THIS WARRANT HAS BEEN, AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED
PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "SHARES") WILL BE, ACQUIRED SOLELY
FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES (TOGETHER, THE
"SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
DISPOSITION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND OF ANY
APPLICABLE STATE SECURITIES LAWS.

 

NEAH POWER SYSTEMS, INC.

 

WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK

 

No.
RN-1                                                                              
50,000,000    Shares of Common Stock

Issue Date: December 18, 2014

 

THIS CERTIFIES THAT, for value received, and in consideration for purchasing the
Convertible Note issued concurrent herewith (the “Convertible Note”), Rich
Niemiec or his registered assigns (the “Holder”), is entitled to subscribe for
and purchase from Neah Power Systems, Inc. (the “Company”), a Nevada corporation
with an address at 22118 20th Ave SE, Suite 142,  Bothell, Washington  998021,
FIFTY MILLION (50,000,000) shares of the fully paid and non-assessable Common
Stock, $0.001 par value ("Shares"), of the Company at the price of $0.008  per
share (the “Exercise Price”), subject to the provisions and upon the terms and
conditions hereinafter set forth.

 

            This Warrant is subject to the following terms and conditions:

 

            1.         TERM.

 

The term of this Warrant shall terminate, to the extent not exercised, on the
seventh anniversary of its issue date (the “Term”).  This Warrant is exercisable
by the Holder, in whole or in part, any time during the Term, commencing upon
the issue date.

 

            2.         EXERCISE PRICE ADJUSTMENT

 

The Exercise Price will be subject to adjustments during the period that the
Convertible Note is outstanding. Each adjustment shall be at the investors’
election, using the 10-day trailing volume weighted average bid price of the
Borrower’s Common Stock at the time of such election (the “New Reference
Price”). If the New Reference Price plus 25% is less than the Exercise Price,
then the New Reference Price plus 25% shall be used as the new Exercise Price,
subject to a floor of $0.003 per share. The Holder shall exercise its election
to adjust the Exercise Price under this Section 2 by delivering  written notice
to the Company (an “Exercise Price Adjustment Notice”)  in each such case and
the Borrower shall acknowledge such  election by the Holder to adjust the
Exercise Price in writing to the  Holder within ten (10) Business Days’ receipt
of each such Holder’s Exercise Price Adjustment Notice.

 

            3.         EXERCISE PRICE PROTECTION

 

The Exercise Price shall be subject to adjustment to prevent dilution in the
event that the Borrower, during the time that the Convertible Note is
outstanding, issues additional shares of its Common Stock or any right or option
to purchase its Common Stock or any other security convertible into its Common
Stock (other than shares issued to employees, consultants or directors under a
Company stock plan) at a purchase price less than the then applicable Exercise
Price.  In such an event, the Exercise Price shall be reduced, concurrently with
such issuance, on a full ratchet basis plus 25% if such calculation results in a
reduction of the Exercise Price.  This protection does not apply if the
Convertible Note is prepaid at the time of such issuance. 

 

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4.         METHOD OF EXERCISE; PAYMENT.

 

            (A)       CASH EXERCISE. The purchase rights represented by this
Warrant may be exercised by the Holder, in whole or in part, from time to time
at the principal office of the Company, by delivering a completed and duly
executed Notice of Exercise (attached hereto as Exhibit “A”) and by the payment
to, and receipt thereof by, the Company of an amount equal to the Exercise Price
multiplied by the number of the Shares being purchased (the “Aggregate Exercise
Price”), which amount may be paid, at the election of the Holder, by wire
transfer or certified check payable to the order of the Company, in immediately
available funds.  Payment of the Exercise Price shall be in lawful money of the
United States of America.  The person or persons in whose name(s) any
certificate(s) representing Shares shall be issuable upon exercise of this
Warrant shall be deemed to have become the holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the Shares represented
thereby (and such Shares shall be deemed to have been issued) immediately prior
to the close of business on the date or dates upon which this Warrant is
exercised, with the Holder having all rights as a record holder including, but
not limited to, all voting rights.

 

       (B)     Cashless Exercise.  The Holder may, in its sole discretion,
exercise this Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the “Net Number” of shares of Common Stock determined according to the
following formula (a “Cashless Exercise”):

 

Net Number = (A x B) - (A x C)

B

                                                                 

For purposes of the foregoing formula:

 

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

 

B= the a price equal to the average of the last sale price of the Common Stock
during the ten (10) consecutive trading days ending on the trading day
immediately preceding the date of the applicable Notice of Exercise if executed
and delivered pursuant to Section 2(A) hereof.

 

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

 

 

        (C)           STOCK CERTIFICATES. In the event of any exercise of the
rights represented by this Warrant, certificates for the Shares so purchased
shall be issued to the beneficiary(ies) named by Holder and shall be delivered
to the Holder within ten (10) business days after said exercise and, unless this
Warrant has been fully exercised or has expired, a new Warrant representing the
rights to acquire Shares with respect to which this Warrant shall not have been
exercised shall also be issued to the Holder within such time.

 

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              5.         STOCK FULLY PAID; RESERVATION OF SHARES. All of the
Shares issuable upon the exercise of the rights represented by this Warrant
will, upon issuance and receipt of the Exercise Price therefore, be fully paid
and non-assessable, and free from all preemptive rights, rights of first refusal
or first offer, taxes, liens and charges with respect to the issuance thereof.
The Company hereby represents and warrants that there have been reserved, and
the Company shall at all applicable times keep reserved until issued as
contemplated by this Section, out of the authorized and unissued Common Stock,
enough shares to provide for the exercise of the rights of purchase represented
by this Warrant.  The Company further represents and warrants that the transfer
agent for the Common Stock (“Transfer Agent”), and every subsequent transfer
agent for the Common Stock or other shares of the Company’s capital stock
issuable upon the exercise of any of the right of purchase or conversion
aforesaid, shall be irrevocably authorized and directed at all times to issue
such number of authorized and unissued shares of Common Stock as shall be
issuable upon the proper exercise hereof. The Company will keep a conformed copy
of this Warrant on file with the Transfer Agent and with every subsequent
transfer agent for the Common Stock or other shares of the Company’s capital
stock issuable upon the exercise of the rights of purchase represented by this
Warrant.  The Company will supply from time to time the Transfer Agent with duly
executed stock certificates required to honor the outstanding Warrant.

 

6.         ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. Subject to the
provisions herein, the number and kind of Shares purchasable upon the exercise
of this Warrant and the Exercise Price therefore shall be subject to adjustment
from time to time upon the occurrence of certain events, as follows:

 

(A)       RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of any
reclassification of the Common Stock (other than a change in par value, or as a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a
consolidation or merger with another corporation in which the Company is a
continuing corporation and in which the Company's stockholders immediately
preceding such consolidation or merger own at least 50% of the voting securities
of the Company following such consolidation or merger and which does not result
in any reclassification of the Shares issuable upon exercise of this Warrant),
or in case of any sale of all or substantially all of the assets of the Company,
the Company, or such successor or purchasing corporation as the case may be,
shall execute a new Warrant, providing that the holder of this Warrant shall
have the right to exercise such new Warrant, and procure upon such exercise and
payment of the same aggregate Exercise Price, in lieu of the Shares theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification,
change, consolidation, sale of all or substantially all of the Company's assets
or merger by a holder of an equivalent number of Shares. Such new Warrant shall
provide for adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Paragraph “(A)” of this Article “4” of
this Warrant. The provisions of this Paragraph “(A)” of this Article “4” of this
Warrant shall similarly apply to successive reclassifications, consolidations,
mergers, sales, leases or conveyances.

 

(B)       STOCK SPLITS, DIVIDENDS AND COMBINATIONS. In the event that the
Company shall at any time subdivide the outstanding Shares or issue a stock
dividend on its outstanding Shares, the number of Shares issuable upon exercise
of this Warrant immediately prior to such subdivision or to the issuance of such
stock dividend shall be proportionately increased, and the Exercise Price shall
be proportionately decreased, and in the event that the Company shall at any
time combine the outstanding Shares, the number of Shares issuable upon exercise
of this Warrant immediately prior to such combination shall be proportionately
decreased, and the Exercise Price shall be proportionately increased, effective
at the close of business on the date of such subdivision, issuance of warrants
or options, stock dividend or combination, as the case may be.

 

            (C)       All calculations under this Section of this Warrant shall
be made to the nearest cent or to the nearest share, as the case may be.

 

(D)       In any case in which this Section of this Warrant shall require that
an adjustment in the number of Shares be made effective as of a record date for
a specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the Holder, if the Holder exercised this Warrant after such
record date, the Shares, if any, issuable upon such exercise over and above the
number of Shares issuable upon such exercise on the basis of the number of
Shares in effect prior to such adjustment; provided, however, that the Company
shall deliver to the Holder a due bill or other appropriate instrument
evidencing the Holder’s right to receive such additional Shares upon the
occurrence of the event requiring such adjustment.

 

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(E)       Whenever there shall be an adjustment as provided in this Section of
this Warrant, the Company shall within twenty (20) days thereafter cause written
notice thereof to be sent to the Holder, which notice shall be accompanied by an
officer’s certificate setting forth the number of Shares issuable and the
Exercise Price thereof after such adjustment and setting forth a brief statement
of the facts requiring such adjustment and the computation thereof, which
officer’s certificate shall be conclusive evidence of the correctness of any
such adjustment absent manifest error.

 

(F)        The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise of this
Warrant. If any fraction of a share of Common Stock would be issuable on the
exercise of this Warrant (or specified portions thereof), it shall be eliminated
by rounding such fraction to the nearest whole integer.

 

(G)       No adjustment in the Exercise Price per Warrant shall be required if
such adjustment is less than $.001.

 

7.         SHORT SALES. Neither Holder nor any affiliate of the Holder acting on
its behalf or pursuant to any understanding with it will execute any short sales
of the Company’s stock or warrants.

 

8.          CONDITIONS OF EXERCISE OR TRANSFER OF WARRANT.

 

(A)       Unless exercised pursuant to an effective registration statement under
the Act which includes the Shares so exercised, it shall be a condition to any
exercise of this Warrant that the Company shall have received, at the time of
such exercise, a representation in writing from the recipient that the Shares
being issued upon exercise, are being acquired for investment and not with a
view to any sale or distribution thereof.

 

(B)       This Warrant and each certificate evidencing the Shares issued upon
exercise of this Warrant shall be stamped or imprinted with a legend
substantially in the following form:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.

 

Subject to this Article “8” of this Warrant, the Company may instruct its
transfer agent not to register the transfer of all or a part of this Warrant, or
any of the Shares, unless the conditions specified in the above legend are
satisfied.

 

9.         REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Holder as follows:

 

(A)       This Warrant has been duly authorized and executed by the Company and
is a valid and binding obligation of the Company enforceable in accordance with
its terms.

 

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(B)       When exercisable in accordance with the terms hereof, the Shares will
have been duly authorized and reserved for issuance by the Company, validly
issued, fully paid and non-assessable.

 

10.       REPRESENTATIONS AND WARRANTIES BY THE HOLDER. The Holder represents
and warrants to the Company as follows:

 

(A)       This Warrant is being acquired for its own account, for investment and
not with a view to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Act. Upon exercise of this Warrant,
the Holder shall, if so requested by the Company, confirm in writing, in a form
reasonably satisfactory to the Company, that the Shares issuable upon exercise
of this Warrant are being acquired for investment and not with a view toward
distribution or resale.

 

            (B)       Unless advised to the contrary in writing by the Company,
the Holder is hereby informed and understands that this Warrant and the Shares
have not been registered under the Act by reason of their issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Act pursuant to Section 4(2) thereof, and that they must be held by the
Holder indefinitely, and that the Holder must therefore bear the economic risk
of such investment indefinitely, unless a subsequent disposition thereof is
registered under the Act or is exempted from such registration.

 

(C)       The Holder has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the purchase of
this Warrant and the Shares purchasable pursuant to the terms of this Warrant
and of protecting its interests in connection therewith.

 

(D)       The Holder is able to bear the economic risk of the purchase of the
Shares pursuant to the terms of this Warrant.

 

11.       RIGHTS OF STOCKHOLDERS. No holder of this Warrant shall be entitled,
as a warrant holder, to vote or receive dividends or be deemed the holder of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of stock, change of
par value, consolidation, merger, conveyance, or otherwise) or to receive notice
of meetings, or to receive dividends or subscription rights or otherwise until
the Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.

 

12.       TRANSFER. Subject to the terms and conditions of this Warrant,
including, but not limited to Paragraph “(B)” of Article “8” of this Warrant,
this Warrant may be transferred, in whole or in part, by delivering a completed
and duly executed Notice of Assignment (attached hereto as Exhibit “B”) to the
Company, with such Notice of Assignment stating the individual or entity to whom
it shall be transferred (the “Transferee”), and whether such transfer shall be
for all rights remaining on the Warrant or only a portion thereof. The Warrants
are transferable by Holder on the registry books of the Company or its transfer
agent, upon surrender of the original Warrants, duly endorsed or accompanied by
proper instrument of transfer satisfactory to the Company or its transfer agent,
together with payment of any applicable transfer taxes.  The Company and its
transfer agent may deem and treat the person in whose name the Warrants are
registered as the holder and as the absolute, true and lawful owner of the
Warrants for all purposes, and neither the Company nor its transfer agent shall
be affected by any notice or knowledge to the contrary.  In the event of any
transfer of rights represented by this Warrant, the Transferee shall receive a
Warrant in this form as soon as practicable after the Company receives the
Notice of Assignment, and, unless this Warrant has been transferred in full, a
new Warrant representing the rights to acquire Shares with respect to which this
Warrant shall not have been exercised and which have not been transferred shall
also be issued to the Holder 

 

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            13. Miscellaneous.

 

(A)       Headings contained in this Warrant are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Warrant.

 

(B)       If any provision which is contained in this Warrant should, for any
reason, be held to be invalid or unenforceable in any respect under the laws of
any jurisdiction, such invalidity or unenforceability shall not affect any other
provision of this Warrant, and this Warrant shall be construed as if such
invalid or unenforceable provision had not been contained herein.

 

(C)       Any notice or other communication required or permitted hereunder must
be in writing and sent by either (i) registered or certified mail, postage
prepaid, return receipt requested, (ii) overnight delivery with confirmation of
delivery or (iii) facsimile transmission with an original mailed by first class
mail, postage prepaid, in each case addressed as follows:

 

To the Holder: To the address of record for the Holder as shown on the registry
books maintained by the Company or its transfer agent for the Warrants.

 

To the Company:                           

 

                        Neah Power Systems, Inc.

                          22118 20th Ave SE, Suite 142

                        Bothell,Washington  998021              

                        Tel: (425) 424-3324 ext. 112

                        Fax: (425) 483-8454

                        Attn: Gerard D’Couto, President

                         

or in each case to such other address and facsimile number as shall have last
been furnished by like notice. If mailing by registered or certified mail is
impossible due to an absence of postal service, and if the other methods of
sending notice set forth in this Paragraph "(C)" of this Article "13" of this
Warrant are not otherwise available, notice shall be in writing and personally
delivered to the aforesaid address. Each notice or communication shall be deemed
to have been given as of the date so mailed or delivered, as the case may be;
provided, however that any notice sent by facsimile shall be deemed to have been
given as of the date sent by facsimile if a copy of such notice is also mailed
by first class mail on the date sent by facsimile; if the date of mailing
differs from the date of sending by facsimile, then the date of mailing by first
class mail shall be deemed to be the date upon which notice was given.

 

            (D)       This Warrant shall in all respects be construed, governed,
applied and enforced under with the internal laws of the State of Nevada without
giving effect to the principles of conflicts of laws and be deemed to be an
agreement entered into in the State of Nevada and made pursuant to the laws of
the State of Nevada.

   

 (E)      Each of the parties further acknowledges and agrees that (i) each has
been advised by counsel during the course of negotiations; (ii) each counsel has
had significant input in the development of this Warrant and (iii) this Warrant
shall not, therefore, be construed more strictly against any party responsible
for its drafting regardless of any presumption or rule requiring construction
against the party whose attorney drafted this agreement.

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             (F)        The parties have not made any representations,
warranties, or covenants with respect to the subject matter hereof which are not
set forth herein, and this Warrant, together with any instruments or other
agreements executed simultaneously herewith, constitutes the entire agreement
between them with respect to the subject matter hereof. All understandings and
agreements heretofore had between the parties with respect to the subject matter
hereof are merged in this Warrant and such other instruments and agreements,
which alone fully and completely express their agreement. This Warrant may not
be changed, modified, extended, terminated or discharged orally, but only by
means of a written agreement which is signed by both parties to this Warrant and
which explicitly states that it modifies this Warrant.

 

(G)       The parties agree to execute any and all such other further
instruments and documents, and to take any and all such further actions which
are reasonably required to effectuate this Warrant and the intents and purposes
hereof.

 

(H)       This Warrant shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, personal
representatives, successors and assigns.

 

(I)        Except as otherwise expressly provided herein, no waiver of any
covenant, condition, or provision of this Warrant shall be deemed to have been
made unless expressly in writing and signed by the party against whom such
waiver is charged; and (i) the failure of any party to insist in any one or more
cases upon the performance of any of the provisions, covenants or conditions of
this Warrant or to exercise any option herein contained shall not be construed
as a waiver or relinquishment for the future of any such provisions, covenants
or conditions, (ii) the acceptance of performance of anything required by this
Warrant to be performed with knowledge of the breach or failure of a covenant,
condition or provision hereof shall not be deemed a waiver of such breach or
failure, and (iii) no waiver by any party of one breach by another party shall
be construed as a waiver of any other or subsequent breach.

 

(J)        All Exhibits annexed or attached to this Warrant are incorporated
into this Warrant by reference thereto and constitute an integral part of this
Warrant.

 

            (K)       This Warrant may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

             (L)        This Warrant is being issued to the Holder in connection
with a certain Securities Purchase Agreement, of even date herewith, pursuant to
which the Holder has loaned and the Company has borrowed certain funds and
issued to the Holder its Debenture, also of even date herewith, pursuant to
which the Holder may convert up to $500,000 of the loan principal into the
common shares of the Company.           

 

[Remainder   of Page Intentionally Left Blank; Signature Page Follows] 

 

 

 

 

 

 

 

 

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

 

Issued this 18th day of December, 2014.

 

Neah Power Systems, Inc.

 

By:  ____________________________                            

       Name: Gerard D’Couto

       Title:   Chief Executive Officer

 

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EXHIBIT A

 

NOTICE OF EXERCISE

 To: Neah Power Systems, Inc.

 

 

Attention: Chief Financial Officer

 

1. The undersigned hereby elects to purchase
_________________________________________ shares of Common Stock of Neah Power
Systems, Inc. pursuant to the terms of this Warrant, and tenders herewith
payment of the purchase price of such shares in full.

 

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

 

A.

____________

a “Cash Exercise” with respect to _________________

 

 

Warrant Shares; and/or

 

B. Payment of Exercise Price. In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the Holder has paid to the Company the Aggregate Exercise Price in the
sum of $___________________  (Per Share) to the Company in accordance with the
terms of the Warrant.

 

3. Please issue a certificate or certificates representing said shares of Common
Stock in the name of the undersigned or in such other name as is specified
below:

 

_________________________________ (Name)

 

_________________________________

_________________________________ (Address)

 

4. The undersigned hereby represents and warrants that the aforesaid shares of
Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares and all representations and warranties of
the undersigned set forth in the attached Warrant are true and correct as of the
date hereof.

 

______________________________

 

By: ­­­­­­­__________________________

 

Title: _________________________

 

Date:_________________________

 

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EXHIBIT B

NOTICE OF ASSIGNMENT

 

(To be executed by the registered Holder to effect

a transfer of Warrants)

 

FOR VALUE RECEIVED, _______________________ hereby sells, assigns and transfers
unto ____________________ the right to purchase ______________ shares of the
common stock, par value $.001 per share, of Neah Power Systems, Inc., evidenced
by the attached Warrant, together with all right, title and interest therein,
and does irrevocably constitute to transfer and appoint ___________________ to
transfer the said right on the books of said company with full power of
substitution in the premises.

 

The undersigned hereby certifies that the Warrants are being sold, assigned or
transferred in accordance with all applicable securities laws.

 

Dated:  ________________

 

                                                                                                                                                                                                                                                                                           
________________________

                                                                                                                                                                                                                                                                                                             
Signature

 

NOTE:  The signature to this transfer must correspond with the name as recorded
on the Warrants in every particular without alteration or enlargement or any
change whatever.  The signature of the person executing this transfer must be
medallion guaranteed.

 

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