Generation Capital Associates
                              1085 Riverside Trace
                                Atlanta, GA 30328
                        Tel 404/303-8450 Fax 404/255-2218

                                CathayOnline Inc.
                            Financing Terms Agreement
                                November 22, 2000

1.   Issuer:

     CathayOnline Inc. (CAOL or Company) a Nevada corporation with its principal
     office located at:

     437 Madison Avenue
     33rd Floor
     New York NY 10022
     Tel: (212) 888-6822
     Fax: (212) 888-1212
     Email:

2.   Purchaser:

     Generation  Capital  Associates  (GCA) and other  purchasers  (collectively
     Purchaser(s)). All Purchaser(s) shall be accredited investors as defined by
     Rule 501 of Regulation D.

3.   Securities:

     (a)  Convertible  Notes  (Notes(s))  convertible  into shares of the common
     stock of (Common Stock).  The Notes(s) shall have a maturity date of twelve
     months;  the  unconverted  principal  balance  and any  accrued  and unpaid
     interest  shall be due and payable in cash on such date.  The maturity date
     of the  Note(s)  shall be  automatically  extended  for up to 18  one-month
     periods,  unless the  Purchaser(s)  or any subsequent  holder,  (Holder(s))
     notifies  the  Company in writing  not less than ten (10) days prior to any
     expiration that the Note(s) will not be extended.

     (b) In lieu of paying a document  preparation fee of $1,500.00 to GCA, CAOL
     shall issue to GCA 1,500,000  warrants (GCA Warrants) to purchase 1,500,000
     shares of Common Stock exercisable for five (5) years from the Closing Date
     (as  defined in Section 14 (b)  herein) at a price equal to the closing bid
     price as quoted by Nasdaq  Level II on the date upon which  this  Financing
     Terms Agreement (agreement) is mutually executed (Signing Date).

     (c) The GCA Warrants have a value of $0.001 per warrant.

     (d) The GCA  Warrants  shall be  cashless  exercise  at any time  after the
     Effective  Date  Deadline  (as  defined in Section 9 (a)  herein)  that the
     shares of Common Stock issuable upon exercise of GCA Warrants (GCA Warrants
     Shares) are not freely saleable under an effective  Registration  Statement
     (as defined in Section 9 (a) herein) and current prospectus.

4.   Investment Amount:

     $250,000

<PAGE>


5.   Conversion Terms:

     The CAOL Note(s) are  convertible  into shares of Common Stock  (Conversion
     Shares) at any time after the  Closing  Date (as  defined in Section 14 (b)
     herein).  The effective date (Effective  Date) of each conversion  shall be
     the date set forth on the conversion notice (Conversion  Notice),  provided
     such  Conversion  Notice is  received by David A  Rapaport,  Esq.  (General
     Counsel of GCA) as escrow agent  (Escrow  Agent) and the Company,  via U.S.
     mail,  facsimile,  overnight  courier,  or hand  delivery no later than the
     fifth  business  day after such date.  The price at which the CAOL  Note(s)
     shall be converted (Conversion Price) shall be the lower of (i) the average
     closing bid price of Company's  Common Stock for the five days prior to the
     Effective Date of the Conversion  Notice time (x) 70%  (Multiplier) or (ii)
     the  closing  bid price as quoted on NASDAQ  Level II on the  Closing  Date
     times the Multiplier.

6.   Prepayment:

     The CAOL  Note(s)  may not be  prepaid,  in whole or in part,  without  the
     written consent of Holder(s).

7.   Interest:

     Ten percent (10%) annual rate,  payable monthly in arrears in cash (or CAOL
     common stock (Interest Shares) at the option of CAOL, only if such Interest
     Shares have been registered and are freely tradable by Holder(s)). Interest
     shall  accrue  from the  Closing  Date and  shall be  payable  on the first
     business day of each month commencing  January 2, 2001. If interest is paid
     in CAOL  common  stock  the  stock  shall be valued at the lower of (i) the
     Multiplier  times the Average  Price for the five trading days  immediately
     preceding  the date the  interest  payment is due;  or (ii) the  Multiplier
     times the Average Price for the five trading days immediately preceding the
     date the Interest Shares are delivered to Holder(s).

8.   Securities Exemption:

     Act The CAOL Note(s) and GCA Warrants are being issued without registration
     under  the  Securities  Act of 1993  (Securities  Act) in  reliance  on the
     exemption provided by Section 4 (1) of the Securities Act.

9.   Securities  Act Registration:

     (a) CAOL shall file an amendment to its registration  statement on Form SB2
     under the Securities  Act including the Conversion  Shares and the Interest
     Shares and the GCA warrant  shares  (Registration  Statement  Amendment) as
     soon as reasonably practicable,  but not more than fifteen (15) days, after
     the Closing Date (Filing Date  Deadline)  and shall use its best efforts to
     cause such Registration  Statement  Amendment to be declared  effective not
     later than February 15, 2001 (Effective Date Deadline).

     (b) In the event the Registration  Statement  Amendment  described above is
     not filed by the Filing Date Deadline and/or shall not become  effective by
     the Effective  Date Deadline:  (i) the exercise  method of the GCA Warrants
     shall become cashless until such Registration  Statement  Amendment becomes
     effective;  (ii) the exercise price of the GCA Warrants shall be reduced by
     $0.03; and shall be further reduced by $0.01 for each month or part thereof
     commencing one month after the Effective Date Deadline, for up to two years
     from the Closing Date,  but to not less than $0.05,  that the  Registration
     Statement  Amendment has not been made effective with a current  prospectus
     available.  Or the Registration  Statement Amendment ceases to be effective
     with a current prospectus available;  or that the Conversion Shares and GCA
     Warrants Shares (Registerable Shares),  cannot be sold pursuant to SEC Rule
     144 (d)  (subject  only to Form  144  filing,  manner  of sale  and  volume
     limitation  provisions  of Rule  144),  and (iii) the  Multiplier  shall be
     reduced  five  percentage  points (a) for the first  month or part  thereof
     after the Filing Date Deadline that the  Registration  Statement  Amendment
     has not been filed;  and/or (b) for the first month or part  thereof  after
     the Effective Date Deadline that the Registration  Statement  Amendment has
     not  become  effective:  and  (iv) the  Multiplier  shall  be  reduced  two
     percentage points for each additional month or part thereof  commencing one
     month or part  thereof  commencing  one  month  after  the  Effective  Date
     Deadline,   for  up  to  two  years  from  the  Effective  Date,  that  the
     Registration Statement Amendment has not been made effective with a current
     prospectus available,  or the Registration Statement Amendment ceases to be
     effective with a current prospectus  available;  or the Registerable Shares
     cannot  be sold  pursuant  to SEC  Rule 144 (d)  (subject  only to Form 144
     filing, manner of sale and volume limitation provision of Rule 144).

     (c) Until the  earlier of (i) two years from the  Closing  Date or the date
     upon  which all of the  Registerable  shares  have been  sold,  CAOL  shall
     maintain  the  effectiveness  of the  Registration  Statement  and/or shall
     maintain its status as a current filer under the Securities Exchange Act of
     1934, so that Purchaser(s) and/or Holder(s) of Registerable  Securities may
     sell  such  securities  without  restriction  (except  for  the  prospectus
     delivery requirements of the Securities Act of 1993 and/or Form 144 filing,
     manner of sale and volume  limitation  provision of Rule 144),  during such
     period.

10.  Limitations:

     No Purchaser or subsequent Holder of CAOL Note(s) and/or GCA Warrants shall
     be permitted to convert any CAOL note(s) or to exercise any GCA Warrants to
     the extent that such conversion would cause any Holder to be the beneficial
     owner of more than 5% of the then  outstanding  CAOL Common Stock,  at that
     given time. This limitation  shall not be deemed to prevent any Holder from
     acquiring more than an aggregate of 5% of the Common Stock, so long as such
     Holder does not  beneficially own more than 5% of CAOL Common Stock, at any
     given time.  The  Holder(s)  shall not be  entitled to vote any  Conversion
     shares  or GCA  Warrants  Shares.  The  prohibition  against  voting  shall
     terminate upon the bona fide transfer of any  Conversion  Shares and/or GCA
     Warrants Shares to a third party who is not an affiliate of any Holder(s).


<PAGE>


11.  Transferability:

     The CAOL  Note(s)  and GCA  Warrants  shall be freely  transferable  by the
     Purchasers  or any Holder(s)  provided such transfer is in compliance  with
     applicable United States and state securities laws.

12.  Escrow of Common Stock:

     (a) To facilitate the delivery of the Conversion Shares upon any conversion
     of the CAOL Note(s) in whole or in part or the full or partial  exercise of
     the GCA  Warrants,  CAOL will issue  6,500,000  shares of CAOL Common Stock
     (Escrow  Shares)  in  the  name  of  Escrow  Agent  and  will  deliver  the
     certificates for such shares without legend to the Escrow Agent within five
     (5) business days of the mutual execution of this Agreement.

     (b)  CAOL  will  deliver  to  Escrow  Agent  at the  address  listed  below
     certificates  without  legend in the name of Escrow  Agent for such  Escrow
     Shares:

                                    David A. Rapaport, Esq.
                                    333 Sandy Springs Circle, Suite 230
                                    Atlanta, GA 30328
                                    Tel: 404/257-9150  Fax: 404/257-9125
                                    Email: drapaport@hcfmgmt.com

     (c) Escrow Agent shall upon receipt of the Escrow Shares or any  Additional
     Escrow Shares (as defined in Section 12 (d) herein),  to deposit the Escrow
     Shares and any  Additional  Escrow  Shares  into his  securities  brokerage
     account at Bear Stearns  Securities Corp.  (BEST).  At the request of BEST,
     CAOL,  will take all  necessary  actions to cause the  Escrow  Shares to be
     transferred promptly into the street name of BEST's securities depository.

     (d) If at any time, or from time to time,  the Escrow Agent is holding less
     than 200% of the number of Escrow Shares  required to convert the remaining
     CAOL Notes(s) (based on the then Conversion Price) plus up to the number of
     shares of CAOL Common Stock issuable upon exercise of the GCA Warrants, the
     Escrow  Agent  and/or  Holder(s)  may  request in writing  that the Company
     deposit  enough  additional  shares of common  Stock with the Escrow  Agent
     (Additional  Escrow Shares) so that the Escrow Agent is holding 200% of the
     number of Escrow  Shares  required to convert such  remaining  CAOL Note(s)
     plus the number of shares of CAOL Commonn  Stock  issuable upon exercise of
     the GCA  Warrants.  The failure of the Company to deliver  such  Additional
     Escrow  Shares  within ten business days of such demand shall be a material
     default of this Agreement and in addition to any other remedies,  including
     without  limitation  specific  performance  (to which  Holder(s) are hereby
     entitled),  shall  entitle the  Holder(s) to an immediate  distribution  of
     Escrow  shares  in an  amount  equal  to  500,000  Escrow  Shares,  plus an

<PAGE>

     additional  50,000 Escrow Shares for each day after the tenth  business day
     such  failure to deliver the  additional  Escrow  Shares  continues.  (Such
     distribution shall be made by the Escrow Agent to the Holder(s) pro-rata to
     the   principal   amount  of  CAOL  Note(s)  held  by  each  Holder.)  CAOL
     acknowledges  that its  obligation  for any  Additional  Escrow  Shares  is
     additional  compensation to Purchaser(s) for the risk of potential  failure
     or  refusal  of CAOL to  deliver  Additional  Escrow  Shares,  and is not a
     penalty.

     (e) Upon the  earlier of (i) thirty (30) days after the date upon which the
     last remaining CAOL Note(s) has been fully converted into Conversion Shares
     with  interest  paid in full;  or (ii) the full  payment  of the  remaining
     principal and interest balance of the CAOL Note(s),  the Escrow Agent shall
     return any  remaining  Escrow  Shares to CAOL  except  for up to  2,000,000
     Escrow  Shares to be held until the earlier of the full exercise of the GCA
     Warrants or the expiration of the GCA Warrants.

     (f) If at any time the Escrow Agent is required to deliver to  Purchaser(s)
     or Holder(s) Escrow Shares that have not been registered or may not be sold
     under Rule 144, the Escrow Agent shall cause CAOL's transfer agent to place
     a standard  restrictive legend on the certificates for such shares prior to
     transfer and delivery to Holder(s).

13.  Escrow of CAOL Note(s):

     (a) To facilitate  the delivery of the Note(s) the Company shall deliver to
     the Escrow Agent at the address set forth in Section  12(b) within five (5)
     business  days of the  mutual  execution  of this  Agreement  five (5) CAOL
     Notes,  which have been duly executed by the Company but which are blank as
     to name and  address  of the  Purchaser(s),  principal  amount  and date of
     issuance (Issue Date).

     (b) The Escrow Agent shall upon receipt of good funds for the purchase of a
     CAOL  Note(s) fill in the name and address of the  Purchaser(s),  principal
     amount and Issue Date. The Escrow Agent shall deliver the completed Note(s)
     to the  Purchaser(s)  and the escrowed  funds  together  with a copy of the
     completed  Note(s) to the Company.  Upon issuance of the entire $250,000 of
     Notes the Escrow Agent shall return any remaining  unissued  blank Notes to
     Company.

14.  Purchase of CAOL Note(s):

     (a)  Purchaser(s)  shall  deposit  with the Escrow  Agent  $250,000 for the
     purchase of the CAOL Note(s)  within five (5) business  days of the receipt
     by the Escrow Agent of the unlegended  certificate(s) for the Escrow Shares
     registered in the name of David A.  Papaport,  Esq.,  the five (5) executed
     blank  Notes,   the  GCA  Warrants  and  a  legal  opinion   acceptable  to
     Purchaser(s) in form and substance from counsel to CAOL.

     (b) The Escrow Agent shall wire the purchase  price for the CAOL Note(s) to
     CAOL in accordance with its written instructions and shall deliver the CAOL
     Notes(s)  to  and  GCA  Warrants  to  GCA  within  five  business  days  of

<PAGE>

     confirmation  that the Escrow Shares have been transferred into the "street
     name" of the BEST's securities depository. The date upon which the purchase
     price for the CAOL Note(s) is wired to CAOL is the "Closing Date."

15.  Representations, Warranties and Covenants of CAOL:

     CAOL makes the following representations, warranties and covenants:

     (a)  Organization,  Good  Standing and Power.  The Company is a corporation
     duly incorporated,  validly existing and in good standing under the laws of
     the State of Nevada and has the requisite corporate power to own, lease and
     operate its  properties and assets and to conduct its business as it is now
     being conducted.

     (b)  Authorization:  Enforcement.  The Company has the requisite  corporate
     power and  authority to enter into and perform this  Agreement and to issue
     and sell the CAOL Note(s),  the Conversion Shares, the GCA Warrants and the
     GCA Warrants  Shares in accordance  with the terms hereof.  The  execution,
     delivery  and  performance  of  this  Agreement  by  the  Company  and  the
     consummation  by it of the  contemplated  hereby and thereby have been duly
     and validly  authorized by all necessary  corporate action,  and no further
     consent  or  authorization  of the  Company  or its Board of  Directors  or
     stockholders  is  required.  This  Agreement  has been  duly  executed  and
     delivered  by the  Company.  The  Agreement  constitutes  valid and binding
     obligation  of the Company  enforceable  against the Company in  accordance
     with its terms,  except as such enforceability may be limited by applicable
     bankruptcy,   insolvency,    reorganization,    moratorium,    liquidation,
     conservatorship,  receivership  or similar  laws  relating to, or affecting
     generally the  enforcement of creditor's  rights and remedies,  or by other
     equitable principles of general application.

     ( c)  Capitalization:  CAOL  represents and warrants that it has 50,000,000
     shares of Common Stock authorized;  and no more than 32,410,258 shares have
     been  issued and are  outstanding;  and that it has no shares of  preferred
     stock  authorized  and that no shares of  preferred  stock are  issued  and
     outstanding;  no more than  45,641,221  shares of Common Stock are reserved
     for issuance  pursuant to stock options and  warrants;  no shares of common
     stock are reserved for convertible  debt; and no shares of common stock are
     reserved for conversion of preferred stock, or for any other purpose.

     (d) Issuance of Conversion  Shares,  GCA Warrants and GCA Warrants  Shares.
     The Conversion  Shares, GCA Warrants and GCA Warrants Shares have been duly
     authorized  by  all  necessary  corporate  action  and  when  delivered  to
     Holder(s) in accordance  with the terms thereof will be validly  issued and
     outstanding, full paid and non-assessable.


<PAGE>


16.  Representations and Warranties of GCA:

     GCA  hereby  makes the  following  representations  and  warranties  to the
     Company:

     (a)  Accredited  Purchaser.  GCA is an  accredited  investor  as defined in
     Regulation D promulgated under the Securities Act.

     (b)  Organization,  Good Standing and Power.  GCA is a limited  partnership
     organized,  validly  existing  and in good  standing  under the laws of the
     State of New York and has the requisite power to own, lease and operate its
     properties  and  assets  and to  conduct  its  business  as it is now being
     conducted.

     ( c) Authorization;  Enforcement. GCA has the requisite power and authority
     to enter into and perform this  Agreement  and to purchase the CAOL Note(s)
     and GCA  Warrants  in  accordance  with the terms  hereof.  The  execution,
     delivery and  performance of this Agreement by GCA and the  consummation by
     it of the transactions  contemplated  hereby and thereby have been duly and
     validly  authorized  by all  necessary  action,  and no further  consent or
     authorization  of GCA,  its  General  Partner  or its  limited  partner  is
     required.  This Agreement has been duly executed and delivered by GCA. This
     Agreement constitutes, or shall constitute when duly executed and delivered
     by all parties thereto,  a valid and binding  obligation of GCA enforceable
     against GCA in accordance with its terms, except as such enforceability may
     be   limited  by   applicable   bankruptcy,   insolvency,   reorganization,
     moratorium,  liquidation,  conservatorship,  receivership  or similar  laws
     relating to, or affecting  generally the  enforcement of creditor's  rights
     and remedies or by other equitable principles of general application.

17.  Right of First Refusal:

     If CAOL  shall  offer to issue any  shares of  common  stock or  securities
     exercisable or  convertible  into common stock (except for (a) the issuance
     of common stock upon the exercise or employee stock options and outstanding
     warrants;  (b) the issuance of Common Stock or  securities  convertible  or
     exercisable into Common Stock for services  rendered to CAOL; (c) shares of
     Common Stock issued in an underwritten  public  offering;  or (d) shares of
     Common  Stock  which  are  restricted  for  resale,  and  which  may not be
     registered for resale,  for at least one year from the issue date) from the
     date of this Agreement  until sixty (60) days following the conversion into
     Common  Stock of all of the  CAOL  Note(s)  and  accrued  interest,  or (b)
     redemption of all of the CAOL Note(s) and payment of all accrued  interest,
     GCA shall have the right of first refusal to purchase such securities,  and
     in this connection , CAOL, prior to the issuance of such securities,  shall
     provide a written term sheet setting forth the terms and conditions of such
     offering, and GCA shall respond within twenty (20) business days of receipt
     of such term  sheet as to  whether  GCA shall  exercise  its right of first
     refusal granted hereunder. In the event that GCA does not elect to exercise
     its right of first  refusal  within such twenty (20)  business  days,  CAOL

<PAGE>

     shall have the right to sell such  securities  to a third party on terms no
     more  favourable  to the third party than those set forth in the term sheet
     for a period  of sixty  (60) days  following  the end of said  twenty  (20)
     business day period.

18.  Default

     Normal  and  customary   events  of  default:   non-payment   of  interest,
     bankruptcy, breach of representations, warranties and covenants, etc.

19.  Binding Agreement

     The parties  shall be legally  bound by the above  terms and shall  execute
     such further  documents as may be required to implement  the  provisions of
     this Agreement, including without limitation, an Escrow Agreement, the CAOL
     Note(s) and the GCA Warrants.


Agreed to and Accepted by:

CathayOnline Inc.



By:
                 Brian Ransom                                 Date



Generation Capital Associates


By:
       Frank E. Hart                                          Date
       General Partner


Escrow Agent:


       David A. Rapaport                                      Date


<PAGE>


                                                                       EXHIBIT A
                            JOINT ESCROW INSTRUCTIONS

Dated as of the date of the
Financing Terms Agreement
To which These Joint Escrow
Instructions Are Attached

David A. Rapaport, Esq.
333 Sandy Springs Circle, Suite 230
Atlanta, GA  30328

Dear Mr. Rapaport:

         As escrow agent for CathayOnline Inc. (CAOL) and Generation Capital
Associates (GCA) as named in the Financing Terms Agreement between CAOL, GCA and
Escrow Agent to which a copy of these Joint Escrow Instructions is attached as
EXHIBIT A (Agreement), you (Escrow Agent) are hereby authorized and directed to
hold and disburse the Escrow Shares, Additional Escrow Shares and funds
deposited with Escrow Agent by Purchaser(s) delivered to the Escrow Agent
pursuant to the terms of the Agreement (Escrow Property):

         1. The Escrow Agent's duties hereunder may be altered, amended,
modified or revoked only by a writing signed by CAOL, GCA and the Escrow Agent.

         2. The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by
the Escrow Agent to be genuine and to have been signed or presented by the
property party or parties. The Escrow Agent shall not be personally liable for
any act the Escrow Agent may do or omit to do hereunder as Escrow Agent while
acting in good faith, except for fraud, willful misconduct, or gross negligence,
and any act done or omitted by the Escrow Agent pursuant to the advice of the
Escrow Agent's attorneys-at-law shall be evidence of such good faith.

         3. The fees, if any, and disbursements of the Escrow Agent chargeable
in respect of services provided in the capacity as Escrow Agent pursuant to this
Escrow Agreement will be the responsibility of the Seller.

         4. The Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.

         5. The Escrow Agent shall not be liable in any respect on account of
the identity, authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.

         6. The Escrow Agent shall be entitled to employ such legal counsel and
other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely

<PAGE>

upon the advice of such counsel, and may pay such counsel reasonable
compensation therefore. The Escrow Agent has acted as legal counsel for Seller
in connection with the Agreement and may continue to act as legal counsel for
Seller, from time to time, notwithstanding its duties as Escrow Agent hereunder.
The Purchaser hereby waives any and all claims and allegations of conflict in
relation to the Escrow Agent's continued representation of the Seller as her
attorney.

         7. The Escrow Agent's responsibilities as Escrow Agent hereunder shall
terminate if the Escrow Agent shall resign by written notice to the Seller and
the Purchaser. In the event of such resignation, the Purchaser and the Seller
shall appoint a successor Escrow Agent.

         8. If the Escrow Agent reasonably requires other or further instruments
in connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.

         9. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the Escrow
Property held by the Escrow Agent hereunder, the Escrow Agent is authorized and
directed in the Escrow Agent's sole discretion (1) to retain in the Escrow
Agent's possession without liability to anyone all or any part of the said
Escrow Property until such disputes shall have been settled either by mutual
written agreement of the parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but the Escrow Agent shall be under no
duty whatsoever to institute or defend any such proceedings or (2) to delver the
Escrow Property held by the Escrow Agent hereunder to a state or federal court
having competent subject matter jurisdiction in accordance with the applicable
procedure therefore.

         10. The Seller and the Purchaser agree jointly and severally to
indemnify and hold harmless the Escrow Agent from any and all claims,
liabilities, costs or expenses in any way arising from or relating to the duties
or performance of the Escrow Agent hereunder other than any such claim,
liability, cost or expense to the extent the same shall have been determined by
final, unappealable judgment of a court of competent jurisdiction to have
resulted from fraud, gross negligence or willful misconduct of the Escrow Agent.

         11. In the event of any action or proceeding brought by any party
against another this Agreement and/or the Financing Terms Agreement, the
prevailing party or parties shall be entitled to recover all expenses incurred
through the date of final collection, including without limitation, all
attorneys' fees.

         12. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given upon personal delivery, overnight courier, facsimile or three business
days after deposit in the United States Postal Service, by registered or
certified mail with postage and fees prepaid, addressed to each of the other
parties thereunto entitled at the addresses listed below their signature, or at
such other addresses as a party may designate by ten days advance written notice
to each of the other parties hereto.

         13. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns and
shall be governed by the laws of the State of Georgia without giving effect to
principles governing the conflicts of laws. A facsimile transmission of these
instructions signed by the Escrow Agent shall be legal and binding on all
parties hereto.



<PAGE>


         14. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings provided in the Agreement.


CathayOnline Inc.

By:
                                         Name, Title & Date

CathayOnline Inc.
437 Madison Avenue
33rd Floor
New York, NY  10022
Tax I.D.
(212) 888-6822   Phone
(212) 888-1212   Fax


Generation Capital Associates

By:
                                         Name, Title & Date

Generation Capital Associates
1085 Riverside Trace
Atlanta, GA 30328
Tax I.D. 13-3175117
(404) 303-8450 - Phone
(404) 255-2218 - Fax


Escrow Agent




David A. Rapaport
333 Sandy Springs Circle
Suite 230
Atlanta, GA  30328
(404) 257-9150 - Phone
(404) 257-9125 - Fax


<PAGE>
                               CATHAYONLINE, INC.
                                CONVERTIBLE NOTE

$ 50,000                                          [                            ]
  -------                                         ------------------------------
 (Amount)                                                    (date)

     FOR  VALUE  RECEIVED,  the  undersigned,   CathayOnline,   Inc.,  a  Nevada
corporation (Company), hereby promises to pay to the order of Generation Capital
Associates,  or its lawful  assigns  (Purchaser),  in lawful money of the United
States of America,  and in  immediately  available  funds,  the principal sum of
$50,000.  The principal  hereof and any unpaid accrued interest thereon shall be
due and payable on or before 5:00 p.m.,  Eastern  Standard Time, on November 30,
2001  (unless the payment date is  accelerated  as provided in Section 4 hereof,
extended as provided in Section 2 hereof,  or unless this Note is  converted  as
set forth in Section 1 hereof).  Payment of all amounts due  hereunder  shall be
made at the  address of the  Purchaser  provided  for in  Section 5 hereof.  The
Company  further  promises to pay  interest at the rate of ten percent per annum
payable monthly on the outstanding principal balance hereof, such interest to be
payable in arrears  commencing  on  January  2, 2001 and on the  maturity  date.
Interest  shall be  payable in cash (or Common  Stock  (Interest  Shares) at the
option of the Company,  only if such Interest  Shares have been  registered  for
resale and are freely  tradable.  If interest  is paid in CAOL common  stock the
stock shall be valued at the lower of (i) the Multiplier times the Average Price
for the five trading days immediately preceding the date the interest payment is
due; or (ii) the  Multiplier  times the Average  Price for the five trading days
immediately preceding the date the Interest Shares are delivered to Holder(s).

     This Note is one of a series of Notes  issued by the Company  pursuant to a
Financing Terms Agreement between the Company and Generation  Capital Associates
dated as of November 22, 2000 (Financing  Terms  Agreement).  Capitalized  terms
herein  shall have the same meaning as in the  Financing  Terms  Agreement.  THE
PROVISIONS  OF  THE  FINANCING  TERMS  AGREEMENT  ARE  INCORPORATED   HEREIN  BY
REFERENCE.

     In connection  with any conversion of the Note into any Conversion  Shares,
the  Company has placed  into  escrow  with David A.  Rapaport,  Esq (the Escrow
Agent) an aggregate of 6,500,000 shares of Common Stock (Escrow Shares) pursuant
to the terms of Joint Escrow  Instructions  dated as of November  22, 2000.  THE
PROVISIONS  OF  THE  JOINT  ESCROW   INSTRUCTIONS  ARE  INCORPORATED  HEREIN  BY
REFERENCE.

     1. CONVERSION. The Purchaser or any subsequent holder or holders (Holder(s)
of this Note is  entitled,  at its option,  at any time and in whole or in part,
until maturity hereof (as extended by Holder(s)) to convert the principal amount
of this Note or any portion of the principal amount hereof into Shares of Common
Stock at lower of (a) the average of the closing bid price  (Closing  Bid Price)
of the Company's  Common Stock for the five-day trading period ending on the day
prior to the Effective Date (Average Price) times (x) 70 % (Multiplier);  or (b)
the Closing Bid Price on the Closing Date times (x) the Multiplier. In the event
a Registration  Statement  Amendment covering the Conversion Shares is not filed
by the Filing Date Deadline  and/or shall not become  effective by the Effective

<PAGE>

Date Deadline the Multiplier shall be reduced five percentage points (a) for the
first month or part thereof after the Filing Date Deadline that the Registration
Statement  Amendment has not been filed;  and/or (b) for the first month of part
thereof  after the  Effective  Date  Deadline  that the  Registration  Statement
Amendment  has not become  effective;  and the  Multiplier  shall be reduced two
percentage points for each additional month or part thereof commencing one month
after the Effective  Date  Deadline,  for up to two years from the Closing Date,
that the  Registration  Statement  Amendment has not been made  effective with a
current prospectus available,  or the Registration Statement Amendment ceases to
be effective  with a current  prospectus  available;  or the  Conversion  Shares
cannot be sold  pursuant to SEC Rule 144 (d)  (subject  only to Form 144 filing,
manner of sale and volume limitation provisions of Rule 144).

     For  purposes of this Note,  the Closing Bid Price shall be the closing bid
price of the Common Stock as reported by the National  Association of Securities
Dealers Automated  Quotation System Level II (Nasdaq),  or the closing bid price
in the over-the-counter market; or, in the event the Common Stock is listed on a
stock exchange, the closing bid price value per share shall be the closing price
on the exchange,  as reported in the Wall Street  Journal.  The shares of Common
Stock issued upon  conversion  of the Note are herein  referred to as Conversion
Shares.  Such  conversion  shall be effectuated by  surrendering  the Note to be
converted  to the Escrow  Agent,  with the form of  Conversion  Notice  attached
hereto as Exhibit 1,  executed by the  Holder(s)  of this Note  evidencing  such
Holder(s)'  intention  to convert  this Note or a specified  portion  hereof (as
above  provided).  The  Effective  Date  shall  be the  date  set  forth  on the
Conversion  Notice,  provided such  Conversion  Notice is received by the Escrow
Agent and the  Company,  via U.S.  mail,  overnight  courier,  hand  delivery or
facsimile, no later than the fifth business day after such date.

     Upon recording the amount  converted and amount of  indebtedness  remaining
under the Note,  set forth in the Conversion  Notice on the grid  comprising the
last page of the Note (Principal  Reduction Grid), the Escrow Agent shall send a
copy of the  revised  Principal  Reduction  Grid to the Company and shall send a
copy of the revised  Principal  Reduction  Grid to the  Holder(s).  Escrow Agent
shall also deliver the Conversion Shares to Holder(s)

     The Company has  authorized  and has reserved and  covenants to continue to
reserve,  free of  preemptive  rights and other  similar  contractual  rights of
stockholders,  a sufficient  number of its  authorized  but  unissued  shares of
Common  Stock to  satisfy  the  rights of  conversion  of the  holder or holders
(Holder(s)) of this Note.

     2.  EXTENSION OF MATURITY  DATE.  The maturity date shall be  automatically
extended  for up to  eighteen  (18)  one-month  periods,  unless  the  Holder(s)
notifies  the Company in writing  not less than 10 days prior to any  expiration
that the Notes will not be extended.

     3. PREPAYMENT. This Note shall not be prepaid, in whole or in part, without
the prior written consent of the Holder(s).

     4.  DEFAULT.  The  occurrence  of any  one of the  following  events  shall
constitute an Event of Default:

<PAGE>

     (a) The  non-payment,  when due, of any  principal or interest  pursuant to
this Note;

     (b) The material breach of any representation or warranty in this Note, the
Financing Terms Agreement or in the Joint Escrow Instructions.  In the event the
Holder(s)  becomes aware of a breach of this Section 4(b),  the Holder(s)  shall
notify the  Company in writing of such  breach and the  Company  shall have five
business days after notice to cure such breach;

     (c) The breach of any covenant or  undertaking  in this Note, the Financing
Terms Agreement or in the Joint Escrow Instructions,  not otherwise provided for
in this Section 5;

     (d) A  default  shall  occur  in  the  payment  when  due  (subject  to any
applicable  grace  period),   whether  by  acceleration  or  otherwise,  of  any
indebtedness  of the Company or an event of default or similar event shall occur
with  respect  to such  indebtedness,  if the  effect of such  default  or event
(subject to any required  notice and any  applicable  grace  period) would be to
accelerate  the  maturity  of any such  indebtedness  or to permit the holder or
holders  of such  indebtedness  to cause  such  indebtedness  to become  due and
payable prior to its express maturity;

     (e) The failure of the Company to file any report or  amendment to a report
under the  Securities  Exchange Act of 1934 more than ten days after such report
or amendment was required to be filed.

     (f) The  commencement by the Company of any voluntary  proceeding under any
bankruptcy,  reorganization,  arrangement,  insolvency,  readjustment  of  debt,
receivership,  dissolution,  or liquidation law or statute of any  jurisdiction,
whether  now or  hereafter  in effect;  or the  adjudication  of the  Company as
insolvent or bankrupt by a decree of a court of competent  jurisdiction;  or the
petition or application by the Company for,  acquiescence  in, or consent by the
Company to, the  appointment  of any  receiver or trustee for the Company or for
all or a substantial  part of the property of the Company;  or the assignment by
the Company  for the  benefit of  creditors;  or the  written  admission  of the
Company of its inability to pay its debts as they mature; or

     (g) The commencement  against the Company of any proceeding relating to the
Company  under  any   bankruptcy,   reorganization,   arrangement,   insolvency,
adjustment of debt,  receivership,  dissolution or liquidation law or statute of
any jurisdiction,  whether now or hereafter in effect,  provided,  however, that
the  commencement of such a proceeding  shall not constitute an Event of Default
unless  the  Company  consents  to the same or admits in  writing  the  material
allegations of same, or said proceeding shall remain undismissed for 20 days; or
the issuance of any order,  judgment or decree for the appointment of a receiver
or trustee for the Company or for all or a  substantial  part of the property of
the Company, which order, judgment or decree remains undismissed for 20 days; or
a warrant of attachment,  execution,  or similar process shall be issued against
any substantial part of the property of the Company.

<PAGE>

     Upon the occurrence of any Default or Event of Default,  the Holder(s) may,
by  written  notice to the  Company,  declare  all or any  portion of the unpaid
principal amount due to Holder(s),  together with all accrued interest  thereon,
immediately due and payable,  in which event it shall  immediately be and become
due and payable, provided that upon the occurrence of an Event of Default as set
forth in paragraph (f) or paragraph (g) hereof, all or any portion of the unpaid
principal amount due to Holder(s),  together with all accrued interest  thereon,
shall immediately become due and payable without any such notice.

     5. NOTICES.  Notices to be given hereunder shall be in writing and shall be
deemed to have been sufficiently given if sent by first class or certified mail,
overnight  courier,  delivered  personally  or sent by  facsimile  transmission.
Notice  shall be deemed to have been  received  on the date and time of personal
delivery,   delivery  by  overnight   courier,   certified   mail  or  facsimile
transmission.

         Notices shall be given to the following addresses:

         If to the Company:

         CathayOnline, Inc.
         437 Madison Avenue
         33rd Floor
         New York, NY  10022
         Tel: (212) 888-6822
         Fax: (212) 888-1212

         Attn:  Brian Ransom, President

         If to the Purchaser:

         Generation Capital Associates
         1085 Riverside Trace
         Atlanta, GA 30328
         Attn:  Frank E. Hart, General Partner
         Fax: 404/255-2218
         Tel:  404/303-8450

         If to the Escrow Agent:

         David A. Rapaport, Esq.
         333 Sandy Springs Circle, Suite 230
         Atlanta, GA 30328
         Fax: 404/ 257-9125
         Tel: 404/257-9150

     6. LIMITATION. Notwithstanding any other provision of this Note (including,
without  limitation,  all  Exhibits  hereto)  to  the  contrary,  no  individual
Holder(s)  of this Note or any  portion of this Note shall be required to accept

<PAGE>

(through the  issuance to such person of Interest  Shares or  otherwise),  or be
permitted to exercise any of the conversion rights to receive  securities of the
Company, if such action would result in the Holder(s) becoming at any particular
time  the  beneficial  owner  of an  aggregate  of  more  than  5% of  the  then
outstanding Common Stock of the Company, as calculated pursuant to Section 13 of
the  Securities  Exchange Act of 1934 (the  Exchange Act) and  Regulation  13D-G
promulgated  thereunder.  The foregoing  shall not prohibit the  Holder(s)  from
receiving  any  remaining  amounts  owed  under this Note to such  Purchaser  or
Holder(s) from the Company, or to receive in the aggregate  securities exceeding
such  amount,  so long as  Holder(s)  does not have  beneficial  ownership of an
aggregate of more than 5% of the outstanding Common Stock at any given time.


     7. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.  The Company consents to
the  jurisdiction  of any court of the State of Georgia and of any federal court
located  in  Georgia.  The  Company  waives  personal  service  of any  summons,
complaint or other process in connection  with any such action or proceeding and
agrees that service  thereof may be made,  as the  Purchaser  or  Holder(s)  may
elect, by certified mail directed to the Company at the location provided for in
Section 6 hereof, or, in the alternative,  in any other form or manner permitted
by law.

     8.  GOVERNING LAW. THIS NOTE HAS BEEN PURCHASED IN THE STATE OF GEORGIA AND
SHALL BE GOVERNED BY AND CONSTRUED AND  INTERPRETED IN ACCORDANCE  WITH THE LAWS
OF THE  STATE OF  GEORGIA  APPLICABLE  TO  CONTRACTS  MADE  AND TO BE  PERFORMED
ENTIRELY THEREIN,  WITHOUT GIVING EFFECT TO THE RULES OR PRINCIPLES OF CONFLICTS
OF LAW.

     9. ATTORNEYS FEES. In the event the Holder(s)  hereof shall refer this Note
to an  attorney  for  collection,  the  Company  agrees to pay all the costs and
expenses incurred in attempting or effecting collection hereunder or enforcement
of the terms of this Note, including reasonable  attorney's fees, whether or not
suit is instituted.

     10.  CONFORMITY  WITH LAW.  It is the  intention  of the Company and of the
Holder(s) to conform strictly to applicable usury and similar laws. Accordingly,
notwithstanding  anything to the  contrary  in this Note,  it is agreed that the
aggregate of all charges which  constitute  interest under  applicable usury and
similar laws that are  contracted  for,  chargeable  or  receivable  under or in
respect of this Note, shall under no circumstances  exceed the maximum amount of
interest  permitted  by  such  laws,  and  any  excess,  whether  occasioned  by
acceleration  or  maturity  of  this  Note  or  otherwise,   shall  be  canceled
automatically,  and if theretofore paid, shall be either refunded to the Company
or credited on the principal amount of this Note.

<PAGE>


                  IN WITNESS WHEREOF, the Company has signed and sealed this
Note as of the date set forth above.


CathayOnline, Inc.

By:
     ---------------------------------------
                       (Signature)


                  (name)


                         (title)

<PAGE>


<TABLE>
<CAPTION>

                            PRINCIPAL REDUCTION GRID


          Date                  Principal             Principal Converted      Adjusted Principal       Conversion Shares
                                                                                                            Delivered
<S>                       <C>                     <C>                          <C>                  <C>
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</TABLE>
<PAGE>
                               CATHAYONLINE, INC.


               Warrant for the purchase of shares of Common Stock

[                                   ]       [                                  ]
-------------------------------------       ------------------------------------
         (Closing Date)                               (No. of  Shares)

     FOR VALUE RECEIVED,  CathayOnline,  Inc. (the "Company"),  hereby certifies
that Generation  Capital  Associates  (GCA), or a permitted  assign thereof,  is
entitled  to  purchase  from  the  Company,  at any  time or  from  time to time
commencing the date hereof and prior to 5:00 P.M., New York City time, on
                                                 (                 )
--------------------------------------------     -------------------
     (Fifth Anniversary of Closing Date)         (Number of Warrants)
fully paid and  nonassessable  shares of the common stock, of the Company for an
aggregate  purchase  price of [                          ($                   )]
                              --------------------------------------------------
(computed  on the basis of $[          ]/share).  (Hereinafter,  (i) said common
                            ------------
stock,  together  with any other  equity  securities  which may be issued by the
Company with respect thereto or in substitution  therefor, is referred to as the
"Common  Stock,"  (ii) the shares of the Common Stock  purchasable  hereunder or
under any other  Warrant (as  hereinafter  defined)  are referred to as the "GCA
Warrants  Shares," the aggregate  purchase  price payable  hereunder for the GCA
Warrants Shares is referred to as the "Aggregate  Warrant Price," (iv) the price
payable hereunder for each of the GCA Warrants Shares is referred to as the "Per
Share Warrant Price," (v) this Warrant,  all identical  warrants (if any) issued
on the date hereof and all warrants hereafter issued in exchange or substitution
for this Warrant or such other  warrants are referred to as the  "Warrants"  and
(vi) the holder of this Warrant is referred to as the "Holder" and the holder of
this  Warrant and all other  Warrants  are  referred to as the  "Holders").  The
Aggregate  Warrant  Price is not subject to  adjustment.  The Per Share  Warrant
Price is subject to adjustment as hereinafter provided; in the event of any such
adjustment,  the number of GCA Warrants Shares shall be adjusted by dividing the
Aggregate  Warrant Price by the Per Share  Warrant  Price in effect  immediately
after such adjustment.

1.       Exercise of Warrant.
         -------------------

     a)   Exercise for Cash

     This Warrant may be exercised, in whole at any time or in part from time to
time,  commencing on the date hereof and prior to 5:00 P.M., New York City time,
on the fifth  anniversary  of the date set  forth  above,  by the  Holder by the
surrender of this  Warrant  (with the  subscription  form at the end hereof duly
executed)  at the address set forth in  Subsection  9(a) hereof,  together  with
proper payment of the Aggregate Warrant Price, or the proportionate part thereof
if this Warrant is exercised in part.  Payment for GCA Warrants  Shares shall be
made by wire,  or certified or official  bank check  payable to the order of the
Company.  If this Warrant is  exercised in part,  this Warrant must be exercised
for a number of whole shares of the Common Stock,  and the Holder is entitled to
receive a new  Warrant  Covering  the GCA  Warrants  Shares  which have not been
exercised and setting  forth the  proportionate  part of the  Aggregate  Warrant
Price  applicable  to such GCA  Warrants  Shares.  Upon such  surrender  of this
Warrant the Company will (a) issue a certificate or  certificates in the name of
the Holder for the largest  number of whole  shares of the Common Stock to which
the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu
of any  fractional  share  of the  Common  Stock to which  the  Holder  shall be
entitled, pay to the

<PAGE>

     Holder cash in an amount equal to the fair value of such  fractional  share
(determined in such  reasonable  manner as the Board of Directors of the Company
shall determine), and (b) deliver the other securities and properties receivable
upon the exercise of this  Warrant,  or the  proportionate  part thereof if this
Warrant is exercised in part, pursuant to the provisions of this Warrant.

     b)   Cashless Exercise

          If at any time  commencing  on the first  anniversary  of the date set
     forth  above the  shares of common  stock  issuable  upon  exercise  of the
     Warrant have not been  registered  for resale under the  Securities  Act of
     1933  with a  current  prospectus  available,  in lieu of  exercising  this
     Warrant in the manner set forth in paragraph l(a) above, the Warrant may be
     exercised  by  surrender  of the  Warrant  without  payment  of  any  other
     consideration,  commission  or  remuneration,  by execution of the cashless
     exercise  subscription form (at the end hereof, duly executed).  The number
     of shares to be issued in  exchange  for the  Warrant  will be  computed by
     subtracting  the Warrant  Exercise  Price from the closing bid price of the
     common stock on the date of receipt of the cashless  exercise  subscription
     form,  multiplying  that amount by the number of shares  represented by the
     Warrant, and dividing by the closing bid price as of the same date.

2.       Reservation of GCA Warrants Shares.
         ----------------------------------

          The Company agrees that, prior to the expiration of this Warrant,  the
     Company  will at all times have  authorized  and in reserve,  and will keep
     available,  solely for  issuance  or  delivery  upon the  exercise  of this
     Warrant, the shares of the Common Stock and other securities and properties
     as from time to time shall be receivable upon the exercise of this Warrant,
     free  and  clear  of all  restrictions  on sale  or  transfer  (except  for
     applicable state or federal securities law restrictions) and free and clear
     of all pre-emptive rights.

3.       Protection Against Dilution.
         ---------------------------

     a)   If, at any time or from time to time  after the date of this  Warrant,
          the Company shall issue or distribute  (for no  consideration)  to the
          holders of shares of Common Stock evidences of its  indebtedness,  any
          other securities of the Company or any cash,  property or other assets
          (excluding a subdivision, combination or reclassification, or dividend
          or  distribution  payable in shares of Common  Stock,  referred  to in
          Subsection   3(b),   and  also   excluding   cash  dividends  or  cash
          distributions  paid out of net profits legally  available  therefor if
          the full amount  thereof,  together with the value of other  dividends
          and  distributions  made  substantially   concurrently   therewith  or
          pursuant to a plan which includes  payment  thereof,  is equivalent to
          not more than 5% of the  Company's  net worth)  (any such  nonexcluded
          event being herein called a "Special Dividend"), the Per Share Warrant
          Price shall be adjusted by  multiplying  the Per Share  Warrant  Price
          then in effect by a fraction, the numerator of which shall be the then
          current  market price of the Common Stock  (defined as the average for
          the thirty  consecutive  business days immediately prior to the record
          date of the daily closing bid price of the Common Stock as reported by
          the NASDAQ  system less the fair market  value (as  determined  by the
          Company's  Board  of  Directors)  of the  evidences  of  indebtedness,
          securities or property,  or other assets issued or distributed in such
          Special  Dividend  applicable  to one  share of  Common  Stock and the

<PAGE>

          denominator of which shall be such then current market price per share
          of Common Stock.  An adjustment  made pursuant to this Subsection 3(a)
          shall become effective  immediately  after the record date of any such
          Special Dividend.

     b)   In case the  Company  shall  hereafter  (i) pay a  dividend  or make a
          distribution  on its  capital  stock in shares of Common  Stock,  (ii)
          subdivide its outstanding shares of Common Stock into a greater number
          of shares, (iii) combine its outstanding shares of Common Stock into a
          smaller  number  of shares or (iv)  issue by  reclassification  of its
          Common Stock any shares of capital stock of the Company, the Per Share
          Warrant Price shall be adjusted so that the Holder of any Warrant upon
          the exercise  hereof shall be entitled to receive the number of shares
          of Common Stock or other  capital  stock of the Company which he would
          have owned immediately  prior thereto.  An adjustment made pursuant to
          this  Subsection  3(b) shall become  effective  immediately  after the
          record date in the case of a dividend or distribution and shall become
          effective  immediately  after  the  effective  date  in the  case of a
          subdivision,  combination or  reclassification.  If, as a result of an
          adjustment  made pursuant to this  Subsection  3(b), the Holder of any
          Warrant  thereafter  surrendered for exercise shall become entitled to
          receive  shares of two or more  classes of capital  stock or shares of
          Common  Stock and other  capital  stock of the  Company,  the Board of
          Directors  (whose  determination  shall  be  conclusive  and  shall be
          described  in a written  notice to the Holder of any Warrant  promptly
          after such adjustment)  shall determine the allocation of the adjusted
          Per Share  Warrant  Price  between or among  shares of such classes or
          capital stock or shares of Common Stock and other capital stock.

     c)   Except as  provided in  Subsection  3(e),  in case the  Company  shall
          hereafter issue or sell any shares of Common Stock for a consideration
          per share  less than the Per Share  Warrant  Price on the date of such
          issuance or sale,  the Per Share Warrant Price shall be adjusted as of
          the date of such  issuance  or sale so that the same  shall  equal the
          consideration  per share received by the Company upon such issuance or
          sale; provided,  however,  that no adjustment of the Per Share Warrant
          Price shall be required in connection with the issuance of shares upon
          the exercise of presently outstanding warrants or options.

     d)   Except as provided in  Subsection  3(a) and 3(e),  in case the Company
          shall  hereafter  issue  or sell  any  rights,  options,  warrants  or
          securities convertible into Common Stock entitling the holders thereof
          to purchase  Common  Stock or to convert such  securities  into Common
          Stock at a price  per  share  (determined  by  dividing  (i) the total
          amount, if any, received or receivable by the Company in consideration
          of  the  issuance  or  sale  of  such  rights,  options,  warrants  or
          convertible  securities plus the total consideration,  if any, payable
          to the  Company  upon  exercise  or  conversion  thereof  (the  "Total
          Consideration")  by (ii) the  number  of  additional  shares of common
          stock  issuable upon exercise or conversion of such  securities)  less
          than the then current Per Share Warrant Price in effect on the date of
          such  issuance or sale,  the Per Share Warrant Price shall be adjusted
          as of the date of such  issuance  or sale so that the same shall equal
          the price  determined  by  dividing  (i) the sum of (a) the  number of

<PAGE>

          shares of Common  Stock  outstanding  on the date of such  issuance or
          sale  multiplied  by the Per Share  Warrant  Price  plus (b) the Total
          Consideration by (ii) the number of shares of Common Stock outstanding
          on the date of such issuance or sale plus (iii) the maximum  number of
          additional shares of Common Stock issuable upon exercise or conversion
          of such securities.

     e)   In case of any  capital  reorganization  or  reclassification,  or any
          consolidation  or merger to which the  Company is a party other than a
          merger  or  consolidation  in  which  the  Company  is the  continuing
          corporation, or in case of any sale or conveyance to another entity of
          the  property of the Company as an  entirety  or  substantially  as an
          entirety,  or in the case of any statutory exchange of securities with
          another  corporation  (including  any exchange  effected in connection
          with a merger of a third corporation into the Company),  the Holder of
          this Warrant  shall have the right  thereafter to convert such Warrant
          into the kind and amount of  securities,  cash or other property which
          he would have owned or have been entitled to receive immediately after
          such   reorganization,   reclassification,    consolidation,   merger,
          statutory exchange, sale or conveyance had this Warrant been converted
          immediately  prior  to the  effective  date  of  such  reorganization,
          reclassification,  consolidation,  merger, statutory exchange, sale or
          conveyance and in any such case, if necessary,  appropriate adjustment
          shall be made in the  application  of the provisions set forth in this
          Section 3 with respect to the rights and  interests  thereafter of the
          Holder of this  Warrant  to the end that the  provisions  set forth in
          this Section 3 shall thereafter correspondingly be made applicable, as
          nearly as may  reasonably  be, in  relation  to any shares of stock or
          other  securities  or be, in  relation to any shares of stock or other
          securities or property  thereafter  deliverable  on the  conversion of
          this  Warrant.  The above  provisions  of this  Subsection  3(e) shall
          similarly  apply  to  successive  reorganizations,  reclassifications,
          consolidations,  mergers,  statutory exchanges,  sales or conveyances.
          The  issuer of any  shares of stock or other  securities  or  property
          thereafter  deliverable  on the  conversion  of this Warrant  shall be
          responsible  for all of the agreements and  obligations of the Company
          hereunder.  Notice  of  any  such  reorganization,   reclassification,
          consolidation,  merger,  statutory exchange, sale or conveyance and of
          said provisions so proposed to be made, shall be mailed to the Holders
          of the Warrants  not less than 10 days prior to such event.  A sale of
          all  or  substantially  all  of  the  assets  of  the  Company  for  a
          consideration  consisting  primarily of  securities  shall be deemed a
          consolidation or merger for the foregoing purposes.

     f)   No adjustment in the Per Share Warrant Price shall be required  unless
          such  adjustment  would  require an  increase  or decrease of at least
          $0.01 per share of Common Stock; provided, however, ------------------
          that any  adjustments  which by reason of this Subsection 3(f) are not
          required to be made shall be carried forward and taken into account in
          any  subsequent   adjustment;   provided  further,   -----------------
          however,  that  adjustments  shall be required and made in  accordance
          with the  provisions  of this  Section 3 (other  than this  Subsection
          3(f)) not later than such time as may be required in order to preserve
          the tax-free nature of a distribution to the Holder of this Warrant or
          Common Stock issuable upon exercise  hereof.  All  calculations  under
          this  Section 3 shall be made to the  nearest  cent.  Anything in this
          Section  3 to the  contrary  notwithstanding,  the  Company  shall  be

<PAGE>

          entitled to make such  reductions in the Per Share Warrant  Price,  in
          addition to those  required by this Section 3, as it in its discretion
          shall  deem  to  be  advisable  in  order  that  any  stock  dividend,
          subdivision of shares or  distribution  of rights to purchase stock or
          securities convertible or exchangeable for stock hereafter made by the
          Company to its shareholders shall not be taxable.

     g)   Whenever the Per Share  Warrant  Price is adjusted as provided in this
          Section  3 and upon any  modification  of the  rights  of a Holder  of
          Warrants in accordance with this Section 3, the Company shall promptly
          obtain, at its expense,  a certificate of a firm of independent public
          accountants of recognized  standing selected by the Board of Directors
          (who may be the regular auditors of the Company) setting forth the Per
          Share Warrant  Price and the number of GCA Warrants  Shares after such
          adjustment or the effect of such  modification,  a brief  statement of
          the facts requiring such adjustment or modification  and the manner of
          computing the same and cause copies of such  certificate  to be mailed
          to the Holders of the Warrants.

     h)   If the Board of Directors of the Company shall declare any dividend or
          other distribution with respect to the Common Stock, other than a cash
          distribution  out of earned  surplus,  the  Company  shall mail notice
          thereof to the Holders of the  Warrants not less than 10 days prior to
          the  record  date  fixed  for  determining  shareholders  entitled  to
          participate in such dividend or other distribution.

4.       Fully Paid Stock, Taxes.
         ------------------------

          The Company agrees that the shares of the Common Stock  represented by
     each  and  every  certificate  for GCA  Warrants  Shares  delivered  on the
     exercise of this Warrant shall,  at the time of such  delivery,  be validly
     issued and outstanding,  fully paid and  nonassessable,  and not subject to
     pre-emptive  rights,  and the Company  will take all such actions as may be
     necessary to assure that the par value or stated  value,  if any, per share
     of the  Common  Stock is at all  times  equal to or less  than the then Per
     Share Warrant Price. The Company further  covenants and agrees that it will
     pay,  when due and payable,  any and all Federal and state stamp,  original
     issue or similar  taxes which may be payable in respect of the issue of any
     Warrant Share or certificate therefor.

5.       Registration Under Securities Act of 1933.
         -----------------------------------------

     a)   The  Company  shall  file an  amendment  to its  pending  registration
          statement  including the GCA Warrants Shares  (Registration  Statement
          Amendment) on or before  (Filing Date Deadline) and shall use its best
          efforts to cause such Registration  Statement Amendment to be declared
          effective by February 15, 2001 (Effective Date Deadline).


     b)   In the event the Registration  Statement  Amendment described above is
          not  filed  by the  Filing  Date  Deadline  and/or  shall  not  become
          effective by the Effective Date Deadline:  (i) the exercise  method of

<PAGE>

          the  GCA  Warrants  shall  become  cashless  until  such  Registration
          Statement Amendment becomes effective;  (ii) the exercise price of the
          GCA Warrants shall be reduced by $0.03;  and shall be further  reduced
          by $0.01 for each month or part thereof commencing one month after the
          Effective  Date  Deadline,  for up to two years from the Closing Date,
          but to not less than $0.05, that the Registration  Statement Amendment
          has not been made effective with a current  prospectus  available,  or
          the  Registration  Statement  Amendment  ceases to be effective with a
          current prospectus available;  or that the GCA Warrants Shares, cannot
          be sold pursuant to SEC Rule 144 (d) (subject only to Form 144 filing,
          manner of sale and volume limitation provisions of Rule 144)

     c)   The  Company  shall (i) furnish  each Holder of any such GCA  Warrants
          Shares and each  underwriter  of such GCA  Warrants  Shares  with such
          copies  of  the  prospectus,  including  the  preliminary  prospectus,
          conforming to the Act,  (and such other  documents as each such Holder
          or  each  such  underwriter  may  reasonably   request)  in  order  to
          facilitate the sale or distribution of the GCA Warrants  Shares,  (ii)
          use its best efforts to register or qualify  such GCA Warrants  Shares
          under  the  blue  sky  laws  (to  the  extent   applicable)   of  such
          jurisdiction or  jurisdictions as the Holders of any such GCA Warrants
          Shares and each -underwriter of GCA Warrants Shares being sold by such
          Holders shall reasonably  request and (iii) take such other actions as
          may be  reasonably  necessary  or advisable to enable such Holders and
          such  underwriters  to  consummate  the sale or  distribution  in such
          jurisdiction  or  jurisdictions  in  which  such  Holders  shall  have
          reasonably requested that the GCA Warrants Shares be sold.

     d)   The Company  shall pay all expenses  incurred in  connection  with any
          registration  or  other  action  pursuant  to the  provisions  of this
          Section 5, other than underwriting  discounts and applicable  transfer
          taxes relating to the GCA Warrants Shares.

     e)   The Company will  indemnify  the Holders of GCA Warrants  Shares which
          are included in each Subsequent  Registration Statement  substantially
          to the same  extent as the Company has  indemnified  the  underwriters
          (the  "Underwriters")  of its public offering of Common Stock pursuant
          to the  Underwriting  Agreement  and such Holders will  indemnify  the
          Company  (and  the  underwriters,   if  applicable)  with  respect  to
          information  furnished by them in writing to the Company for inclusion
          therein  substantially  to the same  extent as the  Underwriters  have
          indemnified the Company.

6.       Transferability.
         ---------------

          The Company may treat the  registered  Holder of this Warrant as he or
     it  appears  on the  Company's  books  at any  time as the  Holder  for all
     purposes.  The  Company  shall  permit  any Holder of a Warrant or his duly
     authorized  attorney,  upon written request during ordinary business hours,
     to inspect and copy or make extracts from its books showing the  registered
     holders of Warrants. All warrants issued upon the transfer or assignment of
     this Warrant will be dated the same date as this Warrant, and all rights of
     the Holder thereof shall be identical to those of the Holder.


<PAGE>

7.       Loss, etc., of Warrant.
         ----------------------

          Upon  receipt of  evidence  satisfactory  to the  Company of the loss,
     theft,  destruction  or  mutilation  of  this  Warrant,  and  of  indemnity
     reasonably  satisfactory to the Company, if lost, stolen or destroyed,  and
     upon surrender and cancellation of this Warrant, if mutilated,  the Company
     shall  execute and deliver to the Holder a new Warrant of like date,  tenor
     and denomination.

8.       Warrant Holder Not Shareholders.
         -------------------------------

          Except as otherwise provided herein, this Warrant does not confer upon
     the  Holder  any  right to vote or to  consent  to or  receive  notice as a
     shareholder of the Company,  as such, in respect of any matters whatsoever,
     or any other rights or liabilities as a shareholder,  prior to the exercise
     hereof

9.       Communication.
         -------------

          No notice or other communication under this Warrant shall be effective
     unless, but any notice or other  communication shall be effective and shall
     be deemed to have been given if,  the same is in  writing  and is mailed by
     first-class  mail,  postage  prepaid,  or sent  vial  facsimile,  overnight
     courier or hand delivery addressed to:

         If to the Company:

         CathayOnline, Inc.
         437 Madison Avenue
         33rd Floor
         New York, NY  10022
         Tel: (212) 888-6822
         Fax: (212) 888-1212

         Attn:  Brian Ransom, President

         If to the Purchaser:

         Generation Capital Associates
         1085 Riverside Trace
         Atlanta, GA 30328
         Attn:  Frank E. Hart, General Partner
         Fax: 404/255-2218
         Tel:  404/303-8450




<PAGE>


         with copy to:

         David A. Rapaport, Esq.
         333 Sandy Springs Circle, Suite 230
         Atlanta, GA 30328
         Fax: 404/257-9125
         Tel: 404/257-9150
         email: drapaport@hcfmgmt.com

10.      Headings.
         --------

          The  headings  of this  Warrant  have  been  inserted  as a matter  of
     convenience and shall not affect the construction hereof.

11.      Applicable Law.
         --------------

          This Warrant shall be governed by and construed in accordance with the
     law of the State of Delaware  without  giving  effect to the  principles of
     conflicts of law thereof.


     IN WITNESS WHEREOF, CathayOnline, Inc. has caused this Warrant to be signed
by its President as of the date set forth above.




Brian Ranson
President






<PAGE>


                                  SUBSCRIPTION


The undersigned, _____________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase shares of the
Common Stock of _______________. covered by said Warrant, and makes payment
therefor in full at the price per share provided by said Warrant.

Dated:                                               Signature:

                                    Address:





                                   ASSIGNMENT

FOR VALUE RECEIVED___________________ hereby sells, assigns and transfers unto
____________ the foregoing Warrant and all rights evidenced thereby, and does
irrevocably constitute and appoint _______________________, attorney, to
transfer said Warrant on the books of ________________

Dated:                                               Signature:

                                    Address:





                               PARTIAL ASSIGNMENT

         FOR VALUE RECEIVED ____________________hereby assigns and transfers
         unto ____________________ the right to purchase ______________ shares
         of the Common Stock of ________________ by the foregoing Warrant, and a
         proportionate part of said Warrant and the rights evidenced hereby, and
         does irrevocably constitute and appoint ____________________, attorney,
         to transfer that part of said Warrant on the books of
         ----------------


Dated:                                               Signature:

                                    Address:



<PAGE>




                         CASHLESS EXERCISE SUBSCRIPTION


         The undersigned _______________________ pursuant to the provisions of
         the foregoing Warrant, hereby agrees to subscribe to that number of
         shares of stock of ________________ as are issuable in accordance with
         the formula set forth in paragraph l(b) of the Warrant, and makes
         payment therefore in full by surrender and delivery of this Warrant.

         Dated:                                      Signature:

                                    Address: