Document:

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                                                                Exhibit 10.3

THE SECURITIES EVIDENCED BY THIS PROMISSORY NOTE AND ISSUABLE UPON EXERCISE OF
THE CONVERSION RIGHTS (AS DEFINED BELOW) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAW AND ACCORDINGLY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED DIRECTLY OR
INDIRECTLY IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT RELATING
THERETO, (II) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO
THE PARENT (AS DEFINED BELOW), THAT SUCH REGISTRATION IS NOT REQUIRED, (iii)
RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION THAT
SUCH REGISTRATION IS NOT REQUIRED, (IV) COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR (V) COMPLIANCE WITH THE PROVISIONS OF
SECTION 3.2 OF THE WARRANT (AS DEFINED BELOW) AS IF SUCH PROVISIONS WERE STATED
TO BE EXPRESSLY APPLICABLE TO THIS PROMISSORY NOTE AND THE SHARES OF THE
PARENT'S COMMON STOCK ISSUABLE UPON EXERCISE OF THE CONVERSION RIGHTS.

                                 PROMISSORY NOTE

$15,000,000                                             Date: June  6, 2001
                                                        Chicago, Illinois

        FOR VALUE RECEIVED, each of the undersigned, HYPERCOM CORPORATION, a
Delaware corporation (the "PARENT"), HYPERCOM U.S.A., INC., a Delaware
corporation ("USA") and HYPERCOM HORIZON, INC., a Missouri corporation
("HORIZON") (Parent, USA and Horizon, each a "BORROWER" and collectively, the
"BORROWERS"), jointly and severally promise to pay to the order of MICHELLE
INVESTMENTS LLC ("LENDER"; the Lender and each subsequent transferee and/or
owner of this Note, whether taking by endorsement or otherwise, are herein
successively called "HOLDER"), at Holder's principal office at 500 Skokie Blvd.,
Northbrook, Illinois 60062, or at such other address as Holder shall advise
Borrowers from time to time, the principal sum of Fifteen Million Dollars
($15,000,000), at the rate of 7.5% per annum (the "INTEREST RATE"). The interest
due under this Note shall be computed on the basis of a year of three hundred
sixty (360) days for the actual number of days elapsed.

        Payments under this Note shall be paid to Holder daily in an amount
equal to 100% of amounts paid by or on behalf of Concord Equipment Sales, Inc.
("CONCORD SALES") or its affiliates or successors the immediately preceding day
under that certain agreement between Hypercom Transaction Systems Group, a
division of USA ("SYSTEMS") and Concord Sales dated September 13, 2000 and any
successor, renewal, substitute, replacement or amended agreement relating to the
subject matter thereof between Systems, USA, Parent or any of their affiliates,
on the one hand, and Concord Sales or any of its affiliates, on the other hand
(the "CONCORD AGREEMENT"); however, in no event shall the aggregate payments
made

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under this Note be less than: One Million Dollars ($1,000,000) as of the one
month anniversary date of this Note; Two Million Dollars ($2,000,000) as of the
two month anniversary date of this Note; Three Million Dollars ($3,000,000) as
of the three month anniversary date of this Note; Four Million Dollars
($4,000,000) as of the four month anniversary date of this Note; Five Million
Dollars ($5,000,000) as of the five month anniversary date of this Note; Seven
Million Five Hundred Thousand Dollars ($7,500,000) of principal plus all accrued
but then unpaid interest (the "MINIMUM SIXTH MONTH PAYMENT AMOUNT") as of the
six month anniversary date of this Note; the Minimum Sixth Month Payment Amount
plus One Million Dollars ($1,000,000) as of the seven month anniversary date of
this Note; the Minimum Sixth Month Payment Amount plus Two Million Dollars
($2,000,000) as of the eight month anniversary date of this Note; the Minimum
Sixth Month Payment Amount plus Three Million Dollars ($3,000,000) as of the
nine month anniversary date of this Note; the Minimum Sixth Month Payment Amount
plus Four Million Dollars ($4,000,000) as of the ten month anniversary date of
this Note; the Minimum Sixth Month Payment Amount plus Five Million Dollars
($5,000,000) as of the eleven month anniversary date of this Note; and the
entire unpaid principal balance of this Note plus all accrued but unpaid
interest as of the one year anniversary date of this Note.

        This Note is given pursuant to that certain Loan and Security Agreement
of today's date, executed by Borrowers and Lender (the "LOAN AGREEMENT") and is
secured by the collateral as described and defined in the Loan Agreement and
Holder is entitled to the benefit of all terms and provisions thereof. The Loan
Agreement and other Loan Documents (as defined in the Loan Agreement) executed
and delivered to Lender in connection with the Loan Agreement contain provisions
for the acceleration of the maturity of this Note and payment of all unpaid
principal and accrued interest shall be accelerated and become immediately due
and payable in full as provided therein.

        Notwithstanding anything herein to the contrary, the aggregate principal
amount due and owing hereunder shall not exceed $15,000,000.00. Upon
satisfaction of Borrowers' obligations hereunder, Holder shall have no right to
receive amounts otherwise due and owing any of the Borrowers under the Concord
Agreement.

        If Holder has not received the full amount of any payment required
hereunder other than the final principal and interest payment, by the end of
three calendar days after the date it is due, Borrowers shall, jointly and
severally, pay a late charge to the Holder in the amount of five percent (5%) of
the overdue payment to compensate Holder for administrative expenses and other
costs of delinquent payment. This late charge may be assessed without notice,
shall be immediately due and payable and shall be in additional to all other
rights and remedies available to Holder. Such late charge shall be in addition
to and separate from any increase in interest due hereunder as a result of
calculation of interest at the Default Rate, as hereinafter defined.

        Upon the occurrence of any Event of Default (as defined in the Loan
Agreement), and after maturity, and continuing until this Note is paid in full,
the principal hereof then outstanding shall bear interest (the "DEFAULT RATE")
at the lesser of (i) 12% per annum or (ii)

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the maximum rate permissible by law.

        All payments and prepayments on account of the indebtedness evidenced by
this Note shall be first applied to costs of collection and any other charges
due hereunder or under the Loan Agreement, if any, then on accrued and unpaid
interest on the unpaid principal balance of this Note and the remainder, if any,
to said principal balance. That certain Warrant No. 1 (the "WARRANT") issued by
Parent to Lender allows certain amounts otherwise due under this Note to be used
for the acquisition of stock of the Parent ("CONVERSION RIGHTS"). Amounts used
pursuant to the exercise of Conversion Rights shall be deemed payments hereunder
on a dollar for dollar basis, but shall be applied in reverse order of maturity
and shall not relieve the Borrowers from the obligation to timely pay any
remaining amounts otherwise due hereunder. For example, if as of the one month
anniversary of this Note no other payments of any sort had been made under this
Note other than the exercise of One Million Five Hundred Thousand Dollars
($1,500,000) of Conversion Rights, the Borrowers would be in default hereunder
for failure to make the minimum amount of payments due as of that date.

        Holder, in accepting this Note, hereby makes and affirms the
representations made in SECTIONS 6.2(a) through (g), inclusive of the Warrant as
if such representations were made with respect to this Note (with due regard to
the need in applying such representations to (i) replace references therein to
"this Warrant" with "this Note", and (ii) replace references therein to "Warrant
Shares" with "shares of the Parent's Common Stock issuable upon exercise of the
Conversion Rights."

        Borrowers may pre-pay this Note in part or in full, at any time and from
time to time without premium or penalty.

        If Holder delays in exercising or fails to exercise any of its rights
under this Note, that delay or failure shall not constitute a waiver of any of
Holder's rights, or of any breach, default or failure of condition of or under
this Note. No waiver by Holder of any of its rights, or of any such breach,
default or failure of condition shall be effective, unless the waiver is
expressly stated in a writing signed by Holder. All of Holder's remedies in
connection with this Note or under applicable law shall be cumulative, and
Holder's exercise of any one or more of those remedies shall not constitute an
election of remedies.

        This Note has been executed and delivered in Chicago, Illinois and shall
be construed in accordance with, and governed by, the laws of the State of
Illinois.

        In the event one or more of the provisions contained in this Note shall
for any reason be held to be invalid, illegal or unenforceable in any respect by
a court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision of this Note, and this
Note shall be construed as if such invalid, illegal or unenforceable provision
had never been contained herein.

        BORROWERS HEREBY IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR

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DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS NOTE, OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (II) ARISING FROM ANY DISPUTE
OR CONTROVERSY ARISING IN CONNECTION WITH OR RELATED TO THIS NOTE, OR ANY SUCH
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREE THAT ANY SUCH ACTION,
SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.

        Borrowers jointly and severally promise to pay all reasonable costs and
expenses (including reasonable attorneys' fees and costs suffered or incurred by
Holder) in collecting this Note or in enforcing any rights under the Loan
Agreement including any collateral granted thereunder. Except for notice
specifically required pursuant to the terms of the Loan Agreement, Borrowers
severally waive any and all notice and other formalities in connection with this
Note to the maximum extent allowed by law, including but not limited to notice
of nonpayment, demand, diligence, notice of extension, presentment for payment,
notice of dishonor, and protest of this Note.

        The obligations and liabilities under this Note of Borrowers shall be
binding upon and enforceable against Borrowers, and their respective successors
and assigns. This Note shall inure to the benefit of and may be enforced by
Lender, its successors and assigns.

        Borrowers agree that to the extent any Borrower makes any payment to
Holder in connection with the indebtedness evidenced by this Note, and all or
any part of such payment is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid by Holder or paid over to a
trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a "PREFERENTIAL
PAYMENT"), then the indebtedness of Borrowers under this Note shall continue or
shall be reinstated, as the case may be, and, to the extent of such payment or
repayment by Holder, the indebtedness evidenced by this Note or part thereof
intended to be satisfied by such Preferential Payment shall be revived and
continued in full force and effect as if said Preferential Payment had not been
made.

        Without limiting the right of Holder to bring any action or proceeding
against Borrowers or against any property of Borrowers (an "ACTION") arising out
of or relating to this Note or any indebtedness evidenced hereby in the courts
of other jurisdictions, Borrowers severally irrevocably submit to the
jurisdiction, process and venue of any Illinois State or Federal court sitting
in Chicago, Illinois and hereby irrevocably agree that any Action may be heard
and determined in such Illinois State court or in such Federal court. Borrowers
severally and irrevocably waive, to the fullest extent they may effectively do
so, the defenses of lack of jurisdiction over any person, inconvenient forum or
improper venue, to the maintenance of any Action in any jurisdiction.

        No provision contained herein which purports to obligate a Borrower to
pay any amount of interest or other sums which is in excess of the maximum
permitted by

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applicable law shall be effective to the extent that it calls for the payment of
any interest or other sums in excess of such maximum. All agreements herein are
expressly limited so that in no contingency or event whatsoever shall the amount
paid or agreed to be paid to Holder for the use, forbearance or detention of the
money to be advanced hereunder exceed the highest lawful rate permissible under
applicable usury laws. If, from any circumstance whatsoever, fulfillment of any
provision hereof, at the time performance of such provisions shall be due, shall
involve transcending the limit of validity prescribed by law which a court of
competent jurisdiction may deem applicable hereto, then ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity and if
from any circumstance Holder hereof shall ever receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance due
hereunder and not to the payment of interest.

        Time is of the essence hereof.

        Borrowers acknowledge and agree that the Loan which is evidenced by this
Note constitutes a "business loan" under the provisions of 815 ILCS Section
205/4.

        All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Loan Agreement for the
giving of notice.

                 THE FOLLOWING PAGE IS THE EXECUTION PAGE HEREOF

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        IN WITNESS WHEREOF, the undersigned have caused this Promissory Note to
be executed.

HYPERCOM CORPORATION, a                      HYPERCOM U.S.A., INC., a Delaware
Delaware corporation                         corporation

By: /s/ Jonathon E. Killmer                  By: /s/ Jonathon E. Killmer
    -----------------------                      -----------------------
        Jonathon E. Killmer                          Jonathon E. Killmer
        its: Executive Vice President                its: Secretary

HYPERCOM HORIZON, INC., a Missouri
corporation

By: /s/ Jonathon E. Killmer
    -----------------------
        Jonathon E. Killmer
        its: Secretary

                                        6<PAGE>   1
                                                                  Exhibit 10.4

THE SECURITIES EVIDENCED BY AND UNDERLYING THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES
LAW AND ACCORDINGLY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED,
DIRECTLY OR INDIRECTLY IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION STATEMENT
RELATING THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii)
RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION THAT
SUCH REGISTRATION IS NOT REQUIRED, (iv) COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OF 1933, OR (v) OTHERWISE COMPLYING WITH THE PROVISIONS OF
ARTICLE III OF THIS WARRANT.

                                    SERIES A
                          WARRANT TO PURCHASE SHARES OF
                                  COMMON STOCK
                                       OF
                              HYPERCOM CORPORATION

                                  Warrant No. 1

                               Dated: June 6, 2001

This certifies that for value received:

                            MICHELLE INVESTMENTS LLC
                      AN ILLINOIS LIMITED LIABILITY COMPANY

or registered assigns, is entitled, subject to the terms set forth herein, to
purchase from Hypercom Corporation, a Delaware corporation, and any successor
thereto (the "COMPANY"), the such number of fully paid and non-assessable shares
of the Company's Common Stock as calculated under "WARRANT SHARES" (as
hereinafter defined in Article I), at the price (the "INITIAL PURCHASE PRICE")
equal to the lower of (i) Three Dollars and Nineteen Cents ($3.19) per share
(the "BASE EXERCISE PRICE") or (ii) the market price of the Common Stock (as
determined pursuant to clauses (ii) through (iv) inclusive under the definition
herein of Fair Market Value) as of the date of exercise. The Initial Purchase
Price and the number of shares purchasable hereunder, are subject to adjustment
in certain events, all as more fully set forth under Article IV herein.

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                                    ARTICLE I

                                   DEFINITIONS

"ADDITIONAL STOCK" means any Common Stock issued by the Company after the
Closing Date, other than (i) Common Stock issuable upon the conversion of
Convertible Securities or Options issued by the Company before the Closing Date,
(ii) Common Stock issuable upon the exercise of Options granted by the Company
to any of its directors, officers, employees, consultants or agents after the
Closing Date pursuant to any compensation or benefit plan approved by the
Company's board of directors or, if not pursuant to any such plan, then pursuant
to any other resolution of the board of directors of the Company, (iii) Common
Stock issued to strategic or joint venture partners of, or lenders or licensors
to, the Company, as approved by the board of directors of the Company, and (iv)
Common Stock issued in connection with the purchase of assets or businesses,
whether by merger, consolidation, purchase of assets or stock or otherwise.

"BUSINESS DAY" means any day other than a Saturday or a Sunday or a United
States federal or Arizona state holiday.

"CERTIFICATE OF INCORPORATION" means the Certificate of Incorporation of the
Company and any amendments thereto, as filed with the Delaware Secretary of
State during the Exercise Period of this Warrant.

"CLOSING DATE" means the date of this Warrant as first above written.

"COMMISSION" means the Securities and Exchange Commission, or any other federal
agency then administering the Exchange Act or the Securities Act, as defined
herein.

"COMMON STOCK" means the Company's Common Shares, par value $0.001, any stock
into which such Common Stock shall have been changed or any stock resulting from
any reclassification of such stock, and any other capital stock of the Company
of any class or series now or hereafter authorized having the right to share in
distributions either of earnings or assets of the Company without limit as to
amount or percentage.

"COMMON STOCK OUTSTANDING" means at any time all shares of Common Stock that are
then outstanding, plus all shares of Common Stock issuable upon conversion of
the Convertible Securities and all shares of Common Stock issuable upon exercise
of the Options (assuming for this purpose that the securities acquirable upon
exercise of the Options are converted into Common Stock).

"COMPANY" means Hypercom Corporation, a Delaware corporation, and any successor
thereto.

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"CONVERTIBLE SECURITIES" means evidences of indebtedness, shares of stock or
other securities which are convertible into or exchangeable for, with or without
payment of additional consideration, shares of Common Stock, either immediately
or upon the arrival of a specified date or the happening of a specified event or
both.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.

"EXERCISE PERIOD" means the applicable exercise period as set forth in (i), (ii)
or (iii) in the definition of Warrant Shares.

"EXERCISE PRICE" means the Initial Purchase Price per share of Common Stock set
forth in the Preamble to this Warrant, as such price may be adjusted pursuant to
Article IV hereof, and which may be paid either in cash or by cancellation of a
like amount of the outstanding principal of the Loan. The Exercise Price shall
be paid as set forth in Section 2.1 hereof.

"FAIR MARKET VALUE" means:

        (i)     If shares of Common Stock are being sold pursuant to a
Registration and Fair Market Value is being determined as of the closing of the
public offering, the "price to public" specified for such shares in the final
prospectus for such public offering;

        (ii)    If shares of Common Stock are then listed or admitted to trading
on any national securities exchange or traded on any national market system and
Fair Market Value is not being determined as of the date described in clause (i)
of this definition, the closing price on such exchange or national market system
on such date, which shall be the last sale price on such date or, if no such
sale takes place on such date, the average of the closing bid and asked prices
on such date, in each case as officially reported on the principal national
securities exchange or national market system on which such shares are then
listed, admitted to trading or traded;

        (iii)   If no shares of Common Stock are then listed or admitted to
trading on any national securities exchange or traded on any national market
system or being offered to the public pursuant to a Registration, the average of
the reported closing bid and asked prices thereof on such date in the
over-the-counter market as shown by the National Association of Securities
Dealers automated quotation system or, if such shares are not then quoted in
such system, as published by the National Quotation Bureau, Incorporated or any
similar successor organization, and in either case as reported by any member
firm of the New York Stock Exchange selected by the Holder; and

        (iv)    If no shares of Common Stock are then listed or admitted to
trading on any national exchange or traded on any national market system, if no
closing bid and asked

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prices thereof are then so quoted or published in the over-the-counter market
and if no such shares are being offered to the public pursuant to a
Registration, the Fair Market Value of a share of Common Stock shall be as
determined by a recognized appraiser or investment banker agreed to by the
Company and the Holder, provided that if they cannot agree (within 15 days of
one party submitting notice to the other), Holder may select the appraiser or
investment banker in his reasonable discretion.

"HOLDER" means Michelle Investments LLC, an Illinois limited liability company,
or any successor thereto or assignee thereof in whose name this Warrant is
registered on the books of the Company maintained for such purpose.

"INITIAL REGISTRATION STATEMENT" has the meaning ascribed to that term in
Section 5.1.

"LOAN" means that certain loan made by Michelle Investments LLC, an Illinois
limited liability company, to the Company and certain of its affiliates of even
date herewith and evidenced by the Promissory Note and Loan Agreement of even
date herewith.

"LOAN AGREEMENT" means that certain Loan and Security Agreement entered into
between Michelle Investments LLC, an Illinois limited liability company, and the
Company and certain of its affiliates as part of the Loan.

"OPTION" means any right, warrant or option to subscribe for or purchase shares
of Common Stock or Convertible Securities.

"PERSON" means and includes natural persons, corporations, limited partnerships,
general partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts,
government entities and authorities and other organizations, whether or not
legal entities.

"PRINCIPAL EXECUTIVE OFFICE" means the Company's office at 2851 West Kathleen
Road, Phoenix, Arizona 85053, or such other office as designated in writing to
the Holder by the Company.

"PROMISSORY NOTE" means that certain Promissory Note executed by the Company and
certain of its affiliates and payable to Michelle Investments LLC, an Illinois
limited liability company, of even date herewith as evidence of the makers'
obligation to repay the Loan (as defined above).

"REGISTER," "REGISTERED" and "REGISTRATION" refer to a registration effected by
preparing and filing a registration statement in compliance with the Securities
Act, and the declaration or ordering of the effectiveness of such registration
statement.

"REGISTRABLE SECURITIES" means the Warrant Shares issuable or issued upon the
exercise of this Warrant.

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"REGISTRATION STATEMENTS" means, collectively, the Initial Registration
Statement and the Second Registration Statement, and "REGISTRATION STATEMENT"
means either of them.

"RULE 144" means Rule 144 as promulgated by the Commission under the Securities
Act, as such Rule may be amended from time to time, or any similar successor
rule that the Commission may promulgate.

"SECOND REGISTRATION STATEMENT" has the meaning ascribed to that term in Section
5.2.

"SECURITIES ACT" means the Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect from time to time.

"SHAREHOLDER" means a holder of one or more Warrant Shares or shares of Common
Stock.

"WARRANT" means this warrant dated as of the Closing Date, issued to the Holder,
subject to partial or full reissuance as provided herein upon the partial
exercise, transfer or division hereof.

"WARRANT SHARES" means such number of shares of Common Stock issuable upon the
exercise of this Warrant as shall be determined as follows:

        (i)     at any time within three months of the Closing Date, up to
        1,000,000 shares of Common Stock;

        (ii)    if the Promissory Note is not paid and extinguished in full
        within three months of the Closing Date, then at any time after three
        months from the Closing Date until the expiration of thirty days after
        the earlier of: (a) the date on which $7,500,000 of principal is paid
        under the Promissory Note or three months after the Closing Date,
        whichever is later; or (b) six months from the Closing Date, up to such
        number of shares of Common Stock as determined by dividing $7,500,000 by
        the Exercise Price as of the date of exercise, less the number of shares
        of Common Stock purchased under (i) above; and

        (iii)   at any time after the expiration of the 30 day period set forth
        in (ii) above (or, if the Promissory Note is paid and extinguished in
        full within three months of the Closing Date) until 5:00 p.m., Tucson,
        Arizona time on the second (2nd) annual anniversary of the Closing Date,
        up to 1,000,000 shares of Common Stock, less any shares of Common Stock
        purchased under (i) and (ii) above.

The provisions of (i), (ii) and (iii) above notwithstanding, at any time
whatsoever that the Promissory Note is in default by reason of any payment
obligation thereunder not being paid within thirty (30) days of when due,
Warrant Shares means up to such number of

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shares of Common Stock as determined by dividing the then total unpaid principal
and interest under the Promissory Note by the lesser of $3.19 or the market
price for the Common Stock as of the date of exercise, and the Holder may (but
need not) purchase up to such number of shares of Common Stock during any such
period of time that the Promissory Note is in such default. Notwithstanding any
other provision in this Warrant, at no time shall the aggregate number of
Warrant Shares issued or issuable under this Warrant exceed 19.9% of the
Company's shares of Common Stock actually issued and outstanding immediately
before the Closing Date (i.e. not to exceed 6,843,300 shares of Common Stock),
subject to adjustment as provided in Article IV hereof.

If under the terms of this Warrant there shall be a change such that the
securities purchasable hereunder shall be issued by an entity other than the
Company or there shall be a change in the type or class of securities
purchasable hereunder, then the term "WARRANT SHARES" shall also mean such other
type or class or the securities issuable by such other entity.

                                   ARTICLE II

                                    EXERCISE

2.1     EXERCISE RIGHT; MANNER OF EXERCISE.

        (a)     EXERCISE. The purchase rights represented by this Warrant may be
exercised by the Holder, in whole or in part, at any time and from time to time
during the Exercise Period upon (i) surrender of this Warrant, together with an
executed Notice of Exercise, substantially in the form of EXHIBIT "A" attached
hereto, at the Principal Executive Office, and (ii) payment to the Company of
the aggregate Exercise Price for the number of Warrant Shares specified in the
Notice of Exercise (such aggregate Exercise Price is herein referred to as the
"TOTAL EXERCISE PRICE"). Any exercise by the Holder of such purchase rights must
be for the purchase of a minimum of 50,000 Warrant Shares, except in the event
that less than 50,000 Warrant Shares are issuable at such time of exercise, in
which event such exercise must be for the purchase of all of such Warrant Shares
issuable. The Holder of this Warrant may, in its sole and exclusive discretion,
pay the Exercise Price for the Warrant Shares in cash or by forgiving any
portion or all of the unpaid principal and interest due under the Promissory
Note at the time of the exercise of this Warrant or by a combination of such
methods. If paid in cash, the Exercise Price shall be paid by check or wire
transfer. If paid by forgiveness of any portion or all of the unpaid principal
and interest due under the Promissory Note, the Holder shall advise the Company
in writing of the amount of the debt forgiveness and such amount shall be
treated as a payment under the Promissory Note; however, except for determining
whether the Promissory Note is paid and extinguished in full within three months
of the Closing Date,

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shall not count as payment of principal for purposes of determining the number
of Warrant Shares under (ii) or (iii) of the definition of Warrant Shares in
Article I.

        (b)     ISSUE OF WARRANT SHARES. The Person or Person(s) in whose
name(s) any certificate(s) representing the Warrant Shares which are issuable
upon exercise of this Warrant shall be deemed to become the holder(s) of, and
shall be treated for all purposes as the record holder(s) of, such Warrant
Shares, and such Warrant Shares shall be deemed to have been issued, immediately
prior to the close of business on the date on which this Warrant and Notice of
Exercise are presented and payment made for such Warrant Shares, notwithstanding
that the stock transfer books of the Company shall then be closed or that
certificates representing such Warrant Shares shall not then be actually
delivered to such Person or Person(s). Certificates for the Warrant Shares so
purchased shall be delivered to the Holder within a reasonable time, not
exceeding fifteen (15) days after this Warrant is exercised. If this Warrant is
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, deliver a new Warrant evidencing the rights of the Holder to
purchase the balance of the Warrant Shares which Holder is entitled to purchase
hereunder. The issuance of Warrant Shares upon exercise of this Warrant shall be
made without charge to the Holder for any issuance tax with respect thereto or
any other cost incurred by the Company in connection with the exercise of this
Warrant and the related issuance of Warrant Shares.

2.2     FRACTIONAL SHARES. The Company shall not issue fractional shares of
Common Stock or scrip representing fractional shares of Common Stock upon any
exercise or conversion of this Warrant. As to any fractional share of Common
Stock which the Holder would otherwise be entitled to purchase from the Company
upon such exercise or conversion, it shall become one share of the pertinent
security without payment of additional consideration by the Holder.

                                   ARTICLE III

                REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT

3.1     MAINTENANCE OF REGISTRATION BOOKS. The Company shall keep at the
Principal Executive Office a register in which, subject to such reasonable
regulations as it may prescribe, it shall provide for the registration, transfer
and exchange of this Warrant. The Company and any Company agent may treat the
Person in whose name this Warrant is registered as the owner of this Warrant for
all purposes whatsoever and neither the Company nor any Company agent shall be
affected by any notice to the contrary.

3.2     RESTRICTIONS ON TRANSFERS.

        (a)     COMPLIANCE WITH SECURITIES ACT. Upon exercise of this Warrant,
the Holder shall confirm in writing, by executing the Investment Representation
Certificate in the form

                                        7
<PAGE>   8
attached as EXHIBIT "B" hereto, that the Warrant Shares are being acquired for
investment, solely for the Holder's own account and not as a nominee for any
other Person, and not with a view toward distribution or resale, and such other
matters as set forth in the Investment Representation Certificate.

        (b)     CERTIFICATE LEGENDS. This Warrant, any warrant resulting from
the exercise, subdivision, consolidation or transfer hereof, and all Warrant
Shares issued upon exercise of this Warrant or any such other warrant (unless
Registered under the Securities Act) shall be stamped or imprinted with a legend
in substantially the following form (in addition to any legends required by
applicable state securities laws):

                THE SECURITIES EVIDENCED BY AND UNDERLYING THIS
                CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
                SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE
                SECURITIES LAW AND ACCORDINGLY MAY NOT BE SOLD,
                OFFERED FOR SALE, PLEDGED OR HYPOTHECATED,
                DIRECTLY OR INDIRECTLY IN THE ABSENCE OF (i) AN
                EFFECTIVE REGISTRATION STATEMENT RELATING
                THERETO, (ii) AN OPINION OF COUNSEL FOR THE
                HOLDER, REASONABLY SATISFACTORY TO THE COMPANY,
                THAT SUCH REGISTRATION IS NOT REQUIRED, (iii)
                RECEIPT OF A NO-ACTION LETTER FROM THE
                SECURITIES AND EXCHANGE COMMISSION THAT SUCH
                REGISTRATION IS NOT REQUIRED, (iv) COMPLIANCE
                WITH REGULATION S UNDER THE SECURITIES ACT OF
                1933, OR (v) OTHERWISE COMPLYING WITH THE
                PROVISIONS OF ARTICLE III OF THIS WARRANT.

        (c)     DISPOSITION OF WARRANT OR SHARES. With respect to any offer,
sale or other disposition of this Warrant or any Warrant Shares prior to
Registration of such shares, the Holder or the Shareholder, as the case may be,
agrees to give written notice to the Company prior thereto, describing briefly
the manner thereof, together with a written opinion of the Holder's or
Shareholder's counsel, if reasonably requested by the Company, to the effect
that such offer, sale or other disposition may be effected without Registration
under the Securities Act or qualification under any applicable state securities
laws of this Warrant or such shares, as the case may be, and indicating whether
or not under the Securities Act certificates for this Warrant or such shares, as
the case may be, to be sold or otherwise disposed of require any restrictive
legend as to applicable restrictions on transferability in order to insure
compliance with the Securities Act. Subject to the next sentence, promptly upon
receiving such written notice and reasonably satisfactory opinion, if so
requested, the Company, as promptly as practicable, shall notify the Holder or
the Shareholder, as the case may be, that it may sell or otherwise dispose of
this Warrant or such shares, as the case may be, all in accordance with the
terms of the notice delivered

                                        8
<PAGE>   9
to the Company. If a determination has been made pursuant to this subsection (c)
that the opinion of counsel for the Holder or the Shareholder, as the case may
be, is not reasonably satisfactory to the Company, the Company shall so notify
the Holder or the Shareholder, as the case may be, promptly after such
determination has been made and shall specify the legal analysis supporting any
such adverse conclusion. Notwithstanding the foregoing, this Warrant or such
shares, as the case may be, may be offered, sold or otherwise disposed of in
accordance with Rule 144, provided that the Company shall have been furnished
with such information as the Company may reasonably request to provide
reasonable assurance that the provisions of Rule 144 have been satisfied. Each
certificate representing this Warrant or the shares thus transferred (except a
transfer pursuant to Rule 144) shall bear a legend as to the applicable
restrictions on transferability in order to insure compliance with the
Securities Act, unless in the aforesaid reasonably satisfactory opinion of
counsel for the Holder or the Shareholder, as the case may be, such legend is
not necessary in order to insure compliance with the Securities Act. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.

        (d)     WARRANT TRANSFER PROCEDURE. Transfer of this Warrant to a third
party, following compliance with the preceding subsections of this Section 3.2,
shall be effected by execution of the Assignment Form attached hereto as EXHIBIT
"C", and surrender for registration of transfer of this Warrant at the Principal
Executive Office, together with funds sufficient to pay any applicable transfer
tax. Upon receipt of the duly executed Assignment Form and the necessary
transfer tax funds, if any, the Company, at its expense, shall execute and
deliver, in the name of the designated transferee or transferees, one or more
new Warrants representing the right to purchase a like aggregate number of
Warrant Shares.

        (e)     TERMINATION OF RESTRICTIONS. Unless otherwise required by law,
the restrictions imposed under this Section 3.2 upon the transferability of the
Warrant and the Warrant Shares shall cease when (i) a registration statement
covering all shares of Common Stock issued or issuable upon exercise of this
Warrant becomes effective under the Securities Act, (ii) the Company is
presented with an opinion of counsel reasonably satisfactory to the Company that
such restrictions are no longer required in order to insure compliance with the
Securities Act or with a Commission "no-action" letter stating that future
transfers of such securities by the transferor or the contemplated transferee
would be exempt from registration under the Securities Act, or (iii) such
securities may be transferred in accordance with Rule 144(k). When such
restrictions terminate, the Company shall, or shall instruct its transfer agent
to, promptly, and without expense to the Holder or the Shareholder, as the case
may be, issue new securities in the name of the Holder and/or the Shareholder,
as the case may be, not bearing the legends required under subsection (b) of
this Section 3.2. In addition, new securities shall be issued without such
legends if such legends may be properly removed under the terms of Rule 144(k).

        (f)     SHORT SALES. The Holder covenants that at any time the market
price of the Common Stock is at or below $3.19 per share (subject to
modification under Article IV

                                        9
<PAGE>   10
hereof) for so long as Holder may purchase Common Stock hereunder, he will not,
directly or indirectly (whether through any affiliate, associate or otherwise),
maintain or create any "short position" in the Common Stock. For purposes of
this subsection 3.2(f), a "short position" shall be deemed to have been
maintained or created by the Holder if the Holder, directly or indirectly, (x)
enters into a "short sale" (as such term is defined in Rule 3b-3 promulgated
under the Exchange Act), (y) purchases a put option to sell shares of Common
Stock, or (z) enters into a derivative, hedging or other similar transaction
pursuant to which the Holder will be compensated in the event of a decline in
the price of the Common Stock.

3.3     EXCHANGE. At the Holder's option, this Warrant may be exchanged for
other Warrants representing the right to purchase a like aggregate number of
Warrant Shares upon surrender of this Warrant at the Principal Executive Office.
Whenever this Warrant is so surrendered to the Company at the Principal
Executive Office for exchange, the Company shall execute and deliver the
Warrants which the Holder is entitled to receive. All Warrants issued upon any
registration of transfer or exchange of Warrants shall be the valid obligations
of the Company, evidencing the same rights, and entitled to the same benefits,
as the Warrants surrendered upon such registration of transfer or exchange. No
service charge shall be made for any exchange of this Warrant.

3.4     REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and (i) in
the case of any such loss theft or destruction, upon delivery of indemnity
reasonably satisfactory to the Company in form and amount, or (ii) in the case
of any such mutilation, upon surrender of such Warrant for cancellation at the
Principal Executive Office, the Company, at its expense, shall execute and
deliver, in lieu thereof, a new Warrant.

                                   ARTICLE IV

                             ANTIDILUTION PROVISIONS

4.1     REORGANIZATION, RECLASSIFICATION OR RECAPITALIZATION OF THE COMPANY.

        (a)     Subject to section 4.1(b), in the event of (1) a capital
reorganization, reclassification or recapitalization of the Company's capital
stock (other than in the cases referred to in Section 4.3 hereof), (2) the
Company's consolidation or merger with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted, by virtue of the
merger, into other property, whether in the form of securities, cash or
otherwise, or (3) the

                                       10
<PAGE>   11
sale or transfer of the Company's property as an entirety or substantially as an
entirety, then, as part of such reorganization, reclassification,
recapitalization, merger, consolidation, sale or transfer, lawful provision
shall be made so that there shall thereafter be deliverable upon the exercise of
this Warrant or any portion thereof (in lieu of or in addition to the number of
shares of Common Stock theretofore deliverable, as appropriate), and without
payment of any additional consideration, the number of shares of stock or other
securities or property to which the holder of the number of shares of Common
Stock which would otherwise have been deliverable upon the exercise of this
Warrant or any portion thereof at the time of such reorganization,
reclassification, recapitalization, consolidation, merger, sale or transfer
would have been entitled to receive in such reorganization, reclassification,
recapitalization, consolidation, merger, sale or transfer. This subsection
4.1(a) shall apply to successive reorganizations, reclassifications,
re-capitalizations, consolidations, mergers, sales and transfers and to the
stock or securities of any other corporation that are at the time receivable
upon the exercise of this Warrant. If the per-share consideration payable to the
Holder for shares of Common Stock in connection with any transaction described
in this subsection 4.1(a) is in a form other than cash or marketable securities,
then the value of such consideration shall be as reasonably determined in good
faith by the Company's Board of Directors.

        (b)     If the Company undertakes a consolidation or merger with or into
another corporation, a reverse triangular merger or any other transaction or
series of related transactions pursuant to which all Shareholders receive 100%
cash consideration for their shares of Common Stock, then at the option of the
Holder or the Person acquiring all of such shares of Common Stock, the Company
shall cause the Holder to receive in connection with the completion of such
transaction(s), without exercise and upon surrender of this Warrant, cash in an
amount equal to (a) the per share acquisition price payable by the acquiring
Person to the Shareholders for their shares of Common Stock minus the Exercise
Price determined as of the date of completion of such transaction(s), multiplied
by (b) the number of Warrant Shares that are eligible for issuance under this
Warrant on such date of completion (which, in the case of a series of related
transactions, shall be the date of completion of the final transaction in such
series). Upon payment of such amount to the Holder, this Warrant shall
automatically expire and the rights hereunder (other than as set forth in
Section 5.5 and Article VII) shall be of no further force or effect.
Notwithstanding the foregoing, the Company shall not permit any of the actions
set forth above in this subsection 4.1(b) unless the Promissory Note is or has
been paid in full and extinguished.

4.2     SPLITS AND COMBINATIONS. If the Company at any time subdivides any of
its outstanding shares of Common Stock into a greater number of shares, the
Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced, and, conversely if the outstanding shares of Common
Stock are combined into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination shall

                                       11
<PAGE>   12
be proportionately increased. Upon any adjustment of the Exercise Price under
this Section 4.2, the number of shares of Common Stock issuable upon exercise of
this Warrant shall equal the number of shares determined by dividing (i) the
aggregate Exercise Price payable for the purchase of all shares issuable upon
exercise of this Warrant immediately prior to such adjustment by (ii) the
Exercise Price per share in effect immediately after such adjustment.

4.3     RECLASSIFICATIONS. If the Company changes any of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted.

4.4     LIQUIDATION; DISSOLUTION. If the Company shall dissolve, liquidate or
wind up its affairs, the Holder shall have the right, but not the obligation, to
exercise this Warrant effective as of the date of such dissolution, liquidation
or winding up. If any such dissolution, liquidation or winding up would result
in any cash distribution to the Holder in excess of the aggregate Exercise Price
for the shares of Common Stock for which this Warrant is exercised, then the
Holder may, at its option, exercise this Warrant without making payment of such
aggregate Exercise Price and, in such case, the Company shall, upon distribution
to the Holder, consider such aggregate Exercise Price to have been paid in full,
and in making such settlement to the Holder, shall deduct an amount equal to
such aggregate Exercise Price from the amount payable to the Holder.

4.5     ADJUSTMENT OF EXERCISE PRICE AND SHARES PURCHASABLE.

        (a)     ADJUSTMENT OF EXERCISE PRICE. Except as expressly provided in
Section 4.2, if the Company issues any Additional Stock for no consideration or
for a consideration per share less than the Base Exercise Price in effect
immediately prior to the time of such issuance, then the Base Exercise Price
shall be reduced to the price determined by dividing:

                (i)     an amount equal to the sum of (A) the number of shares
        of Common Stock Outstanding immediately prior to such issue or sale
        multiplied by the then existing Exercise Price, and (B) an amount equal
        to the aggregate "consideration actually received" by the Company upon
        such issue or sale, by

                (ii)    the sum of the number of shares of Common Stock
        Outstanding immediately after such issue or sale.

                                       12
<PAGE>   13
        For purposes of this subsection (a):

                (A)     In the case of an issue or sale for cash of shares of
        Common Stock, the "consideration actually received" by the Company
        therefor shall be deemed to be the amount of cash received, before
        deducting therefrom any commissions or expenses paid by the Company.

                (B)     In case of the issuance (other than upon conversion or
        exchange of obligations or shares of stock of the Company) of additional
        shares of Common Stock for a consideration other than cash or a
        consideration partly other than cash, the amount of the consideration
        other than cash received by the Company for such shares shall be deemed
        to be the fair market value of such consideration as determined in good
        faith by the Company's Board of Directors.

                (C)     In case of the issuance by the Company in any manner of
        any Options, all shares of Common Stock or Convertible Securities to
        which the holders of such Options shall be entitled to subscribe for or
        purchase pursuant to such Options shall be deemed issued as of the date
        of the offering of such Options, and the minimum aggregate consideration
        named in such Options for the shares of Common Stock or Convertible
        Securities covered thereby, plus the consideration, if any, received by
        the Company for such Options, shall be deemed to be the "consideration
        actually received" by the Company (as of the date of the granting of
        such Options) for the issuance of such Options.

                (D)     In case of the issuance or issuances by the Company in
        any manner of any Convertible Securities, all shares of Common Stock
        issuable upon the conversion or exchange of such Convertible Securities
        shall be deemed issued as of the date such Convertible Securities are
        issued, and the amount of the "consideration actually received" by the
        Company for such Convertible Securities shall be deemed to be the total
        of (x) the amount of consideration received by the Company upon the
        issuance of such Convertible Securities, plus (y) the minimum aggregate
        consideration, if any, other than such Convertible Securities,
        receivable by the Company upon conversion or exchange of such
        Convertible Securities, except in adjustment of dividends.

                (E)     The amount of the "consideration actually received" by
        the Company upon the issuance of any Options referred to in subparagraph
        (C) above or upon the issuance of any Convertible Securities as
        described in subparagraph (D) above, and the amount of the
        consideration, if any, other than such Convertible Securities,
        receivable by the Company upon the exercise, conversion or exchange
        thereof shall be determined in the same manner provided in subparagraphs
        (A) and (B) above with respect to the consideration received by the
        Company in case of the issuance of additional shares of Common Stock;
        provided, however, that if such Convertible Securities are issued in
        payment or satisfaction of any dividend upon any stock of

                                       13
<PAGE>   14
        the Company other than Common Stock, the amount of the "consideration
        actually received" by the Company upon the original issuance of such
        Convertible Securities shall be deemed to be the value of such
        obligations or shares of stock, as of the date of the adoption of the
        resolution declaring such dividend, as reasonably determined in good
        faith by the Company's Board of Directors at or as of that date.

                (F)     On the expiration of any Options referred to in
        subparagraph (C), or the termination of any right of conversion with
        respect to Convertible Securities referred to in subparagraph (D), or
        any change in the number of shares of Common Stock deliverable upon
        exercise of such Options or upon conversion of or exchange of such
        Convertible Securities, the Base Exercise Price then in effect shall
        forthwith be readjusted to such Base Exercise Price as would have
        obtained had the adjustments made upon the issuance of such Options or
        Convertible Securities been made upon the basis of the delivery of only
        the adjusted number of shares of Common Stock actually delivered or to
        be delivered upon the exercise of such Options or upon the conversion or
        exchange of such Convertible Securities.

        (b)     ADJUSTMENT OF NUMBER OF SHARES PURCHASABLE. Upon any adjustment
of the Base Exercise Price under subsection (a) of this Section 4.5, the number
of Warrant Shares issuable upon exercise of this Warrant shall equal the number
of shares determined by dividing (i) the aggregate Base Exercise Price payable
for the purchase of all shares issuable upon exercise of this Warrant
immediately prior to such adjustment by (ii) the Base Exercise Price per share
in effect immediately after such adjustment.

4.6     MAXIMUM EXERCISE PRICE. At no time shall the Base Exercise Price exceed
the amount set forth in the Preamble to this Warrant, unless the Base Exercise
Price is adjusted pursuant to Section 4.2 hereof.

4.7     OTHER DILUTIVE EVENTS. If any event occurs as to which the other
provisions of this Article IV are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles hereof,
then, in each such case, a firm of independent public accountants of recognized
national standing (such accountants as agreed to by the Company and the Holder,
provided that if they cannot agree, within 15 days of one party submitting
notice to the other, the Holder may designate such accountants in his reasonable
discretion) shall give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in this Article
IV, necessary to preserve, without dilution, the purchase rights represented by
this Warrant. Upon receipt of such opinion, the Company shall make the
adjustments described therein.

4.8     CERTIFICATES AND NOTICES.

        (a)     ADJUSTMENT CERTIFICATES. Upon any adjustment of the Exercise
Price and/or the number of shares of Common Stock purchasable upon exercise of
this Warrant, a

                                       14
<PAGE>   15
certificate, signed by (i) the Company's President or Chief Financial Officer,
or (ii) any independent firm of certified public accountants of recognized
national standing the Company selects at its own expense, setting forth in
reasonable detail the events requiring the adjustment and the method by which
such adjustment was calculated, shall be mailed to the Holder and shall specify
the adjusted Exercise Price and the number of shares of Common Stock purchasable
upon exercise of the Warrant after giving effect to the adjustment.

        (b)     EXTRAORDINARY CORPORATE EVENTS. If the Company, after the date
hereof, proposes to effect (i) any transaction described in Sections 4.1, 4.2 or
4.3 hereof, (ii) a liquidation, dissolution or winding up of the Company
described in Section 4.4 hereof, or (iii) any payment of a dividend or
distribution with respect to Common Stock or Common Stock, then, in each such
case, the Company shall mail to the Holder a notice describing such proposed
action and specifying the date on which the Company's books shall close, or a
record shall be taken, for determining the holders of Common Stock entitled to
participate in such action, or the date on which such reorganization,
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up shall take place or commence, as the case may be, and
the date as of which it is expected that holders of Common Stock of record shall
be entitled to receive securities and/or other property deliverable upon such
action, if any such date is to be fixed. Such notice shall be mailed to the
Holder at least ten (10) days prior to the record date for such action in the
case of any action described in clause (i) or clause (iii) above, and in the
case of any action described in clause (ii) above, at least ten (10) days prior
to the date on which the action described is to take place and at least ten (10)
days prior to the record date for determining holders of Common Stock entitled
to receive securities and/or other property in connection with such action;
provided, however, that the failure by the Company to provide any such notice
within the time prescribed herein or otherwise in a timely manner shall have no
effect on any of the transactions contemplated herein.

4.9     NO IMPAIRMENT. The Company shall not, by amendment of the Certificate of
Incorporation or through any reorganization, recapitalization, 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 hereunder by the Company, but shall
at all times in good faith assist in the carrying out of all the provisions of
this Article IV and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.

                                       15
<PAGE>   16
                                    ARTICLE V

                               REGISTRATION RIGHTS

5.1     INITIAL REGISTRATION. Within ninety (90) days after the Closing Date,
the Company shall prepare and file a registration statement under the Securities
Act (the "INITIAL REGISTRATION STATEMENT") for the registration of (i) 1,000,000
Warrant Shares, (ii) such additional number of Warrant Shares as the Company and
the Holder may reasonably agree upon in view of the fact that the number of
Warrant Shares issuable hereunder and the Exercise Price therefor may change
during the Exercise Period, and (iii) at the Company's option, shares of Common
Stock issued or issuable to other security holders of the Company. The Company
shall use commercially reasonable efforts to cause the Initial Registration
Statement to become effective within one hundred and eighty (180) days after the
Closing Date.

5.2     SECOND REGISTRATION. If at any given time after the Initial Registration
Statement is declared effective, the Company and the Holder reasonably mutually
determine that the Initial Registration Statement does not cover (by more than
100,000 Registrable Securities) all Registrable Securities available for
issuance or issued under this Warrant and not already sold to third parties, the
Company shall, within 90 days of the Holder's written request therefor, prepare
and file a registration statement under the Securities Act (the "SECOND
REGISTRATION STATEMENT") for the registration of such reasonably mutually
determined number of Warrant Shares, and shall use commercially reasonable
efforts to cause the Second Registration Statement to become effective within
one hundred and eighty (180) days after the date of the Holder's written request
therefor.

5.3     HOLDER INFORMATION; REGISTRATION EXPENSES. The Holder shall promptly
supply the Company with all such information as the Company may reasonably
request for (i) preparation of the Initial Registration Statement and, if
applicable, the Second Registration Statement, as well as any amendments or
supplements thereto. All expenses incurred in connection with the preparation
and filing of the Registration Statements, including, without limitation, all
federal and "blue sky" registration and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of counsel for the Holder (not to exceed
$2,500.00), but excluding brokers' discounts and commissions, shall be borne by
the Company.

5.4     REGISTRATION RELATED COVENANTS OF COMPANY. In connection with the
registration obligations of the Company provided in this Article V, the Company
hereby covenants that it shall:

        (a)     provide to the Holder such number of copies as the Holder may
reasonably request of (i) the Initial Registration Statement and, if applicable,
the Second Registration Statement, (ii) each amendment and supplement thereto,
and (iii) the prospectus included

                                       16
<PAGE>   17
therein, to facilitate the Holder's disposition of the Warrant Shares
contemplated by the Registration Statements;

        (b)     prepare and file with the Commission any amendment or supplement
to a Registration Statement or the prospectus included therein as may be
necessary to correct any statement or omission or to update any material
information therein (with due regard to the Company's potential need to maintain
in confidence undisclosed information relating to pending transactions or other
corporate matters);

        (c)     promptly notify the Holder of any need to discontinue its use or
dissemination of the prospectus included in a Registration Statement (including
by reason of the fact that there is a material event or development involving
the Company, that the Company intends to effect a primary offering of
securities, or that the information in the prospectus needs to be amended or
supplemented); and

        (d)     notify the Holder promptly after the Company receives notice of
the issuance of any stop order by the Commission suspending the effectiveness of
a Registration Statement, or the threat or initiation of any proceeding for such
purpose, and use commercially reasonable efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued.

5.5     INDEMNIFICATION.

        (a)     BY THE COMPANY. With respect to the Registration Statements, to
the extent permitted by law, the Company will indemnify and hold harmless the
Holder, the legal counsel and accountants for the Holder and each Person, if
any, who controls the Holder within the meaning of the Securities Act or the
Exchange Act (collectively, the "HOLDER INDEMNIFIED PARTIES"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "VIOLATION"):

                (i)     any untrue statement or alleged untrue statement of a
        material fact contained in either Registration Statement, including any
        preliminary prospectus or final prospectus contained therein or any
        amendments or supplements thereto;

                (ii)    the omission or alleged omission to state therein a
        material fact required to be stated therein, or necessary to make the
        statements therein not misleading, or

                (iii)   any violation or alleged violation by the Company of the
        Securities Act, the Exchange Act, any federal or state securities law or
        any rule or regulation promulgated under the Securities Act, the
        Exchange Act or any federal or state

                                       17
<PAGE>   18
        securities law in connection with the offering covered by either such
        Registration Statement;

and the Company will reimburse such Holder Indemnified Parties for any legal or
other expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this subsection
5.5(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
(i) occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder
Indemnified Parties, or (ii) arises out of the Holder's failure to satisfy
prospectus delivery or other distribution requirements in connection with such
registration.

        (b)     BY THE HOLDER. With respect to the Registration Statements, to
the extent permitted by law, the Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed either or
both Registration Statements, each Person, if any, who controls the Company
within the meaning of the Securities Act, legal counsel and accountants for the
Company and other shareholders of the Company against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling Person or other shareholder (collectively, the
"COMPANY INDEMNIFIED PARTIES") may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation (i) occurs in reliance upon and in conformity with written
information furnished by the Holder expressly for use in connection with such
registration, or (ii) arises out of the Holder's failure to satisfy prospectus
delivery or other distribution requirements in connection with such
registration; and the Holder will reimburse any legal or other expenses
reasonably incurred by any Company Indemnified Party in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
5.5(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder (which consent shall not be unreasonably withheld); and provided
further, that in no event shall the Holder's cumulative, aggregate liability
under this subsection 5.5(b) or under subsection 5.5(d), or under such
subsections together, exceed the net proceeds received by the Holder in the
registered offering out of which such Violation arises.

        (c)     NOTICE. Promptly after receipt by an indemnified party under
this Section 5.5 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 5.5, deliver to
the indemnifying party a written notice of the

                                       18
<PAGE>   19
commencement thereof and the indemnifying 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 the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party (together with all other indemnified parties which may
be represented without conflict by one counsel) shall have the right to retain
its own counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
conflict of interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if materially prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this Section 5.5, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 5.5.

        (d)     CONTRIBUTION. If the indemnification provided for in this
Section 5.5 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission; provided, however, that (A) in no event shall the
Holder's cumulative, aggregate liability under subsection 5.5(b) or under this
subsection 5.5(d) hereof, or under such subsections together, exceed the net
proceeds from the offering received by such Holder; and (B) no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. Notwithstanding anything to the
contrary herein, no party shall be liable for contribution under this subsection
5.5(d), except to the extent and under the circumstances as such party would
have been liable to indemnify under subsection 5.5(a) or subsection 5.5(b)
hereof, as the case may be, if such indemnification were enforceable under
applicable law.

        (e)     SURVIVAL. The obligations of the Company and the Holder under
this Section 5.5 shall survive the completion of any offering of Registrable
Securities under either Registration Statement or otherwise.

                                       19
<PAGE>   20
5.6     RULE 144 REPORTING. With a view to making available to the Holder the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock,
the Company agrees to use commercially reasonable efforts to:

        (a)     file with the Commission in a timely manner (after giving effect
to permitted extensions) all reports and other documents required of the Company
under the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements); and

        (b)     so long as the Holder has any rights to acquire Warrant Shares
or owns any Registrable Securities, furnish to the Holder forthwith upon request
(i) a written statement by the Company (A) as to its compliance with the
reporting requirements of said Rule 144 (at any time after ninety (90) days
after the effective date of the first registration statement filed by the
Company for an offering of its securities to the general public), and of the
Securities Act and the Exchange Act (for so long as it is subject to the
reporting requirements of the Exchange Act), or (B) that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies after the date hereof), (ii) a copy of the most recent
annual or quarterly report of the Company, and (iii) such other reports and
documents of the Company and information as the Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing the Holder
to sell any such securities without registration or pursuant to Form S-3 (for so
long as the Company is subject to the reporting requirements of the Exchange
Act).

                                   ARTICLE VI

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

6.1     REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants that:

        (a)     LEGAL STATUS; QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified or licensed to do business in all other countries,
states and provinces in which the laws thereof require the Company to qualify
and/or be licensed, except where failure to qualify or be licensed would not
have a material adverse effect on the business or assets of the Company taken as
a whole;

        (b)     AUTHORITY. The Company has the right and power, and is duly
authorized and empowered, to enter into, execute, deliver and perform this
Warrant;

                                       20
<PAGE>   21
        (c)     BINDING EFFECT. This Warrant has been duly authorized, executed
and delivered and constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms;

        (d)     NO CONFLICT. The execution, delivery and/or performance by the
Company of this Warrant shall not, by the lapse of time, the giving of notice or
otherwise, constitute a violation of any applicable law or a breach of any
provision contained in the Company's Certificate of Incorporation or By-laws or
contained in any agreement, instrument, or document to which the Company is a
party or by which it is bound;

        (e)     CONSENTS. Except for filings required pursuant to applicable
securities laws, no consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental body is
required for the valid issuance of the Warrant or for the performance of any of
the Company's obligations hereunder;

        (f)     OFFERING. Neither the Company nor any agent acting on its behalf
has or will sell or offer for sale or dispose of, or attempt or offer to dispose
of, this Warrant or any part thereof to, or solicit any offers to buy any
warrant of like tenor from, or otherwise approach or negotiate in respect
thereof, with, any Person or Persons so as thereby to bring the issuance of this
Warrant within the provisions of Section 5 of the Securities Act;

        (g)     REGISTRATION. Subject to the Company's reliance on the truth and
accuracy of the Holder's representations and warranties in Section 6.2, it is
not necessary in connection with the issuance and sale of this Warrant to the
Holder to register this Warrant under the Securities Act; and

        (h)     OVERALL REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Warrant, and the other provisions of
this Warrant, do not contain any untrue statement of material fact or omit any
material fact necessary to make the statements contained herein, in view of the
circumstances under which they were made, not misleading.

6.2     REPRESENTATIONS AND WARRANTIES OF THE HOLDER. The Holder represents and
warrants that:

        (a)     PURCHASE FOR OWN ACCOUNT. This Warrant is, and the Warrant
Shares to be received by the Holder upon exercise hereof will be, acquired for
investment for the Holder's own account, not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof, and the Holder has no
present intention of selling, granting any participation in, or otherwise
distributing this Warrant, the Warrant Shares or any part thereof. The Holder
does not have any contract, undertaking, agreement or arrangement with any
Person to sell, transfer or grant participation to such Person with respect to
this Warrant, the Warrant Shares or any part thereof.

                                       21
<PAGE>   22
        (b)     DISCLOSURE OF INFORMATION. The Holder is aware of the Company's
business affairs, financial condition, and status with its lenders, has received
and reviewed all information (including all reports, registrations and other
documents) filed by the Company with the Commission up to the date hereof) he
considers necessary or appropriate for making an informed and knowledgeable
decision as to whether to acquire this Warrant and further represents that he
has had sufficient opportunity to ask questions and receive answers from the
Company regarding the nature and affairs of the Company, including its business,
properties, prospects and financial condition.

        (c)     INVESTMENT EXPERIENCE. The Holder is an investor in securities
of companies and acknowledges that he is capable of bearing the economic risk of
his investment in this Warrant and the Warrant Shares, including the risk of
total loss of any or all of such investments, and has such knowledge and
experience in financial or business matters that he is capable of evaluating the
merits and risks of such investments.

        (d)     ACCREDITED INVESTOR. The Holder is an "accredited investor"
within the meaning of Commission Rule 501 of Regulation D, as presently in
effect.

        (e)     RESTRICTED SECURITIES. The Holder understands and hereby
acknowledges that (i) the Warrant Shares he may purchase pursuant to the
provisions of this Warrant may not initially be registered under the Securities
Act, and in such event will be issued in reliance upon a specific exemption from
the registration requirements under the Securities Act, which exemption depends
upon, among other things, the bona fide nature of the Holder's investment intent
as expressed herein, and (ii) the Warrant Shares must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available.

        (f)     RULE 144 RESTRICTIONS. The Holder is aware of the provisions of
Rule 144, promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in a
non-public offering subject to the satisfaction of certain conditions, if
applicable, including, among other things: (i) the availability of certain
public information about the Company; (ii) the resale occurring not less than
one (1) year after the party has purchased and paid for the securities to be
sold, unless registered; (iii) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Exchange Act), (iv) the amount of
securities being sold during any three-month period not exceeding the specified
limitations stated therein, and (v) the filing of Form 144 with the Commission.

        (g)     RULE 144 LIMITATIONS. The Holder understands and acknowledges
that at the time he wishes to sell some or all of the Warrant Shares there may
not be an active public market upon which to make such a sale, and that, even if
such an active public market upon which to make such a sale then exists, the
Company may not be satisfying the current public information requirements of
Rule 144, and that, in such event, the Holder

                                       22
<PAGE>   23
may be precluded from selling the Warrant Shares under Rule 144 even if the
one-year minimum holding period had been satisfied or the Warrant Shares
registered. The Holder further understands that (i) if all of the requirements
of Rule 144 are not satisfied, registration under the Securities Act, compliance
with Regulation A or Regulation S under the Securities Act or some other
registration exemption will be required to permit the Holder to sell the Warrant
Shares, and (ii) notwithstanding the fact that Rule 144 is not exclusive, the
staff of the Commission has expressed its opinion that Persons proposing to sell
private placement securities other than in a registered offering and other than
pursuant to Rule 144 will have a substantial burden of proof in establishing
that an exemption from registration is available for such offers or sales, and
that such Persons and their respective brokers who participate in such
transactions do so at their own risk.

6.3     COMPANY'S COVENANTS. The Company covenants as follows:

        (a)     AUTHORIZED SHARES. The Company will use commercially reasonable
efforts to have, at all times, authorized, and reserved for the purpose of issue
or transfer upon exercise of the rights evidenced by this Warrant, a sufficient
number of shares of Common Stock to provide for the exercise of the rights
represented by this Warrant (for purposes of determining compliance with this
covenant, the shares of Common Stock issuable upon exercise of all other Options
shall be deemed issued and outstanding);

        (b)     PROPER ISSUANCE. The Company at its expense will use
commercially reasonable efforts to take all such action as may be necessary to
assure that the Common Stock issuable upon the exercise of this Warrant may be
so issued without violation of any applicable law or regulation, or of any
requirements of any domestic securities exchange upon which any capital stock of
the Company may be listed. In addition, the Company shall, at its sole expense,
upon the Holder's written request, use commercially reasonable efforts to cause
the Registrable Securities to be listed for trading on the New York Stock
Exchange or, if the Common Stock ceases to be traded on the New York Stock
Exchange, on such other national securities exchange, national market system or
over-the-counter market on which the Common Stock is listed or quoted for
trading.

        (c)     FULLY PAID SHARES. The Company shall take all actions necessary
or appropriate to validly and legally issue fully paid and non-assessable shares
of Common Stock upon exercise of this Warrant.

                                   ARTICLE VII

                                  MISCELLANEOUS

7.1     CERTAIN EXPENSES. Subject to the provisions of Section 5.3, the Company
shall pay all expenses in connection with, and all taxes (other than stock
transfer taxes) and other

                                       23
<PAGE>   24
governmental charges that may be imposed in respect of, the issuance, sale and
delivery of the Warrant and the Warrant Shares to the Holder.

7.2     HOLDER NOT A SHAREHOLDER. Prior to the exercise of this Warrant as
hereinbefore provided, the Holder shall not be entitled to any of the rights of
a Shareholder, including, without limitation, the right as a Shareholder (i) to
vote on or consent to any proposed action of the Company or (ii) to receive (a)
dividends or any other distributions made to Shareholders, (b) notice of or
attend any meetings of Shareholders of the Company, or (c) notice of any other
proceedings of the Company.

7.3     REMEDIES. The Company stipulates that the remedies at law of the Holder
in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate to the fullest extent permitted by law, and that such terms
may be specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any of the
terms hereof or otherwise.

7.4     ENFORCEMENT COSTS. If any party to, or beneficiary of, this Warrant
seeks to enforce its rights hereunder by legal proceedings or otherwise, then
the non-prevailing party shall pay all reasonable costs and expenses incurred by
the prevailing party, including, without limitation, all reasonable attorneys'
fees. The term "PREVAILING PARTY" shall mean that party whose position is
substantially upheld in a final judgment rendered in such litigation or in a
final arbitration award, or if the final judgment or arbitration award is
appealed, that party whose final position is substantially upheld by the
decision of the final appellate body.

7.5     NONWAIVER; CUMULATIVE REMEDIES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the rights, powers or remedies
of the Holder. No single or partial waiver by the Holder of any provision of
this Warrant or of any breach or default hereunder or of any right or remedy
shall operate as a waiver of any other provision, breach, default right or
remedy or of the same provision, breach, default, right or remedy on a future
occasion. The rights and remedies provided in this Warrant are cumulative and
are in addition to all rights and remedies which the Holder may have in law or
in equity or by statute or otherwise.

7.6     NOTICES. Any notice, demand or delivery to be made pursuant to this
Warrant shall be deemed delivered and received (i) when personally delivered,
(ii) on the third Business Day next following the day when deposited in the U.S.
mail, postage prepaid, certified or registered mail, return receipt requested,
addressed as set forth below or (iii) on the first Business Day after proper and
timely deposit for next day delivery, charges prepaid, with a nationally
recognized delivery service providing next-day service to the location of the
recipient, to such party at the address set forth below. The Holder's address
shall be its last known addresses appearing on the books of the Company
maintained for such purpose. The Company's address shall be its Principal
Executive Office. The Holder and

                                       24
<PAGE>   25
the Company may each designate a different address by notice to the other
pursuant to this Section 7.6.

7.7     ACTIONS ON NON-BUSINESS DAYS. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a day that is not a Business Day, then such action may be taken or such
right may be exercised on the next succeeding Business Day.

7.8     SUCCESSORS AND ASSIGNS. Subject to subsection 4.1(b), this Warrant shall
be binding upon, the Company and any Person succeeding the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets, and all of the obligations of the Company with respect to the shares of
Common Stock issuable upon exercise of this Warrant shall survive the exercise,
expiration or termination of this Warrant and all of the covenants and
agreements of the Company shall inure to the benefit of the Holder and its
successors and assigns. The Company shall, at the time of exercise of this
Warrant, in whole or in part, upon request of the Holder but at the Company's
expense, acknowledge in writing its continuing obligations hereunder with
respect to rights of the Holder to which it shall continue to be entitled after
such exercise in accordance with the terms hereof; provided that the failure of
the Holder to make any such request shall not affect the continuing obligation
of the Company to the Holder in respect of such rights.

7.9     MODIFICATION; SEVERABILITY.

        (a)     If, in any action before any court or agency legally empowered
to enforce any term, any term is found to be unenforceable, then such term shall
be deemed modified to the extent necessary to make it enforceable by such court
or agency.

        (b)     If any term is not curable as set forth in subsection (a) above,
the unenforceability of such term shall not affect the other provisions of this
Warrant but this Warrant shall be construed as if such unenforceable term had
never been contained herein.

7.10    SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and the Holder in this Warrant shall survive the
execution and delivery of this Warrant and the consummation of the transactions
contemplated hereby, notwithstanding any investigation by the Holder or its
agents.

7.11    AMENDMENT. This Warrant may not be modified or amended except by written
agreement of the Company and the Holder.

7.12    HEADINGS. The headings of the Articles and Sections of this Warrant are
for the convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.

                                       25
<PAGE>   26
7.13    MEANINGS. Whenever used in this Warrant, any noun or pronoun shall be
deemed to include both the singular and plural and to cover all genders; and the
words "herein," "hereof" and "hereunder" and words of similar import shall refer
to this instrument as a whole, including any amendments hereto.

7.14    GOVERNING LAW. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Delaware.

                 THE FOLLOWING PAGE IS THE SIGNATURE PAGE HEREOF

                                       26
<PAGE>   27
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
duly authorized officer as of June 6, 2001.

                                     HYPERCOM  CORPORATION

                                    By: /s/ Jonathon E. Killmer
                                        -----------------------
                                            Jonathon E. Killmer
                                            Executive Vice President

                                       27
<PAGE>   28
                              SCHEDULE OF EXHIBITS

        EXHIBIT "A"    Notice of Exercise (Section 2.1)

        EXHIBIT "B"    Investment Representation Certificate (Subsection 3.2(a))

        EXHIBIT "C"    Assignment Form (Subsection 3.2(d))
<PAGE>   29
                                   EXHIBIT "A"
                             NOTICE OF EXERCISE FORM

    (To be executed only upon partial or full exercise of the within Warrant)

        The undersigned registered Holder of the within Warrant hereby
irrevocably exercises the within Warrant for and purchases shares of Common
Stock of Hypercom Corporation and herewith makes payment therefor in the amount
of $_________, all at the price and on the terms and conditions specified in the
within Warrant and requests that a certificate (or _____ certificates in
denominations of shares) for the shares of Common Stock of Hypercom Corporation
hereby purchased be issued in the name of and delivered to (choose one) (a) the
undersigned or (b) [NAME]___________, whose address is ________________________
and, if such shares of Common Stock shall not include all the shares of Common
Stock issuable as provided in the within Warrant, that a new Warrant of like
tenor for the number of shares of Common Stock of Hypercom Corporation not being
purchased hereunder be issued in the name of and delivered to (choose one) (a)
the undersigned or (b) [NAME]__________________, whose address is_______________
_________________________________________________.

        The undersigned herewith makes payment for the shares of Common Stock of
Hypercom Corporation as follows:

                (i)     in cash (ie., check or wire transfer) in the sum of
                $________________________, and/or

                (ii) ___ by forgiveness of debt under the Promissory Note
                (including principal and interest) in the sum of
                $________________________.

Dated: __________________________

Signature Guaranteed
_________________________________

_________________________________
                                     By: _______________________________________
                                            (Signature of Registered Holder)

                                     Title: ____________________________________

NOTICE:        The signature to this Notice of Exercise must correspond with the
name as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatever.
<PAGE>   30
                                   EXHIBIT "B"

                      INVESTMENT REPRESENTATION CERTIFICATE

Purchaser:  ________________________________

Company:  Hypercom Corporation (the "Company")
Security:  Common Stock
Amount:  ____________________
Date:  ______________________

In connection with the purchase of the above-listed shares of Common Stock (the
"Warrant Shares"), the undersigned (the "Holder") hereby represents to the
Company as follows:

        (a)     PURCHASE FOR OWN ACCOUNT. The Warrant Shares are being acquired
for investment for the Holder's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and the Holder
has no present intention of selling, granting any participation in, or otherwise
distributing the Warrant Shares or any part thereof. The Holder does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person with respect to the Warrant
Shares or any part thereof.

        (b)     DISCLOSURE OF INFORMATION. The Holder is aware of the Company's
business affairs and financial condition, has received and reviewed all
information (including all reports, registrations and other documents) filed by
the Company with the United States Securities and Exchange Commission (the
"Commission") up to the date hereof) he considers necessary or appropriate for
making an informed and knowledgeable decision as to whether to acquire this
Warrant and further represents that he has had sufficient opportunity to ask
questions and receive answers from the Company regarding the nature and affairs
of the Company, including its business, properties, prospects and financial
condition.

        (c)     INVESTMENT EXPERIENCE. The Holder is an investor in securities
of companies and acknowledges that he is capable of bearing the economic risk of
his investment in the Warrant Shares, including the risk of total loss of such
investment, and has such knowledge and experience in financial or business
matters that he is capable of evaluating the merits and risks of such
investment.

        (d)     ACCREDITED INVESTOR. The Holder is an "accredited investor"
within the meaning of Commission Rule 501 of Regulation D, as presently in
effect.

        (e)     RESTRICTED SECURITIES. The Holder understands and hereby
acknowledges that (i) the Warrant Shares may not initially be registered under
the Securities Act, and in
<PAGE>   31
such event will be issued in reliance upon a specific exemption from the
registration requirements under the Securities Act, which exemption depends
upon, among other things, the bona fide nature of the Holder's investment intent
as expressed herein, and (ii) the Warrant Shares must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available.

        (f)     RULE 144 RESTRICTIONS. The Holder is aware of the provisions of
Rule 144, promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly, from the issuer thereof (or from an affiliate of such issuer), in a
non-public offering subject to the satisfaction of certain conditions, if
applicable, including, among other things: (i) the availability of certain
public information about the Company; (ii) the resale occurring not less than
one (1) year after the party has purchased and paid for the securities to be
sold, unless registered; (iii) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Exchange Act), (iv) the amount of
securities being sold during any three-month period not exceeding the specified
limitations stated therein, and (v) the filing of Form 144 with the Commission.

        (g)     RULE 144 LIMITATIONS. The Holder understands and acknowledges
that at the time he wishes to sell some or all of the Warrant Shares there may
not be an active public market upon which to make such a sale, and that, even if
such an active public market upon which to make such a sale then exists, the
Company may not be satisfying the current public information requirements of
Rule 144, and that, in such event, the Holder may be precluded from selling the
Warrant Shares under Rule 144 even if the one-year minimum holding period had
been satisfied or the Warrant Shares registered. The Holder further understands
that (i) if all of the requirements of Rule 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A or Regulation S under the
Securities Act or some other registration exemption will be required to permit
the Holder to sell the Warrant Shares, and (ii) notwithstanding the fact that
Rule 144 is not exclusive, the staff of the Commission has expressed its opinion
that persons proposing to sell private placement securities other than in a
registered offering and other than pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from registration is available
for such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.

Date: ___________________, 20___                 PURCHASER:

                                                 _______________________________
<PAGE>   32
                                   EXHIBIT "C"

                                 ASSIGNMENT FORM

         (To be executed only upon the assignment of the within Warrant)

        FOR VALUE RECEIVED, the undersigned registered Holder of the within
Warrant hereby sells, assigns and transfers unto , whose address is all of the
rights of the undersigned under the within Warrant, with respect to shares of
Common Stock of Hypercom Corporation and, if such shares of Common Stock shall
not include all the shares of Common Stock issuable as provided in the within
Warrant, that a new Warrant of like tenor for the number of shares of Common
Stock of Hypercom Corporation not being transferred hereunder be issued in the
name of and delivered to the undersigned, and does hereby irrevocably constitute
and appoint ___________________________________________ attorney to register
such transfer on the books of Hypercom Corporation maintained for the purpose,
with full power of substitution in the premises.

Dated: _______________

Signature Guaranteed

_________________________________

_________________________________
                                     By: _______________________________________
                                            (Signature of Registered Holder)

                                     Title: ____________________________________

NOTICE:        The signature to this Assignment must correspond with the name
upon the face of the within Warrant in every particular, without alteration or
enlargement or any change whatever.

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