Document:

EXHIBIT 10.37

                              EMPLOYMENT AGREEMENT

      This EMPLOYMENT AGREEMENT ("Agreement") is effective as of September 1,
2004 by and between PATRIOT SCIENTIFIC CORPORATION, a Delaware Corporation (the
"Company"), and LOWELL GIFFHORN (the "Employee").

      The parties agree as follows:

1. Term of Employment. The Company hereby agrees to employ the Employee and the
Employee hereby agrees to accept employment as Executive Vice President and
Chief Financial Officer (CFO) of the Company for a one year period commencing
September 1, 2004, or for such shorter period as may be mutually agreed by the
Company and the Employee (the "Employment Period'), subject to the terms and
conditions of this Agreement. In his capacity as CFO of the Company, Employee
will be responsible for the general duties associated with his title including,
but not limited to management of the financial affairs, investor relations,
and/or such other management duties on behalf of the Company as may be assigned
to him from time to time by the Chief Executive Officer ("CEO") of the Company.

      The Employee agrees that, during the Employment Period, he will serve the
Company faithfully and to the best of his abilities, devoting substantially all
his time, energy and skill to the activities of the Company and the promotion of
its interests. The Employee agrees not to work for or participate in any
business that competes in any manner with the business of the Company during his
employment with the Company, including after hours, or on weekends, or during
vacation time, even if only organizational assistance or limited consultation is
involved.

2. Compensation and Benefit Plans.

            (a) The Employee shall receive a base salary during the Employment
Period which shall be payable in installments at such times as other employees
are paid but in any case at least monthly as follows: The Employee shall receive
a gross base salary of not less than twelve thousand dollars ($12,000) per month
for his services as CFO. The base salary may be subject to other upward
adjustments as may be recommended by the CEO of the Company to the Board of
Directors of the Company (the "Board") and as shall be approved by the Board and
Compensation Committee.

            (b) The Employee may receive, at the sole discretion of the Board of
Directors of the Company, an Annual Incentive Bonus up to 50% of the total
yearly base compensation for the applicable year (the "Annual Incentive Bonus").
The Annual Incentive Bonus payment will be based upon mutually agreed upon
objectives and levels of performance, if any, and shall otherwise be at the
discretion of the Board of Directors.

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            (c) The Employee shall be eligible to participate in all employee
benefit programs, if any, maintained by the Company, including, but not limited
to, group life insurance, medical, dental, retirement and pension plans, any
deferred compensation profit sharing plans, 401(k) savings plan, and other such
fringe benefits as are or may be available from time to time to senior Employees
of the Company, including without limitation a car allowance of $400 per month.
The Company reserves the right to modify or eliminate such fringe benefits on a
prospective basis, at any time, effective upon 60 days notice to Employee.
During the Employment Period, the Employee shall accrue vacation at the rate of
4 weeks per annum.

            (d) The Company will pay or reimburse the Employee during the
Employment Period for all expenses normally reimbursed by the Company and
reasonably incurred by the Employee in furtherance of his duties hereunder
including but not limited to, expenses of entertainment, travel, meals, hotel
accommodations and the like upon the submission by the Employee of vouchers or
an itemized list thereof and as may be required in order to permit such payments
as proper deductions for the Company under the Internal Revenue Code of 1986 and
the rules and regulations adopted pursuant thereto now or hereafter in effect.
Any and all business expenses exceeding $100.00 shall be pre-approved by the CEO
of the Company.

      3. Stock Options.

            (a) The Employee is hereby granted an option to purchase 300,000
            shares of the Company's common stock with an exercise price of the
            average of the closing bid and asking price ($.038) as of August 31,
            2004. These shares will be fully vested as of September 1, 2004.

            (b) The Company shall grant to the Employee an option to purchase
            125,000 shares of the Company's common stock on August 31, 2005 at
            an exercise price of the average of the closing bid and ask price as
            of August 31, 2005 and fully vested as of August 31, 2005.

            (c) The Company shall grant to the Employee an option to purchase
            125,000 shares of the Company's common stock on September 1, 2006 at
            an exercise price of the average of the closing bid and ask price as
            of August 31, 2006 and fully vested as of August 31, 2006.

      4. Termination of Employment.

            (a) Termination for Cause by Company. The Company may terminate
Employee's employment immediately at any time for good cause, including, but not
limited to: (a) acts or omissions constituting gross negligence, recklessness,
gross misconduct, dishonesty or an act of moral turpitude on the part of
Employee; (b) Employee's material breach of this Agreement or any other
confidentiality agreement between the Company and Employee; (c) Employee's
conviction or entry of a plea of nolo contendere for fraud, misappropriation or
embezzlement, or any felony or crime of moral turpitude; (d) Employee's breach
of fiduciary duty toward the Company; (e) Employee's inability to perform all of
the essential functions and duties of Employee's position, with or without
reasonable accommodation; (f) Employee's death; (g) improper actions taken to
impair the Company's duly held licenses; (h) a determination or request by an
appropriate regulatory authority that the Employee be removed or disqualified
from acting as an officer of the Company; (i) Employee's failure to
satisfactorily perform his duties to the Company, provided that Employee fails
to cure any such failure within 30 days after written notice from the Company of
such failure, provided further, however, that such right to cure shall not apply
to any repetition of the same failure previously cured hereunder; or (j)
Employee's violation of any material rule, regulation or policy of the Company
that may be established and made known to the Company's employees from time to
time. In the event Employee's employment is terminated in accordance with this
subparagraph 4.(a), Employee shall be entitled to receive only the Base Salary
then in effect, prorated to the date of termination, and any benefits and
expense reimbursements to which Employee is entitled by virtue of his prior
employment with the Company through the date of termination (collectively
referred to as "Standard Entitlements."). All other company obligations to
Employee pursuant to this Agreement will become automatically terminated and
completely extinguished. Executive will not be entitled to receive any severance
payment or any part thereof.

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            (b) Termination Without Cause By The Company. If the Employee's
employment is terminated for other than cause by the Company, then the Employee
is entitled to severance payments equal to four (4) months of the then current
base salary payable in a lump sum payment. providing Employee executes a full
general release, releasing all claims, known or unknown, that Employee may have
against the Company arising out of or any way related to Employee's employment
or termination of employment with the Company. In such event, the Employee shall
have the right to continue coverage in accordance with COBRA, at his expense,
under group life insurance, medical, and dental healthcare plans of the Company
by paying the applicable group premium(s) as if the Employee were still
employed.

            (c) Voluntary Resignation By Employee. Employee may voluntarily
resign Employee's position with the Company, at any time, on thirty (30) days
advance written notice. The Company reserves the right, exercisable in its sole
discretion, to pay Employee his Base Salary and the value of other contractual
benefits provided herein, on a pro rata basis in lieu of the required noticed.
In the event of Employee's resignation, Employee will be entitled to receive the
Standard Entitlements to the date of resignation and no other amount for the
remaining term of this Agreement, if any. All other company obligations to
Employee pursuant to this Agreement will become automatically terminated and
completely extinguished. Employee will not be entitled to receive any severance
payment.

            (d) Change of Control. If within six (6) months of a Change in
Control, as that term is defined herein, Employee refuses to accept or
voluntarily resigns from a position other than a Qualified Position, as that
term is defined herein, Employee shall receive severance compensation equal to
twelve (12) months of the then current base salary payable in a lump sum payment
providing Employee executes a full general release, releasing all claims, known
or unknown, that Employee may have against the Company arising out of or any way
related to Employee's employment or termination of employment with the Company.
A "Change in Control" means the acquisition, directly or indirectly, of more

<PAGE>

than 40% of the outstanding shares of any class of voting securities of the
Company by one person or one entity that is not an existing shareholder as of
the date of this Agreement, or a merger, consolidation or sale of all or
substantially all of the assets of the Company, such that the individuals
constituting the Board of the Company immediately prior to such period shall
cease to constitute a majority of the Board, unless the election of each
director who was not a director prior thereto was approved by vote of at least
two-thirds of the directors then in office who were directors prior to such
period. Notwithstanding the foregoing, an acquisition of the requisite
percentage of voting securities in connection with a public offering of
securities by the Company for the primary purpose of providing capital resources
to the Company shall not be considered a "Change in Control" for purposes of
this paragraph. "Qualified Position" is an Employee officer position with the
entity surviving the Change in Control with substantially the same
responsibilities as those held by the Employee on the date of the Change in
Control as determined by the Company's compensation committee in its sole
discretion. Also, notwithstanding the foregoing, if the Company determines that
the amounts payable to Employee under this Agreement, cause such payments to be
treated as excess parachute payments within the meaning of Section 280G of the
Internal Revenue Code, the Company shall reduce the amount payable to Employee
under this Section 4(d) to an amount that will not subject Employee to the
imposition of tax under Section 4999 of the Internal Revenue Code; provided,
however, that this provision shall apply only to payments to be made under this
employment agreement and Employee by the Company.

      5. Trade Secrets of the Company, Patents and Inventions. Employee agrees
to read, sign and abide by the Company's Proprietary Information and Inventions
Agreement which is attached as Exhibit 1 and incorporated herein by reference.

      6. Severability. In the event that any provisions or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.

      7. Assignment. The rights of the Company (but not its obligations) under
this Agreement may, without the consent of the Employee, be assigned by the
Company to any parent, subsidiary, or a successor of the Company; provided that
such parent, subsidiary or successor acknowledges in writing that it is also
bound by the terms and obligations of this Agreement. Except as provided for in
Section 9 hereunder the Employee may not assign all or any of his rights, duties
or obligations hereunder without the prior written consent of the Company.

      8. Survival of Certain Provisions. The covenants and agreements set forth
in Paragraph 5 through 18 of this Agreement shall survive termination of the
Employee's employment and/or this Agreement, and shall remain in full force and
effect regardless of the cause of such termination.

      9. Beneficiaries: References. The Employee shall be entitled to select
(and change) a beneficiary or beneficiaries to receive any accrued compensation
or benefit payable, if any, following the Employee's death, and may change such
election, in either case, by giving the Company written notice thereof. In the
event of the Employee's death or a judicial determination of his incompetence,
reference in this Agreement shall be deemed, where appropriate, to refer to the
Employee's beneficiary, estate, committee, conservator or other legal
representative.

<PAGE>

      10. Notices. All notices, requests, demands and other communications shall
be in writing and shall be defined to have been duly given if delivered or if
mailed by registered mail, postage prepaid;

            (a) If to the Employee, addressed to him at the following address as
may be changed in writing from time to time:

         Lowell Giffhorn
         10875 Kemah Lane
         San Diego, CA 92131

            (b) If to the Company, addressed to:

         CEO
         Patriot Scientific Corporation
         10989 Via Frontera
         San Diego, CA 92127

or to such other address as any party may request by notice given as aforesaid
to the other parties hereto.

      11. Titles and Headings. Titles and headings to paragraphs hereof are for
the purposes of references only and shall in no way limit, define or otherwise
effect the provisions hereof

      12. Governing Law. This Agreement is being executed and delivered and is
intended to be performed in the State of California, and shall be governed by
and construed in accordance with the laws of the State of California.

      13. Agreement to Arbitrate. Employee and Company agree to arbitrate any
controversy, claim or dispute between them arising out of or in any way related
to this Agreement, the employment relationship between them, and any disputes
upon termination of employment in accordance with the Arbitration Agreement
attached hereto as Exhibit "2" and incorporated by this reference as though
fully set forth herein.

      14. Counterparts. This Agreement shall be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one original counterpart.

      15. Entire Agreement. This Agreement, including the Exhibits attached
hereto, contains the entire agreement of the parties hereto and may be modified
or amended only by a written instrument executed by the parties hereto. This
Agreement supersedes any previous oral or written communications,
representations, understandings or agreements with Employer or any officer or
agent thereof through the date the Agreement is executed by the parties.
Employee understands that no representative of the Company has been authorized
to enter into any agreement or commitment with Employee which is inconsistent in
any way with the terms of this Agreement.

<PAGE>

      16. Good Faith. Each of the parties hereto agrees that he or it shall act
in good faith in all actions taken under this Agreement.

      17. Waiver. No waiver of any of the provisions of this Agreement shall be
deemed to be or shall constitute a waiver of any other provision of the
Agreement, whether or not similar, nor shall any waiver constitute a continuing
waiver. No waiver of any provision of this Agreement shall be binding upon the
parties hereto unless it is executed in writing by the party making the waiver.

      18. Interpretation; Construction. The headings set forth in this Agreement
are for convenience only and shall not be used in interpreting this Agreement.
This Agreement has been drafted by legal counsel representing the Company, but
Employee has participated in the negotiation of its terms. Furthermore, Employee
acknowledges that Employee has had an opportunity to have it reviewed by legal
counsel, if desired, and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement.

      IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of
the day and year first above written.

PATRIOT SCIENTIFIC CORPORATION

By: /S/ J.E. WALLIN
    ------------------------
    J.E. Wallin, CEO

Employee:

By: /S/ LOWELL GIFFHORN
    -------------------
    Lowell GiffhornEXHIBIT 4.1

      [FORM OF WARRANTS]

THESE  SECURITIES  HAVE NOT BEEN  REGISTERED  WITH THE  SECURITIES  AND EXCHANGE
COMMISSION  OR THE  SECURITIES  COMMISSION  OF ANY  STATE  IN  RELIANCE  UPON AN
EXEMPTION  FROM  REGISTRATION  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY,  MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE  REGISTRATION  STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN  AVAILABLE   EXEMPTION  FROM,  OR  IN  A  TRANSACTION  NOT  SUBJECT  TO,  THE
REGISTRATION   REQUIREMENTS  OF  THE  SECURITIES  ACT  AND  IN  ACCORDANCE  WITH
APPLICABLE  STATE  SECURITIES  LAWS.   NOTWITHSTANDING   THE  FOREGOING,   THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

                          CADENCE RESOURCES CORPORATION

                        WARRANT TO PURCHASE COMMON STOCK

Warrant No.:
Number of Shares: _____________
Date of Issuance: January 31, 2005 (the "ISSUANCE DATE")

Cadence  Resources  Corporation,  a Utah  corporation  (the  "COMPANY"),  hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby  acknowledged,  ____________________,  the registered holder
hereof or its  permitted  assigns (the  "HOLDER"),  is entitled,  subject to the
terms set forth below,  to purchase from the Company,  at the Exercise Price (as
defined below) then in effect, upon surrender of this Warrant to Purchase Common
Stock  (including  all  Warrants to Purchase  Common  Stock  issued in exchange,
transfer or replacement hereof, the "WARRANT"), at any time or times on or after
the date hereof, but not after 11:59 P.M., New York Time, on the Expiration Date
(as defined  below),  ______________  (_____________)  fully paid  nonassessable
shares of Common  Stock (as defined  below) (the  "WARRANT  SHARES").  Except as
otherwise  defined  herein,  capitalized  terms in this  Warrant  shall have the
meanings  set forth in  Section  15.  This  Warrant  is one of the  Warrants  to
Purchase Common Stock (the "SPA WARRANTS")  issued pursuant to Section 1 of that
certain  Securities  Purchase  Agreement,  dated as of  January  31,  2005  (the
"SUBSCRIPTION  DATE"),  among the Company and the purchasers (the  "PURCHASERS")
referred to therein (the "SECURITIES PURCHASE AGREEMENT").

<PAGE>

      1. EXERCISE OF WARRANT.

            (a)  Mechanics  of  Exercise.  Subject  to the terms and  conditions
hereof  (including,  without  limitation,  the  limitations set forth in Section
1(f)),  this  Warrant may be  exercised by the Holder on any day, in whole or in
part,  by (i)  delivery  of a written  notice,  in the form  attached  hereto as
Exhibit A (the  "EXERCISE  NOTICE"),  of the Holder's  election to exercise this
Warrant and (ii) (A) payment to the Company of an amount equal to the applicable
Exercise  Price  multiplied  by the  number of  Warrant  Shares as to which this
Warrant is being  exercised  (the  "AGGREGATE  EXERCISE  PRICE") in cash or wire
transfer of  immediately  available  funds or (B) by notifying  the Company that
this Warrant is being exercised  pursuant to a Cashless  Exercise (as defined in
Section 1(d)).  The Holder shall not be required to deliver the original Warrant
in order to effect an  exercise  hereunder;  provided  however,  that the Holder
shall covenant in the Exercise Notice, that it will deliver the original Warrant
to the Company  within five (5) Business  Days of such  exercise.  Execution and
delivery of the  Exercise  Notice  with  respect to less than all of the Warrant
Shares shall have the same effect as  cancellation  of the original  Warrant and
issuance of a new Warrant  evidencing the right to purchase the remaining number
of Warrant  Shares.  On or before the first  Business Day  following the date on
which the Company has  received  each of the Exercise  Notice and the  Aggregate
Exercise  Price (or  notice of a  Cashless  Exercise)  (the  "EXERCISE  DELIVERY
DOCUMENTS"),  the Company  shall  transmit by  facsimile  an  acknowledgment  of
confirmation of receipt of the Exercise Delivery Documents to the Holder and the
Company's transfer agent (the "TRANSFER AGENT"). On or before the third Business
Day  following  the date on which the Company has  received  all of the Exercise
Delivery  Documents (the "SHARE DELIVERY DATE"),  the Company shall (X) provided
that the Transfer Agent is participating in The Depository Trust Company ("DTC")
Fast  Automated  Securities  Transfer  Program,  upon the request of the Holder,
credit such  aggregate  number of shares of Common  Stock to which the Holder is
entitled  pursuant to such  exercise to the Holder's or its  designee's  balance
account with DTC through its Deposit  Withdrawal Agent Commission system, or (Y)
if the Transfer Agent is not participating in the DTC Fast Automated  Securities
Transfer  Program,  issue and  dispatch by  overnight  courier to the address as
specified in the Exercise Notice,  a certificate,  registered in the name of the
Holder or its  designee,  for the number of shares of Common  Stock to which the
Holder is entitled  pursuant to such  exercise.  Upon  delivery of the  Exercise
Notice and  Aggregate  Exercise  Price  referred to in clause  (ii)(A)  above or
notification to the Company of a Cashless  Exercise referred to in Section 1(d),
the Holder shall be deemed for all corporate  purposes to have become the holder
of record of the  Warrant  Shares  with  respect to which this  Warrant has been
exercised,  irrespective of the date of delivery of the certificates  evidencing
such  Warrant  Shares.  If this  Warrant is  submitted  in  connection  with any
exercise  pursuant  to this  Section  1(a)  and the  number  of  Warrant  Shares
represented by this Warrant submitted for exercise is greater than the number of
Warrant Shares being  acquired upon an exercise,  then the Company shall as soon
as practicable and in no event later than three Business Days after any exercise
and at its own expense,  issue a new Warrant (in  accordance  with Section 7(d))
representing  the right to  purchase  the number of Warrant  Shares  purchasable
immediately  prior to such  exercise  under  this  Warrant,  less the  number of
Warrant  Shares with respect to which this Warrant is  exercised.  No fractional
shares of Common Stock are to be issued upon the exercise of this  Warrant,  but
rather the number of shares of Common  Stock to be issued shall be rounded up to
the nearest  whole number.  The Company  shall pay any and all taxes,  including
without limitation,  all documentary stamp,  transfer or similar taxes, or other
incidental expense that may be payable with respect to the issuance and delivery
of Warrant Shares upon exercise of this Warrant.

<PAGE>

            (b) Exercise Price.  For purposes of this Warrant,  "EXERCISE PRICE"
means $1.75 per share, subject to adjustment as provided herein.

            (c) Company's Failure to Timely Deliver Securities.  (i) In addition
to any other rights  available to a Holder,  if the Company  fails to deliver or
cause to be delivered to the Holder a certificate representing Warrant Shares by
the  Business  Day  after  the date on which  delivery  of such  certificate  is
required  by this  Warrant,  and if on or after  such  Business  Day the  Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in  satisfaction  of a sale by the Holder of the Warrant Shares that the
Holder  anticipated  receiving  from the Company (a "BUY-IN"),  then the Company
shall, within three Business Days after the Holder's request and in the Holder's
discretion, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased  (the "BUY-IN  PRICE"),  at which point the  Company's
obligation  to deliver such  certificate  (and to issue such Common Stock) shall
terminate,  or (ii)  promptly  honor its  obligation  to deliver to the Holder a
certificate or certificates  representing  such Common Stock and pay cash to the
Holder in an amount  equal to the excess  (if any) of the Buy-In  Price over the
product of (A) such number of shares of Common Stock, times (B) the Closing Sale
Price on the Exercise Date.

      (ii)  Subject to Section  1(f) and if the  provisions  of clause (i) above
      shall not apply, if the Company shall fail for any reason or for no reason
      to issue to the Holder within seven  Business Days of the Exercise Date, a
      certificate  for the number of shares of Common  Stock to which the Holder
      is entitled or to credit the  Holder's  balance  account with DTC for such
      number of shares of Common Stock to which the Holder is entitled  upon the
      Holder's  exercise of this  Warrant,  the Company  shall pay as additional
      damages in cash to such Holder on each day after such tenth  Business  Day
      that the  issuance of such Common  Stock is not timely  effected an amount
      equal to 1.0% of the  product  of (A) the sum of the  number  of shares of
      Common  Stock not issued to the Holder on a timely  basis and to which the
      Holder is entitled  and (B) the Closing  Sale Price of the Common Stock on
      the trading day  immediately  preceding  the last  possible date which the
      Company  could  have  issued  such  Common  Stock  to the  Holder  without
      violating Section 1(a).

            (d) Cashless Exercise.  Notwithstanding anything contained herein to
the contrary,  the Holder may, in its sole discretion,  exercise this Warrant in
whole or in part and, in lieu of making the cash payment otherwise  contemplated
to be made to the  Company  upon  such  exercise  in  payment  of the  Aggregate
Exercise Price,  elect instead to receive upon such exercise the "Net Number" of
shares  of  Common  Stock  determined  according  to the  following  formula  (a
"CASHLESS EXERCISE"):

         Net Number = (A x B) - (A x C)
                                       B
                  For purposes of the foregoing formula:

                           A= the total number of shares with respect to which
                           this Warrant is then being exercised.

<PAGE>

                           B= the Closing Sale Price of the Common Stock (as
                           reported by Bloomberg) on the date immediately
                           preceding the date of the Exercise Notice.

                                            C= the Exercise Price then in effect
                           for the applicable Warrant Shares at the time of such
                           exercise.

            (e) Disputes.  In the case of a dispute as to the  determination  of
the Exercise Price or the  arithmetic  calculation  of the Warrant  Shares,  the
Company shall promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section 12.

            (f)  Limitations  on  Exercises.  The  Company  shall not effect the
exercise of this  Warrant,  and no Holder shall have the right to exercise  this
Warrant,  to the extent that after giving effect to such  exercise,  such Person
(together with such Person's  affiliates)  would  beneficially  own in excess of
4.99% (the "MAXIMUM  Percentage") of the shares of the Common Stock  outstanding
immediately after giving effect to such exercise.  For purposes of the foregoing
sentence,  the aggregate number of shares of Common Stock  beneficially owned by
such  Person and its  affiliates  shall  include  the number of shares of Common
Stock  issuable  upon  exercise  of this  Warrant  with  respect  to  which  the
determination of such sentence is being made, but shall exclude shares of Common
Stock which would be issuable  upon (i) exercise of the  remaining,  unexercised
portion of this Warrant beneficially owned by such Person and its affiliates and
(ii) exercise or conversion of the  unexercised  or  unconverted  portion of any
other  securities  of the  Company  beneficially  owned by such  Person  and its
affiliates (including, without limitation, any debentures,  convertible notes or
convertible  preferred stock or warrants)  subject to a limitation on conversion
or exercise analogous to the limitation contained herein. Except as set forth in
the preceding  sentence,  for purposes of this paragraph,  beneficial  ownership
shall be calculated in accordance with Section 13(d) of the Securities  Exchange
Act of 1934, as amended (the "EXCHANGE ACT").  For purposes of this Warrant,  in
determining  the number of  outstanding  shares of Common Stock,  the Holder may
rely on the number of outstanding shares of Common Stock as reflected in (1) the
Company's  most  recent  Form 10-Q,  Form 10-K or other  public  filing with the
Securities and Exchange Commission, as the case may be, (2) a more recent public
announcement  by the  Company  or (3) any  other  notice by the  Company  or its
Transfer  Agent setting forth the number of shares of Common Stock  outstanding.
For any reason at any time, upon the written or oral request of the Holder,  the
Company  shall  within one  Business  Day  confirm  orally and in writing to the
Holder the number of shares of Common Stock then  outstanding.  In any case, the
number of  outstanding  shares of Common Stock shall be determined  after giving
effect to the conversion or exercise of securities of the Company, including the
SPA Warrants,  by the Holder and its affiliates  since the date as of which such
number of outstanding shares of Common Stock was reported.  By written notice to
the Company,  the Holder may increase or decrease the Maximum  Percentage to any
other  percentage  not in excess of 19.99%  specified in such notice;  provided,
that any such  increase  will not be  effective  until the 61st day  after  such
notice is delivered to the Company,  and (ii) any such increase or decrease will
apply only to the Holder and not to any other holder of Warrants.

<PAGE>

            (g) No Fractional  Shares or Scrip.  No  fractional  shares or scrip
representing  fractional  shares  shall  be  issued  upon the  exercise  of this
Warrant.  In lieu of any fractional share to which the Holder would otherwise be
entitled,  the Company  shall make a cash payment equal to the fair market value
of such fractional share.

            (h) Forced Exercise By Company.

      (i)  Notwithstanding  the  foregoing,  if at any time  from and  after the
      twelve month  anniversary  of the Issuance  Date, the Conditions to Forced
      Exercise (as defined  below) shall have been  satisfied on each day during
      the period commencing on the Forced Exercise Notice Date and ending on the
      Forced Exercise Date (each, as defined below),  the Company shall have the
      right,  subject to the  limitation  in Section 2(f) above,  to require the
      Holder to exercise all or a portion of this Warrant,  as designated in the
      Forced  Exercise  Notice  (as  defined  below)  into  Common  Stock at the
      Exercise  Price as of the  Forced  Exercise  Date (as  defined  below)  (a
      "FORCED EXERCISE"). The Company may exercise its right to require exercise
      under this Section 2(h) by delivering within not more than two (2) Trading
      Days  following  the end of the  applicable  Measuring  Period (as defined
      below) a written notice thereof by facsimile and overnight courier to all,
      but not less than all, of the holders of the SPA Warrants and the Transfer
      Agent  (the  "FORCED  EXERCISE  NOTICE"  and the date  all of the  holders
      received  such notice by facsimile is referred to as the "FORCED  EXERCISE
      NOTICE  DATE").  The Forced  Exercise  Notice  shall be  irrevocable.  The
      Company  shall  make a public  announcement  with  respect  to the  Forced
      Exercise  Notice on the Forced  Exercise  Notice Date. The Forced Exercise
      Notice shall state (i) the Business Day selected for the Forced  Exercise,
      which  Business  Day shall be at least twenty (20)  Business  Days but not
      more than forty (40) Business Days  following the Forced  Exercise  Notice
      Date (the  "FORCED  EXERCISE  DATE"),  and (ii) the number of Warrants for
      which such Forced  Exercise shall be applicable.  Upon a Forced  Exercise,
      the Holder shall be deemed to have delivered an Exercise  Notice  pursuant
      to Section 1(a) on the Forced Exercise Notice Date.

      (ii) If the  Company  elects to cause a Forced  Exercise of any portion of
      this Warrant pursuant to Section 2(h)(i), then it must simultaneously take
      the same  action  in the same  proportion  with  respect  to the other SPA
      Warrants which provide for the Company's  right to a Forced  Exercise.  If
      the Company has elected a Forced  Exercise,  the mechanics of exercise set
      forth in Section 1(a) shall  apply,  to the extent  applicable,  as if the
      Company had received  from the Holder on the Forced  Exercise  Notice Date
      the Exercise Notice.

      (iii) For purposes of this Section 2(h), the following  definitions  shall
      apply:

<PAGE>

            (1)  "CONDITIONS  TO  FORCED  EXERCISE  "  means  that  each  of the
      following  conditions have been met: (i) the Weighted Average Price of the
      shares  of  Common  Stock  exceeds  286% of the  Exercise  Price as of the
      Issuance Date  (approximately  $5.00 per share,  as of the Issuance  Date)
      (subject to appropriate  adjustments  for stock splits,  stock  dividends,
      stock combinations and other similar transactions after the Issuance Date)
      for each of any twenty (20)  consecutive  Trading Days prior to the Forced
      Exercise  Date;  (ii) on each day during the  period  beginning  three (3)
      months prior to the  applicable  Forced  Exercise Date (such  period,  the
      "MEASURING PERIOD"), either (x) a Registration Statement filed pursuant to
      the Securities Purchase Agreement shall be effective and available for the
      resale of all remaining  Registrable  Securities  in  accordance  with the
      terms of the  Securities  Purchase  Agreement  or (y) all shares of Common
      Stock issuable upon  conversion of the Warrants shall be eligible for sale
      under Rule  144(k);  (iii) on each day during the  Measuring  Period,  the
      Common Stock is designated for quotation on the Principal Market and shall
      not have been  suspended  from trading on such  exchange or market  (other
      than  suspensions of not more than one (1) day and occurring  prior to the
      applicable  date of  determination  due to business  announcements  by the
      Company) nor shall delisting or suspension by such exchange or market been
      threatened or pending  either (A) in writing by such exchange or market or
      (B) by falling below the minimum listing maintenance  requirements of such
      exchange or market;  (iv) during the Measuring Period there shall not have
      occurred  the public  announcement  of a  pending,  proposed  or  intended
      Organic Change which has not been  abandoned,  terminated or  consummated;
      (v) the Company  shall have no  knowledge of any fact that would cause any
      one of the following:  (x) a Registration  Statements required pursuant to
      the  Securities  Purchase  Agreement not to be effective and available for
      the resale of all remaining Registrable  Securities in accordance with the
      terms of the  Securities  Purchase  Agreement  or (y) any shares of Common
      Stock  issuable  upon exercise of the Warrants not to be eligible for sale
      without  restriction  pursuant  to Rule  144(k) and any  applicable  state
      securities  laws;  and (vi)  the  Company  otherwise  shall  have  been in
      material  compliance  with and  shall  not have  materially  breached  any
      provision,  covenant,   representation  or  warranty  of  any  Transaction
      Document (as defined in the Securities Purchase Agreement).

            (2) "WEIGHTED AVERAGE PRICE" means, for any security as of any date,
      the  dollar  volume-weighted  average  price  for  such  security  on  the
      Principal  Market during the period  beginning at 9:30:01  a.m.,  New York
      Time (or such other time as the Principal Market publicly announces is the
      official open of trading),  and ending at 4:00:00 p.m.,  New York Time (or
      such other time as the Principal Market publicly announces is the official
      close of trading) as reported by  Bloomberg  through its "Volume at Price"
      functions, or, if the foregoing does not apply, the dollar volume-weighted
      average  price of such  security  in the  over-the-counter  market  on the
      electronic bulletin board for such security during the period beginning at
      9:30:01  a.m.,  New York Time (or such other time as such market  publicly
      announces is the official  open of trading),  and ending at 4:00:00  p.m.,
      New York Time (or such other time as such market publicly announces is the
      official  close of trading) as  reported  by  Bloomberg,  or, if no dollar
      volume-weighted  average  price is reported for such security by Bloomberg
      for such  hours,  the  average of the  highest  closing  bid price and the
      lowest  closing ask price of any of the market makers for such security as
      reported in the "pink  sheets" by Pink Sheets LLC  (formerly  the National
      Quotation  Bureau,   Inc.).  If  the  Weighted  Average  Price  cannot  be
      calculated  for a security on a  particular  date on any of the  foregoing
      bases,  the Weighted  Average Price of such security on such date shall be
      the fair  market  value as  mutually  determined  by the  Company  and the
      Holder.  If the  Company  and the Holder are unable to agree upon the fair
      market  value of such  security,  then  such  dispute  shall  be  resolved
      pursuant  to  Section  12.  All such  determinations  to be  appropriately
      adjusted for any stock dividend,  stock split,  stock combination or other
      similar transaction during the applicable calculation period.

<PAGE>

            (i) Compliance with Securities Laws.

      (i) The Holder of this Warrant,  by acceptance  hereof,  acknowledges that
      this  Warrant and the Common Stock to be issued upon  exercise  hereof are
      being  acquired  solely for the  Holder's own account and not as a nominee
      for any other  party;  and for  investment,  and that the Holder  will not
      offer, sell or otherwise dispose of this Warrant or any Common Stock to be
      issued upon  exercise  hereof  except  under  circumstances  that will not
      result in a violation of the Securities Act or any state  securities laws.
      Upon  exercise of this  Warrant,  the Holder  shall,  if  requested by the
      Company,  confirm in writing, in a form satisfactory to the Company,  that
      the Common Stock so purchased are being  acquired  solely for the Holder's
      own account and not as a nominee for any other party, for investment,  and
      not with a view toward distribution or resale.

      (ii) This Warrant and all Common Stock issued upon exercise  hereof unless
      registered  under the  Securities Act shall be stamped or imprinted with a
      legend in  substantially  the  following  form (in  addition to any legend
      required by state securities laws):

      THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
      COMMISSION OR THE  SECURITIES  COMMISSION OF ANY STATE IN RELIANCE UPON AN
      EXEMPTION FROM  REGISTRATION  UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE  "SECURITIES  ACT"),  AND,  ACCORDINGLY,  MAY NOT BE  OFFERED OR SOLD
      EXCEPT  PURSUANT  TO  AN  EFFECTIVE   REGISTRATION   STATEMENT  UNDER  THE
      SECURITIES  ACT  OR  PURSUANT  TO AN  AVAILABLE  EXEMPTION  FROM,  OR IN A
      TRANSACTION  NOT  SUBJECT  TO,  THE   REGISTRATION   REQUIREMENTS  OF  THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE  STATE  SECURITIES  LAWS.
      NOTWITHSTANDING  THE  FOREGOING,   THESE  SECURITIES  MAY  BE  PLEDGED  IN
      CONNECTION  WITH A BONA FIDE  MARGIN  ACCOUNT OR OTHER  LOAN OR  FINANCING
      ARRANGEMENT SECURED BY SUCH SECURITIES.

      2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise
Price and the number of Warrant  Shares  shall be adjusted  from time to time as
follows:

            (a) Adjustment  upon Issuance of Common Stock. If and whenever on or
after the date of issuance of this  Warrant the Company  issues or sells,  or in
accordance  with this Section 2 is deemed to have issued or sold,  any shares of
Common Stock  (including the issuance or sale of shares of Common Stock owned or
held by or for the account of the Company, but excluding Excluded Securities (as
defined below) for a consideration  per share less than a price (the "APPLICABLE
PRICE") equal to the Exercise Price in effect immediately prior to such issue or
sale or deemed issuance or sale (the  foregoing,  a "DILUTIVE  ISSUANCE"),  then
immediately after such Dilutive Issuance the Exercise Price then in effect shall
be reduced to an amount equal to the Applicable Price. Upon each such adjustment
of the Exercise Price hereunder,  the number of Warrant Shares shall be adjusted
to the number of shares of Common Stock  determined by multiplying  the Exercise
Price in effect  immediately  prior to such  adjustment by the number of Warrant
Shares  acquirable  upon  exercise  of this  Warrant  immediately  prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.  For purposes of determining the adjusted  Exercise Price under
this Section 2(a), the following shall be applicable:

<PAGE>

      (i) Issuance of Options.  If the Company in any manner  grants any Options
      and the  lowest  price per  share  for which one share of Common  Stock is
      issuable upon the exercise of any such Option or upon conversion, exercise
      or exchange of any  Convertible  Securities  issuable upon exercise of any
      such Option is less than the Applicable  Price,  then such share of Common
      Stock shall be deemed to be  outstanding  and to have been issued and sold
      by the Company at the time of the granting or sale of such Option for such
      price per share. For purposes of this Section  2(a)(i),  the "lowest price
      per share for which one share of Common Stock is issuable upon exercise of
      such Options or upon conversion,  exercise or exchange of such Convertible
      Securities"   shall  be  equal  to  the  sum  of  the  lowest  amounts  of
      consideration  (if any) received or receivable by the Company with respect
      to any one share of Common  Stock upon the granting or sale of the Option,
      upon exercise of the Option and upon  conversion,  exercise or exchange of
      any Convertible Security issuable upon exercise of such Option. No further
      adjustment of the Exercise Price or number of Warrant Shares shall be made
      upon the  actual  issuance  of such  Common  Stock or of such  Convertible
      Securities  upon the exercise of such Options or upon the actual  issuance
      of such  Common  Stock  upon  conversion,  exercise  or  exchange  of such
      Convertible Securities.

      (ii)  Issuance  of  Convertible  Securities.  If the Company in any manner
      issues or sells any Convertible  Securities and the lowest price per share
      for  which  one share of Common  Stock is  issuable  upon the  conversion,
      exercise or exchange thereof is less than the Applicable  Price, then such
      share of Common Stock shall be deemed to be  outstanding  and to have been
      issued and sold by the Company at the time of the issuance or sale of such
      Convertible  Securities for such price per share. For the purposes of this
      Section  2(a)(ii),  the  "lowest  price  per  share for which one share of
      Common Stock is issuable upon the conversion,  exercise or exchange" shall
      be  equal  to the sum of the  lowest  amounts  of  consideration  (if any)
      received or  receivable by the Company with respect to one share of Common
      Stock  upon the  issuance  or sale of the  Convertible  Security  and upon
      conversion,  exercise or exchange of such Convertible Security. No further
      adjustment of the Exercise Price or number of Warrant Shares shall be made
      upon the actual issuance of such Common Stock upon conversion, exercise or
      exchange of such Convertible Securities,  and if any such issue or sale of
      such Convertible Securities is made upon exercise of any Options for which
      adjustment  of this  Warrant  has been or is to be made  pursuant to other
      provisions  of this Section  2(a),  no further  adjustment of the Exercise
      Price or number of Warrant Shares shall be made by reason of such issue or
      sale.

<PAGE>

      (iii) Change in Option Price or Rate of Conversion.  If the purchase price
      provided for in any Options, the additional consideration, if any, payable
      upon the  issue,  conversion,  exercise  or  exchange  of any  Convertible
      Securities,   or  the  rate  at  which  any  Convertible   Securities  are
      convertible into or exercisable or exchangeable for Common Stock increases
      or  decreases at any time,  the  Exercise  Price and the number of Warrant
      Shares  in  effect  at the  time of such  increase  or  decrease  shall be
      adjusted  to the  Exercise  Price and the number of Warrant  Shares  which
      would  have been in effect at such time had such  Options  or  Convertible
      Securities  provided  for such  increased  or  decreased  purchase  price,
      additional consideration or increased or decreased conversion rate, as the
      case may be, at the time initially  granted,  issued or sold. For purposes
      of this  Section  2(a)(iii),  if the terms of any  Option  or  Convertible
      Security that was  outstanding  as of the date of issuance of this Warrant
      are  increased  or decreased  in the manner  described in the  immediately
      preceding  sentence,  then such  Option or  Convertible  Security  and the
      Common Stock deemed issuable upon exercise, conversion or exchange thereof
      shall be  deemed to have been  issued as of the date of such  increase  or
      decrease.  No  adjustment  pursuant to this  Section 2(a) shall be made if
      such adjustment  would result in an increase of the Exercise Price then in
      effect or a decrease in the number of Warrant Shares.

      (iv) Calculation of Consideration  Received.  In case any Option is issued
      in connection  with the issue or sale of other  securities of the Company,
      together  comprising  one  integrated  transaction  in which  no  specific
      consideration  is allocated to such  Options by the parties  thereto,  the
      Options will be deemed to have been issued for a  consideration  of $0.01.
      If any Common Stock, Options or Convertible  Securities are issued or sold
      or deemed to have been issued or sold for cash, the consideration received
      therefor  will be  deemed to be the net  amount  received  by the  Company
      therefor.  If any Common  Stock,  Options or  Convertible  Securities  are
      issued or sold for a  consideration  other than  cash,  the amount of such
      consideration  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
      Closing Sale Price of such security on the date of receipt.  If any Common
      Stock,  Options or Convertible  Securities are issued to the owners of the
      non-surviving entity in connection with any merger in which the Company is
      the surviving entity, 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  entity 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 jointly by
      the  Company  and the  holders  of SPA  Warrants  representing  at least a
      majority of the shares of Common Stock obtainable upon exercise of the SPA
      Warrants then  outstanding.  If such parties are unable to reach agreement
      within 10 days after the occurrence of an event  requiring  valuation (the
      "VALUATION  EVENT"),   the  fair  value  of  such  consideration  will  be
      determined  within fifteen Business Days after the tenth day following the
      Valuation Event by an independent, reputable appraiser jointly selected by
      the  Company  and the  holders  of SPA  Warrants  representing  at least a
      majority of the shares of Common Stock obtainable upon exercise of the SPA
      Warrants then  outstanding.  The  determination of such appraiser shall be
      final and binding upon all parties absent  manifest error and the fees and
      expenses of such appraiser shall be borne by the Company.

<PAGE>

      (v) Record  Date.  If the Company  takes a record of the holders of Common
      Stock for the purpose of entitling them (A) to receive a dividend or other
      distribution payable in Common Stock, Options or in Convertible Securities
      or (B) to subscribe for or purchase  Common Stock,  Options or Convertible
      Securities,  then  such  record  date will be deemed to be the date of the
      issue or sale of the shares of Common  Stock deemed to have been issued or
      sold upon the  declaration  of such  dividend  or the making of such other
      distribution  or the date of the granting of such right of subscription or
      purchase, as the case may be.

            (b) Adjustment  upon  Subdivision or Combination of Common Stock. If
the Company at any time after the  Subscription  Date  subdivides  (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the Exercise
Price in effect  immediately  prior to such subdivision will be  proportionately
reduced and the number of Warrant Shares will be proportionately  increased.  If
the  Company  at any  time  on or  after  the  Subscription  Date  combines  (by
combination,  reverse  stock  split or  otherwise)  one or more  classes  of its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect  immediately  prior to such combination will be  proportionately
increased and the number of Warrant  Shares will be  proportionately  decreased.
Any  adjustment  under this Section 2(b) shall become  effective at the close of
business on the date the subdivision or combination becomes effective.

            (c) Other Events.  If any event occurs of the type  contemplated  by
the  provisions  of  this  Section  2 but  not  expressly  provided  for by such
provisions  (including,  without limitation,  the granting of stock appreciation
rights,  phantom  stock rights or other rights with equity  features),  then the
Company's Board of Directors will make an appropriate adjustment in the Exercise
Price  and the  number of  Warrant  Shares so as to  protect  the  rights of the
Holder;  provided  that no such  adjustment  pursuant to this  Section 2(c) will
increase  the  Exercise  Price or  decrease  the  number  of  Warrant  Shares as
otherwise determined pursuant to this Section 2.

      3. RIGHTS UPON  DISTRIBUTION  OF ASSETS.  If the Company  shall declare or
make any dividend or other  distribution of its assets (or rights to acquire its
assets)  to holders of Common  Stock,  by way of return of capital or  otherwise
(including,  without  limitation,  any  distribution  of  cash,  stock  or other
securities,   property   or   options   by  way  of  a   dividend,   spin   off,
reclassification,  corporate  rearrangement  or other  similar  transaction)  (a
"DISTRIBUTION"),  at any time after the issuance of this Warrant,  then, in each
such case:

            (a) any Exercise Price in effect  immediately  prior to the close of
business  on the record  date fixed for the  determination  of holders of Common
Stock entitled to receive the Distribution shall be reduced, effective as of the
close of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid
Price of the Common Stock on the trading day  immediately  preceding such record
date minus the value of the  Distribution  (as  determined  in good faith by the
Company's Board of Directors)  applicable to one share of Common Stock, and (ii)
the  denominator  shall be the  Closing  Bid  Price of the  Common  Stock on the
trading day immediately preceding such record date; and

<PAGE>

            (b) the number of Warrant  Shares  shall be increased to a number of
shares  equal to the  number of shares of Common  Stock  obtainable  immediately
prior to the close of business on the record date fixed for the determination of
holders of Common Stock entitled to receive the  Distribution  multiplied by the
reciprocal of the fraction set forth in the immediately preceding paragraph (a);
provided  that in the event that the  Distribution  is of common  stock  ("OTHER
COMMON  STOCK")  of a  company  whose  common  stock  is  traded  on a  national
securities  exchange or a national automated  quotation system,  then the Holder
may elect to  receive a warrant to  purchase  Other  Common  Stock in lieu of an
increase in the number of Warrant Shares,  the terms of which shall be identical
to those of this Warrant, except that such warrant shall be exercisable into the
number of shares of Other  Common  Stock  that  would  have been  payable to the
Holder  pursuant  to the  Distribution  had the Holder  exercised  this  Warrant
immediately prior to such record date and with an aggregate exercise price equal
to the  product of the amount by which the  exercise  price of this  Warrant was
decreased  with  respect  to  the  Distribution  pursuant  to the  terms  of the
immediately  preceding paragraph (a) and the number of Warrant Shares calculated
in accordance with the first part of this paragraph (b).

      4. PURCHASE RIGHTS; ORGANIC CHANGE.

            (a)  Purchase  Rights.  In addition to any  adjustments  pursuant to
Section 2 above, if at any time the Company grants, issues or sells any Options,
Convertible  Securities  or rights to purchase  stock,  warrants,  securities or
other  property pro rata to the record holders of any class of Common Stock (the
"PURCHASE RIGHTS"),  then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase  Rights,  the  aggregate  Purchase  Rights which the
Holder  could  have  acquired  if such  holder  had held the number of shares of
Common Stock  acquirable upon complete  exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant)  immediately before the date
on which a record  is taken for the  grant,  issuance  or sale of such  Purchase
Rights,  or, if no such record is taken, the date as of which the record holders
of  Common  Stock  are to be  determined  for the  grant,  issue or sale of such
Purchase Rights.

<PAGE>

            (b)   Organic   Change.   Any   recapitalization,    reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets to another Person or other  transaction,  in each case which is
effected  in such a way that  holders of Common  Stock are  entitled  to receive
securities or assets with respect to or in exchange for Common Stock is referred
to herein as an "ORGANIC  CHANGE." Prior to the  consummation of any (i) sale of
all or substantially  all of the Company's assets to an acquiring Person or (ii)
other Organic Change following which the Company is not a surviving entity,  the
Company will secure from the Person purchasing such assets or the Person issuing
the securities or providing the assets in such Organic Change (in each case, the
"ACQUIRING  ENTITY")  a  written  agreement  (in form and  substance  reasonably
satisfactory to the holders of SPA Warrants  representing at least a majority of
the shares of Common Stock  obtainable  upon  exercise of the SPA Warrants  then
outstanding)  to deliver to the Holder in exchange for this Warrant,  a security
of the Acquiring Entity evidenced by a written instrument  substantially similar
in form and substance to this Warrant and reasonably  satisfactory to the holder
of this Warrant (including an adjusted exercise price equal to the value for the
Common Stock reflected by the terms of such  consolidation,  merger or sale, and
exercisable for a corresponding  number of shares of Common Stock acquirable and
receivable  upon exercise of this Warrant  (without regard to any limitations on
the  exercise  of this  Warrant),  if the  value so  reflected  is less than the
Exercise  Price in effect  immediately  prior to such  consolidation,  merger or
sale).  In the  event  that  an  Acquiring  Entity  is  directly  or  indirectly
controlled by a company or entity whose common stock or similar equity  interest
is listed,  designated or quoted on a securities exchange or trading market, the
Holder may elect to treat such Person as the  Acquiring  Entity for  purposes of
this Section 4(b).  Notwithstanding the foregoing and except with respect to the
Organic Change contemplated by the Merger (as defined in the Securities Purchase
Agreement),  at the Holder's  option and  request,  the  Acquiring  Entity shall
purchase  the  Warrant  from such Holder for a purchase  price,  payable in cash
within five  Business  Days after such request (or, if later,  on the  effective
date of the Organic  Change),  equal to the Black Scholes value of the remaining
unexercised  portion of this Warrant on the date of such  request.  The terms of
any agreement pursuant to which a Organic Change is effected shall include terms
requiring any such  successor or surviving  entity to comply with the provisions
of this  Section 4(b) and  insuring  that the Warrants (or any such  replacement
security) will be similarly adjusted upon any subsequent  transaction  analogous
to an Organic Change. Prior to the consummation of any other Organic Change, the
Company  shall make  appropriate  provision  (in form and  substance  reasonably
satisfactory to the holders of SPA Warrants  representing at least a majority of
the shares of Common Stock  obtainable  upon  exercise of the SPA Warrants  then
outstanding) to insure that the Holder thereafter will have the right to acquire
and  receive  in lieu of or in  addition  to (as the case may be) the  shares of
Common Stock immediately theretofore acquirable and receivable upon the exercise
of this  Warrant  (without  regard to any  limitations  on the  exercise of this
Warrant), such shares of stock, securities or assets that would have been issued
or payable in such Organic  Change with respect to or in exchange for the number
of shares of Common Stock which would have been  acquirable and receivable  upon
the  exercise of this  Warrant as of the date of such  Organic  Change  (without
regard to any limitations on the exercise of this Warrant).

      5.  NONCIRCUMVENTION.  The Company  hereby  covenants  and agrees that the
Company will not, by amendment of its  Certificate of  Incorporation  or through
any  reorganization,  transfer of assets,  consolidation,  merger,  dissolution,
issue or sale of securities,  or any other  voluntary  action,  avoid or seek to
avoid the  observance or  performance  of any of the terms of this Warrant,  and
will at all times in good faith carry out all the provisions of this Warrant and
take all action as may be required to protect the rights of the Holder.  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, (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, and (iii) will, so long as any of the SPA Warrants are
outstanding,  take all action necessary to reserve and keep available out of its
authorized  and unissued  Common Stock,  solely for the purpose of effecting the
exercise of the SPA  Warrants,  125% of the number of shares of Common  Stock as
shall from time to time be  necessary to effect the exercise of the SPA Warrants
then outstanding (without regard to any limitations on exercise).

<PAGE>

      6.  WARRANT  HOLDER  NOT  DEEMED  A   STOCKHOLDER.   Except  as  otherwise
specifically  provided herein, the Holder, solely in such Person's capacity as a
holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of shares of the Company for any purpose,  nor shall  anything
contained in this Warrant be construed to confer upon the Holder, solely in such
Person's  capacity  as the  Holder,  any of the rights of a  shareholder  of the
Company or any right to vote, give or withhold  consent to any corporate  action
(whether  any  reorganization,   issue  of  stock,  reclassification  of  stock,
consolidation,  merger,  conveyance or  otherwise),  receive notice of meetings,
receive dividends or subscription rights, or otherwise, prior to the issuance to
the Holder of the Warrant  Shares which such Person is then  entitled to receive
upon the due exercise of this Warrant.  In addition,  nothing  contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities  (upon exercise of this Warrant or otherwise) or as a stockholder
of the  Company,  whether  such  liabilities  are  asserted by the Company or by
creditors  of the  Company.  Notwithstanding  this  Section 6, the Company  will
provide the Holder with copies of the same notices and other  information  given
to the stockholders of the Company generally,  contemporaneously with the giving
thereof to the stockholders.

      7. REISSUANCE OF WARRANTS.

            (a) Transfer of Warrant.  If this Warrant is to be transferred,  the
Holder shall  surrender this Warrant to the Company,  whereupon the Company will
forthwith  issue and  deliver  upon the order of the  Holder a new  Warrant  (in
accordance   with  Section   7(d)),   registered  as  the  Holder  may  request,
representing   the  right  to  purchase  the  number  of  Warrant  Shares  being
transferred  by the Holder and, if less then the total number of Warrant  Shares
then underlying this Warrant is being transferred,  a new Warrant (in accordance
with Section 7(d)) to the Holder  representing  the right to purchase the number
of Warrant Shares not being transferred.

            (b) Lost, Stolen or Mutilated  Warrant.  Upon receipt by the Company
of  evidence  reasonably  satisfactory  to  the  Company  of  the  loss,  theft,
destruction  or mutilation of this Warrant,  and, in the case of loss,  theft or
destruction,  of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation,  upon surrender and  cancellation
of this  Warrant,  the  Company  shall  execute  and deliver to the Holder a new
Warrant (in accordance with Section 7(d)) representing the right to purchase the
Warrant Shares then underlying this Warrant.

            (c) Warrant  Exchangeable  for  Multiple  Warrants.  This Warrant is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company,  for a new Warrant or Warrants (in  accordance  with Section  7(d))
representing in the aggregate the right to purchase the number of Warrant Shares
then underlying this Warrant, and each such new Warrant will represent the right
to purchase  such portion of such Warrant  Shares as is designated by the Holder
at the  time  of  such  surrender;  provided,  however,  that  no  Warrants  for
fractional shares of Common Stock shall be given.

            (d)  Issuance of New  Warrants.  Whenever the Company is required to
issue a new Warrant pursuant to the terms of this Warrant,  such new Warrant (i)
shall be of like tenor with this Warrant, (ii) shall represent,  as indicated on
the face of such new  Warrant,  the right to purchase  the  Warrant  Shares then
underlying  this Warrant (or in the case of a new Warrant being issued  pursuant
to Section 7(a) or Section  7(c),  the Warrant  Shares  designated by the Holder
which,  when added to the number of shares of Common Stock  underlying the other
new Warrants issued in connection with such issuance, does not exceed the number
of Warrant Shares then underlying  this Warrant),  (iii) except for new warrants
issued  pursuant to section 7(a),  shall have an issuance  date, as indicated on
the face of such new Warrant,  which is the same as the Issuance  Date, and (iv)
shall have the same rights and conditions as this Warrant.

<PAGE>

      8.  NOTICES.  Whenever  notice is required to be given under this Warrant,
unless otherwise provided herein,  such notice shall be given in accordance with
Section 7.4 of the Securities Purchase Agreement.  The Company shall provide the
Holder with prompt written notice of all actions taken pursuant to this Warrant,
including  in  reasonable  detail a  description  of such  action and the reason
therefore.  Without  limiting the generality of the foregoing,  the Company will
give  written  notice to the  Holder (i)  promptly  upon any  adjustment  of the
Exercise  Price or number  of  Warrant  Shares  or number or kind of  securities
purchasable upon exercise of this Warrant,  setting forth in reasonable  detail,
and certifying,  the facts requiring such adjustment and the calculation of such
adjustment and (ii) at least fifteen days prior to the date on which the Company
closes  its  books  or  takes a  record  (A) with  respect  to any  dividend  or
distribution  upon the Common Stock,  (B) with respect to any grants,  issues or
sales of any  Options,  Convertible  Securities  or  rights to  purchase  stock,
warrants,  securities  or other  property to holders of Common  Stock or (C) for
determining rights to vote with respect to any Change of Control, dissolution or
liquidation,  provided in each case that such information shall be made known to
the public prior to or in  conjunction  with such notice  being  provided to the
Holder.

      9.  AMENDMENT  AND  WAIVER.  Except  as  otherwise  provided  herein,  the
provisions  of this  Warrant  may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained  the written  consent of the holders of SPA
Warrants  representing  at  least a  majority  of the  shares  of  Common  Stock
obtainable upon exercise of the SPA Warrants then outstanding;  provided that no
such action may increase  the exercise  price of any SPA Warrant or decrease the
number of shares or class of stock  obtainable  upon exercise of any SPA Warrant
without the written consent of the Holder.  No such amendment shall be effective
to the  extent  that it  applies  to less  than  all of the  holders  of the SPA
Warrants then outstanding.

      10.  GOVERNING  LAW.  This  Warrant  shall be  construed  and  enforced in
accordance  with,  and all  questions  concerning  the  construction,  validity,
interpretation  and  performance  of this  Warrant  shall be  governed  by,  the
internal laws of the State of New York,  without  giving effect to any choice of
law or conflict of law  provision  or rule  (whether of the State of New York or
any other  jurisdictions)  that would cause the  application  of the laws of any
jurisdictions other than the State of New York.

      11.  CONSTRUCTION;  HEADINGS.  This Warrant  shall be deemed to be jointly
drafted by the  Company  and all the  holders of SPA  Warrants  and shall not be
construed against any person as the drafter hereof. The headings of this Warrant
are for  convenience  of  reference  and shall  not form part of, or affect  the
interpretation of, this Warrant.

      12. DISPUTE  RESOLUTION.  In the case of a dispute as to the determination
of the Exercise Price or the arithmetic  calculation of the Warrant Shares,  the
Company shall submit the disputed  determinations or arithmetic calculations via
facsimile within two Business Days of receipt of the Exercise Notice giving rise
to such  dispute,  as the case may be,  to the  Holder.  If the  Holder  and the
Company  are  unable to agree  upon such  determination  or  calculation  of the
Exercise Price or the Warrant Shares within three Business Days of such disputed
determination or arithmetic  calculation being submitted to the Holder, then the
Company  shall,  within two Business  Days submit via facsimile (a) the disputed
determination of the Exercise Price to an independent, reputable investment bank
selected  by the  Company  and  approved  by the  Holder  or  (b)  the  disputed
arithmetic  calculation  of the  Warrant  Shares to the  Company's  independent,
outside  accountant.  The Company shall use its reasonable best efforts to cause
the  investment  bank or the  accountant,  as the case may be,  to  perform  the
determinations  or  calculations  and notify the  Company  and the Holder of the
results no later than ten  Business  Days from the time it receives the disputed
determinations   or  calculations.   Such  investment   bank's  or  accountant's
determination  or  calculation,  as the case may be,  shall be binding  upon all
parties absent demonstrable error.

<PAGE>

      13.  REMEDIES,  OTHER  OBLIGATIONS,  BREACHES AND INJUNCTIVE  RELIEF.  The
remedies  provided in this Warrant  shall be  cumulative  and in addition to all
other remedies available under this Warrant and the other Transaction  Documents
at law or in equity  (including  a decree of specific  performance  and/or other
injunctive  relief),  and nothing  herein shall limit the right of the Holder to
pursue actual damages for any failure by the Company to comply with the terms of
this Warrant.  The Company  acknowledges  that a breach by it of its obligations
hereunder will cause irreparable harm to the holder of this Warrant and that the
remedy at law for any such  breach  may be  inadequate.  The  Company  therefore
agrees that,  in the event of any such breach or threatened  breach,  the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining  any breach,  without the  necessity  of showing  economic  loss and
without any bond or other security being required.

      14. TRANSFER.  This Warrant may be offered for sale, sold,  transferred or
assigned without the consent of the Company.

      15. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms
shall have the following meanings:

            (a) "BLOOMBERG" means Bloomberg Financial Markets.

            (b)  "BUSINESS  DAY"  means any day other than  Saturday,  Sunday or
other day on which  commercial  banks in The City of New York are  authorized or
required by law to remain closed.

            (c)  "CHANGE  OF  CONTROL"  means  each  occurrence  of  any  of the
following:

                  (i) the acquisition,  directly or indirectly, by any person or
      group  (within the meaning of Section  13(d)(3)  of the  Exchange  Act) of
      beneficial ownership of more than 30% of the aggregate  outstanding voting
      power of the capital  stock of the Company;  provided,  however,  that the
      foregoing  shall not apply to the  Merger (as  defined  in the  Securities
      Purchase Agreement);

                  (ii) during any period of 12 consecutive  months,  individuals
      who at the beginning of such period  constituted the Board of Directors of
      the Company  (together with any new directors whose election by such Board
      of Directors or whose  nomination for election by the  shareholders of the
      Company was approved by a vote of at least a majority the directors of the
      Company then still in office who were either directors at the beginning of
      such period,  or whose  election or nomination for election was previously
      approved)  cease for any reason to  constitute  a majority of the Board of
      Directors of the Company;

<PAGE>

                  (iii)  the  Company  ceases to own and  control  100% (or such
      lesser  percentage  ownership  with  respect  to any  subsidiaries  of the
      Company or Aurora (as defined in the Securities  Purchase Agreement) which
      are not 100% owned by the Company or Aurora as of the date  hereof) of the
      shares of the capital stock of the Company's  Subsidiaries  (and after the
      effective date of the closing of the Merger, Aurora and its subsidiaries),
      unless otherwise permitted hereunder; or

                  (iv) the  Company  consolidates  with or merges  into  another
      entity or conveys,  transfers  or leases all or  substantially  all of its
      property and assets to any Person, or (ii) any entity consolidates with or
      merges into the Company,  which in either event (i) or (ii) is pursuant to
      a transaction in which the outstanding voting capital stock of the Company
      is reclassified or changed into or exchanged for cash, securities or other
      property.

            (d)  "CLOSING  BID PRICE" and "CLOSING  SALE PRICE"  means,  for any
security  as of any date,  the last  closing  bid price and last  closing  trade
price,  respectively,  for such security on the Principal Market, as reported by
Bloomberg,  or, if the Principal  Market begins to operate on an extended  hours
basis and does not  designate  the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade  price,  respectively,
of such  security  prior to 4:00 p.m.,  New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal  securities exchange or trading
market  for such  security,  the last  closing  bid price or last  trade  price,
respectively,  of such security on the principal  securities exchange or trading
market where such security is listed or traded as reported by  Bloomberg,  or if
the  foregoing  do not apply,  the last  closing bid price or last trade  price,
respectively,  of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade  price,  respectively,  is  reported  for such  security  by
Bloomberg,  the average of the bid prices, or the ask prices,  respectively,  of
any market  makers for such  security as  reported in the "pink  sheets" by Pink
Sheets LLC (formerly the National  Quotation  Bureau,  Inc.). If the Closing Bid
Price or the  Closing  Sale  Price  cannot be  calculated  for a  security  on a
particular  date on any of the  foregoing  bases,  the  Closing Bid Price or the
Closing Sale Price,  as the case may be, of such  security on such date shall be
the fair market value as mutually  determined by the Company and the Holder.  If
the  Company  and the Holder are unable to agree upon the fair  market  value of
such security,  then such dispute shall be resolved  pursuant to Section 12. All
such determinations to be appropriately  adjusted for any stock dividend,  stock
split,  stock  combination  or other similar  transaction  during the applicable
calculation period.

            (e) "COMMON STOCK" means (i) the Company's  common stock,  par value
$0.01 per share,  and (ii) any capital  stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.

<PAGE>

            (f) "COMMON STOCK DEEMED  OUTSTANDING" means, at any given time, the
number of shares of Common Stock  actually  outstanding  at such time,  plus the
number of shares of Common Stock deemed to be  outstanding  pursuant to Sections
2(a)(i) and 2(a)(ii)  hereof  regardless  of whether the Options or  Convertible
Securities  are actually  exercisable or convertible at such time, but excluding
any shares of Common Stock owned or held by or for the account of the Company or
issuable upon exercise of the SPA Warrants.

            (g) "CONVERTIBLE  SECURITIES"  means any stock or securities  (other
than  Options)  directly  or  indirectly  convertible  into  or  exercisable  or
exchangeable for Common Stock.

            (h)  "EXCLUDED  SECURITIES"  means  shares of Common Stock deemed to
have been  issued or sold by the  Company (i) in  connection  with any  employee
benefit  plan which has been  approved by the Board of Directors of the Company,
pursuant  to which the  Company's  securities  may be  issued  to any  employee,
officer or director for services  provided to the  Company,  (ii) in  connection
with any acquisition by the Company, whether through an acquisition for stock or
a merger,  of any business,  assets or technologies the primary purpose of which
is not to raise equity capital, (iii) in connection with the closing of a merger
between the Company and Aurora Energy,  Ltd.  pursuant to that certain Agreement
and Plan of Merger  dated  January 31, 2005;  (iv)  pursuant to a bona fide firm
commitment underwritten public offering with a nationally recognized underwriter
which generates net proceeds to the Company in excess of $30,000,000 (other than
an "at-the-market  offering" as defined in Rule 415(a)(4) under the 1933 Act and
"equity lines") and (v) upon conversion of any Options or Convertible Securities
which are  outstanding  under any stock  option  plan of the  Company on the day
immediately preceding the Issuance Date, provided that the terms of such Options
or Convertible  Securities are not amended,  modified or changed on or after the
Issuance Date.

            (i) "EXPIRATION DATE" means the date four years after the applicable
Closing  Date (as defined in the  Securities  Purchase  Agreement)  at which the
Company's obligation to issue this Warrant arose or, if such date falls on a day
other  than a  Business  Day or on which  trading  does  not  take  place on the
Principal Market (a "HOLIDAY"), the next date that is not a Holiday.

            (j) "OPTIONS" means any rights, warrants or options to subscribe for
or purchase Common Stock or Convertible Securities.

            (k) "PERSON" means an individual,  a limited  liability  company,  a
partnership,  a  joint  venture,  a  corporation,  a  trust,  an  unincorporated
organization,  any other entity and a  government  or any  department  or agency
thereof.

            (l)  "PRINCIPAL  MARKET"  means any of The New York Stock  Exchange,
Inc.,  the American  Stock  Exchange,  the Nasdaq  National  Market,  The Nasdaq
SmallCap Market or the OTC Bulletin Board.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>

            IN WITNESS WHEREOF,  the Company has caused this Warrant to Purchase
Common Stock to be duly executed as of the Issuance Date set out above.

                                    CADENCE RESOURCES CORPORATION

                                    By: ________________________________________
                                        Name:
                                        Title:
<PAGE>

                                                                       EXHIBIT A

                                 EXERCISE NOTICE

            TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
                        WARRANT TO PURCHASE COMMON STOCK

                          CADENCE RESOURCES CORPORATION

      The   undersigned   holder   hereby   exercises   the  right  to  purchase
_________________  of the shares of Common Stock  ("WARRANT  SHARES") of Cadence
Resources  Corporation,  a Utah corporation  (the  "COMPANY"),  evidenced by the
attached  Warrant to Purchase Common Stock (the  "WARRANT").  Capitalized  terms
used herein and not  otherwise  defined shall have the  respective  meanings set
forth in the Warrant.

      1. Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:

            __________ a "Cash  Exercise" with respect to  ____________  Warrant
Shares; and/or

            __________ a "Cashless Exercise" with respect to ___________ Warrant
Shares.

      2. Payment of Exercise  Price.  In the event that the holder has elected a
Cash  Exercise  with  respect to some or all of the Warrant  Shares to be issued
pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the Warrant.

      3. Accredited Investor.  The holder is an "accredited investor" as defined
in Rule 501(c) under the Securities Act.

      4.  Delivery of Warrant  Shares.  The Company  shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.

      5. Delivery of Warrant.  The Holder shall deliver the original  Warrant to
the Company within five (5) Business Days from the date hereof.

      [6. The Holder hereby represents that contemporaneous with the delivery of
this exercise  notice,  that the Holder has sold  __________  Warrant Shares and
hereby represents that it has complied with the prospectus delivery requirements
of the Securities Act as applicable in connection with such sale.]1

Date: _______________ __, ______

________________________________
   Name of Registered Holder

By: ____________________________
    Name:
    Title:

----------
1     Add only if a contemporaneous sale has occurred pursuant to a Registration
      Statement

<PAGE>

                                 ACKNOWLEDGMENT

      The Company hereby  acknowledges  this Exercise  Notice and hereby directs
OTC Stock Transfer  Company of Salt Lake City, Utah to issue the above indicated
number  of  shares  of  Common  Stock  in  accordance  with the  Transfer  Agent
Instructions dated _________,  2005 from the Company and acknowledged and agreed
to by OTC Stock Transfer Company of Salt Lake City, Utah.

                                    CADENCE RESOURCES CORPORATION

                                    By: ________________________________________
                                        Name:
                                        Title:

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