6% CONVERTIBLE DEBENTURE

         NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
         HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
         EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER
         THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES ARE
         RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED
         EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO AN EFFECTIVE REGISTRATION
         STATEMENT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.


[No. ___]                                         [$500,000 Principal Amount]

                              DBS Industries, Inc.

                  6% CONVERTIBLE DEBENTURE DUE AUGUST 31, 2006


     THIS DEBENTURE is issued by DBS  Industries,  Inc., a Delaware  corporation
(the  "Company"),  and is part of an issue of an aggregate of up to Five Hundred
Thousand  Dollars  $500,000  principal  amount of 6% Convertible  Debentures due
August 31, 2006 (the "Convertible Debentures").

     FOR VALUE RECEIVED,  the Company  promises to pay to Azure Capital Holdings
LLC, or permitted  assigns (the  "Holder"),  the  principal  sum of Five Hundred
Thousand  and 00/100 (US  $500,000)  Dollars] on August 31, 2006 (the  "Maturity
Date") and to pay simple  interest on the principal sum  outstanding at the rate
of 6% per  annum.  Accrual of  interest  shall  commence  on the date of initial
issuance and continue daily on the basis of a 360 day year until payment in full
of the principal sum has been made or duly provided for. If the Maturity Date is
not a business day in the State of Delaware,  then such payment shall be made on
the next succeeding  business day. Subject to the provisions of Section 4 below,
principal  and  accrued  interest on this  Debenture  are payable in cash on the
Maturity  Date, at the address last  appearing on the Debenture  Register of the
Company as  designated  in writing by the Holder from time to time.  The Company
will pay the  principal  of and any  accrued but unpaid  interest  due upon this
Debenture on the Maturity Date, less any amounts required by law to be deducted,
to the  registered  holder  of this  Debenture  as of the fifth day prior to the
Maturity Date and addressed to such holder at the last address  appearing on the
Debenture  register  maintained by the Company (the "Debenture  Register").  The
forwarding  of such check shall  constitute a payment of principal  and interest
hereunder  and shall  satisfy and  discharge  the  liability  for  principal and
interest on this  Debenture to the extent of the sum  represented by such check,
plus any amounts so deducted.

<PAGE>

     This Debenture is subject to the following additional provisions:

     1.  Withholding  and  Issuance  Taxes.  The  Company  shall be  entitled to
withhold from all payments of principal of, and interest on, this  Debenture any
amounts  required to be withheld under the  applicable  provisions of the United
States income tax laws or other  applicable  laws at the time of such  payments,
and Holder shall  execute and deliver all required  documentation  in connection
therewith.  The issuance of certificates for shares of common stock, $ .0004 par
value (the "Common  Stock"),  of the Company upon  conversion of this  Debenture
shall be made without charge to the Holder for any United States issuance tax in
respect thereof,  provided that the Company shall not be required to pay any tax
that may be payable in respect of any  transfer  involved  in the  issuance  and
delivery  of any  certificate  in a name  other  than that of the Holder of this
Debenture.

     2.  Transfer  of  Debenture.  This  Debenture  has been  issued  subject to
investment   representations  of  the  original  purchaser  hereof  and  may  be
transferred or exchanged only in compliance  with the Securities Act of 1933, as
amended  (the  "Securities   Act"),  and  other  applicable  state  and  foreign
securities  laws. The Holder shall deliver  written notice to the Company of any
proposed  transfer of this Debenture.  In the event of any proposed  transfer of
this Debenture, the Company may require, prior to issuance of a new Debenture in
the name of such other person, that it receive reasonable transfer documentation
including  legal  opinions that the issuance of the Debenture in such other name
does not and will not cause a violation of the  Securities Act or any applicable
state or foreign  securities laws. Prior to due presentment for transfer of this
Debenture,  the  Company  and any agent of the  Company  may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving  payment as herein provided and
for all other  purposes,  whether or not this Debenture be overdue,  and neither
the Company nor any such agent shall be affected by notice to the contrary. This
Debenture has been executed and delivered  pursuant to the  Securities  Purchase
Agreement  dated as of August 31, 2001  between  the  Company  and the  original
Holder (the "Purchase Agreement"), and is subject to the terms and conditions of
the Purchase  Agreement,  which are, by this reference,  incorporated herein and
made a part hereof.  Capitalized  terms used and not  otherwise  defined  herein
shall have the meanings set forth for such terms in the Purchase Agreement.

     3. Conversion.  The Holder of this Debenture is entitled, at its option, to
convert,  at any time after the initial issuance of the Convertible  Debentures,
the Principal  Amount of this  Debenture or any portion  thereof,  together with
accrued and unpaid  interest  on such  Principal  Amount,  into shares of Common
Stock as follows:

     (a) Right to Convert.

     (i) Subject to the terms,  conditions,  and restrictions of this Section 3,
at any time after the initial issuance of the Convertible Debentures, the Holder
of this  Debenture  shall  have the right to convert  all or any  portion of the
Principal  Amount  of this  Debenture,  together  with the  accrued  and  unpaid
interest on such Principal  Amount so converted,  into that number of fully-paid
and nonassessable  shares of Common Stock (rounded to the nearest whole share in
accordance with Subsection 3(e)), at the Conversion Rate (as defined below).


<PAGE>

     (ii) Anything in Subsection 3(a)(i) to the contrary notwithstanding,  in no
event  shall  any  Holder be  entitled  to  convert  all or any  portion  of the
Principal  Amount of this  Debenture  in excess of that amount of the  Principal
Amount of this  Debenture  that,  upon giving effect to such  conversion,  would
cause the aggregate number of shares of Common Stock  beneficially  owned by the
Holder and its "affiliates" (as defined in Rule 405 under the Securities Act) to
exceed  4.99% of the  outstanding  shares of the  Common  Stock  following  such
conversion.  For purposes of this Subsection,  the aggregate number of shares of
Common Stock  beneficially  owned by the Holder and its affiliates shall include
the number of shares of Common Stock issuable upon  conversion of this Debenture
with respect to which the  determination  is being made,  but shall  exclude the
number of shares of Common Stock that would be issuable  upon (i)  conversion of
the remaining,  nonconverted  portion of the Principal  Amount of this Debenture
beneficially  owned  by the  Holder  and its  affiliates  and (ii)  exercise  or
conversion of the unexercised or unconverted  portion of any other securities of
the  Company  (including,   without  limitation,  any  warrants  or  convertible
preferred stock) subject to a limitation on conversion or exercise  analogous to
the  limitation  contained  herein  beneficially  owned  by the  Holder  and its
affiliates.  Except as set forth in the preceding sentence, for purposes of this
Subsection 3(a)(ii), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act"). For purposes of this Subsection, in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of outstanding shares of
Common Stock as reflected in (1) the  Company's  most recent Form 10-QSB or Form
10-KSB, as the case may be, (2) a more recent public announcement by the Company
or (3) any other notice by the Company or its transfer  agent  setting forth the
number of shares of Common Stock  outstanding.  For any reason at any time, upon
the written or oral  request of a Holder,  the Company  shall  promptly  confirm
orally and in writing  to any such  Holder the number of shares of Common  Stock
then  outstanding.  In any case, the number of  outstanding  shares Common Stock
shall be determined after giving effect to conversions of this Debenture by such
Holder  since the date as of which such number of  outstanding  shares of Common
Stock  was  reported.  To the  extent  that  the  limitation  contained  in this
Subsection  3(a)(ii) applies,  the determination of whether such portion of this
Debenture is convertible (in relation to other securities owned by a Holder) and
of what portion of this Debenture is convertible shall be in the sole discretion
of such Holder,  and (subject to the restriction set forth below) the submission
of  this  Debenture  for  conversion   shall  be  deemed  to  be  such  Holder's
determination  of whether such  portion of this  Debenture  is  convertible  (in
relation to other  securities  owned by such Holder) and of what portion of this
Debenture  is  convertible,  in each case subject to such  aggregate  percentage
limitation,  and the  Company  shall  have no  obligation  or right to verify or
confirm the accuracy of such  determination.  Nothing  contained herein shall be
deemed to  restrict  the  right of a Holder  to  convert  such  portion  of this
Debenture at such time as such  conversion  will not violate the  provisions  of
this  Subsection.  A Holder of this  Debenture may waive the  provisions of this
Subsection 3(a)(ii) as to itself (and solely as to itself) upon not less than 75
days'  prior  notice  to the  Company,  and the  provisions  of this  Subsection
3(a)(ii)  shall continue to apply until such 75th day (or such later date as may
be  specified  in such notice of waiver).  No  conversion  in  violation of this
Subsection  3(a)(ii),  but otherwise in accordance  with this  Debenture,  shall
affect the status of the Common  Stock  issued upon such  conversion  as validly
issued,   fully-paid  and  nonassessable.   Subsection  3(g)  below  sets  forth
additional  limitations  on the  Company's  obligation to issue shares of Common
Stock upon conversion of this Debenture.

<PAGE>


     (b) Conversion Rate and Other  Definitions.  The number of shares of Common
Stock issuable upon conversion of all or any portion of the Principal  Amount of
this Debenture  pursuant to Subsection  (3)(a) shall be determined  according to
the following formula (the "Conversion Rate"):

                           Conversion Amount
                           ------------------
                           Conversion Price

     For  purposes  of this  Debenture,  the  following  terms  shall  have  the
following meanings:

     "Change of Control" means:

     (i)  The  acquisition  by any  Person  (as  defined  below)  of  beneficial
ownership  (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 40% or more of either (x) the then outstanding  shares of Common Stock of the
Company (the  "Outstanding  Company  Common  Stock") or (y) the combined  voting
power of the then outstanding  voting securities of the Company entitled to vote
generally  in  the  election  of  directors  (the  "Outstanding  Company  Voting
Securities");  provided,  however, that for purposes of this subsection (i), the
following acquisitions of stock shall not result in a Change of Control: (A) any
acquisition  directly from the Company,  (B) any acquisition by the Company, (C)
any  acquisition by any employee  benefit plan (or related  trust)  sponsored or
maintained  by the Company or any  corporation  controlled by the Company or (D)
any acquisition by any corporation  pursuant to a transaction that complies with
clauses (A), (B), and (C) of subsection (iii) of this definition; or

     (ii)  Individuals  who, as of the date  hereof,  constitute  the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Incumbent  Board;  provided,  however,  that any individual  becoming a director
subsequent to the date hereof whose election, or nomination for election, by the
Company's  shareholders  was  approved  by a vote of at least a majority  of the
directors then comprising the Incumbent Board shall be considered as though such
individual  were a  member  of the  Incumbent  Board,  but  excluding,  for this
purpose,  any such  individual  whose  initial  assumption of office occurs as a
result of an actual or threatened  election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Incumbent Board; or

     (iii) Consummation of a reorganization, merger, or consolidation or sale or
other  disposition of all or  substantially  all of the assets of the Company (a
"Business   Combination"),   in  each  case,   unless  following  such  Business
Combination,  (A) all or  substantially  all of the individuals and entities who
were the beneficial  owners,  respectively,  of the  Outstanding  Company Common
Stock  and  Outstanding  Company  Voting  Securities  immediately  prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively,  the  outstanding  shares of common stock and the combined  voting
power of the then outstanding  voting  securities  entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Business Combination,  including, without limitation, a corporation that as

<PAGE>

a result of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more  subsidiaries  (any such
corporation being referred to herein as a "Resulting Company"), in substantially
the same proportions as their ownership of the Outstanding  Company Common Stock
and Outstanding Company Voting Securities, as the case may be, immediately prior
to such Business Combination, (B) no Person (excluding any employee benefit plan
(or related  trust) of the Company or a Resulting  Company)  beneficially  owns,
directly or indirectly, 40% or more of, respectively,  the outstanding shares of
common stock of the Resulting  Company or the combined  voting power of the then
outstanding  voting  securities of such  Resulting  Company except to the extent
that such ownership existed prior to the Business Combination,  and (C) at least
a majority of the members of the board of  directors  of the  Resulting  Company
were members of the Incumbent  Board (or were approved by at least a majority of
the Incumbent Board) at the time of the execution of the initial  agreement,  or
of the action of the Board, providing for such Business Combination; or

     (iv) Approval by the stockholders of the Company of a complete  liquidation
or dissolution of the Corporation.

     "Closing  Bid Price" or "Closing Ask Price"  means,  for any security as of
any  date,  the last  closing  bid or ask  price,  as the case may be,  for such
security on the  Principal  Market (as defined  below) as reported by  Bloomberg
L.P. ("Bloomberg"),  or, if the Principal Market is not the principal securities
exchange or trading market for such security,  the last closing bid or ask price
of such security on the principal  securities  exchange or trading  market where
such security is listed or traded as reported by Bloomberg,  or if the foregoing
do not  apply,  the  last  closing  bid or ask  price  of such  security  in the
over-the-counter  market on the  electronic  bulletin board for such security as
reported by  Bloomberg,  or, if no closing bid or ask price is reported for such
security by Bloomberg, the last closing trade price of such security as reported
by  Bloomberg,  or, if no last closing trade price is reported for such security
by Bloomberg, the average of the bid or ask prices of any market makers for such
security as reported in the "pink sheets" by the National Quotation Bureau, Inc.
If the  Closing  Bid Price or Closing Ask Price  cannot be  calculated  for such
security on such date on any of the  foregoing  bases,  the Closing Bid Price or
Closing Ask Price of such  security on such date shall be the fair market  value
as  mutually  determined  by the  Company  and the  holders of a majority of the
currently  outstanding  Principal Amount of all Convertible  Debentures.  If the
Company and the Holders of the  Convertible  Debentures are unable to agree upon
the fair market value of the Common  Stock,  then such dispute shall be resolved
pursuant to Subsection 3 (h). (All such  determinations  are to be appropriately
adjusted for any stock dividend, stock split or other similar transaction during
such period).

     "Conversion Amount" means that portion of this Debenture being converted by
such Holder.

     "Conversion Date" means the date upon which the relevant  Conversion Notice
shall have been received by the Transfer Agent.

     "Conversion  Price"  means,  as of any  Conversion  Date or  other  date of
determination,  the lower of: (i) a fixed  conversion  price equal to $0.98 (the
"Maximum Conversion Price"); or (ii) a variable conversion price equal to 85% of

<PAGE>6


the Market Price, or, if the Company gives notice of redemption to the Holder in
accordance with Section 4(b) but fails to pay the Optional  Redemption  Price in
full prior to the Optional Redemption Date, then thereafter the Conversion Price
shall be 80% of the Market Price.  Provided,  however, that the Conversion Price
shall in no  event be lower  than $ 0.21  per  share  (the  "Minimum  Conversion
Price").

     "Market  Price"  means the  average of the Closing Bid Prices of the Common
Stock on the Principal Market as reported by Bloomberg for the five Trading Days
immediately preceding the date of determination.

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

     "Registration  Rights  Agreement"  means that certain  Registration  Rights
Agreement between the Company and Target Growth Fund Ltd., the initial holder of
the  Convertible  Debentures,  concerning the  registration of the resale of the
shares of Common Stock issuable upon conversion of the Convertible Debentures.

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

     (c)  Conversion  Notice.  The Holder of this  Debenture  may  exercise  its
conversion right by giving a written  conversion notice in the form of Exhibit A
hereto (the "Conversion  Notice") to the Company's transfer agent for its Common
Stock,  as designated by the Company from time to time (the  "Transfer  Agent"),
(x) by facsimile or (y) by registered mail or overnight delivery service, with a
copy by facsimile to the Company and the Company's  outside counsel as specified
from  time  to  time  by  written  notice  to the  holders  of  the  Convertible
Debentures.  Upon  receipt of a conversion  notice from the Holder,  the Company
shall make a notation on the Debenture Register as to the remaining  outstanding
principal  amount of the  Debentures  registered in the name of the Holder which
shall be conclusive and binding upon the Holder.  Promptly, but in no event more
than five (5) Trading Days after the receipt of a Conversion  Notice  converting
the  entire  unpaid  Principal  Amount  of this  Debenture,  the  Holder of this
Debenture shall surrender this Debenture to the Company (or such other office or
agency of the Company as the Company may  designate  by notice in writing to the
holders of the Convertible Debentures).

     (d) Issuance of Certificates; Time Conversion Effected.

     (i)  Promptly,  but in no event more than three (3) Trading  Days after the
receipt of the Conversion  Notice  referred to in Subsection  3(c), the Transfer
Agent  shall  issue and  deliver,  or the  Company  shall cause to be issued and
delivered,  to the  Holder,  registered  in such name or names as the Holder may
direct,  a certificate or certificates  for the number of whole shares of Common
Stock into which this Debenture has been converted.  In the alternative,  if the
Transfer  Agent is a participant in the electronic  book transfer  program,  the
Transfer Agent shall credit such  aggregate  number of shares of Common Stock to
which the Holder  shall be entitled to the  Holder's or its  designee's  balance
account with The Depository  Trust Company.  Such conversion  shall be deemed to

<PAGE>

have been effected, and the Conversion Date shall be deemed to have occurred, on
the date on which  such  Conversion  Notice  shall  have  been  received  by the
Transfer Agent.  The rights of the Holder of this Debenture shall cease, and the
person or persons in whose name or names any  certificate  or  certificates  for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the Holder or Holders of record of the shares  represented  thereby,
on the  Conversion  Date.  Issuance  of  shares of Common  Stock  issuable  upon
conversion  that are requested to be registered in a name other than that of the
registered Holder shall be subject to compliance with all applicable federal and
state securities laws.

     (ii) The Company  understands that a delay in the issuance of the shares of
Common  Stock after the  Conversion  Date could  result in economic  loss to the
Holder of this  Debenture.  The  Company  shall  make best  efforts to issue the
shares within three (3) Trading Days after the  Conversion  Date ("Best  Efforts
Period"). As full compensation to the Holder for its loss, the Company agrees to
pay late payments to the Holder for late issuance of shares of Common Stock upon
conversion in accordance with the following  schedule  (where "No.  Trading Days
Late" means the number of Trading  Days after  seven (7)  Trading  Days from the
date of receipt of a notice from the Holder to the Company  indicating  that the
issuance has been delayed past the Best Efforts Period):

  No. Trading Days Late                  Late Payment For Each
                                       $5,000 of Conversion Amount of
                                      Principal Amount Being Converted
  ------------------------     ------------------------------------------

    1                                               $100
    2                                               $200
    3                                               $300
    4                                               $400
    5                                               $500
    6                                               $600
    7                                               $700
    8                                               $800
    9                                               $900
    10                                             $1,000
    10                              $1,000 + $200 for each Trading Day
                                         late after 10 Trading Days

Provided, however, that the maximum penalty will be one hundred thousand dollars
($100,000).  The  Company  shall make all  payments  due under  this  Subsection
3(d)(ii) in immediately available funds upon demand.  Nothing herein shall limit
the  Holder's  right to pursue  injunctive  relief for the Company 's failure to
issue and deliver (or to cause its Transfer  Agent to issue and deliver)  Common
Stock to the Holder as required by Subsection 3(d)(i).  Furthermore, in addition
to any other remedies that may be available to the Holder,  if the Company fails
for any reason to effect delivery of such shares of Common Stock within five (5)
Trading Days after the  Conversion  Date,  the Holder will be entitled to revoke
the  relevant  Conversion  Notice by  delivering  a notice to such effect to the
Transfer  Agent,  with a copy by  facsimile  to the  Company  and the  Company's
outside counsel. Upon delivery of such notice of revocation, the Company and the

<PAGE>


Holder shall each be restored to their respective positions immediately prior to
delivery of such Conversion Notice

     (iii) If, at any time, (a) the Company  challenges,  disputes or denies the
right of the Holder to effect the conversion of this Debenture into Common Stock
or otherwise  dishonors or rejects,  or causes the Transfer Agent to dishonor or
reject, any Conversion Notice properly delivered in accordance with this Section
3 or (b) any  third  party  who is not and has never  been an  affiliate  of the
Holder  obtains a  judgment  or order  from any court or public or  governmental
authority that denies,  enjoins,  limits,  modifies,  or delays the right of the
Holder to effect the conversion of this  Debenture  into Common Stock,  then the
Holder shall have the right,  by written  notice to the Company,  to require the
Company to promptly  redeem this  Debenture in accordance  with Section 4. Under
any of the circumstances set forth above, the Company shall indemnify the Holder
against and hold it harmless from,  and be  responsible  for the payment of, all
costs and  expenses  of the  Holder,  including  its  reasonable  legal fees and
expenses,  as and when  incurred in  disputing  any such action or pursuing  its
rights  hereunder  (in addition to any other  rights of the Holder),  unless the
Company or third party prevails. The Company shall not refuse to honor, or cause
the Transfer Agent to refuse to honor, any Conversion  Notice unless the Company
or the Transfer Agent, as the case may be, has actually been enjoined by a court
of competent  jurisdiction from doing so and, if so enjoined,  the Company shall
post with such court a performance  bond equal to 135% of the Conversion  Amount
of this  Debenture  sought to be  converted by the Holder that is the subject of
such injunction.

     (iv) The  Holder  of this  Debenture  shall be  entitled  to  exercise  its
conversion  privilege  notwithstanding  the  commencement  of any case  under 11
U.S.C. section 101 et seq. (the "Bankruptcy Code"). The Company hereby waives to
the fullest  extent  permitted  any rights to relief it may have under 11 U.S.C.
section  362 in respect of the  Holder's  conversion  privilege,  if the Company
becomes a debtor  under  the  Bankruptcy  Code.  The  Company  agrees to take or
consent to any and all action  necessary  to  effectuate  relief under 11 U.S.C.
section 362 without cost or expense to the Holder.

     (e)  Fractional  Shares.  The  Company  shall  not,  nor shall it cause the
Transfer  Agent to,  issue any  fraction  of a share of  Common  Stock  upon any
conversion.  All shares of Common Stock (including  fractions  thereof) issuable
upon conversion of this Debenture by the Holder shall be aggregated for purposes
of determining whether the conversion would result in the issuance of a fraction
of a share of Common Stock. If, after such final aggregation, the issuance would
result in the  issuance  of a fraction of a share of Common  Stock,  the Company
shall  cause the  Transfer  Agent to issue one  whole  share of Common  Stock in
respect of such fraction of a share of Common Stock.

     (f) Adjustment to Conversion Price;  Dilution and Other Events. In order to
prevent  dilution of the rights  granted under this  Debenture,  the  Conversion
Price  will be  subject  to  adjustment  from time to time as  provided  in this
Subsection 3(f).

     (i) Adjustment of Maximum  Conversion Price upon Subdivision or Combination
of Common  Stock.  If the Company at any time  subdivides  (by any stock  split,
stock  dividend,  recapitalization  or  otherwise)  one or more  classes  of its
outstanding  shares of Common Stock into a greater number of shares, the Maximum
Conversion  Price  in  effect  immediately  prior  to such  subdivision  will be

<PAGE>


proportionately  reduced.  If the Company at any time combines (by  combination,
reverse stock split or otherwise) one or more classes of its outstanding  shares
of Common Stock into a smaller number of shares, the Maximum Conversion Price in
effect immediately prior to such combination will be proportionately increased.

     (ii) Reorganization,  Reclassification,  Consolidation, Merger or Sale. Any
recapitalization,  reorganization, reclassification, consolidation, merger, sale
of all or  substantially  all of the  Company's  assets to  another  Person  (as
defined below) or other transaction which is effected in such a way that holders
of Common  Stock are  entitled to receive  (either  directly or upon  subsequent
liquidation)  stock,  securities  or assets with  respect to or in exchange  for
Common  Stock  is  referred  to  herein  as an  "Organic  Change."  Prior to the
consummation of any Organic Change, the Company will make appropriate  provision
(in form and substance reasonably satisfactory to the Holder) to insure that the
Holder  will  thereafter  have the right to acquire and receive in lieu of or in
addition to (as the case may be) the shares of Common Stock otherwise acquirable
and  receivable  upon the  conversion of this  Debenture,  such shares of stock,
securities or assets as would have been issued or payable in such Organic Change
with  respect to or in  exchange  for the number of shares of Common  Stock that
would have been acquirable and receivable had this Debenture been converted into
shares of Common Stock  immediately prior to such Organic Change (without taking
into  account  any  limitations  or  restrictions  on the  timing  or  amount of
conversions).  In any such case, the Company will make appropriate provision (in
form and substance  reasonably  satisfactory  to the Holder) with respect to the
Holder's rights and interests to insure that the provisions of this Section 3(f)
will thereafter be applicable to this Debenture  (including,  in the case of any
such  consolidation,  merger or sale in which the successor entity or purchasing
entity  is other  than the  Company,  an  immediate  adjustment  of the  Maximum
Conversion  Price in accordance with Subsection  3(f)(i) using the value for the
Common Stock  reflected by the terms of such  consolidation,  merger or sale, if
the value so  reflected  is less  than the  Maximum  Conversion  Price in effect
immediately prior to such  consolidation,  merger or sale). The Company will not
effect any such consolidation,  merger or sale, unless prior to the consummation
thereof,  the  successor  entity  (if other  than the  Company)  resulting  from
consolidation or merger or the entity purchasing such assets assumes, by written
instrument (in form and substance  reasonably  satisfactory  to the holders of a
more than fifty percent (50%) of Principal Amount of the Convertible  Debentures
then  outstanding),  the  obligation  to deliver to each  holder of  Convertible
Debentures such shares of stock, securities or assets as, in accordance with the
foregoing  provisions,  such holder may be entitled to acquire.  "Person"  shall
mean an individual, a limited liability company, a partnership, a joint venture,
a corporation,  a trust, an unincorporated  organization and a government or any
department or agency thereof.

     (g) Limitation on Number of Conversion  Shares.  Notwithstanding  any other
provision  herein,  the Company  shall not be  obligated  to issue any shares of
Common Stock upon  conversion of the  Convertible  Debentures if the issuance of
such shares of Common Stock plus shares of Common Stock issued upon the exercise
of the Warrants  issued under the  Securities  Purchase  Agreement  would exceed
19.9% of the shares of Common  Stock issued and  outstanding  on the date of the
Purchase  Agreement  (the  "Exchange  Cap") without the Company's  violating the
corporate  governance rules , if any, of the Principal Market,  except that such
limitation  shall  not apply in the  event  that the  Company  (i)  obtains  the
approval of its  stockholders as required by the corporate  governance  rules of
the  Principal  Market for  issuances  of Common Stock in excess of the Exchange

<PAGE>


Cap, or (ii) obtains a written  opinion from outside counsel to the Company that
such approval is not required, which opinion shall be reasonably satisfactory to
the  holders of more than fifty  percent  (50%) of the  Principal  Amount of the
Convertible Debentures then outstanding.  Until such approval or written opinion
is obtained or such action has been taken by the required number of holders,  no
purchaser  of  Convertible   Debentures  pursuant  to  the  Purchase  Agreement,
collectively,  (the  "Investors"  and,  individually,  an  "Investor")  shall be
issued, upon conversion of Convertible Debentures,  shares of Common Stock in an
amount greater than the product of (x) the Exchange Cap amount multiplied by (y)
a  fraction,  the  numerator  of which is the  Principal  Amount of  Convertible
Debentures purchased by such Investor pursuant to the Purchase Agreement and the
denominator of which is the aggregate  Principal  Amount of all the  Convertible
Debentures  purchased by the Investor  pursuant to the Purchase  Agreement  (the
"Cap Allocation Amount"). In the event that any Investor shall sell or otherwise
transfer any of such Investor's Convertible Debentures,  the transferee shall be
allocated a pro rata portion of such  Investor's Cap Allocation  Amount.  In the
event that any  holder of a  Convertible  Debenture  shall  convert  all of such
holder's Convertible  Debenture into a number of shares of Common Stock that, in
the  aggregate,  is less than such  holder's  Cap  Allocation  Amount,  then the
difference  between such holder's Cap Allocation Amount and the number of shares
of  Common  Stock  actually  issued to such  holder  shall be  allocated  to the
respective  Cap  Allocation  Amounts of the  remaining  holders  of  Convertible
Debentures  on a pro  rata  basis  in  proportion  to the  Principal  Amount  of
Convertible Debentures then held by each such Holder.

     (h) Dispute Resolution. In the case of a dispute as to the determination of
the  Closing Ask Price or Closing  Bid Price of any  security or the  arithmetic
calculation  of the  Conversion  Rate,  the  Company  shall,  or shall cause the
Transfer  Agent to,  promptly issue to the Holder the number of shares of Common
Stock that is not  disputed  and shall  submit the  disputed  determinations  or
arithmetic  calculations to the Holder via facsimile within one (1) business day
of receipt of the Holder's  Conversion Notice. If the Holder and the Company are
unable to agree upon the  determination of such Closing Ask Price or Closing Bid
Price, as the case may be, or the arithmetic  calculation of the Conversion Rate
within  one  (1)  business  day of such  disputed  determination  or  arithmetic
calculation being submitted to the Holder, then the Company shall within one (1)
business  day  following  such date of  delivery  submit via  facsimile  (A) the
disputed  determination  of the Closing  Ask Price or Closing Bid Price,  as the
case may be, to an  independent,  reputable  investment bank or (B) the disputed
arithmetic  calculation  of the  Conversion  Rate to its  independent  certified
public  accounting  firm.  The Company  shall cause the  investment  bank or the
accounting  firm,  as  the  case  may  be,  to  perform  the  determinations  or
calculations  and notify the Company and the Holder of the results no later than
forty-eight (48) hours from the time it receives the disputed  determinations or
calculations.  Such  investment  bank's or accounting  firm's  determination  or
calculation,  as the  case may be,  shall be  binding  upon all  parties  absent
manifest error.

     4. Redemption.

     (a)  Redemption  at the Option of the  Holder.  If,  (i) upon the  Transfer
Agent's receipt of a Conversion Notice, the Transfer Agent fails to issue shares
of Common Stock as contemplated by Subsection  3(d)(i) or cannot issue shares of
Common Stock registered for resale under the registration  statement required to
be filed under the  Registration  Rights Agreement with respect to the shares of

<PAGE>


Common Stock  issuable upon  conversion  of this  Debenture  (the  "Registration
Statement") (or which are exempt from the  registration  requirements  under the
Securities Act pursuant to Rule 144(k) under the Securities Act) for any reason,
including,  without  limitation,  because  the  Company  (x)  does  not  have  a
sufficient  number of shares of Common Stock  authorized and available or (y) is
otherwise  prohibited by applicable  law or by the rules or  regulations  of any
stock  exchange,   interdealer   quotation   system  or  other   self-regulatory
organization  with  jurisdiction  over the Company or its securities,  including
without  limitation  the Exchange Cap, from issuing all of the Common Stock that
is to be issued to the Holder of this Debenture pursuant to a Conversion Notice,
then in the case of clause (i), the Company  shall,  or shall cause the Transfer
Agent  to,  issue  as many  shares  of  Common  Stock  as it is able to issue in
accordance with such holder's  Conversion Notice (if the holder shall have given
such a Conversion  Notice) and pursuant to the  provisions of Section 3(d),  and
with  respect  to all or any part of the  unconverted  Principal  Amount of this
Debenture held by such Holder,  the Holder,  solely at such Holder's option, can
elect to:

     (A)  require  the Company to redeem from such Holder all or any part of its
remaining Principal Amount of this Debenture ("Holder Requested  Redemption") at
a premium  equal to the  greater of (I) the sum of:  (a) 100% of such  Principal
Amount  and (b) the  accrued  interest  thereon  or (II) the  product of (a) the
Conversion  Rate on the date of such Holder's  delivery of an Election  Response
Notice (as  defined  below) and (b) the  greater of (i) the Closing Ask Price of
the Common Stock on the Trading Day immediately  preceding the event giving rise
to such redemption or (ii) the Closing Ask Price of the Common Stock on the date
of the Holder's  delivery to the Company of a notice of  redemption  or, if such
date of delivery is not a Trading  Day,  the next date on which the  exchange or
market on which the  Common  Stock is  traded  is open  (the  "Holder  Requested
Redemption Price");

     (b) Mechanics of Fulfilling Holder's Election. The Company shall within one
(1)  business  day send via  facsimile  to the  Holder of this  Debenture,  upon
receipt of a facsimile copy of a Conversion  Notice from such Holder that cannot
be fully  satisfied as described in  Subsection  4(a), a notice of the Company's
inability to fully satisfy such Holder's  Conversion  Notice (the  "Inability to
Fully Convert  Notice").  Such  Inability to Fully Convert Notice shall indicate
(i) the  reason  why the  Company  is  unable  to fully  satisfy  such  Holder's
Conversion  Notice,  (ii) the Principal  Amount of this Debenture that cannot be
converted and (iii) the applicable Redemption Price. The Holder shall notify the
Company of its election pursuant to Subsection 4(a) above by delivering  written
notice via facsimile to the Company (the "Election Response Notice").

     (c) Payment of Holder Requested Redemption Price. If the Holder shall elect
to have this  Debenture  redeemed  pursuant to Subsection  4(a)(i),  the Company
shall pay the Holder  Requested  Redemption Price to such Holder in cash by wire
transfer of immediately available funds in accordance with such Holder's written
wire transfer  instructions  within five (5) days after the Company's receipt of
the Holder's  Election  Response  Notice.  If the Company  shall fail to pay the
applicable Holder Requested Redemption Price to such holder within such five (5)
day period  (other  than  pursuant to a dispute as to the  determination  of the
arithmetic calculation of the Holder Requested Redemption Price), in addition to
any  remedy  the  Holder  of this  Debenture  may have  hereunder,  or under the
Securities Purchase Agreement and the Registration Rights Agreement, such unpaid
amount shall bear  interest at the rate of 3.0% per month  (prorated for partial

<PAGE>


months) until paid in full. Until the Holder Requested  Redemption Price is paid
in full to such  Holder,  such Holder may void the Holder  Requested  Redemption
with respect to  Principal  Amount of this  Debenture  for which the full Holder
Requested  Redemption  Price has not been paid and  receive  back a  Convertible
Debenture representing such Principal Amount.  Notwithstanding the foregoing, if
the Company fails to pay the applicable Holder Requested Redemption Price within
such  period of five (5) days due to a dispute  as to the  determination  of the
Holder Requested  Redemption  Price,  such dispute shall be resolved pursuant to
Section 3(h) with the term "Holder Requested Redemption Price" being substituted
for the term "Conversion Rate."

     (d)  Pro-rata  Conversion  and  Redemption.  If the Company or the Transfer
Agent receives a Conversion Notice or Election Response Notice electing a Holder
Requested Redemption from more than one holder of Convertible  Debentures on the
same day, and the Company can convert  and/or redeem some,  but not all, of such
Convertible  Debentures  pursuant to this Section 4, the Company  shall  convert
and/or redeem from each holder of  Convertible  Debentures  electing to have its
Convertible  Debenture converted and/or redeemed at such time an amount equal to
such holder's  pro-rata  amount (based on the  Principal  Amount of  Convertible
Debentures held by such holder  relative to the Principal  Amount of Convertible
Debentures sought to be converted) of all Convertible Debentures being converted
and/or redeemed at such time.

     (e) Redemption at the Option of the Company.  At any time after the initial
issuance of the Convertible  Debentures,  the Company,  upon notice delivered to
the  Holders  of the  then  outstanding  Convertible  Debentures  in the  manner
provided  in  Subsection  4(b),  may redeem not less than  $250,000  Convertible
Debentures  (or the  entire  remaining  balance  if  such  amount  is less  than
$250,000)  but only with respect to the Amount as to which such holders have not
theretofore  furnished a Conversion  Notice in compliance with Subsection  3(c).
The price for such redemption (the "Optional  Redemption Price") shall equal the
sum of (a) 120% of the Principal Amount and (b) the accrued interest thereon.

     (f) Notice of Redemption.  (i) Notice of redemption  pursuant to Subsection
4(a) (the "Optional  Redemption Notice") shall be provided by the Company to the
Holder in writing (by registered mail or overnight  courier at the Holder's last
address appearing in the Debenture Register not less than five (5) nor more than
ten (10) days prior to the date  stipulated by the Company for the redemption of
the Convertible  Debentures (the "Optional Redemption Date"), which notice shall
specify  the  Optional  Redemption  Date and refer to  Subsection  4(a) and this
Subsection 4(b).

     (ii) Upon receipt of the Optional  Redemption Notice, the Holder shall have
the option,  at its sole  election,  to specify what portion of the  Convertible
Debentures  called for  redemption  in the Optional  Redemption  Notice shall be
redeemed as provided in  Subsection  4(a) or converted  into Common Stock in the
manner provided in Subsection  3(a). If the Holder elects to convert any portion
of the  Convertible  Debentures,  then such  conversion  shall take place on the
Conversion  Date  specified  by the Holder,  but in no event after the  Optional
Redemption Date, in accordance with the terms of Subsection 3(a).

<PAGE>


     (g)  Surrender  of  Convertible  Debentures.  Upon any  redemption  of this
Convertible  Debenture  pursuant to  Subsection  4(a),  the Holder  shall either
deliver  the  Convertible  Debenture  by hand to the  Company  at its  principal
executive  offices  or  surrender  the same to the  Company  at such  address by
express  courier.   Payment  of  the  Optional  Redemption  Price  specified  in
Subsection  4(a) shall be made by the Company to the Holder  against  receipt of
the  Convertible  Debentures by wire transfer of immediately  available funds to
such  account(s)  as the Holder  shall  specify in  writing to the  Company.  If
payment of such  Optional  Redemption  Price is not made in full by the Optional
Redemption  Date,  the Holder  shall  thereafter  have the right to convert  the
Convertible  Debentures as provided in Section 3(a) hereof at a Conversion Price
equal  to 80% of the  Market  Price,  but in no  event  more  than  the  Maximum
Conversion Price.

     5. Notices. In case at any time:

     (a) the Company shall declare any dividend upon its Common Stock payable in
cash or stock or make any  other pro rata  distribution  to the  holders  of its
Common Stock; or

     (b) the Company shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or other rights; or

     (c) there shall be any capital  reorganization or  reclassification  of the
capital stock of the Company,  or a consolidation  or merger of the Company with
or into, or a sale of all or substantially  all its assets to, another entity or
entities; or

     (d) there shall be a voluntary or involuntary  dissolution,  liquidation or
winding up of the Company;  then, in any one or more of said cases,  the Company
shall give, by first class mail, postage prepaid, or by telex or facsimile or by
recognized overnight delivery service, addressed to the Holder at the address of
the  Holder as shown on the books of the  Company,  (i) at least 10 days'  prior
written  notice of the date on which the books of the  Company  shall close or a
record shall be taken for such dividend,  distribution or subscription rights or
for  determining  rights  to  vote  in  respect  of  any  such   reorganization,
reclassification,  consolidation,  merger,  sale,  dissolution,  liquidation  or
winding  up and (ii) in the case of any such  reorganization,  reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least 10
days'  prior  written  notice of the date when the same shall take  place.  Such
notice in accordance  with the foregoing  clause (i) shall also specify,  in the
case of any such dividend,  distribution  or  subscription  rights,  the date on
which the holders of Common Stock shall be entitled  thereto and (ii) shall also
specify  the date on which the  holders of Common  Stock  shall be  entitled  to
exchange their Common Stock for securities or other  property  deliverable  upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.

     6. Stock to be Reserved.  The Company has a sufficient  number of shares of
Common  Stock  available  to reserve for  issuance  upon the  conversion  of all
outstanding Convertible Debentures,  assuming immediate conversion.  The Company
will at all times reserve and keep available out of its authorized Common Stock,
solely for the purpose of issuance upon the conversion of all of its Convertible
Debentures  as herein  provided,  such number of shares of Common Stock as shall
then be issuable upon the conversion of all Convertible Debentures.  The Company

<PAGE>


covenants  that all shares of Common Stock that shall be so issued shall be duly
and validly  issued,  fully-paid and non  assessable.  The Company will take all
such  action  as may be so taken  without  violation  of any  applicable  law or
regulation  to have a sufficient  number of  authorized  but unissued  shares of
Common Stock to issue upon conversion of all Convertible Debentures. The Company
will not take any action that results in any adjustment of the conversion rights
if the total number of shares of Common  Stock  issued and  issuable  after such
action upon conversion of this Debenture would exceed the total number of shares
of Common Stock then authorized by the Company's Articles of Incorporation.

     7. Default and Remedies.

     (a) Event of Default.  Each of the following shall  constitute an "Event of
Default":

     (i) the Company  shall  default in the payment of  principal or interest on
this Debenture and same shall continue for a period of five (5) days; or

     (ii) any of the material  representations or warranties made by the Company
herein, in the Purchase Agreement,  in the Registration Rights Agreement,  or in
any agreement,  certificate or financial or other written statements  heretofore
or  hereafter  furnished by the Company in  connection  with the  execution  and
delivery  of this  Debenture  or the  Purchase  Agreement,  shall  be  false  or
misleading  in any  material  respect at the time made,  and such default is not
cured within 14 days of receipt of written  notice  specifying the nature of the
misrepresentation; or

     (iii) the Company shall (A) admit in writing its inability to pay its debts
generally as they mature; (B) make an assignment for the benefit of creditors or
commence  proceedings  for its  dissolution;  or (C) apply for or consent to the
appointment  of a trustee,  liquidator  or receiver for its or for a substantial
part of its property or business; or

     (iv) a trustee,  liquidator or receiver  shall be appointed for the Company
or for a  substantial  part of its property or business  without its consent and
shall not be discharged within sixty (60) days after such appointment; or

     (v) any governmental  agency or any court of competent  jurisdiction at the
instance of any governmental agency shall assume custody or control of the whole
or any substantial  portion of the properties or assets of the Company and shall
not be dismissed within sixty (60) days thereafter; or

     (vi) any final money  judgment,  writ or warrant of attachment,  or similar
process in excess of Two Hundred  Thousand  ($200,000)  Dollars in the aggregate
shall be entered or filed against the Company or any of its  properties or other
assets and shall remain unpaid, unvacated,  unbonded or unstayed for a period of
sixty  (60) days or in any event  later  than five (5) days prior to the date of
any proposed sale thereunder; or

     (vii) bankruptcy, reorganization,  insolvency or liquidation proceedings or
other  proceedings for relief under any bankruptcy law or any law for the relief
of debtors  shall be  instituted  by or against the Company  and, if  instituted
against the Company,  shall not be  dismissed  within sixty (60) days after such

<PAGE>


institution or the Company shall by any action or answer approve of, consent to,
or acquiesce in any such  proceedings or admit the material  allegations  of, or
default in answering, a petition filed in any such proceeding.

     (b) Remedies.  Upon the occurrence and during the  continuance of any Event
of Default,  the Holder may declare this Debenture  immediately due and payable,
without  presentment,  demand,  protest or notice of any kind,  all of which are
hereby  expressly  waived,  anything herein or in any note or other  instruments
contained  to the  contrary  notwithstanding,  and the  Holder  may  immediately
enforce any and all of the Holder's  rights and remedies  provided herein or any
other  rights or remedies  afforded by law;  provided,  that any payment of this
Debenture  in  connection  with an  Event of  Default  shall be made at the fair
market  value  of the  shares  of  Common  Stock  that  would be  issued  at the
Conversion  Price on the date the Debenture  becomes due and payable pursuant to
this provision.

     8. Payment Obligation  Unconditional.  No provision of this Debenture shall
alter  or  impair  the  obligation  of  the  Company,   which  is  absolute  and
unconditional,  to pay the principal of, and interest on, this  Debenture at the
time,  place,  and rate,  and in the coin or currency or shares of Common Stock,
herein prescribed. This Debenture is a direct obligation of the Company.

     9. No Recourse  to  Stockholders,  etc.  No  recourse  shall be had for the
payment of the  principal  of, or the  interest on, this  Debenture,  or for any
claim based hereon,  or otherwise in respect hereof,  against any  incorporator,
shareholder, employee, officer or director, as such, past, present or future, of
the Company or any  successor  corporation,  whether by virtue of any statute or
rule of law, or by the  enforcement  of any  assessment or penalty or otherwise,
all  such  liability  being,  by  the  acceptance  hereof  and  as  part  of the
consideration for the issue hereof, expressly waived and released.

     10. No Rights as  Stockholder.  No  provision  of this  Debenture  shall be
construed  as  conferring  upon  the  Holder  the  right  to vote or to  receive
dividends  or to consent or receive  notice as a  stockholder  in respect of any
meeting  of  stockholders  or any  rights  whatsoever  as a  stockholder  of the
Company, unless and to the extent converted in accordance with the terms hereof.

     11. Definitions.  As used in this Debenture,  the term "Common Stock" shall
mean and include the Company's  authorized  common stock, $ .0004 par value,  as
constituted on the issuance date of this  Debenture,  and shall also include any
capital  stock of any class of the  Company  thereafter  authorized  that  shall
neither be limited to a fixed sum or  percentage  of par value in respect of the
rights of the holders  thereof to  participate  in  dividends  nor entitled to a
preference  in the  distribution  of assets upon the  voluntary  or  involuntary
liquidation,  dissolution or winding up of the Company; provided that the shares
of Common Stock  receivable upon conversion of this Debenture shall include only
shares  designated  as Common Stock of the Company on the issuance  date of this
Debenture, or in case of any reorganization, reclassification, or stock split of
the outstanding shares thereof, the stock,  securities or assets provided for in
Sections  3(f) and (g). Any  capitalized  terms used in this  Debenture  but not
defined herein shall have the meanings set forth in the Purchase Agreement.

<PAGE>


     12.  Loss,  Theft,  Destruction  of  Debenture.  Upon  receipt of  evidence
satisfactory  to the Company of the loss,  theft,  destruction  or mutilation of
this Debenture  and, in the case of any such loss,  theft or  destruction,  upon
receipt of indemnity  reasonably  satisfactory  to the Company  (which shall not
include the posting of any bond), or, in the case of any such  mutilation,  upon
surrender and cancellation of this Debenture,  the Company shall make, issue and
deliver, in lieu of such lost, stolen,  destroyed or mutilated Debenture, one or
more new Debentures of like tenor.  This Debenture  shall be held and owned upon
the express  condition that the provisions of this Section 12 are exclusive with
respect to the replacement of mutilated,  destroyed,  lost or stolen  Debentures
and shall preclude any and all other rights and remedies notwithstanding any law
or statute  existing or hereafter  enacted to the  contrary  with respect to the
replacement of negotiable  instruments or other securities without the surrender
thereof.

     13.  Record  Owner.  The  Company  may deem the  person in whose  name this
Debenture  shall be registered upon the registry books of the Company to be, and
may treat such person as, the absolute  owner of this  Debenture for the purpose
of conversion  of this  Debenture  and for all other  purposes,  and the Company
shall not be affected by any notice to the contrary.  All such payments and such
conversion  shall be valid and  effective to satisfy and discharge the liability
upon this  Debenture to the extent of the sum or sums so paid or the  conversion
so made.

     14. Register. The Company shall maintain a transfer agent, which may be the
transfer agent for the Common Stock or the Company itself,  for the registration
of  Convertible  Debentures.  Upon any transfer of this  Debenture in accordance
with the  provisions  hereof,  the Company shall  register or cause the transfer
agent to register such transfer on the Convertible Debenture register.

     15. Remedies, Characterizations, Other Obligations, Breaches and Injunctive
Relief.  The remedies  provided in this  Debenture  shall be  cumulative  and in
addition to all other  remedies  available  under this  Debenture,  at law or in
equity  (including  a decree of specific  performance  and/or  other  injunctive
relief).  No remedy contained herein shall be deemed a waiver of compliance with
the  provisions  giving  rise to such remedy and  nothing  herein  shall limit a
Holder's right to pursue actual damages for any failure by the Company to comply
with the terms of this Debenture.  Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the  amounts to be  received  by the Holder  hereof and shall not,  except as
expressly provided herein, be subject to any other obligation of the Company (or
the performance  thereof).  The Company  acknowledges that a breach by it of its
obligations  hereunder  will  cause  irreparable  harm  to the  Holders  of this
Debenture and that the remedy at law for any such breach may be inadequate.  The
Company  therefore  agrees that,  in the event of any such breach or  threatened
breach,  the Holders of this  Debenture  shall be  entitled,  in addition to all
other available remedies, to an injunction  restraining any breach,  without the
necessity of showing  economic loss and without any bond or other security being
required.

     16.  Construction.  This Debenture shall be deemed to be jointly drafted by
the Company and the initial Holders of the Convertible  Debentures and shall not
be construed against any person as the drafter hereof.

<PAGE>

     17.  Failure or Indulgence  Not Waiver.  No failure or delay on the part of
the Holder of this  Debenture in the  exercise of any power,  right or privilege
hereunder  shall  operate as a waiver  thereof  (except to the extent  that such
power,  right or privilege must, in accordance with the terms of this Debenture,
be  exercised  within a  specified  period  of time and such  period of time has
lapsed without such power,  right or privilege being  exercised),  nor shall any
single or partial exercise of any such power,  right or privilege preclude other
or further exercise thereof or of any other right, power or privilege.

     18.  Governing  Law. This  Debenture  shall be governed by and construed in
accordance with the laws of the State of Delaware.  Each of the parties consents
to the  jurisdiction  of the  United  States  District  Court  for the  Southern
District of New York or the state courts of the State of New York located in the
Borough of Manhattan  in the City of New York,  in  connection  with any dispute
arising under this Agreement and hereby waives,  to the maximum extent permitted
by law, any objection, including any objection based on forum non conveniens, to
the bringing of any such proceeding in such jurisdictions.

     IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.

Dated:  August 31, 2001                     DBS INDUSTRIES, INC.


                                          By:
                                              --------------------------------
                                              Name:  Stanton C. Lawson
                                              Title:    Chief Financial Officer


Attest:
Secretary


                                     <PAGE>
                                    EXHIBIT A

                              NOTICE OF CONVERSION
   (To be Executed by the Registered Holder in order to Convert the Debenture)

     The  undersigned   hereby  irrevocably  elects to convert $        of   the
principal  amount  of the above Debenture No.     into shares  of  Common  Stock
of  DBS Industries, Inc. (the "Company")  according  to the conditions   hereof,
as of the date written below.

Date of Conversion
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Applicable Conversion Price
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Accrued Interest
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Number of shares to be issued:
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Signature
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                                               Name

Address for delivery of shares or DTC account number for deposit of
shares:
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