreement or any  Registrable  Securities sold in a public
offering,  whether sold pursuant to Rule 144  promulgated  under the  Securities
Act, or in a registered offering, or otherwise.

               (c) Registrable Securities Then Outstanding. The number of shares
of "Registrable  Securities then outstanding" shall mean the number of shares of
Purchased  Shares,  shares  of  Common  Stock  and  other  securities  that  are
Registrable Securities and are then issued and outstanding.

               (d) Holder.  For  purposes of this  Section 7, the term  "Holder"
means any person owning of record Registrable Securities that have not been sold
to the public or pursuant to Rule 144  promulgated  under the  Securities Act or
any permitted  assignee of record of such Registrable  Securities to whom rights
under  this  Section  7(b) have  been  duly  assigned  in  accordance  with this
Agreement.

               (e) Form S-3.  The term  "Form  S-3"  means  such form  under the
Securities Act as is in effect on the date hereof or any successor  registration
form under the  Securities  Act  subsequently  adopted  by the SEC that  permits
inclusion or  incorporation  of  substantial  information  by reference to other
documents filed by the Company with the SEC.

          2.2 Demand Registration.

               (a)  Request by  Holders.  If (i) the  Company  shall at any time
after the one hundred  and  twentieth  (120th)  day after the Closing  receive a
written request from the Holders of at least fifty percent (50%) of the Series B
Preferred  issued  as of the  Closing,  that  the  Company  file a  registration
statement under the Securities Act  (including,  without  limitation,  a "shelf"
registration  statement, if requested by such Holders, during any period of time
that Rule 144 is not  available as an exemption  for the sale in a single 90-day
period of all of the  Registrable  Securities  that any such  Holder  desires to
sell, in which case the Company would maintain the effectiveness of such "shelf"
registration  statement  until  the  earlier  of the  first  anniversary  of the
effectiveness thereof or the date on which all such Registrable Securities could
be sold under Rule 144 in a single 90-day period)  covering the  registration of
Registrable  Securities,  and (ii) the  expected  gross  proceeds of the sale of
Registrable  Securities under such registration  statement would equal or exceed
$2,000,000, then the Company shall, within ten (10) business days of the receipt
of such written request,  give written notice of such request ("Request Notice")
to all Holders,  and use commercially  reasonable  efforts to effect, as soon as
practicable,  the  registration  under  the  Securities  Act of all  Registrable
Securities   that  Holders  request  to  be  registered  and  included  in  such
registration  by written  notice given such Holders to the Company within twenty
<PAGE>
(20) days after receipt of the Request  Notice,  subject only to the limitations
of this Section 7(b); provided that the Company shall not be obligated to effect
any such  registration  if the  Company  has,  within  the six (6) month  period
preceding the date of such request,  already  effected a registration  under the
Securities Act pursuant to Section  7(b)(iii),  other than a  registration  from
which the  Registrable  Securities of Holders have been excluded with respect to
all or any  portion of the  Registrable  Securities  the  Holders  requested  be
included in such  registration.  If requested by such Holders upon the advice of
the underwriter,  the Company shall register such Registrable Securities on Form
S-1 or any successor registration form.

               (b)  Underwriting.  If the Holders  initiating  the  registration
request under this Section 7(b)(ii) ("Initiating  Holders") intend to distribute
the Registrable Securities covered by their request by means of an underwriting,
then they  shall so  advise  the  Company  as a part of their  request,  and the
Company  shall include such  information  in the written  notice  referred to in
Section  7(b)(ii)(A).  In such event,  the right of any Holder to include his or
her Registrable  Securities in such registration  shall be conditioned upon such
Holder's  participation in such  underwriting and the inclusion of such Holder's
Registrable  Securities in the underwriting (unless otherwise mutually agreed by
a majority  in  interest of the  initiating  Holders and such Holder  determined
based  on the  number  of  Registrable  Securities  held by such  Holders  being
registered).  All Holders proposing to distribute their securities  through such
underwriting  shall enter into an underwriting  agreement in customary form with
the managing  underwriter or underwriters  selected for such underwriting by the
Holders  of a  majority  of the  Registrable  Securities  being  registered  and
reasonably  acceptable to the Company (including a market stand-off agreement of
up to 180 days if  required  by such  underwriters).  Notwithstanding  any other
provision of this Section 7(b)(ii), if the underwriter(s)  advise(s) the Company
in  writing  that  marketing  factors  require  a  limitation  of the  number of
securities  to be  underwritten  then the Company shall so advise all Holders of
Registrable  Securities  that would  otherwise be  registered  and  underwritten
pursuant hereto,  and the number of Registrable  Securities that may be included
in the  underwriting  shall be reduced as  required  by the  underwriter(s)  and
allocated  among the  Holders  of  Registrable  Securities  on a pro rata  basis
according to the number of Registrable  Securities then outstanding held by each
Holder requesting  registration  (including the Initiating  Holders);  provided,
however,  that the number of shares of Registrable  Securities to be included in
such  underwriting  and  registration  shall  not be  reduced  unless  all other
securities of the Company and any selling security holder other than the Holders
are  first  entirely  excluded  from  the  underwriting  and  registration.  Any
Registrable  Securities  excluded and withdrawn from such underwriting  shall be
withdrawn from the registration.

               (c) Maximum Number of Demand Registrations.  The Company shall be
obligated  to effect only one (1) such  registration  pursuant  to this  Section
7(b)(ii).

               (d) Deferral. Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting the filing of a registration statement pursuant to
this Section  7(b)(ii) a certificate  signed by the President or Chief Executive
Officer of the Company  stating that in the good faith judgment of the Board, it
would be materially  detrimental  to the Company and its  stockholders  for such
registration  statement  to be filed,  then the Company  shall have the right to
<PAGE>
defer such filing for a period of not more than  ninety (90) days after  receipt
of the request of the initiating Holders;  provided,  however,  that the Company
may not utilize this right more than once in any twelve (12) month period.

               (e)  Expenses.  All  expenses  incurred  in  connection  with any
registration pursuant to this Section 7(b)(ii), including without limitation all
federal and "blue sky" registration,  filing and qualification  fees,  printer's
and accounting fees, and fees and  disbursements of counsel for the Company (but
excluding underwriters' discounts and commissions relating to shares sold by the
Holders),  shall  be  borne  by the  Company.  Each  Holder  participating  in a
registration  pursuant  to  this  Section  7(b)(ii)  shall  bear  such  Holder's
proportionate  share  (based  on  the  total  number  of  shares  sold  in  such
registration  other  than for the  account  of the  Company)  of all  discounts,
commissions or other amounts  payable to  underwriters  or brokers in connection
with such offering by the Holders.  Notwithstanding  the foregoing,  the Company
shall not be required to pay for any  expenses  of any  registration  proceeding
begun  pursuant  to  this  Section  7(b)(ii)  if  the  registration  request  is
subsequently  withdrawn  at the  request of the  Holders  of a  majority  of the
Registrable  Securities  to be  registered,  unless the Holders of such majority
agree  that such  registration  constitutes  the use by the  Holders  of one (1)
demand  registration  pursuant  to this  Section  7(b)(ii)  (in which  case such
registration  shall  also  constitute  the  use by all  Holders  of  Registrable
Securities of one (l) such demand registration); provided further, however, that
if at the time of such  withdrawal,  the  Holders  have  learned  of a  Material
Adverse  Effect not known to the  Holders at the time of their  request for such
registration and have withdrawn their request for registration after learning of
such material adverse change,  then the Holders shall not be required to pay any
of such expenses and such registration  shall not constitute the use of a demand
registration pursuant to this Section 7(b)(ii).

          2.3 Piggyback  Registrations.  The Company shall notify all Holders of
Registrable  Securities in writing at least thirty (30) days prior to filing any
registration  statement  under the  Securities  Act for  purposes of effecting a
public  offering of  securities of the Company  (including,  but not limited to,
registration  statements  relating to secondary  offerings of  securities of the
Company, but excluding registration  statements relating to any employee benefit
plan or any merger or other corporate  reorganization) and will afford each such
Holder an opportunity to include in such registration  statement all or any part
of the Registrable  Securities then held by such Holder. Each Holder desiring to
include in any such  registration  statement all or any part of the  Registrable
Securities  held by such Holder shall within  twenty (20) days after  receipt of
the  above-described  notice from the Company, so notify the Company in writing,
and in such  notice  shall  inform  the  Company  of the  number of  Registrable
Securities such Holder wishes to include in such  registration  statement.  If a
Holder  decides  not  to  include  all  of  its  Registrable  Securities  in any
registration  statement  thereafter  filed by the  Company,  such  Holder  shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its  securities,  all upon the terms
and conditions set forth herein.

               (a)  Underwriting.  If a registration  statement  under which the
Company  gives  notice  under  this  Section  7(b)(iii)  is for an  underwritten
offering,   then  the  Company  shall  so  advise  the  Holders  of  Registrable
Securities. In such event, the right of any such Holder's Registrable Securities
<PAGE>
to be included in such a registration  pursuant  shall be conditioned  upon such
Holder's  participation in such  underwriting and the inclusion of such Holder's
Registrable  Securities in the underwriting to the extent provided  herein.  All
Holders  proposing  to  distribute  their  Registrable  Securities  through such
underwriting  shall enter into an underwriting  agreement in customary form with
the  managing  underwriter  or  underwriters   selected  for  such  underwriting
(including  a market  stand-off  agreement of up to 180 days if required by such
underwriters);  provided,  however, that it shall not be considered customary to
require any of the Holders to provide  representations and warranties  regarding
the Company or indemnification of the underwriters for material misstatements or
omissions  in the  registration  statement  or  prospectus  for  such  offering.
Notwithstanding  any  other  provision  of  this  Agreement,   if  the  managing
underwriter  determine(s)  in  good  faith  that  marketing  factors  require  a
limitation  of the  number  of  shares  to be  underwritten,  then the  managing
underwriter(s)  may exclude shares from the registration  and the  underwriting;
provided;  however,  that the securities to be included in the  registration and
the  underwriting  shall  be  allocated,  (1)  first to the  Company  (provided,
however,  that a minimum of twenty  percent  (20%) of the number of  Registrable
Securities that each holder of ten percent (10%) or more of the then outstanding
Common Stock  (where any  Registrable  Securities  that are not shares of Common
Stock but are exercisable or exchangeable  for, or convertible  into,  shares of
Common Stock, shall be deemed to have been so exercised,  exchanged or converted
for such purpose) must also in any event be included), (2) second, to the extent
the managing underwriter  determines additional securities can be included after
compliance  with  Clause  (1),  to each of the  Holders  and  other  holders  of
registration  rights on a parity with the Holders requesting  inclusion of their
Registrable  Securities in such registration statement on a pro rata basis based
on the total number of Registrable  Securities and other securities  entitled to
registration  then held by each such Holder or other holder,  and (3) third,  to
the extent the managing  underwriter  determines  additional  securities  can be
included  after  compliance  with  Clauses  (1) and  (2),  any  shares  or other
securities  held by any person who is an  employee,  officer or  director of the
Company (or any subsidiary of the Company) or any other person.  Any Registrable
Securities  excluded or withdrawn from such  underwriting  shall be excluded and
withdrawn  from the  registration.  For any Holder  that is a  partnership,  the
Holder and the partners and retired partners of such Holder,  or the estates and
family members of any such partners and retired  partners and any trusts for the
benefit  of  any of  the  foregoing  persons,  and  for  any  Holder  that  is a
corporation, the Holder and all corporations that are affiliates of such Holder,
shall be deemed to be a single "Holder," and any pro rata reduction with respect
to such  "Holder"  shall be based upon the aggregate  amount of shares  carrying
registration  rights  owned by all  entities  and  individuals  included in such
"Holder," as defined in this sentence.

               (b)  Expenses.   All  expenses  incurred  in  connection  with  a
registration  pursuant to this Section  7(b)(iii)  (excluding  underwriters' and
brokers'  discounts  and  commissions  relating to shares sold by the  Holders),
including,  without limitation all federal and "blue sky"  registration,  filing
and   qualification   fees,   printers'  and  accounting   fees,  and  fees  and
disbursements of counsel for the Company, shall be borne by the Company.

               (c)  Not  Demand  Registration.  Registration  pursuant  to  this
Section  7(b)(iii) shall not be deemed to be a demand  registration as described
in Section 7(b)(ii) above.  Except as otherwise provided herein,  there shall be
<PAGE>
no  limit on the  number  of times  the  Holders  may  request  registration  of
Registrable Securities under this Section 7(b)(iii).

          2.4  Form S-3  Registration.  The  Company  shall  use all  reasonable
commercial  efforts,  on or prior to the one hundred and  twentieth  (120th) day
after the date of Closing, cause to be filed and become effective with the SEC a
Registration Statement on Form S-3 relating to all of the Registrable Securities
(in the event such registration  statement is not effective at the expiration of
such 120-day period, the Company shall continue to use all reasonable commercial
efforts to cause it to become effective until it becomes  effective);  provided;
however, that in the event Form S-3 is not available to the Company, the Company
shall file such other form as may be available  if Holders who hold  Registrable
Securities  with a market  value of at least One  Million  Dollars  ($1,000,000)
deliver a written  request to the  Company  that the  Company do so,  where such
market value is determined as of the date of such written  request.  The Company
shall use its best  efforts to cause any such  Registration  Statement to become
effective as promptly as possible  after such filing and shall also use its best
efforts to obtain any related qualifications, registrations or other compliances
that may be necessary  under any applicable  "blue sky" laws. In connection with
such registration, the Company will:

               (a) Notice.  Promptly  give written  notice to the Holders of the
proposed registration and any related qualification or compliance; and

               (b) Registration.  Prior to the one hundred and twentieth (120th)
day  after  the  day  of  Closing,   effect  such   registration  and  all  such
qualifications  and  compliances  and as would permit or facilitate the sale and
distribution  of all or such  portion of such  Holders or  Holders'  Registrable
Securities; provided, however, that the Company shall not be obligated to effect
any such  registration,  qualification  or  compliance  pursuant to this Section
7(b)(iv) in any particular  jurisdiction  in which the Company would be required
to qualify to do business or to execute a general  consent to service of process
in effecting such registration, qualification or compliance.

               (c)  Expenses.  The Company  shall pay all  expenses  incurred in
connection with each registration  requested  pursuant to this Section 7(b)(iv),
excluding underwriters' or brokers' discounts and commissions relating to shares
sold by the  Holders,  including  without  limitation  federal  and  "blue  sky"
registration,  filing and qualification fees, printers' and accounting fees, and
fees and disbursements of counsel.

               (d) Deferral. Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting the filing of a registration statement pursuant to
this Section 7(b)(iv),  a certificate signed by the President or Chief Executive
Officer of the Company  stating that in the good faith judgment of the Board, it
would be materially  detrimental  to the Company and its  stockholders  for such
registration  statement  to be filed,  then the Company  shall have the right to
defer such filing for a period of not more than  ninety (90) days after  receipt
of the request of the initiating Holders;  provided,  however,  that the Company
may not utilize this right more than once in any twelve (12) month  period,  and
the period of time that the Company is obligated  to maintain the  effectiveness
of any  registration  statement under Clause (F) below shall be extended for the
length of any such period of deferral.
<PAGE>
               (e) Not Demand Registration.  Form S-3 registrations shall not be
deemed to be demand registrations as described in Section 7(b)(ii) above.

               (f)   Maintenance.   The  Company  shall  use  all   commercially
reasonable  efforts to maintain the  effectiveness  of any Form S-3 registration
statement  filed under this Section  7(b)(iv) until the earlier of: (a) the date
on which all of the  Registrable  Securities  have been sold; and (b) the second
anniversary  of  the  Closing;  provided,   however,  that  unless  all  of  the
Registrable Securities held by each Investor as of such second anniversary could
then be sold in a single  transaction  in  accordance  with  Rule 144  under the
Securities Act without exceeding the volume limitations  thereof, if the Company
receives  written  notice from each Investor that each Investor may be deemed to
be an "affiliate" of the Company for purposes of the Securities Act, the date in
this Clause (b) shall be extended  until each Investor  advises the Company that
it no longer has any reasonable basis to believe it is such an "affiliate."

          2.5  Obligations  of the  Company.  Whenever  required  to effect  the
registration  of any  Registrable  Securities  under this  Agreement the Company
shall, as expeditiously as reasonably possible:

               (a)  Registration  Statement.  Prepare  and  file  with the SEC a
registration  statement  with  respect to such  Registrable  Securities  and use
commercially  reasonable efforts to cause such registration  statement to become
effective;  provided,  however,  that,  except as otherwise  required by in this
Section 7(b),  the Company  shall not be required to keep any such  registration
statement effective for more than ninety (90) days.

               (b)  Amendments  and  Supplements.  Prepare and file with the SEC
such  amendments  and  supplements  to  such  registration   statement  and  the
prospectus  used  in  connection  with  such  registration  statement  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.

               (c) Prospectuses. Furnish to the Holders such number of copies of
a  prospectus,  including  a  preliminary  prospectus,  in  conformity  with the
requirements  of the  Securities  Act,  and  such  other  documents  as they may
reasonably  request in order to facilitate the  disposition  of the  Registrable
Securities owned by them that are included in such registration.

               (d) Blue Sky. Use commercially reasonable efforts to register and
qualify the securities  covered by such registration  statement under such other
securities  or Blue  Sky  laws of such  jurisdictions  as  shall  be  reasonably
requested by the  Holders,  provided  that the Company  shall not be required in
connection  therewith or as a condition  thereto to qualify to do business or to
file  a  general   consent  to  service  of  process  in  any  such   states  or
jurisdictions.

               (e)  Underwriting.  In  the  event  of  any  underwritten  public
offering, enter into and perform its obligations under an underwriting agreement
in  usual  and  customary  form  (including,   without   limitation,   customary
indemnification  of  the  underwriters  by  the  Company),   with  the  managing
underwriter(s) of such offering.  Each Holder participating in such underwriting
<PAGE>
shall also enter  into and  perform  its  obligations  under such an  agreement;
provided,  however,  that it shall not be considered customary to require any of
the Holders to provide  representations and warranties  regarding the Company or
indemnification  of the underwriters for material  misstatements or omissions in
the registration statement or prospectus for such offering.

               (f)  Notification.  Notify each Holder of Registrable  Securities
covered by such  registration  statement at any time when a prospectus  relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result  of which the  prospectus  included  in such  registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material  fact  required to be stated  therein or  necessary to
make the  statements  therein not  misleading in the light of the  circumstances
then existing.

               (g) Opinion and Comfort  Letter.  Furnish,  at the request of any
Holder requesting registration of Registrable Securities,  on the date that such
Registrable  Securities  are  delivered to the  underwriters  for sale,  if such
securities are being sold through  underwriters,  or, if such securities are not
being sold through  underwriters,  on the date that the  registration  statement
with respect to such securities becomes effective,  (i) an opinion,  dated as of
such date,  of the counsel  representing  the  Company for the  purposes of such
registration,  in form and substance as is customarily  given to underwriters in
an  underwritten  public  offering and reasonably  satisfactory to a majority in
interest of the Holders requesting registration,  addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) in the event that such  securities are being sold through  underwriters,  a
"comfort"  letter dated as of such date, from the independent  certified  public
accountants  of the Company,  in form and substance as is  customarily  given by
independent  certified  public  accountants to  underwriters  in an underwritten
public  offering and  reasonably  satisfactory  to a majority in interest of the
Holders  requesting  registration,  addressed  to  the  underwriters  and to the
Holders requesting registration of Registrable Securities.

          2.6  Furnish  Information.  It shall be a condition  precedent  to the
obligations  of the Company to take any action  pursuant  to Sections  7(b)(ii),
(iii) or (iv)  that the  selling  Holders  shall  furnish  to the  Company  such
information regarding themselves,  the Registrable  Securities held by them, and
the intended  method of disposition  of such  securities as shall be required to
timely effect the registration of their Registrable Securities.

          2.7  Indemnification.  In the event  any  Registrable  Securities  are
included in a registration statement under Sections 7(b)(ii), (iii) or (iv):

               (a) By the Company.  To the extent  permitted by law, the Company
will  indemnify  and  hold  harmless  each  Holder,   the  partners,   officers,
shareholders,  employees,  representatives  and  directors of each  Holder,  any
underwriter  (as  determined  in the  Securities  Act) for such  Holder and each
person,  if any, who controls such Holder or  underwriter  within the meaning of
the Securities Act or the Securities  Exchange Act of 1934, as amended,  against
any losses, claims, damages, or Liabilities (joint or several) to which they may
become  subject under the  Securities  Act, the Exchange Act or other federal or
state law, insofar as such losses,  claims,  damages, or liabilities (or actions
<PAGE>
in  respect  thereof)  arise  out  of or are  based  upon  any of the  following
statements, omissions or violations (collectively a "Violation"):

                    (i) any untrue  statement or alleged  untrue  statement of a
material  fact  contained  in  such   registration   statement,   including  any
preliminary  prospectus or final prospectus  contained therein or any amendments
or supplements thereto;

                    (ii) the  omission or alleged  omission  to state  therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or

                    (iii) any  violation or alleged  violation by the Company of
the Securities Act, the Exchange Act, any federal or state securities law or any
Rule or regulation promulgated under the Securities Act, the Exchange Act or any
federal or state  securities law in connection with the offering covered by such
registration  statement;  and the  Company  will  reimburse  each  such  Holder,
partner, officer, shareholder, employee,  representative,  director, underwriter
or  controlling  person for any legal or other expenses  reasonably  incurred by
them, as incurred,  in connection with investigating or defending any such loss,
claim,  damage,  liability  or action;  provided,  however,  that the  indemnity
agreement  contained  in this  subsection  shall  not apply to  amounts  paid in
settlement  of any  such  loss,  claim,  damage,  liability  or  action  if such
settlement is effected  without the consent of the Company  (which consent shall
not be unreasonably withheld),  nor shall the Company be liable in any such case
for any such loss,  claim,  damage,  liability  or action to the extent  that it
arises out of or is based upon a Violation  that occurs in reliance  upon and in
conformity with written  information  furnished  expressly for use in connection
with such registration by such Holder, partner, officer, shareholder,  employee,
representative,  director, underwriter or controlling person of such Holder.

               (b) By Selling  Holders.  To the extent  permitted  by law,  each
selling  Holder  will  indemnify  and hold  harmless  the  Company,  each of its
directors, each of its officers who have signed the registration statement, each
person,  if any, who controls the Company  within the meaning of the  Securities
Act,  any  underwriter  and any  other  Holder  selling  securities  under  such
registration  statement  or any  of  such  other  Holder's  partners,  officers,
shareholders,  employees,  representatives  and  directors  and any  person  who
controls  such Holder within the meaning of the  Securities  Act or the Exchange
Act, against any losses,  claims,  damages or liabilities  (joint or several) to
which  the  Company  or  any  such  officer  or  director,  controlling  person,
underwriter  or other such  Holder,  partner,  officer,  shareholder,  employee,
representative,  director or controlling  person of such other Holder may become
subject  under the  Securities  Act, the Exchange Act or other  federal or state
law,  insofar as such  losses,  claims,  damages or  liabilities  (or actions in
respect  thereto) arise out of or are based upon any Violation,  in each case to
the extent (and only to the extent) that such Violation  occurs in reliance upon
and in conformity with written  information  furnished by such Holder  expressly
for use in  connection  with  such  registration;  and  each  such  Holder  will
reimburse any legal or other expenses  reasonably incurred by the Company or any
such officer or  director,  controlling  person,  underwriter  or other  Holder,
partner, officer, shareholder, employee, representative, director or controlling
person of such other Holder in connection  with  investigating  or defending any
such loss,  claim,  damage,  liability or action:  provided,  however,  that the
<PAGE>
indemnity agreement contained in this subsection shall not apply to amounts paid
in  settlement  of any such loss,  claim,  damage,  liability  or action if such
settlement  is effected  without the consent of the Holder,  which consent shall
not be  unreasonably  withheld;  and provided  further,  that the total  amounts
payable in indemnity by a Holder under this  subsection  or otherwise in respect
of any  Violation  shall not exceed the net proceeds  received by such Holder in
the registered offering out of which such Violation arises.

               (c) Notice.  Promptly after receipt by an indemnified party under
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying  party under this section,  deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to  participate  in,  and,  to the  extent the  indemnifying  party so
desires,  jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however,  that an  indemnified  party  shall  have the right to  retain  its own
counsel, with the fees and expenses to be paid by the indemnifying party, to the
extent that  representation of such indemnified party by the counsel retained by
the  indemnifying  party  would be  inappropriate  due to  actual  or  potential
conflict  of  interests  between  such  indemnified  party and any  other  party
represented by such counsel in such  proceeding.  The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of liability except to
the extent the indemnifying party is prejudiced as a result thereof.

               (d)  Defect  Eliminated  in  Final   Prospectus.   The  foregoing
indemnity  agreements  of the Company  and Holders are subject to the  condition
that,  insofar as they relate to any Violation made in a preliminary  prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the  registration  statement in question  becomes  effective or the amended
prospectus  filed  with  the  SEC  pursuant  to  SEC  Rule  424(b)  (the  "Final
Prospectus"),  such  indemnity  agreement  shall not inure to the benefit of any
person if a copy of the Final Prospectus was timely furnished to the indemnified
party and was not furnished to the person asserting the loss,  liability,  claim
or damage at or prior to the time such action is required by the Securities Act.

               (e)  Contribution.  In order to  provide  for just and  equitable
contribution  to joint  liability  under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder,  makes a claim for  indemnification  pursuant to this
section,  but it is judicially  determined  (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such  indemnification may not be
enforced in such case  notwithstanding  the fact that this Section  provides for
indemnification  in such case, or (ii) contribution under the Securities Act may
be  required  on the part of any such  selling  Holder  or any such  controlling
person in  circumstances  for  which  indemnification  is  provided  under  this
section;  then,  and in each  such  case,  the  Company  and  such  Holder  will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after  contribution from others) in such proportion so that such
Holder is responsible  for the portion  represented  by the percentage  that the
public  offering price of its Registrable  Securities  offered by and sold under
<PAGE>
the registration  statement bears to the public offering price of all securities
offered by and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining  portion;  provided,  however,
that, in any such case:  (A) no such Holder will be required to  contribute  any
amount in excess of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such registration statement; and (B)
no person or entity guilty of fraudulent  misrepresentation  (within the meaning
of Section 11(f) of the Securities  Act) will be entitled to  contribution  from
any person or entity who was not guilty of such fraudulent misrepresentation.

               (f) Survival.  The  obligations  of the Company and Holders under
this  Section  7(b)(vii)  shall  survive  until  the  fifth  anniversary  of the
completion  of  any  offering  of  Registrable   Securities  in  a  registration
statement,  regardless  of the  expiration  of any  statutes  of  limitation  or
extensions of such statutes.

          2.8 Termination of the Company's  Obligations.  The Company shall have
no  obligations  pursuant to this Section  7(b) with respect to any  Registrable
Securities proposed to be sold by a Holder in a registration pursuant to Section
7(b)(ii),  (iii)  or (iv)  more  than  four  (4)  years  after  the date of this
Agreement,  or, if  earlier,  the date on which each  Holder  receives a written
opinion of counsel to the  Company,  reasonably  acceptable  to counsel  for the
Holder, all such Registrable Securities proposed to be sold by a Holder may then
be  sold  under  Rule  144 in  one  transaction  without  exceeding  the  volume
limitations thereunder.

          2.9 No Registration Rights to Third Parties. Without the prior written
consent of the  Holders of  sixty-six  and  two-thirds  percent (66 2/3%) of the
Series B Preferred Stock then outstanding, the Company covenants and agrees that
it shall not grant,  or cause or permit to be  created,  for the  benefit of any
person or entity any  registration  rights of any kind  (whether  similar to the
demand, "piggyback" or Form S-3 registration rights described in this Section 7,
or  otherwise)  relating to shares of the  Company's  Common  Stock or any other
securities of the Company.

          2.10 Suspension Provisions.  Notwithstanding the foregoing subsections
of this Section 7 (b), the Company shall not be required to take any action with
respect  to  the  registration  or  the  declaration  of  effectiveness  of  the
registration  statement following written notice to the Holders from the Company
(a "Suspension  Notice") of the existence of any state of facts or the happening
of any event (including without limitation pending negotiations  relating to, or
the  consummation  of, a  transaction,  or the  occurrence of any event that the
Company believes,  in good faith,  requires  additional  disclosure of material,
non-public  information  by the Company in the  registration  statement that the
Company   believes  it  has  a  bona  fide  business   purpose  for   preserving
confidentiality  or that renders the Company unable to comply with the published
rules and  regulations  of the SEC  promulgated  under the Securities Act or the
Securities  Exchange  Act,  as in effect at any  relevant  time (the  "Rules and
Regulations"))  that  would  result  in  (1)  the  registration  statement,  any
amendment or  post-effective  amendment  thereto,  or any document  incorporated
therein by  reference  containing  an untrue  statement  of a  material  fact or
omitting to state a material fact required to be stated  therein or necessary to
make the statements  therein not misleading,  or (2) the prospectus issued under
the  registration  statement,   any  prospectus  supplement,   or  any  document
incorporated therein by reference including an untrue statement of material fact
<PAGE>
or omitting to state a material fact  necessary in order to make the  statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading,  provided  that the Company (1) shall not issue a Suspension  Notice
more than once in any 12 month period, (2) shall use its best efforts to remedy,
as promptly as practicable, but in any event within 60 days of the date on which
the Suspension  Notice was delivered,  the  circumstances  that gave rise to the
Suspension  Notice and deliver to the Holders  notification  that the Suspension
Notice is no longer in effect  and (3) shall not issue a  Suspension  Notice for
any period  during which the  Company's  executive  officers  are not  similarly
restrained from disposing of shares of the Company's Common Stock.  Upon receipt
of a  Suspension  Notice from the  Company,  all time limits  applicable  to the
Holders under this Section 7(b) shall  automatically be extended by an amount of
time equal to the amount of time the Suspension Notice is in effect, the Holders
will  forthwith  discontinue  disposition  of all such  shares  pursuant  to the
registration  statement  until  receipt from the Company of copies of prospectus
supplements  or  amendments  prepared by or on behalf of the Company  (which the
Company  shall  prepare  promptly),   together  with  a  notification  that  the
Suspension Notice is no longer in effect, and if so directed by the Company, the
Holders  will  deliver  to the  Company  all copies in their  possession  of the
prospectus covering such shares current at the time of receipt of any Suspension
Notice.

     XIV. ASSIGNMENT. The rights of each Investor under Section 7(a) and (b) are
transferable  to any person who  acquires  the  equivalent,  on an  as-converted
basis,  of at least five  percent (5%) of the  outstanding  shares of the Common
Stock  (subject  to  appropriate  adjustment  for all stock  splits,  dividends,
combinations,  recapitalizations  and the like  where all  holders of the Common
Stock participate on a pro rata basis); provided,  however, that no party may be
assigned any of the foregoing  rights unless the Company is given written notice
by the  assigning  party at the  time of such  assignment  stating  the name and
address of the  assignee and  identifying  the  securities  of the Company as to
which the rights in question are being assigned;  and provided  further that any
such assignee  shall receive such assigned  rights  subject to all the terms and
conditions of this Agreement. The rights of each Investor under Section 7(d) may
be assigned only to a subsidiary of which an Investor  beneficially owns, either
directly or  indirectly,  at least fifty percent (50%) of the voting  securities
(each a " Majority Owned Subsidiary);  provided, however that no such assignment
of such rights under Sections 7(d) shall be effective until the Company is given
written  notice by the  assigning  Investor  stating the name and address of the
assignee;  and  provided  further  that any such  assignee  shall  receive  such
assigned  rights  subject  to all the terms and  conditions  of this  Agreement.
Notwithstanding  anything in the foregoing to the contrary,  this  Agreement may
not be assigned by any  Investor  in whole or in part to any  Competitor  of the
Company.  For purposes of this Section 8, a  "Competitor"  of the Company  shall
mean any company,  one of whose  principal  lines of business is the development
and/or  marketing of any product  similar to the Company's  Town Square  product
line  or any  subset  thereof,  and/or  call  accounting,  traffic  engineering,
facilities  and alarm  management,  PBX  security,  voicemail/auto  attendant or
answer  detection  software  and  hardware  systems  that  operate  on  personal
computers, local area networks and stand-alone proprietary hardware and that are
used primarily in the commercial and hospitality markets.
<PAGE>
     XV. MISCELLANEOUS.

     Section  1.  Successors  and  Assigns.  The  terms and  conditions  of this
Agreement  will  inure to the  benefit  of and be  binding  upon the  respective
successors and assigns of the parties.

     Section 2.  Governing Law. This Agreement will be governed by and construed
under  the  internal  laws  of the  State  of  Delaware,  without  reference  to
principles of conflict of laws or choice of laws.

     Section 3.  Counterparts.  This  Agreement  may be  executed in two or more
counterparts,  each of  which  will be  deemed  an  original,  but all of  which
together will constitute one and the same instrument.

     Section 4.  Headings.  The headings and captions used in this Agreement are
used  for  convenience  only  and  are not to be  considered  in  construing  or
interpreting  this  Agreement.  All  references  in this  Agreement to sections,
paragraphs,  exhibits and schedules will,  unless otherwise  provided,  refer to
sections and paragraphs hereof and exhibits and schedules  attached hereto,  all
of which exhibits and schedules are incorporated herein by this reference.

     Section 5. Notices.  Any notice  required or permitted under this Agreement
shall be given in writing,  shall be effective when  received,  and shall in any
event be deemed  received and  effectively  given upon personal  delivery to the
party to be notified or three (3)  business  days after  deposit with the United
States Post Office, by registered or certified mail, postage prepaid, or one (1)
business day after deposit with a nationally  recognized courier service such as
FedEx for next business day delivery under  circumstances  in which such service
guarantees  next business day delivery,  or one (1) business day after facsimile
with copy  delivered by  registered  or  certified  mail,  in any case,  postage
prepaid and  addressed to the party to be notified at the address  indicated for
such  party on the  signature  page  hereof  or at such  other  address  as each
Investor or the Company may  designate  by giving at least ten (10) days advance
written notice pursuant to this Section 9(e).

     Section 6. No Finder's Fees. Each Investor will indemnify and hold harmless
the Company from any liability for any commission or  compensation in the nature
of a finders' or broker's  fee for which such  Investor or any of its  officers,
partners,  employees or consultants,  or  representatives  is  responsible.  The
Company will  indemnify  and hold  harmless each Investor from any liability for
any commission or  compensation  in the nature of a finder's or broker's fee for
which  the  Company  or  any  of  its  officers,  employees  or  consultants  or
representatives is responsible.

     Section 7.  Amendments  and Waivers.  This Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular  instance and either  retroactively or prospectively),  only with the
written consent of the Company and the holders of Purchased Shares  representing
at least  two-thirds  of the total  aggregate  number of  Purchased  Shares then
outstanding  (excluding  any of such shares that have been sold in a transaction
in which rights under  Section  7(b) are not  assigned in  accordance  with this
Agreement  or sold to the public  pursuant  to SEC Rule 144 or  otherwise).  Any
amendment  or waiver  effected  in  accordance  with this  Section  9(g) will be
binding upon each  Investor,  the Company and their  respective  successors  and
<PAGE>
assigns. Notwithstanding the foregoing, the provisions of Clauses (b), (c), (d),
(e), (f) and (g), Section 7 and Section 8 may not be amended without the written
consent of the  Company  and each  Investor,  which may be withheld in either of
their sole and absolute discretions.

     Section 8.  Severability.  If any provision of this Agreement is held to be
unenforceable  under  applicable  law, such provision will be excluded from this
Agreement  and the  balance  of the  Agreement  will be  interpreted  as if such
provision were so excluded and will be enforceable in accordance with its terms.

     Section  9.  Entire  Agreement.  This  Agreement,  together  with the other
Transaction  Agreement  and  all  exhibits  and  schedules  hereto  and  thereto
constitutes the entire  agreement and  understanding of the parties with respect
to the subject  matter  hereof and  supersedes  any and all prior  negotiations,
correspondence,  agreements.  understandings  duties or obligations  between the
parties with respect to the subject matter hereof.

     Section 10. Further  Assurances.  From and after the date of this Agreement
upon the request of the Company or each Investor,  the Company and each Investor
will execute and deliver such instruments, documents or other writings as may be
reasonably  necessary or  desirable  to confirm and carry out and to  effectuate
fully the intent and purposes of this Agreement.

     Section 11.  Meaning of Include and  Including.  Whenever in this Agreement
the word  "include" or "including" is used. it shall be deemed to mean "include,
without limitation" or "including.  without limitation." as the case may be. and
the language following "include" or "including" shall not be deemed to set forth
an exhaustive list.

     Section  12.  Fees,  Costs  and  Expenses.  All fees,  costs  and  expenses
(including  attorney's'  fees and  expenses)  incurred  by either part hereto in
connection with the preparation, negotiation and execution of this Agreement and
the  other  Transaction  Agreements  and the  consummation  of the  transactions
contemplated hereby and thereby (including the costs associated with any filings
with,  or  compliance  with  any  of  the   requirements  of,  any  governmental
authorities), shall be the sole and exclusive responsibility of such party.

     Section  13.  Competition.  Nothing  set  forth  herein  shall be deemed to
preclude,  limit or restrict the Company's or each Investor's ability to compete
with the other.

     Section 14. Cooperation in HSR Act Filings.

          14.1 In the event of a  conversion  of the  Purchased  Shares  (or any
other action by an Investor  with respect to any  Securities of the Company held
by such  Investor)  that  would  require  a filing  by the  Investor  under  the
Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976  (the  "HSR  Act"),  the
Investor and its respective  affiliates (including any "ultimate parent entity",
as  defined  in the HSR Act),  and the  Company  and its  respective  affiliates
(including  any  "ultimate  parent  entity",  as defined in the HSR Act),  shall
promptly prepare and make their respective filings and thereafter shall make all
required or requested  submissions under the HSR Act or any analogous applicable
law, if required. In taking such actions or making any such filings, the parties
<PAGE>
hereto shall  furnish  information  required in  connection  therewith  and seek
timely to obtain  any  applicable  actions,  consents,  approvals  or waivers of
governmental  authorities;  provided,  however,  that the parties  hereto  shall
cooperate  with each other in connection  with the making of all such filings to
the extent  permitted by applicable law.  Without limiting the generality of the
foregoing,  to the  extent  permitted  by  applicable  law  and so  long  as the
following  will not  involve  the  disclosure  of  confidential  or  proprietary
information of one party hereto to another,  each party shall cooperate with the
other by (a)  providing  copies of all  documents to be filed to the  non-filing
party and its advisors prior to filing and, if requested,  accepting  reasonable
additions,  deletions  or changes  suggested  in  connection  therewith  and (b)
providing  to each  other  party  copies of all  correspondence  from and to any
governmental authority in connection with any such filing.

          14.2  Notwithstanding  the foregoing,  neither any Investor nor any of
its  affiliates  shall be under any  obligation  to comply  with any  request or
requirement  imposed by the Federal Trade Commission (the "FTC"), the Department
of Justice (the "DofJ") or any other  governmental  authority in connection with
the compliance  with the  requirements  of the HSR Act, or any other  applicable
law, if the Investor, in the exercise of its reasonable  discretion,  deems such
request or requirement unduly burdensome. Without limiting the generality of the
foregoing,  no Investor shall be obligated to comply with any request by, or any
requirement of, the FTC, the DofJ or any other  governmental  authority:  (i) to
disclose  information  such  Investor  deems  it in its best  interests  to keep
confidential;  (ii) to dispose of any assets or  operations;  or (iii) to comply
with any proposed restriction on the manner in which it conducts its operations.
In the event such Investor  shall receive a second request in respect of its HSR
Filing  determined  by it to be unduly  burdensome  and it shall prove unable to
negotiate  a  means  satisfactory  to  the  Investor  for  complying  with  such
burdensome  second  request,  or the Federal  Trade  Commission or Department of
Justice shall impose any condition on the Investor or its  affiliates in respect
thereof deemed unacceptable by the Investor,  the Company and the Investor shall
cooperate in good faith to negotiate an  alternative  transaction  that provides
such  Investor  with the economic  benefits it would receive if it converted the
Purchased  Shares  (or  took any  such  other  action  referenced  in the  first
parenthetical in the first sentence of Clause (i)).

              [The remainder of this page is intentionally blank.]
<PAGE>
IN WITNESS  WHEREOF,  the parties  hereto have executed this Agreement as of the
date and year first above written.

XIOX CORPORATION                        FLANDERS LANGUAGE VALLEY
                                        Fund CVA, (Incorporated under the laws
By: ________________________________    of Belgium)

Name: ______________________________    By: ____________________________________

Title: _____________________________    Name: Philip Vermeulen

Date Signed: _______________________    Title: CEO

Address: 557 Airport Boulevard,         Date Signed: ___________________________
         Suite 700
         Burlingame, CA 94010           Address: Flanders Language Valley 63
                                                 9011 Ieper
Telephone No: (650) 375-8188                     BELGIUM

Facsimile No: (650) 375-3988            Telephone No.: 011 32 57 22 94 30

                                        Facsimile No.: 011 32 57 20 68 42

                                        Edmund Shea and Mary Shea
                                        Real Property Trust TR UA 10/3/85

                                        By: ____________________________________

                                        Name: Edmund H. Shea, Jr.

                                        Title: _________________________________

                                        Date Signed: ___________________________

                                        Address: 655 Brea Canyon Road
                                                 P.O. Box 489
                                                 Walnut, CA 91788-0489

                                        Telephone No.: (909) 594-9500

                                        Facsimile No.: (909) 594-0935

Other signatures intentionally omitted.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00000-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00000-of-00352.parquet"}]]