Document:

EXHIBIT 10.7

      VOID AFTER 5:00 P.M., NEW YORK CITY
      TIME, ON JANUARY 4, 2010
      (UNLESS EXTENDED PURSUANT TO SECTION 2 HEREOF)

      THIS WARRANT AND THE SHARES  ISSUABLE  UPON  EXERCISE OF THIS WARRANT HAVE
      NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED (THE
      "SECURITIES  ACT"),  OR THE  SECURITIES  LAWS OF ANY  STATE OF THE  UNITED
      STATES OR ANY OTHER  JURISDICTION.  THE SECURITIES  REPRESENTED HEREBY MAY
      NOT BE  OFFERED,  SOLD  OR  TRANSFERRED  IN THE  ABSENCE  OF AN  EFFECTIVE
      REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS
      UNLESS  OFFERED,  SOLD OR TRANSFERRED  PURSUANT TO AN AVAILABLE  EXEMPTION
      FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.

      Right to Purchase  1,500,000  Shares of Common Stock, par value $0.001 per
share

Date: January 4, 2005

                             SLS INTERNATIONAL, INC.
                             STOCK PURCHASE WARRANT

      THIS CERTIFIES THAT, for value received,  HFTP Investment  L.L.C.,  or its
registered  assigns,  is entitled to purchase  from SLS  International,  Inc., a
corporation  organized under the laws of the State of Delaware (the  "COMPANY"),
at any time or from  time to time  during  the  period  specified  in  Section 2
hereof,  One  Million  and Five  Hundred  Thousand  (1,500,000)  fully  paid and
nonassessable  shares (the "WARRANT  SHARES") of the Company's common stock, par
value $0.001 per share (the "COMMON STOCK"), at an exercise price per share (the
"EXERCISE  PRICE") equal to $6.00. The number of Warrant Shares and the Exercise
Price are  subject to  adjustment  as  provided  in  Section 4 hereof.  The term
"WARRANT" and all references thereto, as used throughout this instrument,  shall
mean  this   instrument  as  originally   executed,   or  if  later  amended  or
supplemented, then as so amended or supplemented,  including all Warrants issued
upon  transfer  or exchange of this  Warrant as  provided  herein,  and the term
"Warrants"  means this  Warrant and the other  warrants  of the  Company  issued
pursuant to that certain Securities Purchase  Agreement,  dated as of January 3,
2005,  by  and  among  the  Company  and  the  other  signatories  thereto  (the
"SECURITIES PURCHASE AGREEMENT").

                                       1
<PAGE>

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

1. Exercise of Warrant; Call Option.

      (a) Subject to the provisions hereof, including,  without limitation,  the
limitation  contained in Section 10 hereof, this Warrant may be exercised by the
holder  hereof,  in whole or in part and from time to time,  by the surrender of
this Warrant,  together with a completed exercise agreement in the form attached
hereto (the "EXERCISE  AGREEMENT"),  to the Company during normal business hours
on any business day at the Company's  principal executive offices (or such other
office or agency of the  Company as it may  designate  by written  notice to the
holder  hereof),  and upon (i) payment to the Company in cash,  by  certified or
official bank check or by wire  transfer for the account of the Company,  of the
Exercise  Price for the Warrant  Shares  specified in the Exercise  Agreement or
(ii) if the holder is effectuating a Cashless  Exercise (as defined in Section 9
hereof)  pursuant  to  Section 9 hereof,  delivery  to the  Company of a written
notice of an  election  to effect a Cashless  Exercise  for the  Warrant  Shares
specified in the Exercise Agreement.

      (b)  The  Warrant  Shares  purchased  upon  exercise  of this  Warrant  in
accordance with this Section 1 shall be deemed to be issued to the holder hereof
or the holder's designee, as the record owner of such shares, as of the close of
business  on the date on which this  Warrant  shall have been  surrendered,  the
completed Exercise  Agreement shall have been delivered,  and payment shall have
been made for such  shares as set forth above or, if such date is not a business
day, on the next  succeeding  business  day.  The Warrant  Shares so  purchased,
representing the aggregate number of shares specified in the Exercise Agreement,
shall be  delivered  to the  holder  hereof or the  holder's  designee  within a
reasonable  time, not exceeding two business days, after this Warrant shall have
been so exercised (the "DELIVERY  PERIOD").  If the Company's  transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated  Securities
Transfer program,  and so long as the certificates  therefor are not required to
bear a legend (pursuant to the terms of the Securities  Purchase  Agreement) and
the holder is not  obligated to return such  certificate  for the placement of a
legend thereon  (pursuant to the  Securities  Purchase  Agreement),  the Company
shall cause its transfer agent to electronically  transmit the Warrant Shares so
purchased to the holder or the holder's designee by crediting the account of the
holder or the holder's  designee or its respective  nominee with DTC through its
Deposit   Withdrawal  Agent   Commission   system  ("DTC   TRANSFER").   If  the
aforementioned conditions to a DTC Transfer are not satisfied, the Company shall
deliver  to  the  holder  or  the  holder's   designee   physical   certificates
representing the Warrant Shares so purchased. Notwithstanding the foregoing, the
holder or the  holder's  designee  may  instruct  the  Company to deliver to the
holder or such designee physical certificates representing the Warrant Shares so
purchased  in  lieu  of  delivering  such  shares  by way of DTC  Transfer.  Any
certificates  so delivered shall be in such  denominations  as may be reasonably
requested by the holder hereof or the holder's designee,  shall be registered in
the name of the holder or such other name as shall be  designated  by the holder
and,  following the date on which the Warrant Shares have been registered  under
the Securities Act pursuant to that certain Registration Rights Agreement, dated
as of  January  3,  2005,  by and among the  Company  and the other  signatories
thereto (the  "REGISTRATION  RIGHTS  AGREEMENT") or otherwise may be sold by the
holder pursuant to Rule 144 promulgated under the Securities Act (or a successor
rule),  shall not bear any restrictive  legend.  If this Warrant shall have been
exercised only in part, then the Company shall,  at its expense,  at the time of
delivery of such certificates,  deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.

                                       2
<PAGE>

      (c) If, at any time, a holder of this Warrant  submits  this  Warrant,  an
Exercise  Agreement and payment to the Company of the Exercise Price for each of
the Warrant Shares specified in the Exercise Agreement  (including pursuant to a
Cashless Exercise), and the Company fails for any reason (other than the reasons
contemplated  by  Section  10  hereof)  to  deliver,  on or prior to the  fourth
business day following the expiration of the Delivery  Period for such exercise,
the number of shares of Common  Stock to which the holder is entitled  upon such
exercise  (an  "EXERCISE  DEFAULT"),  then the  Company  shall pay to the holder
payments  ("EXERCISE DEFAULT PAYMENTS") for an Exercise Default in the amount of
(i) (N/365), multiplied by (ii) the amount by which the Market Price (as defined
in Section 11 hereof)  of the Common  Stock on the date the  Exercise  Agreement
giving rise to the  Exercise  Default is  transmitted  in  accordance  with this
Section 1 (the "EXERCISE DEFAULT DATE") exceeds the Exercise Price in respect of
such Warrant  Shares,  multiplied  by (iii) the number of shares of Common Stock
the Company  failed to so deliver in such Exercise  Default,  multiplied by (iv)
..18,  where N equals the number of days from the  Exercise  Default  Date to the
date that the Company  effects the full exercise of this Warrant which gave rise
to the Exercise Default.  The accrued Exercise Default Payment for each calendar
month  shall be paid in cash and shall be made to the holder by the fifth day of
the month  following  the month in which it has  accrued.  Nothing  herein shall
limit the holder's right to pursue actual  damages for the Company's  failure to
maintain a sufficient  number of  authorized  shares of Common Stock as required
pursuant to the terms of Section  3(b) hereof or to  otherwise  issue  shares of
Common Stock upon exercise of this Warrant in accordance  with the terms hereof,
and the holder shall have the right to pursue all  remedies  available at law or
in equity (including a decree of specific performance and/or injunctive relief).

      (d) Call Option.

            (i) At any time, and from time to time, following one year after the
registration  statement  required  to be filed by the  Company  pursuant  to the
Registration  Rights Agreement (the  "REGISTRATION  STATEMENT")  shall have been
declared effective by the United States Securities and Exchange  Commission (the
date on which such registration  statement is declared  effective is hereinafter
referred to as the  "REGISTRATION  STATEMENT  EFFECTIVE  DATE"),  and subject to
Article  XV of the  Certificate  of  Designation,  Rights  and  Preferences,  as
originally  filed on December 29, 2004 and including any and all  amendments and
certificates  of correction  thereto through and including the Issuance Date (as
defined  therein),  with respect to the Company's  Series C Preferred Stock (the
"CERTIFICATE OF DESIGNATION"),  if all of the Required Conditions are satisfied,
then the Company may deliver a written  notice of such fact (a "CALL NOTICE") to
all  holders of this  Warrant,  and all  holders of this  Warrant  shall then be
required, on a date specified by the Company (the "CALL DATE"), which date shall
be no less than 20 business days,  and no more than 30 business  days,  from the
date of the Call Notice, to either (A) exercise this Warrant,  in whole or as to
any part then remaining,  pursuant to the applicable exercise procedures in this
Section 1 and subject to Section 10 hereof, or (B) tender this Warrant, in whole
or as to any part then  remaining,  in  exchange  for  payment by the Company of
$0.01 per Warrant Share issued pursuant to such exercise.

            (ii) The "Required Conditions" shall consist of the following:

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<PAGE>

                  (1)  the  Market  Price  of the  Common  Stock  (A) for any 20
consecutive  trading-day period following the Registration  Statement  Effective
Date and (B) as of the close of  trading  of the  Common  Stock on the Call Date
shall, in each case, equal or exceed 200% of the Exercise Price then in effect;

                  (2) the Registration  Statement shall continue to be effective
up through and including the date of the Call Date (it being understood that the
Company shall comply with all of its obligations  under the Registration  Rights
Agreement relating to the effectiveness of such Registration Statement);

                  (3) all shares of Common Stock issuable upon conversion of the
Series C Preferred  Stock and exercise of the Warrants  shall then have been (a)
duly authorized and reserved for issuance,  (b) registered  under the Securities
Act for resale by the holders or available  for sale under Rule 144(k),  and (c)
listed,  quoted or traded on at least one of the New York  Stock  Exchange,  the
American Stock Exchange,  the Nasdaq National Market, the Nasdaq SmallCap Market
or the Nasdaq Over-the Counter Bulletin Board;

                  (4) no  Redemption  Event (as  defined in Article  VIII of the
Certificate of Designation) shall have occurred without having been cured; and

                  (5) all amounts,  if any,  then  accrued or payable  under the
Certificate of Designation and the Registration Rights Agreement shall have been
paid.

If any  portion of this  Warrant  may not be  exercised  pursuant  to Section 10
hereof,  then (x)  that  portion  of the  Warrant  not  exercised  shall  remain
outstanding and (y) the Company may deliver additional Call Notices with respect
to such  remaining  portion of this Warrant,  provided that, in the case of each
such  additional Call Notice,  (I) the Required  Conditions are met and (II) the
Company complies with the procedures set forth in Section 1(d)(i) hereof. If the
holder of this  Warrant is required  but fails to exercise  this Warrant (or any
portion hereof) pursuant to and in accordance with this Section 1(d) on the Call
Date,  then the  Company  may,  at any time  during the 10  business  day period
following the Call Date,  repurchase the Warrant or such portion thereof subject
to the Call  Notice for a price of $.001 per  underlying  share of Common  Stock
effective  immediately  upon  written  notice of such  repurchase  to the holder
within such 10 business day period.

2. Period of Exercise.  This Warrant  shall be  exercisable  at any time or from
time to time during the period (the "EXERCISE PERIOD") commencing on the date of
initial issuance of this Warrant (the "ISSUE DATE") and ending at 5:00 p.m., New
York City time, on the fifth  anniversary of the Issue Date. The Exercise Period
shall automatically be extended by one day for each day on which (a) the Company
does not have a number of shares of Common  Stock  reserved  for  issuance  upon
exercise hereof at least equal to 100% of the Registrable Securities (as defined
in the Registration  Rights Agreement) issued or issuable upon conversion of the
Preferred  Stock  (without  giving  effect  to  any  limitations  on  conversion
contained  in the  Certificate  of  Designation)  and  exercise  of the  Warrant
(without  giving effect to any  limitation  on exercise  contained  herein),  or
otherwise  fails to  deliver  shares of  Common  Stock in the names set forth in
Section 1 hereof upon exercise  hereof,  or (b) the Warrant  Shares are not then
otherwise  registered  for  resale  as  required  pursuant  to the  terms of the
Registration Rights Agreement.

                                       4
<PAGE>

3. Certain Agreements of the Company. The Company hereby covenants and agrees as
follows:

      (a) Shares to be Fully Paid.  All Warrant  Shares are duly  authorized and
shall,  upon issuance in accordance  with the terms of this Warrant,  be validly
issued, fully paid and non-assessable and free from all taxes, liens, claims and
encumbrances.

      (b) Reservation of Shares.  During the Exercise Period,  the Company shall
at all times have authorized,  and reserved sixteen million  (16,000,000) shares
of its  authorized  but  unissued  shares of Common Stock and,  thereafter,  the
number of authorized  but unissued  shares of Common Stock so reserved  shall at
all times be  sufficient  to provide for (1) the full  conversion  of all of the
Series C Preferred  Stock  outstanding,  together  with all accrued  and/or paid
Premium as of such date, at the then current  Conversion  Price thereof (without
giving effect to the  limitations  contained in Article XV of the Certificate of
Designation)  and (2) the full exercise of the Warrants  outstanding at the then
current  Exercise  Price (as defined in the  Warrant)  thereof  (without  giving
effect to the limitations contained in Section 10 hereof).

      (c)  Listing.  The Company  shall  ensure that the shares of Common  Stock
issuable   upon  exercise  of  this  Warrant  shall  be  quoted  on  the  Nasdaq
Over-the-Counter Bulletin Board (the "OTC") or shall be listed or quoted on such
other national securities exchange or automated or electronic  quotation system,
if any,  upon which  shares of Common  Stock are then listed or quoted or become
listed or quoted  (subject to official  notice of issuance upon exercise of this
Warrant) and shall  maintain,  so long as any other shares of Common Stock shall
so trade or be so listed or quoted,  such  trading,  listing or quotation of all
shares of Common  Stock from time to time  issuable  upon the  exercise  of this
Warrant; and the Company shall maintain the quotation of the Common Stock on the
OTC or list or apply for quotation on such other national securities exchange or
automated or electronic quotation system, as the case may be, and shall maintain
such listing or quotation  of, any other shares of capital  stock of the Company
issuable  upon the  exercise of this Warrant if and so long as any shares of the
same  class  shall be quoted  on the OTC or be  listed  or quoted on such  other
national securities exchange or automated or electronic quotation system.

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

                                       5
<PAGE>

      (e) Successors and Assigns.  This Warrant shall be binding upon any entity
succeeding to the Company by merger,  consolidation,  or  acquisition  of all or
substantially all of the Company's assets.

      (f) Blue Sky Laws. The Company shall, on or before the date of issuance of
any Warrant Shares, take such actions as the Company shall reasonably  determine
are  necessary to qualify the Warrant  Shares for, or obtain  exemption  for the
Warrant Shares for, sale to the holder of this Warrant upon the exercise  hereof
under  applicable  securities  or "blue  sky" laws of the  states of the  United
States,  and shall provide evidence of any such action so taken to the holder of
this Warrant prior to such date; provided,  however,  that the Company shall not
be required in connection  therewith or as a condition thereto to (i) qualify to
do  business in any  jurisdiction  where it would not  otherwise  be required to
qualify but for this Section 3(f),  (ii) subject  itself to general  taxation in
any such  jurisdiction  or (iii) file a general consent to service of process in
any such jurisdiction.

4. Antidilution  Provisions.  During the Exercise Period, the Exercise Price and
the number of Warrant Shares  issuable  hereunder shall be subject to adjustment
from time to time as provided in this Section 4.

      (a)  Stock  Splits,  Stock  Dividends,  Etc.  If, at any time  during  the
Exercise Period,  the number of outstanding  shares of Common Stock is increased
by a stock split, stock dividend, combination, reclassification or other similar
event, the Exercise Price in effect  immediately prior to such increase shall be
proportionately  reduced, or if the number of outstanding shares of Common Stock
is decreased by a reverse stock split,  combination,  reclassification  or other
similar event, the Exercise Price in effect  immediately  prior to such decrease
shall be proportionately  increased. In such event, the Company shall notify its
transfer agent of such change on or before the effective date thereof.

      (b)  Merger,  Consolidation,  Etc.  If, at any time  during  the  Exercise
Period,  there shall be (i) any  reclassification  or change of the  outstanding
shares of Common Stock  (other than a change in par value,  or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination),  (ii) any consolidation or merger of the Company with any other
entity  (other than a merger in which the Company is the surviving or continuing
entity and its capital stock is unchanged), (iii) any sale or transfer of all or
substantially  all of the assets of the  Company or (iv) any share  exchange  or
other  transaction  pursuant  to which all of the  outstanding  shares of Common
Stock are converted into other  securities or property (each of (i) - (iv) above
being a "CORPORATE  CHANGE"),  then the holder hereof shall  thereafter have the
right to receive upon  exercise of this Warrant,  in lieu of the Warrant  Shares
otherwise  issuable,  such shares of stock,  securities and/or other property as
would have been issued or payable in such Corporate Change with respect to or in
exchange for the number of Warrant  Shares which would have been  issuable  upon
exercise had such Corporate Change not taken place (without giving effect to the
limitations  contained  in  Section  10),  and in  any  such  case,  appropriate
provisions (in form and substance reasonably  satisfactory to the holder hereof)
shall be made with respect to the rights and  interests of the holder to the end
that  the  economic  value  of  this  Warrant  is in no way  diminished  by such
Corporate Change and that the provisions hereof (including,  without limitation,
in the case of any such  consolidation,  merger or sale in which  the  successor
entity or purchasing entity is not the Company,  an immediate  adjustment of the
Exercise  Price and Warrant Shares so that the Exercise Price and Warrant Shares
immediately  after the  Corporate  Change  reflects the same  relative  value as
compared  to the value of the  surviving  entity's  common  stock  that  existed
between the Exercise Price and the Warrant Shares and the value of the Company's
Common Stock  immediately  prior to such Corporate  Change) shall  thereafter be
applicable,  as nearly as may be  practicable in relation to any shares of stock
or securities  thereafter  deliverable  upon the exercise  thereof.  The Company
shall not effect any Corporate  Change unless (A) the holder hereof has received
written notice of such  transaction  at least 45 days prior  thereto,  but in no
event  later  than 15 days  prior to the record  date for the  determination  of
stockholders  entitled to vote with respect thereto,  (B) if required by Section
4(h) of the  Securities  Purchase  Agreement,  the consent of the Purchasers (as
such term is  defined  in the  Securities  Purchase  Agreement)  shall have been
obtained in accordance  with such Section 4(h), and (C) the resulting  successor
or acquiring entity (if not the Company) assumes by written  instrument (in form
and substance  reasonable  satisfactory to the holder hereof) the obligations of
the Company under this Warrant.  The above  provisions shall apply regardless of
whether  or not there  would have been a  sufficient  number of shares of Common
Stock  authorized and available for issuance upon exercise hereof as of the date
of such transaction, and shall similarly apply to successive  reclassifications,
consolidations, mergers, sales, transfers or share exchanges.

                                       6
<PAGE>

      (c) Distributions. If, at any time during the Exercise Period, the Company
shall declare or make any  distribution  of its assets (or rights to acquire its
assets) to holders of Common Stock as a partial liquidating  dividend, by way of
return of capital or otherwise  (including any dividend or  distribution  to the
Company's  stockholders  in cash or shares  (or  rights to  acquire  shares)  of
capital stock of a subsidiary (i.e., a spin-off)) (a  "DISTRIBUTION"),  then the
holder  hereof  shall be entitled,  upon any exercise of this Warrant  after the
date of record for determining stockholders entitled to such Distribution (or if
no such  record is taken,  the date on which such  Distribution  is  declared or
made), to receive the amount of such assets which would have been payable to the
holder with respect to the Warrant Shares  issuable upon such exercise  (without
giving effect to the limitations  contained in Section 10) had the holder hereof
been the holder of such Warrant Shares on the record date for the  determination
of stockholders  entitled to such  Distribution  (or if no such record is taken,
the date on which such Distribution is declared or made).

      (d) Convertible Securities and Purchase Rights. If, at any time during the
Exercise Period,  the Company issues any securities or other  instruments  which
are  convertible   into  or  exercisable  or   exchangeable   for  Common  Stock
("CONVERTIBLE  SECURITIES") or options,  warrants or other rights to purchase or
subscribe for Common Stock or  Convertible  Securities  ("PURCHASE  RIGHTS") pro
rata to the  record  holders of any class of Common  Stock,  whether or not such
Convertible   Securities  or  Purchase  Rights  are   immediately   convertible,
exercisable or exchangeable,  then the holder hereof shall be entitled, upon any
exercise of this Warrant after the date of record for  determining  stockholders
entitled to receive such  Convertible  Securities  or Purchase  Rights (or if no
such record is taken, the date on which such Convertible  Securities or Purchase
Rights are issued), to receive the aggregate number of Convertible Securities or
Purchase Rights which the holder would have received with respect to the Warrant
Shares  issuable upon such exercise  (without  giving effect to the  limitations
contained  in Section 10) had the holder  hereof been the holder of such Warrant
Shares on the record  date for the  determination  of  stockholders  entitled to
receive such Convertible  Securities or Purchase Rights (or if no such record is
taken,  the date on which such  Convertible  Securities or Purchase  Rights were
issued). If the right to exercise or convert any such Convertible  Securities or
Purchase  Rights  would  expire in  accordance  with  their  terms  prior to the
exercise  of this  Warrant,  then the terms of such  Convertible  Securities  or
Purchase Rights shall provide that such exercise or  convertibility  right shall
remain  in  effect  until  30 days  after  the  date the  holder  receives  such
Convertible Securities or Purchase Rights pursuant to the exercise hereof.

                                       7
<PAGE>

      (e) Dilutive Issuances.

            (i)  Adjustment  Upon Dilutive  Issuance.  If the Company  issues or
sells, or in accordance with subparagraph (ii) of this Section 4(e) is deemed to
have issued or sold,  any shares of Common Stock for no  consideration  or for a
consideration  per share less than the  Exercise  Price in effect on the date of
issuance or sale (or deemed  issuance  or sale) (a  "DILUTIVE  ISSUANCE"),  then
effective  immediately upon the Dilutive  Issuance,  the Exercise Price shall be
adjusted in accordance with the following formula:

                 AEP  = C x O+P/C
                            -----
                            CSDO

where:

      AEP   = the adjusted Exercise Price;
      C     = the Exercise  Price on (a) for  purposes  any private  offering of
            securities  under Section 4(2) of the Securities  Act, the date that
            the Company enters into legally  binding  definitive  agreements for
            the  issuance of such Common Stock and (b) for purposes of any other
            such issuance of Common Stock, the date of issuance thereof;
      O     = the number of shares of Common Stock outstanding immediately prior
            to the Dilutive Issuance;
      P     = the  aggregate  consideration,  calculated as set forth in Section
            4(e)(ii)  hereof,   received  by  the  Company  upon  such  Dilutive
            Issuance; and
      CSDO  = the total  number of shares of Common Stock  actually  outstanding
            (after  giving  effect to the Dilutive  Issuance,  and not including
            shares of Common  Stock held in the treasury of the  Company),  plus
            (a) in the case of any adjustment  required by this Section  4(e)(i)
            due to the issuance of Purchase Rights,  the maximum total number of
            shares of Common  Stock  issuable  upon the exercise of the Purchase
            Rights for which the  adjustment is required  (including  any Common
            Stock  issuable  upon  the  conversion  of  Convertible   Securities
            issuable upon the exercise of such Purchase Rights),  and (y) in the
            case of any adjustment  required by this Section  4(e)(i) due to the
            issuance of  Convertible  Securities,  the maximum  total  number of
            shares of Common Stock  issuable  upon the  exercise,  conversion or
            exchange of the  Convertible  Securities for which the adjustment is
            required, as of the date of issuance of such Convertible Securities,
            if any.

                                       8
<PAGE>

      Notwithstanding  the  foregoing,  no adjustment  shall be made pursuant to
this Section 4(e) if such adjustment would result in an increase in the Exercise
Price.

            (ii) Effect on Exercise  Price of Certain  Events.  For  purposes of
determining  the adjusted  Exercise Price under clause (i) of this Section 4(e),
the following will be applicable:

                  (1)  Issuance of  Purchase  Rights.  If the Company  issues or
sells any Purchase Rights, whether or not immediately exercisable, and the price
per share for which Common Stock is issuable  upon the exercise of such Purchase
Rights  (and  the  price  of  any  conversion  of  Convertible  Securities,   if
applicable) is less than the Exercise Price in effect on the date of issuance or
sale of such Purchase Rights,  then the maximum total number of shares of Common
Stock  issuable upon the exercise of all such  Purchase  Rights  (assuming  full
conversion,  exercise or  exchange of  Convertible  Securities,  if  applicable)
shall, as of the date of the issuance or sale of such Purchase Rights, be deemed
to be outstanding and to have been issued and sold by the Company for such price
per share.  For  purposes of the  preceding  sentence,  the "price per share for
which Common Stock is issuable upon the exercise of such Purchase  Rights" shall
be determined by dividing (A) the total amount,  if any,  received or receivable
by the Company as  consideration  for the issuance or sale of all such  Purchase
Rights, plus the minimum aggregate amount of additional  consideration,  if any,
payable to the Company upon the exercise of all such Purchase  Rights,  plus, in
the case of Convertible  Securities  issuable upon the exercise of such Purchase
Rights,  the minimum aggregate amount of additional  consideration  payable upon
the conversion,  exercise or exchange thereof (determined in accordance with the
calculation method set forth in clause (ii)(2) of this Section 4(e)) at the time
such   Convertible   Securities   first  become   convertible,   exercisable  or
exchangeable, by (B) the maximum total number of shares of Common Stock issuable
upon the  exercise  of all  such  Purchase  Rights  (assuming  full  conversion,
exercise or exchange  of  Convertible  Securities,  if  applicable).  No further
adjustment to the Exercise Price shall be made upon the actual  issuance of such
Common Stock upon the exercise of such Purchase  Rights or upon the  conversion,
exercise or exchange of  Convertible  Securities  issuable upon exercise of such
Purchase Rights.

                  (2) Issuance of Convertible Securities.  If the Company issues
or sells any Convertible  Securities,  whether or not  immediately  convertible,
exercisable or  exchangeable,  and the price per share for which Common Stock is
issuable  upon such  conversion,  exercise or exchange is less than the Exercise
Price in effect on the date of issuance or sale of such Convertible  Securities,
then the  maximum  total  number of shares of  Common  Stock  issuable  upon the
conversion, exercise or exchange of all such Convertible Securities shall, as of
the date of the issuance or sale of such Convertible Securities, be deemed to be
outstanding  and to have been  issued and sold by the Company for such price per
share. If the Convertible Securities so issued or sold do not have a fluctuating
conversion  or exercise  price or exchange  ratio,  then for the purposes of the
preceding sentence, the "price per share for which Common Stock is issuable upon
such  conversion,  exercise or exchange" shall be determined by dividing (A) the
total amount, if any, received or receivable by the Company as consideration for
the  issuance  or sale of all such  Convertible  Securities,  plus  the  minimum
aggregate  amount of additional  consideration,  if any,  payable to the Company
upon the conversion, exercise or exchange thereof (determined in accordance with
the calculation method set forth in this clause (ii)(2) of this Section 4(e)) at
the time such Convertible  Securities first become  convertible,  exercisable or
exchangeable, by (B) the maximum total number of shares of Common Stock issuable
upon the exercise, conversion or exchange of all such Convertible Securities. If
the  Convertible  Securities so issued or sold have a fluctuating  conversion or
exercise price or exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"),  then
for  purposes  of the next  preceding  sentence,  the "price per share for which
Common Stock is issuable upon such  conversion,  exercise or exchange"  shall be
deemed to be the lowest price per share which would be applicable  (assuming all
holding period and other conditions to any discounts  contained in such Variable
Rate  Convertible  Security have been satisfied) if the conversion price of such
Variable Rate  Convertible  Security on the date of issuance or sale thereof was
seventy-five  percent  (75%) of the  actual  conversion  price on such date (the
"ASSUMED VARIABLE MARKET PRICE"),  and, further, if the conversion price of such
Variable Rate Convertible  Security at any time or times thereafter is less than
or  equal to the  Assumed  Variable  Market  Price  last  used  for  making  any
adjustment under this Section 4(e) with respect to any Variable Rate Convertible
Security, the Exercise Price in effect at such time shall be readjusted to equal
the  Exercise  Price which would have  resulted if the Assumed  Variable  Market
Price at the time of issuance of the Variable Rate Convertible Security had been
seventy-five  percent (75%) of the actual conversion price of such Variable Rate
Convertible  Security  existing at the time of the  adjustment  required by this
sentence.  No further  adjustment  to the Exercise  Price shall be made upon the
actual  issuance of such Common Stock upon  conversion,  exercise or exchange of
such Convertible Securities.

                                       9
<PAGE>

                  (3) Change in Option Price or  Conversion  Rate. If there is a
change at any time in (A) the amount of additional  consideration payable to the
Company upon the exercise of any Purchase  Rights;  (B) the amount of additional
consideration,  if any, payable to the Company upon the conversion,  exercise or
exchange of any Convertible Securities; or (C) the rate at which any Convertible
Securities are convertible  into or exercisable or exchangeable for Common Stock
(in each such  case,  other than under or by reason of  provisions  designed  to
protect  against  dilution),  the  Exercise  Price in effect at the time of such
change shall be readjusted to the Exercise Price which would have been in effect
at  such  time  had  such  Purchase  Rights  or  Convertible   Securities  still
outstanding  provided  for such  changed  additional  consideration  or  changed
conversion, exercise or exchange rate, as the case may be, at the time initially
issued or sold; provided,  however, that if (x) the Exercise Price is readjusted
in respect of any change to any Purchase Right or Convertible  Security pursuant
to the foregoing and (y) such Purchase  Right or  Convertible  Security  remains
unexercised  or  unconverted,   respectively,  at  the  time  of  expiration  or
termination of such Purchase Right or  Convertible  Security,  then the Exercise
Price shall, effective upon such expiration or termination,  again be readjusted
to reverse the readjustment referred to in clause (x) above. Notwithstanding any
of the  foregoing  in this  Section  4(e)(ii)(3),  no  adjustment  shall be made
pursuant to this  Section  4(e)(ii)(3)  if such  adjustment  would  result in an
increase in the Exercise  Price above the Exercise  Price in effect  immediately
prior to the initial  readjustment  referred  to in clause (x) of the  preceding
sentence.

                  (4)  Calculation  of  Consideration  Received.  If any  Common
Stock,  Purchase  Rights or Convertible  Securities are issued or sold for cash,
the  consideration  received therefor will be the amount received by the Company
therefor,  after  deduction  of all  underwriting  discounts  or  allowances  in
connection with such issuance, grant or sale. In case any Common Stock, Purchase
Rights or Convertible  Securities are issued or sold for a consideration part or
all of which shall be other than cash,  including  in the case of a strategic or
similar  arrangement  in which the other  entity  will  provide  services to the
Company,  purchase  services  from the Company or otherwise  provide  intangible
consideration to the Company,  the amount of the  consideration  other than cash
received by the Company  (including  the net present value of the  consideration
expected by the Company for the  provided or  purchased  services)  shall be the
fair  market  value  of such  consideration,  except  where  such  consideration
consists of securities,  in which case the amount of  consideration  received by
the Company will be the Market Price thereof as of the date of receipt.  In case
any  Common  Stock,  Purchase  Rights or  Convertible  Securities  are issued in
connection  with any  merger  or  consolidation  in  which  the  Company  is the
surviving corporation, the amount of consideration therefor will be deemed to be
the fair  market  value of such  portion of the net assets and  business  of the
non-surviving  corporation  as is  attributable  to such Common Stock,  Purchase
Rights or Convertible Securities,  as the case may be. Notwithstanding  anything
else herein to the contrary,  if Common Stock,  Purchase  Rights or  Convertible
Securities are issued or sold in conjunction with each other as part of a single
transaction or in a series of related transactions,  the holder hereof may elect
to determine  the amount of  consideration  deemed to be received by the Company
therefor by deducting the fair value of any type of securities (the "DISREGARDED
SECURITIES")  issued or sold in such transaction or series of  transactions.  If
the holder makes an election pursuant to the immediately  preceding sentence, no
adjustment to the Exercise Price shall be made pursuant to this Section 4(e) for
the issuance of the Disregarded  Securities or upon any conversion,  exercise or
exchange  thereof.  For example,  if the Company were to issue convertible notes
having a face value of  $1,000,000  and  warrants to  purchase  shares of Common
Stock at an exercise  price equal to the Market Price of the Common Stock on the
date of issuance of such warrants in exchange for  $1,000,000 of  consideration,
the fair  value of the  warrants  would be  subtracted  from the  $1,000,000  of
consideration  received by the Company for the purposes of  determining  whether
the shares of Common Stock  issuable upon  conversion of the  convertible  notes
shall be deemed to be issued at a price per share below  Exercise  Price and, if
so, for purposes of determining  any adjustment to the Exercise Price  hereunder
as a  result  of the  issuance  of the  convertible  notes.  The  Company  shall
calculate,  using standard commercial  valuation methods appropriate for valuing
such  assets,  the fair  market  value of any  consideration  other than cash or
securities;  provided, however, that if the holder hereof does not agree to such
fair market value  calculation  within three business days after receipt thereof
from the Company,  then such fair market value shall be determined in good faith
by an  investment  banker or other  appropriate  expert of  national  reputation
selected by the Company and reasonably  acceptable to the holder, with the costs
of such appraisal to be borne by the Company.

                                       10
<PAGE>

                  (5) Issuances Pursuant to Existing Securities.  If the Company
issues (or becomes  obligated to issue)  shares of Common Stock  pursuant to any
antidilution  or similar  adjustments  (other than as a result of stock  splits,
stock  dividends  and the  like)  contained  in any  Convertible  Securities  or
Purchase  Rights  outstanding  as of the date hereof but not included in Section
3(c) of the Disclosure Schedule to the Securities  Purchase Agreement,  then all
shares of  Common  Stock so issued  shall be deemed to have been  issued  for no
consideration.  If the Company issues (or becomes  obligated to issue) shares of
Common Stock pursuant to any  antidilution or similar  adjustments  contained in
any  Convertible  Securities or Purchase  Rights included in Section 3(c) of the
Disclosure  Schedule to the  Securities  Purchase  Agreement  as a result of the
issuance of the Series C Preferred Stock or Warrants  pursuant to the Securities
Purchase  Agreement  and the  number of shares  that the  Company  issues (or is
obligated  to issue) as a result of such  initial  issuance  exceeds  the amount
specified in Section 3(c) of the Disclosure  Schedule to the Securities Purchase
Agreement,  such  excess  shares  shall be  deemed to have  been  issued  for no
consideration.

                                       11
<PAGE>

                  (6) Exceptions to Adjustment of Exercise  Price. No adjustment
to the  Exercise  Price shall be made:  (i) upon the  exercise  of any  Purchase
Rights  set  forth  in  Section  3(c)(ii)  of  the  Disclosure  Schedule  to the
Securities  Purchase  Agreement in  accordance  with the terms of such  Purchase
Rights as of such date,  provided that in the case of each  agreement  under the
heading  "Pending  Agreements" in Section  3(c)(ii) of the Disclosure  Schedule,
such agreement  includes either (A) an exercise or conversion  price of at least
$2.50 per share or (B) a covenant by the party acquiring  securities  thereunder
obligating  such party not to sell more than 5,000 shares of Common Stock in any
single  trading day nor more than 25,000  shares of Common Stock in any calendar
week,  in each case,  until the trading price of the Common Stock is above $6.00
per share;  (ii) upon the grant or  exercise  of any Common  Stock,  Convertible
Securities  or  Purchase  Rights to  employees,  officers  or  directors  of, or
consultants  to, the Company  which may  hereafter be granted to or exercised by
any employee,  officer,  director or consultant under any equity compensation or
similar  benefit  plan of the Company now existing or to be  implemented  in the
future,  so  long as (A)  such  plan  and the  issuance  of such  Common  Stock,
Convertible  Securities  or  Purchase  Rights is  approved  in  accordance  with
reasonable  judgment by a majority of the Board of Directors of the Company or a
majority of the members of a committee  consisting  exclusively of  independent,
non-employee  directors  established  for such  purpose,  and (B)  such  plan is
approved by the  stockholders  of the Company if and to the extent required from
time to time  under  the  Securities  Act,  the  Exchange  Act,  the  rules  and
regulations of the  Commission  thereunder  and/or the listing  standards of any
national  exchange or quotation  service;  (iii) upon conversion of the Series C
Preferred  Stock or  exercise  of the  Warrants  or upon any  adjustment  to the
conversion  price of the Series C Preferred  Stock or the exercise  price of the
Warrants;  (iv) the issuance of securities in a bona fide business  acquisition;
(v) upon the  issuance of  securities  in  connection  with  strategic  business
partnerships,  joint  ventures  or  collaborative  agreements  relating  to  the
promotion of the Company's  products in each case, the primary purpose of which,
in the reasonable judgment of the Board of Directors, is not to raise additional
capital;  or (vi) upon the  issuance of  securities  pursuant  to any  equipment
financing from a bank or similar  financial or lending  institution  approved by
the Board of Directors  and to the extent not  otherwise  restricted  by Article
XIII.(vii) of the Certificate of Designation.

      (f) Other  Action  Affecting  Exercise  Price.  If, at any time during the
Exercise  Period,  the Company takes any action  affecting the Common Stock that
would be covered by Section  4(a)  through (e), but for the manner in which such
action is taken or structured, which would in any way diminish the value of this
Warrant,  then the Exercise  Price shall be adjusted in such manner as the Board
of Directors of the Company shall in good faith  determine to be equitable under
the circumstances.  Notwithstanding  the foregoing,  no adjustment shall be made
pursuant to this Section 4(f) if such adjustment  would result in an increase to
the Exercise Price.

      (g) Adjustment in Number of Shares.  Upon each  adjustment of the Exercise
Price  pursuant  to the  provisions  of this  Section 4, the number of shares of
Common Stock  issuable upon exercise of this Warrant at each such Exercise Price
shall be adjusted by  multiplying a number equal to the Exercise Price in effect
immediately  prior to such  adjustment  by the number of shares of Common  Stock
issuable upon exercise of this Warrant at such Exercise Price  immediately prior
to such adjustment and dividing the product so obtained by the adjusted Exercise
Price.

                                       12
<PAGE>

      (h)  Notice of  Adjustment.  Upon the  occurrence  of each  adjustment  or
readjustment  of the  Exercise  Price  pursuant to this Section 4 amounting to a
more than one percent (1%) change in such Exercise  Price,  or any change in the
number or type of stock, securities and/or other property issuable upon exercise
of this  Warrant,  the Company,  at its  expense,  shall  promptly  compute such
adjustment or  readjustment  or change and prepare and furnish to each holder of
hereof a certificate setting forth such adjustment or readjustment or change and
showing in detail the facts upon which such adjustment or readjustment or change
is based. The Company shall,  upon the written request at any time of any holder
hereof,  furnish to such holder a like Warrant reflecting (i) such adjustment or
readjustment  or change,  (ii) the Exercise  Price in effect at the time of such
request and (iii) the number of shares of Common  Stock and the amount,  if any,
of  other  securities  or  property  which at the time  would be  received  upon
exercise  of the  Warrant.  Such  calculation  shall be  certified  by the chief
financial officer of the Company.

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

      (j) Other Notices. In case at any time:

            (i) the Company  shall  declare any  dividend  upon the Common Stock
payable  in shares of stock of any class or make any other  distribution  (other
than  dividends  or  distributions  payable  in cash  out of  retained  earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;

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

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

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

then,  in each such case,  the Company  shall give to the holder of this Warrant
(A) notice of the date or estimated date on which the books of the Company shall
close or a record  shall be taken for  determining  the holders of Common  Stock
entitled to receive any such dividend,  distribution,  or subscription rights or
for  determining  the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation  or  winding-up  and  (B) in the  case of any  such  reorganization,
reclassification,  consolidation,  merger,  sale,  dissolution,  liquidation  or
winding-up,  notice of the date (or, if not then known,  a  reasonable  estimate
thereof by the Company)  when the same shall take place.  Such notice shall also
specify  the date on which the  holders of Common  Stock  shall be  entitled  to
receive such dividend, distribution, or subscription rights or to exchange their
Common Stock for stock or other  securities  or property  deliverable  upon such
reorganization,  reclassification,  consolidation,  merger,  sale,  dissolution,
liquidation,  or  winding-up,  as the case may be. Such notice shall be given at
least  forty-five  (45) days prior to the  record  date or the date on which the
Company's books are closed in respect thereto but in no event later than 15 days
prior to the record date for the determination of stockholders  entitled to vote
with  respect  thereto.  Failure to give any such  notice or any defect  therein
shall not affect the  validity of the  proceedings  referred to in clauses  (i),
(ii),  (iii) and (iv) above.  Notwithstanding  the foregoing,  the Company shall
publicly  disclose the  substance  of any notice  delivered  hereunder  prior to
delivery of such notice to the holder hereof.

                                       13
<PAGE>

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

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

7. Transfer, Exchange, Redemption and Replacement of Warrant.

      (a)  Restriction  on Transfer.  This Warrant and the rights granted to the
holder  hereof are  transferable,  in whole or in part,  upon  surrender of this
Warrant,  together  with a properly  executed  assignment  in the form  attached
hereto,  at the office or agency of the  Company  referred  to in  Section  7(e)
below,  provided,  however,  that any transfer or assignment shall be subject to
the conditions set forth in Sections 7(f) and 10 hereof and to the provisions of
Section 5(b) of the Securities  Purchase  Agreement.  Until due  presentment for
registration of transfer on the books of the Company,  the Company may treat the
registered  holder hereof as the owner and holder  hereof for all purposes,  and
the Company shall not be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, the registration  rights described in
Section 8 hereof are  assignable  only in accordance  with the provisions of the
Registration Rights Agreement.

      (b) Warrant  Exchangeable  for  Different  Denominations.  This Warrant is
exchangeable,  upon the  surrender  hereof by the holder hereof at the office or
agency of the Company  referred to in Section  7(e) below,  for new  Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased  hereunder,
each of such new  Warrants to  represent  the right to  purchase  such number of
shares (at the Exercise  Price) as shall be  designated  by the holder hereof at
the time of such surrender.

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

                                       14
<PAGE>

      (d) Cancellation;  Payment of Expenses. Upon the surrender of this Warrant
in connection  with any transfer,  exchange,  or replacement as provided in this
Section 7, this Warrant shall be promptly  canceled by the Company.  The Company
shall  pay all  taxes  (other  than  securities  transfer  taxes)  and all other
reasonable  expenses (other than legal expenses,  if any, incurred by the holder
of this  Warrant or  transferees)  and charges  payable in  connection  with the
preparation, execution, and delivery of Warrants pursuant to this Section 7. The
Company shall  indemnify and reimburse the holder of this Warrant for all losses
and damages arising as a result of or related to any breach of the terms of this
Warrant, including reasonable costs and expenses (including legal fees) incurred
by such holder in connection with the enforcement of its rights hereunder.

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

      (f)  Transfer or  Exchange  Without  Registration.  If, at the time of the
surrender  of this Warrant in  connection  with any transfer or exchange of this
Warrant,  this  Warrant  (or, in the case of any  exercise,  the Warrant  Shares
issuable  hereunder)  shall not be registered under the Securities Act and under
applicable  state  securities  or blue sky laws,  the Company may require,  as a
condition  of  allowing  such  transfer  or  exchange,  (i) that the  holder  or
transferee of this Warrant, as the case may be, furnish to the Company a written
opinion  of  counsel  (which  opinion  shall be in  form,  substance  and  scope
customary for opinions of counsel in comparable transactions) to the effect that
such transfer or exchange may be made without  registration under the Securities
Act and under  applicable  state  securities or blue sky laws (the cost of which
shall be borne by the Company if the Company's  counsel renders such an opinion,
and up to $1,000  of such cost  shall be borne by the  Company  if the  holder's
counsel is required to render such opinion),  (ii) that the holder or transferee
execute and deliver to the Company an  investment  letter in form and  substance
acceptable  to the  Company  and (iii)  that the  transferee  be an  "ACCREDITED
INVESTOR"  as defined  in Rule  501(a)  promulgated  under the  Securities  Act;
provided,  however,  that no such opinion,  letter,  or status as an "accredited
investor" shall be required in connection  with a transfer  pursuant to Rule 144
under the Securities Act.

8.  Registration  Rights.  The  initial  holder  of this  Warrant  (and  certain
assignees  thereof) is entitled  to the benefit of such  registration  rights in
respect  of the  Warrant  Shares  as are set  forth in the  Registration  Rights
Agreement,  including the right to assign such rights to certain  assignees,  as
set forth therein.

9.  Cashless  Exercise.  If, at any time from and after 150 days  following  the
Issue Date,  the  Registration  Statement is not  effective as and to the extent
required  under the  Registration  Rights  Agreement,  then this  Warrant may be
exercised by  presentation  and  surrender of this Warrant to the Company at its
principal  executive offices with a written notice of the holder's  intention to
effect a cashless  exercise,  including a calculation of the number of shares of
Common Stock to be issued upon such exercise in accordance with the terms hereof
(a "CASHLESS EXERCISE").  In the event of a Cashless Exercise, in lieu of paying
the Exercise  Price in cash,  the holder shall  surrender  this Warrant for that
number of shares of Common Stock determined by multiplying the number of Warrant
Shares to which it would  otherwise be entitled by a fraction,  the numerator of
which shall be the  difference  between the then current Market Price of a share
of the Common  Stock on the date of exercise  and the  Exercise  Price,  and the
denominator  of which shall be the then current Market Price per share of Common
Stock. The holder of this Warrant shall not be entitled to exercise this Warrant
(or any portion  hereof) on a Cashless  Exercise  basis  except  pursuant to the
foregoing in this Section 9.

                                       15
<PAGE>

10.  Additional  Restrictions  on Exercise and  Transfer.  In no event shall the
holder hereof have the right (or obligation  pursuant to Section 1(d) hereof) to
exercise any portion of this Warrant for shares of Common Stock or to dispose of
any  portion  of this  Warrant  to the  extent  that such  right to effect  such
exercise or disposition  would result in the holder and its affiliates  together
beneficially  owning more than 4.99% of the outstanding  shares of Common Stock.
For purposes of this Section 10,  beneficial  ownership  shall be  determined in
accordance  with  Section  13(d) of the  Securities  Exchange  Act of  1934,  as
amended,  and Regulation  13D-G  thereunder.  The restriction  contained in this
Section  10 may not be  altered,  amended,  deleted  or  changed  in any  manner
whatsoever unless the holders of a majority of the outstanding  shares of Common
Stock  and the  holder  hereof  shall  approve,  in  writing,  such  alteration,
amendment, deletion or change.

11. Certain Definitions. For purposes of this Warrant, the following capitalized
terms shall have the respective meanings assigned to them:

      (a) "BUSINESS DAY" means any day, other than a Saturday or Sunday or a day
on which  banking  institutions  in the  State of New  York  are  authorized  or
obligated by law, regulation or executive order to close.

      (b) "MARKET  PRICE" means,  for any security as of any date,  the last bid
price  of such  security  on the OTC or the  Bulletin  Board  Exchange  or other
principal  trading  market  where such  security is listed,  quoted or traded as
reported by Bloomberg  Financial  Markets (or a comparable  reporting service of
national  reputation  selected  by the Company  and,  for so long as the Initial
Holder holds this Warrant (or any portion hereof),  reasonably acceptable to the
Initial Holder if Bloomberg  Financial Markets is not then reporting closing bid
prices of such security) (collectively,  "BLOOMBERG"),  or if the foregoing does
not apply, the closing sales price of such security on a national exchange or on
the OTC on any other electronic  bulletin board for such security as reported by
Bloomberg,  or, if no such price is reported for such security by Bloomberg, the
average of the bid prices of all market  makers for such security as reported in
the "pink sheets" by the National Quotation Bureau,  Inc., in each case for such
date or,  if such  date was not a  trading  day for such  security,  on the next
preceding  date  which was a trading  day.  If the  Market  Bid Price  cannot be
calculated  for such security as of either of such dates on any of the foregoing
bases,  the  Market  Bid Price of such  security  on such date shall be the fair
market value as reasonably  determined by an investment banking firm selected by
the Company  and,  for so long as the Initial  Holder holds this Warrant (or any
portion hereof),  reasonably acceptable to the Initial Holder, with the costs of
such appraisal to be borne by the Company.

                                       16
<PAGE>

      (c)  "TRADING  DAY"  means  any  day  on  which  principal  United  States
securities  exchange or trading  market where the Common Stock is then listed or
traded, is open for trading.

12. Miscellaneous.

      (a)  Governing  Law;  Jurisdiction.  This Warrant shall be governed by and
construed in  accordance  with the laws of the State of Delaware  applicable  to
contracts made and to be performed in the State of Delaware. Each of the Company
and the holders of this Warrant irrevocably  consents to the jurisdiction of the
United States  federal  courts and the state courts located in the County of New
Castle,  State of Delaware,  in any suit or proceeding based on or arising under
this Warrant and  irrevocably  agrees that all claims in respect of such suit or
proceeding may be determined in such courts. Each of the Company and the holders
of this Warrant  irrevocably  waives the defense of an inconvenient forum to the
maintenance  of such suit or proceeding  in such forum.  Each of the Company and
the  holders of this  Warrant  further  agrees that  service of process  upon it
mailed by first class mail shall be deemed in every respect effective service of
process upon it in any such suit or proceeding.  Nothing herein shall affect the
right of the holder to serve  process in any other manner  permitted by law Each
of the  Company  and the  holders of this  Warrant  that a final  non-appealable
judgment in any such suit or proceeding  shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.

      (b) Construction.  Whenever the context  requires,  the gender of any word
used in this Warrant includes the masculine,  feminine or neuter, and the number
of any word  includes  the  singular  or plural.  Unless the  context  otherwise
requires, all references to articles and sections refer to articles and sections
of this  Warrant,  and all  references  to schedules  are to schedules  attached
hereto,  each of which is made a part hereof for all purposes.  The  descriptive
headings of the several  articles  and sections of this Warrant are inserted for
purposes of reference  only, and shall not affect the meaning or construction of
any of the provisions hereof.

      (c)  Severability.  If any  provision of this Warrant  shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or  enforceability  of the  remainder of this Warrant or the
validity or enforceability of this Warrant in any other jurisdiction.

      (d)  Entire  Agreement;  Amendments.  This  Warrant  contains  the  entire
understanding  of the Company and the holder  hereof with respect to the matters
covered herein. Subject to any additional express provisions of this Warrant, no
provision of this Warrant may be waived other than by an  instrument  in writing
signed by the party to be charged  with  enforcement,  and no  provision of this
Warrant  may be amended  other than by an  instrument  in writing  signed by the
Company and the holder.

      (e) Notices. Any notices required or permitted to be given under the terms
of this Warrant  shall be sent by certified or registered  mail (return  receipt
requested) or delivered  personally,  by nationally recognized overnight carrier
or by confirmed facsimile  transmission,  and shall be effective five days after
being placed in the mail, if mailed,  or upon receipt or refusal of receipt,  if
delivered personally or by nationally  recognized overnight carrier or confirmed
facsimile transmission, in each case addressed to a party. The initial addresses
for such communications shall be as follows, and each party shall provide notice
to the other parties of any change in such party's address:

                                       17
<PAGE>

            (i) If to the Company:

                SLS International, Inc.
                3119 South Scenic
                Springfield, Missouri 65807
                Telephone: (417) 883-4549
                Facsimile:  (417) 883-2723
                Attention:  President and Controller

                with a copy simultaneously  transmitted by like means
                (which   transmittal   shall  not  constitute  notice
                hereunder) to:

                Freeborn & Peters LLP
                311 South Wacker Drive
                Suite 3000
                Chicago, IL 60606
                Telephone: (312) 360-6312
                Facsimile:  (312) 360-6597
                Attention:  Jeffrey M. Mattson, Esq.

            (ii) If to the holder,  at such address as shall be set forth in the
Warrant Register from time to time.

      (f) Successors  and Assigns.  This Warrant shall be binding upon and inure
to the  benefit of the  parties  and their  successors  and  assigns.  Except as
provided  herein,  the Company shall not assign this Warrant or its  obligations
hereunder.  The holder  hereof  may assign or  transfer  this  Warrant  and such
holders rights hereunder in accordance with Section 7 hereof.

      (g) Equitable Relief. The Company  acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holder by vitiating the
intent and purpose of this Warrant.  Accordingly,  the Company acknowledges that
the remedy at law for a breach of its  obligations  hereunder will be inadequate
and agrees,  in the event of a breach or threatened breach by the Company of the
provisions  of this Warrant,  that the holder shall be entitled,  in addition to
all other available remedies, to an injunction  restraining any breach,  without
the necessity of showing  economic  loss and without any bond or other  security
being required.

                                       18
<PAGE>

      (h) Remedies  Cumulative.  The remedies  provided in this Warrant shall be
cumulative and in addition to all other remedies  available  under this Warrant,
at law or in equity  (including  a decree of specific  performance  and/or other
injunctive  relief),  and nothing  herein shall limit a holder's right to pursue
actual  damages  for any failure by the Company to comply with the terms of this
Warrant.  The  Company  acknowledges  that a  breach  by it of  its  obligations
hereunder will cause  irreparable harm to the holders hereof and that the remedy
at law for any such breach may be inadequate.  The Company  therefore agrees, in
the event of any such breach or threatened breach, that the holders hereof shall
be  entitled,  in addition to all other  available  remedies,  to an  injunction
restraining  any breach,  without the  necessity  of showing  economic  loss and
without any bond or other security being required.

                [REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY]

                                       19
<PAGE>

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

                                              SLS INTERNATIONAL, INC.

                                              By:_______________________________
                                              Name:
                                              Title:

                   [SIGNATURE PAGE TO STOCK PURCHASE WARRANT]
<PAGE>

                           FORM OF EXERCISE AGREEMENT

         (TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)

To:   SLS International, Inc.
      3119 South Scenic
      Spingfield, Missouri
      Facsimile: (417) 883-2723
      Attention: Chief Executive Officer

      The  undersigned  hereby  irrevocably  exercises  the  right  to  purchase
_____________  shares  of  the  Common  Stock  of  SLS  International,  Inc.,  a
corporation  organized under the laws of the State of Delaware (the  "Company"),
evidenced by the attached  Warrant,  and herewith [makes payment of the Exercise
Price with respect to such shares in full][elects to effect a Cashless  Exercise
(as  defined  in  Section  9 of  such  Warrant)],  all in  accordance  with  the
conditions and provisions of said Warrant.

      The undersigned agrees not to offer,  sell,  transfer or otherwise dispose
of  any  Common  Stock  obtained  on  exercise  of  the  Warrant,  except  under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.

            |_| The  undersigned  requests  that the Company  cause its transfer
            agent to electronically  transmit the Common Stock issuable pursuant
            to this Exercise  Agreement to the account of the undersigned or its
            nominee  (which is  _________________)  with DTC through its Deposit
            Withdrawal Agent Commission System ("DTC  TRANSFER"),  provided that
            such  transfer  agent   participates   in  the  DTC  Fast  Automated
            Securities Transfer program.

            |_| In lieu  of  receiving  the  shares  of  Common  Stock  issuable
            pursuant to this  Exercise  Agreement  by way of DTC  Transfer,  the
            undersigned  hereby  requests  that the Company  cause its  transfer
            agent to issue and deliver to the undersigned physical  certificates
            representing such shares of Common Stock.

The undersigned  requests that a Warrant  representing  any unexercised  portion
hereof  be  issued,  pursuant  to the  Warrant,  in the name of the  Holder  and
delivered to the undersigned at the address set forth below:

Dated:_________________                     ____________________________________
                                                 Signature of Holder

                                            ____________________________________
                                                 Name of Holder (Print)

                                                 Address:
                                            ____________________________________
                                            ____________________________________
                                            ____________________________________
<PAGE>

                               FORM OF ASSIGNMENT

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

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

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

Dated: _____________________, ____

In the presence of

__________________

                                  Name:_________________________________________

                                  Signature:____________________________________
                                  Title of Signing Officer or Agent (if any):

                                  ______________________________________________

                                  Address:______________________________________
                                          ______________________________________
                                          ______________________________________

                                  Note:  The  above signature should  correspond
                                         exactly with the name  on  the  face of
                                         the within Warrant.EXHIBIT 10.8

      VOID AFTER 5:00 P.M., NEW YORK CITY
      TIME, ON JANUARY 4, 2010
      (UNLESS EXTENDED PURSUANT TO SECTION 2 HEREOF)

      THIS WARRANT AND THE SHARES  ISSUABLE  UPON  EXERCISE OF THIS WARRANT HAVE
      NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED (THE
      "SECURITIES  ACT"),  OR THE  SECURITIES  LAWS OF ANY  STATE OF THE  UNITED
      STATES OR ANY OTHER  JURISDICTION.  THE SECURITIES  REPRESENTED HEREBY MAY
      NOT BE  OFFERED,  SOLD  OR  TRANSFERRED  IN THE  ABSENCE  OF AN  EFFECTIVE
      REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS
      UNLESS  OFFERED,  SOLD OR TRANSFERRED  PURSUANT TO AN AVAILABLE  EXEMPTION
      FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.

      Right to Purchase  1,300,000  Shares of Common Stock, par value $0.001 per
share

Date: January 4, 2005

                             SLS INTERNATIONAL, INC.
                             STOCK PURCHASE WARRANT

      THIS CERTIFIES  THAT,  for value  received,  Royal Bank of Canada,  or its
registered  assigns,  is entitled to purchase  from SLS  International,  Inc., a
corporation  organized under the laws of the State of Delaware (the  "COMPANY"),
at any time or from  time to time  during  the  period  specified  in  Section 2
hereof,  One  Million  and Three  Hundred  Thousand  (1,300,000)  fully paid and
nonassessable  shares (the "WARRANT  SHARES") of the Company's common stock, par
value $0.001 per share (the "COMMON STOCK"), at an exercise price per share (the
"EXERCISE  Price") equal to $6.00. The number of Warrant Shares and the Exercise
Price are  subject to  adjustment  as  provided  in  Section 4 hereof.  The term
"WARRANT" and all references thereto, as used throughout this instrument,  shall
mean  this   instrument  as  originally   executed,   or  if  later  amended  or
supplemented, then as so amended or supplemented,  including all Warrants issued
upon  transfer  or exchange of this  Warrant as  provided  herein,  and the term
"WARRANTS"  means this  Warrant and the other  warrants  of the  Company  issued
pursuant to that certain Securities Purchase  Agreement,  dated as of January 3,
2005,  by  and  among  the  Company  and  the  other  signatories  thereto  (the
"SECURITIES PURCHASE AGREEMENT").

                                       1
<PAGE>

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

1. Exercise of Warrant; Call Option.

      (a) Subject to the provisions hereof, including,  without limitation,  the
limitation  contained in Section 10 hereof, this Warrant may be exercised by the
holder  hereof,  in whole or in part and from time to time,  by the surrender of
this Warrant,  together with a completed exercise agreement in the form attached
hereto (the "EXERCISE  AGREEMENT"),  to the Company during normal business hours
on any business day at the Company's  principal executive offices (or such other
office or agency of the  Company as it may  designate  by written  notice to the
holder  hereof),  and upon (i) payment to the Company in cash,  by  certified or
official bank check or by wire  transfer for the account of the Company,  of the
Exercise  Price for the Warrant  Shares  specified in the Exercise  Agreement or
(ii) if the holder is effectuating a Cashless  Exercise (as defined in Section 9
hereof)  pursuant  to  Section 9 hereof,  delivery  to the  Company of a written
notice of an  election  to effect a Cashless  Exercise  for the  Warrant  Shares
specified in the Exercise Agreement.

      (b)  The  Warrant  Shares  purchased  upon  exercise  of this  Warrant  in
accordance with this Section 1 shall be deemed to be issued to the holder hereof
or the holder's designee, as the record owner of such shares, as of the close of
business  on the date on which this  Warrant  shall have been  surrendered,  the
completed Exercise  Agreement shall have been delivered,  and payment shall have
been made for such  shares as set forth above or, if such date is not a business
day, on the next  succeeding  business  day.  The Warrant  Shares so  purchased,
representing the aggregate number of shares specified in the Exercise Agreement,
shall be  delivered  to the  holder  hereof or the  holder's  designee  within a
reasonable  time, not exceeding two business days, after this Warrant shall have
been so exercised (the "DELIVERY  PERIOD").  If the Company's  transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated  Securities
Transfer program,  and so long as the certificates  therefor are not required to
bear a legend (pursuant to the terms of the Securities  Purchase  Agreement) and
the holder is not  obligated to return such  certificate  for the placement of a
legend thereon  (pursuant to the  Securities  Purchase  Agreement),  the Company
shall cause its transfer agent to electronically  transmit the Warrant Shares so
purchased to the holder or the holder's designee by crediting the account of the
holder or the holder's  designee or its respective  nominee with DTC through its
Deposit   Withdrawal  Agent   Commission   system  ("DTC   TRANSFER").   If  the
aforementioned conditions to a DTC Transfer are not satisfied, the Company shall
deliver  to  the  holder  or  the  holder's   designee   physical   certificates
representing the Warrant Shares so purchased. Notwithstanding the foregoing, the
holder or the  holder's  designee  may  instruct  the  Company to deliver to the
holder or such designee physical certificates representing the Warrant Shares so
purchased  in  lieu  of  delivering  such  shares  by way of DTC  Transfer.  Any
certificates  so delivered shall be in such  denominations  as may be reasonably
requested by the holder hereof or the holder's designee,  shall be registered in
the name of the holder or such other name as shall be  designated  by the holder
and,  following the date on which the Warrant Shares have been registered  under
the Securities Act pursuant to that certain Registration Rights Agreement, dated
as of  January  3,  2005,  by and among the  Company  and the other  signatories
thereto (the  "REGISTRATION  RIGHTS  AGREEMENT") or otherwise may be sold by the
holder pursuant to Rule 144 promulgated under the Securities Act (or a successor
rule),  shall not bear any restrictive  legend.  If this Warrant shall have been
exercised only in part, then the Company shall,  at its expense,  at the time of
delivery of such certificates,  deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.

                                       2
<PAGE>

      (c) If, at any time, a holder of this Warrant  submits  this  Warrant,  an
Exercise  Agreement and payment to the Company of the Exercise Price for each of
the Warrant Shares specified in the Exercise Agreement  (including pursuant to a
Cashless Exercise), and the Company fails for any reason (other than the reasons
contemplated  by  Section  10  hereof)  to  deliver,  on or prior to the  fourth
business day following the expiration of the Delivery  Period for such exercise,
the number of shares of Common  Stock to which the holder is entitled  upon such
exercise  (an  "EXERCISE  DEFAULT"),  then the  Company  shall pay to the holder
payments  ("EXERCISE DEFAULT PAYMENTS") for an Exercise Default in the amount of
(i) (N/365), multiplied by (ii) the amount by which the Market Price (as defined
in Section 11 hereof)  of the Common  Stock on the date the  Exercise  Agreement
giving rise to the  Exercise  Default is  transmitted  in  accordance  with this
Section 1 (the "EXERCISE DEFAULT DATE") exceeds the Exercise Price in respect of
such Warrant  Shares,  multiplied  by (iii) the number of shares of Common Stock
the Company  failed to so deliver in such Exercise  Default,  multiplied by (iv)
..18,  where N equals the number of days from the  Exercise  Default  Date to the
date that the Company  effects the full exercise of this Warrant which gave rise
to the Exercise Default.  The accrued Exercise Default Payment for each calendar
month  shall be paid in cash and shall be made to the holder by the fifth day of
the month  following  the month in which it has  accrued.  Nothing  herein shall
limit the holder's right to pursue actual  damages for the Company's  failure to
maintain a sufficient  number of  authorized  shares of Common Stock as required
pursuant to the terms of Section  3(b) hereof or to  otherwise  issue  shares of
Common Stock upon exercise of this Warrant in accordance  with the terms hereof,
and the holder shall have the right to pursue all  remedies  available at law or
in equity (including a decree of specific performance and/or injunctive relief).

      (d) Call Option.

            (i) At any time, and from time to time, following one year after the
registration  statement  required  to be filed by the  Company  pursuant  to the
Registration  Rights Agreement (the  "REGISTRATION  STATEMENT")  shall have been
declared effective by the United States Securities and Exchange  Commission (the
date on which such registration  statement is declared  effective is hereinafter
referred to as the  "REGISTRATION  STATEMENT  EFFECTIVE  DATE"),  and subject to
Article  XV of the  Certificate  of  Designation,  Rights  and  Preferences,  as
originally  filed on December 29, 2004 and including any and all  amendments and
certificates  of correction  thereto through and including the Issuance Date (as
defined  therein),  with respect to the Company's  Series C Preferred Stock (the
"CERTIFICATE OF DESIGNATION"),  if all of the Required Conditions are satisfied,
then the Company may deliver a written  notice of such fact (a "CALL NOTICE") to
all  holders of this  Warrant,  and all  holders of this  Warrant  shall then be
required, on a date specified by the Company (the "CALL DATE"), which date shall
be no less than 20 business days,  and no more than 30 business  days,  from the
date of the Call Notice, to either (A) exercise this Warrant,  in whole or as to
any part then remaining,  pursuant to the applicable exercise procedures in this
Section 1 and subject to Section 10 hereof, or (B) tender this Warrant, in whole
or as to any part then  remaining,  in  exchange  for  payment by the Company of
$0.01 per Warrant Share issued pursuant to such exercise.

            (ii) The "Required Conditions" shall consist of the following:

                                       3
<PAGE>

                  (1)  the  Market  Price  of the  Common  Stock  (A) for any 20
consecutive  trading-day period following the Registration  Statement  Effective
Date and (B) as of the close of  trading  of the  Common  Stock on the Call Date
shall, in each case, equal or exceed 200% of the Exercise Price then in effect;

                  (2) the Registration  Statement shall continue to be effective
up through and including the date of the Call Date (it being understood that the
Company shall comply with all of its obligations  under the Registration  Rights
Agreement relating to the effectiveness of such Registration Statement);

                  (3) all shares of Common Stock issuable upon conversion of the
Series C Preferred  Stock and exercise of the Warrants  shall then have been (a)
duly authorized and reserved for issuance,  (b) registered  under the Securities
Act for resale by the holders or available  for sale under Rule 144(k),  and (c)
listed,  quoted or traded on at least one of the New York  Stock  Exchange,  the
American Stock Exchange,  the Nasdaq National Market, the Nasdaq SmallCap Market
or the Nasdaq Over-the Counter Bulletin Board;

                  (4) no  Redemption  Event (as  defined in Article  VIII of the
Certificate of Designation) shall have occurred without having been cured; and

                  (5) all amounts,  if any,  then  accrued or payable  under the
Certificate of Designation and the Registration Rights Agreement shall have been
paid.

If any  portion of this  Warrant  may not be  exercised  pursuant  to Section 10
hereof,  then (x)  that  portion  of the  Warrant  not  exercised  shall  remain
outstanding and (y) the Company may deliver additional Call Notices with respect
to such  remaining  portion of this Warrant,  provided that, in the case of each
such  additional Call Notice,  (I) the Required  Conditions are met and (II) the
Company complies with the procedures set forth in Section 1(d)(i) hereof. If the
holder of this  Warrant is required  but fails to exercise  this Warrant (or any
portion hereof) pursuant to and in accordance with this Section 1(d) on the Call
Date,  then the  Company  may,  at any time  during the 10  business  day period
following the Call Date,  repurchase the Warrant or such portion thereof subject
to the Call  Notice for a price of $.001 per  underlying  share of Common  Stock
effective  immediately  upon  written  notice of such  repurchase  to the holder
within such 10 business day period.

2. Period of Exercise.  This Warrant  shall be  exercisable  at any time or from
time to time during the period (the "EXERCISE PERIOD") commencing on the date of
initial issuance of this Warrant (the "ISSUE DATE") and ending at 5:00 p.m., New
York City time, on the fifth  anniversary of the Issue Date. The Exercise Period
shall automatically be extended by one day for each day on which (a) the Company
does not have a number of shares of Common  Stock  reserved  for  issuance  upon
exercise hereof at least equal to 100% of the Registrable Securities (as defined
in the Registration  Rights Agreement) issued or issuable upon conversion of the
Preferred  Stock  (without  giving  effect  to  any  limitations  on  conversion
contained  in the  Certificate  of  Designation)  and  exercise  of the  Warrant
(without  giving effect to any  limitation  on exercise  contained  herein),  or
otherwise  fails to  deliver  shares of  Common  Stock in the names set forth in
Section 1 hereof upon exercise  hereof,  or (b) the Warrant  Shares are not then
otherwise  registered  for  resale  as  required  pursuant  to the  terms of the
Registration Rights Agreement.

                                       4
<PAGE>

3. Certain Agreements of the Company. The Company hereby covenants and agrees as
follows:

      (a) Shares to be Fully Paid.  All Warrant  Shares are duly  authorized and
shall,  upon issuance in accordance  with the terms of this Warrant,  be validly
issued, fully paid and non-assessable and free from all taxes, liens, claims and
encumbrances.

      (b) Reservation of Shares.  During the Exercise Period,  the Company shall
at  all  times  have  authorized,  and  reserved  sixteen  million  (16,000,000)
authorized but unissued  shares of Common Stock and,  thereafter,  the number of
authorized but unissued shares of Common Stock so reserved shall at all times be
sufficient  to  provide  for (1) the  full  conversion  of all of the  Series  C
Preferred Stock outstanding, together with all accrued and/or paid Premium as of
such date, at the then current  Conversion  Price thereof (without giving effect
to the  limitations  contained in Article XV of the  Certificate of Designation)
and (2) the full  exercise  of the  Warrants  outstanding  at the  then  current
Exercise Price (as defined in the Warrant) thereof (without giving effect to the
limitations contained in Section 10 hereof).

      (c)  Listing.  The Company  shall  ensure that the shares of Common  Stock
issuable   upon  exercise  of  this  Warrant  shall  be  quoted  on  the  Nasdaq
Over-the-Counter Bulletin Board (the "OTC") or shall be listed or quoted on such
other national securities exchange or automated or electronic  quotation system,
if any,  upon which  shares of Common  Stock are then listed or quoted or become
listed or quoted  (subject to official  notice of issuance upon exercise of this
Warrant) and shall  maintain,  so long as any other shares of Common Stock shall
so trade or be so listed or quoted,  such  trading,  listing or quotation of all
shares of Common  Stock from time to time  issuable  upon the  exercise  of this
Warrant; and the Company shall maintain the quotation of the Common Stock on the
OTC or list or apply for quotation on such other national securities exchange or
automated or electronic quotation system, as the case may be, and shall maintain
such listing or quotation  of, any other shares of capital  stock of the Company
issuable  upon the  exercise of this Warrant if and so long as any shares of the
same  class  shall be quoted  on the OTC or be  listed  or quoted on such  other
national securities exchange or automated or electronic quotation system.

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

                                       5
<PAGE>

      (e) Successors and Assigns.  This Warrant shall be binding upon any entity
succeeding to the Company by merger,  consolidation,  or  acquisition  of all or
substantially all of the Company's assets.

      (f) Blue Sky Laws. The Company shall, on or before the date of issuance of
any Warrant Shares, take such actions as the Company shall reasonably  determine
are  necessary to qualify the Warrant  Shares for, or obtain  exemption  for the
Warrant Shares for, sale to the holder of this Warrant upon the exercise  hereof
under  applicable  securities  or "blue  sky" laws of the  states of the  United
States,  and shall provide evidence of any such action so taken to the holder of
this Warrant prior to such date; provided,  however,  that the Company shall not
be required in connection  therewith or as a condition thereto to (i) qualify to
do  business in any  jurisdiction  where it would not  otherwise  be required to
qualify but for this Section 3(f),  (ii) subject  itself to general  taxation in
any such  jurisdiction  or (iii) file a general consent to service of process in
any such jurisdiction.

4. Antidilution  Provisions.  During the Exercise Period, the Exercise Price and
the number of Warrant Shares  issuable  hereunder shall be subject to adjustment
from time to time as provided in this Section 4.

      (a)  Stock  Splits,  Stock  Dividends,  Etc.  If, at any time  during  the
Exercise Period,  the number of outstanding  shares of Common Stock is increased
by a stock split, stock dividend, combination, reclassification or other similar
event, the Exercise Price in effect  immediately prior to such increase shall be
proportionately  reduced, or if the number of outstanding shares of Common Stock
is decreased by a reverse stock split,  combination,  reclassification  or other
similar event, the Exercise Price in effect  immediately  prior to such decrease
shall be proportionately  increased. In such event, the Company shall notify its
transfer agent of such change on or before the effective date thereof.

      (b)  Merger,  Consolidation,  Etc.  If, at any time  during  the  Exercise
Period,  there shall be (i) any  reclassification  or change of the  outstanding
shares of Common Stock  (other than a change in par value,  or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination),  (ii) any consolidation or merger of the Company with any other
entity  (other than a merger in which the Company is the surviving or continuing
entity and its capital stock is unchanged), (iii) any sale or transfer of all or
substantially  all of the assets of the  Company or (iv) any share  exchange  or
other  transaction  pursuant  to which all of the  outstanding  shares of Common
Stock are converted into other  securities or property (each of (i) - (iv) above
being a "CORPORATE  CHANGE"),  then the holder hereof shall  thereafter have the
right to receive upon  exercise of this Warrant,  in lieu of the Warrant  Shares
otherwise  issuable,  such shares of stock,  securities and/or other property as
would have been issued or payable in such Corporate Change with respect to or in
exchange for the number of Warrant  Shares which would have been  issuable  upon
exercise had such Corporate Change not taken place (without giving effect to the
limitations  contained  in  Section  10),  and in  any  such  case,  appropriate
provisions (in form and substance reasonably  satisfactory to the holder hereof)
shall be made with respect to the rights and  interests of the holder to the end
that  the  economic  value  of  this  Warrant  is in no way  diminished  by such
Corporate Change and that the provisions hereof (including,  without limitation,
in the case of any such  consolidation,  merger or sale in which  the  successor
entity or purchasing entity is not the Company,  an immediate  adjustment of the
Exercise  Price and Warrant Shares so that the Exercise Price and Warrant Shares
immediately  after the  Corporate  Change  reflects the same  relative  value as
compared  to the value of the  surviving  entity's  common  stock  that  existed
between the Exercise Price and the Warrant Shares and the value of the Company's
Common Stock  immediately  prior to such Corporate  Change) shall  thereafter be
applicable,  as nearly as may be  practicable in relation to any shares of stock
or securities  thereafter  deliverable  upon the exercise  thereof.  The Company
shall not effect any Corporate  Change unless (A) the holder hereof has received
written notice of such  transaction  at least 45 days prior  thereto,  but in no
event  later  than 15 days  prior to the record  date for the  determination  of
stockholders  entitled to vote with respect thereto,  (B) if required by Section
4(h) of the  Securities  Purchase  Agreement,  the consent of the Purchasers (as
such term is  defined  in the  Securities  Purchase  Agreement)  shall have been
obtained in accordance  with such Section 4(h), and (C) the resulting  successor
or acquiring entity (if not the Company) assumes by written  instrument (in form
and substance  reasonable  satisfactory to the holder hereof) the obligations of
the Company under this Warrant.  The above  provisions shall apply regardless of
whether  or not there  would have been a  sufficient  number of shares of Common
Stock  authorized and available for issuance upon exercise hereof as of the date
of such transaction, and shall similarly apply to successive  reclassifications,
consolidations, mergers, sales, transfers or share exchanges.

                                       6
<PAGE>

      (c) Distributions. If, at any time during the Exercise Period, the Company
shall declare or make any  distribution  of its assets (or rights to acquire its
assets) to holders of Common Stock as a partial liquidating  dividend, by way of
return of capital or otherwise  (including any dividend or  distribution  to the
Company's  stockholders  in cash or shares  (or  rights to  acquire  shares)  of
capital stock of a subsidiary (i.e., a spin-off)) (a  "DISTRIBUTION"),  then the
holder  hereof  shall be entitled,  upon any exercise of this Warrant  after the
date of record for determining stockholders entitled to such Distribution (or if
no such  record is taken,  the date on which such  Distribution  is  declared or
made), to receive the amount of such assets which would have been payable to the
holder with respect to the Warrant Shares  issuable upon such exercise  (without
giving effect to the limitations  contained in Section 10) had the holder hereof
been the holder of such Warrant Shares on the record date for the  determination
of stockholders  entitled to such  Distribution  (or if no such record is taken,
the date on which such Distribution is declared or made).

      (d) Convertible Securities and Purchase Rights. If, at any time during the
Exercise Period,  the Company issues any securities or other  instruments  which
are  convertible   into  or  exercisable  or   exchangeable   for  Common  Stock
("CONVERTIBLE  SECURITIES") or options,  warrants or other rights to purchase or
subscribe for Common Stock or  Convertible  Securities  ("PURCHASE  RIGHTS") pro
rata to the  record  holders of any class of Common  Stock,  whether or not such
Convertible   Securities  or  Purchase  Rights  are   immediately   convertible,
exercisable or exchangeable,  then the holder hereof shall be entitled, upon any
exercise of this Warrant after the date of record for  determining  stockholders
entitled to receive such  Convertible  Securities  or Purchase  Rights (or if no
such record is taken, the date on which such Convertible  Securities or Purchase
Rights are issued), to receive the aggregate number of Convertible Securities or
Purchase Rights which the holder would have received with respect to the Warrant
Shares  issuable upon such exercise  (without  giving effect to the  limitations
contained  in Section 10) had the holder  hereof been the holder of such Warrant
Shares on the record  date for the  determination  of  stockholders  entitled to
receive such Convertible  Securities or Purchase Rights (or if no such record is
taken,  the date on which such  Convertible  Securities or Purchase  Rights were
issued). If the right to exercise or convert any such Convertible  Securities or
Purchase  Rights  would  expire in  accordance  with  their  terms  prior to the
exercise  of this  Warrant,  then the terms of such  Convertible  Securities  or
Purchase Rights shall provide that such exercise or  convertibility  right shall
remain  in  effect  until  30 days  after  the  date the  holder  receives  such
Convertible Securities or Purchase Rights pursuant to the exercise hereof.

                                       7
<PAGE>

      (e) Dilutive Issuances.

            (i)  Adjustment  Upon Dilutive  Issuance.  If the Company  issues or
sells, or in accordance with subparagraph (ii) of this Section 4(e) is deemed to
have issued or sold,  any shares of Common Stock for no  consideration  or for a
consideration  per share less than the  Exercise  Price in effect on the date of
issuance or sale (or deemed  issuance  or sale) (a  "DILUTIVE  ISSUANCE"),  then
effective  immediately upon the Dilutive  Issuance,  the Exercise Price shall be
adjusted in accordance with the following formula:

                 AEP  = C x O+P/C
                            -----
                            CSDO

where:

      AEP   = the adjusted Exercise Price;
      C     = the Exercise  Price on (a) for  purposes  any private  offering of
            securities  under Section 4(2) of the Securities  Act, the date that
            the Company enters into legally  binding  definitive  agreements for
            the  issuance of such Common Stock and (b) for purposes of any other
            such issuance of Common Stock, the date of issuance thereof;
      O     = the number of shares of Common Stock outstanding immediately prior
            to the Dilutive Issuance;
      P     = the  aggregate  consideration,  calculated as set forth in Section
            4(e)(ii)  hereof,   received  by  the  Company  upon  such  Dilutive
            Issuance; and
      CSDO  = the total  number of shares of Common Stock  actually  outstanding
            (after  giving  effect to the Dilutive  Issuance,  and not including
            shares of Common  Stock held in the treasury of the  Company),  plus
            (a) in the case of any adjustment  required by this Section  4(e)(i)
            due to the issuance of Purchase Rights,  the maximum total number of
            shares of Common  Stock  issuable  upon the exercise of the Purchase
            Rights for which the  adjustment is required  (including  any Common
            Stock  issuable  upon  the  conversion  of  Convertible   Securities
            issuable upon the exercise of such Purchase Rights),  and (y) in the
            case of any adjustment  required by this Section  4(e)(i) due to the
            issuance of  Convertible  Securities,  the maximum  total  number of
            shares of Common Stock  issuable  upon the  exercise,  conversion or
            exchange of the  Convertible  Securities for which the adjustment is
            required, as of the date of issuance of such Convertible Securities,
            if any.

                                       8
<PAGE>

      Notwithstanding  the  foregoing,  no adjustment  shall be made pursuant to
this Section 4(e) if such adjustment would result in an increase in the Exercise
Price.

            (ii) Effect on Exercise  Price of Certain  Events.  For  purposes of
determining  the adjusted  Exercise Price under clause (i) of this Section 4(e),
the following will be applicable:

                  (1)  Issuance of  Purchase  Rights.  If the Company  issues or
sells any Purchase Rights, whether or not immediately exercisable, and the price
per share for which Common Stock is issuable  upon the exercise of such Purchase
Rights  (and  the  price  of  any  conversion  of  Convertible  Securities,   if
applicable) is less than the Exercise Price in effect on the date of issuance or
sale of such Purchase Rights,  then the maximum total number of shares of Common
Stock  issuable upon the exercise of all such  Purchase  Rights  (assuming  full
conversion,  exercise or  exchange of  Convertible  Securities,  if  applicable)
shall, as of the date of the issuance or sale of such Purchase Rights, be deemed
to be outstanding and to have been issued and sold by the Company for such price
per share.  For  purposes of the  preceding  sentence,  the "price per share for
which Common Stock is issuable upon the exercise of such Purchase  Rights" shall
be determined by dividing (A) the total amount,  if any,  received or receivable
by the Company as  consideration  for the issuance or sale of all such  Purchase
Rights, plus the minimum aggregate amount of additional  consideration,  if any,
payable to the Company upon the exercise of all such Purchase  Rights,  plus, in
the case of Convertible  Securities  issuable upon the exercise of such Purchase
Rights,  the minimum aggregate amount of additional  consideration  payable upon
the conversion,  exercise or exchange thereof (determined in accordance with the
calculation method set forth in clause (ii)(2) of this Section 4(e)) at the time
such   Convertible   Securities   first  become   convertible,   exercisable  or
exchangeable, by (B) the maximum total number of shares of Common Stock issuable
upon the  exercise  of all  such  Purchase  Rights  (assuming  full  conversion,
exercise or exchange  of  Convertible  Securities,  if  applicable).  No further
adjustment to the Exercise Price shall be made upon the actual  issuance of such
Common Stock upon the exercise of such Purchase  Rights or upon the  conversion,
exercise or exchange of  Convertible  Securities  issuable upon exercise of such
Purchase Rights.

                  (2) Issuance of Convertible Securities.  If the Company issues
or sells any Convertible  Securities,  whether or not  immediately  convertible,
exercisable or  exchangeable,  and the price per share for which Common Stock is
issuable  upon such  conversion,  exercise or exchange is less than the Exercise
Price in effect on the date of issuance or sale of such Convertible  Securities,
then the  maximum  total  number of shares of  Common  Stock  issuable  upon the
conversion, exercise or exchange of all such Convertible Securities shall, as of
the date of the issuance or sale of such Convertible Securities, be deemed to be
outstanding  and to have been  issued and sold by the Company for such price per
share. If the Convertible Securities so issued or sold do not have a fluctuating
conversion  or exercise  price or exchange  ratio,  then for the purposes of the
preceding sentence, the "price per share for which Common Stock is issuable upon
such  conversion,  exercise or exchange" shall be determined by dividing (A) the
total amount, if any, received or receivable by the Company as consideration for
the  issuance  or sale of all such  Convertible  Securities,  plus  the  minimum
aggregate  amount of additional  consideration,  if any,  payable to the Company
upon the conversion, exercise or exchange thereof (determined in accordance with
the calculation method set forth in this clause (ii)(2) of this Section 4(e)) at
the time such Convertible  Securities first become  convertible,  exercisable or
exchangeable, by (B) the maximum total number of shares of Common Stock issuable
upon the exercise, conversion or exchange of all such Convertible Securities. If
the  Convertible  Securities so issued or sold have a fluctuating  conversion or
exercise price or exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"),  then
for  purposes  of the next  preceding  sentence,  the "price per share for which
Common Stock is issuable upon such  conversion,  exercise or exchange"  shall be
deemed to be the lowest price per share which would be applicable  (assuming all
holding period and other conditions to any discounts  contained in such Variable
Rate  Convertible  Security have been satisfied) if the conversion price of such
Variable Rate  Convertible  Security on the date of issuance or sale thereof was
seventy-five  percent  (75%) of the  actual  conversion  price on such date (the
"ASSUMED VARIABLE MARKET PRICE"),  and, further, if the conversion price of such
Variable Rate Convertible  Security at any time or times thereafter is less than
or  equal to the  Assumed  Variable  Market  Price  last  used  for  making  any
adjustment under this Section 4(e) with respect to any Variable Rate Convertible
Security, the Exercise Price in effect at such time shall be readjusted to equal
the  Exercise  Price which would have  resulted if the Assumed  Variable  Market
Price at the time of issuance of the Variable Rate Convertible Security had been
seventy-five  percent (75%) of the actual conversion price of such Variable Rate
Convertible  Security  existing at the time of the  adjustment  required by this
sentence.  No further  adjustment  to the Exercise  Price shall be made upon the
actual  issuance of such Common Stock upon  conversion,  exercise or exchange of
such Convertible Securities.

                                       9
<PAGE>

                  (3) Change in Option Price or  Conversion  Rate. If there is a
change at any time in (A) the amount of additional  consideration payable to the
Company upon the exercise of any Purchase  Rights;  (B) the amount of additional
consideration,  if any, payable to the Company upon the conversion,  exercise or
exchange of any Convertible Securities; or (C) the rate at which any Convertible
Securities are convertible  into or exercisable or exchangeable for Common Stock
(in each such  case,  other than under or by reason of  provisions  designed  to
protect  against  dilution),  the  Exercise  Price in effect at the time of such
change shall be readjusted to the Exercise Price which would have been in effect
at  such  time  had  such  Purchase  Rights  or  Convertible   Securities  still
outstanding  provided  for such  changed  additional  consideration  or  changed
conversion, exercise or exchange rate, as the case may be, at the time initially
issued or sold; provided,  however, that if (x) the Exercise Price is readjusted
in respect of any change to any Purchase Right or Convertible  Security pursuant
to the foregoing and (y) such Purchase  Right or  Convertible  Security  remains
unexercised  or  unconverted,   respectively,  at  the  time  of  expiration  or
termination of such Purchase Right or  Convertible  Security,  then the Exercise
Price shall, effective upon such expiration or termination,  again be readjusted
to reverse the readjustment referred to in clause (x) above. Notwithstanding any
of the  foregoing  in this  Section  4(e)(ii)(3),  no  adjustment  shall be made
pursuant to this  Section  4(e)(ii)(3)  if such  adjustment  would  result in an
increase in the Exercise  Price above the Exercise  Price in effect  immediately
prior to the initial  readjustment  referred  to in clause (x) of the  preceding
sentence.

                  (4)  Calculation  of  Consideration  Received.  If any  Common
Stock,  Purchase  Rights or Convertible  Securities are issued or sold for cash,
the  consideration  received therefor will be the amount received by the Company
therefor,  after  deduction  of all  underwriting  discounts  or  allowances  in
connection with such issuance, grant or sale. In case any Common Stock, Purchase
Rights or Convertible  Securities are issued or sold for a consideration part or
all of which shall be other than cash,  including  in the case of a strategic or
similar  arrangement  in which the other  entity  will  provide  services to the
Company,  purchase  services  from the Company or otherwise  provide  intangible
consideration to the Company,  the amount of the  consideration  other than cash
received by the Company  (including  the net present value of the  consideration
expected by the Company for the  provided or  purchased  services)  shall be the
fair  market  value  of such  consideration,  except  where  such  consideration
consists of securities,  in which case the amount of  consideration  received by
the Company will be the Market Price thereof as of the date of receipt.  In case
any  Common  Stock,  Purchase  Rights or  Convertible  Securities  are issued in
connection  with any  merger  or  consolidation  in  which  the  Company  is the
surviving corporation, the amount of consideration therefor will be deemed to be
the fair  market  value of such  portion of the net assets and  business  of the
non-surviving  corporation  as is  attributable  to such Common Stock,  Purchase
Rights or Convertible Securities,  as the case may be. Notwithstanding  anything
else herein to the contrary,  if Common Stock,  Purchase  Rights or  Convertible
Securities are issued or sold in conjunction with each other as part of a single
transaction or in a series of related transactions,  the holder hereof may elect
to determine  the amount of  consideration  deemed to be received by the Company
therefor by deducting the fair value of any type of securities (the "DISREGARDED
SECURITIES")  issued or sold in such transaction or series of  transactions.  If
the holder makes an election pursuant to the immediately  preceding sentence, no
adjustment to the Exercise Price shall be made pursuant to this Section 4(e) for
the issuance of the Disregarded  Securities or upon any conversion,  exercise or
exchange  thereof.  For example,  if the Company were to issue convertible notes
having a face value of  $1,000,000  and  warrants to  purchase  shares of Common
Stock at an exercise  price equal to the Market Price of the Common Stock on the
date of issuance of such warrants in exchange for  $1,000,000 of  consideration,
the fair  value of the  warrants  would be  subtracted  from the  $1,000,000  of
consideration  received by the Company for the purposes of  determining  whether
the shares of Common Stock  issuable upon  conversion of the  convertible  notes
shall be deemed to be issued at a price per share below  Exercise  Price and, if
so, for purposes of determining  any adjustment to the Exercise Price  hereunder
as a  result  of the  issuance  of the  convertible  notes.  The  Company  shall
calculate,  using standard commercial  valuation methods appropriate for valuing
such  assets,  the fair  market  value of any  consideration  other than cash or
securities;  provided, however, that if the holder hereof does not agree to such
fair market value  calculation  within three business days after receipt thereof
from the Company,  then such fair market value shall be determined in good faith
by an  investment  banker or other  appropriate  expert of  national  reputation
selected by the Company and reasonably  acceptable to the holder, with the costs
of such appraisal to be borne by the Company.

                                       10
<PAGE>

                  (5) Issuances Pursuant to Existing Securities.  If the Company
issues (or becomes  obligated to issue)  shares of Common Stock  pursuant to any
antidilution  or similar  adjustments  (other than as a result of stock  splits,
stock  dividends  and the  like)  contained  in any  Convertible  Securities  or
Purchase  Rights  outstanding  as of the date hereof but not included in Section
3(c) of the Disclosure Schedule to the Securities  Purchase Agreement,  then all
shares of  Common  Stock so issued  shall be deemed to have been  issued  for no
consideration.  If the Company issues (or becomes  obligated to issue) shares of
Common Stock pursuant to any  antidilution or similar  adjustments  contained in
any  Convertible  Securities or Purchase  Rights included in Section 3(c) of the
Disclosure  Schedule to the  Securities  Purchase  Agreement  as a result of the
issuance of the Series C Preferred Stock or Warrants  pursuant to the Securities
Purchase  Agreement  and the  number of shares  that the  Company  issues (or is
obligated  to issue) as a result of such  initial  issuance  exceeds  the amount
specified in Section 3(c) of the Disclosure  Schedule to the Securities Purchase
Agreement,  such  excess  shares  shall be  deemed to have  been  issued  for no
consideration.

                                       11
<PAGE>

                  (6) Exceptions to Adjustment of Exercise  Price. No adjustment
to the  Exercise  Price shall be made:  (i) upon the  exercise  of any  Purchase
Rights  set  forth  in  Section  3(c)(ii)  of  the  Disclosure  Schedule  to the
Securities  Purchase  Agreement in  accordance  with the terms of such  Purchase
Rights as of such date,  provided that in the case of each  agreement  under the
heading  "Pending  Agreements" in Section  3(c)(ii) of the Disclosure  Schedule,
such agreement  includes either (A) an exercise or conversion  price of at least
$2.50 per share or (B) a covenant by the party acquiring  securities  thereunder
obligating  such party not to sell more than 5,000 shares of Common Stock in any
single  trading day nor more than 25,000  shares of Common Stock in any calendar
week,  in each case,  until the trading price of the Common Stock is above $6.00
per share;  (ii) upon the grant or  exercise  of any Common  Stock,  Convertible
Securities  or  Purchase  Rights to  employees,  officers  or  directors  of, or
consultants  to, the Company  which may  hereafter be granted to or exercised by
any employee,  officer,  director or consultant under any equity compensation or
similar  benefit  plan of the Company now existing or to be  implemented  in the
future,  so  long as (A)  such  plan  and the  issuance  of such  Common  Stock,
Convertible  Securities  or  Purchase  Rights is  approved  in  accordance  with
reasonable  judgment by a majority of the Board of Directors of the Company or a
majority of the members of a committee  consisting  exclusively of  independent,
non-employee  directors  established  for such  purpose,  and (B)  such  plan is
approved by the  stockholders  of the Company if and to the extent required from
time to time  under  the  Securities  Act,  the  Exchange  Act,  the  rules  and
regulations of the  Commission  thereunder  and/or the listing  standards of any
national  exchange or quotation  service;  (iii) upon conversion of the Series C
Preferred  Stock or  exercise  of the  Warrants  or upon any  adjustment  to the
conversion  price of the Series C Preferred  Stock or the exercise  price of the
Warrants;  (iv) the issuance of securities in a bona fide business  acquisition;
(v) upon the  issuance of  securities  in  connection  with  strategic  business
partnerships,  joint  ventures  or  collaborative  agreements  relating  to  the
promotion of the Company's  products in each case, the primary purpose of which,
in the reasonable judgment of the Board of Directors, is not to raise additional
capital;  or (vi) upon the  issuance of  securities  pursuant  to any  equipment
financing from a bank or similar  financial or lending  institution  approved by
the Board of Directors  and to the extent not  otherwise  restricted  by Article
XIII.(vii) of the Certificate of Designation.

      (f) Other  Action  Affecting  Exercise  Price.  If, at any time during the
Exercise  Period,  the Company takes any action  affecting the Common Stock that
would be covered by Section  4(a)  through (e), but for the manner in which such
action is taken or structured, which would in any way diminish the value of this
Warrant,  then the Exercise  Price shall be adjusted in such manner as the Board
of Directors of the Company shall in good faith  determine to be equitable under
the circumstances.  Notwithstanding  the foregoing,  no adjustment shall be made
pursuant to this Section 4(f) if such adjustment  would result in an increase to
the Exercise Price.

      (g) Adjustment in Number of Shares.  Upon each  adjustment of the Exercise
Price  pursuant  to the  provisions  of this  Section 4, the number of shares of
Common Stock  issuable upon exercise of this Warrant at each such Exercise Price
shall be adjusted by  multiplying a number equal to the Exercise Price in effect
immediately  prior to such  adjustment  by the number of shares of Common  Stock
issuable upon exercise of this Warrant at such Exercise Price  immediately prior
to such adjustment and dividing the product so obtained by the adjusted Exercise
Price.

                                       12
<PAGE>

      (h)  Notice of  Adjustment.  Upon the  occurrence  of each  adjustment  or
readjustment  of the  Exercise  Price  pursuant to this Section 4 amounting to a
more than one percent (1%) change in such Exercise  Price,  or any change in the
number or type of stock, securities and/or other property issuable upon exercise
of this  Warrant,  the Company,  at its  expense,  shall  promptly  compute such
adjustment or  readjustment  or change and prepare and furnish to each holder of
hereof a certificate setting forth such adjustment or readjustment or change and
showing in detail the facts upon which such adjustment or readjustment or change
is based. The Company shall,  upon the written request at any time of any holder
hereof,  furnish to such holder a like Warrant reflecting (i) such adjustment or
readjustment  or change,  (ii) the Exercise  Price in effect at the time of such
request and (iii) the number of shares of Common  Stock and the amount,  if any,
of  other  securities  or  property  which at the time  would be  received  upon
exercise  of the  Warrant.  Such  calculation  shall be  certified  by the chief
financial officer of the Company.

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

      (j) Other Notices. In case at any time:

            (i) the Company  shall  declare any  dividend  upon the Common Stock
payable  in shares of stock of any class or make any other  distribution  (other
than  dividends  or  distributions  payable  in cash  out of  retained  earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;

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

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

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

then,  in each such case,  the Company  shall give to the holder of this Warrant
(A) notice of the date or estimated date on which the books of the Company shall
close or a record  shall be taken for  determining  the holders of Common  Stock
entitled to receive any such dividend,  distribution,  or subscription rights or
for  determining  the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation  or  winding-up  and  (B) in the  case of any  such  reorganization,
reclassification,  consolidation,  merger,  sale,  dissolution,  liquidation  or
winding-up,  notice of the date (or, if not then known,  a  reasonable  estimate
thereof by the Company)  when the same shall take place.  Such notice shall also
specify  the date on which the  holders of Common  Stock  shall be  entitled  to
receive such dividend, distribution, or subscription rights or to exchange their
Common Stock for stock or other  securities  or property  deliverable  upon such
reorganization,  reclassification,  consolidation,  merger,  sale,  dissolution,
liquidation,  or  winding-up,  as the case may be. Such notice shall be given at
least  forty-five  (45) days prior to the  record  date or the date on which the
Company's books are closed in respect thereto but in no event later than 15 days
prior to the record date for the determination of stockholders  entitled to vote
with  respect  thereto.  Failure to give any such  notice or any defect  therein
shall not affect the  validity of the  proceedings  referred to in clauses  (i),
(ii),  (iii) and (iv) above.  Notwithstanding  the foregoing,  the Company shall
publicly  disclose the  substance  of any notice  delivered  hereunder  prior to
delivery of such notice to the holder hereof.

                                       13
<PAGE>

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

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

7. Transfer, Exchange, Redemption and Replacement of Warrant.

      (a)  Restriction  on Transfer.  This Warrant and the rights granted to the
holder  hereof are  transferable,  in whole or in part,  upon  surrender of this
Warrant,  together  with a properly  executed  assignment  in the form  attached
hereto,  at the office or agency of the  Company  referred  to in  Section  7(e)
below,  provided,  however,  that any transfer or assignment shall be subject to
the conditions set forth in Sections 7(f) and 10 hereof and to the provisions of
Section 5(b) of the Securities  Purchase  Agreement.  Until due  presentment for
registration of transfer on the books of the Company,  the Company may treat the
registered  holder hereof as the owner and holder  hereof for all purposes,  and
the Company shall not be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, the registration  rights described in
Section 8 hereof are  assignable  only in accordance  with the provisions of the
Registration Rights Agreement.

      (b) Warrant  Exchangeable  for  Different  Denominations.  This Warrant is
exchangeable,  upon the  surrender  hereof by the holder hereof at the office or
agency of the Company  referred to in Section  7(e) below,  for new  Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased  hereunder,
each of such new  Warrants to  represent  the right to  purchase  such number of
shares (at the Exercise  Price) as shall be  designated  by the holder hereof at
the time of such surrender.

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

                                       14
<PAGE>

      (d) Cancellation;  Payment of Expenses. Upon the surrender of this Warrant
in connection  with any transfer,  exchange,  or replacement as provided in this
Section 7, this Warrant shall be promptly  canceled by the Company.  The Company
shall  pay all  taxes  (other  than  securities  transfer  taxes)  and all other
reasonable  expenses (other than legal expenses,  if any, incurred by the holder
of this  Warrant or  transferees)  and charges  payable in  connection  with the
preparation, execution, and delivery of Warrants pursuant to this Section 7. The
Company shall  indemnify and reimburse the holder of this Warrant for all losses
and damages arising as a result of or related to any breach of the terms of this
Warrant, including reasonable costs and expenses (including legal fees) incurred
by such holder in connection with the enforcement of its rights hereunder.

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

      (f)  Transfer or  Exchange  Without  Registration.  If, at the time of the
surrender  of this Warrant in  connection  with any transfer or exchange of this
Warrant,  this  Warrant  (or, in the case of any  exercise,  the Warrant  Shares
issuable  hereunder)  shall not be registered under the Securities Act and under
applicable  state  securities  or blue sky laws,  the Company may require,  as a
condition  of  allowing  such  transfer  or  exchange,  (i) that the  holder  or
transferee of this Warrant, as the case may be, furnish to the Company a written
opinion  of  counsel  (which  opinion  shall be in  form,  substance  and  scope
customary for opinions of counsel in comparable transactions) to the effect that
such transfer or exchange may be made without  registration under the Securities
Act and under  applicable  state  securities or blue sky laws (the cost of which
shall be borne by the Company if the Company's  counsel renders such an opinion,
and up to $1,000  of such cost  shall be borne by the  Company  if the  holder's
counsel is required to render such opinion),  (ii) that the holder or transferee
execute and deliver to the Company an  investment  letter in form and  substance
acceptable  to the  Company  and (iii)  that the  transferee  be an  "ACCREDITED
INVESTOR"  as defined  in Rule  501(a)  promulgated  under the  Securities  Act;
provided,  however,  that no such opinion,  letter,  or status as an "accredited
investor" shall be required in connection  with a transfer  pursuant to Rule 144
under the Securities Act.

8.  Registration  Rights.  The  initial  holder  of this  Warrant  (and  certain
assignees  thereof) is entitled  to the benefit of such  registration  rights in
respect  of the  Warrant  Shares  as are set  forth in the  Registration  Rights
Agreement,  including the right to assign such rights to certain  assignees,  as
set forth therein.

9.  Cashless  Exercise.  If, at any time from and after 150 days  following  the
Issue Date,  the  Registration  Statement is not  effective as and to the extent
required  under the  Registration  Rights  Agreement,  then this  Warrant may be
exercised by  presentation  and  surrender of this Warrant to the Company at its
principal  executive offices with a written notice of the holder's  intention to
effect a cashless  exercise,  including a calculation of the number of shares of
Common Stock to be issued upon such exercise in accordance with the terms hereof
(a "CASHLESS EXERCISE").  In the event of a Cashless Exercise, in lieu of paying
the Exercise  Price in cash,  the holder shall  surrender  this Warrant for that
number of shares of Common Stock determined by multiplying the number of Warrant
Shares to which it would  otherwise be entitled by a fraction,  the numerator of
which shall be the  difference  between the then current Market Price of a share
of the Common  Stock on the date of exercise  and the  Exercise  Price,  and the
denominator  of which shall be the then current Market Price per share of Common
Stock. The holder of this Warrant shall not be entitled to exercise this Warrant
(or any portion  hereof) on a Cashless  Exercise  basis  except  pursuant to the
foregoing in this Section 9.

                                       15
<PAGE>

10.  Additional  Restrictions  on Exercise and  Transfer.  In no event shall the
holder hereof have the right (or obligation  pursuant to Section 1(d) hereof) to
exercise any portion of this Warrant for shares of Common Stock or to dispose of
any  portion  of this  Warrant  to the  extent  that such  right to effect  such
exercise or disposition  would result in the holder and its affiliates  together
beneficially  owning more than 4.99% of the outstanding  shares of Common Stock.
For purposes of this Section 10,  beneficial  ownership  shall be  determined in
accordance  with  Section  13(d) of the  Securities  Exchange  Act of  1934,  as
amended,  and Regulation  13D-G  thereunder.  The restriction  contained in this
Section  10 may not be  altered,  amended,  deleted  or  changed  in any  manner
whatsoever unless the holders of a majority of the outstanding  shares of Common
Stock  and the  holder  hereof  shall  approve,  in  writing,  such  alteration,
amendment, deletion or change.

11. Certain Definitions. For purposes of this Warrant, the following capitalized
terms shall have the respective meanings assigned to them:

      (a) "BUSINESS DAY" means any day, other than a Saturday or Sunday or a day
on which  banking  institutions  in the  State of New  York  are  authorized  or
obligated by law, regulation or executive order to close.

      (b) "MARKET  PRICE" means,  for any security as of any date,  the last bid
price  of such  security  on the OTC or the  Bulletin  Board  Exchange  or other
principal  trading  market  where such  security is listed,  quoted or traded as
reported by Bloomberg  Financial  Markets (or a comparable  reporting service of
national  reputation  selected  by the Company  and,  for so long as the Initial
Holder holds this Warrant (or any portion hereof),  reasonably acceptable to the
Initial Holder if Bloomberg  Financial Markets is not then reporting closing bid
prices of such security) (collectively,  "BLOOMBERG"),  or if the foregoing does
not apply, the closing sales price of such security on a national exchange or on
the OTC on any other electronic  bulletin board for such security as reported by
Bloomberg,  or, if no such price is reported for such security by Bloomberg, the
average of the bid prices of all market  makers for such security as reported in
the "pink sheets" by the National Quotation Bureau,  Inc., in each case for such
date or,  if such  date was not a  trading  day for such  security,  on the next
preceding  date  which was a trading  day.  If the  Market  Bid Price  cannot be
calculated  for such security as of either of such dates on any of the foregoing
bases,  the  Market  Bid Price of such  security  on such date shall be the fair
market value as reasonably  determined by an investment banking firm selected by
the Company  and,  for so long as the Initial  Holder holds this Warrant (or any
portion hereof),  reasonably acceptable to the Initial Holder, with the costs of
such appraisal to be borne by the Company.

                                       16
<PAGE>

      (c)  "TRADING  DAY"  means  any  day  on  which  principal  United  States
securities  exchange or trading  market where the Common Stock is then listed or
traded, is open for trading.

12. Miscellaneous.

      (a)  Governing  Law;  Jurisdiction.  This Warrant shall be governed by and
construed in  accordance  with the laws of the State of Delaware  applicable  to
contracts made and to be performed in the State of Delaware. Each of the Company
and the holders of this Warrant irrevocably  consents to the jurisdiction of the
United States  federal  courts and the state courts located in the County of New
Castle,  State of Delaware,  in any suit or proceeding based on or arising under
this Warrant and  irrevocably  agrees that all claims in respect of such suit or
proceeding may be determined in such courts. Each of the Company and the holders
of this Warrant  irrevocably  waives the defense of an inconvenient forum to the
maintenance  of such suit or proceeding  in such forum.  Each of the Company and
the  holders of this  Warrant  further  agrees that  service of process  upon it
mailed by first class mail shall be deemed in every respect effective service of
process upon it in any such suit or proceeding.  Nothing herein shall affect the
right of the holder to serve  process in any other manner  permitted by law Each
of the  Company  and the  holders of this  Warrant  that a final  non-appealable
judgment in any such suit or proceeding  shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.

      (b) Construction.  Whenever the context  requires,  the gender of any word
used in this Warrant includes the masculine,  feminine or neuter, and the number
of any word  includes  the  singular  or plural.  Unless the  context  otherwise
requires, all references to articles and sections refer to articles and sections
of this  Warrant,  and all  references  to schedules  are to schedules  attached
hereto,  each of which is made a part hereof for all purposes.  The  descriptive
headings of the several  articles  and sections of this Warrant are inserted for
purposes of reference  only, and shall not affect the meaning or construction of
any of the provisions hereof.

      (c)  Severability.  If any  provision of this Warrant  shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or  enforceability  of the  remainder of this Warrant or the
validity or enforceability of this Warrant in any other jurisdiction.

      (d)  Entire  Agreement;  Amendments.  This  Warrant  contains  the  entire
understanding  of the Company and the holder  hereof with respect to the matters
covered herein. Subject to any additional express provisions of this Warrant, no
provision of this Warrant may be waived other than by an  instrument  in writing
signed by the party to be charged  with  enforcement,  and no  provision of this
Warrant  may be amended  other than by an  instrument  in writing  signed by the
Company and the holder.

      (e) Notices. Any notices required or permitted to be given under the terms
of this Warrant  shall be sent by certified or registered  mail (return  receipt
requested) or delivered  personally,  by nationally recognized overnight carrier
or by confirmed facsimile  transmission,  and shall be effective five days after
being placed in the mail, if mailed,  or upon receipt or refusal of receipt,  if
delivered personally or by nationally  recognized overnight carrier or confirmed
facsimile transmission, in each case addressed to a party. The initial addresses
for such communications shall be as follows, and each party shall provide notice
to the other parties of any change in such party's address:

                                       17
<PAGE>

            (i) If to the Company:

                SLS International, Inc.
                3119 South Scenic
                Springfield, Missouri 65807
                Telephone: (417) 883-4549
                Facsimile:  (417) 883-2723
                Attention:  President and Controller

                with a copy simultaneously  transmitted by like means
                (which   transmittal   shall  not  constitute  notice
                hereunder) to:

                Freeborn & Peters LLP
                311 South Wacker Drive
                Suite 3000
                Chicago, IL 60606
                Telephone: (312) 360-6312
                Facsimile:  (312) 360-6597
                Attention:  Jeffrey M. Mattson, Esq.

            (ii) If to the holder,  at such address as shall be set forth in the
Warrant Register from time to time.

      (f) Successors  and Assigns.  This Warrant shall be binding upon and inure
to the  benefit of the  parties  and their  successors  and  assigns.  Except as
provided  herein,  the Company shall not assign this Warrant or its  obligations
hereunder.  The holder  hereof  may assign or  transfer  this  Warrant  and such
holders rights hereunder in accordance with Section 7 hereof.

      (g) Equitable Relief. The Company  acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holder by vitiating the
intent and purpose of this Warrant.  Accordingly,  the Company acknowledges that
the remedy at law for a breach of its  obligations  hereunder will be inadequate
and agrees,  in the event of a breach or threatened breach by the Company of the
provisions  of this Warrant,  that the holder shall be entitled,  in addition to
all other available remedies, to an injunction  restraining any breach,  without
the necessity of showing  economic  loss and without any bond or other  security
being required.

                                       18
<PAGE>

      (h) Remedies  Cumulative.  The remedies  provided in this Warrant shall be
cumulative and in addition to all other remedies  available  under this Warrant,
at law or in equity  (including  a decree of specific  performance  and/or other
injunctive  relief),  and nothing  herein shall limit a holder's right to pursue
actual  damages  for any failure by the Company to comply with the terms of this
Warrant.  The  Company  acknowledges  that a  breach  by it of  its  obligations
hereunder will cause  irreparable harm to the holders hereof and that the remedy
at law for any such breach may be inadequate.  The Company  therefore agrees, in
the event of any such breach or threatened breach, that the holders hereof shall
be  entitled,  in addition to all other  available  remedies,  to an  injunction
restraining  any breach,  without the  necessity  of showing  economic  loss and
without any bond or other security being required.

                [REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY]

                                       19
<PAGE>

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

                                             SLS INTERNATIONAL, INC.

                                             By:________________________________
                                             Name:
                                             Title:

                   [SIGNATURE PAGE TO STOCK PURCHASE WARRANT]
<PAGE>

                           FORM OF EXERCISE AGREEMENT

         (TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)

To:   SLS International, Inc.
      3119 South Scenic
      Spingfield, Missouri
      Facsimile: (417) 883-2723
      Attention: Chief Executive Officer

      The  undersigned  hereby  irrevocably  exercises  the  right  to  purchase
_____________  shares  of  the  Common  Stock  of  SLS  International,  Inc.,  a
corporation  organized under the laws of the State of Delaware (the  "Company"),
evidenced by the attached  Warrant,  and herewith [makes payment of the Exercise
Price with respect to such shares in full][elects to effect a Cashless  Exercise
(as  defined  in  Section  9 of  such  Warrant)],  all in  accordance  with  the
conditions and provisions of said Warrant.

      The undersigned agrees not to offer,  sell,  transfer or otherwise dispose
of  any  Common  Stock  obtained  on  exercise  of  the  Warrant,  except  under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.

            |_| The  undersigned  requests  that the Company  cause its transfer
            agent to electronically  transmit the Common Stock issuable pursuant
            to this Exercise  Agreement to the account of the undersigned or its
            nominee  (which is  _________________)  with DTC through its Deposit
            Withdrawal Agent Commission System ("DTC  TRANSFER"),  provided that
            such  transfer  agent   participates   in  the  DTC  Fast  Automated
            Securities Transfer program.

            |_| In lieu  of  receiving  the  shares  of  Common  Stock  issuable
            pursuant to this  Exercise  Agreement  by way of DTC  Transfer,  the
            undersigned  hereby  requests  that the Company  cause its  transfer
            agent to issue and deliver to the undersigned physical  certificates
            representing such shares of Common Stock.

The undersigned  requests that a Warrant  representing  any unexercised  portion
hereof  be  issued,  pursuant  to the  Warrant,  in the name of the  Holder  and
delivered to the undersigned at the address set forth below:

Dated:_________________                     ____________________________________
                                                 Signature of Holder

                                            ____________________________________
                                                 Name of Holder (Print)

                                                 Address:
                                            ____________________________________
                                            ____________________________________
                                            ____________________________________
<PAGE>

                               FORM OF ASSIGNMENT

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

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

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

Dated: _____________________, ____

In the presence of

__________________

                                  Name:_________________________________________

                                  Signature:____________________________________
                                  Title of Signing Officer or Agent (if any):

                                  ______________________________________________

                                  Address:______________________________________
                                          ______________________________________
                                          ______________________________________

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

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