Document:

UNLESS THIS  CERTIFICATE  IS PRESENTED BY AN  AUTHORIZED  REPRESENTATIVE  OF THE
DEPOSITORY  TRUST COMPANY,  A NEW YORK  CORPORATION  ("DTC"),  TO ARIZONA PUBLIC
SERVICE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY  CERTIFICATE  ISSUED IS  REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER  NAME AS IS  REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY
PAYMENT  IS MADE TO CEDE & CO. OR TO SUCH  OTHER  ENTITY AS IS  REQUESTED  BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR  OTHERWISE BY OR TO ANY PERSON IS WRONGFUL  INASMUCH AS THE  REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

                         ARIZONA PUBLIC SERVICE COMPANY

                              7 5/8% Note Due 2005

No. 1                                                               $300,000,000
                                                           CUSIP No. 040555 CA O

     Arizona Public Service  Company,  a corporation duly organized and existing
under the laws of Arizona (herein called the "Company",  which term includes any
successor  Person  under  the  Indenture  hereinafter  referred  to),  for value
received,  hereby  promises to pay to Cede & Co.,  or  registered  assigns,  the
principal sum of Three  Hundred  Million  Dollars on August 1, 2005,  and to pay
interest  thereon from August 7, 2000 or from the most recent  Interest  Payment
Date to which  interest has been paid or duly  provided  for,  semi-annually  in
arrears on February 1 and August 1 in each year, commencing February 1, 2001, at
the rate of 7 5/8%,  until the  principal  hereof is paid or made  available for
payment.

     The interest so payable,  and punctually  paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the Person
in  whose  name  this  Security  (or  one or  more  Predecessor  Securities)  is
registered  at the  close  of  business  on the  Regular  Record  Date  for such
interest,  which  shall  be the  January  15 or July  15,  as the  case  may be,
immediately preceding the Interest Payment Date (whether or not a Business Day).
Any such  interest not so punctually  paid or duly  provided for will  forthwith
cease to be payable to the Holder on such Regular  Record Date and may either be
paid to the  Person in whose  name  this  Security  (or one or more  Predecessor
Securities)  is registered at the close of business on a Special Record Date for
the  payment  of such  Defaulted  Interest  to be fixed by the  Trustee,  notice
whereof  shall be given to Holders of Securities of this series not less than 10
days  prior to such  Special  Record  Date,  or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities  exchange
on which the  Securities  of this series may be listed,  and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
<PAGE>
     Payment of the principal of (and premium,  if any) and any interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in The City of New York,  in such coin or currency of the United  States
of America as at the time of payment is legal  tender for  payment of public and
private debts;  provided,  however, that at the option of the Company payment of
interest  may be made by check  mailed to the  address  of the  Person  entitled
thereto as such address shall appear in the Security Register.

     Reference  is hereby made to the further  provisions  of this  Security set
forth on the reverse  hereof,  which further  provisions  shall for all purposes
have the same effect as if set forth at this place.

     Unless the  certificate of  authentication  hereon has been executed by the
Trustee  referred to on the reverse  hereof by manual  signature,  this Security
shall  not be  entitled  to any  benefit  under  the  Indenture  or be  valid or
obligatory for any purpose.

     IN WITNESS  WHEREOF,  the  Company has caused  this  instrument  to be duly
executed under its corporate seal.

                                        ARIZONA PUBLIC SERVICE COMPANY

                                        By Michael V. Palmeri
                                           -------------------------------------
                                           Vice President, Finance

Attest:

Faye Widenmann
----------------------------
Vice President and Secretary
<PAGE>
     This  Security  is one of a duly  authorized  issue  of  securities  of the
Company (herein called the "Securities"), issued and to be issued in one or more
series  under an  Indenture,  dated as of January  15, 1998  (herein  called the
"Indenture",  which  term  shall  have  the  meaning  assigned  to  it  in  such
instrument),  between  the  Company  and The Chase  Manhattan  Bank,  as Trustee
(herein  called the "Trustee",  which term includes any successor  trustee under
the Indenture), and reference is hereby made to the Indenture for a statement of
the respective rights,  limitations of rights,  duties and immunities thereunder
of the Company,  the Trustee and the Holders of the  Securities and of the terms
upon which the Securities are, and are to be, authenticated and delivered.  This
Security  is  one of this series  designated  on the  face  hereof,  limited  in
aggregate principal amount to $300,000,000.

     The Securities of this series are subject to redemption  upon not less than
30 days' notice by mail at the option of the Company,  in whole or in part, from
time to time at a  Redemption  Price equal to the  greater of (a) the  principal
amount of the Securities (or portion thereof) of this series to be redeemed plus
interest (if any) accrued to the Redemption  Date or (b) the  Make-Whole  Amount
(as defined  below) with respect to the Securities of this series to be redeemed
(the "Redemption Price").

     If notice has been given as  provided  in the  Indenture  and funds for the
redemption of any  Securities  (or any portion  thereof)  called for  redemption
shall  have been made  available  on the  Redemption  Date  referred  to in such
notice,  such Securities (or any portion thereof) will cease to bear interest on
the date fixed for such  redemption  specified in such notice and the only right
of the Holders of such  Securities  will be to receive payment of the Redemption
Price.

     Notice of any  optional  redemption  of  Securities  of this series (or any
portion  thereof) will be given to Holders at their  addresses,  as shown in the
Security  Register for such  Securities,  not more than 60 nor less than 30 days
prior to the date fixed for  redemption.  The notice of redemption will specify,
among other items,  the Redemption  Price or, if not  then known,  the manner of
calculation  thereof,  and the principal amount of the Securities of this series
held by such Holder to be redeemed.  If less than all of the  Securities of this
series  are to be  redeemed  at the option of the  Company,  the  Trustee  shall
select,  in such  manner as it shall deem fair and  appropriate,  the portion of
such Securities to be redeemed in whole or in part.

     As used herein:

         "MAKE-WHOLE  AMOUNT" means the sum, as determined by a Quotation Agent,
of the present  values of the principal  amount of the Securities of this series
to be redeemed,  together  with  scheduled  payments of interest  (exclusive  of
interest to the Redemption Date) from the Redemption Date to the Stated Maturity
of the Securities of this series, in each case discounted to the Redemption Date
on a  semi-annual  basis,  assuming a 360-day year  consisting  of twelve 30-day
months,  at the Adjusted  Treasury Rate,  plus accrued  interest (if any) on the
principal  amount  of the  Securities  of  this  series  being  redeemed  to the
Redemption Date.
<PAGE>
          "ADJUSTED  TREASURY RATE" means,  with respect to any Redemption Date,
(i)  the  yield,  under  the  heading  which  represents  the  average  for  the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15 (519)" or any successor  publication which is published
weekly  by the  Board of  Governors  of the  Federal  Reserve  System  and which
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury  Constant  Maturities," for the
maturity  corresponding  to the  Comparable  Treasury  Issue (if no  maturity is
within three months before or after the remaining term of the Securities of this
series,  yields for the two published  maturities most closely  corresponding to
the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate
shall be interpolated or extrapolated from such yields on a straight line basis,
rounding  to the  nearest  month)  or  (ii) if such  release  (or any  successor
release) is not published during the week preceding the calculation date or does
not contain such yields,  the rate per year equal to the semi-annual  equivalent
yield to maturity of the Comparable Treasury Issue, calculated using a price for
the  Comparable  Treasury  Issue  (expressed  as a percentage  of its  principal
amount) equal to the Comparable Treasury Price for such Redemption Date, in each
case   calculated on the third Business Day preceding the Redemption  Date, plus
in each case 0.35%.

          "COMPARABLE  TREASURY ISSUE" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term from the Redemption  Date to the Stated  Maturity of the Securities of this
series that would be utilized,  at the time of selection and in accordance  with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the Securities of this series.

          "QUOTATION AGENT" means the Reference  Treasury Dealer selected by the
Trustee after consultation with the Company.

          "REFERENCE TREASURY DEALER" means a primary U.S. Government securities
dealer selected by the Company.

          "COMPARABLE  TREASURY  PRICE"  means,  with respect to any  Redemption
Date, if clause (ii) of the definition of Adjusted  Treasury Rate is applicable,
the  average of three,  or such lesser  number as is  obtained  by the  Trustee,
Reference Treasury Dealer Quotations for such Redemption Date.

          "REFERENCE  TREASURY DEALER  QUOTATIONS"  means,  with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee,  of the bid and asked  prices for the  Comparable  Treasury  Issue,
expressed  in each  case as a  percentage  of its  principal  amount,  quoted in
writing to the Trustee by such Reference  Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such Redemption Date.

     The Securities of this series will not be subject to any sinking fund.
<PAGE>
     In the event of redemption of this Security in part only, a new Security or
Securities of this series and of like tenor for the  unredeemed  portion  hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.

     The Indenture contains  provisions for defeasance at any time of the entire
indebtedness  of the  Security or certain  restrictive  covenants  and Events of
Default with respect to this Security, in each case upon compliance with certain
conditions set forth in the Indenture.

     If an Event of Default  with  respect to  Securities  of this series  shall
occur and be  continuing,  the principal of the Securities of this series may be
declared  due and  payable in the manner  and with the  effect  provided  in the
Indenture.

     The Indenture  permits,  with certain  exceptions as therein provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Company  and the rights of the  Holders of the  Securities  of each series to be
affected under the Indenture at any time by the Company and the Trustee  without
the consent of such Holders in certain limited circumstances or with the consent
of the  Holders of 66-2/3% in  principal  amount of the  Securities  at the time
Outstanding  of  each  series  to  be  affected.  The  Indenture  also  contains
provisions  permitting the Holders of specified  percentages in principal amount
of the  Securities  of each  series  at the time  Outstanding,  on behalf of the
Holders of all  Securities  of such series,  to waive  compliance by the Company
with certain  provisions of the  Indenture  and certain past defaults  under the
Indenture  and their  consequences.  Any such consent or waiver by the Holder of
this  Security  shall be  conclusive  and binding  upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer  hereof or in  exchange  herefor or in lieu  hereof,  whether or not
notation of such consent or waiver is made upon this Security.

     As provided in and subject to the provisions of the  Indenture,  the Holder
of this  Security  shall not have the right to  institute  any  proceeding  with
respect to the Indenture or for the  appointment of a receiver or trustee or for
any other remedy thereunder,  unless such Holder shall have previously given the
Trustee  written  notice of a  continuing  Event of Default  with respect to the
Securities of this series,  the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the  Trustee  to  institute  proceedings  in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have  received  from the Holders of a majority in principal  amount of
Securities of this series at the time Outstanding a direction  inconsistent with
such  request,  and shall have failed to institute any such  proceeding,  for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit  instituted  by the Holder of this  Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.

     No reference  herein to the  Indenture and no provision of this Security or
of the Indenture  shall alter or impair the obligation of the Company,  which is
absolute and unconditional, to pay the principal of and any premium and interest
on this  Security  at the times,  place and rate,  and in the coin or  currency,
herein prescribed.
<PAGE>
     As provided in the Indenture and subject to certain limitations therein set
forth,  the transfer of this Security is registrable  in the Security  Register,
upon  surrender of this Security for  registration  of transfer at the office or
agency of the  Company in any place where the  principal  of and any premium and
interest on this  Security are payable,  duly endorsed by, or  accompanied  by a
written  instrument  of  transfer  in form  satisfactory  to the Company and the
Security  Registrar  duly  executed by, the Holder  hereof or his attorney  duly
authorized in writing,  and thereupon one or more new  Securities of this series
and of like  tenor,  of  authorized  denominations  and for the  same  aggregate
principal amount, will be issued to the designated transferee or transferees.

     The Securities of this series are issuable only in registered  form without
coupons  in  denominations  of $1,000  and any  integral  multiple  thereof.  As
provided in the Indenture and subject to certain  limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of  Securities  of this  series  and of like  tenor  of a  different  authorized
denomination, as requested by the Holder surrendering the same.

     No service  charge shall be made for any such  registration  of transfer or
exchange,  but the Company may require  payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     Prior to due presentment of this Security for registration of transfer, the
Company,  the  Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this  Security is  registered  as the owner  hereof for all
purposes,  whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

     All terms used in this Security  which are defined in the  Indenture  shall
have the meanings assigned to them in the Indenture.

                          CERTIFICATE OF AUTHENTICATION

     This is one of the Securities of the series designated  therein referred to
in the within-mentioned Indenture.

Dated: August 7, 2000                  THE CHASE MANHATTAN BANK
                                                                      AS TRUSTEE

                                        By R. Lorenzen
                                           -------------------------------------
                                                              AUTHORIZED OFFICER<PAGE>   1
                                                                     EXHIBIT 4.2

THE SALE OF THIS SECURITY HAS NOT BEEN REGISTERED PURSUANT TO THE FEDERAL
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS; ACCORDINGLY, THIS SECURITY
IS NOT FREELY TRANSFERABLE AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
OR UPON RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH SALE, TRANSFER OR ASSIGNMENT.

            Void after 5:00 p.m. New York Time, on December 31, 2003
       Non-Transferable Warrant to Purchase 250,000 Shares of Common Stock

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

               WARRANT TO PURCHASE UP TO 250,000 SHARES OF COMMON STOCK

                                       OF

                              I.T. TECHNOLOGY, INC.

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

               This is to Certify That, FOR VALUE RECEIVED, KENSINGTON CAPITAL
CORP. ("Holder"), is entitled to purchase, subject to the provisions of this
Warrant, from I.T. TECHNOLOGY, INC., a Delaware corporation ("Company"), up to
TWO HUNDRED FIFTY THOUSAND SHARES (250,000) of the fully paid, validly issued
and nonassessable shares of Common Stock of the Company ("Common Stock"). The
exact number of shares of Common Stock which may be purchased pursuant to this
Warrant shall be determined by dividing the number of shares of Common Stock
sold pursuant to that certain registration statement, as amended, filed on Form
SB-2 on August 4, 2000 by the Company (the "Registration Statement") by ten
(10), up to a maximum of Two Hundred Fifty Thousand (250,000) shares.  The
Warrant shall vest upon the closing of the sale of the underlying shares of
Common Stock of the Company pursuant to the Registration Statement (the "Vesting
Date"). Promptly after the Vesting Date, the Company shall confirm in writing
the Vesting Date and the number of shares of Common Stock subject to this
Warrant. The Warrant, once vested, is exercisable at any time or from time to
time during the period from the Vesting Date, through and including December 31,
2003, but not later than 5:00 p.m. New York Time, on December 31, 2003
("Exercise Period"). The price to be paid for each share of Common Stock shall
be $6.00 per share from the Vesting Date through December 31, 2001, $7.00 per
from January 1, 2002 through December 31, 2002 and $8.00 per share from January
1, 2003 through December 31, 2003. The shares of Common Stock deliverable upon
such exercise, and as adjusted from time to time, are hereinafter sometimes
referred to as "Warrant Shares" and the respective exercise price of a share of
Common Stock in effect at any time and as adjusted from time to time is
hereinafter sometimes referred to as the "Exercise Price." Holder agrees that
this Warrant shall be restricted from sale, transfer, assignment, or
hypothecation for a period of one year from the effective date of Registration
Statement of the Company filed on Form SB-2 (Reg. No. 333-30364) except to
officers or partners, excluding directors, of the Holder and members of selling
group and/or their officers or partners.

               1. Exercise of Warrant. Holder may exercise this Warrant in whole
or in part, at any time or from time to time on any Business Day on or prior to
the Expiration Date, by delivering to the Company a duly executed notice (a
"Notice of Exercise") in the form of Annex A hereto, by payment to the Company
of the Exercise Price per Warrant Share in an amount equal to the product of (i)
the Exercise Price times (ii) the number of Warrant Shares as to which this
Warrant is being exercised.

<PAGE>   2

               As soon as practicable after the Company shall have received such
Notice of Exercise and the required payment, the Company shall execute and
deliver or cause to be executed and delivered, in accordance with such Notice of
Exercise, to Holder at the address set forth in such Notice of Exercise a
certificate or certificates representing the number of shares of Common Stock
specified in such Notice of Exercise. The Warrant shall be deemed to have been
exercised and such share certificate or certificates shall be deemed to have
been issued, and Holder shall be deemed for all purposes to have become a holder
of record of shares of Common Stock, as of the date that such Notice of Exercise
and any required payment shall have been received by the Company.

               Holder shall surrender this Warrant certificate of the Company
when it delivers the Notice of Exercise, and in the event of a partial exercise
of the Warrant, the Company shall execute and deliver to Holder, at the time the
Company delivers the share certificate or certificates issued pursuant to such
Notice of Exercise, a new Warrant certificate for the unexercised portion of the
Warrant, but in all other respect identical to this Warrant certificate.

               The Company shall not be require to issue fractional shares of
Common Stock upon an exercise of the Warrant. If any fraction of a share would,
but for this restriction, be issuable upon an exercise of the Warrant, in lieu
of delivering such fractional share, the Company shall pay to Holder, in cash,
an amount equal to the same fraction times the FMV for the Common Stock (which,
for the purposes of this Warrant, shall mean the average closing bid price of
the Common Stock on the principal market for the trading of the Common Stock for
the ten trading days prior to the date of the Notice of Exercise) immediately
prior to the date of such exercise.

               The Company shall pay all expenses, taxes and other charges
payable in connection with the preparation, issuance and delivery of
certificates for the Warrant Shares and any new Warrant certificates.

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

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

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

                                      -2-
<PAGE>   3

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

                      3.2 Whenever the respective Exercise Price payable upon
exercise of each Warrant is adjusted pursuant to Subsection 4.1 above, the
number of Shares purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the respective number of Shares initially issuable
upon exercise of this Warrant by the respective Exercise Price in effect on the
date hereof and dividing the product so obtained by the respective Exercise
Price, as adjusted.

                      3.3 No adjustment in the respective Exercise Price shall
be required unless such adjustment would require an increase or decrease of at
least one cent ($0.01) in such price; provided, however, that any adjustment
which by reason of this Subsection 4.3 is not required to be made shall be
carried forward and taken into account in any subsequent adjustment required to
be made hereunder. All calculations under this Section 4 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section 4 to the contrary notwithstanding, the Company shall be
entitled, but shall not be required, to make such changes in the respective
Exercise Price, in addition to those required by this Section 4, as it shall
determine, in its sole discretion, to be advisable in order that any dividend or
distribution in shares of Common Stock, or any subdivision, reclassification or
combination of Common Stock, hereafter made by the Company shall not result in
any Federal Income tax liability to the holders of Common Stock or securities
convertible into Common Stock (including the Warrants).

                      3.4 In the event that at any time, as a result of an
adjustment made pursuant to Subsection 4.1 above, Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsections 4.1 to 4.3 inclusive above.

                      3.5 Irrespective of any adjustments in the respective
Exercise Price or the related number or kind of share purchasable upon exercise
of this Warrant, Warrants

                                      -3-
<PAGE>   4

theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.

               4. Officer's Certificate. Whenever the respective Exercise Price
shall be adjusted as required by the provisions of the foregoing Section 4, the
Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office, an officer's certificate showing the adjusted
respective Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of related additional shares of Common Stock, if any, and such other
facts as shall be necessary to show the reason for and the manner of computing
such adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
executed and delivered pursuant to Section 1 and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
Holder or any such holder.

               5. Notices to Warrant Holder. So long as this Warrant shall be
outstanding, if there occurs a capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to Holder, at least fifteen days prior the date
specified below, a notice containing a brief description of the proposed action
and stating the date on which such reclassification, reorganization,
consolidation, merger, conveyance, lease, dissolution, liquidation or winding up
is to take place and the date, if any is to be fixed, as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up. The failure to give such
notice shall not effect the action taken by the Company.

               6. Reclassification, Reorganization or Merger. In case of
any reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company, or in case of any consolidation or merger
of the Company with or into another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the class issuable upon exercise of
this Warrant) or in case of any sale, lease or conveyance to another corporation
of the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such

                                      -4-
<PAGE>   5

reclassification, change, consolidation, merger, sale or conveyance. Any such
provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section 7 shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection 4.1 hereof.

               7. No Registration under Securities Act. Neither this Warrant nor
any shares issuable upon the exercise of this Warrant have been registered under
the Securities Act or under the securities laws of any state. In issuing this
Warrant the Company has relied upon the exemption from registration provided by
Section 4(2) of the Securities Act for transactions by an issuer not involving
any public offering. Holder has represented to the Company that it has not
acquired this Warrant with a view to distribution and that any shares issuable
upon exercise of this Warrant will not be acquired by it with a view to
distribution. Holder acknowledges by acceptance of the Warrant that the sale of
the Warrant or of any shares issuable upon exercise of this Warrant, under
certain circumstances may be deemed to constitute a distribution within the
meaning of, and require registration under the Securities Act.

               8. Piggy-Back Registration.

                      8.6 Notice of Registration. If at any time the Company
shall determine to register any of its equity securities, either for its own
account or for the account of any holder of its Common Stock, other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to a Rule 145 transaction, or (iii) a registration in which the
only equity security being registered is Common Stock issuable upon conversion
of convertible debt securities which are also being registered, the Company
will:

                             (a) promptly give to Holder written notice thereof,
and

                             (b) subject to the limitations set forth herein,
include in such registration (and any related qualifications including
compliance with Blue Sky laws), and in any underwriting involved therein, all
the Registrable Securities specified in a written request or requests, made
within ten days after the date of such written notice from the Company, by
Holder.

                      8.7 Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise Holder as a part of the written notice given pursuant to
this Section. In such event, the right of Holder to registration pursuant to
this Section shall be conditioned upon such Holder's

                                      -5-
<PAGE>   6

participation in such underwriting and the inclusion of Registrable Securities
in the underwriting shall be limited to the extent provided herein.

                             If Holder proposes to distribute their securities
through such underwriting, Holder shall (together with the Company and the other
holders distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Company. Notwithstanding any other provision of
this Section, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the amount of all shares held by the existing shareholders
of the Company. The Company shall so advise Holder and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall, unless the Company has agreed otherwise with any shareholder, be
allocated among all the shareholders requesting to be included in the
registration and underwriting in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by them at the time of filing
the registration statement and among all other holders of registration rights
with the Company in accordance with their agreements. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares. If Holder disapproves of the terms of any such underwriting,
Holder may elect to withdraw therefrom by written notice to the Company.

                      8.8 Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.

                      8.9 Subordination of Registration Rights. Notwithstanding
anything contained to the contrary in this Warrant, Holder's right to request
registration of Registrable Securities pursuant to this Warrant shall be subject
to the prior exercise or waiver of any and all registration rights granted to
Instanz Nominees Pty. Ltd. ("Instanz"). Holder recognizes that Holder shall not
be entitled to register any Registrable Securities pursuant to this Warrant
unless Instanz"s rights have lapsed, or been exercised, or have been waived, and
that Instanz is under no obligation whatsoever to exercise or waive any such
rights; consequently, the registration rights granted herein may be severely
limited.

                      8.10 Indemnification. The Company shall indemnify and hold
harmless Holder from and against any and all losses, claims, damages and
liabilities caused by any untrue statement of a material fact contained in any
registration statement filed by the Company under the Securities Act by reason
of Section 9 hereof, any post-effective amendment to such registration
statement, or any prospectus included therein, or caused by any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission based
upon information furnished or required to be furnished in writing to the Company
by Holder (or the

                                      -6-
<PAGE>   7

representatives or agents of Holder) expressly for use therein, which
indemnification shall include each person, if any, who controls Holder within
the meaning of the Securities Act and each officer, director, employee and agent
of Holder; provided, however, that the indemnification in this Section with
respect to any prospectus shall not inure to the benefit of Holder (or to the
benefit of any person controlling Holder) on account of any such loss, claim,
damage or liability arising from the sale of Registerable Securities by Holder,
if a copy of a subsequent prospectus correcting the untrue statement or omission
in such earlier prospectus was provided to Holder by the Company prior to the
subject sale and the subsequent prospectus was not delivered or sent by Holder
to the purchaser of such securities prior to such sale; and provided further,
that the Company shall not be obligated to so indemnify Holder or any other
person referred to above unless Holder or other person, as the case may be,
shall at the same time indemnify the Company, its directors, each officer
signing the registration statement and each person, if any, who controls the
Company within the meaning of the Securities Act, from and against any and all
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in any registration statement or any prospectus required
to be filed or furnished in connection with such public offering or caused any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, insofar as such losses,
claims, damages or liabilities are caused by any untrue statement or omission
based upon information furnished in writing to the Company by Holder expressly
for use therein.

                      If for any reason the indemnification provided for in the
preceding paragraph is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, claim, damage,
liability or expense referred to therein, then the indemnifying party, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.

                      8.11 Registration Expenses. All expenses, filing fees and
other costs incurred by the Company in connection with any registration of
securities pursuant to this Section 9 (exclusive of underwriting discounts,
selling commissions and non-accountable expense allowances applicable to any
sale of registered securities and any fees and costs of legal counsel engaged by
Holder) shall be borne by the Company.

                      8.12 Prospectus. In the case of each registration effected
by the Company pursuant to the provisions of Section 9 hereof, the Company will
(i) furnish to Holder such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as Holder may reasonably request in order to
facilitate the disposition of the Registerable Securities owned by Holder; and
(ii) notify Holder at any time when a prospectus relating thereto is required to
be delivered under the Securities Act of the happening of any event as a result
of

                                      -7-
<PAGE>   8

which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits 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, in which case
the Company agrees to promptly amend and/or supplement, at the Company's cost
and expense, the prospectus and registration statement in order to correct any
such omission or untrue statement.

               9. Registerable Securities. For purposes hereof, the term
"Registerable Securities" means the shares of Common Stock issued or issuable
upon exercise of the Warrants.

               10. Venue. The terms of this Agreement shall be construed in
accordance with the laws of the State of New York. The exclusive venue with
respect to any claims or disputes under this Agreement shall be the appropriate
State or Federal Courts located in New York, New York.

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

                                         I.T. TECHNOLOGY, INC.,
                                         a Delaware corporation

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

Dated: August 4, 2000

ATTEST:

----------------------------------
                       , Secretary
----------------------

                                      -8-
<PAGE>   9

                                  EXERCISE FORM

               The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing Shares of Common Stock of I.T. Technology,
Inc. at $____ per share.

                                    --------

                     INSTRUCTIONS FOR REGISTRATION OF STOCK

Name
    ----------------------------------------------------------------
               (Please typewrite or print in block letters)

Address
       --------------------------------------------------------------

Social Security of Federal I.D. Number:
                                       ------------------------------

THE UNDERSIGNED REPRESENTS AND WARRANTS TO I.T. TECHNOLOGY, INC. THAT THE
CONDITIONS FOR EXERCISE OF THE WITHIN WARRANT SET FORTH IN THE FIRST SENTENCE OF
THE FIRST PARAGRAPH ABOVE HAVE BEEN FULLY COMPLIED WITH.

CHECK APPROPRIATE BOX

[ ]     Payment of $__________ enclosed

[ ]     Cashless Exercise Option

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

        ------------------------------------------------------
        PRINT NAME

                                      -1-

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