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                                                                   EXHIBIT 10.03

                                                                       EXHIBIT B
                                                                              TO
                                                                      SECURITIES
                                                                        PURCHASE
                                                                       AGREEMENT

         THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
         HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
         EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN THAT SECURITIES PURCHASE
         AGREEMENT DATED AS OF FEBRUARY 24, 2000 BY AND AMONG THE PARTIES
         REFERENCED BELOW, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
         SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
         REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR, AN
         OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR
         OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS
         NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
         SUCH ACT.

                                                                   Right to
                                                                   Purchase
                                                                   330,000
                                                                   Shares of
                                                                   Common
                                                                   Stock, no par
                                                                   value

                             STOCK PURCHASE WARRANT

         THIS CERTIFIES THAT, for value received, RGC International Investors,
LDC, or its registered assigns, is entitled to purchase from SmartSources.com,
Inc., a Colorado corporation (the "Company"), at any time or from time to time
during the period specified in Paragraph 2 hereof, THREE HUNDRED THIRTY
THOUSAND (330,000) fully paid and nonassessable shares of the Company's Common
Stock, no par value per share (the "Common Stock"), at an exercise price of
$11.10 per share (the "Exercise Price"). The term "Warrant Shares," as used
herein, refers to the shares of Common Stock purchasable hereunder. The Warrant
Shares and the Exercise Price are subject to adjustment as provided in
Paragraph 4 hereof. The term Warrants means this Warrant and the other warrants
issued pursuant to that certain Securities Purchase Agreement, dated February
24, 2000, by and among the Company and the Buyers listed on the execution page
thereof (the "Securities Purchase Agreement").

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         This Warrant is subject to the following terms, provisions, and
conditions:

         1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of
the Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election
to effect a "Cashless Exercise" (as defined in Section 11(c) below) for the
Warrant Shares specified in the Exercise Agreement. The Warrant Shares so
purchased shall be deemed to be issued to the holder hereof or such holder's
designee, as the record owner of such shares, as of the close of business on
the date on which this Warrant shall have been surrendered, the completed
Exercise Agreement shall have been delivered, and payment shall have been made
for such shares (or an election to effect a Cashless Exercise has been made) as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding two (2)
business days, after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of such holder or such
other name as shall be designated by such holder. If this Warrant shall have
been exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of such certificates, deliver to
the holder a new Warrant representing the number of shares with respect to
which this Warrant shall not then have been exercised.

         Notwithstanding anything in this Warrant to the contrary, in no event
shall the Holder of this Warrant be entitled to exercise a number of Warrants
(or portions thereof) in excess of the number of Warrants (or portions thereof)
upon exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unexercised or unconverted portion of any other
securities of the Company (including the Debentures (as defined in the
Securities Purchase Agreement)) subject to a limitation on conversion or
exercise analogous to the limitation contained herein) and (ii) the number of
shares of Common Stock issuable upon exercise of the Warrants (or portions
thereof) with respect to which the determination described herein is being made,
would result in beneficial ownership by the Holder and its affiliates of more
than 4.9% of the outstanding shares of Common Stock. For purposes of this
Section 1, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder, except as otherwise provided in clause (i) hereof. Notwithstanding
anything in this Warrant to the contrary, the restriction on the Holder set
forth in this paragraph shall not be amended without (i) without the

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written consent of the Holder and the Company and (ii) the approval of the
holders of a majority of Borrower's Common Stock present, or represented by
proxy, and voting at any meeting called to vote on the amendment of such
restriction.

         2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
time to time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the Securities Purchase Agreement (the "Issue Date")
and before 5:00 p.m., New York City time on the fifth (5th) anniversary of the
Issue Date (the "Exercise Period").

         3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants
and agrees as follows:

            (a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid,
and nonassessable and free from all taxes, liens, and charges with respect to
the issue thereof.

            (b) RESERVATION OF SHARES. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.

            (c) LISTING. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of the Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other
shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.

            (d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed by it hereunder, but will at all times
in good faith assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be requested by the
holder of this Warrant in order to protect the exercise privilege of the holder
of this Warrant against dilution or other impairment, consistent with the tenor
and purpose of this Warrant. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.

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            (e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all the Company's assets.

         4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4.

         In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.

            (a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON ISSUANCE
OF COMMON STOCK. Except as otherwise provided in Paragraphs 4(c) and 4(e)
hereof, if and whenever on or after the Issue Date of this Warrant, the Company
issues or sells, or in accordance with Paragraph 4(b) hereof is deemed to have
issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Market Price (as hereinafter defined) on the date of issuance (or deemed
issuance) of such Common Stock (a "Dilutive Issuance"), then immediately upon
the Dilutive Issuance, the Exercise Price will be reduced to a price determined
by multiplying the Exercise Price in effect immediately prior to the Dilutive
Issuance by a fraction, (i) the numerator of which is an amount equal to the
sum of (x) the number of shares of Common Stock actually outstanding
immediately prior to the Dilutive Issuance, plus (y) the quotient of the
aggregate consideration, calculated as set forth in Paragraph 4(b) hereof,
received by the Company upon such Dilutive Issuance divided by the Market Price
in effect immediately prior to the Dilutive Issuance, and (ii) the denominator
of which is the total number of shares of Common Stock Deemed Outstanding (as
defined below) immediately after the Dilutive Issuance.

            (b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:

                (i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
         issues or grants any warrants, rights or options, whether or not
         immediately exercisable, to subscribe for or to purchase Common Stock
         or other securities convertible into or exchangeable for Common Stock
         ("Convertible Securities") (such warrants, rights and options to
         purchase Common Stock or Convertible Securities are hereinafter
         referred to as "Options") and the price per share for which Common
         Stock is issuable upon the exercise of such Options is less than the
         Market Price on the date of issuance or grant of such Options, then
         the maximum total number of shares of Common Stock issuable upon the
         exercise of all such Options will, as of the date of the issuance or
         grant of such Options, be deemed to be outstanding and to have been
         issued and sold by the Company for such price per share. For purposes
         of the preceding sentence, the "price per share for which Common

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         Stock is issuable upon the exercise of such Options" is determined by
         dividing (i) the total amount, if any, received or receivable by the
         Company as consideration for the issuance or granting of all such
         Options, plus the minimum aggregate amount of additional
         consideration, if any, payable to the Company upon the exercise of all
         such Options, plus, in the case of Convertible Securities issuable
         upon the exercise of such Options, the minimum aggregate amount of
         additional consideration payable upon the conversion or exchange
         thereof at the time such Convertible Securities first become
         convertible or exchangeable, by (ii) the maximum total number of
         shares of Common Stock issuable upon the exercise of all such Options
         (assuming full conversion of Convertible Securities, if applicable).
         No further adjustment to the Exercise Price will be made upon the
         actual issuance of such Common Stock upon the exercise of such Options
         or upon the conversion or exchange of Convertible Securities issuable
         upon exercise of such Options.

                (ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
         manner issues or sells any Convertible Securities, whether or not
         immediately convertible (other than where the same are issuable upon
         the exercise of Options) and the price per share for which Common
         Stock is issuable upon such conversion or exchange is less than the
         Market Price on the date of issuance of such Convertible Securities,
         then the maximum total number of shares of Common Stock issuable upon
         the conversion or exchange of all such Convertible Securities will, as
         of the date of the issuance of such Convertible Securities, be deemed
         to be outstanding and to have been issued and sold by the Company for
         such price per share. For the purposes of the preceding sentence, the
         "price per share for which Common Stock is issuable upon such
         conversion or exchange" is determined by dividing (i) the total
         amount, if any, received or receivable by the Company as consideration
         for the issuance or sale of all such Convertible Securities, plus the
         minimum aggregate amount of additional consideration, if any, payable
         to the Company upon the conversion or exchange thereof at the time
         such Convertible Securities first become convertible or exchangeable,
         by (ii) the maximum total number of shares of Common Stock issuable
         upon the conversion or exchange of all such Convertible Securities. No
         further adjustment to the Exercise Price will be made upon the actual
         issuance of such Common Stock upon conversion or exchange of such
         Convertible Securities.

                (iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
         change at any time in (i) the amount of additional consideration
         payable to the Company upon the exercise of any Options; (ii) the
         amount of additional consideration, if any, payable to the Company
         upon the conversion or exchange of any Convertible Securities; or
         (iii) the rate at which any Convertible Securities are convertible
         into or exchangeable for Common Stock (other than under or by reason
         of provisions designed to protect against dilution), the Exercise
         Price in effect at the time of such change will be readjusted to the
         Exercise Price which would have been in effect at such time had such
         Options or Convertible Securities still outstanding provided for such
         changed additional consideration or changed conversion rate, as the
         case may be, at the time initially granted, issued or sold.

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                (iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
         SECURITIES. If, in any case, the total number of shares of Common
         Stock issuable upon exercise of any Option or upon conversion or
         exchange of any Convertible Securities is not, in fact, issued and the
         rights to exercise such Option or to convert or exchange such
         Convertible Securities shall have expired or terminated, the Exercise
         Price then in effect will be readjusted to the Exercise Price which
         would have been in effect at the time of such expiration or
         termination had such Option or Convertible Securities, to the extent
         outstanding immediately prior to such expiration or termination (other
         than in respect of the actual number of shares of Common Stock issued
         upon exercise or conversion thereof), never been issued.

                (v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
         Options or Convertible Securities are issued, granted or sold for
         cash, the consideration received therefor for purposes of this Warrant
         will be the amount received by the Company therefor, before deduction
         of reasonable commissions, underwriting discounts or allowances or
         other reasonable expenses paid or incurred by the Company in
         connection with such issuance, grant or sale. In case any Common
         Stock, Options or Convertible Securities are issued or sold for a
         consideration part or all of which shall be other than cash, the
         amount of the consideration other than cash received by the Company
         will be the fair value of such consideration, except where such
         consideration consists of securities, in which case the amount of
         consideration received by the Company will be the Market Price thereof
         as of the date of receipt. In case any Common Stock, Options or
         Convertible Securities are issued in connection with any acquisition,
         merger or consolidation in which the Company is the surviving
         corporation, the amount of consideration therefor will be deemed to be
         the fair value of such portion of the net assets and business of the
         non-surviving corporation as is attributable to such Common Stock,
         Options or Convertible Securities, as the case may be. The fair value
         of any consideration other than cash or securities will be determined
         in good faith by the Board of Directors of the Company.

                (vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
         to the Exercise Price will be made (i) upon the exercise of any
         warrants, options or convertible securities granted, issued and
         outstanding on the date of issuance of this Warrant; (ii) upon the
         grant or exercise of any stock or options which may hereafter be
         granted or exercised under any employee benefit plan of the Company
         now existing or to be implemented in the future, so long as the
         issuance of such stock or options is approved by a majority of the
         independent members of the Board of Directors of the Company or a
         majority of the members of a committee of independent directors
         established for such purpose; or (iii) upon the exercise of the
         Warrants.

             (c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately

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prior to such subdivision will be proportionately reduced. If the Company at
any time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.

            (d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.

            (e) CONSOLIDATION, MERGER OR SALE. In case of any consolidation of
the Company with, or merger of the Company into, any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in
lieu of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless, prior to the consummation
thereof, the successor or acquiring entity (if other than the Company) and, if
an entity different from the successor or acquiring entity, the entity whose
capital stock or assets the holders of the Common Stock of the Company are
entitled to receive as a result of such consolidation, merger or sale or
conveyance assumes by written instrument the obligations under this Paragraph 4
and the obligations to deliver to the holder of this Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
the holder may be entitled to acquire.

            (f) DISTRIBUTION OF ASSETS. In case the Company shall declare or
make any distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or otherwise,
then, after the date of record for determining stockholders entitled to such
distribution, but prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such distribution.

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            (g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.

            (h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.

            (i) NO FRACTIONAL SHARES. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.

            (j) OTHER NOTICES. In case at any time:

                (i) the Company shall declare any dividend upon the Common
         Stock payable in shares of stock of any class or make any other
         distribution (including dividends or distributions payable in cash out
         of retained earnings) to the holders of the Common Stock;

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

                (iii) there shall be any capital reorganization of the Company,
         or reclassification of the Common Stock, or consolidation or merger of
         the Company with or into, or sale of all or substantially all its
         assets to, another corporation or entity; or

                (iv) there shall be a voluntary or involuntary dissolution,
         liquidation or winding-up of the Company;

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Common Stock entitled to
receive any such dividend, distribution, or subscription rights or for
determining the holders of Common Stock entitled to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable
approximation thereof by the

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Company) when the same shall take place. Such notice shall also specify the
date on which the holders of Common Stock shall be entitled to receive such
dividend, distribution, or subscription rights or to exchange their Common
Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be given at
least 30 days prior to the record date or the date on which the Company's books
are closed in respect thereto. Failure to give any such notice or any defect
therein shall not affect the validity of the proceedings referred to in clauses
(i), (ii), (iii) and (iv) above.

            (k) CERTAIN EVENTS. If any event occurs of the type contemplated by
the adjustment provisions of this Paragraph 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Paragraph 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the Holder
shall be neither enhanced nor diminished by such event.

            (l) CERTAIN DEFINITIONS.

                (i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of
         shares of Common Stock actually outstanding (not including shares of
         Common Stock held in the treasury of the Company), plus (x) pursuant
         to Paragraph 4(b)(i) hereof, the maximum total number of shares of
         Common Stock issuable upon the exercise of Options, as of the date of
         such issuance or grant of such Options, if any, and (y) pursuant to
         Paragraph 4(b)(ii) hereof, the maximum total number of shares of
         Common Stock issuable upon conversion or exchange of Convertible
         Securities, as of the date of issuance of such Convertible Securities,
         if any.

                (ii) "MARKET PRICE," as of any date, (i) means the average of
         the last reported sale prices for the shares of Common Stock on the
         Over-the-Counter Bulletin Board (the "OTC BB") for the five (5)
         trading days immediately preceding such date as reported by Bloomberg
         Financial Markets or an equivalent reliable reporting service mutually
         acceptable to and hereafter designated by the holder of this Warrant
         and the Company ("Bloomberg"), or (ii) if the OTC BB is not the
         principal trading market for the shares of Common Stock, the average
         of the last reported sale prices on the principal trading market for
         the Common Stock during the same period as reported by Bloomberg, or
         (iii) if market value cannot be calculated as of such date on any of
         the foregoing bases, the Market Price shall be the fair market value
         as reasonably determined in good faith by (a) the Board of Directors
         of the Company or, at the option of a majority-in-interest of the
         holders of the outstanding Warrants by (b) an independent investment
         bank of nationally recognized standing in the valuation of businesses
         similar to the business of the Company. The manner of determining the
         Market Price of the Common Stock set forth in the foregoing definition
         shall apply with respect to any other security in respect of which a
         determination as to market value must be made hereunder.

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                (iii) "COMMON STOCK," for purposes of this Paragraph 4,
         includes the Common Stock, no par value per share, and any additional
         class of stock of the Company having no preference as to dividends or
         distributions on liquidation, provided that the shares purchasable
         pursuant to this Warrant shall include only shares of Common Stock, no
         par value per share, in respect of which this Warrant is exercisable,
         or shares resulting from any subdivision or combination of such Common
         Stock, or in the case of any reorganization, reclassification,
         consolidation, merger, or sale of the character referred to in
         Paragraph 4(e) hereof, the stock or other securities or property
         provided for in such Paragraph.

         5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.

         6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.

         7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.

            (a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Paragraph 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Paragraph 7(f) hereof and to the applicable
provisions of the Securities Purchase Agreement. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered holder hereof as the owner and holder hereof for all purposes, and
the Company shall not be affected by any notice to the contrary.
Notwithstanding anything to the contrary contained herein, the registration
rights described in Paragraph 8 are assignable only in accordance with the
provisions of that certain Registration Rights Agreement, dated as of February
24, 2000, by and among the Company and the other signatories thereto (the
"Registration Rights Agreement").

            (b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office
or agency of the Company referred to in Paragraph 7(e) below, for new Warrants
of like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each

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of such new Warrants to represent the right to purchase such number of shares
as shall be designated by the holder hereof at the time of such surrender.

            (c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount
to the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

            (d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided
in this Paragraph 7, this Warrant shall be promptly canceled by the Company.
The Company shall pay all taxes (other than securities transfer taxes) and all
other expenses (other than legal expenses, if any, incurred by the Holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Paragraph 7.

            (e) REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each
transferee and each prior owner of this Warrant.

            (f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered for resale under
the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such exercise, transfer, or
exchange, (i) that the holder or transferee of this Warrant, as the case may
be, furnish to the Company a written opinion of counsel, which opinion and
counsel are acceptable to the Company, to the effect that such exercise,
transfer, or exchange may be made without registration under said Act and under
applicable state securities or blue sky laws, (ii) that the holder or
transferee execute and deliver to the Company an investment letter in form and
substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the
Securities Act; provided that no such opinion, letter or status as an
"accredited investor" shall be required in connection with a transfer pursuant
to Rule 144 under the Securities Act. The first holder of this Warrant, by
taking and holding the same, represents to the Company that such holder is
acquiring this Warrant for investment and not with a view to the distribution
thereof.

         8. REGISTRATION RIGHTS. The initial holder of this Warrant (and
certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in Section 2 of the
Registration Rights Agreement.

                                      11

<PAGE>   12

         9. NOTICES. All notices, requests, and other communications required
or permitted to be given or delivered hereunder to the holder of this Warrant
shall be in writing, and shall be personally delivered, or shall be sent by
certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to such holder at the address shown for such holder on
the books of the Company, or at such other address as shall have been furnished
to the Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be
sent by certified or registered mail or by recognized overnight mail courier,
postage prepaid and addressed, to the office of the Company at 2030 Marine
Drive, Suite 100, North Vancouver, B.C. V7P 1V7, Attention: Chief Executive
Officer, or at such other address as shall have been furnished to the holder of
this Warrant by notice from the Company. Any such notice, request, or other
communication may be sent by facsimile, but shall in such case be subsequently
confirmed by a writing personally delivered or sent by certified or registered
mail or by recognized overnight mail courier as provided above. All notices,
requests, and other communications shall be deemed to have been given either at
the time of the receipt thereof by the person entitled to receive such notice
at the address of such person for purposes of this Paragraph 9, or, if mailed
by registered or certified mail or with a recognized overnight mail courier
upon deposit with the United States Post Office or such overnight mail courier,
if postage is prepaid and the mailing is properly addressed, as the case may
be.

         10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN THE STATE OF DELAWARE (WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS). BOTH PARTIES IRREVOCABLY CONSENT TO THE JURISDICTION OF THE
UNITED STATES FEDERAL COURTS AND THE STATE COURTS LOCATED IN DELAWARE WITH
RESPECT TO ANY SUIT OR PROCEEDING BASED ON OR ARISING UNDER THIS AGREEMENT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY AND IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH SUIT
OR PROCEEDING MAY BE DETERMINED IN SUCH COURTS. BOTH PARTIES IRREVOCABLY WAIVE
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY
MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE
OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL
AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER.

                                      12

<PAGE>   13

         11. MISCELLANEOUS.

             (a) AMENDMENTS. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.

             (b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.

             (c) CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company at its principal executive offices with a written
notice of the holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the
holder shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock.

             (d) REMEDIES CUMULATIVE. The remedies provided in this Warrant
shall be cumulative and in addition to all other remedies available under this
Warrant, 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 giving rise to such remedy and nothing herein shall limit
Holder's right to pursue actual damages for any failure by the Company to
comply with the terms of this Warrant. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to Holder and
that the remedy at law for any such breach may be inadequate. The Company
therefore agrees, in the event of any such breach or threatened breach, Holder
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.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      13

<PAGE>   14

         IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.

                                           SMARTSOURCES.COM, INC.,
                                           a Colorado corporation

                                           By: /s/ DARRYL CARDEY
                                             -----------------------------------
                                              Darryl Cardey,
                                              Chief Financial Officer and
                                              Vice President - Finance

                                           Dated as of February 24, 2000

                                       14

<PAGE>   15

                           FORM OF EXERCISE AGREEMENT

                                                               Dated:_____, 200_

To: SmartSources.com, Inc.

         The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per
share provided by such Warrant in cash or by certified or official bank check
in the amount of, or, if the resale of such Common Stock by the undersigned is
not currently registered pursuant to an effective registration statement under
the Securities Act of 1933, as amended, by surrender of securities issued by
the Company (including a portion of the Warrant) having a market value (in the
case of a portion of this Warrant, determined in accordance with Section 11(c)
of the Warrant) equal to $_________. Please issue a certificate or certificates
for such shares of Common Stock in the name of and pay any cash for any
fractional share to:

                                Name:

                                Signature:
                                Address:

                                Note: The above signature should correspond
                                      exactly with the name on the face of the
                                      within Warrant.

and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.

                                       15

<PAGE>   16

                               FORM OF ASSIGNMENT

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:

Name of Assignee                     Address                       No of Shares
----------------                     -------                       ------------

, and hereby irrevocably constitutes and appoints _____________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.

Dated: _______, 200_

In the presence of:

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

                                  Name:

                                  Signature:

                                  Title of Signing Officer or Agent (if any):

                                  Address:

                                  Note: The above signature should correspond
                                        exactly with the name on the face of the
                                        within Warrant.

                                       16<PAGE>   1
                                                                   Exhibit 10.04

                                                                      EXHIBIT C
                                                                      to
                                                                      Securities
                                                                      Purchase
                                                                      Agreement

                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of February
24, 2000, by and among SmartSources.com, Inc., a Colorado corporation, with its
headquarters located at 2030 Marine Drive, Suite 100, North Vancouver, B.C. V7P
IV7 (the "COMPANY"), and each of the undersigned (together with their respective
affiliates and any assignee or transferee of all of their respective rights
hereunder, the "INITIAL INVESTORS").

         WHEREAS:

         A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "Securities Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) convertible debentures
(the "Debentures") that are convertible into shares of the Company's common
stock, no par value per share (the "Common Stock"), upon the terms and subject
to the limitations and conditions set forth in such Debentures and (ii) warrants
(the "Warrants") to acquire 330,000 shares of Common Stock, upon the terms and
conditions and subject to the limitations and conditions set forth in the
Warrants dated February 24, 2000; and

         B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws;

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Initial Investors hereby agree as follows:

<PAGE>   2

                  1. DEFINITIONS.

                             a. As used in this Agreement, the following terms
         shall have the following meanings:

                                    (i) "INVESTORS" means the Initial Investors
                  and any transferee or assignee who agrees to become bound by
                  the provisions of this Agreement in accordance with Section 9
                  hereof.

                                    (ii) "REGISTER," "REGISTERED," and
                  "REGISTRATION" refer to a registration effected by preparing
                  and filing a Registration Statement or Statements in
                  compliance with the 1933 Act and pursuant to Rule 415 under
                  the 1933 Act or any successor rule providing for offering
                  securities on a continuous basis ("RULE 415"), and the
                  declaration or ordering of effectiveness of such Registration
                  Statement by the United States Securities and Exchange
                  Commission (the "SEC").

                                    (iii) "REGISTRABLE SECURITIES" means (a) the
                  Conversion Shares issued or issuable upon conversion of or
                  otherwise pursuant to the Debentures (including, without
                  limitation, any shares issued or issuable upon exercise of the
                  Investment Options (as defined in the Debenture) or pursuant
                  to Articles I, II.D.3 and II.F of the Debentures and Section
                  2(c) herein) issued and issuable, (b) Warrant Shares issued or
                  issuable upon exercise of or otherwise pursuant to the
                  Warrants issued or issuable and (c) any shares of capital
                  stock issued or issuable as a dividend on or in exchange for
                  or otherwise with respect to any of the foregoing.

                                    (iv) "REGISTRATION STATEMENT(S)" means a
                  registration statement(s) of the Company under the 1933 Act.

                             b. Capitalized terms used herein and not otherwise
         defined herein shall have the respective meanings set forth in the
         Securities Purchase Agreement.

                  2. REGISTRATION.

                             a. MANDATORY REGISTRATION. The Company shall
         prepare, and, on or prior to the date (the "FILING DATE") which is
         thirty (30) days after the date of the Closing under the Securities
         Purchase Agreement (the "CLOSING DATE"), file with the SEC a
         Registration Statement on Form SB-2 or Form S-1 (or, if Form SB-2 or
         Form S-1 is not then available, on such form of Registration Statement
         as is then available to effect a registration of the Registrable
         Securities, subject to the consent of the Initial Investors, which
         consent will not be unreasonably withheld) covering the resale of the
         Registrable Securities, which Registration Statement, to the extent
         allowable under the 1933 Act and the rules and regulations promulgated
         thereunder (including Rule 416), shall state that such Registration
         Statement also covers such indeterminate number of additional shares of
         Common Stock as

                                        2

<PAGE>   3

         may become issuable upon conversion of or otherwise pursuant to the
         Debentures (including, but not limited to, shares issued or issuable
         upon exercise of the Investment Options) and exercise of or otherwise
         pursuant to the Warrants to prevent dilution resulting from stock
         splits, stock dividends or similar transactions. The number of shares
         of Common Stock initially included in such Registration Statement shall
         be no less than two (2) times the sum of (i) the aggregate number of
         Conversion Shares that are then issuable upon conversion of or
         otherwise pursuant to the Debentures (including upon exercise of the
         Investment Options under the Debentures) (in each case based on the
         lesser of the Applicable Percentage (as defined in the Debentures)
         multiplied by the Variable Conversion Price (as defined in the
         Debentures) and the Applicable Percentage multiplied by the Fixed
         Conversion Price (as defined in the Debentures) then in effect) and
         (ii) the Warrant Shares that are then issuable upon exercise of or
         otherwise pursuant to the Warrants, without regard to any limitation on
         the Investor's ability to convert the Debentures or exercise the
         Warrants. The Company acknowledges that the number of shares initially
         included in the Registration Statement represents a good faith estimate
         of the maximum number of shares issuable upon conversion of or
         otherwise pursuant to the Debentures (including upon exercise of the
         Investment Options under the Debentures) and exercise of or otherwise
         pursuant to the Warrants. The Registration Statement (and each
         amendment or supplement thereto, and each request for acceleration of
         effectiveness thereof) shall be provided to (and subject to the
         approval of) the Initial Investors and their counsel prior to its
         filing or other submission.

                             b. UNDERWRITTEN OFFERING. If any offering pursuant
         to a Registration Statement pursuant to Section 2(a) hereof involves an
         underwritten offering, the Investors who hold a majority-in-interest of
         the Registrable Securities subject to such underwritten offering, with
         the consent of a majority-in-interest of the Initial Investors, shall
         have the right to select, at their own expense, one legal counsel and
         an investment banker or bankers and manager or managers to administer
         the offering, which investment banker or bankers or manager or managers
         shall be reasonably satisfactory to the Company. In the event that any
         Investors elect not to participate in such underwritten offering, the
         Registration Statement covering all of the Registrable Securities shall
         contain appropriate plans of distribution reasonably satisfactory to
         the Investors participating in such underwritten offering and the
         Investors electing not to participate in such underwritten offering
         (including, without limitation, the ability of non-participating
         Investors to sell from time to time at any time during the
         effectiveness of such Registration Statement).

                             c. PAYMENTS BY THE COMPANY. The Company shall use
         its best efforts to obtain effectiveness of the Registration Statement
         as soon as practicable, but in any event not later than the one hundred
         twentieth (120th) day after the Closing Date (the "REGISTRATION
         DEADLINE"). If (i) the Registration Statement covering the Registrable
         Securities required to be filed by the Company pursuant to Section 2(a)
         hereof is not declared effective by the SEC by the Registration
         Deadline, or (ii) after the Registration Statement has been declared
         effective by the SEC, sales of all of the Registrable Securities cannot
         be made pursuant to the Registration Statement, (iii) the Common Stock
         is not listed or included for

                                        3

<PAGE>   4

         quotation on the Nasdaq National Market ("NASDAQ"), the Nasdaq SmallCap
         Market ("NASDAQ SMALLCAP"), the New York Stock Exchange (the "NYSE") or
         the American Stock Exchange (the "AMEX") after being so listed or
         included for quotation on one of such markets or (iv) the Common Stock
         ceases to be traded on the Over-the-Counter Bulletin Board (the "OTC
         BB") prior to being listed or included for quotation on one of the
         aforementioned markets, then the Company will make payments to the
         Investors in such amounts and at such times as shall be determined
         pursuant to this Section 2(c) as partial relief for the damages to the
         Investors by reason of any such delay in or reduction of their ability
         to sell the Registrable Securities (which remedy shall not be exclusive
         of any other remedies available at law or in equity). The Company shall
         pay to each holder of the Debentures or Registerable Securities an
         amount equal to the then outstanding principal amount of the Debentures
         (and, in the case of holders of Registrable Securities, the principal
         amount of Debentures from which such Registrable Securities were
         converted) ("OUTSTANDING PRINCIPAL AMOUNT") multiplied by twenty-five
         thousandths (0.25) times the sum of: (i) the number of months (prorated
         for partial months) after the end of the Registration Deadline and
         prior to the date the Registration Statement is declared effective by
         the SEC; provided, however, that there shall be excluded from such
         period any delays which are solely attributable to changes required by
         the Investors in the Registration Statement with respect to information
         relating to the Investors, including, without limitation, changes to
         the plan of distribution, or to the failure of the Investors to conduct
         their review of the Registration Statement pursuant to Section 3(h)
         below in a reasonably prompt manner; (ii) the number of months
         (prorated for partial months) during the Registration Period (as
         defined below) that sales of all of the Registrable Securities cannot
         be made pursuant to the Registration Statement after the Registration
         Statement has been declared effective (including, without limitation,
         when sales cannot be made by reason of the Company's failure to
         properly supplement or amend the prospectus included therein in
         accordance with the terms of this Agreement (including Section 3(b)
         hereof or otherwise), but excluding any days during an Allowed Delay
         (as defined in Section 3(f)); and (iii) the number of months (prorated
         for partial months) that the Common Stock is not listed or included for
         quotation on the OTC BB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX or that
         trading thereon is halted after the Registration Statement has been
         declared effective (each of such monthly periods described in clauses
         (i), (ii) and (iii) being referred to herein as a "DEFAULT PERIOD").
         (For example, if the Registration Statement becomes effective one (1)
         month after the Registration Deadline, the Company would pay $25,000
         for each $1,000,000 of Outstanding Principal Amount. If thereafter,
         sales of all of the Registrable Securities could not be made pursuant
         to the Registration Statement for an additional period of one (1)
         month, the Company would pay an additional $25,000 for each $1,000,000
         of Outstanding Principal Amount.) In addition, the Applicable
         Percentage (as defined in the Debenture) shall be reduced by 2.5% for
         each Default Period (prorated for partial periods) as described in the
         Debentures. Such amounts shall be paid in cash or, at each Investor's
         option, may be added to the Conversion Amount (as defined in the
         Debentures) of the Debentures pursuant to Section II.A.1. of the
         Debentures and thereafter be convertible into Common Stock at the
         "CONVERSION PRICE" (as defined in the Debentures) in accordance with
         the terms of the

                                        4

<PAGE>   5

         Debentures. Any shares of Common Stock issued upon conversion of such
         amounts shall be Registrable Securities. If the Investor desires to
         convert the amounts due hereunder into Registrable Securities, it shall
         so notify the Company in writing within two (2) business days of the
         date on which such amounts are first payable in cash and such amounts
         shall be so convertible (pursuant to the mechanics set forth under
         Article I of the Debentures), beginning on the last day upon which the
         cash amount would otherwise be due in accordance with the following
         sentence. Payments of cash pursuant hereto shall be made within five
         (5) days after the end of each period that gives rise to such
         obligation, provided that, if any such period extends for more than
         thirty (30) days, interim payments shall be made for each such thirty
         (30) day period.

                             d. PIGGY-BACK REGISTRATIONS. Subject to the last
         sentence of this Section 2(d), if at any time prior to the expiration
         of the Registration Period (as hereinafter defined) the Company shall
         determine to file with the SEC a Registration Statement relating to an
         offering for its own account or the account of others under the 1933
         Act of any of its equity securities (other than on Form S-4 or Form S-8
         or their then equivalents relating to equity securities to be issued
         solely in connection with any acquisition of any entity or business or
         equity securities issuable in connection with stock option or other
         employee benefit plans), the Company shall send to each Investor who is
         entitled to registration rights under this Section 2(d) written notice
         of such determination and, if within fifteen (15) days after the
         effective date of such notice, such Investor shall so request in
         writing, the Company shall include in such Registration Statement all
         or any part of the Registrable Securities such Investor requests to be
         registered, except that if, in connection with any underwritten public
         offering for the account of the Company the managing underwriter(s)
         thereof shall impose a limitation on the number of shares of Common
         Stock which may be included in the Registration Statement because, in
         such underwriter(s)' judgment, marketing or other factors dictate such
         limitation is necessary to facilitate public distribution, then the
         Company shall be obligated to include in such Registration Statement
         only such limited portion of the Registrable Securities with respect to
         which such Investor has requested inclusion hereunder as the
         underwriter shall permit. Any exclusion of Registrable Securities shall
         be made pro rata among the Investors seeking to include Registrable
         Securities in proportion to the number of Registrable Securities sought
         to be included by such Investors; provided, however, that the Company
         shall not exclude any Registrable Securities unless the Company has
         first excluded all outstanding securities for which the holders of such
         securities are not entitled by contract to inclusion of such securities
         in such Registration Statement or are not entitled to pro rata
         inclusion with the Registrable Securities; and provided, further,
         however, that, after giving effect to the immediately preceding
         proviso, any exclusion of Registrable Securities shall be made pro rata
         with holders of other securities having the contractual right to
         include such securities in the Registration Statement other than
         holders of securities entitled to inclusion of their securities in such
         Registration Statement by reason of demand registration rights. No
         right to registration of Registrable Securities under this Section 2(d)
         shall be construed to limit any registration required under Section
         2(a) hereof. If an offering in connection with which an Investor is
         entitled to registration under this Section 2(d) is an

                                        5

<PAGE>   6

         underwritten offering, then each Investor whose Registrable Securities
         are included in such Registration Statement shall, unless otherwise
         agreed by the Company, offer and sell such Registrable Securities in an
         underwritten offering using the same underwriter or underwriters and,
         subject to the provisions of this Agreement, on the same terms and
         conditions as other shares of Common Stock included in such
         underwritten offering. Notwithstanding anything to the contrary set
         forth herein, the registration rights of the Investors pursuant to this
         Section 2(d) shall only be available in the event the Company fails to
         timely file, obtain effectiveness or maintain effectiveness of any
         Registration Statement to be filed pursuant to Section 2(a) in
         accordance with the terms of this Agreement.

                             e. ELIGIBILITY FOR FORM SB-2 OR FORM S-1;
         CONVERSION TO FORM S-3. The Company represents and warrants that it (i)
         meets the registrant eligibility and transaction requirements for the
         use of Form SB-2 or Form S-1 for registration of the sale by the
         Initial Investors and any other Investors of the Registrable
         Securities. The Company agrees to file all reports required to be filed
         by the Company with the SEC in a timely manner so as to become eligible
         and thereafter to maintain its eligibility for the use of Form S-3. Not
         later than ten (10) days after the Company first meets the registration
         eligibility and transaction requirements for the use of Form S-3 (or
         any successor form) for registration of the offer and sale by the
         Initial Investors and any other Investors of Registrable Securities,
         the Company shall file a Registration Statement on Form S-3 (or such
         successor form) with respect to the Registrable Securities covered by
         the Registration Statement filed on Form SB-2 or Form S-1, whichever
         is applicable, filed pursuant to Section 2(a) (and include in such
         Registration Statement on Form S-3 the information required by Rule 429
         under the 1933 Act) or convert the Registration Statement filed on Form
         SB-2 or Form S-1 pursuant to Section 2(a) to a Form S-3 pursuant to
         Rule 429 under the 1933 Act and use its best efforts to have such
         Registration Statement (or such amendment) declared effective as soon
         as practicable thereafter.

                  3. OBLIGATIONS OF THE COMPANY.

         In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:

                             a. The Company shall prepare promptly, and file
         with the SEC as soon as practicable after the Closing Date (but no
         later than the Filing Date), a Registration Statement with respect to
         the number of Registrable Securities provided in Section 2(a), and
         thereafter use its best efforts to cause such Registration Statement
         relating to Registrable Securities to become effective as soon as
         possible after such filing (but in no event later than the Registration
         Deadline), and keep the Registration Statement (and, following the
         effectiveness of the Registration Statement on Form S-3 referred to in
         Section 2(a), such later Registration Statement) effective pursuant to
         Rule 415 at all times until such date as is the earlier of (i) the date
         on which all of the Registrable Securities have been sold and (ii) the
         date on which the Registrable Securities (in the opinion of counsel to
         the Initial Investors)

                                        6

<PAGE>   7

         may be immediately sold to the public without registration or
         restriction (including without limitation as to volume by each holder
         thereof) under the 1933 Act (the "REGISTRATION PERIOD"), which
         Registration Statement (including any amendments or supplements thereto
         and prospectuses contained therein) shall not contain any untrue
         statement of a material fact or omit to state a material fact required
         to be stated therein, or necessary to make the statements therein not
         misleading.

                             b. The Company shall prepare and file with the SEC
         such amendments (including post-effective amendments) and supplements
         to the Registration Statements and the prospectus used in connection
         with the Registration Statements as may be necessary to keep the
         Registration Statements effective at all times during the Registration
         Period, and, during such period, comply with the provisions of the 1933
         Act with respect to the disposition of all Registrable Securities of
         the Company covered by the Registration Statements until such time as
         all of such Registrable Securities have been disposed of in accordance
         with the intended methods of disposition by the seller or sellers
         thereof as set forth in the Registration Statements. In the event that
         on any Trading Day (as defined in the Debentures) (the "REGISTRATION
         TRIGGER DATE") the number of shares available under a Registration
         Statement filed pursuant to this Agreement is insufficient to cover all
         of the Registrable Securities issued or issuable upon conversion of or
         otherwise pursuant to the Debentures (including upon exercise of the
         Investment Options under the Debentures) (based on the lesser of the
         Applicable Percentage multiplied by the Variable Conversion Price and
         the Applicable Percentage multiplied by the Fixed Conversion Price
         (each as defined in the Debentures) then in effect) and exercise of or
         otherwise pursuant to the Warrants, in each case without giving effect
         to any limitations on the Investors' ability to convert the Debentures
         or exercise the Warrants, the Company shall amend the Registration
         Statement, or file a new Registration Statement (on the short form
         available therefore, if applicable), or both, so as to cover two
         hundred percent (200%) of all of the Registrable Securities so issued
         or issuable (without giving effect to any limitations on conversion
         contained in the Debentures or exercise contained in the Warrants) as
         of the Registration Trigger Date, in each case, as soon as practicable,
         but in any event within twenty (20) business days after the necessity
         therefor arises (based on the market price of the Common Stock and
         other relevant factors on which the Company reasonably elects to rely).
         The Company shall use its best efforts to cause such amendment and/or
         new Registration Statement to become effective as soon as practicable
         following the filing thereof, but in any event within sixty (60) days
         of the Registration Trigger Date. The provisions of Section 2(c) above
         shall be applicable with respect to the Company's obligations under
         this Section 3(b).

                             c. The Company shall furnish to each Investor whose
         Registrable Securities are included in a Registration Statement and
         such Investor's legal counsel (i) promptly after the same is prepared
         and publicly distributed, filed with the SEC, or received by the
         Company, one copy of each Registration Statement and any amendment
         thereto, each preliminary prospectus and prospectus and each amendment
         or supplement thereto, and, in the case of the Registration Statement
         referred to in Section 2(a), each letter written by or on

                                        7

<PAGE>   8

         behalf of the Company to the SEC or the staff of the SEC, and each item
         of correspondence from the SEC or the staff of the SEC, in each case
         relating to such Registration Statement (other than any portion of any
         thereof which contains information for which the Company has sought
         confidential treatment), and (ii) such number of copies of a
         prospectus, including a preliminary prospectus, and all amendments and
         supplements thereto and such other documents as such Investor may
         reasonably request in order to facilitate the disposition of the
         Registrable Securities owned by such Investor. The Company will
         immediately notify each Investor by facsimile of the effectiveness of
         each Registration Statement or any post-effective amendment. The
         Company will promptly respond to any and all comments received from the
         SEC, with a view towards causing each Registration Statement or any
         amendment thereto to be declared effective by the SEC as soon as
         practicable and shall file an acceleration request as soon as
         practicable following the resolution or clearance of all SEC comments
         or, if applicable, following notification by the SEC that any such
         Registration Statement or any amendment thereto will not be subject to
         review.

                             d. The Company shall use reasonable efforts to (i)
         register and qualify the Registrable Securities covered by the
         Registration Statements under such other securities or "blue sky" laws
         of such jurisdictions in the United States as the Investors who hold a
         majority in interest of the Registrable Securities being offered
         reasonably request, (ii) prepare and file in those jurisdictions such
         amendments (including post-effective amendments) and supplements to
         such registrations and qualifications as may be necessary to maintain
         the effectiveness thereof during the Registration Period, (iii) take
         such other actions as may be necessary to maintain such registrations
         and qualifications in effect at all times during the Registration
         Period, and (iv) take all other actions reasonably necessary or
         advisable to qualify the Registrable Securities for sale in such
         jurisdictions; provided, however, that the Company shall not be
         required in connection therewith or as a condition thereto to (a)
         qualify to do business in any jurisdiction where it would not otherwise
         be required to qualify but for this Section 3(d), (b) subject itself to
         general taxation in any such jurisdiction, (c) file a general consent
         to service of process in any such jurisdiction, (d) provide any
         undertakings that cause the Company undue expense or burden, or (e)
         make any change in its charter or bylaws, which in each case the Board
         of Directors of the Company determines to be contrary to the best
         interests of the Company and its stockholders.

                             e. In the event Investors who hold a
         majority-in-interest of the Registrable Securities being offered in the
         offering (with the approval of a majority-in-interest of the Initial
         Investors) select underwriters for the offering, the Company shall
         enter into and perform its obligations under an underwriting agreement,
         in usual and customary form, including, without limitation, customary
         indemnification and contribution obligations, with the underwriters of
         such offering.

                             f. As promptly as practicable after becoming aware
         of such event, the Company shall notify each Investor of the happening
         of any event, of which the Company has knowledge, as a result of which
         the prospectus included in any Registration Statement,

                                        8

<PAGE>   9

         as then in effect, includes an untrue statement of a material fact or
         omission to state a material fact required to be stated therein or
         necessary to make the statements therein not misleading, and use its
         best efforts promptly to prepare a supplement or amendment to any
         Registration Statement to correct such untrue statement or omission,
         and deliver such number of copies of such supplement or amendment to
         each Investor as such Investor may reasonably request; provided that,
         for not more than ten (10) consecutive trading days (or a total of not
         more than thirty (30) trading days in any twelve (12) month period),
         the Company may delay the disclosure of material non-public information
         concerning the Company (as well as prospectus or Registration Statement
         updating) the disclosure of which at the time is not, in the good faith
         opinion of the Company, in the best interests of the Company (an
         "ALLOWED DELAY"); provided, further, that the Company shall promptly
         (i) notify the Investors in writing of the existence of (but in no
         event, without the prior written consent of an Investor, shall the
         Company disclose to such Investor any of the facts or circumstances
         regarding) material non-public information giving rise to an Allowed
         Delay and (ii) advise the Investors in writing to cease all sales under
         such Registration Statement until the end of the Allowed Delay. Upon
         expiration of the Allowed Delay, the Company shall again be bound by
         the first sentence of this Section 3(f) with respect to the information
         giving rise thereto.

                             g. The Company shall use its best efforts to
         prevent the issuance of any stop order or other suspension of
         effectiveness of any Registration Statement, and, if such an order is
         issued, to obtain the withdrawal of such order at the earliest possible
         moment and to notify each Investor who holds Registrable Securities
         being sold (or, in the event of an underwritten offering, the managing
         underwriters) of the issuance of such order and the resolution thereof.

                             h. The Company shall permit a single firm of
         counsel designated by the Initial Investors (with the fees of such
         counsel being paid pursuant to the expense allowance set forth in
         Section 4(f) of the Securities Purchase Agreement) to review such
         Registration Statement and all amendments and supplements thereto (as
         well as all requests for acceleration or effectiveness thereof) a
         reasonable period of time prior to their filing with the SEC, and not
         file any document in a form to which such counsel reasonably objects
         and will not request acceleration of such Registration Statement
         without prior notice to such counsel. The sections of such Registration
         Statement covering information with respect to the Investors, the
         Investor's beneficial ownership of securities of the Company or the
         Investors intended method of disposition of Registrable Securities
         shall conform to the information provided to the Company by each of the
         Investors.

                             i. The Company shall make generally available to
         its security holders as soon as practicable, but not later than ninety
         (90) days after the close of the period covered thereby, an earnings
         statement (in form complying with the provisions of Rule 158 under the
         1933 Act) covering a twelve-month period beginning not later than the
         first day of the Company's fiscal quarter next following the effective
         date of the Registration Statement.

                                        9

<PAGE>   10

                             j. At the request of any Investor, the Company
         shall furnish, on the date that Registrable Securities are delivered to
         an underwriter, if any, for sale in connection with any Registration
         Statement or, if such securities are not being sold by an underwriter,
         on the date of effectiveness thereof (i) an opinion, dated as of such
         date, from counsel representing the Company for purposes of such
         Registration Statement, in form, scope and substance as is customarily
         given in an underwritten public offering, addressed to the
         underwriters, if any, and the Investors and (ii) a letter, dated such
         date, from the Company's independent certified public accountants in
         form and substance as is customarily given by independent certified
         public accountants to underwriters in an underwritten public offering,
         addressed to the underwriters, if any, and the Investors.

                             k. The Company shall make available for inspection
         by (i) any Investor, (ii) any underwriter participating in any
         disposition pursuant to a Registration Statement, (iii) one firm of
         attorneys and one firm of accountants or other agents retained by the
         Initial Investors, (iv) one firm of attorneys and one firm of
         accountants or other agents retained by all other Investors, and (v)
         one firm of attorneys retained by all such underwriters (collectively,
         the "INSPECTORS") all pertinent financial and other records, and
         pertinent corporate documents and properties of the Company
         (collectively, the "RECORDS"), as shall be reasonably deemed necessary
         by each Inspector to enable each Inspector to exercise its due
         diligence responsibility, and cause the Company's officers, directors
         and employees to supply all information which any Inspector may
         reasonably request for purposes of such due diligence; provided,
         however, that each Inspector shall hold in confidence and shall not
         make any disclosure (except to an Investor) of any Record or other
         information which the Company determines in good faith to be
         confidential, and of which determination the Inspectors are so
         notified, unless (a) the disclosure of such Records is necessary to
         avoid or correct a misstatement or omission in any Registration
         Statement, (b) the release of such Records is ordered pursuant to a
         subpoena or other order from a court or government body of competent
         jurisdiction, or (c) the information in such Records has been made
         generally available to the public other than by disclosure in violation
         of this or any other agreement. The Company shall not be required to
         disclose any confidential information in such Records to any Inspector
         until and unless such Inspector shall have entered into confidentiality
         agreements (in form and substance satisfactory to the Company) with the
         Company with respect thereto, substantially in the form of this Section
         3(k). Each Investor agrees that it shall, upon learning that disclosure
         of such Records is sought in or by a court or governmental body of
         competent jurisdiction or through other means, give prompt notice to
         the Company and allow the Company, at its expense, to undertake
         appropriate action to prevent disclosure of, or to obtain a protective
         order for, the Records deemed confidential. Nothing herein (or in any
         other confidentiality agreement between the Company and any Investor)
         shall be deemed to limit the Investor's ability to sell Registrable
         Securities in a manner which is otherwise consistent with applicable
         laws and regulations.

                                       10

<PAGE>   11

                             l. The Company shall hold in confidence and not
         make any disclosure of information concerning an Investor provided to
         the Company unless (i) disclosure of such information is necessary to
         comply with federal or state securities laws, (ii) the disclosure of
         such information is necessary to avoid or correct a misstatement or
         omission in any Registration Statement, (iii) the release of such
         information is ordered pursuant to a subpoena or other order from a
         court or governmental body of competent jurisdiction, or (iv) such
         information has been made generally available to the public other than
         by disclosure in violation of this or any other agreement. The Company
         agrees that it shall, upon learning that disclosure of such information
         concerning an Investor is sought in or by a court or governmental body
         of competent jurisdiction or through other means, give prompt notice to
         such Investor prior to making such disclosure, and allow the Investor,
         at its expense, to undertake appropriate action to prevent disclosure
         of, or to obtain a protective order for, such information.

                             m. The Company shall (i) cause all the Registrable
         Securities covered by the Registration Statement to be listed on each
         national securities exchange on which securities of the same class or
         series issued by the Company are then listed, if any, if the listing of
         such Registrable Securities is then permitted under the rules of such
         exchange, or (ii) to the extent the securities of the same class or
         series are not then listed on a national securities exchange, secure
         the designation and quotation, of all the Registrable Securities
         covered by the Registration Statement on Nasdaq or the Nasdaq SmallCap
         or, if not eligible for Nasdaq or the Nasdaq SmallCap, on the OTC BB
         and, without limiting the generality of the foregoing, to arrange for
         at least two market makers to register with the National Association of
         Securities Dealers, Inc. ("NASD") as such with respect to such
         Registrable Securities.

                             n. The Company shall provide a transfer agent and
         registrar, which may be a single entity, for the Registrable Securities
         not later than the effective date of the Registration Statement.

                             o. The Company shall cooperate with the Investors
         who hold Registrable Securities being offered and the managing
         underwriter or underwriters, if any, to facilitate the timely
         preparation and delivery of certificates (not bearing any restrictive
         legends) representing Registrable Securities to be offered pursuant to
         such Registration Statement and enable such certificates to be in such
         denominations or amounts, as the case may be, as the managing
         underwriter or underwriters, if any, or the Investors may reasonably
         request and registered in such names as the managing underwriter or
         underwriters, if any, or the Investors may request, and, within three
         (3) business days after a Registration Statement which includes
         Registrable Securities is ordered effective by the SEC, the Company
         shall deliver, and shall cause legal counsel selected by the Company to
         deliver, to the transfer agent for the Registrable Securities (with
         copies to the Investors whose Registrable Securities are included in
         such Registration Statement) an instruction in the form attached hereto
         as EXHIBIT 1 and an opinion of such counsel in the form attached hereto
         as EXHIBIT 2.

                                       11

<PAGE>   12

                             p. At the request of the holders of a
         majority-in-interest of the Registrable Securities, the Company shall
         prepare and file with the SEC such amendments (including post-effective
         amendments) and supplements to a Registration Statement and any
         prospectus used in connection with the Registration Statement as may be
         necessary in order to change the plan of distribution set forth in such
         Registration Statement.

                             q. Except for those commitments of the Company to
         register its Common Stock set forth on Schedule 3(q) of this Agreement,
         the Company shall not, and shall not agree to, allow the holders of any
         securities of the Company to include any of their securities in any
         Registration Statement under Section 2(a) hereof or any amendment or
         supplement thereto under Section 3(b) hereof without the consent of the
         holders of a majority-in-interest of the Registrable Securities. In
         addition, the Company shall not offer any securities for its own
         account or the account of others in any Registration Statement under
         Section 2(a) hereof or any amendment or supplement thereto under
         Section 3(b) hereof without the consent of the holders of a
         majority-in-interest of the Registrable Securities.

                             r. The Company shall take all other reasonable
         actions necessary to expedite and facilitate disposition by the
         Investors of Registrable Securities pursuant to a Registration
         Statement.

                             s. The Company shall comply with all applicable
         laws related to a Registration Statement and offering and sale of
         securities and all applicable rules and regulations of governmental
         authorities in connection therewith (including without limitation the
         1933 Act and or the Securities Exchange Act of 1934, as amended (the
         "1934 ACT") and the rules and regulations promulgated by the SEC).

                  4. OBLIGATIONS OF THE INVESTORS.

         In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:

                             a. It shall be a condition precedent to the
         obligations of the Company to complete the registration pursuant to
         this Agreement with respect to the Registrable Securities of a
         particular Investor that such Investor shall furnish to the Company
         such information regarding itself, the Registrable Securities held by
         it and the intended method of disposition of the Registrable Securities
         held by it as shall be reasonably required to effect the registration
         of such Registrable Securities and shall execute such documents in
         connection with such registration as the Company may reasonably
         request. At least three (3) business days prior to the first
         anticipated filing date of the Registration Statement, the Company
         shall notify each Investor of the information the Company requires from
         each such Investor.

                                       12

<PAGE>   13

                             b. Each Investor, by such Investor's acceptance of
         the Registrable Securities, agrees to cooperate with the Company as
         reasonably requested by the Company in connection with the preparation
         and filing of the Registration Statements hereunder, unless such
         Investor has notified the Company in writing of such Investor's
         election to exclude all of such Investor's Registrable Securities from
         the Registration Statements.

                             c. In the event Investors holding a
         majority-in-interest of the Registrable Securities being registered
         (with the approval of the Initial Investors) determine to engage the
         services of an underwriter, each Investor agrees to enter into and
         perform such Investor's obligations under an underwriting agreement, in
         usual and customary form, including, without limitation, customary
         indemnification and contribution obligations, with the managing
         underwriter of such offering and take such other actions as are
         reasonably required in order to expedite or facilitate the disposition
         of the Registrable Securities, unless such Investor has notified the
         Company in writing of such Investor's election to exclude all of such
         Investor's Registrable Securities from such Registration Statement.

                             d. Each Investor agrees that, upon receipt of any
         notice from the Company of the happening of any event of the kind
         described in Section 3(f) or 3(g), such Investor will immediately
         discontinue disposition of Registrable Securities pursuant to the
         Registration Statement covering such Registrable Securities until such
         Investor's receipt of the copies of the supplemented or amended
         prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
         the Company, such Investor shall deliver to the Company (at the expense
         of the Company) or destroy (and deliver to the Company a certificate of
         destruction) all copies in such Investor's possession, of the
         prospectus covering such Registrable Securities current at the time of
         receipt of such notice.

                             e. No Investor may participate in any underwritten
         registration hereunder unless such Investor (i) agrees to sell such
         Investor's Registrable Securities on the basis provided in any
         underwriting arrangements in usual and customary form entered into by
         the Company, (ii) completes and executes all questionnaires, powers of
         attorney, indemnities, underwriting agreements and other documents
         reasonably required under the terms of such underwriting arrangements,
         and (iii) agrees to pay its pro rata share of all underwriting
         discounts and commissions and any expenses in excess of those payable
         by the Company pursuant to Section 5 below.

                  5. EXPENSES OF REGISTRATION.

         All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel selected by the Initial Investors pursuant to
Sections 2(b) and 3(h) hereof shall be borne by the Company.

                                       13

<PAGE>   14

                  6. INDEMNIFICATION.

         In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

                             a. To the extent permitted by law, the Company will
         indemnify, hold harmless and defend (i) each Investor who holds such
         Registrable Securities, (ii) the directors, officers, partners,
         employees, agents and each person who controls any Investor within the
         meaning of the 1933 Act or the 1934 Act, if any, (iii) any underwriter
         (as defined in the 1933 Act) for the Investors, and (iv) the directors,
         officers, partners, employees and each person who controls any such
         underwriter within the meaning of the 1933 Act or the 1934 Act, if any
         (each, an "INDEMNIFIED PERSON"), against any joint or several losses,
         claims, damages, liabilities or expenses (collectively, together with
         actions, proceedings or inquiries by any regulatory or self-regulatory
         organization, whether commenced or threatened, in respect thereof,
         "CLAIMS") to which any of them may become subject insofar as such
         Claims arise out of or are based upon: (i) any untrue statement or
         alleged untrue statement of a material fact in a Registration Statement
         or the omission or alleged omission to state therein a material fact
         required to be stated or necessary to make the statements therein not
         misleading; (ii) any untrue statement or alleged untrue statement of a
         material fact contained in any preliminary prospectus if used prior to
         the effective date of such Registration Statement, or contained in the
         final prospectus (as amended or supplemented, if the Company files any
         amendment thereof or supplement thereto with the SEC) or the omission
         or alleged omission to state therein any material fact necessary to
         make the statements made therein, in light of the circumstances under
         which the statements therein were made, not misleading; or (iii) any
         violation or alleged violation by the Company of the 1933 Act, the 1934
         Act, any other law, including, without limitation, any state securities
         law, or any rule or regulation thereunder relating to the offer or sale
         of the Registrable Securities (the matters in the foregoing clauses (i)
         through (iii) being, collectively, "VIOLATIONS"). Subject to the
         restrictions set forth in Section 6(c) with respect to the number of
         legal counsel, the Company shall reimburse the Indemnified Person,
         promptly as such expenses are incurred and are due and payable, for any
         reasonable legal fees or other reasonable expenses incurred by them in
         connection with investigating or defending any such Claim.
         Notwithstanding anything to the contrary contained herein, the
         indemnification agreement contained in this Section 6(a): (i) shall not
         apply to a Claim arising out of or based upon a Violation which occurs
         in reliance upon and in conformity with information furnished in
         writing to the Company by any Indemnified Person or underwriter for
         such Indemnified Person expressly for use in connection with the
         preparation of such Registration Statement or any such amendment
         thereof or supplement thereto; (ii) shall not apply to amounts paid in
         settlement of any Claim if such settlement is effected without the
         prior written consent of the Company, which consent shall not be
         unreasonably withheld; and (iii) with respect to any preliminary
         prospectus, shall not inure to the benefit of any Indemnified Person if
         the untrue statement or omission of material fact contained in the
         preliminary prospectus was corrected on a timely basis in the
         prospectus, as then amended or supplemented, such corrected

                                       14

<PAGE>   15

         prospectus was timely made available by the Company pursuant to Section
         3(c) hereof, and the Indemnified Person was promptly advised in writing
         not to use the incorrect prospectus prior to the use giving rise to a
         Violation and such Indemnified Person, notwithstanding such advice,
         used it. Such indemnity shall remain in full force and effect
         regardless of any investigation made by or on behalf of the Indemnified
         Person and shall survive the transfer of the Registrable Securities by
         the Investors pursuant to Section 9.

                             b. In connection with any Registration Statement in
         which an Investor is participating, each such Investor agrees severally
         and not jointly to indemnify, hold harmless and defend, to the same
         extent and in the same manner set forth in Section 6(a), the Company,
         each of its directors, each of its officers who signs the Registration
         Statement, each person, if any, who controls the Company within the
         meaning of the 1933 Act or the 1934 Act, any underwriter and any other
         stockholder selling securities pursuant to the Registration Statement
         or any of its directors or officers or any person who controls such
         stockholder or underwriter within the meaning of the 1933 Act or the
         1934 Act (collectively and together with an Indemnified Person, an
         "INDEMNIFIED PARTY"), against any Claim to which any of them may become
         subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
         Claim arises out of or is based upon any Violation by such Investor, in
         each case to the extent (and only to the extent) that such Violation
         occurs in reliance upon and in conformity with written information
         furnished to the Company by such Investor expressly for use in
         connection with such Registration Statement; and subject to Section
         6(c) such Investor will reimburse any legal or other expenses (promptly
         as such expenses are incurred and are due and payable) reasonably
         incurred by them in connection with investigating or defending any such
         Claim; provided, however, that the indemnity agreement contained in
         this Section 6(b) shall not apply to amounts paid in settlement of any
         Claim if such settlement is effected without the prior written consent
         of such Investor, which consent shall not be unreasonably withheld;
         provided, further, however, that the Investor shall be liable under
         this Agreement (including this Section 6(b) and Section 7) for only
         that amount as does not exceed the net proceeds to such Investor as a
         result of the sale of Registrable Securities pursuant to such
         Registration Statement. Such indemnity shall remain in full force and
         effect regardless of any investigation made by or on behalf of such
         Indemnified Party and shall survive the transfer of the Registrable
         Securities by the Investors pursuant to Section 9. Notwithstanding
         anything to the contrary contained herein, the indemnification
         agreement contained in this Section 6(b) with respect to any
         preliminary prospectus shall not inure to the benefit of any
         Indemnified Party if the untrue statement or omission of material fact
         contained in the preliminary prospectus was corrected on a timely basis
         in the prospectus, as then amended or supplemented.

                             c. Promptly after receipt by an Indemnified Person
         or Indemnified Party under this Section 6 of notice of the commencement
         of any action (including any governmental action), such Indemnified
         Person or Indemnified Party shall, if a Claim in respect thereof is to
         be made against any indemnifying party under this Section 6, deliver to
         the indemnifying party a written notice of the commencement thereof,
         and the indemnifying

                                       15

<PAGE>   16

         party shall have the right to participate in, and, to the extent the
         indemnifying party so desires, jointly with any other indemnifying
         party similarly noticed, to assume control of the defense thereof with
         counsel mutually satisfactory to the indemnifying party and the
         Indemnified Person or the Indemnified Party, as the case may be;
         provided, however, that an Indemnified Person or Indemnified Party
         shall have the right to retain its own counsel with the fees and
         expenses to be paid by the indemnifying party, if, in the reasonable
         opinion of counsel retained by the indemnifying party, the
         representation by such counsel of the Indemnified Person or Indemnified
         Party and the indemnifying party would be inappropriate due to actual
         or potential differing interests between such Indemnified Person or
         Indemnified Party and any other party represented by such counsel in
         such proceeding. The indemnifying party shall pay for only one separate
         legal counsel for the Indemnified Persons or the Indemnified Parties,
         as applicable, and such legal counsel shall be selected by Investors
         holding a majority-in-interest of the Registrable Securities included
         in the Registration Statement to which the Claim relates (with the
         approval of a majority-in-interest of the Initial Investors), if the
         Investors are entitled to indemnification hereunder, or the Company, if
         the Company is entitled to indemnification hereunder, as applicable.
         The failure to deliver written notice to the indemnifying party within
         a reasonable time of the commencement of any such action shall not
         relieve such indemnifying party of any liability to the Indemnified
         Person or Indemnified Party under this Section 6, except to the extent
         that the indemnifying party is actually prejudiced in its ability to
         defend such action. The indemnification required by this Section 6
         shall be made by periodic payments of the amount thereof during the
         course of the investigation or defense, as such expense, loss, damage
         or liability is incurred and is due and payable.

                  7. CONTRIBUTION.

         To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.

                  8. REPORTS UNDER THE 1934 ACT.

         With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the

                                       16

<PAGE>   17

investors to sell securities of the Company to the public without registration
("RULE 144"), the Company agrees to:

                             a. make and keep current public information
         available, as those terms are understood and defined in Rule 144;

                             b. file with the SEC in a timely manner all reports
         and other documents required of the Company under the 1933 Act and the
         1934 Act so long as the Company remains subject to such requirements
         (it being understood that nothing herein shall limit the Company's
         obligations under Section 4(c) of the Securities Purchase Agreement)
         and the filing of such reports and other documents is required for the
         applicable provisions of Rule 144; and

                             c. furnish to each Investor so long as such
         Investor owns Registrable Securities, promptly upon request, (i) a
         written statement by the Company that it has complied with the
         reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii)
         a copy of the most recent annual or quarterly report of the Company and
         such other reports and documents so filed by the Company, and (iii)
         such other information as may be reasonably requested to permit the
         Investors to sell such securities pursuant to Rule 144 without
         registration.

                  9. ASSIGNMENT OF REGISTRATION RIGHTS.

         The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "ACCREDITED INVESTOR" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.

                  10. AMENDMENT OF REGISTRATION RIGHTS.

         Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company, each
of the Initial Investors (to the extent such Initial Investor still

                                       17

<PAGE>   18

owns Registrable Securities) and Investors who hold a majority interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.

                  11. MISCELLANEOUS.

                             a. A person or entity is deemed to be a holder of
         Registrable Securities whenever such person or entity owns of record
         such Registrable Securities. If the Company receives conflicting
         instructions, notices or elections from two or more persons or entities
         with respect to the same Registrable Securities, the Company shall act
         upon the basis of instructions, notice or election received from the
         registered owner of such Registrable Securities.

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

                           If to the Company:

                           SmartSources.com, Inc.
                           2030 Marine Drive, Suite 100
                           North Vancouver, B.C., V7P IV7
                           Attention: Chief Executive Officer
                           Facsimile:  (604) 986-0869

                                       18

<PAGE>   19

                           With copy to:

                           Wolin, Ridley & Miller LLP
                           3100 Bank One Center
                           1717 Main Street
                           Dallas, Texas 75201-4681
                           Attention:  Norman Miller
                           Facsimile: (214) 939-4949

If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.

                           With copy to:
                           Bradley D. Houser
                           Akerman, Senterfitt & Eidson, P.A.
                           One Southeast Third Avenue, 28th Floor
                           Miami, Florida 33131
                           Facsimile:  (305) 374-5095

                             c. Failure of any party to exercise any right or
         remedy under this Agreement or otherwise, or delay by a party in
         exercising such right or remedy, shall not operate as a waiver thereof.

                             d. This Agreement shall be governed by and
         construed in accordance with the laws of the State of Delaware
         applicable to agreements made and to be performed in the State of
         Delaware (without regard to principles of conflict of laws). Both
         parties irrevocably consent to the jurisdiction of the United States
         federal courts and the state courts located in Delaware with respect to
         any suit or proceeding based on or arising under this Agreement, the
         agreements entered into in connection herewith or the transactions
         contemplated hereby or thereby and irrevocably agree that all claims in
         respect of such suit or proceeding may be determined in such courts.
         Both parties irrevocably waive the defense of an inconvenient forum to
         the maintenance of such suit or proceeding. Both parties further agree
         that service of process upon a party mailed by first class mail shall
         be deemed in every respect effective service of process upon the party
         in any such suit or proceeding. Nothing herein shall affect either
         party's right to serve process in any other manner permitted by law.
         Both parties agree that a final non-appealable judgment in any such
         suit or proceeding shall be conclusive and may be enforced in other
         jurisdictions by suit on such judgment or in any other lawful manner.

                             e. This Agreement and the Securities Purchase
         Agreement (including all schedules and exhibits thereto) constitute the
         entire agreement among the parties hereto with

                                       19

<PAGE>   20

         respect to the subject matter hereof and thereof. There are no
         restrictions, promises, warranties or undertakings, other than those
         set forth or referred to herein and therein. This Agreement and the
         Securities Purchase Agreement supersede all prior agreements and
         understandings among the parties hereto with respect to the subject
         matter hereof and thereof.

                             f. Subject to the requirements of Section 9 hereof,
         this Agreement shall inure to the benefit of and be binding upon the
         successors and assigns of each of the parties hereto.

                             g. The headings in this Agreement are for
         convenience of reference only and shall not limit or otherwise affect
         the meaning hereof.

                             h. This Agreement may be executed in two or more
         counterparts, each of which shall be deemed an original but all of
         which shall constitute one and the same agreement. This Agreement, once
         executed by a party, may be delivered to the other party hereto by
         facsimile transmission of a copy of this Agreement bearing the
         signature of the party so delivering this Agreement.

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

                             j. Except as otherwise provided herein, all
         consents and other determinations to be made by the Investors pursuant
         to this Agreement shall be made by Investors holding a majority of the
         Registrable Securities, determined as if the all of the Debentures then
         outstanding have been converted into for Registrable Securities.

                             k. The Company acknowledges that a breach by it of
         its obligations hereunder will cause irreparable harm to each Investor
         by vitiating the intent and purpose of the transactions contemplated
         hereby. Accordingly, the Company acknowledges that the remedy at law
         for breach of its obligations hereunder will be inadequate and agrees,
         in the event of a breach or threatened breach by the Company of any of
         the provisions hereunder, that each Investor shall be entitled, in
         addition to all other available remedies in law or in equity, to an
         injunction or injunctions to prevent or cure breaches of the provisions
         of this Agreement and to enforce specifically the terms and provisions
         hereof, without the necessity of showing economic loss and without any
         bond or other security being required.

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

                                       20

<PAGE>   21

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

                             n. The initial number of Registrable Securities
         included in any Registration Statement and each increase to the number
         of Registrable Securities included therein shall be allocated pro rata
         among the Investors based on the number of Registrable Securities held
         by each Investor at the time of such establishment or increase, as the
         case may be. In the event an Investor shall sell or otherwise transfer
         any of such holder's Registrable Securities, each transferee shall be
         allocated a pro rata portion of the number of Registrable Securities
         included in a Registration Statement for such transferor. Any shares of
         Common Stock included on a Registration Statement and which remain
         allocated to any person or entity which does not hold any Registrable
         Securities shall be allocated to the remaining Investors, pro rata
         based on the number of shares of Registrable Securities then held by
         such Investors. For the avoidance of doubt, the number of Registrable
         Securities held by an Investor shall be determined as if all the
         Debentures and Warrants then outstanding and held by an Investor were
         converted into or exercised for Registrable Securities.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       21

<PAGE>   22

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

SMARTSOURCES.COM, INC.

By: /s/ DARRYL CARDEY
   ---------------------------------------
   Darryl Cardey,
   Chief Financial Officer and Vice President - Finance

RGC INTERNATIONAL INVESTORS, LDC

By:      Rose Glen Capital Management, L.P.,
         Investment Manager
By:      RGC General Partner Corp.,
         as General Partner

By: /s/ STEVEN B. KATZNELSON
   ---------------------------------------
   Steven B. Katznelson
   Managing Director

                                       22

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