Document:

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                                                                     Exhibit 4.1

                          SECURITIES PURCHASE AGREEMENT

         SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of February
23, 2000, by and among Log On America, Inc., a Delaware corporation, with
headquarters located at Three Regency Plaza, Providence, Rhode Island 02903 (the
"Company"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "Buyers").

         WHEREAS:

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

         B. The Company has authorized the following new series of its preferred
stock, par value $0.01 per share: the Company's Series A Convertible Preferred
Stock (the "Preferred Stock"), which shall be convertible into shares of the
Company's common stock, par value $0.01 per share (the "Common Stock") (as
converted, the "Conversion Shares"), in accordance with the terms of the
Company's Certificate of Designations, Preferences and Rights of the Preferred
Stock, substantially in the form attached hereto as Exhibit A (the "Certificate
of Designations");

         C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, initially an aggregate of up to 15,000 shares of the Preferred
Stock (the "Initial Preferred Shares") in the respective amounts set forth
opposite each Buyer's name on the Schedule of Buyers and warrants, substantially
in the form attached hereto as Exhibit B (the "Initial Warrants"), to acquire a
number of shares of Common Stock for each Initial Preferred Share purchased
equal to 39.6136 (as exercised, collectively, the "Initial Warrant Shares"), as
set forth opposite each Buyers name on the Schedule of Buyers;

         D. Subject to the terms and conditions set forth in this Agreement, the
Buyers will be required to buy and the Company will be required to sell an
aggregate of 10,000 shares of Preferred Stock (pro rata based on the number of
Initial Preferred Shares each Buyer purchased in relation to the total number of
Initial Preferred Shares purchased) (the "Mandatory Preferred Shares") and
warrants, substantially in the form attached hereto as Exhibit B (the "Mandatory
Warrants") to acquire a number of shares of Common Stock for each Mandatory
Preferred Share purchased equal to the product of (i) the quotient of (a) $1,000
divided by (b) the Closing Price for the Mandatory Preferred Shares multiplied
by (ii) 0.65, (as exercised, collectively, the "Mandatory Warrant Shares");

         E. Subject to the terms and conditions set forth in this Agreement,
each Buyer may have the right to purchase and the Company may be required to
sell up to an aggregate of 5,000 shares of Preferred Stock (pro rata based on
the number of Initial Preferred Shares each Buyer purchased in relation to the
total number of Initial Preferred Shares) (collectively, the "Additional
Preferred

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Shares") and warrants, substantially in the form attached hereto as Exhibit B
(the "Additional Warrants") to acquire a number of shares of Common Stock for
each Additional Preferred Share purchased equal to the product of (i) the
quotient of (a) $1,000 divided by (b) the Closing Price for the Additional
Preferred Shares multiplied by (ii) 0.65 (as exercised, collectively, the
"Additional Warrant Shares");

         F. Subject to the terms and conditions set forth in this Agreement,
each Buyer may have the right to purchase and the Company may be required to
sell up to an aggregate of 5,000 shares of Preferred Stock (pro rata based on
the number of Initial Preferred Shares each Buyer purchased in relation to the
total number of Initial Preferred Shares) (collectively, the "Call Preferred
Shares") and warrants, substantially in the form attached hereto as Exhibit B
(the "Call Warrants") to acquire a number of shares of Common Stock for each
Call Preferred Share purchased equal to the product of (i) the quotient of (a)
$1,000 divided by (b) the Closing Price for the Call Preferred Shares multiplied
by (ii) 0.65 (as exercised, collectively, the "Call Warrant Shares"). The
Initial Preferred Shares, the Mandatory Preferred Shares, the Additional
Preferred Shares and the Call Preferred Shares collectively are referred to in
this Agreement as the "Preferred Shares"; the Initial Warrants, the Mandatory
Warrants, the Additional Warrants and the Call Warrants collectively are
referred to in this Agreement as the "Warrants"; and the Initial Warrant Shares,
the Mandatory Warrant Shares, the Additional Warrant Shares and the Call Warrant
Shares are collectively referred to as the "Warrant Shares"; and

         G. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit C (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.

         NOW THEREFORE, the Company and the Buyers hereby agree as follows:

         1.       PURCHASE AND SALE OF PREFERRED SHARES.

                  a. Purchase of Preferred Shares. Subject to the satisfaction
(or waiver) of the conditions set forth in Sections 6(a) and 7(a) below, the
Company shall issue and sell to each Buyer and each Buyer severally agrees to
purchase from the Company the respective number of Initial Preferred Shares set
forth opposite such Buyer's name on the Schedule of Buyers, along with the
related Initial Warrants (the "Initial Closing"). Subject to the satisfaction
(or waiver) of the conditions set forth in Sections 1(c), 6(b) and 7(b), each
Buyer shall buy and the Company shall issue and sell that number of Mandatory
Preferred Shares equal to such

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Buyer's pro rata portion of an aggregate of 10,000 Mandatory Preferred Shares
(based on the number of Initial Preferred Shares each Buyer purchased in
relation to the total number of Initial Preferred Shares purchased), along with
the related Mandatory Warrants (the "Mandatory Closing"). Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 1(d), 6(c) and
7(c), at the option of each Buyer, the Company shall issue at multiple closings,
if applicable, and sell to each such Buyer and each such Buyer may purchase from
the Company that number of Additional Preferred Shares equal to such Buyer's pro
rata portion of an aggregate of 5,000 Additional Preferred Shares (based on the
number of Initial Preferred Shares each Buyer purchased in relation to the total
number of Initial Preferred Shares issued), along with the related Additional
Warrants (each an "Additional Closing"). Subject to the satisfaction (or waiver)
of the conditions set forth in Sections 1(e), 6(d) and 7(d), at the option of
each Buyer, the Company shall issue at multiple closings, if applicable, and
sell to each such Buyer and each such Buyer may purchase from the Company that
number of Call Preferred Shares equal to such Buyer's pro rata portion of an
aggregate of 5,000 Call Preferred Shares (based on the number of Initial
Preferred Shares each Buyer purchased in relation to the total number of Initial
Preferred Shares issued), along with the related Call Warrants (each a "Call
Closing" and collectively with the Initial Closing, the Mandatory Closing and
the Additional Closings, the "Closings"). The purchase price (the "Purchase
Price") of each Preferred Share and the related Warrants at each of the Closings
shall be an aggregate of $1,000. "Business Days" means any day other than
Saturday, Sunday or other day on which commercial banks in the City of New York
are authorized or required by law to remain closed.

                  b. The Initial Closing Date. The date and time of the Initial
Closing (the "Initial Closing Date") shall be 10:00 a.m. Central Time, within
three (3) Business Days following the date hereof, subject to the satisfaction
(or waiver) of the conditions to the Initial Closing set forth in Sections 6(a)
and 7(a) (or such later date as is mutually agreed to by the Company and the
Buyers). The Initial Closing shall occur on the Initial Closing Date at the
offices of Katten Muchin Zavis, 525 West Monroe Street, Suite 1600, Chicago,
Illinois 60661-3693.

                  c. The Mandatory Closing Date. The date and time of the
Mandatory Closing (an "Mandatory Closing Date") shall be 10:00 a.m. Central
Time, on July 17, 2000, subject to satisfaction (or waiver) of the conditions to
the Mandatory Closing set forth in Sections 6(b) and 7(b) and the conditions
contained in this Section 1(c) (or such later date as is mutually agreed to by
the Company and the Buyers). On July 3, 2000 (the "Mandatory Share Notice
Date"), subject to the satisfaction of the requirements and the conditions
contained in this Section 1(c), the Company shall deliver written notice to each
Buyer (a "Mandatory Share Notice"). The Mandatory Share Notice shall set forth
(A) the number of Mandatory Preferred Shares and the number of related Mandatory
Warrant Shares subject to Mandatory Warrants each Buyer is required to purchase
at the Mandatory Closing and (B) the aggregate Purchase Price for the Mandatory
Preferred Shares and the related Mandatory Warrants to be purchased.
Notwithstanding the foregoing, no Buyer shall be required to purchase the
Mandatory Preferred Shares and the related Mandatory Warrants and the Company
shall not issue a Mandatory Share Notice unless each of the following conditions
is satisfied: (i) the Initial Registration Statement (as defined in the
Registration Rights Agreement) registering all the Registrable Securities (as
defined in the Registration Rights Agreements) related to the Initial Preferred
Shares and the Initial Warrants is filed on or before April 25, 2000; (ii)
during the period beginning on the date of this Agreement and ending on and
including the Mandatory Closing Date, there shall not have occurred either (I)
the consummation of a Change of Control (as defined in Section 4(b) of the
Certificate of Designations) or a public announcement of a pending, proposed or
intended Change of Control which has not been abandoned or terminated or (II) a
Triggering Event (as defined in Section 3(b) of the Certificate of Designations)
or a Liquidity Default (as defined in Section 3(g) of the Certificate of
Designations) or an event that with the passage of

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time or giving of notice and without being cured would constitute a Triggering
Event or a Liquidity Default; (iii) at all times during the period beginning on
the date of this Agreement and ending on and including the Mandatory Closing
Date, the Common Stock shall have been designated for quotation on the Nasdaq
National Market ("Nasdaq") or listed on The New York Stock Exchange, Inc.
("NYSE") or The American Stock Exchange ("AMEX") and shall not have been
suspended from trading on such exchanges nor shall delisting or suspension by
such exchanges have been threatened either (I) in writing by such exchanges or
(II) by falling below the minimum listing maintenance requirements of such
exchanges; (iv) during the period beginning on the Initial Closing Date and
ending on and including the Mandatory Closing Date, the Company shall have
delivered Conversion Shares and Warrant Shares upon conversion or exercise, as
the case may be, of the Preferred Shares and the Warrants on a timely basis as
set forth in Section 2(d)(ii) of the Certificate of Designations or Section 2(a)
of the Warrants and otherwise shall have been in compliance with and shall not
have breached any provision of the Transaction Documents (as defined below) and
the Certificate of Designations; (v) the Company shall have received the
approval of the Company's stockholders, pursuant to Section 4(m), to issue the
Conversion Shares upon the conversion of the Preferred Shares in excess of the
Exchange Cap (as defined in the Certificate of Designation); (vi) the arithmetic
average of the Closing Bid Prices (as defined in the Certificate of
Designations) of the Common Stock for the fifteen (15) consecutive trading days
ending on the including July 17, 2000 shall equal or exceed $25.00 (as adjusted
for stock split, stock dividends, stock combination or similar transactions);
and (vii) on each day during the period beginning on the Mandatory Share Notice
Date and ending on and including the Mandatory Closing Date the Closing Bid
Price of the Common Stock shall equal or exceed $23.00 (as adjusted for stock
splits, stock dividends, stock combinations and similar transactions). The
Mandatory Closing shall occur on an Mandatory Closing Date at the offices of
Katten Muchin Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois
60661-3693.

                  d. The Additional Closing Date. The date and time of each
Additional Closing (an "Additional Closing Date") shall be 10:00 a.m. Central
time, on the date specified in the Additional Share Notice (as defined below),
subject to satisfaction (or waiver) of the conditions to each Additional Closing
set forth in Sections 6(c) and 7(c) and the conditions contained in this Section
1(d) (or such later date as is mutually agreed to by the Company and the
Buyers). At any time during the period beginning on the Initial Closing Date and
ending on and including the date which is 90 days after the date on which the
Initial Registration Statement is declared effective by the SEC (as defined
below), but subject to the requirements of Sections 6(c) and 7(c) and the
conditions contained in this Section 1(d); each Buyer may purchase, at such
Buyer's option, Additional Preferred Shares and related Additional Warrants by
delivering written notice to the Company (a "Additional Share Notice") at least
five Business Days (the "Additional Share Notice Date") prior to the Additional
Closing Date set forth in the Additional Share Notice. The Additional Share
Notice shall set forth (i) the number of Additional Preferred Shares and the
number of related Additional Warrant Shares subject to the Additional Warrant
such Buyer will purchase, which number shall not exceed such Buyers pro rata
portion (based on the number of Initial Preferred Shares each Buyer purchased in
relation to the total number of Initial Preferred Shares purchased by all the
Buyers) of the aggregate number of Additional Preferred Shares which may be
purchased at all Additional Closings, (ii) the aggregate Purchase Price for the
Additional Preferred Shares and the related Additional Warrants to be purchased
and (iii) the Additional Closing Date. The Additional

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Closing shall occur on an Additional Closing Date at the offices of Katten
Muchin Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois 60661-3693.

                  e. The Call Closing Date. The date and time of each Call
Closing (a "Call Closing Date" and collectively with the Initial Closing Date,
the Mandatory Closing Date and the Additional Closing Dates, the "Closing
Dates") shall be 10:00 a.m. Central time, on the date specified in the Call
Share Notice (as defined below), subject to satisfaction (or waiver) of the
conditions to each Call Closing set forth in Sections 6(d) and 7(d) and the
conditions contained in this Section 1(e) (or such later date as is mutually
agreed to by the Company and the Buyers). At any time during the period
beginning on the Initial Closing Date and ending on and including the date which
is 90 days after the date on which the Initial Registration Statement is
declared effective by the SEC, but subject to the requirements of Sections 6(d)
and 7(d) and the conditions contained in this Section 1(e); each Buyer may
purchase, at such Buyer's option, Call Preferred Shares and related Call
Warrants by delivering written notice to the Company (a "Call Share Notice") at
least five Business Days (the "Call Share Notice Date") prior to the Call
Closing Date set forth in the Call Share Notice. The Call Share Notice shall set
forth (i) the number of Call Preferred Shares and the number of related Call
Warrant Shares subject to the Call Warrant such Buyer will purchase, which
number shall not exceed such Buyers pro rata portion (based on the number of
Initial Preferred Shares each Buyer purchased in relation to the total number of
Initial Preferred Shares purchased by all the Buyers) of the aggregate number of
Call Preferred Shares which may be purchased at all Call Closings, (ii) the
aggregate Purchase Price for the Call Preferred Shares and the related Call
Warrants to be purchased and (iii) the Call Closing Date. Notwithstanding the
foregoing, the Company shall not be required to issue the Call Preferred Shares
and the related Call Warrants and a Buyer shall not deliver a Call Share Notice
unless, on each of the 5 consecutive trading days ending on and including the
Call Share Notice Date, the Closing Bid Price of the Common Stock is greater
than or equal to $20.00 (subject to adjustment for stock splits, stock
dividends, stock combinations and other similar transactions). The Call Closing
shall occur on an Call Closing Date at the offices of Katten Muchin Zavis, 525
West Monroe Street, Suite 1600, Chicago, Illinois 60661-3693.

                  f. Form of Payment. On each of the Closing Dates, (i) each
Buyer shall pay the Purchase Price to the Company for the Preferred Shares and
the related Warrants to be issued and sold to such Buyer at such Closing, by
wire transfer of immediately available funds in accordance with the Company's
written wire instructions, less any amount withheld for expenses pursuant to
Section 4(i), and (ii) the Company shall deliver to each Buyer, stock
certificates (in the denominations as such Buyer shall request) (the "Preferred
Stock Certificates") representing such number of the Preferred Shares which such
Buyer is then purchasing hereunder along with warrants representing the related
Warrants, duly executed on behalf of the Company and registered in the name of
such Buyer or its designee.

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         2.       BUYER'S REPRESENTATIONS AND WARRANTIES.

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

                  a. Investment Purpose. Such Buyer (i) is acquiring the
Preferred Shares and the Warrants, (ii) upon conversion of the Preferred Shares,
will acquire the Conversion Shares issuable upon conversion thereof and (iii)
upon exercise of the Warrants, will acquire the Warrant Shares issuable upon
exercise thereof (the Preferred Shares, the Conversion Shares, the Warrants and
the Warrant Shares collectively are referred to herein as the "Securities"), for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.

                  b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.

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

                  d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Sections 3 and 9(m) below. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.

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

                  f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or

                                      -6-
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transferred unless (A) subsequently registered thereunder, (B) such Buyer shall
have delivered to the Company an opinion of counsel, in a generally acceptable
form, to the effect that such Securities to be sold, assigned or transferred may
be sold, assigned or transferred pursuant to an exemption from such
registration, or (C) such Buyer provides the Company with reasonable assurance
that such Securities can be sold, assigned or transferred pursuant to Rule 144
promulgated under the 1933 Act, as amended, (or a successor rule thereto) ("Rule
144"); (ii) any sale of the Securities made in reliance on Rule 144 may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to
register the Securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
Notwithstanding the foregoing, the Securities may be pledged in connection with
a bona fide margin account or other loan secured by the securities.

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

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
         SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
         TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
         REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
         1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION
         OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
         REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II)
         UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE
         FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
         MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold. Such Buyer

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acknowledges, covenants and agrees to sell Securities represented by a
certificate(s) from which the legend has been removed, only pursuant to (i) a
registration statement effective under the 1933 Act or (ii) advice of counsel to
such Buyer that such sale is exempt from the registration requirements of
Section 5 of the 1933 Act.

                  h. Authorization; Enforcement; Validity. This Agreement and
the Registration Rights Agreement have been duly and validly authorized,
executed and delivered on behalf of such Buyer and are valid and binding
agreements of such Buyer enforceable against such Buyer in accordance with their
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.

                  i. Residency. Such Buyer is a resident of that country
specified in its address on the Schedule of Buyers.

                  j. Ownership of the Company's Common Stock. Neither such Buyer
nor such Buyer's Affiliates (as defined below) has traded in the Company's
Common Stock during the 60 consecutive days ending on the Initial Closing Date
and as of the Initial Closing Date, neither will such Buyer nor such Buyer's
Affiliates have any short position. Notwithstanding the foregoing, an Affiliate
of Marshall Capital Management, Inc. (a Buyer) shall not be subject to the
representations or restrictions set forth in this Section 2(k) solely to the
extent that such Affiliate is not acting in concert with, or at the direction
of, Marshall Capital Management, Inc. "Affiliate" for purposes of this Sections
2(k) means, with respect to any person or entity, another person or entity that,
directly or indirectly, (i) controls that person or entity, (ii) is controlled
by that person or entity or (iii) shares common control with that person or
entity. "Control" or "controls" for purposes of this Section 2(j) means that a
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.

                                      -8-
<PAGE>

         3.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

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

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

                  b. Authorization; Enforcement; Validity. (i) The Company has
the requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5), the Warrants
and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement (collectively,
the "Transaction Documents"), and to issue the Securities in accordance with the
terms hereof and thereof, (ii) the execution and delivery of the Transaction
Documents and the execution and filing of the Certificate of Designations by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation the issuance of the Preferred Shares and
the Warrants and the reservation for issuance and the issuance of the Conversion
Shares and the Warrant Shares issuable upon conversion or exercise thereof, have
been duly authorized and unanimously approved by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders, (iii) this Agreement and the
Registration Rights Agreement have been duly executed and delivered by the
Company, (iv) the Transaction Documents, upon execution and delivery thereof,
will constitute the valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies, and (v) prior to the Initial Closing Date, the Certificate of
Designations has been filed with the Secretary of State of the State of Delaware
and will be in full force and effect, enforceable against the Company in
accordance with its terms and shall not have been amended unless in compliance
with its terms.

                                      -9-
<PAGE>

                  c. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 125,000,000 shares of Common Stock,
of which as of the date hereof, 8,289,793 shares are issued and outstanding,
2,500,000 shares are reserved for issuance pursuant to the Company's stock
option and purchase plans and 995,667 shares are issuable and reserved for
issuance pursuant to securities (other than the Preferred Shares and the
Warrants) exercisable or exchangeable for, or convertible into, shares of Common
Stock and (ii) 25,000,000 shares of Preferred Stock, of which as of the date
hereof, no shares are issued and outstanding. All of such outstanding shares
have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), (A) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company; (B)
there are no outstanding debt securities issued by the Company; (C) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries; (D) there are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement); (E) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (F) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; and (G) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to the Buyer true and
correct copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "Certificate of Incorporation"), and the
Company's Bylaws, as amended and as in effect on the date hereof (the "Bylaws"),
and the terms of all securities convertible into or exercisable for Common Stock
and the material rights of the holders thereof in respect thereto.

                  d. Issuance of Securities. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all taxes, liens
and charges with respect to the issue thereof and (iii) entitled to the rights
and preferences set forth in the Certificate of Designations. At least 2,500,000
shares of Common Stock (subject to adjustment pursuant to the Company's covenant
set forth in Section 4(f) below) have been duly authorized and reserved for
issuance upon conversion of the Preferred Shares and upon exercise of the
Warrants. Upon conversion or exercise in accordance with the Certificate of
Designations or the Warrants, as the case may be, the Conversion Shares and the
Warrant Shares will be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock. The
issuance by the Company of the Securities is exempt from

                                      -10-
<PAGE>

registration under the 1933 Act, assuming that the representations and
warranties of each of the Buyers contained in Section 2 are true and correct as
to factual matters.

                  e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Certificate of
Designations and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the reservation
for issuance and issuance of the Conversion Shares and the Warrant Shares) will
not (i) result in a violation of the Certificate of Incorporation, any
Certificate of Designations, Preferences and Rights of any outstanding series of
preferred stock of the Company or the Bylaws; (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its Subsidiaries is a party; (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and regulations
of the Principal Market (as defined below)) applicable to the Company or any of
its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Except as disclosed in Schedule 3(e), neither
the Company nor its Subsidiaries is in violation of any term of its Certificate
of Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or Bylaws or their
organizational charter or bylaws, respectively. Except as disclosed in Schedule
3(e), neither the Company or any of its Subsidiaries is in violation or any term
of or in default under any contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except where such
violation would not result, either individually or in the aggregate, in a
Material Adverse Effect. The business of the Company and its Subsidiaries is not
being conducted, and shall not be conducted, in violation of any law, ordinance
or regulation of any governmental entity. Except as specifically contemplated by
this Agreement and as required under the 1933 Act, the Company is not required
to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents or to perform its
obligations under the Certificate of Designations, in each case in accordance
with the terms hereof or thereof. Except as disclosed in Schedule 3(e), all
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company and its Subsidiaries are
unaware of any facts or circumstances which might give rise to any of the
foregoing. The Company is not in violation of the listing requirements of the
Principal Market, including, without limitation, the requirements set forth in
Rule 4310(c)(25)(H) of the Principal Market and has no actual knowledge of any
facts which would reasonably lead to delisting or suspension of the Common Stock
by the Principal Market in the foreseeable future.
                  f. SEC Documents; Financial Statements. Since April 22, 1999,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein

                                      -11-
<PAGE>

being hereinafter referred to as the "SEC Documents"). The Company has delivered
to the Buyers or their respective representatives true and complete copies of
the SEC Documents. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d), contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading. Neither the Company nor any of its
Subsidiaries or any of their officers, directors, employees or agents have
provided the Buyers with any material, nonpublic information.

                  g. Absence of Certain Changes. Except as disclosed in Schedule
3(g), since April 22, 1999 there has been no material adverse change and no
material adverse development in the business, properties, assets, operations,
results of operations, financial conditions or prospects of the Company or its
Subsidiaries. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or any of its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do so.
Except as disclosed in Schedule 3(g), since April 22, 1999 the Company has not
declared or paid any dividends, sold any assets, individually or in the
aggregate, in excess of $2,000,000 outside of the ordinary course of business or
had capital expenditures, individually or in the aggregate, in excess of
$2,000,000.

                  h. Absence of Litigation. There is no action, suit,
proceeding, inquiry (except for inquiries that would not have, individually or
in the aggregate, a Material Adverse Effect) or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Common Stock or any of the
Subsidiaries or any of the Company's or the Subsidiaries' officers or directors
in their capacities as such, except as expressly set forth in Schedule 3(h).
Except as set forth in Schedule 3(h), to the knowledge of the Company none of
the directors or officers of the Company have been involved in securities
related litigation during the past five years.

                                      -12-
<PAGE>

                  i. Acknowledgment Regarding Buyer's Purchase of Preferred
Shares. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of an arm's length purchaser with respect to the
Transaction Documents and the Certificate of Designation and the transactions
contemplated hereby and thereby. The Company further acknowledges that each
Buyer is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the
Certificate of Designation and the transactions contemplated hereby and thereby
and any advice given by any of the Buyers or any of their respective
representatives or agents in connection with the Transaction Documents and the
Certificate of Designation and the transactions contemplated hereby and thereby
is merely incidental to such Buyer's purchase of the Securities. The Company
further represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.

                  j. No Undisclosed Events, Liabilities, Developments or
Circumstances. Except for the issuance of the Preferred Stock and Warrants
contemplated by this Agreement, no event, liability, development or circumstance
has occurred or exists, or is contemplated to occur, with respect to the Company
or its Subsidiaries or their respective business, properties, prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement on Form
SB-2 filed with the SEC relating to an issuance and sale by the Company of its
Common Stock and which has not been publicly disclosed.

                  k. No General Solicitation. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.

                  l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated, nor will
the Company or any of its Subsidiaries take any action or steps that would
require registration of any of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with other offerings.

                  m. Dilutive Effect. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Preferred
Shares and the Warrant Shares issuable upon exercise of the Warrants will
increase in certain circumstances. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Shares in
accordance with this Agreement and the Certificate of Designations and its
obligation to issue the Warrant Shares upon exercise of the Warrants in
accordance with this Agreement

                                      -13-
<PAGE>

and the Warrants, is, in each case, absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.

                  n. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. None of the
Company's or its Subsidiaries' employees is a member of a union which relates to
such employee's relationship with the Company, neither the Company nor any of
its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that their relations with their employees
are good. No executive officer (as defined in Rule 501(f) of the 1933 Act) has
notified the Company that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company. No executive officer, to
the best knowledge of the Company and its Subsidiaries, is, or is now expected
to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.

                  o. Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights necessary
to conduct their respective businesses as now conducted. Except as set forth on
Schedule 3(o), none of the Company's trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets or
other intellectual property rights have expired or terminated, or are expected
to expire or terminate within two years from the date of this Agreement. The
Company and its Subsidiaries do not have any knowledge of any infringement by
the Company or its Subsidiaries of trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, trade secrets or other intellectual property rights of
others, or of any development of similar or identical trade secrets or technical
information by others and, except as set forth on Schedule 3(o), there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its Subsidiaries regarding
its trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, trade secrets,
or infringement of other intellectual property rights; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.

                  p. Environmental Laws. Except in such instances as could not,
either individually or in the aggregate, have a Material Adverse Effect, the
Company and its Subsidiaries (i) are in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to

                                      -14-
<PAGE>

conduct their respective businesses and (iii) are in compliance with all terms
and conditions of any such permit, license or approval.

                  q. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(q) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and facilities by the
Company and its Subsidiaries.

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

                  s. Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

                  t. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

                  u. No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.

                                      -15-
<PAGE>

                  v. Tax Status. The Company and each of its Subsidiaries (i)
has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes), (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and for which the Company has made appropriate reserves for on its
books, and (iii) has set aside on its books provisions reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations (referred to in clause (i) above) apply. There
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.

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

                  x. Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws of
the state of its incorporation which is or could become applicable to the Buyers
as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company's issuance of the Securities and the Buyers'
ownership of the Securities.

                  y. Rights Agreement. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.

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

                                      -16-
<PAGE>

payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.

                  aa. Year 2000 Compliance. The Company has initiated a review
and assessment of all areas within its and each Subsidiary's business and
operations that could be materially adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications used by the Company or
any of the Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999). Based on the foregoing, the Company believes that the
computer applications that are currently material to its or any Subsidiary's
business and operations are reasonably expected to be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000.

                  bb. No Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.

                  cc. Fees and Expenses. As of the Initial Closing Date and the
Initial Funding Date (as defined in the Credit Agreement (as defined in Section
7(a)(xv))), the aggregate amount of fees, costs and/or expenses paid or payable
by the Company relating to the issuance of the Preferred Shares does not and
will not exceed $250,000.

         4.       COVENANTS.

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

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

                  c. Reporting Status. Until the later of (i) the date which is
one year after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares and the
Warrant Shares without restriction pursuant to Rule 144(k) promulgated under the
1933 Act (or successor thereto) and (ii) the date which is five (5) years from
the last Closing Date to occur (the "Reporting Period"), the Company shall file
all reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would otherwise permit such termination.

                                      -17-
<PAGE>

                  d. Use of Proceeds. The Company will use the proceeds from the
sale of the Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).

                  e. Financial Information. The Company agrees to send the
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Reporting Period: (i) within two (2) days after the filing
thereof with the SEC (unless available on the EDGAR System, in which case within
seven (7) days after the filing thereof with the SEC), a copy of its Annual
Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on
Form 8-K and any registration statements (other than on Form S-8) or amendments
filed pursuant to the 1933 Act, provided that if any such report is not filed
with the SEC through EDGAR then the Company shall deliver a copy of such report
to each Investor by facsimile on the same day it is filed with the SEC; (ii) on
the same day as the release thereof, facsimile copies of all press releases
issued by the Company or any of its Subsidiaries; and (iii) copies of any
notices and other information made available or given to the stockholders of the
Company generally, contemporaneously with the making available or giving thereof
to the stockholders.

                  f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 200% of the number of shares of Common Stock needed to
provide for the issuance of the shares of Common Stock upon conversion of all
outstanding Preferred Shares (without regard to any limitations on conversions)
and 100% of the number of shares of Common Stock needed to provide for the
issuance of the shares of Common Stock upon exercise of all outstanding Warrants
(without regard to any limitations on exercises).

                  g. Additional Financing; Right of First Refusal. Subject to
the exceptions described below, the Company and its Controlled Subsidiaries (as
defined below) agree that during the period beginning on the date hereof and
ending six (6) months following the Initial Closing Date (the "Lock-Up Period"),
neither the Company nor the Controlled Subsidiaries will, without the prior
written consent of the holders of at least two-thirds (2/3) of the Preferred
Shares then outstanding, negotiate or contract with any party for any equity
financing (including any debt financing with an equity component) or issue any
equity securities of the Company or any Controlled Subsidiary or securities
convertible or exchangeable into or for equity securities of the Company or any
Controlled Subsidiary (including debt securities with an equity component) in
any form (a "Future Offering"). In addition, subject to the exceptions described
below, the Company and its Controlled Subsidiaries agrees that during the period
beginning on the date hereof and ending on and including the date which is one
(1) year after the Initial Closing Date, neither the Company nor its Controlled
Subsidiaries will negotiate or contract with any party for any Future Offering
unless it shall have first delivered to each Buyer or a designee appointed by
such Buyer written notice (the "Future Offering Notice") describing the proposed
Future Offering, including the buyer and terms and conditions thereof, and
providing each Buyer an option to purchase its Aggregate Percentage (as defined
below) of the securities to be issued in such Future Offering (the limitations
referred to in this and the preceding sentence are collectively referred to as
the "Capital Raising Limitations"). For purposes

                                      -18-
<PAGE>

of this Section 4(g), "Aggregate Percentage" shall mean the percentage obtained
by dividing (i) the aggregate number of Preferred Shares initially issued to
such Buyer by (ii) the aggregate number of Preferred Shares initially issued to
all the Buyers. A Buyer can exercise its option to participate in a Future
Offering by delivering written notice to the Company within ten (10) Business
Days after receipt of a Future Offering Notice, which notice shall state whether
such Buyer will purchase its Aggregate Percentage, and that number of securities
such Buyer is willing to purchase in excess of its Aggregate Percentage. In the
event that one or more Buyers fail to elect to purchase each of such Buyer's
Aggregate Percentage, then each Buyer which has indicated that it is willing to
purchase a number of securities in such Future Offering in excess of its
Aggregate Percentage shall be entitled to purchase its pro rata portion
(determined in the same manner as described in the preceding sentence) of the
securities in the Future Offering which one or more of the Buyers have not
elected to purchase. In the event the Buyers fail to elect to fully participate
in the Future Offering within the periods described in this Section 4(g) and
such Future Offering includes gross proceeds to the Company in excess of $25
million, the Company shall not be obligated to sell any of the Future Offering
to the Buyer and shall have 45 days thereafter to sell the securities in such
Future Offering upon terms and conditions, no more favorable to the purchasers
thereof than specified in the Future Offering Notice. In the event the Buyers
fail to elect to fully participate in the Future Offering within the periods
described in this Section 4(g) and such Future Offering includes gross proceeds
to the Company equal to or less than $25 million, the Company shall have 45 days
thereafter to sell the securities in the Future Offering that the Buyers did not
elect to purchase upon terms and conditions, no more favorable to the purchasers
thereof than specified in the Future Offering Notice. In the event the Company
has not sold such securities of the Future Offering within such 45 day period,
the Company shall not thereafter issue or sell such securities without first
offering such securities to the Buyers in the manner provided in this Section
4(g). The Capital Raising Limitations shall not apply to (i) a loan from a
commercial bank which does not have any equity feature, (ii) any transaction
involving the Company's issuances of securities (A) as consideration in a merger
or consolidation, (B) in connection with any strategic partnership or joint
venture (the primary purpose of which is not to raise equity capital), or (C) as
consideration for the acquisition of a business, product, license or other
assets by the Company, (iii) the issuance of Common Stock in a firm commitment,
underwritten public offering, (iv) the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof and (v) the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option plan, restricted stock plan or stock purchase plan for the benefit of the
Company's employees or directors. The Buyers shall not be required to
participate or exercise their right of first refusal with respect to a
particular Future Offering in order to exercise their right of first refusal
with respect to later Future Offerings. "Controlled Subsidiaries" means any
entity in which the Company, directly or indirectly, owns at least 50% of the
capital stock, equity or similar interest of such entity.

                  h. Listing. The Company shall promptly secure the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Registrable Securities from
time to time

                                      -19-
<PAGE>

issuable under the terms of the Transaction Documents and the Certificate of
Designations. The Company shall maintain the Common Stock's authorization for
quotation on Nasdaq or listed on NYSE or AMEX (as applicable, the "Principal
Market"). Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Stock from the Principal Market. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(h).

                  i. Expenses. Subject to Section 9(l) below, at the Initial
Closing, the Company shall pay an expense allowance of $40,000 to HFTP
Investment L.L.C. (a Buyer) which amount shall be withheld by such Buyer from
its Purchase Price to be paid at the Initial Closing.

                  j. Filing of Form 8-K. On or before the third (3rd) Business
Day following the Initial Closing Date, the Company shall file a Form 8-K with
the SEC describing the terms of the transactions contemplated by the Transaction
Documents and including as exhibits to such 8-K this Agreement, the Certificate
of Designation, the Registration Rights Agreement and the Form of Warrant, in
the form required by the 1934 Act. On or before the first (1st) Business Day
following the Mandatory Closing Date, each Additional Closing Date, each Call
Closing Date, each Additional Share Notice Date and each Call Share Notice Date,
the Company shall file a Form 8-K with the SEC describing the transaction
consummated or proposed on such date. The Company shall also file a Form 8-K
with the SEC prior to or concurrent with the Form 8-K referred to in the first
sentence of this Section 4(j), disclosing the financing with Nortel Networks,
Inc. and including as an exhibit the Credit Agreement (as defined in Section
7(a)(xv)).

                  k. Transactions With Affiliates. So long as (i) any Preferred
Shares or Warrants are outstanding or (ii) any Buyer owns Conversion Shares or
Warrant Shares with a market value equal to or greater than $500,000, the
Company shall not, and shall cause each of its Controlled Subsidiaries not to,
enter into, amend, modify or supplement any agreement, transaction, commitment
or arrangement with any of its or any Controlled Subsidiary's officers,
directors, persons who were officers or directors at any time during the
previous two years, stockholders who beneficially own 5% or more of the Common
Stock, or affiliates of the Company or its Controlled Subsidiaries or with any
individual related by blood, marriage or adoption to any such individual or with
any entity in which any such entity or individual owns a 5% or more beneficial
interest (each a "Related Party"), except for (a) customary employment
arrangements and benefit programs on reasonable terms, (b) any agreement,
transaction, commitment or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a person other than
such Related Party, or (c) any agreement, transaction, commitment or arrangement
which is approved by a majority of the disinterested directors of the Company.
For purposes hereof, any director who is also an officer of the Company or any
Controlled Subsidiary shall not be a disinterested director with respect to any
such agreement, transaction, commitment or arrangement. "Affiliate" for purposes
hereof means, with respect to any person or entity, another person or entity
that, directly or indirectly, (i) has a 5% or more equity interest in that
person or entity, (ii) has 5% or more common ownership with that person or
entity, (iii) controls that person or entity, or (iv) shares common control with
that person or entity. "Control" or "controls" for purposes hereof means that a
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.

                                      -20-
<PAGE>

                  l. Capital and Surplus; Special Reserves. The Company agrees
that the capital of the Company (as such term is used in Section 154 of the
General Corporation Law of Delaware) in respect of the Preferred Shares shall be
equal to the aggregate par value of such Preferred Shares and that it shall not
increase the capital of the Company with respect to any shares of the Company's
capital stock at anytime on or after the date of this Agreement. The Company
also agrees that it shall not create any special reserves under Section 171 of
the General Corporation Law of Delaware without the prior written consent of
each holder of Preferred Shares. As any Preferred Shares remain outstanding, the
Company shall not account for as surplus or transfer to or otherwise allocate to
the Company's surplus account for purposes of the Delaware General Corporation
Law any of the capital represented by the Preferred Shares, including, without
limitation, for the purpose of reducing any of its capital stock as contemplated
by Section 244 of the Delaware General Corporation Law. The amount to be
represented in the capital account for the Preferred Stock at all times for each
outstanding Preferred Share shall be an amount equal to the product of (i) the
Liquidation Preference (as defined in the Certificate of Designations) and (ii)
125%.

                  m. Proxy Statement. The Company shall provide each stockholder
entitled to vote at the next meeting of stockholders of the Company, which shall
occur on or before the earlier of (A) the date on which the Company holds its
next annual meeting of stockholders and (B) May 31, 2000 (the "Stockholder
Meeting Deadline"), a proxy statement, which has been previously reviewed by the
Buyers and a counsel of their choice, soliciting each such stockholder's
affirmative vote at such annual stockholder meeting for approval of the
Company's issuance of all of the Securities as described in this Agreement in
accordance with applicable law and the rules and regulations of the Principal
Market (such affirmative approval being referred to herein as the "Stockholder
Approval"), and the Company shall use its best efforts to solicit its
stockholders' approval of such issuance of the Securities and to cause the Board
of Directors of the Company to recommend to the stockholders that they approve
such proposal. Such proxy statement shall not seek approval of any matters other
than the approval described in the preceding sentence and the election of
directors.

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

                  o. Restriction on Short Sales. Each Buyer agrees that, subject
to the exceptions described below, during the period beginning on the Initial
Closing Date and ending on but excluding the earlier of (i) the first date on
which such Buyer no longer holds any Preferred Shares and (ii) the date which is
180 days after the Initial Closing Date, neither such Buyer nor any of its
affiliates shall engage in any transaction constituting a "short sale" (as
defined in Rule 3b-3 of the 1934 Act) of the Common Stock (collectively, "Short
Sales"); provided, however, that each Buyer

                                      -21-
<PAGE>

and its Affiliates are entitled to engage in transactions which constitute Short
Sales to the extent that following such transaction the aggregate net short
position of such Buyer and its Affiliates does not exceed the sum of (a) the
number of shares of Common Stock equal to the aggregate number of Warrant Shares
which such Buyer and its Affiliates have the right to acquire upon exercise of
the Warrants held by such Buyer and its Affiliates (without regard to any
limitations on exercises of the Warrants), plus (b) during the period beginning
on and including the First Company's Conversion Election Notice Date (as defined
in Section 7 of the Certificate of Designations) and ending on and including the
First Company's Election Conversion Date (as defined in Section 7 of the
Certificate of Designations), that number of shares of Common Stock equal to the
number of shares of Common Stock issuable upon conversion of such Buyer's First
Required Conversion Amount (as defined in Section 7 of the Certificate of
Designations) (without regard to any limitations on conversions), plus (c)
during the period beginning on and including the Second Company's Conversion
Election Notice Date (as defined in Section 8 of the Certificate of
Designations) and ending on and including the Second Company's Election
Conversion Date (as defined in Section 8 of the Certificate of Designations),
that number of shares of Common Stock equal to the number of shares of Common
Stock issuable upon conversion of such Buyers Second Required Conversion Amount
(as defined in Section 8 of the Certificate of Designations) (without regard to
any limitations on conversions). Notwithstanding the foregoing, the restriction
on Short Sales set forth in the first sentence of this Section 4(o) shall not
apply (a) with respect to any Short Sale at a price greater than or equal to the
Fixed Conversion Price (as defined in the Certificate of Designations) of the
Initial Preferred Shares then in effect; (b) at any time after the first date
after the Initial Closing Date on which the Closing Bid Price of the Common
Stock is less than 50% of applicable Closing Price (as defined in the
Certificate of Designations) (equitably adjusted for stock splits, stock
dividends, stock combinations and other similar transactions) for any 10 trading
days during the 12 consecutive trading days immediately preceding such date of
determination; (c) on and after any date on which the Common Stock is not listed
or quoted on the Nasdaq National Market or The New York Stock Exchange, Inc. or
has been suspended from trading on any such exchange (excluding suspensions of
not more than one day resulting from business announcements by the Company), or
any such delisting or suspension is threatened or pending either (I) in writing
by such exchanges or (II) by falling below the minimum listing maintenance
requirements of such exchanges; (d) on or after any date on which there shall
have occurred an event constituting a Change of Control or a Triggering Event or
a Liquidity Default or an event that with the passage of time and without being
cured would constitute a Triggering Event or a Liquidity Default; (e) on or
after any date on which there shall have been an announcement of a pending,
proposed or intended Change of Control; (f) on or after any date on which the
Company issues or sells or is deemed to have issued or sold any Convertible
Securities or Options (both as defined in the Certificate of Designations) that
are convertible into or exercisable or exchangeable for shares of Common Stock
at a conversion or exercise price which varies or may vary with the market price
of the Common Stock, including by way of one or more reset(s) to a fixed price;
(g) on or after the Stockholder Meeting Deadline if the Company fails to receive
the Stockholder Approval on or before the Stockholder Meeting Deadline; or (h)
with respect to a short sale so long as the Buyer delivers a Conversion Notice
(as defined in the Certificate of Designations) within two Business Days of such
Short Sale entitling such Buyer to receive a number of shares of Common Stock at
least equal to the number of shares of Common Stock sold in such Short Sale.
Notwithstanding the foregoing, an Affiliate of Marshall Capital Management, Inc.
(a Buyer) shall not be subject to the restrictions set forth in this Section
4(o) solely to the extent that such Affiliate

                                      -22-
<PAGE>

is not acting in concert with, or at the direction of, Marshall Capital
Management, Inc. "Affiliate" for purposes of this Sections 4(o) means, with
respect to any person or entity, another person or entity that, directly or
indirectly, (i) controls that person or entity, (ii) is controlled by that
person or entity or (iii) shares common control with that person or entity.
"Control" or "controls" for purposes of this Section 4(o) means that a person or
entity has the power, direct or indirect, to conduct or govern the policies of
another person or entity.

                  p. Local Exchange Carrier. The Company has been approved as a
competitive local exchange carrier in the states of Rhode Island and
Massachusetts, and will use its best efforts to maintain such designations.

                  q. Nortel Agreement. So long as any Preferred Shares or
Warrants are outstanding, the Company shall comply in all respects with the
Credit Agreement (as defined in Section 7(a)(xv)) and shall immediately pay all
amounts due and owing under the Credit Agreement. The Company shall not amend,
modify, increase, supplement, renew, extend, restate or refinance the Credit
Agreement unless, after giving affect to such amendment, modification, increase,
supplement, renewal, extension, restatement or refinancing, the Company would
still have the ability to borrow up to $30 million (including previous
drawdowns) under the Credit Agreement upon the issuance of the Initial Preferred
Shares and up to $45 million (including previous drawdowns) under the Credit
Agreement upon the issuance of no less than $10 million of additional Preferred
Shares (including, without limitation, all of the Mandatory Preferred Shares).
The Company shall not amend, modify, increase, supplement, renew, extend,
restate or refinance the Credit Agreement, except for such amendments,
modifications, increases, supplements, renewals, extensions, restatements or
refinancings which do not (i) amend Section 9.4(d), Section 9.4(e), Section
9.4(f), Section 9.4(g) or Section 9.4(h) of the Credit Agreement (or the
analogous provisions of any refinancing agreement) in any manner that would
adversely affect the rights of the holders of the Preferred Shares to receive
Restricted Payments (as defined in the Credit Agreement) pursuant to any such
Section (or the analogous provisions of any refinancing agreement) or otherwise
amend the Credit Agreement in any manner that would effectively accomplish any
of the foregoing referred to in this clause (i), or (ii) amend Section 11.1(q),
Section 11.1(t) or Section 11.1(u) of the Credit Agreement (or the analogous
provisions of any refinancing agreement) in any manner that would allow the
Designated Senior Debt Representative (as defined in the Certificate of
Designations) or any of the Lenders (as defined in the Credit Agreement) to
claim that an Event of Default (as defined in Section 11.1 of the Credit
Agreement (or the analogous provisions of any refinancing agreement)) has
occurred under any such Section (or the analogous provisions of any refinancing
agreement) which such person would not have, absent such amendment, been able to
claim prior to such amendment or otherwise amend the Credit Agreement in any
manner that would effectively accomplish any of the foregoing referred to in
this clause (ii).

         5.       TRANSFER AGENT INSTRUCTIONS.

                                      -23-
<PAGE>

                  The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and the Warrant Shares in such amounts as specified from time
to time by each Buyer to the Company upon conversion of the Preferred Shares or
exercise of the Warrants (the "Irrevocable Transfer Agent Instructions"). Prior
to registration of the Conversion Shares and the Warrant Shares under the 1933
Act, all such certificates shall bear the restrictive legend specified in
Section 2(g). The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5 and stop
transfer instructions to give effect to Section 2(f) (in the case of the
Conversion Shares and the Warrant Shares, prior to registration of the
Conversion Shares and the Warrant Shares under the 1933 Act) will be given by
the Company to its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. If a Buyer
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the Securities may
be made without registration under the 1933 Act or the Buyer provides the
Company with reasonable assurances that the Securities can be sold pursuant to
Rule 144 without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer, and, in the case of the Conversion Shares and the Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Buyer and without any
restrictive legend. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that the
Buyers shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.

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

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

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

                  (ii) The Certificate of Designations shall have been filed
         with the Secretary of State of the State of Delaware.

                  (iii) Such Buyer shall have delivered to the Company the
         Purchase Price (less, in the case of HFTP Investment LLC, the amounts
         withheld pursuant to Section 4(i)) for the

                                      -24-
<PAGE>

         Initial Preferred Shares and the Initial Warrants being purchased by
         such Buyer at the Initial Closing by wire transfer of immediately
         available funds pursuant to the wire instructions provided by the
         Company.

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

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

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

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

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

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

                  (ii) The representations and warranties of such Buyer shall be
         true and correct as of the date when made and as of the applicable
         Additional Closing Date as though made at that time (except for
         representations and warranties that speak as of a specific date), and
         such

                                      -25-
<PAGE>

         Buyer shall have performed, satisfied and complied in all material
         respects with the covenants, agreements and conditions required by the
         Transaction Documents to be performed, satisfied or complied with by
         such Buyer at or prior to the applicable Additional Closing Date.
                  d. Call Closing Date. The obligation of the Company hereunder
to issue and sell the Call Preferred Shares and the Call Warrants to each Buyer
at each Call Closing is subject to the satisfaction, at or before such Call
Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:

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

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

         7.       CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.

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

                  (i) The Company shall have executed each of the Transaction
         Documents and delivered the same to such Buyer.

                  (ii) The Certificate of Designations, shall have been filed
         with the Secretary of State of the State of Delaware, and a copy
         thereof certified by such Secretary of State shall have been delivered
         to such Buyer.

                  (iii) The Common Stock (x) shall be designated for quotation
         or listed on the Principal Market and (y) shall not have been suspended
         by the SEC or the Principal Market from trading on the Principal Market
         nor shall suspension by the SEC or the Principal Market have been
         threatened either (A) in writing by the SEC or the Principal Market or
         (B) by falling below the minimum listing maintenance requirements of
         the Principal Market; and the Conversion Shares and the Warrant Shares
         issuable upon conversion or exercise of the Initial Preferred Shares be
         shall be listed upon the Principal Market.

                                      -26-
<PAGE>

                  (iv) The representations and warranties of the Company shall
         be true and correct as of the date when made and as of the Closing Date
         as though made at that time (except for representations and warranties
         that speak as of a specific date) and the Company shall have performed,
         satisfied and complied in all material respects with the covenants,
         agreements and conditions required by the Transaction Documents to be
         performed, satisfied or complied with by the Company at or prior to the
         Closing Date. Such Buyer shall have received a certificate, executed by
         the Chief Executive Officer of the Company, dated as of the Closing
         Date, to the foregoing effect and as to such other matters as may be
         reasonably requested by such Buyer including, without limitation, an
         update as of the Closing Date regarding the representation contained in
         Section 3(c) above.

                  (v) Such Buyer shall have received the opinion of Silverman,
         Collura & Chernis, P.C. dated as of the Initial Closing Date, in form,
         scope and substance reasonably satisfactory to such Buyer and in
         substantially the form of Exhibit D attached hereto.

                  (vi) The Company shall have executed and delivered to such
         Buyer the Preferred Stock Certificates and the Warrants (in such
         denominations as such Buyer shall request) for the Initial Preferred
         Shares and the Initial Warrants being purchased by such Buyer at the
         Initial Closing.

                  (vii) The Board of Directors of the Company shall have adopted
         resolutions consistent with Section 3(b)(ii) above and in a form
         reasonably acceptable to such Buyer (the "Resolutions").

                  (viii) As of the Initial Closing Date, the Company shall have
         reserved out of its authorized and unissued Common Stock, solely for
         the purpose of effecting the conversion of the Initial Preferred Shares
         and the exercise of the Initial Warrants, at least 2,500,000 shares of
         Common Stock.

                  (ix) The Irrevocable Transfer Agent Instructions, in the form
         of Exhibit E attached hereto, shall have been delivered to and
         acknowledged in writing by the Company's transfer agent.

                  (x) The Company shall have delivered to such Buyer a
         certificate evidencing the incorporation and good standing of the
         Company and each Subsidiary in such entity's state of incorporation or
         organization issued by the Secretary of State of such state of
         incorporation or organization as of a date within ten days of the
         Initial Closing Date.

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

                  (xii) The Company shall have delivered to such Buyer a
         secretary's certificate, dated as the Closing Date, as to (A) the
         Resolutions, (B) the Certificate of Incorporation and (C) the Bylaws,
         each as in effect at the Initial Closing.

                                      -27-
<PAGE>

                  (xiii) The Company shall have made all filings under all
         applicable federal and state securities laws necessary to consummate
         the issuance of the Securities pursuant to this Agreement in compliance
         with such laws.

                  (xiv) Each Buyer shall have delivered the Purchase Price for
         the Initial Preferred Shares and the Initial Warrants to be purchased
         by such Buyer at the Initial Closing pursuant to this Agreement.

                  (xv) The Company and Nortel Networks, Inc., a Delaware
         corporation ("Nortel"), shall have entered into the Credit Agreement,
         dated January 31, 2000 by and among the Company and Nortel in the form
         last delivered to such Buyer prior to the date of this Agreement (the
         "Credit Agreement").

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

                  b. Mandatory Closing Date. The obligation of each Buyer
hereunder to purchase the Mandatory Preferred Shares and the Mandatory Warrants
from the Company at the Mandatory Closing is subject to the satisfaction, at or
before the Mandatory Closing Date, of each of the following conditions, provided
that these conditions are for each Buyer's sole benefit and may be waived by
such Buyer at any time in its sole discretion:

                  (i) The Company shall have complied with and satisfied all of
         the requirements of Section 1(c).

                  (ii) The Certificate of Designations shall be in full force
         and effect and shall not have been amended since the Initial Closing
         Date, and a copy thereof certified by the Secretary of State of the
         State of Delaware shall have been delivered to such Buyer.

                  (iii) The Common Stock (x) shall be designated for quotation
         or listed on the Principal Market and (y) shall not have been suspended
         by the SEC or the Principal Market from trading on or delisted from the
         Principal Market nor shall delisting or suspension by such Principal
         Market have been threatened either (A) in writing by the SEC or the
         Principal Market or (B) by falling below the minimum listing
         maintenance requirements of the Principal Market; and all of the
         Conversion Shares and the Warrant Shares issuable upon conversion or
         exercise of the Mandatory Preferred Shares and the Mandatory Warrants,
         as the case may be, shall be listed upon the Principal Market.

                  (iv) The representations and warranties of the Company shall
         be true and correct as of the date when made and as of the Mandatory
         Closing Date as though made at that time (except for representations
         and warranties that speak as of a specific date) and the Company shall
         have performed, satisfied and complied in all respects with the
         covenants, agreements

                                      -28-
<PAGE>

         and conditions required by the Transaction Documents or the Certificate
         of Designations to be performed, satisfied or complied with by the
         Company at or prior to the Mandatory Closing Date. Such Buyer shall
         have received a certificate, executed by the Chief Executive Officer of
         the Company, dated as of the Mandatory Closing Date, to the foregoing
         effect and as to such other matters as may be reasonably requested by
         such Buyer including, without limitation, an update as of the
         applicable Mandatory Closing Date regarding the representation
         contained in Section 3(c) above.

                  (v) Such Buyer shall have received the opinion of Silverman,
         Collura & Chernis, P.C. dated as of the Mandatory Closing Date, in
         form, scope and substance reasonably satisfactory to such Buyer and in
         substantially the form of Exhibit D attached hereto.

                  (vi) The Company shall have executed and delivered to such
         Buyer the Preferred Stock Certificates and the Warrants (in such
         denominations as such Buyer shall request) for the Mandatory Preferred
         Shares and the Mandatory Warrants being purchased by such Buyer at the
         Mandatory Closing.

                  (vii) The Board of Directors of the Company shall have
         adopted, and shall not have amended, the Resolutions.

                  (viii) As of the Mandatory Closing Date, the Company shall
         have reserved out of its authorized and unissued Common Stock, solely
         for the purpose of effecting the conversion of the Preferred Shares, a
         number of shares of Common Stock equal to at least 200% of the number
         of shares of Common Stock which would be issuable upon conversion in
         full of the then outstanding Preferred Shares (without regard to any
         limitations on conversions) and 100% of the number of shares of Common
         Stock which would be issuable upon exercise in full of the then
         outstanding Warrants (without regard to any limitations on exercises),
         including for such purposes the Mandatory Preferred Shares and the
         Mandatory Warrants to be issued at the Mandatory Closing.

                  (ix) The Irrevocable Transfer Agent Instructions shall remain
         in effect as of the Mandatory Closing Date and the Company shall cause
         its Transfer Agent to deliver a letter to the Buyers to that effect.

                  (x) The Company shall have delivered to such Buyer a
         certificate evidencing the incorporation and good standing of the
         Company and each Subsidiary in the state of such entity's state of
         incorporation or organization issued by the Secretary of State of such
         state of incorporation or organization as of a date within ten days of
         the Mandatory Closing Date.

                  (xi) The Company shall have delivered to such Buyer a
         certified copy of its Certificate of Incorporation as certified by the
         Secretary of State of the State of Delaware within ten days of the
         Mandatory Closing Date.

                                      -29-
<PAGE>

                  (xii) The Company shall have delivered to such Buyer a
         secretary's certificate certifying as to (A) the Resolutions, (B) the
         Certificate of Incorporation and (C) the Bylaws, each as in effect at
         the Mandatory Closing.

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

                  (xiv) The Initial Registration Statement covering the resale
         of all the Registrable Securities related to the Initial Preferred
         Share and the Initial Warrants, in accordance with the Registration
         Rights Agreement, shall have been filed on or before April 25, 2000.

                  (xv) Each Buyer shall have delivered the Purchase Price for
         the Mandatory Preferred Shares and the Mandatory Warrants to be
         purchased by such Buyer at the Mandatory Closing pursuant to this
         Agreement.

                  (xvi) The Company shall have received the Stockholder Approval
         on or prior to the Stockholder Meeting Deadline.

                  (xvii) An Event of Default (as defined in the Credit
         Agreement) shall not have occurred on or prior to the Mandatory Closing
         Date, no event that with the passage of time and without being cured
         would constitute an Event of Default shall have occurred and be
         continuing on the Mandatory Closing Date and the Company shall
         otherwise be in compliance in all material respects with all of its
         obligations and covenants under the Credit Agreement as of the
         Mandatory Closing Date.

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

                  c. Additional Closing Dates. The obligation of each Buyer
hereunder to purchase the Additional Preferred Shares and the Additional
Warrants from the Company at each of the applicable Additional Closings is
subject to the satisfaction, at or before each of the Additional Closing Dates,
of each of the following conditions, provided that these conditions are for each
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion:

                  (i) The Company shall have complied with and satisfied all of
         the requirements of Section 1(d).

                  (ii) The Certificate of Designations shall be in full force
         and effect and shall not have been amended since the Initial Closing
         Date, and a copy thereof certified by the Secretary of State of the
         State of Delaware shall have been delivered to such Buyer.

                  (iii) The Common Stock (x) shall be designated for quotation
         or listed on the Principal Market and (y) shall not have been suspended
         by the SEC or the Principal Market from trading on or delisted from the
         Principal Market

                                      -30-
<PAGE>

         nor shall delisting or suspension by such Principal Market have been
         threatened either (A) in writing by the SEC or the Principal Market or
         (B) by falling below the minimum listing maintenance requirements of
         the Principal Market; and all of the Conversion Shares and the Warrant
         Shares issuable upon conversion or exercise of the Additional Preferred
         Shares and the Additional Warrants, as the case may be, shall be listed
         upon the Principal Market.

                  (iv) The representations and warranties of the Company shall
         be true and correct as of the date when made and as of the applicable
         Additional Closing Date as though made at that time (except for
         representations and warranties that speak as of a specific date) and
         the Company shall have performed, satisfied and complied in all
         material respects with the covenants, agreements and conditions
         required by the Transaction Documents or the Certificate of
         Designations to be performed, satisfied or complied with by the Company
         at or prior to the applicable Additional Closing Date. Such Buyer shall
         have received a certificate, executed by the Chief Executive Officer of
         the Company, dated as of the Additional Closing Date, to the foregoing
         effect and as to such other matters as may be reasonably requested by
         such Buyer including, without limitation, an update as of the
         applicable Additional Closing Date regarding the representation
         contained in Section 3(c) above.

                  (v) Such Buyer shall have received the opinion of Silverman,
         Collura & Chernis, P.C. dated as of the applicable Additional Closing
         Date, in form, scope and substance reasonably satisfactory to such
         Buyer and in substantially the form of Exhibit D attached hereto.

                  (vi) The Company shall have executed and delivered to such
         Buyer the Preferred Stock Certificates and the Warrants (in such
         denominations as such Buyer shall request) for the Additional Preferred
         Shares and the Additional Warrants being purchased by such Buyer at the
         applicable Additional Closing.

                  (vii) The Board of Directors of the Company shall have
         adopted, and shall not have amended, the Resolutions.

                  (viii) As of the applicable Additional Closing Date, the
         Company shall have reserved out of its authorized and unissued Common
         Stock, solely for the purpose of effecting the conversion of the
         Preferred Shares, a number of shares of Common Stock equal to at least
         200% of the number of shares of Common Stock which would be issuable
         upon conversion in full of the then outstanding Preferred Shares
         (without regard to any limitations on conversions) and 100% of the
         number of shares of Common Stock which would be issuable upon exercise
         in full of the then outstanding Warrants (without regard to any
         limitations on exercises), including for such purposes the Additional
         Preferred Shares and the Additional Warrants to be issued at such
         Additional Closing.

                                      -31-
<PAGE>

                  (ix) The Irrevocable Transfer Agent Instructions shall remain
         in effect as of the Additional Closing Date and the Company shall cause
         its Transfer Agent to deliver a letter to the Buyers to that effect.

                  (x) The Company shall have delivered to such Buyer a
         certificate evidencing the incorporation and good standing of the
         Company and each Subsidiary in the state of such entity's state of
         incorporation or organization issued by the Secretary of State of such
         state of incorporation or organization as of a date within ten days of
         the applicable Additional Closing Date.

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

                  (xii) The Company shall have delivered to such Buyer a
         secretary's certificate certifying as to (A) the Resolutions, (B) the
         Certificate of Incorporation and (C) the Bylaws, each as in effect at
         the applicable Additional Closing.

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

                  (xiv) The Initial Registration Statement covering the resale
         of the Conversion Shares and Warrant Shares has been declared effective
         by the SEC and at all times since being declared effective other than
         during an Allowable Grace Period and has been effective and available
         for the sale of no less than the sum of (A) 200% of the number of
         Conversion Shares then issuable upon the conversion of all outstanding
         Initial Preferred Shares (without regard to any limitations on
         conversions), (B) 100% of the number of Warrant Shares into which all
         outstanding Initial Warrants are then exercisable (without regard to
         any limitations on exercises) and (C) the number of Conversion Shares
         and Warrant Shares outstanding, which were acquired upon conversion or
         exercise of the Initial Preferred Shares or the Initial Warrants, as
         the case may be, and held by the Buyers at such time.

                  (xv) The Company shall have received the Stockholder Approval
         on or prior to the Stockholder Meeting Deadline.

                  (xvi) An Event of Default (as defined in the Credit Agreement)
         shall not have occurred on or prior to the Additional Closing Date, no
         event that with the passage of time and without being cured would
         constitute an Event of Default shall have occurred and be continuing on
         the applicable Additional Closing Date and the Company shall otherwise
         be in compliance in all material respects with all of its obligations
         and covenants under the Credit agreement as of the applicable
         Additional Closing Date.

                                      -32-
<PAGE>

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

                  d. Call Closing Dates. The obligation of each Buyer hereunder
to purchase the Call Preferred Shares and the Call Warrants from the Company at
each of the applicable Call Closings is subject to the satisfaction, at or
before each of the Call Closing Dates, of each of the following conditions,
provided that these conditions are for each Buyer's sole benefit and may be
waived by such Buyer at any time in its sole discretion:

                  (i) The Company shall have complied with and satisfied all of
         the requirements of Section 1(e).

                  (ii) The Certificate of Designations shall be in full force
         and effect and shall not have been amended since the Initial Closing
         Date, and a copy thereof certified by the Secretary of State of the
         State of Delaware shall have been delivered to such Buyer.

                  (iii) The Common Stock (x) shall be designated for quotation
         or listed on the Principal Market and (y) shall not have been suspended
         by the SEC or the Principal Market from trading on or delisted from the
         Principal Market nor shall delisting or suspension by such Principal
         Market have been threatened either (A) in writing by the SEC or the
         Principal Market or (B) by falling below the minimum listing
         maintenance requirements of the Principal Market; and all of the
         Conversion Shares and the Warrant Shares issuable upon conversion or
         exercise of the Call Preferred Shares and the Call Warrants, as the
         case may be, shall be listed upon the Principal Market.

                  (iv) The representations and warranties of the Company shall
         be true and correct as of the date when made and as of the applicable
         Call Closing Date as though made at that time (except for
         representations and warranties that speak as of a specific date) and
         the Company shall have performed, satisfied and complied in all
         material respects with the covenants, agreements and conditions
         required by the Transaction Documents or the Certificate of
         Designations to be performed, satisfied or complied with by the Company
         at or prior to the applicable Call Closing Date. Such Buyer shall have
         received a certificate, executed by the Chief Executive Officer of the
         Company, dated as of the Call Closing Date, to the foregoing effect and
         as to such other matters as may be reasonably requested by such Buyer
         including, without limitation, an update as of the applicable Call
         Closing Date regarding the representation contained in Section 3(c)
         above.

                  (v) Such Buyer shall have received the opinion of Silverman,
         Collura & Chernis, P.C. dated as of the applicable Call Closing Date,
         in form, scope and substance reasonably satisfactory to such Buyer and
         in substantially the form of Exhibit D attached hereto.

                  (vi) The Company shall have executed and delivered to such
         Buyer the Preferred Stock Certificates and the Warrants (in such
         denominations as such Buyer shall request) for

                                      -33-
<PAGE>

         the Call Preferred Shares and the Call Warrants being purchased by such
         Buyer at the applicable Call Closing.

                  (vii) The Board of Directors of the Company shall have
         adopted, and shall not have amended, the Resolutions.

                  (viii) As of the applicable Call Closing Date, the Company
         shall have reserved out of its authorized and unissued Common Stock,
         solely for the purpose of effecting the conversion of the Preferred
         Shares, a number of shares of Common Stock equal to at least 200% of
         the number of shares of Common Stock which would be issuable upon
         conversion in full of the then outstanding Preferred Shares (without
         regard to any limitations on conversions) and 100% of the number of
         shares of Common Stock which would be issuable upon exercise in full of
         the then outstanding Warrants (without regard to any limitations on
         exercises), including for such purposes the Call Preferred Shares and
         the Call Warrants to be issued at such Call Closing.

                  (ix) The Irrevocable Transfer Agent Instructions shall remain
         in effect as of the Call Closing Date and the Company shall cause its
         Transfer Agent to deliver a letter to the Buyers to that effect.

                  (x) The Company shall have delivered to such Buyer a
         certificate evidencing the incorporation and good standing of the
         Company and each Subsidiary in the state of such entity's state of
         incorporation or organization issued by the Secretary of State of such
         state of incorporation or organization as of a date within ten days of
         the applicable Call Closing Date.

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

                  (xii) The Company shall have delivered to such Buyer a
         secretary's certificate certifying as to (A) the Resolutions, (B) the
         Certificate of Incorporation and (C) the Bylaws, each as in effect at
         the applicable Call Closing.

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

                  (xiv) The Initial Registration Statement covering the resale
         of the Conversion Shares and Warrant Shares has been declared effective
         by the SEC and at all times since being declared effective, other than
         during an Allowable Grace Period, has been effective and available for
         the sale of no less than the sum of (A) 200% of the number of
         Conversion Shares then issuable upon the conversion of all outstanding
         Initial Preferred Shares (without regard to any limitations on
         conversions), (B) 100% of the number of Warrant Shares into which all
         outstanding Initial Warrants are then exercisable (without regard to
         any limitations

                                      -34-
<PAGE>

         on exercises) and (C) the number of Conversion Shares and Warrant
         Shares outstanding, which were acquired upon conversion or exercise of
         the Initial Preferred Shares or the Initial Warrants, as the case may
         be, and held by the Buyers at such time.

                  (xv) The Company shall have received the Stockholder Approval
         on or prior to the Stockholder Meeting Deadline.

                  (xvi) An Event of Default (as defined in the Credit Agreement)
         shall not have occurred on or prior to the Call Closing Date, no event
         that with the passage of time and without being cured would constitute
         an Event of Default shall have occurred and be continuing on the Call
         Closing Date and the Company shall otherwise be in compliance in all
         material respects with all of its obligations and covenants under the
         Credit Agreement as of the Call Closing Date.

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

         8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents and the Certificate of Designations, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each other holder of the
Securities and all of their stockholders, officers, directors, employees and
direct or indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (d) any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of the
issuance of the Securities or (e) the status of such Buyer or holder of the
Securities as an investor in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law. Except as
otherwise set forth herein, the mechanics and procedures with respect to the
rights and obligations under this Section 8 shall be the same as those set forth
in Sections 6(a) and (d) of the

                                      -35-
<PAGE>

Registration Rights Agreement, including, without limitation, those procedures
with respect to the settlement of claims and the Company's rights to assume the
defense of claims. Each Buyer's rights to receive payments for indemnification
pursuant to this Section 8 shall be subject to Section 3(i) of the Certificate
of Designations. A Buyer shall provide the Designated Senior Debt Representative
(as defined in the Certificate of Designations) written notice ("Notice of
Indemnification Claim") via facsimile and overnight courier at least 10 Business
Days prior to a payment by the Company to such Buyer pursuant to this Section 8.
Subject to Section 3(i) of the Certificate of Designations, the Company shall
deliver any payment due under this Section 8 to such Buyer on the date which is
ten (10) Business Days after the Designated Senior Debt Representative's receipt
of a Notice of Indemnification Claim. Any notice required to be delivered to the
Designated Senior Debt Representative by a Buyer pursuant to this Section 8
shall be delivered to Nortel Networks, Inc., GMS 991 15 A40, 2221 Lakeside
Blvd., Richardson, Texas 75082-4399, Attention Paul D. Day, Vice President,
Customer Finance North America and Charles M. Helm, Esq. (Telephone:
972-684-2271, Facsimile: 972-684-3679), and Mail Stop 468/05/B40, 2100 Lakeside
Blvd., Richardson , Texas 75083-3858, Attention: Kimberly Poe, Director, Loan
Administration (Telephone: 972-684-7687, Facsimile: 972-685-3255) or such other
address or facsimile number as may be specified in writing from time to time by
the Designated Senior Debt Representative and provided to each Buyer at least
five (5) Business Days prior to the date on which a holder sends a Notice of
Indemnification Claim.

         9.       GOVERNING LAW; MISCELLANEOUS.

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

                                      -36-
<PAGE>

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

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

                  d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.

                  e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least two-thirds (2/3) of the Initial Preferred
Shares on the Initial Closing Date or, if prior to the Initial Closing Date, the
Buyers listed on the Schedule of Buyers as being obligated to purchase at least
two-thirds (2/3) of the Initial Preferred Shares, and no provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the Preferred Shares or Warrants
then outstanding. No consideration shall be offered or paid to any person to
amend or consent to a waiver or modification of any provision of any of the
Transaction Documents or the Certificate of Designations unless the same
consideration also is offered to all of the parties to the Transaction Documents
or holders of Preferred Shares, as the case may be.

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

                                      -37-
<PAGE>

         If to the Company:

                  Log On America, Inc.
                  Three Regency Plaza
                  Providence, Rhode Island 02903
                  Telephone:        (401) 453-6100
                  Facsimile:        (401) 459-6222
                  Attention:        President

         With a copy to:

                  Silverman, Collura & Chernis, P.C.
                  381 Park Avenue South, Suite 1601
                  New York, New York 10016
                  Telephone:        (212) 779-8600
                  Facsimile:        (212) 779-8858
                  Attention:        Peter Silverman, Esq.

         If to the Transfer Agent:

                  Continental Stock Transfer & Trust Company
                  Two Broadway, 19th Floor
                  New York, New York 10004
                  Telephone:        (212) 509-4000
                  Facsimile:        (212) 616-7616
                  Attention:        Roger Bernhammer

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

                  g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of at least two-thirds (2/3) of the Preferred
Shares then outstanding, including by merger or consolidation, except pursuant
to a Change of Control (as defined in Section 4(c) of the Certificate of
Designations) with respect to which the

                                      -38-
<PAGE>

Company is in compliance with Section 4 of the Certificate of Designations. A
Buyer may assign some or all of its rights hereunder without the consent of the
Company, provided, however, that any such assignment shall not release such
Buyer from its obligations hereunder unless such obligations are assumed by such
assignee and the Company has consented to such assignment and assumption, which
consent shall not be unreasonably withheld. Notwithstanding anything to the
contrary contained in the Transaction Documents, the Buyers shall be entitled to
pledge the Securities in connection with a bona fide margin account or other
loan secured by Securities.

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

                  i. Survival. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive the
Closings. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.

                  j. Publicity. The Company and each Buyer shall have the right
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law, regulation, or rule of the NASD or Principal
Market (although each Buyer shall be consulted by the Company in connection with
any such press release or other public disclosure prior to its release and shall
be provided with a copy thereof).

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

                  l. Termination. In the event that the Initial Closing shall
not have occurred with respect to a Buyer on or before five (5) Business Days
from the date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6(a) and 7(a) above (and the nonbreaching
party's failure to waive such unsatisfied condition(s)), the nonbreaching party
shall have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any party to
any other party; provided, however, that if this Agreement is terminated
pursuant to this Section 9(l), the Company shall remain obligated to reimburse
any nonbreaching Buyers for the expenses described in Section 4(i) above.

                  m. Placement Agent. The Company has not engaged a placement
agent in connection with the sale of the Preferred Shares and the related
Warrants. The Company shall be responsible for the payment of any placement
agent's fees or broker's commissions relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold each Buyer

                                      -39-
<PAGE>

harmless against, any liability, loss or expense (including, without limitation,
attorneys' fees and out of pocket expenses) arising in connection with any such
claim.

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

                  o. Remedies. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
the Certificate of Designations and all rights and remedies which such holders
have been granted at any time under any other agreement or contract and all of
the rights which such holders have under any law. Any person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.

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

                                   * * * * * *

                                      -40-
<PAGE>

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

COMPANY:                                 BUYERS:
--------                                 -------

LOG ON AMERICA, INC.                     HFTP INVESTMENT L.L.C.

By: /s/ David Paolo                      By:  Promethean Asset Management L.L.C.
   ------------------------------
    Name:     David Paolo                Its: Investment Manager
    Title:    President

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

                                         MARSHALL CAPITAL MANAGEMENT, INC.

                                         By: /s/
                                             ------------------------------
                                             Name:  Al Weine
                                             Title:  President

                                         FISHER CAPITAL LTD.

                                         By: /s/
                                             ------------------------------
                                             Name:      Kenneth A. Simpler
                                             Its:       Vice President

                                         WINGATE CAPITAL LTD.

                                         By: /s/
                                             ------------------------------
                                             Name:      Kenneth A. Simpler
                                             Its:       Vice President

<PAGE>

                               SCHEDULE OF BUYERS

                                             Investor Address
    Investor's Name                        and Facsimile Number
--------------------------------   ----------------------------------------
HFTP Investment L.L.C.             c/o Promethean Asset Management,
                                   L.L.C.
                                   750 Lexington Avenue, 22nd Floor
                                   New York, NY 10022
                                   Attention: David M. Kittay
                                       John Floegel
                                   Telephone: (212) 702-5200
                                   Facsimile: (212) 758-9334
                                   Residence: New York

Marshall Capital Management, Inc.  Marshall Capital Management, Inc.
                                   C/O Credit Suisse First Boston
                                   11 Madison Ave., 7th Floor
                                   New York, NY 10010
                                   Attention: Allan Weine
                                              Charles Gassenheimer
                                   Telephone: (212) 325-0038
                                   Facsimile: 212 325-6519
                                   Facsimile: 312 750-1031
                                   Residence: New York

Fisher Capital Ltd.                c/o Citadel Investment Group, L.L.C.
                                   225 West Washington Street, Suite 1600
                                   Chicago, Illinois 60606
                                   Attention: Daniel Hopkins
                                   Telephone: (312) 696-2100
                                   Facsimile: (312) 338-0780
                                   Residence: Cayman Islands

Wingate Capital Ltd.               c/o Citadel Investment Group, L.L.C.
                                   225 West Washington Street, Suite 1600
                                   Chicago, Illinois 60606
                                   Attention: Daniel Hopkins
                                   Telephone: (312) 696-2100
                                   Facsimile: (312) 338-0780
                                   Residence: Cayman Islands

<TABLE>
<CAPTION>
                                   Number of      Number of
                                    Intial        Initial    Investor's Legal Representatives'
  Investor's Name                 Preferred       Warrant       Address and Facsimile Number
                                    Shares        Shares
--------------------------------  ---------      ---------   -------------------------------------
<S>                                <C>           <C>        <C>
HFTP Investment L.L.C.             3,750         148,551    Katten Muchin & Zavis
                                                            525 W. Monroe Street
                                                            Chicago, Illinois 60661-3693
                                                            Attention: Robert J. Brantman, Esq.
                                                            Telephone: (312) 902-5200
                                                            Facsimile: (312) 902-1061

Marshall Capital Management, Inc.  7,500         297,102    Solomon, Zauderer, Ellenhorn,
                                                            Frischer & Sharp
                                                            45 Rockefeller Plaza
                                                            New York, New York 10111
                                                            Attention: Robert Mazzeo
                                                            Telephone: (212) 956-3700
                                                            Facsimile: (212) 956-4068

Fisher Capital Ltd.                2,325         92,102     Katten Muchin & Zavis
                                                            525 W. Monroe Street, Suite 1600
                                                            Chicago, Illinois 60661-3693
                                                            Attention: Robert J. Brantman, Esq.
                                                            Telephone: (312) 902-5200
                                                            Facsimile: (312) 902-1061

Wingate Capital Ltd.               1,425         56,449     Katten Muchin & Zavis
                                                            525 W. Monroe Street, Suite 1600
                                                            Chicago, Illinois 60661-3693
                                                            Attention: Robert J. Brantman, Esq.
                                                            Telephone: (312) 902-5200
                                                            Facsimile: (312) 902-1061

</TABLE><PAGE>
                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of February
23, 2000, by and among LOG ON AMERICA, INC., a Delaware corporation, with
headquarters located at Three Regency Plaza, Providence, Rhode Island 02903 (the
"Company"), and the undersigned buyers (each, a "Buyer" and collectively, the
"Buyers").

         WHEREAS:

         A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "Securities Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers (I) up to 15,000
shares of the Company's Series A Convertible Preferred Stock, par value $0.01
per share (the "Initial Preferred Shares"), which will be convertible into
shares (as converted, the "Initial Conversion Shares") of the Company's common
stock, par value $0.01 per share (the "Common Stock"), in accordance with the
terms of the Company's Certificate of Designations, Preferences and Rights of
the Series A Convertible Preferred Stock (the "Certificate of Designations"),
and (II) warrants to purchase shares of Common Stock (the "Initial Warrants"
and, as exercised, the "Initial Warrant Shares").

         B. In connection with the Securities Purchase Agreement, the Buyers
shall buy and the Company shall issue and sell to the Buyers, upon the terms and
subject to the conditions of the Securities Purchase Agreement (I) up to 10,000
additional Preferred Shares (the "Mandatory Preferred Shares"), which will be
convertible into Common Stock (as converted, the "Mandatory Conversion Shares")
in accordance with the Certificate of Designations, and (II) warrants to
purchase shares of Common Stock (the "Mandatory Warrants" and, as exercised the
"Mandatory Warrant Shares")

         C. In connection with the Securities Purchase Agreement, the Buyers may
have the right, upon the terms and subject to the conditions of the Securities
Purchase Agreement, to require the Company to issue and sell to the Buyers (I)
up to 5,000 additional Preferred Shares (the "Additional Preferred Shares"),
which will be convertible into Common Stock (as converted, the "Additional
Conversion Shares") in accordance with the Certificate of Designations, and (II)
warrants to purchase shares of Common Stock (the "Additional Warrants" and, as
exercised the "Additional Warrant Shares").

         D. In connection with the Securities Purchase Agreement, the Buyers may
have the right, upon the terms and subject to the conditions of the Securities
Purchase Agreement, to require the Company to issue and sell to the Buyers (I)
up to 5,000 additional Preferred Shares (the "Call Preferred Shares" and,
collectively with the Initial Preferred Shares, the Mandatory Preferred Shares
and the Additional Preferred Shares, the "Preferred Shares"), which will be
convertible into Common Stock (as converted, the "Call Conversion Shares" and,
collectively with the Initial

<PAGE>

Conversion Shares, the Mandatory Conversion Shares and the Call Conversion
Shares, the "Conversion Shares") in accordance with the Certificate of
Designations, and (II) warrants to purchase shares of Common Stock (the "Call
Warrants" and, collectively with the Initial Warrants, the Mandatory Warrants
and the Additional Warrants, the "Warrants" and, as exercised the "Call Warrant
Shares" and, collectively with the Initial Warrant Shares, the Mandatory Warrant
Shares and the Additional Warrant Shares, the "Warrant Shares").

         E. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyers hereby agree as follows:

         1.       DEFINITIONS.

                  As used in this Agreement, the following terms shall have the
following meanings:

                  a. "Investor" means a Buyer and any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section
9.

                  b. "Person" means a corporation, a limited liability company,
an association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.

                  c. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").

                  d. "Registrable Securities" means (i) the Conversion Shares
issued or issuable upon conversion of the Preferred Shares, (ii) the Warrant
Shares issued or issuable upon exercise of the Warrants and (iii) any shares of
capital stock issued or issuable with respect to the Conversion Shares, the
Preferred Shares, the Warrant Shares or the Warrants as a result of any stock
split, stock dividend, recapitalization, exchange or similar event or otherwise,
without regard to any limitations on conversions of Preferred Shares or
exercises of Warrants.

                                        2
<PAGE>

                  e. "Initial Registration Statement" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering Registrable Securities relating to the Initial Preferred Shares and the
Initial Warrants.

                  f. "Mandatory Registration Statement" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering Registrable Securities relating to the Mandatory Preferred Shares and
the Mandatory Warrants.

                  g. "Additional Registration Statement" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering Registrable Securities relating to the Additional Preferred Shares and
the Additional Warrants.

                  h. "Call Registration Statement" means a registration
statement or registration statements of the Company filed under the 1933 Act
covering Registrable Securities relating to the Call Preferred Shares and the
Call Warrants.

                  i. "Registration Statement" means Initial Registration
Statement, the Mandatory Registration Statement, the Additional Registration
Statement and the Call Registration Statement.

                  h. "Filing Deadline" means the Initial Filing Deadline, the
Mandatory Filing Deadline, the Additional Filing Deadline or the Call Filling
Deadline, as applicable.

                  i. "Effectiveness Deadline" means the Initial Effectiveness
Deadline, Mandatory Effectiveness Deadline, the Additional Effectiveness
Deadline or the Call Effectiveness Deadline, as applicable.

         2.       REGISTRATION.

                  a. Mandatory Registration.

                      (i) Initial Registration. The Company shall prepare, and,
as soon as practicable but in no event later than April 25, 2000 (the "Initial
Filing Deadline"), file with the SEC an Initial Registration Statement or
Initial Registration Statements (as necessary) on Form S-3 covering the resale
of all of the Registrable Securities relating to the Initial Preferred Shares
and the related Initial Warrants. In the event that Form S-3 is unavailable for
such a registration, the Company shall use such other form as is available for
such a registration, subject to the provisions of Section 2(d). Any initial
Registration Statement prepared pursuant hereto shall register for resale at
least that number of shares of Common Stock equal to the sum of (A) the product
of (x) 2.0 and (y) the number of Conversion Shares issuable upon conversion of
the Initial Preferred Shares (without regard to any limitations on conversions)
as of the date immediately preceding the date the Registration Statement is
initially filed with the SEC and (B) the number of Initial Warrant Shares
issuable upon conversion of the Initial Warrants (without regard to any
limitations on exercises) as of a date immediately preceding the date the
Registration Statement is initially filed with the SEC,

                                        3
<PAGE>

subject to adjustment as provided in Section 2(f). The Company shall use its
best efforts to cause such Initial Registration Statement to be declared
effective by the SEC as soon as practicable, but in no event later than 180 days
after the Initial Closing Date (the "Initial Effectiveness Deadline").

                      (ii) Mandatory Registration. The Company shall prepare,
and, as soon as practicable but in no event later than 40 days after the
Mandatory Closing Date (as defined in the Securities Purchase Agreement) (the
"Mandatory Filing Deadline"), file with the SEC an Mandatory Registration
Statement or Mandatory Registration Statements (as necessary) on Form S-3
covering the resale of all of the Registrable Securities relating to the
Mandatory Preferred Shares and the related Mandatory Warrants which were issued
on such Mandatory Closing Date. In the event that Form S-3 is unavailable for
such a registration, the Company shall use such other form as is available for
such a registration, subject to the provisions of Section 2(d). Any Mandatory
Registration Statement prepared pursuant hereto shall register for resale at
least that number of shares of Common Stock equal to the sum of (A) the product
of (x) 2.0 and (y) the number of Conversion Shares issuable upon conversion of
such Mandatory Preferred Shares (without regard to any limitations on
conversions) as of the date immediately preceding the date the Mandatory
Registration Statement is initially filed with the SEC and (B) number of
Mandatory Warrant Shares issuable upon exercise of the Mandatory Warrants
(without regard to any limitations on exercises) as of the date immediately
preceding the date the Mandatory Registration Statement is filed, subject to
adjustment as provided in Section 2(f). The Company shall use its best efforts
to cause such Registration Statement to be declared effective by the SEC as soon
as practicable, but in no event later than 100 days after the Mandatory Closing
Date (the "Mandatory Effectiveness Deadline").

                      (iii) Additional Registration. The Company shall prepare,
and, as soon as practicable but in no event later than 40 days after an
Additional Closing Date (as defined in the Securities Purchase Agreement) (the
"Additional Filing Deadline"), file with the SEC an Additional Registration
Statement or Additional Registration Statements (as necessary) on Form S-3
covering the resale of all of the Registrable Securities relating to the
Additional Preferred Shares which were issued on such Additional Closing Date
and the related Additional Warrants. In the event that Form S-3 is unavailable
for such a registration, the Company shall use such other form as is available
for such a registration, subject to the provisions of Section 2(d). Any
Additional Registration Statement prepared pursuant hereto shall register for
resale at least that number of shares of Common Stock equal to the sum of (A)
the product of (x) 2.0 and (y) the number of Conversion Shares issuable upon
conversion of such Additional Preferred Shares (without regard to any
limitations on conversions) as of the date immediately preceding the date the
Additional Registration Statement is initially filed with the SEC and (B) number
of Additional Warrant Shares issuable upon exercise of the Additional Warrants
(without regard to any limitations on exercises) as of the date immediately
preceding the date the Additional Registration Statement is filed, subject to
adjustment as provided in Section 2(f). The Company shall use its best efforts
to cause such Registration Statement to be declared effective by the SEC as soon
as practicable, but in no event later than 100 days after the applicable
Additional Closing Date (the "Additional Effectiveness Deadline").

                                        4
<PAGE>

                      (iv) Call Registration. The Company shall prepare, and, as
soon as practicable but in no event later than 40 days after a Call Closing Date
(as defined in the Securities Purchase Agreement) (the "Call Filing Deadline"),
file with the SEC a Call Registration Statement or Call Registration Statements
(as necessary) on Form S-3 covering the resale of all of the Registrable
Securities relating to the Call Preferred Shares which were issued on such Call
Closing Date and the related Call Warrants. In the event that Form S-3 is
unavailable for such a registration, the Company shall use such other form as is
available for such a registration, subject to the provisions of Section 2(d).
Any Call Registration Statement prepared pursuant hereto shall register for
resale at least that number of shares of Common Stock equal to the sum of (A)
the product of (x) 2.0 and (y) the number of Conversion Shares issuable upon
conversion of such Call Preferred Shares (without regard to any limitations on
conversions) as of the date immediately preceding the date the Call Registration
Statement is initially filed with the SEC and (B) number of Call Warrant Shares
issuable upon exercise of the Call Warrants (without regard to any limitations
on exercises) as of the date immediately preceding the date the Call
Registration Statement is filed, subject to adjustment as provided in Section
2(f). The Company shall use its best efforts to cause such Registration
Statement to be declared effective by the SEC as soon as practicable, but in no
event later than 100 days after the applicable Call Closing Date (the "Call
Effectiveness Deadline").

                  b. Allocation of Registrable Securities. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Person's Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement
shall be allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement.

                  c. Legal Counsel. Subject to Section 5 hereof, the Buyers
holding a majority of the Registrable Securities shall have the right to select
one legal counsel to review and oversee any offering pursuant to this Section 2
("Legal Counsel"), which shall be Katten Muchin & Zavis or such other counsel as
thereafter designated by the holders of a majority of Registrable Securities.
The Company shall reasonably cooperate with Legal Counsel in performing the
Company's obligations under this Agreement.

                  d. Ineligibility for Form S-3. In the event that Form S-3 is
not available for any registration of Registrable Securities hereunder, the
Company shall (i) register the sale of the Registrable Securities on another
appropriate form reasonably acceptable to the holders of a majority of the
Registrable Securities and (ii) undertake to register the Registrable Securities
on Form S-3 as soon as such form is available, provided that the Company shall
maintain the effectiveness of the

                                        5
<PAGE>

Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.

                  e. Effect of Failure to File and Obtain and Maintain
Effectiveness of Registration Statement. If (i) a Registration Statement
covering all the Registrable Securities and required to be filed by the Company
pursuant to this Agreement is not (A) filed with the SEC on or before 30 days
after the applicable Filing Deadline or (B) declared effective by the SEC on or
before the applicable Effectiveness Deadline or (ii) on any day after the
Registration Statement has been declared effective by the SEC, sales of all the
Registrable Securities required to be included on such Registration Statement
cannot be made pursuant to the Registration Statement (including, without
limitation, because of a failure to keep the Registration Statement effective,
to disclose such information as is necessary for sales to be made pursuant to
the Registration Statement, to register sufficient shares of Common Stock),
then, as partial relief for the damages to any holder by reason of any such
delay in or reduction of its ability to sell the underlying shares of Common
Stock (which remedy shall not be exclusive of any other remedies available at
law or in equity), the Company shall pay to each holder of Preferred Shares an
amount in cash per Preferred Share held equal to the product of (i) $1,000
multiplied by (ii) the sum of (A) .02, if the Registration Statement is not
filed by the Filing Deadline, plus (B) .02, if the Registration Statement is not
declared effective by the Effectiveness Deadline, plus, (C) the product of (I)
 .00067 multiplied by (II) the sum of (x) the number of days after the Filing
Deadline that such Registration Statement is not filed with the SEC, plus (y)
the number of days after the Effectiveness Deadline that the Registration
Statement is not declared effective by the SEC, plus (z) the number of days
after the Registration Statement has been declared effective by the SEC that
such Registration Statement is not available for the sale of at least all the
Registrable Securities required to be included on such Registration Statement.
The payments to which a holder shall be entitled pursuant to this Section 2(e)
are referred to herein as "Registration Delay Payments." Registration Delay
Payments shall be paid on the earlier of (I) the last day of the calendar month
during which such Registration Delay Payments are incurred and (II) the third
business day after the event or failure giving rise to the Registration Delayed
Payments is cured. In the event the Company fails to make Registration Delay
Payments in a timely manner, such Registration Delay Payments shall bear
interest at the rate of 2.0% per month (prorated for partial months) until paid
in full. Notwithstanding the foregoing, the Company shall not be obligated to
make payments for Registration Delay Payments or interest pursuant to this
Section 2(e) in excess of the Penalty Cap Amount. "Penalty Cap Amount" means the
sum of (A) $300,000 plus (B) to the extent the Company has issued the Mandatory
Preferred Shares, $200,000. Each Buyer shall not be entitled to receive
Registration Delay Payments pursuant to this Section 2(e) in excess of the
product of (A) the Penalty Cap Amount and (B) a fraction, the numerator of which
is the number of Initial Preferred Shares and Mandatory Preferred Shares issued
to such Purchaser pursuant to the Securities Purchase Agreement and the
denominator of which is the aggregate amount of all the Initial Preferred Shares
and the Mandatory Preferred Shares issued to the Purchasers pursuant to the
Securities Purchase Agreement (the "Penalty Allocation Amount"). In the event
that any Purchaser shall sell or otherwise transfer any of such Purchaser's
Preferred Shares, the transferee shall be allocated a pro rata portion of such
Purchaser's Penalty Allocation Amount. In the event that any holder of Preferred
Shares shall convert all of such holder's Preferred Shares prior to such holder
receiving all of its Penalty Allocation Amount, then the difference between such
holder's Penalty

                                       6
<PAGE>

Allocation Amount and the Registration Delay Payments actually paid to such
holder pursuant to this Section 2(e) shall be allocated to the respective
Penalty Allocation Amounts of the remaining holders of Preferred Shares on a pro
rata basis in proportion to the number of Preferred Shares then held by each
such holder.

                  f. Sufficient Number of Shares Registered. In the event the
number of shares available under a Registration Statement filed pursuant to
Section 2(a) is insufficient to cover all of the Registrable Securities which
such Registration Statement is required to cover or an Investor's allocated
portion of the Registrable Securities pursuant to Section 2(b), the Company
shall amend the Registration Statement, or file a new Registration Statement (on
the short form available therefor, if applicable), or both, so as to cover at
least 200% of such Registrable Securities (based on the market price of the
Common Stock on the trading day immediately preceding the date of filing of such
amendment or new Registration Statement), in each case, as soon as practicable,
but in any event not later than fifteen (15) days after the necessity therefor
arises. The Company shall use it best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed "insufficient to cover
all of the Registrable Securities" if at any time the number of Registrable
Securities issued or issuable upon conversion of the Preferred Shares and
exercise of the Warrants covered by such Registration Statement is greater than
the quotient determined by dividing (i) the number of shares of Common Stock
available for resale under such Registration Statement by (ii) 1.5. For purposes
of the calculation set forth in the foregoing sentence, any restrictions on the
convertibility of the Preferred Shares or exercise of the Warrants shall be
disregarded and such calculation shall assume that the Preferred Shares are then
convertible into, and the Warrants are then exercisable for, shares of Common
Stock at the then prevailing Conversion Rate (as defined in the Company's
Certificate of Designations) or Exercise Price (as defined in the Warrants),
respectively.

         3. RELATED OBLIGATIONS.

         At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to Sections 2(a) or 2(f), the Company will use
its best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:

                  a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the applicable Registrable Securities (as
soon as practicable but in no event later than the applicable Filing Deadline)
and use its best efforts to cause such Registration Statement relating to the
Registrable Securities to become effective as soon as practicable after such
filing (but in no event later than the applicable Effectiveness Deadline). The
Company shall keep each Registration Statement effective pursuant to Rule 415 at
all times until the earlier of (i) the date as of which the Investors may sell
all of the Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto) or (ii) the date on which the Investors shall have sold all the
Registrable Securities covered by such Registration Statement (the "Registration
Period"), which Registration Statement

                                       7
<PAGE>

(including any amendments or supplements thereto and prospectuses contained
therein) shall 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 in which they were made, not
misleading. The term "best efforts" shall mean, among other things, that the
Company shall submit to the SEC, within three business days after the Company
learns that no review of a particular Registration Statement will be made by the
staff of the SEC or that the staff has no further comments on the Registration
Statement, as the case may be, a request for acceleration of effectiveness of
such Registration Statement to a time and date not later than 48 hours after the
submission of such request.

                  b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form
10-Q or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "1934 Act"), the Company shall have incorporated such
report by reference into the Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend
or supplement the Registration Statement.

                  c. The Company shall (a) permit Legal Counsel to review and
comment upon (i) the Initial Registration Statement, the Mandatory Registration
Statement, the Additional Registration Statements and the Call Registration
Statements at least seven (7) days prior to its filing with the SEC and (ii) all
other Registration Statements and all amendments and supplements to all such
Registration Statements (except for Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K and any similar or
successor reports) within a reasonable number of days prior to the their filing
with the SEC and (b) not file any document in a form to which Legal Counsel
reasonably objects. The Company shall not submit a request for acceleration of
the effectiveness of a Registration Statement or any amendment or supplement
thereto without the prior approval of Legal Counsel, which consent shall not be
unreasonably withheld. The Company shall furnish to Legal Counsel, without
charge, (i) any correspondence from the SEC or the staff of the SEC to the
Company or its representatives relating to any Registration Statement, (ii)
promptly after the same is prepared and filed with the SEC, one copy of any
Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference and
all exhibits and (iii) upon the effectiveness of any Registration Statement, one
copy of the prospectus included in such Registration Statement and all
amendments

                                       8
<PAGE>

and supplements thereto. The Company shall reasonably cooperate with Legal
Counsel in performing the Company's obligations pursuant to this Section 3.

                  d. The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared and filed with the SEC, at least
one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of any such Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including copies of any
preliminary or final prospectus, as such Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.

                  e. The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as any Investor reasonably requests, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (w) make any change to its certificate of incorporation or by-laws,
(x) qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(e), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify Legal
Counsel and each Investor who holds Registrable Securities of the receipt by the
Company of any notification with respect to the suspension of the registration
or qualification of any of the Registrable Securities for sale under the
securities or "blue sky" laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threat of any proceeding for such
purpose.

                  f. As promptly as practicable after becoming aware of such
event or development, the Company shall notify Legal Counsel and each Investor
in writing of the happening of any event as a result of which the prospectus
included in a Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission 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 (provided that in no
event shall such notice contain any material, nonpublic information), and
promptly prepare a supplement or amendment to such Registration Statement to
correct such untrue statement or omission, and deliver ten (10) copies of such
supplement or amendment to Legal Counsel and each Investor (or such other number
of copies as Legal Counsel or such Investor may reasonably request). The Company
shall also promptly notify Legal Counsel and each Investor in writing (i) when a
prospectus or any prospectus supplement or

                                       9
<PAGE>

post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by facsimile
on the same day of such effectiveness), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.

                  g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction within the United States of
America and, if such an order or suspension is issued, to obtain the withdrawal
of such order or suspension at the earliest possible moment and to notify Legal
Counsel and each Investor who holds Registrable Securities being sold of the
issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.

                  h. At the reasonable request of any Investor, the Company
shall furnish to such Investor, on the date of the effectiveness of the
Registration Statement and thereafter from time to time on such dates as an
Investor may reasonably request (i) a letter, dated such date, from the
Company's independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the Investors.

                  i. The Company shall make available for inspection by (i) any
Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents
retained by the Investors (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall agree, and each Investor hereby
agrees, to hold in strict confidence and shall not make any disclosure (except
to an Investor) or use of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
and the Investor has knowledge. Each Investor agrees that it shall, upon
learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential.

                                       10
<PAGE>

                  j. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.

                  k. The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by a Registration Statement to be listed
on each securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market or, if, despite the
Company's best efforts to satisfy the preceding clause (i) or (ii), the Company
is unsuccessful in satisfying the preceding clause (i) or (ii), to secure the
inclusion for quotation on The Nasdaq SmallCap Market for such Registrable
Securities and, without limiting the generality of the foregoing, to arrange for
at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 3(k).

                  l. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Investors may reasonably
request and registered in such names as the Investors may request.

                  m. Intentionally Left Blank

                  n. If requested by an Investor, the Company shall (i) as soon
as practicable incorporate in a prospectus supplement or post-effective
amendment such information as an Investor requests to be included therein
relating to the sale and distribution of Registrable Securities, including,
without limitation, information with respect to the number of Registrable
Securities offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) as soon as practicable make all required filings of such prospectus
supplement or post-effective amendment after being notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or

                                       11
<PAGE>

make amendments to any Registration Statement if reasonably requested by an
Investor of such Registrable Securities.

                  o. The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.

                  p. The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.

                  q. The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.

                  r. Within two (2) business days after a Registration Statement
which covers applicable Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel for the Company to
deliver, to the transfer agent for such Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.

                  s. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.

                  t. Notwithstanding anything to the contrary in Section 3(f),
at any time after the applicable Registration Statement has been declared
effective by the SEC, the Company may delay the disclosure of material
non-public information concerning the Company, the disclosure of which at the
time is not, in the good faith opinion of the Board of Directors of the Company
and its counsel, in the best interest of the Company and, in the opinion of
counsel to the Company, otherwise required (a "Grace Period"); provided, that
the Company shall promptly (i) notify the Investors in writing of the existence
of material non-public information giving rise to a Grace Period (provided that
in each notice the Company will not disclose the content of such material
non-public information to the Investors) and the date on which the Grace Period
will begin, and (ii) notify the Investors in writing of the date on which the
Grace Period ends; and, provided further, that no Grace Period shall exceed 15
consecutive days and during any 365 day period such Grace Periods shall not
exceed an aggregate of 30 days and the first day of any Grace Period must be at
least two trading days after the last day of any prior Grace Period (an
"Allowable Grace Period"). For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date the holders
receive the notice referred to in clause (i) above and shall end on and include
the later of the date the holders receive the notice referred to in clause (ii)
and the date referred to in such notice. The provisions of Section 3(g) hereof
shall not be applicable during the period of any

                                       12
<PAGE>

Allowable Grace Period. Upon expiration of the Grace Period, the Company shall
again be bound by the first sentence of Section 3(g) with respect to the
information giving rise thereto unless such material non-public information is
no longer applicable.

         4.       OBLIGATIONS OF THE INVESTORS.

                  a. At least seven (7) days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor in writing of the information the Company reasonably requires from each
such Investor if such Investor elects to have any of such Investor's Registrable
Securities included in such Registration Statement. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of a
particular Investor that such Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request.

                  b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.

                  c. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(g),
3(t) or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f) or receipt of notice that no supplement or amendment is
required or that a Grace Period has ended. Notwithstanding anything to the
contrary, the Company shall cause its transfer agent to deliver unlegended
shares of Common Stock to a transferee of an Investor in accordance with the
terms of the Securities Purchase Agreement in connection with any sale of
Registrable Securities with respect to which an Investor has entered into a
contract for sale prior to the Investor's receipt of a notice from the Company
of the happening of any event of the kind described in Section 3(g), 3(t) or the
first sentence of 3(f) and for which the Investor has not yet settled.

         5.       EXPENSES OF REGISTRATION.

                  All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees
shall be paid by the Company. In addition, the Company shall reimburse the
Investors for the reasonable fees and disbursements of Legal Counsel in
connection with registrations, filings or qualifications pursuant to Section 2
and 3 of this Agreement which amount.

                                       13
<PAGE>

         6.       INDEMNIFICATION.

                  In the event any Registrable Securities are included in a
Registration Statement under this Agreement:

                  a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the Securities Exchange Act of 1934, as amended (the "1934 Act") (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, reasonable attorneys' fees, amounts
paid in settlement or expenses, joint or several, (collectively, "Claims")
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("Indemnified Damages"), to which any of them
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). The Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any legal fees or disbursements or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply to
a Claim by an Indemnified Person arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in writing
to the Company by such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto; (ii) shall not be available to the extent such Claim is
based on a failure of the Investor to deliver or to cause to be delivered the
prospectus made available by the Company, if such prospectus was timely made
available by the Company pursuant to Section 3(d); and (iii) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably

                                       14
<PAGE>

withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.

                  b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement and each Person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act
(each an "Indemnified Party"), against any Claim or Indemnified Damages to which
any of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(d), such Investor will
reimburse any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) and the agreement with
respect to contribution contained in Section 7 shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as does
not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any prospectus shall not inure to
the benefit of any Indemnified Party if the untrue statement or omission of
material fact contained in the prospectus was corrected and such new prospectus
was delivered to each Investor prior to such Investor's use of the prospectus to
which the Claim relates.

                  c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified

                                       15
<PAGE>

Person or Indemnified Party and any other party represented by such counsel in
such proceeding. In the case of an Indemnified Person, legal counsel referred to
in the immediately preceding sentence shall be selected by the Investors holding
a majority in interest of the Registrable Securities included in the
Registration Statement to which the Claim relates. The Indemnified Party or
Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.

                  d. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.

                  e. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.

         7.       CONTRIBUTION.

                  To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.

                                       16
<PAGE>

         8.       REPORTS UNDER THE 1934 ACT.

                  With a view to making available to the Investors the benefits
of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:

                  a. make and keep public information available, as those terms
are understood and defined in Rule 144;

                  b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

                  c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.

         9.       ASSIGNMENT OF REGISTRATION RIGHTS.

                  The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or any portion of
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; and (v)
such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement.

         10.      AMENDMENT OF REGISTRATION RIGHTS.

                  Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who then hold at least two-thirds (2/3) of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 10
shall

                                       17
<PAGE>

be binding upon each Investor and the Company. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Registrable Securities. No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.

         11.      MISCELLANEOUS.

                  a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.

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

                  If to the Company:

                           Log On America, Inc.
                           Three Regency Plaza
                           Providence, Rhode Island 02903
                           Telephone:                (401) 453-6100
                           Facsimile:                (401) 459-6222
                           Attention:                Kenneth M. Cornell

                  With a copy to:

                           Silverman, Collura & Chernis, P.C.
                           381 Park Avenue South, Suite 1601
                           New York, New York 10016
                           Telephone:                (212) 779-8600
                           Facsimile:                (212) 779-8858
                           Attention:                Peter Silverman, Esq.

                                       18
<PAGE>

                  If to Legal Counsel:

                           Katten Muchin & Zavis
                           525 West Monroe Street, Suite 1600
                           Chicago, Illinois 60661-3693
                           Telephone:                312-902-5200
                           Facsimile:                312-902-1061
                           Attention:                Robert J. Brantman, Esq.

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

                  c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

                  d. The corporate laws of the State of Delaware shall govern
all issues concerning the relative rights of the Company and the Buyers as its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or

                                       19
<PAGE>

enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

                  e. This Agreement, the Securities Purchase Agreement, the
Warrants and the Certificate of Designations constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement, the
Securities Purchase Agreement, the Warrants and the Certificate of Designations
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.

                  f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.

                  g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

                  h. This Agreement may be executed in identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.

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

                  j. All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by Investors holding a majority of the Registrable
Securities, determined as if all of the Preferred Shares and the Warrants then
outstanding have been converted into or exercised for Registrable Securities
without regard to any limitation on conversions of the Preferred Shares or
exercises of the Warrants.

                  k. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.

                                       20
<PAGE>

                  l. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

                                   * * * * * *

<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.

COMPANY:                               BUYERS:
-------                                ------

LOG ON AMERICA, INC.                   HFTP INVESTMENT L.L.C.

By: /s/ David Paolo                    By:  Promethean Asset Management L.L.C.
   ---------------------------         Its:  Investment Manager
   Name:   David Paolo
   Title:  President

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

                                       MARSHALL CAPITAL MANAGEMENT, INC.

                                       By: /s/
                                          --------------------------------------
                                            Name:     Al Weine
                                            Title:    President

                                       FISHER CAPITAL LTD.

                                       By: /s/
                                          --------------------------------------
                                             Name:    Kenneth A. Simpler
                                             Its:     Vice President

                                       WINGATE CAPITAL LTD.

                                       By: /s/
                                          --------------------------------------
                                               Name:  Kenneth A. Simpler
                                               Its:   Vice President

<PAGE>

                                               SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
                                             Investor Address                Investor's Representatives' Address
      Investor Name                        and Facsimile Number                      and Facsimile Number
-------------------------------     --------------------------------------  --------------------------------------

<S>                                 <C>                                     <C>
HFTP Investment L.L.C.              c/o Promethean Asset Management L.L.C.  c/o Promethean Asset Management L.L.C.
                                    750 Lexington Avenue, 22nd Floor        750 Lexington Avenue, 22nd Floor
                                    New York, New York 10022                New York, New York 10022
                                    Attn: David M. Kittay                   Attn: David M. Kittay
                                             John Floegel                           John Floegel
                                    Telephone:  212-702-5200                Telephone:  212-702-5200
                                    Facsimile:  212-758-9334                Facsimile:  212-758-9334

                                                                            Katten Muchin & Zavis
                                                                            525 West Monroe, Suite 1600
                                                                            Chicago, Illinois  60661-3693
                                                                            Attn:  Robert J. Brantman, Esq.
                                                                            Facsimile:  312-902-1061

Marshall Capital Management, Inc.   Marshall Capital Management, Inc.       Marshall Capital Management, Inc.
                                    227 West Monroe Street                  227 West Monroe Street
                                    41st Floor                              41st Floor
                                    Chicago, IL 60606                       Chicago, IL 60606
                                    Attention: Al Weine                     Attention: Al Weine
                                    Facsimile: (312) 750-1823               Facsimile: (312) 750-1823
                                    Telephone: (312) 750-3239               Telephone: (312) 750-3239

Fisher Capital Ltd.                 c/o Citadel Investment Group, L.L.C.    Katten Muchin & Zavis
                                    225 West Washington Street              525 W. Monroe Street, Suite 1600
                                    Chicago, Illinois 60606                 Chicago, Illinois 60661-3693
                                    Attention: Daniel Hopkins               Attention: Robert J. Brantman, Esq.
                                    Facsimile: (312) 338-0780               Facsimile: (312) 902-1061
                                    Telephone: (312) 696-2100               Telephone: (312) 902-5200

Wingate Capital Ltd.                c/o Citadel Investment Group, L.L.C.    Katten Muchin & Zavis
                                    225 West Washington Street              525 W. Monroe Street, Suite 1600
                                    Chicago, Illinois 60606                 Chicago, Illinois 60661-3693
                                    Attention: Daniel Hopkins               Attention: Robert J. Brantman, Esq.
                                    Facsimile: (312) 338-0780               Facsimile: (312) 902-1061
                                    Telephone: (312) 696-2100               Telephone: (312) 902-5200
</TABLE>

<PAGE>

                                                                       EXHIBIT A

                        FORM OF NOTICE OF EFFECTIVENESS
                           OF REGISTRATION STATEMENT

[TRANSFER AGENT]

Attn:
     --------------------

                  Re:      Log On America, Inc.

Ladies and Gentlemen:

         We are counsel to Log On America, Inc., a Delaware corporation (the
"Company"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "Purchase Agreement") entered into by and
among the Company and the buyers named therein (collectively, the "Holders")
pursuant to which the Company issued to the Holders shares of its Series A
Convertible Preferred Stock, par value $0.01 per share (the "Preferred Shares")
convertible into shares of the Company's common stock, par value $0.01 per share
(the "Common Stock") and Warrants (the "Warrants") to acquire shares of Common
Stock. Pursuant to the Purchase Agreement, the Company also has entered into a
Registration Rights Agreement with the Holders (the "Registration Rights
Agreement") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon conversion of the
Preferred Shares and exercise of the Warrants, under the Securities Act of 1933,
as amended (the "1933 Act"). In connection with the Company's obligations under
the Registration Rights Agreement, on ____________ ____, the Company filed a
Registration Statement on Form S-3 (File No. 333-_____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Holders as
a selling stockholder thereunder.

         In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.

                                                   Very truly yours,

                                                   [ISSUER'S COUNSEL]

                                                   By:
                                                      --------------------------
cc:      [LIST NAMES OF HOLDERS]

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