Document:

Exhibit 10.4

                                                                       EXHIBIT C

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
SECURITIES   COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THIS  SECURITY  AND THE  SECURITIES  ISSUABLE  UPON  EXERCISE  OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

                     SERIES A COMMON STOCK PURCHASE WARRANT

                To Purchase __________ Shares of Common Stock of

                         TIDELANDS OIL & GAS CORPORATION

     THIS SERIES A COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that,
for value received,  _____________ (the "Holder"),  is entitled,  upon the terms
and subject to the  limitations on exercise and the conditions  hereinafter  set
forth, at any time on or after the date hereof (the "Initial Exercise Date") and
on or prior to the close of  business  on the third  anniversary  of the Initial
Exercise Date (the "Termination Date") but not thereafter,  to subscribe for and
purchase  from  Tidelands  Oil & Gas  Corporation,  a  Nevada  corporation  (the
"Company"),  up to ______  shares (the "Warrant  Shares") of Common  Stock,  par
value $.001 per share, of the Company (the "Common  Stock").  The purchase price
of one share of Common Stock under this  Warrant  shall be equal to the Exercise
Price, as defined in Section 2(b).

     Section 1.  Definitions.  Capitalized  terms used and not otherwise defined
herein shall have the meanings  set forth in that  certain  Securities  Purchase
Agreement (the "Purchase Agreement"),  dated January 20, 2006, among the Company
and the purchasers signatory thereto.

     Section 2. Exercise.

          a) Exercise of Warrant. Exercise of the purchase rights represented by
     this Warrant may be made,  in whole or in part,  at any time or times on or
     after the Initial  Exercise Date and on or before the  Termination  Date by
     delivery to the Company of a duly executed  facsimile copy of the Notice of
     Exercise Form annexed hereto (or such other office or agency of the Company
     as it may  designate by notice in writing to the  registered  Holder at the
     address of such Holder  appearing on the books of the  Company);  provided,

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     however,  within 5 Trading  Days of the date said  Notice  of  Exercise  is
     delivered to the Company,  if this Warrant is exercised in full, the Holder
     shall have  surrendered  this Warrant to the Company and the Company  shall
     have received payment of the aggregate Exercise Price of the shares thereby
     purchased  by wire  transfer or  cashier's  check drawn on a United  States
     bank. Notwithstanding anything herein to the contrary, the Holder shall not
     be required to physically  surrender  this Warrant to the Company until the
     Holder has purchased all of the Warrant Shares available  hereunder and the
     Warrant has been  exercised  in full.  Partial  exercises  of this  Warrant
     resulting in  purchases of a portion of the total number of Warrant  Shares
     available  hereunder  shall have the  effect of  lowering  the  outstanding
     number of Warrant  Shares  purchasable  hereunder in an amount equal to the
     applicable number of Warrant Shares  purchased.  The Holder and the Company
     shall maintain  records showing the number of Warrant Shares  purchased and
     the date of such purchases.  The Company shall deliver any objection to any
     Notice of Exercise Form within 1 Business Day of receipt of such notice. In
     the event of any dispute or discrepancy, the records of the Holder shall be
     controlling and  determinative in the absence of manifest error. The Holder
     and any assignee,  by acceptance  of this  Warrant,  acknowledge  and agree
     that, by reason of the provisions of this paragraph, following the purchase
     of a portion of the Warrant Shares hereunder,  the number of Warrant Shares
     available  for  purchase  hereunder  at any given time may be less than the
     amount stated on the face hereof.

          b) Exercise  Price.  The exercise price of the Common Stock under this
     Warrant shall be $0.935,  subject to adjustment  hereunder  (the  "Exercise
     Price").

          c) Cashless  Exercise.  If at any time after one year from the date of
     issuance  of this  Warrant  there is no  effective  Registration  Statement
     registering,  or no current  prospectus  available  for,  the resale of the
     Warrant  Shares by the Holder,  then this  Warrant may also be exercised at
     such time by means of a "cashless  exercise"  in which the Holder  shall be
     entitled to receive a certificate for the number of Warrant Shares equal to
     the quotient obtained by dividing [(A-B) (X)] by (A), where:

          (A)  =    the VWAP on the Trading Day  immediately  preceding the date
                    of such election;

          (B)  =    the Exercise Price of this Warrant, as adjusted; and

          (X)  =    the number of Warrant Shares  issuable upon exercise of this
                    Warrant  in  accordance  with the terms of this  Warrant  by
                    means of a cash exercise rather than a cashless exercise.

          Notwithstanding  anything  herein to the contrary,  on the Termination
     Date, this Warrant shall be automatically  exercised via cashless  exercise
     pursuant to this Section 2(c).

          d) Exercise Limitations.

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               (i)  Holder's  Restrictions.  The  Company  shall not  effect any
                    exercise of this  Warrant,  and a Holder  shall not have the
                    right to exercise any portion of this  Warrant,  pursuant to
                    Section 2(c) or  otherwise,  to the extent that after giving
                    effect  to  such  issuance  after   exercise,   such  Holder
                    (together  with  such  Holder's  affiliates,  and any  other
                    person or entity acting as a group together with such Holder
                    or any of such  Holder's  affiliates),  as set  forth on the
                    applicable  Notice of Exercise,  would  beneficially  own in
                    excess of the  Beneficial  Ownership  Limitation (as defined
                    below). For purposes of the foregoing  sentence,  the number
                    of shares of Common Stock  beneficially owned by such Holder
                    and its  affiliates  shall  include  the number of shares of
                    Common  Stock  issuable  upon  exercise of this Warrant with
                    respect to which the determination of such sentence is being
                    made, but shall exclude the number of shares of Common Stock
                    which would be issuable upon (A) exercise of the  remaining,
                    nonexercised  portion of this Warrant  beneficially owned by
                    such  Holder or any of its  affiliates  and (B)  exercise or
                    conversion of the unexercised or nonconverted portion of any
                    other   securities  of  the  Company   (including,   without
                    limitation,  any other Debentures or Warrants)  subject to a
                    limitation  on  conversion  or  exercise  analogous  to  the
                    limitation  contained  herein  beneficially  owned  by  such
                    Holder or any of its affiliates.  Except as set forth in the
                    preceding  sentence,  for  purposes  of this  Section  2(d),
                    beneficial  ownership shall be calculated in accordance with
                    Section  13(d)  of  the  Exchange  Act  and  the  rules  and
                    regulations promulgated thereunder, it being acknowledged by
                    a Holder that the Company is not representing to such Holder
                    that such calculation is in compliance with Section 13(d) of
                    the Exchange Act and such Holder is solely  responsible  for
                    any schedules required to be filed in accordance  therewith.
                    To the extent that the limitation  contained in this Section
                    2(d) applies,  the  determination of whether this Warrant is
                    exercisable (in relation to other  securities  owned by such
                    Holder)   and  of  which  a  portion  of  this   Warrant  is
                    exercisable shall be in the sole discretion of a Holder, and
                    the submission of a Notice of Exercise shall be deemed to be
                    each  Holder's  determination  of  whether  this  Warrant is
                    exercisable (in relation to other  securities  owned by such
                    Holder) and of which portion of this Warrant is exercisable,
                    in  each  case   subject   to  such   aggregate   percentage
                    limitation,  and the  Company  shall have no  obligation  to
                    verify or confirm  the  accuracy of such  determination.  In
                    addition,   a  determination  as  to  any  group  status  as
                    contemplated  above shall be determined  in accordance  with
                    Section  13(d)  of  the  Exchange  Act  and  the  rules  and
                    regulations  promulgated  thereunder.  For  purposes of this
                    Section  2(d),  in  determining  the  number of  outstanding
                    shares of Common  Stock,  a Holder may rely on the number of

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                    outstanding  shares of Common  Stock as reflected in (x) the
                    Company's  most recent Form  10-QSB or Form  10-KSB,  as the
                    case may be, (y) a more recent  public  announcement  by the
                    Company  or (z)  any  other  notice  by the  Company  or the
                    Company's  Transfer Agent setting forth the number of shares
                    of  Common  Stock  outstanding.  Upon  the  written  or oral
                    request of a Holder,  the Company  shall  within two Trading
                    Days confirm orally and in writing to such Holder the number
                    of shares of Common Stock then outstanding. In any case, the
                    number  of  outstanding  shares  of  Common  Stock  shall be
                    determined after giving effect to the conversion or exercise
                    of securities  of the Company,  including  this Warrant,  by
                    such  Holder  or its  affiliates  since the date as of which
                    such  number  of  outstanding  shares  of  Common  Stock was
                    reported.  The "Beneficial  Ownership  Limitation"  shall be
                    4.99%  of  the  number  of  shares  of  the   Common   Stock
                    outstanding  immediately after giving effect to the issuance
                    of shares of Common  Stock  issuable  upon  exercise of this
                    Warrant. The Beneficial  Ownership Limitation  provisions of
                    this  Section  2(d) may be  waived  by such  Holder,  at the
                    election of such  Holder,  upon not less than 61 days' prior
                    notice to the  Company  to change the  Beneficial  Ownership
                    Limitation  to 9.99% of the  number of shares of the  Common
                    Stock  outstanding  immediately  after giving  effect to the
                    issuance  of shares of Common  Stock upon  exercise  of this
                    Warrant,  and the  provisions  of this  Section  2(d)  shall
                    continue  to  apply.  Upon  such a change by a Holder of the
                    Beneficial  Ownership  Limitation from such 4.99% limitation
                    to  such  9.99%   limitation,   the   Beneficial   Ownership
                    Limitation may not be waived by such Holder.  The provisions
                    of this paragraph shall be implemented in a manner otherwise
                    than in strict  conformity  with the  terms of this  Section
                    2(d) to correct this paragraph (or any portion hereof) which
                    may  be   defective  or   inconsistent   with  the  intended
                    Beneficial  Ownership Limitation herein contained or to make
                    changes or  supplements  necessary  or desirable to properly
                    give effect to such limitation. The limitations contained in
                    this  paragraph  shall apply to a  successor  holder of this
                    Warrant.

               (ii) Authorized  Share  Limitations.   Notwithstanding   anything
                    herein to the  contrary,  if the  Company  has not  obtained
                    Authorized  Share Approval,  then the Company may not issue,
                    upon  exercise of this Series A Warrant,  a number of shares
                    of Common Stock which,  when  aggregated  with any shares of
                    Common Stock issued on or after the Original  Issue Date and
                    prior to such  Conversion  Date (A) in  connection  with any
                    Debentures issued pursuant to the Purchase Agreement, (B) in
                    connection with any Warrants issued pursuant to the Purchase
                    Agreement and (C) in connection  with any warrants issued to
                    any registered broker-dealer as a fee in connection with the
                    issuance  of  the   Securities   pursuant  to  the  Purchase
                    Agreement,  would  exceed  9,000,000  shares of Common Stock
                    (subject to adjustment  for reverse and forward stock splits
                    and  the  like)  (such  number  of  shares,   the  "Issuable
                    Maximum").  If on any  attempted  exercise  of this Series A
                    Warrant,  the  issuance of Warrant  Shares  would exceed the
                    Issuable  Maximum and the Company shall not have  previously
                    obtained  Authorized Share Approval,  then the Company shall
                    issue to the Holder  requesting an exercise of this Series A
                    Warrant such number of Warrant Shares as may be issued below
                    the Issuable  Maximum and,  with respect to the remainder of
                    the  aggregate  number  of  Warrant  Shares,  this  Series A
                    Warrant shall not be exercisable until and unless Authorized
                    Share Approval has been obtained.

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          e) Mechanics of Exercise.

               i.  Authorization of Warrant Shares.  The Company  covenants that
          all  Warrant  Shares  which may be  issued  upon the  exercise  of the
          purchase rights represented by this Warrant will, upon exercise of the
          purchase  rights  represented  by this  Warrant,  be duly  authorized,
          validly issued,  fully paid and nonassessable and free from all taxes,
          liens and charges in respect of the issue thereof (other than taxes in
          respect of any transfer occurring contemporaneously with such issue).

               ii.  Delivery of  Certificates  Upon Exercise.  Certificates  for
          shares purchased  hereunder shall be transmitted by the transfer agent
          of the Company to the Holder by crediting  the account of the Holder's
          prime broker with the  Depository  Trust  Company  through its Deposit
          Withdrawal  Agent  Commission  ("DWAC")  system  if the  Company  is a
          participant in such system,  and otherwise by physical delivery to the
          address  specified  by the Holder in the Notice of  Exercise  within 3
          Trading  Days  from the  delivery  to the  Company  of the  Notice  of
          Exercise Form,  surrender of this Warrant (if required) and payment of
          the  aggregate  Exercise  Price as set  forth  above  ("Warrant  Share
          Delivery  Date").  This Warrant shall be deemed to have been exercised
          on the date the Exercise Price is received by the Company. The Warrant
          Shares  shall be deemed to have been  issued,  and Holder or any other
          person  so  designated  to be named  therein  shall be  deemed to have
          become a holder of record of such shares for all  purposes,  as of the
          date the Warrant has been  exercised  by payment to the Company of the
          Exercise  Price and all taxes  required to be paid by the  Holder,  if
          any,  pursuant  to Section  2(e)(vii)  prior to the  issuance  of such
          shares, have been paid.

               iii.  Delivery of New  Warrants  Upon  Exercise.  If this Warrant
          shall have been exercised in part,  the Company shall,  at the request
          of a Holder and upon  surrender  of this Warrant  certificate,  at the
          time of  delivery  of the  certificate  or  certificates  representing

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          Warrant Shares,  deliver to Holder a new Warrant evidencing the rights
          of Holder to purchase the  unpurchased  Warrant  Shares  called for by
          this  Warrant,  which  new  Warrant  shall in all  other  respects  be
          identical with this Warrant.

               iv. Rescission Rights. If the Company fails to cause its transfer
          agent  to  transmit  to  the  Holder  a  certificate  or  certificates
          representing  the Warrant Shares pursuant to this Section  2(e)(iv) by
          the Warrant Share Delivery  Date,  then the Holder will have the right
          to rescind such exercise.

               v.   Compensation   for  Buy-In  on  Failure  to  Timely  Deliver
          Certificates Upon Exercise.  In addition to any other rights available
          to the Holder,  if the Company  fails to cause its  transfer  agent to
          transmit to the Holder a certificate or certificates  representing the
          Warrant Shares  pursuant to an exercise on or before the Warrant Share
          Delivery  Date,  and if after such date the Holder is  required by its
          broker to purchase (in an open market transaction or otherwise) shares
          of Common Stock to deliver in  satisfaction of a sale by the Holder of
          the Warrant  Shares which the Holder  anticipated  receiving upon such
          exercise (a  "Buy-In"),  then the Company shall (1) pay in cash to the
          Holder  the  amount by which (x) the  Holder's  total  purchase  price
          (including  brokerage  commissions,  if any) for the  shares of Common
          Stock so purchased  exceeds (y) the amount obtained by multiplying (A)
          the number of Warrant  Shares that the Company was required to deliver
          to the Holder in  connection  with the exercise at issue times (B) the
          price at which the sell order giving rise to such purchase  obligation
          was executed,  and (2) at the option of the Holder,  either  reinstate
          the portion of the Warrant and equivalent number of Warrant Shares for
          which  such  exercise  was not  honored  or  deliver to the Holder the
          number of shares of Common  Stock that would have been  issued had the
          Company  timely  complied  with its exercise and delivery  obligations
          hereunder.  For example, if the Holder purchases Common Stock having a
          total  purchase  price of $11,000 to cover a Buy-In with respect to an
          attempted  exercise of shares of Common Stock with an  aggregate  sale
          price giving rise to such purchase obligation of $10,000, under clause
          (1) of  the  immediately  preceding  sentence  the  Company  shall  be
          required  to pay the Holder  $1,000.  The  Holder  shall  provide  the
          Company written notice indicating the amounts payable to the Holder in
          respect of the Buy-In,  together  with  applicable  confirmations  and
          other  evidence  reasonably  requested by the Company.  Nothing herein
          shall limit a Holder's right to pursue any other remedies available to
          it hereunder,  at law or in equity including,  without  limitation,  a
          decree of specific  performance  and/or injunctive relief with respect
          to the Company's failure to timely deliver  certificates  representing
          shares of Common  Stock  upon  exercise  of the  Warrant  as  required
          pursuant to the terms hereof.

               vi. No Fractional  Shares or Scrip. No fractional shares or scrip
          representing  fractional  shares  shall be issued upon the exercise of
          this  Warrant.  As to any  fraction  of a  share  which  Holder  would

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          otherwise  be  entitled to purchase  upon such  exercise,  the Company
          shall pay a cash  adjustment  in respect of such final  fraction in an
          amount equal to such fraction multiplied by the Exercise Price.

               vii.  Charges,  Taxes and Expenses.  Issuance of certificates for
          Warrant  Shares  shall be made  without  charge to the  Holder for any
          issue or transfer  tax or other  incidental  expense in respect of the
          issuance of such certificate, all of which taxes and expenses shall be
          paid by the Company, and such certificates shall be issued in the name
          of the  Holder  or in such  name or  names as may be  directed  by the
          Holder; provided,  however, that in the event certificates for Warrant
          Shares are to be issued in a name  other than the name of the  Holder,
          this Warrant when surrendered for exercise shall be accompanied by the
          Assignment Form attached  hereto duly executed by the Holder;  and the
          Company  may  require,  as a condition  thereto,  the payment of a sum
          sufficient to reimburse it for any transfer tax incidental thereto.

               viii.   Closing  of  Books.   The  Company  will  not  close  its
          stockholder  books or records in any manner which  prevents the timely
          exercise of this Warrant, pursuant to the terms hereof.

          f) Call Provision.  Subject to the provisions of Section 2(d) and this
     Section  2(f),  if,  after  the  Effective  Date  the  VWAP  for each of 20
     consecutive  Trading Days (the "Measurement  Period",  which 20 Trading Day
     period shall not have  commenced  until after the  Effective  Date) exceeds
     250% of the then  Exercise  Price  (subject to  adjustment  for forward and
     reverse stock splits, recapitalizations, stock dividends and the like after
     the Initial Exercise Date) (the "Threshold  Price"),  then the Company may,
     within one Trading Day of the end of such period,  call for cancellation of
     all or any portion of this  Warrant for which a Notice of Exercise  has not
     yet been  delivered  (such right,  a "Call").  To exercise this right,  the
     Company must deliver to the Holder an  irrevocable  written notice (a "Call
     Notice"),  indicating  therein the portion of  unexercised  portion of this
     Warrant to which such notice applies. If the conditions set forth below for
     such Call are  satisfied  from the period  from the date of the Call Notice
     through and including the Call Date (as defined below), then any portion of
     this  Warrant  subject to such Call  Notice for which a Notice of  Exercise
     shall not have been  received  by the Call Date will be  cancelled  at 6:30
     p.m. (New York City time) on the thirtieth  calendar day after the date the

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     Call Notice is received by the Holder  (such date,  the "Call  Date").  Any
     unexercised  portion  of this  Warrant  to which the Call  Notice  does not
     pertain will be unaffected by such Call Notice. In furtherance thereof, the
     Company  covenants  and agrees  that it will honor all  Notices of Exercise
     with respect to Warrant  Shares  subject to a Call Notice that are tendered
     through 6:30 p.m. (New York City time) on the Call Date.  The parties agree
     that any Notice of Exercise  delivered  following a Call Notice shall first
     reduce to zero the number of  Warrant  Shares  subject to such Call  Notice
     prior to reducing the remaining Warrant Shares available for purchase under
     this Warrant.  For example,  if (x) this Warrant then permits the Holder to
     acquire  100  Warrant  Shares,  (y) a Call  Notice  pertains  to 75 Warrant
     Shares,  and (z) prior to 6:30 p.m.  (New York City  time) on the Call Date
     the Holder  tenders a Notice of Exercise  in respect of 50 Warrant  Shares,
     then (1) on the Call  Date the right  under  this  Warrant  to  acquire  25
     Warrant Shares will be  automatically  cancelled,  (2) the Company,  in the
     time and manner required under this Warrant, will have issued and delivered
     to the Holder 50  Warrant  Shares in  respect  of the  exercises  following
     receipt of the Call Notice,  and (3) the Holder may, until the  Termination
     Date, exercise this Warrant for 25 Warrant Shares (subject to adjustment as
     herein provided and subject to subsequent  Call Notices).  Subject again to
     the  provisions  of this Section 2(f),  the Company may deliver  subsequent
     Call Notices for any portion of this Warrant for which the Holder shall not
     have  delivered  a Notice  of  Exercise.  Notwithstanding  anything  to the
     contrary  set forth in this  Warrant,  the  Company  may not deliver a Call
     Notice or require the  cancellation  of this  Warrant  (and any Call Notice
     will be void),  unless,  from the beginning of the 20th consecutive Trading
     Days used to determine  whether the Common Stock has achieved the Threshold
     Price  through  the Call  Date,  (i) the  Company  shall  have  honored  in
     accordance with the terms of this Warrant all Notices of Exercise delivered
     by 6:30 p.m. (New York City time) on the Call Date,  (ii) the  Registration
     Statement  shall be effective as to all Warrant  Shares and the  prospectus
     thereunder  available  for use by the  Holder  for the  resale  of all such
     Warrant  Shares  and (iii) the Common  Stock  shall be listed or quoted for
     trading on the Trading  Market,  and (iv) there is a  sufficient  number of
     authorized  shares of Common Stock for issuance of all Securities under the
     Transaction  Documents,  and (v) the  issuance  of the  shares  shall be in
     accordance  with  Section  2(d)  herein.  The  Company's  right to Call the
     Warrant shall be exercised ratably among the Holders based on each Holder's
     initial purchase of Common Stock.

     Section 3. Certain Adjustments.

          a) Stock Dividends and Splits. If the Company,  at any time while this
     Warrant is  outstanding:  (A) pays a stock  dividend  or  otherwise  make a
     distribution  or  distributions  on shares of its Common Stock or any other
     equity or equity  equivalent  securities  payable in shares of Common Stock
     (which,  for  avoidance  of doubt,  shall not  include any shares of Common
     Stock  issued by the Company  pursuant  to this  Warrant),  (B)  subdivides
     outstanding  shares of Common  Stock into a larger  number of  shares,  (C)
     combines  (including by way of reverse stock split)  outstanding  shares of
     Common  Stock  into  a  smaller   number  of  shares,   or  (D)  issues  by
     reclassification  of shares of the Common Stock any shares of capital stock
     of the Company, then in each case the Exercise Price shall be multiplied by
     a fraction of which the  numerator  shall be the number of shares of Common
     Stock (excluding  treasury shares, if any) outstanding  immediately  before
     such  event and of which the  denominator  shall be the number of shares of
     Common  Stock  outstanding  immediately  after such event and the number of
     shares  issuable  upon  exercise of this Warrant  shall be  proportionately
     adjusted.  Any  adjustment  made pursuant to this Section 3(a) shall become
     effective  immediately  after  the  record  date for the  determination  of
     stockholders  entitled to receive such dividend or  distribution  and shall
     become  effective  immediately  after the  effective  date in the case of a
     subdivision, combination or re-classification.

          b) [RESERVED].

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          c) Pro Rata  Distributions.  If the Company,  at any time prior to the
     Termination  Date, shall distribute to all holders of Common Stock (and not
     to  Holders  of the  Warrants)  evidences  of its  indebtedness  or  assets
     (including  cash and cash dividends) or rights or warrants to subscribe for
     or  purchase  any  security  other than the Common  Stock  (which  shall be
     subject to Section  3(b)),  then in each such case the Exercise Price shall
     be adjusted by multiplying the Exercise Price in effect  immediately  prior
     to the record  date fixed for  determination  of  stockholders  entitled to
     receive such  distribution by a fraction of which the denominator  shall be
     the VWAP determined as of the record date mentioned above, and of which the
     numerator  shall be such VWAP on such  record  date less the then per share
     fair  market  value at such  record  date of the  portion of such assets or
     evidence of indebtedness so distributed applicable to one outstanding share
     of the Common Stock as  determined by the Board of Directors in good faith.
     In either case the adjustments  shall be described in a statement  provided
     to the Holder of the  portion of assets or  evidences  of  indebtedness  so
     distributed or such  subscription  rights applicable to one share of Common
     Stock. Such adjustment shall be made whenever any such distribution is made
     and shall  become  effective  immediately  after the record date  mentioned
     above.

          d)  Fundamental  Transaction.  If, at any time while  this  Warrant is
     outstanding,  (A) the Company  effects any merger or  consolidation  of the
     Company with or into another  Person,  (B) the Company  effects any sale of
     all or  substantially  all of its  assets  in one or a  series  of  related
     transactions,  (C) any  tender  offer or  exchange  offer  (whether  by the
     Company or another Person) is completed pursuant to which holders of Common
     Stock  are  permitted  to  tender  or  exchange   their  shares  for  other
     securities,   cash  or   property,   or  (D)  the   Company   effects   any
     reclassification  of the  Common  Stock or any  compulsory  share  exchange
     pursuant  to which  the  Common  Stock  is  effectively  converted  into or
     exchanged  for other  securities,  cash or  property  (in any such case,  a
     "Fundamental  Transaction"),  then,  upon any  subsequent  exercise of this
     Warrant, the Holder shall have the right to receive, for each Warrant Share
     that would have been issuable upon such exercise  immediately  prior to the
     occurrence of such  Fundamental  Transaction,  at the option of the Holder,
     (a) upon exercise of this Warrant,  the number of shares of Common Stock of
     the  successor or  acquiring  corporation  or of the Company,  if it is the
     surviving  corporation,  and any additional  consideration  (the "Alternate
     Consideration")  receivable  upon or as a  result  of such  reorganization,
     reclassification,  merger,  consolidation  or  disposition  of  assets by a
     Holder of the number of shares of Common  Stock for which  this  Warrant is
     exercisable  immediately  prior  to such  event  or (b) if the  Company  is
     acquired  in an all  cash  transaction,  cash  equal  to the  value of this
     Warrant as determined in accordance with the  Black-Scholes  option pricing
     formula.  For  purposes  of any such  exercise,  the  determination  of the
     Exercise Price shall be  appropriately  adjusted to apply to such Alternate
     Consideration  based on the amount of Alternate  Consideration  issuable in
     respect of one share of Common Stock in such Fundamental  Transaction,  and
     the  Company  shall  apportion  the  Exercise  Price  among  the  Alternate
     Consideration in a reasonable  manner  reflecting the relative value of any
     different components of the Alternate  Consideration.  If holders of Common
     Stock are given any choice as to the  securities,  cash or  property  to be
     received in a Fundamental  Transaction,  then the Holder shall be given the
     same choice as to the Alternate Consideration it receives upon any exercise
     of this  Warrant  following  such  Fundamental  Transaction.  To the extent

                                       9
<PAGE>

     necessary to  effectuate  the  foregoing  provisions,  any successor to the
     Company or surviving entity in such Fundamental  Transaction shall issue to
     the Holder a new  warrant  consistent  with the  foregoing  provisions  and
     evidencing  the Holder's  right to exercise  such  warrant  into  Alternate
     Consideration.  The terms of any agreement  pursuant to which a Fundamental
     Transaction is effected shall include terms requiring any such successor or
     surviving  entity to comply with the  provisions  of this  Section 3(d) and
     insuring  that this  Warrant  (or any such  replacement  security)  will be
     similarly  adjusted  upon  any  subsequent   transaction   analogous  to  a
     Fundamental Transaction.

          e) Calculations.  All calculations  under this Section 3 shall be made
     to the nearest cent or the nearest  1/100th of a share, as the case may be.
     For purposes of this Section 3, the number of shares of Common Stock deemed
     to be issued  and  outstanding  as of a given  date shall be the sum of the
     number of shares of Common Stock (excluding treasury shares, if any) issued
     and outstanding.

          f) Voluntary Adjustment By Company. The Company may at any time during
     the term of this  Warrant  reduce the then  current  Exercise  Price to any
     amount  and for any  period  of time  deemed  appropriate  by the  Board of
     Directors of the Company.

          g) Notice to Holders.

               i. Adjustment to Exercise  Price.  Whenever the Exercise Price is
          adjusted  pursuant to this Section 3, the Company shall  promptly mail
          to each Holder a notice  setting  forth the Exercise  Price after such
          adjustment and setting forth a brief  statement of the facts requiring
          such  adjustment.  If the  Company  issues a variable  rate  security,
          despite the prohibition thereon in the Purchase Agreement, the Company
          shall  be  deemed  to  have  issued   Common  Stock  or  Common  Stock
          Equivalents  at the lowest  possible  conversion or exercise  price at
          which such  securities  may be converted or exercised in the case of a
          Variable Rate Transaction (as defined in the Purchase Agreement).

               ii. Notice to Allow Exercise by Holder.  If (A) the Company shall
          declare a dividend (or any other  distribution)  on the Common  Stock;
          (B) the Company shall declare a special  nonrecurring cash dividend on
          or a redemption of the Common Stock;  (C) the Company shall  authorize
          the  granting to all holders of the Common Stock rights or warrants to
          subscribe  for or purchase any shares of capital stock of any class or
          of any rights;  (D) the  approval of any  stockholders  of the Company
          shall be  required  in  connection  with any  reclassification  of the
          Common Stock,  any  consolidation  or merger to which the Company is a
          party, any sale or transfer of all or substantially  all of the assets
          of the Company,  of any compulsory  share exchange  whereby the Common
          Stock is converted into other  securities,  cash or property;  (E) the
          Company  shall  authorize the  voluntary or  involuntary  dissolution,
          liquidation or winding up of the affairs of the Company; then, in each
          case,  the Company  shall cause to be mailed to the Holder at its last

                                       10
<PAGE>

          address as it shall  appear upon the Warrant  Register of the Company,
          at least 20 calendar days prior to the applicable  record or effective
          date hereinafter  specified,  a notice stating (x) the date on which a
          record is to be taken for the purpose of such dividend,  distribution,
          redemption, rights or warrants, or if a record is not to be taken, the
          date as of which  the  holders  of the  Common  Stock of  record to be
          entitled  to  such  dividend,  distributions,  redemption,  rights  or
          warrants  are  to  be  determined  or  (y)  the  date  on  which  such
          reclassification,  consolidation,  merger,  sale,  transfer  or  share
          exchange is expected to become  effective or close, and the date as of
          which it is expected  that holders of the Common Stock of record shall
          be  entitled  to  exchange  their  shares  of  the  Common  Stock  for
          securities,   cash   or   other   property   deliverable   upon   such
          reclassification,  consolidation,  merger,  sale,  transfer  or  share
          exchange;  provided that the failure to mail such notice or any defect
          therein or in the mailing thereof shall not affect the validity of the
          corporate  action required to be specified in such notice.  The Holder
          is  entitled  to  exercise  this  Warrant  during  the  20-day  period
          commencing  on the date of such  notice to the  effective  date of the
          event triggering such notice.

     Section 4. Transfer of Warrant.

          a)   Transferability.   Subject  to  compliance  with  any  applicable
     securities  laws and the  conditions  set forth in  Sections  5(a) and 4(d)
     hereof and to the provisions of Section 4.1 of the Purchase Agreement, this
     Warrant and all rights  hereunder  are  transferable,  in whole or in part,
     upon  surrender  of this  Warrant at the  principal  office of the Company,
     together  with a written  assignment of this Warrant  substantially  in the
     form  attached  hereto duly executed by the Holder or its agent or attorney
     and funds  sufficient to pay any transfer  taxes payable upon the making of
     such  transfer.  Upon such surrender  and, if required,  such payment,  the
     Company  shall execute and deliver a new Warrant or Warrants in the name of
     the  assignee  or  assignees  and  in  the  denomination  or  denominations
     specified in such instrument of assignment, and shall issue to the assignor
     a new Warrant  evidencing the portion of this Warrant not so assigned,  and
     this Warrant shall promptly be cancelled.  A Warrant, if properly assigned,
     may be exercised by a new holder for the purchase of Warrant Shares without
     having a new Warrant issued.

          b) New  Warrants.  This Warrant may be divided or combined  with other
     Warrants upon  presentation  hereof at the aforesaid office of the Company,
     together with a written notice  specifying the names and  denominations  in
     which new Warrants  are to be issued,  signed by the Holder or its agent or
     attorney. Subject to compliance with Section 4(a), as to any transfer which
     may be involved in such division or combination,  the Company shall execute
     and  deliver a new  Warrant or  Warrants  in  exchange  for the  Warrant or
     Warrants to be divided or combined in accordance with such notice.

          c) Warrant  Register.  The Company shall  register this Warrant,  upon
     records to be  maintained  by the Company for that  purpose  (the  "Warrant
     Register"),  in the name of the record Holder hereof from time to time. The

                                       11
<PAGE>

     Company  may deem and treat the  registered  Holder of this  Warrant as the
     absolute  owner  hereof  for the  purpose  of any  exercise  hereof  or any
     distribution  to the  Holder,  and for all other  purposes,  absent  actual
     notice to the contrary.

          d) Transfer  Restrictions.  If, at the time of the  surrender  of this
     Warrant in connection  with any transfer of this  Warrant,  the transfer of
     this Warrant shall not be registered pursuant to an effective  registration
     statement under the Securities Act and under applicable state securities or
     blue sky laws,  the Company may require,  as a condition  of allowing  such
     transfer (i) that the Holder or transferee of this Warrant, as the case may
     be,  furnish to the  Company a written  opinion of counsel  (which  opinion
     shall be in form,  substance and scope customary for opinions of counsel in
     comparable  transactions)  to the  effect  that such  transfer  may be made
     without  registration  under the Securities Act and under  applicable state
     securities or blue sky laws, (ii) that the holder or transferee execute and
     deliver  to  the  Company  an  investment  letter  in  form  and  substance
     acceptable to the Company and (iii) that the  transferee be an  "accredited
     investor" as defined in Rule 501(a)(1),  (a)(2),  (a)(3), (a)(7), or (a)(8)
     promulgated under the Securities Act or a qualified  institutional buyer as
     defined in Rule 144A(a) under the Securities Act.

     Section 5. Miscellaneous.

          a) Title to  Warrant.  Prior to the  Termination  Date and  subject to
     compliance with applicable laws and Section 4 of this Warrant, this Warrant
     and all rights  hereunder  are  transferable,  in whole or in part,  at the
     office  or  agency  of the  Company  by the  Holder  in  person  or by duly
     authorized  attorney,  upon  surrender  of this Warrant  together  with the
     Assignment Form annexed hereto properly endorsed. The transferee shall sign
     an investment letter in form and substance  reasonably  satisfactory to the
     Company.

          b) No Rights as  Shareholder  Until  Exercise.  This  Warrant does not
     entitle the Holder to any voting rights or other rights as a shareholder of
     the  Company  prior to the  exercise  hereof.  Upon the  surrender  of this
     Warrant and the payment of the aggregate  Exercise  Price (or by means of a
     cashless exercise),  the Warrant Shares so purchased shall be and be deemed
     to be issued to such  Holder as the record  owner of such  shares as of the
     close of business on the later of the date of such surrender or payment.

          c) Loss,  Theft,  Destruction  or Mutilation  of Warrant.  The Company
     covenants  that  upon  receipt  by  the  Company  of  evidence   reasonably
     satisfactory  to it of the loss,  theft,  destruction or mutilation of this
     Warrant or any stock  certificate  relating to the Warrant  Shares,  and in
     case of loss,  theft or  destruction,  of indemnity or security  reasonably
     satisfactory  to it (which,  in the case of the Warrant,  shall not include
     the  posting of any bond),  and upon  surrender  and  cancellation  of such
     Warrant or stock  certificate,  if  mutilated,  the  Company  will make and
     deliver a new  Warrant or stock  certificate  of like tenor and dated as of
     such cancellation, in lieu of such Warrant or stock certificate.

          d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for
     the taking of any action or the expiration of any right required or granted

                                       12
<PAGE>

     herein shall be a Saturday, Sunday or a legal holiday, then such action may
     be taken or such right may be  exercised on the next  succeeding  day not a
     Saturday, Sunday or legal holiday.

          e) Authorized Shares.

               The  Company  covenants  that  during the  period the  Warrant is
          outstanding,  it will reserve from its authorized and unissued  Common
          Stock a sufficient number of shares to provide for the issuance of the
          Warrant  Shares upon the  exercise of any  purchase  rights under this
          Warrant.  The  Company  further  covenants  that its  issuance of this
          Warrant  shall  constitute  full  authority  to its  officers  who are
          charged with the duty of executing  stock  certificates to execute and
          issue the  necessary  certificates  for the  Warrant  Shares  upon the
          exercise of the purchase  rights under this Warrant.  The Company will
          take all such  reasonable  action as may be  necessary  to assure that
          such Warrant Shares may be issued as provided herein without violation
          of any  applicable law or regulation,  or of any  requirements  of the
          Trading Market upon which the Common Stock may be listed.

               Except and to the extent as waived or consented to by the Holder,
          the Company shall not by any action,  including,  without  limitation,
          amending   its   certificate   of   incorporation   or   through   any
          reorganization,    transfer   of   assets,   consolidation,    merger,
          dissolution,  issue  or  sale of  securities  or any  other  voluntary
          action, avoid or seek to avoid the observance or performance of any of
          the terms of this Warrant,  but will at all times in good faith assist
          in the  carrying  out of all such  terms and in the taking of all such
          actions as may be  necessary or  appropriate  to protect the rights of
          Holder  as set  forth  in this  Warrant  against  impairment.  Without
          limiting the  generality  of the  foregoing,  the Company will (a) not
          increase the par value of any Warrant  Shares above the amount payable
          therefor upon such exercise  immediately prior to such increase in par
          value,  (b) take all such action as may be necessary or appropriate in
          order that the Company  may  validly and legally  issue fully paid and
          nonassessable  Warrant  Shares upon the exercise of this Warrant,  and
          (c)  use   commercially   reasonable   efforts   to  obtain  all  such
          authorizations, exemptions or consents from any public regulatory body
          having jurisdiction  thereof as may be necessary to enable the Company
          to perform its obligations under this Warrant.

               Before  taking any action which would result in an  adjustment in
          the number of Warrant  Shares for which this Warrant is exercisable or
          in  the   Exercise   Price,   the  Company   shall   obtain  all  such
          authorizations or exemptions  thereof,  or consents thereto, as may be
          necessary   from  any  public   regulatory   body  or  bodies   having
          jurisdiction thereof.

          f) Jurisdiction. All questions concerning the construction,  validity,
     enforcement  and  interpretation  of this Warrant  shall be  determined  in
     accordance with the provisions of the Purchase Agreement.

                                       13
<PAGE>

          g)  Restrictions.  The Holder  acknowledges  that the  Warrant  Shares
     acquired upon the exercise of this Warrant,  if not  registered,  will have
     restrictions upon resale imposed by state and federal securities laws.

          h)  Nonwaiver  and  Expenses.  No  course of  dealing  or any delay or
     failure to exercise any right hereunder on the part of Holder shall operate
     as a waiver of such right or otherwise prejudice Holder's rights, powers or
     remedies,  notwithstanding  the fact that all rights hereunder terminate on
     the  Termination  Date. If the Company  willfully  and  knowingly  fails to
     comply with any  provision of this  Warrant,  which results in any material
     damages to the  Holder,  the Company  shall pay to Holder  such  amounts as
     shall be  sufficient  to cover any costs and  expenses  including,  but not
     limited  to,  reasonable  attorneys'  fees,  including  those of  appellate
     proceedings,  incurred by Holder in  collecting  any  amounts due  pursuant
     hereto or in  otherwise  enforcing  any of its  rights,  powers or remedies
     hereunder.

          i)  Notices.  Any  notice,  request  or  other  document  required  or
     permitted to be given or  delivered  to the Holder by the Company  shall be
     delivered  in  accordance  with  the  notice  provisions  of  the  Purchase
     Agreement.

          j) Limitation of Liability. No provision hereof, in the absence of any
     affirmative  action by Holder to exercise this Warrant or purchase  Warrant
     Shares,  and no  enumeration  herein of the rights or privileges of Holder,
     shall give rise to any  liability of Holder for the  purchase  price of any
     Common Stock or as a stockholder of the Company,  whether such liability is
     asserted by the Company or by creditors of the Company.

          k)  Remedies.  Holder,  in addition to being  entitled to exercise all
     rights granted by law, including  recovery of damages,  will be entitled to
     specific  performance of its rights under this Warrant.  The Company agrees
     that  monetary  damages  would not be  adequate  compensation  for any loss
     incurred by reason of a breach by it of the  provisions of this Warrant and
     hereby  agrees to waive the defense in any action for specific  performance
     that a remedy at law would be adequate.

          l) Successors and Assigns. Subject to applicable securities laws, this
     Warrant and the rights and obligations  evidenced hereby shall inure to the
     benefit  of and be  binding  upon the  successors  of the  Company  and the
     successors and permitted assigns of Holder.  The provisions of this Warrant
     are intended to be for the benefit of all Holders from time to time of this
     Warrant  and shall be  enforceable  by any such Holder or holder of Warrant
     Shares.

          m)  Amendment.  This  Warrant  may  be  modified  or  amended  or  the
     provisions  hereof  waived with the written  consent of the Company and the
     Holder.

          n)  Severability.  Wherever  possible,  each provision of this Warrant
     shall be  interpreted  in such  manner as to be  effective  and valid under
     applicable law, but if any provision of this Warrant shall be prohibited by

                                       14
<PAGE>

     or invalid under applicable law, such provision shall be ineffective to the
     extent  of  such  prohibition  or  invalidity,   without  invalidating  the
     remainder of such provisions or the remaining provisions of this Warrant.

          o) Headings. The headings used in this Warrant are for the convenience
     of reference only and shall not, for any purpose,  be deemed a part of this
     Warrant.

                              ********************

                                       15
<PAGE>

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

Dated:   January __, 2006

TIDELANDS OIL & GAS CORPORATION

By:__________________________________________
   Name:
   Title:

                                       16
<PAGE>

                               NOTICE OF EXERCISE

TO:      TIDELANDS OIL & GAS CORPORATION

     (1) The undersigned  hereby elects to purchase  ________  Warrant Shares of
the Company  pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.

     (2) Payment shall take the form of (check applicable box):

               [ ] in lawful money of the United States; or

               [ ] the  cancellation  of such  number  of  Warrant  Shares as is
               necessary, in accordance with the formula set forth in subsection
               2(c), to exercise this Warrant with respect to the maximum number
               of Warrant Shares  purchasable  pursuant to the cashless exercise
               procedure set forth in subsection 2(c).

     (3) Please issue a certificate or  certificates  representing  said Warrant
Shares in the name of the  undersigned  or in such  other  name as is  specified
below:

                    ________________________________________

The Warrant Shares shall be delivered to the following:

                    ________________________________________

                    ________________________________________

                    ________________________________________

     (4) Accredited  Investor.  The  undersigned is an "accredited  investor" as
defined  in  Regulation  D  promulgated  under the  Securities  Act of 1933,  as
amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity: ______________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________

<PAGE>

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)

     FOR VALUE RECEIVED,  the foregoing Warrant and all rights evidenced thereby
are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

                    Dated: ______________, _______

          Holder's Signature: _____________________________

          Holder's Address:   _____________________________

                              _____________________________

Signature Guaranteed:  ___________________________________

NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.Exhibit 10.5

                                                                       EXHIBIT E

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
SECURITIES   COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THIS  SECURITY  AND THE  SECURITIES  ISSUABLE  UPON  EXERCISE  OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

                     SERIES B COMMON STOCK PURCHASE WARRANT

                To Purchase __________ Shares of Common Stock of

                         TIDELANDS OIL & GAS CORPORATION

     THIS SERIES B COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that,
for value received,  _____________ (the "Holder"),  is entitled,  upon the terms
and subject to the  limitations on exercise and the conditions  hereinafter  set
forth, at any time on or after the date hereof (the "Initial Exercise Date") and
on or prior to the close of business on the 13 month  anniversary of the Initial
Exercise Date (the "Termination Date") but not thereafter,  to subscribe for and
purchase  from  Tidelands  Oil & Gas  Corporation,  a  Nevada  corporation  (the
"Company"),  up to ______  shares (the "Warrant  Shares") of Common  Stock,  par
value $.001 per share, of the Company (the "Common  Stock").  The purchase price
of one share of Common Stock under this  Warrant  shall be equal to the Exercise
Price, as defined in Section 2(b).

     Section 1.  Definitions.  Capitalized  terms used and not otherwise defined
herein shall have the meanings  set forth in that  certain  Securities  Purchase
Agreement (the "Purchase Agreement"),  dated January 20, 2006, among the Company
and the purchasers signatory thereto.

     Section 2. Exercise.

          a) Exercise of Warrant.

               i.   Exercise of the purchase rights  represented by this Warrant
                    may be made by the Holder,  in whole or in part, at any time
                    or times on or after the 12 month anniversary of the Initial
                    Exercise  Date  and on or  before  the  Termination  Date by
                    delivery to the Company of a duly executed facsimile copy of
                    the Notice of Exercise  Form  annexed  hereto (or such other
                    office or  agency  of the  Company  as it may  designate  by
                    notice in writing to the registered Holder at the address of

                                       1
<PAGE>

                    such  Holder   appearing  on  the  books  of  the  Company);
                    provided,  however,  within 5 Trading  Days of the date said
                    Notice of  Exercise is  delivered  to the  Company,  if this
                    Warrant  is  exercised  in  full,   the  Holder  shall  have
                    surrendered  this  Warrant to the  Company  and the  Company
                    shall have received payment of the aggregate  Exercise Price
                    of  the  shares  thereby   purchased  by  wire  transfer  or
                    cashier's   check   drawn   on   a   United   States   bank.
                    Notwithstanding  anything herein to the contrary, the Holder
                    shall not be required to physically  surrender  this Warrant
                    to the  Company  until the Holder has  purchased  all of the
                    Warrant Shares available  hereunder and the Warrant has been
                    exercised  in  full.   Partial  exercises  of  this  Warrant
                    resulting  in  purchases of a portion of the total number of
                    Warrant Shares available  hereunder shall have the effect of
                    lowering   the   outstanding   number  of   Warrant   Shares
                    purchasable  hereunder in an amount equal to the  applicable
                    number of  Warrant  Shares  purchased.  The  Holder  and the
                    Company shall maintain records showing the number of Warrant
                    Shares purchased and the date of such purchases. The Company
                    shall  deliver any  objection to any Notice of Exercise Form
                    within 1  Business  Day of receipt  of such  notice.  In the
                    event of any  dispute  or  discrepancy,  the  records of the
                    Holder shall be controlling and determinative in the absence
                    of  manifest  error.   The  Holder  and  any  assignee,   by
                    acceptance of this Warrant,  acknowledge  and agree that, by
                    reason of the  provisions of this  paragraph,  following the
                    purchase of a portion of the Warrant Shares  hereunder,  the
                    number of Warrant Shares available for purchase hereunder at
                    any  given  time may be less than the  amount  stated on the
                    face hereof.

               ii.  Notwithstanding  anything  herein to the contrary,  if after
                    the  Effective  Date,  (i)  each  of the  VWAPs  for  any 20
                    consecutive  Trading Days (such period commencing only after
                    the  Effective  Date,  such period the  "Threshold  Period")
                    exceeds 150% of the then  effective  Exercise Price (subject
                    to adjustment  for reverse and forward  stock splits,  stock
                    dividends, stock combinations and other similar transactions
                    of the Common  Stock that occur after the  Initial  Exercise
                    Date) and (ii) the  average  daily  volume  for the last ten
                    Trading  Days  of such  Threshold  Period,  which  Threshold
                    Period shall have commenced  only after the Effective  Date,
                    equals  exceeds  353,370  shares of Common Stock per Trading
                    Day  (subject to  adjustment  for forward and reverse  stock
                    splits,  recapitalizations,  stock  dividends  and the  like
                    after the Initial  Exercise Date), the Company may, within 1
                    Trading Day of the end of any such period,  deliver a notice
                    to the Holder (a "Forced  Exercise Notice" and the date such
                    notice is  received  by the  Holder,  the  "Forced  Exercise
                    Notice  Date") to cause the Holder to exercise  all (but not
                    less than all) of this Warrant, it being understood that the
                    "Warrant  Share  Delivery Date" for purposes of Section 2(e)
                    shall be deemed to occur on the third  Trading Day following
                    the Forced  Exercise  Notice  Date (such  third  Trading Day
                    being referred to as the "Forced Exercise Date"). The Holder
                    shall  deliver the  aggregate  Exercise  Price of the shares
                    thereby purchased by pursuant to a Forced Exercise Notice by
                    wire  transfer or cashier's  check drawn on a United  States

                                       2
<PAGE>

                    bank within five Trading Days following  receipt of a Forced
                    Exercise  Notice.  Notwithstanding  anything  herein  to the
                    contrary,  the  Company may only  deliver a Forced  Exercise
                    Notice if (i) no Material Adverse Effect has occurred during
                    the  period  from the  Initial  Exercise  Date to the Forced
                    Exercise  Date  and (ii) all of the  Equity  Conditions  (as
                    defined  in the  Debentures)  are  met on each  Trading  Day
                    occurring during the applicable Threshold Period through and
                    including  the  later of the  Forced  Exercise  Date and the
                    Trading Day after the date such Warrant  Shares  pursuant to
                    such  exercise  are  delivered  to the  Holder.  Any  Forced
                    Exercise  shall be applied  ratably to all Holders  based on
                    their initial purchases of Warrants pursuant to the Purchase
                    Agreement. For purposes of clarification,  a Forced Exercise
                    shall be  subject  to all of the  provisions  of  Section 2,
                    including,   without  limitation,  the  provision  requiring
                    payment of liquidated damages and limitations on exercise.

          b) Exercise  Price.  The exercise price of the Common Stock under this
     Warrant shall be $1.275,  subject to adjustment  hereunder  (the  "Exercise
     Price").

          c) Cashless  Exercise.  If at any time after one year from the date of
     issuance  of this  Warrant  there is no  effective  Registration  Statement
     registering,  or no current  prospectus  available  for,  the resale of the
     Warrant  Shares by the Holder,  then this  Warrant may also be exercised at
     such time by means of a "cashless  exercise"  in which the Holder  shall be
     entitled to receive a certificate for the number of Warrant Shares equal to
     the quotient obtained by dividing [(A-B) (X)] by (A), where:

          (A)  =    the VWAP on the Trading Day  immediately  preceding the date
                    of such election;

          (B)  =    the Exercise Price of this Warrant, as adjusted; and

          (X)  =    the number of Warrant Shares  issuable upon exercise of this
                    Warrant  in  accordance  with the terms of this  Warrant  by
                    means of a cash exercise rather than a cashless exercise.

          Notwithstanding  anything  herein to the contrary,  on the Termination
     Date, this Warrant shall be automatically  exercised via cashless  exercise
     pursuant to this Section 2(c).

          d) Exercise Limitations.

               (i)  Holder's  Restrictions.  The  Company  shall not  effect any
                    exercise of this  Warrant,  and a Holder  shall not have the
                    right to exercise any portion of this  Warrant,  pursuant to
                    Section 2(c) or  otherwise,  to the extent that after giving
                    effect  to  such  issuance  after   exercise,   such  Holder
                    (together  with  such  Holder's  affiliates,  and any  other
                    person or entity acting as a group together with such Holder

                                       3
<PAGE>

                    or any of such  Holder's  affiliates),  as set  forth on the
                    applicable  Notice of Exercise,  would  beneficially  own in
                    excess of the  Beneficial  Ownership  Limitation (as defined
                    below). For purposes of the foregoing  sentence,  the number
                    of shares of Common Stock  beneficially owned by such Holder
                    and its  affiliates  shall  include  the number of shares of
                    Common  Stock  issuable  upon  exercise of this Warrant with
                    respect to which the determination of such sentence is being
                    made, but shall exclude the number of shares of Common Stock
                    which would be issuable upon (A) exercise of the  remaining,
                    nonexercised  portion of this Warrant  beneficially owned by
                    such  Holder or any of its  affiliates  and (B)  exercise or
                    conversion of the unexercised or nonconverted portion of any
                    other   securities  of  the  Company   (including,   without
                    limitation,  any other Debentures or Warrants)  subject to a
                    limitation  on  conversion  or  exercise  analogous  to  the
                    limitation  contained  herein  beneficially  owned  by  such
                    Holder or any of its affiliates.  Except as set forth in the
                    preceding  sentence,  for  purposes  of this  Section  2(d),
                    beneficial  ownership shall be calculated in accordance with
                    Section  13(d)  of  the  Exchange  Act  and  the  rules  and
                    regulations promulgated thereunder, it being acknowledged by
                    a Holder that the Company is not representing to such Holder
                    that such calculation is in compliance with Section 13(d) of
                    the Exchange Act and such Holder is solely  responsible  for
                    any schedules required to be filed in accordance  therewith.
                    To the extent that the limitation  contained in this Section
                    2(d) applies,  the  determination of whether this Warrant is
                    exercisable (in relation to other  securities  owned by such
                    Holder)   and  of  which  a  portion  of  this   Warrant  is
                    exercisable shall be in the sole discretion of a Holder, and
                    the submission of a Notice of Exercise shall be deemed to be
                    each  Holder's  determination  of  whether  this  Warrant is
                    exercisable (in relation to other  securities  owned by such
                    Holder) and of which portion of this Warrant is exercisable,
                    in  each  case   subject   to  such   aggregate   percentage
                    limitation,  and the  Company  shall have no  obligation  to
                    verify or confirm  the  accuracy of such  determination.  In
                    addition,   a  determination  as  to  any  group  status  as
                    contemplated  above shall be determined  in accordance  with
                    Section  13(d)  of  the  Exchange  Act  and  the  rules  and
                    regulations  promulgated  thereunder.  For  purposes of this
                    Section  2(d),  in  determining  the  number of  outstanding
                    shares of Common  Stock,  a Holder may rely on the number of
                    outstanding  shares of Common  Stock as reflected in (x) the
                    Company's  most recent Form  10-QSB or Form  10-KSB,  as the
                    case may be, (y) a more recent  public  announcement  by the
                    Company  or (z)  any  other  notice  by the  Company  or the
                    Company's  Transfer Agent setting forth the number of shares

                                       4
<PAGE>

                    of  Common  Stock  outstanding.  Upon  the  written  or oral
                    request of a Holder,  the Company  shall  within two Trading
                    Days confirm orally and in writing to such Holder the number
                    of shares of Common Stock then outstanding. In any case, the
                    number  of  outstanding  shares  of  Common  Stock  shall be
                    determined after giving effect to the conversion or exercise
                    of securities  of the Company,  including  this Warrant,  by
                    such  Holder  or its  affiliates  since the date as of which
                    such  number  of  outstanding  shares  of  Common  Stock was
                    reported.  The "Beneficial  Ownership  Limitation"  shall be
                    4.99%  of  the  number  of  shares  of  the   Common   Stock
                    outstanding  immediately after giving effect to the issuance
                    of shares of Common  Stock  issuable  upon  exercise of this
                    Warrant. The Beneficial  Ownership Limitation  provisions of
                    this  Section  2(d) may be  waived  by such  Holder,  at the
                    election of such  Holder,  upon not less than 61 days' prior
                    notice to the  Company  to change the  Beneficial  Ownership
                    Limitation  to 9.99% of the  number of shares of the  Common
                    Stock  outstanding  immediately  after giving  effect to the
                    issuance  of shares of Common  Stock upon  exercise  of this
                    Warrant,  and the  provisions  of this  Section  2(d)  shall
                    continue  to  apply.  Upon  such a change by a Holder of the
                    Beneficial  Ownership  Limitation from such 4.99% limitation
                    to  such  9.99%   limitation,   the   Beneficial   Ownership
                    Limitation may not be waived by such Holder.  The provisions
                    of this paragraph shall be implemented in a manner otherwise
                    than in strict  conformity  with the  terms of this  Section
                    2(d) to correct this paragraph (or any portion hereof) which
                    may  be   defective  or   inconsistent   with  the  intended
                    Beneficial  Ownership Limitation herein contained or to make
                    changes or  supplements  necessary  or desirable to properly
                    give effect to such limitation. The limitations contained in
                    this  paragraph  shall apply to a  successor  holder of this
                    Warrant.

               (ii) Authorized  Share  Limitations.   Notwithstanding   anything
                    herein to the  contrary,  this Series B Warrant shall not be
                    exercisable  until and unless  Authorized Share Approval has
                    been obtained.

          e) Mechanics of Exercise.

                    i.  Authorization of Warrant Shares.  The Company  covenants
               that all Warrant  Shares which may be issued upon the exercise of
               the  purchase  rights  represented  by this  Warrant  will,  upon
               exercise of the purchase rights  represented by this Warrant,  be
               duly authorized, validly issued, fully paid and nonassessable and
               free from all  taxes,  liens and  charges in respect of the issue
               thereof  (other than taxes in respect of any  transfer  occurring
               contemporaneously with such issue).

                                       5
<PAGE>

                    ii. Delivery of Certificates Upon Exercise. Certificates for
               shares  purchased  hereunder shall be transmitted by the transfer
               agent of the  Company to the Holder by  crediting  the account of
               the  Holder's  prime  broker with the  Depository  Trust  Company
               through its Deposit  Withdrawal Agent Commission  ("DWAC") system
               if the Company is a participant in such system,  and otherwise by
               physical  delivery to the address  specified by the Holder in the
               Notice of Exercise within 3 Trading Days from the delivery to the
               Company of the Notice of Exercise Form, surrender of this Warrant
               (if required) and payment of the aggregate  Exercise Price as set
               forth above ("Warrant Share Delivery  Date").  This Warrant shall
               be deemed to have been  exercised on the date the Exercise  Price
               is received by the Company. The Warrant Shares shall be deemed to
               have been issued, and Holder or any other person so designated to
               be named  therein  shall be  deemed  to have  become a holder  of
               record  of such  shares  for all  purposes,  as of the  date  the
               Warrant  has been  exercised  by  payment  to the  Company of the
               Exercise  Price and all taxes  required to be paid by the Holder,
               if any,  pursuant to Section  2(e)(vii)  prior to the issuance of
               such shares, have been paid.

                    iii. Delivery of New Warrants Upon Exercise. If this Warrant
               shall have been  exercised  in part,  the Company  shall,  at the
               request  of  a  Holder  and  upon   surrender   of  this  Warrant
               certificate,  at the  time  of  delivery  of the  certificate  or
               certificates representing Warrant Shares, deliver to Holder a new
               Warrant   evidencing   the  rights  of  Holder  to  purchase  the
               unpurchased Warrant Shares called for by this Warrant,  which new
               Warrant  shall in all  other  respects  be  identical  with  this
               Warrant.

                    iv.  Rescission  Rights.  If the Company  fails to cause its
               transfer  agent  to  transmit  to the  Holder  a  certificate  or
               certificates  representing  the Warrant  Shares  pursuant to this
               Section  2(e)(iv) by the Warrant Share  Delivery  Date,  then the
               Holder will have the right to rescind such exercise.

                    v.  Compensation  for Buy-In on  Failure  to Timely  Deliver
               Certificates  Upon  Exercise.  In  addition  to any other  rights
               available  to the  Holder,  if the  Company  fails to  cause  its
               transfer  agent  to  transmit  to the  Holder  a  certificate  or
               certificates  representing  the  Warrant  Shares  pursuant  to an
               exercise on or before the Warrant  Share  Delivery  Date,  and if
               after such date the Holder is  required by its broker to purchase
               (in an open market  transaction  or  otherwise)  shares of Common
               Stock to deliver in  satisfaction  of a sale by the Holder of the
               Warrant Shares which the Holder  anticipated  receiving upon such
               exercise (a "Buy-In"),  then the Company shall (1) pay in cash to
               the Holder the amount by which (x) the  Holder's  total  purchase
               price (including brokerage commissions, if any) for the shares of
               Common  Stock so  purchased  exceeds  (y) the amount  obtained by
               multiplying (A) the number of Warrant Shares that the Company was
               required to deliver to the Holder in connection with the exercise

                                       6
<PAGE>

               at issue times (B) the price at which the sell order  giving rise
               to such purchase  obligation was executed,  and (2) at the option
               of the Holder,  either  reinstate  the portion of the Warrant and
               equivalent  number of Warrant  Shares for which such exercise was
               not  honored  or  deliver  to the  Holder the number of shares of
               Common  Stock that would have been issued had the Company  timely
               complied  with its exercise and delivery  obligations  hereunder.
               For example,  if the Holder purchases Common Stock having a total
               purchase  price of $11,000 to cover a Buy-In  with  respect to an
               attempted  exercise of shares of Common  Stock with an  aggregate
               sale price giving rise to such  purchase  obligation  of $10,000,
               under  clause  (1)  of the  immediately  preceding  sentence  the
               Company  shall be required to pay the Holder  $1,000.  The Holder
               shall provide the Company  written notice  indicating the amounts
               payable to the Holder in respect  of the  Buy-In,  together  with
               applicable  confirmations and other evidence reasonably requested
               by the Company.  Nothing  herein shall limit a Holder's  right to
               pursue any other remedies available to it hereunder, at law or in
               equity  including,  without  limitation,  a  decree  of  specific
               performance   and/or   injunctive  relief  with  respect  to  the
               Company's  failure to timely  deliver  certificates  representing
               shares of Common  Stock upon  exercise of the Warrant as required
               pursuant to the terms hereof.

                    vi. No Fractional  Shares or Scrip. No fractional  shares or
               scrip  representing  fractional  shares  shall be issued upon the
               exercise  of this  Warrant.  As to any  fraction of a share which
               Holder  would   otherwise  be  entitled  to  purchase  upon  such
               exercise,  the Company shall pay a cash  adjustment in respect of
               such  final   fraction  in  an  amount  equal  to  such  fraction
               multiplied by the Exercise Price.

                    vii. Charges,  Taxes and Expenses.  Issuance of certificates
               for Warrant Shares shall be made without charge to the Holder for
               any issue or transfer tax or other incidental  expense in respect
               of the  issuance  of such  certificate,  all of which  taxes  and
               expenses  shall be paid by the  Company,  and  such  certificates
               shall be  issued  in the name of the  Holder  or in such  name or
               names as may be directed by the Holder;  provided,  however, that
               in the event  certificates for Warrant Shares are to be issued in
               a name  other  than the name of the  Holder,  this  Warrant  when
               surrendered  for exercise  shall be accompanied by the Assignment
               Form attached hereto duly executed by the Holder; and the Company
               may  require,  as a  condition  thereto,  the  payment  of a  sum
               sufficient  to  reimburse  it for  any  transfer  tax  incidental
               thereto.

                    viii.  Closing  of  Books.  The  Company  will not close its
               stockholder  books or records in any manner  which  prevents  the
               timely exercise of this Warrant, pursuant to the terms hereof.

                                       7
<PAGE>

          f) Call Provision.  Subject to the provisions of Section 2(d) and this
     Section 2(f), after the 12 month  anniversary of the Initial Exercise Date,
     the Company may, at any time  thereafter,  call for  cancellation of all or
     any portion of this Warrant for which a Notice of Exercise has not yet been
     delivered (such right, a "Call").  To exercise this right, the Company must
     deliver  to the Holder an  irrevocable  written  notice (a "Call  Notice"),
     indicating  therein the portion of  unexercised  portion of this Warrant to
     which such notice applies.  If the conditions set forth below for such Call
     are satisfied  from the period from the date of the Call Notice through and
     including  the Call  Date (as  defined  below),  then any  portion  of this
     Warrant  subject to such Call Notice for which a Notice of  Exercise  shall
     not have been received by the Call Date will be cancelled at 6:30 p.m. (New
     York City time) on the fifth calendar day after the date the Call Notice is
     received  by the Holder  (such  date,  the "Call  Date").  Any  unexercised
     portion of this  Warrant to which the Call Notice does not pertain  will be
     unaffected  by such  Call  Notice.  In  furtherance  thereof,  the  Company
     covenants  and agrees  that it will  honor all  Notices  of  Exercise  with
     respect  to  Warrant  Shares  subject to a Call  Notice  that are  tendered
     through 6:30 p.m. (New York City time) on the Call Date.  The parties agree
     that any Notice of Exercise  delivered  following a Call Notice shall first
     reduce to zero the number of  Warrant  Shares  subject to such Call  Notice
     prior to reducing the remaining Warrant Shares available for purchase under
     this Warrant.  For example,  if (x) this Warrant then permits the Holder to
     acquire  100  Warrant  Shares,  (y) a Call  Notice  pertains  to 75 Warrant
     Shares,  and (z) prior to 6:30 p.m.  (New York City  time) on the Call Date
     the Holder  tenders a Notice of Exercise  in respect of 50 Warrant  Shares,
     then (1) on the Call  Date the right  under  this  Warrant  to  acquire  25
     Warrant Shares will be  automatically  cancelled,  (2) the Company,  in the
     time and manner required under this Warrant, will have issued and delivered
     to the Holder 50  Warrant  Shares in  respect  of the  exercises  following
     receipt of the Call Notice,  and (3) the Holder may, until the  Termination
     Date, exercise this Warrant for 25 Warrant Shares (subject to adjustment as
     herein provided and subject to subsequent  Call Notices).  Subject again to
     the  provisions  of this Section 2(f),  the Company may deliver  subsequent
     Call Notices for any portion of this Warrant for which the Holder shall not
     have  delivered  a Notice  of  Exercise.  Notwithstanding  anything  to the
     contrary  set forth in this  Warrant,  the  Company  may not deliver a Call
     Notice or require the  cancellation  of this  Warrant  (and any Call Notice
     will be void),  unless,  from the beginning of the 20th consecutive Trading
     Days used to determine  whether the Common Stock has achieved the Threshold
     Price  through  the Call  Date,  (i) the  Company  shall  have  honored  in
     accordance with the terms of this Warrant all Notices of Exercise delivered
     by 6:30 p.m. (New York City time) on the Call Date,  (ii) the  Registration
     Statement  shall be effective as to all Warrant  Shares and the  prospectus
     thereunder  available  for use by the  Holder  for the  resale  of all such
     Warrant  Shares  and (iii) the Common  Stock  shall be listed or quoted for
     trading on the Trading  Market,  and (iv) there is a  sufficient  number of
     authorized  shares of Common Stock for issuance of all Securities under the
     Transaction  Documents,  and (v) the  issuance  of the  shares  shall be in
     accordance  with  Section  2(d)  herein.  The  Company's  right to Call the
     Warrant shall be exercised ratably among the Holders based on each Holder's
     initial purchase of Common Stock.

     Section 3. Certain Adjustments.

                                       8
<PAGE>

          a) Stock Dividends and Splits. If the Company,  at any time while this
     Warrant is  outstanding:  (A) pays a stock  dividend  or  otherwise  make a
     distribution  or  distributions  on shares of its Common Stock or any other
     equity or equity  equivalent  securities  payable in shares of Common Stock
     (which,  for  avoidance  of doubt,  shall not  include any shares of Common
     Stock  issued by the Company  pursuant  to this  Warrant),  (B)  subdivides
     outstanding  shares of Common  Stock into a larger  number of  shares,  (C)
     combines  (including by way of reverse stock split)  outstanding  shares of
     Common  Stock  into  a  smaller   number  of  shares,   or  (D)  issues  by
     reclassification  of shares of the Common Stock any shares of capital stock
     of the Company, then in each case the Exercise Price shall be multiplied by
     a fraction of which the  numerator  shall be the number of shares of Common
     Stock (excluding  treasury shares, if any) outstanding  immediately  before
     such  event and of which the  denominator  shall be the number of shares of
     Common  Stock  outstanding  immediately  after such event and the number of
     shares  issuable  upon  exercise of this Warrant  shall be  proportionately
     adjusted.  Any  adjustment  made pursuant to this Section 3(a) shall become
     effective  immediately  after  the  record  date for the  determination  of
     stockholders  entitled to receive such dividend or  distribution  and shall
     become  effective  immediately  after the  effective  date in the case of a
     subdivision, combination or re-classification.

          b) [RESERVED].

          c) Pro Rata  Distributions.  If the Company,  at any time prior to the
     Termination  Date, shall distribute to all holders of Common Stock (and not
     to  Holders  of the  Warrants)  evidences  of its  indebtedness  or  assets
     (including  cash and cash dividends) or rights or warrants to subscribe for
     or  purchase  any  security  other than the Common  Stock  (which  shall be
     subject to Section  3(b)),  then in each such case the Exercise Price shall
     be adjusted by multiplying the Exercise Price in effect  immediately  prior
     to the record  date fixed for  determination  of  stockholders  entitled to
     receive such  distribution by a fraction of which the denominator  shall be
     the VWAP determined as of the record date mentioned above, and of which the
     numerator  shall be such VWAP on such  record  date less the then per share
     fair  market  value at such  record  date of the  portion of such assets or
     evidence of indebtedness so distributed applicable to one outstanding share
     of the Common Stock as  determined by the Board of Directors in good faith.
     In either case the adjustments  shall be described in a statement  provided
     to the Holder of the  portion of assets or  evidences  of  indebtedness  so
     distributed or such  subscription  rights applicable to one share of Common
     Stock. Such adjustment shall be made whenever any such distribution is made
     and shall  become  effective  immediately  after the record date  mentioned
     above.

          d)  Fundamental  Transaction.  If, at any time while  this  Warrant is
     outstanding,  (A) the Company  effects any merger or  consolidation  of the
     Company with or into another  Person,  (B) the Company  effects any sale of
     all or  substantially  all of its  assets  in one or a  series  of  related
     transactions,  (C) any  tender  offer or  exchange  offer  (whether  by the
     Company or another Person) is completed pursuant to which holders of Common
     Stock  are  permitted  to  tender  or  exchange   their  shares  for  other
     securities,   cash  or   property,   or  (D)  the   Company   effects   any
     reclassification  of the  Common  Stock or any  compulsory  share  exchange
     pursuant  to which  the  Common  Stock  is  effectively  converted  into or

                                       9
<PAGE>

     exchanged  for other  securities,  cash or  property  (in any such case,  a
     "Fundamental  Transaction"),  then,  upon any  subsequent  exercise of this
     Warrant, the Holder shall have the right to receive, for each Warrant Share
     that would have been issuable upon such exercise  immediately  prior to the
     occurrence of such  Fundamental  Transaction,  at the option of the Holder,
     (a) upon exercise of this Warrant,  the number of shares of Common Stock of
     the  successor or  acquiring  corporation  or of the Company,  if it is the
     surviving  corporation,  and any additional  consideration  (the "Alternate
     Consideration")  receivable  upon or as a  result  of such  reorganization,
     reclassification,  merger,  consolidation  or  disposition  of  assets by a
     Holder of the number of shares of Common  Stock for which  this  Warrant is
     exercisable  immediately  prior  to such  event  or (b) if the  Company  is
     acquired  in an all  cash  transaction,  cash  equal  to the  value of this
     Warrant as determined in accordance with the  Black-Scholes  option pricing
     formula.  For  purposes  of any such  exercise,  the  determination  of the
     Exercise Price shall be  appropriately  adjusted to apply to such Alternate
     Consideration  based on the amount of Alternate  Consideration  issuable in
     respect of one share of Common Stock in such Fundamental  Transaction,  and
     the  Company  shall  apportion  the  Exercise  Price  among  the  Alternate
     Consideration in a reasonable  manner  reflecting the relative value of any
     different components of the Alternate  Consideration.  If holders of Common
     Stock are given any choice as to the  securities,  cash or  property  to be
     received in a Fundamental  Transaction,  then the Holder shall be given the
     same choice as to the Alternate Consideration it receives upon any exercise
     of this  Warrant  following  such  Fundamental  Transaction.  To the extent
     necessary to  effectuate  the  foregoing  provisions,  any successor to the
     Company or surviving entity in such Fundamental  Transaction shall issue to
     the Holder a new  warrant  consistent  with the  foregoing  provisions  and
     evidencing  the Holder's  right to exercise  such  warrant  into  Alternate
     Consideration.  The terms of any agreement  pursuant to which a Fundamental
     Transaction is effected shall include terms requiring any such successor or
     surviving  entity to comply with the  provisions  of this  Section 3(d) and
     insuring  that this  Warrant  (or any such  replacement  security)  will be
     similarly  adjusted  upon  any  subsequent   transaction   analogous  to  a
     Fundamental Transaction.

          e) Calculations.  All calculations  under this Section 3 shall be made
     to the nearest cent or the nearest  1/100th of a share, as the case may be.
     For purposes of this Section 3, the number of shares of Common Stock deemed
     to be issued  and  outstanding  as of a given  date shall be the sum of the
     number of shares of Common Stock (excluding treasury shares, if any) issued
     and outstanding.

          f) Voluntary Adjustment By Company. The Company may at any time during
     the term of this  Warrant  reduce the then  current  Exercise  Price to any
     amount  and for any  period  of time  deemed  appropriate  by the  Board of
     Directors of the Company.

          g) Notice to Holders.

                    i. Adjustment to Exercise Price. Whenever the Exercise Price
               is  adjusted  pursuant  to this  Section  3,  the  Company  shall
               promptly mail to each Holder a notice  setting forth the Exercise
               Price after such  adjustment and setting forth a brief  statement
               of the facts requiring such  adjustment.  If the Company issues a
               variable rate security,  despite the  prohibition  thereon in the

                                       10
<PAGE>

               Purchase  Agreement,  the Company  shall be deemed to have issued
               Common Stock or Common Stock  Equivalents at the lowest  possible
               conversion  or  exercise  price at which such  securities  may be
               converted or exercised in the case of a Variable Rate Transaction
               (as defined in the Purchase Agreement).

                    ii. Notice to Allow  Exercise by Holder.  If (A) the Company
               shall  declare  a  dividend  (or any other  distribution)  on the
               Common   Stock;   (B)  the  Company   shall   declare  a  special
               nonrecurring  cash  dividend  on or a  redemption  of the  Common
               Stock;  (C) the  Company  shall  authorize  the  granting  to all
               holders of the Common Stock  rights or warrants to subscribe  for
               or  purchase  any shares of capital  stock of any class or of any
               rights; (D) the approval of any stockholders of the Company shall
               be required in connection with any reclassification of the Common
               Stock,  any  consolidation  or merger to which the  Company  is a
               party,  any sale or transfer of all or  substantially  all of the
               assets of the Company,  of any compulsory  share exchange whereby
               the Common  Stock is  converted  into other  securities,  cash or
               property;  (E) the  Company  shall  authorize  the  voluntary  or
               involuntary dissolution, liquidation or winding up of the affairs
               of the Company; then, in each case, the Company shall cause to be
               mailed to the Holder at its last  address as it shall appear upon
               the Warrant  Register of the Company,  at least 20 calendar  days
               prior to the  applicable  record or  effective  date  hereinafter
               specified,  a notice stating (x) the date on which a record is to
               be  taken  for  the  purpose  of  such  dividend,   distribution,
               redemption,  rights  or  warrants,  or if a  record  is not to be
               taken,  the date as of which the  holders of the Common  Stock of
               record  to  be   entitled   to  such   dividend,   distributions,
               redemption,  rights or warrants are to be  determined  or (y) the
               date on which such reclassification, consolidation, merger, sale,
               transfer or share  exchange is  expected to become  effective  or
               close,  and the date as of which it is expected  that  holders of
               the Common  Stock of record  shall be entitled to exchange  their
               shares of the Common Stock for securities, cash or other property
               deliverable upon such  reclassification,  consolidation,  merger,
               sale,  transfer or share  exchange;  provided that the failure to
               mail such notice or any defect therein or in the mailing  thereof
               shall not affect the validity of the corporate action required to
               be specified  in such notice.  The Holder is entitled to exercise
               this Warrant  during the 20-day period  commencing on the date of
               such notice to the effective  date of the event  triggering  such
               notice.

     Section 4. Transfer of Warrant.

          a)   Transferability.   Subject  to  compliance  with  any  applicable
     securities  laws and the  conditions  set forth in  Sections  5(a) and 4(d)
     hereof and to the provisions of Section 4.1 of the Purchase Agreement, this
     Warrant and all rights  hereunder  are  transferable,  in whole or in part,
     upon  surrender  of this  Warrant at the  principal  office of the Company,
     together  with a written  assignment of this Warrant  substantially  in the
     form  attached  hereto duly executed by the Holder or its agent or attorney
     and funds  sufficient to pay any transfer  taxes payable upon the making of

                                       11
<PAGE>

     such  transfer.  Upon such surrender  and, if required,  such payment,  the
     Company  shall execute and deliver a new Warrant or Warrants in the name of
     the  assignee  or  assignees  and  in  the  denomination  or  denominations
     specified in such instrument of assignment, and shall issue to the assignor
     a new Warrant  evidencing the portion of this Warrant not so assigned,  and
     this Warrant shall promptly be cancelled.  A Warrant, if properly assigned,
     may be exercised by a new holder for the purchase of Warrant Shares without
     having a new Warrant issued.

          b) New  Warrants.  This Warrant may be divided or combined  with other
     Warrants upon  presentation  hereof at the aforesaid office of the Company,
     together with a written notice  specifying the names and  denominations  in
     which new Warrants  are to be issued,  signed by the Holder or its agent or
     attorney. Subject to compliance with Section 4(a), as to any transfer which
     may be involved in such division or combination,  the Company shall execute
     and  deliver a new  Warrant or  Warrants  in  exchange  for the  Warrant or
     Warrants to be divided or combined in accordance with such notice.

          c) Warrant  Register.  The Company shall  register this Warrant,  upon
     records to be  maintained  by the Company for that  purpose  (the  "Warrant
     Register"),  in the name of the record Holder hereof from time to time. The
     Company  may deem and treat the  registered  Holder of this  Warrant as the
     absolute  owner  hereof  for the  purpose  of any  exercise  hereof  or any
     distribution  to the  Holder,  and for all other  purposes,  absent  actual
     notice to the contrary.

          d) Transfer  Restrictions.  If, at the time of the  surrender  of this
     Warrant in connection  with any transfer of this  Warrant,  the transfer of
     this Warrant shall not be registered pursuant to an effective  registration
     statement under the Securities Act and under applicable state securities or
     blue sky laws,  the Company may require,  as a condition  of allowing  such
     transfer (i) that the Holder or transferee of this Warrant, as the case may
     be,  furnish to the  Company a written  opinion of counsel  (which  opinion
     shall be in form,  substance and scope customary for opinions of counsel in
     comparable  transactions)  to the  effect  that such  transfer  may be made
     without  registration  under the Securities Act and under  applicable state
     securities or blue sky laws, (ii) that the holder or transferee execute and
     deliver  to  the  Company  an  investment  letter  in  form  and  substance
     acceptable to the Company and (iii) that the  transferee be an  "accredited
     investor" as defined in Rule 501(a)(1),  (a)(2),  (a)(3), (a)(7), or (a)(8)
     promulgated under the Securities Act or a qualified  institutional buyer as
     defined in Rule 144A(a) under the Securities Act.

     Section 5. Miscellaneous.

          a) Title to  Warrant.  Prior to the  Termination  Date and  subject to
     compliance with applicable laws and Section 4 of this Warrant, this Warrant
     and all rights  hereunder  are  transferable,  in whole or in part,  at the
     office  or  agency  of the  Company  by the  Holder  in  person  or by duly
     authorized  attorney,  upon  surrender  of this Warrant  together  with the
     Assignment Form annexed hereto properly endorsed. The transferee shall sign
     an investment letter in form and substance  reasonably  satisfactory to the
     Company.

                                       12
<PAGE>

          b) No Rights as  Shareholder  Until  Exercise.  This  Warrant does not
     entitle the Holder to any voting rights or other rights as a shareholder of
     the  Company  prior to the  exercise  hereof.  Upon the  surrender  of this
     Warrant and the payment of the aggregate  Exercise  Price (or by means of a
     cashless exercise),  the Warrant Shares so purchased shall be and be deemed
     to be issued to such  Holder as the record  owner of such  shares as of the
     close of business on the later of the date of such surrender or payment.

          c) Loss,  Theft,  Destruction  or Mutilation  of Warrant.  The Company
     covenants  that  upon  receipt  by  the  Company  of  evidence   reasonably
     satisfactory  to it of the loss,  theft,  destruction or mutilation of this
     Warrant or any stock  certificate  relating to the Warrant  Shares,  and in
     case of loss,  theft or  destruction,  of indemnity or security  reasonably
     satisfactory  to it (which,  in the case of the Warrant,  shall not include
     the  posting of any bond),  and upon  surrender  and  cancellation  of such
     Warrant or stock  certificate,  if  mutilated,  the  Company  will make and
     deliver a new  Warrant or stock  certificate  of like tenor and dated as of
     such cancellation, in lieu of such Warrant or stock certificate.

          d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for
     the taking of any action or the expiration of any right required or granted
     herein shall be a Saturday, Sunday or a legal holiday, then such action may
     be taken or such right may be  exercised on the next  succeeding  day not a
     Saturday, Sunday or legal holiday.

          e) Authorized Shares.

               The  Company  covenants  that  during the  period the  Warrant is
          outstanding,  it will reserve from its authorized and unissued  Common
          Stock a sufficient number of shares to provide for the issuance of the
          Warrant  Shares upon the  exercise of any  purchase  rights under this
          Warrant.  The  Company  further  covenants  that its  issuance of this
          Warrant  shall  constitute  full  authority  to its  officers  who are
          charged with the duty of executing  stock  certificates to execute and
          issue the  necessary  certificates  for the  Warrant  Shares  upon the
          exercise of the purchase  rights under this Warrant.  The Company will
          take all such  reasonable  action as may be  necessary  to assure that
          such Warrant Shares may be issued as provided herein without violation
          of any  applicable law or regulation,  or of any  requirements  of the
          Trading Market upon which the Common Stock may be listed.

               Except and to the extent as waived or consented to by the Holder,
          the Company shall not by any action,  including,  without  limitation,
          amending   its   certificate   of   incorporation   or   through   any
          reorganization,    transfer   of   assets,   consolidation,    merger,
          dissolution,  issue  or  sale of  securities  or any  other  voluntary
          action, avoid or seek to avoid the observance or performance of any of
          the terms of this Warrant,  but will at all times in good faith assist
          in the  carrying  out of all such  terms and in the taking of all such
          actions as may be  necessary or  appropriate  to protect the rights of
          Holder  as set  forth  in this  Warrant  against  impairment.  Without
          limiting the  generality  of the  foregoing,  the Company will (a) not
          increase the par value of any Warrant  Shares above the amount payable

                                       13
<PAGE>

          therefor upon such exercise  immediately prior to such increase in par
          value,  (b) take all such action as may be necessary or appropriate in
          order that the Company  may  validly and legally  issue fully paid and
          nonassessable  Warrant  Shares upon the exercise of this Warrant,  and
          (c)  use   commercially   reasonable   efforts   to  obtain  all  such
          authorizations, exemptions or consents from any public regulatory body
          having jurisdiction  thereof as may be necessary to enable the Company
          to perform its obligations under this Warrant.

               Before  taking any action which would result in an  adjustment in
          the number of Warrant  Shares for which this Warrant is exercisable or
          in  the   Exercise   Price,   the  Company   shall   obtain  all  such
          authorizations or exemptions  thereof,  or consents thereto, as may be
          necessary   from  any  public   regulatory   body  or  bodies   having
          jurisdiction thereof.

          f) Jurisdiction. All questions concerning the construction,  validity,
     enforcement  and  interpretation  of this Warrant  shall be  determined  in
     accordance with the provisions of the Purchase Agreement.

          g)  Restrictions.  The Holder  acknowledges  that the  Warrant  Shares
     acquired upon the exercise of this Warrant,  if not  registered,  will have
     restrictions upon resale imposed by state and federal securities laws.

          h)  Nonwaiver  and  Expenses.  No  course of  dealing  or any delay or
     failure to exercise any right hereunder on the part of Holder shall operate
     as a waiver of such right or otherwise prejudice Holder's rights, powers or
     remedies,  notwithstanding  the fact that all rights hereunder terminate on
     the  Termination  Date. If the Company  willfully  and  knowingly  fails to
     comply with any  provision of this  Warrant,  which results in any material
     damages to the  Holder,  the Company  shall pay to Holder  such  amounts as
     shall be  sufficient  to cover any costs and  expenses  including,  but not
     limited  to,  reasonable  attorneys'  fees,  including  those of  appellate
     proceedings,  incurred by Holder in  collecting  any  amounts due  pursuant
     hereto or in  otherwise  enforcing  any of its  rights,  powers or remedies
     hereunder.

          i)  Notices.  Any  notice,  request  or  other  document  required  or
     permitted to be given or  delivered  to the Holder by the Company  shall be
     delivered  in  accordance  with  the  notice  provisions  of  the  Purchase
     Agreement.

          j) Limitation of Liability. No provision hereof, in the absence of any
     affirmative  action by Holder to exercise this Warrant or purchase  Warrant
     Shares,  and no  enumeration  herein of the rights or privileges of Holder,
     shall give rise to any  liability of Holder for the  purchase  price of any
     Common Stock or as a stockholder of the Company,  whether such liability is
     asserted by the Company or by creditors of the Company.

          k)  Remedies.  Holder,  in addition to being  entitled to exercise all
     rights granted by law, including  recovery of damages,  will be entitled to
     specific  performance of its rights under this Warrant.  The Company agrees
     that  monetary  damages  would not be  adequate  compensation  for any loss

                                       14
<PAGE>

     incurred by reason of a breach by it of the  provisions of this Warrant and
     hereby  agrees to waive the defense in any action for specific  performance
     that a remedy at law would be adequate.

          l) Successors and Assigns. Subject to applicable securities laws, this
     Warrant and the rights and obligations  evidenced hereby shall inure to the
     benefit  of and be  binding  upon the  successors  of the  Company  and the
     successors and permitted assigns of Holder.  The provisions of this Warrant
     are intended to be for the benefit of all Holders from time to time of this
     Warrant  and shall be  enforceable  by any such Holder or holder of Warrant
     Shares.

          m)  Amendment.  This  Warrant  may  be  modified  or  amended  or  the
     provisions  hereof  waived with the written  consent of the Company and the
     Holder.

          n)  Severability.  Wherever  possible,  each provision of this Warrant
     shall be  interpreted  in such  manner as to be  effective  and valid under
     applicable law, but if any provision of this Warrant shall be prohibited by
     or invalid under applicable law, such provision shall be ineffective to the
     extent  of  such  prohibition  or  invalidity,   without  invalidating  the
     remainder of such provisions or the remaining provisions of this Warrant.

          o) Headings. The headings used in this Warrant are for the convenience
     of reference only and shall not, for any purpose,  be deemed a part of this
     Warrant.

                              ********************

                                       15
<PAGE>

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

Dated:   January __, 2006

TIDELANDS OIL & GAS CORPORATION

By:__________________________________________
   Name:
   Title:

                                       16
<PAGE>

                               NOTICE OF EXERCISE

TO:      TIDELANDS OIL & GAS CORPORATION

     (1) The undersigned  hereby elects to purchase  ________  Warrant Shares of
the Company  pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.

     (2) Payment shall take the form of (check applicable box):

          [ ] in lawful money of the United States; or

          [ ] the cancellation of such number of Warrant Shares as is necessary,
          in  accordance  with the  formula  set forth in  subsection  2(c),  to
          exercise  this Warrant  with respect to the maximum  number of Warrant
          Shares  purchasable  pursuant to the cashless  exercise  procedure set
          forth in subsection 2(c).

     (3) Please issue a certificate or  certificates  representing  said Warrant
Shares in the name of the  undersigned  or in such  other  name as is  specified
below:

          ___________________________________________

The Warrant Shares shall be delivered to the following:

          ___________________________________________

          ___________________________________________

          ___________________________________________

     (4) Accredited  Investor.  The  undersigned is an "accredited  investor" as
defined  in  Regulation  D  promulgated  under the  Securities  Act of 1933,  as
amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity: ______________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________

<PAGE>

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)

     FOR VALUE RECEIVED,  the foregoing Warrant and all rights evidenced thereby
are hereby assigned to

_______________________________________________ whose address is

________________________________________________________________

________________________________________________________________

                         Dated: ______________, _______

          Holder's Signature: _____________________________

          Holder's Address:   _____________________________

                              _____________________________

Signature Guaranteed:  ____________________________________

NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00096-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00096-of-00352.parquet"}]]