Document:

GUARANTY AND PLEDGE AGREEMENT

     GUARANTY AND PLEDGE AGREEMENT (this "Agreement"), dated as of May 31, 2002,
among Roanoke Technology Corp., a Florida corporation (the "Company"), David L.
Smith, Jr., (the "Pledgor"), AJW Partners, LLC, a limited liability company
("AJW"), New Millennium Capital Partners II, LLC, a limited liability company
("NMC"), AJW/New Millennium Offshore, Ltd., Pegasus Capital Partners, LLC
(collectively herein, the "Pledgees").

                              W I T N E S S E T H:

     WHEREAS, the Company and the Pledgees are parties to that certain
Securities Purchase Agreement, of even date herewith (the "Purchase Agreement"),
pursuant to which the Company (i) has issued (a) 12% secured convertible
debentures in the aggregate principal amount of $200,000 and (b) stock purchase
warrants to purchase an aggregate of 600,000 shares of the Company's common
stock, $0.0001 par value per share (the "Common Stock") and (ii) will issue,
pursuant to Section 4(l) of the Purchase Agreement, (a) 12% secured convertible
debentures in the aggregate principal amount of $400,000, and (b) stock purchase
warrants to purchase an aggregate of 1,200,000 shares of the Common Stock; and

     WHEREAS, as a material inducement to the Pledgees to enter into the
Purchase Agreement, the Pledgees have required and the Pledgor has agreed (i) to
unconditionally guarantee the timely and full satisfaction of all obligations of
the Company, whether matured or unmatured, now or hereafter existing or created
and becoming due and payable (the "Obligations") to the Pledgees, their
successors, endorsees, transferees or assigns under the Transaction Documents
(as defined in the Purchase Agreement) to the extent of the Collateral (as
defined in Section 5 hereof), and (ii) to grant to the Pledgees, their
successors, endorsees, transferees or assigns a security interest in 10,000,000
shares of Common Stock currently owned by the Pledgor (collectively, the
"Shares"), as collateral security for Obligations. Terms used and not defined
herein shall have the meaning ascribed to them in the Purchase Agreement.

     NOW, THEREFORE, in consideration of the foregoing recitals, and the mutual
covenants contained herein, the parties hereby agree as follows:

          1. Guaranty. To the extent of the Collateral, the Pledgor hereby
             --------
absolutely, unconditionally and irrevocably guarantees to the Pledgees, their
successors, endorsees, transferees and assigns the due and punctual performance
and payment of the Obligations owing to the Pledgees, their successors,
endorsees, transferees or assigns when due, all at the time and place and in the
amount and manner prescribed in, and otherwise in accordance with, the
Transaction Documents, regardless of any defense or set-off counterclaim which
the Company or any other person may have or assert, and regardless of whether or
not the Pledgees or anyone on behalf of the Pledgees shall have instituted any
suit, action or proceeding or exhausted its remedies or taken any steps to
enforce any rights against the Company or any other person to compel any such
performance or observance or to collect all or part of any such amount, either
pursuant to the provisions of the Transaction Documents or at law or in equity,
and regardless of any other condition or contingency.

<PAGE>

          2. Waiver of Demand. The Pledgor hereby unconditionally: (i) waives
             ----------------
any requirement that the Pledgees, in the event of a breach in any material
respect by the Company of any of its representations or warranties in the
Transaction Documents, first make demand upon, or seek to enforce remedies
against, the Company or any other person before demanding payment of enforcement
hereunder; (ii) covenants that this Agreement will not be discharged except by
complete performance of all the Obligations to the extent of the Collateral;
(iii) agrees that this Agreement shall remain in full force and effect without
regard to, and shall not be affected or impaired, without limitation, by, any
invalidity, irregularity or unenforceability in whole or in part of the
Transaction Documents or any limitation on the liability of the Company
thereunder, or any limitation on the method or terms of payment thereunder which
may now or hereafter be caused or imposed in any manner whatsoever; and (iv)
waives diligence, presentment and protest with respect to, and notice of default
in the performance or payment of any Obligation by the Company under or in
connection with the Transaction Documents.

          3. Release. The obligations, covenants, agreements and duties of the
             -------
Pledgor hereunder shall not be released, affected or impaired by any assignment
or transfer, in whole or in part, of the Transaction Documents or any
Obligation, although made without notice to or the consent of the Pledgor, or
any waiver by the Pledgees, or by any other person, of the performance or
observance by the Company or the Pledgor of any of the agreements, covenants,
terms or conditions contained in the Transaction Documents, or any indulgence in
or the extension of the time or renewal thereof, or the modification or
amendment (whether material or otherwise), or the voluntary or involuntary
liquidation, sale or other disposition of all or any portion of the stock or
assets of the Company or the Pledgor, or any receivership, insolvency,
bankruptcy, reorganization, or other similar proceedings, affecting the Company
or the Pledgor or any assets of the Company or the Pledgor, or the release of
any proper from any security for any Obligation, or the impairment of any such
property or security, or the release or discharge of the Company or the Pledgor
from the performance or observance of any agreement, covenant, term or condition
contained in or arising out of the Transaction Documents by operation of law, or
the merger or consolidation of the Company, or any other cause, whether similar
or dissimilar to the foregoing.

          4. Subrogation.
             -----------

               (a) Unless and until complete performance of all the Obligations
to the extent of the Collateral, the Pledgor shall not be entitled to exercise
any right of subrogation to any of the rights of the Pledgees against the
Company or any collateral security or guaranty held by the Pledgees for the
payment or performance of the Obligations, nor shall the Pledgor seek any
reimbursement from the Company in respect of payments made by the Pledgor
hereunder.

               (b) In the extent that the Pledgor shall become obligated to
perform or pay any sums hereunder, or in the event that for any reason the
Company is now or shall hereafter become indebted to the Pledgor, the amount of
such sum shall at all times be subordinate as to lien, time of payment and in
all other respects, to the amounts owing to the Pledgees under the Transaction
Documents and the Pledgor shall not enforce or receive payment thereof until all
Obligations due to the Pledgees under the Transaction have been performed or
paid. Nothing herein contained is intended or shall be construed to give to the
Pledgor any right of subrogation

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<PAGE>

in or under the Transaction Documents, or any right to participate in any way
therein, or in any right, title or interest in the assets of the Pledgees.

     5. Security. As collateral security for the punctual payment and
        --------
performance, when due, by the Company of all the Obligations, the Pledgor hereby
pledges with, hypothecates, transfers and assigns to the Pledgees all of the
Shares and all proceeds, shares and other securities received, receivable or
otherwise distributed in respect of or in exchange for the Shares, including,
without limitation, any shares and other securities into which such Shares may
be convertible or exchangeable (collectively, the "Additional Collateral" and
together with the Shares, the "Collateral"). Simultaneously herewith, the
Pledgor shall deliver to counsel to the Pledgees or an escrow agent reasonably
satisfactory to the Pledgor the certificate(s) representing the Shares, stamped
with a bank medallion guarantee, along with a stock transfer power duly executed
in blank by the Pledgor, to be held as security. Any Collateral received by the
Pledgor on or after the date hereof shall be immediately delivered to the
Pledgees together with any executed stock powers or other transfer documents
requested by the Pledgees, which request may be made at any time prior to the
date when the Obligations shall have been paid and otherwise satisfied in full.

     6. Voting Power, Dividends, Etc. and other Agreements.
        --------------------------------------------------

          (a) Unless and until an Event of Default (as set forth in Section 7
hereof) has occurred, the Pledgor shall be entitled to:

               (i) Exercise all voting and/or consensual powers pertaining to
the Collateral, or any part thereof, for all purposes;

               (ii) Receive and retain dividends paid with respect to the
Collateral; and

               (iii) Receive the benefits of any income tax deductions available
to the Pledgor as a shareholder of the Company.

          (b) The Pledgor agrees that it will not sell, assign, transfer,
pledge, hypothecate, encumber or otherwise dispose of the Collateral.

          (c) The Pledgor and the Company jointly and severally agree to pay all
costs including all reasonable attorneys' fees and disbursements incurred by the
Pledgees in enforcing this Agreement in accordance with its terms.

     7. Default and Remedies.
        --------------------

          (a) For the purposes of this Agreement, "Event of Default" shall mean:
                                                   ----------------

               (i) default in or under any of the Obligations after the
expiration, without cure, of any applicable cure period;

               (ii) a breach in any material respect by the Company of any of
its representations or warranties in the Transaction Documents; or

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<PAGE>

               (iii) a breach in any material respect by the Pledgor of any of
its representations or warranties in this Agreement.

          (b) the Pledgees shall have the following rights upon any Event of
Default:

               (i) the rights and remedies provided by the Uniform Commercial
Code as adopted by the State of New York (the "UCC") (as said law may at any
time be amended);

               (ii) the right to receive and retain all dividends, payments and
other distributions of any kind upon any or all of the Collateral;

               (iii) the right to cause any or all of the Collateral to be
transferred to its own name or to the name of its designee and have such
transfer recorded in any place or places deemed appropriate by the Pledgees; and

               (iv) the right to sell, at a public or private sale, the
Collateral or any part thereof for cash, upon credit or for future delivery, and
at such price or prices in accordance with the UCC (as such law may be amended
from time to time). Upon any such sale the Pledgees shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so sold.
The Pledgees shall give the Pledgor not less than ten (10) days' written notice
of its intention to make any such sale. Any such sale, shall be held at such
time or times during ordinary business hours and at such place or places as the
Pledgees may fix in the notice of such sale. The Pledgees may adjourn or cancel
any sale or cause the same to be adjourned from time to time by announcement at
the time and place fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned. In case of any sale of all or any
part of the Collateral upon terms calling for payments in the future, any
Collateral so sold may be retained by the Pledgees until the selling price is
paid by the purchaser thereof, but the Pledgees shall incur no liability in the
case of the failure of such purchaser to take up and pay for the Collateral so
sold and, in the case of such failure, such Collateral may again be sold upon
like notice. The Pledgees, however, instead of exercising the power of sale
herein conferred upon them, may proceed by a suit or suits at law or in equity
to foreclose the security interest and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction, the Pledgor having been given due notice of all such action. The
Pledgees shall incur no liability as a result of a sale of the Collateral or any
part thereof. All proceeds of any such sale, after deducting the reasonable
expenses and reasonable attorneys' fees incurred in connection with such sale,
shall be applied in reduction of the Obligations, and the remainder, if any,
shall be paid to the Pledgor.

     8. Application of Proceeds; Release. The proceeds of any sale or
        --------------------------------
enforcement of or against all or any part of the Collateral, and any other cash
or collateral at the time held by the Pledgees hereunder, shall be applied by
the Pledgees first to the payment of the reasonable costs of any such sale or
enforcement, then to reimburse the Pledgees for any damages, costs or

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<PAGE>

expenses incurred by the Pledgees as a result of an Event of Default, then to
the payment of the principal amount or stated valued (as applicable) of, and
interest or dividends (as applicable) and any other payments due in respect of,
the Obligations. The remainder, if any, shall be paid to the Pledgor. As used in
this Agreement, "proceeds" shall mean cash, securities and other property
realized in respect of, and distributions in kind of, the Collateral, including
any thereof received under any reorganization, liquidation or adjustment of debt
of any issuer of securities included in the Collateral.

     9. Representations and Warranties.
        ------------------------------

          (a) The Pledgor hereby represents and warrants to the Pledgees that:

               (i) the Pledgor has full power and authority and legal right to
pledge the Collateral to the Pledgees pursuant to this Agreement and this
Agreement constitutes a legal, valid and binding obligation of the Pledgor,
enforceable in accordance with its terms.

               (ii) the execution, delivery and performance of this Agreement
and other instruments contemplated herein will not violate any provision of any
order or decree of any court or governmental instrumentality or of any mortgage,
indenture, contract or other agreement to which the Pledgor is a party or by
which the Pledgor and the Collateral may be bound, and will not result in the
creation or imposition of any lien, charge or encumbrance on, or security
interest in, any of the Pledgor's properties pursuant to the provisions of such
mortgage, indenture, contract or other agreement.

               (iii) the Pledgor is the sole record and beneficial owner of all
of the Shares; and

               (iv) the Pledgor owns the Collateral free and clear of all Liens.

          (b) The Company represents and warrants to the Pledgees that:

               (i) it has no knowledge that any of the representations or
warranties of the Pledgor herein are incorrect or false in any material respect;

               (ii) all of the Shares were validly issued, fully paid and
non-assessable; and

               (iii) the Pledgor is the record holder of the Shares.

     10. No Waiver; No Election of Remedies. No failure on the part of the
         ----------------------------------
Pledgees to exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise by the Pledgees of any right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein provided are cumulative and are not exclusive of any
remedies provided by law. In addition, the exercise of any right or remedy of
the Pledgees at law or equity

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<PAGE>

or under this Agreement or any of the documents shall not be deemed to be an
election of Pledgee's rights or remedies under such documents or at law or
equity.

     11. Termination. This Agreement shall terminate on the date on which all
         -----------
Obligations have been performed, satisfied, paid or discharged in full.

     12. Further Assurances. The parties hereto agree that, from time to time
         ------------------
upon the written request of any party hereto, they will execute and deliver such
further documents and do such other acts and things as such party may reasonably
request in order fully to effect the purposes of this Agreement.

     13. Miscellaneous.
         -------------

          (a) Modification. This Agreement contains the entire understanding
between the parties with respect to the subject matter hereof and specifically
incorporates all prior oral and written agreements relating to the subject
matter hereof. No portion or provision of this Agreement may be changed,
modified, amended, waived, supplemented, discharged, canceled or terminated
orally or by any course of dealing, or in any manner other than by an agreement
in writing, signed by the party to be charged.

          (b) Notice. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Business Day (as defined in the Purchase Agreement), (ii) the
Business Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Agreement later than 6:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the Business Day following
the date of mailing, if sent by nationally recognized overnight courier
services, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:

                If to the Company:    Roanoke Technology Corp.
                                      539 Becker Road
                                      Roanoke Rapids, NC  27870
                                      Facsimile No.:  (252) 537-3125
                                      Attn:  David L. Smith, Jr., President
                                      and Chief Executive Officer

                With copies to:       Anslow & Jaclin, LLP
                                      4400 Route 9, 2nd Floor
                                      Freehold, NJ  07728
                                      Facsimile No.:  (732) 577-1188
                                      Attn:  Richard Anslow, Esq.

                                       6

<PAGE>

                If to the Pledgor:    David L. Smith, Jr.
                                      c/o Roanoke Technology Corp.
                                      539 Becker Road
                                      Roanoke Rapids, NC  27870
                                      Facsimile No.:  (252) 537-3125

                If to the Pledgees:   AJW Partners, LLC
                                      1044 Northern Boulevard
                                      Suite 302
                                      Roslyn, New York  11576
                                      Facsimile No.:  (516) 739-7115
                                      Attn:  Corey Ribotsky

                                      New Millennium Capital Partners II, LLC
                                      1044 Northern Boulevard
                                      Suite 302
                                      Roslyn, New York  11576
                                      Attn:  Corey Ribotsky

                                      AJW/New Millennium Offshore, Ltd.
                                      1044 Northern Boulevard
                                      Suite 302
                                      Roslyn, New York  11576
                                      Attn:  Corey Ribotsky

                                      Pegasus Capital Partners, LLC
                                      1044 Northern Boulevard
                                      Suite 302
                                      Roslyn, New York  11576
                                      Attn:  Corey Ribotsky

                With copies to:       Ballard Spahr Andrews & Ingersoll, LLP
                                      1735 Market Street, 51st Fl.
                                      Philadelphia, PA  19103
                                      Facsimile No.:  (215) 864-8999
                                      Attn:   Gerald J. Guarcini, Esq.

          (c) Invalidity. If any part of this Agreement is contrary to,
              ----------
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.

          (d) Benefit of Agreement. This Agreement shall be binding upon and
              --------------------
inure to the parties hereto and their respective successors and assigns.

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<PAGE>

          (e) Mutual Agreement. This Agreement embodies the arm's length
              ----------------
negotiation and mutual agreement between the parties hereto and shall not be
construed against either party as having been drafted by it.

          (f) New York Law to Govern. This Agreement shall be governed by and
              ----------------------
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principals of conflicts of law thereof. 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 or that
such suit, action or proceeding is improper. 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 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.

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<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Guaranty and Pledge
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.

                                ROANOKE TECHNOLOGY CORP.

                                By:    /s/ David L. Smith, Jr.
                                       David L. Smith, Jr.
                                       President and Chief Executive Officer

                                Pledgees:

                                AJW PARTNERS, LLC
                                By:     First Street Manager II, LLC

                                By:     /s/ Corey S. Ribotsky
                                        Corey S. Ribotsky
                                        Manager

                                NEW MILLENNIUM CAPITAL PARTNERS II, LLC
                                By:     First Street Manager II, LLC

                                By:     /s/ Corey S. Ribotsky
                                        Corey S. Ribotsky
                                        Manager

                                AJW/NEW MILLENNIUM OFFSHORE, LTD.
                                By:     First Street Manager II, LLC

                                By:     /s/ Corey S. Ribotsky
                                        Corey S. Ribotsky
                                        Manager

                                       9

<PAGE>

                                PEGASUS CAPITAL PARTNERS, LLC

                                By:     Pegasus Manager, LLC

                                By:     /s/ Corey S. Ribotsky
                                        Corey S. Ribotsky
                                        Manager

                                Pledgor:
                                        /s/ David L. Smith, Jr.
                                         David L. Smith, Jr.

                      Number of Shares subject to this pledge:  10,000,000

                      Date such Shares were acquired:  October 2, 2001

                                       10THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
         HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
         EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE
         AGREEMENT DATED AS OF MAY 31, 2002, NEITHER THIS WARRANT NOR ANY OF
         SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
         EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR,
         AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR
         OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS
         NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR
         REGULATION S UNDER SUCH ACT.

                                                                Right to
                                                                Purchase 195,000
                                                                Shares of Common
                                                                Stock, $.0001
                                                                par value per
                                                                share

                             STOCK PURCHASE WARRANT

         THIS CERTIFIES THAT, for value received, AJW/New Millennium Offshore,
Ltd. or its registered assigns, is entitled to purchase from Roanoke Technology
Corp., a Florida corporation (the "Company"), at any time or from time to time
during the period specified in Paragraph 2 hereof, One Hundred Ninety Five
Thousand (195,000) fully paid and nonassessable shares of the Company's Common
Stock, $.0001 par value per share (the "Common Stock"), at an exercise price per
share equal to the lesser of (i) $.0417 and (ii) the average of the lowest three
(3) Trading Prices (as defined below) during the twenty (20) Trading Days (as
defined below) immediately prior to exercise (the "Exercise Price"). The term
"Warrant Shares," as used herein, refers to the shares of Common Stock
purchasable hereunder. The Warrant Shares and the Exercise Price are subject to
adjustment as provided in Paragraph 4 hereof. The term "Warrants" means this
Warrant and the other warrants issued pursuant to that certain Securities
Purchase Agreement, dated May 31, 2002, by and among the Company and the Buyers
listed on the execution page thereof (the "Securities Purchase Agreement"),
including any additional warrants issuable pursuant to Section 4(l) thereof.
"Trading Price" means, for any security as of any date, the intraday trading
price on the Over-the-Counter Bulletin Board (the "OTCBB") as reported by
Bloomberg Financial Markets or an equivalent, reliable reporting service
mutually acceptable to and hereafter designated by the Company and the holder
hereof ("Bloomberg") or, if the OTCBB is not the principal trading market for
such security, the intraday trading price of such security on the principal
securities exchange or trading market where such security is listed or traded as

<PAGE>

reported by Bloomberg or, if no intraday trading price of such security is
available in any of the foregoing manners, the average of the intraday trading
prices of any market makers for such security that are listed in the "pink
sheets" by the National Quotation Bureau, Inc. If the Trading Price cannot be
calculated for such security on such date in the manner provided above, the
Trading Price shall be the fair market value as mutually determined by the
Company and the holder hereof. "Trading Day" shall mean any day on which the
Common Sock is traded for any period on the OTCBB, or on the principal
securities exchange or other securities market on which the Common Stock is then
being traded.

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

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

          Notwithstanding anything in this Warrant to the contrary, in no event
shall the holder of this Warrant be entitled to exercise a number of Warrants
(or portions thereof) in

<PAGE>

excess of the number of Warrants (or portions thereof) upon exercise of which
the sum of (i) the number of shares of Common Stock beneficially owned by the
holder and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised Warrants and the
unexercised or unconverted portion of any other securities of the Company
(including the Debentures (as defined in the Securities Purchase Agreement))
subject to a limitation on conversion or exercise analogous to the limitation
contained herein) and (ii) the number of shares of Common Stock issuable upon
exercise of the Warrants (or portions thereof) with respect to which the
determination described herein is being made, would result in beneficial
ownership by the holder and its affiliates of more than 4.9% of the outstanding
shares of Common Stock. For purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder,
except as otherwise provided in clause (i) of the preceding sentence. The holder
of this Warrant may waive the limitations set forth herein by sixty-one (61)
days written notice to the Company. Notwithstanding anything to the contrary
contained herein, the limitation on exercise of this Warrant set forth herein
may not be amended without (i) the written consent of the holder hereof and the
Company and (ii) the approval of a majority of shareholders of the Company.

     2. Period of Exercise. This Warrant is exercisable at any time or from time
        ------------------
to time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the Securities Purchase Agreement and before 6:00 p.m.,
New York, New York time on the third (3rd) anniversary of the date of issuance
(the "Exercise Period").

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

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

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

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

          (d) Certain Actions Prohibited. The Company will not, by amendment of
              --------------------------
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or

<PAGE>

performance of any of the terms to be observed or performed by it hereunder, but
will at all times in good faith assist in the carrying out of all the provisions
of this Warrant and in the taking of all such action as may reasonably be
requested by the holder of this Warrant in order to protect the exercise
privilege of the holder of this Warrant against dilution or other impairment,
consistent with the tenor and purpose of this Warrant. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any shares of Common Stock receivable upon the exercise of this Warrant above
the Exercise Price then in effect, and (ii) will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this
Warrant.

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

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

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

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

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

               (i) Issuance of Rights or Options. If the Company in any manner
                   -----------------------------
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
convertible into or exchangeable for Common Stock ("Convertible Securities")
(such warrants, rights and options to purchase Common Stock or Convertible
Securities are hereinafter referred to as "Options") and the price per share for
which Common Stock is issuable upon the exercise of such Options is less than
the

<PAGE>

Market Price on the date of issuance or grant of such Options, then the maximum
total number of shares of Common Stock issuable upon the exercise of all such
Options will, as of the date of the issuance or grant of such Options, be deemed
to be outstanding and to have been issued and sold by the Company for such price
per share. For purposes of the preceding sentence, the "price per share for
which Common Stock is issuable upon the exercise of such Options" is determined
by dividing (i) the total amount, if any, received or receivable by the Company
as consideration for the issuance or granting of all such Options, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of all such Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Options, the minimum aggregate
amount of additional consideration payable upon the conversion or exchange
thereof at the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock upon the
exercise of such Options or upon the conversion or exchange of Convertible
Securities issuable upon exercise of such Options.

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

               (iii) Change in Option Price or Conversion Rate. If there is a
                     -----------------------------------------
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.

<PAGE>

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

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

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

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

<PAGE>

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

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

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

          (g) Notice of Adjustment. Upon the occurrence of any event which
              --------------------
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the Chief Financial Officer of the Company.

          (h) Minimum Adjustment of Exercise Price. No adjustment of the
              ------------------------------------
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which,

<PAGE>

together with any adjustments so carried forward, shall amount to not less than
1% of such Exercise Price.

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

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

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

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

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

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

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

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

<PAGE>

          (l) Certain Definitions.

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

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

               (iii) "Common Stock," for purposes of this Paragraph 4, includes
                      ------------
the Common Stock, par value $.0001 per share, and any additional class of stock
of the Company having no preference as to dividends or distributions on
liquidation, provided that the shares purchasable pursuant to this Warrant shall
include only shares of Common Stock, par value $.0001 per share, in respect of
which this Warrant is exercisable, or shares resulting from any subdivision or
combination of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, merger, or sale of the character referred to in
Paragraph 4(e) hereof, the stock or other securities or property provided for in
such Paragraph.

     5. Issue Tax. The issuance of certificates for Warrant Shares upon the
        ---------
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.

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

<PAGE>

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

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

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

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

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

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

          (f) Exercise or Transfer Without Registration. If, at the time of the
              -----------------------------------------
surrender of this Warrant in connection with any exercise, transfer, or exchange
of this Warrant, this Warrant (or, in the case of any exercise, the Warrant
Shares issuable hereunder), shall not be registered under the Securities Act of
1933, as amended (the "Securities Act") and under applicable state securities or
blue sky laws, the Company may require, as a condition of allowing such
exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case

<PAGE>

may be, furnish to the Company a written opinion of counsel, which opinion and
counsel are acceptable to the Company, to the effect that such exercise,
transfer, or exchange may be made without registration under said Act and under
applicable state securities or blue sky laws, (ii) that the holder or transferee
execute and deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an "accredited
investor" as defined in Rule 501(a) promulgated under the Securities Act;
provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Warrant, by taking and holding the
same, represents to the Company that such holder is acquiring this Warrant for
investment and not with a view to the distribution thereof.

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

     9. Notices. All notices, requests, and other communications required or
        -------
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at Roanoke Technology Corp.,
539 Becker Road, Roanoke Rapids, North Carolina 27870, Attention: President and
Chief Executive Officer, or at such other address as shall have been furnished
to the holder of this Warrant by notice from the Company. Any such notice,
request, or other communication may be sent by facsimile, but shall in such case
be subsequently confirmed by a writing personally delivered or sent by certified
or registered mail or by recognized overnight mail courier as provided above.
All notices, requests, and other communications shall be deemed to have been
given either at the time of the receipt thereof by the person entitled to
receive such notice at the address of such person for purposes of this Paragraph
9, or, if mailed by registered or certified mail or with a recognized overnight
mail courier upon deposit with the United States Post Office or such overnight
mail courier, if postage is prepaid and the mailing is properly addressed, as
the case may be.

     10. Governing Law. THIS WARRANT SHALL BE ENFORCED, GOVERNED BY AND
         -------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITH SUCH STATE, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT, THE AGREEMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE

<PAGE>

THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS WARRANT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

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

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

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

          (c) Cashless Exercise. Notwithstanding anything to the contrary
              -----------------
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company at its principal executive offices with a written
notice of the holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the
holder shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock. For example, if the holder is exercising
100,000 Warrants with a per Warrant exercise price of $0.75 per share through a
cashless exercise when the Common Stock's current Market Price per share is
$2.00 per share, then upon such Cashless Exercise the holder will receive 62,500
shares of Common Stock.

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

<PAGE>

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

                                 ROANOKE TECHNOLOGY CORP.

                                 By:  /s/ David L. Smith, Jr.
                                      _______________________________
                                      David L. Smith, Jr.
                                      President and Chief Executive Officer

Dated as of May 31, 2002

<PAGE>

                           FORM OF EXERCISE AGREEMENT

                                                    Dated:  ________ __, 200_

To:      Roanoke Technology Corp.

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

                        Name:    ______________________________

                        Signature:
                        Address: ____________________________

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

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

<PAGE>

                               FORM OF ASSIGNMENT

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

Name of Assignee             Address                               No of Shares

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

Dated:   ________ __, 200_

In the presence of:        ______________________________

                      Name:______________________________

                      Signature:_________________________
                      Title of Signing Officer or Agent (if any): ________
                      Address: ______________________________

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

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