CONVERTIBLE PREFERRED STOCK AND WARRANTS PURCHASE AGREEMENT

                                     Between

                               Sedona Corporation

                                       and

                         the Investors Signatory Hereto


         CONVERTIBLE PREFERRED STOCK AND WARRANTS PURCHASE AGREEMENT dated as of
February 25, 2000 (the  "Agreement"),  between the  Investors  signatory  hereto
(each an "Investor" and together the  "Investors"),  and Sedona  Corporation,  a
corporation  organized  and  existing  under  the  laws of the  Commonwealth  of
Pennsylvania (the "Company").


         WHEREAS,  the parties  desire  that,  upon the terms and subject to the
conditions  contained herein, the Company shall issue and sell to the Investors,
and the Investors shall purchase in the aggregate,  (i) $3,000,000  Stated Value
of Convertible  Preferred Stock (as defined below) and (ii) Warrants (as defined
below) to purchase  up to 100,000  shares of Common  Stock at an exercise  price
equal to 130% of the  closing  bid price for such  Common  Stock on the  Closing
Date).


         WHEREAS,  such investments will be made in reliance upon the provisions
of Section  4(2) and/or 4(6) of the  Securities  Act of 1933,  as amended,  (the
"Securities  Act") and/or  Regulation D ("Regulation D") and the other rules and
regulations  promulgated  under the  Securities  Act,  and/or  upon  such  other
exemption  from the  registration  requirements  of the Securities Act as may be
available with respect to any or all of the investments in securities to be made
hereunder.


         NOW, THEREFORE, the parties hereto agree as follows:

                                   ARTICLE I

                               Certain Definitions


Section 1.1.   "Capital Shares" shall mean  the Common  Stock  and any shares of
any other class of common stock whether now or hereafter authorized,  having the
right to  participate in the distribution of earnings and assets of the Company.

Section 1.2.    "Capital Shares Equivalents" shall mean  any securities, rights,
or obligations that are convertible into or exchangeable  for  or give any right
to subscribe for any Capital  Shares of the Company or any  Warrants, options or
other rights to subscribe for or purchase Capital Shares or any such convertible
or exchangeable securities.

Section 1.4.   "Certificate  of Designations"  shall  mean  the  Certificate  of
Designations  setting  forth the terms of the Convertible Preferred Stock in the
form of Exhibit A hereto.

Section 1.4.   "Closing"  shall mean the closing of the purchase and sale of the
Convertible  Preferred tock and Warrants pursuant to Section 2.1.

Section 1.5.   "Closing Date" shall mean the date on which all conditions to the
Closing  have  been  satisfied (as  defined  in  Section 2.1 (b) hereto) and the
Closing shall have occurred.

Section 1.6.   "Common Stock" shall mean the Company's common stock,  $.001  par
value per share.

Section 1.7.   "Conversion Shares"  shall  mean  the  shares  of  C ommon  Stock
issuable  upon  conversion  of the Convertible Preferred Stock.

Section 1.8.   "Convertible Preferred Stock"  shall  mean the $3,000,000  Stated
Value of Series G  Convertible  Preferred Stock, as described in the Certificate
of  Designations  to be issued to the Investors pursuant to this Agreement.

Section 1.9.   "Damages" shall mean any loss,  claim, damage, judgment, penalty,
deficiency,  liability,  costs  and  expenses  (including,   without limitation,
reasonable  attorney's fees and  disbursements and reasonable costs and expenses
of expert  witnesses and investigation).

Section 1.10.  "Effective Date"  shall  mean  the  date  on  which the SEC first
declares  effective  a  Registration  Statement  registering  the  resale of the
Registrable  Securities as set forth in the Registration Rights Agreement.

Section 1.11.  "Escrow Agent"  shall  have  the meaning set forth  in the Escrow
Agreement.

Section 1.12.  "Escrow Agreement"    shall   mean   the   Escrow  Agreement   in
substantially   the  form   of  Exhibit   D   hereto  executed   and   delivered
contemporaneously with this Agreement.

Section 1.13.  "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended,  and the rules and regulations promulgated thereunder.

Section 1.14.  "Legend" shall mean the legend set forth in Section 9.1.

Section 1.15.  "Market Price"  on any given date shall mean the lowest three (3)
day average  on  the Principal Market  (as  reported by  Bloomberg  L.P.) of the
Common  Stock  during the twenty (20) consecutive  Trading  Day period ending on
the  Trading  Day immediately prior to the date for which the Market Price is to
be determined.

Section 1.16.  "Material Adverse Effect" shall  mean any effect on the business,
operations,  properties,  prospects, stock price or  financial  condition of the
Company that is material and  adverse  to  the Company and  its subsidiaries and
affiliates,  taken as a whole,  and/or any condition, circumstance, or situation
that would prohibit  or otherwise interfere  with the ability  of the Company to
enter into  and  perform  any  of  its  obligations  under  this Agreement,  the
Registration  Rights  Agreement,    the  Escrow  Agreement,  the  Certificate of
Designations or the Warrants in any material respect.

Section 1.17.  "Outstanding" when  used  with  reference  to  shares  of  Common
Stock or  Capital  Shares (collectively  the "Shares"),  shall mean, at any date
as  of  which the number  of  such  Shares  is to be determined,  all issued and
outstanding  Shares,  and shall include  all  such  Shares  issuable  in respect
of  outstanding  scrip or any certificates   representing  fractional  interests
in  such  Shares;  provided, however,  that  "Outstanding"  shall  not  mean any
such Shares  then  directly or indirectly owned or held by or for the account of
the Company.

Section 1.18.  "Person" shall mean an individual, a corporation,  a partnership,
a  limited  liability  company,  an  association,  a  trust or  other  entity or
organization,  including a  government  or political subdivision or an agency or
instrumentality thereof.

Section 1.19.  "Principal Market"  shall  mean  the   American  Stock  Exchange,
the New York Stock  Exchange,  the NASDAQ  National  Market, the NASDAQ SmallCap
Market or the OTC Bulletin Board, whichever is at the time the principal trading
exchange or market for the Common Stock, based upon share volume.

Section 1.20.  "Purchase Price"  shall  mean  the   Stated  Value  per  share of
Convertible  Preferred  Stock,  as defined in the Certificate of Designations.

Section 1.21.  "Registrable Securities" shall mean  the  Conversion  Shares  and
the  Warrant  Shares  until  (i) the Registration  Statement  has  been declared
effective  by  the  SEC,  and  all Conversion  Shares and  Warrant  Shares  have
been  disposed  of pursuant to the  Registration Statement,  (ii) all Conversion
Shares and Warrant Shares have been sold under  circumstances under which all of
the applicable conditions of Rule 144 (or any similar  provision  then in force)
under the  Securities  Act ("Rule 144")  are met,  (iii)  all  Conversion Shares
and  Warrant  Shares  have been  otherwise  transferred to holders who may trade
such shares without  restriction under the  Securities  Act, and the Company has
delivered a new  certificate  or other evidence of ownership for such securities
not bearing a restrictive legend or (iv) such time as, in the opinion of counsel
to the Company,  all  Conversion Shares  and  Warrant Shares may be sold without
any  time,  volume or manner limitations pursuant to Rule 144(k) (or any similar
provision  then in effect) under the Securities Act.

Section 1.22.  "Registration  Rights  Agreement"    shall   mean  the  agreement
regarding the filing  of the  Registration  Statement  for  the  resale  of  the
Registrable  Securities,  entered  into between  the Company and the Investor as
of the Closing Date in the form annexed hereto as Exhibit C.

Section 1.23.  "Registration Statement" shall mean a  registration  statement on
Form S-3 (if use of such form is then available  to the Company  pursuant to the
rules of the SEC and,  if not,  on  such  other  form promulgated by the SEC for
which the Company then qualifies and which counsel  for the  Company  shall deem
appropriate, and  which form  shall be available for the resale by the Investors
of  the  Registrable  Securities to be registered  thereunder in accordance with
the provisions of this Agreement,  the  Registration  Rights  Agreement  and  in
accordance  with the intended  method of distribution  of such  securities), for
the  registration  of  the  resale by the Investor of the Registrable Securities
under the Securities Act.

Section 1.24.  "Regulation D" shall have the meaning set forth in  the  recitals
of this Agreement.

Section 1.25.  "SEC" shall mean the Securities and Exchange Commission.

Section 1.26.  "Section 4(2)" and "Section 4(6)"  shall  have  the  meanings set
forth in the recitals of this Agreement.

Section 1.27.  "Securities Act" shall have the meaning set forth in the recitals
of this Agreement.

Section 1.28.  "SEC Documents"  shall  mean the Company's  Annual Report on Form
10-K  for  the fiscal  year  ended  December 31, 1998  and  each  report,  proxy
statement or  registration  statement filed by the Company with the SEC pursuant
to the Exchange Act or the Securities Act since the filing of such Annual Report
through the date hereof.

Section 1.29.  "Senior  Securities"  shall mean all existing Series of Preferred
Stock which  by  their  terms  are  required to be senior in right of payment of
dividends  and/or  liquidation proceeds to any after-created Series of Preferred
Stock.

Section 1.30.  "Shares" shall have the meaning set forth in Section 1.17.

Section 1.31.  "Stated  Value"    shall  have  the  meaning  set  forth  in  the
Certificate of Designations.

Section 1.32.  "Trading Day"  shall  mean  any  day  during  which the Principal
Market shall be open for business.

Section 1.33.  "Warrants"  shall  mean the Warrants substantially in the form of
Exhibit B to be issued to the Investors hereunder.

Section 1.34.  "Warrant Shares"  shall  mean all shares of Common Stock or other
securities  issued or issuable pursuant to exercise of the Warrants.

                                   ARTICLE II

          Purchase and Sale of Convertible Preferred Stock and Warrants


Section 2.1.   Investment.


(a) Upon the terms and subject to the conditions  set forth herein,  the Company
agrees to sell, and the Investors  agree to purchase the  Convertible  Preferred
Stock  together  with the Warrants at the Purchase  Price on the Closing Date as
follows:


               (i)         Upon execution and delivery of this  Agreement,  each
                           Investor   shall   deliver   to  the   Escrow   Agent
                           immediately  available  funds in their  proportionate
                           amount  of the  Purchase  Price  as set  forth on the
                           signature pages hereto, and the Company shall deliver
                           the Convertible  Preferred Stock certificates and the
                           Warrants to the Escrow Agent, in each case to be held
                           by the Escrow Agent pursuant to the Escrow Agreement.

               (ii)        Upon  satisfaction  of  the  conditions  set forth in
                           Section  2.1(b),  the losing ("Closing") shall  occur
                           at the offices of the Escrow Agent at which  time the
                           Escrow   Agent  (x)  shall  release  the  Convertible
                           Preferred Stock and the Warrants to the Investors and
                           (y) shall  release the Purchase Price (after all fees
                           have been paid as set forth in the Escrow Agreement),
                           pursuant to the terms of the Escrow Agreement.

(b) The  Closing  is subject  to the  satisfaction  or waiver by the party to be
benefited thereby of the following conditions:


               (i)         acceptance  and  execution  by the Company and by the
                           Investors, of this Agreement and all Exhibits hereto;

               (ii)        delivery  into escrow by each Investor of immediately
                           available funds in the amount of the  Purchase  Price
                           of the Convertible Preferred Stock and  the Warrants,
                           as more fully set  forth  in  the  Escrow  Agreement;

               (iii)        all representations  and warranties of the Investors
                            contained herein shall remain true and correct as of
                            the Closing Date (as a  condition  to the  Company's
                            obligations);

               (iv)         all  representations  and  warranties of the Company
                            contained herein  shall  remain true and correct  as
                            of   the  Closing  Date   (as  a  condition  to  the
                            Investors' obligations);

               (v)          the Company  shall  have  obtained  all  permits and
                            qualifications  required by any state  for the offer
                            and sale of  the  Convertible  Preferred  Stock  and
                            Warrants,   or  shall  have  the   availability   of
                            exemptions therefrom;

               (vi)         the sale and issuance of  the  Convertible Preferred
                            Stock and the Warrants hereunder,  and  the proposed
                            issuance  by  the  Company  to the  Investors of the
                            Common Stock  underlying the  Convertible  Preferred
                            Stock  and  the  Warrants  upon  the  conversion  or
                            exercise  thereof shall be legally  permitted by all
                            laws and  regulations  to  which the  Investors  and
                            the  Company  are  subject  and  there  shall  be no
                            ruling,  judgment  or writ of any court  prohibiting
                            the transactions contemplated  by this  Agreement;

               (vii)        delivery of the original fully executed  Convertible
                            Preferred   Stock    certificates    and    Warrants
                            certificates to the Escrow Agent;

               (viii)       delivery  to the Escrow Agent of an opinion of Piper
                            Marbury Rudnick & Wolfe LLP, counsel to the Company,
                            in the form of Exhibit E hereto;

               (ix)         delivery   to  the  Escrow Agent  of the Irrevocable
                            Instructions  to Transfer Agent in the form attached
                            hereto as Exhibit F; and

               (x)          delivery  to  the  Escrow  Agent of the Registration
                            Rights Agreement.

Section 2.2.   Liquidated Damages.

   The  parties  hereto acknowledge and agree that the sums payable  pursuant to
the Registration Rights  Agreement shall constitute liquidated  damages  and not
penalties.  The  parties  further  acknowledge that (a) the  amount  of  loss or
damages  likely  to be  incurred  is  incapable  or is  difficult  to  precisely
estimate,   (b)  the  amounts  specified  in  such agreement  bear  a reasonable
proportion  and  are  not  plainly   or grossly disproportionate to the probable
loss likely to be incurred by the  Investors in  connection  with the failure by
the Company  to  timely  cause the  registration of the  Registrable  Securities
and  (c)   the   parties  are  sophisticated  business  parties  and  have  been
represented by sophisticated and able legal and financial counsel and negotiated
this Agreement at arm's length.

                                  ARTICLE III

                   Representations and Warranties of Investor

Each Investor, severally and not jointly, represents and warrants to the Company
that:


Section 3.1.   Organization.

   The  Investor  is duly  organized,  validly  existing  and  in  good standing
under  the laws of its jurisdiction of organization.

Section 3.2.   Intent.

   The  Investor  is entering into this  Agreement for  its  own account and not
with a view to or for sale in  connection  with  any  distribution of the Common
Stock.  The Investor has no present arrangement (whether or not legally binding)
at  any  time  to  sell the  Convertible  Preferred  Stock,  the  Warrants,  any
Conversion Shares  or  Warrant Shares  to  or  through  any  person  or  entity;
provided, however, that by making the representations  herein, the Investor does
not agree  to hold such securities  for any minimum  or  other specific term and
reserves  the right to dispose of the  Conversion  Shares and Warrant  Shares at
any time in accordance with federal and state securities laws applicable to such
disposition.

Section 3.3.   Sophisticated Investor.

   The  Investor  is a sophisticated  investor (as described in  Rule  506(b)(2)
(ii) of Regulation D) and  an accredited investor (as  defined  in  Rule  501 of
Regulation  D), and  Investor  has such  experience  in business  and  financial
matters that it has the capacity to protect its own interests in connection with
this  transaction  and is  capable  of  evaluating  the  merits  and risks of an
investment in the Convertible  Preferred  Stock, the Warrants and the underlying
Common Stock.  The Investor  acknowledges  that an investment in the Convertible
Preferred Stock, the Warrants and the underlying Common Stock is speculative and
involves a high degree of risk.

Section 3.4.   Authority.

   This Agreement  and  each  agreement attached as an Exhibit  hereto  which is
required  to be  executed  by  Investor  has been duly  authorized  and  validly
executed and  delivered by the Investor and is a valid and binding  agreement of
the Investor  enforceable  against it in accordance  with its terms,  subject to
applicable  bankruptcy,  insolvency,  or similar laws  relating to, or affecting
generally  the  enforcement  of,  creditors'  rights  and  remedies  or by other
equitable principles of general application.

Section 3.5.   Not an Affiliate.

   The  Investor  is  not an  officer, director or "affiliate"  (as that term is
defined in Rule 405 of the Securities Act) of the Company.

Section 3.6.   Absence of Conflicts.

   The  execution  and delivery of this  Agreement and each  agreement  which is
attached  as an Exhibit  hereto  and  executed  by the  Investor  in  connection
herewith,  and the  consummation  of the  transactions  contemplated  hereby and
thereby,  and  compliance  with  the  requirements  hereof  and  thereof  by the
Investor,  will not violate any law, rule,  regulation,  order, writ,  judgment,
injunction,  decree or award binding on Investor or (a) violate any provision of
any  indenture,  instrument  or  agreement  to which  Investor  is a party or is
subject,  or by which Investor or any of its assets is bound;  (b) conflict with
or  constitute  a material  default  thereunder;  (c) result in the  creation or
imposition of any lien pursuant to the terms of any such  indenture,  instrument
or agreement,  or constitute a breach of any fiduciary  duty owed by Investor to
any third party; or (d) require the approval of any  third-party  (which has not
been  obtained)  pursuant  to  any  material  contract,  agreement,  instrument,
relationship or legal obligation to which Investor is subject or to which any of
its assets, operations or management may be subject.

Section 3.7.   Disclosure; Access to Information.

  The  Investor  has received all documents, records,  books and other  publicly
available  information  pertaining to Investor's  investment in the Company that
have been  requested  by the  Investor.  The Company is subject to the  periodic
reporting requirements of the Exchange Act, and the Investor has reviewed copies
of all SEC Documents deemed relevant by Investor.

Section 3.8.   Manner of Sale.

   At  no  time  was  Investor  presented  with  or solicited  by or through any
leadlet, public  promotional  meeting,  television  advertisement  or any  other
form of general solicitation or advertising.

                                   ARTICLE IV

                  Representations and Warranties of the Company

The Company  represents and Warrants to the Investors that,  except as set forth
on the Disclosure Schedule prepared by the Company and attached hereto:

Section 4.1.   Organization of the Company.

  The Company is a corporation  duly  incorporated and existing in good standing
under  the  laws of the  Commonwealth  of  Pennsylvania  and  has all  requisite
corporate  authority to own its  properties  and to carry on its business as now
being  conducted.  The Company does not have any  subsidiaries  and does not own
more that fifty percent (50%) of or control any other business  entity except as
set forth in the SEC  Documents.  The Company is duly  qualified  and is in good
standing as a foreign  corporation to do business in every jurisdiction in which
the  nature  of the  business  conducted  or  property  owned by it  makes  such
qualification  necessary,  other than  those in which the  failure so to qualify
would not have a Material Adverse Effect.

Section 4.2. Authority.

  (i) The Company has the requisite  corporate power and corporate  authority to
enter into and perform its obligations  under this Agreement,  the  Registration
Rights  Agreement,  the  Escrow  Agreement,  and the  Warrants  and to issue the
Convertible Preferred Stock, the Conversion Shares, the Warrants and the Warrant
Shares  pursuant to their  respective  terms,  (ii) the execution,  issuance and
delivery  of this  Agreement,  the  Registration  Rights  Agreement,  the Escrow
Agreement,  the Certificate of  Designations,  the  Convertible  Preferred Stock
certificates  and the Warrants by the Company and the  consummation by it of the
transactions  contemplated  hereby have been duly  authorized  by all  necessary
corporate  action and no further consent or  authorization of the Company or its
Board of Directors or  stockholders is required,  and (iii) this Agreement,  the
Registration Rights Agreement,  the Escrow Agreement,  the Convertible Preferred
Stock certificates and the Warrants have been duly executed and delivered by the
Company and at the Closing shall constitute valid and binding obligations of the
Company  enforceable  against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy,  insolvency,  or
similar laws relating to, or affecting  generally the enforcement of, creditors'
rights and remedies or by other equitable  principles of general application and
except the  Company  makes no  representation  or warranty  with  respect to the
enforceability  of any terms of these  agreements  which  require the Company to
issue Conversion  Shares upon conversion of the Convertible  Preferred Stock and
Warrant   Shares  upon  the  exercise  of  the  Warrants   notwithstanding   the
commencement of any case under 11 USC Sec. 101 et seq. (the  "Bankruptcy  Code")
or, in the event it is a debtor under the  Bankruptcy  Code, to waive any rights
to relief it may have under 11USC Sec. 362 in respect of the  conversion  of the
Convertible  Preferred Stock and the exercise of the Warrants, or which prohibit
the Company  form  seeking  affirmative  judicial  relief  from its  obligations
hereunder  except  pursuant  to the  Bankruptcy  Code.  The Company has duly and
validly  authorized and reserved for issuance shares of Common Stock  sufficient
in number for the  conversion  of the  Convertible  Preferred  Stock and for the
exercise  of  the  Warrants.   The  Company  understands  and  acknowledges  the
potentially  dilutive  effect  to  the  Common  Stock  of  the  issuance  of the
Conversion Shares and, upon any redemption of the Warrants,  the Warrant Shares.
The Company further  acknowledges that its obligation to issue Conversion Shares
upon  conversion  of the  Convertible  Preferred  Stock and Warrant  Shares upon
exercise of the Warrants in accordance  with this Agreement and the  Certificate
of Designations is absolute and unconditional  regardless of the dilutive effect
that such issuance may have on the ownership  interests of other stockholders of
the  Company  and,  to  the  extent   permitted   under  the  Bankruptcy   Code,
notwithstanding  the  commencement  of any case under the  Bankruptcy  Code. The
Company  shall  not  seek  affirmative  judicial  relief  from  its  obligations
hereunder except pursuant to the Bankruptcy Code,  although the Company reserves
the right to defend any action  brought by any Investor or third  party.  In the
event the Company is a debtor  under the  Bankruptcy  Code,  the Company  hereby
waives to the fullest extent permitted any rights to relief it may have under 11
U.S.C.  ss. 362 in respect of the conversion of the Convertible  Preferred Stock
and the exercise of the Warrants. The Company agrees, without cost or expense to
the Investors,  to take or consent to any and all action necessary to effectuate
relief under 11 U.S.C. ss. 362.

Section 4.3.   Capitalization.

  The authorized  capital stock of the Company consists of (i) 50,000,000 shares
of Common  Stock,  $0.001 par value per share,  of which  24,972,966  shares are
issued and outstanding as of February 3, 2000, (ii) 1,000,000  shares of Class A
preferred  stock;  of  which  (A)  500,000  have  been  designated  as  Series A
Convertible  Preferred Stock, par value $2.00 per share, 500,000 of which shares
are  issued  and  outstanding,  (B)  5,000  have  been  designated  as  Series B
Convertible  Preferred  Stock,  par value  $2.00 per  share,  1,000 of which are
issued and  outstanding;  (C) 125,000 of which have been  designated as Series C
Convertible Preferred Stock, par value $2.00 per share, none of which are issued
and outstanding; (D) 3,300 of which have been designated as Series D Convertible
Preferred  Stock,  par value  $2.00 per  share,  none of which  are  issued  and
outstanding;  (E) 5,200 have been  designated as Series E Convertible  Preferred
Stock, par value $1,000 per share,  none of which are outstanding,  and (F) 1000
have been designated as Series F Convertible  Preferred  Stock, par value $2.00,
1,000 of which are issued and outstanding; and (iii) 2,000,000 shares of Class B
preferred stock, none of which are issued and outstanding.  The Company has duly
and validly  designated  3,000 shares of its Class A preferred stock as Series G
Convertible Preferred Stock. Except for (i) the outstanding Series A Convertible
Preferred Stock,  Series B Convertible  Preferred Stock and Series F Convertible
Preferred Stock,  (ii) outstanding  options and warrants as set forth in the SEC
Documents,  and  (iii) as set  forth in the  Disclosure  Schedule,  there are no
outstanding  Capital Shares  Equivalents  nor any  agreements or  understandings
pursuant to which any Capital Shares  Equivalents  may become  outstanding.  The
Company is not a party to any agreement  granting  registration or anti-dilution
rights to any person with respect to any of its equity or debt  securities.  All
of the  outstanding  shares of Common  Stock of the  Company  have been duly and
validly authorized and issued and are fully paid and non-assessable.

Section 4.4.   Common Stock.

  The Company has  registered  its Common Stock pursuant to Section 12(b) or (g)
of the Exchange Act and is in full compliance with all reporting requirements of
the Exchange Act, and the Company is in compliance with all requirements for the
continued  listing or  quotation of its Common  Stock,  and such Common Stock is
currently listed or quoted on, the Principal Market. As of the date hereof,  the
Principal  Market is the Nasdaq SmallCap Market and the Company has not received
any  notice  regarding,  and  to  its  knowledge  there  is no  threat,  of  the
termination or  discontinuance  of the  eligibility of the Common Stock for such
listing.

Section 4.5.   SEC Documents.

  The Company has made  available to the Investors  true and complete  copies of
the SEC Documents. The Company has not provided to the Investors any information
that,  according  to  applicable  law,  rule or  regulation,  should  have  been
disclosed  publicly  prior to the date hereof by the Company,  but which has not
been so disclosed.  As of their respective dates, the SEC Documents  complied in
all material  respects with the  requirements of the Exchange Act, and rules and
regulations  of the SEC  promulgated  thereunder  and the SEC  Documents did not
contain any untrue statement of a material fact or omit 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.  The  financial  statements  of the  Company  included  in  the  SEC
Documents   complied  in  all  material  respects  with  applicable   accounting
requirements  and the  published  rules  and  regulations  of the  SEC or  other
applicable  rules  and  regulations  with  respect  thereto  at the time of such
inclusion.  Such  financial  statements  have been prepared in  accordance  with
generally  accepted  accounting  principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements  or the  notes  thereto  or (ii) in the  case  of  unaudited  interim
statements,  to the extent they exclude footnotes or may be condensed or summary
statements) and fairly present in all material  respects the financial  position
of the Company as of the dates  thereof and the results of  operations  and cash
flows for the periods  then ended  (subject,  in the case of  unaudited  interim
statements,  to normal year-end audit adjustments).  Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become  due) that would  have been  required  to be  reflected  in,  reserved
against or  otherwise  described  in the  financial  statements  or in the notes
thereto in accordance  with GAAP,  which was not fully  reflected  in,  reserved
against or otherwise described in the financial  statements or the notes thereto
included in the SEC  Documents  or was not  incurred in the  ordinary  course of
business  consistent  with the Company's past  practices  since the last date of
such financial statements.

Section 4.6.   Exemption from Registration; Valid Issuances.

  Subject to the accuracy of the Investors'  representations in Article III, the
sale of the Convertible Preferred Stock, the Conversion Shares, the Warrants and
the Warrant Shares will not require registration under the Securities Act and/or
any applicable state securities law. When issued and paid for in accordance with
the  Warrants  and  validly  converted  in  accordance  with  the  terms  of the
Convertible  Preferred Stock, the Conversion  Shares and the Warrant Shares will
be duly and validly issued, fully paid, and non-assessable. Neither the sales of
the Convertible  Preferred  Stock,  the Conversion  Shares,  the Warrants or the
Warrant Shares  pursuant to, nor the Company's  performance  of its  obligations
under, this Agreement,  the Registration Rights Agreement, the Escrow Agreement,
the  Certificate of Designations or the Warrants will (i) result in the creation
or imposition by the Company of any liens, charges, claims or other encumbrances
upon the Convertible Preferred Stock, the Conversion Shares, the Warrants or the
Warrant  Shares  or,  except as  contemplated  herein,  any of the assets of the
Company, or (ii) entitle the holders of Outstanding Capital Shares to preemptive
or other  rights  to  subscribe  for or  acquire  the  Capital  Shares  or other
securities of the Company.  The  Convertible  Preferred  Stock,  the  Conversion
Shares,  the Warrants and the Warrant  Shares shall not subject the Investors to
personal  liability to the Company or its creditors by reason of the  possession
thereof.

Section 4.7.   No  General  Solicitation  or   Advertising  in  Regard  to  this
Transaction.

  Neither the Company nor any of its  affiliates  nor, to the  knowledge  of the
Company,  any person  acting on its or their  behalf (i) has  conducted  or will
conduct  any  general  solicitation  (as  that  term is used in Rule  502(c)  of
Regulation D) or general advertising with respect to the sale of the Convertible
Preferred  Stock  or the  Warrants,  or (ii)  made  any  offers  or sales of any
security or  solicited  any offers to buy any security  under any  circumstances
that  would  require  registration  of  the  Convertible  Preferred  Stock,  the
Conversion Shares,  the Warrants or the Warrant Shares under the Securities Act.

Section 4.8.   No Conflicts.

  The execution,  delivery and  performance of this Agreement by the Company and
the  consummation  by the  Company  of  the  transactions  contemplated  hereby,
including  without  limitation the issuance of and payment of dividends upon the
Convertible Preferred Stock, the Conversion Shares, the Warrants and the Warrant
Shares,  do not  and  will  not  (i)  result  in a  violation  of the  Company's
Certificate of  Incorporation  or By-Laws or (ii) conflict with, or constitute a
material  default  (or an event that with  notice or lapse of time or both would
become a default) under, or give to others any rights of termination, amendment,
acceleration  or  cancellation   of,  any  material   agreement,   indenture  or
instrument, or any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company is a party, or (iii) result in a violation of any
federal,  state or local  law,  rule,  regulation,  order,  judgment  or  decree
(including federal and state securities laws and regulations)  applicable to the
Company or by which any  material  property  or asset of the Company is bound or
affected, nor is the Company otherwise in violation of, conflict with or default
under any of the foregoing  (except in each case for such  conflicts,  defaults,
terminations,  amendments, accelerations,  cancellations and violations as would
not  have,  individually  or in  the  aggregate,  a  Material  Adverse  Effect),
provided,  that the Company makes no  representation or warranty that any rights
of the Investors  under this  Agreement,  the Certificate of Designations or the
Warrants will be enforceable in any bankruptcy proceeding involving the Company,
nor that the  enforcement of the rights of the Investors under this Agreement or
the  Certificate  of  Designations  does not conflict with or create an event of
default under the governing  documents  respecting  the creation and sale of the
Company's Series B Convertible Preferred Stock or Series F Convertible Preferred
Stock. Further, the Company does not represent or warrant that any terms of this
Agreement,  the  Certificate of  Designations,  the Warrants,  the  Registration
Rights  Agreement or the  Convertible  Preferred  Stock,  Conversion  Shares and
Warrant  Shares  issuable  pursuant to such  documents  requiring the Company to
honor  redemption  requests  during  bankruptcy  or  insolvency,   or  to  honor
redemption requests which cause such bankruptcy or insolvency,  do not result in
a violation of any federal or sate law,  rule or  regulation  applicable  to the
Company.  The business of the Company is not being conducted in violation of any
law,  ordinance or regulation of any  governmental  entity,  except for possible
violations  that  either  singly or in the  aggregate  would not have a Material
Adverse  Effect.  The Company is not required under any Federal,  state or local
law,  rule or regulation  to obtain any consent,  authorization  or order of, or
make any filing or registration with, any court or governmental  agency in order
for  it to  execute,  deliver  or  perform  any of its  obligations  under  this
Agreement or issue and sell the  Convertible  Preferred Stock or the Warrants in
accordance with the terms hereof (other than any SEC,  Principal Market or state
securities  filings that may be required to be made by the Company subsequent to
Closing,  any registration  statement that may be filed pursuant hereto, and any
shareholder  approval required by the rules applicable to companies whose common
stock  trades on the  Principal  Market);  provided  that,  for  purposes of the
representation  made in this sentence,  the Company is assuming and relying upon
the accuracy of the relevant  representations  and  agreements  of the Investors
herein.

Section 4.9.   No Material Adverse Change.

  Since  September 30, 1999, no Material  Adverse  Effect has occurred or exists
with respect to the Company, except as disclosed in the SEC Documents.

Section 4.10.  No Undisclosed Events or Circumstances.

  Since September 30, 1999, no event or circumstance has occurred or exists with
respect to the Company or its businesses,  properties,  prospects, operations or
financial  condition,  that, under applicable law, rule or regulation,  requires
public  disclosure or  announcement  prior to the date hereof by the Company but
which has not been so publicly announced or disclosed in the SEC Documents.

Section 4.11.  No Integrated Offering.

  Other  than  pursuant  to  an  effective   registration  statement  under  the
Securities  Act,  or pursuant  to the  issuance  or  exercise of employee  stock
options, or pursuant to its discussion with the Investors in connection with the
transactions  contemplated  hereby, the Company has not issued,  offered or sold
the  Convertible  Preferred  Stock,  the  Warrants or any shares of Common Stock
(including for this purpose any securities of the same or a similar class as the
Convertible  Preferred  Stock,  the Warrants or Common Stock,  or any securities
convertible  into,  exchangeable or exercisable  for the  Convertible  Preferred
Stock or Common Stock or any such other securities)  within the six-month period
next  preceding  the date  hereof,  and the Company  shall not permit any of its
directors,  officers or affiliates  directly or  indirectly,  to take any action
(including,  without  limitation,  any  offering  or sale to any  Person  of the
Convertible  Preferred Stock, Warrants or shares of Common Stock), so as to make
unavailable the exemption from Securities Act registration  being relied upon by
the Company for the offer and sale to  Investors  of the  Convertible  Preferred
Stock (and the  Conversion  Shares) or the Warrants (and the Warrant  Shares) as
contemplated by this Agreement.

Section 4.12.  Litigation and Other Proceedings.

  Except as disclosed in the SEC Documents, there are no lawsuits or proceedings
pending or, to the knowledge of the Company, threatened,  against the Company or
any subsidiary,  nor has the Company  received any written or oral notice of any
such action,  suit,  proceeding  or  investigation,  which could  reasonably  be
expected  to have a  Material  Adverse  Effect.  Except  as set forth in the SEC
Documents,  no judgment,  order,  writ,  injunction  or decree or award has been
issued  by or,  to  the  knowledge  of  the  Company,  requested  of any  court,
arbitrator  or  governmental  agency  which could  result in a Material  Adverse
Effect.

Section 4.13.  No Misleading or Untrue Communication.

  The Company and, to the knowledge of the Company,  any person representing the
Company,  or any  other  person  selling  or  offering  to sell the  Convertible
Preferred Stock or the Warrants in connection with the transaction  contemplated
by this  Agreement,  have not  made,  at any  time,  any oral  communication  in
connection  with the  offer  or sale of the  same  which  contained  any  untrue
statement of a material fact or omitted to state any material fact  necessary in
order to make the statements, in the light of the circumstances under which they
were made, not misleading.

Section 4.14.  Material Non-Public Information.

  The  Company  has not  disclosed  to the  Investors  any  material  non-public
information  that (i) if  disclosed,  would  reasonably  be  expected  to have a
material effect on the price of the Common Stock or (ii) according to applicable
law,  rule or  regulation,  should have been  disclosed  publicly by the Company
prior to the date hereof but which has not been so disclosed.

Section 4.15.  Insurance.

  The Company and each  subsidiary  maintains  property  and  casualty,  general
liability,  workers'  compensation,  environmental  hazard,  personal injury and
other similar types of insurance with financially  sound and reputable  insurers
that  is  adequate,   consistent  with  industry  standards  and  the  Company's
historical claims experience.  The Company has not received notice from, and has
no knowledge of any threat by, any insurer (that has issued any insurance policy
to the Company)  that such  insurer  intends to deny  coverage  under or cancel,
discontinue or not renew any insurance policy presently in force.

Section 4.16.  Tax Matters.

     (a) The Company and each  subsidiary  has  filed all Tax  Returns  which it
is required to file  under applicable laws;  all such Tax  Returns  are true and
accurate and has been  prepared in  compliance  with all  applicable  laws;  the
Company has paid all Taxes due and owing by it or any subsidiary (whether or not
such Taxes are required to be shown on a Tax Return) and have  withheld and paid
over to the  appropriate  taxing  authorities  all Taxes which it is required to
withhold  from amounts paid or owing to any employee,  stockholder,  creditor or
other third  parties;  and since  December 31, 1998,  the charges,  accruals and
reserves for Taxes with respect to the Company  (including  any  provisions  for
deferred  income  taxes)  reflected  on the books of the Company are adequate to
cover any Tax liabilities of the Company if its current tax year were treated as
ending on the date hereof.

     (b) No claim has been made by a taxing  authority  in a  jurisdiction where
the Company does not file tax returns that the Company or any  subsidiary  is or
may be subject to taxation  by that jurisdiction.  There  are,  to the Company's
knowledge,  no foreign,  federal, state or local tax audits or administrative or
judicial  proceedings  pending or being conducted with respect to the Company or
any subsidiary;  no information related to Tax matters has been requested by any
foreign,  federal,  state or local taxing  authority;  and,  except as disclosed
above,  no written notice  indicating an intent to open an audit or other review
has been received by the Company or any  subsidiary  from any foreign,  federal,
state or local taxing authority.  There are no material unresolved  questions or
claims concerning the Company's Tax liability.  The Company (A) has not executed
or entered into a closing agreement pursuant to ss. 7121 of the Internal Revenue
Code or any  predecessor  provision  thereof or any similar  provision of state,
local or foreign  law; or (B) has not agreed to and is not  required to make any
adjustments  pursuant to ss. 481 (a) of the Internal Revenue Code or any similar
provision  of state,  local or foreign  law by reason of a change in  accounting
method  initiated by the Company or any of its  subsidiaries,  does not have any
knowledge that the IRS has proposed any such  adjustment or change in accounting
method,  and does not have any  application  pending  with any taxing  authority
requesting  permission for any changes in accounting  methods that relate to the
business or operations of the Company.  The Company has not been a United States
real property  holding  corporation  within the meaning of ss.  897(c)(2) of the
Internal   Revenue  Code  during  the   applicable   period   specified  in  ss.
897(c)(1)(A)(ii)  of the Internal  Revenue Code.

     (c) The Company has not made an election  under ss.  341(f)of the  Internal
Revenue  Code.  The Company is not liable for the Taxes of another  person  that
is  not  a  subsidiary  of  the Company under  (A)  Treas. Reg. ss. 1.1502-6 (or
comparable  provisions of state,  local  or foreign law), (B) as a transferee or
successor,  (C) by contract or indemnity or (D)  otherwise.  The  Company is not
a party to  any tax sharing  agreement.   The Company has not made any payments,
is not obligated to make payments and is not a party to an agreement  that could
obligate it to make any payments that would not be deductible under ss. 280G  of
the Internal Revenue Code.

(d)      For purposes of this Section 4.16:


                  "IRS" means the United States Internal Revenue Service.


                  "Tax" or "Taxes" means federal, state, county, local, foreign,
                  or  other  income,  gross  receipts,  ad  valorem,  franchise,
                  profits,  sales  or  use,  transfer,   registration,   excise,
                  utility,  environmental,   communications,  real  or  personal
                  property,  capital  stock,  license,  payroll,  wage or  other
                  withholding,  employment,  social security,  severance, stamp,
                  occupation, alternative or add-on minimum, estimated and other
                  taxes of any kind whatsoever  (including,  without limitation,
                  deficiencies,   penalties,  additions  to  tax,  and  interest
                  attributable thereto) whether disputed or not.

                  "Tax Return"  means any return,  information  report or filing
                  with  respect  to  Taxes,  including  any  schedules  attached
                  thereto and including any amendment thereof.

Section 4.17.  Property.

  Neither the Company nor any of its subsidiaries  owns any real property.  Each
of the  Company  and its  subsidiaries  has  good  and  marketable  title to all
personal  property  owned by it, free and clear of all liens,  encumbrances  and
defects except such as do not  materially  affect the value of such property and
do not  materially  interfere  with the use made and proposed to be made of such
property by the  Company;  and to the  Company's  knowledge  any real prop erty,
mineral or water rights, and buildings held under lease by the Company as tenant
are  held by it  under  valid,  subsisting  and  enforceable  leases  with  such
exceptions  as are not  material  and do not  interfere  with  the use  made and
intended to be made of such property,  mineral or water rights, and buildings by
the Company.

Section 4.18.  Intellectual Property.

  Each of the  Company  and its  subsidiaries  owns or  possesses  adequate  and
enforceable  rights  to  use  all  patents,  patent  applications,   trademarks,
trademark  applications,  trade  names,  service  marks,  copyrights,  copyright
applications,  licenses,  know-how (including trade secrets and other unpatented
and/or  unpatentable  proprietary  or  confidential   information,   systems  or
procedures)  and other similar rights and proprietary  knowledge  (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted.
To the Company's knowledge, except as disclosed in the SEC Documents neither the
Company nor any of its  subsidiaries  is infringing upon or in conflict with any
right of any other person with respect to any  Intangibles.  Except as disclosed
in the SEC Documents,  no adverse claims have been asserted by any person to the
ownership  or use of any  Intangibles  and the Company has no  knowledge  of any
basis for such claim.

Section 4.19.  Internal Controls and Procedures.

  The Company maintains books and records and internal accounting controls which
provide  reasonable  assurance that (i) all transactions to which the Company or
any subsidiary is a party or by which its properties are bound are executed with
management's  authorization;  (ii)  the  recorded  accounting  of the  Company's
consolidated assets is compared with existing assets at regular intervals; (iii)
access to the Company's consolidated assets is permitted only in accordance with
management's  authorization;  and (iv) all  transactions to which the Company or
any  subsidiary is a party or by which its  properties are bound are recorded as
necessary to permit  preparation  of the financial  statements of the Company in
accordance with U.S. generally accepted accounting principles.

Section 4.20.  Payments and Contributions.

  Neither the Company, any subsidiary, nor any of its directors, officers or, to
its knowledge,  other  employees has (i) used any Company funds for any unlawful
contribution,   endorsement,  gift,  entertainment  or  other  unlawful  expense
relating  to  political  activity;  (ii) made any  direct or  indirect  unlawful
payment of Company  funds to any  foreign or  domestic  government  official  or
employee;  (iii)  violated or is in  violation  of any  provision of the Foreign
Corrupt  Practices  Act of 1977,  as  amended;  or (iv) made any bribe,  rebate,
payoff, influence payment,  kickback or other similar payment to any person with
respect to Company matters.

Section 4.21.  No Misrepresentation.

  The representations and warranties of the Company contained in this Agreement,
any schedule,   annex  or  exhibit hereto  and a  ny  agreement,  instrument  or
certificate  furnished  by  the  Company   to  the Investors  pursuant  to  this
Agreement,  do not contain  any  untrue  statement of a material fact or omit to
state a material fact required to  be stated therein or  necessary  to  make the
statements therein,  in light of the  circumstances  under which they were made,
not misleading.

                                   ARTICLE V

                           Covenants of the Investors


         Each  Investor,  severally and not jointly,  covenants with the Company
that:


Section 5.1.   Compliance with Law.

  The  Investor's  trading  activities  with respect to shares of the  Company's
Common  Stock  will be in  compliance  with all  applicable  state  and  federal
securities  laws,  rules  and  regulations  and  rules  and  regulations  of the
Principal Market on which the Company's Common Stock is listed.


Section 5.2.   Limitation on Short Sales.

  The Investor agrees  that  it  will make  no short sales (as  defined  in  any
applicable  SEC or NASD rules) of the Company's  Common  Stock while any  of the
Convertible  Preferred  Stock  owned  by  such   Investor  remains  issued   and
outstanding.   The foregoing limitation  shall not apply on any Trading Day when
the  closing bid price of the Common Stock on the  previous  Trading Day exceeds
three (3) times the closing bid price on the Closing Date.

Section 5.3.      Observance  of  120 Day Limitation  on  Sales of Common Stock.
The Investor acknowledges the  limitation on  resales  of  the Conversion Shares
contained in Section 5(b)(i) of the Certificate of Designations, notwithstanding
that the Effective Date may have occurred prior to such time.

                                   ARTICLE VI

                            Covenants of the Company


Section 6.1.   Registration Rights.

  The Company shall cause the  Registration  Rights  Agreement to remain in full
force and effect and the Company shall comply in all material  respects with the
terms thereof.

Section 6.2.   Reservation of Common Stock.

  As of the date hereof, the Company has reserved and the Company shall continue
to reserve and keep available at all times, free of preemptive rights, shares of
Common  Stock for the  purpose of enabling  the Company to issue the  Conversion
Shares and the Warrant  Shares  pursuant to any  conversion  of the  Convertible
Preferred  Stock or exercise of the  Warrants.  The number of shares so reserved
from time to time, as theretofore  increased or reduced as hereinafter provided,
may be  reduced  by the  number of shares  actually  delivered  pursuant  to any
conversion of the  Convertible  Preferred  Stock or exercise of the Warrants and
the number of shares so reserved  shall be  increased  or  decreased  to reflect
potential  increases  or  decreases  in the Common  Stock that the  Company  may
thereafter be obligated to issue by reason of adjustments to the Warrants.

Section  6.3.   Listing of Common Stock.

  The Company  hereby  agrees to maintain the listing of the Common Stock  on  a
Principal Market,  and as soon as reasonably practicable following  the  Closing
to  list  the  Conversion  Shares  and  the  Warrant  Shares  on  the  Principal
Market.  The Company further  agrees,  if the Company applies to have the Common
Stock traded on any other Principal  Market, it will include in such application
the Conversion Shares and the Warrant Shares, and will take such other action as
is  necessary  or  desirable  in the  opinion  of the  Investors  to  cause  the
Conversion Shares and Warrant Shares to be listed on such other Principal Market
as  promptly as  possible.  The  Company  will take all action to  continue  the
listing  and  trading  of its Common  Stock on a  Principal  Market  (including,
without limitation,  maintaining sufficient net tangible assets) and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the  Principal  Market and shall provide  Investors  with
copies of any correspondence to or from such Principal Market which questions or
threatens  delisting of the Common  Stock,  within three (3) Trading Days of the
Company's  receipt  thereof,  until the Investors  have disposed of all of their
Registrable Securities. The Company agrees to present a proposal for stockholder
approval at the next annual meeting of  stockholders,  which the Company in good
faith  expects to be held no later than June 30, 2000,  to permit the Company to
issue a number of  Conversion  Shares and Warrant  Shares  which is in excess of
19.9% of the number of the  Company's  issued and  outstanding  shares of Common
Stock on the Closing  Date,  with the  recommendation  of the Board of Directors
that such proposal be approved.  If such  proposal is not approved,  the Company
shall either (i) voluntarily  de-list its Common Stock from any Principal Market
which  requires  such approval or (ii) redeem any  un-exchangeable  Exchangeable
Preferred Stock pursuant to Section 7 of the Certificate of Designations, within
five (5) Trading Days of such vote.


Section  6.5.  Exchange Act Registration.

  The Company  will cause its Common  Stock to continue to be  registered  under
Section 12(b) or (g) of the Exchange Act, will use its best efforts to comply in
all respects with its reporting and filing  obligations  under the Exchange Act,
and will not take any action or file any document  (whether or not  permitted by
the  Exchange  Act or  the  rules  thereunder)  to  terminate  or  suspend  such
registration  or to terminate or suspend its  reporting  and filing  obligations
under said Act until the  Investors  have  disposed of all of their  Registrable
Securities.

Section  6.6.  Legends.

  Except as may be  required  by any  change in laws or  regualtions  applicable
thereto  enacted  after  the  date  hereof,  the  certificates   evidencing  the
Registrable Securities shall be free of legends,  except as set forth in Article
IX.

Section  6.7.  Corporate Existence; Conflicting Agreements.

  The  Company  will take all steps  necessary  to  preserve  and  continue  the
corporate  existence  of the  Company.  The  Company  shall not  enter  into any
agreement,  the terms of which  agreement  would restrict or impair the right or
ability of the Company to perform any of its obligations under this Agreement or
any of the other agreements attached as exhibits hereto or under the Certificate
of Designations.

Section  6.8.  Consolidation; Merger.

  The Company shall not, at any time after the date hereof, effect any merger or
consolidation of the Company with or into, or a transfer of all or substantially
all of the assets of the Company to,  another entity (a  "Consolidation  Event")
unless the resulting  successor or acquiring entity (if not the Company) assumes
by written  instrument  or by operation of law the  obligation to deliver to the
Investors  such shares of stock and/or  securities as the Investors are entitled
to receive pursuant to this Agreement and the Certificate of Designations.

Section  6.9.  Issuance of Convertible Preferred Stock and Warrant Shares.

  The sale of the Convertible  Preferred Stock and the Warrants and the issuance
of the Warrant  Shares  pursuant to exercise of the Warrants and the  Conversion
Shares  upon  conversion  of the  Convertible  Preferred  Stock shall be made in
accordance  with the  provisions  and  requirements  of  Section  4(2),  4(6) or
Regulation D and any applicable state securities law. The Company shall make any
necessary  SEC and "blue  sky"  filings  required  to be made by the  Company in
connection  with the sale of the  Securities to the Investors as required by all
applicable  laws,  and shall  provide a copy thereof to the  Investors  promptly
after such filing.

Section  6.10. Limitation on Future Financing.

  The Company  agrees that it will not enter into any sale of its securities for
cash at a discount to Market  Price until 120 days after the  effective  date of
the  Registration  Statement  except for any sales (i) pursuant to any presently
existing  employee  benefit plan which plan has been  approved by the  Company's
stockholders, (ii) pursuant to any compensatory plan for a full-time employee or
key consultant,  (iii) pursuant to a shelf registration,  or (iv) with the prior
approval  of a  majority  in  interest  of  the  Investors,  which  will  not be
unreasonably  withheld,  in  connection  with a strategic  partnership  or other
business  transaction,  the  principal  purpose  of which is not simply to raise
money.

Section  6.11. Pro-Rata Redemption.

  The Company  agrees  that if it shall  redeem any of the Convertible Preferred
Stock,  that  it  shall  make  such  redemption  pro-rata among all Investors in
proportion to their respective initial purchases of such securities  pursuant to
this Agreement.

                                  ARTICLE VII

                            Survival; Indemnification


Section  7.1.  Survival.

  The representations,  warranties and covenants made by each of the Company and
each Investor in this Agreement, the annexes,  schedules and exhibits hereto and
in each instrument, agreement and certificate entered into and delivered by them
pursuant to this  Agreement,  shall survive the Closing and the  consummation of
the   transactions   contemplated   hereby;   provided,    however,   that   the
representations  and  warranties  of the  parties  set forth in Articles 3 and 4
shall survive until  February 25, 2003. In the event of a breach or violation of
any of such  representations,  warranties or  covenants,  the party to whom such
representations,  warranties  or covenants  have been made shall have all rights
and remedies for such breach or violation  available to it under the  provisions
of this  Agreement,  irrespective of any  investigation  made by or on behalf of
such party on or prior to the Closing Date.

Section  7.2.  Indemnity.

  (a) The Company  hereby agrees to indemnify  and hold harmless the  Investors,
their respective Affiliates and their respective officers,  directors,  partners
and members (collectively, the "Investor Indemnitees"), from and against any and
all  Damages  in  excess  of  $50,000,  and  agrees to  reimburse  the  Investor
Indemnitees for all reasonable  out-of-pocket expenses (including the reasonable
fees and expenses of legal  counsel),  in each case  promptly as incurred by the
Investor Indemnitees and to the extent arising out of or in connection with:


               (i)     any  misrepresentation,  omission  of  fact  or breach of
                       any  of  the  Company's   representations  or  warranties
                       contained in this Agreement,  the annexes,  schedules  or
                       exhibits   hereto   or   any  instrument,   agreement  or
                       certificate entered  into  or  delivered  by  the Company
                       pursuant to this Agreement; or


               (ii)   any  failure by the Company to  perform  in  any  material
                      respect any of its covenants,   agreements,   undertakings
                      or obligations  set forth in this  Agreement, the annexes,
                      schedules or exhibits hereto or any instrument,  agreement
                      or  certificate  entered into  or delivered by the Company
                      pursuant to this Agreement; or

               (iii)  any  action  instituted  against  the Investors, or any of
                      them,  by  any  stockholder  of t he Company who is not an
                      Affiliate of an Investor,  with  respect  to  any  of  the
                      transactions contemplated by this Agreement.

  (b) Each  Investor, severally and not jointly,  hereby agrees to indemnify and
hold  harmless  the  Company,  its  Affiliates  and their  respective  officers,
directors, partners and members (collectively, the "Company Indemnitees"),  from
and against any and all  Damages in excess of $50,000,  and agrees to  reimburse
the Company Indemnitees for reasonable all out-of-pocket expenses (including the
reasonable  fees and  expenses  of legal  counsel),  in each  case  promptly  as
incurred  by the  Company  Indemnitees  and to the extent  arising  out of or in
connection with:


               (i)         any misrepresentation, omission of fact, or breach of
                           any of the Investor's  representations  or warranties
                           contained in this Agreement,  the annexes,  schedules
                           or exhibits  hereto or any  instrument,  agreement or
                           certificate entered into or delivered by the Investor
                           pursuant to this Agreement; or

               (ii)       any failure by the Investor to perform in any material
                          respect any of its covenants, agreements, undertakings
                          or  obligations  set  forth  in  this  Agreement,  the
                          annexes,    schedules   or   exhibits  hereto  or  any
                          instrument,  agreement or certificate entered into  or
                          delivered  by the Investor pursuant to this Agreement.

Section 7.3.   Notice.

  Promptly after receipt by either party hereto seeking indemnification pursuant
to Section 7.2 (an "Indemnified  Party") of written notice of any investigation,
claim,  proceeding or other action in respect of which  indemnification is being
sought (each, a "Claim"),  the Indemnified Party promptly shall notify the party
from  whom  indemnification  pursuant  to  Section  7.2  is  being  sought  (the
"Indemnifying Party") of the commencement thereof; but the omission so to notify
the Indemnifying Party shall not relieve it from any liability that it otherwise
may have to the Indemnified  Party,  except to the extent that the  Indemnifying
Party is actually  prejudiced by such omission or delay.  In connection with any
Claim as to which  both the  Indemnifying  Party and the  Indemnified  Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding  the assumption of the defense of any Claim by the  Indemnifying
Party,  the  Indemnified  Party  shall have the right to employ  separate  legal
counsel and to  participate in the defense of such Claim,  and the  Indemnifying
Party shall bear the reasonable fees,  out-of-pocket  costs and expenses of such
separate  legal  counsel  to the  Indemnified  Party if (and only  if):  (x) the
Indemnifying Party shall have agreed to pay such fees,  out-of-pocket  costs and
expenses,  (y) the  Indemnified  Party  reasonably  shall  have  concluded  that
representation of the Indemnified  Party and the Indemnifying  Party by the same
legal  counsel  would  not  be  appropriate  due to  actual  or,  as  reasonably
determined  by legal counsel to the  Indemnified  Party,  potentially  differing
interests  between such parties in the conduct of the defense of such Claim,  or
if there may be legal defenses  available to the  Indemnified  Party that are in
addition to or disparate from those available to the Indemnifying  Party, or (z)
the  Indemnifying  Party shall have failed to employ  legal  counsel  reasonably
satisfactory to the Indemnified  Party within a reasonable  period of time after
notice of the  commencement  of such Claim.  If the  Indemnified  Party  employs
separate legal counsel in circumstances  other than as described in clauses (x),
(y) or (z) above,  the fees,  costs and expenses of such legal  counsel shall be
borne  exclusively  by the  Indemnified  Party.  Except as provided  above,  the
Indemnifying  Party  shall  not,  in  connection  with  any  Claim  in the  same
jurisdiction, be liable for the fees and expenses of more than one firm of legal
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnifying  Party  shall  not,  without  the  prior  written  consent  of  the
Indemnified Party (which consent shall not unreasonably be withheld),  settle or
compromise  any  Claim or  consent  to the entry of any  judgment  that does not
include an unconditional  release of the Indemnified  Party from all liabilities
with respect to such Claim or judgment.

Section 7.4.   Direct Claims.

  In the event one party hereunder should have a claim for indemnification  that
does  not  involve  a claim or  demand  being  asserted  by a third  party,  the
Indemnified   Party   promptly  shall  deliver  notice  of  such  claim  to  the
Indemnifying  Party. If the Indemnified  Party disputes the claim,  such dispute
shall  be  resolved  by  mutual  agreement  of the  Indemnified  Party  and  the
Indemnifying  Party or by binding  arbitration  conducted in accordance with the
procedures  and rules of the American  Arbitration  Association  as set forth in
Article X. Judgment upon any award rendered by any arbitrators may be entered in
any court having competent jurisdiction thereof.

                                  ARTICLE VIII

         Due Diligence Review; Non-Disclosure of Non-Public Information.


Section 8.1.   Due Diligence Review.

  Subject to Section 8.2, the Company shall make  available for  inspection  and
review by the Investors,  advisors to and  representatives of the Investors (who
may or may  not  be  affiliated  with  the  Investors  and  who  are  reasonably
acceptable to the Company), any underwriter  participating in any disposition of
the  Registrable   Securities  on  behalf  of  the  Investors  pursuant  to  the
Registration  Statement,   any  such  registration  statement  or  amendment  or
supplement  thereto or any blue sky,  Nasdaq or other filing,  all SEC Documents
and other  filings  with the SEC,  and all other  publicly  available  corporate
documents and  properties of the Company as may be reasonably  necessary for the
purpose  of such  review,  and  cause  the  Company's  officers,  directors  and
employees to supply all such publicly available information reasonably requested
by  the  Investors  or  any  such  representative,  advisor  or  underwriter  in
connection with such Registration Statement (including,  without limitation,  in
response to all questions and other  inquiries  reasonably  made or submitted by
any of them),  prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the Investors and
such representatives, advisors and underwriters and their respective accountants
and attorneys to conduct  initial and ongoing due diligence  with respect to the
Company and the accuracy of the Registration Statement.

Section 8.2.   Non-Disclosure of Non-Public Information.


     (a) The Company shall not disclose material  non-public information  to the
Investors,  advisors to or  representatives  of the  Investors  unless  prior to
disclosure of such information the Company  identifies such information as being
non-public   information   and  provides  the   Investors,   such  advisors  and
representatives  with the  opportunity  to  accept  or  refuse  to  accept  such
non-public  information for review. Other than disclosure of any comment letters
received  from the SEC staff with  respect to the  Registration  Statement,  the
Company may, as a condition to disclosing any non-public  information hereunder,
require  the   Investors'   advisors  and   representatives   to  enter  into  a
confidentiality  agreement in form and content  reasonably  satisfactory  to the
Company and the Investors.

     (b) Nothing  herein shall  require the Company  to disclose  material  non-
public  information  to the Investors or their advisors or representatives,  and
the  Company  represents  that  it  does  not  disseminate  material  non-public
information  to  any investors  who purchase stock  in  the Company  in a public
offering, to money managers or to securities analysts,  provided,  however, that
notwithstanding   anything  herein  to  the  contrary,   the  Company  will,  as
hereinabove  provided,  promptly notify the advisors and  representatives of the
Investors  and,  if any,  underwriters,  of any  event or the  existence  of any
circumstance   (without  any  obligation  to  disclose  the  specific  event  or
circumstance)  of which  it  becomes  aware,  constituting  material  non-public
information  (whether or not requested of the Company  specifically or generally
during the course of due diligence by such persons or entities),  which,  if not
disclosed in the prospectus  included in the Registration  Statement would cause
such  prospectus to include a material  misstatement  or to omit a material fact
required to be stated therein in order to make the statements,  therein in light
of the circumstances in which they were made, not misleading.  Nothing contained
in this  Section 8.2 shall be  construed  to mean that such  persons or entities
other  than  the  Investors  (without  the  consent  of the  Investors  prior to
disclosure of such  information  as set forth in Section  8.2(a)) may not obtain
non-public  information  in the course of conducting due diligence in accordance
with the terms of this  Agreement  and  nothing  herein  shall  prevent any such
persons or entities  from  notifying  the Company of their opinion that based on
such due diligence by such persons or entities,  that the Registration Statement
contains  an  untrue  statement  of a  material  fact or omits a  material  fact
required to be stated in the  Registration  Statement  or  necessary to make the
statements  contained therein,  in light of the circumstances in which they were
made, not misleading.

                                   ARTICLE IX

                      Legends; Transfer Agent Instructions

Section 9.1.   Legends.

  Unless otherwise provided below, each certificate representing the Convertible
Preferred  Stock,  Warrants or  Registrable  Securities  will bear the following
legend or equivalent (the "Legend"):

THE SECURITIES  EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S.  SECURITIES  ACT OF 1933,  AS  AMENDED  (THE  "SECURITIES  ACT"),  OR STATE
SECURITIES  LAWS AND HAVE BEEN ISSUED IN  RELIANCE  UPON AN  EXEMPTION  FROM THE
REGISTRATION  REQUIREMENTS  OF THE  SECURITIES  ACT AND SUCH LAWS.  NEITHER THIS
SECURITY  NOR ANY  INTEREST  OR  PARTICIPATION  HEREIN  MAY BE  SOLD,  ASSIGNED,
TRANSFERRED,  PLEDGED,  ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO
AN  EFFECTIVE   REGISTRATION  STATEMENT  UNDER  THE  SECURITIES  ACT  AND  STATE
SECURITIES  LAWS  OR  PURSUANT  TO  A  TRANSACTION  THAT  IS  EXEMPT  FROM  SUCH
REGISTRATION.


Section 9.2.   Transfer Agent Instructions.

  Upon the execution and delivery hereof, the Company is issuing to the transfer
agent for its Common Stock (and to any substitute or replacement  transfer agent
for its Common Stock upon the Company's  appointment  of any such  substitute or
replacement transfer agent) instructions  substantially in the form of Exhibit F
hereto. Such instructions shall be irrevocable by the Company from and after the
date hereof or from and after the  issuance  thereof to any such  substitute  or
replacement transfer agent, as the case may be.


Section 9.3.   No Other Legend or Stock Transfer Restrictions.

  No legend  other than the one  specified  in Section  9.1 has been or shall be
placed on the share certificates  representing the Registrable Securities and no
instructions or "stop transfer orders," "stock transfer  restrictions," or other
restrictions  have been or shall be given to the Company's  transfer  agent with
respect thereto other than as expressly set forth in this Article IX or pursuant
to Section 6.6.

Section 9.4.Investors' Compliance.

  Nothing in this Article shall affect in any way each Investor's obligations to
comply with all applicable securities laws upon resale of the Common Stock.

                                   ARTICLE X

                           Choice of Law; Arbitration


Section 10.1   Governing Law/Arbitration.

  This Agreement  shall be governed by and construed in accordance with the laws
of the State of New York  applicable  to  contracts  made in New York by persons
domiciled in New York City and without  regard to its principles of conflicts of
laws. Any dispute under this Agreement  shall be submitted to arbitration  under
the American Arbitration Association (the "AAA") in New York City, New York, and
shall be finally  and  conclusively  determined  by the  decision  of a board of
arbitration  consisting  of three (3)  members  (hereinafter  referred to as the
"Board of Arbitration")  selected  according to the rules governing the AAA. The
Board of Arbitration  shall meet on consecutive  business days in New York City,
New York,  and shall reach and render a decision in writing  (concurred  in by a
majority of the members of the Board of Arbitration) with respect to the amount,
if any,  which the losing party is required to pay to the other party in respect
of a claim filed.  In  connection  with  rendering its  decisions,  the Board of
Arbitration  shall adopt and follow the laws of the State of New York unless the
matter at issue is the corporation law of the company's state of  incorporation,
in which event the corporation law of such jurisdiction shall govern such issue.
To the extent practical, decisions of the Board of Arbitration shall be rendered
no more than thirty (30) calendar days  following  commencement  of  proceedings
with respect thereto.  The Board of Arbitration shall cause its written decision
to be delivered to all parties involved in the dispute. Any decision made by the
Board of  Arbitration  (either  prior to or after the  expiration of such thirty
(30) calendar day period) shall be final,  binding and conclusive on the parties
to the dispute,  and entitled to be enforced to the fullest extent  permitted by
law and entered in any court of competent jurisdiction. The Board of Arbitration
shall be authorized and is hereby directed to enter a default  judgment  against
any party failing to  participate in any  proceeding  hereunder  within the time
periods set forth in the AAA rules. The non-prevailing  party to any arbitration
(as  determined  by the  Board of  Arbitration)  shall pay the  expenses  of the
prevailing party,  including reasonable attorney's fees, in connection with such
arbitration.  Any party  shall be entitled  to obtain  injunctive  relief from a
court in any case where such relief is available,  and the non-prevailing  party
to any such  injunctive  proceeding  shall pay the  expenses  of the  prevailing
party, including reasonable attorney's fees, in connection with such proceeding.

                                   ARTICLE XI

                                   Assignment

Section 11.1.  Assignment.

  Neither  this  Agreement  nor  any  rights  of the  Investors  or the  Company
hereunder may be assigned by either party to any other  person.  Notwithstanding
the foregoing,  (a) the provisions of this Agreement  shall inure to the benefit
of, and be enforceable  by, any permitted  transferee of any of the  Convertible
Preferred Stock or Warrants purchased or acquired by any Investor hereunder with
respect to the Convertible  Preferred Stock or Warrants held by such person, and
(b) upon the prior  written  consent of the  Company,  which  consent  shall not
unreasonably be withheld or delayed,  each Investor's interest in this Agreement
may be assigned at any time,  in whole or in part, to any other person or entity
(including any Affiliate of the Investor) who agrees to make the representations
and warranties  contained in Article III and who agrees to be bound by the terms
of this Agreement. The Investor shall not assign its rights under this Agreement
to any Person  identified  to the Investor by the Company as a competitor of the
Company.

                                  ARTICLE XII

                                     Notices


Section 12.1.   Notices.

  All notices, demands, requests, consents,  approvals, and other communications
required  or  permitted  hereunder  shall be in writing  and,  unless  otherwise
specified  herein,  shall be (i) hand  delivered,  (ii)  deposited  in the mail,
registered  or certified,  return  receipt  requested,  postage  prepaid,  (iii)
delivered  by  reputable  air courier  service  with  charges  prepaid,  or (iv)
transmitted by facsimile,  addressed as set forth below or to such other address
as such party shall have specified most recently by written  notice.  Any notice
or other  communication  required or  permitted to be given  hereunder  shall be
deemed effective (a) upon hand delivery or delivery by facsimile,  with accurate
confirmation  generated by the transmitting facsimile machine, at the address or
number  designated  below (if delivered on a business day during normal business
hours where such notice is to be received),  or the first business day following
such delivery (if delivered  other than on a business day during normal business
hours  where such notice is to be  received)  or (b) on the first  business  day
following  the date of sending by  reputable  courier  service,  fully  prepaid,
addressed  to such  address,  or (c) upon  actual  receipt of such  mailing,  if
mailed. The addresses for such communications shall be:
<TABLE>
<S>                                                  <C>
If to the Company:                                   Sedona Corporation
                                                     649 North Lewis Road
                                                     Limerick, PA 19468
                                                     Attention:  Marco A. Emrich
                                                     Facsimile:

with a copy to (shall not constitute                 Piper Marbury Rudnick & Wolfe LLP
notice):                                             1200 Nineteenth Street, NW
                                                     Washington, DC 20036
                                                     Attention: Robert B. Murphy, Esq.
                                                     Telephone: 202-861-3900
                                                     Facsimile: 202-223-2085

if to the Investors:                                 As set forth on the signature pages hereto


with a copy to:                                      Joseph A. Smith, Esq.
(shall not constitute notice)                        Epstein Becker & Green, P.C.
                                                     250 Park Avenue
                                                     New York, New York
                                                     Telephone: (212) 351-4500
                                                     Facsimile: (212) 661-0989
</TABLE>

Either party hereto may from time to time change its address or facsimile number
for notices  under this  Section 12.1 by giving  written  notice of such changed
address  or  facsimile  number to the other  party  hereto as  provided  in this
Section 12.1.

                                  ARTICLE XIII

                                  Miscellaneous


Section 13.1.  Counterparts/ Facsimile/ Amendments.

  This Agreement may be executed in multiple counterparts,  each of which may be
executed  by less than all of the  parties and shall be deemed to be an original
instrument  which shall be enforceable  against the parties  actually  executing
such  counterparts  and all of which together shall  constitute one and the same
instrument.  Except  as  otherwise  stated  herein,  in  lieu  of  the  original
documents,  a facsimile  transmission or copy of the original documents shall be
as effective and enforceable as the original. This Agreement may be amended only
by a writing executed by all parties.

Section 13.2.  Entire Agreement.

  This Agreement, the agreements attached as Exhibits hereto, which include, but
are not limited to the  Certificate of  Designations,  the Warrants,  the Escrow
Agreement, and the Registration Rights Agreement, set forth the entire agreement
and  understanding  of the parties  relating to the  subject  matter  hereof and
supersedes  all  prior  and   contemporaneous   agreements,   negotiations   and
understandings  between  the  parties,  both oral and  written  relating  to the
subject  matter  hereof.  The  terms  and  conditions  of all  Exhibits  to this
Agreement are incorporated herein by this reference and shall constitute part of
this Agreement as is fully set forth herein.

Section 13.3.  Severability.

  In the event that any provision of this Agreement  becomes or is declared by a
court of  competent  jurisdiction  to be illegal,  unenforceable  or void,  this
Agreement  shall  continue  in full force and  effect  without  said  provision;
provided that such  severability  shall be ineffective if it materially  changes
the economic benefit of this Agreement to any party.

Section 13.4.  Headings.

  The headings used in this Agreement are used for convenience  only and are not
to be considered in construing or interpreting this Agreement.

Section 13.5.  Number and Gender.

  There may be one or more Investors parties to this Agreement,  which Investors
may be natural  persons or entities.  All references to plural  Investors  shall
apply  equally  to a single  Investor  if there  is only one  Investor,  and all
references to an Investor as "it" shall apply equally to a natural person.

Section 13.6.  Reporting Entity for the Common Stock.

  The reporting entity relied upon for the determination of the trading price or
trading  volume of the Common Stock on any given Trading Day for the purposes of
this Agreement shall be Bloomberg,  L.P. or any successor  thereto.  The written
mutual  consent of the Investors and the Company shall be required to employ any
other reporting entity.

Section 13.7.  Replacement of Certificates.

  Upon (i) receipt of  evidence  reasonably  satisfactory  to the Company of the
loss,  theft,  destruction  or  mutilation  of a  certificate  representing  the
Convertible  Preferred Stock or any Conversion Shares or Warrants or any Warrant
Shares  and (ii) in the  case of any such  loss,  theft or  destruction  of such
certificate,  upon  delivery of an indemnity  agreement  or security  reasonably
satisfactory  in form to the Company (which shall not include the posting of any
bond) or (iii) in the case of any such mutilation, on surrender and cancellation
of such  certificate,  the Company at its expense will  execute and deliver,  in
lieu thereof, a new certificate of like tenor.

Section 13.8.  Fees and Expenses.

  Each of the Company and the Investors agrees to pay its own expenses  incident
to the performance of its obligations  hereunder,  except that the Company shall
pay the fees,  expenses  and  disbursements  of  Epstein  Becker & Green,  P.C.,
counsel to the Investors, in an amount equal to $15,000, all as set forth in the
Escrow Agreement.

Section 13.9.  Brokerage.

  Each  of the  parties  hereto  represents  that  it has  had  no  dealings  in
connection  with this  transaction  with any  finder or broker  who will  demand
payment of any fee or  commission  from the other  party  except  for  Ladenburg
Thalman & Co., Inc., whose fee shall be paid by the Company.  The Company on the
one hand,  and the  Investors,  on the other hand,  agree to indemnify the other
against and hold the other  harmless from any and all  liabilities to any person
claiming brokerage commissions or finder's fees on account of services purported
to have been rendered on behalf of the  indemnifying  party in  connection  with
this Agreement or the transactions contemplated hereby.

Section 13.1.  Publicity.

  The Company agrees that it will not issue any press release  or  other  public
announcement  of  the  transactions  contemplated  by  this   Agreement  without
the prior consent of the Investors, which shall not be unreasonably withheld nor
delayed by more than two (2) Trading  Days from their  receipt of such  proposed
release.  No release shall name the Investors without their express consent.


<PAGE>




         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
<TABLE>
<S>                                                  <C>


                                                     SEDONA CORPORATION



                                                     By:__________________________________
                                                        Marco A. Emrick, President and CEO

  Address: c/o Ultrafinanz AG                        AMRO International, S.A.
  Grossmuensterplatz 26
  Zurich CH-8022 Switzerland
  Fax: 011-411-262-5515                              By:__________________________________
  Amount: $1,700,000                                    H. U. Bachofen, Director


  Address: Suite 7B and 8B                           Markham Holdings Limited
  50 Town Range
  Gibraltar
  Fax: 011-350-40404                                 By:__________________________________
  Amount: $300,000                                      J. David Hassan, Authorized Signatory


  Address: Charlotte House                           Aspen International Limited
  Charlotte Street
  Nassau, Bahamas
  Fax: 242-323-7918                                  By:__________________________________
  Amount: $500,000                                      Authorized Signatory

  Address:                                           The Cuttyhunk Fund Limited

   Amount:     $250,000
                                                     By:____________________________________
                                                        Authorized Signatory

  Address:                                           The George S. Sarlo 1995 Charitable Remainder Trust

   Amount:     $250,000
                                                     By:___________________________________
                                                        Authorized Signatory

</TABLE>