Document:

Prepared and filed by St Ives Burrups

 

 Exhibit 4.2

 

The
    issue of the Guaranty of this Note was approved by the Ministry of Finance
    and Public Credit of Mexico on October 11, 2000 pursuant to Official Communication
    No. 305-I.2.1-1661 and on June 5, 2001 pursuant to Official Communication
    No. 305-I.2.1-1079 and has been given Registration No. 57-2000-FPG.

UNLESS
    THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
    TRUST COMPANY, 55 WATER STREET, NEW YORK, NEW YORK 10004, A NEW YORK CORPORATION
    (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
    EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE
    OR ANY PORTION HEREOF IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
    OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CEDE & CO.
    (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
    REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CEDE & CO.), ANY TRANSFER,
    PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OTHER
    THAN DTC OR A NOMINEE THEREOF IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
    HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THIS
    NOTE IS A U.S. GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE REFERRED
    TO HEREINAFTER. THIS NOTE MAY NOT BE EXCHANGED, IN WHOLE OR IN PART, FOR
    A NOTE REGISTERED IN THE NAME OF ANY PERSON OTHER THAN DTC OR A NOMINEE THEREOF
    EXCEPT IN THE LIMITED CIRCUMSTANCES SET FORTH IN SECTION 3.05(a) OF THE INDENTURE.

 

PEMEX PROJECT FUNDING MASTER TRUST

MEDIUM-TERM NOTES, SERIES A

Due from 1 Year to 30 Years from Date of Issue

Unconditionally Guaranteed by

PETROLEOS MEXICANOS

(A Decentralized Public Entity of the

Federal Government of the United Mexican States)

U.S. $1,000,000,000

9.125% Notes due 2010

REGISTERED

NO. R-[  ]

The following summary of terms is subject to the information set forth on the reverse hereof and Schedule I hereto.

	PRINCIPAL AMOUNT:	U.S. $[    ]
	 	 
	SPECIFIED CURRENCY:	U.S. dollars (“U.S. $” or “$”)
	 	 
	STATED MATURITY:	October 13, 2010
	 	 
	ISSUE DATE:	[    ], 2003
	 	 
	CUSIP NO.:	706451 AB 7
	 	 
	INTEREST PAYMENT DATES:	April 13 and October 13 of each year, commencing on October 13, 2003
	 	 
	PRINCIPAL PAYING AGENT AND TRANSFER
    AGENT:	Deutsche Bank Trust Company Americas,
    New York
	 	 
	PAYING AGENTS AND TRANSFER AGENTS:	Deutsche Bank AG, London Branch

    Deutsche Bank Luxembourg S.A.  

Pemex Project Funding Master Trust (herein called “Pemex Project Funding Master Trust” or the “Issuer,” which terms include any successor entity under the Indenture hereinafter referred to), a statutory trust organized under the laws of the State of Delaware, for value received, hereby promises, in accordance with and subject to the provisions set forth on the face and reverse hereof, to pay to Cede & Co. or registered assigns, the principal amount set forth above at the Stated Maturity specified above or on such earlier date as the same may become payable in accordance with the terms hereof the principal amount specified above in the Specified Currency
specified above or such other redemption amount as may be specified herein, and to pay in arrears on the dates specified herein interest on such principal amount at the rate or rates specified herein, and accruing from the date specified herein, until the principal amount hereof is paid or made available for payment.

F-2

Unless defined herein, capitalized terms used herein shall have the meanings assigned to them on the reverse hereof and in the indenture dated as of July 31, 2000 (the “Indenture”), among the Issuer, Petróleos Mexicanos, as Guarantor, and Deutsche Bank Trust Company Americas (formerly Bankers Trust Company), as Trustee (the “Trustee”, which expression shall include any successor trustee under the Indenture).

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed.

Dated:  

	 	 	 	 	 	 	 	PEMEX PROJECT FUNDING 

       MASTER TRUST

by THE BANK OF NEW YORK

        not in its individual capacity, 

        but solely as Managing Trustee

	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
 

By: _________________________

     Name:

     Title:

	 	 	 	 	 	 	 	 

CERTIFICATE OF AUTHENTICATION

This is one of the series of Securities designated herein issued under the within-mentioned Indenture.

	Dated:	 	 	 	 	 	 	
 DEUTSCHE BANK TRUST COMPANY AMERICAS
as Trustee

By: ________________________

             Authorized Signatory

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REVERSE OF NOTE

1.  This Note is one of a duly authorized Series of Securities of Pemex Project Funding Master Trust (the “Issuer”) designated as its 9.125% Notes due 2010 (the “Notes”), issued and to be issued in accordance with an indenture, dated as of July 31, 2000 (herein called the “Indenture”), among the Issuer, Petróleos Mexicanos, as Guarantor (the “Guarantor”), and Deutsche Bank Trust Company Americas (formerly Bankers Trust Company), as Trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), copies of which Indenture are on file and available for inspection at the corporate trust
office of the Trustee in the Borough of Manhattan, The City of New York and, so long as the Notes are listed on the Luxembourg Stock Exchange and such Exchange shall so require, at the office of the Paying Agent in Luxembourg.  Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Issuer and the holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered.  The Notes were originally issued pursuant to an exchange offer made to all holders of the Issuer’s 9.125% Notes due 2010 (the “Old Notes” and, together with the Notes, the “2010 Notes”).  The 2010 Notes are limited to an aggregate initial principal amount of U.S.
$1,000,000,000, subject to further increase as provided in Paragraph 10 below.  Capitalized terms not otherwise defined herein or on the face of this Note shall have the meanings assigned to them in the Indenture.

The Notes are direct, unsecured and unsubordinated Public External Indebtedness (as defined in Paragraph 8 below) of the Issuer for money borrowed and will rank pari passu with each other and with all other present and future unsecured and unsubordinated Public External Indebtedness for money borrowed of the Issuer.  The Notes are not obligations of, or guaranteed by, the United Mexican States (“Mexico”).

Each of the Notes will have the benefit of the unconditional guaranty endorsed hereon (the “Guaranty”) as to punctual payment when due of all amounts of principal of and interest (including Additional Amounts) and premium (if any) on the Notes, and any other amounts payable by the Issuer under the Notes or the Indenture.  The Guarantor’s payment obligations under the Guaranty and the Indenture will have the benefit of an unconditional guaranty as to payment of principal and interest (including Additional Amounts) jointly and severally from each of Pemex-Exploración y Producción, Pemex-Refinación and Pemex-Gas y Petroquímica Básica (each, a
“Subsidiary Guarantor” and together, the “Subsidiary Guarantors”), pursuant to a Guaranty Agreement, dated July 29, 1996 (the “Subsidiary Guaranty”), among the Guarantor and the Subsidiary Guarantors.  The Guarantor has designated its Guaranty of each of the Notes and the Indenture as obligations of the Guarantor entitled to the benefits of the Subsidiary Guaranty, pursuant to certificates of designation, dated October 13, 2000 and June 7, 2001, respectively (the “Certificates of Designation”).

The Notes are denominated in U.S. dollars or in the Specified Currency specified on the face hereof.  Payments on the Notes will be made in the Specified Currency specified on the face hereof.  The Notes are issuable only in fully registered form, without interest coupons.  Notes are issuable in authorized denominations of U.S. $10,000 and integral multiples of U.S. $10,000 above that amount.

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2.  (a)  This Note will bear interest from April 13, 2003 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the interest rate per annum specified on the face hereof, until the principal hereof has been paid or duly made available for payment.  The interest on this Note shall be payable in arrears on each Interest Payment Date specified on the face hereof, and shall be computed on the basis of a 360-day year consisting of twelve 30-day months.  Any payment on this Note due on any day which is not a Business Day in The City of New York or the place of payment need not be made on such day, but may be made on the next succeeding Business
Day with the same force and effect as if made on the due date, and no interest shall accrue for the period from and after such due date.  “Business Day”, as used herein with respect to any particular location, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in such location are authorized or obligated by law to close in such location.

(b)  The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the 15th day (whether or not a Business Day) (the “Regular Record Date”) next preceding such Interest Payment Date; provided that interest payable at Stated Maturity will be payable to the person to whom principal shall be payable; and provided, further, that if this Note is a Global Security, any payment of interest on this Note shall be made to the applicable Depositary or its nominee, as the registered owner hereof.  Unless
otherwise specified on the face hereof, the first payment of interest on any Note originally issued between a Regular Record Date and an Interest Payment Date will be made on the Interest Payment Date following the next succeeding Regular Record Date to the registered owner on such next succeeding Regular Record Date.  Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the holder on such Regular Record Date and may either be paid to the person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on a special record date for the payment of such defaulted interest to be fixed by the Trustee, notice whereof shall be given to holders of Notes not less than 10 days prior to such special record
date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange.

(c)  Payment of principal (and premium, if any) and any interest due with respect to the Notes at Stated Maturity will be made in immediately available funds upon surrender of such Notes at the corporate trust office of the Trustee in the Borough of Manhattan, The City of New York, or at the specified office of any other Paying Agent, provided that the Note is presented to the Paying Agent in time for the Paying Agent to make such payments in such funds in accordance with its normal procedures.  Payments of principal (and premium, if any) and any interest in respect of this Note to be made other than at Stated Maturity or upon redemption will be made by check mailed on or before
the due date for such payments to the address of the persons entitled thereto as they appear in the Security Register; provided that (i) the applicable Depositary, as holder of the Global Securities, shall be entitled to receive payments of interest by wire transfer of immediately available funds and (ii) a holder of U.S. $10,000,000 in aggregate principal or face amount of Notes having the same Interest Payment Date shall be entitled to receive payments of interest by wire transfer to an account maintained by such holder at a bank located in the United States as may have been appropriately designated by such person to the Paying Agent in writing no later than the relevant Regular Record Date.  Unless such designation is revoked, any such designation made by such holder with
respect to such Note shall remain in effect with respect to any further payments with respect to such Note payable to such holder.

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3.  (a) The Issuer shall maintain in the Borough of Manhattan, The City of New York, an office or agency where Notes may be surrendered for registration of transfer or exchange.  The Issuer has initially appointed the corporate trust office of the Trustee as its agent in the Borough of Manhattan, The City of New York, for such purpose and has agreed to cause to be kept at such office a register in which, subject to such reasonable regulations as it may prescribe, the Issuer will provide for the registration of Notes and of transfers of Notes.  The Issuer reserves the right to vary or terminate the appointment of the Trustee as security registrar or of any Transfer Agent or to appoint
additional or other registrars or Transfer Agents or to approve any change in the office through which any security registrar or any Transfer Agent acts, provided that there will at all times be a security registrar in the Borough of Manhattan, The City of New York and, so long as the Notes are listed on the Luxembourg Stock Exchange and such Exchange shall so require, a Transfer Agent in Luxembourg.

(b)  The transfer or exchange of a Note is registrable on the aforementioned register upon surrender of such Note at the corporate trust office of the Trustee or any Transfer Agent duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Trustee duly executed by the holder thereof or his attorney duly authorized in writing.  Upon such surrender of a Note for registration of transfer, the Issuer shall execute one or more new Notes of any authorized denominations and of a like form, tenor and terms and a like aggregate principal amount, the Guarantor shall execute the Guaranty endorsed thereon, and the Trustee shall authenticate and
deliver in the name of the designated transferee or transferees, such new Notes, dated the date of authentication thereof.  At the option of the holder upon request confirmed in writing, Notes may be exchanged for Notes of any authorized denominations and of a like form, tenor and terms and a like aggregate principal amount upon surrender of the Notes to be exchanged at the office of any Transfer Agent or at the corporate trust office of the Trustee. Whenever any Notes are so surrendered for exchange, the Issuer shall execute the Notes which the holder making the exchange is entitled to receive, the Guarantor shall execute the Guaranty endorsed thereon, and the Trustee shall authenticate and deliver such Notes.

(c)  Any registration of transfer or exchange will be effected upon the Transfer Agent or the Trustee, as the case may be, being satisfied with the documents of title and identity of the person making the request and subject to such reasonable regulations as the Issuer may from time to time agree with any Transfer Agents and the Trustee.

(d)  In the event of a redemption of Notes in part (if permitted by the provisions hereof), the Issuer shall not be required (i) to register the transfer of or exchange any Note during a period beginning at the opening of business 15 days before, and continuing until, the date on which notice is given identifying the Notes to be redeemed, or (ii) to register the transfer of or exchange any Note, or portion thereof, called for redemption.

(e)  All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits, as the Notes surrendered upon such registration of transfer or exchange.  No service charge shall be made for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any stamp tax or other governmental charge payable in connection therewith, other than an exchange in connection with a partial redemption of a Note not involving any registration of a transfer.

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Prior to due presentment of this Note for registration of transfer, the Issuer, the Guarantor, each Subsidiary Guarantor, the Trustee and any agent of the Issuer, the Guarantor, any Subsidiary Guarantor or the Trustee may treat the person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Guarantor, any Subsidiary Guarantor, the Trustee nor any such agent shall be affected by any notice to the contrary.

4.  The Issuer shall pay to the Trustee at its principal office in the Borough of Manhattan, The City of New York, on or prior to 11:00 a.m., New York City time, on each Interest Payment Date, any redemption date and at the Stated Maturity of the Notes, in such amounts sufficient (with any amounts then held by the Trustee and available for the purpose) to pay the interest on, the redemption price of and accrued interest (if the redemption date is not an Interest Payment Date) on, and the principal of, the Notes due and payable on such Interest Payment Date, redemption date or Stated Maturity, as the case may be.  The Trustee shall apply the amounts so paid to it to the payment of such
interest, redemption price and principal in accordance with the terms of the Notes.  Any monies paid by the Issuer to the Trustee for the payment of the principal, premium (if any) or interest on any Notes and remaining unclaimed at the end of two years after such principal (or premium, if any) or interest shall have become due and payable (whether at the Stated Maturity, upon call for redemption or otherwise) shall then be repaid to the Issuer upon its written request, and upon such repayment all liability of the Trustee with respect thereto shall cease, without, however, limiting in any way any obligation the Issuer may have to pay the principal of (and premium, if any) and interest on each Note as the same shall become due.  Notwithstanding the foregoing, the right to receive any
payment of principal of or interest on the Notes will become void at the end of five years after the due date thereof.

5.  (a) The Issuer will pay all stamp and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority of or in the foregoing with respect to the Indenture or the issuance of this Note.  Except as otherwise provided herein, the Issuer shall not be required to make any payment with respect to any tax, assessment or other governmental charge imposed by any government or any political subdivision or taxing authority thereof or therein.

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(b) The Issuer, or, in the case of a payment by the Guarantor or a Subsidiary Guarantor, such Guarantor or Subsidiary Guarantor, will pay to the holder of this Note such additional amounts (“Additional Amounts”) as may be necessary in order that every net payment made by the Issuer, the Guarantor or a Subsidiary Guarantor on this Note after deduction or withholding for or on account of any present or future tax, assessment or other governmental charge imposed upon or as a result of such payment by Mexico or any political subdivision or taxing authority thereof or therein (“Mexican Withholding Taxes”), will not be less than the amount then due and payable on this
Note.  The foregoing obligation to pay Additional Amounts, however, will not apply to (i) any Mexican Withholding Taxes that would not have been imposed or levied on the holder of this Note but for the existence of any present or former connection between such holder and Mexico or any political subdivision or territory or possession thereof or area subject to its jurisdiction, including, without limitation, such holder (A) being or having been a citizen or resident thereof, (B) maintaining or having maintained an office, permanent establishment, fixed base or branch therein, or (C) being or having been present or engaged in trade or business therein, except for a connection solely arising from the mere ownership of, or receipt of payment under, this Note; (ii) except as otherwise provided,
any estate, inheritance, gift, sales, transfer or personal property or similar tax, assessment or other governmental charge; (iii) any Mexican Withholding Taxes that are imposed or levied by reason of the failure by such holder to comply with any certification, identification, information, documentation, declaration or other reporting requirement that is required or imposed by a statute, treaty, regulation, general rule or administrative practice as a precondition to exemption from, or reduction in the rate of, the imposition, withholding or deduction of any Mexican Withholding Taxes; provided that at least 60 days prior to (A) the first payment date with respect to which the Issuer, the Guarantor or a Subsidiary Guarantor shall apply this clause (iii) and, (B) in the event of a
change in such certification, identification, information, documentation, declaration or other reporting requirement, the first payment date subsequent to such change, the Issuer, the Guarantor or a Subsidiary Guarantor, as the case may be, shall have notified the Trustee in writing that the holders of Notes will be required to provide such certification, identification, information or documentation, declaration or other reporting; (iv) any Mexican Withholding Taxes imposed at a rate in excess of 4.9% in the event that such holder has failed to provide on a timely basis, at the reasonable request of the Issuer, information or documentation (not described in clause (iii) above) concerning such holder’s eligibility for benefits under an income tax treaty to which Mexico is a party that
is necessary to determine the appropriate rate of deduction or withholding of Mexican taxes under any such treaty; (v) any Mexican Withholding Taxes that would not have been so imposed but for the presentation by such holder of this Note for payment on a date more than 15 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later; or (vi) any payment on this Note to any holder who is a fiduciary or partnership or other than the sole beneficial owner of any such payment, to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such a partnership or the beneficial owner of such payment would not have been entitled to the Additional Amounts had such beneficiary, settlor,
member or beneficial owner been the holder of this Note.  All references in this Note or in the Indenture to principal, premium, if any, and interest in respect of Notes shall, unless the context otherwise requires, be deemed to mean and include all Additional Amounts, if any, payable in respect thereof as set forth in this paragraph (b).

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(c)  Notwithstanding the foregoing, the limitations on the Issuer’s, the Guarantor’s and the Subsidiary Guarantors’ obligation to pay Additional Amounts set forth in clauses (iii) and (iv) above shall not apply if the provision of the certification, identification, information, documentation, declaration or other evidence described in such clauses (iii) and (iv) would be materially more onerous, in form, in procedure or in the substance of information disclosed, to a holder or beneficial owner of this Note (taking into account any relevant differences between United States and Mexican law, regulation or administrative practice) than
comparable information or other applicable reporting requirements imposed or provided for under United States federal income tax law (including the United States-Mexico Income Tax Treaty), regulation (including proposed regulations) and administrative practice.  In addition, the limitations on the Issuer’s, the Guarantor’s and the Subsidiary Guarantors’ obligation to pay Additional Amounts set forth in clauses (iii) and (iv) above shall not apply if Rule 3.25.15  published in the Official Gazette of the Federationon May 30, 2002, or a substantially similar successor of such rule is in effect, unless (A) the provision of the certification, identification, information, documentation, declaration or other evidence described in clauses (iii) and (iv) is expressly
required by statute, regulation, general rules or administrative practice in order to apply Rule 3.25.15 (or a substantially similar successor of such rule), the Issuer, the Guarantor or the applicable Subsidiary Guarantor cannot obtain such certification, identification, information, documentation, declaration or evidence, or satisfy any other reporting requirements, on its own through reasonable diligence and the Issuer, the Guarantor or the applicable Subsidiary Guarantor otherwise would meet the requirements for application of Rule 3.25.15 (or such successor of such rule) or (B) in the case of a holder or beneficial owner of a Note that is a pension fund or other tax-exempt organization, such holder or beneficial owner would be subject to Mexican Withholding Taxes at a rate less than
that provided by Rule 3.25.15 if the information, documentation or other evidence required under clause (iv) above were provided.  In addition, clause (iii) above shall not be construed to require that a non-Mexican pension or retirement fund, a non-Mexican tax-exempt organization or a non-Mexican financial institution or any other holder or beneficial owner of this Note register with the Ministry of Finance and Public Credit of Mexico for the purpose of establishing eligibility for an exemption from or reduction of Mexican Withholding Taxes.

(d)  The Issuer, the Guarantor or a Subsidiary Guarantor, as the case may be, will, upon written request, provide the Trustee, the holders and the Paying Agents with a duly certified or authenticated copy of an original receipt of the payment of Mexican Withholding Taxes which such Issuer, Guarantor of Subsidiary Guarantor has withheld or deducted in respect of any payments made under or with respect to the Notes, the Guaranty or the Subsidiary Guaranty, as the case may be.  Any reference herein or in the Indenture to principal, interest, Redemption Price or any other amount payable under or with respect to the Notes will be deemed also to refer to any
Additional Amounts which may be payable under the undertakings referred to herein.

(e)  In the event that Additional Amounts actually paid with respect to this Note are based on rates of deduction or withholding of Mexican Withholding Taxes in excess of the appropriate rate applicable to the holder of this Note, and, as a result thereof, such holder is entitled to make a claim for a refund or credit of such excess, then such holder shall, by accepting this Note, be deemed to have assigned and transferred all right, title and interest to any such claim for a refund or credit of such excess to the Issuer, the Guarantor or the applicable Subsidiary Guarantor, as the case may be.  However, by making such assignment, the holder makes no
representation or warranty that the Issuer, the Guarantor or the applicable Subsidiary Guarantor, as the case may be, will be entitled to receive such claim for a refund or credit and incurs no other obligation with respect thereto.

6.  (a)  This Note may not be redeemed prior to the Stated Maturity, except as specified in paragraph (b) below.

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(b)  The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, together, if applicable, with interest accrued to but excluding the date fixed for redemption, at par, on giving not less than 30 nor more than 60 days’ notice to the holders of the Notes (which notice shall be irrevocable), if (i) the Issuer or the Guarantor certifies to the Trustee immediately prior to the giving of such notice that it has or will become obligated to pay Additional Amounts in excess of the Additional Amounts that it would be obligated to pay if payments (including payments of interest) on the Notes (or payments under the Guaranties with respect to interest on the
Notes) were subject to a tax at a rate of 10%, as a result of any change in, amendment to, or lapse of, the laws, regulations or rulings of Mexico or any political subdivision or any taxing authority thereof or therein affecting taxation, or any change in, or amendment to, an official interpretation or application of such laws, regulations or rulings, which change or amendment becomes effective on or after the date of issuance of the Notes and (ii) prior to the publication of any notice of redemption, the Issuer or the Guarantor shall deliver to the Trustee an Officer’s Certificate stating that the obligation referred to in (i) above cannot be avoided by the Issuer or the Guarantor, as the case may be, taking reasonable measures available to it, and the Trustee shall be entitled to
accept such certificate as sufficient evidence of the satisfaction of the condition precedent set out in (i) above in which event it shall be conclusive and binding on the holders of the Notes; provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or the Guarantor, as the case may be, would be obligated but for such redemption to pay such Additional Amounts were a payment in respect of the Notes then due and, at the time such notice is given, such obligation to pay such Additional Amounts remains in effect.

(c) The Issuer, the Guarantor or any Subsidiary Guarantor may at any time purchase Notes at any price in the open market or otherwise.  Notes so purchased by the Issuer, the Guarantor or any Subsidiary Guarantor may be held, resold (subject to compliance with applicable securities and tax laws) or surrendered to the Trustee for cancellation.

7.  This Note is not repayable prior to the Stated Maturity at the option of the holder, except as set forth in Paragraph 8.

8.  If any of the following events (each, an “Event of Default”) occurs and is continuing, the Trustee, if so requested in writing by holders of at least 20% in principal amount of the 2010 Notes then outstanding, voting as a single series, shall give notice to the Issuer that the Notes are, and they shall immediately become, due and payable at their principal amount together with accrued interest:

	 	 (a)  Non-Payment: default
      is made in payment of principal of or any interest on any of the Notes
      when due and such failure continues, in the case of non-payment of principal
    for seven days, and of interest for fourteen days after the due date; or

	 	 (b)  Breach
        of Other Obligations: the Issuer or the Guarantor defaults
        in performance or observance of or compliance with any of its other obligations
        set out in the Notes or the Guaranties or (insofar as it concerns the
        Notes or the Guaranties) the Indenture which default is incapable of
        remedy or, if capable of remedy, is not remedied within 30 days after
        notice of such default shall have been given to the Issuer, the Guarantor
    and the Subsidiary Guarantors by the Trustee; or

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(c)  Cross-Default: default
    by the Issuer, the Guarantor or any of the Guarantor’s Material Subsidiaries
  (as defined below) or the Subsidiary Guarantors or any of them or any of their
  respective Material Subsidiaries in the payment of the principal of, or interest
  on, any Public External Indebtedness (as defined below) of, or guaranteed by,
  the Issuer, the Guarantor or any of the Guarantor’s Material Subsidiaries
  or the Subsidiary Guarantors or any of them or any of their respective Material
  Subsidiaries, in an aggregate principal amount exceeding U.S. $40,000,000
  or its equivalent, when and as the same shall become due and payable, if such
  default shall continue for more than the period of grace, if any, originally
  applicable thereto; or

	 	 (d)  Enforcement
        Proceedings: a distress or execution or other legal process
        is levied or enforced or sued out upon or against any substantial part
        of the property, assets or revenues of the Issuer, the Guarantor or any
        of the Guarantor’s Material Subsidiaries or the Subsidiary Guarantors
        or any of them or any of their respective Material Subsidiaries and is
        not discharged or stayed within 60 days of having been so levied, enforced
    or sued out; or

	 	 (e)  Security
        Enforced: an encumbrancer takes possession or a receiver,
        manager or other similar officer is appointed of the whole or any substantial
        part of the undertaking, property, assets or revenues of the Issuer,
        the Guarantor or any of the Guarantor’s Material Subsidiaries or
        the Subsidiary Guarantors or any of them or any of their respective Material
    Subsidiaries; or

	 	 (f)  Insolvency: the
      Issuer, the Guarantor or any of the Guarantor’s Material Subsidiaries
      or the Subsidiary Guarantors or any of them or any of their respective
      Material Subsidiaries becomes insolvent or is generally unable to pay its
      debts as they mature or applies for or consents to or suffers the appointment
      of an administrator, liquidator, síndico or receiver of the
      Issuer, the Guarantor or any of the Guarantor’s Material Subsidiaries
      or the Subsidiary Guarantors or any of them or any of their respective
      Material Subsidiaries or the whole or any substantial part of the undertaking,
      property, assets or revenues of the Issuer, the Guarantor or any of the
      Guarantor’s Material Subsidiaries or the Subsidiary Guarantors or
      any of them or any of their respective Material Subsidiaries or takes any
      proceeding under any law for a readjustment or deferment of its obligations
      or any part of them for bankruptcy, reorganization, suspensión
      de pagos, dissolution or liquidation or makes or enters into a general
      assignment or an arrangement or composition with or for the benefit of
      its creditors or stops or threatens to cease to carry on its business or
    any substantial part of its business; or

	 	 (g)  Winding-up: an
      order is made or an effective resolution passed for winding up the Issuer,
      the Guarantor or any of the Guarantor’s Material Subsidiaries or
      the Subsidiary Guarantors or any of them or any of their respective Material
    Subsidiaries; or

	 	 (h)  Moratorium: a
      general moratorium is agreed or declared in respect of any External Indebtedness
      (as defined below) of the Issuer, the Guarantor or any of the Guarantor’s
      Material Subsidiaries or the Subsidiary Guarantors or any of them or any
    of their respective Material Subsidiaries; or

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	 	 (i)  Authorization
        and Consents: any action, condition or thing (including the
        obtaining or effecting of any necessary consent, approval, authorization,
        exemption, filing, license, order, recording or registration) at any
        time required to be taken, fulfilled or done in order (i) to enable the
        Issuer lawfully to enter into, exercise its rights and perform and comply
        with its obligations under the Notes or the Indenture, (ii) to enable
        the Guarantor lawfully to enter into, exercise its rights and perform
        and comply with its obligations under the Guaranties relating to the
        Notes, the Indenture or the Subsidiary Guaranty Agreement in relation
        to the Notes and the related Guaranties, (iii) to enable any of the Subsidiary
        Guarantors lawfully to enter into, perform and comply with its obligations
        under the Subsidiary Guaranty Agreement in relation to the Notes, the
        related Guaranties or the Indenture and (iv) to ensure that those obligations
        are legally binding and enforceable, is not taken, fulfilled or done
    within 30 days of its being so required; or

	 	 (j)  Illegality: it
      is or becomes unlawful for (i) the Issuer to perform or comply with one
      or more of its obligations under any of the Notes or the Indenture, (ii)
      the Guarantor to perform or comply with any of its obligations under the
      Indenture, the Guaranties or the Subsidiary Guaranty Agreement with respect
      to the Notes, the related Guaranties or the Indenture, or (iii) the Subsidiary
      Guarantors or any of them to perform or comply with one or more of its
      obligations under the Subsidiary Guaranty Agreement with respect to the
    Notes, the related Guaranties or the Indenture; or

	 	 (k)  Control: the
      Guarantor ceases to be a decentralized public entity of the Government
      or the Government otherwise ceases to control the Guarantor or any Subsidiary
      Guarantor; or the Issuer, the Guarantor or any of the Subsidiary Guarantors
      is dissolved, disestablished or suspends its respective operations, and
      such dissolution, disestablishment or suspension of operations is material
      in relation to the business of the Issuer, the Guarantor and the Subsidiary
      Guarantors taken as a whole; or the Guarantor and the Subsidiary Guarantors
      cease to be the entities which have the exclusive right and authority to
      conduct on behalf of Mexico the activities of exploration, exploitation,
      refining, transportation, storage, distribution and first-hand sale of
      crude oil and exploration, exploitation, production and first-hand sale
      of natural gas, as well as the transportation and storage inextricably
      linked with such exploitation and production; or the Issuer ceases to be
    controlled by the Guarantor; or 

	 	(l) 	
Disposals:

	 	 	 (i)  the
      Guarantor ceases to carry on all or a substantial part of its business,
      or sells, transfers or otherwise disposes (whether voluntarily or involuntarily)
      of all or substantially all of its assets (whether by one transaction or
      a series of transactions whether related or not) other than (A) solely
      in connection with the implementation of the Ley Orgánica de
      Petróleos Mexicanos y Organismos Subsidiarios or (B) to a Subsidiary
    Guarantor; or

	 	 	 (ii)  any
      Subsidiary Guarantor ceases to carry on all or a substantial part of its
      business, or sells, transfers or otherwise disposes (whether voluntarily
      or involuntarily) of all or substantially all of its assets (whether by
      one transaction or a series of transactions whether related or not) and
      such cessation, sale, transfer or other disposal is material in relation
      to the business of the Guarantor and the Subsidiary Guarantors taken as
    a whole; or

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	 	 (m)  Analogous
        Events: any event occurs which under the laws of Mexico has
        an analogous effect to any of the events referred to in paragraphs (d)
    to (g) above; or

	 	 (n)  Guaranties: the
      Guaranties or the Subsidiary Guaranty Agreement is not (or is claimed by
      the Guarantor or any of the Subsidiary Guarantors not to be) in full force
    and effect.

	 	“External
      Indebtedness” means Indebtedness which is payable, or at the
      option of its holder may be paid, (i) in a currency or by reference to
      a currency other than the currency of Mexico, (ii) to a person resident
      or having its head office or its principal place of business outside Mexico
    and (iii) outside the territory of Mexico.

	 	“Guarantee” means
    any obligation of a person to pay the Indebtedness of another person, including
    without limitation:

	 	 	 (i)  an
    obligation to pay or purchase such Indebtedness; or

	 	 	 (ii)  an
      obligation to lend money or to purchase or subscribe for shares or other
      securities or to purchase assets or services in order to provide funds
    for the payment of such Indebtedness; or

	 	 	 (iii)   any
    other agreement to be responsible for such Indebtedness.

	 	“Indebtedness” means
      any obligation (whether present or future, actual or contingent) for the
      payment or repayment of money which has been borrowed or raised (including
    money raised by acceptances and leasing).

	 	“Public
      External Indebtedness” means any External Indebtedness which
      is in the form of, or represented by, notes, bonds or other securities
      which are for the time being quoted, listed or ordinarily dealt in on any
    stock exchange.

	 	“Subsidiary” means,
      in relation to any person, any other person (whether or not now existing)
      which is controlled directly or indirectly by, or more than 50 percent
      of whose issued equity share capital (or equivalent) is then held or beneficially
      owned by, the first person and/or any one or more of the first person’s
      Subsidiaries, and “control” means the power to appoint the
      majority of the members of the governing body or management of, or otherwise
    to control the affairs and policies of, that person.

“Material Subsidiaries” means, at any time, each of the Subsidiary Guarantors and any Subsidiary of the Guarantor or any of the Subsidiary Guarantors having, as of the end of the most recent fiscal quarter of the Guarantor, total assets greater than 12% of the total assets of the Guarantor, the Subsidiary Guarantors and their Subsidiaries on a consolidated basis.

After any such acceleration has been made, but before a judgment or decree for the payment of money due based on acceleration has been obtained by the Trustee, the holders of a majority in aggregate principal amount of the 2010 Notes then outstanding, voting as a single series, may rescind and annul such acceleration in writing if all Events of Default, other than the non-payment of the principal of the Notes that have become due solely by such declaration of acceleration, have been cured or waived as provided in the Indenture.

R-10

9.  The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the Guarantor and the rights of the holders of the Notes to be affected under the Indenture at any time by the Issuer, the Guarantor and the Trustee with the consent of the holders of not less than a majority in principal amount of the 2010 Notes, voting as a single series.  The Indenture also contains provisions permitting the holders of specified percentages in principal amount of the 2010 Notes at the time Outstanding, on behalf of the holders of all Notes, to waive compliance by the Issuer or the Guarantor with certain
provisions of the Indenture and certain past defaults under the Indenture or the Notes and their consequences.  Any such consent or waiver by the holder of this Note shall be conclusive and binding upon such holder and upon all future holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note.

10.  The Issuer may from time to time without the consent of any holder of Notes create and issue additional notes having the same terms and conditions as Notes previously issued (or the same except the first payment of interest or the issue price), which additional notes may be consolidated to form a single series with the outstanding Notes.

11.  No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligations of the Issuer or the Guarantor, which are absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed.

12. The Bank of New York is executing this Note not in its individual capacity but solely as Managing Trustee of the Issuer and in no event shall the The Bank of New York have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer or the Guarantor hereunder, as to which recourse shall be had solely to the assets of the Issuer or the Guarantor, and under no circumstances shall The Bank of New York be personally liable for the payment of any indebtedness due under the Note.  The Note does not represent interests in or obligations of The Bank of New York.

13.  THIS NOTE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.

***

R-11

GUARANTY

1.  The Guarantor hereby unconditionally and irrevocably guarantees the punctual payment when due, whether at Stated Maturity, upon redemption or early repayment, upon acceleration or otherwise, of all payments of principal of and interest (including Additional Amounts) on the Notes, and any other amounts payable by the Issuer under the Notes or the Indenture (the “Obligations”).  If the Issuer shall fail to pay punctually any Obligation, the Guarantor shall forthwith pay such Obligation when and as the same shall be due and payable to the person entitled thereto in the manner specified in the Notes or the Indenture.  All payments hereunder shall be made in currency specified
in the Notes in same day funds (or such other funds as may, at the time of payment, be customary for the settlement in New York City of international banking transactions in the such currency) as if such payment were made by the Issuer in accordance with the terms of the Notes and the Indenture.

2.  The obligations of the Guarantor set forth herein shall constitute a guaranty of payment and not of collection, and shall be absolute and unconditional. This Guaranty shall be continuing and remain in full force and effect and be binding upon the Guarantor and its successors and assigns and inure to the benefit of the holders of the Notes and the Trustee (each, a “Beneficiary”, and collectively, the “Beneficiaries”) until all Obligations of the Issuer have been discharged in full.  The Guarantor hereby waives, to the extent permitted by applicable law, all claims of waiver, exchange, release, surrender, alteration or compromise and all set-offs, counterclaims
and recoupments which it may have or assert against the Beneficiaries.  The Guarantor hereby waives promptness, diligence, presentment, demand for payment, notice of acceptance of this Guaranty, protest of any kind whatsoever, any requirement that a Beneficiary exhaust any right or take any action against the Issuer or any other person or entity or any property or collateral, as well as any right to require a proceeding first against the Issuer or the Issuer’s property or the exercise by a holder of the Notes of its rights upon the occurrence and continuation of an Event of Default.

3.  This Guaranty shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Guaranty is endorsed shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized signatories.

4.  The obligations of the Guarantor to the Beneficiaries pursuant to this Guaranty and the Indenture, and the rights of the Guarantor with respect thereto, are expressly set forth in the Indenture and reference is hereby made to the Indenture for the precise terms of this Guaranty, which are incorporated herein by reference and made a part hereof.

5.  Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Indenture.

THIS GUARANTY SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA, EXCEPT THAT ALL MATTERS RELATING TO THE AUTHORIZATION AND EXECUTION BY THE GUARANTOR OF THIS GUARANTY SHALL BE GOVERNED BY THE LAWS OF MEXICO.

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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed.

Dated:  September [   ], 2003

	 	 	 	 	 	 	PETROLEOS MEXICANOS
	 	 	 	 	 	 	
     

  By: ________________________________
  

       Name:

    

     Title:

    

R-13

	         ABBREVIATIONS

The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations:

	TEN COM -  	as tenants

  

  in
    common	UNIF GIFT

  MIN ACT - 

  	
  (Cust)	Custodian

  

  
	
  (Minor)
	TEN ENT -  	as tenants by

  

  the
    entireties	

	Under
    Uniform Gifts to Minors
	 	 	 
	JT TEN -  	as joint tenants with

  right of survivorship and

  not as tenants in common	

  

  State

	 	 
	 	 
	Additional abbreviations may also be used though not in the above list.

	 	 	 
	 	 	 
	FOR VALUE RECEIVED the undersigned hereby sell(s), 

  assign(s) and transfer(s) unto

	 
	PLEASE INSERT SOCIAL
      SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE

	

	 	Please print or typewrite name and address
including postal zip code of assignee

	

	the within note and all rights thereunder, 

hereby irrevocably constituting and appointing
	 
	__________________________________
        attorney to transfer said note on the books of Pemex Project Funding
    Master Trust, with full power of substitution in the premises.
	 
	Dated: 
	

	

	NOTICE: The signature to this assignment
        must correspond with the name as written upon the face of the
        within instrument in every particular, without alteration or enlargement
    or any change whatever.EXHIBIT 4.7

                          COMMON STOCK PURCHASE WARRANT

THE WARRANT  REPRESENTED BY THIS  CERTIFICATE HAS NOT BEEN REGISTERED  UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),  AND IS SUBJECT TO  RESTRICTIONS
ON  TRANSFERABILITY  AS SET FORTH IN THIS  CERTIFICATE.  THIS WARRANT MAY NOT BE
SOLD,  TRANSFERRED,  OR  OTHERWISE  DISPOSED OF IN THE  ABSENCE OF AN  EFFECTIVE
REGISTRATION  STATEMENT  UNDER  THE ACT OR AN  OPINION  OF  COUNSEL,  REASONABLY
ACCEPTABLE  TO COUNSEL FOR THE COMPANY,  TO THE EFFECT THAT THE  PROPOSED  SALE,
TRANSFER, OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT.

                                 WORKSTREAM INC.

                               WARRANT CERTIFICATE

                  THIS WARRANT CERTIFICATE (the "Warrant Certificate") certifies
that for value  received,  MICHAEL  WEISS (the  "Holder"),  is the owner of this
warrant (the "Warrant"), which entitles the Holder to purchase at any time on or
before the  Expiration  Date (as defined below)  (133,333)  shares (the "Warrant
Shares") of fully paid  non-assessable  shares of the common  stock (the "Common
Stock"), of WORKSTREAM INC., a Canada corporation (the "Company"), at a purchase
price of $1.50 per Warrant Share (the "Purchase Price"),  in lawful money of the
United  States of America by bank or certified  check,  subject to adjustment as
hereinafter provided. This Warrant is issued pursuant to the Securities Purchase
Agreement  (the "Purchase  Agreement")  dated of even date among the Company and
the  Holder.  Capitalized  terms not  otherwise  defined  herein  shall have the
meanings ascribed to them in the Purchase Agreement.

1.       WARRANT; PURCHASE PRICE.

                  This Warrant  shall entitle the Holder to purchase the Warrant
Shares at the  Purchase  Price.  The  Purchase  Price and the  number of Warrant
Shares  evidenced  by this  Warrant  Certificate  are subject to  adjustment  as
provided in Article 6.

2.       EXERCISE; EXPIRATION DATE.

                    (a)  This  Warrant  is  exercisable,  at the  option  of the
Holder,  at any time after the date of issuance and on or before the  Expiration
Date (as  defined  below) by (i)  delivering  to the Company  written  notice of
exercise (the  "Exercise  Notice"),  stating the number of Warrant  Shares to be
purchased  thereby,  accompanied by bank or certified check payable to the order
of the Company for the Warrant Shares being purchased  provided,  however,  that
this Warrant may

<PAGE>

not be converted prior to the effectiveness of a registration statement with the
Securities Exchange Commission for the Warrant Shares.  Within ten (10) business
days  of  the  Company's  receipt  of the  Exercise  Notice  accompanied  by the
consideration  for the Warrant Shares being  purchased,  the Company shall issue
and deliver to the Holder a certificate  representing  the Warrant  Shares being
purchased.  In the case of  exercise  for less  than all of the  Warrant  Shares
represented by this Warrant  Certificate,  the Company shall cancel this Warrant
Certificate  upon the  surrender  thereof  and shall  execute  and deliver a new
Warrant Certificate for the balance of such Warrant Shares.

                    (b) EXPIRATION.  The term "Expiration  Date" shall mean 5:00
p.m.,  Ottawa  time,  on May,  30, 2007 or if such date shall in the Province of
Ontario shall be a holiday or a day on which banks are authorized to close, then
5:00 p.m.,  Ottawa time, the next following day which in the Province of Ontario
is not a holiday or a day on which banks are authorized to close.

3.       RESTRICTIONS ON TRANSFER.

                    (a)  RESTRICTIONS.  This Warrant,  and the Warrant Shares or
any other  security  issuable upon exercise of this Warrant may not be assigned,
transferred,  sold,  or  otherwise  disposed  of unless (i) there is in effect a
registration  statement  under the Act covering  such sale,  transfer,  or other
disposition  or (ii) the Holder  furnishes to the Company an opinion of counsel,
reasonably  acceptable  to  counsel  for the  Company,  to the  effect  that the
proposed  sale,   transfer,   or  other  disposition  may  be  effected  without
registration under the Act, as well as such other documentation incident to such
sale,  transfer,  or other disposition as the Company's counsel shall reasonably
request.

                    (b) LEGEND.  Any Warrant  Shares issued upon the exercise of
this Warrant shall bear the following legend:

                  "The shares  evidenced  by this  certificate  were issued upon
                  exercise  of a Warrant  and may not be sold,  transferred,  or
                  otherwise   disposed  of  in  the  absence  of  an   effective
                  registration  under the  Securities Act of 1933 (the "Act") or
                  an opinion of counsel,  reasonably  acceptable  to counsel for
                  the Company,  to the effect that the proposed sale,  transfer,
                  or disposition may be effectuated  without  registration under
                  the Act."

4.       RESERVATION OF SHARES.

                  The  Company  covenants  that it will at all time  reserve and
keep  available out of its  authorized  Common Stock,  solely for the purpose of
issuance upon exercise of this Warrant, such number of shares of Common Stock as
shall then be issuable upon the exercise of this Warrant.  The Company covenants
that all shares of Common  Stock which shall be issuable  upon  exercise of this
Warrant shall be duly and validly issued and fully paid and  non-assessable  and
free from all taxes, liens, and charges with respect to the issue thereof.

                                       2

<PAGE>

5.       LOSS OR MUTILATION.

                  If the  Holder  loses  this  Warrant,  or if this  Warrant  is
stolen, destroyed or mutilated, the Company shall issue an identical replacement
Warrant  upon the Holder's  delivery to the Company of a customary  agreement to
indemnify  the  Company  for any  losses  resulting  from  the  issuance  of the
replacement Warrant.

6.       ANTI-DILUTION PROVISIONS.

                    (a) STOCK DIVIDENDS,  SUBDIVISIONS AND  COMBINATIONS.  If at
any time the Company shall:

                         (i) take a record of the  holders of its  Common  Stock
for the  purpose of  entitling  them to receive a dividend  payable in, or other
distribution of, additional shares of Common Stock,

                         (ii) subdivide its  outstanding  shares of Common Stock
into a larger number of shares of Common Stock, or

                         (iii)  combine its  outstanding  shares of Common Stock
into a smaller number of shares of Common Stock,

then (A) the  number  of  shares of Common  Stock  for  which  this  Warrant  is
exercisable  into  immediately  after the  occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record  holder of
the same number of shares of Common Stock for which this Warrant is  exercisable
into immediately  prior to the occurrence of such event would own or be entitled
to receive after the happening of such event,  and (B) the Purchase  Price shall
be adjusted to equal (x) the current  Purchase  Price  immediately  prior to the
adjustment  multiplied  by the  number of shares of Common  Stock for which this
Warrant is exercisable into immediately  prior to the adjustment  divided by (y)
the number of shares of Common Stock for which this Warrant is exercisable  into
immediately after such adjustment.

                    (b) CERTAIN OTHER DISTRIBUTIONS.  If at any time the Company
shall  take a record of the  holders  of its  Common  Stock for the  purpose  of
entitling them to receive any dividend or other distribution of:

                         (i) cash  (other  than a cash  dividend  payable out of
earnings or earned surplus legally  available for the payment of dividends under
the laws of the jurisdiction of incorporation of the Company),

                         (ii) any evidences of its  indebtedness,  any shares of
stock of any class or any other securities or property of any nature  whatsoever
(other than cash,  convertible securities or additional shares of Common Stock),
or

                         (iii) any warrants or other rights to subscribe  for or
purchase any evidences of its indebtedness,  any shares of stock of any class or
any other  securities  or  property of any nature  whatsoever  (other than cash,
convertible securities or additional shares of Common Stock),

                                        3

<PAGE>

then (A) the  number  of  shares of Common  Stock  for  which  this  Warrant  is
exercisable  into shall be adjusted to equal the product of the number of shares
of Common Stock for which this Warrant is exercisable into immediately  prior to
such  adjustment  by a fraction (x) the  numerator of which shall be the current
Purchase  Price per share of Common  Stock at the date of taking such record and
(y) the  denominator  of which shall be such  current  Purchase  Price minus the
amount  allocable to one share of Common Stock of any such cash so distributable
and of the fair value (as  determined in good faith by the Board of Directors of
the  Company) of any and all such  evidences of  indebtedness,  shares of stock,
other  securities  or property or  warrants  or other  subscription  or purchase
rights so  distributable,  and (B) the Purchase Price shall be adjusted to equal
(x) the Purchase  Price  multiplied  by the number of shares of Common Stock for
which this  Warrant is  exercisable  into  immediately  prior to the  adjustment
divided  by (y) the number of shares of Common  Stock for which this  Warrant is
exercisable into immediately after such adjustment.  A  reclassification  of the
Common  Stock  (other  than a change in par  value,  or from par value to no par
value or from no par value to par value) into shares of Common  Stock and shares
of any other class of stock shall be deemed a distribution by the Company to the
holders of its Common  Stock of such shares of such other class of stock  within
the meaning of this Section 6(b) and, if the outstanding  shares of Common Stock
shall be changed into a larger or smaller  number of shares of Common Stock as a
part of such  reclassification,  such change  shall be deemed a  subdivision  or
combination,  as the case may be, of the  outstanding  shares  of  Common  Stock
within the meaning of Section 6(a).

               (C)      ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.

                         (i) If at any time the Company  shall issue or sell any
additional shares of Common Stock in exchange for consideration in an amount per
additional  share of Common  Stock less than the current  Purchase  Price at the
time the  additional  shares of Common  Stock are  issued or sold,  then (A) the
current Purchase Price shall be reduced to a price determined by dividing (x) an
amount equal to the sum of (1) the number of shares of Common Stock  outstanding
immediately  prior to such issue or sale multiplied by the then existing current
Purchase Price, plus (2) the consideration, if any, received by the Company upon
such  issue  or  sale,  by (y) the  total  number  of  shares  of  Common  Stock
outstanding  immediately  after such issue or sale; and (B) the number of shares
of Common Stock for which this Warrant is exercisable  into shall be adjusted to
equal the product  obtained by multiplying the current  Purchase Price in effect
immediately  prior to such issue or sale by the number of shares of Common Stock
for which this Warrant is exercisable  into  immediately  prior to such issue or
sale and dividing the product  thereof by the current  Purchase Price  resulting
from the adjustment made pursuant to clause (i).

                         (ii) If the Company shall at any time issue or sell any
additional shares of Common Stock in exchange for consideration in an amount per
additional  share of  Common  Stock  less  than the  Current  Market  Price  (as
hereinafter  defined)  at the time the  additional  shares of  Common  Stock are
issued or sold,  then (A) the  number of shares of Common  Stock for which  this
Warrant is exercisable  into shall be adjusted to equal the product  obtained by
multiplying  the  number of shares of Common  Stock for which  this  Warrant  is
exercisable into  immediately  prior to such issue or sale by a fraction (x) the
numerator  of which  shall be the number of shares of Common  Stock  outstanding

                                       4
<PAGE>

immediately  after such issue or sale, and (y) the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such issue
or sale plus the  number of shares  which the  aggregate  offering  price of the
total number of such  additional  shares of Common  Stock would  purchase at the
then Current Market Price;  and (B) the current  Purchase Price as to the number
of shares for which this Warrant is  exercisable  into prior to such  adjustment
shall be adjusted by multiplying  such current  Purchase Price by a fraction (a)
the  numerator  of which shall be the number of shares for which this Warrant is
exercisable  into  immediately  prior  to  such  issue  or  sale;  and  (b)  the
denominator  of which shall be the number of shares of Common Stock  purchasable
immediately after such issue or sale.

                         (iii) "Current  Market Price" means,  in respect of any
share of Common Stock on any date herein specified, if there shall not then be a
public market for the Common Stock,  the value per share of Common Stock at such
date as is  determined  in the good faith  judgment of the Board of Directors of
the Company, or if there shall then be a public market for the Common Stock, the
average of the daily market  prices for 10  consecutive  business days ending on
the  business  day  prior to such  date.  The daily  market  price for each such
business day shall be (i) the last sale price on such day on the principal stock
exchange on which such Common Stock is then listed or admitted to trading,  (ii)
if no sale takes place on such day on any such exchange, the average of the last
reported  closing bid and asked prices on such day as  officially  quoted on any
such  exchange,  (iii) if the Common  Stock is not then  listed or  admitted  to
trading on any stock exchange,  the average of the last reported closing bid and
asked  prices on such day in the  over-the-counter  market,  as furnished by the
National  Association of Securities  Dealers  Automated  Quotation System or the
National Quotation Bureau, Inc., (iv) if neither such corporation at the time is
engaged in the  business of reporting  such prices,  as furnished by any similar
firm  then  engaged  in such  business,  or (v) if  there  is no such  firm,  as
furnished by any member of the NASD selected mutually by the holders of at least
50% of the  aggregate  principal  amount of the  Warrants and the Company or, if
they cannot agree upon such  selection,  as furnished by two such members of the
NASD, one of which shall be selected by holders of at least 50% of the aggregate
principal  amount of the  Warrants  and one of which  shall be  selected  by the
Company.

                         (iv) If at any time the Company shall issue or sell any
additional shares of Common Stock in exchange for consideration in an amount per
additional  shares of Common Stock which is less than the current Purchase Price
and Current Market Price at the time the  additional  shares of Common Stock are
issued or sold, the adjustment  required under Section 6(c)(i) or 6(c)(ii) shall
be made in accordance  with the formula  contained  therein which results in the
lower current  Purchase  Price  following  such  adjustment.  The  provisions of
paragraphs  6(c)(i) and 6(c)(ii)  shall not apply to any issuance of  additional
shares of Common Stock for which an adjustment is provided under Section 6(a) or
6(b).  No  adjustment  of the  number of shares of Common  Stock for which  this
Warrant  shall be  exercisable  into  shall be made under  paragraph  6(c)(i) or
6(c)(ii)  upon the issuance of any  additional  shares of Common Stock which are
issued  pursuant  to the  exercise  of any  warrants  or other  subscription  or
purchase  rights or pursuant to the exercise of any purchase or exchange  rights
in any convertible securities, if any such adjustment shall previously have been
made upon the issuance of such  warrants or other rights or upon the issuance of
such convertible securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 6(d) or Section 6(e).

                    (d) ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time the
Company  shall take a record of the holders of its Common  Stock for the purpose
of entitling them to receive a

                                       5

<PAGE>

distribution of, or shall in any manner (whether  directly or by assumption in a
merger in which the Company is the  surviving  corporation)  issue or sell,  any
warrants or other rights to subscribe for or purchase any  additional  shares of
Common  Stock  or any  convertible  securities,  whether  or not the  rights  to
exchange or convert  thereunder are immediately  exercisable,  and the price per
share for which Common Stock is issuable  upon the exercise of such  warrants or
other rights or upon conversion or exchange of such convertible securities shall
be less than the current  Purchase  Price or the Current  Market Price in effect
immediately  prior to the time of such issue or sale,  then the number of shares
for which this Warrant is exercisable  into and the current Purchase Price shall
be adjusted as provided in Section 6(c) on the basis that the maximum  number of
additional  shares of Common  Stock  issuable  pursuant to all such  warrants or
other  rights or  necessary  to effect the  conversion  or  exchange of all such
convertible  securities  shall be deemed to have been issued and outstanding and
the Company shall have received all of the consideration  payable  therefor,  if
any, as of the date of the actual issuance of such warrants or other rights.  If
the maximum number of additional  shares of Common Stock necessary to effect the
conversion or exchange is indeterminable as a result of a conversion or exercise
price which adjusts over time  (whether  based on the Market Price of the Common
Stock or otherwise),  the determination of adjustments  pursuant to this Section
6(d) shall be  determined  at the time of actual  conversion or exercise of such
convertible  securities  and an  adjustment  shall  be  made  only  upon  actual
conversions  or  exchanges  which are below the  Purchase  Price or the  Current
Market Price on the date of issuance of such Convertible Securities.  No further
adjustments of the current Purchase Price shall be made upon the actual issue of
such  Common  Stock or of such  convertible  securities  upon  exercise  of such
warrants or other rights or upon the actual issue of such Common Stock upon such
conversion or exchange of such convertible securities.

                    (e) ISSUANCE OF CONVERTIBLE  SECURITIES.  If at any time the
Company  shall take a record of the holders of its Common  Stock for the purpose
of entitling them to receive a distribution  of, or shall in any manner (whether
directly  or by  assumption  in a merger in which the  Company is the  surviving
corporation)  issue or sell,  any  convertible  securities,  whether  or not the
rights to exchange or convert  thereunder are immediately  exercisable,  and the
price per share for which  Common  Stock is  issuable  upon such  conversion  or
exchange  shall be less than the current  Purchase Price or Current Market Price
in effect  immediately  prior to the time of such issue or sale, then the number
of shares of Common  Stock for which this  Warrant is  exercisable  into and the
current  Purchase  Price shall be  adjusted  as provided in Section  6(c) on the
basis that the maximum number of additional  shares of Common Stock necessary to
effect the conversion or exchange of all such  convertible  securities  shall be
deemed to have been issued and  outstanding  and the Company shall have received
all of the  consideration  payable  therefor,  if any,  as of the date of actual
issuance of such  convertible  securities.  If the maximum  number of additional
shares of Common  Stock  necessary  to effect  the  conversion  or  exchange  is
indeterminable  as a result of a conversion or exercise price which adjusts over
time (whether based on the Market Price of the Common Stock or  otherwise),  the
determination  of adjustments  pursuant to this Section 6(e) shall be determined
at the time of actual conversion or exercise of such convertible  securities and
an adjustment shall be made only upon actual  conversions or exchanges which are
below the Purchase  Price or the Current Market Price on the date of issuance of
such Convertible  Securities.  No further  adjustment of the number of shares of
Common Stock for which this Warrant is exercisable into and the current Purchase
Price shall be made under this Section 6(e) upon the issuance of any convertible
securities  which are issued  pursuant to the  exercise of any warrants or other
subscription  or  purchase  rights  therefor,   if  any

                                       6

<PAGE>

such  adjustment  shall  previously  have been made  upon the  issuance  of such
warrants or other rights pursuant to Section 6(d). No further adjustments of the
number of shares of Common Stock for which this Warrant is exercisable  into and
the current  Purchase  Price shall be made upon the actual  issue of such Common
Stock upon conversion or exchange of such convertible securities.

                    (f) SUPERSEDING ADJUSTMENT.

                         (i) If, at any time after any  adjustment of the number
of shares of Common  Stock for which this  Warrant is  exercisable  into and the
current  Purchase Price shall have been made pursuant to Section 6(d) or Section
6(e) as the result of any  issuance of  warrants,  other  rights or  convertible
securities,  then (x) such warrants or other rights,  or the right of conversion
or exchange in such other  convertible  securities,  shall expire,  and all or a
portion of such warrants or other rights, or the right of conversion or exchange
with respect to all or a portion of such other  convertible  securities,  as the
case may be shall not have been exercised,  or (y) the  consideration  per share
for which shares of Common Stock are issuable pursuant to such warrants or other
rights,  or the terms of such other convertible  securities,  shall be increased
solely by virtue of provisions  therein  contained for an automatic  increase in
such  consideration  per share upon the occurrence of a specified date or event,
then any such  previous  adjustments  to this  Warrant  shall be  rescinded  and
annulled  and the  additional  shares of Common  Stock which were deemed to have
been issued by virtue of the computation  made in connection with the adjustment
so  rescinded  and  annulled  shall no longer  be deemed to have been  issued by
virtue of such computation.

                         (ii)  Upon  the  occurrence  of an event  set  forth in
Section  6(f) above there shall be, a  recomputation  made of the effect of such
warrants,  other rights or options or other convertible  securities on the basis
of:  (a)  treating  the  number of  additional  shares of Common  Stock or other
property,  if any,  theretofore  actually  issued or  issuable  pursuant  to the
previous  exercise  of any such  warrants  or other  rights or any such right of
conversion  or exchange,  as having been issued on the date or dates of any such
exercise and for the consideration  actually  received and receivable  therefor,
and (b) treating any such warrants or other rights or any such other convertible
securities  which  then  remain  outstanding  as having  been  granted or issued
immediately  after the time of such increase of the  consideration per share for
which shares of Common Stock or other  property are issuable under such warrants
or other rights or other convertible  securities;  whereupon a new adjustment of
the number of shares of Common  Stock for which  this  Warrant  and the  current
Purchase Price shall be made,  which new adjustment shall supersede the previous
adjustment so rescinded and annulled.

                    (g)  OTHER   PROVISIONS   APPLICABLE  TO  ADJUSTMENTS.   The
following  provisions  shall be applicable to the making of  adjustments  of the
number of shares of Common Stock for which this Warrant is exercisable  into and
the current Purchase Price provided for in this Section 6:

                         (i)  COMPUTATION OF  CONSIDERATION.  To the extent that
any  additional  shares of Common  Stock or any  convertible  securities  or any
warrants or other rights to subscribe for or purchase any  additional  shares of
Common Stock or any convertible securities shall

                                       7

<PAGE>

be issued for cash  consideration,  the  consideration  received  by the Company
therefor shall be the amount of the cash received by the Company  therefor,  or,
if such additional shares of Common Stock or convertible  securities are offered
by the Company for subscription,  the subscription price, or, if such additional
shares of Common Stock or  convertible  securities are sold to  underwriters  or
dealers for public offering without a subscription  offering, the initial public
offering price (in any such case  subtracting any amounts paid or receivable for
accrued  interest  or accrued  dividends  and without  taking  into  account any
compensation,  discounts or expenses  paid or incurred by the Company for and in
the underwriting of, or otherwise in connection with, the issuance thereof).  To
the extent  that such  issuance  shall be for a  consideration  other than cash,
then,  except  as  herein  otherwise  expressly  provided,  the  amount  of such
consideration  shall be deemed to be the fair value of such consideration at the
time of such  issuance as  determined in good faith by the Board of Directors of
the Company.  In case any additional  shares of Common Stock or any  convertible
securities  or any warrants or other rights to  subscribe  for or purchase  such
additional  shares of Common Stock or convertible  securities shall be issued in
connection  with any  merger in which the  Company  issues any  securities,  the
amount  of  consideration  therefor  shall be deemed  to be the fair  value,  as
determined  in good  faith by the Board of  Directors  of the  Company,  of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be  attributable  to such additional  shares of
Common Stock, convertible securities,  warrants or other rights, as the case may
be.  The  consideration  for any  additional  shares  of Common  Stock  issuable
pursuant to any warrants or other  rights to subscribe  for or purchase the same
shall be the consideration  received by the Company for issuing such warrants or
other  rights plus the  additional  consideration  payable to the  Company  upon
exercise of such warrants or other rights.  The consideration for any additional
shares  of  Common  Stock  issuable  pursuant  to the  terms of any  convertible
securities  shall be the  consideration  received  by the  Company  for  issuing
warrants  or  other  rights  to  subscribe  for  or  purchase  such  convertible
securities,  plus the consideration paid or payable to the Company in respect of
the  subscription  for or  purchase  of such  convertible  securities,  plus the
additional  consideration,  if any,  payable to the Company upon the exercise of
the right of conversion or exchange in such convertible  securities.  In case of
the issuance at any time of any additional shares of Common Stock or convertible
securities in payment or  satisfaction  of any dividends upon any class of stock
other than Common  Stock,  the Company shall be deemed to have received for such
additional  shares of Common Stock or  convertible  securities  a  consideration
equal to the amount of such dividend so paid or satisfied. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any consideration and the fair value of such  consideration
shall be  determined  by the Board of Directors  to equal or exceed  $2,000,000,
such  determination  shall, if requested by the holder of 51% of the outstanding
Warrants issued pursuant to the Purchase  Agreement,  be supported by an opinion
of an investment  banking firm of recognized  national  standing selected by the
holder of this Warrant and acceptable to the Company.

                         (ii)  WHEN  ADJUSTMENTS  TO BE  MADE.  The  adjustments
required by Section 6 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the number of
shares of Common  Stock for which this  Warrant is  exercisable  into that would
otherwise be required may be postponed  (except in the case of a subdivision  or
combination  of shares of the Common Stock,  as provided for in Section 6(a)) up
to, but not beyond the date of exercise if such  adjustment  either by itself or
with other adjustments not previously made adds or subtracts less than 1% of the
shares of Common Stock for which this Warrant is  exercisable  into  immediately
prior to the making of such adjustment.

                                       8

<PAGE>

Any adjustment representing a change of less than such minimum amount (except as
aforesaid)  which is postponed shall be carried forward and made as soon as such
adjustment,  together with other adjustments  required by this Section 6 and not
previously made, would result in a minimum adjustment or, if sooner, on the date
of exercise.  For the purpose of any  adjustment,  any specified  event shall be
deemed to have occurred at the close of business on the date of its occurrence.

                         (iii) FRACTIONAL  INTERESTS.  In computing  adjustments
under this Section 6,  fractional  interests in Common Stock shall be taken into
account to the nearest 1/100th of a share.

                         (iv) WHEN ADJUSTMENT NOT REQUIRED.

                              (a) If the  Company  shall  take a  record  of the
holders  of its Common  Stock for the  purpose  of  entitling  them to receive a
dividend  or   distribution  or  subscription  or  purchase  rights  and  shall,
thereafter and before the distribution to stockholders thereof,  legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights,  then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment  previously made in respect thereof shall
be rescinded and annulled.

                              (b) No  adjustment  shall be required  pursuant to
this Section 6 upon:

                              (1)  the  exercise  of any  warrants,  options  or
convertible  securities granted,  issued and outstanding on the date of issuance
of this Warrant;

                              (2) upon the  grant or  exercise  of any  stock or
options  which may  hereafter be granted or exercised  under any employee  stock
option 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 the  independent  directors  established  for such
purpose; or

                              (3) the exercise of the Warrants;

                         (v)  ESCROW OF STOCK.  If after  any  property  becomes
distributable  pursuant to this  Section 6 by reason of the taking of any record
of the holders of Common  Stock,  but prior to the  occurrence  of the event for
which  such  record is taken,  and the  holder of this  Warrant  exercises  this
Warrant,  any shares of Common Stock  issuable  upon  exercise by reason of such
event shall be deemed the last shares of Common  Stock for which this Warrant is
exercised  (notwithstanding any other provision to the contrary herein) and such
shares or other  property shall be held in escrow for the holder of this Warrant
by the Company to be issued to the holder of this Warrant upon and to the extent
that the event actually takes place, upon payment of the current Purchase Price.
Notwithstanding  any other  provision to the contrary  herein,  if the event for
which such record was taken fails to occur or is  rescinded,  then such escrowed
shares shall be canceled by the Company and escrowed property returned.

                                       9

<PAGE>

                    (h) OTHER ACTION AFFECTING COMMON STOCK. In case at any time
or from time to time the Company  shall take any action in respect of its Common
Stock, other than the payment of dividends or any other action described in this
Section 6, then,  unless such action will not have a materially  adverse  effect
upon the  rights of the Holder of this  Warrant,  the number of shares of Common
Stock or other  stock for which this  Warrant  is  exercisable  into  and/or the
purchase  price  thereof shall be adjusted in such manner as may be equitable in
the circumstances.

                    (i) CERTAIN LIMITATIONS.  Notwithstanding anything herein to
the contrary,  the Company agrees not to enter into any  transaction  which,  by
reason of any adjustment hereunder, would cause the current Purchase Price to be
less than the par value per share of Common Stock.

                    (j)  CERTIFICATE AS TO  ADJUSTMENTS.  Upon the occurrence of
each  adjustment or  readjustment  of the Purchase  Price,  the Company,  at its
expense,  shall promptly  compute such  adjustment or readjustment in accordance
with the terms  hereof and  prepare  and  furnish  to the  Holder a  certificate
setting forth such  adjustment or  readjustment  and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written  request at any time of the Holder,  furnish or cause to be furnished to
such  holder  a  like  certificate   setting  forth  (i)  such  adjustments  and
readjustments,  (ii) the  Purchase  Price at the time in effect for this Warrant
and (iii) the number of shares of Common Stock and the amount,  if any, or other
property which at the time would be received upon the exercise of this Warrant.

                    (k)  NOTICES OF RECORD  DATE.  In the event of any fixing by
the Company of a record date for the holders of any class of securities  for the
purpose of  determining  the  holders  thereof  who are  entitled to receive any
dividend  (other  than a cash  dividend)  or other  distribution,  any shares of
Common Stock or other  securities,  or any right to subscribe  for,  purchase or
otherwise acquire, or any option for the purchase of, any shares of stock of any
class or any other  securities or property,  or to receive any other right,  the
Company  shall  mail to the Holder at least  thirty  (30) days prior to the date
specified  therein,  a notice specifying the date on which any such record is to
be taken for the  purpose of such  dividend,  distribution  or  rights,  and the
amount and character of such dividend, distribution or right.

                    (l)  MERGER,  CONSOLIDATION,  ETC.  In case  of any  capital
reorganization or any reclassification of the capital stock of the Company or in
case of the consolidation or merger of the Company with another  corporation (or
in the case of any sale,  transfer,  or other disposition to another corporation
of all or substantially all the property,  assets, business, and goodwill of the
Company),  the Holder of this Warrant  shall  thereafter be entitled to purchase
the kind and amount of shares of capital  stock which this Warrant  entitled the
Holder  to  purchase   immediately   prior  to  such   capital   reorganization,
reclassification of capital stock,  consolidation,  merger, sale,  transfer,  or
other disposition; and in any such case appropriate adjustments shall be made in
the  application  of the provisions of this Section 6 with respect to rights and
interests  thereafter  of the  Holder  of  this  Warrant  to the  end  that  the
provisions  of  this  Section  6  shall  thereafter  be  applicable,  as near as
reasonably  may be,  in  relation  to any  shares or other  property  thereafter
purchasable upon the exercise of this Warrant.

                    (m) FRACTIONAL  SHARES. No certificate for fractional shares
shall be issued upon the exercise of this Warrant.

                                       10

<PAGE>

                    (n) RIGHTS OF THE HOLDER.  The Holder of this Warrant  shall
not be entitled to any rights of a shareholder  of the Company in respect of any
Warrant Shares  purchasable  upon the exercise  hereof until such Warrant Shares
have been paid for in full and issued to it. As soon as  practicable  after such
exercise, the Company shall deliver a certificate or certificates for the number
of full shares of Common Stock  issuable  upon such  exercise,  to the person or
persons entitled to receive the same.

                    (o) FUTURE  PRICED  SECURITIES  LIMITATION.  Notwithstanding
anything  contained  herein to the contrary,  the aggregate  number of shares of
Common Stock issued upon conversion and exercise of the Future Priced Securities
(as defined  below)  cannot equal or exceed 20% of the Common Stock  outstanding
immediately before the issuance of a Future Priced Security,  unless the Company
has obtained  prior  shareholder  approval for such  issuance.  In the event the
aggregate  number of shares of Common Stock that would be issued upon conversion
and exercise of the Future Priced Securities equals or exceeds 20% of the Common
Stock so  outstanding,  and the Company has failed to obtain  prior  shareholder
approval for such issuance,  then the number of shares of Common Stock which the
holders of the Future Priced Securities would be entitled to acquire through the
conversion  and exercise of the Future Priced  Securities  shall be reduced on a
pro rata basis (in proportion to a fraction, the numerator of which shall be the
total number of shares of Common Stock issuable to the holder of a Future Priced
Security upon exercise and conversion of such holder's  Future Priced  Security,
and the  denominator of which shall be the aggregate  number of shares of Common
Stock  issuable  upon  exercise  and  conversion  of all of  the  Future  Priced
Securities) so that the aggregate number of shares of Common Stock issuable upon
exercise and conversion of the Future Priced Securities does not equal or exceed
20% of the Common Stock outstanding  immediately  before the first issuance of a
Future Priced Security. For purposes of this Warrant, "Future Priced Securities"
shall mean the Warrants and Common  Shares of the Company  issued in  connection
with the transactions contemplated by the Purchase Agreement.

7.        REPRESENTATIONS AND WARRANTIES.

                    The Holder,  by acceptance of this Warrant,  represents  and
warrants to, and covenants and agrees with, the Company as follows:

                    (a) The  Warrant  is being  acquired  for the  Holder's  own
account for investment and not with a view toward resale or  distribution of any
part thereof,  and the Holder has no present intention of selling,  granting any
participation in, or otherwise distributing the same.

                    (b) The Holder is aware that the  Warrant is not  registered
under  the Act or any  state  securities  or blue sky  laws  and,  as a  result,
substantial  restrictions  exist  with  respect  to the  transferability  of the
Warrant and the Warrant Shares to be acquired upon exercise of the Warrant.

                    (c) The Holder is an accredited  investor as defined in Rule
501(a) of Regulation D under the Act and is a  sophisticated  investor  familiar
with the type of risks  inherent in the  acquisition  of securities  such as the
Warrant, and its financial position is such that it can

                                       11
<PAGE>

afford to retain the Warrant and the Warrant Shares for an indefinite  period of
time without realizing any direct or indirect cash return on this investment.

8.        NO IMPAIRMENT

                  The  Company  shall  not  by  any  action  including,  without
limitation,   amending  its   certificate  of   incorporation   or  through  any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities  or any other  voluntary  action,  avoid or seek to avoid the
observance or performance  of any of the terms of this Warrant,  but will at all
times in good  faith  assist in the  carrying  out of all such  terms and in the
taking of all such  actions as may be necessary  or  appropriate  to protect the
rights of Holder  against  impairment.  Without  limiting the  generality of the
foregoing,  the  Company  will (a) not  increase  the par value of any shares of
Common  Stock  receivable  upon the  exercise of this  Warrant  above the amount
payable  therefor upon such exercise  immediately  prior to such increase in par
value,  (b) 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 (c) use its best
efforts to obtain  all such  authorizations,  exemptions  or  consents  from any
public regulatory body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations  under this Warrant.  Upon the request of
Holder,  the  Company  will at any  time  during  the  period  this  Warrant  is
outstanding  acknowledge  in  writing,  in  form  satisfactory  to  Holder,  the
continuing  validity  of  this  Warrant  and  the  obligations  of  the  Company
hereunder.

9.       SUPPLYING INFORMATION

                  The  Company  shall  cooperate  with Holder and each holder of
Warrant Shares in supplying such information pertaining to the Company as may be
reasonable  necessary  for such  Holder  and each  holder of  Warrant  Shares to
complete  and  file any  information  reporting  forms  presently  or  hereafter
required  by the  Securities  and  Exchange  Commission  as a  condition  to the
availability of an exemption from the Act for the sale of Warrant Shares.

10.      LIMITATION OF LIABILITY

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

11.       MISCELLANEOUS.

                    (a) TRANSFER TAXES;  EXPENSES.  The Holder shall pay any and
all underwriters' discounts,  brokerage fees, and transfer taxes incident to the
sale or exercise of this Warrant or the sale of the underlying  shares  issuable
thereunder,  and shall pay the fees and  expenses  of any special  attorneys  or
accountants retained by it.

                    (b) SUCCESSORS AND ASSIGNS.  Subject to compliance  with the
provisions  of Section 3, this  Warrant and the rights  evidenced  hereby  shall
inure to the benefit of and be binding  upon the  successors  of the Company and
the  successors  and  assigns of Holder.  The

                                       12

<PAGE>

provisions  of this  Warrant  are  intended to be for the benefit of all Holders
from time to time of this Warrant, and shall be enforceable by any such Holder.

                    (c) NOTICE.  Any notice or other  communication  required or
permitted to be given to the Company  shall be in writing and shall be delivered
by certified mail with return  receipt or delivered in person  against  receipt,
addressed to the Company as follows:

                           Workstream Inc.
                           495 March Road, Suite 300,
                           Ottawa, Ontario, Canada K2K-3G1
                           Attn:  Chairman

                  (d)  GOVERNING  LAW.  This  Warrant   Certificate  shall  be
governed  by, and  construed  in  accordance  with,  the laws of the Province of
Ontario and the Country of Canada applicable  therein,  without reference to the
conflicts of laws.

                  IN WITNESS  WHEREOF,   the  Company  has  caused  this Warrant
Certificate to be duly executed as of the date set forth below.

                                             WORKSTREAM INC.

                                             By: /S/ MICHAEL MULLARKEY
                                             --------------------------
                                             Name: Michael Mullarkey
                                             Title: Chairman and CEO

Date:  May 30, 2003

                                       13

<PAGE>

                           FORM OF EXERCISE OF WARRANT

     The  undersigned  hereby  elects to  exercise  this  Warrant as to ________
Common Shares covered thereby.

     Enclosed herewith is a bank or certified check in the amount of $________.

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

                                        Signature
                                        Guarantor:
                                        -----------------------------------

                                       14

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