Document:

EXHIBIT 4.2

               THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE.
THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION
UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF
COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.

                         DEBENTURE ACQUISITION AGREEMENT

               THIS DEBENTURE ACQUISITION AGREEMENT (the "Agreement") is made
and entered into as of September 25, 1998, by and between JAWS TECHNOLOGIES
INC., a Nevada corporation ("Seller") and THOMSON KERNAGHAN & CO. LTD, an
Ontario corporation ("Buyer"), with respect to the following facts:

               A. Seller desires to sell to the Buyer, and Buyer desires to
purchase from the Seller up to $2,000,000 of a 10% Convertible Debentures (the
"Debentures") of Seller and $300,000 of Warrants of Seller (the "Warrants")
exercisable at a per share price equal to the average of the closing bid prices
of the Common Stock of the Seller as quoted on the NASD Electronic Bulletin
Board for the three trading days prior to the Initial Funding Date, September
25, 1998 (as hereinafter defined), equal to U.S. Twenty-Eight Cents ($0.28) in
the forms of Exhibit A and Exhibit D hereto, respectively, (collectively, the
"Securities"), upon the terms and conditions as set forth in this Agreement.

               NOW, THEREFORE, in consideration of the foregoing facts and the
mutual covenants and agreements contained herein, the parties hereby agree as
follows:

               1. PURCHASE AND SALE OF SECURITIES. Seller hereby sells to the
Buyer, and Buyer hereby purchases the Securities from Seller. Seller is
acquiring the Securities as Nominee and intends to resale the Securities to its
customers.

               2. PURCHASE PRICE. The total purchase price (the "Purchase
Price") for the Securities shall be up to Two Million Dollars ($2,000,000),
payable in cash in accordance with the terms, conditions and procedures set
forth herein.

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               3.     TRANSFER OF SECURITIES AND DELIVERY OF PURCHASE
PRICE.

                      3.1

                      (a) On the Initial Funding Date, the Buyer will advance
Two Hundred Thousand Dollars ($200,000) to be used for working capital provided
that:

                               (i) The Seller has filed on an appropriate form
with the United States Securities and Exchange Commission (the "SEC") to
register its Common Stock under Section 12(g) of the Securities Exchange Act of
1934, as amended, and the registration statement with the SEC under the
Securities Act of 1933, as amended, as provided for in Section 6 hereof, which
registration statements contains the required clean opinion on the financial
statements of the Seller by Ernst & Young and was reviewed by United States
securities counsel for the Seller, Jeffer, Mangels, Butler & Marmaro LLP; and

                               (ii) the opinion of the Seller's counsel, Jeffer,
Mangels, Butler and Marmaro, LLP to the effect that the Seller is duly
incorporated and has the corporate power to enter into this Agreement and the
Exhibits thereto, that this Agreement and the Exhibits thereto that have been
entered into as of the Initial Closing Date have been duly approved by all
necessary action on behalf of the Seller and this Agreement and such Exhibits
are binding agreements effective according to their respective terms except for
bankruptcy and equitable principal.

                      The amount advanced shall be represented by a Debenture(s)
in the form of Exhibit B hereto for the amount advanced; provided that
Debentures, at the Buyer's request may be issued in amounts of One Hundred
Thousand Dollars ($100,000) or multiples thereof, whether issued at the Initial
Funding Date or any Subsequent Funding Date. The Seller shall also deliver to
the Buyer on the Initial Funding Date, the Warrants in the form of Exhibit A
hereto.

                      (b) After the Initial Funding Date, one or more Subsequent
Funding Dates may occur in which the Buyer will advance to the Seller no more
than an aggregate of One Million Eight Hundred Thousand Dollars ($1,800,000)
under the following terms and conditions:

                                (i) No more than Two Hundred Thousand Dollars
($200,000) may be advanced on any Subsequent Funding Date;

                                (ii) A Subsequent Funding Date will occur on the
thirtieth (30) day (or the next business day if such thirtieth (30th) day is not
a business day, as defined in the form of the Debenture) after the Buyer
receives a written request (the "Request") from the Seller to advance additional
funds under this Section 3(b), with such written request being sent by facsimile
to the Buyer followed up in writing by overnight courier service;

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                                (iii) Notwithstanding any other provision of
this Section 3(b), the Buyer at a proposed Subsequent Funding Date is not
required to advance any additional amounts to the Seller if (A) the Form 10 or
Form 10-SB registration statement described in Section 3(a) hereof has not
become effective under the Securities Exchange Act of 1934, as amended and the
registration statement under the Securities Act of 1933, as amended, as provided
for in Section 6 hereof has not become effective; (B) the average closing bid
price for the Common Stock of the Seller on the principal market in which such
Common Stock is then trading was Twenty-Five Cents ($0.25) or less for the five
trading days in such principal market preceding the date the Request is dated,
as reported by the principal market on which the Common Stock is then traded; or
(C) the average daily trading volume of the Common Stock of the Seller on the
principal market in which such Common Stock is traded averaged Fifty Thousand
(50,000) shares or less per day for the five trading days in such principal
market preceding the date the Request is dated, as reported by the principal
market on which the Common Stock is then traded. The principal market for the
Common Stock of the Seller shall a the market within the United States on which
the greatest trading volume is occurring. Currently, the principal market for
such Common Stock is the NASD Electronic Bulletin Board;

                                (iv) The Resale Securities (as defined in
Section 6 hereof) have not been placed in the escrow provided for by the Escrow
Agreement in the form of Exhibit C hereto.

                      3.2 On the Initial Funding Date, Seller shall (i) pay a
commission to the Buyer, as placement agent for Buyer's own account, an amount
equal to Ten Percent (10%) of the Principal Sum (as defined in the Debenture)
that is funded on the Initial Funding Date, (ii) pay to the Buyer, for Buyer's
own account, Buyer's reasonable attorney's fees and costs incurred in entering
into this Agreement, (but not more than $10,000) against detailed invoices, and
(iii) issue to the Buyer, for Buyer's own account, $100,000 of Warrants of the
Seller exercisable at a per share price equal to the average of the closing bid
prices of the Common Stock of the Seller as quoted on the NASD Electronic
Bulletin Board for the three trading days prior to the Initial Funding Date,
Twenty-Eight Cents ($0.28), in the form of Exhibit D hereto (the "Buyer
Warrants").

                      3.3 On each Subsequent Funding Date. the Seller shall pay
a commission to the Buyer, as placement agents, for Buyer's own account, an
amount equal to Ten percent (10%) of the Principal Sum that is funded on each
such Subsequent Funding Date.

                      3.4 On the Initial Funding Date, the Seller and the Buyer
shall enter into the Escrow Agreement in the form of Exhibit C hereto, with the
Buyer as Escrow Agent.

               4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
hereby represents and warrants to the Buyer as follows:

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                      4.1 Any Common Stock of Seller issuable upon conversion of
or as payment of interest pursuant to the Debentures and the exercise of the
Warrants and the Buyer's Warrants, will be duly and validly issued fully paid
and nonassessable Common Stock of the Seller.

                      4.2 The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. The Seller
has full corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Seller is duly qualified to do business as a foreign
corporation in each jurisdiction in which the failure to be so qualified could
have a material adverse effect on the Seller. The Seller has furnished the Buyer
or its special counsel with true, correct and complete copies of its Articles of
Incorporation and Bylaws, as amended, as in effect on the date hereof.

                      4.3 The Seller has and will have at the Initial Date, all
requisite legal and corporate power and authority to execute and deliver this
Agreement and the Exhibits hereto, to sell and issue the Securities and the
Buyer's Warrants and all Common Stock underlying the Securities and the Buyer's
Warrants hereunder, and to carry out and perform its obligations under the terms
of this Agreement and the Exhibits hereto.

                      4.4 The authorized capital stock of the Seller consists of
(a) 20,000,000 shares of Common Stock, par value $.001 per share, of which
8,700,000 were issued and outstanding as of September 24, 1998 and, (b)
5,000,000 shares of Preferred Stock, par value $.001 per share, none of which
are issued and outstanding immediately prior to the Initial Funding Date.
Schedule 4.4(a) sets forth a true and correct list of the current stockholders
of the Seller indicating the number of shares of each class of the Seller's
stock held by each such stockholder. Except as set forth on Schedule 4.4(b), the
Seller does not have any authorized or outstanding options, warrants,
convertible debentures, rights or other securities exercisable for or
convertible into any capital stock of any of the Seller. Except for rights
granted under this Agreement, no person is entitled to any preemptive right or
right of first refusal or similar right with respect to any issuance of capital
stock or other securities by the Seller. Except for the Seller's obligations
under this Agreement, there are no outstanding obligations of the Seller to
redeem, purchase or otherwise acquire capital stock or other securities of any
corporation. Except as provided herein no person has any right to require the
Seller to register any shares of its capital stock for sale pursuant to the
Securities Act of 1933, as amended.

                      4.5 All corporate action on the part of the Seller, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement and the Exhibits hereto, the authorization,
sale, issuance and delivery of the Securities the Buyer's Warrants and all
underlying Common Stock and the performance of all of the Seller's obligations
hereunder and under each of the Exhibits hereto has been duly taken by the
Seller. This Agreement, when executed and delivered by the Seller, constitutes,
and each of the Exhibits thereto shall, when executed and delivered, constitute,
a valid and binding obligation of the Seller, enforceable in accordance with
their terms except for bankruptcy and

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equitable remedies. The Common Stock when issued in compliance with the
Securities and the Buyer's Warrants, shall be validly issued, fully paid and
non-assessable. The Securities and the Buyer's Warrants are free of any liens
claims or encumbrances; provided, however, that the will be subject to
restrictions on transfer under applicable state and/or federal securities laws
as set forth herein. The issuance of the Securities or Buyer's Warrants will not
be subject to any preemptive rights or rights of first refusal, or result in any
default of, or conflict with, the Articles of Incorporation or Bylaws of the
Seller, any contract or agreement to which the Seller is a party or by which it
is bound or any other obligation or commitment of the Seller.

                      4.6 The Seller has delivered to the Buyer the unaudited
balance sheet and statements of operations and cash flows of the Seller as of
and for the period ended May 31, 1998 (the "Financial Statements"). The
Financial Statements are complete and correct and have been prepared in
accordance with the books and records of the Seller on a consistent basis. The
Financial Statements accurately set out, present fairly and describe the
consolidated financial condition and operating results of the Seller as of the
dates, and during the periods, indicated therein.

                      4.7 Except as set forth in Schedule 4.7 hereto, the Seller
has no liabilities or obligations of any kind, absolute, contingent or
otherwise, except (a) the liabilities and obligations set forth in the Financial
Statements, (b) liabilities with respect to equipment leases entered into in the
ordinary course of business, and (c) liabilities and obligations which have been
incurred subsequent to May 31, 1998, in the ordinary course of business and
consistent with past practice.

                      4.8 The Seller has good and marketable title to its
properties and assets, and has good title to all its leasehold interests, in
each case subject to no lien, claim or encumbrance other than (a) the lien of
current taxes not yet due and payable, (b) possible minor liens and encumbrances
which do not in any case or in the aggregate materially detract from the value
of the property subject thereto or materially impair the operations of the
Seller, and which have not arisen otherwise than in the ordinary course of
business. The assets and properties of the Seller are adequate to conduct the
operations currently conducted and proposed to be conducted by it. The Seller
enjoys peaceful and undisturbed possession under all leases under which it is
operating, and all said leases are valid and subsisting and in full force and
effect. The leasehold improvements of the Seller and all of their tangible
personal property, machinery, equipment, fixtures and inventories used in the
ordinary course of business are in good repair and in good operating condition,
reasonable wear and tear excluded.

                      4.9 The Seller is not in violation of any term of its
Articles of Incorporation or Bylaws, or of any material term or provision of any
mortgage, indebtedness, indenture, contract, agreement, instrument, judgment or
decree, including without limitation any Material Contract. The Seller is in
compliance with all judgments, decrees, governmental orders, laws, statutes,
rules and regulations by which it is bound or to which it or any of its
properties or assets is subject, except where the failure to comply would not
have a material adverse effect on the Seller. The Seller has all permits,
licenses, franchises and authorizations

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<PAGE>   6

(collectively, the "Licenses") which are required by law and/or necessary to
operate its business as conducted or proposed to be conducted, except where the
failure to have any such License would not have a material adverse effect on the
Seller. All such Licenses were validly issued and are in full force and effect.
The Seller is in compliance in all material respects with all of its Licenses
and no suspension, revocation or termination of any License is pending or, to
the knowledge of the Seller, threatened. The execution, delivery and performance
of and compliance with this Agreement and the Exhibits thereto, and the issuance
of the Securities and the Buyer's Warrants have not resulted and will not result
in any violation of, or conflict with, or constitute a material default under,
(a) the Articles of Incorporation or By-laws of the Seller or (b) assuming the
accuracy of the representations and warranties of the Seller set forth in
hereto, any applicable law, statute, rule, regulation or License, or (c) any
agreement, contract, franchise or instrument to which the Seller is a party, and
has not resulted and will not result in the creation of, any Lien upon any of
the properties or assets of the Seller.

                      4.10 The Seller has good and marketable title to, or valid
and continuing rights and licenses to use, all patents, patent rights, trade
secrets, trademarks, trademark rights, service marks, trade names, copyrights,
franchises, licenses, permits, inventions, customer lists, and all rights with
respect to the foregoing, which are necessary for the operation of its business
as presently conducted and now proposed to be operated (collectively, with any
application with respect to the issuance or granting of any of the foregoing,
the "Intangible Property"). To the Seller's knowledge, the conduct of business
of the Seller as now operated and as now proposed to be operated does not and
will not conflict with any valid intellectual property right of others. The
Seller has not received any notice of any claim against it that any of its
operations, activities, products or publications infringes on any patent,
trademark, trade name, copyright or other property right of a third party, or
that it is illegally or otherwise using the trade secrets or any property rights
of others. The Seller has no knowledge that any licensor of it has any disputes
with or claims against any third party for infringement by such third party of
any trade name or other Intangible Property. Each employee of the Seller has
executed a confidentiality and non-disclosure agreement in favor of the Seller.

                      4.11 There are no actions, suits, proceedings or
investigations pending against the Seller or its properties before any court or
governmental agency (nor, to the best of the Seller's knowledge, is there any
reasonable basis therefor or threat thereof).

                      4.12 To the best of the Seller's knowledge, no employee of
the Seller is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Seller.

                      4.13 All agreements material to the business of the Seller
("Material Contracts") are valid, binding and in full force and effect in all
material respects. The Seller and, to the best of the Seller's knowledge, each
other party to a Material Contract have in all material respects performed all
the obligations required to be performed by them, have received no notice of
default and are not in default under any Material Contract.

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                      4.14 The Seller (a) has accurately prepared and timely
filed all tax returns that are required to have been filed by it with all
appropriate federal, state, county and local governmental agencies (and all such
returns fairly reflect the Seller's operations for tax purposes); and (b) has
paid in full or made adequate provision on the Financial Statements for the
payment of all taxes.

                      4.15 None of this Agreement (including the Exhibits and
Schedules hereto), any instrument, certificate or report furnished to the
Shareholder when read together, contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not misleading. The Seller knows of no information or fact that has and/or
could have a material adverse effect on it that has not been disclosed to the
Buyer in writing.

                      4.16 The Seller represents that it has not offered the
Securities to the Subscriber in the U.S. or, to the best knowledge of the
Seller, to any person in the United States or any U.S. person (as defined in
Regulation S promulgated by the United States Securities and Exchange
Commission).

                      4.17 To the best of the knowledge of the Seller, neither
the Seller nor any person acting for the Seller has conducted any "directed
selling efforts" as that term is defined in Rule 902 of Regulation S.

               5. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
BUYER. The Buyer hereby represents and warrants to and covenants and agrees with
the Seller the following:

                      5.1 The Buyer represents and warrants to the Seller that
(i) the Buyer is not a "U.S. person" as that term is defined in Rule 902(o) of
Regulation S; (ii) the Securities and the Buyer's Warrants were not offered to
the Buyer in the United States and at the time of execution of this Agreement
and of any offer to buy the Securities and Buyer's Warrants hereunder the Buyer
was physically outside the United States; (iii) the Buyer is purchasing the
Securities and Buyer's Warrant for its own account and not on behalf of or for
the benefit of any U.S. person and the sale of the Securities has not been
prearranged with or on behalf of any buyer in the United States; (iv) the Buyer
and to the best knowledge of the Buyer each distributor, if any, participating
in the offering of the Securities and Buyer's Warrants, has agreed and the Buyer
hereby agrees that all offers and sales of the Securities and the Buyer's
Warrants prior to the expiration of a period commencing on the closing of all
the sale of all Debentures offered by this Agreement and ending one year
thereafter (the "Distribution Compliance Period") shall not be made to U.S.
persons or for the account or benefit of U.S. persons and shall otherwise be
made in compliance with the provisions of Regulation S. The Buyer is a dealer
with respect to this transaction and consequently a "distributor" as defined in
Regulation S.

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<PAGE>   8

                      5.2 The Purchase Price to be paid by Buyer to Seller for
the Securities and Buyer's Warrants has been determined by Buyer as fair and
appropriate based solely upon Buyer's independent investigation and due
diligence of the Seller, and neither the Seller nor any of its agents,
including, without limitation, any of their officers, directors, employees,
accountants and attorneys, has made any representations or warranties whatsoever
in connection with the sale of the Securities and Buyer's Warrants by the Seller
to the Buyer, except as specifically set forth herein. The Buyer has had
sufficient opportunity in connection with the sale of the Securities and Buyer's
Warrants to review the Seller's business and affairs (including, without
limitation, the Seller's financial statements and other information) and to
inquire of the Seller's management with respect thereto. The Buyer has had
answered to its satisfaction any questions with respect to the Seller's business
and affairs. The Buyer further has had the opportunity to obtain independent
financial, legal, accounting, business, tax and other appropriate advice with
respect to the transactions contemplated by this Agreement, and is not relying
upon the Seller or any of its agents in any manner in connection with same.

                      5.3 The certificates representing the Securities and the
Buyer's Warrants shall bear the first legend set forth on the first page of this
Agreement and any other legend, if such legend or legends are reasonably
required by the Seller to comply with state, federal or foreign law.

                      5.4 THE BUYER UNDERSTANDS AND AGREES WITH THE SELLER, THAT
IN THE ABSENCE OF THE REGISTRATION OF THE SECURITIES, THE BUYER'S WARRANTS AND
THE UNDERLYING COMMON STOCK UNDER THE ACT, THE SECURITIES, THE BUYER'S WARRANTS
AND THE UNDERLYING COMMON STOCK MAY ONLY BE RESOLD AS PROVIDED FOR IN RULES 903
OR 904 OF REGULATION S, PURSUANT TO A VALID EXEMPTION FROM REGISTRATION UNDER
THE ACT, INCLUDING SALES UNDER RULE 144. Rule 144, promulgated by the United
States Securities and Exchange Commission under the Act, may not be currently
available for sale of the Securities and Buyer's Warrants and underlying Common
Stock in the United States, and there is no assurance that it will be available
at any particular time in the future. Sales of Common Stock underlying the
Securities and the Buyer's Warrants may be made in reliance upon Rule 144 but
ONLY (i) limited quantities after the completion of the Distribution Compliance
Period (for Common Stock underlying the Warrants, one year after exercise if
latter), or (ii) in unlimited quantities by non-affiliates after the first
yearly anniversary of the completion of the Distribution Compliance Period (for
Common Stock underlying the Warrants, two years after exercise if latter), in
each case in accordance with the conditions of the Rule, all of which must be
met (including the requirement, if applicable, that adequate information
concerning the Seller is then available to the public).

                      5.5 To the best of the knowledge of the Buyer and Seller
neither the Buyer nor any distributor, if any, participating in the offering of
the Securities and Buyer"s Warrants nor any person acting for the Buyer or any
such distributor has conducted any "directed selling efforts" as that terms is
defined in Rule 902 of Regulation S.

                      5.6 The Buyer understands that the Securities, the Buyer's
Warrants and all underlying Common Stock have not been registered under the Act
and are being offered

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<PAGE>   9

and sold pursuant to a "safe harbor" from registration contained in Regulation S
promulgated under the Act based in part upon the representations of the Seller
contained herein. The Seller has reviewed the terms of the Warrants and the
Buyer's Warrants and is aware of the restrictions on exercise of the Warrants
and the Buyer's Warrants by U.S. Persons, namely the following:

THE WARRANTS AND THE BUYER'S WARRANTS MAY ONLY BE EXERCISED (I) BY A PERSON WHO
IS NOT A U.S. PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED), (II) IF NOT EXERCISED ON BEHALF OF A U.S.
PERSON, (III) IF NO U.S. PERSON HAS ANY INTEREST IN THE WARRANTS OR BUYER'S
WARRANTS BEING EXERCISED OR THE UNDERLYING SECURITIES TO BE ISSUED UPON
EXERCISE, AND (IV) OUTSIDE THE UNITED STATES AND THE WARRANT SHARES UNDERLYING
THE WARRANTS AND THE BUYER'S WARRANTS ARE TO BE DELIVERED OUTSIDE THE UNITED
STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANTS AND THE BUYER'S
WARRANTS CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND
SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE SELLER
PRIOR TO EXERCISE OF THE WARRANTS AND BUYER'S WARRANTS BEING EXERCISED THAT
REGISTRATION IS NOT REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON
EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

                      5.7 The Buyer knows of no public solicitation or
advertisement of an offer in connection with the proposed issuance and sale of
the Securities and the Buyer's Warrants, the Buyer's Warrants or any underlying
Common Stock.

                      5.8 The Buyer is acquiring the Securities to be issued and
sold hereunder (and the Common Shares issuable thereunder) as a nominee (but is
acquiring the Buyer's Warrants (and the underlying Common Stock) for its own
account for investment and not as a nominee and not with a view to the
distribution thereof). The Buyer understands that it must bear the economic risk
of this investment indefinitely unless the sale of such Securities

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<PAGE>   10
and Buyer's Warrants and the underlying shares of Common Stock is registered
pursuant to the Act, or an exemption from such registration is available, and
that the Buyer has no present intention of registering any such sale of the
Securities, the Buyer's Warrants and any underlying Common Stock, except as
otherwise specifically provide for herein. The Buyer represents and warrants to
the Seller that it has no present plan or intention to sell any of such
Securities, the Buyer's Warrants and the underlying Common Stock in the United
States or to a United States person pursuant to any predetermined arrangements.
The Buyer covenants that neither it not its affiliates nor any person acting on
its or their behalf has the intention of entering or will enter during the
Distribution Compliance Period, into any put option, short position, hedging
transactions, equity swaps or other similar instrument or position with respect
to any of such Securities, the Buyer's Warrants and the underlying Common Stock
or securities of the same class as any of such Securities, the Buyer's Warrants
and the underlying Common Stock in violation of the Act and neither the Buyer
nor any of its affiliates or any person acting on its or their behalf will use
at any time any of such acquired pursuant to this Agreement to settle any put
option, short position, hedging transactions, equity swaps or other similar
instrument or position that may have been entered into prior to the execution of
this Agreement in violation of the Act.

                      5.9 The Buyer further covenants that it will not make any
sale, transfer or other disposition of the Securities and the Buyer's Warrants
or any underlying Common Stock in violation of the Act, the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") or the rules and
regulations of the Securities and Exchange Commission (the "Commission")
promulgated thereunder.

                      5.10 The Buyer has the full power and authority to
execute, deliver and perform this Agreement. This Agreement when executed and
delivered by the Buyer will constitute a valid and legally binding obligation of
the Buyer, enforceable in accordance with its terms except for bankruptcy and
equitable remedies.

                      5.11 The Buyer has reviewed with his, her or its own tax
advisors the foreign, federal, state and local tax consequences of this
investment, where applicable, and the transactions contemplated by this
Agreement. The Buyer is relying solely on such advisors and not on any
statements or representations of the Seller or any of its agents and understands
that the Buyer (and not the Seller) shall be responsible for the Buyer's own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement.

                      5.12 The Buyer acknowledges that it has had this Agreement
and the transactions contemplated by this Agreement reviewed by its own legal
counsel. The Buyer is relying solely on such counsel and not on any statements
or representations of the Seller or any of its agents for legal advice with
respect to this investment or the transactions contemplated by this Agreement.

                      5.13 The Buyer is a "distributor" as defined in Regulation
S will send to any broker/dealer or other person receiving a commission on the
sale of the Securities. the Buyer's Warrants and the underlying Common Stock, a
confirmation or other notice stating

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<PAGE>   11

that such person is subject to the same restrictions on transfer to U.S. Persons
or for the account of or benefit of U.S. Persons during the Distribution
Compliance Period as provided herein.

                      5.14 Upon any transfer of the Securities, the Buyer's
Warrants or the underlying Common Stock unless such transfer is subject to Rule
144 or is covered by a current and effective registration statement under the
Act, the transferee must supply to the Seller with the same representations and
warranties as provided for in Section 5 hereof.

                      5.15 NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS
AGREEMENT, THE DEBENTURES, THE WARRANTS OR THE BUYER'S WARRANTS, THE SELLER DOES
NOT HAVE TO AND WILL NOT RECOGNIZE AND WILL TREAT AS NULL AND VOID ANY ATTEMPT
TO TRANSFER THE DEBENTURES, THE WARRANTS, THE BUYER'S WARRANTS AND THE
UNDERLYING COMMON STOCK MADE IN VIOLATION OF THIS AGREEMENT OR REGULATION S OR
TO EXERCISE THE WARRANTS AND THE BUYER'S WARRANTS OTHER THAN AS PROVIDED
THEREIN.

               6.     REGISTRATION UNDER THE SECURITIES ACT OF 1933.

                      (a) As soon as possible after this date (but in no case
prior to the Initial Funding Date), the Seller will include in an appropriate
form of registration statement filed under the Securities Act of 1933 (the
"Act") for resale by the potential holders (the "Buyer") the following shares of
Common Stock, but only Common Stock, of the Seller (collectively, the "Resale
Securities"):

                               (i) One hundred fifty percent (150%) of the
shares underlying the Debentures, assuming the aggregate outstanding Principal
Sum was Two Million Dollars ($2,000,000) based on a Conversion Price per share
equal to Seventy-eight Percent of the closing bid prices for the Common Stock of
the Seller for the three trading days prior to filing the registration
statement, Twenty-Five Cents ($0.25);

                               (ii) One hundred percent (100%) of the shares
underlying the Warrants to purchase Three Hundred Thousand Dollars ($300,000) of
the Common Stock of the Seller based on an exercise price per share equal to the
closing bid price for the Common Stock of the Seller for the three trading days
prior to the filing of the registration statement, Twenty-Eight Cents ($0.28);
and

                               (iii) One hundred percent (100%) of the shares
underlying the Buyer Warrants to purchase One Hundred Thousand Dollars
($100,000) of the Common Stock of the Seller based on the same exercise price
per share as the Warrants.

                      (b) The Seller shall use its best efforts to cause the
registration statement provided for in Section 6(a) hereof to become effect
under the Act no latter than the ninetieth (90th) day after the Initial Funding
Date; provided, that if such registration statement

                                      -11-

<PAGE>   12

has not been declared effective by the close of such ninetieth (90th) day after
the Initial Funding Date, then for each of the next thirty (30) days after such
ninetieth (90th) day after the Initial Funding Date that such registration
statement has not been declared effective, the Seller shall pay the Holder an
amount equal to the Principal Sum funded on the Initial Funding Date times Nine
Hundred Eighty Six One Thousands of a percent (0.986%); provided further, that
if such registration statement has not been declared effective by the close of
the one hundred twentieth (120th) day after the Initial Funding Date, then for
each day after such one hundred twentieth (120th) day after the Initial Funding
Date that such registration statement has not been declared effective, the
Seller shall pay the Holder and amount equal to the Principal Sum funded on the
Initial Funding Date times One Thousand Six Hundred Four-four One Ten Thousands
of a percent (0.1644%). Any amounts due to the Holder under this Section 6(b)
shall be paid by check no later than the next business day after an amount is
incurred.

                      (c) The following provision of this Section 6 shall also
be applicable:

                               (i) The Buyer shall furnish the Seller with such
appropriate information (relating to the intentions of such holders with regard
to the sale of the Resale Securities included in the registration statement as
the Seller shall reasonably request in writing. Following the effective date of
such registration statement, the Seller shall upon the request of the Buyer
forthwith supply such a number of prospectuses meeting the requirements of the
Act, as shall be requested by the Buyer to permit the Buyer to make a public
offering of all the Resale Securities from time to time offered or sold to the
Buyer provided that the Buyer shall from time to time furnish the Seller with
such appropriate information (as provided for in the immediately proceeding
sentence) as the Seller shall request in writing and provided, further, that the
Seller shall keep such registration statement current and effective until the
last to occur of thirtieth (30th) day after the last to occur of (i) the
Principal Sum of the Debentures being reduced to zero or (ii) the first to occur
of the exercise or all of the Warrants and the Buyer's Warrants or the
expiration of the Warrants and the Buyer's Warrants. The Seller shall also use
its best efforts to qualify the Resale Securities for sale in New York and
Florida, provided that the Seller shall not be required to file a general
consent to service of process in any state pursuant to this sentence.

                               (ii) The Seller shall fill the registration
statement at its own expense and without charge to the Buyer. The Buyer shall,
however, bear the fees of his own counsel and any transfer taxes or underwriting
discounts or commissions applicable to the Resale Securities sold by it pursuant
thereto.

                               (iii) The Seller shall indemnify and hold
harmless the Buyer and each underwriter, within the meaning of the Act, who may
purchase from or sell for any the Buyer any Resale Securities from and against
any and all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in the
registration statement or any post-effective amendment thereto under the Act or
any prospectus included therein required to be filed or furnished by reason of
this Section 6 or caused by any omission or alleged omission to state therein a
material fact required to be

                                      -12-

<PAGE>   13

stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or alleged untrue statement or omission or alleged
omission based upon information furnished or required to be furnished in writing
to the Seller by the Buyer or underwriter expressly for use therein, which
indemnification shall include each person, if any, who controls any such
underwriter within the meaning of such Act; provided, however, that the Seller
shall not be obliged so to indemnify any such underwriter or controlling person
unless such underwriter shall at the same time indemnify the Seller, its
directors, each officer signing the related registration statement and each
person, if any, who controls the Seller within the meaning of such Act, from and
against any and all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or any prospectus required to be filed or furnished by
reason of this Section 6 or caused by any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or alleged untrue statement or omission based
upon information furnished in writing to the Seller by any such underwriter
expressly for use therein.

                               (iv) The Seller's agreements with respect to the
Resale Securities in this Section 6 shall continue in effect regardless or the
conversion and surrender of the Debenture or any exercise of the Warrants or the
Buyer's Warrants. The registration rights of the Buyer under this Section 6 will
inure to the benefit and be assignable automatically to any transferee of the
Securities, the Warrants, the Buyer's Warrants or the underlying Common Stock,
except for any such underlying Common Stock sold pursuant to a registration
statement under the Act or sold pursuant to Rule 144.

               7. ENTIRE AGREEMENT. This Agreement, and the Exhibits hereto,
embodies the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings relating to such subject matter.

               8. CHOICE OF LAW AND VENUE. This Agreement shall be governed by
and construed under the laws of the Province of Alberta, Canada, without regard
to choice of laws, in force from time to time. Any proceeding arising out of
this Agreement shall be brought in Ontario, Canada.

               9. ATTORNEYS' FEES. In any action to enforce this Agreement, the
prevailing party shall be entitled to recover from the non-prevailing party all
reasonable costs, including, without limitation, attorneys' fees.

               10. PARTIES BOUND. This Agreement is binding on and shall inure
to the benefit of the parties and their respective successors, assigns, heirs,
and legal representatives.

               11. NOTICES. Except as otherwise provided herein, all notices,
instructions or other communications required or permitted hereunder shall be in
writing and sent by registered mail, postage prepaid, addressed as follows:

                                      -13-

<PAGE>   14

                      To Jaws Technologies Inc.

                      380-603-7 Avenue SW
                      Calgary, Alberta Canada T2P 2T5
                      Fax:    403-508-5058
                      Voice:  403-508-5055
                      Attn:   Robert Kubbernus
                              President and CEO

                      To Thomson Kernaghan & Co. Limited:

                      365 Bay Street,
                      Toronto, Ontario Canada M5H 2V2
                      Fax:    416-367-8055
                      Voice:  416-860-8800
                      Attn:   Robert F. Wilson

or such other address, telephone numbers or contact persons as shall be
furnished in writing by such party to the other parties hereto. Any such notice,
instruction or communication shall be deemed to have been given three (3)
business days after the date mailed by registered mail or if sent by fax, upon
electronic confirmation or receipt.

               12. GENDER. Masculine nouns and pronouns shall include feminine
nouns and pronouns.

               13. ARBITRATION. All disputes that may arise between the parties
regarding the interpretation or application of this Agreement and the Exhibits
thereto and the legal affect of this Agreement shall, to the exclusion of any
court of law, be arbitrated and determined by a board of arbitrators, unless the
parties can resolve the dispute by mutual agreement. Either party shall have the
right to submit any dispute to arbitration thirty (30) days after the other
party has been notified as to the nature of the dispute. If the dispute goes to
arbitration, each party shall select one arbitrator and the two arbitrators so
selected shall jointly select a third arbitrator. The arbitration shall be
governed by the arbitration rules of the International Chamber of Commerce. The
arbitration proceeding shall be governed by the statutes of the Province of
Ontario, Canada, and the proceeding shall be held in Toronto, Ontario, Canada.
Anything to the contrary contained in the above-mentioned rules and statutes
notwithstanding, the parties consent that any papers, notices, or process
necessary or proper for the institution or continuance of, or relating to any
arbitration proceeding, or for the confirmation of an award and entry of
judgment on any award made, including appeals in connection with any judgment or
award, may be served on each of the parties by registered mail addressed to the
party at the principal office of the party, or by personal service on the party
in or without the above-mentioned state. The parties recognize and consent to
the above-mentioned arbitration association's jurisdiction over each and every
one of them.

                                      -14-

<PAGE>   15

               IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.

               Seller:                JAWS TECHNOLOGIES INC.

                                      By:
                                         ---------------------------------------
                                      Its:
                                          --------------------------------------

               Buyer:                 THOMSON KERNAGHAN & CO. LTD.

                                      By:
                                         ---------------------------------------
                                      Its:
                                          --------------------------------------

                                      -15-

<PAGE>   16

                                  EXHIBIT LIST

<TABLE>
<S>                   <C>
Exhibit A             WARRANT TO PURCHASE 1,071,429 SHARES OF COMMON STOCK

Exhibit B             10% CONVERTIBLE DEBENTURE

Exhibit C             ESCROW AGREEMENT

Exhibit D             BUYER WARRANTS
</TABLE>

                                      -16-

<PAGE>   17

                                    EXHIBIT A

             Void after 5:00 p.m. Alberta Time, on October 31, 2001
                   Warrant to Purchase Shares of Common Stock

     THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE
SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER
REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF
COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.

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

              WARRANT TO PURCHASE 1,071,429 SHARES OF COMMON STOCK

                                       OF

                             JAWS TECHNOLOGIES INC.
                        --------------------------------

     This is to Certify That, FOR VALUE RECEIVED, THOMSON KERNAGHAN & CO. LTD.,
an Ontario corporation , or assigns ("Holder"), is entitled to purchase, subject
to the provisions of this Warrant, from JAWS TECHNOLOGIES INC., a Nevada
corporation ("Company"), the fully paid, validly issued and nonassessable shares
of Common Stock, $0.001 par value, of the Company ("Common Stock") at any time
or from time to time during the period from the date hereof, through and
including October 31, 2001, but not later than 5:00 p.m. Calgary, Alberta Time,
on October 31, 2001 ("Exercise Period") at an initial exercise price equal to
$0.28 per share. The total number of shares of Common

<PAGE>   18

Stock to be issued upon exercise of this Warrant shall be 1,071,429 shares. The
price to be paid for each share of Common Stock may be adjusted from time to
time as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the respective exercise price of a share of Common
Stock in effect at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price." This Warrant is being issued
pursuant to the Company's private placement consisting of up to $2,000,000
principal amount of a 10% Convertible Debenture (the "Debenture") and a
Debenture Acquisition Agreement dated as of September 25, 1998 between the
Company and Thomson Kernaghan & Co. Ltd. All dollar references are to United
States Dollars.

          (a) Exercise of Warrant. This Warrant may be exercised in whole or in
part at any time or from time to time during the Exercise Period; provided,
however, that (i) if the last day of the Exercise Period is a day on which
banking institutions in the Province of Alberta are authorized by law to close,
then the Exercise Period shall terminate on the next succeeding day which shall
not be such a day, and during such period the Holder shall have the right to
exercise this Warrant into the kind and amount of shares of stock and other
securities and property (including cash) receivable by a holder of the number of
shares of Common Stock into which this Warrant might have been exercisable
immediately prior thereto. This Warrant may be exercised by presentation and
surrender hereof to the Escrow Agent pursuant to an Escrow Agreement between the
Company and Thomson Kernaghan & Co. Ltd., dated September 25, 1998, at its
principal office, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of Warrant Shares
specified in such form. As soon as practicable after each such exercise of the
Warrants, but not later than seven (7) days from the date of such exercise, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.

     THIS WARRANT MAY ONLY BE EXERCISED (i) BY A PERSON WHO IS NOT A U.S. PERSON
(AS DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED

<PAGE>   19

OUTSIDE THE UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE
WARRANT CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND
SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY
PRIOR TO EXERCISE OF THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT
REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933.

          (b) Reservation of Shares. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants.

          (c) Fractional Shares. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:

               (1) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or if no such sale is
made (or reported) on such day, the average closing bid and asked prices for
such day on such exchange or system; or

               (2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
reported bid and asked prices reported by the Electronic Bulletin Board or
National Quotation Bureau, Inc. on the last business day prior to the date of
the exercise of this Warrant; or

               (3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
market value shall be an amount, not less than book value thereof as at the end
of the most recent fiscal year of the Company ending prior to the date of the
exercise of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.

          (d) Exchange, Transfer, Assignment or Loss of Warrant. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company for other warrants of different
denominations entitling the holder thereof to purchase in the aggregate the same
number of shares of Common Stock purchasable hereunder. Upon surrender of this
Warrant to the Company at its principal office, with the Assignment Form annexed
hereto duly executed and funds sufficient to pay and transfer tax, the Company
shall, without charge, execute and deliver a new Warrant in the name of the
assignee named in such instrument of assignment and this Warrant shall promptly
be canceled. This Warrant may be divided or combined with other warrants which
carry the

<PAGE>   20

same rights upon presentation hereof at the principal office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt of the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.

     This Warrant and the Common Stock issuable upon exercise of this Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only as provided for in the Debenture Acquisition Agreement
between the Company and the Holder, dated September 25, 1998.

          (e) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.

          (f) Anti-Dilution Provisions. The respective Exercise Price in effect
at any time and the number and kind of securities purchasable upon the exercise
of the Warrants shall be subject to adjustment from time to time upon the
happening of certain events as follows:

               (1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the respective Exercise
Price in effect at the time of the record date for such dividend or distribution
or of the effective date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined by multiplying the
respective Exercise Price by a fraction, the denominator of which shall be the
number of shares of Common Stock outstanding after giving effect to such action,
and the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.

               (2) Whenever the respective Exercise Price payable upon exercise
of each Warrant is adjusted pursuant to Subsection (1) above, the number of
Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the respective number of Shares initially issuable upon
exercise of this Warrant by the respective

<PAGE>   21

Exercise Price in effect on the date hereof and dividing the product so obtained
by the respective Exercise Price, as adjusted.

               (3) No adjustment in the respective Exercise Price shall be
required unless such adjustment would require an increase or decrease of at
least one cent ($0.01) in such price; provided, however, that any adjustment
which by reason of this Subsection (3) is not required to be made shall be
carried forward and taken into account in any subsequent adjustment required to
be made hereunder. All calculations under this Section (f) shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section (f) to the contrary notwithstanding, the Company shall
be entitled, but shall not be required, to make such changes in the respective
Exercise Price, in addition to those required by this Section (f), as it shall
determine, in its sole discretion, to be advisable in order that any dividend or
distribution in shares of Common Stock, or any subdivision, reclassification or
combination of Common Stock, hereafter made by the Company shall not result in
any Federal Income tax liability to the holders of Common Stock or securities
convertible into Common Stock (including the Warrants).

               (4) In the event that at any time, as a result of an adjustment
made pursuant to Subsection (1) above, the Holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subsections (1) to (3) inclusive above.

               (5) Irrespective of any adjustments in the respective Exercise
Price or the related number or kind of share purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue to express the
same price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Agreement.

          (g) Officer's Certificate. Whenever the respective Exercise Price
shall be adjusted as required by the provisions of the foregoing Section (f),
the Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office, an officer's certificate showing the adjusted
respective Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of related additional shares of Common Stock, if any, and such other
facts as shall be necessary to show the reason for and the manner of computing
such adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
executed and delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder or any such holder.

          (h) Notices to Warrant Holders. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the

<PAGE>   22

Common Stock or (ii) if the Company shall offer to the holders of Common Stock
for subscription or purchase by them any share of any class or any other rights
or (iii) if the capital reorganization of the Company, reclassification of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least fifteen days prior the date specified in
(x) or (y) below, as the case may be, a notice containing a brief description of
the proposed action and stating the date on which (x) a record is to be taken
for the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up. The failure to give such notice shall not otherwise effect the
action taken by the Company.

          (i) Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof.

          (j) Registration Under the Securities Act of 1933.

          The shares of Common Stock underlying this Warrant shall be registered
under the United States Securities Act of 1933, as amended, to the extend and
subject to the provisions of the Debenture.

<PAGE>   23

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by the undersigned, each being duly authorized, as of the date below.

                                            JAWS TECHNOLOGIES INC.

                                            ____________________________________
                                            By: Robert Kubbernus
                                            Its:President

Dated: September 25, 1998

ATTEST:

__________________________________
_______________________, Secretary

<PAGE>   24

                                  EXERCISE FORM

THIS WARRANT MAY ONLY BE EXERCISED (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED); (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON; (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE; AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE
UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE
EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF
THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE
UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.

     The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing $_____________ worth of the shares of Common Stock of
Jaws Technologies Inc. at $_______ per share for ___________ shares of Common
Stock.

                                    --------

                     INSTRUCTIONS FOR REGISTRATION OF STOCK

Name _______________________________________________________
         (Please typewrite or print in block letters)

Address __________________________________________________________

Social Security of Federal I.D. Number: __________________________

THE UNDERSIGNED REPRESENTS AND WARRANTS TO JAWS TECHNOLOGIES INC. THAT THE
CONDITIONS FOR EXERCISE OF THE WITHIN WARRANT SET FORTH IN THE FIRST SENTENCE OF
THE FIRST PARAGRAPH ABOVE HAVE BEEN FULLY COMPLIED WITH AND ANY NO U.S. PERSON
HAS ANY INTEREST IN THE WARRANT OR THE WARRANT SHARES.

        Signature _____________________________________________
        (Sign exactly as your name appears on the first page of this Warrant)

<PAGE>   25

                                 ASSIGNMENT FORM

               FOR VALUE RECEIVED, __________________________________________
hereby sells, assigns and transfers unto
Name ________________________________________________________________________
             (Please typewrite or print in block letters)
Address ______________________________________________________________________
Social Security of Federal I.D. Number: ________________________________________
the right to purchase shares of Common Stock of Jaws Technologies Inc.
represented by this Warrant as to which such right is exercisable and does
hereby irrevocably constitute and appoint ______________________________________
Attorney, to transfer the same on the books of Jaws Technologies Inc. with full
power of substitution in the premises.

Date __________ __, ______

Signature _____________________________________
         (Sign exactly as your name appears on
          the first page of this Warrant)

NOTE: This Warrant and the Common Stock issuable upon exercise of this Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only as provided for in the Debenture Acquisition Agreement
between the Company and the Holder, dated _____________, 1998.

<PAGE>   26

                                    EXHIBIT B

     THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE
SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER
REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF
COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.

                             JAWS TECHNOLOGIES INC.
                            10% CONVERTIBLE DEBENTURE

                                                     $200,000 September 25, 1998

          JAWS TECHNOLOGIES INC., a Nevada corporation (the "Company"), for the
value received, hereby unconditionally and absolutely promises to pay to the
order of THOMSON KERNAGHAN & CO. LTD., or holder (collectively, the "Holder"),
upon presentation and surrender of this Debenture to Thomson Kernaghan & Co.
Ltd. at its office at 356 Bay Street, Toronto, Ontario, Canada M5H 2V2 or such
other place as the Company may, from time to time, designate, the Principal Sum
due under this Debenture, on October 31, 2001, or if such day is not a regular
business day, then on the next business day thereafter (the "Maturity Date"),
plus interest at the simple rate of ten percent (10%) per annum with all accrued
and unpaid interest due and payable on the Maturity Date.

          All dollar amounts set forth in this Debenture are United States
Dollars. A regular business day is a day on which banks in the State of New York
and the Province of Alberta are open for business and a trading day is a day in
which the New York Stock Exchange is open for trading.

     1. PRINCIPAL SUM.

          The Principal Sum outstanding at any time shall be Two Hundred
Thousand Dollars ($200,000) less any Principal Sum prepaid through the date of
the calculation and less any Principal Sum which had been converted into Common
Stock as

<PAGE>   27

provided for in Section 2 hereof through the date of the calculation.

     2. CONVERSION.

          (a) The Holder of this Debenture shall have the right, at its option,
beginning on the thirtieth (30th) day after the Initial Funding Date through
5:00 p.m. Alberta, Canada time on the last regular business day immediately
prior to the Maturity Date to convert, subject to the terms and provisions of
this Section 2, any or all of the outstanding Principal Sum of this Debenture in
increments of at least One Hundred Thousand Dollars ($100,000) or multiples
thereof, unless the outstanding Principal Sum at the time of the conversion is
less than One Hundred Thousand Dollars ($100,000) or not multiples of One
Hundred Thousand Dollars ($100,000) then the entire outstanding Principal Sum
may be converted. Conversions pursuant to this Section 2 are at a price per
share equal to the lower of seventy-eight percent (78%) of the average closing
bid price of the Common Stock of the Company on the principal market for such
Common Stock for the three (3) trading days immediately preceding (i) the date
of the Notice of Conversion (on the form attached hereto), as reported by the
principal market on which the Common Stock is then traded or (ii) the date of
this Debenture (the "Conversion Price").

          To convert this Debenture, this Debenture must be surrendered at the
principal executive office of the Escrow Agent pursuant to an Escrow Agreement
between the Company and Thomson Kernaghan & Co. Ltd., dated September 25, 1998,
accompanied by Notice of Conversion duly executed, and, accompanied by a written
instrument or instruments of transfer in form satisfactory to the Escrow Agent
duly executed by the Holder or his attorney duly authorized in writing to
specify whether the Holder desires interest on the amount of the Principal Sum
being converted to be paid in cash by Company check or in shares of Common Stock
of the Company.

          (b) As promptly as practicable after the surrender, as herein
provided, of this Debenture for conversion and the completed and executed Notice
of Conversion, the Company shall deliver or cause to be delivered, to or upon
the written order of the Holder of this Debenture so surrendered: (i)
certificates representing the largest number of fully paid and nonassessable
full shares of Common Stock into which this Debenture may be converted in
accordance with the provisions of this Section 2; (ii) a check in payment for
fractional shares, based on amount in cash equal to such fraction multiplied by
the current "Market Price" as defined in Section 4 hereof; (iii) cash or
additional shares of Common Stock of the Company for the accrued but unpaid
interest due on the Principal Sum being converted through the date of the Notice
of Conversion; and (iv) a replacement Debenture identical to this Debenture,
except as to the issue date and as adjusted to reflect the Principal Amount
actually outstanding after the conversion, if less than the then outstanding
Principal Sum is being converted. Such conversion shall be deemed to have been
made at the close of business on the date that this Debenture shall have been
received by the Company for conversion, with a Notice of Conversion duly
executed, in satisfactory form for conversion, so that the rights of the Holder
of this Debenture as a Debenture holder as to the Principal Sum being converted
shall cease at such time and, subject to the provisions of this Section 2(b),
the person or

<PAGE>   28

persons entitled to receive the shares of Common Stock upon conversion of this
Debenture shall be treated for all purposes as having become the record holder
or holders of such shares of Common Stock (including any Common Stock issued for
interest) at such time and such conversion shall be at the Conversion Price in
effect at such time.

     3. PREPAYMENT.

          The Company may prepay at any time, upon at least thirty (30) days
advance written notice any or all of the outstanding Principal Sum of this
Debenture by notifying the Holder in writing of the date the prepayment is to be
made. Along with any prepayment of the Principal Sum, all accrued but unpaid
interest on such Principal Sum shall also be paid. Within ten (10) days of the
receipt of a notice of prepayment, the Holder shall notify the Company as to
whether the interest to be paid shall be in cash by Company check or in Common
Stock of the Company. Notwithstanding any notice of intention to prepay any or
all of the then outstanding Principal Sum, such Principal Sum may be converted
into Common Stock pursuant to Section 2 hereof until the prepayment actually is
made.

     4. INTEREST.

          (a) At the Holder's election, accrued but unpaid interest must be paid
in Common Stock of the Company in an amount of shares equal to the interest to
be paid in Common Stock divided by the "Market Price Per Share" of the Common
Stock. Not earlier than the sixtieth (60th ) day and not latter than the
thirtieth (30th) day prior to the Maturity Date, the Holder shall notify the
Company if it desires to have the accrued but unpaid interest due on the
Maturity Date paid in shares of Common Stock of the Company. If the Holder does
not give any such notice in a timely manner, the interest at Maturity shall be
paid in cash by Company check.

          (b) For purpose of this Debenture, the "Market Price Per Share" of the
Common Stock of the Company shall be determined as follows:

               (i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the "Market Price Per Share" shall be the
average of the last reported sale prices of the Common Stock on such principle
exchange or system on the five trading days prior to the date the Holder gives
the Company its notice of election to have the interest payments made in the
Common Stock of the Company (or for payment of fractional shares, the date of
the relevant Conversion Notice) or if no such sale is made on any such day, the
average of the closing bid and asked prices for such day on such exchange or
system; or

               (ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the "Market Price Per Share" shall be the average of the
mean of the last reported bid and asked prices reported by the OTC Bulletin
Board, if so quoted, or the "pink sheets" of the National Quotation Bureau, Inc.
on the five trading days prior to the date the Holder gives the Company its
notice of election to have the interest payments made in the

<PAGE>   29

Common Stock of the Company (or for payment of fractional shares, the date of
the relevant Conversion Notice); or

               (iii) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
"Market Price Per Share" shall be an amount, not less than book value thereof as
at the end of the most recent fiscal year of the Company ending prior to the
date of the Conversion Notice; provided, however, in the case of this Section
4(b)(iii) payment of interest shall be paid only in cash by Company check and
not in Common Stock of the Common.

     5. RECLASSIFICATION, REORGANIZATION OR MERGER.

          In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon conversion of this Debenture) or in case of any sale, lease
or conveyance to another corporation of the property of the Company as an
entirety, the Company shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the right
thereafter by converting this Debenture at any time prior to the payment in full
of the Debenture, to acquire the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock which might have been acquired
upon conversion of this Debenture immediately prior to such reclassification,
change consolidation, merger, sale or conveyance. Any such provi sion shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Debenture. The foregoing
provisions of this Section 5 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances. In the event
that in connection with any such capital reorganization or reclassification,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of this
Section 5 hereof.

     6. REGISTRATION UNDER THE SECURITIES ACT OF 1933.

          The Company shall register certain of the shares of the Common Stock
which may be issued upon the conversion of this Debenture to the extent and as
provided for under the Debenture Acquisition Agreement between the Company and
the Holder, dated September 25, 1998. (the "Debenture Acquisition Agreement").

     7. REGULATION S.

<PAGE>   30

          This Debenture and the Common Stock issuable upon conversion or as
interest under this Debenture were issued under Regulation S under the
Securities Act of 1933, as amended, and may be transferred only as provided for
in the Debenture Acquisition Agreement.

     8. EVENTS OF DEFAULT.

          If one or more of the following described events shall occur (each an
"Event of Default"):

          (a) The Company shall fail to pay the principal of, or interest on,
this Debenture within five (5) days after the Holder has given written notice to
the Company that the same has become due; or

          (b) The Company shall fail to perform or observe any of the provisions
contained in any other Section of this Debenture or the Debenture Acquisition
Agreement and such failure shall continue for more than thirty (30) days after
the Holder has given written notice to the Company; or

          (c) Any material representation or warranty made in writing by or on
behalf of the Company in this Debenture shall prove to have been false or
incorrect in any material respect, or omits to state a material fact required to
be stated therein in order to make the statements contained therein, in the
light of the circumstances under which made, not misleading, on the date as of
which made, and the Company shall have failed to cure such false or incorrect
statement within thirty (30) days after the Holder has given written notice to
Borrower; or

          (d) The Company shall be adjudicated a bankrupt or insolvent, or admit
in writing its inability to pay its debts as they mature, or make an assignment
for the benefit of creditors; or the Company shall apply for or consent to the
appointment of a receiver, trustee, or similar officer for it or for all or any
substantial part of its property; or such receiver, trustee or similar officer
shall be appointed without the application or consent of the Company and such
appointment shall continue undischarged for a period of sixty (60) days; or the
Company shall institute (by petition, application, answer, consent or otherwise)
any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it under the laws of
any jurisdiction; or any such proceeding shall be instituted (by petition,
application or otherwise) against the Company and shall remain undismissed for a
period of ninety (90) days; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a substantial
part of the property of the Company and such judgment, writ, or similar process
shall not be released, vacated or fully bonded within ninety (90) days after its
issue or levy; or

          (e) A final judgment for money of over One Hundred Thousand

<PAGE>   31

($100,000) not covered by insurance shall be rendered against the Company and
if, within ninety (90) days after entry thereof, such judgment shall not have
been discharged, satisfied or execution thereof stayed pending appeal, or if,
within ninety (90) days after the expiration of any such stay, such judgment
shall not have been discharged or satisfied; or

          (f) The Company shall be enjoined, restrained or in any way prevented
by a court order from continuing to conduct all or any material part of its
business affairs;

          THEN, or at any time thereafter, and in each and every case:

               (1) Where the Company is in default under the provisions of
Section 8(d) hereof, the entire unpaid principal amount of the Debenture, all
interest accrued and unpaid thereon, and all other amounts payable to the Holder
hereunder shall automatically become and be forthwith due and payable without
offset or counterclaim of any kind and without presentment, demand, protest or
notice of any kind, and without regard to the running of the statute of
limitations, all of which are hereby expressly waived by the Company; and

               (2) In any other case referred to in this Section 8, the Holder
may, by written notice to the Company, declare the entire unpaid principal
amount of this Debenture, all interest accrued and unpaid hereon, and all other
amounts payable hereunder to be forthwith due and payable, whereupon the same
shall become immediately due and payable, without offset or counterclaim of any
kind and without presentment, demand, protest or further notice of any kind, and
without regard to the running of any statutes of limitation, all of which are
hereby expressly waived by the Company.

     Any declaration made pursuant to Section 8(2) hereof is subject to the
condition that, if at any time after the principal of this Debenture shall have
become due and payable, and before any judgment or decree for the payment of the
moneys so due, or any thereof, shall have been entered, all arrears of interest
upon this Debenture (except that Principal Sum of this Debenture which by such
declaration shall have become payable) shall have been duly paid, and every
Event of Default shall have been made good, waived or cured, then and in every
such case the Holder shall be deemed to have rescinded and annulled such
declaration and its consequences; but no such rescission or annulment shall
extend to or affect any subsequent Event of Default or impair any right
consequent thereon.

     9. CORPORATE OBLIGATION.

          It is expressly understood that this Debenture is solely a corporate
obligation of the Company and that any and all personal liability, either at
common law or in equity, or by constitution or statute, of, and any and all
rights and claims against, every stockholder, officer, or director, as such,
past, present or future, are expressly waived and released by the Holder as a
part of the consideration for the issuance hereof.

<PAGE>   32

     10. TRANSFER.

          Subject to the appropriate provisions of the Act and of Section 7
hereof, this Debenture or any portion of the principal amount hereof in One
Hundred Thousand Dollars ($100,000) increments, or multiples thereof (unless the
entire Principal Sum is being transferred), is transferable on the records of
the Company upon presentation of this Debenture, properly endorsed, at its
principal office; upon such presentation and transfer a new Debenture or
Debentures will be issued; provided, however, no transfer shall be made no any
competitors of the Company. For the purposes of payment and all other purposes,
the Company shall deem and treat the person in whose name this Debenture is
registered as the absolute owner hereof and the Company shall not be affected by
any notice to the contrary.

     11. MISCELLANEOUS.

          (a) Notwithstanding the foregoing, the Company promises to pay
interest after maturity (whether by acceleration or otherwise, and before as
well as after judgment) at the same rate as above provided prior to maturity on
balances, if any, then outstanding.

          (b) Interest under this Debenture shall be computed on the basis of a
thirty (30) day month and a year of 360 days for the actual number of days
elapsed.

          (c) In case at any time any Common Stock shall be listed on any stock
exchange or NASDAQ, the Company will list on such exchange or NASDAQ, and all
other exchanges where such stock or other stock, warrants, and securities at the
time issuable upon the conversion of this Debenture may be listed, and keep
listed thereon subject to listing requirements of such exchange or exchanges, an
official notice of issuance upon the conversion of this Debenture, all shares of
common stock and other stock and securities from time to time issuable upon such
conversion.

          (d) Unless otherwise specifically proved herein, any notice required
by this Agreement is effective and deemed delivered when faxed to the numbers
set forth herein and receipt of such fax is electronically confirmed. Any such
notice shall also be sent on the day such fax is sent (or if such day is not a
business day, the next business day by overnight courier), properly addressed.
Notices will be sent to the fax numbers and addresses set forth in this
Agreement, unless either party notifies the other of an fax and/or address
change in writing.

     IN WITNESS WHEREOF, the Company has caused this Debenture to be executed in
Calgary, Alberta, Canada as of the day and year first above written.

                                            JAWS TECHNOLOGIES INC.

<PAGE>   33

                                            By:_________________________________
                                            Its:________________________________

                                            By:_________________________________
                                            Its:________________________________

                       [Signatures Continued from Page 7]

                                            ____________________________________
                                            (Fax Number, including Area Code)

                                            ____________________________________
                                            (Contact Person)

                                            THOMSON KERNAGHAN & CO. LTD.

                                            By:_________________________________

                    (Address)

                    ____________________________________
                                   (City)             (State)         (Zip Code)

                                            ____________________________________
                                            (Fax Number, including Area Code)

                                            ____________________________________
                                            (Contact Person)

<PAGE>   34

                                CONVERSION NOTICE

TO:  JAWS TECHNOLOGIES INC.

     The undersigned Holder of this Debenture hereby irrevocably exercises the
option to convert $________________ of the Principal Sum of this Debenture into
shares of Common Stock of JAWS TECHNOLOGIES INC. in accordance with the terms of
this Debenture, or of such other kind of stock or other property as shall be
authorized under the terms of this Debenture, and directs that the shares or
other property issuable and deliverable upon the conversion, together with any
check in payment for fractional shares and any accrued and unpaid interest on
the portion being converted and any Debenture representing the unconverted
portion of this Debenture, be issued and delivered to the undersigned unless a
different name has been indicated below. If shares are to be issued in the name
of a person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto.

     The accrued and unpaid interest due upon the Principal Sum being converted
shall be paid in cash__ or Common Stock __. (Please check one of the blanks, if
no blanks are checked, the interest shall be paid in cash.)

     The date of this Conversion Notice is _______ ___, _____. The undersigned
has determined the closing bid price for the Common Stock of JAWS TECHNOLOGIES
INC. for the three trading days preceding the date of this [Notice of
Conversion] or of the [Date of Convertible Debenture] on the principal market
for such Common Stock, was $_____, $______ and $____, or an average of $____.
Therefore pursuant to Section 2(a) of the Debenture, the Conversion Price is
$_____ per share.

     If you want the stock certificate made out in another person's name, fill
in the form below and have your signature guaranteed: (Insert other person's
social security or tax I.D. no.)

            (Print or type other person's name, address and zip code)

               Date:_________________,___              Your Signature:
               (Sign exactly as your name appears on the face of this Debenture)
                                                  Signature Guarantee:

<PAGE>   35

                                 ASSIGNMENT FORM

To assign this Debenture, fill in the form below:
I or we assign and transfer this Security to
(insert assignee's social security or tax I.D. no.)

            (print or type other person's name, address and zip code)

                                                         and irrevocably appoint

______________________ agent to transfer this Debenture on the books of the Jaws
Technologies Inc. The agent may substitute another to act for him.

               Date:_________________,___              Your Signature:
               (Sign exactly as your name appears on the face of this Debenture)

                                                  Signature Guarantee:

NOTE: This Debenture and the Common Stock issuable upon conversion or as
interest under this Debenture were issued under Regulation S under the
Securities Act of 1933, as amended, and may be transferred only as provided for
in the Debenture Acquisition Agreement.

<PAGE>   36

                                    EXHIBIT C

     THESE SECURITIES SUBJECT TO THIS ESCROW AGREEMENT HAVE NOT BEEN REGISTERED
WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE. THE SECURITIES HAVE BEEN OFFERED PURSUANT TO A SAFE
HARBOR FROM REGISTRATION UNDER REGULATION S PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE
OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED
IN REGULATION S PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED
UNDER THE ACT, PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION
OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM
THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.

                                ESCROW AGREEMENT

     This Escrow Agreement is entered into this 25 day of September, 1998, by
and among JAWS TECHNOLOGIES INC. (the "Jaws") and THOMAS KERNAGHAN & CO.
LIMITED. ("Escrow Agent").

     1. Escrow

     The Company has filed a registration statement under the United States
Securities Act of 1933, as amended (the "Act") relating to the following shares
of Common Stock (the "Shares"), all of which are being placed in Escrow with the
Escrow Agent and in the Escrow Agent's name:

          (a) 9,500,000 shares in the name of Escrow Agent which may be issued
upon conversion a 10% Convertible Debenture for up to $2,000,000 , dated
September 25, 1998 (the "Debenture"), and issued to the Escrow Agent (the
"Debenture Shares");

          (b) 1,071,429 shares in the name of Escrow which may be issued upon
the exercise of $300,000 of Warrants, dated September 25, 1998 (the "Warrants"),
and issued to the Escrow Agent (the "Warrant Shares"); and

          (c) 357,143 shares in the name of the Escrow Agent which may be

<PAGE>   37

issued upon the exercise of $100,000 Warrants, dated September 25, 1998 (the
"Escrow Agent Warrants"), and issued to Escrow Agent (the "Escrow Agent
Shares").

     For convenience one total share certificate for a total of 10,928,572
shares has been issued to the Escrow Agent.

     Upon the opening of the Escrow, the Escrow Agent shall place the Shares
with the Depository Trust Company.

     Copies of the form of the Debentures, the Warrants and the Escrow Agent
Warrants have also been placed in Escrow.

     2. Release of the Shares

     The Escrow Agent shall release the Shares from Escrow as follows:

          (a) Upon any conversion of the Debenture, a copy of the Conversion
Notice attached hereto shall be promptly faxed to the Company by the Escrow
Agent simultaneously as it is sent by overnight courier service to the Company.
Unless the Escrow Agent receives a written objection sent by facsimile within
forty-eight hours of sending the fax to the Company provided for in the
immediately preceding sentence and the Company takes the action provided for in
Section 6 hereof within such forty-eight hours, the Escrow Holder shall promptly
release to the Escrow Agent, the number of Debenture Shares being acquired upon
conversion of the Debenture as set forth in the Conversion Notice.

          (b) Upon any exercise of the Warrants, a copy of the Exercise Form
attached hereto and evidence of payment for the Shares being exercised shall be
promptly faxed by the Escrow Agent simultaneously as such Exercise Form and
payment is sent by overnight courier service to the Company. Unless the Escrow
Agent receives a written objection sent by facsimile within forty-eight hours of
sending the fax to the Company provided for in the immediately preceding
sentence and the Company takes the action provided for in Section 6 hereof
within such forty-eight hours, the Escrow Holder shall promptly release to the
Escrow Agent, the number of Shares being acquired upon exercise of the Warrants
as set forth in the Exercise Form.

          (c) Upon any exercise of the Escrow Agent Warrants, a copy of the
Exercise Form attached hereto and evidence of payment for the Stark Shares being
exercised shall be promptly faxed to the Company by the Escrow Agent
simultaneously as such Exercise Form and payment is sent by overnight courier
service to the Company. Unless the Escrow Agent receives a written objection
sent by facsimile within forty-eight hours of sending the fax to the Company
provided for in the immediately preceding sentence and the Company takes the
action provided for in Section 6 hereof within such forty-eight hours, the
Escrow Agent, the number of Escrow Agent Shares being acquired upon exercise of
the Escrow Agent Warrant as set forth in the Exercise Form.

<PAGE>   38

          (d) If prior to the conversion of a Debenture or the exercise of the
Warrants or the Escrow Agent Warrants, such securities have been transferred,
then:

               (i) the transferee shall become a party to this Escrow Agreement
by executing an amended thereto reasonably acceptable to the Company and the
Escrow Agent;

               (ii) the transferee must not be in the United States or a U.S.
Person (all as defined in Regulation S as promulgated under the United States
Securities Act of 1933) and the transfer must comply with the terms of the
respective security and with the terms and conditions of the Debenture
Acquisition Agreement between the Company and the Escrow Agent, dated September
25, 1998 and further, any exercise of the Warrants and the Escrow Agent Warrants
must be in strict compliance with their respective terms; and

               (iii) upon conversion of the Debenture, the Conversion Notice and
upon exercise of the Warrants or the Escrow Agent Warrants, the Exercise Form
and the payment shall be delivered to the Escrow Agent and the Escrow Agent
shall then promptly comply with Section 2(a), (b) or (c) as is applicable,

     3. Dividends and Other Distributions

     As long as any Shares are held in Escrow pursuant to this Agreement, then
no dividends or other distributions shall be payable with respect to such
Shares. However, any shares of Common Stock resulting from a stock split,
reverse stock split or stock dividend which would be receivable upon exercise of
the Warrants or the Escrow Agent Warrant shall be placed in Escrow.

     4. Voting Rights

     During the term of this Agreement, and so long any Shares are in Escrow, no
one may vote the Shares on any matter.

     5. Payment of the Debentures and Expiration of the Warrants

     Upon the payment in full of the Debentures as evidenced by a writing signed
by the Company and the then holder, the Escrow Agent shall release all the
remaining Debenture Shares relating to such Debenture and have the Debenture
Shares transferred into the name of the Company. Upon the expiation of the
Warrants or the Escrow Agent Warrants, the Escrow Agent shall release all the
remaining Warrant Shares or the Escrow Agent Shares, respectively, and have the
Warrant Shares or the Escrow Agent Shares, respectively, into the Company. Any
such transfer of the Shares into the name of the Company may be accomplish by
transfer the Shares for an account of the Company through the Depository Trust
Company, provided that the Company so notifies the Escrow Agent of such account
and the information

<PAGE>   39

needed to effect such a transfer.

     6. Objections

          (a) If the Company shall notify by fax the Escrow Agent that it has
any objections to releasing any of the Shares pursuant to Section 2 hereof, the
Company shall also within the respective forty-eight hour period provided for in
Sections 2(a), (b) or (c), as the case may be also deliver to the Escrow Agent
(i) an Certificate signed by an Officer of the Company setting forth the reasons
for the objection, (ii) an opinion from the counsel to the Company, Jeffer,
Mangles, Butler and Marmaro, LLP, that the conversion or the exercise, as the
case may be, would violate either the United States Securities Act of 1933, as
amended, or the United States Securities Exchange Act of 1934, as amended, and
an indemnity bond from an person licensed to issue such bonds in Ontario, Canada
in an amount equal to the number of Shares being objected to being released from
Escrow time Two Hundred Percent of the average closing bid price of the Common
Stock of the Company on the principal market for such Common Stock for the three
(3) trading days immediately preceding the date of the Conversion Notice or the
Exercise Form, as the case may, with such bond lasting until the dispute is
settled by agreement of the parties thereto or a final action of a court of
competent jurisdiction without the right to appeal or the expiration of the
right to appeal.

          (b) If the Escrow Agent does NOT receive within such forty-eight hour
period all of the original signed documents and bond provided for in Section
6(a) hereof, it shall at the end of such forty-eight hour period, release the
Shares in question as requested in the respective Conversion Notice or Exercise
Form.

          (c) If the Escrow Agent does receive within such forty-eight hour
period all of the original signed documents and bond provided for in Section
6(a) hereof, it shall at the end of such forty-eight hour period, if the
objection has not be withdrawn or the parties to the Debenture, the Warrants or
the Escrow Agent Warrants, as the case may be, otherwise agree, shall surrender
the Shares in question to an appropriate court in Toronto, Ontario and submit
the issue to the court to resolve in the nature of an interpleader action.

     7. Escrow Agent

     Escrow Agent, when acting as Escrow Agent, shall not be liable for any
action taken or omitted by it in good faith, and believed by it to be authorized
or within the rights or powers conferred upon it by this Agreement, and may rely
and shall be protected in acting or refraining from acting in reliance upon any
notice or certificate, instrument, request, paper or other documents believed by
it to be genuine and made, sent, signed or presented by the proper party or
parties. The Escrow Agent, acting as Escrow Agent. shall not be liable for
anything it does or may not do as Escrow Agent under this Agreement, except for
its own gross negligence, willful misconduct.

     Escrow Agent shall not be responsible for the validity or sufficiency of
any

<PAGE>   40

stock certificate or other instrument evidencing any security delivered to
it pursuant hereto, or for the identity or authority of any person delivering
any such certificate or other instrument to it.

     Until Escrow Agent shall receive from some person interested in this
Agreement written notice of any event upon which the right to receive any
release, distribution or payment may depend, it shall incur no liability for
actions taken in good faith.

     Escrow Agent shall not be obligated to take any action to enforce this
Agreement, or to appear in, prosecute or defend any action or legal proceeding
or to file any income or other tax return if any such action, in its opinion,
would or might involve cost, expense, loss or liability unless, and as often as
required by it, it shall be furnished with security and an indemnity
satisfactory to it from the Company against all such cost, expense, loss or
liability.

     Escrow Agent shall not be responsible for the validity of any provision of
this Agreement or for the execution thereof by any other party, or for the truth
of any recitals or other statements of fact herein contained. The Escrow Agent
shall be considered as a fiduciary under this Agreement and is not required or
entitled to act in any capacity hereunder other than as a Escrow Agent.

     8. Notices

     Except as otherwise provided herein, all notices, instructions or other
communications required or permitted hereunder shall be in writing and sent by
registered mail, postage prepaid, addressed as follows:

     To Jaws Technologies Inc.

     603-7 Avenue SW, Suite 380
     Calgary, Alberta Canada T2P 2T5
     Fax: (403) 508-5058
     Tel:  (403) 508-5055
     Attn: Robert Kubbernus, President and CEO

     To Thomson Kernaghan & Co. Limited:

     365 Bay Street,
     Toronto, Ontario Canada M5H 2V2
     Fax: 416-367-8055
     Voice: 416-860-8800
     Attn: Robert F. Wilson

or such other address, telephone numbers or contact persons as shall be
furnished in writing by

<PAGE>   41

such party to the other parties hereto. Any such notice, instruction or
communication shall be deemed to have been given three (3) business days after
the date mailed by registered mail or if sent by fax, upon electronic
confirmation or receipt.

     9. Deliveries

     Escrow Agent shall make the deliveries of the Shares pursuant to this
Agreement at the addresses set forth herein, by overnight deliver service with
the ability to trace the delivery or through the Depository Trust Company
accounts.

     10. Successors and Assigns

     This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.

     11. Choice of Law and Venue.

     This Agreement shall be governed by and construed under the laws of the
Province of Alberta, Canada, without regard to choice of laws, in force from
time to time. Any proceeding arising out of this Agreement shall be brought in
Ontario, Canada.

     12. Counterparts

     This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original.

     13. Attorneys' Fees

     If an action is brought to enforce the terms and provisions of this
Agreement, the prevailing party in said action shall be entitled to reasonable
attorneys' fees and costs of suit. This Agreement is subject to arbitration as
provided for in that Debenture Acquisition Agreement between the Company and
Escrow Agent of even date.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.

     The Company:                           JAWS TECHNOLOGIES INC.

                                            By: ________________________________
                                                _________________, _____________

     Escrow Agent:                          THOMAS KERNAGHAN & CO. LTD.

                                            By: ________________________________
                                                _________________, _____________

<PAGE>   42

                                    EXHIBIT D

             Void after 5:00 p.m. Alberta Time, on October 31, 2001
                   Warrant to Purchase Shares of Common Stock

     THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE
SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER
REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S
PROMULGATED UNDER THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT,
PURSUANT TO REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THE SELLER IS PROVIDED WITH OPINION OF
COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.

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

               WARRANT TO PURCHASE 357,143 SHARES OF COMMON STOCK

                                       OF

                             JAWS TECHNOLOGIES INC.
                        --------------------------------

     This is to Certify That, FOR VALUE RECEIVED, THOMSON KERNAGHAN & CO. LTD.,
an Ontario corporation , or assigns ("Holder"), is entitled to purchase, subject
to the provisions of this Warrant, from JAWS TECHNOLOGIES INC., a Nevada
corporation ("Company"), the fully paid, validly issued and nonassessable shares
of Common Stock, $0.001 par value, of the Company ("Common Stock") at any time
or from time to time during the period from the date hereof, through and
including October 31, 2001, but not later than 5:00 p.m. Calgary, Alberta Time,
on October 31, 2001 ("Exercise Period") at an initial exercise price equal to
$0.28 per share. The total number of shares of Common

<PAGE>   43

Stock to be issued upon exercise of this Warrant shall be 357,143 shares. The
price to be paid for each share of Common Stock may be adjusted from time to
time as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the respective exercise price of a share of Common
Stock in effect at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price." This Warrant is being issued
pursuant to the Company's private placement consisting of up to $2,000,000
principal amount of a 10% Convertible Debenture (the "Debenture") and a
Debenture Acquisition Agreement dated as of September 25, 1998 between the
Company and Thomson Kernaghan & Co. Ltd. All dollar references are to United
States Dollars.

          (a) Exercise of Warrant. This Warrant may be exercised in whole or in
part at any time or from time to time during the Exercise Period; provided,
however, that (i) if the last day of the Exercise Period is a day on which
banking institutions in the Province of Alberta are authorized by law to close,
then the Exercise Period shall terminate on the next succeeding day which shall
not be such a day, and during such period the Holder shall have the right to
exercise this Warrant into the kind and amount of shares of stock and other
securities and property (including cash) receivable by a holder of the number of
shares of Common Stock into which this Warrant might have been exercisable
immediately prior thereto. This Warrant may be exercised by presentation and
surrender hereof to the Escrow Agent pursuant to an Escrow Agreement between the
Company and Thomson Kernaghan & Co. Ltd., dated September 25, 1998, at its
principal office, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of Warrant Shares
specified in such form. As soon as practicable after each such exercise of the
Warrants, but not later than seven (7) days from the date of such exercise, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to purchase
the balance of the Warrant Shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common Stock
shall not then be physically delivered to the Holder.

          THIS WARRANT MAY ONLY BE EXERCISED (i) BY A PERSON WHO IS NOT A U.S.
PERSON (AS DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON, (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE, AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED

<PAGE>   44

OUTSIDE THE UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE
WARRANT CAN BE EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND
SUBSTANCE OF WHICH IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY
PRIOR TO EXERCISE OF THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT
REQUIRED, OR THE UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933.

          (b) Reservation of Shares. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants.

          (c) Fractional Shares. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:

               (1) If the Common Stock is listed on a National Securities
Exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the NASDAQ system, the current market value shall be the last
reported sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or if no such sale is
made (or reported) on such day, the average closing bid and asked prices for
such day on such exchange or system; or

               (2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value shall be the mean of the last
reported bid and asked prices reported by the Electronic Bulletin Board or
National Quotation Bureau, Inc. on the last business day prior to the date of
the exercise of this Warrant; or

               (3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
market value shall be an amount, not less than book value thereof as at the end
of the most recent fiscal year of the Company ending prior to the date of the
exercise of the Warrant, determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.

          (d) Exchange, Transfer, Assignment or Loss of Warrant. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company for other warrants of different
denominations entitling the holder thereof to purchase in the aggregate the same
number of shares of Common Stock purchasable hereunder. Upon surrender of this
Warrant to the Company at its principal office, with the Assignment Form annexed
hereto duly executed and funds sufficient to pay and transfer tax, the Company
shall, without charge, execute and deliver a new Warrant in the name of the
assignee named in such instrument of assignment and this Warrant shall promptly
be canceled. This Warrant may be divided or combined with other warrants which
carry the

<PAGE>   45

same rights upon presentation hereof at the principal office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt of the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.

     This Warrant and the Common Stock issuable upon exercise of this Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only as provided for in the Debenture Acquisition Agreement
between the Company and the Holder, dated September 25, 1998.

          (e) Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.

          (f) Anti-Dilution Provisions. The respective Exercise Price in effect
at any time and the number and kind of securities purchasable upon the exercise
of the Warrants shall be subject to adjustment from time to time upon the
happening of certain events as follows:

               (1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the respective Exercise
Price in effect at the time of the record date for such dividend or distribution
or of the effective date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined by multiplying the
respective Exercise Price by a fraction, the denominator of which shall be the
number of shares of Common Stock outstanding after giving effect to such action,
and the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.

               (2) Whenever the respective Exercise Price payable upon exercise
of each Warrant is adjusted pursuant to Subsection (1) above, the number of
Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the respective number of Shares initially issuable upon
exercise of this Warrant by the respective

<PAGE>   46

Exercise Price in effect on the date hereof and dividing the product so obtained
by the respective Exercise Price, as adjusted.

               (3) No adjustment in the respective Exercise Price shall be
required unless such adjustment would require an increase or decrease of at
least one cent ($0.01) in such price; provided, however, that any adjustment
which by reason of this Subsection (3) is not required to be made shall be
carried forward and taken into account in any subsequent adjustment required to
be made hereunder. All calculations under this Section (f) shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section (f) to the contrary notwithstanding, the Company shall
be entitled, but shall not be required, to make such changes in the respective
Exercise Price, in addition to those required by this Section (f), as it shall
determine, in its sole discretion, to be advisable in order that any dividend or
distribution in shares of Common Stock, or any subdivision, reclassification or
combination of Common Stock, hereafter made by the Company shall not result in
any Federal Income tax liability to the holders of Common Stock or securities
convertible into Common Stock (including the Warrants).

               (4) In the event that at any time, as a result of an adjustment
made pursuant to Subsection (1) above, the Holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than Common
Stock, thereafter the number of such other shares so receivable upon exercise of
this Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subsections (1) to (3) inclusive above.

               (5) Irrespective of any adjustments in the respective Exercise
Price or the related number or kind of share purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue to express the
same price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Agreement.

          (g) Officer's Certificate. Whenever the respective Exercise Price
shall be adjusted as required by the provisions of the foregoing Section (f),
the Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office, an officer's certificate showing the adjusted
respective Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of related additional shares of Common Stock, if any, and such other
facts as shall be necessary to show the reason for and the manner of computing
such adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
executed and delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder or any such holder.

          (h) Notices to Warrant Holders. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the

<PAGE>   47

Common Stock or (ii) if the Company shall offer to the holders of Common Stock
for subscription or purchase by them any share of any class or any other rights
or (iii) if the capital reorganization of the Company, reclassification of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least fifteen days prior the date specified in
(x) or (y) below, as the case may be, a notice containing a brief description of
the proposed action and stating the date on which (x) a record is to be taken
for the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up. The failure to give such notice shall not otherwise effect the
action taken by the Company.

          (i) Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof.

          (j) Registration Under the Securities Act of 1933.

          The shares of Common Stock underlying this Warrant shall be registered
under the United States Securities Act of 1933, as amended, to the extend and
subject to the provisions of the Debenture.

<PAGE>   48

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by the Undersigned, each being duly authorized, as of the date below.

                                            JAWS TECHNOLOGIES INC.

                                            ____________________
                                            By: Robert Kubbernus
                                            Its:President

Dated: September 25, 1998

ATTEST:

__________________________________
_______________________, Secretary

<PAGE>   49

                                  EXERCISE FORM

THIS WARRANT MAY ONLY BE EXERCISED (i) BY A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED IN REGULATION S PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED); (ii) IF NOT EXERCISED ON BEHALF OF A U.S. PERSON; (iii) IF NO U.S.
PERSON HAS ANY INTEREST IN THE WARRANTS BEING EXERCISED OR THE UNDERLYING
SECURITIES TO BE ISSUED UPON EXERCISE; AND (iv) OUTSIDE THE UNITED STATES AND
THE WARRANT SHARES UNDERLYING THE WARRANTS ARE TO BE DELIVERED OUTSIDE THE
UNITED STATES. IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANT CAN BE
EXERCISED ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
IS ACCEPTABLE TO THE COMPANY, IS DELIVERED TO THE COMPANY PRIOR TO EXERCISE OF
THE WARRANTS BEING EXERCISED THAT REGISTRATION IS NOT REQUIRED, OR THE
UNDERLYING SECURITIES DELIVERED UPON EXERCISE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.

     The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing $_____________ worth of the shares of Common Stock of
Jaws Technologies Inc. at $_______ per share for ___________ shares of Common
Stock.

                                    --------

                     INSTRUCTIONS FOR REGISTRATION OF STOCK

Name _______________________________________________________
         (Please typewrite or print in block letters)

Address ____________________________________________________

Social Security of Federal I.D. Number: __________________________

THE UNDERSIGNED REPRESENTS AND WARRANTS TO JAWS TECHNOLOGIES INC. THAT THE
CONDITIONS FOR EXERCISE OF THE WITHIN WARRANT SET FORTH IN THE FIRST SENTENCE OF
THE FIRST PARAGRAPH ABOVE HAVE BEEN FULLY COMPLIED WITH AND ANY NO U.S. PERSON
HAS ANY INTEREST IN THE WARRANT OR THE WARRANT SHARES.

        Signature _____________________________________________
        (Sign exactly as your name appears on the first page of this Warrant)

<PAGE>   50

                                 ASSIGNMENT FORM

               FOR VALUE RECEIVED, _____________________________________________
hereby sells, assigns and transfers unto
Name ___________________________________________________________________________
             (Please typewrite or print in block letters)
Address ________________________________________________________________________
Social Security of Federal I.D. Number: ________________________________________
the right to purchase shares of Common Stock of Jaws Technologies Inc.
represented by this Warrant as to which such right is exercisable and does
hereby irrevocably constitute and appoint ______________________________________
Attorney, to transfer the same on the books of Jaws Technologies Inc. with full
power of substitution in the premises.

Date __________ __, ______

Signature _____________________________________
          (Sign exactly as your name appears on
           the first page of this Warrant)

NOTE: This Warrant and the Common Stock issuable upon exercise of this Warrant
were issued under Regulation S under the Securities Act of 1933, as amended, and
may be transferred only as provided for in the Debenture Acquisition Agreement
between the Company and the Holder, dated _____________, 1998.EXHIBIT 4.3

THESE  SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE  COMMISSION  OR  THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES
ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
PROMULGATED  UNDER  THE  SECURITIES  ACT  OF  1933,  AS AMENDED (THE "ACT"). THE
SECURITIES  ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
OR  TO  U.S.  PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER
THE  ACT)  UNLESS  THE  SECURITIES  ARE  REGISTERED  UNDER  THE ACT, PURSUANT TO
REGULATION  S  OR  PURSUANT  TO  AVAILABLE  EXEMPTIONS  FROM  THE  REGISTRATION
REQUIREMENTS  OF  THE  ACT AND THE SELLER IS PROVIDED WITH OPINION OF COUNSEL OR
OTHER  SUCH  INFORMATION  AS  IT  MAY  REASONABLY  REQUIRE  TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY  BE  MADE  ONLY  IN  COMPLIANCE  WITH  THE  ACT.

                               AMENDMENT NO. 1 TO
                          DEBENTURE PURCHASE AGREEMENT

     THIS  AMENDMENT  NO. 1 TO DEBENTURE PURCHASE AGREEMENT (the "Agreement") is
made  and  entered  into  as of April 27, 1999, by and between JAWS TECHNOLOGIES
INC.,  a  Nevada  corporation  ("Seller")  and  THOMSON  KERNAGHAN & CO. LTD, an
Ontario  corporation  ("Buyer"),  with  respect  to  the  following  facts:

     A.     Buyer  and  Seller  originally  entered into a Debenture Acquisition
Agreement  dated  September  25,  1998  respecting  a $2,000,000 10% Convertible
Debenture  (the  "Debenture"). To this date $1,520,000 has been drawn down (with
$210,000  thereof  previously  converted  to  common stock) leaving a balance of
$480,000.  The  parties desire to clarify conversion prices and other terms with
respect  to the previously drawn down debentures and also to restate their terms
and  intentions with respect to an additional $3,000,000 debenture facility, and
to  restate the terms of portions of the convertible debentures previously drawn
down  and  still  outstanding.

     B.     Seller  desires  to sell to the Buyer, and Buyer desires to purchase
from  the Seller an aggregate of up to $5,000,000 of a 10% Convertible Debenture
(the  "Debentures")  of  Seller  in  the  form  of Exhibit B and an aggregate of
$1,000,000 of Warrants of Seller in the forms of Exhibit A and Exhibit D hereto,
respectively, $600,000 of which may be converted at $0.28 per share and $400,000
of  which  may be converted at $0.65 per share (collectively, the "Securities"),
upon  the  terms  and  conditions  as  set  forth  in  this  Agreement.

     NOW,  THEREFORE,  in  consideration  of  the foregoing facts and the mutual
covenants  and agreements contained herein, the parties hereby agree as follows:

     1.     PURCHASE  AND  SALE OF SECURITIES. Seller hereby sells to the Buyer,
and  Buyer  hereby  purchases  the  Securities  from  Seller  on  the  terms and
conditions  stated  herein.  Seller  is  acquiring the Securities as Nominee and
intends  to  resell  the  Securities outside the United States to certain of its
customers  who  are  not  U.S.  persons.

     2.     PURCHASE  PRICE. The total purchase price (the "Purchase Price") for
the Securities shall be up to Five Million Dollars ($5,000,000), payable in cash
in  accordance  with  the  terms,  conditions  and  procedures set forth herein.

     3.     TRANSFER  OF  SECURITIES  AND  DELIVERY  OF  PURCHASE  PRICE.

     3.1     (a)     As  of  September  25,  1998, ("Initial Funding Date"), the
Buyer  purchased  Two  Hundred  Thousand  Dollars  ($200,000)  of Debentures and
Seller:

     (i)     Filed  on an appropriate form with the United States Securities and
Exchange Commission (the "SEC") to register its Common Stock under Section 12(g)
of  the  Securities  Exchange  Act  of  1934,  as  amended, and the registration
statement with the SEC under the Securities Act of 1933, as amended, as provided
for  in  Section  6  hereof, which registration statements contains the required
clean opinion on the financial statements of the Seller by Ernst & Young and was
reviewed  by  United  States securities counsel for the Seller, Jeffer, Mangels,
Butler  &  Marmaro  LLP;  and

     (ii)     Provided  on the opinion of the Seller's counsel, Jeffer, Mangels,
Butler  and  Marmaro, LLP to the effect that the Seller is duly incorporated and
has  the  corporate power to enter into this Agreement and the Exhibits thereto,
that  this  Agreement and the Exhibits thereto that have been entered into as of
the  Initial  Closing  Date  have  been duly approved by all necessary action on
behalf of the Seller and this Agreement and such Exhibits are binding agreements
effective  according  to  their  respective  terms  except  for  bankruptcy  and
equitable  principal.

     The amount advanced was represented by a Debenture in the form of Exhibit B
hereto  for  the  amount advanced. The Seller also delivered to the Buyer on the
Initial  Funding  Date,  Warrants for the purchase of 1,071,429 shares of Common
Stock  in  the  form  of  Exhibit  A  hereto.

     (b)     After  the  Initial  Funding  Date,  one or more Subsequent Funding
Dates  occurred  in  which  the  Buyer purchased an additional One Million Three
Hundred  Twenty  Thousand  Dollars  ($1,320,000)  of  Debentures.

     3.2     (a)     On  the Initial Funding Date, Seller (i) paid a finance fee
to  the Buyer, in an amount equal to ten percent (10 %) of the Principal Sum (as
defined  in the Debenture) funded on the Initial Funding Date, (ii) paid Buyer's
reasonable  attorney's  fees and costs incurred in entering into this Agreement,
(but  not  more than $10,000) against detailed invoices, and (iii) issued to the
Buyer,  for  Buyer's own account, $100,000 of Warrants of the Seller exercisable
at  a  per  share  price  equal  to the average of the closing bid prices of the
Common  Stock  of the Seller as quoted on the NASD Electronic Bulletin Board for
the  three  trading  days  prior to the Initial Funding Date, Twenty-Eight Cents
($0.28),  in  the  form  of  Exhibit  D  hereto (the "Buyer Warrants"). For each
funding  following  the Initial Funding Date and until $2,000,000 has been drawn
upon,  Seller shall pay a finance fee in an amount equal to ten percent (10%) of
the  sum  funded  on  such  date.

     (b)     Upon  the  first funding following the filing of Amendment No. 2 of
the  Seller's  SB-2  Registration  Statement  ("Amendment  No. 2 Funding Date"),
Seller  shall  issue  Warrants  in  the form of Exhibit A hereto for $600,000 of
Common  Stock  at  an exercise price equal to sixty five cents ($0.65) per share
and  shall  pay  to  the  Buyer,  for  Buyer's  own  account, Buyer's reasonable
attorney's fees and costs incurred in entering into this Agreement (but not more
than  $10,000)  against  detailed  invoices.

     3.3     For  each  funding following a draw down of the initial Two Million
Dollars  ($2,000,000)  contemplated  in  the  Debenture,  the Seller shall pay a
finance  fee  to the Buyer, in an amount equal to eight percent (8 %) of the sum
that is funded, thirty-seven point five percent (37.5 %) of which may be paid by
the issuance of shares of Common Stock which may subsequently be resold pursuant
to  an  exemption  under  Rule  144.  Such  shares shall be issued at a value of
seventy-eight  percent  (78  %)  of the average closing price for the three days
preceding  the  funding  date  on the particular financing or another conversion
price  determined  by  the  parties  for  such  funding.

     3.4     On  the Initial Funding Date, the Seller and Buyer entered into the
Escrow  Agreement  in  the  form  of  Exhibit C hereto, with the Buyer as Escrow
Agent.

     3.5     On  each Amendment No. 2 Funding Date for all advances in excess of
the  Two Hundred Thousand Dollars ($200,000) referred to in Section 3. 1 (a) and
the  $720,  000  referred  to  in  Section  3. 1 (b) additional funding shall be
provided  up to an aggregate total of Five Million Dollars ($5,000,000). For the
Six  Hundred  Thousand  Dollars  ($600,000)  advanced  on  April  19,  1999, the
conversion  price  to  be  reflected in the Convertible Debenture shall be sixty
five  cents  ($0.65)  per  share. With respect to any purchases of the remaining
$3,480,000, the conversion price shall be a fixed forty cents ($0.40) per share,
unless the parties agree to a higher conversion price prior to the issuance of a
debenture.

     (a)     An  Amendment No. 2 Funding Date will occur on the 30th day (or the
next  business day if such 30th day is not a Business Day as defined in the form
of  debenture)  after  the  Buyer  receives a written request from the Seller to
advance  additional  funds  with such written request being sent by facsimile to
the  Buyer  followed  up  in  writing  by  over-night  courier  service;

     (b)     Notwithstanding any other provision hereof, the Buyer at a proposed
subsequent funding date is not required to advance any additional amounts to the
Seller  if the Form 10 or Form I OSB Registration Statement described in Section
3.  1  (a)  hereof has not become effective under the Securities Exchange Act of
1934,  as  amended,  and  the Registration Statement under the Securities Act of
1933,  as  amended  as  provided  for  in Section 6 hereof has become effective.

     4.     REPRESENTATIONS  AND  WARRANTIES  OF  THE  SELLER. The Seller hereby
represents  and  warrants  to  the  Buyer  as  follows:

     4.1     Any  Common  Stock  of  Seller  issuable  upon  conversion of or as
payment  of interest pursuant to the Debentures and the exercise of the Warrants
and  the  Buyer's  Warrants,  will  be  duly  and  validly issued fully paid and
nonassessable  Common  Stock  of  the  Seller.

     4.2     The Seller is a corporation duly organized, validly existing and in
good  standing  under  the  laws  of  the  State  of Nevada. The Seller has full
corporate  power and authority to own and operate its properties and assets, and
to carry on its business as presently conducted and as proposed to be conducted.
The  Seller  is  duly  qualified to do business as a foreign corporation in each
jurisdiction  in  which  the  failure  to  be so qualified could have a material
adverse  effect on the Seller. The Seller has furnished the Buyer or its special
counsel  with true, correct and complete copies of its Articles of Incorporation
and  By-laws,  as  amended,  as  in  effect  on  the  date  hereof.

     4.3     The  Seller  has  and  will  have  at  each Amendment No. 2 Funding
Initial  Date,  all requisite legal and corporate power and authority to execute
and  deliver  this  Agreement  and  the  Exhibits  hereto, to sell and issue the
Securities  and  the  Buyer's  Warrants  and  all  Common  Stock  underlying the
Securities,  the  Buyer's  Warrants, hereunder, and to carry out and perform its
obligations  under  the  terms  of  this  Agreement  and  the  Exhibits  hereto.

     4.4     The  authorized  capital  stock  of  the  Seller  consists  of  (a)
95,000,000  shares  of  Common  Stock,  par  value  $.001  per  share,  of which
10,612,317  were  issued and outstanding as of March 31, 1999 and, (b) 5,000,000
shares  of  Preferred Stock, par value $-001 per share, none of which are issued
and  outstanding  immediately prior to the Initial Funding Date. Schedule 4.4(a)
sets  forth  a  true  and correct list of the current stockholders of the Seller
indicating the number of shares of each class of the Seller's stock held by each
such  stockholder.  Except  as set forth on Schedule 4.4(b), the Seller does not
have  any  authorized  or outstanding options, warrants, convertible debentures,
rights or other securities exercisable for or convertible into any capital stock
of  any of the Seller. Except for rights granted under this Agreement, no person
is  entitled  to any preemptive right or right of first refusal or similar right
with respect to any issuance of capital stock or other securities by the Seller.
Except  for  the  Seller's  obligations  under  this  Agreement,  there  are  no
outstanding  obligations  of the Seller to redeem, purchase or otherwise acquire
capital  stock or other securities of any corporation. Except as provided herein
no  person  has  any  right  to require the Seller to register any shares of its
capital  stock  for  sale  pursuant  to  the Securities Act of 1933, as amended.

     4.5     All  corporate  action on the part of the Seller, its directors and
stockholders  necessary  for  the  authorization,  execution,  delivery  and
performance  of this Agreement and the Exhibits hereto, the authorization, sale,
issuance  and delivery of the Securities the Buyer's Warrants and all underlying
Common  Stock  and  the performance of all of the Seller's obligations hereunder
and  under  each  of the Exhibits hereto has been duly taken by the Seller. This
Agreement,  when  executed and delivered by the Seller, constitutes, and each of
the Exhibits thereto shall, when executed and delivered, constitute, a valid and
binding  obligation  of  the  Seller, enforceable in accordance with their terms
except  for  bankruptcy  and equitable remedies. The Common Stock when issued in
compliance  with  the  Securities  and  the  Buyer's  Warrants, shall be validly
issued,  fully  paid and non-assessable. The Securities and the Buyer's Warrants
are  free  of any liens claims or encumbrances; provided, however, that the will
be  subject  to  restrictions  on transfer under applicable state and/or federal
securities  laws  as set forth herein. The issuance of the Securities or Buyer's
Warrants  will  not  be  subject  to  any  preemptive  rights or rights of first
refusal,  or  result  in  any  default  of,  or  conflict  with, the Articles of
Incorporation  or  Bylaws  of the Seller, any contract or agreement to which the
Seller  is a party or by which it is bound or any other obligation or commitment
of  the  Seller.

     4.6     The Seller has delivered to the Buyer the audited balance sheet and
statements  of  operations and cash flows of the Seller as of and for the period
ended  December  31, 1998 (the "Financial Statements"). The Financial Statements
are complete and correct and have been prepared in accordance with the books and
records of the Seller on a consistent basis. The Financial Statements accurately
set  out,  present  fairly and describe the consolidated financial condition and
operating  results  of  the  Seller  as  of  the  dates, and during the periods,
indicated  therein.

     4.7     Except  as  set  forth  in  Schedule  4.7 hereto, the Seller has no
liabilities  or  obligations  of  any  kind,  absolute, contingent or otherwise,
except  (a)  the  liabilities  and  obligations  set  forth  in  the  Financial
Statements, (b) liabilities with respect to equipment leases entered into in the
ordinary course of business, and (c) liabilities and obligations which have been
incurred subsequent to December 31, 1998, in the ordinary course of business and
consistent  with  past  practice.

     4.8     The  Seller  has  good  and  marketable title to its properties and
assets,  and has good title to all its leasehold interests, in each case subject
to  no  lien,  claim or encumbrance other than (a) the lien of current taxes not
yet  due  and payable, (b) possible minor liens and encumbrances which do not in
any  case  or in the aggregate materially detract from the value of the property
subject  thereto  or  materially  impair the operations of the Seller, and which
have  not  arisen  otherwise than in the ordinary course of business. The assets
and  properties  of  the Seller are adequate to conduct the operations currently
conducted  and  proposed  to  be conducted by it. The Seller enjoys peaceful and
undisturbed  possession  under  all  leases under which it is operating, and all
said leases are valid and subsisting and in full force and effect. The leasehold
improvements  of  the  Seller  and  all  of  their  tangible  personal property,
machinery,  equipment,  fixtures  and inventories used in the ordinary course of
business are in good repair and in good operating condition, reasonable wear and
tear  excluded.

     4.9     The  Seller  is  not  in  violation  of any term of its Articles of
Incorporation  or  Bylaws, or of any material term or provision of any mortgage,
indebtedness,  indenture,  contract,  agreement, instrument, judgment or decree,
including  without limitation any Material Contract. The Seller is in compliance
with  all  judgments,  decrees,  governmental  orders, laws, statutes, rules and
regulations  by  which  it  is  bound or to which it or any of its properties or
assets  is subject, except where the failure to comply would not have a material
adverse  effect  on the Seller. The Seller has all permits, licenses, franchises
and  authorizations  (collectively,  the  "Licenses")  which are required by law
and/or  necessary  to  operate  its  business  as  conducted  or  proposed to be
conducted,  except  where  the failure to have any such License would not have a
material adverse effect on the Seller. All such Licenses were validly issued and
are  in  full  force  and  effect.  The  Seller is in compliance in all material
respects  with  all of its Licenses and no suspension, revocation or termination
of  any  License  is pending or, to the knowledge of the Seller, threatened. The
execution,  delivery  and  performance of and compliance with this Agreement and
the  Exhibits  thereto,  and  the  issuance  of  the  Securities and the Buyer's
Warrants  have not resulted and will not result in any violation of, or conflict
with,  or constitute a material default under, (a) the Articles of Incorporation
or By-laws of the Seller or (b) assuming the accuracy of the representations and
warranties of the Seller set forth in hereto, any applicable law, statute, rule,
regulation  or  License, or (c) any agreement, contract, franchise or instrument
to  which the Seller is a party, and has not resulted and will not result in the
creation  of,  any  Lien  upon  any  of  the properties or assets of the Seller.

     4.10     The  Seller  has  good  and  marketable  title  to,  or  valid and
continuing  rights  and  licenses  to  use,  all  patents,  patent rights, trade
secrets,  trademarks,  trademark rights, service marks, trade names, copyrights,
franchises,  licenses,  permits, inventions, customer lists, and all rights with
respect  to the foregoing, which are necessary for the operation of its business
as  presently  conducted and now proposed to be operated (collectively, with any
application  with  respect  to the issuance or granting of any of the foregoing,
the  "Intangible  Property"). To the Seller's knowledge, the conduct of business
of  the  Seller  as now operated and as now proposed to be operated does not and
will  not  conflict  with  any  valid intellectual property right of others. The
Seller  has  not  received  any  notice  of any claim against it that any of its
operations,  activities,  products  or  publications  infringes  on  any patent,
trademark,  trade  name,  copyright or other property right of a third party, or
that it is illegally or otherwise using the trade secrets or any property rights
of  others. The Seller has no knowledge that any licensor of it has any disputes
with  or  claims against any third party for infringement by such third party of
any  trade  name  or  other Intangible Property. Each employee of the Seller has
executed  a confidentiality and non-disclosure agreement in favor of the Seller.

     4.11     There are no actions, suits, proceedings or investigations pending
against  the  Seller  or  its properties before any court or governmental agency
(nor,  to  the  best  of  the  Seller's knowledge, is there any reasonable basis
therefore  or  threat  thereof).

     4.12     To  the  best of the Seller's knowledge, no employee of the Seller
is  in  violation  of  any  term  of  any employment contract, patent disclosure
agreement  or  any  other  contract or agreement relating to the relationship of
such  employee  with  the  Seller.

     4.13     All  agreements  material to the business of the Seller ("Material
Contracts")  are  valid,  binding  and  in full force and effect in all material
respects.  The  Seller  and,  to  the best of the Seller's knowledge, each other
party  to  a  Material  Contract have in all material respects performed all the
obligations required to be performed by them, have received no notice of default
and  are  not  in  default  under  any  Material  Contract.

     4.14     The  Seller  (a)  has accurately prepared and timely filed all tax
returns that are required to have been filed by it with all appropriate federal,
state,  county  and  local  governmental  agencies  (and all such returns fairly
reflect  the  Seller's operations for tax purposes); and (b) has paid in full or
made  adequate  provision  on  the  Financial  Statements for the payment of all
taxes.

     4.15     None  of  this  Agreement  (including  the  Exhibits and Schedules
hereto), any instrument, certificate or report furnished to the Shareholder when
read  together,  contains  any  untrue  statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or  therein,  in  light  of  the  circumstances  under  which they are made, not
misleading.  The  Seller  knows  of no information or fact that has and/or could
have a material adverse effect on it that has not been disclosed to the Buyer in
writing.

     4.16     The  Seller  represents  that it has not offered the Securities to
the  Subscriber  in  the  U.S.  or,  to the best knowledge of the Seller, to any
person  in  the  United  States  or  any U.S. person (as defined in Regulation S
promulgated  by  the  United  States  Securities  and  Exchange  Commission).

     4.17     To the best of the knowledge of the Seller, neither the Seller nor
any person acting for the Seller has conducted any "directed selling efforts" as
that  term  is  defined  in  Rule  902  of  Regulation  S.

     5.     REPRESENTATIONS,  WARRANTIES, COVENANTS AND AGREEMENTS OF THE BUYER.
The  Buyer  hereby  represents and warrants to and covenants and agrees with the
Seller  the  following:

     5.1     The  Buyer represents and warrants to the Seller that (i) the Buyer
is  not  a "U.S. person" as that term is defined in Rule 902(o) of Regulation S;
(ii)  the  Securities  and the Buyer's Warrants were not offered to the Buyer in
the  United  States  and  at  the time of execution of this Agreement and of any
offer  to  buy  the  Securities  and  Buyer's  Warrants  hereunder the Buyer was
physically  outside  the  United  States;  (iii)  the  Buyer  is  purchasing the
Securities  and  Buyer's Warrant for its own account and not on behalf of or for
the  benefit  of  any  U.S.  person  and the sale of the Securities has not been
prearranged  with or on behalf of any buyer in the United States; (iv) the Buyer
and  to  the best knowledge of the Buyer each distributor, if any, participating
in the offering of the Securities and Buyer's Warrants, has agreed and the Buyer
hereby  agrees  that  all  offers  and  sales  of the Securities and the Buyer's
Warrants  prior  to  the expiration of a period commencing on the closing of all
the  sale  of  all  Debentures  offered  by  this  Agreement and ending one year
thereafter  (the  "Distribution  Compliance  Period")  shall not be made to U.S.
persons  or  for  the  account or benefit of U.S. persons and shall otherwise be
made  in  compliance  with  the  provisions  of Regulation S. The Buyer is not a
dealer or underwriter with respect to this transaction and is a "distributor" as
defined  in  Regulation  S.

     5.2     The Purchase Price to be paid by Buyer to Seller for the Securities
and  Buyer's Warrants has been determined by Buyer as fair and appropriate based
solely  upon  Buyer's independent investigation and due diligence of the Seller,
and neither the Seller nor any of its agents, including, without limitation, any
of their officers, directors, employees, accountants and attorneys, has made any
representations  or  warranties  whatsoever  in  connection with the sale of the
Securities  and  Buyer's  Warrants  by  the  Seller  to  the  Buyer,  except  as
specifically  set  forth  herein.  The  Buyer  has had sufficient opportunity in
connection  with  the  sale of the Securities and Buyer's Warrants to review the
Seller's  business  and  affairs  (including,  without  limitation, the Seller's
financial  statements  and  other  information)  and  to inquire of the Seller's
management  with respect thereto. The Buyer has had answered to its satisfaction
any  questions  with  respect  to  the  Seller's business and affairs. The Buyer
further  has  had  the  opportunity  to  obtain  independent  financial,  legal,
accounting,  business,  tax  and  other  appropriate  advice with respect to the
transactions  contemplated by this Agreement, and is not relying upon the Seller
or  any  of  its  agents  in  any  manner  in  connection  with  same.

     5.3     The  certificates  representing  the  Securities  and  the  Buyer's
Warrants  shall  bear  the  first  legend  set  forth  on the first page of this
Agreement  and  any  other  legend,  if  such  legend  or legends are reasonably
required  by  the  Seller  to  comply  with  state,  federal  or  foreign  law.

     5.4     The  Buyer  understands  and  agrees  with  the Seller, that in the
absence  of  the  registration  of  the Securities, the Buyer's Warrants and the
underlying  Common Stock under the Act, the Securities, the Buyer's Warrants and
the  underlying  Common Stock may only be resold as provided for in Rules 903 or
904  of  Regulation S, pursuant to a valid exemption from registration under the
Act,  including sales under Rule 144. Rule 144, promulgated by the United States
Securities and Exchange Commission under the Act, may not be currently available
for  sale  of the Securities and Buyer's Warrants and underlying Common Stock in
the  United  States,  and there is no assurance that it will be available at any
particular  time  in the future. Sales of Common Stock underlying the Securities
and  the  Buyer's  Warrants  may  be made in reliance upon Rule 144 but only (i)
limited  quantities  after  the completion of the Distribution Compliance Period
(for  Common  Stock underlying the Warrants, one year after exercise if latter),
or  (ii)  in  unlimited  quantities  by  non-affiliates  after  the first yearly
anniversary  of the completion of the Distribution Compliance Period (for Common
Stock underlying the Warrants, two years after exercise if latter), in each case
in  accordance  with  the  conditions  of  the  Rule,  all  of which must be met
(including  the requirement, if applicable, that adequate information concerning
the  Seller  is  then  available  to  the  public).

     5.5     To  the  best  of the knowledge of the Buyer and Seller neither the
Buyer  nor  any  distributor,  if  any,  participating  in  the  offering of the
Securities  and Buyer's Warrants nor any person acting for the Buyer or any such
distributor  has  conducted  any  "directed  selling  efforts"  as that terms is
defined  in  Rule  902  of  Regulation  S.

     5.6     The Buyer understands that the Securities, the Buyer's Warrants and
all underlying Common Stock have not been registered under the Act and are being
offered  and  sold  pursuant  to  a "safe harbor" from registration contained in
Regulation S promulgated under the Act based in part upon the representations of
the  Seller  contained herein. The Seller has reviewed the terms of the Warrants
and  the  Buyer's  Warrants  and is aware of the restrictions on exercise of the
Warrants  and  the  Buyer's  Warrants  by  U.S.  Persons,  namely the following:

     THE WARRANTS AND THE BUYER'S WARRANTS MAY ONLY BE EXERCISED (i) BY A PERSON
WHO  IS  NOT  A  U.S.  PERSON  (AS DEFINED IN REGULATION S PROMULGATED UNDER THE
SECURITIES  ACT  OF 1933, AS AMENDED), (ii) IF NOT EXERCISED ON BEHALF OF A U.S.
PERSON,  (iii)  IF  NO  U.S.  PERSON HAS ANY INTEREST IN THE WARRANTS OR BUYER'S
WARRANTS  BEING  EXERCISED  OR  THE  UNDERLYING  SECURITIES  TO  BE  ISSUED UPON
EXERCISE,  AND  (1v) OUTSIDE THE UNITED STATES AND THE WARRANT SHARES UNDERLYING
THE  WARRANTS  AND  THE  BUYER'S WARRANTS ARE TO BE DELIVERED OUTSIDE THE UNITED
STATES.  IF THE ABOVE CANNOT BE COMPLIED WITH, THEN THE WARRANTS AND THE BUYER'S
WARRANTS  CAN  BE  EXERCISED  ONLY IF A WRITTEN OPINION OF COUNSEL, THE FORM AND
SUBSTANCE  OF  WHICH  IS  ACCEPTABLE  TO THE COMPANY, IS DELIVERED TO THE SELLER
PRIOR  TO  EXERCISE  OF  THE  WARRANTS AND BUYER'S WARRANTS BEING EXERCISED THAT
REGISTRATION  IS  NOT  REQUIRED,  OR  THE  UNDERLYING  SECURITIES DELIVERED UPON
EXERCISE  HAVE  BEEN  REGISTERED  UNDER  THE  SECURITIES  ACT  OF  1933.

     5.7     The  Buyer  knows  of no public solicitation or advertisement of an
offer  in  connection  with the proposed issuance and sale of the Securities and
the  Buyer's  Warrants,  the  Buyer's  Warrants  or any underlying Common Stock.

     5.8     The  Buyer  is  acquiring  the  Securities  to  be  issued and sold
hereunder  (and  the  Common  Shares  issuable  thereunder) as a nominee (but is
acquiring  the  Buyer's  Warrants  (and the underlying Common Stock) for its own
account  for  investment  and  not  as  a  nominee  and  not  with a view to the
distribution thereof). The Buyer understands that it must bear the economic risk
of  this  investment indefinitely unless the sale of such Securities and Buyer's
Warrants and the underlying shares of Common Stock is registered pursuant to the
Act, or an exemption from such registration is available, and that the Buyer has
no present intention of registering any such sale of the Securities, the Buyer's
Warrants  and  any  underlying  Common  Stock,  except as otherwise specifically
provide  for herein. The Buyer represents and warrants to the Seller that it has
no  present  plan  or  intention  to  sell  any  of such Securities, the Buyer's
Warrants  and  the  underlying  Common Stock in the United States or to a United
States  person  pursuant  to any predetermined arrangements. The Buyer covenants
that  neither it not its affiliates nor any person acting on its or their behalf
has  the  intention of entering or will enter during the Distribution Compliance
Period,  into any put option, short position, hedging transactions, equity swaps
or  other similar instrument or position with respect to any of such Securities,
the  Buyer's  Warrants and the underlying Common Stock or securities of the same
class  as any of such Securities, the Buyer's Warrants and the underlying Common
Stock in violation of the Act and neither the Buyer nor any of its affiliates or
any  person  acting  on  its  or  their  behalf will use at any time any of such
acquired  pursuant  to  this Agreement to settle any put option, short position,
hedging  transactions, equity swaps or other similar instrument or position that
may have been entered into prior to the execution of this Agreement in violation
of  the  Act.

     5.9     The  Buyer  further  covenants  that  it  will  not  make any sale,
transfer  or other disposition of the Securities and the Buyer's Warrants or any
underlying Common Stock in violation of the Act, the Securities and Exchange Act
of  1934,  as  amended  (the "Exchange Act") or the rules and regulations of the
Securities  and  Exchange  Commission (the "Commission") promulgated thereunder.

     5.10     The Buyer has the full power and authority to execute, deliver and
perform  this Agreement. This Agreement when executed and delivered by the Buyer
will constitute a valid and legally binding obligation of the Buyer, enforceable
in  accordance  with  its  terms  except  for bankruptcy and equitable remedies.

     5.11     The  Buyer  has reviewed with his, her or its own tax advisors the
foreign,  federal,  state  and  local tax consequences of this investment, where
applicable,  and  the  transactions contemplated by this Agreement. The Buyer is
relying  solely on such advisors and not on any statements or representations of
the  Seller  or  any  of  its agents and understands that the Buyer (and not the
Seller) shall be responsible for the Buyer's own tax liability that may arise as
a  result of this investment or the transactions contemplated by this Agreement.

     5.12     The  Buyer  acknowledges  that  it  has had this Agreement and the
transactions  contemplated  by this Agreement reviewed by its own legal counsel.
The  Buyer  is  relying  solely  on  such  counsel  and not on any statements or
representations of the Seller or any of its agents for legal advice with respect
to  this  investment  or  the  transactions  contemplated  by  this  Agreement.

     5.13     The  Buyer  is a "distributor" as defined in Regulation S and will
send  to any broker/dealer or other person receiving a commission on the sale of
the  Securities,  the  Buyer's  Warrants  and  the  underlying  Common  Stock, a
confirmation  or  other  notice  stating that such person is subject to the same
restrictions  on  transfer  to  U.S. Persons or for the account of or benefit of
U.S.  Persons  during  the  Distribution  Compliance  Period as provided herein.

     5.14     Upon  any  transfer of the Securities, the Buyer's Warrants or the
underlying  Common  Stock  unless  such  transfer  is  subject to Rule 144 or is
covered  by  a  current  and effective registration statement under the Act, the
transferee  must  supply  to  the  Seller  with  the  same  representations  and
warranties  as  provided  for  in  Section  5  hereof.

     5.15     NOTWITHSTANDING  ANY  OTHER  PROVISIONS  OF  THIS  AGREEMENT,  THE
DEBENTURES,  THE  WARRANTS  OR THE BUYER'S WARRANTS, THE SELLER DOES NOT HAVE TO
AND  WILL  NOT RECOGNIZE AND WILL TREAT AS NULL AND VOID ANY ATTEMPT TO TRANSFER
THE  DEBENTURES,  THE  WARRANTS,  THE BUYER'S WARRANTS AND THE UNDERLYING COMMON
STOCK  MADE  IN  VIOLATION  OF THIS AGREEMENT OR REGULATION S OR TO EXERCISE THE
WARRANTS  AND  THE  BUYER'S  WARRANTS  OTHER  THAN  AS  PROVIDED  THEREIN.

     6.     REGISTRATION  UNDER  THE  SECURITIES  ACT  OF  1933.

     (a)     As  soon  as  possible after this date (but in no case prior to the
Initial  Funding  Date),  the  Seller  will  include  in  an appropriate form of
registration  statement  filed  under the Securities Act of 1933 (the "Act") for
resale  by  the  potential  holders (the "Buyer") the following shares of Common
Stock,  but  only  Common  Stock,  of  the  Seller  (collectively,  the  "Resale
Securities"):

     (i)     One hundred one hundred percent (100%) of the shares underlying the
Debentures,  assuming  the  aggregate outstanding Principal Sum was Five Million
Dollars  ($5,000,000)  based  on  the  conversion  prices set forth in Section 3
above.

     (ii)  One  hundred  percent (100%) of the shares underlying the Warrants to
purchase  for  aggregate of One Million Dollars ($1,000,000) of the Common Stock
of  the  Seller  based  on an exercise price per share as set forth in Section 3
above.

     (b)     The  Seller  shall  use  its best efforts to cause the registration
statement  provided for in Section 6(a) hereof to become effect under the Act no
latter  than  the ninetieth (90th) day after the Initial Funding Date; provided,
that if such registration statement has not been declared effective by the close
of  such  ninetieth  (90th) day after the Initial Funding Date, then for each of
the  next  thirty  (30)  days  after such ninetieth (90th) day after the Initial
Funding  Date  that such registration statement has not been declared effective,
the  Seller  shall pay the Holder an amount equal to the Principal Sum funded on
the  Initial  Funding  Date  times  Nine  Hundred  Eighty Six One Thousands of a
percent  (0.986%); provided further, that if such registration statement has not
been  declared  effective  by the close of the one hundred twentieth (120th) day
after  the  Initial  Funding  Date,  then  for  each  day after such one hundred
twentieth  (120th)  day  after  the  Initial Funding Date that such registration
statement  has  not been declared effective, the Seller shall pay the Holder and
amount  equal  to the Principal Sum funded on the Initial Funding Date times One
Thousand  Six  Hundred Four-four One Ten Thousands of a percent (0. 1644 %). Any
amounts  due  to  the  Holder  under this Section 6(b) shall be paid by check no
later  than  the  next  business  day  after  an  amount  is  incurred.

     (c)     The following provision of this Section 6 shall also be applicable:

     (i)     The  Buyer  shall  furnish  the  Seller  with  such  appropriate
information  (relating to the intentions of such holders with regard to the sale
of  the  Resale  Securities included in the registration statement as the Seller
shall  reasonably  request  in  writing.  Following  the  effective date of such
registration statement, the Seller shall upon the request of the Buyer forthwith
supply  such  a  number  of prospectuses meeting the requirements of the Act, as
shall be requested by the Buyer to permit the Buyer to make a public offering of
all  the  Resale  Securities  from  time  to  time  offered or sold to the Buyer
provided  that  the  Buyer  shall from time to time furnish the Seller with such
appropriate information (as provided for in the immediately proceeding sentence)
as  the  Seller  shall request in writing and provided, further, that the Seller
shall  keep  such registration statement current and effective until the last to
occur  of  thirtieth (30th) day after the last to occur of (i) the Principal Sum
of  the  Debentures  being  reduced  to  zero  or (ii) the first to occur of the
exercise  or  all  of the Warrants and the Buyer's Warrants or the expiration of
the  Warrants  and  the  Buyer's  Warrants.  The  Seller shall also use its best
efforts  to  qualify  the  Resale  Securities  for sale in New York and Florida,
provided  that  the  Seller  shall  not be required to file a general consent to
service  of  process  in  any  state  pursuant  to  this  sentence.

     (ii)     The  Seller  shall  fill  the  registration  statement  at its own
expense and without charge to the Buyer. The Buyer shall, however, bear the fees
of  his  own  counsel  and  any  transfer  taxes  or  underwriting  discounts or
commissions  applicable  to  the  Resale Securities sold by it pursuant thereto.

     (iii)     The  Seller  shall indemnify and hold harmless the Buyer and each
underwriter,  within  the  meaning of the Act, who may purchase from or sell for
any the Buyer any Resale Securities from and against any and all losses, claims,
damages  and  liabilities  caused  by  any  untrue  statement  or alleged untrue
statement  of  a  material  fact  contained in the registration statement or any
post-effective  amendment  thereto  under  the  Act  or  any prospectus included
therein  required to be filed or furnished by reason of this Section 6 or caused
by any omission or alleged omission to state therein a material fact required to
be  stated  therein  or necessary to make the statements therein not misleading,
except  insofar as such losses, claims, damages or liabilities are caused by any
such  untrue  statement  or  alleged  untrue  statement  or  omission or alleged
omission based upon information furnished or required to be furnished in writing
to  the  Seller  by  the  Buyer  or underwriter expressly for use therein, which
indemnification  shall  include  each  person,  if  any,  who  controls any such
underwriter  within  the meaning of such Act; provided, however, that the Seller
shall  not be obliged so to indemnify any such underwriter or controlling person
unless  such  underwriter  shall  at  the  same  time  indemnify the Seller, its
directors,  each  officer  signing  the  related registration statement and each
person, if any, who controls the Seller within the meaning of such Act, from and
against any and all losses, claims, damages and liabilities caused by any untrue
statement  or  alleged  untrue  statement  of  a  material fact contained in any
registration  statement  or  any prospectus required to be filed or furnished by
reason  of  this Section 6 or caused by any omission to state therein a material
fact  required  to be stated therein or necessary to make the statements therein
not  misleading,  insofar  as  such  losses,  claims, damages or liabilities are
caused  by  any  untrue  statement or alleged untrue statement or omission based
upon  information  furnished  in  writing  to the Seller by any such underwriter
expressly  for  use  therein.

     (iv)     The  Seller's  agreements with respect to the Resale Securities in
this  Section  6  shall  continue  in  effect  regardless  or the conversion and
surrender  of  the  Debenture  or  any  exercise  of the Warrants or the Buyer's
Warrants.  The  registration rights of the Buyer under this Section 6 will inure
to  the  benefit  and  be  assignable  automatically  to  any  transferee of the
Securities,  the  Warrants, the Buyer's Warrants or the underlying Common Stock,
except  for  any  such  underlying  Common Stock sold pursuant to a registration
statement  under  the  Act  or  sold  pursuant  to  Rule  144.

     7.     ENTIRE  AGREEMENT. This Agreement, and the Exhibits hereto, embodies
the  entire  agreement and understanding between the parties hereto with respect
to  the  subject  matter  hereof  and  supersedes  all prior and contemporaneous
agreements  and  understandings  relating  to  such  subject  matter.

     8.     CHOICE  OF  LAW  AND  VENUE. This Agreement shall be governed by and
construed  under  the laws of the Province of Alberta, Canada, without regard to
choice  of  laws, in force from time to time. Any proceeding arising out of this
Agreement  shall  be  brought  in  Ontario,  Canada.

     9.     ATTORNEYS'  FEES.  In  any  action  to  enforce  this Agreement, the
prevailing  party shall be entitled to recover from the non-prevailing party all
reasonable  costs,  including,  without  limitation,  attorneys'  fees.

     10.     PARTIES  BOUND. This Agreement is binding on and shall inure to the
benefit  of  the  parties  and  their respective successors, assigns, heirs, and
legal  representatives.

     11.     NOTICES.  Except  as  otherwise  provided  herein,  all  notices,
instructions or other communications required or permitted hereunder shall be in
writing  and  sent  by  registered  mail, postage prepaid, addressed as follows:

     To  Jaws  Technologies  Inc.

1013  17th  Avenue  SW
Calgary,  Alberta  Canada  TH  OA7
Fax:  403-508-5058
Voice:  403-508-5055
Attn:  Robert  Kubbernus
President  and  CEO  To  Thomson  Kernaghan  &  Co.  Limited:

365  Bay  Street,
Toronto,  Ontario  Canada  M5H  2V2
Fax:  416-367-8055
Voice:  416-860-8800
Attn:  Robert  F.  Wilson

or  such  other  address,  telephone  numbers  or  contact  persons  as shall be
furnished in writing by such party to the other parties hereto. Any such notice,
instruction  or  communication  shall  be  deemed  to  have been given three (3)
business  days  after the date mailed by registered mail or if sent by fax, upon
electronic  confirmation  or  receipt.

     12.     GENDER.  Masculine  nouns and pronouns shall include feminine nouns
and  pronouns.

     13.     ARBITRATION.  All  disputes  that  may  arise  between  the parties
regarding  the  interpretation or application of this Agreement and the Exhibits
thereto  and  the  legal affect of this Agreement shall, to the exclusion of any
court of law, be arbitrated and determined by a board of arbitrators, unless the
parties can resolve the dispute by mutual agreement. Either party shall have the
right  to  submit  any  dispute  to arbitration thirty (30) days after the other
party  has been notified as to the nature of the dispute. If the dispute goes to
arbitration,  each  party shall select one arbitrator and the two arbitrators so
selected  shall  jointly  select  a  third  arbitrator. The arbitration shall be
governed  by the arbitration rules of the International Chamber of Commerce. The
arbitration  proceeding  shall  be  governed  by the statutes of the Province of
Ontario,  Canada,  and the proceeding shall be held in Toronto, Ontario, Canada.
Anything  to  the  contrary  contained in the above-mentioned rules and statutes
notwithstanding,  the  parties  consent  that  any  papers,  notices, or process
necessary  or  proper  for the institution or continuance of, or relating to any
arbitration  proceeding,  or  for  the  confirmation  of  an  award and entry of
judgment on any award made, including appeals in connection with any judgment or
award,  may be served on each of the parties by registered mail addressed to the
party  at the principal office of the party, or by personal service on the party
in  or  without  the above-mentioned state. The parties recognize and consent to
the  above-mentioned  arbitration association's jurisdiction over each and every
one  of  them.

<PAGE>

IN  WITNESS  WHEREOF,  the  parties  have executed this Agreement as of the date
first  above  written.

Seller:     JAWS  TECHNOLOGIES,  INC.

By:
Its:

Buyer:     THOMSON  KERNAGHAN  &  CO.  LTD.

By:
Its:

<PAGE>
                                  EXHIBIT LIST

Exhibit  A     FORM  OF  WARRANT  TO  PURCHASE  SHARES  OF  COMMON  STOCK
Exhibit  B     10%  CONVERTIBLE  DEBENTURE
Exhibit  C     ESCROW  AGREEMENT
Exhibit  D     FORM  OF  BUYER  WARRANTS

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00001-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00001-of-00352.parquet"}]]