Document:

Exhibit 10.1

                STOCK PURCHASE AND REGISTRATION RIGHTS AGREEMENT
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     STOCK PURCHASE AND REGISTRATION RIGHTS AGREEMENT,  dated as of December 24,
2002, between DIRECT INSITE CORP., a Delaware  corporation (the "Company"),  and
METROPOLITAN  VENTURE  PARTNERS II, L.P., a Delaware  limited  partnership  (the
"Purchaser").

     WHEREAS,  pursuant to the terms and  conditions  of the Stock  Purchase and
Registration  Rights  Agreement  dated as of September 25, 2002 (the  "September
2002  Agreement")  by and between the Company and the  Purchaser,  the Purchaser
acquired 93,458 shares of the Company's  Series A Convertible  Preferred  Stock,
par value $0.0001 per share (the "Preferred Stock"); and

     WHEREAS, the Purchaser desires to subscribe for, and the Company desires to
issue to the  Purchaser,  23,365  shares  ("Purchased  Preferred  Stock") of the
Company's  Preferred  Stock, all upon the terms and conditions set forth in this
Agreement; and

     WHEREAS, the parties desire to amend and restate Section 6 of the September
2002  Agreement in its entirety  (including  the  definitions  used  therein) by
substituting  therefor  the  provisions  of  Section  6  hereof  (including  the
definitions  used therein) with regard to registration  rights of the holders of
Registrable Securities (as defined below);

     NOW,  THEREFORE,  in  consideration  of the  foregoing  and  of the  mutual
premises,  covenants,  representations  and warranties herein  contained,  it is
hereby agreed as follows:

     1. Definitions.
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     1.1 Except for any terms that are defined elsewhere in this Agreement,  the
following terms, as used herein, have the following meanings:

     "Accredited Investor" has the meaning set forth in Rule 501 of Regulation D
promulgated under the Securities Act.

     "Affiliate"  of any  specified  Person means any other  Person  directly or
indirectly  controlling  or  controlled  by or under  direct or indirect  common
control  with  such  specified  Person.  For the  purposes  of this  definition,
"control,"  when used with respect to any Person,  means the power to direct the
management and policies of such Person, directly or indirectly,  whether through
the  ownership of voting  securities,  by contract or  otherwise;  and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.

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     "Agreement"  means this Stock Purchase and Registration  Rights  Agreement,
together  with all Exhibits and  Schedules  hereto,  as the same may be amended,
supplemented or modified in accordance with the terms hereof from time to time.

     "Amendment"  means such  amendments  and changes being made to the terms of
the Preferred  Stock by means of the Certificate of Amendment to the Certificate
of Designation, in substantially the form of Exhibit A hereto.

     "Annual Report" has the meaning set forth in Section 3.9 hereof.

     "Balance Sheet" has the meaning set forth in Section 3.9 hereof.

     "Balance Sheet Date" has the meaning set forth in Section 3.9 hereof.

     "Board of Directors" means the board of directors of the Company.

     "Cause" means, with respect to the Purchaser Designee,  as applicable,  (i)
any act of breach of such  individual's  fiduciary  duty to the  Company  or its
stockholders  by  the  Purchaser   Designee  which  under   applicable  law  (A)
constitutes a violation of any legal obligation of the Purchaser Designee to the
Company  or (B)  creates  or results in any  material  legal  liability  for the
Company;  (ii) the Purchaser  Designee is convicted of, or pleads guilty or nolo
contendere with respect to, theft, fraud or a felony under federal or applicable
state law; or (iii) if such individual  commits and is convicted of any act that
results  in the  Company  or any  member  of the  Board of  Directors  suffering
liability under federal or applicable state law for  discrimination or sexual or
other forms of harassment or other similar liabilities from any employees of the
Company or any of its Affiliates.

     "Certificate  of  Designation"  means the Certificate of Designation of the
Company,  dated as of October 4, 2002, as amended by a Certificate  of Amendment
dated as of December 20, 2002 and by the Amendment,  which,  among other things,
sets forth the number, designation, relative rights, preferences and limitations
of the Preferred Stock as fixed by the Board of Directors.

     "Closing" means the closing of the sale of the Purchased Preferred Stock by
the Company to the Purchaser.

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

     "Commission"  means the Securities  and Exchange  Commission or any similar
agency then having  jurisdiction  to enforce the  Securities Act or the Exchange
Act.

     "Common Stock" means the common stock,  par value $0.0001 per share, of the
Company.

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     "Company" has the meaning set forth in the preamble of this Agreement.

     "Company  Indemnified  Person" has the meaning set forth in Section  6.6(b)
hereof.

     "Disclosure Schedule" means the Disclosure Schedule of the Company attached
to this Agreement and hereby made a part hereof.

     "Effectiveness Period" has the meaning set forth in Section 6.1(a) hereof.

     "Environmental  Law" means any federal,  state, or local (including  common
law), statute,  code, ordinance,  rule, regulation or other requirement relating
to the environment,  or natural resources,  and includes, but is not limited to,
the  Comprehensive  Environmental  Response,  Compensation and Liability Act, 42
U.S.C.  Section 9601 et seq.,  the Hazardous  Materials  Transportation  Act, 49
U.S.C.  Section 1801 et seq.,  the Resource  Conservation  and Recovery  Act, 42
U.S.C.  Section  6901 et seq.,  the Clean Water Act, 33 U.S.C.  Section  1251 et
seq., the Clean Air Act, 33 U.S.C.  Section 2601 et seq.,  the Toxic  Substances
Control Act, 15 U.S.C.  2601 et seq., the Federal  Insecticide,  Fungicide,  and
Rodenticide Act, 7 U.S.C. Section 136 et seq., the Oil Pollution Act of 1990, 33
U.S.C.  Section  2701 et seq.  and the  Occupational  Safety and Health  Act, 29
U.S.C.  Section 651 et seq., as such laws have been and may from time to time be
further  amended  or  supplemented,  and the  regulations  promulgated  pursuant
thereto.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended.

     "Exchange Act" means the Securities  Exchange Act of 1934, as amended,  and
the rules and regulations of the Commission thereunder.

     "Financial Statements" has the meaning set forth in Section 3.9 hereof.

     "Form 10-Q" has the meaning set forth in Section 3.9 hereof.

     "Hazardous   Substances"   or  "Hazardous   Waste"  means  any   pollutant,
contaminant,  chemical or  industrial  or toxic  substance  or waste,  petroleum
products,   asbestos,  urea  formaldehyde,   radon,  polychlorinated  biphenyls,
flammable explosives,  nuclear radioactive fuel or waste or any other substance,
waste,  material,  substance,  pollutant  or  contaminant  that is  defined as a
hazardous waste or substance under any applicable  Environmental  Law and/or any
substance for which the generation,  manufacture,  storage, treatment or release
is prohibited or regulated under any applicable Environmental Law.

     "Holder" shall mean any Person that owns Registrable Securities,  including
such  successors  and  assigns as acquire  Registrable  Securities,  directly or

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indirectly,  from such Person.  For purposes of this Agreement,  the Company may
deem the registered holder of a Registrable Security as the Holder thereof.

     "Indemnifiable Costs and Expenses" has the meaning ascribed to such term in
Section 6.6(a)(i) hereof.

     "Liens" means any and all security interests, liens, claims,  encumbrances,
pledges, options, Taxes and charges of any kind or nature.

     "Managing Underwriter" has the meaning set forth in Section 6.1(c) hereof.

     "Material  Adverse Effect" means,  with respect to the Company,  a material
adverse  effect on the business,  assets,  condition  (financial or  otherwise),
results of operations or prospects of the Company and its subsidiaries  taken as
a whole.

     "Material Development Election" shall have the meaning set forth in Section
6.4(a) hereof.

     "Other  Approved  Holders"  shall  mean  holders  of  Common  Stock  having
registration rights with respect to the Common Stock, other than pursuant to the
terms of this Agreement.

     "Person" means any individual, company, corporation,  partnership,  limited
liability  company,   trust,  division,   governmental,   quasi-governmental  or
regulatory entity or authority or other entity.

     "Plans" has the meaning set forth in Section 3.24(a) hereof.

     "Preferred  Stock"  has the  meaning  set  forth  in the  recitals  to this
Agreement.

     "Prospectus" shall mean the prospectus (including a preliminary prospectus)
included  in  any  Registration  Statement,  as  amended  or  supplemented  by a
prospectus  supplement  with respect to the terms of the offering of any portion
of the Registrable  Securities covered by such Registration Statement and by all
other  amendments and  supplements to the prospectus,  including  post-effective
amendments and all material incorporated by reference in such prospectus.

     "Purchase Price" has the meaning set forth in Section 2.1 hereof.

     "Purchased  Preferred  Stock" has the meaning set forth in the  recitals to
this Agreement.

     "Purchaser" has the meaning set forth in the preamble to this Agreement.

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     "Purchaser  Designee"  has the  meaning  assigned  to such term in  Section
5.1(a) hereof.

     "Purchaser Expenses" means all legal and out-of-pocket  expense incurred by
the Purchaser or its agents in connection with the transactions  contemplated by
this Agreement, in an amount not to exceed $8,000.00 in the aggregate, including
all fees and  expenses of Kramer Levin  Naftalis & Frankel  LLP,  counsel to the
Purchaser, incurred in connection with the Transaction Documents.

     "Purchaser  Indemnified Person" has the meaning set forth in Section 7.1(a)
hereof.

     "Registrable  Securities"  shall mean the Common Stock issuable on or after
the date hereof upon  conversion  of the  Preferred  Stock and any other capital
stock or other  securities  issued or issuable  as a result of or in  connection
with any stock  dividend,  stock  split or  reverse  stock  split,  combination,
recapitalization,   reclassification,   merger   or   consolidation,   exchange,
distribution  or similar  transaction in respect of the Preferred  Stock or such
Common Stock.

     "Registration  Expenses" shall have the definition set forth in Section 6.5
hereof.

     "Registration Statement" shall mean any registration statement which covers
any of the Registrable  Securities pursuant to the provisions of this Agreement,
including the Prospectus  included  therein,  all amendments and  supplements to
such  Registration  Statement,  including  post-effective  amendments,  and  all
exhibits  and all  material  incorporated  by  reference  in  such  Registration
Statement.

     "Requesting  Securityholder"  has the  meaning  set  forth in  Section  6.2
hereof.

     "Rule 144" shall mean Rule 144  promulgated  under the  Securities  Act, as
amended  from time to time,  or any similar  successor  rule thereto that may be
promulgated by the Commission.

     "Rule 144A" shall mean Rule 144A  promulgated  under the Securities Act, as
amended  from time to time,  or any similar  successor  rule thereto that may be
promulgated by the Commission.

     "SEC  Filings"  means all  forms,  reports  and  documents  filed  with the
Commission  pursuant to the Securities Act and Exchange Act from January 1, 2001
through the date hereof.

     "Securities  Act" means the  Securities  Act of 1933,  as amended,  and the
rules and regulations of the Commission thereunder.

     "Senior  Indebtedness"  means the  principal  of and  premium,  if any, and
interest on:

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     (a)  all  indebtedness  of  the  Company  and  its   subsidiaries   whether
outstanding on the date of this Agreement or hereafter created and which is;

          (i) for money borrowed from a commercial lending institution,  whether
     the same be evidenced by bonds,  notes or debentures or evidenced by a loan
     agreement, promissory note or an indenture or similar instrument; or

          (ii)  secured by mortgage  or other  security  instrument  (including,
     without  limitation,   conditional  sales  agreements,  chattel  mortgages,
     purchase money bonds or notes or debentures or mortgages, mortgages made or
     given or guaranteed by the Company as mortgagor or guarantor and assumed or
     guaranteed  mortgages  upon  property) for the payment of which the Company
     is, directly or  contingently,  liable or on which the Company  customarily
     pays interest; and

          (iii) all obligations of the Company as lessee, or as the guarantor of
     any lessee,  under leases of personal property of any kind or nature and/or
     equipment; and

     (b) all renewals,  extensions and refundings of any such indebtedness or of
any such obligations.

     "September  2002  Agreement"  has the meaning set forth in the  recitals to
this Agreement.

     "Stock Option  Plans" means,  collectively,  the 1993  Non-Qualified  Stock
Option Plans, the 1995 Stock Option Plan, the 2000 Stock Option Plan, 2001 Stock
Option/stock  Issuance  Plan,  2001-A Stock  Option Plan,  the 2002 Stock Option
Plan, the 2002-A Stock Plan and the 2003 Stock Option Plan.

     "Suspension  Period"  shall have the  meaning  set forth in Section  6.4(a)
hereof.

     "To the best knowledge of the Company" means the actual knowledge of Warren
Wright, Robert L. Carberry, James A. Cannavino or George Aronson.

     "Threshold  Percentage"  means 50.1 percent of (i) the aggregate  shares of
Preferred  Stock issued and  outstanding  immediately  following the Closing and
(ii) the shares of Common Stock issuable upon  conversion of the Preferred Stock
as the  same  may be  adjusted  pursuant  to the  terms  of the  Certificate  of
Designation.

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     "Transaction  Documents"  means this  Agreement  (including  the Disclosure
Schedule),  the Amendment  and any other  documents,  instruments  or agreements
executed by any of the parties hereto in connection herewith or therewith.

The foregoing  definitions shall be equally  applicable to both the singular and
plural forms of the defined terms. The use of the word "including"  herein shall
be  interpreted  to mean  "including,  without  limitation,"  unless the context
clearly requires another interpretation.

     2. Authorization and Sale of the Purchased Preferred Stock.
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     2.1  Purchase  and Sale of Purchased  Preferred  Stock.  In reliance on the
representations  and  warranties  contained  herein and subject to the terms and
conditions  hereof,  the Company agrees that it will sell to the Purchaser,  and
the Purchaser  agrees that it will purchase from the Company at the Closing,  an
aggregate of 23,365  shares of Preferred  Stock and  concurrently  with delivery
hereof the Purchaser has agreed to pay the Company an amount equal to $21.40 per
share of  Preferred  Stock,  or an  aggregate  purchase  price of $500,000  (the
"Purchase Price") by wire transfer in immediately  available funds to an account
designated  by notice from the Company;  provided,  however,  that the Purchaser
shall deduct the Purchaser Expenses from the Purchase Price.

     2.2 Deliverables at Closing. In addition to the foregoing,  at the Closing,
the Company shall deliver to the Purchaser:

     (a) a stock  certificate  representing  23,365  shares of  Preferred  Stock
registered in the name of the Purchaser;

     (b) a opinion  of counsel of the  Company  in the form  attached  hereto as
Exhibit B;

     (c) an executed copy of this Agreement;

     (d) a certificate,  dated the date of Closing  signed by a duly  authorized
officer of the Company dated as of the date of the Closing certifying as to:

          (i) a true and correct copy of the certificate of incorporation of the
     Company (including all amendments),  as attached thereto, and the filing of
     the Amendment with the Secretary of State of the State of Delaware;

          (ii) the By-laws, as attached thereto, are in full force and effect;

          (iii)  the  satisfactory  waiver  of  all  preemptive  rights  by  the
     stockholders of the Company on or before the date of Closing;

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          (iv) the resolutions, in form and substance reasonably satisfactory to
     the Purchaser,  of the Board of Directors duly  authorizing  the execution,
     delivery and  performance of this  Agreement,  the filing of the Amendment,
     the  issuance  of the  Purchased  Preferred  Stock  and the  execution  and
     delivery of any other  documents,  instruments  or  agreements  executed in
     connection herewith or therewith;

          (v) the  incumbency  and  signature of the  individuals  authorized to
     execute and deliver documents on the Company's behalf; and

          (vi) the performance and compliance in all material  respects with all
     of  the  Company's  agreements,  representations,   warranties,  covenants,
     obligations,  duties and  conditions  under this  Agreement  required to be
     performed or complied with by it on or prior to the date of closing.

          (vii) except as set forth in Section 2.2 of the  Disclosure  Schedule,
     since  October  4,  2002,  no event has  occurred  that  would  require  an
     adjustment  to the  Conversion  Price (as  defined  in the  Certificate  of
     Designation).

     2.3 Reservation of Shares. The Company shall reserve and keep available for
issuance such number of its  authorized  but unissued  shares of Common Stock as
will be sufficient to permit the  conversion in full of the Purchased  Preferred
Stock into  Common  Stock in  accordance  with the terms of the  Certificate  of
Designation.  All shares of Common Stock that are so issuable shall, when issued
upon  conversion,  be  duly  authorized,  validly  issued  and  fully  paid  and
non-assessable,  free and clear of any and all Liens and  preemptive  or similar
rights or encumbrances.

     2.4 Use of Cash Proceeds. The Company, shall use the cash proceeds from the
issuance of the Purchased  Preferred  Stock for  development and working capital
purposes as determined by the Board of Directors.

     3. Representations and Warranties of the Company.
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     The Company  makes the  following  representations  and  warranties  to the
Purchaser  as of the  date  hereof  and of as the  date of  Closing,  except  as
otherwise provided herein:

     3.1  Corporate  Status.  The  Company  and  each of its  subsidiaries  is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it was  incorporated  with full corporate power and
authority  to carry on its  business  as now  conducted  and as  proposed  to be
conducted  and to own and lease the  properties  and assets it now owns or holds
under lease.

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     3.2 Authority.  The Company has all necessary corporate power and authority
to execute and deliver the  Transaction  Documents  and to carry out and perform
its  obligations  thereunder.  The  execution,  delivery and  performance by the
Company of the Transaction  Documents and the  consummation of the  transactions
contemplated  hereby  and  thereby,  including  the  issuance  of the  Purchased
Preferred Stock and the Common Stock issuable upon conversion thereof, have been
duly authorized by all necessary corporate action on the part of the Company and
no  further  authorization  on  the  part  of  the  Company,  or  the  Company's
stockholders,   is  necessary  to  authorize   such   execution,   delivery  and
performance.  The  Transaction  Documents,  when  executed and  delivered by the
Company,  will be duly  executed and delivered by the Company.  The  Transaction
Documents,  when so  executed,  will  constitute  the legal,  valid and  binding
obligations of the Company,  enforceable  against the Company in accordance with
their  respective  terms,  except  as the same  may be  limited  by  bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights  generally now or hereafter in effect and subject to the  application  of
equitable principles and the availability of equitable remedies. The issuance of
the  Purchased  Preferred  Stock is not and will not be  subject  to  preemptive
rights or rights of first refusal that have not been properly waived or complied
with prior to the date hereof.

     3.3  No  Conflicts.   The  execution,   delivery  and  performance  of  the
Transaction  Documents and the other  instruments and agreements to be executed,
delivered and performed by the Company  pursuant hereto and the  consummation of
the transactions  contemplated hereby and thereby by the Company,  including the
issuance of the Purchased  Preferred Stock, and upon conversion of the Preferred
Stock,  the  Common  Stock,  do not and will not with or  without  the giving of
notice or the passage of time or both, (a) violate or conflict with or result in
a breach of or a right of  termination  by any  Person of any  provision  of, or
constitute a default  under,  or create a Lien upon any  properties or assets of
the  Company  or any of its  subsidiaries  pursuant  to (i) the  Certificate  of
Incorporation  (including the  Certificate of Designation) or the By-Laws of the
Company or any of its subsidiaries or (ii) any order, judgment, decree, statute,
regulation,  contract,  agreement  or  any  other  restriction  of any  kind  or
description to which the Company or any of its subsidiaries or its assets may be
bound or subject;  (b) violate any applicable law, rule,  regulation,  judgment,
injunction,  order or decree binding upon the Company or any of its subsidiaries
or to which any of their  properties  and assets is  subject;  (c) result in the
loss or impairment of any approval, license, franchise,  permit, legal privilege
or legal right  enjoyed or possessed by the Company or any of its  subsidiaries;
(d) otherwise  result in the creation of any Lien; or (e) require the consent or
approval  of any Person  other than the  consent of the Board of  Directors  and
those  consents or approvals set forth in Section 3.15.  Neither the Company nor
any of its  subsidiaries  is in violation of or (with or without notice or lapse
of time or both)  in  default  under,  any  material  term or  provision  of its
respective   certificate  of   incorporation   (including  the   Certificate  of
Designation)  or  by-laws  or any  indenture,  loan or  credit  agreement,  note
agreement,  mortgage,  security  agreement  or other  agreement,  lease or other
instrument,  commitment  or  arrangement  to  which  the  Company  or any of its
subsidiaries  is a party or by which the  Company's  or any of its  subsidiaries
assets are bound.

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     3.4 Fully Paid and Non-Assessable. Upon issuance of the Purchased Preferred
Stock and payment therefor pursuant to the terms hereof, each share of Purchased
Preferred  Stock  shall  be duly  authorized,  validly  issued,  fully  paid and
non-assessable and free and clear of any and all Liens (other than those created
by the Purchaser on such Purchased  Preferred Stock),  and is not subject to any
preemptive  right,  right of first  refusal  created by the Company,  redemption
right or  similar  right  that has not  been  waived  on or prior to the date of
Closing,  and upon conversion of the Purchased  Preferred  Stock,  each share of
Common Stock issued upon such  conversion  shall have been duly  authorized  and
reserved for issuance and will be validly issued,  fully paid and non-assessable
and free  and  clear of any and all  Liens  (other  than  those  created  by the
Purchaser on such  Purchased  Preferred  Stock),  and will not be subject to any
preemptive  right,  right of first  refusal  granted by the Company,  redemption
right or similar right that has not been waived on or prior to the date thereof.

     3.5 Compliance with Laws and Instruments.

     (a) Copies of the  certificate of  incorporation  and bylaws of the Company
and each of its subsidiaries which have been delivered to (or made available for
inspection by) the Purchaser prior to the execution of this Agreement,  are true
and  complete and have not been  amended or repealed  (other than in  connection
with the  Amendment  and the  Certificate  of  Amendment to the  Certificate  of
Designation filed on December 20, 2002 ).

     (b) The Company and each of its  subsidiaries  is, and their  business  has
been operated, in compliance with their respective certificates of incorporation
and  bylaws  and,  in  all  material  respects,   all  applicable  laws,  rules,
regulations,   decrees,   injunctions,   judgments,   orders,  rulings,  awards,
settlements and writs.

     3.6  Qualification.  The Company and each of its  subsidiaries,  other than
Platinum  Communications,  Inc. ("Platinum") is duly qualified or licensed to do
business and is in good  standing as a foreign  corporation  in the State of New
York. The Company is not and is not required to be qualified to do business as a
foreign  corporation in any other jurisdiction except where the failure to be so
qualified would not individually,  or in the aggregate,  have a Material Adverse
Effect on the Company.

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     3.7 Capital Stock.

     (a) As of the  date  hereof  and  immediately  prior  to the  Closing,  the
authorized capital stock of the Company consists and will consist, respectively,
of (i)  2,000,000  shares of  Preferred  Stock,  of which (A) 93,458  shares are
outstanding,  and (B) 116,823  shares shall be  designated as Series A Preferred
Stock as of the date of  Closing  only;  and (ii)  150,000,000  shares of Common
Stock of which:

     (A)  3,897,573  shares are issued and  outstanding  (which  amount does not
          include (i) 70,000 shares deemed to be issued and  outstanding  to the
          Company's  senior  executive  officers  on account of  non-cash  bonus
          payments for the fiscal year ended  December 31, 2002 and (ii) 100,000
          shares  that  are  currently  anticipated  to  be  deemed  issued  and
          outstanding on account of the  satisfaction of accounts payable of the
          Company that are due and payable as at December 31, 2002);

     (B)  3,016,441  shares are  authorized  for issuance under the Stock Option
          Plans,  of which  2,266,108  shares are reserved for issuance upon the
          exercise of options granted and issuable by the Company thereunder;

     (C)  1,500,000  shares are reserved for issuance upon the conversion of the
          Preferred Stock; and

     (D)  No shares are reserved for issuance upon the exercise of warrants.

     (b) All such  outstanding  shares of Common Stock and  Preferred  Stock and
other securities have been duly authorized and validly issued and are fully paid
and nonassessable and were issued in compliance with all applicable  Federal and
state securities laws.

     (c) Except as  contemplated  by this  Agreement  or as set forth in the SEC
Filings, the Company has no outstanding subscription,  option, warrant, right of
first refusal, preemptive right, call, contract, demand, commitment, convertible
security or other  instrument,  agreement  or  arrangement  of any  character or
nature  whatever  under which the Company is or may be obligated to issue Common
Stock,  Preferred  Stock  or any  other  equity  security  of any  kind or which
otherwise relates to the Company's securities.

     (d) Without limiting the generality of the foregoing and except as provided
herein or in the September  2002  Agreement,  neither the Company nor any of its
subsidiaries has granted or agreed to grant any registration  rights,  including
piggyback rights, to any Person.

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     3.8 Securities  Laws.  Subject to the accuracy of the  representations  and
warranties of the Purchaser  contained in Section 4 hereof, the offer, issue and
sale of the Purchased  Preferred  Stock, and the shares of Common Stock issuable
upon  conversion  thereof,  (i) are and will be  exempt  from  the  registration
requirements of the Securities Act and (ii) are and will be issued in compliance
with all applicable  Federal and state securities laws.  Neither the Company nor
any agent on its behalf has  solicited or will solicit any offers to sell or has
offered to sell or will offer to sell all or any part of the Preferred  Stock to
any Person or Persons  other  than the  Purchaser  or has taken or will take any
other  action  that  would  require  the  Company to  register  the sale of such
Preferred Stock under the Securities Act.

     3.9 Financial Statements; Liabilities.

     (a) Included in the Form 10-Q for the nine months ended  September 30, 2002
("Form  10-Q")  are the  Company's  consolidated  unaudited  balance  sheet (the
"Balance  Sheet") as of September 30, 2002 (the "Balance  Sheet Date"),  and the
consolidated  unaudited  statement of operations for the nine-month  period then
ended  ("Operating  Statement").  Included in its annual report on Form 10-K for
the  year  ended   December  31,  2001  ("Annual   Report")  are  the  Company's
consolidated audited balance sheets as of December 31, 2001 and the consolidated
audited statements of operations,  cash flow and changes of stockholders' equity
for the period then ended, together with the related report of Marcum & Kliegman
LLP,  independent  certified  public  accountants  (such year-end balance sheet,
statement  of  operations,  cash flow and  changes of  stockholders'  equity and
report, together with the Balance Sheet and Operating Statement,  the "Financial
Statements"). The Financial Statements (including any notes thereto):

          (i) are  complete  and  correct in all  material  respects  and are in
     accordance with the books and records of the Company;

          (ii) present fairly the consolidated  financial condition,  results of
     operations  and  cash  flows of the  Company  and its  subsidiaries  at the
     respective  dates  therein  specified  and the  results of  operations  and
     changes in financial  position of the Company and its  subsidiaries for the
     respective periods therein specified; and

          (iii) were prepared in accordance with generally  accepted  accounting
     principles  applied on a basis  consistent  with prior  accounting  periods
     (except that the  unaudited  financial  statements  are subject to year-end
     audit  adjustments  which will not be material in amount and do not contain
     complete footnotes).

     (b) The Company and its subsidiaries  have no liabilities or obligations of
any nature,  either actual or absolute,  contingent or otherwise,  which are not
reflected or provided for in the  Financial  Statements  or related notes except
liabilities  included in the estimated loss from operations set forth in Section
3.9(b) of the Disclosure Schedule.

                                       12
<PAGE>

     (c) The  Company  anticipates  a loss from  operations,  during the quarter
ended  December  31,  2002,  as set forth in  Section  3.9(c) of the  Disclosure
Schedule.

     3.10 Changes.  Since December 31, 2001, except as disclosed in SEC Filings,
including without limitation, the Form 10-Q and current reports on Form 8-K, the
Annual Report, or Section 3.9(c) of the Disclosure  Schedule,  there has been no
event which was has had,  or could  reasonably  be expected to have,  a Material
Adverse Effect.  Since September 30, 2002, except as disclosed in Section 3.9(c)
of the  Disclosure  Schedule,  the Company and its  subsidiaries  have conducted
their business in all material  respects in the ordinary course  consistent with
past practices, and without limiting the generality of the foregoing,  there has
not been any:

     (a) change,  occurrence  or  circumstance  in or  affecting  the  business,
assets, liabilities, financial condition, operations or prospects of the Company
or any of its subsidiaries  that has had or may reasonably be expected to have a
Material Adverse Effect;

     (b)   resignation  or  termination  of  any  key  officers,   employees  or
consultants of the Company or any of its subsidiaries;

     (c)  material  change,  except in the ordinary  course of business,  in the
contingent  obligations  of the  Company  or any of its  subsidiaries  by way of
guaranty,  endorsement,  indemnity,  warranty or otherwise  which has had or may
reasonably be expected to have a Material Adverse Effect;

     (d) damage,  destruction or loss, whether or not covered by insurance, that
has had or may  reasonably be expected to have a Material  Adverse Effect on the
Company;

     (e) waiver by the Company or any of its subsidiaries of a material right or
of a  material  debt  owed to any of them  which  has had or may  reasonably  be
expected to have a Material Adverse Effect;

     (f) direct or indirect  loans or advances made by the Company or any of its
subsidiaries to any  stockholder,  employee,  consultant,  officer,  director or
Affiliate  of the  Company  or any of its  subsidiaries,  other  than  loans  or
advances  made in the  ordinary  course of business  or, in the  aggregate,  not
exceeding $250,000;

     (g) material change in any  compensation  arrangement or agreement with any
employee, consultant, officer, director or shareholder has had or may reasonably
be expected to have a Material Adverse Effect;

     (h) declaration or payment of any dividend or other  distribution of assets
of the Company or any of its subsidiaries or any direct or indirect  redemption,

                                       13
<PAGE>

purchase, retirement or other acquisition of any shares of its capital stock has
had or may reasonably be expected to have a Material Adverse Effect;

     (i) debt,  obligation or liability  incurred,  assumed or guaranteed by the
Company or any of its  subsidiaries,  except  those for  amounts  not  exceeding
$250,000 in the  aggregate or for current  liabilities  incurred in the ordinary
course of business;

     (j) sale,  assignment  or  transfer  of any of the  assets or rights of the
Company  or any of its  subsidiaries  (other  than the sale of their  respective
inventory in the ordinary course of business),  including  patents,  trademarks,
copyrights,  trade secrets or other intangible assets or intellectual  property,
or any  mortgage  or  pledge  of or  Lien  imposed  upon  any of the  assets  or
properties  of the Company or any of its  subsidiaries,  except in the  ordinary
course of business  except any such sales,  assignments,  transfers,  mortgages,
pledges or liens  which,  in the  aggregates,  have had,  or may  reasonably  be
expected to have, a Material Adverse Effect;

     (k) change in or event of default under any material agreement to which the
Company or any of its  subsidiaries  is a party or by which any of them is bound
which  modification or event of default has had or may reasonably be expected to
have, a Material Adverse Effect;

     (l) purchase or other  acquisition of any operating  business or a material
amount of assets or the capital stock of any other Person; or

     (m) other event or condition of any character that, either  individually or
cumulatively,  has had or may reasonably be expected to have a Material  Adverse
Effect.

     3.11 Material Agreements of the Company. Neither the Company nor any of its
subsidiaries  is a party to or otherwise bound by any written or oral agreement,
instrument  or  arrangement  that is material  to the  Company  except for those
agreements included as exhibits to, or disclosed in the SEC Filings or any other
documents filed with the Commission (the "Material Contracts").  The Company has
furnished or made  available to the  Purchaser  true and complete  copies of all
such  agreements  and all other  agreements,  instruments  and  other  documents
requested by the Purchaser or its authorized representative. Neither the Company
nor any of its  subsidiaries,  and to the Company's  best  knowledge,  any other
party to a  Material  Contract,  is in default of any  Material  Contract.  Each
Material  Contract  is in full force and  effect.  To the best of the  Company's
knowledge,  IBM has not notified the Company of its intention to modify or amend
in any material respect the Material Contracts between the Company and IBM.

     3.12 Litigation. Except as disclosed in the SEC Filings, there is no action
pending and, to the best knowledge of the Company, there is no action threatened
against  the  Company  or any of its  subsidiaries  or any of  their  respective
directors,  officers or employees or to which any of the properties or assets of

                                       14
<PAGE>

the  Company  or any of its  subsidiaries  is subject  or which  challenges  the
validity of any Transaction  Document,  the issuance of the Purchased  Preferred
Stock or any action taken or to be taken pursuant hereto or thereto, which seeks
to impose or confirm any limitation on the ability of the Purchaser  effectively
to acquire, hold or exercise full rights of ownership of the Purchased Preferred
Stock or the shares of Common Stock  issuable  upon  conversion  thereof,  which
action, in the aggregate with all other such investigations, claims, actions and
proceedings  would have a Material  Adverse  Effect.  Except as disclosed in the
Form 10-Q or the Annual Report or any other SEC Filing,  neither the Company nor
any of its subsidiaries is a party or is subject to the provisions of any order,
writ, judgment,  injunction,  decree,  determination or award of any court or of
any governmental entity or regulatory authority.  Except as disclosed in the SEC
Filings  or any  press  release  of  the  Company,  there  is no  action,  suit,
proceeding or investigation by the Company or any of its subsidiaries  currently
pending  which has had,  or if  finally  determined  in a manner  adverse to the
Company could reasonably be expected to have, a Material Adverse Effect.

     3.13  Disclosure.   The  representations  and  warranties  of  the  Company
contained  herein,  when read together with the SEC Filings,  do not contain any
untrue  statement of material fact or omit to state a material fact necessary to
make the statements  therein, in light of the circumstances under which they are
made, not misleading.

     3.14 Intellectual Property.

     (a)  Section  3.14(a)  of the  Disclosure  Schedule  contains a list of all
material  Intellectual Property Rights (as defined below) including all material
licenses  and  sublicenses  (whether  as  licensee,  sublicensee,   licensor  or
sublicensor)  and  other  agreements  as to  which  the  Company  or  any of its
subsidiaries  is a party and pursuant to which any Person is  authorized  to use
any such  Intellectual  Property  Right,  including  the identity of all parties
thereto.  As used herein, the term  "Intellectual  Property Right" means any and
all material  trademarks,  service marks, and trade names,  patents,  copyrights
(whether  or not  registered  and  whether  or not  published),  (including  any
registrations  or applications  for registration of any of the foregoing) or any
other material  Intellectual  Property  Right, in any country or jurisdiction in
the world,  in each case which is owned or  licensed  by and either used or held
for use or otherwise  related and material to the conduct of the business of the
Company.

     (b) Except as indicated in any of the SEC Filings,  (i) the Company owns or
has the legally  enforceable right to use, sell,  execute,  reproduce,  display,
perform, modify, enhance,  distribute,  prepare derivative works of, and license
and  sublicense  without  further  payment  to any other  Person,  all  material
Intellectual  Property Rights,  free and clear of all Liens; (ii) the execution,
delivery and  performance of the  Transaction  Documents will not conflict with,
result in a breach of,  constitute  an event of default under (or an event that,
with notice or lapse of time or both,  would  constitute  a conflict,  breach or
default  under),  or accelerate  the  performance  required by, or create in any
Person the right to  accelerate,  terminate,  modify,  or cancel (with notice or

                                       15
<PAGE>

lapse of time or both), or require any notice under, any contract  involving any
Intellectual Property Rights, which default,  conflict, breach or event has had,
or may reasonably be expected to have, a Material  Adverse Effect,  and will not
cause the  forfeiture or termination of or give rise to a right of forfeiture or
termination (with notice or lapse of time or both) of any Intellectual  Property
Rights or otherwise impair the rights of the Company to use, sell or license any
Intellectual Property Rights which forfeiture,  termination, right of forfeiture
or termination or impairment has had, or could reasonably be expected to have, a
Material Adverse Effect.

     (c) Except as  indicated  in any of the SEC Filings or set forth in Section
3.14(c) of the  Disclosure  Schedule,  (i) all  current  and  former  employees,
officers and consultants of the Company  (including the Principal  Stockholders)
that, during the term of such Persons' respective employment or consultancy with
the Company has contributed to or participated in the conception and development
of products  currently offered by the Company and the products which the Company
proposes to offer have acted  during such  respective  terms within the scope of
their  employment in so contributing or  participating;  and (ii) no current and
former officers, employees or consultants of the Company has a right to claim an
ownership  interest in any  Intellectual  Property  Rights as a result of having
been  involved in the  development,  creation or licensing  of any  Intellectual
Property  Rights while  employed or serving as  consultants to the Company which
claim has had or could reasonably be expected to have a Material Adverse Effect.

     (d) Except as indicated  in the SEC  Filings,  (i) the Company has not been
sued or  charged  with or  otherwise  been  notified  of, or been a party in any
claim, suit, action or proceeding relating to its business that has not been the
subject of a final  disposition  prior to the date  hereof  and that  involves a
claim of  interference,  infringement,  misappropriation  or  opposition  by the
Company of any trademark,  patent,  trade secret,  copyright,  know-how or other
proprietary information or intellectual property right of any other Person which
claim,  if  subject  of a  final  disposition  adverse  to  the  Company,  could
reasonably be expected to have a Material Adverse Effect, and the Company has no
knowledge of any reasonable  basis for any such claims,  (ii) the Company has no
knowledge of any interference,  infringement,  misappropriation or opposition by
any  other  Person  of any  Intellectual  Property  Rights  which  interference,
infringement,  misappropriation  or opposition  could  reasonably be expected to
have a Material Adverse Effect; (iii) no Intellectual  Property Right is subject
to any outstanding order, judgment, injunction, decree, stipulation or agreement
prohibiting  or  restricting  the use thereof by the Company or  prohibiting  or
restricting the assignment,  licensing or transfer thereof by the Company to any
Person which has had or could  reasonably be expected to have a Material Adverse
Effect;  (iv) no  Intellectual  Property Rights are currently the subject of any
re-examination,  opposition, cancellation or invalidation proceeding before  any
governmental  authority  which  re-examination,   opposition,   cancellation  or
invalidation  proceeding could reasonably be expected to have a Material Adverse
Effect,  and  all  Intellectual  Property  Rights  registered  or,  to the  best
knowledge of the Company,  filed with a governmental  authority are currently in

                                       16
<PAGE>

compliance  with  all  material  formal  legal  requirements  and,  to the  best
knowledge of the Company, are valid and enforceable; and (v) the Company has not
entered into any agreement to indemnify  any other Person  against any charge of
infringement or  misappropriation  of any  Intellectual  Property Right or other
proprietary information or intellectual property right of any other Person.

     (e) With respect to software  licensed to the Company  from third  parties,
such as  operating  systems  and  databases  required  by the Company to deliver
services to its  customers,  to the best of the  Company's  knowledge,  all such
licenses  are in good  standing  and the Company is  authorized  to deliver such
services to its customers,  except to the extent that the failure of any license
or licenses to be in good  standing or the absence of such  authorization  would
not have,  or could not  reasonably  be  expected  to have,  a Material  Adverse
Effect.

     (f) To the best of the Company's  knowledge,  none of the operations of the
Company   involves  the  unlicensed  or  unauthorized  use  of  confidential  or
proprietary  information.  The  Company  has taken all  reasonable  measures  to
protect the trade secrets and the  confidential  and proprietary  information of
third Persons used in or related to the Company's operations. To the best of the
Company's knowledge, to the extent that information of a confidential nature has
been used in the  operations of the Company in the five year period prior to the
date hereof,  such information  (except insofar as it has fallen into the public
domain  through  no fault  of the  Company  or is not  material)  has been  kept
strictly  confidential  and has not been disclosed  otherwise than subject to an
obligation  of  confidentiality  being  imposed  on  the  Person  to  whom  such
information was disclosed.

     3.15 No Governmental  Consent or Approval Required.  Assuming the truth and
accuracy of the  representations  made by the Purchaser in Section 4 hereof,  no
authorization,   consent,  approval  or  other  order  of,  declaration  to,  or
registration,  qualification,  designation or filing with, any federal, state or
local  governmental  agency or body is  required  by or from the Company for the
valid and lawful  authorization,  execution  and  delivery by the Company of the
Transaction  Documents and consummation of the transactions  contemplated hereby
or  thereby,  or for the  valid and  lawful  authorization,  issuance,  sale and
delivery  of  the  Purchased  Preferred  Stock  or  for  the  valid  and  lawful
authorization,  reservation,  issuance,  sale  and  delivery  of  the  Purchased
Preferred  Stock,  other than (i) the filing of the  Certificate  of Designation
with the Secretary of State of the State of Delaware and (ii) the  qualification
(or  taking of such  action as may be  necessary  to  secure an  exemption  from
qualification,  if available)  of the offer and sale of the Purchased  Preferred
Stock under  applicable  state and Federal  securities  laws,  which filings and
qualifications,  if required,  will be  accomplished in a timely manner so as to
comply with such qualification or exemption from qualification requirements.

     3.16 Nasdaq Listing  Compliance.  The Company's  Common Stock is registered
pursuant to Section  12(g) of the Exchange Act and is listed on the Nasdaq Small
Cap Market and the  Company has taken no action  designed  to, or likely to have
the effect of,  terminating  the  registration  of the  Common  Stock  under the

                                       17
<PAGE>

Exchange Act or de-listing the Common Stock from the Nasdaq Small Cap Market. In
addition, except for the correspondence from NASDAQ to the Company on August 20,
2002, a copy of which has been previously provided to the Purchaser, the Company
has not received any notification  from the Commission or NASDAQ indicating that
the Company is subject to or in risk of being delisted from the Nasdaq  SmallCap
Market;  and provided  further,  that anything  contained herein or elsewhere in
this Agreement to the contrary notwithstanding,  the Purchaser acknowledges that
the  Company  may not be in  compliance  with  the  requirements  of the  Nasdaq
Smallcap Market as to shareholders' equity as at December 31, 2002.

     3.17 Reporting Status. Except as otherwise set forth in Section 3.17 of the
Disclosure Schedule, the Company has filed in a timely manner all forms, reports
and other documents that the Company was required to file under the Exchange Act
and the Securities Act during the 12 months preceding the date of this Agreement
and  such  documents  complied  as to form in all  material  respects  with  the
Commission's   requirements  as  of  their  respective  filing  dates,  and  the
information contained therein as of the respective dates thereof did not contain
any  untrue  statement  of a  material  fact or omit to  state a  material  fact
required to be stated  therein or  necessary to make the  statements  therein in
light of the circumstances under which they were made not misleading.

     3.18 Compliance with Nasdaq Requirements. The Company has complied with all
requirements  of Nasdaq,  Inc.  with  respect to the  issuance of the  Purchased
Preferred Stock and the shares of Common Stock issuable upon conversion  thereof
and agrees to file a listing  application with NASDAQ covering such common stock
in compliance with applicable NASD rules.

     3.19  Eligibility  to File Form S-3. The Company is  currently  eligible to
register  the resale of Common Stock in a secondary  offering on a  registration
statement on Form S-3 under the Securities Act.

     3.20 Subsidiaries.  Except as set forth in the SEC Filings, (i) the Company
does not have, and is not committed to purchase or acquire,  any equity interest
or  equivalent  interest  (direct  or  indirect)  in any  Person  other than the
subsidiaries  of the Company  listed  therein,  (ii) all  outstanding  shares of
capital stock of each subsidiary are owned of record and beneficially  solely by
the Company and have been duly  authorized and validly issued and are fully paid
and non- assessable and (iii) the Company owns all of the issued and outstanding
capital stock of each of its subsidiaries free and clear of any and all Liens.

                                       18
<PAGE>

     3.21  Brokerage.  No placement  agent,  banker,  broker or finder has acted
directly or indirectly for the Company in connection  with this Agreement or the
transactions  contemplated  hereby,  and no placement agent,  banker,  broker or
finder is  entitled to any  commission,  brokerage  or  finder's  fee in respect
thereof based in any way on agreements,  arrangements or understandings  made by
or on behalf of the Company.

     3.22  Employees.  Neither  the Company  nor any of its  subsidiaries  has a
collective  bargaining  agreement with any of its  employees.  There is no labor
union  organizing   activity  pending  or,  to  the  Company's  best  knowledge,
threatened  with  respect to the Company or any of its  subsidiaries.  Except as
disclosed  in any of the  SEC  Filings,  to the  Company's  best  knowledge,  no
employee of the Company or any of its subsidiaries, nor any consultant with whom
the Company or any of its  subsidiaries  has contracted,  is in violation of any
term of any employment contract,  proprietary information agreement or any other
agreement  relating to the right of any such individual to be employed by, or to
contract with, the Company or any such  subsidiary  because of the nature of the
business  to be  conducted  by the Company or any such  subsidiary;  and, to the
Company's  best  knowledge,  the  continued  employment  by the Company and each
subsidiary of its current officers and significant employees, will not result in
any such violation.  Except as disclosed in any of the SEC Filings:  the Company
and each of its subsidiaries  have not received any written notice alleging that
any such violation has occurred; and no employee of or consultant to the Company
or any of its subsidiaries has been granted the right to continued employment by
the  Company  or  such  subsidiary  or to any  material  compensation  following
termination of employment with or by the Company or such subsidiary.

     3.23 Taxes. "Taxes" shall mean all taxes,  charges,  fees, Liens, duties or
other assessments, however denominated, including any interest or penalties that
may become payable in respect thereof,  imposed by the United States government,
any state, local or foreign government or any agency or political subdivision of
any such government (a "Tax Authority"),  which shall include,  without limiting
the  generality  of the  foregoing,  all  income  taxes,  payroll  and  employee
withholding taxes, unemployment insurance, social security, sales and use taxes,
excise taxes,  capital taxes,  franchise taxes, gross receipt taxes,  occupation
taxes,  real and  personal  property  taxes,  value added  taxes,  stamp  taxes,
transfer taxes, workers' compensation taxes and other obligations of the same or
of a similar  nature.  All tax returns or reports  required to be filed by or on
behalf of the  Company  or any of its  subsidiaries  have been  timely  filed or
requests  for  extensions  have been timely  filed or any amounts due and unpaid
have been accrued on the Financial  Statements and, to the best knowledge of the
Company,  any such extension has been granted and has not expired,  and all such
filed returns are complete and accurate in all material respects.  All Taxes due
from the  Company or any of its  subsidiaries  through the date hereof have been
paid in full or an  adequate  provision  has been made for any such Taxes on the
Financial   Statements  (in  accordance  with  generally   accepted   accounting
principles).  Except as otherwise  disclosed in any of the SEC Filings and other
than the  audit  of  sales,  use and  income  taxes  being  performed  (or to be
performed)  by  the  New  York  Department  of  Taxation:  there  is  no  audit,
examination,  deficiency,  or refund  litigation  pending  or  threatened,  with
respect to any Taxes of the  Company or any of its  subsidiaries;  all Taxes due
with  respect to completed  and settled  examinations  or  concluded  litigation
relating  to it have been paid in full or adequate  provision  has been made for

                                       19
<PAGE>

any  such  Taxes on the  Financial  Statements  (in  accordance  with  generally
accepted  accounting  principles);  the Company has not executed an extension or
waiver of any statute of  limitations on the assessment or collection of any Tax
that is  currently in effect;  and no rulings have been issued by or  agreements
entered  into with any Tax  Authority  with respect to the Company or any of its
subsidiaries.

     3.24 ERISA and Employee Benefit Plans.

     (a) Except as disclosed  in any of the SEC Filings,  neither of the Company
nor  any  of  its  subsidiaries   maintains,   sponsors,  is  required  to  make
contributions to or otherwise has any liability, direct, indirect, contingent or
otherwise,  with  respect  to any  pension,  profit  sharing,  thrift  or  other
retirement plan,  employee stock ownership plan,  deferred  compensation,  stock
ownership,  stock purchase,  performance  share,  bonus or other incentive plan,
severance plan,  health or group insurance plan,  welfare plan, or other similar
plan, agreement, policy, arrangement or understanding,  whether written or oral,
whether or not such plan is intended to be qualified under Section 401(a) of the
Code,  including any employee benefit plan within the meaning of Section 3(3) of
ERISA,  which plan covers any employee or former  employee of the Company or any
of its subsidiaries (collectively, the "Plans").

     (b) The Company has delivered to the  Purchaser,  or the same are available
as exhibits to or are disclosed  into reports,  registration  statements,  proxy
statements  or other  filings  made by the Company  with the  Commission,  true,
correct and complete copies of each of the following:

          (i) any  employment  agreements  and any procedure and policy  manuals
     relating  to the  employment  of  employees  of the Company and each of its
     subsidiaries and the use of temporary employees and independent contractors
     by the Company and each of its subsidiaries;

          (ii) each Plan and all related trust  agreements,  insurance and other
     material contracts, and summary plan descriptions and summaries of material
     modifications relating to each Plan and any related material communications
     distributed to participants under the Plans; and

          (iii)  the  latest  reports  which  have  been  filed (or are in fully
     completed  form for  filing)  with the  Internal  Revenue  Service  and the
     Department of Labor with respect to each Plan.

     (c) With respect to each Plan,  to the best  knowledge  of the Company,  no
party in interest or  disqualified  person (as defined in Section 3(14) of ERISA
and  Section  4975 of the  Code,  respectively)  has at any  time  engaged  in a

                                       20
<PAGE>

transaction  which could subject the Company or any of its subsidiaries to a Tax
in a material  amount for  prohibited  transactions  imposed by ERISA or Section
4975 of the Code.

     (d) To the best  knowledge  of the  Company,  no  fiduciary  (as defined in
Section  3(21) of  ERISA)  with  respect  to any Plan  has  breached  any of the
material  responsibilities or obligations imposed upon fiduciaries under Title I
of ERISA.  Each Plan is and has been  operated  in  compliance  in all  material
respects  with its  terms and all  applicable  reporting,  disclosure  and other
requirements of ERISA and the Code as they relate to such Plan,  including where
applicable,  the group health plan continuation  coverage requirements set forth
in Part 6 of Subtitle B of Title I of ERISA and Section  4980B of the Code,  and
by its terms can be terminated at any time.

     (e) As of the date hereof,  the Company and each of its subsidiaries  shall
have made all required  contributions under each Plan for all applicable periods
or adequate accruals therefor will have been provided for by the Company or such
subsidiary.

     (f)  Except  as set  forth in any of the SEC  Filings,  no  Person  will be
entitled to any severance  benefits under the terms of any Plan solely by reason
of  the  transactions   contemplated  by  this  Agreement  or  the  Stockholders
Agreement. Except as otherwise disclosed in any of the SEC Filings, there are no
actions,  claims, suits or arbitrations pending or, to the best knowledge of the
Company,  threatened with respect to any Plan, which actions,  claims,  suits or
arbitrations  has or could  reasonably  be  expected to have,  alone,  or in the
aggregate, a Material Adverse Effect.

     (g)  Neither  the  Company nor any of its  subsidiaries  has  incurred  any
outstanding  liability in any material  amount to the Pension  Benefit  Guaranty
Corporation. Each Plan which is intended to be "qualified" within the meaning of
Section  401(a)  of the  Code  (and  the  exempt  trust  thereunder),  has  been
determined  by  the  Internal  Revenue  Service  to  satisfy  the  qualification
requirements  of  Sections  401(a)  and  501(a) of the Code and every  Plan (and
related  trust) which is intended to comply with the terms and  requirements  of
applicable statutes does so comply in all material respects.

     (h) Neither the Company nor any of its subsidiaries,  other than Softworks,
Inc.,  has  adopted,  during  the last six (6) years,  any Plan or any  employee
benefit plan  subject to Title IV of ERISA,  giving rise to any  liabilities  to
which the Company or any of its subsidiaries is now or may hereafter be subject,
which  liabilities  have,  or could  reasonably  be expected to have, a Material
Adverse Effect.

     (i) The  consummation  of the  transactions  contemplated by this Agreement
will not result in an  increase  in the amount of  compensation  or  benefits or

                                       21
<PAGE>

accelerate  the  vesting or timing of payment of any  benefits  or  compensation
payable in respect of any employee.

     3.25  Transactions  with Related  Persons.  Except as  otherwise  disclosed
herein, in the Disclosure Schedule or any of the SEC Filings:

     (a) Neither the Company nor any of its  subsidiaries  has entered  into any
agreement  with, and no debts,  obligations or liabilities of the Company or any
of its  subsidiaries is owed to, any of their  respective  officers,  directors,
stockholders,  employees,  consultants  or Affiliates  or any Affiliate  thereof
other than:

          (i) for payment of salary,  consulting or director's fees for services
     rendered;

          (ii)  reimbursement for reasonable  expenses incurred on behalf of the
     Company or any such subsidiary; and

          (iii) for other standard employee benefits made generally available to
     all employees  (including  stock option  agreements  outstanding  under any
     stock option plan approved by the board of directors  either of the Company
     or any of its subsidiaries);

     (b) None of the officers,  directors or  stockholders of the Company or any
of its subsidiaries,  or any members of their immediate families or any of their
Affiliates,  is indebted to, or has any cause of action or legal claim  against,
the Company or any of its subsidiaries or, to the best knowledge of the Company,
has any direct or  indirect  ownership  interest  in any  Person  with which the
Company or any of its  subsidiaries  is  affiliated or with which the Company or
any of its  subsidiaries  has a  business  relationship,  or  any  Person  which
competes  with the Company or any of its  subsidiaries,  except  that  officers,
directors and/or  stockholders of the Company or any of its subsidiaries may own
less than two  percent  (2%) of the  issued  and  outstanding  capital  stock in
publicly  traded  companies  which may  compete  with the  Company or any of its
subsidiaries;

     (c) No  officer,  director  or  stockholder  of the  Company  or any of its
subsidiaries,  or any  member  of  their  immediate  families  or  any of  their
Affiliates, is, directly or indirectly, interested in any material contract with
the Company or any of its subsidiaries; and

     (d)  Neither  the  Company  nor  any of its  subsidiaries  is a  guarantor,
indemnitor or contributor of any  indebtedness  or liability of any other Person
involving any guaranty, indemnification or contribution required to be disclosed
in any such SEC Filings.

     3.26. Title to Properties and Assets; Liens, etc.

                                       22
<PAGE>

     (a) Except as otherwise disclosed in the SEC Filings,  the Company and each
of its subsidiaries has good and marketable title to its material properties and
assets, and good title to its material  leasehold estates,  in each case subject
to no material Liens, other than (i) those identified on the Balance Sheet, (ii)
those  resulting  from taxes which have not yet become  delinquent,  (iii) minor
Liens  which do not  materially  detract  from  the  value  of the  property  or
materially  impair the  operations  of the Company or such  subsidiary  and (iv)
those that have otherwise arisen in the ordinary course of business.

     (b) All material facilities,  machinery,  equipment, fixtures, vehicles and
other  properties  owned,  leased  or  used  by  the  Company  and  each  of its
subsidiaries  are in good operating  condition and repair and are reasonably fit
and usable for the purposes for which they are being used.

     (c) The SEC Filings sets forth true,  complete and correct  descriptions of
each  leasehold  interest of the Company  and each of its  subsidiaries  in real
property that is material to the business and  operations of the Company and its
subsidiaries,  taken as a whole. The Company and each of its subsidiaries enjoys
peaceful and undisturbed possession of all such real property.

     (d) Neither the Company  nor any of its  subsidiaries  has ever owned,  nor
does the Company nor any of its subsidiaries or currently own any real property.

     (e)  Except  as set  forth  in the  SEC  Filings,  the  Company  has  never
manufactured or produced,  and does not presently manufacture or produce, any of
its products or goods and such  products  and goods have been and are  presently
manufactured and produced by independent third Persons.

     3.27 Permits.  The Company and each of its subsidiaries has all franchises,
permits, licenses, consents and approvals and any similar authorization required
for their operations,  the absence of which could not be reasonably  expected to
have  alone,  or  in  the  aggregate,   a  Material  Adverse  Effect,   and  all
authorizations they have are in full force and effect.

     3.28. Environmental Matters.

     (a) As used herein,  "Subject  Premises" means the real property now owned,
operated, used or leased or previously owned, operated, used or leased (but only
through the date of termination of such ownership,  operation, use or lease) by,
to or for the Company or any of its subsidiaries.

     (b) To the best knowledge of the Company,  none of the Subject Premises has
any condition or conditions  which would require  notification or remediation by
the  Company  or  any  of  its   subsidiaries   under  any   Environmental   Law
(collectively, "Environmental Defects").

                                       23
<PAGE>

     (c) Neither the Company nor any of its subsidiaries,  nor, to the Company's
best  knowledge,  any other Person has at any time during its  possession of the
Subject  Premises  disposed of any wastes,  Hazardous Waste or otherwise,  other
than in accordance with applicable Environmental Laws and Environmental Permits.

     (d)  Neither  the  Company nor any of its  subsidiaries  has  received  any
written  communication from the Federal  Environmental  Protection Agency or any
other local, state or Federal  regulatory  agencies or any other Person relating
to the existence of Environmental Defects at the Subject Premises.

     (e) Except as disclosed in any of the SEC Filings, to the best knowledge of
the Company, there do not exist any judgments,  orders,  directives,  decrees or
awards of any court,  arbitrator or  administrative  or  governmental  agency or
entity or any other Person  concerning the Company or any of its subsidiaries or
any of their agents' or contractors'  compliance with any  Environmental  Law or
Environmental  Permit (in the case of agents and  contractors,  relating  to the
Company, any of its subsidiaries or the Subject Premises).

     (f) Except as  disclosed  in any of the SEC  Filings,  no claims  have been
asserted or, to the best knowledge of the Company,  are  threatened  against the
Company  or any of its  subsidiaries  relating  to any  Environmental  Defect or
condition which with the passage of time could become an Environmental Defect.

     (g) Except as disclosed in any of the SEC Filings, to the best knowledge of
the  Company,  there do not exist any consent  decrees,  administrative  orders,
settlement  agreements  or other  settlement  documents  entered  into  with any
administrative  or governmental  agency or entity or any other Person concerning
compliance with any Environmental Law or Environmental  Permit applicable to the
Company or any subsidiary or any of the Subject Premises.

     (h) Except as disclosed in any of the SEC Filings, the Subject Premises and
all operations  conducted  thereon by the Company or any of its subsidiaries are
and have at all times  been in  compliance  in all  material  respects  with all
Environmental Laws and Environmental Permits.

     (i) The Company and each of its  subsidiaries  have  obtained and currently
maintain in full force and effect all material environmental permits, approvals,
authorizations,    licenses,    variances,    registrations    and   permissions
(collectively,  "Environmental  Permits")  required  for the  conduct  of  their
respective businesses and operations.

                                       24
<PAGE>

     (j) To the best knowledge of the Company, there are no Hazardous Substances
or  Hazardous  Waste on,  under or about the Subject  Premises  other than those
customarily  used in or  incident  to the  business of the Company or any of its
subsidiaries,  which in any event are used or  maintained  by the Company or its
subsidiaries  in  all  material  respects  in  accordance  with  all  applicable
Environmental Laws and Environmental Permits.

     3.29 Customers and Suppliers. Except as disclosed on in the SEC Filings, no
customer or supplier of the Company or any of its  subsidiaries  has taken,  and
the Company has not received any written  notice,  and the Company does not have
any knowledge that any customer or supplier of the Company  contemplates taking,
any steps that could disrupt the business  relationship of the Company with such
customer or supplier or could result in a diminution in the value of the Company
in a manner that, in either event, would be reasonably likely to have a Material
Adverse  Effect.  The Company has no knowledge of any activities by ex-employees
that have disrupted the business  relationship of the Company with its customers
or suppliers in any material respect.

     3.30 Rights  Agreement;  Interested  Stockholder.  All necessary and proper
action has been taken by the  Company and its Board of  Directors  such that the
execution,  delivery and performance of the Transaction Documents, the purchase,
sale and  issuance of the  Purchased  Preferred  Stock and,  the issuance of the
Common Stock upon conversion of the Purchased Preferred Stock, will not (a) give
rise to the exercise of the rights issued under the Rights  Agreement,  dated as
of August 28,  2001,  between  the  Company  and  Manhattan  Transfer  Registrar
Company, or (b) cause the Purchaser to become an "interested  stockholder" under
Section 203 of the Delaware General Corporation Law.

     3.31  Directors  and Officers  Insurance.  The Company has furnished to the
Purchaser a true,  correct and  complete  copy of the  Company's  directors  and
officers  insurance  policy.  There  is no claim  by the  Company  or any of its
directors or officers  pending  under such policy as to which  coverage has been
questioned,  denied or disputed by the underwriters of such policy. All premiums
due and payable  under such  policy  have been paid and the Company  have in all
material  respects  complied fully with the terms and conditions of such policy.
Such policy is in full force and effect.  Such policy is in the coverage  amount
of $7 million.  The  Company  knows,  to its best  knowledge,  of no  threatened
termination of such policy.

     4.   Representations  and  Warranties  of  the  Purchaser.   The  Purchaser
represents  and  warrants  to the  Company as of the date of this  Agreement  as
follows:

     4.1 Status. The Purchaser is a limited partnership duly organized,  validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
organization  with full power and authority to execute,  deliver and perform its
obligations under this Agreement and each of the other Transaction  Documents to
which the Purchaser is a party.

                                       25
<PAGE>

     4.2  Authority.  The  Purchaser  has the power and authority to execute and
deliver the  Transaction  Documents  to which it is a party and to carry out its
obligations hereunder and thereunder. The execution, delivery and performance by
the  Purchaser  of the  Transaction  Documents  to which  it is a party  and the
consummation of the transactions  contemplated hereby and thereby have been duly
authorized  by all  necessary  limited  partnership  action  on the  part of the
Purchaser,  and the  Transaction  Documents  to which the  Purchaser  is a party
constitute the legal, valid and binding obligation of the Purchaser, enforceable
against the Purchaser in accordance with their respective  terms,  except as the
same may be  limited by  bankruptcy,  insolvency,  reorganization  or other laws
affecting the  enforcement  of creditors'  rights  generally now or hereafter in
effect  and  subject  to  the  application  of  equitable   principles  and  the
availability of equitable remedies.

     4.3  No  Conflicts.   The  execution,   delivery  and  performance  of  the
Transaction  Documents to which the Company is a party and the  consummation  of
the  transactions  contemplated  hereby and thereby by the  Purchaser do not and
will not with or without  the  giving of notice or the  passage of time or both,
violate or conflict with or result in a breach or  termination  of any provision
of, or constitute a default under any organizational instrument of the Purchaser
or any order, judgment, decree, statute, regulation,  contract, agreement or any
other  restriction  of any kind or description to which the Purchaser is a party
or by which the Purchaser is or may be bound.

     4.4 Purchaser Representations and Acknowledgments.

     (a) The  Purchaser  is  acquiring  the  Purchased  Preferred  Stock for the
Purchaser's  own account for investment only and not as nominee or agent and not
with a view to, or for sale in connection  with, a distribution of the Purchased
Preferred Stock or the shares of Common Stock issuable upon  conversion  thereof
or as dividends thereon and with no present intention of selling,  transferring,
granting a participation in or otherwise  distributing,  the Purchased Preferred
Stock or the shares of Common Stock issuable upon conversion thereof, all within
the  meaning of the  Securities  Act and any  applicable  state,  securities  or
blue-sky laws.

     (b) The  Purchaser  is not a party or subject to or bound by any  contract,
undertaking,  agreement  or  arrangement  with any Person to sell,  transfer  or
pledge the Preferred Stock or any part thereof to any Person, and has no present
intention to enter into such a contract, undertaking, agreement or arrangement.

     (c) The Purchaser acknowledges that:

          (i) The Company has advised the  Purchaser  that neither the Preferred
     Stock nor the shares of Common Stock issuable upon conversion  thereof have
     been registered  under the Securities Act or under the laws of any state on

                                       26
<PAGE>

     the basis that the  issuance  thereof  contemplated  by this  Agreement  is
     exempt  from such  registration  in  accordance  with  Section  4(2) of the
     Securities Act;

          (ii) The Company's  reliance on the availability of an exemption under
     the Securities  Act for the issuance of the Preferred  Stock and the shares
     of Common Stock issuable upon conversion  thereof without  registration is,
     in part,  based  upon the  accuracy  and  truthfulness  of the  Purchaser's
     representations contained herein;

          (iii) The  Purchased  Preferred  Stock and the shares of Common  Stock
     issuable upon conversion  thereof cannot be resold without  registration or
     an exemption from registration  under the Securities Act and any applicable
     state  securities  laws, and that  certificates  representing the Purchased
     Preferred  Stock and the shares of Common Stock  issuable  upon  conversion
     thereof will bear a restrictive  legend to such effect in substantially the
     following form and any legend required by applicable state laws:

          THESE  SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
          1933, AS AMENDED,  OR ANY STATE  SECURITIES LAWS. THEY MAY NOT BE SOLD
          OR  OFFERED  FOR  SALE IN THE  ABSENCE  OF AN  EFFECTIVE  REGISTRATION
          STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE
          SECURITIES LAW OR THE  AVAILABILITY OF AN EXEMPTION FROM  REGISTRATION
          UNDER SAID ACT.

          (iv) The  Purchaser  has  evaluated the merits and risks of purchasing
     the Purchased  Preferred  Stock,  and has such  knowledge and experience in
     financial and business  matters that the Purchaser is capable of evaluating
     the merits and risks of such  purchase,  is aware of and has considered the
     financial  risks and hazards of purchasing the Purchased  Preferred  Stock,
     and is able to bear the economic  risk of purchasing  the Preferred  Stock,
     including the possibility of a complete loss with respect thereto;

          (v) The  Purchaser  has had access to such  information  regarding the
     business and finances of the Company, and has been provided the opportunity
     to  discuss  with  the  Company's  management  the  business,  affairs  and
     financial  condition of the Company and such other  matters with respect to
     the  Company  as  would  concern  a  reasonable   person   considering  the
     transactions  contemplated  by this  Agreement  and/or  concerned  with the
     operation of the Company;

          (vi) The  representations  and  warranties  of the Purchaser set forth
     herein are true, correct and complete as of the date of this Agreement, and
     will be true,  complete  and correct on the date of closing of the purchase
     and sale of the  Purchased  Preferred  Stock  pursuant to the terms hereof,
     provided,   however,  if  there  should  be  any  material  change  in  the
     information  underlying  such  representations  and  warranties at any time
     prior to such closing the Purchaser shall immediately  furnish such revised
     or corrected information to the Company; and

                                       27
<PAGE>

          (vii) The  Purchaser,  by initialing the paragraphs in (a) through (g)
     below applicable to the Purchaser,  hereby represents and warrants that the
     Purchaser is an Accredited Investor, because the Purchaser comes within one
     or more of the  enumerated  categories  set forth in (a) through (g) below.
     Check the box  provided  in the  beginning  of each  applicable  paragraph,
     thereby  representing  and  warranting  as  to  the  applicability  to  the
     Purchaser of the checked paragraph or paragraphs:

     [ ]  A  bank as  defined in Section  3(a)(2) of the  Securities  Act,  or a
          savings  and loan  association  or other  institution  as  defined  in
          Section  3(a)(5)(A)  of the  Securities  Act,  whether  acting  in its
          individual  or  fiduciary  capacity;  a broker  or  dealer  registered
          pursuant to Section 15 of the Exchange  Act; an  insurance  company as
          defined in Section 2(13) of the Securities Act; an investment  company
          registered  under the Investment  Company Act of 1940 (the "Investment
          Company Act") or a business  development company as defined in Section
          2(a)(48) of the Investment  Company Act; a Small  Business  Investment
          Company  licensed  by the U.S.  Small  Business  Administration  under
          Section 301(c) or (d) of the Small Business  Investment Act of 1958; a
          plan established and maintained by a state, its political subdivisions
          or  any  agency  or  instrumentality  of  a  state  or  its  political
          subdivisions for the benefit of its employees,  if such plan has total
          assets in excess of  $5,000,000;  an employee  benefit plan within the
          meaning  of the  Employee  Retirement  Income  Security  Act  of  1974
          ("ERISA"),  if the investment decision is made by a plan fiduciary, as
          defined in Section 3(21) of ERISA, which is either a bank, savings and
          loan association, insurance company, or registered investment advisor,
          or if the  employee  benefit  plan  has  total  assets  in  excess  of
          $5,000,000 or, if a self-directed plan, with investment decisions made
          solely by persons that are accredited investors.

     [ ]  A  private  business   development   company  as  defined  in  Section
          202(a)(22) of the Investment Advisers Act of 1940.

     [x]  An   organization   described  in  Section   501(c)(3)  of  the  Code,
          corporation,  Massachusetts or similar business trust, or partnership,
          not  formed  for the  specific  purpose of  acquiring  the  securities
          offered, with total assets in excess of $5,000,000.

     [ ]  A director or executive officer of the Company.

                                       28
<PAGE>

     [ ]  A natural person whose  individual net worth,  or joint net worth with
          that  person's  spouse,  at the  time of his or her  purchase  exceeds
          $1,000,000.

     [ ]  A natural person who had an individual income in excess of $200,000 in
          each of the two most recent years or joint  income with that  person's
          spouse  in  excess  of  $300,000  in each  of  those  years  and has a
          reasonable  expectation  of  reaching  the  same  income  level in the
          current year.

     [ ]  A trust, with total assets in excess of $5,000,000, not formed for the
          specific purpose of acquiring the securities  offered,  whose purchase
          is  directed  by  a   sophisticated   person  as   described  in  Rule
          506(b)(2)(ii) (i.e., a person who has such knowledge and experience in
          financial and business  matters that he is capable of  evaluating  the
          merits and risks of the prospective investment).

     [ ]  An entity in which all of the equity owners are accredited  investors.
          (If this  alternative  is checked,  the  Purchaser  must identify each
          equity owner and provide  statements signed by each  demonstrating how
          each is qualified as an accredited investor.)

     (d) As long as the Purchaser or its affiliates  owns any shares of Series A
Preferred Stock or Common Stock, neither the Purchaser nor its affiliates shall,
directly  or  indirectly,  engage in any form of "short"  sales of any shares of
Common Stock,  whether  "covered" or "uncovered"  short sales,  or engage in any
transaction,  the  purpose of which is to  effectuate  a short sale of or a sale
with a declared  delivery  (more than three days from the actual sale) of any of
the shares sold.

     (e) The  Purchaser  was, on December 20, 2002,  is on the date hereof,  and
will be, on the date of Closing,  the sole owner of the Preferred  Stock, and as
such sole owner,  the  Purchaser has consented to the adoption and filing of the
Amendment and the  Certificate  of Amendment to the  Certificate  of Designation
filed with the Secretary of State of Delaware on December 20, 2002.

     5. Certain Covenants.
        -----------------

     5.1  Board   Designee   (Anything   contained   herein   to  the   contrary
notwithstanding  the  provision  of this  Section 5 shall not be deemed to be in
addition to the rights relative to a Board Designee  granted to the Purchaser in
Section 5 of the September 2002 Agreement but by way of clarification thereof so
as to take  into  account  the  appointment  of Peter B.  Yunich  as a  Director
pursuant to the September 2002 Agreement.)

     (a) The Company hereby covenants and agrees that all times during which the
Purchaser owns not less than the Threshold Percentage, provided that the Company
then has a classified Board of Directors,  the Purchaser shall have the right to
designate  one  director to the  Company's  Board of Directors  (the  "Purchaser

                                       29
<PAGE>

Designee"),  which right shall not be assigned without the prior written consent
of the Company.  The Company and the Purchaser  acknowledge that Peter B. Yunich
is currently  serving as a Class II director on the Board of Directors until the
annual meeting of  stockholders  in 2004 and until his successor is duly elected
and qualified or his earlier resignation or removal.  The Company further agrees
that it shall  nominate  Mr.  Yunich,  or such other  Person  designated  by the
Purchaser and acceptable to the Board of Directors in the good faith exercise of
its reasonable  business  judgment,  to the slate of the Company's  nominees for
election as Class II directors of the Company at the Company's annual meeting of
stockholders in 2004 and that in the event Mr. Yunich shall resign or be removed
from the  Board of  Directors  prior  thereto,  that the  Company  will fill the
vacancy in Class II members of its Board with another  Person  designated by the
Purchaser and acceptable to the Board of Directors in the good faith exercise of
its reasonable  business  judgment.  Notwithstanding  anything contained in this
Section  5.1 to the  contrary,  at any time during  which the  Company  does not
maintain a classified  board of  directors,  so long as the  Purchaser  owns the
Threshold  Percentage,  the Company  shall  comply with the  provisions  of this
Section 5.1 to appoint the Purchaser  Designee to the Board of Directors as then
composed.

     (b) The  Company  agrees to use its best  efforts  to cause  the  Purchaser
Designee to be  nominated  to the Board of Directors of the Company for election
to such Board (and any committees of the Board, to the extent deemed appropriate
by  the   non-Purchaser   Designee  members  of  the  Board)  by  the  Company's
stockholders  at the time and in the manner  provided  for such  nomination  and
election in the Company's bylaws and certificate of  incorporation.  For as long
as the  Purchaser  owns not less than the  Threshold  Percentage,  the Purchaser
Designee may not be removed or replaced  without the  Purchaser's  prior written
consent, except for any removal of such individual for Cause (but subject to the
rights of the  Purchaser  to fill such  vacancy and of the Board of Directors to
accept the Purchaser Designee as provided herein).

     (c) The  Company  shall  also use its best  efforts  to cause  its Board of
Directors to take all necessary and appropriate action to effect the election of
the Purchaser Designee pursuant to the terms of this Section 5.1.

     (d) The Company agrees that the Purchaser Designee shall be entitled to and
shall receive the same  compensation  as other members of the Board of Directors
receive for serving on the Board of Directors.

     (e) Anything contained in this Section 5.1 to the contrary notwithstanding,
neither the Company nor its Board of Directors  shall have any obligation  under
this  Section to do any act or thing which  violates  any  provision of Delaware
law,  the  Exchange  Act,  the  proxy  rules or any other  rules or  regulations
promulgated  under the  Exchange  Act or any other  applicable  Federal or state
securities laws, rules or regulations.

                                       30
<PAGE>

     5.2 Incurrence of Indebtedness; Right of First Refusal.

     (a) If, at any time when the Purchaser owns the Threshold  Percentageand at
least 25% of the Preferred Stock outstanding  immediately following the Closing,
the Company desires to incur any indebtedness (other than Senior  Indebtedness),
the Company  shall  deliver a written  notice to the  Purchaser of the Company's
good  faith  desire  to  incur  such  indebtedness,  specifying  the  amount  of
indebtedness  the Company  desires to incur and a detailed  explanation  for the
reason it desires to incur such  indebtedness  (the "Offer  Notice").  The Offer
Notice shall set forth the  principal  amount of the desired  indebtedness,  the
term, the facilities for payment,  schedule of payments,  interest rate, and any
other material terms and conditions of the desired indebtedness.

     (b) As promptly as practicable  but in no event later than 15 calendar days
after receipt of an Offer Notice (the "Offer Period"),  the Purchaser shall have
the right, but not the obligation,  to elect to provide the Company with all the
financing so desired by the Company in accordance with such Offer Notice. If the
Purchaser  elects to provide such financing to the Company,  the Purchaser shall
give written notice to the Company, prior to the expiration of the Offer Period,
of the Purchaser's election to provide such financing to the Company (a "Funding
Notice").

     (c) Any financing to be provided by the Purchaser  pursuant to this Section
5.2  shall  close  within  fifteen  (15)  calendar  days  after  the date of the
applicable  Funding  Notice.  The Company and the Purchaser  shall enter into an
agreement to effect such  transaction  on the terms and  conditions set forth in
the  Offer  Notice  and  with  such  representations,   warranties,   covenants,
conditions  and  indemnities  as  are  customary  under  the  circumstances  and
otherwise commercially reasonable.

     (d) In the event the Purchaser  declines (by written  notice  declining the
offer  pursuant to the Offer  Notice) or shall fail to provide a Funding  Notice
prior to the expiration of the Offer Period (the "Date of Rejection"),  then the
Company  shall have the right to engage in a  transaction  pursuant to the terms
set forth in the  Offer  Notice  at any time  within  45 days  after the Date of
Rejection  (the "Sale  Period") upon terms and  conditions no more  favorable to
such party than those specified in the Offer Notice.

     (e) For the  purposes of this Section 5.2,  "terms and  conditions  no more
favorable"  shall mean that the  price,  facilities  for  payment,  schedule  of
payments,  interest  rates,  indemnification  provisions  and any other material
terms and  conditions  of the  agreement  pursuant  to which such  financing  is
obtained  by the Company  shall not,  in the  aggregate,  be  economically  more
favorable to such Person than the terms and conditions offered to the Purchaser.

                                       31
<PAGE>

     (f) If such  financing  is not  obtained  by the  Company  within  the Sale
Period, any proposed incurrence of indebtedness (other than Senior Indebtedness)
shall again be subject to the notice  requirements  and rights of first  refusal
set forth in this Section 5.2.

     (g) For purposes of this Section 5.2 only,  the term "the Company" shall be
deemed to include the Company and any of its subsidiaries.

     5.3 Issuances of Company Securities.

     (a) As long as the Purchaser  owns not less than the  Threshold  Percentage
and at least 25% of the Preferred Stock  outstanding  immediately  following the
Closing,  the Company  only shall have the right to issue shares of Common Stock
or  preferred  stock  ranking  junior to the  Preferred  Stock  with  respect to
liquidation  preferences (the "Junior Securities") as long as such issuance does
not  result in a  limitation  on the use of the  Company's  net  operating  loss
carryforwards under Section 382 of the Code.  Notwithstanding the foregoing, the
issuance  of Junior  Securities  will be  permissible  even if it  results  in a
limitation  on the  use of  the  Company's  net  operating  loss  carryforwards;
provided  that  at  least  two (2) of the  Company's  directors  do not  vote in
opposition to such issuance.

     (b) Notwithstanding  anything contained herein to the contrary, the Company
agrees  that  for as long as the  Purchaser  owns not  less  than the  Threshold
Percentage  and at least  25% of the  Preferred  Stock  outstanding  immediately
following the Closing,  without the prior  written  consent of the Purchaser the
Company will not:

          (i) create or authorize the creation or increase the authorized amount
     of or alter the rights of any  additional  or  existing  class or series of
     shares of stock,  unless the same ranks  junior to the  Preferred  Stock as
     liquidation preferences;

          (ii) create or authorize  any  obligation or security  convertible  or
     exercisable into or exchangeable for shares of Preferred Stock,  regardless
     of whether any such creation,  authorization  or increase shall be by means
     of amendment to the Company's  certificate of incorporation,  or by merger,
     consolidation or otherwise; or

     (c) alter or amend the rights,  preferences  or privileges of the Preferred
Stock (whether by merger, consolidation, or otherwise).

     (d)  Notwithstanding  anything contained in this Agreement to the contrary,
there shall be no limitation  whatsoever at any time on the right of the Company
to issue Junior Securities.

     5.4 Delisting.

                                       32
<PAGE>

     In the event that the Company's Common Stock, for any reason, is not listed
on the Nasdaq SmallCap Market, the Over-the-Counter  Bulletin Board or a similar
national exchange,  (absent any time frame applicable to any transition from one
exchange  to  another)  and the  Company is no longer  subject to the  reporting
requirements  of the Exchange Act, the Company hereby  covenants and agrees with
the Purchaser  that, so long as the Purchaser or any of its Affiliates  owns the
Threshold  Percentage,  except as  otherwise  required  in this  Agreement,  the
Company shall:

     (a) Financial and Other Information Rights.

     (i) As soon as  practicable  after the end of each fiscal year,  and in any
event  within  ninety (90) days after each fiscal year  beginning  with the year
ending  December 31, 2002, the Company shall furnish to the Purchaser an audited
consolidated  (and  consolidating)  balance sheet of the Company and each of its
subsidiaries, as of the end of such fiscal year and an audited consolidated (and
consolidating) statements of operations,  accumulated earnings and cash flows of
the Company and each of its  subsidiaries,  for such  fiscal  year,  prepared in
accordance with generally accepted accounting principles,  setting forth in each
case in  comparative  form the  figures for the  previous  fiscal  year,  all in
reasonable  detail and audited by a  nationally  recognized  independent  public
accounting firm selected by the Company and satisfactory to the Purchaser.

     (ii) As soon as practicable  after the end of each fiscal  quarter,  and in
any event within  forty-five (45) days after each fiscal quarter  beginning with
the quarter ending after the Company is subject to such  delisting,  the Company
shall furnish to the  Purchaser an unaudited  consolidated  (and  consolidating)
balance sheet of the Company and each of its subsidiaries, as of the end of such
fiscal  quarter and unaudited  consolidated  (and  consolidating)  statements of
operations,  accumulated  earnings and cash flows of the Company and each of its
subsidiaries,  for such fiscal  quarter and for the current fiscal year to date,
prepared in accordance with generally accepted accounting principles and setting
forth in each case in  comparative  form the  figures  for the  previous  fiscal
quarter, subject to charges resulting from year-end adjustment,  and accompanied
by a brief narrative  description of the Company's  business  activities  during
said fiscal quarter  setting forth events which could  reasonably be expected to
have a Material Adverse Effect,  all in reasonable  detail, and certified by the
chief financial officer and/or chief executive officer of the Company.

     (iii) As soon as practicable  after the end of each month, and in any event
within thirty (30) days thereafter, the Company shall furnish to the Purchaser a
consolidated  balance sheet of the Company and each of its  subsidiaries,  as of
the end of such month,  and consolidated  statements of operations,  accumulated
earnings and cash flow of the Company each of its  subsidiaries,  for such month
and for the current fiscal year to date,  prepared in accordance  with generally
accepted  accounting  principles,  with such  statements  certified by the chief

                                       33
<PAGE>

financial  officer of the Company as having been  prepared  in  accordance  with
generally accepted accounting principles.

     (iv) No later than the end of each fiscal year,  the Company  shall furnish
to the  Purchaser  a business  plan and budget for the  Company  and each of its
subsidiaries,  for the next fiscal  year.  Such  business  plan and budget shall
contain  information,  data and other materials typically included in a business
plan and  budget  of a  company  similar  in size  and  nature  to the  Company,
including budget data (including without limitation revenues,  expenses and cash
position) for each month of such fiscal year, and which budget and business plan
shall be approved by a majority of the Board of Directors.

     (v) From the date the Company becomes subject to the reporting requirements
of the Exchange Act, and in lieu of the financial  information required pursuant
to this  Agreement,  but within the time  periods  required  for the  furnishing
thereof,  the Company shall furnish to the Purchaser copies of its reports filed
on Form 10-K, Form 10-Q, Form 8-K or any successor form or forms.

     (vi) Each set of financial  statements delivered to the Purchasers pursuant
to this  Section  5.4 will be  accompanied  by a  certificate  of the  Chairman,
President or a Vice President and the Treasurer or an Assistant Treasurer of the
Company setting forth:

          (1)  Covenant  Compliance  - any  information  required  in  order  to
               establish whether the Company and any of its subsidiaries were in
               compliance  with the  requirements of this Section 5.4 during the
               period covered by the income statement then being furnished;  and

               Event of Default - that the signers  have  reviewed  the relevant
               terms of this  Agreement  and have  made,  or  caused to be made,
               under  their  supervision,  a  review  of  the  transactions  and
               conditions  of the Company and any of its  subsidiaries  from the
               beginning  of  the  accounting   period  covered  by  the  income
               statements   being  delivered   therewith  to  the  date  of  the
               certificate  and that such review has not disclosed the existence
               during such period of any condition or event which  constitutes a
               breach or default under the other Transaction Documents or any of
               the other  agreements  contemplated  hereby or thereby or, if any
               such condition or event existed or exists,  specifying the nature
               and period of  existence  thereof and what action the Company has
               taken or purposes to take with respect thereto.

     (vii) The Company shall permit at least one representative of the Purchaser
to:

                                       34
<PAGE>

          (1)  visit and inspect any of the  properties of the Company or any of
               its subsidiaries  and to discuss its and their affairs,  finances
               and   accounts   with  the   officers  of  the  Company  and  its
               subsidiaries,   all  at  such  reasonable  times  during  regular
               business hours and as often as may be reasonably requested; and

          (2)  discuss the  affairs,  finances  and accounts of the Company with
               its  officers  and  consult  with and advise the  officers of the
               Company as to the  management  of the  Company at all  reasonable
               times and as often as reasonably requested;

provided that such Purchaser shall maintain and shall take appropriate  steps to
ensure that any Purchaser  representative  maintains the  confidentiality of any
proprietary  information of the Company thereby obtained and,  provided further,
that such Purchaser  shall cause all its inspections to be conducted in a manner
that is not materially disruptive to the employees or operations of the Company.

     (viii) Except as otherwise  indicated,  the Company shall provide notice to
such Purchaser of a Reportable  Event (as  hereinafter  defined) within ten (10)
days  (twenty  (20)  days in the case of  clause  (iii) of this  Section  5.4(a)
following  the  occurrence  of  said  event.   The  following  events  shall  be
"Reportable Events":

          (1)  receipt by the Company of a bona fide offer to buy a  controlling
               interest in the capital stock of the Company;

          (2)  the  receipt by the  Company of a notice  that the  Company is in
               default under any loan agreement to which the Company is a party;

          (3)  the  existence  of any known  default  by the  Company  under its
               certificate  of  incorporation  (as the same may be amended  from
               time to time), including,  without limitation, any certificate of
               designations or this Agreement;

          (4)  as soon  as  available,  information  and  data  on any  material
               adverse  changes in or any event or condition  which has or could
               be reasonably expected to have a Material Adverse Effect;

          (5)  immediately  upon becoming  aware of any condition or event which
               constitutes a breach of any Transaction Document or any agreement
               contemplated  hereby or thereby,  written  notice  specifying the
               nature  and  period of  existence  thereof  and what  action  the
               Company is taking or proposes to take with respect thereto;

                                       35
<PAGE>

          (6)  as soon as  reasonably  possible and in any event within five (5)
               days of becoming aware of any condition or event which reasonably
               could be considered to materially affect the operating results or
               valuation  of  the  Company,   written  notice   describing  such
               condition or event;

          (7)  as soon as  reasonably  possible and in any event within five (5)
               days of becoming  aware that any  employee of the Company  (other
               than a secretarial or clerical employee or employees earning less
               than  $100,000  per year) has been or will be  terminated  or has
               left or will leave his or her employment, written notice thereof;

          (8)  as soon as  reasonably  possible and in any event within five (5)
               days of becoming  aware of any contact with or proposal  from any
               investment  banker or any other Person  expressing an interest in
               acquiring all, or a part of, the Company,  written notice thereof
               describing such contact or proposal;

          (9)  as soon as  reasonably  possible and in any event  within  thirty
               (30) days of becoming aware of any significant  development  with
               respect to the  Company's  market,  competition,  price levels or
               technologies, written notice describing such development;

          (10) immediately  upon  becoming  aware of any  pending or  threatened
               litigation involving the Company, written notice thereof together
               with a description of the Company's  proposed  response  thereto;
               and

          (11) with reasonable promptness,  such other information and data with
               respect to the Company and any Subsidiaries as any such party may
               from time to time reasonably request.

     (b) Additional Covenants.  In addition,  the Company shall, and shall cause
     each of its subsidiaries, as applicable, to:

     (i) Taxes. Promptly pay and discharge,  or cause to be paid and discharged,
when due and payable, all lawful Taxes,  assessments and governmental charges or
levies imposed upon the income, profits,  property or business of the Company or
any subsidiary; provided, however, that any such Tax, assessment, charge or levy
need not be paid if the validity  thereof  shall  currently be contested in good
faith and if the  Company  shall have set aside on its books  adequate  reserves

                                       36
<PAGE>

with respect thereto; and provided, further, that the Company shall pay all such
Taxes,  assessments,  charges  or  levies  forthwith  upon the  commencement  of
proceedings to foreclose any Lien that may have attached as security therefor.

     (ii)  Indebtedness.  Promptly  pay,  or  cause  to be paid,  when  due,  in
conformance  with  the  Company's  past  practices,  all  material  indebtedness
incident to the operations of the Company and its subsidiaries.

     (iii)  Maintenance  of  Property.  Keep  its  properties  and  those of its
subsidiaries  in good repair,  working order and condition,  reasonable wear and
tear  excepted,  and from time to time make all  necessary  and proper  repairs,
renewals, replacements, additions and improvements thereto.

     (iv) Leases.  Comply, and cause its subsidiaries to comply, in all material
respects,  at all times  with the  provisions  of all leases to which any of the
Company and its subsidiaries is a party or under which any of them occupies real
property.

     (v) Insurance. Keep its assets and those of its subsidiaries that are of an
insurable  character insured by financially sound and reputable insurers against
loss or damage by fire,  extended revenge and explosion in amounts customary for
companies  in  similar  businesses  similarly  situated;   and  maintain,   with
financially  sound and reputable  insurers,  insurance against other hazards and
risks and  liability  to persons  and  property  to the extent and in the manner
customary  for  companies in similar  businesses  similarly  situated.  All such
policies  of  insurance  shall  be  occurrence  policies  with  "tail  coverage"
so-called   respecting  all  prior  "claims  made"  policies,   all  in  a  form
satisfactory to the Purchaser.  The Company shall give immediate  written notice
to the  Purchaser  and to insurers of loss or damage to the  property  and shall
promptly file proof of loss with insurers.

     (vi) Books and  Records.  Keep true  records  and books of account in which
full,  true and correct  entries will be made of all dealings or transactions in
relation to its  business  and affairs in  accordance  with  generally  accepted
accounting principles.

     (vii)  Compliance  with  Requirements  of  Governmental  Authorities.  Duly
observe and conform to, and cause its subsidiaries to so observe and conform to,
in  all  material  respects,   all  applicable  statutes,   ordinances,   rules,
regulations,  orders  and all valid  requirements  of  governmental  authorities
relating to the conduct of its businesses or to its property or assets.  Without
limiting the generality of the foregoing, the Company will:

          (1)  comply with all minimum  funding  requirements  applicable to any
               pension plans,  employee  benefit plans or employee  contribution
               plans  which are  subject to ERISA or to the Code,  and comply in
               all  other   respects  with  the  provisions  of  ERISA  and  the
               provisions of the Code applicable to such plans; and

                                       37
<PAGE>

          (2)  comply with all applicable  laws of the United States and of each
               applicable jurisdiction relating to equal employment opportunity,
               any  rules,  regulations,  administrative  orders  and  executive
               orders  relating  thereto and the applicable  terms,  relating to
               equal employment opportunity, of any contract, agreement or grant
               the company has with,  from or relating (by way of subcontract or
               otherwise)  to any other  contract,  agreement  or grant of,  any
               federal or state governmental unit; and keep all records required
               to be kept,  and file all reports,  affirmative  action plans and
               forms required to be filed,  pursuant to any such  applicable law
               or the terms of any such government contract; and

          (3)  so  conduct  its  business  that  neither  the  Company  nor  any
               Subsidiary  nor any property  owned or occupied by the Company or
               any  Subsidiary is in violation of any  Environmental  Law of any
               sort  or  in  violation  of  any  federal  or  state  "OSHA"  law
               so-called.

     (viii)  Organizational   Documents.   Duly  observe  and  comply  with  the
certificate of incorporation,  as the same may be amended from time to time, and
Bylaws of the Company as then in effect.

     (ix) Transfer or Replacement  of Stock.  Use its best efforts to facilitate
the transfer or surrender of stock in the Company,  and to replace  certificates
of stock if lost or damaged.

     (x) Maintenance of Corporate Existence.

          (1)  Maintain in full force and effect its corporate existence, rights
               and franchises  and use its  commercially  reasonable  efforts to
               maintain in full force and effect all  licenses  and other rights
               to use  Intellectual  Property Rights owned or possessed by it or
               any Subsidiary and necessary to the conduct of its business.

          (2)  Not transfer,  assign or license any of its Intellectual Property
               Rights now owned or hereafter  acquired by it without approval of
               the  Company's  Board  of  Directors  without  two  (2)  or  more
               dissenting votes.

     (xi) Proprietary Information.

               (1)  Cause each  person now or  hereafter  employed by it who has
                    access to proprietary  information concerning the Company or

                                       38
<PAGE>

                    any of its  subsidiaries to enter into a customary  business
                    protection  and  or   confidentiality   and   non-disclosure
                    agreement.

               (2)  Will  use  its  commercially  reasonable  best  efforts  and
                    judgment   to   cause   all   technological    developments,
                    inventions, discoveries or improvements made by employees of
                    the Company and any  subsidiaries to be fully  documented in
                    accordance with the best prevailing  professional standards,
                    and where possible and  appropriate,  cause all employees to
                    file  and  prosecute   United  States  and  foreign   patent
                    applications relating to and protecting such developments.

     (xii)  Securities Law Filings.  Make any filings  necessary to perfect in a
timely fashion  exemptions  from (i) the  registration  and prospectus  delivery
requirements of the Securities Act, and (ii) the  registration or  qualification
requirements of all applicable securities or blue sky laws of any state or other
jurisdiction,  for  the  issuance  of  the  Purchased  Preferred  Stock  to  the
Purchaser.

     5.5 Additional Covenant.

     (a) The Company's Board of Directors shall not take any action for the sole
purpose of negatively impacting the Preferred Stock and to positively impact the
Common  Stock in the event  that (i) the  Purchaser  owns at least  50.1% of the
Preferred  Stock  outstanding   immediately  following  the  Closing;  (ii)  the
Purchaser shall have notified the Company of the Purchaser's  objections to such
proposed  action;  (iii) Peter B. Yunich or such other Preferred  Designee voted
against  such action at a meeting of the Board of Directors at which such action
was proposed;  and (iv) such action caused (A) a material harm to the holders of
the  Preferred  Stock and (B) a  material  benefit  to the  Common  Stock.  Cash
dividends to holders of Common Stock shall not be deemed action taken within the
meaning of this Section 5.5.

     (b)  Notwithstanding  paragraph 5.5(a) hereof,  nothing  contained  therein
shall  cause the  Company's  Board of  Directors  to engage in, or refrain  from
engaging in any action,  which may cause the Board of  Directors to breach their
fiduciary obligations.

     5.6   Confidentiality.   The   Purchaser   covenants  and  agrees  to  keep
confidential any and all material non-public information which it has heretofore
obtained or shall  hereafter  obtain,  directly or indirectly,  from the Company
pursuant to this  Agreement or otherwise,  and agrees not to use the same except
for the purpose of this Agreement or to disclose the same to any party except as
provided below,  without the Company's prior written consent;  provided that the
terms of this Section 5.6 shall not extend to any such information that:

                                       39
<PAGE>

     (a) is already publicly known;

     (b) has become  publicly known without any fault of the Purchaser or anyone
to whom the Purchaser has made  disclosure in compliance  with the terms of this
Section 5.6; or

     (c) is required to be disclosed to any  governmental  authorities or courts
of law as a result of operation of law,  regulation,  or court order;  provided,
however, that the Purchaser shall have first given prompt written notice of such
requirement to the Company (if  permissible)  and cooperates with the Company to
restrict such disclosure and/or obtain confidential treatment thereof.

The foregoing  notwithstanding,  the Purchaser may disclose such  information to
each of its  directors,  officers,  employees,  partners  (including its limited
partners),  members, managers and representatives,  which representatives have a
need to know such information;  provided that the Purchaser informs such persons
of the  restrictions  set  forth  in  this  Section  5.6  with  respect  to such
information and such persons agree to comply with the provisions of this Section
5.6. The  Purchaser  further  agrees to give prompt notice to the Company of any
disclosure made by the Purchaser or any of its directors,  officers,  employees,
partners (including limited partners),  members,  managers or representatives in
breach of this Section 5.6, to the extent the  Purchaser  has  knowledge of such
disclosure;  provided  that the  Purchaser  shall have no  liability  for losses
incurred  by  the  Company  or  any  of  its  directors,   officers,  employees,
stockholders or  representatives  solely as the result of the Company's failure,
following  its actual  receipt of notice from the  Purchaser  of  disclosure  of
information in breach of this Agreement, to make prompt public disclosure of the
information so disclosed. For purposes of this Section 5.6, the knowledge of the
Purchaser  shall mean the actual  knowledge of Peter B. Yunich or any successors
to him as Managing Partner of the Purchaser.

     6. Registration of Restricted Stock. The provisions of this Section 6 shall
apply  to the  Purchased  Preferred  Stock  and the  Preferred  Stock  purchased
pursuant to the September  2002  Agreement,  and shall be deemed to have amended
and restated Section 6 of the September 2002 Agreement in its entirety.

     6.1 Demand Registration.

     (a) On or after April 10,  2003,  upon  written  notice of the Holders of a
majority  of the then  outstanding  Registrable  Securities  (on a common  stock
equivalent  basis)  requesting that the Company effect a registration  under the
Securities Act of Registrable  Securities and specifying the intended  method or
methods of  distribution  thereof  (which may  include a  continuous  or delayed
offering),  the Company shall prepare and file a Registration  Statement on Form
S-3 under the Securities Act, or other appropriate Form in the event Form S-3 is
not available,  covering the Registrable  Securities then  outstanding and shall
use  commercially  reasonable  efforts to cause such  Registration  Statement to
become  effective as expeditiously as possible and to remain effective until the
earlier to occur of (i) the date on which all Registrable  Securities covered by

                                       40
<PAGE>

such  Registration  Statement have been sold and the  distribution  contemplated
thereby  has  been  completed  or (ii) the  date by  which  all the  Registrable
Securities  covered  thereby may be sold under Rule  144(k) (the  "Effectiveness
Period");  provided,  however,  that the Purchaser  shall not,  pursuant to this
Section  6.1,  be  entitled  to sell,  during any  calendar  quarter,  more than
twenty-five  percent (25%) of the  aggregate  number of  Registrable  Securities
outstanding  immediately  following at the Closing,  or if the Company's  fiscal
year is not the  calendar  year,  during any fiscal  quarter of the  Company.  A
demand registration requested pursuant to this Section 6.1(a) will not be deemed
to have been effected unless the  Registration  Statement  relating  thereto has
become  effective under the Securities Act and remains  effective for the period
described above.

     (b) A Holder (including the Purchaser) or Holders requesting a registration
pursuant to this Section  6.1(a) may, at any time prior to the effective date of
the Registration Statement relating to such registration, revoke such request by
providing a written notice to the Company revoking such request.

     (c) The Company and any Other Approved Holder may include its securities in
any  demand  registration  effected  pursuant  to this  Section  6.1;  provided,
however,  that if the managing  underwriter(s) or the  representative(s)  of the
several  underwriters  (the "Managing  Underwriter") of a proposed  underwritten
public  offering  of Common  Stock  advises the Holder or Holders  intending  to
participate  in such  offering  in  writing  that the  total  amount  or kind of
securities  which such  Holders,  the  Company and such Other  Approved  Holders
intend to include in such offering is sufficiently large to materially adversely
affect the success of such offering, then the amount or kind of securities to be
offered for the accounts of the Other Approved Holders shall be reduced pro rata
among such Other  Approved  Holders to the extent  necessary to reduce the total
amount or kind of securities to be included in such proposed  public offering to
the  amount  or kind  recommended  by such  Managing  Underwriter  and,  if such
reduction  results in no securities  being offered for the accounts of the Other
Approved  Holders in such proposed public  offering,  then the amount or kind of
securities  to be offered for the account of the Company shall be reduced to the
extent necessary to reduce the total amount or kind of securities to be included
in such  proposed  public  offering  to the amount or kind  recommended  by such
managing underwriter or underwriters.

     6.2 Piggyback  Registration.  If the Company at any time proposes to file a
registration  statement  with  respect  to any class of its  equity  securities,
whether for its own  account  (other than in  connection  with the  Registration
Statement contemplated by Section 6.1 or a registration statement on Form S-4 or
S-8 (or any successor or substantially similar form), or the registration of (A)
an employee stock option,  stock purchase or compensation  plan or of securities
issued or  issuable  pursuant  to any such plan or (B) a  dividend  reinvestment
plan)  or  for  the  account  of  an  Other   Approved   Holder  (a  "Requesting
Securityholder"),  then the Company  shall in each case give  written  notice of

                                       41
<PAGE>

such  proposed  filing to all  Holders  at least  twenty  (20) days prior to the
anticipated filing date of any such registration  statement by the Company,  and
such notice shall offer to all Holders the opportunity to have any or all of the
Registrable  Securities  held  by such  Holders  included  in such  registration
statement.  Each Holder desiring to have its Registrable  Securities  registered
under this  Section  6.2 shall so advise the Company in writing  within  fifteen
(15) days after the date of  receipt of such  notice  (which  request  shall set
forth the amount of Registrable Securities for which registration is requested),
and  the  Company  shall  include  in  such  Registration   Statement  all  such
Registrable Securities so requested to be included therein on the same terms and
conditions  as the  securities  being  registered  by the Company.  Any Holder's
request for such  inclusion may be  withdrawn,  in whole or in part, at any time
prior to the effective date of such Registration Statement.  Notwithstanding the
foregoing,  if the Managing  Underwriter  of any such proposed  public  offering
advises the Company in writing that the total amount or kind of securities which
the Holders, the Company and the Other Approved Holders intend to be included in
such proposed  public  offering is  sufficiently  large to materially  adversely
affect the success of such proposed public offering,  then the amount or kind of
securities  to be offered for the  accounts  of Holders  and the Other  Approved
Holders (other than the Requesting  Securityholder) shall be reduced pro rata to
the extent  necessary  to reduce the total  amount or kind of  securities  to be
included in such proposed public  offering to the amount or kind  recommended by
such Managing  Underwriter  before the securities  offered by the Company or any
Requesting Securityholder are so reduced.

     6.3 Registration Procedures.  In connection with the Company's registration
obligations  pursuant to  Sections  6.1 and 6.2 hereof,  the  Company  will,  as
expeditiously as practicable:

     (a) prepare and file with the  Commission a new  Registration  Statement or
such  amendments  and  post-effective  amendments  to an  existing  Registration
Statement as may be necessary to keep such Registration  Statement effective for
the  time  periods  set  forth  in  Section  6.1 (in  connection  with a  demand
registration); provided, that as soon as practicable, but in no event later than
three (3) business days before filing such Registration  Statement,  any related
Prospectus or any amendment or supplement  thereto,  other than any amendment or
supplement  made solely as a result of  incorporation  by reference of documents
filed  with  the  Commission  subsequent  to the  filing  of  such  Registration
Statement, the Company shall furnish to the Holders covered by such Registration
Statement and the Managing  Underwriter,  if any,  copies of all such  documents
proposed  to be filed,  which  documents  shall be subject to the review of such
Holders and underwriters;

     (b) the Company  shall not file any  Registration  Statement  or  amendment
thereto or any Prospectus or any supplement thereto (other than any amendment or
supplement  made solely as a result of  incorporation  by reference of documents
filed  with  the  Commission  subsequent  to the  filing  of  such  Registration
Statement) to which the Managing Underwriter of the applicable offering, if any,
or the Purchaser (if it is  participating  in such offering) or the Holders of a

                                       42
<PAGE>

majority of the  Registrable  Securities  (on a Common Stock  equivalent  basis)
covered by such Registration Statement shall have reasonably objected in writing
within three (3)  business  days after  receipt of such  documents to the effect
that  such  Registration   Statement  or  amendment  thereto  or  Prospectus  or
supplement   thereto  does  not  comply  in  all  material   respects  with  the
requirements  of the Securities Act (provided that the foregoing shall not limit
the  right  of  any  Holder  whose  Registrable  Securities  are  covered  by  a
Registration  Statement to reasonably object, within two (2) business days after
receipt of such documents, to any particular information that is to be contained
in such Registration Statement, amendment, Prospectus or supplement that relates
specifically to such Holder,  including any information describing the manner in
which such Holder acquired such  Registrable  Securities and the intended method
or methods of distribution of such Registrable  Securities),  and if the Company
is unable  to file any such  document  due to the  objections  of such  Managing
Underwriter,  the  Purchaser  or such  Holders,  the Company  shall use its best
efforts to cooperate with such Managing  Underwriter,  the Purchaser and Holders
to  prepare,  as soon as  practicable,  a  document  that is  responsive  in all
material  respects  to the  reasonable  objections  of  such  underwriters,  the
Purchaser and Holders;

     (c) cause the  Prospectus  to be  supplemented  by any required  Prospectus
supplement,  and as so supplemented to be filed pursuant to Rule 424; and comply
with the provisions of the Securities Act applicable to the Company with respect
to the  disposition of all  securities  covered by such  Registration  Statement
during the applicable  period in accordance  with the intended method or methods
of distribution by the sellers thereof set forth in such Registration Statement,
Prospectus or supplement to the Prospectus;

     (d)  notify the  selling  Holders  and the  Managing  Underwriter,  if any,
promptly (providing confirmation in writing):

          (1)  when a new Registration  Statement,  Prospectus or any Prospectus
               supplement or post-effective  amendment has been filed, and, with
               respect  to any  new  Registration  Statement  or  post-effective
               amendment, when it has become effective;

          (2)  of any request by the Commission for amendments or supplements to
               any  Registration  Statement  or  Prospectus  or  for  additional
               information;

          (3)  of the issuance by the  Commission  of any written  comments with
               respect to any filing;

          (4)  of  any  stop  order   suspending   the   effectiveness   of  any
               Registration  Statement or the initiation of any  proceedings for
               that  purpose  and the  Company  agrees  that it will make  every
               reasonable effort to obtain as soon as possible the withdrawal of
               any such order or other action  suspending the  effectiveness  of

                                       43
<PAGE>

               any  Registration  Statement or suspending the  qualification  or
               registration   (or  exemption   therefrom)  of  the   Registrable
               Securities for sale in any jurisdiction;

          (5)  in the  case of an  underwritten  offering,  if at any  time  the
               representations  and  warranties of the Company  contemplated  by
               paragraph  (n) below  cease to be true and correct as of any time
               they are required to be true and correct;

          (6)  of  any  suspension  of the  qualification  or  registration  (or
               exemption  therefrom) of the  Registrable  Securities for sale in
               any   jurisdiction  or  the  initiation  or  threatening  of  any
               proceeding for such purpose; and

          (7)  of the  happening  of any event  which makes any  statement  of a
               material fact made in any Registration  Statement,  Prospectus or
               any document  incorporated  therein by reference  untrue or which
               requires the making of any changes in any Registration Statement,
               Prospectus or any document  incorporated  therein by reference so
               that it will not contain any untrue  statement of a material fact
               or omit to state any material fact required to be stated  therein
               or necessary to make the statements  therein, in the light of the
               circumstances under which they were made, not misleading;

     (e) if  reasonably  requested  by the Managing  Underwriter  or a Holder of
Registrable  Securities being sold in connection with an underwritten  offering,
promptly incorporate in a Prospectus supplement or post-effective amendment such
information as the Managing  Underwriter,  the Purchaser (if it is participating
in such  offering) and the Holders of a majority of the  Registrable  Securities
(on a Common Stock equivalent  basis) being sold in such  underwritten  offering
reasonably  agree  should  be  included  therein  relating  to the  sale  of the
Registrable  Securities,  including  information  with respect to the  aggregate
number of shares of Registrable  Securities being sold to the underwriters,  the
purchase price being paid therefor by such  underwriters and with respect to any
other terms of the  underwritten  offering of the  Registrable  Securities to be
sold in such offering; and promptly make all required filings of such Prospectus
supplement or post-effective amendment;

     (f) promptly after the filing of any document that is to be incorporated by
reference  into a Registration  Statement or Prospectus  relating to Registrable
Securities covered by a Registration Statement filed pursuant to this Section 6,
provide copies of such document to the selling  Holders  covered thereby and the
underwriters, if any;

     (g)  promptly  after the  filing  of such  documents  with the  Commission,
furnish to each selling Holder and each Managing  Underwriter,  if any,  without
charge, at least one manually signed or "edgarized" copy (but not to exceed five

                                       44
<PAGE>

(5)  manually  signed  copies of any  document  to all  selling  Holders and the
Managing  Underwriter in the  aggregate),  and as many  conformed  copies as may
reasonably be requested,  of the then effective  Registration  Statement and any
post-effective amendments thereto, including financial statements and schedules,
all  documents  incorporated  therein by reference  and all exhibits  (including
those previously furnished or incorporated by reference);

     (h) deliver to each selling  Holder and the Managing  Underwriter,  if any,
without charge, as many copies of the then effective Prospectus  (including each
prospectus  subject to completion) and any amendments or supplements  thereto as
such Persons may reasonably request;

     (i) register or qualify (or obtain  exemption  therefrom) or cooperate with
the selling  Holders,  the Managing  Underwriter,  if any, and their  respective
counsel in  connection  with the  registration  or  qualification  (or exemption
therefrom)  of such  Registrable  Securities  for the offer  and sale  under the
securities  or blue sky laws of such  jurisdictions  as any  selling  Holder  or
Managing Underwriter, if any, reasonably requests in writing;

     (j) use its best efforts to keep each such  registration  or  qualification
(or exemption therefrom)  effective during the Effectiveness  Period; and do any
and all other acts or things  reasonably  necessary  or  advisable to enable the
disposition in such  jurisdictions of the Registrable  Securities covered by the
then effective Registration Statement;  provided, however, that the Company will
not be required to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify, but for this paragraph (j);

     (k) cooperate  with the selling  Holders and the Managing  Underwriter,  if
any,  to  facilitate  the  timely   preparation  and  delivery  of  certificates
representing  Registrable  Securities to be sold and not bearing any restrictive
legends; and enable such Registrable  Securities to be in such denominations and
registered  in such names as the Managing  Underwriter  may request at least two
(2)  business  days  prior  to  any  sale  of  Registrable   Securities  to  the
underwriters;

     (l)  upon  the  occurrence  of any  event  contemplated  by  clause  (7) of
paragraph (d) above,  promptly prepare a supplement or post-effective  amendment
to  the  Registration  Statement  or the  related  Prospectus  or  any  document
incorporated  therein by reference or file any other required  document so that,
as thereafter  delivered to the purchasers of the Registrable  Securities  being
sold  thereunder,  the  Prospectus  will not  contain an untrue  statement  of a
material  fact or  omit  to  state  any  material  fact  necessary  to make  the
statements  therein,  in the light of the  circumstances in which they are made,
not  misleading;  if any event  described in clause (2) of  paragraph  (d) above
occurs,  use its best efforts to cooperate  with the  Commission to prepare,  as
soon as practicable,  any amendment or supplement to such Registration Statement
or such related  Prospectus  and any other  additional  information,  or to take
other action that may have been requested by the Commission;

                                       45
<PAGE>

     (m) cause all Registrable  Securities covered by the Registration Statement
to be listed on each  securities  exchange (or  quotation  system  operated by a
national  securities  association) on which identical  securities  issued by the
Company are then listed (or  included) if requested by the  Purchaser  (if it is
participating  in such offering) or the Holders of a majority of the Registrable
Securities (on a Common Stock  equivalent  basis)  covered by such  Registration
Statement  or the  Managing  Underwriter,  if  any,  and  enter  into  customary
agreements  including,  if necessary,  a listing application and indemnification
agreement in customary  form, and provide a transfer agent for such  Registrable
Securities no later than the effective date of such Registration Statement;

     (n)  enter  into  customary  agreements   (including  in  the  case  of  an
underwritten  offering, an underwriting  agreement with the Managing Underwriter
in form customary with respect to issuers of similar market  capitalization  and
reporting and financial histories) and take all such other actions in connection
therewith in order to expedite or facilitate the disposition of such Registrable
Securities included in such Registration  Statement, in each case, in connection
with  an  underwritten  offering,  as the  Managing  Underwriter  determines  is
reasonable and customary, and in connection therewith:

          (1)  make such  representations  and warranties to the selling Holders
               and each of the underwriters in such form, substance and scope as
               are  customarily  made by issuers to  underwriters  in  secondary
               underwritten   offerings  of  securities  listed  on  the  NASDAQ
               SmallCap Market or any other system of automated dissemination of
               quotation of securities prices;

          (2)  obtain  opinions  of counsel  to the  Company  addressed  to each
               selling  Holder  and to  each  of the  underwriters  and  updates
               thereof  (which   counsel  and  opinions  (in  form,   scope  and
               substance)  shall be reasonably  satisfactory to the underwriters
               and the selling  Holders and shall cover the matters  customarily
               covered in opinions requested in secondary underwritten offerings
               of securities  listed on the NASDAQ  SmallCap Market or any other
               system of automated  dissemination  of  quotation  of  securities
               prices and such other matters as may be  reasonably  requested by
               such Holders and underwriters);

          (3)  obtain  "cold  comfort"  letters  and  updates  thereof  from the
               independent certified public accountants of the Company addressed
               to each selling Holder and each of the underwriters, such letters
               to  be in  customary  form  and  covering  matters  of  the  type
               customarily  covered in "cold comfort" letters in connection with
               secondary  underwritten  offerings  of  securities  listed on the
               NASDAQ   SmallCap   Market  or  any  other  system  of  automated
               dissemination of quotation of securities prices;

                                       46
<PAGE>

          (4)  the  underwriting  agreement  shall contain  indemnification  and
               contribution  provisions  and  procedures no less  favorable than
               those set forth in Section  6.6 (and,  to the extent  applicable,
               Section 7.1) hereof with respect to all parties to be indemnified
               pursuant to Section 6.6 (and, to the extent  applicable,  Section
               7.1); and

          (5)  the Company shall deliver such documents and  certificates as may
               be reasonably  requested by the selling  Holders and the Managing
               Underwriter to evidence compliance with clause (1) above and with
               any customary conditions contained in the underwriting  agreement
               or other agreement  entered into by the Company in respect of the
               relevant offering;

     (o) provide a CUSIP number (if necessary) for the Registrable Securities no
later than the effective date of such registration statement;

     (p) in the case of any non-underwritten offering:

          (1)  obtain  opinions  of  counsel  to  the  Company  at the  time  of
               effectiveness  of  such  Registration   Statement  covering  such
               offering and updates thereof of customary frequency, addressed to
               each Holder  participating  in such offering and covering matters
               that are no more  extensive  in scope than  would be  customarily
               covered in opinions obtained in secondary  underwritten offerings
               by issuers with similar market  capitalization  and reporting and
               financial histories;

          (2)  obtain  "cold  comfort"  letters from the  independent  certified
               public accountants of the Company at the time of effectiveness of
               such  Registration   Statement  and,  upon  the  request  of  the
               Purchaser  (if  it is  participating  in  such  offering)  or the
               Holders of a majority of the Registrable  Securities (on a Common
               Stock equivalent basis) covered by such  Registration  Statement,
               updates thereof of customary frequency, in each case addressed to
               each Holder  participating  in such offering and covering matters
               that are no more  extensive  in scope than  would be  customarily
               covered  in  "cold  comfort"  letters  and  updates  obtained  in
               secondary  underwritten  offerings by issuers with similar market
               capitalization and reporting and financial histories; and

          (3)  deliver a certificate  of an executive  officer of the Company at
               the time of  effectiveness  of such  Registration  Statement and,
               upon the request of the Purchaser (if it is participating in such
               offering)  or  the  Holders  of a  majority  of  the  Registrable
               Securities (on a Common Stock  equivalent  basis) covered by such
               Registration  Statement,  updates thereof of customary frequency,

                                       47
<PAGE>

               such  certificates  to cover  matters no more  extensive in scope
               than those matters customarily covered in officer's  certificates
               delivered in connection  with  underwritten  offerings by issuers
               with similar  market  capitalization  and reporting and financial
               histories;

     (q) otherwise use its best efforts to comply with all applicable  rules and
regulations of the Commission relating to such registration and the distribution
of the securities  being offered and make generally  available to its securities
holders  earnings  statements  satisfying the provisions of Section 11(a) of the
Securities  Act, no later than 60 days after the end of any 12-month  period (or
120 days,  if such period is a fiscal year)  commencing at the end of any fiscal
quarter in which the  Registrable  Securities are sold to underwriters in a firm
commitment  or  best  efforts  underwritten   offering,   or,  if  not  sold  to
underwriters  in such  an  offering,  beginning  with  the  first  month  of the
Company's  first fiscal  quarter  commencing  after the  effective  date of such
Registration  Statement,  which earnings  statements  shall cover such 12- month
periods;

     (r)  cooperate  and  assist  in any  filings  required  to be made with the
National  Association of Securities Dealers,  Inc. and in the performance of any
customary due diligence investigation;

     (s) make  available,  upon  reasonable  notice and during  normal  business
hours,  for inspection by the Holders of the Registrable  Securities  covered by
such Registration  Statement,  any underwriter  participating in any disposition
pursuant  to  such   registration,   and  any  attorney,   accountant  or  other
representative retained by such sellers or underwriter,  all financial and other
records,  pertinent  corporate documents and properties of the Company and cause
the  Company's  officers,  directors  and  employees  to supply all  information
reasonably  requested by, and to cooperate fully with, any such  representative,
underwriter, attorney or accountant in connection with such registration;

     (t) cause the Registrable  Securities covered by the Registration Statement
to be  registered  with or  approved  by such  other  governmental  agencies  or
authorities  as may be  reasonably  necessary  to enable  the  seller or sellers
thereof or the  underwriters,  if any, to  consummate  the  disposition  of such
Registrable  Securities;  provided,  however,  that  the  Company  shall  not be
required  to  qualify  to do  business  in any  jurisdiction  where it would not
otherwise be required to qualify, but for this paragraph (t); and

     (u) use its best  efforts  to take all action  necessary  or  advisable  to
effect such registration in the manner contemplated by this Agreement.

                                       48
<PAGE>

     6.4 Material Development Election.

     (a) Subject to Section 6.4(b) below,  the Company shall be entitled,  for a
period  of time  not to  exceed  thirty  consecutive  (30)  days (a  "Suspension
Period"),  to  postpone  the  filing  of any  Registration  Statement  otherwise
required  to be filed by it  pursuant  to Section  6.1 and/or  request  that the
Holders  refrain  from  effecting  any public  sales or  distributions  of their
Registrable Securities if the Company's Board of Directors shall have reasonably
determined  in good  faith and in its  reasonable  business  judgment  that such
registration  would interfere in any material  respect with any financing (other
than an  underwritten  secondary  offering of any  securities  of the  Company),
acquisition,  corporate  reorganization  or  other  transaction  or  development
involving the Company or any  subsidiary  of the Company that in the  reasonable
good faith business  judgment of such board is a transaction or development that
is or would be material to the Company (a "Material Development Election").

     (b) The Board of  Directors  shall,  as promptly as  practicable,  give the
Holders written notice of any such Material Development  Election.  In the event
of a  determination  by the  Board of  Directors  to  postpone  the  filing of a
Registration  Statement required to be filed pursuant to Section 6.1 hereof, the
Company  shall  be  required  to file  such  Registration  Statement  as soon as
practicable after the Board of Directors of the Company shall determine,  in its
reasonable business judgment, that the filing of such Registration Statement and
the  offering   thereunder  will  not  interfere  with  the  aforesaid  material
transaction  or  development,  but in any  event no  later  than the end of such
Suspension  Period.  In  addition,  if the Board of Directors of the Company has
requested that the Holders refrain from making public sales or  distributions of
their  Registrable  Securities,  such board  shall,  as promptly as  practicable
following its  determination  that the Holders may recommence  such public sales
and distributions,  notify such Holders in writing of such determination (but in
any event no later  than the end of such  Suspension  Period).  In the event the
Company shall exercise a Material  Development  Election  during a period when a
Registration  Statement  filed pursuant to Section 6.1 hereof is effective,  the
time period  specified  in Section  6.1 hereof  during  which such  Registration
Statement  is required to be kept  effective  shall be extended by the number of
days during  which the  Holders are  prohibited  by the  Company  from  publicly
selling or distributing their securities.

     (c) The Purchaser  agrees that, upon receipt of any notice from the Company
of a Suspension Period, the Purchaser shall forthwith discontinue disposition of
shares of Common Stock  covered by such  Registration  Statement  or  Prospectus
until the  Purchaser  (i) is notified in writing by the Company  that the use of
the  applicable  prospectus  may be  resumed,  (ii)  has  received  copies  of a
supplemental or amended prospectus, if applicable, and (iii) has received copies
of any additional or supplemental filings which are incorporated or deemed to be
incorporated by reference into such prospectus.

                                       49
<PAGE>

     (d) Notwithstanding  the foregoing,  no more than one Suspension Period may
occur during any twelve-month period, unless approved by a  majority-in-interest
of the then  outstanding  Holders (on a common  equivalent  basis).  The Company
shall use its best  efforts to limit the duration  and  aggregate  number of any
Suspension Periods.

     6.5  Registration   Expenses.   All  expenses  incident  to  the  Company's
performance  of or compliance  with Section 6 of this  Agreement,  including all
registration and filing fees, fees and expenses of compliance with securities or
blue  sky laws  (including  reasonable  fees and  disbursements  of  counsel  in
connection with blue sky  qualifications  or registrations  (or the obtaining of
exemptions  therefrom)  of  the  Registrable   Securities),   printing  expenses
(including expenses of printing Prospectuses),  messenger and delivery expenses,
internal  expenses  (including  all  salaries  and  expenses of its officers and
employees performing legal or accounting duties),  fees and disbursements of its
counsel and its independent certified public accountants (including the expenses
of any  special  audit or  "comfort"  letters  required  by or  incident to such
performance or compliance),  securities acts liability insurance (if the Company
elects to obtain such  insurance),  fees and  expenses  of any  special  experts
retained by the Company in connection with any registration hereunder,  fees and
expenses of other  Persons  retained by the Company,  (all such  expenses  being
referred to as "Registration Expenses"),  shall be borne by the Company, whether
or not any registration statement becomes effective;  provided that Registration
Expenses  shall not  include any  underwriting  discounts,  commissions  or fees
attributable to the sale of the Registrable Securities.

     6.6 Registration Rights Indemnification.

     (a) Indemnification by the Company.

          (i) The  Company  will  indemnify  and hold  harmless,  to the fullest
     extent permitted by law, but without  duplication,  each Holder and each of
     their respective Affiliates,  including any managed or advised accounts and
     any investment advisor or agent therefor, officers,  directors,  employees,
     partners,  representatives  and agents,  and each Person who controls  such
     Holder or such other  Persons  (within the meaning of the  Securities  Act)
     (for purposes of this Section 6.6(a), a "Holder Indemnified Person"),  from
     and against, and will reimburse such Holder Indemnified Person with respect
     to, any and all claims, actions,  demands,  losses,  damages,  liabilities,
     costs  and  expenses  (including  reasonable  costs  of  investigation  and
     reasonable legal fees and expenses) ("Indemnifiable Costs and Expenses") to
     which  such  Holder   Indemnified  Person  may  become  subject  under  the

                                       50
<PAGE>

     Securities  Act  or  otherwise  and  arise  out of or are  based  upon  (i)
     violation of securities laws or (ii) any untrue statement or alleged untrue
     statement of any  material  fact  contained  in, or any omission or alleged
     omission  to state  therein a material  fact  required to be stated in, any
     such  Registration  Statement,  any  Prospectus  contained  therein  or any
     amendment  or  supplement  thereto  or  necessary  to make  the  statements
     contained  therein,  in light of the  circumstances  under  which they were
     made,  not  misleading;  provided,  however,  that the Company  will not be
     liable in any such case to the extent that any costs or expense  covered by
     the preceding  clauses (i) or (ii) arises out of or results from any untrue
     or  alleged  untrue  statement  of any  material  fact  contained  in  such
     Registration  Statement,  any Prospectus contained therein or any amendment
     or supplement  thereto or any omission or alleged omission to state therein
     a material  fact  required to be stated  therein or  necessary  to make the
     statements  therein, in light of the circumstances in which they were made,
     not misleading,  in each case to the extent,  but only to the extent,  that
     such untrue  statement or alleged  untrue  statement or omission or alleged
     omission was so made solely in reliance upon and in substantial  conformity
     with  written  information  furnished  by such  Holder  Indemnified  Person
     specifically for use in the preparation of any such Registration Statement,
     Prospectus or amendment or supplement thereto.

          (ii) The Company  further  agrees  promptly upon demand by each Holder
     Indemnified  Person to  reimburse  each Holder  Indemnified  Person for any
     Holder  Indemnifiable  Costs  and  Expenses  as they  are  incurred  by it;
     provided  that  if the  Company  reimburses  a  Holder  Indemnified  Person
     hereunder for any expenses  incurred in connection  with a lawsuit,  claim,
     inquiry or other proceeding or investigation for which  indemnification  is
     sought,  such Holder Indemnified Person agrees to refund such reimbursement
     of Holder  Indemnifiable  Costs and  Expenses  to the  extent it is finally
     judicially  determined  that the  indemnity  provided  for in this  Section
     6.6(a) is not applicable  to, or the Company is not otherwise  obligated to
     pay, such Holder  Indemnified Person in accordance with the terms hereof or
     otherwise. The indemnity, contribution and expense reimbursement obligation
     of the  Company  under this  Section  6.6(a)  shall be in  addition  to any
     liability it may otherwise have.

          (iii) The  obligations  of the  Company  hereunder  shall  survive the
     Closing and the termination of any  Registration  Statement under which any
     Registrable  Securities  were  registered the termination of this Agreement
     and shall not be extinguished  with respect to any Person because any other
     Person is not entitled to indemnity or contribution hereunder.

     (b) Indemnification by Holders of Registrable Securities. Each Holder whose
Registrable  Securities are included in a Registration Statement pursuant to the
provisions of this Section 6 will indemnify and hold harmless the Company,  each
of its subsidiaries and Affiliates,  and their respective  officers,  directors,
employees, partners, stockholders,  agents, representatives,  and any Person who
controls  the  Company or any of its  subsidiaries  or  Affiliates  (within  the
meaning of the Securities Act) (each, a "Company Indemnified Person"),  from and
against, and will reimburse such Company Indemnified Person with respect to, any
and all  Indemnifiable  Costs and  Expenses to which the Company or such Company
Indemnified  Person may become subject under the Securities Act or otherwise and
which arise out of or result from any untrue or alleged untrue  statement of any
material fact contained in such Registration Statement, any Prospectus contained
therein or any amendment or supplement  thereto,  or any omission or the alleged
omission to state  therein any material  fact  required to be stated  therein or
necessary to make the statements therein, in light of the circumstances in which
they were made,  not  misleading,  in each case to the  extent,  but only to the
extent,  that such untrue  statement or omission or alleged untrue  statement or

                                       51
<PAGE>

alleged  omission  was so  made  solely  in  reliance  upon  and in  substantial
conformity with written  information  furnished by such Holder  specifically for
use in the preparation  thereof;  provided,  however,  that the liability of any
Holder  pursuant  to this  subsection  (b) shall be  limited to an amount not to
exceed the net  proceeds  received by such Holder  pursuant to the  Registration
Statement which gives rise to such obligation to indemnify.

          (c) Conduct of Indemnification Proceedings; Contribution.

               (i) Each  indemnifying  party and  indemnified  party  under this
          Section  6.6 shall  comply  with the  procedures  set forth in Section
          7.1(c) with respect to any indemnity  sought  pursuant to this Section
          6.6.

               (ii) Each  indemnifying  party and  indemnified  party under this
          Section  6.6 also  agrees to comply  with the  provisions  in  Section
          7.1(d) as they relate to contribution.

     6.7  Reporting  Requirements  Under the Exchange Act. The Company shall use
its best  efforts to make  publicly  available  and  available  to the  Holders,
pursuant to Rule 144, such  information as is necessary to enable the Holders to
make sales of  Registrable  Securities  pursuant to that Rule. The Company shall
use its best  efforts to file  timely  with the  Commission  all  documents  and
reports  required of the  Company  under the  Exchange  Act.  The Company  shall
furnish to any Holder,  upon request,  a written statement executed on behalf of
the Company as to compliance with the current public information requirements of
Rule 144. In addition,  the Company will provide to any Holder of a  Registrable
Security,  or any potential purchaser of a Registrable  Security,  upon any such
Person's  reasonable  request,  the information  required by paragraph (d)(4) of
Rule 144A.

     6.8  Stockholder  Information.  The  Company  may  require  each  seller of
Registrable Securities as to which any registration is being effected to furnish
to the Company such  information  regarding such seller and the  distribution of
such securities as the Company or the Managing Underwriter may from time to time
reasonably request in writing.

     6.9 Participation in Underwritten Registrations.

     (a)  If  any  of  the  Registrable  Securities  covered  by a  Registration
Statement  required to be filed pursuant to Section 6.1 hereunder are to be sold
in an underwritten  offering,  the Company shall select the Managing Underwriter
that  will   administer   the  offering,   provided  the  Purchaser  (if  it  is
participating in such offering) or, if such Purchaser is not so participating in
such  offering,  the Holders of a majority of the  Registrable  Securities (on a
Common Stock equivalent basis) included in such offering shall have the right to
consent  to such  selection,  provided  further  that  such  consent  may not be
unreasonably withheld.

                                       52
<PAGE>

     (b) No Person may participate in any underwritten offering hereunder unless
such Person (i) agrees to sell such Person's Registrable Securities on the basis
provided in any  underwriting  arrangements  approved  by the  Persons  entitled
hereunder  to approve  such  arrangements  and (ii)  completes  and executes all
questionnaires,  powers of attorney,  indemnities,  underwriting  agreements and
other documents  required under the underwriting or other agreement  between the
Company  and the  Managing  Underwriter.  Nothing in this  Section  6.9 shall be
construed  to  create  any  additional  rights  regarding  the  registration  of
Registrable  Securities  in any  Person  otherwise  than as set forth  herein.

     7. Miscellaneous.
        -------------

     7.1 Indemnification.  In addition to any indemnification provided elsewhere
in this Agreement, the parties hereto agree as follows:

     (a) Company Indemnification.

     (i) The Company will  indemnify and hold  harmless,  to the fullest  extent
permitted  by law,  but  without  duplication,  the  Purchaser  and  each of its
Affiliates  including any managed or advised accounts and any investment advisor
or  agent  therefor,  and  their  respective,  officers,  directors,  employees,
partners, representatives,  agents, and each Person who controls the Company and
each of its Affiliates  within the meaning of the  Securities  Act) (each of the
foregoing Persons being a "Purchaser Indemnified Person"),  from and against any
and all  Indemnifiable  Costs and Expenses to which such  Purchaser  Indemnified
Person may become subject under the  Securities Act or otherwise  arising out of
or  based  in  any  manner   upon  any   breach  by  the   Company  of  any  its
representations,  warranties or covenants contained in the Transaction Documents
or in any agreement,  instrument or document  delivered by the Company hereunder
or thereunder.

     (ii) The Company  further  agrees  promptly  upon demand by each  Purchaser
Indemnified  Person to  reimburse  each  Purchaser  Indemnified  Person  for any
Purchaser  Indemnifiable Costs and Expenses as they are incurred by it; provided
that if the Company reimburses a Purchaser  Indemnified Person hereunder for any
Indemnifiable  Costs and Expenses incurred in connection with a lawsuit,  claim,
inquiry  or other  proceeding  or  investigation  for which  indemnification  is
sought, such Purchaser Indemnified Person agrees to refund such reimbursement of
Indemnifiable  Costs  and  Expenses  to  the  extent  it is  finally  judicially
determined  that  the  indemnity  provided  for in this  Section  7.1(a)  is not
applicable to such  Purchaser  Indemnified  Person in accordance  with the terms
hereof or otherwise or the Company is not otherwise  obligated to indemnify such
Purchaser   Indemnified   Person.   The  indemnity,   contribution  and  expense
reimbursement  obligation  of the  Company  under this  Section  7.1 shall be in
addition to any liability it may otherwise have.

                                       53
<PAGE>

          (iii) The  obligations  of the  Company  hereunder  shall  survive the
     Closing  and  any  repurchase,  conversion,  exchange  or  transfer  of the
     Preferred  Stock and the  termination  of this  Agreement  and shall not be
     extinguished  with  respect to any Person  because any other  Person is not
     entitled to indemnity or contribution hereunder.

     (b) Purchaser Indemnification.  The Purchaser agrees and covenants to agree
and covenant to and to hold  harmless  and  indemnify  each Company  Indemnified
Person,  from and against any and all Indemnifiable  Costs and Expenses to which
such Company  Indemnified  Person may become subject under the Securities Act or
otherwise  which  arises out of or is based in any manner upon any breach by the
Purchaser of any its  representations,  warranties or covenants contained in the
Transaction  Document or in any agreement,  instrument or document  delivered by
the Purchaser hereunder or thereunder.

     (c) Conduct of  Indemnification  Proceedings.  Promptly  after receipt by a
party  indemnified  pursuant to the  provisions  of paragraph (a) or (b) of this
Section 7.1 or paragraph (a) or (b) of Section 6.6 of notice of the commencement
of  any  action  involving  the  subject  matter  of  the  foregoing   indemnity
provisions,  such  indemnified  party  will,  if a claim  thereof  is to be made
against the  indemnifying  party  pursuant to the provisions of paragraph (a) or
(b) of this  Section  7.1 or  paragraph  (a) or (b) of Section  6.6,  notify the
indemnifying  party of the commencement  thereof;  but the omission so to notify
the indemnifying  party will not relieve it from any liability which it may have
to an  indemnified  party  otherwise  than  under  paragraph  (a) or (b) of this
Section 7.1 or  paragraph  (a) or (b) of Section  6.6, and shall not relieve the
indemnifying  party from liability  under this Section 7.1 or Section 6.6 unless
such indemnifying party is materially  prejudiced by such omission. In case such
action is brought against any indemnified party and it notifies the indemnifying
party of the commencement  thereof,  the indemnifying party shall have the right
to participate  in, and, to the extent that it may wish,  jointly with any other
indemnifying  party  similarly  notified,  to assume the defense  thereof,  with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying  party to such  indemnified  party of its election so to assume
the  defense  thereof,  the  indemnifying  party  will  not be  liable  to  such
indemnified  party  pursuant to the  provisions of such  paragraph (a) or (b) of
this Section 7.1 or  paragraph  (a) or (b) of Section 6.6 for any legal or other
expense  subsequently  incurred by such indemnified party in connection with the
defense thereof other than reasonable  costs of  investigation.  No indemnifying
party shall be liable to an  indemnified  party for any settlement of any action
or claim without the consent of the  indemnifying  party. No indemnifying  party
will  consent to entry of any judgment or enter into any  settlement  which does
not  include as an  unconditional  term  thereof  the giving by the  claimant or
plaintiff to such  indemnified  party of a release from all liability in respect
to such claim or litigation and no settlement can have non-monetary remedies.

     (d) Contribution.  If the indemnification provided for in subsection (a) or
(b) of this Section 7.1 or in subsection  (a) or (b) of Section 6.6 is held by a
court of competent  jurisdiction  to be unavailable to a party to be indemnified
with respect to any  Indemnifiable  Costs and Expenses,  then each  indemnifying

                                       54
<PAGE>

party under any such subsection,  in lieu of indemnifying such indemnified party
thereunder,  hereby  agrees to  contribute to the amount paid or payable by such
indemnified  party as a result  of  Indemnifiable  Costs and  Expenses,  in such
proportion as is appropriate  to reflect the relative fault of the  indemnifying
party on the one hand and of the  indemnified  party on the other in  connection
with the statements or omissions,  acts,  facts matters or  circumstances  which
resulted in such Indemnifiable Costs and Expenses, as well as any other relevant
equitable  considerations.  To the extent applicable to Section 6.6 hereof,  the
relative fault of the indemnifying  party and of the indemnified  party shall be
determined by reference  to, among other  things,  whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information  supplied by the indemnifying party or by
the indemnified  party and the parties'  relative intent,  knowledge,  access to
information and opportunity to correct or prevent such statement or omission. No
Person  guilty of  fraudulent  misrepresentation  (within the meaning of Section
11(f) of the Securities  Act) shall be entitled to  contribution  hereunder from
any Person who was not guilty of such fraudulent misrepresentation.

     7.2 Entire Agreement; Survival of Provisions. The Transaction Documents and
the SEC Filings referenced herein and therein constitute the entire agreement of
the parties with respect to the transactions  contemplated  hereby and supersede
all prior agreements and understandings with respect thereto, whether written or
oral. All of the covenants of the parties made herein shall remain operative and
in full  force and effect  pursuant  to their  respective  terms  regardless  of
acceptance  of  the  Purchased   Preferred  Stock  and  payment  therefor.   The
representations  and warranties set forth herein shall survive the execution and
delivery of this Agreement, the issuance of the Preferred Stock and the issuance
of the Common Stock upon  conversion of the  Preferred  Stock in each case until
the second anniversary of the date of Closing (the "Expiration Date"), and shall
in no way be affected by any investigation of the subject matter thereof made by
or on behalf of the  Purchaser or the  Company.  Notwithstanding  the  preceding
sentence, any representation or warranty in respect of which an indemnity may be
sought  hereof  shall  survive  the time at which it would  otherwise  terminate
pursuant to the preceding sentence,  if a claim for  indemnification  shall have
been given to the party  against whom such  indemnity may be sought prior to the
Expiration Date. The representations,  warranties, agreements and covenants made
in the  Transaction  Documents  shall be deemed to have been  relied upon by the
parties hereto.

     7.3 No Waiver;  Modifications in Writing. No failure or delay by a party in
exercising  any  right,  power or remedy  hereunder  shall  operate  as a waiver
thereof,  nor shall any single or partial  exercise of any such right,  power or
remedy  preclude  any other or further  exercise  thereof or the exercise of any
other right, power or remedy. Except as otherwise expressly provided herein with
respect to any right of  indemnification,  the remedies  provided for herein are
cumulative  and are not  exclusive of any remedies  that may be available to any
party at law or in equity or otherwise. No waiver of or consent to any departure

                                       55
<PAGE>

by a party from any provision of this Agreement shall be effective unless signed
in writing  by the  parties  entitled  to the  benefit  thereof.  No  amendment,
modification  or  termination  of any  provision  of  this  Agreement  shall  be
effective unless signed in writing by all parties. Any amendment,  supplement or
modification  of or to any  provision  of  this  Agreement,  any  waiver  of any
provision of this Agreement,  and any consent to any departure from the terms of
any  provision  of this  Agreement,  shall  be  effective  only in the  specific
instance and for the specific purpose for which made or given.

     7.4 Notices.  All notices,  demands and other  communications  provided for
hereunder  shall be in writing,  shall be given by registered or certified mail,
return  receipt  requested,  on  the  date  sent  by  telecopy  with  electronic
confirmation of such transmission,  the business day next following deposit with
a courier  service for  overnight  delivery  with written  confirmation  of such
delivery or upon personal delivery, addressed to the parties, as follows:

        If to the Company, to:

        Direct Insite Corp.
        80 Orville Drive
        Bohemia, New York  11716
        Attention:  Chief Financial Officer
        Telecopy:  (631) 563-8085

        with a copy to:

        David H. Lieberman, Esq.
        Beckman, Lieberman & Barandes LLP
        100 Jericho Quadrangle, Suite 225
        Jericho, NY  11753
        Telecopy:  (516) 827-0621

        If to the Purchaser, to:

        Metropolitan Venture Partners II, L.P.
        257 Park Avenue South, 15th Floor
        New York, NY 10010
        Telecopy:   (212) 844-3699
        Attention: Peter B. Yunich, Managing Partner

        with copies to:

        Kramer, Levin, Naftalis & Frankel LLP
        919 Third Avenue
        New York, New York  10022

                                       56
<PAGE>

        Attention:  Scott S. Rosenblum, Esq.
        Telecopy:  (212) 715-8000

or to such other  address as any party shall  designate in writing in compliance
with the provisions of this Section 7.4.

     7.5 Execution in Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto on separate  counterparts,  each
of which counterparts,  when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
and the same Agreement.

     7.6 Binding Effect;  Assignment.  The rights and obligations of the parties
under this  Agreement may not be assigned or otherwise  transferred to any other
Person,  without the prior written  consent of the other party hereto;  provided
that the Purchaser  may assign or otherwise  transfer the shares of Common Stock
issuable upon  conversion  of the Preferred  Stock and any or all of such rights
(except  the  Preferred  Stock)  and/or  obligations  hereunder  to  any  of its
Affiliates without obtaining any such consent,  but only if such Affiliate:  (A)
agrees to be bound by the terms of this  Agreement;  (B) is, at the time of such
transfer,  an  Accredited  Investor;  (C)  provides  the  Company  such  written
certification  as the  Company  may  reasonably  require as to the  transferee's
status as an Accredited Investor and agreement to be so bound as the Company may
reasonably  request;  and (D)  such  transfer  to any such  transferee  does not
violate federal or state securities laws.  Except as expressly  provided in this
Agreement,  this  Agreement  shall not be construed so as to confer any right or
benefit  upon any Person  other than the  parties  to this  Agreement  and their
respective  successors and permitted  assigns.  This Agreement  shall be binding
upon and shall  inure to the benefit of the  Company,  the  Purchaser  and their
respective permitted successors and assigns.

     7.7  Governing  Law. This  Agreement  shall be deemed to be a contract made
under and shall be governed by and  construed  in  accordance  with the internal
laws of the State of New York without reference to the principles of conflict of
laws, provided, however, that the due authorization, issuance and enforceability
of  the  terms  of,  and  the  designation,   rights,  preferences,  rights  and
privileges, of the Preferred Stock or the due authorization, issuance and of the
Common  Stock,  the conduct of, or any  standard of conduct  applicable  to, the
Board of Directors of the Company, or any requirement of stockholder approval or
the validity or invalidity of any action by the Board of Directors or compliance
by the Company or any subsidiary with its certificate of incorporation or bylaws
or any of their  corporate  authority,  shall be governed  by, and  construed in
accordance  with, the laws of the State of Delaware without giving effect to the
principles thereof relating to the conflict of laws.

     7.8 Consent to  Jurisdiction  and Service of Process.  Any suit,  action or
proceeding  arising  out of or  relating  to the  Transaction  Documents  or the
transactions  contemplated  hereby or thereby may be  instituted  in any Federal

                                       57
<PAGE>

court  situated  in the State of New York or any state court of the State of New
York, in each case, in the Borough of Manhattan,  City of New York, or Nassau or
Suffolk County in the State of New York, and each party agrees not to assert, by
way  of  motion,  as a  defense  or  otherwise,  in any  such  suit,  action  or
proceeding,  any claim that it is not subject  personally to the jurisdiction of
such court,  that the suit,  action or proceeding is brought in an  inconvenient
forum,  that the venue of the suit, action or proceeding is improper or that the
Transaction  Documents  or the  subject  matter  hereof  or  thereof  may not be
enforced  in or by such court.  Each party  further  irrevocably  submits to the
jurisdiction of such court in any such suit,  action or proceeding.  Any and all
service of process and any other notice in any such suit,  action or  proceeding
shall be effective  against any party if given  personally  or by  registered or
certified  mail,  return receipt  requested if sent to such party at the address
for such party set forth in Section  7.4  hereof,  or by any other means of mail
that requires a signed receipt,  postage fully prepaid,  mailed to such party as
herein provided. Nothing herein contained shall be deemed to affect the right of
any party to serve process in any manner  permitted by law or to commence  legal
proceedings  or  otherwise   proceed  against  any  other  party  in  any  other
jurisdiction.

     7.9  Further  Assurances.  Each of the  parties  hereto  shall  execute and
deliver such documents, instruments and agreements and take such further actions
as may be  reasonably  required or desirable to carry out the  provisions of the
Transaction Documents and the transactions  contemplated hereby and thereby, and
each of the parties hereto shall  cooperate  with each other in connection  with
the foregoing.

     7.11 Severability of Provisions. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereto waive any
provision of law that renders any such provision  prohibited or unenforceable in
any respect.

     7.12  Headings.  The  Article,  Section  and  subsection  headings  used or
contained in this Agreement are for  convenience of reference only and shall not
affect the construction of this Agreement.

     7.13 Costs, Expenses and Taxes.

     (a) The Company  shall pay any and all stamp,  transfer  and other  similar
Taxes payable or  determined to be payable in connection  with the execution and
delivery of this Agreement or the original  issuance of the Purchased  Preferred
Stock and shall save and hold the  Purchaser  harmless  from and against any and
all  liabilities  with  respect to or  resulting  from any delay in  paying,  or
omission to pay, such Taxes.

                                       58
<PAGE>

     (b) Each party shall bear its own fees,  costs and  expenses in  connection
with the  execution,  delivery and  performance  of the  Transaction  Documents,
except as set forth in this Agreement.

     7.14 Waiver of Jury Trial. The parties hereto hereby  irrevocably waive all
right to a trial by jury in any action,  proceeding or counterclaim  arising out
of  or  relating  to  this  Agreement  or  the  Stockholders  Agreement  or  the
transactions contemplated hereby or thereby.

     7.15  Publicity.  The parties agree that no public release or  announcement
concerning the Transaction Documents or the transactions  contemplated hereby or
thereby shall be made without  advance review and approval by each party hereto,
except as otherwise  required by  applicable  law, and which review and approval
shall not be unreasonably withheld or delayed.

                             SIGNATURE PAGE FOLLOWS

                                       59
<PAGE>

                           COUNTERPART SIGNATURE PAGE

     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.

                                        DIRECT INSITE CORP.

                                        By:     /S/ George Aronson
                                                -------------------
                                        Name:   George Aronson

                                        Title:  Secretary/CFO

                                       60
<PAGE>

                           COUNTERPART SIGNATURE PAGE

     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.

                                METROPOLITAN VENTURE PARTNERS II, L.P.

                                By: METROPOLITAN VENTURE PARTNERS
                                (Advisors), L.P., as general partner

                                By: METROPOLITAN VENTURE PARTNERS
                                CORP., as general partner

                                By:   /s/ Michael Levin
                                      -----------------
                                Name: Michael Levin
                                Title: Vice President of Finance

<PAGE>

                              DISCLOSURE SCHEDULE<PAGE>

                                                                    EXHIBIT 10.1

                                                                         RSA____

                           RESTRICTED STOCK AGREEMENT

     AGREEMENT effective as of the ___ day of January, 2003 ("Issuance Date"),
between CROWN CASTLE INTERNATIONAL CORP. ("Company"), a Delaware corporation,
and _______________________ ("Holder").

     Holder has been serving as a key employee of the Company and/or one of its
Affiliates. In recognition of past service and in order to encourage Holder to
remain with the Company and its Affiliates (the "Group") and devote Holder's
best efforts to their affairs, thereby advancing the interests of the Company
and its shareholders, the Company and Holder agree as follows:

     1. Issuance of Stock. Upon the execution of this Agreement and for
consideration from Holder to the Company in the form of past services to the
Group, the fair market value of which is at least equal to $.01 per share times
the number of the shares issued hereunder, the Company shall issue to Holder
____________________ shares of the $.01 par value Common Stock of the Company
("Stock"). The shares of Stock issued to Holder under this Agreement ("Holder's
Shares") shall be subject to all of the terms, conditions and restrictions set
forth in this Agreement and in the Crown Castle International Corp. 2001 Stock
Incentive Plan (the "2001 Plan"), which is incorporated herein by reference as a
part of this Agreement. "Affiliate" and "Committee" shall have the meaning
contained in the 2001 Plan.

     2. Forfeiture Restrictions. The Holder's Shares shall not be sold,
assigned, pledged, or otherwise transferred except as provided herein, and
Holder shall be obligated to forfeit and surrender, without further
consideration from the Company, such shares (to the extent then subject to the
Forfeiture Restrictions) to the Company in accordance with this Agreement. The
prohibition against transfer and the obligation to forfeit and surrender shares
to the Company are herein collectively referred to as the "Forfeiture
Restrictions," and the Holder's Shares which are subject to the Forfeiture
Restrictions are herein sometimes referred to as "Restricted Shares." The
Forfeiture Restrictions shall be binding upon and enforceable against any
transferee of Restricted Shares.

     3. Performance Measures. (a) Except as otherwise provided in Section 4
hereof, the lapsing of the Forfeiture Restrictions on the Restricted Shares
hereunder shall be contingent upon meeting the applicable time measure ("Time
Measure") or stock price target measure ("Target Measure") described below while
Holder is an employee or a member of the board of directors of the Company or
one of its Affiliates. The applicable measure ("Measure") is either the Time
Measure or Target Measure determined by the Measure that results in the largest
aggregate number of Holder's Shares no longer being Restricted Shares.

<PAGE>

(b) The Time Measure is the date indicated below with the percentage beside such
date being the percentage of the Holder's Shares no longer subject to the
Forfeiture Restrictions.

<TABLE>
<CAPTION>
Time Measure Date                   Incremental Percentage    Aggregate Percentage
-----------------                   ----------------------    --------------------
<S>                                         <C>                       <C>
November 14, 2003                           10%                       10%
November 14, 2004                           15%                       25%
November 14, 2005                           20%                       45%
November 14, 2006                           25%                       70%
November 14, 2007                           30%                       100%
</TABLE>

(c) The Target Measure is the date that the price of a share of Stock closes at
a price equal to or above the price indicated below for twenty (20) consecutive
trade days after the Issuance Date with the percentage beside the stock price
per share being the percentage of the Holder's Shares no longer subject to
Forfeiture Restrictions.

<TABLE>
<CAPTION>
Stock Price Per Share         Incremental Percentage    Aggregate Percentage
---------------------         ----------------------    --------------------
<S>                                 <C>                       <C>
     $ 5.54                         33.33%                     33.33%
     $ 8.30                         33.33%                     66.66%
     $12.45                         33.34%                    100.00%
</TABLE>

The closing price of a share of Stock shall be the closing quotation on the New
York Stock Exchange for the applicable date.

(d) As soon as administratively feasible after a Measure is satisfied that
causes the lapse of Forfeiture Restrictions as to Restricted Shares, the
Committee shall certify in writing that the applicable Measure has been
satisfied and the Forfeiture Restrictions shall lapse as to the Restricted
Shares as described above. The period from the effective date of this Agreement
to the date of the Committee's determination as to whether or not an applicable
Measure was satisfied is sometimes hereinafter called the "Restricted Period".

     4. Termination of Employment of Service. If Holder terminates employment or
service with the Group prior to the end of the Performance Period, then this
Restricted Stock Award shall be forfeited and the remaining Restricted Shares
shall be surrendered to the Company; provided, however, that the Committee may
(subject to restrictions in the 2001 Plan), in its sole discretion, cause the
Forfeiture Restrictions to lapse as to all or a part of the Restricted Shares.

     5. Shares Received in Reorganization or Stock Split. The transfer
restrictions of Section 2 shall not apply to the exchange of Restricted Shares
pursuant to a plan of reorganization of the Company, but the stock or securities
received in exchange therefor, and any stock received as a result of a stock
split or stock dividend with respect to Restricted Shares, shall also become
Restricted Shares subject to the Forfeiture Restrictions.

     6. Endorsement on Certificate. Each certificate representing Restricted
Shares, if the shares of Restricted Stock are represented by a stock certificate
prior lapse of applicable Forfeiture Restrictions, shall be conspicuously
endorsed as follows:

                                       2

<PAGE>

          "The shares of Stock evidenced by this certificate have been issued
     pursuant to the terms of the Crown Castle International Corp. ("Company")
     2001 Stock Incentive Plan ("Plan"). The shares of Stock evidenced by this
     certificate are subject to forfeiture and may not be sold, assigned,
     pledged, or transferred except as provided by the terms and conditions of a
     Restricted Stock Agreement ("Agreement") dated January __, 2003, between
     the Company and the registered holder of the shares. A copy of the Plan and
     Agreement are available from the Company.

     7. Community Interest of Spouse. The community interest, if any, of any
spouse of Holder in any of the Restricted Shares shall be subject to all the
terms, conditions and restrictions of this Agreement, and shall be forfeited and
surrendered to the Company upon the occurrence of any of the events requiring
Holder's interest in such Restricted Shares to be so forfeited and surrendered
pursuant to this Agreement.

     8. Withholding of Tax. To the extent the issuance of Stock or the lapse of
Forfeiture Restrictions results in the receipt of compensation by Holder for tax
purposes, Holder shall deliver to the Company such amount of money or shares of
Stock as the Company may require to meet its obligation under applicable tax
laws or regulations. The Company has the right to withhold Holder's Shares until
Holder has made arrangements approved by the Company to satisfy all applicable
minimum tax withholding requirements of the Company.

     9. Tax Election. If Holder makes the election authorized by Section 83(b)
of the Code, Holder shall submit to the Company a copy of the statement filed by
Holder to make such election.

     10. Stock Power and Retention of Certificates. The Company may require
Holder to execute and deliver to the Company a stock power in blank with respect
to the Restricted Shares and may, in its sole discretion, determine to retain
possession of the certificates for shares with respect to which the Forfeiture
Restrictions have not lapsed. The Company shall have the right, in its sole
discretion, to exercise such stock power in the event that the Company becomes
entitled to the shares pursuant to the provisions of Section 4 hereof.
Notwithstanding retention of such certificates by the Company, Holder shall,
subject to the provisions of Sections 3 and 4 hereof, have all rights (including
dividend and voting rights) with respect to the restricted shares. Upon lapse of
the Forfeiture Restrictions as to all or a part of the Restricted Shares, the
Company shall deliver to Holder a new certificate representing such Holder's
Stock without any restrictive endorsement.

     11. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
Holder.

     12. Contract Terms. Notwithstanding the provisions of this Agreement, if
the Holder has entered into a separate contract or agreement with the Company
which affects the Restricted Shares issued hereunder, the provisions of such
separate contract or agreement shall control over any inconsistent provisions of
this Agreement.

     13. Modification. Any modification of this Agreement will be effective only
if it is in writing and signed by each party whose rights hereunder are affected
thereby, except to the

                                       3

<PAGE>

extent that such modification occurs pursuant to Section 11 of the 2001 Plan or
as a result of an amendment of the 2001 Plan made in accordance with Section 12
of the 2001 Plan.

     14. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Texas, without regard to conflicts of
laws principles thereof.

     IN WITNESS WHEREOF, the Company has executed this Agreement by its duly
authorized officers, and Holder and his or her spouse have executed this
Agreement, on the dates specified below.

                                      CROWN CASTLE INTERNATIONAL CORP.

                                      By:
                                         ----------------------------------
                                      Name:
                                      Title:
                                      Date: January __, 2003

                                      --------------------------------------
                                                                      Holder

                                      Date:  January ___, 2003

                                       4

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