FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549


              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                         For Quarter Ended June 30, 2000

                                       OR

              [ ] TRANSITION REPORT PURSUANT O SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the Transition Period from _______ to _______

                         Commission file number 33-20432

                       MAGNITUDE INFORMATION SYSTEMS, INC.
             (Exact Name of Registrant as Specified in its Charter)

                               Delaware 75-2228828
                  (State or other Jurisdiction of (IRS Employer
               Incorporation or Organization) Identification No.)

                  401 State Route 24, Chester, New Jersey 07930
               (Address of Principal Executive Office) (Zip Code)

                                 (908) 879-2722
               (Registrant's telephone number including area code)


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days.
                                 Yes x No _____

     The  number of shares of  Registrant's  Common  Stock,  $0.0001  par value,
outstanding as of June 30, 2000, was 15,479,163 shares.

<PAGE>




              MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES




                                      INDEX


                                                                       Page
                                                                      Numbe

PART  1  -  FINANCIAL INFORMATION

Item 1   Financial Statements (unaudited)

         Consolidated Balance Sheet
          - June 30, 2000                                               3

         Consolidated Statements of Operations
          - Three and six months ended June 30, 2000 and 1999           4

         Consolidated Statements of Cash Flows
          - Six months ended June 30, 2000 and 1999                     5

         Notes to Consolidated Financial Statements                   6 - 11


Item 2  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                   12 - 13


PART II  -  OTHER INFORMATION                                          14


SIGNATURES                                                             16


FINANCIAL DATA SCHEDULE                                                17

OTHER EXHIBITS                                                         18


                                       2
<PAGE>



PART I  - Item 1
              MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                     June 30, 2000


ASSETS
     Current Assets
<S>                                                                             <C>
     Cash  .............................................................        $        401,121
     Accounts receivable, net of allowance for
        doubtful accounts of 6,646 .....................................                 320,753
     Inventories .......................................................                   8,670
     Deferred tax asset.................................................                 201,470
     Prepaid expenses ..................................................                 446,313
                                                                                ---------------------
        Total Current Assets ...........................................               1,378,327
     Property, plant and equipment, net of accumulated
        depreciation of $165,084 .......................................                 129,627
     Software, net of accumulated amortization of
         $339,622 ......................................................               1,167,668
     Other assets ......................................................                  27,508
                                                                                     -------------
TOTAL ASSETS ...........................................................               2,703,130
                                                                                        ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
     Accounts payable and accrued expenses .............................                 778,646
     Deferred revenue...................................................                  19,410
     Dividends payable .................................................                  47,935
     Prepayments received ..............................................                   5,000
     Loans and notes payable ...........................................                 630,992
     Current maturities long-term debt .................................                       0
     Current maturities lease obligations ..............................                   6,938
                                                                                    -------------
        Total Current Liabilities ......................................               1,488,921
     Long-term debt, less current portion ..............................                 374,890
     Lease obligations, less current portion ...........................                  13,005
                                                                                    -------------
TOTAL LIABILITIES ......................................................               1,876,816

STOCKHOLDERS' EQUITY
     Preferred Stock, $0.001 par value,  3,000,000 shares authorized:
     2,500 shares have been designated Cumulative Preferred Stock,
     of which 1 share is issued and outstanding ..............................                 0
     300,000 shares have been designated Series A Convertible Preferred Stock,
     350,000 shares have been designated Series B Convertible Preferred Stock,
     120,000 shares have been designated Series C Convertible Preferred Stock,
     of which a combined total 351,528 shares are issued and outstanding                     352
     Common Stock, $0.0001 par value, 100,000,000 shares authorized,
     15,479,163 shares are issued and outstanding.............................             1,548
     Contributed capital .....................................................            81,000
     Additional paid-in capital ..............................................        13,701,138
     Accumulated deficit .....................................................       (12,957,724)
                                                                                     ------------
TOTAL STOCKHOLDERS' EQUITY...............................                                826,314

TOTAL LIABILITIES AND EQUITY ....................................               $      2,703,130
                                                                                       ==========
</TABLE>


                 See notes to consolidated financial statements

                                       3


<PAGE>

              MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                             Three Months Ended                Six Months Ended
                                                                  June 30,                          June 30,
                                                           2000              1999            2000               1999


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

<S>                                                  <C>              <C>               <C>                <C>
Total Revenues..............................         $     247,981    $       65,673    $    348,003       $    110,180

     Cost of Goods Sold ....................                43,720            43,563          84,654             86,439
                                                     -------------     -------------     -------------    --------------

Gross Profit ...............................               204,261            22,110         263,349             23,741
     Selling expenses ......................               378,259           191,363         605,079            356,834
     General & administrative expenses .....               610,567           512,464       1,132,853            934,439
                                                       -----------      ------------      -------------    ------------

Operating Income (Loss) ....................              (784,565)         (681,717)     (1,474,583)        (1,267,532)

     Miscellaneous income ..................                     0            23,921          14,048             87,596
     Interest expense, net..................               (23,264)          (58,161)       (132,843)          (109,998)
     Miscellaneous expenses ................                (3,201)           (6,004)         (1,149)           (19,689)
                                                      ------------      -------------     ------------      ------------
Non-Operating Income (Expense) .............               (26,465)          (40,244)       (119,944)           (42,091)
                                                      -------------     -------------    -------------      -------------

Net Loss ...................................           $  (811,030)      $  (721,961)    $(1,594,527)      $ (1,309,623)
                                                      ==============    ==============    ============      =============

Loss per Common Share ......................           $     (0.05)      $     (0.09)    $     (0.11)      $      (0.17)
                                                       =============     =============    =============     =============
Weighted Average Number of
     Common Shares Outstanding .............            15,194,570         8,372,824      14,026,451          7,833,959
</TABLE>


















                 See notes to consolidated financial statements

                                       4
<PAGE>




              MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                               Six Months Ended June 30,
                                                              2000                    1999
Cash Flows from Operating Activities
<S>                                                       <C>                   <C>
     Net income (loss) ..............................     $(1,594,527)          $ (1,309,623)
     Adjustments to net income (loss)
        Depreciation and amortization ...............          98,200                 92,819
        Stock and debt issued for expenses...........         191,667                      0
        Loss on disposition of certain assets .......           1,122                  1,934
        Dividend payments............................         (26,250)                     0
     Decreases (increases) in Assets
        Accounts receivable .........................        (260,275)                70,686
        Miscellaneous receivables....................          14,872                      0
        Inventories .................................             215                  8,827
        Prepaid expenses ............................         (57,432)              (116,171)
        Other assets ................................         (25,050)                  (450)
     Increases (decreases) in Liabilities
        Prepayments received.........................           5,000                      0
        Deferred revenue.............................          19,410
        Accounts payable and accrued expenses .......         (72,447)              (622,138)
                                                           --------------    -----------------
Net Cash Provided (Used) by Operating Activities           (1,705,495)            (1,874,116)

Cash Flows from Investing Activities
     Purchases of equipment and fixtures ............         (51,860)                (1,049)
     Disposition of equipment and fixtures ..........           3,358                      0
                                                            --------------    -----------------
Net Cash Provided (Used) by Investing Activities              (48,502)                (1,049)

Cash Flows from Financing Activities
     Proceeds from notes payable ....................               0                942,500
     Repayment of loans and notes ...................        (444,534)              (283,427)
     Repayment of long-term debt ....................              (0)               (39,000)
     Issuance of preferred stock.....................       1,800,083                      0
     Issuance of common stock ........... ...........         550,000              1,492,409
                                                           -----------          --------------
Net Cash Provided (Used) by Financing Activities            1,905,549              2,112,482
Net Increase (Decrease) in Cash .....................         151,552                237,317
Cash at Beginning of Period .........................         249,569                  9,403
                                                           -----------           ------------
Cash at End of Period ...............................  $      401,121         $      246,720
                                                        =================     ================
</TABLE>










                 See notes to consolidated financial statements


                                       5
<PAGE>



              MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2000

DESCRIPTION OF BUSINESS

         Magnitude  Information Systems, Inc. (the "Company" or "Magnitude") was
         incorporated as a Delaware corporation on April 19, 1988 under the name
         Fortunistics  Inc. On March 4, 1993,  the  Company  changed its name to
         Whitestone  Industries,  Inc. On July 14, 1997, the Company changed its
         name to Proformix Systems,  Inc., and on November 18, 1998, the Company
         changed its name to Magnitude Information Systems, Inc.

         The Company's  primary  product is an integrated  suite of  proprietary
         software  modules  marketed  under the name  ErgoManager(TM)  which are
         designed to help  individual  computer  users and  businesses  increase
         productivity and reduce the risk of potentially  preventable repetitive
         stress injury (RSI). These software modules can be applied individually
         or together in a comprehensive ergonomic and early intervention program
         that seeks to modify a user's  behavior by  monitoring  computer  usage
         patterns over time and warning the user when to break a dangerous trend
         in repetitive  usage of an input  device,  such as a keyboard or mouse.
         The product was developed to train people working on computers, monitor
         computer-use related activities and evaluate a user's risk exposure and
         propensity  towards injury or loss of  effectiveness in connection with
         his/her  day-to-day work.  Moreover,  the software enables a company to
         not only address the issue of health risks  involving  employees and to
         minimize resulting potential liabilities,  but delivers a powerful tool
         to increase overall productivity.

BACKGROUND

         On June 24,  1997,  the  Company,  extended a stock  exchange offer to
         the shareholders  of Proformix,  Inc., a Delaware  corporation and
         manufacturer of ergonomic keyboarding systems. Proformix, Inc. in
         November 1998 changed its name to  Magnitude, Inc. and is now referred
         to as  Magnitude,  Inc.. At the time of this submission,  holders of
         98.5% of Magnitude, Inc. common stock have tendered their  shares. The
         business  combination  which  took  the  form of a reverse acquisition
         has been accounted for as a purchase.  As a result,  the Company and
         Magnitude,  Inc. remain as two separate legal entities whereby
         Magnitude,  Inc. operates as a subsidiary of Magnitude Information
         Systems,  Inc.. The operations of the newly combined entity are
         currently comprised solely of the operations of Magnitude, Inc.

         On February 2, 1998, the Company  entered into an Agreement and Plan of
         Merger with Rolina  Corporation,  a privately held New Jersey  software
         developing  firm,  and on  April  30,  1998,  into  an  Asset  Purchase
         Agreement with Vanity Software  Publishing Co., a Canadian developer of
         specialized  software,  whereby the Company,  in return for payments in
         form of cash and  equity,  acquired  the  rights  to  certain  software
         products and related assets,  with such software products  subsequently
         forming the basis for the further development,  during the year, of the
         Company's proprietary ErgoManager(TM) software system.

         On November  18,  1998,  the Company  and its wholly  owned  subsidiary
         Magnitude,  Inc.  entered into an Asset Purchase  Agreement and several
         related  agreements with 1320236 Ontario Inc. ("OS"), a publicly traded
         Canadian  designer,  manufacturer  and distributor of office  furniture
         based  in  Holland  Landing,  Ontario,  Canada,  pursuant  to  which OS
         acquired  Magnitude,  Inc.'s  hardware  product  line  comprised of the
         Company's  ergonomic  keyboard platform  products and accessories,  all
         related inventory and production  tooling and warehousing  assets,  and
         all intellectual  property rights including the Proformix name, against
         a cash  consideration  and certain royalty payments on OS' sales of the
         Proformix hardware products.
         .
                                       6

<PAGE>



              MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2000

         Magnitude   Inc.'s  wholly  owned   subsidiary,   Corporate   Ergonomic
         Solutions,  Inc.  (Ergonomics)  was  incorporated  in the  State of New
         Jersey during October 1992.  Ergonomics,  which commenced operations in
         September 1997, was formed primarily to market hardware  products.  Its
         operations during the last two years have not been significant.


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     Principles of Consolidation
         The consolidated  financial  statements  include the accounts of
         Magnitude  Information  Systems,  Inc. and its  subsidiaries,
         Magnitude,  Inc. and Corporate  Ergonomic  Solutions,  Inc.
         All significant  intercompany  balances and transactions have been
         eliminated.

     Inventories
         Inventory  consists of finished  goods which are stated at the lower of
         cost (determined by the first-in, first out method) or market.

     Depreciation and Amortization
         Property,  plant and  equipment are recorded at cost.  Depreciation  on
         equipment,   furniture  and  fixtures  and  leasehold  improvements  is
         computed on the straight line method over the estimated useful lives of
         such assets between 3-10 years.  Maintenance and repairs are charged to
         operations as incurred.  Software  assets are amortized on the straight
         line method over 10 years.

     Securities Issued for Services
         The Company accounts for stock, stock options and stock warrants issued
         for services and  compensation  by employees  under the intrinsic value
         method. For non-employees, the fair market value of the Company's stock
         on the date of  stock  issuance  or  option  grant  is used.  Effective
         January 1, 1996, the Company adopted Statement of Financial  Accounting
         Standard (SFAS) No. 123, "Accounting for Stock-based Compensation". The
         statement   generally   suggests,   but  does  not  require,   employee
         stock-based  compensation  transactions  be accounted  for based on the
         fair  value of the  services  rendered  or the fair value of the equity
         instruments issued, whichever is more reliably measurable. As permitted
         by the  statement,  the  Company  has elected to continue to follow the
         requirements of Accounting Principles Board Opinion No. 25, "Accounting
         for Stock Issued to Employees' for employees  under the intrinsic value
         method. The adoption of SFAS No. 123 does not have a material impact on
         the financial statements.

     Income Taxes
         The  Company  provides  for income  taxes  based on enacted tax law and
         statutory  tax rates at which items of income and expenses are expected
         to be settled in the  Company's  income tax  return.  Certain  items of
         revenue and expense are  reported  for Federal  income tax  purposes in
         different  periods  than  for  financial  reporting  purposes,  thereby
         resulting in deferred income taxes.  Deferred taxes are also recognized
         for  operating  losses  that are  available  to offset  future  taxable
         income.  Valuation  allowances are established when necessary to reduce
         deferred tax assets to the amount expected to be realized.  The Company
         has  incurred  net  operating   losses  for   financial-reporting   and
         tax-reporting purposes.  Accordingly,  for Federal income tax purposes,
         the  benefit for income  taxes has been offset  entirely by a valuation
         allowance  against the related federal  deferred tax asset for the year
         ended  December 31,  1999.  For state  income tax  purposes,  a partial
         valuation  allowance has been offset against the related state deferred
         tax asset for the year ended December 31, 1999.

                                       7

<PAGE>



              MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

     Net Loss Per Share
         Net loss per share,  in  accordance  with the  provisions  of Financial
         Accounting Standards Board No. 128, "Earnings Per Share" is computed by
         dividing  net loss by the weighted  average  number of shares of Common
         Stock outstanding during the period.  Common Stock equivalents have not
         been   included  in  this   computation   since  the  effect  would  be
         anti-dilutive.

     Revenue Recognition
         Revenue  from  the  licensing  of  proprietary   software  products  is
         recognized  at the  time  of  licensing  provided  that  the  resulting
         receivable is deemed probable of collection.

     Use of Estimates
         The  preparation of financial  statements in conformity  with generally
         accepted   principles   requires   management  to  make  estimates  and
         assumptions  that affect the reported 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.

DEFERRED TAX ASSET

         During 1999, the Company had filed an  application  with the New Jersey
         Economic  Development  Authority who administers the current New Jersey
         Tax   Certification   program  pursuant  to  the  New  Jersey  Emerging
         Technology and  Biotechnology  Financial  Assistance Act to qualify for
         and be the  beneficiary of this program which will permit a participant
         to liquidate  its State NOL tax benefits  against cash  considerations.
         The Company has been  accepted  under this  program and has been issued
         tax transfer  certificates  which will, upon  liquidation,  result in a
         cash benefit in the amount stated.


PREPAID EXPENSES

         Prepaid  expenses  include a position  of  $375,000  resulting  from an
         agreement  in February  1998 with BNN  Business  News  Network  Inc., a
         nationwide  media  advertising and radio network  company,  whereby the
         Company   purchased   advertising  time  to  be  utilized  on  stations
         associated  with Business  News Network  Inc.,  usable over a period of
         three years and aggregating  $900,000 in retail value, against issuance
         of 150,000 new and  restricted  common shares.  The services  purchased
         were capitalized at the then fair market value of the stock issued, for
         a total of $375,000. The resulting asset will be amortized as utilized,
         over the time frame of the next fifteen months. As per the date of this
         report, no portion of this asset has been utilized. Management believes
         that the Company will derive economic  benefits  commensurate  with the
         value of this asset. If management were to determine that it may not be
         able  to  economically  utilize  the  entire  amount  during  the  time
         allotted,  it will effect an accelerated  amortization or write-down of
         this asset position.
                                       8

<PAGE>



              MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2000

PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
     Property, plant and equipment consist of the following at June 30, 2000:
<S>                                                                                      <C>
              Equipment                                                                  $       178,965
              Furniture and fixtures                                                              69,976
              Leasehold improvements                                                              45,770
                                                                                           --------------

                                                                                                 294,711

              Less accumulated depreciation                                                      165,084
                                                                                           --------------

                                        Total                                            $       129,627
                                                                                           ==============

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts  payable and accrued  expenses  consisted of the  following at June 30,
2000:

              Accounts payable                                                           $       148,864

              Accrued interest                                                                   309,756

              Accrued commissions                                                                 17,712

              Accrued salaries and professional fees (payable in cash)                            57,196

              Accrued salaries and professional fees (payable in equity)                         154,986

              Miscellaneous accruals                                                              90,132
                                                                                            =============

                                    Total                                                $       778,646
                                                                                            =============
</TABLE>


LOANS AND NOTES PAYABLE

     At June 30, 2000,  Magnitude,  Inc. and the Company had borrowings  under
     short term loan  agreements with the following terms and
     conditions:
<TABLE>
<CAPTION>
<S>                                                                                                        <C>
         On December 4, 1996,  Magnitude,  Inc.  repurchased  the  equivalent  of 144,192  shares of its
         common stock and retired same against  issuance of a promissory  note  maturing  twelve  months   $        75,000
         thereafter  accruing  interest at 5% per annum and due  December 4, 1998.  This note is overdue
         at September 30, 1999 and no demand for payment has been made through today's date.

         Private  Placement  Offering:  During  February  through June 1995,  an  underwriter  acting as           425,000
         placement  agent,  on behalf of Magnitude,  Inc.,  in a private  placement  offering  placed an
         aggregate 16 units,  each  consisting of a $100,000,  12% promissory  note and 10,000 shares of
         Magnitude,  Inc.'s common stock.  The promissory notes were originally due on the earlier of 12
         months from their  issuance or the  completion of a public or private  financing of either debt
         or equity  securities  of  Magnitude,  Inc. On April 30, 2000,  $1,075,000  of these notes were
         retired  against a combination  of cash  payments and issuance of common stock and  convertible
         preferred stock.  Two such notes totaling $425,000 remain outstanding.
</TABLE>


                                       9
<PAGE>

              MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2000

<TABLE>
<CAPTION>
         LOANS AND NOTES PAYABLE  continued
         Discounted  present value of a non-interest  bearing $70,000  settlement with a former investor
         of  Magnitude,  Inc.  to be paid in  monthly  payments  commencing  July 1, 1997.  The  imputed
<S>                                                                                                       <C>
         interest rate used to discount the note is 8% per annum.                                         $  33,529

         Promissory  note issued to a former  member of the board of directors of the Company,  carrying
         interest at 12% p.a. and maturing July 2000,  convertible at the holder's option into shares of
         the  common  stock of the  Company  at the rate of $0.50  per  share.  The note was  originally     97,463
         issued for $200,000 with $37,537 since repaid,  and $65,000  having been  converted into common
         stock.
                                                                                                          --------------


                  Total                                                                                   $ 630,992
                                                                                                         ==============

LONG-TERM DEBT

        Pursuant to the  February 2, 1998,  Agreement  and Plan of Merger with Rolina  Corporation  (see   $ 374,890
        "Background")  the Company had issued  155,556  shares (the "Shares") of its common stock to the
        principal of Rolina  Corporation  who  currently  serves as the  Company's  President  and Chief
        Executive Officer,  and had issued a Put Option for such Shares at a price of $2.41 per share in
        accordance with the provisions contained therein,  with notice for exercise eligible to be given
        at any time after  February  1, 2000,  and before  5:00 p.m.  on the 90th day  thereafter.  This
        current liability was converted into a Company obligation  maturing March 31, 2002, and carrying
        interest at the rate of 7% per year payable  monthly.  The obligation  includes an option to the
        holder for conversion of the outstanding  principal into shares of the Company's common stock at
        the rate of $0.50 per share.



  INCOME TAXES

       At December 31, 1999,  the Company had net operating  loss carry forwards approximating              $11,300,000
       which expire  between the years 2008 and 2013 and are subject to certain annual limitations.

  The Company's total deferred tax asset and valuation allowance at December 31, 1999 are as follows:
            Total deferred tax asset                                                                        $ 4,240,000
            Less valuation allowance                                                                          4,240,000
            Net deferred tax asset                                                                          $         -
                                                                                                         ================
</TABLE>


                                       10

<PAGE>




              MAGNITUDE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2000


COMMITMENTS AND CONTINGENCIES

   Lease Agreements
     Magnitude,  Inc.  currently  leases office space which contained its former
     administrative  offices  pursuant to a lease  agreement  dated  December 9,
     1998.  Such lease  commences  December 16, 1998 and expires on December 31,
     2001 and  requires  monthly  payments of $3,700 from  December  16, 1998 to
     October 31, 1999 and $3,250 from  November 1, 1999 to December  31, 2001. A
     portion  of this  space  has been  sublet,  generating  $950  per  month in
     offsetting revenues.

     On March 15, 2000,  the Company  entered into a lease  agreement for office
     space which is utilized for the  Company's  principal  offices.  Such lease
     commenced April 15, 2000 and expires on March 31, 2005 and requires monthly
     payments of $6,500 from April 15, 2000 through  March 31,  2002;  of $6,695
     thereafter  through March 31, 2003; of $6,896 thereafter  through March 31,
     2004; and of $7,103 thereafter through March 31, 2005.


RELATED PARTY TRANSACTIONS

      On March 31,  2000,  the Company  and its  President  and Chief  Executive
      Officer agreed to convert a current liability payable to him in the amount
      of $374,890 into a Company obligation maturing March 31, 2002, which among
      others  provides for a right to the holder to convert such obligation into
      common stock of the Company (see "Long-term debt").


CHANGES IN KEY PERSONNEL

      On May 18, 2000,  during the Annual Meeting of Shareholders of the Company
      the  stockholders  voted to appoint  Messrs.  Steven Rudnik,  John Duncan,
      Ivano  Angelastri,  Steven Gray, and Joseph Tomasek to serve as members of
      the Company's Board of Directors.


SUBSEQUENT EVENTS

      On July  18,  2000,  the  Company  entered  into a Common  Stock  Purchase
      Agreement  with Torneaux  Ltd., an investment  fund  headquartered  in the
      Commonwealth  of The Bahamas (the  "Fund"),  which  provides for an Equity
      Draw Down facility  which may be utilized by the Company at its option and
      whereby the Fund during a period of 14 months if and when called on by the
      Company will purchase  newly to be issued and  registered  common stock of
      the  Company  at  discounts  ranging  from 9.5% to 12% of  average  market
      prices,  up to an aggregate  total amount of between $1.2 Million and $4.2
      Million, depending upon certain market price and other criteria. A copy of
      this Agreement and attachments is attached hereto as Exhibit 10.1.




                                       11

<PAGE>



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


Results of Operations:

         The second  quarter in 2000 showed a substantial  relative  increase in
revenues  over the first  quarter of this year as well as the second  quarter in
1999.  Although in absolute  terms,  revenues have not yet grown to a level that
will cover  ongoing  expenses  management  considers  the sales  results for the
period  significant  insofar as they appear to validate the Company's  marketing
strategy of lowering entry barriers by closely cooperating with larger potential
clients in introducing the proprietary  ErgoManager(TM)  software  through pilot
projects at selected worksites,  thereby creating the necessary  credibility and
awareness  of the  product's  unique  potential  in the  areas  of  productivity
enhancement and risk reduction with respect to repetitive  stress  injuries,  in
the office  environment.  Even though relatively time consuming,  pilot projects
involving  smaller  numbers of  employees  provide a  potential  client  with an
opportunity to test the software's utility and reliability,  systems and network
friendliness,   and  staff  acceptance  without  incurring  the  perceived  risk
associated with an immediate enterprise-wide installation of a new product.

         During the  quarter,  three  companies  and  government  agencies  have
converted  from  pilot  programs  to  full  deployment  of  the  ErgoManager(TM)
software, two of which, the insurance company 21st Century Insurance Co. and the
California  State  Controller's  Office,  are located in the State of California
which in 1998  pioneered  legislation  that  requires  businesses to monitor and
manage  employees  who work on computers  in order to mitigate  health risks and
which was followed by proposals for similar legislation,  in the states of North
Carolina and Washington and by the U.S. Federal OSHA. Although market acceptance
of the  Company's  products,  in  management's  opinion  does not  depend on the
passing of such  legislation,  compliance  motivation  with respect to actual or
proposed  law  constitutes  an  important  element  in the  Company's  marketing
strategy.

         Revenues  for the  quarter  ended June 30,  2000,  amounted to $247,981
compared  to  $65,673  for the same  period  in 1999 and  $100,022  in the first
quarter  2000,  all  such  revenues  generated  by the  Company's  wholly  owned
subsidiary  Magnitude,  Inc.  from the  licensing of the  Company's  proprietary
ErgoManager(TM)  software.  Gross  profits  amounted to $204,261 for a 82% gross
margin.  Gross  profits are  burdened  with a fixed charge for  amortization  of
software  investments.  Software  assets  underlying the Company's  products are
being amortized on a straight line over 10 years, resulting in a level charge of
approximately  $12,000 per month to  cost-of-goods-sold.  Since variable product
costs are low,  the gross  margin is  expected  to further  increase as revenues
grow. After deducting selling expenses and general and  administrative  expenses
of $988,826 the Company  realized an operating loss of $784,565,  compared to an
operating  loss of  $681,717  for the  second  quarter  in  1999.  Non-operating
expenses  totaled  $26,465 and include  $23,264 net  interest  expense.  The net
result for the quarter was a loss of $811,030 or $0.05 per share,  compared to a
loss of $721,961 or $0.09 per share for the same period last year.

         The  quarter's  net  result was  strongly  affected  by the  continuing
expansion of marketing  and sales  operations  resulting in a sharp  increase of
selling  expenses,  which  doubled  from the level a year ago.  The  Company  is
undertaking  pioneering  efforts in educating  future customers and the business
community at large about the merits of a  pro-active  stance in dealing with the
growing  level  of  health  risks  and  potential  liabilities  associated  with
repetitive  stress injuries in the computer  workplace  environment.  Management
believes that these efforts are justified by the potential rewards accruing from
this  "First to  Market"  approach  which  should  lead to a strong  competitive
advantage and a sizable  market share during the years to come. The Company will
continue  to  invest  in a  comprehensive  marketing  campaign  with the goal of
accelerating  the  education of  potential  clients and  promoting  the name and
products of the Company. This process,  however, takes time and while management
is confident of the ultimate  success of its strategy it is not in a position to
predict the timing with any degree of certainty.

                                       12
<PAGE>




         As part of its overall marketing strategy, the Company entered into new
joint marketing and distribution  agreements with Automated Systems, Inc. (ASI),
the well known high level  systems  integrator  headquartered  in  Chicago,  and
Protegrity   Services,   Inc.,  one  of  the  largest  privately  held  workers'
compensation  service  companies  in the  United  States,  serving  over  18,000
business  customers in 17 states.  These partnerships are expected to facilitate
the Company's access to key prospects and accelerate market entry and acceptance
for the Company's software products.

Liquidity and Capital Resources

         As already  reported  for the first  quarter,  the  Company  during the
second  quarter  continued  receiving  new equity  investments  through  private
placements with accredited  investors and agreed with certain other investors to
convert larger amounts of debt into equity.  These transactions further improved
the balance sheet of the Company and firmed up the Company's  financial  profile
so  that,  at  June  30,  2000  and  in  spite  of  the  loss  from  operations,
stockholders'  equity  increased to $826,314  compared to $655,233 at the end of
the previous fiscal  quarter.  During the same time, the working capital deficit
was reduced from $299,658 to $110,594.

         In February, the Company had obtained a firm commitment from a previous
investor to act as placement  agent for a capital  raising  effort to obtain new
equity  capital  of  $3  Million  through  private  placement  subscriptions  by
accredited  investors.  By June 30,  2000,  the Company had  received a total of
$2.25  Million under this program.  The remaining  $.75 Million were  originally
also  scheduled for the second  quarter but have been  rescheduled  for transfer
during the third quarter of this year. In addition to attracting  new capital in
the form of equity  investments,  the Company between April 1, 2000 and June 30,
2000 has converted an aggregate of $776,750  short-term debt into equity in form
of common stock and convertible  preferred stock.  These financing  transactions
more  than  offset  the  negative  cash flow from  operations  of  approximately
$1,705,000 during the first six months of the year.

         To further augment available financial  resources,  the Company on July
18, 2000,  entered into a Common Stock Purchase Agreement with Torneaux Ltd., an
investment fund  headquartered  in the Commonwealth of The Bahamas (the "Fund"),
which  provides  for an Equity Draw Down  facility  which may be utilized by the
Company at its option and  whereby  the Fund during a period of 14 months if and
when called upon by the Company will purchase  newly to be issued and registered
common  stock of the Company at  discounts  ranging  from 9.5% to 12% of average
market prices,  up to an aggregate total amount of between $1.2 Million and $4.2
Million, depending upon certain market price and other criteria. This
transaction is subject to Board approval which is anticipated to occur within
the next several business days.

         Management  believes  that  funds  from  the  above  described  capital
transactions  will  provide  for  adequate  liquidity  and  financial  resources
sufficient to cover present and anticipated future operations during the current
fiscal year.


                                       13

<PAGE>




PART  II  -  OTHER INFORMATION

Item 1   LEGAL PROCEEDINGS

The Company is not a party in any legal proceedings.


Item 2   CHANGES IN SECURITIES      -  None

c)   Issuance of unregistered securities

In addition to the issuance of unregistered  securities  previously noted in the
Company's  report  on  Form  10-QSB  for  the  quarter  ended  March  31,  2000,
incorporated herein by reference the Company,  during the second quarter of 2000
and through August 8, 2000, issued the following unregistered securities:

          (i)  70,000  shares of Common  Stock  pursuant  to the  conversion  of
$35,000 in  convertible  promissory  notes,  issued in reliance upon  exemptions
provided under Section 4(2) of the Securities Act;
         .
         (ii) 27,788 shares of Series B Senior Convertible  Preferred Stock to a
foreign investor pursuant to private placement subscriptions under Section 4 (2)
of the Securities  Act, which resulted in the receipt by the Company of $250,092
in cash, whereby such shares,  among other things, have the following rights and
privileges:  (i) 7% annual preferential dividend,  payable  semi-annually,  (ii)
conversion  at the  holders'  option into shares of Common Stock at a conversion
rate of 10 common  shares  for 1  preferred  share.  The  preferred  shares  are
callable by the Company under certain terms and conditions.


Item 3   DEFAULTS ON SENIOR SECURITIES    -  None
         -----------------------------


Item 4   SUBMISSION OF MATTERS TO A VOTE OF
         SECURITIES' HOLDERS

(a) On May 18, 2000, the Company held its Annual Meeting of Stockholders.

         (c)      Stockholders  of record at the close of  business on March 31,
                  2000, were invited to vote at the Annual  Meeting.  Qualifying
                  stockholders  voted in person or via proxy on the below  items
                  of business, as follows:

(1)      Election of Directors
                  The Board of Directors of the Company nominated the following
                  individuals for election by the stockholders,  to serve as
                  directors for a term of one year and until their successors
                  are elected and  qualified:  Ivano  Angelastri,  John
                  Duncan, Steven Gray, Steven Rudnik, Joseph Tomasek.
                  The nominations were  uncontested. The five nominees received
                  the highest number of votes for election as directors.

(2)      Amendment to the Certificate of Incorporation of the Company
                  The Board of  Directors  of the Company  proposed to amend the
                  Company's   Certificate  of   Incorporation  to  increase  the
                  authorized   number  of  common  shares  from   30,000,000  to
                  100,000,00.   The  stockholders  approved  the  proposal  with
                  8,371,788 shares voted in favor,  63,781 shares voted against,
                  and 327,745 shares abstaining.

                                       14

<PAGE>

(3)     Adoption of the 2000 Stock Incentive Plan
           The Board of Directors of the Company proposed the adoption of
           the 2000  Stock  Incentive  Plan  whereby  the  Company  would
           reserve  5,000,000  common  shares to be issued or  underlying
           stock  options and stock  appreciation  rights to be issued to
           employees, consultants, advisors and directors of the Company.
           The  stockholders  approved the proposal with 3,284,101 shares
           voted in favor,  274,790  shares  voted  against,  and  72,000
                  shares abstaining.

(4)    Appointment of Independent Auditors for the year ending December 31,2000
           The Board of Directors  of the Company  proposed to ratify the
           appointment  of the  firm of  Rosenberg  Rich  Baker  Berman &
           Company as the  Company's  Independent  Auditors  for the year
           ending  December  31,  2000.  The  stockholders  approved  the
           proposal with  8,689,713  shares voted in favor,  2,001 shares
           voted against, and 71,600 shares abstaining.


Item 5   OTHER INFORMATION      -  None


Item 6   EXHIBITS AND REPORTS ON FORM 8-K

(a)         Exhibit  (3)(i) - Articles  of  Incorporation  and  Amendments
            thereto,  incorporated  herein by  reference  to  Exhibits  of
            previous filings with the Commission.

            Exhibit (3)(ii) - By-laws of the Company,  incorporated herein
            by  reference  to  Exhibits  of  previous   filings  with  the
            Commission.

            Exhibit (10.1) - Common Stock Purchase Agreement with Torneaux Ltd.
                              -  attached hereto.

            Exhibit (27) - Financial Data Schedule -  attached hereto.


(b)      Reports on Form 8-K:

                  On April 17,  2000,  the  Company  filed a report on Form 8-K,
                  informing  about a change in the address and telephone  number
                  of its principal offices.

                  On June 1,  2000,  the  Company  filed a report  on Form  8-K,
                  informing about its Annual Meeting of Stockholders held on May
                  18, 2000, and the results of the voting by stockholders.

                                       15

<PAGE>



                                   SIGNATURES


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



                                      MAGNITUDE INFORMATION SYSTEMS, INC.




Date:   August 2, 2000                 By: s/Steven D. Rudnik
                                          ----------------------------------
                                          Steven D. Rudnik
                                          President and Chief Executive Officer















                                       16



<PAGE>




                                  EXHIBIT 10.1









                         COMMON STOCK PURCHASE AGREEMENT




                            Dated as of July 18, 2000




                                 by and between


                       MAGNITUDE INFORMATION SYSTEMS, INC.



                                       and


                                  TORNEAUX LTD.




<PAGE>







                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                                Page

ARTICLE I Definitions  1

<S>                                                                                                              <C>
   Section 1.1    Definitions.....................................................................................1

ARTICLE II Purchase and Sale of Common Stock......................................................................3

   Section 2.1    Purchase and Sale of Stock......................................................................3
   Section 2.2    The Shares......................................................................................3
   Section 2.3    The Warrants....................................................................................3
   Section 2.4    Closing.........................................................................................4

ARTICLE III Representations and Warranties........................................................................4

   Section 3.1    Representations and Warranties of the Company...................................................4
   Section 3.2    Representations, Warranties and Covenants of the Purchaser.....................................11

ARTICLE IV Covenants  13

   Section 4.1    Securities.....................................................................................13
   Section 4.2    Registration and Listing.......................................................................13
   Section 4.3    Registration Statement.........................................................................13
   Section 4.4    Compliance with Laws...........................................................................14
   Section 4.5    Keeping of Records and Books of Account........................................................14
   Section 4.6    Reporting Requirements.........................................................................14
   Section 4.7    Other Agreements...............................................................................14
   Section 4.8    Non-public Information.........................................................................14
   Section 4.9    No Stop Orders.................................................................................15
   Section 4.10   Amendments to the Registration Statement.......................................................15
   Section 4.11   Prospectus Delivery............................................................................15
   Section 4.12   Legends........................................................................................16

ARTICLE V Conditions to Closing, Draw Downs and Warrant Exercise.................................................16

   Section 5.1    Conditions Precedent to the Obligation of the Company to Close this Agreement..................16
   Section 5.2    Conditions Precedent to the Obligation of the Purchaser to Close this Agreement................16
   Section 5.3    Conditions Precedent to the Obligation of the Purchaser to Accept a Draw Down or Exercise the
                  Warrants and Purchase the Shares...............................................................17

ARTICLE VI Draw Down Terms.......................................................................................19

   Section 6.1    Draw Down Terms................................................................................19
</TABLE>

                                      -i-

<PAGE>

<TABLE>
<CAPTION>

ARTICLE VIILegends    21

<S>                                                                                                             <C>
   Section 7.1    Legend.........................................................................................21
   Section 7.2    No Other Legend or Stock Transfer Restrictions.................................................22
   Section 7.3    Purchaser's Compliance.........................................................................22

ARTICLE VIII Termination.........................................................................................22

   Section 8.1    Termination by Mutual Consent..................................................................22
   Section 8.2    Other Termination..............................................................................22
   Section 8.3    Effect of Termination..........................................................................22

ARTICLE IX Indemnification.......................................................................................23

   Section 9.1    General Indemnity..............................................................................23
   Section 9.2    Indemnification Procedures.....................................................................24

ARTICLE X Miscellaneous..........................................................................................25

   Section 10.1   Fees and Expenses..............................................................................25
   Section 10.2   Specific Enforcement, Consent to Jurisdiction..................................................25
   Section 10.3   Entire Agreement; Amendment....................................................................26
   Section 10.4   Notices........................................................................................26
   Section 10.5   Waivers........................................................................................27
   Section 10.6   Headings.......................................................................................27
   Section 10.7   Successors and Assigns.........................................................................27
   Section 10.8   Governing Law..................................................................................28
   Section 10.9   Survival.......................................................................................28
   Section 10.10  Counterparts...................................................................................28
   Section 10.11  Publicity......................................................................................28
   Section 10.12  Severability...................................................................................28
   Section 10.13  Further Assurances.............................................................................28
   Section 10.14  Confidentiality................................................................................29
</TABLE>

                                      -ii-

<PAGE>



                         COMMON STOCK PURCHASE AGREEMENT



         This COMMON STOCK PURCHASE  AGREEMENT (this "Agreement") is dated as of
July 18, 2000 by and between  Magnitude  Information  Systems,  Inc., a Delaware
corporation  (the  "Company") and Torneaux Ltd., a company  organized  under the
laws of the Commonwealth of The Bahamas (the "Purchaser").



         WHEREAS,  the parties  desire  that,  upon the terms and subject to the
conditions  contained herein, the Company shall issue and sell to the Purchaser,
from time to time as provided  herein,  and the Purchaser shall purchase,  up to
2,386,364 shares of the Company's common stock, par value $0.0001 per share (the
"Common Stock"); and



         WHEREAS,  such investments will be made in reliance upon the provisions
of Section 4(2) and ("Section  4(2)") and Regulation D  ("Regulation  D") of the
United States  Securities Act of 1933, as amended and the rules and  regulations
promulgated  thereunder (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 purchases of Common Stock to be made hereunder
from time to time.

         The parties hereto agree as follows:
ARTICLE I

                                   Definitions
Section 1.1       Definitions.

      (a) "Alternate  Market" shall mean the Nasdaq National Market, the Nasdaq
Small Cap  Market,  the  American  Stock  Exchange,  or the New York  Stock
Exchange, whichever is at the time the principal trading exchange or market
for the Common Stock.

      (b) "Commission"  shall have the meaning assigned to such term in Section
3.1(f)hereof.

      (c) "Commission  Documents" shall have the meaning assigned to
such term in Section 3.1(f) hereof.


                                      -1-

<PAGE>

     (d)  "Commission  Filings"  means the Company's  Form 10-KSB for the fiscal
year ended December 31, 1999, its Form 10-QSB for the fiscal quarter ended March
31,2000 and December 31, 1999,  its Form 8-Ks dated May 18, 2000,  and all other
filings  made by the Company  after the date hereof  pursuant to the  Securities
Exchange Act of 1934, as amended (the "Exchange Act").

     (e) "Draw Down" shall have the meaning  assigned to such term in Section
6.1(a)hereof.

     (f) "Draw  Down  Amount"  means the  actual  amount of a Draw  Down,with  a
minimum amount of $100,000.00 and a maximum amount of $612,500.00.

     (g) "Draw Down Discount  Percentage"  means 88% if the  Threshold  Price is
equal to or greater than $1.00; provided, however, that for every $0.50 increase
of the Threshold Price above $1.00, to a maximum  Threshold Price of $3.50, such
draw down  discount  percentage  shall  increase by 0.50%,  incrementally,  to a
maximum of 90.5%.

     (h) "Draw Down  Exercise  Date" shall have the meaning  assigned to such
term in Section  5.3  hereof.

     (i) "Draw  Down  Notice"  shall have the  meaning
assigned to such term in Section 6.1(i) hereof.

     (j) "Draw Down Pricing  Period"
shall  mean a period of twenty  (20)  consecutive  trading  days on the over the
counter bulletin board ("OTC BB") or an Alternate Market starting with the first
trading day  specified in Draw Down Notice (or such other period of  consecutive
trading  days as mutually  agreed upon by the  Company and the  Purchaser).

     (k)"Material Adverse Effect" shall mean any effect on the business, results
of  operations,  prospects,  properties,  assets 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  in any
material respect.

     (l) "Material  Change in Ownership"  shall mean that, as of any  particular
measurement  date, the officers and directors of the Company shall  beneficially
own in the  aggregate  less  than  2% of the  outstanding  Common  Stock  of the
Company,  except that for purposes of making any such calculation,  Common Stock
issued to the Purchaser pursuant to this Agreement shall not be included in such
calculation.

     (m) "Prospectus" as used in this Agreement means the prospectus in
the form included in the Registration  Statement,  as supplemented  from time to
time pursuant to Rule 424(b) of the Securities Act.

                                      -2-

<PAGE>


     (n) "Registration  Statement" shall mean the registration statement on Form
SB-2,  to  be  filed  with  the  Securities  and  Exchange  Commission  for  the
registration  for resale of the Shares,  as such  Registration  Statement may be
amended from time to time.

     (o)"Settlement  Date"  shall  have the  meaning  assigned  to such  term in
Section 6.1(d) hereof.

     (p) "Shares"  shall mean the shares of Common Stock of the Company that
may be purchased  hereunder  pursuant to a Draw Down and/or upon exercise of the
Warrants (as defined Section 2.3).

     (q) "Threshold  Price" is the lowest price at
which  the  Company  will set in the Draw Down  Notice  in order to sell  Shares
during  each Draw  Down  Pricing  Period,  which  Threshold  Price may be set in
increments  of at least $.01.

     (r) "VWAP" shall mean the daily  volume  weighted
average price (based on a trading day from 9:30 a.m. to 4:00 p.m., eastern time)
of the  Company's  Common Stock on the OTC BB (or any  successor  thereto) or an
Alternate  Market as reported by Bloomberg  Financial LP using the AQR function.

                                   ARTICLE II

                        Purchase and Sale of Common Stock

     Section 2.1 Purchase and Sale of Stock. Subject to the terms and conditions
of this  Agreement,  the Company  shall issue and sell to the  Purchaser and the
Purchaser  shall purchase from the Company (i) up to 2,386,364  shares of Common
Stock, based on Draw Downs in accordance with Section 6.1, and (ii) the Warrants
in  accordance  with Section 2.3 hereof.  In no event shall the amount of Common
Stock  required to be purchased by the Purchaser be less than $100,000 or exceed
$612,500 per Draw Down during any Draw Down Pricing Period.

     Section 2.2 The Shares.  The Company has  authorized  and has  reserved and
covenants  to continue to reserve,  subject to Section  4.4(b)  hereof,  free of
preemptive rights and other similar contractual rights of stockholders,
3,579,545  shares  of its  Common  Stock to cover  the  Shares  to be  issued in
connection with all Draw Downs and the shares of Common Stock issuable pursuant
 to the exercise of Warrants.

                  Section 2.3 The Warrants. At each Settlement Date, the Company
shall issue to the Purchaser a warrant (the "Warrant"), to purchase up to 50% of
the number of shares of Common Stock purchased for each Settlement  Period (such
percentage,  as may be adjusted  below,  the "Warrant  Coverage"),  each Warrant
being exercisable for a period of three (3) years commencing on date of issuance
of such Warrant. Each Warrant shall be exercisable at the exercise price of 115%
of the price per Share paid by the Purchaser during such Settlement  Period. The
Warrant  Coverage  shall be adjusted as follows:

                                      -3-

<PAGE>


     (1) If the  Threshold  Price is equal to or less than  $1.00, the  Warrant
Coverage shall be 50%;

     (2) If the Threshold  Price exceeds $1.00, up to and including  $2.00, the
Warrant Coverage shall be 40%; and

     (3) If the Threshold Price exceeds $2.00, the Warrant Coverage
shall be 30%.

         No Warrant shall be  exercisable if the shares of Common Stock issuable
upon any  exercise of such  Warrant,  when  aggregated  with all other shares of
Common Stock then owned by the Purchaser,  would result in the Purchaser  owning
more than 9.99% of all of such Common Stock as would be outstanding on such date
of exercise, as determined in accordance with Section 16 of the Exchange Act and
the regulations promulgated thereunder.

                  Section  2.4  Closing.  In  consideration  of and  in  express
reliance upon the representations,  warranties,  covenants, terms and conditions
of this Agreement, the Company agrees to issue and sell to the Purchaser and the
Purchaser  agrees to purchase from the Company,  that number of the Shares to be
issued in  connection  with each Draw Down.  The  closing of the  execution  and
delivery of this  Agreement (the  "Closing")  shall take place at the offices of
Parker Chapin LLP, The Chrysler  Building,  405 Lexington  Avenue,  New York, NY
10174 at 5:00 p.m.  Eastern Time on (i) July __,  2000,  or (ii) such other time
and place or on such date as the  Purchaser  and the Company may agree upon (the
"Closing  Date").  Each party  shall  deliver  all  documents,  instruments  and
writings required to be delivered by such party pursuant to this Agreement at or
prior to the Closing.

                                  ARTICLE III

                         Representations and Warranties

     Section 3.1  Representations  and  Warranties  of the Company.  The Company
hereby makes the following representations and warranties to the Purchaser:

     (a)Organization, Good Standing and Power. The Company is a corporation duly
incorporated,  validly  existing and in good standing under the laws of Delaware
and has the requisite  corporate  power to own, lease and operate its properties
and assets and to conduct its business as it is now being  conducted.  As of the
date hereof,  the Company does not have any  subsidiaries (as defined in Section
3.1(g)) except as set forth in the Company's most recent Form 10-SKB,  including
the accompanying  financial statements (the "Form 10-KSB"),  or in the Company's
most  recent Form 10-QSB (the "Form  10-QSB"),  or on Schedule  3.1(g)  attached
hereto. The Company and each such subsidiary is duly qualified to do business as
a foreign corporation and is in good standing in every jurisdiction in which the
nature  of  the  business   conducted  or  property   owned  by  it  makes  such
qualification necessary except for any jurisdiction in which the failure to be
so  qualified  will not  have a  Material  Adverse  Effect.

     (b)  Authorization;  Enforcement.  The Company has the requisite  corporate
     power and  authority to enter into and perform this  Agreement and to issue
and sell the Shares in accordance with the terms hereof. The execution, delivery
and  performance of this Agreement by the Company and the  consummation by it of
the transactions  contemplated  hereby have been duly and validly  authorized by
all necessary  corporate action,  and, except as contemplated by Section 3.1(e).
This  Agreement  has been duly  executed  and  delivered  by the  Company.  This
Agreement constitutes,  or when executed and delivered shall constitute, a valid
and  binding  obligation  of the  Company  enforceable  against  the  Company in
accordance  with its  terms,  except as such  enforceability  may be  limited by
applicable  bankruptcy,  insolvency,  reorganization,  moratorium,  liquidation,
conservatorship,   receivership  or  similar  laws  relating  to,  or  affecting
generally  the  enforcement  of  creditor's  rights  and  remedies  or by  other
equitable principles of general application.

     (c) Capitalization. The authorized capital stock of the Company and
the shares thereof  issued and  outstanding as of July 18, 2000 are set forth on
Schedule 3.1(c) attached hereto.  All of the outstanding shares of the Company's
Common  Stock  have been duly and  validly  authorized,  and are fully  paid and
non-assessable.  Except as set forth in this  Agreement  or on  Schedule  3.1(c)
attached hereto,  as of July 18, 2000, no shares of Common Stock are entitled to
preemptive rights or registration  rights and there are no outstanding  options,
warrants,  scrip,  rights to subscribe to, call or  commitments of any character
whatsoever  relating to, or securities or rights convertible into, any shares of
capital  stock  of the  Company.  Furthermore,  except  as  set  forth  in  this
Agreement,  as  of  the  date  hereof,  there  are  no  contracts,  commitments,
understandings,  or  arrangements by which the Company is or may become bound to
issue  additional  shares  of the  capital  stock  of the  Company  or  options,
securities  or rights  convertible  into shares of capital stock of the Company.
Except for customary transfer restrictions  contained in agreements entered into
by the Company in order to sell  restricted  securities,  as of the date hereof,
the Company is not a party to any agreement granting  registration rights to any
person with respect to any of its equity or debt securities.  The Company is not
a party to, and it has no knowledge of, any agreement  restricting the voting or
transfer of any shares of the capital  stock of the Company.  The offer and sale
of all capital stock,  convertible securities,  rights,  warrants, or options of
the Company issued prior to the Closing complied with all applicable federal and
state  securities  laws, and no stockholder has a right of rescission or damages
with respect thereto which would have a Material Adverse Effect. The Company has
furnished or made  available  to the  Purchaser  true and correct  copies of the
Company's  Certificate  of  Incorporation  as in effect on the date  hereof (the
"Certificate"),  and the  Company's  Bylaws as in effect on the date hereof (the
"Bylaws").

     (d)  Issuance  of  Shares.  The sale and  issuance  of the Shares in
accordance with the terms and on the basis of the representations and warranties
set forth in this Agreement will be exempt from the registration requirements of
the  Securities  Act.  The Shares  have been duly  authorized  by all  necessary
corporate  action  and,  when paid for or issued  in  accordance  with the terms
hereof,  the Shares  shall be validly  issued  and  outstanding,  fully paid and
non-assessable,  and the Purchaser shall be entitled to all rights accorded to a
holder  of  Common  Stock.


                                      -5-
<PAGE>


     (e) No Conflicts. The execution, delivery and performance of this Agreement
by the  Company  and  the  consummation  by  the  Company  of  the  transactions
contemplated  therein  do  not  (i)  violate  any  provision  of  the  Company's
Certificate or Bylaws,  (ii) conflict with, or constitute a default (or an event
which with  notice or lapse of time or both would  become a default)  under,  or
give  to  others  any  rights  of   termination,   amendment,   acceleration  or
cancellation of, any material  agreement,  mortgage,  deed of trust,  indenture,
note,  bond,  license,  lease  agreement,  instrument or obligation to which the
Company is a party,  (iii) create or impose a lien, charge or encumbrance on any
property of the  Company  under any  agreement  or any  commitment  to which the
Company  is a party  or by which  the  Company  is bound or by which  any of its
respective  properties or assets are bound, or (iv) result in a violation of any
federal,  state, local or foreign statute, rule, regulation,  order, judgment or
decree (including federal and state securities laws and regulations)  applicable
to the Company or any of its  subsidiaries  or by which any property or asset of
the Company or any of its  subsidiaries  are bound or affected,  except,  in all
cases, for such conflicts,  defaults,  terminations,  amendments,  acceleration,
cancellations  and  violations as would not,  individually  or in the aggregate,
have a Material Adverse Effect. The Company is not required under 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  Shares in  accordance  with the terms  hereof
(other than any filings which may be required to be made by the Company with the
Commission, or Nasdaq subsequent to the Closing, and, any registration statement
which  may  be  filed  pursuant  hereto);  provided  that,  for  purpose  of the
representation  made in this sentence,  the Company is assuming and relying upon
the accuracy of the relevant  representations  and  agreements  of the Purchaser
herein.

     (f) Commission Documents,  Financial Statements.  The Company has timely
filed all reports,  schedules, forms, statements and other documents required to
be filed by it with the Securities and Exchange  Commission  (the  "Commission")
pursuant to the reporting  requirements of the Exchange Act,  including material
filed  pursuant  to  Section  13(a)  or 15(d)  of the  Exchange  Act (all of the
foregoing including filings  incorporated by reference therein being referred to
herein  as the  "Commission  Documents").  The  Company  has  delivered  or made
available to the Purchaser true and complete copies of the Commission  Documents
filed with the Commission  since June 1, 2000 and prior to the Closing Date. The
Company has not provided to the Purchaser any  information  which,  according to
applicable law, rule or regulation,  should have been disclosed  publicly by the
Company  but which has not been so  disclosed,  other  than with  respect to the
transactions  contemplated by this Agreement. The Form 10-KSB for the year ended
December 31, 1999 complied in all material respects with the requirements of the
Exchange  Act  and the  rules  and  regulations  of the  Commission  promulgated
thereunder  and  other  federal,  state and local  laws,  rules and  regulations
applicable  to such  document,  and,  as of its date,  such Form  10-KSB 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 Commission
Documents  complied  as  to  form  in  all  material  respects  with  applicable
accounting   requirements  and  the  published  rules  and  regulations  of  the
Commission or other applicable rules and regulations with respect thereto.  Such
financial  statements have been prepared in accordance  with generally  accepted
accounting  principles ("GAAP") 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  may  not  include   footnotes  or  may  be  condensed  or  summary
statements),  and fairly present in all material respects the financial position
of the Company and its  subsidiaries  as of 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 year-end audit adjustments).


                                      -6-

<PAGE>


     (g)  Subsidiaries.  The Commission  Documents or Schedule  3.1(g)  attached
hereto set forth each  subsidiary of the Company as of the date hereof,  showing
the jurisdiction of its incorporation or organization and showing the percentage
of each person's  ownership of the outstanding  stock or other interests of such
subsidiary.  For the  purposes of this  Agreement,  "subsidiary"  shall mean any
corporation  or other entity of which at least a majority of the  securities  or
other  ownership   interest   having   ordinary  voting  power   (absolutely  or
contingently) for the election of directors or other persons  performing similar
functions are at the time owned directly or indirectly by the Company and/or any
of its other  subsidiaries.  Except as set forth in the Commission  Documents or
the Commission Filings, none of such subsidiaries is a "significant  subsidiary"
as defined in Regulation S-X.

     (h) No Material  Adverse  Change.  Since March 31,  2000,  the
Company has not  experienced  or suffered any Material  Adverse  Effect,  except
continued losses from operations.

     (i)  No  Undisclosed  Liabilities.  Neither  the  Company  nor  any  of its
subsidiaries  has  any  liabilities,  obligations,  claims  or  losses  (whether
liquidated or unliquidated,  secured or unsecured, absolute, accrued, contingent
or  otherwise)  that would be required to be disclosed on a balance sheet of the
Company or any subsidiary  (including the notes thereto) in conformity with GAAP
and are not disclosed in the Commission  Documents or Commission Filings,  other
than those incurred in the ordinary course of the Company's or its subsidiaries'
respective  businesses  since March 31, 2000 and which,  individually  or in the
aggregate, do not or would not have a Material Adverse Effect.

     (j) No Undisclosed  Events or  Circumstances.  No event or circumstance has
occurred or exists  with  respect to the  Company or its  subsidiaries  or their
respective businesses, properties, prospects, operations or financial condition,
which,  under applicable law, rule or regulation,  requires public disclosure or
announcement  by the  Company but which has not been so  publicly  announced  or
disclosed and which,  individually or in the aggregate, do not or would not have
a Material Adverse Effect. (k) Indebtedness. Except as set forth on Schedule 3.1

     (k), the  Commission  Documents or the  Commission  Filings set forth as of
March 31, 2000 all outstanding secured and unsecured Indebtedness of the Company
or any subsidiary,  or for which the Company or any subsidiary has  commitments.
For  the  purposes  of  this  Agreement,   "Indebtedness"  shall  mean  (a)  any
liabilities for borrowed money or amounts owed in excess of $100,000 (other than
trade accounts  payable  incurred in the ordinary  course of business),  (b) all
guaranties, endorsements and other contingent obligations in


                                      -7-

<PAGE>


respect  of  Indebtedness  of  others,  whether or not the same are or should be
reflected  in the  Company's  balance  sheet  (or  the  notes  thereto),  except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar  transactions  in the ordinary  course of business;  and (c) the present
value of any lease  payments in excess of $100,000 due under leases  required to
be capitalized in accordance  with GAAP.  Neither the Company nor any subsidiary
is in default with respect to any Indebtedness.

     (l) Title to Assets.  Each of the Company and the subsidiaries has good and
marketable  title to all of its  real and  personal  property  reflected  in the
Commission Documents,  free of any mortgages,  pledges, charges, liens, security
interests  or other  encumbrances.  All  leases of the  Company  and each of its
subsidiaries  are  valid and  subsisting  and in full  force  and  effect in all
material respects.

     (m) Actions  Pending.  There is no action,  suit,  claim,  investigation or
proceeding  pending or, to the knowledge of the Company,  threatened against the
Company or any subsidiary  which questions the validity of this Agreement or the
transactions  contemplated  hereby or any action  taken or to be taken  pursuant
hereto  or  thereto.  Except  as set forth in the  Commission  Documents  or the
Commission Filings, there is no action, suit, claim, investigation or proceeding
pending or, to the  knowledge of the Company,  threatened,  against or involving
the Company, any subsidiary or any of their respective  properties or assets and
which,  if adversely  determined,  is reasonably  likely to result in a Material
Adverse Effect.

     (n) Compliance  with Law. The business of the Company and the  subsidiaries
has been and is presently  being  conducted in  accordance  with all  applicable
federal,  state and local governmental laws, rules,  regulations and ordinances,
except as set forth in the  Commission  Documents or the  Commission  Filings or
such that do not cause a Material  Adverse  Effect.  The Company and each of its
subsidiaries  have  all  franchises,   permits,  licenses,  consents  and  other
governmental  or  regulatory  authorizations  and  approvals  necessary  for the
conduct  of  its  business  as  now  being  conducted  by it,  except  for  such
franchises,  permits,  licenses,  consents and other  governmental or regulatory
authorizations and approvals,  the failure to possess which,  individually or in
the  aggregate,  could not  reasonably  be expected  to have a Material  Adverse
Effect.

     (o)  Certain  Fees.  No  brokers,  finders or  financial  advisory  fees or
commissions will be payable by the Company or any subsidiary with respect to the
transactions contemplated by this Agreement.

     (p)  Disclosure.  Neither this  Agreement or the  Schedules  hereto nor any
other documents, certificates or instruments furnished to the Purchaser by or on
behalf of the Company or any  subsidiary  in  connection  with the  transactions
contemplated by this Agreement  contain any untrue  statement of a material fact
or omit to state a material fact necessary in order to make the statements  made
herein or therein,  in the light of the circumstances under which they were made
herein or therein, not misleading.

     (q) Operation of Business.  The Company or one of the subsidiaries  owns or
possesses all patents, trademarks,  domain names (whether or not registered) and
any patentable improvements or

                                      -8-

<PAGE>

copyrightable  derivative  works  thereof,  websites and  intellectual  property
rights relating thereto,  service marks, trade names,  copyrights,  licenses and
authorizations  as set  forth  in the  Commission  Documents  or the  Commission
Filings and all rights with respect to the  foregoing,  which are  necessary for
the conduct of its  business as now  conducted  without  any  conflict  with the
rights of others,  except to the extent set forth in the Commission Documents or
that a Material  Adverse  Effect could not reasonably be expected to result from
such  conflict.

     (r) Environmental Compliance. The Company and each of its subsidiaries have
obtained  all  material  approvals,   authorization,   certificates,   consents,
licenses, orders and permits or other similar authorizations of all governmental
authorities, or from any other person, that are required under any Environmental
Laws.  "Environmental  Laws"  shall mean all  applicable  laws  relating  to the
protection of the environment  including,  without limitation,  all requirements
pertaining to reporting, licensing,  permitting,  controlling,  investigating or
remediating emissions,  discharges, releases or threatened releases of hazardous
substances, chemical substances,  pollutants,  contaminants or toxic substances,
materials or wastes,  whether solid,  liquid or gaseous in nature, into the air,
surface water, groundwater or land, or relating to the manufacture,  processing,
distribution,  use,  treatment,  storage,  disposal,  transport  or  handling of
hazardous  substances,  chemical substances,  pollutants,  contaminants or toxic
substances,  material  or wastes,  whether  solid,  liquid or gaseous in nature.
Except for such instances as would not  individually  or in the aggregate have a
Material  Adverse  Effect,  there  are no past or  present  events,  conditions,
circumstances,  incidents,  actions  or  omissions  relating  to or in  any  way
affecting  the Company or its  subsidiaries  that  violate or could  violate any
Environmental Law after the Closing or that could give rise to any environmental
liability,  or  otherwise  form the basis of any claim,  action,  demand,  suit,
proceeding,  hearing, study or investigation (i) under any Environmental Law, or
(ii) based on or  related to the  manufacture,  processing,  distribution,  use,
treatment,  storage (including without  limitation  underground  storage tanks),
disposal,  transport  or  handling,  or  the  emission,  discharge,  release  or
threatened release of any hazardous substance.

     (s) Material Agreements.  Neither the Company nor any subsidiary is a party
to any written or oral contract, instrument, agreement, commitment,  obligation,
plan or  arrangement,  a copy of which  would be  required  to be filed with the
Commission  as  an  exhibit  to a  Commission  Filing  (collectively,  "Material
Agreements") if the Company or any subsidiary were registering  securities under
the Securities Act immediately prior to the effectiveness of this Agreement. The
Company and each of its subsidiaries has in all material respects  performed all
the  obligations  required to be performed  by them to date under the  foregoing
agreements, have received no notice of default and, are not in default under any
Material Agreement now in effect.

     (t) Transactions with Affiliates.  Except as set forth in the Commission
Documents or the Commission  Filings,  there are no loans,  leases,  agreements,
contracts,  royalty  agreements,  management  contracts or arrangements or other
continuing   transactions  exceeding  $100,000  between  (a)  the  Company,  any
subsidiary or any of their respective customers (excluding agreements related to
the purchase or lease of the  Company's  products) or suppliers on the one hand,
and (b) on the other hand, any officer, employee,  consultant or director of the
Company, or any of its subsidiaries,  or any person who would be covered by Item
404(a) of Regulation S-K or any  corporation or other entity  controlled by such
officer, employee,  consultant,  director or person.



                                      -9-
<PAGE>

     (u)  Securities  Act of 1933.  The  Company has  complied  in all  material
respects with all  applicable  federal and state  securities  laws in connection
with the offer,  issuance and sale of the Shares hereunder.  The Company has not
distributed  and,  prior  to the  completion  of the sale of the  Shares  to the
Purchaser,  will not  distribute  any offering  material in connection  with the
offer  and  sale of the  Shares  other  than  the  Registration  Statement,  the
Prospectus or other materials, if any, permitted by
the Securities Act.

     (v) No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person acting on its or their behalf has,  directly or indirectly,  made
any  offers or sales of any  security  or  solicited  any offers or sales of any
security or solicited  any offers to buy any  security,  other than  pursuant to
this  Agreement,  under  circumstances  that would require  registration  of the
Common  Stock  under the  Securities  Act.  Neither  the  Company nor any of its
affiliates nor any person acting on its behalf has conducted or will conduct any
general solicitation (as that term is defined in Rule 502(c) of Regulation D) or
general  advertising  with respect to any of the Shares,  the Warrants or any of
the shares of Common Stock issuable pursuant to exercise of the Warrants.

     (w)Employees. As of the date hereof, neither the Company nor any subsidiary
has any collective  bargaining  arrangements  or agreements  covering any of its
employees,  except as set forth in the  Commission  Documents or the  Commission
Filings.  Each  of the  Company  and its  subsidiaries  requires  its  officers,
employees and certain consultants to enter into agreements regarding proprietary
information, noncompetition, nonsolicitation,  confidentiality, or other similar
agreements containing restrictive covenants.  As of the date hereof, no officer,
consultant or key employee of the Company or any subsidiary  whose  termination,
either individually or in the aggregate,  could reasonably be expected to have a
Material Adverse Effect, has terminated or, to the knowledge of the Company, has
any present  intention of terminating  his or her employment or engagement  with
the Company or any subsidiary.

     (x) Use of Proceeds.  The proceeds from the sale of the Shares will be used
by the Company and its subsidiaries for the purposes set forth in the Prospectus
under "Use of Proceeds."

     (y) Public Utility Holding  Company Act and Investment  Company Act Status.
The  Company is not a "holding  company" or a "public  utility  company" as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.
The Company is not, and as a result of and immediately upon Closing will not be,
an "investment  company" or a company  "controlled" by an "investment  company,"
within the meaning of the Investment Company Act of 1940, as amended.

     (z) ERISA.  No liability to the Pension  Benefit  Guaranty  Corporation has
been incurred with respect to any Plan by the Company or any of its subsidiaries
which is or would have a Material Adverse Effect.  The execution and delivery of
this  Agreement  and the  issue  and sale of the  Shares  will not  involve  any
transaction  which is subject to the  prohibitions of Section 406 of ERISA or in
connection with which a tax could be

                                      -10-

<PAGE>

imposed  pursuant  to Section  4975 of the  Internal  Revenue  Code of 1986,  as
amended,  provided that, if any of the  Purchaser,  or any person or entity that
owns a beneficial  interest in any of the  Purchaser,  is an  "employee  pension
benefit  plan"  (within  the meaning of Section  3(2) of ERISA) with  respect to
which the Company is a "party in interest"  (within the meaning of Section 3(14)
of ERISA),  the  requirements  of  Sections  407(d)(5)  and 408(e) of ERISA,  if
applicable,  are met. As used in this Section 3.1(y), the term "Plan" shall mean
an "employee  pension  benefit plan" (as defined in Section 3 of ERISA) which is
or has been  established or maintained,  or to which  contributions  are or have
been made, by the Company or any subsidiary or by any trade or business, whether
or not  incorporated,  which,  together with the Company or any  subsidiary,  is
under common  control,  as described in Section 414(b) or (c) of the Code.

     (aa)
Acknowledgment   Regarding   Purchaser's   Purchase   of  Shares.   The  Company
acknowledges  and agrees that the  Purchaser is acting solely in the capacity of
arm's length  purchaser  with  respect to this  Agreement  and the  transactions
contemplated  hereunder.  The Company further acknowledges that the Purchaser is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity)  with  respect to this  Agreement  and the  transactions  contemplated
hereunder and any advice given by the Purchaser or any of its representatives or
agents in  connection  with this  Agreement  and the  transactions  contemplated
hereunder  is merely  incidental  to the  Purchaser's  purchase  of the  Shares.

     Section 3.2 Representations, Warranties and Covenants of the Purchaser. The
Purchaser hereby makes the following  representations,  warranties and covenants
to the Company:

     (a) Organization and Standing of the Purchaser.  The Purchaser is a limited
liability  company duly organized,  validly  existing and in good standing under
the laws of the Commonwealth of The Bahamas.

     (b)  Authorization  and Power.  The Purchaser  has the requisite  corporate
power and authority to enter into and perform this Agreement and to purchase the
Shares  in  accordance  with the  terms  hereof.  The  execution,  delivery  and
performance  of this  Agreement by Purchaser 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 Purchaser,  its
Board of Directors or  stockholders  is required.  This  Agreement has been duly
executed and delivered by the Purchaser.  This Agreement constitutes a valid and
binding  obligation  of the  Purchaser  enforceable  against  the  Purchaser  in
accordance  with its  terms,  except as such  enforceability  may be  limited by
applicable  bankruptcy,  insolvency,  reorganization,  moratorium,  liquidation,
conservatorship,  receivership,  or  similar  laws  relating  to,  or  affecting
generally the enforcement of creditor's rights and remedies or by other
equitable principles of general application.

     (c)
No Conflicts. The execution,  delivery and performance of this Agreement and the
consummation  by the  Purchaser  of the  transactions  contemplated  hereby  and
thereby or relating hereto do not and will not (i) result in a violation of such



                                      -11-

<PAGE>

Purchaser's  charter  documents or bylaws or (ii) conflict with, or constitute a
default (or an event  which with notice or lapse of time or both would  become a
default)  under,  or  give to  others  any  rights  of  termination,  amendment,
acceleration or cancellation of any material agreement, mortgage, deed of trust,
indenture,  note, bond,  license,  lease agreement,  instrument or obligation to
which the  Purchaser  is a party,  (iii)  create or impose  any lien,  charge or
encumbrance  on any  property  of  the  Purchaser  under  any  agreement  or any
commitment to which the Purchaser is party or by which the Purchaser is on or by
which any of its  respective  properties or assets are bound or (iv) result in a
violation of any law, rule or  regulation,  or any order,  judgment or decree of
any court or governmental  agency applicable to the Purchaser or its properties,
except for such conflicts, defaults and violations as would not, individually or
in the  aggregate,  prohibit  or  otherwise  interfere  with the  ability of the
Purchaser to enter into and perform its obligations  under this Agreement in any
material  respect.  The  Purchaser  is  not  required  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 to purchase the Shares in accordance  with
the terms hereof,  provided that for purposes of the representation made in this
sentence,  the  Purchaser  is  assuming  and  relying  upon the  accuracy of the
relevant  representations and agreements of the Company herein.

     (d)  Information.  The  Purchaser  and  its  advisors,  if any,  have  been
furnished with all materials  relating to the business,  finances and operations
of the Company and materials  relating to the offer and sale of the Shares which
have been  requested by the Purchaser.  The Purchaser and its advisors,  if any,
have  been  afforded  the  opportunity  to ask  questions  of the  Company.  The
Purchaser has sought such accounting,  legal and tax advice as it has considered
necessary  to  make  an  informed   investment  decision  with  respect  to  its
acquisition of the Shares.  Purchaser  understands that it (and not the Company)
shall be responsible for its own tax  liabilities  that may arise as a result of
this investment or the transactions contemplated by this Agreement.

     (e)  Acquisition  for  Investment.  The Purchaser is purchasing  the Shares
solely for its own account for the purpose of investment  and not with a view to
or for sale in  connection  with a  distribution.  The  Purchaser has no present
intention to sell the Shares, nor a present arrangement  (whether or not legally
binding)  to effect any  distribution  of the Shares to or through any person or
entity;  provided,  however,  that by making  the  representations  herein,  the
Purchaser  does not  agree to hold the  Common  Stock for any  minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance  with federal and state  securities  laws applicable to such
 disposition.

     (f) Sophisticated  Investor.  The Purchaser 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 the Purchaser has such  experience
in business and financial  matters that it is capable of  evaluating  the merits
and risks of an investment in Common Stock. The Purchaser  acknowledges  that an
investment  in the Common  Stock is  speculative  and  involves a high degree of
risk.

     (h) General.  The Purchaser  understands  that the Shares are being offered
and  sold  in  reliance  on a  transactional  exemption  from  the  registration
requirement of federal and state securities laws and the Company is relying upon
the  truth  and  accuracy  of  the  representations,   warranties,   agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine  the  applicability  of such  exemptions  and the  suitability  of the
Purchaser to acquire the Shares.

                                      -12-

<PAGE>


                                    ARTICLE IV

                                    Covenants

         The Company  covenants with the Purchaser as follows,  which  covenants
are for the benefit of the  Purchaser  and its  permitted  assignees (as defined
herein).

     Section 4.1 Securities. The Company shall notify the Commission and the
OTC Bulletin Board or an Alternate  Market,  if applicable,  in accordance  with
their rules and regulations, of the transactions contemplated by this Agreement,
and shall take all other  necessary  actions and  proceedings as may be required
and permitted by applicable  law, rule and  regulation,  for the legal and valid
issuance  of the  Shares to the  Purchaser  and the  resale of the Shares by the
Purchaser.

     Section 4.2  Registration  and  Listing.  The Company  will take all
action necessary to cause its Common Stock to be registered under Sections 12(b)
or 12(g) of the Exchange Act, will 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  Securities  Act or the rules
promulgated  thereunder)  to  terminate  or  suspend  such  registration  or  to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein.  The Company will take all action
necessary to continue the listing or trading of its Common Stock and the listing
of the Shares  purchased  by  Purchaser  hereunder on the OTC BB or an Alternate
Market,  if  applicable,  and will  comply in all  respects  with the  Company's
reporting,  filing and other obligations under the bylaws or rules of the OTC BB
or an Alternate Market.

     Section 4.3  Registration  Statement.

     (a) On or before  August 7, 2000 (the  "Filing  Date"),  the Company  shall
cause to be filed with the Commission a Registration  Statement on Form SB-2 (or
any other comparable form) to register for resale the Shares (pursuant to a Draw
Down or the exercise of any Warrant) to be purchased by the  Purchaser  pursuant
to this Agreement. The Company shall use its reasonable best efforts to take all
steps necessary to cause the Registration  Statement to be declared effective by
November 6, 2000, but in no event later than 120 days after the Filing Date.

     (b) Before the Purchaser shall be obligated to accept any Draw
Down request from the Company, the Company shall have caused a sufficient number
of shares of Common Stock to be  registered  to cover the Shares to be issued in
connection  with such Draw Down request  (including any Warrants to be exercised
in connection therewith).

                                      -13-

<PAGE>


     (c) The Company  shall file a  prospectus  supplement  to its then  current
Registration  Statement on the first business day immediately  following the end
of each  Settlement  Period,  and will  deliver a  prospectus  and a  prospectus
supplement to the Purchaser on the corresponding Settlement Date.

     Section 4.4 Compliance with Laws. The Company shall comply,  and cause each
subsidiary to comply,  with all applicable laws, rules,  regulations and orders,
noncompliance with which could reasonably be expected to have a Material Adverse
Effect.

     Section 4.5 Keeping of Records and Books of Account.  The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which  complete  entries  will be  made in  accordance  with  GAAP  consistently
applied,   reflecting  all  financial   transactions  of  the  Company  and  its
subsidiaries,  and in which,  for each  fiscal  year,  all proper  reserves  for
depreciation, depletion, obsolescence,  amortization, taxes, bad debts and other
purposes in connection  with its business  shall be made.

     Section 4.6 Reporting Requirements. Upon written request, the Company shall
furnish  the  following  to the  Purchaser  so long as such  Purchaser  shall be
obligated hereunder to purchase Shares:

     (a) Quarterly  Reports filed with the Commission on Form 10-QSB as soon
as available, and in any event within 45 days after the end of each of the first
three fiscal  quarters of the  Company;  and

     (b) Annual  Reports  filed with the  Commission  on Form  10-KSB as soon as
available,  and in any event within 90 days after the end of each fiscal year of
the Company.

     Section  4.7  Other  Agreements.  The  Company  may  enter  into any  other
financing  agreement  during a Draw Down Pricing Period (an "Other  Financing");
provided,  however, that such financing shall not be for securities  convertible
or  exchangeable  into  Common  Stock  at a  future  market  price or at a price
determined at a discount to market or contain any repricing or reset  provisions
based on a future market price.  If the Company enters into an Other  Financing,
the Purchaser shall have the option (the "Purchase Option"),  which option shall
be exercised  within five (5) calendar days of the date the Purchaser gives such
consent,  to (i) purchase up to the same number of shares of Common Stock issued
or to be  issued in the Other  Financing  at the price and on such  terms of the
Other Financing,  or (ii) elect not to purchase any Shares during such Draw Down
Pricing  Period.  If the  Purchaser  does not exercise  its  Purchase  Option in
writing before 5 p.m.,  eastern time, on such fifth (5th) calendar day following
the Purchaser's  consent to the applicable  Other  Financing,  the Company shall
have the right to close such Other Financing on the scheduled  closing date with
a third party;  provided that all of the financial  terms and conditions of such
closing are the same as those  provided to the Purchaser  prior to the Purchaser
giving its consent to such Other Financing.

     Section  4.8  Non-Public  Information.  Neither  the Company nor any of its
directors, officers or agents shall disclose any material non-public information
about the Company to the Purchaser.

                                      -14-

<PAGE>

     Section 4.9 No Stop Orders.  The Company will advise the Purchaser promptly
and, if requested by the Purchaser,  will confirm such advice in writing: (i) of
its receipt of notice of any request by the  Commission  for  amendment  of or a
supplement to the  Registration  Statement,  any  Prospectus  or for  additional
information;  (ii) of its receipt of notice of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration  Statement or of
the  suspension  of  qualification  of the  Shares for  offering  or sale in any
jurisdiction or the initiation of any proceeding for such purpose;  and (iii) of
its becoming aware of the happening of any event, which makes any statement of a
material  fact made in the  Registration  Statement or the  Prospectus  (as then
amended or supplemented) untrue or which requires the making of any additions to
or changes in the  Registration  Statement or the Prospectus (as then amended or
supplemented)  in order to state a material fact required by the  Securities Act
or the regulations thereunder to be stated therein or necessary in order to make
the  statements  therein  not  misleading,  or of  the  necessity  to  amend  or
supplement the Prospectus (as then amended or  supplemented)  to comply with the
Securities Act or any other law. If at any time the  Commission  shall issue any
stop order  suspending the  effectiveness  of the  Registration  Statement,  the
Company will make  commercially  reasonable  efforts to obtain the withdrawal of
such order at the earliest possible time.

     Section 4.10 Amendments to the Registration Statement. The Company will not
(i) file any  amendment to the  Registration  Statement or make any amendment or
supplement to the Prospectus of which the Purchaser  shall not  previously  have
been advised or to which the Purchaser  shall  reasonably  object after being so
advised  or (ii) so long  as,  in the  reasonable  opinion  of  counsel  for the
Purchaser,  a Prospectus is required to be delivered in connection with sales by
any Purchaser or dealer, file any information,  documents or reports pursuant to
the Exchange Act without  delivering  a copy of such  information,  documents or
reports to the Purchaser promptly following such filing.

     Section 4.11 Prospectus Delivery. Prior to any Settlement Date, the Company
will deliver to the Purchaser,  without charge, in such quantities as reasonably
requested by the Purchaser, copies of each form of Prospectus. As soon after the
Registration  Statement  has  been  declared  effective  by the  Commission  and
thereafter  from time to time for such  period as in the  opinion of counsel for
the Purchaser a prospectus is required by the  Securities Act to be delivered in
connection with sales by the Purchaser,  the Company will expeditiously  deliver
to the Purchaser,  without charge,  as many copies of the Prospectus (and of any
amendment or supplement  thereto) as the Purchaser may reasonably  request.  The
Company  consents  to the  use of  the  Prospectus  (and  of  any  amendment  or
supplement  thereto) in accordance with the provisions of the Securities Act and
with the  securities or Blue Sky laws of the  jurisdictions  in which the Shares
may be sold by the  Purchaser,  in connection  with the offering and sale of the
Shares and for such period of time  thereafter as the  Prospectus is required by
the  Securities Act to be delivered in connection  with sales of the Shares.  If
during such  period of time any event  shall  occur that in the  judgment of the
Company or in the  opinion of counsel  for the  Purchaser  is required to be set
forth in the Prospectus (as then amended or supplemented) or should be set forth
therein  in  order  to  make  the  statements  therein,  in  the  light  of  the
circumstances under which they were made, not misleading, or if it

                                      -15-

<PAGE>


is necessary to supplement or amend the Prospectus to comply with the Securities
Act or any other law, the Company  will  forthwith  prepare and,  subject to the
provisions  of Section  4.10  above,  file with the  Commission  an  appropriate
supplement or amendment thereto, and will expeditiously furnish to the Purchaser
a  reasonable  number of copies  thereof.  The Company  shall file a  prospectus
supplement  to its current  Registration  Statement  on the first  business  day
immediately  following the end of each Settlement  Period, and the Company shall
deliver to the Purchaser an appropriate  Prospectus and prospectus supplement on
each Settlement  Date.

     Section 4.12 Legends. The certificates evidencing the Shares and the shares
of Common Stock issuable upon exercise of the Warrants shall be free of legends,
except as provided for in Article VII.

                                   ARTICLE V

                      Conditions to Closing and Draw Downs

Section 5.1 Conditions  Precedent to the Obligation of the Company to Close this
Agreement.  The obligation hereunder of the Company to enter into this Agreement
is subject to the satisfaction or waiver,  at or before the Closing,  of each of
the  conditions  set forth below.  These  conditions  are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion.

     (a)No Injunction. No statute,  regulation,  executive order, decree, ruling
or injunction shall have been enacted,  entered,  promulgated or endorsed by any
court or governmental  authority of competent  jurisdiction  which prohibits the
consummation of any of the transactions contemplated by this Agreement.

     (d)  No  Proceedings  or  Litigation.   No  action,   suit  or
proceeding  before any arbitrator or any governmental  authority shall have been
commenced,  and no investigation  by any governmental  authority shall have been
threatened,  against  the  Company or any  subsidiary,  or any of the  officers,
directors or  affiliates of the Company or any  subsidiary  seeking to restrain,
prevent or change the  transactions  contemplated by this Agreement,  or seeking
damages in connection with such transactions.

     Section 5.2  Conditions  Precedent to the  Obligation  of the  Purchaser to
Close this  Agreement.  The obligation  hereunder of the Purchaser to enter this
Agreement is subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below. These conditions are for the Purchaser's
sole  benefit  and may be  waived  by the  Purchaser  at any  time  in its  sole
discretion.

     (a) No Injunction.  No statute, rule, regulation,  executive order, decree,
ruling or injunction shall have been enacted,  entered,  promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.

                                       16
<PAGE>

     (b) No Proceedings or Litigation.  No action, suit or proceeding before any
arbitrator  or any  governmental  authority  shall have been  commenced,  and no
investigation by any governmental authority shall have been threatened,  against
the Company or any subsidiary,  or any of the officers,  directors or affiliates
of the  Company or any  subsidiary  seeking to  restrain,  prevent or change the
transactions  contemplated by this  Agreement,  or seeking damages in connection
with such transactions.

     (c)  Opinion of Counsel,  etc. At the  Closing,  the  Purchaser  shall have
received an opinion of counsel to the Company, dated the date of Closing, in the
form of  Exhibit A hereto,  and such other  certificates  and  documents  as the
Purchaser or its counsel shall reasonably require incident to the Closing.

     Section 5.3  Conditions  Precedent to the  Obligation  of the  Purchaser to
Accept a Draw Down and  Purchase  the Shares.  The  obligation  hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the  satisfaction or waiver,  at or before the date of each Draw Down
request (the "Draw Down Exercise  Date"),  of each of the  conditions  set forth
below.  The conditions are for the Purchaser's sole benefit and may be waived by
the Purchaser at any time in its sole discretion.

     (a) Accuracy of the Company's  Representations and Warranties.  Each of the
representations  and  warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Draw Down Exercise Date
as though made at that time except for representations and warranties that speak
as of a particular date.

     (b)  Effective   Registration   Statement.   The   Registration   Statement
registering  the Shares shall have been  declared  effective  by the  Commission
prior to the initial Draw Down Exercise  Date, and such  Registration  Statement
shall  remain  effective  on each  Settlement  Date,  and  shall be  amended  or
supplemented,  as required,  to disclose the sale of the Shares at least one (1)
trading day prior to each Settlement  Date, and the Company shall have delivered
to the Purchaser an appropriate Prospectus on each Settlement Date.

     (c) No  Suspension.  Trading in the  Company's  Common Stock shall not have
been  suspended by the  Commission or the OTC BB or an Alternate  Market (except
for any  suspension  of trading of limited  duration  agreed to by the  Company,
which suspension  shall be terminated prior to each Draw Down request),  and, at
any time prior to such request,  trading in securities  generally as reported on
the OTC BB or an Alternate  Market shall not have been suspended or limited,  or
minimum prices shall not have been  established  on securities  whose trades are
reported by the American Stock Exchange, or on the New York Stock Exchange,  nor
shall a banking moratorium have been declared either by the United States or New
York State  authorities,  nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international  calamity or crisis
of such  magnitude  in its  effect  on, or any  material  adverse  change in any
financial market which, in each case, in the judgment of the Purchaser, makes it
impracticable or inadvisable to purchase the Shares.  The Common Stock shall not
have been delisted from the OTC Bulletin Board or an Alternate Market.

                                       17
<PAGE>

     (d) Performance by the Company. The Company shall have performed, satisfied
and  complied  in all  material  respects  with all  covenants,  agreements  and
conditions  required by this  Agreement to be  performed,  satisfied or complied
with by the Company at or prior to the  Closing.  The Company  shall have issued
transfer agent  instructions to its transfer agent,  and an original copy of the
transfer  agent  instructions  shall have been signed by the  transfer  agent as
acknowledged and agreed.

     (e) No Injunction.  No statute, rule, regulation,  executive order, decree,
ruling or injunction shall have been enacted,  entered,  promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.

     (f) No Proceedings or Litigation.  No action, suit or proceeding before any
arbitrator  or any  governmental  authority  shall have been  commenced,  and no
investigation by any governmental authority shall have been threatened,  against
the Company or any subsidiary,  or any of the officers,  directors or affiliates
of the  Company or any  subsidiary  seeking to  restrain,  prevent or change the
transactions  contemplated by this  Agreement,  or seeking damages in connection
with such transactions.

     (g) Material  Adverse  Effect;  Material  Change in Ownership.  No Material
Adverse Effect and no Material Change in Ownership shall have occurred.

     (h) Ten Percent  Limitation.  On each Settlement Date, the number of Shares
then to be purchased by the Purchaser shall not exceed the number of such shares
that,  when  aggregated  with all other shares of Common Stock then owned by the
Purchaser  beneficially  or deemed  beneficially  owned by the Purchaser,  would
result in the  Purchaser  owning more than 9.9% of all of such  Common  Stock as
would be outstanding on such  Settlement  Date, as determined in accordance with
Section 16 of the Exchange Act and the regulations promulgated  thereunder.  For
purposes of this  Section  5.3(h),  in the event that the amount of Common Stock
outstanding as determined in accordance  with Section 16 of the Exchange Act and
the regulations  promulgated  thereunder is greater on a Settlement Date than on
the date upon which the Draw Down Notice associated with such Settlement Date is
given,  the amount of Common Stock  outstanding  on such  Settlement  Date shall
govern for purposes of determining  whether the Purchaser,  when aggregating all
purchases of Common Stock made  pursuant to this  Agreement  would own more than
9.9% of the Common Stock following such Settlement Date.

     (i) No  Knowledge.  The Company  shall have no  knowledge of any event more
likely than not to have the effect of causing the  Registration  Statement to be
suspended or otherwise ineffective (which event is more likely than not to occur
within the 25 trading  days  following  the  trading  day on which the Draw Down
Notice is deemed delivered.)

     (j) Other.  On each  Settlement  Date, the Purchaser  shall have received a
certificate  in  substantially  the form and  substance  of  Exhibit  B  hereto,
executed  by an  executive  officer of the  Company  to the effect  that all the
conditions to such  Settlement  Date shall have been satisfied as at the date of
each such certificate.

                                       18

<PAGE>

                                  ARTICLE VI

                                 Draw Down Terms

     Section 6.1 Draw Down Terms.  Subject to the satisfaction of the conditions
set forth in this Agreement, the parties agree as follows:

     (a) The Company, may, in its sole discretion, issue a Draw Down Notice with
respect to a draw down (a "Draw  Down") of  $100,000 if the  Threshold  Price is
equal to $1.00,  and an  additional  $50,000  for every  $0.50  increase  of the
Threshold  Price  above  $1.00 up to $3.50  for a maximum  Draw  Down  Amount of
$350,000,  which Draw Down Amount may be  increased  to a maximum of $612,500 in
accordance  with  clause  (l) of this  Section  6.1,  and  which  Draw  Down the
Purchaser  will be obligated  to accept.  Prior to issuing any Draw Down Notice,
the  Company  shall  have  Shares  representing  at least the Draw  Down  Amount
registered under the Registration Statement.

     (b) The  number of Shares  to be issued in  connection  with each Draw Down
shall be equal to the sum of the  quotients  (for each  trading  day of the Draw
Down Pricing Period for which the VWAP equals or exceeds the Threshold Price) of
(x) 1/20th (or such other  fraction based upon the agreed upon Draw Down Pricing
Period)  of the Draw Down  Amount  divided by (y) (A) the  applicable  Draw Down
Discount Percentage multiplied by (B) the VWAP for such day.

     (c) Only one Draw Down shall be allowed in each Draw Down  Pricing  Period.
Each Draw Down  Pricing  Period  shall  consist  of two (2)  periods of ten (10)
consecutive trading days (each, a "Settlement Period").

     (d) The number of Shares  purchased by the  Purchaser  with respect to each
Draw Down shall be  determined  on a daily basis  during each Draw Down  Pricing
Period  and  settled  on the  second  business  day  following  the  end of each
Settlement Period (the "Settlement Date").

     (e) There shall be a minimum of five (5) trading days (or such other number
of trading days mutually  agreed upon by the Purchaser and the Company)  between
Draw Downs.


     (f) There shall be a maximum of twelve  (12) Draw Downs  during the term of
this Agreement.

     (g) Each Draw Down will  expire on the last  trading  day of each Draw Down
Pricing Period.

     (h) For each trading day during the Draw Down Pricing  Period that the VWAP
is at or above the Threshold  Price,  1/20th (or such other  fraction based upon
the  agreed  upon Draw Down  Pricing  Period) of the Draw Down  Amount  shall be
allocated  to  purchase  Shares at a price  equal to the product of (x) the Draw
Down Discount Percentage multiplied by (y) the VWAP for such day. If the VWAP on
a given  trading day is less than the  Threshold  Price,  then the amount of the
Draw Down for the relevant  Draw Down Pricing  Period shall be reduced by 1/20th
(or such other fraction, based upon the agreed upon Draw Down


                                       19
<PAGE>


Pricing Period).  At no time shall the Threshold Price be set below $1.00 unless
agreed  upon by both  parties.  If  trading  in the  Company's  Common  Stock is
suspended  for any reason for more than three (3) hours in any trading  day, the
price of the Common  Stock shall be deemed to be below the  Threshold  Price for
that  trading day and the Draw Down Amount for the  relevant  Draw Down  Pricing
Period will be reduced by 1/20th.

     (i) The Company must inform the Purchaser via facsimile  transmission as to
the Draw Down  Amount the  Company  wishes to exercise  before  commencement  of
trading on the first trading day of the Draw Down Pricing Period (the "Draw Down
Notice"), substantially in the form attached hereto as Exhibit C. In addition to
the Draw  Down  Amount,  the  Company  shall set the  Threshold  Price and shall
designate the first  trading day of the Draw Down Pricing  Period with each Draw
Down Notice.

     (j) On each Settlement Date, the Company shall deliver the Shares purchased
by the Purchaser during the Settlement  Period to the Purchaser or its designees
via the Purchaser's  prime broker account through its Deposit  Withdrawal  Agent
Commission  system (DWAC),  and upon receipt of the Shares,  the Purchaser shall
cause payment  therefor to be made to the Company's  designated  account by wire
transfer of immediately available funds provided that the Shares are received by
the Purchaser no later than 1:00 p.m., eastern time, or next day available funds
if the Shares are received thereafter.

     (k) If on the  Settlement  Date, the Company fails to deliver the Shares to
be purchased by the Purchaser,  and such failure  continues for ten (10) trading
days,  the  Company  shall pay,  in cash or  restricted  shares of Common  Stock
(subject to the Company's  compliance with applicable  securities  laws), at the
option of the  Purchaser,  as  liquidated  damages and not as a penalty,  to the
Purchaser  an amount  equal to two percent  (2%) of the Draw Down Amount for the
initial thirty (30) days and each additional  thirty (30) day period  thereafter
until such  failure  has been cured,  which shall be pro rated for such  periods
less than thirty (30) days (the  "Periodic  Amount").  Cash  payments to be made
pursuant to this Section 6.1(k) shall be due and payable immediately upon demand
in  immediately  available  cash funds.  Certificates  evidencing the restricted
shares of Common Stock shall be delivered  immediately upon demand.  The parties
agree that the Periodic Amount  represents a reasonable  estimate on the part of
the parties, as of the date of this Agreement, of the amount of damages that may
be incurred by the  Purchaser if the Company  fails to deliver the Shares on the
Settlement  Date.  If the  Purchaser  elects to receive  shares of Common  Stock
instead of cash, the Purchaser shall have the right to demand  registration once
within twelve (12) months of the date of issuance of such shares of Common Stock
and piggyback  registration rights if the Company files a separate  registration
statement.

     (l)  Average  Volume  Option.  Upon  receipt  of a Draw  Down  Notice,  the
Purchaser,  in its sole discretion,  may increase the Draw Down Amount stated in
such Draw Down Notice by (i) 25% if the average  volume for the 10 trading  days
preceding  the date of the Draw Down Notice of the  Company's  Common Stock (the
"Average Volume") exceeds 200,000 shares per day; (ii) 50% if the Average Volume
exceeds  400,000 shares per day; and 75% if the Average  Volume exceeds  600,000
shares per day.


                                       20
<PAGE>


     (m) Escrow. Prior to issuing a Draw Down Notice, the Company shall place in
escrow,  with an entity  designated by the Purchaser (the "Escrow Agent"),  such
number  of shares of Common  Stock as will  equal the  maximum  number of Shares
which the Purchaser  could  purchase  during the Draw Down Pricing  Period.  The
shares of Common  Stock  subject to such escrow  shall be released by the Escrow
Agent to the Purchaser only in the event the Company fails to deliver the Shares
on the relevant  Settlement  Date.  The  Purchaser's  obligation to purchase the
Shares on the Settlement  Date shall be contingent  upon the  fulfillment of the
Company  of the  escrow  requirements  contained  in this  Section  6.1(m).  The
Purchaser may, at its sole discretion,  waive the escrow requirements  contained
in this Section 6.1(m) at any time prior to the relevant Settlement Date.

                                   ARTICLE VII

                                     Legends

     Section 7.1 Legend.  Unless  otherwise  provided  below,  each  certificate
representing the Shares and the shares of Common Stock issuable upon exercise of
the Warrants shall be stamped or otherwise imprinted with a legend substantially
in the following form (the "Legend"):

          THESE   SECURITIES   REPRESENTED  BY  THIS   CERTIFICATE   (THE
          "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
          OF  1933,  AS  AMENDED  (THE  "SECURITIES  ACT")  OR ANY  STATE
          SECURITIES  LAWS AND MAY NOT BE SOLD,  TRANSFERRED OR OTHERWISE
          DISPOSED  OF  UNLESS   REGISTERED  UNDER  THAT  ACT  AND  UNDER
          APPLICABLE  STATE  SECURITIES  LAWS  OR  MAGNITUDE  INFORMATION
          SYSTEMS, INC. (THE "COMPANY") SHALL HAVE RECEIVED AN OPINION OF
          ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THAT ACT
          AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
          NOT REQUIRED.


         As soon as  practicable  after the execution and delivery  hereof,  the
Company shall issue to the transfer agent instructions in substantially the form
of Exhibit D hereto.  Such instructions shall be irrevocable by the Company from
and after the date  thereof or from and after the  issuance  thereof.  It is the
intent and purpose of such  instructions,  as provided  therein,  to require the
transfer agent to issue to the Purchaser, at the Purchaser's option, via DWAC or
in the form of  certificates  evidencing the Shares  incident to a Draw Down and
issued on a Settlement  Date,  free of the Legend,  without  consultation by the
transfer  agent with the  Company or its  counsel  and  without the need for any
further advice or instruction or  documentation to the Transfer Agent by or from
the Company or its counsel or the Purchaser; provided, that (a) the Registration
Statement  shall then be effective,  (b) the Purchaser  confirms to the transfer
agent and the  Company  that it has or  intends  to sell such  Shares to a third
party that is not an affiliate of the Purchaser or the Company and the Purchaser
agrees to redeliver  the  certificate  representing  such Shares to the transfer


                                       21
<PAGE>

agent to add the  Legend  in the  event  the  Shares  are not  sold,  and (c) if
reasonably  requested  by the  transfer  agent  or the  Company,  the  Purchaser
confirms to the transfer  agent and the Company that the  Purchaser has complied
with the prospectus  delivery  requirement under the Securities Act. At any time
after the date the  Registration  Statement has been  declared  effective by the
Commission,  upon surrender of one or more certificates  evidencing Common Stock
that bear the  Legend,  to the extent  accompanied  by a notice  requesting  the
issuance of new  certificates  free of the Legend to replace those  surrendered,
the transfer agent shall reissue such shares of common stock via DWAC or free of
Legend.  If the  transfer  agent fails to deliver  the Shares on the  Settlement
Date,  then the Company  shall pay  liquidated  damages to the  Purchaser in the
amount  of 2% of the  purchase  price  of the  Shares  to be  delivered  on such
Settlement Date.

     Section 7.2 No Other Legend or Stock Transfer Restrictions. No legend other
than the one  specified  in Section 7.1 has been or shall be placed on the share
certificates  representing  the Shares and the shares of Common  Stock  issuable
upon exercise of the Warrants and no instructions or "stop transfer  orders," so
called, "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 VII.

     Section  7.3  Purchaser's  Compliance.  Nothing in this  Article  VII shall
affect in any way the Purchaser's obligations under any agreement to comply with
all  applicable  securities  laws upon  resale of the  Shares  and the shares of
Common Stock issuable upon exercise of the Warrants.

                                  ARTICLE VIII

                                   Termination

     Section 8.1 Termination by Mutual Consent. The term of this Agreement shall
be  fifteen  (15)  months  from the date on which the  Commission  declares  the
Registration  Statement effective (the "Investment Period").  This Agreement may
be terminated at any time by mutual consent of the parties.

     Section 8.2 Other  Termination.  The Purchaser may terminate this Agreement
upon one (1) day's notice (v) if the Company  issues  convertible  debentures or
enters an equity  financing  facility  without  the  Purchaser's  prior  written
consent, or (w) if an event resulting in a Material Adverse Effect or a Material
Change of Control in Ownership has occurred,  or (x) the Registration  Statement
is not declared  effective  within 120 days  following  the Filing Date,  or (y)
there  shall  occur any stop order or  suspension  of the  effectiveness  of the
Registration  Statement  for an  aggregate  of five (5) trading  days during the
Investment  Period,  for any reason other than deferrals or suspension  during a
blackout period as a result of corporate developments  subsequent to the Closing
Date that would  require  such  Registration  Statement to be amended to reflect
such event in order to maintain its compliance with the disclosure  requirements
of the Securities  Act, or (z) the Company shall at any time fail to comply with
the requirements of Section 4.2, 4.3 or 4.4 hereof.

     Section  8.3 Effect of  Termination.  In the event of
termination  by the  Company or the  Purchaser,  written  notice  thereof  shall
forthwith be given to the other party and the transactions  contemplated by this
Agreement  shall be terminated  without  further action by either party. If this
Agreement is terminated as provided in Section 8.1 or 8.2 herein, this Agreement
shall  become  void and of no further  force and  effect,  except as provided in
Section 10.9. Nothing in this Section 8.3 shall be deemed to release the Company


                                       22
<PAGE>

or the Purchaser from any liability for any breach under this  Agreement,  or to
impair  the  rights  of  the  Company  and  the  Purchaser  to  compel  specific
performance by the other party of its obligations under this Agreement.

                                   ARTICLE IX

                                 Indemnification

     Section 9.1     General Indemnity.

     (a)  Indemnification  by the Company.  The Company will  indemnify and hold
harmless  the  Purchaser  and each person,  if any,  who controls the  Purchaser
within the meaning of Section 15 of the  Securities  Act or Section 20(a) of the
Exchange  Act from and against  any losses,  claims,  damages,  liabilities  and
expenses  (including  reasonable  costs of  defense  and  investigation  and all
reasonable  attorney's fees) to which the Purchaser and each person, if any, who
controls  the  Purchaser  may  become  subject,  under  the  Securities  Act  or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions  in  respect  thereof)  arise out of or are based  upon,  (i) any untrue
statement  or  alleged  untrue  statement  of  a  material  fact  contained,  or
incorporated  by  reference,  in the  Registration  Statement or the  Prospectus
relating  to the  shares  being  sold  to the  Purchaser,  or any  amendment  or
supplement  to it, or (ii) the  omission  or alleged  omission  to state in that
Registration  Statement  or  any  document  incorporated  by  reference  in  the
Registration  Statement,  a  material  fact  required  to be stated  therein  or
necessary  to make the  statements  therein not  misleading,  provided  that the
Company shall not be liable under this Section 9.1(a) to the extent that a court
of competent  jurisdiction  shall have  determined by a final judgment that such
loss, claim, damage, liability or action resulted directly from any such acts or
failures  to act,  undertaken  or omitted to be taken by the  Purchaser  or such
person through its bad faith or willful misconduct;  provided, however, that the
foregoing  indemnity shall not apply to any loss,  claim,  damage,  liability or
expense to the extent, but only to the extent,  arising out of or based upon any
untrue  statement or alleged  untrue  statement or omission or alleged  omission
made in reliance upon and in conformity  with written  information  furnished to
the Company by the Purchaser  expressly for use in the  Registration  Statement,
any  preliminary  prospectus or the  Prospectus  (or any amendment or supplement
thereto).
         The Company will  reimburse  the  Purchaser  and each such  controlling
person promptly upon demand for any legal or other costs or expenses  reasonably
incurred by the Purchaser or the controlling person in investigating,  defending
against,  or  preparing  to  defend  against  any such  claim,  action,  suit or
proceeding,  except that the Company will not be liable to the extent a claim or
action which results in a loss, claim,  damage,  liability or expense arises out
of, or is based upon, an untrue statement, alleged untrue statement, omission or
alleged  omission,  included in the Registration  Statement or any Prospectus in
reliance  upon, and in conformity  with,  written  information  furnished by the
Purchaser  to the  Company  for  inclusion  in  the  Registration  Statement  or
Prospectus.


                                       23
<PAGE>

     (b) Indemnification by the Purchaser.  The Purchaser will indemnify
and hold harmless the Company,  each of its  directors  and  officers,  and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities  Act or  Section  20(a) of the  Exchange  Act from  and  against  any
expenses  (including  reasonable  costs of  defense  and  investigation  and all
reasonable  attorneys  fees) to which the Company and any director or officer of
the  Company  and each  person,  if any,  who  controls  the  Company may become
subject, under the Securities Act or otherwise,  insofar as such losses, claims,
damages,  liabilities and expenses (or actions in respect  thereof) arise out of
or are based upon,  (i) any untrue  statement or alleged  untrue  statement of a
material  fact  contained  in any  Prospectus  or (ii) the  omission  or alleged
omission to state in the  Registration  Statement  or any  Prospectus 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,  the untrue  statement,
alleged  untrue  statement,  omission or alleged  omission  was made in reliance
upon, and in conformity with, written information  furnished by the Purchaser to
the Company for inclusion in the Registration  Statement or Prospectus,  and the
Purchaser  will  reimburse  the  Company  and each  such  director,  officer  or
controlling person promptly upon demand for any legal or other costs or expenses
reasonably  incurred  by the  Company  or the  other  person  in  investigating,
defending against,  or preparing to defend against any such claim,  action, suit
or proceeding.

     Section 9.2 Indemnification Procedures.  Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek  indemnification  under paragraph (a) or (b) of Section 9.1, the
person  will  notify  the  indemnifying   party  in  writing  of  the  claim  or
commencement  of the  action,  suit or  proceeding,  but  failure  to notify the
indemnifying  party will not relieve the indemnifying party from liability under
paragraph (a) or (b) of Section 9.1, except to the extent it has been materially
prejudiced  by the  failure  to give  notice.  The  indemnifying  party  will be
entitled to participate in the defense of any claim,  action, suit or proceeding
as to which  indemnification  is being  sought,  and if the  indemnifying  party
acknowledges  in writing the  obligation to indemnify the party against whom the
claim or action is brought, the indemnifying party may (but will not be required
to) assume the  defense  against  the claim,  action,  suit or  proceeding  with
counsel  satisfactory to it. After an indemnifying party notifies an indemnified
party  that the  indemnifying  party  wishes to assume  the  defense of a claim,
action,  suit or proceeding  the  indemnifying  party will not be liable for any
legal or other expenses incurred by the indemnified party in connection with the
defense  against the claim,  action,  suit or proceeding  except that if, in the
opinion of counsel to the  indemnifying  party,  one or more of the  indemnified
parties  should be separately  represented in connection  with a claim,  action,
suit or  proceeding  the  indemnifying  party will pay the  reasonable  fees and
expenses of one separate counsel for the indemnified  parties.  Each indemnified
party, as a condition to receiving  indemnification as provided in Paragraph (a)
or (b) or Section  9.1,  will  cooperate  in all  reasonable  respects  with the
indemnifying  party  in  the  defense  of  any  action  or  claim  as  to  which
indemnification  is  sought.  No  indemnifying  party  will  be  liable  for any
settlement  of any  action  effected  without  its  prior  written  consent.  No
indemnifying  party will,  without the prior written  consent of the indemnified
party,  effect any settlement of a pending or threatened  action with respect to
which an  indemnified  party is, or is informed that it may be, made a party and
for  which  it would be  entitled  to  indemnification,  unless  the  settlement
includes an  unconditional  release of the indemnified  party from all liability
and claims which are the subject matter of the pending or threatened action.

                                       24
<PAGE>


         If for any reason the indemnification provided for in this Agreement is
not available to, or is not sufficient to hold harmless, an indemnified party in
respect of any loss or liability  referred to in paragraph (a) or (b) of Section
9.1, each  indemnifying  party will,  in lieu of  indemnifying  the  indemnified
party,  contribute to the amount paid or payable by the  indemnified  party as a
result of the loss or liability,  (i) in the proportion  which is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and by the  indemnified  party on the other from the sale of stock  which is the
subject of the claim,  action,  suit or proceeding which resulted in the loss or
liability or (ii) if that allocation is not permitted by applicable law, in such
proportion as is  appropriate  to reflect not only the relative  benefits of the
sale of stock,  but also the relative  fault of the  indemnifying  party and the
indemnified  party with respect to the  statements  or  omissions  which are the
subject of the claim,  action,  suit or proceeding  that resulted in the loss or
liability, as well as any other relevant equitable considerations.

                                   ARTICLE X

                                  Miscellaneous

     Section  10.1 Fees and  Expenses.  Except as set forth in  Article  IX, the
Company  shall  pay  (i)  all  reasonable  fees  and  expenses  related  to  the
transactions  contemplated by this Agreement;  provided,  that the Company shall
pay, at the Closing,  all reasonable  attorneys fees and expenses  (exclusive of
disbursements and out-of-pocket  expenses and reasonably  itemized)  incurred by
the Purchaser up to $50,000 in  connection  with the  preparation,  negotiation,
execution and delivery of this Agreement,  (ii) all reasonable fees and expenses
incurred by the Purchaser in connection  with any amendments,  modifications  or
waivers of this Agreement or incurred in connection with the enforcement of this
Agreement,  including,  without  limitation,  all reasonable  attorneys fees and
expenses,  and (iii)  all stamp or other  similar  taxes  and  duties  levied in
connection with issuance of the Shares pursuant hereto.  In addition,  if by the
seven (7) month  anniversary of the  commencement  of the Investment  Period the
Company has not  requested  Draw Down Amounts in an  aggregate of $500,000,  the
Company  in its  sole  and  absolute  discretion  shall  either  (x)  pay to the
Purchaser a fee equal to $24,000 in cash or immediately  available funds; or (y)
issue  warrants to the  Purchaser  to purchase  24,000  shares of the  Company's
Common Stock at an exercise price of 110% of the VWAP of the Common Stock on the
Closing Date.

     Section 10.2       Specific Enforcement, Consent to Jurisdiction.

     (a) The Company and the Purchaser  acknowledge  and 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 or were  otherwise
breached.  It is  accordingly  agreed that the  parties  shall be entitled to an
injunction or  injunctions to prevent or cure breaches of the provisions of this
Agreement  and to  enforce  specifically  the  terms  and  provisions  hereof or
thereof,  this being in addition to any other remedy to which any of them may be
entitled by law or equity.


                                       25
<PAGE>

     (b) Each of the Company and the Purchaser (i) hereby irrevocably submits
to the  jurisdiction of the United States District Court and other courts of the
United  States  sitting in the State of New York for the  purposes  of any suit,
action or  proceeding  arising  out of or relating  to this  Agreement  and (ii)
hereby waives,  and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally  subject to the  jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient  forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the  Purchaser  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 that such service shall constitute
good and  sufficient  service of process  and  notice  thereof.  Nothing in this
Section  10.2  shall  affect or limit any  right to serve  process  in any other
manner permitted by law.

     Section  10.3 Entire  Agreement;  Amendment.  This  Agreement  contains the
entire  understanding  of the parties with respect to the matters covered hereby
and,  except as  specifically  set forth  herein,  neither  the  Company nor the
Purchaser  makes any  representations,  warranty,  covenant or undertaking  with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written  instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.

     Section  10.4  Notices.  Any  notice,  demand,  request,  waiver  or  other
communication  required or permitted to be given  hereunder  shall be in writing
and shall be effective (a) upon hand  delivery,  by telex (with  correct  answer
back received),  telecopy or facsimile 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 second  business day  following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon  actual  receipt of such  mailing,  whichever  shall  first  occur.  The
addresses for such communications shall be:


If to the Company:                     MAGNITUDE INFORMATION SYSTEMS, INC.
                                       401 Route 24
                                       Chester, NJ 07930
                                       Tel. No.: (908) 879-2722
                                       Fax No.:  (908) 879-7006
                                       Attention:  Steven D. Rudnik

                                       26

<PAGE>


With copies to:                        Joseph J. Tomasek, Esq.
                                       77 North Bridge Street
                                       Somerville, NJ 08876
                                       Tel. No.: (908) 429-0030
                                       Fax No.: (908) 429-0040

If to the Purchaser:                   Torneaux Ltd.
                                       Charlotte House
                                       Charlotte Street
                                       P. O. Box N 9204
                                       Nassau, Bahamas
                                       Tel. No.: (242) 325-1033
                                       Fax No.: (242) 323-7918
                                       Attention: Director

With copies to:                        Parker Chapin LLP
                                       The Chrysler Building
                                       405 Lexington Avenue
                                       New York, New York 10174
                                       Tel. No.: (212) 704-6000
                                       Fax No.: (212) 704-6288
                                       Attention:  Christopher S. Auguste, Esq.

         Any party  hereto may from time to time  change its address for notices
by giving at least ten (10) days prior written notice of such changed address to
the other party  hereto.

     Section 10.5 Waivers. No waiver by either party 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  provisions,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.

     Section 10.6 Headings. The article, section and subsection headings in this
Agreement  are for  convenience  only and  shall not  constitute  a part of this
Agreement  for any other  purpose and shall not be deemed to limit or affect any
of the provisions hereof.

     Section 10.7  Successors  and Assigns.  The  Purchaser  may not assign this
Agreement to any person without the prior written consent of the Company,  which
consent will not be unreasonably withheld.  This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.  After
Closing,  the  assignment by a party to this  Agreement of any rights  hereunder
shall not affect the obligations of such party under this Agreement.


                                       27
<PAGE>


     Section  10.8  Governing  Law.  This  Agreement  shall be  governed  by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.

     Section 10.9 Survival.  The  representations  and warranties of the Company
and the  Purchaser  contained  in Article  III and the  covenants  contained  in
Article IV shall survive the execution and delivery hereof and the Closing until
the termination of this Agreement, and the agreements and covenants set forth in
Article IX of this Agreement shall survive the execution and delivery hereof and
the Closing  hereunder.  Section  10.14 shall  survive the  termination  of this
Agreement.

     Section 10.10 Counterparts. This Agreement may be executed in any number of
counterparts,  all of which taken  together  shall  constitute  one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties  hereto,  it being  understood that all
parties  need not sign the same  counterpart.  In the  event  any  signature  is
delivered  by  facsimile  transmission,  the party  using such means of delivery
shall cause four additional executed signature pages to be physically  delivered
to the other parties within five (5) days of the execution and delivery hereof.

     Section 10.11 Publicity.  Except as required by applicable law, the Company
shall not issue any press  release or  otherwise  make any public  statement  or
announcement  with respect to this  Agreement or the  transactions  contemplated
hereby or the  existence  of this  Agreement  without  the prior  consent of the
Purchaser.

     Section 10.12 Severability.  The provisions of this Agreement are severable
and, in the event that any court of competent  jurisdiction shall determine that
any one or more of the  provisions or part of the  provisions  contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement, and this Agreement
shall be reformed and  construed as if such invalid or illegal or  unenforceable
provision,  or part of such provision,  had never been contained herein, so that
such  provisions  would be valid,  legal and  enforceable  to the maximum extent
possible.

     Section  10.13  Further  Assurances.  From  and  after  the  date  of  this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be  reasonably  necessary  or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.

                                       28

<PAGE>


     Section 10.14  Confidentiality.  Purchaser agrees to
maintain the  confidentiality of all information about the Company received from
any  officer,  employee  or  agent  of the  Company,  until  such  time  as that
confidential  information  is released to the public  generally  other than as a
result of any disclosure by Purchaser.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]























                                       29
<PAGE>




        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective  authorized officer as of the date first above
written.


                                  MAGNITUDE INFORMATION SYSTEMS, INC.



                                  By:  s/Steve D. Rudnik
                                        -----------------
                                       Steven D. Rudnik, President and CEO


                                  TORNEAUX LTD.



                                   By:s/Anthony L.M. Inder Rieden
                                      ---------------------------
                                      Anthony L.M. Inder Rieden, Director


                                       30
<PAGE>




                                EXHIBIT A TO THE
                         COMMON STOCK PURCHASE AGREEMENT
                               OPINION OF COUNSEL



     1. The Company is a corporation duly incorporated,  validly existing and in
good  standing  under the laws of the State of  Delaware.  The  Company  has the
requisite  corporate power to own and operate its properties and assets,  and to
carry on its  business  as  presently  conducted.  The  Company  and  each  such
subsidiary is duly qualified to do business as a foreign  corporation  and is in
good  standing  in  every  jurisdiction  in which  the  nature  of the  business
conducted or property owned by it makes such qualification necessary.

     2. The Company has the  requisite  corporate  power and  authority to enter
into and perform its obligations  under the Purchase  Agreement and to issue and
sell the Common Stock,  the Warrants and the Common Stock issuable upon exercise
of the Warrants (the "Warrant Shares"). The execution,  delivery and performance
of the  Purchase  Agreement  by the  Company and the  consummation  by it of the
transactions  contemplated  thereby have been duly and validly authorized by all
necessary  corporate  action and no  further  consent  or  authorization  of the
Company or its Board of Directors  or  stockholders  is  required.  The Purchase
Agreement  has been duly  executed and  delivered,  and the Common Stock and the
Warrants  have been duly  executed,  issued and delivered by the Company and the
Purchase  Agreement  constitutes a legal,  valid and binding  obligations of the
Company enforceable against the Company in accordance with its respective terms.
The  Common  Stock is not  subject  to  preemptive  rights  under the  Company's
certificate of incorporation or bylaws.

     3. The Common  Stock and the  Warrants  have been duly  authorized  and the
Common Stock, when delivered against payment in full as provided in the Purchase
Agreement,  will be validly issued,  fully paid and  nonassessable.  The Warrant
Shares have been duly authorized and reserved for issuance,  and, when delivered
upon exercise or against  payment in full as provided in the  Warrants,  will be
validly issued, fully paid and nonassessable.

     4. The execution, delivery and performance of and compliance with the terms
of  the  Purchase   Agreement  and  the  consummation  by  the  Company  of  the
transactions  contemplated  thereby  (i) do not  violate  any  provision  of the
Company's  certificate  of  incorporation  or bylaws,  (ii)  conflict  with,  or
constitute  a default  (or an event  which with  notice or lapse of time or both
would  become a default)  under,  or give to others  any rights of  termination,
amendment,  acceleration or cancellation of, any material  agreement,  mortgage,
deed of trust,  indenture,  note, bond, license, lease agreement,  instrument or
obligation  to which  the  Company  is a party,  (iii)  create or impose a lien,
charge or  encumbrance on any property of the Company under any agreement or any
commitment  to which the  Company is a party or by which the Company is bound or
by which any of its respective properties or assets are bound, or (iv) result in
a violation of any federal,  state, local or foreign statute,  rule, regulation,
order,


                                       1
<PAGE>

judgment or decree (including federal and state securities laws and regulations)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries  are bound or affected,  except,
in all cases  other than  violations  pursuant  to clause  (i)  above,  for such
conflicts, defaults, terminations,  amendments, acceleration,  cancellations and
violations  as would  not,  individually  or in the  aggregate,  have a Material
Adverse Effect.

     5. There is no action, suit, claim,  investigation or proceeding pending or
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be  taken  pursuant  hereto  or  thereto.  There  is  no  action,  suit,  claim,
investigation or proceeding pending or, to our knowledge, threatened, against or
involving the Company,  any subsidiary or any of their respective  properties or
assets and which, if adversely  determined,  is reasonably likely to result in a
Material Adverse Effect.

     6. No consent, approval or authorization of or designation,  declaration or
filing with any governmental authority on the part of the Company is required in
connection with the valid execution and delivery of the Purchase  Agreement,  or
the  offer,  sale or  issuance  of the  Common  Stock  and the  Warrants  or the
consummation of any other  transaction  contemplated  by the Purchase  Agreement
(other than any filings which may be required to be made by the Company with the
Commission,  or the OTC Bulletin Board or an Alternate Market  subsequent to the
Closing,  and, any  registration  statement  which may be filed  pursuant to the
Purchase Agreement).

     7. The  offer,  issuance  and sale of the  Common  Stock  and the  Warrants
pursuant to the Purchase  Agreement,  and the issuance of the Warrant  Shares to
the Purchaser,  to the Purchase Agreement will be exempt from registration under
the Securities Act of 1933, as amended, pursuant to Rule 4(2) thereunder.

     8. The Company is not a "holding  company" or a "public utility company" as
such terms are defined in the Public  Utility  Holding  Company Act of 1935,  as
amended.  The Company is not,  and as a result of and  immediately  upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.


                                       2
<PAGE>



                                    EXHIBIT B

                             COMPLIANCE CERTIFICATE

         In  connection  with the issuance of shares of common stock of
Magnitude  Information  Systems,  Inc. (the "Company") pursuant to the Draw Dawn
Notice,  dated  ___________  delivered  by the  Company to  Torneaux  Ltd.  (the
"Purchaser") pursuant to Article VI of the Common Stock Purchase Agreement dated
July 18, 2000, by and between the Company and the Purchaser  (the  "Agreement"),
the undersigned hereby certifies as follows:

         1. The undersigned is the duly elected Chief  Executive  Officer of the
Company.

         2. The  representations  and  warranties  of the  Company  set forth in
Section 3.1 of the  Agreement  are true and correct in all material  respects as
though  made  on and as of the  date  hereof,  except  for  representations  and
warranties that speak as of a particular date.

         3. The Company has performed in all material respects all covenants and
agreements  to be performed by the Company on or prior to the Draw Down Exercise
Date and the Settlement Date related to the Draw Down Notice and has complied in
all material  respects with all obligations and conditions  contained in Section
5.3 of the Agreement.

         The terms used herein but not defined  herein  shall have the  meanings
specified in the Agreement.

                  The  undersigned has executed this  Certificate  this ________
day of _________, 2000.

                            By:_________________________________________________
                               Name: Steven D. Rudnik

                            Title: President and CEO



<PAGE>



                                    EXHIBIT C
                     TO THE COMMON STOCK PURCHASE AGREEMENT

                                     FORM OF
                                DRAW DOWN NOTICE

         Reference is made to the Common Stock  Purchase  Agreement  dated as of
________,  ____  (the  "Purchase  Agreement  ")  between  Magnitude  Information
Systems,  Inc.,  a  Delaware  corporation  (the  "Company")  and  Torneaux  Ltd.
Capitalized  terms used and not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement.

         In  accordance  with  and  pursuant  to  Section  6.1 of  the  Purchase
Agreement,  the Company  hereby  issues this Draw Down Notice to exercise a Draw
Down request for the Draw Down Amount indicated below.

         Draw Down Amount:

         Draw Down Pricing Period start date:

         Draw Down Pricing Period end date:

         Settlement Date No. 1:

         Settlement Date No. 2:

         Threshold Price:

         Minimum Threshold Price: $1.00

Dated:

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

                        By:______________________________
                       Steven D. Rudnik, President and CEO


                           Address:
                           Facsimile No.:
                           Wire Instructions:__________________
                           Contact Name:     __________________


<PAGE>




                              DISCLOSURE SCHEDULES
                          RELATING TO THE COMMON STOCK
              PURCHASE AGREEMENT, DATED AS OF JULY 18, 2000 BETWEEN
                     MAGNITUDE INFORMATION SYSTEMS, INC. AND
                                  TORNEAUX LTD.

     ALL SECTION AND SUBSECTION  NUMBERS AND LETTERS RELATE AND COINCIDE TO SUCH
NUMBERS AND LETTERS AS SET FORTH IN THE COMMON  STOCK  PURCHASE  AGREEMENT  (THE
"AGREEMENT").   ANY  TERMS  REQUIRING  DEFINITION  HEREIN  ARE  DEFINED  IN  THE
AGREEMENT.

     ALL  REPRESENTATIONS AND WARRANTIES SET FORTH IN THE AGREEMENT ARE MODIFIED
IN THEIR ENTIRETY BY THESE DISCLOSURE  SCHEDULES.  THE DISCLOSURES  CONTAINED IN
THESE  DISCLOSURE  SCHEDULES  SHALL  BE  READ  IN  THEIR  ENTIRETY,  AND ALL THE
DISCLOSURES SHALL BE READ TOGETHER.



<PAGE>




                                 FORM OF WARRANT

         THIS  WARRANT AND THE SHARES OF COMMON  STOCK  ISSUABLE  UPON  EXERCISE
HEREOF HAVE NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED
(THE  "SECURITIES  ACT"),  OR ANY  STATE  SECURITIES  LAWS  AND MAY NOT BE SOLD,
TRANSFERRED,  PLEDGED  OR  OTHERWISE  DISPOSED  OF UNLESS  REGISTERED  UNDER THE
SECURITIES  ACT  AND  UNDER   APPLICABLE  STATE  SECURITIES  LAWS  OR  MAGNITUDE
INFORMATION SYSTEMS,  INC., A DELAWARE  CORPORATION (THE "COMPANY"),  SHALL HAVE
RECEIVED AN OPINION, IN FORM, SCOPE AND SUBSTANCE  REASONABLY  ACCEPTABLE TO THE
COMPANY,  OF  COUNSEL  WHO  IS  REASONABLY   ACCEPTABLE  TO  THE  COMPANY,  THAT
REGISTRATION  OF  SUCH  SECURITIES  UNDER  THE  SECURITIES  ACT  AND  UNDER  THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.


                               WARRANT TO PURCHASE


                             SHARES OF COMMON STOCK


                                       OF


                       MAGNITUDE INFORMATION SYSTEMS, INC.

Expires [July __], 2003
No.: W-__                                               Number of Shares: _____
Date of Issuance:  [July __], 2000

         FOR VALUE  RECEIVED,  subject to the provisions  hereinafter set forth,
the undersigned,  Magnitude  Information  Systems,  Inc., a Delaware corporation
(together with its successors and assigns, the "Issuer"),  hereby certifies that
Torneaux  Ltd.  or its  registered  assigns is  entitled  to  subscribe  for and
purchase,  during the period specified in this Warrant, up to [1,050,000] shares
(subject to adjustment as hereinafter provided) of the duly authorized,  validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject,  however, to
the  provisions  and  upon the  terms  and  conditions  hereinafter  set  forth.
Capitalized  terms used in this Warrant and not otherwise  defined  herein shall
have the respective  meanings  specified in Section 7 hereof.Term.  The right to
subscribe  for and purchase  shares of Warrant  Stock  represented  hereby shall
commence on the date of issuance of this  Warrant and shall expire at 5:00 p.m.,
eastern  time,  on [July __],  2003 (such period  being the  "Term");  provided,
however,  that the  exercise of this Warrant  shall be subject to the  following
limitations:

     1. Term.  The right to subscribe  for and purchase  shares of Warrant Stock
represented  hereby  shall  commence on the date of issuance of this Warrant and
shall expire at

     5:00  p.m.,  eastern  time on [July  ____],  2003  (such  period  being the
"Term");  provided,  however, that the exercise of this Warrant shall be subject
to the following limitations:

    (i) the right to  subscribe  for and purchase  the first  [_______]  shares
(subject to adjustment as hereinafter provided) of Warrant Stock pursuant to the
exercise of a portion of this Warrant shall be immediately granted to the Holder
as of the date of this  Warrant,  subject to the exercise of all prior  Warrants
and the sale of the shares of Common Stock  underlying such Warrants (the "First
Exercise");


<PAGE>


     (ii) the right to  subscribe  for and purchase  the next  [_______]  shares
(subject to adjustment as hereinafter provided) of Warrant Stock pursuant to the
exercise of a portion of this Warrant shall be immediately granted to the Holder
upon the sale of that number of shares of Common Stock purchased pursuant to the
First Exercise (the "Second Exercise");

     (iii) the right to subscribe for and purchase the next [_______] shares
(subject to adjustment as hereinafter provided) of Warrant Stock pursuant to the
exercise of a portion of this Warrant shall be immediately granted to the Holder
upon the sale of that number of shares of Common Stock purchased pursuant to the
Second Exercise (the "Third Exercise"); and

    (iv) the right to subscribe for and purchase the final [_______] shares
(subject to adjustment as hereinafter provided) of Warrant Stock pursuant to the
exercise of the remaining  portion of this Warrant shall be immediately  granted
to the Holder upon the sale of that number of shares of Common  Stock  purchased
pursuant to the Third Exercise.

     2.  Method of  Exercise  Payment;  Issuance of New  Warrant;  Transfer  and
Exchange.

     (a) Time of Exercise.  The purchase rights  represented by this Warrant
may be  exercised  in whole or in part at any time and from time to time  during
the Term.

     (b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part,  by the  surrender  of this Warrant  (with the  exercise  form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment  to the  Issuer  of an  amount of  consideration  therefor  equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of  Warrant  Stock  with  respect  to which  this  Warrant  is then being
exercised,  payable at such Holder's  election (i) by certified or official bank
check or (ii) by surrender to the Issuer for  cancellation  of a portion of this
Warrant  representing  that number of unissued  shares of Warrant Stock which is
equal  to the  quotient  obtained  by  dividing  (A)  the  product  obtained  by
multiplying  the  Warrant  Price by the number of shares of Warrant  Stock being
purchased upon such exercise by (B) the difference  obtained by subtracting  the
Warrant  Price from the Per Share Market Value as of the date of such  exercise,
or (iii) by a combination  of the foregoing  methods of payment  selected by the
Holder of this Warrant.  In any case where the  consideration  payable upon such
exercise is being paid in whole or in part pursuant to the  provisions of clause
(ii) of this  subsection  (b), such  exercise  shall be  accompanied  by written
notice from the Holder of this Warrant  specifying the manner of payment thereof
and containing a calculation  showing the number of shares of Warrant Stock with
respect to which rights are being  surrendered  thereunder and the net number of
shares of Common Stock to be issued after giving effect to such surrender.

     (c) Issuance of Stock Certificates. In the event of any exercise of the
rights  represented by this Warrant in accordance  with and subject to the terms
and  conditions  hereof,  (i)  certificates  for the shares of Warrant  Stock so
purchased  shall be dated the date of such  exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after such
exercise,  and the  Holder  hereof  shall be deemed for all  purposes  to be the
Holder  of the  shares  of  Warrant  Stock so  purchased  as of the date of such
exercise,  and (ii) unless this Warrant has expired, a new Warrant  representing
the  number of shares of  Warrant  Stock,  if any,  with  respect  to which this
Warrant shall not then have been exercised  (less any amount thereof which shall
have been  canceled  in  payment  or partial  payment  of the  Warrant  Price as
hereinabove  provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.

                                       34
<PAGE>


         (d)  Transferability of Warrant.  Subject to Section 2(e), this Warrant
may be transferred by a Holder without the consent of the Issuer. If transferred
pursuant to this  subsection  and subject to the provisions of subsection (e) of
this  Section 2, this Warrant may be  transferred  on the books of the Issuer by
the Holder hereof in person or by duly  authorized  attorney,  upon surrender of
this Warrant at the principal  office of the Issuer,  properly  endorsed (by the
Holder  executing an assignment in the form attached hereto) and upon payment of
any  necessary  transfer  tax  imposed  upon  such  transfer.  This  Warrant  is
exchangeable at the principal office of the Issuer for Warrants for the purchase
of the same  aggregate  number of shares of Warrant  Stock,  each new Warrant to
represent  the right to purchase  such number of shares of Warrant  Stock as the
Holder hereof shall designate at the time of such exchange.  All Warrants issued
on transfers or  exchanges  shall be dated the Original  Issue Date and shall be
identical  with this Warrant  except as to the number of shares of Warrant Stock
issuable pursuant hereto.

         (e)      Compliance with Securities Laws.

         (i) The Holder of this Warrant, by acceptance hereof, acknowledges that
this Warrant or the shares of Warrant  Stock to be issued upon  exercise  hereof
are being acquired  solely for the Holder's own account and not as a nominee for
any other party, and for investment, and that the Holder will not offer, sell or
otherwise  dispose of this  Warrant or any shares of Warrant  Stock to be issued
upon exercise hereof except pursuant to an effective registration  statement, or
an exemption  from  registration,  under the  Securities  Act and any applicable
state securities laws.

         (ii) Except as provided in paragraph (iii) below,  this Warrant and all
certificates  representing  shares of Warrant Stock issued upon exercise  hereof
shall be stamped or imprinted with a legend in substantially the following form:

         THIS  WARRANT AND THE SHARES OF COMMON  STOCK  ISSUABLE  UPON  EXERCISE
HEREOF HAVE NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED
(THE  "SECURITIES  ACT"),  OR ANY  STATE  SECURITIES  LAWS  AND MAY NOT BE SOLD,
TRANSFERRED,  PLEDGED  OR  OTHERWISE  DISPOSED  OF UNLESS  REGISTERED  UNDER THE
SECURITIES  ACT  AND  UNDER   APPLICABLE  STATE  SECURITIES  LAWS  OR  MAGNITUDE
INFORMATION SYSTEMS,  INC., A DELAWARE  CORPORATION (THE "COMPANY"),  SHALL HAVE
RECEIVED AN OPINION, IN FORM, SCOPE AND SUBSTANCE  REASONABLY  ACCEPTABLE TO THE
COMPANY,  OF  COUNSEL  WHO  IS  REASONABLY   ACCEPTABLE  TO  THE  COMPANY,  THAT
REGISTRATION  OF  SUCH  SECURITIES  UNDER  THE  SECURITIES  ACT  AND  UNDER  THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

         (iii) The restrictions imposed by this subsection (e) upon the transfer
of this  Warrant or the shares of Warrant  Stock to be purchased  upon  exercise
hereof shall terminate (A) when such securities  shall have been resold pursuant
to an effective  registration  statement  under the Securities Act, (B) upon the
Issuer's  receipt of an opinion of  counsel,  in form and  substance  reasonably
satisfactory  to the  Issuer,  addressed  to the Issuer to the effect  that such
restrictions are no longer required to ensure compliance with the Securities Act
and state  securities  laws or (C) upon the Issuer's  receipt of other  evidence
reasonably  satisfactory to the Issuer that such  registration and qualification
under the Securities Act and state  securities  laws are not required.  Whenever
such  restrictions  shall cease and  terminate  as to any such  securities,  the
Holder  thereof  shall be entitled to receive  from the Issuer (or its  transfer
agent and registrar),  without expense (other than applicable transfer taxes, if
any),  new  Warrants  (or,  in the case of shares of  Warrant  Stock,  new stock
certificates)  of like tenor not  bearing  the  applicable  legend  required  by
paragraph  (ii)  above  relating  to the  Securities  Act and  applicable  state
securities laws.

                                       35
<PAGE>
         (f) Continuing Rights of Holder.  The Issuer will, at the time of or at
any time after each  exercise  of this  Warrant,  upon the request of the Holder
hereof,  acknowledge in writing the extent, if any, of its continuing obligation
to afford to such  Holder all rights to which such Holder  shall  continue to be
entitled  after such  exercise  in  accordance  with the terms of this  Warrant;
provided  that if any such  Holder  shall  fail to make any  such  request,  the
failure shall not affect the continuing  obligation of the Issuer to afford such
rights to such Holder.

         (3)     Stock Fully Paid; Reservation and Listing of Shares; Covenants.

         (a) Stock Fully Paid. The Issuer  represents,  warrants,  covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise  hereunder  will, upon issuance,  be duly  authorized,
validly issued, fully paid and non-assessable and free from all taxes and liens,
security interest,  charges and encumbrances of any nature whatsoever created by
or through the Issuer. The Issuer further  represents,  warrants,  covenants and
agrees that during the period  within which this Warrant may be  exercised,  the
Issuer will at all times have  authorized  and  reserved  for the purpose of the
issue upon  exercise  of this  Warrant a  sufficient  number of shares of Common
Stock to provide for the exercise of this Warrant.

         (b) Reservation.  If any shares of Common Stock required to be reserved
for issuance  upon exercise of this Warrant or as otherwise  provided  hereunder
require registration or qualification with any governmental  authority under any
federal or state law before  such  shares may be so issued,  the Issuer  will in
good faith use its best efforts as  expeditiously  as possible at its expense to
cause such shares to be duly  registered or qualified.  If the Issuer shall list
any shares of Common Stock on any securities  exchange or market it will, at its
expense,  list thereon,  maintain and increase when necessary such listing,  of,
all  shares of Warrant  Stock from time to time  issued  upon  exercise  of this
Warrant or as otherwise provided hereunder, and, to the extent permissible under
the applicable  securities  exchange rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder,  so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities  exchange or
market, and will maintain such listing of, any other securities which the Holder
of this  Warrant  shall be entitled to receive upon the exercise of this Warrant
if at the time  any  securities  of the  same  class  shall  be  listed  on such
securities exchange or market by the Issuer.

         (c) Covenants.  The Issuer shall not by any action  including,  without
limitation,  amending the  Certificate  of  Incorporation  or the by-laws of the
Issuer,  or through  any  reorganization,  transfer  of  assets,  consolidation,
merger,  dissolution,  issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms or provisions of
this  Warrant,  but will at all times in good faith  carry out all such terms or
provisions  and take all such  actions as may be  necessary  or  appropriate  to
protect  the  rights  of the  Holder  hereof  against  dilution  (to the  extent
specifically provided herein) or impairment.  Without limiting the generality of
the  foregoing,  the Issuer  will (i) not permit the par value,  if any,  of its
Common  Stock to exceed  the then  effective  Warrant  Price,  (ii) not amend or
modify any  provision  of the  Certificate  of  Incorporation  or by-laws of the
Issuer  in any  manner  that  would  adversely  affect  in any way  the  powers,
preferences or relative  participating,  optional or other special rights of the
Common  Stock or which would  adversely  affect the rights of the Holders of the

                                       37
<PAGE>

Warrants,  (iii) take all such action as may be  reasonably  necessary  in order
that the Issuer may  validly  and  legally  issue  fully paid and  nonassessable
shares  of  Common  Stock,  free and  clear of any  liens,  security  interests,
charges,  claims,  encumbrances and restrictions (other than as provided herein)
upon the  exercise of this  Warrant,  and (iv)  obtain all such  authorizations,
exemptions  or consents  from any public  regulatory  body  having  jurisdiction
thereof as may be  necessary  to enable the  Issuer to perform  its  obligations
under this Warrant.

         (d) Ten Percent  Rule.  This Warrant  shall not be  exercisable  to the
extent that the shares of Common  Stock  issuable  upon any  exercise of hereof,
when  aggregated  with all other shares of Common Stock then owned by the Holder
(as defined in the Purchase  Agreement),  would result in the Holder owning more
than 9.99% of all of such Common Stock as would be  outstanding  on such date of
exercise, as determined in accordance with Section 16 of the Securities Exchange
Act of 1934 and the regulations promulgated thereunder.

         (e) Loss,  Theft,  Destruction  of  Warrants.  Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft,  destruction
or  mutilation  of any  Warrant  and,  in the  case of any such  loss,  theft or
destruction,  upon receipt of indemnity or security  satisfactory  to the Issuer
or, in the case of any such mutilation,  upon surrender and cancellation of such
Warrant,  the  Issuer  will  make and  deliver,  in lieu of such  lost,  stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.

         4. Adjustment of Warrant Price and Warrant Share Number. The number and
kind of Securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to  adjustment  from time to time upon the  happening  of
certain events as follows:

         (a)      Recapitalization, Reorganization, Reclassification,
 Consolidation, Merger or Sale.

         (i) In case the Issuer  after the  Original  Issue Date shall do any of
the following (each, a "Triggering  Event"):  (a) consolidate with or merge into
any other Person and the Issuer shall not be the continuing or surviving  Person
of such  consolidation or merger,  or (b) permit any other Person to consolidate
with or  merge  into the  Issuer  and the  Issuer  shall  be the  continuing  or
surviving  Person but, in  connection  with such  consolidation  or merger,  any
Capital Stock of the Issuer shall be changed into or exchanged for Securities of
any  other  Person  or  cash  or any  other  property,  or (c)  transfer  all or
substantially all of its properties or assets to any other Person, or (d) effect
a capital  reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event,  proper provision shall be made so that,
upon the basis and the terms and in the manner  provided  in this  Warrant,  the
Holder of this Warrant shall be entitled, at the option of such Holder, (x) upon
the exercise hereof at any time after the consummation of such Triggering Event,
to the extent this Warrant is not exercised prior to such  Triggering  Event, to
receive  at the  Warrant  Price in effect at the time  immediately  prior to the
consummation of such Triggering  Event in lieu of the Common Stock issuable upon
such exercise of this Warrant prior to such  Triggering  Event,  the Securities,
cash and  property  to which  such  Holder  would  have been  entitled  upon the
consummation  of such  Triggering  Event if such Holder had exercised the rights
represented by this Warrant  immediately  prior thereto,  subject to adjustments
(subsequent  to such corporate  action) as nearly  equivalent as possible to the
adjustments provided for in Section 4 hereof or (y) to sell this Warrant (or, at
such Holder's election, a portion hereof) concurrently with the Triggering Event
to the Person  continuing  after or surviving such  Triggering  Event, or to the


                                       38
<PAGE>

Issuer (if Issuer is the continuing or surviving  Person) at a sales price equal
to the  amount  of cash,  property  and/or  Securities  to which a holder of the
number of shares of Common Stock which would  otherwise have been delivered upon
the exercise of this Warrant would have been entitled upon the effective date or
closing of any such  Triggering  Event  (the  "Event  Consideration"),  less the
amount or portion of such Event  Consideration  having a fair value equal to the
aggregate  Warrant  Price  applicable  to this Warrant or the portion  hereof so
sold.

         (ii)  Notwithstanding   anything  contained  in  this  Warrant  to  the
contrary,  the Issuer will not effect any Triggering Event unless,  prior to the
consummation  thereof, each Person (other than the Issuer) which may be required
to deliver any Securities, cash or property upon the exercise of this Warrant as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory  to, the Holder of this Warrant,  (A) the obligations of the Issuer
under this  Warrant (and if the Issuer shall  survive the  consummation  of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from,  any  continuing  obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such shares of Securities, cash
or property as, in accordance  with the foregoing  provisions of this subsection
(a),  such  Holder  shall be entitled  to  receive,  and such Person  shall have
similarly delivered to such Holder an opinion of counsel for such Person,  which
counsel  shall be  reasonably  satisfactory  to such  Holder,  stating that this
Warrant shall thereafter  continue in full force and effect and the terms hereof
(including,  without  limitation,  all of the provisions of this subsection (a))
shall be applicable to the Securities, cash or property which such Person may be
required to deliver  upon any  exercise of this  Warrant or the  exercise of any
rights pursuant hereto.

         (iii) If with  respect  to any  Triggering  Event,  the  Holder of this
Warrant has exercised its right as provided in clause (y) of subparagraph (i) of
this subsection (a) to sell this Warrant or a portion thereof, the Issuer agrees
that as a condition to the  consummation of any such Triggering Event the Issuer
shall secure such right of Holder to sell this Warrant to the Person  continuing
after or  surviving  such  Triggering  Event and the Issuer shall not effect any
such  Triggering  Event  unless  upon or prior to the  consummation  thereof the
amounts of cash,  property and/or Securities  required under such clause (y) are
delivered to the Holder of this Warrant.  The obligation of the Issuer to secure
such right of the Holder to sell this Warrant  shall be subject to such Holder's
cooperation  with the  Issuer,  including,  without  limitation,  the  giving of
reasonable  and  customary  representations  and  warranties to the purchaser in
connection  with any such sale.  Prior notice of any  Triggering  Event shall be
given to the Holder of this Warrant in accordance with Section 11 hereof.

                                       39

<PAGE>


         (b)  Subdivision or Combination of Shares.  If the Issuer,  at any time
while this  Warrant is  outstanding,  shall  subdivide  or combine any shares of
Common Stock,  (i) in case of subdivision of shares,  the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer  shall take a record of holders of its Common Stock for the purpose of so
subdividing,  as at the applicable record date, whichever is earlier) to reflect
the  increase in the total  number of shares of Common  Stock  outstanding  as a
result of such subdivision,  or (ii) in the case of a combination of shares, the
Warrant Price shall be  proportionately  increased (as at the effective  date of
such  combination or, if the Issuer shall take a record of holders of its Common
Stock  for the  purpose  of so  combining,  as at the  applicable  record  date,
whichever is earlier) to reflect the  reduction in the total number of shares of
Common Stock outstanding as a result of such combination.

         (c) Certain  Dividends and  Distributions.  If the Issuer,  at any time
while this Warrant is outstanding, shall:

         (i) Stock Dividends.  Pay a dividend in, or make any other distribution
to its stockholders (without consideration therefor) of, shares of Common Stock,
the Warrant  Price  shall be  adjusted,  as at the date the Issuer  shall take a
record of the holders of the Issuer's Capital Stock for the purpose of receiving
such dividend or other  distribution  (or if no such record is taken,  as at the
date of such  payment  or  other  distribution),  to that  price  determined  by
multiplying  the Warrant Price in effect  immediately  prior to such record date
(or if no such record is taken,  then immediately prior to such payment or other
distribution),  by a  fraction  (1) the  numerator  of which  shall be the total
number of shares of Common Stock outstanding  immediately prior to such dividend
or  distribution,  and (2) the denominator of which shall be the total number of
shares  of  Common  Stock   outstanding   immediately  after  such  dividend  or
distribution (plus in the event that the Issuer paid cash for fractional shares,
the number of additional shares which would have been outstanding had the Issuer
issued fractional shares in connection with said dividends); or

         (ii) Other  Dividends.  Pay a dividend on, or make any  distribution of
its  assets  upon  or  with  respect  to  (including,  but  not  limited  to,  a
distribution of its property as a dividend in liquidation or partial liquidation
or by way of return of  capital),  the Common  Stock (other than as described in
clause (i) of this subsection (c)), or in the event that the Company shall offer
options or rights to subscribe for shares of Common  Stock,  or issue any Common
Stock  Equivalents,  to all of its holders of Common  Stock,  then on the record
date for such  payment,  distribution  or offer or, in the  absence  of a record
date,  on the date of such  payment,  distribution  or offer,  the Holder  shall
receive  what the Holder would have  received  had it exercised  this Warrant in
full immediately prior to the record date of such payment, distribution or offer
or,  in the  absence  of a record  date,  immediately  prior to the date of such
payment, distribution or offer.

         (d) Issuance of Additional  Shares of Common Stock.  If the Issuer,  at
any time while this Warrant is outstanding, shall issue any Additional Shares of
Common  Stock  (otherwise  than as provided  in the  foregoing  subsections  (a)
through (c) of this Section 4), at a price per share less than the Warrant Price
then in effect or less than the Per Share Market Value then in effect or without
consideration,  then the Warrant Price upon each such issuance shall be adjusted
to that price  (rounded to the  nearest  cent)  determined  by  multiplying  the
Warrant Price then in effect by a fraction:

                                       40

<PAGE>

         (i) the  numerator of which shall be equal to the sum of (A) the number
of shares of Common Stock outstanding  immediately prior to the issuance of such
Additional  Shares of Common Stock plus (B) the number of shares of Common Stock
(rounded to the nearest whole share) which the aggregate  consideration  for the
total number of such Additional  Shares of Common Stock so issued would purchase
at a price per share equal to the greater of the Per Share  Market Value then in
effect and the Warrant Price then in effect, and

         (ii) the denominator of which shall be equal to the number of shares of
Common  Stock  outstanding  immediately  after the  issuance of such  Additional
Shares of Common Stock.

         The provisions of this  subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or (c)
of this Section 4. No  adjustment  of the Warrant Price shall be made under this
subsection (d) upon the issuance of any Additional  Shares of Common Stock which
are issued pursuant to any Common Stock  Equivalent if upon the issuance of such
Common Stock  Equivalent  (x) any  adjustment  shall have been made  pursuant to
subsection (e) of this Section 4 or (y) no adjustment  was required  pursuant to
subsection  (e) of this Section 4. No  adjustment  of the Warrant Price shall be
made under this  subsection  (d) in an amount less than $.01 per share,  but any
such lesser  adjustment  shall be carried  forward and shall be made at the time
and together with the next  subsequent  adjustment,  if any, which together with
any  adjustments  so  carried  forward  shall  amount to $.01 per share or more;
provided  that  upon any  adjustment  of the  Warrant  Price as a result  of any
dividend or  distribution  payable in Common Stock or Convertible  Securities or
the reclassification,  subdivision or combination of Common Stock into a greater
or smaller  number of shares,  the  foregoing  figure of $.01 per share (or such
figure as last  adjusted)  shall be adjusted (to the nearest  one-half  cent) in
proportion to the adjustment in the Warrant Price.

         (e) Issuance of Common Stock  Equivalents.  If the Issuer,  at any time
while this Warrant is outstanding,  shall issue any Common Stock  Equivalent and
the price per share for which Additional  Shares of Common Stock may be issuable
thereafter  pursuant  to such  Common  Stock  Equivalent  shall be less than the
Warrant  Price  then in effect or less than the Per Share  Market  Value then in
effect,  or if, after any such issuance of Common Stock  Equivalents,  the price
per share for which Additional Shares of Common Stock may be issuable thereafter
is amended  or  adjusted,  and such  price as so amended  shall be less than the
Warrant  Price or less than the Per Share  Market Value in effect at the time of
such  amendment,  then the Warrant  Price upon each such  issuance or  amendment
shall be adjusted as provided in the first  sentence of  subsection  (d) of this
Section 4 on the basis  that (1) the  maximum  number  of  Additional  Shares of
Common Stock  issuable  pursuant to all such Common Stock  Equivalents  shall be
deemed to have been issued  (whether or not such Common  Stock  Equivalents  are
actually then  exercisable,  convertible or exchangeable in whole or in part) as
of the  earlier  of (A) the date on which the  Issuer  shall  enter  into a firm
contract for the issuance of such Common  Stock  Equivalent,  or (B) the date of
actual  issuance  of  such  Common  Stock  Equivalent,  and  (2)  the  aggregate
consideration for such maximum number of Additional Shares of Common Stock shall
be deemed to be the minimum  consideration  received or receivable by the Issuer
for the  issuance of such  Additional  Shares of Common  Stock  pursuant to such
Common Stock Equivalent.  No adjustment of the Warrant Price shall be made under
this  subsection  (e) upon the  issuance of any  Convertible  Security  which is
issued  pursuant  to the  exercise  of any  warrants  or other  subscription  or
purchase rights  therefor,  if any adjustment shall previously have been made in
the  Warrant  Price then in effect upon the  issuance of such  warrants or other
rights  pursuant to this subsection (e). If no adjustment is required under this
subsection  (e)  upon  issuance  of any  Common  Stock  Equivalent  or  once  an


                                       41
<PAGE>


adjustment  is made under this  subsection  (e) based upon the Per Share  Market
Value in effect on the date of such adjustment,  no further  adjustment shall be
made  under  this  subsection  (e) based  solely  upon a change in the Per Share
Market Value after such date.

         (f) Purchase of Common  Stock by the Issuer.  If the Issuer at any time
while this  Warrant is  outstanding  shall,  directly  or  indirectly  through a
Subsidiary or  otherwise,  purchase,  redeem or otherwise  acquire any shares of
Common  Stock at a price per share  greater than the Per Share Market Value then
in  effect,  then the  Warrant  Price  upon each such  purchase,  redemption  or
acquisition  shall be  adjusted to that price  determined  by  multiplying  such
Warrant  Price by a fraction  (i) the  numerator of which shall be the number of
shares  of  Common  Stock  outstanding   immediately  prior  to  such  purchase,
redemption or  acquisition  minus the number of shares of Common Stock which the
aggregate  consideration  for the total number of such shares of Common Stock so
purchased,  redeemed or acquired  would  purchase at the Per Share Market Value;
and (ii) the  denominator of which shall be the number of shares of Common Stock
outstanding immediately after such purchase,  redemption or acquisition. For the
purposes of this subsection (f), the date as of which the Per Share Market Value
shall be computed shall be the earlier of (x) the date on which the Issuer shall
enter into a firm contract for the purchase,  redemption or  acquisition of such
Common Stock, or (y) the date of actual  purchase,  redemption or acquisition of
such  Common  Stock.  For the  purposes  of this  subsection  (f),  a  purchase,
redemption or acquisition of a Common Stock  Equivalent  shall be deemed to be a
purchase of the underlying  Common Stock,  and the  computation  herein required
shall be made on the basis of the full exercise,  conversion or exchange of such
Common Stock  Equivalent  on the date as of which such  computation  is required
hereby to be made,  whether or not such  Common  Stock  Equivalent  is  actually
exercisable, convertible or exchangeable on such date.

         (g) Other  Provisions  Applicable to Adjustments  Under this Section 4.
The following provisions shall be applicable to the making of adjustments in the
Warrant Price hereinbefore provided in Section 4:

         (i) Computation of  Consideration.  The  consideration  received by the
Issuer shall be deemed to be the  following:  to the extent that any  Additional
Shares of Common  Stock or any Common  Stock  Equivalents  shall be issued for a
cash  consideration,  the consideration  received by the Issuer therefor,  or if
such Additional  Shares of Common Stock or Common Stock  Equivalents are offered
by the Issuer for subscription,  the subscription  price, or, if such Additional
Shares of Common Stock or Common Stock  Equivalents  are sold to underwriters or
dealers for public offering without a subscription offering, the public offering
price,  in any such case  excluding any amounts paid or  receivable  for accrued
interest  or  accrued  dividends  and  without  deduction  of any  compensation,
discounts,  commissions,  or  expenses  paid or incurred by the Issuer for or in
connection  with the  underwriting  thereof or otherwise in connection  with the
issue  thereof;  to the extent that such issuance  shall be for a  consideration
other than cash, then, except as herein otherwise expressly  provided,  the fair
market value of such  consideration  at the, time of such issuance as determined
in good faith by the  Board.  The  consideration  for any  Additional  Shares of
Common  Stock  issuable  pursuant to any Common Stock  Equivalents  shall be the
consideration  received by the Issuer for issuing such Common Stock Equivalents,
plus the  additional  consideration  payable  to the Issuer  upon the  exercise,
conversion or exchange of such Common Stock Equivalents. In case of the issuance
at any time of any Additional Shares of Common Stock or Common Stock Equivalents
in payment or  satisfaction  of any dividend  upon any class of Capital Stock of
the Issuer other than Common Stock,  the Issuer shall be deemed to have received
for such  Additional  Shares  of  Common  Stock or Common  Stock  Equivalents  a

41

<PAGE>


consideration equal to the amount of such dividend so paid or satisfied.  In any
case in which the consideration to be received or paid shall be other than cash,
the Board shall  notify the Holder of this Warrant of its  determination  of the
fair market value of such  consideration  prior to payment or accepting  receipt
thereof.  If, within thirty (30) days after receipt of said notice, the Majority
Holders  shall  notify  the  Board  in  writing  of  their   objection  to  such
determination,  a determination  of the fair market value of such  consideration
shall be made by an Independent  Appraiser selected by the Majority Holders with
the approval of the Board (which approval shall not be  unreasonably  withheld),
whose fees and expenses shall be paid by the Issuer.

         (ii)  Readjustment of Warrant Price. Upon the expiration or termination
of the right to convert,  exchange or exercise any Common Stock  Equivalent  the
issuance of which  effected an adjustment in the Warrant  Price,  if such Common
Stock  Equivalent  shall not have been converted,  exercised or exchanged in its
entirety,  the  number  of  shares of  Common  Stock  deemed  to be  issued  and
outstanding  by reason of the fact that  they  were  issuable  upon  conversion,
exchange  or exercise of any such  Common  Stock  Equivalent  shall no longer be
computed as set forth above, and the Warrant Price shall forthwith be readjusted
and  thereafter be the price which it would have been (but  reflecting any other
adjustments in the Warrant Price made pursuant to the provisions of this Section
4 after the issuance of such Common Stock  Equivalent) had the adjustment of the
Warrant Price been made in accordance with the issuance or sale of the number of
Additional  Shares of Common Stock actually issued upon conversion,  exchange or
issuance  of such  Common  Stock  Equivalent  and  thereupon  only the number of
Additional  Shares of Common  Stock  actually so issued  shall be deemed to have
been issued and only the consideration actually received by the Issuer (computed
as in clause (i) of this  subsection  (g)) shall be deemed to have been received
by the Issuer.

         (iii) Outstanding Common Stock. The number of shares of Common Stock at
any time  outstanding  shall (A) not include any shares thereof then directly or
indirectly  owned  or held by or for the  account  of the  Issuer  or any of its
Subsidiaries,  and (B) be deemed to  include  all  shares of Common  Stock  then
issuable upon conversion,  exercise or exchange of any then  outstanding  Common
Stock  Equivalents  or any other  evidences of  Indebtedness,  shares of Capital
Stock or other  Securities  which are or may be at any time  convertible into or
exchangeable for shares of Common Stock or Other Common Stock.

         (h) Other Action  Affecting  Common  Stock.  In case after the Original
Issue Date the Issuer shall take any action  affecting its Common  Stock,  other
than an action described in any of the foregoing  subsections (a) through (g) of
this  Section 4,  inclusive,  and the failure to make any  adjustment  would not
fairly  protect the purchase  rights  represented  by this Warrant in accordance
with the  essential  intent and  principle  of this  Section 4, then the Warrant
Price shall be adjusted in such manner and at such time as the Board may in good
faith determine to be equitable in the circumstances.

         (i)  Adjustment of Warrant Share  Number.  Upon each  adjustment in the
Warrant Price pursuant to any of the foregoing provisions of this Section 4, the
Warrant Share Number shall be adjusted,  to the nearest one hundredth of a whole
share,  to  the  product  obtained  by  multiplying  the  Warrant  Share  Number
immediately  prior to such  adjustment in the Warrant  Price by a fraction,  the
numerator of which shall be the Warrant Price  immediately  before giving effect
to such  adjustment  and the  denominator  of which shall be the  Warrant  Price
immediately  after giving effect to such  adjustment.  If the Issuer shall be in
default  under any  provision  contained  in  Section 3 of this  Warrant so that
shares  issued at the Warrant Price  adjusted in accordance  with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number provided
for in the foregoing  sentence shall  nonetheless be made and the Holder of this
Warrant  shall be  entitled  to purchase  such  greater  number of shares at the
lowest price at which such shares may then be validly  issued  under  applicable
law. Such exercise  shall not  constitute a waiver of any claim arising  against
the Issuer by reason of its default under Section 3 of this Warrant.

                                       42

<PAGE>

        (j) Form of Warrant  after  Adjustments.  The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.

         5. Notice of  Adjustments.  Whenever the Warrant Price or Warrant Share
Number  shall be adjusted  pursuant  to Section 4 hereof  (for  purposes of this
Section 5, each an  "adjustment"),  the Issuer  shall cause its Chief  Financial
Officer to prepare  and  execute a  certificate  setting  forth,  in  reasonable
detail,  the event requiring the adjustment,  the amount of the adjustment,  the
method by which such  adjustment was calculated  (including a description of the
basis on which the Board  made any  determination  hereunder),  and the  Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such  certificate  to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with  respect to the matters set forth in such  certificate  may at
the option of the Holder of this  Warrant be  submitted  to one of the  national
accounting  firms  currently  known as the "big five"  selected  by the  Holder,
provided  that the Issuer shall have ten (10) days after  receipt of notice from
such Holder of its selection of such firm to object thereto,  in which case such
Holder shall select another such firm and the Issuer shall have no such right of
objection.  The firm  selected by the Holder of this  Warrant as provided in the
preceding  sentence shall be instructed to deliver a written  opinion as to such
matters to the Issuer and such Holder within  thirty (30) days after  submission
to it of such  dispute.  Such opinion  shall be final and binding on the parties
hereto.  The fees and  expenses  of such  accounting  firm  shall be paid by the
Issuer.

         6.  Fractional  Shares.  No fractional  shares of Warrant Stock will be
issued in connection  with and exercise  hereof,  but in lieu of such fractional
shares,  the Issuer  shall make a cash payment  therefor  equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.

         7.       Definitions.  For the purposes of this Warrant, the following
 terms have the following meanings:

         "Additional  Shares of Common  Stock"  means all shares of Common Stock
issued by the Issuer  after the  Original  Issue  Date,  and all shares of Other
Common,  if any, issued by the Issuer after the Original Issue Date,  except (i)
the Warrant  Stock,  (ii) any shares of Common  Stock  issued to pursuant to the
Purchase  Agreement,  (iii) any shares of Common  Stock  issued  pursuant to the
stock options as set forth on Schedule A, (iv) any shares of Common Stock issued
pursuant to the stock  warrants  as set forth on Schedule B, (v),  any shares of
Common Stock issued pursuant to the Series A Senior Convertible  Preferred Stock
of the  Issuer as set forth on  Schedule  C, (vi),  any  shares of Common  Stock
issued pursuant to the Series B Senior Convertible Preferred Stock of the Issuer
as set forth on Schedule D, (vii), any shares of Common Stock issued pursuant to
the Series C Senior  Convertible  Preferred  Stock of the Issuer as set forth on
Schedule E, (viii) any shares of Common Stock issued pursuant to the convertible
debt of the  Issuer as set forth on  Schedule  F, and (ix) any  shares of Common
Stock issued  pursuant to the Issuer's 2000 Stock Incentive Plan as set forth on
Schedule G.


                                       43
<PAGE>

         "Board" shall mean the Board of Directors of the Issuer.

         "Capital  Stock" means and includes (i) any and all shares,  interests,
participations  or other  equivalents  of or interests  in (however  designated)
corporate  stock,  including,   without  limitation,   shares  of  preferred  or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a  partnership,  (iii) all  membership  interests or limited
liability  company  interests  in any limited  liability  company,  and (iv) all
equity or ownership interests in any Person of any other type.

         "Certificate of Incorporation"  means the Certificate of Incorporation,
as  amended,  of the  Issuer as in effect on the  Original  Issue  Date,  and as
hereafter  from time to time  amended,  modified,  supplemented  or  restated in
accordance with the terms hereof and thereof and pursuant to applicable law.

         "Common Stock" means the Common Stock,  $.0001 par value, of the Issuer
and any other Capital Stock into which such stock may hereafter be changed.

         "Common Stock  Equivalent"  means any Convertible  Security or warrant,
option or other right to  subscribe  for or purchase  any  Additional  Shares of
Common Stock or any Convertible Security.

         "Convertible  Securities"  means evidences of  Indebtedness,  shares of
Capital Stock or other  Securities  which are or may be at any time  convertible
into  or  exchangeable   for  Additional   Shares  of  Common  Stock.  The  term
"Convertible Security" means one of the Convertible Securities.

         "Governmental   Authority"  means  any   governmental,   regulatory  or
self-regulatory  entity,  department,  body,  official,  authority,  commission,
board, agency or instrumentality,  whether federal,  state or local, and whether
domestic or foreign.

         "Holders" mean the Persons who shall from time to time own any Warrant.
The term  "Holder"  means one of the Holders.

         "Independent Appraiser" means a nationally recognized or major regional
investment  banking firm or firm of independent  certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements  of  the  Issuer)  that  is  regularly  engaged  in the  business  of
appraising  the Capital  Stock or assets of  corporations  or other  entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.

         "Issuer" means Magnitude Information Systems, Inc.,
 a Delaware corporation, and its successors.

         "Majority   Holders"   means  at  any  time  the  Holders  of  Warrants
exercisable  for a majority of the shares of Warrant  Stock  issuable  under the
Warrants at the time outstanding.

         "Original Issue Date" means [July __], 2000.

         "Other Common" means any other Capital Stock of the Issuer of any class
which shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the  distribution
of earnings and assets of the Issuer without limitation as to amount.

                                       44

<PAGE>


         "Person" means an individual,  corporation,  limited liability company,
partnership,  joint stock company,  trust,  unincorporated  organization,  joint
venture, Governmental Authority or other entity of whatever nature.

         "Per Share Market Value" means on any  particular  date (a) the closing
bid price per share of the Common Stock on such date the Nasdaq SmallCap Market,
Nasdaq National Market or other registered  national stock exchange on which the
Common Stock is then listed or if there is no such price on such date,  then the
closing  bid price on such  exchange  or  quotation  system on the date  nearest
preceding such date, or (b) if the Common Stock is not listed then on the Nasdaq
SmallCap  Market,  Nasdaq  National  Market  or any  registered  national  stock
exchange,   the  closing  bid  price  for  a  share  of  Common   Stock  in  the
over-the-counter  market,  as  reported by NASDAQ or in 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 Common Stock is not then  reported by NASDAQ 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 is not then  publicly  traded the fair market  value of a share of
Common Stock as determined by an Independent Appraiser selected in good faith by
the Majority Holders;  provided,  however, that the Issuer, after receipt of the
determination by such Independent  Appraiser,  shall have the right to select an
additional Independent Appraiser,  in which case, the fair market value shall be
equal to the average of the  determinations by each such Independent  Appraiser;
and  provided,  further  that all  determinations  of the Per Share Market Value
shall be appropriately  adjusted for any stock dividends,  stock splits or other
similar  transactions during such period. The determination of fair market value
by an  Independent  Appraiser  shall be based upon the fair market  value of the
Issuer  determined  on a going  concern  basis as between a willing  buyer and a
willing  seller and taking into account all relevant  factors  determinative  of
value,  and shall be final and binding on all parties.  In determining  the fair
market value of any shares of Common Stock, no  consideration  shall be given to
any  restrictions  on transfer of the Common  Stock  imposed by  agreement or by
federal or state  securities  laws,  or to the  existence  or absence of, or any
limitations on, voting rights.

         "Purchase Agreement" means the Common Stock Purchase Agreement dated as
of [July __], 2000 between the Issuer and the Holder.

         "Securities" means any debt or equity securities of the Issuer, whether
now or hereafter authorized, any instrument convertible into or exchangeable for
securities or a security,  and any option, warrant or other right to purchase or
acquire any security. "Security" means one of the Securities.

         "Securities  Act" means the Securities Act of 1933, as amended,  or any
similar federal statute then in effect.

         "Subsidiary"  means any  corporation at least 50% of whose  outstanding
Voting Stock shall at the time be owned  directly or indirectly by the Issuer or
by one or  more of its  Subsidiaries,  or by the  Issuer  and one or more of its
Subsidiaries.

         "Term" has the meaning specified in Section 1 hereof.

                                       45

<PAGE>

         "Trading  Day" means (a) a day on which the  Common  Stock is traded on
the Nasdaq SmallCap Market,  Nasdaq National Market or other registered national
stock  exchange on which the Common Stock has been listed,  or (b) if the Common
Stock is not listed on the Nasdaq  SmallCap  Market,  Nasdaq  National Market or
other  registered  national  stock  exchange on which the Common  Stock has been
listed,  a day on which  the  Common  Stock is  quoted  in the  over-the-counter
market, as reported by the OTC Bulletin Board, or (c) if the Common Stock is not
quoted on the OTC Bulletin  Board,  a day on which the Common Stock is 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, however, that in the event that the Common Stock is
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.

         "Voting  Stock",  as applied to the Capital  Stock of any  corporation,
means Capital Stock of any class or classes (however designated) having ordinary
voting  power for the  election  of a  majority  of the  members of the Board of
Directors  (or other  governing  body) of such  corporation,  other than Capital
Stock having such power only by reason of the happening of a contingency.

         "Warrants"  means the Warrants issued and sold pursuant to the Purchase
Agreement,  including,  without limitation, this Warrant, and any other warrants
of like tenor issued in substitution or exchange for any thereof pursuant to the
provisions  of  Section  2(c),  2(d) or  2(e)  hereof  or of any of  such  other
Warrants.

         "Warrant  Price" means  $______________,  as such price may be adjusted
from time to time as shall  result from the  adjustments  specified in Section 4
herein.

         "Warrant Share Number" means at any time the aggregate number of shares
of Warrant  Stock  which may at such time be  purchased  upon  exercise  of this
Warrant,  after giving  effect to all prior  adjustments  and  increases to such
number made or required to be made under the terms hereof.

         "Warrant  Stock"  means  Common  Stock  issuable  upon  exercise of any
Warrant or Warrants or otherwise issuable pursuant to any Warrant or Warrants.

         8.       Other Notices.  In case at any time:

         (A)      the Issuer shall make any distributions to the holders of
Common Stock; or

         (B) the Issuer  shall  authorize  the  granting  to all  holders of its
Common Stock of rights to subscribe  for or purchase any shares of Capital Stock
of any class or of any Common Stock  Equivalents  or  Convertible  Securities or
other rights; or

         (C)      there shall be any reclassification of the Capital Stock of
the Issuer; or

         (D)      there shall be any capital reorganization by the Issuer; or

                                       46

<PAGE>

         (E) there shall be any (i) consolidation or merger involving the Issuer
or (ii) sale,  transfer or other  disposition of all or substantially all of the
Issuer's property,  assets or business (except a merger or other  reorganization
in which the Issuer shall be the surviving corporation and its shares of Capital
Stock shall continue to be outstanding and unchanged and except a consolidation,
merger,   sale,   transfer  or  other   disposition   involving  a  wholly-owned
Subsidiary); or

         (F) there shall be a voluntary or involuntary dissolution,  liquidation
or  winding-up  of the  Issuer  or any  partial  liquidation  of the  Issuer  or
distribution to holders of Common Stock;

         then,  in each of such cases,  the Issuer shall give written  notice to
the  Holder of the date on which (i) the books of the  Issuer  shall  close or a
record shall be taken for such dividend,  distribution or subscription rights or
(ii) such reorganization, reclassification,  consolidation, merger, disposition,
dissolution,  liquidation or  winding-up,  as the case may be, shall take place.
Such notice also shall  specify the date as of which the holders of Common Stock
of record shall  participate  in such  dividend,  distribution  or  subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities   or   other   property   deliverable   upon   such   reorganization,
reclassification,  consolidation, merger, disposition,  dissolution, liquidation
or  winding-up,  as the case may be. Such notice  shall be given at least twenty
(20) days prior to the action in  question  and not less than  twenty  (20) days
prior to the record date or the date on which the  Issuer's  transfer  books are
closed in respect  thereto.  The Issuer  shall give to the Holder  notice of all
meetings and actions by written consent of its stockholders, at the same time in
the same  manner as notice of any  meetings  of  stockholders  is required to be
given to stockholders  who do not waive such notice (or, if such actions require
no notice,  then two (2) Trading  Days written  notice  thereof  describing  the
matters  upon which  action is to be taken).  The Holder shall have the right to
send two representatives  selected by it to each meeting, who shall be permitted
to attend,  but not vote at, such  meeting and any  adjournments  thereof.  This
Warrant  entitles  the  Holder  to  receive  copies of all  financial  and other
information  distributed  or  required to be  distributed  to the holders of the
Common Stock.

         9. Amendment and Waiver. Any term, covenant,  agreement or condition in
this  Warrant may be amended,  or  compliance  therewith  may be waived  (either
generally   or  in  a   particular   instance   and  either   retroactively   or
prospectively),  by a written instrument or written instruments  executed by the
Issuer and the Majority Holders;  provided,  however,  that no such amendment or
waiver  shall  reduce the Warrant  Share  Number,  increase  the Warrant  Price,
shorten the period  during  which this  Warrant may be  exercised  or modify any
provision of this Section 9 without the consent of the Holder of this Warrant.

         10.  Governing  Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW  YORK,  WITHOUT  GIVING  EFFECT TO
PRINCIPLES  OF  CONFLICTS  OF LAW.  THIS  WARRANT  SHALL NOT BE  INTERPRETED  OR
CONSTRUED  WITH ANY  PRESUMPTION  AGAINST THE PARTY  CAUSING  THIS WARRANT TO BE
DRAFTED.

         11. 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 earlier of (i) the date of  transmission,  if
such  notice or  communication  is  delivered  via  facsimile  at the  facsimile
telephone number specified for notice prior to 5:00 p.m., eastern standard time,
on a Trading Day, (ii) the Trading Day after the date of  transmission,  if such
notice or  communication  is delivered via facsimile at the facsimile  telephone
number specified for notice later than 5:00 p.m.,  eastern standard time, on any
date and earlier than 11:59 p.m., eastern standard time, on such date, (iii) the
Trading Day  following  the date of mailing,  if sent by  nationally  recognized


                                       47
<PAGE>



overnight  courier  service  or (iv)  actual  receipt  by the party to whom such
notice is required to be given. The addresses for such  communications  shall be
with respect to the Holder of this Warrant or of Warrant  Stock issued  pursuant
hereto,  addressed to such Holder at its last known address or facsimile  number
appearing  on the books of the  Issuer  maintained  for such  purposes,  or with
respect to the Issuer, addressed to:

                          Magnitude Information Systems, Inc.
                          401 Route 24
                          Chester, NJ 07930
                          Tel. No.: (908) 879-2722
                          Fax No.:  (908) 879-7006
                          Attention:  [__]

     or to such other address or addresses or facsimile number or numbers as any
such party may most  recently  have  designated  in writing to the other parties
hereto by such  notice.  Copies of notices to the Issuer shall be sent to Joseph
J. Tomasek, Esq., 77 North Bridge Street,  Somerville,  NJ 08876, Facsimile no.:
(908)  429-0040.  Copies of notices to the Holder shall be sent to Parker Chapin
LLP, 405 Lexington Avenue, New York, New York 10174,  Attention:  Christopher S.
Auguste, Esq., Facsimile no.: (212) 704-6288.

         12. Warrant Agent.  The Issuer may, by written notice to each Holder of
this  Warrant,  appoint an agent having an office in New York,  New York for the
purpose  of issuing  shares of Warrant  Stock on the  exercise  of this  Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to  subsection  (d) of Section 2 hereof or replacing  this  Warrant  pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing,  and thereafter any
such  issuance,  exchange or  replacement,  as the case may be, shall be made at
such office by such agent.

         13.  Remedies.  The Issuer  stipulates  that the remedies at law of the
Holder of this Warrant in the event of any default or threatened  default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that,  to the fullest  extent  permitted by
law,  such  terms may be  specifically  enforced  by a decree  for the  specific
performance  of any agreement  contained  herein or by an  injunction  against a
violation of any of the terms hereof or otherwise.

         14.  Successors  and  Assigns.  This  Warrant and the rights  evidenced
hereby  shall inure to the  benefit.of  and be binding upon the  successors  and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such party.

         15.  Modification and Severability.  If, in any action before any court
or agency  legally  empowered to enforce any  provision  contained  herein,  any
provision  hereof is found to be  unenforceable,  then such  provision  shall be
deemed modified to the extent  necessary to make it enforceable by such court or
agency.  If any such provision is not  enforceable as set forth in the preceding
sentence,  the  unenforceability  of such  provision  shall not affect the other
provisions  of this  Warrant,  but this  Warrant  shall be  construed as if such
unenforceable provision had never been contained herein.

         16.      Headings.  The  headings of the Sections of this Warrant are
for  convenience  of reference  only and shall not, for any purpose, be deemed
a part of this Warrant.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       48


<PAGE>



         IN WITNESS WHEREOF,  the Issuer has executed this Warrant as of the day
and year first above written.

                                     MAGNITUDE INFORMATION SYSTEMS, INC.



                                     By:    __________________________________
                                               Name:
                                               Title:



<PAGE>



                                  EXERCISE FORM

         [NAME OF ISSUER]

         The  undersigned  _______________,  pursuant to the  provisions  of the
within  Warrant,  hereby  elects to  purchase  _____  shares of Common  Stock of
___________________ covered by the within Warrant.

Dated: _________________           Signature  ___________________________

                                   Address _____________________

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


                                   ASSIGNMENT

         FOR  VALUE  RECEIVED,   _________________  hereby  sells,  assigns  and
transfers unto  __________________  the within Warrant and all rights  evidenced
thereby and does irrevocably constitute and appoint _____________,  attorney, to
transfer the said Warrant on the books of the within named corporation.

Dated: _________________         Signature   ___________________________

                                 Address _____________________

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

                               PARTIAL ASSIGNMENT

         FOR  VALUE  RECEIVED,   _________________  hereby  sells,  assigns  and
transfers  unto  __________________  the right to purchase  _________  shares of
Warrant Stock evidenced by the within Warrant  together with all rights therein,
and does irrevocably  constitute and appoint  ___________________,  attorney, to
transfer  that  part of the  said  Warrant  on the  books  of the  within  named
corporation.

Dated: _________________         Signature       ___________________________

                                 Address _____________________

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

         FOR USE BY THE ISSUER ONLY:

         This Warrant No. W-__ canceled (or transferred or exchanged) this _____
day of ___________, _____, shares of Common Stock issued therefor in the name of
_______________,  Warrant No. W-__ issued for ____ shares of Common Stock in the
name of _______________.