Document:

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 OR  REGULATION  S
            UNDER SAID ACT.

                          SECURED CONVERTIBLE DEBENTURE

January 15, 2004                                                      $30,000.00

            FOR VALUE  RECEIVED,  SUNBURST  ACQUISITIONS  IV,  INC.,  a Colorado
corporation  (hereinafter called the "BORROWER"),  hereby promises to pay to the
order of Bristol  Capital,  LLC or registered  assigns (the "HOLDER") the sum of
Thirty Thousand Dollars  ($30,000),  on January 15, 2005 (the "MATURITY  DATE"),
and to pay interest on the unpaid principal  balance hereof at the rate of eight
percent (8%) per annum from  January 15, 2004 (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 March 31, 2004,
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,  $.0001 par value 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  or, at the  option of the  Borrower,  in
whole or in part,  in shares of Common Stock of the Borrower  valued at the then
applicable  Conversion Price (as defined herein).  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 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 any day which shall be a federal legal holiday in the United States or
a day on which banking  institutions  in the State of New York are authorized or
required by law or other government  action to close. Each capitalized term used
herein,  and not otherwise  defined,  shall have the meaning ascribed thereto in
that certain Letter  Agreement,  dated January 15, 2004,  pursuant to which this
Debenture is originally issued (the "LETTER AGREEMENT").

<PAGE>

            This   Debenture  is  free  from  all  taxes,   liens,   claims  and
encumbrances  with  respect  to the issue  thereof  and shall not be  subject to
preemptive  rights or other similar rights of  stockholders  of the Borrower and
will not impose personal  liability upon the holder thereof.  The obligations of
the Borrower  under this  Debenture  shall be secured by that  certain  Security
Agreement  dated by and between the Borrower  and the Holder  dated  January 15,
2004.

            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 later of (i) the Maturity Date and (ii)
the  date of  payment  in  full  of the  outstanding  principal  amount  of this
Debenture  plus accrued and unpaid  interest  and any other  amounts owed to the
Holder under the Debenture or Letter Agreement 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 in Section
1.2(a) below (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  Debenture  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  Letter  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.  The Borrower shall have the authority
and obligation to determine  whether the  restriction  contained in this Section
1.1 will  limit any  conversion  hereunder  and to the  extent  that a  Borrower
determines  that  the  limitation   contained  in  this  Section  applies,   the
determination  of which portion of this  Debenture is  convertible  shall be the
responsibility  and  obligation of each such  Borrower.  A Borrower may allocate
which of the equity of the Company  deemed  beneficially  owned by such Borrower
shall  be  included  in the 9.9%  amount  described  above  and  which  shall be
allocated  to  the  excess  above  4.9%.  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  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 facsimile (or by other means  resulting in, or reasonably  expected
to result in, notice) to the Borrower  before 6:00 p.m.,  Palo Alto,  California
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 the Letter  Agreement  and any other  agreements
executed in connection with the initial issuance of this Debenture.

                                       2
<PAGE>

            1.2 CONVERSION PRICE.

                  (A)  CALCULATION OF CONVERSION  PRICE.  The  Conversion  Price
shall mean $0.02.

                  (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 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.

                  (C)  INJUNCTION - POSTING OF BOND. In the event a Holder shall
elect to convert a Note or part thereof,  the Company may not refuse  conversion
based on any claim that such Holder or any one  associated  or  affiliated  with
such Holder has been engaged in any  violation of law, or for any other  reason,
unless,  an injunction  from a court,  on notice,  restraining  and or enjoining
conversion  of all or part of said Note shall have been sought and  obtained and
the  Company  has posted a surety  bond for the  benefit  of such  Holder in the
amount of 130% of the amount of the Note,  which is  subject to the  injunction,
which bond shall remain in effect until the completion of arbitration/litigation
of the dispute and the  proceeds of which shall be payable to such Holder to the
extent Holder obtains judgment.

                                       3
<PAGE>

            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 issued pursuant to the Letter Agreement. The Borrower is required
at all times to have authorized and reserved two times the number of shares that
is  actually  issuable  upon  full  conversion  of the  Debenture  (based on the
Conversion  Price of the  Debenture  or the  Exercise  Price of the  Warrants in
effect from time to time) (the "RESERVED AMOUNT").  The Reserved Amount shall be
increased  from  time to time in  accordance  with  the  Borrower's  obligations
pursuant to the Letter  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 Debenture 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
Debenture.  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 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:

                                       4
<PAGE>

                  (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 6:00 p.m.,  Pacific  Standard  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).

            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 at any time from
time to time after the Issue Date,  by  submitting  to the  Borrower a Notice of
Conversion (by facsimile or other reasonable  means of communication  dispatched
on the Conversion Date prior to 6:00 p.m., Pacific Standard Time).

                  (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.

                                       5
<PAGE>

                  (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 two (2)
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 Letter Agreement  (including,  without limitation,  the
requirement 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 6:00 p.m., Pacific Standard Time, on such date.

                                       6
<PAGE>

                  (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 in cash,  as  liquidated  damages and not as a
penalty,  for each $5,000 of principal amount being  converted,  $50 per Trading
Day  (increasing  to $100 per Trading Day on the third Trading Day following the
Deadline and  increasing  to $200 per Trading Day on the sixth Trading Day after
the Deadline) for each Trading Day after the Deadline until the shares of Common
Stock are  delivered.  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 such additional principal amount
shall be  convertible  into Common  Stock in  accordance  with the terms of this
Debenture.

                  (H) BUY-IN.  In addition to any other rights  available to the
Holder,  if the Company fails to deliver to the Holder such shares issuable upon
conversion of a Note by the Deadline and if five (5) days after the Deadline the
Holder purchases (in an open market  transaction or otherwise)  shares of Common
Stock to deliver in  satisfaction  of a sale by such Holder of the Common  Stock
which the Subscriber  anticipated  receiving upon such  conversion (a "Buy-In"),
then the Company  shall pay in cash to the Holder (in  addition to any  remedies
available to or elected by the  Subscriber) the amount by which (A) the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased  exceeds (B) the aggregate  principal  and/or interest
amount of the Note for which such  conversion was not timely  honored,  together
with interest thereon at a rate of 15% per annum, accruing until such amount and
any  accrued  interest  thereon is paid in full (which  amount  shall be paid as
liquidated damages and not as a penalty).  For example,  if the Holder purchases
shares of Common  Stock  having a total  purchase  price of  $11,000  to cover a
Buy-In with  respect to an  attempted  conversion  of $10,000 of note  principal
and/or  interest,  the Company shall be required to pay the Holder $1,000,  plus
interest.  The Holder shall provide the Company  written  notice  indicating the
amounts  payable to the Holder in respect of the Buy-In.  The  delivery  date by
which Common Stock must be  delivered  pursuant to this Section  shall be tolled
for the amount of days that the Holder does not deliver  information  reasonably
requested by the Company's transfer agent.

                                       7
<PAGE>

            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
Letter  Agreement).  Except as otherwise  provided in the Letter  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 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 OR REGULATION S 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 Letter  Agreement  or (ii) affect in any way the  Holder's
obligations to comply with applicable  prospectus delivery requirements upon the
resale of the securities referred to herein.

                                       8
<PAGE>

            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 50% 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 in
full of the  Debenture,  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
stockholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary  (i.e.,  a spin-off)) (a  "DISTRIBUTION"),  then the Holder of this
Debenture  shall be entitled,  upon any conversion of this  Debenture  after the
date of record for determining  stockholders  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 stockholders entitled to such Distribution.

                  (D) ADJUSTMENT DUE TO DILUTIVE ISSUANCE. If the Company or any
subsidiary  thereof,  as  applicable,   at  any  time  while  the  Debenture  is
outstanding,  shall offer,  sell, grant any option to purchase or offer, sell or
grant any right to reprice its securities,  or otherwise dispose of or issue (or
announce any offer,  sale, grant or any option to purchase or other disposition)
any Common Stock or any equity or equity  equivalent  securities  (including any
equity,  debt or  other  instrument  that is at any time  over the life  thereof
convertible into or exchangeable for Common Stock) (collectively,  "Common Stock
Equivalents") entitling any person to acquire shares of Common Stock, at a price
per share less than the  Conversion  Price (if the holder of the Common Stock or
Common Stock  Equivalent  so issued  shall at any time,  whether by operation of
purchase price adjustments, reset provisions,  floating conversion,  exercise or
exchange  prices or otherwise,  or due to warrants,  options or rights per share
which is issued in connection with such issuance,  be entitled to receive shares
of Common  Stock at a price per share which is less than the  Conversion  Price,
such  issuance  shall be deemed to have  occurred  for less than the  Conversion
Price), then, the Conversion Price shall be adjusted for such conversions as the
Holder  shall  indicate  in its  Conversion  Notices  to equal  the  conversion,
exchange or purchase  price for such Common  Stock or Common  Stock  Equivalents
(including any reset provisions thereof) at issue. Such adjustment shall be made
whenever such Common Stock or Common Stock  Equivalents are issued.  The Company
shall notify the Holder in writing, no later than the business day following the
issuance of any Common Stock or Common Stock Equivalent subject to this section,
indicating therein the applicable  issuance price, or of applicable reset price,
exchange price, conversion price and other pricing terms.

                  (E) PURCHASE  RIGHTS.  If, at any time when this  Debenture is
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.

                                       10
<PAGE>

            1.7 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 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 the Borrower shall
have any  obligation  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 the Borrower shall
have any  obligation  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.

                                       11
<PAGE>

            2.3  BORROWINGS.  So long as the Borrower  shall have any obligation
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  Borrower  shall  have  any
obligation  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 the  Borrower  shall have any
obligation  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,  (b) made
in the ordinary course of business or (c) not in excess of $25,000.

            2.6 CONTINGENT  LIABILITIES.  So long as the Borrower shall have any
obligation  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.

            2.7 PIGGYBACK  REGISTRATION RIGHTS. When the Borrower elects to file
registration  statement  (the  "Registration  Statement"),  with  respect to its
common stock  pursuant to the  Securities  Act of 1933 (the  "Act"),  the Common
Stock underlying this Debenture shall be included and registered pursuant to any
such Registration Statement, at the expense of the Borrower;  provided, however,
that such Registration Statement must be filed no later than the sixtieth (60th)
day following the Closing (as defined in the Letter  Agreement)  and be declared
effective  no later than the one hundred  twentieth  (120th) day  following  the
Closing.  The  Holder  shall  provide  the  Borrower  with the  information  and
documents  reasonably  necessary  to enable the  Borrower  to include the shares
underlying  this  Debenture in the  Registration  Statement.  The Borrower  must
notify the Holder in writing of its intention to file the Registration Statement
at least twenty (20) days prior to the filing of the Registration Statement, and
provide  the Holder with drafts of such  registration  statement  for review and
comment by the Holder upon Holder's request.  In the event the Borrower fails to
file the Registration Statement by the sixtieth (60th) day following the Closing
(the  "Filing  Date") or the  Registration  Statement is not declared by the one
hundred twentieth (120th) day following the Closing (the "Effective  Date"), the
Borrower  shall pay to the Holder two percent  (2%) of the  principal  amount of
this Debenture per month for every month  following the Filing Date or Effective
Date, prorated for partial months, until the Registration  Statement is filed or
effective, as applicable (the "Registration Default Amount"). The Borrower shall
pay the  Registration  Default  Amount in cash or shares of common  stock of the
Borrower at a price per share equal to the Conversion Price.

                                       12
<PAGE>

                         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 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
seven  (7) 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  Letter  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 Letter 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 five (5) days after the Borrower  shall have been notified  thereof
in writing by the Holder.

            3.3 FAILURE TO TIMELY FILE REGISTRATION OR EFFECT REGISTRATION.  The
Borrower fails to include the shares  issuable upon conversion of this Debenture
and any other shares due to the Holder  pursuant to the Letter  Agreement in the
next  registration  statement to be filed by the Borrower within sixty (60) days
following the Closing (as defined in the Letter  Agreement)  (the  "Registration
Statement"), or obtain effectiveness with the Securities and Exchange Commission
of the Registration Statement within one hundred twenty (120) days following the
Closing,  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) for more than
twenty  (20)  consecutive  days or thirty (30) days in any twelve  month  period
after the Registration Statement becomes effective;

            3.4 BREACH OF COVENANTS. The Borrower breaches any material covenant
or other  material  term or  condition  contained in Sections 1.3 or 1.6 of this
Debenture or Letter  Agreement,  and such breach  continues for a period of five
(5) days after written notice thereof to the Borrower from the Holder;

                                       13
<PAGE>

            3.5  FAILURE TO PAY  AMOUNTS DUE UNDER  TRANSACTION  DOCUMENTS.  The
Borrower fails to pay any amounts due under the Letter Agreement within five (5)
days after written notice thereof to the Borrower from the Holder.

            3.6 FAILURE TO REMOVE  LEGEND  FROM SHARES UPON VALID 144 SALE.  The
Borrower  fails to instruct its transfer agent to remove any legends from shares
of Common  Stock  eligible to be sold under Rule 144 of the  Securities  Act and
issue such unlegended  certificates to the Holder within three (3) business days
of the  Holder's  request  so long  as the  Holder  has  provided  the  standard
representations regarding the Rule 144 sale.

            3.7 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  Letter  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 or the Letter Agreement;

            3.8  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;

            3.9 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  $25,000,  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;

            3.10   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;

            3.11 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;

            3.12 DEFAULT UNDER THE  DEBENTURE.  An Event of Default has occurred
and is continuing under this Debenture issued pursuant to the Letter 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, 3.6, 3.7, 3.9, 3.11 or 3.12, at
the option of the Holder and exercisable  through the delivery of written notice
to the Borrower by the Holder (the "DEFAULT NOTICE"), and upon the occurrence of
an Event of Default  specified in Section 3.6 or 3.8, the Debenture 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)
135%  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  Sections  1.3 and 1.4(g)
hereof or  pursuant  to the Letter  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.

                                       14
<PAGE>

                           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
______________________________,  facsimile number:  __________.  Both the Holder
and the Borrower may change the address for service by service of written notice
to the other as herein provided.

                                       15
<PAGE>

            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 instrument issued pursuant to the Letter 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 AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK,  WITHOUT REGARD
TO THE  PRINCIPLES OF CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE  JURISDICTION  OF THE STATE COURTS OR THE UNITED STATES FEDERAL COURTS
LOCATED IN NEW YORK WITH RESPECT TO ANY DISPUTE  ARISING  UNDER THIS  AGREEMENT,
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 AGREEMENT 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 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.

                                       16
<PAGE>

            4.8 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 the
Letter  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 Section 2.7 herein. 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.

            4.9 DENOMINATIONS.  At the request of the Holder,  upon surrender of
this  Debenture,  the  Borrower  shall  promptly  issue a new  Debenture  in the
aggregate  outstanding  principal  amount  hereof,  in the form hereof,  in such
denominations of at least $50,000 as the Holder shall request,  or in the amount
of the balance of the Debenture.

            4.10 LETTER  AGREEMENT.  By its acceptance of this  Debenture,  each
Holder agrees to be bound by the applicable terms of the Letter Agreement.

            4.11 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 stockholders (and copies of proxy materials and other information
sent to stockholders). In the event of any taking by the Borrower of a record of
its stockholders for the purpose of determining stockholders 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  right,  or for the purpose of
determining  stockholders  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.

                                       17
<PAGE>

            4.12 REMEDIES.  The Borrower 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
Borrower  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 Borrower 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.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       18
<PAGE>

            IN WITNESS WHEREOF,  Borrower has caused this Debenture to be signed
in its name by its duly authorized officer this 15th day of January, 2004.

                                       SUNBURST ACQUISITIONS IV, INC.

                                       By: _____________________________________
                                           Name:
                                           Title:

                                       19
<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION

                    (To be Executed by the Registered Holder
                       in order to Convert the Debenture)

            The    undersigned    hereby    irrevocably    elects   to   convert
$________principal amount of the Debenture (defined below) into shares of common
stock, par value $.0001 per share ("COMMON STOCK"), of Sunburst Acquisitions IV,
Inc., a Colorado corporation (the "BORROWER") according to the conditions of the
convertible  debenture  of the  Borrower  dated  as of  January  __,  2004  (the
"Debenture"),  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 Debenture 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 Debenture:__________________________
                  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
Debenture for the number of business days such issuance and delivery is late.

                                      A-1NEITHER THESE  SECURITIES  NOR THE  SECURITIES  INTO WHICH THESE  SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE  COMMISSION OR
THE  SECURITIES  COMMISSION  OF ANY STATE IN  RELIANCE  UPON AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THESE  SECURITIES AND THE  SECURITIES  ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

                          COMMON STOCK PURCHASE WARRANT

                 To Purchase 2,700,000 Shares of Common Stock of

                         SUNBURST ACQUISITIONS IV, INC.

            THIS COMMON STOCK PURCHASE  WARRANT (the "Warrant")  certifies that,
for value received,  Diana Derycz-Kessler (the "Holder"),  is entitled, upon the
terms and subject to the limitations on exercise and the conditions  hereinafter
set forth, at any time on or after the date hereof (the "Initial Exercise Date")
and on or prior to the close of business on the fifth anniversary of the Initial
Exercise Date (the "Termination Date") but not thereafter,  to subscribe for and
purchase  from  Sunburst  Acquisitions  IV,  Inc., a Colorado  corporation  (the
"Company"),  up to 2,700,000  shares (the "Warrant  Shares") of Common Stock, no
par value, of the Company (the "Common Stock").  The purchase price of one share
of Common  Stock  (the  "Exercise  Price")  under this  Warrant  shall be $0.01,
subject to adjustment hereunder.

            1. Title to Warrant.  Prior to the  Termination  Date and subject to
compliance with applicable laws and Section 7 of this Warrant,  this Warrant and
all rights  hereunder  are  transferable,  in whole or in part, at the office or
agency of the  Company by the Holder in person or by duly  authorized  attorney,
upon surrender of this Warrant  together with the Assignment Form annexed hereto
properly  endorsed.  The transferee shall sign an investment  letter in form and
substance reasonably satisfactory to the Company.

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

                                       1
<PAGE>

            3. Exercise of Warrant.

                  (a)  Exercise  of the  purchase  rights  represented  by  this
      Warrant may be made at any time or times on or after the Initial  Exercise
      Date and on or before the Termination Date by delivery to the Company of a
      duly executed facsimile copy of the Notice of Exercise Form annexed hereto
      (or such  other  office or agency of the  Company as it may  designate  by
      notice in writing to the  registered  Holder at the address of such Holder
      appearing  on the  books  of the  Company);  provided,  however,  within 5
      Trading  Days of the date said  Notice of  Exercise  is  delivered  to the
      Company, the Holder shall have surrendered this Warrant to the Company and
      the Company shall have received payment of the aggregate Exercise Price of
      the shares thereby  purchased by wire transfer or cashier's check drawn on
      a United States bank. Certificates for shares purchased hereunder shall be
      delivered  to the Holder  within 3 Trading  Days from the  delivery to the
      Company of the Notice of  Exercise  Form,  surrender  of this  Warrant and
      payment of the aggregate Exercise Price as set forth above ("Warrant Share
      Delivery  Date").  This Warrant shall be deemed to have been  exercised on
      the date the Exercise Price is received by the Company. The Warrant Shares
      shall be deemed to have been  issued,  and  Holder or any other  person so
      designated  to be named therein shall be deemed to have become a holder of
      record of such  shares for all  purposes,  as of the date the  Warrant has
      been  exercised  by payment to the Company of the  Exercise  Price and all
      taxes  required  to be paid by the Holder,  if any,  pursuant to Section 5
      prior to the issuance of such shares, have been paid. If the Company fails
      to deliver to the Holder a certificate or  certificates  representing  the
      Warrant Shares pursuant to this Section 3(a) by the Warrant Share Delivery
      Date,  then the Holder will have the right to rescind  such  exercise.  In
      addition to any other rights available to the Holder, if the Company fails
      to deliver to the Holder a certificate or  certificates  representing  the
      Warrant  Shares  pursuant to an  exercise  on or before the Warrant  Share
      Delivery Date, and if after such date the Holder is required by its broker
      to purchase (in an open market  transaction or otherwise) shares of Common
      Stock to deliver in  satisfaction  of a sale by the Holder of the  Warrant
      Shares  which the  Holder  anticipated  receiving  upon such  exercise  (a
      "Buy-In"), then the Company shall (1) pay in cash to the Holder the amount
      by which  (x) the  Holder's  total  purchase  price  (including  brokerage
      commissions,  if any) for the shares of Common Stock so purchased  exceeds
      (y) the amount  obtained by  multiplying  (A) the number of Warrant Shares
      that the Company was required to deliver to the Holder in connection  with
      the  exercise at issue times (B) the price at which the sell order  giving
      rise to such purchase  obligation  was executed,  and (2) at the option of
      the Holder,  either  reinstate  the portion of the Warrant and  equivalent
      number of  Warrant  Shares  for which  such  exercise  was not  honored or
      deliver to the Holder the number of shares of Common Stock that would have
      been issued had the Company timely complied with its exercise and delivery
      obligations  hereunder.  For example, if the Holder purchases Common Stock
      having a total purchase price of $11,000 to cover a Buy-In with respect to
      an attempted  exercise of shares of Common  Stock with an  aggregate  sale
      price giving rise to such purchase obligation of $10,000, under clause (1)
      of the immediately preceding sentence the Company shall be required to pay
      the Holder  $1,000.  The Holder shall provide the Company  written  notice
      indicating  the  amounts  payable to the Holder in respect of the  Buy-In,
      together  with  applicable  confirmations  and other  evidence  reasonably
      requested by the Company.  Nothing  herein shall limit a Holder's right to
      pursue any other remedies  available to it hereunder,  at law or in equity
      including,  without  limitation,  a decree of specific  performance and/or
      injunctive  relief with respect to the Company's failure to timely deliver
      certificates  representing  shares of Common  Stock upon  exercise  of the
      Warrant as required pursuant to the terms hereof.

                                       2
<PAGE>

                  (b) If this Warrant  shall have been  exercised  in part,  the
      Company shall,  at the time of delivery of the certificate or certificates
      representing  Warrant Shares,  deliver to Holder a new Warrant  evidencing
      the rights of Holder to purchase the unpurchased Warrant Shares called for
      by this  Warrant,  which  new  Warrant  shall  in all  other  respects  be
      identical with this Warrant.

                  (c) The  Holder  shall  not have the  right  to  exercise  any
      portion of this  Warrant,  pursuant to Section 3(a) or  otherwise,  to the
      extent that after  giving  effect to such  issuance  after  exercise,  the
      Holder  (together  with  the  Holder's  affiliates),  as set  forth on the
      applicable Notice of Exercise,  would  beneficially own in excess of 4.99%
      of the number of shares of the Common Stock outstanding  immediately after
      giving effect to such  issuance.  For purposes of the foregoing  sentence,
      the number of shares of Common Stock  beneficially owned by the Holder and
      its affiliates shall include the number of shares of Common Stock issuable
      upon exercise of this Warrant with respect to which the  determination  of
      such  sentence  is being made,  but shall  exclude the number of shares of
      Common Stock which would be issuable  upon (A) exercise of the  remaining,
      nonexercised  portion of this Warrant  beneficially owned by the Holder or
      any of its affiliates and (B) exercise or conversion of the unexercised or
      nonconverted  portion of any other  securities of the Company  (including,
      without  limitation,  any  other  Debentures  or  Warrants)  subject  to a
      limitation on conversion or exercise analogous to the limitation contained
      herein  beneficially owned by the Holder or any of its affiliates.  Except
      as set forth in the preceding sentence, for purposes of this Section 3(c),
      beneficial  ownership shall be calculated in accordance with Section 13(d)
      of the Exchange Act, it being  acknowledged  by Holder that the Company is
      not  representing  to Holder that such  calculation is in compliance  with
      Section 13(d) of the Exchange Act and Holder is solely responsible for any
      schedules required to be filed in accordance therewith. To the extent that
      the limitation  contained in this Section 3(c) applies,  the determination
      of whether this Warrant is  exercisable  (in relation to other  securities
      owned by the Holder) and of which a portion of this Warrant is exercisable
      shall be in the sole  discretion of such Holder,  and the  submission of a
      Notice of Exercise  shall be deemed to be such Holder's  determination  of
      whether this Warrant is exercisable (in relation to other securities owned
      by such Holder) and of which  portion of this Warrant is  exercisable,  in
      each case subject to such aggregate percentage limitation, and the Company
      shall  have no  obligation  to  verify or  confirm  the  accuracy  of such
      determination.  For  purposes of this Section  3(c),  in  determining  the
      number of outstanding  shares of Common Stock,  the Holder may rely on the
      number  of  outstanding  shares of Common  Stock as  reflected  in (x) the
      Company's most recent Form 10-QSB or Form 10-KSB,  as the case may be, (y)
      a more recent public  announcement  by the Company or (z) any other notice
      by the Company or the Company's Transfer Agent setting forth the number of
      shares of Common  Stock  outstanding.  Upon the written or oral request of
      the Holder,  the Company shall within two Trading Days confirm  orally and
      in  writing  to the  Holder  the  number of shares  of Common  Stock  then
      outstanding. In any case, the number of outstanding shares of Common Stock
      shall be determined  after giving effect to the  conversion or exercise of
      securities of the Company,  including  this Warrant,  by the Holder or its
      affiliates since the date as of which such number of outstanding shares of
      Common Stock was reported.

                                       3
<PAGE>

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

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

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

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

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

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

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

            7. Transfer, Division and Combination.

                  (a) Subject to compliance with any applicable  securities laws
      and the conditions  set forth in Sections 1 and 7(e) hereof,  this Warrant
      and all  rights  hereunder  are  transferable,  in whole or in part,  upon
      surrender of this Warrant at the principal office of the Company, together
      with a  written  assignment  of this  Warrant  substantially  in the  form
      attached  hereto duly  executed by the Holder or its agent or attorney and
      funds sufficient to pay any transfer taxes payable upon the making of such
      transfer.  Upon such surrender and, if required, such payment, the Company
      shall  execute  and  deliver a new  Warrant or Warrants in the name of the
      assignee or assignees and in the denomination or  denominations  specified
      in such  instrument of  assignment,  and shall issue to the assignor a new
      Warrant  evidencing the portion of this Warrant not so assigned,  and this
      Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may
      be exercised by a new holder for the  purchase of Warrant  Shares  without
      having a new Warrant issued.

                                       4
<PAGE>

                  (b)  This  Warrant  may be  divided  or  combined  with  other
      Warrants upon presentation  hereof at the aforesaid office of the Company,
      together with a written notice  specifying the names and  denominations in
      which new Warrants are to be issued,  signed by the Holder or its agent or
      attorney.  Subject to  compliance  with Section  7(a),  as to any transfer
      which may be involved in such division or  combination,  the Company shall
      execute and deliver a new Warrant or Warrants in exchange  for the Warrant
      or Warrants to be divided or combined in accordance with such notice.

                  (c) The Company  shall  prepare,  issue and deliver at its own
      expense (other than transfer taxes) the new Warrant or Warrants under this
      Section 7.

                  (d) The Company agrees to maintain,  at its aforesaid  office,
      books  for  the  registration  and the  registration  of  transfer  of the
      Warrants.

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

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

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

                                       5
<PAGE>

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

            11. Adjustments of Exercise Price and Number of Warrant Shares.

                  (a) Stock  Splits,  etc.  The  number  and kind of  securities
      purchasable upon the exercise of this Warrant and the Exercise Price shall
      be subject to  adjustment  from time to time upon the  happening of any of
      the  following.  In case the Company shall (i) pay a dividend in shares of
      Common Stock or make a  distribution  in shares of Common Stock to holders
      of its outstanding  Common Stock, (ii) subdivide its outstanding shares of
      Common  Stock  into  a  greater  number  of  shares,   (iii)  combine  its
      outstanding  shares of  Common  Stock  into a smaller  number of shares of
      Common  Stock,  or  (iv)  issue  any  shares  of its  capital  stock  in a
      reclassification  of the Common Stock,  then the number of Warrant  Shares
      purchasable upon exercise of this Warrant  immediately prior thereto shall
      be adjusted  so that the Holder  shall be entitled to receive the kind and
      number of Warrant Shares or other securities of the Company which it would
      have  owned  or have  been  entitled  to  receive  had such  Warrant  been
      exercised in advance  thereof.  Upon each such  adjustment of the kind and
      number of Warrant  Shares or other  securities  of the  Company  which are
      purchasable hereunder, the Holder shall thereafter be entitled to purchase
      the  number of  Warrant  Shares or other  securities  resulting  from such
      adjustment  at an  Exercise  Price  per  Warrant  Share or other  security
      obtained by multiplying the Exercise Price in effect  immediately prior to
      such  adjustment  by the number of  Warrant  Shares  purchasable  pursuant
      hereto  immediately prior to such adjustment and dividing by the number of
      Warrant  Shares or other  securities  of the Company that are  purchasable
      pursuant  hereto  immediately  after such  adjustment.  An adjustment made
      pursuant to this paragraph shall become  effective  immediately  after the
      effective  date of such event  retroactive to the record date, if any, for
      such event.

                  (b) Anti-Dilution Provisions.  During the Exercise Period, the
      Exercise  Price  shall  be  subject  to  adjustment  from  time to time as
      provided in this Section  11(b).  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 or down to the nearest cent.

                  (i) Adjustment of Exercise  Price. If and whenever the Company
            issues or sells, or in accordance with Section  11(b)(ii)  hereof is
            deemed to have  issued or sold,  any  shares of Common  Stock for an
            effective  consideration  per share of less  than the then  Exercise
            Price, or for no  consideration  (such lower price,  the "Base Share
            Price" and such  issuances  collectively,  a  "Dilutive  Issuance"),
            then,  the  Exercise  Price shall be reduced to equal the Base Share
            Price. Such adjustment shall be made whenever shares of Common Stock
            or Common Stock Equivalents are issued.

                                       6
<PAGE>

                  (ii) Effect on Exercise Price of Certain Events.  For purposes
            of  determining  the adjusted  Exercise  Price under  Section  11(b)
            hereof, the following will be applicable:

                              (A) 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 Common  Stock  Equivalents
                  (such warrants, rights and options to purchase Common Stock or
                  Common  Stock  Equivalents  are  hereinafter  referred  to  as
                  "Options") and the effective  price per share for which Common
                  Stock is issuable  upon the  exercise of such  Options is less
                  than the Exercise Price ("Below Base Price Options"), then the
                  maximum  total number of shares of Common Stock  issuable upon
                  the  exercise of all such Below Base Price  Options  (assuming
                  full   exercise,   conversion  or  exchange  of  Common  Stock
                  Equivalents,  if  applicable)  will,  as of  the  date  of the
                  issuance or grant of such Below Base Price Options,  be deemed
                  to be  outstanding  and to have  been  issued  and sold by the
                  Company for such price per share and the maximum consideration
                  payable  to the  Company  upon such  exercise  (assuming  full
                  exercise,  conversion or exchange of Common Stock Equivalents,
                  if  applicable)  will be deemed to have been  received  by the
                  Company.   For  purposes  of  the  preceding   sentence,   the
                  "effective  price per share for which Common Stock is issuable
                  upon  the  exercise  of such  Below  Base  Price  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 Below Base Price  Options,  plus the
                  minimum aggregate amount of additional consideration,  if any,
                  payable to the  Company  upon the  exercise  of all such Below
                  Base  Price  Options,  plus,  in  the  case  of  Common  Stock
                  Equivalents  issuable  upon the  exercise  of such  Below Base
                  Price  Options,  the minimum  aggregate  amount of  additional
                  consideration   payable  upon  the  exercise,   conversion  or
                  exchange  thereof at the time such  Common  Stock  Equivalents
                  first become exercisable, convertible or exchangeable, by (ii)
                  the maximum  total number of shares of Common  Stock  issuable
                  upon  the  exercise  of all  such  Below  Base  Price  Options
                  (assuming  full  conversion  of Common Stock  Equivalents,  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  Below  Base  Price  Options  or  upon  the
                  exercise,  conversion or exchange of Common Stock  Equivalents
                  issuable upon exercise of such Below Base Price Options.

                                       7
<PAGE>

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

                              (C) 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  exercise,  conversion  or
                  exchange of any Common Stock Equivalents; or (iii) the rate at
                  which any Common Stock  Equivalents  are  convertible  into or
                  exchangeable  for Common Stock (in each such case,  other than
                  under or by reason of provisions  designed to protect  against
                  dilution),  the  Exercise  Price in effect at the time of such
                  change will be  readjusted  to the Exercise  Price which would
                  have been in effect  at such time had such  Options  or Common
                  Stock Equivalents 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.

                              (D) Calculation of Consideration  Received. If any
                  Common Stock,  Options or Common Stock Equivalents 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 Common Stock  Equivalents 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 market value of
                  such consideration,  except where such consideration  consists
                  of  securities,  in which  case the  amount  of  consideration
                  received by the Company will be the fair market value (closing
                  bid price,  if traded on any market) thereof as of the date of
                  receipt.  In case any Common  Stock,  Options or Common  Stock
                  Equivalents  are  issued  in  connection  with any  merger  or
                  consolidation   in  which  the   Company   is  the   surviving
                  corporation,  the  amount of  consideration  therefor  will be
                  deemed to be the fair market  value of such portion of the net
                  assets and  business of the  non-surviving  corporation  as is
                  attributable  to such Common  Stock,  Options or Common  Stock
                  Equivalents,  as the case may be. The fair market value of any
                  consideration other than cash or securities will be determined
                  in good  faith by an  investment  banker or other  appropriate
                  expert of  national  reputation  selected  by the  Company and
                  reasonably  acceptable to the holder hereof, with the costs of
                  such appraisal to be borne by the Company.

                                       8
<PAGE>

                              (E) Failure to comply with  provisions of Warrant.
                  In the event the Company fails to comply with any provision of
                  this Warrant, the Exercise Price shall be reduced by 50%.

                  (iii) Offerings of Other Property to Common Stock Holders.  If
            the  Company,  at any time  prior  to the  Termination  Date,  shall
            distribute to all holders of Common Stock (and not to Holders of the
            Warrants)  evidences  of its  indebtedness  or  assets  or rights or
            warrants to subscribe  for or purchase  any security  other than the
            Common Stock (which shall be subject to Section  11(b)(i)),  then in
            each such case the Exercise  Price shall be adjusted by  multiplying
            the Exercise  Price in effect  immediately  prior to the record date
            fixed for  determination  of  stockholders  entitled to receive such
            distribution  by a fraction  of which the  denominator  shall be the
            VWAP determined as of the record date mentioned  above, and of which
            the  numerator  shall be such VWAP on such record date less the then
            per share fair  market  value at such  record date of the portion of
            such assets or evidence of indebtedness so distributed applicable to
            one outstanding share of the Common Stock as determined by the Board
            of Directors in good faith. In either case the adjustments  shall be
            described  in a statement  provided to the Holders of the portion of
            assets  or  evidences  of   indebtedness   so  distributed  or  such
            subscription  rights  applicable to one share of Common Stock.  Such
            adjustment shall be made whenever any such  distribution is made and
            shall become effective  immediately  after the record date mentioned
            above.

                  (iv) 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.

                                       9
<PAGE>

            12.  Reorganization,   Reclassification,  Merger,  Consolidation  or
Disposition  of  Assets.  In case the  Company  shall  reorganize  its  capital,
reclassify  its  capital  stock,  consolidate  or  merge  with or  into  another
corporation  (where the Company is not the surviving  corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell,  transfer or otherwise  dispose of its property,  assets or business to
another  corporation  and,  pursuant  to  the  terms  of  such   reorganization,
reclassification,  merger,  consolidation  or disposition  of assets,  shares of
common stock of the successor or acquiring  corporation,  or any cash, shares of
stock or other  securities  or  property  of any  nature  whatsoever  (including
warrants or other  subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring  corporation ("Other Property"),  are
to be received by or  distributed to the holders of Common Stock of the Company,
then the Holder shall have the right thereafter to receive, at the option of the
Holder, (a) upon exercise of this Warrant,  the number of shares of Common Stock
of the  successor  or  acquiring  corporation  or of the  Company,  if it is the
surviving corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common  Stock for which  this  Warrant is
exercisable  immediately  prior to such  event or (b) cash equal to the value of
this Warrant as determined in accordance with the  Black-Scholes  option pricing
formula.  In  case  of  any  such  reorganization,   reclassification,   merger,
consolidation or disposition of assets,  the successor or acquiring  corporation
(if  other  than  the  Company)  shall  expressly  assume  the due and  punctual
observance  and  performance  of each and every  covenant and  condition of this
Warrant to be performed and observed by the Company and all the  obligations and
liabilities   hereunder,   subject  to  such  modifications  as  may  be  deemed
appropriate (as determined in good faith by resolution of the Board of Directors
of the Company) in order to provide for  adjustments of Warrant Shares for which
this Warrant is exercisable  which shall be as nearly  equivalent as practicable
to the adjustments provided for in this Section 12. For purposes of this Section
12, "common stock of the successor or acquiring corporation" shall include stock
of such  corporation  of any class which is not  preferred  as to  dividends  or
assets  over any  other  class of stock  of such  corporation  and  which is not
subject to  redemption  and shall also include any  evidences  of  indebtedness,
shares of stock or other  securities  which are convertible into or exchangeable
for any such stock,  either  immediately or upon the arrival of a specified date
or the  happening  of a  specified  event and any  warrants  or other  rights to
subscribe  for or purchase  any such stock.  The  foregoing  provisions  of this
Section   12   shall    similarly    apply   to   successive    reorganizations,
reclassifications, mergers, consolidations or disposition of assets.

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

            14. Notice of  Adjustment.  Whenever the number of Warrant Shares or
number or kind of securities or other property  purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided,  the Company
shall give notice thereof to the Holder,  which notice shall state the number of
Warrant Shares (and other securities or property)  purchasable upon the exercise
of this  Warrant  and the  Exercise  Price of such  Warrant  Shares  (and  other
securities or property) after such  adjustment,  setting forth a brief statement
of the facts  requiring  such  adjustment  and setting forth the  computation by
which such adjustment was made.

                                       10
<PAGE>

            15. Notice of Corporate Action. If at any time:

                  (a) the  Company  shall  take a record of the  holders  of its
      Common  Stock for the purpose of  entitling  them to receive a dividend or
      other  distribution,  or  any  right  to  subscribe  for or  purchase  any
      evidences  of its  indebtedness,  any  shares of stock of any class or any
      other securities or property, or to receive any other right, or

                  (b) there shall be any capital  reorganization of the Company,
      any  reclassification  or  recapitalization  of the  capital  stock of the
      Company or any  consolidation  or merger of the Company with, or any sale,
      transfer or other  disposition of all or  substantially  all the property,
      assets or business of the Company to, another corporation or,

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

then, in any one or more of such cases,  the Company shall give to Holder (i) at
least 20 days' prior written  notice of the date on which a record date shall be
selected for such dividend,  distribution or right or for determining  rights to
vote  in  respect  of  any  such   reorganization,   reclassification,   merger,
consolidation, sale, transfer, disposition,  liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days'  prior  written  notice of the date when the same shall take  place.  Such
notice in accordance  with the foregoing  clause also shall specify (i) the date
on which  any such  record  is to be taken  for the  purpose  of such  dividend,
distribution  or right,  the date on which the holders of Common  Stock shall be
entitled  to any such  dividend,  distribution  or  right,  and the  amount  and
character  thereof,  and  (ii)  the  date  on  which  any  such  reorganization,
reclassification,    merger,   consolidation,   sale,   transfer,   disposition,
dissolution,  liquidation  or winding  up is to take place and the time,  if any
such  time is to be fixed,  as of which the  holders  of Common  Stock  shall be
entitled to exchange  their  Warrant  Shares for  securities  or other  property
deliverable upon such disposition,  dissolution, liquidation or winding up. Each
such written  notice shall be  sufficiently  given if addressed to Holder at the
last address of Holder  appearing  on the books of the Company and  delivered in
accordance with Section 17(d).

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

                                       11
<PAGE>

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

                  Before  taking any action which would result in an  adjustment
in the number of Warrant

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

            17. Registration Rights. If the Company at any time proposes for any
reason to register its restricted common stock under the Securities Act of 1933,
as amended (the "Act"),  it shall include in such registration all of the Common
Stock issued  pursuant to this Warrant on the same terms and  conditions  as the
securities  otherwise being registered in such registration and shall afford the
Holder with an opportunity to review such  registration  statement at least five
(5) business days prior to filing such registration statement.

            18. Miscellaneous.

                  (a) Jurisdiction.  All questions  concerning the construction,
      validity,   enforcement  and  interpretation  of  this  Warrant  shall  be
      determined in accordance  with the internal laws of the State of New York,
      without regard to the  principles of conflicts of law thereof.  Each party
      agrees  that  all  legal  proceedings   concerning  the   interpretations,
      enforcement and defense of the  transactions  contemplated by this Warrant
      (whether  brought  against a party  hereto or its  respective  affiliates,
      directors, officers, shareholders, employees or agents) shall be commenced
      exclusively  in the state and  federal  courts  sitting in the City of New
      York. Each party hereby irrevocably submits to the exclusive  jurisdiction
      of the state and federal courts  sitting in the City of New York,  borough
      of  Manhattan  for  the  adjudication  of  any  dispute  hereunder  or  in
      connection  herewith  or  with  any  transaction  contemplated  hereby  or
      discussed herein, and hereby irrevocably  waives, and agrees not to assert
      in any suit,  action or  proceeding,  any claim that it is not  personally
      subject to the jurisdiction of any such court,  that such suit,  action or
      proceeding is improper or  inconvenient  venue for such  proceeding.  Each
      party hereby  irrevocably  waives personal service of process and consents
      to process being served in any such suit,  action or proceeding by mailing
      a copy  thereof via  registered  or certified  mail or overnight  delivery
      (with  evidence  of  delivery)  to such party at the address in effect for
      notices to it under this  Agreement  and agrees  that such  service  shall
      constitute  good and  sufficient  service of process  and notice  thereof.
      Nothing  contained herein shall be deemed to limit in any way any right to
      serve process in any manner permitted by law. The parties hereby waive all
      rights to a trial by jury.  If either  party  shall  commence an action or
      proceeding to enforce any provisions of the  Transaction  Documents,  then
      the prevailing  party in such action or proceeding  shall be reimbursed by
      the other  party for its  attorneys'  fees and  other  costs and  expenses
      incurred  with the  investigation,  preparation  and  prosecution  of such
      action or proceeding.

                                       12
<PAGE>

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

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

                  (d) Notices. Any notice, request or other document required or
      permitted to be given or  delivered to the Holder by the Company  shall be
      delivered by facsimile to the attention of Terry Fields at (604) 643-7498,
      or by mail to 103 - 20120 64th Avenue Langley, B.C., Canada V2Y 1M8.

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

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

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

                                       13
<PAGE>

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

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

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

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

                                       14
<PAGE>

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

Dated:  May 3, 2004

                                        SUNBURST ACQUISITIONS IV, INC.

                                        By: ___________________________________
                                            Name:
                                            Title:

                                       15
<PAGE>

                               NOTICE OF EXERCISE

TO: SUNBURST ACQUISITIONS IV, INC.

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

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

                  [ ] in lawful money of the United States; or

                  [ ] the  cancellation  of such number of Warrant  Shares as is
                  necessary,  in  accordance  with  the  formula  set  forth  in
                  subsection  3(d), to exercise this Warrant with respect to the
                  maximum number of Warrant Shares  purchasable  pursuant to the
                  cashless exercise procedure set forth in subsection 3(d).

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

                  ________________________________________

The Warrant Shares shall be delivered to the following:

                  ________________________________________

                  ________________________________________

                  ________________________________________

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

                                         [PURCHASER]

                                         By: ___________________________________
                                             Name:
                                             Title:

                                         Dated: ________________________________
<PAGE>

                                 ASSIGNMENT FORM

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

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

_______________________________________________ whose address is

_______________________________________________________________.

                                         Dated: ______________, _______

                   Holder's Signature: ________________________________

                   Holder's Address: __________________________________

Signature Guaranteed:  ___________________________________________

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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}]]