Document:

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                                                                    Exhibit 10.1

                          SECURITIES PURCHASE AGREEMENT

         SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of December
31, 2002, by and among Viewpoint Corporation, a Delaware corporation, with
headquarters located at 498 Seventh Avenue, Suite 1810, New York, New York 10018
(the "COMPANY"), and the investors listed on the Schedule of Buyers attached
hereto (individually, a "BUYER" and collectively, the "BUYERS").

         WHEREAS:

         A. The Company and each Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "1933 ACT"), and
Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the 1933 Act;

         B. The Company has authorized a new series of convertible notes of the
Company in the form attached hereto as Exhibit A (together with any convertible
notes issued in replacement thereof in accordance with the terms thereof, the
"INITIAL NOTES"), which Initial Notes shall be convertible into shares of the
Company's Common Stock, par value $.001 per share (the "COMMON STOCK") (as
converted, the "INITIAL CONVERSION SHARES"), in accordance with the terms of the
Initial Notes;

         C. The Company has authorized a new series of convertible notes of the
Company in the form attached hereto as Exhibit B (together with any convertible
notes issued in replacement thereof in accordance with the terms thereof, the
"SUBSEQUENT NOTES"), which Subsequent Notes shall be convertible into shares of
the Common Stock (as converted, the "SUBSEQUENT CONVERSION SHARES"), in
accordance with the terms of the Subsequent Notes;

         D. The Company has authorized a new series of convertible notes of the
Company in the form attached hereto as Exhibit C (together with any convertible
notes issued in replacement thereof in accordance with the terms thereof, the
"ADDITIONAL NOTES"), which Additional Notes shall be convertible into shares of
the Common Stock (as converted, the "ADDITIONAL CONVERSION SHARES" and
collectively with the Initial Conversion Shares, the Subsequent Conversion
Shares and any Common Stock issued upon any redemption pursuant to any of the
Notes, the "CONVERSION SHARES") in accordance with the terms of the Additional
Notes;

         E. The Initial Notes, the Subsequent Notes and the Additional Notes
collectively are referred to in this Agreement as the "NOTES";

         F. The Notes bear interest, which at the option of the Company, subject
to certain conditions, may be paid in shares of Common Stock ("INTEREST
SHARES");

         G. The Company is agreeing to pledge certain limited assets to secure,
through and including the Interest Date (as defined in the Notes) occurring on
January 1, 2005 (the "PLEDGE PERIOD"), its obligations to pay interest on and
principal of the Notes. The pledge will be
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evidenced by the Pledge Agreement, to be dated as of the Initial Closing Date,
by and among the Company and the Buyers substantially in the form attached
hereto as Exhibit E (the "PLEDGE AGREEMENT");

         H. Each Buyer wishes to purchase, and the Company wishes to sell, upon
the terms and conditions stated in this Agreement, (i) that aggregate principal
amount of Initial Notes set forth opposite such Buyer's name in column (3) on
the Schedule of Buyers (which aggregate principal amount for all Buyers shall be
$7,000,000) and (ii) warrants, in substantially the form attached hereto as
Exhibit D (the "INITIAL WARRANTS"), to acquire that number of shares of Common
Stock for each $1,000 of principal amount of Initial Notes purchased (as
exercised, collectively, the "INITIAL WARRANT SHARES") equal to the quotient of
(i) $200 divided by (ii) $1.9275 (the "VALUATION PRICE");

         I. Subject to the terms and conditions set forth in this Agreement,
each Buyer may be required to purchase, and the Company may have the right to
sell (i) up to that aggregate principal amount of Subsequent Notes set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers (which
aggregate principal amount for all Buyers shall be up to $7,000,000) and (ii)
warrants, in substantially the form attached hereto as Exhibit D (the
"SUBSEQUENT WARRANTS"), to acquire that number of shares of Common Stock for
each $1,000 of principal amount of Subsequent Notes purchased (as exercised,
collectively, the "SUBSEQUENT WARRANT SHARES") equal to the quotient of (i) $200
divided by (ii) the Valuation Price (as appropriately adjusted for any stock
splits, stock dividends, stock combinations and other similar transactions of
the Common Stock which occur after the date of this Agreement and, on the terms
of Section 2 of the Subsequent Warrants in proportion to adjustments that would
be made to the initial Exercise Price thereunder, for any issuances or deemed
issuances of securities by the Company which occur after the date of this
Agreement);

         J. Subject to the terms and conditions set forth in this Agreement,
each Buyer shall have the right to purchase, and the Company shall be required
to sell, (i) up to that aggregate principal amount of Additional Notes set forth
opposite such Buyer's name in column (5) on the Schedule of Buyers (which
aggregate principal amount for all Buyers shall be up to $2,800,000); and (ii)
related warrants, in substantially the form attached hereto as Exhibit D (the
"ADDITIONAL WARRANTS" and, collectively with the Initial Warrants and the
Subsequent Warrants, the "WARRANTS"), to acquire that number of shares of Common
Stock for each $1,000 of principal amount of Additional Notes purchased (as
exercised, collectively, the "ADDITIONAL WARRANT SHARES" and, collectively with
the Initial Warrant Shares and the Subsequent Warrant Shares, the "WARRANT
SHARES") equal to the quotient of (i) $200 divided by (ii) the Valuation Price
(as appropriately adjusted for any stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock which occur
after the date of this Agreement and, on the terms of Section 2 of the
Additional Warrants in proportion to adjustments that would be made to the
initial Exercise Price thereunder, for any issuances or deemed issuances of
securities by the Company which occur after the date of this Agreement);

         K. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit F (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Conversion Shares,

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the Warrant Shares and the Interest Shares under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.

         L. The Notes, the Conversion Shares, the Interest Shares, the Warrants
and the Warrant Shares collectively are referred to herein as the "SECURITIES".

         NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

         1. PURCHASE AND SALE OF NOTES AND WARRANTS.

            (a) Purchase of Notes and Warrants.

                (i) Initial Notes and Initial Warrants. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6(a) and 7(a)
below, the Company shall issue and sell to each Buyer, and each Buyer severally,
but not jointly, agrees to purchase from the Company on the Initial Closing Date
(as defined below), a principal amount of Initial Notes, as is set forth
opposite such Buyer's name in column (3) on the Schedule of Buyers, along with
Initial Warrants to acquire that number of Initial Warrant Shares for each
$1,000 principal amount of Initial Notes purchased equal to the quotient of (A)
$200 divided by (B) the Valuation Price (the "INITIAL CLOSING").

                (ii) Subsequent Notes and Subsequent Warrants. Subject to
satisfaction (or waiver) of the conditions set forth in Sections 1(c), 6(b) and
7(b) below, the Company may elect to issue and sell, and each Buyer severally,
but not jointly, if so elected by the Company, shall be required to purchase on
the Subsequent Closing Date (as defined below) a principal amount of Subsequent
Notes not to exceed such principal amount of Subsequent Notes as is set forth
opposite such Buyer's name in column (4) on the Schedule of Buyers, along with
Subsequent Warrants to acquire that number of Subsequent Warrant Shares for each
$1,000 principal amount of Subsequent Notes purchased equal to the quotient of
(A) $200 divided by (B) the Valuation Price (as appropriately adjusted for any
stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock which occur after the date of this Agreement and, on the
terms of Section 2 of the Subsequent Warrants in proportion to adjustments that
would be made to the initial Exercise Price thereunder, for any issuances or
deemed issuances of securities by the Company which occur after the date of this
Agreement) (the "SUBSEQUENT CLOSING").

                (iii) Additional Notes and Additional Warrants. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 1(d), 6(c) and
7(c) below, at the option of each Buyer from time to time, the Company shall
issue and sell to each Buyer, at multiple closings, if applicable, and each
Buyer severally, but not jointly, may purchase from the Company on an Additional
Closing Date (as defined below), up to the principal amount of Additional Notes
as is set forth opposite such Buyer's name in column (5) on the Schedule of
Buyers, along with Additional Warrants to acquire that number of Additional
Warrant Shares for each $1,000 principal amount of Additional Notes purchased
equal to the quotient of (A) $200 divided by (B) the Valuation Price (as
appropriately adjusted for any stock splits, stock dividends, stock combinations
and other similar transactions of the Common Stock which occur after the date of
this Agreement and, on the terms of Section 2 of the Additional Warrants in

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proportion to adjustments that would be made to the initial Exercise Price
thereunder, for any issuances or deemed issuances of securities by the Company
which occur after the date of this Agreement) (each, an "ADDITIONAL CLOSING").

                (iv) Closings. The Initial Closing, the Subsequent Closing and
the Additional Closings collectively are referred to in this Agreement as the
"CLOSINGS". Each Closing shall occur on the applicable Closing Date at the
offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022.

                (v) Purchase Price. The purchase price for each Buyer (the
"PURCHASE PRICE") of the Notes and related Warrants to be purchased by each such
Buyer at each Closing shall be equal to $1.00 for each $1.00 of principal amount
of Notes being purchased by such Buyer at such Closing.

            (b) Initial Closing Date. The date and time of the Initial Closing
(the "INITIAL CLOSING DATE") shall be 10:00 a.m., New York Time, on the date
hereof, subject to notification of satisfaction (or waiver) of the conditions to
the Initial Closing set forth in Sections 6(a) and 7(a) below (or such later
date as is mutually agreed to by the Company and each Buyer).

            (c) Subsequent Closing Date. Subject to timely delivery by the
Company to the Buyers of the Subsequent Note Notice (as defined below), the date
and time of the Subsequent Closing (the "SUBSEQUENT CLOSING DATE") shall be
10:00 a.m., New York Time, on the date specified in the Subsequent Note Notice
(which date shall not be later than July 15, 2003), subject to satisfaction (or
waiver) of the conditions to the Subsequent Closing set forth in Sections 6(b)
and 7(b) and the conditions set forth in this Section 1(c) (or such later date
as is mutually agreed to by the Company and the Buyers). Subject to the
requirements of Sections 6(b) and 7(b) and the conditions contained in this
Section 1(c), the Company on one occasion may require each Buyer severally, but
not jointly, to purchase up to such principal amount of Subsequent Notes as is
set forth opposite such Buyer's name in column (4) on the Schedule of Buyers on
the Subsequent Closing Date by delivering written notice (the "SUBSEQUENT NOTE
NOTICE") to each Buyer on or prior to June 30, 2003 (the "SUBSEQUENT NOTE NOTICE
Date"). The Subsequent Note Notice shall be irrevocable and shall be delivered
to each Buyer at least 10 Business Days (as defined below) prior to the
Subsequent Closing Date set forth in the Subsequent Note Notice. The Company's
Subsequent Note Notice shall set forth (i) each Buyer's pro rata allocation
(based on the principal amount of Subsequent Notes as is set forth opposite each
such Buyer's name in column (4) on the Schedule of Buyers in relation to
$7,000,000) of the aggregate principal amount of Subsequent Notes (which
aggregate principal amount shall not exceed $7,000,000) and related Subsequent
Warrants which the Company is requiring all of the Buyers to purchase at the
Subsequent Closing and (ii) the aggregate Purchase Price for each such Buyer's
Subsequent Notes and related Subsequent Warrants. Notwithstanding anything in
this Agreement to the contrary, the Company shall not be entitled to require the
Buyers to purchase the Subsequent Notes unless, in addition to the requirements
of Sections 6(b) and 7(b), all of the following conditions are satisfied: (i) on
each day during the period beginning on the first day of the Measuring Period
(as defined below) and ending on the Subsequent Closing Date, the Registration
Statement (as defined in the Registration Rights Agreement) covering the Initial
Registrable Securities (as defined in the Registration Rights Agreement) (the
"INITIAL REGISTRATION STATEMENT") shall be effective and available for the sale
of at least all of the

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Registrable Securities required to be included in such Registration Statement
and there shall not have been any Grace Periods (as defined in the Registration
Rights Agreement); (ii) on each day during the period beginning on the date
hereof and ending on the Subsequent Closing Date, the Common Stock is designated
for quotation on the Principal Market (as defined in Section 3(n)) and shall not
have been suspended from trading on such market (other than suspensions of not
more than one day and occurring prior to the first day of the Measuring Period
due to business announcements by the Company) nor shall delisting or suspension
by such market been threatened or pending in writing by such market; (iii) on
each day during the period beginning on the first Trading Day of the Measuring
Period (as defined below) and ending on the Subsequent Closing Date, delisting
or suspension by the Principal Market shall not have been threatened or pending
by falling below the minimum listing maintenance requirements of such market;
(iv) during the period beginning on the date hereof and ending on and including
the Subsequent Closing Date, there shall not have occurred (A) an event
constituting an Event of Default (as defined in the Notes), (B) an event that
with the passage of time and without being cured would be reasonably likely to
constitute an Event of Default or (C) the public announcement of a pending,
proposed or intended Change of Control (as defined in the Notes), unless such
pending, proposed or intended Change of Control has been terminated, abandoned
or consummated and the Company has publicly announced such termination,
abandonment or consummation of such Change of Control prior to the beginning of
the Measuring Period; (v) during the period beginning on the date hereof and
ending on and including the Subsequent Closing Date, the Company shall have
delivered Initial Conversion Shares upon conversion of the Initial Notes (and,
to the extent any Additional Notes have been issued, Additional Conversion
Shares upon conversion of the Additional Notes) and Initial Warrant Shares upon
exercise of the Initial Warrants (and, to the extent any Additional Warrants
have been issued, Additional Warrant Shares upon exercise of the Additional
Warrants) on a timely basis as set forth in the Initial Notes (or Additional
Notes, if applicable) and the Initial Warrants (or Additional Warrants, if
applicable), respectively; (vi) the Weighted Average Price (as defined in the
Subsequent Notes) of the Common Stock exceeds $3.25 (as appropriately adjusted
for any stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock which occur after the date of this Agreement)
on each of not less than 15 Trading Days (as defined in the Notes) (each, a
"QUALIFYING TRADING DAY") in any 20 consecutive Trading Day period (the
"MEASURING PERIOD") commencing after the effectiveness of the Initial
Registration Statement; (vii) the volume of shares of the Common Stock traded on
the Principal Market on each Qualifying Trading Day exceeds 35,000 shares
(excluding block trades of 20,000 shares or more); and (viii) on or before
delivery of the Subsequent Note Notice, the Company shall have received the
Stockholder Approval (as defined in Section 4(m) below). As used herein,
"BUSINESS DAY" means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law to
remain closed.

            (d) Additional Closing Date. The date and time of each Additional
Closing (each, an "ADDITIONAL CLOSING DATE") shall be 10:00 a.m., New York Time,
on the date specified in the Additional Note Notice (as defined below), subject
to satisfaction (or waiver) of the conditions to each Additional Closing set
forth in Sections 6(c) and 7(c) and the conditions contained in this Section
1(d) (or such later date as is mutually agreed to by the Company and the
applicable Buyer). Subject to the requirements of Sections 6(c) and 7(c) and the
conditions contained in this Section 1(d), each Buyer may purchase, at such
Buyer's option, Additional

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Notes by delivering written notice to the Company (an "ADDITIONAL NOTE NOTICE")
at any time during the period beginning after the date hereof and ending on and
including the date which is the later of (x) 365 days after the date hereof (the
"ANNIVERSARY DATE") and (y) a number of days after the Anniversary Date equal to
the aggregate number of days after each Effectiveness Deadline (as defined in
the Registration Rights Agreement) that the Registration Statement required to
be effective by such date is not so effective. The Additional Note Notice shall
be delivered at least five Business Days prior to the Additional Closing Date
set forth in the Additional Note Notice. The Additional Note Notice shall set
forth (i) the principal amount of Additional Notes and related Additional
Warrants to be purchased by such Buyer at the applicable Additional Closing
Date, which principal amount, when added to the principal amount of any
Additional Notes previously purchased by such Buyer, shall not exceed the
principal amount of Additional Notes as is set forth opposite such Buyer's name
in column (5) on the Schedule of Buyers, (ii) the aggregate Purchase Price for
the Additional Notes and related Additional Warrants to be purchased and (iii)
the Additional Closing Date. In the event that an Acquiring Entity Change of
Control Redemption Notice is delivered pursuant to Section 5(d) of the Notes
prior to the time that the Buyers have fully exercised their rights pursuant to
this Section 1(d), then from and after the Acquiring Entity Change of Control
Redemption Date (as defined in the Notes), the Buyers shall no longer be able to
exercise their rights pursuant to this Section 1(d) and the Acquiring Entity (as
defined in the Notes) shall pay to each Buyer an amount equal to the value of
any unexercised rights of such Buyer pursuant hereto determined in a manner
consistent with the manner used to determine the Acquiring Entity Change of
Control Redemption Price pursuant to the Notes.

            (e) Form of Payment. On each Closing Date, (i) each Buyer shall pay
its Purchase Price to the Company for the Notes and Warrants to be issued and
sold to such Buyer at the applicable Closing, by wire transfer of immediately
available funds in accordance with the Company's written wire instructions, and
(ii) the Company shall deliver to each Buyer, the Notes (in the principal
amounts as such Buyer shall request) which such Buyer is then purchasing along
with the Warrants (in the amounts as such Buyer shall request) such Buyer is
purchasing, duly executed on behalf of the Company and registered in the name of
such Buyer or its designee.

         2. BUYER'S REPRESENTATIONS AND WARRANTIES.

            Each Buyer represents and warrants with respect to only itself that:

            (a) No Public Sale or Distribution. Such Buyer is (i) acquiring the
Notes and Warrants and (ii) upon conversion of the Notes and exercise of the
Warrants (other than pursuant to a Cashless Exercise (as defined in the
Warrants)) will acquire the Conversion Shares issuable upon conversion of the
Notes and the Warrant Shares issuable upon exercise of the Warrants, for its own
account and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.

            (b) Accredited Investor Status. Such Buyer is an "accredited
investor" as that

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term is defined in Rule 501(a) of Regulation D.

            (c) Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.

            (d) Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
herein. Such Buyer understands that its investment in the Securities involves a
high degree of risk. Such Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities.

            (e) No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

            (f) Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, or (B) such Buyer shall have delivered to
the Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, (ii) any sale of
the Securities made in reliance on Rule 144 or Rule 144A promulgated under the
1933 Act, as amended, (or a successor rule thereto) (collectively, "RULE 144")
may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Securities under circumstances in which
the seller (or the Person (as defined in Section 3(r)) through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the 1933
Act) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor
any other Person is under any obligation to register the Securities under the
1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder. The Securities may be pledged in connection with a
bona fide margin account or other loan secured by the Securities and such pledge
of Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Buyer effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other

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Transaction Document, including, without limitation, this Section 2(g);
provided, that in order to make any sale, transfer or assignment of Securities,
such Buyer and its pledgee makes such disposition in accordance with or pursuant
to a registration statement or an exemption under the 1933 Act.

            (g) Legends. Such Buyer understands that the certificates or other
instruments representing the Notes and the Warrants and, until such time as the
sale of the Conversion Shares and the Warrant Shares have been registered under
the 1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Conversion Shares and the Warrant Shares, except
as set forth below, shall bear any legend as required by the "blue sky" laws of
any state and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):

            [NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
            CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
            [CONVERTIBLE][EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY
            THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT
            OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
            SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
            ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
            FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
            APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL
            ADDRESSED TO THE COMPANY, IN A GENERALLY ACCEPTABLE FORM, THAT
            REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
            SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
            BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
            LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act, (ii) in connection with a
sale, assignment or other transfer, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Securities may be made without registration
under the 1933 Act, or (iii) such holder provides the Company with reasonable
assurance that the Securities can be sold, assigned or transferred pursuant to
Rule 144.

            (h) Prohibited Transactions. Prior to the date hereof, such Buyer
has not, directly or indirectly, sold or agreed to sell any shares of Common
Stock, effected any short sale, whether or not against the box, established any
"put equivalent position" (as defined in Rule 16a-1(h) under the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), with respect to the Common
Stock, granted any other right (including, without limitation, any put or call
option) with respect to the Common Stock or with respect to any security that
includes, relates to or derived any significant part of its value from the
Common Stock, in each case, in order to hedge

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its position in the Notes or the Warrants (each, a "PROHIBITED TRANSACTION")."

            (i) Validity; Enforcement. This Agreement, the Pledge Agreement, the
Control Agreement (as defined in the Pledge Agreement) and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of such Buyer and shall constitute the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.

            (j) No Conflicts. The execution, delivery and performance by such
Buyer of the Transaction Documents to which it is a party and the consummation
by the such Buyer of the transactions contemplated hereby and thereby will not
(i) result in a violation of the organizational documents of such Buyer or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which such Buyer is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to such Buyer, except in the case
of clauses (ii) and (iii) above, for such conflicts, defaults, rights or
violations which would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of such Buyer to
perform its obligations hereunder.

            (k) Residency. Such Buyer is a resident of that country specified
below its address on the Schedule of Buyers.

         3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company represents and warrants to each of the Buyers that:

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            (a) Organization and Qualification. The Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, to
the extent such qualification is required by law, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
reasonably be expected to have a Material Adverse Effect. As used in this
Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse effect on the
business, properties, assets, operations, results of operations or condition
(financial or otherwise) of the Company and its Subsidiaries, taken as a whole,
or on the transactions contemplated hereby or by the agreements and instruments
to be entered into in connection herewith, or on the authority or ability of the
Company to perform its obligations under the Transaction Documents (as defined
below). The Company has no Subsidiaries except as set forth on Schedule 3(a).

            (b) Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Notes, the Registration Rights Agreement,
the Irrevocable Transfer Agent Instructions (as defined in Section 5(b)), the
Warrants, the Pledge Agreement, the Control Agreement and each of the other
agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "TRANSACTION
DOCUMENTS") and to issue the Securities in accordance with the terms hereof and
thereof. The execution and delivery of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the Notes and the
Warrants and the reservation for issuance and the issuance of the Conversion
Shares and the Warrant Shares issuable upon conversion or exercise thereof, as
the case may be, have been duly authorized by the Company's Board of Directors
and no further consent or authorization is required by the Company, its Board of
Directors or its stockholders. This Agreement and the other Transaction
Documents of even date herewith have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies. As of each Closing, the Company shall represent
and warrant that the Transaction Documents dated after the date hereof and
required to have been executed and delivered with respect to such Closing shall
have been duly executed and delivered by the Company, and shall constitute the
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as such enforceability
may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of applicable creditor's rights and
remedies.

            (c) Issuance of Securities. The Notes and Warrants are duly
authorized and, upon issuance in accordance with the terms hereof, shall be free
from all taxes, liens and charges

                                       10
<PAGE>
with respect to the issue thereof. As of the applicable Closing, a number of
shares of Common Stock shall have been duly authorized and reserved for issuance
which equals the sum of 130% of the number of shares of Common Stock issuable
upon conversion of, or as payment for interest on, the Notes to be issued at
such Closing and 100% of the number of shares of Common Stock issuable upon
exercise of the Warrants to be issued at such Closing. Upon conversion or
exercise in accordance with the Notes or the Warrants, as the case may be, and
upon issuance of Interest Shares as interest on the Notes, the Conversion
Shares, the Warrant Shares and the Interest Shares, respectively, will be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock. Assuming the accuracy of each
of the representations and warranties of Buyer contained in Section 2, the
issuance by the Company of the Securities is exempt from registration under the
1933 Act.

            (d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Notes and Warrants and reservation for issuance and issuance of
the Conversion Shares, the Interest Shares and the Warrant Shares) will not (i)
result in a violation of the certificate of incorporation, any certificate of
designations, preferences and rights of any outstanding series of preferred
stock or bylaws of the Company or any Subsidiary or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the Principal Market) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

            (e) Consents. Except as disclosed in Schedule 3(e), the Company is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the Initial Closing Date. The Company and its
Subsidiaries are unaware of any facts or circumstances which might reasonably be
expected to prevent the Company from obtaining or effecting any of the
foregoing. The Company is not in violation of the listing requirements of the
Principal Market and, except as disclosed on Schedule 3(e), has no knowledge of
any facts which would reasonably lead to delisting or suspension of the Common
Stock in the foreseeable future.

            (f) Acknowledgment Regarding Buyer's Purchase of Securities. The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that no Buyer is acting as a financial

                                       11
<PAGE>
advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated hereby and thereby,
and any advice given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on (i)
the independent evaluation by the Company and its representatives and (ii) each
Buyer's representations and warranties contained in Section 2.

            (g) No General Solicitation; Placement Agent's Fees. Neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities. Other than engaging Banc of America Securities LLC as placement
agent (the "AGENT"), the Company has not engaged any placement agent or other
agent in connection with the sale of the Notes and the Warrants.

            (h) No Integrated Offering. None of the Company, its Subsidiaries,
any of their affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated. None of the
Company, its Subsidiaries, their affiliates and any Person acting on their
behalf will take any action or steps referred to in the preceding sentence that
would require registration of any of the Securities under the 1933 Act or cause
the offering of the Securities to be integrated with other offerings.

            (i) Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Notes and the
Warrant Shares issuable upon exercise of the Warrants will increase in certain
circumstances. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Notes in accordance with this Agreement
and the Notes and its obligation to issue the Warrant Shares upon exercise of
the Warrants in accordance with this Agreement and the Warrants is (subject to
the receipt of any necessary Stockholder Approval), in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.

            (j) Application of Takeover Protections; Rights Agreement. The
Company and its board of directors have taken all necessary action in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation (as defined in
Section 3(q)) or the laws of the state of its incorporation which is or could
become applicable to any Buyer as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company's issuance of the
Securities and any Buyer's ownership of the Securities. The Company specifically
represents, warrants and agrees that, in accordance with Section 1 of the rights
agreement, dated as of June 24, 1999, between the

                                       12
<PAGE>
Company and BankBoston, N.A., as amended (the "RIGHTS PLAN"), regardless of the
number of Conversion Shares, Interest Shares and Warrant Shares of which each
Buyer is deemed the Beneficial Owner (as defined in the Rights Plan), none of
the Buyers is intended to be or will be deemed to be an Acquiring Person within
the meaning of the Rights Plan because of the acquisition of the Securities
(including the Conversion Shares, Interest Shares and the Warrant Shares)
pursuant to this Agreement, and the acquisition of the Securities (including the
Conversion Shares, Interest Shares and the Warrant Shares) pursuant to this
Agreement shall not, under any circumstances, trigger a Distribution Date within
the meaning of the Rights Plan; provided, however, that only Securities
(including the Conversion Shares, Interest Shares and the Warrant Shares)
acquired pursuant to this Agreement, upon conversion or redemption of or as
interest on the Notes or upon exercise of the Warrants, as the case may be,
shall be deemed excluded from the number of shares of Common Stock deemed
beneficially owned by each Buyer in determining whether such Buyer is an
Acquiring Person within the meaning of the Rights Plan. The exclusion of the
Securities from the number of shares of Common Stock deemed beneficially owned
by each Buyer, as provided in the preceding sentence, shall no longer apply in
the event that such Buyer becomes the beneficial owner of any additional
securities of the Company, other than in connection with the transactions
contemplated by this Agreement.

            (k) SEC Documents; Financial Statements. Since December 31, 2000,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof, or in connection with any Closing subsequent to the date hereof, filed
prior to the date of such Closing, and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC DOCUMENTS"). The
Company has delivered to the Buyers or their respective representatives true,
correct and complete copies of the SEC Documents not available on the EDGAR
system. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC, 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 the
light of the circumstances under which they were made, not misleading. As of
their respective dates, 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 with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, 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 exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). None of the
presentations that were provided in writing by the Company to the Buyers and
that are attached to this Agreement as Schedule 3(k), which are not included in
the SEC Documents, contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein, in
the light of the circumstance under which they are or were made, not

                                       13
<PAGE>
misleading.

            (l) Absence of Certain Changes. Except as disclosed in Schedule
3(l), since September 30, 2002, there has been no material adverse change and no
material adverse development in the business, properties, operations, condition
(financial or otherwise), or results of operations of the Company or its
Subsidiaries. Since December 31, 2001, the Company has not (i) declared or paid
any dividends, (ii) sold any assets, individually or in the aggregate, in excess
of $100,000 outside of the ordinary course of business or (iii) had capital
expenditures, individually or in the aggregate, in excess of $1,300,000. The
Company has not taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge that its creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge of any fact
which would reasonably lead a creditor to do so. The Company is not as of the
date hereof, and after giving effect to the transactions contemplated hereby to
occur at each Closing, will not be Insolvent (as defined below). For purposes of
this Section 3(l), "INSOLVENT" means (i) the present fair saleable value of the
Company's assets is less than the amount required to pay the Company's total
indebtedness, contingent or otherwise, (ii) the Company is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) the Company intends to incur or
believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) the Company has unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.

            (m) No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
business, properties, prospects, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws on a
registration statement on Form S-1 filed with the SEC relating to an issuance
and sale by the Company of its Common Stock and which has not been publicly
announced.

            (n) Conduct of Business; Regulatory Permits. Neither the Company nor
its Subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or Bylaws or
their organizational charter or bylaws, respectively. Except as disclosed in
Schedule 3(n), neither the Company nor any of its Subsidiaries is in violation
of any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or its Subsidiaries, and neither the Company nor any
of its Subsidiaries will conduct its business in violation of any of the
foregoing, except for possible violations which would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. Without
limiting the generality of the foregoing, the Company is not in violation of any
of the rules, regulations or requirements of the Nasdaq National Market (the
"PRINCIPAL MARKET") and has no knowledge of any facts or circumstances which
would reasonably lead to delisting or suspension of the Common Stock by the
Principal Market in the foreseeable future. Except as disclosed on Schedule
3(n), since December 31, 2001, (i) the Common Stock has been designated for
quotation or listed on the Principal Market, (ii) trading in the Common Stock
has not been suspended by the SEC or the Principal Market and (iii) the Company
has received no communication, written or oral, from the SEC or the Principal
Market regarding the suspension or delisting of the Common Stock from the
Principal Market. The Company and its Subsidiaries

                                       14
<PAGE>
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such certificates,
authorizations or permits would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect, and neither the Company nor any
such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit.

            (o) Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other Person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.

            (p) Transactions With Affiliates. Except as set forth on Schedule
3(p) and in the SEC Documents filed at least ten days prior to the date hereof
and other than the grant of stock options disclosed on Schedule 3(q), none of
the officers, directors or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for ordinary
course services as employees, officers or directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.

            (q) Equity Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (x) 75,000,000 shares of Common Stock,
of which as of the date hereof, 41,179,400 are issued (none of which are
treasury shares) and 41,179,400 are outstanding, 10,288,454 shares are reserved
for issuance pursuant to the Company's stock option and purchase plans and
57,500 shares are reserved for issuance pursuant to securities (other than the
Notes and the Warrants) exercisable or exchangeable for, or convertible into,
shares of Common Stock, and (y) 5,000,000 shares of preferred stock, of which as
of the date hereof, none are issued and outstanding. All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. Except as disclosed in Schedule 3(q): (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company; (ii)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its Subsidiaries; (iii)

                                       15
<PAGE>
there are no financing statements securing obligations in any material amounts,
either singly or in the aggregate, filed in connection with the Company; (iv)
there are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement); (v) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement; and (viii)
the Company and its Subsidiaries have no liabilities or obligations required to
be disclosed in the SEC Documents (as defined herein) but not so disclosed in
the SEC Documents, other than those incurred in the ordinary course of the
Company's or its Subsidiaries' respective businesses and which, individually or
in the aggregate, do not or would not reasonably be expected to have a Material
Adverse Effect. The Company has furnished to the Buyer true, correct and
complete copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "CERTIFICATE OF INCORPORATION"), and the
Company's Bylaws, as amended and as in effect on the date hereof (the "BYLAWS"),
and the terms of all securities convertible into, or exercisable or exchangeable
for, Common Stock.

            (r) Indebtedness and Other Contracts. Except as disclosed in
Schedule 3(r), neither the Company nor any of its Subsidiaries (i) has any
outstanding Indebtedness (as defined below), or (ii) is in violation of any term
of or in default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not reasonably be
expected to result, individually or in the aggregate, in a Material Adverse
Effect. Schedule 3(r) provides a detailed description of the material terms of
any such outstanding Indebtedness. For purposes of this Agreement: (x)
"INDEBTEDNESS" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, change, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in

                                       16
<PAGE>
respect of indebtedness or obligations of others of the kinds referred to in
clauses (A) through (G) above; (y) "CONTINGENT OBLIGATION" means, as to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to any indebtedness, lease, dividend or other obligation of
another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the obligee
of such liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect
thereto; and (z) "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.

            (s) Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by the Principal Market, any court, public
board, government agency, self-regulatory organization or body pending or, to
the knowledge of the Company, threatened against or affecting the Company (other
than industry-wide actions or suits that are not directed against the Company
and that would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect), the Common Stock or any of the Company's
Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or
directors in their capacities as such, except as set forth in Schedule 3(s).

            (t) Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.

            (u) Employee Relations. (i) Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. The Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer of the Company (as defined
in Rule 501(f) of the 1933 Act) has notified the Company that such officer
intends to leave the Company or otherwise terminate such officer's employment
with the Company. No executive officer of the Company, to the knowledge of the
Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters.

                (ii) The Company and its Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.

                                       17
<PAGE>
            (v) Title. The Company and its Subsidiaries have good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(v) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Neither the Company nor any of its Subsidiaries owns any real
property. Any real property and facilities held under lease by the Company and
any of its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and its Subsidiaries.

            (w) Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
("INTELLECTUAL PROPERTY RIGHTS") necessary to conduct their respective
businesses as now conducted, other than those the absence of which would not
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Schedule 3(w), none of the Company's Intellectual Property Rights have expired
or terminated, or are expected to expire or terminate within three years from
the date of this Agreement. The Company does not have any knowledge of any
infringement by the Company or its Subsidiaries of Intellectual Property Rights
of others. Except as set forth in Schedule 3(w), there is no claim, action or
proceeding being made or brought, or to the knowledge of the Company, being
threatened, against the Company or its Subsidiaries regarding its Intellectual
Property Rights. The Company is unaware of any facts or circumstances which
might give rise to any of the foregoing infringements or claims, actions or
proceedings. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties.

            (x) Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all Environmental Laws (as hereinafter defined), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. The term "ENVIRONMENTAL LAWS" means
all federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

            (y) Subsidiary Rights. The Company or one of its Subsidiaries has
the unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive

                                       18
<PAGE>
dividends and distributions on, all capital securities of its material
Subsidiaries as owned by the Company or such Subsidiary.

            (z) Tax Status. The Company and each of its Subsidiaries (i) has
made or filed all federal and state income and all other material tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith or that are not
material and (iii) has set aside on its books provision reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.

            (aa) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference.

         4. COVENANTS.

            (a) Reasonable Best Efforts. Each party shall use its reasonable
best efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.

            (b) Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for or to
qualify the Securities for sale to the Buyers at each of the Closings pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Dates. The Company shall make all filings and reports relating to
the offer and sale of the Securities required under applicable securities or
"Blue Sky" laws of the states of the United States following each of the Closing
Dates.

            (c) Reporting Status. Until the date on which the Investors (as
defined in the Registration Rights Agreement) shall have sold all the Conversion
Shares, Interest Shares and Warrant Shares and none of the Notes or Warrants is
outstanding, or, if earlier, until such time as the Conversion Shares, Interest
Shares and/or Warrant Shares can be sold without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (the "REPORTING PERIOD"), the Company
shall file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act

                                       19
<PAGE>
even if the 1934 Act or the rules and regulations thereunder would otherwise
permit such termination.

            (d) Use of Proceeds. The Company will use the proceeds from the sale
of the Securities for working capital purposes, to fund the pledge required
pursuant to Section 4(q), to fund strategic acquisitions (provided, that from
the date of the Initial Closing until the Subsequent Closing Date, if any, no
more than $2 million of the Purchase Price at the Initial Closing may be used to
fund strategic acquisitions) and not for the repayment of any outstanding
Indebtedness of the Company or any of its Subsidiaries.

            (e) Financial Information. The Company agrees to send the following
to each Investor during the Reporting Period (i) unless the following are filed
with the SEC through EDGAR and are available to the public through the EDGAR
system, within three (3) Business Days after the filing thereof with the SEC, a
copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any
Current Reports on Form 8-K and any registration statements (other than on Form
S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the
release thereof, facsimile copies of all press releases issued by the Company or
any of its Subsidiaries, and (iii) copies of any notices and other information
made available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.

            (f) Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents. The Company shall
maintain the Common Stock's authorization for quotation on the Nasdaq National
Market or obtain a listing on The New York Stock Exchange, Inc. (the "NYSE") or
the American Stock Exchange (the "AMEX"). If the Company obtains a listing of
the Common Stock on the NYSE or the AMEX and terminates its listing on the
Nasdaq National Market, references in the Transaction Documents to the
"Principal Market" shall mean, from and after the date of the NYSE or AMEX
listing, the NYSE or AMEX, as applicable. Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal Market. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(f).

            (g) Fees. Subject to Section 8 below, at the Initial Closing, the
Company shall pay a nonaccountable expense allowance of $30,000 to Smithfield
Fiduciary LLC (a Buyer) or its designee(s) (in addition to any other expense
amounts paid to any Buyer prior to the date of this Agreement), which amount
shall be withheld by Buyer from its Purchase Price at the Initial Closing. The
Company shall be responsible for the payment of any placement agent's fees,
financial advisory fees, or broker's commissions (other than for Persons engaged
by any Buyer) relating to or arising out of the transactions contemplated
hereby, including, without limitation, any fees or commissions payable to the
Agent. The Company shall pay, and hold each Buyer harmless against, any
liability, loss or expense (including, without limitation, reasonable attorney's
fees and out-of-pocket expenses) arising in connection with claim relating to
any such

                                       20
<PAGE>
payment. Except as otherwise set forth in this Agreement or in the Registration
Rights Agreement, each party to this Agreement shall bear its own expenses in
connection with the sale of the Securities to the Buyers.

            (h) Pledge of Securities. The Company acknowledges and agrees that
the Securities may be pledged by an Investor (as defined in the Registration
Rights Agreement) in connection with a bona fide margin agreement or other loan
or financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Investor effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document, including, without limitation, Section 2(f) of this Agreement;
provided that an Investor and its pledgee shall be required to comply with the
provisions of Section 2(f) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees to execute
and deliver such documentation as a pledgee of the Securities may reasonably
request in connection with a pledge of the Securities to such pledgee by an
Investor.

            (i) Disclosure of Transactions and Other Material Information. On or
before 8:30 a.m., New York Time, on the first Trading Day following the Initial
Closing Date, the Company shall file a Current Report on Form 8-K describing the
terms of the transactions contemplated by the Transaction Documents in the form
required by the 1934 Act, and attaching the material Transaction Documents
(including, without limitation, this Agreement (and all schedules to this
Agreement), the form of each of the Notes, the form of Warrant, the Pledge
Agreement, the Control Agreement and the Registration Rights Agreement) as
exhibits to such filing (including all attachments, the "8-K FILING", and the
description and attachments, the "8-K MATERIALS"). On or before 8:30 a.m., New
York Time, on the first Trading Day following the Subsequent Closing Date and
each Additional Closing Date, the Company shall file a Current Report on Form
8-K with the SEC describing the transaction consummated or proposed on such
date. From and after the filing of the 8-K Filing with the SEC, no Buyer shall
be in possession of any material, nonpublic information received from the
Company, any of its Subsidiaries or any of its respective officers, directors,
employees or agents, that is not disclosed in the 8-K Filing. The Company shall
not, and shall cause each of its Subsidiaries and its and each of their
respective officers, directors, employees and agents, not to, provide any Buyer
with any material nonpublic information regarding the Company or any of its
Subsidiaries from and after the filing of the 8-K Filing with the SEC without
the express written consent of such Buyer. In the event of a breach of the
foregoing covenant by the Company, any of its Subsidiaries, or any of its or
their respective officers, directors, employees and agents, in addition to any
other remedy provided herein or in the Transaction Documents, a Buyer shall have
the right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of the 8-K Materials without the prior approval by
the Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. No Buyer shall have any liability to the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, shareholders or agents for any such disclosure. Subject to
the foregoing, neither the Company nor any Buyer shall issue any press releases
or any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with
respect to such transactions (i) in substantial conformity with the 8-K Filing
and contemporaneously therewith

                                       21
<PAGE>
and (ii) as is required by applicable law and regulations, including the
applicable rules and regulations of the Principal Market (provided that in the
case of clause (i) each Buyer shall be consulted by the Company (although the
consent of such Buyer shall not be required) in connection with any such press
release or other public disclosure prior to its release).

            (j) Restriction on Redemption and Cash Dividends. So long as any
Notes are outstanding, the Company shall not, directly or indirectly, redeem, or
declare or pay any cash dividend or distribution on, the Common Stock without
the prior express written consent of the holders of Notes representing not less
than two-thirds of the aggregate principal amount of the then outstanding Notes.

            (k) Additional Notes. For so long as any Buyer beneficially owns any
Notes, the Company will not issue any Notes other than to the Buyers as
contemplated hereby and the Company shall not issue any other securities that
would cause a breach or default under the Notes.

            (l) Variable Securities. The Company shall not, in any manner, issue
or sell any rights, warrants or options to subscribe for or purchase Common
Stock or directly or indirectly convertible into or exchangeable or exercisable
for Common Stock at a price which varies or may vary with the market price of
the Common Stock, including by way of one or more reset(s) to any fixed price
unless the conversion, exchange or exercise price of any such security cannot be
less than the then applicable Conversion Price (as defined in the Notes) under
any Note.

            (m) Proxy Statement. The Company shall provide each stockholder
entitled to vote at the next meeting of stockholders of the Company, which shall
not be later than June 15, 2003 (the "STOCKHOLDER MEETING DEADLINE"), a proxy
statement, which has been previously reviewed by the Buyers and a single legal
counsel of their choice, soliciting each such stockholder's affirmative vote at
such stockholder meeting for approval of the Company's issuance of all of the
Securities as described in the Transaction Documents in accordance with
applicable law and the rules and regulations of the Principal Market (such
affirmative approval being referred to herein as the "STOCKHOLDER APPROVAL"),
and the Company shall use its best efforts to solicit its stockholders' approval
of such issuance of the Securities and to cause the Board of Directors of the
Company to recommend to the stockholders that they approve such proposal. The
Company shall be obligated to obtain the Stockholder Approval by the Stockholder
Meeting Deadline.

            (n) Corporate Existence. So long as any Buyer beneficially owns any
Notes or Warrants or has the right to purchase any Additional Notes, the Company
shall maintain its corporate existence and shall not sell all or substantially
all of the Company's assets, except in the event of a merger or consolidation or
sale of all or substantially all of the Company's assets, where the surviving or
successor entity in such transaction (i) assumes the Company's obligations
hereunder and under the agreements and instruments entered into in connection
herewith and (ii) is a publicly traded corporation whose common stock is quoted
on or listed for trading on the Principal Market, the NYSE or the AMEX.

            (o) Prohibited Transactions. Prior to the earlier of (i) the
termination of this

                                       22
<PAGE>
Agreement, or (ii) the Initial Closing Date, no Buyer shall engage, directly or
indirectly, in a Prohibited Transaction. Each Buyer acknowledges that the
representations, warranties, agreements and covenants contained in Section 2(i)
and this Section 4(o) are being made for the benefit of the Buyers as well as
the Company and that each of the other Buyers shall have an independent right to
assert any claims against any Buyer arising out of any breach or violation of
the provisions of Section 2(h) and this Section 4(o).

            (p) Computer Associates Note. So long as any Notes are outstanding,
the Company shall not, directly or indirectly, repay in cash or cash equivalents
any amount due and owing to Computer Associates International, Inc. under the
promissory note due April 30, 2002.

            (q) Pledge Agreement. At the Initial Closing, the Company shall
purchase and pledge for the benefit of the Buyers and deliver to the Account
Holder (as defined in the Pledge Agreement) pursuant to the terms of the Pledge
Agreement, U.S. Treasury securities in an amount, including principal and coupon
amounts, sufficient to pay any interest payments required to be paid on the
Initial Notes on any Interest Date during the Pledge Period and shall deliver at
the Initial Closing reasonably sufficient evidence of such purchase, pledge and
delivery. In addition to the foregoing, if the Subsequent Closing or any
Additional Closing occurs during the Pledge Period, the Company shall also
purchase and pledge to the Buyers and deliver to the Account Holder pursuant to
the terms of the Pledge Agreement, U.S. Treasury securities in an amount,
including principal and coupon amounts, sufficient to pay any additional
interest payments required to be paid on the Subsequent Notes or Additional
Notes, as applicable, on any Interest Dates remaining during the Pledge Period
and shall deliver at the Subsequent Closing and applicable Additional Closing
reasonably sufficient evidence of such purchase, pledge and delivery.

            (r) Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, (x) as of the each Closing Date, the sum of 130% of the number of
shares of Common Stock issuable upon conversion of, or as payment for interest
on, the Notes being issued at such Closing and (ii) 100% of the number of shares
of Common Stock issuable upon exercise of the Warrants being issued at such
Closing, and (y) after each Closing Date, no less than the sum of (i) 110% of
the number of shares of Common Stock issuable upon conversion of, or as payment
for interest on, the Notes issued at all previous Closings and (ii) 100% of the
number of shares of Common Stock issuable upon exercise of the Warrants issued
at such Closings.

         5. REGISTER; TRANSFER AGENT INSTRUCTIONS.

            (a) Register. The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to each holder of Notes or Warrants), a register for the Notes and the
Warrants, in which the Company shall record the name and address of the Person
in whose name the Notes and the Warrants have been issued (including the name
and address of each transferee), the principal amount of Notes held by such
Person and the number of Warrant Shares issuable upon exercise of the Warrants
held by such Person. The Company shall keep the register open and available at
all times during business hours for inspection of any Buyer or its legal
representatives.

                                       23
<PAGE>
            (b) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at DTC,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares, the Interest Shares, if any, and the Warrant Shares in such
amounts as specified from time to time by each Buyer to the Company upon
conversion of the Notes or exercise of the Warrants in the form of Exhibit G
attached hereto (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5(b), and stop transfer instructions to
give effect to Section 2(g) hereof, will be given by the Company to its transfer
agent, and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the other Transaction Documents. If a Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(g), the Company shall
permit the transfer and shall promptly instruct its transfer agent to issue one
or more certificates or credit shares to the applicable balance accounts at DTC
in such name and in such denominations as specified by such Buyer to effect such
sale, transfer or assignment. In the event that such sale, assignment or
transfer involves Conversion Shares, Interest Shares or Warrant Shares sold,
assigned or transferred pursuant to an effective registration statement or
pursuant to Rule 144, the transfer agent shall issue such Securities to the
Buyer, assignee or transferee, as the case may be, without any restrictive
legend (subject, in the case of a sale under Rule 144, to the Company's receipt
of the opinion of Buyer's counsel referred to in Section 2(f)(i)(B)). The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5(b), that a Buyer shall be entitled,
in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.

         6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

            (a) Initial Closing Date. The obligation of the Company hereunder to
issue and sell the Initial Notes and the related Initial Warrants to each Buyer
at the Initial Closing is subject to the satisfaction, at or before the Initial
Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:

                (i) Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.

                (ii) Such Buyer and each other Buyer shall have delivered to the
Company the Purchase Price (less, in the case of Smithfield Fiduciary LLC, the
amounts withheld pursuant to Section 4(g)) for the Initial Notes and the related
Initial Warrants being purchased by such Buyer and each other Buyer at the
Initial Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.

                                       24
<PAGE>
                (iii) The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and as of the
Initial Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Initial Closing Date.

            (b) Subsequent Closing Date. The obligation of the Company hereunder
to issue and sell the Subsequent Notes and the related Subsequent Warrants to
each Buyer at the Subsequent Closing is subject to the satisfaction, at or
before the Subsequent Closing Date, of each of the following conditions,
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion by providing each Buyer
with prior written notice thereof:

                (i) Such Buyer shall have delivered to the Company the Purchase
Price for the Subsequent Notes and the related Subsequent Warrants being
purchased by such Buyer at the Subsequent Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by the
Company.

                (ii) The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and as of the
Subsequent Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Buyer at or prior to the Subsequent Closing Date.

            (c) Additional Closing Date. The obligation of the Company hereunder
to issue and sell the Additional Notes and the related Additional Warrants to
each Buyer at each Additional Closing is subject to the satisfaction, at or
before such Additional Closing Date, of each of the following conditions,
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion by providing each Buyer
with prior written notice thereof:

                (i) Such Buyer shall have delivered to the Company the Purchase
Price for the Additional Notes and the related Additional Warrants being
purchased by such Buyer at the applicable Additional Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by the
Company.

                (ii) The representations and warranties of such Buyer shall be
true and correct in all material respects as of the date when made and as of the
applicable Additional Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and such Buyer
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Buyer at or prior to the applicable
Additional Closing Date.

                                       25
<PAGE>
         7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.

            (a) Initial Closing Date. The obligation of each Buyer hereunder to
purchase the Initial Notes and the related Initial Warrants at the Initial
Closing is subject to the satisfaction, at or before the Initial Closing Date,
of each of the following conditions, provided that these conditions are for each
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion by providing the Company with prior written notice thereof:

                (i) The Company shall have executed and delivered to such Buyer
(i) each of the Transaction Documents and (ii) the Initial Notes (in such
principal amounts as such Buyer shall request) and the related Initial Warrants
(in such amounts as such Buyer shall request) being purchased by such Buyer at
the Initial Closing pursuant to this Agreement.

                (ii) Such Buyer shall have received the opinions of Milbank,
Tweed, Hadley & McCloy LLP, the Company's outside counsel, and Brian O'Donoghue,
the Company's General Counsel, each dated as of the Initial Closing Date, in
substantially the form of Exhibits H-1 and H-2 attached hereto.

                (iii) The Company shall have delivered to such Buyer a copy of
the Irrevocable Transfer Agent Instructions, in the form of Exhibit G attached
hereto, which instructions shall have been delivered to and acknowledged in
writing by the Company's transfer agent.

                (iv) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each Subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation, to the extent required by
Section 3(a), as of a date within 10 days of the Initial Closing Date.

                (v) The Company shall have delivered to such Buyer a certificate
evidencing the Company's qualification as a foreign corporation and good
standing issued by the Secretary of State of the State of New York as of a date
within 10 days of the Initial Closing Date.

                (vi) The Company shall have delivered to such Buyer a certified
copy of the Certificate of Incorporation as certified by the Secretary of State
of the State of Delaware within 10 days of the Initial Closing Date.

                (vii) The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company and dated as of the
Initial Closing Date, as to (i) the resolutions consistent with Section 3(b) as
adopted by the Company's Board of Directors in a form reasonably acceptable to
such Buyer (the "RESOLUTIONS"), (ii) the Certificate of Incorporation and (iii)
the Bylaws, each as in effect at the Initial Closing, in the form attached
hereto as Exhibit I.

                (viii) The representations and warranties of the Company shall
be true and correct in all material respects (except for those representations
and warranties that are qualified by materiality or Material Adverse Effect,
which shall be true and correct in all

                                       26
<PAGE>
respects) as of the date when made and as of the Initial Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Initial Closing Date. Such Buyer shall have received
a certificate, executed by the Chief Executive Officer of the Company, dated as
of the Initial Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by such Buyer in the form attached hereto
as Exhibit J.

                (ix) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the Initial Closing Date.

                (x) The Common Stock (I) shall be designated for quotation or
listed on the Principal Market and (II) shall not have been suspended, as of the
Initial Closing Date, by the SEC or the Principal Market from trading on the
Principal Market nor shall suspension by the SEC or the Principal Market have
been threatened, as of the Initial Closing Date, either (A) in writing by the
SEC or the Principal Market or (B) by falling below the minimum listing
maintenance requirements of the Principal Market.

                (xi) The Company shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Initial Notes and the Initial Warrants.

                (xii) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as such
Buyer or its counsel may reasonably request.

            (b) Subsequent Closing Date. The obligation of each Buyer hereunder
to purchase the Subsequent Notes and the related Subsequent Warrants at the
Subsequent Closing is subject to the satisfaction, at or before the Subsequent
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:

                (i) The Company shall have executed and delivered to such Buyer
the Subsequent Notes (in such principal amounts as such Buyer shall request) and
related Subsequent Warrants (in such amounts as such Buyer shall request) being
purchased by such Buyer at the Subsequent Closing pursuant to this Agreement.

                (ii) Such Buyer shall have received the opinions of Milbank,
Tweed, Hadley & McCloy LLP, the Company's outside counsel, and Brian O'Donoghue,
the Company's General Counsel, each dated as of the Subsequent Closing Date, in
substantially the form of Exhibits H-1 and H-2 attached hereto.

                (iii) The Irrevocable Transfer Agent Instructions shall remain
in effect as of the Subsequent Closing Date and the Company shall cause its
transfer agent to deliver a letter to such Buyer to that effect.

                                       27
<PAGE>
                (iv) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each Subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation, to the extent required by
Section 3(a), as of a date within 10 days of the Subsequent Closing Date.

                (v) The Company shall have delivered to such Buyer a certificate
evidencing the Company's qualification as a foreign corporation and good
standing issued by the Secretary of State of the State of New York as of a date
within 10 days of the Subsequent Closing Date.

                (vi) The Company shall have delivered to such Buyer a certified
copy of the Certificate of Incorporation as certified by the Secretary of State
of the State of Delaware within 10 days of the Subsequent Closing Date.

                (vii) The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company dated as of the Subsequent
Closing Date, as to (i) the Resolutions, (ii) the Certificate of Incorporation
and (iii) the Bylaws, each as in effect at the Subsequent Closing, in the form
attached hereto as Exhibit I.

                (viii) The representations and warranties of the Company shall
be true and correct in all material respects (except for those representations
and warranties that are qualified by materiality or Material Adverse Effect,
which shall be true and correct in all respects) as of the date when made and as
of the Subsequent Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the Company
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the
Subsequent Closing Date. Such Buyer shall have received a certificate, executed
by the Chief Executive Officer of the Company, dated as of the Subsequent
Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as Exhibit J.

                (ix) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the Subsequent Closing Date.

                (x) The Common Stock (I) shall be designated for quotation or
listed on the Principal Market and (II) shall not have been suspended, as of the
Subsequent Closing Date, by the SEC or the Principal Market from trading on the
Principal Market nor shall suspension by the SEC or the Principal Market have
been threatened, as of the Subsequent Closing Date, either (A) in writing by the
SEC or the Principal Market or (B) by falling below the minimum listing
maintenance requirements of the Principal Market.

                (xi) The Company shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Subsequent Notes and the

                                       28
<PAGE>
Subsequent Warrants.

                (xii) During the period beginning on the Initial Closing Date
and ending on and including the Subsequent Closing Date, neither the Company nor
any of its Subsidiaries shall have been in default under any mortgage, indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness of the Company or any of its Subsidiaries.

                (xiii) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as such
Buyer or its counsel may reasonably request.

            (c) Additional Closing Date. The obligation of each Buyer hereunder
to purchase the Additional Notes and the related Additional Warrants at each of
the applicable Additional Closings is subject to the satisfaction, at or before
each of the Additional Closing Dates, of each of the following conditions,
provided that these conditions are for each Buyer's sole benefit and may be
waived by such Buyer at any time in its sole discretion by providing the Company
with prior written notice thereof:

                (i) The Company shall have executed and delivered to such Buyer
the Additional Notes (in such principal amounts as such Buyer shall request) and
related Additional Warrants (in such principal amounts as such Buyer shall
request) being purchased by such Buyer at the applicable Additional Closing
pursuant to this Agreement.

                (ii) Such Buyer shall have received the opinions of Milbank,
Tweed, Hadley & McCloy LLP, the Company's outside counsel, and Brian O'Donoghue,
the Company's General Counsel, each dated as of the applicable Additional
Closing Date, in substantially the form of Exhibits H-1 and H-2 attached hereto.

                (iii) The Irrevocable Transfer Agent Instructions shall remain
in effect as of the applicable Additional Closing Date and the Company shall
cause its transfer agent to deliver a letter to such Buyer to that effect.

                (iv) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each Subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation, to the extent required by
Section 3(a), as of a date within 10 days of the applicable Additional Closing
Date.

                (v) The Company shall have delivered to such Buyer a certificate
evidencing the Company's qualification as a foreign corporation and good
standing issued by the Secretary of State of the State of New York as of a date
within 10 days of the Additional Closing Date.

                (vi) The Company shall have delivered to such Buyer a certified
copy of the Certificate of Incorporation as certified by the Secretary of State
of the State of Delaware within 10 days of the applicable Additional Closing
Date.

                                       29
<PAGE>
                (vii) The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company dated as of the applicable
Additional Closing Date, as to (i) the Resolutions, (ii) the Certificate of
Incorporation and (iii) the Bylaws, each as in effect at the applicable
Additional Closing, in the form attached hereto as Exhibit I.

                (viii) The representations and warranties of the Company shall
be true and correct in all material respects (except for those representations
and warranties that are qualified by materiality or Material Adverse Effect,
which shall be true and correct in all respects) as of the date when made and as
of the applicable Additional Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at or prior
to the applicable Additional Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the applicable Additional Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer in the form attached
hereto as Exhibit J.

                (ix) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the applicable Additional
Closing Date.

                (x) The Common Stock (I) shall be designated for quotation or
listed on the Principal Market and (II) shall not have been suspended, as of the
Additional Closing Date, by the SEC or the Principal Market from trading on the
Principal Market nor shall suspension by the SEC or the Principal Market have
been threatened, as of the Additional Closing Date, either (A) in writing by the
SEC or the Principal Market or (B) by falling below the minimum listing
maintenance requirements of the Principal Market.

                (xi) The Company shall have obtained all governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Additional Notes and the Additional Warrants being purchased at the
applicable Additional Closing.

                (xii) During the period beginning on the Initial Closing Date
and ending on and including the applicable Additional Closing Date, neither the
Company nor any of its Subsidiaries shall have been in default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness of the Company or any of its
Subsidiaries.

                (xiii) During the period beginning on the Initial Closing Date
and ending on and including the Additional Closing Date, there shall not have
occurred (A) an Event of Default or (B) consummation of a Change of Control (as
defined in the Notes) or a public announcement of a pending, proposed or
intended Change of Control, which has not been abandoned or terminated prior to
the applicable Additional Closing Date.

                (xiv) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as such
Buyer or its

                                       30
<PAGE>
counsel may reasonably request.

         8. TERMINATION. In the event that the Initial Closing shall not have
occurred with respect to a Buyer on or before five (5) Business Days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, this if this Agreement is terminated pursuant to
this Section 8, the Company shall remain obligated to reimburse the
non-breaching Buyers for the expenses described in Section 4(g) above.

         9. MISCELLANEOUS.

            (a) Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

            (b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

            (c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

            (d) Severability. If any provision of this Agreement shall be
invalid or

                                       31
<PAGE>
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

            (e) Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyers, the Company, their
affiliates and Persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of Notes representing at least two-thirds of the
aggregate principal amount of the Initial Notes, or, if prior to the Initial
Closing Date, the Company and the Buyers listed on the Schedule of Buyers as
being obligated to purchase at least two-thirds of the aggregate principal
amount of the Initial Notes. No provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Notes then outstanding. No consideration shall be offered
or paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration also
is offered to all of the parties to the Transaction Documents, holders of Notes
or holders of the Warrants, as the case may be. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.

            (f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:

         If to the Company:

                  Viewpoint Corporation
                  498 Seventh Avenue, Suite 1810
                  New York, New York 10018
                  Telephone:  (212) 201-0800
                  Facsimile:  (212) 201-0846
                  Attention:  Jeffrey J. Kaplan, Executive Vice President,
                              Business Affairs and
                              Brian J. O'Donoghue, Executive Vice President and
                              General Counsel

         with a copy to:

                                       32
<PAGE>
                  Milbank, Tweed, Hadley & McCloy LLP
                  1 Chase Manhattan Plaza
                  New York, New York  10005
                  Telephone:        (212) 530-5171
                  Facsimile:        (212) 822-5171
                  Attention:        Alexander M. Kaye, Esq.

         If to the Transfer Agent:

                  Equiserve Trust Company
                  Post Office Box 9187
                  Canton, Massachusetts  02021
                  Telephone:        (781) 575-2790
                  Facsimile:        (617) 360-6911
                  Attention:        Donna Rosas

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers, or to such other address and/or facsimile number and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

            (g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes or the Warrants. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of Notes representing at least two-thirds of the
aggregate principal amount of the Notes then outstanding, including by merger or
consolidation, except pursuant to a Change of Control (as defined in Section 5
of the Notes) with respect to which the Company is in compliance with Section 5
of the Notes and Section 4(b) of the Warrants. A Buyer may assign some or all of
its rights hereunder without the consent of the Company, in which event such
assignee shall be deemed to be a Buyer hereunder with respect to such assigned
rights.

            (h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

            (i) Survival. Unless this Agreement is terminated under Section 8,
the representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9
shall survive each Closing. Each

                                       33
<PAGE>
Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.

            (j) Further Assurances. Each party 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 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.

            (k) Indemnification. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities who is a successor or assignee
pursuant to Section 9(g) and all of their stockholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the
foregoing Persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "INDEMNITEES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and reasonable expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the
Company contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby or (c) any cause of
action, suit or claim brought or made against such Indemnitee by a third party
(including for these purposes a derivative action brought on behalf of the
Company) and arising out of or resulting from (i) the execution, delivery,
performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by such Buyer pursuant to Section 4(i), or (iv) the status of
such Buyer or holder of the Securities as an investor in the Company. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(k)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.

            (l) No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.

            (m) Remedies. Each Buyer and each holder of the Securities shall
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the

                                       34
<PAGE>
rights which such holders have under any law. Any Person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under this Agreement, any remedy at law may prove to be inadequate
relief to the Buyers. The Company therefore agrees that the Buyers shall be
entitled to seek temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages and without posting a bond or
other security.

            (n) Payment Set Aside. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Buyers enforce or exercise their rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.

                            [SIGNATURE PAGE FOLLOWS]

                                       35
<PAGE>
         IN WITNESS WHEREOF, each Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

<TABLE>
<S>                                           <C>
COMPANY:                                      BUYERS:
VIEWPOINT CORPORATION                         SMITHFIELD FIDUCIARY LLC

By:  /s/ Brian O'Donoghue                     By:  /s/ Adam J. Chill
     -------------------------------             -------------------------------
     Name:  Brian O'Donoghue                     Name:  Adam J. Chill
     Title:   Executive Vice President           Title: Authorized Signatory

                                              PORTSIDE GROWTH & OPPORTUNITY FUND

                                              By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

                                              RIVERVIEW GROUP, LLC

                                              By:
                                                 -------------------------------
                                                 Name:
                                                 Title:
</TABLE>
<PAGE>
                               SCHEDULE OF BUYERS

<TABLE>
<CAPTION>
  (1)                          (2)                         (3)             (4)             (5)               (6)

                                                         AGGREGATE       AGGREGATE      AGGREGATE
                                                         PRINCIPAL       PRINCIPAL      PRINCIPAL
                                                         AMOUNT OF       AMOUNT OF       AMOUNT OF
                                                          INITIAL        SUBSEQUENT     ADDITIONAL     LEGAL REPRESENTATIVE'S
  BUYER                 ADDRESS AND FACSIMILE NUMBER      NOTES            NOTES         NOTES      ADDRESS AND FACSIMILE NUMBER
------------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>                              <C>             <C>         <C>            <C>
Smithfield Fiduciary    c/o Highbridge Capital           $2,600,000      $2,600,000  $1,040,000     Schulte Roth & Zabel LLP
LLC                     Management, LLC                                                             919 Third Avenue
                        9 West 57th Street, 27th Floor                                              New York, New York  10022
                        New York, New York  10019                                                   Attention: Eleazer Klein, Esq.
                        Attention:  Ari J. Storch                                                   Facsimile: (212) 593-5955
                                    Adam J. Chill                                                   Telephone:  (212) 756-2376
                        Facsimile:  (212) 751-0755
                        Telephone:  (212) 287-4720
                        Residence:  Cayman Islands

Portside Growth &       c/o Ramius Capital Group,        $2,000,000      $2,000,000  $ 800,000      Schulte Roth & Zabel LLP
Opportunity Fund        L.L.C.                                                                      919 Third Avenue
                        666 Third Avenue, 26th Floor                                                New York, New York  10022
                        New York, New York  10017                                                   Attention:  Eleazer Klein, Esq.
                        Attention:  Jeffrey Solomon                                                 Facsimile: (212) 593-5955
                                    Jeffrey Smith                                                   Telephone:  (212) 756-2376
                        Facsimile:  (212) 845-7999
                        Telephone:  (212) 845-7917
                        Residence:  Cayman Islands
Riverview Group,
LLC                     c/o Millennium Partners          $2,400,000      $2,400,000  $ 960,000      Schulte Roth & Zabel LLP
                        666 Fifth Avenue, 8th Floor                                                 919 Third Avenue
                        New York, New York  10103                                                   New York, NY 10022
                        Attention:  Manager                                                         Attention:  Eleazer Klein, Esq.
                        Facsimile:  (212) 841-6302                                                  Facsimile: (212) 593-5955
                        Residence:  New York                                                        Telephone:  (212) 756-2376
</TABLE>
<PAGE>
                                    EXHIBITS

<TABLE>
<S>               <C>
Exhibit A         Form of Initial Notes
Exhibit B         Form of Subsequent Notes
Exhibit C         Form of Additional Notes
Exhibit D         Form of Warrants
Exhibit E         Form of Pledge Agreement
Exhibit F         Form of Registration Rights Agreement
Exhibit G         Form of Irrevocable Transfer Agent Instructions
Exhibit H-1       Form of Company Outside Counsel Opinion
Exhibit H-2       Form of Company General Counsel Opinion
Exhibit I         Form of Secretary's Certificate
Exhibit J         Form of Officer's Certificate
</TABLE>

                                    SCHEDULES

<TABLE>
<S>               <C>
Schedule 3(a)     Subsidiaries
Schedule 3(e)     Consents
Schedule 3(k)     Presentations
Schedule 3(l)     Absence of Certain Changes
Schedule 3(n)     Conduct of Business; Regulatory Permits
Schedule 3(p)     Transactions with Affiliates
Schedule 3(q)     Capitalization
Schedule 3(r)     Indebtedness and Other Contracts
Schedule 3(s)     Litigation
Schedule 3(v)     Title
Schedule 3(w)     Intellectual Property
</TABLE>
<PAGE>
                                  SCHEDULES TO

                          SECURITIES PURCHASE AGREEMENT

                          DATED AS OF DECEMBER 31, 2002

                                 BY AND BETWEEN

                              VIEWPOINT CORPORATION

                                       AND

                     THE INVESTORS LISTED ON THE SCHEDULE OF

                             BUYERS ATTACHED THERETO
<PAGE>
                                  SCHEDULE 3(A)

                                  SUBSIDIARIES

MetaCreations Europe SARL (France)

MetaCreations Holding Corporation (California)

MetaCreations Holding Limited (Ireland)

MetaCreations International Limited (Ireland)

MetaTools Barbados FSC (Barbados)

Viewpoint Digital, Inc. (Delaware)

Viewpoint Digital SARL (France)

Viewpoint Digital Limited (UK)

Thinkfish Acquisition Company (Delaware)

Canoma, Inc. (California)
<PAGE>
                                  SCHEDULE 3(E)

                                    CONSENTS

None
<PAGE>
                                  SCHEDULE 3(L)

                           ABSENCE OF CERTAIN CHANGES

None
<PAGE>
                                  SCHEDULE 3(N)

                     CONDUCT OF BUSINESS; REGULATORY PERMITS

None
<PAGE>
                                  SCHEDULE 3(P)

                          TRANSACTIONS WITH AFFILIATES

None
<PAGE>
                                  SCHEDULE 3(Q)

                              EQUITY CAPITALIZATION

     1.  VIEWPOINT CORPORATION OUTSTANDING OPTIONS AS OF DECEMBER 31, 2002

<TABLE>
<CAPTION>
    Price                                   Issued                        Vested
    ($/Share)                             (# of Shares)                (# of Shares)
    ---------                             -------------                -------------
<S>                                       <C>                          <C>
  0.8700                                  2,167,433                    1,873,589
  2.1800                                  77,000                       0
  2.6100                                  805,350                      621,733
  3.0000                                  15,000                       11,250
  3.1000                                  68,000                       0
  3.2680                                  23,000                       0
  3.4000                                  22,000                       6,875
  3.5000                                  37,000                       32,000
  3.8130                                  25,000                       10,938
  3.8800                                  1,200,000                    54,167
  4.0000                                  4,000                        1,167
  4.1800                                  44,000                       0
  4.2500                                  10,000                       3,125
  4.3500                                  1,535,542                    1,200,745
  4.4000                                  67,000                       0
  4.4100                                  58,000                       19,166
  4.4690                                  72,333                       42,062
  4.6800                                  5,000                        5,000
</TABLE>
<PAGE>
<TABLE>
<S>                                       <C>                          <C>
  4.6900                                  168,600                      78,039
  4.7660                                  269,042                      128,158
  4.8200                                  36,000                       0
  5.0300                                  90,165                       90,165
  5.0625                                  9,000                        0
  5.0900                                  269,500                      265,333
  5.0938                                  258,396                      251,606
  5.1300                                  18,417                       8,501
  5.1500                                  45,000                       17,813
  5.3750                                  180,500                      82,187
  5.5200                                  500                          0
  5.6250                                  88,825                       44,378
  5.6500                                  80,500                       80,500
  5.7000                                  24,000                       0
  5.7300                                  265,000                      0
  5.7500                                  78,750                       47,031
  5.8100                                  342,500                      8,438
  5.9900                                  125,000                      0
  6.0000                                  46,000                       0
  6.0400                                  8,000                        0
  6.1000                                  8,000                        2,834
  6.1300                                  460,000                      210,833
  6.2900                                  20,000                       14,168
  6.6250                                  5,000                        5,000
  6.7000                                  5,500                        0
</TABLE>
<PAGE>
<TABLE>
<S>                                       <C>                          <C>
  6.8750                                  10,000                       5,000
  7.3100                                  45,233                       28,174
  7.9375                                  25,000                       22,396
  8.5000                                  6,500                        4,000
  8.5630                                  150,000                      84,375
  8.7000                                  15,333                       15,333
  8.7300                                  16,100                       8,721
  9.0000                                  5,000                        5,000
  10.7500                                 5,000                        5,000
  11.0000                                 20,000                       20,000
  11.0900                                 9,200                        5,176
  12.8750                                 5,000                        5,000
  25.1250                                 5,000                        5,000
                                          --------------------         ---------
                                 TOTALS:  9,455,220                    5,429,976
                                          ====================         =========
                                          AVERAGE ISSUED PRICE               3.8081
                                          AVERAGE VESTED PRICE               3.3622
</TABLE>
<PAGE>
         2. VIEWPOINT CORPORATION OUTSTANDING WARRANTS AS OF DECEMBER 31, 2002

<TABLE>
<CAPTION>
                    Price                       Issued
                  ($/Share)                   (# of Shares)
        --------------------------          ------------------
<S>                                         <C>
         15.6500                             57,500
                                             -----------------
                        TOTALS:              57,500
                                             =================
                AVERAGE ISSUED PRICE         15.6500
</TABLE>

         3. VIEWPOINT CORPORATION PRE-EMPTIVE RIGHTS

                  a.    Pursuant to Section 7.4 of the Amended and Restated
                        Series A Preferred Stock Purchase Agreement, dated as of
                        June 12, 2000 among Metastream Corporation, a Delaware
                        corporation and predecessor in interest to Viewpoint
                        Corporation, MetaCreations Corporation, a Delaware
                        corporation (now known as Viewpoint Corporation) and
                        America Online, Inc., a Delaware corporation ("AOL"),
                        AOL has a right, upon the issuance of Viewpoint common
                        stock to a third party under certain circumstances, to
                        acquire an amount of shares of Viewpoint common stock as
                        will permit AOL to maintain its percentage equity
                        interest in Viewpoint immediately prior to the proposed
                        issuance at the same price and on the same terms and
                        conditions as such proposed issuance to a third party.
                        AOL currently owns 1,725,000 shares of Viewpoint common
                        stock (approximately 4.2%) and has orally stated that it
                        will waive the above-described rights.

                  b.    Pursuant to Section 7.4 of the Series B Preferred Stock
                        Purchase Agreement, dated as of July 18, 2000 among
                        Metastream Corporation, a Delaware corporation and
                        predecessor in interest to Viewpoint Corporation,
                        MetaCreations Corporation, a Delaware corporation now
                        known as Viewpoint Corporation, and Adobe Systems
                        Incorporated, a Delaware corporation ("Adobe"), Adobe
                        has a right, upon the issuance of Viewpoint common stock
                        to a third party under certain circumstances, to acquire
                        an amount of shares of Viewpoint common stock as will
                        permit Adobe to maintain its percentage equity interest
                        in Viewpoint immediately prior to the proposed issuance
                        at the same price and on the same terms and conditions
                        as such proposed issuance to a third party. Adobe
                        currently owns 1,499,000 shares of Viewpoint common
                        stock (approximately 3.7%) and has orally stated that it
                        will waive the above-described rights.
<PAGE>
                  c.    Pursuant to Section 8.1 of the Exchange Agreement, dated
                        as of August 10, 2000 (this "Agreement"), by and between
                        MetaCreations Corporation, a Delaware corporation now
                        known as Viewpoint Corporation, and Computer Associates
                        International, Inc., a Delaware corporation ("Computer
                        Associates"), Computer Associates has a right, upon the
                        issuance of Viewpoint common stock to a third party
                        under certain circumstances, to acquire an amount of
                        shares as will permit Computer Associates to maintain
                        its percentage equity interest in Viewpoint immediately
                        prior to the proposed issuance at the same price and on
                        the same terms and conditions as such proposed issuance
                        to a third party. Computer Associates currently owns
                        3,744,093 shares of Viewpoint common stock
                        (approximately 9.1%) and has orally stated that it will
                        waive the above-described rights.
<PAGE>
                                  SCHEDULE 3(R)

                        INDEBTEDNESS AND OTHER CONTRACTS

Irrevocable Clean Transferable Standby Letter of Credit No. S303505

Date: October 1, 2001

Bank: KeyBank National Association

Benefeciary: 498 Seventh, LLC; c/o George Comfort & Sons, Inc.

Issued Amount: $289, 328.00; Current Amount: $252,581.00

Expiry, original: October 1, 2002; current expiry: October 1, 2003

Automatic One-Year Extensions

[Backed by KeyBank restricted cash bank account]
<PAGE>
                                  SCHEDULE 3(S)

                                   LITIGATION

Viewpoint v. Abate: Litigation commenced by the Company against James A. Abate
to recover $1.5 million. Bench trial ended November 21, 2002. Awaiting judge's
decision.

Viewpoint v. de Espona: Litigation commenced in Spain by Viewpoint against an
individual (Jose Maria de Espona) to recover damages for intellectual property
infringement. Viewpoint alleges that de Espona is marketing and selling a
collection of three-dimensional models to which Viewpoint has exclusive rights.
A decision by the court in Spain is expected in the first half of 2003 and the
amount in dispute is less than $750,000.
<PAGE>
                                  SCHEDULE 3(V)

                                      TITLE

None

                                  SCHEDULE 3(W)

                          INTELLECTUAL PROPERTY RIGHTS

None<PAGE>
                                                                    Exhibit 10.2

                           [FORM OF CONVERTIBLE NOTE]

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS, OR (B) AN OPINION OF COUNSEL ADDRESSED TO THE COMPANY, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE
SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(C)(III) AND
16(A) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY,
THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET
FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(C)(III) OF THIS NOTE.

                                CONVERTIBLE NOTE

Issuance Date: December 31, 2002                      Principal: U.S. $_________

         FOR VALUE RECEIVED, VIEWPOINT CORPORATION, a Delaware corporation (the
"COMPANY"), hereby promises to pay to the order of _____________, or registered
assigns ("HOLDER") the amount set out above as the Principal (as reduced
pursuant to the terms hereof pursuant to redemption, conversion or otherwise,
the "PRINCIPAL") when due, whether upon the Maturity Date (as defined below),
acceleration, redemption or otherwise (in each case in accordance with the terms
hereof) and to pay interest ("INTEREST") on any outstanding Principal at the
rate of 4.95% per annum, subject to periodic adjustment pursuant to Section 2
(the "INTEREST RATE"), from the date set out above as the Issuance Date (the
"ISSUANCE DATE") until the same becomes due and payable, whether upon an
Interest Date (as defined below), the Maturity Date (as defined below),
acceleration, conversion, redemption or otherwise (in each case in accordance
with the terms hereof). This Convertible Note (including all Convertible Notes
issued in exchange, transfer or replacement hereof, this "NOTE") is one of an
issue of Convertible Notes (collectively, the "NOTES" and such other Convertible
Notes, the "OTHER NOTES") issued on the Issuance Date pursuant to the Securities
Purchase Agreement (as defined below). Certain capitalized terms are defined in
Section 29.
<PAGE>
                  (1) MATURITY. On the Maturity Date, the Holder shall surrender
this Note to the Company and the Company shall pay to the Holder an amount in
cash representing all outstanding Principal, accrued and unpaid Interest and
accrued and unpaid Late Charges, if any. The "MATURITY DATE" shall be December
31, 2007 as extended at the option of the Holder (i) in the event that, and for
so long as, an Event of Default (as defined in Section 4(a)) shall have occurred
and be continuing or any event shall have occurred and be continuing which with
the passage of time and the failure to cure would result in an Event of Default
and (ii) through the date that is ten days after the consummation of a Change of
Control (as defined in Section 5(a)) in the event that a Change of Control is
publicly announced or a Change of Control Notice (as defined in Section 5(a)) is
delivered prior to the Maturity Date.

                  (2) INTEREST; INTEREST RATE. Interest on this Note shall
commence accruing on the Issuance Date and shall be computed on the basis of a
365-day year and actual days elapsed and shall be payable in arrears on the
first day of each Calendar Quarter during the period beginning on the Issuance
Date and ending on, and including, the Maturity Date (each, an "INTEREST DATE")
with the first Interest Date being April 1, 2003. Interest shall be payable on
each Interest Date in cash or, at the option of the Company, in shares of Common
Stock ("INTEREST SHARES") provided that the Interest which accrued during any
period shall be payable in Interest Shares only if the Company delivers written
notice of such election ("INTEREST ELECTION NOTICE") to each holder of the Notes
and the Separate Tranche Notes at least seven (7) Trading Days prior to the
Interest Date (an "INTEREST ELECTION DATE"). Interest to be paid on an Interest
Date in Interest Shares shall be paid in a number of fully paid and
nonassessable shares (rounded to the nearest whole share in accordance with
Section 3(a)) of Common Stock equal to the quotient of (a) the Interest payable
and (b) the Interest Conversion Price on the applicable Interest Date. If any
Interest Shares are to be paid on an Interest Date, then the Company shall (X)
issue and deliver on the applicable Interest Date, to such address as specified
by the Holder in writing to the Company at least two Business Days prior to the
applicable Interest Date, a certificate, registered in the name of the Holder or
its designee, for the number of Interest Shares to which the Holder shall be
entitled, or (Y) provided that the Company's transfer agent (the "TRANSFER
AGENT") is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of Interest Shares to which the Holder shall be entitled to the
Holder's or its designee's balance account with DTC through its Deposit
Withdrawal Agent Commission system. Notwithstanding the foregoing, the Company
shall not be entitled to pay Interest in Interest Shares and shall be required
to pay such Interest in cash on the applicable Interest Date if (x) any event
constituting an Event of Default or an event that with the passage of time and
assuming it were not cured would constitute an Event of Default has occurred and
is continuing on the applicable Interest Election Date or the Interest Date,
unless consented to in writing by the Holder, (y) the Registration Statement (as
defined in the Registration Rights Agreement) covering the Interest Shares is
not effective and available for the resale of all of the Registrable Securities
(as defined in the Registration Rights Agreement) relating to this Note on the
Interest Election Date or on the Interest Date or (z) the Company has not
obtained the Stockholder Approval (as defined in the

                                       2
<PAGE>
Securities Purchase Agreement) prior to the Interest Election Date. Prior to the
payment of Interest on an Interest Date, Interest on this Note shall accrue at
the Interest Rate and be payable upon conversion by way of inclusion of the
Interest in the Conversion Amount in accordance with Section 3(b)(i). From and
after the occurrence of an Event of Default, the Interest Rate shall be
increased to 12%. In the event that such Event of Default is subsequently cured,
the adjustment referred to in the preceding sentence shall cease to be effective
as of the date of such cure; provided that the Interest as calculated at such
increased rate during the continuance of such Event of Default shall continue to
apply to the extent relating to the days after the occurrence of such Event of
Default through and including the date of cure of such Event of Default. The
Company shall pay any and all documentary stamp, transfer or similar taxes that
may be payable with respect to the issuance and delivery of Interest Shares.

                  (3) CONVERSION OF NOTES. This Note shall be convertible into
shares of the Company's common stock, par value $0.001 per share (the "COMMON
STOCK"), on the terms and conditions set forth in this Section 3.

                        (a) Conversion Right. Subject to the provisions of
Section 3(d), at any time or times on or after the Issuance Date, the Holder
shall be entitled to convert any portion of the outstanding and unpaid
Conversion Amount (as defined below) into fully paid and nonassessable shares of
Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined
below). The Company shall not issue any fraction of a share of Common Stock upon
any conversion. If the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up to the nearest whole share. The Company shall pay any and all
documentary stamp, transfer or similar taxes that may be payable with respect to
the issuance and delivery of Common Stock upon conversion of any Conversion
Amount.

                        (b) Conversion Rate. The number of shares of Common
Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a)
shall be determined by dividing (x) such Conversion Amount by (y) the Conversion
Price (as defined below) (the "CONVERSION RATE").

        (i) "CONVERSION AMOUNT" means the sum of (A) the portion of the
        Principal to be converted, redeemed or otherwise with respect to which
        this determination is being made, (B) accrued and unpaid Interest with
        respect to such Principal and (C) accrued and unpaid Late Charges with
        respect to such Principal and Interest.

        (ii) "CONVERSION PRICE" means, as of any Conversion Date (as defined
        below) or other date of determination, and subject to adjustment as
        provided herein, $2.26.

                        (c) Mechanics of Conversion.

        (i) Optional Conversion. To convert any Conversion Amount into shares of

                                       3
<PAGE>
        Common Stock on any date (a "CONVERSION Date"), the Holder shall (A)
        transmit by facsimile (or otherwise deliver), for receipt on or prior to
        11:59 p.m., New York Time, on such date, a copy of an executed notice of
        conversion in the form attached hereto as Exhibit I (the "CONVERSION
        NOTICE") to the Company and (B) if required by Section 3(c)(iii),
        surrender this Note to a common carrier for delivery to the Company as
        soon as practicable on or following such date (or an indemnification
        undertaking with respect to this Note in the case of its loss, theft or
        destruction). On or before the first Business Day following the date of
        receipt of a Conversion Notice, the Company shall transmit by facsimile
        a confirmation of receipt of such Conversion Notice to the Holder and
        the Transfer Agent. On or before the second Business Day following the
        date of receipt of a Conversion Notice (the "SHARE DELIVERY DATE"), the
        Company shall (X) issue and deliver to the address as specified in the
        Conversion Notice, a certificate, registered in the name of the Holder
        or its designee, for the number of shares of Common Stock to which the
        Holder shall be entitled, or (Y) provided that the Transfer Agent is
        participating in DTC Fast Automated Securities Transfer Program, upon
        the request of the Holder, credit such aggregate number of shares of
        Common Stock to which the Holder shall be entitled to the Holder's or
        its designee's balance account with DTC through its Deposit Withdrawal
        Agent Commission system. If this Note is physically surrendered for
        conversion as required by Section 3(c)(iii) and the outstanding
        Principal of this Note is greater than the Principal portion of the
        Conversion Amount being converted, then the Company shall as soon as
        practicable and in no event later than three Business Days after receipt
        of this Note and at its own expense, issue and deliver to the holder a
        new Note (in accordance with Section 19(d)) representing the outstanding
        Principal not converted. The Person or Persons entitled to receive the
        shares of Common Stock issuable upon a conversion of this Note shall be
        treated for all purposes as the record holder or holders of such shares
        of Common Stock on the Conversion Date.

        (ii) Company's Failure to Timely Convert. If the Company shall fail to
        issue a certificate to the Holder or credit the Holder's balance account
        with DTC for the number of shares of Common Stock to which the Holder is
        entitled upon conversion of any Conversion Amount on or prior to the
        date which is five Business Days after the Conversion Date (a
        "CONVERSION FAILURE"), then (A) the Company shall pay damages to the
        Holder for each date of such Conversion Failure in an amount equal to
        1.0% of the product of (I) the sum of the number of shares of Common
        Stock not issued to the Holder on or prior to the Share Delivery Date
        and to which the Holder is entitled, and (II) the Closing Sale Price of
        the Common Stock on the Share Delivery Date and (B) the Holder, upon
        written notice to the Company, may void its Conversion Notice with
        respect to, and retain or have returned, as the case may be, any portion
        of this Note that has not been converted pursuant to such Conversion
        Notice; provided that the voiding of a Conversion Notice shall not
        affect the Company's obligations to make any payments which have accrued
        prior to the date of such notice pursuant to this Section 3(c)(ii) or
        otherwise.

        (iii) Book-Entry. Notwithstanding anything to the contrary set forth
        herein, upon

                                       4
<PAGE>
        conversion of any portion of this Note in accordance with the terms
        hereof, the Holder shall not be required to physically surrender this
        Note to the Company unless (A) the full Conversion Amount represented by
        this Note is being converted or (B) the Holder has provided the Company
        with prior written notice (which notice may be included in a Conversion
        Notice) requesting physical surrender and reissue of this Note. The
        Holder and the Company shall maintain records showing the Principal,
        Interest, and Late Charges converted and the dates of such conversions
        or shall use such other method, reasonably satisfactory to the Holder
        and the Company, so as not to require physical surrender of this Note
        upon conversion.

        (iv) Pro Rata Conversion; Disputes. In the event that the Company
        receives a Conversion Notice from more than one holder of Notes or
        Separate Tranche Notes for the same Conversion Date and the Company can
        convert some, but not all, of such portions of the Notes submitted for
        conversion, the Company, subject to Section 3(d), shall convert from
        each holder of Notes or Separate Tranche Notes electing to have Notes or
        Separate Tranche Notes converted on such date a pro rata amount of such
        holder's portion of its Notes or Separate Tranche Notes submitted for
        conversion based on the principal amount of Notes and Separate Tranche
        Notes submitted for conversion on such date by such holder relative to
        the aggregate principal amount of all Notes and Separate Tranche Notes
        submitted for conversion on such date. In the event of a dispute as to
        the number of shares of Common Stock issuable to the Holder in
        connection with a conversion of this Note, the Company shall issue to
        the Holder the number of shares of Common Stock not in dispute and
        resolve such dispute in accordance with Section 24.

                        (d) Limitations on Conversions.

        (i) Beneficial Ownership. The Company shall not effect any conversion of
        this Note, and the Holder of this Note shall not have the right to
        convert any portion of this Note pursuant to Section 3(a), to the extent
        that after giving effect to such conversion, the Holder (together with
        the Holder's affiliates) would beneficially own in excess of 4.99% of
        the number of shares of Common Stock outstanding immediately after
        giving effect to such conversion. For purposes of the foregoing
        sentence, the number of shares of Common Stock beneficially owned by the
        Holder and its affiliates shall include the number of shares of Common
        Stock issuable upon conversion of this Note with respect to which the
        determination of such sentence is being made, but shall exclude the
        number of shares of Common Stock which would be issuable upon (A)
        conversion of the remaining, nonconverted portion of this Note
        beneficially owned by the Holder or any of its affiliates and (B)
        exercise or conversion of the unexercised or nonconverted portion of any
        other securities of the Company (including, without limitation, any
        Other Notes, Separate Tranche Notes or warrants) subject to a limitation
        on conversion or exercise analogous to the limitation contained herein
        beneficially owned by the Holder or any of its affiliates. Except as set
        forth in the preceding sentence, for purposes of this Section 3(d)(i),
        beneficial ownership shall be calculated in accordance with Section
        13(d) of the

                                       5
<PAGE>
        Securities Exchange Act of 1934, as amended. For purposes of this
        Section 3(d)(i), in determining the number of outstanding shares of
        Common Stock, the Holder may rely on the number of outstanding shares of
        Common Stock as reflected in (x) the Company's most recent Form 10-Q or
        Form 10-K, as the case may be, (y) a more recent public announcement by
        the Company or (z) any other notice by the Company or the Transfer Agent
        setting forth the number of shares of Common Stock outstanding. For any
        reason at any time, upon the written or oral request of the Holder, the
        Company shall within two Business Days confirm in writing to the Holder
        the number of shares of Common Stock then outstanding. In any case, the
        number of outstanding shares of Common Stock shall be determined after
        giving effect to the conversion or exercise of securities of the
        Company, including this Note, by the Holder or its affiliates since the
        date as of which such number of outstanding shares of Common Stock was
        reported.

        (ii) Principal Market Regulation. The Company shall not be obligated to
        issue any shares of Common Stock upon conversion of this Note if the
        issuance of such shares of Common Stock would exceed that number of
        shares of Common Stock which the Company may issue upon conversion of
        the Notes and the Separate Tranche Notes without breaching the Company's
        obligations under the rules or regulations of the Principal Market (the
        "EXCHANGE CAP"), except that such limitation shall not apply in the
        event that the Company obtains the approval of its stockholders as
        required by the applicable rules of the Principal Market for issuances
        of Common Stock in excess of such amount. Until such approval is
        obtained, no purchaser of the Notes or Separate Tranche Notes pursuant
        to the Securities Purchase Agreement (the "PURCHASERS") shall be issued,
        upon conversion of Notes or Separate Tranche Notes, shares of Common
        Stock in an amount greater than the product of the Exchange Cap
        multiplied by a fraction, the numerator of which is the principal amount
        of Notes issued to such Purchaser pursuant to the Securities Purchase
        Agreement on the Initial Issuance Date and the denominator of which is
        the aggregate principal amount of all Notes issued to the Purchasers
        pursuant to the Securities Purchase Agreement on the Initial Issuance
        Date (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In
        the event that any Purchaser shall sell or otherwise transfer any of
        such Purchaser's Notes or Separate Tranche Notes, the transferee shall
        be allocated a pro rata portion of such Purchaser's Exchange Cap
        Allocation, and the restrictions of the prior sentence shall apply to
        such transferee with respect to the portion of the Exchange Cap
        Allocation allocated to such transferee. In the event that any holder of
        Notes or Separate Tranche Notes shall convert all of such holder's Notes
        or Separate Tranche Notes into a number of shares of Common Stock which,
        in the aggregate, is less than such holder's Exchange Cap Allocation,
        then the difference between such holder's Exchange Cap Allocation and
        the number of shares of Common Stock actually issued to such holder
        shall be allocated to the respective Exchange Cap Allocations of the
        remaining holders of Notes and Separate Tranche Notes on a pro rata
        basis in proportion to the aggregate principal amount of the Notes and
        Separate Tranche Notes then held by each such holder.

                                       6
<PAGE>
                (4) RIGHTS UPON EVENT OF DEFAULT.

                        (a) Event of Default. Each of the following events shall
constitute an "EVENT OF DEFAULT":

        (i) the failure of the applicable Registration Statement required to be
        filed pursuant to the Registration Rights Agreement to be declared
        effective by the SEC on or prior to the date that is 60 days after the
        applicable Effectiveness Deadline (as defined in the Registration Rights
        Agreement), or, while the applicable Registration Statement is required
        to be maintained effective pursuant to the terms of the Registration
        Rights Agreement, the effectiveness of the applicable Registration
        Statement lapses for any reason (including, without limitation, the
        issuance of a stop order) or is unavailable to any holder of the Notes
        for sale of all of such holder's Registrable Securities (as defined in
        the Registration Rights Agreement) in accordance with the terms of the
        Registration Rights Agreement, and such lapse or unavailability
        continues for a period of 10 consecutive days or for more than an
        aggregate of 30 days in any 365-day period (other than days during an
        Allowable Grace Period (as defined in the Registration Rights
        Agreement));

        (ii) the suspension from trading or failure of the Common Stock to be
        listed on the Principal Market, The New York Stock Exchange, Inc. (the
        "NYSE"), or the American Stock Exchange (the "AMEX") for a period of
        five consecutive days or for more than an aggregate of 10 days in any
        365-day period;

        (iii) the Company's (A) failure to cure a Conversion Failure by delivery
        of the required number of shares of Common Stock, as applicable, within
        10 days after the applicable Conversion Date or (B) written notice to
        any holder of the Notes, including by way of public announcement or
        through any of its agents, at any time, of its intention not to comply
        with a request for conversion of any Notes into shares of Common Stock
        that is tendered in accordance with the provisions of the Notes;

        (iv) upon the Company's receipt of a Conversion Notice, the Company is
        not obligated to issue shares of Common Stock upon such conversion due
        to the provisions of Section 3(d)(ii);

        (v) at any time following the tenth consecutive Business Day that the
        Holder's Authorized Share Allocation is less than the number of shares
        of Common Stock that the Holder would be entitled to receive upon a
        conversion of the full Conversion Amount of this Note (without regard to
        any limitations on conversion set forth in Section 3(d) or otherwise);

        (vi) the Company's failure to pay to the Holder any amount of Principal,
        Interest, Late Charges or other amounts when and as due under this Note,
        the Securities Purchase Agreement, the Registration Rights Agreement,
        the Pledge Agreement (as defined in the

                                       7
<PAGE>
        Securities Purchase Agreement) or the Control Agreement (as defined in
        the Pledge Agreement), except, in the case of a failure to pay Interest
        and Late Charges and such other amounts when and as due, in which case
        only if such failure continues for a period of at least five Business
        Days;

        (vii) any default under, redemption of or acceleration prior to maturity
        of any Indebtedness (as defined in Section 3(r) of the Securities
        Purchase Agreement) of the Company or any of its Subsidiaries (as
        defined in Section 3(a) of the Securities Purchase Agreement) other than
        with respect to any Other Notes or Separate Tranche Notes or with
        respect to Purchase Money Indebtedness;

        (viii) the Company or any of its Subsidiaries, pursuant to or within the
        meaning of Title 11, U.S. Code, or any similar Federal or state law for
        the relief of debtors (collectively, "BANKRUPTCY LAW"), (A) commences a
        voluntary case, (B) consents to the entry of an order for relief against
        it in an involuntary case, (C) consents to the appointment of a
        receiver, trustee, assignee, liquidator or similar official (a
        "CUSTODIAN"), (D) makes a general assignment for the benefit of its
        creditors or (E) admits in writing that it is generally unable to pay
        its debts as they become due;

        (ix) any proceeding shall be instituted against the Company or any of
        its Significant Subsidiaries (as defined in Rule 405 of the Exchange
        Act) seeking to adjudicate it a bankrupt or insolvent, or seeking
        dissolution, liquidation, winding up, reorganization, arrangement,
        adjustment, protection, relief of debtors, or seeking the entry of an
        order for relief or the appointment of a Custodian for the Company or
        any such Subsidiary or for any substantial part of its assets or
        properties, and either such proceeding shall remain undismissed or
        unstayed for a period of 60 days or any of the actions sought in such
        proceeding (including, without limitation, the entry of an order for
        relief against the Company or any such Subsidiary or the appointment of
        a Custodian for it or for any substantial part of its assets or
        properties) shall occur;

        (x) a final judgment or judgments for the payment of money aggregating
        in excess of $1,000,000 are rendered against the Company or any of its
        Subsidiaries and which judgments are not, within 60 days after the entry
        thereof, bonded, discharged or stayed pending appeal, or are not
        discharged within 60 days after the expiration of such stay; provided,
        however, that any judgment which is covered by insurance or an indemnity
        from a credit worthy party shall not be included in calculating the
        $1,000,000 amount set forth above so long as the Company provides the
        Holder a written statement from such insurer or indemnity provider
        (which written statement shall be reasonably satisfactory to the Holder)
        to the effect that such judgment is covered by insurance or an indemnity
        and the Company will receive the proceeds of such insurance or indemnity
        within 30 days of the issuance of such judgment;

        (xi) the Company breaches any representation, warranty, covenant or
        other term or

                                       8
<PAGE>
        condition of the Securities Purchase Agreement, the Registration Rights
        Agreement, this Note, the Other Notes, the Separate Tranche Notes, the
        Pledge Agreement, the Control Agreement or any other agreement,
        document, certificate or other instrument delivered in connection with
        the transactions contemplated thereby and hereby to which the Holder is
        a party, except to the extent that such breach would not have a Material
        Adverse Effect (as defined in Section 3(a) of the Securities Purchase
        Agreement) and except, in the case of a breach of a covenant which is
        curable, only if such breach continues for a period of at least five
        consecutive Business Days;

        (xii) any breach or failure in any respect to comply with Section 15 of
        this Note;

        (xiii) any Event of Default (as defined in the Other Notes or the
        Separate Tranche Notes) occurs with respect to any Other Notes or
        Separate Tranche Notes; or

        (xiv) the Company shall, directly or indirectly, repay, prepay, redeem,
        defease or otherwise make any payment on any Indebtedness (other than
        Purchase Money Indebtedness) existing on the Initial Issuance Date
        (including, without limitation, any Indebtedness due to Computer
        Associates International, Inc. or any of its affiliates) in cash or cash
        equivalents.

                        (b) Redemption Right. Promptly after the occurrence of
an Event of Default with respect to this Note or any Other Note, the Company
shall deliver written notice thereof via facsimile and overnight courier (an
"EVENT OF DEFAULT Notice") to the Holder. At any time after the earlier of the
Holder's receipt of an Event of Default Notice and the Holder becoming aware of
an Event of Default, the Holder may require the Company to redeem all or any
portion of this Note by delivering written notice thereof (the "EVENT OF DEFAULT
REDEMPTION NOTICE") to the Company, which Event of Default Redemption Notice
shall indicate the portion of this Note the Holder is electing to redeem. Each
portion of this Note subject to redemption by the Company pursuant to this
Section 4(b) shall be redeemed by the Company at a price equal to the greater of
(i) the product of (x) the Conversion Amount to be redeemed and (y) the
Redemption Premium and (ii) the product of (A) the Conversion Rate with respect
to such Conversion Amount in effect at such time as the Holder delivers an Event
of Default Redemption Notice and (B) the Closing Sale Price of the Common Stock
on the date immediately preceding such Event of Default (the "EVENT OF DEFAULT
REDEMPTION PRICE"). Redemptions required by this Section 4(b) shall be made in
accordance with the provisions of Section 12.

                (5) RIGHTS UPON CHANGE OF CONTROL.

                        (a) Change of Control. Each of the following events
shall constitute a "CHANGE OF CONTROL":

        (i) the consolidation, merger or other business combination (including,
        without

                                       9
<PAGE>
        limitation, a reorganization or recapitalization) of the Company with or
        into another Person (other than (A) a consolidation, merger or other
        business combination (including, without limitation, reorganization or
        recapitalization) in which holders of the Company's voting power
        immediately prior to the transaction continue after the transaction to
        hold, directly or indirectly, the voting power of the surviving entity
        or entities necessary to elect a majority of the members of the board of
        directors (or their equivalent if other than a corporation) of such
        entity or entities, or (B) pursuant to a migratory merger effected
        solely for the purpose of changing the jurisdiction of incorporation of
        the Company);

        (ii) the sale or transfer of all or substantially all of the Company's
        assets; or

        (iii) a purchase, tender or exchange offer made to and accepted by the
        holders of more than the 50% of the outstanding shares of Common Stock.

No sooner than the public announcement of such Change of Control nor later than
10 days prior to the consummation of a Change of Control, the Company shall
deliver written notice thereof via facsimile and overnight courier to the Holder
(a "CHANGE OF CONTROL NOTICE").

                        (b) Assumption. Prior to the consummation of any Change
of Control, the Company will secure from any Person purchasing the Company's
assets or Common Stock or any successor resulting from such Change of Control
(in each case, an "ACQUIRING ENTITY") a written agreement (in form and substance
reasonably satisfactory to the holders of Notes representing at least two-thirds
of the aggregate principal amount of the Notes then outstanding) to deliver to
each holder of Notes in exchange for such Notes, a security of the Acquiring
Entity evidenced by a written instrument substantially similar in form and
substance to the Notes, including, without limitation, having a principal amount
and interest rate equal to the principal amounts and the interest rates of the
Notes held by such holder, and reasonably satisfactory to the holders of Notes
representing at least two-thirds of the principal amount of the Notes then
outstanding. In the event that an Acquiring Entity is directly or indirectly
controlled by a company or entity whose common stock or similar equity interest
is listed, designated or quoted on a securities exchange or trading market, the
holders of Notes representing at least two-thirds of the aggregate principal
amount of the Notes then outstanding may elect to treat such Person as the
Acquiring Entity for purposes of this Section 5(b).

                        (c) Holder Redemption Right. At any time during the
period beginning after the Holder's receipt of a Change of Control Notice and
ending on the date of the consummation of such Change of Control (or, in the
event a Change of Control Notice is not delivered at least 10 days prior to a
Change of Control, at any time on or after the date which is 10 days prior to a
Change of Control and ending 10 days after the consummation of such Change of
Control), the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION
NOTICE") to the Company, which Change of Control Redemption Notice shall
indicate the Conversion Amount the Holder is electing to redeem. The portion of
this Note subject to redemption pursuant to this Section

                                       10
<PAGE>
5(c) shall be redeemed by the Company at a price equal to the greater of (i) the
product of (x) the Conversion Amount being redeemed and (y) the quotient
determined by dividing (A) the Closing Sale Price of the Common Stock
immediately following the public announcement of such proposed Change of Control
by (B) the Conversion Price and (ii) 115% of the Conversion Amount being
redeemed (the "CHANGE OF CONTROL REDEMPTION PRICE"). Redemptions required by
this Section 5(c) shall be made in accordance with the provisions of Section 12
and shall have priority to payments to other stockholders in connection with a
Change of Control.

                        (d) Acquiring Entity Redemption Right. At any time from
and after the delivery of a Change of Control Notice but not later than the day
immediately preceding the consummation of such Change of Control, the Acquiring
Entity may deliver a written notice via facsimile and overnight courier to the
Holder indicating that if the Company shall not receive from the Holder a Change
of Control Redemption Notice in accordance with Section 5(c), then the Acquiring
Entity is electing to redeem all, but not less than all, of this Note, all Other
Notes and all Separate Tranche Notes (an "ACQUIRING ENTITY CHANGE OF CONTROL
REDEMPTION Notice"). The Acquiring Entity Change of Control Redemption Notice
shall be irrevocable. If the Company shall not receive from the Holder a Change
of Control Redemption Notice in accordance with Section 5(c) and the Conditions
to Acquiring Entity Redemption (as set forth below) are satisfied or waved in
writing by the Holder, then this Note shall be redeemed by the Acquiring Entity
at a price equal to the greater of (i) the Change of Control Redemption Price
and (ii) the Note Valuation Amount (the "ACQUIRING ENTITY CHANGE OF CONTROL
REDEMPTION PRICE"). Notwithstanding the foregoing, the Holder may continue to
convert this Note into Common Stock pursuant to Section 3(a) on or prior to the
date immediately preceding the Acquiring Entity Change of Control Redemption
Date. Redemptions required by this Section 5(d) shall be made in accordance with
the provisions of Section 12 and shall have priority to payments to other
stockholders in connection with a Change of Control. "CONDITIONS TO ACQUIRING
ENTITY REDEMPTION" means the following conditions: (i) on each day during the
period beginning on the date of delivery of the Acquiring Entity Change of
Control Redemption Notice to each holder of the Notes and Separate Tranche Notes
and ending on and including the date immediately preceding the Acquiring Entity
Change of Control Redemption Date, no Grace Period (as defined in the
Registration Rights Agreement) shall be in effect and either (x) the
Registration Statement or Registration Statements required pursuant to the
Registration Rights Agreement shall be effective and available for the sale for
all of the Registrable Securities in accordance with the terms of the
Registration Rights Agreement or (y) all shares of Common Stock issuable upon
conversion of the Notes and the Separate Tranche Notes and shares of Common
Stock issuable upon exercise of the Warrants and the Separate Tranche Warrants
shall be eligible for sale without restriction pursuant to Rule 144(k) and the
state securities laws, (ii) the Company shall have no knowledge of any fact that
would cause (x) the Registration Statements required pursuant to the
Registration Rights Agreement not to be effective and available for the sale of
at least all of the Registrable Securities in accordance with the terms of the
Registration Rights Agreement or (y) any shares of Common Stock issuable upon
conversion or redemption of the Notes and the Separate Tranche Notes and shares
of Common Stock issuable upon exercise of the Warrants and the Separate Tranche
Warrants not to be eligible for

                                       11
<PAGE>
sale without restriction pursuant to Rule 144(k) and any applicable state
securities laws; (iii) on each day during the period beginning on the date of
delivery of the Acquiring Entity Change of Control Redemption Notice and ending
on and including the date immediately preceding the Acquiring Entity Change of
Control Redemption Date, the Common Stock is designated for quotation on the
Principal Market, the NYSE or the AMEX and shall not have been suspended from
trading on such exchange or market nor shall delisting or suspension by such
exchange or market been threatened or pending either (A) in writing by such
exchange or market or (B) by falling below the minimum listing maintenance
requirements of such exchange or market; (iv) during the period beginning on the
Initial Issuance Date and ending on and including the date immediately preceding
the Acquiring Entity Change of Control Redemption Date, the Company shall have
delivered shares of Common Stock upon any conversion of Conversion Amounts on a
timely basis as set forth in Section 3(c)(i) of this Note (and analogous
provisions under the Other Notes) and the Separate Tranche Notes and delivered
shares of Common Stock upon exercise of any Warrants and the Separate Tranche
Warrants on a timely basis as set forth in Section 1(a) of the Warrants and the
Separate Tranche Warrants; (v) the Company has obtained the Stockholder Approval
prior to the date of delivery of the Acquiring Entity Change of Control
Redemption Notice; and (vi) the Company otherwise shall have been in material
compliance with and shall not have breached, in any material respect, any
provision, covenant, representation or warranty of the Securities Purchase
Agreement, the Registration Rights Agreement, any of the Warrants or the
Separate Tranche Warrants, the Pledge Agreement, the Control Agreement or any of
the Notes or Separate Tranche Notes.

                  (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER
CORPORATE EVENTS.

                        (a) Purchase Rights. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

                        (b) Other Corporate Events. Prior to the consummation of
any recapitalization, reorganization, consolidation, merger, spin-off or other
business combination (other than a Change of Control) pursuant to which holders
of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for Common Stock (a "CORPORATE EVENT"), the Company shall make
appropriate provision to insure that the Holder will thereafter have the right
to receive upon a conversion of this Note, (i) in addition to the

                                       12
<PAGE>
shares of Common Stock receivable upon such conversion, such securities or other
assets to which the Holder would have been entitled with respect to such shares
of Common Stock had such shares of Common Stock been held by the Holder upon the
consummation of such Corporate Event or (ii) in lieu of the shares of Common
Stock otherwise receivable upon such conversion, such securities or other assets
received by the holders of Common Stock in connection with the consummation of
such Corporate Event in such amounts as the Holder would have been entitled to
receive had this Note initially been issued with conversion rights for the form
of such consideration (as opposed to shares of Common Stock) at a conversion
rate for such consideration commensurate with the Conversion Rate. Provision
made pursuant to the preceding sentence shall be in a form and substance
reasonably satisfactory to the holders of Notes representing at least two-thirds
of the aggregate principal amount of the Notes then outstanding.

                  (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

                        (a) Adjustment of Conversion Price upon Issuance of
Common Stock. If and whenever on or after the Initial Issuance Date, the Company
issues or sells, or in accordance with this Section 7(a) is deemed to have
issued or sold, any shares of Common Stock (including the issuance or sale of
shares of Common Stock owned or held by or for the account of the Company, but
excluding shares of Common Stock deemed to have been issued or sold by the
Company (I) in connection with any employee benefit plan which has been approved
by the Board of Directors of the Company, pursuant to which the Company's
securities may be issued to any employee, officer or director for services
provided to the Company (an "APPROVED STOCK PLAN"), (II) upon conversion of the
Notes or the Separate Tranche Notes or upon exercise of the Warrants or the
Separate Tranche Warrants, (III) in connection with the payment of any Interest
Shares on the Notes or (IV) in connection with any Excluded Security) for a
consideration per share less than a price (the "APPLICABLE PRICE") equal to the
Conversion Price in effect immediately prior to such issue or sale (the
foregoing, a "DILUTIVE ISSUANCE"), then immediately after such issue or sale,
the Conversion Price then in effect shall be reduced to an amount equal to the
Applicable Price. For purposes of determining the adjusted Conversion Price
under this Section 7(a), the following shall be applicable:

        (i) Issuance of Options. If the Company in any manner grants or sells
        any Options and the lowest price per share for which one share of Common
        Stock is issuable upon the exercise of any such Option or upon
        conversion or exchange or exercise of any Convertible Securities
        issuable upon exercise of such Option is less than the Applicable Price,
        then such share of Common Stock shall be deemed to be outstanding and to
        have been issued and sold by the Company at the time of the granting or
        sale of such Option for such price per share. For purposes of this
        Section 7(a)(i), the "lowest price per share for which one share of
        Common Stock is issuable upon the exercise of any such Option or upon
        conversion or exchange or exercise of any Convertible Securities
        issuable upon exercise of such Option" shall be equal to the sum of the
        lowest amounts of consideration (if any) received or receivable by the
        Company with respect to any one share of Common

                                       13
<PAGE>
        Stock upon granting or sale of the Option, upon exercise of the Option
        and upon conversion or exchange or exercise of any Convertible Security
        issuable upon exercise of such Option. No further adjustment of the
        Conversion Price shall be made upon the actual issuance of such Common
        Stock or of such Convertible Securities upon the exercise of such
        Options or upon the actual issuance of such Common Stock upon conversion
        or exchange or exercise of such Convertible Securities.

        (ii) Issuance of Convertible Securities. If the Company in any manner
        issues or sells any Convertible Securities and the lowest price per
        share for which one share of Common Stock is issuable upon such
        conversion or exchange or exercise thereof is less than the Applicable
        Price, then such share of Common Stock shall be deemed to be outstanding
        and to have been issued and sold by the Company at the time of the
        issuance of sale of such Convertible Securities for such price per
        share. For the purposes of this Section 7(a)(ii), the "price per share
        for which one share of Common Stock is issuable upon such conversion or
        exchange or exercise" shall be equal to the sum of the lowest amounts of
        consideration (if any) received or receivable by the Company with
        respect to any one share of Common Stock upon the issuance or sale of
        the Convertible Security and upon the conversion or exchange or exercise
        of such Convertible Security. No further adjustment of the Conversion
        Price shall be made upon the actual issuance of such Common Stock upon
        conversion or exchange or exercise of such Convertible Securities, and
        if any such issue or sale of such Convertible Securities is made upon
        exercise of any Options for which adjustment of the Conversion Price had
        been or are to be made pursuant to other provisions of this Section
        7(a), no further adjustment of the Conversion Price shall be made by
        reason of such issue or sale.

        (iii) Change in Option Price or Rate of Conversion. If the purchase
        price provided for in any Options, the additional consideration, if any,
        payable upon the issue, conversion, exchange or exercise of any
        Convertible Securities, or the rate at which any Convertible Securities
        are convertible into or exchangeable or exercisable for Common Stock
        changes at any time, the Conversion Price in effect at the time of such
        change shall be adjusted to the Conversion Price which would have been
        in effect at such time had such Options or Convertible Securities
        provided for such changed purchase price, additional consideration or
        changed conversion rate, as the case may be, at the time initially
        granted, issued or sold. For purposes of this Section 7(a)(iii), if the
        terms of any Option or Convertible Security that was outstanding as of
        the Initial Issuance Date are changed in the manner described in the
        immediately preceding sentence, then such Option or Convertible Security
        and the Common Stock deemed issuable upon exercise, conversion or
        exchange thereof shall be deemed to have been issued as of the date of
        such change. No adjustment shall be made if such adjustment would result
        in an increase of the Conversion Price then in effect.

        (iv) Calculation of Consideration Received. In case any Option is issued
        in connection with the issue or sale of other securities of the Company,
        together comprising

                                       14
<PAGE>
        one integrated transaction in which no specific consideration is
        allocated to such Options by the parties thereto, the Options will be
        deemed to have been issued for a consideration of $.01. If any Common
        Stock, Options or Convertible Securities are issued or sold or deemed to
        have been issued or sold for cash, the consideration received therefor
        will be deemed to be the gross amount received by the Company therefor.
        If any Common Stock, Options or Convertible Securities are issued or
        sold for a consideration other than cash, the amount of the
        consideration other than cash received by the Company will be the fair
        value of such consideration, except where such consideration consists of
        securities, in which case the amount of consideration received by the
        Company will be the Closing Sale Price of such securities on the date of
        receipt. If any Common Stock, Options or Convertible Securities are
        issued to the owners of the non-surviving entity in connection with any
        merger in which the Company is the surviving entity, the amount of
        consideration therefor will be deemed to be the fair value of such
        portion of the net assets and business of the non-surviving entity as is
        attributable to such Common Stock, Options or Convertible Securities, as
        the case may be. The fair value of any consideration other than cash or
        securities will be determined in good faith by the Board of Directors of
        the Company. The holders of Notes and Separate Tranche Notes
        representing at least two-thirds of the principal amounts of the Notes
        and Separate Tranche Notes then outstanding shall be entitled to dispute
        the determination of the Board of Directors of the Company. If such
        holders and the Company are unable to reach agreement within ten days
        after the occurrence of an event requiring valuation (the "VALUATION
        EVENT"), the fair value of such consideration will be determined within
        five Business Days after the tenth day following the Valuation Event by
        an independent, reputable appraiser jointly selected by the Company and
        the holders of Notes representing at least two-thirds of the principal
        amounts of the Notes and Separate Tranche Notes then outstanding. The
        determination of such appraiser shall be deemed binding upon all parties
        absent manifest error and the fees and expenses of such appraiser shall
        be borne equally by the Company and the holders.

        (v) Record Date. If the Company takes a record of the holders of Common
        Stock for the purpose of entitling them (A) to receive a dividend or
        other distribution payable in Common Stock, Options or in Convertible
        Securities or (B) to subscribe for or purchase Common Stock, Options or
        Convertible Securities, then such record date will be deemed to be the
        date of the issue or sale of the shares of Common Stock deemed to have
        been issued or sold upon the declaration of such dividend or the making
        of such other distribution or the date of the granting of such right of
        subscription or purchase, as the case may be.

                        (b) Adjustment of Conversion Price upon Subdivision or
Combination of Common Stock. If the Company at any time subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by

                                       15
<PAGE>
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased.

                        (c) Other Events. (i) If any event occurs of the type
contemplated by the provisions of this Section 7 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the Holder under this Note;
provided that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 7. (ii) In the event that the Holder has
participated in any dividend or distribution in accordance with the terms of
Section 16, no other adjustment shall be made to the Conversion Price pursuant
to this Section 7.

                  (8) HOLDER RIGHT OF OPTIONAL REDEMPTION.

                        (a) Holder Initial Redemption Option. If at any time
during the Holder Initial Redemption Period, the Weighted Average Price of the
Common Stock is less than the Conversion Price for any 25 consecutive Trading
Days (a "HOLDER INITIAL REDEMPTION MEASURING PERIOD"), the Holder shall have the
right, in its sole discretion, to require that the Company redeem all or any
portion of this Note (a "HOLDER INITIAL REDEMPTION") by delivering written
notice thereof (a "HOLDER INITIAL REDEMPTION NOTICE") to the Company at any time
during the Holder Initial Redemption Period, which Holder Initial Redemption
Notice shall indicate the Conversion Amount the Holder is electing to redeem.
The portion of this Note subject to redemption pursuant to this Section 8(a)
shall be redeemed by the Company at a price equal to the Conversion Amount being
redeemed (the "HOLDER INITIAL REDEMPTION PRICE"). Redemptions required by this
Section 8(a) shall be made in accordance with the provisions of Section 12.

                        (b) Holder Secondary Redemption Option. If at any time
during the Holder Secondary Redemption Period, the Weighted Average Price of the
Common Stock is less than the Conversion Price for any 25 consecutive Trading
Days, the Holder shall have the right, in its sole discretion, to require that
the Company redeem all or any portion of this Note (a "HOLDER SECONDARY
REDEMPTION") by delivering written notice thereof (a "HOLDER SECONDARY
REDEMPTION NOTICE") to the Company at any time during the Holder Secondary
Redemption Period, which Holder Secondary Redemption Notice shall indicate the
Conversion Amount the Holder is electing to redeem. The portion of this Note
subject to redemption pursuant to this Section 8(b) shall be redeemed by the
Company at a price equal to the product derived by multiplying (x) .83 by (y)
the sum of (i) the Principal being redeemed, (ii) accrued and unpaid Interest
with respect to such Principal and (iii) accrued and unpaid Late Charges with
respect to such Principal and Interest on the Conversion Amount being redeemed
(the "HOLDER SECONDARY REDEMPTION PRICE"). Redemptions required by this Section
8(b) shall be made in accordance with the provisions of Section 12.

                                       16
<PAGE>
                        (c) Definitions.

                                (i) "HOLDER INITIAL REDEMPTION PERIOD" means the
period commencing on and including the twenty-fifth (25th) Trading Day prior to
June 30, 2004 and ending on and including the twenty-fourth (24th) Trading Day
after January 1, 2006.

                                (ii) "HOLDER SECONDARY REDEMPTION PERIOD" means
the period commencing on and including January 1, 2006 and ending on and
including the Maturity Date.

                        (d) Partial Redemption In Shares. The Company shall have
the option to indicate in a notice delivered to all holders of Notes, no later
than the close of business on the fifth (5th) consecutive Trading Day that
comprises the first five(5) Trading Days of a Holder Initial Redemption
Measuring Period during which the Weighted Average Price of the Common Stock is
less than the Conversion Price, the percentage, if any (not to exceed 20%) (the
"COMPANY REDEMPTION SHARE PERCENTAGE"), of the applicable Holder Initial
Redemption Price that the Company shall satisfy through the delivery of shares
of Common Stock upon receipt of Holder Initial Redemption Notices (a "COMPANY
REDEMPTION SHARE ELECTION"). Each Company Redemption Share Election shall be
irrevocable. The number of shares of Common Stock to be delivered in connection
with a Company Redemption Share Election shall equal a number of fully paid and
nonassessable shares (rounded to the nearest whole share in accordance with
Section 3(a)) of Common Stock equal to the quotient of (x) the applicable
portion of the Holder Initial Redemption Price, if any, and (b) the Redemption
Conversion Price. If any portion of the Holder Initial Redemption Price is to be
paid in shares of Common Stock, then the Company shall, on the Initial
Redemption Date, (X) issue and deliver to the address as specified in the Holder
Initial Redemption Notice a certificate, registered in the name of the Holder or
its designee, for the number of shares of Common Stock to which the Company is
required to issue and deliver pursuant to a Company Redemption Share Election,
or (Y) provided that the Transfer Agent is participating in DTC Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of shares of Common Stock to which the Company is required to
issue and deliver pursuant to a Company Redemption Share Election to the
Holder's or its designee's balance account with DTC through its Deposit
Withdrawal Agent Commission system. Notwithstanding the foregoing, the Company
shall not be entitled to pay any of the Holder Initial Redemption Price in
shares of Common Stock and shall be required to pay such Holder Initial
Redemption Price entirely in cash if the Conditions to Holder Initial Redemption
in Shares are not satisfied. "CONDITIONS TO HOLDER INITIAL REDEMPTION IN SHARES"
means the following conditions: (i) during the period beginning on the Initial
Issuance Date and ending on and including the date immediately preceding the
Initial Redemption Date, the Company shall have delivered shares of Common Stock
upon any conversion of Conversion Amounts on a timely basis as set forth in
Section 3(c)(i) of this Note (and analogous provisions under the Other Notes)
and the Separate Tranche Notes and delivered shares of Common Stock upon
exercise of any Warrants and the Separate Tranche Warrants on a

                                       17
<PAGE>
timely basis as set forth in Section 1(a) of the Warrants and the Separate
Tranche Warrants; (ii) on each day during the period beginning on the first
Trading Day of the Holder Initial Redemption Period and ending on and including
the Initial Redemption Date, the Common Stock shall be listed on the Principal
Market, the NYSE or the AMEX and delisting or suspension by such market or
exchange shall not have been threatened either (A) in writing by such market or
exchange or (B) by falling below the minimum listing maintenance requirements of
such market or exchange; (iii) during the period beginning on the Initial
Issuance Date and ending on and including the Initial Redemption Date, there
shall not have occurred either (x) the public announcement of a pending,
proposed or intended Change of Control which has not been abandoned, terminated
or consummated or (y) an Event of Default; (iv) during the period beginning on
the first Trading Day of the Holder Initial Redemption Period and ending on and
including the Initial Redemption Date, there shall not have occurred an event
that with the passage of time or giving of notice would constitute an Event of
Default; (v) any of the shares of Common Stock to be issued in payment of the
Holder Initial Redemption Price shall be either (x) registered pursuant to an
effective Registration Statement available for the sale for all of such shares
of Common Stock in accordance with the terms set forth in the Registration
Rights Agreement or (y) eligible for sale without restriction pursuant to Rule
144(k) and any applicable state securities laws; (vi) the Company shall have no
knowledge of any fact that would cause (x) the Registration Statements required
pursuant to the Registration Rights Agreement not to be effective and available
for the sale of at least all of the Registrable Securities (including the shares
of Common Stock to be delivered pursuant to a Company Redemption Share Election)
in accordance with the terms of the Registration Rights Agreement or (y) any
shares of Common Stock issuable upon conversion or redemption of the Notes and
the Separate Tranche Notes and shares of Common Stock issuable upon exercise of
the Warrants and the Separate Tranche Warrants not to be eligible for sale
without restriction pursuant to Rule 144(k) and any applicable state securities
laws; (vii) the Company otherwise shall have been in material compliance with
and shall not have breached, in any material respect, any provision, covenant,
representation or warranty of the Securities Purchase Agreement, the
Registration Rights Agreement, any of the Warrants or Separate Tranche Warrants,
the Pledge Agreement, the Control Agreement or any of the Notes or Separate
Tranche Notes; and (viii) the Company has obtained the Stockholder Approval
prior to making the Company Redemption Share Election.

                  (9) COMPANY'S RIGHT OF MANDATORY CONVERSION; COMPANY OPTIONAL
REDEMPTION.

                        (a) Company's Right of Mandatory Conversion.

                                (i) Mandatory Conversion. If at any time from
and after April 15, 2004, the arithmetic average of the Weighted Average Price
of the Common Stock exceeds 150% of the Conversion Price as of the Issuance Date
(subject to appropriate adjustments for stock splits, stock dividends, stock
combinations and other similar transactions after the Issuance Date for any 25
consecutive Trading Days following April 15, 2004 (the "MANDATORY CONVERSION
MEASURING PERIOD") and the Conditions to Mandatory Conversion (as set forth in

                                       18
<PAGE>
Section 9(a)(iii)) are satisfied or waived in writing by the Holder, the Company
shall have the right to require the Holder to convert all or any such portion of
the Conversion Amount of this Note designated in the Mandatory Conversion Notice
into fully paid, validly issued and nonassessable shares of Common Stock in
accordance with Section 3(c) hereof at the Conversion Rate as of the Mandatory
Conversion Date (as defined below) (a "MANDATORY CONVERSION"). The Company may
exercise its right to require conversion under this Section 9(a) by delivering
within not more than three Trading Days following the end of such Mandatory
Conversion Measuring Period a written notice thereof by facsimile and overnight
courier to all, but not less than all, of the holders of Notes and Separate
Tranche Notes and the Transfer Agent (the "MANDATORY CONVERSION NOTICE" and the
date all of the holders received such notice is referred to as the "MANDATORY
CONVERSION NOTICE DATE"). The Mandatory Conversion Notice shall be irrevocable.

                                (ii) Pro Rata Conversion Requirement. If the
Company elects to cause a conversion of all or any portion of the Conversion
Amount of this Note pursuant to Section 9(a)(i), then it must simultaneously
take the similar action with respect to the Other Notes. If the Company elects
to cause the conversion of this Note pursuant to Section 9(a)(i) (or similar
provisions under the Other Notes) with respect to less than all of the
Conversion Amounts of the Notes then outstanding, then the Company shall require
conversion of a Conversion Amount from each of the holders of the Notes equal to
the product of (I) the aggregate Conversion Amount of Notes which the Company
has elected to cause to be converted pursuant to Section 9(a)(i), multiplied by
(II) the fraction, the numerator of which is the sum of the aggregate principal
amount of the Notes initially purchased by such holder on the Issuance Date and
the denominator of which is the sum of the aggregate principal amount of the
Notes purchased by all holders on the Issuance Date (such fraction with respect
to each holder is referred to as its "ALLOCATION PERCENTAGE", and such amount
with respect to each holder is referred to as its "PRO RATA CONVERSION AMOUNT").
In the event that the initial holder of any Notes shall sell or otherwise
transfer any of such holder's Notes, the transferee shall be allocated a pro
rata portion of such holder's Allocation Percentage. The Mandatory Conversion
Notice shall state (A) the Trading Day selected for the Mandatory Conversion in
accordance with Section 9(a)(i), which Trading Day shall be at least 20 Business
Days but not more than 60 Business Days following the Mandatory Conversion
Notice Date (the "MANDATORY CONVERSION DATE"), (B) the aggregate Conversion
Amount of the Notes which the Company has elected to be subject to mandatory
conversion from all of the holders of the Notes pursuant to this Section 9(a)
(and analogous provisions under the Other Notes), (C) each holder's Pro Rata
Conversion Amount of the Conversion Amount of the Notes the Company has elected
to cause to be converted pursuant to this Section 9(a) (and analogous provisions
under the Other Notes) and (D) the number of shares of Common Stock to be issued
to such Holder as of the Mandatory Conversion Date. All Conversion Amounts
converted by the Holder after the Mandatory Conversion Notice Date shall reduce
the Conversion Amount of this Note required to be converted on the Mandatory
Conversion Date. If the Company has elected a Mandatory Conversion, the
mechanics of conversion set forth in Section 3(c) shall apply, to the extent
applicable, as if the Company and the Transfer Agent had received from the
Holder on the

                                       19
<PAGE>
Mandatory Conversion Date a Conversion Notice with respect to the Conversion
Amount being converted pursuant to the Mandatory Conversion.

                                (iii) Conditions to Mandatory Conversion. For
purposes of this Section 9(a), "CONDITIONS TO MANDATORY CONVERSION" means the
following conditions: (A) during the period beginning on the Initial Issuance
Date and ending on and including the Mandatory Conversion Date, the Company
shall have delivered shares of Common Stock upon any conversion of Conversion
Amounts on a timely basis as set forth in Section 3(c)(i) of this Note (and
analogous provisions under the Other Notes) and the Separate Tranche Notes and
delivered shares of Common Stock upon exercise of any Warrants and the Separate
Tranche Warrants on a timely basis as set forth in Section 1(a) of the Warrants
and the Separate Tranche Warrants; (B) on each day during the period beginning
on the first Trading Day of the Mandatory Conversion Measuring Period, and
ending on and including the Mandatory Conversion Date, the Common Stock shall be
listed on the Principal Market, the NYSE or the AMEX and delisting or suspension
by such market or exchange shall not have been threatened either (I) in writing
by such market or exchange or (II) by falling below the minimum listing
maintenance requirements of such market or exchange; (C) during the period
beginning on the Initial Issuance Date and ending on and including the Mandatory
Conversion Date, there shall not have occurred either (I) the public
announcement of a pending, proposed or intended Change of Control which has not
been abandoned, terminated or consummated or (II) an Event of Default; (D)
during the period beginning on the date which is the first Trading Day of the
Mandatory Conversion Measuring Period and ending on and including the Mandatory
Conversion Date, there shall not have occurred an event that with the passage of
time or giving of notice would constitute an Event of Default; (E) on each day
of the period beginning on the date of delivery of the Mandatory Conversion
Notice and ending on the Mandatory Conversion Date either (I) the Registration
Statement or Registration Statements required pursuant to the Registration
Rights Agreement shall be effective and available for the sale for all of the
Registrable Securities in accordance with the terms of the Registration Rights
Agreement or (II) all shares of Common Stock issuable upon conversion of the
Notes and the Separate Tranche Notes and shares of Common Stock issuable upon
exercise of the Warrants and the Separate Tranche Warrants shall be eligible for
sale without restriction pursuant to Rule 144(k) and any applicable state
securities laws, (F) the Company shall have no knowledge of any fact that would
cause (I) the Registration Statements required pursuant to the Registration
Rights Agreement not to be effective and available for the sale of at least all
of the Registrable Securities in accordance with the terms of the Registration
Rights Agreement or (II) any shares of Common Stock issuable upon conversion or
redemption of the Notes and the Separate Tranche Notes and shares of Common
Stock issuable upon exercise of the Warrants and the Separate Tranche Warrants
not to be eligible for sale without restriction pursuant to Rule 144(k) and any
applicable state securities laws, and (G) the Company otherwise shall have been
in material compliance with and shall not have breached, in any material
respect, any provision, covenant, representation or warranty of the Securities
Purchase Agreement, the Registration Rights Agreement, any of the Warrants or
the Separate Tranche Warrants, the Pledge Agreement, the Control Agreement or
any of the Notes or Separate Tranche Notes.

                                       20
<PAGE>
                        (b) Company Optional Redemption Right.

                                (i) Company Optional Redemption. If at any time
from and after the 30 month anniversary of the day the Registration Statement
relating to the Conversion Shares, Interest Shares and any other shares of
Common Stock issuable in connection with this Note and the Other Notes is
declared effective by the SEC, the Conditions to Company Redemption (as set
forth below) are satisfied or waived in writing by the Holder, the Company shall
have the right to redeem this Note (a "COMPANY OPTIONAL REDEMPTION"). The
Company may exercised its right of redemption under this Section 9(b)(i) by
delivering a written notice thereof by facsimile and overnight courier to all of
the holders of Notes and the Transfer Agent (the "COMPANY OPTIONAL REDEMPTION
NOTICE", and, collectively with a Event of Default Redemption Notice, a Change
of Control Redemption Notice, an Acquiring Entity Change of Control Redemption
Notice, a Holder Initial Redemption Notice and a Holder Secondary Redemption
Notice, "REDEMPTION NOTICES" and, individually, each, a "REDEMPTION NOTICE")).
The Company shall not issue a Company Optional Redemption Notice with respect to
this Note and the Other Notes to the extent that any Separate Tranche Notes with
a conversion price that is greater than the Conversion Price pursuant to this
Note and the Other Notes shall remain outstanding. The Company Optional
Redemption Notice shall be irrevocable. This Note shall be redeemed by the
Company pursuant to this Section 9(b)(i) at a price equal to the greater of (i)
the Conversion Amount and (ii) the Note Valuation Amount (the "COMPANY OPTIONAL
REDEMPTION PRICE" and, together with the Event of Default Redemption Price, the
Change of Control Redemption Price, the Acquiring Entity Change of Control
Redemption Price, the Holder Initial Redemption Price, the Holder Secondary
Redemption Price, the "REDEMPTION PRICE"). Notwithstanding the foregoing, the
Holder may continue to convert this Note into Common Stock pursuant to Section
3(a) on or prior to the date immediately preceding the Company Optional
Redemption Date. Redemptions required by this Section 9(b) shall be made in
accordance with the provisions of Section 12.

                                (ii) Pro Rata Redemption Requirement. If the
Company elects to cause a redemption of all or any portion of the Conversion
Amount of this Note pursuant to Section 9(b)(i), then it must simultaneously
take the similar action with respect to the Other Notes. If the Company elects
to cause the redemption of this Note pursuant to Section 9(b)(i) (or similar
provisions under the Other Notes) with respect to less than all of the
Conversion Amounts of the Notes then outstanding, then the Company shall redeem
a Conversion Amount from each of the holders of the Notes equal to the product
of (I) the aggregate Conversion Amount of Notes which the Company has elected to
redeem pursuant to Section 9(b)(i) (or similar provisions under the Other
Notes), multiplied by (II) a fraction, the numerator of which is the sum of the
aggregate principal amount of the Notes initially purchased by such holder on
the applicable Issuance Date and the denominator of which is the sum of the
aggregate principal amount of the Notes purchased by all holders on the
applicable Issuance Date (such fraction with respect to each holder is referred
to as its "REDEMPTION ALLOCATION PERCENTAGE", and such amount with respect to
each holder is referred to as its "PRO RATA REDEMPTION AMOUNT"). In

                                       21
<PAGE>
the event that the initial holder of any Notes shall sell or otherwise transfer
any of such holder's Notes, the transferee shall be allocated a pro rata portion
of such holder's Redemption Allocation Percentage. The Company Optional
Redemption Notice shall state (A) the Trading Day selected for the Company
Optional Redemption in accordance with Section 9(b)(i), which Trading Day shall
be at least 20 Business Days but not more than 60 Business Days following the
Company Optional Redemption Notice Date (the "COMPANY OPTIONAL REDEMPTION
DATE"), (B) the aggregate Conversion Amount of the Notes which the Company has
elected to redeem from all of the holders of the Notes pursuant to this Section
9(b) (and analogous provisions under the Other Notes), (C) each holder's Pro
Rata Redemption Amount of the Conversion Amount of the Notes the Company has
elected to redeem pursuant to this Section 9(b) (and analogous provisions under
the Other Notes) and (D) the Company Optional Redemption Price to be paid to
such Holder as of the Company Optional Redemption Date. All Conversion Amounts
converted by the Holder after delivery of the Company Optional Redemption Notice
Date shall reduce the Conversion Amount of this Note required to be redeemed on
the Company Optional Redemption Date. Redemptions required by this Section 9(b)
shall be made in accordance with the provisions of Section 12.

                                (iii) Conditions to Company Redemption. For
purposes of this Section 9(b), "CONDITIONS TO COMPANY REDEMPTION" means the
following conditions: (i) on each day during the period beginning on the date of
delivery of the Company Optional Redemption Notice to each holder of the Notes
and ending on and including the date immediately preceding the Company Optional
Redemption Date, no Grace Period (as defined in the Registration Rights
Agreement) shall be in effect and either (x) the Registration Statement or
Registration Statements required pursuant to the Registration Rights Agreement
shall be effective and available for the sale for all of the Registrable
Securities in accordance with the terms of the Registration Rights Agreement or
(y) all shares of Common Stock issuable upon conversion and redemption of the
Notes and the Separate Tranche Notes and shares of Common Stock issuable upon
exercise of the Warrants and the Separate Tranche Warrants shall be eligible for
sale without restriction pursuant to Rule 144(k) and any applicable state
securities laws, (ii) the Company shall have no knowledge of any fact that would
cause (x) the Registration Statements required pursuant to the Registration
Rights Agreement not to be effective and available for the sale of at least all
of the Registrable Securities in accordance with the terms of the Registration
Rights Agreement or (y) any shares of Common Stock issuable upon conversion or
redemption of the Notes and the Separate Tranche Notes and shares of Common
Stock issuable upon exercise of the Warrants and the Separate Tranche Warrants
not to be eligible for sale without restriction pursuant to Rule 144(k) and any
applicable state securities laws; (iii) on each day during the period beginning
on the date of delivery of the Company Optional Redemption Notice to each holder
of the Notes and ending on and including the date immediately preceding the
Company Optional Redemption Date, the Common Stock is designated for quotation
on the Principal Market, the NYSE or the AMEX and shall not have been suspended
from trading on such exchange or market nor shall delisting or suspension by
such exchange or market been threatened or pending either (A) in writing by such
exchange or market or (B) by falling below the minimum listing maintenance
requirements of such exchange

                                       22
<PAGE>
or market; (iv) during the period beginning on the Initial Issuance Date and
ending on and including the date immediately preceding the Company Optional
Redemption Date, the Company shall have delivered shares of Common Stock upon
any conversion of Conversion Amounts on a timely basis as set forth in Section
3(c)(i) of this Note (and analogous provisions under the Other Notes) and the
Separate Tranche Notes and delivered shares of Common Stock upon exercise of any
Warrants and the Separate Tranche Warrants on a timely basis as set forth in
Section 1(a) of the Warrants and the Separate Tranche Warrants; (v) the Company
has obtained the Stockholder Approval prior to the date of delivery of the
Company Optional Redemption Notice; (vi) during the period beginning on the
Initial Issuance Date and ending on and including the Company Optional
Redemption Date, there shall not have occurred either (x) the public
announcement of a pending, proposed or intended Change of Control which has not
been abandoned, terminated or consummated or (y) an Event of Default; and (vii)
the Company otherwise shall have been in material compliance with and shall not
have breached, in any material respect, any provision, covenant, representation
or warranty of the Securities Purchase Agreement, the Registration Rights
Agreement, any of the Warrants or the Separate Tranche Warrants, the Pledge
Agreement, the Control Agreement or any of the Notes or Separate Tranche Notes.

                  (10) NONCIRCUMVENTION. The Company hereby covenants and agrees
that 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 of this Note,
and will at all times in good faith carry out all of the provisions of this
Note.

                  (11) RESERVATION OF AUTHORIZED SHARES.

                        (a) Reservation. The Company shall initially reserve out
of its authorized and unissued Common Stock a number of shares of Common Stock
for each of the Notes equal to 130% of the Conversion Rate with respect to the
Conversion Amount of each such Note as of the Issuance Date. Thereafter, the
Company shall, so long as any of the Notes are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the Notes,
110% of the number of shares of Common Stock as shall from time to time be
necessary to effect the conversion of all of the Notes then outstanding;
provided that at no time shall the number of shares of Common Stock so reserved
be less than the number of shares required to be reserved by the previous
sentence (without regard to any limitations on conversions) (the "REQUIRED
RESERVE AMOUNT"). The initial number of shares of Common Stock reserved for
conversions of the Notes and each increase in the number of shares so reserved
shall be allocated pro rata among the holders of the Notes based on the
principal amount of the Notes held by each holder at the time of Issuance Date
or increase in the number of reserved shares, as the case may be (the
"AUTHORIZED SHARE ALLOCATION"). In the event that a holder shall sell or
otherwise transfer any of such holder's Notes, each transferee shall be
allocated a pro rata portion of such holder's Authorized Share Allocation. Any
shares of Common Stock reserved and allocated to any

                                       23
<PAGE>
Person which ceases to hold any Notes shall be allocated to the remaining
holders of Notes, pro rata based on the principal amount of the Notes then held
by such holders.

                        (b) Insufficient Authorized Shares. If at any time while
any of the Notes remain outstanding the Company does not have a sufficient
number of authorized and unreserved shares of Common Stock to satisfy its
obligation to reserve for issuance upon conversion of the Notes at least a
number of shares of Common Stock equal to the Required Reserve Amount (an
"AUTHORIZED SHARE FAILURE"), then the Company shall immediately take all action
necessary to increase the Company's authorized shares of Common Stock to an
amount sufficient to allow the Company to reserve the Required Reserve Amount
for the Notes then outstanding. Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence of an
Authorized Share Failure, but in no event later than 60 days after the
occurrence of such Authorized Share Failure, the Company shall hold a meeting of
its stockholders for the approval of an increase in the number of authorized
shares of Common Stock. In connection with such meeting, the Company shall
provide each stockholder with a proxy statement and shall use its best efforts
to solicit its stockholders' approval of such increase in authorized shares of
Common Stock and to cause its board of directors to recommend to the
stockholders that they approve such proposal.

                  (12) HOLDER'S REDEMPTIONS.

                        (a) Mechanics. In the event that the Holder has either
sent a Redemption Notice to the Company pursuant to Section 4(b), Section 5(c),
Section 8(a) or Section 8(b), or the Holder has received an Acquiring Entity
Change of Control Redemption Notice pursuant to Section 5(d) or a Company
Optional Redemption Notice pursuant to Section 9(b), then the Holder shall
promptly after receipt of the applicable Redemption Price (and shares of Common
Stock to which the Company is required to issue and deliver pursuant to the
Company Redemption Share Election) submit this Note to the Company. The Company
shall deliver the applicable Event of Default Redemption Price to the Holder
within five Business Days after the Company's receipt of the Holder's Event of
Default Redemption Notice. If the Holder has submitted a Change of Control
Redemption Notice in accordance with Section 5(c), the Company shall deliver the
applicable Change of Control Redemption Price to the Holder concurrently with
the consummation of such Change of Control if such notice is received prior to
the consummation of such Change of Control and within five Business Days after
the Company's receipt of such notice otherwise. If the Holder has received an
Acquiring Entity Change of Control Redemption Notice and the Conditions to
Acquiring Entity Redemption are satisfied pursuant to Section 5(d), then the
Company shall deliver the applicable Acquiring Entity Change of Control
Redemption Price to the Holder concurrently with the consummation of such Change
of Control if such notice is received at least five (5) days prior to the
consummation of such Change of Control and within five Business Days after the
Company's delivery of such notice otherwise (the "ACQUIRING ENTITY CHANGE OF
CONTROL REDEMPTION DATE"). The Company shall deliver the applicable Holder
Initial Redemption Price to the Holder within five Business Days after the
Company's receipt of the Holder Initial Redemption Notice (the "INITIAL

                                       24
<PAGE>
REDEMPTION DATE"). The Company shall deliver the applicable Holder Secondary
Redemption Price to the Holder on (i) April 15, 2006, if the Holder delivers the
Holder Secondary Redemption Notice to the Company on or before April 13, 2006
and (ii) within five Business Days after the Company's receipt of the Holder
Secondary Redemption Notice if delivered after April 13, 2006 (the "SECONDARY
REDEMPTION DATE"). The Company shall deliver the Company Optional Redemption
Amount to the Holder on the fifth Business Day after delivery of the Company
Optional Redemption Notice (the "COMPANY OPTIONAL REDEMPTION DATE"). In the
event of a redemption of less than all of the Conversion Amount of this Note,
the Company shall promptly cause to be issued and delivered to the Holder a new
Note (in accordance with Section 19(d)) representing the outstanding Principal
which has not been redeemed. In the event that the Company does not pay the
Redemption Price to the Holder (or deliver any Common Stock to be issued
pursuant to a Company Redemption Share Election) within the time period
required, at any time thereafter and until the Company pays such unpaid
Redemption Price (and issues any Common Stock required pursuant to a Company
Redemption Share Election) in full, the Holder shall have the option, in lieu of
redemption, to require the Company to promptly return to the Holder all or any
portion of this Note representing the Conversion Amount that was submitted for
redemption and for which the applicable Redemption Price (or any Common Stock
required to be issued pursuant to a Company Redemption Share Election) (together
with any Late Charges thereon) has not been paid. Upon the Company's receipt of
such notice, (x) the Redemption Notice shall be null and void with respect to
such Conversion Amount, (y) the Company shall immediately return this Note, or
issue a new Note (in accordance with Section 19(d)) to the Holder representing
such Conversion Amount and (z) the Conversion Price of this Note or such new
Notes shall be adjusted to the lesser of (A) the Conversion Price as in effect
on the date on which the Redemption Notice is voided and (B) the lowest Closing
Bid Price during the period beginning on and including the date on which the
Redemption Notice is delivered to or by the Company and ending on and including
the date on which the Redemption Notice is voided. The Holder's delivery of a
notice voiding a Redemption Notice and exercise of its rights following such
notice shall not affect the Company's obligations to make any payments of Late
Charges which have accrued prior to the date of such notice with respect to the
Conversion Amount subject to such notice.

                        (b) Redemption by Other Holders. Upon the Company's
receipt of notice from any of the holders of the Other Notes or the Separate
Tranche Notes for redemption or repayment as a result of an event or occurrence
substantially similar to the events or occurrences described in Section 4(b),
Section 5(c), Section 8(a) or Section 8(b), or the delivery to the holders of
the Other Notes or the Separate Tranche Notes of an Acquiring Entity Change of
Control Redemption Notice or Company Optional Redemption Notice or similar
notice based on events or occurrences substantially similar to the events or
occurrences described in Section 5(d) and Section 9(b) (each, an "OTHER
REDEMPTION NOTICE"), the Company shall immediately forward to the Holder by
facsimile a copy of such notice. If the Company receives, or the Acquiring
Entity or the Company delivers, as the case may be, a Redemption Notice and one
or more Other Redemption Notices during the seven Business Day period beginning
on and including the date which is three Business Days prior to the Company's
receipt of the Holder's

                                       25
<PAGE>
Redemption Notice, or the Acquiring Entity's delivery of an Acquiring Entity
Change of Control Redemption Notice or the Company's delivery of a Company
Optional Redemption Notice, as the case may be, and ending on and including the
date which is three Business Days after the Company's receipt of the Holder's
Redemption Notice, or the Acquiring Entity's delivery of an Acquiring Entity
Change of Control Redemption Notice or the Company's delivery of the Company
Optional Redemption Notice, as the case may be, and the Company is unable to
redeem all principal, interest and other amounts designated in such Redemption
Notice and such Other Redemption Notices received or delivered, as the case may
be, during such seven Business Day period, then the Company shall redeem a pro
rata amount from each holder of the Notes (including the Holder) and the
Separate Tranche Notes based on the principal amount of the Notes and the
Separate Tranche Notes submitted for redemption pursuant to such Redemption
Notice and such Other Redemption Notices received or delivered, as the case may
be, during such seven Business Day period.

                  (13) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS. Until all
of the Notes have been converted, redeemed or otherwise satisfied in accordance
with their terms, the Company shall not, directly or indirectly, redeem,
repurchase or declare or pay any cash dividend or distribution on, its capital
stock without the prior express written consent of the holders of Notes
representing at least two-thirds of the aggregate principal amount of the Notes
then outstanding.

                  (14) VOTING RIGHTS. The Holder shall have no voting rights as
the holder of this Note, except as required by law, including but not limited to
the Delaware General Corporation Law, and as expressly provided in this Note.

                  (15) RANK; ADDITIONAL INDEBTEDNESS; LIENS.

                        (a) Rank. Payments of Principal and Interest and other
payments due under this Note (a) shall rank pari passu with all Other Notes and
Separate Tranche Notes and (b) shall be senior to all other Indebtedness (as
defined in Section 3(r) of the Securities Purchase Agreement) of the Company and
its Subsidiaries (as defined in the Securities Purchase Agreement), other than
Purchase Money Indebtedness (as defined below) and Permitted Indebtedness.

                        (b) Incurrence of Indebtedness. So long as this Note is
outstanding the Company shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to
exist any Indebtedness, other than (i) the Indebtedness evidenced by this Note,
the Other Notes and the Separate Tranche Notes, (ii) Purchase Money Indebtedness
and (iii) Permitted Indebtedness.

                        (c) Existence of Liens. So long as this Note is
outstanding the Company shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, allow or suffer to exist any mortgage,
lien, pledge, charge, security interest or other

                                       26
<PAGE>
encumbrance upon or in any property or assets (including accounts and contract
rights) owned by the Company or any of its Subsidiaries other than pursuant to
the Pledge Agreement and other than Permitted Liens.

                  (16) PARTICIPATION. The Holder, as the holder of this Note,
shall be entitled to such dividends paid and distributions made to the holders
of Common Stock to the same extent as if the Holder had converted this Note into
Common Stock (without regard to any limitations on conversion herein or
elsewhere) and had held such shares of Common Stock on the record date for such
dividends and distributions. Payments under the preceding sentence shall be made
concurrently with the dividend or distribution to the holders of Common Stock.

                  (17) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of Notes representing not less than
two-thirds of the aggregate principal amount of the then outstanding Notes,
shall be required for any change or amendment to this Note or the Other Notes.

                  (18) TRANSFER. This Note may be offered, sold, assigned or
transferred by the Holder without the consent of the Company, subject only to
the provisions of Section 2(f) of the Securities Purchase Agreement.

                  (19) REISSUANCE OF THIS NOTE.

                        (a) Transfer. If this Note is to be transferred, the
Holder shall surrender this Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Note (in
accordance with Section 19(d)), registered as the Holder may request,
representing the outstanding Principal being transferred by the Holder and, if
less then the entire outstanding Principal is being transferred, a new Note (in
accordance with Section 19(d)) to the Holder representing the outstanding
Principal not being transferred. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of Section
3(c)(iii) and this Section 19(a), following conversion or redemption of any
portion of this Note, the outstanding Principal represented by this Note may be
less than the Principal stated on the face of this Note.

                        (b) Lost, Stolen or Mutilated Note. Upon receipt by the
Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to the Company in
customary form and reasonably acceptable to the Company (based in part on the
net worth of, or security provided by, the Holder) and, in the case of
mutilation, upon surrender and cancellation of this Note, the Company shall
execute and deliver to the Holder a new Note (in accordance with Section 19(d))
representing the outstanding Principal.

                        (c) Note Exchangeable for Different Denominations. This
Note is

                                       27
<PAGE>
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Note or Notes (in accordance with Section 19(d) and in
principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.

                        (d) Issuance of New Notes. Whenever the Company is
required to issue a new Note pursuant to the terms of this Note, such new Note
(i) shall be of like tenor with this Note, (ii) shall represent, as indicated on
the face of such new Note, the Principal remaining outstanding (or in the case
of a new Note being issued pursuant to Section 19(a) or Section 19(c), the
Principal designated by the Holder which, when added to the principal
represented by the other new Notes issued in connection with such issuance, does
not exceed the Principal remaining outstanding under this Note immediately prior
to such issuance of new Notes), (iii) shall have an issuance date, as indicated
on the face of such new Note which is the same as the Issuance Date of this
Note, (iv) shall have the same rights and conditions as this Note, and (v) shall
represent accrued Interest and Late Charges on the Principal and Interest of
this Note, from the Issuance Date.

                  (20) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES
AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative
and in addition to all other remedies available under this Note, the Securities
Purchase Agreement, the Pledge Agreement, the Control Agreement, the Warrants
and the Registration Rights Agreement, at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein
shall limit the Holder's right to pursue actual and consequential damages for
any failure by the Company to comply with the terms of this Note. Amounts set
forth or provided for herein with respect to payments, conversion and the like
(and the computation thereof) shall be the amounts to be received by the Holder
and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Holder and that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.

                  (21) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. The
Company agrees to pay, on demand, all costs and expenses of collection or
enforcement of this Note and/or the enforcement of Holder's rights with respect
to, or the administration, supervision, preservation, protection of, or
realization upon, any property securing payment hereof, including, without
limitation, reasonable attorney's fees, including fees related to any suit,
mediation or arbitration proceeding, out of court payment agreement, trial,
appeal, bankruptcy, reorganization, receivership or other proceeding.

                                       28
<PAGE>
                  (22) CONSTRUCTION; HEADINGS. This Note shall be deemed to be
jointly drafted by the Company and all the Purchasers and shall not be construed
against any person as the drafter hereof. The headings of this Note are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Note.

                  (23) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on
the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

                  (24) DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Redemption Price or the arithmetic calculation of the
Conversion Rate or the Redemption Price, the Company shall submit the disputed
determinations or arithmetic calculations via facsimile within one Business Day
of receipt of the Conversion Notice or Redemption Notice giving rise to such
dispute, as the case may be, to the Holder. If the Holder and the Company are
unable to agree upon such determination or calculation of the Conversion Rate
within one Business Day of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall, within one Business Day
submit via facsimile (a) the disputed determination of the Closing Bid Price or
the Closing Sale Price to an independent, reputable investment bank selected by
the Company and approved by the Holder or (b) the disputed arithmetic
calculation of the Conversion Rate or the Redemption Price to the Company's
independent, outside accountant. The Company shall instruct the investment bank
or the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than
five Business Days from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error. The expenses of the investment bank or accountant, as the
case may be, shall be borne by the party whose determination or calculation was
furthest away from the determination or calculation reached by the investment
bank or accountant, as the case may be.

                  (25)     NOTICES; PAYMENTS.

                        (a) Notices. Whenever notice is required to be given
under this Note, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement. The Company
shall provide the Holder with prompt written notice of all actions taken
pursuant to this Note, including in reasonable detail a description of such
action and the reason therefore. Without limiting the generality of the
foregoing, the Company will give written notice to the Holder (i) immediately
upon any adjustment of the Conversion Price, setting forth in reasonable detail,
and certifying, the calculation of such adjustment and (ii) at least twenty days
prior to the date on which the Company closes its books or takes a record (A)
with respect to any dividend or distribution upon the Common Stock, (B) with
respect to any pro rata subscription offer to holders of Common Stock or (C) for
determining rights to vote with respect to any Change of Control, dissolution or
liquidation,

                                       29
<PAGE>
provided in each case that such information shall be made known to the public
prior to or in conjunction with such notice being provided to the Holder.
Notwithstanding the foregoing, Section 4(i) of the Securities Purchase Agreement
shall apply to all notices given pursuant to this Note.

                        (b) Payments. Whenever any payment of cash is to be made
by the Company to any Person pursuant to this Note, such payment shall be made
in lawful money of the United States of America by a check drawn on the account
of the Company and sent via overnight courier service to such Person at such
address as previously provided to the Company in writing (which address, in the
case of each of the Purchasers (as defined in Section 3(d)(ii)), shall initially
be as set forth on the Schedule of Buyers attached to the Securities Purchase
Agreement); provided that the Holder may elect to receive a payment of cash via
wire transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a Business Day, the same shall instead be due on
the next succeeding day which is a Business Day and, in the case of any Interest
Date which is not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes of determining
the amount of Interest due on such date. Any amount of Interest, Principal or
other amounts due under this Note which is not paid when due shall result in a
late charge being incurred and payable by the Company in an amount equal to
interest on such amount at the rate of 15% per annum from the date such amount
was due until the same is paid in full ("LATE CHARGE").

                  (26) CANCELLATION. After all Principal, accrued Interest and
other amounts at any time owed on this Note has been paid in full, this Note
shall automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.

                  (27) WAIVER OF NOTICE. To the extent permitted by law, the
Company hereby waives demand, notice, protest and all other demands and notices
in connection with the delivery, acceptance, performance, default or enforcement
of this Note and the Securities Purchase Agreement.

                  (28) GOVERNING LAW. This Note shall be construed and enforced
in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal
laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York.

                  (29) CERTAIN DEFINITIONS. For purposes of this Note, the
following terms shall have the following meanings:

                        (a) "BLOOMBERG" means Bloomberg Financial Markets.

                                       30
<PAGE>
                        (b) "BUSINESS DAY" means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.

                        (c) "CALENDAR QUARTER" means, each of the period
beginning on and including January 1 and ending on and including March 31, the
period beginning on and including April 1 and ending on and including June 30,
the period beginning on and including July 1 and ending on and including
September 30, and the period beginning on and including October 1 and ending on
and including December 31.

                        (d) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,
for any security as of any date, the last closing bid price and last closing
trade price, respectively, for such security on the Principal Market, as
reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing
trade price, as the case may be, then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
by Bloomberg, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last closing bid price or last
trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
the Closing Bid Price or the Closing Sale Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Closing Bid
Price or the Closing Sale Price, as the case may be, of such security on such
date shall be the fair market value as mutually determined by the Company and
the Holder. If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved pursuant to
Section 24. All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during the
applicable calculation period.

                        (e) "CONVERTIBLE SECURITIES" means any stock or
securities (other than Options) directly or indirectly convertible into or
exercisable or exchangeable for Common Stock.

                        (f) "EXCLUDED SECURITIES" means any shares of Common
Stock issued or issuable (i) in connection with one or more strategic
partnerships or joint ventures in which there is a significant commercial
relationship with the Company, in an amount not to exceed, in the aggregate,
gross proceeds to the Company of $10,000,000 or an aggregate of 5,000,000 shares
of Common Stock, (ii) in connection with any acquisition by the Company,

                                       31
<PAGE>
whether through an acquisition for stock or a merger, of any business, assets or
technologies the primary purpose of which is not to raise equity capital, in an
amount not to exceed, in the aggregate, 19.99% of the total outstanding shares
of Common Stock in any calendar year, (iii) pursuant to a bona fide firm
commitment underwritten public offering with a nationally recognized underwriter
which generates gross proceeds to the Company in excess of $22,500,000 (other
than an "at-the-market offering" as defined in Rule 415(a)(4) under the 1933 Act
and "equity lines") and (iv) upon conversion of any Options or Convertible
Securities which are outstanding under any stock option plan of the Company on
the day immediately preceding the Initial Issuance Date, provided that the terms
of such Options or Convertible Securities are not amended, modified or changed
on or after the Initial Issuance Date.

                        (g) "INITIAL ISSUANCE DATE" means December 31, 2002.

                        (h) "INTEREST CONVERSION PRICE" means, with respect to
any Interest Date, that price which shall be computed as 95% of the arithmetic
average of the Weighted Average Price of the Common Stock on each of the five
consecutive Trading Days immediately preceding such Interest Date. All such
determinations to be appropriately adjusted for any stock split, stock dividend,
stock combination or other similar transaction during such period.

                        (i) "OPTIONS" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.

                        (j) "NOTE VALUATION AMOUNT" means, as of the Acquiring
Entity Change of Control Redemption Date or the Company Optional Redemption
Date, as applicable, the current value of this Note as determined (using
established methodologies for valuing convertible instruments similar to this
Note) by an independent, reputable investment bank or major financial
institution jointly selected by the Company and the holders of Notes and
Separate Tranche Notes representing at least two-thirds of the principal amounts
of the Notes and Separate Tranche Notes then outstanding. The determination of
such investment bank or financial institution shall be made prior to the date of
the Acquiring Entity Change of Control Redemption Date or the Company Optional
Redemption Date, as applicable, and shall be deemed binding upon all parties
absent manifest error. The fees and expenses of such investment bank or
financial institution shall be borne by the Company.

                        (k) "PERMITTED INDEBTEDNESS" means Indebtedness that is
unsecured, that is subordinate or pari passu in right of payment to this Note,
the Other Notes and the Separate Tranche Notes and that provides for an interest
that is no greater than market rate interests; provided that the amount of
Permitted Indebtedness shall not in the aggregate exceed the sum of $1,500,000
in the aggregate.

                        (l) "PERMITTED LIENS" means (i) any lien for taxes not
yet due or delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance with
generally acceptable accounting principles in

                                       32
<PAGE>
the United States applied on a consistent basis, (ii) any statutory lien arising
in the ordinary course of business by operation of law with respect to a
liability that is not yet due or delinquent and (iii) any minor imperfection of
title or similar lien which individually or in the aggregate with other such
liens would not reasonably be expected to have a Material Adverse Effect.

                        (m) "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, any other entity and a government or any department
or agency thereof.

                        (n) "PRINCIPAL MARKET" means the Nasdaq National Market.

                        (o) "PURCHASE MONEY INDEBTEDNESS" means Indebtedness of
the Company or any Subsidiary incurred solely for the purpose of financing all
or any part of the purchase price of equipment, furniture or fixtures or the
cost of construction or improvement of any property; provided, however, that the
aggregate principal amount of any such Indebtedness does not exceed the lesser
of the fair market value of such property, as determined in the good faith
judgment of the Company's Board of Directors, or such purchase price or cost,
including any refinancing of such Indebtedness that does not increase the
aggregate principal amount (or accreted amount, if less) thereof as of the date
of refinancing.

                        (p) "REDEMPTION CONVERSION PRICE" means with respect to
the Holder Initial Redemption, that price which shall be computed as 95% of the
arithmetic average of the Weighted Average Price of the Common Stock on each of
the twenty consecutive Trading Days immediately preceding the applicable Holder
Initial Redemption Date. All such determinations to be appropriately adjusted
for any stock split, stock dividend, stock combination or other similar
transaction during such period.

                        (q) "REDEMPTION PREMIUM" means (i) in the case of the
Events of Default described in Section 4(a)(i) - (vii) and (xi) - (xiv), 120% or
(ii) in the case of the Events of Default described in Section 4(a)(vii) - (x),
100%.

                        (r) "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement between the Company and the initial holders of the
Notes relating to the registration of the resale of the shares of Common Stock
issuable upon conversion of the Notes.

                        (s) "SEC" means the United States Securities and
Exchange Commission.

                        (t) "SECURITIES PURCHASE AGREEMENT" means that certain
securities purchase agreement between the Company and the initial holders of the
Notes pursuant to which the Company issued the Notes.

                        (u) "SEPARATE TRANCHE NOTES" means the convertible notes
which

                                       33
<PAGE>
may be have been issued or may be issued pursuant to the Securities Purchase
Agreement at one or more separate closings following the Issuance Date.

                        (v) "SEPARATE TRANCHE WARRANTS" means the warrants which
may be have been issued or may be issued pursuant to the Securities Purchase
Agreement at one or more separate closings following the Issuance Date.

                        (w) "TRADING DAY" means any day on which the Common
Stock is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities
exchange or securities market on which the Common Stock is then traded; provided
that "Trading Day" shall not include any day on which the Common Stock is
scheduled to trade on such exchange or market for less than 4.5 hours or any day
that the Common Stock is suspended from trading during the final hour of trading
on such exchange or market (or if such exchange or market does not designate in
advance the closing time of trading on such exchange or market, then during the
hour ending at 4:00 p.m., Eastern Time).

                        (x) "WARRANTS" has the meaning ascribed to such term in
the Securities Purchase Agreement, and shall include all warrants issued in
exchange therefore or replacement thereof.

                        (y) "WEIGHTED AVERAGE PRICE" means, for any security as
of any date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New York Time (or
such other time as the Principal Market publicly announces is the official open
of trading), and ending at 4:00:00 p.m., New York Time (or such other time as
the Principal Market publicly announces is the official close of trading) as
reported by Bloomberg through its "Volume at Price" functions, or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York Time (or
such other time as the Principal Market publicly announces is the official open
of trading), and ending at 4:00:00 p.m., New York Time (or such other time as
the Principal Market publicly announces is the official close of trading) as
reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the "pink sheets" by Pink Sheets LLC
(formerly the National Quotation Bureau, Inc.). If the Weighted Average Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Weighted Average Price of such security on such date shall be the
fair market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 24. All such
determinations to be appropriately adjusted for any stock dividend, stock split,
stock combination or other similar transaction during the applicable calculation
period.

                                       34
<PAGE>
                            [SIGNATURE PAGE FOLLOWS]

                                       35
<PAGE>
         IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the Issuance Date set out above.

                                VIEWPOINT CORPORATION

                                By: ____________________________________________
                                      Name:
                                      Title: President / Chief Executive Officer

                                                                       EXHIBIT I

                              VIEWPOINT CORPORATION
                                CONVERSION NOTICE

Reference is made to the Convertible Note (the "NOTE") issued to the undersigned
by Viewpoint Corporation (the "COMPANY"). In accordance with and pursuant to the
Note, the undersigned hereby elects to convert the Conversion Amount (as defined
in the Note) of the Note indicated below into shares of Common Stock, par value
$0.001 per share (the "COMMON STOCK"), of the Company as of the date specified
below.

         Date of Conversion:____________________________________________________

         Aggregate Conversion Amount to be converted:___________________________

Please confirm the following information:

         Conversion Price:______________________________________________________

         Number of shares of Common Stock to be issued:_________________________

Please issue the Common Stock into which the Note is being converted in the
following name and to the following address:

         Issue to:______________________________________________________________
                  ______________________________________________________________
                  ______________________________________________________________

         Facsimile Number:______________________________________________________

                                       36
<PAGE>
         Authorization:_________________________________________________________

                  By:___________________________________________________________
                                                      Title:____________________

Dated:__________________________________________________________________________

         Account Number:________________________________________________________
          (if electronic book entry transfer)

         Transaction Code Number:_______________________________________________
          (if electronic book entry transfer)
<PAGE>
                                 ACKNOWLEDGMENT

         The Company hereby acknowledges this Conversion Notice and hereby
directs Equiserve Trust Company to issue the above indicated number of shares of
Common Stock in accordance with the Transfer Agent Instructions dated December
31, 2002, from the Company and acknowledged and agreed to by Equiserve Trust
Company.

                                       VIEWPOINT CORPORATION

                                       By:______________________________________
                                            Name:
                                            Title:

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