S-1

As filed with the Securities and Exchange Commission on November 9, 2000

Registration No. 333-     

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

SERANOVA, INC.

(Exact name of registrant as specified in its charter)

New Jersey
(State or other jurisdiction of
incorporation or organization) 7379
(Primary Standard Industrial
Classification Code Number) 22-3677719
(I.R.S. Employer
Identification Number)

499 Thornall Street,

Edison, New Jersey 08837

732-590-1600

(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

Rajkumar Koneru

Chairman, President and Chief Executive Officer

SeraNova, Inc.

499 Thornall Street

Edison, New Jersey 08837

732-590-1600

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Copies To:

Stephen V. Burger
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
(212)732-3200 Eric L. Cohen
Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
(212) 541-2000

         Approximate date of commencement of the proposed sale to the public: From time to time after this Registration Statement becomes effective, as determined by market conditions and other factors.

     If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  [X]

     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [   ] 

     If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [   ] 

     If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  [   ] 

     If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  [   ]

CALCULATION OF REGISTRATION FEE

			Proposed maximum		Proposed maximum		Amount of
Title of each class	Amount to be		offering price		aggregate offering		registration
of securities to be registered	registered		per unit		price(1)		fee(2)
Common Stock, par value $0.01 per share		3,981,470 shs.(1)	$	3.9219(2)	$	15,614,927(2)	$	4,122.35

(1)

Includes 2,840,000 shares of common stock issuable upon conversion of the Registrant’s 6% Series A Convertible Preferred Stock, and 310,000 shares of common stock issuable upon exercise of warrants. Pursuant to Rule 416 under the Securities Act of 1933, this Registration Statement shall be deemed to cover additional shares of common stock which may be offered or issued pursuant to terms which provide for a change in the amount of shares to prevent dilution resulting from stock splits, stock dividends or similar transactions.

(2)

Estimated solely for the purpose of computing the registration fee. Calculated pursuant to Rule 457(c) under the Securities Act of 1933 on the basis of the average of the high and low prices ($4.00 and $3.8438) of a share of common stock as quoted on the Nasdaq Stock Market on November 3, 2000.

      The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

________________________________________________________________________________

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion

Preliminary Prospectus dated November 9, 2000

SERANOVA, INC.

3,981,470 Shares of Common Stock,

Par Value $0.01 per Share

        This prospectus relates to offers and sales from time to time, by the selling shareholders named in this prospectus, of up to 3,981,470 shares of the common stock of SeraNova, Inc. These shares consist of 831,470 shares currently outstanding, up to 2,840,000 shares issuable upon conversion of preferred shares of SeraNova, and 310,000 shares issuable upon the exercise of common stock purchase warrants. SeraNova will receive no part of the proceeds from the sale of these shares of common stock by the selling shareholders.

      The SeraNova common stock is listed on the Nasdaq National Stock Market (symbol: SERA). On November 7, 2000, the closing price of a share of the common stock as quoted on the Nasdaq Stock Market was $4.00.

      The selling shareholders have informed SeraNova that they may sell the shares from time to time in ordinary brokers’ transactions at then current market prices or in other transactions at negotiated prices. The selling shareholders may effect these transactions through or with brokers or dealers who may receive compensation in the form of commissions or discounts.

      The principal executive offices of SeraNova are located at 499 Thornall Street, Edison, New Jersey 08837, tel. (732) 590-1600.

       Investing in the common stock involves risks that we describe in the “Risk Factors” section beginning on page 8 of this prospectus.

       Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the common stock being offered by this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is              , 2000.

TABLE OF CONTENTS

	Page
Forward-Looking Statements		2
Prospectus Summary		3
Risk Factors		8
The Proposed Merger		20
Dividend Policy		21
Price Range of SeraNova Common Stock		21
Capitalization		22
Selected Historical Financial Data		23
Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Business		35
Management		44
The Spin-off and Our Relationship with Intelligroup		50
Certain Transactions		52
Principal Shareholders		52
The Selling Shareholders		53
Plan of Distribution		54
Description of Capital Stock		55
Legal Matters		60
Experts		60
Where You Can Find More Information		61
Index to Financial Statements		F-1

FORWARD-LOOKING STATEMENTS

      This prospectus contains certain “forward-looking statements” concerning our operations, performance and financial condition, including our future economic performance, cash flows, plans, and objectives and the likelihood of success in developing and expanding our business. These statements are based upon a number of assumptions and estimates which are subject to significant uncertainties, many of which are beyond our control. The words “may,” “would,” “could,” “will,” “expect,” “anticipate,” “believe,” “intend,” “plan,” “estimate” and similar expressions are meant to identify such forward-looking statements. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those set forth in the section entitled “Risk Factors.” These forward-looking statements reflect our views only as of the date of this prospectus. We undertake no obligation to update such statements or publicly release the result of any revisions to these forward-looking statements which we may make to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

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PROSPECTUS SUMMARY

      This summary highlights selected information from this prospectus but does not contain all the information about SeraNova that may be important to a prospective investor. To better understand our business and financial position, you should carefully review this entire prospectus.

Our Business

      SeraNova provides Internet professional services to businesses. Our services enable our clients to combine the scope and efficiencies of the Internet with their existing business processes. We design and implement Internet-based software applications that help companies manage procurement, sell products and services, provide customer service, conduct supplier transactions and communicate with their employees over the Internet. Our services include strategy consulting, creative design, technology implementation and maintenance of Internet-based software applications. In all of our client engagements, we apply SeraNova’s Time-to-Market Approach, our proprietary methodology, to deliver these services. We focus on five industry markets — financial services, telecommunications, automotive, technology and healthcare. During the last three years, we have provided Internet professional services to over 80 clients. Our clients include Global 5000 companies and emerging Internet-based companies that conduct their business exclusively over the Internet.

      Increasingly, many companies are using the Internet as the primary platform for communications and business transactions. In order to conduct complex business-to-business transactions over the Internet, companies must build sophisticated Internet-based software applications that are consistent with their market positioning and business goals. In order to build these applications, companies must have expertise in business strategy, creative design and technology implementation. Many companies are seeking outside specialists with comprehensive and integrated offerings to provide these services.

      SeraNova provides an integrated set of services that enable rapid deployment of Internet-based software applications. Typically, we begin our client engagement with strategy consulting. Our team of industry experts and business process specialists help formulate a comprehensive Internet strategy for our clients. Next, our technology experts and implementation project managers identify project requirements and create a software application deployment plan. We then select and deploy a technology team from our more than 800 professionals located across our seven global delivery centers to develop and implement these applications. Once these applications are deployed, SeraNova provides software application management services, that include website and related database updates and software functionality enhancements. This improves our clients’ ability to dynamically adjust their business processes and effectively address changing market opportunities. We believe our proprietary methodology and our knowledge management processes, allow us to reduce the time to deliver our services.

      We seek to continue to strengthen our relationships with key clients and further penetrate our target industry markets. We currently are executing a focused marketing strategy that is aimed at building the SeraNova brand. We intend to continue to attract and retain outstanding professionals critical to our professional services business. SeraNova places great emphasis on proactive recruiting, career development and employee retention.

Corporate Information

      SeraNova was incorporated in New Jersey under the name Infinient, Inc. on September 9, 1999 as a wholly-owned subsidiary of Intelligroup, Inc. Effective January 1, 2000, Intelligroup contributed the assets and liabilities of its Internet solutions group — including SeraNova India which commenced operations in October 1999, the capital stock of Network Publishing, Inc. and the capital stock of the Azimuth Companies — to SeraNova. This contribution was accounted for using the carryover basis of accounting. Intelligroup had acquired the Azimuth Companies in a transaction accounted for as a pooling of interests and had acquired Network Publishing, Inc. through a purchase acquisition. SeraNova began operations in India in October 1999 and the United Kingdom in November 1999.

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      On July 5, 2000, Intelligroup distributed to its shareholders all 16,629,413 shares of the SeraNova common stock it held. For each share of Intelligroup common stock held by an Intelligroup shareholder, one share of SeraNova common stock was issued. SeraNova split the number of its outstanding shares on the record date of such dividends so that the number of SeraNova’s outstanding shares equaled the number of outstanding shares of Intelligroup.

      Since the spin-off, SeraNova and Intelligroup have operated independently of each other as separate public companies. Prior to the spin-off, we entered into the following agreements with Intelligroup: Contribution Agreement; Services Agreement; Space Sharing Agreement; Tax Sharing Agreement and Distribution Agreement. Such agreements govern our on-going relationship with Intelligroup. See “The Spin-Off and Our Relationship with Intelligroup — Contractual Arrangements.”

      Our principal executive offices are located at 499 Thornall Street, Edison, New Jersey 08837. Our telephone number at that address is (732) 590-1600. Our website is located at http://www.SeraNova.com. The information contained at our website is not incorporated into and does not constitute a part of this prospectus.

      All references to “we,” “us,” “our” or “SeraNova” in this prospectus means SeraNova, Inc. and SeraNova’s business after the contribution of assets and liabilities of Intelligroup, Inc.’s Internet services business to us by Intelligroup and certain of its subsidiaries pursuant to the contribution agreement between Intelligroup, Inc. and SeraNova dated as of January 1, 2000.

The Proposed Merger

      On October 27, 2000, SeraNova and Silverline Technologies Limited announced that they had entered into an agreement and plan of merger, under which Silverline would acquire SeraNova in exchange for American depositary shares of Silverline then valued at approximately $99 million, and the assumption by Silverline of SeraNova indebtedness currently in the amount of approximately $12 million. The acquisition would occur by means of a merger of a wholly-owned subsidiary of Silverline into SeraNova in which each share of SeraNova common stock would be converted into 0.35 of a Silverline American depositary share. On October 26, 2000, the day before the agreement and plan of merger was signed, the closing price of a Silverline American depositary share for New York Stock Exchange composite transactions was $15.875. The merger is subject to regulatory approvals and approval by the shareholders of SeraNova and Silverline. Subject to such approvals, we expect that the merger will be complete sometime in the first quarter of 2001.

      The agreement and plan of merger provides that SeraNova will pay Silverline a termination fee of $4 million in certain circumstances if the agreement and plan of merger is terminated and within twelve months thereafter another person acquires at least 50% of the assets of SeraNova and its subsidiaries or at least 50% of the combined voting power of the shares of SeraNova common stock, or a merger, consolidation, business combination, recapitalization, dissolution, liquidation or similar transaction occurs involving SeraNova or any of its subsidiaries, in which the acquiring person or its stockholders will own at least 40% of the combined voting power of the parent entity resulting from any such transaction.

      For more information concerning Silverline and the proposed merger, see “The Proposed Merger.”

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The Offering

Use of proceeds	SeraNova will not receive any of the proceeds from the sale of shares in this offering by the selling shareholders.
Nasdaq symbol	SERA
Risk factors	See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in the common stock.
Transfer Agent and Registrar for our common stock	American Stock Transfer & Trust Company
Restriction on further acquisitions of common stock	Two of the selling shareholders — Strong River Investments, Inc. and Montrose Investments Ltd. — each may not convert SeraNova preferred stock into SeraNova common stock or exercise common stock purchase warrants to the extent that they would thereafter beneficially own more than 4.999% and/or 9.999% of the outstanding shares of SeraNova common stock. This restriction may be waived by either of the selling shareholders as to itself upon not less than 61 days’ notice to SeraNova. See “Selling Shareholders.”

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Summary Combined Financial Data

      The historical summary combined financial data set forth below for each of the fiscal years in the two-year period ended December 31, 1999, is derived from our audited combined financial statements included elsewhere in this prospectus. The historical summary combined financial data for the fiscal year ended March 31, 1998 is derived from our audited combined financial statements not included in this prospectus. The historical summary combined financial data for the six months ended June 30, 2000 and 1999 are unaudited but, in our opinion have been prepared on a basis consistent with that of each of the fiscal years in the three-year period ended December 31, 1999 (except for normal year-end adjustments). Historical financial information may not be indicative of our future performance as an independent company. The information set forth below should also be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Combined Financial Statements and Notes. See “Index to Financial Statements.” We have for all periods presented data about historical earnings per share. This is calculated for all periods by dividing net income (loss) by the outstanding shares of common stock of Intelligroup as of May 12, 2000, the spin-off record date plus the weighted average number of shares sold to investors on March 14, 2000 (see Note 13 to SeraNova’s Combined Financial Statements).

										Nine-Month
		Six Months Ended					Year Ended			Period Ended			Year Ended
		June 30,					December 31,			December 31,			March 31,
		2000			1999		1999(1)			1998(2)			1998
		(in thousands, except per share data)
Statement of Operations Data:
	Revenues	$	36,019		$	16,602	$	39,795		$	12,438		$	8,995
	Cost of sales		18,435			9,515		22,475			7,315			4,797
	Selling, general and administrative expenses		23,095			6,100		17,605			5,106			3,812
	Depreciation and amortization		1,131			279		1,131			102			133
	Operating income (loss)		(6,642	)		708		(1,416	)		(85	)		253
	Net income (loss)		(4,891	)		432		(1,261	)		(552	)		(253	)
	Net income (loss) per common share — basic and diluted(3)	$	(0.29	)	$	0.03	$	(0.08	)	$	(0.03	)	$	(0.02	)
	Shares used in per share calculation of net income (loss) — basic and diluted(3)		17,123			16,629		16,629			16,629			16,629
Balance Sheet Data (at period end):
	Cash and cash equivalents	$	920		$	99	$	611		$	677		$	368
	Working capital (deficit)		13,145			1,120		(776	)		(424	)		145
	Total assets		36,874			12,936		18,880			5,775			3,216
	Total liabilities		26,170			7,106		13,910			5,383			2,975
	Shareholders’ equity		10,704			5,830		4,970			392			241
Other Data:
	Capital expenditures	$	5,270		$	392	$	2,175		$	603		$	7

(1)	On January 8, 1999, Intelligroup, Inc. acquired the common stock of Network Publishing, Inc. in a purchase business combination. The results of operations of Network Publishing, Inc. have been included above since the date of acquisition. Pro forma results for the period January 1, 1999 to January 7, 1999 are not material to SeraNova’s Combined Financial Statements for the year ended December 31, 1999.
(2)	Effective April 1, 1998, we changed our fiscal year from March 31 to December  31.
(3)	See Note 2 to SeraNova’s Combined Financial Statements.

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Summary of Unaudited Pro Forma Combined Financial Data

      We entered into certain agreements with Intelligroup that became effective January 1, 2000. Under these agreements, Intelligroup is continuing to provide us with certain general and administrative functions on a fee basis. See “Relationship with Intelligroup” for a summary of these agreements. We believe that, temporarily, these agreements are the most cost efficient and least disruptive way to maintain the administrative support services we require.

      The pro forma statement of operations for the year ended December 31, 1999 adjusts the results of operations as if the agreements with Intelligroup had been effective during 1999. The pro forma amounts are presented for informational purposes only. The pro forma financial data is not necessarily indicative of our results of operations.

SERANOVA, INC. AND AFFILIATES

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

For the Year Ended December 31, 1999

(in thousands, except per share data)

		Historical
		SeraNova, Inc.			Pro Forma Adjustments						Pro Forma
Revenues		$	39,795								$	39,795
Cost of Sales			22,475									22,475
Gross Profit			17,320									17,320
Selling, general and administrative expenses			17,605		$	(803	)(1)	$	1,162	(2)		17,964	(3)
Depreciation and amortization			1,131									1,131
	Total operating expenses		18,736			(803	)		1,162			19,095
Operating loss			(1,416	)		803			(1,162	)		(1,775	)
Other income (expense), net			(80	)					(288	)(4)		(368	)
Loss before income taxes			(1,496	)		803			(1,450	)		(2,143	)
Benefit for income taxes			(235	)								(235	)
Net loss		$	(1,261	)	$	803		$	(1,450	)	$	(1,908	)
Unaudited pro forma net loss per common share — basic and diluted		$	(0.08	)							$	(0.11	)
Shares used in per share calculation of unaudited pro forma net loss — basic and diluted(5)			16,785									16,785

(1)	Represents the elimination of historical costs covered by the services and space sharing agreements.
(2)	Represents the estimated annual costs that would have been incurred under the services and space sharing agreements (See Note 4 to the Combined Financial Statements).
(3)	The difference between the historical costs covered by the services and space sharing arrangements and the costs to be incurred under the services and space sharing agreements is due to our growth throughout 1999 which resulted in our utilizing an increasing volume of office space and incurring higher costs as the year progressed.
(4)	Represents the estimated annual interest expense to be incurred if the bank credit facility was in place for the year 1999.
(5)	Represents the outstanding shares of Intelligroup as of May 12, 2000, the spin-off date of record, plus the weighted average number of shares sold to certain of the selling shareholders on March 14, 2000.

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RISK FACTORS

      You should carefully consider each of the following risks and all of the other information in this prospectus. Some of the following risks relate principally to the spin-off from Intelligroup while other risks relate principally to the proposed merger with Silverline or to our business in general and the industry in which we operate. Finally, other risks relate principally to the securities markets and ownership of our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected. If that happens, the trading price of our common stock could decline.

      This prospectus contains forward-looking statements that involve risks and uncertainties. We use words such as “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” and similar expressions to identify such forward-looking statements. This prospectus also contains forward-looking statements attributed to certain third parties relating to their estimates regarding, among other things, the growth in the market for Internet professional services. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks faced by us described below and elsewhere in this prospectus.

RISKS RELATING TO THE SPIN-OFF

If the Spin-off Was Not a Legal Dividend, It Could Be Held Invalid by a Court.

      The dividend which effected the spin-off was subject to New Jersey corporate law. We cannot assure you that a court will not determine that the spin-off was invalid under New Jersey law and reverse the spin-off. The resulting complications, costs and expenses could have a material adverse effect on our business, financial condition and results of operations.

Creditors of Intelligroup at the Time of the Spin-off May Challenge the Spin-off.

      If a court in a lawsuit by an unpaid creditor or representative of creditors of Intelligroup, such as a trustee in bankruptcy, were to find that among other reasons, at the time of the spin-off, Intelligroup or SeraNova:

•  was insolvent;

•  was rendered insolvent by reason of the spin-off;

•  was engaged in a business or transaction for which Intelligroup’s or SeraNova’s remaining assets constituted unreasonably small capital; or

•  intended to incur, or believed it would incur, debts beyond its ability to pay such debts as they matured,

the court may be asked to void the spin-off (in whole or in part) as a fraudulent conveyance. The court could then require that the shareholders return some or all of the shares of SeraNova common stock, or require Intelligroup or SeraNova, as the case may be, to fund certain liabilities of the other company for the benefit of creditors. The measure of insolvency for purposes of the foregoing will vary depending upon the jurisdiction whose law is being applied. Generally, however, each of Intelligroup and SeraNova, as the case may be, would be considered insolvent if the fair value of its assets were less than the amount of its liabilities or if it incurred debt beyond its ability to repay such debt as it matures. Intelligroup and SeraNova believe that each company has been solvent since the spin-off.

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RISKS RELATING TO SILVERLINE MERGER

SeraNova common shareholders cannot be sure what the market value of their Silverline American depositary shares will be after the merger has been completed.

      On October 26, 2000, the day before the agreement and plan of merger was signed, the closing price of a Silverline American depositary share for New York Stock Exchange composite transactions was $15.875, so that the consideration offered in the merger agreement per share of SeraNova common stock had a value on that date of $15.875 × 0.35, or $5.5563. However, if the market value of Silverline American depositary shares on the effective date of the merger is less than $15.875, holders of SeraNova common stock will receive Silverline ADSs in the merger with an initial value less than $5.5563 per share of SeraNova common stock.

      The merger agreement makes no provision for adjusting the exchange ratio to reflect changes in the relative market values of the SeraNova common stock and the Silverline ADSs prior to the effective time of the merger. The market prices of Silverline ADSs and SeraNova common stock, and the value of Silverline ADSs relative to SeraNova common stock, may be substantially different on the date the merger agreement was signed, the date of this prospectus, the date of the meetings of the SeraNova and Silverline shareholders to approve the merger, and the effective date of the merger. For example, since June 20, 2000, when the Silverline ADSs commenced trading on the New York Stock Exchange, the price of a Silverline ADS ranged from a low of $11.625 to a high of $30.75, and since July 6, 2000, when the SeraNova common stock commenced trading on the Nasdaq system, the closing price of a share of SeraNova common stock ranged from a low of $1.7812 to a high of $12.25. See “Price Range of SeraNova Common Stock.” These market prices may vary depending upon changes in the business, operations or prospectus of SeraNova and Silverline, market assessments of the likelihood that the merger will be consummated and the timing thereof, general market and economic conditions, and other factors both within and beyond the control of SeraNova and Silverline.

Silverline may not realize fully the cost savings and other benefits it expects to realize as a result of the merger. This may adversely affect Silverline’s earnings and financial condition.

      To achieve the benefits which Silverline expects from the merger, it will need to integrate the operations of SeraNova into Silverline’s operations quickly and efficiently. The integration of SeraNova into Silverline will be complex and time consuming, and will require substantial attention from Silverline management. The diversion of management attention from other matters, and any difficulties encountered in the integration process, could have a material adverse effect upon the sales, level of expenses, operating results and financial condition of Silverline.

After the merger, customers of Silverline may seek alternative information technology services.

      After the merger, some customers of either Silverline or SeraNova could transfer their business. We cannot predict whether this will occur or to what extent.

As a result of the Silverline merger, SeraNova may become liable to Intelligroup for taxes connected with the spin-off.

      The spin-off has been treated as tax-free under the Internal Revenue Code. However, Section 355(e) of the Code provides that if one of the companies involved in the spin-off is acquired or sold within a two-year period after the spin-off, the spin-off may become taxable to Intelligroup. SeraNova has agreed to indemnify Intelligroup for any tax liabilities which Intelligroup may incur if the completion of the Silverline merger were to result in the spin-off being deemed a taxable transaction.

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RISK FACTORS RELATING TO OUR BUSINESS AND OUR SECURITIES

Our Limited Operating History as a Separate Company Makes it Difficult to Evaluate Our Business.

      SeraNova was operated as a separate business division within Intelligroup since September 1999. We were not operated as a separate company until January 1, 2000 and, therefore, we have a limited operating history as a stand-alone company. Accordingly, we have a limited history of addressing material risks in our business. These risks are magnified by the fact that we are operating in the new and expanding Internet professional services markets. These risks include our potential inability to:

•  attract, retain and motivate qualified personnel;

•  expand our sales and support staff;

•  obtain financing for our expanding business which may be hindered by our lack of an operating history as a separate corporate entity;

•  develop our own internal operating and financial reporting procedures;

•  increase the scale of our operations;

•  maintain sufficiently high employee utilization;

•  respond effectively to competitive pressures;

•  continue to develop and upgrade our services and solutions;

•  replace the transitional services necessary for the conduct of our business that Intelligroup has agreed to provide to us for a limited period after the completion of the spin-off; and

•  satisfy legal and regulatory requirements.

      In addition, we believe that our historical financial statements for all periods do not reflect potential changes that may occur in our funding and our operations as a result of our becoming a stand-alone company, as discussed in the following risk factors.

We Anticipate Future Losses.

      We expect to incur significant sales and marketing, infrastructure development and general and administrative expenses. As a result, we anticipate losses through at least the third quarter of 2000. In order to achieve profitability, we will need to control costs associated with building our own infrastructure as well as increase our revenues. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis in the future. We cannot assure you that we will be able to contain costs, grow revenue or increase profitability.

We Derive a Substantial Portion of Our Revenue from a Small Number of Clients. Any Significant Loss of or Delay in Services Provided to Those Clients Could Significantly and Adversely Impact Our Financial Performance.

      We have historically derived, and for the foreseeable future expect to derive, a significant portion of our revenue from a relatively small number of clients. For the year ended December 31, 1999, six clients, including American Express (our largest customer, which accounted for approximately 28% of total revenues), accounted for approximately 50% of total revenues. During the six months ended June 30, 2000, American Express and Volkswagen of America accounted for approximately 39% and 13% of total revenues, respectively. If any of these clients stop or delay engaging us for services, our financial performance would be negatively impacted. Additionally, American Express has not yet consented to the assignment of their contracts with Intelligroup to us.

We Will Not Be Able to Rely on Intelligroup to Fund Future Capital Requirements.

      Prior to January 1, 2000, the assets, liabilities, operations and personnel associated with our business were operated within Intelligroup and certain of its subsidiaries. As such, all of our capital requirements in

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excess of internally generated funds were provided by Intelligroup’s equity offerings or credit facilities. Consequently, we did not independently maintain or manage any cash and were not responsible for obtaining external sources of financing. Pursuant to the terms of Intelligroup’s current credit facility, Intelligroup is not permitted to provide funds to finance our working capital or other cash requirements. While our agreements with Intelligroup permit, and Intelligroup has in the past provided, intercompany loans, Intelligroup is no longer able to fund our operations. We believe our capital requirements will vary greatly from quarter to quarter, depending on, among other things, capital expenditures, fluctuations in our operating results and financing activities. We cannot guarantee that financing, if needed, will be available on favorable terms, if at all. In addition, future financing could subject us to restrictive covenants that may limit our ability to take certain actions. We may not be able to obtain financing with interest rates as favorable as those historically obtained by Intelligroup. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

We Anticipate That We Will Need to Consummate Additional Debt or Equity Financings to Repay Our Obligations To Intelligroup.

      On May 31, 2000, we entered into a promissory note with Intelligroup for $15.1 million. Under the terms of the note, we paid Intelligroup $3.0 million prior to September 30, 2000, and, under the terms of the note as amended effective September 29, 2000, SeraNova paid Intelligroup an additional $500,000 on November 8, 2000, and will pay additional installments of $500,000 on or before each of the last days of January, February, March, April and May 2001. The balance of principal and interest on the note is due on July 31, 2001. If the Silverline merger is not completed, we anticipate that our cash flow from operations would not be sufficient to satisfy our obligations to Intelligroup and, therefore, we would need to pursue alternative sources of capital, including debt or equity financings, to meet these obligations. On July 14, 2000, SeraNova executed an agreement with Fleet Credit Corporation for a three-year asset-based revolving credit facility that will provide SeraNova with up to $15 million in financing. However, if at any time adequate funds are not available and we are unable to repay Intelligroup in a timely manner, Intelligroup will be entitled to pursue all remedies under the note, including legal proceedings. In the event we issue and sell shares of capital stock, such issuances may dilute our existing shareholders. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

Potential Conflicts with Intelligroup May Not Be Resolved in Our Favor.

      Conflicts may develop between Intelligroup and us regarding the terms of our agreements with Intelligroup. Such disputes may not be resolved in our favor. It is our policy and the policy of Intelligroup that transactions between Intelligroup and SeraNova will generally be on terms and conditions comparable to those between unaffiliated third parties. However, because our agreements with Intelligroup were for the most part negotiated in the context of a parent-subsidiary relationship, we cannot assure you that these agreements, or the transactions with Intelligroup contemplated by such agreements, are on terms as favorable to us as could have been obtained from unaffiliated third parties. If such conflicts are not resolved in our favor, our business, financial condition and results of operations could be adversely affected. See “The Spin-off and Our Relationship with Intelligroup.”

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Variability of Quarterly Operating Results May Adversely Affect Our Stock Price.

      The market price of our common stock may be adversely affected because our revenue, gross profit, operating income and net income or net loss may vary substantially from quarter to quarter. Many factors may contribute to fluctuations in our operating results. These factors include the following:

      Factors within our control:

      •  changes in our pricing policies;

      •  introduction of our new services offerings;

      •  possibility of over-runs on fixed-price contracts;

      •  the timing and number of personnel we hire;

      •  the timing and acquisition of new businesses by us; and

      •  the efficiency with which we utilize our employees.

      Factors not exclusively within our control:

      •  changes in our competitors’ pricing policies;

      •  variations in billing margins and personnel utilization rates;

      •  introduction of new services by our competitors;

      •  acceptance of our new services offerings;

      •  the market for qualified technical personnel;

      •  seasonal impact on customer spending;

      •  cancellation or delay of contracts by our customers or potential customers;

      •  length of our sales cycle;

      •  short-term nature of our customers’ contractual commitments;

      •  the number, size, scope and timing of our projects; and

      •  the demand for Internet professional services.

We May Not Be Able to Expand Our Own Sales and Support Organization.

      We need to substantially expand our direct and indirect sales activities and we may not be able to successfully do so. Our services require a sophisticated and technical sales effort targeted at professionals at different levels within our prospective customers’ organizations. Without an expanded sales effort, we may not be able to:

•  build market awareness and establish name recognition for SeraNova;

•  compete effectively with larger Internet services organizations; or

•  establish alternative sales channels.

      We cannot be certain that we will be able to successfully expand our sales and marketing efforts or that we will be able to successfully promote our existing or future services offerings. See “Business — Business Strategy” and “— Sales and Marketing.”

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Our Historical Financial Information May Have Limited Relevance to Our Results of Operations as a Separate Company.

      Prior to the transfer of Intelligroup’s Internet services business to us on January 1, 2000, Intelligroup did not account for our business as, and prior to September 1999, we were not operated as, a separate unit or division. In presenting our historical financial statements for all periods, we specifically identified all revenue, cost of sales, other income (expense) and certain selling, general and administrative expenses incurred by Intelligroup on our behalf. Other selling, general and administrative expenses were allocated using methodologies which took into consideration the ratio of our revenue to the consolidated revenue of Intelligroup, head count, occupancy and other factors. However, we cannot assure you that our historical financial information prior to December 31, 1999 necessarily reflects what the results of operations, financial position and cash flows would have been had we been a separate company, or is indicative of our future results of operations, financial positions and cash flows. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We May Not Be Able to Hire and Retain Quality Technical and Managerial Personnel Due to a Competitive Market.

      We may not be able to hire and retain the number of quality technical personnel necessary to meet our requirements. Our future success depends to a significant extent on our ability to attract, train and retain quality professionals who are highly skilled in the Internet and its rapidly changing technology. We believe that there is a worldwide shortage of, and significant competition for, professionals with the advanced technical and managerial skills necessary to perform the services we offer. Our business, financial condition, results of operations and growth prospects could decline significantly if we are unable to hire and retain qualified technical personnel that are necessary to conduct and expand our operations successfully. While substantially all of our technical personnel have entered into agreements which contain non-disclosure, non-solicitation and non-competition provisions, we cannot guarantee that such agreements are enforceable or ensure continued service by such individuals. See “Business — Business Strategy” and “— People and Culture.”

If We Experience Lower Billing and Utilization Rates Our Results of Operations Will Be Adversely Affected.

      Our personnel costs are relatively fixed for any given period. Our personnel expense levels are based in part on expectations of future revenue. As a result, our operating results have been, and in the future will continue to be, impacted by changes in technical personnel billing and utilization rates. We may be required to increase the compensation of our employees due to the competitive market for technical personnel, which would likely result in lower billing margins. During periods of rapid and concentrated hiring, technical personnel utilization rates have been, and are expected to continue to be, adversely affected and we are likely to incur greater technical training costs. Due to these and other factors, if we are successful in expanding our services offerings and revenue, periods of variability in utilization are likely to occur. We believe, therefore, that past operating results and period-to-period comparisons should not be relied upon as an indication of future operating performance. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Selected Quarterly Results of Operations.”

There Is Intense Competition in the Internet Services Market.

      The Internet services market is relatively new, intensely competitive and rapidly changing. We expect competition to continue and intensify which may adversely affect our ability to maintain or increase our market share. To be competitive, we must respond effectively to evolving changes in technology as well as to our competitors’ innovations by continuing to enhance our services offerings and expand our sales channels. Any pricing pressures, reduced margins or loss of market share resulting from our failure to compete effectively could materially adversely affect our business. Furthermore, we believe the barriers to entry into our markets are relatively low, which enable new competitors to offer competing services.

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Current or future competitors may develop or offer services that are comparable or superior to ours at a lower price, which could result in a decrease in our revenues and the value of your investment.

      Many of our current and potential competitors have longer operating histories and substantially greater financial, marketing, technical and other resources. Some of these competitors have a greater ability to provide services on a national or international basis and may be able to adapt more quickly to changes in customer needs or to devote greater resources to providing Internet professional services. Such competitors may attempt to increase their presence in our markets by forming strategic alliances with other competitors or our customers, offering new or improved products and services to our customers or increasing their efforts to gain and retain market share through competitive pricing. In addition, other companies have developed particularly strong reputations in niche service offerings or local markets which may provide them with a competitive advantage. See “Business — Competition.”

We May Be Liable To Dissatisfied Customers.

      We design, develop, implement and manage Internet solutions that are critical to the operation of our customers’ businesses. Defects in the solutions developed by us could result in delayed or lost revenue to our customers. Since many of our projects are critical to the operation of our customers’ businesses and provide benefits that are difficult to quantify, the claim for damages by any customer could be substantial. In cases in which we have written contracts with our customers, we attempt to contractually limit our liability for damages arising from errors, mistakes, omissions or negligent acts performed while rendering our services. However, the limitations of liability set forth in our contracts may not be enforceable in all instances or may not otherwise protect us from liability for damages. Additionally, we do not have written contracts with many of our customers, and therefore we have no contractual limitation of liability. We do not carry errors and omissions insurance. We intend to pursue such coverage. However, we can not assure you that such coverage will be available on terms acceptable to us. Our business, financial condition and results of operations could decline if customers successfully assert one or more large claims that exceed available insurance coverage, if any, against us.

We Must Manage Our Growth Effectively.

      We have experienced substantial growth in revenue, employees and customers during the past few years. Future growth will likely place a strain on our resources. We also expect that additional demands will be placed on our resources due to our becoming a separate company. To manage our growth effectively, we will have to develop and improve our operational, financial and other internal systems, as well as our business development capabilities. We must also continue to attract, train, retain, motivate and manage our employees.

      Our future success will depend in large part on our ability to:

•  continue to maintain high rates of employee utilization at profitable billing rates;

•  successfully execute fixed-price contracts within our target cost parameters;

•  maintain project quality, particularly if the size and scope of our projects increase; and

•  integrate the services offerings, operations and employees of acquired businesses.

      In the foreseeable future, Intelligroup will continue to provide us with a limited amount of administrative, operational and other infrastructure resources. Over the long term, our ability to manage growth will depend on our ability to develop independent internal systems, as well as our own business development capabilities. If we fail to manage our growth effectively, it could adversely affect our business, financial condition and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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We May Not Be Able to Keep Pace With Anticipated Rapid Technological Changes.

      Our success depends, in part, on our ability to develop solutions that keep pace with:

•  rapidly changing Internet and other technology;

•  evolving industry standards;

•  changing customer objectives and standards; and

•  frequent new services introductions.

      Any delay or failure on our part in responding quickly, efficiently and cost-effectively to these developments could result in serious harm to our business and operating results. The development and commercialization of new technologies and the introduction of new services could render our existing services obsolete or unmarketable. We cannot assure you that we will be successful in identifying, developing, marketing or implementing the new services necessary to keep pace with technological change. We must enhance existing services while developing, integrating and introducing new services offerings on a timely and cost-effective basis to keep pace with technological developments and address increasingly sophisticated customer requirements. We may experience contractual, technical or personnel difficulties that could delay or prevent our successful introduction of such new services. See “Business — Industry Background.”

Our Success is Dependent Upon Our Key Personnel.

      We believe our success depends to a significant degree upon the continued service of the key members of our management team, Rajkumar Koneru, our chairman, chief executive officer and president, Ravi Singh, our chief financial officer and executive vice president, and Rajan Nair, our chief operating officer, because of their industry knowledge, marketing skills and relationships with our major customers, strategic partners and employees. The loss of the services of any one of them could materially adversely affect us. See “Management — Employment Agreements.”

Our Future Acquisitions May Negatively Impact Our Business.

      A key element of our strategy is growth by acquisition. We expect to undertake acquisitions in the future, although none are planned or being negotiated as of the date of this prospectus. Risks associated with an acquisition include:

•  potential difficulty assimilating acquired personnel, operations, customers or vendors;

•  possibility that we are unable to retain acquired personnel, customers or vendors;

•  management of growth issues;

•  dilution to existing shareholders in the event we have to incur debt or issue equity securities to pay for any future acquisitions;

•  risks associated with financing;

•  disruption of our ongoing business and distraction of our management and employees; and

•  unanticipated expenses or liabilities or lower than expected revenues of the business acquired.

Although we intend to conduct due diligence reviews with respect to all acquisition candidates, we may not successfully identify all material liabilities or risks related to a potential acquisition candidate.

We May Experience Cost Over-runs on Fixed-Price Contracts.

      We bear the risk of cost over-runs and inflation in connection with fixed-price projects. An increasing number of our future projects may be fixed-price contracts rather than contracts billed based on actual time spent providing services. Cost over-runs for fixed-price contracts would likely result from our

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inaccurately estimating the time or resources required. Inaccurate estimates on our part could lead to losses on our engagements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview.”

We Generally Do Not Have Long-Term Contracts and Need to Establish Relationships

With New Clients.

      We generally are engaged by clients on a project-by-project basis, rather than long-term contracts. As a result, clients may not engage us for future services once a project has been completed. Additionally, most of our contracts can be canceled by the customer on short notice and without significant penalty. The cancellation or significant reduction in the scope of a large contract could have a material adverse effect on our business.

We Rely on Our Intellectual Property Rights.

      Our future success is dependent, in part, upon our proprietary implementation methodology, development tools and other intellectual property rights. In order to protect our proprietary rights, we:

•  rely upon trade secrets, nondisclosure and other contractual arrangements;

•  rely on copyright and trademark laws;

•  enter into confidentiality agreements with employees, consultants and customers;

•  limit access to and distribution of proprietary information; and

•  require almost all employees and consultants to assign to us their rights in intellectual property developed during their employment or engagement by us.

      There can be no assurance that the steps taken by us will be adequate to deter misappropriation of our proprietary information or that we will be able to detect unauthorized use of and take appropriate steps to enforce our intellectual property rights.

      We believe that our trademarks, service marks, services, methodology and development tools do not infringe on the intellectual property rights of others. We cannot assure you, however, that such a claim will not be asserted against us in the future, or that if asserted, any such claim will be successfully defended.

Our Success Depends on the Continued Growth of the Internet.

      The Internet is new and rapidly evolving. Our future success depends on the acceptance and continued use of the Internet for conducting business. Our business will be adversely affected if commerce on the Internet does not continue to grow, or grows more slowly than anticipated. Some of the critical issues relating to Internet usage that concern businesses and consumers include:

•  actual or perceived lack of security;

•  cost and ease of Internet access;

•  intellectual property ownership;

•  potentially inadequate network infrastructure;

•  quality of service; and

•  uncertainty of potential taxation of electronic commerce transactions.

Government Regulation and Legal Uncertainties Relating to the Internet Could Affect Our Business.

      An increase in the regulation of the Internet could hinder the growth and the use of the Internet for business and commerce. Although there are currently few laws and regulations in effect, federal, state and

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local governmental organizations as well as foreign governments are considering a number of legislative and regulatory proposals. New laws and regulations may govern or restrict the areas of:

•  user privacy;

•  pricing and taxation of goods and services offered over the Internet;

•  quality of services;

•  content of websites; and

•  intellectual property ownership.

      We can not be certain as to how new or existing laws governing the Internet will affect our business.

We Face Risks Because We Have International Operations.

      Our international operations have increased in recent years. For the year ended December 31, 1999 and the six months ended June 30, 2000, approximately 31% and 28.5% of our revenues, respectively, were derived from international operations. To date, we have established foreign operations in Australia, New Zealand, the Philippines, Thailand, India and the United Kingdom. In order to expand international sales, we may establish or acquire additional foreign operations. Increasing foreign operations has required and likely will continue to require significant management attention and financial resources and could materially adversely affect our business. There can be no assurance that we will be able to increase international market demand for our services. The risks in our international business activities include:

•  unexpected changes in regulatory environments;

•  foreign currency fluctuations;

•  tariffs and other trade barriers;

•  longer accounts receivable payment cycles;

•  difficulties in managing international operations;

•  political instability;

•  potential foreign tax consequences including restrictions on the repatriation of earnings; and

•  the burdens of complying with a wide variety of foreign laws and regulations.

      There can be no assurance that such factors will not have a material adverse effect on our future international sales, if any, and, consequently, on our business.

We Face Risks Associated With Our Operations in India.

      We commenced Internet operations in India in October 1999. As a result, we are subject to the risks associated with doing business in India. India’s central and state governments heavily regulate the Indian economy. In the recent past, the government of India has provided significant tax incentives and relaxed certain regulatory restrictions in order to encourage foreign investment in certain sectors of the economy. Certain of these benefits that directly affect our Indian operations include:

•  tax holidays;

•  liberalized import and export duties; and

•  preferential rules on foreign investment and repatriation.

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      Changes in the business, political or regulatory climate of India could have a material adverse effect on our Indian business. Changes in the following factors could have a material adverse effect on our business:

•  inflation;

•  interest rates;

•  taxation; or

•  other social, political, economic or diplomatic developments affecting India in the future.

Risk of Increased Government Regulation of Immigration.

      In the United States, we have relied, and in the future expect to continue to rely, increasingly upon attracting and retaining personnel with technical and project management skills from other countries. The Immigration and Naturalization Service limits the number of new petitions it approves each year. Accordingly, we may be unable to obtain visas necessary to bring critical foreign employees to the United States. Any difficulty in hiring or retaining foreign nationals in the United States could increase competition for technical personnel and have a material adverse effect on our business.

Our Stock Price May Be Volatile.

      The market price of our common stock may be volatile as the stock market in general has been volatile. In addition, the stock prices for many technology and Internet-related companies, including Intelligroup, have experienced wide fluctuations which often have been unrelated to operating performance. Investors may not be able to resell their shares of common stock at acceptable prices following periods of volatility because of the market’s adverse reaction to such volatility. Factors that could cause volatility in our stock price include, among other things:

•  actual or anticipated variations in quarterly results;

•  variations in our operating results which may cause us to fail to meet analysts’ or investors’ expectations;

•  changes in earnings estimates or recommendations by securities analysts;

•  conditions or trends in the Internet services industry;

•  changes in the market valuations of, and earnings and other announcements by, providers of Internet professional services;

•  announcements by us or our competitors of technological innovations;

•  additions or departures of our key personnel; and

•  volume and timing of sales of our common stock.

Anti-Takeover Provisions and Our Right to Issue Preferred Stock Could Deter Our Acquisition by a Third Party.

      Certain provisions of our certificate of incorporation and by-laws could make it more difficult for a third party to acquire control of us, even if such change in control would be beneficial to or favored by our shareholders. For example, our certificate of incorporation eliminates the rights of shareholders to call a special meeting of shareholders or take action by written consent. In addition, our certificate of incorporation allows our board of directors to issue preferred stock without shareholder approval. Such issuances could make it more difficult for a third party to acquire us. As a New Jersey corporation, we are also subject to the New Jersey Shareholders Protection Act contained in Section 14A:10A-1. In general, Section 14A:10A-1 prohibits a publicly-held New Jersey corporation from engaging in a “business combination” with an “interested shareholder” for a period of five years following the date the person became an interested shareholder, unless, among other things:

•  the board of directors approved the transaction in which such shareholder became an interested shareholder prior to the date the interested shareholder attained such status; and

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•  the business combination is approved by the affirmative vote of the holders of at least 66 2/3% of the corporation’s voting stock not beneficially owned by the interested shareholder at a meeting called for such purpose.

      A “business combination” generally includes a merger, sale of assets or stock, or other transaction resulting in a financial benefit to the interested shareholder. In general, an interested shareholder is a person who, together with affiliates and associates, owns, or within five years prior to the determination of interested shareholder status, did own, 10% or more of the corporation’s voting stock. See “Description of Capital Stock — Preferred Stock” and “— Anti-Takeover Effects of Certain Certificate of Incorporation and By-law Provisions.”

Absence of Dividends.

      We have never paid, and do not anticipate paying, any cash dividends on our common stock in the foreseeable future.

THE PROPOSED MERGER

      On October 27, 2000, SeraNova and Silverline Technologies Limited announced that they had entered into an agreement and plan of merger, under which Silverline would acquire SeraNova in exchange for American depositary shares of Silverline then valued at approximately $99 million, and the assumption by Silverline of SeraNova indebtedness currently in the amount of approximately $12 million. The acquisition would occur by means of a merger of a wholly-owned subsidiary of Silverline into SeraNova in which each share of SeraNova common stock would be converted into 0.35 of a Silverline American depositary share, and each share of SeraNova’s 6% series A convertible preferred stock would, at the option of the holder, either be converted into the number of Silverline ADSs the holder would have received if such preferred share had been converted into SeraNova common stock immediately before the Silverline merger, or be converted into a cash payment equal to 120% of the stated value of a preferred share, which stated value is currently $10,000. On October 26, 2000, the day before the agreement and plan of merger was signed, the closing price of a Silverline American depositary share for New York Stock Exchange composite transactions was $15.875. The merger is subject to regulatory approvals and approval by the shareholders of SeraNova and Silverline. Subject to such approvals, we expect that the merger will be complete sometime in the first quarter of 2001.

      The agreement and plan of merger provides that SeraNova will pay Silverline a termination fee of $4 million in certain circumstances if

•  the agreement and plan of merger is terminated after a competing proposal or offer is made to acquire at least 20% of the assets of SeraNova and its subsidiaries or at least 20% of the combined voting power of the shares of SeraNova common stock, or after a competing proposal is made to involve SeraNova or any of its subsidiaries in a merger consolidation, business combination, recapitalization, dissolution, liquidation or similar transaction in which the other party to the transaction or its stockholders would own at least 20% of the combined voting power of the parent entity resulting from any such transaction, and

•  within twelve months of such termination, SeraNova or any of its subsidiaries enters into an agreement with respect to, or approves or consummates, a proposal to acquire at least 50% of the assets of SeraNova and its subsidiaries or at least 50% of the combined voting power of the shares of SeraNova common stock, or a proposal involving SeraNova or any of its subsidiaries in a merger, consolidation, business combination, recapitalization, dissolution, liquidation or similar transaction in which the other party to the transaction or its stockholders will own at least 40% of the combined voting power of the parent entity resulting from any such transaction.

      Silverline Technologies is a Bombay, India based international software solutions provider with more than 12 years of industry experience and over 1600 software professionals globally. Silverline provides IT solutions and outsourcing services with specific focus in eBusiness, CRM, Legacy Transformation, and Application Maintenance. While experienced in many business disciplines, Silverline brings exceptional skills to the key areas of telecommunications, banking, utilities, insurance, transportation, and retail. With

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annual revenues of over $116 million for trailing twelve months ended June 2000, Silverline provides solutions to Fortune 500 companies as well as major corporations throughout the world. Silverline Technologies is ISO 9001 and SEI CMM Level 4 certified with facilities in the United States, India, Canada, the UK, Germany, Hong Kong, Japan, and Egypt. Silverline uses its global delivery model to provide superior service, accelerated delivery and significant cost savings to its network of worldwide clients.

DIVIDEND POLICY

      We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain any future earnings to fund future growth and development of our business and, therefore, do not anticipate paying any cash dividends in the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors after taking into account factors such as our earnings, financial condition, operating results and current and anticipated cash needs, as well as any economic conditions the board of directors may deem relevant. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

PRICE RANGE OF SERANOVA COMMON STOCK

      The common stock of SeraNova has been quoted on the Nasdaq National Stock Market since July 6, 2000, under the symbol “SERA.” The following table shows the high and low sales prices of a share of SeraNova common stock for the calendar quarterly periods indicated:

	High		Low
2000
Third quarter (beginning July 6)	$	12.25	$	4.9375
Fourth quarter (through November 7)		5.375		1.7812

      On November 7, 2000, the closing price for a share of SeraNova common stock as quoted on the Nasdaq National Stock Market was $4.00.

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CAPITALIZATION

      The following table sets forth our capitalization as of June 30, 2000 on an actual and as adjusted to reflect (i) the spin-off as if it had occurred on June 30, 2000, and (ii) the private placement on September 29, 2000 of 800 shares of 6% series A convertible preferred stock and common stock warrants, and the application of $3,000,000 of the $8,000,000 of proceeds from that sale to pay the installment of principal due September 30, 2000 on the note payable to Intelligroup.

      You should read this table in conjunction with “Selected Historical Financial Data,” our historical financial statements, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which appear elsewhere in this prospectus.

		June 30, 2000
		(in thousands)
		Actual			As Adjusted
Note payable to Intelligroup(1)		$	15,109		$	12,109
Long-term debt			1,888			1,888
Preferred Stock, $0.01 par value — 5,000,000 shares authorized; 800 shares of 6% series A cumulative preferred stock issued and outstanding as adjusted			—			7,307
Shareholders’ equity
Common stock, $0.01 par value — 40,000,000 shares authorized; 17,460,883 shares issued and outstanding(2)			175			175
Common stock warrants			—			693
Additional paid-in capital			9,992			17,558
Intelligroup investment(3)			7,566			—
Accumulated comprehensive loss			(7,029	)		(7,029	)
	Total shareholders’ equity		10,704			11,397
	Total capitalization	$	27,701		$	32,701

(1)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”
(2)	Excludes 1,072,251 vested SeraNova options as of July 6, 2000.
(3)	At the time of the spin-off (July 5, 2000), the Intelligroup investment was converted to common stock and additional paid-in capital.

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SELECTED HISTORICAL FINANCIAL DATA

      The selected historical financial data for all periods reflects the combined results of operations and financial condition of Intelligroup’s Internet services business as if we had existed as a corporation separate from Intelligroup during the periods presented. The selected historical data includes the historical assets, liabilities, revenue and expenses directly related to our operations that were either specifically identified or in the case of certain selling, general and administrative expenses, allocated using methodologies which took into consideration the ratio of our revenue to the consolidated revenue of Intelligroup, headcount, occupancy or other appropriate factors. You should read the selected historical financial data together with our financial statements and the sections of this prospectus entitled “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

      We derived the selected financial data presented below from our combined financial statements described in this paragraph. Arthur Andersen LLP, independent public accountants, audited our combined financial statements as of December 31, 1999 and 1998 and for the year ended December 31, 1999, the nine months ended December 31, 1998 and the year ended March 31, 1998. Their report relating to such audits appears on page F-2 of this prospectus. The historical financial data set forth below for the fiscal year ended March 31, 1997 is derived from SeraNova’s audited combined financial statements not included in this prospectus. The historical financial data set forth below as of June 30, 2000 and 1999, and for the six months ended June 30, 2000 and 1999 are derived from SeraNova’s unaudited combined financial statements. In our opinion, these unaudited combined financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information.

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SERANOVA, INC. AND AFFILIATES

SELECTED HISTORICAL FINANCIAL DATA

(in thousands, except per share data)

		Six months ended									Nine months
		June 30,						Year ended			ended			Year ended March 31,
								December 31,			December 31,
		2000			1999			1999(3)			1998(1)			1998			1997			1996
Statement of Operations Data:
Revenues		$	36,019		$	16,602		$	39,795		$	12,438		$	8,995		$	9,200		$	9,347
Cost of sales			18,435			9,515			22,475			7,315			4,797			4,949			4,664
Gross profit			17,584			7,087			17,320			5,123			4,198			4,251			4,683
Selling, general and administrative expenses			23,095			6,100			17,605			5,106			3,812			4,092			3,576
Depreciation and amortization			1,131			279			1,131			102			133			150			119
	Total operating expenses		24,226			6,379			18,736			5,208			3,945			4,242			3,695
Operating income (loss)			(6,642	)		708			(1,416	)		(85	)		253			9			988
Other income (expense), net			(344	)		(32	)		(80	)		(66	)		13			(80	)		13
Income (loss) before income taxes			(6,986	)		676			(1,496	)		(151	)		266			(71	)		1,001
Provision (benefit) for income taxes			(2,095	)		244			(235	)		401			519			172			470
Net income (loss)		$	(4,891	)	$	432		$	(1,261	)	$	(552	)	$	(253	)	$	(243	)	$	531
Net income (loss) per common share — basic and diluted(2)		$	(0.29	)	$	0.03		$	(0.08	)	$	(0.03	)	$	(0.02	)	$	(0.01	)	$	0.03
Shares used in per share calculation of net income (loss) — basic and diluted(2)			17,123			16,629			16,629			16,629			16,629			16,629			16,629
Balance Sheet Data: (at period end)
Cash		$	920		$	99		$	611		$	677		$	368		$	635		$	1,237
Working capital (deficit)			13,145			1,120			(776	)		(424	)		145			565			1,152
Total assets			36,874			12,936			18,880			5,775			3,216			2,402			4,026
Long-term debt			1,888			674			618			—			219			521			523
Shareholders’ equity			10,704			5,830			4,970			392			241			536			925

(1)	Effective April 1, 1998, SeraNova changed its fiscal year from March 31 to December 31.
(2)	See Note 2 to SeraNova’s Combined Financial Statements.
(3)	On January 8, 1999, Intelligroup, Inc. acquired the common stock of Network Publishing, Inc. in a purchase business combination. The results of operations of Network Publishing, Inc. have been included above since the date of acquisition. Pro forma results for the period January 1, 1999 to January 7, 1999 are not material to SeraNova’s combined financial statements for the year ended December 31, 1999.

23

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

      The following discussion should be read in conjunction with our combined financial statements and the notes related to combined financial statements contained elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. SeraNova’s actual results could differ materially from those anticipated by such forward-looking information due to competitive factors and other factors discussed under “Risk Factors” and elsewhere in this prospectus.

Overview

      SeraNova provides Internet professional services to businesses. We design and implement Internet-based software applications that help companies manage procurement, sell products and services, provide customer service, conduct supplier transactions and communicate with their employees over the Internet. We offer a comprehensive set of services, including strategy consulting, creative design, technology implementation and maintenance of Internet-based software applications. In all of our client engagements, we apply SeraNova’s Time-to-Market Approach, our proprietary methodology, to deliver these services. We believe that our services allow our clients to gain competitive advantages by enabling them to penetrate existing markets, enter new markets, reduce operational costs, improve customer service, shorten product development cycles and enhance employee productivity. We focus on five industry markets — financial services, telecommunications, automotive, technology and healthcare. Most of the services we provide are for clients within the United States. In addition to our domestic offices, we maintain a presence in multiple locations in the Asia-Pacific region, India and the United Kingdom.

      We generally bill our services based on the actual time spent providing services. For the six months ended June 30, 2000, approximately 95% of our revenues were derived from such time and materials contracts and arrangements. Revenues related to time and materials contracts are typically recognized when the services are provided. Revenues with respect to fixed-price contracts are recognized in proportion to the costs incurred. American Express accounted for approximately 39% of the total revenues for the six months ended June 30, 2000. Another client, Volkswagen of America, accounted for approximately 13% of total revenues during the same period. No other client accounted for more than 10% of revenues for the six months ended June 30, 2000. Six clients, including American Express, accounted for approximately 50% of total revenue for the year ended December 31, 1999. We anticipate that such client concentration will continue for the foreseeable future. To effectively address the market demand, and to remain competitive, our clients tend to pursue multiple Internet initiatives at the same time. By proactively developing a strong relationship with our key clients, we expect to benefit from such initiatives, but to the extent our significant clients use fewer of our services or terminate their relationship with us, our revenues could decline materially. This could result in a significant negative impact on our business and operations. Our results from quarter to quarter may vary based upon various factors such as changes in our pricing policies, variations in billing margins and personnel utilization rates, length of our sales cycle, our ability to recruit technical personnel, the acceptance of our new services offerings and fluctuation in foreign exchange rates.

      Our cost of sales represent the costs to provide our professional services and include compensation, benefits, consultant-training and expenses incurred by our personnel that are not billable to our clients. They do not include expenses relating to our sales and marketing efforts. Given the supply-constrained market, we anticipate that our cost per professional will increase in future quarters. Our typical client engagement lasts between three and six months, and any early termination or postponement of a large project or of several projects could significantly impact revenues in any given quarter and result in lower gross margins.

      Selling, general and administrative expenses include costs associated with a range of sales and sales support functions such as salaries, commissions and related expenses for our salesforce; salaries and bonuses of executives, marketing, information technology, human resources and other administrative personnel; marketing expenses, facilities costs, technology expenditures, professional services and fees and

24

other general corporate costs. Beginning in the fourth quarter of 1999, we made, and anticipate making, significant marketing investments to build a visible SeraNova brand among prospects and potential employees, and to reorganize our sales process.

      We expect to incur significant sales and marketing, infrastructure development and general and administrative expenses. As a result, we anticipate losses through at least the third quarter of 2000. In order to achieve profitability, we will need to control costs associated with building an infrastructure as well as increase our revenues. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis in the future. We cannot assure you that we will be able to contain costs, grow revenue or increase profitability.

      In November 1998, Intelligroup acquired Azimuth Consulting Limited, Azimuth Holdings Limited, Braithwaite Richmond Limited and Azimuth Corporation Limited (the “Azimuth Companies”), by exchanging 902,928 shares of Intelligroup common stock for all the common stock of the Azimuth Companies. The acquisition of the Azimuth Companies was accounted for as a pooling of interests. Accordingly, all prior period combined financial statements contain the financial results and financial position of Azimuth Companies. In January 1999, Intelligroup acquired Network Publishing, Inc., a Utah-based Internet consulting firm, for a combination of cash paid up front and an additional consideration amount payable upon the achievement of certain operating results. In July 1999, Intelligroup and the owners of Network Publishing, Inc. agreed that this additional consideration was approximately $2.43 million, and would no longer be contingent on any operating performance. However, Intelligroup at its discretion, could pay the amount either in cash, or in its common stock. Intelligroup paid approximately $340,000 in cash and issued 99,558 shares of its common stock in connection with such agreement on January 8, 2000. This acquisition has been accounted for using the purchase method. The excess of the purchase price over net tangible assets acquired has been allocated to intangible assets and goodwill and is being amortized over five years. The financial results of Network Publishing, Inc. have been included in the combined financial statements since the date of acquisition. The management and operations of the Azimuth Companies and Network Publishing, Inc. have now been integrated into SeraNova. SeraNova’s U.S. Internet business commenced in mid 1997. Prior to such period, all operating results are those of the Azimuth Companies.

      Prior to September 1999, Intelligroup did not account for our business as a separate unit or division. In presenting our historical financial statements for all periods, we specifically identified all revenue, cost of sales, other income (expense) and certain selling, general and administrative expenses incurred by Intelligroup on our behalf. Other selling, general and administrative expenses were allocated using methodologies which took into consideration the ratio of our revenue to the consolidated revenue of Intelligroup, head count, occupancy and other factors. However, we cannot assure you that our historical financial information prior to December 31, 1999 necessarily reflects what the results of operations, financial position and cash flows would have been had we been a separate company, or is indicative of our future results of operations, financial positions and cash flows.

25

Results of Operations

			Six months ended									Nine-month
			June 30,						Year ended			period ended			Year ended
									December 31,			December 31,			March 31,
			2000			1999			1999			1998			1998
			(in thousands)
Revenues			$	36,019		$	16,602		$	39,795		$	12,438		$	8,995
Cost of sales				18,435			9,515			22,475			7,315			4,797
	Gross profit			17,584			7,087			17,320			5,123			4,198
Operating expenses:
Selling, general and administrative expenses				23,095			6,100			17,605			5,106			3,812
Depreciation and amortization				1,131			279			1,131			102			133
		Total operating expenses		24,226			6,379			18,736			5,208			3,945
		Operating income (loss)		(6,642	)		708			(1,416	)		(85	)		253
Other income (expenses), net:
Interest expense				(346	)		(59	)		(82	)		(14	)		(10	)
Other income (expense), net				2			27			2			(52	)		23
		Total other income (expenses), net		(344	)		(32	)		(80	)		(66	)		13
Income (loss) before income taxes				(6,986	)		676			(1,496	)		(151	)		266
Provision (benefit) for income taxes				(2,095	)		244			(235	)		401			519
	Net income (loss)		$	(4,891	)	$	432		$	(1,261	)	$	(552	)	$	(253	)

			Six months ended									Nine-month
			June 30,						Year ended			period ended			Year ended
									December 31,			December 31,			March 31,
			2000			1999			1999			1998			1998
As a Percentage of Revenues:
Revenues				100.0	%		100.0	%		100.0%			100.0%			100.0%
Cost of sales				51.2			57.3			56.5			58.8			53.3
	Gross profit			48.8			42.7			43.5			41.2			46.7
Operating expenses:
Selling, general and administrative expenses				64.1			36.7			44.2			41.1			42.4
Depreciation and amortization				3.2			1.8			2.9			0.8			1.5
		Total operating expenses		67.3			38.4			47.1			41.9			43.9
		Operating income (loss)		(18.4	)		4.3			(3.6	)		(0.7	)		2.8
Other income (expenses), net:
	Interest expense			(1.0	)		(0.4	)		(0.2	)		(0.1	)		(0.1	)
	Other income (expense)			0.0			0.2			0.0			(0.4	)		0.3
		Total other income (expenses), net		(1.0	)		(0.2	)		(0.2	)		(0.5	)		0.2
Income (loss) before income taxes				(19.4	)		4.1			(3.8	)		(1.2	)		3.0
Provision (benefit) for income taxes				(5.8	)		1.5			(0.6	)		3.2			5.8
	Net income (loss)			(13.6	)%		2.6	%		(3.2	)%		(4.4	)%		(2.8	)%

Six Months Ended June 30, 2000 compared to Six Months Ended June 30, 1999

      Revenues. Revenues increased by $19.4 million, to $36.0 million, for the six months ended June 30, 2000 compared with $16.6 million for the first six months of 1999. The increase in revenue is the result the increases in the number of clients, consultants billing rates and the size of engagements in the U.S. and the development of our India subsidiary. U.S. based revenue increased by $14.7 million for the first six months of 2000 compared with the same period in 1999. Revenue from the India subsidiary was $4.9 million for the six months ended June 30, 2000 compared with $0 for the corresponding period in 1999. The India subsidiary began operations in October 1999. Combined revenue from all other foreign

26

subsidiaries was down slightly for the six months ended June 30, 2000 compared with the same period in 1999.

      Professional service costs. Professional service costs increased to $18.4 million for the six months ended June 30, 2000 compared with $9.5 million for the corresponding period in 1999 but decreased as a percentage of revenues by 6.1%, to 51.2% from 57.3%. Professional service costs represent the cost of consultant salaries and payroll-related costs plus non-reimbursed direct expenses attributable to the consultants or projects, such as training, recruiting, relocation and travel expenses. The primary reasons for the decrease in professional service costs as a percentage of total revenues are an increase in billing margins for U.S.-based consultants and the considerable development of the India subsidiary during 2000. Billing margins in the U.S. increased by 10.7% to 49.4% for the six months ended June 30, 2000 compared with 38.7% for the first six months of 1999. Margins on professional services costs as a percentage of revenue in India was 78.7% the six months ended June 30, 2000 due to the lower cost structure in India.

      Selling, General and administrative expenses. Selling, general and administrative expenses include sales, marketing and administrative salaries and related benefit costs, advertising expenses, recruiting, travel, occupancy costs, professional fees, and other costs. These expenses increased by $17.0 million, or 278.6%, to $23.1 million for the first six months of 2000 compared to $6.1 million for the comparable period in 1999. Selling, general and administrative expenses also increased as a percentage of revenue to 64.1% from 36.7% over the same periods. These increases in actual selling expenses and as a percentage of revenue were due to significant investments in the sales and marketing infrastructure during the first six months of 2000 and to advertising expenses to promote the SeraNova, Inc. name during 2000. The primary reasons for the increases in actual general and administrative expenses and the increase of general and administrative expenses as a percentage of total revenue were: (1) costs associated with the development of foreign operations in India and Europe during 2000, (2) investment in the infrastructure of U.S. operations and (3) costs associated with the spin-off of SeraNova.

      Depreciation and amortization. Depreciation and amortization increased by $852,000, or 305.4%, to $1.1 million in the six months ended June 30, 2000 from $279,000 in the same period in 1999. Depreciation and amortization also increased as a percentage of total revenues to 3.1% in the six months ended June 30, 2000. from 1.7% in the comparable period of 1999. Both the actual and percentage increases were primarily due capital investment in U.S. expansion and the development of foreign operations in Europe and India.

      Other income (expense), net. Other income (expense), net decreased by $312,000 to a net expense of $344,000 for the six-month period ended June 30, 2000 from a net expense of $32,000 for the six months ended June 30, 1999. The decrease is primarily a due to interest on loans from Intelligroup during the three months ended June 30, 2000.

      Provision for income taxes. Income tax expense represents combined federal, state and foreign taxes. Our income tax benefit was $2.1 million on a pretax loss of $7.0 million for the first six months of 2000 compared with a tax provision of $244,000 on pretax profits of $676,000 for the six-month period ended June 30, 1999. The effective tax rate for the first six months of 2000 was 30.0% compared with an effective tax rate of 36.2% for the same period in 1999. The lower effective tax rate for the first six months of 2000 is due to a tax provision recognized on certain foreign operations that could not be offset against losses in other jurisdictions.

      Net loss. Net loss increased by $5.3 million to a net loss of $4.9 million for the six months ended June 30, 2000 from a net income of $432,000 for the six months ended June 30, 1999. The primary reasons for the net loss for the six months ended June 30, 2000 were planned increases in selling and marketing infrastructure, general and administrative expenses for the continued expansion of operations in the U.S. and abroad, specifically India and the United Kingdom, and costs related to the spin-off.

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Twelve Months Ended December 31, 1999 compared to Nine Months Ended December 31, 1998

      Revenues. Revenues increased by $27.4 million, to $39.8 million for the year ended December 31, 1999 compared with $12.4 million for the nine-month period ended December 31, 1998. This increase would equate to $23.3 million, or 141.2%, if the nine-month period were annualized. The increase in revenue is the result of an increase in the number of clients and an increase in the average size of engagements, as well as the acquisition of Network Publishing, Inc. on January 8, 1999. Network Publishing, Inc. accounted for approximately $5.9 million, or 14.8%, of total revenue for the year ended December 1999. U.S. based revenue, exclusive of Network Publishing, increased $15.5 million during the year ended December 31, 1999 to $21.5 million from $6.0 million for the nine-month period ended December 31, 1998. U.S. billing rates increased by 5.4% and the number of billable consultants increased from 153 to 249, or 62.8%, for the year ended December 31, 1999. The Azimuth Companies’ revenue increased by $2.8 million, or 32.3% for the year 1999 as compared with an annualized 1998. This increase in sales is due to Azimuth’s expansion into additional foreign markets.

      Gross profit. Gross profit represents revenues less cost of sales. Cost of sales consists primarily of salaries and associated employee benefits for personnel directly assigned to client projects and non-reimbursed direct expenses incurred to complete projects. For the year ended December 31, 1999, gross profit increased by $12.2 million to $17.3 million from $5.1 million in the nine months ended December 31, 1998. This increase would equate to a $10.5 million, or 153.6% for the year 1999 versus an annualized 1998. The primary reasons for this increase is the expansion of U.S. operations, the addition of Network Publishing, Inc. in January 1999, and an increase in profitability in the Azimuth Companies’ operations. U.S. operations, exclusive of Network Publishing, increased by $4.8 million during the year ended December 31, 1999 compared to the nine-month period ended December 31, 1998 or $4.1 million (151.8%) compared to an annualized 1998. Network Publishing contributed $4.1 million of gross profit during the year 1999. The Azimuth Companies gross profit increased from $3.1 million during the nine months ended December 31, 1998 to $5.7 million for the year ended December 31, 1999. This is a 38.0% increase of 1999 over 1998 on an annualized basis. Gross profit as a percentage of total revenues increased by 2.3% to 43.5% for 1999 as compared to 41.2% for the nine months ended December 31, 1998. The gross profit percentage is primarily affected by two factors: the overall utilization of consulting personnel and average billing rates less consultant payroll rates. Employee utilization could be impacted by multiple factors including increases in recruiting, rapid growth or reduction of number or size of projects.

      Selling, general and administrative expenses. Selling, general and administrative expenses include sales and administrative salaries and related benefit costs, occupancy costs, professional fees, and other costs. These expenses increased $12.5 million, or 245.0%, to $17.6 million for the year ended December 31, 1999 from $5.1 million in the nine month period ended December 1998. This would equate to an increase of $10.8 million, or 158.8%, for the year 1999 over an annualized 1998. Selling, general and administrative expenses increased slightly as a percentage of total sales to 44.2% for the year ended December 31, 1999 compared to 41.1% for the nine months ended December 31, 1998. The primary reasons for the large increase in actual selling, general and administrative expenses during 1999 as compared with an annualized 1998 were: 1) costs associated with the acquisition of Network Publishing, Inc., 2) the continued investment in the expansion of U.S. operations, 3) an emphasis on marketing and development of SeraNova during 1999 and 4) costs associated with the spin-off of SeraNova.

      Depreciation and amortization. Depreciation and amortization increased $1.0 million, or 1008.8%, to $1.1 million for the year ended December 31, 1999 from $102,000 in the nine months ended December 31, 1998. This would equate to an increase of $995,000, or 731.6% based on an annualization of 1998. The primary reasons for the significant increase in depreciation and amortization during 1999 are the acquisition of Network Publishing and the expansion of U.S. based operations. Amortization of goodwill and intangible assets related to the acquisition were $569,000 for 1999 plus depreciation of $279,000 from Network Publishing operations. Depreciation related to U.S. operations increased by $165,000 during 1999 as compared to the nine months ended December 31, 1998.

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      Other income (expense), net. Other income (expense), net decreased $14,000, or 21.2%, to a net expense of $80,000 for the year ended December 31, 1999 as compared to a net expense of $66,000 for the nine months ended December 31, 1998. The decrease is primarily the result of additional interest expenses of $77,000 in 1999 from Network Publishing operations.

      Provision for income taxes. Income tax expense represents combined federal, state and foreign taxes. Our income tax benefit is $235,000 on pretax losses of $1.5 million for the year ended December 31, 1999 compared to a tax provision of $401,000 on pretax loss of $151,000 for the comparable period in 1998. The effective tax rate for the year ended 1999 was (15.7)% as compared with 265.5% for the nine months ended December 31, 1998. The low effective tax rate benefit for 1999 was due to income taxes incurred in certain foreign countries which were not able to be offset against domestic operations. The high effective tax rate for 1998 was due to income taxes incurred by the Azimuth Companies that were not able to be offset against losses in other foreign jurisdictions. Our India operation, which commenced in the fourth quarter of 1999, has a tax holiday for ten years, thus no income taxes have been provided on their earnings.

      Net loss. Net loss increased by $709,000, or 128.4%, to $1.3 million for the year ended December 31, 1999 from $552,000 for the nine months ended December 31, 1998. This would equate to a net loss increase of $525,000, or 71.3%, if the nine-month period were annualized. The primary reason for the increase in net loss for the year ended December 31, 1999 was an increase in depreciation and amortization expense of $1.0 million over the nine-month period ended December 31, 1998. Such increase amounted to $840,000 calculated on an after-tax basis.

Nine Months Ended December 31, 1998 compared to Twelve Months Ended March 31, 1998

      Revenues. Revenues increased $3.4 million, or 38.3%, to $12.4 million for the nine-month period ended December 31, 1998 from $9.0 million for the twelve-month period ending March 31, 1998. This increase would equate to an increase of $7.5 million, or 84.4%, if the nine-month period was annualized. This increase is due primarily to the rapid expansion of U.S. operations from start up in the last calendar quarter of 1997. U.S. revenues increased by $3.9 million to $6.0 million for the nine-month period ended December 31, 1998 compared to $2.1 million for the twelve-month period ended March 31, 1998. Revenues from foreign operations were relatively equal for the nine-month period ended December 31, 1998 and the twelve month period ended March 31, 1998 at $6.4 million and $6.9 million, respectively. Annualization of the nine-month period ended December 31, 1998 would equate to an increase of 23.2% over the twelve-month period ended March 31, 1998. Revenue increases were the result of growth in both the size and number of client projects.

      Gross profit. Gross profit increased $924,000, or 22.0%, to $5.1 million over the nine-month period ending December 31, 1998 from $4.2 million for the twelve month period ended March 31, 1998. Annualization of the nine-month period would equate to an increase of $2.6 million, or 62.7% over the twelve-month period ended March 31, 1998. These increases are primarily attributable to rapid expansion of U.S. operations during 1998. Gross profit from U.S. operations increased $1.3 million for the nine-month period ending December 31, 1998 compared with the twelve-month period ended March 31, 1998. Gross profit as a percentage of total revenues decreased to 41.2% for the nine-month period ended December 31, 1998 from 46.7% for the twelve-month period ended March 31, 1998. The decrease in gross margin percentage is primarily due to lower utilization rates attained during expansion of the U.S. operations and, therefore, higher costs as compared with the established foreign operations.

      Selling, general and administrative expenses. Selling, general and administrative expenses increased $1.3 million, or 34.0%, to $5.1 million in the nine-month period ended December 31, 1998 from $3.8 million for the twelve-month period ended March 31, 1998. This increase would equate to an increase of $3.0 million, or 78.6%, if the nine-month period were annualized. Selling, general and administrative expenses decreased as a percentage of total revenue to 41.1% for the nine-month period ended December 31, 1998 from 42.4% for the twelve-month period ended March 31, 1998. The increase in actual dollars is primarily due to the additional investment in U.S. operations and a one-time charge of $659,000

29

incurred in the nine months ended December 31, 1998. This one time charge is for legal and accounting fees associated with the sale of the Azimuth Companies to Intelligroup, Inc.

      Depreciation and amortization. Depreciation and amortization decreased $31,000, or 23.6%, to $102,000 in the nine-month period ended December 31, 1998 from $133,000 in the twelve-month period ended March 31, 1998. If the nine-month period were annualized, depreciation and amortization would increase $3,000, or 1.9% to approximately $136,000. This increase in depreciation and amortization expense over the twelve-month period was due to an increase in depreciation on the increased asset base in the U.S. somewhat offset by a reduction in depreciation expense on foreign operations. The decrease in foreign depreciation expense is primarily due to a smaller asset base.

      Other income (expense), net. Other income (expense), net decreased $79,000, or 597.8%, to a net expense of $66,000 in the nine-month period ended December 31, 1998 from a net income of $13,000 in the twelve-month period ended March 31, 1998. If the nine-month period were annualized to twelve months, the decrease would be approximately $101,000. The decrease is principally due to losses incurred on currency fluctuations relating to foreign operations during the nine-month period ended December 31, 1998 compared with gains on currency fluctuations during the comparative twelve-month period ended March 31, 1998.

      Provision for income taxes. Income tax expense represents combined federal, state and foreign taxes. Our income tax provision was $401,000 on pretax losses of $151,000 for the nine-month period ended December 31, 1998 compared with $519,000 on pretax profits of $266,000 for the twelve-month period ended March 31, 1998. The high effective income tax rates in these periods were due to income taxes incurred by the Azimuth Companies in certain foreign countries that were not able to be offset against losses in New Zealand.

      Net loss. Net loss increased by $299,000, or 118.2%, to $552,000 during the period ended December 31, 1998 compared to a net loss of $253,000 for the year ended March 31, 1998. This would equate to net loss increase of $483,000, or 190.9%, if the nine-month period were annualized. The primary reason for the increase in net loss was due to a decrease in gross margin as a percentage of revenues for the nine months ended December 31, 1998 compared to the twelve months ended March 31, 1998.

Selected Quarterly Results of Operations

      The following table presents certain condensed unaudited quarterly financial information for each of the eight most recent quarters in the period ended June 30, 2000. This information is derived from our unaudited financial statements that include, in our opinion, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of results of operations for such periods. This table should be read in conjunction with the audited Combined Financial Statements and Notes thereto beginning on page F-1 of this prospectus.

30

		Quarter Ended
		June 30,			Mar. 31,			Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
		2000			2000			1999			1999			1999			1999			1998			1998
		(in thousands)
Revenues		$	19,843		$	16,176		$	12,722		$	10,471		$	8,614		$	7,988		$	4,811		$	4,169
Cost of sales			10,046			8,389			6,869			6,091			4,866			4,649			2,898			2,534
	Gross profit		9,797			7,787			5,853			4,380			3,748			3,339			1,913			1,635
Operating expenses:
	Selling, general and administrative expenses		11,776			11,319			7,808			3,698			3,373			2,726			2,327			1,525
	Depreciation and amortization		659			472			501			350			145			135			75			2
	Total operating expenses		12,435			11,791			8,309			4,048			3,518			2,861			2,402			1,527
	Operating income (loss)		(2,638	)		(4,004	)		(2,456	)		332			230			478			(489	)		108
Other (expenses) income, net			(159	)		(185	)		(43	)		(5	)		(13	)		(19	)		(156	)		106
Income (loss) before income taxes			(2,797	)		(4,189	)		(2,499	)		327			217			459			(645	)		214
Provision (benefit) for income taxes			(985	)		(1,110	)		(684	)		205			65			179			(69	)		420
Net income (loss)		$	(1,812	)	$	(3,079	)	$	(1,815	)	$	122		$	152		$	280		$	(576	)	$	(206	)

		Quarter Ended
		June 30,			Mar. 31			Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,
		2000			2000			1999			1999			1999			1999			1998			1998
As a Percentage of Revenues:
Revenues			100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales			50.6			51.9			54.0			58.2			56.5			58.2			60.2			60.8
	Gross profit		49.4			48.1			46.0			41.8			43.5			41.8			39.8			39.2
Operating expenses:
	Selling, general and administrative expenses		59.3			70.0			61.4			35.3			39.2			34.1			48.3			36.6
	Depreciation and amortization		3.3			2.9			3.9			3.3			1.7			1.7			1.6			0.1
	Total operating expenses		62.7			72.9			65.3			38.6			40.9			35.8			49.9			36.7
	Operating income (loss)		(13.3	)		(24.8	)		(19.3	)		3.2			2.6			6.0			(10.1	)		2.5
Other (expenses) income, net			(0.8	)		(1.1	)		(0.3	)		(0.1	)		(0.2	)		(0.2	)		(3.3	)		2.5
Income (loss) before income taxes			(14.1	)		(25.9	)		(19.6	)		3.1			2.4			5.8			(13.4	)		5.0
Provision (benefit) for income taxes			(5.0	)		(6.9	)		(5.4	)		2.0			0.8			2.2			1.4			10.1
Net income (loss)			(9.0	)%		(18.9	)%		(14.2	)%		1.1	%		1.6	%		3.6	%		(12.0	)%		(5.1	)%

Liquidity and Capital Resources

      Our principal capital requirements are to fund working capital needs and capital expenditures in order to support revenue growth. Historically, SeraNova’s business has operated as a division or subsidiary of Intelligroup. As a result, prior to the spin-off, Intelligroup managed most of our cash, capital resources and cash management functions. Following the spin-off, we implemented a separate and independent cash management system and have sought and obtained separate financing. See “The Spin-off and Our Relationship with Intelligroup.”

      For the six months ended June 30, 2000, net cash used in operating activities totaled $13.0 million. Cash was provided by $1.1 million from depreciation and amortization, $3.0 million increase in accounts payable, $1.5 million increase in accrued payroll and related expenses and $950,000 from provision for bad debt. This was offset by a net loss of $4.9 million, $6.5 million increase in accounts receivable, $3.7 million increase in unbilled revenue, $2.9 million increase in deferred taxes and $1.1 million increase in other assets. The increases in accounts receivable and unbilled services were primarily due to the increased operations within the U.S. and India. In the six months ended June 30, 1999, net cash used in operating

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activities was $2.5 million. The principal uses of funds were an increase in accounts receivable of $2.0 million, an increase in unbilled services of $332,000 and a decrease in accrued expenses and other liabilities of $1.6 million. This was offset by net income of $432,000, $279,000 from depreciation and amortization and a decrease in other current assets of $205,000.

      We had capital expenditures for the first six months of 2000 and 1999 of $5.3 million and $392,000, respectively, for computers, furniture, equipment and leasehold improvements. Capital expenditures are expected to decrease over the next six months compared to the first six months of 2000.

      The foregoing cash flows are not necessarily indicative of the cash flows that would have resulted if we were a separate entity.

      From time to time, SeraNova, as a subsidiary of Intelligroup, borrowed funds from Intelligroup for working capital purposes. Note Payable to Intelligroup in SeraNova’s combined balance sheets represents a calculation of net borrowings from Intelligroup. In connection with the contribution by Intelligroup of its Internet services business to SeraNova, on January 1, 2000, SeraNova became a co-borrower and additional guarantor under Intelligroup’s revolving credit facility. A portion of such borrowings were converted to amounts repayable by SeraNova to a bank under Intelligroup’s revolving credit facility agreement. As of March 31, 2000, SeraNova had repaid all borrowings due to the bank with a portion of the proceeds from the sale of common stock, but remained a co-borrower and guarantor to Intelligroup’s bank pending Intelligroup’s negotiation of a new credit facility. On May 31, 2000, Intelligroup entered into a new credit facility with a bank. As a result, SeraNova was released from all obligations under Intelligroup’s former revolving credit agreement on such date and SeraNova has no obligations to Intelligroup’s lender under the new facility. Under Intelligroup’s new loan facility, Intelligroup is not permitted to loan additional funds to SeraNova. Separately, on May 31, 2000, SeraNova entered into a $15,100,000 unsecured promissory note with Intelligroup reflecting funds borrowed from Intelligroup through the effective date of Intelligroup’s new facility. The note bears interest at the prime rate plus  1/2%. A payment of $3,000,000 was made on September 29, 2000 with some of the proceeds from the sale of SeraNova’s 6% series A convertible preferred stock (see below), and the balance of $12,100,000 was due on July 31, 2001. The note has certain mandatory prepayment provisions based on possible future debt or equity financings by SeraNova. Pursuant to these provisions, a $3,000,000 prepayment would have been due as a result of the September 29 sale of the preferred stock; however, Intelligroup waived this prepayment in return for an amended repayment schedule, under which SeraNova paid Intelligroup $500,000 on November 8, 2000, will pay $400,000 on or before December 15, 2000 (or apply such payment as an advance payment towards a contemplated services arrangement between Intelligroup and SeraNova), and will pay additional installments of $500,000 on or before each of the last days of January, February, March, April and May 2001. The balance of the note ($9,100,000 or $8,700,000) will still be due on July 31, 2001.

      Under Intelligroup’s current credit facility with its bank, all of Intelligroup’s assets, including the promissory note from SeraNova, serve as collateral. In the event of default by SeraNova, Intelligroup will be entitled to pursue all remedies under the note through legal proceedings.

      On March 14, 2000, SeraNova entered into purchase agreements with five institutional investors pursuant to which such investors purchased an aggregate of 831,470 shares of our common stock for an aggregate purchase price of $10,000,000. A portion of the proceeds from the sale of common stock was used to pay off the outstanding balance due to Intelligroup’s bank as of March 31, 2000.

      On July 14, 2000, SeraNova executed an agreement with Fleet Credit Corporation for an asset-based revolving credit facility that will provide SeraNova with up to $15 million in financing. The credit facility is a three-year agreement secured by substantially all U.S. based assets of SeraNova. Borrowings may be made under the facility for general corporate purposes with interest at the then current prime rate plus  1/2%. The credit agreement contains customary representations, warranties, default provisions and financial covenants. The specific financial covenants effective with the third quarter of 2000 are: (1) SeraNova must maintain total debt to tangible net worth not to exceed a ratio of three to one; (2) any quarterly loss may not exceed the original budget amount plus 10%; and (3) SeraNova must maintain an interest coverage

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ratio of not less than 1.25 to 1, and principal and interest coverage of not less than 1.1 to 1. Approximately $6.4 million is currently available under this facility.

      On September 29, 2000, SeraNova sold 800 shares of 6% series A convertible preferred stock to two institutional investors for $8,000,000. See “Description of Capital Stock.” Cumulative dividends on the preferred stock have been accruing since that date at the rate of 6% per year on the $8,000,000 of aggregate stated value. SeraNova will pay these dividends at such time as the preferred stock is converted into common stock, in cash or, at SeraNova’s option, by increasing the stated value of the preferred stock. The preferred stock in general has no voting rights and is convertible into shares of common stock at $7.00 of stated value per share of common stock, subject to antidilution adjustments in certain circumstances, including the exercise at a price of less than $7.00 per share of the warrants described in the next paragraph. The preferred stock is also redeemable by the holders at a premium in certain events, such as a change in control of SeraNova or an agreement to sell more than a third of its assets. A portion of the proceeds from the sale of the 6% series A convertible preferred stock was used to pay $3,000,000 of SeraNova’s outstanding obligation to Intelligroup as described above.

      In addition, SeraNova has granted these two investors warrants to purchase 310,000 shares of SeraNova common stock at an exercise price equal to the lesser of $7.00 and the average price per share of SeraNova common stock for the five trading days immediately preceding the date of exercise; however, the exercise price is $7.00 until December 29, 2000. Of these warrants, warrants to purchase 150,000 shares are currently exercisable, and warrants to purchase 160,000 shares will become exercisable if SeraNova redeems any shares of the 6% series A convertible preferred stock. SeraNova generally can redeem the preferred stock at any time at 105% of the stated value of the preferred stock.

      Management believes that the cash to be generated from SeraNova’s operations, proceeds from the sale of its 6% Series A convertible preferred stock, and funds available under the credit facility through Fleet Credit Corporation will be sufficient to satisfy SeraNova’s cash requirements throughout at the least the next twelve months. However, we cannot assure this.

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BUSINESS

Overview

      We provide Internet professional services which enable our business clients to combine the scope and efficiencies of the Internet with their existing business processes. We design and implement Internet-based software applications that help companies manage procurement, sell products and services, provide customer service, conduct supplier transactions and communicate with their employees over the Internet. We offer a comprehensive set of services, including strategy consulting, creative design, technology implementation and maintenance of Internet-based software applications. In all of our client engagements, we apply SeraNova’s Time-to-Market Approach, our proprietary methodology, to deliver these services. We believe that our services allow our clients to gain competitive advantages by enabling them to penetrate existing markets, enter new markets, reduce operational costs, improve customer service, shorten product development cycles and enhance employee productivity. We focus on five industry markets — financial services, telecommunications, automotive, technology and healthcare.

Industry Background

  Growth of Business-to-Business Electronic Commerce

      The Internet is one of the fastest growing means of communication, reaching consumers and businesses globally. Companies are increasingly using the Internet to improve their core business processes, lower operating costs and acquire new competencies. Many companies have identified new offerings to extend and complement their existing products and services. Many other companies have adopted the Internet as the primary platform to conduct transactions with their customers, suppliers and business partners. International Data Corporation estimates that business-to-business transactions on the Internet will reach $1.14 trillion by 2003.

  Market for Strategic Internet Professional Services

      We believe that the Internet represents a revolutionary and powerful vehicle through which businesses and entire industries will conduct day-to-day operations. Rapidly changing markets, constantly evolving customer and supplier relationships, emergence of new technologies, geographically dispersed operations and demands for increased efficiencies are forcing companies to reevaluate their business models. As a result, many senior executives rank their Internet strategy among their highest corporate priorities.

      In order to take advantage of the opportunities presented by the Internet, businesses must use Internet-based applications that enable them to conduct sophisticated business transactions. Few businesses have the range of expertise and skills that are required to develop and maintain such applications. To develop effective Internet-based applications, companies need business strategists, Internet technology experts, creative designers and application developers. Given the increasing pressure to bring products and offerings to market quickly, training in-house employees to learn the requisite skills is impractical. In addition, hiring and maintaining a full-service staff of trained professionals can be inefficient and costly. Accordingly, many companies have chosen to outsource some or all of their Internet services requirements to outside professionals. These outsourcing needs have generated a dramatic demand for Internet professional services, which International Data Corporation estimates will grow from $7 billion in 1998 to $78.5 billion in 2003.

  Challenges in Selecting the Right Internet Professional Services Provider

      Increased demand for Internet professional services has attracted many firms to this market. We believe that only a few firms provide a comprehensive set of offerings. For example, many traditional information technology service providers do not have the creative skills required to create captivating web-based content and provide a favorable user-experience. Advertising and marketing firms typically lack the technical expertise and integration skills necessary to deliver the sophisticated software applications required to run increasingly complex business transactions. Strategy consulting firms lack Internet

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technology expertise, marketing perspective and implementation capabilities. In addition, many of these firms lack sufficient knowledge of their clients’ industries and business processes, an important ingredient to build effective applications. Furthermore, companies realize that their Internet strategy is constantly evolving, and often they are forced to simultaneously embark on several initiatives. Therefore, program management, or the ability to manage multiple projects and ensure an execution that is consistent with a company’s business goals, is critical to success.

      We believe that companies seeking to effectively capitalize on the Internet require and seek one firm that has a comprehensive suite of service offerings, such as strategy consulting, technology implementation and application maintenance capabilities. Furthermore, to be able to execute a rapid application deployment, the service provider must utilize an integrated methodology.

The SeraNova Solution

      SeraNova provides professional services that enable companies to take advantage of the Internet to improve their existing business processes and acquire new competencies. We design and deploy Internet-based software applications that facilitate a range of business-to-business activities such as procurement, sales and customer service over the Internet. Our services include strategy consulting, technology implementation and maintenance of Internet applications. We believe we have the necessary assets to build strategic Internet applications that enable our clients to achieve competitive advantages. These key assets include:

•  approximately 75 strategy consultants with strong expertise in business processes and substantial knowledge in specific industry markets;

•  approximately 800 technology professionals across seven global delivery centers;

•  information planning and program management experience;

•  knowledge of widely-used enterprise software applications and technologies;

•  SeraNova Time-to-Market Approach, a proprietary methodology that emphasizes constant innovation and enables rapid execution; and

•  internet application maintenance capabilities.

  SeraNova Time-to-Market Approach — A Structured and Proprietary Methodology.

      SeraNova Time-to-Market Approach is an integral part of our services offerings. The service model divides each client engagement into five well-defined phases — eStrategy, Discover, Plan, Implement and Optimize, which provides our consultants with a consistent, yet flexible approach. Our methodology identifies and prioritizes initiatives, rapidly delivers them to market, captures valuable market experience and feedback and immediately applies the feedback to refine the solution. We believe this process results in a competitive advantage to our clients. Often, we execute multiple initiatives within the same client project to effectively adapt to constantly changing markets. Our approach allows us to identify, retain and re-use valuable knowledge that we develop in client projects.

  Global Delivery Model

      Internet professional service providers must deploy professionals on a project in a timely manner and reduce the time it takes to develop software applications. SeraNova has built a network of global delivery centers spanning multiple time zones. These delivery centers enable us to engage in concurrent development and to have a virtual 24-hour work day on client projects. In order to quickly deploy the appropriate professional capabilities, we can select from our approximately 800 technology professionals in our seven global delivery centers. We have two delivery centers strategically located in the US — in Edison, New Jersey and Phoenix, Arizona. Also, we have a design center in Provo, Utah. Outside the US, we have one delivery center in each of the UK and Australia and three delivery centers in India. Our concurrent development capabilities enable us to significantly reduce development time for our clients.

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Business Strategy

      We seek to be a leading Internet professional services provider that enables companies to utilize the Internet to improve their business processes. To that end, we are pursuing the following strategies:

•  Build Our Brand. We plan to establish and build recognition of the SeraNova name through an aggressive marketing strategy, which will emphasize our industry expertise, broad knowledge of business processes and our global delivery model. In addition, we intend to sponsor seminars and host roundtable discussions that will highlight our innovative Internet applications that we have developed for our clients.

•  Attract and Retain Outstanding Professionals. Our future growth and our ability to build meaningful competitive advantages for our clients are dependent on our ability to attract and retain highly skilled, dedicated and experienced professionals. We are committed to training and developing our professionals to meet the challenges of the fast-paced environment in which we perform. We attract business and technical professionals who are driven by a desire to work on strategic and technically leading-edge projects. We plan to retain and motivate our employees through competitive compensation packages, stock option grants and a culture that rewards teamwork and customer-orientation. We place great emphasis on training our employees and provide numerous career and personal improvement programs within SeraNova. We seek to reward employees based on merit.

•  Deepen Industry Expertise and Expand Business Process Offerings. We are investing to build superior practice groups along specific industry markets and business processes. We continue to enhance our capabilities in five target industry markets — financial services, telecommunications, automotive, technology and healthcare. Our business process offerings are focused on suppliers, partners, employees and customers. For example, our electronic procurement offering focuses on building strategy and Internet applications to facilitate transactions and communications between companies and their suppliers. Our interactive customer offering targets companies looking to conduct sales and provide customer service over the Internet. We believe our integrated approach, in which we combine business process expertise with industry specific knowledge allows our consultants to quickly formulate effective Internet strategies.

•  Further Penetrate Our Client Base. We seek to establish close and long term relationships with our clients. The Internet market is continuously and rapidly changing. In such an environment, our long lasting relationships with our clients become critical in developing sustainable competitive advantages for them. By working closely with our clients to define and enhance their Internet strategies, we believe we can help our clients effectively address challenges and seize opportunities. To further strengthen the relationships with our key clients, we continue to assemble a portfolio of client-driven service offerings. We believe such a focus results in client-satisfaction, follow-on engagements with existing clients and referrals for engagements with new clients.

•  Widen Our Global Presence. We have established a worldwide organization to support our customers’ global needs. Currently, in addition to the United States, we offer services in Europe, Australia, New Zealand, Thailand, India and the Philippines. Additionally, we intend to enhance our presence within the United States and certain global markets, as a result of demands from our existing clients, gaining new customers and through strategic acquisitions.

•  Provide Comprehensive Offerings. We provide an integrated set of services, including strategy consulting, creative design, technology implementation and maintenance of Internet-based software applications. By offering a portfolio of integrated services, we believe we reduce the development time and maximize the impact, quality, consistency and cost-effectiveness of these Internet applications for our clients. Our comprehensive offering also allows us to increase the potential size of a client project. We believe SeraNova is one of the very few Internet professional services providers that offer a seamless application management service. This offering allows us to continue

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our engagement beyond the implementation phase. When we maintain the applications, and update the website and related databases, we often learn of new client opportunities.

•

Refine and Enhance SeraNova Time-To-Market Approach and Solutions Frameworks. In all of our projects, we use the SeraNova Time-to-Market Approach, our proprietary methodology, enabling our team to formulate strategy, implement Internet applications in a rapid time-frame and maintain the application after deployment. We believe our approach allows us to reduce our implementation time, lower our costs and consistently deliver high quality results. We continue to refine these processes, resulting in further acceleration of the delivery of our services. We also continue to evaluate, identify, test and incorporate new technologies into our methodology. We believe that continuous enhancement of our methodology is critical to maintaining a competitive advantage in the market for Internet professional services.

Our Services

      We offer three types of services: strategy consulting, Internet-based application development and application management. These offerings represent our view of how successful Internet strategies and software applications are deployed.

  Strategy Consulting

      Changing market places and competitive pressures are forcing companies to pursue multiple Internet initiatives at the same time. Often companies pursue these initiatives in an isolated and uncoordinated manner. As a result, many companies fail to capitalize on the opportunity to integrate their Internet initiatives within a broader corporate strategy. Our strategy consultants work with clients to help them define their competitive positioning and tailor a strategy that is designed to provide competitive advantages. We utilize our industry experience and knowledge of specific business processes to formulate executable Internet strategies that are closely tied to the client’s overall business objectives and operations.

  Internet-based Application Development

      Our technology professionals utilize the strategic plan and recommendations from our strategy consultants and rapidly develop effective applications that are aimed at enabling one or more strategic business processes. These offerings are focused on four primary enterprise stakeholders: customers, suppliers, employees and business partners.

•  Customer Interaction Applications. We believe that the Internet offers our clients an opportunity to reach customers on a global basis and to target specific services and products based on their customers’ needs. The Internet allows companies to significantly reduce their customer acquisition costs. We design and implement customer focused applications that enable clients to engage in personalized interactions with their customers and prospects over the Internet. These applications allow our clients to establish long-term relationships with their customers, segment customers based on specific criteria, tailor their marketing efforts to individual customers, and rapidly grow their online customer base by attracting and serving prospects with relevant information.

•  Electronic Procurement Applications. The Internet has created an opportunity to re-engineer procurement processes. We have created new Internet-enabled procurement processes for businesses and implemented Internet-based applications that automate their online procurement cycle. We believe that these electronic procurement applications streamline clients’ procurement processes and deliver significant direct cost-savings to our clients.

•  Employee Services Applications. We have gained significant experience in designing and implementing Internet-based applications that provide employees with the relevant and timely information needed to effectively perform their job. In addition, we develop applications that help our clients provide a range of services over the Internet to their employees reducing certain of the company’s existing human resources costs.

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•  Channel Management Applications. Our clients interact with multiple business partners like dealers, resellers and distributors. While the Internet can serve as a cost-effective channel for selling products and services within certain industries, it can often result in channel conflicts. For example, automotive manufacturers selling vehicles directly over the Internet can create a conflict with their dealer network. Through careful planning and execution, it is possible to resolve these conflicts and have the Internet and traditional channels co-exist and often complement each other. We build channel management applications that expand, integrate and manage multiple channels.

  Application Management

      As business processes become more complex, the Internet applications, websites and related databases that support these processes must be updated and their functionalities must be expanded. Application management is an integral part of our comprehensive offering. Following the deployment of an Internet solution, we provide comprehensive application management services including timely updates, application upgrades, additional application development, management of information systems and transition onto new technology platforms. These services improve our clients’ ability to dynamically adjust their business processes and effectively address changing market opportunities. We perform these functions from our delivery centers in Phoenix, Arizona, and Hyderabad, India.

      Our clients can choose to have our application management team work at their location or at our numerous support facilities, or we can provide 24-by-7 maintenance and support from our Internet Development Center located in Hyderabad, India. Most clients choose a combination of the above options to achieve the optimal set of services and cost savings. We typically do not host applications for our clients, unless requested to do so. SeraNova can perform the required application management services regardless of where the customer’s Internet applications are hosted.

Our Approach and Application Frameworks

  SeraNova Time-to-Market Approach

      We formulate an effective Internet strategy, design and rapidly deploy Internet applications for our clients. Our proprietary methodology, SeraNova Time-to-Market Approach, is comprised of five phases: eStrategy, Discover, Plan, Implement and Optimize.

•  eStrategy. In this phase, we identify enterprise business objectives, assess opportunities and risks and analyze the market and competition. Our strategy consultants help companies define the relevant criteria to improve their business processes, evaluate existing infrastructures and recommend an appropriate technology architecture. The eStrategy phase identifies multiple projects that can be executed simultaneously across the organization. Each of these projects then goes through the next four phases: Discover; Plan; Implement; and Optimize. One of the key components of eStrategy is the program management function that allows our team to manage multiple projects.

•  Discover. In this phase we define the requirements and scope for a specific project. Based on our client’s objectives, SeraNova professionals help our clients define the appropriate technology architecture and choose relevant software packages.

•  Plan. During this phase the project team creates an initial layout and subsequent plan to deploy the Internet applications. The project team carefully plans development objectives and testing criteria.

•  Implement. In this fourth phase, we build and deploy Internet applications through incremental releases. Our project team performs rigorous testing on each release to ensure proper function and reliability.

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•  Optimize. This final phase coincides with the application management offering. Some of the activities we engage in during our Optimize phase include return on investment analyses, application support, website and database updates, maintenance and performance reviews.

[THE SERANOVA TIME-TO-MARKET APPROACH CHART]

  Application Frameworks

      Application frameworks are sets of guidelines for the implementation of specific business processes such as procurement, sales or customer service. By incorporating our experience in developing interactive and integrated Internet-based software applications for our clients, we bring our cumulative expertise to client engagements, allowing us to leverage our knowledge for the benefit of our clients. We believe that these frameworks result in faster and more efficient application implementation.

Case Studies

      In 1999, SeraNova worked with Global 5000 companies as well as emerging Internet-startups. The following case studies illustrate the challenges faced by these companies and the solutions we have provided to address these challenges. Volkswagen and LiquidPrice.com were top ten customers in terms of revenue in 1999.

     Volkswagen of America: New Product Launch

      Volkswagen of America, Inc. markets a full line of Volkswagen and Audi vehicles manufactured at company plants in Germany and Mexico. In the fall of 1997, Volkswagen of America sought to expand its Internet presence in preparation for the launch of its new Beetle in January 1998. Volkswagen saw the Internet as the perfect new medium to redefine its brand identity, to transform its customer acquisition process and to generate new and sustainable demand.

      Our automotive practice began working with Volkswagen’s Interactive Marketing group to reposition Volkswagen’s brand and communication identity. Following a market assessment of Volkswagen’s target

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audience and positioning strategy, our team executed extensive functional re-design of its website including building comparitors to compare different models, an online commerce platform and an innovative configurator for the new Beetle model. These applications were integrated with Volkswagen’s internal business processes such as product planning and inventory management. We believe our solutions enabled Volkswagen to achieve a significant online milestone. Both the number of visits to Volkswagen site and the time spent per visit have doubled (almost 24,000 visits a day) since the launch of the new site. At present, we are working on multiple electronic commerce initiatives with Volkswagen, including an on-line buying system that is integrated with the sales and distribution systems of Volkswagen and its dealer network.

LiquidPrice.com: Online market place connecting buyers, merchants and manufacturers

      In July 1999, LiquidPrice.com sought to re-define the business of shopping for new products. Their portal would not only fill a growing need for the buyers — “hassle-free shopping at the best price,” but would significantly expand the presence of traditional merchants and add tremendous efficiency to the manufacturers’ channel management. Buyers can choose their target purchase items from an extensive catalog of products; and the merchants and manufacturers can bid for the buyers’ business.

      LiquidPrice.com was on a critical path to launch the site in the United States by the 1999 Christmas holiday season. Engaged by LiquidPrice.com in August 1999, our team moved quickly to outline the positioning and created a strategic framework to take them from “idea” to “launch.” A four-week eStrategy session yielded a complete set of functional requirements. In the following six weeks, a team of strategy, creative and technology professionals built and launched the first version of the site. At present, we are building the second version of the site with complete business-to-business integration among merchants, manufacturers and distribution agents.

Clients

      We have provided professional services to a variety of clients worldwide in a range of industries. The following were our top 14 clients in 1999, each of which represented in excess of $50,000 of revenue during such year. American Express, Philippines Long Distance Telecom and Volkswagen of America accounted for approximately 28%, 9% and 5% of our revenues in 1999, respectively.

Financial Services	Telecommunication	Automotive
American Express	Philippines Long Distance	Volkswagen of America
	Bell Atlantic	Audi of America
	US Cellular	Subaru of America
	New Zealand Telecom
	CLEAR Communications
Technology	Internet Start-ups	Healthcare
Hewlett Packard	LiquidPrice.com	Medical Internet Solutions
3 COM
Novell

Sales and Marketing

      Our sales process is strategic, targeted and comprehensive. Once an opportunity is identified, a sales manager, accompanied by the appropriate industry-market expert and a business process specialist, present a market analysis and business scenario to the client team. We believe a consultative sales process yields more value for our clients and allows us to capitalize on additional opportunities with the client.

      Our marketing efforts include communicating with existing customers and developing relationships with new customers through referrals, requests for proposals, responses to customer-initiated contacts and contacts initiated by us with desired customers. A critical focus for us is to build a visible identity among our customers, prospects and employees. To that end, we have retained Mueller Shields, a leading sales

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and marketing consulting firm to enable us achieve these goals. In addition, they are helping extensively in generating qualified leads and closing sales. We are seeking to expand the size and enhance the quality of our sales force. By hiring additional highly qualified sales personnel, we intend to increase direct sales, build market awareness, establish name recognition and promote our reputation as a high-quality, comprehensive Internet professional services provider.

      The length of the sales cycle varies depending on the type of service and size of customer, typically ranging from approximately one to three months. Our direct sales representatives generally have several years of sales experience in the Internet professional services industry.

People and Culture

      As of June 30, 2000, we employed 720 client-team professionals worldwide. They included strategy consultants, creative designers, technical architects and application development specialists. Our non-client staff included approximately 87 in sales, 100 in services support and 146 in administrative and management functions. None of our employees is represented by a labor union. Substantially all of our employees have executed non-competition agreements.

      We recognize that our employees are key to our future success. This future success is based on (1) an effective recruiting program that attracts intelligent, creative and entrepreneurial individuals, (2) a strong and coherent corporate culture, (3) an effective career management program and (4) equity-ownership by our employees. Substantially all of our employees participate in our employee stock option program.

Recruiting

      We have dedicated significant resources to our recruiting efforts. From time to time, we use certain recruiting consultants to assist our staff recruiters. Our recruiting efforts are targeted at four levels of professionals: executives, industry experts, technical and creative personnel. We have designed specific career development programs for strategy consultants, technical experts and creative professionals within our company. We aggressively train and provide numerous career and personal improvement programs.

Administrative and Support Services

      While SeraNova has its own independent support staff for critical functions such as sales, marketing and recruiting, we anticipate in the short term, Intelligroup will provide a range of support services. For further details, please see Intercompany Service Agreements discussed elsewhere in this registration statement.

Competition

      We compete in rapidly changing markets that are intensely competitive and highly fragmented. We compete, directly and indirectly, with a variety of national and regional companies, such as

•  Internet professional service providers, including Sapient, Scient, Viant, Proxicom, iXL and Razorfish.

•  Large systems integrators and consulting firms, such as Andersen Consulting and the consulting units of “Big Five” accounting firms.

•  General management consulting firms, such as McKinsey & Co., Bain & Company and Boston Consulting Group.

      We believe that the principal competitive factors in the market for Internet services include technical expertise, breadth of service offerings, reputation, financial stability and price. To be competitive, we must respond promptly and effectively to the challenges of technological change, evolving standards and our competitors’ innovations by continuing to enhance our service offerings and expand our sales channels. Any pricing pressure, reduced margins or loss of market share resulting from our failure to compete effectively could materially affect our business.

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      Many of our current and potential competitors have longer operating histories and substantially greater financial, marketing, technical and other resources. Some of these competitors have a greater ability to provide services on a national or international basis and may be able to adapt more quickly to changes in customer needs or to devote greater resources to providing Internet professional services. Such competitors may attempt to build their presence in our markets by forming strategic alliances with other competitors or our customers, offering new or improved products and services to our customers or increasing their efforts to gain and retain market share through competitive pricing. Some companies have developed particularly strong reputations in niche service offerings or local markets which may provide them with a competitive advantage. In addition, competition for quality technical personnel has continued to intensify, resulting in increased personnel costs. Such competition has adversely affected, and is likely to continue to adversely affect, our gross profits, margins and results of operations. Furthermore, we believe the barriers to entry into our markets are relatively low, which enable new competitors to offer competing services. See “Risk Factors — There is Intense Competition in the Internet Services Market.”

      We believe that we compete successfully by offering comprehensive solutions for our customers. We provide creative, leading-edge, comprehensive Internet professional services to help our customers expand their businesses and maintain their competitive advantage through Internet-driven opportunities. We also believe that we distinguish ourselves on the basis of our strategic thinking, technical expertise, competitive pricing, our 24x7 global delivery model and our ability to understand our customers’ needs.

Facilities

      SeraNova leases various office facilities under operating leases expiring at various dates through December 31, 2005 (See Notes to the Financial Statements). Also, we are currently permitted to occupy and use various office space pursuant to the terms of a space sharing agreement with Intelligroup. Our principal executive offices are located in Edison, New Jersey. Our headquarters includes sufficient space for certain of our sales and technical staffs and our marketing, administrative, finance and management personnel. We maintain offices in the following locations:

United States	Europe	Asia Pacific
Edison, New Jersey Foster City,   California Phoenix, Arizona Rosemont, Illinois Auburn Hills, Michigan Provo, Utah Fayetteville, Georgia	United Kingdom	Australia New Zealand Philippines Thailand India Hong Kong

      We believe that our existing facilities are adequate to meet our current needs and that suitable additional or alternative space will be available in the future on reasonable terms as needed.

Intellectual Property Rights

      We do not have and do not rely on registered trademarks or patents to protect our proprietary information. Instead, we rely primarily on a combination of copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions.

      We have developed specific processes, methodologies and tools underlying the SeraNova Time-To-Market Approach. We can not guarantee that the steps we have taken to protect our proprietary rights will be adequate to prevent misappropriation of our intellectual property.

Legal Proceedings

      There are currently no material legal proceedings pending to which we are a party or to which any of our property is subject.

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MANAGEMENT

Directors, Executive Officers and Key Employees

      The following individuals serve on our board of directors and/or as our executive officers or key employees. Our board of directors may appoint additional executive officers from time to time.

Name	Age		Position(s)
Rajkumar Koneru		30	Chairman, Chief Executive Officer and President
Ravi Singh		41	Chief Financial Officer, Executive Vice President and Director
Rajan Nair		31	Chief Operating Officer
Nagarjun Valluripalli		31	Director
Richard Bevis		50	Vice President, Marketing
Tarun Chandra		33	Vice President, Corporate Strategy
Ashok Roy		28	Vice President, Business Development
James E. Abbott		41	Director

      All directors hold office until the next annual meeting of shareholders or until their successors have been elected and qualified. All of our executive officers are elected annually by the board of directors and serve at the discretion of the board of directors and until their successors are elected and qualified.

      Rajkumar Koneru has been the Chief Executive Officer of SeraNova since its formation in September 1999. Mr. Koneru joined our parent company, Intelligroup, in 1994 when his company Oxford Systems merged with Intelligroup. He has served as the Chief Executive Officer of Intelligroup from November 1997 to April 1998, and from May 1999 to January 2000. Mr. Koneru led the reorganization of Intelligroup resulting in two separate businesses — ASP Plus and SeraNova. Mr. Koneru has led SeraNova’s strategic direction and growth over the last three years. He also serves as the Chairman of the Board of Directors of IndiaInfo.com Private Limited and Visual Interactive, Inc. Mr. Koneru graduated from the Birla Institute of Technology and Science with a Masters degree in Management Studies.

      Ravi Singh has served as our Chief Financial Officer since September 1999. Mr. Singh has eighteen years of investment banking and senior management experience, including eleven years in investment banking, focused on technology and emerging growth companies. Before joining SeraNova, from July 1998 to September 1999, Mr. Singh was a Managing Director and Head of Technology Investment Banking at Punk Ziegel & Company in New York. From 1996 to July 1998, before joining Punk Ziegel, Mr. Singh was Managing Director of Forbes & Walker Inc., a New York and Toronto based private equity investment firm. Prior to that, from July 1992, Mr. Singh was a General Partner and Managing Director of SG Cowen in New York. Before joining SG Cowen, Mr. Singh was a Manager in Coopers & Lybrand’s New York practice. Mr. Singh is a member of the Board of Directors of SeraNova. He also serves on the Board of Directors of Bacon Felt Company in Taunton, MA. Mr. Singh received his MBA from Columbia University.

      Rajan Nair has served as the Chief Operating Officer of SeraNova since December 1999. Since joining Intelligroup in February 1997, Mr. Nair has been instrumental in building the sales force and delivery team for Intelligroup’s Internet Services unit. From January 1999 to December 1999 he was the Vice President of Intelligroup’s Internet Services unit. In December 1999 Mr. Nair was appointed as the Chief Operating Officer of SeraNova. Prior to that, from August 1995 to February 1997, he was a Principal with Computer Sciences Corporation’s national SAP practice. From February 1994 to August 1995, Mr. Nair was a Senior Consultant with Deloitte & Touche. Mr. Nair received his bachelor’s degree from Bombay University in India.

      Nagarjun Valluripalli served as Secretary and Treasurer of SeraNova from July 1999 to July 2000 and remains a member of its Board of Directors. Mr. Valluripalli joined Intelligroup in 1994 when his

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company Oxford Systems merged with Intelligroup and currently serves as Chairman and Co-Chief Executive Officer of Intelligroup. Prior to founding Intelligroup, Mr. Valluripalli was a regional sales manager for Satya Electronics. He received a Masters in Technology from Birla Institute of Technology and Science in 1990.

      Richard Bevis has served as the Vice President of Marketing at SeraNova since September 1999. Mr. Bevis served as the Director of Marketing for Intelligroup from February 1999 to September 1999. Prior to that, Mr. Bevis served in various capacities at multiple technology companies. He was Vice President of Marketing at Planetworks from 1997 to 1999. From 1990 to 1994, Mr. Bevis managed the Consulting Partners Program at Novell and was a Group Marketing Manager at Unix System Laboratories. Mr. Bevis has a B.Sc. degree in Physics and Math from the University of Liverpool and an MBA in Information Systems from Pace University.

      Tarun Chandra is the Vice President of Corporate Strategy at SeraNova. Prior to joining SeraNova in October 1999, Mr. Chandra spent eight years on Wall Street. Most recently, from 1997 to 1999 he was a Partner and Senior Analyst with Punk, Ziegel & Company, a technology and healthcare investment banking boutique in New York, where he covered IT services and Internet companies. Mr. Chandra has an MBA in Finance from the University of Detroit, and an M.S. in information systems from Pace University.

      Ashok Roy has been the Vice President of Business Development at SeraNova since September 1999. Mr. Roy is responsible for SeraNova’s business development with respect to Internet-based companies and acquisitions. Mr. Roy joined Intelligroup in December 1997 to lead Intelligroup’s mergers and acquisition efforts. Prior to joining Intelligroup, Mr. Roy was an investment banker at Broadview Associates. He received his MBA from the Wharton School and a Bachelor of Technology degree from the Indian Institute of Technology.

      James E. Abbott has been a partner in the New York law firm of Carter, Ledyard & Milburn since 1993. Prior to becoming a partner, Mr. Abbott was an associate in the same firm beginning in 1984.

      The board of directors has a compensation committee, which approves salaries and incentive compensation for our executive officers and administers our stock plan. The compensation committee currently consists of Messrs. Koneru and Singh. Upon the election of three independent directors, we expect that our compensation committee will consist of Mr. Koneru and one or more of the independent directors. The board of directors also has an audit committee, which reviews the results and scope of the audit and other services provided by our independent accountants. The audit committee currently consists of the entire board. Nasdaq has granted to us a temporary exception to the independent director and audit committee requirements as set forth under Marketplace Rules 4460(c) and 4460(d), respectively. Such exception expires 90 calendar days following the first day of trading on the Nasdaq National Market. Upon the election of three independent directors, we expect that our audit committee will consist of at least three independent directors.

Directors’ Compensation

      Currently, we do not provide our directors with cash compensation for their services as members of our board of directors. However, we anticipate that we will compensate each non-employee member of the Board with cash compensation and stock option grants upon his or her election to the Board of Directors. James E. Abbott, who was elected to the Board effective October 13, 2000, received on that date an option to purchase 50,000 shares of SeraNova common stock at a price of $3.275 per share. In December 1999, we granted Mr. Nagarjun Valluripalli options to purchase 300,000 shares of SeraNova’s common stock at an exercise price of $6.51 per share.

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Executive Compensation

      The following table sets forth certain information concerning compensation paid by Intelligroup for services in all capacities awarded to, earned by or paid to our chief executive officer and each of our other executive officers whose aggregate salary and bonus exceeded $100,000 during the year ended December 31, 1999 or would have exceeded $100,000 had they served the entire year (collectively, the “Named Executives”):

SUMMARY COMPENSATION TABLE

								Long-term
								compensation
								awards
				Annual compensation				Securities
								underlying
Name and Principal Position(s) with Intelligroup		Year		Salary		Bonus		options*
Rajkumar Koneru			1999	$	252,798	$	—		777,938
	Chairman, Chief Executive Officer and President
Ravi Singh			1999		75,803		—		466,763
	Chief Financial Officer
Rajan Nair			1999		200,126		81,126		466,763
	Chief Operating Officer

*  Shares of SeraNova common stock.

Option Grants in 1999

      The following table sets forth information concerning individual grants of options to purchase SeraNova common stock made during the year ended December 31, 1999 to each of the Named Executives:

OPTION GRANTS IN LAST FISCAL YEAR

	Individual grants									Potential realizable
										value at assumed annual
	No. of		% of total							rates of stock price
	shares		options			Exercise				appreciation for option
	underlying		granted to			price				term(4)
	options		employees in			per		Expiration
Name	granted(1)		1999(2)			share(3)		date		5%		10%
Rajkumar Koneru		777,938		24.0	%	$	2.52		9/15/09	$	1,232,887	$	3,124,379
Ravi Singh		466,763		14.4			2.52		9/15/09		739,732		1,874,628
Rajan Nair		466,763		14.4			2.52		10/1/09		739,732		1,874,628

(1)	One-third of these options became exercisable on March 15, 2000 and the balance of the options are becoming exercisable in equal monthly amounts over a 30-month period after March 31, 2000.
(2)	Based on 3,236,092 shares reserved for issuance upon the exercise of options granted to employees during 1999.
(3)	The exercise price equals the fair market value of the common stock as of the grant date as determined by the board of directors.
(4)	The potential realizable value is calculated based upon the term of the option at the time of grant (10 years). Assumed stock price appreciation of 5% and 10% is based on the fair value at the time of grant.

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AGGREGATED OPTION EXERCISES IN 1999

AND 1999 YEAR-END OPTION VALUES

			Number of
			shares underlying				Value of unexercised
			unexercised options				in-the-money options
			at fiscal year-end				at end of 1999(1)
	Shares acquired
Name	on exercise		Vested		Unvested		Vested		Unvested
Rajkumar Koneru		-0-		—		777,938	$	—	$	3,103,973
Ravi Singh		-0-		—		466,763		—		1,862,384
Rajan Nair		-0-		—		466,763		—		1,862,384

(1)  Based on a year-end fair market value of the underlying securities equal to $6.51 per share less the exercise price per share for such shares. The year-end fair market value of the common stock was determined in good faith by the board of directors of SeraNova.

1999 Stock Plan

      The 1999 Stock Plan was adopted by the board of directors, approved by Intelligroup, as our sole shareholder prior to the spin-off, and became effective on December 1, 1999. The 1999 Stock Plan shall remain in effect until terminated by the board of directors. As of December 31, 1999, a total of 5,000,000 shares of common stock were reserved for issuance upon the exercise of options or the grant of restricted stock awards or stock awards under the 1999 Stock Plan. However, the total number of shares reserved for issuance under the 1999 Stock Plan will be automatically increased in the event such number of shares represents less than 20% of the outstanding shares of our common stock on December 31 of any future year. Those eligible to receive stock option grants, restricted stock awards and stock awards under the 1999 Stock Plan include employees, non-employee directors and consultants. The 1999 Stock Plan is administered by the compensation committee of our board of directors.

      Subject to the provisions of the 1999 Stock Plan, the committee has the discretion to determine the optionees and/ or grantees, the type of options or awards to be granted, the vesting provisions, the terms of the grants and other related provisions as are consistent with the 1999 Stock Plan. The exercise price of an incentive stock option may not be less than the fair market value per share of the our common stock on the date of grant or, in the case of an optionee who beneficially owns 10% or more of the voting power of all classes of our capital stock, not less than 110% of the fair market value per share on the date of grant. The exercise price of a non-qualified stock option may not be less than 85% of the fair market value per share of our common stock on the date of grant. Prior to the spin-off, the fair market value was determined by the board of directors in good faith. Since the spin-off, the fair market value is being determined in accordance with the closing sales price of our common stock as quoted on the Nasdaq National Stock Market. In addition, the 1999 Stock Plan allows for the grant of restricted stock awards and stock awards subject to the restrictions and conditions as the compensation committee may determine at the time of grant.

      The term of each stock option granted under the 1999 Stock Plan shall be stated in the applicable option agreement, provided, however, in the case of incentive stock options, the term shall be no more than ten years from the date of grant, subject to earlier termination upon or after a fixed period following the optionee’s death, disability or termination of employment with us. The term of any options granted to a holder of more than 10% of our capital stock may be no longer than five years. Options granted under the 1999 Stock Plan to our employees will vest in the manner determined by our board of directors. Typically, options are not assignable or otherwise transferable except by will or as per the laws of descent and distribution. The compensation committee, however, may in its discretion provide that certain options may be transferred to one or more transferees provided certain conditions are satisfied. In the event of a merger or consolidation of us with or into another corporation or the sale of all or substantially all of our assets in which the successor corporation does not assume outstanding options or issue equivalent options, our board of directors is required to provide accelerated vesting of outstanding options.

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      As of September 30, 2000, there were options to purchase 1,856,183 shares of common stock at a weighted average exercise price per share of $7.50 outstanding under this plan.

      In addition, there are 15 currently outstanding options outside the plan to purchase an aggregate of 3,226,895 shares of common stock. These options include the grants to the Named Executives described above. The weighted average exercise price of these options is $3.25 per share.

Employment Agreements

      We have entered into employment agreements with each of our executive officers.

      We have an employment agreement with Rajkumar Koneru, our President, Chief Executive Officer and Chairman of the Board, which expires September 9, 2002. Such employment agreement automatically renews for additional successive one-year terms unless otherwise terminated by either party upon 60 days written notice prior to the expiration of the term then in effect. The annual salary provided under this agreement is $350,000 together with an annual bonus of not less than $150,000 per year. In the event of termination without cause, the agreement provides for Mr. Koneru to receive his annual base salary for the full term of such agreement, as well as continued coverage under all of our benefit plans, programs and policies to the extent required by law. Additionally, the agreement provided for the grant of options to purchase 777,938 shares of our common stock at $2.52 per share which was equal to the fair market value per share of our common stock as of the grant date as determined by the board of directors. One third of such options vest on March 15, 2000 and the remaining options vest in equal monthly amounts over a 30 month period thereafter. Additionally, Mr. Koneru has agreed that during the term of his agreement and for one year thereafter, he will not interfere with our customer relationships or solicit our executives or affiliates.

      We have an employment agreement with Ravi Singh, our Chief Financial Officer, which expires September 9, 2002. Such employment agreement automatically renews for additional successive one-year terms unless otherwise terminated by either party upon 90 days written notice prior to the term then in effect. The annual salary provided under this contract is approximately $250,000 together with an annual bonus of not less than $100,000 per year. In the event of termination without cause, the agreement provides for a severance payment equal to one year of salary, bonus, benefit payments and coverage. Additionally, the agreement provided for the granting of options to purchase 466,763 shares of our common stock at $2.52 per share which was equal to the fair market value per share of our common stock as of the grant date as determined by the board of directors. One third of such options vest on March 15, 2000, and the remaining options vest in equal monthly amounts over a 30 month period thereafter. Mr. Singh has agreed that during the term of this agreement and, in the event his employment is terminated for cause, permanent incapacity or by Mr. Singh without good reason, then for a period of one year thereafter, he will not compete with us. Mr. Singh has also agreed that during the term of his agreement and for one year thereafter, he will not interfere with our customer relationships. The agreement also provides that Mr. Singh maintain the confidentiality of information about us and our business. Additionally, Mr. Singh has agreed to assign and transfer to us all his title and right to inventions and works in our business.

      We have an employment agreement with Rajan Nair, our Chief Operating Officer. The annual salary provided under this agreement is $250,000. Either party may terminate the agreement without cause upon 30 days written notice. In the event of termination without cause, the agreement provides for severance payment equal to six months salary. The agreement provides that Mr. Nair maintain the confidentiality of our information and our business. Mr. Nair has also agreed to assign and transfer to us all of his title and right to inventions and works in our business. Additionally, during the term of the agreement and for one year thereafter, Mr. Nair has agreed not to solicit or accept similar business from our customers or prospective customers, interfere with our customer relationships or solicit our executives and individual contractors.

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      In addition to the foregoing agreements, we have executed agreements with each of our employees, whereby each employee agrees to maintain the confidentiality of our information and to assign inventions to us.

Compensation Committee Interlocks and Insider Participation

      During the year ended December 31, 1999, the compensation of our executive officers was determined by the compensation committee. The compensation committee was established by the board of directors on September 10, 1999. The compensation committee consists of Messrs. Koneru and Singh. Upon the election of three independent directors, we expect that our compensation committee will consist of Mr. Koneru and one or more of the independent directors. Mr. Koneru also serves on the compensation committee of the Intelligroup board of directors which, among other things, determines the compensation of Mr. Valluripalli, a member of our board of directors. See “Management — Employment Agreements” and “Certain Transactions.”

Indemnification of Directors and Officers

      Our certificate of incorporation and by-laws provide that SeraNova is authorized to indemnify our directors and officers to the fullest extent authorized under New Jersey law. We intend to enter into indemnification agreements with each of our directors and officers providing for indemnification of such directors and officers to the fullest extent permitted by applicable law.

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THE SPIN-OFF AND OUR RELATIONSHIP WITH INTELLIGROUP

Reasons for the Spin-off

      The spin-off has allowed us to focus solely on our Internet professional services business which requires a sales and marketing effort that is distinct from Intelligroup’s. In addition, we believe that we are able to raise capital more easily and provide better incentives for our employees as a separate publicly-traded Internet services company. The spin-off has enabled us and Intelligroup to conduct business with each other’s competitors and to invest in or acquire complementary businesses that will potentially solidify our competitive position in the market for Internet professional services. The spin-off also allows Intelligroup to focus on its core business relating to the implementation of enterprise resource planning software and as an application service provider.

Manner of Effecting the Spin-off

      The spin-off was effected on July 5, 2000 by a stock dividend paid to each holder of record of Intelligroup common stock on that date. The spin-off ratio was one share of SeraNova common stock for every one share of Intelligroup common stock outstanding on the spin-off record date.

      As a result of the spin-off, SeraNova became a separate, publicly-traded company and Intelligroup continues to own and operate its other business.

Contractual Arrangements

      We entered into a number of agreements with Intelligroup which became effective January 1, 2000. We believe that the terms of these agreements equitably reflect the benefits and costs of our ongoing relationship with Intelligroup. However, as a result of Intelligroup’s ownership interest in SeraNova, the terms of such agreements were not the result of arm’s-length negotiations.

  Contribution Agreement

      The assets and liabilities of Intelligroup’s Internet services business were transferred by Intelligroup and certain of its subsidiaries to SeraNova on January 1, 2000. SeraNova and Intelligroup have agreed to execute and deliver such further assignments, documents of transfer, deeds and instruments as may be necessary for the more effective implementation of such transfers.

      Some post-closing assignments and transfers may require consent by third parties and various filings, approvals or recordings with governmental entities. Some permits or licenses may require reapplication by us, and the reissuance in our name. If consent to the assignment or reissuance of any contract, license or permit being transferred is not obtained, SeraNova and Intelligroup will seek to develop alternative approaches so that, to the maximum extent possible, we will receive the benefits of the contract, license or permit and will discharge the duties and bear the costs and risks under the contract, license or permit. We will bear the risk that the alternative arrangements will not provide us with the full benefits of the contract, license or permit. We and Intelligroup, however, believe that all necessary consents and reissuances that are material to us have been obtained.

  Services Agreement

      Prior to Intelligroup’s transfer of its Internet services business to us on January 1, 2000, Intelligroup’s administrative personnel provided support services for our business. We have entered into a services agreement with Intelligroup under which Intelligroup will continue to provide to us certain general and administrative functions. We believe that our services agreement with Intelligroup minimizes the possibility of disruption of such functions for the foreseeable future.

      The initial term of the services agreement is for a period of one year beginning on January 1, 2000. The services agreement shall automatically renew for additional consecutive one-year periods unless either

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party gives notice of its intent not to renew at least 60 days prior to the end of the then expiring term. The services agreement can be terminated by either party upon 30 days written notice.

      General and Administrative Services and Expenses. Under the terms of the services agreement, we have agreed with Intelligroup: (1) to share certain general and administrative expenses; and (2) for Intelligroup to provide us with other general and administrative services in exchange for a fixed fee. The general and administrative expenses that we have agreed to share with Intelligroup include payroll costs for shared employees, utilities costs, equipment expenses, taxes and office supplies.

      The services that Intelligroup has agreed to provide to us for a fee are:

•  Administrative services, including reception services, 401(k) plan maintenance and travel administration;

•  Tax services, including preparation and filing of corporate tax returns, assistance with tax compliance and accounting for taxes, and supervision of audits and other proceedings and litigation;

•  Human resources services, including advice and assistance relating to employee benefits, facilitation of government/regulatory reporting and assistance with compliance issues; and

•  Management information systems services, including operational and technical support for telephones and voice mail.

      Our Cost of Fee-Based Services. Our cost for administrative services provided by Intelligroup is approximately $30,000 per month.

      Reasons for the Agreement. We believe that the most cost-efficient and least disruptive way to obtain the administrative support services we require is for Intelligroup to continue to provide such services to us on a fee basis as described above rather than based on the actual hours spent by Intelligroup personnel providing such services. It would be difficult, if not impossible, to determine the portion of time spent by Intelligroup’s employees on functions pertaining only to our business or only to Intelligroup’s business. For example, the provision of technical support services for internal operating systems, inputting and processing data, recruiting of personnel, administration of employee benefit plans that pertain to both companies and government reporting would be difficult to allocate.

      Direct Expenses. Except for the services provided on our behalf by Intelligroup pursuant to the services agreement and the other agreements described below, we are responsible for providing or otherwise obtaining all of the necessary administrative, management and support services required to conduct our business, all of which were previously provided or obtained by Intelligroup. The direct expenses include executive compensation, personnel salaries and benefits for our employees.

  Space Sharing Agreement

      We have entered into a space sharing agreement with Intelligroup providing for the sharing by Intelligroup and us of Intelligroup’s office facilities, including the office facilities located in Edison, New Jersey at which our and Intelligroup’s principal executive offices are located. We and Intelligroup believe that it is beneficial for us to continue to be located within Intelligroup’s corporate headquarters and branch office facilities due to economies of scale.

      Under the space sharing agreement, the costs associated with the leasing and maintaining facilities are, in general, allocated between Intelligroup and us on the basis of actual use of floor space.

  Tax Sharing Agreement

      We have entered into a tax sharing agreement with Intelligroup that governs the allocation between us of federal, state, local and foreign tax liabilities and related tax matters, such as the preparation and filing of tax returns and the conduct of audits and other tax proceedings, for taxable periods before and after the spin-off.

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      In general, the tax sharing agreement provides for, among other things, that:

•  each of Intelligroup and SeraNova are responsible for their respective tax liabilities and receive their respective tax benefits relating to the taxable periods prior to the spin-off as allocated by the agreement;

•  Intelligroup is responsible for, and will indemnify us against, its tax liabilities for taxable periods ending prior to the date of the spin-off; and

•  we are responsible for, and will indemnify Intelligroup and its subsidiaries against, our tax liabilities for taxable periods beginning on or after the date of the spin-off.

      In addition, Intelligroup will be liable for, and will indemnify us against, all tax liabilities incurred by us as a result of any event, action, or failure to act, wholly or partially within the control of Intelligroup or any of its subsidiaries, including any event, action or failure to act that results in a breach of any representation made to the Internal Revenue Service, or any other event related to the acquisition of Intelligroup stock, resulting in taxes imposed on us with respect to any action taken pursuant to the spin-off or any related transaction. We will be liable for, and will indemnify Intelligroup and its subsidiaries against, all tax liabilities incurred by Intelligroup or any of its subsidiaries as a result of any event, action, or failure to act wholly or partially within our control, including any event, action or failure to act that results in a breach of any representation made to the Internal Revenue Service, or any other event related to the acquisition of our stock, resulting in taxes imposed on Intelligroup or any of its subsidiaries with respect to any action taken pursuant to the spin-off or any related transaction.

Potential Conflicts with Intelligroup

      As a result of our relationship with Intelligroup, including our promissory note with Intelligroup, conflicts may develop between Intelligroup and us and such conflicts may not be resolved in our favor. For some examples of potential conflicts, see “Risk Factors — Potential Conflicts with Intelligroup May Not Be Resolved in Our Favor.”

      Our agreements with Intelligroup provide procedures for resolving any disputes arising out of or relating to such agreements. Generally, the procedure establishes that the parties shall first attempt to negotiate in good faith a resolution of the dispute. If the parties fail to amicably resolve the dispute, either party may submit the dispute to binding arbitration.

      We may enter into material transactions and agreements with Intelligroup in the future in addition to those described above. The SeraNova board will utilize such procedures in evaluating the terms and provisions of any material transactions between Intelligroup or its affiliates and us as the board may deem appropriate in light of its fiduciary duties under state law. Depending on the nature and size of the particular transaction, in any such evaluation, the board may rely on management’s statements and opinions and may or may not utilize outside experts or consultants or obtain independent appraisals or opinions.

      Two of our three directors are also directors of Intelligroup. Rajkumar Koneru, our Chairman, President and Chief Executive Officer resigned as an officer of Intelligroup in January 2000. Mr. Koneru will remain a director of Intelligroup. Nagarjun Valluripalli, a member of our board also serves as Co-Chief Executive Officer of Intelligroup. Our directors who are also directors of Intelligroup may have conflicts of interest with respect to matters potentially or actually involving or affecting Intelligroup and us, such as acquisitions, financing and other corporate opportunities that may be suitable for Intelligroup and us. To the extent that such opportunities arise, such directors may consult with their legal advisors and make a determination after consideration of a number of factors, including whether such opportunity is presented to any such director in his capacity as our director, whether such opportunity is within our line of business or consistent with our strategic objectives and whether we will be able to undertake or benefit from such opportunity. In addition, determinations may be made by the board, when appropriate, by the vote of the disinterested directors only. Notwithstanding the foregoing, there can be no assurance that conflicts will be resolved in our favor.

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CERTAIN TRANSACTIONS

      We have a loan payable to Intelligroup currently in the amount of $11.6 million. Under the terms of the promissory note evidencing the loan, we are obligated to pay Intelligroup the balance of principal and interest on the note in installments on and before July 31, 2001. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” Under Intelligroup’s current credit facility, Intelligroup will no longer be able to fund our operations.

PRINCIPAL SHAREHOLDERS

      The following table sets forth as of November 1, 2000, certain information regarding beneficial ownership of our common stock by:

•  each person or group of affiliated persons known to us to be the beneficial owner of more than 5% of the outstanding shares of common stock;

•  each director;

•  each Named Executive; and

•  all directors and executive officers as a group.

      The address for each director and officer is c/o SeraNova, Inc., 499 Thornall Street, Edison, New Jersey 08837.

Name	Shares(1)			Percentage(2)
Rajkumar Koneru		2,616,950	(3)		14.6	%
Nagarjun Valluripalli		2,277,221	(4)		13.0
Ashok Pandey		2,080,083	(5)		11.9
Capital Guardian Trust Company(7)		1,199,000	(6)		5.0
Ravi Singh		251,118	(7)		1.4
Rajan Nair		186,705	(7)		1.1
James E. Abbott		-0-			—
Richard Bevis		18,470	(8)		*
Tarun Chandra		120,514	(9)		*
Ashok Roy		103,745	(7)		*
All directors and executive officers as a group (eight persons)		5,574,723	(10)		29.9

  * Less than 1%.

(1)  Beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and also any shares which the individual or entity has a right to acquire, or will first have a right to acquire within 60 days after November 1, 2000, through the exercise of any stock options. The inclusion herein of such shares, however, does not constitute an admission that the named stockholder is a direct or indirect beneficial owner of such shares. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power with respect to all shares of common stock listed as owned by such person or entity.

(2)	Based upon 17,460,803 shares of SeraNova common stock outstanding as of November 1, 2000.
(3)	Includes 418,530 shares of common stock issuable upon the exercise of options.
(4)	Includes 75,000 shares of common stock issuable upon the exercise of options.
(5)	The address for Ashok Pandey is c/o Intelligroup, Inc., 499 Thornall Street, Edison, New Jersey 08837. Includes 603,755 shares held in trust as to which Mr. Pandey, or co-trustee shares voting and dispositive power.
(6)	The address for Capital Guardian Trust Company is 11100 Santa Monica Boulevard, Los Angeles, California 90025-3384. The information set forth in the table concerning Capital Guardian Trust Company and its parent holding company — Capital Group International, Inc. — is based solely on a

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Schedule 13F Holdings Report filed by Capital Guardian Trust Company for the calendar quarter ended June 30, 2000, before the SeraNova spin-off. This report discloses that at June 30, 2000, Capital Guardian Trust Company and Capital Group International, Inc. shared “investment discretion” with respect to 1,199,000 shares of Intelligroup common stock and together had sole voting power with respect to 815,000 shares of Intelligroup common stock.

(7)	Consists of shares of common stock issuable upon the exercise of options.
(8)	Includes 16,670 shares of common stock issuable upon exercise of options.
(9)	Includes 116,714 shares of common stock issuable upon exercise of options.

(10)  Includes 1,168,482 shares of common stock issuable upon exercise of options.

THE SELLING SHAREHOLDERS

      The table below identifies the selling shareholders and shows the number of shares of SeraNova common stock which each of them is or will be offering hereby. The selling shareholders other than NSA Investments LLC (“NSA”) have advised SeraNova that except for the shares shown below, they are not currently the direct or indirect owners of any shares of SeraNova common stock. NSA has advised SeraNova that it owns 100,000 shares of our common stock other than those shown for it below, and that NSA expects to continue to hold these 100,000 shares (representing less than 0.1% of the shares of common stock currently outstanding) after the completion of this offering.

      On September 29, 2000, Strong River Investment, Inc. (“Strong River”) and Montrose Investments Ltd. (“Montrose”) purchased from SeraNova for $8 million an aggregate of 800 shares of SeraNova’s 6% series A convertible preferred stock convertible into common stock, and warrants to purchase SeraNova common stock. However, a holder of the preferred stock or these warrants may not convert or exercise them to acquire shares of our common stock to the extent that such acquisition would result in the holder, together with its affiliates, beneficially owning in excess of 4.999% and/or 9.999% of the outstanding shares of SeraNova common stock following such acquisition. This restriction may be waived by the holder on not less than 61 days’ notice to SeraNova. However, the 4.999% and 9.999% limitations would not prevent Strong River and Montrose from acquiring and selling over time in excess of 4.999% or 9.999% of SeraNova common stock in a series of acquisitions and sales.

Name	Number of shares
Strong River Investments, Inc.		1,658,147	(1)
Montrose Investments Ltd.		1,575,000	(2)
NSA Investments II LLC		332,588
Evansville Limited		166,294	(3)
SSB Investments Ltd.		166,294	(4)
Ampal-American Israel Corporation		83,147	(5)

(1)	Includes 1,575,000 shares issuable upon conversion of preferred shares and exercise of warrants issued by SeraNova. This number is based on certain assumptions and is subject to adjustment. Enright Holding Corp., of which Avi Vigder is managing director, has voting and investment power over securities owned by Strong River Investments, Inc.
(2)	Comprised of 1,575,000 shares issuable upon conversion of preferred shares and exercise of warrants issued by SeraNova. This number is based on certain assumptions and is subject to adjustment. HBK Investments L.P. has voting and investment control over securities owned by Montrose Investments Ltd. pursuant to a management agreement. Each of Harlan B. Korenvaes, Kenneth M. Hirsh, Laurence H. Lebowitz, William E. Rose, Richard L. Booth, David C. Halcy and Jamiel A. Akhtar are members of HBK Management LLC, the general partner of HBK Partners II L.P., which in turn is the general partner of HBK Investments L.P.
(3)	Evansville Limited is wholly owned by the Phyllis Quasha Revocable Trust.

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(4)	Raj Notwan, a resident of Hong Kong, is the controlling shareholder of SSB Investments Ltd.
(5)	Rebar Financial Corporation (“Rebar”) is the controlling shareholder of Ampal-American Isreal Corporation. Rebar is wholly owned by Daniel and Raz Steinmetz.

      No selling shareholder or any of its affiliates has had any material relationship with SeraNova (other than as an investor), with Intelligroup or with any of their respective affiliates during the past three years.

PLAN OF DISTRIBUTION

      The selling shareholders and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of SeraNova common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. SeraNova will receive no part of the proceeds from the sale of the shares by the selling shareholders. The selling shareholders may use any one or more of the following methods when selling shares:

•  ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

•  block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

•  purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

•  an exchange distribution or special offering in accordance with the rules of the applicable exchange;

•  privately negotiated transactions;

•  short sales;

•  sales by broker-dealers of a specified number of such shares at a stipulated price per share;

•  a combination of any such methods of sale; and

•  any other method permitted pursuant to applicable law.

      The selling shareholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.

      The selling shareholders may also engage in short sales against the box, puts and calls and other transactions in securities of SeraNova or derivatives of SeraNova’s securities and may sell or deliver shares in connection with these trades. The selling shareholders may pledge their shares to their brokers under the margin provisions of customer agreements. If a selling shareholder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares. The selling shareholders have advised SeraNova that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares other than ordinary course brokerage arrangements, nor is there an underwriter or coordinating broker acting in connection with the proposed sale of shares by the selling shareholders.

      Broker-dealers engaged by the selling shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling shareholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling shareholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.

      The selling shareholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.

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      SeraNova is required to pay all fees and expenses incident to the registration of the shares, including fees and disbursements of counsel to the selling shareholders. SeraNova has agreed to indemnify the selling shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

      If any selling shareholder notifies SeraNova that the selling shareholder has entered into any material arrangement with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, SeraNova will file a supplement to this prospectus, if required, pursuant to Rule 424(b) under the Securities Act, disclosing:

•  the name of the participating broker-dealer(s);

•  the number of shares involved;

•  the price at which such shares were sold;

•  the commission paid or discounts or concessions allowed to the broker-dealer(s), where applicable;

•  whether the broker-dealer(s) conducted any investigations to verify the information in or incorporated by reference in this prospectus; and

•  other material facts of the transaction.

      Also, if a selling shareholder notifies SeraNova that a donee, pledgee, transferee, or other successor-in-interest of the shares intends to sell more than 500 shares, SeraNova will file an appropriate supplement to this prospectus.

DESCRIPTION OF CAPITAL STOCK

General

      Our authorized capital stock consists of 40,000,000 shares of common stock, par value $0.01 per share and 5,000,000 shares of preferred stock, par value $0.01 per share, issuable in series. The following statements are brief summaries of the material provisions with respect to our capital stock contained in our certificate of incorporation and by-laws, copies of which are exhibits to the registration statement of which this prospectus is a part. The following summary is qualified in its entirety by reference thereto.

Preferred Stock

      The preferred stock is issuable from time to time in one or more series and with such designations, preferences and other rights for each series as shall be stated in the resolutions providing for the designation and issue of each such series adopted by our board of directors. The board of directors is authorized by our certificate of incorporation to determine, among other things, the voting, dividend, redemption, conversion, exchange and liquidation powers, rights and preferences and the limitations thereon pertaining to such series. The board of directors, without shareholder approval, may issue preferred stock with voting and other rights that could adversely affect the voting power of the holders of the common stock and that could have certain anti-takeover effects. The ability of the board of directors to issue preferred stock without shareholder approval could have the effect of delaying, deferring or preventing a change in control of us or the removal of existing management.

      The only shares of preferred stock of SeraNova currently outstanding are 800 shares of 6% Series A Convertible Preferred Stock (the “Series A Preferred Stock”). The following description of the SeraNova common stock includes a description of those terms of the Series A Preferred Stock which affect the rights evidenced by the common stock.

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Common Stock

  Voting Rights

      The holders of our common stock are entitled to one vote per share on all matters to be voted on by shareholders. Holders of shares of our common stock are not entitled to cumulate their votes in the election of directors. Generally, all matters to be voted on by shareholders must be approved by a majority, or, in the case of election of directors, by a plurality, of the votes entitled to be cast by the holders of our common stock present in person or represented by proxy, subject to any voting rights granted to holders of any preferred stock. Except as otherwise provided by law or in our certificate of incorporation, and subject to any voting rights granted to holders of any outstanding preferred stock, amendments to our certificate of incorporation must be approved by a majority of the votes entitled to be cast by the holders of our common stock. However, amendments to our certificate of incorporation that would alter or change the powers, preferences or special rights of any class or series of stock (including the Series A Preferred Stock) so as to affect them adversely also must be approved by a majority of the votes entitled to be cast by the holders of the class or series affected by the amendment. Notwithstanding the foregoing, any amendment to our certificate of incorporation to increase the authorized shares of any class of our capital stock requires the approval only of a majority of the votes entitled to be cast by the holders of our common stock.

      The Series A Preferred Stock has no voting rights except as described in the immediately preceding paragraph, and except that as long as any shares of Series A Preferred Stock are outstanding, SeraNova may not, without the affirmative vote of the holders of a majority of the shares of the Series A Preferred Stock then outstanding,

      (a)  alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or alter or amend the certificate of designation providing for the Series A Preferred Stock,

      (b)  authorize or create any class of stock ranking senior to or equal to the Series A Preferred Stock as to dividends or distribution of assets upon a liquidation,

      (c)  amend SeraNova’s certificate of incorporation or other charter documents so as to affect adversely any rights of the holders of Series A Preferred Stock,

      (d)  increase the authorized number of shares of Series A Preferred Stock, or

      (e)  enter into any agreement with respect to clauses (a) through (d) above.

  Dividends

      Holders of our common stock will share ratably on a per share basis in any dividend declared by the board of directors, subject to any preferential rights of any outstanding preferred stock. Dividends payable in shares of common stock may be paid only as follows: (1) shares of our common stock may be paid only to holders of our common stock; and (2) the number of shares so paid will be equal on a per share basis with respect to each outstanding share of our common stock.

      Holders of Series A Preferred Stock are entitled to receive, out of funds legally available therefor, cumulative dividends at the rate per share (as a percentage of the stated value per share) of 6% per annum. Stated value per share of Series A Preferred Stock is currently $10,000. Accrued dividends on a share of Series A Preferred Stock are payable (1) on the date when such share is converted into shares of common stock, and (2) in cash or by accretion of the stated value of such share. The decision whether to accrete dividends to the stated value or to pay dividends in cash is at the discretion of SeraNova, subject to certain exceptions. For example, SeraNova must pay dividends in cash if

•  the number of shares of common stock at the time authorized, unissued and unreserved for all purposes is insufficient to accrete such dividends to the stated value to permit conversion in full of all outstanding stated value, or

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•  the common stock is not then listed or quoted on the Nasdaq National Stock Market, the New York Stock Exchange, the American Stock Exchange or the Nasdaq SmallCap Stock Market.

      Any dividends to be paid in cash hereunder that are not paid within three Nasdaq trading days following a conversion date shall continue to accrue and shall entail a late fee, which must be paid in cash, at the rate of 18% per annum or the lesser rate permitted by applicable law.

      As long as any shares of Series A Preferred Stock are outstanding, neither SeraNova nor any subsidiary of SeraNova may purchase or otherwise acquire directly or indirectly any shares of common stock, nor shall SeraNova directly or indirectly (a) pay or declare any dividend or make any distribution upon the common stock at any time when SeraNova is not in compliance with its payment and other obligations with respect to the Series A Preferred Stock, (b) make any distribution in respect of any shares of common stock, or (c) set aside any monies for the purchase of any shares of common stock.

  Other Rights

      Unless approved by a majority of the votes entitled to be cast by the holders of our common stock, in the event of any reorganization or consolidation of SeraNova with one or more corporations or a merger of SeraNova with another corporation in which shares of common stock are converted into or exchangeable for shares of stock, other securities or property, all holders of our common stock, will be entitled to receive the same kind and amount of shares of stock and other securities and property.

      Upon any liquidation, dissolution or winding up of SeraNova, after payment in full of the amounts required to be paid to holders of preferred stock, if any, all holders of our common stock, are entitled to receive the same amount per share with respect to any distribution of assets to holders of shares of our common stock. Upon any liquidation, dissolution or winding-up of SeraNova, the holders of Series A Preferred Stock will be entitled to receive, out of the assets of SeraNova for each share of Series A Preferred Stock, an amount equal to the stated value per share of the Series A Preferred Stock (currently $10,000, or $8,000,000 for all 800 outstanding shares of Series A Preferred Stock in the aggregate) before any distribution or payment will be made to the holders of common stock.

      No shares of our common stock are subject to redemption or have preemptive rights to purchase additional shares of our common stock or our other securities.

Anti-Takeover Effects of Certain Certificate of Incorporation and By-Law Provisions

  Shareholders Protection Act

      We are governed by the provisions of Section 14A:10A-1 et seq., of the New Jersey Business Corporation Act, known as the New Jersey Shareholders Protection Act (the “Shareholders Protection Act”). In general, the Shareholders Protection Act prohibits a publicly-held New Jersey corporation from engaging in a “business combination” with an “interested shareholder” for a period of five years after the date of the transaction in which the person became an interested shareholder, unless the business combination is approved in advance by the corporation’s board of directors. A “business combination” includes certain mergers, asset sales and other transactions resulting in a financial benefit to the interested shareholder. An “interested shareholder” is a person who, together with affiliates and associates, owns (or within five years, did own) 10% or more of the corporation’s voting stock. After the five-year waiting period has elapsed, a business combination between a corporation and an interested shareholder will be prohibited unless the business combination is approved by the holders of at least two-thirds of the voting stock not beneficially owned by the interested shareholder, or unless the business combination satisfies a fair price provision in the Shareholders Protection Act.

  General

      The provisions of our certificate of incorporation and by-laws summarized below may delay, deter, or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interest.

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  Board of Directors

      Our by-laws provide that the number of SeraNova’s directors shall be fixed from time to time exclusively by the vote of a majority of the entire board of directors. In addition, the by-laws provide that any vacancies occurring in the board, and newly created directorships resulting from an increase in the authorized number of directors, will be filled

•  by the affirmative vote of a majority of the remaining directors, even if less than a quorum, or

•  by a sole remaining director.

      Generally, directors may be removed from office with or without cause by the affirmative vote of the holders of at least a majority of the shares then entitled to vote for the election of directors.

  Exercise of Directors’ Business Judgment

      Consistent with Section 14A:6-1 of the New Jersey Business Corporation Act, our certificate of incorporation provides that if ever SeraNova’s board of directors evaluate any offer to (a) make a tender or exchange offer for any equity security of SeraNova, or (b) effect a business combination, merger or consolidation involving SeraNova, or a sale of all or substantially all of the assets of SeraNova, the board may, in exercising its judgement to determine what is in the best interest of SeraNova as a whole, give due consideration to any factors which the board of directors determines to be relevant, including

•  the short-term and long-term interests of SeraNova and its shareholders, including the possibility that these interest might be best served by the continued independence of SeraNova,

•  whether the proposed transaction might violate federal or state law,

•  not only the consideration being offered in the proposed transaction and the relationship of such consideration to the then current market price for the outstanding capital stock of SeraNova, but also (1) the market price for the capital stock of SeraNova over a period of years, (2) the estimated price that might be achieved in a negotiated sale of all or part of SeraNova or through an orderly liquidation of SeraNova, (3) the premiums over market price for the securities of other corporations in similar transactions, (4)  current political, economic and other factors bearing on securities prices, and (5) SeraNova’s financial condition and future prospects, and

•  the social, legal and economic effects of the proposed transaction upon employees, suppliers, creditors, customers and others having similar relationships with SeraNova, upon the communities in which SeraNova operates its business and upon the economy of the state, region and nation.

  Special Meetings and Action by Written Consent

      Our certificate of incorporation provides that, special meetings of shareholders may be called only by the President, the Chairman or by a majority of the board of directors. Business transacted at any special meeting of shareholders is limited to matters relating to the purposes set forth in the notice of meeting. In addition, our certificate of incorporation provides that our shareholders may not act by written consent in lieu of a meeting of shareholders.

  Amendment

      Amendment of the foregoing provisions requires approval by holders of at least 66 2/3% of all of the outstanding shares of our capital stock entitled to vote in the election of directors, voting together as a single class. Our by-laws may also be amended by action of the board of directors.

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Limitations on Directors’ and Officers’ Liability

      Section 14A:3-5 of the New Jersey Business Corporation Act permits each New Jersey business corporation to indemnify its directors, officers, employees and agents against expenses and liabilities in connection with:

•  any proceeding involving such persons by reason of his serving or having served in such capacities; or

•  for each such person’s acts taken in his capacity as a director, officer, employee or agent of the corporation if such actions were taken in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation.

      With respect to any criminal proceeding, indemnity is permitted if such person had no reasonable cause to believe his or her conduct was unlawful, provided that any such proceeding is not by or in the right of the corporation.

      Our certificate of incorporation limits the liability of our directors and officers as authorized by Section 14A:2-7(3). Section 14A:2-7(3) of the New Jersey Business Corporation Act enables a corporation in its certificate of incorporation to limit the liability of directors and officers of the corporation to the corporation or its shareholders. Specifically, the certificate of incorporation may provide that directors and officers of the corporation will not be personally liable for money damages for breach of a duty as a director or an officer, except for liability:

•  for any breach of the director’s or officer’s duty of loyalty to the corporation or its shareholders,

•  for acts or omissions not in good faith or which involve a knowing violation of law,

•  as to directors only, under Section 14A:6-12(1) of the New Jersey Business Corporation Act, which relates to unlawful declarations of dividends or other distributions of assets to shareholders or the unlawful purchase of shares of the corporation, or

•  for any transaction from which the director or officer derived an improper personal benefit.

      Article XI of SeraNova’s by-laws specifies that it will indemnify our directors, officers, employees and agents to the extent such parties are a party to any action because he or she was our director, officer, employee or agent. This provision of the by-laws is deemed to be a contract between SeraNova and each director and officer who serves in such capacity at any time while such provision and the relevant provisions of the New Jersey Business Corporation Act are in effect, and any repeal or modification thereof shall not offset any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts. The affirmative vote of the holders of at least 80% of the voting power of all outstanding shares of our capital stock is required to adopt, amend or repeal such provisions of the by-laws.

      We intend that SeraNova will enter into indemnification agreements with each of our officers and directors pursuant to which we will agree to indemnify such parties to the full extent permitted by law, subject to certain exceptions, if such party becomes subject to an action because such party is a director or officer of SeraNova.

      At present, there is no pending litigation or proceeding involving a director or officer of SeraNova as to which indemnification is being sought nor are we aware of any threatened litigation that may result in claims for indemnification by any officer of director.

Listing

      Our common stock is quoted on the Nasdaq National Stock Market under the symbol “SERA.”

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Transfer Agent and Registrar

      The transfer agent and registrar for the our common stock is American Stock Transfer & Trust Company.

LEGAL MATTERS

      Certain legal matters pertaining to this prospectus will be passed upon for us by Carter, Ledyard & Milburn, New York, New York. James E. Abbott, a partner in Carter, Ledyard & Milburn, is a director of SeraNova.

EXPERTS

      The financial statements included in this prospectus and elsewhere in the registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing.

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WHERE YOU CAN FIND MORE INFORMATION

      SeraNova has filed with the Securities and Exchange Commission the registration statement under the Securities Act with respect to the SeraNova common stock being offered in this prospectus. This prospectus does not contain all of the information set forth in the registration statement and its exhibits, to which reference is hereby made. Statements made in this prospectus as to the contents of any contract, agreement or other document referred to herein and filed as an exhibit are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the registration statement, we refer you to such exhibit for a more complete description of the matter involved, and each such statement is qualified in its entirety by such reference. The registration statement and its exhibits may be inspected at the public reference facilities of the Securities and Exchange Commission listed below.

      SeraNova is subject to the information requirements of the Exchange Act, and in accordance therewith will file reports, proxy statements and other information with the Securities and Exchange Commission. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Securities and Exchange Commission at its principal offices at 450 Fifth Street, N.W., Washington, D.C. 20549, and at its regional offices at Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such documents may be obtained from the Public Reference Room of the Commission at prescribed rates. This material also may be obtained on the Commission’s website at http://www.sec.gov. Information regarding the operation of the Public Reference Room may be obtained by calling the Commission at 1(800) SEC-0330.

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INDEX TO FINANCIAL STATEMENTS

	Page
SeraNova, Inc. And Affiliates
Report of Independent Public Accountants		F-2
Combined Balance Sheets		F-3
Combined Statements of Operations		F-4
Combined Statements of Changes in Shareholders’ Equity & Comprehensive Income (Loss)		F-5
Combined Statements of Cash Flows		F-6
Notes to Combined Financial Statements		F-7
Network Publishing, Inc.
Report of Independent Public Accountants		F-20
Balance Sheets		F-21
Statements of Operations		F-22
Statements of Shareholders’ Equity		F-23
Statements of Cash Flows		F-24
Notes to Financial Statements		F-25

F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To SeraNova, Inc.:

      We have audited the accompanying combined balance sheets of SeraNova, Inc. (a New Jersey corporation) and affiliates as of December 31, 1999 and 1998 and the related statements of operations, shareholders’ equity and cash flows for the year ended December 31, 1999, the nine-month period ended December 31, 1998 and the year ended March 31, 1998. These financial statements are the responsibility of SeraNova’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SeraNova, Inc. and affiliates as of December 31, 1999 and 1998, and the results of their operations and their cash flows for the year ended December 31, 1999, the nine-month period ended December 31, 1998 and the year ended March 31, 1998, in conformity with accounting principles generally accepted in the United States.

/s/ ARTHUR ANDERSEN LLP

ARTHUR ANDERSEN LLP

Roseland, New Jersey

March 6, 2000 (except with respect to the first paragraph of Note 13 as to which the date is March 14, 2000, the net income (loss) per share disclosure in Note 2 as to which the date is May 12, 2000, and the seventh through twelfth paragraphs in Note 13 as to which the date is July 14, 2000.)

F-2

SERANOVA, INC. AND AFFILIATES

COMBINED BALANCE SHEETS

(in thousands, except per share and share data)

		June 30,			December 31,			December 31,
		2000			1999			1998
		(unaudited)
ASSETS
Current Assets:
	Cash	$	920		$	611		$	677
	Accounts receivable, net of allowance for doubtful accounts of $1,086, $353 and $207, respectively		13,052			7,456			3,096
	Unbilled services		7,419			3,680			900
	Other current assets		3,928			769			286
Total Current Assets			25,319			12,516			4,959
Property and equipment, net			7,408			2,863			816
Intangible assets, net			3,086			3,492			—
Other assets			1,061			9			—
Total Assets		$	36,874		$	18,880		$	5,775
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
	Current portion of long-term debt	$	138		$	120		$	—
	Note payable to Intelligroup		3,000			8,397			1,779
	Accounts payable		3,843			872			526
	Accrued payroll and related costs		3,074			1,551			1,039
	Accrued expenses and other liabilities		2,118			2,352			2,039
Total Current Liabilities			12,173			13,292			5,383
Long-Term Debt, net of current portion			13,997			618			—
Total Liabilities			26,170			13,910			5,383
Commitments
Shareholders’ Equity:
	Preferred stock $.01 par value, 5,000,000 shares authorized, none issued or outstanding		—			—			—
	Common stock, $.01 par value, 40,000,000 shares authorized, 17,460,883, 16,629,413 and 16,629,413 shares issued and outstanding as of June 30, 2000 and December  31, 1999 and 1998		175			167			167
	Additional paid-in capital		9,992			—			—
	Intelligroup investment		7,566			7,083			1,186
	Accumulated deficit		(7,137	)		(2,246	)		(985	)
	Currency translation adjustment		108			(34	)		24
Total Shareholders’ Equity			10,704			4,970			392
Total Liabilities and Shareholders’ Equity		$	36,874		$	18,880		$	5,775

The accompanying notes to combined financial statements are an integral part of these statements.

F-3

SERANOVA, INC. AND AFFILIATES

COMBINED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	For the									For the
	Six Months						For the			Nine-Month			For the
	Ended June 30,						Year Ended			Period Ended			Year Ended
							December 31,			December 31,			March 31,
	2000			1999			1999			1998			1998
	(unaudited)
Revenues	$	36,019		$	16,602		$	39,795		$	12,438		$	8,995
Cost of sales		18,435			9,515			22,475			7,315			4,797
Gross profit		17,584			7,087			17,320			5,123			4,198
Selling, general and administrative expenses		23,095			6,100			17,605			5,106			3,812
Depreciation and amortization		1,131			279			1,131			102			133
Total operating expenses		24,226			6,379			18,736			5,208			3,945
Operating income (loss)		(6,642	)		708			(1,416	)		(85	)		253
Other income (expense), net		(344	)		(32	)		(80	)		(66	)		13
Income (loss) before income taxes		(6,986	)		676			(1,496	)		(151	)		266
Provision (benefit) for income taxes		(2,095	)		244			(235	)		401			519
Net income (loss)	$	(4,891	)	$	432		$	(1,261	)	$	(552	)	$	(253	)
Net income (loss) per common share — basic and diluted	$	(0.29	)	$	0.03		$	(0.08	)	$	(0.03	)	$	(0.02	)
Shares used in per share calculation of net income (loss) — basic and diluted		17,123			16,629			16,629			16,629			16,629

The accompanying notes to combined financial statements are an integral part of these statements.

F-4

SERANOVA, INC. AND AFFILIATES

COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY AND

COMPREHENSIVE INCOME (LOSS)

(in thousands)

													Total Shareholders’
										Accumulated Other			Equity and
	Common		Intelligroup		Additional		Accumulated			Comprehensive			Comprehensive
	Stock		Investment		Paid-in-Capital		Deficit			Income (Loss)			Income (loss)
Balance — March 31, 1997	$	167	$	534	$	—	$	(180	)	$	15		$	536
Net loss		—		—		—		(253	)		—			(253	)
Foreign currency translation		—		—		—		—			(68	)		(68	)
Comprehensive loss		—												(321	)
Net transfers from Intelligroup, Inc.		—		26		—		—			—			26
Balance — March 31, 1998		167		560		—		(433	)		(53	)		241
Net loss		—		—		—		(552	)		—			(552	)
Foreign currency translation		—		—		—		—			77			77
Comprehensive loss		—												(475	)
Net transfers from Intelligroup, Inc.		—		626		—		—			—			626
Balance — December 31, 1998		167		1,186		—		(985	)		24			392
Net loss		—		—		—		(1,261	)		—			(1,261	)
Foreign currency translation		—		—		—		—			(58	)		(58	)
Comprehensive loss		—												(1,319	)
Net transfers from Intelligroup, Inc.		—		5,897		—		—			—			5,897
Balance — December 31, 1999		167		7,083		—		(2,246	)		(34	)		4,970
Net loss (unaudited)		—		—		—		(4,891	)		—			(4,891	)
Foreign currency translation (unaudited)		—		—		—		—			142			142
Comprehensive loss (unaudited)		—		—		—		—			—			(4,749	)
Net transfers from Intelligroup, Inc. (unaudited)		—		483		—		—			—			483
Sale of 831,470 shares of common stock		8		—		9,992		—			—			10,000
Balance — June 30, 2000 (unaudited)	$	175	$	7,566	$	9,992	$	(7,137	)	$	108		$	10,704

The accompanying notes to combined financial statements are an integral part of these statements.

F-5

SERANOVA, INC. AND AFFILIATES

COMBINED STATEMENTS OF CASH FLOWS

(in thousands)

					For the									For the
					Six Months						For the			Nine-Month			For the
					Ended June 30,						Year Ended			Period Ended			Year Ended
											December 31,			December 31,			March 31,
					2000			1999			1999			1998			1998
					(unaudited)
Cash Flows from Operating Activities:
		Net income (loss)			$	(4,891	)	$	432		$	(1,261	)	$	(552	)	$	(253	)
Adjustments to reconcile net income (loss) to net cash used operating activities:
		Depreciation and amortization				1,131			279			1,131			102			133
		Provision for doubtful receivables				950			—			189			140			127
		Deferred taxes				(2,868	)		—			—			—			—
		Changes in assets and liabilities, net of acquired business:
			Accounts receivable			(6,546	)		(2,034	)		(3,766	)		(1,068	)		(1,066	)
			Unbilled services			(3,739	)		(332	)		(2,662	)		(648	)		(248	)
			Other current assets			(291	)		205			(425	)		(174	)		(71	)
			Other assets			(1,051	)		(7	)		(5	)		—			—
			Accounts payable			2,971			(258	)		288			250			139
			Accrued payroll and related costs			1,523			(180	)		410			74			(32	)
			Accrued expenses and other liabilities			(234	)		(1,568	)		8			1,410			418
			Income taxes payable			—			1,002			—			—			—
				Net cash used in operating activities		(13,045	)		(2,461	)		(6,093	)		(466	)		(853	)
Cash Flows from Investing Activities:
		Purchase of business, net of cash acquired				—			(2,186	)		(2,186	)		—			—
		Capital expenditures				(5,270	)		(392	)		(2,175	)		(603	)		(7	)
		Net cash used in investing activities				(5,270	)		(2,578	)		(4,361	)		(603	)		(7	)
Cash Flows from Financing Activities:
			Loans from Intelligroup			15,001			1,467			6,618			894			886
			Repayment of loans			(7,002	)		(53	)		(109	)		(219	)		(302	)
			Proceeds from sale of common stock			10,000			—			—			—			—
			Net transfers from Intelligroup			483			3,073			3,937			626			26
				Net cash provided by financing activities		18,482			4,487			10,446			1,301			610
Effect of Exchange Rate Changes on Cash and Cash Equivalents						142			(26	)		(58	)		77			(17	)
Increase (Decrease) in Cash and Cash Equivalents						309			(578	)		(66	)		309			(267	)
Cash and Cash Equivalents, Beginning of Period						611			677			677			368			635
			Cash and Cash Equivalents, End of Period		$	920		$	99		$	611		$	677		$	368
	Supplementary disclosures of cash flow information:
			Cash paid for interest		$	25		$	40		$	81		$	17		$	6
			Cash paid for income taxes		$	675		$	70		$	229		$	361		$	84

The accompanying notes to combined financial statements are an integral part of these statements.

F-6

SERANOVA, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS

Note 1 — SeraNova

      SeraNova, Inc. (“SeraNova”) is a provider of strategic eBusiness services, including business-to-business solutions. SeraNova’s services include strategic consulting, design, implementation and management of eBusiness systems. SeraNova serves e-business solution needs of Global 5000 as well as emerging internet based companies through rapid conception, creation and deployment of innovation internet and portal-based solutions.

      SeraNova was incorporated under the name Infinient, Inc. in the State of New Jersey on September 9, 1999 and issued 100 shares to Intelligroup, Inc. (“Intelligroup”) on such date. Effective on January 1, 2000, Intelligroup contributed the assets and liabilities of its Internet solutions group, including SeraNova India which commenced operations in October 1999, the capital stock of Network Publishing, Inc. and the capital stock of the Azimuth Companies to SeraNova in exchange for 900 shares of the common stock of SeraNova, $0.01 par value per share (the “Formation”). The Formation was accounted for using the carryover basis of accounting. The accompanying combined financial statements include the accounts and operations of the Internet solutions group since its inception in 1997, Network Publishing, Inc. from the date of its acquisition by Intelligroup (January 8, 1999) and the Azimuth Companies for all periods presented (see Note 3). Intelligroup acquired the Azimuth Companies in a transaction accounted for as a pooling of interests and Network publishing, Inc. through a purchase acquisition.

      SeraNova began operations in India in October of 1999 and the United Kingdom in November of 1999. Results of operations and financial information since inception have been included in the accompanying combined financial statements.

      Intelligroup has proposed to distribute to its shareholders of all of the SeraNova shares of common stock it holds. For each common share of Intelligroup stock held, one share of SeraNova common stock is anticipated to be issued. SeraNova intends to split the number of its outstanding shares on the record date of such dividend so that the number of SeraNova’s outstanding shares shall equal the number of outstanding shares of Intelligroup. The spin-off is subject to certain conditions and approvals.

      SeraNova has not operated as a separate company and faces the risks and uncertainties encountered by companies in the early stages of development such as managing growth, intense competition, expansion both domestically and internationally and rapidly changing technology. In the past, SeraNova has relied on Intelligroup for many administrative services and financial support. SeraNova has entered into various agreements with Intelligroup (see Note 4) and is currently exploring various alternative financing options.

      Effective April 1, 1998, SeraNova changed its year end from March 31 (the Azimuth Companies former year end) to December 31. All significant intercompany balances and transactions have been eliminated.

Note 2 — Summary of Significant Accounting Policies

  Interim Financial Information

      The consolidated financial statements and accompanying financial information as of June 30, 2000 and for the six months ended June 30, 2000 and 1999 are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) which SeraNova considers necessary for a fair presentation of the financial position of SeraNova at such dates and the operating results and cash flows for those periods. Results for interim periods are not necessarily indicative of results for the entire year.

F-7

SERANOVA, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

  Use of Estimates

      The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the recorded amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

  Cash and Cash Equivalents

      Cash and cash equivalents consist of investments in highly liquid short-term instruments, with maturities of three months or less from date of purchase.

  Revenue Recognition

      SeraNova generates revenue from professional services rendered. Revenue is recognized as services are performed with the corresponding cost of providing those services reflected as cost of sales. Substantially all customers are billed on a per diem basis whereby actual time is charged directly to the customer. Billings to customers for out-of-pocket expenses are recorded as a reduction of expenses incurred. Unbilled services represent services provided which are billed subsequent to the respective period end. SeraNova anticipates all such amounts to be realized within the following year.

  Property and Equipment

      Property and equipment is stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets (five years). Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life (ten years). Cost of maintenance and repairs are charged to expense as incurred.

  Intangible Assets

      Intangible assets as of June 30, 2000 and December 31, 1999 include goodwill of $3,922,000 and other intangibles totaling $139,500 less accumulated amortization of $975,000 and $569,000, respectively, that was attributable to the acquisition of Network Publishing, Inc. (see Note 3). These intangible assets are being amortized over the estimated useful lives of 5 years using the straight-line method. Amortization expense was $406,000 for the six months ended June 30, 2000 and $569,000 for the year ended December 31, 1999.

  Allowance for Doubtful Accounts

      SeraNova provides an allowance for doubtful accounts based upon a review of outstanding receivables as well as historical collection information. Credit is granted to substantially all customers on an unsecured basis. In determining the amount of allowance, management is required to make certain estimates and assumptions. The provision for doubtful accounts totaled $189,000, $140,000 and $127,000 for the year ended December 31, 1999, the nine months ended December 31, 1998 and the year ended March 31, 1998, respectively. Write-offs of accounts receivable totaled $43,000, $60,000 and $0 for the year ended December 31, 1999, the nine months ended December 31, 1998 and the year ended March 31, 1998, respectively.

  Recoverability of Long-Lived Assets

      SeraNova reviews the recoverability of its long-lived assets on a periodic basis whenever events and circumstances have occurred that indicate the remaining balance may not be recoverable. The assessment

F-8

SERANOVA, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

for potential impairment is based primarily on SeraNova’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. SeraNova does not believe that any such events or changes in circumstances have occurred. The amount of impairment of goodwill and other intangibles would be determined as part of the long-lived asset grouping being evaluated utilizing undiscounted net income over the remaining life of the asset. Where goodwill is identified with assets subject to an impairment loss, the carrying amount of the identified goodwill would be eliminated before making any reduction of the carrying amounts of the impaired long-lived assets and identifiable intangibles.

  Stock-Based Compensation

      Stock-based compensation is recognized using the intrinsic value method under APB No. 25. For disclosure purposes, pro forma net income (loss) impacts are provided as if the fair market value method has been applied.

  Currency Translation

      Assets and liabilities relating to foreign operations are translated into US dollars using exchange rates in effect at the balance sheet date. Income and expenses are translated in US dollars using monthly average exchange rates during the year. Translation adjustments associated with assets and liabilities are excluded from income and credited or charged directly to shareholder’s equity.

      Foreign currency transaction gains and losses are recorded in other income (expense) in the combined statements of operations.

  Concentrations

      One customer accounted for approximately 39% and a second customer accounted for approximately 13% of the combined revenues of SeraNova for the six months ended June 30, 2000. Accounts receivable as of June 30, 2000 attributable to these customers was $4,764,000 and $863,000, respectively. No other customer accounted for more than 10% of the combined revenues of SeraNova for the six months ended June 30, 2000.

      One customer accounted for approximately 28% of the combined revenues of SeraNova for the year ended December 31, 1999. Accounts receivable as of December 31, 1999 attributable to this customer was $1,960,000. Another customer accounted for 13% of revenues for the nine-month period ended December 31, 1998 (See Note 4). Accounts receivable attributable to this customer was $419,000 as of December 31, 1998. No other customer contributed in excess of 10% of the combined revenues for any other period. For the year ended December 31, 1999, six customers accounted for approximately 50% of SeraNova’s revenues.

  Income Taxes

      SeraNova accounts for income taxes pursuant to SFAS 109, “Accounting for Income Taxes”, which uses the liability method to calculate deferred income taxes.

      The accompanying combined statements of operations reflect income taxes as if SeraNova filed a separate tax return. U.S. income taxes on undistributed earnings of foreign entities have not been provided as they are considered permanently invested.

F-9

SERANOVA, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

  Fair Value of Financial Instruments

      The carrying amounts of cash and cash equivalents, accounts receivable and debt approximate fair value because of the short-term nature of these instruments.

  Net Income (Loss) Per Share

      Net income (loss) per share — basic has been computed by dividing the net loss by the May 12, 2000 (the record date of the spin off) outstanding shares of common stock of Intelligroup and the weighted average number of shares sold to investors on March 14, 2000 (see Note 13).

      Net income (loss) per share — diluted has been computed by dividing the net loss by the May 12, 2000 outstanding shares of common stock of Intelligroup and the weighted average number of shares sold to investors on March 14, 2000 (see Note 13). Stock options (3,236,000 as of December 31, 1999) have not been included in the calculation since they are anti-dilutive.

      All common shares and per share amounts have been adjusted retroactively to give effect to a 16,629.413-for-one stock split effective May 12, 2000 relating to the spin-off.

Note 3 — Business Combinations

      On November 25, 1998, Intelligroup consummated the acquisition of all of the outstanding capital stock of Azimuth Consulting Limited, Azimuth Holdings Limited, Braithwaite Richmond Limited and Azimuth Corporation Limited (collectively the “Azimuth Companies”). The acquisition of the Azimuth Companies was accounted for as a pooling of interests. The accompanying combined financial statements include the results of operations and financial position of the Azimuth Companies for all periods presented in accordance with pooling of interests accounting. As consideration for this acquisition, Intelligroup issued 902,928 shares of its common stock.

      On January 8, 1999, Intelligroup consummated the acquisition of all of the shares of outstanding capital stock of Network Publishing, Inc. The acquisition was accounted for utilizing the purchase method of accounting. The purchase price included an initial cash payment in the aggregate of $1,800,000 together with a cash payment of $200,000 to be held in escrow plus costs of the transaction, and resulted in costs in excess of fair value of net tangible assets acquired of $1,600,000. Such amount has been allocated to intangible assets (assembled workforce of $139,500) with the remainder assigned to goodwill. In addition, the purchase price included an earn-out payment of up to $2,212,650 in restricted shares of Intelligroup’s common stock payable on or before April 15, 2000 and a potential lump sum cash payment of $354,024 payable no later than March 31, 2000. In July 1999, Intelligroup and the former shareholders of Network Publishing, Inc. agreed to amend the agreements to eliminate the earnout and fix the additional consideration amount at $2,430,000 payable at the option of Intelligroup in Intelligroup’s common stock or cash. As of December 31, 1999, SeraNova has recorded this transaction as an increase to goodwill and equity. On January 8, 2000, Intelligroup made a cash payment of $340,000 and issued approximately 100,000 shares of its common stock to satisfy its obligation.

      The following unaudited pro forma information presents a summary of results of operations of SeraNova and Network Publishing, Inc. as if the acquisition had occurred on April 1, 1997.

	For the Nine-Month
	Period Ended			For the Year Ended
	December 31, 1998			March 31, 1998
Revenues	$	15,576,000		$	12,393,000
Net loss		(571,000	)		(559,000	)
Net loss per common share — basic and diluted	$	(0.03	)	$	(0.03	)

F-10

SERANOVA, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

Note 4 — Related Party Transactions

      Prior to the Formation, Intelligroup accounted for the separate financial results of Network Publishing, Inc. and the Azimuth Companies. However, Intelligroup did not account separately for the U.S. internet business. In the preparation of the accompanying combined financial statements, SeraNova and Intelligroup have specifically identified all revenue, costs of sales, other income (expense), net and certain direct selling, general and administrative expenses incurred on behalf of SeraNova related to the U.S. internet operations. Other selling, general and administrative expenses have been allocated between Intelligroup and SeraNova based on either revenue generation, head count or occupancy, where applicable. The selling, general and administrative expenses captured and allocated by these methods pertain to only U.S. operations. Revenue, head count and occupancy percentages were calculated using only U.S. data for Intelligroup and SeraNova. SeraNova believes that allocated costs approximate the historical costs of SeraNova and that the allocation methods used are reasonable. For balance sheet purposes, the U.S. internet operation’s cash and payables are included in Intelligroup’s investment as they historically have not been accounted for separately.

      For the nine-month period ended December 31, 1998, one customer accounted for approximately $1.7 million, or 13%, of the combined revenues of SeraNova. An executive officer of such customer is currently a member of the Board of Directors of Intelligroup. SeraNova generated approximately $58,000 of revenue from such company during the year ended December 31, 1999. During the six months ended June 30, 2000 and the year ended December 31, 1999, one customer accounted for approximately $673,000 and $105,000, respectively, of combined revenues of SeraNova. Accounts receivable for this customer was $406,000 and $0 as of June 30, 2000 and December 31, 1999, respectively. An executive officer of such customer is currently the chairman of SeraNova.

      Note payable to Intelligroup represents a calculation of net borrowing from Intelligroup as of December 31, 1999 and 1998 (See Note 13).

      SeraNova and Intelligroup have entered into the following agreements effective January 1, 2000.

  Distribution Agreement

      This agreement between SeraNova and Intelligroup calls for distribution by Intelligroup on the Distribution Date of the SeraNova Common Stock owned by Intelligroup to the holders of Intelligroup Common Stock as of the Record Date, subject to certain conditions.

  Services Agreement

      Under the terms of the services agreement, SeraNova has agreed with Intelligroup: (1) to share certain general and administrative expenses; and (2) for Intelligroup to provide SeraNova with other general, administrative services in exchange for a fee. The general and administrative expenses include payroll costs for shared employees, utilities costs, equipment expenses, taxes and office supplies. SeraNova’s cost for administrative services provided by Intelligroup will approximate $30,000 per month.

  Contribution Agreement

      The assets and liabilities of Intelligroup’s Internet services business, as defined, were transferred by Intelligroup and certain of its subsidiaries to SeraNova effective January 1, 2000 subject to certain conditions being satisfied. The transfer may be subject to a post contribution adjustment, as defined. Some assignments and transfers may require prior consent by third parties and various filings or recordings with governmental entities.

F-11

SERANOVA, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

  Space Sharing Agreement

      SeraNova has entered into a space sharing agreement with Intelligroup providing for the sharing by Intelligroup and SeraNova of Intelligroup’s office facilities, including the office facilities located in Edison, New Jersey at which SeraNova’s and Intelligroup’s principal executive offices are located. Under the space sharing agreement, the costs associated with leasing and maintaining facilities are, in general, allocated between Intelligroup and SeraNova on the basis of actual use of floor space. SeraNova’s space sharing costs will approximate $68,000 per month.

  Tax Sharing Agreement

      SeraNova has entered into a tax sharing agreement with Intelligroup that governs the allocation of federal, state, local and foreign tax liabilities and related tax matters.

Note 5 — Commitments

  Employment Agreements

      In September and October, 1999, SeraNova entered into three employment agreements with certain executive officers which expire through October 2002. The amount due under these contracts is approximately $1.1 million per year. Additionally, the contracts provided for the granting of options to purchase 1,711,464 shares of SeraNova’s common stock at $2.52 per share which was equal to the estimated fair market value of SeraNova’s common stock as of the grant date as determined by the board of directors (See Note 10). The options vest over a three year period.

  Leases

      SeraNova leases various office space, office equipment and vehicles under operating leases expiring at various dates through December 2005. Rental expense for all leases approximated $917,000 and $354,000 for the six months ended June 30, 2000 and 1999, respectively, $729,000 for the year ended December 31, 1999, $284,000 for the nine-month period ended December 31, 1998 and $388,000 for the year ended March 31, 1998, respectively. Future lease commitments are as follows:

For the years ended December 31,
2000	$	736,000
2001		635,000
2002		586,000
2003		551,000
2004		611,000
Thereafter		479,000
	$	3,598,000

      Rental expense associated with the space sharing agreement with Intelligroup (Note 4) is not included in the above table.

  Benefit Plans

      Employees of SeraNova were eligible to participate in the Intelligroup, Inc. Employee Retirement Plan (the “Plan”). The Plan allows eligible employees to contribute up to 15% percent of their annual compensation, subject to the Internal Revenue Code’s statutory limitations. Effective January 1, 1999, contributions to the Plan by Intelligroup are made at the discretion of the Board of Directors, and the related expense specific to the SeraNova Plan were approximately $132,000 for the year ended

F-12

SERANOVA, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

December 31, 1999. There were no employer contributions to the Plan for the periods prior to January 1, 1999.

      Effective January 1, 2000, the SeraNova, Inc. Employee Retirement Plan was formed. As of this date, SeraNova employees will no longer be eligible to participate in the Intelligroup, Inc. Retirement Plan. SeraNova will contribute 50% of the first 4% of a participants contribution subject to the Internal Revenue Code’s statutory limitations.

  Other Commitments

      SeraNova has entered into an agreement with a strategic marketing consulting company in connection with certain sales and marketing services. Under the terms of this agreement the consulting company will assist SeraNova in building a SeraNova brand, generate leads, support sales force and build a sales systems infrastructure. SeraNova expects to spend approximately $3 million in the first six months of the fiscal year 2000 related to this agreement.

Note 6 — Income Taxes

      The operating results of the domestic Internet solutions group have historically been included in the consolidated tax returns of Intelligroup and have been computed as if they were on a stand-alone basis. The tax accounts for Network Publishing, Inc. and the Azimuth Companies are reported based on individual tax returns filed by each company historically. The provisions for income taxes include the effect of certain temporary differences between amounts reported for tax purposes versus financial reporting.

      The provision (benefit) for income taxes was as follows:

		For the periods ended
		December 31,			December 31,			March 31,
		1999			1998			1998
Current
	Federal	$	(560,000	)	$	163,000		$	76,000
	State		(55,000	)		54,000			25,000
	Foreign		363,000			386,000			450,000
	Current		(252,000	)		603,000			551,000
Deferred
	Federal		15,000			(37,000	)		(26,000	)
	State		2,000			(9,000	)		(6,000	)
	Deferred		17,000			(46,000	)		(32,000	)
Total		$	(235,000	)	$	557,000		$	519,000

F-13

SERANOVA, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

      The tax effects of the significant temporary differences which comprised the deferred tax assets and liabilities are as follows:

		December 31,			December 31,
		1999			1998
Tax Deferred Assets:
	Allowance for doubtful accounts	$	124,000		$	84,000
	Vacation accrual		180,000			123,000
	Foreign net operating loss carryforwards		81,000			75,000
	Total deferred tax assets		385,000			282,000
Deferred Tax Liabilities:
	Depreciation		24,000			(4,000	)
Valuation allowance			(261,000	)		(198,000	)
Net deferred tax asset		$	100,000		$	80,000
Current		$	304,000		$	207,000
Non-current			57,000			71,000
Valuation			(261,000	)		(198,000	)
Net deferred tax asset		$	100,000		$	80,000

      SeraNova has provided a valuation allowance for all deferred tax assets of the Azimuth Companies and the start up operations in the United Kingdom due to the historical losses of these companies.

      The effective tax rate of SeraNova for each period presented is comprised of federal taxes on income of domestic operations at 34%. State taxes on domestic income totaled 4% of the effective tax rate. Other permanent items, including, among others, non-deductible entertainment expenses, totaled 3% of the effective rate while non-deductible amortization totaled 13% of the effective tax rate in 1999. The remaining difference between the statutory federal rate of 34% and SeraNova’s effective rates relates to taxes on income from foreign jurisdictions. Losses incurred in certain countries could not be offset by income from other countries thus resulting in high effective rate.

Note 7 — Long-Term Debt

      Network Publishing, Inc. has entered into a $875,000 note payable with a bank dated April 25, 1997, secured by their equipment, furniture and fixtures. The note, which bears interest at the bank’s prime rate (8.5% percent as of December 31, 1999) plus 2%, matures on April 25, 2007. Principal and interest are payable in monthly installments. Interest expense for the periods ended June 30, 2000 and December 31, 1999 was $38,000 and $77,000, respectively. Included in current portion of long-term debt are other miscellaneous borrowings totaling approximately $35,000 and $48,000 as of June 30, 2000 and December 31, 1999, respectively. The aggregate amount of principal maturities of long-term debt as of December 31, 1999 are as follows:

2000	$	120,000
2001		73,000
2002		81,000
2003		89,000
2004		99,000
Thereafter		276,000
	$	738,000

F-14

SERANOVA, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

Note 8 — Property and Equipment

      Property and Equipment consist of the following (in thousands):

	June 30,			December 31,			December 31,
	2000			1999			1998
Computers and software	$	6,391		$	2,839		$	595
Furniture and equipment		2,857			1,191			796
		9,248			4,030			1,391
Accumulated depreciation		(1,840	)		(1,167	)		(575	)
	$	7,408		$	2,863		$	816

Depreciation expense was $725, $561, $102 and $133 for the six months ended June 30, 2000, the year ended December 31, 1999, the nine months ended December 31, 1998 and the year ended March 31, 1998.

Note 9 — Accrued Expenses and Other Liabilities

      Accrued expenses and other liabilities consisted of the following (in thousands):

		June 30,		December 31,		December 31,
		2000		1999		1998
Accrued expenses		$	1,657	$	2,053	$	1,779
Advanced billings			266		83		64
Income taxes payable			195		216		196
	Total	$	2,118	$	2,352	$	2,039

Note 10 — Stock Options

      On December 1, 1999 SeraNova adopted the SeraNova, Inc. 1999 Stock Plan covering its employees, officers and directors, and certain consultants, agents and key contractors. The maximum number of shares available for issuance under the Plan is 5,000,000 on a post split and spin-off basis, subject to certain adjustments. SeraNova has granted stock options with an exercise price at fair market value as described below. The Plan provides for both non-qualified and incentive stock options. Generally, options granted under the Plan vest in six equal installments at the end of each six month period after the date of grant and expire within ten years from the date of the grant and have an exercise price equal to the fair market value of SeraNova’s common stock on the date of grant.

      SeraNova has elected to follow APB No. 25 in accounting for its employee stock options. Accordingly, no compensation cost has been recognized. A summary of the stock option grants is as follows:

	Number of		Weighted Average		Weighted Average
	Shares		Exercise Price		Fair Value
Options Outstanding, December 31, 1998		—		—		—
Options Granted, September 15, 1999		1,244,701	$	2.52	$	2.16
Options Granted, October 1, 1999		1,450,010		2.52		2.16
Options Granted, December 1, 1999		541,381		6.51		5.58
Options Outstanding, December 31, 1999 (none exercisable)		3,236,092	$	3.19	$	2.73

F-15

SERANOVA, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

      On January 1, 2000, pursuant to the 1999 stock plan, stock options were granted to purchase 1,407,575 shares of SeraNova’s common stock at an exercise price of $6.51 per share. On January 14, 2000, SeraNova granted stock options under the 1999 stock plan to purchase 260,000 shares of SeraNova’s common stock with an exercise price per share of $6.51.

      The calculation of the option grant prices of SeraNova’s common stock was as follows: SeraNova multiplied SeraNova’s revenue contribution in the most recent quarter (SeraNova’s revenue as a percentage of the total consolidated revenue for Intelligroup) to the Intelligroup’s stock price as of the valuation date. Then SeraNova applied 100% premium to the implied price to obtain fair market value of SeraNova’s common stock.

      The fair value of option grants for disclosure purposes is estimated on the date of grant using the Black-Scholes option-pricing model that uses the following assumptions: expected volatility of 82%, risk-free interest rate of 6%, dividend rate of 0% and expected lives of 10 years. The weighted-average fair value of options granted during 1999 was $2.73. Had the compensation cost for SeraNova’s stock options been determined using the Black-Scholes fair value pricing model, the net of tax impact for year ended December 31, 1999 would be as follows:

Net loss as reported	$	(1,261,000	)
Net loss pro forma	$	(1,625,000	)
Unaudited pro forma net loss per common share as reported — basic and diluted	$	(0.08	)
Unaudited pro forma net loss per common share as adjusted — basic and diluted	$	(0.10	)

      The pro forma results are not intended to be indicative of or a projection of future results.

Note 11 — Segment Information

      Historically, SeraNova has managed operations only by geographic region. The following is information by geographic area as of and for the three-month period ended June 30, 2000, for the year ended December 31, 1999, the nine-month period ended December 31, 1998 and the year ended March 31, 1998.

For the Six-Month Period
Ended June 30, 2000	United States			Asia Pacific			Europe			India		Combined Total
Revenue	$	25,766		$	5,138		$	187		$	4,928	$	36,019
Depreciation & amortization		795			51			3			282		1,131
Income (loss) from operations		(4,877	)		(2,725	)		1,101			2,601		(6,642	)
Interest income		—			3			—			2		5
Interest expense		303			9			—			34		346
Other income (expense)		(5	)		(3	)		—			5		(3	)
Income (loss) before income taxes		(5,184	)		(2,735	)		(1,101	)		2,034		(6,986	)
Capital spending		2,501			137			78			2,554		5,270
Total assets		26,594			2,751			(117	)		7,640		36,874

F-16

SERANOVA, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

For The Year Ended December 31, 1999	United States			Asia Pacific			Europe			India		Combined Total
Revenue	$	27,408		$	11,324		$	—		$	1,063	$	39,795
Depreciation & amortization		1,015			82			—			34		1,131
Income (loss) from operations		(2,734	)		848			(99	)		569		(1,416	)
Interest income		6			24			—			—		30
Interest expense		(77	)		(5	)		—			—		(82	)
Other income (expense)		—			(28	)		—			—		(28	)
Income (loss) before income taxes		(2,805	)		839			(99	)		569		(1,496	)
Capital spending		1,012			120			—			1,043		2,175
Total assets		14,032			3,410			39			1,399		18,880

For The Nine-Month Period Ended December 31, 1998	United States		Asia Pacific			Combined Total
Revenue	$	6,020	$	6,418		$	12,438
Depreciation & amortization		33		69			102
Income (loss) from operations		411		(496	)		(85	)
Interest income		—		—			—
Interest expense		—		14			14
Other income (expense)		—		(52	)		(52	)
Income (loss) before income taxes		411		(562	)		(151	)
Capital spending		594		9			603
Total assets		2,968		2,807			5,775

For The Year Ended March 31, 1998	United States		Asia Pacific		Combined Total
Revenue	$	2,100	$	6,895	$	8,995
Depreciation & amortization		—		133		133
Income (loss) from operations		169		84		253
Interest income		—		1		1
Interest expense		—		10		10
Other income (expense)		—		22		22
Income (loss) before income taxes		170		96		266
Capital spending		—		7		7
Total assets		1,328		1,888		3,216

      Foreign revenue is based on the country in which SeraNova’s operations reside.

Note 12 — Preferred Stock

      Pursuant to SeraNova’s Certificate of Incorporation, SeraNova has the authority to issue 5,000,000 shares of undesignated preferred stock, par value $.01 per share. The preferred stock may be issued, from time to time, pursuant to a resolution by SeraNova’s Board of Directors that will set forth the voting powers and other pertinent rights of such series.

Note 13 — Subsequent Events

  Sale of common stock

      On March 14, 2000, SeraNova sold 831,470 shares of its common stock to four institutional investors for $10,000,000. SeraNova granted certain demand and piggyback registration rights to such investors.

F-17

SERANOVA, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

  Sale of preferred stock and warrants

      On September 29, 2000, SeraNova sold 800 shares of 6% Series A convertible preferred stock to two institutional investors for $8,000,000. Upon conversion, the cumulative dividends will be payable at 6% per annum, in cash or shares. The convertible preferred stockholders have no voting rights, however, they are required to approve certain transactions, as defined. The convertible preferred stock can be converted into shares of the Company’s common stock at $7 per share at any time and, also is redeemable by the holders at a premium if certain triggering events, as defined, occur.

      In addition, SeraNova has granted the investors warrants to purchase 150,000 shares of SeraNova common stock. The exercise price for the warrant shares equals the lesser of $7.00 and the average price per share of SeraNova common stock for the five trading days immediately preceding the date of the exercise.

      SeraNova has the right to redeem the preferred stock at 105% of the initial investment value. In case of such redemption by SeraNova, it will grant additional warrants to the investors to purchase 160,000 shares of SeraNova common stock. The exercise price for the warrant shares will equal the lesser of $7.00 and the average price per share of SeraNova common stock for the five trading immediately preceding the date of the exercise. SeraNova also has the option to require the conversion of the convertible preferred stock into common stock if the asking price of the common stock for 10 trading days is 130% of the conversion price.

      SeraNova has agreed to register the common stock underlying the preferred stock and warrants. In addition, SeraNova has provided certain piggyback registration rights to the investors. SeraNova is subject to monetary penalties, as defined, if the underlying common stock is not registered within a defined time frame.

      A portion of the proceeds from the sale of convertible preferred stock was used to repay $3,000,000 of the Intelligroup note which partially matured on September 30, 2000.

  Borrowings

      As discussed in Note 4, note payable to Intelligroup represents a calculation of net borrowings from Intelligroup. On January 1, 2000, such borrowings were converted to amounts repayable by SeraNova to a bank under Intelligroup’s revolving credit facility agreement. Effective January 1, 2000, SeraNova became a co-borrower under Intelligroup’s revolving credit facility agreement with a bank. Intelligroup and SeraNova are jointly and severally liable under the agreement. In the event Intelligroup requests and the bank approves a change in control of the ownership of SeraNova, as contemplated by the spin off, all SeraNova’s obligations under the agreement become due and payable. Intelligroup was in technical default of one of the bank covenants as of March 31, 2000 but obtained a waiver of such default through September 2000.

      There are no aggregate outstanding advances against the revolving credit facility as of March 31, 2000. As of December 31, 1999, the aggregate outstanding advances against the revolving credit facility were $10.6 million. SeraNova’s portion of the outstanding balance as of December 31, 1999, was $8.4 million. As of March 31, 2000, a portion of the proceeds from the sale of common stock was used to pay off the outstanding balance due to the bank as of March 31, 2000.

      On May 31, 2000, SeraNova was released from all obligations under Intelligroup’s revolving credit facility agreement and entered into a $15,100,000 promissory note with Intelligroup. Such note is for services and advances previously provided by Intelligroup. The note, which is unsecured and bears interest at the prime rate plus   1/2%, partially matures with $3,000,000 due on September 30, 2000 with the balance due on July 31, 2001. The note has certain mandatory prepayment provisions based on future debt or equity financings by SeraNova, as defined.

F-18

SERANOVA, INC. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)

      On June 20, 2000, SeraNova India executed an agreement with Andhra Bank for a fixed asset-based revolving term loan that will provide SeraNova India with up to INR 87.6 million (approximately USD 2 million) in financing for fixed assets purchases. The term loan is secured by substantially all fixed assets of SeraNova India; it is also co-secured by collateral properties owned by the two Directors, Raj Koneru and Nagarjun Valluripalli. Borrowings may be made under the loan for fixed assets purchases with interest at the prime rate (approximately 12% at June 30, 2000) plus 1%. The loan agreement contains customary representations, warranties, default provisions and financial covenants. As of June 30, 2000, the outstanding balance on the loan in INR 50 million (approximately USD 1.1 million).

      On June 30, 2000, SeraNova India executed an agreement with Andhra Bank for a working capital revolving credit facility that will provide SeraNova with up to INR 180 million (approximately $4 million) in financing. The credit facility is secured by substantially all accounts receivables and fixed assets of SeraNova India; it is also co-secured by collateral properties owned by two Directors, Raj Koneru and Nagarjun Valluripalli. Borrowings may be made under the loan for general corporate purposes with interest at the then current prime rate (approximately 12% at June 30, 2000) plus 1%. The credit agreement contains customary representations, warranties, default provisions and financial covenants. As of June 30, 2000, the outstanding balance on the facility is INR 11.4 million (approximately USD 256,000).

      On July 14, 2000, SeraNova executed an agreement with Fleet Credit Corporation for an asset-based revolving credit facility that will provide SeraNova with up to $15 million in financing. The credit facility is a three-year agreement secured by substantially all U.S. based assets of SeraNova. Borrowings may be made under the facility for general corporate purposes with interest at the then current prime rate plus  1/2%. The credit agreement contains customary representations, warranties, default provisions and financial covenants. The specific financial covenants to effective with the third quarter of 2000 are: (1) SeraNova must maintain a total debt to tangible net worth not to exceed a ratio of three to one, (2) any quarterly loss may not exceed the original budget amount plus 10%, (3) interest coverage ratio of not less than 1.25 to 1 and (4) principal and interest coverage of not less than 1.1 to 1. SeraNova anticipates that approximately $6.8 million will be available initially under the facility.

The Merger

      On October 27, 2000, SeraNova and Silverline Technologies Limited announced that they had entered into an agreement and plan of merger, under which Silverline would acquire SeraNova in exchange for American depositary shares of Silverline then valued at approximately $99 million, and the assumption by Silverline of SeraNova indebtedness currently in the amount of approximately $12 million. The acquisition would occur by means of a merger of a wholly-owned subsidiary of Silverline into SeraNova in which each share of SeraNova common stock would be converted into 0.35 of a Silverline American depositary share, and each share of SeraNova’s 6% series A convertible preferred stock would, at the option of the holder, either be converted into the number of Silverline ADSs the holder would have received if such preferred share had been converted into SeraNova common stock immediately before the Silverline merger, or be converted into a cash payment equal to 120% of the stated value of a preferred share, which stated value is currently $10,000. The merger is subject to regulatory approvals and approval by the shareholders of SeraNova and Silverline. Subject to such approvals, SeraNova expects that the merger will be complete sometime in the first quarter of 2001.

      Under the tax sharing agreement described in Note 4, SeraNova has indemnified Intelligroup for any tax liabilities in the event a future transaction of SeraNova results in the spin-off being deemed a taxable transaction. However, Company management has represented that the proposed merger with Silverline as described above was not contemplated at the time of the spin-off and accordingly, the spin-off should be tax free. Should the spin-off be ultimately construed to be taxable, the resultant tax liability could be up to $40.0 million.

F-19

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Network Publishing, Inc.:

      We have audited the accompanying balance sheets of Network Publishing, Inc. (a Utah corporation) as of December 31, 1998 and 1997, and the related statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Network Publishing, Inc. as of December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles.

/s/ ARTHUR ANDERSEN LLP

Salt Lake City, Utah

December 21, 1999

F-20

NETWORK PUBLISHING, INC.

BALANCE SHEETS

AS OF DECEMBER 31, 1998 AND 1997

ASSETS

			1998			1997
CURRENT ASSETS:
	Cash		$	319,282		$	93,957
	Accounts receivable, net of allowance for doubtful accounts of $36,000 and $44,000, respectively			781,845			656,670
	Unbilled services			118,006			56,382
	Prepaid expenses			47,510			9,070
	Related-party note receivable			10,089			—
	Income tax receivable			—			106,598
	Deferred income tax asset			—			12,436
		Total current assets		1,276,732			935,113
FURNITURE AND EQUIPMENT:
	Computer equipment			748,467			622,520
	Software			249,611			173,379
	Office furniture and equipment			54,582			54,582
				1,052,660			850,481
	Less accumulated depreciation			(617,930	)		(359,080	)
				434,730			491,401
DEFERRED INCOME TAX ASSET				3,923			—
			$	1,715,385		$	1,426,514

LIABILITIES AND SHAREHOLDERS’ EQUITY

			1998			1997
CURRENT LIABILITIES:
	Line of credit		$	—		$	80,000
	Current portion of long-term debt			61,887			42,652
	Current portion of capital lease obligations			47,135			—
	Accounts payable			57,687			88,241
	Accrued payroll and related benefits			102,304			100,249
	Accrued liabilities			27,078			70,604
	Deferred revenue			133,633			163,047
	Income taxes payable			11,979			—
	Deferred income tax liability			132,363			—
		Total current liabilities		574,066			544,793
LONG-TERM DEBT, net of current portion				690,464			767,958
CAPITAL LEASE OBLIGATIONS, net of current portion				47,692			—
DEFERRED INCOME TAX LIABILITY				—			15,211
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS’ EQUITY:
	Common stock, $1 par value; 100,000 shares authorized, 40,000 shares issued			40,000			40,000
	Additional paid-in capital			514,013			274,975
	Treasury stock; 22,000 shares at cost			(420,577	)		(420,577	)
	Deferred compensation			(225,338	)		(25,021	)
	Retained earnings			495,065			229,175
		Total shareholders’ equity		403,163			98,552
			$	1,715,385		$	1,426,514

F-21

NETWORK PUBLISHING, INC.

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

			1998			1997			1996
REVENUES			$	3,947,763		$	3,397,713		$	2,556,607
COST OF REVENUES				1,277,263			1,057,211			719,322
		Gross margin		2,670,500			2,340,502			1,837,285
OPERATING EXPENSES:
	Research and development			230,120			288,319			—
	Selling, general and administrative			1,920,171			2,047,078			1,433,280
		Total operating expenses		2,150,291			2,335,397			1,433,280
OPERATING INCOME				520,209			5,105			404,005
INTEREST INCOME (EXPENSE):
	Interest income			7,902			1,189			5,720
	Interest expense			(84,281	)		(64,451	)		(16,207	)
		Interest expense, net		(76,379	)		(63,262	)		(10,487	)
INCOME (LOSS) BEFORE (PROVISION) BENEFIT FOR INCOME TAXES				443,830			(58,157	)		393,518
(PROVISION) BENEFIT FOR INCOME TAXES				(177,940	)		36,773			(160,647	)
NET INCOME (LOSS)			$	265,890		$	(21,384	)	$	232,871

F-22

NETWORK PUBLISHING, INC.

STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

	Common Stock				Additional		Treasury Stock
					Paid-in							Deferred
	Shares		Amount		Capital		Shares		Amount			Compensation			Retained Earnings
Balance, December 31, 1995		40,000	$	40,000	$	254,250		—	$	—		$	(17,245	)	$	17,688
Deferred compensation related to stock option grants		—		—		8,425		—		—			(8,425	)		—
Amortization of deferred compensation		—		—		—		—		—			5,183			—
Net income		—		—		—		—					—			232,871
Balance, December 31, 1996		40,000		40,000		262,675		—		—			(20,487	)		250,559
Deferred compensation related to stock option grants		—		—		12,300		—		—			(12,300	)		—
Amortization of deferred compensation		—		—		—		—		—			7,766			—
Purchase of treasury stock		—		—		—		22,000		(420,577	)		—			—
Net loss		—		—		—		—		—			—			(21,384	)
Balance, December 31, 1997		40,000		40,000		274,975		22,000		(420,577	)		(25,021	)		229,175
Deferred compensation related to stock option grants		—		—		239,038		—		—			(239,038	)		—
Amortization of deferred compensation		—		—		—		—		—			38,721			—
Net income		—		—		—		—		—			—			265,890
Balance, December 31, 1998		40,000	$	40,000	$	514,013		22,000	$	(420,577	)	$	(225,338	)	$	495,065

[Additional columns below]

[Continued from above table, first column(s) repeated]

	Total
	Shareholders’
	Equity
Balance, December 31, 1995	$	294,693
Deferred compensation related to stock option grants		—
Amortization of deferred compensation		5,183
Net income		232,871
Balance, December 31, 1996		532,747
Deferred compensation related to stock option grants		—
Amortization of deferred compensation		7,766
Purchase of treasury stock		(420,577	)
Net loss		(21,384	)
Balance, December 31, 1997		98,552
Deferred compensation related to stock option grants		—
Amortization of deferred compensation		38,721
Net income		265,890
Balance, December 31, 1998	$	403,163

F-23

NETWORK PUBLISHING, INC.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

Increase (Decrease) in Cash

					1998			1997			1996
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income (loss)				$	265,890		$	(21,384	)	$	232,871
	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
		Depreciation				258,850			213,229			109,027
		Deferred income taxes				125,665			(15,830	)		12,185
		Amortization of deferred compensation				38,721			7,766			5,183
		Changes in operating assets and liabilities:
			Accounts receivable, net			(125,175	)		(198,505	)		(319,716	)
			Unbilled services			(61,624	)		22,557			(51,425	)
			Prepaid expenses			(38,440	)		(7,753	)		11,704
			Accounts payable			(30,554	)		(1,667	)		65,351
			Accrued payroll and related benefits			2,055			38,661			39,596
			Accrued liabilities			(43,526	)		71,230			(6,642	)
			Deferred revenue			(29,414	)		123,047			38,763
			Income taxes payable/receivable			118,577			(240,948	)		144,251
				Net cash provided by (used in) operating activities		481,025			(9,597	)		281,148
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of furniture and equipment					(114,267	)		(344,609	)		(289,688	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Net borrowings (repayments) on line of credit					(80,000	)		80,000			—
	Proceeds from issuance of debt					—			863,973			125,000
	Principal payments on debt					(58,259	)		(213,452	)		(35,865	)
	Principal payments on capital lease obligations					(3,174	)		—			—
	Purchase of treasury stock					—			(420,577	)		—
				Net cash provided by (used in) financing activities		(141,433	)		309,944			89,135
NET INCREASE (DECREASE) IN CASH						225,325			(44,262	)		80,595
CASH, beginning of year						93,957			138,219			57,624
CASH, end of year					$	319,282		$	93,957		$	138,219
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest					$	77,902		$	60,395		$	16,207
Cash paid for income taxes						19,777			219,905			—

Supplemental Disclosure of Non-cash Investing and Financing Activities:

      During 1998, the Company entered into four capital lease agreements to finance the acquisition of certain computer equipment totaling $98,001.

      During 1998, the Company sold various pieces of computer equipment to Utah.com, a company owned by the three shareholders of the Company, in exchange for a note receivable from Utah.com in the amount of $10,089.

F-24

NETWORK PUBLISHING, INC.

NOTES TO FINANCIAL STATEMENTS

Note 1 — Nature of Operations and Summary of Significant Accounting Policies

  Nature of Operations

      Network Publishing, Inc. (the “Company”), a Utah corporation founded on February 4, 1994, provides information technology services through web-site development and hosting services based on leading technologies. The Company markets its services to a wide variety of industries in the United States. The majority of the Company’s business is with large established companies, including automobile manufacturers and technology companies.

      As discussed in Note 9, subsequent to December 31, 1998, all of the Company’s outstanding shares of common stock were acquired by Intelligroup, Inc.

  Use of Estimates

      The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the recorded amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

  Fair Value of Financial Instruments

      The Company’s financial instruments consist primarily of cash, trade receivables, trade payables and debt instruments. The carrying amounts of these instruments reported in the accompanying balance sheets are considered to estimate their fair values due to the short-term nature of such financial instruments and the current interest rate environment.

  Concentration of Credit Risk and Significant Customers

      In the normal course of business, the Company extends credit to substantially all its customers on an unsecured basis. The Company provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables as well as historical collection information. At December 31, 1998, management believes the Company had incurred no material impairments in the carrying value of its accounts receivable, other than uncollectable amounts for which a provision has been recorded.

      One customer accounted for approximately 26, 19 and 10 percent of revenue in 1998, 1997 and 1996, respectively. Accounts receivable due from this customer were approximately 37 and 32 percent of accounts receivable as of December 31, 1998 and 1997, respectively. Another customer accounted for approximately 6, 44 and 61 percent of revenue in 1998, 1997 and 1996, respectively. Accounts receivable due from this customer were approximately 6 and 30 percent of accounts receivable as of December 31, 1998 and 1997, respectively. Two additional customers each accounted for approximately 17 percent of revenue during 1998 and 36 and 3 percent of accounts receivable as of December 31, 1998. No other customer accounted for more than 10 percent of the Company’s accounts receivable as of December 31, 1998 or 1997 or revenues for 1998, 1997 or 1996. The loss of one or more of these significant customers could have a material adverse impact on the Company’s financial position and results of operations.

  Furniture and Equipment

      Furniture and equipment are stated at cost, less accumulated depreciation. Computer equipment, software and furniture and fixtures are depreciated using the straight-line method over the estimated useful life of the asset, which is typically three to seven years.

F-25

NETWORK PUBLISHING, INC.

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments that extend the useful lives of existing equipment are capitalized and depreciated. On retirement or disposition of property and equipment, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the statement of operations.

  Impairment of Long-Lived Assets

      The Company reviews its long-lived assets for impairment when events or changes in circumstances indicate that the book value of an asset may not be recoverable. The Company evaluates, at each balance sheet date, whether events and circumstances have occurred which indicate possible impairment. The Company uses an estimate of future undiscounted net cash flows of the related asset or group of assets over the remaining life in measuring whether the assets are recoverable. As of December 31, 1998, the Company does not consider any of its long-lived assets to be impaired.

  Revenue Recognition

      The Company generates revenue from professional services rendered. Revenue is recognized as services are performed with the corresponding cost of providing those services reflected as cost of sales. A majority of the customers are billed on a time and materials basis. Billings to customers for out-of-pocket expenses are recorded as a reduction of expenses incurred. Unbilled services of $118,006 and $56,382 at December 31, 1998 and 1997, respectively, represent services provided prior to year-end which were billed subsequent to year-end. Revenue from advance billings is deferred until the services are provided and amounted to $133,633 and $163,047 as of December 31, 1998 and 1997, respectively.

  Research and Development

      Research and development costs are expensed as incurred and amounted to $230,120 and $288,319 during the years ended December 31, 1998 and 1997, respectively. No research and development costs were incurred during the year ended December 31, 1996.

  Income Taxes

      The Company recognizes an asset or liability for the deferred income tax consequences of all temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the assets and liabilities are recovered or settled. These deferred income tax assets or liabilities are measured using currently enacted tax rates.

Note 2 — Line of Credit

      The Company has entered into a line of credit agreement with a bank, which provided for maximum borrowings of $300,000 as of December 31, 1998. Borrowings under the agreement were secured by the accounts receivable of the Company, were guaranteed by the Company’s three shareholders and bore interest at the bank’s prime rate (7.75 percent at December 31, 1998) plus three percent. As of December 31, 1998 and December 31, 1997, the Company had outstanding borrowings of $0 and $80,000, respectively. The line of credit matured on April 5, 1999.

      Under the terms of the agreement, the Company was required to comply with certain restrictive covenants, including a minimum earnings ratio and a minimum debt to net worth requirement. As of December 31, 1998, the Company was in compliance with these covenants.

F-26

NETWORK PUBLISHING, INC.

NOTES TO FINANCIAL STATEMENTS — (Continued)

Note 3 — Long-Term Debt

      As of December 31, 1996, long-term debt consisted of two notes payable to a bank. In April 1997, the Company paid the outstanding balance on these two notes with proceeds from a new note obtained from the same bank. Principal and interest are payable in monthly installments through April 2007. The note bears interest at the bank’s prime rate (7.75 percent at December 31, 1998) plus two percent. The note is secured by furniture and equipment, and is guaranteed by the Company’s three shareholders.

      The aggregate amount of principal maturities of long-term debt as of December 31, 1998 were as follows:

Year Ending December 31,
1999	$	61,877
2000		65,585
2001		72,842
2002		80,669
2003		89,337
Thereafter		382,031
	$	752,351

Note 4 — Income Taxes

      The components of the income tax provision (benefit) for the years ended December 31, 1998, 1997 and 1996 are as follows:

		1998		1997			1996
Current:
	Federal	$	45,268	$	(18,136	)	$	128,561
	State		7,007		(2,807	)		19,901
			52,275		(20,943	)		148,462
Deferred:
	Federal		118,995		(16,480	)		11,575
	State		6,670		650			610
			125,665		(15,830	)		12,185
		$	177,940	$	(36,773	)	$	160,647

      The reconciliation of the total provision (benefit) for income taxes with amounts determined by applying the statutory U. S. federal income tax rate to income (loss) before income tax provision (benefit) for the years ended December 31, 1998, 1997 and 1996 is as follows:

	1998			1997			1996
Federal income tax at statutory rate	$	150,902		$	(19,773	)	$	133,796
State income tax, net of federal income tax impact		14,646			(1,919	)		12,986
Non-deductible compensation expense related to stock option grants		14,443			2,897			1,933
Research and development income tax credits		(14,429	)		(18,078	)		—
Other		12,378			100			11,932
	$	177,940		$	(36,773	)	$	160,647

F-27

NETWORK PUBLISHING, INC.

NOTES TO FINANCIAL STATEMENTS — (Continued)

      Deferred income taxes reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred income tax assets and liabilities as of December 31, 1998 and 1997 are as follows:

		1998			1997
Deferred income tax assets:
	Depreciation	$	3,923		$	—
	Research and development income tax credits		36,565			28,830
			40,488			28,830
Deferred income tax liabilities:
	Accrual to cash basis conversion		(168,928	)		(16,394	)
	Depreciation		—			(15,211	)
			(168,928	)		(31,605	)
Net deferred income tax liability		$	(128,440	)	$	(2,775	)

      As of December 31, 1998, the Company has research and development income tax credit carryforwards of $36,565 for which there is no expiration date.

Note 5 — Commitments and Contingencies

  Leases

      The Company leases its facilities and vehicles under operating leases and certain computer equipment under capital leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 1998. Future minimum aggregate annual lease payments are as follows:

	Capital Lease			Operating Lease
Year ending December 31,	Obligations			Obligations
1999	$	53,653		$	122,177
2000		49,181			19,575
2001		677			—
		103,511		$	141,752
Less interest		(8,684	)
		94,827
Less current portion		(47,135	)
	$	47,692

      The Company has certain computer equipment under capital lease obligations. These assets had a gross book value of $98,001 and a net book value of $89,963 as of December 31, 1998.

      Rent expense related to the operating leases was $129,634, $115,308 and $50,376 for the years ended December 31, 1998, 1997 and 1996, respectively.

  Legal

      The Company is engaged in legal and administrative proceedings arising in the ordinary course of business. Management believes the outcome of these proceedings will not have a material adverse effect on the Company’s financial position or results of operations.

F-28

NETWORK PUBLISHING, INC.

NOTES TO FINANCIAL STATEMENTS — (Continued)

Note 6 — Shareholders’ Equity

  Treasury Stock

      In April 1997, the Company’s Board of Directors approved the repurchase of 22,000 shares of common stock for $420,577 from the Company’s majority shareholder. The Company repurchased these shares for cash on April 24, 1997.

  Stock Options

      On July 1, 1995, the Company adopted the 1995 Stock Option Plan (the “Plan”) to provide incentives to eligible employees and officers. Under the Plan, the Board of Directors is authorized to grant 3,200 options to purchase shares of common stock to eligible participants. The Board of Directors is also authorized to specify the terms and conditions of each option granted, including the number of shares, the exercise price, vesting provisions, and the option term.

      A summary of option activity under the 1995 Stock Option Plan for the years ended December 31, 1998, 1997 and 1996 is presented below:

		Options
Balance, December 31, 1995			1,400
	Granted		500
Balance, December 31, 1996			1,900
	Granted		200
Balance, December 31, 1997			2,100
	Granted		1,150
	Canceled		(50	)
Balance December 31, 1998.			3,200

      All of the options granted by the Company have an exercise price of $1 and a term of 7 years from the date of grant. The outstanding options as of December 31, 1998 have a weighted average remaining contractual life of 4.9 years and 1,350 of these options are exercisable. The weighted average fair value of options granted during 1998, 1997 and 1996 was $208.09, $61.78 and $17.07, respectively.

      The Company accounts for its stock options issued to directors, officers and employees under Accounting Principles Board Opinion No. 25 (“APB No. 25”) and related interpretations. Under APB No. 25, compensation expense is recognized if an option’s exercise price is below the intrinsic fair value of the Company’s common stock at the date of grant. During 1998, 1997 and 1996, the Company granted options at prices less than the estimated intrinsic fair value of the Company’s common stock at the date of grant and accordingly recorded deferred compensation of $239,038, $12,300 and $8,425, respectively. The Company amortizes the deferred compensation related to these option issuances over the vesting term of the related options and accordingly, recorded compensation expense of $38,721, $7,766 and $5,183 during the years ended December 31, 1998, 1997 and 1996, respectively.

      Statement of Financial Accounting Standards No. 123 (“SFAS No. 123”), “Accounting for Stock-Based Compensation,” requires pro forma information regarding net income (loss) as if the Company had accounted for its stock options granted subsequent to January 1, 1996 under the fair value method. The fair market value of the stock options is estimated on the date of grant using the Black-Scholes pricing model with the following weighted-average assumptions for grants during the years ended December 31, 1998, 1997 and 1996: risk-free interest rates of 5.33 percent, 6.23 percent and 6.13 percent, respectively; expected dividend yield of zero percent; and expected exercise lives of 4 years for all periods. For purposes

F-29

NETWORK PUBLISHING, INC.

NOTES TO FINANCIAL STATEMENTS — (Continued)

of the pro forma disclosures, the estimated fair market value of the stock options is amortized over the vesting periods of the respective stock options. Following are the pro forma disclosures and the related impact on net income (loss) for the years ended December 31, 1998, 1997 and 1996:

	1998		1997			1996
Net income (loss) as reported	$	265,890	$	(21,384	)	$	232,871
Net income (loss) pro forma		265,670		(21,428	)		232,756

Note 7 — Segment Information

      In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 “Disclosures about Segments of an Enterprise and Related Information”. This statement requires disclosures related to components of a company for which separate financial information is available and evaluated regularly by the company’s chief operating decision makers in deciding how to allocate resources and in assessing performance. Management believes that the Company has only one operating segment because the Company’s core business operations consist only of information technology services. All of the Company’s revenues for the years ended December 31, 1998, 1997 and 1996 were sourced from the United States.

Note 8 — Employee Benefit Plans

      The Company offers its employees participation in a qualified 401(k) profit-sharing plan which requires the Company to match employee contributions up to predetermined limits for qualified employees as defined by the plan. For the years ended December 31, 1998, 1997 and 1996, the Company contributed $24,025, $20,451 and $7,383 to the plan, respectively.

Note 9 — Subsequent Event

      On January 8, 1999, all outstanding shares of the Company’s common stock and vested stock options to purchase the Company’s common stock were purchased by Intelligroup, Inc. for a purchase price of approximately $4.5 million, consisting of cash and Intelligroup, Inc. common stock.

F-30

PART II

Item 13.  Other Expenses of Issuance and Distribution

      The following table sets forth the estimated costs and expenses payable in connection with the securities being registered.

Item	Amount
Securities and Exchange Commission Registration fee	$	4,122
Printing and engraving expenses		30,000
Legal fees and expenses		135,000
Accounting fees and expenses		65,000
Miscellaneous		10,878
Total	$	245,000

SeraNova is paying all of the costs and expenses in connection with the securities being offered.

Item 14.  Indemnification of Directors and Officers

      Section 14A:3-5 of the New Jersey Business Corporation Act permits each New Jersey business corporation to indemnify its directors, officers, employees and agents against expenses and liabilities in connection with any proceeding involving such persons by reason of his serving or having served in such capacities or for each such person’s acts taken in his capacity as a director, officer, employee or agent of the corporation if such actions were taken in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal proceeding, if he had no reasonable cause to believe his conduct was unlawful, provided that any such proceeding is not by or in the right of the corporation.

      Section 14A:2-7(3) of the New Jersey Business Corporation Act enables a corporation in its certificate of incorporation to limit the liability of directors and officers of the corporation to the corporation or its shareholders. Specifically, the certificate of incorporation may provide that directors and officers of the corporation will not be personally liable for money damages for breach of a duty as a director or an officer, except for liability (i) for any breach of the director’s or officer’s duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve a knowing violation of law, (iii) as to directors only, under Section 14A:6-12(1) of the New Jersey Business Corporation Act, which relates to unlawful declarations of dividends or other distributions of assets to shareholders or the unlawful purchase of shares of the corporation, or (iv) for any transaction from which the director or officer derived an improper personal benefit.

      The registrant’s Certificate of Incorporation limits the liability of its directors and officers as authorized by Section 14A:2-7(3).

      Article XI of the registrant’s By-laws specifies that the registrant shall indemnify its directors, officers, employees and agents to the extent such parties are a party to any action because he was a director, officer, employee or agent of the Company. This provision of the By-laws is deemed to be a contract between the registrant and each director and officer who serves in such capacity at any time while such provision and the relevant provisions of the New Jersey Business Corporation Act are in effect, and any repeal or modification of Article XI of the By-laws shall not adversely affect any right or protection under Article XI of any person in respect of any act or omission occurring prior to the time of such repeal or modification. The affirmative vote of the holders of at least 80% of the voting power of all outstanding shares of capital stock of the Company is required to adopt, amend or repeal such provisions of the By-laws.

      We intend to enter into indemnification agreements with each of our officers and directors pursuant to which we will agree to indemnify such parties to the full extent permitted by law, subject to certain

II-1

exceptions, if such party becomes subject to an action because such party is a director or officer of SeraNova.

      At present, there is no pending litigation or proceeding involving a director or officer of SeraNova as to which indemnification is being sought nor are we aware of any threatened litigation that may result in claims for indemnification by any officer or director.

Item 15.  Recent Sales of Unregistered Securities

      Since September 9, 1999, SeraNova has issued unregistered securities in the transactions described below. Securities issued in such transactions were offered in reliance upon the exemption from registration under Section 4(2) of the Securities Act of 1933, relating to sales by an issuer not involving any public offering, or under Rule 701 under the Securities Act of 1933 as transactions made pursuant to a written compensatory plan or pursuant to a written contract relating to compensation. The transactions were effected without the use of an underwriter and the certificates evidencing the shares bear a restrictive legend permitting the transfer thereof only upon registration of the shares or an exemption under the Securities Act of 1933. All recipients had adequate access to information about SeraNova.

      (i)  On September 9, 1999, Intelligroup, Inc. formed Infinient, Inc. and was issued 100 shares of its common stock in connection therewith. On December 6, 1999, Infinient changed its name to SeraNova, Inc. On January 1, 2000, SeraNova, in connection with the transfer by Intelligroup of its Internet solutions business to SeraNova, issued 900 shares of its common stock to Intelligroup. The 1,000 shares currently held by Intelligroup equate to 16,629,413 shares after giving effect to the May 12, 2000 stock split.

      (ii)  Since September 9, 1999, SeraNova has granted stock options to purchase an aggregate of 3,236,092 shares of its common stock outside of any stock option plan at a weighted average exercise price of $3.19 per share.

      (iii)  Since September 9, 1999, SeraNova has granted stock options to purchase an aggregate of 1,667,575 shares of its common stock under the 1999 Stock Plan at a weighted average exercise price of $6.51 per share.

      (iv)  On March 15, 2000, SeraNova issued an aggregate of 50 shares of common stock to five accredited institutional investors for an aggregate purchase price of $10,000,000. The 50 shares equate to 831,470 shares after giving effect to the May 12, 2000 stock split. The accredited investors include Evansville Limited, Ampal-American Israel Corporation, NSA Investments LLC, SSB Investments Ltd. and Strong River Investments, Inc.

      (v)  On September 29, 2000, SeraNova issued an aggregate of 800 shares of its 6% series A convertible preferred stock and warrants to purchase 310,000 shares of SeraNova common stock to two institutional investors for an aggregate purchase price of $8,000,000. The institutional investors were Strong River Investments, Inc. and Montrose Investments Ltd.

II-2

Item 16.  Exhibits and Financial Statement Schedules

(a)  Exhibits

*2.1	Distribution Agreement by and between Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000.
2.2	Agreement and Plan of Merger dated as of October 27, 2000, among Silverline Technologies Limited, Silverline Acquisition Corp., Silverline Technologies, Inc. and the Registrant. Not included in this exhibit are certain schedules to the representations and warranties of the Registrant in Article III of the Agreement, and to the representations and warranties of Silverline Technologies Limited and Silverline Acquisition Corp. in Article IV of the Agreement, the Registrant undertakes to furnish these schedules supplementally to the Commission upon its request.
*3.1A	Certificate of Incorporation of SeraNova, Inc.
3.1B	Certificate of Designation constituting part of the Certificate of Incorporation of SeraNova, Inc., providing for its 6% series A convertible preferred stock.
*3.2	By-Laws of SeraNova, Inc.
5	Opinion of Carter, Ledyard & Milburn.
*10.1	Contribution Agreement by and between Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000.
*10.2	Services Agreement by and between Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000.
*10.3	Space Sharing Agreement by and among Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000.
*10.4	Tax Sharing Agreement by and between Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000.
*10.5	Form of Indemnification Agreement by and between SeraNova, Inc. and each of its directors and executive officers.
*10.6	Employment Agreement by and between SeraNova, Inc. and Rajkumar Koneru dated as of September 9, 1999.
*10.7	Employment Agreement by and between SeraNova, Inc. and Ravi Singh dated as of September 9, 1999.
*10.8	Employment Agreement by and between SeraNova, Inc. and Rajan Nair dated as of October 1, 1999.
*10.9	Master Consulting Services Agreement by and between SeraNova, Inc. and Mueller/ Shields dated as of December  21, 1999.
*10.10	1999 Stock Plan.
*10.11	Registration Rights Agreement by and between SeraNova, Inc. and Evansville, Ltd. dated as of March 14, 2000.
*10.12	Registration Rights Agreement by and between SeraNova, Inc. and Ampal — American Israel Corporation, dated as of March 14, 2000.
*10.13	Registration Rights Agreement by and between SeraNova, Inc. and NSA Investments, Inc. dated as of March 14, 2000.
*10.14	Registration Rights Agreement by and between SeraNova, Inc. and SSB, Ltd. dated as of March 14, 2000.
*10.15	Common Stock Purchase Option Agreement by and between SeraNova, Inc. and Global Emerging Markets North America, Inc. dated March 15, 2000.
*10.16	Amended and Restated Promissory Note issued by SeraNova, Inc. to Intelligroup, Inc. dated as of May 31, 2000.

*  Filed as an exhibit to SeraNova’s Registration Statement on Form S-1, Registration No. 333-34964, and incorporated herein by reference.

II-3

*10.17	Amendment No. 1 to Services Agreement by and between SeraNova, Inc. and Intelligroup, Inc. dated as of June  14, 2000.
10.18	Convertible Preferred Stock Purchase Agreement dated as of September 26, 2000, among SeraNova, Inc., Strong River Investments, Inc., and Montrose Investments Ltd.
10.19	Agreement and Waiver with Respect to Amended and Restated Promissory Note (Exhibit 10.16) entered into as of September 29, 2000, by the Registrant and Intelligroup, Inc.
*21.1	Subsidiaries of the Registrant.
23.1	Consent of Arthur Andersen LLP with respect to SeraNova, Inc.
23.2	Consent of Arthur Andersen LLP with respect to Network Publishing, Inc.
23.3	Consent of Carter, Ledyard & Milburn (contained in the opinion filed as Exhibit 5 to this Registration Statement).
24	Powers of Attorney of certain officers and directors of SeraNova, Inc. (contained on the signature page of this Registration Statement).

*  Filed as an exhibit to SeraNova’s Registration Statement on Form S-1, Registration No. 333-34964, and incorporated herein by reference.

(b)  Financial Statement Schedules

None required.

Item 17.  Undertakings

      (1)  The undersigned registrant hereby undertakes:

      (a)  To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

      (i)  to include any prospectus required by section 10(a)(3) of the Securities Act;

      (ii)  to reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment hereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement. (Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the change in volume represents no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.); and

      (iii)  to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement;

provided, however, that paragraphs (i) and (ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) that are incorporated by reference in this Registration Statement;

      (b)  That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

      (c)  To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

II-4

      (2)  The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

      (3)  Insofar as indemnification for liabilities arising under the Securities Act may be permitted as to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 14, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

II-5

SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933, as amended, the Company has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Edison, State of New Jersey, on the 9th day of November, 2000.

SERANOVA, INC.

By:  /s/ RAJKUMAR KONERU

    Rajkumar Koneru

    Chairman, President and

    Chief Executive Officer

II-6

POWER OF ATTORNEY

      KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Rajkumar Koneru and Ravi Singh, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and to sign any registration statement for the same offering covered by the Registration Statement that is to be effective upon filing pursuant to Rule 462 promulgated under the Securities Act of 1933, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

      Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed on November 9, 2000 by the following persons in the capacities indicated:

Signature	Title
/s/ RAJKUMAR KONERU Rajkumar Koneru	Chairman, President, Chief Executive Officer and Director (Principal Executive Officer)
/s/ RAVI SINGH Ravi Singh	Chief Financial Officer and Director (Principal Financial and Accounting Officer)
/s/ NAGARJUN VALLURIPALLI Nagarjun Valluripalli	Director
/s/ JAMES E. ABBOTT James E. Abbott	Director

II-7

EXHIBIT INDEX

Exhibit
No.		Description of Exhibit
	*2.1	Distribution Agreement by and between Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000.
	2.2	Agreement and Plan of Merger dated as of October 27, 2000, among Silverline Technologies Limited, Silverline Acquisition Corp., Silverline Technologies, Inc. and the Registrant. Not included in this exhibit are certain schedules to the representations and warranties of the Registrant in Article III of the Agreement, and to the representations and warranties of Silverline Technologies Limited and Silverline Acquisition Corp. in Article IV of the Agreement. The Registrant undertakes to furnish these schedules supplementally to the Commission upon its request.
	*3.1A	Certificate of Incorporation of SeraNova, Inc.
	3.1B	Certificate of Designation constituting part of the Certificate of Incorporation of SeraNova, Inc., providing for its 6% series A convertible preferred stock.
	*3.2	By-Laws of SeraNova, Inc.
	5	Opinion of Carter, Ledyard & Milburn.
	*10.1	Contribution Agreement by and between Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000.
	*10.2	Services Agreement by and between Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000.
	*10.3	Space Sharing Agreement by and among Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000.
	*10.4	Tax Sharing Agreement by and between Intelligroup, Inc. and SeraNova, Inc. dated as of January 1, 2000.
	*10.5	Form of Indemnification Agreement by and between SeraNova, Inc. and each of its directors and executive officers.
	*10.6	Employment Agreement by and between SeraNova, Inc. and Rajkumar Koneru dated as of September 9, 1999.
	*10.7	Employment Agreement by and between SeraNova, Inc. and Ravi Singh dated as of September 9, 1999.
	*10.8	Employment Agreement by and between SeraNova, Inc. and Rajan Nair dated as of October 1, 1999.
	*10.9	Master Consulting Services Agreement by and between SeraNova, Inc. and Mueller/ Shields dated as of December  21, 1999.
	*10.10	1999 Stock Plan.
	*10.11	Registration Rights Agreement by and between SeraNova, Inc. and Evansville, Ltd. dated as of March 14, 2000.
	*10.12	Registration Rights Agreement by and between SeraNova, Inc. and Ampal — American Israel Corporation, dated as of March 14, 2000.
	*10.13	Registration Rights Agreement by and between SeraNova, Inc. and NSA Investments, Inc. dated as of March 14, 2000.

* Filed as an exhibit to SeraNova’s Registration Statement on Form S-1, Registration No. 333-34964, and incorporated herein by reference.

Exhibit
No.		Description of Exhibit
	*10.14	Registration Rights Agreement by and between SeraNova, Inc. and SSB, Ltd. dated as of March 14, 2000.
	*10.15	Common Stock Purchase Option Agreement by and between SeraNova, Inc. and Global Emerging Markets North America, Inc. dated March 15, 2000.
	*10.16	Amended and Restated Promissory Note issued by SeraNova, Inc. to Intelligroup, Inc. dated as of May 31, 2000.
	*10.17	Amendment No. 1 to Services Agreement by and between SeraNova, Inc. and Intelligroup, Inc. dated as of June 14, 2000.
	10.18	Convertible Preferred Stock Purchase Agreement dated as of September 26, 2000, among SeraNova, Inc., Strong River Investments, Inc., and Montrose Investments Ltd.
	10.19	Agreement and Waiver with Respect to Amended and Restated Promissory Note (Exhibit 10.16) entered into as of September 29, 2000, by the Registrant and Intelligroup, Inc.
	*21.1	Subsidiaries of the Registrant.
	23.1	Consent of Arthur Andersen LLP with respect to SeraNova, Inc.
	23.2	Consent of Arthur Andersen LLP with respect to Network Publishing, Inc.
	23.3	Consent of Carter, Ledyard & Milburn (contained in the opinion filed as Exhibit 5 to this Registration Statement).
	24	Powers of Attorney of certain officers and directors of SeraNova, Inc. (contained on the signature page of this Registration Statement).

*  Filed as an exhibit to SeraNova’s Registration Statement on Form S-1, Registration No. 333-34964, and incorporated herein by reference.

EX-2.2

   1
                                                                     EXHIBIT 2.2


                          AGREEMENT AND PLAN OF MERGER

                                      among

                        SILVERLINE TECHNOLOGIES LIMITED,

                          SILVERLINE ACQUISITION CORP.

                          SILVERLINE TECHNOLOGIES, INC.

                                       and

                                 SERANOVA, INC.

                          DATED AS OF OCTOBER 27, 2000


   2




                                  AGREEMENT AND
                                 PLAN OF MERGER

      AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") dated as of October 27,
2000, by and among SILVERLINE TECHNOLOGIES LIMITED, a corporation organized
under the laws of India ("SILVERLINE"), SILVERLINE ACQUISITION CORP., a Delaware
corporation ("ACQUISITION"), SILVERLINE TECHNOLOGIES, INC., a Delaware
corporation ("STI") and SERANOVA, INC., a New Jersey corporation ("SERANOVA").
STI has become a party to this Agreement for the limited purpose of agreeing to
Section 1.8.

                                   BACKGROUND

      A. SeraNova is a New Jersey corporation with its principal executive
office located at 499 Thornall Street, Edison, New Jersey 08837. SeraNova is
engaged principally in the business of providing Internet professional services
to businesses (the "Business").

      B. Silverline is an Indian corporation with its registered office in
Mumbai, India.

      C. Acquisition is a wholly-owned subsidiary of Silverline and was formed
to merge with and into SeraNova so that as a result of the merger SeraNova will
survive and become a wholly-owned subsidiary of Silverline. Acquisition is a
Delaware corporation with its registered office located in Wilmington, Delaware,
and has authorized aggregate of 3,000 shares of common stock, with a par value
of $0.01 per share (the "ACQUISITION COMMON STOCK").

      D. Subject to the terms and conditions hereof, Acquisition will merge with
and into SeraNova so that as a result of the merger SeraNova will survive and
become a wholly-owned subsidiary of Silverline.

      E. The board of directors of each of Acquisition and SeraNova have
determined that the merger of Acquisition with and into SeraNova (the "MERGER")
in accordance with the provisions of the Delaware General Corporation Law, as
amended (the "DGCL"), and the New Jersey Business Corporation Act, as amended
(the "NJBCA"), and subject to the terms and conditions of this Agreement, is in
the best interests of Acquisition and SeraNova and their respective
stockholders.

      F. The boards of directors of Acquisition and SeraNova have approved this
Agreement and the transactions contemplated hereby.

      G. The parties intend that the Merger shall qualify as a reorganization
within the meaning of Section 368(a) of the Code and that this Agreement shall
constitute a plan of reorganization.

      H. STI is a wholly-owned subsidiary of Silverline.
   3

      I. Immediately following the Merger, Silverline will contribute the stock
of the Surviving Corporation as its capital in STI so that the Surviving
Corporation shall become a wholly-owned subsidiary of STI.

      NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the terms and conditions hereof, the parties hereto
intending to be legally bound do hereby agree as follows:

                                    ARTICLE I

                                   THE MERGER

            1.1 General. Subject to the terms and conditions of this Agreement
and in accordance with the DGCL and the NJBCA, at the Effective Time, (i)
Acquisition shall be merged with and into SeraNova, (ii) the separate corporate
existence of Acquisition shall cease and (iii) SeraNova shall be the surviving
corporation (the "SURVIVING CORPORATION") and shall continue its corporate
existence under the laws of New Jersey.

            (a) The Merger shall become effective at the time of filing of
certificates of merger, in the form reasonably satisfactory to Silverline and
SeraNova (the "CERTIFICATES OF MERGER"), with the Secretary of State of the
State of Delaware in accordance with the provisions of Section 251 of the DGCL
and in accordance with the provisions of Section 14A:10-7 of the NJBCA, or at
such later time as may be stated in the Certificates of Merger or the parties
may mutually agree (the "EFFECTIVE TIME"). Subject to the terms and conditions
of this Agreement, SeraNova and Acquisition shall duly execute and file the
Certificates of Merger with the Secretary of State of the State of Delaware and
the Department of the Treasury of the State of New Jersey at the time of the
Closing. The closing of the Merger (the "CLOSING") shall take place at the
offices of Greenberg Traurig, LLP, 200 Park Avenue, New York, New York, at 10:00
A.M. two Business Days after the date on which the last of the conditions set
forth in Article VII shall have been satisfied or waived, or on such other date,
time and place as the parties may mutually agree (the "CLOSING DATE").

            (b) At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the DGCL and the NJBCA. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of the
SeraNova and Acquisition shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of the SeraNova
and Acquisition shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.

            1.2 Certificate of Incorporation. The certificate of incorporation
of SeraNova, as in effect immediately prior to the Effective Time, shall be
amended to be comparable to the certificate of incorporation of Acquisition, as
in effect immediately prior to the Effective Time,

                                       3
   4



and shall be the certificate of incorporation of the Surviving Corporation,
until thereafter amended as provided therein or by applicable law.

            1.3 By-Laws. The by-laws of Acquisition, as in effect immediately
prior to the Effective Time, shall be the by-laws of the Surviving Corporation
until thereafter amended as provided therein or by applicable law.

            1.4 Directors and Officers. From and after the Effective Time, (a)
the directors of Acquisition at the Effective Time shall be the initial
directors of the Surviving Corporation, each shall hold office in accordance
with the certificate of incorporation and by-laws of the Surviving Corporation,
and (b) the officers of Acquisition at the Effective Time shall be the initial
officers of the Surviving Corporation, in each case, until their respective
successors are duly elected or appointed and qualified.

            1.5 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Acquisition, SeraNova or the
holders of any of the following securities:

            (a) Each issued and outstanding share of common stock of Acquisition
shall be converted into one validly issued, fully paid and nonassessable share
of common stock, no par value per share, of the Surviving Corporation;

            (b) Each share of SeraNova Stock held in the treasury of the
SeraNova and each share of SeraNova Stock owned by Silverline shall be canceled
without any conversion thereof and no payment or distribution shall be made with
respect thereto; and

            (c) Subject to the provisions of Sections 1.6 and 2.3, each share of
SeraNova Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares canceled in accordance with Section 1.5(b)) shall be
converted into 0.35 (such number as adjusted in accordance with Section 1.6, the
"COMMON STOCK EXCHANGE RATIO", "EXCHANGE RATIO" or "EXCHANGE RATIOS") of a
validly issued, fully paid and nonassessable American depository share of
Silverline ("SILVERLINE ADS"). As of the Effective Time, each share of SeraNova
Common Stock shall no longer be outstanding and shall automatically be canceled
and retired, and each holder of a certificate representing any shares of
SeraNova Common Stock shall cease to have any rights with respect thereto other
than (i) the right to receive Silverline ADSs to be issued in consideration
therefor upon the surrender of such certificate, (ii) any dividends and other
distributions in accordance with Section 2.2 and (iii) any cash, without
interest, to be paid in lieu of any fractional share of Silverline ADS in
accordance with Section 2.3. The SeraNova Preferred Stock shall be dealt with in
accordance with its certificate of designation.

            1.6 Adjustment of the Exchange Ratios. In the event that, prior to
the Effective Time, any stock split, combination, reclassification or stock
dividend with respect to Silverline ADSs, any change or conversion of Silverline
ADSs into other securities or any other dividend or distribution with respect to
Silverline ADSs (other than regular dividends) should

                                       4
   5

occur or, if a record date with respect to any of the foregoing should occur,
appropriate and proportionate adjustments shall be made to the Exchange Ratio,
and thereafter all references to an Exchange Ratio shall be deemed to be to such
Exchange Ratio as so adjusted.

            1.7 Dissenting Shares. (a) Notwithstanding any provision of this
Agreement to the contrary, shares of SeraNova Common Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders who
shall not have voted in favor of the Merger, or consented thereto in writing,
and who shall have demanded properly in writing and are entitled to appraisal
for such shares in accordance with Section 14A:11-1 of the NJBCA (collectively,
the "DISSENTING SHARES") shall not be converted into or represent the right to
receive the consideration set forth in Section 1.5(c). Such stockholders (the
"DISSENTERS") shall be entitled to receive such consideration as is determined
to be due with respect to such Dissenting Shares in accordance with the
provisions of Section 14A:11-1, except that all Dissenting Shares held by
stockholders who shall have failed to perfect, or who effectively shall have
withdrawn or lost their rights to appraisal of such shares under Section
14A:11-1 shall thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to receive the
Silverline ADSs specified in Section 1.5(c), without any interest thereon, upon
surrender, in the manner provided in Section 2.2 of the Certificate or
Certificates that were formerly evidenced by such Dissenting Shares.

            (b) SeraNova shall give Silverline (i) prompt notice of any demands
for appraisal received by SeraNova, withdrawals of such demands, and any other
instruments served pursuant to Section 14A:11-1 of the NJBCA and received by
SeraNova and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under Section 14A:11-1 of the NJBCA .
SeraNova shall not, except with the prior written consent of Silverline, make
any payment with respect to any demands for appraisal or offer to settle or
settle any such demands.

            1.8 Contribution of Surviving Corporation's Stock. Immediately
following the Merger, Silverline will contribute the stock of the Surviving
Corporation capital of STI (the "SILVERLINE STOCK CONTRIBUTION"). As a result of
the Silverline Stock Contribution, the Surviving Corporation shall become a
wholly-owned subsidiary of STI.

                                   ARTICLE II

                              EXCHANGE OF CERTIFICATES

            2.1 Exchange Agent. Prior to the Effective Time, Silverline shall
appoint a commercial bank or trust company reasonably satisfactory to SeraNova
to act as exchange agent hereunder for the purpose of exchanging Certificates
for Silverline ADSs (the "EXCHANGE AGENT").

            2.2 Exchange Procedures; Distributions with Respect to Unexchanged
Shares; Stock Transfer Books. (a) As of the Effective Time, Silverline shall
deposit with the Exchange

                                       5
   6

Agent, for the benefit of the holders of shares of SeraNova Common Stock
certificates representing such number of Silverline ADSs as may be issuable
pursuant to Sections 1.5(c) in exchange for the shares of SeraNova Common Stock
assuming an exchange of 100% of SeraNova Common Stock less shares of SeraNova
Common Stock held by the Dissenters. Such shares of Silverline ADSs deposited
with the Exchange Agent, together with any dividends or distributions with
respect thereto pursuant to Sections 2.3 and 2.2(c), are referred to herein as
the "EXCHANGE FUND".

            (b) As soon as practicable after the Effective Time, Silverline
shall use its reasonable best efforts to cause the Exchange Agent to send to
each Person who was, at the Effective Time, a holder of record of certificates
which represented outstanding SeraNova Common Stock (the "CERTIFICATES"), which
shares were converted into the right to receive Silverline ADSs pursuant to
Section 1.5(c), a letter of transmittal which (i) shall specify that delivery
shall be effected and risk of loss and title to such Certificates shall pass,
only upon actual delivery thereof to the Exchange Agent and (ii) shall contain
instructions for use in effecting the surrender of the Certificates. Upon
surrender to the Exchange Agent of Certificates for cancellation, together with
such letter of transmittal duly executed and such other documents as the
Exchange Agent may reasonably require, such holder shall be entitled to receive
in exchange therefor (A) a certificate representing the number of whole shares
of Silverline ADSs into which the SeraNova Common Stock represented by the
surrendered Certificate shall have been converted at the Effective Time, (B)
cash in lieu of any fractional share of Silverline ADSs in accordance with
Section 2.3 and (C) dividends and distributions, if any, that are payable in
accordance with Section 2.2(c), and the Certificates so surrendered shall then
be canceled. Subject to Section 2.3 and Section 2.2(c), until surrendered as
contemplated by this Section 2.2(b), each Certificate as applicable, from and
after the Effective Time shall be deemed to represent only the right to receive,
upon such surrender, the number of Silverline ADSs into which such SeraNova
Common Stock shall have been converted.

            (c) No dividends or other distributions declared or made after the
Effective Time with respect to the Silverline ADSs with a record date after the
Effective Time shall be paid to any holder entitled by reason of the Merger to
receive certificates representing Silverline ADSs and no cash payment in lieu of
a fractional share of Silverline ADS shall be paid to any such holder pursuant
to Section 2.3 until such holder shall have surrendered its Certificates
pursuant to this Section 2.2. Subject to applicable law, following surrender of
any such Certificate such holder shall be paid, in each case, without interest,
(i) the amount of any dividends or other distributions theretofore paid with
respect to Silverline ADSs represented by the certificate received by such
holder and having a record date on or after the Effective Time and a payment
date prior to such surrender and (ii) at the appropriate payment date, or as
promptly as practicable thereafter, the amount of any dividends or other
distributions payable with respect to such Silverline ADSs and having a record
date on or after the Effective Time but prior to such surrender and a payment
date on or after such surrender.

            (d) If any certificate representing Silverline ADSs, or any cash, is
to be issued or paid to any Person other than the registered holder of the
Certificate surrendered in exchange

                                       6
   7

therefor, it shall be a condition to such exchange that such surrendered
Certificate shall be properly endorsed and otherwise in proper form for transfer
and such Person either (i) shall pay to the Exchange Agent any transfer or other
taxes required as a result of the issuance of such certificates of Silverline
ADSs and the distribution of such cash payment to such Person, or (ii) shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable. Silverline or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of SeraNova Stock such amounts as Silverline
or the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Silverline or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of SeraNova Common
Stock in respect of which such deduction and withholding was made by Silverline
or the Exchange Agent. All amounts in respect of taxes received or withheld by
Silverline shall be disposed of by Silverline in accordance with the Code or
such state, local or foreign tax law, as applicable.

            (e) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed, and subject to such other
conditions as the board of directors of the Surviving Corporation may impose,
the Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate Silverline ADSs as determined under Section 1.5(c) and pay any cash,
dividends or other distributions as determined in accordance with Sections 2.3
and 2.2(c) in respect of such Certificate; provided, that, Silverline may, in
its reasonable discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificate to deliver a
bond in such sum as it may reasonably require as indemnity against any claim
that may be made against Silverline, the Surviving Corporation or the Exchange
Agent with respect to the Certificate alleged to have been lost, stolen or
destroyed.

            (f) At the close of business on the day on which the Effective Time
occurs, the stock transfer books of the SeraNova shall be closed and thereafter
there shall be no further registration of transfers of shares of SeraNova Common
Stock on the records of the SeraNova. From and after the Effective Time, the
holders of shares of SeraNova Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares except
as otherwise provided herein or by applicable law.

            2.3 No Fractional Shares. No certificates or scrip representing
fractional Silverline ADSs shall be issued upon the surrender for exchange of
Certificates as applicable, and such fractional Silverline ADS shall not entitle
the record or beneficial owner thereof to vote or to any other rights as a
holder of Silverline ADS. In lieu of receiving any such fractional Silverline
ADS, the stockholder shall receive cash (without interest) in an amount rounded
to the nearest whole cent, determined by multiplying (i) the per ADS closing
price on the New York Stock Exchange, Inc. (the "NYSE") of Silverline ADS (as
reported on the NYSE Composite Transactions Tape as such tape is reported in the
Wall Street Journal or another recognized business publication) on the date
immediately preceding the date on which the Effective Time


                                       7
   8

shall occur (or, if the Silverline ADS did not trade on the NYSE on such prior
date, the last day of trading in Silverline ADS on the NYSE prior to the
Effective Time) by (ii) the fraction of the ADS to which such holder would
otherwise be entitled. Silverline shall make available to the Exchange Agent the
cash necessary for this purpose.

            2.4 Return of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former holders of SeraNova Common Stock, as
applicable, for six months after the Effective Time shall be delivered to
Silverline, upon its request, and any such former holders who have not
theretofore surrendered to the Exchange Agent their Certificates in compliance
herewith shall thereafter look only to Silverline for payment of their claim of
Silverline ADSs, any cash in lieu of fractional Silverline ADS and any dividends
or distributions with respect to such Silverline ADSs, and Silverline agrees to
promptly pay any such bonafide claims. None of Silverline, the Exchange Agent or
the SeraNova shall be liable to any former holder of SeraNova Common Stock for
any such Silverline ADSs held in the Exchange Fund (and any cash, dividends and
distributions payable in respect thereof) which are delivered to a public
official pursuant to an official request under any applicable abandoned
property, escheat or similar law.

            2.5 No Further Ownership Rights in SeraNova Capital Stock. All
certificates representing Silverline ADSs delivered upon the surrender for
exchange of any Certificate in accordance with the terms hereof (including any
cash paid pursuant to Section 2.3 or Section 2.2) shall be deemed to have been
delivered (and paid) in full satisfaction of all rights pertaining to the
SeraNova Common Stock previously represented by such Certificate.

            2.6 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either
SeraNova or Acquisition or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either the SeraNova or Acquisition, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of the SeraNova or
Acquisition, all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of the SeraNova or
Acquisition, as applicable, and otherwise to carry out the purposes of this
Agreement.

                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF SERANOVA


                                       8
   9


            Except as disclosed in the SeraNova disclosure schedule attached
hereto (the "SERANOVA DISCLOSURE SCHEDULE"), SeraNova hereby represents and
warrants to Silverline and Acquisition as follows:

            3.1 Corporate Organization. (a) SeraNova is a corporation duly
organized, validly existing and in good standing under the laws of the state of
New Jersey. SeraNova has the corporate power and authority to own or lease all
of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect on SeraNova. As used in this Agreement,
the term "MATERIAL ADVERSE EFFECT" means, with respect to Silverline or
SeraNova, as the case may be, a material adverse effect on (i) the business,
operations, results of operations or financial condition of such party and its
material Subsidiaries or (ii) the ability of such party to consummate the
transactions contemplated hereby. As used in this Agreement, the word
"SUBSIDIARY" means any corporation, partnership, limited liability company,
joint venture or other legal entity of which Silverline or SeraNova, as the case
may be (either alone or through or together with any other Subsidiary), (i)
owns, directly or indirectly, 50% or more of the stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation, partnership,
limited liability company, joint venture or other legal entity, (ii) is a
general partner, trustee or other entity or person performing similar functions
or (iii) has control (as defined in Rule 405 under the Securities Act of 1933,
as amended (together with the rules and regulations promulgated thereunder, the
"SECURITIES ACT")). True and complete copies of the certificate of incorporation
and by-laws of SeraNova, as in effect as of the date of this Agreement, have
previously been made available by SeraNova to Silverline.

            (b) Each SeraNova Subsidiary (i) is duly organized and validly
existing under the laws of its jurisdiction of organization, (ii) is duly
qualified to do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and in which the
failure to be so qualified would have a Material Adverse Effect on SeraNova and
(iii) has all requisite corporate power and authority to own or lease its
properties and assets and to carry on its business as now conducted.

            (c) The minute books of SeraNova accurately reflect in all material
respects all corporate meetings and actions held or taken since the
incorporation of SeraNova by, or of, its stockholders and board of directors
(including committees of the board of directors of SeraNova).

            3.2 Capitalization. (a) The authorized capital stock of SeraNova
consists of (i) 40,000,000 shares of SeraNova common stock par value $0.01 per
share, of which, as of the date of this Agreement 17,460,883 shares were issued
and outstanding and 5,000,000 shares were held in treasury ("SERANOVA COMMON
STOCK"), and (ii) 800 shares of 6% Series A

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convertible preferred stock, par value $0.01 per share of SeraNova (the
"SERANOVA PREFERRED STOCK" and together with SeraNova Common Stock, "SERANOVA
STOCK"), of which, as of the date hereof, 800 shares were designated, issued and
outstanding. All of the issued and outstanding shares of SeraNova Stock have
been duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except pursuant to the terms of
options issued pursuant to the SeraNova Stock Option Plan and other employee
options ("SERANOVA STOCK OPTIONS") and warrants for 310,000 shares of SeraNova
Common Stock, SeraNova and its Subsidiaries do not have, and are not bound by,
any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of SeraNova Stock, or any other securities of SeraNova or its subsidiaries, or
any securities representing the right to purchase or otherwise receive any
shares of SeraNova Stock or any of its Subsidiaries. As of the date of this
Agreement, no shares of SeraNova Stock are reserved for issuance, except for
5,691,752 shares of SeraNova Stock reserved for issuance upon exercise of
SeraNova Stock Options. Since July 6, 2000, SeraNova has not issued any shares
of its capital stock or any securities convertible into, or exercisable for, any
shares of its capital stock, other than pursuant to the exercise of employee
stock options granted prior to such date and SeraNova Preferred Stock. Assuming
compliance by Silverline with the terms of this Agreement, after the Effective
Time, there will not be any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character by which SeraNova or any of its
Subsidiaries, or their respective successors, will be bound calling for the
purchase or issuance of any shares of the capital stock of SeraNova. Section
3.2(a) of the SeraNova Disclosure Schedule sets forth a list of the option
holders, the date of each option to purchase SeraNova Stock granted, the number
of shares subject to each such option, the expiration date of each such option,
and the price at which each such option may be exercised under the SeraNova
Stock Option Plan.

            (b) SeraNova owns, directly or indirectly, all of the issued and
outstanding shares of capital stock or other equity ownership interests of each
of the SeraNova Subsidiaries, free and clear of any Liens and all of such shares
or equity ownership interests are duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. No SeraNova Subsidiary has or is
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock, or any other equity security of such Subsidiary, or any
securities representing the right to purchase or otherwise receive any shares of
capital stock, or any other equity security, of such Subsidiary.

            3.3 Authority; No Violation. (a) SeraNova has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by all necessary corporate action and, except for (i) the
approval of this Agreement by the stockholders of SeraNova, and (ii) the filing
and recordation of appropriate merger documents as required by the DGCL and
NJBCA, no other corporate or other proceedings on the part of SeraNova are

                                       10
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necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by SeraNova and (assuming due authorization, execution and delivery by
Silverline and Acquisition) constitutes a valid and binding obligation of
SeraNova, enforceable against SeraNova in accordance with its terms.

            (b) Neither the execution and delivery of this Agreement by
SeraNova, nor the consummation by SeraNova of the transactions contemplated
hereby, nor compliance by SeraNova with any of the terms or provisions hereof,
will (i) violate any provision of the SeraNova certificate of incorporation or
by-laws or (ii) assuming approvals referred to in Section 3.4 are duly obtained,
(x) violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to SeraNova or any of its Subsidiaries or
any of their respective properties or assets, or (y) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of, or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of SeraNova or any of its Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which SeraNova or
any of its Subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected, except (in the case of clause (y)
above) for such violations, conflicts, breaches or defaults which, either
individually, or in the aggregate, will not have, or be reasonably likely to
have, a Material Adverse Effect on SeraNova.

            3.4 Consents and Approvals. Except (i) in connection or in
compliance, with the provisions of Hart-Scott-Rodino Antitrust Improvement Act
of 1976, as amended (the "HSR ACT"), (ii) for the filing of any required
applications or notices with any state or foreign agencies and approval of such
applications and notices as disclosed in Schedule 3.4 of the SeraNova Disclosure
Schedule (the "STATE APPROVALS") and Indian Regulatory Approvals, or (iii) for
the filing of Certificates of Merger with the Secretary of State of the state of
Delaware and the Department of Treasury of the State of New Jersey pursuant to
the DGCL and NJBCA, no consents or approvals of or filings or registrations with
any court, administrative agency or commission or other governmental authority
or instrumentality (each a "GOVERNMENTAL ENTITY"), or with any third party are
necessary in connection with (A) the execution and delivery by SeraNova of this
Agreement and (B) the consummation by SeraNova of the Merger and the other
transactions contemplated hereby.

            3.5 Financial Statements; Indebtedness; No Undisclosed Liabilities.
(a) Schedule 3.5 of the SeraNova Disclosure Schedule sets forth true, correct
and complete copies of the balance sheet of SeraNova as of December 31, 1999
(the "BALANCE SHEET"), the statement of income of SeraNova for the annual period
ended December 31, 1999 and financial statements for the quarter ended June 30,
2000 (collectively, the "FINANCIAL STATEMENTS").

                                       11
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            The Financial Statements reflect and present fairly in all material
respects, the assets, liabilities, and financial condition of SeraNova as of
their indicated dates, and the results of its operations, for the indicated
periods and are in compliance with U.S. GAAP.

            (b) The Company does not have any liabilities, debts, claims or
obligations of any nature (whether contingent, unasserted or otherwise) which
are, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on SeraNova, except (i) to the extent reflected or disclosed in
the Financial Statements, (ii) for items disclosed in Schedule 3.5 of the
SeraNova Disclosure Schedule, and (iii) for liabilities and obligations incurred
in the ordinary course of business consistent with past practice and not in
violation of the Agreement. Schedule 3.5 of the SeraNova Disclosure Schedule
also sets forth a description of each encumbrance with respect to Indebtedness
of SeraNova and SeraNova Preferred Stock. Except as set forth in Schedule 3.5 of
the SeraNova Disclosure Schedule, no default exists with respect to, or under,
any Indebtedness of SeraNova or any instrument or agreement relating thereto.

            3.6 Absence of Certain Changes or Events. Except as disclosed in
Schedule 3.6 of the SeraNova Disclosure Schedule, since June 30, 2000, (i)
SeraNova and its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material oral
or written agreement or other transaction, that is not in the ordinary course of
business, and which would reasonably be likely to have a Material Adverse Effect
on SeraNova, (ii) SeraNova and its Subsidiaries have not sustained any loss or
interference with their business or properties from fire, flood, windstorm,
accident or other calamity (whether or not covered by insurance) that has had or
may have a Material Adverse Effect on SeraNova, (iii) there has been no change
in the capital stock of SeraNova and no dividend or distribution of any kind
declared, paid or made by SeraNova on any class of its stock, (iv) there has not
been (x) any payment or agreement to pay, or award or grant under any Benefit
Plan (as defined in Section 3.11(d)) to any executive officer of SeraNova or any
of its Subsidiaries any compensation, (y) any granting by SeraNova or any of its
Subsidiaries to any such executive officer of any severance or termination
agreements or (z) any entry by SeraNova or any of its Subsidiaries into any
employment, severance or termination agreement with any such executive officer
and (v) there has been no other event causing a Material Adverse Effect on
SeraNova, nor any development that would, individually or in the aggregate,
reasonably be likely to have a Material Adverse Effect on SeraNova.

            3.7 Permits and Compliance. Each of SeraNova and its Subsidiaries is
in possession of all franchises, grants, authorizations, licenses, permits,
charters, easements, variances, exceptions, consents, certificates, approvals
and orders of any Governmental Entity necessary for SeraNova or any of its
Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "SERANOVA PERMITS"), except where the
failure to have any of the SeraNova Permits would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect on SeraNova
and its Subsidiaries, and, as of the date of this Agreement, no suspension or
cancellation of any of the SeraNova Permits is pending or, to the Knowledge of
SeraNova, threatened, except where the suspension or cancellation of any of the
SeraNova Permits, individually or in the aggregate, would not

                                       12
   13

reasonably be likely to have a Material Adverse Effect on SeraNova. Neither
SeraNova nor any of its Subsidiaries is in violation of (i) its charter, by-laws
or other organizational documents, or (ii) any order, decree or judgment of any
Governmental Entity having jurisdiction over SeraNova or any of its
Subsidiaries, except, in the case of clauses (i) and (ii), for any violations
that, individually or in the aggregate, would not reasonably be likely to have a
Material Adverse Effect on SeraNova. Except as disclosed in Schedule 3.7 of the
SeraNova Disclosure Schedule, and except for contracts or agreements entered
into prior to July 6, 2000, there is no contract or agreement that is material
to the business, properties, results of operations or condition (financial or
otherwise) of SeraNova and its Subsidiaries, taken as a whole. Except as set
forth in Schedule 3.7 of the SeraNova Disclosure Schedule, no event of default
or event that, but for the giving of notice or the lapse of time or both, would
constitute an event of default exists or, upon the consummation by SeraNova of
the transactions contemplated by this Agreement, will exist under any indenture,
mortgage, loan agreement, note or other agreement or instrument for borrowed
money, any guarantee of any agreement or instrument for borrowed money or any
lease, license or other agreement or instrument to which SeraNova or any of its
Subsidiaries is a party, or by which SeraNova or any such Subsidiary is bound,
or to which any of the properties, assets or operations of SeraNova or any such
Subsidiary is subject, other than any defaults that, individually or in the
aggregate, would not reasonably be likely to have a Material Adverse Effect on
SeraNova. "KNOWLEDGE OF SERANOVA" means and includes the actual knowledge, after
reasonable investigation, of each of the executive officers of SeraNova.

            3.8 Tax Matters. (a) Except as otherwise set forth in Schedule 3.8
of the SeraNova Disclosure Schedule, (i) SeraNova and each of its Subsidiaries
have filed all federal, and all material state, local, foreign and provincial,
Tax Returns required to have been filed, or appropriate extensions therefor have
been properly obtained, and such Tax Returns are correct and complete, except to
the extent that any failure to so file, or any failure to be correct and
complete, individually or in the aggregate, would not reasonably be likely to
have a Material Adverse Effect on SeraNova; (ii) all Taxes (as hereinafter
defined) shown to be due on such Tax Returns have been timely paid, or
extensions for payment have been properly obtained, or such Taxes are being
timely and properly contested, (iii) SeraNova and each of its Subsidiaries have
complied in all material respects with all rules and regulations relating to the
withholding of Taxes owing to any employee, independent contractor, creditor,
stockholder or other third party, except to the extent that any failure to
comply with such rules and regulations, individually and in the aggregate, would
not reasonably be likely to have a Material Adverse Effect on SeraNova; (iv)
neither SeraNova nor any of its Subsidiaries has waived any statute of
limitations in respect of its Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency; (v) any Tax Returns referred to in
clause (i) relating to federal and state income Taxes have been examined by the
Internal Revenue Service (the "IRS"), or the appropriate state taxing authority,
or the period for assessment of the Taxes in respect of which such Tax Returns
were required to be filed has expired; (vi) no issues that have been raised in
writing by the relevant taxing authority in connection with the examination of
the Tax Returns referred to in clause (i) are currently pending, and there is no
action, suit, investigation, audit, claim or assessment pending or proposed or,
to Knowledge of SeraNova, threatened with respect to Taxes of SeraNova or any of
its Subsidiaries, and no basis exists therefor; (vii) all deficiencies asserted
or assessments

                                       13
   14

made as a result of any examination of such Tax Returns by any taxing authority
have been paid in full or are being timely and properly contested; (viii) all
tax indemnity arrangements relating to SeraNova or any of its Subsidiaries,
(other than pursuant to this Agreement) and any agreement or arrangement with
any other Person regarding the filing of Tax Returns or relating to the sharing
of tax benefits or liabilities with such Persons will terminate prior to the
Closing Date, and neither SeraNova nor any of its Subsidiaries will have any
liability thereunder on or after the Closing Date; (ix) there are no Liens for
any Taxes upon the assets of SeraNova except Liens relating to current Taxes not
yet due; (x) all Taxes which SeraNova is required by law to withhold or to
collect for payment have been duly withheld and collected, and have been paid or
accrued, reserved against and entered on the books of SeraNova; (xi) neither
SeraNova nor any of its Subsidiaries has been a member of any Company Group or
has any liability for the Taxes of any Person (other than SeraNova and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as transferee or successor, by
contract or otherwise; (xii) neither SeraNova nor any of its Subsidiaries has
filed a consent under Section 341(f) of the Code (or any similar provision of
state, local or foreign law); (xiii) neither SeraNova nor any of its
Subsidiaries is a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code; and (xiv) SeraNova and each of its
Subsidiaries has disclosed on its federal income Tax all positions taken therein
that could give rise to a substantial understatement of federal income Tax
within the meaning of Section 6662 of the Code.

            (b) No payment or other benefit, and no acceleration of the vesting
of any options, payments or other benefits, will be, as a direct or indirect
result of the transactions contemplated by this Agreement, an "excess parachute
payment" to a "disqualified individual" as those terms are defined in Section
280G of the Code and the Treasury Regulations thereunder.

            (c) For purposes of this Agreement, "COMPANY GROUP" shall mean any
"affiliated group" (as defined in Section 1504(a) of the Code, without regard to
the limitations contained in Section 1504(b) of the Code), that at any time on
or before the Closing Date, includes or has included SeraNova or any of its
Subsidiaries or any predecessor of or successor to SeraNova or any of its
Subsidiaries (or another such predecessor or successor), that, at any time on or
before the Closing Date, files or have filed Tax Returns on a combined,
consolidated or unitary basis with SeraNova or any of its Subsidiaries or any
predecessor of or successor to SeraNova or any of its Subsidiaries (or another
such predecessor or successor).

            3.9 Actions and Proceedings. Except as set forth in Schedule 3.9 of
the SeraNova Disclosure Schedule, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or involving
SeraNova or any of its Subsidiaries, or to the Knowledge of SeraNova against or
involving any of the directors, officers or employees of SeraNova, or any of its
Subsidiaries, in their capacities as directors, officers or employees of
SeraNova or any Subsidiary, any of its or their properties, assets or business
or any SeraNova Plan that, individually or in the aggregate, would reasonably be
likely to have a Material Adverse Effect on SeraNova. As of the date of this
Agreement, there are no actions, suits or claims or legal, administrative or
arbitrative proceedings or investigations, hearings, including appeals and


                                       14
   15

applications for review pending or, to the Knowledge of SeraNova, threatened
against, or involving SeraNova, any of its Subsidiaries or to the Knowledge of
SeraNova any of its or their directors, officers or employees as directors,
officers or employees, or any of its or their properties, assets or business or
any Benefit Plan before any court, tribunal, arbitrator, other judicial or
quasi-judicial body or Government Entity that, individually or in the aggregate,
would reasonably be likely to have a Material Adverse Effect on SeraNova or its
Subsidiaries. There are no actions, suits, labor disputes or other litigation,
legal or administrative proceedings or governmental investigations pending or,
to the Knowledge of SeraNova, threatened against or affecting SeraNova or any of
its Subsidiaries, or to the Knowledge of SeraNova any of its or their officers,
directors or employees, in their capacity as directors, officers or employees,
or any of its or their properties, assets or business relating to the
transactions contemplated by this Agreement. SeraNova is not in default under,
nor has it failed to comply with any judgment, order, consent, agreement or
decree of any court, tribunal, arbitrator, other judicial or quasi-judicial body
or Governmental Entity applicable to it where such default or non-compliance
would reasonably be likely to have a Material Adverse Effect.

            3.10 Certain Agreements. Except as set forth in Schedule 3.10 of the
SeraNova Disclosure Schedule, neither SeraNova nor any of its Subsidiaries is a
party to any oral or written agreement or plan, including any employment
agreement, severance agreement, stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement, or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement. Except as set forth in
Schedule 3.10 of the SeraNova Disclosure Schedule, no holder of any option to
purchase shares of SeraNova Stock, or shares of SeraNova Stock granted in
connection with the performance of services for SeraNova or its Subsidiaries, is
or will be entitled to receive cash from SeraNova or any Subsidiary in lieu of,
or in exchange for, such option or shares as a result of the transactions
contemplated by this Agreement.

            3.11 Benefit Plans. (a) Schedule 3.11 of the SeraNova Disclosure
Schedule sets forth a list of all "employee pension benefit plans" (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (sometimes referred to herein as "PENSION PLANS"), "employee
welfare benefit plans" (as defined in Section 3(l) of ERISA), bonus, stock
option, stock purchase, deferred compensation plans or arrangements, other
employee fringe benefit plans and employee benefit plans (all the foregoing
being herein called "BENEFIT PLANS") maintained, or contributed to, by SeraNova
and its material Subsidiaries for the benefit of any employees of SeraNova and
its material Subsidiaries. SeraNova shall deliver to Silverline within ten (10)
days hereof true, complete and correct copies of each Benefit Plan (or, in the
case of any unwritten Benefit Plans, descriptions thereof), the most recent
annual report on Form 5500 filed with the Internal Revenue Service with respect
to each Benefit Plan (if any such report was required), the most recent Summary
Plan description for each Benefit Plan for which a Summary Plan description is
required, the most recent determination letter, if any, in the case of all
Pension Plans intended to qualify under Section 401 of the Code and each trust
agreement and group annuity contract relating to any Benefit Plan.


                                       15
   16


            (b) Each Benefit Plan has been administered in all material respects
in accordance with its terms and the applicable provisions of ERISA and the
Code. SeraNova has received no notice of any investigations by any governmental
agency, termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Benefit Plans), suits or proceedings
against, or involving, any Benefit Plan, or asserting any rights or claims to
benefits under any Benefit Plan that could reasonably give rise to any material
liability, and, to the Knowledge of SeraNova, there are no facts that could
reasonably give rise to any material liability in the event of any such
investigation, claim, suit or proceeding.

            (c) All contributions to, and payments from, the Benefit Plans that
may have been required to be made in accordance with the Benefit Plans have been
timely made. Except as set forth in Schedule 3.11 of the SeraNova Disclosure
Schedule all obligations and liabilities under the Benefit Plans that have
accrued but are not yet due are adequately reflected or reserved for in SeraNova
Financial Statements except those incurred in the ordinary course of business.

            (d) No "prohibited transaction" (as defined in Section 4975 of the
Code or Section 406 of ERISA) has occurred that involves the assets of any
Benefit Plan and that could subject SeraNova or any of its employees, or, to the
Knowledge of SeraNova, a trustee, administrator or other fiduciary of any trusts
created under any Benefit Plan, to any material tax or penalty on prohibited
transactions imposed by Section 4975 of the Code or the sanctions imposed under
Title I of ERISA.

            (e) SeraNova has not contributed, does not contribute, has not been
required to contribute and has not committed to contribute at any time in the
future to any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA).
SeraNova does not maintain or contribute to a Pension Plan which is subject to
Section 302 of ERISA or Section 412 of the Code.

            (f) SeraNova has not taken any action, nor to the Knowledge of
SeraNova has any event occurred, which has resulted in, or will likely result
in, any liability to SeraNova under Title IV of ERISA, including any withdrawal
liability with respect to any multiemployer plan.

            (g) Each Pension Plan intended to be qualified under Section 401(a)
of the Code has received a favorable determination letter from the Internal
Revenue Service, or a timely and proper application letter for such a
determination letter is now pending or will be filed on a timely and proper
manner, as to all of which applications, to the Knowledge of SeraNova, there
exist no reason that a favorable determination letter will not be received, and
to the Knowledge of SeraNova nothing has occurred and no condition exists that
could cause the loss of such qualification.

            (h) Neither SeraNova nor any Subsidiary have any current, contingent
or projected liability in respect of post-employment or post-retirement health,
medical, or life insurance benefits for retired, former, or current employees,
except as required to avoid excise tax under Section 4980B of the Code.


                                       16
   17

            (i)   No payment or other benefit, and no acceleration of the
vesting of any options, payments or other benefits, will, as a direct or
indirect result of the transactions contemplated by this Agreement, be (or
under Section 280G of the Code and the Treasury Regulations thereunder be
presumed to be ) a "parachute payment" to a "disqualified individual" (as those
terms are defined in Section 280G of the Code and the Treasury Regulations
thereunder) with respect to SeraNova or any Subsidiary of SeraNova, without
regard to whether such payment or acceleration is reasonable compensation for
personal services performed, or to be performed, in the future.

            (j)   SeraNova and its material Subsidiaries properly maintain all
Benefit Plans required to be maintained by them under any law, including the
laws of India, except where such failure is not likely to cause a Material
Adverse Effect.

            3.12  Absence of Changes or Events. Since June 30, 2000, SeraNova
has conducted its business in the ordinary course consistent with past
practice, and there has not been any change, event or development to the
Knowledge of SeraNova, or any discovery of any pre-existing facts, that has
resulted or is reasonably likely to result in a Material Adverse Effect.
Without limiting the generality of the foregoing sentence, except as set forth
in Schedule 3.12 of the SeraNova Disclosure Schedule and as otherwise
contemplated by this Agreement, SeraNova has not:

            (i)   transferred, assigned, sold or otherwise disposed of any of
      the assets reflected on the Balance Sheet, or canceled any debts or
      claims, except in the ordinary course of business consistent with past
      practice;

            (ii)  incurred any material obligation or liability (absolute,
      accrued, contingent or otherwise) except obligations with respect of
      SeraNova Preferred Stock and those incurred in the ordinary course of
      business;

            (iii) discharged or satisfied any Liens, or paid or satisfied any
      material obligation or liability (absolute, accrued, contingent or
      otherwise) other than (x) liabilities shown or reflected on the Balance
      Sheet or (y) liabilities incurred since the date of the Balance Sheet in
      the ordinary course of business consistent with past practice;

            (iv)  to the Knowledge of SeraNova experienced any change, or
      received any threat of any change, in SeraNova's relations with, or any
      loss or threat of loss of, any significant suppliers, clients, partners or
      employees of SeraNova;

            (v)   disposed of or failed to keep in effect any rights in, to or
      for the use of any material license or intellectual property;

            (vi)  incurred any damage, destruction or loss, whether or not
      covered by insurance, having a Material Adverse Effect;


                                       17
   18

            (vii) suffered any operating loss or any extraordinary loss, or
      waived any rights of substantial value, or entered into any commitment or
      transaction not in the ordinary course of business where such loss,
      rights, commitment or transaction has or would have a Material Adverse
      Effect;

            (viii) made any general wage or salary increases in respect of
      personnel which it employs, or paid any bonuses to personnel outside the
      ordinary course of business consistent with past practice;

            (ix) mortgaged, pledged, subjected to lien, granted a security
      interest in, or otherwise encumbered itself, or any material portion of
      its assets or property, whether tangible or intangible;

            (x) made any single capital expenditure in excess of $100,000;

            (xi) authorized or agreed or otherwise become committed to do any of
      the foregoing; or

            (xii) prepared or filed any Tax Return inconsistent with past
      practice or, on any such Tax Return, taken any position, made any
      election, or adopted any method that is inconsistent with positions taken,
      elections made or methods used in preparing or filing similar Tax Returns
      in prior periods (including, without limitation, positions, elections or
      methods which would have the effect of deferring income).

            3.13 Compliance with Applicable Laws. To the Knowledge of SeraNova,
(a) SeraNova is in compliance in all material respects with all applicable laws
except where the failure to comply would not have a Material Adverse Effect and
(b) no notice, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending
or, to the Knowledge of SeraNova, threatened with respect to any alleged
violation by SeraNova, in respect of SeraNova, of any law.

            3.14 Inspections and Investigations. To the Knowledge of SeraNova
and except as provided on Schedule 3.14 of the SeraNova Disclosure Schedule,
neither SeraNova nor any individual affiliated with SeraNova has, during the
past three years, been the subject of any inspection, investigation, survey,
audit or monitoring by any Governmental Entity, trade association, professional
review organization, accrediting organization or certifying agency, nor has
SeraNova received from any such entity any notice of deficiency in connection
with the operation of the SeraNova which would have a Material Adverse Effect on
SeraNova. Attached as part of Schedule 3.14 of the SeraNova Disclosure Schedule
are copies of all material reports, correspondence, notice and other documents
relating to any such inspection, investigation, survey, audit, monitoring or
other form of review to which any of the foregoing has been subject.

            3.15 Intellectual Property. (a) Except as set forth in Schedule 3.15
of the SeraNova Disclosure Schedule, SeraNova and its Subsidiaries own or
license such trademarks, trade names, patent rights, copyrights, licenses,
approvals and governmental authorization as are

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necessary to conduct their businesses substantially as now conducted. To the
Knowledge of SeraNova no claim of infringement by it or its Subsidiaries of any
trademark, trade name, patent, copyright, licenses, trade secret or other
similar rights of others, and there is no claim being made against SeraNova or
its Subsidiaries regarding trademark, trade name, patent, copyright, license,
trade secret or other infringement has been made or asserted with respect to its
and its Subsidiaries business, and SeraNova and its Subsidiaries have no notice
of, or knowledge of any basis for, any claim that the operations, activities,
products, software, equipment, machinery or processes of its business and its
Subsidiaries (including without limitation any duplication, distribution, use or
other exploitation of the Technology Assets), infringe any intellectual property
rights of any third party, in any such case which could reasonably be expected
to cause a Material Adverse Change.

            (b) Schedule 3.15(b) of the SeraNova Disclosure Schedule contains a
list of all Intellectual Property Rights that are registered (or otherwise
recorded with the federal government), licensed, sub-licensed or for which
applications are pending (including all assumed or fictitious names under which
SeraNova and its Subsidiaries are conducting their business or have conducted
their business) owned by, licensed to or used by SeraNova and its Subsidiaries
in connection with the conduct of their business, specifying for each
Intellectual Property Right (as hereinafter defined) whether it is owned or
licensed and, if licensed, identifying the licensor and if it is subject to
registration, the registration date and number or the status of the registration
application.

            (c) Schedule 3.15(c) of the SeraNova Disclosure Schedule contains a
list (showing in each case the parties thereto and the dates thereof) of all
agreements, contracts, licenses, sublicenses, assignments and indemnities which
relate to the Technology Assets. Except to the extent not having (or not
reasonably likely to have) a Material Adverse Effect on SeraNova or its
Subsidiaries, SeraNova has not breached any agreements, contracts, licenses,
sublicenses, assignments and indemnities relating to the Technology Assets, and
is current with respect to any and all payment obligations thereunder.

            (d) That (i) all registrations of the Intellectual Property Rights
(as hereinafter defined) identified in Schedule 3.15(b) of the SeraNova
Disclosure Schedule as being owned by SeraNova and its Subsidiaries are valid
and in force, and all applications to register any unregistered Intellectual
Property Rights so identified are pending and in good standing, all to the
Knowledge of SeraNova, without challenge of any kind; (ii) the Intellectual
Property Rights are valid and enforceable; and (iii) SeraNova has the sole and
exclusive right to bring actions for infringement or unauthorized use of the
Intellectual Property Rights owned by SeraNova, and to the Knowledge of
SeraNova, there is no basis for any such action. Except as disclosed in Schedule
3.15(d) of the SeraNova Disclosure Schedule, SeraNova has provided Silverline
with correct and complete copies of all registrations of, or applications to,
register any copyright or trademark included within the Intellectual Property
Rights owned by SeraNova and all patents and applications for patents included
within the Intellectual Property Rights owned by SeraNova and its Subsidiaries
(together with any subsequent correspondence or filings relating to the
foregoing).


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            (e) Except as set forth in Schedule 3.15(e) of the SeraNova
Disclosure Schedule, to the Knowledge of SeraNova, no infringement of any third
party patent or trademark, has occurred or results in any way from the
operations of it and its Subsidiaries business. Except as set forth in Schedule
3.15(e) of the SeraNova Disclosure Schedule, to the Knowledge of SeraNova, no
infringement of any third party copyright, trade secret, or other intellectual
property right (other than patent or trademark) has occurred or results in any
way from the operations of SeraNova and its Subsidiaries business. To the
Knowledge of SeraNova, no claim of infringement has been made or asserted with
respect to its and its Subsidiaries business, and SeraNova and its Subsidiaries
have no notice of, or knowledge of any basis for, any claim that the operations,
activities, products, software, equipment, machinery or processes of its
business and its Subsidiaries (including without limitation any duplication,
distribution, use or other exploitation of the Technology Assets), infringe any
intellectual property rights of any third party.

            (f) Except as disclosed in Schedule 3.15(f) of the SeraNova
Disclosure Schedule: (i) the Technology Assets are not subject to any transfer,
assignment, site, equipment, or other limitations; (ii) SeraNova has maintained
and protected the Technology Assets (including, all source code, system code,
system specifications and company's website), with customary proprietary
notices, confidentiality and non-disclosure agreements and such other measures
as are customary to protect the proprietary, trade secret or confidential
information contained therein; (iii) the copyrights with respect to the
significant releases of separate versions of Software have been effectively
registered under U.S. copyright law and no such copyright has been forfeited to
the public domain; (iv) SeraNova has copies of all significant releases or
separate versions of the Software so that the same may be subject to
registration in the United States Copyright Office; (v) SeraNova has complete
and exclusive right, title and interest in and to the Technology Assets; (vi)
the Software includes the client site documentation, source code, system
documentation, statements of principles of operation and schematics, as well as
any pertinent commentary, explanation, program (including compilers),
workbenches, tools, and higher level (or "proprietary") language used for the
development, maintenance, implementation and use thereof, so that a computer
programmer trained in the Software could develop, maintain, support, compile,
build and use all releases or separate versions of the same; (vii) there are no
agreements or arrangements in effect with respect to the marketing,
distribution, licensing or promotion of the Software and Software Material by
any third party except in the ordinary course of business; (viii) the Software
and Software Material complies with all applicable requirements of laws relating
to the export or re-export of the same; (ix) the Software and Software Material
may be exported or re-exported to all countries without the necessity of any
license, other than to those countries specified as prohibited destinations
pursuant to applicable regulations of the U.S. Department of Commerce and/or the
United States State Department, and (x) to the Knowledge of SeraNova, no third
party (including customers and partners) is infringing or misappropriating, or
has infringed or misappropriated, any of the Intellectual Property Rights.

            (g) To the Knowledge of SeraNova, except as set forth in Schedule
3.15(g) of the SeraNova Disclosure Schedule no present or former employee,
consultant or contractor of

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SeraNova is in violation of, or has violated, any term of any employment
contract, consulting contract, patent disclosure agreement, or any other
contract or agreement relating to the relationship of such employee, consultant
or contractor with SeraNova in any way that could reasonably be expected to
cause a Material Adverse Effect on SeraNova or its Subsidiaries. Except as set
forth in Schedule 3.15(g) of the SeraNova Disclosure Schedule, each present or
former employee, consultant or contractor of SeraNova, who has or had access to
Confidential Information, or who is or was involved in the creation,
development, maintenance or enhancement of any Technology Assets, has executed
(i) an employee non-disclosure agreement, containing a "work made for hire"
provision or (ii) an agreement including an effective assignment in favor of
SeraNova (or its predecessor in interest, as applicable) of all right, title and
interest in the Technology Assets and a confidentiality or non-disclosure
provision, prohibiting any unauthorized use or disclosure of Confidential
Information.

            (h) The Software and all technology relating to the operation of the
business of SeraNova are Year 2000 Compliant and to the Knowledge of SeraNova,
no further expenses, outlays or costs will be incurred by SeraNova in connection
with it becoming Year 2000 Compliant, including any costs relating to audits or
filings, and SeraNova is not subject to any claim from any Year 2000 issues.

            For the purposes of this Agreement:

            "CONFIDENTIAL INFORMATION" means any information or material that is
not generally known by personnel outside of SeraNova and that relates to the
Technology Assets, the operations of SeraNova and its Subsidiaries, or the
development, marketing or use of any of the foregoing, including, without
limitation, discoveries, ideas, inventions, concepts, software in various stages
of development, designs, drawings, specifications, techniques, models, data,
source code, object code, documentation, diagrams, flow charts, research,
development, processes, procedures, "know-how," marketing techniques and
materials, marketing and development plans, customer names and other information
related to customers, price lists, pricing policies, financial information and
employee information.

            "INTELLECTUAL PROPERTY RIGHTS" means all copyrights, patents,
applications for patent, copyright registrations, applications for copyright
registration, trade secret rights, trademarks, service marks, trademark or
service mark registrations, applications for trademark or service mark
registration, and other intellectual property rights relating primarily to the
Software or Software Material, any invention or original work of authorship
relating thereto, or embodied therein, any trademark, trade name, service mark,
logo or other designation used with respect thereto, and any part, or any, of
the foregoing.

            "LICENSES" means all the licenses under which SeraNova is the
licensee of any Intellectual Property Rights, including those set forth in
Schedule 3.15(g) of the SeraNova Disclosure Schedule.

            "SOFTWARE" means the software set forth in Schedule 3.15(g) of the
SeraNova Disclosure Schedule, all prior versions of such software (including,
without limitation, anything

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from which such software product is derived), and all derivative works (as that
term is defined in the Copyright Act of 1976) based on, or modified versions of,
any of the foregoing acquired, created or developed by, or for SeraNova or any
of its Subsidiaries, or any affiliate thereof (including, without limitation,
any patches or other software intended to repair, or otherwise operate in
conjunction with, any of the foregoing).

            "SOFTWARE MATERIAL" means any and all materials of SeraNova relating
to the Software, including, but not limited to, any material that includes
Confidential Information, specifications, technical documentation, user
documentation, advertising and promotional material, customer lists, support
logs, build environment and build specifications, and bug lists.

            "YEAR 2000 COMPLIANT" means currently capable of (i) accurately
processing, during and after the year 2000, all date related data and dates
before, on and after January 1, 2000, including, but not limited to, accurately
inputting, storing, manipulating, comparing, calculating, updating, recording,
displaying, outputting, transferring and sequencing such dates and data; (ii)
accurately interfacing with other software and hardware that uses standard date
format (4 digits) for representation of the year; (iii) correctly processing
calendar dates for leap years, as defined by the Gregorian calendar (including
year 2000, which is a leap year); (iv) not incurring any adverse performance
degradation due to changes added to support year 2000 compliance; (v) providing
capability for users to readily identify and use the century in any date fields
without special processing; and (vi) accommodating date data century recognition
(4 digit year) in all date-related data fields and in all date-related
functions.

            "TECHNOLOGY ASSETS" means the technology assets set forth in
Schedule 3.15(g) of the SeraNova Disclosure Schedule.

            3.16 Full Disclosure. To the Knowledge of SeraNova, no
representation or warranty, or any information with respect to SeraNova and its
Subsidiaries, contained in this Agreement, and no schedule, document,
certificate or other paper furnished by, or on behalf of SeraNova, to Silverline
or its agents, contains an untrue statement of a material fact, or omits to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the context in which made, not misleading. To the
Knowledge of SeraNova there is no fact that SeraNova has not disclosed to
Silverline in writing that has a, or is reasonably likely to have a Material
Adverse Affect.

            3.17 Reports and Financial Statements. SeraNova has filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the Securities and Exchange Commission (the "SEC") (collectively,
including all exhibits thereto, the "SERANOVA SEC REPORTS"). No Significant
Subsidiary of SeraNova is required to file any form, report or other document
with the SEC. None of the SeraNova SEC Report, when filed contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the financial
statements (including the related notes) included in the SeraNova SEC Reports
presents fairly, in all material respects, the

                                       22
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consolidated financial position and consolidated results of operations and cash
flows of SeraNova and its Subsidiaries as of the respective dates or for the
respective period, set forth therein, all in conformity with U.S. GAAP, and
subject, in the case of the unaudited interim financial statements, to normal
and recurring year-end adjustments. All of SeraNova SEC Reports, as of their
respective dates (and as of the date of any amendment to the respective SeraNova
SEC Report), complied as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act.

            3.18 Information Supplied. (i) None of the information supplied or
to be supplied by SeraNova for inclusion or incorporation by reference in (A)
the Form F-4 to be filed with the SEC by Silverline in connection with the
issuance of the Silverline ADSs in the Merger will, at the time the Form F-4
becomes effective under the Securities Act, contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (B) the Joint
Proxy Statement/Prospectus included in the Form F-4 related to the SeraNova
Stockholders Meeting and the Silverline Shareholders Meeting and the Silverline
ADSs to be issued in the Merger will, on the date it is first mailed to SeraNova
stockholders or Silverline Shareholders or at the time of the SeraNova
Stockholders Meeting or Silverline Shareholders Meeting, contain any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
requirements of the Exchange Act.

            (ii) Notwithstanding the foregoing provisions of this Section 3.18,
no representation or warranty is made by SeraNova with, respect to statements
made or incorporated by reference in the Form F-4 or the Joint Proxy
Statement/Prospectus based on information supplied by Silverline or its
Affiliates for inclusion or incorporation by reference therein.

            3.19 State Takeover Statutes; Approvals. The board of directors of
SeraNova (including the disinterested directors thereof), has approved and
recommended the terms of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement and such approval of the
board of directors of SeraNova constitutes approval of the Merger and the other
transactions contemplated by this Agreement by the board of directors of
SeraNova to the extent applicable under all relevant statutory provisions and
charter documents of SeraNova. No other New Jersey state takeover statute is
applicable to SeraNova in connection with this Agreement, the Merger or the
other transactions contemplated hereby. Other than those that have been made
prior to the date hereof, no approval or determination of the board of directors
of SeraNova or any committee thereof is required with respect to any class or
series of SeraNova Stock or under SeraNova's articles of incorporation, bylaws
or governance policies to approve this Agreement or any of the transactions,
contemplated hereby.

            3.20 Representations Not Waived. Notwithstanding any other provision
of this Agreement, the representations and warranties of SeraNova contained
herein shall not be affected or deemed waived by reason of any investigation
made by, or on behalf of, Silverline

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and/or its representatives, or by reason of the fact that Silverline and/or such
representatives knew, or should have known, that any such representation or
warranty is, or might be, inaccurate in any respect.

            3.21 Compliance with Worker Safety and Environmental Laws. (a)
Except as set forth in Section 3.21 of the SeraNova Disclosure Schedule, the
properties, assets and operations of SeraNova and its Subsidiaries are in
compliance with all applicable federal, state, local, regional and foreign laws,
rules and regulations, orders, decrees, common law, judgments, permits and
licenses relating to public and worker health and safety (collectively, the
"WORKER SAFETY LAWS") and the protection, regulation and clean-up of the indoor
and outdoor environment and activities or conditions related thereto, including,
without limitation, those relating to the generation, handling, disposal,
transportation or release of hazardous or toxic materials, substances, wastes,
pollutants and contaminants including, without limitation, asbestos, petroleum,
radon and polychlorinated biphenyls (collectively, the "ENVIRONMENTAL LAWS"),
except for any violations that, individually or in the aggregate, have not had,
and would not reasonably be likely to have, a Material Adverse Effect on
SeraNova. With respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, there are
no past, present or reasonably anticipated future events, conditions,
circumstances, activities, practices, incidents, actions or plans of SeraNova or
any of its Subsidiaries that may interfere with, or prevent compliance or
continued compliance with, applicable Worker Safety Laws and Environmental Laws,
other than any such interference or prevention that, individually or in the
aggregate, has not had, and would not reasonably be likely to have, a Material
Adverse Effect on SeraNova and its Subsidiaries.

            (b) SeraNova and its Subsidiaries have not caused or permitted any
property, asset, operation, including any previously owned property, asset or
operation, to use, generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer or process hazardous or toxic materials, substances,
wastes, pollutants or contaminants, except in material compliance with all
Environmental Laws and Worker Safety Laws, other than any such activity that,
individually or in the aggregate, has not had, and would not reasonably be
likely to have, a Material Adverse Effect on SeraNova. SeraNova and its
Subsidiaries have not reported to any Governmental Entity any material violation
of an Environmental Law or any release, discharge or emission of any hazardous
or toxic materials, substances, wastes, pollutants or contaminants, other than
any such violation, release, discharge or emission that, individually or in the
aggregate, has not had, and would not reasonably be likely to have, a Material
Adverse Effect on SeraNova. To SeraNova Knowledge there is no pending,
threatened or anticipated claims or liabilities under CERCLA, 42 U.S.C. Section
9601 et seq., RCRA, 42 U.S.C. Section 6901 et seq., or equivalent state law
provisions and no current or former property, asset or operation is identified
or currently proposed for the National Priorities List at 40 CFR Section 300,
Appendix B, or the CERCLIS or equivalent state lists or hazardous substances
release sites.

            3.22 Insurance. A true and accurate list of the insurance policies
currently maintained with respect to SeraNova is set forth in Schedule 3.22 of
the SeraNova Disclosure Schedule. Such policies are sufficient for compliance
with all agreements to which SeraNova is

                                       24
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a party. All such policies are in full force and effect, and except to the
extent not having a Material Adverse Effect on SeraNova or its Subsidiaries
SeraNova is not in default, whether as to the payment of premium or otherwise,
under any such policy, and no cancellation or non-renewal will result under any
such policies as a result of the Closing, or the other transactions contemplated
by this Agreement. SeraNova has never been subject to liability as a
self-insurer. Within the immediately preceding five (5) years, SeraNova has not
been denied insurance, nor has any prospective or actual carrier or underwriting
board recommended or required material expenditures by SeraNova in order to
obtain insurance. To the Knowledge of SeraNova, no insurance company providing
insurance under such policies is insolvent. No notices of cancellation or
indication of an intention not to renew any insurance policy has been received
by SeraNova. Schedule 3.22 of the SeraNova Disclosure Schedule sets forth a true
and complete description of (x) all current and open or known claims under such
policies and (y) all written claims made against SeraNova and its Subsidiaries
during the past three years or known events which are reasonably likely to give
rise to a claim against SeraNova or its Subsidiaries which are reasonably likely
to have a Material Adverse Effect on SeraNova or its Subsidiaries, whether or
not covered by insurance.

            3.23 Contract. Except as described in Schedule 3.23 of the SeraNova
Disclosure Schedule, neither SeraNova or its Subsidiaries, or the property or
assets of SeraNova or its Subsidiaries, is as of the date of this Agreement a
party to, or bound by:

            (i) any material (A) collective bargaining agreement or other
      contract with any labor union, (B) plan, program, practice, arrangement or
      agreement that provides for the (1) payment of severance, termination or
      similar type of compensation or benefits upon the termination, retirement
      or resignation of any employee or (2) medical, life insurance, pension or
      other benefits for employees or their affiliates upon retirement or
      termination of employment;

            (ii) any material covenant not to compete or other agreement,
      contract or commitment limiting or restraining SeraNova or its
      subsidiaries from engaging or competing in any products or lines of
      business with any Person;

            (iii) any material agreement, contract or commitment with any
      Affiliate, officer, director or employee of SeraNova or its affiliates or
      its subsidiaries (other than employment agreements arising by operation of
      law with SeraNova' directors, officers and employees);

            (iv) any material lease or similar agreement under which SeraNova is
      a sublessor of, or makes available for use by any third party, any real
      property leased by SeraNova or its subsidiaries or any portion of premises
      otherwise occupied by SeraNova;

            (v) any material lease or similar agreement under which SeraNova or
      any of its subsidiaries is the lessee or lessor of, or holds or uses, any
      machinery, furniture, personalty, equipment, or other tangible personal
      property, contract, order or commitment for the future purchase or sale of
      materials, supplies, services, products or equipment

                                       25
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      (other than purchase contracts and orders in the ordinary course of
      business consistent with past practice and with an aggregate future
      liability not in excess of $100,000) or management, service, consulting or
      other similar type of contract;

            (vi)   any material agreement, contract or instrument pursuant to,
      or under, which SeraNova or any of its subsidiaries has borrowed or loaned
      any money, including any note, bond, indenture or other evidence of
      indebtedness, or directly or indirectly guaranteed (including, through
      take-or-pay, keep-well or similar agreements or security agreements
      pledging assets as security for obligations of a third party)
      indebtedness, liabilities or obligations of others (other than
      endorsements for the purpose of collection in the ordinary course of
      business);

            (vii)  any material agreement, contract or commitment under which
      any other Person has directly or indirectly guaranteed indebtedness,
      liabilities or obligations of SeraNova or any of its subsidiaries (other
      than endorsements for the purpose of collection in the ordinary course of
      business);

            (viii) any material mortgage, pledge, security agreement, deed of
      trust or other document granting a Lien (including liens upon properties
      acquired under conditional sales, capital leases or other title retention
      or security devices);

            (ix)   any material agreement, contract or commitment (A) providing
      for the payment by SeraNova or any of its subsidiaries of any bonus or
      commission based on revenues, earnings, return on net assets or any other
      measure of performance of SeraNova or any of its subsidiaries or (B)
      providing for any bonus or other payment by SeraNova or any of its
      subsidiaries based on the sale of any portion of SeraNova or any of its
      subsidiaries or their assets;

            (x)    any material other agreement, contract, lease, license,
      commitment or instrument to which SeraNova or any of its subsidiaries is a
      party, or by, or to which it, or any of its properties or assets is bound,
      or subject, which has an aggregate future liability in excess of $10,000;

            (xi)   any material partnership or joint venture agreements;

            (xii)  any material agreement, contract, commitment or other option
      relating to the sale or purchase of assets in excess of $10,000;

            (xiii) any material agreement, contract, commitment or other option
      relating to the purchase by SeraNova or any of its subsidiaries of any
      equity or debt interest in, or asset (other than purchases of assets in
      the ordinary course of business consistent with past practice) of any
      Person;

            (xiv)  any material other agreement, contract, lease, license,
      commitment or instrument material to the business of SeraNova or any of
      its subsidiaries, or any

                                       26
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      agreement, contract, lease, license, commitment or instrument not made in
      the ordinary course of business (other than such agreements, contracts or
      commitments not made in the ordinary course of business which
      individually, or in the aggregate, do not represent aggregate future
      liabilities in excess of $10,000);

            (xv)  any material marketing agreements; or

            (xvi) any material agreements providing for poison pills, parachute
      payments or agreements containing similar provisions.

            To the Knowledge of SeraNova, each agreement, contract, lease,
license, commitment or instrument to which SeraNova or any of its subsidiaries
is a party, or by which it, or the property or assets of SeraNova is bound
(collectively, the "CONTRACTS") is valid, binding and in full force and effect.
SeraNova or any of its subsidiaries have performed all material obligations
required to be performed by it to date under the Contracts and are not (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any material respect thereunder and, to the Knowledge of SeraNova, no other
party to any of the Contracts is (with or without the lapse of time or the
giving of notice, or both) in breach or in default in any material respect
thereunder.

            3.24  Deleted.

            3.25 Reorganization. SeraNova has not taken any action or failed to
take any action which action or failure would jeopardize the qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the Code.

            3.26 Compliance with Securities Laws. SeraNova has at all times
complied in all material respects with the requirements of the Securities Act.

            3.27 Vote Required. The affirmative vote of the holders of shares
representing a majority of the total voting power of SeraNova Common Stock
entitled to vote at the SeraNova Stockholders Meeting to adopt this Agreement
voting together as a single class (the "REQUIRED SERANOVA VOTE") is the only
vote or approval of the holders of any class or series of capital stock of
SeraNova necessary to adopt this Agreement and to approve the transactions
contemplated hereby.

            3.28 Opinion of Financial Advisor. SeraNova has received the opinion
of Punk, Ziegel & Company, dated the date of this Agreement, to the effect that,
as of the date hereof, the Exchange Ratio was fair to the holders of SeraNova
Common Stock from a financial point of view.

            3.29 Absence of Changes in SeraNova's Benefit Plans. Except as
expressly permitted by this Agreement, since the date of the most recent audited
financial statements included in the SeraNova Filed SEC Reports, there has not
been any adoption or amendment in any material respect by SeraNova or any of its
Subsidiaries of any of SeraNova's Benefit Plans,

                                       27
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or any material change in any actuarial or other assumption used to calculate
funding obligations with respect to any SeraNova Pension Plans, or any material
change in the manner in which contributions to any SeraNova Pension Plans are
made or the basis on which such contributions are determined other than a change
required under the terms or such plans as in effect on the date hereof or as
required by applicable law.

                                   ARTICLE IV

         REPRESENTATIONS AND WARRANTIES OF SILVERLINE AND ACQUISITION

            Each of Silverline and Acquisition represent and warrant to SeraNova
as follows:

            4.1 Organization. Each of Silverline and Acquisition is a
corporation duly organized, validly existing and in good standing under the laws
of India and the State of Delaware respectively and has all requisite corporate
power and authority and all necessary governmental approvals to enter into and
perform this Agreement and the transactions contemplated hereby to be performed
by it.

            4.2 Capital Structure. The authorized capital stock of Silverline as
of the date of this Agreement consists of 85,000,000 shares of common stock, par
value Indian rupees ("RS.") 10 per share (the "Silverline Stock") of which
73,200,000 shares have been issued and are outstanding and 5,000,000 shares have
been reserved for issuance pursuant to Silverline's outstanding stock options
and warrants. All the outstanding shares of Silverline Stock have been duly and
validly authorized and issued and are fully paid and nonassessable. None of the
outstanding shares of Silverline Stock has been issued in violation of the
preemptive rights of any stockholder of Silverline. The shares of outstanding
Silverline Stock were issued in compliance in all material respects with all
laws. The Silverline ADSs to be issued pursuant to the Merger will be duly and
validly authorized and issued, will be fully paid and non-assessable and will
not be issued in violation of the preemptive rights of any stockholder of
Silverline, or in violation of any laws. Each of Acquisition and STI are
wholly-owned Subsidiaries of Silverline.

            4.3 Authority. (a) Each of Silverline and Acquisition has full
corporate power and authority to execute, deliver and perform this Agreement and
the transactions contemplated hereby. The board of directors of Silverline and
Acquisition have declared the Merger advisable and approved this Agreement and
resolved to recommend the approval of the Merger and adoption of this Agreement
and the consummation of the transactions contemplated hereby to the sole
stockholder of Acquisition. The execution, delivery and performance of this
Agreement by each of Silverline and Acquisition has been duly authorized and
approved (i) in the case of Acquisition, by its board of directors and sole
stockholder and (ii) in the case of Silverline, by all necessary corporate
action and, except for (A) Indian Regulatory Approvals, (B) the approval of this
Agreement by the stockholders of Silverline, (C) the adoption of this Agreement
by the stockholder of Acquisition and (D) the filing of appropriate merger
documents as required by the DGCL and New Jersey law, no other corporate
proceedings, other than actions previously taken

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on the part of either Silverline or Acquisition are necessary to authorize this
Agreement and the transactions contemplated hereby.

            (b) The execution, delivery and performance by each of Silverline
and Acquisition of this Agreement and the consummation of the Merger do not, and
will not, (i) violate or conflict with any provision of the charter documents of
either Silverline or Acquisition, (ii) violate any law, except for violations
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on Silverline and Acquisition taken as a whole,
or (iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any note, bond, indenture,
lien, mortgage, lease, permit, guaranty or other agreement, instrument or
obligation, oral or written, to which Silverline or Acquisition is a party, or
by which any of the properties of Silverline or Acquisition may be bound, except
for violations, breaches or defaults which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on
Silverline, its Subsidiaries and Acquisition taken as a whole.

            (c) The execution and delivery of this Agreement by each of
Silverline and Acquisition does not, and the performance by each of Silverline
and Acquisition of this Agreement will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, or any other Person except for (i)
the filing and recordation of appropriate merger documents as required by the
DGCL and NJBCA; (ii) any such consent, approval, authorization, permission,
notice or filing which is required under the Securities Act, Exchange Act,
applicable state securities laws, the HSR Act and laws of India; and (iii) any
such consent, approval, authorization, permission, notice or filing which if not
obtained or made could not reasonably be expected to have a Material Adverse
Effect on Silverline, and Acquisition taken as a whole.

            4.4 Litigation. (a) Neither Silverline nor Acquisition is a party to
any suit, action, arbitration or legal, administrative, governmental or other
proceeding or investigation pending or, to its knowledge threatened, which
reasonably could adversely affect or restrict its ability to consummate the
transactions contemplated by this Agreement, or to perform its obligations
hereunder, or which could reasonably be expected to have a Material Adverse
Effect on Silverline, and Acquisition taken as a whole.

            (b) There is no judgment, order, writ, injunction or decree of any
court, arbitration tribunal or other governmental or regulatory authority,
domestic or foreign, to which Silverline or Acquisition is subject which might
adversely affect or restrict its ability to consummate the transactions
contemplated by this Agreement, or to perform its obligations hereunder, or
which could reasonably be expected to have a Material Adverse Effect on
Silverline, and Acquisition taken as a whole.

            4.5 Silverline Financial Statements; Indebtedness. (a) A true,
correct and complete copies of the balance sheet of Silverline as of March 31,
2000 (the "SILVERLINE BALANCE

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SHEET"), and the statement of income of Silverline for the annual period ended
March 31, 2000 and unaudited quarterly financials dated June 30, 2000
(collectively, the "SILVERLINE FINANCIAL STATEMENTS") has been duly delivered to
SeraNova. The Silverline Financial Statements reflect and present fairly the
assets, liabilities, transactions and financial condition of Silverline as of
their indicated dates, and the results of its operations, for the indicated
periods. Silverline has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC (collectively, including
all exhibits thereto, the "SILVERLINE SEC REPORTS"). No Subsidiary of SeraNova
is required to file any form, report or other document with the SEC. No
Silverline SEC Report when filed contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each of the financial statements
(including the related notes) included in the SeraNova SEC Reports presents
fairly, in all material respects, the consolidated financial position and
consolidated results of operations and cash flows of Silverline and its
Subsidiaries as of the date or for the period indicated, all in conformity with
GAAP, and subject, in the case of the unaudited interim financial statements, to
normal and recurring year-end adjustments. All of Silverline reports, as of
their respective dates (and as of the date of any amendment to the respective
Silverline SEC Report), complied as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act.

            (b) Except for liabilities (i) reflected in such Financial
Statements or in the notes thereto, (ii) set forth in Schedule 4.5(b) hereof,
(iii) incurred in the ordinary course of business consistent with past practice
since the date of the most recent audited financial statements, or (iv) incurred
in connection with this Agreement or the transactions contemplated hereby,
neither Silverline nor any of its Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Silverline and its Subsidiaries taken as a whole.

            4.6 Information Supplied. (i) None of the information supplied or to
be supplied by Silverline for inclusion or incorporation by reference in (A) the
Form F-4 will, at the time the Form F-4 becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (B) the Joint Proxy Statement/Prospectus will, on
the date it is first mailed to SeraNova stockholders or Silverline shareholders
or at the time of the SeraNova Stockholders Meeting or the Silverline
Shareholders Meeting, contain any untrue statement of a material fact, or omit
to state any material fact required to be stated therein, or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Form F-4 and the Joint Proxy Statement/Prospectus
will comply as to form in all material respects with the requirements of the
Securities Act and the Exchange Act.

            (ii) Notwithstanding the foregoing provisions of this Section 4.6,
no representation or warranty is made by Silverline with respect to statements
made or incorporated

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by reference in the Form F-4 or the Joint Proxy Statement/Prospectus based on
information supplied by SeraNova or its Affiliates for inclusion or
incorporation by reference therein.

            4.7 Operations and Obligations. Except as described in Schedule 4.7
hereof, since the date of the Silverline Financial Statements, (i) except as a
result of the transactions contemplated by this Agreement, there has not been
any development that has had or could reasonably be expected to have a Material
Adverse Effect on Silverline and its Subsidiaries taken as a whole; (ii) there
has not been any material change by Silverline in its accounting methods,
principles or practices, except as required by changes in Indian or U.S. GAAP,
or any other change provided such other change could not reasonably be expected
to have a Material Adverse Effect on Silverline and its Subsidiaries taken as a
whole; or (iii) except as a result of the transactions contemplated by this
Agreement, there has not been any material revaluation by Silverline of any of
its assets including, without limitation, writing down the value of capitalized
software or inventory, or writing off notes or accounts receivable which could
reasonably be expected to have a Material Adverse Effect.

            4.8 Consents and Approvals. Except (i) in connection with or in
compliance, with the provisions of the HSR Act, (ii) for the filing of any
required applications or notices with any state or foreign agencies and approval
of such applications and notices as disclosed in Schedule 4.8 of the Silverline
Disclosure Schedule (the "STATE APPROVALS") and Indian Regulatory Approvals, or
(iii) for the filing of Certificates of Merger with the Secretary of State of
the state of Delaware and the Department of Treasury of the State of New Jersey
pursuant to the DGCL and the NJBCA, no consents or approvals of or filings or
registrations with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "GOVERNMENTAL ENTITY"), or
with any third party are necessary in connection with (A) the execution and
delivery by Silverline of this Agreement and (B) the consummation by Silverline
of the Merger and the other transactions contemplated hereby.

            4.9 Full Disclosure. No representation or warranty, or any
information with respect to Silverline and it Subsidiaries, contained in this
Agreement, and no schedule hereto or, document or certificate delivered pursuant
to the terms hereof, contains an untrue statement of a material fact, or omits
to state a material fact required to be stated therein or necessary to make the
statements made therein, in the context in which made, not misleading.

            4.10 Compliance with Applicable Laws. To the Knowledge of
Silverline, (a) Silverline is in compliance in all material respects with all
applicable laws, except where failure to comply would not have a Material
Adverse Effect on Silverline, (b) no notice, citation, summons or order has been
received, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened with respect to any alleged
violation by Silverline, in respect of Silverline, of any law.

            4.11 Representations Not Waived. Notwithstanding any other provision
of this Agreement, the representations and warranties of Silverline contained
herein shall not be affected or deemed waived by reason of any investigations
made by, or on behalf of, SeraNova

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and/or its representatives, or by reason of the fact that SeraNova and/or
representatives knew, or should have known, that any such representation or
warranty is, or might be, inaccurate in any respect.

            4.12 Reorganization. Silverline has not taken any action or failed
to take any action which action or failure would jeopardize the qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the Code.

            4.13 Compliance with Securities Laws. Silverline has at all times
complied in all material respects with the requirements of the Securities Act.

                                    ARTICLE V

                             CONDUCT PENDING CLOSING

            5.1 Conduct of Business Pending Closing. From the date hereof until
the Closing, SeraNova will:

            (a)   maintain its existence in good standing;

            (b) maintain the general character of its business and properties
and conduct its business in the ordinary and usual manner consistent with past
practices, except as expressly permitted by this Agreement;

            (c) maintain business and accounting records consistent with past
practices; and

            (d) use its reasonable best efforts (i) to preserve its business
intact, (ii) to keep available to SeraNova the services of its present officers
and employees, and (iii) to preserve for SeraNova the goodwill of its suppliers,
customers and others having business relations with SeraNova.

            5.2 Prohibited Actions Pending Closing. Unless otherwise provided
for herein or approved by Silverline in writing, which approval shall not be
unreasonably withheld from the date hereof until the Closing, SeraNova shall
not:

            (a)   amend or otherwise change its certificate of incorporation
or by-laws;

            (b) issue or sell, or authorize for issuance or sale, or grant any
options or make other agreements with respect to, any shares of its capital
stock or any other of its securities, except in connection with the exercise of
outstanding SeraNova Stock Options or Warrants;

            (c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise with respect to any
of its capital stock;


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            (d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock except
redemption of SeraNova Preferred Stock;

            (e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership,
other business organization or any division thereof, (ii) acquire assets with an
aggregate purchase price of in excess of $100,000; (iii) incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee or endorse,
or otherwise as an accommodation become responsible for, the obligations of any
Person, or make any loans or advances, except for (A) interest and fees on
indebtedness set forth on Schedule 3.5 of the SeraNova Disclosure Schedule, (B)
incurred in the ordinary course of business and consistent with past practice or
(C) for indebtedness in aggregate principal amount not in excess of $100,000;
(iv) enter into any contract or agreement other than in the ordinary course of
business, consistent with past practice; (v) authorize any capital commitment
which is in excess of $200,000 or capital expenditures which are, in the
aggregate, in excess of $100,000; or (vi) enter into or amend any contract,
agreement, commitment or arrangement with respect to any matter set forth in
this Section 5.2(e);

            (f) mortgage, pledge or subject to Lien, any of its assets or
properties or agree to do so except for Permitted Liens;

            (g) assume, guarantee or otherwise become responsible for the
obligations of any other Person, or agree to so do;

            (h) enter into or agree to enter into, or terminate prior to the
expiration date thereof, any employment agreement with respect to any employee
whose annual salary exceeds $75,000;

            (i) increase the compensation or benefits payable, or to become
payable, to its officers or employees, except for increases in accordance with
past practices in salaries or wages of employees of SeraNova who are not
officers of SeraNova, or grant any severance or termination pay to, or enter
into any severance agreement with any current director, officer or other
employee of SeraNova, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any such director, officer or employee except as
required under applicable law;

            (j) take any action, other than in the ordinary course of business
and consistent with past practice, with respect to accounting policies or
procedures (including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivables);

            (k) make any material Tax election, or settle or compromise any
material federal, state, local or foreign income Tax liability;


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            (l) settle or compromise any pending or threatened suit, action or
claim which is material, or which relates to any of the transactions
contemplated by this Agreement;

            (m) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
(i) the payment, discharge or satisfaction, in the ordinary course of business
and consistent with past practice, of liabilities reflected or reserved against
in the balance sheet or subsequently incurred in the ordinary course of business
and consistent with past practice and (ii) other claims, liabilities or
obligations (qualified as aforesaid) that in the aggregate do not exceed
$100,000;

            (n) except in connection with the sale or licensing of SeraNova's
products in the ordinary course of business and consistent with past practice,
sell, assign, transfer, license, sublicense, pledge or otherwise encumber any of
the Intellectual Property Rights; or

            (o) announce an intention, commit or agree to do any of the
foregoing.

            5.3 Access; Documents; Supplemental Information. (a) From and after
the date hereof until the Closing, SeraNova shall afford and, with respect to
clause (ii) below, shall use its reasonable best efforts to cause the
independent certified public accountants for SeraNova to afford, to the
officers, independent certified public accountants, counsel and other
representatives of Silverline, upon reasonable notice, free and full access at
all reasonable times to the properties, books and records including tax returns
filed and those in preparation of SeraNova, and the right to consult with the
officers, employees, accountants, counsel and other representatives of SeraNova
in order that Silverline may have full opportunity to make such investigations
as they shall reasonably desire to make of the operations, properties, business,
financial condition and prospects of SeraNova and its Subsidiaries, (i) to the
independent certified public accountants of Silverline, free and full access at
all reasonable times to the work papers and other records of the accountants
relating to SeraNova, and (ii) to Silverline and their representatives, such
additional financial and operating data and other information as to the
properties, operations, business, financial condition and prospects of SeraNova
as Acquisition and Silverline shall from time to time reasonably require.

            (b) From the date of this Agreement through and including the
Closing, Acquisition, Silverline and SeraNova agree to furnish to each other
copies of any notices, documents, requests, court papers, or other materials
received from any governmental agency, or any other third party with respect to
the transactions contemplated by this Agreement, except where it is obvious from
such notice, document, request, court paper or other material that the other
party was already furnished with a copy thereof.

            (c) SeraNova shall deliver to Silverline, without charge, the
following financial information (collectively, the "SUPPLEMENTAL FINANCIAL
INFORMATION"): (i) as soon as is reasonably possible after each fiscal quarter
ending after the date hereof and prior to the Effective Time, the unaudited
balance sheet of SeraNova as of the end of such quarter and the unaudited
statements of income, stockholders' equity and cash flows of SeraNova for such
quarter and for the portion of the fiscal year then completed, (ii) as soon as
is reasonably possible

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after each fiscal year ending after the date hereof and prior to the Effective
Time, the audited balance sheet of SeraNova as of the end of such year and the
audited statements of income, stockholders' equity and cash flows of SeraNova
for such year, in each case, prepared in accordance with U.S. GAAP certified by
Arthur Anderson LLP, and (iii) promptly upon the reasonable request by
Silverline, such additional financial information as may be required in
connection with any filing by Silverline pursuant to the requirements of federal
or state securities laws or the laws, rules and regulations of India. Such
Supplemental Financial Information shall present fairly, in all material
respects, the consolidated financial position of SeraNova and its Subsidiaries
for the period covered, subject in the case of unaudited financials to normal
year-end adjustments and the omission of footnotes.

            5.4 Warrants. Pursuant to the terms of SeraNova's outstanding
warrants (each, a "WARRANT") to purchase shares of SeraNova Common Stock, each
Warrant shall, as of the Effective Time, be converted into a right of such
holder to receive (i) upon exercise of such Warrant such number of Silverline
ADSs (rounded down to the nearest whole ADS) as are equal to the number of
shares of SeraNova Stock subject to such Warrant immediately prior to the
Effective Time multiplied by 0.35 or (ii) to require the Surviving Corporation
to pay such holder, in cash, 120% of the Black Scholes value of the Warrant on
the Effective Date.

            5.5 Notification of Certain Matters. SeraNova shall give prompt
notice to Silverline, and Silverline shall give prompt notice to SeraNova, of
(a) the occurrence, or non-occurrence, of any event which would be likely to
cause (i) any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect or (ii) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied; and
(b) any failure of SeraNova, Silverline or Acquisition, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, that, the delivery of any notice
pursuant to this Section 5.5 shall not limit or otherwise affect the remedies
available to the party receiving such notice.

            5.6   Deleted.

            5.7 Reorganization. Each of Silverline and SeraNova shall use its
reasonable best efforts to cause the business combination of the Merger to be
qualified as a reorganization under Section 368(a) of the Code.

            5.8 Actions by the Parties. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties hereto will use its
reasonable 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 law
to consummate and make effective in the most expeditious manner practicable, the
transactions contemplated by this Agreement including (i) the obtaining of all
necessary actions and non-actions, waivers and consents, if any, from any
governmental or regulatory authority, domestic and foreign, and the making of
all necessary registrations and filings and the taking of all reasonable steps
as may be necessary to obtain an approval or waiver from, or to avoid an action
or proceeding by any governmental or regulatory authority, domestic

                                       35
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and foreign; (ii) the obtaining of all necessary consents, approvals or waivers
from any other Person; (iii) the defending of any claim, investigation, action,
suit or other legal proceeding, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby; and
(iv) the execution of additional instruments necessary to consummate the
transactions contemplated by this Agreement. Each party will promptly consult
with the other and provide necessary information (including copies thereof) with
respect to all filings made by such party with the any agency or authority in
connection with this Agreement and the transactions contemplated hereby.

            5.9 Indemnification. (a)From and after the Effective Time,
Silverline shall or shall cause the Surviving Corporation to, fulfill and honor
in all respects the obligations of SeraNova to indemnify each Person who is or
was a director or officer (an "INDEMNIFIED PARTY") of SeraNova pursuant to any
indemnification provision of the certificate of incorporation or by-laws or
equivalent constituent documents of SeraNova as each is in effect on the date
hereof and the indemnification agreements between SeraNova and each such
director or officer.

            (b) For a period of six years after the Effective Time, Silverline
shall cause to be maintained in effect officers' and directors' liability
insurance with respect to each Indemnified Party of SeraNova covering acts or
omissions by such Person occurring prior to the Effective Time under customary
terms and conditions. This Section 5.9 shall survive the closing of all the
transactions contemplated hereby, is intended to benefit the Indemnified Parties
and their respective heirs and personal representative (each of which shall be
entitled to enforce this Section 5.9 against Silverline, as the case may be, as
a third-party beneficiary of this Agreement).

                                   ARTICLE VI.

                              ADDITIONAL AGREEMENTS

            6.1 Preparation of the Form F-4 and the Joint Proxy
Statement/Prospectus; Stockholders Meetings. (a) As promptly as practicable
following the date hereof, Silverline and SeraNova shall jointly prepare and
file with the SEC preliminary proxy materials and any amendments or supplements
thereto which shall constitute the joint proxy statement/prospectus (such proxy
statement/prospectus, and any amendments or supplements thereto, the "JOINT
PROXY STATEMENT/PROSPECTUS") and Silverline shall prepare and file with the SEC
the Registration Statement on Form F-4 with respect to the issuance of
Silverline ADSs in the Merger (the "FORM F-4") in which the Joint Proxy
Statement/Prospectus will be included as a prospectus. The Form F-4 and the
Joint Proxy Statement/Prospectus shall comply as to form in all material
respects with the applicable provisions of the Securities Act and the Exchange
Act. Each of Silverline and SeraNova shall use all reasonable efforts to have
the Form F-4 declared effective under the Securities Act as promptly as
practicable after filing with the SEC and to keep the Form F-4 effective as long
as is necessary to consummate the Merger. The parties shall promptly provide
copies to and consult with each other and prepare written responses with

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respect to any written comments received from the SEC with respect to the Form
F-4 and the Joint Proxy Statement/Prospectus and promptly advise the other party
of any oral comments received from the SEC. Silverline warrants that none of the
information supplied or to be supplied by Silverline for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time of mailing thereof and at the time
of the SeraNova Stockholders Meeting or the Silverline Shareholders Meeting,
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statement therein,
in light of the circumstances under which they were made, not misleading.
SeraNova warrants that none of the information supplied or to be supplied by
SeraNova for inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the SeraNova Stockholders Meeting or the
Silverline Shareholders Meeting, will contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. For purposes of the foregoing, it is understood and
agreed that information concerning or related to Silverline and the Silverline
Shareholders Meeting will be deemed to have been supplied by Silverline and
information concerning or related to SeraNova and the SeraNova Stockholders
Meeting shall be deemed to have been supplied by SeraNova. No amendment or
supplement to the information supplied by SeraNova for inclusion in the Joint
Proxy Statement/Prospectus shall be made without the approval of SeraNova, which
approval shall not be unreasonably withheld or delayed.

            (b) SeraNova shall, as promptly as practicable following the
execution of this Agreement, duly call give notice of, convene and hold a
meeting of its stockholders (the "SERANOVA STOCKHOLDERS MEETING") for the
purpose of obtaining the Required SeraNova Vote with respect to the transactions
contemplated by this Agreement, shall use it, reasonable best efforts, subject
to Section 6.4, to solicit the adoption of this Agreement by the Required
SeraNova Vote and, subject to Section 6.4, the board of directors of SeraNova
shall recommend adoption of this Agreement by the stockholders of SeraNova.
Without limiting the generality of the foregoing but subject to its rights
pursuant to Sections 6.4 and 8.1 (e), SeraNova agrees that its obligations
pursuant to the first sentence of this Section 6.1(b) shall not be affected by
the commencement, public proposal, public disclosure or communication to
SeraNova of any SeraNova Acquisition Proposal.

            (c) Silverline shall, as promptly as practicable following the
execution of this Agreement, duly call, give notice of, convene and hold a
meeting of its shareholders (the "SILVERLINE SHAREHOLDERS MEETING") for the
purpose of obtaining the Required Silverline Vote with respect to the
transactions contemplated by this Agreement, shall use its reasonable best
efforts, subject to Section 6.5, to solicit the approval of this Agreement by
the Required Silverline Vote and, subject to Section 6.5, the board of directors
of Silverline shall recommend the approval of this Agreement by the shareholders
of Silverline.

            (d) The SeraNova Stockholders Meeting and the Silverline
Shareholders Meeting shall take place on the same date, to the extent
practicable.


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            6.2 Access to Information. Upon reasonable notice, each of
Silverline and SeraNova shall, and shall cause its Subsidiaries to, afford to
the other party and to the officers, employees, accountants, counsel, financial
advisors and other representatives of such other party reasonable access during
normal business hours, during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period.
Each of Silverline and SeraNova shall, and shall cause its Subsidiaries to,
furnish promptly to the other party consistent with its legal obligations, all
other information concerning its bonuses, properties and personnel as such other
party may reasonably request; provided, however, that each of Silverline and
SeraNova may restrict the foregoing access to the extent that (i) a Governmental
Entity requires either party or any of its Subsidiaries to restrict access to
any properties or information reasonably related to any such contract on the
basis of applicable laws and regulations with respect to national security
matters or (ii) in the reasonable judgment of such party, any law, treaty, rule
or regulation of any Governmental Entity applicable to such party requires it or
its Subsidiaries to restrict access to any properties or information. The
parties will hold any such information in confidence to the extent required by,
and in accordance with, the provisions of the agreements dated October 19, 2000,
between SeraNova and Silverline (collectively the "CONFIDENTIALITY AGREEMENT").
Any investigation by Silverline or SeraNova shall not affect the representations
and warranties of SeraNova or Silverline, as the case may be.

            6.3 Reasonable Best Efforts. (a) Subject to the terms and conditions
of this Agreement, each party hereto will use its reasonable best efforts to (i)
take, or cause to be taken, all actions and to do, or cause to he done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the Merger and the other transactions contemplated by this Agreement
as soon as practicable after the date hereof and (ii) to obtain and maintain all
approvals, consents, waivers, registrations, permits, authorizations, clearances
and other confirmations, required to be obtained from any third party and/or any
Governmental Entity that are reasonably necessary to consummate the Merger and
the transactions contemplated hereby (each a "REQUIRED APPROVAL"). In
furtherance and not to limitation of the foregoing, each party hereto agrees to
make, as promptly as practicable, to the extent it has not already done so, (i)
an appropriate filing of a Notification and Report Form pursuant to the HSR Act
with respect to the transactions contemplated hereby (which filing shall be made
in any event within five Business Days of the date hereof), (ii) all necessary
filings with other Governmental Entities relating to the Merger, and, in each
case, to supply as promptly as practicable any additional information and
documentary material that may be requested pursuant to such laws and to use
reasonable best effort to cause the expiration or termination of the applicable
waiting periods under the HSR Act and the receipt of Required Approvals under
such other laws as soon as practicable.

            (b) Each of Silverline and SeraNova shall, in connection with the
efforts referenced in Section 6.3(a) to obtain all Required Approvals, use its
reasonable best efforts to (i) cooperate in all respects with each other in
connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party (ii) promptly inform the other party of any communication received by such
party from, or given by such party to, the Antitrust Division of the Department
of Justice (the "DOJ")

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or any other Governmental Entity and of any material communication received or
given in connection with any proceeding by a private party, in each case
regarding any of the transactions contemplated hereby, and (iii) permit the
other party to review any communications given by it to, and consult with each
other in advance to the extent practicable of any meeting or conference with,
the DOJ or any such other Governmental Entity or, in connection with any
proceeding by a private party, with any other Person, and to the extent
permitted by the DOJ or such other applicable Governmental Entity or other
Person, give the other party the opportunity to attend and participate in such
meetings and conferences.

            (c) In furtherance and not in limitation of the covenants of the
parties contained in Section 6.3(a) and 6.3(b), if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law, or if any
statute, rule, regulation, executive order, decree, injunction or administrative
order is enacted, entered, promulgated or enforced by a Governmental Entity
which would make the Merger, or the transactions contemplated hereby illegal, or
would otherwise prohibit or materially impair or delay the consummation of the
Merger, or the transactions contemplated hereby, each of Silverline and SeraNova
shall cooperate in all respects with each other and use its respective
reasonable best efforts to contest and resist any such action or proceeding and
to have vacated, lifted, overturned any decree, judgment, injunction or other
order, whether temporary, preliminary or permanent, that is to effect and that
prohibits, prevents or restricts consummation of the Merger, or the transactions
contemplated by this Agreement and to have such statue, rule, regulation,
executive order, decree, injunction or administrative order repealed, rescinded
or made inapplicable. Notwithstanding the foregoing or any other provision of
this Agreement, nothing in this Section 6.3 shall limit a party's right to
terminate this Agreement pursuant to Section 8.1(b) or 8.1(c) so long as such
party has up to then complied in all respects with its obligations under this
Section 6.3. For purposes of this Agreement, "REGULATORY LAW" means the HSR Act,
and all other U.S. and Indian Federal, state and foreign, if any, statutes,
rules, regulations, orders, decrees, administrative and judicial doctrines and
other laws that are designed or intended to regulate mergers, acquisitions or
other business combinations.

            (d) SeraNova and its board of directors shall, if any state takeover
statute or similar statute becomes applicable to this Agreement, the Merger or
any other transactions contemplated hereby or thereby, take all action
reasonably necessary to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated hereby or thereby and otherwise to minimize the effect of
such statute or regulation on this Agreement, the Merger and the other
transactions contemplated hereby.

            (e) Silverline and its board of directors shall, if any state
takeover statute for similar statute becomes applicable to this Agreement, the
Merger or any other transactions contemplated hereby, to the extent legally
permissible take all action reasonably necessary to ensure that the Merger and
the other transactions contemplated by this Agreement may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise to


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minimize the effect of such statue or regulation on this Agreement, the Merger
and the other transactions contemplated hereby.

            6.4 No Solicitation by SeraNova. (a) SeraNova shall not, nor shall
it permit any of its Subsidiaries to, nor shall it authorize or permit any of
its directors, officers or employee, or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its Subsidiaries to, directly or indirectly through another Person, (i) solicit,
initiate or knowingly encourage (including by way of furnishing information), or
knowingly take any other action to facilitate, the making of any proposal that
constitute, a SeraNova Competing Proposal or (ii) participate in any discussions
or negotiations regarding any SeraNova Competing Proposal; provided, however,
that if, at any time during the period commencing on the 46th day after the date
hereof and ending on the date the Required SeraNova Vote is obtained (the
"SERANOVA APPLICABLE PERIOD"), the board of directors of SeraNova, in the
exercise of its fiduciary duties, determines in good faith, after consultation
with outside counsel, that to do otherwise would not be in the best interests of
SeraNova's stockholders, SeraNova and its representatives may, in response to a
SeraNova Superior Proposal which did not result from a breach of this Section
6.4(a), and subject to providing prior or contemporaneous notice of its decision
to take such action to Silverline, (x) furnish information with respect to
SeraNova and its Subsidiaries to any Person making a SeraNova Superior Proposal
pursuant to a customary confidentiality agreement (as determined by SeraNova
after consultation with its outside counsel) and (y) participate in discussions
or negotiations regarding such SeraNova Superior Proposal. For purposes of this
Agreement, "SERANOVA COMPETING PROPOSAL" means any bona fide proposal or offer
from any Person relating to any direct or indirect acquisition or purchase of
20% or more of the assets of SeraNova and its Subsidiaries, taken as a whole, or
20% or more of the combined voting power of the shares of SeraNova Common Stock,
any tender offer or exchange offer that if consummated would result in any
Person beneficially owning 20 % of more of the combined voting power of the
shares of SeraNova Common Stock, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving SeraNova or any of its Subsidiaries in which the other party thereto
or its stockholder, will own 20% or more of the combined voting power of the
parent entity resulting from any such transaction, other than the transactions
contemplated by this Agreement. For purpose of this Agreement, a "SERANOVA
SUPERIOR PROPOSAL" means (i) any proposal made by a third party relating to any
direct or indirect acquisition or purchase of 50% or more of the assets of
SeraNova and its Subsidiaries, taken as a whole, or 50% or more of the combined
voting power of the share, of SeraNova Common Stock, any tender offer or
exchange offer that if consummated would result in any Person beneficially
owning 50% or more of the combined voting power of the shares of SeraNova Common
Stock or any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving SeraNova or any of its
Subsidiaries in which the other party thereto or its stockholders will own 40%
or more of the combined voting power of the parent entity resulting from any
such transaction and (ii) otherwise on terms which the board of directors of
SeraNova determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation), taking into account the
Person making the proposal and the legal, financial, regulatory and other
aspects of the proposal deemed appropriate by the board of directors of
SeraNova, (x) is reasonably

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likely to result in a transaction that would be more favorable than the Merger
to SeraNova's stockholders taken as a whole, (y) is reasonably capable of being
completed and (z) for which financing, to the extent required, is then committed
of is reasonably capable of being obtained by such third party.

            (b) Neither the board of directors of SeraNova nor any committee
thereof shall (i) withdraw, or propose publicly to withdraw, in a manner adverse
to Silverline, the approval or recommendation by such board of directors or such
committee of the Merger or this agreement, (ii) subject to Section 6.4(d),
modify, or propose publicly to modify, in a manner adverse to Silverline, the
approval or recommendation by such board of directors or such committee of the
Merger or this Agreement, (iii) approve or recommend, or propose publicly to
approve or recommend, any SeraNova Competing Proposal or (iv) approve or
recommend, or propose to approve or recommend, or execute or enter into, any
letter of intent, agreement in principle, merger agreement, acquisition
agreement, option agreement or other similar agreement or propose publicly or
agree to do any of the foregoing (each, a "SERANOVA ACQUISITION AGREEMENT")
related to any SeraNova Competing Proposal. Notwithstanding the foregoing,
during the SeraNova Applicable Period, in response to a SeraNova Superior
Proposal which would be more favorable than the Merger to SeraNova's
Stockholders taken as a whole and which did not result from a breach of Section
6.4(a), if the board of directors of SeraNova, in the exercise of its fiduciary
duties, determines in good faith, after consultation with outside counsel, that
to do otherwise would not be in the best interests of SeraNova's stockholders,
the board of directors of SeraNova may (x) modify or propose publicly to modify,
in a manner adverse to Silverline, the approval or recommendation of the Merger
or this Agreement by the board of directors of SeraNova and/or (y) terminate
this Agreement (and concurrently with or after such termination, if it so
chooses, cause SeraNova to enter into any SeraNova Acquisition Agreement with
respect to any SeraNova Superior Proposal), but, in the case of clause (y), only
at a time that is during the SeraNova Applicable Period and is after the tenth
day (or the tenth day after a material amendment, in the case of a material
amendment to a SeraNova Superior Proposal) following Silverline's receipt of
written notice advising Silverline that the board of directors of SeraNova is
prepared to accept a SeraNova Superior Proposal (or any material amendment
thereto), specifying the material terms and conditions of such SeraNova Superior
Proposal (or any material amendment thereto) and identifying the Person making
such SeraNova Superior Proposal (or any material amendment thereto) provided
Silverline does not during such period offer a proposal that meets or is
superior to the SeraNova Superior Proposal.

            (c) In addition to the obligations of SeraNova set forth in
paragraphs (a) and (b) of this Section 5.4, SeraNova shall promptly advise
Silverline of any SeraNova Competing Proposal or any inquiry or request for
information relating thereto, the material terms and conditions of such request
or SeraNova Competing Proposal and the identity of the Person making such
request or SeraNova Competing Proposal. SeraNova will promptly keep Silverline
reasonably informed of the status (including amendments) of any such request or
SeraNova Competing Proposal.


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            (d) Nothing contained in this Section 6.4 shall prohibit SeraNova
from taking and disclosing to its stockholders a position contemplated by Rule
14d-9 or 14e-2 promulgated under the Exchange Act or from making any disclosure
to SeraNova's stockholders if, in the good faith judgment of the board of
directors of SeraNova, after consultation with outside counsel, failure so to
disclose would be inconsistent with its obligations under applicable law;
provided, however, that, subject to Section 6.4(b), neither SeraNova nor its
board of directors, nor any committee thereof shall withdraw, or propose
publicly to withdraw, its position with respect to this Agreement or the Merger
or approve or recommend, or propose publicly to approve or recommend, a SeraNova
Competing Proposal.

            6.5 SeraNova Stock Options. (a) As soon as practicable following the
date of this Agreement, the board of directors of SeraNova (or, if appropriate,
any committee administering the SeraNova Stock Option Plan) shall adopt such
resolutions or take such other actions as may be required to effect the
following:

            (i) adjust the terms of all outstanding SeraNova Stock Options
issued under SeraNova Stock Option Plan and seek amendment to SeraNova's other
option agreements (each, as so adjusted, an "ADJUSTED OPTION"), whether vested
or unvested, as necessary to provide that, at the Effective Time, each SeraNova
Stock Option outstanding immediately prior to the Effective Time shall be
amended and converted, on the same terms and conditions as were applicable under
such SeraNova Stock Option, as follows (the "OPTION ADJUSTMENT"):

            (A) each such SeraNova Stock Option to acquire shares of SeraNova
Common Stock will be converted into an option to acquire the number of
Silverline ADSs determined by multiplying the number of shares of SeraNova
Common Stock subject to such SeraNova Stock Option by the Common Stock Exchange
Ratio (rounded up to the nearest whole share) at an exercise price determined by
dividing the exercise price set forth in such SeraNova Stock Option by the
Common Exchange Ratio (rounded up to the nearest whole cent); and

            (B) make such other changes to the SeraNova Stock Option Plans as
Silverline and SeraNova may agree are appropriate to give effect to the Merger.

            (b) The adjustments provided in this Section 6.5 with respect to any
SeraNova Stock Options to which Section 421(a) of the Code applies shall be and
are intended to be effected in a manner which is consistent with Section 424(a)
of the Code notwithstanding any other provision in this Section 6.5.

            (c) Prior to the Effective Time, Silverline shall take all necessary
actions (including, if required to comply with Section 162(m) of the Code (and
the regulations thereunder) or applicable law or rule of NYSE, obtaining the
approval of its shareholders at the next regularly scheduled annual meeting of
Silverline following the Effective Time) to assume as of the Effective Time all
obligations undertaken by, or on behalf of, SeraNova under Section 6.5(a) and to
adopt at the Effective Time the SeraNova Stock Option Plans and each Adjusted
Option and to take all other action called for in this Section 6.5, including
the reservation,

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issuance and listing of Silverline Capital Stock in a number at least equal to
the number of shares of Silverline Common Stock that will be subject to the
Adjusted Options.

            (d) As soon as practicable following the Effective Time, Silverline
shall prepare and file with the SEC a registration statement on Form F-8 (or
another appropriate form) registering the Silverline ADSs equal to the number of
shares subject to the Adjusted Options. Such registration statement shall be
kept effective (and the current status of the prospectus or prospectuses
required thereby shall be maintained) at least for so long as any Adjusted
Options or any unsettled awards granted under the SeraNova Stock Option Plan
after the Effective Time may remain outstanding.

            (e) As soon as practicable after the Effective Time, Silverline
shall deliver to the holders of the SeraNova Stock Options appropriate notices
setting forth such holders' rights pursuant to the respective SeraNova Stock
Option Plans and the agreements evidencing the grants of such SeraNova Stock
Options and that such SeraNova Stock Options and agreements shall be assumed by
Silverline and shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 6.5 after giving effect to
the Merger).

            (f) Except as otherwise expressly provided in this Section 6.5 and
except to the extent required under the respective terms of the SeraNova Stock
Options, all restrictions or limitations on transfer and vesting with respect to
the SeraNova Stock Options awarded under the SeraNova Stock Option Plan or any
other plan, program or arrangement of SeraNova or any of its Subsidiaries, to
the extent that such restrictions or limitations shall not have already lapsed,
and all other terms thereof, shall remain in full force and effect with respect
to such options after giving effect to the Merger and the assumption by
Silverline as set forth above.

            6.6 Employee Matters. (a) During the one-year period following the
Effective Time (the "TRANSITION PERIOD"), Silverline shall maintain employee
benefit plans, programs and policies for the employee of SeraNova and its
Subsidiaries which, in the aggregate, are substantially comparable to the
employee benefit plan, programs and policies provided by SeraNova and its
Subsidiaries before the Effective Time (other than SeraNova's Employees Stock
Purchase Plan). Furthermore, no employee of SeraNova or a Subsidiary of SeraNova
shall have his or her base hourly rate of pay, base salary or bonus opportunity
reduced during the Transition Period except to the extent such reduction is
called for as a result of a violation of Silverline's generally applicable
policies or a failure to satisfy Silverline's generally applicable performance
standards for similarly situated Silverline employees. The participant accounts
in each unfunded plan, program or policy of SeraNova and each Subsidiary of
SeraNova which are designed to track the performance of SeraNova Stock but which
only pay benefits in cash shall be converted at the Effective Time to accounts
which track the performance of the corresponding Silverline Stock based upon the
principles set forth in this Agreement for converting SeraNova Stock to
Silverline Stock except that there shall he no rounding up or down as part of
such conversions.


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            (b) During the one-year period following the Transition Period, the
employees of SeraNova and each Subsidiary of SeraNova shall be eligible to
participate in employee benefit plans, programs and policies which, in the
aggregate, are substantially comparable to the employee benefit plans, programs
and policies maintained by Silverline for similarly situated employees.

            (c) Each employee of SeraNova and each Subsidiary of SeraNova shall
receive full credit under each applicable Silverline plan, program or policy for
his or her service as an employee of SeraNova and any Subsidiary of SeraNova on
the same basis that he or she would have received such credit if such service
had been completed as an employee of Silverline for purposes of satisfying any
service requirement to participate in such plan, program or policy (including
any plan, program or policy which provides post-retirement medical benefits) and
any service requirement to receive a non-forfeitable interest in the benefit,
under such plan, program or policy and any service requirement to become
eligible for any early requirement benefit under any pension plans maintained.
Furthermore, if any such Silverline plan, program or policy has any active
employment requirements, pre-existing condition requirements, co-pay,
coinsurance or deductible requirements in effect for a year and an employee of
SeraNova or a Subsidiary of SeraNova had satisfied (or had made payments towards
satisfying) such requirements for a part of such year as a participant in a
SeraNova plan, program or policy, such employee shall receive full credit for
satisfying (or for payments made towards satisfying) such requirements in the
Silverline plan, program or policy for such year when he or she begins to
participate in such plan, program or policy and any such co-pay, coinsurance or
deductible requirements for such year under the Silverline plan, program or
policy shall be no greater than the co-pay, coinsurance or deductible
requirement under the SeraNova plan, program or policy for such year.

            6.7 Fees and Expenses. (a) Whether or not the Merger is consummated,
all Expenses, including fees paid to attorneys, accountants and investment
bankers, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses, except
Expenses (excluding attorneys fees, accountants fees and investment bankers
fees), incurred in connection with the filing, printing and mailing of the Form
F-4 and the Joint Proxy Statement/Prospectus (including SEC filing fees) and the
filing fees for the premerger notification and report forms under the HSR Act,
which shall be shared equally by Silverline and SeraNova. As used in this
Agreement, "EXPENSES" includes all out-of-pocket expenses (including all fees
and expenses of counsel, accountants, investment bankers, experts and
consultant, to a party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby, including the preparation, printing, filing and mailing of
the Form F-4 and the Joint Proxy Statement/Prospectus and the solicitation of
stockholder approvals and all other matters related to the transactions
contemplated hereby.

            (b) If (1) prior to the date the Required SeraNova Vote is obtained,
a SeraNova Competing Proposal shall have been made to SeraNova or any of its
Subsidiaries, or shall have been made directly to the stockholders of SeraNova
generally, or any Person shall

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have publicly announced an intention (whether or not conditional) to make a
SeraNova Competing Proposal and thereafter this Agreement is terminated by
either Silverline or SeraNova pursuant to Section 8.1(b), without a SeraNova
Stockholders Meeting having occurred, or 8.l(d)(i) or (2) this Agreement is
terminated by SeraNova pursuant to Section 8.1(e), then SeraNova shall promptly,
but in no event later than the date of such termination, pay Silverline a fee
equal to $4.00 million (the "TERMINATION FEE"), payable by wire transfer of same
day funds; provided, however, that no Termination Fee shall be payable to
Silverline pursuant to clause (1) or (2) of this paragraph (b) unless and until
within 12 months of such termination SeraNova or any of its Subsidiaries enters
into any SeraNova Acquisition Agreement with respect to, or approves or
consummates, any SeraNova Competing Proposal (for the purposes of the foregoing
proviso the term "SERANOVA COMPETING PROPOSAL" shall mean a SeraNova Superior
Proposal pursuant to clause (i) without giving effect to clause (ii)) of the
definition thereof in Section 6.4(a) in which event the Termination Fee shall be
payable under the first to occur of such events. SeraNova acknowledges that the
agreements contained in this Section 6.7(b) are an integral part of the
transactions contemplated by the Agreement, and that, without these agreements,
Silverline would not enter into this Agreement; accordingly, if SeraNova fails
promptly to pay the amount due pursuant to this Section 6.7(b), and, in order to
obtain such payment, Silverline commences a suit which results in a judgment
against SeraNova for the fee set forth in this Section 6.7(b), SeraNova shall
pay to Silverline its costs and expenses (including attorneys' fees and
expenses) in connection with such suit, together with interest on the amount of
the fee at the prime rate of Citibank, N.A. in effect on the date such payment
was required to be made.

            6.8 Public Announcements. SeraNova and Silverline shall use all
reasonable efforts to develop a joint communications plan and each party shall
use all reasonable efforts (i) to ensure that all press releases and other
public statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.

            6.9 Listing. Silverline shall use its reasonable best efforts to
cause the Silverline ADSs to be issued in the Merger to be approved for
quotation on NYSE, subject to official notice of issuance.

            6.10 Affiliate Letter. On or prior to the date of the SeraNova
Stockholders Meeting, SeraNova will deliver to Silverline a letter (the
"SERANOVA AFFILIATE LETTER") identifying all Persons who are, or may be deemed
to be, "AFFILIATES" of SeraNova for purposes of Rule 145 under the Securities
Act ("RULE 145"). On or prior to the Closing Date, SeraNova will use its
reasonable efforts to deliver on behalf of each Person identified as an
"affiliate" in the SeraNova Affiliate Letter a written agreement in connection
with restrictions on affiliates under Rule 145.


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            6.11 Tax Treatment. Each of Silverline and SeraNova shall use
reasonable efforts to cause the Merger to qualify as a "reorganization" under
the provisions of Section 368 of the Code and to obtain the opinions of counsel
referred to herein, including the execution of the letters of representation
referred to therein updated as necessary. SeraNova and Silverline and their
respective Subsidiaries shall treat the Silverline ADSs (the "SILVERLINE
RELEVANT STOCK") received in the Merger by holders of SeraNova Common Stock as
property permitted to be received under Section 354 of the Code without the
recognition of gain. Each of SeraNova and Silverline covenants and agrees to,
and agrees to cause its affiliates to, vigorously and in good faith defend all
challenges to the treatment of the reorganization as described in this Section
6.11, including any such challenge to the treatment of the Silverline Relevant
Stock as property permitted to be received under Section 354 of the Code without
the recognition of gain. Each of SeraNova and Silverline agrees that if it
becomes aware of any such fact or circumstance that is reasonably likely to
prevent the Merger from qualifying as a reorganization described in Section
368(a) of the Code, including any such fact or circumstance that is reasonably
likely to prevent the Silverline Relevant Stock from being treated as property
permitted to be received under Section 354 of the Code without the recognition
of gain, it will promptly notify the other party in writing.

            6.12  Tax Representations.  (i)  Silverline, the Surviving
Corporation, and their Affiliates will not engage or consent to any
transaction that would, alone or together with other transactions that have
or occurred or reasonably could occur, require the "Five-Percent Transferee
Shareholders" as defined in Treas. Reg. Sec. 1.367(a)-3(c)(5)(ii) and as
identified by SeraNova, to recognize gain under the gain recognition
agreements required pursuant to Treas. Reg. Sec. 1.367(a)-8 (assuming
compliance by such shareholders with paragraph (g)(2) of such regulation).
Silverline agrees to give written notice to the Five-Percent Transferee
Shareholders of any transaction that would require the recognition of gain
with respect to the Merger pursuant to Trans. Reg. Sec. 1.367(a)-8 (without
assuming compliance this paragraph (g)(2)).  Silverline agrees to supply all
information required for the Five-Percent Transferee Shareholders to comply
with their obligations under Treas. Reg. Sec. 1.367(a)-8 with respect to the
Merger.

            (ii) For the taxable years in which the Merger occurs, Silverline
shall prepare the income tax returns of the Surviving Corporation, including the
information statement required by Treas. Reg. Section 1.367(a)-3(c)(6) (the
"INFORMATION STATEMENT"). The Five-Percent Transferee Shareholders shall have
the right to review Information Statement and receive drafts thereof at least 5
days prior to its due date. Fees for preparing the Information Statement shall
be borne by the Surviving Corporation; however, any costs associated with the
Five-Percent Transferee Shareholders review shall be borne by the Five-Percent
Transferee Shareholders.

            6.13 Supplemental Disclosure Schedule Information. On or prior to
November 17, 2000, SeraNova may deliver to Silverline in accordance with Section
10.7 hereof a revised and supplemental SeraNova Disclosure Schedule containing
additional information gathered and summarized by SeraNova (the "SUPPLEMENTAL
DISCLOSURE SCHEDULE"). SeraNova will provide Silverline and its advisors prompt
access to all documents and other information necessary for Silverline to
analyze the newly disclosed information contained in the Supplemental Disclosure

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Schedule. Unless Silverline gives SeraNova written notice (a "SCHEDULE
TERMINATION NOTICE") within 15 Business Days after it receives the Supplemental
Disclosure Schedule stating that the newly disclosed information contained in
the Supplemental Disclosure Schedule constitutes a Material Adverse Effect
concerning SeraNova and stating its intention to termination this Agreement as a
result of such determination, the Supplemental Disclosure Schedule shall be
deemed to be and to replace the SeraNova disclosure Schedule for all purposes
under this Agreement.

            6.14 Fleet Bank. SeraNova shall use its reasonable best efforts to
obtain the consent of Fleet Capital Corporation and Fleet Bank to the terms of
this Agreement and the transactions contemplated hereby.

                                   ARTICLE VII

                              CONDITIONS PRECEDENT

            7.1 Conditions to Each Party's Obligation to Effect the Merger. The
obligations of SeraNova and Silverline to effect the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:

            (a)   Stockholder Approvals.  (i)   SeraNova shall have obtained
the Required SeraNova Vote and (ii) Silverline shall have obtained the
Required Silverline Vote.

            (b) No Injunctions or Restraint; Illegality. No laws shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other Governmental
Entity of competent jurisdiction shall be in effect, having the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger;
provided, however, that the provisions of this Section 7.1(b) shall not be
available to any party whose failure to fulfill its obligations pursuant to
Section 6.3 shall have been the cause of, or shall have resulted in, such order
or injunction.

            (c) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired; provided, however, that the provision of this Section 7.1(c) shall
not be available to any party whose failure to fulfill its obligations pursuant
to Section 6.3 shall have been the cause of, or shall have resulted in, the
failure to obtain such termination or expiration.

            (d) NYSE Listing. The Silverline ADSs to be issued in the Merger
shall have been approved for quotation on NYSE, subject to official notice of
issuance.

            (e) Effectiveness of the Form F-4. The Form F-4 shall have been
declared effective by the SEC under the Securities Act. No stop order suspending
the effectiveness of the Form F-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or threatened by the SEC.


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            (f) Indian Regulatory Approvals. Each of Silverline and SeraNova
shall have obtained all approvals required to be obtained by each of them from
the Reserve Bank of India and other regulatory authorities in India in order to
consummate the transactions set forth in this Agreement (the "INDIAN REGULATORY
APPROVALS"). Silverline and SeraNova shall cooperate with each other and use
their reasonable best efforts to obtain the Indian Regulatory Approvals as soon
as possible.

            7.2 Additional Conditions to Obligations of Silverline. The
obligations of Silverline to effect the Merger are subject to the satisfaction
of, or waiver by Silverline, on or prior to the Closing Date of the following
additional conditions:

            (a) Representations and Warranties. Each of the representations and
warranties of SeraNova set forth in this Agreement shall be true and correct on
the date of this Agreement, and as of the Closing Date, as if made at and as of
such time (except to the extent expressly made as of an earlier date, in which
case as of such date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to any limitation as
to "materiality" or "Material Adverse Effect" set forth therein), individually
or in the aggregate, does not have, and is not reasonably likely to have, a
Material Adverse Effect on SeraNova.

            (b) Performance of Obligations of SeraNova. SeraNova shall have
performed or complied in all material respects with all material agreements and
covenants required to be performed by it or complied with under this Agreement
at or prior to the Closing Date. Silverline shall have received a certificate of
the chief executive officer and the chief financial officer of SeraNova to such
effect.

            (c) Tax Opinion. Silverline shall have received from Deloitte &
Touche LLP, on the date on which the Form F-4 is declared effective by the SEC
and on the Closing Date, a written opinion dated as of such date stating that:
(i) the Merger will qualify as a "reorganization" within the meaning of Section
368(a) of the Code, (ii) Silverline and SeraNova will each be a "party" to that
reorganization within the meaning of Section 368(b) of the Code and (iii) the
issuance of the Silverline Relevant Stock to the holders of the SeraNova Common
Stock in the Merger will not result in Silverline's recognizing an amount of
income or gain or being subject to an amount of tax, in each case that
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on Silverline. In rendering such opinions, counsel to Silverline
shall be entitled to rely upon representations of officers of Silverline and
SeraNova. The opinions shall be in the form reasonably acceptable to Silverline.

            (d) No Material Adverse Change. Since the date of this Agreement,
there shall not have been any Material Adverse Change in SeraNova. For the
purposes of this Agreement, "MATERIAL ADVERSE CHANGE" shall mean with respect to
SeraNova or Silverline, as the case may be, any event or condition occurring
since June 30, 2000, other than changes in interest rates or changes in stock
prices or currency rates, which has had a material adverse change on (i) the
business operations, results of operations or financial condition of such party

                                       48
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and its material subsidiaries, or (ii) the ability of such party to consummate
the transactions contemplated hereby.

            (e) Employment Retention Agreements. Each of Rajan Nair and Ragu
Rajagopal shall have entered into an employment retention agreement, in form and
substance reasonably satisfactory to Silverline.

            (f) Opinion. Silverline shall have received an opinion from Carter,
Ledyard & Milburn in the form reasonably acceptable to Silverline.

            (g) The representation and warranties set forth in the tax
representation agreement between Silverline, STI and Rajkumar Koneru, Ravi
Singh, Rajan Nair and Nagarajan Valluripalli (the "TAX REPRESENTATION
AGREEMENT") shall be true and correct on the date of this Agreement, and as of
the Closing Date, as if made at and as of such time.

            (h) The Option Adjustment has been completed.

            7.3 Additional Conditions to Obligations of SeraNova. The
obligations of SeraNova to effect the Merger are subject to the satisfaction of,
or waiver by SeraNova, on or prior to the Closing Date of the following
additional conditions:

            (a) Representations and Warranties. Each of the representations and
warranties of Silverline set forth in this Agreement shall be true and correct
on the date of this Agreement and as of the Closing Date, as if made at and as
of such time (except to the extent expressly made as of an earlier date, in
which case as of such date), and except where the failure of such
representations and warranties to be so true and correct (without giving effect
to any limitation as to "MATERIALITy" or "MATERIAL ADVERSE EFFECT" set forth
therein), individually or in the aggregate, does not have, and is not reasonably
likely to have, a Material Adverse Effect on Silverline. SeraNova shall have
received a certificate of the chief executive officer and the chief financial
officer of Silverline to such effect.

            (b) Performance of Obligation of Silverline. Silverline shall have
performed or compiled in all material respects with all material agreements and
covenants required to be performed by it or complied with under this Agreement
at or prior to the Closing Date. SeraNova shall have received a certificate of
the chief executive officer and the chief financial officer of Silverline to
such effect.

            (c) Tax Opinion. SeraNova shall have received from Carter, Ledyard &
Milburn, counsel to SeraNova, on the date on which the Form F-4 is declared
effective by the SEC and on the Closing Date, a written opinion dated as of such
date stating that: (i) the Merger will qualify as a "reorganization" within the
meaning of Section 368(a) of the Code, (ii) SeraNova and Silverline will each be
a "party" to that reorganization within the meaning of Section 368(b) of the
Code and (iii) the Silverline Relevant Stock received in the Merger by holders
of SeraNova Common Stock is properly permitted to be received under Section 354
of the Code without the recognition of gain. In rendering such opinions, counsel
to SeraNova shall

                                       49
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be entitled to rely upon representations of officers of Silverline and SeraNova.
The opinions shall be in the form reasonably acceptable to Silverline.

            (d) No Material Adverse Change. Since the date of this Agreement,
there shall not have been any Material Adverse Change in Silverline.

                                       ARTICLE VIII

                                TERMINATION AND AMENDMENT

            8.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, by action taken or authorized by the board of directors
of the terminating party or parties, and except as provided below, whether
before or after approval of the matters presented in connection with the Merger
by the stockholders of SeraNova or Silverline:

            (a) by mutual written consent of Silverline and SeraNova, by action
of their respective boards of directors;

            (b) by either SeraNova or Silverline if the Effective Time shall not
have occurred on or before July 31, 2001 (the "TERMINATION DATE"); provided,
however, that the right to terminate this Agreement under this Section 8.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement (including Section 6.3) has caused, or resulted in, the
failure of the Effective Time to occur on or before the Termination Date;

            (c) by either SeraNova or Silverline if any Governmental Entity (i)
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or to take any
other action shall have become final and nonappealable or (ii) shall have failed
to issue an order, decree or ruling or to take any other action (which order,
decree, ruling or other action the parties shall have used their reasonable best
efforts to obtain, in accordance with Section 6.3), in each case (i) and (ii)
which is necessary to fulfill the condition set forth in Sections 7.1(c) and
such denial of a request to issue such order, decree, ruling or take such other
action shall have become final and nonappealable; provided, however, that the
right to terminate this Agreement under this Section 8.1(c) shall not be
available to any party whose failure to comply with Section 6.3 has caused or
resulted in such action or inaction;

            (d) by either SeraNova or Silverline if (i) the approval by the
stockholders of SeraNova required for the consummation of the Merger shall not
have been obtained by reason of the failure to obtain the Required SeraNova Vote
at a duly held SeraNova Stockholders Meeting, or at any adjournment or
postponement thereof or (ii) the approval by the shareholders of Silverline
required for the consummation of the Merger shall not have been obtained by
reason of the failure to obtain the Required Silverline Vote at a duly held
Silverline Shareholders Meeting or at any adjournment or postponement thereof;


                                       50
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            (e) by SeraNova in accordance with Section 6.4(b); provided, that,
in order for the termination of this Agreement pursuant to this paragraph (e) to
be deemed effective, SeraNova shall have complied with the notice provisions of
Section 6.4 and shall have paid the Termination Fee in accordance with Section
6.7(b);

            (f) by SeraNova, if Silverline shall have breached or failed to
perform any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (A) would give
rise to the failure of a condition set forth in Section 7.3(a) or (b) and (B)
has not been or is incapable of being cured by Silverline within forty-five (45)
calendar days after its receipt of written notice thereof from SeraNova;

            (g) by Silverline, if SeraNova shall have breached or failed to
perform any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (A) would give
rise to the failure of a condition set forth in Section 7.2(a) or (b) and (B)
has not been or is incapable of being cured by SeraNova within forty-five (45)
calendar days after its receipt of written notice thereof from Silverline;

            (h) by Silverline, in the event that SeraNova takes any action set
forth in Section 6.4(b)(x); or

            (i) by Silverline, in the event it gives a Schedule Termination
Notice under Section 6.13; provided, however, that if SeraNova shall within
three Business Days after receipt of a Schedule Termination Notice give
Silverline written notice that it disputes Silverline's Material Adverse Change
determination, then such termination shall not be effective unless and until
such dispute is resolved in Silverline' favor by agreement of the parties or by
appropriate proceedings.

            Notwithstanding anything else contained in this Agreement, the right
to terminate this Agreement under this Section 8.1 shall not be available to any
party (a) that is in material breach of its obligations hereunder or (b) whose
failure to fulfill its obligations or to comply with its covenants under this
Agreement has been the cause of, or resulted in, the failure to satisfy any
condition to the obligations of either party hereunder.

            8.2 Effect of Termination. In the event of termination of this
Agreement by either SeraNova or Silverline as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Silverline or SeraNova or their respective directors
or officers except with respect to Article IX, the second sentence of Section
6.2, Section 6.8, this Section 8.2 and Article X. Termination of this Agreement
will not relieve a breaching party from liability for any willful and material
breach by such party of any of its representations, warranties, covenants or
agreements set forth in this Agreement.

            8.3   Deleted.

            8.4 Extension; Waiver; Consent. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
boards of directors, may, to the

                                       51
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extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with or give a
consent under any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension, waiver or consent
shall be valid only if set forth in a written instrument signed on behalf of
such party in its sole discretion. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of those rights.

                                   ARTICLE IX

                           BROKERS' AND FINDERS' FEES

            9.1 SeraNova. SeraNova represents and warrants to Acquisition and
Silverline that no broker, investment banker or financial advisor other than
Punk, Ziegel & Company, is entitled to receive a brokerage fee, financing
commission or other commission from SeraNova in respect of the execution of this
Agreement or the consummation of the transactions contemplated hereby. SeraNova
agrees that if the transactions contemplated by this Agreement are not
consummated (other than as a result of a breach or default by Silverline or
Acquisition), it shall indemnify and hold STI and Silverline harmless against
any and all claims, losses, liabilities, costs or expenses which may be asserted
against them as a result of SeraNova's or any of its Affiliates' dealings,
arrangements or agreements with any such Person.

            9.2 Acquisition and Silverline. Acquisition and Silverline represent
and warrant to SeraNova that no broker, investment banker or financial advisor
other than Salomon Smith Barney, Inc. is entitled to receive any brokerage fee,
financing commission or other commission from Silverline in respect of the
execution of this Agreement, or the consummation of the transactions
contemplated hereby. Acquisition and Silverline agree that if the transactions
contemplated hereby are not consummated (other than as a result of a breach or
default by SeraNova), they shall jointly and severally indemnify and hold
SeraNova harmless against any and all claims, losses, liabilities, costs or
expenses which may be asserted against them, as a result of Acquisition's or
Silverline's dealings, arrangements or agreements with any such Person.

                                       52
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                                    ARTICLE X

                               GENERAL PROVISIONS

            10.1 Non-Survival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and agreements, shall survive the Effective Time except for those
covenants and agreements contained herein that by their terms apply or are to be
performed in whole or in part after the Effective Time and this Article X.

            10.2 Press Releases. Except as required by law or Silverline's
listing agreement with NYSE or any Indian stock exchange, Silverline,
Acquisition and SeraNova and their respective affiliates shall not issue any
press release or otherwise make public any information with respect to this
Agreement, nor the transactions contemplated hereby, prior to the Closing,
without the prior consent of the other parties to this Agreement.

            10.3 Contents of Agreement; Parties in Interest; etc. This Agreement
and the agreements, schedules and exhibits referred to or contemplated herein,
certain inducement agreements entered into by the parties hereto and certain
shareholders of SeraNova and Silverline and certain holders of options for
SeraNova Common Stock, the Confidentiality Agreement and the Tax Representation
Agreement set forth the entire understanding of the parties hereto with respect
to the transactions contemplated hereby, and there are no representations or
warranties, express or implied, made by any party to this Agreement with respect
to the subject matter of this Agreement, and any and all previous agreements and
understandings between or among the parties regarding the subject matter hereof,
whether written or oral, are superseded by this Agreement and the agreements
referred to or contemplated herein. All statements contained in schedules,
exhibits, certificates and other instruments attached hereto shall be deemed
representations and warranties (or exceptions thereto) by SeraNova, Acquisition
or Silverline, as the case may be.

            10.4 Assignment and Binding Effect. This Agreement may not be
assigned by either party hereto without the prior written consent of the other
parties; provided, that, Silverline and/or Acquisition may assign its rights and
obligations under this Agreement to any direct or indirect wholly-owned
Subsidiary of Silverline, upon written notice to SeraNova if the assignee shall
assume the obligations of the Assignor hereunder and Silverline shall remain
liable for its obligations hereunder. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto.

            10.5 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific

                                       53
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performance of the terms hereof, this being in addition to any other remedy to
which they are entitled at law or in equity.

            10.6 Definitions. As used in this Agreement the terms set forth
below shall have the following meanings:

            (a) "AFFILIATE" of a Person shall mean any other Person who (i)
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such Person ,or (ii) owns more
than 5% of the voting stock, or voting interest in, such Person. "CONTROL" means
the possession of the power, directly or indirectly, to direct or cause the
direction of the management and policies of a Person whether through the
ownership of voting securities, by contract or otherwise.

            (b) "BUSINESS DAY" means any day other than a Saturday, Sunday or
other day on which banking institutions in the City of New York or India are
authorized or obligated by law or executive order to close.

            (c) "CODE" shall mean the Internal Revenue Code of 1986, as amended.

            (d) "COMPANIES ACT" shall mean the Indian Companies Act of 1956, as
amended.

            (e) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, together with the rules and regulations promulgated thereunder.

            (f) "GAAP" shall mean generally accepted accounting principles.

            (g) "HAZARDOUS SUBSTANCES" shall mean any and all hazardous and
toxic substances, wastes or materials, any pollutants, contaminants, or
dangerous materials (including, but not limited to, polychlorinated biphenyls,
PCBs, friable asbestos, volatile and semi-volatile organic compounds, oil,
petroleum products and fractions, and any materials which include hazardous
constituents or become hazardous, toxic, or dangerous when their composition or
state is changed), or any other similar substances or materials which are
included under or regulated by any Environmental Law.

            (h) "INDEBTEDNESS" shall mean as at any date of determination, the
sum of the following items of SeraNova, without duplication: (i) obligations of
SeraNova created, issued or incurred for borrowed money, including all fees and
obligations thereunder (including, without limitation, any prepayment or
termination fees arising or which will arise out of the prepayment of such
Indebtedness prior to its maturity and termination), (ii) obligations of
SeraNova to pay the deferred purchase price, or acquisition price of property or
services, other than trade or accounts payable arising, and accrued expenses
incurred, in the ordinary course of business consistent with past practice,
(iii) the face amount of all letters of credit issued for the account of
SeraNova and all drafts thereunder, (iv) capital lease obligations of SeraNova,
and (v) any

                                       54
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obligation guaranteeing any Indebtedness or other obligations of any other
Person (including any obligations under any keep well or support agreements).

            (i) "LIENS" shall mean any mortgage, pledge, lien, security
interest, conditional or installment sale agreement, encumbrance, charge or
other claims of third parties of any kind.

            (l) "PERMITTED LIENS" shall mean (i) Liens for taxes, assessments,
or similar charges, incurred in the ordinary course of business that are not yet
due and payable or are being contested in good faith; (ii) pledges or deposits
made in the ordinary course of business; (iii) Liens of mechanics, materialmen,
warehousemen or other like Liens securing obligations incurred in the ordinary
course of business that are not yet due and payable or are being contested in
good faith; and (iv) similar Liens and encumbrances which are incurred in the
ordinary course of business and which do not in the aggregate materially detract
from the value of such assets or properties, or materially impair the use
thereof, in the operation of such business.

            (m) "PERSON" shall mean any individual, corporation, partnership,
limited partnership, limited liability company, trust, association or entity or
government agency or authority.

            (n) "TAX" (and, with correlative meaning, "TAXES" and "TAXABLE")
shall mean any federal, state, local, municipal or foreign net income, gross
income, gross receipts, windfall profit, severance, property, production, sales,
use, license, excise, franchise, employment, payroll, withholding, alternative
or add-on minimum, ad valorem, value-added, transfer, stamp, or environmental
tax, or any other tax, custom, duty, tariff levy, import, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, addition to tax or additional amount imposed by any
governmental or regulatory authority, domestic and foreign.

            (o) "TAX RETURN" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.

            (p) "SERANOVA STOCK OPTION PLAN" shall mean the 1999 SeraNova Stock
Option Plan.

            (q) "SIGNIFICANT SUBSIDIARY" has the meaning ascribed thereto in
Rule 1-02(w) of Regulation s-x of the SEC.

            10.7 Notices. Any notice, request, demand, waiver, consent,
approval, or other communication which is required or permitted to be given to
any party hereunder shall be in writing and shall be deemed given only if
delivered to the party personally or by registered or

                                       55
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certified mail (return receipt requested), with postage and registration or
certification fees thereon prepaid, addressed to the party at its address set
forth below:

            If to Silverline, Acquisition or STI:

            53 Knightsbridge Road
            Piscataway, New Jersey  08756
            Att.: Shankar Iyer

            with a copy to:

            Greenberg Traurig, LLP
            200 Park Avenue
            New York, New York  10166
            Att:  Rajiv Khanna, Esq.

If to SeraNova:

            SeraNova , Inc.
            499 Thornall Street
            Edison, New Jersey 08837
            Att: Rajkumar Koneru

            with a copy to:

            Carter, Ledyard & Milburn
            2 Wall Street
            New York, NY 10005
            Att:  James E. Abbott, Esq.

or to such other address or Person as any party may have specified in a notice
duly given to the other party as provided herein. Such notice, request, demand,
waiver, consent, approval or other communication will be deemed to have been
given as of the date so delivered, telegraphed or mailed.

            10.8 Amendment. This Agreement may be amended, modified or
supplemented at any time prior to the Effective Time by the respective boards of
directors of the parties hereto notwithstanding the approval hereof by the
stockholders of SeraNova, Silverline or Acquisition, STI, as applicable, except
as provided in Section 251(d) of the DGCL, NJBCA and the Companies Act. Any
amendment, modification or revision of this Agreement and any waiver of
compliance or consent with respect hereto shall be effective only if in a
written instrument executed by the parties hereto.

            10.9 Governing Law. This Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the State of New York as
applied to contracts made

                                       56
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and fully performed in such state, except insofar as (a) the DGCL and the NJBCA
shall be mandatorily applicable to the Merger and the rights of the stockholders
of SeraNova in connection therewith, and (b) the Companies Act and the laws,
rules and regulations of India shall be mandatorily applicable to Silverline and
the rights of Silverline's shareholders and the transactions contemplated by
this Agreement.

            10.10 No Benefit to Others. Except as stated otherwise in this
Agreement, the representations, warranties, covenants and agreements contained
in this Agreement are for the sole benefit of the parties hereto, and their
respective successors and assigns, and they shall not be construed as
conferring, and are not intended to confer, any rights on any other Person.

            10.11 Severability. If any term or other provision of this Agreement
is determined to be invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other terms and provisions of the Agreement shall
remain in full force and effect. Upon such determination, the parties hereto
shall negotiate in good faith to modify this Agreement so as to give effect to
the original intent of the parties to the fullest extent permitted by applicable
law.

            10.12 Section Headings. All section headings are for convenience
only and shall in no way modify or restrict any of the terms or provisions
hereof.

            10.13 Schedules and Exhibits. All Schedules and Exhibits referred to
herein are intended to be and hereby are specifically made a part of this
Agreement.

            10.14 Extensions. At any time prior to the Effective Time, any party
may by corporate action, extend the time for compliance by or waive performance
of any representation, warranty, condition or obligation of any other party.

            10.15 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and SeraNova,
Acquisition, STI and Silverline may become a party hereto by executing a
counterpart hereof. This Agreement and any counterpart so executed shall be
deemed to be one and the same instrument.

            10.16 Consent to Jurisdiction. Each party hereto irrevocably submits
to the exclusive jurisdiction of courts sitting in New York, New York, for the
purposes of any action, suit or other proceeding arising out of the Agreement or
any transaction contemplated hereby. Each party hereto agrees to commence any
such action, suit or proceeding relating thereto either in the United States
District Court for the Southern District of New York or, if, for jurisdictional
reasons, such suit, action or other proceeding may not be brought in such court,
in the Supreme Court of the State of New York, New York County. Each party
hereto further agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set forth above shall
be effective service of process for any such action, suit or proceeding with
respect to any matters to which it has submitted to jurisdiction as set forth
above in this Section 10.16. Each party hereto irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or proceeding
described above in (x) the Supreme Court of

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the State of New York, New York County, or (y) the United States District Court
for the Southern District of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.

            10.17 Waiver of Jury Trial. To the maximum extent permitted by
applicable law, each party to the Agreement waives the right to trial by a jury
in any suit or proceeding arising from the Agreement.



                                       58
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      IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Agreement as of the date first above written.

                                       SILVERLINE TECHNOLOGIES LIMITED

                                       By: /s/ Ravi Subramanian
                                          --------------------------------
                                       Name: Ravi Subramanian
                                       Title: Chairman

                                       SERANOVA, INC.

                                       By: /s/ Raj Koneru
                                          --------------------------------
                                       Name: Raj Koneru
                                       Title: Chairman & CEO

                                       SILVERLINE ACQUISITION CORP.

                                       By: /s/ Shankar Iyer
                                          --------------------------------
                                       Name: Shankar Iyer
                                       Title: President

                                       SILVERLINE TECHNOLOGIES, INC.

                                       By: /s/ Ravi Subramanian
                                          --------------------------------
                                       Name: Ravi Subramanian
                                       Title: Chairman



                                       59

EX-3.B

   1
                                                                    EXHIBIT 3.1B


                   CERTIFICATE OF AMENDMENT TO THE CERTIFICATE
                                OF INCORPORATION

                                       OF


                                 SERANOVA, INC.



To:   The Department of the Treasury
      State of New Jersey


      Pursuant to the provisions of Section 14A:7-2(2) of the New Jersey
Business Corporation Act, the undersigned corporation executes the following
Certificate of Amendment to its Certificate of Incorporation:

      1. The name of the corporation is SeraNova, Inc.

      2. The following is a copy of a resolution duly adopted by the Board of
Directors of the corporation on September 15, 2000, pursuant to authority
conferred upon the said Board of Directors by the Certificate of Incorporation:

      RESOLVED, that the Board of Directors of the Corporation, pursuant to the
authority expressly vested in it by the Certificate of Incorporation of the
Corporation, does hereby provide for and authorize the issuance of a series of
Preferred Stock of the Corporation, par value $ 0.01 per share, of the
Corporation, to be designated the "6% Series A Convertible Preferred Stock" and
does hereby fix and herein state the designations, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, as follows:

            Section a. Designation, Amount and Par Value. The series of
preferred stock shall be designated as its 6% Series A Convertible Preferred
Stock (the "Preferred Stock") and the number of shares so designated shall be
800 (which shall not be subject to increase without the consent of the holders
of the Preferred Stock (each, a "Holder" and collectively, the "Holders")). Each
share of Preferred Stock shall have a par value of $.01 per share and a stated
value equal to the sum of $10,000 plus all accrued and unpaid dividends to the
date of determination to the extent not previously paid in cash in accordance
with the terms hereof (the "Stated Value").

            Section b.  Dividends.

   2


            (i) Holders shall be entitled to receive, out of funds legally
available therefor, and the Company shall pay, cumulative dividends at the rate
per share (as a percentage of the Stated Value per share) of 6% per annum,
payable on each Conversion Date (as defined herein) for such share, in cash or
by accretion of the Stated Value. Subject to the terms and conditions herein,
the decision whether to accrete dividends hereunder to the Stated Value or to
pay for dividends in cash shall be at the discretion of the Company. The Company
shall provide the Holders written notice of its intention to accrete dividends
hereunder to the Stated Value or pay dividends in cash not less than ten days
prior to each Conversion Date for so long as shares of Preferred Stock are
outstanding (the Company may indicate in such notice that the election contained
in such notice shall continue for later periods until revised). Failure to
timely provide such written notice shall be deemed (if permitted hereunder) an
election by the Company to accrete dividends hereunder to the Stated Value.
Dividends on the Preferred Stock shall be calculated on the basis of a 360-day
year, shall accrue daily commencing on the Original Issue Date (as defined in
Section 8), and shall be deemed to accrue from such date whether or not earned
or declared and whether or not there are profits, surplus or other funds of the
Company legally available for the payment of dividends. Except as otherwise
provided herein, if at any time the Company pays less than the total amount of
dividends then accrued on account of the Preferred Stock, such payment shall be
distributed ratably among the Holders based upon the number of shares of
Preferred Stock held by each Holder. Any dividends to be paid in cash hereunder
that are not paid within three Trading Days (as defined in Section 8) following
a Conversion Date shall continue to accrue and shall entail a late fee, which
must be paid in cash, at the rate of 18% per annum or the lesser rate permitted
by applicable law (such fees to accrue daily, from the date such dividend is due
hereunder through and including the date of payment).

            (ii) Notwithstanding anything to the contrary contained herein and
subject to applicable legal requirements, the Company must pay dividends in cash
if:

                  (1) the number of shares of Common Stock (as defined in
Section 8) at the time authorized, unissued and unreserved for all purposes is
insufficient to accrete such dividends to the Stated Value to permit conversion
in full of all outstanding Stated Value;

                  (2) after the Dividend Effectiveness Date (as defined in
Section 8), Underlying Shares (as defined in Section 8) (x) are not registered
for resale pursuant to an effective Underlying Shares Registration Statement (as
defined in Section 8) and (y) may not be sold without volume restrictions
pursuant to Rule 144(k) promulgated under the Securities Act (as defined in
Section 8), (if the Company is permitted and elects to pay dividends in shares
of Common Stock under this clause (ii) prior to the Dividend Effectiveness Date
and thereafter an Underlying Shares Registration Statement shall be declared
effective by the Commission (as defined in Section 8), the Company shall, within
three Trading Days after the date of such declaration of effectiveness, exchange
such Underlying Shares for shares of Common Stock that are free of restrictive
legends of any kind);



   3


                  (3) the Common Stock is not then listed or quoted on the
Nasdaq National Market (the "Nasdaq"), or on the New York Stock Exchange,
American Stock Exchange or Nasdaq SmallCap Market (each, a "Subsequent Market");
or

                  (4) the accretion of such dividends to the Stated Value and
subsequent conversions of all then outstanding Stated Value would result in a
violation of Section 5(a)(iii) or the rules of the Nasdaq or any other rules and
regulations governing any Subsequent Market on which the Common Stock is then
listed or quoted for trading.

            (iii) So long as any Preferred Stock shall remain outstanding,
neither the Company nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities (as defined in
Section 8), nor shall the Company directly or indirectly pay or declare any
dividend or make any distribution (other than a dividend or distribution
described in Section 5 or dividends due and paid in the ordinary course on
preferred stock of the Company at such times when the Company is in compliance
with its payment and other obligations hereunder) upon, nor shall any
distribution be made in respect of, any Junior Securities, nor shall any monies
be set aside for or applied to the purchase or redemption (through a sinking
fund or otherwise) of any Junior Securities or shares pari passu with the
Preferred Stock.

            Section c. Voting Rights. Except as otherwise provided herein and as
otherwise required by law, the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the Company
shall not, without the affirmative vote of the Holders of a majority of the
shares of the Preferred Stock then outstanding, i. alter or change adversely the
powers, preferences or rights given to the Preferred Stock or alter or amend
this Certificate of Designation, ii. authorize or create any class of stock
ranking as to dividends or distribution of assets upon a Liquidation (as defined
in Section 4) senior to or otherwise pari passu with the Preferred Stock, iii.
amend its certificate or articles of incorporation or other charter documents so
as to affect adversely any rights of the Holders, iv. increase the authorized
number of shares of Preferred Stock, or (e) enter into any agreement with
respect to the foregoing.


            Section d. Liquidation. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a "Liquidation"),
the Holders shall be entitled to receive out of the assets of the Company,
whether such assets are capital or surplus, for each share of Preferred Stock an
amount equal to the Stated Value per share before any distribution or payment
shall be made to the holders of any Junior Securities, and if the assets of the
Company shall be insufficient to pay in full such amounts, then the entire
assets to be distributed to the Holders shall be distributed among the Holders
ratably in accordance with the respective amounts that would be payable on such
shares if all amounts payable thereon were paid in full. A sale, conveyance or
disposition of 50% or more of the assets of the Company or the effectuation by
the Company of a transaction or series of related transactions in which more
than 33% of the voting power of the Company is disposed of, or a consolidation
or merger of the Company with or into any other company or companies into one or
more companies not wholly-owned by the Company shall not be treated as a
Liquidation, but instead shall be subject to the provisions of Section 5. The
Company
   4

shall mail written notice of any such Liquidation, not less than 45 days
prior to the payment date stated therein, to each record Holder.

            Section e.  Conversion.

            i.(i) Conversions at Option of Holder. Each share of Preferred Stock
shall be convertible into shares of Common Stock (subject to the limitations set
forth in Section (a)(iii)) at the Conversion Ratio (as defined in Section 8), at
the option of the Holder, at any time and from time to time from and after the
Original Issue Date. Holders shall effect conversions by providing the Company
with the form of conversion notice attached hereto as Exhibit A (a "Holder
Conversion Notice"). Each Holder Conversion Notice shall specify the number of
shares of Preferred Stock to be converted, the number of shares of Preferred
Stock owned prior to the conversion at issue, number of shares of Preferred
Stock owned subsequent to the conversion at issue and the date on which such
conversion is to be effected, which date may not be prior to the date the Holder
delivers such Conversion Notice by facsimile (the "Holder Conversion Date"). The
number of shares of Preferred Stock shown as owned by the Holder prior to and
giving effect to a conversion shall control absent manifest or mathematical
error. If no Holder Conversion Date is specified in a Holder Conversion Notice,
the Holder Conversion Date shall be the date that such Holder Conversion Notice
is deemed delivered hereunder. To effect conversions of Preferred Stock, a
Holder shall not be required to surrender the certificate(s) representing such
shares of Preferred Stock to the Company unless all of the shares of Preferred
Stock represented thereby are so converted.

                  (ii) Conversion At Option of the Company. If at any time after
the Effective Date, the Closing Price for 20 consecutive Trading Days exceeds
130% of Conversion Price on the Original Issue Date (subject to equitable
adjustment for stock splits, recombinations and similar events pursuant to
Section 4(c)(ii)), the Company may require the Holder to convert all or any
portion of the Preferred Stock (subject to the limitations set forth in Section
5(a)(iii)) at the Conversion Ratio. provided, that the Company shall not be
permitted to deliver a Company Conversion Notice (as defined below) at any time
when the Underlying Securities Registration Statement is not then effective or
shares of Common Stock are not actively traded on the Nasdaq National Market
("NASDAQ") or listed or quoted for trading on the New York Stock Exchange,
American Stock Exchange or Nasdaq SmallCap Market (each, a "Subsequent Market")
and provided further that the Closing Price must equal or exceed the price
required pursuant to this sentence on the Company Conversion Date. The Company
shall effect such conversion by delivering to the Holder a written notice in the
form attached hereto as Exhibit B (the "Company Conversion Notice"), which
Company Conversion Notice, once given, shall be irrevocable. Each Company
Conversion Notice shall specify the number of shares of Preferred Stock to be
converted. The date of delivery of the Company Conversion Notice is referred to
herein as the "Company Conversion Date". A Holder Conversion Notice and a
Company Conversion Notice may sometimes be referred to as a "Conversion Notice".
A Holder Conversion Date and a Company Conversion Date may sometimes be referred
to as a "Conversion Date".


                  (iii) Certain Conversion Restrictions.
   5
                  (A) A Holder may not convert or be required to convert shares
of Preferred Stock or receive shares of Common Stock as payment of dividends
hereunder to the extent such conversion or receipt of such dividend payment
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act (as
defined in Section 8) and the rules promulgated thereunder) in excess of 4.999%
of the then issued and outstanding shares of Common Stock, including shares
issuable upon conversion of, and payment of dividends on, the shares of
Preferred Stock held by such Holder after application of this Section. Since the
Holder will not be obligated to report to the Company the number of shares of
Common Stock it may hold at the time of a conversion hereunder, unless the
conversion at issue would result in the issuance of shares of Common Stock in
excess of 4.999% of the then outstanding shares of Common Stock without regard
to any other shares which may be beneficially owned by the Holder or an
affiliate thereof, the Holder shall have the authority and obligation to
determine whether the restriction contained in this Section will limit any
particular conversion hereunder and to the extent that the Holder determines
that the limitation contained in this Section applies, the determination of
which portion of the shares of Preferred Stock are convertible shall be the
responsibility and obligation of the Holder. If the Holder has delivered a
Conversion Notice for shares of Preferred Stock that, without regard to any
other shares that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount hereunder, the Company
shall notify the Holder of this fact and shall honor the conversion for the
maximum number of shares of Preferred Stock permitted to be converted on such
Conversion Date in accordance with the periods described in Section 5(b) and, at
the option of the Holder, either retain shares of Preferred Stock tendered for
conversion in excess of the permitted amount hereunder for future conversions or
return such excess shares of Preferred Stock permitted to the Holder. The
provisions of this Section may be waived by a Holder (but only as to itself and
not to any other Holder) upon not less than 61 days prior notice to the Company.
Other Holders shall be unaffected by any such waiver.



                  (B) A Holder may not convert or be required to convert shares
of Preferred Stock or receive shares of Common Stock as payment of dividends
hereunder to the extent such conversion or receipt of such dividend payment
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act and
the rules promulgated thereunder) in excess of 9.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon conversion
of, and payment of dividends on, the shares of Preferred Stock held by such
Holder after application of this Section. Since the Holder will not be obligated
to report to the Company the number of shares of Common Stock it may hold at the
time of a conversion hereunder, unless the conversion at issue would result in
the issuance of shares of Common Stock in excess of 9.999% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the shares of Preferred Stock are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for shares of Preferred Stock that,
without regard to any other shares that the Holder or its affiliates may
beneficially own,

   6

would result in the issuance in excess of the permitted amount hereunder, the
Company shall notify the Holder of this fact and shall honor the conversion for
the maximum number of shares of Preferred Stock permitted to be converted on
such Conversion Date in accordance with the periods described in Section 5(b)
and, at the option of the Holder, either retain shares of Preferred Stock
tendered for conversion in excess of the permitted amount hereunder for future
conversions or return such excess shares of Preferred Stock permitted to the
Holder. The provisions of this Section may be waived by a Holder (but only as to
itself and not to any other Holder) upon not less than 61 days prior notice to
the Company. Other Holders shall be unaffected by any such waiver.


                  (C) If the Common Stock is then listed for trading on the
Nasdaq or the Nasdaq SmallCap Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company may not issue in
excess of 3,492,001.9 shares of Common Stock (which equals 19.999% of the number
of shares of Common Stock outstanding on the Trading Day immediately preceding
the Original Closing Date) upon conversions of Preferred Stock and exercise of
Redemption Warrants and Closing Warrants (each as defined in the Purchase
Agreement), in either case, at a price per share that is less than the Per Share
Market Value on the Trading Day immediately preceding the Original Issue Date
(such number of shares, the "Issuable Maximum"). Each Holder shall be entitled
to a portion of the Issuable Maximum equal to the quotient obtained by dividing
(x) the number of shares of Preferred Stock issued and sold to such Holder on
the Original Issue Date by (y) the number of shares of Preferred Stock issued
and sold by the Company on the Original Issue Date. If any Holder shall no
longer hold shares of Preferred Stock, then such Holder's remaining portion of
the Issuable Maximum shall be allocated pro-rata among the remaining Holders. If
on any Conversion Date (A) the shares of Common Stock are listed for trading on
the Nasdaq or Nasdaq SmallCap Market, (B) the Conversion Price then in effect is
such that the aggregate number of shares of Common Stock that would then be
issuable upon conversion in full of all then outstanding shares of Preferred
Stock and exercise in full of the Redemption Warrants and Closing Warrants,
together with any shares of Common Stock previously issued upon conversion of
shares of Preferred Stock and exercise in full of the Redemption Warrants and
Closing Warrants would exceed the Issuable Maximum, and (C) the Company shall
not have previously obtained the vote of shareholders (the "Shareholder
Approval"), if any, as may be required by the applicable rules and regulations
of the Nasdaq (or any successor entity) applicable to approve the issuance of
shares of Common Stock in excess of the Issuable Maximum pursuant to the terms
hereof, then the Company shall issue to the Holder requesting a conversion a
number of shares of Common Stock equal to such Holder's pro-rata portion (which
shall be calculated pursuant to the terms hereof) of the Issuable Maximum and,
with respect to the remainder of the aggregate Stated Value of the shares of
Preferred Stock then held by such Holder for which a conversion in accordance
with the Conversion Price would result in an issuance of shares of Common Stock
in excess of such Holder's pro-rata portion (which shall be calculated pursuant
to the terms hereof) of the Issuable Maximum (the "Excess Stated Value"), the
converting Holder shall have the option to require the Company to either: (1)
use its best efforts to obtain the Shareholder Approval applicable to such
issuance as soon as is possible, but in any event not later than the 60th day
after such request, or (2) pay cash to the converting Holder in an amount equal
to the Mandatory Redemption Amount (as defined in Section 8) for the Excess
Stated Value. If the converting Holder shall have elected the first option
pursuant to the immediately preceding sentence and the Company shall have failed

   7

to obtain the Shareholder Approval on or prior to the 60th day after such
request, then within three (3) days of such 60th day, the Company shall pay cash
to the converting Holder an amount equal to the Mandatory Redemption Amount for
the Excess Stated Value. If the Company fails to pay the Mandatory Redemption
Amount in full pursuant to this Section within seven days after the date
payable, the Company will pay interest thereon at a rate of 18% per annum or
such lesser maximum amount that is permitted to be paid by applicable law, to
the converting Holder, accruing daily from the Conversion Date until such
amount, plus all such interest thereon, is paid in full. The Company and the
Holder understand and agree that shares of Common Stock issued to and then held
by the Holder as a result of conversions of Preferred Stock shall not be
entitled to cast votes on any resolution to obtain Shareholder Approval pursuant
hereto.

            ii.(i) Not later than five Trading Days after each Conversion Date,
the Company will deliver to the Holder (A) a certificate or certificates which
shall be free of restrictive legends and trading restrictions (other than those
required by Section 3.1(b) of the Purchase Agreement) representing the number of
shares of Common Stock being acquired upon the conversion of shares of Preferred
Stock, and (B) a bank check in the amount of accrued and unpaid dividends (if
the Company has elected or is required to pay accrued dividends in cash). The
Company shall, upon request of the Holder, if available, use its best efforts to
deliver any certificate or certificates required to be delivered by the Company
under this Section electronically through the Depository Trust Corporation or
another established clearing corporation performing similar functions. If in the
case of any Conversion Notice such certificate or certificates are not delivered
to or as directed by the applicable Holder by the fifth Trading Day after the
Conversion Date, the Holder shall be entitled to elect by written notice to the
Company at any time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company shall
immediately return the certificates representing the shares of Preferred Stock
tendered for conversion.

                  (ii) If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 5(b)(i), by the fifth Trading
Day after the Conversion Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, $5,000 for each Trading Day after such
fifth Trading Day until such certificates are delivered. Nothing herein shall
limit a Holder's right to pursue actual damages for the Company's failure to
deliver certificates representing shares of Common Stock upon conversion within
the period specified herein and such Holder shall have the right to pursue all
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.


                  (iii) In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 5(b)(i), by the fifth Trading Day after the Conversion Date,
and if after such fifth Trading Day the Holder purchases (in an open market
transaction or otherwise) Common Stock to deliver in satisfaction of a sale by
such Holder of the Underlying Shares (with respect to which the Holder was
unable to utilize borrowed shares for such purpose due to the inability or
unwillingness of the broker of such Holder to loan such shares to such Holder)
which the Holder was entitled to receive upon such conversion (a "Buy-In"), then
the Company shall (A) pay in cash to the Holder the amount by which (x) the
Holder's total purchase price (including brokerage commissions, if any) for the
Common Stock so purchased

   8

exceeds (y) the product of (1) the aggregate number of shares of Common Stock
that such Holder was entitled to receive from the conversion at issue multiplied
by (2) the market price of the Common Stock at the time of the sale giving rise
to such purchase obligation and (B) at the option of the Holder, either return
the shares of Preferred Stock for which such conversion was not honored or
deliver to such Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its conversion and delivery
obligations under Section 5(b)(i). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of shares of Preferred Stock with respect to which the
market price of the Underlying Shares on the date of conversion totaled $10,000,
under clause (A) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In.
Nothing herein shall limit a Holder's right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the
Company's failure to timely deliver certificates representing shares of Common
Stock upon conversion of the shares of Preferred Stock as required pursuant to
the terms hereof.

            iii.(1) The conversion price for each share of Preferred Stock in
effect on any Conversion Date shall be $7.00 (the "Conversion Price").

                  (2) If the Company, at any time while any shares of Preferred
Stock are outstanding, shall (a) pay a stock dividend or otherwise make a
distribution or distributions on shares of its Junior Securities or pari passu
securities payable in shares of Common Stock, (b) subdivide outstanding shares
of Common Stock into a larger number of shares, (c) combine (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification and exchange of the Common Stock any
shares of capital stock of the Company, then the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
5(c)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.


                  (3) If the Company, at any time while any shares of Preferred
Stock are outstanding, shall issue rights, warrants or options to all holders of
Common Stock (and not to Holders) entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the Per Share Market Value
at the record date mentioned below, then the Conversion Price shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance of such rights,
warrants or options, plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares so offered would purchase
at such Per Share Market Value, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock offered for subscription or
purchase. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately

   9

after the record date for the determination of stockholders entitled to receive
such rights or warrants. However, upon the expiration of any right, warrant or
option to purchase shares of Common Stock the issuance of which resulted in an
adjustment in the Conversion Price pursuant to this Section 5(c)(iii), if any
such right, warrant or option shall expire and shall not have been exercised,
the Conversion Price shall immediately upon such expiration shall be recomputed
and effective immediately upon such expiration shall be increased to the price
which it would have been (but reflecting any other adjustments in the Conversion
Price made pursuant to the provisions of this Section 5 upon the issuance of
other rights or warrants) had the adjustment of the Conversion Price made upon
the issuance of such rights, warrants, or options been made on the basis of
offering for subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights, warrants or options
actually exercised.


                  (4) If the Company or any subsidiary thereof, as applicable
with respect to Common Stock Equivalents (as defined below), at any time while
any shares of Preferred Stock are outstanding, shall issue shares of Common
Stock or rights, warrants (including the issuance of shares of Common Stock upon
exercise of warrants issued to the Purchasers under the Purchase Agreement),
options or other securities or debt that is convertible into or exchangeable for
shares of Common Stock ("Common Stock Equivalents") entitling any Person to
acquire shares of Common Stock, at a price per share less than the Conversion
Price (if the holder of the Common Stock or Common Stock Equivalent so issued
shall at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights issued in connection with such issuance, be
entitled to receive shares of Common Stock at a price less than the Conversion
Price, such issuance shall be deemed to have occurred for less than the
Conversion Price), then, at the option of the Holder, the Conversion Price shall
be replaced with the conversion, exchange or purchase price for such Common
Stock or Common Stock Equivalents (including any reset provisions thereof) for
all subsequent conversions of Preferred Stock or such conversions as shall be
indicated by the Holder on its Conversion Notice. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued. The Company
shall notify the Holder in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalent subject to this section,
of the issuance of such Common Stock or Common Stock Equivalent (or of such
agent pursuant to which such Common Stock or Common Stock Equivalent may be
issued, indicating therein the applicable issuance price, or of applicable reset
price, exchange price, exercise price, conversion price and other pricing terms.
Notwithstanding to the contrary anything herein, this Section shall not apply
to: (i) issuance of options and warrants to employees, officers and directors of
the Company, and the issuance of Common Stock upon exercise of such options and
warrants granted under any stock option agreements and stock option plans
heretofore issued or adopted by the Company and any stock option plan
hereinafter duly adopted by the Company, (ii) issuance of Common Stock or Common
Stock Equivalents as part payment of the purchase price in (A) the acquisition
of assets or a business by the Company or (B) in connection with the acquisition
of goods or a license by the Company and (iii) as royalty payments in connection
with or under a firm underwritten primary offering of the Company's stock in
which the full purchase price is paid upon the first closing thereof (which
shall not include equity lines of credit or any similar financing structure).

   10

                  (5) If the Company, at any time while shares of Preferred
Stock are outstanding, shall distribute to all holders of Common Stock (and not
to Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
5(c)(ii)-(iv) above), then in each such case the Conversion Price at which each
share of Preferred Stock shall thereafter be convertible shall be determined by
multiplying the Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Per Share Market Value
determined as of the record date mentioned above, and of which the numerator
shall be such Per Share Market Value on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common Stock
as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holders of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.

                  (6) All calculations under this Section 5 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. The number
of shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.

                  (7) Whenever the Conversion Price is adjusted pursuant to
Section 5(c)(ii),(iii), (iv) or (v) the Company shall promptly mail to each
Holder, a notice setting forth the Fixed Conversion Price or the Conversion
Price (as applicable) after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.


                  (8) In case of any reclassification of the Common Stock, or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property (other than compulsory share exchanges
which constitute Change of Control Transactions), the Holders of the Preferred
Stock then outstanding shall have the right thereafter to convert such shares
only into the shares of stock and other securities, cash and property receivable
upon or deemed to be held by holders of Common Stock following such
reclassification or share exchange, and the Holders of the Preferred Stock shall
be entitled upon such event to receive such amount of securities, cash or
property as a holder of the number of shares of Common Stock of the Company into
which such shares of Preferred Stock could have been converted immediately prior
to such reclassification or share exchange would have been entitled. This
provision shall similarly apply to successive reclassifications or share
exchanges.

                  (9) In case of any merger or consolidation of the Company with
or into another Person, or sale by the Company of more than one-half of the
assets of the Company (on an as valued basis) in one or a series of related
transactions, a Holder shall have the right thereafter to: (A) convert its
shares of Preferred Stock into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and such Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and

   11

property as the shares of Common Stock into which such shares of Preferred Stock
could have been converted immediately prior to such merger, consolidation or
sales would have been entitled or (B) in the case of a merger or consolidation,
require the Company to pay to the Holder, in cash,120% of the Stated Value of
the shares of Preferred Stock then held by such Holder. The terms of any such
merger, sale or consolidation shall include such terms so as continue to give
the Holders the right to receive the securities, cash and property set forth in
this Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events. The rights set forth
in this Section 5(c)(ix) shall not alter the rights of a Holder set forth in
Section 7, provided, that, a Holder may only exercise the rights set forth in
this Section 5(c)(ix) or the rights set forth in Section 7 with respect to a
single event giving rise to such rights.


                  (10) If (a) the Company shall declare a dividend (or any other
distribution) on the Common Stock, (b) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock, (c) the
Company shall authorize the granting to all holders of Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of any class
or of any rights, (d) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company, or any compulsory share
of exchange whereby the Common Stock is converted into other securities, cash or
property, or (e) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company; then the
Company shall notify the Holders at their last addresses as they shall appear
upon the stock books of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange. Holders are entitled to convert shares of
Preferred Stock during the 20-day period commencing the date of such notice to
the effective date of the event triggering such notice.

            iv. The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of Preferred Stock, each as herein
provided, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders, not less than such number of shares of
Common Stock as shall be issuable (taking into account the provisions of Section
5(a) and Section 5(c)) upon the conversion of all outstanding shares of
Preferred Stock. The Company covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized, issued
and fully paid and nonassessable.

   12

            v. Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If any fraction of
an Underlying Share would, except for the provisions of this Section, be
issuable upon a conversion hereunder, the Company shall pay an amount in cash
equal to the Conversion Ratio multiplied by such fraction.

            vi. The issuance of certificates for Common Stock on conversion of
Preferred Stock shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder of such shares of Preferred Stock so converted.

            vii. Shares of Preferred Stock converted into Common Stock or
redeemed in accordance with the terms hereof shall be canceled and may not be
reissued.


            viii. Any and all notices or other communications or deliveries to
be provided by the Holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to the attention of the Chief Financial Officer of the Company
addressed to 499 Thornall Street, Edison, New Jersey 08837 Facsimile No.:
732-362-2123, attention Chief Financial Officer, or to such other address or
facsimile number as shall be specified in writing by the Company for such
purpose. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to each Holder at the facsimile telephone number or address of such
Holder appearing on the books of the Company, or if no such facsimile telephone
number or address appears, at the principal place of business of the Holder. Any
notice or other communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section prior to 6:30 p.m. (New York City time) (with
confirmation of transmission), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date
(with confirmation of transmission), (iii) upon receipt, if sent by a nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given.

      Section f.  Optional Redemption.

            i. The Company shall have the right, subject to the provisions of
this Section 6, upon a 30 Trading Day prior written notice (an "Optional
Redemption Notice" and the date such Optional Redemption Notice is received by a
Holder, an "Optional Redemption Date") to the

   13

Holders, to redeem all or any portion of the shares of Preferred Stock which
have not previously been redeemed or for which Conversion Notices shall not have
been delivered, at a price equal to the Optional Redemption Price (as defined in
Section 8). The Company may only deliver an Optional Redemption Notice if: (1)
the number of shares of Common Stock at the time authorized, unissued and
unreserved for all purposes is sufficient to satisfy the Company's conversion
obligations of all shares of Preferred Stock then outstanding, (2) the
Underlying Shares then outstanding are registered for resale pursuant to an
effective Underlying Shares Registration Statement pursuant to which the Holders
are permitted to sell Underlying Shares or the Underlying Shares may be resold
without volume restrictions pursuant to Rule 144(k) promulgated under the
Securities Act, and (3) the Common Stock is listed for trading on the Nasdaq or
on a Subsequent Market. In order for an Optional Redemption Notice to remain in
effect subsequent to the Optional Redemption Date, each of clauses (i) - (iii)
of the immediately preceding sentence must be true during the entire 30 Trading
Days between the Optional Redemption Date and the date of payment of the
Optional Redemption Price. The entire Optional Redemption Price shall be paid in
cash. A Holder may convert (and the Company shall honor such conversions in
accordance with the terms hereof) any or all of the shares of Preferred Stock
subject to an Optional Redemption Notice delivered for conversion on or prior to
the 30th Trading Day following the Optional Redemption Date.


            ii. Failure by the Company to pay any portion of the Optional
Redemption Price on the 30th Trading Day following an Optional Redemption Date
shall, at the option of the Holder subject thereto, result in the invalidation
ab initio of the unpaid portion of such optional redemption, and,
notwithstanding anything herein to the contrary, the Company shall thereafter
have no further rights to optionally redeem any shares of Preferred Stock. In
such event, the Company shall, at the option of the Holder, either, (i) not
later than three Trading Days from receipt of Holder's request for such
election, return to the Holder all of the shares of Preferred Stock for which
such Optional Redemption Price has not been paid in full (the "Unpaid Redemption
Shares") or (ii) convert all or any portion of the Unpaid Redemption Shares in
which event the Per Share Market Value for such shares shall be the lower of the
Per Share Market Value calculated on the date the Optional Redemption Price was
originally due and the Per Share Market Value as of the Holder's written demand
for conversion. If the Holder elects option (ii) above, the Company shall within
three Trading Days of its receipt of such election deliver to the Holder the
shares of Common Stock issuable upon conversion of the Unpaid Redemption Shares
subject to such Holder conversion demand and otherwise perform its obligations
hereunder with respect thereto.

            Section g.  Redemption Upon Triggering  Events.

            (a) Upon the occurrence of a Triggering Event, each Holder shall (in
addition to all other rights it may have hereunder or under applicable law),
have the right, exercisable at the sole option of such Holder, to require the
Company to redeem all or a portion of the Preferred Stock and such shares of
Common Stock as described below then held by such Holder for a redemption price,
in cash, equal to the sum of (i) the Mandatory Redemption Amount plus (ii) the
product of (A) the number of Underlying Shares issued in respect of conversions
of shares of Preferred Stock hereunder within thirty Trading Days of the
Holder's demand for redemption pursuant to this Section

   14

6, and then held by the Holder and (B) the Closing Price on the date such
redemption is demanded or the date the redemption price hereunder is paid in
full, whichever is greater (such sum, the "Redemption Price"). The Redemption
Price shall be due and payable within five Trading Days of the date on which the
notice for the payment therefor is provided by a Holder. If the Company fails to
pay the Redemption Price hereunder in full pursuant to this Section on the date
such amount is due in accordance with this Section, the Company will pay
interest thereon at a rate of 18% per annum (or the lesser amount permitted by
applicable law), accruing daily from such date until the Redemption Price, plus
all such interest thereon, is paid in full. For purposes of this Section, a
share of Preferred Stock is outstanding until such date as the Holder shall have
received Underlying Shares upon a conversion (or attempted conversion) thereof
that meets the requirements hereof.

            A "Triggering Event" means any one or more of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):

                  (i) the failure of an Underlying Shares Registration Statement
to be declared effective by the Commission on or prior to the 180th day after
the Original Issue Date;


                  (ii) if, during the Effectiveness Period, the effectiveness of
the Underlying Shares Registration Statement lapses for any reason for more than
an aggregate of twenty Trading Days (which need not be consecutive Trading
Days), or the Holder shall not be permitted to resell Registrable Securities
under the Underlying Shares Registration Statement for more than an aggregate of
twenty Trading Days (which need not be consecutive Trading Days);

                  (iii) the Company shall fail for any reason to deliver
certificates representing Underlying Shares issuable upon a conversion hereunder
that comply with the provisions hereof prior to the tenth Trading Days after the
Conversion Date or the Company shall provide notice to any Holder, including by
way of public announcement, at any time, of its intention not to comply with
requests for conversion of any shares of Preferred Stock in accordance with the
terms hereof;

                  (iv) the Company shall be a party to any Change of Control
Transaction, shall agree to sell (in one or a series of related transactions)
more than 33% of its assets or shall redeem more than a de minimis number of
Common Stock or other Junior Securities (other than redemptions of Underlying
Shares);

                  (v) an Event (as defined in the Registration Rights Agreement)
shall not have been cured to the satisfaction of the Holders prior to the
expiration of 60 days from the Event Date (as defined in the Registration Rights
Agreement) relating thereto (other than an Event resulting from a failure of an
Underlying Shares Registration Statement to be declared effective by the
Commission on or prior to the 180th day after the Original Issue Date, which
shall be covered by Section 6(a)(i));

   15

                  (vi) the Company shall fail for any reason to pay in full the
amount of cash due pursuant to a Buy-In within twenty-one days after notice
therefor is delivered hereunder or shall fail to pay all amounts owed on account
of an Event within twenty-one days of the date due;

                  (vii) the Company shall fail to have available a sufficient
number of authorized and unreserved shares of Common Stock to issue to such
Holder upon a conversion hereunder; or

                  (viii) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any breach of
the Transaction Documents (as defined in Section 8) that may result in a
Material Adverse Effect (as defined in the Purchase Agreement), and such failure
or breach shall not, if subject to the possibility of a cure by the Company,
have been remedied within ten Business Days after the date on which written
notice of such failure or breach shall have been given.


            Section h.  Definitions.  For the purposes hereof, the following
terms shall have the following meanings:

            "Change of Control Transaction" means the occurrence of any of (i)
an acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 40% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's board of directors which is
not approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), (iii) the merger of the Company with or into
another entity that is not wholly-owned by the Company, consolidation or sale of
33% or more of the assets of the Company in one or a series of related
transactions, or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).

            "Closing Price" means on any particular date (a) the closing sale
price per share of Common Stock on such date on the Nasdaq or on such Subsequent
Market on which the shares of Common Stock are then listed or quoted, or if
there is no such price on such date, then the closing sale price on the Nasdaq
or on such Subsequent Market on the date nearest preceding such date, or (b) if
the shares of Common Stock are not then listed or quoted on the Nasdaq or a
Subsequent Market, the closing sale price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the shares of
Common Stock are not then reported by the National Quotation Bureau Incorporated
(or

   16

similar organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the Holder, or (d) if the Common Stock are not
then publicly traded the fair market value of a share of Common Stock as
determined by an Appraiser selected in good faith by the Holders of a majority
of the shares of the Preferred Stock.

            "Commission" means the Securities and Exchange Commission.

            "Common Stock" means the Company's common stock, par value $.01 per
share, and stock of any other class into which such shares may hereafter have
been reclassified or changed.

            "Conversion Ratio" means, at any time, a fraction, the numerator of
which is Stated Value (or Excess Stated Value, as the case may be) and the
denominator of which is the Conversion Price at such time.


            "Dividend Effectiveness Date" means the earlier to occur of (x) the
Effectiveness Date (as defined in the Registration Rights Agreement) and (y) the
Effective Date.

            "Effective Date" means the date that the Underlying Shares
Registration Statement is declared effective by the Commission.

            "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

            "Junior Securities" means the Common Stock and all other equity or
equity equivalent securities of the Company other than those securities that are
outstanding on the Original Issue Date and which are explicitly senior in rights
or liquidation preference to the Preferred Stock.

            "Mandatory Redemption Amount" for each share of Preferred Stock
means the sum of (i) the greater of (A) 120% of the Stated Value and (B) the
product of (a) the Closing Price on the Trading Day immediately preceding (x)
the date of the Triggering Event or the Conversion Date, as the case may be, or
(y) the date of payment in full by the Company of the applicable redemption
price, whichever is greater, and (b) the Conversion Ratio calculated on the date
of the Triggering Event, or the Conversion Date, as the case may be, and (ii)
all other amounts, costs, expenses and liquidated damages due in respect of such
share of Preferred Stock.

            "Optional Redemption Price" shall be sum of (i) 105% of the Stated
Value of the shares of Preferred Stock to be redeemed pursuant to Section 6 and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such shares of Preferred Stock.

            "Original Issue Date" shall mean the date of the first issuance of
any shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.

   17

            "Per Share Market Value" means on any particular date (a) the
closing bid price per share of Common Stock on such date on the Nasdaq or on
such Subsequent Market on which the shares of Common Stock are then listed or
quoted, or if there is no such price on such date, then the closing bid price on
the Nasdaq or on such Subsequent Market on the date nearest preceding such date,
or (b) if the shares of Common Stock are not then listed or quoted on the Nasdaq
or a Subsequent Market, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the shares of
Common Stock are not then reported by the National Quotation Bureau Incorporated
(or similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant conversion
period, as determined in good faith by the Holder, or (d) if the Common Stock
are not then publicly traded the fair market value of a share of Common Stock as
determined by an Appraiser selected in good faith by the Holders of a majority
of the shares of the Preferred Stock.


            "Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.

            "Purchase Agreement" means the Convertible Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, to which the Company and the
original Holders are parties, as amended, modified or supplemented from time to
time in accordance with its terms.

            "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, to which the Company and the
original Holders are parties, as amended, modified or supplemented from time to
time in accordance with its terms.

            "Securities Act" means the Securities Act of 1933, as amended.

            "Trading Day" means (a) a day on which the shares of Common Stock
are traded on the Nasdaq or on such Subsequent Market on which the shares of
Common Stock are then listed or quoted, or (b) if the shares of Common Stock are
not listed on the Nasdaq or a Subsequent Market, a day on which the shares of
Common Stock are traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the shares of Common Stock are not quoted on the OTC
Bulletin Board, a day on which the shares of Common Stock are quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); provided, that in the event that the shares of Common Stock
are not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading
Day shall mean any day except Saturday, Sunday and any day which shall be a
legal holiday or a day on which banking institutions in the State of New York
are authorized or required by law or other government action to close.

            "Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.

   18

            "Underlying Shares" means, collectively, the shares of Common Stock
into which the shares of Preferred Stock are convertible in accordance with the
terms hereof.

            "Underlying Shares Registration Statement" means a registration
statement that meets the requirements of the Registration Rights Agreement and
registers the resale of all Underlying Shares by the Holder, who shall be named
as a "selling stockholder" thereunder.


   19



                                    EXHIBIT A

                              NOTICE OF CONVERSION

(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)

The undersigned hereby elects to convert the number of shares of 6% Series A
Convertible Preferred Stock indicated below, into shares of common stock, par
value $.01 per share (the "Common Stock"), of SeraNova, Inc., a New Jersey
corporation (the "Company"), according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
Holder for any conversion, except for such transfer taxes, if any.





                       
Conversion calculations:   Date to Effect Conversion

                           -----------------------------------------------------
                           Number of shares of Preferred Stock owned prior to
                           Conversion

                           -----------------------------------------------------
                           Number of shares of Preferred Stock to be Converted

                           -----------------------------------------------------
                           Stated Value of shares of Preferred Stock to be
                           Converted

                           -----------------------------------------------------
                           Number of shares of Common Stock to be Issued

                           -----------------------------------------------------
                           Applicable Conversion Price

                           -----------------------------------------------------
                           Number of shares of Preferred Stock subsequent to
                           Conversion

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

                           -----------------------------------------------------
                           Name

                           -----------------------------------------------------
                           Address




                                          3    The Certificate of Incorporation
of the corporation is hereby amended so that the designation and number of each
class and series acted upon in the aforesaid resolution, and the relative
rights, preferences and limitations of each such class and series, are as stated
in the aforesaid resolution.


   20


Dated this 26th day of September, 2000.


SeraNova, Inc.

By: /s/ Ravi Singh
   ------------------------------
      (Signature)

Name: Ravi Singh

Title: Executive Vice President and Chief Financial Officer

EX-5

   1
                                                                       EXHIBIT 5

                            CARTER, LEDYARD & MILBURN
                               Counsellors at Law
                                  2 Wall Street
                             New York, NY 10005-2072
                                        -
                               Tel (212) 732-3200
                               Fax (212) 732-3232


                                    November 9, 2000


SeraNova, Inc.
499 Thornall Street
Edison, New Jersey  08837


                Re: SeraNova, Inc.
                    Registration Statement on Form S-1

Ladies and Gentlemen:

      We have acted as counsel for SeraNova, Inc., a New Jersey corporation
(the "Company"),  in connection with the filing of this Registration
Statement on Form S-1 under the Securities Act  of 1933 relating to the
following 3,981,470 shares of the common stock, par value $0.01 per share of
the Company:

            1.    831,470 outstanding shares (the "Outstanding Shares"),
      which were issued in March 2000 to Evansville Limited, Strong River
      Investments, Inc. ("Strong River"), SSB Investments Ltd.,
      Ampal-American Israel Corporation and NSA Investments II LLC pursuant
      to five Stock Purchase Agreements made as of March 15, 2000 (the
      "Agreements");

            2.    2,840,000 shares (the "Conversion Shares") issuable upon
      conversion of the 800 outstanding shares of the Company's 6% series A
      convertible preferred stock (the "Preferred Shares");

            3.    150,000 shares (the "Warrant Shares") issuable upon
      exercise of the Warrants dated September 29, 2000 (the "Warrants"),
      issued to Strong River and Montrose Investments Ltd. ("Montrose"); and

   2

            4.    160,000 shares (the "Redemption Warrant Shares") issuable
      upon exercise of the Redemption Warrants dated September 29, 2000 (the
      "Redemption Warrants"), issued to Strong River and Montrose.
      In connection with the issuance of this opinion, we have examined:


            A.    The certificate of incorporation of the Company, including
      the Certificate of Designation providing for the Preferred Shares
      (the "Certificate of Designation");

            B.    The by-laws of the Company;

            C.    The Agreements;

            D.    The Convertible Preferred Stock Purchase Agreement dated as
      of September 26, 2000, among the Company, Strong River and Montrose,
      pursuant to which the Preferred Shares were issued;

            E.    The Warrants;

            F.    The Redemption Warrants; and

            G.    Such other documents as we have deemed necessary as a basis
      for this opinion.

In such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the
conformity with the originals of all documents submitted to us as copies.

      Based on the foregoing, we are of the opinion that:

            I.    The Outstanding Shares have been legally issued and are
      fully-paid and non-assessable.

            II.   The Conversion Shares, upon their issuance in accordance
      with the terms of the Certificate of Designation, will be legally
      issued, fully-paid and non-assessable.  In giving this opinion, we have
      assumed that (a) all the outstanding Preferred Shares will remain
      outstanding for five years, (b) all accrued dividends on the Preferred
      Shares will be added to the stated value of the Preferred Shares as
      provided in the Certificate of Designation, and (c) the applicable
      Conversion Price (as defined in the Certificate of Designation) will be
      not more than $3.50.

   3
SeraNova, Inc.                                                             -3-


            III.  The Warrant Shares, upon their issuance in accordance with
      the terms of the Warrants, will be legally issued, fully-paid and
      non-assessable.

            IV.   The Redemption Warrant Shares, upon their issuance in
      accordance with the terms of the Redemption Warrants, will be legally
      issued, fully-paid and non-assessable.

      No opinion is expressed herein as to any laws other than the laws of
the United States of America, the laws of the State of New York and the New
Jersey Business Corporation Act.

      We hereby consent to the references to our name under the caption
"Legal Matters" in the prospectus forming part of this Registration
Statement, and to the filing of this opinion as an exhibit to this
Registration Statement.  In giving this consent, we do not acknowledge that
we come within the category of persons whose consent is required by the
Securities Act of 1933 or by the rules and regulations promulgated thereunder.

                                    Very truly yours,


                                    /s/ Carter, Ledyard & Milburn

JEA:lrh

EX-10.18

   1
                                                                 EXHIBIT 10.18


- --------------------------------------------------------------------------------
                 CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

                                      Among

                                 SERANOVA, INC.

                                       and

                         THE INVESTORS SIGNATORY HERETO




                         Dated as of September 26, 2000
- --------------------------------------------------------------------------------








   2


      CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"),
dated as of September 26, 2000, among SeraNova, Inc., a New Jersey
corporation (the "Company"), and the investors signatory hereto (each such
investor is a "Purchaser" and all such investors are, collectively, the
"Purchasers").

      WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933 (the
"Securities Act"), as amended, the Company desires to issue and sell to the
Purchasers and the Purchasers, severally and not jointly, desire to purchase
from the Company shares of the Company's 6% Series A Convertible Preferred
Stock, par value $.01 per share (the "Preferred Stock"), which are
convertible into shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), and certain other securities of the Company as
more fully described in this Agreement.

      NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers
agree as follows:


                                    ARTICLE I
                                PURCHASE AND SALE

      1.1   The Closing.

            (a)   The Closing  (i) Subject to the terms and conditions set
forth in this Agreement the Company shall issue and sell to the Purchasers
and the Purchasers shall, severally and not jointly, purchase an aggregate of
800 shares of Preferred Stock ("Shares") and certain Common Stock purchase
warrants as described below in this Section for an aggregate purchase price
of $8,000,000.  The closing of the purchase and sale of such securities (the
"Closing") shall take place at the offices of Robinson Silverman Pearce
Aronsohn & Berman LLP ("Robinson Silverman"), 1290 Avenue of the Americas,
New York, New York 10104, immediately following the execution hereof or such
later date as the parties shall agree.  The date of the Closing is
hereinafter referred to as the "Closing Date."


                                       -1-
   3


            (ii)  At the Closing, the parties shall deliver or shall cause to
be delivered the following: (A) the Company shall deliver to each Purchaser
(1) a stock certificate registered in the name of such Purchaser,
representing a number of Shares equal to the quotient obtained by dividing
the purchase price indicated below such Purchaser's name on the signature
page to this Agreement by 10,000, (2) a Common Stock purchase warrant, in the
form of Exhibit D-1, registered in the name of such Purchaser, pursuant to
which such Purchaser shall have the right to acquire the  number of Warrant
Shares (as defined in the Warrant) indicated below such Purchaser's name on
the signature page to this Agreement, pursuant to the terms thereof
(collectively, the "Closing Warrants"), (3) a Common Stock purchase warrant,
in the form of Exhibit D-2, registered in the name of such Purchaser,
pursuant to which, in the event that the Company shall redeem the Shares,
such Purchaser shall have the right to acquire the  number of Warrant Shares
indicated below such Purchaser's name on the signature page to this
Agreement, pursuant to the terms thereof (collectively, the "Redemption
Warrants", and together with the Closing Warrants, the "Warrants"),(3) the
legal opinion of Carter, Ledyard & Milburn, outside counsel to the Company in
the form of Exhibit C, (4) an executed Registration Rights Agreement, dated
as of the date hereof, among the Company and the Purchasers, in the form of
Exhibit B (the "Registration Rights Agreement"), and (5) Transfer Agent
Instructions, in the form of Exhibit E, executed by the Company and delivered
to and acknowledged by the Company's transfer agent (the "Transfer Agent
Instructions"); and (B) each Purchaser shall deliver (1) the purchase price
indicated below such Purchaser's name on the signature page to this Agreement
in United States dollars in immediately available funds by wire transfer to
an account designated in writing by the Company for such purpose, and (2) an
executed Registration Rights Agreement.

      1.2   Terms of Preferred Stock.  The Preferred Stock shall have the
rights preferences and privileges set forth in Exhibit A, and shall be
incorporated into a Certificate of Designation (the "Certificate of
Designation") to be filed prior to the Closing by the Company with the
Secretary of State of New Jersey, in form and substance mutually agreed to by
the parties.

      1.3   Certain Defined Terms. For purposes of this Agreement, "Original
Issue Date" and "Trading Day" shall have the meanings set forth in Exhibit A
and "Business Day" shall mean any day except Saturday, Sunday and any day
which shall be a federal legal holiday or a day on which banking institutions
in the State of New York or the State of New Jersey are authorized or
required by law or other governmental action to close.  A "Person" means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.


                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

      2.1   Representations and Warranties of the Company.  The Company
hereby makes the following representations and warranties to the Purchasers:



                                       -2-
   4


            (a)   Organization and Qualification.  The Company is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of New Jersey, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted.  The Company has no subsidiaries other than
as set forth in Schedule 2.1(a) (collectively, the "Subsidiaries").  Each of
the Subsidiaries is an entity, duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization (as applicable), with the requisite power
and authority to own and use its properties and assets and to carry on its
business as currently conducted.  Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing,
as the case may be, could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of the Securities
(as defined below) or any of this Agreement, the Registration Rights
Agreement, the Certificate of Designation, the Transfer Agent Instructions or
the Warrants (collectively, the "Transaction Documents"), (y) have or result
in a material adverse effect on the results of operations, assets, prospects,
or condition (financial or otherwise) of the Company and the Subsidiaries,
taken as a whole, or (z) adversely impair the Company's ability to perform
fully on a timely basis its obligations under any of the Transaction
Documents (any of (x), (y) or (z), a "Material Adverse Effect").

            (b)   Authorization; Enforcement.  The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise
to carry out its obligations thereunder.  The execution and delivery of each
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company.  Each of the Transaction Documents has been duly executed by the
Company and, when delivered (or filed, as the case may be) in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation,
by-laws or other organizational or charter documents.

            (c)   Capitalization.  The number of authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 2.1(c).
Except as disclosed in Schedule 2.1(c), the Company owns all of the capital
stock of each Subsidiary.  No shares of Common Stock are entitled to
preemptive or similar rights, nor is any holder of the securities of the
Company or any Subsidiary entitled to preemptive or similar rights arising
out of any agreement or understanding with the Company or any Subsidiary by
virtue of any of the Transaction Documents.  Except as a result of the
purchase and sale of the Shares and the Warrants and except as disclosed in
Schedule 2.1(c), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings, or arrangements by which
the Company or any Subsidiary is or may become bound to issue additional
shares of Common Stock, or securities or rights convertible or exchangeable
into shares of Common


                                       -3-
   5


Stock. The issue and sale of the Shares, Warrants or Underlying Shares (as
hereinafter defined) will not obligate the Company to issue shares of Common
Stock or other securities to any Person other than the Purchaser and will not
result in a right of any holder of Company's securities to adjust the exercise
or conversion or reset price under such securities.


            (d)   Issuance of the Shares and the Warrants.  The Shares and
the Warrants are duly authorized and, when issued and paid for in accordance
with the terms hereof, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of first
refusal of any kind (collectively, "Liens") other than liens created by the
holders thereof.  The Company has on the date hereof and will, at all times
while the Shares and the Warrants are outstanding, maintain an adequate
reserve of duly authorized shares of Common Stock, reserved for issuance to
the holders of the Shares and the Warrants, to enable it to perform its
conversion, exercise and other obligations under this Agreement, the
Certificate of Designation and the Warrants.  Such number of reserved and
available shares of Common Stock is not less than the sum of (i) the number
of shares of Common Stock issuable upon conversion in full of the outstanding
Shares, assuming for such purposes that such Shares are outstanding for five
years, and that all accrued dividends are added to the Stated Value (as
defined in the Certificate of Designation), and (ii) the number of shares of
Common Stock issuable upon exercise in full of the Warrants, assuming for
such purposes that (1) the Closing Warrants are exercised in full on the
Closing Date at an exercise price equal to 50% of the  closing sales price of
the Common Stock (as reported by Bloomberg L.P. or the successor to its
function of reporting share prices) on the Closing Date, the Filing Date or
the Trading Day preceding the date the Company files an acceleration request
with the Commission relating to the Registration Statement, whichever is
lowest, and (2) the Redemption Warrants fully vest and are exercisable in
full on the Closing Date.(such number of shares of Common Stock as
contemplated in clauses (i)-(ii), the "Initial Minimum").  All such
authorized shares of Common Stock shall be duly reserved for issuance to the
holders of the Shares and the Warrants.  The shares of Common Stock issuable
upon conversion of the Shares and upon exercise of the Warrants are
collectively referred to herein as the "Underlying Shares."  The Shares, the
Warrants and the Underlying Shares are collectively referred to herein as,
the "Securities."  When issued in accordance with the Certificate of
Designation and the Warrants, the Underlying Shares will be duly authorized,
validly issued, fully paid and nonassessable, free and clear of all Liens
other than liens created by the holders thereof.

            (e)   No Conflicts.  The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated thereby do not and will not (i) conflict
with or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other charter documents
(each as amended through the date hereof), or (ii) subject to obtaining the
Required Approvals (as defined below), conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any agreement, credit facility, debt or other instrument or other
understanding to which the Company or any Subsidiary is a party or by which
any property or asset of the Company or any Subsidiary is bound or affected,
or (iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental
authority to


                                       -4-
   6

which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate, have or
result in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.


            (f)   Filings, Consents and Approvals.  Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than (i) the filing of the
Certificate of Designation with the Secretary of State of New Jersey, (ii)
the filings required pursuant to Section 3.9, (iii) the filing with the
Securities and Exchange Commission (the "Commission") of a registration
statement meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Underlying Shares by the Purchasers
(the "Underlying Shares Registration Statement"), (iv) the application(s) to
the Nasdaq National Market ("NASDAQ") for the listing of the Underlying
Shares for trading on the NASDAQ (and with any other national securities
exchange  or market on which the Common Stock is then listed) in the time and
manner required thereby, (v) applicable Blue Sky filings, and (vi) in all
other cases where the failure to obtain such consent, waiver, authorization
or order, or to give such notice or make such filing or registration could
not have or result in, individually or in the aggregate, a Material Adverse
Effect (collectively, the "Required Approvals").

            (g)   Litigation; Proceedings.   There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
of its Subsidiaries or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an
"Action") which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, individually or in the
aggregate, have or result in a Material Adverse Effect.  Except as described
in the SEC Documents, (i) neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action
involving (A) a claim of violation of or liability under federal or state
securities laws or (B) a claim of breach of fiduciary duty; (ii) the Company
does not have pending before the Commission any request for confidential
treatment of information and the Company has no knowledge of any expected
such request that would be made prior to the Effectiveness Date (as defined
in the Registration Rights Agreement); and (iii) there has not been, and to
the best of the Company's knowledge there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or
former director or officer of the Company.


            (h)   No Default or Violation.  Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has
occurred which has not been waived which, with notice or lapse of time or
both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default


                                       -5-
   7

under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, (ii) is in violation of any order
of any court, arbitrator or governmental body, or (iii) is in violation of
any statute, rule or regulation of any governmental authority, in each case
of clauses (i), (ii) or (iii) above, except as could not individually or in
the aggregate, have or result in a Material Adverse Effect.

            (i)   Private Offering.  Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers
as contemplated hereby are exempt from the registration requirements of the
Securities Act.  Neither the Company nor any Person acting on its behalf has
taken or is, to the knowledge of the Company, contemplating taking any action
which could subject the offering, issuance or sale of the Securities to the
registration requirements of the Securities Act including soliciting any
offer to buy or sell the Securities by means of any form of general
solicitation or advertising.

            (j)   SEC Documents; Financial Statements.  The Company has filed
all reports required to be filed by it under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the
foregoing materials being collectively referred to herein as the "SEC
Documents" and, together with the Schedules to this Agreement, the
"Disclosure Materials") on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Documents prior to the
expiration of any such extension.  As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  All material agreements to which the Company is a party or
to which the property or assets of the Company are subject have been filed as
exhibits to the SEC Documents as required under the Exchange Act.  The
financial statements of the Company included in the SEC Documents comply in
all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the
time of filing.  Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified in
such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations
and cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.  Since June
30, 2000, except as specifically disclosed in the SEC Documents, (a) there
has been no event, occurrence or development that has or that could result in
a Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x) liabilities incurred in the ordinary
course of business consistent with past practice and (y) liabilities not
required to be reflected in the Company's financial statements pursuant to
GAAP or otherwise required to be disclosed in filings made with the
Commission, (c) the Company has not altered its method of



                                       -6-
   8

accounting or the identity of its auditors and (d) the Company has not declared
or made any payment or distribution of cash or other property to its
stockholders or officers or directors (other than in compliance with existing
Company stock option plans) with respect to its capital stock, or purchased,
redeemed (or made any agreements to purchase or redeem) any shares of its
capital stock.

            (k)   Investment Company.  The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.

            (l)   Certain Fees.  Except for certain fees payable to Oswestry
Research Co. by the Company, no fees or commissions will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement.  The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section
that may be due in connection with the transactions contemplated by this
Agreement.  The Company shall indemnify and hold harmless the Purchasers,
their employees, officers, directors, agents, and partners, and their
respective Affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses
suffered in respect of any such claimed or existing fees, as such fees and
expenses are incurred.

            (m)   Form S-1 Eligibility.  The Company is eligible to register
securities for resale with the Commission under Form S-1 promulgated under
the Securities Act.

            (n)   Seniority.  No class of equity securities of the Company is
senior to the Shares in right of payment, whether upon liquidation or
dissolution, or otherwise.

            (o)   Listing and Maintenance Requirements.  Except as set forth
in the SEC Documents, the Company has not, in the two years preceding the
date hereof received notice (written or oral) from the NASDAQ, any stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted) to the effect that the Company is not
in compliance with the listing or maintenance requirements of such exchange,
market or trading facility.  The Company is, and has no reason to believe
that it will not in the foreseeable future continue to be, in compliance with
all such listing and maintenance requirements.

            (p)   Patents and Trademarks.  The Company and its Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
rights which are necessary or material for use in connection with their
respective businesses as described in the SEC Documents  and which the
failure to so have would have a Material Adverse Effect (collectively, the
"Intellectual Property Rights").  Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or its Subsidiaries violates or infringes upon the rights of any
Person.  To the best knowledge of the Company, all such Intellectual Property
Rights are



                                       -7-
   9

enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights.

            (q)   Registration Rights; Rights of Participation. Except as
disclosed in Section 6(c) of the Registration Rights Agreement, the Company
has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority which have
not been satisfied. No Person, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents.

            (r)   Regulatory Permits.  The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Documents, except
where the failure to possess such permits could not, individually or in the
aggregate, have or result in a Material Adverse Effect ("Material Permits"),
and neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.

            (s)   Title.  The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them which is
material to the business of the Company and its Subsidiaries and good and
marketable title in all personal property owned by them which is material to
the business of the Company and its Subsidiaries, in each case free and clear
of all Liens, except for Liens as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of
such property by the Company and its Subsidiaries.  Any real property and
facilities held under lease by the Company and its Subsidiaries are held by
them under valid, subsisting and enforceable leases of which the Company and
its Subsidiaries are in compliance and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
Subsidiaries.

            (t)   Labor Relations.  No material labor problem exists or, to
the knowledge of the Company, is imminent with respect to any of the
employees of the Company.

            (u)   Shareholders Rights Plan. Neither the consummation of the
transactions contemplated hereby nor the issuance of the Underlying Shares
will cause the Purchasers to be deemed an "Acquiring Person" under any
existing or hereafter adopted shareholders rights plan or similar arrangement.

            (v)   Disclosure.   The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or its
agents or counsel with any information that constitutes or might constitute
material non-public information.  The Company understands and confirms that
the Purchasers shall be relying on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished by
or on behalf of the Company are true and correct in all material respects and
do not contain any untrue statement of a material fact or omit to state any



                                       -8-
   10

material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.


      2.2   Representations and Warranties of the Purchasers.  Each Purchaser
hereby for itself and for no other Purchaser represents and warrants to the
Company as follows:

            (a)   Organization; Authority.  Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder.  The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of
such Purchaser.  Each of this Agreement and the Registration Rights Agreement
has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms.

            (b)   Investment Intent.  Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and
not with a view to or for distributing or reselling such Securities or any
part thereof, without prejudice, however, to such Purchaser's right, subject
to the provisions of this Agreement, the Registration Rights Agreement and
the Warrants, at all times to sell or otherwise dispose of all or any part of
such Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws.  Nothing contained herein
shall be deemed a representation or warranty by such Purchaser to hold
Securities for any period of time.  Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business.  Such Purchaser
does not have any agreement or understanding, directly or indirectly, with
any Person to distribute the Securities.

            (c)   Purchaser Status.  At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is, and at each exercise
date under its respective Warrants, it will be, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.

            (d)   Experience of such Purchaser.  Such Purchaser, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.

            (e)   Ability of such Purchaser to Bear Risk of Investment.  Such
Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.

            (f)   Access to Information.  Such Purchaser acknowledges that it
has reviewed the Disclosure Materials and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities and the merits and risks of
investing in


                                       -9-
   11


the Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.

            (g)   General Solicitation.  Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice
or other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented
at any seminar or any other general solicitation or general advertisement.

            (h)   Reliance.  Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act and (ii) the availability of
such exemption, depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the foregoing representations and such
Purchaser hereby consents to such reliance.

            The Company acknowledges and agrees that no Purchaser makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
2.2.


                                   ARTICLE III
                         OTHER AGREEMENTS OF THE PARTIES


      3.1   Transfer Restrictions.  (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to
the Company or pursuant to an available exemption from or in a transaction
not subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws.  In
connection with any transfer of Securities other than pursuant to an
effective registration statement or to the Company, except as otherwise set
forth herein, the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company,
to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act.  Any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall have
the rights and obligations of a Purchaser under this Agreement and a Holder
under the Registration Rights Agreement.

            (b)   The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:



                                       -10-
   12

            NEITHER THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
      SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH
      THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
      ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
      ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
      REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
      APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
      COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL
      BE REASONABLY ACCEPTABLE TO THE COMPANY.

            Underlying Shares shall not contain the legend set forth above
nor any other legend at any time while an Underlying Shares Registration
Statement is effective under the Securities Act or the holder of any such
security is relying on Rule 144 promulgated under the Securities Act ("Rule
144") in connection with the resale of such Underlying Shares or, in the
event there is not an effective Underlying Shares Registration Statement, at
such time and Rule 144 is not then available, if, in the opinion of counsel
to the Company, such legend is not required under applicable requirements of
the Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission). The Company shall cause its counsel
to issue the legal opinion included in the Transfer Agent Instructions to the
Company's transfer agent on the day that the Underlying Shares Registration
Statement is declared effective by the Commission (the "Effective Date").
The Company agrees that, in the event any Underlying Shares are issued with a
legend in accordance with this Section 3.1(b), it will, within three (3)
Trading Days after request therefor by a Purchaser, provide such Purchaser
with a certificate or certificates representing such Underlying Shares, free
from such legend at such time as such legend would not have been required
under this Section 3.1(b) had such issuance occurred on the date of such
request.  The Company may not make any notation on its records or give
instructions to any transfer agent of the Company which enlarge the
restrictions of transfer set forth in this Section.

      3.2   Acknowledgment of Dilution.  The Company acknowledges that the
issuance of the Underlying Shares upon (i) conversion of the Shares in
accordance with the terms of the Certificate of Designation, and (ii)
exercise of the Warrants in accordance with their terms, will result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions.  The Company further
acknowledges that its obligation to issue Underlying Shares upon (x)
conversion of the Shares in accordance with the terms of the Certificate of
Designation, and (y) exercise of the Warrants in accordance with their terms,
is unconditional and absolute, subject to the limitations set forth herein,
in the Certificate of Designation or pursuant to the Warrants, regardless of
the effect of any such dilution.



                                       -11-
   13

      3.3   Furnishing of Information.  As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act.   As long as the Purchasers own
Securities, if the Company is not required to file reports pursuant to such
sections, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
such information as is required for the Purchasers to sell the Securities
under Rule 144 promulgated under the Securities Act.  The Company further
covenants that it will take such further action as any holder of Securities
may reasonably request, all to the extent required from time to time to
enable such Person to sell Underlying Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including in circumstances where an
exemption is available to the holder under the Securities Act causing its
attorneys to render and deliver any legal opinion required in order to permit
a Purchaser to receive Underlying Shares free of all restrictive legends and
to subsequently sell Underlying Shares under Rule 144 upon receipt of a
notice of an intention to sell or other form of notice having a similar
effect and related Form 144, brokers representation letter, sellers
representation letter and other documentation reasonably requested by such
counsel.  Upon the request of any such Person, the Company shall deliver to
such Person a written certification of a duly authorized officer as to
whether it has complied with such requirements.

      3.4   Integration.  The Company shall not, and shall use its best
efforts to ensure that, no Affiliate of the Company shall, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the
Securities to the Purchasers, or that would be integrated with the offer or
sale of the Securities for the purposes of the rules and regulations of
NASDAQ.

      3.5   Increase in Authorized Shares.  If on any date the Company would
be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from issuing (a) the number of Underlying
Shares as would then be issuable upon a conversion in full of the Shares, and
(b) the number of Underlying Shares as would then be issuable upon exercise
of the Warrants, assuming an exercise price of 75% of the then current
exercise price (the "Current Required Minimum"), in either case, due to the
unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Company shall
promptly prepare and mail to the stockholders of the Company proxy materials
requesting authorization to amend the Company's certificate or articles of
incorporation to increase the number of shares of Common Stock which the
Company is authorized to issue to at least such number of shares as
reasonably requested by the Purchasers in order to provide for such number of
authorized and unissued shares of Common Stock to enable the Company to
comply with its issuance, conversion, exercise and reservation of shares
obligations as set forth in this Agreement, the Certificate of Designation
and the Warrants (the sum of (x) the number of shares of Common Stock then
outstanding plus all shares of Common Stock issuable upon exercise of all
outstanding options, warrants and convertible instruments, and (y) the
Current Required Minimum, shall be a reasonable number).  In connection
therewith, the Board of



                                       -12-
   14

Directors shall (a) adopt proper resolutions authorizing such increase, (b)
recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the stockholders no later than the earlier to occur of the 60th day after
delivery of the proxy materials relating to such meeting and the 90th day after
request by a holder of Securities to issue the number of Underlying Shares in
accordance with the terms hereof) and (c) within five Business Days of obtaining
such stockholder authorization, file an appropriate amendment to the Company's
certificate or articles of incorporation to evidence such increase.

      3.6   Reservation and Listing of Underlying Shares.  (a)  The Company
shall (i) in the time and manner required by the NASDAQ and any such other
exchange, market or quotation facility on which the Common Stock is traded,
prepare and file with the NASDAQ (and such national securities exchange,
market or trading or quotation facility on which the Common Stock is then
traded) an additional shares listing application covering a number of shares
of Common Stock which is not less than the Initial Minimum, (ii) take all
steps necessary to cause  such shares of Common Stock to be approved for
listing on the NASDAQ (as well as on any such other national securities
exchange or market or trading or quotation facility on which the Common Stock
is then listed) as soon as possible thereafter, and (iii) provide to the
Purchasers evidence of such listing, and the Company shall maintain the
listing of its Common Stock thereon. If the number of Underlying Shares
issuable upon conversion in full of the then outstanding Shares  and upon
exercise of the then unexercised portion of the Warrants exceeds 85% of the
number of Underlying Shares previously listed on account thereof with  NASDAQ
(and any such other required exchanges, then the Company shall take the
necessary actions to immediately list a number of Underlying Shares as equals
no less than the then Current Required Minimum.

            (b)  The Company shall maintain a reserve of shares of Common
Stock for issuance upon conversion of the Shares in full and upon exercise in
full of the Warrants in accordance with this Agreement, the Certificate of
Designation and the Warrants, respectively, in such amount as may be required
to fulfill its obligations in full under the Transaction Documents, which
reserve shall equal no less than the then Current Required Minimum.

      3.7   Conversion and Exercise Obligations and Procedures.  The Company
shall honor conversion of the Shares and exercise of the Warrants and shall
deliver Underlying Shares in accordance with the respective terms, conditions
and time periods set forth in the Certificate of Designation and Warrants.
The Transfer Agent Instructions,  Conversion Notice (as defined in the
Certificate of Designation) and Notice of Exercise under the Warrants set
forth the totality of the procedures with respect to the conversion of the
Shares and exercise of the Warrants, including the form of legal opinion, if
necessary, that shall be rendered to the Company's transfer agent and such
other information and instructions as may be reasonably necessary to enable
the Purchasers to convert their Shares and exercise their Warrants as
contemplated in the Certificate of Designation and the Warrants (as
applicable).

      3.8   Subsequent Financing; Limitation on Registrations.  (a) Subject
to Section 3.8(c) and (d), from the date hereof through the 180th Trading Day
following the Effective Date, the Company shall not, directly or indirectly,
offer, sell, grant any option to purchase, or otherwise



                                       -13-
   15

dispose of (or announce any offer, sale, grant or any option to purchase or
other disposition) (i) any of its equity or equity-equivalent securities or
securities of any of its Affiliates that are exchangeable or convertible
(directly or indirectly) for shares of Common Stock, including the issuance of
any debt or other instrument at any time over the life thereof convertible into
or exchangeable for Common Stock entitling any Person to acquire shares of
Common Stock that is senior or pari passu in right of payment, whether upon
liquidation or dissolution or otherwise to the Shares, (ii) any of its
non-derivative equity securities, at a price that is either (x) less than 80% of
the Per Share Market Value (as defined in the Certificate of Designation) on the
date of issuance thereof or (y) established by reference to the Per Share Market
Value or another market valuation to be determined at any date after the
issuance thereof or (iii) securities pursuant to an equity line of credit or
similar financing (collectively, a "Subsequent Placement") from the date hereof
until the expiration of the 180th Trading Day after the Effective Date, unless
(A) the Company delivers to each of the Purchasers a written notice (the
"Subsequent Placement Notice") of its intention to effect such Subsequent
Placement, which Subsequent Placement Notice shall describe in reasonable detail
the proposed terms of such Subsequent Placement, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Placement shall be
effected, and attached to which shall be a term sheet or similar document
relating thereto and (B) such Purchaser shall not have notified the Company by
6:30 p.m. (New York City time) on the tenth Trading Day after its receipt of the
Subsequent Placement Notice of its willingness to provide (or to cause its sole
designee to provide), subject to completion of mutually acceptable
documentation, financing to the Company on the same terms set forth in the
Subsequent Placement Notice. If the Purchasers shall fail to notify the Company
of their intention to enter into such negotiations within such time period, the
Company may effect the Subsequent Placement substantially upon the terms and to
the Persons (or Affiliates of such Persons) set forth in the Subsequent
Placement Notice; provided, that the Company shall provide the Purchasers with a
second Subsequent Placement Notice, and the Purchasers shall again have the
right of first refusal set forth above in this paragraph (a), if the Subsequent
Placement subject to the initial Subsequent Placement Notice shall not have been
consummated for any reason on the terms set forth in such Subsequent Placement
Notice within 30 Trading Days after the date of the initial Subsequent Placement
Notice with the Person (or an Affiliate of such Person) identified in the
Subsequent Placement Notice. If the Purchasers shall indicate a willingness to
provide financing in excess of the amount set forth in the Subsequent Placement
Notice, then each Purchaser shall be entitled to provide financing pursuant to
such Subsequent Placement Notice up to an amount equal to such Purchaser's
pro-rata portion of the aggregate number of Shares purchased by such Purchaser
under this Agreement, but the Company shall not be required to accept financing
from the Purchasers in an amount in excess of the amount set forth in the
Subsequent Placement Notice.

            (b)   Except for (w) Underlying Shares, (x) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to
be registered, and securities of the Company permitted pursuant to Section
6(c) of the Registration Rights Agreement to be registered, in the Underlying
Shares Registration Statement in accordance with the Registration Rights
Agreement, (y) Common Stock issued pursuant to a primary offering by the
Company (which shall not include an equity line of credit or similar
financing), and (z) Common Stock permitted to be issued pursuant to Section
3.8 (d), the Company shall not, for a period of not less than 90 days after
the Effective Date, without the prior written consent of the Purchasers (i)
issue



                                       -14-
   16

or sell any of its or any of its Affiliates' equity or equity-equivalent
securities pursuant to Regulation S promulgated under the Securities Act, or
(ii) register any securities of the Company. Any days after the Effective Date
that a Purchaser is unable to sell Underlying Shares under the Underlying Shares
Registration Statement shall be added to such 90 day period.

            (c)   With respect to Section 3.8(a) and (b), the 90 days and 180
Trading Day periods shall be extended for the number of Trading Days during
such period (A) in which trading in the Common Stock is suspended by any
securities exchange or market or quotation system on which the Common Stock
is then listed, or (B) during which the Underlying Shares Registration
Statement is not effective, or (C) during which the prospectus included in
the Underlying Shares Registration Statement may not be used by the holders
thereof for the resale of Underlying Shares.

            (d)   The restrictions contained in Section 3.8(a) and (b) above,
shall not apply to (i) the issuance of securities upon the exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof and to the extent specifically listed in
Schedule 2.1(c) (but not the repricing of any such outstanding security),
(ii) the granting of additional options or warrants to employees, officers
and directors of the Company, and the issuance of Common Stock upon exercise
of such options or warrants granted under any stock option plan heretofore or
hereinafter duly adopted by the Company and (iii) issuances of Common Stock
pursuant to a Strategic Transaction (as defined herein).  A "Strategic
Transaction" shall mean (i) any merger, consolidation or the acquisition of
assets, a business, products or a license by the Company, or (ii) a
transaction or relationship in which the Company issues shares of Common
Stock to a Person which is, itself or through its subsidiaries, an operating
company in a business related to the business of the Company and in which the
Company receives material benefits in addition to the investment of funds,
but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities.

      3.9   Certain Securities Laws Disclosures; Publicity.  The Company
shall: (i) on the Closing Date issue a press release reasonably acceptable to
the Purchasers disclosing the transactions contemplated hereby, (ii) file
with the Commission a Report on Form 8-K disclosing the transactions
contemplated hereby within ten Business Days after the Closing Date, and
(iii) timely file with the Commission a Form D promulgated under the
Securities Act.  The Company shall, no less than two Business Days prior to
the filing of any disclosure required by clauses (ii) and (iii) above,
provide a copy thereof  to the Purchasers for their review.  The Company and
the Purchasers shall consult with each other in issuing any other press
releases or otherwise making public statements or filings and other
communications  with the Commission or any regulatory agency or stock market
or trading facility with respect to the transactions contemplated hereby and
neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications without the prior written
consent of the other, except if such disclosure is required by law or stock
market or trading facility regulation, in which such case the disclosing
party shall promptly provide the other party with prior notice of such public
statement, filing or other communication.  Notwithstanding the foregoing, the
Company shall not publicly disclose the names of the Purchasers, or include
the names of the Purchasers in any filing with the Commission or any
regulatory agency, trading facility or stock market without the prior


                                       -15-
   17

written consent of the Purchasers, except to the extent such disclosure (but not
any disclosure as to the controlling Persons thereof) is required by law or
stock market regulations, in which case the Company shall provide the Purchasers
with prior notice of such disclosure.

      3.10  Use of Proceeds.  The Company may use up to $4,000,000 of the net
proceeds from the sale of the Securities hereunder for the satisfaction of
the Company's debt and the rest of the net proceeds shall be used for general
working capital purposes. The Company shall not use any of the net proceeds
to redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation.

      3.11  Transfer of Intellectual Property Rights.  Except in connection
with the sale of all or substantially all of the assets of the Company or in
connection with the transfer or licensing arrangements in the ordinary course
of the Company's business, the Company shall not transfer, sell or otherwise
dispose of any Intellectual Property Rights, or allow any of the Intellectual
Property Rights to become subject to any Liens, or fail to renew such
Intellectual Property Rights (if renewable and it would otherwise lapse if
not renewed), without the prior written consent of the Purchasers.

      3.12  Reimbursement. If any Purchaser becomes involved in any capacity
in any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, solely as a result of acquiring the
Securities under this Agreement, the Company will reimburse such Purchaser
for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred.  The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same
terms and conditions to any Affiliates of the Purchasers who are actually
named in such action, proceeding or investigation, and partners, directors,
agents, employees and controlling persons (if any), as the case may be, of
the Purchasers and any such Affiliate, and shall be binding upon and inure to
the benefit of any successors, assigns, heirs and personal representatives of
the Company, the Purchasers and any such Affiliate and any such Person.  The
Company also agrees that neither the Purchasers nor any such Affiliates,
partners, directors, agents, employees or controlling persons shall have any
liability to the Company or any Person asserting claims on behalf of or in
right of the Company solely as a result of acquiring the Securities under
this Agreement.

      3.13  Exclusivity.  The Company shall not issue and sell the Shares to
any Person other than the Purchasers without specific prior written consent
of the Purchasers.

      3.14  Shareholder Rights Plan.  No claim will be made or enforced by
the Company or any other Person that any Purchaser is an "Acquiring Person"
under any shareholders rights plan or similar plan or arrangement in effect
or hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities or shares of Common Stock under the Transaction
Documents.




                                       -16-
   18
                                  ARTICLE IV


                                MISCELLANEOUS

      4.1   Fees and Expenses.  At the Closing, the Company shall reimburse
the Purchasers for their legal fees and expenses incurred in connection with
the preparation and negotiation of the Transaction Documents by paying to
Robinson Silverman $30,000 for the preparation and negotiation of the
Transaction Documents.  The amount contemplated by the immediately preceding
sentence shall be retained by the Purchasers and shall not be delivered to
the Company at the Closing.  Other than the amount contemplated herein, and
except as otherwise set forth in the Registration Rights Agreement, each
party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance
of this Agreement.  The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of the Securities.

      4.2   Entire Agreement; Amendments.  The Transaction Documents,
together with the Exhibits and Schedules thereto and the Transfer Agent
Instructions contain the entire understanding of the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules.

      4.3   Notices.  Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 6:30 p.m.
(New York City time) on a Business Day, (ii) the Business Day after the date
of transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number specified in this Agreement later than 6:30
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date, (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be
given.  The address for such notices and communications shall be as follows:



      If to the Company:            SeraNova, Inc.
                              499 Thornall Street
                                    Edison, NJ 08837
                                    Facsimile No.: (732) 362-2123
                                    Attn:  Chief Financial Officer

      With copies to:               Carter, Ledyard & Milburn
                                    2 Wall Street
                                    New York, New York 10005
                                    Facsimile No.: (212) 732-3232
                                    Attn: James E. Abbott, Esq.



                                       -17-
   19

      If to a Purchaser:      To the address set forth under such Purchaser's
                              name on the signature pages hereto.

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

      4.4   Amendments; Waivers.  No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right accruing to it
thereafter.

      4.5   Headings.  The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.

      4.6   Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchasers.
Except as set forth in Section 3.1(a), the Purchasers may not assign this
Agreement or any of the rights or obligations hereunder without the consent
of the Company.  This provision shall not limit any Purchaser's right to
transfer securities or transfer or assign rights under the Registration
Rights Agreement.

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

      4.8   Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the
State of New York, without regard to the principles of conflicts of law
thereof.  Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of the Transaction Documents), and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of any such court, that such suit, action or proceeding is improper.  Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.


                                       -18-
   20

      4.9   Survival.  The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and
conversion or exercise (as the case may be) of the Shares and of the
Warrants.

      4.10  Execution.  This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart.  In the event that any
signature is delivered by facsimile transmission, such signature shall create
a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if
such facsimile signature page were an original thereof.

      4.11  Severability.  In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.

      4.12  Remedies.  In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance of each
other's obligations under the Transaction Documents.  The parties agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agree to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.

      4.13  Independent Nature of Purchasers' Obligations and Rights.  The
obligations of each Purchaser under any Transaction Document is several and
not joint with the obligations of any other Purchaser and no Purchaser shall
be responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document.  Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert with respect
to such obligations or the transactions contemplated by the Transaction
Document.  Each Purchaser shall be entitled to independently protect and
enforce its rights, including without limitation the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.




                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                            SIGNATURE PAGES FOLLOW]



                                       -19-
   21



            IN WITNESS WHEREOF, the parties hereto have caused this
Convertible Preferred Stock Purchase Agreement to be duly executed by their
respective authorized signatories as of the date first indicated above.

                        SERANOVA, INC.

                        By: /s/RAVI SINGH
                           ---------------------------------------------------
                              Name: Ravi Singh
                              Title: Chief Financial Officer



                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGES OF PURCHASERS FOLLOW]




                                       -20-
   22


                           STRONG RIVER INVESTMENTS, INC.



                         By: /s/ KENNETH L. HENDERSON
                             --------------------------------------------
                             Kenneth L. Henderson
                             Attorney-in-Fact

                        Purchase Price:                      $4,000,000

                        Number of Closing Warrants:       75,000

                        Number of Redemption Warrants:            80,000
                        Address for Notice:

                        Strong River Investments, Inc.
                        c/o Gonzalez-Ruiz Aleman (BVI) Limited
                        Wickhams Cay I, Vanterpool Plaza
                        P.O. Box 873
                        Road Town, Tortolla, B.V.I.

                        With copies to:

                        Robinson Silverman Pearce Aronsohn & Berman LLP
                        1290 Avenue of the Americas
                        New York, NY  10104
                        Facsimile No.:  (212) 541-4630 and (212) 541-1432
                        Attn: Eric L. Cohen, Esq.


                                       -21-
   23




                        MONTROSE INVESTMENTS LTD.


                        By: /s/ Kevin O'Neal
                           _____________________________________
                          Name: Kevin O'Neal
                          Title:

                        Purchase Price:                    $4,000,000

                        Number of Closing Warrants:            75,000

                        Number of Redemption Warrants:         80,000

                        Address for Notice:
                        Montrose Investments Ltd.
                        c/o HBK Investments L.P.
                        300 Crescent Court, Suite 700
                        Dallas, Texas  75201
                        Facsimile: (214) 758-1221
                        Attn: Jeff Estes and Kim Rozman

      With copies to:   Robinson Silverman Pearce Aronsohn & Berman LLP
                        1290 Avenue of the Americas
                        New York, NY  10104
                        Facsimile No.:  (212) 541-4630 and (212) 541-1432
                        Attn: Eric L. Cohen, Esq.


                                       -22-
   24




                                 SCHEDULE 2.1(a)

LIST OF SUBSIDIARIES OF SERANOVA, INC.

      Azimuth Consulting Limited, a corporation formed pursuant to the laws
of New Zealand and a wholly-owned subsidiary of SeraNova, Inc.

            Azimuth Consulting Philippines, Inc., a corporation
            formed pursuant to the laws of the Philippines and a
            wholly-owned subsidiary of Azimuth Consulting Limited.

      Azimuth Corporation Limited, a corporation formed pursuant to the laws
of New Zealand and a wholly-owned subsidiary of SeraNova, Inc.

            New Zealand Public Information Management Limited, a
            corporation formed pursuant to the laws of New
            Zealand and a wholly-owned subsidiary of Azimuth
            Corporation Limited.

      Azimuth Holdings Limited, a corporation formed pursuant to the laws of
New Zealand and a wholly-owned subsidiary of SeraNova, Inc.

            Azimuth Holdings Pty Limited, a corporation formed
            pursuant to the laws of Australia and a wholly-owned
            subsidiary of Azimuth Holdings Limited.

            Azimuth Consulting Australia Pty Limited, a
            corporation formed pursuant to the laws of Australia
            and a wholly-owned subsidiary of Azimuth Holdings
            Limited.

      Braithwaite Richmond Limited, a corporation formed pursuant to the laws
of New Zealand and a wholly-owned subsidiary of SeraNova, Inc.

      Network Publishing, Inc., a Utah corporation and a wholly-owned
subsidiary of SeraNova, Inc.

      SeraNova Limited, a corporation formed pursuant to the laws of England
and Wales and a wholly-owned subsidiary of SeraNova, Inc.




   25
                                                                     EXHIBIT A

                            TERMS OF PREFERRED STOCK

      Section 1.  Designation, Amount and Par Value.  The series of preferred
stock shall be designated as its 6% Series A Convertible Preferred Stock (the
"Preferred Stock") and the number of shares so designated shall be 800 (which
shall not be subject to increase without the consent of the holders of the
Preferred Stock (each, a "Holder" and collectively, the "Holders")).  Each
share of Preferred Stock shall have a par value of $.01 per share and a
stated value equal to the sum of $10,000 plus all accrued and unpaid
dividends to the date of determination to the extent not previously paid in
cash in accordance with the terms hereof (the "Stated Value").

      Section 2.  Dividends.

            (a)  Holders shall be entitled to receive, out of funds legally
available therefor, and the Company shall pay, cumulative dividends at the
rate per share (as a percentage of the Stated Value per share) of 6% per
annum, payable on each Conversion Date (as defined herein) for such share, in
cash or by accretion of the Stated Value.  Subject to the terms and
conditions herein, the decision whether to accrete dividends hereunder to the
Stated Value or to pay for dividends in cash shall be at the discretion of
the Company.  The Company shall provide the Holders written notice of its
intention to accrete dividends hereunder to the Stated Value or pay dividends
in cash not less than ten days prior to each Conversion  Date for so long as
shares of Preferred Stock are outstanding (the Company may indicate in such
notice that the election contained in such notice shall continue for later
periods until revised).  Failure to timely provide such written notice shall
be deemed (if permitted hereunder) an election by the Company to accrete
dividends hereunder to the Stated Value.  Dividends on the Preferred Stock
shall be calculated on the basis of a 360-day year, shall accrue daily
commencing on the Original Issue Date (as defined in Section 8), and shall be
deemed to accrue from such date whether or not earned or declared and whether
or not there are profits, surplus or other funds of the Company legally
available for the payment of dividends.  Except as otherwise provided herein,
if at any time the Company pays less than the total amount of dividends then
accrued on account of the Preferred Stock, such payment shall be distributed
ratably among the Holders based upon the number of shares of Preferred Stock
held by each Holder. Any dividends to be paid in cash hereunder that are not
paid within three Trading Days (as defined in Section 8) following a
Conversion Date shall continue to accrue and shall entail a late fee, which
must be paid in cash, at the rate of 18% per annum or the lesser rate
permitted by applicable law (such fees to accrue daily, from the date such
dividend is due hereunder through and including the date of payment).

            (b)  Notwithstanding anything to the contrary contained herein
and subject to applicable legal requirements, the Company must pay dividends
in cash if:

                  (i)  the number of shares of Common Stock (as defined in
Section 8) at the time authorized, unissued and unreserved for all purposes
is insufficient to accrete such dividends to the Stated Value to permit
conversion in full of all outstanding Stated Value;

                                      A-1
   26
                   (ii) after the Dividend Effectiveness Date (as defined in
Section 8), Underlying Shares (as defined in Section 8) (x) are not
registered for resale pursuant to an effective Underlying Shares Registration
Statement (as defined in Section 8) and (y) may not be sold without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act (as
defined in Section 8), (if the Company is permitted and elects to pay
dividends in shares of Common Stock under this clause (ii) prior to the
Dividend Effectiveness Date and thereafter an Underlying Shares Registration
Statement shall be declared effective by the Commission (as defined in
Section 8), the Company shall, within three Trading Days after the date of
such declaration of effectiveness, exchange such Underlying Shares for shares
of Common Stock that are free of restrictive legends of any kind);

                  (iii) the Common Stock is not then listed or quoted on the
Nasdaq National Market (the "Nasdaq"), or on the New York Stock Exchange,
American Stock Exchange or Nasdaq SmallCap Market (each, a "Subsequent
Market"); or

                  (iv)  the accretion of such dividends to the Stated Value
and subsequent conversions of all then outstanding Stated Value would result
in a violation of Section 5(a)(iii) or the rules of the Nasdaq or any other
rules and regulations governing any Subsequent Market on which the Common
Stock is then listed or quoted for trading.

            (c)   So long as any Preferred Stock shall remain outstanding,
neither the Company nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities (as defined in
Section 8), nor shall the Company directly or indirectly pay or declare any
dividend or make any distribution (other than a dividend or distribution
described in Section 5 or dividends due and paid in the ordinary course on
preferred stock of the Company at such times when the Company is in
compliance with its payment and other obligations hereunder) upon, nor shall
any distribution be made in respect of, any Junior Securities, nor shall any
monies be set aside for or applied to the purchase or redemption (through a
sinking fund or otherwise) of any Junior Securities or shares pari passu with
the Preferred Stock.

            Section 3.  Voting Rights.   Except as otherwise provided herein
and as otherwise required by law, the Preferred Stock shall have no voting
rights.  However, so long as any shares of Preferred Stock are outstanding,
the Company shall not, without the affirmative vote of the Holders of a
majority of the shares of the Preferred Stock then outstanding, (a) alter or
change adversely the powers, preferences or rights given to the Preferred
Stock or alter or amend this Certificate of Designation, (b) authorize or
create any class of stock ranking as to dividends or distribution of assets
upon a Liquidation (as defined in Section 4) senior to or otherwise pari
passu with the Preferred Stock, (c) amend its certificate or articles of
incorporation or other charter documents so as to affect adversely any rights
of the Holders, (d) increase the authorized number of shares of Preferred
Stock, or (e) enter into any agreement with respect to the foregoing.

            Section 4.  Liquidation.  Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a
"Liquidation"), the Holders shall be entitled to


                                      A-2
   27

receive out of the assets of the Company, whether such assets are capital or
surplus, for each share of Preferred Stock an amount equal to the Stated Value
per share before any distribution or payment shall be made to the holders of any
Junior Securities, and if the assets of the Company shall be insufficient to pay
in full such amounts, then the entire assets to be distributed to the Holders
shall be distributed among the Holders ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were
paid in full. A sale, conveyance or disposition of 50% or more of the assets of
the Company or the effectuation by the Company of a transaction or series of
related transactions in which more than 33% of the voting power of the Company
is disposed of, or a consolidation or merger of the Company with or into any
other company or companies into one or more companies not wholly-owned by the
Company shall not be treated as a Liquidation, but instead shall be subject to
the provisions of Section 5. The Company shall mail written notice of any such
Liquidation, not less than 45 days prior to the payment date stated therein, to
each record Holder.

            Section 5.  Conversion.

            (a)(i) Conversions at Option of Holder.  Each share of Preferred
Stock shall be convertible into shares of Common Stock (subject to the
limitations set forth in Section (a)(iii)) at the Conversion Ratio (as
defined in Section 8), at the option of the Holder, at any time and from time
to time from and after the Original Issue Date.  Holders shall effect
conversions by providing the Company with the form of conversion notice
attached hereto as Exhibit A (a "Holder Conversion Notice").  Each Holder
Conversion Notice shall specify the number of shares of Preferred Stock to be
converted, the number of shares of Preferred Stock owned prior to the
conversion at issue, number of shares of Preferred Stock owned subsequent to
the conversion at issue and the date on which such conversion is to be
effected, which date may not be prior to the date the Holder delivers such
Conversion Notice by facsimile (the "Holder Conversion Date"). The number of
shares of Preferred Stock shown as owned by the Holder prior to and giving
effect to a conversion shall control absent manifest or mathematical error.
If no Holder Conversion Date is specified in a Holder Conversion Notice, the
Holder Conversion Date shall be the date that such Holder Conversion Notice
is deemed delivered hereunder.  To effect conversions of Preferred Stock, a
Holder shall not be required to surrender the certificate(s) representing
such shares of Preferred Stock to the Company unless all of the shares of
Preferred Stock represented thereby are so converted.

                  (ii) Conversion At Option of the Company.   If at any time
after the Effective Date, the Closing Price for 20 consecutive Trading Days
exceeds 130% of Conversion Price on the Original Issue Date (subject to
equitable adjustment for stock splits, recombinations and similar events
pursuant to Section 4(c)(ii)), the Company may require the Holder to convert
all or any portion of the Preferred Stock (subject to the limitations set
forth in Section 5(a)(iii)) at the Conversion Ratio. provided, that the
Company shall not be permitted to deliver a Company Conversion Notice (as
defined below) at any time when the Underlying Securities Registration
Statement is not then effective or shares of Common Stock are not actively
traded on the Nasdaq National Market ("NASDAQ") or listed or quoted for
trading on the New York Stock Exchange, American Stock Exchange or Nasdaq
SmallCap Market (each, a "Subsequent Market") and provided further that the
Closing Price must equal or exceed the price required pursuant to this
sentence on

                                      A-3

   28

the Company Conversion Date. The Company shall effect such conversion by
delivering to the Holder a written notice in the form attached hereto as Exhibit
B (the "Company Conversion Notice"), which Company Conversion Notice, once
given, shall be irrevocable. Each Company Conversion Notice shall specify the
number of shares of Preferred Stock to be converted. The date of delivery of the
Company Conversion Notice is referred to herein as the "Company Conversion
Date". A Holder Conversion Notice and a Company Conversion Notice may sometimes
be referred to as a "Conversion Notice". A Holder Conversion Date and a Company
Conversion Date may sometimes be referred to as a "Conversion Date".

                  (iii) Certain Conversion Restrictions.

                  (A)  A Holder may not convert or be required to convert
shares of Preferred Stock or receive shares of Common Stock as payment of
dividends hereunder to the extent such conversion or receipt of such dividend
payment would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act (as defined in Section 8) and the rules promulgated thereunder)
in excess of 4.999% of the then issued and outstanding shares of Common
Stock, including shares issuable upon conversion of, and payment of dividends
on, the shares of Preferred Stock held by such Holder after application of
this Section.  Since the Holder will not be obligated to report to the
Company the number of shares of Common Stock it may hold at the time of a
conversion hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares which
may be beneficially owned by the Holder or an affiliate thereof, the Holder
shall have the authority and obligation to determine whether the restriction
contained in this Section will limit any particular conversion hereunder and
to the extent that the Holder determines that the limitation contained in
this Section applies, the determination of which portion of the shares of
Preferred Stock are convertible shall be the responsibility and obligation of
the Holder.  If the Holder has delivered a Conversion Notice for shares of
Preferred Stock that, without regard to any other shares that the Holder or
its affiliates may beneficially own,  would result in the issuance in excess
of the permitted amount hereunder, the Company shall notify the Holder of
this fact and shall honor the conversion for the maximum number of shares of
Preferred Stock permitted to be converted on such Conversion Date in
accordance with the periods described in Section 5(b) and, at the option of
the Holder, either retain shares of Preferred Stock tendered for conversion
in excess of the permitted amount hereunder for future conversions or return
such excess shares of Preferred Stock permitted to the Holder.  The
provisions of this Section may be waived by a Holder (but only as to itself
and not to any other Holder) upon not less than 61 days prior notice to the
Company. Other Holders shall be unaffected by any such waiver.

                  (B)  A Holder may not convert or be required to convert
shares of Preferred Stock or receive shares of Common Stock as payment of
dividends hereunder to the extent such conversion or receipt of such dividend
payment would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares issuable
upon conversion of, and payment of dividends on, the shares of Preferred
Stock held by such Holder after application of this Section.


                                      A-4

   29

Since the Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the time of a conversion hereunder, unless
the conversion at issue would result in the issuance of shares of Common Stock
in excess of 9.999% of the then outstanding shares of Common Stock without
regard to any other shares which may be beneficially owned by the Holder or an
affiliate thereof, the Holder shall have the authority and obligation to
determine whether the restriction contained in this Section will limit any
particular conversion hereunder and to the extent that the Holder determines
that the limitation contained in this Section applies, the determination of
which portion of the shares of Preferred Stock are convertible shall be the
responsibility and obligation of the Holder. If the Holder has delivered a
Conversion Notice for shares of Preferred Stock that, without regard to any
other shares that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount hereunder, the Company
shall notify the Holder of this fact and shall honor the conversion for the
maximum number of shares of Preferred Stock permitted to be converted on such
Conversion Date in accordance with the periods described in Section 5(b) and, at
the option of the Holder, either retain shares of Preferred Stock tendered for
conversion in excess of the permitted amount hereunder for future conversions or
return such excess shares of Preferred Stock permitted to the Holder. The
provisions of this Section may be waived by a Holder (but only as to itself and
not to any other Holder) upon not less than 61 days prior notice to the Company.
Other Holders shall be unaffected by any such waiver.

                  (C)   If the Common Stock is then listed for trading on the
Nasdaq or the Nasdaq SmallCap Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company may not issue in
excess of 3,492,001.9 shares of Common Stock (which equals 19.999% of the
number of shares of Common Stock outstanding on the Trading Day immediately
preceding the Original Closing Date) upon conversions of Preferred Stock and
exercise of Redemption Warrants and Closing Warrants (each as defined in the
Purchase Agreement), in either case, at a price per share that is less than
the Per Share Market Value on the Trading Day immediately preceding the
Original Issue Date (such number of shares, the "Issuable Maximum").  Each
Holder shall be entitled to a portion of the Issuable Maximum equal to the
quotient obtained by dividing (x) the number of shares of Preferred Stock
issued and sold to such Holder on the Original Issue Date by (y) the number
of shares of Preferred Stock issued and sold by the Company on the Original
Issue Date.  If any Holder shall no longer hold shares of Preferred Stock,
then such Holder's remaining portion of the Issuable Maximum shall be
allocated pro-rata among the remaining Holders.  If on any Conversion Date
(A) the shares of Common Stock are listed for trading on the Nasdaq or Nasdaq
SmallCap Market, (B) the Conversion Price then in effect is such that the
aggregate number of shares of Common Stock that would then be issuable upon
conversion in full of all then outstanding shares of Preferred Stock and
exercise in full of the Redemption Warrants and Closing Warrants, together
with any shares of  Common Stock previously issued upon conversion of shares
of Preferred Stock and exercise in full of the Redemption Warrants and
Closing Warrants would exceed the Issuable Maximum, and (C) the Company shall
not have previously obtained the vote of shareholders (the "Shareholder
Approval"), if any, as may be required by the applicable rules and
regulations of the Nasdaq (or any successor entity) applicable to approve the
issuance of shares of Common Stock  in excess of the Issuable Maximum
pursuant to the terms hereof, then the Company shall issue to the Holder
requesting a conversion a number of shares of Common Stock  equal to such
Holder's pro-rata portion (which shall be calculated pursuant to the


                                      A-5
   30

terms hereof) of the Issuable Maximum and, with respect to the remainder of the
aggregate Stated Value of the shares of Preferred Stock then held by such Holder
for which a conversion in accordance with the Conversion Price would result in
an issuance of shares of Common Stock in excess of such Holder's pro-rata
portion (which shall be calculated pursuant to the terms hereof) of the Issuable
Maximum (the "Excess Stated Value"), the converting Holder shall have the option
to require the Company to either: (1) use its best efforts to obtain the
Shareholder Approval applicable to such issuance as soon as is possible, but in
any event not later than the 60th day after such request, or (2) pay cash to the
converting Holder in an amount equal to the Mandatory Redemption Amount (as
defined in Section 8) for the Excess Stated Value. If the converting Holder
shall have elected the first option pursuant to the immediately preceding
sentence and the Company shall have failed to obtain the Shareholder Approval on
or prior to the 60th day after such request, then within three (3) days of such
60th day, the Company shall pay cash to the converting Holder an amount equal to
the Mandatory Redemption Amount for the Excess Stated Value. If the Company
fails to pay the Mandatory Redemption Amount in full pursuant to this Section
within seven days after the date payable, the Company will pay interest thereon
at a rate of 18% per annum or such lesser maximum amount that is permitted to be
paid by applicable law, to the converting Holder, accruing daily from the
Conversion Date until such amount, plus all such interest thereon, is paid in
full. The Company and the Holder understand and agree that shares of Common
Stock issued to and then held by the Holder as a result of conversions of
Preferred Stock shall not be entitled to cast votes on any resolution to obtain
Shareholder Approval pursuant hereto.

            (b)(i) Not later than five Trading Days after each Conversion
Date, the Company will deliver to the Holder (A) a certificate or
certificates which shall be free of restrictive legends and trading
restrictions (other than those required by Section 3.1(b) of the Purchase
Agreement) representing the number of shares of Common Stock being acquired
upon the conversion of shares of Preferred Stock, and (B) a bank check in the
amount of accrued and unpaid dividends (if the Company has elected or is
required to pay accrued dividends in cash). The Company shall, upon request
of the Holder, if available, use its best efforts to deliver any certificate
or certificates required to be delivered by the Company under this Section
electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions.  If in the
case of any Conversion Notice such certificate or certificates are not
delivered to or as directed by the applicable Holder by the fifth Trading Day
after the Conversion Date, the Holder shall be entitled to elect by written
notice to the Company at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such conversion, in which
event the Company shall immediately return the certificates representing the
shares of Preferred Stock tendered for conversion.

                  (ii) If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 5(b)(i), by the fifth Trading
Day after the Conversion Date, the Company shall pay to such Holder, in cash,
as liquidated damages and not as a penalty, $5,000 for each Trading Day after
such fifth Trading Day until such certificates are delivered. Nothing herein
shall limit a Holder's right to pursue actual damages for the Company's
failure to deliver certificates representing shares of Common Stock upon
conversion within the period specified herein and such Holder shall have the
right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.


                                      A-6
   31

                  (iii)  In addition to any other rights available to the
Holder, if the Company fails to deliver to the Holder such certificate or
certificates pursuant to Section 5(b)(i), by the fifth Trading Day after the
Conversion Date, and if after such fifth Trading Day the Holder purchases (in
an open market transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Underlying Shares (with respect
to which the Holder was unable to utilize borrowed shares for such purpose
due to the inability or unwillingness of the broker of such Holder to loan
such shares to such Holder) which the Holder was entitled to receive upon
such conversion (a "Buy-In"), then the Company shall (A) pay in cash to the
Holder the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y)
the product of (1) the aggregate number of shares of Common Stock that such
Holder was entitled to receive from the conversion at issue multiplied by (2)
the market price of the Common Stock at the time of the sale giving rise to
such purchase obligation and (B) at the option of the Holder, either return
the shares of Preferred Stock for which such conversion was not honored or
deliver to such Holder the number of shares of Common Stock that would have
been issued had the Company timely complied with its conversion and delivery
obligations under Section 5(b)(i).  For example, if the Holder purchases
Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted conversion of shares of Preferred Stock with respect
to which the market price of the Underlying Shares on the date of conversion
totaled $10,000, under clause (A) of the immediately preceding sentence the
Company shall be required to pay the Holder $1,000.  The Holder shall provide
the Company written notice indicating the amounts payable to the Holder in
respect of the Buy-In.  Nothing herein shall limit a Holder's right to pursue
any other remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to the Company's failure to timely deliver certificates
representing shares of Common Stock upon conversion of the shares of
Preferred Stock as required pursuant to the terms hereof.

            (c)(i)  The conversion price for each share of Preferred Stock
in effect on any Conversion Date shall be $7.00 (the "Conversion Price").

                  (ii)  If the Company, at any time while any shares of
Preferred Stock are outstanding, shall (a) pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior Securities or
pari passu securities payable in shares of Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c)
combine (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares, or (d) issue by
reclassification and exchange of the Common Stock any shares of capital stock
of the Company, then the Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of  Common Stock
(excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of Common Stock
outstanding after such event.  Any adjustment made pursuant to this Section
5(c)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date
in the case of a subdivision, combination or re-classification.


                                      A-7
   32

                  (iii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights, warrants or options to
all holders of Common Stock (and not to Holders) entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than the Per
Share Market Value at the record date mentioned below, then the Conversion
Price shall be multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to the
issuance of such rights, warrants or options, plus the number of shares of
Common Stock which the aggregate offering price of the total number of shares
so offered would purchase at such Per Share Market Value, and the denominator
of which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of shares of Common Stock
offered for subscription or purchase.  Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately
after the record date for the determination of stockholders entitled to
receive such rights or warrants.  However, upon the expiration of any right,
warrant or option to purchase shares of Common Stock the issuance of which
resulted in an adjustment in the Conversion Price pursuant to this Section
5(c)(iii), if any such right, warrant or option shall expire and shall not
have been exercised, the Conversion Price shall immediately upon such
expiration shall be recomputed and effective immediately upon such expiration
shall be increased to the price which it would have been (but reflecting any
other adjustments in the Conversion Price made pursuant to the provisions of
this Section 5 upon the issuance of other rights or warrants) had the
adjustment of the Conversion Price made upon the issuance of such rights,
warrants, or options  been made on the basis of offering for subscription or
purchase only that number of shares of Common Stock actually purchased upon
the exercise of such rights, warrants or options actually exercised.

                  (iv)  If the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below), at
any time while any shares of Preferred Stock are outstanding, shall issue
shares of Common Stock or rights, warrants (including the issuance of shares
of Common Stock upon exercise of warrants issued to the Purchasers under the
Purchase Agreement), options or other securities or debt that is convertible
into or exchangeable for shares of Common Stock ("Common Stock Equivalents")
entitling any Person to acquire shares of Common Stock, at a price per share
less than the Conversion Price (if the holder of the Common Stock or Common
Stock Equivalent so issued shall at any time, whether by operation of
purchase price adjustments, reset provisions, floating conversion, exercise
or exchange prices or otherwise, or due to warrants, options or rights issued
in connection with such issuance, be entitled to receive shares of Common
Stock at a price less than the Conversion Price, such issuance shall be
deemed to have occurred for less than the Conversion Price), then, at the
option of the Holder, the Conversion Price shall be replaced with the
conversion, exchange or purchase price for such Common Stock or Common Stock
Equivalents (including any reset provisions thereof) for all subsequent
conversions of Preferred Stock or such conversions as shall be indicated by
the Holder on its Conversion Notice.  Such adjustment shall be made whenever
such Common Stock or Common Stock Equivalents are issued.  The Company shall
notify the Holder in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalent subject to this
section, of the issuance of such Common Stock or Common Stock Equivalent (or
of such agent pursuant to which such Common Stock or Common Stock Equivalent
may be issued, indicating therein the applicable issuance price, or of
applicable reset price, exchange price, exercise


                                      A-8
   33

price, conversion price and other pricing terms. Notwithstanding to the contrary
anything herein, this Section shall not apply to: (i) issuance of options and
warrants to employees, officers and directors of the Company, and the issuance
of Common Stock upon exercise of such options and warrants granted under any
stock option agreements and stock option plans heretofore issued or adopted by
the Company and any stock option plan hereinafter duly adopted by the Company,
(ii) issuance of Common Stock or Common Stock Equivalents as part payment of the
purchase price in (A) the acquisition of assets or a business by the Company or
(B) in connection with the acquisition of goods or a license by the Company and
(iii) as royalty payments in connection with or under a firm underwritten
primary offering of the Company's stock in which the full purchase price is paid
upon the first closing thereof (which shall not include equity lines of credit
or any similar financing structure).

                  (v)    If the Company, at any time while shares of
Preferred Stock are outstanding, shall distribute to all holders of Common
Stock (and not to Holders) evidences of its indebtedness or assets or rights
or warrants to subscribe for or purchase any security (excluding those
referred to in Sections 5(c)(ii)-(iv) above), then in each such case the
Conversion Price at which each share of Preferred Stock shall thereafter be
convertible shall be determined by multiplying the Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Per Share Market Value determined as of the record date
mentioned above, and of which the numerator shall be such Per Share Market
Value on such record date less the then fair market value at such record date
of the portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of Common Stock as determined by the
Board of Directors in good faith.  In either case the adjustments shall be
described in a statement provided to the Holders of the portion of assets or
evidences of indebtedness so distributed or such subscription rights
applicable to one share of Common Stock.  Such adjustment shall be made
whenever any such distribution is made and shall become effective immediately
after the record date mentioned above.

                  (vi)  All calculations under this Section 5 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
The number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or sale of Common
Stock.

                  (vii) Whenever the Conversion Price is adjusted pursuant to
Section 5(c)(ii),(iii), (iv) or (v) the Company shall promptly mail to each
Holder, a notice setting forth the Fixed Conversion Price or the Conversion
Price (as applicable) after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.

                  (viii)      In case of any reclassification of the Common
Stock, or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property (other than compulsory
share exchanges which constitute Change of Control Transactions), the Holders
of the Preferred Stock then outstanding shall have the right thereafter to
convert such shares only into the shares of stock and other securities, cash
and property receivable


                                      A-9
   34

upon or deemed to be held by holders of Common Stock following such
reclassification or share exchange, and the Holders of the Preferred Stock shall
be entitled upon such event to receive such amount of securities, cash or
property as a holder of the number of shares of Common Stock of the Company into
which such shares of Preferred Stock could have been converted immediately prior
to such reclassification or share exchange would have been entitled. This
provision shall similarly apply to successive reclassifications or share
exchanges.

                  (ix)  In case of any merger or consolidation of the Company
with or into another Person, or sale by the Company of more than one-half of
the assets of the Company (on an as valued basis) in one or a series of
related transactions, a Holder shall have the right thereafter to: (A)
convert its shares of Preferred Stock into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders
of Common Stock following such merger, consolidation or sale, and such Holder
shall be entitled upon such event or series of related events to receive such
amount of securities, cash and property as the shares of Common Stock into
which such shares of Preferred Stock could have been converted immediately
prior to such merger, consolidation or sales would have been entitled or (B)
in the case of a merger or consolidation, require the Company to pay to the
Holder, in cash,120% of the Stated Value of the shares of Preferred Stock
then held by such Holder.  The terms of any such merger, sale or
consolidation shall include such terms so as continue to give the Holders the
right to receive the securities, cash and property set forth in this Section
upon any conversion or redemption following such event. This provision shall
similarly apply to successive such events.  The rights set forth in this
Section 5(c)(ix) shall not alter the rights of a Holder set forth in Section
7, provided, that, a Holder may only exercise the rights set forth in this
Section 5(c)(ix) or the rights set forth in Section 7 with respect to a
single event giving rise to such rights.

                  (x)    If (a) the Company shall declare a dividend (or any
other distribution) on the Common Stock, (b) the Company shall declare a
special nonrecurring cash dividend on or a redemption of the Common Stock,
(c) the Company shall authorize the granting to all holders of Common Stock
rights or warrants to subscribe for or purchase any shares of capital stock
of any class or of any rights, (d) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the
Common Stock, any consolidation or merger to which the Company is a party,
any sale or transfer of all or substantially all of the assets of the
Company, or any compulsory share of exchange whereby the Common Stock  is
converted into other securities, cash or property, or (e) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up
of the affairs of the Company; then the Company shall notify the Holders at
their last addresses as they shall appear upon the stock books of the
Company, at least 20 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer


                                  A-10
   35
or share exchange. Holders are entitled to convert shares of Preferred Stock
during the 20-day period commencing the date of such notice to the effective
date of the event triggering such notice.

            (d)  The Company covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of Common Stock
solely for the purpose of issuance upon conversion of Preferred Stock, each
as herein provided, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holders, not less than
such number of shares of Common Stock as shall be issuable (taking into
account the provisions of Section 5(a) and Section 5(c)) upon the conversion
of all outstanding shares of Preferred Stock.  The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly
and validly authorized, issued and fully paid and nonassessable.

            (e)  Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in respect
of any final fraction of a share based on the Per Share Market Value at such
time.  If any fraction of an Underlying Share would, except for the
provisions of this Section, be issuable upon a conversion hereunder, the
Company shall pay an amount in cash equal to the Conversion Ratio multiplied
by such fraction.

            (f)  The issuance of certificates for Common Stock on conversion
of Preferred Stock shall be made without charge to the Holders thereof for
any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such certificate, provided that the Company shall not be
required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion
in a name other than that of the Holder of such shares of Preferred Stock so
converted.

            (g)  Shares of Preferred Stock converted into Common Stock or
redeemed in accordance with the terms hereof shall be canceled and may not be
reissued.

            (h)  Any and all notices or other communications or deliveries
to be provided by the Holders of the Preferred Stock hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile or sent by a nationally recognized overnight courier
service, addressed to the attention of the Chief Financial Officer of the
Company addressed to 499 Thornall Street, Edison, New Jersey 08837 Facsimile
No.: 732-362-2123, attention Chief Financial Officer, or to such other
address or facsimile number as shall be specified in writing by the Company
for such purpose.  Any and all notices or other communications or deliveries
to be provided by the Company hereunder shall be in writing and delivered
personally, by facsimile or sent by a nationally recognized overnight courier
service, addressed to each Holder at the facsimile telephone number or
address of such Holder appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal place of
business of the Holder.  Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number specified in this Section prior to 6:30
p.m. (New York City time) (with confirmation of transmission), (ii) the date
after the date of transmission, if such notice or


                                      A-11
   36

communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 6:30 p.m. (New York City time) on any date
and earlier than 11:59 p.m. (New York City time) on such date (with confirmation
of transmission), (iii) upon receipt, if sent by a nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.

      Section 6.  Optional Redemption.


            (a)  The Company shall have the right, subject to the provisions
of this Section 6, upon a 30 Trading Day prior written notice (an "Optional
Redemption Notice" and the date such Optional Redemption Notice is received
by a Holder, an "Optional Redemption Date") to the Holders, to redeem all or
any portion of the shares of Preferred Stock which have not previously been
redeemed or for which Conversion Notices shall not have been delivered, at a
price equal to the Optional Redemption Price (as defined in Section 8).  The
Company may only deliver an Optional Redemption Notice if: (i)  the number of
shares of Common Stock at the time authorized, unissued and unreserved for
all purposes is sufficient to satisfy the Company's conversion obligations of
all shares of Preferred Stock then outstanding, (ii) the Underlying Shares
then outstanding are registered for resale pursuant to an effective
Underlying Shares Registration Statement pursuant to which the Holders are
permitted to sell Underlying Shares or the Underlying Shares may be resold
without volume restrictions pursuant to Rule 144(k) promulgated under the
Securities Act, and (iii) the Common Stock is listed for trading on the
Nasdaq or on a Subsequent Market.  In order for an Optional Redemption Notice
to remain in effect subsequent to the Optional Redemption Date, each of
clauses (i) - (iii) of the immediately preceding sentence must be true during
the entire 30 Trading Days between the Optional Redemption Date and the date
of payment of the Optional Redemption Price.  The entire Optional Redemption
Price shall be paid in cash.  A Holder may convert (and the Company shall
honor such conversions in accordance with the terms hereof) any or all of the
shares of Preferred Stock subject to an Optional Redemption Notice delivered
for conversion on or prior to the 30th Trading Day  following the Optional
Redemption Date.

            (b)  Failure by the Company to pay any portion of the Optional
Redemption Price on the 30th Trading Day  following an Optional Redemption
Date shall, at the option of the Holder subject thereto, result in the
invalidation ab initio of the unpaid portion of such optional redemption,
and, notwithstanding anything herein to the contrary, the Company shall
thereafter have no further rights to optionally redeem any shares of
Preferred Stock.  In such event, the Company shall, at the option of the
Holder, either, (i) not later than three Trading Days from receipt of
Holder's request for such election, return to the Holder all of the shares of
Preferred Stock for which such Optional Redemption Price has not been paid in
full (the "Unpaid Redemption Shares") or (ii) convert all or any portion of
the Unpaid Redemption Shares in which event the Per Share Market Value for
such shares shall be the lower of the Per Share Market Value calculated on
the date the Optional Redemption Price was originally due and the Per Share
Market Value as of the Holder's written demand for conversion. If the Holder
elects option (ii) above, the Company shall within three Trading Days of its
receipt of such election deliver to the Holder the shares of Common Stock


                                      A-12
   37

issuable upon conversion of the Unpaid Redemption Shares subject to such
Holder conversion demand and otherwise perform its obligations hereunder with
respect thereto.

            Section 7.  Redemption Upon Triggering  Events.

            (a)   Upon the occurrence of a Triggering  Event, each Holder
shall (in addition to all other rights it may have hereunder or under
applicable law), have the right, exercisable at the sole option of such
Holder, to require the Company to redeem all or a portion of the Preferred
Stock and such shares of Common Stock as described below then held by such
Holder for a redemption price, in cash, equal to the sum of (i) the Mandatory
Redemption Amount plus (ii) the product of (A) the number of Underlying
Shares issued in respect of conversions of shares of Preferred Stock
hereunder within thirty Trading Days of the Holder's demand for redemption
pursuant to this Section 6, and then held by the Holder and (B) the Closing
Price on the date such redemption is demanded or the date the redemption
price hereunder is paid in full, whichever is greater (such sum, the
"Redemption Price").  The Redemption Price shall be due and payable within
five Trading Days of the date on which the notice for the payment therefor is
provided by a Holder.   If the Company fails to pay the Redemption Price
hereunder in full pursuant to this Section on the date such amount is due in
accordance with this Section, the Company will pay interest thereon at a rate
of 18% per annum (or the lesser amount permitted by applicable law), accruing
daily from such date until the Redemption Price, plus all such interest
thereon, is paid in full.  For purposes of this Section, a share of Preferred
Stock is outstanding until such date as the Holder shall have received
Underlying Shares upon a conversion (or attempted conversion) thereof that
meets the requirements hereof.

            A "Triggering  Event" means any one or more of the following
events (whatever the reason and whether it shall be voluntary or involuntary
or effected by operation of law or pursuant to any judgment, decree or order
of any court, or any order, rule or regulation of any administrative or
governmental body):

                  (i)   the failure of an Underlying Shares Registration
Statement to be declared effective by the Commission on or prior to the 180th
day after the Original Issue Date;

                  (ii)  if, during the Effectiveness Period, the
effectiveness of the Underlying Shares Registration Statement lapses for any
reason for more than an aggregate of twenty Trading Days (which need not be
consecutive Trading Days), or the Holder shall not be permitted to resell
Registrable Securities under the Underlying Shares Registration Statement for
more than an aggregate of twenty Trading Days (which need not be consecutive
Trading Days);

                  (iii) the Company shall fail for any reason to deliver
certificates representing Underlying Shares issuable upon a conversion
hereunder that comply with the provisions hereof prior to the tenth Trading
Days after the Conversion Date or the Company shall provide notice to any
Holder, including by way of public announcement, at any time, of its
intention not to comply with requests for conversion of any shares of
Preferred Stock in accordance with the terms hereof;

                                      A-13
   38

                  (iv)  the Company shall be a party to any Change of Control
Transaction, shall agree to sell (in one or a series of related transactions)
more than 33% of its assets or shall redeem more than a de minimis number of
Common Stock or other Junior Securities (other than redemptions of Underlying
Shares);

                  (v)   an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the satisfaction of the Holders prior
to the expiration of 60 days from the Event Date (as defined in the
Registration Rights Agreement) relating thereto (other than an Event
resulting from a failure of an Underlying Shares Registration Statement to be
declared effective by the Commission on or prior to the 180th day after the
Original Issue Date, which shall be covered by Section 6(a)(i));

                  (vi)   the Company shall fail for any reason to pay in full
the amount of cash due pursuant to a Buy-In within twenty-one days after
notice therefor is delivered hereunder or shall fail to pay all amounts owed
on account of an Event within twenty-one days of the date due;

                  (vii) the Company shall fail to have available a sufficient
number of authorized and unreserved shares of Common Stock to issue to such
Holder upon a conversion hereunder; or

                  (viii)   the Company shall fail to observe or perform any
other covenant, agreement or warranty contained in, or otherwise commit any
breach of the Transaction Documents (as defined in Section 8) that may result
in a Material Adverse Effect (as defined in the Purchase Agreement), and such
failure or breach shall not, if subject to the possibility of a cure by the
Company, have been remedied within ten Business Days after the date on which
written notice of such failure or breach shall have been given.

            Section 8.  Definitions.  For the purposes hereof, the following
terms shall have the following meanings:

            "Change of Control Transaction" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of
capital stock of the Company, by contract or otherwise) of in excess of 40%
of the voting securities of the Company, (ii) a replacement at one time or
over time of more than one-half of the members of the Company's board of
directors which is not approved by a majority of those individuals who are
members of the board of directors on the date hereof (or by those individuals
who are serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of the
members of the board of directors who are members on the date hereof), (iii)
the merger of the Company with or into another entity that is not
wholly-owned by the Company, consolidation or sale of 33% or more of the
assets of the Company in one or a series of related transactions, or (iv) the
execution by the Company of an agreement to which the


                                      A-14
   39

Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).

            "Closing Price" means on any particular date (a) the closing sale
price per share of Common Stock on such date on the Nasdaq or on such
Subsequent Market on which the shares of Common Stock are then listed or
quoted, or if there is no such price on such date, then the  closing sale
price on the Nasdaq or on such Subsequent Market on the date nearest
preceding such date, or (b) if the shares of Common Stock are not then listed
or quoted on the Nasdaq or a Subsequent Market, the closing sale price for a
share of Common Stock in the over-the-counter market, as reported by the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the shares of Common Stock are not then reported by the
National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the
"Pink Sheet" quotes for the relevant conversion period, as determined in good
faith by the Holder, or (d) if the Common Stock are not then publicly traded
the fair market value of a share of Common Stock as determined by an
Appraiser selected in good faith by the Holders of a majority of the shares
of the Preferred Stock.

            "Commission" means the Securities and Exchange Commission.

            "Common Stock" means the Company's common stock,  par value $.01
per share, and stock of any other class into which such shares may hereafter
have been reclassified or changed.

            "Conversion Ratio" means, at any time, a fraction, the  numerator
of which is Stated Value (or Excess Stated Value, as the case may be) and
the  denominator of which is the Conversion Price at such time.

            "Dividend Effectiveness Date" means the earlier to occur of (x)
the Effectiveness Date (as defined in the Registration Rights Agreement) and
(y) the Effective Date.

            "Effective Date" means the date that the Underlying Shares
Registration Statement is declared effective by the Commission.

            "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

            "Junior Securities" means the Common Stock and all other equity
or equity equivalent securities of the Company other than those securities
that are outstanding on the Original Issue Date and which are explicitly
senior in rights or liquidation preference to the Preferred Stock.

            "Mandatory Redemption Amount" for each share of Preferred Stock
means the sum of (i) the greater of (A) 120% of the Stated Value and (B) the
product of (a) the Closing Price on the Trading Day immediately preceding (x)
the date of the Triggering  Event or the Conversion Date, as the case may be,
or (y) the date of payment in full by the Company of the applicable
redemption price, whichever is greater, and (b) the Conversion  Ratio
calculated on the date of the Triggering


                                      A-15
   40

Event, or the Conversion Date, as the case may be, and (ii) all other amounts,
costs, expenses and liquidated damages due in respect of such share of Preferred
Stock.

            "Optional Redemption Price" shall be sum of (i) 105% of the
Stated Value of the shares of Preferred Stock to be redeemed pursuant to
Section 6 and (ii) all other amounts, costs, expenses and liquidated damages
due in respect of such shares of Preferred Stock.

            "Original Issue Date" shall mean the date of the first issuance
of any shares of the Preferred Stock regardless of the number of transfers of
any particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.

            "Per Share Market Value" means on any particular date (a) the
closing bid price per share of Common Stock on such date on the Nasdaq or on
such Subsequent Market on which the shares of Common Stock are then listed or
quoted, or if there is no such price on such date, then the  closing bid
price on the Nasdaq or on such Subsequent Market on the date nearest
preceding such date, or (b) if the shares of Common Stock are not then listed
or quoted on the Nasdaq or a Subsequent Market, the closing bid price for a
share of Common Stock in the over-the-counter market, as reported by the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the shares of Common Stock are not then reported by the
National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the
"Pink Sheet" quotes for the relevant conversion period, as determined in good
faith by the Holder, or (d) if the Common Stock are not then publicly traded
the fair market value of a share of Common Stock as determined by an
Appraiser selected in good faith by the Holders of a majority of the shares
of the Preferred Stock.

            "Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.

            "Purchase Agreement" means the Convertible Preferred Stock
Purchase Agreement, dated as of the Original Issue Date, to which the Company
and the original Holders are parties, as amended, modified or supplemented
from time to time in accordance with its terms.

            "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, to which the Company and the
original Holders are parties, as amended, modified or supplemented from time
to time in accordance with its terms.

            "Securities Act" means the Securities Act of 1933, as amended.

            "Trading Day" means (a) a day on which the shares of Common Stock
are traded on the Nasdaq or on such Subsequent Market on which the shares of
Common Stock are then listed or quoted, or (b) if the shares of Common Stock
are not listed on the Nasdaq or a Subsequent Market, a day on which the
shares of Common Stock are traded in the over-the-counter market, as reported
by the OTC Bulletin Board, or (c) if the shares of Common Stock are not
quoted on the OTC Bulletin Board, a day on which the shares of Common Stock
are quoted in the over-the-counter


                                      A-16
   41

market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
that in the event that the shares of Common Stock are not listed or quoted as
set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day except
Saturday, Sunday and any day which shall be a legal holiday or a day on which
banking institutions in the State of New York are authorized or required by law
or other government action to close.

            "Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.

            "Underlying Shares" means, collectively, the shares of Common
Stock  into which the shares of Preferred Stock are convertible in accordance
with the terms hereof.

            "Underlying Shares Registration Statement" means a registration
statement that meets the requirements of the Registration Rights Agreement
and registers the resale of all Underlying Shares by the Holder, who shall be
named as a "selling stockholder" thereunder.



                                      A-17
   42

                                   EXHIBIT A

                             NOTICE OF CONVERSION

(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)

The undersigned hereby elects to convert the number of shares of 6% Series A
Convertible Preferred Stock indicated below, into shares of common stock, par
value $.01 per share (the "Common Stock"), of SeraNova, Inc., a New Jersey
corporation (the "Company"), according to the conditions hereof, as of the
date written below.  If shares are to be issued in the name of a person other
than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith.  No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any.




                       
Conversion calculations:   Date to Effect Conversion

                           -----------------------------------------------------
                           Number of shares of Preferred Stock owned prior to
                           Conversion

                           -----------------------------------------------------
                           Number of shares of Preferred Stock to be Converted

                           -----------------------------------------------------
                           Stated Value of shares of Preferred Stock to be
                           Converted

                           -----------------------------------------------------
                           Number of shares of Common Stock to be Issued

                           -----------------------------------------------------
                           Applicable Conversion Price

                           -----------------------------------------------------
                           Number of shares of Preferred Stock subsequent to
                           Conversion
                           -----------------------------------------------------

                           Signature

                           -----------------------------------------------------
                           Name

                           -----------------------------------------------------
                           Address



ACCEPTED AND AGREED:

SeraNova, Inc.



                                      A-18
   43


By:_____________________________________
    Name:
    Title:



                                      A-19


   44

                                                                       EXHIBIT B

                          REGISTRATION RIGHTS AGREEMENT

                  This Registration Rights Agreement (this "Agreement") is made
and entered into as of September 29, 2000, among SeraNova, Inc., a New Jersey
corporation (the "Company"), and the investors signatory hereto (each such
investor is a "Purchaser" and all such investors are, collectively, the
"Purchasers").

                  This Agreement is made pursuant to the Convertible Preferred
Stock Purchase Agreement, dated as of the date hereof among the Company and the
Purchasers (the "Purchase Agreement").

                  The Company and the Purchasers hereby agree as follows:

         1.       Definitions

                  Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:

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

                  "Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday in the State of New York or New Jersey or a
day on which banking institutions in the State of New York or New Jersey are
authorized or required by law or other government actions to close.

                  "Certificate of Designation" shall have the meaning set forth
in the Purchase Agreement.

                  "Closing Date" shall have the meaning set forth in the
Purchase Agreement.

                  "Commission" means the Securities and Exchange Commission.

                  "Common Stock" means the Company's common stock, $.01 par
value per share, or such securities into which that such stock shall hereafter
be reclassified.



                                      B-1
   45



                  "Effectiveness Date" means, (1) with respect to the
Registration Statement required to be filed in respect of the Common Stock
underlying the Shares and Warrants issued at the Closing, the 90th day following
the Closing Date and (2) with respect to any additional Registration Statements
which may be required pursuant to Section 3(c), the 90th day following the date
that notice of the requirement to file such additional Registration Statement is
provided.

                  "Effectiveness Period" shall have the meaning set forth in
Section 2(a).

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

                  "Filing Date" means (1) with respect to the Registration
Statement required to be filed in respect of the Shares and Warrants issued at
the Closing, the 45th day following the Closing Date and (2) with respect to any
additional Registration Statements which may be required pursuant to Section
3(c), the 45th day following the date that notice of the requirement to file
such additional Registration Statement is provided.

                  "Holder" or "Holders" means the holder or holders of record,
as the case may be, from time to time of Registrable Securities.

                  "Indemnified Party" shall have the meaning set forth in
Section 5(c).

                  "Indemnifying Party" shall have the meaning set forth in
Section 5(c).

                  "Losses" shall have the meaning set forth in Section 5(a).

                  "Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.

                  "Preferred Stock" means the Company's 6% Series A Convertible
Preferred Stock issued or issuable to the Purchasers in accordance with the
Purchase Agreement.

                  "Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.

                  "Prospectus" means the prospectus constituting Part I of any
Registration Statement (including, without limitation, a prospectus that
includes any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.



                                      B-2
   46

                  "Registrable Securities" means the shares of Common Stock
issuable upon conversion in full of the Preferred Stock and exercise in full of
the Warrants, until the end of the Effectiveness Period.

                  "Registration Statement" means the registration statement
under the Securities Act covering the resale by the Holders of any Registrable
Securities, and any additional registration statements contemplated by Section
3(c), including (in each case) the Prospectus, amendments and supplements to
such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.

                  "Rule 144" means Rule 144 promulgated by the Commission under
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

                  "Rule 415" means Rule 415 promulgated by the Commission under
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

                  "Rule 424" means Rule 424 promulgated by the Commission under
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

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

                  "Special Counsel" means one special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.

                  "Warrants" shall mean the Common Stock purchase warrants
issued to the Purchasers pursuant to the Purchase Agreement.




                                      B-3
   47


         2.       Shelf Registration

                  (a) On or prior to each Filing Date, the Company shall prepare
and file with the Commission a "Shelf" Registration Statement covering the
resale of all then unregistered Registrable Securities for an offering to be
made on a continuous basis pursuant to Rule 415. The Registration Statement
shall be on Form S-1 or other permissible form and shall contain (except if
otherwise directed by the Holders) the "Plan of Distribution" attached hereto as
Annex A. The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the Effectiveness
Date, and shall use its best efforts to keep such Registration Statement
continuously effective under the Securities Act until the date which is two
years after the date that such Registration Statement is declared effective by
the Commission or such earlier date when all Registrable Securities covered by
such Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144(k) (the "Effectiveness Period").
Notwithstanding the foregoing, the Company shall not be liable to the Holders
for any liquidated damages pursuant to Section 2(c) hereof if the Registration
Statement is not declared effective prior to the 30th day following the
Effectiveness Date.

                  (b) The initial Registration Statement to be filed hereunder
(as contemplated by clause (1) of the definition of Filing Date and
Effectiveness Date) shall include no less than 3,150,000 shares of Common Stock
which is equal to the sum of: (i) the number of shares of Common Stock issuable
upon conversion in full of the outstanding Preferred Stock, assuming for such
purposes that such shares of Preferred Stock are outstanding for five years,
that all accrued dividends are added to the Stated Value (as defined in the
Certificate of Designation) and that the applicable Conversion Price (as defined
in the Certificate of Designation) is $3.50, and (ii) the number of shares of
Common Stock issuable upon exercise in full of the Warrants, assuming for such
purposes that (1) the Closing Warrants are exercised in full on the Closing Date
and (2) the Redemption Warrants fully vest and are exercisable in full on the
Closing Date.

                  (c) If (a) a Registration Statement is not filed on or prior
to its Filing Date (if the Company files such Registration Statement without
affording the Holder the opportunity to review and comment on the same as
required by Section 3(a) hereof, the Company shall not be deemed to have
satisfied this clause (a)), or (b) the Company fails to file or make with the
Commission an acceleration request in accordance with Rule 461 promulgated under
the Securities Act, within five Business Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that a
Registration Statement will not be "reviewed," or not subject to further review,
or (c) a Registration Statement filed hereunder is not declared effective by the
Commission on or prior to the 30th day following the Effectiveness Date, or (d)
after a Registration Statement is filed with and declared effective by the
Commission, such Registration Statement ceases to be effective as to all
Registrable Securities to which it is required to relate at any time prior to
the expiration of the Effectiveness Period without being succeeded within ten
Business Days by an amendment to such Registration Statement or by a subsequent
Registration Statement filed with and declared effective by the Commission, or
(e) the Common Stock shall be delisted or suspended from trading on the Nasdaq
National Market ("NASDAQ"), the New York Stock Exchange, the American Stock
Exchange or the Nasdaq Smallcap Market (each, a "Subsequent Market") for more
than three



                                      B-4
   48

Trading Days (which need not be consecutive Trading Days), or (f) the conversion
or exercise rights of the Holders pursuant to Certificate of Designation and the
Warrants are suspended for any reason, (any such failure or breach being
referred to as an "Event," and for purposes of clauses (a), (c), (f) the date on
which such Event occurs, or for purposes of clause (b) the date on which such
five Business Day period is exceeded, or for purposes of clause (d) the date
which such ten Business Day-period is exceeded, or for purposes of clause (e)
the date on which such three Trading Day-period is exceeded, being referred to
as "Event Date"), then, on each such Event Date and every monthly anniversary
thereof until the applicable Event is cured, the Company shall pay to each
Holder an amount in cash, as liquidated damages and not as a penalty, equal to
2.0% of the purchase price paid by such Holder pursuant to the Purchase
Agreement. If the Company fails to pay any liquidated damages pursuant to this
Section in full within seven days after the date payable, the Company will pay
interest thereon at a rate of 18% per annum (or such lesser maximum amount that
is permitted to be paid by applicable law) to the Holder, accruing daily from
the date such liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. The liquidated damages pursuant to the terms
hereof shall apply on a pro-rata basis for any portion of a month prior to the
cure of an Event.

                  (d) For a period not exceeding either (i) 10 consecutive
Trading Days or (ii) an aggregate of 25 Trading Days in any 12 month period, the
Company may suspend the ability of the Holders to make dispositions under a
Registration Statement or Prospectus by providing the Holders with written
notification (a "Blocking Notice") if the Company's board of directors
determines in its good faith judgment that the Company's obligation to ensure
that such Registration Statement and Prospectus contain current and complete
information would require the Company to make a public disclosure regarding a
material non-public transaction, provided, that the Company shall not be
entitled to deliver a Blocking Notice within 10 Trading Days of the expiration
of any Blocking Notice previously delivered. Each Blocking Notice shall contain
a general statement of the reasons for such postponement and an approximation of
the anticipated delay. Notwithstanding anything to the contrary herein, in the
event of a merger of the Company with or into another entity that is not
wholly-owned by the Company and is reportable under Item 2 of Form 8-K under the
Exchange Act, the Company may deliver a Blocking Notice for a period of up to 25
consecutive Trading Days in any 12 month period, in which case, the number of
consecutive Trading Days available to the Company pursuant to clause (ii) of
this Section shall be reduced by such number of Trading Days. Each Holder agrees
by acquisition of the Registrable Securities that, upon receipt of a Blocking
Notice from the Company, such Holder shall not dispose of, sell or offer for
sale the Registrable Securities pursuant to the Registration Statement until
such Holder receives (i) copies of the supplemented or amended Prospectus, or
until counsel for the Company shall have determined that such disclosure is not
required due to subsequent events, (ii) notice in writing from the Company that
the use of the Prospectus may be resumed and (iii) copies of any additional or
supplemental filings that are incorporated by reference to in the Prospectus. In
the event the Company shall provide any Blocking Notice pursuant to this
Section, the Effectiveness Date and the Effectiveness Period shall be extended
for a number of days equal to the number of days during which such Blocking
Notice is in effect.

                  (e) Each Holder of Registrable Securities agrees to furnish to
the Company with



                                      B-5
   49

its name, number of shares now owned and offered in the Registration Statement,
its address, the name of the natural person who controls the disposition and
investment of the registered securities and changes to the Plan of Distribution.
Without limiting the foregoing, the Company may exclude a Holder's Registrable
securities from any Registration Statement, or suspend the preparation of a
Registration Statement, if such Holder has not furnished to the Company in
writing the information with respect to such Holder and its intended plan of
distribution set forth in the first sentence of this paragraph. However, the
Company shall (i) promptly include in such Registration Statement the
Registrable Securities of any such Holder who subsequently provides such
information, and (ii) file the Registration Statement or an appropriate
amendment thereto on or prior to the date that is ten days after the Company
receives such information. Each Holder agrees to notify the Company as promptly
as practicable of any inaccuracy or change in information previously furnished
by such Holder to the Company and to promptly furnish to the Company any
additional information required to correct and update any previously furnished
information or required so that such Prospectus shall not contain, with respect
to such Holder or the distribution of such Holder's Registrable Securities, an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.

         3.       Registration Procedures

                  In connection with the Company's registration obligations
hereunder, the Company shall:

                  (a) Not less than five Business Days prior to the filing of
each Registration Statement or any related Prospectus or any amendment or
supplement thereto (including any document that would be incorporated or deemed
to be incorporated therein by reference), the Company shall, (i) furnish to the
Holders and their Special Counsel copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders and
their Special Counsel, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of Special Counsel to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities and their Special Counsel shall reasonably object,
provided, the Company is notified of such objection no later than 3 Business
Days after the Holders have been so furnished copies of such documents.

                  (b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424, if required thereby;
(iii) respond as promptly as reasonably possible, and in any event within ten
Business Days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence from
and



                                      B-6
   50

to the Commission relating to the Registration Statement; and (iv) comply in
all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.

                  (c) File additional Registration Statements upon the Company's
receipt of notice from the Holders that the number of Registrable Securities
exceeds 85% of the number of shares of Common Stock then registered for the
account of the Holders in all existing Registration Statements hereunder.

                  (d) Notify the Holders of Registrable Securities to be sold
and their Special Counsel as promptly as reasonably possible (and, in the case
of (i)(A) below, not less than five Business Days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
Business Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the
Holders); and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby cease to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible for
inclusion therein or any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

                  (e) Promptly deliver to each Holder and their Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. Except as otherwise provided in Section 2(d) and Section
6(e) of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.



                                      B-7
   51

                  (f) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, that the Company shall not be required to qualify generally to do
business or to qualify as a securities dealer in any jurisdiction where it is
not then so qualified or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.

                  (g) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any such Holders may request.

                  (h) Upon the occurrence of any event contemplated by Section
3(d)(vi), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

                  (i) Comply with all applicable rules and regulations of the
Commission.

         4.       Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the NASDAQ and any Subsequent Market on which the
Common Stock is then listed for trading, and (B) in compliance with applicable
state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Company in connection with Blue Sky
qualifications or exemptions of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as requested by the Holders )), (ii) printing or photocopying
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing or photocopying prospectuses requested by
the Holders), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company, (v) fees and disbursements of Special
Counsel for the Holders in an amount not to exceed $7,500 and (vi) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement.



                                      B-8
   52

         5.       Indemnification

                  (a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (1) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (2) in the case of an occurrence of an event of the type specified in Section
3(d)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(e). The Company shall notify the Holders promptly of
the institution, threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.

                  (b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in any Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished in
writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder's pro-



                                      B-9
   53

posed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (2) in the case of an occurrence of an event
of the type specified in Section 3(d)(ii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 6(e). In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.

                  (c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.

                  An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party 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 thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.

                  All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Business Days of written notice thereof to the Indemnifying
Party (regardless



                                      B-10
   54

of whether it is ultimately determined that an Indemnified Party is not
entitled to indemnification hereunder; provided, that the Indemnifying Party
may require such Indemnified Party to undertake to reimburse promptly all such
fees and expenses to the extent it is finally judicially determined that such
Indemnified Party is not entitled to indemnification hereunder).

                  (d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.

                  The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(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
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall
be required to contribute, in the aggregate, any amount in excess of the amount
by which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.

                  The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.



                                      B-11
   55

         6.       Miscellaneous

                  (a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least two-thirds of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority of the outstanding
Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.

                  (b) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has entered, as of the date hereof, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflict with the provisions hereof. Except as and to the extent specified in
Schedule 6(b) hereto, neither the Company nor any of its subsidiaries has
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person that have not been satisfied in
full.

                  (c) No Piggyback on Registrations. Except as and to the extent
specified in Schedule 6(b) hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.

                  (d) Compliance. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.

                  (e) Discontinued Disposition. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Sections
3(d)(ii), 3(d)(iii), 3(d)(iv), 3(d)(v) or 3(d)(vi), such Holder will forthwith
discontinue disposition of such Registrable Securities under the Registration
Statement until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by Section 3(h),
or until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration Statement.
The Company may provide appropriate stop orders to enforce the provisions of
this paragraph.

                  (f) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the



                                      B-12
   56

Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within
fifteen days after receipt of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all or any
part of such unregistered Registrable Securities such holder requests to be
registered. In the case of a registration statement for an underwritten public
offering by the Company (which shall not include a equity line of credit or
similar financing), the right of any Holder to registration pursuant to this
Section 6(f) shall be conditioned upon the inclusion of such Holders'
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall (together with the Company and other shareholders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter(s) selected for
such underwriting by the Company. Notwithstanding any other provision of this
Section 6(f), if the underwriter(s) determine(s) that marketing factors require
limitation of the number of the number of shares of Common Stock to be
underwritten, the underwriter(s) may limit the number of Registrable Securities
to be included in the registration and the underwriting; provided, that (i) all
other selling shareholders participating in such registration and underwriting
shall be limited pro-rata and (ii) the underwriter may not limit the amount of
Registrable Securities included in such registration and underwriting to less
than an amount equal to 10% of the amount of all the shares of Common Stock
included within such registration and underwriting. The Company shall so advise
all Holders which would otherwise be registered and underwritten pursuant
hereto, and the number of Registrable Securities that may be included in the in
the registration and underwriting shall be allocated among all Holders and other
shareholders distributing their securities through such underwriting thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities and other securities (as applicable) entitled to inclusion in such
registration held by such Holders at the time of filing of the registration
statement. If any Holder disapproves of the terms of terms of any such
underwriting, he may elect to withdraw therefrom and from the registration by
written notice to the Company.

                  (g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 6:30 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 6:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:

         If to the Company:           SeraNova, Inc.


                                      B-13
   57


                                     499 Thornall Street
                                     Edison, NJ 08837
                                     Facsimile No.: (732) 362-2123
                                     Attn: Chief Financial Officer


         With copies to:            Carter, Ledyard & Miburn
                                    2 Wall Street
                                    New York, New York 10005
                                    Facsimile No.: (212) 732-3232
                                    Attn: James E. Abbott, Esq.

         If to a Purchaser:         To the address set forth under such
                                    Purchaser's name on the signature pages
                                    hereto.

         If to any other Person who is then the registered Holder:

                                    To the address of such Holder as it appears
                                    in the stock transfer books of the Company

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

                  (h) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign its rights hereunder in the manner and to
the Persons as permitted under Sections 4.6 and 3.1(a) of the Purchase
Agreement.

                  (i) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

                  (j) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees




                                      B-14
   58

that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.

                  (k) Cumulative Remedies.  The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.

                  (l) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.

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

                  (n) Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder is several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled to
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to be
joined as an additional party in any proceeding for such purpose.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                           SIGNATURE PAGES TO FOLLOW]



                                      B-15
   59


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

                                    SERANOVA, INC.

                                    By: /s/Ravi Singh
                                       ---------------------------------
                                       Name: Ravi Singh
                                       Title: Chief Financial Officer



                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE OF PURCHASER FOLLOWS]



                                      B-16
   60


                      STRONG RIVER INVESTMENTS, INC.



                       By:/s/Kenneth L. Henderson
                          -----------------------------------------
                          Kenneth L. Henderson
                          Attorney-in-Fact


                      Address for Notice:

                      Strong River Investments, Inc.
                      c/o Gonzalez-Ruiz Aleman (BVI) Limited
                      Wickhams Cay I, Vanterpool Plaza
                      P.O. Box 873
                      Road Town, Tortolla, B.V.I.

                      With copies to:

                      Robinson Silverman Pearce Aronsohn & Berman LLP
                      1290 Avenue of the Americas
                      New York, NY  10104
                      Facsimile No.:  (212) 541-4630 and (212) 541-1432
                      Attn: Eric L. Cohen, Esq. and  Kenneth L. Henderson, Esq.


                                      B-17
   61



                      MONTROSE INVESTMENTS LTD.


                      By: /s/ Kevin O'Neal
                         --------------------------------------
                        Name: Kevin O'Neal
                        Title:


                      Address for Notice:
                      Montrose Investments Ltd.
                      c/o HBK Investments L.P.
                      300 Crescent Court, Suite 700
                      Dallas, Texas  75201
                      Facsimile: (214) 758-1221
                      Attn: Jeff Estes and Kim Rozman

    With copies to:   Robinson Silverman Pearce Aronsohn & Berman LLP
                      1290 Avenue of the Americas
                      New York, NY  10104
                      Facsimile No.:  (212) 541-4630 and (212) 541-1432
                      Attn: Eric L. Cohen, Esq.



                                      B-18
   62


                                                                         Annex A

                              PLAN OF DISTRIBUTION


         The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Company will receive no part of the proceeds from the
sale of the Shares by the Selling Stockholders. The Selling Stockholders may use
any one or more of the following methods when selling shares:

- -        ordinary brokerage transactions and transactions in which the broker-
         dealer solicits purchasers;

- -        block trades in which the broker-dealer will attempt to sell the shares
         as agent but may position and resell a portion of the block as
         principal to facilitate the transaction;

- -        purchases by a broker-dealer as principal and resale by the broker-
         dealer for its account;

- -        an exchange distribution or special offering in accordance with the
         rules of the applicable exchange;

- -        privately negotiated transactions;

- -        short sales;

- -        sales by broker-dealers of a specified number of such shares at a
         stipulated price per share;

- -        a combination of any such methods of sale; and

- -        any other method permitted pursuant to applicable law.

         The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

         The Selling Stockholders may also engage in short sales against the
box, puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The Selling Stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a Selling
Stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares. The Selling Stockholders have advised the Company
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their shares other
than ordinary course brokerage arrangements, nor is there an underwriter or



                                      B-19
   63

coordinating broker acting in connection with the proposed sale of shares by the
Selling Stockholders.

         Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.

         The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.

         The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.

         If any Selling Stockholder notifies the Company that the Selling
Stockholder has entered into any material arrangement with a broker-dealer for
the sale of shares through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, the
Company will file a supplement to this prospectus, if required, pursuant to Rule
424(b) under the Securities Act, disclosing:

- -        the name of the participating broker-dealer(s);

- -        the number of shares involved;

- -        the price at which such shares were sold;

- -        the commission paid or discounts or concessions allowed to the broker-
         dealer(s), where applicable;

- -        whether the broker-dealer(s) conducted any investigations to verify the
         information in or incorporated by reference in this prospectus; and

- -        other material facts of the transaction.

         Also, if a Selling Stockholder notifies the Company that a donee,
pledgee, transferee, or other successor-in-interest of the shares intends to
sell more than 500 shares, the Company will file an appropriate supplement to
this prospectus.


                                      B-20
   64




                                                                     EXHIBIT D-1

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.


                                 SERANOVA, INC.

                                     WARRANT

Warrant No.[ ]                                        Dated: September [ ], 2000


         SeraNova, Inc., a New Jersey corporation (the "Company"), hereby
certifies that, for value received, [ ] or its registered assigns ("Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company up
to a total of [150,000] shares of common stock, $.01 par value per share (the
"Common Stock"), of the Company (each such share, a "Warrant Share" and all such
shares, the "Warrant Shares") at the Exercise Price set forth in Section 3, at
any time and from time to time from and after the date hereof and through and
including September [ ], 2005 (the "Expiration Date"), and subject to the
following terms and conditions:

         1.       Registration of Warrant. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.



                                     D-1-1
   65



         2.       Registration of Transfers and Exchanges.

                  (a) The Company shall register the transfer of any  portion of
this Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the Transfer
Agent or to the Company at its address for notice set forth in Section 12. Upon
any such registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New Warrant"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.

                  (b) This Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company at its address for notice set forth in
Section 12 for one or more New Warrants, evidencing in the aggregate the right
to purchase the number of Warrant Shares which may then be purchased hereunder.
Any such New Warrant will be dated the date of such exchange.

         3.       Duration and Exercise of Warrants.

                  (a) This Warrant shall be exercisable by the registered Holder
on any business day before 6:30 P.M., New York City time, at any time and from
time to time on or after the date hereof to and including the Expiration Date.
At 6:30 P.M., New York City time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
Prior to the Expiration Date, the Company may not call or otherwise redeem this
Warrant.

                  (b) Upon delivery of a duly completed and signed Form of
Election to Purchase attached hereto (and the grid attached hereto as Annex A)
duly completed and signed, to the Company at its address for notice set forth in
Section 12 and upon payment of the Exercise Price multiplied by the number of
Warrant Shares that the Holder intends to purchase hereunder, in the manner
provided hereunder, all as specified by the Holder in the Form of Election to
Purchase, the Company shall promptly (but in no event later than 3 business days
after the Date of Exercise (as defined herein)) issue or cause to be issued and
cause to be delivered to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise, free of restrictive legends except (i) either in
the event that a registration statement covering the resale of the Warrant
Shares and naming the Holder as a selling stockholder thereunder is not then
effective or the Warrant Shares are not freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) if this Warrant shall have been
issued pursuant to a written agreement between the original Holder and the
Company, as required by such agreement. Any person so designated by the Holder
to receive Warrant Shares shall be deemed to have become holder of record of
such Warrant Shares as of the Date of Exercise of this Warrant. The Company
shall, upon request of the Holder, if available, use its best efforts to deliver
Warrant Shares hereunder electronically through the Depository Trust Corporation
or another established clearing corporation



                                     D-1-2
   66

performing similar functions. To effect an exercise hereunder, the Holder shall
not be required to physically surrender this Warrant to the Company unless all
the Warrant Shares have been exercised. Exercises hereunder shall have the
effect of lowering the number of Warrant Shares in an amount equal to the
applicable exercise, which shall be evidenced by entries set forth in the
Exercise Schedule. The Holder and the Company shall maintain records showing the
number of Warrant Shares exercised and the date of such exercises . In the event
of any dispute or discrepancy, the records of the Holder shall be controlling
and determinative in the absence of manifest error. The Holder and any assignee,
by acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following exercise of a portion of this Warrant,
the number of shares issuable upon exercise of this Warrant may be less than the
amount stated on the face hereof.

                  A "Date of Exercise" means the date on which the Company shall
have received (i) the Form of Election to Purchase completed and duly signed,
and (ii) payment of the Exercise Price for the number of Warrant Shares so
indicated by the Holder to be purchased.

                  (c) The "Exercise Price" for the Warrant Shares equals the
lesser of $7.00 (subject to equitable adjustment for stock splits, reverse stock
splits, and similar events) and the average of the Per Share Market Values for
the five Trading Days immediately preceding the date of the exercise, provided,
that, for the first 90 days following the Closing Date (as defined in the
Purchase Agreement), the Exercise Price may not be less than $7.00 (subject to
equitable adjustment for stock splits, reverse stock splits, and similar
events). The Exercise Price shall be subject to adjustment in accordance with
Section 8.

         4.       Piggyback Registration Rights. This Warrant is subject to
the piggyback registration rights granted under the Registration Rights
Agreement and such piggyback registration rights shall continue until all of the
Holder's Warrant Shares have been sold in accordance with an effective
registration statement or upon the Expiration Date. The Company will pay all
registration expenses in connection therewith.

         5.       Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.

         6.       Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.

                                     D-1-3
   67

         7.       Reservation of Warrant Shares. The Company covenants that
it will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 8). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.

         8.       Certain Adjustments.  The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 8.

                  (a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a stated
dividend rate) or otherwise make a distribution or distributions on shares of
its Common Stock or on any other class of capital stock payable in shares of
Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision or combination, and shall apply to successive subdivisions and
combinations.

                  (b) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification or share exchange, and the Holder
shall be entitled upon such event to receive such amount of securities or
property equal to the amount of Warrant Shares such Holder would have been
entitled to had such Holder exercised this Warrant immediately prior to such
reclassification or share exchange. The terms of any such reclassification or
share exchange shall include such terms so as to continue to give to the Holder
the right to receive the securities or property set forth in this Section 8(b)
upon any exercise following any such reclassification or share exchange.

                  (c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 8(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for



                                     D-1-4
   68

determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Exercise Price determined as of
the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").

                  (d) If the Company or any subsidiary thereof, as applicable
with respect to Common Stock Equivalents (as defined below), at any time while
this Warrant is outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities, including securities issued to the Holder
as of the date hereof, or debt that are convertible into or exchangeable for
shares of Common Stock ("Common Stock Equivalents"), entitling any Person to
acquire shares of Common Stock at a price per share less than the greater of the
Closing Price on such date of issuance and the Exercise Price (if the holder of
the Common Stock or Common Stock Equivalent so issued shall at any time, whether
by operation of purchase price adjustments, reset provisions, floating
conversion, exercise or exchange prices or otherwise, or due to warrants,
options or rights issued in connection with such issuance, be entitled to
receive shares of Common Stock at a price less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise Price),
then, at the sole option of the Holder, the Exercise Price shall be adjusted to
mirror the conversion, exchange or purchase price for such Common Stock
Equivalents (including any reset provisions thereof), provided, that for
purposes hereof, all shares of Common Stock that are issuable upon conversion,
exercise or exchange of Common Stock Equivalents shall be deemed outstanding
immediately after the issuance of such Common Stock Equivalents. Such adjustment
shall be made whenever such shares of Common Stock or Common Stock Equivalents
are issued. Notwithstanding to the contrary anything herein, this Section shall
not apply to: (i) issuance of options and warrants to employees, officers and
directors of the Company, and the issuance of Common Stock upon exercise of such
options and warrants granted under any stock option plan hereinafter duly
adopted by the Company, (ii) issuance of Common Stock or Common Stock
Equivalents as part payment of the purchase price in (A) the acquisition of
assets or a business by the Company or (B) in connection with the acquisition of
goods or a license by the Company and (iii) as royalty payments in connection
with or under a firm underwritten primary offering of the Company's stock in
which the full purchase price is paid upon the first closing thereof (which
shall not include equity lines of credit or any similar financing structure).

                  (e) In case of any (1) merger or consolidation of the Company
with or into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a book value basis) in one or a series of related
transactions, the Holder shall have the right thereafter to (A) exercise this
Warrant for the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
merger, consolidation or sale, and the Holder shall be entitled upon such event
or series of related events to receive such amount of securities, cash and
property as the Common Stock for which this Warrant could have been exercised
immediately prior to such merger, consolidation or sales would have been
entitled or (B) in the case of a merger or consolidation, require the Company to
pay to the Holder, in cash, 120% of the Black Scholes value of this Warrant. The
terms of any such merger, sale or



                                     D-1-5
   69

consolidation shall include such terms so as continue to give the Holder the
right to receive the securities, cash and property set forth in this Section
upon any conversion or redemption following such event. This provision shall
similarly apply to successive such events.

                  (f) For the purposes of this Section 8, the following clauses
shall also be applicable:

                      (i)  Record Date.  In case the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into shares of Common Stock, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

                      (ii)  Treasury Shares.  The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.

                  (g) All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.

                  (h) Whenever the Exercise Price is adjusted pursuant to
Section 8(c) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall
be a nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the Appraiser
and such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.

                  (i) If:

                        (i)         the Company shall declare a dividend (or any
                                    other distribution) on its Common Stock; or

                       (ii)         the Company shall declare a special
                                    nonrecurring cash dividend on or a
                                    redemption of its Common Stock; or

                      (iii)         the Company shall authorize the granting to
                                    all holders of the Common Stock rights or
                                    warrants to subscribe for or purchase any
                                    shares of capital stock of any class or of
                                    any rights; or

                                     D-1-6

   70

                       (iv)         the approval of any stockholders of the
                                    Company shall be required in connection with
                                    any reclassification of the Common Stock,
                                    any consolidation or merger to which the
                                    Company is a party, any sale or transfer
                                    of all or substantially all of the assets of
                                    the Company, or any compulsory share
                                    exchange whereby the Common Stock is
                                    converted into other securities, cash or
                                    property; or

                        (v)         the Company shall authorize the voluntary
                                    dissolution, liquidation or winding up of
                                    the affairs of the Company,

then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 20 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.

         9.       Payment of Exercise Price.  The Holder shall pay the Exercise
Price in one of the following manners:

                  (a) Cash Exercise.  The Holder may deliver immediately
available funds; or

                  (b) Cashless Exercise. The Holder may surrender this Warrant
to the Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:

                                    X = Y [(A-B)/A]
         where:
                                    X = the number of Warrant Shares to be
         issued to the Holder.

                                    Y = the number of Warrant Shares with
                                    respect to which this Warrant is being
                                    exercised.

                                     D-1-7
   71

                                    A = the average of the closing sale prices
                                    of the Common Stock for the five (5) trading
                                    days immediately prior to (but not
                                    including) the Date of Exercise.

                                    B = the Exercise Price.

For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.

         10.      Certain Exercise Restrictions.

                  (a) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
promulgated thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares issuable upon such exercise and held by
such Holder after application of this Section. Since the Holder will not be
obligated to report to the Company the number of shares of Common Stock it may
hold at the time of an exercise hereunder, unless the exercise at issue would
result in the issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular exercise hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of this Warrant is exercisable shall
be the responsibility and obligation of the Holder. If the Holder has delivered
a Form of Election to Purchase for a number of Warrant Shares that, without
regard to any other shares that the Holder or its affiliates may beneficially
own, would result in the issuance in excess of the permitted amount hereunder,
the Company shall notify the Holder of this fact and shall honor the exercise
for the maximum portion of this Warrant permitted to be exercised on such Date
of Exercise in accordance with the periods described herein and, at the option
of the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant to the Holder. The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.

                  (b) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares issuable
upon such exercise and held by such Holder after application of this Section.
Since the Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the time of an exercise hereunder, unless
the exercise at issue would result in the issuance of shares of Common  Stock
in excess of 9.999% of the then outstanding shares of Common


                                     D-1-8
   72

Stock without regard to any other shares which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section will
limit any particular exercise hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that, without regard to
any other shares that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount hereunder, the Company
shall notify the Holder of this fact and shall honor the exercise for the
maximum portion of this Warrant permitted to be exercised on such Date of
Exercise in accordance with the periods described herein and, at the option of
the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant to the Holder. The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.

                  (c) If the Company Stock is then listed for trading on the
Nasdaq or the Nasdaq SmallCap Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company may not issue in
excess of 3,492,001.9 shares of Common Stock (which equals 19.999% of the number
of shares of Common Stock outstanding on the Trading Day immediately preceding
the date hereof) upon exercise of this Warrant, the Redeemable Warrants (as
defined in the purchase agreement dated the date hereof pursuant to which this
Warrant was issued) or conversion of the Preferred Stock (as defined in the
purchase agreement dated the date hereof pursuant to which this Warrant was
issued), in any case, at a price per share that is less than the Closing Price
on the Trading Day immediately preceding the date hereof (such number of shares,
the "Issuable Maximum"). Each Holder shall be entitled to a portion of the
Issuable Maximum equal to the quotient obtained by dividing (x) the number of
shares of Common Stock issued and sold to such Holder on the Date hereof by (y)
the number of shares of Common Stock issued and sold by the Company on the Date
hereof. If any Holder shall no longer hold Warrants then such Holder's remaining
portion of the Issuable Maximum shall be allocated pro-rata among the remaining
Holders. If on any Date of Exercise: (A) the Company Stock is listed for trading
on the Nasdaq or the Nasdaq SmallCap Market, (B) the Exercise Price then in
effect is such that the aggregate number of shares of Common Stock that would
then be issuable upon exercise in full of this Warrant, the Redemption Warrants
and conversion in full of the Preferred Stock, together with any shares of
Common Stock previously issued upon exercise of this Warrant, the Closing
Warrants and conversion of the Series A Stock, would equal or exceed the
Issuable Maximum, and (C) the Company shall not have previously obtained the
vote of shareholders, if any, as may be required by the applicable rules and
regulations of the Nasdaq Stock Market to approve the issuance of shares of
Common Stock in excess of the Issuable Maximum pursuant to the terms hereof (the
"Shareholder Approval"), then the Company shall issue to the Holder a number of
shares of Common Stock equal to the Issuable Maximum and, with respect to the
shares whose issuance would result in an issuance of shares of Common Stock in
excess of the Issuable Maximum, (the "Excess Warrant Shares"), the Holder shall
have the option to require the Company to either (1) use its best efforts to
obtain the Shareholder Approval applicable to such issuance as soon as possible,
but in any event no later than 60 days after such request (such 60th day, the
"Target Date") or (2) pay to the Holder, within one (1)



                                     D-1-9


   73

Trading Day from the request therefor, an amount in cash equal to the product of
(x) the Excess Warrant Shares multiplied by (y) the closing sales price of the
Common Stock on (a) the Target Date or (b) the Date of Exercise giving rise to
the obligation to seek Shareholder Approval, whichever is greater (the "Cash
Payment"). In the event the Holder has elected to require the Company to seek
the Shareholder Approval pursuant to clause (1) of the immediately preceding
sentence and the Company does not obtain the Shareholder Approval on or prior to
the Target Date, then, on the Target Date, the Company shall pay the Cash
Payment to the Holder. If the Company fails to pay the Cash Payment in full
pursuant to this Section within seven (7) days after the date payable, the
Company will pay interest on such amount at a rate of 18% per annum, or such
lesser maximum amount that is permitted to be paid by applicable law, to the
Holder, accruing daily from the date payable until such amount, plus all such
interest thereon, is paid in full. The Company and the Holder understand and
agree that shares of Common Stock issued upon exercise of this Warrant and then
held by the Holder or an affiliate thereof may not cast votes or be deemed
outstanding for purposes of any vote to obtain the Shareholder Approval.

                  11. Fractional Shares. The Company shall not be required to
issue or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate number
of Warrant Shares purchasable on exercise of this Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable on the exercise of this Warrant, the Company shall pay an amount in
cash equal to the Exercise Price multiplied by such fraction.

                  12. Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the business day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
499 Thornall Street, Edison, New Jersey, 08837, facsimile: (732) 362-2123,
attention Chief Financial Officer, or (ii) if to the Holder, to the Holder at
the address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section.

                  13. Warrant Agent. The Company shall serve as warrant agent
under this Warrant. Upon thirty days' notice to the Holder, the Company may
appoint a new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under this Warrant without any further act. Any
such successor warrant agent shall promptly cause notice



                                     D-1-10
   74

of its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.

         14.      Miscellaneous.

                  (a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns. This Warrant
may be amended only in writing signed by the Company and the Holder and their
successors and assigns.

                  (b) Subject to Section 14(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company and
the Holder.

                  (c) The corporate laws of the State of New Jersey shall govern
all issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. The Company and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, or that such suit,
action or proceeding is improper. Each of the Company and the Holder hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by receiving a copy thereof sent
to the Company at the address in effect for notices to it under this instrument
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.

                  (d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.

                  (e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                             SIGNATURE PAGE FOLLOWS]



                                     D-1-11
   75


                  IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.


                                     SERANOVA, INC.


                                     By:
                                        -------------------------------------
                                        Name: Ravi Singh
                                        Title: Chief Financial Officer



                                     D-1-12
   76


                          FORM OF ELECTION TO PURCHASE

(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)

To SeraNova, Inc.:

         The undersigned hereby irrevocably elects to purchase _____________
shares of common stock, $.01 par value per share, of SeraNova, Inc. (the "Common
Stock") and , if such Holder is not utilizing the cashless exercise provisions
set forth in this Warrant, encloses herewith $________ in cash, certified or
official bank check or checks, which sum represents the aggregate Exercise Price
(as defined in the Warrant) for the number of shares of Common Stock to which
this Form of Election to Purchase relates, together with any applicable taxes
payable by the undersigned pursuant to the Warrant.

         The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of

                                           PLEASE INSERT SOCIAL SECURITY OR
                                           TAX IDENTIFICATION NUMBER


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

- --------------------------------------------------------------------------------
                         (Please print name and address)




Dated:            ,                 Name of Holder:
      ------------  -----


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

                                           (By:)
                                                --------------------------------
                                           (Name:)
                                           (Title:)
                                           (Signature must conform in all
                                           respects to name of holder as
                                           specified on the face of the Warrant)


                                     D-1-13
   77


                               FORM OF ASSIGNMENT

           [To be completed and signed only upon transfer of Warrant]

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase  ____________ shares of Common Stock of SeraNova, Inc. to
which the  within Warrant relates and appoints ________________ attorney to
transfer said  right on the books of SeraNova, Inc. with full power of
substitution in the  premises.

Dated:

- ---------------, ----


                                         ---------------------------------------
                                         (Signature must conform in all respects
                                         to name of holder as specified on the
                                         face of the Warrant)


                                         ---------------------------------------
                                         Address of Transferee

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

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



In the presence of:


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




                                     D-1-14
   78



                                     Annex A





            Date                Number of Warrant Shares        Number of Warrant Shares        Number of Warrant
                               Available to be Exercised                Exercised              Shares Remaining to
                                                                                                   be Exercised
- -------------------------------------------------------------------------------------------------------------------
                                                                                     

















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




                                     D-1-15
   79
                                                                     EXHIBIT D-2

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.


                                 SERANOVA, INC.

                               REDEMPTION WARRANT

Warrant No.[ ]                                         Dated: September __, 2000


         SeraNova, Inc., a New Jersey corporation (the "Company"), hereby
certifies that, for value received, [ ] or its registered assigns ("Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company
[160,000] shares of common stock, $.01 par value per share (the "Common Stock"),
of the Company (each such share, a "Warrant Share" and all such shares, the
"Warrant Shares") at the Exercise Price set forth in Section 3, at any time and
from time to time from and after the date on which the Company delivers an
Optional Redemption Notice under the Certificate of Designation (as defined in
the Purchase Agreement) issued to the original Holder, in accordance with the
Certificate of Designation filed by the Company on the date hereof with respect
to the Company's 6% Series A Convertible Preferred Stock (the "Series A Stock")
issued to the original Holder, and through and including the fifth year
following the vesting of this Warrant anniversary of the date of the Company
delivers such Optional Redemption Notice (the "Expiration Date"), and subject to
the following terms and conditions:

                  1. Registration of Warrant. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.


                                     D-2-1
   80


         2.       Registration of Transfers and Exchanges.

                  (a) The Company shall register the transfer of any portion of
this Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the Transfer
Agent or to the Company at its address for notice set forth in Section 12. Upon
any such registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New Warrant"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.

                  (b) This Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company at its address for notice set forth in
Section 12 for one or more New Warrants, evidencing in the aggregate the right
to purchase the number of Warrant Shares which may then be purchased hereunder.
Any such New Warrant will be dated the date of such exchange.

         3.       Duration and Exercise of Warrants.

                  (a) This Warrant shall be exercisable by the registered Holder
on any business day before 6:30 P.M., New York City time, at any time and from
time to time on or after the date the Company delivers an Optional Redemption
Notice with respect to the A Series Stock issued to the original Holder under
and including the Expiration Date. At 6:30 P.M., New York City time on the
earlier to occur of (i) Expiration Date, or (ii) the date on which the Series A
Stock issued to the original Holder is converted to Common Stock or otherwise
redeemed or retired in any manner prior to delivery of an Optional Redemption
Notice, the portion of this Warrant not exercised prior thereto shall be and
become void and of no value. Prior to the Expiration Date, the Company may not
call or otherwise redeem this Warrant.

                  (b) Upon delivery of a duly completed and signed Form of
Election to Purchase attached hereto (and the grid attached hereto as Annex A)
duly completed and signed, to the Company at its address for notice set forth in
Section 12 and upon payment of the Exercise Price multiplied by the number of
Warrant Shares that the Holder intends to purchase hereunder, in the manner
provided hereunder, all as specified by the Holder in the Form of Election to
Purchase, the Company shall promptly (but in no event later than 3 business days
after the Date of Exercise (as defined herein)) issue or cause to be issued and
cause to be delivered to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise, free of restrictive legends except (i) either in
the event that a registration statement covering the resale of the Warrant
Shares and naming the Holder as a selling stockholder thereunder is not then
effective or the Warrant Shares are not freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) if this Warrant shall have been
issued pursuant to a written agreement between the original Holder and the
Company, as required by such agreement. Any person so designated by the Holder
to receive Warrant Shares shall be deemed to have become



                                     D-2-2
   81

holder of record of such Warrant Shares as of the Date of Exercise of this
Warrant. The Company shall, upon request of the Holder, if available, use its
best efforts to deliver Warrant Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions. To effect an exercise hereunder, the Holder shall
not be required to physically surrender this Warrant to the Company unless all
the Warrant Shares have been exercised. Exercises hereunder shall have the
effect of lowering the number of Warrant Shares in an amount equal to the
applicable exercise, which shall be evidenced by entries set forth in the
Exercise Schedule. The Holder and the Company shall maintain records showing the
number of Warrant Shares exercised and the date of such exercises . In the event
of any dispute or discrepancy, the records of the Holder shall be controlling
and determinative in the absence of manifest error. The Holder and any assignee,
by acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following exercise of a portion of this Warrant,
the number of shares issuable upon exercise of this Warrant may be less than the
amount stated on the face hereof.

                  A "Date of Exercise" means the date on which the Company shall
have received (i) the Form of Election to Purchase completed and duly signed,
and (ii) payment of the Exercise Price for the number of Warrant Shares so
indicated by the Holder to be purchased.

                  (c) The "Exercise Price" for the Warrant Shares equals the
lesser of $7.00 (subject to equitable adjustment for stock splits, reverse stock
splits, and similar events) and the Closing Price on the Trading Day immediately
preceding the date of the exercise, provided, that, for the first 90 days
following the Closing Date (as defined in the Purchase Agreement), the Exercise
Price may not be less than $7.00 (subject to equitable adjustment for stock
splits, reverse stock splits, and similar events). The Exercise Price shall be
subject to adjustment in accordance with Section 8.

                  4. Piggyback Registration Rights. This Warrant is subject to
the piggyback registration rights granted under the Registration Rights
Agreement and such piggyback registration rights shall continue until all of the
Holder's Warrant Shares have been sold in accordance with an effective
registration statement or upon the Expiration Date. The Company will pay all
registration expenses in connection therewith.

                  5. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the issuance of Warrant Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name other
than that of the Holder. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Warrant or
receiving Warrant Shares upon exercise hereof.

                  6. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.



                                     D-2-3
   82

         7.       Reservation of Warrant Shares. The Company covenants that
it will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 8). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.

         8.       Certain Adjustments.  The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 8.

                  (a) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification or share exchange, and the Holder
shall be entitled upon such event to receive such amount of securities or
property equal to the amount of Warrant Shares such Holder would have been
entitled to had such Holder exercised this Warrant immediately prior to such
reclassification or share exchange. The terms of any such reclassification or
share exchange shall include such terms so as to continue to give to the Holder
the right to receive the securities or property set forth in this Section 8(b)
upon any exercise following any such reclassification or share exchange.

                  (b) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 8(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").

                  (c) If the Company or any subsidiary thereof, as applicable
with respect to Common Stock Equivalents (as defined below), at any time while
this Warrant is outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities, including securities issued to the Holder
as of the date hereof, or debt that are convertible into or exchangeable for
shares of Common Stock ("Common Stock Equivalents"), entitling any Person to
acquire shares



                                     D-2-4
   83

of Common Stock at a price per share less than the greater of the Closing Price
on such date of issuance and the Exercise Price (if the holder of the Common
Stock or Common Stock Equivalent so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or rights
issued in connection with such issuance, be entitled to receive shares of Common
Stock at a price less than the Exercise Price, such issuance shall be deemed to
have occurred for less than the Exercise Price), then, at the sole option of the
Holder, the Exercise Price shall be adjusted to mirror the conversion, exchange
or purchase price for such Common Stock Equivalents (including any reset
provisions thereof), provided, that for purposes hereof, all shares of Common
Stock that are issuable upon conversion, exercise or exchange of Common Stock
Equivalents shall be deemed outstanding immediately after the issuance of such
Common Stock Equivalents. Such adjustment shall be made whenever such shares of
Common Stock or Common Stock Equivalents are issued. Notwithstanding to the
contrary anything herein, this Section shall not apply to: (i) issuance of
options and warrants to employees, officers and directors of the Company, and
the issuance of Common Stock upon exercise of such options and warrants granted
under any stock option plan hereinafter duly adopted by the Company, (ii)
issuance of Common Stock or Common Stock Equivalents as part payment of the
purchase price in (A) the acquisition of assets or a business by the Company or
(B) in connection with the acquisition of goods or a license by the Company and
(iii) as royalty payments in connection with or under a firm underwritten
primary offering of the Company's stock in which the full purchase price is paid
upon the first closing thereof (which shall not include equity lines of credit
or any similar financing structure).

                  (d) In case of any (1) merger or consolidation of the Company
with or into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a book value basis) in one or a series of related
transactions, the Holder shall have the right thereafter to (A) exercise this
Warrant for the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
merger, consolidation or sale, and the Holder shall be entitled upon such event
or series of related events to receive such amount of securities, cash and
property as the Common Stock for which this Warrant could have been exercised
immediately prior to such merger, consolidation or sales would have been
entitled or (B) in the case of a merger or consolidation, require the Company to
pay to the Holder, in cash, 120% of the Black Scholes value of this Warrant. The
terms of any such merger, sale or consolidation shall include such terms so as
continue to give the Holder the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption following
such event. This provision shall similarly apply to successive such events.

         For the purposes of this Warrant, "Closing Price" shall mean on any
particular date (a) the closing sale price per share of Common Stock on such
date on the Nasdaq or on such Subsequent Market on which the shares of Common
Stock are then listed or quoted, or if there is no such price on such date, then
the closing sale price on the Nasdaq or on such Subsequent Market on the date
nearest preceding such date, or (b) if the shares of Common Stock are not then
listed or quoted on the Nasdaq or a Subsequent Market, the closing sale price
for a share of Common Stock in the over-the-counter market, as reported by the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the shares of Common Stock are not then reported by the
National Quotation




                                     D-2-5
   84

Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), then the average of the "Pink Sheet" quotes for
the relevant conversion period, as determined in good faith by the Holder, or
(d) if the Common Stock are not then publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser selected in good faith by
the Holders of a majority of the Warrants.

                  (e) For the purposes of this Section 8, the following clauses
shall also be applicable:

                      (i)  Record Date.  In case the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into shares of Common Stock, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

                     (ii)  Treasury Shares.  The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.

                  (f) All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.

                  (g) Whenever the Exercise Price is adjusted pursuant to
Section 8(c) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall
be a nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the Appraiser
and such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.

                  (h) If:

                        (i)         the Company shall declare a dividend (or
                                    any other distribution) on its Common Stock;
                                    or

                       (ii)         the Company shall declare a special
                                    nonrecurring cash dividend on or a
                                    redemption of its Common Stock; or

                      (iii)         the Company shall authorize the granting to
                                    all holders of the Common Stock rights or
                                    warrants to subscribe



                                     D-2-6



   85

                                    for or purchase any  shares of capital stock
                                    of any class or of  any rights; or

                       (iv)         the approval of any stockholders of the
                                    Company shall be required in connection with
                                    any reclassification of the Common Stock,
                                    any consolidation or merger to which the
                                    Company is a party, any sale or transfer of
                                    all or substantially all of the assets of
                                    the Company, or any compulsory share
                                    exchange whereby the Common Stock is
                                    converted  into other securities, cash or
                                    property; or

                        (v)         the Company shall authorize the voluntary
                                    dissolution, liquidation or winding up of
                                    the affairs of the Company,

then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 20 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.

         9.       Payment of Exercise Price.  The Holder shall pay the Exercise
Price in one of the following manners:

                  (a) Cash Exercise.  The Holder may deliver immediately
available funds; or

                  (b) Cashless Exercise. The Holder may surrender this Warrant
to the Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:

                                    X = Y [(A-B)/A]
         where:
                                    X = the number of Warrant Shares to be
         issued to the Holder.



                                     D-2-7
   86

                                    Y = the number of Warrant Shares with
                                    respect to which this Warrant is being
                                    exercised.

                                    A = the average of the closing sale prices
                                    of the Common Stock for the five (5) trading
                                    days immediately prior to (but not
                                    including) the Date of Exercise.

                                    B = the Exercise Price.

For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.

         10.      Certain Exercise Restrictions.

                  (a) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
promulgated thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares issuable upon such exercise and held by
such Holder after application of this Section. Since the Holder will not be
obligated to report to the Company the number of shares of Common Stock it may
hold at the time of an exercise hereunder, unless the exercise at issue would
result in the issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular exercise hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of this Warrant is exercisable shall
be the responsibility and obligation of the Holder. If the Holder has delivered
a Form of Election to Purchase for a number of Warrant Shares that, without
regard to any other shares that the Holder or its affiliates may beneficially
own, would result in the issuance in excess of the permitted amount hereunder,
the Company shall notify the Holder of this fact and shall honor the exercise
for the maximum portion of this Warrant permitted to be exercised on such Date
of Exercise in accordance with the periods described herein and, at the option
of the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant to the Holder. The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.

                  (b) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares issuable
upon such exercise and held by such Holder after application of this Section.
Since the



                                     D-2-8
   87

Holder will not be obligated to report to the Company the number of shares of
Common Stock it may hold at the time of an exercise hereunder, unless the
exercise at issue would result in the issuance of shares of Common Stock in
excess of 9.999% of the then outstanding shares of Common Stock without regard
to any other shares which may be beneficially owned by the Holder or an
affiliate thereof, the Holder shall have the authority and obligation to
determine whether the restriction contained in this Section will limit any
particular exercise hereunder and to the extent that the Holder determines that
the limitation contained in this Section applies, the determination of which
portion of this Warrant is exercisable shall be the responsibility and
obligation of the Holder. If the Holder has delivered a Form of Election to
Purchase for a number of Warrant Shares that, without regard to any other shares
that the Holder or its affiliates may beneficially own, would result in the
issuance in excess of the permitted amount hereunder, the Company shall notify
the Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in accordance
with the periods described herein and, at the option of the Holder, either keep
the portion of the Warrant tendered for exercise in excess of the permitted
amount hereunder for future exercises or return such excess portion of the
Warrant to the Holder. The provisions of this Section may be waived by a Holder
(but only as to itself and not to any other Holder) upon not less than 61 days
prior notice to the Company. Other Holders shall be unaffected by any such
waiver.

                  (c) If the Company Stock is then listed for trading on the
Nasdaq or the Nasdaq SmallCap Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company may not issue in
excess of 3,492,001.9 shares of Common Stock (which equals 19.999% of the number
of shares of Common Stock outstanding on the Trading Day immediately preceding
the date hereof) upon exercise of this Warrant, the Closing Warrants (as defined
in the Purchase Agreement or conversion of the Series A Stock, in any case, at a
price per share that is less than the Closing Price on the Trading Day
immediately preceding the date hereof (such number of shares, the "Issuable
Maximum"). Each Holder shall be entitled to a portion of the Issuable Maximum
equal to the quotient obtained by dividing (x) the number of shares of Common
Stock issued and sold to such Holder on the Date hereof by (y) the number of
shares of Common Stock issued and sold by the Company on the Date hereof. If any
Holder shall no longer hold Warrants then such Holder's remaining portion of the
Issuable Maximum shall be allocated pro-rata among the remaining Holders. If on
any Date of Exercise: (A) the Company Stock is listed for trading on the Nasdaq
or the Nasdaq SmallCap Market, (B) the Exercise Price then in effect is such
that the aggregate number of shares of Common Stock that would then be issuable
upon exercise in full of this Warrant, the Closing Warrants and conversion in
full of the Series A Stock, together with any shares of Common Stock previously
issued upon exercise of this Warrant, the Closing Warrants and conversion of the
Series A Stock, would equal or exceed the Issuable Maximum, and (C) the Company
shall not have previously obtained the vote of shareholders, if any, as may be
required by the applicable rules and regulations of the Nasdaq Stock Market to
approve the issuance of shares of Common Stock in excess of the Issuable Maximum
pursuant to the terms hereof (the "Shareholder Approval"), then the Company
shall issue to the Holder a number of shares of Common Stock equal to the
Issuable Maximum and, with respect to the shares whose issuance would result in
an issuance of shares of Common Stock in excess of the Issuable Maximum, (the
"Excess Warrant Shares"), the Holder shall have the option to require the
Company to either (1) use its best efforts to obtain the Shareholder Approval
applicable to such issuance as soon as possible, but in any event no later than


                                     D-2-9
   88

60 days after such request (such 60th day, the "Target Date") or (2) pay to the
Holder, within one (1) Trading Day from the request therefor, an amount in cash
equal to the product of (x) the Excess Warrant Shares multiplied by (y) the
closing sales price of the Common Stock on (a) the Target Date or (b) the Date
of Exercise giving rise to the obligation to seek Shareholder Approval,
whichever is greater (the "Cash Payment"). In the event the Holder has elected
to require the Company to seek the Shareholder Approval pursuant to clause (1)
of the immediately preceding sentence and the Company does not obtain the
Shareholder Approval on or prior to the Target Date, then, on the Target Date,
the Company shall pay the Cash Payment to the Holder. If the Company fails to
pay the Cash Payment in full pursuant to this Section within seven (7) days
after the date payable, the Company will pay interest on such amount at a rate
of 18% per annum, or such lesser maximum amount that is permitted to be paid by
applicable law, to the Holder, accruing daily from the date payable until such
amount, plus all such interest thereon, is paid in full. The Company and the
Holder understand and agree that shares of Common Stock issued upon exercise of
this Warrant and then held by the Holder or an affiliate thereof may not cast
votes or be deemed outstanding for purposes of any vote to obtain the
Shareholder Approval.

         11.      Fractional Shares. The Company shall not be required to
issue or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate number
of Warrant Shares purchasable on exercise of this Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable on the exercise of this Warrant, the Company shall pay an amount in
cash equal to the Exercise Price multiplied by such fraction.

         12.      Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the business day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
499 Thornall Street, Edison, New Jersey, 08837, facsimile: (732) 362-2123,
attention Chief Financial Officer, or (ii) if to the Holder, to the Holder at
the address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section.

         13.      Warrant Agent. The Company shall serve as warrant agent
under this Warrant. Upon thirty days' notice to the Holder, the Company may
appoint a new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under



                                     D-2-10


   89

this Warrant without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder's last address as shown
on the Warrant Register.

         14.      Miscellaneous.

                  (a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns. This Warrant
may be amended only in writing signed by the Company and the Holder and their
successors and assigns.

                  (b) Subject to Section 14(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company and
the Holder.

                  (c) The corporate laws of the State of New Jersey shall govern
all issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. The Company and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, or that such suit,
action or proceeding is improper. Each of the Company and the Holder hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by receiving a copy thereof sent
to the Company at the address in effect for notices to it under this instrument
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.

                  (d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.

                  (e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                             SIGNATURE PAGE FOLLOWS]



                                     D-2-11
   90


                  IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.


                                            SERANOVA, INC.


                                            By:
                                               --------------------------------
                                               Name: Ravi Singh
                                               Title: Chief Financial Officer


                                     D-2-12
   91



                          FORM OF ELECTION TO PURCHASE

(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)

To SeraNova, Inc.:

         The undersigned hereby irrevocably elects to purchase _____________
shares of common stock, $.01 par value per share, of SeraNova, Inc. (the "Common
Stock") and , if such Holder is not utilizing the cashless exercise provisions
set forth in this Warrant, encloses herewith $________ in cash, certified or
official bank check or checks, which sum represents the aggregate Exercise Price
(as defined in the Warrant) for the number of shares of Common Stock to which
this Form of Election to Purchase relates, together with any applicable taxes
payable by the undersigned pursuant to the Warrant.

         The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of

                                           PLEASE INSERT SOCIAL SECURITY OR
                                           TAX IDENTIFICATION NUMBER

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

- --------------------------------------------------------------------------------
                         (Please print name and address)




Dated:            ,                 Name of Holder:
      ------------  -----


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

                                         (By:)
                                              ----------------------------------
                                         (Name:)
                                         (Title:)
                                         (Signature must conform in all respects
                                         to name of holder as specified on the
                                         face of the Warrant)



                                     D-2-13
   92



                               FORM OF ASSIGNMENT

           [To be completed and signed only upon transfer of Warrant]

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of SeraNova, Inc. to
which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of SeraNova, Inc. with full power of
substitution in the premises.

Dated:

- ---------------, ----


                            ---------------------------------------
                            (Signature must conform in all respects to name of
                            holder as specified on the face of the Warrant)


                            ---------------------------------------
                            Address of Transferee

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

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



In the presence of:


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



                                     D-2-14
   93



                                     Annex A





            Date                Number of Warrant Shares        Number of Warrant Shares        Number of Warrant
                               Available to be Exercised                Exercised              Shares Remaining to
                                                                                                   be Exercised
- -------------------------------------------------------------------------------------------------------------------
                                                                                     

















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




                                     D-2-15

EX-10.19

   1
                                                                  EXHIBIT 10.19


                              AGREEMENT AND WAIVER


         THIS AGREEMENT AND WAIVER WITH RESPECT TO AMENDED AND RESTATED
PROMISSORY NOTE (the "Waiver"), is entered into as of September 29, 2000, by
SeraNova, Inc., a New Jersey corporation (the "Obligor") and Intelligroup, Inc.,
a New Jersey corporation (the "Holder").

         WHEREAS, the Obligor and the Holder entered into that certain Amended
and Restated Promissory Note dated as of May 31, 2000 (the "Note");

         WHEREAS, the Obligor has consummated an equity financing with Strong
River Investments, Inc. and certain other investors (the "Financing") for an
aggregate amount of eight million dollars ($8,000,000);

         WHEREAS, Section 3 of the Note provides that in the event the Obligor
consummates any debt or equity financing, the Obligor shall make a mandatory
prepayment to the Holder in an amount to be determined pursuant to a schedule of
mandatory prepayments contained in Section 3 of the Note;

         WHEREAS, the Obligor has, following the Financing, not made to the
Holder the mandatory prepayment required by the mandatory prepayment provisions
of Section 3 of the Note to be made in the event of the Financing; and

         WHEREAS, the Obligor and the Holder desire, in light of the current
operations of the Obligor and the Holder, to waive, subject to and upon the
terms contained herein, the mandatory prepayment obligations of the Obligor
under the terms of the Note arising as a result of the consummation of the
Financing.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Obligor and the Holder,
intending to be legally bound, agree as follows:

1.       Defined Terms.  Capitalized terms used in this Waiver shall have the
meanings assigned to such terms in the Note, unless a different definition is
provided in this Waiver.

2.       Conditions to the Waiver of the Holder.  The effectiveness of the
waiver provided by the Holder under this Waiver is subject to the following
conditions being satisfied:

         (a)      Payment. The Obligor shall pay to the Holder (i) five hundred
                  thousand dollars ($500,000) upon the execution of this Waiver;
                  (ii) five hundred thousand dollars ($500,000) on or before
                  each of January 31, 2001, February 28, 2001, March 31, 2001,
                  April 30, 2001 and May 31, 2001; and (iii) four hundred
                  thousand dollars ($400,000) on or before December 15, 2000 to
                  be applied either as (A) an advance



   2

                  payment towards a contemplated services arrangement between
                  the Holder and the Obligor relating to hosting services for
                  business critical systems (the "Hosting Agreement"); or (B) in
                  the event that no such Hosting Agreement is executed on or
                  before December 15, 2000, an additional advance prepayment
                  toward the principal balance of the Note.

         (b)      If any payment pursuant to Section 2(a) of this Waiver shall
                  become due on a Saturday, Sunday or on any legal holiday, such
                  payment shall be made on the next succeeding business day. The
                  Obligor shall be in default under this Waiver in the event
                  Obligor fails to timely satisfy its payment obligations
                  pursuant to Section 2(a) of this Waiver and such failure to
                  pay shall continue unremedied for a period of five business
                  days following the due date of such payment set forth in
                  Section 2(a) of this Waiver;

         (c)      Representations and Warranties. The following representations
                  and warranties of the parties shall be true and correct as of
                  the date of this Waiver:

                  (i)      Of the Obligor: Except as set forth herein, to the
         Obligor's knowledge, no event or condition has occurred or exists
         which, with the giving of notice or the passage of time, or both, would
         constitute an Event of Default under the Note.

                  The execution and delivery of this Waiver and the consummation
         of the transactions contemplated hereby and by any other documents
         executed by the Obligor required to be delivered to the Holder in
         connection with this Waiver has been duly and validly authorized by the
         Obligor and all such documents together constitute the legal, valid and
         binding agreement of the Obligor, enforceable against the Obligor in
         accordance with their respective terms, except to the extent that
         enforceability of any of such document may be limited by bankruptcy,
         insolvency, reorganization, moratorium or other similar laws affecting
         the enforceability of creditors' rights generally or general equitable
         principles.

                  (ii)     Of the Holder: The execution and delivery of this
         Waiver and the consummation of the transactions contemplated hereby and
         by any other documents executed by the Holder required to be delivered
         to the Obligor in connection with this Waiver have been duly and
         validly authorized by the Holder and all such documents together
         constitute the legal, valid and binding agreement of the Holder,
         enforceable against the Holder in accordance with their respective
         terms, except to the extent that enforceablility of any of such
         document may be limited by bankruptcy, insolvency, reorganization,
         moratorium or other similar laws affecting the enforceability of
         creditors' rights generally or general equitable principles.

3.       Waiver of Compliance. The following waiver by Holder shall be effective
so long as it is in compliance with and satisfies the payment obligations set
forth in Paragraph 2(a) of this Waiver:

         (a)      With respect to the Financing only, the Holder hereby waives
                  compliance by the Obligor with the mandatory prepayment
                  obligations of Section 3 of the Note and the



   3

                  requirement that the Obligor make a mandatory prepayment of
                  principal to the Holder in an amount equal to three million
                  dollars ($3,000,000) and agrees not to exercise its rights
                  under Section 7 of the Note. Notwithstanding the foregoing
                  waiver of prepayment, all unpaid amounts of principal and
                  interest due under the Note shall remain the obligation of the
                  Obligor and shall be due and payable pursuant to the terms of
                  the Note, as amended by this Waiver. This Waiver shall not
                  apply to any subsequent equity or debt financings by the
                  Obligor.

4.       Notice. Obligor hereby waives presentment, demand, protest or notice of
any kind in connection with this Waiver.

5.       Currency. All references to "$" or "dollars" herein shall mean United
States dollars.

6.       Entire Agreement. The Note (including the documents and instruments
referred to therein), as modified by this Waiver, constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter thereof
and hereof.

7.       Counterparts. This Waiver may be signed in any number of counterpart
copies and by the parties hereto on separate counterparts, but all such copies
shall constitute one and the same instrument.

8.       Limitation of Waiver. This Waiver shall not, except as expressly set
forth above, serve to waive, supplement or amend the Note, which Note shall,
except as amended hereby, remain in full force and effect.


                           [Signature Page to Follow]


   4


         WITNESS the due execution of this Waiver as a document under seal, as
of the date first written above.

                                 SERANOVA, INC.


                                 By: /s/ David Rogers
                                     ----------------------------------------

                                 Print Name: David Rogers
                                            --------------------------------

                                 Title: Corporate Controller
                                        -------------------------------------


                                 INTELLIGROUP, INC.


                                 By: /s/
                                     ----------------------------------------

                                 Print Name:
                                             --------------------------------

                                 Title:
                                        -------------------------------------

EX-23.1

   1
                                                                   EXHIBIT 23.1

                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS




To SeraNova, Inc.:




As independent public accountants, we hereby consent to the use of our report
dated March 6, 2000 (except with respect to the first paragraph of Note 13 as to
which the date is March 14, 2000, the net income (loss) per share disclosure in
Note 2 as to which the date is May 12, 2000 and the seventh through twelfth
paragraphs in Note 13 as to which the date is July 14, 2000 and to all
references to our Firm included in this registration statement on Form S-1.



                                             /s/ ARTHUR ANDERSEN LLP


Roseland, New Jersey
November 8, 2000

EX-23.2

   1
                                                                   EXHIBIT 23.2


                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS





To Network Publishing, Inc.:




As independent public accountants, we hereby consent to the use of our report
dated December 21, 1999, and to all references to our Firm included in this
registration statement on Form S-1.


                                                  /s/ ARTHUR ANDERSEN LLP


Salt Lake City, Utah
November 8, 2000