Document:

UNLESS  PERMITTED  UNDER  SECURITIES  LEGISLATION,  THE HOLDER OF THE SECURITIES
SHALL NOT TRADE THE SECURITIES BEFORE FEBRUARY 20,2004.

WITHOUT  PFICR  WRITTEN  APPROVAL  OF  THE  EXCHANGE  AND  COMPLIANCE  WITH  ALL
APPLICABLE   SECURITIES   LEGISLATION,   THE  SECURITIES   RPPRESENTED  BY  THIS
CERTIFICAI"B MAY NOT BE SOLD.  TRANSFERRED,  HYPOTHECATED OR OTHERWISE TRADED ON
OR THROUGH THE FACILITIES OF THE TSX VENTURE  EXCHANGE OR OTHERWISE IN CANADA OR
TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL FEBRUARY 20, 2004.

CONVERTIBLE DEBENTURE

Date:                   October 20, 2003

Principal Sum:          5150,000

Due Date:               October 20, 2006

Lender:                 A&F Capital Corporation

Lender's Address:       15 Wertheim Ct., #501, Richmond Hill, Ontario, 1,413 3H7

1.    Terms of Repayment

      Talware Networx Inc. (the  "Company"),  a company  incorporated  under the
      laws of Ontario,  for value received hereby  acknowledges  itself indebted
      for the above  mentioned  principal  sum and  promises to pay to or to the
      order of the Lender as follows:

      i)    interest at a rate of 8% per annum,  payable  annually in arrears on
            October 20;

      ii)   principal and all accrued unpaid interest payable in full on the due
            date.

      Payment  of both  principal  and  interest  shall be made at the  Lender's
      address,  set out above,  or at such other  place in Ontario as the Lender
      may designate in writing to the Company.

      The  Company  waives  presentment  for  payment,   demand,  or  notice  of
      non-payment  of  this  Debenture  in  collection,   and  consents  to  all
      extensions of time, renewals, waivers or modifications that may be granted
      by the holder with  respect to the payment or any other  provision of this
      Debenture.

2.    Conversion

      (a)   Conversion Privilege and Conversion Price

            (i)   Upon and  subject to the  provisions  and  conditions  of this
                  section, the holder of this Debenture shall have the right, at
                  his option, upon not less than 20 days prior written notice to
                  the Company,  to convert, at any time and from time to time up

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                                      -2-

                  to the close of business on the due date (the "Expiry  Time"),
                  up to the  entire  principal  amount of this  Debenture,  into
                  units ("Units") of the Company in  denominations  of $1,000 of
                  principal  amount.  Such right of conversion shall extend only
                  to the maximum  number of whole Units into which the aggregate
                  principal  amount of the Debenture or  Debentures  surrendered
                  for conversion  may be converted.  The price for conversion of
                  the  whole or any part of a  Debenture,  at the  option of the
                  holder,  shall be $0.06  per  Unit if  converted  prior to the
                  second  anniversary of the issuance of the  Debenture";  and a
                  price of $0.07 per Unit if converted  subsequent to the second
                  anniversary  and prior to the  Expiry  Time  (the  "Conversion
                  Price").

            (ii)  Accrued  interest  shall  be  convertible  into  Units  of the
                  Company at the option of the holder in denominations of $1,000
                  of interest. Such right of conversion shall only extend to the
                  maximum number of whole Units into which the aggregate  amount
                  of interest  desired to be  converted  may be  converted_  The
                  price  for  conversion  of the  whole or any part of  interest
                  shall be the  higher of (a) $0.06 per Unit;  or (b) the market
                  price (as  defined in Policy 1.1 of the TSX  Venture  Exchange
                  Corporate  Finance Manual) of the common shares of the Company
                  at the time of conversion.

            (iii) Each Unit shall  consist of one common share of the Company (a
                  "Common  Share") and one share purchase  warrant (a "Warrant")
                  in the form  attached  hereto as  Schedule  "A"- Each  Warrant
                  shall  entitle the holder  thereof to  purchase an  additional
                  Common Share at a purchase  price of $0.10,  exercisable on or
                  before  the  period  ending  two years  following  the date of
                  issuance of the Warrant.

      (b)   Conversion Procedure for Optional Conversion

            (i)   The  holder  of  this  Debenture   desiring  to  convert  such
                  Debenture  shall  surrender this Debenture to the Company,  at
                  its executive offices as specified in section 9, together with
                  written  notice in the form  attached  hereto as Schedule "B",
                  duly   executed  by  the   registered   holder  or  his  legal
                  representatives   or  his  attorney   duly   appointed  by  an
                  instrument  in writing in form and execution  satisfactory  to
                  the Company  exercising his right to convert this Debenture in
                  accordance with the provisions of this Section.  The holder of
                  this  Debenture  shall also  specify  the name or names,  with
                  addresses   in   which   the   certificate   or   certificates
                  representing  the Common  Shares and  Warrants,  respectively,
                  issuable upon  conversion  shall be registered.  Thereupon the
                  Debenture  bolder or,  subject  to  payment of all  applicable
                  transfer taxes and compliance with all reasonable requirements
                  of any transfer  agents and  applicable  securities  laws, his
                  nominee  or  assignee, shall be entitled  to be entered in the

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                                      -3-

                  books  of  the  Company  as at  the  Date  of  Conversion  (as
                  hereinafter  defined)  as the  holder of the  number of Common
                  Shares and Warrants into which this  Debenture is  convertible
                  in accordance with the provisions of this Section and, as soon
                  as  practicable  thereafter,  the Company shall deliver to the
                  holder,   or  his  nominee  or  assignee,   a  certificate  or
                  certificates for such Common Shares.

            (ii)  For the  purposes of this  Section,  this  Debenture  shall be
                  deemed to be  surrendered  for  conversion on the date (herein
                  called the "Date of Conversion") on which it is so surrendered
                  in accordance with the provisions of this Section and, in case
                  this  Debenture  is  surrendered  by post or  other  means  of
                  transmission,  on the  date on  which  it is  received  by the
                  Company at its executive  offices specified in subsection (i);
                  provided that if this Debenture is surrendered  for conversion
                  on a day on which the register of Common Shares or Warrants is
                  closed,  the person or  persons  entitled  to  receive  Common
                  Shares and  Warrants  upon such  conversion  shall  become the
                  holder or holders of record of such Common Shares and Warrants
                  as at the date on which such  registers  are reopened and such
                  date shall be deemed to be the date on which this Debenture is
                  surrendered for conversion.

(c)   Adjustment of Conversion Price

            (i)   Subject to  subsection  (ii),  the  Conversion  Price shall be
                  subject to  adjustment  from time to time in the events and in
                  the manner provided in this section, and for such purposes and
                  as used in this  section,  "Current  Market  Price"  means the
                  closing  price of the  Common  Shares on the  principal  stock
                  exchange or quotation  system  through which the Common Shares
                  trade  on the day  prior to the date in  question  or,  in the
                  event  that  the  Common  Shares  do  not  trade  through  the
                  facilities of a stock exchange or quotation system,  means the
                  current  value of the Common Shares on the date in question as
                  determined by the Company's board of directors.

                  (A)   If and  whenever  at any time after the date  hereof and
                        prior to the Expiry Time the Company shall:

                        (1)  issue Common Shares to all or substantially all the
                             holders of the Common Shares as a stock dividend;

                        (2)  subdivide  its  outstanding  Common  Shares  into a
                             greater number of shares; or

                        (3)  consolidate  its  outstanding  Common Shares into a
                             smaller number of shares,

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                                      -4-

                        (any of such events in (1),  (2) and (3) being  called a
                        "COMMON  SHARE  Reorganization"),  then  the  Conversion
                        Price shall be adjusted, effective immediately after the
                        record  date at which the  holders of Common  Shares are
                        determined   for  the   purpose  of  the  Common   Share
                        Reorganization,  by multiplying the Conversion  Price in
                        effect  immediately  prior  to  such  record  date  by a
                        fraction,  the numerator of which shall be the number of
                        Common  Shares  outstanding  on such  record date before
                        giving  effect to such Common Share  Reorganization  and
                        the  denominator  of which shall be the number of Common
                        Shares  outstanding  immediately  after giving effect to
                        such Common Share Reorganization (including, in the case
                        where  securities  exchangeable  for or convertible into
                        Common  Shares  are  distributed,  the  number of Common
                        Shares  that  would have been  outstanding  had all such
                        securities  been  exchanged for or converted into Common
                        Shares on such record date).

                  (B)   If and  whenever  at any time after the date  hereof and
                        prior to the Expiry Time the Company  shall fix a record
                        date for the issuance of rights,  options or warrants to
                        all or  substantially  all of the  holders of the Common
                        Shares under which such holders are  entitled,  during a
                        period expiring not more than 45 calendar days after the
                        record  date for such issue (the  "Rights  Period"),  to
                        subscribe  for or purchase  Common  Shares or securities
                        exchangeable  for or convertible into Common Shares at a
                        price per Common  Share to the holder (or in the case of
                        securities  exchangeable  for or convertible into Common
                        Shares,  at a conversion or exchange  price per share at
                        the date of issue of such  securities  to the holder) of
                        less than 95% of the Current Market Price for the Common
                        Shares on such  record  date (any of such  events  being
                        called a "Rights  Offering"),  then the Conversion Price
                        shall be adjusted effective immediately after the end of
                        the Rights Period to a price  determined by  multiplying
                        the Conversion Price in effect  immediately prior to the
                        end of the Rights Period by a fraction:

                        (1)  the numerator of which shall be the aggregate of.

                             (a)  the number of Common Shares  outstanding as of
                                  the record date for the Rights Offering, plus

                             (b)  a number  determined by dividing the aggregate
                                  price of the total number of additional Common

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                                      -5-

                                  Shares  offered for  subscription  or purchase
                                  (or the aggregate conversion or exchange price
                                  of the convertible  securities offered) by the
                                  Current Market Price as of the record date for
                                  the Rights Offering, and

                        (2)  the  denominator  of which  shall be the  number of
                             Common  Shares  outstanding  after giving effect to
                             the Rights Offering (including the number of Common
                             Shares actually issued or subscribed for during the
                             Rights Period upon exercise of the rights, warrants
                             or options under the Rights Offering).

                  (C)   If and  whenever  at any time after the date  hereof and
                        prior to the Expiry Time the Company  shall fix a record
                        date  for  the  issue  or  the  distribution  to  all or
                        substantially  all the holders of the Common  Shares of:
                        (1)  shares  of the  Company  of any class  (other  than
                        Common  Shares  and other  than  shares  distributed  to
                        holders of Common Shares  pursuant to their  exercise of
                        options to receive  dividends in the form of such shares
                        in lieu of cash dividends paid in the ordinary course on
                        the Common Shares);  (2) rights,  options or warrants to
                        acquire Common Shares or property or other assets of the
                        Company;  (3)  evidences  of  indebtedness;  or (4)  any
                        property  or  other  assets,  and if  such  issuance  or
                        distribution   does  not   constitute   a  Common  Share
                        Reorganization   or  a  Rights  Offering  (any  of  such
                        non-excluded  events  being  herein  called  a  "Special
                        Distribution");  the Conversion  Price shall be adjusted
                        effective  immediately after such record date to a price
                        determined by multiplying the Conversion Price in effect
                        on such record date by a fraction:

                        (1)  the numerator of which shall be:

                             (a)  the  product  of the  number of Common  Shares
                                  outstanding   on  such  record  date  and  the
                                  Current  Market Price of the Common  Shares on
                                  such record date, less

                             (b)  the fair market  value,  as  determined by the
                                  directors (whose  determination shall be final
                                  and  conclusive),   of  the  shares,   rights,
                                  options,  warrants,  evidences of indebtedness
                                  or   property  or  other   assets   issued  or
                                  distributed in the  Special Distribution,  and

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                                      -6-

                        (2)  the  denominator  of which  shall be the  number of
                             Common  Shares  outstanding  on  such  record  date
                             multiplied  by  the  Current  Market  Price  of the
                             Common Shares on such record date.

                  (D)   If and  whenever  at any time after the date  hereof and
                        prior   to   the   Expiry   Time   there   shall   be  a
                        reclassification  of  the  Common  Shares  at  any  time
                        outstanding  or a change of the Common Shares into other
                        shares or into  other  securities  (other  than a Common
                        Share Reorganization), or a consolidation,  amalgamation
                        or  merger  of  the  Company  with  or  into  any  other
                        corporation or other entity (other than a consolidation,
                        amalgamation  or  merger  which  does not  result in any
                        reclassification  of the outstanding  Common Shares or a
                        change  of the  Common  Shares  into the  shares of such
                        other  corporation  or  entity),  or a  transfer  of the
                        undertaking  or assets of the  Company as an entirety or
                        substantially  as an entirety to another  corporation or
                        other entity (any of such events  being herein  called a
                        "Capital  Reorganization"),   and  the  holder  of  this
                        Debenture  exercises his right of  conversion  after the
                        effective  date  of  such  Capital  Reorganization,  the
                        holder shall be entitled to receive,  and shall  accept,
                        for the  same  aggregate  consideration,  in lieu of the
                        number  of  Common   Shares  to  which  the  holder  was
                        theretofore entitled upon such conversion,  the kind and
                        the  aggregate  number of shares,  other  securities  or
                        other property which the holder would have been entitled
                        to  receive as a result of such  Capital  Reorganization
                        if,  on the  effective  date  thereof,  the  holder  was
                        theretofore entitled upon conversion.

            (ii)  Rules  for  Calculating   Adjustments   (For  the  purpose  of
                  subsection (i)):

                  (A)   The  adjustments  provided  for in  subsection  (i)  are
                        cumulative   and   such   adjustments   shall   be  made
                        successively whenever an event referred to therein shall
                        occur,  subject  to the  following  subsections  of this
                        subsection (ii).

                  (B)   No adjustment in the Conversion  Price shall be required
                        unless such  adjustment  would  result in a change of at
                        least 1% in the prevailing  Conversion Price,  provided,
                        however,  that any  adjustments  which,  except  for the
                        provisions of this subsection  (ii)(B),  would otherwise
                        have been  required to be made shall be carried  forward
                        and taken into account in any subsequent adjustment.

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                                      -7-

                  (C)   If a dispute  shall at any time  arise  with  respect to
                        adjustments provided for in subsection (i), such dispute
                        shall be  determined by the  Company's  auditors,  or if
                        they are unable or  unwilling to act, by such other firm
                        of independent  chartered accountants as may be selected
                        by the  directors  and any such  determination  shall be
                        final and  conclusive  and binding  upon the Company and
                        the holder.

                  (D)   If the Company  shall set a record date to determine the
                        holders  of  the  Common   Shares  for  the  purpose  of
                        entitling  them to receive any dividend or  distribution
                        or  any  subscription  or  purchase  rights  and  shall,
                        thereafter   and   before  the   distribution   to  such
                        shareholders  of  any  such  dividend,  distribution  or
                        subscription  or purchase  rights,  legally  abandon its
                        plan to pay or deliver such  dividend,  distribution  or
                        subscription or purchase  rights,  then no adjustment in
                        the  Conversion  Price or the  number of  Common  Shares
                        issuable  upon  conversion  of the  Debenture  shall  be
                        required by reason of the setting of such record date.

                  (E)   In the absence of resolution  of the directors  fixing a
                        record date for a Common Share  Reorganization,  Capital
                        Reorganization, Rights Offering or Special Distribution,
                        the Company  shall be deemed to have fixed as the record
                        date  therefor  the  date  on  which  the  Common  Share
                        Reorganization,  Capital Reorganization, Rights Offering
                        or Special Distribution is effected.

                  (F)   As a  condition  precedent  to the  taking of any action
                        which  would  require  any  adjustment  in  any  of  the
                        conversion  rights pursuant to the Debenture,  including
                        the  Conversion  Price and the number or class of shares
                        or other  securities  which are to be received  upon the
                        conversion thereof, the Company shall take any corporate
                        action  which  may,  in  the  opinion  of  counsel,   be
                        necessary  in order that the Company  have  unissued and
                        reserved in its authorized share capital and may validly
                        and legally issue as fully paid and  non-assessable  all
                        the  shares  or other  securities  which  the  holder is
                        entitled to receive on the total  conversion  thereof in
                        accordance with the provisions thereof.

                  (G)   If,  in the  opinion  of the  board  of  directors,  the
                        provisions   of   subsection   (i)  are   not   strictly
                        applicable,  or if strictly  applicable would not fairly
                        protect the rights of the holder in accordance  with the
                        intent and purposes hereof, the board of directors shall
                        make any  adjustment in such  provisions for the benefit
                        of  the   holder  as  the  board  of   directors   deems
                        appropriate.

<PAGE>
                                      -8-

            (iii) Whenever the number of Common Shares or the  Conversion  Price
                  shall require an adjustment  pursuant to subsection  (ii), the
                  Company  shall  forthwith  obtain a  certificate  signed  by a
                  senior  officer of the Company,  setting  forth in  reasonable
                  detail,  the event  requiring the adjustment and the method by
                  which such adjustment was calculated  (including an opinion on
                  the fair value, as determined by the board of directors of the
                  Company,  of any evidences of  indebtedness,  shares of stock,
                  other  securities  or property or  warrants,  options or other
                  subscription  or purchase  rights  referred  to in  subsection
                  (ii))  and   specifying  the  numbers  of  Common  Shares  and
                  describing  the  numbers  and  kind  of any  other  securities
                  issuable upon  conversion of the Debenture,  and any change in
                  the  Conversion  Price  thereof,  after giving  effect to such
                  adjustment or change_ The Company shall  promptly,  and in any
                  case within 30 days after the making of such adjustment, cause
                  a signed  copy off such  certificate  to be  delivered  to the
                  holder.  The Company shall keep at its office or agency copies
                  of all such  certificates  and cause the same to be  available
                  for  inspection  upon  receipt  of  reasonable  notice at said
                  office during normal business hours by the holder.

      (d)   Reservation of Common Shares

            The Company  covenants and agrees that, so long as this Debenture is
            outstanding and entitled to the right of conversion herein provided,
            it will at all times  reserve  and hold out of its  unissued  Common
            Shares a sufficient  number of unissued  Common Shares to enable the
            outstanding  principal and interest of the Debenture to be converted
            into Common Shares upon the basis and upon the terms and  conditions
            herein  provided in this section 2;  provided  that  nothing  herein
            contained  shall  affect or  restrict  the right of the  Company  to
            increase  the number of its  Common  Shares in  accordance  with the
            Business  Corporations  Act, 1990  (Ontario) or to issue such Common
            Shares from time to time.

      (e)   Regulatory Approvals and Filing in Connection with Conversion

            If any Common Shares of the Company,  allotted or to be allotted for
            the purpose of conversion  of this  Debenture  require  registration
            with or approval of any  governmental  or other  authority under any
            Canadian or provincial  law before such shares may be validly issued
            upon conversion and traded on any stock exchange on which the Common
            Shares are then listed and posted for trading, the Company will take
            such  action as may be  necessary  to secure  such  registration  or
            approval, as the case may be.

3.    Reporting Requirements

<PAGE>
                                      -9-

      The Company shall provide the Lender with the following:

      (a)   audited  financial  statements of the Company  within 140 days alter
            the year end of each fiscal year; and

      (b)   unaudited financial  statements of the Company within 60 days of the
            end of each of its fiscal quarters.

4.    Default

      If any of the following events shall occur and be continuing (an "EVENT OF
      DEFAULT"),  the Lender may, at its option, demand immediate payment of the
      entire  principal of this Debenture and all interest thereon either due or
      accruing due hereunder,  and all other  indebtedness of the Company to the
      Lender hereunder or otherwise shall thereupon  become  immediately due and
      payable, namely:

      (a)   failure by the Company to make any  required  repayment of principal
            hereunder, when due;

      (b)   if any  representation  or warranty  made in any  document,  report,
            statement,  certificate or other instrument  furnished to the Lender
            including,  without limiting the generality of the foregoing,  those
            representations  and warranties  provided below, shall prove to have
            been  false or to have  otherwise  failed to deal with any  material
            particulars so as to have made such instrument materially misleading
            upon the date when made or deemed to be made:

            (i)   the Company is a  corporation  duly  incorporated  and validly
                  existing and in good  standing  under the laws of the Province
                  of Ontario.  The Company is duly licensed and  registered as a
                  corporation  to do business in each  jurisdiction  in which it
                  owns or leases  property  or carries on  business  and has all
                  necessary  corporate  power to own its properties and to carry
                  on its business;

            (ii)  the Company is  conducting  and has  conducted its business in
                  compliance in all material  respects  with all the  applicable
                  laws,  regulations and rules of each  jurisdiction in which it
                  carries on business;

            (iii) the Company will reserve or set aside sufficient shares in the
                  treasury of the Company to issue to the  Subscriber the common
                  shares  issuable  upon the  conversion  of the  Debenture,  or
                  exercise of any Warrants, according to their respective terms;

            (iv)  the  Company  has  complied  fully  with the  requirements  of
                  applicable  securities  laws and has  received the approval of
                  all applicable  securities  regulators in connection  with the
                  issuance of the Debenture;

<PAGE>
                                      -10-

            (v)   the issuance of the Debenture by the Company does not and will
                  not conflict with and does not and will not result in a breach
                  of  any  of  the  terms,   conditions  or  provisions  of  its
                  constating  documents or any  agreement or instrument to which
                  the Company is a party for which it has not received  approval
                  or a waiver;

            (vi)  this  Debenture  has been  duly  authorized  by all  necessary
                  corporate action on the part of the Company and upon execution
                  by the Company  constitutes a valid  obligation of the Company
                  legally binding upon it and enforceable in accordance with its
                  terms;

            (vii) no bankruptcy,  insolvency or  receivership  proceedings  have
                  been instituted or are pending against Company and the Company
                  is able to satisfy its liabilities as they become due;

            (viii)there are no  consents,  authorizations,  licences,  franchise
                  agreements,  permits,  approvals  or orders  of any  person or
                  government  required to permit the  Company to  complete  this
                  transaction  with  the  Subscriber  which  it has not  already
                  received;

            (ix)  the Company is not selling the Debenture with knowledge of any
                  material  fact about the Company  that has not been  generally
                  disclosed; and

            (x)   the  Company is a  reporting  issuer and is not on the list of
                  defaulting   reporting   issuers  under  the   Securities  Act
                  (Ontario), the Securities Act (Alberta) and the Securities Act
                  (British Columbia).  No order ceasing or suspending trading in
                  securities  of  the  Company  or   prohibiting   the  sale  of
                  securities  by the Company has been issued and no  proceedings
                  for  this   purpose   have  been   instituted,   are  pending,
                  contemplated or threatened.

      (c)   if any other  indebtedness  of the Company  shall  become due, or be
            declared  pursuant  to the  terms  thereof  to be due  prior  to the
            expressed maturity thereof, and shall not be duly paid;

      (d)   the Company  ceases or threatens to cease to carry on business;  the
            Company  makes  or  agrees  to make a bulk  sale of  assets  without
            complying  with  applicable  law;  the  making by the  Company of an
            assignment  or any proposal for the benefit of its  creditors  under
            applicable insolvency  legislation;  the filing or presentation of a
            bankruptcy  or similar  petition by the  Company;  the entering of a
            judgment  or  order  ordering  a   reorganization,   arrangement  or
            composition  of or with  respect  to the  Company  or its  debts  or
            obligations;  or the  appointment  of a  custodian  or  receiver  or
            receiver and manager or other official with similar  power,  whether
            or not pursuant to a court order,  for all or a substantial  portion
            of the properties or assets of the Company;

<PAGE>
                                      -11-

      (e)   the  presentation or filing of a bankruptcy or similar petition with
            respect to  bankruptcy  or  insolvency of the Company by any person,
            which  bankruptcy or similar  petition is not  discharged  within 90
            days of its presentation or filing;

5.    Transfer and Assignment

      (a)   The Lender is the person  entitled to receive the  principal of this
            Debenture  and all  other  monies  payable  hereunder  and to give a
            discharge hereof

      (c)   The  Lender  acknowledges  that the  Debenture  is being  issued  in
            reliance  upon  exemption  from  the  prospectus  and   registration
            requirements  of  applicable  securities  legislation.   The  Lender
            covenants  that it will not transfer,  sell or otherwise  assign the
            Debenture or the Common Shares or Warrants  acquired upon conversion
            of the  Debenture  except  strictly in  accordance  with  applicable
            securities legislation

6.    Prepayment

      The Company shall have the right, at its option, to prepay at any time the
      whole  or,  from  time to time,  any part of the  principal  amount of the
      Principal  Sum for the  Time  being  outstanding,  together  with  accrued
      interest  thereon,  upon  giving the Lender not less than 30 days  notice,
      without  penalty or bonus.  The Lender  shall  during this  30-day  notice
      period retain his/her option to convert as described in section 2 above.

7.    Purchase for  Cancellation

      The Company may offer to  purchase  this  Debenture  for  cancellation  by
      private contract at any time, subject to approval by applicable regulatory
      authorities.

8.    Waiver

      No consent  or waiver by the  Lender  shall be  effective  unless  made in
      writing and signed by the Lender.

9.    Notice

      Any notice to the Company may be given by delivery, facsimile transmission
      or prepaid  registered  mail to the Company at 123  Commerce  Valley Drive
      East, Suite 301, Thornhill,  Ontario, L3T 7W8 (fax:  905-731-5036) and any
      notice so give i shall be  deemed  to have  been duly  given on the day on
      which the notice is delivered or  transmitted by facsimile to such address
      or on the  third  business  day  after  the  day  on  which  the  envelope
      containing  the notice was  deposited  prepaid  and  registered  in a post
      office in Canada, as the case may be.

<PAGE>
                                      -12-

      IN WITNESS WHEREOF the Company has duly executed this Debenture.

                                                        TALWARE NETWORX INC.

                                                   per:                    c/s
                                                       ------------------------
                                                       A.S.O.

<PAGE>
                                      -13-

                                  Schedule "A"
                          SERIES o WARRANT CERTIFICATE

Certificate No.: o                                            No- of Warrants:o

                  EXERCISABLE BEFORE 4:00 P.M. (TORONTO TIME)

                      ON o, 200 o (THE "TIME OF EXPIRY"),
                         AFTER WHICH TIME THIS WARRANT

                       CERTIFICATE WILL RE NULL AND VOID

                      $0.10 COMMON SHARE PURCHASE WARRANTS
                     to Purchase Common Shares ("Warrants")

                                       of

                              TALWARE NETWORX INC.

             (Organized under the laws of the Province of Ontario)

1.    THIS IS TO CERTIFY that, for value received,  o (the "HOLDER") is entitled
      to  purchase,  at any  time  before  the  Time of  Expiry  filly  paid and
      non-assessable  common shares ("COMMON  SHARES") in the capital of Talware
      Networx Inc. (the  "COMPANY"),  as constituted on the date hereof,  on the
      basis of one Common Share for each of the number  specified above of whole
      Warrants,  by  surrendering  to the Company at its  principal  office this
      Warrant  Certificate,  with a subscription in the form set forth on page 7
      hereof duly completed and executed,  and cash or a certified cheque,  bank
      draft or money order in lawful money of Canada, payable to or to the order
      of the  Company,  at par in Toronto,  in an amount  equal to the  purchase
      price of the Common Shares so subscribed for.

2.    Surrender of this Warrant  Certificate  and payment as provided above will
      be deemed to have been effected only on personal  delivery thereof to, or,
      if sent by mail or other means of transmission,  on actual receipt thereof
      by, the Company.

3.    Subject to  adjustment  thereof  in the  events  and in the manner  herein
      referred to, the purchase  price (the "EXERCISE  PRICE")  payable for each
      Common  Share  on  exercise  of any  Warrants  evidenced  by this  Warrant
      Certificate will be $0.10

4.    Common Shares will not be issued  pursuant to any Warrants if the issuance
      of such Common Shares would  constitute a violation of the securities laws
      of any applicable jurisdiction.

5.    Certificates  representing the Common Shares subscribed for hereunder will
      be mailed to the person,  persons or company specified in the subscription
      form at  their  address  specified  therein  or,  if so  specified  in the
      subscription form, delivered to such person or persons at the office where
      this Warrant  Certificate  was  surrendered.  If fewer  Common  Shares are
      purchased than the number that

<PAGE>
                                      -14-

      may be subscribed  for pursuant to the Warrants  evidenced by this Warrant
      Certificate, the holder will be entitled to receive, without charge, a new
      Warrant  Certificate  in  respect  of  the  balance  of  such  unexercised
      Warrants.  To the extent that any  Warrant  evidenced  hereby  confers the
      right  to  purchase  a  fraction  of a Common  Share,  such  right  may be
      exercised in respect of such  fraction  only in  combination  with another
      Warrant  Certificate or other Warrant  Certificates which in the aggregate
      entitle the holder to be issued a whole number of Common Snares, and under
      no circumstances is the Company  obligated to issue any fractional  Common
      Share.

6.    On presentation at the principal office of the Company,  and on compliance
      with the  reasonable  requirements  of the  Company,  one or more  Warrant
      Certificates  may be  exchanged  for one or more Warrant  Certificates  of
      different  denomination  evidencing  in the  aggregate  the same number of
      Warrants  as  the  Warrant  Certificate  or  Warrant   Certificates  being
      exchanged.

7.    Subject to Section 8, the Exercise  Price (and the number of Common Shares
      in the case of  subsections  (D) and (E)) shall be  subject to  adjustment
      from  time  to time  in the  events  and in the  manner  provided  in this
      section,  and for  such  purposes  and as used in this  section,  "Current
      Market  Price"  means  the  closing  price  of the  Common  Shares  on the
      principal  stock  exchange or quotation  system  through  which the Common
      Shares  trade on the day  prior to the date in  question  or, in the event
      that the Common  Shares do not trade  through  the  facilities  of a stock
      exchange or quotation system, means the current value of the Common Shares
      on the date in question as determined by the Company's board of directors.

      (A)   If and  whenever  at any time after the date hereof and prior to the
            Time of Expiry the Company  shall:  (ii)  subdivide its  outstanding
            Common Shares into a greater number of shares; or

            (iii) consolidate  its  outstanding  Common  Shares  into a  smaller
                  number of shares,

            (any of such events in (i),  (ii) and (iii)  being  called a "Common
            Share  Reorganization"),  then the Exercise Price shall be adjusted,
            effective  immediately after the record date at which the holders of
            Common  Shares are  determined  for the purpose of the Common  Share
            Reorganization,   by  multiplying   the  Exercise  Price  in  effect
            immediately  prior to such record date by a fraction,  the numerator
            of which shall be the number of Common  Shares  outstanding  on such
            record date before giving effect to such Common Share Reorganization
            and the  denominator  of which shall be the number of Common  Shares
            outstanding  immediately  after  giving  effect to such Common Share
            Reorganization (including, in the case where (i) issue Common Shares
            to all or  substantially  all the holders of the Common  Shares as a
            stock  dividend;  securities  exchangeable  for or  convertible into

<PAGE>
                                      -15-

            Common  Shares are  distributed,  the number of Common  Shares  that
            would have been  outstanding  had all such securities been exchanged
            for or converted into Common Shares on such record date).

      (B)   If and  whenever  at any time after the date hereof and prior to the
            Time of Expiry the Company  shall fix a record date for the issuance
            of rights,  options or warrants to all or  substantially  all of the
            holders of the Common  Shares under which such holders are entitled,
            during a period  expiring  not more than 45 calendar  days after the
            record date for such issue (the "Rights  Period"),  to subscribe for
            or  purchase  Common  Shares  or  securities   exchangeable  for  or
            convertible  into Common  Shares at a price per Common  Share to the
            holder (or in the case of securities exchangeable for or convertible
            into Common  Shares,  at a conversion or exchange price per share at
            the date of issue of such securities to the holder) of less than 95%
            of the  Current  Market  Price for the Common  Shares on such record
            date (any of such events being called a 'Rights Offering"), then the
            Exercise Price shall be adjusted effective immediately after the end
            of the  Rights  Period  to a price  determined  by  multiplying  the
            Exercise Price in effect  immediately prior to the end of the Rights
            Period  by a  fraction:

            (i)   the numerator of which shall be the aggregate of:

                  (a)   the number of Common Shares outstanding as of the record
                        date for the Rights Offering, plus

                  (b)   a number  determined by dividing the aggregate  price of
                        the total number of additional Common Snares offered for
                        subscription or purchase (or the aggregate conversion or
                        exchange price of the convertible securities offered) by
                        the Current  Market  Price as of the record date for the
                        Rights Offering, and

            (ii)  the  denominator of which shall be the number of Common Shares
                  outstanding   after  giving  effect  to  the  Rights  Offering
                  (including  the  number of Common  Shares  actually  issued or
                  subscribed  for during the Rights  Period upon exercise of the
                  rights, warrants or options tinder the Rights Offering).

      (C)   If and  whenever  at any time after the date hereof and prior to the
            Time of Expiry the Company  shall fix a record date for the issue or
            the  distribution  to all or  substantially  all the  holders of the
            Common Shares of: (i) shares of the Company of any class (other than
            Common Shares and other than shares distributed to holders of Common
            Shares pursuant to their exercise of options to receive dividends in
            the  form of such  shares  in  lieu  of cash  dividends  paid in the
            ordinary  course on the  Common  Shares);  (ii)  rights,  options or
            warrants to acquire Common Shares or property or other assets of the
            Company; (iii) evidences of indebtedness; or (iv) any property or

<PAGE>
                                      -16-

            other  assets,  and  if  such  issuance  or  distribution  does  not
            constitute a Common Share  Reorganization  or a Rights Offering (any
            of  such   non-excluded   events  being  herein  called  a  "Special
            Distribution");  the  Exercise  Price  shall be  adjusted  effective
            immediately  after  such  record  date  to  a  price  determined  by
            multiplying  the  Exercise  Price in effect on such record date by a
            fraction:

            (i)   the numerator of which shall be:

                  (a)   the product of the number od Common  Shares  outstanding
                        on such  record  date and  Current  Market  Price of the
                        Common Shares on such Record date, less

                  (b)   the fair market  value,  as  determined by the directors
                        (whose determination shall be final and conclusive),  of
                        the shares,  rights,  options,  warrants,  evidences  of
                        indebtedness  or  property  or other  assets  issued  or
                        distributed in the Special Distribution, and

            (ii)  the  denominator of which shall be the number of Common Shares
                  outstanding  on such  record  date  multiplied  by the Current
                  Market Price of the Common Shares on such record date.

      (D)   If and  whenever  at any time after the date hereof and prior to the
            Time of  Expiry  there  shall be a  reclassification  of the  Common
            Shares at any time outstanding or a change of the Common Shares into
            other  shares or into other  securities  (other than a Common  Share
            Reorganization),  or a consolidation,  amalgamation or merger of the
            Company with or into any other  corporation  or other entity  (other
            than a  consolidation,  amalgamation or merger which does not result
            in any reclassification of the outstanding Common Shares or a change
            of the Common  Shares into the shares of such other  corporation  or
            entity),  or a transfer of the  undertaking or assets of the Company
            as  an  entirety  or   substantially   as  an  entirety  to  another
            corporation or other entity (any of such events being. herein called
            a "Capital  Reorganization"),  and the holder exercises his right to
            purchase  Common Shares then held after the  effective  date of such
            Capital Reorganization, the holder shall be entitled to receive, and
            shall accept, for the same aggregate  consideration,  in lieu of the
            number of Common Shares to which the holder was theretofore entitled
            upon such  exercise,  the kind and the  aggregate  number of shares,
            other  securities or other property which the holder would have been
            entitled to receive as a result of such Capital  Reorganization  if,
            on the effective date thereof,  the holder was theretofore  entitled
            upon exercise.

      (E)   If and  whenever  at any time after the date hereof and prior to the
            Time of Expiry

<PAGE>
                                      -17-

            (i)   a Common  Share  Reorganization  or a  Capital  Reorganization
                  shall occur, or

            (ii)  the Company shall fix a record date for a Rights Offering,

            and any such event results in an  adjustment  in the Exercise  Price
            pursuant to the  provisions  of this Section 7, the number of Common
            Shares shall be adjusted  contemporaneously  with the  adjustment of
            the  Exercise  Price by  multiplying  the  number of  Common  Shares
            theretofore  purchasable  by a fraction the numerator of which shall
            be the Exercise Price in effect immediately prior to such adjustment
            and the  denominator of which shall be the Exercise Price  resulting
            from such adjustment.

8.    Rates for Calculating Adjustments (For the purpose of section 7):

      (A)   The  adjustments  provided for in section 7 are  cumulative and such
            adjustments shall be made successively whenever an event referred to
            therein shall occur,  subject to the following  subsections  of this
            Section 8.

      (B)   No  adjustment in the Exercise  Price shall be required  unless such
            adjustment would result in a change of at least 1% in the prevailing
            Exercise  Price  and no  adjustment  shall be made in the  number of
            Common  Shares  unless  it  would  result  in a  change  of at least
            one-hundredth of a share,  provided,  however,  that any adjustments
            which,  except  for the  provisions  of this  subsection  (B)  would
            otherwise have been required to be made shall be carried forward and
            taken into account in any subsequent adjustment.

      (C)   If a dispute  shall at any time  arise with  respect to  adjustments
            provided for in Section 7, such dispute  shall be  determined by the
            Company's  auditors,  or if they are unable or  unwilling to act, by
            such  other  fiat of  independent  chartered  accountants  as may be
            selected by the directors and any such determination  shall be final
            and conclusive and binding upon the Company and the holder.

      (D)   If the Company  shall set a record date to determine  the holders of
            the Common  Shares for the purpose of entitling  them to receive any
            dividend or distribution or any  subscription or purchase rights and
            shall,  thereafter and before the distribution to such  shareholders
            of any such  dividend,  distribution  or  subscription  or  purchase
            rights,  legally  abandon its plan to pay or deliver such  dividend,
            distribution or subscription or purchase rights,  then no adjustment
            in the  Exercise  Price or the number of Common  Shares  purchasable
            upon  exercise  of the  Warrant  shall be  required by reason of the
            setting of such record date.

      (E)   In the absence of resolution  of the directors  fixing a record date
            for a Common Share Reorganization,  Capital  Reorganization,  Rights
            Offering or Special  Distribution,  the  Company  shall be deemed to
            have  fixed as the (D)  record  date there for the date on which the
            Common Share Reorganization, Capital Reorganization, Rights Offering
            or Special Distribution is effected.

<PAGE>
                                      -18-

      (H)   As a  condition  precedent  to the taking of any action  which would
            require any adjustment in any of the purchase rights pursuant to any
            of the  Warrants,  including  the  Exercise  Price and the number or
            class of shares or other  securities  which are to be received  upon
            the exercise  thereof,  the Company shall take any corporate  action
            which may, in the opinion of counsel, be necessary in order that the
            Company have unissued and reserved in its  authorized  share capital
            and may validly and legally  issue as fully paid and  non-assessable
            all the shares or other  securities  which the holder is entitled to
            receive  on the  total  exercise  thereof  in  accordance  with  the
            provisions thereof.

      (I)   If, in the  opinion of the board of  directors,  the  provisions  of
            Section 7 are not  strictly  applicable,  or if strictly  applicable
            would not fairly protect the rights of the holder in accordance with
            the intent and purposes  hereof,  the board of directors  shall make
            any  adjustment in such  provisions for the benefit of the holder as
            the board of directors deems appropriate.

9.    Whenever the number of Common  Shares or the Exercise  Price shall require
      an ac adjustment pursuant to Section 8, the Company shall forthwith obtain
      a certificate  sited by a senior officer of the Company,  setting forth in
      reasonable  detail,  the event  requiring the adjustment and the method by
      which such  adjustment  was  calculated  (including an opinion on the fair
      value,  as  determined  by the Board of Directors  of the Company,  of any
      evidences of indebtedness,  shares of stock,  other securities or property
      or warrants,  options or other subscription or purchase rights referred to
      in Section 8) and  specifying  the numbers of Common Shares and describing
      the numbers and kind of any other securities issuable upon exercise of the
      Warrants,  and any change in the  Exercise  Price  thereof,  after  giving
      effect to such adjustment or change.  The Company shall  promptly,  and in
      any case  within 30 days  after the  making  of such  adjustment,  cause a
      signed copy of such certificate to be delivered to the holder. The Company
      shall keep at its  office or agency  copies of all such  certificates  and
      cause the same to be available for  inspection  upon receipt of reasonable
      notice at said office during normal business hours by the holder.

10.   The holding of this Warrant  Certificate  will not constitute the holder a
      shareholder  of the  Company or entitle  him to any right or  interest  in
      respect thereof.

11.   This Warrant Certificate is transferable subject to applicable  securities
      laws.

      IN  WITNESS   WHEREOF   Talware  Networx  Inc.  has  caused  this  Warrant
Certificate  lo be signed by its  director or officer  duly  authorized  in that
behalf as of the of e, 200...

<PAGE>
                                      -19-

                                              TALWARE NETWORX INC.

                                              per:_____________________________
                                                    Alan Rootenberg, President

<PAGE>
                                      -20-

                               SUBSCRIPTION FORM

TO: TALWARE NETWORX INC.

The undersigned  holder of the Common Share Purchase  Warrants  evidenced by the
within  Warrant  Certificate  hereby  subscribes  for  Common  Shares of Talware
Networx Inc.  pursuant to such Common Share Purchase Warrants at $0.10 per share
on the terms specified it such Warrant Certificate o, and encloses herewith cash
or a certified cheque, bank draft or money order payable to the order of Talware
Networx Inc. in payment  thereof.

Expiry Date:                                                           o,200o

Number of warrants held:                                                   o

Number of warrants  exercised  under this  subscription:           ____________

Balance of unexercised warrants:                                   ____________

Subscription funds submitted
          ($0.10 x number of warrants exercised):                  ____________

The undersigned hereby irrevocably directs that the said Common Shares be issued
as follows:

    Registration             Address of Registered Holder        Denomination
    ------------             ----------------------------        ------------

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

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

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

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

Dated this     day of          , 20

                                                        SUBSCRIBER

                                                  per:_________________________
                                                      A.S.O.

This subscription is acknowledged this            day of          ,20

                                                      TALWARE NETWORX INC.

                                                  per:_________________________
                                                      A.S.O.

<PAGE>
                                      -21-

ASSIGNMENT

      (Do not sign this assignment if you intend to subscribe for shares.)

      FOR VALUE  RECEIVED the  undersigned  hereby sells,  assigns and transfers
unto   ________________________________   the  within  warrant  and  all  rights
represented  thereby  and does  hereby"  irrevocably  constitute  and appoint to
transfer  the  same  on 1:he  books  of  Talware  Networx  Inc.  with  power  of
substitution in the premises.

Dated this     day of                        20    .

---------------------------                         ---------------------------
    Signature of Witness                               Signature of Assignee

---------------------------
   Guarantee of Signature

                          INSTRUCTIONS FOR ASSIGNMENT

The signature to the foregoing  assignment must correspond with the name written
on  the  face  of  this  warrant  in  every  particular  without  alteration  or
enlargement  or any  change  whatever  and  must  be  guaranteed  by a  Canadian
chartered  bank or by a  broker  who is a member  of the TSX or the TSX  Venture
Exchange  or  by  some  other  person   satisfactory  to  Talware  Networx  Inc.
Assignments may be made to one assignee only unless the assignment be to a joint
account. To assign to more persons than one for separate accounts,  this warrant
should be split into warrants of smaller denominations_

In case of persons  signing by agent or attorney  the  authority of the agent or
attorney must be proven to the satisfaction of Talware Networx Inc.

<PAGE>
                                      -22-

                                  SCHEDULE "B"

                                CONVERSION NOTICE

TO: TALWARE NETWORX INC.

The  undersigned  holder of a Convertible  Debenture in the principal  amount of
$______________  hereby subscribes for Units of Talware Networx Inc. pursuant to
such Convertible Debenture on the terms specified in such Convertible Debenture.

Principal amount plus accrued interest of Convertible Debenture held: __________

Dollar value of conversion under this subscription:                   __________

Balance owing pursuant to Convertible Debenture:                      __________

Number of Units issuable:                                             __________

The  undersigned  hereby  irrevocably  directs  that the said Units be issued as
follows:

    Registration             Address of Registered Holder        Denomination
    ------------             ----------------------------        ------------

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

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

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

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

Dated this     day of          , 20

                                                        SUBSCRIBER

                                                  per:_________________________
                                                      A.S.O.

This subscription is acknowledged this            day of          ,20

                                                      TALWARE NETWORX INC.

                                                  per:_________________________
                                                      A.S.O.REVOLVING LINE OF CREDIT
                                 LOAN AGREEMENT

      This agreement  ("Agreement") is made and entered into effective as of the
14th day of April,  2004 (the  "Effective  Date")  by and among  United  Capital
Mortgage Corporation,  an Arkansas corporation  ("Borrower") and Absolute Return
Europe Fund, Ltd. ("ARE") and Florian Homm ("Homm") (ARE and Homm, collectively,
the "Lender").

                                    RECITALS:

      Borrower  desires to obtain from  Lender a  revolving  line of credit (the
"Loan")  and  Lender  is  willing  to make the  Loan,  but only on the terms and
conditions hereinafter set forth.

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

      1.    LOAN.

            1.1 REVOLVING  LINE OF CREDIT.  Subject to the terms and  conditions
contained herein and in the other documents, instruments and agreements executed
in  connection  with the Loan (the "Loan  Documents"),  Lender agrees to lend to
Borrower the Loan as a revolving  line of credit  against which Lender will make
advances (the "Advances") from time to time for the purpose of providing working
capital to Borrower.  Subject to the terms hereof, Borrower shall have the right
to obtain Advances, repay Advances and obtain additional Advances;  however, all
of the Advances hereunder shall be viewed as a single loan. At no time shall the
unpaid principal balance of the Loan exceed Two Million Dollars  ($2,000,000.00)
(the  "Maximum  Amount") and all Advances of the Loan shall be made on or before
December 31, 2004 (the "Maturity Date"), unless otherwise extended at the option
of Borrower pursuant to Section 1.2 hereof. Lender's obligation to make Loans to
Borrower under this Agreement is hereinafter referred to as the "Commitment".

            1.2 OPTION TO EXTEND.  Borrower  shall have the option to extend the
Maturity  Date without  penalty or interest for a period of 8.5 months ending on
August 15, 2005 by (a)  providing  Lender  written  notice of its  intention  to
extend  the  Maturity  Date at any time prior to  December  31,  2004;  rovided,
however,  that there has been no Event of  Default,  which has not been cured or
waived by Lender.

            1.3 NOTE.  The Loan shall be  evidenced  by a  promissory  note (the
"Note")  of even date  herewith  in a form  approved  by  Lender in the  Maximum
Amount, payable in accordance with the terms thereof.  Interest on the principal
amount  outstanding  from time to time shall be charged as  provided in the Note
and should such rate of interest as calculated thereunder exceed that allowed by
law,  the  applicable  rate of  interest  will be the  maximum  rate of interest
allowed by applicable law.

            1.4 PREPAYMENTS.  Borrower may from time to time, prepay all or part
of the outstanding principal balance of the Loan.

      2.    ADVANCES.

            2.1  CONDITIONS  PRECEDENT TO ADVANCES.  Lender shall have  complete
discretion as to whether to make any and all Advances hereunder.

<PAGE>

            2.2 REQUEST FOR ADVANCES. Advances may be made by Lender at the oral
or written  request of the persons named in Section 12.2 hereof,  any one acting
alone, who are authorized to request Advances and direct disposition of any such
Advances  until written  notice of the  revocation of such authority is received
from Borrower by Lender.

            2.3  Subject to this  Section 2, the  Borrower  shall be entitled to
borrow,  repay and reborrow the principal amount of this Loan at any time during
the term of this Loan.

            2.4 The  parties  acknowledge  that the advance  previously  made by
Lender to UCAP in the amount of $1,000,000 on March 31, 2004 shall be considered
an Advance under this Agreement.

      3.    COLLATERAL AND GUARANTY

            3.1 The repayment by Borrower of its indebtedness under the Loan and
the  Note,  and the  performance  by  Borrower  of all  obligations  under  this
Agreement  shall be secured by a security  interest in all of the  Collateral of
UCMC as such term is defined in and  pursuant  to a Security  Agreement  of even
date herewith in a form approved by Lender (the "UCMC Security Agreement").

            3.2 The repayment by Borrower of its indebtedness under the Loan and
the  Note,  and the  performance  by  Borrower  of all  obligations  under  this
Agreement  shall  be  further  secured  by a  security  interest  in  all of the
Collateral of UCAP Incorporated,  a Colorado  corporation and parent corporation
of  borrower  ("UCAP")  as such term is  defined in and  pursuant  to a Security
Agreement of even date herewith in a form approved by Lender (the "UCAP Security
Agreement").

            3.3 Borrower and UCAP shall  execute and deliver,  or shall cause to
be executed and delivered,  UCC financing  statements  and such other  documents
relating to and  perfecting  Lender's  security  interest in the  Collateral  as
Lender may from time to time request.

            3.4 The repayment by Borrower of its indebtedness under the Loan and
the  Note,  and the  performance  by  Borrower  of all  obligations  under  this
Agreement  shall  be  further  secured  by a  pledge  of all of the  issued  and
outstanding  stock of Borrower by UCAP  pursuant to a Pledge  Agreement  of even
date herewith in a form approved by Lender (the "Pledge Agreement").

      4.    GUARANTY.  As  additional  consideration  for Lender's commitment to
make the Loan, UCAP shall guaranty  the full  and punctual  payment  (whether at
stated  maturity,  upon   acceleration  or  otherwise) of  the principal  of and
interest on the Note  pursuant to a  Guaranty  Agreement  of even date  herewith
 in a form approved by Lender (the "Guaranty Agreement").

      5.    REPRESENTATIONS AND WARRANTIES; CONDITIONS PRECEDENT.

            Borrower represents and warrants to Lender as follows:

            5.1 Borrower is a corporation  duly organized,  validly existing and
in good standing under the laws of Arkansas,  and is qualified to do business in
all jurisdictions in which it is required to be qualified.

            5.2 The execution  and delivery by Borrower of, and the  performance
by Borrower of its obligations under, this Agreement and the Note have been duly
authorized by all  requisite  action on the part of Borrower and do not and will
not (i) violate any provision of Borrower's  organizational  documents, (ii) any
law or any judgment,  order or ruling of any court or  governmental  agency,  or
(iii) be in  conflict  with,  result in a breach  of, or  constitute,  following
notice  or  lapse of time or both,  a  default  under  any  material  indenture,

                                      -2-
<PAGE>

agreement or other  instrument to which Borrower is a party or by which Borrower
or any of its property is bound.

            5.3 This  Agreement  and the Note  constitute  the legal,  valid and
binding agreements of Borrower enforceable in accordance with their terms.

            5.4  Except  as  reported  in the  reports  filed  by UCAP  with the
Securities  and  Exchange  Commission  or as  otherwise  provided  to  Lender in
writing,  there are no pending or threatened  actions or proceedings  before any
court or  administrative  or  governmental  agency  that  may,  individually  or
collectively, adversely affect the financial condition or business operations of
Borrower.

            5.5 The  financial  statements  previously  delivered by Borrower to
Lender,  fairly and accurately present the financial condition of Borrower as of
such  date  and  have  been  prepared  in  accordance  with  generally  accepted
accounting  principles  consistently  applied.  Since the date of such financial
statements, there has been no material adverse change in the financial condition
of Borrower,  and, after reasonable inquiry, there exists no material contingent
liability or obligation assertable against Borrower, except as disclosed in such
financial statements.

            5.6 All federal, state and other tax returns of Borrower required by
law to be filed have been  completed  in full and have been duly filed,  and all
taxes,  assessments and withholdings shown on such returns or billed to Borrower
have been paid, and Borrower maintains adequate reserves and accruals in respect
of all such federal, state and other taxes, assessments and withholdings.  There
are no assessments  pending against Borrower for any taxes or withholdings,  and
Borrower knows of no basis therefor.

            5.7 Except  with  respect to  Residential  Funding  Corporation,  as
reported  by UCAP in the  reports  that it files with the SEC,  or as  otherwise
reported in writing to Lender,  the obligations of Borrower under this Agreement
and the Note are not  currently  subordinated  in right of  payment to any other
obligations of Borrower.

            5.8 No event has occurred and is continuing  which is, or which with
the giving of notice or lapse of time or both would be, an Event of Default  (as
defined in Section 8 below).

      6.    AFFIRMATIVE COVENANTS.

            Borrower  covenants  and agrees that, so long as it may borrow under
this Agreement or so long as any indebtedness remains outstanding under the Loan
or under the Note, Borrower shall:

            6.1 Maintain  its books,  accounts  and records in  accordance  with
generally accepted  accounting  principles and shall permit any person or entity
designated  in writing  by Lender to visit and  inspect  any of its  properties,
books and financial records, and to make copies thereof.

            6.2 Pay and discharge all taxes, assessments, fees, withholdings and
other  governmental  charges  or levies  imposed  upon it or upon its income and
profits,  or upon  any  property  belonging  to it,  prior  to the date on which
penalties  attached  thereto,  unless the legality thereof shall be promptly and
actively contested in good faith by appropriate proceedings.

            6.3 Promptly notify Lender in writing of the occurrence of any Event
of Default or of any pending or threatened  litigation  claiming  damages in any
amount seeking relief that, if granted,  would  materially  adversely affect the
financial condition or business operations of Borrower.

                                      -3-
<PAGE>

      7.    NEGATIVE COVENANTS.

            Borrower  covenants  and  agrees  that,  without  the prior  written
consent of Lender,  so long as it may borrow under this  Agreement or so long as
any indebtedness  remains outstanding under the Loan or under the Note, Borrower
shall not:

            7.1 Use any  proceeds  of the Loan  except for  purposes  of working
capital or as otherwise agreed to in writing by Lender.

            7.2 Merge,  consolidate or enter into a partnership or joint venture
with any other person or entity; or sell,  lease,  transfer or otherwise dispose
of all or any substantial  portion of its assets,  except in the ordinary course
of business.

            7.3 Guarantee or become  contingently  liable for any  obligation or
indebtedness  of any other  person or entity,  except that  Borrower may endorse
negotiable  instruments  for  collection  in the  ordinary  course of  business,
including  with  respect to those  sources of  financing  disclosed  pursuant to
Section 5.7.

            7.4 Make any loans,  advances or  extensions of credit to any person
or entity, except in the ordinary course of business, and including with respect
to those sources of financing disclosed pursuant to Section 5.7.

            7.5  Grant  any  lien  on or  security  interest  in,  or  otherwise
encumber,  any of its  properties or assets,  except for liens for taxes not yet
due and  payable  or  which  are  being  actively  contested  in good  faith  by
appropriate  proceedings and for which adequate reserves are being maintained by
Borrower and those liens disclosed to Lender by Borrower in writing prior to the
execution of this Agreement,  and including those sources of financing disclosed
pursuant to Section 5.7,  Borrower shall not permit to exist any lien,  security
interest or other encumbrance on any of the Collateral.

      8. EVENTS OF DEFAULT.  Borrower will be deemed to be in default (an "Event
of Default") if (a) any principal,  interest or other monetary sum due under the
Note is not paid within  five days from the date when due and Lender  shall have
given notice of such  failure to Borrower  and such failure  shall not have been
cured by Borrower  within fifteen (15) days from the delivery of such notice (an
"Event of  Default");  (b)  Borrower  materially  breaches  any  representation,
warranty or covenant  contained in this  Agreement and fails to cure such breach
within  thirty (30) days from  delivery of notice of such  breach;  (c) Borrower
fails to pay when due any  payment of  principal  or  interest  due on any other
obligation  for money borrowed in excess of $5,000,  and such default  continues
beyond any grace  period;  (d) Any judgment or order for the payment of money in
excess of $10,000.00,  is entered against Borrower, unless the same shall be (i)
fully  covered by insurance and the issuer of the  applicable  policy shall have
acknowledged  full coverage in writing  within thirty (30) days of judgment,  or
(ii) vacated,  stayed, bonded, paid or discharged within a period of thirty (30)
days from the date of such  judgment or order;  (e) Borrower or Guarantor  shall
take  any  action  to make  an  assignment  for the  benefit  of  creditors,  or
petitioning or taking any action to petition any tribunal for the appointment of
a custodian, receiver or any trustee for it or a substantial part of its assets,
or  commencing  or  taking  any  action to  commence  any  proceeding  under any
bankruptcy,  reorganization,  arrangement,  readjustment  of debt,  dissolution,
liquidation or debtor relief law or statute of any jurisdiction,  whether now or
hereafter in effect, including,  without limitation,  any chapter of the federal
Bankruptcy  Code;  or, if there  shall  have  been  filed or  commenced  against
Borrower or Guarantor any such petition,  application or proceeding which is not
dismissed within sixty (60) days or in which an order for relief is entered;  or
should Borrower or Guarantor by any act or omission  indicate its approval of or
acquiescence in any such petition, application or proceeding or order for relief
or  the  appointment  of a  custodian,  receiver  or any  trustee  for it or any

                                      -4-
<PAGE>

substantial  part of any of its  properties;  or should  Borrower  or  Guarantor
suffer  to exist  any  such  custodianship,  receivership  or  trusteeship;  (f)
Borrower or Guarantor conceals,  removes, or permits to be concealed or removed,
any part of its property,  with intent to hinder, delay or defraud its creditors
or any of them,  or making or suffering a transfer of any of its property  which
may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or
making any  transfer  of its  property  to or for the benefit of a creditor at a
time when other creditors similarly situated have not been paid, or suffering or
permitting,  while  insolvent,  any  creditor  to  obtain a lien upon any of its
property  through legal  proceedings or distraint which is not vacated within 30
days after the date thereof; or (g) the dissolution,  cessation of business,  or
insolvency of Borrower or Guarantor.

      9. REMEDIES OF LENDER UPON DEFAULT. Upon an Event of Default,  Lender will
have,  in  addition to its rights and  remedies  under the Note,  full  recourse
against any assets of Borrower,  and may pursue any legal or equitable  remedies
that are available to Lender, and may declare the entire unpaid principal amount
of this Note and all unpaid  accrued  interest  under the Note to be immediately
due and payable in full.

      10.  WAIVER.  Any waiver of any of the terms of this  Agreement  by Lender
shall not be construed as a waiver of any other terms of this Agreement,  and no
waiver  shall be  effective  unless  made in  writing.  The failure of Lender to
exercise any right with respect to the  declaration  of any default shall not be
deemed or  construed  to  constitute  a waiver by, or to  preclude  Lender  from
exercising  any right  with  respect  to such  default  at a later  date or with
respect to any subsequent default by Borrower.

      11. NOTICES. Any notices required or permitted to be given pursuant to any
of the Loan  Documents  shall be in writing and shall be deemed given (i) in the
case of personal delivery or delivery by telecopy, on the date of such delivery,
or (ii) in the case of dispatch by international overnight courier, two business
days following such  dispatch,  to the address or facsimile  number set forth in
Section 12.3 hereof.  If either party desires to change the address or facsimile
number to which notices are to be sent it shall do so in writing and deliver the
same to the other  party in  accordance  with the  notice  provisions  set forth
above.

      12.   MISCELLANEOUS.

            12.1 PARTIES.  This Agreement is made solely among Borrower,  Lender
and UCAP,  and no other  person  shall have any right of action  hereunder.  The
parties  expressly  agree that no person shall be a third-party  beneficiary  to
this Agreement.

            12.2 PERSONS AUTHORIZED TO REQUEST ADVANCES FROM LENDER:

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

            Or such other  persons  as may be  evidenced  by written  notice and
accompanied  by an  incumbency  certificate  from the Borrower  reflecting  such
persons authority to make such requests from time tot time.

            12.3  ADDRESSES  FOR NOTICES:  All notices,  requests,  consents and
other  communications  hereunder  shall be in writing and shall be  delivered in
person,  mailed by certified or registered mail,  return receipt  requested,  or
sent by telecopier  or  recognized  overnight  courier  service,  to the address
listed below or at such other address or addresses as shall have been  furnished
in writing by such party:

                                      -5-
<PAGE>

           (a)      if to the Borrower:      United Capital Mortgage Corporation
                                             14001 East Iliff Avenue, Suite 701
                                             Denver, CO 80014
                                             Facsimile: (303) 696-6369
                                             Attn: _______________________

           (b)                               if to the  Lender:
                                             Absolute    Return
                                             Europe Fund, Ltd.

                                             Facsimile:
                                                        -----------------------
                                             Attn:
                                                   ----------------------------

                                             Mr. Florian Homm
                                             C'an Girasol
                                             Cami de Sarria 63
                                             07010 Establiments
                                             Palma de Mallorca, Spain

            12.4  ENTIRE  AGREEMENT.  This  Agreement,  the  Note,  and the Loan
Documents  constitute the entire agreement and  understanding  among the parties
with  respect  to  the  subject   matter   thereof  and   supersede   any  prior
understandings or agreements of the parties with respect to such subject matter.

            12.5 ASSIGNMENT. This Agreement shall inure to the benefit of and be
binding upon the parties  hereto and their  respective  successors  and assigns;
provided,  however,  that neither this  Agreement nor any rights or  obligations
hereunder  shall be  assignable  by Borrower by  operations of law or otherwise,
without  the  prior  express  written  consent  of  Lender,  and  any  purported
assignment made in contravention hereof shall be void.

            12.6  GOVERNING  LAW. This  Agreement and each of the Loan Documents
shall be construed in  accordance  with and governed by the laws of the State of
Colorado.

            12.7 TIME. Time is of the essence hereof.

            12.8 TERMINATION.  Borrower may terminate this Agreement at any time
by written notice to Lender accompanied with payment of all accrued interest and
outstanding principal.

            12.9 SEVERABILITY. If any term or provision of this Agreement or any
other Loan Document,  or the application  thereof to any circumstance,  shall be
invalid,  illegal or unenforceable  to any extent,  such term or provision shall
not  invalidate  or render  unenforceable  any other term or  provision  of this
Agreement  or any  other  Loan  Document,  or the  application  of such  term or
provision to any other circumstance. To the extent permitted by law, the parties
hereto  hereby  waive any  provision  of law that  renders any term or provision
hereof invalid or unenforceable in any respect.

                  [Remainder of page intentionally left blank]

                                      -6-
<PAGE>

         IN WITNESS WHEREOF,  the parties have executed this Agreement effective
as of the date first written above.

                    BORROWER:

                    United Capital Mortgage Corporation, an Arkansas corporation

                    By: /s/ Colleen Brewer
                       -------------------------------
                    Name: Colleen Brewer
                    Its: Investment Advisor, Principal

                    LENDER:

                    Absolute Return Europe Fund, Ltd.

                    By: /s/ Florian Homm
                       -------------------------------
                    Name: Florian Homm
                    Its: Investment Advisor, Principal

                    /s/ Florian Homm
                    -----------------------------------
                    Florian Homm, Individually

Acknowledged and Agreed
for purposes of Articles 3 & 4

UCAP Incorporated, a Colorado corporation

By: /s/ Colleen Brewer
   -------------------
Name: Colleen Brewer
Its: Chief Financial Officer

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