WARRANT TO PURCHASE
                             SHARES OF COMMON STOCK
                         OF VIVID LEARNING SYSTEMS, INC.

      This  certifies that Nick Bauer (the  "Holder"),  for value  received,  is
entitled to purchase from Vivid Learning Systems,  Inc., a Delaware  corporation
(the  "Company"),  a maximum of One  Hundred  Thousand  (100,000)  shares of the
Company's  common stock  ("Common  Stock") for cash at a price of Three  Dollars
($3.00) per share (the "Stock Purchase  Price") at any time or from time to time
up to and  including 4 p.m.  (Pacific  Standard  Time) on December 31, 2008 (the
"Expiration Date") The Stock Purchase Price and the number of shares purchasable
hereunder  are subject to  adjustment  as provided in Section 3 of this Warrant.
The Holder may only make an exercise of one-fourth  (1/4) of the total number of
shares of Common Stock  represented  by this  Warrant on December 31, 2004,  and
thereafter an additional one-fourth (1/4) each December 31st thereafter.

      This Warrant is subject to the following terms and conditions:

      1. Exercise; Issuance of Certificates; Payment for shares. This Warrant is
exercisable at the option of the Holder, at any time or from time to time, up to
the  Expiration  Date for all or any part of the shares of Common Stock (but not
for a fraction of a share) that may be  purchased  hereunder.  To exercise  this
Warrant,  Holder must  surrender  this  Warrant to the Company at its  principal
office  (or at such  other  location  as the  Company  may  advise the Holder in
writing) together with a properly endorsed Form of Subscription  attached hereto
as  Exhibit  A-1.  Holder  must also  tender  payment in cash or by check of the
aggregate  Stock  Purchase Price for the number of shares for which this Warrant
is being  exercised  determined in accordance  with the provisions  hereof.  The
Company  agrees that the shares of Common  Stock  purchased  under this  Warrant
shall be and are deemed to be issued to the  Holder as the record  owner of such
shares as of the close of business on the date on which (a) this  Warrant  shall
have been surrendered and properly endorsed;  (b) the Form of Subscription shall
have been  completed,  executed,  and  endorsed;  and,  (c) the payment for such
shares shall have been delivered. Certificates for the shares of Common Stock so
purchased  shall be  delivered  to the Holder by the  Company  at the  Company's
expense  within a reasonable  time after the rights  represented by this Warrant
have been so exercised.  Each stock  certificate  so delivered  shall be in such
denominations  of Common  Stock as may be  requested  by the Holder and shall be
registered  in the name of such Holder.  In the event of a purchase of less than
all the shares  which may be purchased  under this  Warrant,  the Company  shall
cancel this Warrant and execute and deliver a new Warrant for the balance of the
shares  purchasable  under the  Warrant  surrendered  upon such  purchase to the
Holder within a reasonable time.

                                       1
<PAGE>

      Notwithstanding  the  foregoing  provisions  of this Section 1, the Holder
shall be entitled to the benefit of the following provisions upon the occurrence
of each of the specified events:

      (i)   If, at the time the Holder  exercises  any portion of this  Warrant,
            the Common Stock is publicly  traded and the Stock Purchase Price is
            lower than the  then-current  market price of the Common Stock as of
            the  exercise  date  ("Market  Price"),  then,  in lieu of tendering
            payment  of the  required  Stock  Purchase  Price,  the  Holder  may
            surrender the exercised portion of this Warrant in exchange for that
            number of shares of Common Stock which could be purchased  that date
            at the Market Price utilizing the difference obtained by subtracting
            (A) the Stock  Purchase  Price for the shares  which would have been
            issued upon  exercising  that  portion of the  Warrant  from (B) the
            Market Price of that same number of shares as of that date.

      (ii)  If, at any time prior to the Expiration  Date, the Company  declares
            an extraordinary  dividend,  which shall not include  dividends from
            earnings but rather be defined as a dividend associated with a major
            asset sale  wherein the  dividend is made from the  proceeds of said
            sale and  decreases  the assets of the Company or is one wherein the
            asset  value of the  Company is  decreased  in excess of the current
            years' net earnings, to its shareholders ("Special Dividend"),  then
            the Holder shall be entitled to receive as of that Special  Dividend
            payment date a payment from the Company equal in value to the amount
            that the Holder would have  received  from that Special  Dividend if
            the Holder,  as of the day before the effective  date of the Special
            Dividend,  had been  issued 50% of the  maximum  number of shares of
            Common Stock that the Holder could have acquired if it had exercised
            the entire Warrant as of that date.

      (iii) If, each December 31st as a portion of the Warrant becomes  eligible
            for exercise,  should Holder elect to not exercise such right,  then
            the Company  will cancel that  portion and provide a cash payment to
            Holder of Thirty-seven  Thousand Five Hundred  Dollars  ($37,500) in
            lieu of the  exercise by Holder of the then  eligible  for  exercise
            portion of the  Warrant.  The Company  shall have sixty (60) days to
            make said payment after receipt of notice from Holder that they have
            elected to not  exercise  the  portion of the Warrant  eligible  for
            exercise that December  31st.  Such an election to receive a payment
            instead of  exercising a portion of the Warrant in one year does not
            effect Holder's ability to make an exercise in a later year.


                                       2
<PAGE>

      2. Shares to be Fully Paid;  Reservation of Shares.  The Company covenants
and agrees that all shares of Common  Stock that may be issued upon the exercise
of the  rights  represented  by  this  Warrant  will,  upon  issuance,  be  duly
authorized,  validly  issued,  fully paid, and  nonassessable  and free from all
preemptive  rights of any shareholder and free of all taxes,  liens, and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period  within  which the rights  represented  by this Warrant may be
exercised,  the Company will at all times have authorized and reserved,  for the
purpose of issue or transfer upon exercise of the subscription  rights evidenced
by this Warrant, a sufficient number of shares of authorized but unissued Common
Stock, or other securities and property, when and as required to provide for the
exercise of the rights  represented  by this Warrant.  The Company will take all
such action as may be  necessary  to assure that such shares of Common Stock may
be  issued  as  provided  herein  without  violation  of any  applicable  law or
regulation;  provided, however, that the Company shall not be required to effect
a  registration  under  Federal or State  securities  laws with  respect to such
exercise.

      3.  Adjustment of Stock Purchase Price and Number of Shares.  In the event
that the  outstanding  shares of the Company's  Common Stock are changed into or
exchanged  for a  different  number or kind of shares  of the  Company  or other
securities of the Company or a successor  entity by reason of merger,  corporate
reorganization,   recapitalization,   reclassification,  stock  split-up,  stock
dividend,  combination  of shares,  or otherwise,  the Board of Directors of the
Company,  or  the  governing  body  of  any  successor  entity,  shall  make  an
appropriate  and  equitable  adjustment  in the  number and kind of shares as to
which this Warrant is then  unexercised  and the Stock Purchase Price to the end
that,  after such event, the shares as to which this Warrant is then unexercised
shall  represent the same potential  ownership  interest in the Company (or that
part of the successor  entity which consists of the Company)  immediately  after
such  event  as  they  represented  immediately  before  such  event.  Any  such
adjustment by the Board of Directors or such  governing body shall be conclusive
and shall bind the Holder,  the Company,  any  successor  entity,  and any other
interested persons.

      4.  No  Voting  or  Dividend  Rights;  Limitation  of  Liability.  Nothing
contained in this Warrant shall be construed as  conferring  upon the Holder the
right to vote or to consent or to receive notice as a shareholder of the Company
or any other matters or any rights  whatsoever as a shareholder  of the Company.
No dividends or interest  shall be payable or accrued in respect of this Warrant
or the interest  represented hereby or the shares  purchasable  hereunder until,
and only to the  extent  that,  this  Warrant  shall  have  been  exercised.  No
provisions  hereof,  in the  absence  of  affirmative  action  by the  Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges  of the Holder,  shall give rise to any  liability of such Holder for
the Stock  Purchase  Price or as a  shareholder  of the  Company,  whether  such
liability is asserted by the Company or by its creditors.


                                       3
<PAGE>

         5. Representations and Warranties of Holder. The Holder represents,
warrants, and agrees:

            5.1 The Holder will acquire the shares pursuant to this Warrant with
the Holder's own funds and not with the funds of anyone else. The shares will be
acquired for the Holder's own account, not as a nominee or agent and not for the
account  of any  other  person  or firm,  and no one  else has or will  have any
interest,  beneficial  or  otherwise,  in any of the  shares.  The Holder is not
obligated to transfer  any of the shares or any interest  therein to anyone else
other than its partners nor has it any agreement or  understanding to do so. The
Holder will acquire the shares,  if at all,  for  investment  for an  indefinite
period  and not  with a view  to the  sale or  distribution  of any  part or all
thereof, by public or private sale or other disposition, and has no intention of
selling,  granting any participation in, or otherwise  distributing or disposing
of any shares or any interest therein.

            5.2 The  Holder  is (or  will be at the time of any  acquisition  of
shares) able to bear the economic risk of any  investment in shares and is aware
that the Holder must be prepared to hold any shares  received for an  indefinite
period and that such shares have not been registered under the Securities Act of
1933, as amended (the "Act").

            5.3 The Holder has such  knowledge  and  experience in financial and
business  matters that the Holder is capable of evaluating  the merits and risks
of the prospective investment by the Holder contemplated by this Warrant and the
Holder has  carefully  reviewed and will  carefully  review all the  information
regarding  the  Company,  access  to which has been or will be  accorded  to the
Holder  hereunder,  is thoroughly  familiar with the business,  operations,  and
properties  of the Company by virtue of such review and has  discussed  with the
officers of the Company any  questions  the Holder may have had with  respect to
the Company. Holder has sought outside professional advice as to any information
or material it was not competent to evaluate personally.

            5.4 Without in any way limiting the Holder's  representations as set
forth herein,  the Holder  further agrees that the Holder shall in no event make
any  disposition of all or any part of or interest in this Warrant or the shares
and that the shares shall not be  encumbered,  pledged,  hypothecated,  sold, or
transferred by the Holder nor shall the Holder receive any consideration for the
shares or for any interest  therein  from any person,  unless and until prior to
any proposed transfer, encumbrance,  disposition, pledge, hypothecation, or sale
of any of the shares,  either (a) a registration  statement under the securities
laws with respect to the shares  proposed to be transferred  is then  effective;
or, (b)(i) the Holder notifies the Company of the proposed disposition, (ii) the
Holder  furnishes  the Company with an opinion of counsel in form and  substance
satisfactory to the Company to the effect that such disposition will not require
registration of any of the shares under the Act or  qualification  of the shares
under any other  securities  law, and (iii) such  opinion of counsel  shall have
been  concurred in by counsel for the Company and the Company shall have advised
the Holder of such concurrence.


                                       4
<PAGE>

            5.5 The Holder  hereby  agrees to indemnify  the Company and hold it
harmless  from and  against  any and all  liability,  damage,  cost,  or expense
incurred  on  account  of or  arising  out of (a) any  inaccuracy  in any of the
representations,  warranties, or agreements set forth in this Section 5; (b) the
disposition of any shares which the Holder may receive, contrary to the Holder's
representations, warranties, and agreements set forth in this Section 5; or, (c)
any action,  suit,  or  proceeding  based on a claim that said  representations,
warranties,  or agreements  were inaccurate or misleading or otherwise cause for
obtaining  damages  or  redress  from the  Company  under the  Federal  or State
securities laws.

      6. Miscellaneous.

            6.1 The Holder understands and agrees that certificates representing
any  shares  received  on  exercise  of this  Warrant  will bear a legend  which
restricts the sale,  transfer,  or disposition  of the shares  otherwise than in
accordance with the provisions of this Warrant.

            6.2 This  Warrant  may not be  assigned  by the  Holder  whether  by
operation of law or  otherwise,  without the prior  written  consent of Company;
provided  that such  consent  shall not required if the assignee is a partner of
the Holder and then only if such assignee acknowledges to be bound in the future
by the restriction of this 6.2.

            6.2 This Warrant and any  provision  hereof may be changed,  waived,
discharged,  or terminated  only by an instrument in writing signed by the party
against which enforcement of the same is sought.

            6.3 Any notice,  request or other document  required or permitted to
be given or delivered  to the Holder or the Company  shall be delivered or shall
be sent by certified  mail,  postage  prepaid,  to such Holder at its address as
shown on the books of the Company or to the Company at its  principal  office or
such other address as either may from time to time provide to the other.


                                       5
<PAGE>

      IN WITNESS  WHEREOF,  the parties  have signed this Warrant as of the date
below.

VIVID LEARNING SYSTEMS, INC.                                 NICK BAUER

/S/ KEVIN A. SMITH                                           /S/ NICK BAUER
-----------------------                                      -------------------
Kevin A. Smith                                               Nick Bauer
President & CEO                                              An Individual

   "Company"                                                      "Holder"
Date:  May 25, 2004                                          Date: May 25, 2004


                                       6