Document:

Exhibit 4.3

                     THE EARTHGRAINS COMPANY
               FIRST AMENDMENT TO RIGHTS AGREEMENT

     FIRST AMENDMENT TO RIGHTS AGREEMENT, dated as of June 29, 2001
("Amendment"), to the Rights Agreement, dated as of February 22, 1996
(the "Rights Agreement"), between The Earthgrains Company (the
"Company") and Mellon Investor Services LLC (successor to Boatmen's
Trust Company), as the Rights Agent ("Rights Agent").  All capitalized
terms not otherwise defined herein shall have the meaning ascribed to
such terms in the Rights Agreement.

     WHEREAS, the Company believes it to be in the best interest of the
Company and its shareholders to enter into an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of the date hereof, by and
among the Company, Sara Lee Corporation, a Maryland corporation (the
"Purchaser"), and SLC Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of the Purchaser ("Merger Sub"), which Merger
Agreement provides for, among other things, a tender offer (the
"Offer") by Merger Sub, for all of the issued and outstanding shares of
the Company's common stock, $0.01 par value per share ("Common Stock")
(including the associated Common Stock purchase rights (the "Rights")
to purchase shares of Series A Junior Participating Preferred Stock of
the Company pursuant to the terms of the Rights Agreement).

     WHEREAS, as a result of the foregoing, the Company desires that
the transactions contemplated by the Merger Agreement, as well as
Purchaser, Merger Sub and any affiliates thereof be exempt from the
provisions of the Rights agreement;

     WHEREAS, the Company and the Rights Agent have heretofore executed
and entered into the Rights Agreement;

     WHEREAS, pursuant to Section 26 of the Rights Agreement, the
Company may supplement or amend any provision of the Rights Agreement
in accordance with the provisions of Section 26 thereof; and

     WHEREAS, the Company has executed the Officer's Certificate,
attached hereto as Annex A, and has performed all other acts and things
necessary to make this Amendment a valid agreement, enforceable
according to its terms, and the execution and delivery of this
Amendment by the Company and the Rights Agent have been in all respects
duly authorized by the Company and the Rights Agent.

     NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties hereby agree as follows:

     Section 1.     Amendments to the Rights Agreement.

<PAGE>

A.     The first sentence of Section 2 of the Rights Agreement is
hereby amended to delete the following words: "and the holders of the
Rights (who, in accordance with Section 3, shall prior to the
Distribution Date also be the holders of the Common Stock)".

B.     Section 3(a) of the Rights Agreement is hereby amended to add
the following paragraph at the end thereof:

     "Notwithstanding anything in this Agreement to the contrary, (i)
neither Purchaser, Merger Sub, nor any of their respective Affiliates
or Associates shall become an Acquiring Person, either individually or
collectively, (ii) no Distribution Date, Stock Acquisition Date or
Triggering Event shall occur, (iii) no Rights shall separate from the
shares of Common Stock or otherwise become exercisable, (iv) no holder
of Rights or any other Person shall have any legal or equitable rights,
remedy or claim under this Agreement, and (v) no adjustment shall be
made pursuant to Section 11 or 13, in each case solely by virtue of (A)
the announcement of the Offer (as defined in the Merger Agreement (as
defined below)), (B) the acquisition of Common Stock of the Company
pursuant to the Offer, the Merger (as defined in the Merger Agreement)
or the Agreement and Plan of Merger, dated as of July 29, 2001, among
Purchaser, the Company and Merger Sub (the "Merger Agreement"), (C) the
execution and delivery of the Merger Agreement or (D) the consummation
of the Offer, the Merger or any of the other transactions set forth in
the Merger Agreement."

C.     Section 20(c) of the Rights Agreement is hereby amended by
adding the following words to the end of such section:

     "Anything to the contrary notwithstanding, in no event shall the
Rights Agent be liable for special, punitive, indirect, consequential
or incidental loss or damage of any kind whatsoever (including but not
limited to lost profits), even if the Rights Agent has been advised of
the likelihood of such loss or damage."

     Section 2.     Definition.  The term "Agreement," as used in the
Rights Agreement, shall be deemed to refer to the Rights Agreement as
amended hereby.

     Section 3.     Full Force and Effect.  Except as expressly amended
hereby, the Rights Agreement shall continue in full force and effect in
accordance with the provisions thereof on the date hereof.

     Section 4.     Governing Law.  This Amendment shall be governed by
and construed in accordance with the law of the State of Delaware
applicable to contracts to be made and performed entirely within such
State.

     Section 5.     Counterparts.  This Amendment may be executed in
two counterparts, each of which shall be deemed an original, but both
of which together shall constitute one and the same instrument.

<PAGE>

     Section 6.     Severability.  If any term, provision, covenant or
restriction of this Amendment is held by a court of competent
jurisdiction or other authority to be invalid, illegal, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment, and of the Rights Agreement, shall
remain in full force and effect and shall in no way be effected.

     IN WITNESS WHEREOF, the parties hereto have cause this Amendment
to be duly executed as of the day and year first above written.

                         THE EARTHGRAINS COMPANY

                         By:  /s/ Barry H. Beracha
                              --------------------
                         Name:   Barry H. Beracha
                         Title:  Chairman and CEO

                         MELLON INVESTOR SERVICES LLC

                         By:  /s/ Patricia Trevino
                              --------------------
                         Name:    Patricia Trevino
                         Title:   Vice President

<PAGE>

                                                                   Annex A

                        OFFICER'S CERTIFICATE

     I, Joseph M. Noelker, Vice President, General Counsel and
Secretary of The Earthgrains Company, a Delaware corporation (the
"Company") do hereby certify, in accordance with Section 26 of the
Rights Agreement, dated as of February 22, 1996 (the "Rights
Agreement"), between the Company and Mellon Investor Services LLC (the
"Rights Agent"), that as of the date hereof, the Amendment to the
Rights Agreement, dated the date hereof, between the Company and the
Rights Agent, is in compliance with the terms of Section 26 of the
Rights Agreement.

     IN WITNESS THEREOF, I have signed this certificate.

     Dated:  June 29, 2001

                         THE EARTHGRAINS COMPANY

                           /s/ Joseph Noelker
                               --------------
                        Name:  Joseph M. Noelker
                       Title:  Vice President, General Counsel &
                               SecretaryExhibit 4.49

                               EXCHANGE AGREEMENT

     AGREEMENT,  dated as of April  28,  2001,  between  American  International
Petroleum Corporation (the " Company"), a Nevada corporation,  and GCA Strategic
Investment Fund Limited ("Purchaser"), a Bermuda Corporation.

                                R E C I T A L S:

     WHEREAS,  the Company  desires  and  Purchaser  has agreed to exchange  the
Bridge Notes due April 28, 2001,  made by the Company and held by Purchaser  set
forth on Schedule 1.1 of this Agreement  (the "Bridge  Notes") for the Company's
$5,936,128.00 aggregate principal amount 3% Convertible Debentures due April 28,
2002 (the " Convertible Debentures"),  with terms and conditions as set forth in
the form of Convertible Debenture attached hereto as Exhibit A;

     WHEREAS, the Convertible  Debentures will be convertible into shares of the
Company's common stock, $0.08 par value per share (the " Common Stock");

     WHEREAS,  Purchaser will have certain  registration  rights with respect to
such shares of Common Stock issuable as interest under,  and upon conversion of,
the  Convertible  Debentures  (the  "Conversion  Shares")  as set  forth  in the
Registration Rights Agreement in the form attached hereto as Exhibit B;

     NOW,  THEREFORE,  in  consideration  of  the  foregoing  premises  and  the
covenants  contained  herein  and other  good and  valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereto
agree as follows:

                             ARTICLE I. DEFINITIONS

     Section 1.1  Definitions.  The following  terms,  as used herein,  have the
following meanings:

     "Additional  Shares of Common  Stock" has the  meaning set forth in Section
11.6.

     "Affiliate" means, with respect to any Person (the " Subject Person"),  (i)
any other Person (a " Controlling Person") that directly,  or indirectly through
one or more intermediaries, Controls the Subject Person or (ii) any other Person
(other  than the  Subject  Person or a  Consolidated  Subsidiary  of the Subject
Person)  which is  Controlled  by or is under common  Control with a Controlling
Person.

     "Agreement"  means this Exchange  Agreement,  as amended,  supplemented  or
otherwise modified from time to time in accordance with its terms.

<PAGE>

     "Asset Sale" has the meaning set forth in Section 8.4.

     "Balance Sheet Date" has the meaning set forth in Section 4.7.

     "Benefit Arrangement" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by the Company.

     "Benefit Plans" has the meaning set forth in Section 4.9(b).

     "Bridge Notes" has the meaning set forth in the recitals to this Agreement.

     "Business  Day"  means any day  except a  Saturday,  Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.

     "Capital Reorganization" has the meaning set forth in Section 11.5.

     "Change in Control" means (i) after the date of this Agreement,  any person
or group of persons  (within the  meaning of Sections 13 and 14 of the  Exchange
Act and the rules and  regulations of the Commission  relating to such sections)
other than  Purchaser  shall have  acquired  beneficial  ownership  (within  the
meaning of Rules 13d-3 and 13d-5  promulgated by the Commission  pursuant to the
Exchange Act) of 331/3% or more of the outstanding shares of Common Stock of the
Company;  (ii) any sale or other  disposition  (other than by reason of death or
disability) to any Person by any executive officers and/or employee directors of
the  Company   within  ten  Trading  Days  following  the  dates  on  which  the
Registration  Statement Amendment and the Registration  Statement (as such terms
are defined in Section 10.4 of this  Agreement)  are  declared  effective by the
Commission. (iii) individuals constituting the Board of Directors of the Company
on the date hereof (together with any new Directors whose election by such Board
of Directors or whose nomination for election by the shareholders of the Company
was  approved by a vote of at least 50.1% of the  Directors  still in office who
are either  Directors as of the date hereof or whose  election or nomination for
election was  previously  so  approved),  cease for any reason to  constitute at
least two-thirds of the Board of Directors of the Company then in office.

                                       2
<PAGE>

     "Closing Bid Price" shall mean for any security as of any date,  the lowest
closing bid price as reported by Bloomberg, L.P. (" Bloomberg") on the principal
securities  exchange or trading  market where such  security is listed or traded
or, if the  foregoing  does not  apply,  the  lowest  closing  bid price of such
security in the  over-the-counter  market on the  electronic  bulletin board for
such  security as  reported  by  Bloomberg,  or, if no lowest  trading  price is
reported for such security by  Bloomberg,  then the average of the bid prices of
any market  makers for such  securities  as reported in the "Pink Sheets" by the
National  Quotation  Bureau,  Inc.  If the lowest  closing  bid price  cannot be
calculated  for such  security on such date on any of the foregoing  bases,  the
lowest  closing bid price of such security on such date shall be the fair market
value as  mutually  determined  by  Purchaser  and the  Company  for  which  the
calculation of the closing bid price requires, and in the absence of such mutual
determination,  as  determined  by the Board of Directors of the Company in good
faith.

     "Closing  Date" means the date hereof.

     "Code" means the Internal Revenue Code of 1986, as amended.

     "Commission"  means the  Securities  and Exchange  Commission or any entity
succeeding to all of its material functions.

     "Common  Stock" means the common stock,  $0.08 par value per share,  of the
Company.

     "Company"  means American  International  Petroleum  Corporation,  a Nevada
corporation, and its successors.

     "Company  Corporate  Documents" means the certificate of incorporation  and
bylaws of the Company.

     "Consolidated Net Worth" means at any date the total  shareholder's  equity
which would appear on a consolidated balance sheet of the Company prepared as of
such date.

     "Consolidated  Subsidiary"  means at any date with respect to any Person or
Subsidiary or other  entity,  the accounts of which would be  consolidated  with
those of such Person in its consolidated financial statements if such statements
were prepared as of such date.

     "Control" (including,  with correlative meanings,  the terms "Controlling,"
"Controlled by" and under "common  Control  with"),  as used with respect to any
Person, means the possession,  directly or indirectly, of the power to direct or
cause the  direction of the  management  and  policies of that  Person,  whether
through the ownership of voting securities, by contract or otherwise.

     "Conversion Date" shall mean the date of delivery  (including  delivery via
telecopy)  of a Notice  of  Conversion  for all or a  portion  of a  Convertible
Debenture by the holder thereof to the Company as specified in each  Convertible
Debenture.

     "Conversion Price" has the meaning set forth in the Convertible Debentures.

                                       3
<PAGE>

     "Conversion Shares" has the meaning set forth in the Recitals.

     "Convertible  Debentures" means the Company's 3% Convertible Debentures due
April 28, 2002 substantially in the form set forth as Exhibit A hereto.

     "Deadline" has the meaning set forth in Section 10.1.

     "Debt"  of any  Person  means at any  date,  without  duplication,  (i) all
obligations  of such Person for borrowed  money,  (ii) all  obligations  of such
Person  evidenced by bonds,  debentures,  notes,  or other  similar  instruments
issued by such Person,  (iii) all obligations of such Person as lessee which (y)
are capitalized in accordance with GAAP or (z) arise pursuant to  sale-leaseback
transactions,  (iv) all  reimbursement  obligations of such Person in respect of
letters of credit or other similar  instruments,  (v) all Debt of others secured
by a Lien on any asset of such Person,  whether or not such Debt is otherwise an
obligation of such Person and (vi) all Debt of others Guaranteed by such Person.

     "Default"  means  any  event or  condition  which  constitutes  an Event of
Default  or which  with the  giving of  notice  or lapse of time or both  would,
unless cured or waived, become an Event of Default.

     "Derivative Securities" has the meaning set forth in Section 8.6.

     "Discounted Equity Offerings" has the meaning set forth in Section 8.6.

     "Directors" means the individuals then serving on the Board of Directors or
similar such management council of the Company.

     "Environmental  Laws" means any and all federal,  state,  local and foreign
statutes,  laws, regulations,  ordinances,  rules,  judgments,  orders, decrees,
permits,  concessions,   grants,  franchises,   licenses,  agreements  or  other
governmental   restrictions   relating  to  the  environment  or  to  emissions,
discharges  or releases of  pollutants,  contaminants,  petroleum  or  petroleum
products,  chemicals or industrial, toxic or hazardous substances or wastes into
the  environment,  including,  without  limitation,  ambient air, surface water,
ground water,  or land, or otherwise  relating to the  manufacture,  processing,
distribution,  use,  treatment,  storage,  disposal,  transport  or  handling of
pollutants,   contaminants,   petroleum  or  petroleum  products,  chemicals  or
industrial,  toxic or  hazardous  substances  or wastes or the  cleanup or other
remediation thereof.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended, or any successor statute.

     "ERISA  Group" means the Company and each  Subsidiary  and all members of a
controlled  group of corporations  and all trades or businesses  (whether or not
incorporated)  under  common  control  which,  together  with the Company or any
Subsidiary, are treated as a single employer under the Code.

                                       4
<PAGE>

     "Event of Default" has the meaning set forth in Article XII hereof.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Financing"  means a  public  or  private  financing  consummated  (meaning
closing and  funding)  through the  issuance  of debt or equity  securities  (or
securities  convertible into or exchangeable  for debt or equity  securities) of
the Company, other than Permitted Financings.

     "Fixed Price(s)" has the meaning set forth in Section 11.1.

     "Formula Price" has the meaning set forth in Section 3.4 (a).

     "GAAP" has the meaning set forth in Section 1.2.

     "Guarantee" by any Person means any obligation, contingent or otherwise, of
such  Person  directly  or  indirectly   guaranteeing   (whether  by  virtue  of
partnership arrangements,  by agreement to keep well, to purchase assets, goods,
securities  or  services,  to  take-or-pay,  or to maintain a minimum net worth,
financial  ratio or similar  requirements,  or otherwise)  any Debt of any other
Person and,  without  limiting the generality of the foregoing,  any obligation,
direct or indirect,  contingent or otherwise,  of such Person (i) to purchase or
pay (or  advance or supply  funds for the  purchase  or payment of) such Debt or
(ii)  entered into for the purpose of assuring in any other manner the holder of
such Debt of the  payment  thereof or to protect  such  holder  against  loss in
respect  thereof (in whole or in part);  provided that the term Guarantee  shall
not include  endorsements  for  collection or deposit in the ordinary  course of
business. The term Guarantee used as a verb has a corresponding meaning.

     "Hazardous  Materials"  means any hazardous  materials,  hazardous  wastes,
hazardous  constituents,  hazardous or toxic  substances  or petroleum  products
(including  crude  oil  or any  derivative  or  fraction  thereof),  defined  or
regulated as such in or under any Environmental Laws.

     "Intellectual Property" has the meaning set forth in Section 4.20.

     "Investment" means any investment in any Person,  whether by means of share
purchase,  partnership  interest,  capital  contribution,  loan, time deposit or
otherwise.

     "Lien"  means  any  lien,  mechanic's  lien,   materialmen's  lien,  lease,
easement,  charge,  encumbrance,  mortgage,  conditional  sale agreement,  title
retention  agreement,   agreement  to  sell  or  convey,  option,  claim,  title
imperfection, encroachment or other survey defect, pledge, restriction, security
interest or other  adverse  claim,  whether  arising by contract or under law or
otherwise   (including,   without   limitation,   any  financing   lease  having
substantially  the same economic effect as any of the foregoing,  and the filing
of any financing  statement under the

                                       5
<PAGE>

Uniform  Commercial Code or comparable law of any jurisdiction in respect of any
of the foregoing).

     "Listing Applications" has the meaning set forth in Section 4.4.

     "Majority Holders" means (i) as of the Closing Date,  Purchaser and (ii) at
any time thereafter,  the holders of more than 50% in aggregate principal amount
of the 3% Convertible Debentures due April 28, 2002 outstanding at such time.

     "Market  Price"  shall  mean the  Closing  Bid  Price of the  Common  Stock
preceding the date of determination.

     "Maturity  Date"  shall  mean  the  date  of  maturity  of the  Convertible
Debentures.

     "Maximum  Number of Shares" shall mean that percentage that the Company may
issue without  shareholder  approval under the applicable  rules of the National
Market or the applicable OTC Bulletin  Board or equivalent  entity,  of the then
issued  and  outstanding  shares  of  Common  Stock  of  the  Company  as of the
applicable  date of  determination,  or such  greater  number  of  shares as the
shareholders of the Company may have previously approved.

     "Mortgage" means the amendment to the agreement between St. Marks Refinery,
Inc., the Company and Purchaser dated the date hereof  substantially in the form
of Exhibit F attached hereto.

     "NASD" has the meaning set forth in Section 7.10.

     "Nasdaq Market" means the Nasdaq Stock Market's National Market System.

     "National Market" means the Nasdaq Market, the Nasdaq Small Cap Market, the
New York Stock Exchange, Inc. or the American Stock Exchange, Inc.

     "Net Cash  Proceeds"  means,  with  respect to any  transaction,  the total
amount of cash  proceeds  received  by the  Company or any  Subsidiary  less (i)
reasonable  underwriters' fees, brokerage commissions,  reasonable  professional
fees and other customary  out-of-pocket expenses payable in connection with such
transaction, and (ii) in the case of dispositions of assets, (A) actual transfer
taxes (but not income taxes) payable with respect to such dispositions,  and (B)
the amount of Debt, if any, secured by a Lien on the asset or assets disposed of
and  required to be, and  actually  repaid by the Company or any  Subsidiary  in
connection therewith, and any trade payables specifically relating to such asset
or assets  sold by the  Company or any  Subsidiary  that are not  assumed by the
purchaser of such asset or assets.

     "Notice  of  Conversion"  means the form to be  delivered  by a holder of a
Convertible Debenture upon conversion of all or a portion thereof to the Company
substantially in the form of Exhibit A to the form of Convertible Debenture.

                                       6
<PAGE>

     "Officer's Certificate" shall mean a certificate executed by the president,
chief executive officer or chief financial officer of the Company in the form of
Exhibit D attached hereto.

     "OTC Bulletin Board" means the over-the-counter  bulletin board operated by
the NASD.

     "Other Taxes" has the meaning set forth in Section 3.6(b).

     "PBGC"  means  the  Pension  Benefit  Guaranty  Corporation  or any  entity
succeeding to any or all of its functions under ERISA.

     "Permits"  means all domestic  and foreign  licenses,  franchises,  grants,
authorizations,    permits,   easements,   variances,    exemptions,   consents,
certificates,  orders and  approvals  necessary  to own,  lease and  operate the
properties of, and to carry on the business of the Company and the Subsidiaries.

     "Permitted Financings" has the meaning set forth in Section 10.5.

     "Person" means an individual, corporation, partnership, trust, incorporated
or unincorporated  association,  joint venture, joint stock Company,  government
(or any agency or political subdivision thereof) or other entity of any kind.

     "Plan" means at any time an employee  pension benefit plan which is covered
by Title IV of ERISA or subject to the minimum funding  standards under the Code
and  either (i) is  maintained,  or  contributed  to, by any member of the ERISA
Group for  employees  of any  member of the ERISA  Group or (ii) has at any time
within the  preceding  five years been  maintained,  or  contributed  to, by any
Person  which was at such time a member of the ERISA Group for  employees of the
Person which was at such time a member of the ERISA Group.

     "Purchaser" means GCA Strategic  Investment Fund Limited and its successors
and assigns, including holders from time to time of the Convertible Debentures.

     "Recourse  Financing" means Debt of the Company or any Subsidiary which, by
its terms,  does not bar the lender  thereof from action  against the Company or
any Subsidiary,  as borrower or guarantor,  if the security value of the project
or asset  pledged in respect  thereof  falls below the amount  required to repay
such Debt.

     "Redemption Event" has the meaning set forth in Section 3.4.

     "Registrable Securities" has the meaning set forth in Section 10.4(a).

     "Registration Default" has the meaning set forth in Section 10.4(e).

     "Registration  Maintenance  Period"  has the  meaning  set forth in Section
10.4(e).

     "Registration Statement" has the meaning set forth in Section 10.4(b).

                                       7
<PAGE>

     "Registration Rights Agreement" means the agreement between the Company and
Purchaser dated the date hereof substantially in the form set forth in Exhibit B
attached hereto.

     "Required Effectiveness Date" has the meaning set forth in Section 10.4(b).

     "Reserved Amount" has the meaning set forth in Section 7.10(a).

     "Restricted Payment" means, with respect to any Person, (i) any dividend or
other  distribution  on any  shares  of  capital  stock of such  Person  (except
dividends  payable solely in shares of capital stock of the same or junior class
of such Person and dividends from a wholly-owned  direct or indirect  Subsidiary
of the  Company to its parent  corporation),  (ii) any payment on account of the
purchase,  redemption,  retirement  or  acquisition  of (a) any  shares  of such
Person's  capital  stock or (b) any  option,  warrant or other  right to acquire
shares of such  Person's  capital stock or (iii) any loan, or advance or capital
contribution  to any Person (a  "Stockholder")  owning any capital stock of such
Person other than relocation,  travel or like advances to officers and employees
in the ordinary course of business,  and other than  reasonable  compensation as
determined by the Board of Directors.

     "Rights Offering" has the meaning set forth in Section 11.3.

     "Sale Event" has the meaning set forth in Section 3.4.

     "SEC Reports" shall have the meaning set forth in Section 7.1(a).

     "Security  Agreement"  means the  Amendments  to the  Pledge  and  Security
Agreements between the Company and Purchaser dated the date hereof substantially
in the form of Exhibit E attached hereto.

     "Securities"  means the  Convertible  Debentures,  and, as applicable,  the
Conversion Shares.

     "Securities Act" means the Securities Act of 1933, as amended.

     "Share Reorganization" has the meaning set forth in Section 11.2.

     "Solvency  Certificate"  shall  mean a  certificate  executed  by the chief
financial officer of the Company as to the solvency of the Company, the adequacy
of its capital and its ability to pay its debts,  all after giving effect to the
issuance  and  sale of the  Convertible  Debentures  and the  completion  of the
offering  (including  without  limitation the payment of any fees or expenses in
connection  therewith),  which such Solvency Certificate shall be in the form of
Exhibit C attached hereto.

     "Special Distribution" has the meaning set forth in Section 11.4.

                                       8
<PAGE>

     "Subsidiary" has the meaning set forth in Section 4.27.

     "Subsidiary  Corporate  Documents"  means the certificates of incorporation
and bylaws of each Subsidiary.

     "Taxes" has the meaning set forth in Section 3.6.

     "Trading  Day" shall mean any  Business  Day in which the Nasdaq  Market or
other automated  quotation  system or exchange on which the Common Stock is then
traded is open for trading for at least four (4) hours.

     "Transaction  Agreements" means this Agreement, the Convertible Debentures,
the Registration Rights Agreement,  the Security Agreement, the Mortgage and the
other agreements contemplated by this Agreement.

     "Transfer" means any disposition of Securities that would constitute a sale
thereof under the Securities Act.

     "Unfunded  Liabilities"  means,  with respect to any Plan at any time,  the
amount  (if any) by which  (i) the  present  value of all  benefits  under  Plan
exceeds (ii) the fair market value of all Plan assets allocable to such benefits
(excluding any accrued but unpaid contributions),  all determined as of the then
most  recent  valuation  date for such Plan,  but only to the  extent  that such
excess  represents  a potential  liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.

Section 1.2 Accounting  Terms and  Determinations.  Unless  otherwise  specified
herein,  all accounting  terms used herein shall be interpreted,  all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared,  in accordance with generally accepted
accounting  principles  as in effect from time to time,  applied on a consistent
basis  (except for changes  concurred  in by the  Company's  independent  public
accountants)  (" GAAP").  All  references to "dollars,"  "Dollars" or "$" are to
United States dollars unless otherwise indicated.

                       ARTICLE II. EXCHANGE OF SECURITIES

Section 2.1  Exchange of  Securities.  Subject to the terms and  conditions  set
forth  herein,  the  Purchaser  agrees to exchange the Bridge Notes due the date
hereof and the Company  agrees to issue to Purchaser  Convertible  Debentures in
the aggregate  principal amount of Five Million Nine Hundred Thirty Six Thousand
One Hundred Twenty Eight Dollars ($5,936,128.00).

                                       9
<PAGE>

Section 2.2 Closing.

     (a) The Purchaser  shall deliver to the Company each of the Bridge Notes on
the Closing Date in exchange for the Convertible Debentures.

     (b) The  Convertible  Debentures  issued on the Closing Date shall be dated
the date hereof and interest shall begin to accrue on the Convertible Debentures
as of the date hereof.

              ARTICLE III. PAYMENT TERMS OF CONVERTIBLE DEBENTURES

Section 3.1 Payment of Principal and Interest;  Payment  Mechanics.  The Company
will pay all amounts due on each Convertible  Debenture by the method and at the
address  specified  for such  purpose  by  Purchaser  in  writing,  without  the
presentation  or  surrender  of any  Convertible  Debenture or the making of any
notation  thereon,  except  that  upon  written  request  of  the  Company  made
concurrently with or reasonably  promptly after payment or prepayment in full of
this Convertible Debenture, the holder shall surrender the Convertible Debenture
for cancellation,  reasonably promptly after any such request, to the Company at
its principal  executive  office.  Prior to any sale or other disposition of any
Convertible Debenture, the holder thereof will, at its election,  either endorse
thereon the amount of principal paid thereon and the last date to which interest
has been paid thereon or surrender the  Convertible  Debenture to the Company in
exchange for a new Convertible Debenture or Convertible Debentures.  The Company
will  afford  the  benefits  of  this  Section  3.1 to any  direct  or  indirect
transferee of the Convertible  Debenture purchased under this Agreement and that
has made the same agreement relating to this Convertible  Debenture as Purchaser
has in this  Section  3.1;  provided  that  such  transferee  is an  "accredited
investor" under Rule 501 of the Securities Act.

Section  3.2  Payment of  Interest.  Interest  shall  accrue on the  outstanding
principal amount of each Convertible Debenture and shall be payable as specified
therein.

Section 3.3 Voluntary Prepayment.  For so long as no Event of Default shall have
occurred and is continuing,  the Company may, at its option,  repay, in whole or
in part, the  Convertible  Debentures,  in accordance with Sections 3 and 5.1 of
Exhibit A hereto, following at least five (5) Business Days prior written notice
to  Purchaser  (the  expiration  date of such five (5) Business Day period being
referred to as the "prepayment date");  provided,  however, that if such date is
not a  Business  Day,  the  prepayment  date  shall  be the  next  Business  Day
thereafter.

                                       10
<PAGE>

Section 3.4 Mandatory Prepayments.

          (a) Upon (i) the  occurrence  of a Change in Control  of the  Company,
     (ii) a transfer of all or substantially all of the assets of the Company to
     any Person in a single transaction or series of related transactions, (iii)
     a consolidation, merger or amalgamation of the Company with or into another
     Person in which the  Company  is not the  surviving  entity  (other  than a
     merger which is effected solely to change the jurisdiction of incorporation
     of the Company and results in a reclassification, conversion or exchange of
     outstanding  shares of Common  Stock  solely into  shares of Common  Stock)
     (each of items (i),  (ii) and (iii) being  referred to as a " Sale Event"),
     or (iv) the occurrence of a Registration  Default which  continues  uncured
     for a period of twenty (20) days,  then, in each case,  the Company  shall,
     upon request of the Majority  Holders,  redeem the Convertible  Debentures,
     subject to the provisions of Section 5 of the Convertible  Debentures.  The
     redemption  price payable upon any such redemption  shall be the Redemption
     Price in Section 5 of the Convertible Debentures (referred to herein as the
     "Formula Price").

          (b) At the option of Purchaser,  upon the  consummation of one or more
     Financings except a Permitted  Financing,  the Company shall use 25% of the
     Net Cash Proceeds  therefrom  (unless such Net Cash Proceeds from each such
     Financing is less than $250,000) to redeem the Convertible Debentures.

          (c) Upon the issuance of the Maximum  Number of Shares and the failure
     within 40 days of such  issuance  to obtain  shareholder  approval to issue
     additional  shares of Common Stock (the " Redemption  Event"),  the Company
     shall redeem the outstanding balance of each Convertible  Debenture for the
     Formula Price.

          (d) In the event that there is an  insufficient  number of authorized,
     issuable, unlegended and freely tradeable shares of Common Stock registered
     under the Registration  Statement filed by the Company to fully convert the
     Convertible  Debentures  held by  Purchaser  and sell  such  shares  issued
     thereon,  then the Company shall  immediately file an amendment to the then
     current  registration  statement  to register a  sufficient  number of such
     shares to convert  said  Convertible  Debentures.  Upon the failure  within
     twenty (20) Trading  Days to register a  sufficient  number of such shares,
     the  Company  shall  redeem the  outstanding  balance  of each  Convertible
     Debenture  for the Formula  Price.  In addition,  failure of the Company to
     register  a  sufficient  number  of  such  shares  to  fully  convert  said
     Convertible  Debentures  shall  be a  Registration  Default  under  Section
     10.4(e)  from  the  date of the  Notice  of  Conversion  to the date of the
     earlier of (i) the redemption of the outstanding balance of the Convertible
     Debentures or (ii) full conversion of the Convertible Debentures.

                                       11
<PAGE>

Section 3.5 Prepayment Procedures.

          (a)  Any  permitted   prepayment  or  redemption  of  the  Convertible
     Debentures  pursuant  to  Sections  3.3 or 3.4 above  shall be deemed to be
     effective and  consummated  (for purposes of determining  the Formula Price
     and the time at which Purchaser shall thereafter not be entitled to deliver
     a Notice of Conversion for the Convertible Debentures) as follows:

               (i) A prepayment  pursuant to Section 3.3, the "prepayment  date"
          specified therein;

               (ii) A  redemption  pursuant  to  Section  3.4(a),  the  date  of
          consummation of the applicable Sale Event or the Registration Default;

               (iii) A redemption pursuant to Section 3.4(b), three (3) Business
          Days following the date of  consummation  of the applicable  Financing
          (meaning closing and funding); and

               (iv) A redemption  pursuant to Section 3.4(c), the date specified
          in each Convertible Debenture.

          (b) On the Maturity Date and on the effective  date of a prepayment or
     redemption of the  Convertible  Debentures  as specified in Section  3.5(a)
     above,   the  Company   shall   deliver  by  wire  transfer  of  funds  the
     prepayment/redemption  price to  Purchaser  of the  Convertible  Debentures
     subject to prepayment or redemption.  Should  Purchaser not receive payment
     of  any  amounts  due  on  prepayment  or  redemption  of  its  Convertible
     Debentures by reason of the Company's  failure to make payment at the times
     prescribed  above for any reason,  the Company shall pay to the  applicable
     holder on demand  (x)  interest  on the sums not paid when due at an annual
     rate equal to the greater of (I) the  maximum  lawful rate and (II) 18% per
     annum, compounded at the end of each thirty (30) days, until the applicable
     holder is paid in full and (y) all costs of collection,  including, but not
     limited to,  reasonable  attorneys' fees and costs,  whether or not suit or
     other formal proceedings are instituted.

          (c) The Company shall select the Convertible Debentures to be redeemed
     in any redemption in which not all of the Convertible  Debentures are to be
     redeemed  so that the ratio of the  Convertible  Debentures  of each holder
     selected for redemption to the total  Convertible  Debentures owned by that
     holder  shall be the same as the ratio of all such  Convertible  Debentures
     selected  for  redemption  bears  to  the  total  of all  then  outstanding
     Convertible  Debentures.  Should any Convertible  Debentures required to be
     redeemed  under  the  terms  hereof  not be  redeemed  solely  by reason of
     limitations imposed by law, the applicable  Convertible Debentures shall be
     redeemed on the earliest  possible  dates  thereafter to the maximum extent
     permitted by law.

                                       12
<PAGE>

          (d)  Any  Notice  of  Conversion  delivered  by  Purchaser  (including
     delivery via telecopy) to the Company prior to the (x) Maturity Date or (y)
     effective  date of a  voluntary  prepayment  pursuant  to Section  3.3 or a
     mandatory prepayment pursuant to Section 3.4 as specified in Section 3.5(a)
     above),  shall  be  honored  by  the  Company  and  the  conversion  of the
     Convertible  Debentures shall be deemed effected on the Conversion Date. In
     addition,  between the effective date of a voluntary prepayment pursuant to
     Section 3.3 or a mandatory  prepayment pursuant to Section 3.4 as specified
     in Section 3.5(a) above and the date the Company is required to deliver the
     redemption proceeds in full to Purchaser, Purchaser may deliver a Notice of
     Conversion to the Company. Such notice will be (x) of no force or effect if
     the Company timely pays the prepayment or redemption  proceeds to Purchaser
     when due or (y) honored on or as of the date of the Notice of Conversion if
     the Company fails to timely pay the  prepayment  or redemption  proceeds to
     Purchaser when due.

Section 3.6 Payment of Additional Amounts.

          (a) Any  and all  payments  by the  Company  hereunder  or  under  the
     Convertible  Debentures to Purchaser and each "qualified  assignee" thereof
     shall be made free and clear of and without  deduction or  withholding  for
     any and all present or future taxes, levies, imposts,  deductions,  charges
     or withholdings,  and all liabilities with respect thereto (all such taxes,
     levies, imposts,  deductions,  charges,  withholdings and liabilities being
     hereinafter  referred to as "Taxes")  unless such Taxes are required by law
     or the  administration  thereof to be deducted or withheld.  If the Company
     shall  be  required  by law or the  administration  thereof  to  deduct  or
     withhold  any  Taxes  from or in  respect  of any  sum  payable  under  the
     Convertible  Debentures  (i)  the  holders  of the  Convertible  Debentures
     subject to such Taxes shall have the right,  but not the obligation,  for a
     period of thirty (30) days  commencing  upon the day it shall have received
     written  notice from the Company  that it is required to withhold  Taxes to
     transfer all or any portion of the  Convertible  Debentures  to a qualified
     assignee to the extent such transfer can be effected in accordance with the
     other  provisions of this  Agreement and  applicable  law; (ii) the Company
     shall make such deductions or withholdings;  (iii) the sum payable shall be
     increased as may be necessary so that after making all required  deductions
     or  withholdings   (including  deductions  or  withholdings  applicable  to
     additional  amounts  paid under this  Section  3.6)  Purchaser  receives an
     amount  equal to the sum it would have  received  if no such  deduction  or
     withholding  had been made;  and (iv) the Company  shall  forthwith pay the
     full  amount  deducted  or  withheld  to the  relevant  taxation  or  other
     authority  in  accordance  with  applicable.  A  "qualified  assignee" of a
     Purchaser  is a Person that is  organized  under the laws of (i) the United
     States  or (II) any  jurisdiction  other  than  the  United  States  or any
     political  subdivision  thereof and that (y) represents and warrants to the
     Company  that  payments of the Company to such  assignee  under the laws in
     existence on the date of this  Agreement  would not be subject to any Taxes
     and (z) from time to time, as and when  requested by the Company,  executes
     and delivers to the Company and the Internal  Revenue  Service  forms,  and
     provides the Company  with any  information  necessary  to  establish  such
     assignee's continued exemption from Taxes under applicable law.

                                       13
<PAGE>

          (b) The Company  shall  forthwith  pay any present or future  stamp or
     documentary taxes or any other excise or property taxes, charges or similar
     levies (all such taxes,  charges  and levies  hereinafter  referred to as "
     Other  Taxes")  which  arise  from  any  payment  made  under  any  of  the
     Transaction Agreements or from the execution,  delivery or registration of,
     or  otherwise  with  respect to, this  Agreement  other than Taxes  payable
     solely  as a result  of the  transfer  from  Purchaser  to a Person  of any
     Security.

          (c) The Company shall indemnify Purchaser,  or qualified assignee, for
     the full amount of Taxes or Other Taxes (including, without limitation, any
     Taxes or Other Taxes imposed by any  jurisdiction  on amounts payable under
     this  Section  3.6)  paid by  Purchaser,  or  qualified  assignee,  and any
     liability (including penalties, interest and expenses) arising therefrom or
     with  respect  thereto,  whether  or not such  Taxes or  Other  Taxes  were
     correctly or legally asserted.  Payment under this indemnification shall be
     made  within 30 days from the date  Purchaser  or  assignee  makes  written
     demand  therefor.  A  certificate  as to the  amount of such Taxes or Other
     Taxes submitted to the Company by Purchaser or qualified  assignee shall be
     conclusive evidence of the amount due from the Company to such party.

          (d) Within 30 days after the date of any payment of Taxes, the Company
     will  furnish to Purchaser  the  original or a certified  copy of a receipt
     evidencing payment thereof.

          (e) Purchaser shall provide to the Company a form W-8, stating that it
     is a non-U.S.  person,  together with any additional tax forms which may be
     required  under the  Code,  as  amended  after  the date  hereof,  to allow
     interest payments to be made to it without deduction.

                   ARTICLE IV. REPRESENTATIONS AND WARRANTIES

     The Company represents and warrants to Purchaser as of the Closing Date the
following:

Section 4.1 Organization and Qualification. The Company and each Subsidiary is a
corporation (or other legal entity) duly organized, validly existing and in good
standing under the laws of its  jurisdiction of  incorporation,  with full power
and authority to own, lease,  use and operate its properties and to carry on its
business as and where now owned,  leased,  used,  operated  and  conducted.  The
Company  and each  subsidiary  is  qualified  to conduct  business  as a foreign
corporation and is in good standing in every jurisdiction in which the nature of
the business  conducted by it makes such qualification  necessary,  except where
such failure  would not have a Material  Adverse  Effect.  A " Material  Adverse
Effect"  means  any  material  adverse  effect  on the  operations,  results  of
operations,  properties,  assets or condition  (financial  or  otherwise) of the
Company  or the  Company  and its  Subsidiaries,  taken  as a  whole,  or on the
transactions  contemplated  hereby or by the  agreements  or  instruments  to be
entered into in connection herewith.

                                       14
<PAGE>

Section 4.2 Authorization and Execution.

          (a) The Company and each Subsidiary, as applicable,  has all requisite
     corporate  power and  authority to enter into and perform each  Transaction
     Agreement  and to  consummate  the  transactions  contemplated  hereby  and
     thereby and to issue the Securities in accordance with the terms hereof and
     thereof.

          (b) The  execution,  delivery and  performance by the Company and each
     Subsidiary,  as applicable,  of each Transaction Agreement and the issuance
     by the Company of the Securities,  have been duly and validly authorized by
     the Board of Directors of the Company and each  Subsidiary,  as applicable,
     and no further consent or authorization of the Company or its Subsidiaries,
     their Board of Directors or the Company's shareholders is required.

          (c) This  Agreement  has  been  duly  executed  and  delivered  by the
     Company.

          (d) This  Agreement  constitutes,  and  upon  execution  and  delivery
     thereof by the Company, each of the Transaction Agreements will constitute,
     a valid and  binding  agreement  of the  Company  and each  Subsidiary,  as
     applicable,   in  each  case  enforceable  against  the  Company  and  each
     Subsidiary, as applicable, in accordance with its respective terms.

Section 4.3  Capitalization.  As of the date hereof, the authorized,  issued and
outstanding  capital stock of the Company is as set forth on Schedule 4.3 hereto
and except as set forth on Schedule 4.3 no other shares of capital  stock of the
Company will be  outstanding  as of the Closing  Date.  All of such  outstanding
shares of capital stock are, or upon issuance will be, duly authorized,  validly
issued, fully paid and nonassessable.  No shares of capital stock of the Company
are subject to preemptive  rights or similar rights of the  shareholders  of the
Company or any liens or  encumbrances  imposed through the actions or failure to
act of the Company.  Other than as set forth on Schedule  4.3 hereto,  as of the
date hereof, (i) there are no outstanding  options,  warrants,  scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character  whatsoever  relating to,
or  securities  or rights  convertible  into or  exchangeable  for any shares of
capital  stock of the Company or any of its  Subsidiaries,  or  arrangements  by
which the  Company or any of its  Subsidiaries  is or may become  bound to issue
additional  shares of capital  stock of the Company or any of its  Subsidiaries,
and (ii) there are no agreements or arrangements  under which the Company or any
of its  Subsidiaries  are  obligated to register the sale of any of its or their
securities under the Securities Act (except pursuant to the Registration  Rights
Agreement) and (iii) there are no anti-dilution  or price adjustment  provisions
contained in any security  issued by the Company (or in any agreement  providing
rights to  security  holders)  that will be  triggered  by the  issuance  of the
Convertible  Debentures  or  Conversion  Shares.  The Company has  furnished  to
Purchaser true and correct copies of the Company's Corporate Documents,  and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.

                                       15
<PAGE>

Section  4.4  Governmental  Authorization.  The  execution  and  delivery by the
Company of the  Transaction  Agreements  does not and will not, the issuance and
sale  by  the  Company  of the  Securities  does  not  and  will  not,  and  the
consummation  of  the  transactions   contemplated   hereby  and  by  the  other
Transaction  Agreements  will not,  require  any action by or in respect  of, or
filing with, any governmental  body, agency or governmental  official except (a)
such  actions or  filings  that have been  undertaken  or made prior to the date
hereof and that will be in full force and effect (or as to which all  applicable
waiting  periods  have  expired)  on and as of the date  hereof or which are not
required  to be filed  on or prior to the  Closing  Date,  (b) such  actions  or
filings that, if not obtained,  would not result in a Material  Adverse  Effect,
(c)  listing  applications  (" Listing  Applications")  to be filed with the OTC
Bulletin Board or the National Market relating to the Conversion Shares issuable
upon conversion of the  Convertible  Debentures and (d) the filing of a "Form D"
as described in Section 7.13 below.

Section 4.5 Issuance of Shares.  Upon conversion in accordance with the terms of
the  Convertible  Debentures,  the  Conversion  Shares shall be duly and validly
issued  and  outstanding,  fully paid and  nonassessable,  free and clear of any
Taxes,  Liens and charges with respect to issuance  other than those  created by
Purchaser and shall not be subject to preemptive rights or similar rights of any
other shareholders of the Company.  Assuming the  representations and warranties
of Purchaser herein are true and correct in all material  respects,  each of the
Securities will have been issued in material compliance with all applicable U.S.
federal and state  securities  laws. The Company  understands  and  acknowledges
that, in certain  circumstances,  the issuance of Conversion Shares could dilute
the  ownership  interests  of other  shareholders  of the  Company.  The Company
further  acknowledges  that its  obligation  to  issue  Conversion  Shares  upon
conversion  of  the  Convertible   Debentures  is  absolute  and   unconditional
regardless  of the dilutive  effect that such issuance may have on the ownership
interests of other shareholders of the Company.

Section  4.6 No  Conflicts.  The  execution  and  delivery by the Company of the
Transaction Agreements to which it is a party did not and will not, the issuance
and  sale  by the  Company  of the  Securities  did  not  and  will  not and the
consummation  of  the  transactions   contemplated   hereby  and  by  the  other
Transaction  Agreements  will not,  contravene  or constitute a default under or
violation of (i) any  provision of  applicable  law or  regulation  known by the
Company to be applicable to it, (ii) the Company Corporate Documents,  (iii) any
agreement,  judgment, injunction, order, decree or other instrument binding upon
the Company or any Subsidiary or any of their  respective  assets,  or result in
the  creation  or  imposition  of any Lien on any  asset of the  Company  or any
Subsidiary except those created by the Transaction  Agreements.  The Company and
each  Subsidiary  is in  compliance  with and  conforms to all  statutes,  laws,
ordinances,  rules,  regulations,  orders,  restrictions  and  all  other  legal
requirements  of any  domestic  or  foreign  government  or any  instrumentality
thereof having  jurisdiction over the conduct of its businesses or the ownership
of its properties,  except where such failure would not have a Material  Adverse
Effect.

Section 4.7 Financial Information.  Since December 31, 2000 (the " Balance Sheet
Date"),  except as  disclosed  in Schedule  4.7,  there has been (x) no material
adverse  change in the assets

                                       16
<PAGE>

or liabilities,  or in the business or condition,  financial or otherwise, or in
the results of  operations or  prospects,  of the Company and its  Subsidiaries,
whether as a result of any legislative or regulatory  change,  revocation of any
license or rights to do business,  fire, explosion,  accident,  casualty,  labor
trouble, flood, drought, riot, storm, condemnation,  act of God, public force or
otherwise and (y) no material adverse change in the assets or liabilities, or in
the  business  or  condition,  financial  or  otherwise,  or in the  results  of
operations  or  prospects,  of the  Company and its  subsidiaries  except in the
ordinary  course of  business;  and to the  knowledge  of the Company no fact or
condition  exists or is  contemplated  or  threatened  which  might cause such a
change in the future. The audited consolidated balance sheets of the Company and
its  Subsidiaries  for the period  ending  December  31,  2000,  and the related
consolidated  statements of income,  changes in shareholders' equity and changes
in cash flows for the  periods  then ended,  including  the  footnotes  thereto,
except  as  indicated  therein,  (i)  complied  in all  material  respects  with
applicable  accounting  requirements  and (ii) have been  prepared in accordance
with GAAP consistently applied throughout the periods indicated, except that the
unaudited financial statements do not contain notes and may be subject to normal
audit  adjustments  and normal annual  adjustments.  Such  financial  statements
fairly present the financial  condition of the Company and its  Subsidiaries  at
the dates indicated and the  consolidated  results of their  operations and cash
flows for the periods then ended and, except as indicated  therein,  reflect all
claims   against  and  all  Debts  and   liabilities  of  the  Company  and  its
Subsidiaries, fixed or continency required to be reflected therein.

Section 4.8 Litigation. Except as set forth on Schedule 4.8, there is no action,
suit or  proceeding  pending or, to the  knowledge  of the  Company,  threatened
against the Company or any  Subsidiary,  before any court or  arbitrator  or any
governmental body, agency or official in which there is a reasonable possibility
of an adverse  decision  which could be  reasonably  expected to have a Material
Adverse Effect or which challenges the validity of any Transaction Agreements.

Section 4.9 Compliance with ERISA and other Benefit Plans.

     (a) Each member of the ERISA Group has fulfilled its obligations  under the
minimum funding standards of ERISA and the Code with respect to each Plan and is
in compliance in all material respects with the presently applicable  provisions
of ERISA and the Code with  respect to each Plan.  No member of the ERISA  Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Code in respect of any Plan,  (ii) failed to make any required  contribution  or
payment  to any  Plan  or  Multiemployer  Plan  or in  respect  of  any  Benefit
Arrangement, or made any amendment to any Plan or Benefit Arrangement,  which as
resulted or could result in the imposition of a Lien or the posting of a bond or
other  security  under ERISA or the Code or (iii)  incurred any liability  under
Title IV of ERISA other than a liability to the PBGC for premiums  under Section
4007 of ERISA.

     (b) The benefit plans not covered under clause (a) above (including  profit
sharing,  deferred compensation,  stock option, employee stock purchase,  bonus,
retirement,  health or  insurance  plans,  collectively  the "  Benefit  Plans")
relating to the employees of the Company are duly registered  where required by,
and are in good standing in all material  respects under,  all

                                       17
<PAGE>

applicable laws. All required  employer and employee  contributions and premiums
under the Benefit Plans to the date hereof have been made, the  respective  fund
or funds  established  under the  Benefit  Plans are funded in  accordance  with
applicable laws, and no past service funding liabilities exist thereunder.

     (c) No Benefit  Plans  have any  unfunded  liabilities,  either on a "going
concern" or "winding up" basis and determined in accordance  with all applicable
laws and actuarial  practices and using  actuarial  assumptions and methods that
are  reasonable  in the  circumstances.  No event has  occurred and no condition
exists with respect to any Benefit  Plans that has resulted or could  reasonably
be  expected to result in any pension  plan having its  registration  revoked or
wound up (in whole or in part) or refused  for the  purposes  of any  applicable
laws or being placed under the  administration  of any relevant pension benefits
regulatory  authority or being  required to pay any taxes or  penalties  (in any
material amounts) under any applicable laws.

Section 4.10 Environmental  Matters.  The costs and liabilities  associated with
Environmental Laws (including the cost of compliance  therewith) are unlikely to
have  a  material  adverse  effect  on the  business,  condition  (financial  or
otherwise), operations,  performance,  properties or prospects of the Company or
any Subsidiary. Each of the Company and the Subsidiaries conducts its businesses
in compliance in all material respects with all applicable Environmental Laws.

Section 4.11 Taxes.  All United States  federal,  state,  county,  municipality,
local  or  foreign  income  tax  returns  and all  other  material  tax  returns
(including  foreign tax returns)  which are required to be filed by or on behalf
of the Company and each  Subsidiary  have been filed and all material  taxes due
pursuant to such returns or pursuant to any  assessment  received by the Company
and each Subsidiary have been paid except those being disputed in good faith and
for which adequate  reserves have been  established.  The charges,  accruals and
reserves on the books of the Company and each Subsidiary in respect of taxes and
other governmental charges have been established in accordance with GAAP.

Section 4.12  Investments,  Joint Ventures.  Other than as set forth in Schedule
4.12, the Company has no other direct or indirect  Investment in any Person, and
the  Company is not a party to any  partnership,  management,  shareholders'  or
joint venture or similar agreement.

Section 4.13 Not an Investment  Company.  Neither the Company nor any Subsidiary
is an "Investment Company" within the meaning of Investment Company Act of 1940,
as amended.

Section  4.14 Full  Disclosure.  The  information  heretofore  furnished  by the
Company to Purchaser for purposes of or in connection with this Agreement or any
transaction  contemplated  hereby does not, and all such  information  hereafter
furnished by the Company or any  Subsidiary to Purchaser  will not (in each case
taken  together  and on the date as of which  such  information  is  furnished),
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein, in the light of the
circumstances under which they are made, not misleading.

                                       18
<PAGE>

Section 4.15 No Solicitation;  No Integration  with Other Offerings.  No form of
general  solicitation or general  advertising was used by the Company or, to the
best of its actual knowledge,  any other Person acting on behalf of the Company,
in connection  with the offer and sale of the  Securities.  Neither the Company,
nor, to its knowledge,  any Person acting on behalf of the Company,  has, either
directly  or  indirectly,  sold or offered  for sale to any Person  (other  than
Purchaser)  any of the  Securities  or,  within the six months prior to the date
hereof, any other similar security of the Company except as contemplated by this
Agreement,  and the  Company  represents  that  neither  itself  nor any  Person
authorized to act on its behalf (except that the Company makes no representation
as to  Purchaser  and  their  Affiliates)  will  sell or offer for sale any such
security to, or solicit any offers to buy any such  security  from, or otherwise
approach  or  negotiate  in respect  thereof  with,  any Person or Persons so as
thereby  to  cause  the  issuance  or  sale  of any of the  Securities  to be in
violation  of any of the  provisions  of Section 5 of the  Securities  Act.  The
issuance of the  Securities to Purchaser  will not be integrated  with any other
issuance of the Company's  securities  (past,  current or future) which requires
stockholder approval under the rules of the any National Market.

Section  4.16  Permits.  (a) Each of the  Company and its  Subsidiaries  has all
material Permits; (b) all such Permits are in full force and effect, and each of
the Company and its  Subsidiaries  has  fulfilled  and  performed  all  material
obligations  with  respect  to such  Permits;  (c) no event has  occurred  which
allows, or after notice of lapse of time would allow,  revocation or termination
by the issuer thereof or which results in any other  material  impairment of the
rights of the holder of any such  Permit;  and (d) the  Company has no reason to
believe that any governmental body or agency is considering limiting, suspending
or revoking any such Permit,  except in each case or in the aggregate that could
not be reasonably expected to have a Material Adverse Effect.

Section 4.17 Leases.  Neither the Company nor any  Subsidiary  is a party to any
capital lease  obligation with a value greater than $250,000 or to any operating
lease with an aggregate  annual rental greater than $250,000  during the life of
such lease.

Section 4.18 Absence of Any Undisclosed  Liabilities or Capital Calls. There are
no liabilities of the Company or any Subsidiary of any kind whatsoever,  whether
accrued, contingent, absolute, determined,  determinable or otherwise, and there
is no  existing  condition,  situation  or  set  of  circumstances  which  would
reasonably  be  expected  to result in such a  liability,  other  than (i) those
liabilities  provided  for in the  financial  statements  delivered  pursuant to
Section 4.7 and (ii) other undisclosed liabilities which, individually or in the
aggregate, would not have a Material Adverse Effect.

Section  4.19  Public  Utility  Holding  Company.  Neither  the  Company nor any
Subsidiary  is, or will be upon issuance and sale of the  Securities and the use
of the proceeds described herein, subject to regulation under the Public Utility
Holding  Company Act of 1935, as amended,  the Federal Power Act, the Interstate
Commerce  Act or to any  federal or state  statute or  regulation  limiting  its
ability to issue and perform its obligations under any Transaction Agreement.

                                       19
<PAGE>

Section  4.20  Intellectual  Property  Rights.  Each  of  the  Company  and  its
Subsidiaries owns, or is licensed under, and has the rights to use, all material
to the knowledge of the Company, patents,  trademarks,  trade names, copyrights,
technology, know-how and processes (collectively, " Intellectual Property") used
in, or necessary for the conduct of its  business;  no claims have been asserted
by any Person to the use of any such  Intellectual  Property or  challenging  or
questioning the validity or  effectiveness  of any license or agreement  related
thereto. To the best of Company's and its Subsidiaries'  knowledge,  there is no
valid basis for any such claim and the use of such Intellectual  Property by the
Company and its Subsidiaries will not infringe upon the rights of any Person.

Section  4.21  Insurance.  The  Company  and  its  Subsidiaries  maintain,  with
financially sound and reputable insurance companies,  insurance in at least such
amounts and  against  such risks such that any  uninsured  loss would not have a
Material  Adverse  Effect.  All  insurance  coverages  of the  Company  and  its
Subsidiaries  are in full force and effect and there are no past due premiums in
respect of any such insurance.

Section 4.22 Title to Properties. The Company and its Subsidiaries have good and
marketable title to all their respective  properties  reflected on the financial
statements referred to in Section 4.7, free and clear of all Liens. The property
designated  as  collateral  in the  Mortgage  is  owned  by the  Company  or its
Subsidiaries free and clear of all Liens except as set forth therein.

Section  4.23  Internal  Accounting  Controls.  The  Company  and  each  of  its
Subsidiaries  maintain a system of internal accounting controls  sufficient,  in
the  judgment  of the  Company's  Board  of  Directors,  to  provide  reasonable
assurance that (i)  transactions  are executed in accordance  with  managements'
general or specific authorizations,  (ii) transactions are recorded as necessary
to permit  preparation  of financial  statements in conformity  with GAAP and to
maintain  asset  accountability,  (iii)  access to assets is  permitted  only in
accordance with  management's  general or specific  authorization,  and (iv) the
recorded  accountability  for assets is  compared  with the  existing  assets at
reasonable  intervals  and  appropriate  action  is taken  with  respect  to any
differences.

Section 4.24 Reserved.

Section 4.25 Foreign Practices.  Neither the Company nor any of its Subsidiaries
nor, to the  Company's  knowledge,  any  employee or agent of the Company or any
Subsidiary  has made any  payments  of funds of the  Company or  Subsidiary,  or
received or retained any funds,  in each case in  violation of any law,  rule or
regulation.

Section 4.26 Title to Certain Assets.  The Company owns the assets designated as
collateral and described on Exhibit A to the Security Agreement,  free and clear
of any lien.

                                       20
<PAGE>

Section  4.27  Subsidiaries.  Except  for  the  directly  and  indirectly  owned
subsidiaries of the Company as set forth on Schedule 4.27 (the  "Subsidiaries"),
the  Company  does not own or hold any shares of stock or any other  security or
interest  in any other  equity,  or any rights to acquire  any such  security or
interest.  Except for the  Subsidiaries  disclosed on Schedule 4.27, the Company
has never  had any  subsidiary  corporation  of which  the  securities  having a
majority of voting power in electing the board of  directors or  representing  a
majority  of  the  economic  interests  were,  at  the  time  as  of  which  any
determination was made, owned by the Company either directly or indirectly.  The
number of  authorized,  issued and  outstanding  shares of capital  stock of the
Subsidiaries  is as set forth on Schedule  4.27. All  outstanding  shares of the
Subsidiaries capital stock are validly issued, fully paid and nonassessable, are
free from,  and were not issued in violation of any preemptive  rights,  and are
owned of record and beneficially by the Company.

             ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PURCHASER

Section 5.1 Purchaser. Purchaser hereby  represents and warrants to the Company
that:

          (a) Purchaser is an "accredited  investor"  within the meaning of Rule
     501(a) under the  Securities  Act and the  Securities  to be acquired by it
     pursuant to this  Agreement are being  acquired for its own account and, as
     of the date hereof, not with a view toward, or for sale in connection with,
     any distribution thereof except in compliance with applicable United States
     federal  and  state  securities  law;  provided  that  the  disposition  of
     Purchaser's property shall at all times be and remain within its control;

          (b) the execution,  delivery and performance of this Agreement and the
     exchange  of  the  Securities   pursuant  thereto  are  within  Purchaser's
     corporate or  partnership  powers,  as  applicable,  and have been duly and
     validly authorized by all requisite corporate or partnership action;

          (c) this Agreement has been duly executed and delivered by Purchaser;

          (d)  the  execution  and  delivery  by  Purchaser  of the  Transaction
     Agreements  to which it is a party does not,  and the  consummation  of the
     transactions  contemplated  hereby  and  thereby  will not,  contravene  or
     constitute a default  under or violation of (i) any provision of applicable
     law or regulation,  or (ii) any  agreement,  judgment,  injunction,  order,
     decree or other instrument binding upon Purchaser;

          (e) Purchaser understands that the Securities have not been registered
     under  the  Securities  Act and may not be  transferred  or sold  except as
     specified in this Agreement or the remaining Transaction Agreements;

          (f) this  Agreement  constitutes  a valid  and  binding  agreement  of
     Purchaser  enforceable  in  accordance  with  its  terms,  subject  to  (i)
     applicable   bankruptcy,   insolvency

                                       21
<PAGE>

     or similar laws affecting the  enforceability of creditors rights generally
     and (ii) equitable principles of general applicability;

          (g)  Purchaser  has such  knowledge  and  experience  in financial and
     business  matters so as to be capable of evaluating the merits and risks of
     its  investment in the  Securities  and Purchaser is capable of bearing the
     economic risks of such investment;

          (h)  Purchaser is  knowledgeable,  sophisticated  and  experienced  in
     business  and  financial  matters;  Purchaser  has  previously  invested in
     securities  similar to the Securities and fully understands the limitations
     on  transfer  described  herein;  Purchaser  has been  afforded  access  to
     information  about the  Company  and the  financial  condition,  results of
     operations, property, management and prospects of the Company sufficient to
     enable it to evaluate its investment in the Securities;  Purchaser has been
     afforded the  opportunity to ask such questions as it has deemed  necessary
     of, and to receive answers from,  representatives of the Company concerning
     the terms and  conditions of the offering of the  Securities and the merits
     and the  risks of  investing  in the  Securities;  and  Purchaser  has been
     afforded the  opportunity to obtain such additional  information  which the
     Company  possesses  or can acquire that is necessary to verify the accuracy
     and  completeness  of the  information  given to Purchaser  concerning  the
     Company.  The  foregoing  does not in any way  relieve  the  Company of its
     representations  and  other  undertakings  hereunder,  and  shall not limit
     Purchaser's ability to rely thereon;

          (i) no part of the source of funds used by  Purchaser  to acquire  the
     Securities  constitutes assets allocated to any separate account maintained
     by Purchaser in which any employee  benefit plan (or its related trust) has
     any interest; and

          (j) Purchaser is a corporation organized under the laws of Bermuda.

           ARTICLE VI. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES

Section 6.1  Conditions  Precedent to Purchaser's  Obligations to Purchase.  The
obligation of Purchaser hereunder to exchange the Convertible  Debentures at the
Closing is subject to the  satisfaction,  on or before the Closing Date, of each
of the following conditions,  provided that these conditions are for Purchaser's
sole benefit and may be waived by Purchaser at any time in its sole discretion:

          (a) The  Company and each  Subsidiary,  as  required,  shall have duly
     executed  this  Agreement,  the  Registration  Rights  Agreement,  and  the
     Security  Agreement,  the  Mortgage  and all  other  appropriate  financing
     statements, and delivered the same to Purchaser;

          (b) The Company  shall have  delivered  to  Purchaser a duly  executed
     certificate  representing  the  Convertible  Debenture in  accordance  with
     Section 2.3 hereof;

          (c) The Company shall have delivered the Solvency Certificate;

                                       22
<PAGE>

          (d)  The  representations  and  warranties  of  the  Company  and  its
     Subsidiaries  contained  in each  Transaction  Agreement  shall be true and
     correct  in all  material  respects  as of the date when made and as of the
     Closing  Date as though made at such time (except for  representations  and
     warranties  that  speak as of a  specified  date) and the  Company  and its
     Subsidiaries  shall  have  performed,   satisfied  and  complied  with  all
     covenants,   agreements  and  conditions   required  by  such   Transaction
     Agreements to be performed,  satisfied or complied with by them at or prior
     to the Closing Date. Purchaser shall have received an Officer's Certificate
     executed by the chief  executive  officer of the  Company,  dated as of the
     Closing Date,  to the foregoing  effect and as to such other matters as may
     be  reasonably  requested  by  Purchaser,  including  but  not  limited  to
     certificates   with  respect  to  the  Company  and  Subsidiary   Corporate
     Documents, resolutions relating to the transactions contemplated hereby and
     the incumbencies of certain officers and Directors of the Company. The form
     of such certificate is attached hereto as Exhibit D;

          (e) The  Company  shall  have  received  all  governmental,  Board  of
     Directors, shareholders and third party consents and approvals necessary or
     desirable in  connection  with the issuance and exchange of the  Securities
     and the  consummation of the  transactions  contemplated by the Transaction
     Agreements;

          (f) All  applicable  waiting  periods in respect to the  issuance  and
     exchange of the  Securities  shall have expired  without any action  having
     been  taken by any  competent  authority  that could  restrain,  prevent or
     impose  any  materially  adverse  conditions  thereon or that could seek or
     threaten any of the foregoing;

          (g) No law or  regulation  shall have been imposed or enacted that, in
     the judgment of Purchaser,  could  adversely  affect the  transactions  set
     forth  herein  or in  the  other  Transaction  Agreements,  and  no  law or
     regulation  shall have been  proposed  that in the  reasonable  judgment of
     Purchaser could reasonably have any such effect;

          (h) Purchaser shall have received an opinion,  dated the Closing Date,
     of counsel to the Company, in form and substance satisfactory to Purchaser;

          (i) All fees and  expenses  due and payable by the Company on or prior
     to the Closing Date shall have been paid;

          (j) The  Company  Corporate  Documents  and the  Subsidiary  Corporate
     Documents,  if  any,  shall  be in full  force  and  effect  and no term or
     condition  thereof  shall have been amended,  waived or otherwise  modified
     without the prior written consent of Purchaser;

          (k) There  shall  have  occurred  no  material  adverse  change in the
     business,  condition  (financial or  otherwise),  operations,  performance,
     properties or prospects of the Company or any Subsidiary since December 31,
     2000;

                                       23
<PAGE>

          (l) There shall exist no action,  suit,  investigation,  litigation or
     proceeding  pending or threatened in any court or before any  arbitrator or
     governmental instrumentality that challenges the validity of or purports to
     affect  this  Agreement  or  any  other  Transaction  Agreement,  or  other
     transaction  contemplated  hereby or thereby or that  could  reasonably  be
     expected to have a Material Adverse Effect,  or any material adverse effect
     on the  enforceability  of the Transaction  Agreements or the Securities or
     the rights of the holders of the Securities or Purchaser hereunder;

          (m)  Purchaser  shall have  confirmed  the receipt of the  Convertible
     Debentures to be issued,  duly executed by the Company in the denominations
     and registered in the name of Purchaser;

          (n) There shall not have occurred any  disruption or adverse change in
     the financial or capital markets generally, or in the market for the Common
     Stock  (including but not limited to any  suspension or  delisting),  which
     Purchaser  reasonably deems material in connection with the purchase of the
     Securities; and

          (o) As of the Closing  Date, no Default or Event of Default shall have
     occurred and be continuing;

Section 6.2  Conditions to the Company's  Obligations.  The  obligations  of the
Company to issue and  exchange  the  Securities  to  Purchaser  pursuant to this
Agreement are subject to the  satisfaction,  at or prior to any Closing Date, of
the following conditions:

          (a) The  representations  and warranties of Purchaser contained herein
     shall be true and correct in all material  respects on the Closing Date and
     Purchaser  shall have performed and complied in all material  respects with
     all agreements  required by this Agreement to be performed or complied with
     by Purchaser at or prior to the Closing Date;

          (b) The issue and exchange of the  Securities by the Company shall not
     be  prohibited  by  any  applicable   law,  court  order  or   governmental
     regulation;

          (c)  Receipt by the  Company  of duly  executed  counterparts  of this
     Agreement and the Registration Rights Agreement signed by Purchaser;

          (d) The Company shall have received the Bridge Notes for cancellation;

                       ARTICLE VII. AFFIRMATIVE COVENANTS

     The Company hereby agrees that,  from and after the date hereof for so long
as any  Convertible  Debentures  remain  outstanding  and  for  the  benefit  of
Purchaser:

                                       24
<PAGE>

Section  7.1  Information.  The  Company  will  deliver  to each  holder  of the
Convertible Debentures:

          (a) promptly upon the filing thereof,  copies of (i) all  registration
     statements (other than the exhibits thereto and any registration statements
     on Form S-8 or its  equivalent),  and (ii) all reports of Forms 10-K,  10-Q
     and 8-K (or other  equivalents)  which the  Company or any  Subsidiary  has
     filed with the Commission (collectively, "SEC Reports");

          (b)  simultaneously  with the  delivery  of each item  referred  to in
     clause (a) above,  a certificate  from the chief  financial  officer of the
     Company  stating  that no Default or Event of Default has  occurred  and is
     continuing,  or, if as of the date of such  delivery  a Default  shall have
     occurred and be continuing,  a certificate  from the Company  setting forth
     the details of such  Default or Event of Default  and the action  which the
     Company is taking or proposes to take with respect thereto;

          (c)  within  two (2) days after any  officer  of the  Company  obtains
     knowledge  of a Default or Event of  Default,  or that any Person has given
     any notice or taken any action with respect to a claimed Default hereunder,
     a certificate of the chief  financial  officer of the Company setting forth
     the details  thereof and the action which the Company is taking or proposed
     to take with respect thereto;

          (d)  promptly  upon the  mailing  thereof to the  shareholders  of the
     Company generally,  copies of all financial  statements,  reports and proxy
     statements  so  mailed  and any other  document  generally  distributed  to
     shareholders;

          (e) at least two (2) Business  Days prior to the  consummation  of any
     Financing  or  other  event   requiring  a  repayment  of  the  Convertible
     Debentures under Section 3.4, notice thereof together with a summary of all
     material  terms  thereof  and  copies  of  all  documents  and  instruments
     associated therewith;

          (f)  notice  promptly  upon the  occurrence  of any event by which the
     Reserved  Amount  becomes  less than the sum of (i) 1.5  times the  maximum
     number  of  Conversion   Shares   issuable   pursuant  to  the  Transaction
     Agreements; and

          (g)  promptly  following  the  commencement  thereof,   notice  and  a
     description  in reasonable  detail of any litigation or proceeding to which
     the Company or any  Subsidiary  is a party in which the amount  involved is
     $250,000 or more and not covered by  insurance  or in which  injunctive  or
     similar relief is sought.

Section  7.2  Payment of  Obligations.  The  Company  will,  and will cause each
Subsidiary to, pay and discharge,  at or before  maturity,  all their respective
material obligations,  including,  without limitation,  tax liabilities,  except
where the same may be contested  in good faith by

                                       25
<PAGE>

appropriate  proceedings and will maintain, in accordance with GAAP, appropriate
reserves for the accrual of any of the same.

Section 7.3 Maintenance of Property; Insurance. The Company will, and will cause
each  Subsidiary  to, keep all property  useful and necessary in its business in
good working order and condition,  ordinary wear and tear excepted. In addition,
the Company and each Subsidiary will maintain insurance in at least such amounts
and against such risks as it has insured against as of the Closing Date.

Section 7.4  Maintenance  of Existence.  The Company  will,  and will cause each
Subsidiary  to,  continue to engage in business of the same  general type as now
conducted by the Company and such  Subsidiaries,  and will  preserve,  renew and
keep in full force and  effect  its  respective  corporate  existence  and their
respective material rights,  privileges and franchises necessary or desirable in
the normal conduct of business.

Section  7.5  Compliance  with  Laws.  The  Company  will,  and will  cause each
Subsidiary  to,  comply,  in all material  respects,  with all  federal,  state,
municipal,  local or foreign applicable laws,  ordinances,  rules,  regulations,
municipal   by-laws,   codes  and   requirements  of  governmental   authorities
(including,  without limitation,  Environmental Laws and ERISA and the rules and
regulations  thereunder)  except (i) where compliance  therewith is contested in
good faith by  appropriate  proceedings or (ii) where  non-compliance  therewith
could not reasonably be expected,  in the aggregate,  to have a material adverse
effect  on  the  business,  condition  (financial  or  otherwise),   operations,
performance, properties or prospects of the Company or such Subsidiary.

Section 7.6  Inspection of Property,  Books and Records.  The Company will,  and
will cause each  Subsidiary to, keep proper books of record and account in which
full, true and correct entries shall be made of all dealings and transactions in
relation to their respective businesses and activities;  and will permit, during
normal business hours,  Purchaser'  Representative or an affiliate  thereof,  as
representatives  of  Purchaser,  to visit and  inspect  any of their  respective
properties, upon reasonable prior notice, to examine and make abstracts from any
of their respective  books and records and to discuss their respective  affairs,
finances and accounts with their respective  executive  officers and independent
public accountants (and by this provision the Company authorizes its independent
public accountants to disclose and discuss with Purchaser the affairs,  finances
and  accounts  of  the  Company  and  its  Subsidiaries  in  the  presence  of a
representative of the Company; provided, however, that such discussions will not
result in any unreasonable expense to the Company, without Company consent), all
at such reasonable times.

Section  7.7  Investment  Company  Act.  The  Company  will not be or  become an
open-end  investment  trust,  unit investment  trust or face-amount  certificate
company  that  is or is  required  to  be  registered  under  Section  8 of  the
Investment Company Act of 1940, as amended.

Section 7.8 Reserved.

                                       26
<PAGE>

Section 7.9  Compliance  with Terms and  Conditions of Material  Contracts . The
Company will, and will cause each Subsidiary to, comply,  in all respects,  with
all terms and conditions of all material contracts to which it is subject.

Section 7.10 Reserved Shares and Listings.

     (a) The Company  shall at all times have  authorized,  and reserved for the
purpose of issuance,  a  sufficient  number of shares of Common Stock to provide
for the full conversion of the outstanding  Convertible  Debentures and issuance
of the  Conversion  Shares  (based on the  conversion  price of the  Convertible
Debentures  in effect  from time to time (the  "Reserved  Amount").  The Company
shall not  reduce the  Reserved  Amount  without  the prior  written  consent of
Purchaser.  With respect to all Securities which contain an indeterminate number
of  shares  of  Common  Stock  issuable  in  connection  therewith  (such as the
Convertible  Debentures),  the Company shall include in the Reserve  Amount,  no
less than two (2) times the number of shares that is then actually issuable upon
conversion or exercise of such  Securities.  If at any time the number of shares
of Common  Stock  authorized  and  reserved  for issuance is below the number of
Conversion  Shares  issued  or  issuable  upon  conversion  of  the  Convertible
Debentures,  the Company will promptly take all  corporate  action  necessary to
authorize  and  reserve  a  sufficient  number  of  shares,  including,  without
limitation,  either (x) calling a special  meeting of  shareholders to authorize
additional shares, in the case of an insufficient number of authorized shares or
(y) in lieu thereof,  consummating  the immediate  repurchase of the Convertible
Debentures  contemplated  in Sections 3.4(c) and 10.3 hereof,  respectively.  In
addition  to  the  foregoing,  the  Company  shall  undertake  to  authorize  an
additional  50,000,000  shares of its  Common  Stock at its  Annual  Meeting  of
Shareholders  not later than July 15, 2001,  and to reserve the Reserved  Amount
for  issuance of the  Conversion  Shares to  Purchaser  in  accordance  with the
provisions of this Agreement.

     (b) The Company shall promptly file the Listing Applications and secure the
listing of the  Conversion  Shares  upon each  national  securities  exchange or
automated  quotation  system, if any, upon which shares of Common Stock are then
listed (subject to official  notice of issuance) and shall maintain,  so long as
any  other  shares of Common  Stock  shall be so  listed,  such  listing  of all
Conversion  Shares from time to time issuable upon conversion of the Convertible
Debentures.  The  Company  will  maintain  the listing and trading of its Common
Stock on the OTC Bulletin  Board.  The Company will comply in all respects  with
the Company's reporting,  filing and other obligations under the bylaws or rules
of the National  Association of Securities  Dealers,  Inc. (the "NASD") and such
exchanges, as applicable. The Company shall promptly provide to Purchaser copies
of any notices it receives from Nasdaq  regarding the continued  eligibility  of
the Common Stock for listing on the OTC Bulletin  Board or any National  Market,
as applicable.

Section  7.11  Transfer  Agent  Instructions.   Upon  receipt  of  a  Notice  of
Conversion, the Company shall immediately direct the Company's transfer agent to
issue certificates,  registered in the name of Purchaser or its nominee, for the
Conversion  Shares,  in such amounts as specified from time to time by Purchaser
to the Company  upon  proper  conversion  of the  Convertible  Debentures.  Upon
conversion of any  Convertible  Debentures  in  accordance  with

                                       27
<PAGE>

their terms the Company will,  and will use its best lawful efforts to cause its
transfer agent to, issue one or more certificates  representing shares of Common
Stock in such name or names and in such  denominations  specified by a Purchaser
in a Notice of Conversion. As long as the Registration Statement contemplated by
the Registration  Rights Agreement shall remain effective,  the shares of Common
Stock issuable upon conversion of any Convertible  Debentures shall be issued to
any transferee of such shares from Purchaser without any restrictive legend upon
appropriate  evidence of transfer in compliance  with the Securities Act and the
rules  and  regulations  of the  Commission;  provided  that  for so long as the
Registration  Statement is effective,  no opinion of counsel will be required to
effect any such  transfer.  The  Company  further  warrants  and agrees  that no
instructions  other  than these  instructions  have been or will be given to its
transfer  agent.  Nothing  in  this  Section  7.11  shall  affect  in any  way a
Purchaser's  obligation  to  comply  with  all  securities  laws  applicable  to
Purchaser  upon resale of such shares of Common Stock,  including any prospectus
delivery requirements.

Section 7.12 Maintenance of Reporting Status;  Supplemental Information. So long
as any of the  Securities  are  outstanding,  the Company  shall timely file all
reports  required to be filed with the Commission  pursuant to the Exchange Act.
The Company shall not terminate its status as an issuer required to file reports
under the Exchange  Act,  even if the Exchange Act or the rules and  regulations
thereunder  would  permit  such  termination.  If at anytime  the Company is not
subject to the  requirements  of Section 13 or 15(d) of the  Exchange  Act,  the
Company will promptly furnish at its expense,  upon request,  for the benefit of
the holders  from time to time of  Securities,  and  prospective  purchasers  of
Securities,  information  satisfying the  information  requirements  of Rule 144
under the Securities Act.

Section 7.13 Form D; Blue Sky Laws.  The Company  agrees to file a "Form D" with
respect to the Securities as required  under  Regulation D of the Securities Act
and to provide a copy  thereof to  Purchaser  promptly  after such  filing.  The
Company  shall,  on or before the Closing Date,  take such action as the Company
shall  reasonably  determine is necessary to qualify the Securities for exchange
with  Purchaser  at the Closing  pursuant  to this  Agreement  under  applicable
securities  or "blue sky" laws of the states of the United  States (or to obtain
an exemption from such  qualification),  and shall provide  evidence of any such
action so taken to Purchaser on or prior to the Closing Date.

Section 7.14 Certain  Payments.  The Company agrees to pay all title  insurance,
filing,  recordation  or  other  fees,  including  any  taxes,  relating  to the
execution and perfection of the security interest evidenced by the Mortgage, and
to cooperate with Purchaser in connection with filing the appropriate  documents
for the perfection of such security interest.

                        ARTICLE VIII. NEGATIVE COVENANTS

     The Company  hereby  agrees that from and after the date hereof for so long
as any  Convertible  Debentures  remain  outstanding  and  for  the  benefit  of
Purchaser:

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<PAGE>

Section 8.1  Limitations on Debt or Other  Liabilities.  Neither the Company nor
any Subsidiary will create,  incur, assume or suffer to exist (at any time after
the Closing Date,  after giving effect to the application of the proceeds of the
issuance of the Securities) (i) any Debt except (x) Debt incurred in a Permitted
Financing,  (y) Debt incurred in connection  with equipment  leases to which the
Company or its  Subsidiaries  are a party  incurred  in the  ordinary  course of
business;  and (z) Debt  incurred in  connection  with trade  accounts  payable,
imbalances and refunds  arising in the ordinary  course of business and (ii) any
equity securities (including Derivative Securities) (other than those securities
that are issuable (x) under or pursuant to stock option plans, warrants or other
rights  programs that exist as of the date hereof,  (z) in  connection  with the
acquisition (including by merger) of a business or of assets otherwise permitted
under this Agreement), unless the Company complies with the mandatory prepayment
terms of Section 3.4(b) hereof.

Section 8.2 Transactions  with Affiliates.  The Company and each Subsidiary will
not,  directly or  indirectly,  pay any funds to or for the account of, make any
investment  (whether by acquisition or stock or indebtedness,  by loan, advance,
transfer of property,  guarantee or other agreement to pay, purchase or service,
directly or  indirectly,  and Debt, or otherwise) in, lease,  sell,  transfer or
otherwise dispose of any assets, tangible or intangible,  to, or participate in,
or effect any transaction in connection with any joint enterprise or other joint
arrangement  with,  any  Affiliate,  except,  (1)  pursuant to those  agreements
specifically  identified  on Schedule 8.2  attached  hereto (with a copy of such
agreements annexed to such Schedule 8.2) and (2) on terms to the Company or such
Subsidiary no less favorable than terms that could be obtained by the Company or
such  Subsidiary  from a Person that is not an  Affiliate  of the  Company  upon
negotiation  at arms'  length,  as  determined  in good  faith  by the  Board of
Directors  of the  Company;  provided  that no  determination  of the  Board  of
Directors shall be required with respect to any such  transactions  entered into
in the ordinary  course of business.

Section  8.3  Merger  or  Consolidation.  The  Company  will  not,  in a  single
transaction or a series of related  transactions  (i) consolidate  with or merge
with or into any other  Person,  or (ii) permit any other Person to  consolidate
with or merge into it,  unless the Company  shall be the survivor of such merger
or consolidation  and (x) immediately  before and immediately after given effect
to such transaction  (including any  indebtedness  incurred or anticipated to be
incurred in  connection  with the  transaction),  no Default or Event of Default
shall have  occurred  and be  continuing;  and (y) the Company has  delivered to
Purchaser an Officer's  Certificate stating that such  consolidation,  merger or
transfer complies with this Agreement, and that all conditions precedent in this
Agreement relating to such transaction have been satisfied.

Section 8.4  Limitation on Asset Sales.  Neither the Company nor any  Subsidiary
will  consummate  an  Asset  Sale  of  material  assets  of the  Company  or any
Subsidiary  without the prior written consent of Purchaser,  which consent shall
not be  unreasonably  withheld.  As used  herein,  "Asset  Sale" means any sale,
lease,  transfer  or other  disposition  (or  series of related  sales,  leases,
transfers or dispositions) or sales of capital stock of a Subsidiary (other than
directors'  qualifying  shares),  property or other assets (each referred to for
the purpose of this definition as a "disposition"), including any disposition by
means of a merger, consolidation or similar transaction other than a disposition
of property or assets at fair market value in the  ordinary

                                       29
<PAGE>

course of business;  provided, however, Asset Sale shall not include the sale of
a portion of the  Company's  ownership  interest in License  1551 or License 953
relating to the  development of certain oil and gas fields in Kazakhstan and the
sale of any oil or gas resulting  from the  development  of such property  under
License 1551 or License 953 owned by the Company.

Section  8.5  Restrictions  on Certain  Amendments.  Neither the Company nor any
Subsidiary  will waive any  provision of,  amend,  or suffer to be amended,  any
provision of such entity's  existing  Debt,  except for the Company's 5% Secured
Convertible Debentures due February 18, 2004, any material contract or agreement
previously or hereafter  filed by the Company with the Commission as part of its
SEC Reports,  any Company Corporate Document or Subsidiary Corporate Document if
such amendment, in the Company's reasonable judgment, would materially adversely
affect  Purchaser  or the holders of the  Securities  without the prior  written
consent of Purchaser.

Section 8.6 Prohibition on Discounted Equity Offerings.

          (a) In  addition  to and  not in  lieu of the  covenant  specified  in
     Section 8.1 above,  beginning on the Closing Date and continuing  until 180
     days  following  the date on which the  Registration  Statement is declared
     effective by the Commission  (the  "Effective  Date") or until such time as
     all of the  Convertible  Debentures  have been either redeemed or converted
     into Conversion  Shares in full,  whichever is later to occur,  the Company
     agrees that it will not issue any of its equity  securities  (or securities
     convertible into or exchangeable or exercisable for equity  securities (the
     "Derivative  Securities"))  on terms that allow a holder thereof to acquire
     such equity  securities  (or  Derivative  Securities)  at a discount to the
     Market Price of the Common Stock at the time of issuance or, in the case of
     Derivative  Securities  at a conversion  price based on any formula  (other
     than standard anti-dilution provisions) based on the Market Price on a date
     later than the date of issuance so long as such conversion is not below the
     Market Price on the date of issuance (each such event, a "Discounted Equity
     Offering").  As used herein,  "discount" shall include,  but not be limited
     to,  (i) any  warrant,  right or  other  security  granted  or  offered  in
     connection  with such issuance  which,  on the applicable date of grant, is
     offered with an exercise or conversion  price,  as the case may be, at less
     than the then current Market Price of the Common Stock or, if such security
     has an  exercise  or  conversion  price  based on any  formula  (other than
     standard  anti-dilution  provisions)  based on the  Market  Price on a date
     later than the date of issuance,  then at a price below the Market Price on
     such  date of  exercise  or  conversion,  as the case  may be,  or (ii) any
     commissions,  fees  or  other  allowances  paid  in  connection  with  such
     issuances (other than customary underwriter or placement agent commissions,
     fees or  allowances).  For the purposes of determining  the Market Price at
     which  Common Stock is acquired  under this  Section,  normal  underwriting
     commissions and placement fees (including  underwriters' warrants) shall be
     excluded.

          (b)  Beginning  on the  Closing  Date and  continuing  until  180 days
     following the Effective  Date or until such time as all of the  Convertible
     Debentures have been either redeemed or converted into Conversion Shares in
     full, whichever is later to occur,

                                       30
<PAGE>

     the  Company  agrees  it will not issue any of its  equity  securities  (or
     Derivative  Securities),  unless  any  shares  of  Common  Stock  issued or
     issuable in  connection  therewith  are  "restricted  securities."  As used
     herein "restricted  securities" shall mean securities which may not be sold
     by virtue of contractual  restrictions imposed by the Company or otherwise,
     in each case prior to twelve (12) months  following the date of issuance of
     such securities.

          (c) The restrictions  contained in this Section 8.6 shall not apply to
     the issuance by the Company of (or the  agreement to issue) Common Stock or
     Derivative Securities in connection with (i) the acquisition  (including by
     merger)  of  a  business  or  of  assets  otherwise  permitted  under  this
     Agreement, or (ii) stock option or other compensatory plans.

Section 8.7  Limitation on Stock  Repurchases.  Except as otherwise set forth in
the Convertible  Debentures,  the Company shall not, without the written consent
of the Majority  Holders,  redeem,  repurchase or otherwise acquire (whether for
cash or in exchange for property or other securities or otherwise) any shares of
capital stock of the Company or any  warrants,  rights or options to purchase or
acquire any such shares.

                         ARTICLE IX. RESTRICTIVE LEGENDS

Section 9.1  Restrictions on Transfer.  From and after their respective dates of
issuance,  none  of  the  Securities  shall  be  transferable  except  upon  the
conditions specified in this Article IX, which conditions are intended to ensure
compliance  with the provisions of the Securities Act in respect of the Transfer
of any of such Securities or any interest  therein.  Each Purchaser will use its
best efforts to cause any proposed  transferee of any  Securities  held by it to
agree to take and hold such  Securities  subject to the  provisions and upon the
conditions specified in this Article IX.

Section 9.2 Notice of Proposed Transfers.  Prior to any proposed Transfer of the
Securities  (other than a Transfer (i)  registered  or exempt from  registration
under the  Securities  Act,  (ii) to an  affiliate  of a  Purchaser  which is an
"accredited  investor"  within the meaning of Rule 501(a)  under the  Securities
Act,  provided that any such transferee  shall agree to be bound by the terms of
this Agreement and the  Registration  Rights  Agreement,  or (iii) to be made in
reliance on Rule 144 under the  Securities  Act),  the holder thereof shall give
written  notice  to the  Company  of such  holder's  intention  to  effect  such
Transfer,  setting forth the manner and circumstances of the proposed  Transfer,
which shall be accompanied by (A) an opinion of counsel reasonably acceptable to
the Company,  confirming that such transfer does not give rise to a violation of
the Securities Act, (B) representation  letters in form and substance reasonably
satisfactory  to the Company to ensure  compliance  with the  provisions  of the
Securities Act and (C) letters in form and substance reasonably  satisfactory to
the Company from each such transferee stating such transferee's  agreement to be
bound by the terms of this Agreement and the Registration Rights Agreement. Such
proposed  Transfer may be effected  only if the Company shall have received such
notice of transfer, opinion of counsel, representation letters and other letters
referred to in

                                       31
<PAGE>

the  immediately  preceding  sentence,  whereupon the holder of such  Securities
shall be entitled to Transfer such  Securities  in accordance  with the terms of
the notice delivered by the holder to the Company.

               ARTICLE X. ADDITIONAL AGREEMENTS AMONG THE PARTIES

Section 10.1 Liquidated Damages.

          (a) The  Company  shall,  and shall use its best  efforts to cause its
     transfer agent to, issue and deliver shares of Common Stock consistent with
     Section 7.11 hereof within three (3) New York Stock  Exchange  Trading Days
     of delivery of a Notice of Conversion (the "Deadline") to Purchaser (or any
     party  receiving  Securities by transfer from  Purchaser) at the address of
     Purchaser  set forth in the Notice of  Conversion,  as the case may be. The
     Company understands that a delay in the issuance of such certificates after
     the Deadline could result in economic loss to Purchaser.

          (b)  Without in any way  limiting  Purchaser's  right to pursue  other
     remedies,  including  actual damages and/or equitable  relief,  the Company
     agrees  that if  delivery  of the  Conversion  Shares  is more than one (1)
     Business  Day  after  the  Deadline  (other  than  a  failure  due  to  the
     circumstances described in Section 4.3 of the Convertible Debentures, which
     failure  shall be  governed  by such  Section)  the  Company  shall  pay to
     Purchaser,  as  liquidated  damages  and not as a  penalty,  $500  for each
     $100,000  principal  amount of Convertible  Debentures then outstanding per
     day in cash, for each of the first ten days following the Deadline that the
     Company  fails to deliver such Common  Stock,  and $1,000 for each $100,000
     principal  amount of Convertible  Debentures  then  outstanding  per day in
     cash,  for each day  thereafter  the Company  fails to deliver  such Common
     Stock. Such cash amount shall be paid to Purchaser upon demand.

Section 10.2  Conversion  Notice.  The Company  agrees that,  in addition to any
other remedies which may be available to Purchaser,  including,  but not limited
to, the remedies  available  under  Section 10.1, in the event the Company fails
for any reason (other than as a result of actions taken by a Purchaser in breach
of this  Agreement) to effect  delivery to a Purchaser of  certificates  with or
without  restrictive  legends as  contemplated  by Article IX  representing  the
shares of  Common  Stock on or prior to the  Deadline  after  conversion  of any
Convertible Debentures,  Purchaser will be entitled, if prior to the delivery of
such certificates, to revoke the Notice of Conversion, by delivering a notice to
such effect to the Company  whereupon  the Company and  Purchaser  shall each be
restored to their  respective  positions  immediately  prior to delivery of such
Notice of Conversion.

Section 10.3 Conversion Limit.  Notwithstanding  the conversion rights under the
Convertible  Debentures,  unless Purchaser  delivers a waiver in accordance with
the immediately  following sentence,  in no event shall Purchaser be entitled to
convert any portion of the Convertible Debentures,  in excess of that portion of
the Convertible Debentures, as applicable, of which the sum of (i) the number of
shares of Common Stock beneficially owned by Purchaser

                                       32
<PAGE>

and its  Affiliates  (other  than  shares  of Common  Stock  which may be deemed
beneficially  owned  through the  ownership  of the  unconverted  portion of the
Convertible  Debenture  or  other  Derivative  Securities  convertible  into  or
exchangeable  for shares of Common Stock which  contain a limitation  similar to
that set forth in this  Section  10.3),  and (ii) the number of shares of Common
Stock issuable upon the conversion of the portion of the  Convertible  Debenture
with  respect  to which  this  determination  is being  made,  would  result  in
beneficial  ownership by Purchaser and its  Affiliates of more than 4.99% of the
outstanding  shares of Common Stock. For purposes of Section 10.3(i)  beneficial
ownership  shall be determined in accordance with Rule 13d-3 of the Exchange Act
and Regulations 13 D-G thereunder,  except as otherwise provided in this Section
10.3. The foregoing  limitation shall not apply and shall be of no further force
or effect (i) immediately  preceding and upon the occurrence of any voluntary or
mandatory  redemption  or  repayment  transaction  described  herein  or in  the
Convertible  Debentures,  (ii)  immediately  preceding  and upon any Sale Event,
(iii) on the Maturity  Date or (iv)  following  the  occurrence  of any Event of
Default which is not cured for a period of ten (10) calendar days.

Section 10.4 Registration Rights.

          (a) The Company shall grant Purchaser registration rights covering the
     Conversion Shares (the "Registrable  Securities") on the terms set forth in
     the Registration Rights Agreement and herein.

          The Company shall prepare and file within seven (7) days following the
     Company's Annual Meeting of Shareholders' for 2001, which meeting shall not
     take place later than July 15, 2001 (the  "Filing  Date"),  a  registration
     statement  (the  "Registration   Statement")  to  register  not  less  than
     30,000,000  of  Common  Stock  to  cover  the  resale  of  the  Registrable
     Securities.  In the  event  the  Company  fails  to file  the  Registration
     statement by the Filing Date, the Company shall pay Purchaser as liquidated
     damages,  and not as a penalty,  an amount of cash equal to one  percent of
     the aggregate  principal amount of Convertible  Debentures then outstanding
     per day until the Registration Statement is filed with the Commission.  The
     Company shall use its best efforts to cause the  Registration  Statement to
     be  declared  effective  by the  Commission  or the  earlier of (i) 60 days
     following  the Filing Date or (ii) ten days  following the receipt of a "no
     review" or similar letter from the Commission (the "Required  Effectiveness
     Date").  The Company  shall pay all  expenses of  registration  (other than
     underwriting  fees  and  discounts,  if  any,  in  respect  of  Registrable
     Securities   offered  and  sold  under  such   registration   statement  by
     Purchaser).

          (b) If the  Registration  Statement is not  declared  effective by the
     Commission  by the Required  Effectiveness  Date,  the Company shall pay to
     Purchaser,  as liquidated damages and not as a penalty,  an amount equal to
     2% of the  outstanding  principal  amount  of the  Convertible  Debentures,
     prorated, for each 30 day period the Registration Statement is not declared
     effective  by the  Commission,  which amount will be increased to 3% of the
     outstanding  principal  amount of the  Convertible  Debentures in the event
     that the Registration Statement is not declared effective by the Commission
     within 90 days of the Filing Date. In the event the Company fails to obtain
     an effective  registration

                                       33
<PAGE>

     statement  by the 120th day  following  the Filing  Date,  the Company will
     redeem  the  Convertible  Debentures  as  set  forth  in  Section  5 of the
     Convertible Debentures.  Additionally,  the Company will grant to Purchaser
     certain piggyback  registration rights in the event the Company proposes to
     effect a  registered  offering of Common Stock or warrants or both prior to
     the filing of the Registration Statement referenced above.

          (c) Any such  liquidated  damages shall be paid in cash by the Company
     to Purchaser by wire transfer in  immediately  available  funds on the last
     day of each calendar week following the event requiring its payment.

          (d) If, following the declaration of effectiveness of the Registration
     Statement,  such registration  statement (or any prospectus or supplemental
     prospectus  contained  therein)  shall cease to be effective for any reason
     (including  but not limited to the  occurrence of any event that results in
     any prospectus or supplemental prospectus containing an untrue statement of
     a material fact or omitting a material  fact required to be stated  therein
     or  necessary  in  order to make the  statements  therein,  in light of the
     circumstances  under which they were made, not  misleading)  for the period
     required  in  the   Registration   Rights   Agreement  (the   "Registration
     Maintenance Period"),  the Company fails to file required amendments to the
     Registration  Statement  in order to allow the  Purchaser  to exercise  its
     rights to receive  unrestricted,  unlegended,  freely  tradeable  shares of
     Common Stock,  or if for any reason there are  insufficient  shares of such
     shares of Common  Stock  registered  under  the then  current  Registration
     Statement  to effect  full  conversion  of the  Convertible  Debentures  (a
     "Registration  Default"),  the Company shall immediately take all necessary
     steps to cause the Registration  Statement to be amended or supplemented so
     as to cure  such  Registration  Default.  Failure  to  cure a  Registration
     Default within ten (10) business days shall result in the Company paying to
     Purchaser liquidated damages at the rate of $1,000 per day from the date of
     such Registration Default until the Registration Default is cured.

Section 10.5  Restriction  on Issuance of  Securities.  Beginning on the Closing
Date and  continuing  for a period of 180 days  following the Effective  Date or
until the Convertible Debentures have been fully converted into shares of Common
Stock, whichever is later to occur, the Company will not sell, or offer to sell,
any  securities   (including   credit  facilities  which  are  convertible  into
securities  which may be issued at a discount to the then current  Market Price)
other  than   borrowings  that  provide  for  the  payment  of  the  Convertible
Debentures,  or the Company's 5%  Convertible  Secured  Debenture  issued to the
Halifax Fund, L.P.,  borrowings under conventional credit facilities existing as
of the date  hereof,  stock issued or credit  facilities  to be  established  in
connection  with  acquisitions,  employee  and  director  stock  options  of the
Company, existing rights and warrants of the Company and securities issued under
the  Convertible  Debentures.  In  addition,  the  Company  shall  not issue any
securities in connection with a strategic  alliance  entered into by the Company
unless such  securities  are the subject of a one year  statutory or contractual
hold period or, if not subject to such a hold period,  unless the  Purchaser has
fully  converted all outstanding  Convertible  Debentures.  Notwithstanding  the
foregoing,  the  Company  may enter  into the  following  types of  transactions
(collectively referred to as "Permitted Financings"):  (1) "permanent financing"
transactions,  which would include any

                                       34
<PAGE>

form of debt or equity financing (other than an underwritten offering), which is
followed by a reduction of the said financing  commitment to zero and payment of
all related fees and  expenses;  (2) "project  financing"  which provide for the
issuance of recourse debt  instruments  in connection  with the operation of the
Company's business as presently conducted or as proposed to be conducted; (3) an
underwritten  offering of Common Stock, provided that such offering provides for
the  registration of the Common Stock to be received by Purchaser as a result of
the conversion of the Convertible Debentures held by the Purchaser to the extent
there is not an effective  Registration Statement for the sale of the Conversion
Shares  in  place  at the  time  of  such  offering;  and  (4)  other  financing
transactions specifically consented to in writing by the Purchaser.

                      ARTICLE XI. ADJUSTMENT OF FIXED PRICE

Section 11.1  Reorganization. The Conversion Price the ("Fixed Price") shall be
adjusted, as applicable, as hereafter provided.

Section 11.2 Share Reorganization. If and whenever the Company shall:

          (i)  subdivide the  outstanding  shares of Common Stock into a greater
     number of shares;

          (ii) consolidate the outstanding shares of Common Stock into a smaller
     number of shares;

          (iii)  issue  Common   Stock  or   securities   convertible   into  or
     exchangeable  for  shares of  Common  Stock as a stock  dividend  to all or
     substantially all the holders of Common Stock; or

          (iv) make a  distribution  on the  outstanding  Common Stock to all or
     substantially  all the holders of Common  Stock  payable in Common Stock or
     securities convertible into or exchangeable for Common Stock;

any of such events being herein  called a "Share  Reorganization,"  then in each
such case the Fixed Price shall be  adjusted,  effective  immediately  after the
record date at which the holders of Common Stock are determined for the purposes
of the Share  Reorganization  or, if no record date is fixed, the effective date
of the Share  Reorganization,  by multiplying  the Fixed Price in effect on such
record or effective date, as the case may be, by a fraction of which:

          (i) the  numerator  shall be the  number of  shares  of  Common  Stock
     outstanding on such record or effective date (without  giving effect to the
     transaction); and

                                       35
<PAGE>

          (II) the  denominator  shall be the  number of shares of Common  Stock
     outstanding after giving effect to such Share Reorganization, including, in
     the case of a distribution of securities  convertible  into or exchangeable
     for shares of Common Stock, the number of shares of Common Stock that would
     have  been  outstanding  if such  securities  had  been  converted  into or
     exchanged for Common Stock on such record or effective date.

Section 11.3 Rights Offering.  If and whenever the Company shall issue to all or
substantially all the holders of Common Stock, rights, options or warrants under
which such holders are entitled,  during a period expiring not more than 45 days
after the record date of such issue,  to subscribe for or purchase  Common Stock
(or Derivative Securities),  at a price per share (or, in the case of securities
convertible  into or exchangeable for Common Stock, at an exchange or conversion
price per share at the date of issue of such securities) of less than 95% of the
Market  Price of the Common  Stock on such  record  date (any such  event  being
herein called a "Rights Offering"), then in each such case the Fixed Price shall
be adjusted,  effective  immediately  after the record date at which  holders of
Common  Stock  are  determined  for the  purposes  of the  Rights  Offering,  by
multiplying  the Fixed  Price in effect on such  record  date by a  fraction  of
which:

     (i) the numerator shall be the sum of:

          (i) the number of shares of Common  Stock  outstanding  on such record
     date; and

          (II) a number obtained by dividing:

          (A) either,

               (x) the product of the total  number of shares of Common Stock so
          offered  for  subscription  or  purchase  and the price at which  such
          shares are so offered, or

               (y) the product of the maximum  number of shares of Common  Stock
          into or for  which  the  convertible  or  exchangeable  securities  so
          offered for subscription or purchase may be converted or exchanged and
          the conversion or exchange price of such  securities,  or, as the case
          may be, by

          (B) the Market Price of the Common Stock on such record date; and

     (ii) the denominator shall be the sum of:

          (i) the number of shares of Common  Stock  outstanding  on such record
     date; and

          (II) the number of shares of Common Stock so offered for  subscription
     or purchase (or, in the case of Derivative  Securities,  the maximum number
     of shares of

                                       36
<PAGE>

     Common Stock for or into which the  securities so offered for  subscription
     or purchase may be converted or exchanged).

To the extent that such rights,  options or warrants are not exercised  prior to
the  expiry  time  thereof,  the  Fixed  Price  shall  be  readjusted  effective
immediately after such expiry time to the Fixed Price which would then have been
in effect upon the number of shares of Common Stock (or  Derivative  Securities)
actually delivered upon the exercise of such rights, options or warrants.

Section 11.4 Special  Distribution.  If and whenever the Company  shall issue or
distribute to all or substantially all the holders of Common Stock:

          (i) shares of the Company of any class, other than Common Stock;

          (ii) rights, options or warrants; or

          (iii)  any other  assets  (excluding  cash  dividends  and  equivalent
     dividends in shares paid in lieu of cash dividends in the ordinary course);

and if such issuance or distribution does not constitute a Share  Reorganization
or  a  Rights   Offering   (any  such  event  being  herein  called  a  "Special
Distribution"),  then in each  such  case the  Fixed  Price  shall be  adjusted,
effective immediately after the record date at which the holders of Common Stock
are determined  for purposes of the Special  Distribution,  by  multiplying  the
Fixed Price in effect on such record date by a fraction of which:

          (i) the numerator shall be the difference between:

          (A) the product of the number of shares of Common Stock outstanding on
     such record date and the Market Price of the Common Stock on such date; and

          (B) the fair market  value,  as  determined  by the  Directors  (whose
     determination  shall be conclusive),  to the holders of Common Stock of the
     shares,  rights,  options,  warrants,  evidences of  indebtedness  or other
     assets  issued  or  distributed  in the  Special  Distribution  (net of any
     consideration paid therefor by the holders of Common Stock), and

          (ii) the  denominator  shall be the product of the number of shares of
     Common  Stock  outstanding  on such record date and the Market Price of the
     Common Stock on such date.

                                       37
<PAGE>

Section 11.5 Capital Reorganization. If and whenever there shall occur:

          (i) a reclassification  or redesignation of the shares of Common Stock
     or any change of the shares of Common Stock into other  shares,  other than
     in a Share Reorganization;

          (ii) a  consolidation,  merger or amalgamation of the Company with, or
     into another body corporate; or

          (iii) the  transfer of all or  substantially  all of the assets of the
     Company to another body corporate;

(any such event being herein  called a "Capital  Reorganization"),  then in each
such case the holder who exercises the right to convert  Convertible  Debentures
after the  effective  date of such Capital  Reorganization  shall be entitled to
receive and shall accept, upon the exercise of such right, in lieu of the number
of shares of Common Stock to which such holder was theretofore entitled upon the
exercise of the conversion  privilege,  the aggregate  number of shares or other
securities or property of the Company or of the body  corporate  resulting  from
such Capital Reorganization that such holder would have been entitled to receive
as a result of such Capital  Reorganization  if, on the effective  date thereof,
such  holders  had been the  holder of the  number of shares of Common  Stock to
which such holder was theretofore entitled upon conversion;  provided,  however,
that no such Capital  Reorganization  shall be  consummated in effect unless all
necessary  steps shall have been taken so that such holders shall  thereafter be
entitled to receive such number of shares or other  securities of the Company or
of the body  corporate  resulting from such Capital  Reorganization,  subject to
adjustment  thereafter in accordance  with provisions the same, as nearly as may
be possible, as those contained above.

Section 11.6 Purchase  Price  Adjustments.  In case at any time and from time to
time the Company shall issue any shares of Common Stock or Derivative Securities
convertible or  exercisable  for shares of Common Stock (the number of shares so
issued,  or issuable upon conversion or exercise of such Derivative  Securities,
as applicable,  being  referred to as  "Additional  Shares of Common Stock") for
consideration  less than the then  Market  Price at the date of issuance of such
shares  of Common  Stock or such  Derivative  Securities,  in each such case the
Conversion  Price  shall,  concurrently  with  such  issuance,  be  adjusted  by
multiplying the Conversion Price  immediately prior to such event by a fraction:
(i) the  numerator  of which  shall be the  number of  shares  of  Common  Stock
outstanding  immediately  prior to the  issuance  of such  Additional  Shares of
Common  Stock  plus the  number of shares of  Common  Stock  that the  aggregate
consideration  received by the Company for the total  number of such  Additional
Shares of Common Stock so issued would purchase at the Market Price and (ii) the
denominator  of which shall be the number of shares of Common Stock  outstanding
immediately  prior to the issuance of Additional Shares of Common Stock plus the
number of such Additional Shares of Common Stock so issued or sold.

                                       38
<PAGE>

Section 11.7  Adjustment  Rules.  The following  rules and  procedures  shall be
applicable to adjustments made in this Article XI:

          (a) no  adjustment  in the Fixed Price  shall be required  unless such
     adjustment  would result in a change of at least 1% in the Fixed Price then
     in effect,  provided,  however,  that any  adjustments  which,  but for the
     provisions  of this clause would  otherwise  have been required to be made,
     shall  be  carried  forward  and  taken  into  account  in  any  subsequent
     adjustment;

          (b) if any event  occurs of the type  contemplated  by the  adjustment
     provisions  of this  Article  XI but  not  expressly  provided  for by such
     provisions,  the Company will give notice of such event as provided herein,
     and the Company's board of directors will make an appropriate adjustment in
     the  Fixed  Price so that  the  rights  of the  holders  of the  applicable
     Security shall not be diminished by such event; and

          (c)  if a  dispute  shall  at  any  time  arise  with  respect  to any
     adjustment  of  the  Fixed  Price,   such  dispute  shall  be  conclusively
     determined  by the  auditors  of the  Company  or,  if they are  unable  or
     unwilling to act, by a firm of independent  chartered  accountants selected
     by the  Directors  and any such  determination  shall be  binding  upon the
     Company and Purchaser.

Section 11.8  Certificate as to Adjustment.  The Company shall from time to time
promptly  after the  occurrence of any event which requires an adjustment in the
Fixed Price  deliver to  Purchaser a  certificate  specifying  the nature of the
event  requiring  the  adjustment,  the  amount of the  adjustment  necessitated
thereby,  the Fixed Price after  giving  effect to such  adjustment  and setting
forth, in reasonable  detail, the method of calculation and the facts upon which
such calculation is based.

Section 11.9 Notice to Holders. If the Company shall fix a record date for:

          (a)  any  Share   Reorganization   (other  than  the   subdivision  of
     outstanding   Common  Stock  into  a  greater   number  of  shares  or  the
     consolidation of outstanding Common Stock into a smaller number of shares),

          (b) any Rights Offering,

          (c) any Special Distribution,

          (d) any  Capital  Reorganization  (other  than a  reclassification  or
     redesignation of the Common Stock into other shares),

                                       39
<PAGE>

          (e) Sale Event; or

          (f) any cash dividend,

the  Company  shall,  not less than 10 days prior to such  record date or, if no
record  date is  fixed,  prior  to the  effective  date of such  event,  give to
Purchaser  notice of the  particulars  of the proposed  event or the extent that
such particulars have been determined at the time of giving the notice.

                         ARTICLE XII. EVENTS OF DEFAULT

Section 12.1 Events of Default.  If one or more of the following events (each an
"Event of Default") shall have occurred and be continuing:

          (a) failure by the  Company to pay or repay when due,  all or any part
     of the principal on any of the Convertible Debentures (whether by virtue of
     the agreements specified in this Agreement or the Convertible Debentures);

          (b) failure by the Company to pay (i) within five (5) Business Days of
     the due date thereof any  interest on any  Convertible  Debentures  or (ii)
     within  five (5)  Business  Days  following  the  delivery of notice to the
     Company of any fees or any other amount payable (not otherwise  referred to
     in (a) above or this clause (b)) by the Company under this Agreement or any
     other Transaction Agreement;

          (c) failure by the Company to timely comply with the  requirements  of
     Section  7.11 or 10.1  hereof,  which  failure is not cured within five (5)
     Business Days of such failure;

          (d)  failure on the part of the  Company  to  observe  or perform  any
     covenant contained in Section 7.10 or Article VIII of this Agreement, which
     failure is not cured within five business days of such failure;

          (e)  failure on the part of the  Company  to  observe  or perform  any
     covenant or agreement  contained in any Transaction  Agreement  (other than
     those  covered by clauses (a),  (b), (c) or (d) above) for 30 days from the
     date of such occurrence;

          (f) the trading in the Common  Stock shall have been  suspended by the
     Commission,  any National  Market or the OTC Bulletin Board (except for any
     suspension of trading of limited duration solely to permit dissemination of
     material information regarding the Company and except if, at the time there
     is any  suspension on any National

                                       40
<PAGE>

     Market or the OTC  Bulletin  Board,  the  Common  Stock is then  listed and
     approved  for trading on another  National  Market  within ten (10) Trading
     Days thereof);

          (g) failure of the Company to file the Listing  Applications  required
     to be filed within twenty (20)  Business  Days of the Closing  Date,  which
     failure is not cured within five (5) Business Days of such failure;

          (h) the Company  shall have its Common Stock  delisted from a National
     Market or the OTC Bulletin Board for at least ten (10) consecutive  Trading
     Days and is  unable to obtain a  listing  on a  National  Market or the OTC
     Bulletin Board within such ten (10) Trading Days;

          (i) the Registration  Statement shall not have been declared effective
     by the Commission by the Required Effectiveness Date, or such effectiveness
     shall not be maintained for the Registration  Maintenance  Period,  in each
     case which results in the Company incurring the Default Fee for a period in
     excess of 10 days;

          (j) the Company or any  Subsidiary  has commenced a voluntary  case or
     other proceeding seeking liquidation,  winding-up,  reorganization or other
     relief  with  respect  to  itself  or  its  debts  under  any   bankruptcy,
     insolvency,  moratorium  or other similar law now or hereafter in effect or
     seeking the appointment of a trustee,  receiver,  liquidator,  custodian or
     other similar  official of it or any substantial  part of its property,  or
     has  consented  to any  such  relief  or to the  appointment  of or  taking
     possession by any such official in an involuntary  case or other proceeding
     commenced  against it, or has made a general  assignment for the benefit of
     creditors,  or has failed generally to pay its debts as they become due, or
     has taken any corporate action to authorize any of the foregoing;

          (k) an involuntary case or other proceeding has been commenced against
     the   Company   or  any   Subsidiary   seeking   liquidation,   winding-up,
     reorganization  or other  relief with  respect to it or its debts under any
     bankruptcy, insolvency, moratorium or other similar law now or hereafter in
     effect or  seeking  the  appointment  of a trustee,  receiver,  liquidator,
     custodian or other similar  official of it or any  substantial  part of its
     property,  and such  involuntary  case or  other  proceeding  shall  remain
     undismissed  and unstayed  for a period of 60 days,  or an order for relief
     has been entered  against the Company or any  Subsidiary  under the federal
     bankruptcy laws as now or hereafter in effect;

          (l) default in any  provision  (including  payment)  or any  agreement
     governing the terms of any Debt of the Company or any  Subsidiary in excess
     of $500,000, which has not been cured within any applicable period of grace
     associated therewith;

                                       41
<PAGE>

          (m)  judgments  or  orders  for the  payment  of  money  which  in the
     aggregate  at any  one  time  exceed  $1,000,000  and are  not  covered  by
     insurance  have been  rendered  against the Company or any  Subsidiary by a
     court of competent jurisdiction and such judgments or orders shall continue
     unsatisfied and unstayed for a period of 60 days; or

          (n) any representation,  warranty,  certification or statement made by
     the  Company in any  Transaction  Agreement  or which is  contained  in any
     certificate, document or financial or other statement furnished at any time
     under or in connection with any  Transaction  Agreement shall prove to have
     been untrue in any material respect when made.

then, and in every such  occurrence,  Purchaser may, with respect to an Event of
Default  specified in paragraphs (a) or (b), and the Majority  Holders may, with
respect to any other Event of  Default,  by notice to the  Company,  declare the
Convertible  Debentures  to be, and the  Convertible  Debentures  shall  thereon
become  immediately  due and  payable;  provided  that in the case of any of the
Events of Default  specified in  paragraph  (j) or (k) above with respect to the
Company or any Subsidiary,  then, without any notice to the Company or any other
act by Purchaser,  the entire amount of the Convertible  Debentures shall become
immediately  due and  payable,  provided,  further,  if any Event of Default has
occurred  and  is  continuing,  and  irrespective  of  whether  any  Convertible
Debenture has been declared immediately due and payable hereunder, any Purchaser
of  Convertible  Debentures  may  proceed to protect  and  enforce the rights of
Purchaser by an action at law, suit in equity or other  appropriate  proceeding,
whether for the specific performance of any agreement contained herein or in any
Convertible  Debenture,  or for an injunction  against a violation of any of the
terms hereof or thereof,  or in aid of the exercise of any power granted  hereby
or thereby or by law or  otherwise,  and  provided  further,  in the case of any
Event of  Default,  the  amount  declared  due and  payable  on the  Convertible
Debentures shall be the Formula Price thereof.

Section 12.2 Powers and Remedies Cumulative. No right or remedy herein conferred
upon or reserved to  Purchaser is intended to be exclusive of any other right or
remedy,  and every right and remedy  shall,  to the extent  permitted by law, be
cumulative  and in addition to every other right and remedy  given  hereunder or
now  hereafter  existing  at law or in equity or  otherwise.  The  assertion  or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent  assertion or  employment of any other  appropriate  right or remedy.
Every  power and remedy  given by the  Convertible  Debentures  or by law may be
exercised  from  time to time,  and as often as shall be  deemed  expedient,  by
Purchaser.

                                       42
<PAGE>

                           ARTICLE XIII. MISCELLANEOUS

Section 13.1 Notices. All notices, demands and other communications to any party
hereunder  shall be in writing  (including  telecopier  or similar  writing) and
shall be given to such party at its  address  set forth on the  signature  pages
hereof,  or such  other  address  as such party may  hereafter  specify  for the
purpose to the other parties.  Each such notice,  demand or other  communication
shall be effective (i) if given by telecopy,  when such telecopy is  transmitted
to the telecopy number specified on the signature page hereof,  (ii) if given by
mail,  four days after such  communication  is  deposited in the mail with first
class  postage  prepaid,  addressed  as aforesaid or (iii) if given by any other
means, when delivered at the address specified in or pursuant to this Section.

Section 13.2 No Waivers; Amendments.

          (a) No  failure  or delay on the part of any party in  exercising  any
     right,  power or remedy  hereunder shall operate as a waiver  thereof,  nor
     shall any single or partial  exercise  of any such  right,  power or remedy
     preclude any other or further exercise thereof or the exercise of any other
     right, power or remedy.

          (b) Any provision of this  Agreement may be amended,  supplemented  or
     waived if, but only if, such amendment,  supplement or waiver is in writing
     and is signed by the  Company  and the  Majority  Holders;  provided,  that
     without the consent of each holder of any  Convertible  Debenture  affected
     thereby,  an amendment or waiver may not (a) reduce the aggregate principal
     amount of Convertible Debentures whose holders must consent to an amendment
     or waiver,  (b) reduce the rate or extend the time for  payment of interest
     on any Convertible Debenture,  (c) reduce the principal amount of or extend
     the  stated  maturity  of  any  Convertible   Debenture  or  (d)  make  any
     Convertible  Debenture payable in money or property other than as stated in
     such  Convertible  Debenture.  In  determining  whether  the holders of the
     requisite principal amount of Convertible  Debentures have concurred in any
     direction,  consent,  or waiver as provided in any  Transaction  Agreement,
     Convertible  Debentures which are owned by the Company or any other obligor
     on  or  guarantor  of  the  convertible   Debentures,   or  by  any  Person
     Controlling,  Controlled  by,  or  under  common  Control  with  any of the
     foregoing,  shall be disregarded  and deemed not to be outstanding  for the
     purpose  of any  such  determination;  and  provided  further  that no such
     amendment,  supplement  or waiver which affects the rights of Purchaser and
     their  affiliates  otherwise than solely in their  capacities as holders of
     Convertible  Debentures  shall be  effective  with  respect to them without
     their prior written consent.

                                       43
<PAGE>

Section 13.3 Indemnification.

          (a) The Company agrees to indemnify and hold harmless  Purchaser,  its
     Affiliates,  and each Person, if any, who controls Purchaser, or any of its
     Affiliates,  within the meaning of the  Securities  Act or the Exchange Act
     (each,  a  "Controlling  Person"),  and the  respective  partners,  agents,
     employees,  officers and Directors of Purchaser,  their  Affiliates and any
     such Controlling Person (each an "Indemnified Party") and collectively, the
     "Indemnified  Parties"),  from  and  against  any and all  losses,  claims,
     damages,  liabilities and expenses  (including,  without  limitation and as
     incurred,  reasonable  costs of  investigating,  preparing or defending any
     such claim or  action,  whether  or not such  Indemnified  Party is a party
     thereto,  provided  that the Company shall not be obligated to advance such
     costs to any Indemnified  Party other than Purchaser unless it has received
     from such  Indemnified  Party an  undertaking  to repay to the  Company the
     costs so advanced if it should be determined  by final  judgment of a court
     of competent  jurisdiction  that such Indemnified Party was not entitled to
     indemnification hereunder with respect to such costs) which may be incurred
     by  such   Indemnified   Party  in  connection   with  any   investigative,
     administrative or judicial proceeding brought or threatened that relates to
     or arises out of, or is in connection  with any activities  contemplated by
     any  Transaction  Agreement or any other  services  rendered in  connection
     herewith; provided that the Company will not be responsible for any claims,
     liabilities,  losses,  damages or  expenses  that are  determined  by final
     judgment  of  a  court  of  competent  jurisdiction  to  result  from  such
     Indemnified Party's gross negligence, willful misconduct or bad faith.

          (b) If any action shall be brought  against an Indemnified  Party with
     respect to which  indemnity  may be sought  against the Company  under this
     Agreement,  such  Indemnified  Party shall  promptly  notify the Company in
     writing and the Company,  at its option,  may, assume the defense  thereof,
     including  the  employment  of  counsel  reasonably  satisfactory  to  such
     Indemnified  Party and payment of all  reasonable  fees and  expenses.  The
     failure to so notify the  Company  shall not  affect  any  obligations  the
     Company  may  have  to such  Indemnified  Party  under  this  Agreement  or
     otherwise  unless the  Company is  materially  adversely  affected  by such
     failure.  Such  Indemnified  Party shall have the right to employ  separate
     counsel in such action and participate in the defense thereof, but the fees
     and  expenses of such counsel  shall be at the expense of such  Indemnified
     Party,  unless (i) the  Company has failed to assume the defense and employ
     counsel  or (ii) the  named  parties  to any  such  action  (including  any
     impleaded parties) include such Indemnified Party and the Company, and such
     Indemnified  Party shall have been advised by counsel that there may be one
     or  more  legal  defenses  available  to it  which  are  different  from or
     additional  to those  available  to the  Company,  in which  case,  if such
     Indemnified  Party notifies the Company in writing that it elects to employ
     separate counsel at the expense of the Company,  the Company shall not have
     the right to assume the defense of such action or  proceeding  on behalf of
     such Indemnified Party,

                                       44
<PAGE>

     provided,  however,  that the Company shall not, in connection with any one
     such action or proceeding or separate but substantially  similar or related
     actions or  proceedings  in the same  jurisdiction  arising out of the same
     general  allegations or  circumstances,  be  responsible  hereunder for the
     reasonable  fees  and  expenses  of more  than one  such  firm of  separate
     counsel,  in  addition  to  any  local  counsel,  which  counsel  shall  be
     designated by Purchaser. The Company shall not be liable for any settlement
     of any such action  effected  without  the  written  consent of the Company
     (which  shall  not be  unreasonably  withheld)  and the  Company  agrees to
     indemnify  and hold harmless  each  Indemnified  Party from and against any
     loss or liability by reason of settlement  of any action  effected with the
     consent of the  Company.  In addition,  the Company  will not,  without the
     prior written consent of Purchaser,  settle or compromise or consent to the
     entry of any  judgment in or  otherwise  seek to  terminate  any pending or
     threatened   action,   claim,  suit  or  proceeding  in  respect  to  which
     indemnification or contribution may be sought hereunder (whether or not any
     Indemnified  Party is a party thereto) unless such settlement,  compromise,
     consent  or  termination  includes  an  express  unconditional  release  of
     Purchaser  and the  other  Indemnified  Parties,  satisfactory  in form and
     substance  to  Purchaser,  from all  liability  arising out of such action,
     claim, suit or proceeding.

          (c)  If  for  any  reason  the  foregoing   indemnity  is  unavailable
     (otherwise  than  pursuant to the express  terms of such  indemnity)  to an
     Indemnified  Party or insufficient  to hold an Indemnified  Party harmless,
     then in lieu of  indemnifying  such  Indemnified  Party,  the Company shall
     contribute  to the amount  paid or payable by such  Indemnified  Party as a
     result of such claims,  liabilities,  losses,  damages,  or expenses (i) in
     such proportion as is appropriate to reflect the relative benefits received
     by the  Company  on the one hand and by  Purchaser  on the  other  from the
     transactions  contemplated  by this  Agreement  or  (ii) if the  allocation
     provided  by clause (i) is not  permitted  under  applicable  law,  in such
     proportion  as is  appropriate  to reflect not only the  relative  benefits
     received by the  Company on the one hand and  Purchaser  on the other,  but
     also the relative  fault of the Company and  Purchaser as well as any other
     relevant equitable  considerations.  Notwithstanding the provisions of this
     Section 13.3, the aggregate  contribution of all Indemnified  Parties shall
     not exceed the amount of interest and fees  actually  received by Purchaser
     pursuant to this  Agreement.  It is hereby further agreed that the relative
     benefits  to the  Company on the one hand and  Purchaser  on the other with
     respect to the  transactions  contemplated  hereby shall be  determined  by
     reference  to,  among other  things,  whether any untrue or alleged  untrue
     statement of material  fact or the omission or alleged  omission to state a
     material  fact  related  to  information  supplied  by  the  Company  or by
     Purchaser  and  the  parties'   relative  intent,   knowledge,   access  to
     information  and  opportunity  to  correct  or prevent  such  statement  or
     omission.  No Person  guilty of  fraudulent  misrepresentation  (within the
     meaning of  Section  11(f) of the  Securities  Act)  shall be  entitled  to
     contribution  from  any  Person  who was  not  guilty  of  such  fraudulent
     misrepresentation.

                                       45
<PAGE>

          (d)  The  indemnification,   contribution  and  expense  reimbursement
     obligations  set forth in this Section 13.3 (i) shall be in addition to any
     liability  the Company may have to any  Indemnified  Party at common law or
     otherwise;  (ii) shall survive the  termination  of this  Agreement and the
     other  Transaction  Agreements  and the payment in full of the  Convertible
     Debentures  and (iii) shall remain  operative  and in full force and effect
     regardless  of any  investigation  made by or on behalf of Purchaser or any
     other Indemnified Party.

Section 13.4 Reserved.

Section 13.5 Payment.  The Company  agrees that, so long as Purchaser  shall own
any  Convertible  Debentures  purchased  by it from the Company  hereunder,  the
Company  will make  payments  to  Purchaser  of all  amounts due thereon by wire
transfer by 4:00 P.M. (E.S.T.).

Section 13.6  Successors and Assigns.  This Agreement  shall be binding upon the
Company and upon Purchaser and its respective  successors and assigns;  provided
that  the  Company  shall  not  assign  or  otherwise  transfer  its  rights  or
obligations  under this  Agreement to any other Person without the prior written
consent of the Majority  Holders.  All provisions  hereunder  purporting to give
rights to Purchaser and its  affiliates or to holders of Securities  are for the
express benefit of such Persons and their successors and assigns.

Section 13.7 Reserved.

Section 13.8 New York Law;  Submission to  Jurisdiction;  Waiver of Jury Trial;
Appointment of Agent.  THIS AGREEMENT  SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.  EACH PARTY HERETO HEREBY SUBMITS
TO THE  EXCLUSIVE  JURISDICTION  OF THE  UNITED  STATES  DISTRICT  COURT FOR THE
SOUTHERN  DISTRICT OF NEW YORK AND OF ANY FEDERAL  DISTRICT COURT SITTING IN NEW
YORK FOR  PURPOSES OF ALL LEGAL  PROCEEDINGS  ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY
WAIVES,  TO THE FULLEST EXTENT  PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH  PROCEEDING  BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING  BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY TO THIS AGREEMENT  IRREVOCABLY
CONSENTS  TO THE  SERVICE OF PROCESS IN ANY SUCH  PROCEEDING  BY THE  MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,  POSTAGE PREPAID,  TO SUCH PARTY
AT ITS ADDRESS SET FORTH  HEREIN.  NOTHING  HEREIN SHALL AFFECT THE RIGHT OF ANY
PARTY TO SERVE  PROCESS IN ANY OTHER MANNER  PERMITTED BY LAW. EACH PARTY WAIVES
ITS RIGHT TO A TRIAL BY JURY.

                                       46
<PAGE>

Section 13.9 Entire Agreement. This Agreement, the Exhibits or Schedules hereto,
which  include,  but  are  not  limited  to  the  Convertible   Debenture,   the
Registration Rights Agreement,  Mortgage, and the Security Agreement,  set forth
the entire  agreement and  understanding  of the parties relating to the subject
matter  hereof  and  supercedes  all  prior  and   contemporaneous   agreements,
negotiations  and  understandings  between  the  parties,  both oral and written
relating to the subject matter hereof.  The terms and conditions of all Exhibits
and Schedules to this  Agreement are  incorporated  herein by this reference and
shall constitute part of this Agreement as is fully set forth herein.

Section 13.10 Survival; Severability. The representations, warranties, covenants
and agreements of the parties hereto shall survive the Closing hereunder. In the
event that any provision of this Agreement  becomes or is declared by a court of
competent  jurisdiction  to be illegal,  unenforceable  or void,  this Agreement
shall  continue in full force and effect without said  provision;  provided that
such  severability  shall be ineffective  if it materially  changes the economic
benefit of this Agreement to any party.

Section  13.11  Title and  Subtitles.  The  titles  and  subtitles  used in this
Agreement  are  used  for  convenience  only  and  are not to be  considered  in
construing or interpreting this Agreement.

Section 13.12 Reporting Entity for the Common Stock. The reporting entity relied
upon for the  determination of the trading price or trading volume of the Common
Stock on any  given  Trading  Day for the  purposes  of this  Agreement  and all
Exhibits shall be Bloomberg,  L.P. or any successor thereto.  The written mutual
consent of the  Purchaser  and the Company shall be required to employ any other
reporting entity.

Section 13.13  Publicity.  The Company and the Purchaser shall consult with each
other in issuing any press releases or otherwise  making public  statements with
respect to the  transactions  contemplated  hereby and no party  shall issue any
such press release or otherwise make any such public statement without the prior
written  consent of the other parties,  which consent shall not be  unreasonably
withheld or  delayed,  except  that no prior  consent  shall be required if such
disclosure  is required by law,  in which such case the  disclosing  party shall
provide  the  other  parties  with  prior  notice  of  such  public   statement.
Notwithstanding the foregoing,  the Company shall not publicly disclose the name
of  Purchaser  without the prior  written  consent of  Purchaser,  except to the
extent  required by law, in which case the Company shall provide  Purchaser with
prior written notice of such public disclosure.

                                       47
<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly  executed by their  respective  authorized  officers,  as of the date first
above written.

                                  AMERICAN INTERNATIONAL PETROLEUM CORPORATION

                                  By: __________________________________________
                                  Name:     Denis J. Fitzpatrick
                                  Title:    Chief Financial Officer
                                  Address:  American International Petroleum
                                            Corporation
                                              2950 North Loop West
                                            Suite 1000
                                            Houston, TX 77092
                                            Fax:  713-682-7278
                                            Tel.: 713-802-0087

                                  GCA STRATEGIC INVESTMENT FUND LIMITED

                                  By: __________________________________________
                                  Name:     Lewis N. Lester
                                  Title:    Director
                                  Address:  c/o Prime Management Limited
                                            Mechanics Building
                                            12 Church Street
                                            Hamilton HM II, Bermuda
                                            Fax:     441-295-3926
                                            Tel.:    441-295-0329

                                       48
<PAGE>

                                  Schedule 1.1
                                  Bridge Notes

1. $1,850,000  Principal  Amount Bridge Note of the Company,  dated February 28,
2000

2.  $2,500,000  Principal  Amount Bridge Note of the Company,  dated December 1,
1999.

3. $3,000,000  Principal Amount Secured Bridge Note dated May 8, 2000, (of which
$1,437,500.00   principal   amount  plus  $148,628   accrued   interest  remains
outstanding.

                                       49
<PAGE>

                                TABLE OF CONTENTS

ARTICLE  I. DEFINITIONS........................................................1
     Section 1.1 Definitions .00...............................................1
     Section 1.2 Accounting Terms and Determinations...........................9

ARTICLE II.  EXCHANGE OF SECURITIES............................................9
     Section 2.1 Exchange of Securities........................................9
     Section 2.2  Closing.....................................................10

ARTICLE III.  PAYMENT TERMS OF CONVERTIBLE DEBENTURES.........................10
     Section 3.1  Payment of Principal and Interest; Payment Mechanics........10
     Section 3.2  Payment of Interest.........................................10
     Section 3.3  Voluntary Prepayment........................................10
     Section 3.4  Mandatory Prepayments.......................................11
     Section 3.5  Prepayment Procedures.......................................12
     Section 3.6  Payment of Additional Amounts...............................13

ARTICLE IV.  REPRESENTATIONS AND WARRANTIES...................................14
     Section 4.1  Organization and Qualification..............................14
     Section 4.2  Authorization and Execution.................................15
     Section 4.3  Capitalization .............................................15
     Section 4.4  Governmental Authorization..................................16
     Section 4.5  Issuance of Shares..........................................16
     Section 4.6  No Conflicts................................................16
     Section 4.7  Financial Information.......................................16
     Section 4.8  Litigation..................................................17
     Section 4.9  Compliance with ERISA and other Benefit Plans...............17
     Section 4.10 Environmental Matters.......................................18
     Section 4.11 Taxes.......................................................18
     Section 4.12 Investments, Joint Ventures.................................18
     Section 4.13 Not an Investment Company...................................18
     Section 4.14 Full Disclosure.............................................18
     Section 4.15 No Solicitation; No Integration with Other Offerings........19
     Section 4.16 Permits.....................................................19
     Section 4.17 Leases......................................................19
     Section 4.18 Absence of Any Undisclosed Liabilities or Capital Calls.....19
     Section 4.19 Public Utility Holding Company..............................19
     Section 4.20 Intellectual Property Rights................................20
     Section 4.21 Insurance...................................................20

                                       i
<PAGE>

     Section 4.22 Title to Properties.........................................20
     Section 4.23 Internal Accounting Controls................................20
     Section 4.24 Reserved....................................................20
     Section 4.25 Foreign Practices...........................................20
     Section 4.26 Title to Certain Assets.....................................20
     Section 4.27 Subsidiaries................................................21

ARTICLE V.  REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................21
     Section 5.1  Purchaser...................................................21

ARTICLE VI.  CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES...................22
     Section 6.1  Conditions Precedent to Purchaser's Obligations to Purchase.22
     Section 6.2  Conditions to the Company's Obligations.....................24

ARTICLE VII.  AFFIRMATIVE COVENANTS...........................................24
     Section 7.1  Information.................................................25
     Section 7.2  Payment of Obligations......................................25
     Section 7.3  Maintenance of Property; Insurance..........................26
     Section 7.4  Maintenance of Existence....................................26
     Section 7.5  Compliance with Laws........................................26
     Section 7.6  Inspection of Property, Books and Records...................26
     Section 7.7  Investment Company Act......................................26
     Section 7.8  Reserved....................................................26
     Section 7.9  Compliance with Terms and Conditions of Material Contracts..27
     Section 7.10 Reserved Shares and Listings................................27
     Section 7.11 Transfer Agent Instructions.................................27
     Section 7.12 Maintenance of Reporting Status; Supplemental Information...28
     Section 7.13 Form D; Blue Sky Laws.......................................28
     Section 7.14 Certain Payments............................................28

ARTICLE VIII.  NEGATIVE COVENANTS.............................................28
     Section 8.1  Limitations on Debt or Other Liabilities....................29
     Section 8.2  Transactions with Affiliates................................29
     Section 8.3  Merger or Consolidation.....................................29
     Section 8.4  Limitation on Asset Sales...................................29
     Section 8.5  Restrictions on Certain Amendments..........................30
     Section 8.6  Prohibition on Discounted Equity Offerings..................30

                                       ii
<PAGE>

     Section 8.7  Limitation on Stock Repurchases.............................31

ARTICLE IX.  RESTRICTIVE LEGENDS..............................................31
     Section 9.1  Restrictions on Transfer....................................31
     Section 9.2  Notice of Proposed Transfers................................31

ARTICLE X.  ADDITIONAL AGREEMENTS AMONG THE PARTIES...........................32
     Section 10.1  Liquidated Damages.........................................32
     Section 10.2  Conversion Notice..........................................32
     Section 10.3  Conversion Limit...........................................32
     Section 10.4  Registration Rights........................................33
     Section 10.5  Restriction on Issuance of Securities......................34

ARTICLE XI.  ADJUSTMENT OF FIXED PRICE........................................35
     Section 11.1  Reorganization.............................................35
     Section 11.2  Share Reorganization.......................................35
     Section 11.3  Rights Offering............................................36
     Section 11.4  Special Distribution.......................................37
     Section 11.5  Capital Reorganization.....................................38
     Section 11.6  Purchase Price Adjustments.................................38
     Section 11.7  Adjustment Rules...........................................39
     Section 11.8  Certificate as to Adjustment...............................39
     Section 11.9  Notice to Holders..........................................39

ARTICLE XII.  EVENTS OF DEFAULT...............................................40
     Section 12.1  Events of Default..........................................40
     Section 12.2  Powers and Remedies Cumulative.............................42

ARTICLE XIII.  MISCELLANEOUS..................................................43
     Section 13.1  Notices....................................................43
     Section 13.2  No Waivers; Amendments.....................................43
     Section 13.3  Indemnification............................................44
     Section 13.4  Reserved...................................................46
     Section 13.5  Payment....................................................46
     Section 13.6  Successors and Assigns.....................................46
     Section 13.7  Reserved...................................................46
     Section 13.8  New York Law; Submission to Jurisdiction;
                     Waiver of Jury Trial; Appointment of Agent...............46
     Section 13.9  Entire Agreement...........................................47
     Section 13.10 Survival; Severability.....................................47
     Section 13.12 Reporting Entity for the Common Stock.  ...................47
     Section 13.13 Publicity..................................................47

                                       iii
<PAGE>
                               LIST OF SCHEDULES

Schedule 1.1
Bridge Notes
Schedule 4.3
Capitalization
Schedule 4.7
Financial Information
Schedule 4.8
Litigation
Schedule 4.12
Investments, Joint Ventures
Schedule 4.27
Subsidiaries
Schedule 7.8
Use of Proceeds
Schedule 8.2
Transactions with Affiliates

                                       iv
<PAGE>

                                LIST OF EXHIBITS

Exhibit A Form of Convertible Debentures
Exhibit B Form of Registration Rights
Exhibit C Form of Solvency Certificate
Exhibit D Form of Officer's Certificate
Exhibit E Pledge and Security Agreement
Exhibit F Mortgage and Security Agreement

                                        v
<PAGE>

                               EXCHANGE AGREEMENT

                                   dated as of

                                 April 28, 2001

                                 by and between

                  American International Petroleum Corporation
                                 as the Issuer,

                                       and

                      GCA Strategic Investment Fund Limited

<PAGE>

                                                                    Exhibit 4.50

                                    EXHIBIT A

                          FORM OF CONVERTIBLE DEBENTURE

<PAGE>

THE  SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN  REGISTERED  UNDER THE UNITED
STATES  SECURITIES ACT OF 1933, AS AMENDED (THE  "SECURITIES  ACT").  THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES AGREES FOR THE BENEFIT OF THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED,  SOLD OR OTHERWISE  TRANSFERRED  ONLY (A) TO THE
COMPANY,  (B) PURSUANT TO AN EXEMPTION  FROM  REGISTRATION  UNDER THE SECURITIES
ACT, OR (C) IF REGISTERED  UNDER THE  SECURITIES  ACT AND ANY  APPLICABLE  STATE
SECURITIES LAWS. IN ADDITION,  A SECURITIES PURCHASE AGREEMENT,  DATED AS OF THE
DATE HEREOF,  A COPY OF WHICH MAY BE OBTAINED  FROM THE COMPANY AT ITS PRINCIPAL
EXECUTIVE  OFFICE,  CONTAINS  CERTAIN  ADDITIONAL  AGREEMENTS AMONG THE PARTIES,
INCLUDING, WITHOUT LIMITATION,  PROVISIONS WHICH (A) LIMIT THE CONVERSION RIGHTS
OF THE HOLDER,  (B) SPECIFY  VOLUNTARY AND MANDATORY  REPAYMENT,  PREPAYMENT AND
REDEMPTION  RIGHTS AND OBLIGATIONS  AND (C) SPECIFY EVENTS OF DEFAULT  FOLLOWING
WHICH THE REMAINING BALANCE DUE AND OWING HEREUNDER MAY BE ACCELERATED.

No.  1                                                                $5,936,128

                            3% CONVERTIBLE DEBENTURE
                                       of

     American  International   Petroleum   Corporation,   a  Nevada  corporation
(together  with its  successors,  the  "Company"),  for  value  received  hereby
promises to pay to:

                      GCA Strategic Investment Fund Limited

(The  "Holder") and registered  assigns,  the principal sum of Five Million Nine
Hundred Thirty Six Thousand One Hundred Twenty Eight Dollars ($5,936,128) or, if
less, the principal amount of this Debenture then  outstanding,  on the Maturity
Date by wire transfer of immediately  available funds to the Holder in such coin
or currency of the United  States of America as at the time of payment  shall be
legal  tender for the payment of public and private  debts,  and to pay interest
which shall accrue beginning the date hereof,  quarterly in arrears,  on (i) the
last day of March, June,  September and December of each year until the Maturity
Date,  commencing June 30, 2001 (unless such day is not a Business Day, in which
event on the next  succeeding  Business Day) (each an "Interest  Payment Date"),
(ii) the Maturity Date,  (iii) each Conversion Date, as hereafter  defined,  and
(iv)  the date the  principal  amount  of the  Convertible  Debentures  shall be
declared to be or shall  automatically  become due and payable, on the principal
sum  hereof  outstanding  in like coin or  currency,  at the rates per annum set
forth below,  from the most recent  Interest  Payment Date to which interest has
been paid on this Convertible Debenture, or if no interest has been paid on this
Convertible Debenture, from the date of this Convertible Debenture until payment
in full of the  principal  sum hereof has been made.  The Maturity Date is April
28, 2002.

     The  interest  rate shall be three  percent  (3%) per annum (the  "Interest
Rate") or, if less,  the maximum rate  permitted  by  applicable  law.  Past due
amounts  (including  interest,  to the extent permitted by law) will also accrue
interest at the  Interest  Rate plus 2% per annum or, if less,  the maximum rate
permitted by applicable law, and will be payable on demand ("Default Interest").
Interest on this  Convertible  Debenture  will be  calculated  on the basis of a
360-day year of twelve 30 day months.  All  payments of  principal  and interest
hereunder  shall be made for the benefit of the Holder  pursuant to the terms of
the Agreement (hereafter defined). At the option of the Company, interest may be
paid in cash or in shares of Common  Stock.  If the  Company  determines  to pay
interest in shares of Common Stock, it shall be required to notify the Holder of
such election on the Closing Date. On each  Conversion  Date,  interest shall be
paid in shares of Common  Stock on the portion of the  principal  balance of the
Convertible Debenture then being converted. The number of shares of Common Stock
issued as interest shall be determined by dividing the dollar amount of interest
due on the  applicable  Interest  Payment Date by the  Conversion  Price then in
effect.

<PAGE>

     This  Convertible  Debenture  (this  "Convertible  Debenture")  is  a  duly
authorized issuance of Convertible Debentures of the Company referred to in that
certain  Exchange  Agreement dated as of the date hereof between the Company and
the Purchaser named therein (the  "Agreement").  The Agreement  contains certain
additional  agreements  among  the  parties  with  respect  to the terms of this
Convertible Debenture, including, without limitation, provisions which (A) limit
the  conversion  rights of the  Holder,  (B)  specify  voluntary  and  mandatory
repayment,  prepayment and  redemption  rights and  obligations  and (C) specify
Events of Default  following which the remaining balance due and owing hereunder
may be accelerated. All such provisions are an integral part of this Convertible
Debenture and are incorporated herein by reference.  This Convertible  Debenture
is  transferable  and assignable to one or more Persons,  in accordance with the
limitations set forth in the Agreement.

     This  Convertible  Debenture  shall  be  secured  by  Pledge  and  Security
Agreements (the "Security Agreements") made by the Company and Holder creating a
security  interest  in favor of the Holder in certain  of the  Company's  assets
described in the Security Agreements,  and a Mortgage and Security Agreement, as
amended (the  "Mortgage")  made by St.  Marks  Refinery,  Inc.,  a  wholly-owned
subsidiary  of the Company,  creating a security  interest in favor of holder in
certain real property described in the Mortgage.

     The  Company  shall  keep a register  (the  "Register")  in which  shall be
entered the names and  addresses of the  registered  holder of this  Convertible
Debenture and particulars of this Convertible  Debenture held by such holder and
of all  transfers of this  Convertible  Debenture.  References  to the Holder or
"Holders"  shall mean the Person listed in the Register as registered  holder of
such Convertible  Debentures.  The ownership of this Convertible Debenture shall
be proven by the Register.

     ARTICLE 1. Certain  Terms  Defined.  All terms defined in the Agreement and
not  otherwise  defined  herein  shall have for  purposes  hereof  the  meanings
provided for in the Agreement.

     ARTICLE 2.  Covenants.  The  Company  covenants  and agrees to observe  and
perform each of its covenants,  obligations  and  undertakings  contained in the
Agreement,  which  obligations and undertakings are expressly  assumed herein by
the Company and made for the benefit of the holder hereof.

     ARTICLE 3. Payment of  Principal;  Prepayment.  The Company shall repay the
remaining unpaid balance of this Convertible Debenture on the Maturity Date. For
so long as no Event of Default or Default has  occurred,  the Company may prepay
all of the outstanding principal amount and accrued interest of this Convertible
Debenture in accordance  with this Section 3.  Prepayment may occur on or before
the 120th day following the date of this Convertible  Debenture for a prepayment
price  equal  to 115%  of the  original  outstanding  principal  amount  of this
Convertible  Debenture  plus  all  accrued  interest  thereon  (the  "Prepayment
Price"). If Prepayment is made between the 121st day and the 150th day following
the date of this Convertible Debenture, the Prepayment Price is equal to 118% of
the original outstanding principal amount of this Convertible Debenture plus all
accrued  interest  thereon.  If Prepayment is made between the 151st day and the
180th day following the date of this Convertible Debenture, the Prepayment Price
is equal  to 120% of the  original  outstanding  principal  of this  Convertible
Debenture plus all accrued interest thereon.  The Company's right to Prepay this
Convertible  Debenture  shall expire on the 181st day following the date of this
Convertible Debenture.  Notwithstanding the foregoing,  the Company may or shall
be obligated  under  certain  circumstances,  to redeem all or a portion of this
Convertible Debenture on the terms specified in the Agreement in accordance with
Section 5 of this Convertible Debenture.

     ARTICLE 4. Conversion.

     ARTICLE  4.1  Conversion  of  Convertible  Debenture.  Subject to Section 5
hereof,  the Holder shall have the right,  at its option,  at any time following
the date of issuance of this  Convertible  Debenture,  to convert the  principal
amount of this Convertible  Debenture,  or any portion of such principal amount,
into that number of fully paid and nonassessable shares of Common Stock (as such
shares shall then be constituted)  determined  pursuant to this Section 4.1. The
number  of shares of Common  Stock to be  issued  upon each  conversion  of this
Convertible  Debenture shall be determined by dividing the Conversion Amount (as
defined  below) by the Conversion  Price in effect on the date (the  "Conversion
Date") a Notice of Conversion

                                       2
<PAGE>

is delivered to the Company, as applicable,  by the Holder by facsimile or other
reasonable means of communication dispatched prior to 5:00 p.m., E.S.T. The term
"Conversion  Amount" means,  with respect to any conversion of this  Convertible
Debenture,  the sum of (1) the principal amount of this Convertible Debenture to
be converted in such conversion plus (2) accrued and unpaid interest, if any, on
such  principal  amount  at the  interest  rates  provided  in this  Convertible
Debenture  to the  Conversion  Date plus (3)  Default  Interest,  if any, on the
interest  referred to in the  immediately  preceding  clause (2) plus (4) at the
Holder's option,  any amounts owed to the Holder pursuant to Section 4.3 hereof,
Sections 10.1 and 10.4 of the Agreement.

     ARTICLE 4.2 Conversion  Price. At the option of the Holder,  any portion or
all of the outstanding  principal amount of this Convertible  Debenture shall be
converted into a number of shares of Common Stock at the  conversion  price (the
"Conversion  Price") equal to 90% of the average of the three (3) lowest Closing
Bid Prices of the Common Stock as reported by Bloomberg  L.P.  during the twenty
(20)  Trading  Days  immediately  preceding  but not  including  the date of the
related Notice of Conversion.

     ARTICLE 4.3 Authorized Shares.

     (a) Consistent  with Section 7.11 of the  Agreement,  the Company (i) shall
promptly irrevocably instruct the Company's transfer agent to issue certificates
for the Common Stock issuable upon conversion of this Convertible  Debenture and
(ii) agrees that its issuance of this  Convertible  Debenture  shall  constitute
full  authority  to its  officers  and agents who are  charged  with the duty of
executing stock certificates to execute and issue the necessary certificates for
shares of Common  Stock in  accordance  with the  terms and  conditions  of this
Convertible Debenture.

     (b) If at any time a Holder of this Convertible  Debenture submits a Notice
of Conversion (x) the Company does not have  sufficient  authorized but unissued
shares of Common Stock available to effect such conversion in full in accordance
with the  provisions  of this Article 4 or (y) the Company is  prohibited by the
applicable  rules of the OTC Bulletin Board or the National  Market on which the
Common  Shares are listed and traded at that time to effect such  conversion  in
full as provided in subsection (d) below,  without stockholder approval (each, a
"Conversion  Default"),  the Company shall issue to the Holder all of the shares
of Common Stock which are then available to effect such conversion.  The portion
of this Convertible Debenture which the Holder included in its Conversion Notice
and which exceeds the amount which is then  convertible into available shares of
Common  Stock (the  "Excess  Amount")  shall,  notwithstanding  anything  to the
contrary  contained  herein,  not be convertible into Common Stock in accordance
with the terms hereof  until (and at the Holder's  option at any time after) the
date  additional  shares of Common Stock are  authorized by the Company,  or its
stockholders,  as  applicable,  at which  time the  Conversion  Price in respect
thereof shall be the lower of (i) the Conversion Price on the Conversion Default
Date (as defined  below) and (ii) the Conversion  Price on the  Conversion  Date
thereafter  elected by the Holder in respect  thereof.  The Company shall pay to
the Holder payments  ("Conversion Default Payments") for a Conversion Default in
the  amount of  (N/365) x .24 x the  Excess  Amount  on the  Conversion  Date in
respect of the Conversion Default (the "Conversion Default Date"), where N = the
number of days from the Conversion Default Date to the date (the  "Authorization
Date") that the  Company,  or its  stockholders,  as  applicable,  authorizes  a
sufficient  number of shares of Common  Stock to effect  conversion  of the full
outstanding principal balance of this Convertible  Debenture.  The Company shall
use its best efforts to authorize, or cause its stockholders to authorize within
40 days of the occurrence of a Conversion Default,  as applicable,  a sufficient
number of shares of Common Stock as soon as practicable following the earlier of
(i) such time that the Holder notifies the Company or that the Company otherwise
becomes aware that there are or likely will be insufficient shares to allow full
conversion thereof and (ii) a Conversion Default.  The Company shall send notice
to the Holder of the  authorization  of additional  shares of Common Stock,  the
Authorization  Date  and the  amount  of  Holder's  accrued  Conversion  Default
Payments.  The accrued Conversion Default Payments for each calendar month shall
be paid in cash or shall be convertible into Common Stock (at such time as there
are sufficient  authorized  shares of Common Stock) at the Market Price,  at the
Holder's option, as follows:

                                       3
<PAGE>

          (i) In the event the Holder elects to take such payment in cash,  cash
     payment  shall be made to  Holder by the  fifth  Business  Day of the month
     following the month in which it has accrued; and

          (ii) In the event the  Holder  elects to take such  payment  in Common
     Stock,  the Holder may convert such payment amount into Common Stock at the
     Conversion Price (as in effect at the time of conversion) at any time after
     the fifth  Business  Day of the month  following  the month in which it has
     accrued (at such time as there are sufficient  authorized  shares of Common
     Stock) in accordance with the terms of this Article 4.

     (c) The  Holder's  election  pursuant to this  Section 4.3 shall be made in
writing to the  Company at any time  prior to 5:00  p.m.,  E.S.T.,  on the third
Business  Day of the  month  following  the  month in which  Conversion  Default
payments  have  accrued.  If no election is made,  the Holder shall be deemed to
have elected to receive  cash.  Nothing  herein shall limit the Holders right to
pursue  actual  damages  (to the  extent  in excess  of the  Conversion  Default
Payments)  due to the  Company's  failure  to  maintain a  sufficient  number of
authorized shares of Common Stock.

     (d) In no event  shall the Company  issue more than the  Maximum  Number of
Shares upon conversion of this Convertible  Debenture,  unless the Company shall
have  obtained  approval  by  the  stockholders  of  the  Company  ("Stockholder
Approval")  or a waiver of such  requirement  by the OTC  Bulletin  Board or the
National  Market on which the Common  Shares are listed and traded at that time.
Once the  Maximum  Number  of  Shares  has  been  issued  (the  date of which is
hereinafter  referred to as the "Maximum  Conversion Date"),  unless the Company
shall have obtained  Stockholder Approval or a waiver of such requirement by the
OTC Bulletin Board or the National  Market on which the Common Shares are listed
and  traded at that time  within 40 days of the  Maximum  Conversion  Date,  the
Company  shall pay to the Holder  within five (5)  Business  Days of the Maximum
Conversion Date (or, if the Company is, in good faith, using its best efforts to
obtain  Stockholder  Approval,  then the  earlier of (x) 40 days  following  the
Maximum Conversion Date, and (y) such date that it becomes  reasonably  apparent
that Stockholder  Approval will not be obtained within such 40 days period), the
Formula  Price plus  accrued and unpaid  Default  Interest,  if any. The Maximum
Number of Shares  shall be  subject  to  adjustment  from time to time for stock
splits,  stock  dividends,  combinations,  capital  reorganizations  and similar
events  relating  to the  Common  Stock  occurring  after  the  date  hereof  as
contemplated  by Article XI of the  Agreement.  With  respect to each  Holder of
Convertible  Debentures,  the  Maximum  Number  of  Shares  shall  refer to such
Holder's pro rata share thereof based upon the  aggregate  principal  balance of
the  Convertible  Debentures  then  outstanding.  In the event that the  Company
obtains Stockholder Approval, approval of the OTC Bulletin Board or the National
Market on which the  Common  Shares  are  listed  and  traded at that  time,  or
otherwise  is able to  increase  the  number of  shares  to be issued  above the
Maximum Number of Shares (such increased number being the "New Maximum Number of
Shares"),  the  references to Maximum  Number of Shares above shall be deemed to
be, instead, references to the New Maximum Number of Shares.

                                       4
<PAGE>

     ARTICLE 4.4 Method of Conversion.

     (a)  Notwithstanding  anything  to the  contrary  set  forth  herein,  upon
conversion of this  Convertible  Debenture in accordance  with the terms hereof,
the Holder  shall not be  required  to  physically  surrender  this  Convertible
Debenture  to the  Company  unless the entire  unpaid  principal  amount of this
Convertible  Debenture is so converted.  Rather,  records  showing the principal
amount  converted  (or  otherwise  repaid)  and the date of such  conversion  or
repayment shall be maintained on a ledger  substantially  in the form of Annex A
attached  hereto (a copy of which shall be  delivered  to ------- the Company or
transfer agent with each Notice of Conversion).  It is specifically contemplated
that the Holder hereof shall act as the  calculation  agent for  conversions and
repayments.  In  the  event  of  any  dispute  or  discrepancies,  such  records
maintained by the Holder shall be controlling and  determinative  in the absence
of manifest error or failure of Holder to record the principal  amount converted
(or  otherwise  repaid)  from time to time,  in which  events  the record of the
Company shall be controlling and determinative.  The Holder and any assignee, by
acceptance of this Convertible Debenture,  acknowledge and agree that, by reason
of the provisions of this paragraph, following a conversion of a portion of this
Convertible  Debenture,  the principal  amount  represented by this  Convertible
Debenture will be the amount  indicated on Annex A attached hereto (which may be
less than the amount stated on the face hereof). -------

     (b) 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 shares of
Common Stock or other  securities or property on conversion of this  Convertible
Debenture in a name other than that of the Holder (or in street  name),  and the
Company  shall not be  required  to issue or  deliver  any such  shares or other
securities  or property  unless and until the person or persons  (other than the
Holder or the  custodian in whose street name such shares are to be held for the
Holder's account) requesting the issuance thereof shall have paid to the Company
the amount of any such tax or shall have  established to the satisfaction of the
Company that such tax has been paid.

     (c) Subject to Section 5 hereof, upon receipt by the Company of a Notice of
Conversion,  the Holder shall be deemed to be the holder of record of the Common
Stock issuable upon such  conversion,  the outstanding  principal amount and the
amount of accrued and unpaid  interest on this  Convertible  Debenture  shall be
deemed reduced to reflect such  conversion,  and, unless the Company defaults on
its obligations  under this Article 4, all rights with respect to the portion of
this Convertible  Debenture being so converted shall forthwith  terminate except
the right to receive the Common Stock or other securities, cash or other assets,
as herein  provided,  on such  conversion.  Subject to Section 5 hereof,  if the
Holder shall have given a Notice of Conversion as provided herein, the Company's
obligation  to issue and deliver  the  certificates  for shares of Common  Stock
shall be absolute and  unconditional,  irrespective of the absence of any action
by the Holder to enforce  the same,  any waiver or consent  with  respect to any
provisions  thereof,  the  recovery  of any  judgment  against any person or any
action  by the  Holder  to  enforce  the  same,  any  failure  or  delay  in the
enforcement of any other  obligation of the Company to the Holder of record,  or
any setoff, counterclaim,  recoupment,  limitation or termination, or any breach
or alleged breach by the Holder of any obligation to the Company, and subject to
Section 4.4(a)  irrespective  of any other  circumstance  which might  otherwise
limit such  obligation  of the  Company to the  Holder in  connection  with such
conversion.  The date of receipt (including receipt via telecopy) of such Notice
of Conversion shall be the Conversion Date so long as it is received before 5:00
p.m., E.S.T., on such date.

     (d)   Notwithstanding   the  foregoing,   if  a  Holder  has  not  received
certificates  for all  shares of Common  Stock  prior to the  expiration  of the
Deadline  with  respect  to a  conversion  of any  portion  of this  Convertible
Debenture for any reason, then (unless the Holder otherwise elects to retain its
status as a holder of Common  Stock by so  notifying  the  Company),  the Holder
shall regain the rights of a Holder of this  Convertible  Debenture with respect
to such  unconverted  portions  of this  Convertible  Debenture  and the Company
shall, as soon as practicable,  return such unconverted Convertible Debenture to
the holder or, if the Convertible Debenture has not been surrendered, adjust its
records to reflect  that such  portion of this  Convertible  Debenture  not been
converted.  In all cases, the Holder shall retain all of its rights and remedies
(including,  without  limitation,  (i) the right to receive  Conversion  Default
Payments  to the extent

                                       5
<PAGE>

required  thereby  for such  Conversion  Default and any  subsequent  Conversion
Default  and  (ii) the  right  to have the  Conversion  Price  with  respect  to
subsequent  conversions  determined  in  accordance  with  Section  4.3  for the
Company's failure to convert this Convertible Debenture.

     (e) In lieu of delivering  physical  certificates  representing  the Common
Stock  issuable  upon  conversion,  provided  the  Company's  transfer  agent is
participating in the Depository Trust Company ("DTC") Fast Automated  Securities
Transfer  program,  upon  request  of the  Holder  and its  compliance  with the
provisions  contained in Section 4.1 and in this Section 4.4, the Company  shall
use its best efforts to cause its transfer agent to electronically  transmit the
Common Stock issuable upon  conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit  Withdrawal  Agent Commission
System.

     ARTICLE 5. Redemption by Company.

     ARTICLE 5.1 Company's Right to Redeem. In accordance with the provisions of
the Purchase  Agreement and subject to the  provisions of Section 3 hereof,  the
Company  may elect at any time  following  the 180th day  following  the date of
issuance  of  this   Convertible   Debenture,   or  be  required  under  certain
circumstances  to redeem in whole or in part,  the  remaining  unpaid  principal
amount  of this  Convertible  Debenture,  for cash at a  redemption  price  (the
"Redemption Price") equal to (x) the number of shares of Common Stock into which
this Convertible  Debenture is then  convertible,  times (y) the average Closing
Bid Price of Common Stock for the five (5) trading days as reported by Bloomberg
L.P. immediately prior to the date that this Convertible Debenture is called for
redemption, plus accrued and unpaid interest.

     ARTICLE 5.2  Mechanics of  Redemption.  The Company  shall effect each such
redemption within three business days of giving notice of its election to redeem
by facsimile  with a copy by either  overnight or 2-day courier to the Holder of
this Convertible Debenture to be redeemed at the address and facsimile number of
such Holder appearing in the Company's register for the Convertible  Debentures.
Such  redemption  notice shall  indicate  whether the Company will redeem all or
part of  such  portion  of the  Convertible  Debenture  to be  redeemed  and the
applicable  Redemption  Price.  The  Company  shall not be  entitled to send any
notice of redemption  and begin the redemption  procedure  unless it has (i) the
full amount of the  Redemption  Price,  in cash,  available in a demand or other
immediately available account in a bank or similar financial institution or (ii)
immediately  available credit  facilities,  in the full amount of the Redemption
Price, with a bank or similar  financial  institution on the date the redemption
notice is sent to the Holders of this Convertible Debenture.  Provided, however,
the Company will process any Notice of Conversion received prior to the issuance
of a notice  of  redemption;  and  further  provided  that,  after a  notice  of
redemption  has been issued,  the Holder may issue a Notice of Conversion  which
will not be honored unless the Company fails to make the redemption payment when
due. In the event of such failure,  the Notice of Conversion  will be honored as
of the date of the Notice of Conversion.  Additionally,  if the Company fails to
make full payments of the Redemption Price of this  Convertible  Debenture being
redeemed by the third business day following the notice or redemption,  then the
Company  waives  its  right to  redeem  any of the  remaining  then  outstanding
Debentures, unless approved by the Holder.

     ARTICLE 5.3 Payment of Redemption Price. The Redemption Price shall be paid
to the Holder of this  Convertible  Debenture  within three business days of the
delivery of the notice of such redemption to such Holder.

     ARTICLE 6. Holder's Right to Advance Notice of Election Redeem.

     ARTICLE 6.1 Holder's Right to Elect to Receive Notice of Cash Redemption by
Company.  The  Holder  of this  Convertible  Debenture  shall  have the right to
require Company to provide advance notice

                                       6
<PAGE>

stating  whether the Company will elect to redeem all or part of the  redeemable
portion in cash,  pursuant  to the  Company's  redemption  rights  discussed  in
Section 5.1 above.

     ARTICLE 6.2 Mechanics of Holder's Election Notice. Holder shall give notice
to the Company by facsimile (the "Election Notice"),  requiring that the Company
disclose  whether the Company  would elect to redeem the  redeemable  portion of
this Convertible Debenture (in whole or in part) if the Holder were to provide a
Notice of  Conversion  and sought to convert the  Convertible  Debenture in such
principal amount as is specified in the Notice of Election.

     ARTICLE 6.3  Company's  Response.  Company  must  respond,  disclosing  its
election,  within two (2) business days of receipt of Holder's  Election  Notice
via  facsimile.  If Company  does not respond to Holder  within two (2) business
days (by 12:00 noon, if required  above) via facsimile,  Company shall be deemed
to have forfeited its right to exercise redemption pursuant to Section 5(a) upon
its receipt of (but only with respect to) that Notice of Conversion.

     ARTICLE 7. Miscellaneous.  This Convertible Debenture shall be deemed to be
a contract  made under the laws of the State of New York,  and for all  purposes
shall be governed by and  construed in  accordance  with the laws of said State.
The  parties  hereto,  including  all  guarantors  or  endorsers,  hereby  waive
presentment,  demand,  notice,  protest  and all other  demands  and  notices in
connection  with the delivery,  acceptance,  performance and enforcement of this
Convertible  Debenture,  except as specifically  provided  herein,  and asset to
extensions of the time of payment,  or forbearance or other  indulgence  without
notice.  The Company hereby submits to the exclusive  jurisdiction of the United
States District Court for the Southern District of New York and of any New York,
New York state court  sitting in New York for purposes of all legal  proceedings
arising  out  of  or  relating  to  this  Convertible  Debenture.   The  Company
irrevocably  waives, to the fullest extent permitted by law, any objection which
it may now or hereafter  have to the laying of the venue of any such  proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient  forum. The Company hereby irrevocably
waives any and all right to trial by jury in any legal proceeding arising out of
or relating to this Convertible Debenture.

     The Holder of this Convertible  Debenture by acceptance of this Convertible
Debenture  agrees to be bound by the  provisions of this  Convertible  Debenture
which are expressly binding on such Holder.

                                       7
<PAGE>

     IN WITNESS  WHEREOF,  the  Company has caused  this  instrument  to be duly
executed.

     Dated: April 28, 2001

                                    AMERICAN INTERNATIONAL PETROLEUM CORPORATION

                                    By:_________________________________________
                                    Name:  Denis J. Fitzpatrick
                                    Title: Chief Financial Officer

                                       8
<PAGE>

ANNEX A

CONVERSION AND REPAYMENT LEDGER

<TABLE>
<CAPTION>
                               Interest Converted   Principal Converted
Date        Principal Balance  or Paid              or Paid               New Principal Balance   Issuer Initials  Holder Initials
----------- ------------------ -------------------- --------------------- ----------------------- ---------------- -----------------
<S>         <C>                <C>                  <C>                   <C>                     <C>              <C>
----------- ------------------ -------------------- --------------------- ----------------------- ---------------- -----------------

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

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

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

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

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

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

----------- ------------------ -------------------- --------------------- ----------------------- ---------------- -----------------
</TABLE>

                                       9
<PAGE>

FULL NAME AND ADDRESS OF SUBSCRIBER FOR REGISTRATION PURPOSES:

NAME:

ADDRESS:

TEL NO:

FAX NO:

CONTACT
NAME:

DELIVERY INSTRUCTIONS (IF DIFFERENT FROM REGISTRATION NAME):

NAME:

ADDRESS:

TEL NO:

FAX NO:

CONTACT
NAME:

SPECIAL INSTRUCTIONS: _________________________________________________

                      _________________________________________________

                                       10
<PAGE>

                              NOTICE OF CONVERSION

                    (To be Executed by the Registered Holder

                 in order to Convert the Convertible Debenture)

     The  undersigned  hereby  irrevocably  elects to convert  $________  of the
principal balance of the Convertible  Debenture into shares of Common Stock, .08
par value per share (the "Common Stock"),  of American  International  Petroleum
Corporation (the "Company")  according to the conditions  hereof, as of the date
written below. No fee will be charged to the Holder for any  conversion,  except
for transfer taxes, if any. The  undersigned,  as contemplated by Section 5.1 of
the Securities  Purchase Agreement  pursuant to which the Convertible  Debenture
was  issued,  hereby  states  that the  representations  and  warranties  of the
undersigned  set forth therein are true and correct in all material  respects as
of  the  date  hereof  (provided,   the  undersigned  makes  no  representations
concerning its investment  intent with respect to the Common Stock received upon
this conversion).

Conversion calculations:

                                            ____________________________________
                                            Date of Conversion

                                            ____________________________________
                                            Applicable Conversion Price

                                            ____________________________________
                                            Number of Shares

                                            ____________________________________
                                            Name/Signature

                                            Address:

                                            ____________________________________
                                            ____________________________________

<PAGE>

                                                                    Exhibit 4.51

                                    EXHIBIT B

                      FORM OF REGISTRATION RIGHTS AGREEMENT

<PAGE>

                          REGISTRATION RIGHTS AGREEMENT

     REGISTRATION  RIGHTS  AGREEMENT (this  "Agreement"),  dated as of April 28,
2001, between American International Petroleum Corporation, a Nevada corporation
(the "Company"), and GCA Strategic Investment Fund Limited (the "Fund").

     1. Introduction.

          1.1 Exchange  Agreement.  The Company and the Fund have today executed
that certain Exchange  Agreement (the "Exchange  Agreement"),  pursuant to which
the Company and the Fund have agreed, among other things, to exchange the Bridge
Notes for an aggregate  of Five  Million  Nine  Hundred  Thirty Six Thousand One
Hundred  Twenty Eight  Dollars  ($5,936,128.00)  (U.S.)  principal  amount of 3%
Convertible  Debentures  of the Company  (the  "Debentures")  to the Fund or its
successors, assigns or transferees (collectively, the "Holders"). The Debentures
are  convertible  into  an  indeterminable  number  of  shares  (the  "Debenture
Conversion  Shares") of the Company's common stock,  $.08 per share (the "Common
Stock")  pursuant  to the  terms of the  Debentures.  The  number  of  Debenture
Conversion  Shares is subject to adjustment upon the occurrence of stock splits,
recapitalizations and similar events occurring after the date hereof.

          1.2  Definition of  Securities.  The Debenture  Conversion  Shares are
herein referred to as the "Securities."

          1.3 Trading  Representation.  The Company represents and warrants that
the  Company's  Common Stock is  currently  eligible for trading on OTC Bulletin
Board under the symbol "AIPN." Certain  capitalized terms used in this Agreement
are defined in Section 3 hereof;  references to sections shall be to sections of
this Agreement.

     2. Registration under Securities Act, etc.

          2.1 Mandatory Registration.

          (a) Registration of Registrable Securities.  The Company shall prepare
     and file within seven (7) days  following the Company's  Annual  Meeting of
     Shareholders  for 2001 (the "Filing Date"),  a registration  statement (the
     "Registration  Statement") to register

<PAGE>

     not less than 30,000,000  shares of the Company's Common Stock to cover the
     resale of the  Registrable  Securities.  In the event the Company  fails to
     file the Registration Statement by the Filing Date, the Company will pay to
     the  Fund  liquidated  damages  in  the  amount  of 1% of  the  outstanding
     principal  amount  of  then  outstanding  Debentures  per  day  until  such
     Registration  Statement  has been  filed.  The  Company  shall use its best
     efforts to cause the Registration Statement to be declared effective by the
     Commission on the earlier of (i) 60 days  following the Filing Date or (ii)
     ten (10) days following the receipt of a "No Review" or similar letter from
     the  Commission  (the "Required  Effectiveness  Date").  Nothing  contained
     herein shall be deemed to limit the number of Registrable  Securities to be
     registered by the Company hereunder.  As a result,  should the Registration
     Statement  not  relate  to the  maximum  number of  Registrable  Securities
     acquired  by (or  potentially  acquirable  by)  the  holders  thereof  upon
     conversion  of the  Debentures,  or exercise of the Common  Stock  Purchase
     Warrants  described  in Section 1 above,  the Company  shall be required to
     promptly  file  a  separate  registration  statement  (utilizing  Rule  462
     promulgated  under the Exchange  Act,  where  applicable)  relating to such
     Registrable  Securities which then remain  unregistered.  The provisions of
     this Agreement shall relate to any such Registration Statement and any such
     separate  registration  statement  as  if  it  were  an  amendment  to  the
     Registration Statement.

          (b) Registration Statement Form.  Registrations under this Section 2.1
     shall be on Form S-1 or such  other  appropriate  registration  form of the
     Commission as shall permit the disposition of such  Registrable  Securities
     in accordance with the intended method or methods of disposition  specified
     by the Fund;  provided,  however,  such intended method of deposition shall
     not include an underwritten offering of the Registrable Securities.

          (c)  Expenses.  The  Company  will pay all  Registration  Expenses  in
     connection with any registration required by this Section 2.1.

          (d)  Effective   Registration   Statement.  A  registration  requested
     pursuant to this Section 2.1 shall not be deemed to have been  effected (i)
     unless a registration  statement with respect thereto has become  effective
     within the time period specified herein, provided that a registration which
     does not become effective after the Company filed a registration  statement
     with  respect  thereto  solely by reason of the  refusal  to proceed of any
     holder of  Registrable  Securities  (other than a refusal to proceed  based
     upon the advice of counsel in the form of a letter  signed by such  counsel
     and provided to the Company  relating to a disclosure  matter  unrelated to
     such holder)  shall be deemed to have been  effected by the Company  unless
     the holders of the  Registrable  Securities  shall have  elected to pay all
     Registration Expenses in connection with such registration,  (ii) if, after
     it has become  effective,  such  registration  becomes  subject to any stop
     order,  injunction  or other  order  or  extraordinary  requirement  of the
     Commission  or other  governmental  agency or court for any reason or (iii)
     if, after it has become effective, such registration ceases to be effective
     for more than an aggregate of twenty (20) days.

          (e)  Plan  of  Distribution.   The  Company  hereby  agrees  that  the
     Registration  Statement  shall  include  a  plan  of  distribution  section
     reasonably acceptable to the Fund.

                                       2
<PAGE>

          2.2 Incidental Registration.

          (a) Right to Include Registrable Securities.  If at any time after the
     date  hereof but  before  the third  anniversary  of the date  hereof,  the
     Company proposes to register any of its securities under the Securities Act
     (other than by a registration in connection with an acquisition in a manner
     which would not permit  registration of Registrable  Securities for sale to
     the public, on Form S-8, or any successor form thereto, on Form S-4, or any
     successor  form  thereto  and other than  pursuant to Section  2.1),  on an
     underwritten  basis (either  best-efforts  or  firm-commitment),  then, the
     Company  will each such time give prompt  written  notice to all Holders of
     its intention to do so and of such Holders"  rights under this Section 2.2.
     Upon the written  request of any such  Holder made within  twenty (20) days
     after the  receipt of any such  notice  (which  request  shall  specify the
     Registrable Securities intended to be disposed of by such Holder an and the
     intended method of disposition  thereof),  the Company will, subject to the
     terms of this Agreement,  use its  commercially  reasonable best efforts to
     effect  the  registration  under  the  Securities  Act of  the  Registrable
     Securities,   to  the  extent  requisite  to  permit  the  disposition  (in
     accordance  with  the  intended  methods  thereof  as  aforesaid)  of  such
     Registrable   Securities  so  to  be  registered,   by  inclusion  of  such
     Registrable  Securities  in the  registration  statement  which  covers the
     securities which the Company proposes to register, provided that if, at any
     time after written  notice of its intention to register any  securities and
     prior  to  the  effective  date  of the  registration  statement  filed  in
     connection  with such  registration,  the Company  shall  determine for any
     reason either not to register or to delay  registration of such securities,
     the Company may, at its election, give written notice of such determination
     to each Holder and,  thereupon,  (i) in the case of a determination  not to
     register,  shall be relieved of this obligation to register any Registrable
     Securities  in  connection  with  such   registration  (but  not  from  its
     obligation  to pay the  Registration  Expenses  in  connection  therewith),
     without  prejudice,  however,  to the  rights of any  holder or  holders of
     Registrable  Securities entitled to do so to request that such registration
     be effected as a registration  under Section 2.1, and (ii) in the case of a
     determination to delay registering, shall be permitted to delay registering
     any Registrable Securities, for the same period as the delay in registering
     such other  securities.  No  registration  effected  under this Section 2.2
     shall relieve the Company of its obligation to effect any registration upon
     request  under  Section 2.1, nor shall any such  registration  hereunder be
     deemed to have been effected  pursuant to Section 2.1. The Company will pay
     all  Registration   Expenses  in  connection  with  each   registration  of
     Registrable  Securities  requested  pursuant to this Section 2.2. The right
     provided the Holders of the Registrable Securities pursuant to this Section
     shall be exercisable at their sole  discretion and will in no way limit any
     of the  Company's  obligations  to pay the  Securities  according  to their
     terms.

          (b) Priority in Incidental Registrations.  If the managing underwriter
     of the underwritten  offering contemplated by this Section 2.2 shall inform
     the Company  and  holders of the  Registrable  Securities  requesting  such
     registration  by  letter  of its  belief  that  the  number  of  securities
     requested to be included in such registration  exceeds the number which can
     be  sold  in  such  offering,   then  the  Company  will  include  in  such
     registration,  to the extent of the number  which the Company is so advised
     can be sold in such offering,  (i) first securities proposed by the Company
     to be sold for its own account, and (iii) second Registrable Securities and
     securities of other selling  security  holders  requested to be included in
     such  registration  pro rata on the  basis of the  number of shares of such
     securities  so  proposed  to be  sold  and  so

                                       3
<PAGE>

     requested to be included;  provided,  however,  the holders of  Registrable
     Securities  shall have  priority  to all shares  sought to be  included  by
     officers  and  directors  of the  Company as well as holders of ten percent
     (10%) or more of the Company's Common Stock.

          2.3 Registration  Procedures.  If and whenever the Company is required
     to  effect  the  registration  of  any  Registrable  Securities  under  the
     Securities  Act as provided in Section 2.1 and,  as  applicable,  2.2,  the
     Company shall, as expeditiously as possible:

               (i)  prepare  and  file  with  the  Commission  the  Registration
          Statement  or  amendments   thereto,   to  effect  such   registration
          (including such audited financial statements as may be required by the
          Securities Act or the rules and  regulations  promulgated  thereunder)
          and thereafter use its  commercially  reasonable best efforts to cause
          such   registration   statement  to  be  declared   effective  by  the
          Commission, as soon as practicable, but in any event no later than the
          Required  Effectiveness Date (with respect to a registration  pursuant
          to  Section  2.1);   provided,   however,   that  before  filing  such
          registration  statement or any  amendments  thereto,  the Company will
          furnish  to  the  counsel  selected  by  the  holders  of  Registrable
          Securities  which are to be included in such  registration,  copies of
          all such documents proposed to be filed;

               (ii) with respect to any  registration  statement or registration
          statement amendment pursuant to Section 2.1, prepare and file with the
          Commission  such  amendments  and  supplements  to  such  registration
          statement and the  prospectus  used in connection  therewith as may be
          necessary to keep such registration  statement effective and to comply
          with  the  provisions  of  the  Securities  Act  with  respect  to the
          disposition of all Registrable Securities covered by such registration
          statement  until the earlier to occur of five (5) years after the date
          of this  Agreement(subject  to the right of the Company to suspend the
          effectiveness  thereof  for not more  than 10  consecutive  days or an
          aggregate  of 30 days in such five (5) years  period)  or such time as
          all of the  securities  which  are the  subject  of such  registration
          statement  cease to be Registrable  Securities  (such period,  in each
          case, the "Registration Maintenance Period");

               (iii) furnish to each seller of Registrable Securities covered by
          such  registration  statement such number of conformed  copies of such
          registration  statement  and of each  such  amendment  and  supplement
          thereto (in each case including all  exhibits),  such number of copies
          of the prospectus contained in such registration  statement (including
          each preliminary  prospectus and any summary prospectus) and any other
          prospectus   filed  under  Rule  424  under  the  Securities  Act,  in
          conformity with the requirements of the Securities Act, and such other
          documents,  as such seller and  underwriter,  if any,  may  reasonably
          request in order to facilitate the public sale or other disposition of
          the Registrable Securities owned by such seller;

               (iv) use its commercially  reasonable best efforts to register or
          qualify all  Registrable  Securities and other  securities  covered by
          such  registration  statement under such other securities laws or blue
          sky laws as any seller thereof shall reasonably  request, to keep such
          registrations  or  qualifications  in  effect  for  so  long  as  such
          registration  statement  remains in effect,  and take any other action
          which may be reasonably  necessary to enable such seller to consummate
          the disposition in such  jurisdictions of the securities owned by such
          seller,  except  that the  Company  shall not for any such  purpose be
          required to qualify generally to do business as a foreign  corporation
          in any  jurisdiction  wherein it would not but for the requirements of
          this

                                       4
<PAGE>

          subdivision  (iv) be  obligated  to be so  qualified  or to consent to
          general service of process in any such jurisdiction;

               (v) use its  commercially  reasonable  best  efforts to cause all
          Registrable  Securities  covered by such registration  statement to be
          registered  with or  approved by such other  governmental  agencies or
          authorities  as may be  necessary  to enable  the  seller  or  sellers
          thereof to consummate the disposition of such Registrable Securities;

               (vi)  furnish to each seller of  Registrable  Securities a signed
          counterpart,  addressed to such seller, and the underwriters,  if any,
          of:

                    (A) an  opinion  of  counsel  for  the  Company,  dated  the
               effective  date  of  such  registration  statement  (or,  if such
               registration includes an underwritten public offering, an opinion
               dated   the  date  of  the   closing   under   the   underwriting
               agreement),reasonably  satisfactory in form and substance to such
               seller)   including   that  the  prospectus  and  any  prospectus
               supplement forming a part of the Registration  Statement does not
               contain  an  untrue  statement  of a  material  fact  or  omits a
               material fact required to be stated therein or necessary in order
               to make the  statements  therein,  in light of the  circumstances
               under which they were made, not misleading, and

                    (B) a "comfort"  letter (or, in the case of any Person which
               does not satisfy the conditions for receipt of a "comfort" letter
               specified in Statement on Auditing  Standards  No. 72, an "agreed
               upon  procedures"  letter),  dated  the  effective  date  of such
               registration  statement  (and, if such  registration  includes an
               underwritten  public  offering,  a letter of like kind  dated the
               date of the closing under the underwriting agreement),  signed by
               the  independent   public  accountants  who  have  certified  the
               Company's  financial  statement  included  in  such  registration
               statement,  covering  substantially the same matters with respect
               to such  registration  statement  (and  the  prospectus  included
               therein)  and,  in the  case  of the  accountants"  letter,  with
               respect  to  events  subsequent  to the  date of  such  financial
               statements,  as are  customarily  covered in opinions of issuer's
               counsel and in accountants" letters delivered to the underwriters
               in underwritten public offerings of securities (with, in the case
               of an "agreed upon  procedures"  letter,  such  modifications  or
               deletions  as  may  be  required  under   Statement  on  Auditing
               Standards  No. 35) and, in the case of the  accountants"  letter,
               such  other  financial  matters,  and,  in the case of the  legal
               opinion,  such  other  legal  matters,  as  such  seller  (or the
               underwriters, if any) may reasonably request;

          (vii) notify the Sellers"  Representative and its counsel promptly and
     confirm  such advice in writing  promptly  after the Company has  knowledge
     thereof:

               (A)  when  the  Registration  Statement,  the  prospectus  or any
          prospectus  supplement related thereto or post-effective  amendment to
          the  Registration  Statement has been filed,  and, with respect to the
          Registration  Statement or any post-effective  amendment thereto, when
          the same has become effective;

               (B)  of  any  request  by  the   Commission   for  amendments  or
          supplements  to the  Registration  Statement or the  prospectus or for
          additional information;

                                       5
<PAGE>

               (C)  of  the  issuance  by  the  Commission  of  any  stop  order
          suspending  the  effectiveness  of the  Registration  Statement or the
          initiation of any proceedings by any Person for that purpose; and

               (D) of  the  receipt  by the  Company  of any  notification  with
          respect to the  suspension  of the  qualification  of any  Registrable
          Securities  for  sale  under  the  securities  or blue sky laws of any
          jurisdiction  or the  initiation or threat of any  proceeding for such
          purpose;

          (viii) notify each seller of  Registrable  Securities  covered by such
     registration  statement,  at any time when a prospectus relating thereto is
     required to be delivered  under the Securities Act, upon discovery that, or
     upon the  happening  of any  event as a result  of  which,  the  prospectus
     included in such  registration  statement,  as then in effect,  includes an
     untrue  statement of a material  fact or omits to state any material  facts
     required to be stated therein or necessary to make the  statements  therein
     not misleading in the light of the circumstances then existing,  and at the
     request of any such  seller  promptly  prepare and furnish to such seller a
     reasonable  number of copies of a  supplement  to or an  amendment  of such
     prospectus  as may be necessary  so that,  as  thereafter  delivered to the
     purchasers of such securities,  such prospectus shall not include an untrue
     statement of a material  fact or omit to state a material  fact required to
     be  stated  therein  or  necessary  to  make  the  statements  therein  not
     misleading in the light of the circumstances then existing;

          (ix) use its best  efforts  to  obtain  the  withdrawal  of any  order
     suspending the effectiveness of the Registration  Statement at the earliest
     possible moment;

          (x) otherwise use its  commercially  reasonable best efforts to comply
     with all  applicable  rules and  regulations  of the  Commission,  and make
     available to its security holders,  as soon as reasonably  practicable,  an
     earnings  statement  covering the period of at least twelve months, but not
     more than eighteen  months,  beginning  with the first full calendar  month
     after the effective  date of such  registration  statement,  which earnings
     statement  shall satisfy the  provisions of Section 11(a) of the Securities
     Act and Rule 158 thereunder;

          (xi) enter  into such  agreements  and take such other  actions as the
     Sellers' Representative shall reasonably request in writing (at the expense
     of the requesting or benefiting sellers) in order to expedite or facilitate
     the disposition of such Registrable Securities; and

          (xii)  use its  commercially  reasonable  best  efforts  to  list  all
     Registrable  Securities  covered  by  such  registration  statement  on any
     securities  exchange on which any of the  Registrable  Securities  are then
     listed.

     The Company may require each seller of  Registrable  Securities as to which
any  registration  is being  effected to furnish the  Company  such  information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.

                                       6
<PAGE>

     The Company will not file any  registration  statement  pursuant to Section
2.1, or amendment thereto or any prospectus or any supplement thereto (including
such  documents  incorporated  by  reference  and proposed to be filed after the
initial   filing  of  the   Registration   Statement   to  which  the   Sellers"
Representative shall reasonably object,  provided that the Company may file such
documents in a form required by law or upon the advice of its counsel.

     The  Company   represents  and  warrants  to  each  holder  of  Registrable
Securities   that  it  has  obtained  all   necessary   waivers,   consents  and
authorizations   necessary  to  execute  this   Agreement  and   consummate  the
transactions  contemplated  hereby  other  than such  waivers,  consents  and/or
authorizations specifically contemplated by the Exchange Agreement.

     The Fund agrees  that,  upon  receipt of any notice from the Company of the
occurrence  of any event of the kind  described  in  subdivision  (viii) of this
Section 2.3,  the Fund will  forthwith  discontinue  the Fund's  disposition  of
Registrable  Securities pursuant to the Registration  Statement relating to such
Registrable   Securities   until  the  Fund's  receipt  of  the  copies  of  the
supplemented or amended  prospectus  contemplated by subdivision  (viii) of this
Section 2.3 and, if so directed by the Company,  will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in the
Fund's  possession of the  prospectus  relating to such  Registrable  Securities
current at the time of receipt of such notice.

     2.4 Underwritten Offerings.

          (a)  Incidental  Underwritten  Offerings.  If the  Company at any time
     proposes to register  any of its  securities  under the  Securities  Act as
     contemplated by Section 2.2 and such securities are to be distributed by or
     through one or more  underwriters,  the Company  will,  if requested by any
     holder of Registrable  Securities as provided in Section 2.2 and subject to
     the provisions of Section  2.2(a),  use its  commercially  reasonable  best
     efforts to arrange for such  underwriters  to include  all the  Registrable
     Securities to be offered and sold by such holder among the securities to be
     distributed by such underwriters.

          (b) Holdback Agreements. Subject to such other reasonable requirements
     as may be imposed by the  underwriter  as a condition  of  inclusion of the
     Fund's  Registrable  Securities  in the  registration  statement,  the Fund
     agrees by  acquisition  of  Registrable  Securities,  if so required by the
     managing underwriter,  not to sell, make any short sale of, loan, grant any
     option for the purchase of,  effect any public sale or  distribution  of or
     otherwise dispose of, except as part of such underwritten registration, any
     equity  securities of the Company,  during such  reasonable  period of time
     requested  by the  underwriter;  provided  however,  such period  shall not
     exceed the 120 day period  commencing 30 days prior to the  commencement of
     such  underwritten  offering and ending 90 days following the completion of
     such underwritten offering.

          (c) Participation in Underwritten  Offerings. No holder of Registrable
     Securities may participate in any  underwritten  offering under Section 2.2
     unless  such  holder  of  Registrable  Securities  (i)  agrees to sell such
     Person's securities on the basis provided in any underwriting  arrangements
     approved, subject to the terms and conditions hereof, by the

                                       7
<PAGE>

holders  of a  majority  of  Registrable  Securities  to  be  included  in  such
underwritten  offering  and (ii)  completes  and  executes  all  questionnaires,
indemnities,  underwriting  agreements and other documents (other than powers of
attorney)   required  under  the  terms  of  such   underwriting   arrangements.
Notwithstanding the foregoing,  no underwriting agreement (or other agreement in
connection   with  such  offering)  shall  require  any  holder  of  Registrable
Securities to make an  representations  or warranties to or agreements  with the
Company or the underwriters other than  representations and warranties contained
in a  writing  furnished  by  such  holder  expressly  for  use in  the  related
registration  statement or representations,  warranties or agreements  regarding
such holder,  such holder's  Registrable  Securities and such holder's  intended
method of distribution and any other representation required by law.

     2.5  Preparation;   Reasonable   Investigation.   In  connection  with  the
preparation and filing of each registration statement and registration statement
amendment under the Securities Act pursuant to this Agreement,  the Company will
give the holders of Registrable  Securities  registered under such  registration
statement,  and their  respective  counsel and  accountants,  the opportunity to
participate in the preparation of such registration  statement,  each prospectus
included  therein or filed with the  Commission,  and each amendment  thereof or
supplement  thereto,  and will give  each of them  such  access to its books and
records and such  opportunities  to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the reasonable opinion of such holders" and
such underwriters"  respective  counsel,  to conduct a reasonable  investigation
within the meaning of the Securities Act.

     2.6 Registration Default Fee. If the Registration Statement contemplated in
Section 2.1 is (x) not declared effective by the Required  Effectiveness Date or
(y)  such  effectiveness  is not  maintained  for the  Registration  Maintenance
Period,  then the Company  shall pay to the Fund the Default  Fee  specified  in
Section 10.4 of the Exchange Agreement.

     2.7 Indemnification.

          (a)  Indemnification by the Company.  In the event of any registration
     of any  securities  of the Company  under the  Securities  Act, the Company
     will,  and hereby does agree to indemnify  and hold  harmless the holder of
     any  Registrable  Securities  covered  by such  registration  statement  or
     registration  statement amendment,  its directors and officers,  each other
     Person who  participates  as an underwriter in the offering or sale of such
     securities  and each other Person,  if any, who controls such holder or any
     such  underwriter  within the  meaning of the  Securities  Act  against any
     losses,  claims,  damages or liabilities,  joint or several,  to which such
     holder or any such director or officer or underwriter or controlling person
     may become subject under the  Securities Act or otherwise,  insofar as such
     losses, claims, damages or liabilities (or actions or proceedings,  whether
     commenced or threatened, in respect thereof) arise out of or are based upon
     any untrue  statement or alleged  untrue  statement  of any  material  fact
     contained in any  registration  statement  under which such securities were
     registered  under the Securities  Act, any  preliminary  prospectus,  final
     prospectus or summary  prospectus  contained  therein,  or any amendment or
     supplement  thereto, or any omission or alleged omission to state therein a
     material  fact  required  to be stated  therein  or  necessary  to make the
     statements  therein not  misleading,  and the Company will  reimburse  such
     holder and each such director,

                                       8
<PAGE>

     officer,  underwriter  and  controlling  person  for any legal or any other
     expenses  reasonably  incurred by them in connection with  investigating or
     defending any such loss, claim, liability,  action or proceeding,  provided
     that the  Company  shall not be liable in any such case to the extent  that
     any such  loss,  claim,  damage,  liability,  (or action or  proceeding  in
     respect  thereof)  or  expense  arises  out of or is based  upon an  untrue
     statement or alleged untrue  statement or omission or alleged omission made
     in such  registration  statement,  any such preliminary  prospectus,  final
     prospectus,  summary  prospectus,  amendment or supplement in reliance upon
     and in conformity with written information furnished to the Company by such
     holder or underwriter stating that it is for use in the preparation thereof
     and,  provided  further that the Company  shall not be liable to any Person
     who  participates  as an underwriter in the offering or sale of Registrable
     Securities  or to any other Person,  if any, who controls such  underwriter
     within the  meaning of the  Securities  Act, in any such case to the extent
     that any such loss,  claim,  damage,  liability (or action or proceeding in
     respect  thereof) or expense arises out of such Person's failure to send or
     give a copy of the final  prospectus,  as the same may be then supplemented
     or amended,  within the time required by the  Securities  Act to the Person
     asserting the existence of an untrue  statement or alleged untrue statement
     or omission or alleged omission at or prior to the written  confirmation of
     the sale of  Registrable  Securities  to such Person if such  statement  or
     omission  was  corrected  in  such  final  prospectus  or an  amendment  or
     supplement  thereto.  Such indemnity  shall remain in full force and effect
     regardless of any investigation  made by or on behalf of such holder or any
     such director, officer, underwriter or controlling person and shall survive
     the transfer of such securities by such holder.

          (b)  Indemnification  by the Sellers.  The Company may  require,  as a
     condition to  including  any  Registrable  Securities  in any  registration
     statement or amendment  thereto filed pursuant to this Agreement,  that the
     Company  shall have  received an  undertaking  satisfactory  to it from the
     prospective  seller of such Registrable  Securities,  to indemnify and hold
     harmless  (in the  same  manner  and to the  same  extent  as set  forth in
     subdivision  (a) of this  Section 2.7) the  Company,  each  director of the
     Company,  each  officer of the Company and each other  Person,  if any, who
     controls the Company within the meaning of the Securities Act, with respect
     to any  statement or alleged  statement in or omission or alleged  omission
     from  such  registration  statement,  any  preliminary  prospectus,   final
     prospectus or summary  prospectus  contained  therein,  or any amendment or
     supplement  thereto,  if such statement or alleged statement or omission or
     alleged  omission was made in reliance upon and in conformity  with written
     information furnished to the Company through an instrument duly executed by
     such seller  specifically  stating that it is for use in the preparation of
     such  registration  statement,  preliminary  prospectus,  final prospectus,
     summary  prospectus,  amendment or  supplement.  Any such  indemnity  shall
     remain in full force and effect, regardless of any investigation made by or
     on behalf of the  Company  or any such  director,  officer  or  controlling
     person and shall survive the transfer of such securities by such seller.

          (c) Notices of Claims,  etc.  Promptly after receipt by an indemnified
     party of notice of the commencement of any action or proceeding involving a
     claim referred to in the preceding  subdivisions  of this Section 2.7, such
     indemnified party will, if a claim in respect thereof is to be made against
     an  indemnifying   party,   give  written  notice  to  the  latter  of  the
     commencement  of such action,  provided that the failure of any indemnified
     party to give notice as provided herein shall not relieve the  indemnifying
     party of its obligations under the preceding

                                       9
<PAGE>

     subdivisions   of  this  Section  2.7,   except  to  the  extent  that  the
     indemnifying  party is actually  prejudiced by such failure to give notice.
     In case any such action is brought against an indemnified party,  unless in
     such indemnified party's reasonable judgment a conflict of interest between
     such  indemnified  and  indemnifying  parties  may exist in respect of such
     claim,  the  indemnifying  party shall be entitled to participate in and to
     assume the  defense  thereof,  jointly  with any other  indemnifying  party
     similarly  notified,  to the extent that the  indemnifying  party may wish,
     with counsel  reasonably  satisfactory to such indemnified party, and after
     notice  from  the  indemnifying  party  to such  indemnified  party  of its
     election so to assume the defense thereof, the indemnifying party shall not
     be  liable  to such  indemnified  party  for any  legal or  other  expenses
     subsequently  incurred by the latter in connection with the defense thereof
     other than reasonable costs of investigation.  No indemnifying party shall,
     without  the  consent  of the  indemnified  party,  consent to entry of any
     judgment or enter into any  settlement  of any such  action  which does not
     include as an  unconditional  term  thereof  the giving by the  claimant or
     plaintiff to such indemnified  party of a release from all liability,  or a
     covenant not to sue, in respect to such claim or litigation. No indemnified
     party shall  consent to entry of any judgment or enter into any  settlement
     of any such action the defense of which has been assumed by an indemnifying
     party without the consent of such indemnifying party.

          (d) Other Indemnification.  Indemnification  similar to that specified
     in the  preceding  subdivisions  of  this  Section  2.7  (with  appropriate
     modifications) shall be given by the Company and each seller of Registrable
     Securities (but only if and to the extent required pursuant to the terms of
     Section  2.7(b))  with  respect  to  any  required  registration  or  other
     qualification of securities under any Federal or state law or regulation of
     any governmental authority, other than the Securities Act.

          (e) Indemnification  Payments.  The  indemnification  required by this
     Section 2.7 shall be made by periodic payments of the amount thereof during
     the course of the investigation or defense,  as and when bills are received
     or expense, loss, damage or liability is incurred.

          (f) Contribution. If the indemnification provided for in the preceding
     subdivision of this Section 2.7 is  unavailable to an indemnified  party in
     respect of any  expense,  loss,  claim,  damage or  liability  referred  to
     therein,  then  each  indemnifying  party,  in  lieu of  indemnifying  such
     indemnified  party,  shall contribute to the amount paid or payable by such
     indemnified  party as a result  of such  expense,  loss,  claim,  damage or
     liability (i) in such  proportion as is appropriate to reflect the relative
     benefits  received  by the  Company  on the  one  hand  and the  holder  or
     underwriter,  as the case may be, on the other from the distribution of the
     Registrable  Securities  or (ii) if the  allocation  provided by clause (i)
     above  is not  permitted  by  applicable  law,  in  such  proportion  as is
     appropriate to reflect not only the relative benefits referred to in clause
     (i) above but also the relative fault of the Company on the one hand and of
     the holder or  underwriter,  as the case may be, on the other in connection
     with the  statements or omissions  which  resulted in such  expense,  loss,
     damage   or   liability,   as  well  as  any   other   relevant   equitable
     considerations.  The relative  benefits  received by the Company on the one
     hand and the  holder  or  underwriter,  as the case may be, on the other in
     connection with the  distribution of the  Registrable  Securities  shall be
     deemed to be in the same  proportion as the total net proceeds  received by
     the Company  from the initial  sale of the  Registrable  Securities  by the
     Company to

                                       10
<PAGE>

     the purchasers  bear to the gain, if any,  realized by all selling  holders
     participating   in  such  offering  or  the   underwriting   discounts  and
     commissions  received by the underwriter,  as the case may be. The relative
     fault of the Company on the one hand and of the holder or  underwriter,  as
     the case may be, on the other shall be  determined  by reference  to, among
     other things,  whether the untrue or alleged untrue statement of a material
     fact or omission to state a material fact relates to  information  supplied
     by the  Company,  by the  holder  or by the  underwriter  and the  parties"
     relative intent, knowledge,  access to information supplied by the Company,
     by the  holder or by the  underwriter  and the  parties"  relative  intent,
     knowledge, access to information and opportunity to correct or prevent such
     statement or omission,  provided that the foregoing  contribution agreement
     shall not inure to the benefit of any indemnified party if  indemnification
     would be unavailable to such indemnified  party by reason of the provisions
     contained in the first sentence of subdivision (a) of this Section 2.7, and
     in no event shall the  obligation of any  indemnifying  party to contribute
     under this subdivision (f) exceed the amount that such  indemnifying  party
     would  have  been  obligated  to  pay  by  way  of  indemnification  if the
     indemnification provided for under subdivisions (b) of this Section 2.7 had
     been available under the circumstances.

     The Company and the holders of Registrable  Securities  agree that it would
not be just and equitable if contribution  pursuant to this subdivision (f) were
determined by pro rata allocation (even if the holders and any underwriters were
treated as one entity for such  purpose)  or by any other  method of  allocation
that does not take account of the  equitable  considerations  referred to in the
immediately  preceding  paragraph.  The amount paid or payable by an indemnified
party as a result of the losses,  claims, damages and liabilities referred to in
the immediately  preceding paragraph shall be deemed to include,  subject to the
limitations  set forth in the  preceding  sentence and  subdivision  (c) of this
Section 2.7, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.

     Notwithstanding  the  provisions  of this  subdivision  (f),  no  holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the  amount  by which (i) in the case of any such  holder,  the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the  case of an  underwriter,  the  total  price  at  which  the  Registrable
Securities  purchased  by it and  distributed  to the public were offered to the
public exceeds,  in any such case, the amount of any damages that such holder or
underwriter  has  otherwise  been  required  to pay by reason of such  untrue or
allege   untrue   statement  or  omission.   No  Person   guilty  of  fraudulent
misrepresentation  (within the meaning of Section 11(f) of the  Securities  Act)
shall be  entitled  to  contribution  from any person who was not guilty of such
fraudulent misrepresentation.

     3. Definitions.  As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:

          "Agreement": As defined in Section 1.

          "Commission":  The  Securities  and Exchange  Commission  or any other
     Federal agency at the time administering the Securities Act.

                                       11
<PAGE>

          "Common Stock": As defined in Section 1.

          "Company": As defined in the introductory paragraph of this Agreement.

          "Conversion Shares": As defined in Section 1.

          "Debentures":  As  defined  in  Section  1, such term to  include  any
     securities issued in substitution of or in addition to such Debentures.

          "Exchange Act": The Securities  Exchange Act of 1934, as amended,  and
     the rules and regulations of the Commission thereunder.

          "Exchange Agreement": As defined in Section 1.

          "Person":  A  corporation,  association,  partnership,   organization,
     business,  individual,  governmental or political  subdivision thereof or a
     governmental agency.

          "Registrable Securities":  The Securities and any securities issued or
     issuable with respect to such  Securities by way of stock dividend or stock
     split or in  connection  with a  combination  of shares,  recapitalization,
     merger,  consolidation or other  reorganization  or otherwise.  Once issued
     such  securities  shall  cease  to be  Registrable  Securities  when  (a) a
     registration  statement with respect to the sale of such  securities  shall
     have become  effective under the Securities Act and such  securities  shall
     have been disposed of in accordance with such registration  statement,  (b)
     they shall have been distributed to the public pursuant to Rule 144 (or any
     successor  provision)  under the  Securities  Act, (c) they shall have been
     otherwise  transferred,  new  certificates  for them not  bearing  a legend
     restricting  further  transfer shall have been delivered by the Company and
     subsequent   disposition  of  them  shall  not  require   registration   or
     qualification  of them under the  Securities  Act or any similar  state law
     then in force,  (d) they shall have  ceased to be  outstanding,  (e) on the
     expiration of the applicable Registration Maintenance Period or (f) any and
     all legends  restricting  transfer  thereof have been removed in accordance
     with the provisions of Rule 144(k) (or any successor  provision)  under the
     Securities Act.

          "Registration  Expenses":  All  expenses  incident  to  the  Company's
     performance  of or  compliance  with  this  Agreement,  including,  without
     limitation, all registration,  filing and NASD fees, all stock exchange and
     OTC Bulletin Board or other NASD or stock  exchange  listing fees, all fees
     and  expenses  of  complying  with  securities  or blue sky laws,  all word
     processing,  duplicating  and  printing  expenses,  messenger  and delivery
     expenses,  the fees and disbursements of counsel for the Company and of its
     independent  public  accountants,  including  the  expenses  of any special
     audits  or  "cold  comfort"   letters  required  by  or  incident  to  such
     performance and compliance,  the reasonable fees and  disbursements  of not
     more than one law firm (not to exceed  $20,000)  retained  by the holder or
     holders of more than 50% of the Registrable Securities,  premiums and other
     costs of policies of insurance of the Company against  liabilities  arising
     out of the public offering of the Registrable  Securities  being registered
     and any fees and disbursements of underwriters  customarily paid by issuers
     or  sellers  of  securities,   but  excluding  underwriting  discounts  and
     commissions and transfer  taxes,  if any,  provided that, in any case where
     Registration  Expenses  are not to be borne by the Company,  such  expenses
     shall

                                       12
<PAGE>

     not include salaries of Company  personnel or general overhead  expenses of
     the  Company,  auditing  fees,  premiums  or  other  expenses  relating  to
     liability  insurance  required  by  underwriters  of the  Company  or other
     expenses for the preparation of financial statements or other data normally
     prepared by the Company in the ordinary course of its business or which the
     Company would have incurred in any event.

          "Registration Maintenance Period": As defined in Section 2.3.

          "Required Effectiveness Date": As defined in Section 2.1.

          "Securities  Act":  The  Securities  Act of 1933, as amended,  and the
     rules and regulations of the Commission thereunder.

          "Sellers" Representative": Global Capital Advisors Ltd. or such Person
     designated by Global Capital Advisors Ltd. as of the time of disposition of
     the  last  of the  Debentures  held by the  Fund  (or  subsequent  Sellers"
     Representative).

     4. Rule 144. The Company shall timely file the reports required to be filed
by it under the  Securities  Act and the Exchange Act (including but not limited
to the reports  under  Sections 13 and 15(d) of the  Exchange Act referred to in
subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act)
and the rules and regulations  adopted by the Commission  thereunder (or, if the
Company is not  required  to file such  reports,  will,  upon the request of any
holder of Registrable Securities, make publicly available other information) and
will take such  further  action as any  holder  of  Registrable  Securities  may
reasonably request,  all to the extent required from time to time to enable such
holder to sell Registrable  Securities without registration under the Securities
Act within the limitation of the  exemptions  provided by (a) Rule 144 under the
Securities  Act,  as such  Rule may be  amended  from  time to time,  or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any holder of Registrable Securities, the Company will deliver to such holder
a written  statement as to whether it has complied with the requirements of this
Section 4.

     5.  Amendments  and Waivers.  This Agreement may be amended and the Company
may take  any  action  herein  prohibited,  or omit to  perform  any act  herein
required to be  performed  by it, only if the Company  shall have  obtained  the
written consent to such  amendment,  action or omission to act, of the holder or
holders  of the  sum of  the  51% or  more  of  the  shares  of (i)  Registrable
Securities issued at such time, plus (ii) Registrable  Securities  issuable upon
exercise or conversion of the Securities then constituting derivative securities
(if such Securities were not fully exchanged or converted in full as of the date
such consent if sought).  Each holder of any Registrable  Securities at the time
or  thereafter  outstanding  shall be bound by any  consent  authorized  by this
Section 5, whether or not such Registrable  Securities shall have been marked to
indicate such consent.

     6.  Nominees  for  Beneficial  Owners.  In the event  that any  Registrable
Securities  are  held  by a  nominee  for  the  beneficial  owner  thereof,  the
beneficial owner thereof may, at its election,  be treated as the holder of such
Registrable Securities for purposes of any request or

                                       13
<PAGE>

other action by any holder or holders of Registrable Securities pursuant to this
Agreement  or any  determination  of any  number  of  percentage  of  shares  of
Registrable  Securities  held by an holder or holders of Registrable  Securities
contemplated  by this  Agreement.  If the  beneficial  owner of any  Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership or such Registrable Securities.

     7. Notices.  Except as otherwise  provided in this Agreement,  all notices,
requests and other  communications to any Person provided for hereunder shall be
in writing and shall be given to such  Person (a) in the case of a party  hereto
other than the  Company,  addressed to such party in the manner set forth in the
Exchange  Agreement or at such other address as such party shall have  furnished
to the Company in writing, or (b) in the case of any other holder of Registrable
Securities,  at the address that such holder shall have furnished to the Company
in  writing,  or,  until any such other  holder so  furnishes  to the Company an
address,  then to and at the  address  of the last  holder  of such  Registrable
Securities  who has  furnished an address to the Company,  or (c) in the case of
the  Company,  at the address set forth on the  signature  page  hereto,  to the
attention of its  President,  or at such other  address,  or to the attention of
such other  officer,  as the  Company  shall have  furnished  to each  holder of
Registrable  Securities at the time  outstanding.  Each such notice,  request or
other communication shall be effective (i) if given by mail, 72 hours after such
communication  is  deposited  in the mails with  first  class  postage  prepaid,
addressed as aforesaid or (ii) if given by any other means  (including,  without
limitation,  by fax or air  courier),  when  delivered at the address  specified
above,  provided  that any such notice,  request or  communication  shall not be
effective until received.

     8.  Assignment.  This  Agreement  shall be  binding  upon and  inure to the
benefit of and be enforceable by the parties hereto. In addition, and whether or
not any  express  assignment  shall  have  been  made,  the  provisions  of this
Agreement which are for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any subsequent holder of any
Registrable  Securities.  Each  of the  Holders  of the  Registrable  Securities
agrees,  by accepting any portion of the Registrable  Securities  after the date
hereof,  to the  provisions of this  Agreement  including,  without  limitation,
appointment  of the  Sellers"  Representative  to act on behalf  of such  Holder
pursuant to the terms hereof which such actions  shall be made in the good faith
discretion of the Sellers"  Representative and be binding on all persons for all
purposes.

     9. Descriptive  Headings.  The descriptive headings of the several sections
and  paragraphs of this  Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.

     10.  Governing  Law.  THIS  AGREEMENT  SHALL BE  CONSTRUED  AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.

     11.  Counterparts.  This  Agreement may be executed by facsimile and may be
signed  simultaneously  in any number of  counterparts,  each of which  shall be
deemed an original,  but all such counterparts shall together constitute one and
the same instrument.

                                       14
<PAGE>

     12. Entire  Agreement.  This  Agreement  embodies the entire  agreement and
understanding  between the Company and each other party  hereto  relating to the
subject  matter hereof and supersedes  all prior  agreements and  understandings
relating to such subject matter.

     13. Severability. If any provision of this Agreement, or the application of
such  provisions  to any  Person or  circumstance,  shall be held  invalid,  the
remainder of this Agreement,  or the application of such provision to Persons or
circumstances  other  than  those  to  which it is held  invalid,  shall  not be
affected thereby.

                                       15
<PAGE>

     IN WITNESS  WHEREOF,  the parties have caused this Agreement to be executed
and delivered by their respective  officers  thereunto duly authorized as of the
date first above written.

                             AMERICAN INTERNATIONAL PETROLEUM CORPORATION

                                 By:      ______________________________________
                                 Name:    Denis J. Fitzpatrick
                                 Title:   Chief Financial Officer
                                 Address: 2950 North Loop West, Suite 1000
                                          Houston, Texas   77092

                                          Fax:     713-682-7278
                                          Tel.:    713-802-0087

                             GCA STRATEGIC INVESTMENT FUND LIMITED

                                 By:      ______________________________________
                                 Name:    Lewis N. Lester
                                 Title:   Director
                                 Address: c/o Prime Management Limited
                                          Mechanics Building
                                          12 Church Street
                                          Hamilton HM II, Bermuda

                                          Fax:     441-295-3926
                                          Tel.:    441-295-0329

                                                   Registration Rights Agreement

                                       16
<PAGE>

                                TABLE OF CONTENTS

1.   Introduction.............................................................1
     1.1      Exchange Agreement..............................................1
     1.2      Definition of Securities........................................1
     1.3      Trading Market Representation...................................1

2.   Registration under Securities Act, etc...................................1
     2.1      Mandatory Registration..........................................1
              (a)      Registration of Registrable Securities.................1
              (b)      Registration Statement Form............................2
              (c)      Expenses...............................................2
              (d)      Effective Registration Statement.......................2
              (e)      Plan of Distribution...................................2
     2.2      Incidental Registration.........................................3
              (a)      Right to Include Registrable Securities................3
              (b)      Priority in Incidental Registrations...................3
     2.3      Registration Procedures.........................................4
     2.4      Underwritten Offerings..........................................7
              (a)      Incidental Underwritten Offerings......................7
              (b)      Holdback Agreements....................................7
              (c)      Participation in Underwritten Offerings................7
     2.5      Preparation; Reasonable Investigation...........................8
     2.6      Registration Default Fee........................................8
     2.7      Indemnification.................................................8
              (a)      Indemnification by the Company.........................8
              (b)      Indemnification by the Sellers.........................9
              (c)      Notices of Claims, etc.................................9
              (d)      Other Indemnification.................................10
              (e)      Indemnification Payments..............................10
              (f)      Contribution..........................................10

3.   Definitions.............................................................11

4.   Rule 144................................................................13

5.   Amendments and Waivers..................................................13

6.   Nominees for Beneficial Owners..........................................14

7.   Notices.................................................................14

8.   Assignment..............................................................14

9.   Descriptive Headings....................................................14

10.  Governing Law...........................................................14

11.  Counterparts............................................................14

12.  Entire Agreement........................................................15

13.  Severability............................................................15

                                       i
<PAGE>

                          Registration Rights Agreement

                                   dated as of

                                 April 28, 2001

                                 by and between

                  American International Petroleum Corporation,

                                       and

                      GCA Strategic Investment Fund Limited

<PAGE>

                                    EXHIBIT C

                          FORM OF SOLVENCY CERTIFICATE

<PAGE>

                  AMERICAN INTERNATIONAL PETROLEUM CORPORATION

                              SOLVENCY CERTIFICATE

     I,  Denis  J.   Fitzpatrick,   the  Chief  Financial  Officer  of  American
International  Petroleum Corporation,  a Nevada corporation (the "Company"),  on
behalf of the Company, hereby certify that:

     1. I am the duly  elected  and  qualified  Chief  Financial  Officer of the
Company and am  familiar  with the  business  and  financial  matters and things
hereinafter described.

     2. This Certificate is made and delivered to GCA Strategic  Investment Fund
Limited (the  "Purchaser")  pursuant to Section 6.1(c) of that certain  Exchange
Agreement among the Company and the Purchaser (the  "Agreement").  All terms not
defined herein shall have the meanings given them in the Agreement.

     3. As of the  Closing  Date and  after  giving  effect to the  issuance  of
Convertible Debentures under the Agreement and to the transactions  contemplated
under the Agreement and the other Transaction Agreements:

          (a)  The  aggregate  value  of  the  Company  and  its   Subsidiaries,
     collectively and  individually,  as a going concern,  at their present fair
     market value as reasonably  determined by the  undersigned  assuming normal
     market  conditions  (i.e.,  the  amount  which  may be  realized  within  a
     reasonable time,  considered to be six months to one year,  through sale at
     the going  concern  value as the amount  which  could be  obtained  for the
     property  in  question  within  such  period  by  a  capable  and  diligent
     businessman  from an  interested  buyer who is  willing to  purchase  under
     ordinary  selling  conditions),  exceeds  the  amount  of all the debts and
     liabilities (including contingent, subordinated, unmatured and unliquidated
     liabilities)  of  the  Company  and  its  Subsidiaries,   collectively  and
     individually.

          (b) The  aggregate  value of all  liabilities  of the  Company and its
     Subsidiaries,  collectively  and  individually,  is less than the aggregate
     value of all assets (including  goodwill and other intangible  assets) at a
     fair  valuation  of the  Company  and its  Subsidiaries,  collectively  and
     individually.

          (c) The Company and its  Subsidiaries,  collectively and individually,
     do not have an  unreasonably  small  capital  with which to  conduct  their
     business operations as heretofore conducted.

          (d)  The  Company  and  each  of its  Subsidiaries,  collectively  and
     individually,  have no reason to believe that they will not have sufficient
     cash  flow to  enable  them to pay their  liabilities  as such  liabilities
     become absolute and mature.

          (e)  No  final  judgments  against  the  Company  or  any  Subsidiary,
     collectively or individually,  in actions for money damages with respect to
     pending  or  threatened

<PAGE>

     litigation  could reasonably be expected to be rendered at a time when, and
     in an amount such that,  the  Company or any  Subsidiary,  collectively  or
     individually,  will be unable to satisfy  any such  judgments  promptly  in
     accordance  with their terms  (taking into  account the maximum  reasonable
     amount of such  judgments in any such  actions and the earliest  reasonable
     time at which such  judgments  might be rendered) and the cash available to
     the Company and its  Subsidiaries,  collectively  and  individually,  after
     taking into account all other  anticipated  uses of the cash of the Company
     and its Subsidiaries, collectively and individually (including the payments
     on or in respect of debt),  is anticipated to be sufficient to pay all such
     judgments promptly in accordance with their terms.

     4. The Company and its Subsidiaries,  collectively and  individually,  have
not  incurred,  do not intend to incur,  and  believe  that they will not incur,
liabilities  beyond their ability to pay such  liabilities  as such  liabilities
become absolute and mature.

     5. The Company and its Subsidiaries,  collectively and individually, do not
contemplate   filing  a  petition  in  bankruptcy  or  for  an   arrangement  or
reorganization  under  the  Federal  Bankruptcy  Code,  not,  to the  best of my
knowledge, are there any threatened bankruptcy or insolvency proceedings against
the Company or its Subsidiaries.

                            [Signature page follows]

<PAGE>

     IN WITNESS  WHEREOF,  the undersigned has caused this instrument to be duly
executed.

     Dated: April 28, 2001

                                   AMERICAN INTERNATIONAL PETROLEUM CORPORATION

                                   By:__________________________________________
                                   Name:  Denis J. Fitzpatrick
                                   Title: Chief Financial Officer

<PAGE>

                                    EXHIBIT D

                          FORM OF OFFICER'S CERTIFICATE

<PAGE>

                  AMERICAN INTERNATIONAL PETROLEUM CORPORATION

                              OFFICER'S CERTIFICATE

     I, Denis J. Fitzpatrick,  Chief Financial Officer of American International
Petroleum Corporation (the "Company") DO HEREBY CERTIFY as follows:

     (a) Attached hereto as Annex 1 is a true,  correct and complete copy of the
Certificate of  Incorporation of the Company,  in effect on the date hereof.  No
amendment  or  other  document  relating  to or  affecting  the  Certificate  of
Incorporation  has been  filed in the  office of any  Secretary  of State of the
State of Nevada,  after the last date of any document included  therein,  and no
such action has been taken by the Company or officers, directors or shareholders
of the Company to effect or authorize any further amendment thereto.

     (b) Attached hereto as Annex 2 is a true,  correct and complete copy of the
Bylaws  of the  Company,  amended  and in effect  on the date  hereof,  and such
Bylaws,  as  amended,  have  been in full  force and  effect at all times  since
adoption, through the date hereof.

     (c) Attached  hereto as Annex 3 are true,  correct and  complete  copies of
those  resolutions  adopted  by the  Board of  Directors  of the  Company;  said
resolutions  have not been amended,  rescinded or modified  since their adoption
and remain in full force and effect as of the date hereof,  and said resolutions
are the only  resolutions  adopted by the Board of Directors of the Company,  or
any committee thereof, relating in any way to the Exchange Agreement dated as of
April 28, 2001,  among the Company and the Purchaser (the "Exchange  Agreement")
and any Transaction Agreement.

     (d) As of the date hereof, no Default has occurred and been continuing.

     (e) The  representations  and warranties of the Company and each subsidiary
contained in each  Transaction  Agreement  are true and correct on and as of the
date hereof as if made on and as of such date and the Company has  performed and
complied with all covenants and agreements required by the Transaction Agreement
to be performed or complied with at or prior to the date hereof.

     (f) The Company and each  subsidiary  has  performed  and complied with all
conditions  required by the Transaction  Agreements to be performed and complied
with by it prior to the date hereof.

     (g) The following  persons are on the date hereof duly qualified and acting
officers of the  Company,  duly  elected or  appointed  to the offices set forth
beside their  respective  names and signatures,  and each such person who, as an
officer  of the  Company,  signed  the  Exchange  Agreement,  any  of the  other
Transaction  Agreements or any other  document  delivered  before or on the date
hereof in connection  with such  agreements  and documents and the  transactions
contemplated  therein was, at the respective times of such signing and delivery,
and is now duly elected or appointed, qualified and acting as such officers, and
the  signatures  of such persons  appearing on such  documents are their genuine
signatures.

<PAGE>

         Name              Position                           Signature

Denis J. Fitzpatrick       Chief Financial Officer    _____________________

William L. Tracy           Assistant Secretary        _____________________

     (h) The  collateral  described  in that  certain  Security  and  Pledge Ag+
reement and that certain Mortgage and Security  Agreement,  each as amended date
hereof is free and clear of any liens or  encumbrances  except as  described  in
such agreements.

     All terms not otherwise  defined herein shall have the respective  meanings
set forth in the Exchange Agreement.

                            [Signature page follows]

<PAGE>

     IN WITNESS  WHEREOF,  the undersigned has caused this instrument to be duly
executed.

     Dated: April 28, 2001

                                 AMERICAN INTERNATIONAL PETROLEUM CORPORATION

                                 By:
                                    --------------------------------------------
                                      Name:  Denis J. Fitzpatrick
                                      Title: Chief Financial Officer

                                                           Officer's Certificate
<PAGE>

                      AMENDMENT NO. 1 TO SECURITY AGREEMENT

     This AMENDMENT NO. 1 (this "Amendment") is made as of April 28, 2001 by and
between  AMERICAN  INTERNATIONAL  PETROLEUM  CORPORATION,  a Nevada  corporation
("AIPC"),  ST. MARKS REFINERY,  INC., a Florida  corporation ("St. Marks') (AIPC
and St. Marks are collectively referred to as the "Debtors"), and GCA Investment
Fund Limited, a Bermuda corporation ("Secured Party").

     WHEREAS,  Debtors and Secured Party entered into a Security Agreement dated
as of May 8, 2000 (the  "Security  Agreement"),  pursuant to which Secured Party
was  granted a  security  interest  in  certain of the  Debtor's  property  (the
"Collateral")  which secures that certain Bridge Note dated as of May 8, 2000 in
the original Principal Amount of Three Million Dollars ($3,000,000) (the "Bridge
Note"),

     WHEREAS,  AIPC and Secured  Party have  agreed,  pursuant  to that  certain
Exchange Agreement dated of even date herewith,  to exchange the Bridge Note for
a  $5,936,128.00  Principal  Amount 3% Convertible  Debenture due April 28, 2002
(the " Convertible Debenture"); and

     WHEREAS,  Debtors and Secured Party desire to amend this Security Agreement
to grant  Secured  Party a security  interest  in the  Collateral  to secure the
Convertible Debenture.

         NOW THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, Debtors and Secured Party hereby agree as follows:

     1. The Security Agreement shall be amended so that the term "Note" shall be
defined as:  "Note - means that  certain 3%  Convertible  Debenture  dated as of
April  28,  2001,  in the  original  principal  amount of  $5,936,128,  made and
executed by AIPC and issued to Secured Party, and all amendments and supplements
thereto,  restatements  thereof and  renewals,  extensions,  restructurings  and
refinancings thereof."

     2. All other terms and provisions of the Security Agreement shall remain in
full force and effect and unchanged by this Amendment.

     Duly executed and delivered by the parties on the date first written above.

                           AMERICAN INTERNATIONAL PETROLEUM CORPORATION

                           By: _________________________________________
                           Name:  Denis J. Fitzpatrick
                           Title:  Chief Financial Officer

                           ST. MARKS REFINERY, INC.

                           By: _________________________________________
                           Name:  Denis J. Fitzpatrick
                           Title:   Chief Financial Officer

                           GCA STRATEGIC INVESTMENT FUND LIMITED

                           By: _________________________________________
                           Title:________________________________________

<PAGE>

                      AMENDMENT NO. 2 TO SECURITY AGREEMENT

     This AMENDMENT NO. 2 (this "Amendment") is made as of April 28, 2000 by and
between  AMERICAN  INTERNATIONAL  PETROLEUM  CORPORATION,  a Nevada  corporation
("AIPC"),  ST. MARKS REFINERY,  INC., a Florida  corporation ("St. Marks') (AIPC
and St. Marks are collectively referred to as the "Debtors"), and GCA Investment
Fund Limited, a Bermuda corporation ("Secured Party").

     WHEREAS,  Debtors and Secured Party entered into a Security Agreement dated
as of December 1, 1999 as amended by Amendment No. 1 to Security Agreement dated
February 28, 2000 (the  "Security  Agreement"),  pursuant to which Secured Party
was  granted a  security  interest  in  certain of the  Debtor's  property  (the
"Collateral")  which  secures that  certain  Bridge Note dated as of December 1,
1999 in the  original  Principal  Amount of Two Million  Five  Hundred  Thousand
Dollars  ($2,500,000) and that certain Bridge Note dated as of February 28, 2000
in the Principal  amount of One Million Eight  Hundred  Fifty  Thousand  Dollars
($1,850,000) each made by AIPC and issued to Secured Party (the "Bridge Notes"),

     WHEREAS,  AIPC  and  Secured  Party,  pursuant  to  that  certain  Exchange
Agreement dated of even date herewith,  have agreed to exchange the Bridge Notes
for a $5,936,128.00 Principal Amount 3% Convertible Debenture due April 28, 2002
(the "Debenture");

     WHEREAS,  Debtors and Secured Party desire to amend this Security Agreement
to provide for a security interest in the Collateral to secure the Debenture.

     NOW  THEREFORE,  in  consideration  of the  foregoing,  and intending to be
legally bound hereby, Debtors and Secured Party hereby agree as follows:

     3. The Security Agreement shall be amended so that the term "Note" shall be
defined as "Note - means that certain 3% Convertible Debenture dated as of April
28, 2001, in the original  principal amount of $5,936,128,  made and executed by
AIPC and issued to Secured Party,  and all amendments and  supplements  thereto,
restatements thereof and renewals,  extensions,  restructurings and refinancings
thereof."

     4. All other terms and provisions of the Security Agreement shall remain in
full force and effect and unchanged by this Amendment.

     Duly executed and delivered by the parties on the date first written above.

                           AMERICAN INTERNATIONAL PETROLEUM CORPORATION

                           By: _________________________________________
                           Name:  Denis J. Fitzpatrick
                           Title: Chief Financial Officer

                           ST. MARKS REFINERY, INC.

                           By: _________________________________________
                           Name:  Denis J. Fitzpatrick
                           Title:  Chief Financial Officer

                           GCA STRATEGIC INVESTMENT FUND LIMITED

                           By: _________________________________________
                           Title:________________________________________

<PAGE>

               AMENDMENT NO. 1 TO MORTGAGE AND SECURITY AGREEMENT

     This Amendment No. 1 (the  "Amendment") is made as of April 28, 2001 by and
between St. Marks Refinery, Inc., a Florida corporation ("Borrower"),  having an
address  at  5201  Westshore  Boulevard,  Tampa,  Florida  33611-5699,  and  GCA
Strategic Investment Fund Limited, a Bermuda corporation  ("Lender"),  having an
address at Mechanics Building, 12 Church Street, Hamilton HMII, Bermuda.

     WHEREAS, Borrower and Lender entered into a Mortgage and Security Agreement
dated as of February  28, 2000 (the  "Mortgage"),  pursuant to which  Lender was
granted a security interest in certain of Borrower's real property. The Mortgage
secures that certain Bridge Note in the Principal Amount of  $1,850,000.00  made
by American  International  Petroleum Corporation ("AIPC"), the sole shareholder
of Borrower, in favor of Lender;

     WHEREAS, AIPC and Lender, pursuant to that certain Exchange Agreement dated
of even date herewith (the  "Exchange  Agreement"),  have agreed to exchange the
Bridge Note for a $5,936,128.00  Principal  Amount 3% Convertible  Debenture due
April 28, 2002 made by AIPC to Lender (the "Convertible Debenture"); and

     WHEREAS,  Borrower and Lender desire to amend the Mortgage to provide for a
security interest in the collateral to secure the Convertible Debenture.

     NOW  THEREFORE,  in  consideration  of the  foregoing  and  intending to be
legally bound hereby, Borrower and Lender hereby agree , as follows:

     1. The  Mortgage  shall be  amended  so that the  Background  Statement  is
deleted in its  entirety  and a new  Background  Statement  is  inserted in lieu
thereof which reads as follows:

     "AIPC and Lender are parties to that certain  Exchange  Agreement  dated of
even date herewith (the "Exchange  Agreement") pursuant to which Lender and AIPC
agreed to exchange (i) $1,850,000.00  Principal Amount Bridge dated February 28,
2000, (ii) $2,500,000.00 Principal Amount Bridge Note dated December 1, 1999 and
(iii) $3,000,000.00  Principal Amount Bridge Note dated May 8, 2000 (the "Bridge
Notes") made by AIPC to Lender in exchange for a $5,936,128.00  Principal Amount
3% Convertible Debenture.  The exchange is evidenced by that certain Convertible
Debenture  dated  April 28,  2001 in the  Principal  Amount  $5,936,128.00  (the
"Note").  AIPC  desires to secure the Note with a security  interest  in certain
real  property  owned by  Borrower.  The  Exchange  Agreement,  the  Note,  this
Mortgage,  and  all of  their  instruments  evidencing,  securing  or  otherwise
relating to the Note are hereinafter referred to as the "Mortgage Documents".

     2. The  Mortgage  shall  further be  amended  so that the term  "Securities
Purchase Agreement" used in the Mortgage shall be replaced in each instance with
the term "Exchange Agreement".

<PAGE>

     3. All other terms and provisions of the Security Agreement shall remain in
full force and effect and unchanged by this Amendment.

     IN WITNESS  WHEREOF,  Borrower has executed this Mortgage under seal, as of
the day and year first above written.

Signed, sealed and delivered          ST MARKS REFINERY, INC.
in the presence of:

_________________________________      By: _____________________________________
Witness                                Name:  Denis J. Fitzpatrick
Print Name: Sandra Bell                Title: Chief Financial Officer

                                       Attest:__________________________________
_________________________________      Name:  William L. Tracy
Witness                                Title: Assistant Secretary
Print Name: Sandra Bell

                                              [CORPORATE SEAL]

<PAGE>

STATE OF TEXAS

COUNTY OF HARRIS

     The  foregoing  instrument  was  acknowledged  before me on the 28th day of
April,  2001, by Denis J.  Fitzpatrick and William L. Tracy, the Chief Financial
Officer and Assistant Secretary,  respectively,  of St. Marks Refinery,  Inc., a
Florida  corporation,  and they acknowledged  executing the foregoing instrument
under  authority  duly vested in them by said  corporation,  as the free act and
deed of said corporation, for the purposes therein expressed.

     WITNESS my hand and official  seal in the county and state last  aforesaid,
as of the 28th day of April, 2001.

                                       _________________________________________
                                       Notary Public

                                       Print Name:______________________________

                                       My commission expires:___________________

                                       Notary Seal

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