Document:

NUMBER                          GRAPHIC OMITTED                          SHARES
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               INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA

                           HERITAGE MANAGEMENT, INC.

The  Corporation  is authorized to issue  25,000,000  Common  shares--Par  Value
$0.001 each

This Certifies that             SPECIMEN                         is the owner of
                    ____________________________________________

_____________________________________________________________     fully paid and
non-assessable  Shares  of  the  above  Corporation  transferable  only  on  the
books of the Corporation by the holder  hereof in  person or by duly  authorized
Attorney upon surrender of this Certificate properly endorsed.

In Witness Whereof, the said  Corporation  has caused  this  Certificate  to  be
signed by its duly  authorized officers  and to be  sealed with  the Seal of the
Corporation.

Dated_______________________

_______________________________                  _______________________________
                      SECRETARY                                        PRESIDENT

--------------------------------------------------------------------------------Heritage Management, Inc.

                             SUBSCRIPTION AGREEMENT

                             ________________, 2003

Heritage Management, Inc.
1529 E. Interstate 30, Suite 104
Garland, Texas 75043

Ladies and Gentlemen:

    1. PURCHASE OF COMMON STOCK.  Intending to be legally bound , I hereby agree
to purchase  ________ shares of voting, no par value common stock (the "Shares")
of Heritage Management, Inc. (the "Corporation") for ______________ U.S. Dollars
(number of Shares to be purchased  multiplied by $0.50).  This offer to purchase
is  submitted  in  accordance  with and  subject  to the  terms  and  conditions
described in this Subscription  Agreement (the "Agreement").  I acknowledge that
the  Corporation  reserves the right,  in its sole and absolute  discretion,  to
accept or reject  this  subscription  and the  subscription  will not be binding
until accepted by the Corporation in writing.

    2.  PAYMENT.  I agree to deliver to the  Corporation  immediately  available
funds in the full  amount due under  this  Agreement,  by cash or by  certified,
personal or  cashier's  check  payable to the  "Heritage  Management,  Inc." The
Corporation  shall hold the funds  uncashed  until the  minimum  amount has been
raised at which time the funds will be deposited in the Company bank account.

    3. ISSUANCE OF SHARES.  The Shares subscribed for herein will only be issued
upon acceptance by the Corporation as evidenced by the Corporation  returning to
the  investor  an  executed   Agreement   acknowledging   acceptance   and  upon
satisfaction of the terms and conditions of the offering.

    4. REPRESENTATION AND WARRANTIES.
         A. I understand  that the offering and sale of the Shares is registered
under (i) the Securities  Act of 1933, as amended (the  "Securities  Act"),  and
(ii)  various   States'   Divisions  of  Securities  in  compliance  with  their
administration  and  enforcement  of the  respective  States'  Blue Sky Laws and
Regulations. In accordance therewith and in furtherance thereof, I represent and
warrant to and agree with the Corporation as follows:

         [1] I am a resident of the State of  ________________ as of the date of
this  Agreement  and I have no present  intention  of becoming a resident of any
other state or jurisdiction;

         [2] I have  received  and have  reviewed the  Corporation's  Prospectus
dated July 10, 2003;

         [3] I have had a reasonable opportunity to ask questions of and receive
answers from a

<PAGE>

person  or  persons  acting  on  behalf  of  the  Corporation   concerning  this
investment,  including the terms and conditions of this  offering,  and all such
questions have been answered to my full satisfaction;

    5.  IRREVOCABILITY;  BINDING EFFECT. I hereby acknowledge and agree that the
purchase hereunder is irrevocable,  that I am not entitled to cancel,  terminate
or revoke this Agreement or any agreements of the undersigned hereunder and that
this  Agreement and such other  agreements  shall survive my death or disability
and shall be  binding  upon and inure to the  benefit of the  parties  and their
heirs, executor, administrators,  successors, legal representatives and assigns.
If the  undersigned is more than one person,  the obligations of the undersigned
hereunder  shall be joint  and  several,  and the  agreements,  representations,
warranties and  acknowledgments  herein  contained shall be deemed to be made by
and are binding upon each such person and his heirs, executors,  administrators,
successors, legal representatives and assigns.

    6.  MODIFICATION.  Neither this Agreement not any provisions hereof shall be
waived,  modified,  discharged or terminated  except by an instrument in writing
signed by the party  against  whom any such waiver,  modification,  discharge or
termination is sought.

    7. NOTICES. Any notice, demand or other communication which any party hereto
may  require,  or may  elect to give to  anyone  interested  hereunder  shall be
sufficiently  given if [a] deposited,  postage prepaid,  in a United States mail
box, stamped registered or certified mail, return receipt requested addressed to
such  address as may be listed on the books of the  Corporation,  [b]  delivered
personally  at such  address,  or [c]  delivered  (in person,  or by a facsimile
transmission, telex or similar telecommunications equipment) against receipt.

    8. COUNTERPARTS.  This Agreement may be executed through the use of separate
signature pages or in any number of counterparts,  and each of such counterparts
shall,  for all  purposes,  constitute  one  agreement  binding on all  parties,
notwithstanding that all parties are not signatories to the same counterpart.

    9. ENTIRE  AGREEMENT.  This Agreement  contains the entire  agreement of the
parties  with  respect  to  the  subject  matter   hereof,   and  there  are  no
representations,  covenants or other agreements  except as stated or referred to
herein.

    10.  SEVERABILITY.  Each  provision  of  the  Agreement  is  intended  to be
severable  from every other  provision,  and the invalidity or illegality of any
portion  hereof  shall not affect the  validity  or  legality  of the  remainder
hereof.

    11.  ASSIGNABILITY.  This Agreement is not transferable or assignable by the
undersigned except as may be provided herein.

    12.  APPLICABLE  LAW. This  Agreement  shall be governed by and construed in
accordance  with the laws of the State of Texas as applied to  residents of that
state executing contracts wholly to be performed in that state.

<PAGE>

INDIVIDUAL(S) SUBSCRIBER

IN  WITNESS  WHEREOF,  I have  executed  this  Agreement  as of the  ____ day of
___________, 2001.
                                                  Address:

-------------------------------------------       ------------------------------
Signature of Purchaser
                                                  ------------------------------
-------------------------------------------
Name(s) of Purchaser (Please print or type)

ENTITY SUBSCRIBER

IN WITNESS WHEREOF, I have executed this Agreement as of the ______ day of
_________________, 2001.
                                                  Address:

------------------------------                    ------------------------------
Entity
                                                  ------------------------------
------------------------------
Signed By

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

------------------------------
Date

PURCHASE ACCEPTED FOR _________ SHARES:

HERITAGE MANAGEMENT, INC.

By:
    ----------------------------------
       E. Lee Murdock, President

Date:
      --------------------------------<PAGE>

                                                                     Exhibit 4.1

                                    SBE, INC.

                          SECURITIES PURCHASE AGREEMENT

                                  JUNE 27, 2003

<PAGE>

                                    SBE, INC.

                          SECURITIES PURCHASE AGREEMENT

         THIS SECURITIES  PURCHASE  AGREEMENT  (this  "AGREEMENT") is made as of
June 27, 2003, by and among SBE, INC., a Delaware  corporation  (the "COMPANY"),
and the persons listed on the Schedule of Purchasers  attached hereto as EXHIBIT
A (the "PURCHASERS").

         The parties to this Agreement agree as follows:

                                   ARTICLE 1

              AUTHORIZATION AND SALE OF COMMON SHARES AND WARRANTS

         1.1 AUTHORIZATION. The Company has authorized (a) the sale and issuance
of up to 500,000  shares of its Common Stock (the  "COMMON  SHARES") and (b) the
sale and issuance of  warrants,  in the form  attached  hereto as EXHIBIT B (the
"WARRANTS"),  to purchase up to 50,000 shares of the Company's Common Stock (the
"COMMON STOCK") pursuant to this Agreement.

         1.2 SALE OF COMMON SHARES AND  WARRANTS.  At the Closing (as defined in
Section 2.1), on the terms and subject to the conditions of this Agreement,  the
Company will issue and sell to each  Purchaser and each  Purchaser will purchase
from the Company:

              (A)  Common  Shares in the amount  and at the  purchase  price set
forth opposite each Purchaser's name on EXHIBIT A; and

              (B) Warrants to purchase  shares of the Company's  Common Stock in
the amount set forth opposite each  Purchaser's name on EXHIBIT A at an exercise
price equal to $1.50 per share of Common Stock (the "WARRANT PRICE"). The shares
of Common Stock issuable upon exercise of or otherwise  pursuant to the Warrants
are referred to herein as the "WARRANT  SHARES." The Common Shares,  the Warrant
Shares and the Warrants are collectively referred to herein as the "SECURITIES."

                                   ARTICLE 2

                                CLOSING; DELIVERY

         2.1  CLOSING  DATE.  Subject  to the  satisfaction  (or  waiver) of the
conditions  thereto set forth in Article 5 and Article 6 of this Agreement,  the
closing of the  purchase and sale of the Common  Shares and  Warrants  hereunder
(the "CLOSING") shall be held at the offices of Cooley Godward LLP, One Maritime
Plaza,  20th Floor,  San  Francisco,  California  94111,  upon execution of this
Agreement.

         2.2  DELIVERY.  At the  Closing,  the  Company  will  deliver  to  each
Purchaser a duly executed  Warrant,  and as soon as practicable  thereafter will
deliver to each Purchaser a certificate representing the number of Common Shares
to be purchased by such Purchaser,  registered in the Purchaser's  name as shown
on  EXHIBIT A. Such  delivery  shall be against

                                       1
<PAGE>

payment of the  purchase  price  therefor  at the  Closing by wire  transfer  of
immediately  available  funds to the Company in  accordance  with the  Company's
written wiring instructions.

                                   ARTICLE 3

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company represents and warrants to the Purchasers as of the date of
this Agreement:

         3.1  ORGANIZATION  AND  STANDING.  The  Company is a  corporation  duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware  and is in good  standing as a domestic  corporation  under the laws of
said  state.  The  Company  is duly  qualified  as a foreign  corporation  to do
business and is in good  standing in each  jurisdiction  where the nature of the
business  conducted or property owned by it makes such  qualification  necessary
other than those jurisdictions in which the failure to so qualify would not have
a material and adverse effect on the business, operations, properties, prospects
or condition (financial or otherwise) of the Company.

         3.2 CORPORATE POWER; AUTHORIZATION. The Company has all requisite legal
and corporate power and has taken all requisite  corporate action to execute and
deliver this  Agreement,  to sell and issue the Common Shares and  Warrants,  to
issue the Warrant  Shares upon exercise of the Warrants in  accordance  with the
terms of such  Warrants,  and to carry out and  perform  all of its  obligations
under  this  Agreement.  This  Agreement  constitutes,  and upon  execution  and
delivery by the Company of the Warrants,  the Warrants will  constitute,  legal,
valid and binding  obligations of the Company,  enforceable  in accordance  with
their  respective  terms,  except  (a)  as  limited  by  applicable  bankruptcy,
insolvency,  reorganization  or  similar  laws  relating  to  or  affecting  the
enforcement  of  creditors'  rights  generally  and (b) as limited by  equitable
principles generally. The execution and delivery of this Agreement does not, and
the performance of this Agreement and the compliance with the provisions hereof,
the  issuance,  sale and  delivery of the Common  Shares and the Warrants by the
Company will not  materially  conflict  with, or result in a material  breach or
violation of the terms,  conditions or  provisions  of, or constitute a material
default  under,  or result in the creation or  imposition  of any material  lien
pursuant to the terms of, the Certificate of Incorporation  (the  "CERTIFICATE")
or Bylaws of the Company or any statute, law, rule or regulation or any state or
federal  order,  judgment or decree or any indenture,  mortgage,  lease or other
material  agreement or instrument to which the Company or any of its  properties
is subject.

         3.3  ISSUANCE  AND  DELIVERY OF THE  SECURITIES;  CAPITALIZATION.  When
issued in compliance with the provisions of this Agreement and the  Certificate,
the Common Shares will be validly  issued,  fully paid and  nonassessable.  Upon
exercise  of the  Warrants in  accordance  with the terms  thereof,  the Warrant
Shares will be validly issued,  fully paid and  nonassessable.  The issuance and
delivery of the Common  Shares and the Warrants is not subject to  preemptive or
any other  similar  rights of the  stockholders  of the  Company or any liens or
encumbrances.  As of the date of this Agreement, prior to issuances contemplated
by this Agreement,  4,182,417 shares of the Company's  Common Stock,  options to
purchase 1,548,811 shares of the Company's Common Stock and warrants to purchase
122,429 shares of the Company's Common Stock are outstanding.

                                       2
<PAGE>

         3.4 SEC  DOCUMENTS.  The  Company  has  filed  in a timely  manner  all
documents that the Company was required to file with the Securities and Exchange
Commission  (the "SEC") under  Sections  13,  14(a) and 15(d) of the  Securities
Exchange Act of 1934,  as amended  (the  "EXCHANGE  ACT"),  during the 12 months
preceding the date of this Agreement.  As of their respective  filing dates, all
documents  filed by the Company with the SEC (the "SEC  DOCUMENTS")  complied in
all  material  respects  with  the  requirements  of  the  Exchange  Act  or the
Securities Act of 1933, as amended (the "SECURITIES ACT"), as applicable.  As of
their respective dates, the SEC Documents complied in all material respects with
the  requirements  of the  Securities Act or the Exchange Act as the case may be
and the rules and regulations of the SEC promulgated thereunder, and none of the
SEC Documents  contained  any untrue  statement of a material fact or omitted to
state a material  fact  required to be stated  therein or  necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.  As of their filing with the SEC, the financial statements
of the Company included in the SEC Documents complied as to form in all material
respects with  applicable  accounting  requirements  and the published rules and
regulations of the SEC or other  applicable  rules and regulations  with respect
thereto.  Such financial  statements  were prepared in accordance with generally
accepted accounting  principles applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial  statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary statements)
and fairly  presented in all material  respects  the  financial  position of the
Company as of the dates thereof and the results of operations and cash flows for
the periods then ended (subject, in the case of unaudited statements,  to normal
year-end audit adjustments).

         3.5 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 (a) compliance  with the securities and blue sky laws
in the states in which the Common  Shares and Warrants are offered  and/or sold,
which  compliance  will be effected in accordance with such laws, (b) the filing
of the  Registration  Statement  (as defined in Section 7.1) and all  amendments
thereto with the SEC as contemplated  by Section 7.2 of this Agreement,  and (c)
the filing of the Nasdaq  Stock Market  Notification  Form with the Nasdaq Stock
Market.

         3.6 LITIGATION.  Except as disclosed in the SEC Documents, there are no
actions,  suits  proceedings  or  investigations  pending or, to the best of the
Company's  knowledge,  threatened  against the Company or any of its  properties
before  or by any  court or  arbitrator  or any  governmental  body,  agency  or
official  in which  there is a  reasonable  likelihood  (in the  judgment of the
Company) of an adverse decision that (a) could have a material adverse effect on
the  Company's  properties or assets or the business of the Company as currently
conducted,  or (b) could  impair the  ability  of the  Company to perform in any
material respect its obligations under this Agreement.

         3.7  ELIGIBILITY  TO USE FORM S-3.  The Company is eligible to use Form
S-3 for the  registration  of its  securities  under the Securities Act that are
offered in transactions involving secondary offerings.

                                       3
<PAGE>

         3.8 ABSENCE OF CERTAIN CHANGES. Since April 30, 2003, there has been no
material  adverse  change and no material  adverse  development in the business,
properties,  operations,  financial  condition,  or results of operations of the
Company.

         3.9 FULL DISCLOSURE.  There is no fact known to the Company (other than
general  economic or industry  conditions  known to the public  generally  or as
disclosed  in the  documents  referred  to in  Section  3.4)  that  has not been
disclosed  to Puglisi & Co.  that (i) would  reasonably  be  expected  to have a
material adverse effect on the business or financial condition of the Company or
(ii) would reasonably be expected to materially and adversely affect the ability
of the Company to perform its obligations pursuant to this Agreement.

         3.10 USE OF PROCEEDS. The proceeds of the sale of the Common Shares and
the  Warrants  hereunder  shall be used by the Company  for working  capital and
general corporate purposes,  including funding  acquisitions of other businesses
and assets.

                                   ARTICLE 4

           REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS

         The Purchaser  hereby  jointly and severally  represent and warrant to,
and covenant with, the Company as follows:

         4.1 AUTHORIZATION. Each Purchaser has all requisite legal and corporate
or other  power and  capacity  and has taken all  requisite  corporate  or other
action to execute and deliver this Agreement,  to purchase the Common Shares and
the  Warrants  to be  purchased  by it and to carry out and  perform  all of its
obligations under this Agreement.  This Agreement  constitutes the legal,  valid
and binding  obligation of each  Purchaser,  enforceable in accordance  with its
terms,   except   (i)  as   limited  by   applicable   bankruptcy,   insolvency,
reorganization,  or similar laws  relating to or affecting  the  enforcement  of
creditors'  rights  generally  and  (ii)  as  limited  by  equitable  principles
generally.

         4.2 INVESTMENT  EXPERIENCE.  Each Purchaser is an "accredited investor"
as defined in Rule 501(a) under the  Securities  Act. Each Purchaser is aware of
the Company's business affairs and financial condition and has had access to and
has acquired  sufficient  information about the Company to reach an informed and
knowledgeable  decision  to acquire  the Common  Shares and the  Warrants.  Each
Purchaser has such  business and financial  experience as is required to give it
the capacity to protect its own interests in connection with the purchase of the
Common Shares and Warrants.

         4.3 INVESTMENT  INTENT.  Each Purchaser is purchasing the Common Shares
and the Warrants for its own account as principal, for investment purposes only,
and  not  with  a   present   view  to,   or  for,   resale,   distribution   or
fractionalization  thereof,  in whole  or in part,  within  the  meaning  of the
Securities  Act,  other  than as  contemplated  by  Article  7.  Each  Purchaser
understands  that the Common  Shares and the Warrants  have not been  registered
under the Securities Act or registered or qualified  under any state  securities
law in reliance on specific  exemptions  therefrom,  which exemptions may depend
upon, among other things, the bona fide nature of Purchaser's  investment intent
as expressed herein.  Each Purchaser has completed or

                                       4
<PAGE>

caused to be completed the Purchaser  Questionnaire attached hereto as EXHIBIT C
for use in preparation of the Registration Statement, and the responses provided
therein shall be true and correct as of the Closing and will be true and correct
as of the effective  date of the  Registration  Statement.  Each  Purchaser,  in
connection with its decision to purchase the Common Shares and the Warrants, has
relied solely upon the SEC Documents and the  representations  and warranties of
the Company contained  herein.  Each Purchaser will not, directly or indirectly,
offer, sell, pledge,  transfer or otherwise dispose of (or solicit any offers to
buy,  purchase or otherwise  acquire or take a pledge of) any of the  Securities
except in  compliance  with the  Securities  Act, and the rules and  regulations
promulgated thereunder.

         4.4  REGISTRATION  OR EXEMPTION  REQUIREMENTS.  Each Purchaser  further
acknowledges  and understands that the Securities may not be resold or otherwise
transferred  except in a  transaction  registered  under the  Securities  Act or
unless an exemption from such registration is available.

         4.5  DISPOSITIONS.  Each Purchaser will not, prior to the effectiveness
of the  Registration  Statement,  if then  prohibited by law or regulation:  (a)
sell, offer to sell,  solicit offers to buy,  dispose of, loan,  pledge or grant
any right with respect to (collectively, a "DISPOSITION") the Securities; or (b)
engage in any hedging or other  transaction that is designed or could reasonably
be  expected  to  lead to or  result  in a  Disposition  of  Securities  by such
Purchaser or any person or entity.  In addition,  each Purchaser agrees that for
so long as it owns any  Shares,  it will not enter into any short sale of Shares
or similar  hedging  transaction  if such short  sale  results in the  Purchaser
having a net short position in the Shares.

         4.6 RESIDENCY.  Each Purchaser's principal executive offices are in the
jurisdiction  set forth  immediately  below  Purchaser's name on the Schedule of
Purchasers attached hereto as EXHIBIT A.

         4.7 LEGEND.  Each Purchaser  understands  that,  until such time as the
Registration Statement has been declared effective or the Securities may be sold
pursuant to Rule 144 under the Securities Act without any  restriction as to the
number of securities as of a particular date that can then be immediately  sold,
the Securities may bear a restrictive legend in substantially the following form
(and a stop transfer  order may be placed against  transfer of the  certificates
for the Securities):

                  "THE SECURITIES  REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
         REGISTERED  UNDER  THE  SECURITIES  ACT OF  1933,  AS  AMENDED,  OR THE
         SECURITIES  LAWS OF ANY  STATE OF THE  UNITED  STATES  OR IN ANY  OTHER
         JURISDICTION.  THE  SECURITIES  REPRESENTED  HEREBY MAY NOT BE OFFERED,
         SOLD  OR  TRANSFERRED  IN  THE  ABSENCE  OF AN  EFFECTIVE  REGISTRATION
         STATEMENT FOR THE SECURITIES  UNDER  APPLICABLE  SECURITIES LAWS UNLESS
         OFFERED,  SOLD OR TRANSFERRED  PURSUANT TO AN AVAILABLE  EXEMPTION FROM
         THE REGISTRATION REQUIREMENTS OF THOSE LAWS."

                                       5
<PAGE>

                                   ARTICLE 5

                 CONDITIONS TO CLOSING OBLIGATIONS OF PURCHASERS

         The  Purchasers'  obligation  to  purchase  the  Common  Shares and the
Warrants  at the  Closing  is, at the option of a majority  in  interest  of the
Purchasers,  subject  to the  fulfillment  or  waiver as of the  Closing  of the
following conditions:

         5.1 REPRESENTATIONS AND WARRANTIES.  The representations and warranties
made by the  Company  in  Article 3 hereof  shall be true and  correct as of the
Closing.

         5.2 COVENANTS.  All covenants,  agreements and conditions  contained in
this  Agreement to be performed by the Company at or prior to the Closing  shall
have been performed or complied with in all material respects.

         5.3 LISTING. The Company shall have complied with all requirements with
respect  to the  listing of the Common  Shares on the  Nasdaq  SmallCap  Market,
except for such requirements not required until after the issuance of the Common
Shares, such requirements to be complied with promptly after Closing.

         5.4 JUDGMENTS. No judgment, writ, order, injunction, award or decree of
or by any court, or judge, justice or magistrate, including any bankruptcy court
or judge,  or any order of or by any  governmental  authority,  shall  have been
issued,  and  no  action  or  proceeding  shall  have  been  instituted  by  any
governmental  authority,   enjoining  or  preventing  the  consummation  of  the
transactions contemplated hereby.

                                   ARTICLE 6

                  CONDITIONS TO CLOSING OBLIGATIONS OF COMPANY

         The  Company's  obligation  to sell and issue the Common Shares and the
Warrants  at the  Closing  is, at the  option  of the  Company,  subject  to the
fulfillment or waiver of the following conditions:

         6.1 RECEIPT OF PAYMENT.  The Purchasers shall have delivered payment of
the purchase  price to the Company for the Common Shares and the Warrants  being
issued hereunder.

         6.2 REPRESENTATIONS AND WARRANTIES.  The representations and warranties
made by the  Purchasers  in Article 4 hereof shall be true and correct as of the
Closing.

         6.3 COVENANTS.  All covenants,  agreements and conditions  contained in
this  Agreement  to be performed  by the  Purchasers  at or prior to the Closing
shall have been performed or complied with in all material respects.

         6.4  DELIVERY  OF  PURCHASER  QUESTIONNAIRE.  The  Company  shall  have
received from each Purchaser a fully completed  Purchaser  Questionnaire  in the
form attached  hereto as EXHIBIT C

                                       7
<PAGE>

prior  to the  Closing  for the  Company's  use in  preparing  the  Registration
Statement pursuant to Article 7 below.

                                   ARTICLE 7

                                                                 COVENANTS

         7.1 DEFINITIONS. For the purpose of this Article 7:

              (A) the term "REGISTRATION  STATEMENT" shall mean any registration
statement  required  to be filed by Section  7.2 below,  and shall  include  any
preliminary  prospectus,  final prospectus,  exhibit or amendment included in or
relating to such registration statements;

              (B) the term  "REGISTRABLE  SHARES"  shall  mean all of the Common
Shares and the Warrant  Shares,  and any securities of the Company or securities
of any  successor  corporation  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,
the Common Shares or Warrant Shares; and

              (C) The terms "REGISTER,"  "REGISTERED," and "REGISTRATION"  refer
to a registration  under the Securities Act,  effected by preparing and filing a
registration  statement or similar  document in compliance  with the  Securities
Act,  and the  declaration  or ordering of  effectiveness  of such  registration
statement, document or amendment thereto.

         7.2 REGISTRATION PROCEDURES AND EXPENSES. The Company shall:

              (A) use its best efforts to file a Registration Statement with the
SEC within 30 days following the Closing to register the Registrable  Shares for
resale on Form S-3 under the Securities Act (providing for shelf registration of
such Registrable Shares under SEC Rule 415);

              (B) use all commercially reasonable efforts, subject to receipt of
necessary  information  from  the  Purchasers,  to cause  any such  Registration
Statement filed pursuant to Section 7.2(a) above to become effective as promptly
after filing of such Registration Statement as practicable, and in any event not
later than 120 days following the Closing;

              (C) prepare and file with the SEC such  amendments and supplements
to such Registration  Statement and the prospectus used in connection  therewith
as  may be  necessary  to  keep  such  Registration  Statement  effective  until
termination of such obligation as provided in Section 7.7 below,  subject to the
Company's right to suspend pursuant to Section 7.6;

              (D)   furnish  to  each   Purchaser   such  number  of  copies  of
prospectuses in conformity with the  requirements of the Securities Act and such
other documents as the Purchasers may reasonably request, in order to facilitate
the public sale or other disposition of all or any of the Registrable  Shares by
the Purchasers;

              (E) file such  documents  as may be  required  of the  Company for
normal securities law clearance for the resale of the Registrable Shares in such
states of the United  States as may be reasonably  requested by each  Purchaser;
provided,  however,  that the Company shall

                                       7
<PAGE>

not be required in  connection  with this  paragraph (e) to qualify as a foreign
corporation  or  execute  a  general  consent  to  service  of  process  in  any
jurisdiction;

              (F) advise each Purchaser promptly:

              (I) of any request by the SEC for  amendments to the  Registration
Statement or amendments to the prospectus or for additional information relating
thereto;

              (II) of the issuance by the SEC of any stop order  suspending  the
effectiveness of the  Registration  Statement under the Securities Act or of the
suspension  by any  state  securities  commission  of the  qualification  of the
Registrable  Shares for offering or sale in any jurisdiction,  or the initiation
of any proceeding for any of the preceding purposes; and

              (III) of the  existence of any fact and the happening of any event
that makes any statement of a material fact made in the Registration  Statement,
the prospectus and amendment or supplement thereto, or any document incorporated
by reference therein, untrue, or that requires the making of any additions to or
changes in the  Registration  Statement or the  prospectus  in order to make the
statements therein not misleading;

              (G) use its best  efforts  to cause all  Registrable  Shares to be
listed on each  securities  exchange,  if any, on which the common  stock of the
Company is then listed; and

              (H)  bear all  expenses  in  connection  with  the  procedures  in
paragraphs  (a) through  (g) of this  Section  7.2 and the  registration  of the
Registrable  Shares on such  Registration  Statement and the satisfaction of the
blue sky laws of such states.

         7.3 OTHER  REGISTRATIONS.  As of the date hereof and through the 60-day
period following the first date of  effectiveness of the Registration  Statement
(the "RESTRICTION  PERIOD"), the Company shall not, without the prior consent of
Puglisi & Co.,  file a  registration  statement  with respect to any  securities
other than (i) with respect to any merger,  consolidation or acquisition or (ii)
shares of equity securities and/or options or other rights in respect thereof to
be  offered  solely  to  directors,  employees,  consultants  or  sales  agents,
distributors or similar representatives of the Company solely on Form S-8 or any
successor form.  Notwithstanding the foregoing, the Company agrees to enter into
lock-up  agreements with the Company's  directors and officers pursuant to which
each  director  and officer  will not engage in a public  sale of the  Company's
securities  owned by him during the Restriction  Period for so long as he serves
as a director or officer.

         7.4 DELAY IN FILING.  If the  Registration  Statement is not filed with
the SEC by the date  specified in Section  7.2(a),  then for each 30-day  period
following such date,  until the date the  Registration  Statement is filed,  the
Company shall, for such period,  pay each Purchaser,  as liquidated  damages and
not as a penalty,  an amount equal to 3.0% of the  purchase  price of the Common
Shares purchased by such Purchaser  hereunder,  for such period (or prorated for
any partial  period);  and for any such period,  such  payment  shall be made no
later than the first business day of the calendar month next succeeding the last
month in which such period occurs. If the Registration Statement is not declared
effective by the date specified in Section  7.2(b),  then for each 30-day period
following  such date,  until the date the  Registration  Statement  is  declared
effective,  the per-share  exercise  price of the Warrants shall be decreased by
$0.10 (as

                                       8
<PAGE>

adjusted for stock splits,  combinations,  dividends and the like).  The parties
hereto  agree that the  liquidated  damages  provided  for in this  Section  7.4
constitute  a  reasonable  estimate of the  damages  that may be incurred by the
Purchasers by reason of the failure of the Registration Statement to be filed in
accordance with the provisions hereof.

         7.5 INDEMNIFICATION.

              (A) The  Company  agrees  to  indemnify  and  hold  harmless  each
Purchaser from and against any losses,  claims,  damages or liabilities to which
such  Purchaser  may become  subject  (under the  Securities  Act or  otherwise)
insofar  as  such  losses,   claims,  damages  or  liabilities  (or  actions  or
proceedings  in respect  thereof)  arise out of, or are based  upon,  any untrue
statement  or alleged  untrue  statement  of a material  fact  contained  in the
Registration  Statement or any omission or alleged  omission to state  therein a
material fact required to be stated  therein or necessary to make the statements
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading or arise out of any failure by the Company to fulfill any undertaking
included in the  Registration  Statement  and the  Company  will,  as  incurred,
reimburse such Purchaser for any legal or other expenses  reasonably incurred in
investigating,  defending or preparing to defend any such action,  proceeding or
claim; provided,  however, that the Company shall not be liable in any such case
to the extent that such loss, claim, damage or liability (collectively,  "LOSS")
arises out of, or is based  upon,  an untrue  statement  or  omission or alleged
untrue  statement or omission  made in such  Registration  Statement in reliance
upon and in conformity with written  information  furnished to the Company by or
on  behalf  of  such  Purchaser  specifically  for  use  in  preparation  of the
Registration  Statement or any breach of this Agreement by such  Purchaser;  and
provided further, however, that the Company shall not be liable to any Purchaser
of  Registrable  Shares to the extent  that any such Loss is caused by an untrue
statement  or  omission or alleged  untrue  statement  or  omission  made in any
preliminary prospectus if either (i)(A) such Purchaser failed to send or deliver
a copy of the  final  prospectus  with  or  prior  to the  delivery  of  written
confirmation  of the sale by such  Purchaser to the person  asserting  the claim
from which such Loss resulted and (B) the final prospectus corrected such untrue
statement or omission,  (ii) (X) such untrue  statement or omission is corrected
in an amendment or supplement to the prospectus and (Y) having  previously  been
furnished  by or on behalf of the Company  with copies of the  prospectus  as so
amended  or  supplemented,  such  Purchaser  thereafter  fails to  deliver  such
prospectus  as so  amended or  supplemented,  with or prior to the  delivery  of
written  confirmation of the sale of a Registrable Share to the person asserting
the claim from which such Loss resulted or (iii) such Purchaser sold Registrable
Shares in violation  of such  Purchaser's  covenant  contained in Section 7.6 of
this Agreement.

              (B) The Purchasers,  severally and not jointly, agree to indemnify
and hold  harmless  the  Company  each  officer  of the  Company  who  signs the
Registration  Statement and each  director of the Company,  from and against any
Losses to which the Company (or any such officer or director) may become subject
(under the Securities  Act or otherwise),  insofar as such Losses (or actions or
proceedings  in respect  thereof) arise out of, or are based upon, any breach of
this  Agreement  by a  Purchaser  or any  untrue  statement  or  alleged  untrue
statement  of a material  fact  contained in the  Registration  Statement or any
omission or alleged  omission to state  therein a material  fact  required to be
stated  therein or necessary  to make the  statements  therein,  in light of the
circumstances  under which they were made,  not  misleading in each case, on the
effective date thereof, if, and to the extent, such untrue

                                       9
<PAGE>

statement  or  omission or alleged  untrue  statement  or  omission  was made in
reliance  upon and in  conformity  with written  information  furnished by or on
behalf of a Purchaser  specifically  for use in preparation of the  Registration
Statement,  and the  Purchasers  will  reimburse  the  Company  (and each of its
officers  and  directors)   for  any  legal  or  other   expenses   incurred  in
investigating,  defending or preparing to defend any such action,  proceeding or
claim;  provided,  however,  that in no event  shall any  indemnity  under  this
Section  7.5(b) be greater in amount than the dollar amount of the proceeds (net
of the amount of any damages the Purchasers  have otherwise been required to pay
by reason of such untrue  statement or omission or alleged  untrue  statement or
omission) received by the Purchasers upon the sale of the Registrable Securities
included  in the  Registration  Statement  giving  rise to such  indemnification
obligation.

              (C) Promptly after receipt by any  indemnified  person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought  against an  indemnifying  person  pursuant  to this  Section  7.5,  such
indemnified person shall notify the indemnifying person in writing of such claim
or  of  the  commencement  of  such  action,  and,  subject  to  the  provisions
hereinafter  stated,  in case  any  such  action  shall be  brought  against  an
indemnified  person  and such  indemnifying  person  shall  have  been  notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent that it shall wish,  to assume the defense  thereof,  with counsel
reasonably  satisfactory  to such  indemnified  person.  After  notice  from the
indemnifying  person to such  indemnified  person of its  election to assume the
defense  thereof,   such  indemnifying  person  shall  not  be  liable  to  such
indemnified  person  for  any  legal  expenses  subsequently  incurred  by  such
indemnified  person in connection with the defense thereof;  provided,  however,
that if there  exists or shall exist a conflict  of interest  that would make it
inappropriate in the reasonable  judgment of the indemnified person for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof,  the indemnified person shall be entitled to
retain its own counsel at the  expense of such  indemnifying  person;  provided,
further,  that no  indemnifying  person  shall be  responsible  for the fees and
expense of more than one  separate  counsel  for all  indemnified  parties.  The
indemnifying  party  shall not  settle  an action  without  the  consent  of the
indemnified party, which consent shall not be unreasonably withheld.

              (D) If after proper notice of a claim or the  commencement  of any
action against the indemnified  party, the indemnifying party does not choose to
participate,  then the  indemnified  party shall assume the defense  thereof and
upon written notice by the  indemnified  party  requesting  advance payment of a
stated amount for its reasonable  defense costs and expenses,  the  indemnifying
party shall advance payment for such reasonable  defense costs and expenses (the
"ADVANCE  INDEMNIFICATION  PAYMENT") to the indemnified party. In the event that
the  indemnified  party's actual defense costs and expenses exceed the amount of
the  Advance   Indemnification   Payment,  then  upon  written  request  by  the
indemnified  party, the indemnifying party shall reimburse the indemnified party
for such  difference;  in the event  that the  Advance  Indemnification  Payment
exceeds the indemnified party's actual costs and expenses, the indemnified party
shall promptly remit payment of such difference to the indemnifying party.

         7.6  PROSPECTUS  DELIVERY.  Each  Purchaser  hereby  covenants with the
Company not to make any sale of the  Registrable  Shares without  complying with
Section  8.3.  Each  Purchaser  acknowledges  that  there may be times  when the
Company  must  suspend  the  use  of  the  prospectus  forming  a  part  of  the
Registration  Statement  until  such time as an  amendment  to the

                                       10
<PAGE>

Registration  Statement has been filed by the Company and declared  effective by
the SEC, or until such time as the Company has filed an appropriate  report with
the SEC pursuant to the Exchange Act. Each  Purchaser  hereby  covenants that it
will not sell any  Registrable  Shares  pursuant to said  prospectus  during the
period  commencing at the time at which the Company gives such Purchaser  notice
of the  suspension  of the use of said  prospectus  and  ending  at the time the
Company gives such  Purchaser  notice that the Purchaser may  thereafter  effect
sales pursuant to said prospectus;  provided that such suspension  periods shall
in no event  exceed 45 days in any 12-month  period and that,  in the good faith
judgment of the Company's Board of Directors,  the Company would, in the absence
of such  delay or  suspension  hereunder,  be  required  under  state or federal
securities laws to disclose any corporate development, a potentially significant
transaction or event involving the Company, or any negotiations, discussions, or
proposals  directly  relating  thereto,  in either case the  disclosure of which
would  reasonably be expected to have a material adverse effect upon the Company
or its stockholders.

         7.7 TERMINATION OF OBLIGATIONS. The obligations of the Company pursuant
to Section 7.2 hereof shall cease and terminate upon the earlier to occur of (a)
such time as all of the  Registrable  Shares have been resold and (b) the second
anniversary of the Closing.

         7.8 REPORTING REQUIREMENTS.

            (A) With a view to making  available the benefits of certain rules
and  regulations  of the  SEC  that  may at any  time  permit  the  sale  of the
Securities  to the public  without  registration  or pursuant to a  registration
statement on Form S-3, the Company will use all commercially  reasonable efforts
to:

              (I) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;

              (II) file with the SEC in a timely  manner all  reports  and other
documents required of the Company under the Securities Act and the Exchange Act;
and

         so long as any of the Purchasers own Registrable  Shares, to furnish to
any Purchaser upon request (A) a written  statement by the Company as to whether
it is in compliance with the reporting  requirements of Rule 144, the Securities
Act and the  Exchange  Act, or whether it is  qualified  as a  registrant  whose
securities  may be resold  pursuant to SEC Form S-3,  and (B) a copy of the most
recent  annual or  quarterly  report of the Company  and such other  reports and
documents so filed by the Company.

         7.9  ASSIGNMENT OF RIGHTS.  The rights to cause the Company to register
all or any  portion of  Registrable  Shares  pursuant  to this  Section 7 may be
assigned  by  Purchasers  to a  proper  transferee  or  assignee  under  Section
8.3(a)(iii).  Within a reasonable time after such transfer,  the Purchaser shall
notify the Company of the name and address of such  transferee or assignee,  and
the  securities  with  respect  to which  such  registration  rights  are  being
assigned.  Such assignment  shall be effective only if, (i) the Purchaser agrees
in writing with the transferee or assignee to assign such rights,  and a copy of
such agreement is furnished to the Company  within a reasonable  time after such
transfer or assignment  (subject to the purchase  price of the shares being kept
confidential by the Purchaser and such transferee or assignee), (ii) the Company

                                       11
<PAGE>

is, within a reasonable  time after such transfer or assignment,  furnished with
written  notice of (A) the name and address of such  transferee  or assignee and
(B) the Registrable  Shares with respect to which such  registration  rights are
being  assigned,  (iii)  following  such  transfer  or  assignment,  the further
disposition  of the  Registrable  Securities  by the  transferee  or assignee is
restricted  under the Securities Act and applicable  state securities laws, (iv)
at or before the time that the Company receives the written notice  contemplated
by clause (ii) of this  sentence the  transferee  or assignee  agrees in writing
with the Company to be bound by all of the provisions contained herein, (v) such
transfer shall have been made in accordance  with Section  8.3(a)(iii)  and (vi)
such  transferee  shall be an "accredited  investor," as that term is defined in
Rule 501 of Regulation D, promulgated under the Securities Act.

         7.10 RIGHT OF FIRST REFUSAL.

              (A) SUBSEQUENT  OFFERINGS.  Subject to applicable securities laws,
each  Purchaser  shall have a right of first  refusal to  purchase  its pro rata
share of all Equity  Securities,  as defined  below,  that the Company may, from
time to time,  propose  to sell and  issue,  other  than the  Equity  Securities
excluded by Section 7.10(f) hereof.  Each Purchaser's pro rata share is equal to
the ratio of (a) the  number of shares of the  Common  Stock  purchased  by such
Purchaser  under  this  Agreement  (as  adjusted  for stock  splits,  dividends,
combinations  and the like) or the number of shares of the Common  Stock held by
such  Purchaser  immediately  prior to the  issuance of such Equity  Securities,
whichever  is less,  to (b) the  total  number of  shares  of the  Common  Stock
outstanding immediately prior to the issuance of the Equity Securities. The term
"EQUITY  SECURITIES"  shall  mean  (i)  the  Common  Stock,  (ii)  any  security
convertible   into  or  exercisable  or   exchangeable   for,  with  or  without
consideration,  the Common  Stock,  (iii) any  security  carrying any warrant or
right to subscribe  for or purchase any Common Stock or (iv) any such warrant or
right.

              (B)  EXERCISE  OF RIGHTS.  If the  Company  proposes  to issue any
Equity  Securities,  it shall give each  Purchaser  then  holding  shares of the
Common Stock written notice of its intention,  describing the Equity Securities,
the price and the terms and conditions upon which the Company  proposes to issue
the same.  Each such Purchaser shall have 10 days from the giving of such notice
to agree to purchase its pro rata share of the Equity  Securities  for the price
and upon the terms and  conditions  specified  in the  notice by giving  written
notice to the Company and stating  therein the quantity of Equity  Securities to
be purchased.  Notwithstanding the foregoing,  the Company shall not be required
to offer or sell such Equity  Securities  to any  Purchaser  who would cause the
Company to be in violation of applicable  federal  securities  laws by virtue of
such offer or sale.

              (C)  ISSUANCE  OF  EQUITY  SECURITIES  TO  OTHER  PERSONS.  If the
Purchasers  fail to  exercise in full the rights of first  refusal,  the Company
shall have 90 days thereafter to sell the Equity  Securities in respect of which
the Purchasers' rights were not exercised, at a price and upon general terms and
conditions  not  materially  more  favorable  to  the  purchasers  thereof  than
specified in the Company's  notice pursuant to Section  7.10(b)  hereof.  If the
Company  has not  sold  such  Equity  Securities  within  90 days of the  notice
provided pursuant to Section 7.10(b),  the Company shall not thereafter issue or
sell such Equity  Securities  without  first  offering  such  securities  to the
Purchasers in the manner provided above.

                                       12
<PAGE>

              (D)  SALE  WITHOUT  NOTICE.  In  lieu  of  giving  notice  to  the
Purchasers  prior to the  issuance of Equity  Securities  as provided in Section
7.10(b),  the Company may elect to give notice to the Purchasers  within 30 days
after the issuance of Equity  Securities.  Such notice shall  describe the type,
price and terms of the Equity Securities.  Each Purchaser then holding shares of
the Common  Stock  shall have 10 days from the date of receipt of such notice to
elect to purchase up to the number of shares that would,  if  purchased  by such
Purchaser,  maintain  such  Purchaser's  pro rata share (as set forth in Section
7.10(a)) of the Common  Stock.  The  closing of such sale shall occur  within 60
days of the date of notice to the Purchasers.

              (E)  TERMINATION.  The right of first refusal  established by this
Section  7.10 shall  terminate  upon the first  anniversary  of the date of this
Agreement.

              (F) EXCLUDED SECURITIES. The right of first refusal established by
this  Section  7.10 shall have no  application  to any of the  following  Equity
Securities:

                 (I) shares of Common  Stock and/or  options,  warrants or other
Common  Stock  purchase  rights and the Common  Stock  issued  pursuant  to such
options,  warrants or other rights  issued or to be issued after the date hereof
to  employees,  officers  or  directors  of, or  consultants  or advisors to the
Company or any  subsidiary,  pursuant to stock purchase or stock option plans or
other arrangements that are approved by the Board of Directors;

                 (II)  stock  issued  or  issuable  pursuant  to any  rights  or
agreements,  options,  warrants or convertible  securities outstanding as of the
date of this  Agreement;  and  stock  issued  pursuant  to any  such  rights  or
agreements  granted  after the date of this  Agreement,  so long as the right of
first  refusal  established  by this  Section  7.10 were  complied  with or were
inapplicable  pursuant to any provision of this Section  7.10(f) with respect to
the initial sale or grant by the Company of such rights or agreements;

                 (III) any Equity Securities issued for consideration other than
cash pursuant to a merger,  consolidation,  strategic  alliance,  acquisition or
similar business combination;

                 (IV) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;

                 (V) any  Equity  Securities  that  are  issued  by the  Company
pursuant to a registration statement filed under the Securities Act;

                 (VI) any Equity  Securities issued in connection with strategic
transactions  involving  the Company  and other  entities,  including  (A) joint
ventures,   manufacturing,   marketing  or  distribution   arrangements  or  (B)
technology transfer or development arrangements;  provided that such transaction
is not substantially for equity financing purposes;

                 (VII) any Common Stock issued for a purchase price in excess of
$1.10 per share (as adjusted for stock splits,  dividends,  combinations and the
like); and

                                       13
<PAGE>

                 (VIII) any  securities  exchangeable  or  exercisable  for,  or
convertible  into, shares of Common Stock where the deemed issuance price of the
Common Stock upon such  exchange,  exercise or  conversion is in excess of $1.10
per share (as adjusted for stock splits, dividends, combinations and the like).

                                   ARTICLE 8

                 RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
                         COMPLIANCE WITH SECURITIES ACT

         8.1  RESTRICTIONS  ON  TRANSFERABILITY.  The  Securities  shall  not be
transferable  in the absence of an  effective  registration  statement  therefor
under  the  Securities  Act or an  exemption  therefrom.  The  Company  shall be
entitled to give stop transfer  instructions  to its transfer agent with respect
to the Securities in order to enforce the foregoing restrictions.

         8.2 INSTRUCTION SHEET. Each certificate representing Registrable Shares
shall bear the  Instruction  Sheet attached  hereto as EXHIBIT D (in addition to
any legends required hereunder or under applicable securities laws).

         8.3 TRANSFER OF SECURITIES.

              (A) Each Purchaser  hereby  covenants with the Company not to make
any sale of the Securities except:

                 (I) in accordance  with the  Registration  Statement,  in which
case such  Purchaser  covenants to comply with the  requirement  of delivering a
current prospectus; or

                 (II) in accordance  with Rule 144, in which case such Purchaser
covenants to comply with Rule 144; or

                 (III) (A) If the  transferee  has agreed in writing to be bound
by the terms of this  Agreement,  (B) such  Purchaser  shall have  notified  the
Company of the proposed  disposition and shall have furnished the Company with a
detailed  statement of the circumstances  surrounding the proposed  disposition,
and (C) if  reasonably  requested  by the  Company,  such  Purchaser  shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company,  that such  disposition  will not require  registration  of such shares
under the Securities Act and applicable state securities laws.

              (B) Each Purchaser  further  acknowledges and agrees that, if such
Purchaser is selling the Securities  using the prospectus  forming a part of the
Registration Statement, such Securities are not transferable on the books of the
Company  unless  the  certificate  submitted  to the  Company's  transfer  agent
evidencing such Securities is accompanied by a separate  certificate executed by
an officer of, or other  person duly  authorized  by, the  Purchaser in the form
attached hereto as EXHIBIT E.

         8.4  PURCHASER  INFORMATION.  Each  Purchaser  covenants  that  it will
promptly  notify the Company of any changes in the  information set forth in the
Registration  Statement  regarding such Purchaser or such  Purchaser's  "Plan of
Distribution."

                                       14
<PAGE>

         8.5 FILINGS.  The Company  undertakes  and agrees to make all necessary
filings in connection  with the sale of the Shares to the  Purchasers  under any
United States laws and regulations,  or by any domestic  securities  exchange or
trading market, and upon the request of any Purchaser, to provide a copy thereof
to such  Purchasers  promptly  after such  request or filing,  whichever  occurs
later.

         8.6 REPORTING STATUS. Until the second anniversary of this Agreement or
until the Purchasers no longer own any of the Securities,  the Company shall use
its best efforts to file all reports  required to be filed with the SEC pursuant
to Section 13 or 15(d) of the 1934 Act, and the Company shall not file a Form 15
to terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations  thereunder  would permit such
termination.

                                   ARTICLE 9

                                  MISCELLANEOUS

         9.1 WAIVERS AND AMENDMENTS. The terms of this Agreement with respect to
any Purchaser  may be waived or amended with the written  consent of the Company
and such Purchaser. In addition, with the written consent of the Company and the
record holders of a majority of the Registrable Shares then outstanding and held
by Purchasers, the terms of this Agreement may be waived or amended and any such
amendment  or waiver  shall be  binding  upon the  Company  and all  holders  of
Registrable Shares.

         9.2 BROKER'S FEE. Each Purchaser  acknowledges that the Company intends
to pay a fee in respect of the sale of the  Securities  to Puglisi & Co. Each of
the parties to this Agreement  represents  that, on the basis of any actions and
agreements by it, there are no other brokers or finders entitled to compensation
in connection with the sale of Securities to the Purchasers.

         9.3 GOVERNING LAW. This Agreement  shall be governed in all respects by
and construed in  accordance  with the laws of the State of New York without any
regard to conflicts of laws principles.

         9.4 SURVIVAL. The representations, warranties, covenants and agreements
made in this Agreement  shall survive any  investigation  made by the Company or
the Purchasers and the Closing for a period of one year following the Closing.

         9.5  SUCCESSORS AND ASSIGNS.  The provisions  hereof shall inure to the
benefit of, and be binding upon, the successors,  assigns,  heirs, executors and
administrators of the parties to this Agreement.  Upon a permitted transfer of a
Purchaser's  Securities on the books of the Company in accordance with the terms
of  Sections  8.3(a)(iii)  or 8.3(b),  the  Purchaser  may assign its rights and
obligations under this Agreement to the permitted  transferee upon prior written
notice  to the  Company.  Except  as set  forth  in the  previous  sentence,  no
Purchaser  shall assign this Agreement  without the prior written consent of the
Company.

         9.6 ENTIRE  AGREEMENT.  This Agreement  constitutes the full and entire
understanding  and  agreement  between the parties  with regard to the  subjects
thereof.

                                       15
<PAGE>

         9.7  NOTICES,  ETC.  All notices and other  communications  required or
permitted  under this  Agreement  shall be in writing  and may be  delivered  in
person,  by telecopy,  overnight  delivery  service or  registered  or certified
United States mail, addressed to the Company or the Purchasers,  as the case may
be, at their  respective  addresses set forth at the beginning of this Agreement
or on EXHIBIT A, or at such other address as the Company or the Purchasers shall
have   furnished  to  the  other  party  in  writing.   All  notices  and  other
communications  shall be effective upon the earlier of actual receipt thereof by
the  person  to whom  notice  is  directed  or (a) in the  case of  notices  and
communications  sent by personal  delivery or  telecopy,  one business day after
such  notice  or  communication   arrives  at  the  applicable  address  or  was
successfully sent to the applicable  telecopy number, (b) in the case of notices
and communications  sent by overnight delivery service,  at noon (local time) on
the second business day following the day such notice or communication was sent,
and (c) in the case of notices and  communications  sent by United  States mail,
seven days after such notice or  communication  shall have been deposited in the
United States mail.

         9.8 SEVERABILITY OF THIS AGREEMENT.  If any provision of this Agreement
shall be judicially  determined  to be invalid,  illegal or  unenforceable,  the
validity,  legality and enforceability of the remaining  provisions shall not in
any way be affected or impaired thereby.

         9.9  COUNTERPARTS.  This  Agreement  may be  executed  in any number of
counterparts,  each of which  shall be an  original,  but all of which  together
shall constitute one instrument.

         9.10  FURTHER  ASSURANCES.  Each party to this  Agreement  shall do and
perform or cause to be done and  performed  all such further acts and things and
shall execute and deliver all such other agreements,  certificates,  instruments
and documents as the other party hereto may reasonably request in order to carry
out  the  intent  and   accomplish  the  purposes  of  this  Agreement  and  the
consummation of the transactions contemplated hereby.

         9.11 EXPENSES. Except as set forth in the letter agreement, dated as of
June 18, 2003,  between the Company and Puglisi & Co., each party shall bear the
expenses  incurred  on its  behalf  with  respect  to  this  Agreement  and  the
transactions contemplated hereby, including fees of legal counsel.

                                       16
<PAGE>

         The foregoing  agreement is hereby  executed as of the date first above
written.

SBE, INC.

By: /s/ David Brunton
    -----------------------------
    David Brunton
    Chief Financial Officer

PURCHASERS:

PUGLISI CAPITAL PARTNERS, L.P.                SCHOTTENFELD QUALIFIED
                                              ASSOCIATES, L.P.

By: Its General Partner                       By: Its General Partner
    -------------------------------               ----------------------------

By: /s/ Jeffrey Puglisi                       By: /s/ Richard Schottenfeld
    -------------------------------               ----------------------------

/s/ Gina Storelli                             /s/ Craig Bass
-------------------------------               ----------------------------
GINA STORELLI                                 CRAIG BASS

/s/ David Koch                                /s/ Christopher DiVecchio
-------------------------------               ----------------------------
DAVID KOCH                                    CHRISTOPHER DIVECCHIO

                SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT

<PAGE>

                                    EXHIBIT A

                             SCHEDULE OF PURCHASERS

<TABLE>
<CAPTION>
                     PURCHASER                                  PURCHASE PRICE        COMMON SHARES           WARRANTS
                     ---------                                  --------------        -------------           --------
<S>                                                               <C>                    <C>                   <C>
Puglisi Capital Partners, L.P.                                    $220,000               200,000               20,000
399 Park Avenue, 37th Floor
New York, NY  10022
Attn:  Jeff Puglisi

Schottenfeld Qualified Associates, L.P.                            220,000               200,000               20,000
399 Park Avenue, 37th Floor
New York, NY  10022
Attn:  Richard Schottenfeld

Gina Storelli                                                       27,500                25,000                2,500
420 East 55th Street, #10C
New York, NY  10022

Craig Bass                                                          27,500                25,000                2,500
203 Sinclair Place
Westfield, NJ  07090

David Koch                                                          27,500                25,000                2,500
285 Mariomi Road
New Canaan, CT  06840

Christopher DiVecchio                                               27,500                25,000                2,500
100 Sasco River Lane
Southport, CT  06890

TOTAL                                                          $550,000.00               500,000               50,000
</TABLE>

                                      A-1

<PAGE>

                                    EXHIBIT B

                                 FORM OF WARRANT

THIS WARRANT AND THE UNDERLYING  SECURITIES HAVE NOT BEEN  REGISTERED  UNDER THE
SECURITIES  ACT OF 1933,  AS AMENDED (THE "ACT") OR ANY STATE  SECURITIES  LAWS.
THEY MAY NOT BE SOLD,  OFFERED FOR SALE,  PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE  REGISTRATION  STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND
APPLICABLE  STATE  SECURITIES LAWS OR AN OPINION OF COUNSEL  SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

                                    SBE, INC.

                        WARRANT TO PURCHASE COMMON STOCK

                                                           ______________, 2003
                         VOID AFTER _____________, 2008

         THIS CERTIFIES THAT, for value  received,  ___________________________,
with its principal office at  __________________________,  or permitted  assigns
(the "Holder"),  is entitled to subscribe for and purchase at the Exercise Price
(defined below) from SBE, Inc., a Delaware  corporation (the  "Company"),  up to
__________  shares of the Common Stock of the Company (the "Common  Stock"),  as
adjusted as provided below.

         1.  DEFINITIONS.  As used herein,  the  following  terms shall have the
following respective meanings:

              (A) "Exercise  Period" shall mean the period  commencing  with the
date hereof and ending at 5:00 p.m.  (California  time) on the fifth anniversary
of the date hereof.

              (B)  "Exercise  Price"  shall  mean  $1.50 per  share,  subject to
adjustment pursuant to Section 5 below.

              (C)  "Exercise  Shares"  shall  mean the  shares of the  Company's
Common Stock issuable upon exercise of this Warrant.

         2. EXERCISE OF WARRANT.  The rights  represented by this Warrant may be
exercised  in  whole or in part at any  time  during  the  Exercise  Period,  by
delivery of the  following  to the Company at its address set forth above (or at
such other address as it may designate by notice in writing to the Holder):

              (A) An executed Notice of Exercise in the form attached hereto;

              (B) Payment of the Exercise Price either in cash or by check; and

              (C) This Warrant.

                                      B-1
<PAGE>

         Upon  the  exercise  of the  rights  represented  by  this  Warrant,  a
certificate or certificates for the Exercise Shares so purchased,  registered in
the name of the Holder or persons  affiliated with the Holder,  if the Holder so
designates, shall be issued and delivered to the Holder within a reasonable time
after the rights represented by this Warrant shall have been so exercised.

         The person in whose name any certificate or  certificates  for Exercise
Shares are to be issued upon  exercise of this  Warrant  shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such  certificate  or  certificates,  except that, if the date of
such  surrender  and  payment  is a date  when the stock  transfer  books of the
Company  are closed,  such  person  shall be deemed to have become the holder of
such shares at the close of business  on the next  succeeding  date on which the
stock transfer books are open.

         Notwithstanding  any  provisions  herein to the  contrary,  if the fair
market  value of one share of the  Company's  Common  Stock is greater  than the
Exercise  Price  (at the date of  calculation  as set forth  below),  in lieu of
exercising  this  Warrant by  payment  of cash,  the Holder may elect to receive
shares equal to the value (as determined  below) of this Warrant (or the portion
thereof being canceled) by surrender of this Warrant at the principal  office of
the Company  together  with the  properly  endorsed  Notice of Exercise in which
event the Company  shall issue to the Holder a number of shares of Common  Stock
computed using the following formula:

                           X = Y (A-B)
                               -------
                                   A

Where X =         the  number  of  shares  of  Common  Stock to be issued to the
                  Holder

      Y =         the  number of shares of Common  Stock  purchasable  under the
                  Warrant  or,  if  only a  portion  of  the  Warrant  is  being
                  exercised,  the portion of the Warrant being  canceled (at the
                  date of such calculation)

      A =         the fair  market  value of one share of the  Company's  Common
                  Stock (at the date of such calculation)

      B =         Exercise Price (as adjusted to the date of such calculation)

         For purposes of the above  calculation,  the "fair market value" of one
share of Common Stock shall mean (i) the average of the closing sales prices for
the shares of Common Stock on the Nasdaq SmallCap Market or other trading market
where such  security  is listed or traded as  reported  by  Bloomberg  Financial
Markets (or a comparable  reporting service of national  reputation  selected by
the Company and  reasonably  acceptable  to the holders if  Bloomberg  Financial
Markets is not then  reporting  sales  prices of such  security)  (collectively,
"Bloomberg")  for the 10  consecutive  trading days  immediately  preceding such
date, or (ii) if the Nasdaq SmallCap Market is not the principal  trading market
for the  shares of Common  Stock,  the  average  of the  reported  sales  prices
reported by  Bloomberg  on the  principal  trading  market for the Common  Stock
during the same period, or, if there is no sales price for such period, the last
sales price  reported by Bloomberg  for such period,  or (iii) if neither of the
foregoing applies, the

                                      B-2
<PAGE>

last sales  price of such  security in the  over-the-counter  market on the pink
sheets or bulletin  board for such security as reported by  Bloomberg,  or if no
sales  price is so  reported  for  such  security,  the  last bid  price of such
security as  reported  by  Bloomberg,  or (iv) if fair  market  value  cannot be
calculated as of such date on any of the foregoing  bases, the fair market value
shall be as  determined by the Board of Directors of the Company in the exercise
of its good faith judgment.

         3. COVENANTS OF THE COMPANY.

              (A)  COVENANTS AS TO EXERCISE  SHARES.  The Company  covenants and
agrees that all  Exercise  Shares  that may be issued  upon the  exercise of the
rights  represented by this Warrant will,  upon issuance,  be validly issued and
outstanding,  fully paid and  nonassessable,  and free from all taxes, liens and
charges with respect to the issuance thereof.

              (B) NO IMPAIRMENT. Except as and to the extent waived or consented
to by the Holder,  the Company  will not, by  amendment  of its  Certificate  of
Incorporation or through any reorganization,  transfer of assets, consolidation,
merger, dissolution,  issue or sale of securities or any other voluntary action,
avoid or seek to avoid the  observance or  performance of any of the terms to be
observed or performed  hereunder  by the Company,  but will at all times in good
faith assist in the carrying  out of all the  provisions  of this Warrant and in
the taking of all such action as may be  necessary  or  appropriate  in order to
protect the exercise rights of the Holder against impairment.

              (C)  NOTICES  OF RECORD  DATE.  In the event of any  taking by the
Company of a record of the holders of any class of securities for the purpose of
determining  the  holders  thereof who are  entitled to receive any  dividend or
other distribution, the Company shall mail to the Holder, at least 10 days prior
to the date  specified  herein,  a notice  specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.

         4. REPRESENTATIONS AND COVENANTS OF HOLDER.

              (A)  ACQUISITION  OF  WARRANT  FOR  PERSONAL  ACCOUNT.  The Holder
represents  and warrants that it is acquiring the Warrant solely for its account
for  investment  and not  with a view to or for  sale  or  distribution  of said
Warrant or any part thereof.  The Holder also  represents  that the entire legal
and  beneficial  interests  of the  Warrant  and  Exercise  Shares the Holder is
acquiring is being acquired for, and will be held for, its account only.

              (B) SECURITIES ARE NOT REGISTERED.

              (1) The  Holder  understands  that the  Warrant  and the  Exercise
Shares have not been  registered  under the  Securities  Act of 1933, as amended
(the "Act"),  on the basis that no  distribution or public offering of the stock
of the Company is to be  effected.  The Holder  realizes  that the basis for the
exemption may not be present if, notwithstanding its representations, the Holder
has a present  intention of acquiring the securities for a fixed or determinable
period in the future,  selling (in connection with a distribution or otherwise),
granting any  participation  in, or otherwise  distributing the securities.  The
Holder  has no such  present  intention  except as set forth in Article 7 of the
Securities  Purchase  Agreement  dated as of

                                      B-3
<PAGE>

the date hereof by and among the Company and the  purchasers  named therein (the
"Securities Purchase Agreement").

              (2) The Holder recognizes that the Warrant and the Exercise Shares
must be held indefinitely unless they are subsequently  registered under the Act
or an exemption from such registration is available.  The Holder recognizes that
the Company will  register the Exercise  Shares  pursuant to the  provisions  of
Section 7 of the Securities Purchase Agreement.

              (3) The Holder is aware that  neither the Warrant nor the Exercise
Shares may be sold  pursuant  to Rule 144 adopted  under the Act unless  certain
conditions  are met,  including,  among other things,  the existence of a public
market for the shares,  the  availability of certain current public  information
about the Company,  the resale  following the required holding period under Rule
144 and the  number of shares  being  sold  during  any three  month  period not
exceeding specified limitations.

         (C) DISPOSITION OF WARRANT AND EXERCISE SHARES.

              (1) The Holder will not make any disposition of all or any part of
the Warrant or Exercise Shares in any event unless and until:

              (A) The Company shall have received a letter secured by the Holder
from the  Securities  and  Exchange  Commission  stating  that no action will be
recommended to the Commission with respect to the proposed disposition;

              (B) There is then in effect a registration statement under the Act
covering such proposed  disposition  and such  disposition is made in accordance
with said registration statement; or

              (C) The Holder  shall have  notified  the Company of the  proposed
disposition  and shall have  furnished the Company with a detailed  statement of
the  circumstances  surrounding  the  proposed  disposition,  and if  reasonably
requested by the Company,  the Holder shall have  furnished  the Company with an
opinion of counsel,  reasonably  satisfactory to the Company,  for the Holder to
the effect that such disposition  will not require  registration of such Warrant
or Exercise Shares under the Act or any applicable state securities laws.

              (2) The  Holder  understands  and  agrees  that  all  certificates
evidencing the shares to be issued to the Holder may bear the following legend:

         "THESE  SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
         1933, AS AMENDED (THE "ACT").  THEY MAY NOT BE SOLD,  OFFERED FOR SALE,
         PLEDGED OR  HYPOTHECATED  IN THE ABSENCE OF AN  EFFECTIVE  REGISTRATION
         STATEMENT AS TO THE  SECURITIES  UNDER THE ACT OR AN OPINION OF COUNSEL
         SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."

                                      B-4
<PAGE>

         5. ADJUSTMENT OF EXERCISE PRICE AND SHARES.

            (A) In the event of changes in the outstanding Common Stock of the
Company   by   reason   of  stock   dividends,   split-ups,   recapitalizations,
reclassifications,   combinations   or   exchanges   of   shares,   separations,
reorganizations,   liquidations,   consolidation,  acquisition  of  the  Company
(whether through merger or acquisition of substantially  all the assets or stock
of the Company), or the like, the number and class of shares available under the
Warrant  in the  aggregate  and the  Exercise  Price  shall  be  correspondingly
adjusted to give the Holder of the Warrant,  on exercise for the same  aggregate
Exercise Price, the total number, class, and kind of shares or other property as
the Holder  would have owned had the Warrant been  exercised  prior to the event
and had the  Holder  continued  to hold such  shares  until the event  requiring
adjustment.  The  form  of this  Warrant  need  not be  changed  because  of any
adjustment in the number of Exercise Shares subject to this Warrant.

            (B) If at any time or from  time to time  the  holders  of  Common
Stock of the  Company  (or any shares of stock or other  securities  at the time
receivable  upon the  exercise of this  Warrant)  shall have  received or become
entitled to receive, without payment therefor,

              (1) Common Stock or any shares of stock or other  securities which
are at any time  directly or indirectly  convertible  into or  exchangeable  for
Common Stock,  or any rights or options to subscribe for,  purchase or otherwise
acquire any of the  foregoing  by way of dividend or other  distribution  (other
than a dividend or distribution covered in section 5(a) above),

              (2) any cash paid or payable otherwise than as a cash dividend, or

              (3)  Common  Stock or  additional  stock or  other  securities  or
property  (including  cash)  by  way  of  spinoff,  split-up,  reclassification,
combination of shares or similar corporate  rearrangement  (other than shares of
Common Stock pursuant to Section 5(a) above),

then and in each such case,  the Holder  hereof will,  upon the exercise of this
Warrant,  be entitled to receive,  in addition to the number of shares of Common
Stock receivable thereupon,  and without payment of any additional consideration
therefor,  the amount of stock and other securities and property (including cash
in the cases  referred to in clauses (2) and (3) above)  which such Holder would
hold on the date of such  exercise  had he been the  holder  of  record  of such
Common Stock as of the date on which holders of Common Stock  received or became
entitled  to  receive  such  shares  or all  other  additional  stock  and other
securities and property.

            (C) SALE OF COMMON STOCK BELOW EXERCISE PRICE.

              (I) If at any time or from time to time after the issuance hereof,
the  Company  issues or sells,  or is deemed by the express  provisions  of this
Section  5(c) to have  issued or sold  Additional  Shares  of  Common  Stock (as
defined  below)  for an  Effective  Price  (as  defined  below)  less  than  the
then-existing  Exercise Price (a "Qualifying  Dilutive  Issuance"),  then and in
each such case, the then-existing  Exercise Price shall be reduced,  as of 12:01
a.m. New York time on the date immediately  after such issue or sale, to a price
equal to the Effective Price

                                      B-5
<PAGE>

of such  Additional  Shares of Common Stock issued or deemed to be issued in the
Qualifying Dilutive Issuance.

              (II) No  adjustment  shall  be made to the  Exercise  Price  in an
amount less than one cent per share. Any adjustment  otherwise  required by this
Section 5(c) that is not required to be made due to the preceding sentence shall
be included in any subsequent adjustment to the Exercise Price.

              (III) For the purpose of making any adjustment required under this
Section 5(c), the consideration received by the Company for any issue or sale of
securities (the "Aggregate  Consideration")  shall be computed at the net amount
of cash received by the Company after  deduction of any  underwriting or similar
commissions,  compensation  or  concessions  paid or allowed  by the  Company in
connection with such issue or sale but without deduction of any expenses payable
by the Company.  If Additional Shares of Common Stock or Convertible  Securities
(as defined  below) are sold  together  with other stock or  securities or other
assets  of  the  Company  for  a  consideration  that  covers  both,   Aggregate
Consideration  will be computed as the portion of the  consideration so received
that may be reasonably  determined in good faith by the Board to be allocable to
such  Additional  Shares of Common  Stock,  Convertible  Securities or rights or
options.

              (IV) (1) For the  purpose of the  adjustment  required  under this
Section 5(c), if the Company sells preferred stock, options, warrants,  purchase
rights or other securities convertible into or exercisable for Additional Shares
of Common Stock ("Convertible Securities"),  the Company shall be deemed to have
issued at the time of the issuance of such  Convertible  Securities  the maximum
number of Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares an
amount equal to the total amount of the  consideration,  if any, received by the
Company for the issuance of such Convertible Securities plus the minimum amounts
of consideration, if any, payable to the Company upon the conversion or exercise
thereof (other than by cancellation  of liabilities or obligations  evidenced by
such  Convertible  Securities);  provided  that if the  minimum  amounts of such
consideration  cannot be  ascertained,  but are a function  of  antidilution  or
similar  protective  clauses,  the Company  shall be deemed to have received the
minimum amounts of consideration without reference to such clauses.

              (2) If the minimum amount of consideration  payable to the Company
upon the exercise or conversion of  Convertible  Securities is reduced over time
or on the occurrence or  non-occurrence of specified events other than by reason
of  antidilution  adjustments,  the  Effective  Price on the  then-unexercisable
portion of this  Warrant  shall be  recalculated  using the figure to which such
minimum  amount of  consideration  is  reduced;  provided  further,  that if the
minimum  amount of  consideration  payable to the Company  upon the  exercise or
conversion of such rights,  options or  Convertible  Securities is  subsequently
increased,  the Effective Price shall be again  recalculated using the increased
minimum  amount of  consideration  payable to the Company  upon the  exercise or
conversion of such Convertible Securities.

              (3) No further  adjustment of the Exercise Price, as adjusted upon
the issuance of such  Convertible  Securities,  shall be made as a result of the
actual

                                      B-6
<PAGE>

issuance of Additional  Shares of Common Stock the conversion or exercise of any
such Convertible Securities. If the conversion or exercise privilege represented
by any such  Convertible  Securities shall expire without having been exercised,
the Exercise Price as adjusted upon the issuance of such Convertible  Securities
shall be readjusted to the Exercise  Price that would have been in effect had an
adjustment  been made on the  basis  that the only  Additional  Shares of Common
Stock so issued were the  Additional  Shares of Common Stock,  if any,  actually
issued or sold on the exercise or conversion of such Convertible Securities, and
such  Additional  Shares of Common  Stock,  if any,  were issued or sold for the
consideration  actually  received by the Company  upon such  exercise,  plus the
consideration,  if any,  actually received by the Company for issuing or selling
the Convertible Securities actually converted,  plus the consideration,  if any,
actually  received by the Company (other than by  cancellation of liabilities or
obligations evidenced by such Convertible  Securities) on the conversion of such
Convertible Securities.

         (V) For the purpose of making any  adjustment to the Exercise  Price as
required under this Section 5(c), "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Company or deemed to be issued pursuant
to this Section 5(c) (including shares of Common Stock  subsequently  reacquired
or retired by the Company) for cash in a bona fide financing  transaction or any
other assets or consideration in any transaction. Notwithstanding the foregoing,
Additional Shares of Common Stock shall not include:

              (1) shares of Common  Stock or  Convertible  Securities  issued to
employees,  officers or directors of, or  consultants or advisors to the Company
or any  subsidiary  pursuant to stock  purchase or stock  option  plans or other
arrangements;

              (2) shares of Common  Stock  issued  pursuant  to the  exercise of
Convertible Securities outstanding as of the date hereof;

              (3) shares of Common Stock or  Convertible  Securities  issued for
consideration other than cash pursuant to a merger, consolidation,  acquisition,
strategic alliance or similar business combination;

              (4) shares of Common  Stock or  Convertible  Securities  issued to
third-party  service  providers in exchange for or as partial  consideration for
services rendered to the Company; and

              (5)  any  Common  Stock  or  Convertible   Securities   issued  in
connection with strategic transactions involving the Company and other entities,
including  (i)  joint   ventures,   manufacturing,   marketing  or  distribution
arrangements or (ii) technology transfer or development arrangements.

         References to Common Stock in the  subsections of this clause (v) above
shall  mean all  shares of Common  Stock  issued by the  Company or deemed to be
issued pursuant to this Section 5(c). The "Effective Price" of Additional Shares
of Common Stock shall mean the quotient  determined by dividing the total number
of  Additional  Shares of Common  Stock  issued or sold,  or deemed to have been
issued or sold by the  Company  under  this  Section  5(c),  into the

                                      B-7
<PAGE>

Aggregate Consideration received, or deemed to have been received by the Company
for such issue under this Section  5(c),  for such  Additional  Shares of Common
Stock.

              (D)  The  Exercise   Price  shall  also  be  subject  to  downward
adjustment as provided in Section 7.4 of the Securities Purchase Agreement.

         6.  FRACTIONAL  SHARES.  No fractional  shares shall be issued upon the
exercise of this Warrant as a consequence of any adjustment pursuant hereto. All
Exercise Shares (including fractions) issuable upon exercise of this Warrant may
be aggregated for purposes of  determining  whether the exercise would result in
the issuance of any fractional share. If, after aggregation,  the exercise would
result in the  issuance of a fractional  share,  the Company  shall,  in lieu of
issuance of any  fractional  share,  pay the Holder  otherwise  entitled to such
fraction a sum in cash equal to the product  resulting from multiplying the then
current fair market value of an Exercise Share by such fraction.

         7. NO  STOCKHOLDER  RIGHTS.  This  Warrant  in and of itself  shall not
entitle the Holder to any voting rights or other rights as a stockholder  of the
Company.

         8. TRANSFER OF WARRANT.  Subject to applicable laws and the restriction
on transfer  set forth on the first page of this  Warrant,  this Warrant and all
rights hereunder are transferable, by the Holder in person or by duly authorized
attorney,  upon  delivery of this  Warrant and the form of  assignment  attached
hereto to any  transferee  designated by Holder.  The  transferee  shall sign an
investment letter in form and substance satisfactory to the Company.

         9. LOST,  STOLEN,  MUTILATED OR DESTROYED  WARRANT.  If this Warrant is
lost,  stolen,  mutilated  or  destroyed,  the Company  may, on such terms as to
indemnity or otherwise as it may reasonably  impose (which shall, in the case of
a mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost,  stolen,  mutilated or destroyed.
Any such new Warrant shall constitute an original contractual  obligation of the
Company,  whether or not the  allegedly  lost,  stolen,  mutilated  or destroyed
Warrant shall be at any time enforceable by anyone.

         10. NOTICES,  ETC. All notices required or permitted hereunder shall be
in writing and shall be deemed  effectively given: (a) upon personal delivery to
the party to be notified,  (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day,  (c) five days after  having been sent by  registered  or  certified  mail,
return receipt requested,  postage prepaid,  or (d) one day after deposit with a
nationally  recognized  overnight  courier,  specifying next day delivery,  with
written verification of receipt. All communications shall be sent to the Company
at the address  listed on the signature page and to Holder at the address listed
on the  signature  page or at such other  address  as the  Company or Holder may
designate by 10 days' advance written notice to the other parties hereto.

         11. ACCEPTANCE.  Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to all of the terms and conditions contained herein.

                                      B-8
<PAGE>

                                      B-9
<PAGE>

12.  GOVERNING  LAW. This Warrant and all rights,  obligations  and  liabilities
hereunder  shall be governed by the laws of the State of New York without regard
to conflicts of laws principles.

                                      B-10
<PAGE>

         The  Company  has  caused  this  Warrant  to be  executed  by its  duly
authorized officer as of June 27, 2003.

                                         SBE, INC.

                                         By:
                                            ---------------------------------
                                            David Brunton
                                            Chief Financial Officer

                                         Address:
                                                 ----------------------------

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

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

                                         Holder's address:

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

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

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

<PAGE>

                               NOTICE OF EXERCISE

TO:  SBE, INC.

         (1) |_| The  undersigned  hereby elects to purchase  ________ shares of
the Common  Stock of SBE,  INC.  (the  "Company")  pursuant  to the terms of the
attached  Warrant,  and tenders  herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.

             |_| The undersigned  hereby elects to purchase  ________ shares of
Common Stock of the Company pursuant to the terms of the net exercise provisions
set forth in Section 2 of the attached Warrant,  and shall tender payment of all
applicable transfer taxes, if any.

         (2) Please issue a certificate or certificates representing said shares
of Common Stock of the Company in the name of the  undersigned  or in such other
name as is specified below:

                            ------------------------
                                     (Name)

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

                            ------------------------
                                    (Address)

         (3) The undersigned  represents that (i) the aforesaid shares of Common
Stock are being acquired for the account of the  undersigned  for investment and
not with a view to, or for resale in connection with, the  distribution  thereof
and that the undersigned  has no present  intention of distributing or reselling
such shares,  other than as contemplated by Article 7 of the Securities Purchase
Agreement  dated as of June 27, 2003 by and among the Company and the purchasers
named therein (the  "Securities  Purchase  Agreement");  (ii) the undersigned is
aware of the Company's business affairs and financial condition and has acquired
sufficient  information about the Company to reach an informed and knowledgeable
decision  regarding its  investment  in the Company;  (iii) the  undersigned  is
experienced  in  making  investments  of this  type and has such  knowledge  and
background in financial and business  matters that the undersigned is capable of
evaluating  the  merits  and  risks  of  this   investment  and  protecting  the
undersigned's own interests; (iv) the undersigned understands that the shares of
Common Stock  issuable  upon  exercise of this Warrant have not been  registered
(except to the extent a registration  statement  pursuant to and as contemplated
by  Article 7 of the  Securities  Purchase  Agreement  is  effective)  under the
Securities  Act of 1933,  as  amended  (the  "Securities  Act"),  by reason of a
specific exemption from the registration provisions of the Securities Act, which
exemption  depends  upon,  among  other  things,  the bona  fide  nature  of the
investment  intent as expressed  herein,  and,  because such securities have not
been registered under the Securities Act, they must be held indefinitely  unless
subsequently  registered  under the  Securities  Act or an  exemption  from such
registration  is  available;  (v) the  undersigned  is aware that the  aforesaid
shares of Common  Stock may not be sold  pursuant to Rule 144 adopted  under the
Securities Act unless certain  conditions are met and until the  undersigned has
held the shares for the number of years  prescribed  by Rule 144, that among the
conditions for use of the Rule is the availability of current information to the
public  about  the  Company;  and (vi) the  undersigned  agrees  not to make any
disposition  of all or

                                       1
<PAGE>

any part of the aforesaid  shares of Common Stock unless and until there is then
in effect a  registration  statement  under the  Securities  Act  covering  such
proposed  disposition  and such  disposition  is made in  accordance  with  said
registration  statement,  or the  undersigned  has  provided the Company with an
opinion of counsel  satisfactory to the Company,  stating that such registration
is not required.

-----------------------------                   -------------------------------
(Date)                                          (Signature)

                                                -------------------------------
                                                (Print name)

                                       2
<PAGE>

                                 ASSIGNMENT FORM

                  (To assign the foregoing Warrant, execute this form and supply
                  required  information.  Do  not  use  this  form  to  purchase
                  shares.)

         FOR VALUE  RECEIVED,  the  foregoing  Warrant and all rights  evidenced
thereby are hereby assigned to

Name:
     --------------------------------------------------------------------------
                                   (Please Print)

Address:
        -----------------------------------------------------------------------
                                   (Please Print)

Dated:  __________, 20__

Holder's
Signature:
            -----------------------------------------------------------

Holder's
Address:
          -------------------------------------------------------------

NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change  whatever.  Officers of  corporations  and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.

<PAGE>

                                    EXHIBIT C

                         INSTRUCTION SHEET FOR PURCHASER
                   (TO BE READ IN CONJUNCTION WITH THE ENTIRE
                         SECURITIES PURCHASE AGREEMENT)

A.       Complete the following items in the Securities Purchase Agreement:

         1.       Provide the information  regarding the Purchaser  requested on
                  the  signature  page.  The  Agreement  must be  executed by an
                  individual authorized to bind the Purchaser.

         2.       EXHIBIT C-1 - Stock Certificate Questionnaire:

                  Provide the  information  requested  by the Stock  Certificate
                  Questionnaire.

         3.       EXHIBIT C-2 - Registration Statement Questionnaire:

                  Provide  the   information   requested  by  the   Registration
                  Statement Questionnaire.

         4.       EXHIBIT C-3 - Purchaser Certificate:

                  Provide  the  information  requested  by the  Certificate  for
                  Individual   Purchasers  or  the  Certificate  for  Corporate,
                  Partnership,   Trust,  Foundation  and  Joint  Purchasers,  as
                  applicable.

         5.       Return the signed Securities Purchase Agreement to:

                           William Edison
                           Cooley Godward LLP
                           One Maritime Plaza, 20th Floor
                           San Francisco, California 94111

B.       Instructions  regarding  the  transfer  of funds  for the  purchase  of
         Securities will be telecopied to the Purchaser at a later date.

C.       Upon the resale of the  Registrable  Shares by the Purchaser  after the
         Registration Statement covering the Registrable Shares is effective, as
         described in the Securities Purchase Agreement, the Purchaser:

         (I)      must deliver a current  prospectus,  and annual and  quarterly
                  reports of the Company to the buyer (prospectuses,  and annual
                  and quarterly  reports may be obtained from the Company at the
                  Purchaser's request); and

         (II)     must send a letter in the form of EXHIBIT E to the  Securities
                  Purchase  Agreement  to the  Company  so that the  Registrable
                  Shares may be properly transferred.

                                       C-1

<PAGE>

                                   EXHIBIT C-1

                                    SBE, INC.
                         STOCK CERTIFICATE QUESTIONNAIRE

Pursuant to Section 4.3 of the  Agreement,  please provide us with the following
information:

<TABLE>
<S>                                                                                     <C>
1.   The exact name that the  Securities  are to be  registered  in (this is the
     name that will appear on the stock  certificate(s)).  You may use a nominee
     name if appropriate:                                                               ______________________________

2.   The relationship between the Purchaser of the Securities and the Registered
     Holder listed in response to item 1 above:                                         ______________________________

3.   The mailing  address of the Registered  Holder listed in response to item 1
     above:                                                                             ______________________________

                                                                                        ______________________________

                                                                                        ______________________________

4.   The Tax  Identification  Number of the Registered Holder listed in response
     to item 1 above:                                                                   ______________________________

</TABLE>

                                     C-1-1

<PAGE>

                                   EXHIBIT C-2

                                    SBE, INC.

                      REGISTRATION STATEMENT QUESTIONNAIRE

         In  connection  with the  preparation  of the  Registration  Statement,
please provide us with the following information regarding the Purchaser.

A. GENERAL INFORMATION

         1. Please state your organization's name exactly as it should appear in
the Registration Statement:

         2.  Have you or your  organization  had any  position,  office or other
material  relationship  within  the past  three  years  with the  Company or its
affiliates   other  than  as  disclosed  in  the  Prospectus   included  in  the
Registration Statement?

                                 [ ] Yes [ ] No

         If yes, please indicate the nature of any such relationships below:

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

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

B.       SECURITIES HOLDINGS

         Please fill in all blanks in the  following  questions  related to your
BENEFICIAL  OWNERSHIP  of the  Company's  capital  stock.  Generally,  the  term
"BENEFICIAL  OWNERSHIP"  refers  to  any  direct  or  indirect  interest  in the
securities  which  entitles  you to any of the rights or benefits of  ownership,
even though you may not be the holder of record of the securities.  For example,
securities  held in "street  name" over which you exercise  voting or investment
power would be considered  BENEFICIALLY OWNED by you. Other examples of indirect
ownership include ownership by a partnership in which you are a partner or by an
estate  or  trust of which  you or any  member  of your  IMMEDIATE  FAMILY  is a
beneficiary.  Ownership of  securities  held in the names of your spouse,  minor
children or other  relatives who live in the same household may be attributed to
you.

================================================================================
         PLEASE  NOTE:  IF YOU HAVE ANY REASON TO BELIEVE  THAT ANY  INTEREST IN
SECURITIES OF THE COMPANY WHICH YOU MAY HAVE,  HOWEVER  REMOTE,  IS A BENEFICIAL
INTEREST,  PLEASE  DESCRIBE  SUCH  INTEREST.  FOR PURPOSES OF RESPONDING TO THIS
QUESTIONNAIRE,  IT IS  PREFERABLE  TO ERR ON THE SIDE OF  INCLUSION  RATHER THAN
EXCLUSION.  WHERE THE SEC'S INTERPRETATION OF BENEFICIAL OWNERSHIP WOULD REQUIRE
DISCLOSURE  OF YOUR INTEREST OR POSSIBLE  INTEREST IN CERTAIN  SECURITIES OF THE
COMPANY,  AND YOU BELIEVE THAT YOU DO NOT  ACTUALLY  POSSESS THE  ATTRIBUTES  OF
BENEFICIAL OWNERSHIP, AN APPROPRIATE RESPONSE IS TO DISCLOSE THE INTEREST AND AT
THE SAME TIME DISCLAIM BENEFICIAL OWNERSHIP OF THE SECURITIES.
================================================================================

                                     C-2-1

<PAGE>

         1. As of JUNE 27, 2003, I owned outright  (including  shares registered
in my name  individually  or jointly with  others,  shares held in the name of a
bank,  broker,  nominee,  depository  or in "street  name" for my account),  the
following number of shares of the Company's capital stock: _________________.

         2. In addition to the number of shares I own  outright as  indicated by
my answer to question B(1), as of JUNE 27, 2003, I had or shared voting power or
investment  power,  directly or  indirectly,  through a  contract,  arrangement,
understanding, relationship or otherwise, over the following number of shares of
the Company's capital stock: _________________.

         If the answer to this question B(2) was not "zero," please complete the
following:  with  whom  shared;  and  the  nature  of the  relationship  and any
underlying voting trust agreement, investment arrangement or the like:

                           SHARED VOTING POWER:

 =========================== ========================= =========================

      NUMBER OF SHARES           WITH WHOM SHARED        NATURE OF RELATIONSHIP
 =========================== ========================= =========================

 =========================== ========================= =========================

 SHARED INVESTMENT POWER:

 =========================== ========================= =========================

      NUMBER OF SHARES           WITH WHOM SHARED        NATURE OF RELATIONSHIP
 =========================== ========================= =========================

 =========================== ========================= =========================

         As of AUGUST 27, 2003, I will have the right to acquire ________ shares
of the Company's  capital stock  pursuant to  outstanding  stock options  issued
under the  Company's  stock  option  plans and  ______  shares  pursuant  to the
exercise of outstanding warrants (none, indicated by "0" above).

 ============================================================================
                            OPTIONS AND WARRANTS
              CLASS                                   NUMBER OF SHARES
 ======================================= ====================================

 ======================================= ====================================

                                     C-2-2

<PAGE>

         (4) Please  identify  the  natural  person or persons  who have  voting
and/or investment control over the Company's  securities that you own, and state
whether such person(s)  disclaims  beneficial  ownership of the securities.  For
example, if you are a general partnership,  please identify the general partners
in the partnership.

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

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

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

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

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

                                     C-2-3

<PAGE>

C.       NASD QUESTIONS

         1. Are you (i) a "member"/1/ of the National  Association of Securities
Dealers,  Inc. (the  "NASD"),  (ii) an  "affiliate"/2/  of a member of the NASD,
(iii)  a  "person  associated  with a  member"  or an  "associated  person  of a
member"/3/  of the  NASD or (iv) an  immediate  family  member/4/  of any of the
foregoing  persons?  IF YES,  please  identify  the  member  and  describe  such
relationship (whether direct or indirect), and please respond to Question Number
2 below; IF NO, please proceed directly to Question Number 3.

                               Yes _____ No _____

Description:

-----------------
  /1/ NASD defines a "member" as any broker or dealer  admitted to membership in
the NASD, or any officer or partner or branch  manager of such a member,  or any
person  occupying a similar  status or performing a similar  function for such a
member.
  /2/ The term "affiliate" means a person that directly,  or indirectly  through
one or more  intermediaries,  controls,  or is  controlled  by,  or is in common
control  with,  the person  specified.  Persons  who have acted or are acting on
behalf  of or for the  benefit  of a  person  include,  but are not  necessarily
limited  to,  directors,  officers,  employees,  agents,  consultants  and sales
representatives. The following should apply for purposes of the foregoing:
         (i) a person  should be  presumed  to  control  a Member if the  person
beneficially  owns 10 percent or more the  outstanding  voting  securities  of a
Member which is a corporation, or beneficially owns a partnership interest in 10
percent or more of the  distributable  profits or losses of a Member  which is a
partnership;
         (ii) a Member  should be presumed to control a person if the Member and
Persons  Associated  With a Member  beneficially  own 10  percent or more of the
outstanding   voting  securities  of  a  person  which  is  a  corporation,   or
beneficially  own  a  partnership   interest  in  10  percent  or  more  of  the
distributable profits or losses of a person which is a partnership;
         (iii) a person  should be presumed to be under  common  control  with a
Member if:
                  (1) the same  person  controls  both the  Member  and  another
         person by  beneficially  owning 10 percent  or more of the  outstanding
         voting  securities of a Member or person which is a corporation,  or by
         beneficially owning a partnership interest in 10 percent or more of the
         distributable  profits  or  losses  of a Member  or  person  which is a
         partnership; or
                  (2) a person having the power to direct or cause the direction
         of the management or policies of the Member or such person also has the
         power to direct or cause the direction of the management or policies of
         the other entity in question.
  /3/ The NASD  defines a "person  associated  with a member" or an  "associated
person of a member"  as being  every sole  proprietor,  partner,  equity  owner,
officer,  director  or branch  manager  of any  member,  or any  natural  person
occupying  a similar  status or  performing  similar  functions,  or any natural
person engaged in the investment banking or securities  business who directly or
indirectly controls or is controlled by such member (for example, any employee),
whether or not any such person is  registered or exempt from  registration  with
the NASD.
  /4/ Immediate family includes parents, mother-in-law,  father-in-law,  husband
or wife,  brother or sister,  brother-in-law  or  sister-in-law,  son-in-law  or
daughter-in-law, and children, or any other person who is supported, directly or
indirectly,  to a material extent,  by a person  associated with a member of the
NASD or any other broker/dealer.

                                     C-2-4

<PAGE>

         2. If you  answered  "yes" to  Question  Number 1,  please  furnish any
information as to whether any such member intends to participate in any capacity
in the public offering, including the details of such participation:

Description:

         3. Are you or have you been an "underwriter or related  person"/5/ or a
person  associated  with an underwriter or related  person,  including,  without
limitation,  with  respect  to the  proposed  public  offering?  If yes,  please
identify  the  underwriter  or related  person and  describe  such  relationship
(whether direct or indirect).

                               Yes _____ No _____

Description:

         4. If known, please describe in detail any underwriting  compensations,
arrangements  or dealings  entered into during the previous  twelve  months,  or
proposed  to  be  consummated  in  the  next  twelve  months,  between  (i)  any
underwriter or related person,  member of the NASD, affiliate of a member of the
NASD,  person  associated with a member or associated  person of a member of the
NASD or any  immediate  family  member  thereof,  on the one hand,  and (ii) the
Company,  or any director,  officer or stockholder  thereof,  on the other hand,
which  provides  for the receipt of any item of value and/or the transfer of any
warrants, options or other securities from the Company to any such person (other
than the information  relating to the  arrangements  with any investment firm or
underwriting   organization   which  may  participate  in  the  proposed  public
offering).

Description:

         5.  Have  you  purchased  the  securities  in the  ordinary  course  of
business?

                               Yes _____ No _____

----------------
   /5/ The  term   "underwriter  or  related  person"   includes   underwriters,
underwriters' counsel,  financial consultants and advisors,  finders, members of
the selling or distribution group, and any and all other persons associated with
or related to any of such persons,  including members of the immediate family of
such persons.

                                     C-2-5
<PAGE>

The answers to the foregoing  questions  are correctly  stated to the best of my
information  and belief.  I shall advise William Edison at (415)  693-2021,  the
Company's outside counsel, promptly of any changes in the foregoing information.

                                     ------------------------------------------
                                     (Print name of Selling Security Holder)

                                     ------------------------------------------
                                     (Signature)

                                     By:
                                        ---------------------------------------
                                        (Name and title of signatory, if
                                         stockholder is an entity)

                                     ------------------------------------------
                                     (Date)

                                     C-2-6

<PAGE>

                                   EXHIBIT C-3

                                    SBE, INC.
                      CERTIFICATE FOR INDIVIDUAL PURCHASERS

         If the  investor is an  individual  Purchaser  (or married  couple) the
Purchaser must complete, date and sign this Certificate.

                                   CERTIFICATE

         I certify that the  representations  and  responses  below are true and
accurate:

         In  order  for  the  Company  to  offer  and  sell  the  Securities  in
conformance with state and federal  securities  laws, the following  information
must be obtained  regarding your investor  status.  Please INITIAL EACH CATEGORY
applicable to you as an investor in the Company.

         _____ (1) A natural person whose net worth/1/,  either  individually or
jointly with such person's spouse exceeds $1,000,000;

         _____ (2) A natural  person who had an income/2/ in excess of $200,000,
or joint  income with the  person's  spouse in excess of  $300,000,  in 2001 and
2002, and reasonably  expects to have individual  income reaching the same level
in 2003;

         _____ (3) An executive officer or director of the Company.

Date:
      -----------------------           --------------------------------
                                        Name(s) of Purchaser

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

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

------------------
/1/ For  purposes of this  Certificate,  "net  worth"  means the excess of total
assets at fair market value over total  liabilities,  except that the  principal
residence  owned  by a  natural  person  shall  be  valued  either  (a) at cost,
including  the  cost of  improvements,  net of  current  encumbrances  upon  the
property,  or (b) at the appraised  value of the residence as determined  upon a
written  appraisal  used  by an  institutional  lender  making  a  loan  to  the
individual   secured  by  the   property,   including  the  cost  of  subsequent
improvements,  net of current  encumbrances  upon the  property.  As used in the
preceding  sentence,  "institutional  lender"  means a bank,  savings  and  loan
company,  industrial loan company, credit union or personal property broker or a
company  whose  principal  business  is as a  lender  of loans  secured  by real
property  and which has such loans  receivable  in the amount of  $2,000,000  or
more.

/2/ For purposes of this  Certificate,  "income" means adjusted gross income, as
reported for federal  income tax purposes,  increased by the following  amounts:
(a) the amount of any tax exempt  interest  income  received,  (b) the amount of
losses claimed as a limited partner in a limited partnership,  (c) any deduction
claimed for depletion,  (d) amounts  contributed  to an IRA or Keogh  retirement
plan,  (e)  alimony  paid,  and (f) any amounts by which  income from  long-term
capital gains has been reduced in arriving at adjusted gross income  pursuant to
the provisions of Section 1202 of the Internal Revenue Code.

                                     C-3-1

<PAGE>

                                   EXHIBIT C-3

                                    SBE, INC.
                     CERTIFICATE FOR CORPORATE, PARTNERSHIP,
                     TRUST, FOUNDATION, AND JOINT PURCHASERS

         If the investor is a  corporation,  partnership,  trust,  pension plan,
foundation,  joint purchaser  (other than a married couple) or other entity,  an
authorized  officer,  partner,  or  trustee  must  complete,  date and sign this
Certificate.

                                   CERTIFICATE

         The undersigned  certifies that the representations and responses below
are true and accurate:

         (A) The investor  has been duly formed and is validly  existing and has
full power and authority to invest in the Company.  The person signing on behalf
of the  undersigned  has the  authority  to execute and  deliver the  Securities
Purchase  Agreement on behalf of the  Purchaser  and to take other  actions with
respect thereto.

         (B) Indicate the form of entity of the undersigned:

               |_|  Limited Partnership

               |_|  General Partnership

               |_|  Corporation

               |_|  Revocable  Trust  (identify  each grantor and indicate under
                    what circumstances the trust is revocable by the grantor:

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

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

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

                    ------------------------------------------------------------
                    (Continue on a separate piece of paper, if necessary.)

               |_|  Other Type of Trust  (indicate type of trust and, for trusts
                    other  than   pension   trusts,   name  the   grantors   and
                    beneficiaries:

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

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

                    ------------------------------------------------------------
                    (Continue on a separate piece of paper, if necessary.)

               |_|  Other form of organization  (indicate form of organization
                    ( ). _______________________________________________________

                                     C-3-2

<PAGE>

     (C) Indicate the approximate date the undersigned entity was formed: .

     (D) In  order  for  the  Company  to  offer  and  sell  the  Securities  in
conformance with state and federal  securities  laws, the following  information
must be obtained  regarding your investor  status.  Please INITIAL EACH CATEGORY
applicable to you as an investor in the Company.

          _______  (1) A bank as defined in  Section  3(a)(2) of the  Securities
     Act, or any savings and loan association or other institution as defined in
     Section  3(a)(5)(A) of the  Securities Act whether acting in its individual
     or fiduciary capacity;

          _______  (2) A broker or dealer  registered  pursuant to Section 15 of
     the Securities Exchange Act of 1934;

          _______ (3) An  insurance  company as defined in Section  2(13) of the
     Securities Act;

          _______ (4) An  investment  company  registered  under the  Investment
     Company Act of 1940 or a business development company as defined in Section
     2(a)(48) of that Act;

          _______ (5) A Small Business  Investment  Company licensed by the U.S.
     Small  Business  Administration  under  Section  301(c) or (d) of the Small
     Business Investment Act of 1958;

          _______  (6)  A  plan  established  and  maintained  by a  state,  its
     political subdivisions,  or any agency or instrumentality of a state or its
     political subdivisions,  for the benefit of its employees, if such plan has
     total assets in excess of $5,000,000;

          _______  (7) An  employee  benefit  plan  within  the  meaning  of the
     Employee Retirement Income Security Act of 1974, if the investment decision
     is made by a plan fiduciary, as defined in Section 3(21) of such act, which
     is either a bank,  savings  and loan  association,  insurance  company,  or
     registered  investment  adviser,  or if the employee benefit plan has total
     assets in excess of $5,000,000 or, if a self-directed plan, with investment
     decisions made solely by persons that are accredited investors;

          _______  (8) A private  business  development  company  as  defined in
     Section 202(a)(22) of the Investment Advisers Act of 1940;

          _______ (9) An  organization  described  in Section  501(c)(3)  of the
     Internal  Revenue Code, a corporation,  Massachusetts  or similar  business
     trust, or partnership, not formed for the specific purpose of acquiring the
     Securities, with total assets in excess of $5,000,000;

          _______ (10) A trust,  with total assets in excess of $5,000,000,  not
     formed for the specific purpose of acquiring the Securities, whose purchase
     is directed by a sophisticated person who has such knowledge and experience
     in financial and business matters that such person is capable of evaluating
     the merits and risks of investing in the Company;

                                     C-3-3

<PAGE>

          _______ (11) An entity in which all of the equity owners qualify under
     any of the above subparagraphs. If the undersigned belongs to this investor
     category only, list the equity owners of the undersigned,  and the investor
     category which each such equity owner satisfies:

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

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

     ---------------------------------------------------------------------------
     (Continue on a separate piece of paper, if necessary.)

Dated:
       ----------------------------------------------

-------------------------------------
Name of investor

-------------------------------------
Signature and title of authorized
officer, partner or trustee

                                     C-3-4
<PAGE>

                                    EXHIBIT D

                                    SBE, INC.

IMPORTANT  - DO NOT  REMOVE  THIS  INSTRUCTION  SHEET  FROM THE  ATTACHED  SHARE
CERTIFICATE UNLESS AND UNTIL THE SHARES ARE SOLD AS FOLLOWS:

(1) THE SHARES ARE RESOLD  PURSUANT TO THE  REGISTRATION  STATEMENT  ON FORM S-3
(NO.  [________________]),  AND, IN CONNECTION WITH SUCH RESALE,  THE HOLDER HAS
DELIVERED TO THE PURCHASER OF THE SHARES A CURRENT  PROSPECTUS  AND HAS PROVIDED
TO THE COMPANY OR TO THE TRANSFER  AGENT FOR THE  COMPANY'S  STOCK A PURCHASER'S
CERTIFICATE OF SUBSEQUENT SALE; OR

(2) THE  SHARES  ARE  RESOLD  IN A  TRANSACTION  EXEMPT  FROM  THE  REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,  PROVIDED THAT, PRIOR TO
SUCH  RESALE,  THE HOLDER HAS  NOTIFIED  THE  COMPANY  OF SUCH  DISPOSITION  AND
PROVIDED THE COMPANY WITH WRITTEN ASSURANCES, IN FORM AND SUBSTANCE SATISFACTORY
TO THE COMPANY, OF COMPLIANCE WITH THE REQUIREMENTS OF SUCH EXEMPTION.

                    DO NOT REMOVE THIS INSTRUCTION SHEET FROM
                         THE ATTACHED SHARE CERTIFICATE
                            EXCEPT IN ACCORDANCE WITH
                        THE INSTRUCTIONS SET FORTH ABOVE.

                                      D-1

<PAGE>

                                    EXHIBIT E

                   PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE

To:      [INSERT TRANSFER AGENT]

         ATTENTION: [________________]

     The  undersigned,  the  Purchaser  or an officer  of, or other  person duly
authorized      by      the      Purchaser,      hereby      certifies      that
_____________________________________ was the
    [FILL IN NAME OF INSTITUTION]

     Purchaser of the shares evidenced by the attached certificate, and as such,
proposes to transfer  such  shares on or about  _________________  either (i) in
                                                      [DATE]
accordance with the registration

statement,  file number  [_______________] in which case the Purchaser certifies
that the  requirement of delivering a current  prospectus has been complied with
or will be complied  with in  connection  with such sale,  or (ii) in accordance
with Rule 144 under the Securities  Act of 1933 ("RULE 144"),  in which case the
Purchaser  certifies  that  it  has  complied  with  or  will  comply  with  the
requirements of Rule 144.

Print or type:

        Name of Purchaser:
                                           -------------------------------------

        Name of Individual representing
        Purchaser (if an Institution):
                                           -------------------------------------

        Title of Individual representing
        Purchaser (if an Institution):
                                           -------------------------------------

Signature by:

        Purchaser or Individual
        representing Purchaser:
                                           -------------------------------------

                                      E-1

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                             <C>
ARTICLE 1         AUTHORIZATION AND SALE OF COMMON SHARES AND WARRANTS...........................................1

         1.1      Authorization..................................................................................1

         1.2      Sale of Common Shares and Warrants.............................................................1

ARTICLE 2         CLOSING; DELIVERY..............................................................................1

         2.1      Closing Date...................................................................................1

         2.2      Delivery.......................................................................................1

ARTICLE 3         REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................2

         3.1      Organization and Standing......................................................................2

         3.2      Corporate Power; Authorization.................................................................2

         3.3      Issuance and Delivery of the Securities; Capitalization........................................2

         3.4      SEC Documents..................................................................................3

         3.5      Governmental Consents..........................................................................3

         3.6      Litigation.....................................................................................3

         3.7      Eligibility to Use Form S-3....................................................................3

         3.8      Absence of Certain Changes.....................................................................4

         3.9      Full Disclosure................................................................................4

         3.10     Use of Proceeds................................................................................4

ARTICLE 4         REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS....................................4

         4.1      Authorization..................................................................................4

         4.2      Investment Experience..........................................................................4

         4.3      Investment Intent..............................................................................4

         4.4      Registration or Exemption Requirements.........................................................5

         4.5      Dispositions...................................................................................5

         4.6      Residency......................................................................................5

         4.7      Legend.........................................................................................5

ARTICLE 5         CONDITIONS TO CLOSING OBLIGATIONS OF PURCHASERS................................................6

         5.1      Representations and Warranties.................................................................6

         5.2      Covenants......................................................................................6
</TABLE>

<PAGE>

                                TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                ----
<S>                                                                                                             <C>
         5.3      Listing........................................................................................6

         5.4      Judgments......................................................................................6

ARTICLE 6         CONDITIONS TO CLOSING OBLIGATIONS OF COMPANY...................................................6

         6.1      Receipt of Payment.............................................................................6

         6.2      Representations and Warranties.................................................................6

         6.3      Covenants......................................................................................6

         6.4      Delivery of Purchaser Questionnaire............................................................6

ARTICLE 7         COVENANTS......................................................................................7

         7.1      Definitions....................................................................................7

         7.2      Registration Procedures and Expenses...........................................................7

         7.3      Other Registrations............................................................................8

         7.4      Delay in Filing................................................................................8

         7.5      Indemnification................................................................................9

         7.6      Prospectus Delivery...........................................................................10

         7.7      Termination of Obligations....................................................................11

         7.8      Reporting Requirements........................................................................11

         7.9      Assignment of Rights..........................................................................11

         7.10     Right of First Refusal........................................................................12

ARTICLE 8         RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH SECURITIES ACT.................14

         8.1      Restrictions on Transferability...............................................................14

         8.2      Instruction Sheet.............................................................................14

         8.3      Transfer of Securities........................................................................14

         8.4      Purchaser Information.........................................................................14

         8.5      Filings.......................................................................................15

         8.6      Reporting Status..............................................................................15

ARTICLE 9         MISCELLANEOUS.................................................................................15

         9.1      Waivers and Amendments........................................................................15

         9.2      Broker's Fee..................................................................................15

         9.3      Governing Law.................................................................................15
</TABLE>

<PAGE>

                                TABLE OF CONTENTS
                                  (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                ----
<S>                                                                                                            <C>
         9.4      Survival......................................................................................15

         9.5      Successors and Assigns........................................................................15

         9.6      Entire Agreement..............................................................................15

         9.7      Notices, etc..................................................................................16

         9.8      Severability of this Agreement................................................................16

         9.9      Counterparts..................................................................................16

         9.10     Further Assurances............................................................................16

         9.11     Expenses......................................................................................16

A.        General Information....................................................................................1

B.        Securities Holdings....................................................................................1

C.        NASD Questions.........................................................................................4
</TABLE>

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