Document:

THE SECURITIES  REPRESENTED  HEREBY MAY NOT BE  TRANSFERRED  UNLESS (I)
SUCH  SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED,  (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K),  OR
(III) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY  SATISFACTORY TO
IT THAT SUCH  TRANSFER  MAY  LAWFULLY  BE MADE  WITHOUT  REGISTRATION  UNDER THE
SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.

         SUBJECT TO THE  PROVISIONS OF SECTION 10 HEREOF,  THIS WARRANT SHALL BE
VOID AFTER 5:00 P.M. EASTERN TIME ON MARCH 31, 2010 (the "EXPIRATION DATE").

No. __________

                               ION NETWORKS, INC.

                      WARRANT TO PURCHASE _______ SHARES OF
                    COMMON STOCK, PAR VALUE $0.001 PER SHARE

         For VALUE RECEIVED, ____________________ ("Warrantholder"), is entitled
to purchase, subject to the provisions of this Warrant, from Ion Networks, Inc.,
a  Delaware  corporation  ("Company"),  at any time not later  than  5:00  P.M.,
Eastern time, on the Expiration  Date (as defined  above),  at an exercise price
per share equal to $0.23 (the  exercise  price in effect being herein called the
"Warrant  Price"),  ______ shares  ("Warrant  Shares") of the  Company's  Common
Stock, par value $0.001 per share ("Common Stock"). The number of Warrant Shares
purchasable upon exercise of this Warrant and the Warrant Price shall be subject
to adjustment from time to time as described herein.

         Section 1.  Registration.  The  Company  shall  maintain  books for the
transfer  and  registration  of the Warrant.  Upon the initial  issuance of this
Warrant,  the Company  shall issue and  register  the Warrant in the name of the
Warrantholder.

         Section  2.  Transfers.   As  provided  herein,  this  Warrant  may  be
transferred only pursuant to a registration statement filed under the Securities
Act of 1933,  as amended  (the  "Securities  Act"),  or an  exemption  from such
registration.  Subject to such  restrictions,  the Company  shall  transfer this
Warrant  from time to time upon the books to be  maintained  by the  Company for
that  purpose,   upon  surrender  thereof  for  transfer  properly  endorsed  or
accompanied by appropriate instructions for transfer and such other documents as
may be  reasonably  required  by the  Company,  including,  if  required  by the
Company,  an opinion of its counsel to the effect  that such  transfer is exempt
from the registration requirements of the Securities Act, to establish that such
transfer is being made in accordance  with the terms  hereof,  and a new Warrant
shall be issued to the transferee and the surrendered  Warrant shall be canceled
by the Company.
<PAGE>

         Section 3. Exercise of Warrant.  Subject to the provisions  hereof, the
Warrantholder may exercise this Warrant in whole or in part at any time prior to
its expiration upon surrender of the Warrant, together with delivery of the duly
executed  Warrant  exercise  form attached  hereto as Appendix A (the  "Exercise
Agreement") and payment by cash,  certified check or wire transfer of funds (or,
in certain  circumstances,  by  cash-less  exercise as  provided  below) for the
aggregate  Warrant Price for that number of Warrant Shares then being purchased,
to the Company during normal business hours on any business day at the Company's
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the  Warrantholder).  The Warrant Shares so purchased
shall  be  deemed  to be  issued  to the  Warrantholder  or the  Warrantholder's
designee, as the record owner of such shares, as of the close of business on the
date on which this  Warrant  shall have been  surrendered  (or evidence of loss,
theft or  destruction  thereof and  security or  indemnity  satisfactory  to the
Company),  the  Warrant  Price shall have been paid and the  completed  Exercise
Agreement  shall have been  delivered.  Certificates  for the Warrant  Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the Warrantholder within a reasonable time, not
exceeding  three (3)  business  days,  after  this  Warrant  shall  have been so
exercised.  The certificates so delivered shall be in such  denominations as may
be requested by the  Warrantholder  and shall be  registered  in the name of the
Warrantholder or such other name as shall be designated by the Warrantholder. If
this Warrant shall have been exercised only in part,  then,  unless this Warrant
has expired,  the Company shall, at its expense, at the time of delivery of such
certificates, deliver to the Warrantholder a new Warrant representing the number
of shares with respect to which this Warrant shall not then have been exercised.
As used herein,  "business day" means a day, other than a Saturday or Sunday, on
which banks in New York City are open for the general  transaction  of business.
Each exercise hereof shall constitute the  re-affirmation  by the  Warrantholder
that the representations  and warranties  contained in Section 5 of the Purchase
Agreement (as defined below) are true and correct in all material  respects with
respect to the Warrantholder as of the time of such exercise.

         Section  4.  Compliance  with the  Securities  Act of 1933.  Except  as
provided in the Purchase Agreement (as defined below), the Company may cause the
legend  set  forth on the  first  page of this  Warrant  to be set forth on each
Warrant or similar  legend on any security  issued or issuable  upon exercise of
this  Warrant,  unless  counsel for the Company is of the opinion as to any such
security that such legend is unnecessary.

         Section 5. Payment of Taxes. The Company will pay any documentary stamp
taxes  attributable to the initial  issuance of Warrant Shares issuable upon the
exercise  of the  Warrant;  provided,  however,  that the  Company  shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the  Warrantholder  in respect of which such  shares are
issued,  and in such case, the Company shall not be required to issue or deliver
any  certificate  for Warrant Shares or any Warrant until the person  requesting
the same has paid to the  Company the amount of such tax or has  established  to
the  Company's  reasonable  satisfaction  that  such  tax  has  been  paid.  The
Warrantholder shall be responsible for income taxes due under federal,  state or
other law, if any such tax is due.

                                      -2-
<PAGE>

         Section 6. Mutilated or Missing Warrants. In case this Warrant shall be
mutilated,  lost, stolen, or destroyed,  the Company shall issue in exchange and
substitution of and upon  cancellation of the mutilated  Warrant,  or in lieu of
and  substitution  for the Warrant lost,  stolen or destroyed,  a new Warrant of
like tenor and for the  purchase  of a like number of Warrant  Shares,  but only
upon receipt of evidence  reasonably  satisfactory  to the Company of such loss,
theft or  destruction  of the  Warrant,  and with  respect to a lost,  stolen or
destroyed  Warrant,  reasonable  indemnity  or bond  with  respect  thereto,  if
requested by the Company.

         Section 7. Reservation of Common Stock.  The Company hereby  represents
and  warrants  that  there  have been  reserved,  and the  Company  shall at all
applicable  times keep reserved until issued (if necessary) as  contemplated  by
this  Section 7, out of the  authorized  and  unissued  shares of Common  Stock,
sufficient  shares  to  provide  for the  exercise  of the  rights  of  purchase
represented  by this Warrant.  The Company agrees that all Warrant Shares issued
upon due  exercise  of the  Warrant  shall  be, at the time of  delivery  of the
certificates  for such Warrant Shares,  duly authorized,  validly issued,  fully
paid and non-assessable shares of Common Stock of the Company.

         Section 8. Adjustments.  Subject and pursuant to the provisions of this
Section  8, the  Warrant  Price and  number of  Warrant  Shares  subject to this
Warrant  shall  be  subject  to  adjustment  from  time  to  time  as set  forth
hereinafter.

                  (a) If the  Company  shall,  at any time or from  time to time
while this Warrant is outstanding,  pay a dividend or make a distribution on its
Common Stock in shares of Common  Stock,  subdivide  its  outstanding  shares of
Common Stock into a greater number of shares or combine its  outstanding  shares
of Common Stock into a smaller number of shares or issue by  reclassification of
its  outstanding  shares  of  Common  Stock  any  shares  of its  capital  stock
(including  any such  reclassification  in connection  with a  consolidation  or
merger in which the Company is the continuing  corporation),  then the number of
Warrant Shares purchasable upon exercise of the Warrant and the Warrant Price in
effect  immediately  prior to the date  upon  which  such  change  shall  become
effective, shall be adjusted by the Company so that the Warrantholder thereafter
exercising  the  Warrant  shall be  entitled  to receive the number of shares of
Common Stock or other capital stock which the Warrantholder  would have received
if the Warrant had been exercised  immediately  prior to such event upon payment
of a Warrant  Price that has been  adjusted to reflect a fair  allocation of the
economics of such event to the  Warrantholder.  Such  adjustments  shall be made
successively whenever any event listed above shall occur.

                  (b) If any  capital  reorganization,  reclassification  of the
capital  stock of the Company  (other than a  transaction  covered in clause (a)
above), consolidation or merger of the Company with another corporation in which
the Company is not the survivor (or if it is the survivor,  the shares of Common
Stock are converted  into cash or other  property in connection  therewith),  or
sale, transfer or other disposition of all or substantially all of the Company's
assets to another  corporation  shall be effected,  then, as a condition of such
reorganization, reclassification, consolidation, merger, sale, transfer or other
disposition,   lawful  and  adequate   provision  shall  be  made  whereby  each
Warrantholder  shall  thereafter have the right to purchase and receive upon the
basis and upon the  terms and  conditions  herein  specified  and in lieu of the
Warrant Shares  immediately  theretofore  issuable upon exercise of the Warrant,

                                      -3-
<PAGE>

such  shares of stock,  securities  or assets  as would  have been  issuable  or
payable with  respect to or in exchange for a number of Warrant  Shares equal to
the number of Warrant Shares immediately  theretofore  issuable upon exercise of
the Warrant, had such reorganization,  reclassification,  consolidation, merger,
sale,  transfer  or other  disposition  not  taken  place,  and in any such case
appropriate  provision shall be made with respect to the rights and interests of
each  Warrantholder to the end that the provisions  hereof  (including,  without
limitation,  provision for adjustment of the Warrant Price) shall  thereafter be
applicable, as nearly equivalent as may be practicable in relation to any shares
of stock,  securities or assets thereafter deliverable upon the exercise hereof.
The Company shall not effect any such consolidation,  merger,  sale, transfer or
other  disposition  unless  prior to or  simultaneously  with  the  consummation
thereof the successor  corporation  (if other than the Company)  resulting  from
such  consolidation  or  merger,  or the  corporation  purchasing  or  otherwise
acquiring  such assets or other  appropriate  corporation or entity shall assume
the  obligation  to deliver  to the  Warrantholder,  at the last  address of the
Warrantholder  appearing  on the  books of the  Company,  such  shares of stock,
securities  or assets  as, in  accordance  with the  foregoing  provisions,  the
Warrantholder may be entitled to purchase,  and the other obligations under this
Warrant.  The  provisions  of  this  paragraph  (b)  shall  similarly  apply  to
successive reorganizations,  reclassifications,  consolidations, mergers, sales,
transfers or other dispositions.

                  (c) In case  the  Company  shall  fix a  payment  date for the
making of a  distribution  to all holders of Common  Stock  (including  any such
distribution  made in  connection  with a  consolidation  or merger in which the
Company is the continuing  corporation)  of evidences of  indebtedness or assets
(other than cash  dividends or cash  distributions  payable out of  consolidated
earnings or earned surplus or dividends or distributions  referred to in Section
8(a)),  or  subscription  rights or warrants,  the Warrant Price to be in effect
after such payment date shall be determined by multiplying  the Warrant Price in
effect  immediately  prior to such payment date by a fraction,  the numerator of
which shall be the total number of shares of Common Stock outstanding multiplied
by the Market  Price (as defined  below) per share of Common  Stock  immediately
prior to such payment  date,  less the fair market value (as  determined  by the
Company's  Board of  Directors  in good  faith) of said assets or  evidences  of
indebtedness so distributed, or of such subscription rights or warrants, and the
denominator  of which  shall be the total  number  of  shares  of  Common  Stock
outstanding   multiplied  by  such  Market  Price  per  share  of  Common  Stock
immediately  prior to such payment date.  "Market Price" as of a particular date
(the "Valuation Date") shall mean the following: (a) if the Common Stock is then
listed on a national  stock  exchange,  the  closing  sale price of one share of
Common  Stock on such  exchange on the last  trading day prior to the  Valuation
Date;  (b) if the Common Stock is then quoted on The Nasdaq Stock  Market,  Inc.
("Nasdaq"),  the National  Association of Securities Dealers,  Inc. OTC Bulletin
Board (the  "Bulletin  Board") or such  similar  exchange  or  association,  the
closing sale price of one share of Common Stock on Nasdaq, the Bulletin Board or
such  other  exchange  or  association  on the  last  trading  day  prior to the
Valuation  Date or, if no such closing sale price is  available,  the average of
the high bid and the low asked  price  quoted  thereon on the last  trading  day
prior to the Valuation  Date; or (c) if the Common Stock is not then listed on a
national  stock  exchange or quoted on Nasdaq,  the Bulletin Board or such other
exchange or  association,  the fair market value of one share of Common Stock as
of the  Valuation  Date,  shall be  determined  in good  faith  by the  Board of
Directors of the Company and the Warrantholder.  If the Common Stock is not then
listed on a  national  securities  exchange,  the  Bulletin  Board or such other
exchange or  association,  the Board of Directors of the Company  shall  respond
promptly,  in writing,  to an inquiry by the Warrantholder prior to the exercise
hereunder as to the fair market  value of a share of Common Stock as  determined
by the  Board of  Directors  of the  Company.  In the  event  that the  Board of
Directors of the Company and the Warrantholder are unable to agree upon the fair
market value in respect of subpart (c) hereof, the Company and the Warrantholder
shall  jointly  select an appraiser,  who is  experienced  in such matters.  The
decision of such appraiser shall be final and  conclusive,  and the cost of such
appraiser  shall be borne  equally by the  Company and the  Warrantholder.  Such
adjustment shall be made successively whenever such a payment date is fixed.

                                      -4-
<PAGE>

                  (d) An adjustment to the Warrant Price shall become  effective
immediately  after the payment date in the case of each dividend or distribution
and  immediately  after the effective date of each other event which requires an
adjustment.

                  (e) In the  event  that,  as a result  of an  adjustment  made
pursuant to this Section 8, the  Warrantholder  shall become entitled to receive
any shares of capital  stock of the Company  other than shares of Common  Stock,
the number of such other  shares so  receivable  upon  exercise of this  Warrant
shall be subject  thereafter to adjustment  from time to time in a manner and on
terms as nearly  equivalent as practicable to the provisions with respect to the
Warrant Shares contained in this Warrant.

                  (f)  Except as  provided  in  subsection  (g)  hereof,  if and
whenever  the Company  shall  issue or sell,  or is, in  accordance  with any of
subsections  (f)(l) through  (f)(7)  hereof,  deemed to have issued or sold, any
shares of Common Stock for no  consideration  or for a  consideration  per share
less  than the  Warrant  Price in effect  immediately  prior to the time of such
issue  or  sale,  then  and  in  each  such  case  (a  "Trigger  Issuance")  the
then-existing  Warrant Price,  shall be reduced,  as of the close of business on
the  effective  date of the Trigger  Issuance,  to the lowest price per share at
which  any share of  Common  Stock was  issued or sold or deemed to be issued or
sold; provided,  however,  that in no event shall the Warrant Price after giving
effect to such  Trigger  Issuance be greater  than the  Warrant  Price in effect
prior to such Trigger Issuance.

                  For purposes of this subsection (f), the following subsections
(f)(l) to (f)(7) shall also be applicable:

                           (f)(1) Issuance of Rights or Options.  In case at any
                  time the Company  shall in any manner grant  (directly and not
                  by assumption in a merger or otherwise)  any warrants or other
                  rights to subscribe for or to purchase, or any options for the
                  purchase of, Common Stock or any stock or security convertible
                  into or exchangeable  for Common Stock (such warrants,  rights
                  or options  being called  "Options"  and such  convertible  or
                  exchangeable  stock or  securities  being called  "Convertible
                  Securities")  whether  or not  such  Options  or the  right to
                  convert  or  exchange  any  such  Convertible  Securities  are
                  immediately  exercisable,  and the  price  per share for which
                  Common Stock is issuable  upon the exercise of such Options or
                  upon the conversion or exchange of such Convertible Securities
                  (determined   by  dividing   (i)  the  sum  (which  sum  shall
                  constitute  the  applicable  consideration)  of (x) the  total

                                      -5-
<PAGE>

                  amount,  if any,  received  or  receivable  by the  Company as
                  consideration  for the granting of such Options,  plus (y) the
                  aggregate  amount of additional  consideration  payable to the
                  Company  upon the exercise of all such  Options,  plus (z), in
                  the  case  of  such  Options   which  relate  to   Convertible
                  Securities,  the aggregate amount of additional consideration,
                  if any,  payable  upon the  issue or sale of such  Convertible
                  Securities  and upon the  conversion or exchange  thereof,  by
                  (ii) the total  maximum  number  of  shares  of  Common  Stock
                  issuable  upon  the  exercise  of such  Options  or  upon  the
                  conversion  or  exchange  of all such  Convertible  Securities
                  issuable upon the exercise of such Options) shall be less than
                  the Warrant Price in effect  immediately  prior to the time of
                  the granting of such Options,  then the total number of shares
                  of Common Stock  issuable upon the exercise of such Options or
                  upon  conversion  or  exchange  of the  total  amount  of such
                  Convertible  Securities  issuable  upon the  exercise  of such
                  Options shall be deemed to have been issued for such price per
                  share  as of the  date  of  granting  of such  Options  or the
                  issuance of such  Convertible  Securities and thereafter shall
                  be deemed to be  outstanding  for  purposes of  adjusting  the
                  Warrant  Price.  Except as  otherwise  provided in  subsection
                  8(f)(3), no adjustment of the Warrant Price shall be made upon
                  the actual issue of such Common  Stock or of such  Convertible
                  Securities  upon  exercise of such  Options or upon the actual
                  issue of such Common Stock upon conversion or exchange of such
                  Convertible Securities.

                           (f)(2)  Issuance of Convertible  Securities.  In case
                  the Company  shall in any manner  issue  (directly  and not by
                  assumption in a merger or  otherwise) or sell any  Convertible
                  Securities,  whether or not the rights to  exchange or convert
                  any such Convertible  Securities are immediately  exercisable,
                  and the price per share  for which  Common  Stock is  issuable
                  upon such  conversion or exchange  (determined by dividing (i)
                  the  sum   (which   sum  shall   constitute   the   applicable
                  consideration)  of (x) the total amount received or receivable
                  by the Company as consideration  for the issue or sale of such
                  Convertible  Securities,  plus  (y) the  aggregate  amount  of
                  additional consideration,  if any, payable to the Company upon
                  the conversion or exchange  thereof,  by (ii) the total number
                  of shares of Common  Stock  issuable  upon the  conversion  or
                  exchange  of all such  Convertible  Securities)  shall be less
                  than the Warrant Price in effect immediately prior to the time
                  of such issue or sale, then the total maximum number of shares
                  of Common Stock  issuable  upon  conversion or exchange of all
                  such  Convertible  Securities  shall be  deemed  to have  been
                  issued for such price per share as of the date of the issue or
                  sale of such  Convertible  Securities and thereafter  shall be
                  deemed to be outstanding for purposes of adjusting the Warrant
                  Price,  provided  that (a)  except as  otherwise  provided  in
                  subsection  8(f)(3),  no adjustment of the Warrant Price shall
                  be made upon the actual  issuance  of such  Common  Stock upon
                  conversion or exchange of such Convertible  Securities and (b)
                  no further  adjustment  of the Warrant  Price shall be made by
                  reason of the  issue or sale of  Convertible  Securities  upon
                  exercise  of any  Options  to  purchase  any such  Convertible
                  Securities  for which  adjustments  of the Warrant  Price have
                  been made pursuant to the other provisions of subsection 8(f).

                                      -6-
<PAGE>

                           (f)(3)  Change in Option  Price or  Conversion  Rate.
                  Upon the happening of any of the following events,  namely, if
                  the purchase price  provided for in any Option  referred to in
                  subsection  8(f)(l) hereof, the additional  consideration,  if
                  any,   payable  upon  the   conversion   or  exchange  of  any
                  Convertible  Securities  referred to in subsections 8(f)(l) or
                  8(f)(2), or the rate at which Convertible  Securities referred
                  to in subsections  8(f)(l) or 8(f)(2) are convertible  into or
                  exchangeable  for  Common  Stock  shall  change  at  any  time
                  (including,  but not limited to, changes under or by reason of
                  provisions designed to protect against dilution),  the Warrant
                  Price in effect at the time of such event shall  forthwith  be
                  readjusted  to the  Warrant  Price  which  would  have been in
                  effect at such time had such Options or Convertible Securities
                  still  outstanding  provided for such changed  purchase price,
                  additional  consideration  or conversion rate, as the case may
                  be, at the time  initially  granted,  issued  or sold.  On the
                  termination  of any Option for which any  adjustment  was made
                  pursuant  to this  subsection  8(f) or any right to convert or
                  exchange  Convertible  Securities for which any adjustment was
                  made  pursuant  to this  subsection  8(f)  (including  without
                  limitation  upon the redemption or purchase for  consideration
                  of such  Convertible  Securities by the Company),  the Warrant
                  Price then in effect  hereunder  shall forthwith be changed to
                  the Warrant  Price which would have been in effect at the time
                  of such termination had such Option or Convertible Securities,
                  to  the   extent   outstanding   immediately   prior  to  such
                  termination, never been issued.

                           (f)(4) Stock Dividends.  Subject to the provisions of
                  this  Section  8(f),  in case  the  Company  shall  declare  a
                  dividend or make any other  distribution upon any stock of the
                  Company (other than the Common Stock) payable in Common Stock,
                  Options  or  Convertible  Securities  in  a  circumstance  not
                  covered by Section  8(c),  then any Common  Stock,  Options or
                  Convertible  Securities,  as the  case  may  be,  issuable  in
                  payment of such  dividend or  distribution  shall be deemed to
                  have been  issued  or sold  without  consideration;  provided,
                  however,   that  any  shares  of  Common  Stock  issued  as  a
                  payment-in-kind  dividend  shall be deemed to have been issued
                  for a  consideration  per  share  equal to the  amount  of the
                  dividend  divided  by the  number of  shares  of Common  Stock
                  issued in payment of such dividend.

                           (f)(5) Consideration for Stock. In case any shares of
                  Common  Stock,  Options  or  Convertible  Securities  shall be
                  issued or sold for cash, the  consideration  received therefor
                  shall be deemed to be the net amount  received  by the Company
                  therefor,  after deduction  therefrom of any expenses incurred
                  or any underwriting commissions or concessions paid or allowed
                  by the Company in connection therewith.  In case any shares of
                  Common  Stock,  Options  or  Convertible  Securities  shall be
                  issued or sold for a consideration other than cash, the amount
                  of the  consideration  other than cash received by the Company
                  shall be deemed to be the fair value of such  consideration as
                  determined  in good  faith by the  Board of  Directors  of the
                  Company,  after  deduction  of any  expenses  incurred  or any
                  underwriting commissions or concessions paid or allowed by the
                  Company in connection therewith.  In case any Options shall be
                  issued  in  connection  with  the  issue  and  sale  of  other
                  securities of the Company,  together  comprising  one integral

                                      -7-
<PAGE>

                  transaction,  such Options shall be deemed to have been issued
                  for a  consideration  equal  to the fair  market  value of the
                  Options (as determined using the Black-Scholes  option pricing
                  model or another method  mutually agreed to by the Company and
                  the  Warrantholder)  and the consideration for which the other
                  securities  shall  be  deemed  to have  been  issued  shall be
                  reduced  accordingly;  provided,  however,  that the  price at
                  which  shares of Common  Stock  issuable  upon the exercise of
                  such Options shall be deemed to be issued shall continue to be
                  governed by clause (f)(1) above. The Board of Directors of the
                  Company shall respond promptly,  in writing,  to an inquiry by
                  the  Warrantholder  as to the  fair  market  value of any such
                  Options.  In the  event  that the  Board of  Directors  of the
                  Company  and the  Warrantholder  are  unable to agree upon the
                  fair  market  value  of  such  Options,  the  Company  and the
                  Warrantholder  shall  jointly  select  an  appraiser,  who  is
                  experienced  in such matters.  The decision of such  appraiser
                  shall be final and conclusive,  and the cost of such appraiser
                  shall be borne evenly by the Company and the Warrantholder.

                           (f)(6)  Record Date. In case the Company shall take a
                  record of the  holders of its Common  Stock for the purpose of
                  entitling them (i) to receive a dividend or other distribution
                  payable in Common Stock, Options or Convertible  Securities or
                  (ii) to subscribe  for or purchase  Common  Stock,  Options or
                  Convertible Securities,  then such record date shall be deemed
                  to be the date of the  issue or sale of the  shares  of Common
                  Stock deemed to have been issued or sold upon the  declaration
                  of such dividend or the making of such other  distribution  or
                  the date of the  granting  of such  right of  subscription  or
                  purchase, as the case may be.

                           (f)(7)  Treasury  Shares.  The  number  of  shares of
                  Common Stock  outstanding  at any given time shall not include
                  shares  owned or held by or for the  account of the Company or
                  any of its wholly-owned  subsidiaries,  and the disposition of
                  any such shares  (other than the  cancellation  or  retirement
                  thereof)  shall be considered an issue or sale of Common Stock
                  for the purpose of this subsection (f).

                  (g)  Anything  herein  to the  contrary  notwithstanding,  the
Company shall not be required to make any adjustment of the Warrant Price in the
case of the  issuance of (A) capital  stock,  Options,  Convertible  Securities,
stock appreciation rights or phantom stock rights issued to directors, officers,
employees or  consultants  of the Company in  connection  with their  service as
directors of the Company,  their employment by the Company or their retention as
consultants by the Company pursuant to an equity compensation program,  contract
or  arrangement  approved  by the  Board  of  Directors  of the  Company  or the
compensation  committee of the Board of Directors of the Company,  (B) shares of
Common Stock issued upon the  conversion  or exercise of Options or  Convertible
Securities  issued prior to the date hereof,  provided such  securities  are not
amended  after the date hereof to increase  the number of shares of Common Stock
issuable  thereunder or to lower the exercise or conversion  price thereof,  (C)
securities  issued pursuant to that certain  Purchase  Agreement dated March 31,
2005,  among  the  Company  and  the  Investors  named  therein  (the  "Purchase
Agreement")  and  securities  issued upon the  exercise or  conversion  of those
securities,  (D)  securities  upon  a  reorganization,   merger,  consolidation,
exchange of shares or other combination, (E) securities in exchange for property
or services or in connection  with an acquisition of business or technology made
by the  Company  or issued as an  adjunct to a bank  financing,  (F)  securities
pursuant to any  licensing  arrangements,  equipment  financing  or research and
development  transactions,  the  primary  purpose of which is not the raising of
capital  and (G)  shares  of Common  Stock  issued  or  issuable  by reason of a
dividend,  stock split or other distribution on shares of Common Stock (but only
to the  extent  that  such a  dividend,  split  or  distribution  results  in an
adjustment  in the  Warrant  Price  pursuant  to the  other  provisions  of this
Warrant) (collectively, "Excluded Issuances").

                                      -8-
<PAGE>

                  (h) Upon any  adjustment  to the  Warrant  Price  pursuant  to
Section 8(f) above, the number of Warrant Shares purchasable  hereunder shall be
adjusted by multiplying such number by a fraction,  the numerator of which shall
be the Warrant  Price in effect  immediately  prior to such  adjustment  and the
denominator  of  which  shall  be  the  Warrant  Price  in  effect   immediately
thereafter.

         Section 9.  Fractional  Interest.  The Company shall not be required to
issue  fractions  of Warrant  Shares upon the exercise of this  Warrant.  If any
fractional  share of Common Stock would,  except for the provisions of the first
sentence of this Section 9, be deliverable upon such exercise,  the Company,  in
lieu  of  delivering  such  fractional  share,   shall  pay  to  the  exercising
Warrantholder  an amount in cash  equal to the Market  Price of such  fractional
share of Common Stock on the date of exercise.

         Section 10. Extension of Expiration Date. If the Company fails to cause
any Registration  Statement  covering  Registrable  Securities (unless otherwise
defined  herein,  capitalized  terms are as defined in the  Registration  Rights
Agreement relating to the Warrant Shares (the "Registration  Rights Agreement"))
to be declared effective prior to the applicable dates set forth therein,  or if
any of the events  specified  in Section  2(c)(ii)  of the  Registration  Rights
Agreement occurs, and the Blackout Period (whether alone, or in combination with
any  other  Blackout  Period)  continues  for more  than 60 days in any 12 month
period,  or for more than a total of 90 days,  then the Expiration  Date of this
Warrant  shall be  extended  one day for each day  beyond  the  60-day or 90-day
limits, as the case may be, that the Blackout Period continues.

         Section 11.  Benefits.  Nothing in this  Warrant  shall be construed to
give  any  person,   firm  or  corporation  (other  than  the  Company  and  the
Warrantholder)  any legal or equitable  right,  remedy or claim, it being agreed
that this Warrant shall be for the sole and exclusive benefit of the Company and
the Warrantholder.

         Section 12. Notices to  Warrantholder.  Upon the happening of any event
requiring an adjustment of the Warrant  Price,  the Company shall  promptly give
written  notice  thereof to the  Warrantholder  at the address  appearing in the
records of the  Company,  stating the  adjusted  Warrant  Price and the adjusted
number of  Warrant  Shares  resulting  from  such  event  and  setting  forth in
reasonable  detail  the  method of  calculation  and the facts  upon  which such
calculation is based.  Failure to give such notice to the  Warrantholder  or any
defect  therein  shall not  affect  the  legality  or  validity  of the  subject
adjustment.

                                      -9-
<PAGE>

         Section 13.  Identity of Transfer  Agent.  The  Transfer  Agent for the
Common Stock is American Stock Transfer and Trust Company.  Upon the appointment
of any  subsequent  transfer  agent for the Common  Stock or other shares of the
Company's  capital  stock  issuable  upon the exercise of the rights of purchase
represented  by the  Warrant,  the  Company  will  mail to the  Warrantholder  a
statement setting forth the name and address of such transfer agent.

         Section 14. Notices.  Unless otherwise provided, any notice required or
permitted  under  this  Warrant  shall be given in  writing  and shall be deemed
effectively  given as hereinafter  described (i) if given by personal  delivery,
then such  notice  shall be deemed  given upon such  delivery,  (ii) if given by
telex or  facsimile,  then such  notice  shall be deemed  given upon  receipt of
confirmation of complete  transmittal,  (iii) if given by mail, then such notice
shall be deemed  given  upon the  earlier of (A)  receipt of such  notice by the
recipient  or (B) three days after such notice is deposited in first class mail,
postage prepaid,  and (iv) if given by an internationally  recognized  overnight
air  courier,  then such notice  shall be deemed  given one  business  day after
delivery to such carrier.  All notices shall be addressed as follows:  if to the
Warrantholder,  at its address as set forth in the  Company's  books and records
and, if to the Company,  at the address as follows,  or at such other address as
the  Warrantholder  or the Company may  designate by ten days'  advance  written
notice to the other:

                           If to the Company:

                                    Ion Networks, Inc.
                                    120 Corporate Boulevard
                                    South Plainfield, NJ 07080
                                    Attention:
                                    Fax:

                           With a copy to:

                                    Moses & Singer LLP
                                    1301 Avenue of the Americas
                                    New York, NY 10019-6076
                                    Attention:  Allan Grauberd, Esq.
                                    Fax:  (212) 554-7700

         Section 15. Registration Rights. The initial  Warrantholder is entitled
to the  benefit of certain  registration  rights  with  respect to the shares of
Common  Stock  issuable  upon the  exercise  of this  Warrant as provided in the
Registration Rights Agreement,  and any subsequent Warrantholder may be entitled
to such rights.

         Section 16.  Successors.  All the covenants and provisions hereof by or
for the benefit of the Warrantholder  shall bind and inure to the benefit of its
respective successors and assigns hereunder.

         Section 17.  Governing  Law;  Consent to  Jurisdiction;  Waiver of Jury
Trial.  This Warrant shall be governed by, and construed in accordance with, the
internal laws of the State of New York,  without  reference to the choice of law
provisions   thereof.   The  Company  and,  by  accepting   this  Warrant,   the
Warrantholder,  each  irrevocably  submits to the exclusive  jurisdiction of the
courts of the State of New York located in New York County and the United States
District  Court for the  Southern  District  of New York for the  purpose of any
suit, action,  proceeding or judgment relating to or arising out of this Warrant
and the transactions  contemplated hereby. Service of process in connection with
any such suit,  action or proceeding may be served on each party hereto anywhere
in the world by the same  methods  as are  specified  for the  giving of notices
under  this  Warrant.   The  Company  and,  by  accepting   this  Warrant,   the
Warrantholder,  each irrevocably  consents to the jurisdiction of any such court
in any such suit, action or proceeding and to the laying of venue in such court.
The Company and, by accepting this Warrant, the Warrantholder,  each irrevocably
waives  any  objection  to the  laying  of  venue of any such  suit,  action  or
proceeding brought in such courts and irrevocably waives any claim that any such
suit,  action or  proceeding  brought in any such  court has been  brought in an
inconvenient  forum.  EACH OF THE COMPANY  AND, BY ITS  ACCEPTANCE  HEREOF,  THE
WARRANTHOLDER  HEREBY  WAIVES  ANY  RIGHT  TO  REQUEST  A  TRIAL  BY JURY IN ANY
LITIGATION  WITH  RESPECT TO THIS WARRANT AND  REPRESENTS  THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.

                                      -10-
<PAGE>

         Section  18.  Call  Provision.   Notwithstanding  any  other  provision
contained  herein to the contrary,  in the event that the closing bid price of a
share of Common Stock as traded on the Bulletin Board (or such other exchange or
stock market on which the Common  Stock may then be listed or quoted)  equals or
exceeds $0.69 (appropriately  adjusted for any stock split, reverse stock split,
stock  dividend or other  reclassification  or  combination  of the Common Stock
occurring  after the date  hereof)  for twenty  (20)  consecutive  trading  days
commencing  after the  Registration  Statement  (as defined in the  Registration
Rights  Agreement) has been declared  effective,  the Company,  upon thirty (30)
days prior  written  notice (the  "Notice  Period")  given to the  Warrantholder
within one  business  day  immediately  following  the end of such  twenty  (20)
trading  day  period,  may call this  Warrant,  in whole  but not in part,  at a
redemption  price  equal to $0.001 per share of Common  Stock  then  purchasable
pursuant to this Warrant; provided that (i) the Company simultaneously calls all
Company Warrants (as defined below) on the same terms and (ii) all of the shares
of Common Stock  issuable  hereunder  either (A) are  registered  pursuant to an
effective   Registration  Statement  (as  defined  in  the  Registration  Rights
Agreement)  which  has not been  suspended  and for  which  no stop  order is in
effect,  and pursuant to which the  Warrantholder is able to sell such shares of
Common Stock at all times during the Notice  Period or (B) no longer  constitute
Registrable  Securities  (as  defined  in the  Registration  Rights  Agreement).
Notwithstanding any such notice by the Company, the Warrantholder shall have the
right to exercise this Warrant prior to the end of the Notice Period.

         Section 19.  Cashless  Exercise.  Notwithstanding  any other  provision
contained  herein to the contrary,  from and after the first  anniversary of the
Closing Date (as defined in the Purchase  Agreement)  and so long as the Company
is  required  under the  Registration  Rights  Agreement  to have  effected  the
registration  of the  Warrant  Shares  for  sale  to the  public  pursuant  to a
Registration  Statement  (as such term is  defined  in the  Registration  Rights
Agreement),  if the Warrant  Shares may not be freely sold to the public for any
reason  (including,  but not  limited  to, the  failure  of the  Company to have

                                      -11-
<PAGE>

effected the registration of the Warrant Shares or to have a current  prospectus
available  for delivery or  otherwise,  but  excluding the period of any Allowed
Delay (as defined in the Registration  Rights Agreement),  the Warrantholder may
elect to  receive,  without the payment by the  Warrantholder  of the  aggregate
Warrant Price in respect of the shares of Common Stock to be acquired, shares of
Common  Stock equal to the value of this  Warrant or any  portion  hereof by the
surrender of this Warrant (or such portion of this Warrant  being so  exercised)
together with the Net Issue  Election  Notice  annexed hereto as Appendix B duly
executed,  at the office of the Company.  Thereupon,  the Company shall issue to
the  Warrantholder  such number of fully paid,  validly issued and nonassessable
shares of Common Stock as is computed using the following formula:

                                  X = Y (A - B)
                                                            A

where

        X = the number of shares of Common Stock which the Warrantholder has
then requested be issued to the Warrantholder;

        Y = the total number of shares of Common Stock covered by this Warrant
which the Warrantholder has surrendered at such time for cash-less exercise
(including both shares to be issued to the Warrantholder and shares to be
canceled as payment therefor);

        A = the "Market Price" of one share of Common Stock as at the time the
net issue election is made; and

        B = the Warrant Price in effect under this Warrant at the time the net
issue election is made.

        Section 20. No Rights as Stockholder. Prior to the exercise of this
Warrant, the Warrantholder shall not have or exercise any rights as a
stockholder of the Company by virtue of its ownership of this Warrant.

        Section 21. Amendment; Waiver. This Warrant is one of a series of
Warrants of like tenor issued by the Company pursuant to the Purchase Agreement
and initially covering an aggregate of 2,205,882 shares of Common Stock
(collectively, the "Company Warrants"). Any term of this Warrant may be amended
or waived (including the adjustment provisions included in Section 8 of this
Warrant) upon the written consent of the Company and the holders of Company
Warrants representing at least 50% of the number of shares of Common Stock then
subject to all outstanding Company Warrants (the "Majority Holders"); provided,
that (x) any such amendment or waiver must apply to all Company Warrants; and
(y) the number of Warrant Shares subject to this Warrant, the Warrant Price and
the Expiration Date may not be amended, and the right to exercise this Warrant
may not be altered or waived, without the written consent of the Warrantholder.

         Section 23. Section Headings.  The section headings in this Warrant are
for the  convenience of the Company and the  Warrantholder  and in no way alter,
modify, amend, limit or restrict the provisions hereof.

                                      -12-
<PAGE>

         IN WITNESS  WHEREOF,  the Company  has caused  this  Warrant to be duly
executed, as of the 30th day of March, 2005.

                                                     ION NETWORKS, INC.

                                                     By:
                                                     -------------------------
                                                     Name:
                                                     Title:

                                      -13-
<PAGE>

                                   APPENDIX A
                               ION NETWORKS, INC.
                              WARRANT EXERCISE FORM

To Ion Networks, Inc.:

         The  undersigned  hereby  irrevocably  elects to exercise  the right of
purchase  represented  by the within  Warrant  ("Warrant")  for, and to purchase
thereunder  by the payment of the Warrant  Price and  surrender  of the Warrant,
_______________  shares of Common Stock ("Warrant Shares") provided for therein,
and requests that certificates for the Warrant Shares be issued as follows:

                           -------------------------------------
                           Name
                           -------------------------------------
                           Address
                           -------------------------------------
                           Federal Tax ID or Social Security No.

         and delivered by (certified mail to the above address, or
                          (electronically (provide DWAC Instructions:_____), or
                          (other (specify): _______________________________).

and,  if the  number  of  Warrant  Shares  shall not be all the  Warrant  Shares
purchasable upon exercise of the Warrant,  that a new Warrant for the balance of
the Warrant  Shares  purchasable  upon exercise of this Warrant be registered in
the name of the undersigned Warrantholder or the undersigned's Assignee as below
indicated and delivered to the address stated below.

Dated: ___________________, ____

Note:  The signature must correspond with     Signature:-----------------------
the name of the Warrantholder as written
on the first page of the Warrant in every     ---------------------------------
particular, without alteration or enlargement     Name (please print)
or any change whatever, unless the Warrant
has been assigned.                                -----------------------------

                                                  Address
                                                  -----------------------------
                                                  Federal Identification or
                                                  Social Security No.

                                                  Assignee:

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

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

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

                                      -14-
<PAGE>

                                   APPENDIX B
                               ION NETWORKS, INC.
                            NET ISSUE ELECTION NOTICE

To: Ion Networks, Inc.

Date:[_________________________]

         The  undersigned  hereby  elects  under  Section 19 of this  Warrant to
surrender the right to purchase  [____________]  shares of Common Stock pursuant
to this Warrant and hereby  requests the issuance of  [_____________]  shares of
Common Stock.  The  certificate(s)  for the shares  issuable upon such net issue
election  shall  be  issued  in the  name  of the  undersigned  or as  otherwise
indicated below.

-----------------------------------------
Signature

-----------------------------------------
Name for Registration

-----------------------------------------
Mailing Address

                                      -15-Exhibit 10.1

                               PURCHASE AGREEMENT

                  THIS PURCHASE  AGREEMENT  ("Agreement") is made as of the 31st
day of March, 2005 by and among Ion Networks,  Inc., a Delaware corporation (the
"Company"),  and the Investors set forth on the signature  pages affixed  hereto
(each an "Investor" and collectively the "Investors").

                                    RECITALS

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

                  B. The Investors  wish to purchase  from the Company,  and the
Company wishes to sell and issue to the Investors, upon the terms and conditions
stated in this Agreement,  (i) an aggregate of 4,411,764 shares of the Company's
Common Stock,  par value $0.001 per share  (together  with any  securities  into
which such shares may be reclassified the "Common Stock"),  at purchase price of
$0.17 per share,  and (ii) warrants to purchase an aggregate of 2,205,882 shares
of Common Stock  (subject to adjustment) at an exercise price of $0.23 per share
(subject  to  adjustment)  in  the  form  attached  hereto  as  Exhibit  A  (the
"Warrants"); and

                  C.  Contemporaneous  with the  sale of the  Common  Stock  and
Warrants,  the parties  hereto will  execute and deliver a  Registration  Rights
Agreement,  in the form attached hereto as Exhibit B (the  "Registration  Rights
Agreement"),  pursuant  to which  the  Company  will  agree to  provide  certain
registration rights under the Securities Act of 1933, as amended,  and the rules
and regulations promulgated thereunder, and applicable state securities laws.

                  In  consideration  of the mutual  promises made herein and for
other good and valuable consideration,  the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

         1. Definitions.  In addition to those terms defined above and elsewhere
in this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings set forth below:

                  "Affiliate"  means,  with  respect  to any  Person,  any other
Person which directly or indirectly through one or more intermediaries Controls,
is controlled by, or is under common control with, such Person.

                  "Business  Day" means a day,  other than a Saturday or Sunday,
on which  banks  in New York  City  are  open  for the  general  transaction  of
business.

<PAGE>

                  "Common Stock Equivalents" means any securities of the Company
or the  Subsidiaries  which would  entitle the holder  thereof to acquire at any
time Common Stock,  including  without  limitation,  any debt,  preferred stock,
rights,  options,  warrants or other  instrument that is at any time convertible
into or exchangeable  for, or otherwise  entitles the holder thereof to receive,
Common Stock.

                  "Company's  Knowledge"  means  the  actual  knowledge  of  the
executive  officers  (as defined in Rule 405 under the 1933 Act) of the Company,
after due inquiry.

                  "Confidential  Information" means trade secrets,  confidential
information  and  know-how  (including  but  not  limited  to  ideas,  formulae,
compositions,  processes,  procedures and  techniques,  research and development
information,   computer  program  code,  performance   specifications,   support
documentation, drawings, specifications,  designs, business and marketing plans,
and customer and supplier lists and related information).

                  "Control" (including the terms "controlling",  "controlled by"
or "under common control with") means the possession, direct or indirect, of the
power to direct or cause the  direction  of the  management  and  policies  of a
Person,  whether  through the  ownership  of voting  securities,  by contract or
otherwise.

                  "Effective   Date"   means  the  date  on  which  the  initial
Registration Statement is declared effective by the SEC.

                  "Effectiveness  Deadline"  means the date on which the initial
Registration Statement is required to be declared effective by the SEC under the
terms of the Registration Rights Agreement.

                  "Intellectual  Property"  means  all  of  the  following:  (i)
patents, patent applications,  patent disclosures and inventions (whether or not
patentable  and whether or not reduced to practice);  (ii)  trademarks,  service
marks, trade dress, trade names,  corporate names,  logos,  slogans and Internet
domain names,  together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable  works; (iv) registrations,  applications and
renewals  for  any of the  foregoing;  and  (v)  proprietary  computer  software
(including but not limited to data, data bases and documentation).

                  "Material  Adverse Effect" means a material  adverse effect on
(i) the assets,  liabilities,  results of  operations,  condition  (financial or
otherwise),  business, or prospects of the Company and its Subsidiaries taken as
a whole, or (ii) the ability of the Company to perform its obligations under the
Transaction Documents.

                  "Person"  means  an  individual,   corporation,   partnership,
limited  liability  company,  trust,  business trust,  association,  joint stock
company,  joint  venture,  sole  proprietorship,   unincorporated  organization,
governmental  authority  or any other  form of entity  not  specifically  listed
herein.

                                      -2-
<PAGE>

                  "Purchase Price" means Seven Hundred Fifty Thousand Dollars
($750,000).

                  "SEC Filings" has the meaning set forth in Section 4.6.

                  "Registration  Statement"  has the  meaning  set  forth in the
Registration Rights Agreement.

                  "Securities"  means the Shares,  the  Warrants and the Warrant
Shares.

                  "Shares"  means the shares of Common Stock being  purchased by
the Investors hereunder.

                  "Subsidiary" of any Person means another Person,  an amount of
the voting securities, other voting ownership or voting partnership interests of
which is  sufficient  to elect at least a majority of its Board of  Directors or
other governing body (or, if there are no such voting interests,  50% or more of
the equity  interests of which) is owned  directly or  indirectly  by such first
Person.

                  "Transaction Documents" means this Agreement, the Warrants and
the Registration Rights Agreement.

                  "Warrant  Shares"  means the shares of Common  Stock  issuable
upon the exercise of the Warrants.

                  "1933 Act" means the  Securities  Act of 1933, as amended,  or
any successor statute, and the rules and regulations promulgated thereunder.

                  "1934  Act"  means the  Securities  Exchange  Act of 1934,  as
amended,  or any successor  statute,  and the rules and regulations  promulgated
thereunder.

         2. Purchase and Sale of the Shares and  Warrants.  Subject to the terms
and  conditions of this  Agreement,  on the Closing Date,  each of the Investors
shall severally, and not jointly, purchase, and the Company shall sell and issue
to the Investors,  the Shares and Warrants in the  respective  amounts set forth
opposite the Investors' names on the signature pages attached hereto in exchange
for the Purchase Price as specified in Section 3 below.

         3.  Closing.  Upon  confirmation  that the other  conditions to closing
specified  herein  have been  satisfied  or duly  waived by the  Investors,  the
Company  shall  deliver to Lowenstein  Sandler PC, in trust,  a  certificate  or
certificates,  registered in such name or names as the Investors may  designate,
representing the Shares and Warrants,  with  instructions that such certificates
are to be held for  release to the  Investors  only upon  payment in full of the
Purchase  Price to the  Company  by all the  Investors.  Upon  such  receipt  by
Lowenstein Sandler PC of the certificates,  each Investor shall promptly, but no
more than one Business Day  thereafter,  cause a wire transfer in same day funds
to be sent to the  account  of the  Company  as  instructed  in  writing  by the
Company,  in an amount  representing  such  Investor's  pro rata  portion of the
Purchase  Price as set forth on the signature  pages to this  Agreement.  On the
date  (the  "Closing  Date")  the  Company  receives  the  Purchase  Price,  the
certificates  evidencing  the  Shares  and  Warrants  shall be  released  to the
Investors  (the  "Closing").  The Closing of the purchase and sale of the Shares
and  Warrants  shall take place at the  offices of  Lowenstein  Sandler PC, 1251
Avenue of the Americas,  18th Floor,  New York, New York 10020, or at such other
location and on such other date as the Company and the Investors  shall mutually
agree.

                                      -3-
<PAGE>

         4.  Representations  and Warranties of the Company.  The Company hereby
represents  and  warrants  to the  Investors  that,  except  as set forth in the
schedules delivered herewith (collectively, the "Disclosure Schedules"):

                  4. 1 Organization,  Good Standing and  Qualification.  Each of
the  Company and its  Subsidiaries  is a  corporation  duly  organized,  validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
incorporation  and has all requisite  corporate  power and authority to carry on
its business as now conducted and to own its properties. Each of the Company and
its  Subsidiaries is duly qualified to do business as a foreign  corporation and
is in good standing in each jurisdiction in which the conduct of its business or
its  ownership  or  leasing of  property  makes  such  qualification  or leasing
necessary  unless the failure to so qualify has not and could not  reasonably be
expected to have a Material  Adverse  Effect.  The  Company's  Subsidiaries  are
listed on Schedule 4.1 hereto.

                  4.2  Authorization.  The Company has full power and  authority
and has taken all  requisite  action on the part of the Company,  its  officers,
directors and stockholders  necessary for (i) the  authorization,  execution and
delivery of the Transaction Documents, (ii) the authorization of the performance
of all  obligations  of the  Company  hereunder  or  thereunder,  and  (iii) the
authorization,  issuance  (or  reservation  for  issuance)  and  delivery of the
Securities.  The Transaction  Documents  constitute the legal, valid and binding
obligations of the Company,  enforceable  against the Company in accordance with
their  terms,   subject  to   bankruptcy,   insolvency,   fraudulent   transfer,
reorganization,  moratorium and similar laws of general applicability,  relating
to or affecting creditors' rights generally.

                  4.3 Capitalization. Schedule 4.3 sets forth (a) the authorized
capital  stock of the  Company on the date  hereof;  (b) the number of shares of
capital stock issued and outstanding;  (c) the number of shares of capital stock
issuable  pursuant to the Company's stock plans; and (d) the number of shares of
capital stock issuable and reserved for issuance  pursuant to securities  (other
than the  Shares and the  Warrants)  exercisable  for,  or  convertible  into or
exchangeable  for any shares of capital stock of the Company.  All of the issued
and outstanding  shares of the Company's capital stock have been duly authorized
and validly  issued and are fully paid,  nonassessable  and free of  pre-emptive
rights and were  issued in full  compliance  with  applicable  state and federal
securities law and any rights of third parties.  Except as described on Schedule
4.3,  all of the  issued  and  outstanding  shares  of  capital  stock  of  each
Subsidiary  have been duly  authorized  and  validly  issued and are fully paid,
nonassessable  and free of pre-emptive  rights,  were issued in full  compliance
with  applicable  law and any  rights  of  third  parties  and are  owned by the
Company,  beneficially and of record,  subject to no lien,  encumbrance or other
adverse  claim.  Except as described  on Schedule  4.3, no Person is entitled to
pre-emptive  or similar  statutory  or  contractual  rights with  respect to any
securities  of the Company.  Except as described on Schedule  4.3,  there are no
outstanding  warrants,   options,   convertible   securities  or  other  rights,
agreements or  arrangements  of any character  under which the Company or any of
its  Subsidiaries  is or may be obligated to issue any equity  securities of any
kind and except as contemplated  by this Agreement,  neither the Company nor any
of its  Subsidiaries is currently in negotiations for the issuance of any equity
securities  of any kind.  Except as described on Schedule 4.3 and except for the
Registration  Rights  Agreement,  there  are  no  voting  agreements,   buy-sell
agreements,  option or right of first purchase agreements or other agreements of
any  kind  among  the  Company  and any of the  securityholders  of the  Company
relating to the  securities of the Company held by them.  Except as described on
Schedule 4.3 and except as provided in the  Registration  Rights  Agreement,  no
Person has the right to require the Company to register  any  securities  of the
Company under the 1933 Act,  whether on a demand basis or in connection with the
registration of securities of the Company for its own account or for the account
of any other Person.

                                      -4-
<PAGE>

                  Except as described on Schedule  4.3, the issuance and sale of
the Securities hereunder will not obligate the Company to issue shares of Common
Stock or other  securities  to any other Person (other than the  Investors)  and
will not result in the adjustment of the exercise, conversion, exchange or reset
price of any outstanding security.

                  Except as described on Schedule 4.3, the Company does not have
outstanding  stockholder  purchase  rights  or  "poison  pill"  or  any  similar
arrangement  in effect  giving  any  Person  the right to  purchase  any  equity
interest in the Company upon the occurrence of certain events.

                  4.4 Valid  Issuance.  The  Shares  have been duly and  validly
authorized  and,  when issued and paid for pursuant to this  Agreement,  will be
validly issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances  and  restrictions  (other  than those  created by the  Investors),
except for  restrictions on transfer set forth in the  Transaction  Documents or
imposed by applicable  securities  laws. The Warrants have been duly and validly
authorized.  Upon the due exercise of the Warrants,  the Warrant  Shares will be
validly issued, fully paid and non-assessable free and clear of all encumbrances
and  restrictions,  except  for  restrictions  on  transfer  set  forth  in  the
Transaction  Documents or imposed by applicable securities laws. The Company has
reserved a sufficient  number of shares of Common  Stock for  issuance  upon the
exercise of the Warrants,  free and clear of all encumbrances and  restrictions,
except for  restrictions on transfer set forth in the  Transaction  Documents or
imposed  by  applicable  securities  laws and  except  for those  created by the
Investors.

                  4.5 Consents. Assuming the accuracy of the representations and
warranties of the  Investors set forth in Section 5 hereof,  except as set forth
in Schedule 4.5, the execution,  delivery and  performance by the Company of the
Transaction Documents and the offer, issuance and sale of the Securities require
no  consent  of,  action  by or in  respect  of,  or filing  with,  any  Person,
governmental  body,  agency,  or official other than filings that have been made
pursuant to applicable state  securities laws and post-sale  filings pursuant to
applicable  state and federal  securities  laws which the Company  undertakes to
file  within  the  applicable  time  periods.  Subject  to the  accuracy  of the
representations  and  warranties of each Investor set forth in Section 5 hereof,
the Company has taken all action  necessary  to exempt (i) the issuance and sale
of the Securities,  (ii) the issuance of the Warrant Shares upon due exercise of
the Warrants,  and (iii) the other transactions  contemplated by the Transaction
Documents  from the provisions of any  stockholder  rights plan or other "poison
pill" arrangement, any anti-takeover,  business combination or control share law
or statute  binding on the  Company or to which the Company or any of its assets
and properties may be subject and any provision of the Company's  Certificate of
Incorporation  or By-laws  that is or could  reasonably  be  expected  to become
applicable to the Investors as a result of the transactions contemplated hereby,
including without limitation,  the issuance of the Securities and the ownership,
disposition  or voting of the Securities by the Investors or the exercise of any
right  granted  to the  Investors  pursuant  to  this  Agreement  or  the  other
Transaction Documents.

                                      -5-
<PAGE>

                  4.6  Delivery of SEC Filings;  Business.  The Company has made
available to the Investors through the EDGAR system, true and complete copies of
the Company's most recent Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2004 (the  "10-KSB"),  and all other  reports  filed by the Company
pursuant  to the 1934 Act since the  filing of the  10-KSB and prior to the date
hereof (collectively,  the "SEC Filings").  The SEC Filings are the only filings
required of the Company  pursuant to the 1934 Act for such  period.  The Company
and its Subsidiaries  are engaged in all material  respects only in the business
described in the SEC Filings and the SEC Filings contain a complete and accurate
description  in all  material  respects  of the  business of the Company and its
Subsidiaries, taken as a whole.

                  4.7 Use of  Proceeds.  The  net  proceeds  of the  sale of the
Shares and the  Warrants  hereunder  shall be used by the  Company  for  working
capital and general corporate purposes.

                  4.8      No  Material Adverse Change. Since December 31, 2004,
except as  identified  and  described  in the SEC  Filings  or as  described  on
Schedule 4.8, there has not been:

                           (i)   any   change   in  the   consolidated   assets,
liabilities,  financial  condition or operating results of the Company from that
reflected in the financial statements included in the 10-KSB, except for changes
in the ordinary  course of business  which have not had and could not reasonably
be expected to have a Material Adverse Effect, individually or in the aggregate;

                           (ii) any  declaration or payment of any dividend,  or
any authorization or payment of any distribution, on any of the capital stock of
the Company, or any redemption or repurchase of any securities of the Company;

                           (iii)  any  material  damage,  destruction  or  loss,
whether or not covered by insurance to any assets or  properties  of the Company
or its Subsidiaries;

                           (iv)  any  waiver,  not in  the  ordinary  course  of
business,  by the Company or any Subsidiary of a material right or of a material
debt owed to it;

                           (v) any  satisfaction or discharge of any lien, claim
or  encumbrance  or payment of any  obligation  by the Company or a  Subsidiary,
except in the  ordinary  course of  business  and which is not  material  to the
assets,  properties,  financial condition,  operating results or business of the
Company and its  Subsidiaries  taken as a whole (as such  business is  presently
conducted and as it is proposed to be conducted);

                                      -6-
<PAGE>

                           (vi)  any  change  or  amendment  to  the   Company's
Certificate  of  Incorporation  or by-laws,  or material  change to any material
contract or  arrangement  by which the Company or any  Subsidiary is bound or to
which any of their respective assets or properties is subject;

                           (vii) any material labor  difficulties or labor union
organizing   activities  with  respect  to  employees  of  the  Company  or  any
Subsidiary;

                           (viii) any material  transaction  entered into by the
Company or a Subsidiary other than in the ordinary course of business;

                           (ix) the loss of the services of any key employee, or
material  change in the  composition  or duties of the senior  management of the
Company or any Subsidiary;

                           (x) the loss or threatened loss of any customer which
has had or could reasonably be expected to have a Material Adverse Effect; or

                           (xi) any other event or  condition  of any  character
that has had or could reasonably be expected to have a Material Adverse Effect.

                  4.9      SEC Filings.

                           (a) At the time of filing  thereof,  the SEC  Filings
complied as to form in all material  respects with the  requirements of the 1934
Act and did not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.

                           (b) Each  registration  statement  and any  amendment
thereto  filed by the Company since January 1, 2001 pursuant to the 1933 Act and
the rules and regulations thereunder, as of the date such statement or amendment
became effective, complied as to form in all material respects with the 1933 Act
and did not contain any untrue statement of a material fact or omit to state any
material  fact  required to be stated  therein or necessary in order to make the
statements  made therein not misleading;  and each prospectus  filed pursuant to
Rule  424(b)  under the 1933 Act,  as of its issue date and as of the closing of
any sale of securities  pursuant thereto did not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements  made therein,  in the light of the
circumstances under which they were made, not misleading.

                                      -7-
<PAGE>

                  4.10 No Conflict, Breach, Violation or Default. The execution,
delivery and  performance  of the  Transaction  Documents by the Company and the
issuance and sale of the Securities will not conflict with or result in a breach
or  violation  of any of the terms and  provisions  of, or  constitute a default
under (i) the Company's  Certificate of Incorporation  or the Company's  Bylaws,
both as in effect on the date  hereof  (true and  complete  copies of which have
been made available to the Investors  through the EDGAR system),  or (ii)(a) any
statute,  rule,  regulation or order of any  governmental  agency or body or any
court, domestic or foreign, having jurisdiction over the Company, any Subsidiary
or any of  their  respective  assets  or  properties,  or (b) any  agreement  or
instrument  to which the  Company or any  Subsidiary  is a party or by which the
Company or a Subsidiary is bound or to which any of their  respective  assets or
properties is subject.

                  4.11 Tax Matters.  The Company and each  Subsidiary has timely
prepared and filed all tax returns required to have been filed by the Company or
such Subsidiary with all appropriate  governmental  agencies and timely paid all
taxes shown thereon or otherwise owed by it. The charges,  accruals and reserves
on the books of the  Company  in respect  of taxes for all  fiscal  periods  are
adequate in all material respects,  and there are no material unpaid assessments
against the Company or any Subsidiary nor, to the Company's Knowledge, any basis
for the assessment of any additional taxes, penalties or interest for any fiscal
period or audits by any federal,  state or local taxing authority except for any
assessment which is not material to the Company and its Subsidiaries, taken as a
whole.  All taxes and other  assessments  and  levies  that the  Company  or any
Subsidiary  is required  to  withhold  or to collect for payment  have been duly
withheld and collected and paid to the proper governmental entity or third party
when  due.  There  are no tax  liens or  claims  pending  or,  to the  Company's
Knowledge,  threatened  against  the Company or any  Subsidiary  or any of their
respective  assets or property.  Except as described on Schedule 4.11, there are
no outstanding  tax sharing  agreements or other such  arrangements  between the
Company and any Subsidiary or other corporation or entity.

                  4.12  Title to  Properties.  Except  as  disclosed  in the SEC
Filings,  the Company and each  Subsidiary has good and marketable  title to all
real  properties  and all other  properties and assets owned by it, in each case
free from liens, encumbrances and defects that would materially affect the value
thereof or  materially  interfere  with the use made or currently  planned to be
made thereof by them;  and except as  disclosed in the SEC Filings,  the Company
and each Subsidiary  holds any leased real or personal  property under valid and
enforceable  leases with no exceptions that would materially  interfere with the
use made or currently planned to be made thereof by them.

                  4.13  Certificates,  Authorities and Permits.  The Company and
each Subsidiary possess adequate certificates,  authorities or permits issued by
appropriate  governmental  agencies or bodies  necessary to conduct the business
now operated by it, and neither the Company nor any  Subsidiary has received any
notice of  proceedings  relating to the revocation or  modification  of any such
certificate, authority or permit that, if determined adversely to the Company or
such Subsidiary, could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.

                  4.14     Labor Matters.

                (a) Except as set forth on Schedule  4.14,  the Company is not a
party to or bound by any collective  bargaining  agreements or other  agreements
with labor  organizations.  The Company has not violated in any material respect
any laws,  regulations,  orders or  contract  terms,  affecting  the  collective
bargaining rights of employees,  labor organizations or any laws, regulations or
orders affecting employment  discrimination,  equal opportunity  employment,  or
employees' health, safety, welfare, wages and hours.

                                      -8-
<PAGE>

                (b)  (i)  There  are  no  labor  disputes  existing,  or to  the
Company's Knowledge,  threatened, involving strikes, slow-downs, work stoppages,
job actions, disputes,  lockouts or any other disruptions of or by the Company's
employees,  (ii) there are no unfair labor  practices or petitions  for election
pending or, to the Company's  Knowledge,  threatened  before the National  Labor
Relations Board or any other federal,  state or local labor commission  relating
to the Company's  employees,  (iii) no demand for  recognition or  certification
heretofore made by any labor  organization or group of employees is pending with
respect to the Company and (iv) to the Company's  Knowledge,  the Company enjoys
good labor and employee relations with its employees and labor organizations.

                (c) The Company is, and at all times has been,  in compliance in
all material respects with all applicable laws respecting  employment (including
laws relating to  classification  of employees and independent  contractors) and
employment practices,  terms and conditions of employment,  wages and hours, and
immigration and naturalization.  There no claims are pending against the Company
before the Equal Employment  Opportunity  Commission or any other administrative
body or in any court  asserting  any  violation of Title VII of the Civil Rights
Act of 1964, the Age Discrimination  Act of 1967, 42 U.S.C.  ss.ss. 1981 or 1983
or any  other  federal,  state  or  local  Law,  statute  or  ordinance  barring
discrimination in employment.

                (d) Except as  disclosed  in the SEC Filings or as  described on
Schedule  4.14,  the Company is not a party to, or bound by, any  employment  or
other  contract or agreement  that contains any  severance,  termination  pay or
change of control liability or obligation,  including,  without limitation,  any
"excess  parachute  payment,"  as  defined in  Section  2806(b) of the  Internal
Revenue Code.

(e) Except as specified in Schedule 4.14,  each of the Company's  employees is a
Person who is either a United States citizen or a permanent resident entitled to
work in the United  States.  To the  Company's  Knowledge,  the  Company  has no
liability for the improper  classification  by the Company of such  employees as
independent contractors or leased employees prior to the Closing.

                  4.15     Intellectual Property.

                           (a) All Intellectual  Property of the Company and its
Subsidiaries is currently in compliance with all legal  requirements  (including
timely filings,  proofs and payments of fees) and is valid and  enforceable.  No
Intellectual  Property of the Company or its Subsidiaries which is necessary for
the conduct of Company's and each of its Subsidiaries'  respective businesses as
currently  conducted or as currently proposed to be conducted has been or is now
involved in any  cancellation,  dispute or  litigation,  and,  to the  Company's
Knowledge,  no such  action  is  threatened.  No patent  of the  Company  or its
Subsidiaries  has  been  or  is  now  involved  in  any  interference,  reissue,
re-examination or opposition proceeding.

                                      -9-
<PAGE>

                           (b) All of the licenses and  sublicenses and consent,
royalty or other agreements concerning Intellectual Property which are necessary
for the  conduct  of the  Company's  and  each of its  Subsidiaries'  respective
businesses  as currently  conducted or as currently  proposed to be conducted to
which the Company or any  Subsidiary  is a party or by which any of their assets
are  bound   (other   than   generally   commercially   available,   non-custom,
off-the-shelf software application programs having a retail acquisition price of
less than $10,000 per license)  (collectively,  "License  Agreements") are valid
and  binding  obligations  of the Company or its  Subsidiaries  that are parties
thereto and, to the Company's Knowledge, the other parties thereto,  enforceable
in accordance with their terms,  except to the extent that  enforcement  thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting the enforcement of creditors'  rights
generally,  and  there  exists  no event or  condition  which  will  result in a
material  violation  or breach of or  constitute  (with or without due notice or
lapse of time or both) a default by the Company or any of its Subsidiaries under
any such License Agreement.

                           (c) To the Company's  Knowledge,  the Company and its
Subsidiaries own or have the valid right to use all of the Intellectual Property
that is necessary for the conduct of the Company's and each of its Subsidiaries'
respective  businesses  as currently  conducted  or as currently  proposed to be
conducted and for the ownership,  maintenance and operation of the Company's and
its  Subsidiaries'   properties  and  assets,  free  and  clear  of  all  liens,
encumbrances,   adverse   claims  or  obligations  to  license  all  such  owned
Intellectual Property and Confidential Information,  other than licenses entered
into in the ordinary course of the Company's and its  Subsidiaries'  businesses.
To the Company's  Knowledge,  the Company and its Subsidiaries  have a valid and
enforceable right to use all third party Intellectual  Property and Confidential
Information used or held for use in the respective businesses of the Company and
its Subsidiaries.

                           (d) To the  Company's  Knowledge,  the conduct of the
Company's  and its  Subsidiaries'  businesses  as currently  conducted  does not
infringe or otherwise  impair or conflict with  (collectively,  "Infringe")  any
Intellectual   Property  rights  of  any  third  party  or  any  confidentiality
obligation  owed  to a  third  party,  and,  to  the  Company's  Knowledge,  the
Intellectual  Property  and  Confidential  Information  of the  Company  and its
Subsidiaries  which are  necessary  for the conduct of Company's and each of its
Subsidiaries'  respective  businesses  as  currently  conducted  or as currently
proposed to be conducted are not being Infringed by any third party. There is no
litigation  or order  pending or  outstanding  or, to the  Company's  Knowledge,
threatened  or imminent,  that seeks to limit or challenge or that  concerns the
ownership,  use,  validity or  enforceability  of any  Intellectual  Property or
Confidential  Information of the Company and its  Subsidiaries and the Company's
and  its  Subsidiaries'  use  of  any  Intellectual   Property  or  Confidential
Information owned by a third party, and, to the Company's Knowledge, there is no
valid basis for the same.

                           (e) The consummation of the transactions contemplated
hereby and by the other Transaction Documents will not result in the alteration,
loss,  impairment of or restriction on the Company's or any of its Subsidiaries'
ownership  or  right to use any of the  Intellectual  Property  or  Confidential
Information  which is  necessary  for the conduct of  Company's  and each of its
Subsidiaries'  respective  businesses  as  currently  conducted  or as currently
proposed to be conducted.

                                      -10-
<PAGE>

                           (f) The  Company  and  its  Subsidiaries  have  taken
reasonable steps to protect the Company's and its Subsidiaries'  rights in their
Intellectual Property and Confidential  Information.  Each employee,  consultant
and contractor who has had access to Confidential Information which is necessary
for the conduct of Company's and each of its Subsidiaries' respective businesses
as currently  conducted or as currently proposed to be conducted has executed an
agreement to maintain the  confidentiality of such Confidential  Information and
has executed appropriate  agreements that are substantially  consistent with the
Company's  standard forms  thereof.  Except under  confidentiality  obligations,
there  has  been  no  material  disclosure  of  any  of  the  Company's  or  its
Subsidiaries' Confidential Information to any third party.

                  4.16  Environmental  Matters.  Neither  the  Company  nor  any
Subsidiary is in violation of any statute, rule,  regulation,  decision or order
of any governmental agency or body or any court,  domestic or foreign,  relating
to the use,  disposal or release of hazardous or toxic substances or relating to
the protection or restoration of the  environment or human exposure to hazardous
or toxic substances  (collectively,  "Environmental Laws"), owns or operates any
real  property   contaminated   with  any  substance  that  is  subject  to  any
Environmental  Laws,  is  liable  for any  off-site  disposal  or  contamination
pursuant to any Environmental  Laws, and is subject to any claim relating to any
Environmental Laws, which violation,  contamination,  liability or claim has had
or could reasonably be expected to have a Material Adverse Effect,  individually
or in the  aggregate;  and there is no pending or, to the  Company's  Knowledge,
threatened investigation that might lead to such a claim.

                  4.17  Litigation.  Except as described on Schedule 4.17, there
are no pending actions,  suits or proceedings  against or affecting the Company,
its  Subsidiaries  or  any  of its or  their  properties;  and to the  Company's
Knowledge, no such actions, suits or proceedings are threatened or contemplated.

                  4.18 Financial  Statements.  The financial statements included
in each SEC Filing present fairly,  in all material  respects,  the consolidated
financial  position of the  Company as of the dates  shown and its  consolidated
results of operations and cash flows for the periods  shown,  and such financial
statements  have been  prepared  in  conformity  with  United  States  generally
accepted accounting principles applied on a consistent basis ("GAAP") (except as
may be disclosed therein or in the notes thereto,  and, in the case of quarterly
financial statements, as permitted by Form 10-QSB under the 1934 Act). Except as
set forth in the financial statements of the Company included in the SEC Filings
filed prior to the date hereof or as  described  on Schedule  4.18,  neither the
Company nor any of its Subsidiaries has incurred any liabilities,  contingent or
otherwise, except those incurred in the ordinary course of business,  consistent
(as to amount and nature) with past  practices  since the date of such financial
statements,  none of which,  individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect.

                  4.19  Insurance  Coverage.  The  Company  and each  Subsidiary
maintains in full force and effect  insurance  coverage  that is  customary  for
comparably  situated  companies for the business being  conducted and properties
owned or leased by the Company and each Subsidiary,  and the Company  reasonably
believes such insurance coverage to be adequate against all liabilities,  claims
and risks  against which it is customary for  comparably  situated  companies to
insure.

                                      -11-
<PAGE>

                  4.20 Brokers and Finders.  No Person will have, as a result of
the  transactions  contemplated by the Transaction  Documents,  any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or  understanding  entered  into by or on behalf of the  Company,  other than as
described in Schedule 4.20.

                  4.21 No  Directed  Selling  Efforts or  General  Solicitation.
Neither  the  Company  nor any Person  acting on its behalf  has  conducted  any
general  solicitation  or  general  advertising  (as  those  terms  are  used in
Regulation D) in connection with the offer or sale of any of the Securities.

                  4.22 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 Company  security or solicited  any
offers to buy any security,  under  circumstances  that would  adversely  affect
reliance by the Company on Section 4(2) for the exemption from  registration for
the  transactions  contemplated  hereby  or would  require  registration  of the
Securities under the 1933 Act.

                  4.23   Private   Placement.   Assuming  the  accuracy  of  the
representations  and  warranties of the investors set forth in Section 5 hereof,
the offer and sale of the Securities to the Investors as contemplated  hereby is
exempt from the registration requirements of the 1933 Act.

                  4.24 Questionable Payments. Neither the Company nor any of its
Subsidiaries nor, to the Company's Knowledge, any of their respective current or
former stockholders,  directors,  officers,  employees,  agents or other Persons
acting on behalf of the Company or any Subsidiary,  has on behalf of the Company
or any Subsidiary or in connection with their  respective  businesses:  (a) used
any corporate funds for unlawful  contributions,  gifts,  entertainment or other
unlawful  expenses  relating  to  political  activity;  (b) made any  direct  or
indirect  unlawful  payments to any  governmental  officials or  employees  from
corporate  funds;  (c) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets; (d) made any false or fictitious entries on
the books and records of the Company or any Subsidiary; or (e) made any unlawful
bribe, rebate, payoff, influence payment,  kickback or other unlawful payment of
any nature.

                  4.25 Transactions with Affiliates.  Except as disclosed in the
SEC Filings or as disclosed on Schedule 4.25,  none of the officers or directors
of the Company and, to the  Company's  Knowledge,  none of the  employees of the
Company  is  presently  a party  to any  transaction  with  the  Company  or any
Subsidiary  (other than as holders of stock  options  and/or  warrants,  and for
services  as  employees,  officers  and  directors),   including  any  contract,
agreement or other  arrangement  providing for the  furnishing of services to or
by,  providing for rental of real or personal  property to or from, or otherwise
requiring payments to or from any officer,  director or such employee or, to the
Company's  Knowledge,  any entity in which any  officer,  director,  or any such
employee  has a  substantial  interest  or is an officer,  director,  trustee or
partner.

                                      -12-
<PAGE>

                  4.26 Internal Controls.  The Company is in material compliance
with the provisions of the  Sarbanes-Oxley  Act of 2002 currently  applicable to
the  Company.  The  Company and the  Subsidiaries  maintain a system of internal
accounting  controls  sufficient  to  provide  reasonable   assurance  that  (i)
transactions  are executed in accordance with  management's  general or specific
authorizations,   (ii)   transactions   are  recorded  as  necessary  to  permit
preparation  of financial  statements  in  conformity  with GAAP and to maintain
asset  accountability,  (iii) access to assets is permitted  only in  accordance
with  management's  general or  specific  authorization,  and (iv) the  recorded
accountability  for assets is compared  with the existing  assets at  reasonable
intervals and appropriate  action is taken with respect to any differences.  The
Company has established  disclosure  controls and procedures (as defined in 1934
Act Rules  13a-14 and  15d-14)  for the Company  and  designed  such  disclosure
controls and  procedures  to ensure that  material  information  relating to the
Company, including the Subsidiaries, is made known to the certifying officers by
others  within  those  entities,  particularly  during  the  period in which the
Company's  most recently filed period report under the 1934 Act, as the case may
be, is being  prepared.  The Company's  certifying  officers have  evaluated the
effectiveness  of the  Company's  controls and  procedures  as of the end of the
period  covered by the most recently  filed  periodic  report under the 1934 Act
(such date, the "Evaluation  Date").  The Company presented in its most recently
filed  periodic  report  under the 1934 Act the  conclusions  of the  certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no  significant  changes in the Company's  internal  controls (as such
term is  defined  in  Item  307(b)  of  Regulation  S-K)  or,  to the  Company's
Knowledge,  in other  factors  that could  significantly  affect  the  Company's
internal  controls.  The  Company  maintains  and will  continue  to  maintain a
standard system of accounting  established  and  administered in accordance with
GAAP and the applicable requirements of the 1934 Act.

                  4.27 Disclosures. Neither the Company nor any Person acting on
its  behalf has  provided  the  Investors  or their  agents or counsel  with any
information   that  constitutes  or  might   constitute   material,   non-public
information. The written materials delivered to the Investors in connection with
the  transactions  contemplated by the Transaction  Documents do not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
in order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading.

         5.  Representations  and  Warranties  of  the  Investors.  Each  of the
Investors  hereby  severally,  and not jointly,  represents  and warrants to the
Company that:

                  5.1  Organization  and  Existence.  Such Investor is a validly
existing  corporation,  limited partnership or limited liability company and has
all requisite  corporate,  partnership  or limited  liability  company power and
authority to invest in the Securities pursuant to this Agreement.

                                      -13-
<PAGE>

                  5.2 Authorization.  The execution, delivery and performance by
such  Investor of the  Transaction  Documents to which such  Investor is a party
have been duly authorized and will each constitute the valid and legally binding
obligation  of such  Investor,  enforceable  against such Investor in accordance
with their  respective  terms,  subject to  bankruptcy,  insolvency,  fraudulent
transfer, reorganization,  moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally.

                  5.3 Purchase  Entirely for Own Account.  The  Securities to be
received by such Investor  hereunder  will be acquired for such  Investor's  own
account,  not as  nominee  or  agent,  and  not  with a view  to the  resale  or
distribution of any part thereof in violation of the 1933 Act, and such Investor
has no present intention of selling, granting any participation in, or otherwise
distributing the same in violation of the 1933 Act without  prejudice,  however,
to such Investor's right at all times to sell or otherwise dispose of all or any
part  of such  Securities  in  compliance  with  applicable  federal  and  state
securities laws.  Nothing  contained herein shall be deemed a representation  or
warranty by such Investor to hold the  Securities  for any period of time.  Such
Investor is not a broker-dealer registered with the SEC under the 1934 Act or an
entity engaged in a business that would require it to be so registered.

                  5.4 Investment Experience.  Such Investor acknowledges that it
can bear the economic risk and complete loss of its investment in the Securities
and has such knowledge and  experience in financial or business  matters that it
is capable of  evaluating  the merits and risks of the  investment  contemplated
hereby.

                  5.5  Disclosure  of  Information.  Such  Investor  has  had an
opportunity to receive all  information  related to the Company  requested by it
and to ask  questions  of and receive  answers  from the Company  regarding  the
Company,  its  business  and the terms and  conditions  of the  offering  of the
Securities.  Such  Investor  acknowledges  receipt of copies of the SEC Filings.
Neither such  inquiries nor any other due diligence  investigation  conducted by
such Investor shall modify, amend or affect such Investor's right to rely on the
Company's representations and warranties contained in this Agreement.

                  5.6 Restricted Securities.  Such Investor understands that the
Securities are  characterized as "restricted  securities" under the U.S. federal
securities  laws  inasmuch  as they are being  acquired  from the  Company  in a
transaction  not  involving  a public  offering  and that  under  such  laws and
applicable  regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.

                  5.7 Legends.  It is understood that, except as provided below,
certificates  evidencing  the  Securities  may bear the following or any similar
legend:

                           (a) "The  securities  represented  hereby  may not be
transferred unless (i) such securities have been registered for sale pursuant to
the  Securities  Act of 1933,  as  amended,  (ii)  such  securities  may be sold
pursuant to Rule 144(k), or (iii) the Company has received an opinion of counsel
reasonably  satisfactory  to it that such  transfer may lawfully be made without
registration under the Securities Act of 1933 or qualification  under applicable
state securities laws."

                                      -14-
<PAGE>

                           (b) If  required by the  authorities  of any state in
connection with the issuance of sale of the  Securities,  the legend required by
such state authority.

                      5.8  Accredited  Investor.  Such Investor is an accredited
investor as defined in Rule 501(a) of Regulation  D, as amended,  under the 1933
Act.

                      5.9 No General  Solicitation.  Such Investor did not learn
of the  investment in the  Securities as a result of any public  advertising  or
general solicitation.

                      5.10 Brokers and Finders. No Person will have, as a result
of the transactions  contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or an Investor for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of such Investor.

                      5.11 Prohibited Transactions.  During the last thirty (30)
days prior to the date hereof,  neither such  Investor nor any Affiliate of such
Investor which (x) had knowledge of the transactions  contemplated  hereby,  (y)
has or shares discretion  relating to such Investor's  investments or trading or
information concerning such Investor's investments,  including in respect of the
Securities, or (z) is subject to such Investor's review or input concerning such
Affiliate's  investments or trading  (collectively,  "Trading  Affiliates") has,
directly or indirectly,  effected or agreed to effect any short sale, whether or
not against the box,  established any "put  equivalent  position" (as defined in
Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock,  granted any
other right (including, without limitation, any put or call option) with respect
to the Common Stock or with respect to any security that includes, relates to or
derived any  significant  part of its value from the Common  Stock or  otherwise
sought  to  hedge  its  position  in  the   Securities   (each,   a  "Prohibited
Transaction").  Prior to the  earliest to occur of (i) the  termination  of this
Agreement,  (ii) the Effective Date or (iii) the  Effectiveness  Deadline,  such
Investor  shall not,  and shall cause its  Trading  Affiliates  not to,  engage,
directly or indirectly, in a Prohibited Transaction.  Such Investor acknowledges
that the  representations,  warranties  and covenants  contained in this Section
5.11 are being made for the benefit of the  Investors as well as the Company and
that each of the other Investors  shall have an independent  right to assert any
claims  against  such  Investor  arising out of any breach or  violation  of the
provisions of this Section 5.11.

         6. Conditions to Closing.

                  6.1 Conditions to the Investors'  Obligations.  The obligation
of each  Investor  to  purchase  the Shares and the  Warrants  at the Closing is
subject to the fulfillment to such Investor's  satisfaction,  on or prior to the
Closing Date, of the  following  conditions,  any of which may be waived by such
Investor (as to itself only):

                           (a) The  representations  and warranties  made by the
Company  in  Section  4 hereof  qualified  as to  materiality  shall be true and
correct at all times prior to and on the Closing Date,  except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which

                                      -15-
<PAGE>

case  such  representation  or  warranty  shall be true and  correct  as of such
earlier date,  and, the  representations  and warranties  made by the Company in
Section 4 hereof not  qualified as to  materiality  shall be true and correct in
all material  respects at all times prior to and on the Closing Date,  except to
the extent any such representation or warranty expressly speaks as of an earlier
date, in which case such representation or warranty shall be true and correct in
all material  respects as of such earlier date. The Company shall have performed
in all material  respects all obligations  and conditions  herein required to be
performed or observed by it on or prior to the Closing Date.

                           (b)  The  Company  shall  have  obtained  any and all
consents, permits, approvals, registrations and waivers necessary or appropriate
for consummation of the purchase and sale of the Securities and the consummation
of the other  transactions  contemplated  by the Transaction  Documents,  all of
which shall be in full force and effect.

                           (c) The Company shall have executed and delivered the
Registration Rights Agreement.

                           (e) No judgment,  writ, order,  injunction,  award or
decree of or by any  court,  or judge,  justice  or  magistrate,  including  any
bankruptcy  court or judge,  or any order of or by any  governmental  authority,
shall have been issued,  and no action or proceeding  shall have been instituted
by any governmental  authority,  enjoining or preventing the consummation of the
transactions contemplated hereby or in the other Transaction Documents.

                           (f) The Company shall have  delivered a  Certificate,
executed  on behalf of the Company by its Chief  Executive  Officer or its Chief
Financial Officer,  dated as of the Closing Date,  certifying to the fulfillment
of the conditions  specified in  subsections  (a), (b), (d), (e) and (i) of this
Section 6.1.

                           (g) The Company shall have  delivered a  Certificate,
executed  on behalf of the  Company by its  Secretary,  dated as of the  Closing
Date,  certifying  the  resolutions  adopted  by the Board of  Directors  of the
Company approving the transactions  contemplated by this Agreement and the other
Transaction Documents and the issuance of the Securities, certifying the current
versions  of the  Certificate  of  Incorporation  and Bylaws of the  Company and
certifying as to the signatures and authority of persons signing the Transaction
Documents and related documents on behalf of the Company.

                           (h) The Investors shall have received an opinion from
Moses & Singer LLP, the Company's counsel, dated as of the Closing Date, in form
and substance  reasonably  acceptable to the Investors and addressing such legal
matters as the Investors may reasonably request.

                           (i) No stop order or suspension of trading shall have
been  imposed  by the SEC or any  other  governmental  or  regulatory  body with
respect to public trading in the Common Stock.

                                      -16-
<PAGE>

                  6.2 Conditions to  Obligations  of the Company.  The Company's
obligation  to sell and issue the  Shares  and the  Warrants  at the  Closing is
subject to the fulfillment to the satisfaction of the Company on or prior to the
Closing  Date of the  following  conditions,  any of which  may be waived by the
Company:

                           (a) The  representations  and warranties  made by the
Investors in Section 5 hereof,  other than the  representations  and  warranties
contained in Sections 5.3,  5.4,  5.5,  5.6,  5.7, 5.8 and 5.9 (the  "Investment
Representations"), shall be true and correct in all material respects when made,
and shall be true and correct in all material  respects on the Closing Date with
the same force and  effect as if they had been made on and as of said date.  The
Investment  Representations shall be true and correct in all respects when made,
and shall be true and correct in all  respects on the Closing Date with the same
force and effect as if they had been made on and as of said date.  The Investors
shall have  performed in all material  respects all  obligations  and conditions
herein  required to be  performed or observed by them on or prior to the Closing
Date.

                           (b) The  Investors  shall have executed and delivered
the Registration Rights Agreement.

                           (c) The Investors  shall have  delivered the Purchase
Price to the Company.

                  6.3     Termination of Obligations to Effect Closing; Effects.

                           (a) The obligations of the Company,  on the one hand,
and the Investors,  on the other hand, to effect the Closing shall  terminate as
follows:

                                    (i) Upon the mutual  written  consent of the
Company and the Investors;

                                    (ii) By the Company if any of the conditions
set forth in Section 6.2 shall have become  incapable of fulfillment,  and shall
not have been waived by the Company;

                                    (iii) By an Investor (with respect to itself
only) if any of the  conditions  set  forth in  Section  6.1 shall  have  become
incapable of fulfillment, and shall not have been waived by the Investor; or

                                    (iv) By either the  Company or any  Investor
(with  respect to itself  only) if the Closing  has not  occurred on or prior to
April 5, 2005;

provided,  however,  that,  except in the case of clause  (i)  above,  the party
seeking to terminate  its  obligation to effect the Closing shall not then be in
breach  of any of  its  representations,  warranties,  covenants  or  agreements
contained in this  Agreement or the other  Transaction  Documents if such breach
has  resulted  in the  circumstances  giving  rise to such  party's  seeking  to
terminate its obligation to effect the Closing.

                                      -17-
<PAGE>

                  (b) In the event of termination by the Company or any Investor
of its obligations to effect the Closing  pursuant to this Section 6.3,  written
notice  thereof  shall  forthwith be given to the other  Investors and the other
Investors  shall have the right to  terminate  their  obligations  to effect the
Closing upon written notice to the Company and the other  Investors.  Nothing in
this Section 6.3 shall be deemed to release any party from any liability for any
breach by such party of the terms and  provisions of this Agreement or the other
Transaction  Documents  or to impair  the right of any party to compel  specific
performance  by any other party of its  obligations  under this Agreement or the
other Transaction Documents.

         7. Covenants and Agreements of the Company.

                  7.1  Limitation  on Certain  Actions.  Commencing  on the date
hereof  and  continuing  until such time as the  Investors  no longer own in the
aggregate at least 400,000 shares  (appropriately  adjusted for any stock split,
reverse stock split, stock dividend or other  reclassification or combination of
the Common Stock occurring  after the date hereof),  the Company shall not offer
or sell or enter into any agreement,  arrangement or  understanding  to offer or
sell any Equity  Security  (as  defined  below) if the Equity  Security  (or any
agreement,  arrangement or understanding  entered into in connection  therewith)
provides for the future adjustment of (i) the purchase price therefor,  (ii) the
number of Equity Securities to be issued,  or (iii) the conversion,  exercise or
exchange rate applicable thereto (other than customary anti-dilution  provisions
no more  favorable to the holder than those  contained in the Warrants)  without
the prior written consent of the Required Investors,  which consent shall not be
unreasonably  withheld  or  delayed.  The term  "Equity  Securities"  means  the
Company's capital stock, warrants, rights, and options giving the holder thereof
the right to acquire  shares of capital  stock,  and any  security  directly  or
indirectly  convertible  into or exercisable for or exchangeable  into shares of
the Company's capital stock. Nothing in this Section 7.1 shall prohibit or limit
the Company from entering into or performing its obligations under an "earn-out"
or  similar  arrangement  entered  into in good  faith  in  connection  with the
acquisition of another entity or line of business  pursuant to which the Company
agrees to issue Equity  Securities to the  principals of such entity or business
line upon the achievement of certain performance targets established at the time
of the acquisition.

                  7.2  Reservation  of Common  Stock.  The Company  shall at all
times reserve and keep available out of its  authorized  but unissued  shares of
Common  Stock,  solely for the  purpose of  providing  for the  exercise  of the
Warrants, such number of shares of Common Stock as shall from time to time equal
the number of shares  sufficient  to permit the exercise of the Warrants  issued
pursuant to this Agreement in accordance with their respective terms.

                  7.3 Reports. The Company will furnish to such Investors and/or
their assignees such information relating to the Company and its Subsidiaries as
from time to time may  reasonably  be requested by such  Investors  and/or their
assignees; provided, however, that such Investors and/or assignees shall hold in
confidence any confidential or proprietary information received from the Company
and identified as such at the time of disclosure such  information and shall use
any such  confidential  or  proprietary  information  solely for the  purpose of
monitoring  and  evaluating  their  investment  in the  Company  and;  provided,
further,  that the Company shall not be required to provide any  information  to
the  Investors  which,  if disclosed to such  Investors  and/or their  assignees
pursuant to the terms of this Section 7.3,  would, in the good faith judgment of
the  Company,  cause the  Company or any  Subsidiary  to violate  the terms of a
confidentiality  undertaking  binding on the  Company or such  Subsidiary.  Each
Investor and/or assignee  acknowledges that it is aware, and that it will advise
its  representatives  who are given access to such information,  that the United
States  securities  laws may  prohibit  a person  who has  material,  non-public
information  concerning  matters  that may be  disclosed  to it pursuant to this
Section 7.3 from  purchasing  or selling  securities of the Company or a company
which may be, or may be affiliated  with, a party to a business  arrangement  or
proposed  business  arrangement  with the  Company  or from  communicating  such
information  to any other person under  circumstances  in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.

                                      -18-
<PAGE>

                  7.4 No Conflicting  Agreements.  The Company will not take any
action,  enter into any agreement or make any commitment  that would conflict or
interfere  in  any  material  respect  with  the  Company's  obligations  to the
Investors under the Transaction Documents.

                  7.5      Insurance.  The Company shall not materially   reduce
the insurance coverages described in Section 4.19.

                  7.6  Compliance  with Laws.  The  Company  will  comply in all
material  respects with all  applicable  laws,  rules,  regulations,  orders and
decrees of all governmental authorities.

                  7.7 Listing of Underlying  Shares and Related Matters.  If the
Company  applies  to have its  Common  Stock or other  securities  traded on any
principal  stock exchange or market,  it shall include in such  application  the
Shares and the Warrant Shares and will take such other action as is necessary to
cause such Common Stock to be so listed.

                  7.8  Termination of Covenants.  The provisions of Sections 7.3
through 7.6 shall terminate and be of no further force and effect on the date on
which the  Company's  obligations  under the  Registration  Rights  Agreement to
register  or  maintain  the  effectiveness  of  any  registration  covering  the
Registrable  Securities  (as such term is  defined  in the  Registration  Rights
Agreement) shall terminate.

                  7.8 Removal of Legends.  Upon the earlier of (i)  registration
for resale  pursuant to the  Registration  Rights  Agreement  and receipt by the
Company of the Investor's written  confirmation that such Securities will not be
disposed of except in compliance  with the prospectus  delivery  requirements of
the 1933 Act or (ii) Rule 144(k) becoming  available the Company shall,  upon an
Investor's  written  request,   promptly  cause   certificates   evidencing  the
Investor's  Securities to be replaced with  certificates  which do not bear such
restrictive legends, and Warrant Shares subsequently issued upon due exercise of
the Warrants shall not bear such restrictive  legends provided the provisions of
either  clause (i) or clause (ii)  above,  as  applicable,  are  satisfied  with
respect to such Warrant Shares. When the Company is required to cause unlegended
certificates to replace previously issued legended  certificates,  if unlegended
certificates  are not delivered to an Investor within three (3) Business Days of
submission by that Investor of legended certificate(s) to the Company's transfer
agent together with a representation letter in customary form, the Company shall
be liable to the Investor for  liquidated  damages in an amount equal to 1.5% of
the aggregate purchase price of the Securities  evidenced by such certificate(s)
for each  thirty  (30) day period (or  portion  thereof)  beyond  such three (3)
Business Day that the unlegended certificates have not been so delivered.

                                      -19-
<PAGE>

                  7.9 Right to Participate in Future  Financings.  From the date
hereof until one year after the Closing  Date,  upon any offering by the Company
of its Common Stock or Common Stock Equivalents at an equivalent price per share
(determined in accordance with the formulas set forth in the Warrants) of Common
Stock of less than $0.17  (appropriately  adjusted for any stock split,  reverse
stock split,  stock  dividend or other  reclassification  or  combination of the
Common Stock occurring after the date hereof) (a "Subsequent  Financing"),  each
Investor  shall have the right to participate  in such  Subsequent  Financing as
provided  herein.  At least five (5)  Business  Days prior to the closing of the
Subsequent  Financing,  the  Company  shall  deliver to each  Investor a written
notice of its intention to effect a Subsequent Financing  ("Pre-Notice"),  which
Pre-Notice  shall ask such  Investor  if it wants to review the  details of such
financing (such additional notice, a "Subsequent  Financing  Notice").  Upon the
request  of an  Investor,  and  only  upon a  request  by such  Investor,  for a
Subsequent  Financing Notice, the Company shall promptly,  but no later than one
Business Day after such request,  deliver a Subsequent  Financing Notice to such
Investor.  The Subsequent  Financing Notice shall describe in reasonable  detail
the proposed terms of such Subsequent Financing, the amount of proceeds intended
to be raised  thereunder,  the Person  with whom such  Subsequent  Financing  is
proposed to be effected,  and attached to which shall be a term sheet or similar
document relating  thereto.  Each Investor shall notify the Company by 6:30 p.m.
(New York City time) on the fifth (5th)  Business Day after their receipt of the
Subsequent  Financing  Notice  of its  willingness  to  provide  the  Subsequent
Financing on the terms described in the Subsequent Financing Notice,  subject to
completion of mutually acceptable documentation.  If one or more Investors shall
fail to so  notify  the  Company  of their  willingness  to  participate  in the
Subsequent  Financing,  the Investors  agreeing to participate in the Subsequent
Financing (the "Participating Investors") shall have the right to provide all of
the Subsequent Financing. If one or more Investors fail to notify the Company of
their   willingness  to  provide  all  of  the  Subsequent   Financing  and  the
Participating Investors do not agree to provide all of the Subsequent Financing,
the Company may effect the remaining portion of such Subsequent Financing on the
terms and to the Persons set forth in the Subsequent Financing Notice;  provided
that the Company must provide the Investors with a second  Subsequent  Financing
Notice,  and the Investors  will again have the right of first refusal set forth
above in this Section 7.9, if the  Subsequent  Financing  subject to the initial
Subsequent  Financing  Notice is not consummated for any reason on the terms set
forth in such Subsequent Financing Notice within 60 Business Days after the date
of the initial  Subsequent  Financing  Notice with the Person  identified in the
Subsequent  Financing  Notice.  In the event the Company  receives  responses to
Subsequent  Financing  Notices from Investors  seeking to purchase more than the
financing sought by the Company in the Subsequent Financing such Investors shall
have the right to purchase  their Pro Rata  Portion  (as  defined  below) of the
Common  Stock or  Common  Stock  Equivalents  to be  issued  in such  Subsequent
Financing.  "Pro Rata  Portion" is the ratio of (x) the amount  invested by such
Investor  pursuant to this  Agreement  (the  "Subscription  Amount") and (y) the
aggregate sum of all of the Subscription Amounts. Notwithstanding the foregoing,
this Section 7.9 shall not apply in respect of any Excluded Issuance (as defined
in the Warrant).

                                      -20-
<PAGE>

         7A.      Investor Covenant.

         7.1  Securities  Law  Compliance.  Each  Investor  shall company in all
material  respects with the  provisions of the 1933 Act and 1934 Act,  including
without limitation,  any reporting  requirements  pursuant to Sections 13(d) and
16(a) of the 1934 Act that may be  applicable to such  Investor's  investment in
the Securities..

         8. Survival and Indemnification.

                  8.1 Survival.  The representations and warranties contained in
this Agreement  shall survive the Closing of the  transactions  contemplated  by
this  Agreement for a period of two years  following the Closing.  The covenants
and agreements contained herein shall survive the Closing in accordance with the
terms thereof.

                           8.2 Indemnification. The Company  agrees to indemnify
and  hold  harmless  each  Investor  and its  Affiliates  and  their  respective
directors,  officers,  employees and agents from and against any and all losses,
claims,   damages,   liabilities  and  expenses  (including  without  limitation
reasonable  attorney  fees and  disbursements  and other  expenses  incurred  in
connection  with  investigating,  preparing  or defending  any action,  claim or
proceeding,  pending  or  threatened  and  the  costs  of  enforcement  thereof)
(collectively,  "Losses") to which such Person may become subject as a result of
any breach of representation,  warranty,  covenant or agreement made by or to be
performed on the part of the Company under the Transaction  Documents,  and will
reimburse  any such  Person for all such  amounts as they are  incurred  by such
Person.

                           8.3 Conduct of  Indemnification Proceedings. Promptly
after receipt by any Person (the "Indemnified  Person") of notice of any demand,
claim  or  circumstances  which  would  or  might  give  rise to a claim  or the
commencement  of any action,  proceeding  or  investigation  in respect of which
indemnity may be sought pursuant to Section 8.2, such  Indemnified  Person shall
promptly  notify the Company in writing and the Company shall assume the defense
thereof,  including the employment of counsel  reasonably  satisfactory  to such
Indemnified  Person,  and shall  assume the  payment  of all fees and  expenses;
provided,  however,  that the failure of any Indemnified Person so to notify the
Company shall not relieve the Company of its obligations hereunder except to the
extent that the Company is materially  prejudiced by such failure to notify.  In
any such proceeding,  any Indemnified  Person shall have the right to retain its
own counsel,  but the fees and expenses of such counsel  shall be at the expense
of such Indemnified  Person unless:  (i) the Company and the Indemnified  Person
shall have  mutually  agreed to the  retention of such  counsel;  or (ii) in the
reasonable judgment of counsel to such Indemnified Person representation of both
parties by the same counsel  would be  inappropriate  due to actual or potential
differing  interests  between  them.  The  Company  shall not be liable  for any
settlement of any proceeding effected without its written consent, which consent
shall not be  unreasonably  withheld,  but if settled with such  consent,  or if
there be a final  judgment for the  plaintiff,  the Company shall  indemnify and
hold harmless such Indemnified Person from and against any loss or liability (to
the extent stated above) by reason of such  settlement or judgment.  Without the
prior  written  consent of the  Indemnified  Person,  which consent shall not be
unreasonably  withheld,  the  Company  shall not  effect any  settlement  of any
pending or threatened  proceeding in respect of which any Indemnified  Person is
or could have been a party and  indemnity  could have been sought  hereunder  by
such Indemnified Party, unless such settlement includes an unconditional release
of such Indemnified Person from all liability arising out of such proceeding.

                                      -21-
<PAGE>

         9. Miscellaneous.

                  9.1 Successors and Assigns. This Agreement may not be assigned
by a party  hereto  without  the prior  written  consent  of the  Company or the
Investors,  as applicable,  provided,  however,  that an Investor may assign its
rights and delegate its duties  hereunder in whole or in part to an Affiliate or
to a  third  party  acquiring  some  or  all  of  its  Securities  in a  private
transaction  without  the prior  written  consent  of the  Company  or the other
Investors,  after  notice duly given by such  Investor to the Company  provided,
that no such  assignment  or  obligation  shall affect the  obligations  of such
Investor hereunder.  The provisions of this Agreement shall inure to the benefit
of and be binding upon the  respective  permitted  successors and assigns of the
parties.  Nothing in this Agreement,  express or implied,  is intended to confer
upon any party other than the parties hereto or their respective  successors and
assigns any rights, remedies,  obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.

                  9.2 Counterparts; Faxes. This Agreement may be executed in two
or more  counterparts,  each of which  shall be deemed an  original,  but all of
which together shall constitute one and the same instrument.  This Agreement may
also be executed via facsimile, which shall be deemed an original.

                  9.3 Titles and  Subtitles.  The titles and  subtitles  used in
this  Agreement  are used for  convenience  only and are not to be considered in
construing or interpreting this Agreement.

                  9.4 Notices. Unless otherwise provided, any notice required or
permitted  under this  Agreement  shall be given in writing  and shall be deemed
effectively  given as hereinafter  described (i) if given by personal  delivery,
then such  notice  shall be deemed  given upon such  delivery,  (ii) if given by
telex or  telecopier,  then such notice  shall be deemed  given upon  receipt of
confirmation of complete  transmittal,  (iii) if given by mail, then such notice
shall be deemed  given  upon the  earlier of (A)  receipt of such  notice by the
recipient  or (B) three days after such notice is deposited in first class mail,
postage prepaid,  and (iv) if given by an internationally  recognized  overnight
air  courier,  then such notice  shall be deemed  given one  Business  Day after
delivery to such  carrier.  All notices  shall be  addressed  to the party to be
notified at the address as follows,  or at such other  address as such party may
designate by ten days' advance written notice to the other party:

                                      -22-
<PAGE>

                           If to the Company:

                                    Ion Networks, Inc.
                                    120 Corporate Boulevard
                                    South Plainfield, NJ 07080
                                    Attention:
                                    Fax:

                           With a copy to:

                                    Moses & Singer LLP
                                    1301 Avenue of the Americas
                                    New York, NY 10019-6076
                                    Attention:  Allan Grauberd, Esq.
                                    Fax:  (212) 554-7700

                           If to the Investors:

to the addresses set forth on the signature pages hereto.

                  9.5 Expenses. The parties hereto shall pay their own costs and
expenses  in  connection  herewith,  except  that  the  Company  shall  pay  the
reasonable  fees and expenses of  Lowenstein  Sandler PC not to exceed  $10,000.
Such  expenses  shall be paid not later  than the  Closing.  The  Company  shall
reimburse the Investors  upon demand for all reasonable  out-of-pocket  expenses
incurred  by  the  Investors,  including  without  limitation  reimbursement  of
attorneys'   fees  and   disbursements,   in  connection   with  any  amendment,
modification or waiver of this Agreement or the other Transaction Documents.  In
the event that legal  proceedings  are commenced by any party to this  Agreement
against another party to this Agreement in connection with this Agreement or the
other Transaction  Documents,  the party or parties which do not prevail in such
proceedings  shall severally,  but not jointly,  pay their pro rata share of the
reasonable attorneys' fees and other reasonable out-of-pocket costs and expenses
incurred by the prevailing party in such proceedings.

                  9.6 Amendments and Waivers.  Any term of this Agreement may be
amended and the  observance of any term of this  Agreement may be waived (either
generally   or  in  a   particular   instance   and  either   retroactively   or
prospectively),  only with the written consent of the Company and the Investors.
Any amendment or waiver  effected in  accordance  with this  paragraph  shall be
binding upon each holder of any Securities purchased under this Agreement at the
time outstanding, each future holder of all such Securities, and the Company.

                  9.7 Publicity. Except as set forth below, no public release or
announcement concerning the transactions  contemplated hereby shall be issued by
the Company or the  Investors  without the prior  consent of the Company (in the
case of a release or  announcement  by the  Investors)  or the Investors (in the
case of a release or  announcement  by the Company) (which consents shall not be
unreasonably  withheld),  except as such release or announcement may be required
by law or the applicable  rules or  regulations  of any  securities  exchange or
securities  market, in which case the Company or the Investors,  as the case may
be,  shall allow the  Investors  or the Company,  as  applicable,  to the extent
reasonably practicable in the circumstances,  reasonable time to comment on such
release or announcement in advance of such issuance. By 8:30 a.m. (New York City
time) on the trading day  immediately  following the Closing  Date,  the Company
shall issue a press release  disclosing  the  consummation  of the  transactions
contemplated  by this  Agreement.  No later than the third trading day following
the Closing Date,  the Company will file a Current  Report on Form 8-K attaching
the press release  described in the foregoing  sentence as well as copies of the
Transaction Documents. In addition, the Company will make such other filings and
notices in the manner and time required by the SEC.

                                      -23-
<PAGE>

                  9.8  Severability.  Any  provision of this  Agreement  that is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating the remaining  provisions  hereof but shall be interpreted as if it
were  written  so as to be  enforceable  to  the  maximum  extent  permitted  by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall  not  invalidate  or  render  unenforceable  such  provision  in any other
jurisdiction.  To the extent  permitted by  applicable  law, the parties  hereby
waive any  provision of law which  renders any  provision  hereof  prohibited or
unenforceable in any respect.

                  9.9 Entire Agreement.  This Agreement,  including the Exhibits
and the Disclosure Schedules, and the other Transaction Documents constitute the
entire  agreement  among the parties  hereof with respect to the subject  matter
hereof and thereof and supersede all prior agreements and  understandings,  both
oral and written,  between the parties with respect to the subject matter hereof
and thereof.

                  9.10 Further Assurances. The parties shall execute and deliver
all such further  instruments  and  documents and take all such other actions as
may reasonably be required to carry out the transactions contemplated hereby and
to evidence the fulfillment of the agreements herein contained.

                  9.11 Governing Law;  Consent to  Jurisdiction;  Waiver of Jury
Trial.  This Agreement  shall be governed by, and construed in accordance  with,
the internal  laws of the State of New York without  regard to the choice of law
principles  thereof.  Each of the  parties  hereto  irrevocably  submits  to the
exclusive  jurisdiction  of the  courts of the State of New York  located in New
York County and the United States  District  Court for the Southern  District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising  out of this  Agreement  and the  transactions  contemplated  hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party  hereto  anywhere  in the world by the same  methods as are
specified  for the giving of notices under this  Agreement.  Each of the parties
hereto  irrevocably  consents to the  jurisdiction of any such court in any such
suit,  action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or  proceeding  brought in such courts and  irrevocably  waives any claim
that any such  suit,  action or  proceeding  brought  in any such court has been
brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY  LITIGATION  WITH RESPECT TO THIS  AGREEMENT  AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

                                      -24-
<PAGE>

                      9.12  Independent  Nature of  Investors'  Obligations  and
Rights.  The  obligations  of each Investor under any  Transaction  Document are
several  and not  joint  with the  obligations  of any  other  Investor,  and no
Investor shall be responsible in any way for the  performance of the obligations
of any other  Investor  under any  Transaction  Document.  The  decision of each
Investor to purchase Securities  pursuant to the Transaction  Documents has been
made by such Investor  independently  of any other Investor.  Nothing  contained
herein  or in any  Transaction  Document,  and no action  taken by any  Investor
pursuant thereto,  shall be deemed to constitute the Investors as a partnership,
an  association,  a joint  venture  or any  other  kind of  entity,  or create a
presumption  that the  Investors  are in any way acting in concert or as a group
with  respect  to  such  obligations  or the  transactions  contemplated  by the
Transaction  Documents.  Each Investor  acknowledges  that no other Investor has
acted as agent for such  Investor  in  connection  with  making  its  investment
hereunder  and that no  Investor  will be  acting as agent of such  Investor  in
connection  with  monitoring  its  investment in the Securities or enforcing its
rights  under the  Transaction  Documents.  Each  Investor  shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other Transaction  Documents,
and it  shall  not be  necessary  for any  other  Investor  to be  joined  as an
additional  party in any proceeding for such purpose.  The Company  acknowledges
that each of the Investors has been provided with the same Transaction Documents
for the purpose of closing a transaction with multiple Investors and not because
it was required or requested to do so by any Investor. [signature page follows]

                  IN WITNESS  WHEREOF,  the parties have executed this Agreement
or caused their duly  authorized  officers to execute  this  Agreement as of the
date first above written.

The Company:                                ION NETWORKS, INC.

                                            By: /s/ Norman Corn
                                            ------------------------------
                                            Name: /s/ Norman Corn
                                            Title:

                                      -25-
<PAGE>

The Investors:                              SPECIAL SITUATIONS FUND III, L.P.

                                            By: /s/  Austin W. Marxe
                                           ----------------------------------
                                            Name: Austin W. Marxe
                                            Title: General Partner

Aggregate Purchase Price:  $390,000
Number of Shares:  2,294,117
Number of Warrants:  1,147,058

Address for Notice:
                                         153 E. 53rd Street
                                         55th Floor
                                         New York, NY  10022

                                         with a copy to:

                                         Lowenstein Sandler PC
                                         65 Livingston Avenue
                                         Roseland, NJ  07068
                                         Attn:  John D. Hogoboom, Esq.
                                         Telephone:        973.597.2500
                                         Facsimile:        973.597.2400

                                         SPECIAL SITUATIONS CAYMAN FUND, L.P.

                                         By: /s/ Austin W. Marxe
                                            ----------------------
                                            Name: Austin W. Marxe
                                            Title: General Partner

Aggregate Purchase Price:  $139,000
Number of Shares:  817,647
Number of Warrants:  408,824

Address for Notice:
                                                     153 E. 53rd Street
                                                     55th Floor
                                                     New York, NY  10022

                                      -26-
<PAGE>

                                             with a copy to:

                                             Lowenstein Sandler PC
                                             65 Livingston Avenue
                                             Roseland, NJ  07068
                                             Attn:  John D. Hogoboom, Esq.
                                             Telephone:        973.597.2500
                                             Facsimile:        973.597.2400

                                SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.

                                            By: /s/ Austin W. Marxe
                                            --------------------------
                                            Name: Austin W. Marxe
                                            Title: General Partner

Aggregate Purchase Price:  $150,000
Number of Shares:  882,353
Number of Warrants:  441,176

                                        153 E. 53rd Street
                                        55th Floor
                                        New York, NY  10022

                                        with a copy to:

                                        Lowenstein Sandler PC
                                        65 Livingston Avenue
                                        Roseland, NJ  07068
                                        Attn:  John D. Hogoboom, Esq.
                                        Telephone:        973.597.2500
                                        Facsimile:        973.597.2400

                                      SPECIAL SITUATIONS TECHNOLOGY FUND, L.P.

                                            By: /s/ Austin W. Marxe
                                            -------------------------------
                                            Name: Austin W. Marxe
                                            Title: General Partner

Aggregate Purchase Price:  $11,000
Number of Shares:  64,706
Number of Warrants:  32,353

                                      -27-
<PAGE>

Address for Notice:
                                          153 E. 53rd Street
                                          55th Floor
                                          New York, NY  10022

                                          with a copy to:

                                          Lowenstein Sandler PC
                                          65 Livingston Avenue
                                          Roseland, NJ  07068
                                          Attn:  John D. Hogoboom, Esq.
                                          Telephone:        973.597.2500
                                          Facsimile:        973.597.2400

                                    SPECIAL SITUATIONS TECHNOLOGY FUND II, L.P.

                                            By: /s/ Austin W. Marxe
                                           ----------------------------
                                            Name: Austin W. Marxe
                                            Title: General Partner

Aggregate Purchase Price:  $60,000
Number of Shares:  352,941
Number of Warrants:  176,471

Address for Notice:
                                         153 E. 53rd Street
                                         55th Floor
                                         New York, NY  10022

                                         with a copy to:

                                         Lowenstein Sandler PC
                                         65 Livingston Avenue
                                         Roseland, NJ  07068
                                         Attn:  John D. Hogoboom, Esq.
                                         Telephone:        973.597.2500
                                         Facsimile:        973.597.2400

                                      -28-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00082-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00082-of-00352.parquet"}]]