Document:

form-sb2_021113

                          SECURITIES PURCHASE AGREEMENT

     SECURITIES PURCHASE AGREEMENT (this  "Agreement"),  dated as of February 6,
2003, by and among iDial Networks, Inc., a Nevada corporation, with headquarters
located at 10800 East Bethany  Drive,  Suite 380,  Denver,  Colorado  80014 (the
"Company"),  and each of the purchasers set forth on the signature  pages hereto
(the "Buyers").

     WHEREAS:

A.   The Company and the Buyers are executing and  delivering  this Agreement in
     reliance upon the exemption from  securities  registration  afforded by the
     rules and  regulations as  promulgated by the United States  Securities and
     Exchange  Commission  (the  "SEC")  under the  Securities  Act of 1933,  as
     amended (the "1933 Act");

B.   Buyers desire to purchase and the Company  desires to issue and sell,  upon
     the terms and conditions  set forth in this  Agreement (i) 12%  convertible
     debentures of the Company,  in the form attached  hereto as Exhibit "A", in
     the aggregate  principal  amount of Seven Hundred  Fifty  Thousand  Dollars
     ($750,000) (together with any debenture(s) issued in replacement thereof or
     as a dividend  thereon or otherwise with respect thereto in accordance with
     the terms thereof,  the  "Debentures"),  convertible  into shares of common
     stock, par value $.005 per share, of the Company (the "Common Stock"), upon
     the terms and subject to the  limitations  and conditions set forth in such
     Debentures and (ii) warrants,  in the form attached  hereto as Exhibit "B",
     to purchase Two Million Two Hundred Fifty  Thousand  (2,250,000)  shares of
     Common Stock (the "Warrants").

C.   Each Buyer wishes to purchase, upon the terms and conditions stated in this
     Agreement, such principal amount of Debentures and number of Warrants as is
     set forth immediately below its name on the signature pages hereto; and

D.   Contemporaneous  with the  execution  and delivery of this  Agreement,  the
     parties  hereto  are  executing  and   delivering  a  Registration   Rights
     Agreement,  in the form attached  hereto as Exhibit "C" (the  "Registration
     Rights  Agreement"),  pursuant  to which the  Company has agreed to provide
     certain   registration  rights  under  the  1933  Act  and  the  rules  and
     regulations promulgated thereunder, and applicable state securities laws.

NOW  THEREFORE,  the Company and each of the Buyers  severally (and not jointly)
     hereby agree as follows:

1.   PURCHASE AND SALE OF DEBENTURES AND WARRANTS.

     a.   Purchase of Debentures  and Warrants.  On the Closing Date (as defined
          below),  the Company shall issue and sell to each Buyer and each Buyer
          severally agrees to purchase from the Company such principal amount of
          Debentures  and number of Warrants as is set forth  immediately  below
          such Buyer's name on the signature pages hereto.

     b.   Form of Payment.  On the Closing  Date (as  defined  below),  (i) each
          Buyer shall pay the purchase price for the Debentures and the Warrants
          to be issued and sold to it at the  Closing  (as  defined  below) (the
          "Purchase  Price") by wire transfer of immediately  available funds to
          the  Company,   in  accordance  with  the  Company's   written  wiring
          instructions,  against  delivery of the  Debentures  in the  principal
          amount  equal to the  Purchase  Price and the number of Warrants as is
          set forth  immediately  below such Buyer's name on the signature pages
          hereto,  and  (ii) the  Company  shall  deliver  such  Debentures  and
          Warrants  duly  executed  on behalf  of the  Company,  to such  Buyer,
          against delivery of such Purchase Price.

     c.   Closing Date.  Subject to the  satisfaction (or written waiver) of the
          conditions  thereto  set forth in Section 6 and  Section 7 below,  the
          date  and time of the  issuance  and  sale of the  Debentures  and the
          Warrants  pursuant to this  Agreement  (the  "Closing  Date") shall be
          12:00 noon,  Eastern  Standard  Time on February 6, 2003 or such other
          mutually   agreed  upon  time.   The   closing  of  the   transactions
          contemplated  by this  Agreement  (the  "Closing")  shall occur on the
          Closing Date at such location as may be agreed to by the parties.

2.   BUYERS'  REPRESENTATIONS  AND  WARRANTIES.  Each Buyer  severally  (and not
     jointly)  represents  and  warrants to the Company  solely as to such Buyer
     that:

     a.   Investment Purpose. As of the date hereof, the Buyer is purchasing the
          Debentures and the shares of Common Stock issuable upon  conversion of
          or  otherwise   pursuant  to  the   Debentures   (including,   without
          limitation,  such  additional  shares of Common Stock,  if any, as are
          issuable  (i) on  account of  interest  on the  Debentures,  (ii) as a
          result of the  events  described  in  Sections  1.3 and  1.4(g) of the
          Debentures and Section 2(c) of the  Registration  Rights  Agreement or
          (iii) in payment of the Standard Liquidated Damages Amount (as defined
          in Section  2(f)  below)  pursuant to this  Agreement,  such shares of
          Common Stock being collectively  referred to herein as the "Conversion
          Shares") and the Warrants and the shares of Common Stock issuable upon
          exercise  thereof (the  "Warrant  Shares" and,  collectively  with the
          Debentures,  Warrants and Conversion Shares, the "Securities") for its
          own  account  and not with a present  view  towards the public sale or
          distribution thereof,  except pursuant to sales registered or exempted
          from  registration  under the 1933  Act;  provided,  however,  that by
          making the  representations  herein,  the Buyer does not agree to hold
          any of the  Securities  for any  minimum  or other  specific  term and
          reserves  the  right  to  dispose  of the  Securities  at any  time in
          accordance  with  or  pursuant  to  a  registration  statement  or  an
          exemption under the 1933 Act.

     b.   Accredited  Investor Status. The Buyer is an "accredited  investor" as
          that term is defined in Rule 501(a) of  Regulation  D (an  "Accredited
          Investor").

     c.   Reliance on Exemptions.  The Buyer understands that the Securities are
          being offered and sold to it in reliance upon specific exemptions from
          the  registration  requirements  of United  States  federal  and state
          securities  laws and that the  Company is  relying  upon the truth and
          accuracy of, and the Buyer's  compliance  with,  the  representations,
          warranties,  agreements,  acknowledgments  and  understandings  of the
          Buyer set forth herein in order to determine the  availability of such
          exemptions and the eligibility of the Buyer to acquire the Securities.

     d.   Information. The Buyer and its advisors, if any, have been, and for so
          long as the Debentures and Warrants remain  outstanding  will continue
          to be, furnished with all materials relating to the business, finances
          and operations of the Company and materials  relating to the offer and
          sale of the  Securities  which have been requested by the Buyer or its
          advisors.  The Buyer and its advisors,  if any, have been,  and for so
          long as the Debentures and Warrants remain  outstanding  will continue
          to be,  afforded  the  opportunity  to ask  questions  of the Company.
          Notwithstanding  the  foregoing,  the Company has not disclosed to the
          Buyer any material  nonpublic  information  and will not disclose such
          information  unless such  information is disclosed to the public prior
          to or promptly  following such  disclosure to the Buyer.  Neither such
          inquiries nor any other due diligence investigation conducted by Buyer
          or any of its  advisors  or  representatives  shall  modify,  amend or
          affect  Buyer's  right to rely on the  Company's  representations  and
          warranties  contained in Section 3 below.  The Buyer  understands that
          its  investment in the  Securities  involves a  significant  degree of
          risk.

     e.   Governmental  Review.  The Buyer  understands  that no  United  States
          federal or state agency or any other government or governmental agency
          has  passed  upon or made any  recommendation  or  endorsement  of the
          Securities.

     f.   Transfer or Re-sale. The Buyer understands that (i) except as provided
          in the  Registration  Rights  Agreement,  the sale or  re-sale  of the
          Securities has not been and is not being registered under the 1933 Act
          or any applicable state securities laws, and the Securities may not be
          transferred  unless  (a)  the  Securities  are  sold  pursuant  to  an
          effective  registration  statement  under the 1933 Act,  (b) the Buyer
          shall have  delivered  to the Company an opinion of counsel that shall
          be in form,  substance and scope  customary for opinions of counsel in
          comparable  transactions  to the effect that the Securities to be sold
          or  transferred  may be sold or  transferred  pursuant to an exemption
          from  such  registration,  which  opinion  shall  be  accepted  by the
          Company,  (c) the Securities are sold or transferred to an "affiliate"
          (as defined in Rule 144 promulgated under the 1933 Act (or a successor
          rule)  ("Rule  144"))  of the Buyer  who  agrees to sell or  otherwise
          transfer the Securities  only in accordance with this Section 2(f) and
          who is an Accredited Investor, (d) the Securities are sold pursuant to
          Rule 144, or (e) the  Securities  are sold  pursuant to  Regulation  S
          under the 1933 Act (or a successor  rule)  ("Regulation  S"),  and the
          Buyer shall have  delivered  to the Company an opinion of counsel that
          shall be in form,  substance  and  scope  customary  for  opinions  of
          counsel in corporate transactions,  which opinion shall be accepted by
          the Company; (ii) any sale of such Securities made in reliance on Rule
          144 may be made  only in  accordance  with the  terms of said Rule and
          further,  if  said  Rule  is  not  applicable,  any  re-sale  of  such
          Securities  under  circumstances  in which the  seller  (or the person
          through whom the sale is made) may be deemed to be an underwriter  (as
          that term is defined in the 1933 Act) may require compliance with some
          other exemption under the 1933 Act or the rules and regulations of the
          SEC thereunder;  and (iii) neither the Company nor any other person is
          under any obligation to register such Securities under the 1933 Act or
          any state  securities  laws or to comply with the terms and conditions
          of any exemption  thereunder (in each case, other than pursuant to the
          Registration  Rights  Agreement).  Notwithstanding  the  foregoing  or
          anything else contained herein to the contrary,  the Securities may be
          pledged as collateral in connection with a bona fide margin account or
          other  lending  arrangement.  In the event that the  Company  does not
          accept the opinion of counsel  provided  by the Buyer with  respect to
          the transfer of Securities pursuant to an exemption from registration,
          such as Rule 144 or  Regulation  S, within three (3) business  days of
          delivery of the opinion to the Company,  the Company  shall pay to the
          Buyer  liquidated  damages of three  percent  (3%) of the  outstanding
          amount of the Debentures per month plus accrued and unpaid interest on
          the Debentures,  prorated for partial months, in cash or shares at the
          option of the Buyer ("Standard  Liquidated  Damages  Amount").  If the
          Buyer  elects to be paid the  Standard  Liquidated  Damages  Amount in
          shares of Common Stock,  such shares shall be issued at the Conversion
          Price at the time of payment.

     g.   Legends.  The Buyer  understands  that the Debentures and the Warrants
          and, until such time as the Conversion  Shares and Warrant Shares have
          been registered under the 1933 Act as contemplated by the Registration
          Rights  Agreement  or  otherwise  may be sold  pursuant to Rule 144 or
          Regulation S without any restriction as to the number of securities as
          of a particular date that can then be immediately sold, the Conversion
          Shares  and  Warrant   Shares  may  bear  a   restrictive   legend  in
          substantially  the following  form (and a  stop-transfer  order may be
          placed against transfer of the certificates for such Securities):

               "The  securities  represented by this  certificate  have not been
               registered  under the  Securities  Act of 1933,  as amended.  The
               securities  may  not be  sold,  transferred  or  assigned  in the
               absence of an effective registration statement for the securities
               under said Act, or an opinion of counsel, in form,  substance and
               scope   customary   for   opinions   of  counsel  in   comparable
               transactions, that registration is not required under said Act or
               unless sold pursuant to Rule 144 or Regulation S under said Act."

               The legend set forth above shall be removed and the Company shall
               issue a  certificate  without  such  legend to the  holder of any
               Security upon which it is stamped,  if, unless otherwise required
               by  applicable  state  securities  laws,  (a)  such  Security  is
               registered  for sale under an  effective  registration  statement
               filed  under the 1933 Act or  otherwise  may be sold  pursuant to
               Rule 144 or Regulation S without any restriction as to the number
               of  securities  as  of  a  particular   date  that  can  then  be
               immediately sold, or (b) such holder provides the Company with an
               opinion of counsel,  in form,  substance and scope  customary for
               opinions  of counsel in  comparable  transactions,  to the effect
               that a  public  sale or  transfer  of such  Security  may be made
               without  registration  under the 1933 Act, which opinion shall be
               accepted  by the Company so that the sale or transfer is effected
               or  (c)  such  holder   provides  the  Company  with   reasonable
               assurances that such Security can be sold pursuant to Rule 144 or
               Regulation S. The Buyer agrees to sell all Securities,  including
               those  represented by a certificate(s)  from which the legend has
               been removed,  in compliance with applicable  prospectus delivery
               requirements, if any.

     h.   Authorization; Enforcement. This Agreement and the Registration Rights
          Agreement  have been duly and validly  authorized.  This Agreement has
          been duly  executed  and  delivered  on behalf of the Buyer,  and this
          Agreement constitutes, and upon execution and delivery by the Buyer of
          the  Registration  Rights  Agreement,  such agreement will constitute,
          valid and binding  agreements of the Buyer  enforceable  in accordance
          with their terms.

     i.   Residency.  The  Buyer is a  resident  of the  jurisdiction  set forth
          immediately below such Buyer's name on the signature pages hereto.

3.   REPRESENTATIONS  AND WARRANTIES OF THE COMPANY.  The Company represents and
     warrants to each Buyer that:

     a.   Organization   and   Qualification.   The  Company  and  each  of  its
          Subsidiaries  (as  defined  below),  if  any,  is a  corporation  duly
          organized, validly existing and in good standing under the laws of the
          jurisdiction  in  which  it  is  incorporated,  with  full  power  and
          authority  (corporate  and other) to own,  lease,  use and operate its
          properties  and to carry  on its  business  as and  where  now  owned,
          leased, used, operated and conducted.  Schedule 3(a) sets forth a list
          of all of the  Subsidiaries  of the  Company and the  jurisdiction  in
          which each is  incorporated.  The Company and each of its Subsidiaries
          is duly  qualified as a foreign  corporation  to do business and is in
          good standing in every  jurisdiction  in which its ownership or use of
          property  or the  nature of the  business  conducted  by it makes such
          qualification necessary except where the failure to be so qualified or
          in good standing would not have a Material  Adverse Effect.  "Material
          Adverse  Effect"  means any material  adverse  effect on the business,
          operations, assets, financial condition or prospects of the Company or
          its  Subsidiaries,  if any, taken as a whole,  or on the  transactions
          contemplated  hereby or by the agreements or instruments to be entered
          into in connection  herewith.  "Subsidiaries" means any corporation or
          other organization,  whether incorporated or unincorporated,  in which
          the  Company  owns,  directly  or  indirectly,  any  equity  or  other
          ownership interest.

     b.   Authorization;   Enforcement.   (i)  The  Company  has  all  requisite
          corporate   power  and  authority  to  enter  into  and  perform  this
          Agreement,  the Registration Rights Agreement,  the Debentures and the
          Warrants and to consummate the  transactions  contemplated  hereby and
          thereby  and to issue the  Securities,  in  accordance  with the terms
          hereof and thereof, (ii) the execution and delivery of this Agreement,
          the Registration Rights Agreement,  the Debentures and the Warrants by
          the  Company  and  the   consummation   by  it  of  the   transactions
          contemplated  hereby and thereby  (including without  limitation,  the
          issuance of the  Debentures  and the  Warrants  and the  issuance  and
          reservation  for issuance of the Conversion  Shares and Warrant Shares
          issuable  upon   conversion  or  exercise   thereof)  have  been  duly
          authorized by the Company's  Board of Directors and no further consent
          or  authorization  of the  Company,  its  Board of  Directors,  or its
          shareholders is required,  (iii) this Agreement has been duly executed
          and  delivered by the Company by its  authorized  representative,  and
          such authorized representative is the true and official representative
          with authority to sign this Agreement and the other documents executed
          in connection herewith and bind the Company accordingly, and (iv) this
          Agreement constitutes,  and upon execution and delivery by the Company
          of the Registration Rights Agreement, the Debentures and the Warrants,
          each of such instruments will constitute,  a legal,  valid and binding
          obligation  of  the  Company   enforceable   against  the  Company  in
          accordance with its terms.

     c.   Capitalization. As of the date hereof, the authorized capital stock of
          the Company  consists of (i)  500,000,000  shares of Common Stock,  of
          which  106,442,055  shares are issued and  outstanding,  no shares are
          reserved for issuance  pursuant to the  Company's  stock option plans,
          167,000 shares are reserved for issuance pursuant to securities (other
          than the Debentures and the Warrants)  exercisable for, or convertible
          into or exchangeable for shares of Common Stock and 104,500,000 shares
          are reserved for issuance upon  conversion of the  Debentures  and the
          Additional Debentures (as defined in Section 4(l)) and exercise of the
          Warrants  and the  Additional  Warrants  (as defined in Section  4(l))
          (subject to adjustment pursuant to the Company's covenant set forth in
          Section 4(h) below); and (ii) 30,000,000 shares of preferred stock, of
          which no shares are issued and  outstanding.  All of such  outstanding
          shares  of  capital   stock  are,  or  upon  issuance  will  be,  duly
          authorized, validly issued, fully paid and nonassessable. No shares of
          capital stock of the Company are subject to  preemptive  rights or any
          other similar rights of the  shareholders  of the Company or any liens
          or  encumbrances  imposed through the actions or failure to act of the
          Company.  Except as disclosed in Schedule  3(c),  as of the  effective
          date  of  this  Agreement,  (i)  there  are  no  outstanding  options,
          warrants, scrip, rights to subscribe for, puts, calls, rights of first
          refusal,  agreements,  understandings,  claims or other commitments or
          rights of any  character  whatsoever  relating  to, or  securities  or
          rights  convertible  into or  exchangeable  for any  shares of capital
          stock of the Company or any of its  Subsidiaries,  or  arrangements by
          which the Company or any of its Subsidiaries is or may become bound to
          issue additional  shares of capital stock of the Company or any of its
          Subsidiaries, (ii) there are no agreements or arrangements under which
          the Company or any of its  Subsidiaries  is  obligated to register the
          sale of any of its or their  securities under the 1933 Act (except the
          Registration Rights Agreement) and (iii) there are no anti-dilution or
          price  adjustment  provisions  contained in any security issued by the
          Company (or in any  agreement  providing  rights to security  holders)
          that  will  be  triggered  by  the  issuance  of the  Debentures,  the
          Warrants,  the Conversion  Shares or Warrant  Shares.  The Company has
          furnished  to the  Buyer  true and  correct  copies  of the  Company's
          Articles of Incorporation  as in effect on the date hereof  ("Articles
          of  Incorporation"),  the Company's By-laws,  as in effect on the date
          hereof (the  "By-laws"),  and the terms of all securities  convertible
          into or  exercisable  for Common Stock of the Company and the material
          rights of the holders  thereof in respect  thereto.  The Company shall
          provide the Buyer with a written update of this representation  signed
          by the Company's Chief Executive or Chief Financial  Officer on behalf
          of the Company as of the Closing Date.

     d.   Issuance of Shares.  The Conversion Shares and Warrant Shares are duly
          authorized  and reserved  for issuance  and,  upon  conversion  of the
          Debentures  and  exercise  of the  Warrants in  accordance  with their
          respective   terms,   will  be   validly   issued,   fully   paid  and
          non-assessable,   and  free  from  all   taxes,   liens,   claims  and
          encumbrances  with  respect  to the  issue  thereof  and  shall not be
          subject to preemptive  rights or other similar rights of  shareholders
          of the Company and will not impose personal  liability upon the holder
          thereof.

     e.   Acknowledgment of Dilution.  The Company  understands and acknowledges
          the potentially  dilutive effect to the Common Stock upon the issuance
          of the  Conversion  Shares and Warrant  Shares upon  conversion of the
          Debenture   or  exercise  of  the   Warrants.   The  Company   further
          acknowledges  that its  obligation  to  issue  Conversion  Shares  and
          Warrant  Shares upon  conversion of the  Debentures or exercise of the
          Warrants in accordance  with this  Agreement,  the  Debentures and the
          Warrants is absolute  and  unconditional  regardless  of the  dilutive
          effect that such issuance may have on the ownership interests of other
          shareholders of the Company.

     f.   No  Conflicts.  The  execution,   delivery  and  performance  of  this
          Agreement,  the Registration Rights Agreement,  the Debentures and the
          Warrants  by the Company  and the  consummation  by the Company of the
          transactions  contemplated  hereby  and  thereby  (including,  without
          limitation,   the  issuance  and   reservation  for  issuance  of  the
          Conversion  Shares and Warrant  Shares) will not (i) conflict  with or
          result  in  a  violation   of  any   provision   of  the  Articles  of
          Incorporation  or By-laws or (ii) violate or conflict  with, or result
          in a breach of any  provision of, or constitute a default (or an event
          which  with  notice or lapse of time or both  could  become a default)
          under,  or  give to  others  any  rights  of  termination,  amendment,
          acceleration or  cancellation  of, any agreement,  indenture,  patent,
          patent  license  or  instrument  to which  the  Company  or any of its
          Subsidiaries  is a party,  or (iii)  result in a violation of any law,
          rule,  regulation,  order,  judgment or decree (including  federal and
          state   securities   laws  and  regulations  and  regulations  of  any
          self-regulatory  organizations  to which the Company or its securities
          are subject)  applicable to the Company or any of its  Subsidiaries or
          by  which  any  property  or  asset  of  the  Company  or  any  of its
          Subsidiaries  is  bound  or  affected   (except  for  such  conflicts,
          defaults, terminations,  amendments, accelerations,  cancellations and
          violations  as would not,  individually  or in the  aggregate,  have a
          Material  Adverse  Effect).   Neither  the  Company  nor  any  of  its
          Subsidiaries is in violation of its Articles of Incorporation, By-laws
          or other  organizational  documents and neither the Company nor any of
          its  Subsidiaries  is in default (and no event has occurred which with
          notice or lapse of time or both  could put the  Company  or any of its
          Subsidiaries in default) under, and neither the Company nor any of its
          Subsidiaries  has taken any action or failed to take any  action  that
          would   give  to  others  any   rights  of   termination,   amendment,
          acceleration   or  cancellation   of,  any  agreement,   indenture  or
          instrument to which the Company or any of its  Subsidiaries is a party
          or by which  any  property  or  assets  of the  Company  or any of its
          Subsidiaries  is bound or affected,  except for  possible  defaults as
          would not,  individually or in the aggregate,  have a Material Adverse
          Effect.  The businesses of the Company and its  Subsidiaries,  if any,
          are not being conducted, and shall not be conducted so long as a Buyer
          owns any of the  Securities,  in  violation  of any law,  ordinance or
          regulation  of  any  governmental   entity.   Except  as  specifically
          contemplated  by this Agreement and as required under the 1933 Act and
          any applicable  state  securities laws, the Company is not required to
          obtain any consent,  authorization  or order of, or make any filing or
          registration with, any court,  governmental agency, regulatory agency,
          self  regulatory  organization  or stock  market or any third party in
          order for it to  execute,  deliver or perform  any of its  obligations
          under  this  Agreement,   the  Registration   Rights  Agreement,   the
          Debentures  or the  Warrants in  accordance  with the terms  hereof or
          thereof or to issue and sell the Debentures and Warrants in accordance
          with  the  terms  hereof  and to  issue  the  Conversion  Shares  upon
          conversion of the  Debentures  and the Warrant Shares upon exercise of
          the  Warrants.  Except as disclosed in Schedule  3(f),  all  consents,
          authorizations, orders, filings and registrations which the Company is
          required  to  obtain  pursuant  to the  preceding  sentence  have been
          obtained or effected  on or prior to the date  hereof.  The Company is
          not in violation of the listing  requirements of the  Over-the-Counter
          Bulletin Board (the "OTCBB") and does not reasonably  anticipate  that
          the Common  Stock  will be  delisted  by the OTCBB in the  foreseeable
          future.  The Company and its  Subsidiaries are unaware of any facts or
          circumstances which might give rise to any of the foregoing.

     g.   SEC Documents;  Financial Statements.  Except as disclosed in Schedule
          3(g),  the Company has timely  filed all  reports,  schedules,  forms,
          statements and other documents required to be filed by it with the SEC
          pursuant to the reporting  requirements of the Securities Exchange Act
          of 1934, as amended (the "1934 Act") (all of the foregoing filed prior
          to the date hereof and all  exhibits  included  therein and  financial
          statements and schedules thereto and documents (other than exhibits to
          such documents)  incorporated by reference therein,  being hereinafter
          referred to herein as the "SEC Documents").  The Company has delivered
          to each Buyer true and complete  copies of the SEC  Documents,  except
          for such exhibits and incorporated  documents.  As of their respective
          dates,  the SEC Documents  complied in all material  respects with the
          requirements  of the 1934 Act and the rules and regulations of the SEC
          promulgated  thereunder  applicable to the SEC Documents,  and none of
          the SEC Documents, at the time they were filed with the SEC, contained
          any untrue statement of a material fact or omitted to state a material
          fact  required to be stated  therein or necessary in order to make the
          statements  therein,  in light of the  circumstances  under which they
          were made, not misleading. None of the statements made in any such SEC
          Documents  is, or has been,  required  to be amended or updated  under
          applicable  law (except for such  statements  as have been  amended or
          updated in  subsequent  filings  prior the date  hereof).  As of their
          respective dates, the financial  statements of the Company included in
          the SEC  Documents  complied as to form in all material  respects with
          applicable  accounting   requirements  and  the  published  rules  and
          regulations of the SEC with respect thereto. Such financial statements
          have been prepared in accordance with United States generally accepted
          accounting  principles,   consistently  applied,  during  the  periods
          involved  (except (i) as may be otherwise  indicated in such financial
          statements  or the  notes  thereto,  or (ii) in the case of  unaudited
          interim  statements,  to the extent they may not include  footnotes or
          may be  condensed  or summary  statements)  and fairly  present in all
          material respects the consolidated  financial  position of the Company
          and its  consolidated  Subsidiaries  as of the dates  thereof  and the
          consolidated  results  of  their  operations  and cash  flows  for the
          periods then ended (subject, in the case of unaudited  statements,  to
          normal  year-end  audit  adjustments).  Except  as  set  forth  in the
          financial statements of the Company included in the SEC Documents, the
          Company has no  liabilities,  contingent or otherwise,  other than (i)
          liabilities  incurred in the ordinary course of business subsequent to
          December 31, 2001 and (ii) obligations under contracts and commitments
          incurred in the ordinary  course of business  and not  required  under
          generally  accepted  accounting  principles  to be  reflected  in such
          financial statements, which, individually or in the aggregate, are not
          material  to the  financial  condition  or  operating  results  of the
          Company.

     h.   Absence  of Certain  Changes.  Except as set forth in  Schedule  3(h),
          Since December 31, 2001, there has been no material adverse change and
          no material adverse development in the assets, liabilities,  business,
          properties,  operations, financial condition, results of operations or
          prospects of the Company or any of its Subsidiaries.

     i.   Absence of Litigation.  There is no action,  suit, claim,  proceeding,
          inquiry  or  investigation  before  or by  any  court,  public  board,
          government agency, self-regulatory organization or body pending or, to
          the  knowledge of the Company or any of its  Subsidiaries,  threatened
          against or affecting the Company or any of its Subsidiaries,  or their
          officers or  directors  in their  capacity as such,  that could have a
          Material  Adverse  Effect.  Schedule 3(i) contains a complete list and
          summary description of any pending or threatened proceeding against or
          affecting the Company or any of its  Subsidiaries,  without  regard to
          whether it would have a Material  Adverse Effect.  The Company and its
          Subsidiaries  are  unaware of any facts or  circumstances  which might
          give rise to any of the foregoing.

     j.   Patents, Copyrights, etc.

          (i)  The Company and each of its  Subsidiaries  owns or possesses  the
               requisite   licenses  or  rights  to  use  all  patents,   patent
               applications, patent rights, inventions, know-how, trade secrets,
               trademarks, trademark applications, service marks, service names,
               trade names and copyrights ("Intellectual Property") necessary to
               enable it to conduct its business as now operated (and, except as
               set forth in Schedule  3(j) hereof,  to the best of the Company's
               knowledge,  as  presently  contemplated  to be  operated  in  the
               future); there is no claim or action by any person pertaining to,
               or proceeding pending, or to the Company's knowledge  threatened,
               which challenges the right of the Company or of a Subsidiary with
               respect to any  Intellectual  Property  necessary to enable it to
               conduct its business as now operated (and, except as set forth in
               Schedule 3(j) hereof, to the best of the Company's knowledge,  as
               presently contemplated to be operated in the future); to the best
               of the Company's  knowledge,  the Company's or its  Subsidiaries'
               current and  intended  products,  services  and  processes do not
               infringe on any Intellectual Property or other rights held by any
               person;  and the Company is unaware of any facts or circumstances
               which  might give rise to any of the  foregoing.  The Company and
               each of its Subsidiaries have taken reasonable  security measures
               to  protect  the  secrecy,  confidentiality  and  value  of their
               Intellectual Property.

          (ii) All of the Company's computer software and computer hardware, and
               other  similar or related  items of  automated,  computerized  or
               software systems that are used or relied on by the Company in the
               conduct of its  business or that were,  or  currently  are being,
               sold or  licensed  by the  Company  to  customers  (collectively,
               "Information Technology"),  are Year 2000 Compliant. For purposes
               of this  Agreement,  the term "Year 2000 Compliant"  means,  with
               respect  to  the  Company's  Information  Technology,   that  the
               Information  Technology  is designed to be used prior to,  during
               and after the calendar Year 2000, and the Information  Technology
               used  during  each  such time  period  will  accurately  receive,
               provide  and  process  date and  time  data  (including,  but not
               limited to, calculating, comparing and sequencing) from, into and
               between the 20th and 21st centuries, including the years 1999 and
               2000, and leap-year calculations, and will not malfunction, cease
               to function,  or provide invalid or incorrect results as a result
               of the date or time data,  to the extent  that other  information
               technology,  used in combination with the Information Technology,
               properly  exchanges  date and time data with it. The  Company has
               delivered to the Buyers true and correct  copies of all analyses,
               reports,   studies  and  similar  written  information,   whether
               prepared by the Company or another party, relating to whether the
               Information Technology is Year 2000 Compliant, if any.

     k.   No Materially Adverse  Contracts,  Etc. Neither the Company nor any of
          its  Subsidiaries is subject to any charter,  corporate or other legal
          restriction,  or any judgment, decree, order, rule or regulation which
          in the  judgment of the  Company's  officers has or is expected in the
          future to have a Material Adverse Effect.  Neither the Company nor any
          of its  Subsidiaries  is a party to any contract or agreement which in
          the  judgment of the  Company's  officers has or is expected to have a
          Material Adverse Effect.

     l.   Tax Status. Except as set forth on Schedule 3(l), the Company and each
          of its Subsidiaries  has made or filed all federal,  state and foreign
          income and all other tax returns, reports and declarations required by
          any jurisdiction to which it is subject (unless and only to the extent
          that the  Company  and each of its  Subsidiaries  has set aside on its
          books provisions reasonably adequate for the payment of all unpaid and
          unreported  taxes)  and has  paid all  taxes  and  other  governmental
          assessments  and  charges  that  are  material  in  amount,  shown  or
          determined to be due on such returns, reports and declarations, except
          those  being  contested  in good  faith and has set aside on its books
          provisions  reasonably  adequate  for the  payment  of all  taxes  for
          periods  subsequent to the periods to which such  returns,  reports or
          declarations  apply.  There are no unpaid taxes in any material amount
          claimed to be due by the taxing authority of any jurisdiction, and the
          officers  of the  Company  know of no basis  for any such  claim.  The
          Company  has not  executed a waiver  with  respect  to the  statute of
          limitations  relating to the  assessment or collection of any foreign,
          federal,  state or local tax.  Except as set forth on  Schedule  3(l),
          none of the  Company's  tax returns is presently  being audited by any
          taxing authority.

     m.   Certain Transactions.  Except as set forth on Schedule 3(m) and except
          for arm's length transactions  pursuant to which the Company or any of
          its  Subsidiaries  makes  payments in the ordinary  course of business
          upon  terms  no  less  favorable  than  the  Company  or  any  of  its
          Subsidiaries  could obtain from third parties and other than the grant
          of stock  options  disclosed on Schedule  3(c),  none of the officers,
          directors,  or  employees  of the Company is  presently a party to any
          transaction  with the Company or any of its  Subsidiaries  (other than
          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  knowledge  of the
          Company, any corporation,  partnership, trust or other entity in which
          any officer, director, or any such employee has a substantial interest
          or is an officer, director, trustee or partner.

     n.   Disclosure.  All information  relating to or concerning the Company or
          any of its  Subsidiaries  set forth in this  Agreement and provided to
          the Buyers pursuant to Section 2(d) hereof and otherwise in connection
          with the transactions  contemplated  hereby is true and correct in all
          material  respects  and the  Company  has not  omitted  to  state  any
          material fact necessary in order to make the statements made herein or
          therein, in light of the circumstances under which they were made, not
          misleading.  No event or  circumstance  has  occurred  or exists  with
          respect  to the  Company  or any of its  Subsidiaries  or its or their
          business, properties,  prospects,  operations or financial conditions,
          which,  under  applicable  law, rule or  regulation,  requires  public
          disclosure  or  announcement  by the Company but which has not been so
          publicly  announced or disclosed  (assuming  for this purpose that the
          Company's reports filed under the 1934 Act are being incorporated into
          an effective  registration  statement  filed by the Company  under the
          1933 Act).

     o.   Acknowledgment  Regarding Buyers' Purchase of Securities.  The Company
          acknowledges  and agrees  that the  Buyers  are  acting  solely in the
          capacity of arm's length purchasers with respect to this Agreement and
          the transactions contemplated hereby. The Company further acknowledges
          that no Buyer is acting as a  financial  advisor or  fiduciary  of the
          Company (or in any similar  capacity)  with respect to this  Agreement
          and the transactions contemplated hereby and any statement made by any
          Buyer  or  any  of  their  respective  representatives  or  agents  in
          connection  with  this  Agreement  and the  transactions  contemplated
          hereby is not advice or a recommendation  and is merely  incidental to
          the Buyers' purchase of the Securities. The Company further represents
          to each Buyer that the Company's decision to enter into this Agreement
          has been based solely on the independent evaluation of the Company and
          its representatives.

     p.   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 in any  security or solicited
          any offers to buy any security under  circumstances that would require
          registration  under the 1933 Act of the issuance of the  Securities to
          the Buyers.  The issuance of the  Securities to the Buyers will not be
          integrated with any other issuance of the Company's  securities (past,
          current or future) for purposes of any shareholder approval provisions
          applicable to the Company or its securities.

     q.   No Brokers.  The Company has taken no action  which would give rise to
          any claim by any person for brokerage commissions, transaction fees or
          similar  payments  relating  to  this  Agreement  or the  transactions
          contemplated hereby.

     r.   Permits;  Compliance.  The Company and each of its  Subsidiaries is in
          possession  of  all  franchises,  grants,  authorizations,   licenses,
          permits, easements,  variances,  exemptions,  consents,  certificates,
          approvals  and  orders   necessary  to  own,  lease  and  operate  its
          properties  and to carry on its business as it is now being  conducted
          (collectively,  the "Company Permits"), and there is no action pending
          or, to the knowledge of the Company,  threatened  regarding suspension
          or cancellation of any of the Company Permits. Neither the Company nor
          any  of  its  Subsidiaries  is in  conflict  with,  or in  default  or
          violation  of,  any  of the  Company  Permits,  except  for  any  such
          conflicts,  defaults  or  violations  which,  individually  or in  the
          aggregate, would not reasonably be expected to have a Material Adverse
          Effect.  Since  December 31, 2001,  neither the Company nor any of its
          Subsidiaries  has received any  notification  with respect to possible
          conflicts,  defaults or  violations  of  applicable  laws,  except for
          notices relating to possible conflicts,  defaults or violations, which
          conflicts,  defaults or violations  would not have a Material  Adverse
          Effect.

     s.   Environmental Matters.

          (i)  Except as set forth in Schedule 3(s), there are, to the Company's
               knowledge, with respect to the Company or any of its Subsidiaries
               or any predecessor of the Company,  no past or present violations
               of  Environmental  Laws  (as  defined  below),  releases  of  any
               material    into   the    environment,    actions,    activities,
               circumstances,  conditions,  events,  incidents,  or  contractual
               obligations  which may give rise to any common law  environmental
               liability or any liability under the Comprehensive  Environmental
               Response,  Compensation  and  Liability  Act of 1980  or  similar
               federal, state, local or foreign laws and neither the Company nor
               any of its  Subsidiaries  has received any notice with respect to
               any  of the  foregoing,  nor is any  action  pending  or,  to the
               Company's  knowledge,  threatened in  connection  with any of the
               foregoing.  The term  "Environmental  Laws"  means  all  federal,
               state,  local or foreign laws relating to pollution or protection
               of  human   health  or  the   environment   (including,   without
               limitation, ambient air, surface water, groundwater, land surface
               or  subsurface  strata),  including,   without  limitation,  laws
               relating  to  emissions,   discharges,   releases  or  threatened
               releases  of  chemicals,  pollutants  contaminants,  or  toxic or
               hazardous   substances   or  wastes   (collectively,   "Hazardous
               Materials")  into the environment,  or otherwise  relating to the
               manufacture,  processing,  distribution, use, treatment, storage,
               disposal,  transport or handling of Hazardous Materials,  as well
               as all authorizations, codes, decrees, demands or demand letters,
               injunctions,  judgments,  licenses,  notices  or notice  letters,
               orders,   permits,   plans  or   regulations   issued,   entered,
               promulgated or approved thereunder.

          (ii) Other than those that are or were stored,  used or disposed of in
               compliance  with  applicable  law,  no  Hazardous  Materials  are
               contained on or about any real property  currently owned,  leased
               or  used  by the  Company  or any  of  its  Subsidiaries,  and no
               Hazardous  Materials  were released on or about any real property
               previously  owned,  leased or used by the  Company  or any of its
               Subsidiaries  during the period the property was owned, leased or
               used by the  Company  or any of its  Subsidiaries,  except in the
               normal  course  of the  Company's  or  any  of its  Subsidiaries'
               business.

          (iii)Except as set forth in Schedule  3(s),  there are no  underground
               storage tanks on or under any real property owned, leased or used
               by  the  Company  or  any of its  Subsidiaries  that  are  not in
               compliance with applicable law.

     t.   Title to  Property.  The  Company and its  Subsidiaries  have good and
          marketable  title  in fee  simple  to all real  property  and good and
          marketable  title to all  personal  property  owned  by them  which is
          material to the business of the Company and its Subsidiaries,  in each
          case free and clear of all liens, encumbrances and defects except such
          as are described in Schedule 3(t) or such as would not have a Material
          Adverse  Effect.  Any real property and facilities held under lease by
          the  Company  and its  Subsidiaries  are  held by  them  under  valid,
          subsisting and  enforceable  leases with such  exceptions as would not
          have a Material Adverse Effect.

     u.   Insurance.  The  Company and each of its  Subsidiaries  are insured by
          insurers of recognized  financial  responsibility  against such losses
          and risks and in such amounts as management of the Company believes to
          be prudent and  customary in the  businesses  in which the Company and
          its  Subsidiaries  are  engaged.  Neither  the  Company  nor any  such
          Subsidiary has any reason to believe that it will not be able to renew
          its existing  insurance  coverage as and when such coverage expires or
          to obtain similar  coverage from similar  insurers as may be necessary
          to  continue  its  business  at a cost that  would not have a Material
          Adverse  Effect.  The Company  has  provided to Buyer true and correct
          copies of all policies relating to directors' and officers'  liability
          coverage,  errors  and  omissions  coverage,  and  commercial  general
          liability coverage.

     v.   Internal Accounting Controls. The Company and each of its Subsidiaries
          maintain a system of internal accounting controls  sufficient,  in the
          judgment of the Company's  board of directors,  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  generally  accepted  accounting  principles  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.

     w.   Foreign  Corrupt  Practices.  Neither  the  Company,  nor  any  of its
          Subsidiaries,  nor any  director,  officer,  agent,  employee or other
          person acting on behalf of the Company or any  Subsidiary  has, in the
          course of his  actions  for,  or on behalf of, the  Company,  used any
          corporate funds for any unlawful contribution,  gift, entertainment or
          other  unlawful  expenses  relating to  political  activity;  made any
          direct  or  indirect  unlawful  payment  to any  foreign  or  domestic
          government  official or employee from corporate funds;  violated or is
          in violation of any provision of the U.S.  Foreign  Corrupt  Practices
          Act of 1977, as amended, or made any bribe, rebate, payoff,  influence
          payment, kickback or other unlawful payment to any foreign or domestic
          government official or employee.

     x.   Solvency.  Except as set forth in Schedule  3(x),  the Company  (after
          giving effect to the  transactions  contemplated by this Agreement) is
          solvent  (i.e.,  its assets have a fair market  value in excess of the
          amount required to pay its probable  liabilities on its existing debts
          as they become  absolute and matured) and currently the Company has no
          information that would lead it to reasonably conclude that the Company
          would not, after giving effect to the transaction contemplated by this
          Agreement,  have the ability to, nor does it intend to take any action
          that  would  impair  its  ability  to, pay its debts from time to time
          incurred in connection  therewith as such debts mature.  Except as set
          forth in  Schedule  3(x),  the  Company  did not  receive a  qualified
          opinion from its auditors  with respect to its most recent fiscal year
          end and, after giving effect to the transactions  contemplated by this
          Agreement,  does not  anticipate  or know of any basis  upon which its
          auditors  might  issue a  qualified  opinion in respect of its current
          fiscal year.

     y.   No Investment  Company.  The Company is not, and upon the issuance and
          sale of the Securities as  contemplated  by this Agreement will not be
          an "investment company" required to be registered under the Investment
          Company  Act of 1940 (an  "Investment  Company").  The  Company is not
          controlled by an Investment Company.

     z.   Breach  of  Representations  and  Warranties  by the  Company.  If the
          Company breaches any of the representations or warranties set forth in
          this Section 3, and in addition to any other remedies available to the
          Buyers pursuant to this Agreement,  the Company shall pay to the Buyer
          the Standard  Liquidated Damages Amount in cash or in shares of Common
          Stock at the option of the Buyer,  until such breach is cured.  If the
          Buyers elect to be paid the  Standard  Liquidated  Damages  Amounts in
          shares of Common Stock,  such shares shall be issued at the Conversion
          Price at the time of payment.

4.   COVENANTS.

     a.   Best  Efforts.  The  parties  shall use their best  efforts to satisfy
          timely  each of the  conditions  described  in Section 6 and 7 of this
          Agreement.

     b.   Form D;  Blue  Sky  Laws.  The  Company  agrees  to file a Form D with
          respect  to the  Securities  as  required  under  Regulation  D and to
          provide a copy thereof to each Buyer promptly  after such filing.  The
          Company shall,  on or before the Closing Date, take such action as the
          Company  shall  reasonably  determine  is  necessary  to  qualify  the
          Securities for sale to the Buyers at the applicable  closing  pursuant
          to this Agreement  under  applicable  securities or "blue sky" laws of
          the states of the United  States (or to obtain an exemption  from such
          qualification), and shall provide evidence of any such action so taken
          to each Buyer on or prior to the Closing Date.

     c.   Reporting  Status;  Eligibility to Use Form S-3, SB-2 or Form S-1. The
          Company's  Common Stock is registered  under Section 12(g) of the 1934
          Act.  The  Company   represents   and  warrants   that  it  meets  the
          requirements  for  the  use of  Form  S-3  (or if the  Company  is not
          eligible  for the use of Form S-3 as of the Filing Date (as defined in
          the Registration  Rights  Agreement),  the Company may use the form of
          registration  for which it is eligible at that time) for  registration
          of the sale by the Buyer of the Registrable  Securities (as defined in
          the Registration Rights Agreement).  So long as the Buyer beneficially
          owns any of the Securities,  the Company shall timely file all reports
          required to be filed with the SEC  pursuant  to the 1934 Act,  and the
          Company shall not  terminate its status as an issuer  required to file
          reports  under  the 1934 Act  even if the  1934 Act or the  rules  and
          regulations  thereunder  would  permit such  termination.  The Company
          further agrees to file all reports required to be filed by the Company
          with  the  SEC  in a  timely  manner  so as to  become  eligible,  and
          thereafter to maintain its  eligibility,  for the use of Form S-3. The
          Company shall issue a press release  describing the materials terms of
          the transaction  contemplated hereby as soon as practicable  following
          the Closing  Date but in no event more than two (2)  business  days of
          the Closing Date, which press release shall be subject to prior review
          by the Buyers.  The Company  agrees that such press  release shall not
          disclose  the name of the  Buyers  unless  expressly  consented  to in
          writing  by  the  Buyers  or  unless  required  by  applicable  law or
          regulation, and then only to the extent of such requirement.

     d.   Use of Proceeds.  The Company  shall use the proceeds from the sale of
          the  Debentures  and the  Warrants in the manner set forth in Schedule
          4(d) attached hereto and made a part hereof and shall not, directly or
          indirectly,  use such  proceeds for any loan to or  investment  in any
          other corporation,  partnership, enterprise or other person (except in
          connection   with  its   currently   existing   direct   or   indirect
          Subsidiaries)

     e.   Future  Offerings.  Subject to the  exceptions  described  below,  the
          Company   will  not,   without   the  prior   written   consent  of  a
          majority-in-interest  of the Buyers, not to be unreasonably  withheld,
          negotiate  or  contract  with any  party to obtain  additional  equity
          financing  (including  debt financing with an equity  component)  that
          involves  (A) the issuance of Common Stock at a discount to the market
          price of the Common Stock on the date of issuance (taking into account
          the value of any warrants or options to acquire Common Stock issued in
          connection  therewith) or (B) the issuance of  convertible  securities
          that are convertible into an indeterminate  number of shares of Common
          Stock or (C) the issuance of warrants  during the period (the "Lock-up
          Period")  beginning on the Closing Date and ending on the later of (i)
          two  hundred  seventy  (270) days from the  Closing  Date and (ii) one
          hundred eighty (180) days from the date the Registration Statement (as
          defined in the Registration  Rights  Agreement) is declared  effective
          (plus any days in which sales cannot be made thereunder). In addition,
          subject  to the  exceptions  described  below,  the  Company  will not
          conduct any equity financing (including debt with an equity component)
          ("Future  Offerings")  during the period beginning on the Closing Date
          and ending two (2) years after the end of the Lock-up Period unless it
          shall  have  first  delivered  to each  Buyer,  at least  twenty  (20)
          business  days prior to the closing of such Future  Offering,  written
          notice  describing the proposed Future  Offering,  including the terms
          and conditions  thereof and proposed  definitive  documentation  to be
          entered into in  connection  therewith,  and  providing  each Buyer an
          option during the fifteen (15) day period  following  delivery of such
          notice to  purchase  its pro rata  share  (based on the ratio that the
          aggregate  principal  amount of  Debentures  purchased by it hereunder
          bears  to the  aggregate  principal  amount  of  Debentures  purchased
          hereunder) of the securities  being offered in the Future  Offering on
          the  same  terms  as   contemplated   by  such  Future  Offering  (the
          limitations  referred to in this sentence and the  preceding  sentence
          are collectively referred to as the "Capital Raising Limitations"). In
          the event the terms and conditions of a proposed  Future  Offering are
          amended  in any  respect  after  delivery  of the notice to the Buyers
          concerning the proposed Future  Offering,  the Company shall deliver a
          new notice to each Buyer  describing  the amended terms and conditions
          of the proposed Future Offering and each Buyer  thereafter  shall have
          an option  during the fifteen  (15) day period  following  delivery of
          such new notice to purchase its pro rata share of the securities being
          offered  on the same terms as  contemplated  by such  proposed  Future
          Offering, as amended. The foregoing sentence shall apply to successive
          amendments  to  the  terms  and  conditions  of  any  proposed  Future
          Offering.  The  Capital  Raising  Limitations  shall  not apply to any
          transaction involving (i) issuances of securities in a firm commitment
          underwritten public offering (excluding a continuous offering pursuant
          to Rule 415 under the 1933 Act) or (ii)  issuances  of  securities  as
          consideration for a merger, consolidation or purchase of assets, or in
          connection  with  any  strategic  partnership  or joint  venture  (the
          primary  purpose  of  which  is not to raise  equity  capital),  or in
          connection with the disposition or acquisition of a business,  product
          or license by the Company.  The Capital Raising Limitations also shall
          not apply to the issuance of securities upon exercise or conversion of
          the  Company's  options,  warrants  or  other  convertible  securities
          outstanding  as of the  date  hereof  or to the  grant  of  additional
          options or warrants, or the issuance of additional  securities,  under
          any Company  stock  option or  restricted  stock plan  approved by the
          shareholders of the Company.

     f.   Expenses.  At the  Closing,  the Company  shall  reimburse  Buyers for
          expenses   incurred  by  them  in  connection  with  the  negotiation,
          preparation, execution, delivery and performance of this Agreement and
          the  other   agreements   to  be  executed  in   connection   herewith
          ("Documents"),   including,   without   limitation,   attorneys'   and
          consultants'  fees and expenses,  transfer agent fees,  fees for stock
          quotation  services,  fees relating to any amendments or modifications
          of the  Documents  or any  consents  or waivers of  provisions  in the
          Documents,  fees for the  preparation  of opinions of counsel,  escrow
          fees, and costs of restructuring the transactions  contemplated by the
          Documents.  When  possible,  the Company must pay these fees directly,
          otherwise the Company must make immediate payment for reimbursement to
          the Buyers for all fees and expenses  immediately  upon written notice
          by the  Buyer or the  submission  of an  invoice  by the  Buyer If the
          Company fails to reimburse the Buyer in full within three (3) business
          days of the written notice or submission of invoice by the Buyer,  the
          Company  shall  pay  interest  on  the  total  amount  of  fees  to be
          reimbursed at a rate of 15% per annum.

     g.   Financial  Information.  The  Company  agrees  to send  the  following
          reports to each Buyer until such Buyer  transfers,  assigns,  or sells
          all of the Securities:  (i) within ten (10) days after the filing with
          the SEC, a copy of its Annual  Report on Form  10-KSB,  its  Quarterly
          Reports on Form  10-QSB  and any  Current  Reports  on Form 8-K;  (ii)
          within one (1) day after release,  copies of all press releases issued
          by the Company or any of its Subsidiaries; and (iii) contemporaneously
          with  the  making  available  or  giving  to the  shareholders  of the
          Company,  copies of any notices or other information the Company makes
          available or gives to such shareholders.

     h.   Authorization  and  Reservation  of Shares.  The Company  shall at all
          times have  authorized,  and reserved  for the purpose of issuance,  a
          sufficient  number of shares of Common  Stock to provide  for the full
          conversion or exercise of the outstanding  Debentures and Warrants and
          issuance of the  Conversion  Shares and Warrant  Shares in  connection
          therewith (based on the Conversion Price of the Debentures or Exercise
          Price of the  Warrants in effect  from time to time) and as  otherwise
          required by the Debentures. The Company shall not reduce the number of
          shares of Common  Stock  reserved  for  issuance  upon  conversion  of
          Debentures  and exercise of the  Warrants  without the consent of each
          Buyer. The Company shall at all times maintain the number of shares of
          Common Stock so reserved for issuance at an amount ("Reserved Amount")
          equal to no less than two (2) times the number  that is then  actually
          issuable  upon  full  conversion  of  the  Debentures  and  Additional
          Debentures  and  upon  exercise  of the  Warrants  and the  Additional
          Warrants  (based  on the  Conversion  Price of the  Debentures  or the
          Exercise Price of the Warrants in effect from time to time). If at any
          time the number of shares of Common Stock  authorized and reserved for
          issuance  ("Authorized  and  Reserved  Shares") is below the  Reserved
          Amount,  the Company will promptly take all corporate action necessary
          to  authorize  and reserve a sufficient  number of shares,  including,
          without  limitation,  calling a special  meeting  of  shareholders  to
          authorize  additional  shares to meet the Company's  obligations under
          this Section 4(h), in the case of an insufficient number of authorized
          shares,  obtain shareholder approval of an increase in such authorized
          number of shares,  and voting the management  shares of the Company in
          favor of an increase in the authorized shares of the Company to ensure
          that  the  number  of  authorized  shares  is  sufficient  to meet the
          Reserved  Amount.  If the  Company  fails to obtain  such  shareholder
          approval  within  thirty  (30)  days  following  the date on which the
          number of Authorized and Reserved Shares exceeds the Reserved  Amount,
          the Company shall pay to the Borrower the Standard  Liquidated Damages
          Amount,  in cash or in  shares of  Common  Stock at the  option of the
          Buyer. If the Buyer elects to be paid the Standard  Liquidated Damages
          Amount in shares of Common  Stock,  such shares shall be issued at the
          Conversion  Price at the time of payment.  In order to ensure that the
          Company  has  authorized  a  sufficient  amount  of shares to meet the
          Reserved Amount at all times, the Company must deliver to the Buyer at
          the end of every  month a list  detailing  (1) the  current  amount of
          shares  authorized by the Company and reserved for the Buyer;  and (2)
          amount of shares  issuable upon  conversion of the Debentures and upon
          exercise of the  Warrants  and as payment of  interest  accrued on the
          Debentures  for one year.  If the Company  fails to provide  such list
          within five (5)  business  days of the end of each month,  the Company
          shall pay the Standard Liquidated Damages Amount, in cash or in shares
          of  Common  Stock  at the  option  of the  Buyer,  until  the  list is
          delivered.  If the  Buyer  elects to be paid the  Standard  Liquidated
          Damages Amount in shares of Common Stock,  such shares shall be issued
          at the Conversion Price at the time of payment.

     i.   Listing.  The  Company  shall  promptly  secure  the  listing  of  the
          Conversion  Shares and Warrant  Shares upon each  national  securities
          exchange or automated  quotation  system, if any, upon which shares of
          Common Stock are then listed  (subject to official notice of issuance)
          and, so long as any Buyer owns any of the Securities,  shall maintain,
          so long as any other shares of Common  Stock shall be so listed,  such
          listing of all Conversion  Shares and Warrant Shares from time to time
          issuable  upon  conversion  of  the  Debentures  or  exercise  of  the
          Warrants.  The Company  will obtain and, so long as any Buyer owns any
          of the  Securities,  maintain  the  listing  and trading of its Common
          Stock on the OTCBB or any equivalent  replacement exchange, the Nasdaq
          National  Market  ("Nasdaq"),  the  Nasdaq  SmallCap  Market  ("Nasdaq
          SmallCap"),  the New York Stock  Exchange  ("NYSE"),  or the  American
          Stock  Exchange  ("AMEX")  and will  comply in all  respects  with the
          Company's reporting,  filing and other obligations under the bylaws or
          rules of the National  Association of Securities  Dealers ("NASD") and
          such exchanges,  as applicable.  The Company shall promptly provide to
          each Buyer  copies of any notices it  receives  from the OTCBB and any
          other exchanges or quotation systems on which the Common Stock is then
          listed  regarding  the continued  eligibility  of the Common Stock for
          listing on such exchanges and quotation systems.

     j.   Corporate  Existence.  So  long  as  a  Buyer  beneficially  owns  any
          Debentures  or Warrants,  the Company  shall  maintain  its  corporate
          existence and shall not sell all or substantially all of the Company's
          assets,  except in the event of a merger or  consolidation  or sale of
          all or substantially all of the Company's assets,  where the surviving
          or  successor  entity in such  transaction  (i) assumes the  Company's
          obligations hereunder and under the agreements and instruments entered
          into in connection  herewith and (ii) is a publicly traded corporation
          whose Common Stock is listed for trading on the OTCBB, Nasdaq,  Nasdaq
          SmallCap, NYSE or AMEX.

     k.   No Integration.  The Company shall not make any offers or sales of any
          security (other than the Securities)  under  circumstances  that would
          require registration of the Securities being offered or sold hereunder
          under  the 1933 Act or cause  the  offering  of the  Securities  to be
          integrated  with any other  offering of  securities by the Company for
          the purpose of any stockholder  approval  provision  applicable to the
          Company or its securities.

     l.   Subsequent  Investment.  The Company and the Buyers  agree that,  upon
          filing  by the  Company  of the  Registration  Statement  to be  filed
          pursuant to the Registration Rights Agreement (the "Filing Date"), the
          Buyers shall purchase additional  debentures ("Filing  Debentures") in
          the aggregate  principal  amount of Two Hundred Fifty Thousand Dollars
          ($250,000) and additional warrants (the "Filing Warrants") to purchase
          an  aggregate  of 750,000  shares of Common  Stock,  for an  aggregate
          purchase price of Two Hundred Fifty Thousand Dollars ($250,000),  with
          the closing of such purchase to occur within five (5) business days of
          the Filing Date; provided,  however, that the obligation of each Buyer
          to purchase the Filing  Debentures and the Filing  Warrants is subject
          to the  satisfaction,  at or before the closing of such  purchase  and
          sale,  of the  conditions  set forth in Section 7. The Company and the
          Buyers further agree that,  upon the declaration of  effectiveness  of
          the  Registration  Statement to be filed pursuant to the  Registration
          Rights  Agreement (the  "Effective  Date"),  the Buyers shall purchase
          additional    debentures   (the   "Effectiveness    Debentures"   and,
          collectively with the Filing Debentures,  the "Additional Debentures")
          in the  aggregate  principal  amount  of Two  Hundred  Fifty  Thousand
          Dollars  ($250,000)  and  additional   warrants  (the   "Effectiveness
          Warrants" and, collectively with the Filing Warrants,  the "Additional
          Warrants") to purchase an aggregate of 750,000 shares of Common Stock,
          for an aggregate  purchase price of Two Hundred Fifty Thousand Dollars
          ($250,000), with the closing of such purchase to occur within five (5)
          business  days of the  Effective  Date;  provided,  however,  that the
          obligation of each Buyer to purchase the Effectiveness  Debentures and
          the  Effectiveness  Warrants  is  subject to the  satisfaction,  at or
          before the closing of such  purchase and sale, of the  conditions  set
          forth in Section 7; and, provided,  further, that there shall not have
          been a Material Adverse Effect as of such effective date. The terms of
          the  Additional  Debentures  and  the  Additional  Warrants  shall  be
          identical to the terms of the Debentures and Warrants, as the case may
          be, to be issued on the Closing Date. The Common Stock  underlying the
          Additional Debentures and the Additional Warrants shall be Registrable
          Securities (as defined in the Registration Rights Agreement) and shall
          be included in the Registration  Statement to be filed pursuant to the
          Registration Rights Agreement.

     m.   Breach of Covenants.  If the Company breaches any of the covenants set
          forth  in this  Section  4,  and in  addition  to any  other  remedies
          available to the Buyers pursuant to this Agreement,  the Company shall
          pay to the Buyers the Standard  Liquidated  Damages Amount, in cash or
          in shares of Common  Stock at the  option  of the  Buyer,  until  such
          breach  is  cured.  If  the  Buyers  elect  to be  paid  the  Standard
          Liquidated  Damages  Amount in shares,  such shares shall be issued at
          the Conversion Price at the time of payment.

5.   TRANSFER   AGENT   INSTRUCTIONS.   The  Company  shall  issue   irrevocable
     instructions to its transfer agent to issue certificates, registered in the
     name of each Buyer or its nominee,  for the  Conversion  Shares and Warrant
     Shares in such amounts as specified  from time to time by each Buyer to the
     Company upon  conversion  of the  Debentures or exercise of the Warrants in
     accordance  with  the  terms  thereof  (the  "Irrevocable   Transfer  Agent
     Instructions").  Prior to registration of the Conversion Shares and Warrant
     Shares  under the 1933 Act or the date on which the  Conversion  Shares and
     Warrant Shares may be sold pursuant to Rule 144 without any  restriction as
     to the  number  of  Securities  as of a  particular  date  that can then be
     immediately sold, all such certificates  shall bear the restrictive  legend
     specified in Section 2(g) of this Agreement.  The Company  warrants that no
     instruction other than the Irrevocable Transfer Agent Instructions referred
     to in this  Section 5, and stop  transfer  instructions  to give  effect to
     Section  2(f)  hereof (in the case of the  Conversion  Shares  and  Warrant
     Shares,  prior to registration of the Conversion  Shares and Warrant Shares
     under the 1933 Act or the date on which the  Conversion  Shares and Warrant
     Shares may be sold pursuant to Rule 144 without any  restriction  as to the
     number of Securities as of a particular  date that can then be  immediately
     sold),  will be given by the  Company  to its  transfer  agent and that the
     Securities shall otherwise be freely  transferable on the books and records
     of the  Company as and to the extent  provided  in this  Agreement  and the
     Registration Rights Agreement.  Nothing in this Section shall affect in any
     way the Buyer's  obligations and agreement set forth in Section 2(g) hereof
     to comply with all applicable  prospectus  delivery  requirements,  if any,
     upon re-sale of the Securities. If a Buyer provides the Company with (i) an
     opinion of counsel in form,  substance and scope  customary for opinions in
     comparable  transactions,  to the effect  that a public sale or transfer of
     such  Securities  may be made without  registration  under the 1933 Act and
     such sale or transfer is  effected  or (ii) the Buyer  provides  reasonable
     assurances  that the  Securities  can be sold  pursuant  to Rule  144,  the
     Company  shall  permit the  transfer,  and,  in the case of the  Conversion
     Shares and Warrant  Shares,  promptly  instruct its transfer agent to issue
     one or more certificates, free from restrictive legend, in such name and in
     such  denominations  as specified by such Buyer.  The Company  acknowledges
     that a breach by it of its  obligations  hereunder  will cause  irreparable
     harm to the Buyers, by vitiating the intent and purpose of the transactions
     contemplated hereby. Accordingly,  the Company acknowledges that the remedy
     at law  for a  breach  of  its  obligations  under  this  Section  5 may be
     inadequate and agrees, in the event of a breach or threatened breach by the
     Company  of the  provisions  of this  Section,  that  the  Buyers  shall be
     entitled,  in addition to all other  available  remedies,  to an injunction
     restraining  any breach  and  requiring  immediate  transfer,  without  the
     necessity of showing  economic loss and without any bond or other  security
     being required.

6.   CONDITIONS  TO THE  COMPANY'S  OBLIGATION  TO SELL.  The  obligation of the
     Company  hereunder to issue and sell the Debentures and Warrants to a Buyer
     at the  Closing is subject to the  satisfaction,  at or before the  Closing
     Date of each of the  following  conditions  thereto,  provided  that  these
     conditions  are for the  Company's  sole  benefit  and may be waived by the
     Company at any time in its sole discretion:

     a.   The  applicable  Buyer  shall have  executed  this  Agreement  and the
          Registration Rights Agreement, and delivered the same to the Company.

     b.   The  applicable  Buyer  shall have  delivered  the  Purchase  Price in
          accordance with Section 1(b) above.

     c.   The  representations  and warranties of the applicable  Buyer shall be
          true and correct in all material respects as of the date when made and
          as of the  Closing  Date  as  though  made at that  time  (except  for
          representations  and warranties that speak as of a specific date), and
          the applicable  Buyer shall have performed,  satisfied and complied in
          all material  respects with the  covenants,  agreements and conditions
          required by this Agreement to be performed, satisfied or complied with
          by the applicable Buyer at or prior to the Closing Date.

     d.   No litigation,  statute,  rule,  regulation,  executive order, decree,
          ruling or injunction shall have been enacted, entered,  promulgated or
          endorsed by or in any court or  governmental  authority  of  competent
          jurisdiction or any self-regulatory organization having authority over
          the matters  contemplated  hereby which prohibits the  consummation of
          any of the transactions contemplated by this Agreement.

7.   CONDITIONS TO EACH BUYER'S  OBLIGATION TO PURCHASE.  The obligation of each
     Buyer  hereunder to purchase the  Debentures and Warrants at the Closing is
     subject to the  satisfaction,  at or before the Closing Date of each of the
     following  conditions,  provided that these conditions are for such Buyer's
     sole  benefit  and may be  waived  by such  Buyer  at any  time in its sole
     discretion:

     a.   The Company shall have executed  this  Agreement and the  Registration
          Rights Agreement, and delivered the same to the Buyer.

     b.   The  Company  shall  have   delivered  to  such  Buyer  duly  executed
          Debentures  (in such  denominations  as the Buyer shall  request)  and
          Warrants in accordance with Section 1(b) above.

     c.   The  Irrevocable  Transfer Agent  Instructions,  in form and substance
          satisfactory to a majority-in-interest  of the Buyers, shall have been
          delivered to and  acknowledged  in writing by the  Company's  Transfer
          Agent.

     d.   The  representations  and  warranties of the Company shall be true and
          correct in all  material  respects  as of the date when made and as of
          the   Closing   Date  as  though   made  at  such  time   (except  for
          representations  and warranties  that speak as of a specific date) and
          the  Company  shall have  performed,  satisfied  and  complied  in all
          material  respects  with  the  covenants,  agreements  and  conditions
          required by this Agreement to be performed, satisfied or complied with
          by the Company at or prior to the Closing  Date.  The Buyer shall have
          received  a  certificate  or  certificates,   executed  by  the  chief
          executive officer of the Company, dated as of the Closing Date, to the
          foregoing  effect  and as to such other  matters as may be  reasonably
          requested  by such Buyer  including,  but not limited to  certificates
          with respect to the Company's  Articles of Incorporation,  By-laws and
          Board  of  Directors'   resolutions   relating  to  the   transactions
          contemplated hereby.

     e.   No litigation,  statute,  rule,  regulation,  executive order, decree,
          ruling or injunction shall have been enacted, entered,  promulgated or
          endorsed by or in any court or  governmental  authority  of  competent
          jurisdiction or any self-regulatory organization having authority over
          the matters  contemplated  hereby which prohibits the  consummation of
          any of the transactions contemplated by this Agreement.

     f.   No event shall have  occurred  which could  reasonably  be expected to
          have a Material Adverse Effect on the Company.

     g.   The Conversion  Shares and Warrant  Shares shall have been  authorized
          for  quotation  on the OTCBB and  trading in the  Common  Stock on the
          OTCBB shall not have been suspended by the SEC or the OTCBB.

     h.   The Buyer  shall have  received an opinion of the  Company's  counsel,
          dated as of the Closing Date, in form, scope and substance  reasonably
          satisfactory  to the  Buyer  and in  substantially  the  same  form as
          Exhibit "D" attached hereto.

     i.   The Buyer shall have  received an officer's  certificate  described in
          Section 3(c) above, dated as of the Closing Date.

8.   GOVERNING LAW; MISCELLANEOUS.

     a.   Governing  Law.  THIS  AGREEMENT  SHALL BE  ENFORCED,  GOVERNED BY AND
          CONSTRUED  IN  ACCORDANCE  WITH  THE  LAWS OF THE  STATE  OF NEW  YORK
          APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
          STATE,  WITHOUT  REGARD TO THE  PRINCIPLES  OF CONFLICT  OF LAWS.  THE
          PARTIES  HERETO  HEREBY SUBMIT TO THE  EXCLUSIVE  JURISDICTION  OF THE
          UNITED  STATES  FEDERAL  COURTS  LOCATED  IN NEW  YORK,  NEW YORK WITH
          RESPECT TO ANY DISPUTE  ARISING UNDER THIS  AGREEMENT,  THE AGREEMENTS
          ENTERED INTO IN CONNECTION  HEREWITH OR THE TRANSACTIONS  CONTEMPLATED
          HEREBY OR THEREBY.  BOTH PARTIES  IRREVOCABLY  WAIVE THE DEFENSE OF AN
          INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH
          PARTIES  FURTHER  AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY
          FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
          PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING.  NOTHING HEREIN
          SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
          PERMITTED  BY LAW.  BOTH  PARTIES  AGREE  THAT A FINAL  NON-APPEALABLE
          JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
          ENFORCED  IN OTHER  JURISDICTIONS  BY SUIT ON SUCH  JUDGMENT OR IN ANY
          OTHER LAWFUL  MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE
          ARISING UNDER THIS  AGREEMENT  SHALL BE  RESPONSIBLE  FOR ALL FEES AND
          EXPENSES,  INCLUDING ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY
          IN CONNECTION WITH SUCH DISPUTE.

     b.   Counterparts;  Signatures by Facsimile. This Agreement may be executed
          in one or more counterparts, each of which shall be deemed an original
          but all of which shall constitute one and the same agreement and shall
          become effective when  counterparts have been signed by each party and
          delivered  to the other  party.  This  Agreement,  once  executed by a
          party,  may be  delivered  to the  other  party  hereto  by  facsimile
          transmission of a copy of this Agreement  bearing the signature of the
          party so delivering this Agreement.

     c.   Headings.  The  headings  of this  Agreement  are for  convenience  of
          reference   only  and  shall   not  form   part  of,  or  affect   the
          interpretation of, this Agreement.

     d.   Severability.  In the event that any  provision  of this  Agreement is
          invalid or unenforceable  under any applicable statute or rule of law,
          then such provision shall be deemed  inoperative to the extent that it
          may conflict  therewith  and shall be deemed  modified to conform with
          such  statute or rule of law.  Any  provision  hereof  which may prove
          invalid or  unenforceable  under any law shall not affect the validity
          or enforceability of any other provision hereof.

     e.   Entire  Agreement;  Amendments.  This  Agreement  and the  instruments
          referenced herein contain the entire understanding of the parties with
          respect to the  matters  covered  herein and  therein  and,  except as
          specifically set forth herein or therein,  neither the Company nor the
          Buyer makes any representation, warranty, covenant or undertaking with
          respect to such matters.  No provision of this Agreement may be waived
          or amended other than by an instrument in writing  signed by the party
          to be charged with enforcement.

     f.   Notices. Any notices required or permitted to be given under the terms
          of this  Agreement  shall  be sent by  certified  or  registered  mail
          (return  receipt  requested)  or  delivered  personally  or by courier
          (including a recognized  overnight  delivery  service) or by facsimile
          and shall be effective  five days after being  placed in the mail,  if
          mailed by regular  United States mail,  or upon receipt,  if delivered
          personally or by courier  (including a recognized  overnight  delivery
          service)  or by  facsimile,  in each case  addressed  to a party.  The
          addresses for such communications shall be:

                  If to the Company:

                        iDial Networks, Inc.
                        10800 East Bethany Drive
                        Suite 380
                        Denver, Colorado 80014
                        Attention:  Mark T. Wood
                        Telephone: 215-465-3100
                        Facsimile:  281-292-8083

                  With a copy to:

                        Sichenzia Ross Friedman Ference LLP
                        1065 Avenue of the Americas, 21st Floor
                        New York, New York 10018
                        Attention:  Gregory Sichenzia, Esq.
                        Telephone:  212-930-9700
                        Facsimile:   212-930-9725
                        Email: GSichenzia@srfllp.net

     If to a Buyer: To the address set forth immediately below such Buyer's name
on the signature pages hereto.

                  With copy to:

                        Ballard Spahr Andrews & Ingersoll, LLP
                        1735 Market Street
                        51st Floor
                        Philadelphia, Pennsylvania  19103
                        Attention:  Gerald J. Guarcini, Esq.
                        Telephone:  215-864-8625
                        Facsimile:  215-864-8999
                        Email:  guarcini@ballardspahr.com

     Each  party  shall  provide  notice  to the  other  party of any  change in
address.

          g.   Successors and Assigns.  This Agreement shall be binding upon and
               inure to the  benefit of the  parties  and their  successors  and
               assigns.  Neither the  Company  nor any Buyer  shall  assign this
               Agreement  or any rights or  obligations  hereunder  without  the
               prior  written   consent  of  the  other.   Notwithstanding   the
               foregoing,  subject  to  Section  2(f),  any Buyer may assign its
               rights  hereunder to any person that  purchases  Securities  in a
               private  transaction from a Buyer or to any of its  "affiliates,"
               as that term is defined  under the 1934 Act,  without the consent
               of the Company.

          h.   Third Party  Beneficiaries.  This  Agreement  is intended for the
               benefit  of the  parties  hereto and their  respective  permitted
               successors  and  assigns,  and is not for the benefit of, nor may
               any provision hereof be enforced by, any other person.

          i.   Survival.  The  representations and warranties of the Company and
               the  agreements and covenants set forth in Sections 3, 4, 5 and 8
               shall  survive  the  closing  hereunder  notwithstanding  any due
               diligence  investigation conducted by or on behalf of the Buyers.
               The Company  agrees to indemnify  and hold  harmless  each of the
               Buyers and all their  officers,  directors,  employees and agents
               for loss or  damage  arising  as a result  of or  related  to any
               breach  or  alleged   breach  by  the   Company  of  any  of  its
               representations, warranties and covenants set forth in Sections 3
               and 4 hereof or any of its covenants and  obligations  under this
               Agreement  or  the  Registration   Rights  Agreement,   including
               advancement of expenses as they are incurred.

          j.   Publicity.  The  Company  and each of the  Buyers  shall have the
               right to review a  reasonable  period of time before  issuance of
               any press  releases,  SEC,  OTCBB or NASD  filings,  or any other
               public  statements with respect to the transactions  contemplated
               hereby;  provided,  however,  that the Company shall be entitled,
               without the prior  approval  of each of the  Buyers,  to make any
               press release or SEC, OTCBB (or other applicable  trading market)
               or NASD filings with respect to such  transactions as is required
               by applicable  law and  regulations  (although each of the Buyers
               shall be  consulted  by the Company in  connection  with any such
               press  release  prior to its release and shall be provided with a
               copy thereof and be given an opportunity to comment thereon).

          k.   Further Assurances.  Each party shall do and perform, or cause to
               be done and  performed,  all such  further  acts and things,  and
               shall   execute   and   deliver   all  such   other   agreements,
               certificates,  instruments and documents,  as the other party may
               reasonably   request  in  order  to  carry  out  the  intent  and
               accomplish the purposes of this Agreement and the consummation of
               the transactions contemplated hereby.

          l.   No Strict Construction.  The language used in this Agreement will
               be deemed to be the  language  chosen by the  parties  to express
               their mutual intent, and no rules of strict  construction will be
               applied against any party.

          m.   Remedies.  The  Company  acknowledges  that a breach by it of its
               obligations  hereunder will cause  irreparable harm to the Buyers
               by   vitiating   the  intent  and  purpose  of  the   transaction
               contemplated hereby.  Accordingly,  the Company acknowledges that
               the  remedy at law for a breach  of its  obligations  under  this
               Agreement will be inadequate and agrees, in the event of a breach
               or  threatened  breach by the Company of the  provisions  of this
               Agreement,  that the Buyers shall be entitled, in addition to all
               other available  remedies at law or in equity, and in addition to
               the penalties  assessable herein, to an injunction or injunctions
               restraining,  preventing  or curing any breach of this  Agreement
               and to  enforce  specifically  the terms and  provisions  hereof,
               without the  necessity of showing  economic  loss and without any
               bond or other security being required.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

     IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused this
Agreement to be duly executed as of the date first above written.

IDIAL NETWORKS, INC.

--------------------------------
Mark T. Wood
Chief Executive Officer

AJW PARTNERS, LLC
By:  SMS Group, LLC

--------------------------------------
Corey S. Ribotsky
Manager

RESIDENCE:  Delaware

ADDRESS:    1044 Northern Boulevard
            Suite 302
            Roslyn, New York  11576
            Facsimile:  (516) 739-7115
            Telephone:  (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

      Aggregate Principal Amount of Debentures:                   $100,000
      Number of Warrants:                                          300,000
      Aggregate Purchase Price:                                   $100,000

AJW OFFSHORE, LTD.
By:  First Street Manager II, LLC

--------------------------------------
Corey S. Ribotsky
Manager

RESIDENCE:      Cayman Islands

ADDRESS:    AJW Offshore, Ltd.
            P.O. Box 32021 SMB
            Grand Cayman, Cayman Island, B.W.I.

AGGREGATE SUBSCRIPTION AMOUNT:

      Aggregate Principal Amount of Debentures:                       $100,000
      Number of Warrants:                                              300,000
      Aggregate Purchase Price:                                       $100,000

AJW QUALIFIED PARTNERS, LLC
By:  AJW Manager, LLC

------------------------------------
Corey S. Ribotsky
Manager

RESIDENCE:      New York

ADDRESS:    1044 Northern Boulevard
            Suite 302
            Roslyn, New York  11576
            Facsimile:  (516) 739-7115
            Telephone:  (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

      Aggregate Principal Amount of Debentures:                        $50,000
      Number of Warrants:                                              150,000
      Aggregate Purchase Price:                                        $50,000form-sb2_021113

                               SECURITY AGREEMENT

     SECURITY AGREEMENT (this "Agreement"), dated as of February 6, 2003, by and
among iDial Networks,  Inc., a Nevada corporation  ("Company"),  and the secured
parties signatory hereto and their respective endorsees, transferees and assigns
(collectively, the "Secured Party").

                              W I T N E S S E T H:

     WHEREAS, pursuant to a Securities Purchase Agreement, dated the date hereof
between  Company and the Secured Party (the "Purchase  Agreement"),  Company has
agreed  to issue to the  Secured  Party  and the  Secured  Party  has  agreed to
purchase from Company certain of Company's 12% Secured  Convertible  Debentures,
due one year from the date of issue (the  "Debentures"),  which are  convertible
into shares of Company's  Common  Stock,  par value $.005 per share (the "Common
Stock"). In connection therewith,  Company shall issue the Secured Party certain
Common  Stock  purchase  warrants  dated as of the date hereof to  purchase  the
number of shares of Common Stock  indicated  below each Secured  Party's name on
the Purchase Agreement (the "Warrants"); and

     WHEREAS,  in order to induce the Secured Party to purchase the  Debentures,
Company has agreed to execute and  deliver to the Secured  Party this  Agreement
for the  benefit  of the  Secured  Party  and to  grant  to it a first  priority
security  interest in certain  property of Company to secure the prompt payment,
performance  and  discharge  in full of all of Company's  obligations  under the
Debentures and exercise and discharge in full of Company's obligations under the
Warrants.

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

1.   Certain Definitions.  As used in this Agreement,  the following terms shall
     have the meanings set forth in this Section 1. Terms used but not otherwise
     defined in this Agreement that are defined in Article 9 of the UCC (such as
     "general  intangibles" and "proceeds")  shall have the respective  meanings
     given such terms in Article 9 of the UCC.

     (a)  "Collateral"  means  the  collateral  in which  the  Secured  Party is
          granted a security  interest by this Agreement and which shall include
          the  following,  whether  presently  owned or  existing  or  hereafter
          acquired or coming into  existence,  and all additions and  accessions
          thereto  and  all  substitutions  and  replacements  thereof,  and all
          proceeds,   products  and   accounts   thereof,   including,   without
          limitation,  all proceeds from the sale or transfer of the  Collateral
          and  of  insurance  covering  the  same  and  of any  tort  claims  in
          connection therewith:

          (i)  All Goods of the Company,  including,  without  limitations,  all
               machinery,  equipment,  computers, motor vehicles, trucks, tanks,
               boats, ships, appliances,  furniture,  special and general tools,
               fixtures, test and quality control devices and other equipment of
               every kind and nature and wherever  situated,  together  with all
               documents  of title and  documents  representing  the  same,  all
               additions and  accessions  thereto,  replacements  therefor,  all
               parts therefor,  and all substitutes for any of the foregoing and
               all other items used and useful in connection  with the Company's
               businesses  and  all  improvements  thereto  (collectively,   the
               "Equipment"); and

          (ii) All Inventory of the Company; and

          (iii)All of the  Company's  contract  rights and general  intangibles,
               including,  without limitation,  all partnership interests, stock
               or other securities, licenses, distribution and other agreements,
               computer  software   development  rights,   leases,   franchises,
               customer lists,  quality control  procedures,  grants and rights,
               goodwill,  trademarks,  service marks, trade styles, trade names,
               patents, patent applications,  copyrights,  deposit accounts, and
               income tax refunds (collectively, the "General Intangibles"); and

          (iv) All Receivables of the Company including all insurance  proceeds,
               and  rights  to  refunds  or  indemnification  whatsoever  owing,
               together   with  all   instruments,   all   documents   of  title
               representing   any  of  the   foregoing,   all   rights   in  any
               merchandising,  goods, equipment, motor vehicles and trucks which
               any of the same may represent, and all right, title, security and
               guaranties with respect to each  Receivable,  including any right
               of stoppage in transit; and

          (v)  All of the Company's  documents,  instruments  and chattel paper,
               files,  records,  books of  account,  business  papers,  computer
               programs and the  products  and proceeds of all of the  foregoing
               Collateral set forth in clauses (i)-(iv) above.

     (b)  "Company"   shall   mean,   collectively,   Company  and  all  of  the
          subsidiaries  of Company,  a list of which is contained in Schedule A,
          attached hereto.

     (c)  "Obligations"  means  all  of the  Company's  obligations  under  this
          Agreement and the Debentures,  in each case,  whether now or hereafter
          existing,  voluntary or involuntary,  direct or indirect,  absolute or
          contingent,  liquidated or  unliquidated,  whether or not jointly owed
          with  others,  and  whether  or not  from  time to time  decreased  or
          extinguished and later decreased,  created or incurred, and all or any
          portion  of such  obligations  or  liabilities  that are paid,  to the
          extent  all or any  part of  such  payment  is  avoided  or  recovered
          directly  or  indirectly  from  the  Secured  Party  as a  preference,
          fraudulent  transfer or otherwise as such  obligations may be amended,
          supplemented, converted, extended or modified from time to time.

     (d)  "UCC" means the Uniform Commercial Code, as currently in effect in the
          State of New York.

2.   Grant of Security  Interest.  As an  inducement  for the  Secured  Party to
     purchase the  Debentures  and to secure the  complete  and timely  payment,
     performance  and  discharge  in full,  as the  case  may be,  of all of the
     Obligations, the Company hereby, unconditionally and irrevocably,  pledges,
     grants  and  hypothecates  to the  Secured  Party,  a  continuing  security
     interest  in,  a  continuing  first  lien  upon,  an  unqualified  right to
     possession and disposition of and a right of set-off against,  in each case
     to the fullest extent permitted by law, all of the Company's  right,  title
     and interest of whatsoever  kind and nature in and to the  Collateral  (the
     "Security Interest").

3.   Representations,  Warranties,  Covenants and Agreements of the Company. The
     Company  represents  and warrants to, and  covenants  and agrees with,  the
     Secured Party as follows:

     (a)  The Company has the requisite  corporate  power and authority to enter
          into  this  Agreement  and  otherwise  to  carry  out its  obligations
          thereunder. The execution,  delivery and performance by the Company of
          this  Agreement  and the filings  contemplated  therein have been duly
          authorized by all  necessary  action on the part of the Company and no
          further action is required by the Company.  This Agreement constitutes
          a legal,  valid and binding  obligation of the Company  enforceable in
          accordance with its terms,  except as enforceability may be limited by
          bankruptcy,  insolvency,  reorganization,  moratorium  or similar laws
          affecting the enforcement of creditor's rights generally.

     (b)  The Company  represents  and warrants that it has no place of business
          or offices where its respective  books of account and records are kept
          (other  than   temporarily   at  the  offices  of  its   attorneys  or
          accountants) or places where  Collateral is stored or located,  except
          as set forth on Schedule A attached hereto;

     (c)  The  Company  is  the  sole  owner  of  the  Collateral   (except  for
          non-exclusive  licenses  granted by the Company in the ordinary course
          of  business),  free  and  clear  of any  liens,  security  interests,
          encumbrances,  rights or claims,  and is fully authorized to grant the
          Security  Interest  in and to pledge the  Collateral.  There is not on
          file in any governmental or regulatory authority,  agency or recording
          office an effective financing statement,  security agreement,  license
          or  transfer or any notice of any of the  foregoing  (other than those
          that have been filed in favor of the  Secured  Party  pursuant to this
          Agreement)  covering or affecting  any of the  Collateral.  So long as
          this Agreement  shall be in effect,  the Company shall not execute and
          shall not knowingly  permit to be on file in any such office or agency
          any such financing  statement or other document or instrument  (except
          to the extent filed or recorded in favor of the Secured Party pursuant
          to the terms of this Agreement).

     (d)  No part of the Collateral has been judged invalid or unenforceable. No
          written claim has been  received that any  Collateral or the Company's
          use of any  Collateral  violates the rights of any third party.  There
          has been no  adverse  decision  to the  Company's  claim of  ownership
          rights  in  or  exclusive   rights  to  use  the   Collateral  in  any
          jurisdiction  or to the  Company's  right  to keep and  maintain  such
          Collateral  in full  force  and  effect,  and  there is no  proceeding
          involving  said  rights  pending  or,  to the  best  knowledge  of the
          Company, threatened before any court, judicial body, administrative or
          regulatory agency, arbitrator or other governmental authority.

     (e)  The  Company  shall at all times  maintain  its books of  account  and
          records  relating to the Collateral at its principal place of business
          and its  Collateral  at the locations set forth on Schedule A attached
          hereto  and may not  relocate  such books of  account  and  records or
          tangible  Collateral  unless it delivers to the Secured Party at least
          30 days prior to such relocation (i) written notice of such relocation
          and the new location  thereof (which must be within the United States)
          and (ii)  evidence that  appropriate  financing  statements  and other
          necessary  documents have been filed and recorded and other steps have
          been taken to perfect the Security  Interest to create in favor of the
          Secured Party valid,  perfected and continuing first priority liens in
          the Collateral.

     (f)  This Agreement  creates in favor of the Secured Party a valid security
          interest in the Collateral securing the payment and performance of the
          Obligations and, upon making the filings  described in the immediately
          following  sentence,  a perfected first priority  security interest in
          such  Collateral.  Except for the filing of  financing  statements  on
          Form-1 under the UCC with the  jurisdictions  indicated on Schedule B,
          attached  hereto,  no  authorization  or approval of or filing with or
          notice to any  governmental  authority or regulatory  body is required
          either (i) for the grant by the Company of, or the  effectiveness  of,
          the Security  Interest  granted hereby or for the execution,  delivery
          and  performance  of this  Agreement  by the  Company  or (ii) for the
          perfection  of or  exercise  by the  Secured  Party of its  rights and
          remedies hereunder.

     (g)  On the date of execution of this  Agreement,  the Company will deliver
          to the Secured Party one or more executed UCC financing  statements on
          Form-1  with  respect to the  Security  Interest  for filing  with the
          jurisdictions  indicated  on Schedule B,  attached  hereto and in such
          other jurisdictions as may be requested by the Secured Party.

     (h)  The  execution,  delivery and  performance  of this Agreement does not
          conflict  with or cause a breach or default,  or an event that with or
          without the passage of time or notice,  shall  constitute  a breach or
          default,  under any  agreement  to which the  Company is a party or by
          which the Company is bound. No consent (including, without limitation,
          from stock  holders or  creditors  of the Company) is required for the
          Company to enter into and perform its obligations hereunder.

     (i)  The  Company  shall at all  times  maintain  the  liens  and  Security
          Interest  provided for hereunder as valid and perfected first priority
          liens and security interests in the Collateral in favor of the Secured
          Party until this Agreement and the Security  Interest  hereunder shall
          terminate  pursuant to Section 11. The Company hereby agrees to defend
          the same against any and all persons.  The Company shall safeguard and
          protect all Collateral  for the account of the Secured  Party.  At the
          request of the Secured Party, the Company will sign and deliver to the
          Secured  Party at any time or from time to time one or more  financing
          statements  pursuant to the UCC (or any other  applicable  statute) in
          form  reasonably  satisfactory  to the Secured  Party and will pay the
          cost of filing the same in all public offices  wherever  filing is, or
          is deemed by the Secured Party to be, necessary or desirable to effect
          the rights and obligations  provided for herein.  Without limiting the
          generality of the foregoing, the Company shall pay all fees, taxes and
          other amounts  necessary to maintain the  Collateral  and the Security
          Interest  hereunder,  and the Company  shall obtain and furnish to the
          Secured Party from time to time,  upon demand,  such  releases  and/or
          subordinations  of claims and liens  which may be required to maintain
          the priority of the Security Interest hereunder.

     (j)  The Company will not transfer, pledge, hypothecate,  encumber, license
          (except  for  non-exclusive  licenses  granted  by the  Company in the
          ordinary course of business),  sell or otherwise dispose of any of the
          Collateral without the prior written consent of the Secured Party.

     (k)  The Company shall keep and preserve its Equipment, Inventory and other
          tangible Collateral in good condition,  repair and order and shall not
          operate  or locate any such  Collateral  (or cause to be  operated  or
          located) in any area excluded from insurance coverage.

     (l)  The  Company  shall,  within  ten  (10)  days of  obtaining  knowledge
          thereof,  advise the Secured Party promptly,  in sufficient detail, of
          any substantial change in the Collateral, and of the occurrence of any
          event which would have a material  adverse  effect on the value of the
          Collateral or on the Secured Party's security interest therein.

     (m)  The Company  shall  promptly  execute and deliver to the Secured Party
          such  further  deeds,  mortgages,  assignments,  security  agreements,
          financing statements or other instruments, documents, certificates and
          assurances  and take such further action as the Secured Party may from
          time to time request and may in its sole  discretion deem necessary to
          perfect,  protect or enforce its security  interest in the  Collateral
          including,  without  limitation,  the  execution  and  delivery  of  a
          separate security agreement with respect to the Company's intellectual
          property  ("Intellectual  Property  Security  Agreement") in which the
          Secured  Party  has  been  granted  a  security  interest   hereunder,
          substantially  in a  form  acceptable  to  the  Secured  Party,  which
          Intellectual  Property  Security  Agreement,   other  than  as  stated
          therein, shall be subject to all of the terms and conditions hereof.

     (n)  The Company shall permit the Secured Party and its representatives and
          agents to inspect the  Collateral  at any time,  and to make copies of
          records  pertaining  to the  Collateral  as may  be  requested  by the
          Secured Party from time to time.

     (o)  The Company will take all steps  reasonably  necessary  to  diligently
          pursue and seek to preserve,  enforce and collect any rights,  claims,
          causes of action and accounts receivable in respect of the Collateral.

     (p)  The Company  shall  promptly  notify the Secured  Party in  sufficient
          detail upon becoming aware of any attachment,  garnishment,  execution
          or other legal process  levied against any Collateral and of any other
          information  received by the Company  that may  materially  affect the
          value of the  Collateral,  the  Security  Interest  or the  rights and
          remedies of the Secured Party hereunder.

     (q)  All  information  heretofore,  herein  or  hereafter  supplied  to the
          Secured  Party by or on  behalf of the  Company  with  respect  to the
          Collateral is accurate and complete in all material respects as of the
          date furnished.

     (r)  Schedule A attached hereto contains a list of all of the  subsidiaries
          of Company.

4.   Defaults. The following events shall be "Events of Default":

     (a)  The  occurrence of an Event of Default (as defined in the  Debentures)
          under the Debentures;

     (b)  Any  representation or warranty of the Company in this Agreement or in
          the Intellectual  Property Security Agreement shall prove to have been
          incorrect in any material respect when made;

     (c)  The  failure  by  the  Company  to  observe  or  perform  any  of  its
          obligations   hereunder  or  in  the  Intellectual  Property  Security
          Agreement  for ten (10) days after receipt by the Company of notice of
          such failure from the Secured Party; and

     (d)  Any breach of, or default under, the Warrants.

5.   Duty To Hold In Trust.  Upon the  occurrence of any Event of Default and at
     any time thereafter,  the Company shall, upon receipt by it of any revenue,
     income or other sums  subject to the  Security  Interest,  whether  payable
     pursuant to the  Debentures or  otherwise,  or of any check,  draft,  note,
     trade  acceptance or other  instrument  evidencing an obligation to pay any
     such sum, hold the same in trust for the Secured Party and shall  forthwith
     endorse and transfer any such sums or instruments,  or both, to the Secured
     Party for application to the satisfaction of the Obligations.

6.   Rights and Remedies Upon Default.  Upon  occurrence of any Event of Default
     and at any time  thereafter,  the  Secured  Party  shall  have the right to
     exercise all of the remedies conferred  hereunder and under the Debentures,
     and the Secured  Party shall have all the rights and  remedies of a secured
     party under the UCC and/or any other  applicable law (including the Uniform
     Commercial  Code  of any  jurisdiction  in  which  any  Collateral  is then
     located).  Without  limitation,  the Secured Party shall have the following
     rights and powers:

     (a)  The  Secured  Party  shall  have the right to take  possession  of the
          Collateral and, for that purpose,  enter,  with the aid and assistance
          of any person, any premises where the Collateral, or any part thereof,
          is or may be  placed  and  remove  the  same,  and the  Company  shall
          assemble the  Collateral and make it available to the Secured Party at
          places which the Secured Party shall reasonably select, whether at the
          Company's  premises or  elsewhere,  and make  available to the Secured
          Party,  without  rent,  all of the Company's  respective  premises and
          facilities for the purpose of the Secured Party taking  possession of,
          removing or putting the Collateral in saleable or disposable form.

     (b)  The Secured  Party shall have the right to operate the business of the
          Company using the Collateral and shall have the right to assign, sell,
          lease  or  otherwise  dispose  of and  deliver  all or any part of the
          Collateral,  at public or private  sale or  otherwise,  either with or
          without special  conditions or stipulations,  for cash or on credit or
          for future  delivery,  in such  parcel or parcels  and at such time or
          times and at such place or places,  and upon such terms and conditions
          as the Secured  Party may deem  commercially  reasonable,  all without
          (except  as shall be  required  by  applicable  statute  and cannot be
          waived) advertisement or demand upon or notice to the Company or right
          of redemption of the Company,  which are hereby expressly waived. Upon
          each such sale, lease, assignment or other transfer of Collateral, the
          Secured Party may, unless prohibited by applicable law which cannot be
          waived,  purchase all or any part of the Collateral  being sold,  free
          from and  discharged of all trusts,  claims,  right of redemption  and
          equities of the Company, which are hereby waived and released.

7.   Applications  of Proceeds.  The  proceeds of any such sale,  lease or other
     disposition of the  Collateral  hereunder  shall be applied  first,  to the
     expenses of retaking,  holding, storing, processing and preparing for sale,
     selling, and the like (including,  without limitation,  any taxes, fees and
     other costs  incurred in connection  therewith) of the  Collateral,  to the
     reasonable  attorneys'  fees and expenses  incurred by the Secured Party in
     enforcing its rights hereunder and in connection with  collecting,  storing
     and  disposing  of  the  Collateral,   and  then  to  satisfaction  of  the
     Obligations, and to the payment of any other amounts required by applicable
     law,  after  which the  Secured  Party shall pay to the Company any surplus
     proceeds.   If,  upon  the  sale,  license  or  other  disposition  of  the
     Collateral,  the proceeds  thereof are  insufficient  to pay all amounts to
     which the Secured Party is legally entitled, the Company will be liable for
     the  deficiency,  together  with interest  thereon,  at the rate of 15% per
     annum  (the  "Default  Rate"),  and the  reasonable  fees of any  attorneys
     employed by the Secured  Party to collect  such  deficiency.  To the extent
     permitted by  applicable  law, the Company  waives all claims,  damages and
     demands against the Secured Party arising out of the repossession, removal,
     retention or sale of the Collateral,  unless due to the gross negligence or
     willful misconduct of the Secured Party.

8.   Costs and Expenses. The Company agrees to pay all out-of-pocket fees, costs
     and expenses  incurred in connection  with any filing  required  hereunder,
     including  without  limitation,  any  financing  statements,   continuation
     statements,  partial releases and/or termination statements related thereto
     or any expenses of any searches  reasonably  required by the Secured Party.
     The  Company  shall  also pay all other  claims  and  charges  which in the
     reasonable  opinion  of the  Secured  Party  might  prejudice,  imperil  or
     otherwise  affect the  Collateral  or the Security  Interest  therein.  The
     Company will also, upon demand,  pay to the Secured Party the amount of any
     and all reasonable expenses,  including the reasonable fees and expenses of
     its counsel and of any  experts  and  agents,  which the Secured  Party may
     incur in connection with (i) the  enforcement of this  Agreement,  (ii) the
     custody  or  preservation  of, or the sale of,  collection  from,  or other
     realization  upon,  any  of  the  Collateral,  or  (iii)  the  exercise  or
     enforcement of any of the rights of the Secured Party under the Debentures.
     Until so paid, any fees payable  hereunder  shall be added to the principal
     amount of the Debentures and shall bear interest at the Default Rate.

9.   Responsibility  for  Collateral.  The Company  assumes all  liabilities and
     responsibility  in connection with all  Collateral,  and the obligations of
     the Company  hereunder or under the Debentures and the Warrants shall in no
     way be affected or diminished by reason of the loss, destruction, damage or
     theft of any of the Collateral or its unavailability for any reason.

10.  Security  Interest  Absolute.  All  rights  of the  Secured  Party  and all
     Obligations of the Company hereunder,  shall be absolute and unconditional,
     irrespective  of:  (a)  any  lack of  validity  or  enforceability  of this
     Agreement,  the Debentures,  the Warrants or any agreement  entered into in
     connection  with the foregoing,  or any portion hereof or thereof;  (b) any
     change in the time, manner or place of payment or performance of, or in any
     other term of, all or any of the  Obligations,  or any other  amendment  or
     waiver of or any consent to any departure from the Debentures, the Warrants
     or any other agreement  entered into in connection with the foregoing;  (c)
     any exchange,  release or  nonperfection  of any of the Collateral,  or any
     release or amendment  or waiver of or consent to  departure  from any other
     collateral for, or any guaranty,  or any other security,  for all or any of
     the  Obligations;  (d) any action by the Secured  Party to obtain,  adjust,
     settle and cancel in its sole  discretion  any insurance  claims or matters
     made or  arising  in  connection  with  the  Collateral;  or (e) any  other
     circumstance  which  might  otherwise  constitute  any  legal or  equitable
     defense available to the Company,  or a discharge of all or any part of the
     Security  Interest  granted hereby.  Until the Obligations  shall have been
     paid and performed in full,  the rights of the Secured Party shall continue
     even if the  Obligations  are barred  for any  reason,  including,  without
     limitation,  the running of the statute of limitations  or bankruptcy.  The
     Company expressly waives presentment,  protest, notice of protest,  demand,
     notice of nonpayment and demand for  performance.  In the event that at any
     time any transfer of any Collateral or any payment  received by the Secured
     Party  hereunder  shall be  deemed by final  order of a court of  competent
     jurisdiction  to have been a voidable  preference or fraudulent  conveyance
     under the bankruptcy or insolvency  laws of the United States,  or shall be
     deemed to be otherwise due to any party other than the Secured Party, then,
     in any such  event,  the  Company's  obligations  hereunder  shall  survive
     cancellation of this Agreement, and shall not be discharged or satisfied by
     any prior payment thereof and/or cancellation of this Agreement,  but shall
     remain a valid and binding  obligation  enforceable in accordance  with the
     terms and  provisions  hereof.  The Company waives all right to require the
     Secured  Party  to  proceed  against  any  other  person  or to  apply  any
     Collateral  which the  Secured  Party may hold at any time,  or to  marshal
     assets,  or to pursue any other  remedy.  The  Company  waives any  defense
     arising by reason of the  application  of the statute of limitations to any
     obligation secured hereby.

11.  Term of Agreement. This Agreement and the Security Interest shall terminate
     on the date on which all payments  under the  Debentures  have been made in
     full and all other  Obligations  have been  paid or  discharged.  Upon such
     termination,  the Secured  Party,  at the request and at the expense of the
     Company,  will join in executing any termination  statement with respect to
     any financing statement executed and filed pursuant to this Agreement.

12.  Power of Attorney; Further Assurances.

     (a)  The Company  authorizes  the  Secured  Party,  and does  hereby  make,
          constitute  and  appoint  it,  and its  respective  officers,  agents,
          successors  or  assigns  with  full  power  of  substitution,  as  the
          Company's  true and lawful  attorney-in-fact,  with power,  in its own
          name or in the name of the  Company,  to,  after  the  occurrence  and
          during the continuance of an Event of Default,  (i) endorse any notes,
          checks,   drafts,  money  orders,  or  other  instruments  of  payment
          (including  payments  payable  under or in  respect  of any  policy of
          insurance) in respect of the Collateral  that may come into possession
          of the  Secured  Party;  (ii) to sign and  endorse  any UCC  financing
          statement or any  invoice,  freight or express  bill,  bill of lading,
          storage or warehouse  receipts,  drafts against debtors,  assignments,
          verifications  and  notices in  connection  with  accounts,  and other
          documents relating to the Collateral; (iii) to pay or discharge taxes,
          liens,  security interests or other encumbrances at any time levied or
          placed  on or  threatened  against  the  Collateral;  (iv) to  demand,
          collect,  receipt  for,  compromise,  settle and sue for monies due in
          respect of the Collateral;  and (v) generally, to do, at the option of
          the Secured Party, and at the Company's expense,  at any time, or from
          time to time,  all acts and  things  which  the  Secured  Party  deems
          necessary to protect, preserve and realize upon the Collateral and the
          Security  Interest  granted  therein  in order to effect the intent of
          this  Agreement,  the  Debentures  and the Warrants,  all as fully and
          effectually  as the Company might or could do; and the Company  hereby
          ratifies all that said attorney  shall lawfully do or cause to be done
          by virtue  hereof.  This power of attorney is coupled with an interest
          and shall be irrevocable for the term of this Agreement and thereafter
          as long as any of the Obligations shall be outstanding.

     (b)  On a continuing  basis, the Company will make,  execute,  acknowledge,
          deliver, file and record, as the case may be, in the proper filing and
          recording places in any jurisdiction,  including,  without limitation,
          the jurisdictions  indicated on Schedule B, attached hereto,  all such
          instruments,  and take all such  action  as may  reasonably  be deemed
          necessary  or  advisable,  or as  reasonably  requested by the Secured
          Party,  to  perfect  the  Security   Interest  granted  hereunder  and
          otherwise to carry out the intent and purposes of this  Agreement,  or
          for  assuring  and  confirming  to the  Secured  Party  the  grant  or
          perfection of a security interest in all the Collateral.

     (c)  The Company  hereby  irrevocably  appoints  the  Secured  Party as the
          Company's attorney-in-fact, with full authority in the place and stead
          of the  Company and in the name of the  Company,  from time to time in
          the Secured Party's discretion,  to take any action and to execute any
          instrument  which the Secured Party may deem necessary or advisable to
          accomplish the purposes of this  Agreement,  including the filing,  in
          its  sole  discretion,  of  one  or  more  financing  or  continuation
          statements and amendments  thereto,  relative to any of the Collateral
          without the signature of the Company where permitted by law.

13.  Notices. All notices,  requests, demands and other communications hereunder
     shall be in writing, with copies to all the other parties hereto, and shall
     be deemed  to have been duly  given  when (i) if  delivered  by hand,  upon
     receipt,  (ii) if sent by  facsimile,  upon  receipt  of proof  of  sending
     thereof,  (iii) if sent by nationally recognized overnight delivery service
     (receipt requested), the next business day or (iv) if mailed by first-class
     registered or certified mail,  return receipt  requested,  postage prepaid,
     four days after posting in the U.S. mails, in each case if delivered to the
     following addresses:

      If to the Company:      iDial Networks, Inc.
                              10800 East Bethany Drive
                              Suite 380
                              Denver, Colorado 80014
                              Attention:  Mark T. Wood
                              Telephone:  281-465-3100
                              Facsimile:  281-292-8083

      With copies to:         Sichenzia Ross Friedman Ference LLP
                              1065 Avenue of the Americas, 21st Floor
                              New York, New York 10018
                              Attention:  Gregory Sichenzia, Esq.
                              Telephone:  (212) 930-9700
                              Facsimile:   (212) 930-9725
                              Email:  GSichenzia@srfllp.net

      If to the Secured Party:______________________________AJW Partners, LLC
                              AJW Offshore, Ltd.
                              AJW Qualified Partners, LLC
                              1044 Northern Boulevard
                              Suite 302
                              Roslyn, New York  11576
                              Attention:  Corey Ribotsky
                              Facsimile:  516-739-7115

                              With copies to:

                              Ballard Spahr Andrews & Ingersoll, LLP
                              1735 Market Street, 51st Floor
                              Philadelphia, Pennsylvania  19103
                              Attention:  Gerald J. Guarcini, Esq.
                              Facsimile:  215-864-8999

14.  Other  Security.  To the extent that the  Obligations  are now or hereafter
     secured  by  property  other  than  the  Collateral  or by  the  guarantee,
     endorsement  or property of any other person,  firm,  corporation  or other
     entity,  then  the  Secured  Party  shall  have  the  right,  in  its  sole
     discretion, to pursue,  relinquish,  subordinate,  modify or take any other
     action with respect thereto,  without in any way modifying or affecting any
     of the Secured Party's rights and remedies hereunder.

15.  Miscellaneous.

     (a)  No course of dealing  between the Company and the Secured  Party,  nor
          any failure to exercise,  nor any delay in exercising,  on the part of
          the Secured Party,  any right,  power or privilege  hereunder or under
          the Debentures shall operate as a waiver thereof; nor shall any single
          or partial  exercise of any right,  power or  privilege  hereunder  or
          thereunder  preclude  any other or  further  exercise  thereof  or the
          exercise of any other right, power or privilege.

     (b)  All of the rights and  remedies of the Secured  Party with  respect to
          the Collateral,  whether established hereby or by the Debentures or by
          any other  agreements,  instruments  or  documents  or by law shall be
          cumulative and may be exercised singly or concurrently.

     (c)  This Agreement  constitutes  the entire  agreement of the parties with
          respect to the subject  matter hereof and is intended to supersede all
          prior   negotiations,   understandings  and  agreements  with  respect
          thereto.  Except  as  specifically  set  forth in this  Agreement,  no
          provision  of this  Agreement  may be modified or amended  except by a
          written agreement  specifically referring to this Agreement and signed
          by the parties hereto.

     (d)  In the  event  that  any  provision  of this  Agreement  is held to be
          invalid,  prohibited  or  unenforceable  in any  jurisdiction  for any
          reason,  unless such  provision is narrowed by judicial  construction,
          this Agreement shall, as to such jurisdiction, be construed as if such
          invalid,  prohibited or unenforceable provision had been more narrowly
          drawn  so as not  to be  invalid,  prohibited  or  unenforceable.  If,
          notwithstanding the foregoing, any provision of this Agreement is held
          to be invalid,  prohibited or unenforceable in any jurisdiction,  such
          provision, as to such jurisdiction, shall be ineffective to the extent
          of  such   invalidity,   prohibition   or   unenforceability   without
          invalidating  the  remaining  portion of such  provision  or the other
          provisions  of this  Agreement  and without  affecting the validity or
          enforceability  of such  provision  or the  other  provisions  of this
          Agreement in any other jurisdiction.

     (e)  No waiver of any breach or default or any right  under this  Agreement
          shall be  considered  valid  unless in writing and signed by the party
          giving such waiver, and no such waiver shall be deemed a waiver of any
          subsequent breach or default or right,  whether of the same or similar
          nature or otherwise.

     (f)  This Agreement  shall be binding upon and inure to the benefit of each
          party hereto and its successors and assigns.

     (g)  Each party shall take such further action and execute and deliver such
          further documents as may be necessary or appropriate in order to carry
          out the provisions and purposes of this Agreement.

     (h)  This Agreement  shall be construed in accordance  with the laws of the
          State of New York,  except to the extent the  validity,  perfection or
          enforcement  of a  security  interest  hereunder  in  respect  of  any
          particular  Collateral which are governed by a jurisdiction other than
          the State of New York in which case such law shall govern. Each of the
          parties hereto irrevocably submit to the exclusive jurisdiction of any
          New York State or United  States  Federal  court  sitting in Manhattan
          county  over any action or  proceeding  arising  out of or relating to
          this Agreement,  and the parties hereto hereby  irrevocably agree that
          all claims in respect of such  action or  proceeding  may be heard and
          determined in such New York State or Federal court. The parties hereto
          agree that a final judgment in any such action or proceeding  shall be
          conclusive and may be enforced in other  jurisdictions  by suit on the
          judgment or in any other manner  provided by law.  The parties  hereto
          further  waive any objection to venue in the State of New York and any
          objection to an action or  proceeding  in the State of New York on the
          basis of forum non conveniens.

     (i)  EACH PARTY HERETO  HEREBY AGREES TO WAIVE ITS  RESPECTIVE  RIGHTS TO A
          JURY TRAIL OF ANY CLAIM OR CAUSE OF ACTION  BASED UPON OR ARISING  OUT
          OF THIS  AGREEMENT.  THE SCOPE OF THIS  WAIVER IS  INTENDED  TO BE ALL
          ENCOMPASSING  OF ANY DISPUTES  THAT MAY BE FILED IN ANY COURT AND THAT
          RELATE  TO THE  SUBJECT  MATER OF THIS  AGREEMENT,  INCLUDING  WITHOUT
          LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL
          OTHER COMMON LAW AND STATUTORY CLAIMS.  EACH PARTY HERETO ACKNOWLEDGES
          THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO
          A BUSINESS  RELATIONSHIP,  THAT EACH PARTY HAS ALREADY  RELIED ON THIS
          WAIVER IN  ENTERING  INTO THIS  AGREEMENT  AND THAT  EACH  PARTY  WILL
          CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH
          PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
          WITH ITS  LEGAL  COUNSEL,  AND  THAT  SUCH  PARTY  HAS  KNOWINGLY  AND
          VOLUNTARILY   WAIVES  ITS  RIGHTS  TO  A  JURY  TRIAL  FOLLOWING  SUCH
          CONSULTATION.    THIS   WAIVER   IS    IRREVOCABLE,    MEANING   THAT,
          NOTWITHSTANDING  ANYTHING  HEREIN  TO  THE  CONTRARY,  IT  MAY  NOT BE
          MODIFIED  EITHER ORALLY OR IN WRITING,  AND THIS WAIVER SHALL APPLY TO
          ANY SUBSEQUENT  AMENDMENTS,  RENEWALS AND SUPPLEMENTS OR MODIFICATIONS
          TO THIS AGREEMENT. IN THE EVENT OF A LITIGATION, THIS AGREEMENT MAY BE
          FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

     (j)  This Agreement may be executed in any number of counterparts,  each of
          which when so executed  shall be deemed to be an original  and, all of
          which taken together shall  constitute one and the same Agreement.  In
          the event that any  signature is delivered by facsimile  transmission,
          such  signature  shall create a valid binding  obligation of the party
          executing  (or on whose behalf such  signature  is executed)  the same
          with the same force and effect as if such facsimile signature were the
          original thereof.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

     IN WITNESS WHEREOF,  the parties hereto have caused this Security Agreement
to be duly executed on the day and year first above written.

                              IDIAL NETWORKS, INC.

                              By:  _____________________________________
                                  Mark T. Wood
                                  Chief Executive Officer

                               AJW PARTNERS, LLC
                              By: SMS Group, LLC

                               By:  _____________________________________
                                  Corey S. Ribotsky
                                  Manager

                               AJW OFFSHORE, LTD.
                              By:  First Street Manager II, LLC

                               By:  _____________________________________
                                  Corey S. Ribotsky
                                  Manager

                              AJW QUALIFIED PARTNERS, LLC
                              By:  AJW Manager, LLC

                               By:  _____________________________________
                                  Corey S. Ribotsky
                                  Manager

                                   SCHEDULE A

Principal Place of Business of the Company:
------------------------------------------

10800 E. Bethany Dr. Suite 380, Denver, CO 80014

Locations Where Collateral is Located or Stored:
-----------------------------------------------

o     60 Hudson Suite 1215-217, NY, NY 10013

o     Sirius Telecom - Suite 800, 624 South Grand Avenue, Los Angeles,
      California 90017

o     2204 Timberloch Place Suite 224, The Woodlands, TX 77380

o     10800 E Bethany Suite 380, Denver, CO 80014

List of Subsidiaries of the Company:
-----------------------------------

o     IDNW Carrier Services, Inc. - Delaware Corp.

o     IDNW, Inc. - Delaware Corp.

o     Global Dollar, Inc. - Delaware Corp.

o     Dibz, Inc. - Delaware, Corp.

o     2Sendit, Inc. - Colorado Corp.

o     Adelant Telecom, Inc. - Nevada Corp.

                                   SCHEDULE B

Jurisdictions:
-------------

California

Colorado

New York

Texas

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