<SUBMISSION>
<ACCESSION-NUMBER>0000950136-01-501214
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>7
<PERIOD>20010630
<FILING-DATE>20010820
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>5B TECHNOLOGIES CORP
<CIK>0001000179
<ASSIGNED-SIC>7377
<IRS-NUMBER>113529387
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-27190
<FILM-NUMBER>1719175
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>100 SUNNYSIDE BLVD
<CITY>WOODBURY
<STATE>NY
<ZIP>11797
<PHONE>5166776100
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>100 SUNNYSIDE BLVD
<CITY>WOODBURY
<STATE>NY
<ZIP>11797
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>PARAMOUNT FINANCIAL CORP
<DATE-CHANGED>19950906
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>file001.txt
<DESCRIPTION>QUARTERLY REPORT
<TEXT>
<PAGE>


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

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                      -----

                                    FORM 10-Q


             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001


                         COMMISSION FILE NUMBER 0-27190


                           5B TECHNOLOGIES CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


<TABLE>
<CAPTION>
<S>                                                                     <C>
                          DELAWARE                                                   11-3529387
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)          (I.R.S. EMPLOYER IDENTIFICATION NO.)

          100 SUNNYSIDE BOULEVARD, WOODBURY, NEW YORK                                  11797
            (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                                 (ZIP CODE)
</TABLE>

                                 (516) 677-6100
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
                                             ---  ---

                 NUMBER OF SHARES OUTSTANDING AT JULY 15, 2001:

          2,215,550 SHARES OF COMMON STOCK, PAR VALUE $0.04 PER SHARE.


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


<PAGE>


                           5B TECHNOLOGIES CORPORATION

                    INDEX TO FORM 10-Q FOR THE QUARTER ENDED

                                  JUNE 30, 2001

<TABLE>
<CAPTION>
                                                                                 Page No.
                                                                                 --------
<S>                                                                             <C>
PART I - FINANCIAL INFORMATION

       Item 1 -  Financial Statements

                 Consolidated Balance Sheets
                 June 30, 2001 (unaudited) and December 31, 2000....................1

                 Consolidated Statements of Operations Three Months
                 Ended and Six Months Ended June 30, 2001
                 (unaudited) and 2000 (unaudited)...................................2

                 Consolidated Statements of Cash Flows Three Months
                 Ended and Six Months Ended June 30, 2001
                 (unaudited) and 2000 (unaudited)...................................3

                 Notes to Condensed Consolidated Financial Statements.............4-9

       Item 2 -  Management's Discussion and Analysis of Financial
                 Condition and Results of Operations............................13-21

       Item 3 -  Quantitative and Qualitative Disclosures About
                 Market Risk.......................................................21

PART II - Other Information.....................................................22-24

SIGNATURES.........................................................................25
</TABLE>



<PAGE>

                          PART I: FINANCIAL INFORMATION
                          -----------------------------

ITEM 1.       FINANCIAL STATEMENTS

                  5B TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                  --------------------------------------------

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
<TABLE>
<CAPTION>
                                                                                       June 30,           December 31,
                                                                                         2001                 2000
----------------------------------------------------------------------------------------------------------------------
                                   ASSETS                                             (UNAUDITED)          (RESTATED)
<S>                                                                                 <C>                  <C>
Current assets:
   Cash and cash equivalents                                                          $    912,738        $  1,156,436
   Investments available for sale (includes $0 and $298,000 respectively,
      restricted as collateral)                                                              1,472             499,778
   Accounts receivable, net of allowance for doubtful accounts of $146,000                 846,851           1,501,523
   Note receivable for services provided                                                   332,778             427,590
   Other current assets                                                                    229,574              64,385
----------------------------------------------------------------------------------------------------------------------
       Total current assets                                                              2,323,413           3,649,712
----------------------------------------------------------------------------------------------------------------------
   Goodwill & other intangibles, net                                                     1,013,032             939,900
   Net assets of discontinued operations                                                         -           1,247,094
   Other assets                                                                            519,573             509,610
----------------------------------------------------------------------------------------------------------------------
      TOTAL ASSETS                                                                    $  3,856,018        $  6,346,316
----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Notes payable                                                                      $  1,222,025        $    850,159
   Accounts payable                                                                        656,897           1,129,308
   Accrued expenses                                                                        227,558             332,273
   Unearned sales revenue                                                                   27,206             174,527
----------------------------------------------------------------------------------------------------------------------
      Total current liabilities                                                          2,133,686           2,486,267
----------------------------------------------------------------------------------------------------------------------
   Notes payable                                                                           358,789              11,928
----------------------------------------------------------------------------------------------------------------------
   Net liabilities of discontinued operations                                               28,717                   -
----------------------------------------------------------------------------------------------------------------------
     TOTAL LIABILITIES                                                                   2,521,192           2,498,195
----------------------------------------------------------------------------------------------------------------------

REDEEMABLE PREFERRED STOCK                                                               1,250,000           1,250,000
----------------------------------------------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
   Preferred stock, $.01 par value; 5,000,000 shares authorized, 1,000 shares
      issued and outstanding                                                                     -                   -
   Common stock, $.04 par value, 17,500,000 shares authorized, 2,240,050 and
      2,165,036 shares issued and outstanding, respectively                                 89,602              86,601
   Additional paid-in capital                                                           14,072,573          14,525,450
   Stock subscription receivable                                                                 -            (812,500)
   Accumulated deficit                                                                 (14,026,744)        (11,150,825)
   Treasury stock at cost, 24,500 shares                                                   (50,605)            (50,605)
----------------------------------------------------------------------------------------------------------------------
     TOTAL STOCKHOLDERS' EQUITY                                                             84,826           2,598,121
----------------------------------------------------------------------------------------------------------------------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $  3,856,018        $  6,346,316
----------------------------------------------------------------------------------------------------------------------
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       1

<PAGE>


                  5B TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                  --------------------------------------------

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------

                                    UNAUDITED
                                    ---------
<TABLE>
<CAPTION>
                                                                  Three Months   Three Months     Six Months    Six Months
                                                                         Ended          Ended          Ended         Ended
                                                                      June 30,       June 30,       June 30,      June 30,
                                                                          2001           2000           2001          2000
--------------------------------------------------------------------------------------------------------------------------
                                                                   (UNAUDITED)    (UNAUDITED)    (UNAUDITED)   (UNAUDITED)
<S>                                                              <C>            <C>            <C>           <C>
Net sales                                                         $ 1,158,520    $ 7,502,321    $ 2,762,392   $ 9,418,631
Cost of sales                                                         894,630      6,302,303      2,114,909     7,558,286
--------------------------------------------------------------------------------------------------------------------------
       Gross profit                                                   263,890      1,200,018        647,483     1,860,345
--------------------------------------------------------------------------------------------------------------------------
Expenses:
      Selling                                                         277,500        229,485        642,505       423,104
      General and administrative expenses                             694,100        951,883      1,436,579     1,681,906
--------------------------------------------------------------------------------------------------------------------------
       Total expenses                                                 971,600      1,181,368      2,079,084     2,105,010
--------------------------------------------------------------------------------------------------------------------------
(Loss) income from operations                                        (707,710)        18,650     (1,431,601)     (244,665)
Other income (expense):
      Settlement of lawsuit (note 3)                               (1,170,165)             -     (1,234,956)            -
      Other, net                                                       73,284              -         73,284             -
      Interest expense                                                (18,094)       (32,710)       (42,361)      (67,856)
      Interest income                                                  14,259         19,268         25,992        28,501
--------------------------------------------------------------------------------------------------------------------------
(Loss) income before provision for income taxes and
discontinued operations                                            (1,808,426)         5,208     (2,609,642)     (284,020)
State and local taxes                                                     732          5,397         20,538         6,341
--------------------------------------------------------------------------------------------------------------------------
        Loss from continuing operations                            (1,809,158)          (189)    (2,630,180)     (290,361)
Discontinued operations:
     Income (loss) from discontinued operations,  net of income
        taxes of $0 and $80,892 respectively                                -         39,439       (681,193)     (142,246)
        Gain (loss) on disposal of discontinued operations                  -              -        472,957      (856,198)
--------------------------------------------------------------------------------------------------------------------------
Net (loss) income                                                 $(1,809,158)   $    39,250    $(2,838,416)  $(1,288,805)
Preferred dividends                                                   (18,750)       (18,750)       (37,500)      (18,750)
--------------------------------------------------------------------------------------------------------------------------
Net (loss) income attributable to common shareholders             $(1,827,908)   $    20,500    $(2,875,916)  $(1,307,555)
--------------------------------------------------------------------------------------------------------------------------

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic                                                               2,215,565      2,135,500      2,186,784     2,135,500
Diluted                                                             2,215,565      2,135,500      2,186,784     2,135,500

BASIC LOSS PER COMMON SHARE:
         Continuing operations                                    $     (0.83)   $    (0.01)    $    (1.22)   $    (0.14)
--------------------------------------------------------------------------------------------------------------------------
         Discontinued operations                                  $     (0.00)   $     0.02     $    (0.10)   $    (0.47)
--------------------------------------------------------------------------------------------------------------------------
         Net loss per share                                       $     (0.83)   $     0.01     $    (1.32)   $    (0.61)
--------------------------------------------------------------------------------------------------------------------------
</TABLE>


         See accompanying notes to consolidated financial statements.



                                       2
<PAGE>

                  5B TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                  --------------------------------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                        FOR THE SIX MONTHS ENDED JUNE 30,
                        ---------------------------------
                                    UNAUDITED
                                    ---------
<TABLE>
<CAPTION>
                                                                                                2001           2000
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                                                       (UNAUDITED)     (UNAUDITED)
   Net loss                                                                                $ (2,838,416)   $ (1,288,805)
   Adjustments to reconcile net loss to net cash provided by operating activities:
      Loss from discontinued operations                                                         681,193          61,353
      (Gain) loss from disposal of discontinued operations                                     (472,957)        856,198
      Bad debt                                                                                        -          10,000
      Depreciation and amortization                                                             138,072         148,676
      Warrants issued in connection with lawsuit settlement                                     250,000               -
      Notes payable issued in connection with lawsuit settlement                                820,000               -
      Issuance of options and warrants for services                                                   -          16,300
      Changes in operating assets and liabilities:
        Accounts receivable                                                                     534,672      (4,780,110)
        Other assets                                                                             15,909         (85,659)
        Accounts payable                                                                       (472,411)      4,748,822
        Accrued expenses                                                                       (289,536)       (310,073)
------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS                             (1,633,474)       (623,298)
------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS                        1,100,555         314,565
------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES                                                          (532,919)       (308,733)
------------------------------------------------------------------------------------------------------------------------
   CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of investments                                                                        -         (13,749)
      Proceeds from sale of investments                                                         498,306               -
      Purchase of equipment                                                                     (11,367)              -
------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES FROM CONTINUING OPERATIONS                  486,939         (13,749)
------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS                            508,222      12,203,495
------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES                                                       995,161      12,189,746
------------------------------------------------------------------------------------------------------------------------
   CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from issuance of preferred stock                                                       -         874,465
      Proceeds from exercise of stock options by employees and warrants                          50,124               -
      Proceeds from notes payable                                                               444,906         645,768
      Repayment of notes payable                                                               (659,766)     (1,111,546)
------------------------------------------------------------------------------------------------------------------------
NET CASH (USED IN)  PROVIDED BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS                (164,736)        408,687
------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES FROM DISCONTINUED OPERATIONS                             (541,204)    (11,927,032)
------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES                                                          (705,940)    (11,518,345)
------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                           (243,698)        362,668
------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                1,156,436       1,003,752
------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                                   $    912,738    $  1,366,420
------------------------------------------------------------------------------------------------------------------------
Supplemental non cash financing information:
------------------------------------------------------------------------------------------------------------------------
Rescission of Stock Subscription receivable in connection with lawsuit settlement          $    812,500               -
------------------------------------------------------------------------------------------------------------------------
Common stock issued to redeem notes payable                                                $     62,500               -
------------------------------------------------------------------------------------------------------------------------
Cash paid for income taxes                                                                 $      3,599    $      1,694
Cash paid for income taxes for discontinued operations                                     $     16,939    $     70,969
Cash paid for interest                                                                     $     42,361    $     35,147
Cash paid for interest for discontinued operations                                         $     26,268    $    271,136
------------------------------------------------------------------------------------------------------------------------
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>


                  5B TECHNOLOGIES CORPORATION AND SUBSIDIARIES
                  --------------------------------------------

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
              ----------------------------------------------------

1.       General
         -------

         The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q and Regulation S-X
related to interim period financial statements and, therefore, do not include
all information and footnotes required by generally accepted accounting
principles. However, in the opinion of management, all adjustments (consisting
of normal recurring adjustments and accruals) considered necessary for a fair
presentation of the financial position of 5B Technologies Corporation and
subsidiaries (the "Company") at June 30, 2001 and its results of operations and
cash flows for the three and six months ended June 30, 2001 and 2000,
respectively, have been included (See Note 2).

         The financial statements for the three and six months ended June 30,
2001 include the results of the Company and its wholly owned subsidiaries. All
material intercompany balances and transactions have been eliminated.

         The results of operations for the interim periods are not necessarily
indicative of the results that may be expected for the entire year. In addition,
our auditors included in their report on our financial statements for the year
ended December 31, 2000 in our Form 10-K, an explanatory paragraph about our
ability to continue as a going concern.

          Reference should be made to the annual financial statements, including
footnotes thereto, included in the Company's Form 10-K for the fiscal year ended
December 31, 2000.

2.       Discontinued Operation
         ----------------------

         On May 14, 2001, the Company sold its legal staffing business, which
was maintained through a wholly owned subsidiary, Deltaforce Personnel Services,
Inc. ("DeltaGroup"), for approximately $1,500,000, plus 50% of revenue in excess
of $7.25 million and $7.5 million in the first and second years after closing.
Accordingly, DeltaGroup has been presented as a discontinued operation for the
six months ended June 30, 2001. The balance sheet as of December 31, 2000 and
the statements of operations and cash flows for the three and six months ended
June 30, 2001 and 2000, respectively, have been restated to conform to such
presentation. The loss on disposal of DeltaGroup includes provisions for
estimated losses of approximately $681,000 and a gain on sale, exclusive of
contingent consideration, of approximately $473,000, for a total loss of
approximately $208,000. The provision for estimated losses of approximately
$681,000 is based on management's estimate of future expenses relating to
contractual obligations and other expenses related to the staffing business. Net
sales for DeltaGroup were approximately $2,631,000 and $3,982,000 for the six
months ended June 30, 2001 and 2000, respectively.

         On May 2, 2000, the Company sold the majority of its lease portfolio
(the "Assets"), which was maintained through a wholly owned subsidiary,
Paramount Operations Inc. ("Paramount"), for approximately $700,000 and the
assumption of approximately $6,117,000 of


                                       4
<PAGE>


indebtedness related to the Assets. Accordingly, Paramount has been presented as
a discontinued operation as of June 30, 2001 and December 31, 2000 and for the
three and six months ended June 30, 2001 and 2000, respectively. The loss on
disposal of Paramount includes provisions for estimated losses of approximately
$602,000 and a loss on sale of approximately $254,000, for a total loss of
approximately $856,000. The provision for estimated losses of approximately
$602,000 is based on management's estimate of future income and expenses
relating to the remaining lease portfolio and write-downs of certain related
assets. Net sales for Paramount were approximately $284,000 and $2,051,000 for
the six months ended June 30, 2001 and 2000, respectively.

         The components of net assets of discontinued operation included in the
Company's Consolidated Balance Sheets at June 30, 2001 and December 31, 2000,
are as follows:


<TABLE>
<CAPTION>
                                                                             2001              2000
                                                                        -------------      -------------
<S>                                                                     <C>                <C>
DELTAFORCE PERSONNEL SERVICES, INC.
Accounts receivable                                                          293,834           932,219
Note receivable                                                              300,000                 -
Other assets                                                                  90,257           122,706
Goodwill and intangibles                                                           -         1,056,772
Accounts payable                                                             (77,562)          (77,758)
Accrued expenses                                                            (317,952)          (89,574)
Notes payable                                                                      -          (750,000)
                                                                        -------------      -------------
                                                                             288,577         1,194,365
                                                                        -------------      -------------
PARAMOUNT OPERATIONS INC.
Accounts receivable                                                           37,434           103,528
Net investment in direct finance and sales-type leases                     3,394,831         3,198,704
Assets held under operating leases, net of accumulated depreciation          194,695           261,737
Other assets                                                                       -           162,000
Accrued expenses                                                            (442,535)         (380,317)
Notes payable                                                                (24,417)          (76,384)
Obligations for financed equipment - non-recourse                         (3,477,302)       (3,216,539)
                                                                        -------------      -------------
                                                                            (317,294)           52,729
                                                                        -------------      -------------
                                                                        $    (28,717)      $ 1,247,094
                                                                        =============      =============
</TABLE>

3.       Legal Proceedings
         -----------------

         In August 2000, Robert Klein commenced a lawsuit against the Company
and Deltaforce Personnel Services Inc. in the Supreme Court of New York. The
Complaint alleged that the Company breached an agreement to timely register Mr.
Klein's stock. In July 2001, a settlement was reached and the Company agreed to
pay Mr. Klein $875,000 in cash to be paid over a 3-year period (which has a
present value of $820,000), and to issue to Mr. Klein a warrant to purchase
400,000 shares of the Company's common stock, which warrant expires in July
2005, and has an exercise price of $0.75 per share (which warrant is valued at
$250,000 based on the


                                       5
<PAGE>

Black-Scholes valuation model). Of the cash settlement amount, $500,000 is
payable as follows: $150,000 upon execution of the settlement in July 2001,
$100,000 on August 1, 2001, $50,000 on September 1, 2001, $100,000 on January 2,
2002 and $100,000 on January 2, 2003; and $375,000 is payable at the rate of
$12,500 per month over a period of 30 months commencing on October 1, 2001. In
addition, the stock subscription receivable of $812,500 was rescinded in
connection with the settlement. Legal fees relating to the lawsuit approximated
$165,000 for the six months ended June 30, 2001. $1,170,000 of the cash
settlement, the value of the warrant and legal fees in connection with the
settlement was expensed during the three month period ended June 30, 2001.

         On January 4, 2001, La Vista Investors, LLC ("La Vista") commenced an
action against the Company. The action seeks compensatory and other damages and
equitable relief. Among the remedies La Vista has demanded are the redemption of
the preferred stock at a redemption price of $1,250,000, and liquidated damages
of $100,000 relating to delays in effectuating the registration statement. On
February 6, 2001, the Company responded to the Complaint denying liability for
the relief sought and pleading certain affirmative defenses. On February 28,
2001, La Vista made a motion to strike the Company's defenses and for summary
judgment. In March 2001, the Company made a motion to amend its Answer to, among
other things, plead additional affirmative defenses. The Company also opposed La
Vista's motion for summary judgment. The motion for summary judgment and the
motion to amend the Company's Answer are awaiting decision. The Company believes
that it will be successful in opposing the motion for summary judgment, and that
the motion to amend its Answer will be granted. The Company believes that it has
strong legal defenses and other legal rights and intends to continue to
vigorously defend this Action.

         Larry Kagan, a former employee of Delta, was terminated for cause on
October 14, 1999. In June 2000, Mr. Kagan commenced an arbitration alleging that
Delta breached his employment agreement and that the Company breached a related
stock purchase agreement by terminating his employment. Delta and the Company
have denied liability, asserted counterclaims of $200,000 (plus $200,000 in
punitive damages) against Mr. Kagan and are vigorously defending the
arbitration. The arbitration hearing was held over the course of six days in
June, July and August 2001. The matter will be submitted to the arbitration
panel for decision with the submission of the parties' post-hearing briefs due
on August 27, 2001. The Company does not believe that the ultimate outcome of
this proceeding will have a material impact on the Company's financial
condition.

4.       Lines of Credit
         ---------------

         At June 30, 2001, the Company had two credit lines available with
Connecticut Bank of Commerce ("CBC"):

         5B Group Revolving Credit Facility: On May 24, 2001, the Company
         entered into a revolving credit facility secured by eligible accounts
         receivable (as defined in the credit facility). The term of the credit
         facility is two years from the date of closing. Borrowings are limited
         to 75% of eligible accounts receivable. The rate of interest charged on
         the facility will be 1 1/2% above the Wall Street prime commercial
         lending rate. As of June 30, 2001, 5B Group had $621,000 outstanding
         under this line. As of June 30, 2001,


                                       6
<PAGE>

         primarily as a consequence of the settlement of the Klein litigation
         referenced in footnote 3 above, the Company was not in compliance with
         its minimum tangible net worth requirement. However, on August 16,
         2001, the Company obtained a waiver of such non-compliance contained
         in the amendment to the credit facility in connection with the
         acquisition of certain assets of Knowledge Strategies Group, Inc.
         ("KSG") (see footnote 9) and is now in compliance with such covenant.

         Mezzanine Facility: On May 24, 2001, the Company obtained a maximum
         mezzanine facility of $1,500,000, to be used for future acquisitions
         and other agreed to purposes. The maximum amount of the mezzanine
         facility will be limited to the lesser of $1,500,000 and 110% of the
         total cash, cash equivalents, marketable securities and accounts
         receivable of the Company less the outstanding amount of the revolving
         credit facility. Additionally, the mezzanine facility may not be
         utilized until either (a) the amount of the mezzanine facility to be
         used is secured by cash collateral acceptable to CBC, or (b) (i) the
         sale of certain material assets, (ii) 5B has demonstrated a return to
         profitability, and (iii) a satisfactory settlement of the litigation
         relating to the redeemable preferred stock. The mezzanine facility will
         mature within two years, or be rolled into the 5B Group revolving
         credit facility. The rate of interest charged on the facility will be
         2% above the Wall Street prime commercial lending rate. As of June 30,
         2001, 5B Group had $0 outstanding under this line, however, in
         connection with the KSG asset acquisition, CBC has relaxed certain of
         the above requirements and the Company believes that, subject to CBC's
         approval, it will be able to use this mezzanine facility for future
         acquisitions.

         The two credit lines also have a requirement to maintain a minimum of
$1,000,000 with CBC at all times. If this requirement is not met there is a fee
of 2%, which is based on the shortfall. 5B did not meet this cash requirement
and has been charged the aforementioned fee.

5.       Redeemable Preferred Stock
         --------------------------

         On April 17, 2000, the Company received an equity investment of
$874,465 ($1,000,000 less transaction costs of $125,535) from La Vista
Investors, LLC, a fund managed by WEC Asset Management LLC, a New
York-based investment company.

         In connection with its investment, La Vista received (i) 1,000 shares
of the Company's Series A 6% Convertible Preferred Stock, par value $0.01 per
share (the "Series A Preferred Stock"), and (ii) a warrant convertible into
100,000 shares of the Company's Common Stock at an exercise price of $10.00 per
share of Common Stock (which was deemed to have an immaterial value), subject to
certain anti-dilution adjustments. Each share of Series A Preferred Stock is
convertible into such number of shares of Common Stock as is determined by
dividing $1,000, plus the amount of any accrued and unpaid dividends, by the
lower of (i) nine dollars ($9.00) or (ii) 80% of the average of the three lowest
Closing Bid Prices (as defined in the Certificate of Designations of the Series
A Preferred Stock) of the Company's Common Stock during the thirty (30) trading
days immediately preceding the date of notice from a holder of the Series A
Preferred Stock of any such conversion. On the commitment date, the conversion
price exceeded the market price of the Company's common stock. In August 2000,
the Company and the holders of the Company's Series A Preferred Stock agreed to
exchange the Series A Preferred


                                       7
<PAGE>

Stock for the Series B Preferred Stock on a one-for-one basis. The terms of the
Series A Preferred Stock were identical to those of the Series B Preferred
except that the holders of the Series A Preferred Stock had the right to vote
together with the holders of Common Stock as a single class.

         In addition to the right of the selling stockholder to voluntarily
convert its Series B Preferred Stock into shares of our common stock, all
unconverted shares of the Series B Preferred Stock will automatically convert
into shares of common stock, at the then-applicable conversion formula, on April
17, 2003.

REDEMPTION RIGHTS OF REDEEMABLE PREFERRED STOCK

         The Company may be obligated to redeem the Series B Preferred Stock if:
(1) the number of shares issued upon conversion of the Series B Preferred Stock
were to exceed 19.9% of our outstanding common stock, or (2) we fail to conclude
certain required actions or if certain enumerated events (as described below)
were to occur.

         The Company will be required to redeem the outstanding Series B
Preferred Stock at a price equal to 125% of the Liquidation Preference (as
defined in the Certificate of Designations) if any of the following events
(among others) were to happen: (i) the registration statement registering the
shares of common stock into which the Series B Preferred Stock is convertible is
not effective by September 27, 2000, (ii) the Company breaches the terms of the
Series B Preferred Stock and does not cure such breach within 10 days of notice
to us of such breach, (iii) the Company becomes bankrupt by court order or if we
voluntarily institute bankruptcy proceedings or if other similar events occur
(iv) the Company defaults under any of our material contracts in our businesses
or lose a final judgment, where the default or judgment is in excess of
$250,000, or (v) there is a Change of Control (as defined in the Certificate of
Designations).

         Additionally, if the number of shares of common stock issued upon
conversion of the Series B Preferred Stock exceeds 19.9% of our outstanding
common stock, we must take, at our option, one of two actions: (i) redeem all of
the remaining shares of Series B Preferred Stock at a price equal to 120% of the
Liquidation Preference or (ii) call a special meeting of the Company's
stockholders to approve of the issuance of the common stock and use the
Company's best efforts to obtain such approval.

         The Company's ability to elect the first alternative (i.e., redeem at
120% of the Liquidation Preference) will depend on numerous factors in the
future, including whether it has sufficient funds to make such redemption. At
June 30, 2001, the Series B Preferred Stock was convertible into 1,262,626
shares of Common Stock, which exceeded the 19.9% limitation.

         On September 28, 2000, the Company received notification from La Vista
demanding redemption of the outstanding Series B Preferred Stock in accordance
with the terms of the Series B Preferred Stock due to the Company's failure to
have a registration statement declared effective by September 27, 2000. Although
the Company filed a registration statement relating to the Series B Preferred
Stock, which was declared effective on February 16, 2001, La Vista instituted a
lawsuit against the Company on January 4, 2001. The action seeks compensatory


                                       8
<PAGE>

and other damages and equitable relief. Among the remedies La Vista has demanded
are the redemption of the preferred stock at a redemption price of $1,250,000,
and liquidated damages of $100,000 relating to delays in effectuating the
registration statement. On February 6, 2001, the Company responded to the
Complaint denying liability for the relief sought and pleading certain
affirmative defenses. On February 28, 2001, La Vista made a motion to strike the
Company's defenses and for summary judgment. In March 2001, the Company made a
motion to amend its Answer to, among other things, plead additional affirmative
defenses. The Company also opposed La Vista's motion for summary judgment. The
motion for summary judgment and the motion to amend the Company's Answer are
awaiting decision. The Company believes that it will be successful in opposing
the motion for summary judgment, and that the motion to amend its Answer will be
granted. The Company believes that it has strong legal defenses and other legal
rights and intends to continue to vigorously defend this Action.

6.       Net Loss Per Common Share
         -------------------------

         Basic loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding. Diluted loss per share reflects, in
periods in which they have a dilutive effect, the effect of common shares
issuable upon exercise of stock options and warrants. Income attributable to
common stockholders is computed by increasing net loss by dividends on preferred
stock and other adjustments.

         Options to purchase approximately 69,500 shares of common stock at
exercise prices ranging from $1.01 to $1.84 per share and warrants to purchase
approximately 50,000 shares of common stock at $0.91 per share were outstanding
during the six months ended June 30, 2001. Options to purchase approximately
538,550 shares of common stock at exercise prices ranging from $0.44 to $13.25
per share and warrants to purchase approximately 110,000 shares of common stock
at prices ranging from $0.85 to $2.34 per share were outstanding during a
portion of 2000. These options and warrants expire through 2010 and 2004,
respectively.

         The options and warrants were not included in the computation of
diluted earnings per share because they were anti-dilutive in their respective
periods.

7.       Segment Information
         -------------------

         The Company's results of operations are reviewed and managed through
two segments (i) corporate overhead ("5B") and (ii) Internet, e-commerce and
systems integration ("5B Group"). The accounting policies of the segments are
the same as those described in the Summary of Significant Accounting Policies,
which can be found on pages F-7 through F-11 of the Company's Annual Report on
Form 10-K (for the year ended December 31, 2000). The following represents
selected financial information for the Company's segments for the three and six
months ended June 30, 2001 and 2000:



                                       9
<PAGE>

                                      5B           5B Group           Total
--------------------------------------------------------------------------------
Three months ended
June 30, 2001
--------------------------------------------------------------------------------
Revenues                         $         -      $1,158,520      $ 1,158,520
Cost of sales                              -         894,630          894,630
Selling                               17,627         259,873          277,500
General and Administrative           101,915         592,185          694,100
Interest expense                       5,467          12,627           18,094
Pre-tax loss                      (1,327,901)       (480,525)      (1,808,426)
Assets                              $795,968      $3,060,050       $3,856,018

Three months ended
June 30, 2000
--------------------------------------------------------------------------------
Revenues                         $         -      $7,502,321      $ 7,502,321
Cost of sales                              -       6,302,303        6,302,303
Selling                               33,942         195,543          229,485
General and Administrative           314,980         636,903          951,883
Interest expense                       9,077          23,633           32,710
Pre-tax (loss) income               (338,728)        343,936            5,208
Assets                           $ 4,390,150      $8,483,291      $12,873,441
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Six months ended
June 30, 2001
--------------------------------------------------------------------------------
Revenues                         $         -      $2,762,392      $ 2,762,392
Cost of sales                              -       2,114,909        2,114,909
Selling                               67,163         575,342          642,505
General and Administrative           181,138       1,255,441        1,436,579
Interest expense                      14,109          28,252           42,361
Pre-tax loss                      (1,511,391)     (1,098,251)      (2,609,642)
Assets                           $   795,968      $3,060,050      $ 3,856,018

Six months ended
June 30, 2000
--------------------------------------------------------------------------------
Revenues                         $         -      $9,418,631      $ 9,418,631
Cost of sales                              -       7,558,286        7,558,286
Selling                               48,217         374,887          423,104
General and Administrative           585,128       1,096,778        1,681,906
Interest expense                      21,089          46,767           67,856
Pre-tax (loss) income               (625,933)        341,913         (284,020)
Assets                           $ 4,390,150      $8,483,291      $12,873,441
--------------------------------------------------------------------------------





                                       10
<PAGE>

8.       Recent Accounting Pronouncements
         --------------------------------

         In June 2001, the Financial Accounting Standards Board finalized FASB
Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill and
Other Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase
method of accounting and prohibits the use of the pooling-of-interests method of
accounting for business combinations initiated after June 30, 2001. SFAS 141
also requires that the Company recognize acquired intangible assets apart from
goodwill if the acquired intangible assets meet certain criteria. SFAS 141
applies to all business combinations initiated after June 30, 2001 and for
purchase business combinations completed on or after July 1, 2001. It also
requires, upon adoption of SFAS 142, that the Company reclassify, if necessary,
the carrying amounts of intangible assets and goodwill based on the criteria in
SFAS 141.

         SFAS 142 requires, among other things, that companies no longer
amortize goodwill, but instead test goodwill for impairment at least annually.
In addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized at that date, regardless of when those assets were
initially recognized. SFAS 142 requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption. The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142.

         The Company's previous business combinations were accounted for using
the purchase method. As of June 30, 2001, the net carrying of amount of goodwill
is $502,000 and other intangible assets is $511,000. Amortization expense during
the six-month period ended June 30, 2001 was $103,000. At present, the Company
is currently assessing but has not yet determined the impact the adoption of
SFAS 141 and SFAS 142 will have on its financial position and results of
operations

9.       Subsequent Events
         -----------------
         On July 6, 2001, the Company received a correspondence from the NASDAQ
Stock Market in connection with a determination by NASDAQ that the Company did
not meet the net tangible assets and proposed shareholders equity maintenance
criteria for continued listing as set forth in Marketplace Rule 4310(c)(2)(B)
and the proposed amendment to Marketplace Rule 4310(c)(2)(B)(i), respectively.
Although NASDAQ had determined to delist the Company's securities on July 16,
2001, the Company requested a hearing before the NASDAQ Listing Qualifications
Panel to appeal the delisting determination, which will stay such delisting
pending the outcome of the hearing. The Company has been notified that the
hearing date has been scheduled for August 23, 2001. Although the Company
believes that the acquisitions discussed below will result in compliance with
the NASDAQ Marketplace Rules, there can be no assurance that the Company will be
able to convince the hearing panel that it will be able to maintain compliance
with such maintenance criteria in the future or that the hearing panel will
render a favorable decision.


                                       11
<PAGE>

         On July 30, 2001, The Company executed a definitive agreement to
acquire certain assets of Knowledge Strategies Group, Inc. ("KSG"), a privately
held New York City based e-commerce web site development and hosting company. On
August 16, 2001, the Company acquired the operating assets of KSG in exchange
for 150,000 shares of the Company's common stock and the assumption by the
Company of certain indebtedness of KSG, including KSG's indebtedness to CBC. The
Company issued to CBC 140,193 shares of common stock and shares of the Company's
Series C, Series D and Series E Convertible Preferred Stock (the "CBC Preferred
Stock") in satisfaction of the Company's obligations with respect to such CBC
indebtedness. The CBC Preferred Stock is convertible into an aggregate of
648,486 shares of the Company's common stock; provided, however, that to the
extent such CBC Preferred Stock will be converted into shares of common stock
that exceeds 19.9% of the Company's outstanding common stock (calculated as of
the date of issuance of the CBC Preferred Stock), the Company must first obtain
the approval of the Company's stockholders prior to such issuance. The Company
has undertaken to obtain such stockholder approval at the annual meeting of
stockholders scheduled for 2002. Additionally, the Company has granted certain
registration rights with respect to the shares of common stock issuable upon
conversion of the CBC Preferred Stock and has undertaken to register the 140,193
shares of common stock issued to CBC within 120 business days of the date of
issuance. The terms of the CBC Preferred Stock also contains certain
anti-dilution protections, including with respect to issuances of securities by
the Company below the market price per share. In connection with the KSG
transaction, CBC has amended its credit arrangement with the Company making such
arrangement with respect to the mezzanine facility less restrictive.

         On August 17, 2001, the Company executed a non-binding Term Sheet with
Galt Corporation ("Galt"), a private company engaged in the business of
application development and the integration of information technology solutions.
The Company intends to acquire Galt pursuant to a merger of a wholly-owned
subsidiary of the Company with and into Galt whereby Galt will become a
wholly-owned subsidiary of the Company. The Company intends to exchange 300,000
shares of its common stock, shares of Series F Convertible Preferred Stock and
warrants to purchase 300,000 shares of common stock for all of the issued and
outstanding capital stock of Galt. The Series F Preferred Stock will be
convertible into an aggregate of 300,000 shares of the Company's common stock
(subject to a prohibition on the issuance of shares in excess of 19.9% of the
outstanding common stock of the Company (calculated as of the date of issuance
of the Series F Preferred Stock) without first obtaining stockholder approval,
which the Company will undertake to obtain at the 2002 annual meeting of
stockholders). The warrants are expected to have an exercise price of $1.00 per
share and expire five years from the date of issuance. The consummation of this
transaction is subject to certain conditions, including the negotiation and
execution of definitive legal documentation. The Company anticipates completing
this transaction by the end of September 2001. Galt Corporation, located in
Melville, New York, had revenue of $3.3 million for the twelve month period
ending June 30, 2001. Upon consummation of the merger transaction, it is
anticipated that the operations of Galt will be integrated into the Company's
offices in Woodbury, New York, thereby increasing the operating efficiencies of
the Company.



                                       12
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The following discussion and analysis should be read in conjunction
with, and is qualified in its entirety by, the unaudited financial statements,
including the notes thereto, appearing elsewhere in this 10-Q.

RECENT DEVELOPMENTS

         The second quarter of 2001 has represented a difficult time for the
technology industry. Many technology companies have closed their doors while the
remaining companies are competing for clients at all levels. 5B Technologies
Corporation has not escaped this industry downturn, but is aggressively trying
to maintain its clients and market share as well as grow its core business.
While the three months ended June 30, 2001 resulted in a loss of $1,809,000 from
continuing operations, it should be noted that $1,170,165 of such loss was
related to the settlement of a lawsuit. In August 2000, Robert Klein commenced a
lawsuit against the Company and Deltaforce Personnel Services Inc. in the
Supreme Court of New York. The Complaint alleged that the Company breached an
agreement to timely register Mr. Klein's stock. In July 2001, a settlement was
reached and the Company agreed to pay Mr. Klein $875,000 in cash to be paid over
a 3-year period (which has a present value of $820,000), and to issue to Mr.
Klein a warrant to purchase 400,000 shares of the Company's common stock, which
warrant expires in July 2005, and has an exercise price of $0.75 per share
(which warrant is valued at $250,000 based on the Black-Scholes valuation
model). Of the cash settlement amount, $500,000 is payable as follows: $150,000
upon execution of the settlement in July 2001, $100,000 on August 1, 2001,
$50,000 on September 1, 2001, $100,000 on January 2, 2002 and $100,000 on
January 2, 2003; and $375,000 is payable at the rate of $12,500 per month over a
period of 30 months commencing on October 1, 2001. In addition, the stock
subscription receivable of $812,500 was rescinded in connection with the
settlement. Legal fees relating to the lawsuit approximated $165,000 for the six
months ended June 30, 2001. $1,170,000 of the cash settlement, the value of the
warrant and legal fees in connection with the settlement was expensed during the
three month period ended June 30, 2001.

         On May 14, 2001, the Company sold its legal staffing business, which
was maintained through a wholly owned subsidiary, Deltaforce Personnel Services,
Inc. ("DeltaGroup"), for approximately $1,500,000, plus 50% of revenue in excess
of $7.25 million and $7.5 million in the first and second years after closing.
Accordingly, DeltaGroup has been presented as a discontinued operation for the
six months ended June 30, 2001. The balance sheet as of December 31, 2000 and
the statements of operations and cash flows for the three and six months ended
June 30, 2001 and 2000, respectively, have been restated to conform to such
presentation. The loss on disposal of DeltaGroup includes provisions for
estimated losses of approximately $681,000 and a gain on sale, exclusive of
contingent consideration, of approximately $473,000, for a total loss of
approximately $208,000. The provision for estimated losses of approximately
$681,000 is based on management's estimate of future expenses relating to
contractual obligations and other expenses related to the staffing business. Net
sales for DeltaGroup were approximately $2,631,000 and $3,982,000 for the six
months ended June 30, 2001 and 2000, respectively.


                                       13
<PAGE>

         On May 2, 2000, the Company sold the majority of its lease portfolio
(the "Assets"), which was maintained through a wholly owned subsidiary,
Paramount Operations Inc. ("Paramount"), for approximately $700,000 and the
assumption of approximately $6,117,000 of indebtedness related to the Assets.
Accordingly, Paramount has been presented as a discontinued operation as of June
30, 2001 and December 31, 2000 and for the three and six months ended June 30,
2001 and 2000, respectively. The loss on disposal of Paramount includes
provisions for estimated losses of approximately $602,000 and a loss on sale of
approximately $254,000, for a total loss of approximately $856,000. The
provision for estimated losses of approximately $602,000 is based on
management's estimate of future income and expenses relating to the remaining
lease portfolio and write-downs of certain related assets. Net sales for
Paramount were approximately $284,000 and $2,051,000 for the six months ended
June 30, 2001 and 2000, respectively.

         On July 6, 2001, the Company received a correspondence from the NASDAQ
Stock Market in connection with a determination by NASDAQ that the Company did
not meet the net tangible assets and proposed shareholders equity maintenance
criteria for continued listing as set forth in Marketplace Rule 4310(c)(2)(B)
and the proposed amendment to Marketplace Rule 4310(c)(2)(B)(i), respectively.
Although NASDAQ had determined to delist the Company's securities on July 16,
2001, the Company requested a hearing before the NASDAQ Listing Qualifications
Panel to appeal the delisting determination, which will stay such delisting
pending the outcome of the hearing. The Company has been notified that the
hearing date has been scheduled for August 23, 2001. Although the Company
believes that the acquisitions discussed below will result in compliance with
the NASDAQ Marketplace Rules, there can be no assurance that the Company will be
able to convince the hearing panel that it will be able to maintain compliance
with such maintenance criteria in the future or that the hearing panel will
render a favorable decision.

         While the recent developments of the Klein lawsuit and the potential
NASDAQ delisting are negative matters, the Company is moving forward to expand
its operations in a tight market. On July 30, 2001, the Company executed a
definitive agreement to acquire certain assets of Knowledge Strategies Group
("KSG"), a privately held New York City based e-commerce web site development
and hosting company. Founded in 1995, Knowledge Strategies Group focuses on
delivering innovative business solutions that leverage KSG's proprietary
technology and design expertise. With a strong retail focus (which is a market
that the Company is currently not competing in), KSG builds e-commerce enabled
websites, business-to-business networks and intranets for the most respected
names in the retail marketplace. KSG has developed a formidable roster of
clients that transform and guide the digital marketplace, including
Bloomingdale's, Ermenegildo Zegna, Ghurka, Arrow Shirts, Telebeam and Gold Toe
Socks.

         In March 2000, KSG acquired Eosk.com, the leader in e-commerce enabled
kiosks, furthering the development of complete Omnitailing solutions. By
utilizing multiple channels including stores, Web sites, kiosks, handheld
computers and wireless devices, Omnitailing allows businesses to connect to
consumers in more ways than have ever before been possible.

         On August 16, 2001, the Company acquired the operating assets of KSG in
exchange for 150,000 shares of the Company's common stock and the assumption by
the Company of certain


                                       14
<PAGE>

indebtedness of KSG, including KSG's indebtedness to CBC. The Company issued to
CBC 140,193 shares of common stock and shares of the Company's Series C, Series
D and Series E Convertible Preferred Stock (the "CBC Preferred Stock") in
satisfaction of the Company's obligations with respect to such CBC indebtedness.
The CBC Preferred Stock is convertible into an aggregate of 648,486 shares of
the Company's common stock; provided, however, that to the extent such CBC
Preferred Stock will be converted into shares of common stock that exceeds 19.9%
of the Company's outstanding common stock (calculated as of the date of issuance
of the CBC Preferred Stock), the Company must first obtain the approval of the
Company's stockholders prior to such issuance. The Company has undertaken to
obtain such stockholder approval at the annual meeting of stockholders scheduled
for 2002. Additionally, the Company has granted certain registration rights with
respect to the shares of common stock issuable upon conversion of the CBC
Preferred Stock and has undertaken to register the 140,193 shares of common
stock issued to CBC within 120 business days of the date of issuance. The terms
of the CBC Preferred Stock also contains certain anti-dilution protections,
including with respect to issuances of securities by the Company below the
market price per share. In connection with the KSG transaction, CBC has amended
its credit arrangement with the Company making such arrangement with respect to
the mezzanine facility less restrictive.

         On August 17, 2001, the Company executed a non-binding Term Sheet with
Galt Corporation ("Galt"), a private company engaged in the business of
application development and the integration of information technology solutions.
The Company intends to acquire Galt pursuant to a merger of a wholly-owned
subsidiary of the Company with and into Galt whereby Galt will become a
wholly-owned subsidiary of the Company. The Company intends to exchange 300,000
shares of its common stock, shares of Series F Convertible Preferred Stock and
warrants to purchase 300,000 shares of common stock for all of the issued and
outstanding capital stock of Galt. The Series F Preferred Stock will be
convertible into an aggregate of 300,000 shares of the Company's common stock
(subject to a prohibition on the issuance of shares in excess of 19.9% of the
outstanding common stock of the Company (calculated as of the date of issuance
of the Series F Preferred Stock) without first obtaining stockholder approval,
which the Company will undertake to obtain at the 2002 annual meeting of
stockholders). The warrants are expected to have an exercise price of $1.00 per
share and expire five years from the date of issuance. The consummation of this
transaction is subject to certain conditions, including the negotiation and
execution of definitive legal documentation. The Company anticipates completing
this transaction by the end of September 2001. Galt Corporation, located in
Melville, New York, had revenue of $3.3 million for the twelve month period
ending June 30, 2001. Upon consummation of the merger transaction, it is
anticipated that the operations of Galt will be integrated into the Company's
offices in Woodbury, New York, thereby increasing the operating efficiencies of
the Company.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000

         For the three months ended June 30, 2001, the Company recorded sales
revenue of $1.2 million; a $6.3 million decrease from the $7.5 million recorded
during the three months ended June 30, 2000. $5.0 million of the $6.3 million
dollar decrease related to a one-time sale of hardware/software associated with
an internet infrastructure database build out in the fiscal 2000



                                       15
<PAGE>

period which was not replaced in the fiscal 2001 period. The remaining decrease
in sales at 5B Group is a result of the timing of new projects being authorized,
which the Company believes is due to the economy.

         Cost of sales consists of all direct labor costs and other costs, such
as payroll taxes, employee benefits, outside contractors and equipment
purchases, related to each project or individual sale. For the three months
ended June 30, 2001, the Company recorded cost of sales of $895,000; a decrease
of $5.4 million compared to the $6.3 million recorded for the three months ended
June 30, 2000. The reason for this decrease is a decrease in sales as set forth
above and implementation of cost reduction plans.

         Selling expense consists of all sales force salaries, commissions and
associated costs. Selling expense for the three months ended June 30, 2001 was
$278,000, a 21% increase over the $229,000 recorded in the comparable prior
period. 5B Group reported selling expenses of $260,000, or 20% of revenue, for
the three months ended June 30, 2001 compared to $196,000, or 3% of revenue for
the three months ended June 30, 2000. The increase in selling expenses for 5B
Group is predominantly due to a restructuring of the sales force and addition of
salespeople.

         General and administrative expenses totaled $694,000, or 60% of
revenue, for the three months ended June 30, 2001, representing a decrease of
$258,000 compared to the $952,000, or 13% of revenue, recorded during the three
months ended June 30, 2000. 5B Group reported general and administrative
expenses of $592,000, or 46% of revenue, for the three months ended June 30,
2001 compared to $637,000, or 8% of revenue, for the three months ended June 30,
2000. The decrease is attributable to implementation of the Company's cost
reduction plans. 5B reported general and administrative expenses of $102,000 for
the three months ended June 30, 2001 compared to $315,000 for the three months
ended June 30, 2000. The decrease is attributable to implementation of the
Company's cost reduction plans.

         Net loss from continuing operations was $1.8 million for the three
months ended June 30, 2001, which included $1,170,165 in settlement of the Klein
lawsuit discussed above, which is included in Other income (expense).

SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000

         For the six months ended June 30, 2001, the Company recorded sales
revenue of $2.8 million; a $6.6 million decrease from the $9.4 million recorded
during the six months ended June 30, 2000. $5.0 million, of the $6.3 million
decrease related to a one-time sale of hardware/software sales associated with
an internet infrastructure database build out in the fiscal 2000 period which
was not replaced in the fiscal 2001 period. The remaining decrease in sales at
5B Group is a result of the timing of new projects being authorized, which the
Company believes is due to the economy.

         For the six months ended June 30, 2001, the Company recorded cost of
sales of $2.1 million; a decrease of $5.5 million compared to the $7.6 million
recorded for the six months ended June 30, 2000, primarily as a result of a
decrease in sales and implementation of cost reduction plans.

                                       16
<PAGE>

          Selling expense for the six months ended June 30, 2001 was $643,000, a
52% increase over the $423,000 recorded in the comparable prior period. 5B Group
reported selling expenses of $575,000, or 20% of revenue, for the six months
ended June 30, 2001 compared to $375,000, or 4% of revenue, for the six months
ended June 30, 2000. The increase in selling expenses for 5B Group is due
primarily to the addition of more salespeople.

         General and administrative expenses totaled $1.4 million, or 52% of
revenue, for the six months ended June 30, 2001, representing a decrease of
$300,000 compared to the $1.7 million, or 18% of revenue, recorded during the
six months ended June 30, 2000. 5B Group reported general and administrative
expenses of $1.3 million, or 44% of revenue, for the six months ended June 30,
2001 compared to $1.1 million, or 12% of revenue, for the six months ended June
30, 2000. The decrease is attributable to implementation of the Company's cost
reduction plans. 5B reported general and administrative expenses of $181,000 for
the six months ended June 30, 2001 compared to $585,000 for the six months ended
June 30, 2000. The decrease is attributable to implementation of the Company's
cost reduction plans.

         Net loss from continuing operations was $2.6 million for the six months
ended June 30, 2001, which included $1,234,956 in settlement of the Klein
lawsuit discussed above, which is included in Other income (expense).

LIQUIDITY AND CAPITAL RESOURCES

         As of June 30, 2001, the Company had $914,000 in cash and cash
equivalents and investments available for sale. Substantially this entire amount
was invested in interest-bearing savings accounts, money market accounts
established by major commercial banks or in United States Government, other AA
rated obligations and mutual funds. Primarily as a result of the continued
investment in 5B Group, the acquisitions it made in prior years and new
financings, the Company experienced a decrease in net cash and investments
available for sale during the six months ended June 30, 2001 of $742,004 and an
increase of $284,952 for the three months ended June 30, 2001.

         The Company continues to use its cash balances to fund its operations.
In order to expand its operations, which the Company is aggressively seeking to
accomplish, the Company will need to utilize its cash balances to promote
internal growth and fund potential future acquisitions. However, unless the
Company is able in the future to raise significant additional financing, the
Company will be limited to its current cash balances for funding such internal
growth and add-on acquisitions. There can be no assurance that the Company will
be able to raise any such financing or on terms that are acceptable to the
Company. Further, the Company's cash funds for acquisitions might be limited to
the extent that the Company's current operations or the operations of any future
acquisitions require the funding of losses or the incurrence of significant
capital expenditure.

         At June 30, 2001, the Company had two credit lines available with
Connecticut Bank of Commerce ("CBC"):

         5B Group Revolving Credit Facility: On May 24, 2001, the Company
         entered into a revolving credit facility secured by eligible accounts
         receivable (as defined in the credit


                                       17
<PAGE>

         facility). The term of the credit facility is two years from the date
         of closing. Borrowings are limited to 75% of eligible accounts
         receivable. The rate of interest charged on the facility will be 1
         1/2% above the Wall Street prime commercial lending rate. As of June
         30, 2001, 5B Group had $621,000 outstanding under this line. As of
         June 30, 2001, primarily as a consequence of the settlement of the
         Klein litigation referenced above, the Company was not in compliance
         with its minimum tangible net worth requirement. However, on August
         16, 2001, the Company obtained a waiver of such non-compliance
         contained in the amendment to the credit facility in connection with
         the KSG transaction and is now in compliance with such covenant.

         Mezzanine Facility: On May 24, 2001, the Company obtained a maximum
         mezzanine facility of $1,500,000, to be used for future acquisitions
         and other agreed to purposes. The maximum amount of the mezzanine
         facility will be limited to the lesser of $1,500,000 and 110% of the
         total cash, cash equivalents, marketable securities and accounts
         receivable of the Company less the outstanding amount of the revolving
         credit facility. Additionally, the mezzanine facility may not be
         utilized until either (a) the amount of the mezzanine facility to be
         used is secured by cash collateral acceptable to CBC, or (b) (i) the
         sale of certain material assets, (ii) 5B has demonstrated a return to
         profitability, and (iii) a satisfactory settlement of the litigation
         relating to the redeemable preferred stock. The mezzanine facility will
         mature within two years, or be rolled into the 5B Group revolving
         credit facility. The rate of interest charged on the facility will be
         2% above the Wall Street prime commercial lending rate. As of June 30,
         2001, 5B Group had $0 outstanding under this line, however, in
         connection with the KSG asset acquisition, CBC has relaxed certain of
         the above requirements and the Company believes that, subject to CBC's
         approval, it will be able to use this mezzanine facility for future
         acquisitions.

         The two credit lines also have a requirement to maintain a minimum of
$1,000,000 with CBC at all times. If this requirement is not met there is a fee
of 2%, which is based on the shortfall. 5B did not meet this cash requirement
and has been charged the aforementioned fee.

         On April 17, 2000, the Company received an equity investment of
$874,465 ($1,000,000 less transaction costs of $125,535) from La Vista
Investors, LLC ("La Vista"), a fund managed by WEC Asset Management LLC, a New
York-based investment company.

         In connection with its investment, La Vista received (i) 1,000 shares
of the Company's Series A 6% Convertible Preferred Stock, par value $0.01 per
share (the "Series A Preferred Stock"), and (ii) a warrant convertible into
100,000 shares of the Company's Common Stock at an exercise price of $10.00 per
share of Common Stock (which was deemed to have an immaterial value), subject to
certain anti-dilution adjustments. Each share of Series A Preferred Stock is
convertible into such number of shares of Common Stock as is determined by
dividing $1,000, plus the amount of any accrued and unpaid dividends, by the
lower of (i) nine dollars ($9.00) or (ii) 80% of the average of the three lowest
Closing Bid Prices (as defined in the Certificate of Designations of the Series
A Preferred Stock) of the Company's Common Stock during the thirty (30) trading
days immediately preceding the date of notice from a holder of the Series A
Preferred Stock of any such conversion. In August 2000, the Company and the
holders


                                       18
<PAGE>

of the Company's Series A Preferred Stock agreed to exchange the Series A
Preferred Stock for the Series B Preferred Stock on a one-for-one basis. The
terms of the Series A Preferred Stock were identical to those of the Series B
Preferred except that the holders of the Series A Preferred Stock had the right
to vote together with the holders of Common Stock as a single class.

         In addition to the right of the selling stockholder to voluntarily
convert its Series B Preferred Stock into shares of our common stock, all
unconverted shares of the Series B Preferred Stock will automatically convert
into shares of common stock, at the then-applicable conversion formula, on April
17, 2003.

REDEMPTION RIGHTS OF REDEEMABLE PREFERRED STOCK

         The Company may be obligated to redeem the Series B Preferred Stock if:
(1) the number of shares issued upon conversion of the Series B Preferred Stock
were to exceed 19.9% of our outstanding common stock, or (2) we fail to conclude
certain required actions or if certain enumerated events (as described below)
were to occur.

         The Company will be required to redeem the outstanding Series B
Preferred Stock at a price equal to 125% of the Liquidation Preference (as
defined in the Certificate of Designations) if any of the following events
(among others) were to happen: (i) the registration statement registering the
shares of common stock into which the Series B Preferred Stock is convertible is
not effective by September 27, 2000, (ii) the Company breaches the terms of the
Series B Preferred Stock and does not cure such breach within 10 days of notice
to us of such breach, (iii) the Company becomes bankrupt by court order or if we
voluntarily institute bankruptcy proceedings or if other similar events occur
(iv) the Company defaults under any of our material contracts in our businesses
or lose a final judgment, where the default or judgment is in excess of
$250,000, or (v) there is a Change of Control (as defined in the Certificate of
Designations).

         Additionally, if the number of shares of common stock issued upon
conversion of the Series B Preferred Stock exceeds 19.9% of our outstanding
common stock, we must take, at our option, one of two actions: (i) redeem all of
the remaining shares of Series B Preferred Stock at a price equal to 120% of the
Liquidation Preference or (ii) call a special meeting of the Company's
stockholders to approve of the issuance of the common stock and use the
Company's best efforts to obtain such approval.

         The Company's ability to elect the first alternative (i.e., redeem at
120% of the Liquidation Preference) will depend on numerous factors in the
future, including whether it has sufficient funds to make such redemption. At
June 30, 2001, the Series B Preferred Stock was convertible into 1,262,626
shares of Common Stock, which exceeded the 19.9% limitation.

         On September 28, 2000, the Company received notification from La Vista
demanding redemption of the outstanding Series B Preferred Stock in accordance
with the terms of the Series B Preferred Stock due to the Company's failure to
have a registration statement declared effective by September 27, 2000. Although
the Company filed a registration statement relating to the Series B Preferred
Stock, which was declared effective on February 16, 2001, La Vista instituted a
lawsuit against the Company on January 4, 2001. The action seeks compensatory


                                       19
<PAGE>

and other damages and equitable relief. Among the remedies La Vista has demanded
are the redemption of the preferred stock at a redemption price of $1,250,000,
and liquidated damages of $100,000 relating to delays in effectuating the
registration statement. on February 6, 2001, the Company responded to the
Complaint denying liability for the relief sought and pleading certain
affirmative defenses. On February 28, 2001, La Vista made a motion to strike the
Company's defenses and for summary judgment. In March 2001, the Company made a
motion to amend its Answer to, among other things, plead additional affirmative
defenses. The Company also opposed La Vista's motion for summary judgment. The
motion for summary judgment and the motion to amend the Company's Answer are
awaiting decision. The Company believes that it will be successful in opposing
the motion for summary judgment, and that the motion to amend its Answer will be
granted. The Company believes that it has strong legal defenses and other legal
rights and intends to continue to vigorously defend this Action.

         Because of our present stock price, it is highly unlikely that we will
be able to raise funds through the sale of our equity securities, and our
financial condition prevents us from issuing debt securities. In the event that
we are unsuccessful in our litigation with the holder of our redeemable
preferred stock, we cannot assure you that we will be able to generate funds to
enable the Company to pay its financial obligations. In addition, our auditors
included in their report on our financial statements for the year ended December
31, 2000 an explanatory paragraph about our ability to continue as a going
concern.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board finalized FASB
Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill and
Other Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase
method of accounting and prohibits the use of the pooling-of-interests method of
accounting for business combinations initiated after June 30, 2001. SFAS 141
also requires that the Company recognize acquired intangible assets apart from
goodwill if the acquired intangible assets meet certain criteria. SFAS 141
applies to all business combinations initiated after June 30, 2001 and for
purchase business combinations completed on or after July 1, 2001. It also
requires, upon adoption of SFAS 142, that the Company reclassify, if necessary,
the carrying amounts of intangible assets and goodwill based on the criteria in
SFAS 141.

         SFAS 142 requires, among other things, that companies no longer
amortize goodwill, but instead test goodwill for impairment at least annually.
In addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized at that date, regardless of when those assets were
initially recognized. SFAS 142 requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption. The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142.


                                       20
<PAGE>

         The Company's previous business combinations were accounted for using
the purchase method. As of June 30, 2001, the net carrying of amount of goodwill
is $502,000 and other intangible assets is $511,000. Amortization expense during
the six-month period ended June 30, 2001 was $103,000. At present, the Company
is currently assessing but has not yet determined the impact the adoption of
SFAS 141 and SFAS 142 will have on its financial position and results of
operations.

INFLATION

         Management does not believe inflation had a material adverse effect on
the financial statements for the periods presented.

FORWARD LOOKING STATEMENTS AND ASSOCIATED RISK

         Statements contained in this Form 10-Q, which are not historical facts,
are forwarding-looking statements. The forward-looking statements in this Form
10-Q are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements made herein contain a
number of risks and uncertainties that could cause actual results to differ
materially. These risks and uncertainties include, but are not limited to,
specific factors impacting the Company's business, including increased
competition; the ability of the Company to expand its operations and attract and
retain qualified sales representatives and technically trained consultants
experienced in the Internet and IT sectors; the ability of the Company to
attract and retain Internet solutions and IT professionals skilled in specific
applications; the ability of the Company to attract and retain qualified
personnel in the legal staffing sector; the availability of computer equipment;
competition in the Internet solutions and IT consulting sector and general
economic conditions and the Company's need for additional capital to finance the
growth of its operations.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         "Quantitative and Qualitative Disclosure About Market Risk", on page 24
of the Company's Annual Report on Form 10-K, is incorporated herein by
reference. No material changes have occurred from the disclosure in Form 10-K,
through the three and six months ended June 30, 2001.




                                       21
<PAGE>

                           PART II: OTHER INFORMATION
                           --------------------------

ITEM 1.  LEGAL PROCEEDINGS

         In August 2000, Robert Klein commenced a lawsuit against the Company
and Deltaforce Personnel Services Inc. in the Supreme Court of New York. The
Complaint alleged that the Company breached an agreement to timely register Mr.
Klein's stock. In July 2001, a settlement was reached and the Company agreed to
pay Mr. Klein $875,000 in cash to be paid over a 3-year period (which has a
present value of $820,000), and to issue to Mr. Klein a warrant to purchase
400,000 shares of the Company's common stock, which warrant expires in July
2005, and has an exercise price of $0.75 per share (which warrant is valued at
$250,000 based on the Black-Scholes valuation model). Of the cash settlement
amount, $500,000 is payable as follows: $150,000 upon execution of the
settlement in July 2001, $100,000 on August 1, 2001, $50,000 on September 1,
2001, $100,000 on January 2, 2002 and $100,000 on January 2, 2003; and $375,000
is payable at the rate of $12,500 per month over a period of 30 months
commencing on October 1, 2001. In addition, the stock subscription receivable of
$812,500 was rescinded in connection with the settlement. Legal fees relating to
the lawsuit approximated $165,000 for the six months ended June 30, 2001.

         On September 28, 2000, the Company received notification from La Vista
demanding redemption of the outstanding Series B Preferred Stock in accordance
with the terms of the Series B Preferred Stock due to the Company's failure to
have a registration statement declared effective by September 27, 2000. Although
the Company filed a registration statement relating to the Series B Preferred
Stock, which was declared effective on February 16, 2001, La Vista instituted a
lawsuit against the Company on January 4, 2001. The action seeks compensatory
and other damages and equitable relief. Among the remedies La Vista has demanded
are the redemption of the preferred stock at a redemption price of $1,250,000,
and liquidated damages of $100,000 relating to delays in effectuating the
registration statement. On February 6, 2001, the Company responded to the
Complaint denying liability for the relief sought and pleading certain
affirmative defenses. On February 28, 2001, La Vista made a motion to strike the
Company's defenses and for summary judgment. In March 2001, the Company made a
motion to amend its Answer to, among other things, plead additional affirmative
defenses. The Company also opposed La Vista's motion for summary judgment. The
motion for summary judgment and the motion to amend the Company's Answer are
awaiting decision. The Company believes that it will be successful in opposing
the motion for summary judgment, and that the motion to amend its Answer will be
granted. The Company believes that it has strong legal defenses and other legal
rights and intends to continue to vigorously defend this Action.

         Larry Kagan, a former employee of Delta, was terminated for cause on
October 14, 1999. In June 2000, Mr. Kagan commenced an arbitration alleging that
Delta breached his employment agreement and that the Company breached a related
stock purchase agreement by terminating his employment. Delta and the Company
have denied liability, asserted counterclaims of $200,000 (plus $200,000 in
punitive damages) against Mr. Kagan and are vigorously defending the
arbitration. The arbitration hearing was held over the course of six days in
June, July and August 2001. The matter will be submitted to the arbitration
panel for decision with the submission of the parties' post-hearing briefs due
on August 27, 2001. The Company does not believe that the


                                       22
<PAGE>

ultimate outcome of this proceeding will have a material impact on the Company's
financial condition.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         The information contained in Footnote 9- Subsequent Events, set forth
in Notes to Unaudited Consolidated Financial Statements herein, is hereby
incorporated by reference into this Item 2. The securities described in such
Footnote 9 were sold in reliance upon Section 4(2) of the Securities Act of
1933, as amended, which provides an exemption for sales of securities by an
issuer not involving a public offering.

ITEM 6.  XHIBITS AND REPORTS ON FORM 8-K

         (A)   EXHIBITS:

               3.5     -     Certificate of Designations of Series C, Series D
                             and Series E 6% Convertible Preferred Stock of 5B
                             Technologies Corporation.

               10.19   -     Asset Purchase Agreement dated as of July 30, 2001,
                             by and among the Company, Knowledge Acquisition
                             Corporation, Knowledge Strategies Group, Inc.,
                             Cynthia Hollen, Douglas Carlson and Michael
                             Thompson.

               10.20   -     Amendment No. 1 to Asset Purchase Agreement, dated
                             as of August 16, 2001, by and among the Company,
                             Knowledge Acquisition Corporation, Knowledge
                             Strategies Group, Inc., Cynthia Hollen, Douglas
                             Carlson and Michael Thompson.

               10.21   -     First Amendment to Credit Agreement, dated as of
                             August 16, 2001, between 5B Technologies Group,
                             Inc. and Connecticut Bank of Commerce.

               10.22   -     Security Agreement, dated as of August 16, 2001,
                             between Knowledge Acquisition Corporation and
                             Connecticut Bank of Commerce.

               10.23   -     Amended and Restated Registration Rights Agreement,
                             dated as of August 16, 2001, between the Company
                             and Connecticut Bank of Commerce.

         (B)   REPORTS ON FORM 8-K:

         The Company filed the following Current Reports on Form 8-K during the
three month period ended June 30, 2001:

         (i)      Current Report on Form 8-K dated May 16, 2001 reporting under
Item 5. the sale of the Company's DeltaForce Personnel Services business; and


                                       23
<PAGE>


         (ii)     Current Report on Form 8-K dated May 29, 2001 reporting under
Item 2. the sale of the Company's DeltaForce Personnel Services business.










                                       24
<PAGE>


                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                       5B TECHNOLOGIES CORPORATION


Date:  August 17, 2001                 By:         /s/ Glenn Nortman
                                          --------------------------------------
                                          Glenn Nortman, Chief Executive Officer



                                       By:       /s/ Anthony Fernandez
                                          --------------------------------------
                                          Anthony Fernandez, Principal Financial
                                          Officer





                                       25


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.5
<SEQUENCE>3
<FILENAME>file002.txt
<DESCRIPTION>CERTIFICATE OF DESIGNATIONS
<TEXT>
<PAGE>


                           CERTIFICATE OF DESIGNATION
                                       FOR
                    SERIES C 6% CONVERTIBLE PREFERRED STOCK,
                   SERIES D 6% CONVERTIBLE PREFERRED STOCK AND
                     SERIES E 6% CONVERTIBLE PREFERRED STOCK
                                       OF
                           5B TECHNOLOGIES CORPORATION

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

 Pursuant to Section 151 of the General Corporation Law of the State of Delaware

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

     The undersigned, Glenn Nortman, hereby certifies that:

     1.  I am the duly elected and acting Chief Executive Officer of 5B
         Technologies Corporation, a Delaware corporation (the "Corporation").

     2.  The Certificate of Incorporation of the Corporation authorizes five
         million (5,000,000) shares of preferred stock, $0.01 par value per
         share.

     3.  The following is a true and correct copy of the resolution duly adopted
         by the unanimous written consent of the Board of Directors of the
         Corporation (the "Board of Directors") on July 30, 2001 pursuant to the
         Certificate of Incorporation of the Corporation and in accordance with
         the provisions of the General Corporation Law of the State of Delaware,
         relating to the designation and issuance of the Series C, D and E
         preferred stock, each at a par value $.01 per share, of the
         Corporation, to be designated "Series C 6% Convertible Preferred
         Stock", "Series D 6% Convertible Preferred Stock" and "Series E 6%
         Convertible Preferred Stock," which resolution remains in full force
         and effect as of the date hereof:

         RESOLVED, that pursuant to the authority vested in the Board of
     Directors of the Corporation by the Certificate of Incorporation, the Board
     of Directors does hereby provide for the issuance of the following series
     of preferred stock, par value $0.01 per share, of the Corporation, to be
     designated "Series C 6% Convertible Preferred Stock" ("Series C
     Preferred"), "Series D 6% Convertible Preferred Stock" ("Series D
     Preferred") and "Series E 6% Convertible Preferred Stock" ("Series E
     Preferred" and with the Series C Preferred and the Series D Preferred,
     hereinafter collectively referred to as the "Preferred Stock") which shall
     have the designation, rights, preferences, privileges and restrictions and
     limitations as follows:

<PAGE>

"I       SERIES C 6% CONVERTIBLE PREFERRED STOCK

(A)      Designation and Amount. The shares of such series shall be designated
     as "Series C 6% Convertible Preferred Stock," par value $0.01 per share
     (the "Series C Preferred"), and the number of shares constituting such
     series shall be 4,000.


(B)      Rights, Preferences, Privileges and Restrictions of the Series C
     Preferred. The rights, preferences, privileges and restrictions granted to
     and imposed on the Series C Preferred are as follows:

(1)      Dividend Provisions.

         (a) The holders of shares of the Series C Preferred shall be entitled
         to receive, out of any funds legally available therefor, prior and in
         preference to the declaration or payment of any dividend or
         distribution to the holders of Common Stock or any other shares or
         securities of the Corporation ranking junior to the Series C Preferred
         with respect to the payment of dividends and/or the distribution of
         assets on liquidation (including, without limitation, the Series A
         Preferred Stock and the Series B Preferred Stock, the "Junior
         Securities"), dividends which shall accrue cumulatively on each share
         of the Series C Preferred at the rate and in the manner prescribed in
         this section 1 from and including the date of issuance of such shares
         of the Series C Preferred, but excluding the date on which any
         conversion or redemption of such shares of the Series C Preferred shall
         have been effected, and payable quarterly in arrears. The date on which
         the Corporation initially issues a share of the Series C Preferred will
         be deemed to be its "date of issuance" regardless of the number of
         times transfer of such shares of the Series C Preferred is made, or of
         the number of certificates which may be issued to evidence a share of
         the Series C Preferred.

         (b) Dividends shall accrue on each share of the Series C Preferred (and
         on any accrued and unpaid dividends thereon) at a rate per annum,
         compounded quarterly, of 6% of the Original Series C Preferred Stock
         Issue Price (as defined below) (as adjusted for stock splits, stock
         dividends, combinations,

                                       2
<PAGE>

         recapitalizations and similar events). In the event of any liquidation,
         dissolution or winding up of the Corporation or the redemption of a
         share of the Series C Preferred or the bankruptcy of the Corporation,
         all accrued and unpaid dividends on a share of Series C Preferred shall
         be added to the liquidation preference of such share on the payment
         date under subsection 2(a) below, or on the date of redemption of such
         share or upon the bankruptcy of the Corporation, as the case may be,
         accrued cumulatively to but excluding such payment date or redemption
         date or bankruptcy on a daily basis. If there shall be any accrued but
         unpaid dividends immediately prior to, and in the event of, a
         conversion of shares of the Series C Preferred into shares of Common
         Stock, all such accrued and unpaid dividends shall, at the
         Corporation's option, be converted into that number of shares of Common
         Stock determined by dividing the amount of such dividends by the then
         effective Conversion Price (as defined in subsection 3(a) below), but
         only if the Corporation delivers to the holder of such Series C
         Preferred a written notice of the election by the Corporation to
         exercise such option within five days after the receipt by the
         Corporation of the certificate or certificates representing such shares
         of Series C Preferred (as contemplated by Section I(B)(3)(d) below).

         (c) No dividend or other distribution (other than a dividend or
         distribution payable solely in Common Stock) shall be paid on or set
         apart for payment on the Common Stock or other Junior Securities nor
         shall any payment be made on account of the purchase, redemption or
         retirement of any Common Stock or other Junior Securities, unless all
         accrued and unpaid dividends on the Series C Preferred have been or
         contemporaneously are paid or set apart for payment in accordance
         herewith; provided, however, that the Corporation may repurchase Common
         Stock owned by terminated employees of, or consultants to, the
         Corporation or its subsidiaries as and to the extent contemplated by
         Section I(B)(8) below. A conversion of a convertible security which by
         its terms is convertible into Common Stock by the holder thereof shall
         not be deemed a purchase, redemption or retirement of the security so
         converted for purposes of this subsection 1(c). No dividend or other
         distribution shall be declared on any series of preferred stock ranking
         as to dividends or other distributions on a parity with any other
         series of preferred stock unless there shall have been

                                       3
<PAGE>

         declared on all shares then outstanding of such series of preferred
         stock like proportionate dividends or other distributions ratably in
         proportion to the respective dividends or other distributions payable
         in respect of each such series of preferred stock (the Series D
         Preferred and the Series E Preferred shall rank on a parity with the
         Series C Preferred as to dividends and other distributions).

         (d) Any cash dividend (other than pursuant to Section (B)(1)(b) above)
         which has been declared with respect to the Series C Preferred and is
         otherwise due and payable thereon shall be paid in cash.

(2)      Liquidation Preference.

         (a) In the event of any liquidation, dissolution or winding up of the
         Corporation, either voluntary or involuntary, the holders of the Series
         C Preferred shall be entitled to receive, in cash, prior and in
         preference to any distribution of any of the assets or surplus funds of
         the Corporation to the holders of the Common Stock or any other Junior
         Securities by reason of their ownership thereof, the amount of $100.00
         per share (the "Original Series C Preferred Stock Issue Price") in cash
         or cash equivalents for each share of Series C Preferred then held by
         them, and, in addition, an amount equal to all accrued but unpaid
         dividends on such shares of Series C Preferred in cash or cash
         equivalents. If, upon occurrence of such event the assets and funds
         thus distributed ratably among the holders of the Series C Preferred
         shall be insufficient to permit the payment to such holders (and the
         holders of any series of preferred stock that ranks on a parity with
         the Series C Preferred on any liquidation, dissolution or winding up of
         the Corporation, including, without limitation, the Series D Preferred
         Stock and the Series E Preferred Stock) of the full preferential
         amount, then the entire assets and funds of the Corporation legally
         available for distribution shall be distributed among the holders of
         the Series C Preferred (and such parity stock) in proportion to the
         amount that the holders of the Series C Preferred and the holders of
         such parity stock would be entitled to receive if they were to be paid
         the full amounts due to them at the time of such liquidation,
         dissolution or winding up. After payment has been made to the holders
         of the Series C Preferred of the full amounts to which they shall be
         entitled as aforesaid, all remaining assets of the Corporation shall be

                                       4
<PAGE>

         distributed among all holders of the preferred stock of the Corporation
         that rank junior to the Series C Preferred on any liquidation,
         dissolution or winding up of the Corporation (including, without
         limitation, holders of Series A 6% Convertible Preferred Stock and
         Series B 6% Convertible Preferred Stock and any subsequently issued
         series of preferred stock) and all holders of Common Stock and other
         Junior Securities in proportion to the number of shares of Common Stock
         which would be held by each such holder if all shares of such series'
         of preferred stock were converted into Common Stock.

         (b) For purposes of this section 2, a liquidation, dissolution or
         winding up of the Corporation shall be deemed to be occasioned by, and
         to include, without limitation, the redemption or other purchase by the
         Corporation of all of its outstanding Common Stock, the Corporation's
         sale of all or substantially all of its assets or the acquisition of
         this Corporation by another entity by means of merger or consolidation
         of the Corporation with or into any other entity (whether or not the
         Corporation is the surviving or emerging entity) in which cash, stock
         or other securities or property of the Corporation, transferee or
         surviving or emerging entity or an affiliate thereof are to be received
         or where the holders of shares of the Corporation prior to such merger
         or consolidation represent less than 50% of the outstanding shares of
         the surviving entity after such merger or consolidation. Written notice
         of any event of liquidation pursuant to this section 2 shall be given
         by first class mail, postage prepaid, not less than 30 days prior to
         any payment date, which shall be stated therein, to the holders of
         record of the Series C Preferred, such notice to be addressed to each
         such holder at his last address as shown by the records of the
         Corporation. Notwithstanding the receipt of such notice, prior to the
         payment date with respect to any such liquidation as set forth therein,
         the holder of record of the Series C Preferred may still avail itself
         of the Conversion Rights set forth in section 3 below.

     (3) Conversion. The holders of the Series C Preferred shall each have
     conversion rights as follows (the "Conversion Rights"):

                                       5
<PAGE>

         (a) Right to Convert.Subject to the limitations set forth in subsection
         3(b) below, at any time, each share of Series C Preferred shall be
         convertible into a number of fully paid and nonassessable shares of
         Common Stock equal to (x) the sum of the Original Series C Preferred
         Stock Issue Price (as defined below) and, in the event the Corporation
         shall not elect to exercise its option referred to in the last sentence
         of Section I(B)(1)(b), the amount of all accrued and unpaid dividends
         thereon, divided by (y) the Series C Conversion Price at such time.
         Each share of Series C Preferred shall be convertible at the option of
         the holder thereof at any time. The price at which shares of Common
         Stock shall be deliverable upon conversion (the "Series C Conversion
         Price") shall initially be $2.00 per share of Common Stock. Such
         initial Series C Conversion Price shall be subject to adjustment as
         hereinafter provided.

         (b) Nasdaq Conversion Limitation. Unless the Company obtains the
         requisite approval of its stockholders to comply with the applicable
         rules of the Nasdaq SmallCap Market or the Nasdaq National Market, no
         holder of any shares of Series C Preferred may exercise its conversion
         rights to the extent that such conversion would, together with (i) an
         aggregate of 140,193 shares of Common Stock issued by the Corporation
         to such holder on the date hereof, (ii) 50,000 shares of Common Stock
         subject to outstanding warrants to purchase Common Stock and (iii)
         shares of Common Stock issued upon conversion of the Series D Preferred
         and the Series E Preferred, cause such holder to obtain more than 19.9%
         of all issued and outstanding shares of Common Stock including shares
         issuable in respect of outstanding scrip or any certificates
         representing fractional interests in such shares of Common Stock. The
         prior sentence shall not prohibit any holder of shares of Series C
         Preferred from exercising its conversion rights at any time following
         such time as the Common Stock is not listed on the Nasdaq SmallCap
         Market or the Nasdaq National Market. Nothing in this subsection 3(b)
         shall prohibit a holder of Series C Preferred from converting such
         stock if and to the extent that the shares issued upon such conversion,
         together with the shares of Common Stock referred to in subclauses (i),
         (ii) and (iii) above and any and all shares of Common Stock issued upon
         prior conversions by such holder of the Series C Preferred, would equal
         19.9% or less of all issued and outstanding shares of Common Stock,
         including shares issuable in respect of

                                       6
<PAGE>

         outstanding scrip or any certificates representing fractional interests
         in such shares of Common Stock. With respect to any holder of Series C
         Preferred, all references in this subsection 3(b) to 19.9% of all
         issued and outstanding shares of Common Stock of the Corporation shall
         mean 19.9% of such issued and outstanding Common Stock as of the date
         of issuance by the Corporation of the Series C Preferred to such
         holder.

         (c) Shareholder Vote regarding Conversion Limitation. If a holder of
         the Series C Preferred is unable to exercise its conversion rights due
         to the limitations set forth in subsection 3(b) above, the Board of
         Directors shall use commercially reasonable efforts to present and
         recommend to the stockholders of the Company at the next annual meeting
         of stockholders (to be held in accordance with the corporate laws of
         Delaware, the Certificate of Incorporation and the Bylaws of the
         Company) a proposal to approve such holder acquiring in excess of 19.9%
         of the issued and outstanding shares of Common Stock upon conversion of
         the Series C Preferred. The Corporation hereby undertakes to present
         such proposal at the annual meeting of stockholders to take place in
         2002 or, if earlier, at the next meeting of stockholders (or in the
         next action taken by consent of stockholders without a meeting) other
         than the annual meeting of stockholders to take place in 2001. The
         Corporation shall use its best efforts to hold such annual meeting of
         stockholders prior to September 30, 2002. Notwithstanding the
         foregoing, at the request of the holders of the Series C Preferred, the
         Company shall hold a special meeting of stockholders as soon as
         practicable in accordance with all applicable state and federal laws
         and regulations; provided that the holders of the Series C Preferred
         pay or promptly reimburse the Corporation for all costs and expenses
         relating to such special meeting of stockholders. If such approval is
         not obtained at the next such meeting of the stockholders of the
         Corporation (or in the next action taken by consent of stockholders
         without a meeting), the Corporation shall thereafter continue to use
         commercially reasonable efforts to effect such approval. In no event
         may the Corporation issue more than 19.9% of the issued and outstanding
         shares of Common Stock as determined in subsection 3(b) above without
         obtaining such requisite vote of stockholders as set forth herein.

                                       7
<PAGE>

         (d) Mechanics of Conversion. No fractional shares of Common Stock shall
         be issued upon conversion of the Series C Preferred. In lieu of any
         fractional share to which a holder would otherwise be entitled, the
         Corporation shall pay cash equal to such fraction multiplied by the
         fair market value of the Common Stock as determined by the Board of
         Directors. Before any holder of the Series C Preferred shall be
         entitled to convert the same into full shares of Common Stock, he shall
         surrender the certificate or certificates therefor, duly endorsed, at
         the office of the Corporation or of any transfer agent for the Series C
         Preferred, as designated by the Corporation, and shall give written
         notice to the Corporation at such office that he elects to convert the
         same. The Corporation shall, as soon as practicable thereafter, issue
         and deliver at such office to such holder of Series C Preferred, a
         certificate or certificates for the number of shares of Common Stock to
         which such holder shall be entitled as aforesaid and a check payable to
         the holder in the amount of any cash amounts payable as the result of a
         conversion into a fractional share of Common Stock and, if the
         Corporation shall exercise the option referred to in the last sentence
         of Section I(B)(1)(b), any amount owed to such holder as the result of
         such exercise. Such conversion shall be deemed to have been made
         immediately prior to the close of business on the date of such
         surrender of the shares of Series C Preferred to be converted, and the
         person or persons entitled to receive the shares of Common Stock
         issuable upon such conversion shall be treated for all purposes as the
         record holder or holders of such shares of Common Stock on such date.

         (e) Adjustments to Series C Conversion Price for Diluting Issues.

                    (i) Stock Dividends. If the number of shares of Common Stock
             outstanding at any time after the effectiveness of these
             resolutions is increased by a stock dividend payable in shares of
             Common Stock or by a subdivision or split-up of shares of Common
             Stock or a similar transaction in respect thereof, then immediately
             effective at the close of business upon the record date fixed for
             the determination of holders of Common Stock entitled to receive
             such stock dividend, subdivision or split-up or similar
             transaction, the Series C Conversion Price shall be appropriately
             decreased so that the number of shares of Common Stock

                                       8
<PAGE>


             issuable on conversion of each share of Series C Preferred shall be
             increased in proportion to such increase of outstanding shares of
             Common Stock. Successive adjustments shall be made upon each such
             stock dividend, subdivision or split or similar transaction.

                    (ii) Adjustments for Subdivisions, Combinations, or
             Consolidations of Common Stock. In the event the outstanding shares
             of Common Stock shall be decreased by a subdivision or combination,
             by reclassification or otherwise, into a greater or lesser number
             of shares of Common Stock, the Series C Conversion Price in effect
             immediately prior to such subdivision or combination shall,
             concurrently with the effectiveness of such subdivision,
             combination or consolidation, be proportionately adjusted so that
             the number of shares of Common Stock issuable upon conversion of
             each share of Series C Preferred shall be decreased in proportion
             to such decrease of outstanding shares of Common Stock. Successive
             adjustments shall be made upon each such subdivision, combination
             or reclassification.

                    (iii) Adjustments for Other Distributions. In the event the
             Corporation at any time or from time to time makes, or fixes a
             record date for the determination of holders of Common Stock
             entitled to receive, any distribution payable in securities of the
             Corporation other than shares of Common Stock, then and in each
             such event provision shall be made so that the holders of the
             Series C Preferred shall receive upon conversion thereof, in
             addition to the number of shares of Common Stock receivable
             thereupon, the amount of securities of the Corporation which they
             would have received had their Series C Preferred been converted
             into Common Stock on the date of such event to and including the
             date of conversion, and retained such securities receivable by them
             as aforesaid during such period, subject to all other adjustments
             called for during such period under these resolutions with respect
             to the rights of the holders of the Series C Preferred.

                                       9
<PAGE>

                    (iv) Adjustments for Reorganizations, Reclassifications,
             etc. If the Common Stock issuable upon conversion of the Series C
             Preferred shall be changed into the same or a different number of
             shares of any other class or classes of stock or other securities
             or property, whether by reclassification, a merger or consolidation
             of this Corporation with or into any other entity or entities
             (other than pursuant to a subdivision, combination, stock dividend,
             or other distribution provided for in subsections 3(e)(i), (ii) or
             (iii) above), the Series C Conversion Price then in effect shall,
             concurrently with the effectiveness of such reorganization or
             reclassification, be proportionately adjusted such that the Series
             C Preferred shall be convertible into, in lieu of the number of
             shares of Common Stock which the holders would otherwise have been
             entitled to receive, a number of shares of such other class or
             classes of stock or securities or other property equivalent to the
             number of shares of Common Stock that would have been subject to
             receipt by the holders upon conversion of the Series C Preferred
             immediately before such event; and, in any such case, appropriate
             adjustment shall be made in the application of the provisions
             herein set forth with respect to the rights and interest thereafter
             of the holders of the Series C Preferred, to the end that the
             provisions set forth herein (including provisions with respect to
             changes in and other adjustments of the Series C Conversion Price)
             shall thereafter be applicable, as nearly as may be reasonable, in
             relation to any shares of stock or other property thereafter
             deliverable upon the conversion of the Series C Preferred.
             Successive adjustments shall be made upon each such
             reclassification, merger or consolidation.

                    (v) Adjustments for Issuances Below the Current Market
             Price.

                    (A) Except as provided in subsection (B), if the Corporation
             shall, while there are any shares of the Series C Preferred
             outstanding, issue or sell shares of the Common Stock of the
             Corporation at a price per share less than the then Current Market
             Price (as defined below) in effect immediately prior to such
             issuance or sale, then in each such case, the Series C Conversion
             Price shall be adjusted, effective as of the date

                                       10
<PAGE>

             of the issuance of such shares of the Common Stock of the
             Corporation, to an amount determined by multiplying the Series C
             Conversion Price in effect immediately prior to such issuance or
             sale by a fraction:

                    (i) the numerator of which shall be (1) the aggregate number
                    of shares of the Common Stock outstanding immediately prior
                    to the issuance of such additional shares of Common Stock,
                    plus (2) the aggregate number of shares of Common Stock then
                    issuable upon conversion of the shares of Series C Preferred
                    outstanding immediately prior to the issuance of such
                    additional shares of Common Stock, plus (3) the number of
                    shares of Common Stock that the net aggregate consideration
                    received by the Corporation for the total number of such
                    additional shares of the Common Stock so issued would
                    purchase at such Series C Conversion Price in effect
                    immediately prior to such issuance, and

                    (ii) the denominator of which shall be (1) the aggregate
                    number of shares of the Common Stock outstanding immediately
                    prior to the issuance of such additional shares of the
                    Common Stock, plus (2) the aggregate number of shares of
                    Common Stock then issuable upon conversion of the shares of
                    Series C Preferred outstanding immediately prior to the
                    issuance of such additional shares of Common Stock, plus (3)
                    the number of such additional shares of the Common Stock so
                    issued.

                    (B) The adjustments contemplated by subsection (A) above
             shall not apply to (i) any issuance of shares of the Common Stock
             to officers, directors, employees, consultants or agents of the
             Corporation or any subsidiary of the Corporation pursuant to any
             stock option plan or arrangement or other equity incentive, bonus,
             or similar plan or arrangement approved by the Board of Directors,
             (ii) the issuance of shares of Common Stock in connection with the
             merger or acquisition of the Corporation or any of its subsidiaries
             with or into an unaffiliated third party or for purposes of a
             strategic business alliance with an

                                       11
<PAGE>

             unaffiliated third party, (iii) the issuance of any Common Stock
             issued in connection with an underwritten public offering of such
             securities in which the per share price to the public and any
             underwriting discounts and commissions are determined in a manner
             that is customary for an underwritten offering of similar size and
             composition, or (iv) the issuance of any Common Stock in connection
             with the conversion of the Series B Preferred Stock, Series C
             Preferred Stock, Series D Preferred Stock or Series E Preferred
             Stock.

             (C) For purposes of this section 3(e)(v), the issuance of any
             warrants, options, subscriptions or purchase rights with respect to
             shares of Common Stock and the issuance of any securities
             convertible into or exchangeable for shares of Common Stock, or the
             issuance of any warrants, options or any rights with respect to
             such convertible or exchangeable securities, shall be deemed to be
             an issuance of shares of Common Stock at the time of the issuance
             thereof if the Net Consideration Per Share (as hereinafter defined)
             which may be received by the Corporation for the shares of Common
             Stock or issuable upon the exercise thereof is less than the then
             Current Market Price at the time of the issuance of such warrants,
             options subscriptions, purchase rights or securities. Any
             obligation, agreement or undertaking to issue warrants, options,
             subscriptions, purchase rights or such securities at any time in
             the future shall be deemed to be an issuance at the time such
             obligation, agreement or undertaking is made or arises.
             Notwithstanding the foregoing, any adjustment made to the Series C
             Conversion Price pursuant to the provisions of this section 3(e)(v)
             which relates to warrants, options, subscriptions or purchase
             rights with respect to shares of Common Stock shall be disregarded
             when, as and if all of such warrants, options, subscriptions or
             purchase rights expire or are canceled without being exercised, so
             that the Series C Conversion Price effective immediately upon such
             cancellation or expiration shall be equal to the Series C
             Conversion Price in effect at the time of the issuance of the
             expired or canceled warrants, options, subscriptions or purchase
             rights, after taking into account any other adjustments that would
             have been

                                       12
<PAGE>

             made to the Series C Conversion Price had the expired or canceled
             warrants, options, subscriptions or purchase rights not been
             issued. No adjustment to the Series C Conversion Price shall be
             made pursuant to the provisions of this section 3(e)(v) either (x)
             upon the issuance of any shares of the Common Stock that are issued
             pursuant to the exercise of any warrants, options, subscriptions or
             purchase rights or pursuant to the exercise of any conversion or
             exchange rights of any convertible securities if any adjustment
             shall previously have been made upon the issuance of any such
             warrants, options or subscriptions or purchase rights or upon the
             issuance of any such convertible securities (or upon the issuance
             of any warrants, options or any rights therefor) or (y) upon the
             issuance of any warrants, options, subscription or purchase rights
             or any other securities convertible into or exchangeable or
             exercisable for shares of Common Stock (or upon the issuance of any
             warrants, options or rights to purchase such securities) in
             accordance with subsection (B). Any anti-dilution adjustment to any
             other class or series of warrants, options, rights, or convertible
             securities shall be deemed to be an issuance of Common Stock at the
             time of such adjustment; provided, however, that in no event shall
             the Series C Preferred Stock be subject to more than one adjustment
             as a result of any single anti-dilution adjustments to any other
             security of the Corporation.

                    (D) For purposes of subsection (C), the "Net Consideration
             Per Share" shall mean the amount which is equal to the total amount
             of consideration, if any, received by the Corporation for the
             issuance of warrants, options, subscriptions or other purchase
             rights or convertible or exchangeable securities, plus the minimum
             amount of consideration, if any, payable to the Corporation upon
             exercise or conversion thereof, divided by the aggregate number of
             shares of the Common Stock that would be issued if all such
             warrants, options, subscriptions or other purchase rights or
             convertible or exchangeable securities were exercised, converted or
             exchanged. For purposes of this subsection (D), if part or all of
             the consideration received or to be received by the Corporation in
             connection with the issuance of shares of Common Stock or the
             issuance

                                       13
<PAGE>

             of any of the securities described in this subsection (D) consists
             of property other than cash, the value of such property shall be
             determined by or at the direction of the Board of Directors, in
             good faith, whereupon such value shall be given to such
             consideration and shall be recorded on the books of the Corporation
             with respect to receipt of such property.

                    (E) For the purpose of any computation under subsection (A)
             the Current Market Price per share of Common Stock on any date
             shall be (i) the last reported sale price, or if none is reported,
             the average of the reported closing bid and asked prices, on all
             domestic securities exchanges on which the Common Stock is listed,
             or (ii) if on any day the Common Stock is not so listed, the sales
             price for the Common Stock as of 4:00 P.M., New York time, as
             reported on the Nasdaq Stock Market, or (iii) if the Common Stock
             is not reported on the Nasdaq Stock Market, the average of the
             representative bid and asked quotations for the Common Stock as of
             4:00 P.M., New York time, as reported on the Nasdaq interdealer
             quotation system, bulletin board, over the counter market or any
             similar or successor organization, in each such case averaged over
             a period of 15 trading days prior to the day as of which the
             Current Market Price is being determined. If there is no such
             closing price or closing bid and asked prices or the Common Stock
             is not reported on any such exchange or market, the Current Market
             Price shall be determined in any good faith reasonable manner
             approved by the Board of Directors of the Corporation.

         (f) No Impairment.

                    (i) The Corporation will not, by amendment of its
             Certificate of Incorporation or through any reorganization,
             transfer of assets, merger, dissolution, issue or sale of
             securities or any other voluntary action, avoid or seek to avoid
             the observance or performance of any of the terms to be observed or
             performed hereunder by the Corporation but will at all times in
             good faith assist in the carrying out of all the

                                       14
<PAGE>

             provisions of this section 3 and in the taking of all such action
             as may be necessary or appropriate in order to protect the
             conversion rights of the holders of the Series C Preferred against
             impairment.

                    (ii) The Corporation shall at all times reserve and keep
             available for issuance upon the conversion of the Series C
             Preferred a number of its authorized but unissued shares of Common
             Stock that will from time to time be sufficient to permit the
             conversion of all outstanding shares of Series C Preferred, and
             shall take all action required to increase the authorized number of
             shares of Common Stock if at any time there shall be insufficient
             authorized but unissued shares of Common Stock to permit such
             reservation or to permit the conversion of all outstanding shares
             of Series C Preferred.

                    (iii) Any registered holder of Series C Preferred shall be
             entitled to seek an injunction or injunctions to prevent breaches
             of the provisions of this certificate of designation and to enforce
             specifically the terms and provisions of this certificate of
             designation in any court of the United States or any state thereof
             having jurisdiction, this being in addition to any other remedy to
             which such holder may be entitled at law or in equity.

         (g) Certificate as to Adjustments. Upon the occurrence of each
         adjustment or readjustment of the Series C Conversion Price pursuant to
         this section 3, the Corporation, at its expense, shall promptly compute
         such adjustment or readjustment in accordance with the terms hereof and
         furnish to each holder of Series C Preferred a certificate setting
         forth such adjustment or readjustment and showing in detail the facts
         upon which such adjustment or readjustment is based. The Corporation
         shall, upon the written request at any time of any holder of Series C
         Preferred, furnish or cause to be furnished to such holder a like
         certificate setting forth (i) such adjustments and readjustments,(ii)
         the Series C Conversion Price at the time in effect, and (iii) the
         number of shares of Common Stock and the amount, if any, of other
         property which at the time would be received upon the conversion of
         Series C Preferred.

                                       15
<PAGE>

         (h) Notices of Record Date. In the event that this Corporation shall
         propose at any time:

                    (i) to declare any dividend or distribution upon its Common
             Stock, whether in cash, property, stock or other securities,
             whether or not a regular cash dividend and whether or not out of
             earnings or earned surplus;

                    (ii) to effect any reclassification or recapitalization or
             other reorganization of its capital stock; or

                    (iii) to merge with or into any other corporation or other
             entity, or sell, lease or convey all or substantially all its
             property or business, or to liquidate, dissolve or wind up;

         then, in connection with each such event, this Corporation shall send
         to the holders of the Series C Preferred shares:

                    (A) at least 10 days' prior written notice of the date on
             which a record shall be taken for such dividend, distribution or
             subscription rights and setting forth a description thereof (and
             specifying the date on which the holders of Common Stock shall be
             entitled thereto) or for determining rights to vote in respect of
             the matters referred to in (iii) above; and

                    (B) in the case of the matters referred to in subsection
             3(h)(ii) or (iii) above, at least 10 days' prior written notice of
             the date when the same shall take place (and specifying the date on
             which the holders of Common Stock shall be entitled to exchange
             their Common Stock for securities or other property deliverable
             upon the occurrence of such event).

         Each such written notice shall be given by first class mail, postage
         prepaid, addressed to the holders of Series C Preferred at the address
         for each such holder as shown on the books of this Corporation.

(4) Voting. Except as otherwise required by law, the holders of Series C
Preferred shall not be entitled to vote upon any matter submitted to the
stockholders for a vote except as to matters affecting holders of Series C
Preferred as a class, as set forth in section (5) below.

(5) Protective Provisions. In addition to any other rights provided by law, so
long as any Series C Preferred shall be outstanding, this Corporation shall not,
without first obtaining the affirmative vote or written consent of the holders
of more than 50 percent of such outstanding shares of Series C Preferred:

         (a) amend or repeal any provision of, or add any provision to, this
         Corporation's Certificate of Incorporation or Bylaws if such action
         would alter or change the preferences, rights, privileges or powers of,
         or the restrictions provided for the benefit of, the Series C
         Preferred;

         (b) authorize or issue shares of any class of stock having any
         preference or priority as to dividends or assets superior to or on a
         parity with any such

                                       16
<PAGE>

         preference or priority of the Series C Preferred, or authorize or issue
         shares of stock of any class or any bonds, debentures, notes or other
         obligations convertible into or exchangeable for, or having option
         rights to purchase, any shares of stock of this Corporation having any
         preference or priority as to dividends or assets superior to or on a
         parity with any such preference or priority of the Series C Preferred;
         or

         (c) reclassify any Common Stock into shares having any preference or
         priority as to dividends or assets superior to or on a parity with any
         such preference or priority of the Series C Preferred.

(6) Status of Converted Stock. In the event any shares of Series C Preferred
shall be converted pursuant to section 3 hereof, the shares so converted shall
be canceled and shall not be issuable by the Corporation.

(7) Residual Rights. All rights accruing to the outstanding shares of this
Corporation not expressly provided for to the contrary herein shall be vested in
the Common Stock.

(8) Consent for Certain Repurchases of Common Stock Deemed to be Distributions.
Each holder of Series C Preferred shall be deemed to have consented to
distributions made by the Corporation in connection with the repurchase of
shares of Common Stock issued to or held by employees or consultants upon
termination of their employment or services pursuant to agreements providing for
such right of repurchase between the Corporation and such persons.


                                       17
<PAGE>

II                  SERIES D 6% CONVERTIBLE PREFERRED STOCK


(A)      Designation and Amount. The shares of such series shall be designated
     as "Series D 6% Convertible Preferred Stock," par value $0.01 per share
     (the "Series D Preferred"), and the number of shares constituting such
     series shall be 5,000.

(B)      Rights, Preferences, Privileges and Restrictions of the Series D
     Preferred. The rights, preferences, privileges and restrictions granted to
     and imposed on the Series D Preferred are as follows:

     (1) Dividend Provisions.

         (a) The holders of shares of the Series D Preferred shall be entitled
         to receive, out of any funds legally available therefor, prior and in
         preference to the declaration or payment of any dividend or
         distribution to the holders of Common Stock or any other shares or
         securities of the Corporation ranking junior to the Series D Preferred
         with respect to the payment of dividends and/or the distribution of
         assets on liquidation (including, without limitation, the Series A
         Preferred Stock and the Series B Preferred Stock, the "Junior
         Securities"), dividends which shall accrue cumulatively on each share
         of the Series D Preferred at the rate and in the manner prescribed in
         this section 1 from and including the date of issuance of such shares
         of the Series D Preferred, but excluding the date on which any
         conversion or redemption of such shares of the Series D Preferred shall
         have been effected, and payable quarterly in arrears. The date on which
         the Corporation initially issues a share of the Series D Preferred will
         be deemed to be its "date of issuance" regardless of the number of
         times transfer of such shares of the Series D Preferred is made, or of
         the number of certificates which may be issued to evidence a share of
         the Series D Preferred.

         (b) Dividends shall accrue on each share of the Series D Preferred (and
         on any accrued and unpaid dividends thereon) at a rate per annum,
         compounded quarterly, of 6% of the Original Series D Preferred Stock
         Issue Price (as

                                       18
<PAGE>

         defined below) (as adjusted for stock splits, stock dividends,
         combinations, recapitalizations and similar events). In the event of
         any liquidation, dissolution or winding up of the Corporation or the
         redemption of a share of the Series D Preferred or the bankruptcy of
         the Corporation, all accrued and unpaid dividends on a share of Series
         D Preferred shall be added to the liquidation preference of such share
         on the payment date under subsection 2(a) below, or on the date of
         redemption of such share or upon the bankruptcy of the Corporation, as
         the case may be, accrued cumulatively to but excluding such payment
         date or redemption date or bankruptcy on a daily basis. If there shall
         be any accrued but unpaid dividends immediately prior to, and in the
         event of, a conversion of shares of the Series D Preferred into shares
         of Common Stock, all such accrued and unpaid dividends shall, at the
         Corporation's option, be converted into that number of shares of Common
         Stock determined by dividing the amount of such dividends by the then
         effective Conversion Price (as defined in subsection 3(a) below), but
         only if the Corporation delivers to the holder of such Series D
         Preferred a written notice of the election by the Corporation to
         exercise such option within five days after the receipt by the
         Corporation of the certificate or certificates representing such shares
         of Series D Preferred (as contemplated by Section II(B)(3)(d) below).

         (c) No dividend or other distribution (other than a dividend or
         distribution payable solely in Common Stock) shall be paid on or set
         apart for payment on the Common Stock or other Junior Securities nor
         shall any payment be made on account of the purchase, redemption or
         retirement of any Common Stock or other Junior Securities, unless all
         accrued and unpaid dividends on the Series D Preferred have been or
         contemporaneously are paid or set apart for payment in accordance
         herewith; provided, however, that the Corporation may repurchase Common
         Stock owned by terminated employees of, or consultants to, the
         Corporation or its subsidiaries as and to the extent contemplated by
         Section II(B)(8) below. A conversion of a convertible security which by
         its terms is convertible into Common Stock by the holder thereof shall
         not be deemed a purchase, redemption or retirement of the security so
         converted for purposes of this subsection 1(c). No dividend or other
         distribution shall be declared on any series of preferred stock ranking
         as to dividends or other distributions on a

                                       19
<PAGE>

         parity with any other series of preferred stock unless there shall have
         been declared on all shares then outstanding of such series of
         preferred stock like proportionate dividends or other distributions
         ratably in proportion to the respective dividends or other
         distributions payable in respect of each such series of preferred stock
         (the Series C Preferred and the Series E Preferred shall rank on a
         parity with the Series D Preferred as to dividends and other
         distributions).

         (d) Any cash dividend (other than pursuant to Section (B)(1)(b) above)
         which has been declared with respect to the Series D Preferred and is
         otherwise due and payable thereon shall be paid in cash.

(2)      Liquidation Preference.

         (a) In the event of any liquidation, dissolution or winding up of the
         Corporation, either voluntary or involuntary, the holders of the Series
         D Preferred shall be entitled to receive, in cash, prior and in
         preference to any distribution of any of the assets or surplus funds of
         the Corporation to the holders of the Common Stock or any other Junior
         Securities by reason of their ownership thereof, the amount of $100.00
         per share (the "Original Series D Preferred Stock Issue Price") in cash
         or cash equivalents for each share of Series D Preferred then held by
         them, and, in addition, an amount equal to all accrued but unpaid
         dividends on such shares of Series D Preferred in cash or cash
         equivalents. If, upon occurrence of such event the assets and funds
         thus distributed ratably among the holders of the Series D Preferred
         shall be insufficient to permit the payment to such holders (and the
         holders of any series of preferred stock that ranks on a parity with
         the Series D Preferred on any liquidation, dissolution or winding up of
         the Corporation, including, without limitation, the Series C Preferred
         Stock and the Series E Preferred Stock) of the full preferential
         amount, then the entire assets and funds of the Corporation legally
         available for distribution shall be distributed among the holders of
         the Series D Preferred (and such parity stock) in proportion to the
         amount that the holders of the Series D Preferred and the holders of
         such parity stock would be entitled to receive if they were to be paid
         the full amounts due to them at the time of such liquidation,
         dissolution or winding up. After payment has been made to

                                       20
<PAGE>

         the holders of the Series D Preferred of the full amounts to which they
         shall be entitled as aforesaid, all remaining assets of the Corporation
         shall be distributed among all holders of the preferred stock of the
         Corporation that rank junior to the Series D Preferred on any
         liquidation, dissolution or winding up of the Corporation (including,
         without limitation, holders of Series A 6% Convertible Preferred Stock
         and Series B 6% Convertible Preferred Stock and any subsequently issued
         series of preferred stock) and all holders of Common Stock and other
         Junior Securities in proportion to the number of shares of Common Stock
         which would be held by each such holder if all shares of such series'
         of preferred stock were converted into Common Stock.

         (b) For purposes of this section 2, a liquidation, dissolution or
         winding up of the Corporation shall be deemed to be occasioned by, and
         to include, without limitation, the redemption or other purchase by the
         Corporation of all of its outstanding Common Stock, the Corporation's
         sale of all or substantially all of its assets or the acquisition of
         this Corporation by another entity by means of merger or consolidation
         of the Corporation with or into any other entity (whether or not the
         Corporation is the surviving or emerging entity) in which cash, stock
         or other securities or property of the Corporation, transferee or
         surviving or emerging entity or an affiliate thereof are to be received
         or where the holders of shares of the Corporation prior to such merger
         or consolidation represent less than 50% of the outstanding shares of
         the surviving entity after such merger or consolidation. Written notice
         of any event of liquidation pursuant to this section 2 shall be given
         by first class mail, postage prepaid, not less than 30 days prior to
         any payment date, which shall be stated therein, to the holders of
         record of the Series D Preferred, such notice to be addressed to each
         such holder at his last address as shown by the records of the
         Corporation. Notwithstanding the receipt of such notice, prior to the
         payment date with respect to any such liquidation as set forth therein,
         the holder of record of the Series D Preferred may still avail itself
         of the Conversion Rights set forth in section 3 below.

(3) Conversion. The holders of the Series D Preferred shall each have conversion
rights as follows (the "Conversion Rights"):

                                       21
<PAGE>

         (a) Right to Convert. Subject to the limitations set forth in
         subsection 3(b) below, at any time, each share of Series D Preferred
         shall be convertible into a number of fully paid and nonassessable
         shares of Common Stock equal to (x) the sum of the Original Series D
         Preferred Stock Issue Price (as defined below) and, in the event the
         Corporation shall not elect to exercise its option referred to in the
         last sentence of Section II(B)(1)(b), the amount of all accrued and
         unpaid dividends thereon, divided by (y) the Series D Conversion Price
         at such time. Each share of Series D Preferred shall be convertible at
         the option of the holder thereof at any time. The price at which shares
         of Common Stock shall be deliverable upon conversion (the "Series D
         Conversion Price") shall initially be $2.75 per share of Common Stock.
         Such initial Series D Conversion Price shall be subject to adjustment
         as hereinafter provided.

         (b) Nasdaq Conversion Limitation. Unless the Company obtains the
         requisite approval of its stockholders to comply with the applicable
         rules of the Nasdaq SmallCap Market or the Nasdaq National Market, no
         holder of any shares of Series D Preferred may exercise its conversion
         rights to the extent that such conversion would, together with (i) an
         aggregate of 140,193 shares of Common Stock issued by the Corporation
         to such holder on the date hereof, (ii) 50,000 shares of Common Stock
         subject to outstanding warrants to purchase Common Stock, and (iii)
         shares of Common Stock issued upon conversion of the Series C Preferred
         and the Series E Preferred, cause such holder to obtain more than 19.9%
         of all issued and outstanding shares of Common Stock, including shares
         issuable in respect of outstanding scrip or any certificates
         representing fractional interests in such shares of Common Stock. The
         prior sentence shall not prohibit any holder of shares of Series D
         Preferred from exercising its conversion rights at any time following
         such time as the Common Stock is not listed on the Nasdaq SmallCap
         Market or the Nasdaq National Market. Nothing in this subsection 3(b)
         shall prohibit a holder of Series D Preferred from converting such
         stock if and to the extent that the shares issued upon such conversion,
         together with the shares of Common Stock referred to in subclauses (i),
         (ii) and (iii) above and any and all shares of Common Stock issued upon
         prior conversions by such holder of the Series D Preferred, would equal
         19.9% or less of all issued and outstanding shares of Common Stock,
         including

                                       22
<PAGE>

         shares issuable in respect of outstanding scrip or any certificates
         representing fractional interests in such shares of Common Stock. With
         respect to any holder of Series D Preferred, all references in this
         subsection 3(b) to 19.9% of all issued and outstanding shares of Common
         Stock of the Corporation shall mean 19.9% of such issued and
         outstanding Common Stock as of the date of issuance by the Corporation
         of the Series D Preferred to such holder.

         (c) Shareholder Vote regarding Conversion Limitation. If a holder of
         the Series D Preferred is unable to exercise its conversion rights due
         to the limitations set forth in subsection 3(b) above, the Board of
         Directors shall use commercially reasonable efforts to present and
         recommend to the stockholders of the Company at the next annual meeting
         of stockholders (to be held in accordance with the corporate laws of
         Delaware, the Certificate of Incorporation and the Bylaws of the
         Company) a proposal to approve such holder acquiring in excess of 19.9%
         of the issued and outstanding shares of Common Stock upon conversion of
         the Series D Preferred. The Corporation hereby undertakes to present
         such proposal at the annual meeting of stockholders to take place in
         2002 or, if earlier, at the next meeting of stockholders (or in the
         next action taken by consent of stockholders without a meeting) other
         than the annual meeting of stockholders to take place in 2001. The
         Corporation shall use its best efforts to hold such annual meeting of
         stockholders prior to September 30, 2002. Notwithstanding the
         foregoing, at the request of the holders of the Series D Preferred, the
         Company shall hold a special meeting of stockholders as soon as
         practicable in accordance with all applicable state and federal laws
         and regulations; provided that the holders of the Series D Preferred
         pay or promptly reimburse the Corporation for all costs and expenses
         relating to such special meeting of stockholders. If such approval is
         not obtained at the next such meeting of the stockholders of the
         Corporation (or in the next action taken by consent of stockholders
         without a meeting), the Corporation shall thereafter continue to use
         commercially reasonable efforts to effect such approval. In no event
         may the Corporation issue more than 19.9% of the issued and outstanding
         shares of Common Stock as determined in subsection 3(b) above without
         obtaining such requisite vote of stockholders as set forth herein.

                                       23
<PAGE>

         (d) Mechanics of Conversion. No fractional shares of Common Stock shall
         be issued upon conversion of the Series D Preferred. In lieu of any
         fractional share to which a holder would otherwise be entitled, the
         Corporation shall pay cash equal to such fraction multiplied by the
         fair market value of the Common Stock as determined by the Board of
         Directors. Before any holder of the Series D Preferred shall be
         entitled to convert the same into full shares of Common Stock, he shall
         surrender the certificate or certificates therefor, duly endorsed, at
         the office of the Corporation or of any transfer agent for the Series D
         Preferred, as designated by the Corporation, and shall give written
         notice to the Corporation at such office that he elects to convert the
         same. The Corporation shall, as soon as practicable thereafter, issue
         and deliver at such office to such holder of Series D Preferred, a
         certificate or certificates for the number of shares of Common Stock to
         which such holder shall be entitled as aforesaid and a check payable to
         the holder in the amount of any cash amounts payable as the result of a
         conversion into a fractional share of Common Stock and, if the
         Corporation shall exercise the option referred to in the last sentence
         of Section II(B)(1)(b), any amount owed to such holder as the result of
         such exercise. Such conversion shall be deemed to have been made
         immediately prior to the close of business on the date of such
         surrender of the shares of Series D Preferred to be converted, and the
         person or persons entitled to receive the shares of Common Stock
         issuable upon such conversion shall be treated for all purposes as the
         record holder or holders of such shares of Common Stock on such date.

         (e) Adjustments to Series D Conversion Price for Diluting Issues.

                    (i) Stock Dividends. If the number of shares of Common Stock
             outstanding at any time after the effectiveness of these
             resolutions is increased by a stock dividend payable in shares of
             Common Stock or by a subdivision or split-up of shares of Common
             Stock or a similar transaction in respect thereof, then immediately
             effective at the close of business upon the record date fixed for
             the determination of holders of Common Stock entitled to receive
             such stock dividend, subdivision or split-up or similar
             transaction, the Series D Conversion Price shall be

                                       24
<PAGE>

             appropriately decreased so that the number of shares of Common
             Stock issuable on conversion of each share of Series D Preferred
             shall be increased in proportion to such increase of outstanding
             shares of Common Stock. Successive adjustments shall be made upon
             each such stock dividend, subdivision or split or similar
             transaction.

                    (ii) Adjustments for Subdivisions, Combinations, or
             Consolidations of Common Stock. In the event the outstanding shares
             of Common Stock shall be decreased by a subdivision or combination,
             by reclassification or otherwise, into a greater or lesser number
             of shares of Common Stock, the Series D Conversion Price in effect
             immediately prior to such subdivision or combination shall,
             concurrently with the effectiveness of such subdivision,
             combination or consolidation, be proportionately adjusted so that
             the number of shares of Common Stock issuable upon conversion of
             each share of Series D Preferred shall be decreased in proportion
             to such decrease of outstanding shares of Common Stock. Successive
             adjustments shall be made upon each such subdivision, combination
             or reclassification.

                    (iii) Adjustments for Other Distributions. In the event the
             Corporation at any time or from time to time makes, or fixes a
             record date for the determination of holders of Common Stock
             entitled to receive, any distribution payable in securities of the
             Corporation other than shares of Common Stock, then and in each
             such event provision shall be made so that the holders of the
             Series D Preferred shall receive upon conversion thereof, in
             addition to the number of shares of Common Stock receivable
             thereupon, the amount of securities of the Corporation which they
             would have received had their Series D Preferred been converted
             into Common Stock on the date of such event to and including the
             date of conversion, and retained such securities receivable by them
             as aforesaid during such period, subject to all other adjustments
             called for during such period under these resolutions with respect
             to the rights of the holders of the Series D Preferred.

                                       25
<PAGE>

                    (iv) Adjustments for Reorganizations, Reclassifications,
             etc. If the Common Stock issuable upon conversion of the Series D
             Preferred shall be changed into the same or a different number of
             shares of any other class or classes of stock or other securities
             or property, whether by reclassification, a merger or consolidation
             of this Corporation with or into any other entity or entities
             (other than pursuant to a subdivision, combination, stock dividend,
             or other distribution provided for in subsections 3(e)(i), (ii) or
             (iii) above), the Series D Conversion Price then in effect shall,
             concurrently with the effectiveness of such reorganization or
             reclassification, be proportionately adjusted such that the Series
             D Preferred shall be convertible into, in lieu of the number of
             shares of Common Stock which the holders would otherwise have been
             entitled to receive, a number of shares of such other class or
             classes of stock or securities or other property equivalent to the
             number of shares of Common Stock that would have been subject to
             receipt by the holders upon conversion of the Series D Preferred
             immediately before such event; and, in any such case, appropriate
             adjustment shall be made in the application of the provisions
             herein set forth with respect to the rights and interest thereafter
             of the holders of the Series D Preferred, to the end that the
             provisions set forth herein (including provisions with respect to
             changes in and other adjustments of the Series D Conversion Price)
             shall thereafter be applicable, as nearly as may be reasonable, in
             relation to any shares of stock or other property thereafter
             deliverable upon the conversion of the Series D Preferred.
             Successive adjustments shall be made upon each such
             reclassification, merger or consolidation.

                    (v) Adjustments for Issuances Below the Current Market
             Price.

                    (A) Except as provided in subsection (B), if the Corporation
             shall, while there are any shares of the Series D Preferred
             outstanding, issue or sell shares of the Common Stock of the
             Corporation at a price per share less than the then Current Market
             Price (as defined below) in

                                       26
<PAGE>

             effect immediately prior to such issuance or sale, then in each
             such case, the Series D Conversion Price shall be adjusted,
             effective as of the date of the issuance of such shares of the
             Common Stock of the Corporation, to an amount determined by
             multiplying the Series D Conversion Price in effect immediately
             prior to such issuance or sale by a fraction:

                    (i) the numerator of which shall be (1) the aggregate number
                    of shares of the Common Stock outstanding immediately prior
                    to the issuance of such additional shares of Common Stock,
                    plus (2) the aggregate number of shares of Common Stock then
                    issuable upon conversion of the shares of Series D Preferred
                    outstanding immediately prior to the issuance of such
                    additional shares of Common Stock, plus (3) the number of
                    shares of Common Stock that the net aggregate consideration
                    received by the Corporation for the total number of such
                    additional shares of the Common Stock so issued would
                    purchase at such Series D Conversion Price in effect
                    immediately prior to such issuance, and

                    (ii) the denominator of which shall be (1) the aggregate
                    number of shares of the Common Stock outstanding immediately
                    prior to the issuance of such additional shares of the
                    Common Stock, plus (2) the aggregate number of shares of
                    Common Stock then issuable upon conversion of the shares of
                    Series D Preferred outstanding immediately prior to the
                    issuance of such additional shares of Common Stock, plus (3)
                    the number of such additional shares of the Common Stock so
                    issued.

                    (B) The adjustments contemplated by subsection (A) above
             shall not apply to (i) any issuance of shares of the Common Stock
             to officers, directors, employees, consultants or agents of the
             Corporation or any subsidiary of the Corporation pursuant to any
             stock option plan or arrangement or other equity incentive, bonus,
             or similar plan or arrangement approved by the Board of Directors,
             (ii) the issuance of shares of Common Stock in connection with the
             merger or acquisition of

                                       27
<PAGE>

             the Corporation or any of its subsidiaries with or into an
             unaffiliated third party or for purposes of a strategic business
             alliance with an unaffiliated third party, (iii) the issuance of
             any Common Stock issued in connection with an underwritten public
             offering of such securities in which the per share price to the
             public and any underwriting discounts and commissions are
             determined in a manner that is customary for an underwritten
             offering of similar size and composition, or (iv) the issuance of
             any Common Stock in connection with the conversion of the Series B
             Preferred Stock, Series C Preferred Stock, Series D Preferred
             Stock, or Series E Preferred Stock.

                    (C) For purposes of this section 3(e)(v), the issuance of
             any warrants, options, subscriptions or purchase rights with
             respect to shares of Common Stock and the issuance of any
             securities convertible into or exchangeable for shares of Common
             Stock, or the issuance of any warrants, options or any rights with
             respect to such convertible or exchangeable securities, shall be
             deemed to be an issuance of shares of Common Stock at the time of
             the issuance thereof if the Net Consideration Per Share (as
             hereinafter defined) which may be received by the Corporation for
             the shares of Common Stock or issuable upon the exercise thereof is
             less than the then Current Market Price at the time of the issuance
             of such warrants, options subscriptions, purchase rights or
             securities. Any obligation, agreement or undertaking to issue
             warrants, options, subscriptions, purchase rights or such
             securities at any time in the future shall be deemed to be an
             issuance at the time such obligation, agreement or undertaking is
             made or arises. Notwithstanding the foregoing, any adjustment made
             to the Series D Conversion Price pursuant to the provisions of this
             section 3(e)(v) which relates to warrants, options, subscriptions
             or purchase rights with respect to shares of Common Stock shall be
             disregarded when, as and if all of such warrants, options,
             subscriptions or purchase rights expire or are canceled without
             being exercised, so that the Series D Conversion Price effective
             immediately upon such cancellation or expiration shall be equal to
             the Series D Conversion Price in effect at the time of the issuance
             of the

                                       28
<PAGE>

             expired or canceled warrants, options, subscriptions or purchase
             rights, after taking into account any other adjustments that would
             have been made to the Series D Conversion Price had the expired or
             canceled warrants, options, subscriptions or purchase rights not
             been issued. No adjustment to the Series D Conversion Price shall
             be made pursuant to the provisions of this section 3(e)(v) either
             (x) upon the issuance of any shares of the Common Stock that are
             issued pursuant to the exercise of any warrants, options,
             subscriptions or purchase rights or pursuant to the exercise of any
             conversion or exchange rights of any convertible securities if any
             adjustment shall previously have been made upon the issuance of any
             such warrants, options or subscriptions or purchase rights or upon
             the issuance of any such convertible securities (or upon the
             issuance of any warrants, options or any rights therefor) or (y)
             upon the issuance of any warrants, options, subscription or
             purchase rights or any other securities convertible into or
             exchangeable or exercisable for shares of Common Stock (or upon the
             issuance of any warrants, options or rights to purchase such
             securities) in accordance with subsection (B). Any anti-dilution
             adjustment to any other class or series of warrants, options,
             rights, or convertible securities shall be deemed to be an issuance
             of Common Stock at the time of such adjustment; provided, however,
             that in no event shall the Series D Preferred Stock be subject to
             more than one adjustment as a result of any single anti-dilution
             adjustments to any other security of the Corporation.

                    (D) For purposes of subsection (C), the "Net Consideration
             Per Share" shall mean the amount which is equal to the total amount
             of consideration, if any, received by the Corporation for the
             issuance of warrants, options, subscriptions or other purchase
             rights or convertible or exchangeable securities, plus the minimum
             amount of consideration, if any, payable to the Corporation upon
             exercise or conversion thereof, divided by the aggregate number of
             shares of the Common Stock that would be issued if all such
             warrants, options, subscriptions or other purchase rights or
             convertible or exchangeable securities were exercised, converted or
             exchanged. For purposes of this subsection (D), if part or all of
             the consideration received or to be received by the Corporation in
             connection with the issuance of shares of Common Stock or the
             issuance of any of the securities described in this subsection (D)
             consists of property other than cash, the value of such property
             shall be determined by or at the direction of the Board of
             Directors, in good faith, whereupon such value shall be given to
             such consideration and shall be recorded on the books of the
             Corporation with respect to receipt of such property.

                    (E) For the purpose of any computation under subsection (A)
             the Current Market Price per share of Common Stock on any date
             shall be (i) the last reported sale price, or if none is reported,
             the average of the reported closing bid and asked prices, on all
             domestic securities exchanges on which the Common Stock is listed,
             or (ii) if on any day the

                                       29
<PAGE>

             Common Stock is not so listed, the sales price for the Common Stock
             as of 4:00 P.M., New York time, as reported on the Nasdaq Stock
             Market, or (iii) if the Common Stock is not reported on the Nasdaq
             Stock Market, the average of the representative bid and asked
             quotations for the Common Stock as of 4:00 P.M., New York time, as
             reported on the Nasdaq interdealer quotation system, bulletin
             board, over-the-counter market or any similar or successor
             organization, in each such case averaged over a period of 15
             trading days prior to the day as of which the Current Market Price
             is being determined. If there is no such closing price or closing
             bid and asked prices or the Common Stock is not reported on any
             such exchange or market, the Current Market Price shall be
             determined in any good faith reasonable manner approved by the
             Board of Directors of the Corporation.

         (f) No Impairment.

                    (i) The Corporation will not, by amendment of its
             Certificate of Incorporation or through any reorganization,
             transfer of assets, merger, dissolution, issue or sale of
             securities or any other voluntary action, avoid or seek to avoid
             the observance or performance of any of

                                       30
<PAGE>

             the terms to be observed or performed hereunder by the Corporation
             but will at all times in good faith assist in the carrying out of
             all the provisions of this section 3 and in the taking of all such
             action as may be necessary or appropriate in order to protect the
             conversion rights of the holders of the Series D Preferred against
             impairment.

                    (ii) The Corporation shall at all times reserve and keep
             available for issuance upon the conversion of the Series D
             Preferred a number of its authorized but unissued shares of Common
             Stock that will from time to time be sufficient to permit the
             conversion of all outstanding shares of Series D Preferred, and
             shall take all action required to increase the authorized number of
             shares of Common Stock if at any time there shall be insufficient
             authorized but unissued shares of Common Stock to permit such
             reservation or to permit the conversion of all outstanding shares
             of Series D Preferred.

                    (iii) Any registered holder of Series D Preferred shall be
             entitled to seek an injunction or injunctions to prevent breaches
             of the provisions of this certificate of designation and to enforce
             specifically the terms and provisions of this certificate of
             designation in any court of the United States or any state thereof
             having jurisdiction, this being in addition to any other remedy to
             which such holder may be entitled at law or in equity.

         (g) Certificate as to Adjustments. Upon the occurrence of each
         adjustment or readjustment of the Series D Conversion Price pursuant to
         this section 3, the Corporation, at its expense, shall promptly compute
         such adjustment or readjustment in accordance with the terms hereof and
         furnish to each holder of Series D Preferred a certificate setting
         forth such adjustment or readjustment and showing in detail the facts
         upon which such adjustment or readjustment is based. The Corporation
         shall, upon the written request at any time of any holder of Series D
         Preferred, furnish or cause to be furnished to such holder a like
         certificate setting forth (i) such adjustments and readjustments,(ii)
         the Series D Conversion Price at the time in effect, and (iii) the
         number of shares of

                                       31
<PAGE>

             Common Stock and the amount, if any, of other property which at the
             time would be received upon the conversion of Series D Preferred.

         (h) Notices of Record Date. In the event that this Corporation shall
         propose at any time:

                    (i) to declare any dividend or distribution upon its Common
             Stock, whether in cash, property, stock or other securities,
             whether or not a regular cash dividend and whether or not out of
             earnings or earned surplus;

                    (ii) to effect any reclassification or recapitalization or
             other reorganization of its capital stock; or

                    (iii) to merge with or into any other corporation or other
             entity, or sell, lease or convey all or substantially all its
             property or business, or to liquidate, dissolve or wind up;
         then, in connection with each such event, this Corporation shall send
         to the holders of the Series D Preferred shares:

                    (A) at least 10 days' prior written notice of the date on
             which a record shall be taken for such dividend, distribution or
             subscription rights and setting forth a description thereof (and
             specifying the date on which the holders of Common Stock shall be
             entitled thereto) or for determining rights to vote in respect of
             the matters referred to in (iii) above; and

                    (B) in the case of the matters referred to in subsection
             3(h)(ii) or (iii) above, at least 10 days' prior written notice of
             the date when the same shall take place (and specifying the date on
             which the holders of Common Stock shall be entitled to exchange
             their Common Stock for securities or other property deliverable
             upon the occurrence of such event).

                                       32
<PAGE>

         Each such written notice shall be given by first class mail, postage
         prepaid, addressed to the holders of Series D Preferred at the address
         for each such holder as shown on the books of this Corporation.

(4) Voting. Except as otherwise required by law, the holders of Series D
Preferred shall not be entitled to vote upon any matter submitted to the
stockholders for a vote except as to matters affecting holders of Series D
Preferred as a class, as set forth in section (5) below.

(5) Protective Provisions. In addition to any other rights provided by law, so
long as any Series D Preferred shall be outstanding, this Corporation shall not,
without first obtaining the affirmative vote or written consent of the holders
of more than 50 percent of such outstanding shares of Series D Preferred:

         (a) amend or repeal any provision of, or add any provision to, this
         Corporation's Certificate of Incorporation or Bylaws if such action
         would alter or change the preferences, rights, privileges or powers of,
         or the restrictions provided for the benefit of, the Series D
         Preferred;

         (b) authorize or issue shares of any class of stock having any
         preference or priority as to dividends or assets superior to or on a
         parity with any such preference or priority of the Series D Preferred,
         or authorize or issue shares of stock of any class or any bonds,
         debentures, notes or other obligations convertible into or exchangeable
         for, or having option rights to purchase, any shares of stock of this
         Corporation having any preference or priority as to dividends or assets
         superior to or on a parity with any such preference or priority of the
         Series D Preferred; or

         (c) reclassify any Common Stock into shares having any preference or
         priority as to dividends or assets superior to or on a parity with any
         such preference or priority of the Series D Preferred.

                                       33
<PAGE>

(6) Status of Converted Stock. In the event any shares of Series D Preferred
shall be converted pursuant to section 3 hereof, the shares so converted shall
be canceled and shall not be issuable by the Corporation.

(7) Residual Rights. All rights accruing to the outstanding shares of this
Corporation not expressly provided for to the contrary herein shall be vested in
the Common Stock.

(8) Consent for Certain Repurchases of Common Stock Deemed to be Distributions.
Each holder of Series D Preferred shall be deemed to have consented to
distributions made by the Corporation in connection with the repurchase of
shares of Common Stock issued to or held by employees or consultants upon
termination of their employment or services pursuant to agreements providing for
such right of repurchase between the Corporation and such persons.


                                       34
<PAGE>

III                  SERIES E 6% CONVERTIBLE PREFERRED STOCK

(A)      Designation and Amount. The shares of such series shall be designated
     as "Series E 6% Convertible Preferred Stock," par value $0.01 per share
     (the "Series E Preferred"), and the number of shares constituting such
     series shall be 10,000.


(B)      Rights, Preferences, Privileges and Restrictions of the Series E
     Preferred. The rights, preferences, privileges and restrictions granted to
     and imposed on the Series E Preferred are as follows:

     (1) Dividend Provisions.

         (a) The holders of shares of the Series E Preferred shall be entitled
         to receive, out of any funds legally available therefor, prior and in
         preference to the declaration or payment of any dividend or
         distribution to the holders of Common Stock or any other shares or
         securities of the Corporation ranking junior to the Series E Preferred
         with respect to the payment of dividends and/or the distribution of
         assets on liquidation (including, without limitation, the Series A
         Preferred Stock and the Series B Preferred Stock, the "Junior
         Securities"), dividends which shall accrue cumulatively on each share
         of the Series E Preferred at the rate and in the manner prescribed in
         this section 1 from and including the date of issuance of such shares
         of the Series E Preferred, but excluding the date on which any
         conversion or redemption of such shares of the Series E Preferred shall
         have been effected, and payable quarterly in arrears. The date on which
         the Corporation initially issues a share of the Series E Preferred will
         be deemed to be its "date of issuance" regardless of the number of
         times transfer of such shares of the Series E Preferred is made, or of
         the number of certificates which may be issued to evidence a share of
         the Series E Preferred.

         (b) Dividends shall accrue on each share of the Series E Preferred (and
         on any accrued and unpaid dividends thereon) at a rate per annum,
         compounded quarterly, of 6% of the Original Series E Preferred Stock
         Issue Price (as defined below) (as adjusted for stock splits, stock
         dividends, combinations,

                                       35
<PAGE>

         recapitalizations and similar events). In the event of any liquidation,
         dissolution or winding up of the Corporation or the redemption of a
         share of the Series E Preferred or the bankruptcy of the Corporation,
         all accrued and unpaid dividends on a share of Series E Preferred shall
         be added to the liquidation preference of such share on the payment
         date under subsection 2(a) below, or on the date of redemption of such
         share or upon the bankruptcy of the Corporation, as the case may be,
         accrued cumulatively to but excluding such payment date or redemption
         date or bankruptcy on a daily basis. If there shall be any accrued but
         unpaid dividends immediately prior to, and in the event of, a
         conversion of shares of the Series E Preferred into shares of Common
         Stock, all such accrued and unpaid dividends shall, at the
         Corporation's option, be converted into that number of shares of Common
         Stock determined by dividing the amount of such dividends by the then
         effective Conversion Price (as defined in subsection 3(a) below), but
         only if the Corporation delivers to the holder of such Series E
         Preferred a written notice of the election by the Corporation to
         exercise such option within five days after the receipt by the
         Corporation of the certificate or certificates representing such shares
         of Series E Preferred (as contemplated by Section III(B)(3)(d) below).

         (c) No dividend or other distribution (other than a dividend or
         distribution payable solely in Common Stock) shall be paid on or set
         apart for payment on the Common Stock or other Junior Securities nor
         shall any payment be made on account of the purchase, redemption or
         retirement of any Common Stock or other Junior Securities, unless all
         accrued and unpaid dividends on the Series E Preferred have been or
         contemporaneously are paid or set apart for payment in accordance
         herewith; provided, however, that the Corporation may repurchase Common
         Stock owned by terminated employees of, or consultants to, the
         Corporation or its subsidiaries as and to the extent contemplated by
         Section III(B)(8) below. A conversion of a convertible security which
         by its terms is convertible into Common Stock by the holder thereof
         shall not be deemed a purchase, redemption or retirement of the
         security so converted for purposes of this subsection 1(c). No dividend
         or other distribution shall be declared on any series of preferred
         stock ranking as to dividends or other distributions on a parity with
         any other series of preferred stock unless there shall have been

                                       36
<PAGE>

         declared on all shares then outstanding of such series of preferred
         stock like proportionate dividends or other distributions ratably in
         proportion to the respective dividends or other distributions payable
         in respect of each such series of preferred stock (the Series C
         Preferred and the Series D Preferred shall rank on a parity with the
         Series E Preferred as to dividends and other distributions).

         (d) Any cash dividend (other than pursuant to Section (B)(1)(b) above)
         which has been declared with respect to the Series E Preferred and is
         otherwise due and payable thereon shall be paid in cash.

     (2) Liquidation Preference.

         (a) In the event of any liquidation, dissolution or winding up of the
         Corporation, either voluntary or involuntary, the holders of the Series
         E Preferred shall be entitled to receive, in cash, prior and in
         preference to any distribution of any of the assets or surplus funds of
         the Corporation to the holders of the Common Stock or any other Junior
         Securities by reason of their ownership thereof, the amount of $100.00
         per share (the "Original Series E Preferred Stock Issue Price") in cash
         or cash equivalents for each share of Series E Preferred then held by
         them, and, in addition, an amount equal to all accrued but unpaid
         dividends on such shares of Series E Preferred in cash or cash
         equivalents. If, upon occurrence of such event the assets and funds
         thus distributed ratably among the holders of the Series E Preferred
         shall be insufficient to permit the payment to such holders (and the
         holders of any series of preferred stock that ranks on a parity with
         the Series E Preferred on any liquidation, dissolution or winding up of
         the Corporation, including, without limitation, the Series C Preferred
         Stock and the Series D Preferred Stock) of the full preferential
         amount, then the entire assets and funds of the Corporation legally
         available for distribution shall be distributed among the holders of
         the Series E Preferred (and such parity stock) in proportion to the
         amount that the holders of the Series E Preferred and the holders of
         such parity stock would be entitled to receive if they were to be paid
         the full amounts due to them at the time of such liquidation,
         dissolution or winding up. After payment has been made to the holders
         of the Series E Preferred of the full amounts to which they shall be
         entitled as aforesaid, all remaining assets of the Corporation shall be
         distributed among all holders of the preferred stock of the Corporation
         that rank junior to the Series E Preferred on any liquidation,
         dissolution or winding up of the Corporation (including, without
         limitation, holders of Series A 6% Convertible

                                       37
<PAGE>

         Preferred Stock and Series B 6% Convertible Preferred Stock and any
         subsequently issued series of preferred stock) and all holders of
         Common Stock and other Junior Securities in proportion to the number of
         shares of Common Stock which would be held by each such holder if all
         shares of such series' of preferred stock were converted into Common
         Stock.

         (b) For purposes of this section 2, a liquidation, dissolution or
         winding up of the Corporation shall be deemed to be occasioned by, and
         to include, without limitation, the redemption or other purchase by the
         Corporation of all of its outstanding Common Stock, the Corporation's
         sale of all or substantially all of its assets or the acquisition of
         this Corporation by another entity by means of merger or consolidation
         of the Corporation with or into any other entity (whether or not the
         Corporation is the surviving or emerging entity) in which cash, stock
         or other securities or property of the Corporation, transferee or
         surviving or emerging entity or an affiliate thereof are to be received
         or where the holders of shares of the Corporation prior to such merger
         or consolidation represent less than 50% of the outstanding shares of
         the surviving entity after such merger or consolidation. Written notice
         of any event of liquidation pursuant to this section 2 shall be given
         by first class mail, postage prepaid, not less than 30 days prior to
         any payment date, which shall be stated therein, to the holders of
         record of the Series E Preferred, such notice to be addressed to each
         such holder at his last address as shown by the records of the
         Corporation. Notwithstanding the receipt of such notice, prior to the
         payment date with respect to any such liquidation as set forth therein,
         the holder of record of the Series E Preferred may still avail itself
         of the Conversion Rights set forth in section 3 below.

(3) Conversion. The holders of the Series E Preferred shall each have conversion
rights as follows (the "Conversion Rights"):

         (a) Right to Convert. Subject to the limitations set forth in
         subsection 3(b) below, at any time, each share of Series E Preferred
         shall be convertible into a number of fully paid and nonassessable
         shares of Common Stock equal to (x) the sum of the Original Series E
         Preferred Stock Issue Price (as defined below) and, in the event the
         Corporation shall not elect to exercise its option referred to in the
         last sentence of Section III(B)(1)(b), the amount of all accrued

                                       38
<PAGE>

         and unpaid dividends thereon, divided by (y) the Series E Conversion
         Price at such time. Each share of Series E Preferred shall be
         convertible at the option of the holder thereof at any time. The price
         at which shares of Common Stock shall be deliverable upon conversion
         (the "Series E Conversion Price") shall initially be $3.75 per share of
         Common Stock. Such initial Series E Conversion Price shall be subject
         to adjustment as hereinafter provided.

         (b) Nasdaq Conversion Limitation. Unless the Company obtains the
         requisite approval of its stockholders to comply with the applicable
         rules of the Nasdaq SmallCap Market or the Nasdaq National Market, no
         holder of any shares of Series E Preferred may exercise its conversion
         rights to the extent that such conversion would, together with an (i)
         aggregate of 140,193 shares of Common Stock issued by the Corporation
         to such holder on the date hereof, (ii) 50,000 shares of Common Stock
         subject to outstanding warrants to purchase Common Stock, and (iii)
         shares of Common Stock issued upon conversion of the Series C Preferred
         and the Series D Preferred, cause such holder to obtain more than 19.9%
         of all issued and outstanding shares of Common Stock including shares
         issuable in respect of outstanding scrip or any certificates
         representing fractional interests in such shares of Common Stock. The
         prior sentence shall not prohibit any holder of shares of Series E
         Preferred from exercising its conversion rights at any time following
         such time as the Common Stock is not listed on the Nasdaq SmallCap
         Market or the Nasdaq National Market. Nothing in this subsection 3(b)
         shall prohibit a holder of Series E Preferred from converting such
         stock if and to the extent that the shares issued upon such conversion,
         together with the shares of Common Stock referred to in subclauses (i),
         (ii) and (iii) above and any and all shares of Common Stock issued upon
         prior conversions by such holder of the Series E Preferred, would equal
         19.9% or less of all issued and outstanding shares of Common Stock,
         including

                                       39
<PAGE>

         shares issuable in respect of outstanding scrip or any certificates
         representing fractional interests in such shares of Common Stock. With
         respect to any holder of Series E Preferred, all references in this
         subsection 3(b) to 19.9% of all issued and outstanding shares of Common
         Stock of the Corporation shall mean 19.9% of such issued and
         outstanding Common Stock as of the date of issuance by the Corporation
         of the Series E Preferred to such holder.

         (c) Shareholder Vote regarding Conversion Limitation. If a holder of
         the Series E Preferred is unable to exercise its conversion rights due
         to the limitations set forth in subsection 3(b) above, the Board of
         Directors shall use commercially reasonable efforts to present and
         recommend to the stockholders of the Company at the next annual meeting
         of stockholders (to be held in accordance with the corporate laws of
         Delaware, the Certificate of Incorporation and the Bylaws of the
         Company) a proposal to approve such holder acquiring in excess of 19.9%
         of the issued and outstanding shares of Common Stock upon conversion of
         the Series E Preferred. The Corporation hereby undertakes to present
         such proposal at the annual meeting of stockholders to take place in
         2002 or, if earlier, at the next meeting of stockholders (or in the
         next action taken by consent of stockholders without a meeting) other
         than the annual meeting of stockholders to take place in 2001. The
         Corporation shall use its best efforts to hold such annual meeting of
         stockholders prior to September 30, 2002. Notwithstanding the
         foregoing, at the request of the holders of the Series E Preferred, the
         Company shall hold a special meeting of stockholders as soon as
         practicable in accordance with all applicable state and federal laws
         and regulations; provided that the holders of the Series E Preferred
         pay or promptly reimburse the Corporation for all costs and expenses
         relating to such special meeting of stockholders. If such approval is
         not obtained at the next such meeting of the stockholders of the
         Corporation (or in the next action taken by consent of stockholders
         without a meeting), the Corporation shall thereafter continue to use
         commercially reasonable efforts to effect such approval. In no event
         may the Corporation issue more than 19.9% of the issued and outstanding
         shares of Common Stock as determined in subsection 3(b) above without
         obtaining such requisite vote of stockholders as set forth herein.

                                       40
<PAGE>

         (d) Mechanics of Conversion. No fractional shares of Common Stock shall
         be issued upon conversion of the Series E Preferred. In lieu of any
         fractional share to which a holder would otherwise be entitled, the
         Corporation shall pay cash equal to such fraction multiplied by the
         fair market value of the Common Stock as determined by the Board of
         Directors. Before any holder of the Series E Preferred shall be
         entitled to convert the same into full shares of Common Stock, he shall
         surrender the certificate or certificates therefor, duly endorsed, at
         the office of the Corporation or of any transfer agent for the Series E
         Preferred, as designated by the Corporation, and shall give written
         notice to the Corporation at such office that he elects to convert the
         same. The Corporation shall, as soon as practicable thereafter, issue
         and deliver at such office to such holder of Series E Preferred, a
         certificate or certificates for the number of shares of Common Stock to
         which such holder shall be entitled as aforesaid and a check payable to
         the holder in the amount of any cash amounts payable as the result of a
         conversion into a fractional share of Common Stock and, if the
         Corporation shall exercise the option referred to in the last sentence
         of Section III(B)(1)(b), any amount owed to such holder as the result
         of such exercise. Such conversion shall be deemed to have been made
         immediately prior to the close of business on the date of such
         surrender of the shares of Series E Preferred to be converted, and the
         person or persons entitled to receive the shares of Common Stock
         issuable upon such conversion shall be treated for all purposes as the
         record holder or holders of such shares of Common Stock on such date.

         (e) Adjustments to Series E Conversion Price for Diluting Issues.

                    (v) Stock Dividends. If the number of shares of Common Stock
             outstanding at any time after the effectiveness of these
             resolutions is increased by a stock dividend payable in shares of
             Common Stock or by a subdivision or split-up of shares of Common
             Stock or a simlar transaction in respect thereof, then immediately
             effective at the close of business upon the record date fixed for
             the determination of holders of Common Stock entitled to receive
             such stock dividend, subdivision or split-up or similar
             transaction, the Series E Conversion Price shall be

                                       41
<PAGE>

             appropriately decreased so that the number of shares of Common
             Stock issuable on conversion of each share of Series E Preferred
             shall be increased in proportion to such increase of outstanding
             shares of Common Stock. Successive adjustments shall be made upon
             each such stock dividend, subdivision or split or similar
             transaction.

                    (vi) Adjustments for Subdivisions, Combinations, or
             Consolidations of Common Stock. In the event the outstanding shares
             of Common Stock shall be decreased by a subdivision or combination,
             by reclassification or otherwise, into a greater or lesser number
             of shares of Common Stock, the Series E Conversion Price in effect
             immediately prior to such subdivision or combination shall,
             concurrently with the effectiveness of such subdivision,
             combination or consolidation, be proportionately adjusted so that
             the number of shares of Common Stock issuable upon conversion of
             each share of Series E Preferred shall be decreased in proportion
             to such decrease of outstanding shares of Common Stock. Successive
             adjustments shall be made upon each such subdivision, combination
             or reclassification.

                    (vii) Adjustments for Other Distributions. In the event the
             Corporation at any time or from time to time makes, or fixes a
             record date for the determination of holders of Common Stock
             entitled to receive, any distribution payable in securities of the
             Corporation other than shares of Common Stock, then and in each
             such event provision shall be made so that the holders of the
             Series E Preferred shall receive upon conversion thereof, in
             addition to the number of shares of Common Stock receivable
             thereupon, the amount of securities of the Corporation which they
             would have received had their Series E Preferred been converted
             into Common Stock on the date of such event to and including the
             date of conversion, and retained such securities receivable by them
             as aforesaid during such period, subject to all other adjustments
             called for during such period under these resolutions with respect
             to the rights of the holders of the Series E Preferred.

                                       42
<PAGE>

                    (viii) Adjustments for Reorganizations, Reclassifications,
             etc. If the Common Stock issuable upon conversion of the Series E
             Preferred shall be changed into the same or a different number of
             shares of any other class or classes of stock or other securities
             or property, whether by reclassification, a merger or consolidation
             of this Corporation with or into any other entity or entities
             (other than pursuant to a subdivision, combination, stock dividend,
             or other distribution provided for in subsections 3(e)(i), (ii) or
             (iii) above), the Series E Conversion Price then in effect shall,
             concurrently with the effectiveness of such reorganization or
             reclassification, be proportionately adjusted such that the Series
             E Preferred shall be convertible into, in lieu of the number of
             shares of Common Stock which the holders would otherwise have been
             entitled to receive, a number of shares of such other class or
             classes of stock or securities or other property equivalent to the
             number of shares of Common Stock that would have been subject to
             receipt by the holders upon conversion of the Series E Preferred
             immediately before such event; and, in any such case, appropriate
             adjustment shall be made in the application of the provisions
             herein set forth with respect to the rights and interest thereafter
             of the holders of the Series E Preferred, to the end that the
             provisions set forth herein (including provisions with respect to
             changes in and other adjustments of the Series E Conversion Price)
             shall thereafter be applicable, as nearly as may be reasonable, in
             relation to any shares of stock or other property thereafter
             deliverable upon the conversion of the Series E Preferred.
             Successive adjustments shall be made upon each such
             reclassification, merger or consolidation.

                    (v) Adjustments for Issuances Below the Current Market
             Price.

                    (A) Except as provided in subsection (B), if the Corporation
             shall, while there are any shares of the Series E Preferred
             outstanding, issue or sell shares of the Common Stock of the
             Corporation at a price per share less than the then Current Market
             Price (as defined below) in effect immediately prior to such
             issuance or sale, then in each such case, the Series E Conversion
             Price shall be adjusted, effective as of the date of the issuance
             of such shares of the Common Stock of the Corporation, to an amount
             determined by multiplying the Series E Conversion Price in effect
             immediately prior to such issuance or sale by a fraction:

                    (i) the numerator of which shall be (1) the aggregate number
                    of shares of the Common Stock outstanding immediately prior
                    to the issuance of such additional shares of Common Stock,
                    plus (2) the aggregate number of shares of Common Stock then
                    issuable upon conversion of the shares of Series E Preferred
                    outstanding immediately prior to the issuance of such
                    additional shares of

                                       43
<PAGE>

                    Common Stock, plus (3) the number of shares of Common Stock
                    that the net aggregate consideration received by the
                    Corporation for the total number of such additional shares
                    of the Common Stock so issued would purchase at such Series
                    E Conversion Price in effect immediately prior to such
                    issuance, and

                    (ii) the denominator of which shall be (1) the aggregate
                    number of shares of the Common Stock outstanding immediately
                    prior to the issuance of such additional shares of the
                    Common Stock, plus (2) the aggregate number of shares of
                    Common Stock then issuable upon conversion of the shares of
                    Series E Preferred outstanding immediately prior to the
                    issuance of such additional shares of Common Stock, plus (3)
                    the number of such additional shares of the Common Stock so
                    issued.

                    (B) The adjustments contemplated by subsection (A) above
             shall not apply to (i) any issuance of shares of the Common Stock
             to officers, directors, employees, consultants or agents of the
             Corporation or any subsidiary of the Corporation pursuant to any
             stock option plan or arrangement or other equity incentive, bonus,
             or similar plan or arrangement approved by the Board of Directors,
             (ii) the issuance of shares of Common Stock in connection with the
             merger or acquisition of the Corporation or any of its subsidiaries
             with or into an unaffiliated

                                       44
<PAGE>

             third party or for purposes of a strategic business alliance with
             an unaffiliated third party, (iii) the issuance of any Common Stock
             issued in connection with an underwritten public offering of such
             securities in which the per share price to the public and any
             underwriting discounts and commissions are determined in a manner
             that is customary for an underwritten offering of similar size and
             composition, or (iv) the issuance of any Common Stock in connection
             with the conversion of the Series B Preferred Stock, Series C
             Preferred Stock, Series D Preferred Stock or Series E Preferred
             Stock.

                    (C) For purposes of this section 3(e)(v), the issuance of
             any warrants, options, subscriptions or purchase rights with
             respect to shares of Common Stock and the issuance of any
             securities convertible into or exchangeable for shares of Common
             Stock, or the issuance of any warrants, options or any rights with
             respect to such convertible or exchangeable securities, shall be
             deemed to be an issuance of shares of Common Stock at the time of
             the issuance thereof if the Net Consideration Per Share (as
             hereinafter defined) which may be received by the Corporation for
             the shares of Common Stock or issuable upon the exercise thereof is
             less than the then Current Market Price at the time of the issuance
             of such warrants, options subscriptions, purchase rights or
             securities. Any obligation, agreement or undertaking to issue
             warrants, options, subscriptions, purchase rights or such
             securities at any time in the future shall be deemed to be an
             issuance at the time such obligation, agreement or undertaking is
             made or arises. Notwithstanding the foregoing, any adjustment made
             to the Series E Conversion Price pursuant to the provisions of this
             section 3(e)(v) which relates to warrants, options, subscriptions
             or purchase rights with respect to shares of Common Stock shall be
             disregarded when, as and if all of such warrants, options,
             subscriptions or purchase rights expire or are canceled without
             being exercised, so that the Series E Conversion Price effective
             immediately upon such cancellation or expiration shall be equal to
             the Series E Conversion Price in effect at the time of the issuance
             of the expired or canceled warrants, options, subscriptions or
             purchase rights,

                                       45
<PAGE>

             after taking into account any other adjustments that would have
             been made to the Series E Conversion Price had the expired or
             canceled warrants, options, subscriptions or purchase rights not
             been issued. No adjustment to the Series E Conversion Price shall
             be made pursuant to the provisions of this section 3(e)(v) either
             (x) upon the issuance of any shares of the Common Stock that are
             issued pursuant to the exercise of any warrants, options,
             subscriptions or purchase rights or pursuant to the exercise of any
             conversion or exchange rights of any convertible securities if any
             adjustment shall previously have been made upon the issuance of any
             such warrants, options or subscriptions or purchase rights or upon
             the issuance of any such convertible securities (or upon the
             issuance of any warrants, options or any rights therefor) or (y)
             upon the issuance of any warrants, options, subscription or
             purchase rights or any other securities convertible into or
             exchangeable or exercisable for shares of Common Stock (or upon the
             issuance of any warrants, options or rights to purchase such
             securities) in accordance with subsection (B). Any anti-dilution
             adjustment to any other class or series of warrants, options,
             rights, or convertible securities shall be deemed to be an issuance
             of Common Stock at the time of such adjustment; provided, however,
             that in no event shall the Series E Preferred Stock be subject to
             more than one adjustment as a result of any single anti-dilution
             adjustments to any other security of the Corporation.

                    (D) For purposes of subsection (C), the "Net Consideration
             Per Share" shall mean the amount which is equal to the total amount
             of consideration, if any, received by the Corporation for the
             issuance of warrants, options, subscriptions or other purchase
             rights or convertible or exchangeable securities, plus the minimum
             amount of consideration, if any, payable to the Corporation upon
             exercise or conversion thereof, divided by the aggregate number of
             shares of the Common Stock that would be issued if all such
             warrants, options, subscriptions or other purchase rights or
             convertible or exchangeable securities were exercised, converted or
             exchanged. For purposes of this subsection (D), if part or all of
             the consideration received or to be received by the Corporation in
             connection with the issuance of shares of Common Stock or the
             issuance of any of the securities described in this subsection (D)
             consists of property other than cash, the value of such property
             shall be determined by or at the direction of the Board of
             Directors, in good faith, whereupon such value shall be given to
             such consideration and shall be recorded on the books of the
             Corporation with respect to receipt of such property.

                    (E) For the purpose of any computation under subsection (A)
             the Current Market Price per share of Common Stock on any date
             shall be (i) the last reported sale price, or if none is reported,
             the average of the reported closing bid and asked prices, on all
             domestic securities exchanges on which the Common Stock is listed,
             or (ii) if on any day the Common Stock is not so listed, the sales
             price for the Common Stock as of 4:00 P.M., New York time, as
             reported on the Nasdaq Stock Market,

                                       46
<PAGE>

             or (iii) if the Common Stock is not reported on the Nasdaq Stock
             Market, the average of the representative bid and asked quotations
             for the Common Stock as of 4:00 P.M., New York time, as reported on
             the Nasdaq interdealer quotation system, bulletin board,
             over-the-counter market or any similar or successor organization,
             in each such case averaged over a period of 15 trading days prior
             to the day as of which the Current Market Price is being
             determined. If there is no such closing price or closing bid and
             asked prices or the Common Stock is not reported on any such
             exchange or market, the Current Market Price shall be determined in
             any good faith reasonable manner approved by the Board of Directors
             of the Corporation.

         (f) No Impairment.

                    (i) The Corporation will not, by amendment of its
             Certificate of Incorporation or through any reorganization,
             transfer of assets, merger, dissolution, issue or sale of
             securities or any other voluntary action, avoid or seek to avoid
             the observance or performance of any of the terms to be observed or
             performed hereunder by the Corporation but will at all times in
             good faith assist in the carrying out of all the provisions of this
             section 3 and in the taking of all such action as may be necessary
             or appropriate in order to protect the conversion rights of the
             holders of the Series E Preferred against impairment.

                    (ii) The Corporation shall at all times reserve and keep
             available for issuance upon the conversion of the Series E
             Preferred a number of its authorized but unissued shares of Common
             Stock that will from time to time be sufficient to permit the
             conversion of all outstanding shares of Series E Preferred, and
             shall take all action required to increase the authorized number of
             shares of Common Stock if at any time there shall be insufficient
             authorized but unissued shares of Common Stock to permit such
             reservation or to permit the conversion of all outstanding shares
             of Series E Preferred.

                                       47
<PAGE>

                    (iii) Any registered holder of Series E Preferred shall be
             entitled to seek an injunction or injunctions to prevent breaches
             of the provisions of this certificate of designation and to enforce
             specifically the terms and provisions of this certificate of
             designation in any court of the United States or any state thereof
             having jurisdiction, this being in addition to any other remedy to
             which such holder may be entitled at law or in equity.

         (g) Certificate as to Adjustments. Upon the occurrence of each
         adjustment or readjustment of the Series E Conversion Price pursuant to
         this section 3, the Corporation, at its expense, shall promptly compute
         such adjustment or readjustment in accordance with the terms hereof and
         furnish to each holder of Series E Preferred a certificate setting
         forth such adjustment or readjustment and showing in detail the facts
         upon which such adjustment or readjustment is based. The Corporation
         shall, upon the written request at any time of any holder of Series E
         Preferred, furnish or cause to be furnished to such holder a like
         certificate setting forth (i) such adjustments and readjustments,(ii)
         the Series E Conversion Price at the time in effect, and (iii) the
         number of shares of

                                       48
<PAGE>

         Common Stock and the amount, if any, of other property which at the
         time would be received upon the conversion of Series E Preferred.

         (h) Notices of Record Date. In the event that this Corporation shall
         propose at any time:

                    (i) to declare any dividend or distribution upon its Common
             Stock, whether in cash, property, stock or other securities,
             whether or not a regular cash dividend and whether or not out of
             earnings or earned surplus;

                    (ii) to effect any reclassification or recapitalization or
             other reorganization of its capital stock; or

                    (iii) to merge with or into any other corporation or other
             entity, or sell, lease or convey all or substantially all its
             property or business, or to liquidate, dissolve or wind up;

         then, in connection with each such event, this Corporation shall send
         to the holders of the Series E Preferred shares:

                    (A) at least 10 days' prior written notice of the date on
             which a record shall be taken for such dividend, distribution or
             subscription rights and setting forth a description thereof (and
             specifying the date on which the holders of Common Stock shall be
             entitled thereto) or for determining rights to vote in respect of
             the matters referred to in (iii) above; and

                    (B) in the case of the matters referred to in subsection
             3(h)(ii) or (iii) above, at least 10 days' prior written notice of
             the date when the same shall take place (and specifying the date on
             which the holders of Common Stock shall be entitled to exchange
             their Common Stock for securities or other property deliverable
             upon the occurrence of such event).

                                       49
<PAGE>

         Each such written notice shall be given by first class mail, postage
         prepaid, addressed to the holders of Series E Preferred at the address
         for each such holder as shown on the books of this Corporation.

(4) Voting. Except as otherwise required by law, the holders of Series E
Preferred shall not be entitled to vote upon any matter submitted to the
stockholders for a vote except as to matters affecting holders of Series E
Preferred as a class, as set forth in section (5) below.

(5) Protective Provisions. In addition to any other rights provided by law, so
long as any Series E Preferred shall be outstanding, this Corporation shall not,
without first obtaining the affirmative vote or written consent of the holders
of more than 50 percent of such outstanding shares of Series E Preferred:

         (a) amend or repeal any provision of, or add any provision to, this
         Corporation's Certificate of Incorporation or Bylaws if such action
         would alter or change the preferences, rights, privileges or powers of,
         or the restrictions provided for the benefit of, the Series E
         Preferred;

         (b) authorize or issue shares of any class of stock having any
         preference or priority as to dividends or assets superior to or on a
         parity with any such preference or priority of the Series E Preferred,
         or authorize or issue shares of stock of any class or any bonds,
         debentures, notes or other obligations convertible into or exchangeable
         for, or having option rights to purchase, any shares of stock of this
         Corporation having any preference or priority as to dividends or assets
         superior to or on a parity with any such preference or priority of the
         Series E Preferred; or

         (c) reclassify any Common Stock into shares having any preference or
         priority as to dividends or assets superior to or on a parity with any
         such preference or priority of the Series E Preferred.


                                       50
<PAGE>

(6) Status of Converted Stock. In the event any shares of Series E Preferred
shall be converted pursuant to section 3 hereof, the shares so converted shall
be canceled and shall not be issuable by the Corporation.

(7) Residual Rights. All rights accruing to the outstanding shares of this
Corporation not expressly provided for to the contrary herein shall be vested in
the Common Stock.

(8) Consent for Certain Repurchases of Common Stock Deemed to be Distributions.
Each holder of Series E Preferred shall be deemed to have consented to
distributions made by the Corporation in connection with the repurchase of
shares of Common Stock issued to or held by employees or consultants upon
termination of their employment or services pursuant to agreements providing for
such right of repurchase between the Corporation and such persons.

     IN WITNESS WHEREOF, 5B Technologies Corporation has caused its corporate
seal to be hereunto affixed and this certificate to be signed by Glenn Nortman,
its Chief Executive Officer, this 16th day of August, 2001.


                                          5B TECHNOLOGIES CORPORATION


                                          By: /s/ Glenn Nortman
                                              -------------------------------
                                              Glenn Nortman
                                              Chief Executive Officer


                                       51

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.19
<SEQUENCE>4
<FILENAME>file003.txt
<DESCRIPTION>ASSET PURCHASE AGREEMENT
<TEXT>
<PAGE>




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

                            ASSET PURCHASE AGREEMENT

                                  BY AND AMONG

                          5B TECHNOLOGIES CORPORATION,

                       KNOWLEDGE ACQUISITION CORPORATION,

                        KNOWLEDGE STRATEGIES GROUP INC.,

                                CYNTHIA HOLLEN,

                                DOUGLAS CARLSON

                                      AND

                                MICHAEL THOMPSON



                               DATED JULY 30, 2001

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

<PAGE>


                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
ARTICLE I Definitions [more to be added].....................................1
         1.1      Definitions................................................1

ARTICLE II Sale and Purchase.................................................7
         2.1      Sale and Purchase of Acquired Assets.......................7
         2.2      Excluded Assets............................................8
         2.3      Assumption of Liabilities..................................8
         2.4      Information and Records....................................9

ARTICLE III Consideration...................................................10
         3.1      Payment of Purchase Price.................................10
         3.2      Additional Consideration..................................10
         3.3      Use of Consideration......................................10
         3.4      Allocation of the Purchase Price..........................10

ARTICLE IV Closing..........................................................11
         4.1      Closing...................................................11
         4.2      Seller at Closing.........................................11
         4.3      Buyer at Closing..........................................12
         4.4      Further Assurances........................................12

ARTICLE V Representations and Warranties of the Sellers.....................13
         5.1      Organization, Standing and Qualification;
                   Subsidiaries.............................................13
         5.2      Authority.................................................14
         5.3      Capitalization; Equity Interest...........................14
         5.4      Consents and Approvals; No Violation......................14
         5.5      Books and Records.........................................15
         5.6      Financial Statements; Certain Financial Information[;
                   EBIT]....................................................15
         5.7      Absence of Undisclosed Liabilities........................16
         5.8      Absence of Certain Changes or Events......................17
         5.9      Real Property.............................................18
         5.10     Leases....................................................18
         5.11     Title to Acquired Assets..................................19
         5.12     Intellectual Property Rights..............................19
         5.13     Contracts.................................................22
         5.14     Litigation................................................23
         5.15     Insurance.................................................23
         5.16     Employee Benefit Plans....................................23
         5.17     Tax Matters...............................................25
         5.18     Environmental Matters.....................................27
         5.19     Labor Relations; Employees................................28
         5.20     Compliance with Law.......................................30


                                       i
<PAGE>

         5.21     Government Permits........................................30
         5.22     Bank Accounts; Powers-of-Attorney.........................31
         5.23     Brokers or Finders........................................31
         5.24     Transactions with Affiliates..............................31
         5.25     Customers and Suppliers...................................31
         5.26     Accounts Receivable and Payables..........................32
         5.27     Guarantees................................................32
         5.28     Common Activities.........................................32
         5.29     Disclosure................................................33

ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT...............34
         6.1      Organization, Standing and Qualification..................34
         6.2      Authority.................................................34
         6.3      Capitalization............................................35
         6.4      Validity; Issuance of Shares..............................35
         6.5      Consents and Approvals; No Violation......................35
         6.6      Brokers or Finders........................................36
         6.7      Public Reports............................................36
         6.8      Disclosure................................................36

ARTICLE VII COVENANTS.......................................................36
         7.1      Conduct of Business.......................................36
         7.2      Access to Information.....................................38
         7.3      Best Efforts..............................................38
         7.4      No Solicitation by the Sellers............................39
         7.5      Fees and Expenses.........................................39
         7.6      Books and Records.........................................40
         7.7      Compliance with Laws, Orders  and Contracts...............40
         7.8      Certain Activities between Signing and Closing............40
         7.9      Expenditures..............................................40
         7.10     Notification of Certain Matters...........................40

ARTICLE VIII CLOSING CONDITIONS.............................................41
         8.1      Conditions Precedent to Obligations of Parent and
                   the Buyer................................................41
         8.2      Conditions Precedent to Obligations of the Sellers........43

ARTICLE IX INDEMNIFICATION AND SURVIVAL.....................................44
         9.1      Indemnification...........................................44
         9.2      Survival Periods..........................................47
         9.3      Cancellation of Shares....................................47

ARTICLE X TERMINATION.......................................................48

ARTICLE XI General..........................................................48
         11.1     Expenses..................................................48
         11.2     Notices...................................................49
         11.3     Entire Agreement; Headings; Counterparts..................49


                                       ii
<PAGE>

         11.4     Amendment; Waiver.........................................49
         11.5     Severability..............................................50
         11.6     Parties in Interest; Assignment...........................50
         11.7     Applicable Law............................................50
         11.8     Publicity.................................................51
         11.9     Bulk Sales Compliance.....................................51

                                      iii

<PAGE>



                            ASSET PURCHASE AGREEMENT

         This Asset Purchase Agreement dated as of the 30th day of July, 2001
(this "Agreement"), by and among Knowledge Acquisition Corporation, a New York
corporation, having its principal offices at 100 Sunnyside Boulevard, Woodbury,
New York 11797 (the "Buyer"), 5B Technologies Corporation, a Delaware
corporation, having its principal offices at 100 Sunnyside Boulevard, Woodbury,
New York 11797 ("Parent"), Knowledge Strategies Group Inc., a New York
corporation, having its principal offices at 900 Broadway, Suite 602, New York,
NY 10010 ("KSG"), Cynthia Hollen, an individual residing at __________________
("Hollen"), Douglas Carlson, an individual residing at ____________________
("Carlson"), Michael Thompson, an individual residing at
_______________________ ("Thompson," and together with Hollen and Carlson,
collectively, the "Principals"). KSG and the Principals are collectively
referred to in this Agreement as the "Sellers."

                              W I T N E S S E T H:

         WHEREAS, the Principals own all of the issued and outstanding equity
capital of KSG;

         WHEREAS, the Sellers are the owners of the Acquired Assets (as defined
below);

         WHEREAS, the Buyer is a wholly-owned subsidiary of the Parent;

         WHEREAS, the Sellers wish to sell to the Buyer, and the Buyer wishes
to purchase from the Sellers, the Acquired Assets upon the terms and subject to
the exclusions and conditions set forth in this Agreement; and

         WHEREAS, as a condition precedent for the Buyer and Parent to
consummate the transactions contemplated hereby, the Bank (as defined herein)
has agreed to enter into an amendment (the "Credit Agreement Amendment") to
that certain Credit Agreement dated May 24, 2001, between the Bank and 5B
Technologies Group, Inc. (the "Credit Agreement"), in form and substance
satisfactory to Parent and the Bank.

         NOW, THEREFORE, for and in consideration of the mutual promises and
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

       1.1 Definitions. The following terms shall have the following meanings
for the purposes of this Agreement:

         "Acquired Assets" shall have the meaning provided in Section 2.1.

         "Acquisition Proposal" shall have the meaning provided in Section 7.4.


<PAGE>

         "Affiliate" shall mean, with respect to any specified Person, any
other Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person.
For purposes of this definition "controls," "is controlled by" and "under
common control with" means the possession of the power to direct or cause the
direction of the management and policies of a specified Person through the
ownership of voting securities or otherwise.

         "Agreement" shall mean this Purchase Agreement, including all exhibits
and schedules hereto, as it may be amended from time to time in accordance with
its terms.

         "Asset Acquisition Statement" shall have the meaning provided in
Section 3.4.

         "Assignment and Assumption Agreement" shall mean that certain the
Assignment and Assumption Agreement, dated the Closing Date, between the Buyer
and the Sellers, in form and substance reasonably satisfying to the Buyer and
the Sellers, the form of which is attached hereto as Exhibit F.

         "Assumed Contracts" shall have the meaning provided in Section 2.1(f).

         "Assumed Liabilities" shall have the meaning provided in Section 2.3.

         "Audited Financials" shall have the meaning provided in Section
5.6(a).

         "Bank" shall have the meaning provided in Section 3.3.

         "Bank Consent" shall mean the Bank Consent, dated the Closing Date,
between KSG and the Bank with respect to the Bank's consent to the transactions
contemplated under this Agreement.

         "Bill of Sale" shall mean the bill of sale, dated the Closing Date,
between the Buyer and the Sellers, in form and substance reasonably satisfying
to the Buyer and the Sellers, the form of which is attached hereto as Exhibit
A.

         "Books and Records" shall have the meaning provided in Section 8.1(m).

         "Business" shall mean the business of KSG as currently conducted.

         "Business Combination" shall have the meaning provided in Section 7.4.

         "Buyer Parties" shall have the meaning provided in Section 9.1(a).

         "Buyer" shall have the meaning provided in the preamble to this
Agreement.

         "Buyer Disclosure Schedule" shall have the meaning provided in Section
6.5(a).

         "Carlson" shall have the meaning provided in the preamble to this
Agreement.

         "CBC Loan Agreement" shall mean that certain Credit Agreement dated as
of December 15, 1999 between KSG and the Bank.



                                       2
<PAGE>

         "Claim Notice" shall have the meaning provided in Section 9.1(c)(i).

         "Closing" shall have the meaning provided in Section 4.1.

         "Closing Date" shall have the meaning provided in Section 4.1.

         "Code" means the Internal Revenue Code of 1986, as amended, modified
or supplemented from time to time.

         "Common Control Entity" shall be defined in accordance with Section
414(b) or (c) of the Code.

         "Common Stock" shall mean the common stock, $.04 par value per share,
of Parent.

         "Confidential Information" shall mean the proprietary and confidential
information of either party, including, without limitation, all information,
know-how, marketing and development plans, techniques and materials, client
names and other information related to clients, price lists, pricing policies
and financial information, and methods of production, vendor agreements, use,
operation and application: (i) which are not generally known to the public; and
(ii) in which such Person has rights.

         "Confidentiality Agreements" shall mean the Non-Compete/
Confidentiality and Trade Secret/Invention Agreement to be executed by certain
employees of KSG as of the Closing Date, the form of which is attached hereto
as Exhibit D.

         "Consulting Agreements" shall mean the consulting agreements between
the Buyer and Hollen and the Buyer and Carlson to be executed at the Closing,
in form and substance satisfactory to the parties thereto, the form of which is
attached hereto as Exhibit B.

         "Contaminant" shall have the meaning provided in Section 5.18(a).

         "Contracts" shall have the meaning provided in Section 5.13.

         "Core Software Products" shall have the meaning provided in Section
5.12(a)(i).

         "Credit Agreement" shall have the meaning provided in the preamble to
this Agreement.

         "Credit Agreement Amendment" shall have the meaning provided in the
preamble to this Agreement.

         "Dispute Period" shall have the meaning provided in Section 9.1(c)(i).

         "DOL" shall mean the Department of Labor, as provided in Section
5.12(d).

         "Environmental Laws" shall have the meaning provided in Section
5.18(a).

         "ERISA" shall have the meaning provided in Section 5.16(b).



                                       3
<PAGE>

         "ERISA Affiliate" shall have the meaning provided in Section 5.16(a).

         "Excluded Assets" shall have the meaning provided in Section 2.2.

         "Expiration Date" shall have the meaning provided in Section 9.2(a).

         "Financial Statements" shall have the meaning provided in Section
5.6(a).

         "GAAP" means U.S. generally accepted accounting principles,
consistently applied.

         "Governmental Permits" shall have the meaning provided in Section
5.21.

         "Hollen" shall have the meaning provided in the preamble to this
Agreement.

         "Income Taxes" means any federal, state, local, or foreign income, or
franchise Tax and in each instance any interest, penalties, or additions to tax
attributable to such Tax.

         "Indebtedness" shall have the meaning provided in Section 5.7.

         "Indemnified Party" shall have the meaning provided in Section 9.1(c).

         "Indemnifying Party" shall have the meaning provided in Section
9.1(c)(i).

         "Indemnity Notice" shall have the meaning provided in Section
9.1(c)(v).

         "Intellectual Property Rights" shall have the meaning provided in
Section 5.12.

         "Interim Balance Sheet" shall have the meaning provided in Section
5.6(a).

         "Interim Balance Sheet Date" shall have the meaning provided in
Section 5.6(a).

         "Interim Financial Statements" shall have the meaning provided in
Section 5.6(a).

         "Inventory" shall have the meaning provided in Section 2.1(c).

         "IRS" shall have the meaning provided in Section 5.16(b).

         "KSG" shall have the meaning provided in the preamble to this
Agreement.

         "KSG Common Stock" shall have the meaning provided in Section 5.3(a).

         "Laws" shall have the meaning provided in Section 5.20.

         "Leased Real Property" shall have the meaning provided in Section
5.10(a).

         "Lien" shall mean any mortgage, lien, charge, restriction, pledge,
security interest, option, lease or sublease, claim, right of any third party,
easement, encroachment or



                                       4
<PAGE>

encumbrance of any kind or any agreement or arrangement, whether oral or
written, having similar effect.

         "Loss" shall mean any and all losses, liabilities, fines, judgments,
claims, damages, settlement payments, actions or causes of action, Liens, costs
and expenses (including reasonable attorneys' fees).

         "Material Adverse Effect" shall have the meaning provided in Section
5.8(b).

         "Office Action" shall mean any official action by the United States
Patent and Trademark Office reporting that a particular trademark or service
mark application is not entitled to federal registration for any reason and
advising of the reasons therefor and of any formal requirements or objections
with respect thereto.

         "Order" shall have the meaning provided in Section 5.4.

         "Parent" shall have the meaning provided in the preamble to this
Agreement.

         "Parent's SEC Reports" shall have the meaning provided in Section 6.7.

         "Person" shall mean any individual, corporation, proprietorship, firm,
partnership, limited liability company, limited partnership, trust, association
or other entity.

         "Plan" shall have the meaning provided in Section 5.16(a).

         "Preferred Stock" shall mean shares of Series C Convertible Preferred
Stock, par value $.01 per share, of Parent, in a sufficient amount to
satisfying the outstanding amounts under the CBC Loan Agreement.

         "Prepaid Expenses" shall have the meaning provided in Section 2.1(d).

         "Principals" shall have the meaning provided in the preamble to this
Agreement.

         "Proceeding" shall have the meaning provided in Section 5.14.

         "Purchase Price" shall have the meaning provided in Section 3.1.

         "Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated the Closing Date, with respect to the shares of Common Stock
underlying the Preferred Stock, in form and substance reasonably satisfactory
to Parent and the Bank, the form of which is attached hereto as Exhibit B.

         "Related Agreements" shall mean any contract or agreement which is or
is to be entered into at the Closing or otherwise pursuant to this Agreement,
including, without limitation, the Bill of Sale, the Consulting Agreements,
Confidentiality Agreements, Registration Rights Agreement and any assignments
of any of the foregoing. The Related Agreements executed by a specified Person
shall be referred to as "such Person's Related Agreements," "its Related
Agreements" or another similar expression.



                                       5
<PAGE>

         "Release" shall have the meaning provided in Section 5.18(a).

         "Release Agreement" shall mean the Release Agreement, dated the
Closing Date, between the Sellers and the Bank, releasing all security
interests and Liens of the Bank with respect to the Acquired Assets, in form
and substance reasonably satisfactory to the Sellers and the Bank.

         "Representatives" shall have the meaning provided in Section 7.2.

         "Resolution Period" shall have the meaning provided in Section
9.1(c)(iv).

         "Retained Liabilities" shall have the meaning provided in Section
2.3(b).

         "Return" means any report, return, statement, estimate, declaration,
form, or other information required to be supplied to a taxing authority in
connection with Taxes.

         "Sellers" shall have the meaning provided in the preamble to this
Agreement.

         "Sellers Parties" shall have the meaning provided in Section 9.1(b).

         "Sellers' Disclosure Schedule" shall have the meaning provided in
Article V.

         "Shares" shall mean 150,000 shares of Common Stock.

         "Software Products" shall have the meaning provided in Section
5.12(a)(i).

         "Tax" or "Taxes" means taxes of any kind, levies or other like
assessments, customs, duties, imposts, charges or, including, without
limitation, income, gross receipts, ad valorem, value added, excise, real or
personal property, asset, sales, use, license, payroll, transaction, capital,
net worth and franchise taxes, estimated taxes, withholding, employment, social
security, workers compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer and gains taxes
or other governmental taxes imposed or payable to the United States, or any
state, county, local, or foreign government or subdivision or agency thereof,
and in each instance such term shall include any interest, penalties, or
additions to tax attributable to any such Tax. "Indebtedness" shall have the
meaning provided in Section 5.7.

         "Third Party Claim" shall have the meaning provided in Section
9.1(c)(i).

         "Trademarks" shall have the meaning provided in Section 2.1(a).

         "Trademark Assignment" means the trademark assignment between the
Buyer and the Sellers, the form of which is attached hereto as Exhibit C.

         "WARN Act" shall have the meaning provided in Section 5.19(c).



                                       6
<PAGE>

                                  ARTICLE II

                               SALE AND PURCHASE

      2.1 Sale and Purchase of Acquired Assets. Subject to the terms and
conditions of this Agreement, at the Closing, the Sellers shall sell, transfer,
assign, convey and deliver to the Buyer, and the Buyer shall purchase, acquire
and take assignment and delivery of all right, title and interest in, to and
under the following assets owned by the Sellers (all of the assets sold,
assigned, transferred and delivered to the Buyer hereunder being referred to
collectively herein as the "Acquired Assets" and are set forth on Schedule 2.1
attached hereto):

         (a) all of the following intangible assets which are owned by the
Sellers and used in connection with the operation of or relating to the
Business throughout the world: (a) registered and unregistered trademarks and
service marks (including common law rights) and applications for trademark and
service mark registrations, in each case which are related to the Business; (b)
trade names related to the Business (all assets in subparagraph (a) and (b)
which shall include those items identified on Schedule A hereto, collectively
referred to as the "Trademarks"); (c) registered and unregistered copyrights
and applications for copyright registrations related to the Business; (d)
proprietary concept information, including, without limitation, business and
marketing plans, marketing materials (including without limitation, brochures,
folders, special event planning guides and collateral materials) a reproducible
copy of the Sellers' web page, advertising concepts, designs and slogans, in
each case which are related to the Business, including audio and video and
other production products utilized to create any of the foregoing; and (e) all
enhancements, improvements and derivative works of each of the foregoing, in
each case, which are used in connection with the Business;

         (b) all machinery, fixtures, equipment, vehicles, transportation and
storage facilities, furniture, tools, stores, spare parts and other tangible
personal property utilized in the Business owned by the Sellers and the
Sellers' rights in any of the foregoing items leased or licensed by the Sellers
and used in the Business;

         (c) all inventory (including raw materials, work-in-process, and
finished goods), and supplies (including office, packaging, shop and other
supplies) on hand and used in connection with the Business (the "Inventory");

         (d) all items of pre-paid expenses relating to the Business, if any
("Pre-paid Expenses");

         (e) all licenses with respect to patents, inventions, trade secrets,
trademarks, technology, know-how, specifications, designs, drawings, processes,
quality control data, and other technical and proprietary information relating
to the Business;

         (f) the Sellers' rights and interests in and to (subject to the
Buyer's assumption of the obligations thereunder arising on and after the
Closing) all contracts, sales orders, purchase orders, equipment leases,
personal property leases, licenses, forward commitments for supplies or
materials and other contracts, arrangements and agreements, whether written or
oral, which were entered into in the ordinary course of business with


                                       7
<PAGE>

customers, suppliers, sales representatives, distributors, agents, lessors,
lessees, licensors, licensees, consignors, consignees and other third parties,
including, without limitation, all Contracts listed on Schedule 5.13 hereto,
all of which relate to the Acquired Assets and the operation of the Business
(the "Assumed Contracts");

         (g) the Sellers' rights, to the extent assignable, under all third
party warranties and guarantees, whether express or implied, as they relate to
the Business;

         (h) all claims, rights, setoffs and credits of Seller relating to the
Assumed Contracts or the Acquired Assets;

         (i) all separately maintained (as well as relevant portions of those
which are not separately maintained) books, records and files relating to the
ownership, occupancy, use or operation of, the Business or the Acquired Assets,
including, without limitation, customer lists, vendor lists, catalogs and
accounting and tax records;

         (j) all licenses, approvals, registrations, authorizations and permits
pertaining to the ownership, occupancy, use or operation of the Business or the
Acquired Assets; and

         (k) all accounts receivables (whether or not invoiced) with respect to
goods sold or services rendered within the 90 day period prior to the Interim
Balance Sheet Date.

      2.2 Excluded Assets. Notwithstanding anything to the contrary set
forth in this Agreement, there shall be excluded from the Acquired Assets (the
"Excluded Assets"): (i) any cash (including cash equivalents and securities) of
the Sellers on hand or on deposit as of the Closing Date; (ii) any accounts
receivable due, owing, accrued or payable to the Sellers (whether or not
invoiced) with respect to goods sold or services rendered during the period up
to the Closing Date which accounts receivable are in excess of 90 days past due
and are set forth on Schedule 2.2 hereto; (iii) any computer software used to
provide sales, payroll, accounting or other administrative services to KSG;
(iv) the benefit of any of KSG's insurance coverages or policies on and after
the Closing Date and (v) any and all assets of the Sellers not utilized in or
relating to the Business.

      2.3 Assumption of Liabilities.

         (a) On and after the Closing Date, the Buyer shall assume, and agrees
and undertakes to pay, perform and discharge, as and when due, each of the
obligations, responsibilities, liabilities and debts with respect to the
Business (other than Retained Liabilities) which are specifically described in
Schedule 2.3 hereto (all of which are hereinafter referred to collectively as
the "Assumed Liabilities").

         (b) Notwithstanding anything to the contrary contained herein, Assumed
Liabilities shall not include any of the following, all of which shall be
retained by the Sellers and are hereinafter referred to as "Retained
Liabilities":

               (i) legal, accounting, brokerage, finder's fee, taxes or other
          expenses incurred by the Sellers in connection with this Agreement or
          the consummation of the transactions contemplated hereby;



                                       8
<PAGE>

               (ii) liabilities or obligations incurred by the Sellers after
          the Closing;

               (iii) any obligations or liability relating to any litigation,
          actions, grievances, arbitrations, suits, proceedings, investigations
          or claims arising out of or relating to any of the Sellers'
          activities or any of the Sellers' operation of the Business or
          ownership or use of the Acquired Assets prior to the Closing Date or
          any dispute, the material elements of which accrued prior to the
          Closing, whether or not listed on any Schedule hereto;

               (iv) any liability for any foreign, federal, state or local
          taxes accrued to (or which should have been accrued pursuant to GAAP)
          or incurred by any of the Sellers prior to the Closing, or as a
          consequence of the transactions contemplated hereby;

               (v) all liabilities to employees of KSG with respect to any
          claims, whether contingent or otherwise, relating to labor relations
          and compliance with fair employment practices prior to the Closing or
          any salary, bonuses, commissions, benefits or other amounts payable
          from, or contributions to, any benefit plans or arrangements,
          payments of insurance premiums or other compensation matters for or
          with respect to the period prior to the Closing Date;

               (vi) all liabilities, costs or obligations under or which relate
          to or are associated with any employee benefit plans or arrangements,
          including the Employee Plans sponsored by any of the Sellers or a
          Common Control Entity (as determined under Section 414(b) or (c) of
          the Code) either before or after the Closing;

               (vii) all liabilities to the extent they are associated with or
          relate to any of the Excluded Assets, whether arising from events
          occurring prior to or after the Closing Date;

               (viii) all liabilities or obligations to any Affiliates of
          Sellers arising prior to or after the Closing Date;

               (ix) all liabilities for severance obligations, if any, to any
          employee of KSG who does not become an employee of the Buyer;

               (x) all accounts payable for goods and services, including
          customer and third party credits, trade accounts payable and accrued
          expenses and other debts or sums due, owing, accrued or payable with
          respect to any of the Sellers' activities and the operation of the
          Business prior to the Closing Date, except those accounts payable
          specifically assumed by the Buyer as set forth in Schedule 2.3
          hereto; and

               (xi) any liabilities or obligations of the Sellers or relating
          to the Business or the Acquired Assets not expressly assumed by the
          Buyer as set forth in Schedule 2.3 hereto.

         2.4 Information and Records. Following the Closing, the Sellers shall
also provide to the Buyer, copies of, or access to, all technical information,
Confidential Information, price lists, marketing information, sales records,
customer lists, documents related to the Business and the



                                       9
<PAGE>

Acquired Assets, agreements with vendors, suppliers and manufacturers and any
other entities which do business with the Sellers with respect to the Business,
and any other business records of the Sellers that would be useful to the
Buyer.

                                  ARTICLE III

                                 CONSIDERATION

         3.1 Payment of Purchase Price. At the Closing, in consideration for
the Acquired Assets, the Buyer shall (i) issue the Preferred Stock to KSG, and
(ii) issue the Shares to KSG collectively, the "Purchase Price").

         3.2 Additional Consideration. Subsequent to the Closing Date, KSG
shall be entitled to receive a percentage of the profit (which for purposes of
this Section 3.2 shall mean revenue less all employment related costs
(including, without limitation, salaries, commissions, consulting fees,
payroll taxes, benefits and travel and entertainment expenses) and less an
administrative charge of $25,000 per month) from KSG's customers existing on
the Closing Date who become customers of the Buyer thereafter and any new
customers of the Buyer procured by the Principals, equal to (a) 15% during the
period commencing from the Closing Date and ending on the first anniversary of
the Closing Date, and (b) 10% during the period commencing from the first
anniversary of the Closing Date and ending on the second anniversary of the
Closing Date, as such profit amount shall be determined by the Buyer's
independent auditors; provided, however, that the Buyer shall not be required
to pay any such profit participation to KSG in the event that at any time
during such two year period (or such shorter period pursuant to the term of the
Consulting Agreements) (i) any of Hollen, Carlson, Thompson or Burton Hensley,
for any reason, has not performed services on behalf of the Company pursuant to
their respective Consulting Agreements, (ii) there has been a default or breach
under this Agreement, the Consulting Agreements or the Related Agreements, that
has not been cured within 30 days thereof or is not curable, or (iii) the Buyer
or Parent has submitted a notice of claim with respect to the indemnification
obligations pursuant to Article IX and such indemnification obligations have
not been satisfied within 30 days of submission of such notice of claim.
Payments to KSG pursuant to this Section 3.2 shall be made quarterly in arrears
within 60 days following the end of each quarter.

         3.3 Use of Consideration. The Sellers hereby covenant and agree that
they shall (i) immediately upon receipt of the Preferred Stock on the Closing
Date, assign all of such shares of Preferred Stock to Connecticut Bank of
Commerce (the "Bank") in full satisfaction of all amounts due and owing under
the CBC Loan Agreement, and the Sellers shall concurrently therewith obtain
from the Bank the Release Agreement with respect to release of all Liens and
security interests on the assets of the Sellers, including, without limitation,
the Acquired Assets, and (ii) immediately upon receipt of any proceeds pursuant
to Section 3.2, repay all Indebtedness and other payables validly owing (and
not contested) by KSG until same have been paid in full.

         3.4 Allocation of the Purchase Price. Prior to the Closing Date, the
parties will mutually agree upon the fair market value of the Acquired Assets
in order to establish a Purchase Price allocation for all foreign, federal,
state and local tax purposes and shall set forth such



                                      10
<PAGE>

allocation on Schedule 3.4 to be delivered prior to the Closing. The Purchase
Price for the Acquired Assets, consisting of the Purchase Price under Section
3.1 and the Assumed Liabilities under Section 2.3(a), shall be allocated in
accordance with Section 1060 of the Code. Neither party will voluntarily take a
position inconsistent therewith upon examination of any such tax return or
report, in any refund claim, in any litigation or otherwise with respect to
such tax returns. Each party agrees to prepare and timely file Internal Revenue
Service Form 8594 ("Asset Acquisition Statement") detailing the agreed upon
allocation and any supplemental filing, if necessary, upon determination of any
adjustment to the Purchase Price hereunder, to cooperate in every reasonable
way with the other party in the preparation of such form(s) and to furnish the
other party with a copy of such form(s) prepared in draft within a reasonable
period before the due date for filing.

                                  ARTICLE IV

                                    CLOSING

         4.1 Closing. The closing of the transactions contemplated hereby (the
"Closing") shall be held at the offices of the Buyer or its counsel, or at such
other place as the parties may agree upon, at 10:00 a.m., E.S.T., on the next
business day following the date the conditions to Closing are satisfied or
waived, or as may be mutually agreed upon by the parties (the "Closing Date").

         4.2 Sellers at Closing. At the Closing, the Sellers shall deliver to
the Buyer:

         (a) all of the Acquired Assets;

         (b) a bill of sale duly executed by the Sellers in the form of Exhibit
A, attached hereto;

         (c) the following agreements duly executed by the Sellers: the
Consulting Agreements, the Confidentiality Agreements, the Registration Rights
Agreement and the Release Agreement, each in form and substance satisfactory to
the parties thereto, and in substantially the forms attached as Exhibits A, B1,
B2, B3, B4, D and E, respectively;

         (d) an incumbency and specimen signature certificate with respect to
each of the officers of KSG executing this Agreement, the other agreements
required to be delivered pursuant to Sections 4.2(c) and (e) hereof and any
other documents, agreements, instruments and certificates delivered hereunder,
on behalf of KSG;

         (e) an Assignment and Assumption Agreement duly executed by the
Sellers in the form of Exhibit F attached hereto;

         (f) the certificates required to be delivered pursuant to Section
8.1(e) hereof;

         (g) consent to assignment of all Intellectual Property Rights and any
other Contracts requiring consent in connection with consummation of the
transactions contemplated by this Agreement;



                                      11
<PAGE>

         (h) an estoppel certificate or other evidence of satisfaction with
respect to the CBC Loan Agreement;

         (i) all authorizations necessary for ownership, use and operation of
the Business and the Acquired Assets; and

         (j) all such other documents, agreements, instruments, consents or
certificates required to be delivered to Buyer under the provisions of this
Agreement or as Buyer may deem reasonably necessary or appropriate to effect,
evidence or facilitate the transactions contemplated by this Agreement and vest
in Buyer good and marketable title to the Acquired Assets.

       4.3 Buyer at Closing. At the Closing, Buyer shall:

         (a) deliver the Purchase Price, which shall contain appropriate
restrictive legends, and the Registration Rights Agreement;

         (b) deliver to KSG an Assignment and Assumption Agreement duly
executed by the Buyer in the form of Exhibit F attached hereto;

         (c) deliver to the Sellers the following agreements duly executed by
the Buyer: the Consulting Agreements and the Confidentiality Agreements; and

         (d) deliver to the Sellers all such documents, agreements, instruments
or certificates required to be delivered to the Sellers under the provisions of
this Agreement or as the Sellers may deem reasonably necessary or appropriate
to effect, evidence or facilitate the transactions contemplated by this
Agreement.

      4.4 Further Assurances.

         (a) From time to time, each of the Sellers shall, subject to the
provisions of this Agreement, execute and deliver such other good and
sufficient instruments of sale, transfer, conveyance and assignment as the
Buyer may reasonably request in order to sell, convey, transfer and assign to
the Buyer, or to vest in the Buyer good and marketable title to the Acquired
Assets, or otherwise to carry out the purposes and intent of this Agreement
(including, without limitation, all Exhibits hereto). From time to time the
Buyer shall, at its expense, execute and deliver such instruments and documents
as the Sellers may reasonably request to cause the Buyer to assume the Assumed
Liabilities or otherwise carry out the purposes and intent of this Agreement.

         (b) The Buyer, each of the Sellers and their respective Affiliates
will cooperate with each other in connection with any audit by the Internal
Revenue Service or any other taxing authority (including, without limitation,
foreign, federal, state or local authorities) of any tax return or report in
connection with the Acquired Assets or the Business (including the use,
operation, or ownership thereof), the transferred employees or the sale of the
Acquired Assets hereunder. The party responsible for the applicable tax
liability shall have the sole right, at its sole expense, to conduct any audit
or any other proceeding before any such taxing authority, to prepare and file
any amended tax return, claim for refund or Tax Court petition, to prosecute
any such claim and to select counsel, to engage in litigation and to consent to
any



                                      12
<PAGE>

settlement in connection therewith with respect to any taxes for any such
period, and the other party will execute and deliver, or cause to be executed
and delivered, to the responsible party or its designees, all instruments
(including, without limitation, powers of attorney) reasonably requested by the
responsible party in order to implement the provisions of this Section 4.4(b).

                                   ARTICLE V

                 REPRESENTATIONS AND WARRANTIES OF THE SELLERS

         Except as otherwise set forth in the Sellers' disclosure schedule
delivered to the Buyer and Parent concurrently with the parties' execution of
this Agreement (the "Sellers' Disclosure Schedule"), which statements contained
in the Sellers' Disclosure Schedule shall also be deemed to be representations
and warranties made and given by the Sellers under this Article V of this
Agreement, each of the Sellers hereby jointly and severally represents and
warrants to each of the Buyer and Parent as follows:

      5.1 Organization, Standing and Qualification; Subsidiaries.

         (a) KSG and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate or other power and authority to
own, lease and operate its properties and to carry on its business as it is now
being conducted. KSG and each of its subsidiaries is duly qualified or licensed
to do business and in good standing in each jurisdiction in which its property
is owned, leased or operated or the nature of the Business conducted by it
makes such qualification or licensing necessary. Section 5.1 of the Sellers'
Disclosure Schedule lists all lines of business constituting the Business, the
names (registered or otherwise) in which KSG does business, the complete and
correct list of all of the Principals' Affiliates and KSG's subsidiaries and
their respective jurisdictions of incorporation or organization (such list to
include the ownership structure of each entity and the jurisdiction in which
each entity is doing business and whether each is qualified or licensed to do
business in such jurisdiction), and the names and titles of all officers and
directors of KSG. KSG has delivered to the Buyer or its counsel complete and
correct copies of its and each of its subsidiaries' certificate of
incorporation and bylaws, as currently in effect.

         (b) All the outstanding shares of capital stock of, or other equity
interests in, each of KSG's subsidiaries have been validly issued and are fully
paid and non-assessable and are owned directly or indirectly by KSG, free and
clear of all Liens and security interests of any kind or nature whatsoever and
free of any other restriction (including any restriction on the right to vote,
sell or otherwise dispose of such capital stock or other ownership interests),
except for restrictions imposed by applicable securities laws, and no other
person or entity has any rights of any nature to acquire any securities of any
of such subsidiaries. Neither KSG nor any of its subsidiaries directly or
indirectly owns any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any corporation, partnership, joint
venture or other business association or entity.



                                      13
<PAGE>

         5.2 Authority. Each of the Sellers has all requisite corporate or
other power and authority to enter into this Agreement and the Related
Agreements and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Sellers. This Agreement
has been duly executed and delivered by each of the Sellers and the Related
Agreements, when executed and delivered by each of the Sellers, will constitute
legal, valid and binding obligations of each of the Sellers, enforceable
against each of the Sellers in accordance with its respective terms, except to
the extent enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforceability
of creditors' rights in general and subject to general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity
or at law).

         5.3 Capitalization; Equity Interest.

         (a) The authorized capital stock of KSG as of the date hereof
consists, and as of the Closing Date will consist, of 26,000,000 shares of
Class A Common Stock and 4,000,000 shares of Class B Common Stock, par value
$.001 per share (the "KSG Common Stock"). As of the date hereof, 12,400,000
shares of KSG's Class A Common Stock are issued and outstanding and no shares
of KSG's Class B Common Stock are issued and outstanding. Except as set forth
in Section 5.3(a) of the Seller's Disclosure Schedule, there are no other
securities of KSG issued or outstanding or options and warrants granted on or
prior to the date hereof, no shares of KSG's Common Stock are held in KSG's
treasury and there are no other shares of capital stock of KSG authorized,
issued or outstanding. All outstanding shares of KSG's capital stock are duly
authorized, validly issued, fully paid and non-assessable and free of Liens and
preemptive rights.

         (b) Except as set forth in Section 5.3(a), there are no: (i) shares of
capital stock of KSG authorized, issued or outstanding, (ii) securities
convertible into or exchangeable or exercisable for, or any options, warrants,
calls, puts, subscriptions or other rights (preemptive or otherwise) to
acquire, directly or indirectly, any shares of capital stock of KSG or its
subsidiaries, (iii) agreements or contractual commitments, whether written or
oral, relating to the capital stock of KSG or its subsidiaries or obligating
KSG or its subsidiaries to issue, sell, repurchase, redeem or otherwise acquire
any shares of capital stock of KSG or its subsidiaries or any such securities,
options, warrants, calls, puts, subscriptions or other rights, (iv) Liens
relating to any capital stock of KSG or its subsidiaries, (v) rights or
contractual commitments of KSG or its subsidiaries (whether written or oral)
that give any Person any right to reserve or exercise any benefits or rights
similar to any rights enjoyed by or accruing to the Principals or (vi) rights
or contractual commitments of KSG or its subsidiaries (whether written or oral)
to provide funds to or make any investment in any other Person.

     5.4 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement or the Related Agreements, nor the consummation of
the transactions contemplated hereby or thereby nor compliance by the Sellers
with any of the provisions hereof or thereof will (i) conflict with or result
in a breach of the certificate of incorporation, bylaws or other constitutive
documents of KSG or any of its subsidiaries, (ii) conflict with or result (with
or without notice or lapse of time or both) in a default (or give rise to any
right of reimbursement, termination, cancellation, modification or
acceleration) under any of the provisions of any note,



                                      14
<PAGE>

bond, lease, mortgage, indenture, license, franchise, permit agreement or other
instrument or obligation to which any of the Sellers or any of their respective
subsidiaries is a party, or by which any of the Sellers or any of their
respective subsidiaries or their respective properties or assets may be bound
or affected, except for such conflict, breach or default as to which requisite
waivers or consents are described in Section 5.4 of the Sellers' Disclosure
Schedule and are required to be obtained prior to Closing, (iii) violate any
Law, statute, rule or regulation or order, writ, injunction, judgment or decree
(each, an "Order") applicable to any of the Sellers or any of its subsidiaries
or their respective properties or assets or (iv) result in the creation or
imposition of any Lien upon any property or assets used or held in connection
with the Business. Except as set forth in Section 5.4 of the Sellers'
Disclosure Schedule, no consent or approval by, or any notification of or
filing with, or other action of any Person (governmental or private) is
required in connection with the execution, delivery and performance by the
Sellers of this Agreement or any Related Agreement. There is no Proceeding
pending or, to the knowledge of the Sellers, threatened against the Sellers or
any of their respective assets or properties that seeks to prevent the
consummation of the transactions contemplated herein or in any Related
Agreement.

      5.5 Books and Records. The minute books and other similar records of
KSG and each of its subsidiaries made available to the Buyer prior to the
execution of this Agreement contain a true, correct and complete record of all
actions taken at all meetings and by all written consents in lieu of meetings
of the shareholders, the board of directors and committees of the board of
directors of KSG and each of its subsidiaries. The stock transfer ledger and
other similar records of KSG and each of its subsidiaries made available to the
Buyer prior to the execution of this Agreement accurately reflect all record
transfers prior to the execution of this Agreement in the capital stock of KSG
and each of its subsidiaries. No Books and Records of KSG and each of its
subsidiaries have been recorded, stored, maintained, operated or are otherwise
wholly or partly dependent upon or held by any means (including any electronic,
mechanical or photographic process, whether computerized or not) which
(including all means or access thereto and therefrom) are not under the
exclusive ownership and direct control of KSG and each of its subsidiaries.
"Books and Records" means, collectively, all files, documents, instruments,
papers, books and records relating to the business or the condition of a
company, including financial statements, tax returns and related work papers
and letters from accountants, budgets, pricing guidelines, ledgers, journals,
deeds, title policies, minute books, stock certificates and books, corporate
seals, stock transfer ledgers, contracts, licenses, customer lists, computer
files and programs, retrieval programs, operating data and plans and
environmental studies and plans.

      5.6 Financial Statements; Certain Financial Information.

         (a) KSG has previously delivered to the Buyer true and complete copies
of the following financial statements: (i) the unaudited consolidated balance
sheet of KSG and its subsidiaries as of June 30, 2001 and the related unaudited
statements of operations and cash flows of KSG for the six months then ended
(such balance sheet as of June 30, 2001 (the "Interim Balance Sheet Date") is
referred to herein as the "Interim Balance Sheet" and all of the financial
statement described in this clause (i) are referred to as the "Interim
Financial Statements"); and (ii) the audited consolidated balance sheets of KSG
and its subsidiaries for the fiscal years ended December 31, 1998, December 31,
1999 and December 31, 2000 and the related audited statements of operations and
cash flows of KSG and its subsidiaries for the fiscal



                                      15
<PAGE>

years then ended (except with respect to fiscal 2000 which have been reviewed
by KSG's independent accountants), certified by KSG's independent certified
public accountants (the "Audited Financials") (such financial statements
described in clauses (i) and (ii) and any notes thereto are hereinafter
collectively referred to as the "Financial Statements"). Each of the balance
sheets included in the Financial Statements is true, complete and correct, and
each of the balance sheets included in the Financial Statements presents fairly
the financial position of KSG and its subsidiaries as of the respective date of
such balance sheet, in each case in accordance with GAAP, subject, in the case
of the Interim Balance Sheet, to year-end adjustments and the absence of notes.
Each of the statements of operations and cash flows included in the Financial
Statements is true, complete and correct, and each of the statements of
operations and cash flows included in the Financial Statements presents fairly
the results of operations of KSG and its subsidiaries for the periods set forth
therein, in each case in accordance with GAAP, subject, in the case of the
Interim Balance Sheet, to year-end adjustments and the absence of notes. The
Financial Statements were compiled from the Books and Records regularly
maintained by management and used to prepare financial statements of KSG and
its subsidiaries in accordance with the principles stated therein. The Sellers
have maintained the Books and Records in a manner sufficient to permit the
preparation of the Financial Statements in accordance with GAAP. The Books and
Records fairly reflect the income, expenses, assets and liabilities of KSG and
its subsidiaries and provide a fair and accurate basis for the preparation of
the Financial Statements.

         (b) All reserves established by KSG and its subsidiaries are reflected
on the Interim Balance Sheet and are adequate and are stated in accordance with
GAAP, including reserves for bad debt, vacation, sick leave and similar paid
leave. There are no loss contingencies that are required to be accrued by
Statement of Financial Accounting Standard No. 5 of the Financial Accounting
Standards Board which are not provided for on such Interim Balance Sheet.

      5.7 Absence of Undisclosed Liabilities. Except as set forth on Section
5.7 of the Sellers' Disclosure Schedule, KSG and each of its subsidiaries do
not have, and as a result of the transactions contemplated herein will not
have, any Indebtedness (as defined below), liabilities or obligations of any
nature (whether known or unknown, absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise, and whether due or to become due),
except for the Indebtedness, liabilities and obligations (i) reflected on the
Interim Balance Sheet (including the notes thereto); or (ii) incurred in the
ordinary course of business consistent with past practice since the date of the
Interim Balance Sheet and which do not exceed $5,000 individually or $10,000 in
the aggregate. Notwithstanding the foregoing, on the Closing Date, (i) KSG and
each of its subsidiaries will have no pension liabilities and no contingent
liabilities required to be reported in accordance with GAAP, including as a
result of the transactions contemplated herein; (ii) any related party
receivables of KSG and each of its subsidiaries will have been collected; and
(iii) KSG and each of its subsidiaries will have no related party payables
(accrued or unaccrued, contingent or fixed), except as set forth in Section 5.7
of the Sellers' Disclosure Schedule. "Indebtedness" means all obligations of
KSG or any of its subsidiaries as of any date, (i) for borrowed money,
including such indebtedness payable to any stockholder, (ii) evidenced by
notes, bonds, debentures or similar instruments, (iii) for which interest
charges are customarily paid, (iv) under conditional sale or other title
retention agreements relating to property or assets purchased by KSG or any of
its subsidiaries, (v) issued or assumed as the



                                      16
<PAGE>

deferred purchase price of property or services (other than trade accounts
payable and accrued obligations incurred in the ordinary course of business
consistent with past practice), (vi) under capital leases, (vii) in respect of
interest rate protection agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements, (viii) as an account
party in respect of letters of credit and bankers' acceptances, (ix) with
respect to the issuance of preferred stock, (x) with respect to Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by KSG or any of its subsidiaries, (xi) in the nature of guarantees of
Indebtedness of others, (xii) with respect to any warrants and (xiii) with
respect to any negative cash balances, and other such similar amounts in each
case, as of such date, including accrued interest, premiums and penalties upon
prepayment as of such date; provided, however, that Indebtedness does not
include accounts payable of KSG or any of its subsidiaries and other operating
expenses (such as payroll) incurred by KSG or any of its subsidiaries in the
ordinary course of business consistent with past practice and, in either case,
does not, individually or in the aggregate, exceed $10,000 except as set forth
on the Interim Financial Statements.

      5.8 Absence of Certain Changes or Events. Except as set forth in
Section 5.8 of the Sellers' Disclosure Schedule, since December 31, 2000,
neither KSG nor any of its subsidiaries has:

         (a) made any material change in its business or operations or in the
manner of conducting its business;

         (b) suffered any event, violation or other matter that would have a
material adverse effect on the Business, condition (financial or otherwise),
assets, liabilities, operations, properties or prospects of the Sellers (a
"Material Adverse Effect"), and no fact or condition exists that would
reasonably be expected to cause a Material Adverse Effect in the future;

         (c) suffered any material casualty loss (whether or not insured) or
condemnation or other taking;

         (d) other than in the ordinary course of business, entered into any
employment or consulting contract or commitment (whether oral or written) or
compensation arrangement or employee benefit plan, or changed or committed to
change (including any change pursuant to any bonus, pension, profit-sharing or
other plan, commitment, policy or arrangement) the compensation payable or to
become payable to any of its officers, directors, employees, agents or
consultants, or made any pension, retirement, profit-sharing, bonus or other
employee welfare or benefit payment or contribution;

         (e) declared, paid or made, or set aside for payment or making, any
dividend or other distribution in respect of its common stock or other capital
stock or securities, or directly or indirectly redeemed, purchased or otherwise
acquired any of its common stock or other capital stock or securities, or
combined or subdivided or in any way changed any of the terms or provisions of
its common stock or other capital stock or securities;

         (f) paid, loaned or advanced any amount to or in respect of, or sold,
transferred or leased any property or assets (real, personal or mixed, tangible
or intangible) to, or



                                      17
<PAGE>

entered into, amended or waived any rights under any transactions, agreements
or arrangements with or for the benefit of, any of its stockholders or any of
their respective Affiliates, associates or family members or any of its
officers or directors or any Affiliate or associate of its officers or
directors;

         (g) made or proposed any change in any accounting or tax principles,
practices or methods, including its accounts payable or accounts receivable
practices and terms (including reserves), except for such changes which are
both (x) required by GAAP or by Law and (y) set forth in Section 5.8(g) of the
Sellers' Disclosure Schedule;

         (h) incurred any liability (whether known or unknown, absolute,
accrued, fixed, contingent, liquidated, unliquidated or otherwise, and whether
due or to become due), except for current liabilities reflected on the Interim
Balance Sheet or incurred after the date of the Interim Balance Sheet in the
ordinary course of business consistent with past practice and not exceeding
$5,000 individually or $10,000 in the aggregate;

         (i) canceled or waived rights with respect to any debts or other
obligations owed to or claims held by the Sellers (including the settlement of
any claims or litigation or other Proceeding);

         (j) accelerated or delayed collection of notes or accounts receivable
generated by the Business in advance of or beyond their regular due dates or
the dates when the same otherwise would have been collected;

         (k) terminated or amended or suffered the termination or amendment of
any Contract pursuant to which KSG or any of its subsidiaries would receive
from any Person or pay to any Person more than $5,000 in any calendar year or
disposed of or permitted to lapse any item of Intellectual Property Rights;

         (l) made any capital expenditures or commitments for additions to
property, plant or equipment constituting capital assets in excess of $5,000
(or $10,000 in the aggregate);

         (m) incurred any Indebtedness; and

         (n) agreed, whether in writing or otherwise, to take any action
described in this Section 5.8 or any action which, if taken after the date of
this Agreement without the Buyer's consent, would constitute a breach under
this Agreement.

      5.9 Real Property. Neither KSG nor any of its subsidiaries have ever
owned, nor will own as of the Closing Date, any real property or any option to
acquire any real property.

      5.10 Leases.



                                      18
<PAGE>

         (a) All leases of real property as to which KSG or any of its
subsidiaries is the lessee or sublessee (the "Leased Real Property"), or
personal property as to which KSG or any of its subsidiaries is the lessee or
sublessee, are listed in Section 5.10 of the Sellers' Disclosure Schedule
(true, correct and complete copies of which have been delivered to the Buyer).
All such leases are in full force and effect, are enforceable against KSG or
its subsidiaries and the other parties thereto and have not been modified or
amended, except as set forth in Section 5.10 of the Sellers' Disclosure
Schedule. There exists no default by KSG or any of its subsidiaries under any
of such leases or, to the knowledge of the Sellers, by any other party thereto,
nor any event which, with the giving of notice or the passage of time or both,
would constitute an event of default by KSG or any of its subsidiaries or any
other party thereunder.

        (b) There are no leases of real or personal property leased or subleased
for the use or benefit of any Person other than KSG or any of its subsidiaries
to which KSG or any of its subsidiaries is a party.

      5.11 Title to Acquired Assets. KSG and each of its subsidiaries has
good, valid and marketable title to all of the Acquired Assets and the assets
shown on the Interim Balance Sheet or acquired since the date of the Interim
Balance Sheet, except for assets sold in the ordinary course of business
consistent with past practice since the date of the Interim Balance Sheet not
exceeding $5,000 individually or $10,000 in the aggregate. Except as set forth
in Section 5.11 of the Sellers' Disclosure Schedule, the Acquired Assets are
free and clear of any Lien. The Acquired Assets are in good operating
condition, subject to ordinary wear and tear, and constitute all of the assets,
interests and rights held for use or used in connection with the Business and
constitute all those necessary to operate the Business as it is currently
conducted and in accordance with recent historical practice. All items of
personal property with a book value in excess of $5,000 are listed in Section
5.11 of Sellers' Disclosure Schedule.

      5.12 Intellectual Property Rights.

         (a) KSG and each of its subsidiaries is the exclusive owner of all
right, title and interest in and to each of the following that are used or
licensed in the Business as currently conducted and are included in the
Acquired Assets:

               (i) except as set forth in Section 5.12(a)(i) of the Sellers'
          Disclosure Schedule, and except for commercially available computer
          software programs, all computer programs, databases and associated
          system and user documentation (the "Software Products");

               (ii) all copyrights and copyright registrations owned by the
          Sellers and any of their subsidiaries and Affiliates, including,
          without limitation, all copyrights and copyright registrations owned
          by the Sellers and any of their subsidiaries and Affiliates listed in
          Section 5.12(a)(ii) of the Sellers' Disclosure Schedule and all
          copyrights and copyright registrations in and to the Software
          Products or otherwise related to or used in the Business;

               (iii) all patentable inventions, patents and patent applications
          owned by the Sellers, including, without limitation, all inventions,
          patents and patent applications



                                      19
<PAGE>

          owned by the Sellers and any of their subsidiaries and Affiliates
          listed in Section 5.12(a)(iii) of the Sellers' Disclosure Schedule
          and all patentable inventions, patents and patent applications
          relating to or embodied in the Software Products or otherwise related
          to or used in the Business;

               (iv) all Internet domain names and registrations, trademarks,
          service marks and trade names, and the applications to register any
          of them in federal, state or foreign jurisdictions, including,
          without limitation, all Internet domain names and registrations,
          trademarks, service marks and trade names, and the applications to
          register any of them in federal, state or foreign jurisdictions owned
          by the Sellers and any of their subsidiaries and Affiliates listed in
          Section 5.12(a)(iv) of Sellers' Disclosure Schedule and all Internet
          domain names and registrations, trademarks, service marks and trade
          names, and the applications to register any of them in federal, state
          or foreign jurisdictions now used or contemplated to be used in
          connection with the Software Products or otherwise related to or used
          in the Business; and

               (v) except for such trade secrets as may be contained in the
          third-party software programs listed in Section 5.12(a)(i) of the
          Sellers' Disclosure Schedule, all trade secrets and other proprietary
          rights, including those applicable to any of the Software Products,
          necessary or useful for the operation of the Business as currently
          conducted.

These items referred to in subparagraphs (i) through (v) of this Section
5.12(a) are herein referred to collectively as the "Intellectual Property
Rights."

         (b) Section 5.12(b) of the Sellers' Disclosure Schedule sets forth a
list of all licenses and similar agreements between any of the Sellers and any
of their subsidiaries and Affiliates, on the one hand, and third parties, on
the other hand, under which any of the Sellers and any of their subsidiaries
and Affiliates are granted rights to make, use, sell, reproduce, distribute,
manufacture, prepare derivative works based upon, perform or display publicly,
or license items embodying the patent, copyright, trade secret, trademark or
other proprietary rights of such third parties for use in the Business. None of
the Sellers and any of their subsidiaries and Affiliates is, nor as a result of
the execution and delivery of this Agreement or any Related Agreement or the
performance of its obligations hereunder or thereunder will be, in violation of
or lose any rights pursuant to any license or similar agreement described in
Section 5.12(b) of the Sellers' Disclosure Schedule. Except as set forth in
Section 5.12(b) of the Sellers' Disclosure Schedule, no Person is entitled to
any royalty, fee or other payment with respect to any such agreement or any
Intellectual Property Rights.

         (c) Section 5.12(c) of the Sellers' Disclosure Schedule sets forth a
list of all agreements under which the Sellers and any of their subsidiaries
and Affiliates have granted rights to third parties under the Intellectual
Property Rights. Except as set forth in Section 5.12(c) of the Sellers'
Disclosure Schedule, all such rights granted have been and are non-exclusive.
True, correct and complete copies of all such agreements have been delivered to
the Buyer.



                                      20
<PAGE>

         (d) No claims with respect to any Intellectual Property Right have
been asserted or, to the knowledge of any of the Sellers, are threatened by any
Person, nor do any of the Sellers know of any valid grounds for any bona fide
claims against the use by the Sellers and any of their subsidiaries and
Affiliates of any Intellectual Property Rights. All Internet domain names
granted and issued patents listed in Section 5.12(a)(iii) of the Sellers'
Disclosure Schedule, all trademarks, trade names and service marks and all
applications to register the same listed in Section 5.12(a)(iv) of the Sellers'
Disclosure Schedule, and all copyrights and copyrights registrations listed in
Section 5.12(a)(ii) of the Sellers' Disclosure Schedule are valid, enforceable
and subsisting. As of the date hereof, there has not been and there is not any
unauthorized use, infringement or misappropriation of any of the Intellectual
Property Rights by any third party, employee, consultant or former employee or
consultant of any of the Sellers or any of their subsidiaries and Affiliates.

         (e) No Intellectual Property Rights are subject to any Order
restricting in any manner the use or licensing thereof by the Sellers or any of
their subsidiaries and Affiliates. None of the Sellers or any of their
subsidiaries and Affiliates has entered into any agreement to indemnify any
other Person against any charge of infringement of any third party intellectual
property rights. Neither the Sellers nor any of their subsidiaries or
Affiliates have entered into any agreement granting any third party the right
to bring infringement actions or otherwise to enforce rights with respect to
any Intellectual Property Rights. KSG has the exclusive right to file,
prosecute and maintain all applications and registrations with respect to the
Intellectual Property Rights.

         (f) Each of the Software Products set forth in Section 5.12(a)(i) of
the Sellers' Disclosure Schedule is the most recent version of such Software
Product. Except as set forth in Section 5.12(f) of the Sellers' Disclosure
Schedule, each of the Software Products set forth in Section 5.12(f) of the
Sellers' Disclosure Schedule (the "Core Software Products") conforms
substantially to the functional and operational specifications set forth in the
respective user manuals and other documentation for such Core Software Product.
KSG owns and has possession of all such technical documentation and software
tools (including, by way of example and not limitation, all source code,
compilers, system documentation, statements of principles of operation and
schematics, as applicable) for each of such Core Software Products as are
necessary and sufficient for the continued effective use, further development
and maintenance of the latest version of each such Core Software Product. The
current status of such conformity is set forth in brackets immediately
following the name and version number of each such Core Software Product in
Section 5.12(f) of the Sellers' Disclosure Schedule.

         (g) Except as set forth in Section 5.12(g) of the Sellers' Disclosure
Schedule, there are no restrictions on the direct or indirect transfer of any
Contract, or any interest therein, held by any of the Sellers or any of their
subsidiaries or Affiliates in respect of the Intellectual Property Rights or
the Software Products. The Sellers have delivered to the Buyer prior to the
date hereof documentation with respect to any invention, process, design,
computer program or other know-how or trade secret included in the Intellectual
Property Rights, which documentation is accurate in all material respects and
reasonably sufficient in detail and content to identify and explain such
invention, process, design, computer program or other know-how or trade secret
and to facilitate its full and proper use without reliance on the special
knowledge of


                                      21
<PAGE>

any Person. Each of the Sellers has taken the necessary security and other
measures to protect the secrecy, confidentiality and value of its trade secrets
and other Intellectual Property Rights.

         (h) No former or present employee, consultant, officer or director of
the Sellers or any of their subsidiaries or Affiliates holds any right, title
or interest, directly or indirectly, in whole or in part, in or to any
Intellectual Property Rights.

         (i) The Intellectual Property Rights are sufficient and adequate for
KSG to carry on the Business as presently constituted.

      5.13 Contracts. Section 5.13 of the Sellers' Disclosure Schedule
contains a true and complete list of all written and oral (and a brief
description of such oral agreements) material contracts, agreements and other
instruments (collectively, "Contracts") to which any of the Sellers is a party
(i) relating to Indebtedness or guaranty of performance or warranty of products
or services, (ii) of duration of six months or more from the date hereof and
not cancelable by any of the Sellers without material penalty on 30 days' or
less notice, (iii) relating to commitments in excess of $5,000, (iv) relating
to the employment or compensation of any director, officer, employee,
consultant or other agent of any of the Sellers, (v) relating to the sale or
other disposition of any assets, properties or rights, (vi) relating to the
lease or similar arrangement of any machinery, equipment, motor vehicles,
furniture, fixture or similar property, (vii) to which any federal, state or
local governmental agency or authority is a party, (viii) between any of the
Sellers and any KSG stockholder or Affiliate of any KSG stockholder, (ix) that
restricts the operation of any of the Sellers anywhere in the world, (x)
pursuant to which any of the Sellers is or may be obligated to make payments,
contingent or otherwise, on account of or arising out of prior acquisitions or
sales of businesses, assets or stock of other Persons, (xi) providing for the
license to the Sellers by third parties of rights to use software or other
technology or providing for the performance of development services by or for
any third party; or (xii) that is otherwise material to the Business or entered
into other than in the ordinary course of business consistent with past
practice. None of the Sellers is in default under any such Contract, and there
has been no event that with the giving of notice or the passage of time, or
both, would constitute such a default or, to the knowledge of the Sellers, any
default, or event that with the giving of notice or the passage of time, or
both, would constitute such a default, by any other party thereto, existing
with respect to any such Contract except for such defaults which, in the
aggregate, would result in loss or liability to KSG of no more than $5,000, and
none of the Sellers intends, and has not received notice that any party to any
such Contract intends, to terminate, amend, not renew or cancel any such
Contract. Each of the Contracts listed in Section 5.13 of the Sellers'
Disclosure Schedule is in full force and effect and constitutes a legal, valid
and binding obligation of the Sellers and, to the Sellers' knowledge, the other
parties thereto, enforceable in accordance with its terms. The Sellers have
delivered to the Buyer true and complete copies of all written Contracts
described in Section 5.13 of the Sellers' Disclosure Schedule. KSG is not
currently obligated to pay or liable for any amounts under any of the
Contracts, nor are the Sellers aware of any facts or circumstances that could
result in any claim under any Contract with respect to periods ending on or
before the date of this Agreement, in each instance, for which an accrual on
the Sellers Financial Statements is or would have been required under GAAP and
has not been made.



                                      22
<PAGE>

         5.14 Litigation. Except as set forth in Section 5.14 of the Sellers'
Disclosure Schedule, there are no, nor have there been for the five years prior
to the date of this Agreement any, (i) investigations pending or, to the
knowledge of the Sellers, threatened affecting or potentially affecting the
Sellers or any of their subsidiaries or Affiliates or the Business, (ii)
actions, causes of action, claims, suits, proceedings, arbitrations, mediations
or other alternative dispute resolution procedures, orders, writs, injunctions
or decrees (each, a "Proceeding") entered against, involving, pending or, to
the knowledge of the Sellers, threatened against any of the Sellers or any of
their subsidiaries or Affiliates or, in each case affecting or potentially
affecting the operations of the Sellers or any of their subsidiaries or
Affiliates, the Business, assets, properties or prospects of the Sellers or any
of their subsidiaries or Affiliates or the Business, at law or in equity, or
before or by any governmental entity, and (iii) existing or prior facts,
circumstances or conditions that could reasonably form the basis for a
Proceeding against any of the Sellers or any of their subsidiaries or
Affiliates that would affect or potentially affect the operations of KSG, the
Business, assets, properties or prospects of the Sellers or any of their
subsidiaries or Affiliate or the Business. None of the Sellers or any of their
subsidiaries or Affiliates is in default with respect to any Order of any
governmental entity. The Sellers have delivered to the Buyer accurate and
complete copies of all documentation relating to each Proceeding.

         5.15 Insurance. All insurance policies relating to the Business are in
full force and effect and shall remain in full force and effect through the
Closing Date and thereafter (until the scheduled expiration date). With respect
to all policies, all premiums currently payable or previously due have been
paid, and no notice of cancellation or termination has been received by the
Sellers with respect to any such policy. All such policies are sufficient for
compliance with all requirements of law and of all Contracts to which any of
the Sellers is a party or otherwise bound and are valid, outstanding,
enforceable and, to the knowledge of the Sellers, collectible policies and
provide insurance coverage that is adequate and customary for businesses of
similar size and type. Complete and accurate copies of all such policies and
related documentation have previously been delivered to the Buyer.

         5.16 Employee Benefit Plans.

         (a) Except as set forth in Section 5.16 of the Sellers' Disclosure
Schedule, neither the Sellers nor any ERISA Affiliate (as defined below)
maintains or contributes to, has ever maintained or contributed to, or has or
has ever incurred any liability (whether or not contingent) with respect to any
employee benefit plan or any collective bargaining agreement or any bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, stock appreciation
right, retirement, vacation, severance, disability, death benefit,
hospitalization, medical, worker's compensation, disability, supplementary
unemployment benefits, or other plan, arrangement or understanding (whether or
not legally binding), or any employment, severance, termination or any similar
agreement (each, a "Plan"). "ERISA Affiliate" means (i) any corporation which
at any time on or before the Closing Date is or was a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as the Sellers; (ii) any partnership, trade or business (whether or not
incorporated) which at any time on or before the Closing Date is or was under
common control (within the meaning of Section 414(c) of the Code) with the
Sellers; and (iii) any entity which at any time on or before the Closing Date
is or was a member of the same



                                      23
<PAGE>

affiliated service group (within the meaning of Section 414(m) of the Code) as
either the Sellers, any corporation described in clause (i) or any partnership,
trade or business described in clause (ii).

         (b) Section 5.16 of the Sellers' Disclosure Schedule contains a list
and a brief, general description of each Plan. The Sellers have delivered to
the Buyer true and complete copies of (A) each Plan, (B) the summary plan
description, if any, for each Plan, (C) the latest annual report, if any, which
has been filed with the Internal Revenue Service (the "IRS") for each Plan, (D)
the most recent IRS determination letter for each Plan that is a pension plan
(as defined in Section 3(2) of ERISA) intended to be qualified under Code
Section 401(a) and (E) copies of reports for the three most recent Plan years
showing compliance with discrimination rules under those of Code Sections
401(a), 401(k), 401(m), 419, 419A, 505, 501(c)(9), 105(h), 125 or 129
applicable to such Plan. Each Plan intended to be tax qualified under Sections
401(a) and 501(a) of the Code has been determined by the IRS to be tax
qualified under Sections 401(a) and 501(a) of the Code, and, no amendment to or
failure to amend any such Plan and, no other circumstance or event has occurred
that adversely affects its tax qualified status. There has been no prohibited
transaction within the meaning of Section 4975 of the Code and Section 406 of
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), with respect to any Plan. None of the Sellers have any commitment,
whether or not legally binding, to create any additional employee benefit plan
(as defined in Section 3(3) of ERISA) or to change the terms of any existing
Plan.

         (c) Neither the Sellers nor any ERISA Affiliate has ever maintained an
employee benefit plan (as defined in Section 3(3) of ERISA) subject to the
provisions of Section 412 of the Code, Part 3 of Subtitle B of Title I of ERISA
or Title IV of ERISA.

         (d) There are no Proceedings by any Plan participant, Plan beneficiary
or any representative thereof, (other than routine claims for benefits)
pending, or, to the knowledge of the Sellers, threatened, and no facts or
circumstances exist which could give rise to any Proceeding. The Sellers have
timely satisfied all funding, compliance and reporting requirements for all
Plans. No event or condition exists or is reasonably expected to occur in
connection with the administration of any Plan that would either (i) subject
the Buyer, Parent or any of their Affiliates to any liability, contingent or
otherwise to the IRS, the Department of Labor ("DOL") or the Pension Benefit
Guarantee Corporation (other than any liability for premiums payments to the
Pension Benefit Guarantee Corporation) or (ii) cause the imposition of any lien
on the assets of the Buyer, Parent, or any of their Affiliates under the Code
or ERISA. No Plan is the subject of any pending application for administrative
relief under any voluntary compliance program or closing agreement program of
the IRS or the DOL. With respect to each Plan, the Sellers have timely paid all
contributions (including employee salary reduction contributions) and all
insurance premiums that have become due, and any such expense accrued but not
yet due has been properly reflected in the Financial Statements. Each Plan has
been operated in accordance with its terms and complies in all material
respects with all applicable Laws.

         (e) No Plan provides or is required to provide, now or in the future,
health, medical, dental, accident, disability, death or survivor benefits to or
in respect of any individual beyond termination of employment except to the
extent required under any state insurance Law



                                      24
<PAGE>

or under Part 6 of Subtitle B of Title I of ERISA and under Section 4980(B) of
the Code (COBRA benefits). Except to the extent of such COBRA benefits, no Plan
covers any individual other than an employee of KSG or dependents of employees
under health and child care Plans disclosed to the Buyer.

         (f) Except as set forth in Section 5.16 of the Sellers' Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
and the Related Agreements will not (A) entitle any Person providing or that
has provided services at anytime to the Sellers to severance pay or termination
benefits for which the Buyer, Parent or any of their Affiliates may become
liable, (B) solely as a result of their consummation, increase or accelerate
any amount due under any Plan, require assets to be set aside or other forms of
security to be provided with respect to any liability under any Plan, or result
in any "parachute payment" (within the meaning of Code Section 280G) under any
Plan or (C) except as and to the extent accrued or reserved for on the Interim
Balance Sheet, obligate the Sellers or any of their Affiliates to pay or
otherwise be liable for any compensation (including options, warrants, rights
and similar instruments), vacation days, pension contribution or other benefits
to any such Person for periods before the Closing Date or for personnel whom
KSG does not actually employ.

      5.17 Tax Matters.

         (a) Except as set forth in Section 5.17 of the Sellers' Disclosure
Schedule, all federal, state, local and foreign tax returns and tax reports
required to be filed by the Sellers and any of their subsidiaries on or prior
to the Closing Date (giving effect to any valid requests for extension that
have been, or will be, validly filed and granted) have been or will be filed on
a timely basis with the appropriate governmental agencies in all jurisdictions
in which such returns and reports are required to be filed. All such returns
and reports are and will be true, correct and complete in all material respects
and disclose all taxes required to be paid by the Sellers and any of their
subsidiaries. Except as set forth in Section 5.17 of the Sellers' Disclosure
Schedule, all federal, state, local and foreign income, profits, franchise,
sales, use, occupation, property, excise, employment and other taxes (including
interest, penalties and withholdings of tax) due from and payable by the
Sellers and any of their subsidiaries with respect to periods through the
Closing Date have been or will be fully paid on a timely basis or will be
adequately reserved for on the Interim Balance Sheet. Each of the Sellers and
any of their subsidiaries is not currently the beneficiary of any extension of
time within which to file any tax return. There are no Liens for taxes upon the
assets of the Sellers or any of their subsidiaries or Affiliates except for
statutory liens for current taxes not yet due.

         (b) No claim has ever been made by an authority in a jurisdiction
where each of the Sellers or any of their subsidiaries or Affiliates does not
file tax returns that it is or may be subject to taxation by that jurisdiction,
and each of the Sellers or any of their subsidiaries or Affiliates has not
received any notice or request for information from any such authority.

         (c) No issues have been raised with the Sellers or any of their
subsidiaries or Affiliates by the IRS or any other taxing authority in
connection with any tax return or report filed by the Sellers or any of their
subsidiaries or Affiliates relating to the Sellers or any of their subsidiaries
or Affiliates, and there are no issues which, either individually or in the
aggregate, could reasonably result in any liability for tax obligations of the
Sellers or any of their



                                      25
<PAGE>

subsidiaries or Affiliates relating to periods ending on or before the Closing
Date in excess of the accrued liability for taxes shown on the Interim Balance
Sheet. No waivers or extensions of statutes of limitations have been given or
requested with respect to the Sellers or any of their subsidiaries or
Affiliates. Except as set forth in Section 5.17(c) of the Sellers' Disclosure
Schedule, none of the Sellers or any of their subsidiaries or Affiliates has
been, or have received notice that any of the Sellers or any of their
subsidiaries or Affiliates may be, subject to an audit by any federal, state,
local or foreign tax authority.

         (d) No material differences exist between the amounts of the book
basis and tax basis of assets that are not accounted for by an accrual on the
books of KSG for income tax purposes. The Sellers will not be required to
recognize for income tax purposes in a taxable year beginning on or after the
Closing Date any amount of income or gain which it would have been required to
recognize under the accrual method of accounting for tax purposes in a tax
period ending on or before the Closing Date as a result of the installment
method of accounting, the completed contract method of accounting, the cash
method of accounting or a change in method of accounting.

         (e) All transactions or methods of accounting that could give rise to
an understatement of federal income tax (within the meaning of Section 6661 of
the Code for tax returns filed on or before December 31, 1990, and within the
meaning of Section 6662 of the Code for tax returns filed after December 31,
1990) have been adequately disclosed on the tax return in accordance with
Section 6661(b)(2)(B) of the Code for tax returns filed on or prior to December
31, 1990, and in accordance with Section 6662(d)(2)(B) of the Code for tax
returns filed after December 31, 1990.

         (f) None of the Sellers or any of their subsidiaries or Affiliates is
or has been a United States real property holding company (as defined in
Section 897(2) of the Code) during the applicable period specified in Section
897(c)(1)(11) of the Code.

         (g) The Sellers and each of their subsidiaries and Affiliates have
complied (and until the Closing will comply) with all applicable Laws relating
to the payment and withholding of taxes (including withholding and reporting
requirements under Section 1441 through 1464, 3401 through 3406, 6041 and 6049
of the Code and similar provisions under any other Laws) and, within the time
and in the manner prescribed by Law, has withheld from wages, fees and other
payments and paid over to the proper governmental or regulatory authorities all
amounts required.

         (h) None of the Sellers or any of their subsidiaries and Affiliates is
a party to any tax-sharing or tax indemnity agreement or any other agreement of
a similar nature that remains in effect on the Closing Date.

         (i) None of the Sellers or any of their subsidiaries or Affiliates is
subject to any liability under Treasury Regulations 1.1502-6 or any comparable
provision of state, local or foreign tax law or regulation.

         (j) There are no tax rulings, requests for rulings, closing agreements
or changes of accounting method relating to the Sellers or any of their
subsidiaries or Affiliates that



                                      26
<PAGE>

could affect their liability for Taxes for any period after the Closing. No
power of attorney with respect to any matter relating to Taxes of the Sellers
or any of their subsidiaries or Affiliates is currently in force. None of the
Sellers nor any of their subsidiaries and Affiliates has any deferred gain or
loss (i) arising from deferred intercompany transactions (as referred to in
Treasury Regulations Section 1.1502- 13), or (ii) with respect to the stock or
obligations of any other member of the Sellers' affiliated group (as described
in Treasury Regulations Section 1.1502-14). None of the Sellers has filed a
consent under Section 341(f) of the Code or any comparable provision of state
revenue statutes. No property of the Sellers or any of their subsidiaries or
Affiliates is "tax-exempt use property" within the meaning of Section 168(h) of
the Code. None of the Sellers or any of their subsidiaries or Affiliates is a
party to any lease made pursuant to Section 168(f) of the Code. Any amount or
other entitlement that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by
this Agreement or the Related Agreements by any employee, officer or director
of the Sellers or any of their subsidiaries or Affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulations Section 1.280G-1) under any Employee Plans or other compensation
arrangement entered into or in effect prior to the Closing would not be
characterized as an "excess parachute payment" or a "parachute payment" (as
such terms are defined in Section 280G(b)(1) of the Code).

         (k) None of the Sellers or any of their subsidiaries or Affiliates
file, and has never filed or been included in, a consolidated Return for
federal Income Tax purposes.

         (l) For purposes of this Agreement, except as otherwise expressly
provided, unless the context otherwise requires:

         "income taxes" means any federal, state, local, or foreign income, or
franchise Tax and in each instance any interest, penalties, or additions to tax
attributable to such Tax;

         "return" means any report, return, statement, estimate, declaration,
form, or other information required to be supplied to a taxing authority in
connection with Taxes; and

         "tax" or "taxes" means taxes of any kind, levies or other like
assessments, customs, duties, imposts, charges or, including, without
limitation, income, gross receipts, ad valorem, value added, excise, real or
personal property, asset, sales, use, license, payroll, transaction, capital,
net worth and franchise taxes, estimated taxes, withholding, employment, social
security, workers compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer and gains taxes
or other governmental taxes imposed or payable to the United States, or any
state, county, local, or foreign government or subdivision or agency thereof,
and in each instance such term shall include any interest, penalties, or
additions to tax attributable to any such Tax.

      5.18 Environmental Matters.

         (a) The operations of the Sellers and each of their subsidiaries and
Affiliates comply with all applicable federal, state, local, and foreign laws,
codes, regulations, requirements, directives, Orders and common law, and all
administrative or judicial interpretations thereof that may be enforced by any
governmental entity, other Person or court,


                                      27
<PAGE>

relating to pollution, the protection of human health, the protection of the
environment or the emission, discharge, disposal, storage, transportation,
Release or threatened Release of materials in or into the environment,
including the Occupational Safety and Health Act (collectively, "Environmental
Laws"). "Release" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
environment or into or out of any property, including the movement of
Contaminants through or in the air, soil, surface water, groundwater or Leased
Real Property or other property. "Contaminant" means any pollutant contaminant,
chemical or industrial, hazardous or toxic material or waste for which
liability or standards of conduct are imposed under Environmental Laws, and
includes asbestos or asbestos-containing materials, PCBs, and petroleum, oil or
petroleum or oil products or derivatives.

         (b) Each of the Sellers and their subsidiaries and Affiliates has
obtained all environmental, health and safety Governmental Permits (as defined
in Section 5.21) necessary for the operation of the Business, and all such
Governmental Permits are in full force and effect and will not be revoked,
suspended or otherwise adversely affected by the consummation of the
transactions contemplated hereby. Each of the Sellers and their subsidiaries
and Affiliates is in compliance with all terms and conditions of such
Governmental Permits.

         (c) Each of the Sellers and their subsidiaries and Affiliates is not
subject to any judicial, administrative or other Proceeding, Order or
settlement alleging or addressing a violation of or liability or Indebtedness
under any Environmental Law.

         (d) None of the Sellers or their subsidiaries or Affiliates has
received any notice or claim (whether written or oral) to the effect that it is
or may be liable to any governmental entity or any other Person as a result of
the Release or threatened Release of a Contaminant, and, to the knowledge of
the Sellers and their subsidiaries and Affiliates, there are no existing or
prior facts, circumstances or conditions that could reasonably form the basis
for such a notice or claim against the Sellers or their subsidiaries or
Affiliates.

         (e) Except as set forth in Section 5.18(e) of the Sellers' Disclosure
Schedule, there have been no environmental investigations, studies, audits,
tests, reviews or other analysis conducted by or on behalf of, or which are in
the possession of, the Sellers or their subsidiaries or Affiliates in relation
to any site or facility now or previously owned, operated or leased by the
Sellers or their subsidiaries or Affiliates which have not been delivered to
the Buyer prior to the execution of this Agreement.

      5.19 Labor Relations; Employees.

         (a) There is no labor strike, dispute, slowdown, stoppage or lockout
pending, affecting, or, to the knowledge of the Sellers and their subsidiaries
and Affiliates, threatened against the Sellers or their subsidiaries or
Affiliates, and during the last five years there has not been any such action,
and there are no existing or prior facts, circumstances or conditions that are
reasonably likely to lead to such an action. There are no union claims to
represent the employees of any of the Sellers or their subsidiaries or
Affiliates, nor have there been any such claims within the last five years.
There is no written or oral contract, commitment, agreement, understanding or
other arrangement with any labor organization or multi-employer or union


                                      28
<PAGE>

benefit or pension fund, or work rules or practices agreed to with any labor
organization or employee association, applicable to employees of any of the
Sellers or their subsidiaries or Affiliates, nor is any of the Sellers or their
subsidiaries or Affiliates a party to or bound by any collective bargaining or
similar agreement. There is, and within the last five years has been, no
representation of the employees of any of the Sellers or their subsidiaries or
Affiliates by any labor organization and, to the knowledge of the Sellers and
their subsidiaries and Affiliates, there are no union organizing activities
among the employees of any of the Sellers or their subsidiaries or Affiliates,
nor does any question concerning representation exist concerning such
employees.

         (b) Section 5.19(b) of the Sellers' Disclosure Schedule sets forth all
personnel policies, rules or procedures (whether written or oral) applicable to
employees of the Sellers and their subsidiaries and Affiliates, and the Sellers
have delivered to the Buyer complete and accurate copies of all such written
policies, rules or procedures plus summaries of all oral policies, rules or
procedures. Neither the Sellers nor any of their subsidiaries or Affiliates has
engaged in any unfair labor practices as defined in the National Labor
Relations Act or other applicable Law, ordinance or regulation, and each of the
Sellers and their subsidiaries and Affiliates is and has for the past five
years been in compliance in all material respects with all applicable Laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and health. There is
no unfair labor practice charge or complaint against the Sellers or any of
their subsidiaries or Affiliates pending or, to the knowledge of the Sellers or
any of their subsidiaries or Affiliates, threatened before the National Labor
Relations Board or any similar state or foreign agency, and there are no
existing or prior facts, circumstances or conditions that could reasonably be
expected to form the basis therefor. There is no grievance pending or, to the
knowledge of the Sellers and their subsidiaries and Affiliates, threatened
against any of the Sellers or their subsidiaries or Affiliates arising out of
any collective bargaining agreement or other grievance procedure, and there are
no existing or prior facts, circumstances or conditions that could reasonably
be expected to form the basis therefor. There are no charges with respect to or
relating to any of the Sellers or their subsidiaries or Affiliates pending or,
to the knowledge of the Sellers and their subsidiaries and Affiliates,
threatened before the Equal Employment Opportunity Commission or any other
governmental entity responsible for the prevention of unlawful employment
practices, and there are no existing or prior facts, circumstances or
conditions that could reasonably be expected to form the basis therefor. There
are no workers compensation claims pending, and the Sellers and their
subsidiaries and Affiliates have no knowledge of any such potential claim. The
Sellers and their subsidiaries and Affiliates have not received notice of the
intent of any government entity responsible for the enforcement of labor or
employment Laws to conduct an investigation with respect to or relating to the
Sellers and, to the knowledge of the Sellers and their subsidiaries and
Affiliates, no such investigation is in progress. No complaints, lawsuits or
other Proceedings are pending or, to the knowledge of the Sellers and their
subsidiaries and Affiliates, threatened in any forum by or on behalf of any
present or former employee of any of the Sellers or their subsidiaries or
Affiliates, any applicant for employment or classes of the foregoing alleging
breach of any express or implied contract for employment, any Law governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with any employment relationship.

         (c) Since the enactment of the Worker Adjustment and Retraining
Notification Act of 1988 (the "WARN Act"), none of the Sellers or their
subsidiaries or



                                      29
<PAGE>

Affiliates has effectuated or experienced (i) a "plant closing" (as defined in
the WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility used by any of the
Sellers or their subsidiaries or Affiliates; or (ii) a "mass layoff" (as
defined in the WARN Act) affecting any site of employment or facility used by
any of the Sellers or their subsidiaries or Affiliates, nor has any of the
Sellers or their subsidiaries or Affiliates been affected by any transaction or
engaged in layoffs or employment terminations sufficient in number to trigger
application of any similar state or local Law. None of the Sellers' employees
has suffered an "employment loss" (as defined in the WARN Act) at any time
prior to the Closing Date.

         (d) Each of the Sellers and their subsidiaries and Affiliates has
complied with all employment verification procedures including proper
completion of Forms I-9 as it relates to all of its current and former
employees. Each of the Sellers and their subsidiaries and Affiliates has
complied with all applicable immigration, visa and work-related laws, codes and
regulations of the United States in general.

      5.20 Compliance with Law. Each of the Sellers and their subsidiaries
and Affiliates has complied for the past five years and is presently complying
with all applicable laws (whether statutory or otherwise), rules, regulations,
orders, ordinances, judgments, decrees or other pronouncements having the
effect of any of the foregoing, of all governmental entities having
jurisdiction (collectively, "Laws"), including the Federal Occupational Safety
and Health Act and all Laws relating to the safe conduct of business and
environmental protection and conservation, the Civil Rights Act of 1964 and
Executive Order 11246 concerning equal employment opportunity obligations of
federal contractors and any applicable health, sanitation, fire, safety, labor,
zoning and building laws. The Sellers have not received written notification of
any asserted present or past failure by the Sellers or any of their
subsidiaries or Affiliates to so comply with the Laws and there are no existing
or prior facts, circumstances or conditions that could reasonably be expected
to form the basis for such notification or assertion. The representations of
this Section 5.20 are intended to be in addition to and not as a qualification
of any other Section in this Article V.

      5.21 Government Permits. Each of the Sellers and their subsidiaries
and Affiliates owns, holds or possesses all licenses, franchises, permits,
privileges, immunities, approvals and other authorizations from all
governmental entities that are necessary to entitle it to own or lease, operate
and use its assets and to carry on and conduct the Business substantially as
currently conducted (herein collectively called "Governmental Permits"). Such
Governmental Permits are in full force and effect, no violations are or have
been recorded in respect thereof, no Proceeding is pending, or, to the
knowledge of the Sellers and their subsidiaries and Affiliates, threatened, to
revoke or limit any thereof or to affect the rights of the Sellers or any of
their subsidiaries or Affiliates under any thereof. The Sellers and their
subsidiaries and Affiliates do not know of any basis for any such Proceeding,
and none of such Governmental Permits will be revoked, suspended or otherwise
adversely affected by the consummation of the transactions contemplated hereby.
Section 5.21 of the Sellers' Disclosure Schedule sets forth a list and brief
description of each Governmental Permit. Complete and correct copies of all
Governmental Permits have been delivered to the Buyer.



                                      30
<PAGE>

      5.22 Bank Accounts; Powers-of-Attorney. Section 5.22 of the Sellers'
Disclosure Schedule contains a true and complete list of (i) all bank accounts
and safe deposit boxes of KSG and its subsidiaries and all Persons who are
signatories thereunder or who have access thereto and (ii) the names of all
Persons holding general or special powers-of-attorney from the Sellers and a
summary of the terms thereof, true copies of all such powers-of-attorney have
been previously delivered to the Buyer.

      5.23 Brokers or Finders. Neither the Buyer, Parent nor any of their
Affiliates will have any obligation to pay any broker's, finder's, investment
banker's, intermediary's, financial advisor's or similar fee in connection with
this Agreement or the Related Agreements or the transactions contemplated
herein or therein by reason of any action taken by or on behalf of the Sellers
or any of their respective subsidiaries or Affiliates.

      5.24 Transactions with Affiliates.

         (a) Except as set forth in Section 5.24(a) of the Sellers' Disclosure
Schedule, each of KSG and its subsidiaries has no outstanding Indebtedness,
liabilities or obligations of any nature (accrued or unaccrued, contingent or
fixed) for amounts owing to, or notes or accounts receivable from, or leases,
contracts or other commitments or arrangements with or for the benefit of, any
of KSG's stockholders, or any of their respective Affiliates, associates or
family members, or any of KSG's directors, officers or employees or Affiliates
of any of the foregoing.

         (b) As of the Closing Date, (i) all Indebtedness, liabilities and
obligations set forth in Section 5.24(a) of the Sellers' Disclosure Schedule
shall have been repaid in cash and in full, (ii) all amounts owing on notes and
all accounts receivable set forth in Section 5.24(a) of the Sellers' Disclosure
Schedule shall have been collected by KSG in cash and in full and (iii) all
leases, contracts and other commitments and arrangements set forth in Section
5.24(a) of the Sellers' Disclosure Schedule shall have been irrevocably
terminated without continuing liability on the part of the Buyer, Parent or
KSG.

         (c) Since December 31, 2000, neither KSG nor its subsidiaries has made
any payments, loans or advances of any kind or paid any dividends or
distributions of any kind to or for the benefit of KSG's stockholders or any of
their respective Affiliates, associates or family members.

      5.25 Customers and Suppliers. Section 5.25 of the Sellers' Disclosure
Schedule sets forth a true and complete list of the names and addresses of the
ten largest suppliers (and for each such supplier the dollar volume and
percentage of total purchases of similar items from all suppliers of such item)
of products and services to KSG and its subsidiaries and the ten largest
customers (and for each such customer the dollar volume and percentage of total
sales to all customers) of products and services of KSG and its subsidiaries
during the 12 months ended December 31, 1999 and December 31, 2000, indicating
any existing contractual arrangements for continued supply from or to each such
firm. Except as set forth in Section 5.25 of the Sellers' Disclosure Schedule,
there exists no actual or, to the knowledge of the Sellers, threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship of KSG and its subsidiaries with any customer or
group of customers which



                                      31
<PAGE>

are listed in Section 5.25 of the Sellers' Disclosure Schedule or which are
otherwise material to the operations of the Business, or with any supplier or
group of suppliers which are listed in Section 5.25 of the Sellers' Disclosure
Schedule or which are otherwise material to the operations of the Business, and
none of the Sellers or any of their subsidiaries or Affiliates has received any
report or other information from any employee, sales representative or other
Person who reports to the Sellers on such matters in the ordinary course of
business regarding the existence of any present or future condition or state of
facts or circumstances involving customers, suppliers or sales representatives
(including the consummation of the transactions contemplated in this Agreement)
that would materially adversely affect the Business or the prospects of KSG or
the Business or prevent the conduct of the Business after the consummation of
the transactions contemplated in this Agreement on substantially the same terms
as the Business has been conducted. The Sellers have delivered to the Buyer
copies of all written Contracts or other arrangements and written summaries of
any oral arrangements with the customers and suppliers listed in Section 5.25
of the Sellers' Disclosure Schedule.

      5.26 Accounts Receivable and Payables. The accounts and notes
receivable and all other receivables shown on the Interim Balance Sheet
(subject to reserves for non-collectibility as reflected therein), and all
receivables acquired or generated by KSG and its subsidiaries since June 30,
2001, are bona fide receivables and represent amounts due with respect to
actual, arm's-length transactions entered into in the ordinary course of
business consistent with past practice and, except as set forth in Section 5.26
of the Sellers' Disclosure Schedule, the Sellers are not aware of any facts or
circumstances that would render such amounts uncollectable in excess of the
reserves for such recorded on the Interim Balance Sheet. Such reserves for
non-collectibility have been reflected on the Interim Balance Sheet in
accordance with GAAP and are adequate. No such account has been assigned or
pledged to any other Person, and no defense or set-off or similar right to any
such account has been asserted by the account obligor.

      5.27 Guarantees.

         (a) Except as set forth in Section 5.27(a) of the Sellers' Disclosure
Schedule, none of the Indebtedness, liabilities or obligations of KSG or any of
its subsidiaries is guaranteed by KSG stockholders or their respective
Affiliates, associates or family members or by any of KSG'S officers, directors
or employees or Affiliates of any of the foregoing.

         (b) Except as set forth on Section 5.27(b) of the Sellers' Disclosure
Schedule, none of KSG or any of its subsidiaries is a guarantor or co-obligor
of any Indebtedness, liability or obligation of any KSG stockholder or any KSG
stockholder's Affiliates, associates or family members or of KSG's officers,
directors or employees or Affiliates of any of the foregoing.

      5.28 Common Activities. In the conduct of the Business, the assets of
KSG and its subsidiaries have not been commingled with those of any Affiliate
or associate of KSG, and KSG and its subsidiaries have not engaged in any joint
activities with regard to the purchase or sale of products or services, failed
to maintain appropriate distinction between the Business and assets and
property of KSG and its subsidiaries and those of any other Person or engaged
in any other acts or omitted to take any other action which could reasonably be
expected to form the basis for any claim or assertion that KSG or any of its
subsidiaries or its property or assets were responsible for any Indebtedness,
liability or obligation of any other Person.



                                      32
<PAGE>

      5.29 Disclosure. The representations and warranties by the Sellers in
this Agreement and the Related Agreement and the statements contained in the
Sellers' Disclosure Schedule or any other schedules, certificates, documents,
exhibits and agreements referred to herein or otherwise furnished or to be
furnished by the Sellers to the Buyer or Parent pursuant to this Agreement and
the Related Agreements or in connection with the transactions contemplated
hereby or thereby do not and will not contain any untrue statement of a
material fact and do not and will not omit to state any material fact necessary
to make the statements herein or therein not misleading. The Sellers have
delivered to the Buyer or its counsel true and complete copies of all material
certificates, exhibits, schedules, agreements or documents and has notified the
Buyer or its counsel of all events, facts, circumstances, violations or other
matters that to the best of their knowledge after due inquiry may have a
Material Adverse Effect on the Business, transactions contemplated in this
Agreement or the Related Agreements, or the business or operations of the Buyer
or Parent subsequent to the consummation of the transactions contemplated
hereby.

      5.30 Investment Representations. Each of the Sellers acknowledges,
represents and warrants that:

         (a) the Shares and the shares of Preferred Stock are being acquired
for the account of KSG and not with a view to, or for sale in connection with,
the distribution thereof, nor with any present intention of distributing or
selling any of such Shares and shares of Preferred Stock;

         (b) they have been advised that the Shares and shares of Preferred
Stock have not been registered under the Securities Act on the ground that no
distribution or public offering of the Shares and shares of Preferred Stock are
to be effected, and in this connection Parent is relying in part on their
representations set forth in this Section;

         (c) the Sellers have sufficient available financial resources to
provide adequately for their current needs and can bear the economic risk of
the complete loss of their investment in the Shares and shares of Preferred
Stock without materially affecting their financial condition.

         (d) the transfer of the Shares and shares of Preferred Stock has not
been registered under the Securities Act, and the Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available and the Company is under no
obligation to register the Shares and shares of Preferred Stock; and

         (e) they understand that the Shares are restricted securities within
the meaning of Rule 144 promulgated under the Securities Act; that the
exemption form registration under Rule 144 will not be available unless (i) a
public trading market then exists for the common stock of the Company, (ii)
adequate information concerning the Company is then available to the public,
and (iii) other terms and conditions of Rule 144 or any exemption therefrom are
complied with

         (e) Parent has provided the Sellers with the opportunity to meet and
confer with representatives of Parent regarding all aspects of its business and
has afforded the Sellers



                                      33
<PAGE>

the opportunity to obtain additional information concerning the Company and has
answered all questions to the satisfaction of the Sellers.

                                  ARTICLE VI

               REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT

      The Buyer and Parent represent and warrant to the Sellers as follows:

      6.1 Organization, Standing and Qualification. Parent is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Parent is duly qualified or licensed to do business and in good standing in
each jurisdiction in which its property is owned, leased or operated or the
nature of its business makes such qualification or licensing necessary, except
where the failure to be so duly qualified or licensed and in good standing
would not in the aggregate have a material adverse effect on Parent. The buyer
is a corporation duly organized, validly existing and in good standing under
the laws of New York. The Buyer has not engaged in any business (other than in
connection with this Agreement and the transactions contemplated hereby) since
the date of its incorporation.

      6.2 Authority.

         (a) Parent has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby.
Parent has all requisite corporate power and authority to enter into the
Related Agreements to which it is a party, and to consummate the transactions
contemplated thereby. The execution and delivery of this Agreement and the
Related Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Parent. This Agreement has been duly
executed and delivered by Parent. This Agreement does, and, when executed and
delivered by Parent, the Related Agreements to which it is a party will,
constitute legal, valid and binding obligations of Parent, enforceable against
Parent in accordance with its respective terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforceability of creditors'
rights in general and subject to general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).

         (b) The Buyer has all requisite corporate power and authority to enter
into this Agreement and the Related Agreements to which it is a party and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Related Agreements to which it is a party
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of the
Buyer. This Agreement has been duly executed and delivered by the Buyer. This
Agreement does, and, when executed and delivered by the Buyer, the Related
Agreements to which it is a party will, constitute legal, valid and binding
obligations of the Buyer, enforceable against the Buyer in



                                      34
<PAGE>

accordance with its terms, except to the extent enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditors' rights in general and subject to
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).

     6.3 Capitalization. The authorized capital stock of Parent consists of
22,500,000 shares consisting of 17,500,000 shares of common stock and 5,000,000
shares of preferred stock. As of the date hereof, 2,198,565 shares of Common
Stock are issued and outstanding, 1,012,500 shares of Common Stock are reserved
for issuance pursuant to options granted or to be granted under Parent's stock
option plans, 24,500 shares of Common Stock are held in treasury, 893,333
shares are reserved for issuance pursuant to outstanding warrants to purchase
Common Stock, 2,046,722 shares of Common Stock are reserved for issuance
pursuant to outstanding shares of convertible preferred stock (of which 3,500
are designated Series A 6% Convertible Preferred Stock, which were converted
into 3,500 shares of Series B 6% Convertible Preferred Stock), and there are no
other shares of capital stock of Parent authorized, issued or outstanding,
except as otherwise set forth in this Agreement and the transactions
contemplated hereby or as otherwise set forth in the Parent's SEC Reports.

      6.4 Validity; Issuance of Shares. The Shares of Common Stock and
Preferred Stock being issued as part of the Purchase Price have been duly
authorized and, when issued in accordance with this Agreement, will be validly
issued, fully paid and non-assessable.

      6.5 Consents and Approvals; No Violation.

         (a) Neither the execution and delivery of this Agreement or the
Related Agreements, nor the consummation of the transactions contemplated
hereby or thereby, nor compliance by Parent with any of the provisions hereof
or thereof will (i) conflict with or result in a breach of the certificate of
incorporation or by-laws or other constitutive documents of Parent, (ii)
conflict with or result (with or without notice or lapse of time or both) in a
default (or give rise to any right of reimbursement, termination, cancellation,
modification or acceleration) under any of the provisions of any material note,
bond, lease, mortgage, indenture, license, franchise, permit agreement or other
instrument or obligation to which Parent is a party, or by which Parent or its
properties or assets may be bound or affected, except for such conflict, breach
or default as to which requisite waivers or consents are described in Section
6.5 of the disclosure schedule delivered to the Sellers prior to the date of
this Agreement (the "Buyer Disclosure Schedule") and are required to be
obtained prior to Closing or would otherwise not have a Material Adverse Effect
on Parent, or (iii) violate any Law or Order applicable to Parent or its
properties or assets; or (iv) result in the creation or imposition of any
material Lien upon any property or assets used in Parent's business. Except as
set forth in Section 6.5 of the Buyer Disclosure Schedule, no consent or
approval by, or any notification of or filing with, or other action of any
Person (governmental or private) that has not been obtained is required in
connection with the execution, delivery and performance by Parent of this
Agreement or the Related Agreements. There is no Proceeding pending or, to the
knowledge of Parent, threatened against Parent or the Buyer that seeks to
prevent the consummation of the transactions contemplated herein or in any
Related Agreement to which Parent is a party.



                                      35
<PAGE>

         (b) Neither the execution and delivery of this Agreement or any of the
Related Agreements to which it is a party, nor the consummation of the
transactions contemplated hereby or thereby nor compliance by the Buyer with
any of the provisions hereof or thereof will (i) conflict with or result in a
breach of the certificate of incorporation or by-laws or other constitutive
documents of the Buyer or (ii) violate any Law or Order applicable to the Buyer
or the properties or assets of the Buyer that would prevent or materially
impair the consummation of the transactions contemplated hereby or thereby.

      6.6 Brokers or Finders. Neither Parent nor the Buyer will have any
obligation to pay any broker's, finder's, investment banker's, intermediary's,
financial advisor's or similar fee in connection with this Agreement or the
transactions contemplated herein by reason of any action taken by or on behalf
of Parent or the Buyer.

      6.7 Public Reports. Parent has and, as of the Closing Date will have,
filed all required forms, reports and documents with the SEC since July 1, 2000
(collectively, the "Parent's SEC Reports") all of which have and shall have
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, and Parent is current in all of its
required filings under the Exchange Act.

      6.8 Disclosure. The representations and warranties by Parent in this
Agreement and the Related Agreements and the statements contained in the Buyer
Disclosure Schedule or any other schedules, certificates, documents, exhibits
and agreements referred to herein or otherwise furnished or to be furnished by
Parent to the Sellers pursuant to this Agreement or in connection with the
transactions contemplated hereby do not and will not contain any untrue
statement of a material fact and do not and will not omit to state any material
fact necessary to make the statements herein or therein not misleading.

                                  ARTICLE VII

                                   COVENANTS

      7.1 Conduct of Business.

         (a) From the date hereof until the Closing Date, except as otherwise
consented to by Parent in writing, the Sellers shall operate KSG, its
subsidiaries and the Business only in the ordinary course of business
consistent with past practice.

         (b) Without limiting the generality of the foregoing, (i) the Sellers
shall use all reasonable efforts to preserve intact in all material respects
KSG's and its subsidiaries' present business organization and reputation and to
preserve its relationships with employees, creditors, customers and suppliers
and others having significant business relationships with KSG and its
subsidiaries, (ii) the Sellers shall not, without the prior written consent of
Parent, directly or indirectly, cause or permit any state of affairs, action or
omission described in clauses (a) through (n) of Section 5.8, and (iii) the
Sellers shall not take, or agree to commit to take, any action that would make
any representation or warranty of the Sellers contained herein or in any
Related Agreement inaccurate in any material respect at, or as of any time
prior to, the Closing Date.



                                      36
<PAGE>

         (c) From the date hereof and until the Closing Date, except as
expressly contemplated by this Agreement or in any Related Agreement or
expressly consented to by an instrument in writing signed by Parent, the
Principals shall cause KSG and each of its subsidiaries to: (i) conduct its
business and operations only in the ordinary course, consistent with past
practice, (ii) maintain and preserve its personal, real and intangible
properties in good repair, order and condition, (iii) preserve its business
operations and organizations intact, (iv) use commercially reasonable efforts
to keep available the services of its current employees, (v) not grant any
increase in the rate or terms of compensation payable, or become payable to any
of its directors, officers or employees, (vii) not adopt, amend or grant any
increase in the rate or terms of any company benefit plan, (viii) not enter
into any agreement or make any other commitment or incur any Indebtedness
involving an amount in excess of $10,000, (ix) not redeem, purchase, sell,
transfer, issue, convert, exchange or otherwise acquire any of its share
capital or authorize or effect any stock split, recapitalization, dividend or
distribution, (x) not issue any share capital, options, warrants or other
securities convertible or exchangeable for any share capital or other
securities of KSG or any of its subsidiaries, (xi) not take any action or enter
into any agreement or arrangement that would have the effect, or would be
reasonably likely to have the effect, of causing (A) any representation or
warranty contained herein to be or become untrue, (B) a breach of this
Agreement or any Related Agreement or any covenant contained herein or therein,
or (C) the failure or inability to satisfy any condition set forth in Article
VIII, (xii) not permit any other change in the capital structure of KSG or any
of its subsidiaries, (xiii) not permit the sale, transfer, assignment, lease,
license, exchange, or disposition of assets or rights (including, without
limitation, intellectual property rights) of, (xiv) not purchase or acquire any
ownership interest in any Person, company or business, whether effected as a
merger, a purchase, a joint venture, an acquisition of assets or a purchase,
pooling or acquisition of capital stock or otherwise, (xv) not enter into any
agreement involving, or consummate, any merger, sale, consolidation or any
other business combination, or any reorganization, recapitalization,
reclassification, spin-off, liquidation, extraordinary dividend, split-up,
distribution to shareholders or combination of the securities of KSG or any of
its subsidiaries, (xvi) not (w) dissolve or liquidate, or adopt any plan of
dissolution or liquidation, (x) consent to or commence any suit, proceeding,
petition or other action or the filing of a petition (A) under any law relating
to bankruptcy, insolvency or reorganization or seeking reorganization,
arrangement, adjustment, winding up, or other relief with respect to it, or (B)
seeking appointment of a receiver, trustee or custodian for it or all or any
substantial part of its assets, (y) allow any assignment for the benefit of
creditors, or (z) permit the admission in writing of its inability to pay its
debts generally as they become due, (xvii) not amend, alter or repeal its
articles of incorporation or other constituent documents, (xviii) not create
any new subsidiary or enter into any new business, (xix) not enter into any
transaction providing for the leasing or purchase of any interest in real
property, (xx) not enter into or amend, modify, extend or terminate any
agreements or arrangements with any Principal or any of their Affiliates or
enter into any transaction in which any Principal or any of their Affiliates
has an indirect or direct economic interest, (xxi) not institute or settle any
litigation, arbitration, proceeding, dispute or claim (including any tax claim
or audit adjustment), (xxii) not grant any power of attorney, (xxiii) not grant
any Lien on any of its property, (xxiv) not enter into, extend or modify any
agreement, contract or arrangement which (a) contains a material restriction on
its ability to conduct business, or (b) can be modified, amended or terminated
by the other party by its terms upon an assignment or change of control or
ownership or a specific individual ceasing to be employed or associated with
KSG or any of


                                      37
<PAGE>

its subsidiaries, or which requires payment upon occurrence of any of the
foregoing, (xxv) not issue or sell any interest or participation in its
profits, losses, assets, properties, capital or business, (xxvi) not enter
into, or modify or amend, any employment, consulting, union or similar
agreement, (xxvii) not make any loan or guaranty any obligation of any Person,
(xxviii) not permit the payment of any Indebtedness to any Person (other than
payments under equipment leases and unaffiliated third party trade payables in
the ordinary course of business and currently existing credit agreements with
financial institutions), (xxix) not enter into, extend or modify any Contract,
agreement, or arrangement, (xxx) not change its name or trading name(s), (xxxi)
not violate any law, rule or regulation to which it is subject, or (xxxii) not
agree or commit to do any of the foregoing.

      7.2 Access to Information. The Sellers shall (i) give Parent and its
officers, directors, employees, agents, counsel, accountants, financial
advisors, existing lenders, consultants and other representatives
(collectively, "Representatives") reasonable access, upon reasonable prior
notice, to all officers and accountants of KSG and its subsidiaries and
Affiliates and to all Books and Records, offices and other facilities and
properties utilized by KSG and its subsidiaries and Affiliates in connection
with the Business and all information relating to KSG and its subsidiaries and
Affiliates, the Business and the properties, assets, Contracts, financial
condition, results of operations and prospects of KSG and its subsidiaries and
Affiliates as Parent or its Representatives may reasonably request, (ii) permit
Parent and its Representatives to make such inspections thereof and, with the
prior consent of KSG (which shall not be unreasonably withheld), interview such
personnel, customers and vendors of KSG and its subsidiaries and Affiliates
during normal business hours as Parent or its Representatives may reasonably
request, (iii) cause KSG's officers and auditors to furnish Parent and its
Representatives with such financial and operating data and other information
with respect to the items set forth in clause (i) as Parent or its
Representatives may from time to time reasonably request, and cause the
auditors to deliver their work papers related to such information if Parent or
its Representatives shall so request, and (iv) at Parent's or its
Representatives' reasonable request, cause KSG's officers to compile
information that has not been compiled for another purpose.

      7.3 Best Efforts.

         (a) Upon the terms and subject to the conditions of this Agreement,
each of the parties hereto agrees to use its best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws and regulations to consummate and
make effective the transactions contemplated in this Agreement as promptly as
practicable, including (i) the preparation and filing of any forms,
registrations and notices required to be filed to consummate the transactions
contemplated in this Agreement and the taking of such actions as are necessary
to obtain any requisite approvals, consents, Orders, exemptions or waivers by
any third party or governmental entity and (ii) the satisfaction of all
conditions to Closing. Each party shall promptly consult with the other with
respect to, provide any necessary information not subject to legal privilege
with respect to and, except as otherwise not permitted by Law, provide the
other (or its Representatives) copies of, all filings made by such party with
any governmental entity or any other information supplied by such party to a
governmental entity in connection with this Agreement and the transactions
contemplated by this Agreement or as otherwise reasonably requested.



                                      38
<PAGE>

         (b) Each party hereto shall promptly inform the other of any
communication from any governmental entity regarding any of the transactions
contemplated by this Agreement. If any party or Affiliate thereof receives a
request for additional information or documentary material from any such
governmental entity with respect to the transactions contemplated by this
Agreement, then such party will endeavor in good faith to make, or cause to be
made, as soon as reasonably practicable and after consultation with the other
party(ies), an appropriate response in compliance with such request.

         (c) Notwithstanding the foregoing, nothing in this Agreement shall be
deemed to require Parent, the Buyer or any of their Affiliates to enter into
any agreement with any governmental entity or to consent to any Order requiring
any of them to hold, separate or divest, or to restrict the dominion or control
of any of them over, any of their respective assets, properties or businesses
or to submit to the laws and regulations of such governmental entity or qualify
to do business or submit to process in any other jurisdiction.

      7.4 No Solicitation by the Sellers. The Sellers shall, and shall cause
KSG to, immediately cease any existing discussions or negotiations with any
third parties conducted prior to the date hereof with respect to any Business
Combination (as defined below). For a period from the date hereof to the
Closing Date, the Sellers shall not, and the Sellers shall cause KSG and their
respective Affiliates and Representatives not to, directly or indirectly, take
any action to (i) initiate, assist, solicit, receive, negotiate, encourage or
accept any offer or inquiry from any Person with respect to a Business
Combination or engage in any Business Combination, (ii) reach any agreement or
understanding (whether or not such agreement or understanding is absolute,
revocable, contingent or conditional) for, or otherwise attempt to consummate,
any Business Combination or (iii) furnish or cause to be furnished any
information with respect to the Sellers or KSG to any Person (other than as
expressly provided in Section 7.2 of this Agreement) who the Sellers or KSG or
any of their respective Affiliates or Representatives knows or has reason to
believe is in the process of considering any Business Combination. If the
Sellers or KSG or any of their respective Affiliates or Representatives
receives from any Person any offer, inquiry or informational request referred
to above (an "Acquisition Proposal"), the Sellers will, or will cause KSG or
such Affiliate or Representative to, promptly advise such Person, by written
notice, of the terms of this Section 7.4 and promptly, orally and in writing,
advise Parent of such offer, inquiry or informational request. "Business
Combination" means any merger, consolidation or combination to which the
Sellers or KSG or any of its subsidiaries or any of their respective Affiliates
is a party, any sale, dividend, split or other disposition of the capital stock
of or other equity interest in KSG or any of its subsidiaries or any of their
respective Affiliates or any sale, dividend or other disposition of any of the
assets and properties of the Sellers, KSG or any of its subsidiaries or any of
their respective Affiliates, other than in the ordinary course of business and
the transactions contemplated herein.

      7.5 Fees and Expenses. Parent and the Buyer, on the one hand, and the
Sellers, on the other hand, shall pay their own fees, costs and expenses
incurred in connection with the preparation and negotiation of this Agreement
and the transactions contemplated herein, including the performance of such
party's obligations hereunder (including, but not limited to, the fees and
disbursements of counsel and advisors).



                                      39
<PAGE>

      7.6 Books and Records. KSG and its subsidiaries shall maintain all
Books and Records in the regular and customary manner as such Books and Records
have been maintained consistent with past practices.

      7.7 Compliance with Laws, Orders and Contracts. KSG and its
subsidiaries shall comply in all material respects with all Laws, Orders and
Contracts applicable to the Business or to KSG and its subsidiaries and,
promptly following receipt thereof, give Parent copies of any notice received
from any governmental entity or other Person alleging any violation of any such
Law, Order or Contract.

      7.8 Certain Activities between Signing and Closing.

         (a) From the date hereof until the Closing, except as required by Law,
without the prior written consent of Parent, none of the Sellers or their
respective subsidiaries and Affiliates shall make or change any tax election,
change any annual tax accounting period, adopt or change any method of tax
accounting, file any amended tax return, enter into any closing agreement,
settle any material tax claim or assessment, surrender any right to claim a tax
refund, consent to any extension or waiver of the limitations period applicable
to any tax claim or assessment or take or omit to take any other action, if any
such other action or omission would have the effect of increasing the tax
liability or decreasing any tax benefit or tax refund or similar matter of KSG,
Parent or the Buyer as a result of the transactions contemplated herein.

         (b) All tax returns with respect to the Sellers or their respective
subsidiaries and Affiliates (i) shall, to the extent required to be filed on or
before the Closing Date (taking into account any valid extensions), be filed by
the Sellers or their respective subsidiaries and Affiliates when due in
accordance with all applicable Laws and (ii) shall, as of the time of filing,
correctly reflect in all material respects the facts regarding the income,
business, assets, operations, activities and status of the Sellers and their
respective subsidiaries and Affiliates and any other information required to be
shown therein.

         (c) From the date hereof until the Closing, without the prior written
consent of Parent, none of the Sellers, KSG or their respective subsidiaries
and Affiliates shall amend or adopt any Plan, except as required by Law.

      7.9 Expenditures. KSG and each of its subsidiaries agrees that it will
not make any capital expenditure in excess of $5,000 (or $10,000 in the
aggregate) or engage in any extraordinary corporate or business transactions,
including, but not limited to, stock splits, dividends, repurchases or
recapitalizations, without the express written approval of Parent.

      7.10 Notification of Certain Matters. Each of the Sellers, KSG and
their respective subsidiaries and Affiliates agrees that it will not take any
action which would cause or constitute a material breach, or would, if it had
been taken prior to the date hereof, have caused or constituted a material
breach, of any of the representations and warranties set forth in Article V
hereof or in any of the Related Agreements. From the date hereof until the
Closing Date, the Sellers shall have a continuing obligation to give detailed
notice thereof to Parent and to update or supplement any information provided
herein in the event of, or promptly after the occurrence of, or promptly after
obtaining knowledge of the occurrence of or the impending or threatened


                                      40
<PAGE>

occurrence of, any fact, circumstance or event which would cause or constitute
or be reasonably likely to cause or constitute a Material Adverse Effect with
regard to the Sellers, KSG and their respective subsidiaries and Affiliates,
the Business or a breach of any of the representations and warranties set forth
in Article V hereof or in any of the Related Agreements. The Sellers shall use
their best efforts to prevent or promptly remedy such breach. The Sellers'
compliance with this Section 7.10 shall not limit or otherwise affect the
remedies available hereunder to Parent, including, but not limited to Parent's
right to terminate this Agreement notwithstanding any remedy of any breach
hereunder and Parent's rights under Article IX hereunder.

                                 ARTICLE VIII

                               CLOSING CONDITIONS

      8.1 Conditions Precedent to Obligations of Parent and the Buyer. The
obligation of Parent and the Buyer under this Agreement to consummate the
purchase of the Acquired Assets on the Closing Date shall be subject to the
satisfaction, at or prior to the Closing Date, of all of the following
conditions, any one or more of which may be waived by the Parent and the Buyer
in their sole discretion:

         (a) Warranties Accurate. The representations and warranties of the
Sellers contained in this Agreement and the Related Agreements which are
qualified as to materiality shall be true and correct in all respects, and
those not so qualified shall be true and correct in all material respects, as
of the date of this Agreement and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date.

         (b) Performance by the Sellers. The Sellers shall have performed and
complied in all material respects with all covenants and agreements required to
be performed or complied with by the Sellers hereunder or in the Related
Agreements on or prior to the Closing Date.

         (c) Consents. All consents, approvals, filings and notices required in
connection with the sale and transfer of the Acquired Assets and the Closing
(including, but not limited to, those set forth on Schedules 5.4 and 6.5 and
the Bank Consent shall have been duly obtained, made or given and shall be in
full force and effect, without the imposition upon Parent or the Buyer of any
material condition, restriction or required undertaking.

         (d) No Legal Prohibition. No suit, action, investigation, inquiry or
other proceeding by any Governmental Entity or other person shall have been
instituted or threatened which arises out of or relates to this Agreement, the
Related Agreements or the transactions contemplated hereby or thereby; and no
injunction, order, decree or judgment shall have been issued and be in effect
or threatened to be issued by any Governmental Entity of competent
jurisdiction, and no statute, rule or regulation shall have been enacted or
promulgated by any Governmental Entity and be in effect, which in each case
restrains or prohibits the consummation of the sale of the Acquired Assets or
otherwise results in a Material Adverse Effect on the Business, Parent or the
Buyer.



                                      41
<PAGE>

         (e) Certificate. Parent and Buyer shall have received (i) a
certificate, dated the Closing Date, signed by an officer of KSG to the effect
that the conditions set forth in Sections 8.1(a), (b) and (c) have been
satisfied and (ii) a certificate, dated the Closing Date, signed by the
secretary of KSG certifying to the Certificate of Incorporation, by-laws and
resolutions of KSG and its shareholders.

         (f) No Material Adverse Change. No material adverse change shall have
occurred in the business, earnings, operations, assets, liabilities, condition
(financial or otherwise) of KSG, its subsidiaries, the Business or any of the
Acquired Assets and no other event, loss, damage, condition or state of facts
of any kind shall exist which has a Material Adverse Effect, or can reasonably
be expected to have a Material Adverse Effect, on Parent, the Buyer, KSG, its
subsidiaries, the Business or any of the Acquired Assets.

         (g) Shareholder Approval. Each of the shareholders of KSG and any
other Person necessary in order to transfer the Acquired Assets shall have
approved and adopted this Agreement and the transactions contemplated by this
Agreement and all requisite resolutions and consents shall have been adopted
and delivered to Parent and the Buyer.

         (h) Other Documents. The Sellers shall execute and deliver the Related
Agreements in conformity with the forms attached hereto.

         (i) Additional Documents, etc. There shall have been delivered to
Parent and the Buyer each other agreement, document, certificate and other
items as is reasonably necessary to effectuate the transactions contemplated
hereby.

         (j) Payment of Bank Loan. Simultaneously with the Closing, all amounts
owed by the Sellers and their respective subsidiaries and Affiliates under the
CBC Loan Agreement shall have been paid in full and all security interests held
by the Bank covering any of the Acquired Assets or otherwise affecting the
Business, shall have been released unconditionally.

         (k) Transfer Taxes. The Sellers shall pay all required transfer taxes,
stamp duties and similar assessments and taxes in connection with the sale and
transfer of the Shares and the Preferred Stock as contemplated herein, if any.

         (l) Due Diligence. Parent and the Buyer shall not have discovered or
otherwise become aware of any circumstance, event or fact during the course of
its due diligence investigation or otherwise prior to the Closing Date that
would, in its sole determination, likely result in a material change to or
breach of any of the representations or warranties, covenants or agreements
contained herein or in any of the Related Agreements. In addition to, and not
in limitation of, the foregoing, Parent and the Buyer shall have satisfactorily
completed its review of the Sellers' Disclosure Schedules, which determination
shall be made in the sole and absolute discretion of Parent and the Buyer.

         (m) Books and Records. All files, documents, instruments, papers,
books and records relating to the Business or the Acquired Assets including
financial statements, tax returns and related work papers and letters from
accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, corporate seals, stock


                                      42
<PAGE>

transfer ledgers, contracts, licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental
studies and plans (collectively, the "Books and Records") shall be delivered to
Parent or the Buyer on or prior to the Closing Date.

         (n) Change of Corporate Names. Concurrently with the Closing (or, if
necessary, no more than one Business Day thereafter), the Sellers shall change
the name of KSG and its subsidiaries and Affiliates to a name that does not
include any of the words "Knowledge Strategies Group" or any similar or
derivative words or initials thereof or any trademarks, tradenames or service
marks with respect thereto and shall not use any of such words or marks in any
manner, including, without limitation, in connection with advertising,
corporate names, business names, promotional and sales materials, web sites,
domain names, or any publication of any kind.

         (o) Credit Agreement Amendment. Concurrently with the Closing, Parent
and the Bank shall have executed the Credit Agreement Amendment.

         (p) Allocation Schedule. The Sellers and the Buyer shall have
delivered the schedule as contemplated pursuant to Section 3.4.

      8.2 Conditions Precedent to Obligations of the Sellers. The
obligations of the Sellers under this Agreement to consummate the sale and
transfer of the Acquired Assets on the Closing Date shall be subject to the
satisfaction, at or prior to the Closing Date, of all of the following
conditions, any one or more of which may be waived by the Sellers in their sole
discretion:

         (a) Performance by Purchaser. Parent and the Buyer shall have
performed and complied in all material respects with all covenants and
agreements required to be performed or complied with by Parent and the Buyer
hereunder on or prior to the Closing Date.

         (b) Consents. All Consents set forth on Schedule 6.5 shall have been
duly obtained, made or given and shall be in full force and effect.

         (c) No Legal Prohibition. No suit, action, investigation, inquiry or
other proceeding by any Governmental Entity or other person shall have been
instituted or threatened which arises out of or relates to this Agreement, the
Related Agreements or the transactions contemplated hereby or thereby and no
injunction, order, decree or judgment shall have been issued and be in effect
or threatened to be issued by any Governmental Entity of competent
jurisdiction, and no statute, rule or regulation shall have been enacted or
promulgated by any Governmental Entity and be in effect, which in each case
restrains or prohibits the consummation of the sale of the Acquired Assets.

         (d) Other Documents. Parent and the Buyer shall execute and deliver
the agreements to which it is a party which are described in Section 4.3.



                                      43
<PAGE>

                                  ARTICLE IX

                          INDEMNIFICATION AND SURVIVAL

     9.1 Indemnification.

         (a) The Sellers shall jointly and severally indemnify the Buyer,
Parent and their respective officers, directors, stockholders, employees,
agents and Affiliates (the "Buyer Parties") and hold each of them harmless from
and against any Loss suffered, incurred or sustained by any of them or to which
any of them becomes subject, resulting from, arising out of or relating to (i)
any inaccuracy in or breach of, or any alleged inaccuracy in or alleged breach
of, any representation or warranty or failure to perform any covenant or
agreement to be performed on or before the Closing Date on the part of the
Sellers contained in this Agreement or the Related Agreements; (ii) any
intentional tort, including without limitation, fraud (including fraud in the
inducement), willful misconduct or bad faith by the Sellers or any executive
officer, director, stockholder or employee of the Sellers in connection with
this Agreement, the Related Agreements or the transactions contemplated hereby
or thereby; (iii) the assertion against the Parent, the Buyer, the Business or
the Acquired Assets, of any liability or obligation of the Sellers or their
respective subsidiaries or Affiliates or relating to the Sellers' operations,
businesses or other activities of any kind or nature prior to the Closing Date
that have not been expressly assumed by Parent or the Buyer under this
Agreement; and (iv) any and all actions, suits, Proceedings, demands,
judgments, costs and legal and reasonable other expenses incident to any of the
matters referred to in clauses (i), (ii) and (iii) of this Section 9.1(a).
Once it is determined there is such an indemnifiable event, the amount of the
Loss shall be determined without giving effect to any "Material Adverse Effect"
qualification or any other materiality, dollar limit or similar qualification
contained in the representation, warranty, covenant or agreement.

         (b) Each of Parent and the Buyer hereby indemnifies and holds harmless
the Sellers and their officers, directors, stockholders, agents and Affiliates
(the "Sellers Parties") from and against any Loss suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to (i) any inaccuracy in or breach of, or any
alleged inaccuracy or alleged breach of any representation or warranty or
failure to perform any covenant or agreement to be performed on or before the
Closing Date on the part of the Buyer or Parent contained in this Agreement or
the Related Agreements to which the Buyer or Parent is a party; (ii) any
intentional tort, including without limitation, fraud (including fraud in the
inducement), willful misconduct or bad faith by any of the Buyer Parties in
connection with this Agreement, the Related Agreements or the transactions
contemplated hereby or thereby; and (iii) any and all actions, suits,
Proceedings, demands, judgments, costs and legal and reasonable other expenses
incident to any of the matters referred to in clauses (i) and (ii) of this
Section 9.1(b). Once it is determined there is such an indemnifiable event, the
amount of the Loss shall be determined without giving effect to any "Material
Adverse Effect" qualification or any other materiality, dollar limit or similar
qualification contained in the representation, warranty, covenant or agreement.

         (c) All claims for indemnification by any party seeking indemnity
under this Agreement (an "Indemnified Party") will be asserted and resolved as
follows:



                                      44
<PAGE>

          (i) In the event any claim or demand, in respect of which an
     Indemnified Party might seek indemnity under this Agreement, is asserted
     against or sought to be collected from such Indemnified Party by a Person
     other than a Buyer Party or a Sellers Party or any of their respective
     Affiliates (a "Third Party Claim"), the Indemnified Party shall deliver a
     notice (a "Claim Notice") with reasonable promptness to the party from
     whom the Indemnified Party is seeking indemnification (the "Indemnifying
     Party"), which Claim Notice shall provide reasonable detail relating to
     such Third Party Claim, including the amount of Loss claimed, to the
     extent known. If the Indemnified Party fails to provide the Claim Notice
     with reasonable promptness after the Indemnified Party receives notice of
     such Third Party Claim, the Indemnifying Party shall not be obligated to
     indemnify the Indemnified Party with respect to such Third Party Claim
     only to the extent that the Indemnifying Party demonstrates that its
     ability to defend such Third Party Claim has been irreparably prejudiced
     by such failure of the Indemnified Party. The Indemnifying Party shall
     notify the Indemnified Party as soon as practicable within the Dispute
     Period (defined below) whether the Indemnifying Party disputes its
     liability to the Indemnified Party, and whether the Indemnifying Party
     desires, at its sole cost and expense, to defend the Indemnified Party
     against such Third Party Claim. "Dispute Period" means the period ending
     30 days following receipt by an Indemnifying Party of either a Claim
     Notice or an Indemnity Notice (as hereinafter defined).

          (ii) If the Indemnifying Party notifies the Indemnified Party within
     the Dispute Period that the Indemnifying Party desires to defend the
     Indemnified Party with respect to the Third Party Claim pursuant to this
     Section 9.1, then the Indemnifying Party shall have the right to defend,
     with counsel reasonably satisfactory to the Indemnified Party, at the sole
     cost and expense of the Indemnifying Party, such Third Party Claim by all
     appropriate proceedings, which proceedings must be vigorously and
     diligently prosecuted by the Indemnifying Party to a final conclusion or
     may be settled at the discretion of the Indemnifying Party; provided,
     however, that the Indemnifying Party shall not be permitted to effect any
     settlement without the written consent (which shall not be unreasonably
     withheld) of the Indemnified Party unless (A) the sole relief provided in
     connection with such settlement is monetary damages that are paid in full
     by the Indemnifying Party, (B) such settlement involves no finding or
     admission of any wrongdoing, violation or breach by any Indemnified Party
     of any right of any other Person or any Laws, Contracts or Governmental
     Permits, and (C) such settlement has no effect on any other claims that
     may be made against or liabilities of any Indemnified Party. The
     Indemnifying Party shall have full control of such defense and
     proceedings, including any compromise or settlement thereof (except as
     provided in the preceding sentence); provided, however, that the
     Indemnified Party may, at its sole cost and expense, at any time prior to
     the Indemnifying Party's delivery of the notice referred to in the first
     sentence of this clause (ii), file any motion, answer or other pleadings
     or take any other action that the Indemnified Party reasonably believes to
     be necessary or appropriate to protect its interests; and provided
     further, that if requested by the Indemnifying Party, the Indemnified
     Party shall, at the sole cost and expense of the Indemnifying Party,
     provide reasonable cooperation to the Indemnifying Party in contesting any
     Third Party Claim that the Indemnifying Party elects to contest. The
     Indemnified Party may participate in, but not control, any defense or
     settlement of any Third Party Claim



                                      45
<PAGE>

     controlled by the Indemnifying Party pursuant to this clause (ii) and,
     except as provided in the first sentence of this clause (ii) and the
     preceding sentence, the Indemnified Party will bear its own costs and
     expenses with respect to such participation. Notwithstanding the
     foregoing, the Indemnified Party may take over the control of the defense
     or settlement of a Third Party Claim at any time if it irrevocably waives
     its right to indemnity with respect to such Third Party Claim.

          (iii) If the Indemnifying Party fails to notify the Indemnified Party
     within the Dispute Period that the Indemnifying Party desires to defend
     the Third Party Claim pursuant to Section 9.1(c)(ii) or if the
     Indemnifying Party gives such notice but fails to prosecute vigorously and
     diligently or settle the Third Party Claim (in each case in accordance
     with Section 9.1(c)(ii) above), or if the Indemnifying Party fails to give
     any notice whatsoever within the Dispute Period, then the Indemnified
     Party will have the right to defend, at the sole cost and expense of the
     Indemnifying Party, the Third Party Claim by all appropriate proceedings,
     which proceedings will be prosecuted by the Indemnified Party in a
     reasonable manner and in good faith or will be settled at the discretion
     of the Indemnified Party (with the consent of the Indemnifying Party,
     which consent will not be unreasonably withheld). Subject to the
     immediately preceding sentence, the Indemnified Party will have full
     control of such defense and proceedings, including any compromise or
     settlement thereof; provided, however, that if requested by the
     Indemnified Party, the Indemnifying Party will, at the sole cost and
     expense of the Indemnifying Party, provide reasonable cooperation to the
     Indemnified Party and its counsel in contesting any Third Party Claim
     which the Indemnified Party is contesting. The Indemnifying Party may
     participate in, but not control, any defense or settlement controlled by
     the Indemnified Party pursuant to this clause (iii), and the Indemnifying
     Party will bear its own costs and expenses with respect to such
     participation.

          (iv) If the Indemnifying Party notifies the Indemnified Party that it
     does not dispute its liability to the Indemnified Party with respect to a
     Third Party Claim or fails to notify the Indemnified Party within the
     Dispute Period whether the Indemnifying Party disputes its liability to
     the Indemnified Party with respect to such Third Party Claim, the Loss in
     the amount specified in the Claim Notice will be conclusively deemed a
     liability of the Indemnifying Party, and the Indemnifying Party shall pay
     the amount of such Loss to the Indemnified Party on demand. If the
     Indemnifying Party has timely disputed its liability with respect to such
     claim, the Indemnifying Party and Indemnified Party will proceed in good
     faith to negotiate a resolution of such dispute, and if not resolved
     through negotiations within the Resolution Period, such dispute shall be
     resolved by litigation in a court of competent jurisdiction. "Resolution
     Period" means the period ending 30 days following expiration of the
     Dispute Period.

          (v) In the event any Indemnified Party should have a claim under this
     Agreement against any Indemnifying Party that does not involve a Third
     Party Claim, the Indemnified Party shall deliver a notice (an "Indemnity
     Notice") with reasonable promptness to the Indemnifying Party, which
     Indemnity Notice shall provide reasonable detail relating to such claim,
     including the amount of Loss claimed, to the extent known. If the
     Indemnified Party fails to provide the Indemnity Notice with reasonable


                                      46
<PAGE>

     promptness, the Indemnifying Party shall not be obligated to indemnify the
     Indemnified Party with respect to such claim only to the extent that an
     Indemnifying Party demonstrates that it has been irreparably prejudiced by
     such failure of the Indemnified Party. If the Indemnifying Party notifies
     the Indemnified Party that it does not dispute the claim described in such
     Indemnity Notice or fails to notify the Indemnified Party within the
     Dispute Period whether the Indemnifying Party disputes the claim described
     in such Indemnity Notice, the Loss in the amount specified in the
     Indemnity Notice will be conclusively deemed a liability of the
     Indemnifying Party, and the Indemnifying Party shall pay the amount of
     such Loss to the Indemnified Party on demand. If the Indemnifying Party
     has timely disputed its liability with respect to such claim, the
     Indemnifying Party and the Indemnified Party will proceed in good faith to
     negotiate a resolution of such dispute, and if not resolved through
     negotiations within the Resolution Period, such dispute shall be resolved
     by litigation in a court of competent jurisdiction.

         (d) Any indemnity payment, including any payments made through
cancellation of the Shares as set forth in Section 9.3 will be treated for tax
purposes as an adjustment to the Purchase Price.

      9.2 Survival Periods.

         (a) All representations and warranties of the Sellers contained in
this Agreement, the Sellers' Disclosure Schedule, the Related Agreements or any
certificate or document delivered in connection herewith or therewith shall
survive the Closing and shall remain in full force and effect for 24 months
after the Closing Date (such 24-month anniversary to the Closing Date being
referred to as the "Expiration Date") and shall apply beyond such 24 month
period with respect to claims asserted in writing within such 24 month period;
provided, however, that those representations and warranties which relate to
taxes, benefit plans, environmental liabilities and Intellectual Property
Rights shall survive until 90 days beyond all applicable statutes of
limitations have expired. Except as otherwise provided, the covenants and
agreements of the parties hereto shall survive the Closing. Rights of an
Indemnified Party to indemnification shall not be limited or affected in any
way by any pre-Closing investigation by such Indemnified Party or by such
Indemnified Party's actual knowledge of any inaccuracy of the representations
and warranties.

         (b) All representations and warranties of Parent and the Buyer
contained in this Agreement, the Buyer Disclosure Schedule, the Related
Agreements or any certificate or document delivered in connection herewith or
therewith shall survive the Closing and shall remain in full force and effect
for a period of twelve months after the Closing Date and any claims in respect
thereof, whether made by the Sellers or any current or former holder of the
capital stock of KSG or any of its subsidiaries, shall be limited to an amount
in the aggregate not in excess of $150,000.

      9.3 Cancellation of Shares. The parties hereto acknowledge that the
Shares of the Buyer Common Stock representing a portion of the Purchase Price
are subject to cancellation by Parent (without any additional action on the
part of the holders of such Shares) in connection with any claims by any Buyer
Party with respect to the indemnification obligations of the Sellers hereunder.
The value of such Shares with respect to payment of any indemnity obligation
shall



                                      47
<PAGE>

be based on the fair market value of such Shares as of the Closing Date.
Notwithstanding the foregoing, cancellation of such Shares as provided for
hereunder shall not relieve the Sellers of their indemnification obligations
and any Buyer Party may enforce its rights and seek all remedies available to
it in lieu of or in addition to those set forth in this Section 9.3.

                                   ARTICLE X

                                  TERMINATION

      10.1 This Agreement may be terminated, and the transactions
contemplated herein may be abandoned:

         (a) any time before the Closing, by mutual written agreement of the
parties hereto;

         (b) any time before the Closing, by Parent and the Buyer, on the one
hand, or the Sellers, on the other hand, in the event of a material breach
hereof or under the Related Agreements or the inability to satisfy any of the
conditions of Article VIII on or prior to the Closing Date by any
non-terminating party; or

         (c) any time after August 31, 2001, by Parent and the Buyer upon
notification to the Sellers if the Closing shall not have occurred on or before
such date and such failure to consummate is not caused by a breach of this
Agreement by Parent or the Buyer.

     10.2 If this Agreement is validly terminated pursuant to Section 10.1,
this Agreement will forthwith become null and void, and there will be no
liability or obligation on the part of any party (or any of their respective
officers, directors, employees, partners, agents or other representatives or
Affiliates), except as provided in the next succeeding sentence and except that
the provisions of Articles IX and XI will continue to apply following any such
termination. Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to Section 10.1, the
Sellers and each of their respective subsidiaries and Affiliates will remain
liable to the Buyer Parties for any misrepresentation or breach of this
Agreement or any Related Agreement by any such person, and Parent and the Buyer
will remain liable to the Sellers Parties for any misrepresentation or breach
of this Agreement by Parent and the Buyer, and the Buyer Parties, on the one
hand, or the Sellers Parties, on the other hand, may seek such remedies,
including damages and fees of attorneys, against the other with respect to any
such misrepresentation or breach as are provided in this Agreement or the
Related Agreements or as are otherwise available at law or in equity.

                                  ARTICLE XI

                                    GENERAL

      11.1 Expenses. Except as otherwise provided by this Agreement, each
party shall bear and pay its own expenses incurred in connection with the
transactions referred to in this Agreement.



                                      48
<PAGE>

      11.2 Notices. Any notices required or permitted to be sent to a party
hereunder shall be delivered personally or mailed, certified mail, return
receipt requested, delivered by overnight courier service, or by telecopy to
the following addresses, or such other address as such party hereto designates
by written notice given to the other party, and shall be deemed to have been
delivered five business days after mailing, if mailed, or four business days
after delivery to the courier, if delivered by overnight courier services or if
by telecopy, on the date set forth on the confirmation:

        If to any
        of the Sellers to:      c/o Knowledge Strategies Group, Inc.
                                900 Broadway, Ste. 602
                                New York, New York 10003
                                Attention: Cynthia Hollen
                                Facsimile No.: (212) 414-0909

                 copy to:
                                ----------------------------------

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

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

                                ----------------------------------
        If to Parent or
        the Buyer to:           c/o 5B Technologies Corporation
                                100 Sunnyside Boulevard
                                Woodbury, NY 11797
                                Attention: Glenn Nortman, CEO and President
                                Facsimile No.: (516) 677-6111

                 copy to:       Proskauer Rose LLP
                                1585 Broadway
                                New York, NY 10036
                                Attention: Neil S. Belloff, Esq.
                                Facsimile No.: (212) 969-2900

      11.3 Entire Agreement; Headings; Counterparts. This Agreement
constitutes the entire understanding and agreement between the parties with
respect to the transactions contemplated herein, and supersedes any and all
prior or contemporaneous, oral or written, communications with respect to the
subject matter hereof, all of which are merged herein. The section headings
contained herein shall in no way limit, extend, or interpret the scope or
language of this Agreement or of any particular section and are intended only
for convenience of reference. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, without necessity of
production of the others. Such counterparts may be delivered to the other
parties hereto by facsimile and such delivery shall be deemed a delivery of an
executed original.

      11.4 Amendment; Waiver. This Agreement cannot be modified, amended or
in any way altered except by written document executed by each of the parties
hereto. No waiver of any provision of this Agreement, or of any rights or
obligations of any party hereunder, shall be


                                      49
<PAGE>

effective unless in writing and executed by the party waiving compliance, and
such waiver shall be effective only in the specific instance, and for the
specific purpose, stated in such writing. No waiver of any breach of, or
default under, any provision of this Agreement shall be deemed a waiver of any
other provision, or of any subsequent breach or default of the same provision,
of this Agreement.

      11.5 Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, that provision shall be deemed stricken and the
remainder of the Agreement shall continue in full force and effect, insofar as
it remains a workable instrument to accomplish the intent and purposes of the
parties. The parties further agree to replace the severed provision with the
provision that will come closest to reflecting the intention of the parties
underlying the severed provision but that will be valid, legal and enforceable.

      11.6 Parties in Interest; Assignment. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns; provided, however, that neither party may
assign by operation of law or otherwise to any third party, any right or
obligation set forth in this Agreement without the prior written consent of the
other party. Nothing in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto any rights or remedies
under or by reason of this Agreement.

      11.7 Applicable Law.

         (a) This Agreement and the performance of the parties hereunder shall
be governed and construed in accordance with the substantive laws of the State
of New York without giving effect to the principles of conflicts of law
thereof.

         (b) For the purpose of the serving of legal documents in relation to
litigation and arbitration, the parties choose domicile at the addresses
mentioned in Section 11.2.

         (c) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY OF THE PARTIES WITH
RESPECT TO THIS AGREEMENT OR ANY RELATED AGREEMENT, MAY BE BROUGHT IN ANY STATE
OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT THE PARTIES ACCEPT FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT AND ANY RELATED
AGREEMENT. THE PARTIES DESIGNATE AND APPOINT CSC NETWORKS/PRENTICE HALL LEGAL
AND FINANCIAL SERVICES AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY
THEM IRREVOCABLY AGREEING IN WRITING TO SERVE, AS THEIR AGENT TO RECEIVE ON
THEIR BEHALF, SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT,
SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THEM TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. A COPY OF SUCH PROCESS SO SERVED SHALL BE MAILED BY
REGISTERED MAIL TO THE PARTIES AT THEIR ADDRESS PROVIDED IN SECTION 11.2,
EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL
SUCH COPY



                                      50
<PAGE>

SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY
A PARTY REFUSES TO ACCEPT SERVICE, SUCH PARTY HEREBY AGREE THAT SERVICE UPON IT
BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

         (d) EACH OF THE PARTIES HEREBY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO,
IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, ANY RELATED AGREEMENT, OR
THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY, NO CLAIM
MAY BE MADE BY ANY OF THE SELLERS AGAINST PARENT OR THE BUYER FOR ANY LOST
PROFITS OR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY
BREACH OR WRONGFUL CONDUCT (OTHER THAN WILLFUL MISCONDUCT CONSTITUTING ACTUAL
FRAUD) IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THE
TRANSACTIONS CONTEMPLATED HEREUNDER OR UNDER ANY RELATED AGREEMENT OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; EACH OF THE PARTIES HEREBY
WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH
DAMAGES. EACH OF THE SELLERS AGREES THAT THIS SECTION IS A SPECIFIC AND
MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGE THAT PARENT AND THE BUYER
WOULD NOT ENTER INTO THIS AGREEMENT IF THIS SECTION WERE NOT PART OF THIS
AGREEMENT.

      11.8 Publicity. The financial and business terms of this Agreement or
the Related Agreements shall not be disclosed to any third party or the public
without the prior written consent of the other party; provided, however, that
either party may disclose such information as required by law (including
applicable securities laws), the rules of any applicable stock exchange, or
court order or as necessary to enforce the terms of this Agreement. The
foregoing shall not prohibit either party from disclosing this Agreement or its
contents to its attorneys, accountants or other advisors.

      11.9 Bulk Sales Compliance. The Buyer hereby waives compliance by the
Sellers with the provisions of any applicable Bulk Sales Law of any state, in
consideration whereof the Sellers agree to pay and discharge when due all
claims of creditors which could be asserted against the Buyer or Parent by
reason of noncompliance to the extent that such liabilities are not assumed by
the Buyer or Parent under this Agreement and to indemnify and hold Parent and
the Buyer Parties harmless from and against any such claims pursuant to Article
IX hereof.



                                      51
<PAGE>


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


                         5B TECHNOLOGIES CORPORATION

                         By:  /s/ Glenn Nortman
                              ----------------------------------
                         Name:  Glenn Nortman

                         Title: Chief Executive Officer and President



                         KNOWLEDGE ACQUISITION CORPORATION

                         By:  /s/ Glenn Nortman
                            ----------------------------------
                         Name:    Glenn Nortman
                         Title:   President


                         KNOWLEDGE STRATEGIES GROUP INC.

                         By: /s/ Douglas Carlson
                           ----------------------------------
                         Name:  Douglas Carlson
                         Title:



                         /s/ Cynthia Hollen
                         ----------------------------------
                         CYNTHIA HOLLEN

                         /s/ Douglas Carlson
                         ----------------------------------
                         DOUGLAS CARLSON

                         /s/ Michael Thompson
                         ----------------------------------
                         MCHAEL THOMPSON



                                      52


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.20
<SEQUENCE>5
<FILENAME>file004.txt
<DESCRIPTION>AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
<TEXT>
<PAGE>


                               AMENDMENT NO. 1 TO

                            ASSET PURCHASE AGREEMENT

                                  BY AND AMONG

                          5B TECHNOLOGIES CORPORATION,

                       KNOWLEDGE ACQUISITION CORPORATION,

                        KNOWLEDGE STRATEGIES GROUP INC.,

                                 CYNTHIA HOLLEN,

                                 DOUGLAS CARLSON

                                       AND

                                MICHAEL THOMPSON

                           DATED AS OF AUGUST __, 2001

     This AMENDMENT NO. 1 to the ASSET PURCHASE AGREEMENT dated as of July 30,
2001 (the "Agreement") by and among 5B TECHNOLOGIES CORPORATION ("Parent"),
KNOWLEDGE ACQUISITION CORPORATION (the "Buyer"), KNOWLEDGE STRATEGIES GROUP
INC.("KSG"), CYNTHIA HOLLEN ("Hollen"), DOUGLAS CARLSON ("Carlson") and MICHAEL
THOMPSON ("Thompson", and together with Hollen and Carlson, collectively
referred to as the "Principals"), is entered into as of the __ day of August,
2001 (this "Amendment") between Parent, the Buyer, KSG and the Principals.
Capitalized terms contained herein and not defined herein shall have the
meanings ascribed to such terms in the Agreement.

     WHEREAS, the parties hereto have entered into the Agreement, providing for
the sale by the Sellers to the Buyer of the Acquired Assets; and

     WHEREAS, the parties hereto desire to amend the Agreement as set forth
herein.

     NOW THEREFORE, in consideration of the premises and the mutual agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

<PAGE>

     1. Amendment of Fifth "WHEREAS" Clause. The Fifth "WHEREAS" Clause on page
1 of the Agreement is hereby amended by deleting same in its entirety.

     2. Amendment of Section 1.1 - Definition of CBC Loan Agreement. The
definition of "CBC Loan Agreement" contained in Section 1.1 of the Agreement is
hereby amended to add at the end thereof the following:

     ", and the other Loan Documents (as defined in such Credit Agreement) to
     which KSG is a party or by which KSG or its properties and assets are bound
     or affected."

     3. Amendment of Section 1.1 - Definition of Credit Agreement. The
definition of "Credit Agreement" contained in Section 1.1 of the Agreement is
hereby amended and restated in its entirety as follows:

     " "Credit Agreement" shall mean that certain Credit Agreement dated May 24,
     2001, between the Bank and 5B Technologies Group, Inc."

     4. Amendment of Section 1.1 - Definition of Credit Agreement Amendment. The
definition of "Credit Agreement Amendment" contained in Section 1.1 of the
Agreement is hereby amended and restated in its entirety as follows:

     " "Credit Agreement Amendment" shall mean that certain amendment to the
     Credit Agreement, to be entered into as a condition to Closing, in form and
     substance satisfactory to Parent and the Bank."

     5. Amendment of Sections 1.1, 5.30, 6.4 and 8.1(k). Sections 1.1, 5.30, 6.4
and 8.1(k) of the Agreement are each hereby amended to delete all references to
"Preferred Stock" and/or "shares of Preferred Stock."

     6. Amendment of Sections 1.1, 4.2 and 4.3. Sections 1.1, 4.2 and 4.3 of the
Agreement are each hereby amended to delete all references to "Registration
Rights Agreement."

     7. Amendment of Section 3.1 of the Agreement. Section 3.1 of the Agreement
is hereby amended by deleting subsection (i) in its entirety and inserting in
its place the following:

     "(i) assume the Assumed Liabilities as set forth on Schedule 2.3, which
     shall include the outstanding indebtedness to the Bank pursuant to the CBC
     Loan Agreement, and"

     8. Amendment of Section 3.3 of the Agreement. Section 3.3 of the Agreement
is hereby amended by deleting subsection (i) in its entirety.

                                       2
<PAGE>

     9. Amendment of Section 8.1(c) of the Agreement. Section 8.1(c) of the
Agreement is hereby amended by adding in the third line thereof a close
parentheses following the word "Consent."

     10. Amendment of Section 8.1(j) of the Agreement. Section 8.1(j) of the
Agreement is hereby amended and restated in its entirety as follows:

     " (j) Release Agreement. Simultaneously with the Closing, the Bank shall
     execute and deliver the Release Agreement, in form and substance
     satisfactory to Parent and the Bank (which may include the execution and
     filing of UCC-3 termination statements), relating to the release of all
     security interests held by the Bank covering any of the Acquired Assets or
     otherwise affecting the Business."

     11. Effectiveness of Amendment. This Amendment shall become effective upon
the execution and delivery of this Amendment by each of the undersigned.

     12. Effect on the Agreement. The Agreement shall continue in full force and
effect as amended by this Amendment. From and after the date hereof, all
references to the Agreement shall be deemed to mean the Agreement as amended by
this Amendment.

     13. Miscellaneous. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OR CHOICE OF LAWS, OR ANY OTHER LAW THAT WOULD MAKE THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK APPLICABLE HERETO. ARTICLE AND
SECTION HEADINGS ARE INCLUDED FOR CONVENIENCE ONLY AND SHALL NOT AFFECT THE
INTERPRETATION OF ANY OF THE PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT
CONSTITUTES THE ENTIRE UNDERSTANDING AND AGREEMENT AND SUPERSEDES ANY AND ALL
OTHER UNDERSTANDINGS AND AGREEMENTS, BOTH WRITTEN AND ORAL, BETWEEN THE PARTIES
WITH RESPECT TO THE SUBJECT MATTER HEREOF.

     14. Counterparts. This Amendment may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.



                                       3
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.

                                   5B TECHNOLOGIES CORPORATION

                                   By: /s/ Glenn Nortman
                                      ------------------------------------------
                                   Name:  Glenn Nortman
                                   Title: Chief Executive Officer and President

                                   KNOWLEDGE ACQUISITION CORPORATION

                                   By: /s/ Glenn Nortman
                                      ------------------------------------------
                                      Name:  Glenn Nortman
                                      Title: President

                                   KNOWLEDGE STRATEGIES GROUP INC.

                                   By: /s/ Douglas Carlson
                                      ------------------------------------------
                                      Name:  Douglas Carlson
                                      Title:

                                   /s/ Cynthia Hollen
                                   ---------------------------------------------
                                   CYNTHIA HOLLEN


                                   /s/ Douglas Carlson
                                   ---------------------------------------------
                                   DOUGLAS CARLSON


                                   /s/ Michael Thompson
                                   ---------------------------------------------
                                   MCHAEL THOMPSON




                                       4

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>6
<FILENAME>file005.txt
<DESCRIPTION>FIRST AMENDMENT TO 5B CREDIT AGREEMENT
<TEXT>
<PAGE>

CONNECTICUT BANK OF COMMERCE
--------------------------------------------------------------------------------

                     FIRST AMENDMENT TO 5B CREDIT AGREEMENT

         FIRST AMENDMENT, dated August 16, 2001 (this "Amendment"), to the
CREDIT AGREEMENT, dated May 24, 2001 (the "Existing 5B Credit Agreement" and as
amended, supplemented or otherwise modified hereby and otherwise from time to
time, the "5B Credit Agreement"), between 5B TECHNOLOGIES GROUP INC., a New York
corporation, with its principal place of business at 100 Sunnyside Boulevard,
Woodbury, New York 11797 (the "Borrower") and CONNECTICUT BANK OF COMMERCE, a
commercial bank organized under the Banking Laws of Connecticut, with its
principal office located at 90 Broad Street, New York, New York 10004-2290 (the
"Bank").

                                    RECITALS

         5B Technologies Corporation, a Delaware corporation and the parent (the
"Parent") of the Borrower, and the Borrower have informed the Bank that the
Parent intends to acquire certain of the assets, and assume certain of the
liabilities, of Knowledge Strategies Group, Inc., a New York corporation
(formerly known as Knowledge Strategies, Inc.) ("KSG") through Knowledge
Acquisition Corp., a New York corporation (the "Buyer"), a wholly-owned
subsidiary of the Parent, pursuant to an asset purchase agreement (the "Asset
Purchase Agreement") dated July 31, 2001 between the Parent, the Buyer, KSG and
certain other parties named therein. KSG and the Bank are parties to a Credit
Agreement dated December 15, 1999, as amended to date (the "KSG Credit
Agreement" and together with all other Loan Documents (as defined in that Credit
Agreement, the "KSG Facility").

         The transactions contemplated by the Asset Purchase Agreement (the "KSG
Transactions") involve, among other things, the following: (a) the transfer of
certain of the assets of KSG (including, without limitation, certain
intellectual property and other assets of KSG relating to the business of KSG),
to the Buyer (the "Transferred Assets") and (b) the assumption of certain
liabilities and obligations of KSG, as will be set forth on Schedule 2.3 to the
Asset Purchase Agreement (which shall include the liabilities and obligations of
KSG to the Bank under the KSG Facility as set forth on such Schedule (the
"Assumed Bank Indebtedness")).

         The execution and delivery by KSG and the Parent of the Asset Purchase
Agreement and the consummation by KSG and the Parent of the KSG Transactions
require the Bank's consent and waiver under Section IV(b)(iii) of the KSG Credit
Agreement and under Sections IV(b)(i), (ii) and (iv) and IV(b)(ix) of the
Existing 5B Credit Agreement. The Borrower, the Parent, the Buyer and the other
Guarantors have requested that the Bank (i) consent to the KSG Transactions
pursuant to the terms of the Asset Purchase Documents (as hereinafter defined),
(ii) amend Section I(b) of the Existing 5B Credit Agreement to amend the
conditions precedent to the use by the Borrower of the Acquisition Loan
Facility, and (iii) make certain other changes to the Existing 5B Credit
Agreement and the other Loan Documents (as defined in the 5B Credit Agreement).
The Bank has agreed to do so upon the terms and subject to the conditions set
forth in this Amendment.

         Accordingly, in consideration of the mutual covenants and agreements
contained in this Amendment, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Borrower and the
Bank hereby agree as follows:

         1. Defined Terms; Rules of Interpretation. Capitalized terms used but
not defined herein (including above in the recital clauses of this Amendment)
shall have their respective meanings as

<PAGE>

set forth in the 5B Credit Agreement. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Amendment shall refer
to this Amendment as a whole and not to any particular provision of this
Amendment. All terms defined in the Uniform Commercial Code and not otherwise
defined herein have the meanings assigned to them in the Uniform Commercial
Code. References to Articles, Sections, subsections, Exhibits, Schedules and the
like, are to Articles, Sections and subsections of, or Exhibits or Schedules
attached to, this Amendment unless otherwise expressly provided. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". Unless the context in which used herein otherwise
clearly requires, "or" has the inclusive meaning represented by the phrase
"and/or".

         2. Limited Consent and Waivers.

            (a) The Borrower has requested that the Parent be permitted to form
a new subsidiary, the Buyer, for the purpose of acquiring substantially all of
the assets of KSG and consummating, or causing the consummation of, the KSG
Transactions and that the Buyer and the Parent be permitted to consummate the
KSG Transactions. Subject to the conditions set forth in Section 5 of this
Agreement, but notwithstanding the provisions of Sections IV(b)(i), (ii), (iv)
and IV(b)(ix) of the Existing 5B Credit Agreement, the Bank hereby consents to
the organization of the Buyer by the Parent and to the consummation by the Buyer
and the Parent of the KSG Transactions in accordance with the terms and
conditions of the Asset Purchase Documents and this Amendment.

            (b) The Borrower has informed the Bank that an Event of Default has
occurred under Section IV(c)(i) of the Credit Agreement by virtue of the
incurrence by the Parent of Indebtedness to Robert Klein in the aggregate amount
of $875,000 (the "Klein Indebtedness") pursuant to the Settlement Agreement
dated July 13, 2001 among the Parent, DPSNY Capital Corp. and Robert Klein (the
"Settlement Agreement"), a true and correct copy of which has been delivered to
the Bank, and the Borrower has requested that the Bank waive such Event of
Default. Subject to the conditions set forth in Section 5, the Bank hereby
waives the Event of Default under Section IV(c)(i) of the Credit Agreement due
to the incurrence by the Parent of the Klein Indebtedness pursuant to terms and
conditions of the Settlement Agreement.

            (c) The Borrower has also informed the Bank that an Event of Default
has occurred under Section IV(a)(viii) of the Credit Agreement by virtue of the
Parent's and the Parent's consolidated subsidiaries' failure to maintain a
Tangible Net Worth at the levels required by Section IV(a)(viii) of the Credit
Agreement as at June 30, 2001 and for the period from that date to the date of
this Amendment (such period, the "TNW Default Period"), and that such Tangible
New Worth for the TNW Default Period was not less than $1,279,826. Subject to
the conditions set forth in Section 5, and provided that the Tangible Net Worth
of the Parent and the Parent's consolidated subsidiaries during the TNW Default
Period was not less than $1,279,826, the Bank hereby waives the Event of Default
under Section IV(a)(viii) of the Credit Agreement due to the failure by the
Parent's and the Parent's consolidated subsidiaries' failure to maintain a
Tangible Net Worth at the levels required by Section IV(a)(viii) of the Credit
Agreement during the TNW Default Period.

            (d) The foregoing consent and waivers are limited to the items
expressly set forth in Sections 2(a), (b) and (c) above. The Borrower, the Buyer
and the Guarantors each acknowledges and agrees that nothing herein or otherwise
shall be deemed or considered to be a waiver of any other term or provision of
the 5B Credit Agreement or any other Loan Document. In addition, except as
expressly set forth herein, nothing in this Amendment or otherwise shall be
deemed or considered to be a waiver of, and is without prejudice to, any right
or remedy of the Bank under the 5B Credit Agreement,



                                       2
<PAGE>

any other Loan Document, applicable law, or otherwise, all of which are hereby
expressly reserved by the Bank.

       3. Amendments.

         (a) The Borrower has requested that the Bank agree to amend certain
provisions of the Existing 5B Credit Agreement relating to the use by the
Borrower from and after the date hereof of the Acquisition Loan Facility and
the Bank is willing to agree to such requested amendments. Accordingly, subject
to the conditions set forth in Section 5 of this Agreement, Section I(b) of the
Existing 5B Credit Agreement is hereby amended in its entirety to read as
follows:


     " (b) Acquisition Loans. During the term of this Agreement, the Bank
     hereby agrees, subject to the terms and conditions set forth herein, to
     make loans to the Borrower ("Acquisition Loans" and together with the
     Revolving Loans, the "Loans") on a revolving basis (the "Acquisition Loan
     Facility" and together with the Revolving Loan Facility, each a "Facility"
     and together the "Facilities") which will not, in the aggregate at any one
     time outstanding exceed the lesser of: (i) ONE MILLION FIVE HUNDRED
     THOUSAND DOLLARS ($1,500,000) (the "Acquisition Loan Commitment"); or (ii)
     one hundred ten percent (110%) of the total Cash and Cash Equivalents (as
     hereinafter defined) and accounts receivable of the Borrower less the sum
     of: (A) the aggregate amount of all outstanding Revolving Loans and (B)
     the aggregate face amount of the outstanding Letters of Credit issued by
     the Bank hereunder (as so calculated, the "Acquisition Borrowing Base").
     The Borrower may not borrow an Acquisition Loan, and the Bank shall not be
     required to make any Acquisition Loan to the Borrower, unless the proposed
     acquisition shall be acceptable to the Bank in its sole discretion, and
     the Borrower shall have also complied with Section I.(d) hereof and all
     conditions to the making of such Acquisition Loan shall have been
     fulfilled, in each case to the satisfaction of the Bank in its sole
     discretion. Subject to the foregoing, including, without limitation, the
     Borrower's compliance with Section I.(d) hereof, the proceeds of the
     Acquisition Loans shall be used to finance future acquisitions by the
     Borrower."

         (b) The term "Registration Rights Agreement" as set forth in the
Existing 5B Credit Agreement, from and after the effectiveness of this
Amendment, shall mean the Amended and Restated Registration Rights Agreement
dated the date hereof between the Parent and the Bank, as the same may be
amended, modified, supplemented from time to time after the date hereof.

         4. Release of the Buyer and Certain Liens. The Borrower, the Buyer and
the Parent have proposed that the Bank release its Liens on the Transferred
Assets granted by KSG in favor of the Bank pursuant to the KSG Facility and
that the Bank release the Buyer from any liability or obligation thereunder.
Subject to the conditions set forth in Section 5 of this Amendment, and in
consideration for the issuance to the Bank by the Parent from the Parent's
authorized but unissued shares of capital stock, of the shares (the "Common
Shares") of the Parent's common stock, $.04 par value per share (the "Common
Shares"), and the shares of Parent's preferred stock, $.01 par value per share
(the "Preferred Shares"), set forth on Exhibit A hereto (the Common Shares and
the Preferred Shares are hereinafter collectively referred to as the "Shares"),
free and clear of all Liens and in compliance with all applicable laws, rules
and regulations, including without limitation, federal securities laws and
state securities and "blue sky" laws, the Bank agrees to execute and deliver
the Limited Release of Indebtedness and Liens in substantially the form of
Exhibit B hereto (the "Release Agreement"); provided, that the Release
Agreement shall not be considered to be a release or waiver of, and shall not
affect in any manner whatsoever, (a) the Liens of the Bank on the Transferred
Assets and all other assets of the Buyer granted



                                       3
<PAGE>

by the Buyer pursuant to its Security Agreement dated the date hereof in favor
of the Bank, which Liens shall remain in full force and effect and which
Security Agreement shall remain in full force and effect in accordance with its
terms and provisions; or (b) any other liabilities or obligations of the Buyer
to the Bank, including, without limitation, all liabilities and obligations of
the Guarantee of the Buyer dated the date hereof in favor of the Bank, which
shall remain in full force and effect in accordance with its terms provisions.

       5. Representations and Warranties. In order to induce the Bank to
enter into this Amendment, each of the Borrower, the Buyer and the Guarantors
hereby certifies to the Bank that:

         (a) The recital clauses set forth in this Amendment are true, complete
and correct in all respects;

         (b) After giving effect to the limited consent and waiver set forth in
Section 2 and the amendment set forth in Section 3, (i) all representations and
warranties contained in the 5B Credit Agreement and the other Loan Documents
are true and correct in all respects on the date hereof and (ii) no Event of
Default, or event that with notice, or lapse of time, or both, would constitute
an Event of Default, has occurred;

         (c) The execution, delivery and performance by each of the Borrower,
the Buyer and the Guarantors of this Amendment and the other Loan Documents to
which it is respectively a party (whether in connection with the Existing 5B
Credit Agreement or this Amendment), and the borrowings by the Borrower from
time to time under the 5B Credit Agreement have been duly authorized by all
necessary corporate action and do not and will not (i) require any consent or
approval of the Borrower's, the Buyer's or any Guarantor's stockholders; (ii)
require any authorization, consent or approval by, or registration, declaration
or filing with, or notice to, any governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or any third party,
except such authorization, consent, approval, registration, declaration, filing
or notice as has been obtained, accomplished or given prior to the date hereof;
(iii) violate any provision of any law, rule or regulation (including, without
limitation, Regulation X of the Board of Governors of the Federal Reserve
System) or of any order, writ, injunction or decree presently in effect having
applicability to the Borrower, the Buyer or any Guarantor or of the Borrower's,
the Buyer's, or any Guarantor's certificate of incorporation or bylaws; (iv)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which the
Borrower, the Buyer, or any Guarantor is a party or by which any of their
respective properties may be bound or affected; or (v) result in, or require,
the creation or imposition of any Lien of any kind or nature whatsoever (other
than Liens in favor of the Bank) upon or with respect to any of the properties
now owned or hereafter acquired by the Borrower, the Buyer, or any Guarantor;

(d) The authorized capital stock of Parent consists of 22,500,000
shares consisting of 17,500,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock; and as of the date hereof, 2,198,565 shares of Common Stock are
issued and outstanding, 1,012,500 shares of Common Stock are reserved for
issuance pursuant to options granted or to be granted under Parent's stock
option plans, 24,500 shares of Common Stock are held in treasury, 893,333 shares
are reserved for issuance pursuant outstanding warrants to purchase Common
Stock, 2,046,722 shares of Common Stock are reserved for issuance pursuant to
outstanding shares of convertible Preferred Stock (of which 3,500 are designated
as Series A 6% Convertible Preferred Stock, all of which were converted into
3,500 shares of Series B 6% Convertible Preferred Stock (all of which are issued
and outstanding)), and there are no other shares of capital stock of Parent
authorized (other than the Shares and the 150,000 shares of Common Stock being
issued pursuant to the Asset Purchase Agreement), issued or outstanding;



                                       4
<PAGE>

         (e) The offer, sale and issuance of the Shares are exempt from
registration under the Securities Act of 1933, as amended, and under all state
securities or "blue sky" laws;

         (f) There are no statutory preemptive rights of any holders of any
security of the Parent or similar contractual rights (including, without
limitation, under the certificate of incorporation and by-laws of the Parent)
that will entitle the holders thereof to subscribe for or purchase any security
as a result of the issuance of the Shares; and

         (g) This Amendment constitutes and, upon the due execution by the
Borrower, the Buyer and each Guarantor, will constitute, together with the
other Loan Documents, the legal, valid and binding obligations of the Borrower
and each Guarantor, enforceable against the Borrower and each Guarantor in
accordance with their respective terms.

       6. Conditions Precedent.

         (a) The effectiveness of this Amendment is subject, among other
things, to the receipt by the Bank of each of the following, each in form and
substance satisfactory to the Bank:

          (i) this Amendment, properly executed by the Borrower and accepted
     and agreed to by the Buyer and each of the Guarantors;

          (ii) a Guaranty, properly executed by the Buyer, as Guarantor (and,
     for purposes of clarification, the Borrower, the Buyer and each Guarantor
     hereby confirm that such Guarantee shall be considered a "Loan Document"
     under (and as defined in) the 5B Credit Agreement and that the Buyer shall
     be considered to be a "Guarantor" under (and as defined in) the 5B Credit
     Agreement);

          (iii) a Security Agreement, properly executed by the Buyer (and, for
     purposes of clarification, the Borrower, the Buyer and each Guarantor
     hereby confirm that such Security Agreement shall be considered a "Loan
     Document" under (and as defined in) the 5B Credit Agreement);

          (iv) a Certificate of the Secretary or Assistant Secretary of the
     Buyer, certifying as to (A) the certificate of incorporation of the Buyer,
     certified by the Secretary of State of its state of incorporation, (B) the
     by-laws of the Buyer, (C) all corporate and stockholder action taken by
     the Buyer to authorize the execution, delivery and performance of this
     Amendment and the transactions contemplated hereby and thereby, (D) good
     standing certificates as of a recent date with respect to the Buyer from
     its state of incorporation and from each other state in which the Buyer is
     qualified to do business, and (E) incumbency certificate (with specimen
     signatures) with respect to the Buyer;

          (v) true, complete and correct copies of the Asset Purchase
     Agreement, together with all exhibits and schedules attached thereto, the
     Related Agreements (as defined in the Asset Purchase Agreement) and all
     other agreements, documents and instruments relating to any of the
     foregoing (including without limitation, a copy of the amendment to the
     certificate of incorporation of the Parent setting forth the designation
     of the Preferred Shares, as certified by the Secretary of State of the
     State of Delaware) (collectively, the "Asset Purchase Documents"), in each
     case, as certified by an authorized officer of the Borrower;



                                       5
<PAGE>

          (vi) intentionally omitted;

          (vii) authorizations to file UCC termination statements and other
     release documents from each and every secured creditor of the Buyer;

          (viii) evidence satisfactory to the Bank that the KSG Transactions
     have been consummated in accordance with the Asset Purchase Documents and
     all conditions thereto shall have been satisfied or the fulfillment of any
     such condition shall have been waived with the consent of the Bank;

          (ix) evidence satisfactory to the Bank that it has a first priority
     Lien on all of the Transferred Assets;

          (x) copies of the Buyer's property and casualty insurance policies
     and general liability policies, in each case, in amounts and from
     insurance companies satisfactory to the Bank in its sole discretion, and
     in each case naming the Bank as loss payee and additional insured
     (including the Bank's form of loss payee endorsement signed by the issuer
     of the policy), all in form and substance satisfactory to the Bank;

          (xi) the Shares;

          (xii) a Registration Rights Agreement duly executed and delivered by
     the Parent relating to the Shares (and, for purposes of clarification, the
     Borrower, the Buyer and each Guarantor hereby confirm that such
     Registration Rights Agreement shall be considered a "Loan Document" under
     (and as defined in) the 5B Credit Agreement);

          (xiii) an Acknowledgement and Consent signed by each of the
     guarantors under the KSG Facility, pursuant to which, among other things,
     each of such guarantors acknowledge and confirm their continuing
     liabilities and obligations to the Bank in respect of the liabilities and
     obligations of KSG to the Bank under the KSG Facility, substantially in
     the form of Exhibit C hereto; and

          (xiv) a general release of the Bank by KSG, the Buyer, the Borrower,
     the Guarantors and all other loan parties under the KSG Loan Facility
     substantially in the form of Exhibit D hereto.

         (b) The effectiveness of this Amendment is subject, among other
things, to the satisfaction of the Bank, in its sole discretion, of the
following additional conditions precedent:

          (i) the Bank shall have completed it legal and other due diligence of
     KAS, the Buyer, the Asset Purchase Documents, the KSG Transactions and the
     transactions contemplated by this Amendment, and the Bank shall not have
     discovered any, fact, event or condition which in the Bank's sole judgment
     makes it inadvisable for it to consummate the transactions contemplated by
     this Amendment;

          (ii) all statements, documents and other information, whether oral or
     written, furnished by or on behalf of the Borrower, the Buyer, KSG, the
     Guarantors and their respective affiliates to the Bank, its agents and
     representatives, with regard to their respective businesses, operations,
     condition and character and the transactions



                                       6
<PAGE>

     contemplated by this Amendment shall have been true, complete and correct
     in all respects, shall include all facts with regard to such businesses,
     operations, condition, character and transactions, and shall not contain
     any untrue statement of any fact or omit any fact necessary to make the
     statements therein not misleading; and

          (iii) no default or Event of Default shall have occurred and is
     continuing under any of the Loan Documents.

       7. Acknowledgments Regarding 5B Credit Agreement.

         (a) The 5B Credit Agreement and the other Loan Documents, as
supplemented, modified and amended by this Amendment, shall remain in full
force and effect and are hereby ratified, confirmed and approved. From and
after the effectiveness hereof, all references to the 5B Credit Agreement
therein and in the other Loan Documents shall mean the 5B Credit Agreement as
amended and modified by this Amendment.

         (b) The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of the Bank under the 5B
Credit Agreement or any other Loan Document nor constitute a waiver of any
provision of the 5B Credit Agreement or any other Loan Documents, except as
specifically set forth herein. Upon the effectiveness of this Amendment, each
reference in the Existing 5B Credit Agreement to "the Agreement", "hereunder",
"hereof", "herein" or words of similar import shall mean and be a reference to
the 5B Credit Agreement.

         (c) The Borrower hereby acknowledges and agrees that the Obligations
(i) shall remain and continue in full force and effect, both before and after
giving effect to this Amendment, (ii) are not subject to any defense,
counterclaim, setoff, right of recoupment, abatement, reduction or other claim
or determination, and (iii) are and shall continue to be governed by the terms
of the Existing 5B Credit Agreement and the other Loan Documents, as
supplemented, modified and amended by this Amendment.

      8. Governing Law; Jurisdiction, Venue; Waiver of Jury Trial. This
Amendment, the 5B Credit Agreement and the other Loan Documents shall be
governed by and construed and enforced in accordance with the laws of the State
of New York, without regard to principles of conflicts of law (other than
Section 5-1401 of the New York General Obligations Law). Each party hereto
hereby (i) consents to the personal jurisdiction of the state and federal
courts located in the State of New York in connection with any controversy
related to this Amendment, the 5B Credit Agreement or the other Loan Documents;
(ii) waives any argument that venue in any such forum is not convenient, (iii)
agrees that any litigation initiated in connection with this Amendment, the 5B
Credit Agreement or the other Loan Documents shall be venued in the Supreme
Court for the County of New York, or the United States District Court for the
Southern District of New York; and (iv) agrees that a final judgment in any
such suit, action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. THE BORROWER EXPRESSLY RATIFIES AND CONFIRMS THE WAIVER OF JURY TRIAL AND
OTHER PROVISIONS OF SECTION IV(I) OF THE 5B CREDIT AGREEMENT. EACH GUARANTOR
EXPRESSLY RATIFIES AND CONFIRMS THE WAIVER OF JURY TRIAL AND OTHER PROVISIONS
OF SECTION 15(F) OF EACH GUARANTOR'S RESPECTIVE GUARANTOR SECURITY AGREEMENT.


       9. Execution in Counterparts; Facsimile; Effective Date. This
Amendment may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same



                                       7
<PAGE>

instrument. Any signature delivered by a party by facsimile transmission shall
be deemed to be an original signature hereto. This Amendment shall become
effective as of the date above upon receipt by the Agent of two (2) copies of
this Amendment executed by the Borrower.

         10. Assignability. This Amendment shall be binding upon and inure to
the benefit of the Borrower, the Guarantors, the Bank, and their respective
successors and permitted assigns.

         11. Severability of Provisions. Any provision of this Amendment which
is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.

         12. Headings. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.

         13. Joint and Several Obligations. All of the indebtedness,
liabilities and other obligations (whether of payment or performance, or
otherwise) of the Borrower, the buyer and the Guarantors under this Amendment,
the 5B Credit Agreement, the Notes and the other Loan Documents, including,
without limitation, the Obligations, shall be the joint and several obligations
of the Borrower and the Guarantors.

                   [Signatures appear on the following pages]


                                       8
<PAGE>



         IN WITNESS WHEREOF, the Borrower and the Bank have signed, and each of
the Buyer and the Guarantors have accepted and agreed to, this Amendment on the
date first above written.

                                   5B TECHNOLOGIES GROUP INC.

                                   By: /s/ Glenn Nortman
                                   -------------------------------------
                                   Name:  Glenn Nortman
                                   Title: Chief Executive Officer

                                   CONNECTICUT BANK OF COMMERCE

                                   By: /s/ Richard Assaf
                                   -------------------------------------
                                   Name:  Richard Assaf
                                   Title: Vice President


ACCEPTED AND AGREED:

GUARANTORS:

5B TECHNOLOGIES CORPORATION.

By: /s/ Glenn Nortman
-------------------------------------
Name:  Glenn Nortman
Title: Chief Executive Officer

PARAMOUNT OPERATIONS, INC.

By: /s/ Glenn Nortman
-------------------------------------
Name:  Glenn Nortman
Title: Chief Executive Officer

DPSNY CAPITAL CORP.

By: /s/ Glenn Nortman
-------------------------------------
Name:  Glenn Nortman
Title: Chief Executive Officer




                                       9
<PAGE>

COMPTECH ACQUISITION CORPORATION

By: /s/ Glenn Nortman
-------------------------------------
Name:  Glenn Nortman
Title: Chief Executive Officer

5B OPERATIONS, INC.

By: /s/ Glenn Nortman
-------------------------------------
Name:  Glenn Nortman
Title: Chief Executive Officer

5B WEB VENTURES INC.

By: /s/ Glenn Nortman
-------------------------------------
Name:  Glenn Nortman
Title: Chief Executive Officer

ABBEY, GARRETT & SETH, LTD.

By: /s/ Glenn Nortman
-------------------------------------
Name:  Glenn Nortman
Title: Chief Executive Officer

KNOWLEDGE ACQUISITION CORPORATION

By: /s/ Glenn Nortman
-------------------------------------
Name:  Glenn Nortman
Title: Chief Executive Officer




                                      10
<PAGE>


                                   EXHIBIT A

             SHARES OF CAPITAL STOCK OF 5B TECHNOLOGIES CORPORATION
                  TO BE ISSUED TO CONNECTICUT BANK OF COMMERCE

1.   The number of shares of the Common Stock, $.04 par value per share (the
     "Common Stock"), of 5B Technologies Corporation (the "Issuer") determined
     by dividing 100,000 by the average of the per share closing prices of
     Common Stock on The Nasdaq SmallCap Market for the three (3) trading days
     prior to the Closing under the Asset Purchase Agreement dated July 30,
     2001, as amended to date, among the Issuer, Knowledge Acquisition
     Corporation, Knowledge Strategies Group, Inc., Cynthia Hollen, Douglas
     Carlson and Michael Thompson.

2.   4,000 shares of the Series C 6% Convertible Preferred Stock of the Issuer.

3.   5,000 shares of the Series D 6% Convertible Preferred Stock of the Issuer.

4.   10,000 shares of the Series E 6% Convertible Preferred Stock of the
     Issuer.




                                      11


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.22
<SEQUENCE>7
<FILENAME>file006.txt
<DESCRIPTION>SECURITY AGREEMENT
<TEXT>
<PAGE>

CONNECTICUT BANK OF COMMERCE
--------------------------------------------------------------------------------

                               SECURITY AGREEMENT

                                     BETWEEN

                  KNOWLEDGE ACQUISITION CORPORATION, as Pledgor

                                       AND

                 CONNECTICUT BANK OF COMMERCE, as Secured Party

     This Security Agreement (this "Agreement") made this 16th day of August
2001 by and between Knowledge Acquisition Corporation, a corporation organized
under the laws of New York, with its principal place of business at 100
Sunnyside Blvd., Woodbury, New York 11797 (hereinafter the "Pledgor")
(telecopier no. (516) 677-6111) and CONNECTICUT BANK OF COMMERCE, a commercial
bank organized under the laws of the State of Connecticut, with an office
located at 90 Broad Street, New York, New York 10004 (hereinafter the "Bank")
(telecopier no.(212) 859-5771).

     1. Security Interest

         As security for the payment and performance of all indebtedness,
liabilities, agreements and obligations of 5B Technologies Group, Inc. (the
"Borrower") to the Bank, of Pledgor to the Bank, and of each other Guarantor (as
defined in the Credit Agreement dated the date hereof by and between Borrower
and the Bank as it may hereafter be amended, modified, supplemented or renewed
from time to time (the "Credit Agreement")) to the Bank, in each case now
existing or hereafter incurred, direct or contingent, due or to become due, of
every kind and description, including, but not limited to, any advances made by
the Bank and all indebtedness, liabilities, agreements and obligations of
Borrower to the Bank under the Credit Agreement (all such indebtedness,
liabilities, agreements and obligations, are hereinafter collectively called the
"Obligations"), Pledgor hereby pledges to the Bank and grants the Bank a present
lien and security interest in (a) all of Pledgor's personal property and
fixtures, whether now or hereafter existing or now owned or hereafter acquired
and wherever located, of every kind and description, tangible and intangible,
including, without limitation, the balance of every lockbox, blocked or other
deposit account now or hereafter existing of Pledgor, whether maintained with
the Bank or not, any other claim of Pledgor against the Bank, now or hereafter
existing, and all goods, equipment, furniture, inventory, accounts, contract
rights, chattel paper, notes receivable, investment property, financial assets
and all other stocks, bonds, mutual fund shares, money market shares and U.S.
Governmental securities, all letter-of-credit rights and letters of credit, all
instruments and documents, including, without limitation, documents of title,
warehouse receipts and all other shipping documents and instruments of any kind
whatsoever whether relating to goods in transit or otherwise, all rights to
payment evidenced by chattel paper or instruments, all general intangibles,
payment intangibles, credits, claims, demands and any other obligations of any
kind, whether now or hereafter arising, of or owing to Pledgor, and the balance
of every lockbox, blocked or other deposit account now or hereafter existing of
Pledgor with any agent for the Bank, correspondent bank of the Bank or other
unaffiliated bank, and any and all additions and accessions thereto, all
substitutions and replacements therefor and all products and proceeds thereof
and proceeds of insurance thereon, (b) all choses in action, any rights arising
under any judgment, statute or rule, all corporate and business records,
customer lists, credit files, computer program printouts, and other computer
materials and records, all inventories, trademarks, trade styles, designs,
patents, copyrights, licenses, license agreements, and any applications for
patents and/or trademarks,

<PAGE>

including, without limitation, in connection with such trademarks, trade styles,
designs, patents, copyrights, licenses, licenses agreements, and any
applications for patents and/or trademarks, any and all reissues, divisions,
continuations, reexaminations, renewals and extensions thereof (whether in whole
or in part), any and all rights corresponding thereto throughout the world, and
the good will of the business to which each relates, and any and all accounts,
contract rights, warranties, litigation claims and rights and other general
intangibles related to any of the foregoing, in each case whether now existing
or hereafter acquired or created, whether owned, leased, licensed, beneficially
or of record, and whether owned, leased or licensed individually, jointly or
otherwise, and all payments and other distributions with respect thereto and any
renewals, continuations, modifications and extensions of any and all of the
foregoing, (c) upon request by the Bank, all commercial tort claims it may have
against any Person (insofar as any earlier grant thereof under this Agreement
was not effective under applicable law) and (d) any and all additions and
accessions to the foregoing, all substitutions and replacements therefor and all
products and proceeds thereof and proceeds of insurance thereon (all of the
property listed in (a), (b), (c) and (d) is hereinafter collectively referred to
as the "Collateral").

         The term "accounts" shall mean, without limiting the generality of the
foregoing, any right to payment of a monetary obligation, whether or not earned
by performance, and whether in the form of accounts receivable, notes, drafts,
acceptances or other forms of obligations and receivables now or hereafter
received by or belonging to Pledgor for (a) inventory sold or leased by it, (b)
advances or loans made by it to customers or (c) any other purpose described in
the Uniform Commercial Code, together with all proceeds thereof, whether cash
proceeds or otherwise, including, without limitation, all right, title and
interest of the Pledgor in the inventory which gave rise to any such accounts,
including without limitation, the right to stoppage in transit and all returned,
rejected, rerouted or repossessed inventory. The term "inventory" shall include,
without limiting the generality of the foregoing, raw materials, goods or work
in process, materials used or consumed in a business, finished products, goods
that are leased, goods that are held for sale or lease, goods that are furnished
or to be furnished under a contract of service, returns and all supplies, goods,
incidentals, packaging materials and all other items which contribute to the
finished product or to the promotion or sale thereof and all additions thereto,
substitutions therefor and the proceeds and products thereof. All terms defined
in the Uniform Commercial Code and not otherwise defined herein have the
meanings assigned to them in the Uniform Commercial Code.

     2. Pledgor's Title; Liens and Encumbrances.

         Pledgor represents and warrants that Pledgor is, or to the extent that
this Security Agreement states that the Collateral is to be acquired after the
date hereof, will be, the owner of the Collateral, having good and marketable
title thereto, free from any and all liens, security interest, encumbrances and
claims. Pledgor will not create or assume or permit to exist any such lien,
security interest, encumbrance or claim on or against the Collateral except as
created by this Security Agreement, and will promptly notify the Bank of any
such other claim, lien, security interest or other encumbrance made or asserted
against the Collateral and will defend the Collateral against any such claim,
lien, security interest or other encumbrance.

     3. Representations and Warranties; Location of Collateral and Records;
        Business and Trade Names of Pledgor.

         (a) Pledgor represents and warrants that it has no place of business,
offices where Pledgor's books of account and records are kept, or places where
the Collateral is used, stored or located, except as set forth on Schedule I
annexed hereto. Pledgor further covenants that it will not use, store or

                                       2
<PAGE>

locate any of the Collateral (except for Collateral delivered to the Bank),
including, without limitation, all books and records relating to the Collateral,
at any location other than the places set forth on Exhibit I.

         (b) Pledgor represents and warrants that it currently uses no business
or trade names, except as set forth on Schedule I annexed hereto, and covenants
that Pledgor will promptly notify the Bank, in sufficient detail, of any changes
in, additions to, or deletions from the business or trade names used by Pledgor.
Pledgor covenants that it shall not change its legal name without prior written
notice to the Bank.

         (c) Pledgor represents and warrants that it has complied and is in
compliance with the provisions of the Fair Labor Standards Act (the "Act"),
including, without limitation, the minimum wage and overtime rules of that Act,
and covenants that Pledgor will continue to comply with the provisions of such
Act.

         (d) Schedule I annexed hereto accurately lists the federal employer
I.D. number of Pledgor.

     4. Perfection of Security Interest.

         Pledgor will join with the Bank in executing such mortgages,
assignments, pledges, notices and financing statements pursuant to the Uniform
Commercial Code and all applicable law in form satisfactory to the Bank as the
Bank shall request and will pay all filing or recording costs with respect
thereto, and all costs of filing or recording this Security Agreement or any
other instrument, agreement or document executed and delivered pursuant hereto
or to the Agreement (including the cost of all federal, state or local mortgage,
documentary, stamp or other taxes), in each case, in all public offices where
filing or recording is deemed by the Bank to be necessary or desirable. Pledgor
hereby authorizes the Bank to take all action (including, without limitation,
the filing of any Uniform Commercial Code Financing Statements or amendments
thereto and the filing of all such mortgages, assignments, pledges, notices and
other documents, all without the signature of Pledgor) which the Bank may deem
necessary or desirable to perfect or otherwise protect the liens and security
interests created hereunder and to obtain the benefits of this Security
Agreement. Any Uniform Commercial Code Financing Statements or amendments
thereto may be filed by the Bank with or without the signature of the Pledgor or
the Bank, or the further authorization of the Pledgor, to the extent otherwise
permitted by applicable law. In the Bank's discretion, the Collateral may be
described therein as "all assets" or "all personal property" (or words of like
intent).

     5. General Covenants.

         Pledgor shall:

         (a) furnish the Bank from time to time at the Bank's request written
statements and schedules further identifying and describing the Collateral in
such detail as the Bank may reasonably require;

         (b) advise the Bank promptly, in sufficient detail, of any change in
the Collateral, and of the occurrence of any event which would have an adverse
effect on the value of the Collateral or on the Bank's security interest
therein;

                                       3
<PAGE>

         (c) comply with all acts, rules, regulations and orders of any
legislative, administrative or judicial body or official applicable to the
Collateral or any part thereof or to the operation of Pledgor's business;

         (d) perform and observe all covenants, restrictions and conditions
contained in the Agreement providing for payment of taxes, maintenance of
insurance and otherwise relating to the Collateral, as though such covenants,
restrictions and conditions were fully set forth in this Security Agreement;

         (e) promptly notify the Bank of all disputes with account debtors
involving amounts in excess of $50,000.00; and

         (f) promptly execute and deliver to the Bank such further deeds,
mortgages, assignments, security agreements or other instruments, documents,
certificates and assurances and take such further action as the Bank may from
time to time in its sole discretion deem necessary to perfect, protect or
enforce its security interest in the collateral or otherwise to effectuate the
intent of this Security Agreement, the Credit Agreement and the other Loan
Documents (as such term is defined in the Credit Agreement).

     6. Assignment of Insurance.

         Prior to the making of any loan or advance under the Credit Agreement,
Pledgor shall deliver to the Bank lender loss payable endorsements of any and
all policies of insurance owned by Pledgor covering or in any manner relating to
the Collateral, in form and substance satisfactory to the Bank, indicating that
the policy will not be terminated, or reduced in coverage or amount, without at
least thirty (30) days' prior written notice from the insurer to the Bank. As
further security for the due payment and performance of the Obligations, Pledgor
hereby assigns to the Bank all sums, including returned or unearned premiums,
which may become payable under or in respect of any policy of insurance owned by
Pledgor covering or in any manner relating to the Collateral, and Pledgor hereby
directs each insurance company issuing any such policy to make payment of sums
directly to the Bank. Pledgor hereby appoints the Bank as Pledgor's
attorney-in-fact and authorizes the Bank in Pledgor's or in the Bank's name to
endorse any check or draft representing any receipt and any other document
required by such insurance company as a condition to or otherwise in connection
with such payment, and to cancel, assign or surrender any such policies. All
such sums received by the Bank shall be applied by the Bank to satisfaction of
the Obligations or, to the extent that such sums represent unearned premiums in
respect of any policy of insurance on the Collateral refunded by reason of
cancellation, toward payment for similar insurance protecting the respective
interests of Pledgor and the Bank, or as otherwise required by applicable law
and to the extent not so applied shall be paid over to Pledgor.

     7. Fixtures.

         It is the intent of Pledgor and the Bank that none of the Collateral is
or shall be regarded as fixtures, as that term is used or defined in Article 9
of the Uniform Commercial Code, and Pledgor represents and warrants that it has
not made and is not bound by any lease or other agreement which is inconsistent
with such intent. Nevertheless, if the Collateral or any part thereof is or is
to become attached or affixed to any real estate, Pledgor will, upon request,
use reasonable efforts to furnish the Bank with a disclaimer or subordination in
form satisfactory to the Bank of their interests in the Collateral from all
persons having an interest in the real estate to which the Collateral is
attached or affixed, together with the names and addresses of the record owners
of, and all other persons having interest in, and a general description of, such
real estate.

                                       4
<PAGE>

     8. Collections.

         (a) Pledgor may collect all checks, drafts, cash or other remittances
in payment of any of its accounts, contract rights or general intangibles
constituting part of the Collateral, and all of the foregoing amounts so
collected shall be held in trust by the Pledgor for, and as the property of, the
Bank and shall not be commingled with other funds, money or property of Pledgor.
Pledgor will immediately upon receipt of all such checks, drafts, cash or other
remittances in payment of any of its accounts, contract rights or general
intangibles constituting part of the Collateral, deliver any such items to the
Bank accompanied by a remittance report in form supplied or approved by the
Bank, such items to be delivered to the Bank in the same form received, endorsed
or otherwise assigned by Pledgor where necessary to permit collection of such
items and, regardless of the form of such endorsement, Pledgor hereby waives
presentment, demand, notice of dishonor, protest, notice of protest and all
other notices with respect thereto. Without limiting the foregoing, the Bank may
(i) advise Pledgor's account debtors of the assignment of an account to the
Bank, (ii) contact Pledgor's account debtors to obtain verification of the
account and (iii) advise Pledgor's account debtors to make direct payment of all
checks, drafts, cash or other remittances in payment of Pledgor's accounts,
contract rights or general intangibles constituting part of the Collateral
directly to the Bank. For purposes of this Agreement, an "account debtor" shall
mean a person, firm or corporation indebted to Pledgor as the result of a
creation of an account receivable. For purposes of this Agreement, "accounts" or
"accounts receivable" shall include, without limitation, book debts, notes,
acceptances, drafts, contract rights, choses in action and chattel paper (as
such terms are defined in the Uniform Commercial Code of the State of New York).

         (b) Pledgor will promptly notify the Bank in writing of the return or
rejection of any goods represented by any accounts, contract rights or general
intangibles and Pledgor shall forthwith account therefor to the Bank in cash
without demand or notice and until such payment has been received by the Bank,
Pledgor will receive and hold all such goods separate and apart, in trust for
and subject to the security interest in favor of the Bank, and the Bank is
authorized to sell, for Pledgor's account and at the Pledgor's sole risk, all or
any part of such goods.

         (c) All of the foregoing remittances shall be applied and credited by
the Bank first to satisfaction of the Obligations or as otherwise required by
applicable law, and to the extent not so credited or applied, shall be paid over
to Pledgor.

     9. Rights and Remedies on Default.

         In the event of the occurrence of any Event of Default (as defined in
the Credit Agreement), the Bank shall at any time thereafter have the right,
with or without notice to Pledgor, as to any or all of the Collateral, by any
available judicial procedure or without judicial process, to take possession of
the Collateral and without liability for trespass to enter any premises where
the Collateral may be located for the purpose of taking possession of or
removing the Collateral, and, generally, to exercise any and all rights afforded
to a secured party under the Uniform Commercial Code of New York or other
applicable law. Without limiting the generality of the foregoing, Pledgor agrees
that the Bank shall have the right to sell, lease, or otherwise dispose of all
or any part of the Collateral, whether in its then condition or after further
preparation or processing, either at public or private sale or at any broker's
board, in lots or in bulk, for cash or for credit, with or without warranties or
representations, and upon such terms and conditions, all as the Bank in its sole
discretion may deem advisable, and it shall have the right to purchase the
Collateral at any such sale; and, if any Collateral shall require rebuilding,
repairing, maintenance, preparation, or is in process or other unfinished state,
the Bank shall have the right, at its option, to do such rebuilding, repairing,
preparation, processing or completion of manufacturing, for the

                                       5
<PAGE>

purpose of putting the Collateral in such saleable or disposable form as it
shall deem appropriate. At the Bank's request, Pledgor shall assemble the
Collateral and make it available to the Bank at places which the Bank shall
select, whether at Pledgor's premises or elsewhere, and make available to the
Bank, without rent, all of premises and facilities for the purpose of the Bank's
taking possession of, removing or putting the Collateral in saleable or
disposable form. The proceeds of any such sale, lease or other disposition of
the Collateral shall be applied first, to the expenses of retaking, holding,
storing, processing and preparing for sale, selling, and the like, and to the
reasonable attorneys' fees and legal expenses incurred by the Bank, and then to
satisfaction of the Obligations, and to the payment of any other amounts
required by applicable law, after which the Bank shall account to Pledgor for
any surplus proceeds. If, upon the sale, lease or other disposition of the
Collateral, the proceeds thereof are insufficient to pay all amounts to which
the Bank is legally entitled, Pledgor will be liable for the deficiency,
together with interest thereon, at the rate prescribed in the Note, together
with the reasonable fees of any attorneys employed by the Bank to collect such
deficiency. To the extent permitted by applicable law, Pledgor waives all
claims, damages and demands against the Bank arising out of the repossession,
removal, retention or sale of the Collateral.

     10. Costs and Expenses.

         Any and all fees, costs and expenses, of whatever kind or nature,
including the reasonable attorneys' fees and legal expenses incurred by the Bank
in connection with the filing or recording of financing statements and other
documents (including all taxes in connection therewith) in public offices, the
payment or discharge of any taxes, insurance premiums, encumbrances or otherwise
protecting, maintaining or preserving the Collateral, or the enforcing,
foreclosing, retaking, holding, storing, processing, selling or otherwise
realizing upon the Collateral and Bank's security interest therein, whether
through judicial proceedings or otherwise, or in defending or prosecuting any
actions or proceedings arising out of or related to the transaction to which
this Security Agreement relates, shall be borne and paid by Pledgor on demand by
the Bank and until so paid shall be added to the principal amount of the
Obligations and shall bear interest at the Post Default Rate prescribed in the
Credit Agreement.

     11. Power of Attorney.

         Pledgor authorizes the Bank and does hereby make, constitute and
appoint the Bank, and any officer or agent of the Bank, with full power of
substitution, as Pledgor's true and lawful attorney-in-fact, with power, in its
own name or in the name of Pledgor: (a) to endorse any notes, checks, drafts,
money orders, or other instruments of payment (including payments payable under
or in respect of any policy of insurance) in respect of the Collateral that may
come into possession of the Bank; (b) to sign and endorse any invoice, freight
or express bill, bill of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with account, and
other documents relating to the Collateral; (c) to pay or discharge any taxes,
liens, security interest or other encumbrances at any time levied or placed on
or threatened against the Collateral; (d) to demand, collect, receipt for,
compromise, settle and sue for monies due in respect of the Collateral; and (e)
generally, to do, at the Bank's option and at Pledgor's expense, at any time, or
from time to time, all acts and things which the Bank deems necessary to
protect, preserve and realize upon the Collateral and the Bank's security
interest therein and otherwise in order to effect the intent of this Security
Agreement, the Credit Agreement and all other Loan Documents, all as fully and
effectually as Pledgor might or could do; and Pledgor hereby ratifies all that
said attorney shall lawfully do or cause to be done by virtue hereof. This power
of attorney is coupled with an interest and shall be irrevocable for the term of
this Security Agreement and thereafter as long as any of the Obligations shall
be outstanding.

                                       6
<PAGE>

     12. Notices.

         All notices, requests and other communications pursuant to this
Security Agreement shall be in writing, either by letter (delivered by hand or
sent by certified or registered mail, return receipt requested), or other
equivalent national overnight courier, or telecopier addressed to the parties at
the addresses set forth at the beginning of this Security Agreement or to such
other address as the parties may, from time to time, furnish to each other in
writing, and in the case of the Pledgor, to the attention of President and, in
the case of the Bank, to the attention of Gary S. Kendler, Senior Vice
President, at the address of the Bank set forth at the beginning of this
Security Agreement, with a copy to William D. Freedman, Esq., Jenkens &
Gilchrist Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New
York, New York 10174 (fax no. (212) 704-6288). Any such notice, request or
communication shall be deemed to have been given on the day on which it is
telecopied to such party at the telecopier number specified in the beginning of
this Security Agreement or in this Section 12, or delivered by hand upon
delivery to such party at its address set forth in the beginning of this
Agreement or in this Section 12, or, if sent by mail, on the third business day
after the day deposited in the mail, postage prepaid, addressed as aforesaid, or
on the first business day after the day timely deposited with Federal Express
(or other equivalent national overnight courier) or United States Express Mail,
in each case with the cost of delivery prepaid, and addressed as aforesaid.

     13. Other Security.

         To the extent that the Obligations are now or hereafter secured by
property other than the Collateral or by the guarantee, endorsement or property
of any other person then the Bank shall have the right in its sole discretion to
pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Bank's rights and
remedies hereunder.

     14. Deposits.

         Any and all deposits or other sums at any time credited by or due from
the Bank to Pledgor, whether in regular or special depository accounts or
otherwise, shall at all times constitute additional collateral for the
Obligations, and may be set-off by the Bank against any Obligations at any time
whether or not they are then due and whether or not other collateral held by the
Bank is considered to be adequate.

     15. Miscellaneous.

         (a) Beyond the safe custody thereof, the Bank shall have no duty as to
the collection of any Collateral in its possession or control or in the
possession or control of any agent or nominee of the Bank, or any income thereon
or as to the preservation of rights against prior parties or any other rights
pertaining thereto.

         (b) No course of dealing between Pledgor and the Bank, nor any failure
to exercise, nor any delay in exercising, on the part of the Bank, any right,
power or privilege hereunder or under the Credit Agreement or the other Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.

         (c) All of the Bank's rights and remedies with respect to the
Collateral, whether established hereby or by the Credit Agreement and the other
Loan Documents, or by any other

                                       7
<PAGE>

agreements, instruments or documents or by law, shall be cumulative and may be
exercised singly or concurrently.

         (d) The provisions of this Security Agreement are severable, and if any
clause or provision shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision of this Security Agreement in any
jurisdiction.

         (e) This Security Agreement and the rights and obligations of the
parties hereunder shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York, without regard to principles of
conflicts of law (other than Section 5-1401 of the New York General Obligations
Law).

         (F) PLEDGOR HEREBY WAIVES ANY RIGHT TO JURY TRIAL. PLEDGOR IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK SITTING IN NEW
YORK COUNTY OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK FOR THE PURPOSE OF ANY SUIT, ACTION, OR OTHER PROCEEDING ARISING OUT OF
THIS AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, WHICH IS BROUGHT
BY OR AGAINST IT (I) IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT, (II)
TO THE EXTENT THAT IT HAS ACQUIRED, OR HEREAFTER MAY ACQUIRE, ANY IMMUNITY FROM
JURISDICTION OF ANY SUCH COURT OR FROM ANY LEGAL PROCESS THEREIN, IT HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, SUCH IMMUNITY AND (III) AGREES
NOT TO COMMENCE ANY ACTION, SUIT OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
TRANSACTION EXCEPT IN SUCH COURT. PLEDGOR HEREBY WAIVES, AND AGREES NOT TO
ASSERT IN ANY SUCH SUIT, ACTION OR PROCEEDING, IN EACH CASE, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (A) IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, (B) IT IS IMMUNE FROM ANY LEGAL
PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT
ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO IT OR
ITS PROPERTY (AND PLEDGOR FURTHER IRREVOCABLY AGREES THAT SERVICE OF PROCESS AND
ALL OTHER LEGAL PROCESS MAY BE DELIVERED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 12 ABOVE AND THAT SUCH SERVICE SHALL BE SUFFICIENT FOR ALL PURPOSES OF
APPLICABLE LAW), OR (C) JURISDICTION OR VENUE FOR ANY SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER OR THAT ANY SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM.

         (g) This Security Agreement is subject to modification only by a
writing signed by the parties.

         (h) The benefits and burdens of this Security Agreement shall inure to
the benefit of and be binding upon the respective successors and assigns of the
parties; provided, however, that the rights and obligations of Pledgor under
this Security Agreement shall not be assigned or delegated without the prior
written consent of the Bank, and any purported assignment or delegation without
such consent shall be void.

                                       8
<PAGE>

     16. Term of Security Agreement.

         The term of this Security Agreement shall commence on the date hereof
and this Security Agreement shall continue in full force and effect, and be
binding upon Pledgor, until all of the Obligations (other than the obligations
of 5B Technologies Corporation under the Warrant (as such term is defined in the
Credit Agreement), the Registration Rights Agreement (as such term is defined in
the Credit Agreement) and the Certificate of Designation of Series C 6%
Convertible Preferred Stock, Series D 6% Convertible Preferred Stock and Series
E Series Convertible Preferred Stock of 5B Technologies Corporation filed on the
date hereof with the Secretary of State of the State of Delaware) have been
fully paid and performed and such payment and performance has been acknowledged
in writing by the Bank, whereupon this Security Agreement shall terminate.

         IN WITNESS WHEREOF, the parties have caused this Security Agreement to
be executed by their duly authorized representatives on the day and year first
above written.

                                       KNOWLEDGE ACQUISITION CORPORATION

                                       By: /s/ Glenn Nortman
                                          ----------------------------------
                                       Print Name: Glenn Nortman
                                       Print Title: Chief Executive Officer


                                       CONNECTICUT BANK OF COMMERCE

                                       By: /s/ Richard Assaf
                                          ----------------------------------
                                       Print Name: Richard Assaf
                                       Print Title: Vice President




                                       9
<PAGE>

                                   SCHEDULE I

Pledgor's Chief Executive Office:

100 Sunnyside Blvd.
Woodbury, New York 11797

Pledgor's Other Places of Business; Other Locations of Collateral (where only an
immaterial amount of Collateral is located):

900 Broadway
New York, New York 10003

Location of Pledgor's Books and Records:

100 Sunnyside Blvd.
Woodbury, New York 11797

Pledgor's Business and/or Trade Names:

Knowledge Strategies Group

Federal Employer Identification No.:

Applied for



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.23
<SEQUENCE>8
<FILENAME>file007.txt
<DESCRIPTION>AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
<TEXT>
<PAGE>

               AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

                            DATED AS OF AUGUST , 2001

                                     BETWEEN

                           5B TECHNOLOGIES CORPORATION
         A CORPORATION ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE

                                       AND

                          CONNECTICUT BANK OF COMMERCE
     A COMMERCIAL BANK ORGANIZED UNDER THE LAWS OF THE STATE OF CONNECTICUT




<PAGE>




                                Table of Contents

                                                                         Page


Preamble..................................................................1
Recitals..................................................................1
Agreement.................................................................1
Section 1.  Required Registration.........................................1
Section 2.  Demand Registration Rights....................................2
Section 3.  Piggy-Back Registration Rights................................4
Section 4.  Registration on Form S-3......................................5
Section 5.  Registration Provisions.......................................6
Section 6.  Blackout Provisions..........................................11
Section 7.  Expenses.....................................................12
Section 8.  Indemnification..............................................13
Section 9.  Transfer Restrictions........................................16
Section 10.  Exempt Sales................................................17
Section 11.  Merger, Consolidation, Exchange, Etc........................17
Section 12.  Notices.....................................................18
Section 13.  No Waivers; Remedies........................................19
Section 14.  Amendments, Etc.............................................19
Section 15.  Successors and Assigns......................................19
Section 16.  Governing Law...............................................19
Section 17.  Counterparts; Effectiveness.................................19
Section 18.  Severability of Provisions..................................19
Section 19.  Headings and References.....................................20
Section 20.  Entire Agreement............................................20
Section 21.  Survival....................................................20
Section 22.  Exclusive Jurisdiction......................................20
Section 23.  Waiver of Jury Trial........................................20
Section 24.  Affiliate...................................................20
Section 25.  Non-Recourse................................................20


                                      -i-
<PAGE>

               AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

                                 August 16, 2001
                                 ---------------

     This Amended and Restated Registration Rights Agreement (as the same may be
amended, supplemented or modified from time to time in accordance with its
terms, this "AGREEMENT") is between 5B Technologies Corporation, a corporation
organized under the laws of the state of Delaware (together with its successors
and assigns, the "COMPANY"), and Connecticut Bank of Commerce, a commercial bank
organized under the laws of the state of Connecticut (together with its
successors and assigns, the "STOCKHOLDER").

                                    Recitals
                                    --------

     Concurrently with the execution and delivery of this Agreement, the Company
and the Stockholder are entering into a First Amendment dated as of the date
hereof (as the same may be amended, supplemented or modified from time to time
in accordance with its terms, the "AMENDMENT") to the Credit Agreement dated as
of May 24, 2001 (subject to the last sentence of Section 2(c) below, the "CREDIT
AGREEMENT") between the Company and the Stockholder.

     On May 24, 2001, the Company issued to the Stockholder a warrant (the
"WARRANT") to purchase 50,000 shares of the Company's common stock, par value
$.04 per share ("COMMON STOCK") and entered into a Registration Rights Agreement
(the "ORIGINAL AGREEMENT") with respect to the shares of Common Stock issuable
upon exercise of the Warrant.

     As contemplated by Section 4 of the Amendment, concurrently with the
execution and delivery of this Agreement, the Company is issuing to the
Stockholder (i) a number of shares (the "INITIAL SHARES") of Common Stock
determined in accordance with paragraph 1 of Exhibit A to the Amendment and (ii)
4,000 shares of the Company's Series C Preferred Stock, 5,000 shares of the
Company's Series D Preferred Stock and 10,000 shares of the Company's Series E
Preferred Stock, all of which preferred stock is convertible into Common Stock
(the Initial Shares and the shares of Common Stock that may be issued from time
to time upon exercise of the Warrant and upon conversion of such Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock are
collectively referred to as the "REGISTRABLE SHARES").

     The Company and the Stockholder desire to enter into this Agreement to
amend and restate the Original Agreement and to provide for, among other things,
the registration under the Securities Act of 1933 (the "SECURITIES ACT") of the
disposition of the Registrable Shares.

                                    Agreement
                                    ---------

     The parties agree as follows:

     SECTION 1. REQUIRED REGISTRATION.

     (a) Within, 120 Business Days (as defined in Section 5(l) below) after the
date hereof, the Company shall file a Registration Statement (as defined in
Section 5(m) below)

<PAGE>

registering the Initial Shares with the Securities and Exchange Commission
(together with any successor or replacement agency or branch of government, the
"SEC").

     (b) Subject to Sections 6 and 27 hereof, the Company shall use its best
efforts to cause the Registration Statement filed pursuant to Section 1(a) to be
declared effective with the SEC as soon as reasonably practicable after the date
of the initial filing thereof.

     SECTION 2. DEMAND REGISTRATION RIGHTS.

     (a) From and after 90 days after the date hereof (the "COMMENCEMENT DATE")
and to and including the date that is the later to occur of (x) the fifth
anniversary of the Commencement Date and (y) the date that all of the
Registering Stockholders (as defined below) could sell the Registrable Shares
owned by them pursuant to paragraph (k) of Rule 144 under the Securities Act,
subject in the case of the preceding clause (x) to extension pursuant to Section
2 (c) and Section 6 hereof (as so extended from time to time, the "TERMINATION
DATE"), on four occasions when the Company shall have received the written
request of the Stockholder or holders of Registrable Shares that have been
acquired directly or indirectly from the Stockholder and to which rights under
this Section 2 shall have been assigned pursuant to Section 16(a) (each such
person (including without limitation, the Stockholder), when requesting
registration under this Section 2 or under Section 3 or under Section 3 and
thereafter in connection with any such registration, being hereinafter referred
to as a "REGISTERING STOCKHOLDER"), the Company shall give written notice of the
receipt of such request to each potential Registering Stockholder. The Company
shall file a Registration Statement registering the Registrable Shares owned by
the Registering Stockholders (collectively, "TRANSACTION REGISTRABLE SHARES")
that in each case shall have been duly requested to be registered by such
Registering Stockholders by written notice received by the Company not later
than 10 Business Days after the Company shall have given written notice to the
Registering Stockholders pursuant to the prior sentence of this Section 2(a),
which Registration Statement shall be filed with the SEC within 35 Business Days
after the expiration of such 10 Business Day period.

     (b) Subject to Sections 6 and 27 hereof, the Company shall use its best
efforts to cause any Registration Statement filed pursuant to the last sentence
of Section 2(a) to be declared effective by the SEC as soon as reasonably
practicable after the date of the initial filing thereof.

     (c) Upon any renewal or extension of the Credit Agreement dated as of May
24, 2001 between the Company and the Stockholder, the Termination Date shall be
extended to and including the date that is the last day of such renewal or
extension (without regard to any early termination of the Credit Agreement). For
the purposes hereof, the "CREDIT AGREEMENT" shall include any amendment
(including, without limitation, any amendment and restatement thereof),
supplement or other modification thereof, including, without limitation any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring all or any portion of the indebtedness of the Company thereunder,
but only if the Stockholder continues to extend credit to the Company
thereunder.

     (d) If the Registering Stockholders initiating a request for registration
of Registrable Shares pursuant to Section 2(a) shall state in such written
notice that they intend to distribute the Transaction Registrable Shares covered
by their request by means of an underwritten offering,

                                      -2-
<PAGE>

the Company shall include such information in the written notice delivered by
the Company pursuant to Section 2(a). The Company shall select the managing
underwriter for the offering and any additional investment bankers and managers
to be used in connection with the offering, with the consent of the Registering
Stockholders holding a majority of the Transaction Registrable Shares, which
consent shall not be unreasonably withheld, conditioned or delayed.

     (e) Notwithstanding anything herein to the contrary:

         (i) the Company shall not be required to prepare and file pursuant to
     this Section 2 a Registration Statement including less than 200,000
     Transaction Registrable Shares in the aggregate;

         (ii) subject to the following clause (iii), the Company shall not be
     required to prepare and file pursuant to this Section 2 more than one
     Registration Statement in any 12-month period; provided, however, that a
     Registration Statement shall be deemed not (y) to have been prepared and
     filed if the same does not become effective for any reason other than the
     withdrawal therefrom (for any reason whatsoever) of 50% or more of the
     Transaction Registrable Shares requested to be included in such
     Registration Statement or the determination by Registering Stockholders
     owning 50% or more of such Transaction Registrable Shares not to proceed
     with the contemplated distribution of such Transaction Registrable Shares
     and (y) to count as one of the four registrations referred to in Section
     2(a) if such Registration Statement shall not, following effectiveness,
     remain effective for the period of time contemplated by the first sentence
     of Section 5(e);

         (iii) if a requested registration pursuant to this Section 2 shall
     involve an underwritten offering, and if the managing underwriter shall
     advise the Company and the Registering Stockholders in writing that, in its
     opinion, the number of Transaction Registrable Shares proposed to be
     included in the registration is so large as to adversely affect the
     offering, including the price at which the Transaction Registrable Shares
     could be sold, the Company shall include in the registration the maximum
     number of securities which it is so advised can be sold without the adverse
     effect, allocated as follows:

               (A) first, all Transaction Registrable Shares duly requested to
         be included in the registration, allocated pro rata among all
         Registering Stockholders on the basis of the relative number of
         Transaction Registrable Shares that each Registering Stockholder shall
         have duly requested to be included in the registration; and

               (B) second, any securities proposed to be registered by the
         Company for its own account; and

               (C) third, any other securities proposed to be registered by the
         Company (other than for its own account), including, without
         limitation, securities proposed to be registered by the Company
         pursuant to the exercise by any person other than a Registering
         Stockholder of a "piggy-back" right requesting the registration of
         shares of Common Stock in circumstances similar to those contemplated
         by Section 3;

                                      -3-
<PAGE>

     provided, however, that if 50% or more of the Transaction Registrable
     Shares requested to be included in a registration pursuant to this Section
     2 are so excluded from any registration and an investment banking firm of
     recognized national standing shall advise the Company that the number of
     the Transaction Registrable Shares requested to be registered, at the time
     of the request and in light of the market conditions then prevailing, did
     not exceed the number that would have an adverse effect on the offering of
     such Transaction Registrable Shares, including the price of which such
     Transaction Registrable Shares could be sold, the Company shall, with
     respect to any 12-month period referred to in the preceding Section
     2(e)(ii), provide the holders of such Transaction Registrable Shares with
     one additional registration in any such 12-month period under the preceding
     Section 2(e)(ii) in respect of each such exclusion; and

         (iv) the Company shall not be required to prepare and file pursuant to
     this Section 2(a) a Registration Statement for the underwritten public sale
     and distribution of securities of the Company during the period of time the
     Registering Stockholders have agreed not to effect any public sale or
     distribution pursuant to Section 6(d) below; and

         (v) the Company shall not be required to prepare and file a
     Registration Statement within 120 days after the effective date of a
     previous registration of securities of the Company under the Securities Act
     for the non-underwritten public sale and distribution of securities of the
     Company as to which either (x) the Registering Stockholders have exercised
     their rights under Section 2 or Section 4 of this Agreement or (y) the
     Registering Stockholders have been given a notice contemplated by Section
     3(a) below.

     SECTION 3. PIGGY-BACK REGISTRATION RIGHTS.

     (a) From and after the Commencement Date to and including the Termination
Date, if the Company shall determine to file a registration statement under the
Securities Act and under any applicable state securities laws for any offering
of any securities of the Company, other than an offering with respect to which a
Registering Stockholder shall have requested a registration pursuant to Section
1 or Section 2, then the Company shall give notice of such determination to each
potential Registering Stockholder. The Company shall, subject to the limitation
set forth in Section 3(c) below, include in a Registration Statement the
Transaction Registrable Shares that in each case shall have been duly specified
by such Registering Stockholders by written notice received by the Company not
later than 10 Business Days after the Company shall have given written notice to
the Registering Stockholders pursuant to this Section 3(a).

     (b) Subject to Sections 6 and 27 hereof, the Company shall use its best
efforts to cause any Registration Statement filed pursuant the last sentence of
Section 3(a) to be declared effective by the SEC as soon as reasonably
practicable after the date of the initial filing thereof.

     (c) Notwithstanding anything herein to the contrary:

         (i) the Company shall not be required by this Section 3 to include any
     Registrable Shares in a registration statement on Form S-4 or S-8 (or any
     successor form)

                                      -4-
<PAGE>

     or a registration statement filed in connection with an exchange offer or
     other offering of securities solely to the then existing stockholders of
     the Company; and

         (ii) if a registration pursuant to this Section 3 involves an
     underwritten offering, the Company shall select the managing underwriter
     for the offering and any additional investment bankers and managers to be
     used in connection with the offering, and if the managing underwriter
     advises the Company in writing that, in its opinion, the number of
     securities requested to be included in the registration is so large as to
     adversely affect the offering, including the price at which the securities
     could be sold, the Company shall include in the registration the maximum
     number of securities which it is so advised can be sold without the adverse
     effect, allocated as follows:

               (A) first, all securities proposed to be registered by the
         Company for its own account;

               (B) second, all securities proposed to be registered by the
         Company pursuant to the exercise by any person other than a Registering
         Stockholder of a "demand" right requesting the registration of shares
         of Common Stock who are entitled to have shares included therein in
         circumstances similar to those contemplated by Section 2; and

               (C) third, any Transaction Registrable Shares duly requested to
         be included in the Registration Statement and any other shares of
         Common Stock proposed to be registered by the Company (other than for
         its own account) pursuant to the exercise by any person of a
         "piggy-back" right requesting the registration of shares of Common
         Stock who is entitled to have securities included therein in
         circumstances similar to those contemplated by this Section 3 shall be
         allocated pro rata among all Registering Stockholders and such other
         persons on the basis of the relative number of Transaction Registrable
         Shares and such other shares of Common Stock that each Registering
         Stockholder and such other persons have duly requested to be included
         in such registration.

     SECTION 4. REGISTRATION ON FORM S-3.

     (a) If, at any time prior to the Termination Date, (i) a Registering
Stockholder or Registering Stockholders of any Transaction Registrable Shares
requests that the Company file a Registration Statement on Form S-3, or any
successor thereto, for a public offering of all or any portion of such
Registering Stockholder's Transaction Registrable Shares, and (ii) the Company
is a registrant entitled to use Form S-3, or such successor, to register such
shares, then the Company shall (x) give written notice to each other potential
Registering Stockholders within 10 Business Days after the receipt of such
request (which such notice shall inform such Registering Stockholders that the
Company is filing a Registration Statement pursuant to this Section 3 and shall
set forth other information that is needed to enable such Registering
Stockholders to register their Transaction Registrable Shares pursuant to this
Section 4) and (y) within 30 Business Days after the Company gives the written
notice referred to in the preceding clause (x) file on a Registration Statement
on Form S-3 (or any such successor thereto) covering the Transaction Registrable
Shares that have been duly specified by any Registering Stockholders

                                      -5-
<PAGE>

who either provided a request to the Company pursuant to the preceding clause
(i) or provided a written notice to the Company not later than 10 Business Days
after the Company shall have given the written notice referred to in the
preceding clause (x). Notwithstanding the foregoing, the Company shall not be
required to prepare and file pursuant to this Section 4(a) a Registration
Statement including less than 200,000 Transaction Registrable Shares in the
aggregate.

     (b) Subject to Sections 6 and 27 hereof, the Company shall use its best
efforts to cause any Registration Statement filed pursuant the last sentence of
Section 4(a) to be declared effective by the SEC as soon as reasonably
practicable after the date of the initial filing thereof.

     (c) Whenever the Company is required by this Section 4 to file a
Registration Statement on Form S-3 (or any successor thereto), each of the
applicable procedures and requirements of Section 2 (including, without
limitation, the requirement that the Company notify each other potential
Registering Stockholder of the proposed registration of securities of the
Company on such Registration Statement) shall apply to such Registration
Statement.

     SECTION 5. REGISTRATION PROVISIONS. With respect to each registration
pursuant to this Agreement:

     (a) Notwithstanding anything herein to the contrary, the Company shall not
be required to include in any Registration Statement any of the Registrable
Shares owned by a Registering Stockholder (i) if the Company shall deliver to
the Registering Stockholder an opinion, satisfactory in form, scope and
substance to the Registering Stockholder and addressed to the Registering
Stockholder by legal counsel satisfactory to the Registering Stockholder, to the
effect that the distribution of such Registrable Shares proposed by the
Registering Stockholder is exempt from registration under the Securities Act and
all applicable state securities laws, (ii) if such Registering Stockholder or
any underwriter of such Registrable Shares shall fail to furnish to the Company
the information in respect of the distribution of such Registrable Shares that
may be required under this Agreement to be furnished by the Registering
Stockholder or the underwriter to the Company, or (iii) if such registration
involves an underwritten offering, the Registering Stockholder fails to enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwritten offering.

     (b) The Company shall make available for inspection by each Registering
Stockholder participating in the registration, each underwriter of Transaction
Registrable Shares owned by the Registering Stockholder and their respective
accountants, counsel and other representatives all financial and other records,
pertinent corporate documents and properties of the Company as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility in connection with each registration of Transaction Registrable
Shares owned by the Registering Stockholder, and shall cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such person in connection with such registration; provided, however, that
records and documents which the Company determines, in good faith, after
consultation with counsel for the Company and counsel for the Registering
Stockholder or underwriter, as the case may be, to be confidential and which it
notifies such persons are confidential shall not be disclosed to them, except in
each case to the extent that (i) the disclosure of such records or documents is
necessary to avoid or correct a misstatement or omission in the Registration
Statement or (ii) the release of such records or documents is ordered

                                      -6-
<PAGE>

pursuant to a subpoena or other order from a court of competent jurisdiction.
Each Registering Stockholder shall, upon learning that disclosure of any such
records or documents is sought in a court of competent jurisdiction, give notice
to the Company, and allow the Company, at the Company's expense, to undertake
appropriate action and to prevent disclosure of any such records or documents
deemed confidential.

     (c) Each Registering Stockholder shall furnish, and shall cause each
underwriter of Transaction Registrable Shares owned by the Registering
Stockholder to be distributed pursuant to the registration to furnish, to the
Company in writing promptly upon the request of the Company the information
regarding the Registering Stockholder or the underwriter, the contemplated plan
of distribution of the Transaction Registrable Shares and the other information
regarding the proposed distribution by the Registering Stockholder and the
underwriter that shall be required in connection with the proposed distribution
by the applicable securities laws of the United States of America and the states
thereof in which the Transaction Registrable Shares are contemplated to be
distributed.

     (d) The Company shall, within the time periods specified in Sections 1, 2,
3 or 4, as applicable, prepare and file the Registration Statement, including
the Prospectus (as defined in Section 5(l) below), and each amendment thereof or
supplement thereto, with, and cause to be declared effective by, the SEC under
the Securities Act and as required under any applicable state securities laws,
on the form that is then required or available for use by the Company to permit
each Registering Stockholder, upon the effective date of the Registration
Statement, to use the Prospectus in connection with the contemplated
distribution by the Registering Stockholder of the Transaction Registrable
Shares requested to be so registered. A registration pursuant to Section 1,
Section 2 or Section 4 shall be effected pursuant to Rule 415 (or any similar
provision then in force) under the Securities Act if the manner of distribution
contemplated by the Registering Stockholder initiating the request for such
registration shall include an offering on a delayed or continuous basis. The
Company shall furnish to each Registering Stockholder drafts of the Registration
Statement and the Prospectus and each amendment thereof or supplement thereto
for its timely review prior to the filing thereof with the SEC. If any
Registration Statement refers to any Registering Stockholder by name or
otherwise as the holder of any securities of the Company but such reference is
not required by the Securities Act or any similar federal statute then in force,
then the Registering Stockholder shall have the right to require the deletion of
such reference. The Company shall deliver to each Registering Stockholder,
without charge, one executed copy of the Registration Statement and each
amendment or post-effective amendment thereof and one copy of each document
incorporated therein by reference. If the registration shall have been initiated
solely by the Company or shall not have been initiated by a Registering
Stockholder, the Company shall not be obligated to prosecute the registration
and may withdraw the Registration Statement at any time prior to the
effectiveness thereof if the Company shall determine in good faith not to
proceed with the offering of securities included in the Registration Statement.
The Company shall deliver to each Registering Stockholder evidence of the
effectiveness and a reasonable supply of copies of the Prospectus and each
amendment thereof or supplement thereto. The Company consents to the use by each
Registering Stockholder of each Prospectus and each amendment thereof and
supplement thereto in connection with the distribution, in accordance with this
Agreement, of the Transaction Registrable Shares owned by the Registering
Stockholder. In addition, if necessary for resale by the Registering
Stockholders, the Company

                                      -7-
<PAGE>

shall qualify or register in such states as may be reasonably requested by each
Registering Stockholder the Transaction Registrable Shares of the Registering
Stockholder that shall have been included in the Registration Statement;
provided, however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation in any
state in which it is not subject to process or qualified as of the date of the
request. The Company shall advise the Stockholder and each Registering
Stockholder in writing, promptly after the occurrence of any of the following,
of (i) the filing of the Registration Statement or any Prospectus, or any
amendment thereof or supplement thereto, with the SEC, (ii) the effectiveness of
the Registration Statement and any post-effective amendment thereto, (iii) the
receipt by the Company of any communication from the SEC with respect to the
Registration Statement or the Prospectus, or any amendment thereof or supplement
thereto, including, without limitation, any stop order suspending the
effectiveness thereof, any comments with respect thereto and any requests for
amendments or supplements and (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification of Transaction
Registrable Shares owned by the Registering Stockholders for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose.

     (e) The Company shall use commercially reasonable efforts to cause the
Registration Statement to remain effective under the Securities Act and the
Prospectus to remain current, including the filing of necessary amendments,
post-effective amendments and supplements, and shall furnish copies of such
amendments, post-effective amendments and supplements to the Registering
Stockholders, so as to permit the Registering Stockholders to distribute the
Transaction Registrable Shares owned by them in their respective manner of
distribution during their respective contemplated periods of distribution, but
in no event longer than nine consecutive months from the effective date of the
Registration Statement; provided, however, that the period shall be increased by
the number of days that any Registering Stockholder shall have been required by
Section 6 to refrain from disposing under the registration any of the
Transaction Registrable Shares owned by the Registering Stockholder. During such
respective contemplated periods of distribution, the Company shall comply with
the provisions of the Securities Act applicable to it with respect to the
disposition of all Transaction Registrable Shares owned by the Registering
Stockholders that shall have been included in the Registration Statement in
accordance with their respective contemplated manner of disposition by the
Registering Stockholders set forth in the Registration Statement, the Prospectus
or the supplement, as the case may be.

     (f) The Company shall notify each Registering Stockholder, at any time when
a prospectus with respect to the Transaction Registrable Shares owned by the
Registering Stockholders is required to be delivered under the Securities Act,
when the Company becomes aware of the happening of any event as a result of
which the Prospectus (as then in effect) contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein (in the case of the Prospectus or any preliminary prospectus, in light
of the circumstances under which they were made) not misleading; and, as soon as
possible thereafter, but subject to Section 6, the Company shall use
commercially reasonable efforts to prepare and file with the SEC an amendment or
supplement to the Registration Statement or the Prospectus so that, as
thereafter delivered to the purchasers of such Transaction Registrable Shares,
such Prospectus will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light of
the circumstances under which

                                      -8-
<PAGE>

they were made, not misleading. The Company also shall notify each Registering
Stockholder, when the Company becomes aware of the occurrence thereof, of the
issuance by the SEC of an order suspending the effectiveness of the Registration
Statement; and, as soon as possible thereafter, but subject to Section 5, the
Company shall use commercially reasonable efforts to obtain the withdrawal of
such order at the earliest possible moment.

     (g) If requested by any Registering Stockholder or an underwriter of
Transaction Registrable Shares owned by the Registering Stockholder and required
by the Securities Act, the Company shall as promptly as practicable prepare and
file with the SEC an amendment or supplement to the Registration Statement or
the Prospectus containing such information as the Registering Stockholder or the
underwriter requests to be included therein, including, without limitation,
information with respect to the Transaction Registrable Shares being sold by the
Registering Stockholder to the underwriter or any assignee of any Transaction
Registrable Shares, the purchase price being paid therefor by such underwriter
and other terms of the underwritten offering of the Transaction Registrable
Shares to be sold in such offering.

     (h) Each Registering Stockholder shall (i) offer to sell or otherwise
distribute Registrable Shares in reliance upon a registration contemplated
pursuant to Section 1, 2, 3 or 4 only if such Registrable Shares are Transaction
Registrable Shares and after the related Registration Statement shall have been
filed with the SEC, (ii) sell or otherwise distribute Registrable Shares in
reliance upon such registration only if such Registrable Shares are Transaction
Registrable Shares and the related Registration Statement is then effective
under the Securities Act, (iii) subject to the time period not to exceed the
lesser of (x) 60 Business Days and (y) 5 Business Days following the cessation
of the occurrence of any condition subsequent referred to in clauses (i), (ii)
or (iii) of Section 6(b) below, not sell or otherwise distribute Transaction
Registrable Securities during any period specified in a Suspension Notice
received by the Registering Stockholder pursuant to Section 6 (until the
Registering Stockholder shall have received written notice from the Company
pursuant to Section 5(d) that the registration of such Transaction Registrable
Shares is again effective) and (iv) report to the Company distributions made by
the Registering Stockholder of Transaction Registrable Shares pursuant to the
Prospectus. Each Registering Stockholder shall distribute Transaction
Registrable Shares only in accordance with the manner of distribution
contemplated by the Prospectus with respect to the Transaction Registrable
Shares owned by the Registering Stockholder. Each Registering Stockholder, by
participating in a registration pursuant to this Agreement, acknowledges that
the remedies of the Company at law for failure by the Registering Stockholder to
comply with the undertaking contained in this Section 5(h) would be inadequate
and that the failure would not be adequately compensable in damages and would
cause irreparable harm to the Company, and therefore agrees that undertakings
made by the Registering Stockholder in this Section 5(h) may be specifically
enforced.

     (i) If the registration involves an underwritten offering, the Company
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting and shall cause to be
delivered to each Registering Stockholder, its counsel and each underwriter of
Transaction Registrable Shares owned by the Registering Stockholders to be
distributed pursuant to such registration, copies of the certificates, opinions
of counsel and comfort letters that are delivered in connection with such
underwritten offering.

                                      -9-
<PAGE>

     (j) In connection with sales of such Transaction Registrable Shares, the
Company shall cooperate with each Registering Stockholder and each underwriter
of Transaction Registrable Shares owned by the Registering Stockholder to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing the Transaction Registrable Shares sold under
the Registration Statement, and to enable such Transaction Registrable Shares to
be in such denominations and registered in the name or names of each transferee
thereof or in such denominations and registered in the name or names that the
underwriter may request, as the case may be.

     (k) The Company shall use commercially reasonable efforts to comply with
all applicable rules and regulations of the SEC, and, if required to comply with
applicable law or facilitate sales under a Registration Statement, make
generally available to its securityholders, as soon as practicable but no later
than 16 months following the effective date of such Registration Statement, an
earnings statement covering a period of at least twelve months beginning with
the first calendar month after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder.

     (l) The Company shall use commercially reasonable efforts to cause the
Transaction Registrable Shares to be listed on each national securities exchange
on which Common Stock shall then be listed, if any, and to be qualified for
inclusion in The Nasdaq National Market or The Nasdaq SmallCap Market, as the
case may be, if Common Stock is then so qualified, and in each case if the
listing or inclusion of the Transaction Registrable Shares is then permitted
under the rules of such national securities exchange or the NASDAQ, as the case
may be.

     (m) For the purposes of this Agreement, the following terms shall have the
following meanings:

         (i) "BUSINESS DAY" means any day excluding Saturday, Sunday and any day
     which is a legal holiday under the laws of the State of New York or is a
     day on which banking institutions located in such state are authorized or
     required by law or other governmental action to close;

         (ii) "PROSPECTUS" means (A) the prospectus relating to the Transaction
     Registrable Shares owned by the Registering Stockholders included in a
     Registration Statement, (B) if a prospectus relating to the Transaction
     Registrable Shares shall be filed with the SEC pursuant to Rule 424 (or any
     similar provision then in force) under the Securities Act, such prospectus,
     and (C) in the event of any amendment or supplement to the prospectus after
     the effective date of the Registration Statement, then from and after the
     effectiveness of the amendment or the filing with the SEC of the
     supplement, the prospectus as so amended or supplemented;

         (iii) "REGISTRATION STATEMENT" means (A) a registration statement filed
     by the Company in accordance with Section 5(d), including exhibits and
     financial statements thereto, in the form in which it shall become
     effective, the documents incorporated by reference therein pursuant to Item
     12 of Form S-3 (or any similar provision or forms then in force) under the
     Securities Act and information deemed to be a part of such

                                      -10-
<PAGE>

     registration statement pursuant to paragraph (b) of Rule 430A (or any
     similar provision then in force) and (B) in the event of any amendment
     thereto after the effective date of the registration statement, then from
     and after the effectiveness of the amendment, the registration statement as
     so amended; and

         (iv) information "CONTAINED," "INCLUDED" or "STATED" in a Registration
     Statement or a Prospectus (or other references of like import) includes
     information incorporated by reference.

     SECTION 6. BLACKOUT PROVISIONS.

     (a) Notwithstanding anything in this Agreement to the contrary, subject to
Section 6(b) below, by delivery of written notice to any of the Registering
Stockholders and the other holders of Registrable Shares (a "SUSPENSION
NOTICE"), stating which one or more of the following limitations shall apply to
the addressee of such Suspension Notice, the Company may (i) postpone effecting
a registration under this Agreement, (ii) require such addressee to refrain from
disposing of Transaction Registrable Shares under the registration or (iii)
require such addressee to refrain from otherwise disposing of any Registrable
Shares or other equity securities of the Company owned by such addressee
(whether pursuant to Rule 144 or 144A under the Securities Act or otherwise), in
each case for a reasonable time specified in the notice but not exceeding the
lesser of 60 Business Days and 5 Business Days following the cessation of the
occurrence of any condition subsequent referred to in clauses (i), (ii) or (iii)
of Section 6(b) below (which period may not be extended or renewed).

     (b) The Company may postpone effecting a registration or apply to any
person specified in clauses (ii) and (iii) of Section 6(a) above any of the
limitations specified in such clauses if (i) the Company is then taking, or
proposes to take, any of the actions referred to in Section 5(f), (ii) an
investment banking firm of recognized national standing shall advise the Company
in writing that effecting the registration or the disposition by such person of
Registrable Shares or other equity securities of the Company, as the case may
be, would materially and adversely affect an offering of equity securities of
the Company the preparation of which had then been commenced or (iii) the
Company is in possession of material non-public information the disclosure of
which during the period specified in such notice the Company reasonably believes
would materially and adversely affect the interests of the Company if disclosed.

     (c) If the Company shall take any action pursuant to Section 6(a) above,
the period during which the Registering Stockholders may exercise their
respective rights under Sections 1, 2 and 4 shall be extended by one day beyond
the Termination Date for each day that, pursuant to this Section 6, the Company
requires any person to refrain from disposing of Transaction Registrable Shares
under a registration or otherwise requires any person to refrain from disposing
of Registrable Shares or other securities of the Company.

     (d) In any underwritten public offering by the Company, to the extent not
inconsistent with applicable law, upon the request of the Company or of the
underwriters managing any underwritten offering of the Company's securities, the
Registering Stockholders will not effect any public sale or distribution (other
than those included in the registration statement pursuant to

                                      -11-
<PAGE>

which such underwritten public offering is made) of any securities of the
Company, or any securities, options or rights convertible into or exchangeable
or exercisable for such securities during (x) the period of time (not to exceed
seven days) prior the effective date of such registration statement that all of
the Company's executive officers, directors and affiliates have agreed not to
effect any public sale or distribution of any securities of the Company, or any
securities, options or rights convertible into or exchangeable or exercisable
for such securities and (y) and from and after the effective date of such
registration statement during the period of time (not to exceed 180 days) during
which all of the Company's executive officers, directors and affiliates have
agreed not to effect any public sale or distribution of any securities of the
Company, or any securities, options or rights convertible into or exchangeable
or exercisable for such securities, unless, in any instance referred to in the
preceding clauses (x) and (y), the Company or the managing underwriters, as the
case may be, otherwise agree to a shorter period of time.

     (e) No Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements (including, without
limitation, pursuant to the terms of any over-allotment or "green shoe" option
requested by the managing underwriter(s), provided, however, that each holder of
Registrable Shares shall not be required to sell more than the number of
Registrable Securities that such holder has requested the Company to include in
any registration) subject to the terms and provisions hereof and (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents in customary form that are reasonably required
under the terms of such underwriting arrangements and this Agreement.

     SECTION 7. EXPENSES.

     (a) The Company shall bear all expenses related to the following in
connection with the registration of Transaction Registrable Shares pursuant to
this Agreement, whether or not any related Registration Statement shall become
effective:

         (i) preparing, printing and filing each Registration Statement and
     Prospectus and each qualification or notice required to be filed under
     federal and state securities laws or the rules and regulations of the
     National Association of Securities Dealers, Inc. (the "NASDAQ");

         (ii) all fees and expenses of complying with federal and state
     securities laws and the rules and regulations of the NASDAQ;

         (iii) furnishing to each Registering Stockholder one executed copy of
     the related Registration Statement and the number of copies of the related
     Prospectus that may be required by Sections 5(d) and 5(e) to be so
     furnished, together with a like number of copies of each amendment,
     post-effective amendment or supplement;

         (iv) performing its obligations under Sections 5(d) and 5(j);

                                      -12-
<PAGE>

         (v) printing and issuing share certificates, including the transfer
     agent's fees, in connection with each distribution so registered;

         (vi) preparing audited financial statements required by the Securities
     Act and the rules and regulations thereunder to be included in the
     Registration Statement and preparing audited financial statements for use
     in connection with the registration other than audited financial statements
     required by the Securities Act and the rules and regulations thereunder;

         (vii) internal expenses of the Company (including, without limitation,
     all salaries and expenses of its officers and employees performing legal or
     accounting duties);

         (viii) premiums or other expenses relating to liability insurance
     required by the Company or underwriters of the Registering Stockholders;

         (ix) fees and disbursements of underwriters of the Registering
     Stockholders customarily paid by issuers or sellers of securities;

         (x) listing of the Registrable Shares on national securities exchanges
     and inclusion of the Registrable Shares on The Nasdaq National Market or
     The Nasdaq SmallCap Market, as the case may be;

         (xi) fees and expenses of any special experts retained by the Company
     in connection with the registration; and

         (xii) reasonable fees and expenses of one counsel to the Registering
     Stockholders (not to exceed $10,000), who shall be chosen by the holder or
     holders of a majority of the Transaction Registrable Shares included in
     such Registration Statement.

     (b) The Registering Stockholders shall bear all other expenses incident to
the distribution by the respective Registering Stockholders of the Transaction
Registrable Shares owned by them in connection with a registration pursuant to
this Agreement, including, without limitation (but excluding the expenses
referred to in Section 7(a)(viii) above), the selling expenses of the
Registering Stockholders, commissions, underwriting discounts, insurance, fees
of counsel for the Registering Stockholders and their underwriters.

     SECTION 8. INDEMNIFICATION.

     (a) The Company shall indemnify and hold harmless each Registering
Stockholder participating in a registration pursuant to this Agreement, each
underwriter of Transaction Registrable Shares owned by the Registering
Stockholder to be distributed pursuant to the registration, each partner in the
Registering Stockholder, the officers and directors of the Registering
Stockholder and the underwriter and each person, if any, who controls the
Registering Stockholder, any partner in the Registering Stockholder or the
underwriter within the meaning of Section 15 (or any successor provision) of the
Securities Act, and their respective successors and assigns, against all claims,
losses, damages and liabilities to third parties (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue

                                      -13-
<PAGE>

statement) of a material fact contained in the Registration Statement or the
Prospectus or other document incident thereto or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse
each such Registering Stockholder and each other person indemnified pursuant to
this Section 8(a) for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that the Company shall not be liable in
any case to the extent that any such claim, loss, damage or liability arises out
of or is based on any untrue statement or omission based upon written
information furnished to the Company by the Registering Stockholder or the
underwriter of such Transaction Registrable Shares specifically for use in the
Registration Statement or the Prospectus or by failure of such Registering
Holder to deliver a copy of the Registration Statement or Prospectus or any
amendments or supplements thereto after the Company has furnished such
Registering Stockholder with a sufficient number of copies of the same.

     (b) Each Registering Stockholder, by participating in a registration
pursuant to this Agreement, thereby agrees to indemnify and to hold harmless the
Company and its officers and directors and each person, if any, who controls any
of them within the meaning of Section 15 (or any successor provision) of the
Securities Act, and their respective successors, against all claims, losses,
damages and liabilities to third parties (or actions in respect thereof) arising
out of or based upon (i) any untrue statement (or alleged untrue statement) of a
material fact contained in the Registration Statement or the Prospectus or other
document incident thereto or (ii) any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading or (iii) the purchase or sale of Transaction
Registrable Shares during a suspension as set forth in (and in accordance with)
Section 6, and shall reimburse the Company and each other person indemnified
pursuant to this Section 8(b) for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action; provided, however, that (x) this Section 8(b) shall
apply only if (and only to the extent that) the statement or omission was made
in reliance upon and in conformity with information furnished to the Company in
writing by the Registering Stockholder specifically for use in the Registration
Statement or the Prospectus and (y) in no event shall the liability of a
Registering Stockholder under this Section 8 exceed the amount of the gross
proceeds paid to the Registering Stockholder in consideration of the sale of
Transaction Registrable Shares pursuant to such registration.

     (c) If any action or proceeding (including any governmental investigation
or inquiry) shall be brought, asserted or threatened against any person
indemnified under this Section 8, the indemnified person shall promptly notify
the indemnifying party in writing, and the indemnifying party shall assume the
defense of the action or proceeding, including the employment of counsel
satisfactory to the indemnified person and the payment of all expenses in such
action. The indemnified person shall have the right to employ separate counsel
in any action or proceeding and to participate in the defense of the action or
proceeding, but the fees and expenses of that counsel shall be at the expense of
the indemnified person unless:

         (i) the indemnifying party shall have agreed to pay those fees and
     expenses; or

                                      -14-
<PAGE>

         (ii) the indemnifying party shall have failed to assume the defense of
     the action or proceeding; or

         (iii) the named parties to the action or proceeding (including any
     impleaded parties) include both the indemnified person and the indemnifying
     party, and the indemnified person shall have been advised by counsel that
     there may be one or more legal defenses available to the indemnified person
     that are different from or additional to those available to the
     indemnifying party (in which case, if the indemnified person notifies the
     indemnifying party in writing that it elects to employ separate counsel at
     the expense of the indemnifying party, the indemnifying party shall not
     have the right to assume the defense of such action or proceeding on behalf
     of the indemnified person; it being understood, however, that the
     indemnifying party shall not, in connection with any one action or
     proceeding or separate but substantially similar or related actions or
     proceedings in the same jurisdiction arising out of the same general
     allegations or circumstances, be liable for the reasonable fees and
     expenses of more than one separate firm of attorneys at any time for the
     indemnified person, which firm shall be designated in writing by the
     indemnified person).

The indemnifying party shall not be liable for any settlement of any action or
proceeding effected without its written consent, but if settled with its written
consent, or if there be a final judgment for the plaintiff in any such action or
proceeding, the indemnifying party shall indemnify and hold harmless the
indemnified person from and against any loss or liability by reason of the
settlement or judgment.

     (d) If the indemnification provided for in this Section 8 is unavailable to
an indemnified person (other than by reason of exceptions provided in this
Section 8) in respect of losses, claims, damages, liabilities or expenses
referred to in this Section 8, then each applicable indemnifying party, in lieu
of indemnifying the indemnified person, shall contribute to the amount paid or
payable by the indemnified person as a result of the losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
person on the other in connection with the statements or omissions which
resulted in the losses, claims, damages, liabilities or expenses as well as any
other relevant equitable considerations. The relative fault of the indemnifying
party on the one hand and of the indemnified person on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or by
the indemnified person and by these persons' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The parties agree that it would not be just and equitable if contribution
pursuant to this Section 8(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding sentence. The amount
paid or payable by a person as a result of the losses, claims, damages,
liabilities and expenses shall be deemed to include any legal or other fees or
expenses reasonably incurred by the person in connection with investigating or
defending any action or claim. Notwithstanding in the foregoing to the contrary,
no Registering Stockholder or underwriter of Transaction Registrable Shares
owned by the Registering Stockholder shall be required to contribute any amount
in excess of the amount by which (i) in

                                      -15-
<PAGE>

the case of the Registering Stockholder, the gross proceeds paid to the
Registering Stockholder in consideration of the sale pursuant to the
registration of Transaction Registrable Shares owned by it or (ii) in the case
of the underwriter, the total price at which such Transaction Registrable Shares
purchased by it and distributed to the public were offered to the public
exceeds, in any such case, the amount of any damages that the Registering
Stockholder or underwriter, as the case may be, has otherwise been required to
pay by reason of any untrue or alleged untrue statement or omission. No person
finally adjudicated guilty of fraudulent representation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation.

     (e) Each Registering Stockholder participating in a registration pursuant
to Section 2 shall cause each underwriter of any Transaction Registrable Shares
owned by the Registering Stockholder to be distributed pursuant to the
registration to agree in writing on terms reasonably satisfactory to the Company
to indemnify and to hold harmless the Company and its officers and directors and
each person, if any, who controls any of them within the meaning of Section 15
(or any similar provision then in force) of the Securities Act, and their
respective successors, against all claims, losses, damages and liabilities to
third parties (or actions in respect thereof) arising out of or based upon any
untrue statement (or alleged untrue statement) of a material fact contained in
the Registration Statement or the Prospectus or other document incident thereto
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and to reimburse the Company and each other person indemnified pursuant to the
agreement for any legal or any other expense reasonably incurred in connection
with investigating or defending any claim, loss, damage, liability or action;
provided, however, that the agreement shall apply only if (and only to the
extent that) the statement or omission was made in reliance upon and in
conformity with information furnished to the Company in writing by the
underwriter specifically for use in the Registration Statement or the
Prospectus.

     SECTION 9. TRANSFER RESTRICTIONS.

     (a) Except as provided to the contrary in this Section 9, each instrument
or certificate evidencing or representing the Warrant (and any certificate or
instrument issued in exchange therefor) or any certificate or instrument issued
upon conversion, exercise or transfer thereof (including without limitation, any
certificate representing any Registrable Shares), and any certificate issued in
exchange therefor or upon conversion, exercise or transfer thereof, shall bear a
legend substantially in the following form:

     "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE SECURITIES ACT OF 1933 OR PURSUANT TO THE SECURITIES OR "BLUE
     SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD,
     TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT
     TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
     EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT, OR
     (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT, PROVIDED THAT,
     IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY
     IN FORM AND SUBSTANCE IS

                                      -16-
<PAGE>

     FURNISHED TO THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION
     REQUIREMENTS OF SUCH ACT IS AVAILABLE."

     (b) If the holder of any Warrant or any Registrable Shares shall request in
writing that the Company remove any legend stated in Section 9(a) from the
instruments or certificates evidencing or representing such Registrable Shares,
then, as soon as practicable following the later of the date of receipt of such
request and the date of receipt of such instruments or certificates bearing such
legends, the Company shall issue and deliver to the registered owner of such
Registrable Shares or its registered transferee instruments or certificates
evidencing or representing such Warrant or such Registrable Shares without such
legends if either (i) such substitute instruments or certificates are issued in
connection with a sale that is registered under the Securities Act or (ii) the
Stockholder has received either an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to Stockholder, or a "no-action" letter
obtained by the holder from the staff of the SEC, to the effect that the
restrictions imposed by Rule 144 under the Securities Act no longer apply to
such shares.

     SECTION 10. EXEMPT SALES.

     (a) The Company shall use commercially reasonable efforts to make all
filings with the SEC required by paragraph (c) of Rule 144 (or any similar
provision then in force) under the Securities Act to permit the sale of
Registrable Shares by any holder thereof (other than an Affiliate of the
Company) to satisfy the conditions of Rule 144 (or any similar provision then in
force). The Company shall, promptly upon the written request of the holder of
Registrable Shares, deliver to such holder a written statement as to whether the
Company has complied with all such filing requirements.

     (b) Following sales of Registrable Shares pursuant to an exemption from the
registration requirements of the Securities Act, the Company shall, subject to
Section 8(b), cooperate with the Stockholder and each other Registering
Shareholder to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legends) representing such Registrable Shares
registered in the name of the transferee thereof.

     SECTION 11. MERGER, CONSOLIDATION, EXCHANGE, ETC.

     (a) In the event, directly or indirectly, (i) the Company shall merge with
and into, or consolidate with, any other person or (ii) any person shall merge
with and into, or consolidate, the Company and the Company shall be the
surviving corporation of such merger or consolidation and, in connection with
such merger or consolidation referred to in the preceding clauses (i) or (ii),
all or part of the Registrable Shares shall be changed into or exchanged for
stock or other securities of any other person, then, in each such case, proper
provision shall be made so that such other person shall be bound by the
provisions of this Agreement and the term the "Company" shall thereafter be
deemed to refer to such other person.

     (b) Notwithstanding anything in this Agreement to the contrary, in the
event that any shares of Common Stock issuable upon exercise of the Warrant,
Initial Shares, Registrable Shares and/or Transaction Registrable Shares should,
as a result of a stock split or stock dividend or combination of shares or any
other change or exchange for other securities by reclassification,

                                      -17-
<PAGE>

reorganization, redesignation, merger, consolidation, recapitalization,
split-up, spinoff, partial or complete liquidation, sale of assets, distribution
to Registering Stockholders, combination of shares or otherwise, be increased or
decreased or changed into or exchanged for a different number or kind of shares
of capital stock or other securities of the Company or of another corporation or
other entity, the terms Initial Shares Registrable Shares or Transaction
Registrable Shares, as the case may be shall include, without limitation, all of
the capital stock of any class of the Company (or such other corporation or
other entity) now owned or that may be issued hereafter to the holders thereof
in consequence of any event.

     SECTION 12. NOTICES. All notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing signed by
the sender, and shall be considered given: (w) on the date delivered, if
personally delivered; (x) on the date sent by telecopier with automatic
confirmation of the transmitting machine showing the proper number of pages were
transmitted without error; (y) on the business day after being sent by Federal
Express or another recognized overnight mail service in time for and specifying
next day or next business day delivery; or (z) five business days after mailing,
if mailed by United States postage-paid certified or registered mail, return
receipt requested, in each instance referred to in the preceding clauses (x)
through (z), only if all delivery charges are pre-paid and addressed to the
parties at the following addresses or telecopier numbers (or such other address
or telecopier number as may be specified in a notice given in accordance with
the provisions hereof):

     (a) If to the Company to:

         100 Sunnyside Boulevard
         Woodbury, New York  11797
         Attention:  President
         Telecopier No:  (516) 677-6111

         with a copy to:

         Proskauer Rose LLP
         1585 Broadway
         New York, New York  10036
         Attention:  Neil S. Belloff, Esq.
         Telecopier No.:  (212) 969-2900

     (b) if to the Stockholder to:

         90 Broad Street
         New York, New York  10004
         Attention: Gary S. Kendler

         Senior Vice President
         Telecopier No.:  (212) 859-5771

         with a copy to:


                                      -18-
<PAGE>

         Jenkens & Gilchrist Parker Chapin LLP
         405 Lexington Avenue
         New York, New York  10174
         Attention:  William D. Freedman
         Telecopier No.:  (212) 704-6288

     SECTION 13. NO WAIVERS; REMEDIES. No failure or delay by any party in
exercising any right, power or privilege under this Agreement shall operate as a
waiver of the right, power or privilege. A single or partial exercise of any
right, power or privilege shall not preclude any other or further exercise of
the right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement shall be
cumulative and not exclusive of any rights or remedies provided by law.

     SECTION 14. AMENDMENTS, ETC. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any departure by a
party to this Agreement from any provision of this Agreement, shall be effective
unless it shall be in writing and signed and delivered by the other party to
this Agreement, and then it shall be effective only in the specific instance and
for the specific purpose for which it is given.

     SECTION 15. SUCCESSORS AND ASSIGNS.

     (a) Each holder of Registrable Shares may assign to any transferee of
Registrable Shares its rights and delegate to the transferee its obligations
under this Agreement including, without limitation, the rights of assignment
pursuant to this Section 15; provided, however, that such transferee assignee
shall accept such rights and assume such obligations by written instrument, in
form and substance reasonably satisfactory to the Company. Thereafter, without
any further action by any person, all references in this Agreement to the holder
of such Registrable Shares, and all comparable references, shall be deemed to be
references to the transferee, and the transferor shall be released from each
obligation or liability under this Agreement with respect to the Registrable
Shares so transferred.

     (b) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties to this Agreement, the express beneficiaries thereof and
their respective heirs, executors, legal representatives, successors and
permitted assigns, and no other person.

     SECTION 16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York that apply to
contracts made and performed entirely within such state (and not the laws of any
other state).

     SECTION 17. COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if all signatures were on the same instrument.

     SECTION 18. SEVERABILITY OF PROVISIONS. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of the provision in any other
jurisdiction.

                                      -19-
<PAGE>

     SECTION 19. HEADINGS AND REFERENCES. Section headings in this Agreement are
included for the convenience of reference only and do not constitute a part of
this Agreement for any other purpose. References to parties, express
beneficiaries and sections in this Agreement are references to the parties to or
the express beneficiaries and sections of this Agreement, as the case may be,
unless the context shall require otherwise.

     SECTION 20. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding of the parties and supersedes all prior agreements or
understandings with respect to the subject matters of this Agreement.

     SECTION 21. SURVIVAL. Except as otherwise specifically provided in this
Agreement, each representation, warranty or covenant of each party contained in
to this Agreement shall remain in full force and effect, notwithstanding any
investigation or notice to the contrary or any waiver by the other party of a
related condition precedent to the performance by such other party of an
obligation under this Agreement.

     SECTION 22. EXCLUSIVE JURISDICTION. Each of the parties hereto hereby (a)
irrevocably consents and submits to the exclusive jurisdiction of the Supreme
Court of the State of New York located in New York County and of the United
States District Court for the Southern District of New York in connection with
any suit, action or other proceeding (each, an "ACTION") arising out of or
relating to this Agreement or the transactions contemplated hereby as the
exclusive jurisdictions for such proceeding, (b) waives any objection to venue
in New York County or such District, and (c) agrees that service of any summons,
complaint, notice or other process relating to such suit, action or other
proceeding may be effected in the manner provided by Section 12.

     SECTION 23. WAIVER OF JURY TRIAL. Each party waives any right to a trial by
jury in any Action to enforce or defend any right under this Agreement or any
amendment, instrument, document or agreement delivered, or which in the future
may be delivered, in connection with this Agreement and agrees that any Action
shall be tried before a court and not before a jury.

     SECTION 24. AFFILIATE. Nothing contained in this Agreement shall constitute
Stockholder or any Registering Stockholder an "affiliate" of any of the Company
and its Subsidiaries within the meanings of the Securities Act or the Exchange
Act, respectively, including, without limitation, Rule 144 under the Securities
Act.

     SECTION 25. NON-RECOURSE. No recourse under this Agreement shall be had
against any "controlling person" (within the meaning of Section 20 of the
Exchange Act) of any party or the stockholders, directors, officers, employees,
agents and Affiliates of such party or such controlling persons, whether by the
enforcement of any assessment or by any legal or equitable proceeding, or by
virtue of any regulation, it being expressly agreed and acknowledged that no
personal liability whatsoever shall attach to, be imposed on or otherwise be
incurred by such controlling person, stockholder, director, officer, employee,
agent or affiliate, as such, for any obligations of such party under this
Agreement or for any claim based on, in respect of or by reason of such
obligations or their creation.

                                      -20-
<PAGE>

     SECTION 26. NO INCONSISTENT AGREEMENTS. The Company shall not enter into,
or amend or otherwise modify, any agreement to afford to any person other than
Stockholder and the holders of Registrable Shares rights with respect to the
registration under the Securities Act of shares of Common Stock or other
securities or the inclusion of any such shares or other securities in any
registration that are inconsistent with, or conflict with, the rights of
Stockholder and the holders of Registrable Shares under this Agreement,
including, without limitation, Sections 1, 2, 3 and 4. In no event shall the
Company enter into any agreement or other arrangement with any person that would
entitle such person to have securities registered by the Company with the SEC in
circumstances that would permit the allocation of such securities other than
pursuant to Section 2(e)(iii)(C) (with respect to any "demand" registration
rights) or Section 3(c)(ii)(C) (with respect to any "piggy-back" registration
rights). The Company represents and warrants to the Stockholder that the Company
has not previously granted any registration rights that would entitle any person
to have securities registered by the Company with the SEC, other than in a
manner that would be in accordance with the prior two sentence if such two
sentence were in effect on the date of grant thereof.

     SECTION 27. BEST EFFORTS. Whenever this Agreement requires a party to use
its "best efforts," such "best efforts" shall in no event require such party to
incur expenses that are unreasonable in light of the circumstances at the time
such best efforts are required.



                      [The next page is the signature page]



                                      -21-
<PAGE>

     The parties have executed and delivered this Amended and Restated
Registration Rights Agreement as of the date first written above.

                                          5B TECHNOLOGIES CORPORATION

                                          By: /s/ Glenn Nortman
                                             -----------------------------
                                             Name:  Glenn Nortman
                                             Title: Chief Executive Officer

                                          CONNECTICUT BANK OF COMMERCE

                                          By: /s/ Richard Assaf
                                             -----------------------------
                                             Name:  Richard Assaf
                                             Title: Vice President



</TEXT>
</DOCUMENT>
</SUBMISSION>
