Exhibit 4.1


     

    
      
        

      



    AMENDMENT
      AGREEMENT 

     

    AMENDMENT
      AGREEMENT
      (the
“Agreement”),
      dated
      as of April 11, 2006, by and between Arotech Corporation, a Delaware corporation
      (the “Company”),
      and
MAINFIELD
      ENTERPRISES, INC.
      (the
“Investor”).

     

    WHEREAS:

     

    A.
        The
      Investor is the holder of, inter
      alia,
      warrants to purchase shares of the Company’s Common Stock par value $0.01 per
      share (the “Common
      Stock”)
      as set
      forth in Schedule
      1
      attached
      hereto (collectively, the “Existing
      Warrants”).

     

    B.
        The
      Company and the Investor desire to enter into this Agreement, pursuant to which
      upon satisfaction of certain conditions, among other things, (x) the Company
      will (i) adjust the exercise price of the Existing Warrants to $0.40 (the
“Adjusted
      Exercise Price”),
      (ii)
      issue warrants (the “Replacement
      Warrants”),
      in
      the form attached hereto as Exhibit
      A,
      to
      acquire up to 577,812 shares (the “Replacement
      Warrants Shares”)
      of
      Common Stock on the terms and conditions set forth in Exhibit
      A;
      and (y)
      the Investor will exercise the Existing Warrants at the Adjusted Exercise
      Price.

     

    C.
        The
      proceeds from the Investor’s exercise of the Existing Warrants will be deposited
      in an interest-bearing Cash Collateral Account (as defined below) to secure
      the
      Company’s obligations to repay the 8% Convertible Debenture due September 30,
      2006 in the original principal amount of $1,050,000 issued to Investor (the
      “Debenture”).

     

    D.
        The
      parties hereto desire that the Replacement Warrants Shares be covered by
      registration rights terms substantially identical, mutatis
      mutandis,
      to
      those set forth in the Registration Rights Agreement, dated
      as
      of September 29, 2005, by and among the Company and certain investors thereto
      (the “Registration
      Rights Agreement”).

     

    NOW,
      THEREFORE,
      the
      Company and the Investor hereby agree as follows:

     

    
      	1  	
              ADJUSTMENT
                OF EXERCISE PRICE AND ISSUANCE OF REPLACEMENT WARRANTS.

            


    

     

    (a)  Issuance
      of Replacement Warrants.
      Subject
      to satisfaction (or waiver) of the conditions set forth in Sections 4, (i)
      the
      Company shall at the Closing (as defined below), (I) adjust the exercise price
      of the Existing Warrants to the Adjusted Exercise Price and (II) issue to the
      Investor the Replacement Warrants and (ii) the Investor shall exercise the
      Existing Warrants at the Adjusted Exercise Price (the “Closing”).

     

    (b)  Closing
      Date.
      The
      date and time of the Closing (the “Closing
      Date”)
      shall
      be 10:00 a.m., New York Time, on the date of satisfaction (or waiver) of the
      conditions to the Closing set forth in Sections 4 below (or such later date
      as
      is mutually agreed to by the Company and the Investor). The Closing shall occur
      on the Closing Date at the offices of Schulte Roth & Zabel LLP, 919 Third
      Avenue, New York, New York 10022.

     

    (c)  Form
      of Payment.
      On the
      Closing Date, the Investor shall pay an amount equal to the aggregate exercise
      price of the Existing Warrants at the Adjusted Exercise Price (the

     


    
      
         

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    “Exercise
      Amount”)
      by
      wire transfer of immediately available funds in accordance with the Company’s
      written wire instructions into the Cash Collateral Account.

     

    
      	2  	
              REPRESENTATIONS
                AND WARRANTIES.

            


    

     

    (a)  Company
      Bring Down.
      The
      Company represents and warrants to the Investor as set forth in Section 3 (other
      than Section 3(z) thereto) of the Securities Purchase Agreement dated September
      29, 2005, by and among the Company and certain investors thereto (the
“Securities
      Purchase Agreement”)
      as if
      such representations and warranties were made as of the date hereof and set
      forth in their entirety in this Agreement, including without limitation the
      schedules referenced therein.

     

    (b)  Investor
      Bring Down.
      The
      Investor hereby represents and warrants, as to itself only, as set forth in
      Section 2 (other than Section 2(l) thereto) of the Securities Purchase Agreement
      as if such representations and warranties were made as of the date hereof and
      set forth in their entirety in this Agreement.

     

    (c)  For
      purposes of Sections 2(a) and 2(b) hereto, (i)
      the
      term “Securities” and “Warrant” shall mean the Replacement Warrant, (ii) the
      term “Warrant Shares” shall mean the Replacement Warrants Shares; (iii) all
      references to the “Agreement”, the “Registration Rights Agreement”, the
“Security Agreements” and the “Transaction Documents” shall mean this Agreement,
      and (iv) all references to the “Notes”, “Conversion Shares”, “Letter of Credit”,
      shall be deemed deleted. 

     

    
      	3  	
              CERTAIN
                COVENANTS AND AGREEMENTS.

            


    

     

    (a)  Cash
      Collateral Account. On
      or
      prior to the Closing, the Company shall establish with a bank acceptable to
      the
      Investor (the “Cash
      Collateral Bank”)
      a
      deposit account (together with all monies on deposit in such deposit account
      and
      all certificates and instruments, if any, representing or evidencing such
      deposit account, the “Cash
      Collateral Account”),
      and
      shall cause the Cash Collateral Bank to execute and deliver such customary
      agreements and instruments necessary to grant to the Investor a first priority
      perfected security interest in the amounts on deposit in the Cash Collateral
      Account to secure the obligations under the Debenture, in form and substance
      reasonably satisfactory to the Investor. The Company agrees that it shall not
      permit the Cash Collateral Account to be subject to any lien, pledge, charge,
      security interest or other encumbrance other than as provided in the immediately
      preceding sentence. The funds in the Cash Collateral Account shall be
      distributed to the Investor on September 30, 2006.

     

    (b)  Stockholder
      Approval.
      The
      Company shall provide each stockholder entitled to vote at a special or annual
      meeting of stockholders of the Company (the “Stockholder
      Meeting”),
      which
      shall be promptly called and held not later than June 30, 2006 (the
“Stockholder
      Meeting Deadline”),
      a
      proxy statement, substantially in the form which shall have been previously
      reviewed by the Investor and Schulte Roth & Zabel LLP (which review shall be
      completed within five (5) Business Days of such counsel’s receipt of the proxy
      statement and such review requirement shall be waived if such counsel has not
      completed its review within such five (5) Business Day period), soliciting
      each
      such stockholder’s affirmative vote at the Stockholder Meeting for approval of
      resolutions providing for the Company’s issuance of all of the Replacement
      Warrants and the Replacement Warrants Shares issuable upon the exercise thereof
      in accordance with applicable law and the rules and regulations of the Principal
      Market

     


    
      
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    (such
      affirmative
      approval being referred to herein as the “Stockholder
      Approval”),
      and
      the Company shall use its reasonable best efforts to solicit its stockholders’
approval of such resolutions and to cause the Board of Directors of the Company
      to recommend to the stockholders that they approve such resolutions. The Company
      shall be obligated to use its reasonable best efforts to obtain the Stockholder
      Approval by the Stockholder Meeting Deadline. If, despite the Company’s
      reasonable best efforts the Stockholder Approval is not obtained on or prior
      to
      the Stockholder Meeting Deadline, the Company shall cause an additional
      Stockholder Meeting to be held every four (4) months thereafter until such
      Stockholder Approval is obtained or the Notes are no longer outstanding. As
      used
      herein, “Business
      Day”
means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

     

    (c)  Registration
      Rights.
      Promptly after the Closing Date, the Company shall file a new registration
      statement, with the Replacement Warrants Shares
      being
      treated as “Registrable Securities” in accordance with, and being governed by,
      identical terms to the Registration Rights Agreement, which provisions and
      terms
      should be applicable hereto mutatis
      mutandis,
      as if
      the Company and the Investor had executed such Registration Rights Agreement,
      and as if the Investors were party thereto, as of the Closing Date; provided,
      however,
      that:

     

    (i)  “Registrable
      Securities”
shall
      mean (i) the Replacement Warrants Shares and (ii) any shares of capital stock
      issued or issuable with respect to the Replacement Warrants Shares or the
      Replacement Warrants as a result of any stock split, stock dividend,
      recapitalization, exchange or similar event or otherwise, without regard to
      any
      limitations on exercise of the Replacement Warrants.

     

    (ii)  All
      references to “Conversion Shares” and “Notes” shall be deemed
      deleted.

     

    (iii)  “Effectiveness
      Date”
shall
      mean with respect to the Registration Statement required to be filed thereunder
      relating to the Replacement Warrants Shares, the earlier of (1) (i) in the
      event
      that the Registration Statement is not subject to a full review by the SEC,
      60
      days after the Closing Date or (ii) in the event that the Registration Statement
      is subject to a full review by the SEC, 90 days after the Closing Date, and
      (2)
      the fifth Business Day following the date on which the Company is notified
      by
      the SEC that such Registration Statement will not be reviewed or is no longer
      subject to further review and comments.

     

    (iv)  “Filing
      Date”
shall
      mean with respect to the Registration Statement required to be filed hereunder
      relating to the Warrant Shares, the 30th day following the earlier of (i) the
      date on which the Company’s annual report on Form 10-K for the year ended
      December 31, 2005 is required to be filed (after any extensions under Rule
      12b-25 under the Securities Exchange Act of 1934, as amended) or (ii) the date
      on which the Company’s annual report on Form 10-K for the year ended December
      31, 2005 is filed.

     

    (v)  The
      “aggregate principal amount of Notes, then held by such Holder” referenced in
      Section 2(b)(x) and 2(b)(y) of the Registration Rights Agreement shall be
      replaced with the “Exercise Amount.”

     

    
      
        
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    (vi)  In
      no
      event shall the aggregate amount of liquidated damages payable by the Company
      pursuant to Section 2(b) exceed 10% of the Exercise Amount. 

     

    (d)  Disclosure
      of Transactions and Other Material Information.
      On or
      before 8:30 a.m., New York Time, on the
      first
      Business Day following the date hereof, the Company shall file a Current Report
      on Form 8-K describing the terms of the transactions contemplated by this
      Agreement and by any documents relating to the issuance of the Replacement
      Warrants in the form required by the Securities Exchange Act of 1934, as
      amended, and attaching the material transaction documents (including, without
      limitation, this Agreement and the form of the Replacement Warrants) as exhibits
      to such filing (including all attachments, the “8-K
      Filing”,
      and
      the description and attachments, the “8-K
      Materials”).
      From
      and after the filing of the 8-K Filing with the SEC, the Investors shall not
      be
      in possession of any material, nonpublic information received from the Company,
      any of its Subsidiaries or any of its respective officers, directors, employees
      or agents, that is not disclosed in the 8-K Filing. The Company shall not,
      and
      shall cause each of its Subsidiaries and its and each of their respective
      officers, directors, employees and agents, not to, provide the Investor with
      any
      material nonpublic information regarding the Company or any of its Subsidiaries
      from and after the filing of the 8-K Filing with the SEC without the express
      written consent of such Investor. Subject to the foregoing, neither the Company
      nor the Investor shall issue any press releases or any other public statements
      with respect to the transactions contemplated hereby; provided,
      however,
      that
      the Company shall be entitled, without the prior approval of the Investor,
      to
      make any press release or other public disclosure with respect to such
      transactions (i) in substantial conformity with the 8-K Filing and
      contemporaneously therewith and (ii) as is required by applicable law and
      regulations, including the applicable rules and regulations of the Trading
      Market (as such term is defined in the Securities Purchase Agreement) (provided
      that in the case of clause (i) the Investor shall be consulted by the
      Company in connection with any such press release or other public disclosure
      prior to its release).

     

    (e)  Fees
      and Expenses.
      At the
      Closing, the Company shall reimburse the Investor for its reasonable legal
      and
      due diligence fees and expenses in connection with the preparation and
      negotiation of this Agreement and the related documents by paying such amount
      to
      Schulte Roth & Zabel LLP (the “Investor
      Counsel Expense”).
      Except as otherwise set forth in this Agreement or pursuant to the registration
      rights pursuant to Section 3(c) hereof, each party shall pay the fees and
      expenses of its advisers, counsel, accountants and other experts, if any, and
      all other expenses incurred by such party incident to the negotiation,
      preparation, execution, delivery and performance of this Agreement. The Company
      shall pay all stamp and other non-income taxes and duties levied in connection
      with the issuance (but not the exercise) of the Replacement
      Warrants.

     

    
      	4  	
              COMPANY’S
                CLOSING DELIVERIES.

            


    

     

    At
      the
      Closing, the Company shall deliver or cause to be delivered to the Investor
      the
      following:

     

    (i)  The
      Replacement Warrants registered in the name of the Investor, pursuant to which
      the Investor shall have the right to acquire the Replacement Warrants
      Shares.

     

    
      
        
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    (ii)  The
      legal
      opinion of Company Counsel, in agreed form, addressed to the
      Investor.

     

    (iii)  The
      Company shall use its best efforts to have delivered to the Investor within
      five
      business days after the Closing Date a letter from the Company’s transfer agent
      acknowledging that the Irrevocable Transfer Agent Instructions delivered to
      the
      transfer agent on September 29, 2005, shall also apply to the shares of common
      stock underlying the Replacement Warrants.

     

    (iv)  A
      certificate, executed by the Chief Executive Officer of the Company, dated
      as of
      the Closing Date, to the effect that the Company shall have taken all corporate
      action and obtained all governmental, regulatory or third party consents and
      approvals, if any, necessary for the issuance of the Replacement
      Warrant.

     

    (v)  An
      amount
      in United States dollars and in immediately available funds, by wire transfer
      to
      an account designated in writing by the Investor for such purpose, equal to
      the
      Investor Counsel Expense.

     

    (vi)  Such
      other documents relating to the transactions contemplated by this Agreement
      as
      the Investor or its counsel may reasonably request.

     

    
      	5  	
              INVESTOR’S
                CLOSING DELIVERIES.

            


    

     

    At
      the
      Closing, the Investor shall deliver or cause to be delivered to the Company
      in
      United States dollars and in immediately available funds, by wire transfer
      to
      the Cash Collateral Account, an amount equal to the Exercise Amount.
Notwithstanding
      the foregoing, the Company agrees that the Investor shall not be required to
      deliver or caused to be delivered to the Company an amount equal to the Exercise
      Amount until promptly after the Company delivers an account control agreement
      in
      form and substance reasonably satisfactory to the Investor pursuant to Section
      3(a) of this Agreement.

     

    
      	6  	
              MISCELLANEOUS.

            


    

     

    (a)  Governing
      Law; Jurisdiction; Jury Trial.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      of
      New York. Each party hereby irrevocably submits to the non-exclusive
      jurisdiction of the state and federal courts sitting in The City of New York,
      Borough of Manhattan, for the adjudication of any dispute hereunder or in
      connection herewith or with any transaction contemplated hereby or discussed
      herein, and hereby irrevocably waives, and agrees not to assert in any suit,
      action or proceeding, any claim that it is not personally subject to the
      jurisdiction of any such court, that such suit, action or proceeding is brought
      in an inconvenient forum or that the venue of such suit, action or proceeding
      is
      improper. Each party hereby irrevocably waives personal service of process
      and
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof to such party at the address for such notices to it
      under
      this Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT

     


    
      
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          5 -

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    MAY
      HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
      DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR
      ANY
      TRANSACTION CONTEMPLATED HEREBY. 

     

    (b)  Counterparts.
      This
      Agreement may be executed in one or more identical counterparts, all of which
      shall be considered one and the same agreement and shall become effective when
      counterparts have been signed by each party and delivered to the other party;
      provided that a facsimile signature shall be considered due execution and shall
      be binding upon the signatory thereto with the same force and effect as if
      the
      signature were an original, not a facsimile signature.

     

    (c)  Headings.
      The
      headings of this Agreement are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Agreement.

     

    (d)  Severability.
      If any
      provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction.

     

    (e)  Entire
      Agreement; Effect on Prior Agreements; Amendments.
      This
      Agreement, the documents referenced herein and any agreements entered into
      on
      the date hereof in connection with the transactions contemplated by this
      Agreement supersede all other prior oral or written agreements between the
      Investors, the Company, their affiliates and Persons acting on their behalf
      with
      respect to the matters discussed herein, and this Agreement and the instruments
      referenced herein contain the entire understanding of the parties with respect
      to the matters covered herein and therein and, except as specifically set forth
      herein or therein, neither the Company nor any Investor makes any
      representation, warranty, covenant or undertaking with respect to such matters.
      No provision of this Agreement may be amended other than by an instrument in
      writing signed by signed by the party against whom enforcement is sought. No
      provision hereof may be waived other than by an instrument in writing signed
      by
      the party against whom enforcement is sought. The Company has not, directly
      or
      indirectly, made any agreements with any of the Investors relating to the terms
      or conditions of the transactions contemplated hereby except as set forth or
      referenced herein as amended or cancelled by this Agreement.

     

    (f)  Notices.
      Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one Business Day after deposit with an overnight courier service,
      in
      each case properly addressed to the party to receive the same. The addresses
      and
      facsimile numbers for such communications shall be:

     


    
      
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          6
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    If
      to the
      Company:

     

    Arotech
      Corporation

    354
      Industry Drive

    Auburn,
      Alabama 36830

    Facsimile
      No.: (334) 502-9001

    Telephone
      No.: (334) 502-3008

    Attention:
      Chief Executive Officer

     

    
      with
        a
        copy to:

    

    
       

      Electric
        Fuel (E.F.L.) Ltd.

      One
        HaSolela Street, POB 641

      Western
        Industrial Park

      Beit
        Shemesh 99000, Israel 

      Telephone:
        011-972-2-990-6623

      Facsimile:
        011-972-2-990-6688

      Attention:
        General Counsel

       
If
      to the
      Investor:


      NEITHER
        THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
        THE
        SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
        LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
        (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
        IN A
        GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
        OR
        (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
        NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
        WITH
        A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
        BY THE
        SECURITIES.

      


      


      AROTECH
        CORPORATION

      


      Warrant
        To Purchase Common Stock

      


      


      Warrant
        No.:  RL-5 

      Number
        of
        Shares of Common Stock: 577,812

      Date
        of
        Issuance: April 11, 2006 (“Issuance
        Date”)

      


      


      AROTECH
        CORPORATION, a Delaware corporation (the “Company”),
        hereby certifies that, for good and valuable consideration, the receipt and
        sufficiency of which are hereby acknowledged, MAINFIELD ENTERPRISES, INC.,
        the
        registered holder hereof (the “Investor”)
        or its
        permitted assigns (the “Holder”),
        is
        entitled, subject to the terms set forth below, to purchase from the Company,
        at
        the Exercise Price (as defined below) then in effect, at any time or times
        on or
        after the date hereof, (the “Initial
        Exercise Date”),
        but
        not after 11:59 p.m., New York Time, on the Expiration Date (as defined below),
        five hundred seventy-seven thousand eight hundred twelve (577,812) fully
        paid
        nonassessable shares of Common Stock (as defined below) (the
        “Warrant
        Shares”).
        Except as otherwise defined herein, capitalized terms in this Warrant shall
        have
        the meanings set forth in Section 15. This Warrant (including all Warrants
        issued in exchange, transfer or replacement hereof, the “Warrants”)
        is one
        of the Warrants to purchase Common Stock (the “Amendment
        Warrants”)
        issued
        or that may be issued pursuant to one or more amendment agreements
        (collectively, the “Amendment
        Agreements”)
        entered into or that may be entered into between the Company and the Buyers
        (collectively, the “Buyers”)
        under
        that certain Securities Purchase Agreement dated as of September 29, 2005,
        including an amendment agreement with the Holder, dated as of April 11, 2006
        (the “Subscription
        Date”).

       

      1.  EXERCISE
        OF WARRANT.

       

       

      (a)  Mechanics
        of Exercise.
        Subject
        to the terms and conditions hereof (including, without limitation, the
        limitations set forth in Section 1(g)), this Warrant may be

       

       

      exercised
        by the Holder on any day from and after the Initial Exercise Date, in whole
        or
        in part, by (i) delivery of a written notice, in the form attached hereto
        as Exhibit
        I
        (the
“Exercise
        Notice”),
        of
        the Holder’s election to exercise this Warrant and (ii) (A) payment to the
        Company of an amount equal to the applicable Exercise Price multiplied by
        the
        number of Warrant Shares as to which this Warrant is being exercised (the
        “Aggregate
        Exercise Price”)
        in
        cash or wire transfer of immediately available funds or (B) by notifying
        the
        Company that this Warrant is being exercised pursuant to a Cashless Exercise
        (as
        defined in Section 1(d)) by delivery of a written notice, in the form attached
        hereto as Exhibit
        II.
        The
        date the Exercise Notice and the Aggregate Exercise Price (or notice of a
        Cashless Exercise) are delivered to the Company (as determined in accordance
        with the notice provisions hereof) is an “Exercise
        Date”.
        The
        Holder shall not be required to deliver the original Warrant in order to
        effect
        an exercise hereunder. Execution and delivery of the Exercise Notice with
        respect to less than all of the Warrant Shares shall have the same effect
        as
        cancellation of the original Warrant and issuance of a new Warrant evidencing
        the right to purchase the remaining number of Warrant Shares. On or before
        the
        first Business Day following the Exercise Date, the Company shall transmit
        by
        facsimile an acknowledgment of confirmation of receipt of the Exercise Notice
        and the Aggregate Exercise Price to the Holder and the Company’s transfer agent
        (the “Transfer
        Agent”).
        On or
        before the third Business Day following the Exercise Date, the Company shall
        direct the Transfer Agent to credit through The Depository Trust Company
        (“DTC”)
        Fast
        Automated Securities Transfer Program, such aggregate number of shares of
        Common
        Stock to which the Holder is entitled pursuant to such exercise to the Holder’s
        or its designee’s balance account with DTC through its Deposit Withdrawal Agent
        Commission system. On the Exercise Date, the Holder shall be deemed for all
        corporate purposes to have become the holder of record of the Warrant Shares
        with respect to which this Warrant has been exercised, irrespective of the
        date
        of delivery of the certificates evidencing such Warrant Shares. Upon surrender
        of this Warrant to the Company following one or more partial exercises, the
        Company shall as soon as practicable and in no event later than three Business
        Days after receipt of the Warrant and at its own expense, issue a new Warrant
        (in accordance with Section 7(d)) representing the right to purchase the
        number
        of Warrant Shares purchasable immediately prior to such exercise under this
        Warrant, less the number of Warrant Shares with respect to which this Warrant
        is
        exercised. No fractional shares of Common Stock are to be issued upon the
        exercise of this Warrant, but rather the number of shares of Common Stock
        to be
        issued shall be rounded up to the nearest whole number. The Company shall
        pay
        any and all taxes which may be payable with respect to the issuance and delivery
        of Warrant Shares upon exercise of this Warrant. In the event that the Company
        is unable to electronically deliver the Warrant Shares because of applicable
        securities laws, then the Company shall issue and deliver to the address
        as
        specified in the Exercise Notice a certificate, registered in the name of
        the
        Holder or its designee, for the number of shares of Common Stock to which
        the
        holder of this Warrant is entitled pursuant to such exercise.

       

       

      (b)  Exercise
        Price.
        For
        purposes of this Warrant, “Exercise
        Price”
means
        $0.594, subject to adjustment as provided herein.

       

       

      (c)  Company’s
        Failure to Timely Deliver Shares.
        Subject
        to Section 1(g), if the Company shall fail for any reason or for no reason
        within three Business Days of the Exercise Date to credit the Holder’s balance
        account with DTC for such number of shares of Common Stock to which the Holder
        is entitled upon the Holder’s exercise of this Warrant, and if

       


      
        
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      after
        such third Business Day the Holder purchases (in an open market transaction
        or
        otherwise) shares of Common Stock to deliver in satisfaction of a sale by
        the
        Holder of the Warrant Shares that the Holder anticipated receiving from the
        Company (a “Buy-In”),
        then
        the Company shall, within three Business Days after the Holder’s request and in
        the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to
        the Holder’s total purchase price (including brokerage commissions, if any) for
        the shares of Common Stock so purchased (the “Buy-In
        Price”),
        at
        which point the Company’s obligation to issue such shares of Common Stock shall
        terminate, or (ii) promptly honor its obligation to credit to the Holder
        such
        shares of Common Stock and pay cash to the Holder in an amount equal to the
        excess (if any) of the Buy-In Price over the product of (A) such number of
        shares of Common Stock, times (B) the Closing Sale Price on the date of the
        event giving rise to the Company’s obligation to deliver such certificate.
        Subject to Section 1(g), if the Company shall fail for any reason or for
        no
        reason within three Business Days of the Exercise Date to credit the Holder’s
        balance account with DTC for such number of shares of Common Stock to which
        the
        Holder is entitled upon the Holder’s exercise of this Warrant, then the Holder
        will have the right to rescind such exercise. 

       

       

      (d)  Cashless
        Exercise.
         Notwithstanding
        anything contained herein to the contrary, if at any time during the period
        commencing ten (10) Business Days prior to the Holder’s delivery of an Exercise
        Notice and ending on the day of delivery of the Exercise Notice, the
        Registration Statement (as defined in the Registration Rights Agreement)
        covering the Warrant Shares that are the subject of the Exercise Notice (the
        “Unavailable
        Warrant Shares”)
        is not
        available for the resale of such Unavailable Warrant Shares, 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
        Closing Sale Price of the shares of Common Stock (as reported by Bloomberg)
        on
        the date immediately preceding the date of the Exercise Notice.

       

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

       

       

      (e)  Absolute
        and Unconditional Obligation.
        The
        Company’s obligations to issue and deliver Warrant Shares in accordance with the
        terms hereof are absolute and unconditional, irrespective of any action or
        inaction by the Holder to enforce the same, the recovery of any judgment
        against
        any Person or any action to enforce the same, or any setoff,

       


      
        
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      counterclaim,
        recoupment, limitation or termination, or any breach or alleged breach by
        the
        Holder or any other Person of any obligation to the Company or any violation
        or
        alleged violation of law by the Holder or any other Person. Nothing herein
        shall
        limit the Holder’s right to pursue any other remedies available to it hereunder,
        at law or in equity, including, without limitation, a decree of specific
        performance and/or injunctive relief with respect to the Company’s failure to
        timely deliver certificates representing Warrant Shares upon exercise of
        the
        Warrant as required pursuant to the terms hereof.

       

       

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

       

      
        	(g)  	
                Limitations
                  on Exercises

              


      

       

      (i) Beneficial
        Ownership.
        The
        Company shall not effect the exercise of this Warrant, and the Holder shall
        not
        have the right to exercise this Warrant, to the extent that after giving
        effect
        to such exercise, such Person (together with such Person’s affiliates) would
        beneficially own in excess of 4.99% of the shares of Common Stock outstanding
        immediately after giving effect to such exercise. For purposes of the foregoing
        sentence, the aggregate number of shares of Common Stock beneficially owned
        by
        such Person and its affiliates shall include the number of shares of Common
        Stock issuable upon exercise of this Warrant with respect to which the
        determination of such sentence is being made, but shall exclude shares of
        Common
        Stock which would be issuable upon (i) exercise of the remaining, unexercised
        portion of this Warrant beneficially owned by such Person and its affiliates
        and
        (ii) exercise or conversion of the unexercised or unconverted portion of
        any
        other securities of the Company beneficially owned by such Person and its
        affiliates (including, without limitation, any convertible notes, convertible
        debentures, convertible preferred stock or warrants) subject to a limitation
        on
        conversion or exercise analogous to the limitation contained herein. Except
        as
        set forth in the preceding sentence, for purposes of this paragraph, beneficial
        ownership shall be calculated in accordance with Section 13(d) of the Securities
        Exchange Act of 1934, as amended. For purposes of this Warrant, in determining
        the number of outstanding shares of Common Stock, the Holder may rely on
        the
        number of outstanding shares of Common Stock as reflected in (1) the Company’s
        most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public
        filing with the Securities and Exchange Commission, as the case may be, (2)
        a
        more recent public announcement by the Company or (3) any other notice by
        the
        Company or the Transfer Agent setting forth the number of shares of Common
        Stock
        outstanding. For any reason at any time, upon the written or oral request
        of the
        Holder, the Company shall within two Business Days confirm orally and in
        writing
        to the Holder the number of shares of Common Stock then outstanding. In any
        case, the number of outstanding shares of Common Stock shall be determined
        after
        giving effect to the conversion or exercise of securities of the Company,
        including the Amendment Warrants, by the Holder and its affiliates since
        the
        date as of which such number of outstanding shares of Common Stock was
        reported.

       

      (ii) Principal
        Market Regulation.
        The
        Company shall not be obligated to issue any shares of Common Stock upon exercise
        of this Warrant if the issuance of such shares of Common Stock would exceed
        that
        number of shares of Common Stock which the

       


      
        
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      Company
        may issue upon exercise of this Warrant without breaching the Company’s
        obligations under the rules or regulations of the Principal Market (the
“Exchange
        Cap”),
        except that such limitation shall not apply in the event that the Company
        obtains the approval of its stockholders as required by the applicable rules
        of
        the Principal Market for issuances of shares of Common Stock in excess of
        such
        amount. Until such approval is obtained, no Buyer shall be issued, upon exercise
        or conversion, as applicable, of any Amendment Warrants, shares of Common
        Stock
        in an amount greater than the product of the Exchange Cap multiplied by a
        fraction, the numerator of which is the total number of shares of Common
        Stock
        underlying the Amendment Warrants issued to such Buyer pursuant to the Amendment
        Agreements on the Subscription Date and the denominator of which is the
        aggregate number of shares of Common Stock underlying all the Warrants issued
        to
        the Buyers pursuant to the Amendment Agreements on the Subscription Date
        (with
        respect to each Buyer, the “Exchange
        Cap Allocation”).
        In
        the event that any Buyer shall sell or otherwise transfer any of such Buyer’s
        Amendment Warrants, the transferee shall be allocated a pro rata portion
        of such
        Buyer’s Exchange Cap Allocation, and the restrictions of the prior sentence
        shall apply to such transferee with respect to the portion of the Exchange
        Cap
        Allocation allocated to such transferee. In the event that any holder of
        Amendment Warrants shall exercise all of such holder’s Amendment Warrants into a
        number of shares of Common Stock which, in the aggregate, is less than such
        holder’s Exchange Cap Allocation, then the difference between such holder’s
        Exchange Cap Allocation and the number of shares of Common Stock actually
        issued
        to such holder shall be allocated to the respective Exchange Cap Allocations
        of
        the remaining holders of Amendment Warrants on a pro rata basis in proportion
        to
        the shares of Common Stock underlying the Amendment Warrants then held by
        each
        such holder. In the event that the Company is prohibited from issuing any
        Warrant Shares for which an Exercise Notice has been received as a result
        of the
        operation of this Section 1(f)(ii), the Company shall pay cash in exchange
        for
        cancellation of such Warrant Shares, at a price per Warrant Share equal to
        the
        difference between the Closing Sale Price and the Exercise Price as of the
        date
        of the attempted exercise.

       

       

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

       

       

      3.  RIGHTS
        UPON DISTRIBUTION OF ASSETS.
        If the
        Company shall declare or make any dividend or other distribution of its assets
        (or rights to acquire its assets) to holders of shares of Common Stock, by
        way
        of return of capital or otherwise (including, without limitation, any
        distribution of cash, stock or other securities, property or options by way
        of
        a

       


      
        
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      dividend,
        spin off, reclassification, corporate rearrangement or other similar
        transaction) (a “Distribution”),
        at
        any time after the issuance of this Warrant, then, in each such
        case:

       

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

       

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

       

      4.  PURCHASE
        RIGHTS; FUNDAMENTAL TRANSACTIONS.

       

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

       

      (b)  Fundamental
        Transactions.
        The
        Company shall not enter into or be party to a Fundamental Transaction unless
        (i)  the Successor Entity assumes in writing all of the obligations of the
        Company under this Warrant and the other Transaction Documents in

       


      
        
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      accordance
        with the provisions of this Section (4)(b) pursuant to written agreements
        in
        form and substance reasonably satisfactory to the Required Holders, including
        agreements to deliver to each holder of Warrants in exchange for such Warrants
        a
        security of the Successor Entity evidenced by a written instrument substantially
        similar in form and substance to this Warrant, including, without limitation,
        an
        adjusted exercise price equal to the value for the shares of Common Stock
        reflected by the terms of such Fundamental Transaction, and exercisable for
        a
        corresponding number of shares of capital stock equivalent to the shares
        of
        Common Stock acquirable and receivable upon exercise of this Warrant (without
        regard to any limitations on the exercise of this Warrant) prior to such
        Fundamental Transaction, and satisfactory to the Required Holders and
        (ii) the Successor Entity (including its Parent Entity) is a publicly
        traded corporation whose common stock is quoted on or listed for trading
        on an
        Eligible Market. Upon the occurrence of any Fundamental Transaction, the
        Successor Entity shall succeed to, and be substituted for (so that from and
        after the date of such Fundamental Transaction, the provisions of this Warrant
        referring to the “Company” shall refer instead to the Successor Entity), and may
        exercise every right and power of the Company and shall assume all of the
        obligations of the Company under this Warrant with the same effect as if
        such
        Successor Entity had been named as the Company herein. Upon consummation
        of the
        Fundamental Transaction, the Successor Entity shall deliver to the Holder
        confirmation that there shall be issued upon exercise of this Warrant
at
        any
        time after the consummation of the Fundamental Transaction, in lieu of the
        shares of the Common Stock (or
        other
        securities, cash, assets or other property) purchasable
        upon the exercise of the Warrant
        prior
        to
        such Fundamental Transaction,
        such
        shares of the publicly traded common stock (or its equivalent) of the Successor
        Entity (including its Parent Entity), as adjusted in accordance with the
        provisions of this Warrant.
        In
        addition to and not in substitution for any other rights hereunder, prior
        to the
        consummation of any Fundamental Transaction pursuant to which holders of
        shares
        of Common Stock are entitled to receive securities or other assets with respect
        to or in exchange for shares of Common Stock (a “Corporate
        Event”),
        the
        Company shall make appropriate provision to insure that the Holder will
        thereafter have the right to receive upon an exercise of this Warrant
at
        any
        time after the consummation of the Fundamental Transaction but
        prior
        to the Expiration Date,
        in lieu
        of the shares of the Common Stock (or
        other
        securities, cash, assets or other property) purchasable
        upon the exercise of the Warrant prior to such Fundamental
        Transaction,
        such
        shares of stock, securities, cash, assets or any other property whatsoever
        (including warrants or other purchase or subscription rights) which the Holder
        would have been entitled to receive upon the happening of such Fundamental
        Transaction had the Warrant been exercised immediately prior to such Fundamental
        Transaction. Provision
        made pursuant to the preceding sentence shall be in a form and substance
        reasonably satisfactory to the Required Holders. The provisions of this Section
        shall apply similarly and equally to successive Fundamental Transactions
        and
        Corporate Events and shall be applied without regard to any limitations on
        the
        exercise of this Warrant.

       

      5.  NONCIRCUMVENTION.
        The
        Company hereby covenants and agrees that the Company will not, by amendment
        of
        its Certificate of Incorporation, Bylaws or through any reorganization, transfer
        of assets, consolidation, merger, scheme of arrangement, dissolution, issue
        or
        sale of securities, or any other voluntary action, avoid or seek to avoid
        the
        observance or performance of any of the terms of this Warrant, and will at
        all
        times in good faith carry out all the provisions of this Warrant and take
        all
        action as may be required to protect the rights of the Holder. Without limiting
        the generality of the foregoing, the Company (i) shall not increase the par
        value of any shares of Common Stock receivable upon the exercise of this
        Warrant
        above the

       


      
        
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      Exercise
        Price then in effect, (ii) shall take all such actions as may be necessary
        or appropriate in order that the Company may validly and legally issue fully
        paid and nonassessable shares of Common Stock upon the exercise of this Warrant,
        and (iii) shall, so long as any of the Amendment Warrants are outstanding,
        take
        all action necessary to reserve and keep available out of its authorized
        and
        unissued shares of Common Stock, solely for the purpose of effecting the
        exercise of the Amendment Warrants, 100% of the number of shares of Common
        Stock
        as shall from time to time be necessary to effect the exercise of the Amendment
        Warrants then outstanding (without regard to any limitations on
        exercise).

       

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

       

      7.  REISSUANCE
        OF WARRANTS.

       

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

       

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

       

      (c)  Exchangeable
        for Multiple Warrants.
        This
        Warrant is exchangeable, upon the surrender hereof by the Holder at the
        principal office of the Company, for a new Warrant or Warrants (in accordance
        with Section 7(d)) representing in the aggregate the right to

       


      
        
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      purchase
        the number of Warrant Shares then underlying this Warrant, and each such
        new
        Warrant will represent the right to purchase such portion of such Warrant
        Shares
        as is designated by the Holder at the time of such surrender; provided, however,
        that no Warrants for fractional shares of Common Stock shall be
        given.

       

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

       

      8.  NOTICES.
        Whenever notice is required to be given under this Warrant, unless otherwise
        provided herein, such notice shall be given in accordance with Section 9(f)
        of
        the Securities Purchase Agreement. The Company shall provide the Holder with
        prompt written notice of all actions taken pursuant to this Warrant, including
        in reasonable detail a description of such action and the reason therefore.
        Without limiting the generality of the foregoing, the Company will give written
        notice to the Holder (i) immediately upon any adjustment of the Exercise
        Price,
        setting forth in reasonable detail, and certifying, the calculation of such
        adjustment and (ii) promptly after the date on which the Company establishes
        a
        record date (A) with respect to any dividend or distribution upon the shares
        of
        Common Stock, (B) with respect to any grants, issuances or sales of any Options,
        Convertible Securities or rights to purchase stock, warrants, securities
        or
        other property to holders of shares of Common Stock or (C) for determining
        rights to vote with respect to any Fundamental Transaction, dissolution or
        liquidation, provided in each case that such information shall be made known
        to
        the public prior to or in conjunction with such notice being provided to
        the
        Holder.

       

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

       

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

       

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

       

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

       

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

       

      14.  TRANSFER.

       

      (a)  This
        Warrant may be offered for sale, sold, transferred or assigned in compliance
        with the Federal and state securities laws without the consent of the
        Company.

       

      (b)  Except
        as
        provided in Section 2(f) of the Securities Purchase Agreement, the Company
        may
        cause the legend set forth on the first page of this Warrant to be set forth
        on
        each Warrant, and a similar legend on any security issued or issuable upon
        exercise of this Warrant, unless counsel for the Company is of the opinion
        as to
        any such security that 

       

      15.  PAYMENT
        OF TAXES.
        The
        Company will pay any documentary stamp taxes attributable to the initial
        issuance of Warrant Shares issuable upon the exercise of the Warrant; provided,
        however, that the Company shall not be required to pay any tax or taxes which
        may be payable in respect of any transfer involved in the issuance or delivery
        of any

       


      
        
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            -

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      certificates
        for Warrant Shares in a name other than that of the Holder in respect of
        which
        such shares are issued, and in such case, the Company shall not be required
        to
        issue or deliver any certificate for Warrant Shares or any Warrant until
        the
        person requesting the same has paid to the Company the amount of such tax
        or has
        established to the Company’s reasonable satisfaction that such tax has been
        paid. The Holder shall be responsible for income taxes due under federal,
        state
        or other law, if any such tax is due.

       

       

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

       

       

      (a)  “Bloomberg”
means
        Bloomberg Financial Markets.

       

       

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

       

       

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

       

       

      (d)  “Common
        Stock”
means
        (i) the Company’s shares of Common Stock, $0.01 par value per share, and
        (ii) any share capital into which such Common Stock shall have been changed
        or any share capital resulting from a reclassification of such Common
        Stock.

       

       

      (e)  “Convertible
        Securities”
means
        any stock or securities (other than Options) directly or indirectly convertible
        into or exercisable or exchangeable for shares of Common Stock.

       

       

      (f)  “Eligible
        Market”
means
        the Principal Market, the American Stock Exchange, The New York Stock Exchange,
        Inc., The Nasdaq SmallCap Market or the OTC Bulletin Board.

       

       

      (g)  “Expiration
        Date”
means
        March 31, 2008; provided that if the Stockholder Approval (as such term is
        defined is the Amendment Agreement) is not obtained on or prior to June 30,
        2006, the Expiration Date shall be extended for each day after June 30, 2006
        that the Stockholder Approval is not obtained or, if such date falls on a
        day
        other than a Business Day or on which trading does not take place on the
        Principal Market (a “Holiday”),
        the
        next date that is not a Holiday.

       

       

      (h)  “Fundamental
        Transaction”
means
        that the Company shall, directly or indirectly, in one or more related
        transactions, (i) consolidate or merge with or into (whether or not the Company
        is the surviving corporation) another Person, or (ii) sell, assign, transfer,
        convey or otherwise dispose of all or substantially all of the properties
        or
        assets of the Company to another Person, or (iii) allow another Person to
        make a
        purchase, tender or exchange offer that is accepted by the holders of more
        than
        the 50% of either the outstanding shares of Common Stock (not including any
        shares of Common Stock held by the Person or Persons making or party to,
        or
        associated or affiliated with the Persons making or party to, such purchase,
        tender or exchange offer), or (iv) consummate a stock purchase agreement
        or
        other business combination (including, without limitation, a reorganization,
        recapitalization, spin-off or scheme of arrangement) with another Person
        whereby
        such other Person acquires more than the 50% of the outstanding shares of
        Common
        Stock (not including any shares of Common Stock held by the other Person
        or
        other Persons making or party to, or associated or affiliated with the other
        Persons making or party to, such stock purchase agreement or other business
        combination), or (v) reorganize, recapitalize or reclassify its Common
        Stock.

       

       

      (i)  “Options”
means
        any rights, warrants or options to subscribe for or purchase shares of Common
        Stock or Convertible Securities.

       

       

      (j)  “Parent
        Entity”
of
        a
        Person means an entity that, directly or indirectly, controls the applicable
        Person and whose common stock or equivalent equity security is quoted or
        listed
        on an Eligible Market, or, if there is more than one such Person or Parent
        Entity, the Person or Parent Entity with the largest public market
        capitalization as of the date of consummation of the Fundamental
        Transaction.

       

       

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

       

       

      (l)  “Principal
        Market”
means
        the Nasdaq National Market.

       

       

      (m)  “Registration
        Rights Agreement”
means
        that certain registration rights agreement as defined in the Amendment Agreement
        between the Company and the Investor.

       

       

      (n)  Required
        Holders”
means
        the holders of the Amendment Warrants representing at least a majority of
        shares
        of Common Stock underlying the Amendment Warrants then outstanding.

       

       

      (o)  “Successor
        Entity”
means
        the Person, which may be the Company, formed by, resulting from or surviving
        any
        Fundamental Transaction or the Person with which such Fundamental Transaction
        shall have been made, provided that if such Person is not a publicly traded
        entity whose common stock or equivalent equity security is quoted or listed
        for
        trading on an Eligible Market, Successor Entity shall mean such Person’s Parent
        Entity.

       

      [Signature
        Page Follows]

      



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

      


      


      AROTECH
        CORPORATION

      


      


      By: 

      Name: Robert
        S.
        Ehrlich

      Title: Chief
        Executive Officer

      



      
        
          
            


          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      



      EXHIBIT
        I

      


      EXERCISE
        NOTICE

       

      TO
        BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

       

      WARRANT
        TO PURCHASE COMMON STOCK

       

      AROTECH
        CORPORATION

       

      The
        undersigned holder hereby exercises the right to purchase _________________
        of
        the shares of Common Stock (“Warrant
        Shares”)
        of
        Arotech Corporation, a Delaware corporation (the “Company”),
        evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”),
        and
        tenders herewith payment to the Company of the aggregate exercise price in
        full,
        equal to $_____________________, together with all applicable transfer taxes,
        if
        any.

       

      Please
        issue the Warrant Shares in the following name and to the following
        address:

      


      Issue
        to:

       

       

      Facsimile
        Number:

      


      Authorization:

       

      Account
        Number:

        (if
        electronic book entry transfer)

       

      Transaction
        Code Number:

      (if
        electronic book entry transfer)

       

      To
        the
        extent the foregoing exercise is for less than the full number of Warrant
        Shares
        issuable pursuant to the Warrant, a replacement Warrant representing the
        remainder of the Warrant Shares issuable (and otherwise of like form, tenor
        and
        effect) shall be delivered to holder.

       

      The
        undersigned confirms the continuing validity of, and reaffirms as of the
        date
        hereof, the representations and warranties set forth in Section 2(b) of the
        Amendment Agreement, dated as of April 11, 2006, between the Company and
        the
        Investor.

       

      The
        undersigned agrees to comply with the prospectus delivery requirements (to
        the
        extent applicable) under the applicable securities laws in connection with
        any
        transfer of the aforesaid Warrant Shares.

       

      Date:
        _______________ __, ______

      


      Name
        of
        Registered Holder

      


      By: 

      Name:

      Title:

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      EXHIBIT
        II

       

      EXERCISE
        NOTICE

       

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

       

       

      AROTECH
        CORPORATION

      


       

      Gentlemen:

       

      


      The
        undersigned, registered holder of the Warrant to Purchase Common Stock delivered
        herewith, hereby irrevocably exercises such Warrant for, and purchases
        thereunder, shares of the Common Stock (“Warrant
        Shares”)
        of
        Arotech Corporation, a Delaware corporation, as provided below. Capitalized
        terms used herein, unless otherwise defined herein, shall have the meanings
        given in the Warrant. The portion of the Exercise Price to be applied toward
        the
        purchase of the Warrant Shares pursuant to this Exercise Notice is $_______.
        Such exercise shall be pursuant to the cashless exercise provisions of
        Section 1(d) of the Warrant; therefore, holder makes no payment with
        respect to this Exercise Notice. The number of shares to be issued pursuant
        to
        this exercise shall be determined by reference to the formula in
        Section 1(d) of the Warrant which, by reference to Section 1(d),
        requires the use of the Closing Price of the Company’s Common Stock on the day
        immediately preceding the date of this Exercise Notice, which is
        $______.

       

      Please
        issue the Warrant Shares in the following name and to the following
        address:

      


      Issue
        to:

       

       

      


      Facsimile
        Number:

      


      Authorization:

      Account
        Number:

        (if
        electronic book entry transfer)

      


      Transaction
        Code Number:

      (if
        electronic book entry transfer)

       

      To
        the
        extent the foregoing exercise is for less than the full number of Warrant
        Shares
        issuable pursuant to the Warrant, a replacement Warrant representing the
        remainder of the


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Warrant
        Shares issuable (and otherwise of like form, tenor and effect) shall be
        delivered to holder.

       

      The
        undersigned confirms the continuing validity of, and reaffirms as of the
        date
        hereof, the representations and warranties set forth in Section 2(b) through
        (j)
        of the Amendment Agreement, dated as of April 11, 2006, between the Company
        and
        the Investor.

       

      The
        undersigned agrees to comply with the prospectus delivery requirements (to
        the
        extent applicable) under the applicable securities laws in connection with
        any
        transfer of the aforesaid Warrant Shares. 

       

      Date:
        _______________ __, ______

       

       

      Name
        of
        Registered Holder

       

      By: 

      Name:

      Title:


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


      ACKNOWLEDGMENT

      


      


      The
        Company hereby acknowledges this Exercise Notice and hereby directs American
        Stock Transfer & Trust Co. to issue the above indicated number of shares of
        Common Stock in accordance with the Transfer Agent Instructions dated February
        [
        ], 2006 from the Company and acknowledged and agreed to by American Stock
        Transfer & Trust Co.

      


      AROTECH
        CORPORATION

      


      


      


      By:

      Name:

      Title:


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


      FORM
        OF
        ASSIGNMENT

      


       

      [To
        be
        completed and signed only upon transfer of Warrant]

       

      


       

      FOR
        VALUE
        RECEIVED, the undersigned hereby sells, assigns and transfers unto
        ________________________________ the right represented by the within Warrant
        to
        purchase ____________ shares of Common Stock of Arotech Corporation to which
        the
        within Warrant relates and appoints ________________ attorney to transfer
        said
        right on the books of Arotech Corporation with full power of substitution
        in the
        premises.

       

      
        	
                 

                Dated:
                  ,
                  

              	 
	 	 
	 	
                (Signature
                  must conform in all respects to name of Holder as specified on
                  the face of
                  the Warrant)

              
	 	 
	 	
                Address
                  of Transferee

              
	 	 
	 	 
	 	 
	 	 
	
                In
                  the presence of:

              	 
	 	 


      

      


      


       

      


       

      


       

      


       


      NEITHER
        THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
        THE
        SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
        LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
        (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
        IN A
        GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
        OR
        (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
        NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
        WITH
        A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
        BY THE
        SECURITIES.

      


      


      AROTECH
        CORPORATION

      


      Warrant
        To Purchase Common Stock

      


      


      Warrant
        No.:  RL-5 

      Number
        of
        Shares of Common Stock: 577,812

      Date
        of
        Issuance: April 11, 2006 (“Issuance
        Date”)

      


      


      AROTECH
        CORPORATION, a Delaware corporation (the “Company”),
        hereby certifies that, for good and valuable consideration, the receipt and
        sufficiency of which are hereby acknowledged, MAINFIELD ENTERPRISES, INC.,
        the
        registered holder hereof (the “Investor”)
        or its
        permitted assigns (the “Holder”),
        is
        entitled, subject to the terms set forth below, to purchase from the Company,
        at
        the Exercise Price (as defined below) then in effect, at any time or times
        on or
        after the date hereof, (the “Initial
        Exercise Date”),
        but
        not after 11:59 p.m., New York Time, on the Expiration Date (as defined below),
        five hundred seventy-seven thousand eight hundred twelve (577,812) fully
        paid
        nonassessable shares of Common Stock (as defined below) (the
        “Warrant
        Shares”).
        Except as otherwise defined herein, capitalized terms in this Warrant shall
        have
        the meanings set forth in Section 15. This Warrant (including all Warrants
        issued in exchange, transfer or replacement hereof, the “Warrants”)
        is one
        of the Warrants to purchase Common Stock (the “Amendment
        Warrants”)
        issued
        or that may be issued pursuant to one or more amendment agreements
        (collectively, the “Amendment
        Agreements”)
        entered into or that may be entered into between the Company and the Buyers
        (collectively, the “Buyers”)
        under
        that certain Securities Purchase Agreement dated as of September 29, 2005,
        including an amendment agreement with the Holder, dated as of April 11, 2006
        (the “Subscription
        Date”).

       

      1.  EXERCISE
        OF WARRANT.

       

       

      (a)  Mechanics
        of Exercise.
        Subject
        to the terms and conditions hereof (including, without limitation, the
        limitations set forth in Section 1(g)), this Warrant may be

       

       

      exercised
        by the Holder on any day from and after the Initial Exercise Date, in whole
        or
        in part, by (i) delivery of a written notice, in the form attached hereto
        as Exhibit
        I
        (the
“Exercise
        Notice”),
        of
        the Holder’s election to exercise this Warrant and (ii) (A) payment to the
        Company of an amount equal to the applicable Exercise Price multiplied by
        the
        number of Warrant Shares as to which this Warrant is being exercised (the
        “Aggregate
        Exercise Price”)
        in
        cash or wire transfer of immediately available funds or (B) by notifying
        the
        Company that this Warrant is being exercised pursuant to a Cashless Exercise
        (as
        defined in Section 1(d)) by delivery of a written notice, in the form attached
        hereto as Exhibit
        II.
        The
        date the Exercise Notice and the Aggregate Exercise Price (or notice of a
        Cashless Exercise) are delivered to the Company (as determined in accordance
        with the notice provisions hereof) is an “Exercise
        Date”.
        The
        Holder shall not be required to deliver the original Warrant in order to
        effect
        an exercise hereunder. Execution and delivery of the Exercise Notice with
        respect to less than all of the Warrant Shares shall have the same effect
        as
        cancellation of the original Warrant and issuance of a new Warrant evidencing
        the right to purchase the remaining number of Warrant Shares. On or before
        the
        first Business Day following the Exercise Date, the Company shall transmit
        by
        facsimile an acknowledgment of confirmation of receipt of the Exercise Notice
        and the Aggregate Exercise Price to the Holder and the Company’s transfer agent
        (the “Transfer
        Agent”).
        On or
        before the third Business Day following the Exercise Date, the Company shall
        direct the Transfer Agent to credit through The Depository Trust Company
        (“DTC”)
        Fast
        Automated Securities Transfer Program, such aggregate number of shares of
        Common
        Stock to which the Holder is entitled pursuant to such exercise to the Holder’s
        or its designee’s balance account with DTC through its Deposit Withdrawal Agent
        Commission system. On the Exercise Date, the Holder shall be deemed for all
        corporate purposes to have become the holder of record of the Warrant Shares
        with respect to which this Warrant has been exercised, irrespective of the
        date
        of delivery of the certificates evidencing such Warrant Shares. Upon surrender
        of this Warrant to the Company following one or more partial exercises, the
        Company shall as soon as practicable and in no event later than three Business
        Days after receipt of the Warrant and at its own expense, issue a new Warrant
        (in accordance with Section 7(d)) representing the right to purchase the
        number
        of Warrant Shares purchasable immediately prior to such exercise under this
        Warrant, less the number of Warrant Shares with respect to which this Warrant
        is
        exercised. No fractional shares of Common Stock are to be issued upon the
        exercise of this Warrant, but rather the number of shares of Common Stock
        to be
        issued shall be rounded up to the nearest whole number. The Company shall
        pay
        any and all taxes which may be payable with respect to the issuance and delivery
        of Warrant Shares upon exercise of this Warrant. In the event that the Company
        is unable to electronically deliver the Warrant Shares because of applicable
        securities laws, then the Company shall issue and deliver to the address
        as
        specified in the Exercise Notice a certificate, registered in the name of
        the
        Holder or its designee, for the number of shares of Common Stock to which
        the
        holder of this Warrant is entitled pursuant to such exercise.

       

       

      (b)  Exercise
        Price.
        For
        purposes of this Warrant, “Exercise
        Price”
means
        $0.594, subject to adjustment as provided herein.

       

       

      (c)  Company’s
        Failure to Timely Deliver Shares.
        Subject
        to Section 1(g), if the Company shall fail for any reason or for no reason
        within three Business Days of the Exercise Date to credit the Holder’s balance
        account with DTC for such number of shares of Common Stock to which the Holder
        is entitled upon the Holder’s exercise of this Warrant, and if

       


      
        
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      after
        such third Business Day the Holder purchases (in an open market transaction
        or
        otherwise) shares of Common Stock to deliver in satisfaction of a sale by
        the
        Holder of the Warrant Shares that the Holder anticipated receiving from the
        Company (a “Buy-In”),
        then
        the Company shall, within three Business Days after the Holder’s request and in
        the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to
        the Holder’s total purchase price (including brokerage commissions, if any) for
        the shares of Common Stock so purchased (the “Buy-In
        Price”),
        at
        which point the Company’s obligation to issue such shares of Common Stock shall
        terminate, or (ii) promptly honor its obligation to credit to the Holder
        such
        shares of Common Stock and pay cash to the Holder in an amount equal to the
        excess (if any) of the Buy-In Price over the product of (A) such number of
        shares of Common Stock, times (B) the Closing Sale Price on the date of the
        event giving rise to the Company’s obligation to deliver such certificate.
        Subject to Section 1(g), if the Company shall fail for any reason or for
        no
        reason within three Business Days of the Exercise Date to credit the Holder’s
        balance account with DTC for such number of shares of Common Stock to which
        the
        Holder is entitled upon the Holder’s exercise of this Warrant, then the Holder
        will have the right to rescind such exercise. 

       

       

      (d)  Cashless
        Exercise.
         Notwithstanding
        anything contained herein to the contrary, if at any time during the period
        commencing ten (10) Business Days prior to the Holder’s delivery of an Exercise
        Notice and ending on the day of delivery of the Exercise Notice, the
        Registration Statement (as defined in the Registration Rights Agreement)
        covering the Warrant Shares that are the subject of the Exercise Notice (the
        “Unavailable
        Warrant Shares”)
        is not
        available for the resale of such Unavailable Warrant Shares, 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
        Closing Sale Price of the shares of Common Stock (as reported by Bloomberg)
        on
        the date immediately preceding the date of the Exercise Notice.

       

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

       

       

      (e)  Absolute
        and Unconditional Obligation.
        The
        Company’s obligations to issue and deliver Warrant Shares in accordance with the
        terms hereof are absolute and unconditional, irrespective of any action or
        inaction by the Holder to enforce the same, the recovery of any judgment
        against
        any Person or any action to enforce the same, or any setoff,

       


      
        
          -
            -

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


       

      counterclaim,
        recoupment, limitation or termination, or any breach or alleged breach by
        the
        Holder or any other Person of any obligation to the Company or any violation
        or
        alleged violation of law by the Holder or any other Person. Nothing herein
        shall
        limit the Holder’s right to pursue any other remedies available to it hereunder,
        at law or in equity, including, without limitation, a decree of specific
        performance and/or injunctive relief with respect to the Company’s failure to
        timely deliver certificates representing Warrant Shares upon exercise of
        the
        Warrant as required pursuant to the terms hereof.

       

       

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

       

      
        	(g)  	
                Limitations
                  on Exercises

              


      

       

      (i) Beneficial
        Ownership.
        The
        Company shall not effect the exercise of this Warrant, and the Holder shall
        not
        have the right to exercise this Warrant, to the extent that after giving
        effect
        to such exercise, such Person (together with such Person’s affiliates) would
        beneficially own in excess of 4.99% of the shares of Common Stock outstanding
        immediately after giving effect to such exercise. For purposes of the foregoing
        sentence, the aggregate number of shares of Common Stock beneficially owned
        by
        such Person and its affiliates shall include the number of shares of Common
        Stock issuable upon exercise of this Warrant with respect to which the
        determination of such sentence is being made, but shall exclude shares of
        Common
        Stock which would be issuable upon (i) exercise of the remaining, unexercised
        portion of this Warrant beneficially owned by such Person and its affiliates
        and
        (ii) exercise or conversion of the unexercised or unconverted portion of
        any
        other securities of the Company beneficially owned by such Person and its
        affiliates (including, without limitation, any convertible notes, convertible
        debentures, convertible preferred stock or warrants) subject to a limitation
        on
        conversion or exercise analogous to the limitation contained herein. Except
        as
        set forth in the preceding sentence, for purposes of this paragraph, beneficial
        ownership shall be calculated in accordance with Section 13(d) of the Securities
        Exchange Act of 1934, as amended. For purposes of this Warrant, in determining
        the number of outstanding shares of Common Stock, the Holder may rely on
        the
        number of outstanding shares of Common Stock as reflected in (1) the Company’s
        most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public
        filing with the Securities and Exchange Commission, as the case may be, (2)
        a
        more recent public announcement by the Company or (3) any other notice by
        the
        Company or the Transfer Agent setting forth the number of shares of Common
        Stock
        outstanding. For any reason at any time, upon the written or oral request
        of the
        Holder, the Company shall within two Business Days confirm orally and in
        writing
        to the Holder the number of shares of Common Stock then outstanding. In any
        case, the number of outstanding shares of Common Stock shall be determined
        after
        giving effect to the conversion or exercise of securities of the Company,
        including the Amendment Warrants, by the Holder and its affiliates since
        the
        date as of which such number of outstanding shares of Common Stock was
        reported.

       

      (ii) Principal
        Market Regulation.
        The
        Company shall not be obligated to issue any shares of Common Stock upon exercise
        of this Warrant if the issuance of such shares of Common Stock would exceed
        that
        number of shares of Common Stock which the

       


      
        
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      Company
        may issue upon exercise of this Warrant without breaching the Company’s
        obligations under the rules or regulations of the Principal Market (the
“Exchange
        Cap”),
        except that such limitation shall not apply in the event that the Company
        obtains the approval of its stockholders as required by the applicable rules
        of
        the Principal Market for issuances of shares of Common Stock in excess of
        such
        amount. Until such approval is obtained, no Buyer shall be issued, upon exercise
        or conversion, as applicable, of any Amendment Warrants, shares of Common
        Stock
        in an amount greater than the product of the Exchange Cap multiplied by a
        fraction, the numerator of which is the total number of shares of Common
        Stock
        underlying the Amendment Warrants issued to such Buyer pursuant to the Amendment
        Agreements on the Subscription Date and the denominator of which is the
        aggregate number of shares of Common Stock underlying all the Warrants issued
        to
        the Buyers pursuant to the Amendment Agreements on the Subscription Date
        (with
        respect to each Buyer, the “Exchange
        Cap Allocation”).
        In
        the event that any Buyer shall sell or otherwise transfer any of such Buyer’s
        Amendment Warrants, the transferee shall be allocated a pro rata portion
        of such
        Buyer’s Exchange Cap Allocation, and the restrictions of the prior sentence
        shall apply to such transferee with respect to the portion of the Exchange
        Cap
        Allocation allocated to such transferee. In the event that any holder of
        Amendment Warrants shall exercise all of such holder’s Amendment Warrants into a
        number of shares of Common Stock which, in the aggregate, is less than such
        holder’s Exchange Cap Allocation, then the difference between such holder’s
        Exchange Cap Allocation and the number of shares of Common Stock actually
        issued
        to such holder shall be allocated to the respective Exchange Cap Allocations
        of
        the remaining holders of Amendment Warrants on a pro rata basis in proportion
        to
        the shares of Common Stock underlying the Amendment Warrants then held by
        each
        such holder. In the event that the Company is prohibited from issuing any
        Warrant Shares for which an Exercise Notice has been received as a result
        of the
        operation of this Section 1(f)(ii), the Company shall pay cash in exchange
        for
        cancellation of such Warrant Shares, at a price per Warrant Share equal to
        the
        difference between the Closing Sale Price and the Exercise Price as of the
        date
        of the attempted exercise.

       

       

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

       

       

      3.  RIGHTS
        UPON DISTRIBUTION OF ASSETS.
        If the
        Company shall declare or make any dividend or other distribution of its assets
        (or rights to acquire its assets) to holders of shares of Common Stock, by
        way
        of return of capital or otherwise (including, without limitation, any
        distribution of cash, stock or other securities, property or options by way
        of
        a

       


      
        
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      dividend,
        spin off, reclassification, corporate rearrangement or other similar
        transaction) (a “Distribution”),
        at
        any time after the issuance of this Warrant, then, in each such
        case:

       

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

       

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

       

      4.  PURCHASE
        RIGHTS; FUNDAMENTAL TRANSACTIONS.

       

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

       

      (b)  Fundamental
        Transactions.
        The
        Company shall not enter into or be party to a Fundamental Transaction unless
        (i)  the Successor Entity assumes in writing all of the obligations of the
        Company under this Warrant and the other Transaction Documents in

       


      
        
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      accordance
        with the provisions of this Section (4)(b) pursuant to written agreements
        in
        form and substance reasonably satisfactory to the Required Holders, including
        agreements to deliver to each holder of Warrants in exchange for such Warrants
        a
        security of the Successor Entity evidenced by a written instrument substantially
        similar in form and substance to this Warrant, including, without limitation,
        an
        adjusted exercise price equal to the value for the shares of Common Stock
        reflected by the terms of such Fundamental Transaction, and exercisable for
        a
        corresponding number of shares of capital stock equivalent to the shares
        of
        Common Stock acquirable and receivable upon exercise of this Warrant (without
        regard to any limitations on the exercise of this Warrant) prior to such
        Fundamental Transaction, and satisfactory to the Required Holders and
        (ii) the Successor Entity (including its Parent Entity) is a publicly
        traded corporation whose common stock is quoted on or listed for trading
        on an
        Eligible Market. Upon the occurrence of any Fundamental Transaction, the
        Successor Entity shall succeed to, and be substituted for (so that from and
        after the date of such Fundamental Transaction, the provisions of this Warrant
        referring to the “Company” shall refer instead to the Successor Entity), and may
        exercise every right and power of the Company and shall assume all of the
        obligations of the Company under this Warrant with the same effect as if
        such
        Successor Entity had been named as the Company herein. Upon consummation
        of the
        Fundamental Transaction, the Successor Entity shall deliver to the Holder
        confirmation that there shall be issued upon exercise of this Warrant
at
        any
        time after the consummation of the Fundamental Transaction, in lieu of the
        shares of the Common Stock (or
        other
        securities, cash, assets or other property) purchasable
        upon the exercise of the Warrant
        prior
        to
        such Fundamental Transaction,
        such
        shares of the publicly traded common stock (or its equivalent) of the Successor
        Entity (including its Parent Entity), as adjusted in accordance with the
        provisions of this Warrant.
        In
        addition to and not in substitution for any other rights hereunder, prior
        to the
        consummation of any Fundamental Transaction pursuant to which holders of
        shares
        of Common Stock are entitled to receive securities or other assets with respect
        to or in exchange for shares of Common Stock (a “Corporate
        Event”),
        the
        Company shall make appropriate provision to insure that the Holder will
        thereafter have the right to receive upon an exercise of this Warrant
at
        any
        time after the consummation of the Fundamental Transaction but
        prior
        to the Expiration Date,
        in lieu
        of the shares of the Common Stock (or
        other
        securities, cash, assets or other property) purchasable
        upon the exercise of the Warrant prior to such Fundamental
        Transaction,
        such
        shares of stock, securities, cash, assets or any other property whatsoever
        (including warrants or other purchase or subscription rights) which the Holder
        would have been entitled to receive upon the happening of such Fundamental
        Transaction had the Warrant been exercised immediately prior to such Fundamental
        Transaction. Provision
        made pursuant to the preceding sentence shall be in a form and substance
        reasonably satisfactory to the Required Holders. The provisions of this Section
        shall apply similarly and equally to successive Fundamental Transactions
        and
        Corporate Events and shall be applied without regard to any limitations on
        the
        exercise of this Warrant.

       

      5.  NONCIRCUMVENTION.
        The
        Company hereby covenants and agrees that the Company will not, by amendment
        of
        its Certificate of Incorporation, Bylaws or through any reorganization, transfer
        of assets, consolidation, merger, scheme of arrangement, dissolution, issue
        or
        sale of securities, or any other voluntary action, avoid or seek to avoid
        the
        observance or performance of any of the terms of this Warrant, and will at
        all
        times in good faith carry out all the provisions of this Warrant and take
        all
        action as may be required to protect the rights of the Holder. Without limiting
        the generality of the foregoing, the Company (i) shall not increase the par
        value of any shares of Common Stock receivable upon the exercise of this
        Warrant
        above the

       


      
        
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      Exercise
        Price then in effect, (ii) shall take all such actions as may be necessary
        or appropriate in order that the Company may validly and legally issue fully
        paid and nonassessable shares of Common Stock upon the exercise of this Warrant,
        and (iii) shall, so long as any of the Amendment Warrants are outstanding,
        take
        all action necessary to reserve and keep available out of its authorized
        and
        unissued shares of Common Stock, solely for the purpose of effecting the
        exercise of the Amendment Warrants, 100% of the number of shares of Common
        Stock
        as shall from time to time be necessary to effect the exercise of the Amendment
        Warrants then outstanding (without regard to any limitations on
        exercise).

       

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

       

      7.  REISSUANCE
        OF WARRANTS.

       

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

       

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

       

      (c)  Exchangeable
        for Multiple Warrants.
        This
        Warrant is exchangeable, upon the surrender hereof by the Holder at the
        principal office of the Company, for a new Warrant or Warrants (in accordance
        with Section 7(d)) representing in the aggregate the right to

       


      
        
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      purchase
        the number of Warrant Shares then underlying this Warrant, and each such
        new
        Warrant will represent the right to purchase such portion of such Warrant
        Shares
        as is designated by the Holder at the time of such surrender; provided, however,
        that no Warrants for fractional shares of Common Stock shall be
        given.

       

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

       

      8.  NOTICES.
        Whenever notice is required to be given under this Warrant, unless otherwise
        provided herein, such notice shall be given in accordance with Section 9(f)
        of
        the Securities Purchase Agreement. The Company shall provide the Holder with
        prompt written notice of all actions taken pursuant to this Warrant, including
        in reasonable detail a description of such action and the reason therefore.
        Without limiting the generality of the foregoing, the Company will give written
        notice to the Holder (i) immediately upon any adjustment of the Exercise
        Price,
        setting forth in reasonable detail, and certifying, the calculation of such
        adjustment and (ii) promptly after the date on which the Company establishes
        a
        record date (A) with respect to any dividend or distribution upon the shares
        of
        Common Stock, (B) with respect to any grants, issuances or sales of any Options,
        Convertible Securities or rights to purchase stock, warrants, securities
        or
        other property to holders of shares of Common Stock or (C) for determining
        rights to vote with respect to any Fundamental Transaction, dissolution or
        liquidation, provided in each case that such information shall be made known
        to
        the public prior to or in conjunction with such notice being provided to
        the
        Holder.

       

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

       

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

       

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

       

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

       

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

       

      14.  TRANSFER.

       

      (a)  This
        Warrant may be offered for sale, sold, transferred or assigned in compliance
        with the Federal and state securities laws without the consent of the
        Company.

       

      (b)  Except
        as
        provided in Section 2(f) of the Securities Purchase Agreement, the Company
        may
        cause the legend set forth on the first page of this Warrant to be set forth
        on
        each Warrant, and a similar legend on any security issued or issuable upon
        exercise of this Warrant, unless counsel for the Company is of the opinion
        as to
        any such security that 

       

      15.  PAYMENT
        OF TAXES.
        The
        Company will pay any documentary stamp taxes attributable to the initial
        issuance of Warrant Shares issuable upon the exercise of the Warrant; provided,
        however, that the Company shall not be required to pay any tax or taxes which
        may be payable in respect of any transfer involved in the issuance or delivery
        of any

       


      
        
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      certificates
        for Warrant Shares in a name other than that of the Holder in respect of
        which
        such shares are issued, and in such case, the Company shall not be required
        to
        issue or deliver any certificate for Warrant Shares or any Warrant until
        the
        person requesting the same has paid to the Company the amount of such tax
        or has
        established to the Company’s reasonable satisfaction that such tax has been
        paid. The Holder shall be responsible for income taxes due under federal,
        state
        or other law, if any such tax is due.

       

       

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

       

       

      (a)  “Bloomberg”
means
        Bloomberg Financial Markets.

       

       

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

       

       

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

       

       

      (d)  “Common
        Stock”
means
        (i) the Company’s shares of Common Stock, $0.01 par value per share, and
        (ii) any share capital into which such Common Stock shall have been changed
        or any share capital resulting from a reclassification of such Common
        Stock.

       

       

      (e)  “Convertible
        Securities”
means
        any stock or securities (other than Options) directly or indirectly convertible
        into or exercisable or exchangeable for shares of Common Stock.

       

       

      (f)  “Eligible
        Market”
means
        the Principal Market, the American Stock Exchange, The New York Stock Exchange,
        Inc., The Nasdaq SmallCap Market or the OTC Bulletin Board.

       

       

      (g)  “Expiration
        Date”
means
        March 31, 2008; provided that if the Stockholder Approval (as such term is
        defined is the Amendment Agreement) is not obtained on or prior to June 30,
        2006, the Expiration Date shall be extended for each day after June 30, 2006
        that the Stockholder Approval is not obtained or, if such date falls on a
        day
        other than a Business Day or on which trading does not take place on the
        Principal Market (a “Holiday”),
        the
        next date that is not a Holiday.

       

       

      (h)  “Fundamental
        Transaction”
means
        that the Company shall, directly or indirectly, in one or more related
        transactions, (i) consolidate or merge with or into (whether or not the Company
        is the surviving corporation) another Person, or (ii) sell, assign, transfer,
        convey or otherwise dispose of all or substantially all of the properties
        or
        assets of the Company to another Person, or (iii) allow another Person to
        make a
        purchase, tender or exchange offer that is accepted by the holders of more
        than
        the 50% of either the outstanding shares of Common Stock (not including any
        shares of Common Stock held by the Person or Persons making or party to,
        or
        associated or affiliated with the Persons making or party to, such purchase,
        tender or exchange offer), or (iv) consummate a stock purchase agreement
        or
        other business combination (including, without limitation, a reorganization,
        recapitalization, spin-off or scheme of arrangement) with another Person
        whereby
        such other Person acquires more than the 50% of the outstanding shares of
        Common
        Stock (not including any shares of Common Stock held by the other Person
        or
        other Persons making or party to, or associated or affiliated with the other
        Persons making or party to, such stock purchase agreement or other business
        combination), or (v) reorganize, recapitalize or reclassify its Common
        Stock.

       

       

      (i)  “Options”
means
        any rights, warrants or options to subscribe for or purchase shares of Common
        Stock or Convertible Securities.

       

       

      (j)  “Parent
        Entity”
of
        a
        Person means an entity that, directly or indirectly, controls the applicable
        Person and whose common stock or equivalent equity security is quoted or
        listed
        on an Eligible Market, or, if there is more than one such Person or Parent
        Entity, the Person or Parent Entity with the largest public market
        capitalization as of the date of consummation of the Fundamental
        Transaction.

       

       

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

       

       

      (l)  “Principal
        Market”
means
        the Nasdaq National Market.

       

       

      (m)  “Registration
        Rights Agreement”
means
        that certain registration rights agreement as defined in the Amendment Agreement
        between the Company and the Investor.

       

       

      (n)  Required
        Holders”
means
        the holders of the Amendment Warrants representing at least a majority of
        shares
        of Common Stock underlying the Amendment Warrants then outstanding.

       

       

      (o)  “Successor
        Entity”
means
        the Person, which may be the Company, formed by, resulting from or surviving
        any
        Fundamental Transaction or the Person with which such Fundamental Transaction
        shall have been made, provided that if such Person is not a publicly traded
        entity whose common stock or equivalent equity security is quoted or listed
        for
        trading on an Eligible Market, Successor Entity shall mean such Person’s Parent
        Entity.

       

      [Signature
        Page Follows]

      



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

      


      


      AROTECH
        CORPORATION

      


      


      By: 

      Name: Robert
        S.
        Ehrlich

      Title: Chief
        Executive Officer

      



      
        
          
            


          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      



      EXHIBIT
        I

      


      EXERCISE
        NOTICE

       

      TO
        BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

       

      WARRANT
        TO PURCHASE COMMON STOCK

       

      AROTECH
        CORPORATION

       

      The
        undersigned holder hereby exercises the right to purchase _________________
        of
        the shares of Common Stock (“Warrant
        Shares”)
        of
        Arotech Corporation, a Delaware corporation (the “Company”),
        evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”),
        and
        tenders herewith payment to the Company of the aggregate exercise price in
        full,
        equal to $_____________________, together with all applicable transfer taxes,
        if
        any.

       

      Please
        issue the Warrant Shares in the following name and to the following
        address:

      


      Issue
        to:

       

       

      Facsimile
        Number:

      


      Authorization:

       

      Account
        Number:

        (if
        electronic book entry transfer)

       

      Transaction
        Code Number:

      (if
        electronic book entry transfer)

       

      To
        the
        extent the foregoing exercise is for less than the full number of Warrant
        Shares
        issuable pursuant to the Warrant, a replacement Warrant representing the
        remainder of the Warrant Shares issuable (and otherwise of like form, tenor
        and
        effect) shall be delivered to holder.

       

      The
        undersigned confirms the continuing validity of, and reaffirms as of the
        date
        hereof, the representations and warranties set forth in Section 2(b) of the
        Amendment Agreement, dated as of April 11, 2006, between the Company and
        the
        Investor.

       

      The
        undersigned agrees to comply with the prospectus delivery requirements (to
        the
        extent applicable) under the applicable securities laws in connection with
        any
        transfer of the aforesaid Warrant Shares.

       

      Date:
        _______________ __, ______

      


      Name
        of
        Registered Holder

      


      By: 

      Name:

      Title:

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      EXHIBIT
        II

       

      EXERCISE
        NOTICE

       

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

       

       

      AROTECH
        CORPORATION

      


       

      Gentlemen:

       

      


      The
        undersigned, registered holder of the Warrant to Purchase Common Stock delivered
        herewith, hereby irrevocably exercises such Warrant for, and purchases
        thereunder, shares of the Common Stock (“Warrant
        Shares”)
        of
        Arotech Corporation, a Delaware corporation, as provided below. Capitalized
        terms used herein, unless otherwise defined herein, shall have the meanings
        given in the Warrant. The portion of the Exercise Price to be applied toward
        the
        purchase of the Warrant Shares pursuant to this Exercise Notice is $_______.
        Such exercise shall be pursuant to the cashless exercise provisions of
        Section 1(d) of the Warrant; therefore, holder makes no payment with
        respect to this Exercise Notice. The number of shares to be issued pursuant
        to
        this exercise shall be determined by reference to the formula in
        Section 1(d) of the Warrant which, by reference to Section 1(d),
        requires the use of the Closing Price of the Company’s Common Stock on the day
        immediately preceding the date of this Exercise Notice, which is
        $______.

       

      Please
        issue the Warrant Shares in the following name and to the following
        address:

      


      Issue
        to:

       

       

      


      Facsimile
        Number:

      


      Authorization:

      Account
        Number:

        (if
        electronic book entry transfer)

      


      Transaction
        Code Number:

      (if
        electronic book entry transfer)

       

      To
        the
        extent the foregoing exercise is for less than the full number of Warrant
        Shares
        issuable pursuant to the Warrant, a replacement Warrant representing the
        remainder of the


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Warrant
        Shares issuable (and otherwise of like form, tenor and effect) shall be
        delivered to holder.

       

      The
        undersigned confirms the continuing validity of, and reaffirms as of the
        date
        hereof, the representations and warranties set forth in Section 2(b) through
        (j)
        of the Amendment Agreement, dated as of April 11, 2006, between the Company
        and
        the Investor.

       

      The
        undersigned agrees to comply with the prospectus delivery requirements (to
        the
        extent applicable) under the applicable securities laws in connection with
        any
        transfer of the aforesaid Warrant Shares. 

       

      Date:
        _______________ __, ______

       

       

      Name
        of
        Registered Holder

       

      By: 

      Name:

      Title:


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


      ACKNOWLEDGMENT

      


      


      The
        Company hereby acknowledges this Exercise Notice and hereby directs American
        Stock Transfer & Trust Co. to issue the above indicated number of shares of
        Common Stock in accordance with the Transfer Agent Instructions dated February
        [
        ], 2006 from the Company and acknowledged and agreed to by American Stock
        Transfer & Trust Co.

      


      AROTECH
        CORPORATION

      


      


      


      By:

      Name:

      Title:


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


      FORM
        OF
        ASSIGNMENT

      


       

      [To
        be
        completed and signed only upon transfer of Warrant]

       

      


       

      FOR
        VALUE
        RECEIVED, the undersigned hereby sells, assigns and transfers unto
        ________________________________ the right represented by the within Warrant
        to
        purchase ____________ shares of Common Stock of Arotech Corporation to which
        the
        within Warrant relates and appoints ________________ attorney to transfer
        said
        right on the books of Arotech Corporation with full power of substitution
        in the
        premises.

       

      
        	
                 

                Dated:
                  ,
                  

              	 
	 	 
	 	
                (Signature
                  must conform in all respects to name of Holder as specified on
                  the face of
                  the Warrant)

              
	 	 
	 	
                Address
                  of Transferee

              
	 	 
	 	 
	 	 
	 	 
	
                In
                  the presence of:

              	 
	 	 


      

      


      


       

      


       

      


       

      


       


      NEITHER
        THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
        THE
        SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
        LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
        (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
        IN A
        GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
        OR
        (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
        NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
        WITH
        A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
        BY THE
        SECURITIES.

      


      


      AROTECH
        CORPORATION

      


      Warrant
        To Purchase Common Stock

      


      


      Warrant
        No.:  RL-5 

      Number
        of
        Shares of Common Stock: 577,812

      Date
        of
        Issuance: April 11, 2006 (“Issuance
        Date”)

      


      


      AROTECH
        CORPORATION, a Delaware corporation (the “Company”),
        hereby certifies that, for good and valuable consideration, the receipt and
        sufficiency of which are hereby acknowledged, MAINFIELD ENTERPRISES, INC.,
        the
        registered holder hereof (the “Investor”)
        or its
        permitted assigns (the “Holder”),
        is
        entitled, subject to the terms set forth below, to purchase from the Company,
        at
        the Exercise Price (as defined below) then in effect, at any time or times
        on or
        after the date hereof, (the “Initial
        Exercise Date”),
        but
        not after 11:59 p.m., New York Time, on the Expiration Date (as defined below),
        five hundred seventy-seven thousand eight hundred twelve (577,812) fully
        paid
        nonassessable shares of Common Stock (as defined below) (the
        “Warrant
        Shares”).
        Except as otherwise defined herein, capitalized terms in this Warrant shall
        have
        the meanings set forth in Section 15. This Warrant (including all Warrants
        issued in exchange, transfer or replacement hereof, the “Warrants”)
        is one
        of the Warrants to purchase Common Stock (the “Amendment
        Warrants”)
        issued
        or that may be issued pursuant to one or more amendment agreements
        (collectively, the “Amendment
        Agreements”)
        entered into or that may be entered into between the Company and the Buyers
        (collectively, the “Buyers”)
        under
        that certain Securities Purchase Agreement dated as of September 29, 2005,
        including an amendment agreement with the Holder, dated as of April 11, 2006
        (the “Subscription
        Date”).

       

      1.  EXERCISE
        OF WARRANT.

       

       

      (a)  Mechanics
        of Exercise.
        Subject
        to the terms and conditions hereof (including, without limitation, the
        limitations set forth in Section 1(g)), this Warrant may be

       

       

      exercised
        by the Holder on any day from and after the Initial Exercise Date, in whole
        or
        in part, by (i) delivery of a written notice, in the form attached hereto
        as Exhibit
        I
        (the
“Exercise
        Notice”),
        of
        the Holder’s election to exercise this Warrant and (ii) (A) payment to the
        Company of an amount equal to the applicable Exercise Price multiplied by
        the
        number of Warrant Shares as to which this Warrant is being exercised (the
        “Aggregate
        Exercise Price”)
        in
        cash or wire transfer of immediately available funds or (B) by notifying
        the
        Company that this Warrant is being exercised pursuant to a Cashless Exercise
        (as
        defined in Section 1(d)) by delivery of a written notice, in the form attached
        hereto as Exhibit
        II.
        The
        date the Exercise Notice and the Aggregate Exercise Price (or notice of a
        Cashless Exercise) are delivered to the Company (as determined in accordance
        with the notice provisions hereof) is an “Exercise
        Date”.
        The
        Holder shall not be required to deliver the original Warrant in order to
        effect
        an exercise hereunder. Execution and delivery of the Exercise Notice with
        respect to less than all of the Warrant Shares shall have the same effect
        as
        cancellation of the original Warrant and issuance of a new Warrant evidencing
        the right to purchase the remaining number of Warrant Shares. On or before
        the
        first Business Day following the Exercise Date, the Company shall transmit
        by
        facsimile an acknowledgment of confirmation of receipt of the Exercise Notice
        and the Aggregate Exercise Price to the Holder and the Company’s transfer agent
        (the “Transfer
        Agent”).
        On or
        before the third Business Day following the Exercise Date, the Company shall
        direct the Transfer Agent to credit through The Depository Trust Company
        (“DTC”)
        Fast
        Automated Securities Transfer Program, such aggregate number of shares of
        Common
        Stock to which the Holder is entitled pursuant to such exercise to the Holder’s
        or its designee’s balance account with DTC through its Deposit Withdrawal Agent
        Commission system. On the Exercise Date, the Holder shall be deemed for all
        corporate purposes to have become the holder of record of the Warrant Shares
        with respect to which this Warrant has been exercised, irrespective of the
        date
        of delivery of the certificates evidencing such Warrant Shares. Upon surrender
        of this Warrant to the Company following one or more partial exercises, the
        Company shall as soon as practicable and in no event later than three Business
        Days after receipt of the Warrant and at its own expense, issue a new Warrant
        (in accordance with Section 7(d)) representing the right to purchase the
        number
        of Warrant Shares purchasable immediately prior to such exercise under this
        Warrant, less the number of Warrant Shares with respect to which this Warrant
        is
        exercised. No fractional shares of Common Stock are to be issued upon the
        exercise of this Warrant, but rather the number of shares of Common Stock
        to be
        issued shall be rounded up to the nearest whole number. The Company shall
        pay
        any and all taxes which may be payable with respect to the issuance and delivery
        of Warrant Shares upon exercise of this Warrant. In the event that the Company
        is unable to electronically deliver the Warrant Shares because of applicable
        securities laws, then the Company shall issue and deliver to the address
        as
        specified in the Exercise Notice a certificate, registered in the name of
        the
        Holder or its designee, for the number of shares of Common Stock to which
        the
        holder of this Warrant is entitled pursuant to such exercise.

       

       

      (b)  Exercise
        Price.
        For
        purposes of this Warrant, “Exercise
        Price”
means
        $0.594, subject to adjustment as provided herein.

       

       

      (c)  Company’s
        Failure to Timely Deliver Shares.
        Subject
        to Section 1(g), if the Company shall fail for any reason or for no reason
        within three Business Days of the Exercise Date to credit the Holder’s balance
        account with DTC for such number of shares of Common Stock to which the Holder
        is entitled upon the Holder’s exercise of this Warrant, and if

       


      
        
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      after
        such third Business Day the Holder purchases (in an open market transaction
        or
        otherwise) shares of Common Stock to deliver in satisfaction of a sale by
        the
        Holder of the Warrant Shares that the Holder anticipated receiving from the
        Company (a “Buy-In”),
        then
        the Company shall, within three Business Days after the Holder’s request and in
        the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to
        the Holder’s total purchase price (including brokerage commissions, if any) for
        the shares of Common Stock so purchased (the “Buy-In
        Price”),
        at
        which point the Company’s obligation to issue such shares of Common Stock shall
        terminate, or (ii) promptly honor its obligation to credit to the Holder
        such
        shares of Common Stock and pay cash to the Holder in an amount equal to the
        excess (if any) of the Buy-In Price over the product of (A) such number of
        shares of Common Stock, times (B) the Closing Sale Price on the date of the
        event giving rise to the Company’s obligation to deliver such certificate.
        Subject to Section 1(g), if the Company shall fail for any reason or for
        no
        reason within three Business Days of the Exercise Date to credit the Holder’s
        balance account with DTC for such number of shares of Common Stock to which
        the
        Holder is entitled upon the Holder’s exercise of this Warrant, then the Holder
        will have the right to rescind such exercise. 

       

       

      (d)  Cashless
        Exercise.
         Notwithstanding
        anything contained herein to the contrary, if at any time during the period
        commencing ten (10) Business Days prior to the Holder’s delivery of an Exercise
        Notice and ending on the day of delivery of the Exercise Notice, the
        Registration Statement (as defined in the Registration Rights Agreement)
        covering the Warrant Shares that are the subject of the Exercise Notice (the
        “Unavailable
        Warrant Shares”)
        is not
        available for the resale of such Unavailable Warrant Shares, 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
        Closing Sale Price of the shares of Common Stock (as reported by Bloomberg)
        on
        the date immediately preceding the date of the Exercise Notice.

       

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

       

       

      (e)  Absolute
        and Unconditional Obligation.
        The
        Company’s obligations to issue and deliver Warrant Shares in accordance with the
        terms hereof are absolute and unconditional, irrespective of any action or
        inaction by the Holder to enforce the same, the recovery of any judgment
        against
        any Person or any action to enforce the same, or any setoff,

       


      
        
          -
            -

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


       

      counterclaim,
        recoupment, limitation or termination, or any breach or alleged breach by
        the
        Holder or any other Person of any obligation to the Company or any violation
        or
        alleged violation of law by the Holder or any other Person. Nothing herein
        shall
        limit the Holder’s right to pursue any other remedies available to it hereunder,
        at law or in equity, including, without limitation, a decree of specific
        performance and/or injunctive relief with respect to the Company’s failure to
        timely deliver certificates representing Warrant Shares upon exercise of
        the
        Warrant as required pursuant to the terms hereof.

       

       

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

       

      
        	(g)  	
                Limitations
                  on Exercises

              


      

       

      (i) Beneficial
        Ownership.
        The
        Company shall not effect the exercise of this Warrant, and the Holder shall
        not
        have the right to exercise this Warrant, to the extent that after giving
        effect
        to such exercise, such Person (together with such Person’s affiliates) would
        beneficially own in excess of 4.99% of the shares of Common Stock outstanding
        immediately after giving effect to such exercise. For purposes of the foregoing
        sentence, the aggregate number of shares of Common Stock beneficially owned
        by
        such Person and its affiliates shall include the number of shares of Common
        Stock issuable upon exercise of this Warrant with respect to which the
        determination of such sentence is being made, but shall exclude shares of
        Common
        Stock which would be issuable upon (i) exercise of the remaining, unexercised
        portion of this Warrant beneficially owned by such Person and its affiliates
        and
        (ii) exercise or conversion of the unexercised or unconverted portion of
        any
        other securities of the Company beneficially owned by such Person and its
        affiliates (including, without limitation, any convertible notes, convertible
        debentures, convertible preferred stock or warrants) subject to a limitation
        on
        conversion or exercise analogous to the limitation contained herein. Except
        as
        set forth in the preceding sentence, for purposes of this paragraph, beneficial
        ownership shall be calculated in accordance with Section 13(d) of the Securities
        Exchange Act of 1934, as amended. For purposes of this Warrant, in determining
        the number of outstanding shares of Common Stock, the Holder may rely on
        the
        number of outstanding shares of Common Stock as reflected in (1) the Company’s
        most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public
        filing with the Securities and Exchange Commission, as the case may be, (2)
        a
        more recent public announcement by the Company or (3) any other notice by
        the
        Company or the Transfer Agent setting forth the number of shares of Common
        Stock
        outstanding. For any reason at any time, upon the written or oral request
        of the
        Holder, the Company shall within two Business Days confirm orally and in
        writing
        to the Holder the number of shares of Common Stock then outstanding. In any
        case, the number of outstanding shares of Common Stock shall be determined
        after
        giving effect to the conversion or exercise of securities of the Company,
        including the Amendment Warrants, by the Holder and its affiliates since
        the
        date as of which such number of outstanding shares of Common Stock was
        reported.

       

      (ii) Principal
        Market Regulation.
        The
        Company shall not be obligated to issue any shares of Common Stock upon exercise
        of this Warrant if the issuance of such shares of Common Stock would exceed
        that
        number of shares of Common Stock which the

       


      
        
          -
            -

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Company
        may issue upon exercise of this Warrant without breaching the Company’s
        obligations under the rules or regulations of the Principal Market (the
“Exchange
        Cap”),
        except that such limitation shall not apply in the event that the Company
        obtains the approval of its stockholders as required by the applicable rules
        of
        the Principal Market for issuances of shares of Common Stock in excess of
        such
        amount. Until such approval is obtained, no Buyer shall be issued, upon exercise
        or conversion, as applicable, of any Amendment Warrants, shares of Common
        Stock
        in an amount greater than the product of the Exchange Cap multiplied by a
        fraction, the numerator of which is the total number of shares of Common
        Stock
        underlying the Amendment Warrants issued to such Buyer pursuant to the Amendment
        Agreements on the Subscription Date and the denominator of which is the
        aggregate number of shares of Common Stock underlying all the Warrants issued
        to
        the Buyers pursuant to the Amendment Agreements on the Subscription Date
        (with
        respect to each Buyer, the “Exchange
        Cap Allocation”).
        In
        the event that any Buyer shall sell or otherwise transfer any of such Buyer’s
        Amendment Warrants, the transferee shall be allocated a pro rata portion
        of such
        Buyer’s Exchange Cap Allocation, and the restrictions of the prior sentence
        shall apply to such transferee with respect to the portion of the Exchange
        Cap
        Allocation allocated to such transferee. In the event that any holder of
        Amendment Warrants shall exercise all of such holder’s Amendment Warrants into a
        number of shares of Common Stock which, in the aggregate, is less than such
        holder’s Exchange Cap Allocation, then the difference between such holder’s
        Exchange Cap Allocation and the number of shares of Common Stock actually
        issued
        to such holder shall be allocated to the respective Exchange Cap Allocations
        of
        the remaining holders of Amendment Warrants on a pro rata basis in proportion
        to
        the shares of Common Stock underlying the Amendment Warrants then held by
        each
        such holder. In the event that the Company is prohibited from issuing any
        Warrant Shares for which an Exercise Notice has been received as a result
        of the
        operation of this Section 1(f)(ii), the Company shall pay cash in exchange
        for
        cancellation of such Warrant Shares, at a price per Warrant Share equal to
        the
        difference between the Closing Sale Price and the Exercise Price as of the
        date
        of the attempted exercise.

       

       

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

       

       

      3.  RIGHTS
        UPON DISTRIBUTION OF ASSETS.
        If the
        Company shall declare or make any dividend or other distribution of its assets
        (or rights to acquire its assets) to holders of shares of Common Stock, by
        way
        of return of capital or otherwise (including, without limitation, any
        distribution of cash, stock or other securities, property or options by way
        of
        a

       


      
        
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      dividend,
        spin off, reclassification, corporate rearrangement or other similar
        transaction) (a “Distribution”),
        at
        any time after the issuance of this Warrant, then, in each such
        case:

       

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

       

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

       

      4.  PURCHASE
        RIGHTS; FUNDAMENTAL TRANSACTIONS.

       

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

       

      (b)  Fundamental
        Transactions.
        The
        Company shall not enter into or be party to a Fundamental Transaction unless
        (i)  the Successor Entity assumes in writing all of the obligations of the
        Company under this Warrant and the other Transaction Documents in

       


      
        
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      accordance
        with the provisions of this Section (4)(b) pursuant to written agreements
        in
        form and substance reasonably satisfactory to the Required Holders, including
        agreements to deliver to each holder of Warrants in exchange for such Warrants
        a
        security of the Successor Entity evidenced by a written instrument substantially
        similar in form and substance to this Warrant, including, without limitation,
        an
        adjusted exercise price equal to the value for the shares of Common Stock
        reflected by the terms of such Fundamental Transaction, and exercisable for
        a
        corresponding number of shares of capital stock equivalent to the shares
        of
        Common Stock acquirable and receivable upon exercise of this Warrant (without
        regard to any limitations on the exercise of this Warrant) prior to such
        Fundamental Transaction, and satisfactory to the Required Holders and
        (ii) the Successor Entity (including its Parent Entity) is a publicly
        traded corporation whose common stock is quoted on or listed for trading
        on an
        Eligible Market. Upon the occurrence of any Fundamental Transaction, the
        Successor Entity shall succeed to, and be substituted for (so that from and
        after the date of such Fundamental Transaction, the provisions of this Warrant
        referring to the “Company” shall refer instead to the Successor Entity), and may
        exercise every right and power of the Company and shall assume all of the
        obligations of the Company under this Warrant with the same effect as if
        such
        Successor Entity had been named as the Company herein. Upon consummation
        of the
        Fundamental Transaction, the Successor Entity shall deliver to the Holder
        confirmation that there shall be issued upon exercise of this Warrant
at
        any
        time after the consummation of the Fundamental Transaction, in lieu of the
        shares of the Common Stock (or
        other
        securities, cash, assets or other property) purchasable
        upon the exercise of the Warrant
        prior
        to
        such Fundamental Transaction,
        such
        shares of the publicly traded common stock (or its equivalent) of the Successor
        Entity (including its Parent Entity), as adjusted in accordance with the
        provisions of this Warrant.
        In
        addition to and not in substitution for any other rights hereunder, prior
        to the
        consummation of any Fundamental Transaction pursuant to which holders of
        shares
        of Common Stock are entitled to receive securities or other assets with respect
        to or in exchange for shares of Common Stock (a “Corporate
        Event”),
        the
        Company shall make appropriate provision to insure that the Holder will
        thereafter have the right to receive upon an exercise of this Warrant
at
        any
        time after the consummation of the Fundamental Transaction but
        prior
        to the Expiration Date,
        in lieu
        of the shares of the Common Stock (or
        other
        securities, cash, assets or other property) purchasable
        upon the exercise of the Warrant prior to such Fundamental
        Transaction,
        such
        shares of stock, securities, cash, assets or any other property whatsoever
        (including warrants or other purchase or subscription rights) which the Holder
        would have been entitled to receive upon the happening of such Fundamental
        Transaction had the Warrant been exercised immediately prior to such Fundamental
        Transaction. Provision
        made pursuant to the preceding sentence shall be in a form and substance
        reasonably satisfactory to the Required Holders. The provisions of this Section
        shall apply similarly and equally to successive Fundamental Transactions
        and
        Corporate Events and shall be applied without regard to any limitations on
        the
        exercise of this Warrant.

       

      5.  NONCIRCUMVENTION.
        The
        Company hereby covenants and agrees that the Company will not, by amendment
        of
        its Certificate of Incorporation, Bylaws or through any reorganization, transfer
        of assets, consolidation, merger, scheme of arrangement, dissolution, issue
        or
        sale of securities, or any other voluntary action, avoid or seek to avoid
        the
        observance or performance of any of the terms of this Warrant, and will at
        all
        times in good faith carry out all the provisions of this Warrant and take
        all
        action as may be required to protect the rights of the Holder. Without limiting
        the generality of the foregoing, the Company (i) shall not increase the par
        value of any shares of Common Stock receivable upon the exercise of this
        Warrant
        above the

       


      
        
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      Exercise
        Price then in effect, (ii) shall take all such actions as may be necessary
        or appropriate in order that the Company may validly and legally issue fully
        paid and nonassessable shares of Common Stock upon the exercise of this Warrant,
        and (iii) shall, so long as any of the Amendment Warrants are outstanding,
        take
        all action necessary to reserve and keep available out of its authorized
        and
        unissued shares of Common Stock, solely for the purpose of effecting the
        exercise of the Amendment Warrants, 100% of the number of shares of Common
        Stock
        as shall from time to time be necessary to effect the exercise of the Amendment
        Warrants then outstanding (without regard to any limitations on
        exercise).

       

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

       

      7.  REISSUANCE
        OF WARRANTS.

       

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

       

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

       

      (c)  Exchangeable
        for Multiple Warrants.
        This
        Warrant is exchangeable, upon the surrender hereof by the Holder at the
        principal office of the Company, for a new Warrant or Warrants (in accordance
        with Section 7(d)) representing in the aggregate the right to

       


      
        
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      purchase
        the number of Warrant Shares then underlying this Warrant, and each such
        new
        Warrant will represent the right to purchase such portion of such Warrant
        Shares
        as is designated by the Holder at the time of such surrender; provided, however,
        that no Warrants for fractional shares of Common Stock shall be
        given.

       

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

       

      8.  NOTICES.
        Whenever notice is required to be given under this Warrant, unless otherwise
        provided herein, such notice shall be given in accordance with Section 9(f)
        of
        the Securities Purchase Agreement. The Company shall provide the Holder with
        prompt written notice of all actions taken pursuant to this Warrant, including
        in reasonable detail a description of such action and the reason therefore.
        Without limiting the generality of the foregoing, the Company will give written
        notice to the Holder (i) immediately upon any adjustment of the Exercise
        Price,
        setting forth in reasonable detail, and certifying, the calculation of such
        adjustment and (ii) promptly after the date on which the Company establishes
        a
        record date (A) with respect to any dividend or distribution upon the shares
        of
        Common Stock, (B) with respect to any grants, issuances or sales of any Options,
        Convertible Securities or rights to purchase stock, warrants, securities
        or
        other property to holders of shares of Common Stock or (C) for determining
        rights to vote with respect to any Fundamental Transaction, dissolution or
        liquidation, provided in each case that such information shall be made known
        to
        the public prior to or in conjunction with such notice being provided to
        the
        Holder.

       

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

       

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

       

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

       

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

       

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

       

      14.  TRANSFER.

       

      (a)  This
        Warrant may be offered for sale, sold, transferred or assigned in compliance
        with the Federal and state securities laws without the consent of the
        Company.

       

      (b)  Except
        as
        provided in Section 2(f) of the Securities Purchase Agreement, the Company
        may
        cause the legend set forth on the first page of this Warrant to be set forth
        on
        each Warrant, and a similar legend on any security issued or issuable upon
        exercise of this Warrant, unless counsel for the Company is of the opinion
        as to
        any such security that 

       

      15.  PAYMENT
        OF TAXES.
        The
        Company will pay any documentary stamp taxes attributable to the initial
        issuance of Warrant Shares issuable upon the exercise of the Warrant; provided,
        however, that the Company shall not be required to pay any tax or taxes which
        may be payable in respect of any transfer involved in the issuance or delivery
        of any

       


      
        
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      certificates
        for Warrant Shares in a name other than that of the Holder in respect of
        which
        such shares are issued, and in such case, the Company shall not be required
        to
        issue or deliver any certificate for Warrant Shares or any Warrant until
        the
        person requesting the same has paid to the Company the amount of such tax
        or has
        established to the Company’s reasonable satisfaction that such tax has been
        paid. The Holder shall be responsible for income taxes due under federal,
        state
        or other law, if any such tax is due.

       

       

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

       

       

      (a)  “Bloomberg”
means
        Bloomberg Financial Markets.

       

       

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

       

       

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

       

       

      (d)  “Common
        Stock”
means
        (i) the Company’s shares of Common Stock, $0.01 par value per share, and
        (ii) any share capital into which such Common Stock shall have been changed
        or any share capital resulting from a reclassification of such Common
        Stock.

       

       

      (e)  “Convertible
        Securities”
means
        any stock or securities (other than Options) directly or indirectly convertible
        into or exercisable or exchangeable for shares of Common Stock.

       

       

      (f)  “Eligible
        Market”
means
        the Principal Market, the American Stock Exchange, The New York Stock Exchange,
        Inc., The Nasdaq SmallCap Market or the OTC Bulletin Board.

       

       

      (g)  “Expiration
        Date”
means
        March 31, 2008; provided that if the Stockholder Approval (as such term is
        defined is the Amendment Agreement) is not obtained on or prior to June 30,
        2006, the Expiration Date shall be extended for each day after June 30, 2006
        that the Stockholder Approval is not obtained or, if such date falls on a
        day
        other than a Business Day or on which trading does not take place on the
        Principal Market (a “Holiday”),
        the
        next date that is not a Holiday.

       

       

      (h)  “Fundamental
        Transaction”
means
        that the Company shall, directly or indirectly, in one or more related
        transactions, (i) consolidate or merge with or into (whether or not the Company
        is the surviving corporation) another Person, or (ii) sell, assign, transfer,
        convey or otherwise dispose of all or substantially all of the properties
        or
        assets of the Company to another Person, or (iii) allow another Person to
        make a
        purchase, tender or exchange offer that is accepted by the holders of more
        than
        the 50% of either the outstanding shares of Common Stock (not including any
        shares of Common Stock held by the Person or Persons making or party to,
        or
        associated or affiliated with the Persons making or party to, such purchase,
        tender or exchange offer), or (iv) consummate a stock purchase agreement
        or
        other business combination (including, without limitation, a reorganization,
        recapitalization, spin-off or scheme of arrangement) with another Person
        whereby
        such other Person acquires more than the 50% of the outstanding shares of
        Common
        Stock (not including any shares of Common Stock held by the other Person
        or
        other Persons making or party to, or associated or affiliated with the other
        Persons making or party to, such stock purchase agreement or other business
        combination), or (v) reorganize, recapitalize or reclassify its Common
        Stock.

       

       

      (i)  “Options”
means
        any rights, warrants or options to subscribe for or purchase shares of Common
        Stock or Convertible Securities.

       

       

      (j)  “Parent
        Entity”
of
        a
        Person means an entity that, directly or indirectly, controls the applicable
        Person and whose common stock or equivalent equity security is quoted or
        listed
        on an Eligible Market, or, if there is more than one such Person or Parent
        Entity, the Person or Parent Entity with the largest public market
        capitalization as of the date of consummation of the Fundamental
        Transaction.

       

       

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

       

       

      (l)  “Principal
        Market”
means
        the Nasdaq National Market.

       

       

      (m)  “Registration
        Rights Agreement”
means
        that certain registration rights agreement as defined in the Amendment Agreement
        between the Company and the Investor.

       

       

      (n)  Required
        Holders”
means
        the holders of the Amendment Warrants representing at least a majority of
        shares
        of Common Stock underlying the Amendment Warrants then outstanding.

       

       

      (o)  “Successor
        Entity”
means
        the Person, which may be the Company, formed by, resulting from or surviving
        any
        Fundamental Transaction or the Person with which such Fundamental Transaction
        shall have been made, provided that if such Person is not a publicly traded
        entity whose common stock or equivalent equity security is quoted or listed
        for
        trading on an Eligible Market, Successor Entity shall mean such Person’s Parent
        Entity.

       

      [Signature
        Page Follows]

      



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

      


      


      AROTECH
        CORPORATION

      


      


      By: 

      Name: Robert
        S.
        Ehrlich

      Title: Chief
        Executive Officer

      



      
        
          
            


          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      



      EXHIBIT
        I

      


      EXERCISE
        NOTICE

       

      TO
        BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

       

      WARRANT
        TO PURCHASE COMMON STOCK

       

      AROTECH
        CORPORATION

       

      The
        undersigned holder hereby exercises the right to purchase _________________
        of
        the shares of Common Stock (“Warrant
        Shares”)
        of
        Arotech Corporation, a Delaware corporation (the “Company”),
        evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”),
        and
        tenders herewith payment to the Company of the aggregate exercise price in
        full,
        equal to $_____________________, together with all applicable transfer taxes,
        if
        any.

       

      Please
        issue the Warrant Shares in the following name and to the following
        address:

      


      Issue
        to:

       

       

      Facsimile
        Number:

      


      Authorization:

       

      Account
        Number:

        (if
        electronic book entry transfer)

       

      Transaction
        Code Number:

      (if
        electronic book entry transfer)

       

      To
        the
        extent the foregoing exercise is for less than the full number of Warrant
        Shares
        issuable pursuant to the Warrant, a replacement Warrant representing the
        remainder of the Warrant Shares issuable (and otherwise of like form, tenor
        and
        effect) shall be delivered to holder.

       

      The
        undersigned confirms the continuing validity of, and reaffirms as of the
        date
        hereof, the representations and warranties set forth in Section 2(b) of the
        Amendment Agreement, dated as of April 11, 2006, between the Company and
        the
        Investor.

       

      The
        undersigned agrees to comply with the prospectus delivery requirements (to
        the
        extent applicable) under the applicable securities laws in connection with
        any
        transfer of the aforesaid Warrant Shares.

       

      Date:
        _______________ __, ______

      


      Name
        of
        Registered Holder

      


      By: 

      Name:

      Title:

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      EXHIBIT
        II

       

      EXERCISE
        NOTICE

       

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

       

       

      AROTECH
        CORPORATION

      


       

      Gentlemen:

       

      


      The
        undersigned, registered holder of the Warrant to Purchase Common Stock delivered
        herewith, hereby irrevocably exercises such Warrant for, and purchases
        thereunder, shares of the Common Stock (“Warrant
        Shares”)
        of
        Arotech Corporation, a Delaware corporation, as provided below. Capitalized
        terms used herein, unless otherwise defined herein, shall have the meanings
        given in the Warrant. The portion of the Exercise Price to be applied toward
        the
        purchase of the Warrant Shares pursuant to this Exercise Notice is $_______.
        Such exercise shall be pursuant to the cashless exercise provisions of
        Section 1(d) of the Warrant; therefore, holder makes no payment with
        respect to this Exercise Notice. The number of shares to be issued pursuant
        to
        this exercise shall be determined by reference to the formula in
        Section 1(d) of the Warrant which, by reference to Section 1(d),
        requires the use of the Closing Price of the Company’s Common Stock on the day
        immediately preceding the date of this Exercise Notice, which is
        $______.

       

      Please
        issue the Warrant Shares in the following name and to the following
        address:

      


      Issue
        to:

       

       

      


      Facsimile
        Number:

      


      Authorization:

      Account
        Number:

        (if
        electronic book entry transfer)

      


      Transaction
        Code Number:

      (if
        electronic book entry transfer)

       

      To
        the
        extent the foregoing exercise is for less than the full number of Warrant
        Shares
        issuable pursuant to the Warrant, a replacement Warrant representing the
        remainder of the


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      Warrant
        Shares issuable (and otherwise of like form, tenor and effect) shall be
        delivered to holder.

       

      The
        undersigned confirms the continuing validity of, and reaffirms as of the
        date
        hereof, the representations and warranties set forth in Section 2(b) through
        (j)
        of the Amendment Agreement, dated as of April 11, 2006, between the Company
        and
        the Investor.

       

      The
        undersigned agrees to comply with the prospectus delivery requirements (to
        the
        extent applicable) under the applicable securities laws in connection with
        any
        transfer of the aforesaid Warrant Shares. 

       

      Date:
        _______________ __, ______

       

       

      Name
        of
        Registered Holder

       

      By: 

      Name:

      Title:


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


      ACKNOWLEDGMENT

      


      


      The
        Company hereby acknowledges this Exercise Notice and hereby directs American
        Stock Transfer & Trust Co. to issue the above indicated number of shares of
        Common Stock in accordance with the Transfer Agent Instructions dated February
        [
        ], 2006 from the Company and acknowledged and agreed to by American Stock
        Transfer & Trust Co.

      


      AROTECH
        CORPORATION

      


      


      


      By:

      Name:

      Title:


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


      FORM
        OF
        ASSIGNMENT

      


       

      [To
        be
        completed and signed only upon transfer of Warrant]

       

      


       

      FOR
        VALUE
        RECEIVED, the undersigned hereby sells, assigns and transfers unto
        ________________________________ the right represented by the within Warrant
        to
        purchase ____________ shares of Common Stock of Arotech Corporation to which
        the
        within Warrant relates and appoints ________________ attorney to transfer
        said
        right on the books of Arotech Corporation with full power of substitution
        in the
        premises.

       

      
        	
                 

                Dated:
                  ,
                  

              	 
	 	 
	 	
                (Signature
                  must conform in all respects to name of Holder as specified on
                  the face of
                  the Warrant)

              
	 	 
	 	
                Address
                  of Transferee

              
	 	 
	 	 
	 	 
	 	 
	
                In
                  the presence of:

              	 
	 	 


      

      


      


       

      


       

      


       

      


       

    

    To
      the
      address set forth under the Investor’s name on the signature page
      hereof

     

    
      with
        a
        copy to:

      
Schulte
        Roth & Zabel LLP

    

    919
      Third
      Avenue

    New
      York,
      New York 10022

    Facsimile
      No.: (212) 593-5955

    Telephone
      No.: (212) 756-2376

    Attention:
      Eleazer Klein, Esq.

     

    or
      to
      such other address and/or facsimile number and/or to the attention of such
      other
      Person as the recipient party has specified by written notice given to each
      other party five (5) days prior to the effectiveness of such change. Written
      confirmation of receipt (A) given by the recipient of such notice, consent,
      waiver or other communication, (B) mechanically or electronically generated
      by
      the sender’s facsimile machine containing the time, date, recipient facsimile
      number and an image of the first page of such transmission or (C) provided
      by an
      overnight courier service shall be rebuttable evidence of personal service,
      receipt by facsimile or receipt from an overnight courier service in accordance
      with clause (i), (ii) or (iii) above, respectively.

     

    (g)  Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and assigns, including any assignees of the
      Replacement Warrants.

     

    (h)  No
      Third Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    
      
        -
          7 -

      

      
        
        

        
          

        

      

      
        
        

      

    

    (i)  Survival.
      The
      representations and warranties of the Company and the Investors contained
      herein, and the agreements and covenants set forth herein, shall survive the
      Closing.

     

    (j)  Further
      Assurances.
      Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as the other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

    (k)  No
      Strict Construction.
      The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

     

    (l)  Remedies.
      The
      Investors shall have all rights and remedies which such holders have been
      granted at any time under any other agreement or contract and all of the rights
      which such holders have under any law. Any Person having any rights under any
      provision of this Agreement shall be entitled to enforce such rights
      specifically (without posting a bond or other security), to recover damages
      by
      reason of any breach of any provision of this Agreement and to exercise all
      other rights granted by law. Furthermore, the Company recognizes that in the
      event that it fails to perform, observe, or discharge any or all of its
      obligations under this Agreement, any remedy at law may prove to be inadequate
      relief to the Investor. The Company therefore agrees that the Investor shall
      be
      entitled to seek temporary and permanent injunctive relief in any such case
      without the necessity of proving actual damages and without posting a bond
      or
      other security.

     

    


    
      
        - 8
          -

      

      
        
        

        
          

        

      

      
        
        

      

    

     


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

     

    AROTECH
      CORPORATION

     

    By: 

     

    Name:

     

    Title:

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

     

    SIGNATURE
      PAGE OF INVESTOR FOLLOWS]

     


    
      
        -
          9
-

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


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

     

    MAINFIELD
      ENTERPRISES, INC.

     

    By:_____________________________________

    Name:

    Title:

    


    Address
      for Notice:

    


    c/o
      Sage
      Capital Growth, Inc.

    660
      Madison Avenue, 18th Floor

    New
      York,
      New York 10021

    


    Facsimile
      No.: +1-212-651-9010

    


    Attention:
      Mr. Mor Sagi

    


    



    
      
        
          -
            10
-

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    



    EXHIBITS

     

    Exhibit
      A
      - Form
      of
      Replacement Warrant

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SCHEDULE
      1

     

    List
      of Existing Warrants

     

    


    
      	
              Holder

            	
              Date

              Exercisable

            	
              Expiration
                Date

            	
              Number

            	
              Original

              Price

            	
              New

              Price

            
	
              Mainfield
                Enterprises Inc.

            	
              07/07/04

            	
              07/07/07

            	
              1,063,829

            	
              1.8800

            	
              0.40

            
	
              Mainfield
                Enterprises Inc.

            	
              06/08/04

            	
              06/18/09

            	
              155,700

            	
              2.2000

            	
              0.40

            
	
              Mainfield
                Enterprises Inc.

            	
              07/15/04

            	
              07/14/09

            	
              225,000

            	
              1.3800

            	
              0.40

            
	
              Mainfield
                Enterprises Inc.

            	
              07/15/04

            	
              07/14/09

            	
              1,444,529

            	
              1.3800

            	
              0.40