Document:

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                                                                     Exhibit 4.2

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").  THE SECURITIES
     MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
     REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF
     COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN
     COMPARABLE TRANSACTIONS THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
     UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

                         SECURED CONVERTIBLE DEBENTURE

Roanoke, Texas
May 8, 2001                                                             $150,000

          FOR VALUE RECEIVED, e resources inc, a Utah corporation (hereinafter
called the "Borrower"), hereby promises to pay to the order of
______________________ ____________________, or registered assigns (the
"Holder") the sum of One Hundred Fifty Thousand Dollars ($150,000), on May 8,
2002 (the "Maturity Date"), and to pay interest on the unpaid principal balance
hereof at the rate of twelve percent (12%) per annum from May 8, 2001 (the
"Issue Date") until the same becomes due and payable, whether at maturity or
upon acceleration or by prepayment or otherwise.  Any amount of principal or
interest on this Debenture which is not paid when due shall bear interest at the
rate of fifteen percent (15%) per annum from the due date thereof until the same
is paid ("Default Interest").  Interest shall commence accruing on the issue
date, shall be computed on the basis of a 365-day year and the actual number of
days elapsed and shall be payable, at the option of the Holder, either quarterly
on March 31, June 30, September 30 and December 31 of each year beginning on
June 30, 2001, or at the time of conversion of the principal to which such
interest relates in accordance with Article I below.  All payments due hereunder
(to the extent not converted into common stock, par value $0.001 per share, of
the Borrower (the "Common Stock") in accordance with the terms hereof) shall be
made in lawful money of the United States of America.  Payments of interest
shall be made, at the option of Borrower, in cash or shares of Common Stock.  In
the event that the Borrower elects to make interest payments due hereunder in
Common Stock, such payments shall be made at the Conversion Price then
prevailing at the time such payment is made.  All payments shall be made at such
address as the Holder shall hereafter give to the Borrower by written notice
made in accordance with the provisions of this Debenture.  Whenever any amount
expressed to be due by the terms of this Debenture is due on any day which is
not a business day, the same shall instead be due on the next succeeding day
which is a
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business day and, in the case of any interest payment date which is not the date
on which this Debenture is paid in full, the extension of the due date thereof
shall not be taken into account for purposes of determining the amount of
interest due on such date. As used in this Debenture, the term "business day"
shall mean any day other than a Saturday, Sunday or a day on which commercial
banks in New York City, New York are authorized or required by law or executive
order to remain closed. This Debenture shall be secured pursuant to the terms of
that certain Security Agreement by and between the Borrower and the Holder of
even date herewith. Each capitalized term used herein, and not otherwise
defined, shall have the meaning ascribed thereto in that certain Securities
Purchase Agreement, dated May 8, 2001, pursuant to which this Debenture was
originally issued (the "Purchase Agreement").

     The following terms shall apply to this Debenture:

                         ARTICLE I.  CONVERSION RIGHTS

          1.1  Conversion Right.  The Holder shall have the right from time to
               ----------------
time, and at any time on or prior to the earlier of (i) the Maturity Date and
(ii) the date of payment of the Default Amount (as defined in Article III)
pursuant to Section 1.6(a) or Article III, the Optional Prepayment Amount (as
defined in Section 5.1) or any payments pursuant to Section 1.7, each in respect
of the remaining outstanding principal amount of this Debenture, to convert all
or any part of the outstanding and unpaid principal amount of this Debenture
into fully paid and non-assessable shares of Common Stock, as such Common Stock
exists on the Issue Date, or any shares of capital stock or other securities of
the Borrower into which such Common Stock shall hereafter be changed or
reclassified at the conversion price  (the "Conversion Price") determined as
provided herein (a "Conversion"); provided, however, that in no event shall the
                                  --------  -------
Holder be entitled to convert any portion of this Debenture in excess of that
portion of this Debenture upon conversion of which the sum of (1) the number of
shares of Common Stock beneficially owned by the Holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Debentures or the
unexercised or unconverted portion of any other security of the Borrower
(including, without limitation, the warrants issued by the Borrower pursuant to
the Purchase Agreement) subject to a limitation on conversion or exercise
analogous to the limitations contained herein) and (2) the number of shares of
Common Stock issuable upon the conversion of the portion of this Debenture with
respect to which the determination of this proviso is being made, would result
in beneficial ownership by the Holder and its affiliates of more than 4.9% of
the outstanding shares of Common Stock.  For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulations 13D-G thereunder, except as otherwise provided in
clause (1) of such proviso.  The Holder of this Debenture may waive the
limitations set forth herein by sixty-one (61) days prior written notice to the
Company.  The number of shares of Common Stock to be issued upon each conversion
of this Debenture shall be determined by dividing the Conversion Amount (as
defined below) by the applicable Conversion Price then in effect on the date
specified in the notice of conversion, in the form attached hereto as Exhibit A
(the "Notice of Conversion"), delivered to the Borrower by the Holder in
accordance with Section 1.4 below; provided that the Notice of Conversion is
submitted by

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facsimile (or by other means resulting in, or reasonably expected to result in,
notice) to the Borrower before 9:00 p.m., New York City, New York time on such
conversion date (the "Conversion Date").  The term "Conversion Amount" means,
with respect to any conversion of this Debenture, the sum of (1) the principal
amount of this 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 Debenture to the Conversion Date plus (3) Default Interest,
                                                  ----
if any, on the amounts referred to in the immediately preceding clauses (1)
and/or (2) plus (4) at the Holder's option, any amounts owed to the Holder
           ----
pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of that
certain Registration Rights Agreement, dated as of May 8, 2001, executed in
connection with the initial issuance of this Debenture and the other Debentures
issued on the Issue Date (the "Registration Rights Agreement").

          1.2  Conversion Price.
               ----------------

          (a)  Calculation of Conversion Price.  The Conversion Price shall be
               -------------------------------
the lesser of (i) the Variable Conversion Price (as defined herein) and (ii) the
Fixed Conversion Price (as defined herein) (subject, in each case, to equitable
adjustments for stock splits, stock dividends or rights offerings by the
Borrower relating to the Borrower's securities or the securities of any
subsidiary of the Borrower, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events).  The "Variable Conversion
Price" shall mean the Applicable Percentage (as defined herein) multiplied by
the Market Price (as defined herein).  "Market Price" means the average of the
lowest three (3) Trading Prices (as defined below) for the Common Stock during
the twenty (20) Trading Day period ending one Trading Day prior to the date the
Conversion Notice is sent by the Holder to the Borrower via facsimile (the
"Conversion Date").  "Trading Price" means, for any security as of any date, the
inter-day trading price on the Over-the-Counter Bulletin Board (the "OTCBB") as
reported by a reliable reporting service mutually acceptable to and hereafter
designated by Holders of a majority in interest of the Debentures (the
"Reporting Service") or, if the OTCBB is not the principal trading market for
such security, the inter-day trading price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by the Reporting Service or, if no inter-day trading price of such
security is available in any of the foregoing manners, the average of the inter-
day trading prices of any market makers for such security that are listed in the
"pink sheets" by the National Quotation Bureau, Inc.  If the Trading Price
cannot be calculated for such security on such date in the manner provided
above, the Trading Price shall be the fair market value as mutually determined
by the Borrower and the Holders of a majority in interest of the Debentures
being converted for which the calculation of the Trading Price is required in
order to determine the Conversion Price of such Debentures.  "Trading Day" shall
mean any day on which the Common Stock is traded for any period on the OTCBB, or
on the principal securities exchange or other securities market on which the
Common Stock is then being traded.  "Applicable Percentage" shall mean 50.0%.
The "Fixed Conversion Price" shall mean $.03.

          (b) Conversion Price During Major Announcements.  Notwithstanding
              -------------------------------------------
anything contained in Section 1.2(a) to the contrary, in the event the Borrower
(i) makes a public announcement that it intends to consolidate or merge with any
other corporation (other than a merger in which the Borrower is the surviving or
continuing

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corporation and its capital stock is unchanged) or sell or transfer all or
substantially all of the assets of the Borrower or (ii) any person, group or
entity (including the Borrower) publicly announces a tender offer to purchase
50% or more of the Borrower's Common Stock (or any other takeover scheme) (the
date of the announcement referred to in clause (i) or (ii) is hereinafter
referred to as the "Announcement Date"), then the Conversion Price shall,
effective upon the Announcement Date and continuing through the Adjusted
Conversion Price Termination Date (as defined below), be equal to the lower of
(x) the Conversion Price which would have been applicable for a Conversion
occurring on the Announcement Date and (y) the Conversion Price that would
otherwise be in effect. From and after the Adjusted Conversion Price Termination
Date, the Conversion Price shall be determined as set forth in this Section
1.2(a). For purposes hereof, "Adjusted Conversion Price Termination Date" shall
mean, with respect to any proposed transaction or tender offer (or takeover
scheme) for which a public announcement as contemplated by this Section 1.2(b)
has been made, the date upon which the Borrower (in the case of clause (i)
above) or the person, group or entity (in the case of clause (ii) above)
consummates or publicly announces the termination or abandonment of the proposed
transaction or tender offer (or takeover scheme) which caused this Section
1.2(b) to become operative.

          1.3  Authorized Shares.  The Borrower covenants that during the period
               -----------------
the conversion right exists, the Borrower will reserve from its authorized and
unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion of
this Debenture and the other Debentures issued pursuant to the Purchase
Agreement.  As of the date of issuance of this Debenture, 12,000,000 (2x
currently required) authorized and unissued shares of Common Stock have been
duly reserved for issuance upon conversion of this Debenture and the other
Debentures issued pursuant to the Purchase Agreement (the "Reserved Amount").
The Reserved Amount shall be increased from time to time in accordance with the
Borrower's obligations pursuant to Section 4(h) of the Purchase Agreement.  The
Borrower represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable.  In addition, if the Borrower shall issue
any securities or make any change to its capital structure which would change
the number of shares of Common Stock into which the Debentures shall be
convertible at the then current Conversion Price, the Borrower shall at the same
time make proper provision so that thereafter there shall be a sufficient number
of shares of Common Stock authorized and reserved, free from preemptive rights,
for conversion of the outstanding Debentures.  The Borrower (i) acknowledges
that it has irrevocably instructed its transfer agent to issue certificates for
the Common Stock issuable upon conversion of this Debenture, and (ii) agrees
that its issuance of this 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 Debenture.

          If, at any time a Holder of this Debenture submits a Notice of
Conversion, and the Borrower does not have sufficient authorized but unissued
shares of Common Stock available to effect such conversion in accordance with
the provisions of this Article I (a "Conversion Default"), subject to Section
4.8, the Borrower shall issue to the Holder all of the shares of Common Stock
which are then available to effect such conversion.  The portion of this
Debenture which the Holder included in its Conversion Notice and which exceeds
the amount

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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 Borrower to permit such conversion, at
which time the Conversion Price in respect thereof shall be the lesser 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.  In addition, the Borrower shall pay to the Holder payments
("Conversion Default Payments") for a Conversion Default in the amount of (x)
the sum of (1) the then outstanding principal amount of this Debenture plus (2)
    ------                                                             ----
accrued and unpaid interest on the unpaid principal amount of this Debenture
through the Authorization Date (as defined below) plus (3) Default Interest, if
                                                  ----
any, on the amounts referred to in clauses (1) and/or (2), multiplied by (y)
                                                           -------------
 .24, multiplied by (z) (N/365), where N = the number of days from the day the
     -------------
holder submits a Notice of Conversion giving rise to a Conversion Default (the
"Conversion Default Date") to the date (the "Authorization Date") that the
Borrower authorizes a sufficient number of shares of Common Stock to effect
conversion of the full outstanding principal balance of this Debenture.  The
Borrower shall use its best efforts to authorize a sufficient number of shares
of Common Stock as soon as practicable following the earlier of (i) such time
that the Holder notifies the Borrower or that the Borrower otherwise becomes
aware that there are or likely will be insufficient authorized and unissued
shares to allow full conversion thereof and (ii) a Conversion Default.  The
Borrower 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 applicable Conversion Price, at the Holder's option, as follows:

          (a) In the event Holder elects to take such payment in cash, cash
payment shall be made to Holder by the fifth (5th) day of the month following
the month in which it has accrued; and

          (b) In the event 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 day
of the month following the month in which it has accrued in accordance with the
terms of this Article I (so long as there is then a sufficient number of
authorized shares of Common Stock).

          The Holder's election shall be made in writing to the Borrower at any
time prior to 9:00 p.m., New York City, New York time, on the third 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 Holder's right to pursue actual damages (to the
extent in excess of the Conversion Default Payments) for the Borrower's failure
to maintain a sufficient number of authorized shares of Common Stock, and each
holder shall have the right to pursue all remedies available at law or in equity
(including degree of specific performance and/or injunctive relief).

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     1.4  Method of Conversion.
          --------------------

          (a)  Mechanics of Conversion.  Subject to Section 1.1, this Debenture
               -----------------------
may be converted by the Holder in whole or in part (together with accrued and
unpaid interest thereon) at any time from time to time after the Issue Date, by
(A) submitting to the Borrower a Notice of Conversion (by facsimile or other
reasonable means of communication dispatched on the Conversion Date prior to
9:00 p.m., New York City, New York time) and (B) subject to Section 1.4(b),
surrendering this Debenture at the principal office of the Borrower.

          (b) Surrender of Debenture Upon Conversion.  Notwithstanding anything
              --------------------------------------
to the contrary set forth herein, upon conversion of this Debenture in
accordance with the terms hereof, the Holder shall not be required to physically
surrender this Debenture to the Borrower unless the entire unpaid principal
amount of this Debenture is so converted.  The Holder and the Borrower shall
maintain records showing the principal amount so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holder and the Borrower, so as not to require physical surrender of this
Debenture upon each such conversion.  In the event of any dispute or
discrepancy, such records of the Borrower shall be controlling and determinative
in the absence of manifest error.  Notwithstanding the foregoing, if any portion
of this Debenture is converted as aforesaid, the Holder may not transfer this
Debenture unless the Holder first physically surrenders this Debenture to the
Borrower, whereupon the Borrower will forthwith issue and deliver upon the order
of the Holder a new Debenture of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the remaining unpaid principal amount of this
Debenture.  The Holder and any assignee, by acceptance of this Debenture,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Debenture, the unpaid and unconverted
principal amount of this Debenture represented by this Debenture may be less
than the amount stated on the face hereof.

          (c)  Payment of Taxes.  The Borrower shall not be required to pay any
               ----------------
tax which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock or other securities or property on conversion
of this Debenture in a name other than that of the Holder (or in street name),
and the Borrower 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
Borrower the amount of any such tax or shall have established to the
satisfaction of the Borrower that such tax has been paid.

          (d) Delivery of Common Stock Upon Conversion.  Upon receipt by the
              ----------------------------------------
Borrower from the Holder of a facsimile transmission (or other reasonable means
of communication) of a Notice of Conversion meeting the requirements for
conversion as provided in this Section 1.4, the Borrower shall issue and deliver
or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within three (3)
business days after such receipt (and, solely in the case of conversion of the
entire unpaid principal amount hereof, surrender of this Debenture) (such second
business day being hereinafter referred to as the "Deadline") in accordance with
the terms hereof and the

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Purchase Agreement (including, without limitation, in accordance with the
requirements of Section 2(g) of the Purchase Agreement that certificates for
shares of Common Stock issued on or after the effective date of the Registration
Statement upon conversion of this Debenture shall not bear any restrictive
legend).

          (e) Obligation of Borrower to Deliver Common Stock.  Upon receipt by
              ----------------------------------------------
the Borrower 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 Debenture shall be reduced to reflect such conversion, and, unless the
Borrower defaults on its obligations under this Article I, all rights with
respect to the portion of this 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.  If the Holder shall
have given a Notice of Conversion as provided herein, the Borrower's obligation
to issue and deliver the certificates for 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 provision thereof,
the recovery of any judgment against any person or any action to enforce the
same, any failure or delay in the enforcement of any other obligation of the
Borrower 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 Borrower, and irrespective of any other circumstance which
might otherwise limit such obligation of the Borrower to the Holder in
connection with such conversion.  The Conversion Date specified in the Notice of
Conversion shall be the Conversion Date so long as the Notice of Conversion is
received by the Borrower before 9:00 p.m., New York City, New York time, on such
date.

          (f) Delivery of Common Stock by Electronic Transfer.  In lieu of
              -----------------------------------------------
delivering physical certificates representing the Common Stock issuable upon
conversion, provided the Borrower's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST")
program, upon request of the Holder and its compliance with the provisions
contained in Section 1.1 and in this Section 1.4, the Borrower 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
("DWAC") system.

          (g) Failure to Deliver Common Stock Prior to Deadline.  Without in any
              -------------------------------------------------
way limiting the Holder's right to pursue other remedies, including actual
damages and/or equitable relief, the parties agree that if delivery of the
Common Stock issuable upon conversion of this Debenture is more than two (2)
days after the Deadline (other than a failure due to the circumstances described
in Section 1.3 above, which failure shall be governed by such Section) the
Borrower shall pay to the Holder $1,000 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock.  Such cash amount
shall be paid to Holder by the fifth day of the month following the month in
which it has accrued or, at the option of the Holder (by written notice to the
Borrower by the first day of the month following the month in which it has
accrued), shall be added to the principal amount of this Debenture, in which
event interest shall accrue thereon in accordance with the terms of this
Debenture and

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such additional principal amount shall be convertible into Common Stock in
accordance with the terms of this Debenture.

          1.5  Concerning the Shares.  The shares of Common Stock issuable upon
               ---------------------
conversion of this Debenture may not be sold or transferred unless  (i) such
shares are sold pursuant to an effective registration statement under the Act or
(ii) the Borrower or its transfer agent shall have been furnished with an
opinion of  counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the shares to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration or (iii) such shares are sold or transferred
pursuant to Rule 144 under the Act (or a successor rule) ("Rule 144") or (iv)
such shares are transferred to an "affiliate" (as defined in Rule 144) of the
Borrower who agrees to sell or otherwise transfer the shares only in accordance
with this Section 1.5 and who is an Accredited Investor (as defined in the
Purchase Agreement).  Except as otherwise provided in the Purchase Agreement
(and subject to the removal provisions set forth below), until such time as the
shares of Common Stock issuable upon conversion of this Debenture have been
registered under the Act as contemplated by the Registration Rights Agreement or
otherwise may be sold pursuant to Rule 144 without any restriction as to the
number of securities as of a particular date that can then be immediately sold,
each certificate for shares of Common Stock issuable upon conversion of this
Debenture that has not been so included in an effective registration statement
or that has not been sold pursuant to an effective registration statement or an
exemption that permits removal of the legend, shall bear a legend substantially
in the following form, as appropriate:

     "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THE SECURITIES MAY NOT BE
     SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
     STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN
     FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
     TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT  UNLESS SOLD
     PURSUANT TO RULE 144 UNDER SAID ACT."

          The legend set forth above shall be removed and the Borrower shall
issue to the Holder a new certificate therefor free of any transfer legend if
(i) the Borrower or its transfer agent shall have received an opinion of
counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or transfer of such
Common Stock may be made without registration under the Act and the shares are
so sold or transferred, (ii) such Holder provides the Borrower or its transfer
agent with reasonable assurances that the Common Stock issuable upon conversion
of this Debenture (to the extent such securities are deemed to have been
acquired on the same date) can be sold pursuant to Rule 144 or (iii) in the case
of the Common Stock issuable upon conversion of this Debenture, such security is
registered for sale by the Holder under an effective registration statement
filed under the Act or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date that can then
be immediately sold.  Nothing in this Debenture shall (i) limit the Borrower's
obligation under the Registration Rights Agreement or (ii) affect in

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any way the Holder's obligations to comply with applicable prospectus delivery
requirements upon the resale of the securities referred to herein.

     1.6  Effect of Certain Events.
          ------------------------

          (a) Effect of Merger, Consolidation, Etc.  At the option of the
              -------------------------------------
Holder, the sale, conveyance or disposition of all or substantially all of the
assets of the Borrower, the effectuation by the Borrower of a transaction or
series of related transactions in which more than 33% of the voting power of the
Borrower is disposed of, or the consolidation, merger or other business
combination of the Borrower with or into any other Person (as defined below) or
Persons when the Borrower is not the survivor shall either:  (i) be deemed to be
an Event of Default (as defined in Article III) pursuant to which the Borrower
shall be required to pay to the Holder upon the consummation of and as a
condition to such transaction an amount equal to the Default Amount (as defined
in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof.  "Person"
shall mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.

          (b)  Adjustment Due to Merger, Consolidation, Etc.  If, at any time
               ---------------------------------------------
when this Debenture is issued and outstanding and prior to conversion of all of
the Debentures, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Borrower shall be changed into the same or a
different number of shares of another class or classes of stock or securities of
the Borrower or another entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in connection with a
plan of complete liquidation of the Borrower, then the Holder of this Debenture
shall thereafter have the right to receive upon conversion of this Debenture,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to
receive in such transaction had this Debenture been converted in full
immediately prior to such transaction (without regard to any limitations on
conversion set forth herein), and in any such case appropriate provisions shall
be made with respect to the rights and interests of the Holder of this Debenture
to the end that the provisions hereof (including, without limitation, provisions
for adjustment of the Conversion Price and of the number of shares issuable upon
conversion of the Debenture) shall thereafter be applicable, as nearly as may be
practicable in relation to any securities or assets thereafter deliverable upon
the conversion hereof.  The Borrower shall not effect any transaction described
in this Section 1.6(b) unless (a) it first gives, to the extent practicable,
thirty (30) days prior written notice (but in any event at least fifteen (15)
days prior written notice) of the record date of the special meeting of
stockholders to approve, or if there is no such record date, the consummation
of, such merger, consolidation, exchange of shares, recapitalization,
reorganization or other similar event or sale of assets (during which time the
Holder shall be entitled to convert this Debenture) and (b) the resulting
successor or acquiring entity (if not the Borrower) assumes by written
instrument the obligations of this Section 1.6(b).  The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers or share
exchanges.

                                       9
<PAGE>

          (c)  Adjustment Due to Distribution.  If the Borrower shall declare or
               ------------------------------
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the Borrower's shareholders
in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a "Distribution"), then the Holder of this Debenture shall
be entitled, upon any conversion of this Debenture after the date of record for
determining shareholders entitled to such Distribution, to receive the amount of
such assets which would have been payable to the Holder with respect to the
shares of Common Stock issuable upon such conversion had such Holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such Distribution.

          (d) Adjustment Due to Dilutive Issuance. If, at any time when any
              -----------------------------------
Debentures are issued and outstanding, the Borrower issues or sells, or in
accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Fixed Conversion
Price in effect on the date of such issuance (or deemed issuance) of such shares
of Common Stock (a "Dilutive Issuance"), then immediately upon the Dilutive
Issuance, the Fixed Conversion Price will be reduced to the amount of the
consideration per share received by the Borrower in such Dilutive Issuance;
provided that only one adjustment will be made for each Dilutive Issuance.
--------

                The Borrower shall be deemed to have issued or sold shares of
Common Stock if the Borrower in any manner issues or grants any warrants, rights
or options, whether or not immediately exercisable, to subscribe for or to
purchase Common Stock or other securities convertible into or exchangeable for
Common Stock ("Convertible Securities") (such warrants, rights and options to
purchase Common Stock or Convertible Securities are hereinafter referred to as
"Options") and the price per share for which Common Stock is issuable upon the
exercise of such Options is less than the Fixed Conversion Price then in effect,
then the Fixed Conversion Price shall be equal to such price per share. For
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Options" is determined by dividing (i) the
total amount, if any, received or receivable by the Borrower as consideration
for the issuance or granting of all such Options, plus the minimum aggregate
amount of additional consideration, if any, payable to the Borrower upon the
exercise of all such Options, plus, in the case of Convertible Securities
issuable upon the exercise of such Options, the minimum aggregate amount of
additional consideration payable upon the conversion or exchange thereof at the
time such Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options (assuming full conversion of Convertible
Securities, if applicable). No further adjustment to the Conversion Price will
be made upon the actual issuance of such Common Stock upon the exercise of such
Options or upon the conversion or exchange of Convertible Securities issuable
upon exercise of such Options.

                Additionally, the Borrower shall be deemed to have issued or
sold shares of Common Stock if the Borrower in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon

                                       10
<PAGE>

the exercise of Options), and the price per share for which Common Stock is
issuable upon such conversion or exchange is less than the Fixed Conversion
Price then in effect, then the Fixed Conversion Price shall be equal to such
price per share. For the purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon such conversion or exchange" is
determined by dividing (i) the total amount, if any, received or receivable by
the Borrower as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Borrower upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii)
the maximum total number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment to the
Fixed Conversion Price will be made upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities.

          (e)  Purchase Rights.  If, at any time when any Debentures are issued
               ---------------
and outstanding, the Borrower issues any convertible securities or rights to
purchase stock, warrants, securities or other property (the "Purchase Rights")
pro rata to the record holders of any class of Common Stock, then the Holder of
this Debenture will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of shares of Common Stock acquirable
upon complete conversion of this Debenture (without regard to any limitations on
conversion contained herein) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

          (f)  Notice of Adjustments.  Upon the occurrence of each adjustment
               ---------------------
or readjustment of the Conversion Price as a result of the events described in
this Section 1.6, the Borrower, at its expense, shall promptly compute such
adjustment or readjustment and prepare and furnish to the Holder of a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based.  The Borrower
shall, upon the written request at any time of the Holder, furnish to such
Holder a like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price at the time in effect and (iii) the number of shares
of Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of the Debenture.

     1.7  Trading Market Limitations.  Unless permitted by the applicable
          --------------------------
rules and regulations of the principal securities market on which the Common
Stock is then listed or traded, in no event shall the Borrower issue upon
conversion of or otherwise pursuant to this Debenture and the other Debentures
issued pursuant to the Purchase Agreement more than the maximum number of shares
of Common Stock that the Borrower can issue pursuant to any rule of the
principal United States securities market on which the Common Stock is then
traded (the "Maximum Share Amount"), which, as of the Issue Date shall be
2,938,721 shares (19.99% of the total shares outstanding on the Issue Date),
subject to equitable 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.  Once the Maximum Share Amount
has

                                       11
<PAGE>

been issued (the date of which is hereinafter referred to as the "Maximum
Conversion Date"), if the Borrower fails to eliminate any prohibitions under
applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over
the Borrower or any of its securities on the Borrower's ability to issue shares
of Common Stock in excess of the Maximum Share Amount (a "Trading Market
Prepayment Event"), in lieu of any further right to convert this Debenture, and
in full satisfaction of the Borrower's obligations under this Debenture, the
Borrower shall pay to the Holder, within fifteen (15) business days of the
Maximum Conversion Date (the "Trading Market Prepayment Date"), an amount equal
to 130% times the sum of (a) the then outstanding principal amount of this
        -----     ---
Debenture immediately following the Maximum Conversion Date, plus (b) accrued
                                                             ----
and unpaid interest on the unpaid principal amount of this Debenture to the
Trading Market Prepayment Date, plus (c) Default Interest, if any, on the
                                ----
amounts referred to in clause (a) and/or (b) above, plus (d) any optional
                                                    ----
amounts that may be added thereto at the Maximum Conversion Date by the Holder
in accordance with the terms hereof (the then outstanding principal amount of
this Debenture immediately following the Maximum Conversion Date, plus the
                                                                  ----
amounts referred to in clauses (b), (c) and (d) above shall collectively be
referred to as the "Remaining Convertible Amount").  With respect to each Holder
of Debentures, the Maximum Share Amount shall refer to such Holder's pro rata
                                                                     --- ----
share thereof determined in accordance with Section 4.8 below.  In the event
that the sum of (x) the aggregate number of shares of Common Stock issued upon
conversion of this Debenture and the other Debentures issued pursuant to the
Purchase Agreement plus (y) the aggregate number of shares of Common Stock that
                   ----
remain issuable upon conversion of this Debenture and the other Debentures
issued pursuant to the Purchase Agreement, represents at least one hundred
percent (100%) of the Maximum Share Amount (the "Triggering Event"), the
Borrower will use its best efforts to seek and obtain Stockholder Approval (or
obtain such other relief as will allow conversions hereunder in excess of the
Maximum Share Amount) as soon as practicable following the Triggering Event and
before the Maximum Conversion Date.  As used herein, "Stockholder Approval"
means approval by the stockholders of the Borrower to authorize the issuance of
the full number of shares of Common Stock which would be issuable upon full
conversion of the then outstanding Debentures but for the Maximum Share Amount.

          1.8  Status as Stockholder.  Upon submission of a Notice of Conversion
               ---------------------
by a Holder, (i) the shares covered thereby (other than the shares, if any,
which cannot be issued because their issuance would exceed such Holder's
allocated portion of the Reserved Amount or Maximum Share Amount) shall be
deemed converted into shares of Common Stock and (ii) the Holder's rights as a
Holder of such converted portion of this Debenture shall cease and terminate,
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity
to such Holder because of a failure by the Borrower to comply with the terms  of
this Debenture.  Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business
day after the expiration of the Deadline with respect to a conversion of any
portion of this Debenture for any reason, then (unless the Holder otherwise
elects to retain its status as a holder of Common Stock by so notifying the
Borrower) the Holder shall regain the rights of a Holder of this Debenture with
respect to such unconverted portions of this Debenture and the Borrower shall,
as soon as practicable, return such unconverted Debenture to the Holder or, if
the Debenture has not been surrendered, adjust its records to

                                       12
<PAGE>

reflect that such portion of this Debenture has 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
pursuant to Section 1.3 to the extent 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 1.3) for the Borrower's failure to convert this Debenture.

                        ARTICLE II.  CERTAIN COVENANTS

          2.1  Distributions on Capital Stock.  So long as at least $50,000
               ------------------------------
remains outstanding under this Debenture, the Borrower shall not without the
Holder's written consent (a) pay, declare or set apart for such payment, any
dividend or other distribution (whether in cash, property or other securities)
on shares of capital stock other than dividends on shares of Common Stock solely
in the form of additional shares of Common Stock or (b) directly or indirectly
or through any subsidiary make any other payment or distribution in respect of
its capital stock except for distributions pursuant to any shareholders' rights
plan which is approved by a majority of the Borrower's disinterested directors.

          2.2  Restriction on Stock Repurchases.  So long as at least $50,000
               --------------------------------
remains outstanding under this Debenture, the Borrower shall not without the
Holder's written consent redeem, repurchase or otherwise acquire (whether for
cash or in exchange for property or other securities or otherwise) in any one
transaction or series of related transactions any shares of capital stock of the
Borrower or any warrants, rights or options to purchase or acquire any such
shares.

          2.3  Borrowings.  So long as at least $50,000 remains outstanding
               ----------
under this Debenture, the Borrower shall not, without the Holder's written
consent, create, incur, assume or suffer to exist any liability for borrowed
money, except (a) borrowings in existence or committed on the date hereof and of
which the Borrower has informed Holder in writing prior to the date hereof, (b)
indebtedness to trade creditors or financial institutions incurred in the
ordinary course of business or (c) borrowings, the proceeds of which shall be
used to repay this Debenture.

          2.4  Sale of Assets.  So long as the at least $50,000 remains
               --------------
outstanding under this Debenture, the Borrower shall not, without the Holder's
written consent, sell, lease or otherwise dispose of any significant portion of
its assets outside the ordinary course of business.  Any consent to the
disposition of any assets may be conditioned on a specified use of the proceeds
of disposition.

          2.5  Advances and Loans.  So long as at least $50,000 remains
               ------------------
outstanding under this Debenture, the Borrower shall not, without the Holder's
written consent, lend money, give credit or make advances to any person, firm,
joint venture or corporation, including, without limitation, officers,
directors, employees, subsidiaries and affiliates of the Borrower, except loans,
credits or advances (a) in existence or committed on the date hereof and which
the Borrower has informed Holder in writing prior to the date hereof or (b) made
in the ordinary course of business.

                                       13
<PAGE>

          2.6  Contingent Liabilities.  So long as at least $50,000 remains
               ----------------------
outstanding under this Debenture, the Borrower shall not, without the Holder's
written consent, assume, guarantee, endorse, contingently agree to purchase or
otherwise become liable upon the obligation of any person, firm, partnership,
joint venture or corporation, except by the endorsement of negotiable
instruments for deposit or collection and except assumptions, guarantees,
endorsements and contingencies (a) in existence or committed on the date hereof
and which the Borrower has informed Holder in writing prior to the date hereof,
and (b) similar transactions in the ordinary course of business.

                        ARTICLE III.  EVENTS OF DEFAULT

          If any of the following events of default (each, an "Event of
Default") shall occur:

          3.1  Failure to Pay Principal or Interest.  The Borrower fails to pay
               ------------------------------------
the principal hereof or interest thereon when due on this Debenture, whether at
maturity, upon a Trading Market Prepayment Event pursuant to Section 1.7, upon
acceleration or otherwise.

          3.2  Conversion and the Shares.  The Borrower fails to issue shares of
               -------------------------
Common Stock to the Holder (or announces or threatens that it will not honor its
obligation to do so) upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Debenture (for a period of at least
sixty (60) days, if such failure is solely as a result of the circumstances
governed by Section 1.3 and the Borrower is using its best efforts to authorize
a sufficient number of shares of Common Stock as soon as practicable), fails to
transfer or cause its transfer agent to transfer (electronically or in
certificated form) any certificate for shares of Common Stock issued to the
Holder upon conversion of or otherwise pursuant to this Debenture as and when
required by this Debenture or the Registration Rights Agreement, or fails to
remove any restrictive legend (or to withdraw any stop transfer instructions in
respect thereof) on any certificate for any shares of Common Stock issued to the
Holder upon conversion of or otherwise pursuant to this Debenture as and when
required by this Debenture or the Registration Rights Agreement (or makes any
announcement, statement or threat that it does not intend to honor the
obligations described in this paragraph) and any such failure shall continue
uncured (or any announcement, statement or threat not to honor its obligations
shall not be rescinded in writing) for ten (10) days after the Borrower shall
have been notified thereof in writing by the Holder.

          3.3  Failure to Effect Registration.  The Borrower fails to obtain
               ------------------------------
effectiveness with the Securities and Exchange Commission of the Registration
Statement prior to ninety (90) days from the Closing Date or such Registration
Statement lapses in effect (or sales cannot otherwise be made thereunder
effective, whether by reason of the Borrower's failure to amend or supplement
the prospectus included therein in accordance with the Registration Rights
Agreement or otherwise) for more than ten (10) consecutive days or fifteen (15)
days in any twelve month period after the Registration Statement becomes
effective;

                                       14
<PAGE>

          3.4  Breach of Covenants.  The Borrower breaches any material covenant
               -------------------
or other material term or condition contained in Sections 1.3, 1.6 or 1.7 of
this Debenture, or Sections 4(c), 4(e), 4(h), 4(i), 4(j) or 5 of the Purchase
Agreement and such breach continues for a period of ten (10) days after written
notice thereof to the Borrower from the Holder;

          3.5  Breach of Representations and Warranties.  Any representation or
               ----------------------------------------
warranty of the Borrower made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Purchase Agreement and the Registration
Rights Agreement), shall be false or misleading in any material respect when
made and the breach of which has (or with the passage of time will have) a
material adverse effect on the rights of the Holder with respect to this
Debenture, the Purchase Agreement or the Registration Rights Agreement;

          3.6  Receiver or Trustee.  The Borrower or any subsidiary of the
               -------------------
Borrower shall make an assignment for the benefit of creditors, or apply for or
consent to the appointment of a receiver or trustee for it or for a substantial
part of its property or business, or such a receiver or trustee shall otherwise
be appointed;

          3.7  Judgments.  Any money judgment, writ or similar process shall be
               ---------
entered or filed against the Borrower or any subsidiary of the Borrower or any
of its property or other assets for more than $50,000, and shall remain
unvacated, unbonded or unstayed for a period of twenty (20) days unless
otherwise consented to by the Holder, which consent will not be unreasonably
withheld;

          3.8  Bankruptcy.  Bankruptcy, insolvency, reorganization or
               ----------
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Borrower or any subsidiary of the Borrower; or

          3.9  Delisting of Common Stock.  The Borrower shall fail to maintain
               -------------------------
the listing of the Common Stock on at least one of the OTCBB, the Nasdaq
National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the
American Stock Exchange;

          3.10 Default Under Other Debentures.  An Event of Default has
               ------------------------------
occurred and is continuing under any of the other Debentures issued pursuant to
the Purchase Agreement.

then, upon the occurrence and during the continuation of any Event of Default
specified in Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, at the option
of the Holders of a majority of the aggregate principal amount of the
outstanding Debentures issued pursuant to the Purchase Agreement exercisable
through the delivery of written notice to the Borrower by such Holders (the
"Default Notice"), and upon the occurrence of an Event of Default specified in
Section 3.6 or 3.8, the Debentures shall become immediately due and payable and
the Borrower shall pay to the Holder, in full satisfaction of its obligations
hereunder, an amount equal to the greater of (i) 130% times the sum of (w) the
                                                      -----     ---
then outstanding principal amount of this Debenture plus (x) accrued and unpaid
                                                    ----
interest on the unpaid principal amount of this Debenture to the date of payment
(the "Mandatory Prepayment Date") plus (y) Default Interest, if any, on the
                                  ----
amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the
                                              ----
Holder pursuant to

                                       15
<PAGE>

Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of the Registration
Rights Agreement (the then outstanding principal amount of this Debenture to
the date of payment plus the amounts referred to in clauses (x), (y) and (z)
                    ----
shall collectively be known as the "Default Sum") or (ii) the "parity value"
of the Default Sum to be prepaid, where parity value means (a) the highest
number of shares of Common Stock issuable upon conversion of or otherwise
pursuant to such Default Sum in accordance with Article I, treating the Trading
Day immediately preceding the Mandatory Prepayment Date as the "Conversion
Date" for purposes of determining the lowest applicable Conversion Price,
unless the Default Event arises as a result of a breach in respect of a
specific Conversion Date in which case such Conversion Date shall be the
Conversion Date), multiplied by (b) the highest Closing Price for the Common
                  -------------
Stock during the period beginning on the date of first occurrence of the Event
of Default and ending one day prior to the Mandatory Prepayment Date (the
"Default Amount") and all other amounts payable hereunder shall immediately
become due and payable, all without demand, presentment or notice, all of which
hereby are expressly waived, together with all costs, including, without
limitation, legal fees and expenses, of collection, and the Holder shall be
entitled to exercise all other rights and remedies available at law or in
equity.  If the Borrower fails to pay the Default Amount within five (5)
business days of written notice that such amount is due and payable, then the
Holder shall have the right at any time, so long as the Borrower remains in
default (and so long and to the extent that there are sufficient authorized
shares), to require the Borrower, upon written notice, to immediately issue, in
lieu of the Default Amount, the number of shares of Common Stock of the Borrower
equal to the Default Amount divided by the Conversion Price then in effect.

                          ARTICLE IV.  MISCELLANEOUS

          4.1  Failure or Indulgence Not Waiver.  No failure or delay on the
               --------------------------------
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges.  All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

          4.2  Notices.  Any notice herein required or permitted to be given
               -------
shall be in writing and may be personally served or delivered by courier or sent
by United States mail and shall be deemed to have been given upon receipt if
personally served (which shall include telephone line facsimile transmission) or
sent by courier or three (3) days after being deposited in the United States
mail, certified, with postage pre-paid and properly addressed, if sent by mail.
For the purposes hereof, the address of the Holder shall be as shown on the
records of the Borrower; and the address of the Borrower shall be 304 North
Highway 377, Roanoke, Texas  76262 (facsimile number: (817) 491-9634).  Both the
Holder and the Borrower may change the address for service by service of written
notice to the other as herein provided.

          4.3  Amendments.  This Debenture and any provision hereof may only be
               ----------
amended by an instrument in writing signed by the Borrower and the Holder.  The
term "Debenture" and all reference thereto, as used throughout this instrument,
shall mean this

                                       16
<PAGE>

instrument (and the other Debentures issued pursuant to the Purchase Agreement)
as originally executed, or if later amended or supplemented, then as so amended
or supplemented.

          4.4  Assignability.  This Debenture shall be binding upon the Borrower
               -------------
and its successors and assigns, and shall inure to be the benefit of the Holder
and its successors and assigns.  Each transferee of this Debenture must be an
"accredited investor" (as defined in Rule 501(a) of the 1933 Act).
Notwithstanding anything in this Debenture to the contrary, this Debenture may
be pledged as collateral in connection with a bona fide margin account or other
                                              ---- ----
lending arrangement.

          4.5  Cost of Collection.  If default is made in the payment of this
               ------------------
Debenture, the Borrower shall pay the Holder hereof costs of collection,
including reasonable attorneys' fees.

          4.6  Governing Law.  THIS DEBENTURE SHALL BE ENFORCED, GOVERNED BY AND
               -------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE BORROWER HEREBY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS DEBENTURE, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES FURTHER AGREE
THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES AGREE THAT A FINAL NON-
APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY
BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS DEBENTURE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

          4.7  Certain Amounts.  Whenever pursuant to this Debenture the
               ---------------
Borrower is required to pay an amount in excess of the outstanding principal
amount (or the portion thereof required to be paid at that time) plus accrued
and unpaid interest plus Default Interest on such interest, the Borrower and the
Holder agree that the actual damages to the Holder from the receipt of cash
payment on this Debenture may be difficult to determine and the amount to be so
paid by the Borrower represents stipulated damages and not a penalty and is
intended to compensate the Holder in part for loss of the opportunity to convert
this Debenture and to earn a return from the sale of shares of Common Stock
acquired upon conversion of this Debenture at a price in excess of the price
paid for such shares pursuant to this Debenture.  The Borrower and

                                       17
<PAGE>

the Holder hereby agree that such amount of stipulated damages is not plainly
disproportionate to the possible loss to the Holder from the receipt of a cash
payment without the opportunity to convert this Debenture into shares of Common
Stock.

          4.8  Allocations of Maximum Share Amount and Reserved Amount.  The
               -------------------------------------------------------
Maximum Share Amount and Reserved Amount shall be allocated pro rata among the
Holders of Debentures based on the principal amount of such Debentures issued to
each Holder.  Each increase to the Maximum Share Amount and Reserved Amount
shall be allocated pro rata among the Holders of Debentures based on the
principal amount of such Debentures held by each Holder at the time of the
increase in the Maximum Share Amount or Reserved Amount.  In the event a Holder
shall sell or otherwise transfer any of such Holder's Debentures, each
transferee shall be allocated a pro rata portion of such transferor's Maximum
Share Amount and Reserved Amount.  Any portion of the Maximum Share Amount or
Reserved Amount which remains allocated to any person or entity which does not
hold any Debentures shall be allocated to the remaining Holders of Debentures,
pro rata based on the principal amount of such Debentures then held by such
Holders.

          4.9  Damages Shares.  The shares of Common Stock that may be issuable
               --------------
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof and pursuant to Section
2(c) of the Registration Rights Agreement ("Damages Shares") shall be treated as
Common Stock issuable upon conversion of this Debenture for all purposes hereof
and shall be subject to all of the limitations and afforded all of the rights of
the other shares of Common Stock issuable hereunder, including without
limitation, the right to be included in the Registration Statement filed
pursuant to the Registration Rights Agreement.  For purposes of calculating
interest payable on the outstanding principal amount hereof, except as otherwise
provided herein, amounts convertible into Damages Shares ("Damages Amounts")
shall not bear interest but must be converted prior to the conversion of any
outstanding principal amount hereof, until the outstanding Damages Amounts is
zero.

          4.10 Denominations.  At the request of the Holder, upon surrender of
               -------------
this Debenture, the Borrower shall promptly issue new Debentures in the
aggregate outstanding principal amount hereof, in the form hereof, in such
denominations of at least $50,000 as the Holder shall request.

          4.11 Purchase Agreement.  By its acceptance of this Debenture, each
               ------------------
Holder agrees to be bound by the applicable terms of the Purchase Agreement.

          4.12 Notice of Corporate Events.  Except as otherwise provided below,
               --------------------------
the Holder of this Debenture shall have no rights as a Holder of Common Stock
unless and only to the extent that it converts this Debenture into Common Stock.
The Borrower shall provide the Holder with prior notification of any meeting of
the Borrower's shareholders (and copies of proxy materials and other information
sent to shareholders).  In the event of any taking by the Borrower of a record
of its shareholders for the purpose of determining shareholders who are entitled
to receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any other
securities or property, or to receive any other

                                       18
<PAGE>

right, or for the purpose of determining shareholders who are entitled to vote
in connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of the Borrower or any proposed liquidation,
dissolution or winding up of the Borrower, the Borrower shall mail a notice to
the Holder, at least twenty (20) days prior to the record date specified therein
(or thirty (30) days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such record is to be taken for
the purpose of such dividend, distribution, right or other event, and a brief
statement regarding the amount and character of such dividend, distribution,
right or other event to the extent known at such time. The Borrower shall make a
public announcement of any event requiring notification to the Holder hereunder
substantially simultaneously with the notification to the Holder in accordance
with the terms of this Section 4.12.

          4.13  Remedies.  The Company acknowledges that a breach by it of its
                --------
obligations hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby.  Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Debenture will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Debenture, that the
Holder shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Debenture
and to enforce specifically the terms and provisions thereof, without the
necessity of showing economic loss and without any bond or other security being
required.

                        ARTICLE V.  OPTIONAL PREPAYMENT

          5.1.  Optional Prepayment.  Notwithstanding anything to the contrary
                -------------------
contained in this Article V, for not more than thirty (30) days from the date
hereof, so long as (i) no Event of Default or Trading Market Prepayment Event
shall have occurred and be continuing, and (ii) the Borrower has a sufficient
number of authorized shares of Common Stock reserved for issuance upon full
conversion of the Debentures, then at any time after the Issue Date, the
Borrower shall have the right, exercisable on not less than ten (10) Trading
Days prior written notice to the Holders of the Debentures (which notice may not
be sent to the Holders of the Debentures until the Borrower is permitted to
prepay the Debentures pursuant to this Section 5.1), to prepay all of the
outstanding Debentures in accordance with this Section 5.1.  Any notice of
prepayment hereunder (an "Optional Prepayment") shall be delivered to the
Holders of the Debentures at their registered addresses appearing on the books
and records of the Borrower and shall state (1) that the Borrower is exercising
its right to prepay all of the Debentures issued on the Issue Date and (2) the
date of prepayment (the "Optional Prepayment Notice").  On the date fixed for
prepayment (the "Optional Prepayment Date"), the Borrower shall make payment of
the Optional Prepayment Amount (as defined below) to or upon the order of the
Holders as specified by the Holders in writing to the Borrower at least one (1)
business day prior to the Optional Prepayment Date.  If the Borrower exercises
its right to prepay the Debentures, the Borrower shall make payment to the
holders of an amount in cash (the "Optional Prepayment Amount") equal to 130%
multiplied by the sum of (w) the then outstanding principal amount of this
Debenture plus (x) accrued and unpaid interest on the unpaid principal
          ----

                                       19
<PAGE>

amount of this Debenture to the Optional Prepayment Date plus (y) Default
                                                         ----
Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z)
                                                                    ----
any amount owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or
pursuant to Section 2(c) of the Registration Rights Agreement (the then
outstanding principal amount of this Debenture to the date of payment plus
                                                                      ----
the amounts referred to in clauses (x), (y) and (z) shall collectively be
known as the "Optional Prepayment Sum"). Notwithstanding notice of an Optional
Prepayment, the Holders shall at all times prior to the Optional Prepayment Date
maintain the right to convert all or any portion of the Debentures in accordance
with Article I and any portion of Debentures so converted after receipt of an
Optional Prepayment Notice and prior to the Optional Prepayment Date set forth
in such notice and payment of the aggregate Optional Prepayment Amount shall be
deducted from the principal amount of Debentures which are otherwise subject to
prepayment pursuant to such notice. If the Borrower delivers an Optional
Prepayment Notice and fails to pay the Optional Prepayment Amount due to the
Holders of the Debentures within two (2) business days following the Optional
Prepayment Date, the Borrower shall forever forfeit its right to redeem the
Debentures pursuant to this Section 5.1.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       20
<PAGE>

          IN WITNESS WHEREOF, Borrower has caused this Debenture to be signed in
its name by its duly authorized officer this 8th day of May, 2001.

                              e resources inc

                              By:
                                  ------------------------------
                                    Christopher D. Curtis
                                    Chief Executive Officer

                                       21
<PAGE>

                                                                       EXHIBIT A

                              NOTICE OF CONVERSION
                    (To be Executed by the Registered Holder
                      in order to Convert the Debentures)

          The undersigned hereby irrevocably elects to convert $________
principal amount of the Debenture (defined below) into shares of common stock,
par value $0.001 per share ("Common Stock"), of e resources inc, a Utah
corporation (the "Borrower") according to the conditions of the convertible
debentures of the Borrower dated as of May 8, 2001 (the "Debentures"), as of the
date written below. If securities are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates. No fee will be
charged to the Holder for any conversion, except for transfer taxes, if any. A
copy of each Debenture is attached hereto (or evidence of loss, theft or
destruction thereof).

          The Borrower shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or its
nominee with DTC through its Deposit Withdrawal Agent Commission system ( "DWAC
Transfer").

          Name of DTC Prime Broker:
                                   -----------------------------------------
          Account Number:
                          --------------------------------------------------

          In lieu of receiving shares of Common Stock issuable pursuant to this
Notice of Conversion by way of a DWAC Transfer, the undersigned hereby requests
that the Borrower issue a certificate or certificates for the number of shares
of Common Stock set forth below (which numbers are based on the Holder's
calculation attached hereto) in the name(s) specified immediately below or, if
additional space is necessary, on an attachment hereto:

          Name:
                ------------------------------------------------------------
          Address:
                  ----------------------------------------------------------

          The undersigned represents and warrants that all offers and sales by
the undersigned of the securities issuable to the undersigned upon conversion of
the Debentures shall be made pursuant to registration of the securities under
the Securities Act of 1933, as amended (the "Act"), or pursuant to an exemption
from registration under the Act.

                  Date of Conversion:
                                      --------------------------------------
                  Applicable Conversion Price:
                                               -----------------------------
                  Number of Shares of Common Stock to be Issued
                  Pursuant to Conversion of the Debentures:
                                                            ----------------
                  Signature:
                             -----------------------------------------------

Name:
      -------------------------------------------
Address:
        -----------------------------------------

The Borrower shall issue and deliver shares of Common Stock to an overnight
courier not later than three business days following receipt of the original
Debenture(s) to be converted, and shall make payments pursuant to the Debentures
for the number of business days such issuance and delivery is late.

                                      A-1<PAGE>

                                                                     Exhibit 4.3

     THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE
     NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  EXCEPT
     AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE AGREEMENT DATED
     AS OF MAY 8 2001, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
     TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
     STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR, AN OPINION OF COUNSEL, IN
     FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
     TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS
     SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.

                                                         Right to
                                                         Purchase
                                                         150,000
                                                         Shares of
                                                         Common
                                                         Stock, par
                                                         value $0.001
                                                         per share

                             STOCK PURCHASE WARRANT

     THIS CERTIFIES THAT, for value received, _________________________
_____________________, or its registered assigns, is entitled to purchase from e
resources inc, a Utah corporation (the "Company"), at any time or from time to
time during the period specified in Paragraph 2 hereof, One Hundred Fifty
Thousand (150,000) fully paid and nonassessable shares of the Company's Common
Stock, par value $0.001 per share (the "Common Stock"), at an exercise price per
share equal to the lesser of (i) $.025 and (ii) the average of lowest three (3)
Trading Prices (as defined below) during the twenty (20) Trading Days (as
defined below) immediately prior to exercise (the "Exercise Price").  The term
"Warrant Shares," as used herein, refers to the shares of Common Stock
purchasable hereunder.  The Warrant Shares and the Exercise Price are subject to
adjustment as provided in Paragraph 4 hereof.  The term "Warrants" means this
Warrant and the other warrants issued pursuant to that certain Securities
Purchase Agreement, dated May __, 2001, by and among the Company and the Buyers
listed on the execution page thereof (the "Securities Purchase Agreement").
"Trading Price" means, for any security as of any date, the inter-day trading
price on the Over-the-Counter Bulletin Board (the "OTCBB") as reported by
Bloomberg Financial Markets or an equivalent, reliable reporting service
mutually acceptable to and hereafter designated by Holders of a majority in
interest of the Debentures ("Bloomberg") or, if the OTCBB is not the principal
trading market for such security, the inter-day trading price of such security
on the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg or, if no inter-day trading price of
such security is available in any of the foregoing manners, the average of the
inter-
<PAGE>

day trading prices of any market makers for such security that are listed
in the "pink sheets" by the National Quotation Bureau, Inc.  If the Trading
Price cannot be calculated for such security on such date in the manner provided
above, the Trading Price shall be the fair market value as mutually determined
by the Corporation and the holders of a majority in interest of the Debentures
being converted for which the calculation of the Trading Price is required in
order to determine the Conversion Price of such Debentures.  "Trading Day" shall
mean any day on which the Common Sock is traded for any period on the OTCBB, or
on the principal securities exchange or other securities market on which the
Common Stock is then being traded.

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

     1.  Manner of Exercise; Issuance of Certificates; Payment for Shares.
         ----------------------------------------------------------------
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three (3)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised. In addition to all other available remedies
at law or in equity, if the Company fails to deliver certificates for the
Warrant Shares within three (3) business days after this Warrant is exercised,
then the Company shall pay to the holder in cash a penalty (the "Penalty") equal
to 2% of the number of Warrant Shares that the Holder is entitled to multiplied
by the Market Price for each day that the Company fails to deliver certificates
for the Warrant Shares. For example, if the Holder is entitled to 100,000
Warrant Shares and the Market Price is $2.00, then the Company shall pay to the
Holder $4,000 for each day that the Company fails to deliver certificates for
the Warrant Shares. The Penalty shall be paid to the Holder by the fifth day of
the month following the month in which it has accrued.

                                      -2-
<PAGE>

          Notwithstanding anything in this Warrant to the contrary, in no event
shall the holder of this Warrant be entitled to exercise a number of Warrants
(or portions thereof) in excess of the number of Warrants (or portions thereof)
upon exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unexercised or unconverted portion of any other
securities of the Company (including the Debentures (as defined in the
Securities Purchase Agreement)) subject to a limitation on conversion or
exercise analogous to the limitation contained herein) and (ii) the number of
shares of Common Stock issuable upon exercise of the Warrants (or portions
thereof) with respect to which the determination described herein is being made,
would result in beneficial ownership by the holder and its affiliates of more
than 4.9% of the outstanding shares of Common Stock.  For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in clause
(i) of the preceding sentence.  Notwithstanding anything to the contrary
contained herein, the limitation on exercise of this Warrant set forth herein
may not be amended without (i) the written consent of the holder hereof and the
Company and (ii) the approval of a majority of shareholders of the Company.

     2.   Period of Exercise.  This Warrant is exercisable at any time or from
          ------------------
time to time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the Securities Purchase Agreement and before 5:00 p.m.,
New York City, New York time, on the third (3rd) anniversary of the date of
issuance (the "Exercise Period").

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

          (a)  Shares to be Fully Paid.  All Warrant Shares will, upon issuance
               -----------------------
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof.

          (b)  Reservation of Shares.  During the Exercise Period, the Company
               ---------------------
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.

          (c)  Listing.  The Company shall promptly secure the listing of the
               -------
shares of Common Stock issuable upon exercise of the Warrant 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 upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company shall
so list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.

                                      -3-
<PAGE>

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

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

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

     In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up to the
nearest cent.

          (a)  Adjustment of Exercise Price and Number of Shares upon Issuance
               ---------------------------------------------------------------
of Common Stock. Except as otherwise provided in Paragraphs 4(c) and 4(e)
---------------
hereof, if and whenever on or after the date of issuance of this Warrant, the
Company issues or sells, or in accordance with Paragraph 4(b) hereof is deemed
to have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Market Price (as hereinafter defined) on the date of issuance (a "Dilutive
Issuance"), then immediately upon the Dilutive Issuance, the Exercise Price will
be reduced to a price determined by multiplying the Exercise Price in effect
immediately prior to the Dilutive Issuance by a fraction, (i) the numerator of
which is an amount equal to the sum of (x) the number of shares of Common Stock
actually outstanding immediately prior to the Dilutive Issuance, plus (y) the
quotient of the aggregate consideration, calculated as set forth in Paragraph
4(b) hereof, received by the Company upon such Dilutive Issuance divided by the
Market Price in effect immediately prior to the Dilutive Issuance, and (ii) the
denominator of which is the total number of shares of Common Stock Deemed
Outstanding (as defined below) immediately after the Dilutive Issuance.

          (b)  Effect on Exercise Price of Certain Events.  For purposes of
               ------------------------------------------
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:

                                      -4-
<PAGE>

               (i)    Issuance of Rights or Options.  If the Company in any
                      -----------------------------
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock ("Convertible
Securities") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or grant of
such Options, be deemed to be outstanding and to have been issued and sold by
the Company for such price per share. For purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon the exercise of
such Options" is determined by dividing (i) the total amount, if any, received
or receivable by the Company as consideration for the issuance or granting of
all such Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Options, plus, in
the case of Convertible Securities issuable upon the exercise of such Options,
the minimum aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of such Options.

               (ii)   Issuance of Convertible Securities. If the Company in any
                      ----------------------------------
manner issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Market Price on the date of issuance,
then the maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.

               (iii)  Change in Option Price or Conversion Rate.  If there is a
                      -----------------------------------------
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at

                                      -5-
<PAGE>

which any Convertible Securities are convertible into or exchangeable for Common
Stock (other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exerci se Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.

               (iv)   Treatment of Expired Options and Unexercised Convertible
                      --------------------------------------------------------
Securities. If, in any case, the total number of shares of Common Stock issuable
----------
upon exercise of any Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.

               (v)    Calculation of Consideration Received.  If any Common
                      -------------------------------------
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair value
of such consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the Company.

               (vi)   Exceptions to Adjustment of Exercise Price.  No adjustment
                      ------------------------------------------
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities granted, issued and outstanding on the date of
issuance of this Warrant; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit
plan, stock option plan or restricted stock plan of the Company now existing or
to be implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the independent members of the Board of
Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose; or (iii) upon the exercise
of the Warrants.

          (c)  Subdivision or Combination of Common Stock. If the Company at
               ------------------------------------------
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization,

                                      -6-
<PAGE>

reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a greater number of shares, then, after the date of record for eff ecting
such subdivision, the Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time combines
(by reverse stock split, recapitalization, reorganization, reclassification or
otherwise) the shares of Common Stock acquirable hereunder into a smaller number
of shares, then, after the date of record for effecting such combination, the
Exercise Price in effect immediately prior to such combination will be
proportionately increased.

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

          (e)  Consolidation, Merger or Sale.  In case of any consolidation of
               -----------------------------
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in lieu
of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire.

          (f)  Distribution of Assets.  In case the Company shall declare or
               ----------------------
make any distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or otherwise,
then, after the date of record for determining stockholders entitled to such
distribution, but prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such distribution.

          (g)  Notice of Adjustment.  Upon the occurrence of any event which
               --------------------
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from

                                      -7-
<PAGE>

such adjustment and the increase or decrease in the number of Warrant Shares
purchasable at such price upon exercise, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. Such
calculation shall be certified by the Chief Financial Officer of the Company.

          (h)  Minimum Adjustment of Exercise Price.  No adjustment of the
               ------------------------------------
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.

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

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

               (i)   the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(including dividends or distributions payable in cash out of retained earnings)
to the holders of the Common Stock;

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

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

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

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place.  Such notice shall also specify the
date on which the holders of Common Stock shall be entitled to receive such
dividend, distribution, or subscription rights or to exchange their Common Stock
for stock or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be.  Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are

                                      -8-
<PAGE>

closed in respect thereto. Failure to give any such notice or any defect therein
shall not affect the validity of the proceedings referred to in clauses (i),
(ii), (iii) and (iv) above.

          (k)  Certain Events.  If any event occurs of the type contemplated by
               --------------
the adjustment provisions of this Paragraph 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Paragraph 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the holder
shall be neither enhanced nor diminished by such event.

          (l)  Certain Definitions.
               -------------------

               (i)   "Common Stock Deemed Outstanding" shall mean the number of
                      -------------------------------
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.

               (ii)  "Market Price," as of any date, (i) means the average of
                      ------------
the last reported sale prices for the shares of Common Stock on the OTCBB for
the five (5) Trading Days immediately preceding such date as reported by
Bloomberg, or (ii) if the OTCBB is not the principal trading market for the
shares of Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same period as reported
by Bloomberg, or (iii) if market value cannot be calculated as of such date on
any of the foregoing bases, the Market Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of the
Corporation or, at the option of a majority-in-interest of the holders of the
outstanding Warrants by (b) an independent investment bank of nationally
recognized standing in the valuation of businesses similar to the business of
the corporation. The manner of determining the Market Price of the Common Stock
set forth in the foregoing definition shall apply with respect to any other
security in respect of which a determination as to market value must be made
hereunder.

               (iii) "Common Stock," for purposes of this Paragraph 4, includes
                      ------------
the Common Stock, par value $0.001 per share, and any additional class of stock
of the Company having no preference as to dividends or distributions on
liquidation, provided that the shares purchasable pursuant to this Warrant shall
include only shares of Common Stock, par value $0.001 per share, in respect of
which this Warrant is exercisable, or shares resulting from any subdivision or
combination of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, merger, or sale of the character referred to in
Paragraph 4(e) hereof, the stock or other securities or property provided for in
such Paragraph.

        5.  Issue Tax.  The issuance of certificates for Warrant Shares upon the
            ---------
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to

                                      -9-
<PAGE>

pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than the holder of this
Warrant.

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

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

            (a)  Restriction on Transfer.  This Warrant and the rights granted
                 -----------------------
to the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Paragraph 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Paragraph 7(f) hereof and to the applicable
provisions of the Securities Purchase Agreement. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered holder hereof as the owner and holder hereof for all purposes, and
the Company shall not be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, the registration rights described in
Paragraph 8 are assignable only in accordance with the provisions of that
certain Registration Rights Agreement, dated as of May 8, 2001, by and among the
Company and the other signatories thereto (the "Registration Rights Agreement").

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

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

            (d)  Cancellation; Payment of Expenses.  Upon the surrender of this
                 ---------------------------------
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Paragraph 7.

                                      -10-
<PAGE>

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

            (f)  Exercise or Transfer Without Registration.  If, at the time of
                 -----------------------------------------
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the "Securities Act") and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Warrant, by taking and holding the
same, represents to the Company that such holder is acquiring this Warrant for
investment and not with a view to the distribution thereof.

       8.  Registration Rights.  The initial holder of this Warrant (and certain
           -------------------
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration
Rights Agreement.

       9.  Notices.  All notices, requests, and other communications required or
           -------
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder.  All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 304 North Highway 377,
Roanoke, Texas  76262, Attention:  Christopher D. Curtis, Chief Executive
Officer, or at such other address as shall have been furnished to the holder of
this Warrant by notice from the Company.  Any such notice, request, or other
communication may be sent by facsimile, but shall in such case be subsequently
confirmed by a writing personally delivered or sent by certified or registered
mail or by recognized overnight mail courier as provided above.  All notices,
requests, and other communications shall be deemed to have been given either at
the time of the receipt thereof by the person entitled to receive such notice at
the address of such person for purposes of this Paragraph 9, or, if mailed by
registered or certified mail or with a recognized overnight mail courier

                                      -11-
<PAGE>

upon deposit with the United States Post Office or such overnight mail courier,
if postage is prepaid and the mailing is properly addressed, as the case may be.

        10.  Governing Law.  THIS WARRANT SHALL BE ENFORCED, GOVERNED BY AND
             -------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITH SUCH STATE, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT, THE AGREEMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT
SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-
APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY
BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS WARRANT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

        11.  Miscellaneous.
             -------------

             (a)  Amendments.  This Warrant and any provision hereof may only be
                  ----------
amended by an instrument in writing signed by the Company and the holder hereof.

             (b)  Descriptive Headings.  The descriptive headings of the several
                  --------------------
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.

             (c)  Cashless Exercise.  Notwithstanding anything to the contrary
                  -----------------
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company at its principal executive offices with a written
notice of the holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the
holder shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the

                                      -12-
<PAGE>

denominator of which shall be the then current Market Price per share of Common
Stock. For example, if the holder is exercising 100,000 Warrants with a per
Warrant exercise price of $0.75 per share through a cashless exercise when the
Common Stock's current Market Price per share is $2.00 per share, then upon such
Cashless Exercise the holder will receive 62,500 shares of Common Stock.

        (d)  Remedies.  The Company acknowledges that a breach by it of its
             --------
obligations hereunder will cause irreparable harm to the holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Warrant will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Warrant, that the
holder shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Warrant and
to enforce specifically the terms and provisions thereof, without the necessity
of showing economic loss and without any bond or other security being required.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -13-
<PAGE>

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

                              e resources inc

                              By:
                                  --------------------------------
                                  Christopher D. Curtis
                                  Chief Executive Officer

Dated as of May 8, 2001

                                      -14-
<PAGE>

                          FORM OF EXERCISE AGREEMENT

                                                     Dated:  ________ __, 200_

To:  e resources inc

     The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________.  Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:

                              Name:
                                    -----------------------------------

                              Signature:
                                          -----------------------------
                              Address:
                                       --------------------------------

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

and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
<PAGE>

                               FORM OF ASSIGNMENT

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

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

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

Dated:  ________ __, 200__

In the presence of:
                              ------------------------------------------------

                              Name:
                                    ------------------------------------------

                              Signature:
                                          ------------------------------------
                              Title of Signing Officer or Agent (in any):

                                       ---------------------------------------
                              Address:
                                       ---------------------------------------

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

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

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