**Exhibit
        2(b)(ii)**
   **SUBSCRIPTION
        AGREEMENT**
   **THIS
        SUBSCRIPTION AGREEMENT** (this
“ **Agreement** ”),
        dated
        as of August 5 2005, by and among Valcent Products Inc. (formerly known as
        Nettron.com, Inc.), an Alberta, Canada corporation (the “ **Company** ”),
        and
        the subscribers identified on the signature page hereto (each a “ **Subscriber** ”
        and
        collectively “ **Subscribers** ”).
  **WHEREAS** ,
        the
        Company and the Subscribers are executing and delivering this Agreement in
        reliance upon an exemption from securities registration afforded by the
        provisions of Section 4(2), Section 4(6) and/or Regulation D (“ **Regulation
        D** ”)
        as
        promulgated by the United States Securities and Exchange Commission (the
        “ **Commission** ”)
        under
        the Securities Act of 1933, as amended (the “ **1933
        Act** ”).
  **WHEREAS** ,
        the
        parties desire that, upon the terms and subject to the conditions contained
        herein, the Company shall issue and sell to the Subscribers, as provided
        herein,
        and the Subscribers, in the aggregate, shall purchase for not less than $750,000
        and up to $1,500,000 (the " **Purchase
        Price** ")
        of
        principal amount of promissory notes of the Company (“ **Note** ”
        or
“ **Notes** ”)
        (see **Exhibit
        A Form of Convertible Note** )
        which
        Notes are convertible into shares of the Company's common stock, no par value
        (the " **Common
        Stock** ")
        at a
        per share conversion price set forth in the Note (“ **Conversion
        Price** ”);
        and
        share purchase warrants (the “ **Warrants** ”)
        in the
        forms attached hereto as **Exhibit
        B** to
        purchase shares of Common Stock (the “ **Warrant
        Shares** ”).
        The
        Notes, shares of Common Stock issuable upon conversion of the Notes (the
        “ **Shares** ”),
        the
        Warrants and the Warrant Shares are collectively referred to herein as the
        " **Securities** ";
        and
  **NOW,
        THEREFORE** ,
        in
        consideration of the mutual covenants and other agreements contained in this
        Agreement the Company and the Subscribers hereby agree as follows:
  1. Closing .
        Subject
        to the satisfaction or waiver of the terms and conditions of this Agreement,
        on
        each Closing Date (as defined in Section 2 below), each Subscriber shall
        purchase and the Company shall sell to each Subscriber a Note in the principal
        amount designated on the signature page hereto for the consideration set
        forth
        on the signature page hereto, and the amount of Warrants determined pursuant
        to
        Section 3 below.
  2. Closing
        Date .
        The
        consummation of the transactions contemplated herein shall take place, from
        time
        to time, at the offices of Grushko & Mittman, P.C., 551 Fifth Avenue, Suite
        1601, New York, New York 10176, upon the satisfaction of all conditions to
        Closing set forth in this Agreement (“ **Closing
        Date** ”).
        In
        the event there is more than one Closing, then the first Closing Date shall
        be
        the date employed to calculate all time related requirements hereunder for
        all
        Subscribers.
 
 3. Warrants.
 
 (a) Class
        A Warrants .
        On the
        Closing Date, the Company will issue and deliver Class A Warrants to the
        Subscribers. One Class A Warrant will be issued for each $0.75 of Purchase
        Price
        paid by a Subscriber on a Closing Date. The exercise price to acquire a Warrant
        Share upon exercise of a Class A Warrant shall be $0.50, subject to reduction
        as
        described in the Class A Warrant. The Class A Warrants shall be exercisable
        until three years after the Closing Date.
  (b) Class
        B Warrants . On
        the
        Closing Date, the Company will issue and deliver Class B Warrants to the
        Subscribers. One Class B Warrant will be issued for each $0.75 of Purchase
        Price
        paid by a Subscriber on a Closing Date. The exercise price to acquire a Warrant
        Share upon exercise of a Class B Warrant shall be $1.00, subject to reduction
        as
        described in the Class B Warrant. The Class B Warrants shall be exercisable
        until three years after the Closing Date.
  
  4. Subscriber's
        Representations and Warranties .
        Each
        Subscriber hereby represents and warrants to and agrees with the Company
        only as
        to such Subscriber that:
 
 (a) Organization
        and Standing of the Subscribers .
        If the
        Subscriber is an entity, such Subscriber is a corporation, partnership or
        other
        entity duly incorporated or organized, validly existing and in good standing
        under the laws of the jurisdiction of its incorporation or
        organization.
 
 (b) Authorization
        and Power .
        Each
        Subscriber has the requisite power and authority to enter into and perform
        this
        Agreement and to purchase the Notes and Warrants being sold to it hereunder.
        The
        execution, delivery and performance of this Agreement by such Subscriber
        and the
        consummation by it of the transactions contemplated hereby and thereby have
        been
        duly authorized by all necessary corporate or partnership action, and no
        further
        consent or authorization of such Subscriber or its Board of Directors,
        stockholders, partners, members, as the case may be, is required. This Agreement
        has been duly authorized, executed and delivered by Subscriber and constitutes,
        or shall constitute when executed and delivered, a valid and binding obligation
        of the Subscriber enforceable against the Subscriber in accordance with the
        terms thereof.
  (c) No
        Conflicts .
        The
        execution, delivery and performance of this Agreement and the consummation
        by
        Subscriber of the transactions contemplated hereby or relating hereto do
        not and
        will not (i) result in a violation of such Subscriber’s charter documents or
        bylaws or other organizational documents or (ii) conflict with, or constitute
        a
        default (or an event which with notice or lapse of time or both would become
        a
        default) under, or give to others any rights of termination, amendment,
        acceleration or cancellation of any agreement, indenture or instrument or
        obligation to which such Subscriber is a party or by which its properties
        or
        assets are bound, or result in a violation of any law, rule, or regulation,
        or
        any order, judgment or decree of any court or governmental agency applicable
        to
        such Subscriber or its properties (except for such conflicts, defaults and
        violations as would not, individually or in the aggregate, have a material
        adverse effect on such Subscriber). Such Subscriber is not required to obtain
        any consent, authorization or order of, or make any filing or registration
        with,
        any court or governmental agency in order for it to execute, deliver or perform
        any of its obligations under this Agreement or to purchase the Notes or acquire
        the Warrants in accordance with the terms hereof, provided that for purposes
        of
        the representation made in this sentence, such Subscriber is assuming and
        relying upon the accuracy of the relevant representations and agreements
        of the
        Company herein.
 
 ( d) Information
        on Company .
        The
        Subscriber has been furnished with or has had access at the EDGAR Website
        of the
        Commission to the Company's Form 20-F for the year ended March 31, 2004 as
        filed
        with the Commission, together with all subsequently filed Forms 6-F, and
        filings
        made with the Commission available at the EDGAR website (hereinafter referred
        to
        collectively as the " **Reports** ").
        The
        Subscriber has had an opportunity to ask questions and receive answers from
        representatives of the Company. In addition, the Subscriber has received
        in
        writing from the Company such other information concerning its operations,
        financial condition and other matters as the Subscriber has requested in
        writing
        (such other information is collectively, the " **Other
        Written Information** "),
        and
        considered all factors the Subscriber deems material in deciding on the
        advisability of investing in the Securities.
  (e) Information
        on Subscriber .
        The
        Subscriber is, and will be at the time of the conversion of the Notes and
        exercise of the Warrants, an " **accredited
        investor** ",
        as
        such term is defined in Regulation D promulgated by the Commission under
        the
        1933 Act, is experienced in investments and business matters, has made
        investments of a speculative nature and has purchased securities of United
        States publicly-owned companies in private placements in the past and, with
        its
        representatives, has such knowledge and experience in financial, tax and
        other
        business matters as to enable the Subscriber to utilize the information made
        available by the Company to evaluate the merits and risks of and to make
        an
        informed investment decision with respect to the proposed purchase, which
        represents a speculative investment. The Subscriber has the authority and
        is
        duly and legally qualified to purchase and own the Securities. The Subscriber
        is
        able to bear the risk of such investment for an indefinite period and to
        afford
        a complete loss thereof. The information set forth on the signature page
        hereto
        regarding the Subscriber is accurate.
  (f) Purchase
        of Notes and Warrants .
        On the
        Closing Date, the Subscriber will purchase the Notes, and Warrants as principal
        for its own account for investment only and not with a view toward, or for
        resale in connection with, the public sale or any distribution
        thereof.
  
  (g) Compliance
        with Securities Act .  The
        Subscriber understands and agrees that the Securities have not been registered
        any applicable securities laws and that such Securities must be held
        indefinitely unless a subsequent disposition is registered under any applicable
        securities laws or is exempt from such registration.
  (h) Shares
        Legend .
        The
        Shares, and the Warrant Shares shall bear the following or similar legend, or
        such
        other legend as may be required by Canadian securities regulations:
 
 “Unless
        permitted under securities legislation, the holder of this security must
        not
        trade the security before November
        25, 2005
  (i) Warrants
        Legend .
        The
        Warrants shall bear the following or similar legend, or such other legend
        as may
        be required by Canadian securities regulations.
 
 “Unless
        permitted under securities legislation, the holder of this security must
        not
        trade the security before November 25, 2005 or the common shares issuable
        upon
        its exercise”.]
  (j) Note
        Legend .
        The
        Note shall bear the following legend, or such other legend as may be required
        by
        Canadian securities regulations:
 
 “Unless
        permitted under securities legislation, the holder of this security must
        not
        trade the security before November 25, 2005 or the common shares issuable
        upon
        its exercise”
  (k) Communication
        of Offer .
        The
        offer to sell the Securities was directly communicated to the Subscriber
        by the
        Company. At no time was the Subscriber presented with or solicited by any
        leaflet, newspaper or magazine article, radio or television advertisement,
        or
        any other form of general advertising or solicited or invited to attend a
        promotional meeting otherwise than in connection and concurrently with such
        communicated offer.
  ( l ) Authority;
        Enforceability .
        This
        Agreement and other agreements delivered together with this Agreement or
        in
        connection herewith have been duly authorized, executed and delivered by
        the
        Subscriber and are valid and binding agreements enforceable in accordance
        with
        their terms, subject to bankruptcy, insolvency, fraudulent transfer,
        reorganization, moratorium and similar laws of general applicability relating
        to
        or affecting creditors’ rights generally and to general principles of equity;
        and Subscriber has full corporate power and authority necessary to enter
        into
        this Agreement and such other agreements and to perform its obligations
        hereunder and under all other agreements entered into by the Subscriber relating
        hereto.
 
 ( m ) Restricted
        Securities .
        Subscriber understands that the Securities are subject to certain resale
        restrictions as per applicable securities laws.
  ( n ) No
        Governmental Review .
        Each
        Subscriber understands that no United States federal or state agency or any
        other governmental or state agency has passed on or made recommendations
        or
        endorsement of the Securities or the suitability of the investment in the
        Securities nor have such authorities passed upon or endorsed the merits of
        the
        offering of the Securities.
  
 
 (o) Correctness
        of Representations .
        Each
        Subscriber represents as to such Subscriber that the foregoing representations
        and warranties are true and correct as of the date hereof and, unless a
        Subscriber otherwise notifies the Company prior to the Closing Date shall
        be
        true and correct as of the Closing Date.
 
 (p) Survival .
        The
        foregoing representations and warranties shall survive the Closing Date for
        a
        period of three years.
  5. Company
        Representations and Warranties .
        The
        Company represents and warrants to and agrees with each Subscriber
        that:
  (a) Due
        Incorporation .
        The
        Company and each of its Subsidiaries is a corporation or other entity duly
        incorporated or organized, validly existing and in good standing under the
        laws
        of the jurisdiction of its incorporation or organization and has the requisite
        corporate power to own its properties and to carry on its business as presently
        conducted. The Company and each of its Subsidiaries is duly qualified as
        a
        foreign corporation to do business and is in good standing in each jurisdiction
        where the nature of the business conducted or property owned by it makes
        such
        qualification necessary, other than those jurisdictions in which the failure
        to
        so qualify would not have a Material Adverse Effect. For purposes of this
        Agreement, a “ **Material
        Adverse Effect** ”
        shall
        mean a material adverse effect on the financial condition, results of
        operations, properties or business of the Company and its Subsidiaries taken
        as
        a whole. For purposes of this Agreement, “ **Subsidiary** ”
        means,
        with respect to any entity at any date, any corporation, limited or general
        partnership, limited liability company, trust, estate, association, joint
        venture or other business entity of which more than 50% of (i) the
        outstanding capital stock having (in the absence of contingencies) ordinary
        voting power to elect a majority of the board of directors or other managing
        body of such entity, (ii) in the case of a partnership or limited
        liability
        company, the interest in the capital or profits of such partnership or limited
        liability company or (iii) in the case of a trust, estate, association,
        joint venture or other entity, the beneficial interest in such trust, estate,
        association or other entity business is, at the time of determination, owned
        or
        controlled directly or indirectly through one or more intermediaries, by
        such
        entity. All the Company’s Subsidiaries as of the Closing Date are set forth on **Schedule
        5(a)** hereto.
  (b) Outstanding
        Stock .
        All
        issued and outstanding shares of capital stock of the Company has been duly
        authorized and validly issued and are fully paid and nonassessable.
  (c) Authority;
        Enforceability .
        This
        Agreement, the Note, the Warrants and any other agreements delivered together
        with this Agreement or in connection herewith (collectively “ **Transaction
        Documents** ”)
        have
        been duly authorized, executed and delivered by the Company and are valid
        and
        binding agreements enforceable in accordance with their terms, subject to
        bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
        similar laws of general applicability relating to or affecting creditors'
        rights
        generally and to general principles of equity. The Company has full corporate
        power and authority necessary to enter into and deliver the Transaction
        Documents and to perform its obligations thereunder.
  (d) Additional
        Issuances .
        There
        are no outstanding agreements or preemptive or similar rights affecting the
        Company's common stock or equity and no outstanding rights, warrants or options
        to acquire, or instruments convertible into or exchangeable for, or agreements
        or understandings with respect to the sale or issuance of any shares of common
        stock or equity of the Company or other equity interest in any of the
        Subsidiaries of the Company except as described on **Schedule
        5(d)** .
  (e) Consents .
        No
        consent, approval, authorization or order of any court, governmental agency
        or
        body or arbitrator having jurisdiction over the Company, or any of its
        Affiliates, the OTC Bulletin Board (“ **Bulletin
        Board** ”)
        nor
        the Company's shareholders is required for the execution by the Company of
        the
        Transaction Documents and compliance and performance by the Company of its
        obligations under the Transaction Documents, including, without limitation,
        the
        issuance and sale of the Securities.
  
  (f) No
        Violation or Conflict .
        Assuming the representations and warranties of the Subscribers in Section
        4 are
        true and correct, neither the issuance and sale of the Securities nor the
        performance of the Company’s obligations under this Agreement and all other
        agreements entered into by the Company relating thereto by the Company
        will:
  (i) violate,
        conflict with, result in a breach of, or constitute a default (or an event
        which
        with the giving of notice or the lapse of time or both would be reasonably
        likely to constitute a default) under (A) the articles or certificate of
        incorporation, charter or bylaws of the Company, (B) to the Company's knowledge,
        any decree, judgment, order, law, treaty, rule, regulation or determination
        applicable to the Company of any court, governmental agency or body, or
        arbitrator having jurisdiction over the Company or over the properties or
        assets
        of the Company or any of its Affiliates, (C) the terms of any bond, debenture,
        note or any other evidence of indebtedness, or any agreement, stock option
        or
        other similar plan, indenture, lease, mortgage, deed of trust or other
        instrument to which the Company or any of its Affiliates is a party, by which
        the Company or any of its Affiliates is bound, or to which any of the properties
        of the Company or any of its Affiliates is subject, or (D) the terms of any
        "lock-up" or similar provision of any underwriting or similar agreement to
        which
        the Company, or any of its Affiliates is a party except the violation, conflict,
        breach, or default of which would not have a Material Adverse Effect ;
        or
  (ii) result
        in
        the creation or imposition of any lien, charge or encumbrance upon the
        Securities or any of the assets of the Company or any of its Affiliates except
        as described herein; or
  (iii) result
        in
        the activation of any anti-dilution rights or a reset or repricing of any
        debt
        or security instrument of any other creditor or equity holder of the Company,
        nor result in the acceleration of the due date of any obligation of the Company;
        or
  (iv) result
        in
        the activation of any piggy-back registration rights of any person or entity
        holding securities of the Company or having the right to receive securities
        of
        the Company.
  (g) The
        Securities .
        The
        Securities upon issuance:
  (i) are,
        or
        will be, free and clear of any security interests, liens, claims or other
        encumbrances, subject to restrictions upon under any applicable securities
        laws;
 
 (ii) have
        been, or will be, duly and validly authorized and on the date of issuance
        of the
        Shares and upon exercise of the Warrants, the Shares and Warrant Shares will
        be
        duly and validly issued, fully paid and nonassessable or if registered pursuant
        to the 1933 Act, and resold pursuant to an effective registration statement
        and
        prospectus delivery requirements are satisfied, will be free trading and
        unrestricted);
  (iii) will
        not
        have been issued or sold in violation of any preemptive or other similar
        rights
        of the holders of any securities of the Company;
  (iv) will
        not
        subject the holders thereof to personal liability by reason of being such
        holders; and
  (v) assuming
        the representations warranties of the Subscribers as set forth in Section
        4
        hereof are true and correct, will not result in a violation of any applicable
        securities laws.
  (h) Litigation .
        There
        is no pending or, to the best knowledge of the Company, threatened action,
        suit,
        proceeding or investigation before any court, governmental agency or body,
        or
        arbitrator having jurisdiction over the Company, or any of its Affiliates
        that
        would affect the execution by the Company or the performance by the Company
        of
        its obligations under the Transaction Documents. Except as disclosed in the
        Reports or in the schedules hereto, there is no pending or, to the best
        knowledge of the Company, basis for or threatened action, suit, proceeding
        or
        investigation before any court, governmental agency or body, or arbitrator
        having jurisdiction over the Company, or any of its Affiliates which litigation
        if adversely determined would have a Material Adverse Effect .
  
  (i) Reporting
        Company .
        The
        Company is a publicly-held company subject to reporting obligations pursuant
        to
        Section 13 of the 1934
        Act and has
        a class of common shares registered pursuant to Section 12(g) of the 1934
        Act.
        Pursuant to the provisions of the 1934 Act, the Company has filed all reports
        and other materials required to be filed thereunder with the Commission during
        the preceding twelve months.
  (j) No
        Market Manipulation .
        The
        Company and its Affiliates have not taken, and will not take, directly or
        indirectly, any action designed to, or that might reasonably be expected
        to,
        cause or result in stabilization or manipulation of the price of the Common
        Stock to
        facilitate the sale or resale of the Securities or affect the price at which
        the
        Securities may be issued or resold.
  (k) Information
        Concerning Company .
        The
        Reports contain all material information relating to the Company and its
        operations and financial condition as of their respective dates which
        information is required to be disclosed therein. Since the date of the financial
        statements included in the Reports, and except as modified in the Other Written
        Information or in the Schedules hereto, there has been no Material Adverse
        Event
        relating to the Company's business, financial condition or affairs not disclosed
        in the Reports. The Reports, including the financial statements included
        therein, do not contain any untrue statement of a material fact or omit to
        state
        a material fact required to be stated therein or necessary to make the
        statements therein not misleading in light of the circumstances when
        made.
  (l) Stop
        Transfer .
        The
        Company will not issue any stop transfer order or other order impeding the
        sale,
        resale or delivery of any of the Securities, except as may be required by
        any
        applicable federal or state securities laws and unless contemporaneous notice
        of
        such instruction is given to the Subscriber.
  (m) Defaults .
        The
        Company is not in violation of its articles of incorporation or bylaws. The
        Company is (i) not in default under or in violation of any other material
        agreement or instrument to which it is a party or by which it or any of its
        properties are bound or affected, which default or violation would have a
        Material Adverse Effect ,
        (ii)
        not in default with respect to any order of any court, arbitrator or
        governmental body or subject to or party to any order of any court or
        governmental authority arising out of any action, suit or proceeding under
        any
        statute or other law respecting antitrust, monopoly, restraint of trade,
        unfair
        competition or similar matters, or (iii) to the Company’s knowledge not in
        violation of any statute, rule or regulation of any governmental authority
        which
        violation would have a Material Adverse Effect .
  (n) No
        Integrated Offering. Neither
        the Company, nor any of its Affiliates, nor any person acting on its or their
        behalf, has directly or indirectly made any offers or sales of any security
        or
        solicited any offers to buy any security under circumstances that would cause
        the offer of the Securities pursuant to this Agreement to be integrated with
        prior offerings by the Company for purposes of the 1933 Act or any applicable
        stockholder approval provisions, including, without limitation, under the
        rules
        and regulations of the Bulletin Board. Nor will the Company or any of its
        Affiliates take any action or steps that would cause the offer or issuance
        of
        the Securities to be integrated with other offerings. The Company will not
        conduct any offering other than the transactions contemplated hereby that
        will
        be integrated with the offer or issuance of the Securities, which would impair
        the exemption relied upon in this Offering.
  (o) No
        General Solicitation .
        Neither
        the Company, nor any of its Affiliates, nor to its knowledge, any person
        acting
        on its or their behalf, has engaged in any form of general solicitation or
        general advertising (within the meaning of Regulation D under the 1933 Act)
        in
        connection with the offer or sale of the Securities.
  (p) Listing .
        The
        Common Stock is quoted on the Bulletin Board. The Company has not received
        any
        oral or written notice that the Common Stock is not eligible nor will become
        ineligible for quotation on the Bulletin Board nor that the Common Stock
        does
        not meet all requirements for the continuation of such quotation and the
        Company
        satisfies all the requirements for the continued quotation of the Common
        Stock
        on the Bulletin Board.
  
  (q) No
        Undisclosed Liabilities .
        The
        Company has no liabilities or obligations which are material, individually
        or in
        the aggregate, which are not disclosed in the Reports and Other Written
        Information, other than those incurred in the ordinary course of the Company’s
        businesses since March 31, 2004 and which, individually or in the aggregate,
        would reasonably be expected to have a Material Adverse Effect ,
        except
        as disclosed on **Schedule
        5(q)** .
  (r) No
        Undisclosed Events or Circumstances .
        Since
        March 31, 2004, no event or circumstance has occurred or exists with respect
        to
        the Company or its businesses, properties, operations or financial condition,
        that, under applicable law, rule or regulation, requires public disclosure
        or
        announcement prior to the date hereof by the Company but which has not been
        so
        publicly announced or disclosed in the Reports.
  (s) Capitalization .
        The
        authorized and outstanding capital stock of the Company as of the date of
        this
        Agreement and the Closing Date (not including the Securities) are set forth
        on **Schedule
        5(d)** .
        Except
        as set forth on **Schedule
        5(d)** ,
        there
        are no options, warrants, or rights to subscribe to, securities, rights or
        obligations convertible into or exchangeable for or giving any right to
        subscribe for any shares of capital stock of the Company or any of its
        Subsidiaries. All of the outstanding shares of Common Stock of the Company
        have
        been duly and validly authorized and issued and are fully paid and
        nonassessable.
  (t) Dilution .
        The
        Company's executive officers and directors understand the nature of the
        Securities being sold hereby and recognize that the issuance of the Securities
        will have a potential dilutive effect on the equity holdings of other holders
        of
        the Company’s equity or rights to receive equity of the Company. The board of
        directors of the Company has concluded, in its good faith business judgment
        that
        the issuance of the Securities is in the best interests of the Company. The
        Company specifically acknowledges that its obligation to issue the Shares
        upon
        conversion of the Notes, and the Warrant Shares upon exercise of the Warrants
        is
        binding upon the Company and enforceable regardless of the dilution such
        issuance may have on the ownership interests of other shareholders of the
        Company or parties entitled to receive equity of the Company.
  (u) No
        Disagreements with Accountants and Lawyers. There
        are no disagreements of any kind presently existing, or reasonably anticipated
        by the Company to arise, between the Company and the accountants and lawyers
        formerly or presently employed by the Company, including but not limited
        to
        disputes or conflicts over payment owed to such accountants and
        lawyers.
 
 (v) Investment
        Company .
        Neither
        the Company nor any Affiliate is an “investment company” within the meaning of
        the Investment Company Act of 1940, as amended.
 
 (w) Subsidiary
        Representations .
        The
        Company makes each of the representations contained in Sections 5(a), (b),
        (d),
        (f), (h), (k), (m), (q) through (s), (u) and (v) of this Agreement, as same
        relate to each Subsidiary of the Company.
 
 (x) Company
        Predecessor .
        All
        representations made by or relating to the Company of a historical or
        prospective nature and all undertaking described in Sections 9(g) through
        9(l)
        shall relate and refer to the Company, its predecessors, and the
        Subsidiaries.
 
 (y) Correctness
        of Representations .
        The
        Company represents that the foregoing representations and warranties are
        true
        and correct as of the date hereof in all material respects, and, unless the
        Company otherwise notifies the Subscribers prior to the Closing Date, shall
        be
        true and correct in all material respects as of the Closing Date.
  (z) Survival .
        The
        foregoing representations and warranties shall survive the Closing Date for
        a
        period of three years.
  
  6. Regulation
        D Offering .
        The
        offer and issuance of the Securities to the Subscribers is being made pursuant
        to the exemption from the registration provisions of the 1933 Act afforded
        by
        Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
        D
        promulgated thereunder or such other exemptions as may be allowed in Canada.
 
 7.1. Conversion
        of Note .
 
 (a) Upon
        the
        conversion of a Note or part thereof, the Company shall, at its own cost
        and
        expense, take all necessary action, including obtaining and delivering, an
        opinion of counsel to assure that the Company's transfer agent shall issue
        stock
        certificates in the name of Subscriber (or its nominee) or such other persons
        as
        designated by Subscriber and in such denominations to be specified at conversion
        representing the number of shares of Common Stock issuable upon such conversion.
        The Company warrants that no instructions other than these instructions have
        been or will be given to the transfer agent of the Company's Common Stock
        and
        that, unless waived by the Subscriber, the Shares will be free-trading, and
        freely transferable, and will not contain a legend restricting the resale
        or
        transferability of the Shares provided the Shares are being sold pursuant
        to an
        effective registration statement covering the Shares (and prospectus delivery
        requirements are satisfied) or are otherwise exempt from registration.
 
 (b) Subscriber
        will give notice of its decision to exercise its right to convert the Note,
        interest, any sum due to the Subscriber under the Transaction Documents
        including Liquidated Damages, or part thereof by telecopying an executed
        and
        completed Notice of Conversion (a form of which is annexed as **Exhibit
        A** to the
        Note) to the Company via confirmed telecopier transmission or otherwise pursuant
        to Section 13(a) of this Agreement. The Subscriber will not be
        required to surrender the Note until
        the Note has been fully converted or satisfied. Each date on which a Notice
        of
        Conversion is telecopied to the Company in accordance with the provisions
        hereof
        shall be deemed a **Conversion
        Date** .
        The
        Company will itself or cause the Company’s transfer agent to transmit the
        Company's Common Stock certificates representing the Shares issuable upon
        conversion of the Note to the Subscriber via express courier for receipt
        by such
        Subscriber within four (4) business days after receipt by the Company of
        the
        Notice of Conversion (such third day being the " **Delivery
        Date** ").
        In
        the event the Shares are electronically transferable, then delivery of the
        Shares must be made
        by electronic transfer provided request for such electronic transfer has
        been
        made by the Subscriber
        and the Subscriber has complied with all applicable securities laws in
        connection with the sale of the Common Stock, including, without limitation,
        the
        prospectus delivery requirements. A Note representing the balance of the
        Note
        not so converted will be provided by the Company to the Subscriber if requested
        by Subscriber, provided the Subscriber delivers the
        original Note to the Company. In the event that a Subscriber elects not to
        surrender a Note for reissuance upon partial payment or conversion, the
        Subscriber hereby indemnifies the Company against any and all loss or damage
        attributable to a third-party claim in an amount in excess of the actual
        amount
        then due under the Note.
 
 (c) The
        Company understands that a delay in the delivery of the Shares in the form
        required pursuant to Section 7.1 hereof, or the Mandatory Redemption Amount
        described in Section 7.2 hereof, respectively after the Delivery Date or
        the
        Mandatory Redemption Payment Date (as hereinafter defined) could result in
        economic loss to the Subscriber. As compensation to the Subscriber for such
        loss, the Company agrees to pay (as liquidated damages and not as a penalty)
        to
        the Subscriber for late issuance of Shares in the form required pursuant
        to
        Section 7.1 hereof upon Conversion of the Note in the amount of $100 per
        business day after the Delivery Date for each $10,000 of Note principal amount
        being converted of the corresponding Shares which are not timely delivered.
        The
        Company shall pay any payments incurred under this Section in immediately
        available funds upon demand. Furthermore, in addition to any other remedies
        which may be available to the Subscriber, in the event that the Company fails
        for any reason to effect delivery of the Shares by the Delivery Date or make
        payment by the Mandatory Redemption Payment Date, the Subscriber will be
        entitled to revoke all or part of the relevant Notice of Conversion or rescind
        all or part of the notice of Mandatory Redemption by delivery of a notice
        to
        such effect to the Company whereupon the Company and the Subscriber shall
        each
        be restored to their respective positions immediately prior to the delivery
        of
        such notice, except that the liquidated damages described above shall be
        payable
        through the date notice of revocation or rescission is given to the
        Company.
 
 (d) Nothing
        contained herein or in any document referred to herein or delivered in
        connection herewith shall be deemed to establish or require the payment of
        a
        rate of interest or other charges in excess of the maximum permitted by
        applicable law. In the event that the rate of interest or dividends required
        to
        be paid or other charges hereunder exceed the maximum permitted by such law,
        any
        payments in excess of such maximum shall be credited against amounts owed
        by the
        Company to the Subscriber and thus refunded to the Company.
  
 
 7.2. Mandatory
        Redemption at Subscriber’s Election .
        In the
        event the Company is prohibited from issuing Shares, or fails to timely deliver
        Shares on a Delivery Date, or upon the occurrence of any other Event of Default
        (as defined in the Note or in this Agreement) that is not cured during any
        applicable cure period and an additional ten days thereafter, then at the
        Subscriber's election, the Company must pay to the Subscriber ten (10) business
        days after request by the Subscriber, at the Subscriber’s election, a sum of
        money determined by (i) multiplying up to the outstanding principal amount
        of
        the Note designated by the Subscriber by 130%, or (ii) multiplying the number
        of
        Shares otherwise deliverable upon conversion of an amount of Note principal
        and/or interest designated by the Subscriber (with the date of giving of
        such
        designation being a “ **Deemed
        Conversion Date** ”)
        at the
        then Conversion Price that would be in effect on the Deemed Conversion Date
        by
        the closing price of the Common Stock on the Principal Market for the last
        trading day preceding the Deemed Conversion Date, whichever is greater of
        (i)
        and (ii) above, together with accrued but unpaid interest thereon and any
        other
        sums arising and outstanding under the Transaction Documents (" **Mandatory
        Redemption Payment** ").
        The
        Mandatory Redemption Payment must be received by the Subscriber on the same
        date
        as the Company Shares otherwise deliverable or within ten (10) business days
        after request, whichever is sooner (" **Mandatory
        Redemption Payment Date** ").
        Upon
        receipt of the Mandatory Redemption Payment, the corresponding Note principal
        and interest will be deemed paid and no longer outstanding. Liquidated damages
        calculated pursuant to Section 7.1(c) hereof, that have been paid or accrued
        for
        the twenty day period prior to the actual receipt of the Mandatory Redemption
        Payment by the Subscriber shall be credited against the Mandatory Redemption
        Payment calculated pursuant to subsections (i) and (ii) above of this Section
        7.2. In the event of a “ **Change
        in Control** ”
        (as
        defined below), the Subscriber may demand, and the Company shall pay, a
        Mandatory Redemption Payment equal to 130% of the outstanding principal amount
        of the Note designated by the Subscriber together with accrued but unpaid
        interest thereon and any other sums arising and outstanding under the
        Transaction Documents. For purposes of this Section 7.2, “ **Change
        in Control** ”
        shall
        mean (i) the Company no longer having a class of shares publicly tradable
        and
        listed on a Principal Market, (ii) the Company becoming a Subsidiary of another
        entity or merging into or with another entity, (iii) a majority of the board
        of
        directors of the Company as of the Closing Date no longer serving as directors
        of the Company, other than due to (a) natural causes except in the normal
        course
        of business or as may have been disclosed in the Reports or Other Written
        Information, (b) voluntary resignation, or (c) voluntary election not to
        be
        reappointed as director, (iv) if the holders of the Company’s Common Stock as of
        the Closing Date beneficially owning at any time after the Closing Date less
        than twenty-five percent of the Common stock owned by them on the Closing
        Date,
        or (v) the sale, lease, license or transfer of substantially all the assets
        of
        the Company or Subsidiaries.
 
 7.3. Maximum
        Conversion .
        The
        Subscriber shall not be entitled to convert on a Conversion Date that amount
        of
        the Note in connection with that number of shares of Common Stock which would
        be
        in excess of the sum of (i) the number of shares of common stock beneficially
        owned by the Subscriber and its Affiliates on a Conversion Date, and (ii)
        the
        number of shares of Common Stock issuable upon the conversion of the Note
        with
        respect to which the determination of this provision is being made on a
        Conversion Date, which would result in beneficial ownership by the Subscriber
        and its Affiliates of more than 4.99% of the outstanding shares of common
        stock
        of the Company on such Conversion Date. For the purposes of the provision
        to the
        immediately preceding sentence, beneficial ownership shall be determined
        in
        accordance with Section 13(d) of the Securities Exchange Act of 1934, as
        amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the
        Subscriber shall not be limited to aggregate conversions of only 4.99% and
        aggregate conversions by the Subscriber may exceed 4.99%. The Subscriber
        may
        waive the conversion limitation described in this Section 7.3, in whole or
        in
        part, or increase the permitted beneficial ownership amount upon and effective
        after 61 days prior written notice to the Company. The Subscriber may allocate
        which of the equity of the Company deemed beneficially owned by the Subscriber
        shall be included in the 4.99% amount described above and which shall be
        allocated to the excess above 4.99%.
 
 7.4. Injunction Posting of Bond .
        In the
        event a Subscriber shall elect to convert a Note or part thereof or exercise
        the
        Warrant in whole or in part, the Company may not refuse conversion or exercise
        based on any claim that such Subscriber or any one associated or affiliated
        with
        such Subscriber has been engaged in any violation of law, or for any other
        reason, unless, an injunction from a court, on notice, restraining and or
        enjoining conversion of all or part of such Note or exercise of all or part
        of
        such Warrant shall have been sought and obtained by the Company and the
        Company has posted a surety bond for the benefit of such Subscriber in the
        amount of 130% of the amount of the Note, or aggregate purchase price of
        the
        Warrant Shares which are sought to be subject to the injunction, which bond
        shall remain in effect until the completion of arbitration/litigation of
        the
        dispute and the proceeds of which shall be payable to such Subscriber to
        the
        extent Subscriber obtains judgment.
  
 
 7.5. Buy-In .
        In
        addition to any other rights available to the Subscriber, if the Company
        fails
        to deliver to the Subscriber such shares issuable upon conversion of a Note
        by
        the Delivery Date and if after seven (7) business days after the Delivery
        Date
        the Subscriber purchases (in an open market transaction or otherwise) shares
        of
        Common Stock to deliver in satisfaction of a sale by such Subscriber of the
        Common Stock which the Subscriber was entitled to receive upon such conversion
        (a " **Buy-In** "),
        then
        the Company shall pay in cash to the Subscriber (in addition to any remedies
        available to or elected by the Subscriber) the amount by which (A) the
        Subscriber's total purchase price (including brokerage commissions, if any)
        for
        the shares of Common Stock so purchased exceeds (B) the aggregate principal
        and/or interest amount of the Note for which such conversion was not timely
        honored ,
        together with interest thereon at a rate of 15% per annum, accruing until
        such
        amount and any accrued interest thereon is paid in full (which amount shall
        be
        paid as liquidated damages and not as a penalty). For
        example, if the Subscriber purchases shares of Common Stock having a total
        purchase price of $11,000 to cover a Buy-In with respect to an attempted
        conversion of $10,000 of note principal and/or interest, the Company shall
        be
        required to pay the Subscriber $ 1,000,
        plus interest. The
        Subscriber shall provide the Company written notice indicating the amounts
        payable to the Subscriber in respect of the Buy-In.
 
 7.6 Adjustments. The
        Conversion Price, Warrant exercise price and amount of Shares issuable upon
        conversion of the Notes and exercise of the Warrants shall be equitably adjusted
        and as otherwise described in the Transaction Documents.
  7.7. Redemption .
        The
        Note shall not be redeemable or callable except as described in the Note.
        The
        Warrants shall not be callable or redeemable.
 
 7.8. Trickle
        Out .
        Subscriber agrees
        that commencing on the Closing Date and for so long as 70% of the average
        of the
        lowest five closing prices of the Common Stock (“ **Reported
        Price** ”)
        as
        reported by Bloomberg L.P. for the Principal Market is less than $0.50 (a
        “ **Trading
        Period** ”),
        the
        Subscriber will not sell or otherwise dispose of, during any thirty day period,
        more than 10% of the Shares receivable upon conversion of Notes (“ **Monthly
        Amount** ”),
        other
        than in connection with an offer made to all shareholders of the Company
        or any
        merger, consolidation or similar transaction involving the Company. During
        the
        thirty day period following a Trading Period during which the Reported Price
        is
        $0.50 or higher but less than $1.00, the Monthly Amount shall be 15%. During
        the
        thirty day period following a Trading Period during which the Reported Price
        is
        $1.00 or higher but less than $1.50, the Monthly Amount shall be 20%. The
        foregoing notwithstanding from and after any Trading Period during which
        the
        Reported Price is $1.50 or higher, the Monthly Amount Shall be 100%. Monthly
        Amounts that may have been sold during a prior period may be sold in a
        subsequent period in addition to such subsequent period’s Monthly Amount.
        Subscriber further agrees that the Company is authorized to and the Company
        may
        place "stop orders" on its books to prevent any transfer of Shares in violation
        of this Agreement. Notwithstanding the foregoing restrictions on transfer,
        the
        Subscriber may, at any time and from time to time transfer Shares (i) as
        bona
        fide gifts or transfers by will or intestacy, (ii) to any trust for the direct
        or indirect benefit of the Subscriber or the immediate family of the Subscriber,
        provided that any such transfer shall not involve a disposition for value,
        (iii)
        to a partnership which is the general partner of a partnership of which the
        Subscriber is a general partner, provided, that, in the case of any gift
        or
        transfer described in clauses (i), (ii) or (iii), each donee or transferee
        agrees in writing to be bound by the terms and conditions contained herein
        in
        the same manner as such terms and conditions apply to the Subscriber. For
        purposes hereof, "immediate family" means any relationship by blood, marriage
        or
        adoption, not more remote than first cousin. The foregoing restrictions may
        be
        released by a majority of the board of directors of the Company, provided
        such
        release is proportional to all Subscribers. From and after the occurrence
        of an
        Event of Default (as defined in the Note), the Monthly Amount shall be
        100%.
 
 8. Finder’s
        Fee/Legal Fees.
  (a) Finder’s
        Fee. The
        Company on the one hand, and each Subscriber (for himself only) on the other
        hand, agree to indemnify the other against and hold the other harmless from
        any
        and all liabilities to any persons claiming brokerage commissions or finder’s
        fees on account of services purported to have been rendered on behalf of
        the
        indemnifying party in connection with this Agreement or the transactions
        contemplated hereby and arising out of such party’s actions. The Company expects
        to pay finders fees as described on **Schedule
        8(a)** hereto.
  
  (b) Legal
        Fees .
        The
        Company shall pay to Grushko & Mittman, P.C., a fee of $15,000
        (“ **Legal
        Fees** ”)
        as
        reimbursement for services rendered to the Subscribers in connection with
        this
        Agreement and the purchase and sale of the Notes, and Warrants (the
“ **Offering** ”)..
  9. Covenants
        of the Company .
        The
        Company covenants and agrees with the Subscribers as follows:
  (a) Stop
        Orders .
        The
        Company will advise the Subscribers within two hours after it receives notice
        of
        issuance by the Commission, any state securities commission or any other
        regulatory authority of any stop order or of any order preventing or suspending
        any offering of any securities of the Company, or of the suspension of the
        qualification of the Common Stock of the Company for offering or sale in
        any
        jurisdiction, or the initiation of any proceeding for any such
        purpose.
  (b) Listing .
        The
        Company shall promptly secure the listing of the Shares and the Warrant Shares
        upon each national securities exchange, or electronic or automated quotation
        system upon which they are or become eligible for listing and shall maintain
        such listing so long as any Notes or Warrants are outstanding and such listing
        is maintained for any class of the Company’s securities. The Company will
        maintain the listing of its Common Stock on the American Stock Exchange,
        Nasdaq
        SmallCap Market, Nasdaq National Market System, Bulletin Board, or New York
        Stock Exchange (whichever of the foregoing is at the time the principal trading
        exchange or market for the Common Stock (the “ **Principal
        Market** ”)),
        and
        will comply in all respects with the Company's reporting, filing and other
        obligations under the bylaws or rules of the Principal Market, as applicable.
        The Company will provide the Subscribers copies of all notices it receives
        notifying the Company of the threatened and actual delisting of the Common
        Stock
        from any Principal Market. As of the date of this Agreement and the Closing
        Date, the Bulletin Board is and will be the Principal Market.
  (c) Market
        Regulations .
        The
        Company shall notify the Commission, the Principal Market and applicable
        state
        authorities, in accordance with their requirements, of the transactions
        contemplated by this Agreement, and shall take all other necessary action
        and
        proceedings as may be required and permitted by applicable law, rule and
        regulation, for the legal and valid issuance of the Securities to the
        Subscribers and promptly provide copies thereof to Subscriber.
  (d) Filing
        Requirements .
        From
        the date of this Agreement and until the sooner of (i) two (2) years after
        the
        Closing Date, or (ii) until all the Shares and Warrant Shares have been resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        or
        pursuant to Rule 144, without regard to volume limitation, the Company will
        (A)
        cause its Common Stock to continue to be registered under Section 12(b) or
        12(g)
        of the 1934 Act, (B) comply in all respects with its reporting and filing
        obligations under the 1934 Act, (C) comply with all reporting requirements
        that
        are applicable to an issuer with a class of shares registered pursuant to
        Section 12(b) or 12(g) of the 1934 Act, as applicable, and (D) comply with
        all
        filing requirements related to any registration statement filed pursuant
        to this
        Agreement. The Company will use its best efforts not to take any action or
        file
        any document (whether or not permitted by the 1933 Act or the 1934 Act or
        the
        rules thereunder) to terminate or suspend such registration or to terminate
        or
        suspend its reporting and filing obligations under said acts until two (2)
        years
        after the Closing Date. Until the earlier of the resale of the Shares, and
        Warrant Shares by each Subscriber or until two (2) years after the Warrants
        have
        been exercised, the Company will use its best efforts to continue the listing
        or
        quotation of the Common Stock on a Principal Market and will comply in all
        respects with the Company's reporting, filing and other obligations under
        the
        bylaws or rules of the Principal Market. The Company agrees to timely file
        a
        Form D with respect to the Securities if required under Regulation D and
        to
        provide a copy thereof to each Subscriber promptly after such
        filing.
  
  (e) Use
        of
        Proceeds .
        The
        proceeds of the Offering are for general working capital purposes and for
        the
        purposes set forth on **Schedule
        9(e)** hereto.
        Except as set forth on **Schedule
        9(e)** ,
        the
        Purchase Price may not and will not be used for accrued and unpaid officer
        and
        director salaries, payment of financing related debt, redemption of outstanding
        notes or equity instruments of the Company nor non-trade obligations outstanding
        on a Closing Date. It is an express condition to Closing the proceeds of
        the
        Offering be employed to complete the acquisition of certain proprietary
        technology on the terms described in the Company’s Form 6-K filed with the
        Commission on March 17, 2005; which acquisition must close contemporaneously
        with the Closing of the Offering.
  (f) Reservation .
        Prior
        to the Closing Date, the Company undertakes to reserve, pro  rata ,
        on
        behalf of each holder of a Note or Warrant, from its authorized but unissued
        common stock, a number of common shares equal to 200%
        of
        the amount of Common Stock necessary to allow each holder of a Note to be
        able
        to convert all such outstanding Notes and interest and reserve the amount
        of
        Warrant Shares issuable upon exercise of the Warrants. Failure to have
        sufficient shares reserved pursuant to this Section 9(f) for three (3)
        consecutive business days or ten (10) days in the aggregate shall be a material
        default of the Company’s obligations under this Agreement and an Event of
        Default under the Note.
  (g) Taxes .
        From
        the date of this Agreement and until the sooner of (i) two (2) years after
        the
        Closing Date, or (ii) until all the Shares, and Warrant Shares have been
        resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        or
        pursuant to Rule 144, without regard to volume limitations, the Company will
        promptly pay and discharge, or cause to be paid and discharged, when due
        and
        payable, all lawful taxes, assessments and governmental charges or levies
        imposed upon the income, profits, property or business of the Company; provided,
        however, that any such tax, assessment, charge or levy need not be paid if
        the
        validity thereof shall currently be contested in good faith by appropriate
        proceedings and if the Company shall have set aside on its books adequate
        reserves with respect thereto, and provided, further, that the Company will
        pay
        all such taxes, assessments, charges or levies forthwith upon the commencement
        of proceedings to foreclose any lien which may have attached as security
        therefore.
  (h) Insurance .
        From
        the date of this Agreement and until the sooner of (i) two (2) years after
        the
        Closing Date, or (ii) until all the Shares, and Warrant Shares have been
        resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        or
        pursuant to Rule 144, without regard to volume limitations, the Company will
        keep its assets which are of an insurable character insured by financially
        sound
        and reputable insurers against loss or damage by fire, explosion and other
        risks
        customarily insured against by companies in the Company’s line of business, in
        amounts sufficient to prevent the Company from becoming a co-insurer, and
        the
        Company will maintain, with financially sound and reputable insurers, insurance
        against other hazards and risks and liability to persons and property to
        the
        extent and in the manner customary for companies in similar businesses similarly
        situated and to the extent available on commercially reasonable
        terms.
  (i) Books
        and Records. From the
        date of this Agreement and until the sooner of (i) two (2) years after the
        Closing Date, or (ii) until all the Shares, and Warrant Shares have been
        resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        or
        pursuant to Rule 144, without regard to volume limitations, the Company will
        keep true records and books of account in which full, true and correct entries
        will be made of all dealings or transactions in relation to its business
        and
        affairs in accordance with generally accepted accounting principles applied
        on a
        consistent basis.
  (j) Governmental
        Authorities. From the
        date of this Agreement and until the sooner of (i) two (2) years after the
        Closing Date, or (ii) until all the Shares, and Warrant Shares have been
        resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        or
        pursuant to Rule 144, without regard to volume limitations, the Company shall
        duly observe and conform in all material respects to all valid requirements
        of
        governmental authorities relating to the conduct of its business or to its
        properties or assets.
  (k) Intellectual
        Property .
        From
        the date of this Agreement and until the sooner of (i) two (2) years after
        the
        Closing Date, or (ii) until all the Shares, and Warrant Shares have been
        resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        or
        pursuant to Rule 144, without regard to volume limitations, the Company shall
        maintain in full force and effect its corporate existence, rights and franchises
        and all licenses and other rights to use intellectual property owned or
        possessed by it and reasonably deemed to be necessary to the conduct of its
        business.
  
  (l) Properties. From the
        date of this Agreement and until the sooner of (i) two (2) years after the
        Closing Date, or (ii) until all the Shares, and Warrant Shares have been
        resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        (as
        defined in Section 11.1(iv) hereof) or pursuant to Rule 144, without regard
        to
        volume limitations, the Company will keep its properties in good repair,
        working
        order and condition, reasonable wear and tear excepted, and from time to
        time
        make all necessary and proper repairs, renewals, replacements, additions
        and
        improvements thereto; and the Company will at all times comply with each
        provision of all leases to which it is a party or under which it occupies
        property if the breach of such provision could reasonably be expected to
        have a
        Material Adverse Effect.
  (m) Confidentiality/Public
        Announcement. From the
        date of this Agreement and until the sooner of (i) two (2) years after the
        Closing Date, or (ii) until all the Shares, and Warrant Shares have been
        resold
        or transferred by all the Subscribers pursuant to the Registration Statement
        or
        pursuant to Rule 144, without regard to volume limitations, the Company agrees
        that except in connection with a Form 8-K or the Registration Statement,
        it will
        not disclose publicly or privately the identity of the Subscribers unless
        expressly agreed to in writing by a Subscriber or only to the extent required
        by
        law and then only upon five days prior notice to Subscriber. In any event
        and
        subject to the foregoing, the Company shall file
        a
        Form 8-K or make a public announcement describing the Offering not later
        than
        the first business day after the Closing Date. In the Form 8-K or public
        announcement, the Company will specifically disclose the amount of common
        stock
        outstanding immediately after the Closing.
  (n) Further
        Registration Statements. Except
        for a registration statement filed on behalf of the Subscribers pursuant
        to
        Section 11 of this Agreement and as otherwise described on **Schedule
        11.1** hereto,
        the Company will not file any registration statements or amend any already
        filed
        registration statement, including but not limited to Form S-8, with the
        Commission or with state regulatory authorities without the consent of the
        Subscriber until the sooner of (i) one year after the Closing Date, or (ii)
        less
        than 10% of the Note principal remains outstanding (“ **Exclusion
        Period** ”).
        The
        Exclusion Period will be in effect during the pendency of an Event of Default
        as
        defined in the Note.
  (o) Non-Public
        Information .
        The
        Company covenants and agrees that neither it nor any other person acting
        on its
        behalf will provide any Subscriber or its agents or counsel with any information
        that the Company believes constitutes material non-public information, unless
        prior thereto such Subscriber shall have agreed in writing to receive such
        information. The Company understands and confirms that each Subscriber shall
        be
        relying on the foregoing representations in effecting transactions in securities
        of the Company.
  10. Covenants
        of the Company and Subscriber Regarding Indemnification.
  (a) The
        Company agrees to indemnify, hold harmless, reimburse and defend the
        Subscribers, the Subscribers' officers, directors, agents, Affiliates, control
        persons, and principal shareholders, against any claim, cost, expense,
        liability, obligation, loss or damage (including reasonable legal fees) of
        any
        nature, incurred by or imposed upon the Subscriber or any such person which
        results, arises out of or is based upon (i) any material misrepresentation
        by
        Company or breach of any warranty by Company in this Agreement or in any
        Exhibits or Schedules attached hereto, or other agreement delivered pursuant
        hereto; or (ii) after any applicable notice and/or cure periods, any breach
        or
        default in performance by the Company of any covenant or undertaking to be
        performed by the Company hereunder, or any other agreement entered into by
        the
        Company and Subscriber relating hereto.
  (b) Each
        Subscriber agrees to indemnify, hold harmless, reimburse and defend the Company
        and each of the Company’s officers, directors, agents, Affiliates, control
        persons against any claim, cost, expense, liability, obligation, loss or
        damage
        (including reasonable legal fees) of any nature, incurred by or imposed upon
        the
        Company or any such person which results, arises out of or is based upon
        (i) any
        material misrepresentation by such Subscriber in this Agreement or in any
        Exhibits or Schedules attached hereto, or other agreement delivered pursuant
        hereto; or (ii) after any applicable notice and/or cure periods, any breach
        or
        default in performance by such Subscriber of any covenant or undertaking
        to be
        performed by such Subscriber hereunder, or any other agreement entered into
        by
        the Company and Subscribers, relating hereto.
  
  (c) In
        no
        event shall the liability of any Subscriber or permitted successor hereunder
        or
        under any Transaction Document or other agreement delivered in connection
        herewith be greater in amount than the dollar amount of the net proceeds
        actually received by such Subscriber upon the sale of Registrable Securities
        (as
        defined herein).
  (d) The
        procedures set forth in Section 11.6 shall apply to the indemnification set
        forth in Sections 10(a) and 10(b) above.
  11.1. Registration
        Rights .
        The
        Company hereby grants the following registration rights to holders of the
        Securities.
  (i) On
        one
        occasion, for a period commencing one hundred and fifty-one (151) days after
        the
        Closing Date, but not later than two (2) years after the Closing Date
        (“ **Request
        Date** ”),
        upon
        a written request therefor from any record holder or holders of more than
        50% of
        the Shares issued and issuable upon conversion of the Notes and Warrant Shares
        actually issued upon exercise of the Warrants and Finder’s Warrants, the Company
        shall prepare and file with the Commission a registration statement under
        the
        1933 Act registering the Shares issuable upon conversion of all sums due
        under
        the Notes and Warrant Shares issuable upon exercise of the Warrants and Finder’s
        Warrants (collectively “ **Registrable
        Securities** ”)
        which
        are the subject of such request for unrestricted public resale by the holder
        thereof. For purposes of Sections 11.1(i) and 11.1(ii), Registrable Securities
        shall not include Securities (A) which are registered for resale in an effective
        registration statement, (B) included for registration in a pending registration
        statement, or (C) which have been issued without further transfer restrictions
        after a sale or transfer pursuant to Rule 144 under the 1933 Act. Upon the
        receipt of such request, the Company shall promptly give written notice to
        all
        other record holders of the Registrable Securities that such registration
        statement is to be filed and shall include in such registration statement
        Registrable Securities for which it has received written requests within
        ten
        (10) days after the Company gives such written notice. Such other requesting
        record holders shall be deemed to have exercised their demand registration
        right
        under this Section 11.1(i).
  (ii) If
        the
        Company at any time proposes to register any of its securities under the
        1933
        Act for sale to the public, whether for its own account or for the account
        of
        other security holders or both, except with respect to registration statements
        on Forms S-4, S-8 or another form not available for registering the Registrable
        Securities for sale to the public, provided the Registrable Securities are
        not
        otherwise registered for resale by the Subscribers or Holder pursuant to
        an
        effective registration statement, each such time it will give at least fifteen
        (15) days' prior written notice to the record holder of the Registrable
        Securities of its intention so to do. Upon the written request of the holder,
        received by the Company within ten (10) days after the giving of any such
        notice
        by the Company, to register any of the Registrable Securities not previously
        registered, the Company will cause such Registrable Securities as to which
        registration shall have been so requested to be included with the securities
        to
        be covered by the registration statement proposed to be filed by the Company,
        all to the extent required to permit the sale or other disposition of the
        Registrable Securities so registered by the holder of such Registrable
        Securities (the “ **Seller** ”
        or
“ **Sellers** ”).
        In
        the event that any registration pursuant to this Section 11.1(ii) shall be,
        in
        whole or in part, an underwritten public offering of common stock of the
        Company, the number of shares of Registrable Securities to be included in
        such
        an underwriting may be reduced by the managing underwriter if and to the
        extent
        that the Company and the underwriter shall reasonably be of the opinion that
        such inclusion would adversely affect the marketing of the securities to
        be sold
        by the Company therein; provided, however, that the Company shall notify
        the
        Seller in writing of any such reduction. Notwithstanding the foregoing
        provisions, or Section 11.4 hereof, the Company may withdraw or delay or
        suffer
        a delay of any registration statement referred to in this Section 11.1(ii)
        without thereby incurring any liability to the Seller.
  (iii) If,
        at
        the time any written request for registration is received by the Company
        pursuant to Section 11.1(i), the Company has determined to proceed with the
        actual preparation and filing of a registration statement under the 1933
        Act in
        connection with the proposed offer and sale for cash of any of its securities
        for the Company's own account and the Company actually does file such other
        registration statement, such written request shall be deemed to have been
        given
        pursuant to Section 11.1(ii) rather than Section 11.1(i), and the rights
        of the
        holders of Registrable Securities covered by such written request shall be
        governed by Section 11.1(ii).
  
  (iv) The
        Company shall file with the Commission a Form F-1 registration statement
        (the
“ **Registration
        Statement** ”)
        (or
        such other form that it is eligible to use) in order to register the Registrable
        Securities for resale and distribution under the 1933 Act) not later
        than sixty
        (60) days after the Closing Date (the “ **Filing
        Date** ”),
        and
        cause it to be declared effective not
        later
        than one hundred and fifty (150) days after the Closing Date (the
“ **Effective
        Date** ”).
        The
        Company will register not less than a number of shares of Common Stock in
        the
        aforedescribed registration statement that is equal to 200%
        of
        the Shares issuable upon conversion of the Notes and all of the Warrant Shares
        issuable upon exercise of the Warrants. The Registrable Securities shall
        be
        reserved and set aside exclusively for the benefit of each Subscriber and
        Warrant holder, pro  rata ,
        and not
        issued, employed or reserved for anyone other than each such Subscriber and
        Warrant holder. The Registration Statement will immediately be amended or
        additional registration statements will be immediately filed by the Company
        as
        necessary to register additional shares of Common Stock to allow the public
        resale of all Common Stock included in and issuable by virtue of the Registrable
        Securities. Without the written consent of the Subscriber, no securities
        of the
        Company other than the Registrable Securities will be included in the
        Registration Statement except as described on **Schedule
        11.1** ,
        hereto.
        It shall be deemed a Non-Registration Event if at any time after the date
        the
        Registration Statement is declared effective by the Commission (“ **Actual
        Effective Date** ”),
        the
        Company has registered for unrestricted resale on behalf of a Subscriber
        fewer
        than 125%
        of
        the amount of Common Shares issuable upon full conversion of all sums due
        under
        the Notes and 100% of the Warrant Shares issuable upon exercise of the
        Warrants.
  (v) The
        law
        firm which will prepare and file the Registration Statement and all amendments
        thereto will be subject to the approval of the Subscribers.
  11.2. Registration
        Procedures .
        If and
        whenever the Company is required by the provisions of Section 11.1(i), 11.1(ii),
        or (iv) to effect the registration of any Registrable Securities under the
        1933
        Act, the Company will, as expeditiously as possible:
  (a) subject
        to the timelines provided in this Agreement, prepare and file with the
        Commission a registration statement required by Section 11, with respect
        to such
        securities and use its best efforts to cause such registration statement
        to
        become and remain effective for the period of the distribution contemplated
        thereby (determined as herein provided), promptly provide to the holders
        of the
        Registrable Securities copies of all filings and Commission letters of comment
        and notify Subscribers (by telecopier and by e-mail addresses provided by
        Subscribers) and Grushko & Mittman, P.C. (by telecopier and by email to Counslers@aol.com )
        on or
        before 3:00 PM EST on the next business day that the Company receives notice
        that (i) the Commission has no comments or no further comments on the
        Registration Statement, and (ii) the registration statement has been declared
        effective (failure to timely provide notice as required by this Section 11.2(a)
        shall be a material breach of the Company’s obligation and an Event of Default
        as defined in the Notes
        and
        a Non-Registration Event as defined in Section 11.4 of this Agreement);
  (b) prepare
        and file with the Commission such amendments and supplements to such
        registration statement and the prospectus used in connection therewith as
        may be
        necessary to keep such registration statement effective until such registration
        statement has been effective for a period of two (2) years, and comply with
        the
        provisions of the 1933 Act with respect to the disposition of all of the
        Registrable Securities covered by such registration statement in accordance
        with
        the Sellers’ intended method of disposition set forth in such registration
        statement for such period;
  (c) furnish
        to the Sellers, at the Company’s expense, such number of copies of the
        registration statement and the prospectus included therein (including each
        preliminary prospectus) as such persons reasonably may request in order to
        facilitate the public sale or their disposition of the securities covered
        by
        such registration statement;
  (d) use
        its commercially
        reasonable best efforts to register or qualify the Registrable Securities
        covered by such registration statement under the securities or “blue sky” laws
        of New York and such jurisdictions as the Sellers shall request in writing,
        provided, however, that the Company shall not for any such purpose be required
        to qualify generally to transact business as a foreign corporation in any
        jurisdiction where it is not so qualified or to consent to general service
        of
        process in any such jurisdiction;
  
  (e) if
        applicable, list the Registrable Securities covered by such registration
        statement with any securities exchange on which the Common Stock of the Company
        is then listed;
  (f) notify
        the Subscribers within two hours of the Company’s becoming aware that a
        prospectus relating thereto is required to be delivered under the 1933 Act,
        of
        the happening of any event of which the Company has knowledge as a result
        of
        which the prospectus contained in such registration statement, as then in
        effect, includes an untrue statement of a material fact or omits to state
        a
        material fact required to be stated therein or necessary to make the statements
        therein not misleading in light of the circumstances then existing or which
        becomes subject to a Commission, state or other governmental order suspending
        the effectiveness of the registration statement covering any of the Shares;
        and
  (g) provided
        same would not be in violation of the provision of Regulation FD under the
        1934
        Act, make available for inspection by the Sellers, and any attorney, accountant
        or other agent retained by the Seller or underwriter, all publicly available,
        non-confidential financial and other records, pertinent corporate documents
        and
        properties of the Company, and cause the Company's officers, directors and
        employees to supply all publicly available, non-confidential information
        reasonably requested by the seller, attorney, accountant or agent in connection
        with such registration statement.
  11.3. Provision
        of Documents .
        In
        connection with each registration described in this Section 11, each Seller
        will
        furnish to the Company in writing such information and representation letters
        with respect to itself and the proposed distribution by it as reasonably
        shall
        be necessary in order to assure compliance with federal and applicable state
        securities laws.
  11.4. Non-Registration
        Events .
        The
        Company and the Subscribers agree that the Sellers will suffer damages if
        the
        Registration Statement is not filed by the Filing Date and not declared
        effective by the Commission by the Effective Date, and any registration
        statement required under Section 11.1(i) or 11.1(ii) is not filed within
        60 days
        after written request and declared effective by the Commission within 120
        days
        after such request, and maintained in the manner and within the time periods
        contemplated by Section 11 hereof, and it would not be feasible to ascertain
        the
        extent of such damages with precision. Accordingly, if (A) the Registration
        Statement is not filed on or before the Filing Date, (B) is not declared
        effective on or before the Effective Date, (C) the Registration Statement
        is not
        declared effective within three (3) business days after receipt by the Company
        or its attorneys of a written or oral communication from the Commission that
        the
        Registration Statement will not be reviewed or that the Commission has no
        further comments, (D) if the registration statement described in Sections
        11.1(i) or 11.1(ii) is not filed within 60 days after such written request,
        or
        is not declared effective within 120 days after such written request, or
        (E) any
        registration statement described in Sections 11.1(i), 11.1(ii) or 11.1(iv)
        is
        filed and declared effective but shall thereafter cease to be effective (without
        being succeeded within fifteen (15) business days by an effective replacement
        or
        amended registration statement) for a period of time which shall exceed 20
        days
        in the aggregate per year (defined as a period of 365 days commencing on
        the
        date the Registration Statement is declared effective) (each such event referred
        to in clauses (A) through (E) of this Section 11.4 is referred to herein
        as a
        "Non-Registration Event"), then the Company shall deliver to the holder of
        Registrable Securities, as Liquidated Damages, an amount equal to two percent
        (2%) for each thirty (30) days or part thereof during the pendency of such
        default, of the Purchase Price of the Notes remaining unconverted and purchase
        price of Shares issued upon conversion of the Notes owned of record by such
        holder which are subject to such Non-Registration Event. The Company must
        pay
        the Liquidated Damages in cash. The Liquidated Damages must be paid within
        ten
        (10) days after the end of each thirty (30) day period or shorter part thereof
        for which Liquidated Damages are payable. In the event a Registration Statement
        is filed by the Filing Date but is withdrawn prior to being declared effective
        by the Commission, then such Registration Statement will be deemed to have
        not
        been filed. All
        oral
        or written comments received from the Commission relating to the Registration
        Statement must be satisfactorily responded to within
        ten (10) business days after receipt of comments from the Commission.
        Failure to
        timely respond to Commission comments is a Non-Registration Event for which
        Liquidated Damages shall accrue and be payable by the Company to the holders
        of
        Registrable Securities at the same rate set forth above. Notwithstanding
        the
        foregoing, the Company shall not be liable to the Subscriber under this Section
        11.4 for any events or delays occurring as a consequence of the acts or
        omissions of the Subscribers contrary to the obligations undertaken by
        Subscribers in this Agreement. Liquidated Damages will not accrue nor be
        payable
        pursuant to this Section 11.4 nor will a Non-Registration Event be deemed
        to
        have occurred for times during which Registrable Securities are transferable
        by
        the holder of Registrable Securities pursuant to Rule 144(k) under the 1933
        Act.
  
  11.5. Expenses .
        All
        expenses incurred by the Company in complying with Section 11, including,
        without limitation, all registration and filing fees, printing expenses,
        fees
        and disbursements of counsel and independent public accountants for the Company,
        fees and expenses (including reasonable counsel fees) incurred in connection
        with complying with state securities or “blue sky” laws, fees of the National
        Association of Securities Dealers, Inc., transfer taxes, fees of transfer
        agents
        and registrars, costs of insurance and fee of one counsel for all Sellers
        (not
        to exceed $5,000) are called “ **Registration
        Expenses** .”
        All
        underwriting discounts and selling commissions applicable to the sale of
        Registrable Securities, including any fees and disbursements of one counsel
        to
        the Seller, are called " **Selling
        Expenses** ."
        The
        Company will pay all Registration Expenses in connection with the registration
        statement under Section 11. Selling Expenses in connection with each
        registration statement under Section 11 shall be borne by the Seller and
        may be
        apportioned among the Sellers in proportion to the number of shares sold
        by the
        Seller relative to the number of shares sold under such registration statement
        or as all Sellers thereunder may agree.
  11.6. Indemnification
        and Contribution .
  (a) In
        the
        event of a registration of any Registrable Securities under the 1933 Act
        pursuant to Section 11, the Company will, to the extent permitted by law,
        indemnify and hold harmless the Seller, each officer of the Seller, each
        director of the Seller, each underwriter of such Registrable Securities
        thereunder and each other person, if any, who controls such Seller or
        underwriter within the meaning of the 1933 Act, against any losses, claims,
        damages or liabilities, joint or several, to which the Seller, or such
        underwriter or controlling person may become subject under the 1933 Act or
        otherwise, insofar as such losses, claims, damages or liabilities (or actions
        in
        respect thereof) arise out of or are based upon any untrue statement or alleged
        untrue statement of any material fact contained in any registration statement
        under which such Registrable Securities was registered under the 1933 Act
        pursuant to Section 11, any preliminary prospectus or final prospectus contained
        therein, or any amendment or supplement thereof, or arise out of or are based
        upon the omission or alleged omission to state therein a material fact required
        to be stated therein or necessary to make the statements therein not misleading
        in light of the circumstances when made, and will subject to the provisions
        of
        Section 11.6(c) reimburse the Seller, each such underwriter and each such
        controlling person for any legal or other expenses reasonably incurred by
        them
        in connection with investigating or defending any such loss, claim, damage,
        liability or action; provided, however, that the Company shall not be liable
        to
        the Seller to the extent that any such damages arise out of or are based
        upon an
        untrue statement or omission made in any preliminary prospectus if (i) the
        Seller failed to send or deliver a copy of the final prospectus delivered
        by the
        Company to the Seller with or prior to the delivery of written confirmation
        of
        the sale by the Seller to the person asserting the claim from which such
        damages
        arise, (ii) the final prospectus would have corrected such untrue statement
        or
        alleged untrue statement or such omission or alleged omission, or (iii) to
        the
        extent that any such loss, claim, damage or liability arises out of or is
        based
        upon an untrue statement or alleged untrue statement or omission or alleged
        omission so made in conformity with information furnished by any such Seller,
        or
        any such controlling person in writing specifically for use in such registration
        statement or prospectus.
  (b) In
        the
        event of a registration of any of the Registrable Securities under the 1933
        Act
        pursuant to Section 11, each Seller severally but not jointly will, to the
        extent permitted by law, indemnify and hold harmless the Company, and each
        person, if any, who controls the Company within the meaning of the 1933 Act,
        each officer of the Company who signs the registration statement, each director
        of the Company, each underwriter and each person who controls any underwriter
        within the meaning of the 1933 Act, against all losses, claims, damages or
        liabilities, joint or several, to which the Company or such officer, director,
        underwriter or controlling person may become subject under the 1933 Act or
        otherwise, insofar as such losses, claims, damages or liabilities (or actions
        in
        respect thereof) arise out of or are based upon any untrue statement or alleged
        untrue statement of any material fact contained in the registration statement
        under which such Registrable Securities were registered under the 1933 Act
        pursuant to Section 11, any preliminary prospectus or final prospectus contained
        therein, or any amendment or supplement thereof, or arise out of or are based
        upon the omission or alleged omission to state therein a material fact required
        to be stated therein or necessary to make the statements therein not misleading,
        and will reimburse the Company and each such officer, director, underwriter
        and
        controlling person for any legal or other expenses reasonably incurred by
        them
        in connection with investigating or defending any such loss, claim, damage,
        liability or action, provided, however, that the Seller will be liable hereunder
        in any such case if and only to the extent that any such loss, claim, damage
        or
        liability arises out of or is based upon an untrue statement or alleged untrue
        statement or omission or alleged omission made in reliance upon and in
        conformity with information pertaining to such Seller, as such, furnished
        in
        writing to the Company by such Seller specifically for use in such registration
        statement or prospectus, and provided, further, however, that the liability
        of
        the Seller hereunder shall be limited to the net proceeds actually received
        by
        the Seller from the sale of Registrable Securities covered by such registration
        statement.
  
  (c) Promptly
        after receipt by an indemnified party hereunder of notice of the commencement
        of
        any action, such indemnified party shall, if a claim in respect thereof is
        to be
        made against the indemnifying party hereunder, notify the indemnifying party
        in
        writing thereof, but the omission so to notify the indemnifying party shall
        not
        relieve it from any liability which it may have to such indemnified party
        other
        than under this Section 11.6(c) and shall only relieve it from any liability
        which it may have to such indemnified party under this Section 11.6(c), except
        and only if and to the extent the indemnifying party is prejudiced by such
        omission. In case any such action shall be brought against any indemnified
        party
        and it shall notify the indemnifying party of the commencement thereof, the
        indemnifying party shall be entitled to participate in and, to the extent
        it
        shall wish, to assume and undertake the defense thereof with counsel
        satisfactory to such indemnified party, and, after notice from the indemnifying
        party to such indemnified party of its election so to assume and undertake
        the
        defense thereof, the indemnifying party shall not be liable to such indemnified
        party under this Section 11.6(c) for any legal expenses subsequently incurred
        by
        such indemnified party in connection with the defense thereof other than
        reasonable costs of investigation and of liaison with counsel so selected,
        provided, however, that, if the defendants in any such action include both
        the
        indemnified party and the indemnifying party and the indemnified party shall
        have reasonably concluded that there may be reasonable defenses available
        to it
        which are different from or additional to those available to the indemnifying
        party or if the interests of the indemnified party reasonably may be deemed
        to
        conflict with the interests of the indemnifying party, the indemnified parties,
        as a group, shall have the right to select one separate counsel and to assume
        such legal defenses and otherwise to participate in the defense of such action,
        with the reasonable expenses and fees of such separate counsel and other
        expenses related to such participation to be reimbursed by the indemnifying
        party as incurred.
  (d) In
        order
        to provide for just and equitable contribution in the event of joint liability
        under the 1933 Act in any case in which either (i) a Seller, or any controlling
        person of a Seller, makes a claim for indemnification pursuant to this Section
        11.6 but it is judicially determined (by the entry of a final judgment or
        decree
        by a court of competent jurisdiction and the expiration of time to appeal
        or the
        denial of the last right of appeal) that such indemnification may not be
        enforced in such case notwithstanding the fact that this Section 11.6 provides
        for indemnification in such case, or (ii) contribution under the 1933 Act
        may be
        required on the part of the Seller or controlling person of the Seller in
        circumstances for which indemnification is not provided under this Section
        11.6;
        then, and in each such case, the Company and the Seller will contribute to
        the
        aggregate losses, claims, damages or liabilities to which they may be subject
        (after contribution from others) in such proportion so that the Seller is
        responsible only for the portion represented by the percentage that the public
        offering price of its securities offered by the registration statement bears
        to
        the public offering price of all securities offered by such registration
        statement, provided, however, that, in any such case, (y) the Seller will
        not be
        required to contribute any amount in excess of the public offering price
        of all
        such securities sold by it pursuant to such registration statement; and (z)
        no
        person or entity guilty of fraudulent misrepresentation (within the meaning
        of
        Section 11(f) of the 1933 Act) will be entitled to contribution from any
        person
        or entity who was not guilty of such fraudulent misrepresentation.
  11.7. Delivery
        of Unlegended Shares .
  (a) Within
        four (4) business days (such fourth business day being the “ **Unlegended
        Shares Delivery Date** ”)
        after
        the business day on which the Company has received (i) a notice that Shares,
        or
        Warrant Shares have been sold pursuant to the Registration Statement or Rule
        144
        under the 1933 Act, (ii) a representation that the prospectus delivery
        requirements, or the requirements of Rule 144, as applicable and if required,
        have been satisfied, and (iii) the original share certificates representing
        the
        shares of Common Stock that have been sold, and (iv) in the case of sales
        under
        Rule 144, customary representation letters of the Subscriber and/or Subscriber’s
        broker regarding compliance with the requirements of Rule 144, the Company
        at
        its expense, (y) shall deliver, and shall cause legal counsel selected by
        the
        Company to deliver to its transfer agent (with copies to Subscriber) an
        appropriate instruction and opinion of such counsel, directing the delivery
        of
        shares of Common Stock without any legends including the legend set forth
        in
        Section 4( h )
        above,
        reissuable pursuant to any effective and current Registration Statement
        described in Section 11 of this Agreement or pursuant to Rule 144 under the
        1933
        Act (the “ **Unlegended
        Shares** ”);
        and
        (z) cause the transmission of the certificates representing the Unlegended
        Shares together with a legended certificate representing the balance of the
        submitted certificates, if any, to the Subscriber at the address specified
        in
        the notice of sale, via express courier, by electronic transfer or otherwise
        on
        or before the Unlegended Shares Delivery Date. Transfer fees shall be the
        responsibility of the Seller.
  
  (b) In
        lieu
        of delivering physical certificates representing the Unlegended Shares, if
        the
        Company’s transfer agent is participating in the Depository Trust Company
        (“ **DTC** ”)
        Fast
        Automated Securities Transfer program, upon request of a Subscriber, so long
        as
        the certificates therefor do not bear a legend and the Subscriber is not
        obligated to return such certificate for the placement of a legend thereon,
        the
        Company shall cause its transfer agent to electronically transmit the Unlegended
        Shares by crediting the account of Subscriber’s prime Broker with DTC through
        its Deposit Withdrawal Agent Commission system. Such delivery must be made
        on or
        before the Unlegended Shares Delivery Date.
 
 (c) The
        Company understands that a delay in the delivery of the Unlegended Shares
        pursuant to Section 11 hereof later than the Unlegended Shares Delivery Date
        could result in economic loss to a Subscriber. As compensation to a Subscriber
        for such loss, the Company agrees to pay late payment fees (as liquidated
        damages and not as a penalty) to the Subscriber for late delivery of Unlegended
        Shares in the amount of $100 per business day after the Delivery Date for
        each
        $10,000 of purchase price of the Unlegended Shares subject to the delivery
        default. If during any 360 day period, the Company fails to deliver Unlegended
        Shares as required by this Section 11.7 for an aggregate of thirty (30) days,
        then each Subscriber or assignee holding Securities subject to such default
        may,
        at its option, require the Company to redeem all or any portion of the Shares,
        and Warrant Shares subject to such default at a price per share equal to
        130% of
        the purchase price or value described in Section 12(e) hereof, of such Shares,
        and Warrant Shares (“ **Unlegended
        Redemption Amount** ”).
        The
        amount of the aforedescribed liquidated damages that have accrued or been
        paid
        for the twenty day period prior to the receipt by the Subscriber of the
        Unlegended Redemption Amount shall be credited against the Unlegended Redemption
        Amount. The Company shall pay any payments incurred under this Section in
        immediately available funds upon demand.
  (d) In
        addition to any other rights available to a Subscriber, if the Company fails
        to
        deliver to a Subscriber Unlegended Shares as required pursuant to this
        Agreement, within seven (7) business days after the Unlegended Shares Delivery
        Date and the Subscriber purchases (in an open market transaction or otherwise)
        shares of common stock to deliver in satisfaction of a sale by such Subscriber
        of the shares of Common Stock which the Subscriber was entitled to receive
        from
        the Company (a " **Buy-In** "),
        then
        the Company shall pay in cash to the Subscriber (in addition to any remedies
        available to or elected by the Subscriber) the amount by which (A) the
        Subscriber's total purchase price (including brokerage commissions, if any)
        for
        the shares of common stock so purchased exceeds (B) the aggregate purchase
        price
        of the shares of Common Stock delivered to the Company for reissuance as
        Unlegended Shares   together
        with interest thereon at a rate of 15% per annum, accruing until such amount
        and
        any accrued interest thereon is paid in full (which amount shall be paid
        as
        liquidated damages and not as a penalty). For
        example, if a Subscriber purchases shares of Common Stock having a total
        purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
        price of shares of Common Stock delivered to the Company for reissuance as
        Unlegended Shares, the Company shall be required to pay the Subscriber
        $ 1,000,
        plus interest. The
        Subscriber shall provide the Company written notice indicating the amounts
        payable to the Subscriber in respect of the Buy-In.
  (e) In
        the
        event a Subscriber shall request delivery of Unlegended Shares as described
        in
        Section 11.7 and the Company is required to deliver such Unlegended Shares
        pursuant to Section 11.7, the Company may not refuse to deliver Unlegended
        Shares based on any claim that such Subscriber or any one associated or
        affiliated with such Subscriber has been engaged in any violation of law,
        or for
        any other reason, unless, an injunction or temporary restraining order from
        a
        court, on notice, restraining and or enjoining delivery of such Unlegended
        Shares or exercise of all or part of said Warrant shall have been sought
        and
        obtained and the
        Company has posted a surety bond for the benefit of such Subscriber in the
        amount of 130% of the amount of the aggregate purchase price of the Common
        Stock
        and Warrant Shares which are subject to the injunction or temporary restraining
        order, which bond shall remain in effect until the completion of
        arbitration/litigation of the dispute and the proceeds of which shall be
        payable
        to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s
        favor.
  
  12. (a)  Offering
        Restrictions .
        Except
        in connection with (i) the
        exercise of options or warrants or conversion of Notes or amounts which are
        granted, issued or accrue pursuant to this Agreement, (ii) a s
        has
        been described in the Reports or Other Written Information filed with the
        Commission or delivered to the Subscribers prior to the Closing Date, (iii)
        full
        or partial consideration in connection with a strategic merger, consolidation
        or
        purchase of substantially all of the securities or assets of corporation
        or
        other entity, (iv) the
        Company’s issuance of securities in connection with strategic license agreements
        and other partnering arrangements so long as such issuances are not for the
        purpose of raising capital, (v) the Company’s issuance of Common Stock or the
        issuance or grants of options to purchase Common Stock pursuant to the Company’s
        stock option plans and employee stock purchase plans as they now exist, which
        copies of such plans have been delivered to the Subscribers, and (vi) sales
        of
        Common Stock without the grant of any registration rights to the purchasers
        of
        such Common Stock and which the Company irrevocably agrees not to register
        for
        public resale (collectively
        the foregoing are “ **Excepted
        Issuances** ”),
        until
        the Actual Effective Date and during the pendency of an Event of Default,
        or
        when any compensatory or liquidated damages are accruing or are outstanding,
        the
        Company will not enter into an agreement to nor issue any equity, convertible
        debt or other securities convertible into common stock or equity of the Company
        nor modify any of the foregoing which may be outstanding at anytime, without
        the
        prior written consent of the Subscriber, which consent may be withheld for
        any
        reason. For so long as the Notes are outstanding the Company will not enter
        into
        any equity line of credit or similar agreement, nor issue or agree to issue
        any
        floating or variable priced equity linked instruments nor any of the foregoing
        or equity with price reset rights.
  (b) Favored
        Nations Provision .
        Except
        for the Excepted Issuances, if at any time Notes or Warrants are outstanding
        the
        Company shall offer, issue or agree to issue any common stock or securities
        convertible into or exercisable for shares of common stock (or modify any
        of the
        foregoing which may be outstanding) to any person or entity at a price per
        share
        or conversion or exercise price per share which shall be less than the
        Conversion Price in respect of the Shares, or if less than the Warrant exercise
        price in respect of the Warrant Shares, without the consent of each Subscriber
        holding Notes, Shares, Warrants, or Warrant Shares, then the Company shall
        issue, for each such occasion, additional shares of Common Stock to each
        Subscriber so that the average per share purchase price of the shares of
        Common
        Stock issued to the Subscriber (of only the Common Stock or Warrant Shares
        still
        owned by the Subscriber) is equal to such other lower price per share and
        the
        Conversion Price and Warrant Exercise Price shall automatically be reduced
        to
        such other lower price per share. The average Purchase Price of the Shares
        and
        average exercise price in relation to the Warrant Shares shall be calculated
        separately for the Shares and Warrant Shares. The foregoing calculation and
        issuance shall be made separately for Shares received upon Note conversion
        and
        separately for Warrant Shares. The delivery to the Subscriber of the additional
        shares of Common Stock shall be not later than the closing date of the
        transaction giving rise to the requirement to issue additional shares of
        Common
        Stock. The Subscriber is granted the registration rights described in Section
        11
        hereof in relation to such additional shares of Common Stock except that
        the
        Filing Date and Effective Date vis-à-vis such additional common shares shall be,
        respectively, the thirtieth (30 th )
        and
        sixtieth (60 th )
        date
        after the closing date giving rise to the requirement to issue the additional
        shares of Common Stock. For purposes of the issuance and adjustment described
        in
        this paragraph, the issuance of any security of the Company carrying the
        right
        to convert such security into shares of Common Stock or of any warrant, right
        or
        option to purchase Common Stock shall result in the issuance of the additional
        shares of Common Stock upon the sooner of the agreement to or actual issuance
        of
        such convertible security, warrant, right or option and again at any time
        upon
        any subsequent issuances of shares of Common Stock upon exercise of such
        conversion or purchase rights if such issuance is at a price lower than the
        Conversion Price or Warrant exercise price in effect upon such issuance.
        The
        rights of the Subscriber set forth in this Section 12 are in addition to
        any
        other rights the Subscriber has pursuant to this Agreement, the Note, any
        Transaction Document, and any other agreement referred to or entered into
        in
        connection herewith.
  
  (c) Option
        Plan Restrictions .
        The
        only officer, director, employee and consultant stock option or stock incentive
        plan currently in effect or contemplated by the Company has been submitted
        to
        the Subscribers or is described with Reports. No other plan will be adopted
        nor
        may any options or equity not included in such plan be issued until after
        the
        Exclusion Period.
  (d) Right
        of First Offer .
        Until
        one year after the Closing Date, the Subscribers shall be given not less
        than
        ten (10) business days prior written notice of any proposed sale by the Company
        of its common stock or other securities or debt obligations, except in
        connection with the Excepted Issuances. The
        Subscribers who exercise their rights pursuant to this Section 12(a) shall
        have
        the right during the ten (10) business days following receipt of the notice
        to
        purchase, in the aggregate, such offered common stock, debt or other securities
        in accordance with the terms and conditions set forth in the notice of sale
        in
        the same proportion to each other as their purchase of Notes in the Offering.
        In
        the event such terms and conditions are modified during the notice period,
        the
        Subscribers shall be given prompt notice of such modification and shall have
        the
        right during the ten (10) business days following the notice of modification
        to
        exercise such right.
  (e) Paid
        In Kind .
        The
        Subscriber may demand that some or all of the sums payable to the Subscriber
        pursuant to Sections 7.1(c), 7.2, 7.5, 11.4, 11.7(c), 11.7(d) and 11.7(e)
        that
        are not paid within ten business days of the required payment date be paid
        in
        shares of Common Stock valued at the Conversion Price in effect at the time
        Subscriber makes such demand or, at the Subscriber’s election, at such other
        valuation described in the Transaction Documents. In addition to any other
        rights granted to the Subscriber herein, the Subscriber is also granted the
        registration rights set forth in Section 11.1(ii) hereof in relation to such
        shares of Common Stock and the Common Stock issuable pursuant to this Section
        12(e). For purposes only of determining any liquidated damages pursuant to
        the
        Transaction Documents, the entire Purchase Price shall be allocated to the
        Notes
        and none to the Warrants; and the Warrant Shares shall be valued at the actual
        exercise price thereof.
  (f) Maximum
        Exercise of Rights .
        In the
        event the exercise of the rights described in Sections 12(b), 12(d) and 12(e) would
        result in the issuance of an amount of common stock of the Company that would
        exceed the maximum amount that may be issued to a Subscriber calculated in
        the
        manner described in Section 7.3 of this Agreement, then the issuance of such
        additional shares of common stock of the Company to such Subscriber will
        be
        deferred in whole or in part until such time as such Subscriber is able to
        beneficially own such common stock without exceeding the maximum amount set
        forth calculated in the manner described in Section 7.3 of this Agreement.
        The
        determination of when such common stock may be issued shall be made by each
        Subscriber as to only such Subscriber.
  13. Miscellaneous .
  (a) Notices .
        All
        notices, demands, requests, consents, approvals, and other communications
        required or permitted hereunder shall be in writing and, unless otherwise
        specified herein, shall be (i) personally served, (ii) deposited in the mail,
        registered or certified, return receipt requested, postage prepaid, (iii)
        delivered by reputable air courier service with charges prepaid, or (iv)
        transmitted by hand delivery, telegram, or facsimile, addressed as set forth
        below or to such other address as such party shall have specified most recently
        by written notice. Any notice or other communication required or permitted
        to be
        given hereunder shall be deemed effective (a) upon hand delivery or delivery
        by
        facsimile, with accurate confirmation generated by the transmitting facsimile
        machine, at the address or number designated below (if delivered on a business
        day during normal business hours where such notice is to be received), or
        the
        first business day following such delivery (if delivered other than on a
        business day during normal business hours where such notice is to be received)
        or (b) on the second business day following the date of mailing by express
        courier service, fully prepaid, addressed to such address, or upon actual
        receipt of such mailing, whichever shall first occur. The addresses for such
        communications shall be: (i) if to the Company, to: Valcent Products Inc.,
        420-475 Howe Street, Vancouver, British Columbia, Canada V6C 2B3, Attn: Douglas
        E. Ford, President, telecopier number: (604) 904-9431, with an additional
        copy
        only by telecopier only to: George Orr, Suite 420-475 Howe Street, Vancouver,
        British Columbia, Canada V6C 2B3, telecopier
        number: (604) 606-7980, and (ii) if to the Subscribers, to: the
        one
        or more addresses and telecopier numbers indicated on the signature pages
        hereto, with an additional copy by telecopier only to: Grushko & Mittman,
        P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, telecopier
        number:
        (212) 697-3575.
  
  (b) Entire
        Agreement; Assignment .
        This
        Agreement and other documents delivered in connection herewith represent
        the
        entire agreement between the parties hereto with respect to the subject matter
        hereof and may be amended only by a writing executed by both parties. Neither
        the Company nor the Subscribers have relied on any representations not contained
        or referred to in this Agreement and the documents delivered herewith. No
        right
        or obligation of the Company shall be assigned without prior notice to and
        the
        written consent of the Subscribers.
  (c) Counterparts/Execution .
        This
        Agreement may be executed in any number of counterparts and by the different
        signatories hereto on separate counterparts, each of which, when so executed,
        shall be deemed an original, but all such counterparts shall constitute but
        one
        and the same instrument. This Agreement may be executed by facsimile signature
        and delivered by facsimile transmission.
  (d) Law
        Governing this Agreement .
        This
        Agreement shall be governed by and construed in accordance with the laws
        of the
        State of New York without regard to conflicts
        of laws  principles
        that would result in the application of the substantive laws of another
        jurisdiction. Any action brought by either party against the other concerning
        the transactions contemplated by this Agreement shall be brought only in
        the
        state courts of New York or in the federal courts located in the state of
        New
        York. **The
        parties and the individuals executing this Agreement and other agreements
        referred to herein or delivered in connection herewith on behalf of the Company
        agree to submit to the jurisdiction of such courts and waive trial by
        jury.** The
        prevailing party shall be entitled to recover from the other party its
        reasonable attorney's fees and costs. In the event that any provision of
        this
        Agreement or any other agreement delivered in connection herewith is invalid
        or
        unenforceable under any applicable statute or rule of law, then such provision
        shall be deemed inoperative to the extent that it may conflict therewith
        and
        shall be deemed modified to conform with such statute or rule of law. Any
        such
        provision which may prove invalid or unenforceable under any law shall not
        affect the validity or enforceability of any other provision of any
        agreement.
  (e) Specific
        Enforcement, Consent to Jurisdiction .
        The
        Company and Subscriber acknowledge and agree that irreparable damage would
        occur
        in the event that any of the provisions of this Agreement were not performed
        in
        accordance with their specific terms or were otherwise breached. It is
        accordingly agreed that the parties shall be entitled to one or more preliminary
        and final injunctions to prevent or cure breaches of the provisions of this
        Agreement and to enforce specifically the terms and provisions hereof, this
        being in addition to any other remedy to which any of them may be entitled
        by
        law or equity. Subject to Section 13(d) hereof, each of the Company, Subscriber
        and any signator hereto in his personal capacity hereby waives, and agrees
        not
        to assert in any such suit, action or proceeding, any claim that it is not
        personally subject to the jurisdiction in New York of such court, that the
        suit,
        action or proceeding is brought in an inconvenient forum or that the venue
        of
        the suit, action or proceeding is improper. Nothing in this Section shall
        affect
        or limit any right to serve process in any other manner permitted by
        law.
  (f) Currency .
        All
        references to currency in the Transaction Documents shall mean the currency
        of
        the United States of America.
  (g) Independent
        Nature of Subscribers . The
        Company acknowledges that the obligations of each Subscriber under the
        Transaction Documents are several and not joint with the obligations of any
        other Subscriber, and no Subscriber shall be responsible in any way for the
        performance of the obligations of any other Subscriber under the Transaction
        Documents. The
        Company acknowledges that each Subscriber has represented that the decision
        of
        each Subscriber to purchase Securities has been made by such Subscriber
        independently of any other Subscriber and independently of any information,
        materials, statements or opinions as to the business, affairs, operations,
        assets, properties, liabilities, results of operations, condition (financial
        or
        otherwise) or prospects of the Company which may have been made or given
        by any
        other Subscriber or by any agent or employee of any other Subscriber, and
        no
        Subscriber or any of its agents or employees shall have any liability to
        any
        Subscriber (or any other person) relating to or arising from any such
        information, materials, statements or opinions. The
        Company acknowledges that nothing contained in any Transaction Document,
        and no
        action taken by any Subscriber pursuant hereto or thereto (including, but
        not
        limited to, the (i) inclusion of a Subscriber in the Registration Statement
        and
        (ii) review by, and consent to, such Registration Statement by a Subscriber)
        shall be deemed to constitute the Subscribers as a partnership, an association,
        a joint venture or any other kind of entity, or create a presumption that
        the
        Subscribers are in any way acting in concert or as a group with respect to
        such
        obligations or the transactions contemplated by the Transaction Documents. 
        The Company acknowledges that each Subscriber shall be entitled to independently
        protect and enforce its rights, including without limitation, the rights
        arising
        out of the Transaction Documents, and it shall not be necessary
        for
        any other Subscriber to be joined as an additional party in any proceeding
        for
        such purpose.  The Company acknowledges that it has elected to provide
        all
        Subscribers with the same terms and Transaction Documents for the convenience
        of
        the Company and not because Company was required or requested to do so by
        the
        Subscribers.  The Company acknowledges that such procedure with respect
        to
        the Transaction Documents in no way creates a presumption that the Subscribers
        are in any way acting in concert or as a group with respect to the Transaction
        Documents or the transactions contemplated thereby.
 
 
 **[THIS
        SPACE INTENTIONALLY LEFT BLANK]**
  
 
 
 **SIGNATURE
        PAGE TO SUBSCRIPTION AGREEMENT**
  
 Please
        acknowledge your acceptance of the foregoing Subscription Agreement by signing
        and returning a copy to the undersigned whereupon it shall become a binding
        agreement between us.
 
 VALCENT
        PRODUCTS INC.
 an
        Alberta, Canada corporation
 
 
 By:_________________________________
 Name:
        Douglas E. Ford
 Title:
        President
 
 Dated:
        July _____, 2005
 
  **SUBSCRIBER**
              **NOTE
                  PRINCIPAL**_____________________________________
                (Signature)
                By:
              $
 
  
  **LIST
        OF EXHIBITS AND SCHEDULES**
 Exhibit
                      A
                  Form
                      of Convertible NoteExhibit
                      B
                  Form
                      of Class A [Class B] WarrantExhibit
                      C
                  Canadian
                      Investor Representation LettersSchedule
                      5(a)
                  SubsidiariesSchedule
                      5(d)
                  Additional
                      Issuances / CapitalizationSchedule
                      5(q)
                  Undisclosed
                      LiabilitiesSchedule
                      8(a)
                  Form
                      of Finder’s FeeSchedule
                      9(e)
                  Use
                      of ProceedsSchedule
                      11.1
                  Other
                      Securities to be RegisteredSchedule
                      12(a)
                  Other
                      Excepted
                      Issuances
  
  **EXHIBIT
        A**
 
 THIS
        NOTE
        AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
        COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
        FOR
        SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
        STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED.
 
 **CONVERTIBLE
        NOTE**
 
 FOR
        VALUE
        RECEIVED, VALCENT PRODUCTS INC., an Alberta, Canada corporation (hereinafter
        called "Borrower"), hereby promises to pay to ALPHA CAPITAL AKTIENGESELLSCHAFT,
        Pradafant 7, 9490 Furstentums, Vaduz, Lichtenstein **,** Fax:
        011-42-32323196 (the "Holder") or order, without demand, the sum of Two Hundred
        Thousand Dollars ($200,000.00), with interest, on July 29, 2006 (the "Maturity
        Date").
 
 This
        Note
        has been entered into pursuant to the terms of a subscription agreement between
        the Borrower and the Holder, dated of even date herewith (the “Subscription
        Agreement”), and shall be governed by the terms of such Subscription Agreement.
        Unless otherwise separately defined herein, all capitalized terms used in
        this
        Note shall have the same meaning as is set forth in the Subscription Agreement.
        The following terms shall apply to this Note:
 
 **ARTICLE
        I**
 
 GENERAL
        PROVISIONS
 
 1.1 Payment
        Grace Period .
        The
        Borrower shall have a ten (10) business day grace period to pay any monetary
        amounts due under this Note, after which grace period a default interest
        rate of
        fifteen percent (15%) per annum shall apply to the amounts owed
        hereunder.
 
 1.2 Conversion
        Privileges .
        The
        Conversion Privileges set forth in Article II shall remain in full force
        and
        effect immediately from the date hereof and until the Note is paid in full
        regardless of the occurrence of an Event of Default. The Note shall be payable
        in full on the Maturity Date, unless previously converted into Common Stock
        in
        accordance with Article II hereof; provided, that if an Event of Default
        has
        occurred, the Borrower may not pay this Note, without the consent of the
        Holder,
        until one year after the later of the date the Event of Default has been
        cured
        or one year after the Maturity Date.
 
 1.3 Interest
        Rate . Subject
        to Section 4.7 hereof, interest payable on this Note shall accrue at a rate
        per
        annum (the "Interest Rate") of eight percent (8%) per annum. Interest on
        the
        Principal Amount shall be payable on the Maturity Date, whether by acceleration
        or otherwise. Interest shall compound annually. Provided an Event of Default
        has
        not occurred, interest may be paid at the Borrower’s election in cash or with
        registered free-trading shares of Common Stock at a value of $0.50 per share
        of
        Common Stock.
  
  THIS
        NOTE
        AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
        COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
        FOR
        SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
        STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED.
 
 **CONVERTIBLE
        NOTE**
 
 FOR
        VALUE
        RECEIVED, VALCENT PRODUCTS INC., an Alberta, Canada corporation (hereinafter
        called "Borrower"), hereby promises to pay to PLATINUM PARTNERS GLOBAL MACRO
        FUND, LP, 152 West 57 th Street,
        New York, New York 10019, Fax: (212) 581-0002 (the "Holder") or order, without
        demand, the sum of Two Hundred and Fifty Thousand Dollars ($250,000.00),
        with
        interest, on July 29, 2006 (the "Maturity Date").
 
 This
        Note
        has been entered into pursuant to the terms of a subscription agreement between
        the Borrower and the Holder, dated of even date herewith (the “Subscription
        Agreement”), and shall be governed by the terms of such Subscription Agreement.
        Unless otherwise separately defined herein, all capitalized terms used in
        this
        Note shall have the same meaning as is set forth in the Subscription Agreement.
        The following terms shall apply to this Note:
 
 **ARTICLE
        I**
 
 GENERAL
        PROVISIONS
 
 1.1 Payment
        Grace Period .
        The
        Borrower shall have a ten (10) business day grace period to pay any monetary
        amounts due under this Note, after which grace period a default interest
        rate of
        fifteen percent (15%) per annum shall apply to the amounts owed
        hereunder.
 
 1.2 Conversion
        Privileges .
        The
        Conversion Privileges set forth in Article II shall remain in full force
        and
        effect immediately from the date hereof and until the Note is paid in full
        regardless of the occurrence of an Event of Default. The Note shall be payable
        in full on the Maturity Date, unless previously converted into Common Stock
        in
        accordance with Article II hereof; provided, that if an Event of Default
        has
        occurred, the Borrower may not pay this Note, without the consent of the
        Holder,
        until one year after the later of the date the Event of Default has been
        cured
        or one year after the Maturity Date.
 
 1.3 Interest
        Rate . Subject
        to Section 4.7 hereof, interest payable on this Note shall accrue at a rate
        per
        annum (the "Interest Rate") of eight percent (8%) per annum. Interest on
        the
        Principal Amount shall be payable on the Maturity Date, whether by acceleration
        or otherwise. Interest shall compound annually. Provided an Event of Default
        has
        not occurred, interest may be paid at the Borrower’s election in cash or with
        registered free-trading shares of Common Stock at a value of $0.50 per share
        of
        Common Stock.
  
  THIS
        NOTE
        AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
        COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
        FOR
        SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
        STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED.
 
 **CONVERTIBLE
        NOTE**
 
 FOR
        VALUE
        RECEIVED, VALCENT PRODUCTS INC., an Alberta, Canada corporation (hereinafter
        called "Borrower"), hereby promises to pay to DAVID A. ROSE, 1701 Milford
        Street, Houston, TX 77098, Fax: (713) 238-8008 (the "Holder") or order, without
        demand, the sum of Ten Thousand Dollars ($10,000.00), with interest, on July
        29,
        2006 (the "Maturity Date").
 
 This
        Note
        has been entered into pursuant to the terms of a subscription agreement between
        the Borrower and the Holder, dated of even date herewith (the “Subscription
        Agreement”), and shall be governed by the terms of such Subscription Agreement.
        Unless otherwise separately defined herein, all capitalized terms used in
        this
        Note shall have the same meaning as is set forth in the Subscription Agreement.
        The following terms shall apply to this Note:
 
 **ARTICLE
        I**
 
 GENERAL
        PROVISIONS
 
 1.1 Payment
        Grace Period .
        The
        Borrower shall have a ten (10) business day grace period to pay any monetary
        amounts due under this Note, after which grace period a default interest
        rate of
        fifteen percent (15%) per annum shall apply to the amounts owed
        hereunder.
 
 1.2 Conversion
        Privileges .
        The
        Conversion Privileges set forth in Article II shall remain in full force
        and
        effect immediately from the date hereof and until the Note is paid in full
        regardless of the occurrence of an Event of Default. The Note shall be payable
        in full on the Maturity Date, unless previously converted into Common Stock
        in
        accordance with Article II hereof; provided, that if an Event of Default
        has
        occurred, the Borrower may not pay this Note, without the consent of the
        Holder,
        until one year after the later of the date the Event of Default has been
        cured
        or one year after the Maturity Date.
 
 1.3 Interest
        Rate . Subject
        to Section 4.7 hereof, interest payable on this Note shall accrue at a rate
        per
        annum (the "Interest Rate") of eight percent (8%) per annum. Interest on
        the
        Principal Amount shall be payable on the Maturity Date, whether by acceleration
        or otherwise. Interest shall compound annually. Provided an Event of Default
        has
        not occurred, interest may be paid at the Borrower’s election in cash or with
        registered free-trading shares of Common Stock at a value of $0.50 per share
        of
        Common Stock.
 
  
  THIS
        NOTE
        AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
        COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
        FOR
        SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
        STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED.
 
 **CONVERTIBLE
        NOTE**
 
 FOR
        VALUE
        RECEIVED, VALCENT PRODUCTS INC., an Alberta, Canada corporation (hereinafter
        called "Borrower"), hereby promises to pay to MONARCH CAPITAL FUND LTD.,
        c/o
        Beacon Capital Management Limited, Beacon Fund Advisors Limited, Harbour
        House,
        Waterfront Drive, P.O. Box 972, Road Town, Tortola, British Virgin Island,
        Fax:
        (284) 494-4771 (the "Holder") or order, without demand, the sum of One Hundred
        and Twenty-Five Thousand Dollars ($125,000.00), with interest, on July 29,
        2006
        (the "Maturity Date").
 
 This
        Note
        has been entered into pursuant to the terms of a subscription agreement between
        the Borrower and the Holder, dated of even date herewith (the “Subscription
        Agreement”), and shall be governed by the terms of such Subscription Agreement.
        Unless otherwise separately defined herein, all capitalized terms used in
        this
        Note shall have the same meaning as is set forth in the Subscription Agreement.
        The following terms shall apply to this Note:
 
 **ARTICLE
        I**
 
 GENERAL
        PROVISIONS
 
 1.1 Payment
        Grace Period .
        The
        Borrower shall have a ten (10) business day grace period to pay any monetary
        amounts due under this Note, after which grace period a default interest
        rate of
        fifteen percent (15%) per annum shall apply to the amounts owed
        hereunder.
 
 1.2 Conversion
        Privileges .
        The
        Conversion Privileges set forth in Article II shall remain in full force
        and
        effect immediately from the date hereof and until the Note is paid in full
        regardless of the occurrence of an Event of Default. The Note shall be payable
        in full on the Maturity Date, unless previously converted into Common Stock
        in
        accordance with Article II hereof; provided, that if an Event of Default
        has
        occurred, the Borrower may not pay this Note, without the consent of the
        Holder,
        until one year after the later of the date the Event of Default has been
        cured
        or one year after the Maturity Date.
 
 1.3 Interest
        Rate . Subject
        to Section 4.7 hereof, interest payable on this Note shall accrue at a rate
        per
        annum (the "Interest Rate") of eight percent (8%) per annum. Interest on
        the
        Principal Amount shall be payable on the Maturity Date, whether by acceleration
        or otherwise. Interest shall compound annually. Provided an Event of Default
        has
        not occurred, interest may be paid at the Borrower’s election in cash or with
        registered free-trading shares of Common Stock at a value of $0.50 per share
        of
        Common Stock.
  
  THIS
        NOTE
        AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
        COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
        FOR
        SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
        STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED.
 
 **CONVERTIBLE
        NOTE**
 
 FOR
        VALUE
        RECEIVED, VALCENT PRODUCTS INC., an Alberta, Canada corporation (hereinafter
        called "Borrower"), hereby promises to pay to CMS CAPITAL, 9612 Ventura Blvd.,
        Suite 108, Panorama City, CA 91402, Fax: (818) 907-3372, (the "Holder") or
        order, without demand, the sum of One Hundred Thousand Dollars ($100,000.00),
        with interest, on July 29, 2006 (the "Maturity Date").
 
 This
        Note
        has been entered into pursuant to the terms of a subscription agreement between
        the Borrower and the Holder, dated of even date herewith (the “Subscription
        Agreement”), and shall be governed by the terms of such Subscription Agreement.
        Unless otherwise separately defined herein, all capitalized terms used in
        this
        Note shall have the same meaning as is set forth in the Subscription Agreement.
        The following terms shall apply to this Note:
 
 **ARTICLE
        I**
 
 GENERAL
        PROVISIONS
 
 1.1 Payment
        Grace Period .
        The
        Borrower shall have a ten (10) business day grace period to pay any monetary
        amounts due under this Note, after which grace period a default interest
        rate of
        fifteen percent (15%) per annum shall apply to the amounts owed
        hereunder.
 
 1.2 Conversion
        Privileges .
        The
        Conversion Privileges set forth in Article II shall remain in full force
        and
        effect immediately from the date hereof and until the Note is paid in full
        regardless of the occurrence of an Event of Default. The Note shall be payable
        in full on the Maturity Date, unless previously converted into Common Stock
        in
        accordance with Article II hereof; provided, that if an Event of Default
        has
        occurred, the Borrower may not pay this Note, without the consent of the
        Holder,
        until one year after the later of the date the Event of Default has been
        cured
        or one year after the Maturity Date.
 
 1.3 Interest
        Rate . Subject
        to Section 4.7 hereof, interest payable on this Note shall accrue at a rate
        per
        annum (the "Interest Rate") of eight percent (8%) per annum. Interest on
        the
        Principal Amount shall be payable on the Maturity Date, whether by acceleration
        or otherwise. Interest shall compound annually. Provided an Event of Default
        has
        not occurred, interest may be paid at the Borrower’s election in cash or with
        registered free-trading shares of Common Stock at a value of $0.50 per share
        of
        Common Stock.
 
  
  **ARTICLE
        II**
 
 **CONVERSION
        RIGHTS**
 
 The
        Holder shall have the right to convert the principal due under this Note
        into
        Shares of the Borrower's Common Stock, no par value per share (“Common Stock”)
        as set forth below.
 
 2.1. Conversion
        into the Borrower's Common Stock .
 
 (a) The
        Holder shall have the right from and after the date of the issuance of this
        Note
        and then at any time until this Note is fully paid, to convert any outstanding
        and unpaid principal portion of this Note, and accrued interest, at the election
        of the Holder (the date of giving of such notice of conversion being a
        "Conversion Date") into fully paid and nonassessable shares of Common Stock
        as
        such stock exists on the date of issuance of this Note, or any shares of
        capital
        stock of Borrower into which such Common Stock shall hereafter be changed
        or
        reclassified, at the conversion price as defined in Section 2.1(b) hereof
        (the
        "Conversion Price"), determined as provided herein. Upon delivery to the
        Borrower of a completed Notice of Conversion, a form of which is annexed
        hereto,
        Borrower shall issue and deliver to the Holder within four (4) business days
        from the Conversion Date (such third day being the “Delivery Date”) that number
        of shares of Common Stock for the portion of the Note converted in accordance
        with the foregoing. At the election of the Holder, the Borrower will deliver
        accrued but unpaid interest on the Note in the manner provided in Section
        1.3
        through the Conversion Date directly to the Holder on or before the Delivery
        Date (as defined in the Subscription Agreement). The number of shares of
        Common
        Stock to be issued upon each conversion of this Note shall be determined
        by
        dividing that portion of the principal of the Note and interest to be converted,
        by the Conversion Price.
 
 (b) Subject
        to adjustment as provided in Section 2.1(c) hereof, the Conversion Price
        per
        share shall be the lesser of: (i) seventy percent (70%) of the average of
        the
        five lowest closing bid prices for the Common Stock as reported by Bloomberg
        L.P. for the Principal Market for the ten trading days preceding a Conversion
        Date, or (ii) $0.55.
 
 (c) The
        Conversion Price and number and kind of shares or other securities to be
        issued
        upon conversion determined pursuant to Section 2.1(a), shall be subject to
        adjustment from time to time upon the happening of certain events while this
        conversion right remains outstanding, as follows:
 
 A. Merger,
        Sale of Assets, etc. If the Borrower at any time shall consolidate with or
        merge
        into or sell or convey all or substantially all its assets to any other
        corporation, this Note, as to the unpaid principal portion thereof and accrued
        interest thereon, shall thereafter be deemed to evidence the right to purchase
        such number and kind of shares or other securities and property as would
        have
        been issuable or distributable on account of such consolidation, merger,
        sale or
        conveyance, upon or with respect to the securities subject to the conversion
        or
        purchase right immediately prior to such consolidation, merger, sale or
        conveyance. The foregoing provision shall similarly apply to successive
        transactions of a similar nature by any such successor or purchaser. Without
        limiting the generality of the foregoing, the anti-dilution provisions of
        this
        Section shall apply to such securities of such successor or purchaser after
        any
        such consolidation, merger, sale or conveyance.
 
 B. Reclassification,
        etc. If the Borrower at any time shall, by reclassification or otherwise,
        change
        the Common Stock into the same or a different number of securities of any
        class
        or classes that may be issued or outstanding, this Note, as to the unpaid
        principal portion thereof and accrued interest thereon, shall thereafter
        be
        deemed to evidence the right to purchase an adjusted number of such securities
        and kind of securities as would have been issuable as the result of such
        change
        with respect to the Common Stock immediately prior to such reclassification
        or
        other change.
 
 C. Stock
        Splits, Combinations and Dividends. If the shares of Common Stock are subdivided
        or combined into a greater or smaller number of shares of Common Stock, or
        if a
        dividend is paid on the Common Stock in shares of Common Stock, the Conversion
        Price shall be proportionately reduced in case of subdivision of shares or
        stock
        dividend or proportionately increased in the case of combination of shares,
        in
        each such case by the ratio which the total number of shares of Common Stock
        outstanding immediately after such event bears to the total number of shares
        of
        Common Stock outstanding immediately prior to such event.
  
  D. Share
        Issuance. So long as this Note is outstanding, if the Borrower shall issue
        or
        agree to issue any shares of Common Stock except for the Excepted Issuances
        (as
        defined in the Subscription Agreement) for a consideration less than the
        Conversion Price in effect at the time of such issue, then, and thereafter
        successively upon each such issue, the Conversion Price shall be reduced
        to such
        other lower issue price. For purposes of this adjustment, the issuance of
        any
        security carrying the right to convert such security into shares of Common
        Stock
        or of any warrant, right or option to purchase Common Stock shall result
        in an
        adjustment to the Conversion Price upon the issuance of the above-described
        security and again upon the issuance of shares of Common Stock upon exercise
        of
        such conversion or purchase rights if such issuance is at a price lower than
        the
        then applicable Maximum Base Price. The reduction of the Conversion Price
        described in this paragraph is in addition to other rights of the Holder
        described in this Note and the Subscription Agreement.
 
 (d) Whenever
        the Conversion Price is adjusted pursuant to Section 2.1(c) above, the Borrower
        shall promptly mail to the Holder a notice setting forth the Conversion Price
        after such adjustment and setting forth a statement of the facts requiring
        such
        adjustment.
 
 (e) During
        the period the conversion right exists, Borrower will reserve from its
        authorized and unissued Common Stock not less than 200% of the number of
        shares
        of Common Stock issuable upon the full conversion of this Note. Borrower
        represents that upon issuance, such shares will be duly and validly issued,
        fully paid and non-assessable. Borrower agrees that its issuance of this
        Note
        shall constitute full authority to its officers, agents, and transfer agents
        who
        are charged with the duty of executing and issuing stock certificates to
        execute
        and issue the necessary certificates for shares of Common Stock upon the
        conversion of this Note.
 
 2.2 Method
        of Conversion .
        This
        Note may be converted by the Holder in whole or in part as described in Section
        2.1(a) hereof and the Subscription Agreement. Upon partial conversion of
        this
        Note, a new Note containing the same date and provisions of this Note shall,
        at
        the request of the Holder, be issued by the Borrower to the Holder for the
        principal balance of this Note and interest which shall not have been converted
        or paid.
 
 2.3 Maximum
        Conversion .
        The
        Holder shall not be entitled to convert on a Conversion Date that amount
        of the
        Note in connection with that number of shares of Common Stock which would
        be in
        excess of the sum of (i) the number of shares of Common Stock beneficially
        owned
        by the Holder and its affiliates on a Conversion Date, (ii) any Common Stock
        issuable in connection with the unconverted portion of the Note, and (iii)
        the
        number of shares of Common Stock issuable upon the conversion of the Note
        with
        respect to which the determination of this provision is being made on a
        Conversion Date, which would result in beneficial ownership by the Holder
        and
        its affiliates of more than 4.99% of the outstanding shares of Common Stock
        of
        the Borrower on such Conversion Date. For the purposes of the provision to
        the
        immediately preceding sentence, beneficial ownership shall be determined
        in
        accordance with Section 13(d) of the Securities Exchange Act of 1934, as
        amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder
        shall not be limited to aggregate conversions of only 4.99% and aggregate
        conversion by the Holder may exceed 4.99%. The Holder shall have the authority
        and obligation to determine whether the restriction contained in this Section
        2.3 will limit any conversion hereunder and to the extent that the Holder
        determines that the limitation contained in this Section applies, the
        determination of which portion of the Notes are convertible shall be the
        responsibility and obligation of the Holder. The Holder may waive the conversion
        limitation described in this Section 2.3, in whole or in part, upon and
        effective after 61 days prior written notice to the Borrower. The Holder
        may
        allocate which of the equity of the Borrower deemed beneficially owned by
        the
        Holder shall be included in the 4.99% amount described above and which shall
        be
        allocated to the excess above 4.99%.
 
 2.4. Optional
        Redemption of Principal Amount .
        Provided an Event of Default has not occurred, whether or not such Event
        of
        Default has been cured and further provided that the Common Stock has had
        a
        closing price of more than $1.50 as reported by Bloomberg L.P. for the Principal
        Market for twenty consecutive trading days, the Borrower will have the option
        of
        prepaying the outstanding Principal Amount ("Optional Redemption"), in whole
        or
        in part, by paying to the Holder a sum of money equal to one hundred and
        thirty
        percent (130%) of the Principal Amount to be redeemed, together with accrued
        but
        unpaid interest thereon and any and all other sums due, accrued or payable
        to
        the Holder arising under this Note or any Transaction Document through the
        Redemption Payment Date as defined below (the "Redemption Amount"). Borrower’s
        election to exercise its right to prepay must be by notice in writing (“Notice
        of Redemption”). The Notice of Redemption shall specify the date for such
        Optional Redemption (the "Redemption Payment Date"), which date shall be
        ten
        (10) business days after the date of the Notice of Redemption (the "Redemption
        Period"). A Notice of Redemption shall not be effective with respect to any
        portion of the Principal Amount for which the Holder has a pending election
        to
        convert pursuant to Section 2.1, or for conversions initiated or made by
        the
        Holder pursuant to Section 2.1 during the Redemption Period. On the Redemption
        Payment Date, the Redemption Amount, less any portion of the Redemption Amount
        against which the Holder has exercised its rights pursuant to Section 2.1,
        shall
        be paid in good funds to the Holder. In the event the Borrower fails to pay
        the
        Redemption Amount on the Redemption Payment Date as set forth herein, then
        (i)
        such Notice of Redemption will be null and void, (ii) Borrower will have
        no
        right to deliver another Notice of Redemption, and (iii) Borrower’s failure may
        be deemed by Holder to be a non-curable Event of Default.
  
 
 **ARTICLE
        III**
 
 **EVENT
        OF DEFAULT**
 
 The
        occurrence of any of the following events of default ("Event of Default")
        shall,
        at the option of the Holder hereof, make all sums of principal and interest
        then
        remaining unpaid hereon and all other amounts payable hereunder immediately
        due
        and payable, upon demand, without presentment, or grace period, all of which
        hereby are expressly waived, except as set forth below:
 
 3.1 Failure
        to Pay Principal or Interest .
        The
        Borrower fails to pay any installment of principal, interest or other sum
        due
        under this Note when due and such failure continues for a period of ten (10)
        business days after the due date. The ten (10) day period described in this
        Section 3.1 is the same ten (10) business day period described in Section
        1.1
        hereof.
 
 3.2 Breach
        of Covenant .
        The
        Borrower breaches any material covenant or other term or condition of the
        Subscription Agreement or this Note in any material respect and such breach,
        if
        subject to cure, continues for a period of ten (10) business days after written
        notice to the Borrower from the Holder.
 
 3.3 Breach
        of Representations and Warranties .
        Any
        material representation or warranty of the Borrower made herein, in the
        Subscription Agreement, or in any agreement, statement or certificate given
        in
        writing pursuant hereto or in connection therewith shall be false or misleading
        in any material respect as of the date made and the Closing Date.
 
 3.4 Receiver
        or Trustee .
        The
        Borrower shall make an assignment for the benefit of creditors, or apply
        for or
        consent to the appointment of a receiver or trustee for it or for a substantial
        part of its property or business; or such a receiver or trustee shall otherwise
        be appointed without the consent of the Borrower is not dismissed within
        sixty
        (60) days of appointment.
 
 3.5 Judgments .
        Any
        money judgment, writ or similar final process shall be entered or filed against
        Borrower or any of its property or other assets for more than $75,000, and
        shall
        remain unvacated, unbonded or unstayed for a period of forty-five (45)
        days.
 
 3.6 Bankruptcy .
        Bankruptcy, insolvency, reorganization or liquidation proceedings or other
        proceedings or relief under any bankruptcy law or any law, or the issuance
        of
        any notice in relation to such event, for the relief of debtors shall be
        instituted by or against the Borrower and if instituted against Borrower
        are not
        dismissed within forty-five (45) days of initiation.
 
 3.7 Delisting .
        Delisting of the Common Stock from a Principal Market; failure to comply
        with
        the requirements for continued listing on a Principal Market for a period
        of
        five consecutive trading days; or notification from any Principal Market
        that
        the Borrower is not in compliance with the conditions for such continued
        listing
        on such Principal Market.
 
 3.8 Non-Payment .
        A
        default by the Borrower under any one or more obligations in an aggregate
        monetary amount in excess of $75,000 for more than twenty days after the
        due
        date, unless the Borrower is contesting the validity of such obligation in
        good
        faith.
 
 3.9 Stop
        Trade .
        An SEC
        or judicial stop trade order or Principal Market trading suspension that
        lasts
        for five or more consecutive trading days.
  
 
 3.10 Failure
        to Deliver Common Stock or Replacement Note .
        Borrower's failure to timely deliver Common Stock to the Holder pursuant
        to and
        in the form required by this Note and Sections 7 and 11 of the Subscription
        Agreement, or, if required, a replacement Note.
 
 3.11 Non-Registration
        Event .
        The
        occurrence of a Non-Registration Event as described in Section 11.4 of the
        Subscription Agreement.
 
 3.12 Reservation
        Default .
        Failure
        by the Borrower to have reserved for issuance upon conversion of the Note
        the
        amount of Common stock as set forth in this Note and the Subscription
        Agreement.
 
 3.13 Cross
        Default .
        A
        default by the Borrower of a material term, covenant, warranty or undertaking
        of
        any other agreement to which the Borrower and Holder are parties, or the
        occurrence of a material event of default under any such other agreement
        which
        is not cured after any required notice and/or cure period.
 
 **ARTICLE
        IV**
 
 **MISCELLANEOUS**
 
 4.1 Failure
        or Indulgence Not Waiver .
        No
        failure or delay on the part of Holder hereof in the exercise of any power,
        right or privilege hereunder shall operate as a waiver thereof, nor shall
        any
        single or partial exercise of any such power, right or privilege preclude
        other
        or further exercise thereof or of any other right, power or privilege. All
        rights and remedies existing hereunder are cumulative to, and not exclusive
        of,
        any rights or remedies otherwise available.
 
 4.2 Notices .
        All
        notices, demands, requests, consents, approvals, and other communications
        required or permitted hereunder shall be in writing and, unless otherwise
        specified herein, shall be (i) personally served, (ii) deposited in the mail,
        registered or certified, return receipt requested, postage prepaid, (iii)
        delivered by reputable air courier service with charges prepaid, or (iv)
        transmitted by hand delivery, telegram, or facsimile, addressed as set forth
        below or to such other address as such party shall have specified most recently
        by written notice. Any notice or other communication required or permitted
        to be
        given hereunder shall be deemed effective (a) upon hand delivery or delivery
        by
        facsimile, with accurate confirmation generated by the transmitting facsimile
        machine, at the address or number designated below (if delivered on a business
        day during normal business hours where such notice is to be received), or
        the
        first business day following such delivery (if delivered other than on a
        business day during normal business hours where such notice is to be received)
        or (b) on the second business day following the date of mailing by express
        courier service, fully prepaid, addressed to such address, or upon actual
        receipt of such mailing, whichever shall first occur. The addresses for such
        communications shall be: (i) if to the Borrower to: Valcent
        Products Inc., 420-475 Howe Street, Vancouver, British Columbia, Canada V6C
        2B3,
        Attn: Douglas E. Ford, Director, telecopier number: (604) 606-7980, with
        an
        additional copy only by telecopier only to: George Orr, Suite 420-475 Howe
        Street, Vancouver, British Columbia, Canada V6C 2B3, telecopier number: (604)
        606-7980 ,
        and
        (ii) if to the Holder, to the name, address and telecopy number set forth
        on the
        front page of this Note, with a copy by telecopier only to Grushko &
        Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
        telecopier number: (212) 697-3575.
 
 4.3 Amendment
        Provision .
        The
        term "Note" and all reference thereto, as used throughout this instrument,
        shall
        mean this instrument as originally executed, or if later amended or
        supplemented, then as so amended or supplemented.
 
 4.4 Assignability .
        This
        Note shall be binding upon the Borrower and its successors and assigns, and
        shall inure to the benefit of the Holder and its successors and
        assigns.
 
 4.5 Cost
        of Collection .
        If
        default is made in the payment of this Note, Borrower shall pay the Holder
        hereof reasonable costs of collection, including reasonable attorneys'
        fees.
 
 4.6 Governing
        Law .
        This
        Note shall be governed by and construed in accordance with the laws of the
        State
        of New York. Any action brought by either party against the other concerning
        the
        transactions contemplated by this Agreement shall be brought only in the
        civil
        or state courts of New York or in the federal courts located in the State
        and
        county of New York. Both parties and the individual signing this Agreement
        on
        behalf of the Borrower agree to submit to the jurisdiction of such courts.
        The
        prevailing party shall be entitled to recover from the other party its
        reasonable attorney's fees and costs.
  
 
 4.7 Maximum
        Payments .
        Nothing
        contained herein shall be deemed to establish or require the payment of a
        rate
        of interest or other charges in excess of the maximum permitted by applicable
        law. In the event that the rate of interest required to be paid or other
        charges
        hereunder exceed the maximum permitted by such law, any payments in excess
        of
        such maximum shall be credited against amounts owed by the Borrower to the
        Holder and thus refunded to the Borrower.
 
 4.8 Shareholder
        Status .
        The
        Holder shall not have rights as a shareholder of the Borrower with respect
        to
        unconverted portions of this Note. However, the Holder will have all the
        rights
        of a shareholder of the Borrower with respect to the shares of Common Stock
        to
        be received by Holder after delivery by the Holder of a Conversion Notice
        to the
        Borrower.
  
 **[THIS
        SPACE INTENTIONALLY LEFT BLANK]**
    
  **IN
        WITNESS WHEREOF** ,
        Borrower has caused this Note to be signed in its name by an authorized officer
        as of the ____ day of July, 2005.
 
 VALCENT
        PRODUCTS INC.
   By:________________________________
 Name:
 Title:
  WITNESS:
 
 ______________________________________
   
  **NOTICE
        OF CONVERSION**
 
 (To
        be
        executed by the Registered Holder in order to convert the Note)
 
 
 The
        undersigned hereby elects to convert $_________ of the principal and $_________
        of the interest due on the Note issued by Valcent Products Inc. on July 29,
        2005
        into Shares of Common Stock of Valcent Products Inc. (the "Borrower") according
        to the conditions set forth in such Note, as of the date written
        below.
 
 
 
 Date
        of
        Conversion:____________________________________________________________________
 
 
 Conversion
        Price:______________________________________________________________________
 
 
 Shares
        To
        Be
        Delivered:_________________________________________________________________
 
 
 Signature:____________________________________________________________________________
 
 
 Print
        Name:__________________________________________________________________________
 
 
 Address:_____________________________________________________________________________
 
 ____________________________________________________________________________
  
  
  **EXHIBIT
        B**
 
 **THIS
        WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
        AND
        THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
        OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED** .
 
 Right
                  to Purchase 266,666 shares of Common Stock of Valcent Products
                  Inc.
                  (subject to adjustment as provided
                  herein)
 
 **CLASS
        A COMMON STOCK PURCHASE WARRANT**
  No. 2005-A-001 Issue
        Date: July 29, 2005
  VALCENT
        PRODUCTS INC., a corporation organized under the laws of the province of
        Alberta, Canada (the “Company”), hereby certifies that, for value received,
        ALPHA CAPITAL AKTIENGESELLSCHAFT, Pradafant 7, 9490 Furstentums, Vaduz,
        Lichtenstein **,** Fax:
        011-42-32323196 ,
        or its
        assigns (the “Holder”), is entitled, subject to the terms set forth below, to
        purchase from the Company at any time after the Issue Date until 5:00 p.m.,
        E.S.T on the third (3 rd )
        anniversary of the Issue Date (the “Expiration Date”), up to 266,666 fully paid
        and nonassessable shares of Common Stock at a per share purchase price of
        $0.50.
        The aforedescribed purchase price per share, as adjusted from time to time
        as
        herein provided, is referred to herein as the "Purchase Price." The number
        and
        character of such shares of Common Stock and the Purchase Price are subject
        to
        adjustment as provided herein. The Company may reduce the Purchase Price
        without
        the consent of the Holder. Capitalized terms used and not otherwise defined
        herein shall have the meanings set forth in that certain Subscription Agreement
        (the “ **Subscription
        Agreement** ”),
        dated
        July 29, 2005, entered into by the Company and Holders of the Class A
        Warrants.
 
 As
        used
        herein the following terms, unless the context otherwise requires, have the
        following respective meanings:
  (a) The
        term
“Company” shall include Valcent Products Inc. and any corporation which shall
        succeed or assume the obligations of Valcent Products Inc. hereunder.
  (b) The
        term
“Common Stock” includes (a) the Company's Common Stock, no par value per
        share, as authorized on the date of the Subscription Agreement, and (b) any
        other securities into which or for which any of the securities described
        in
        (a) may be converted or exchanged pursuant to a plan of recapitalization,
        reorganization, merger, sale of assets or otherwise.
  (c) The
        term
“Other Securities” refers to any stock (other than Common Stock) and other
        securities of the Company or any other person (corporate or otherwise) which
        the
        holder of the Warrant at any time shall be entitled to receive, or shall
        have
        received, on the exercise of the Warrant, in lieu of or in addition to Common
        Stock, or which at any time shall be issuable or shall have been issued in
        exchange for or in replacement of Common Stock or Other Securities pursuant
        to
        Section 5 or otherwise.
  (d) The
        term
“Warrant Shares” shall mean the Common Stock issuable upon exercise of this
        Warrant.
   
  **THIS
        WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
        AND
        THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
        OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED** .
 
 Right
                  to Purchase 333,333 shares of Common Stock of Valcent Products
                  Inc.
                  (subject to adjustment as provided
                  herein)
 
 **CLASS
        A COMMON STOCK PURCHASE WARRANT**
  No. 2005-A-002 Issue
        Date: July 29, 2005
  VALCENT
        PRODUCTS INC., a corporation organized under the laws of the province of
        Alberta, Canada (the “Company”), hereby certifies that, for value received,
        PLATINUM PARTNERS GLOBAL MACRO FUND, LP, 152 West 57 th Street,
        New York, New York 10019, Fax: (212) 581-0002 ,
        or its
        assigns (the “Holder”), is entitled, subject to the terms set forth below, to
        purchase from the Company at any time after the Issue Date until 5:00 p.m.,
        E.S.T on the third (3 rd )
        anniversary of the Issue Date (the “Expiration Date”), up to 333,333 fully paid
        and nonassessable shares of Common Stock at a per share purchase price of
        $0.50.
        The aforedescribed purchase price per share, as adjusted from time to time
        as
        herein provided, is referred to herein as the "Purchase Price." The number
        and
        character of such shares of Common Stock and the Purchase Price are subject
        to
        adjustment as provided herein. The Company may reduce the Purchase Price
        without
        the consent of the Holder. Capitalized terms used and not otherwise defined
        herein shall have the meanings set forth in that certain Subscription Agreement
        (the “ **Subscription
        Agreement** ”),
        dated
        July 29, 2005, entered into by the Company and Holders of the Class A
        Warrants.
 
 As
        used
        herein the following terms, unless the context otherwise requires, have the
        following respective meanings:
  (a) The
        term
“Company” shall include Valcent Products Inc. and any corporation which shall
        succeed or assume the obligations of Valcent Products Inc. hereunder.
  (b) The
        term
“Common Stock” includes (a) the Company's Common Stock, no par value per
        share, as authorized on the date of the Subscription Agreement, and (b) any
        other securities into which or for which any of the securities described
        in
        (a) may be converted or exchanged pursuant to a plan of recapitalization,
        reorganization, merger, sale of assets or otherwise.
  (c) The
        term
“Other Securities” refers to any stock (other than Common Stock) and other
        securities of the Company or any other person (corporate or otherwise) which
        the
        holder of the Warrant at any time shall be entitled to receive, or shall
        have
        received, on the exercise of the Warrant, in lieu of or in addition to Common
        Stock, or which at any time shall be issuable or shall have been issued in
        exchange for or in replacement of Common Stock or Other Securities pursuant
        to
        Section 5 or otherwise.
  (d) The
        term
“Warrant Shares” shall mean the Common Stock issuable upon exercise of this
        Warrant.
   
  **THIS
        WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
        AND
        THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
        OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED** .
 
 Right
                  to Purchase 13,333 shares of Common Stock of Valcent Products Inc.
                  (subject to adjustment as provided
                  herein)
 
 **CLASS
        A COMMON STOCK PURCHASE WARRANT**
  No. 2005-A-003 Issue
        Date: July 29, 2005
  VALCENT
        PRODUCTS INC., a corporation organized under the laws of the province of
        Alberta, Canada (the “Company”), hereby certifies that, for value received,
        DAVID A. ROSE, 1701 Milford Street, Houston, TX 77098, Fax: (713)
        238-8008 ,
        or its
        assigns (the “Holder”), is entitled, subject to the terms set forth below, to
        purchase from the Company at any time after the Issue Date until 5:00 p.m.,
        E.S.T on the third (3 rd )
        anniversary of the Issue Date (the “Expiration Date”), up to 13,333 fully paid
        and nonassessable shares of Common Stock at a per share purchase price of
        $0.50.
        The aforedescribed purchase price per share, as adjusted from time to time
        as
        herein provided, is referred to herein as the "Purchase Price." The number
        and
        character of such shares of Common Stock and the Purchase Price are subject
        to
        adjustment as provided herein. The Company may reduce the Purchase Price
        without
        the consent of the Holder. Capitalized terms used and not otherwise defined
        herein shall have the meanings set forth in that certain Subscription Agreement
        (the “ **Subscription
        Agreement** ”),
        dated
        July 29, 2005, entered into by the Company and Holders of the Class A
        Warrants.
 
 As
        used
        herein the following terms, unless the context otherwise requires, have the
        following respective meanings:
  (a) The
        term
“Company” shall include Valcent Products Inc. and any corporation which shall
        succeed or assume the obligations of Valcent Products Inc. hereunder.
  (b) The
        term
“Common Stock” includes (a) the Company's Common Stock, no par value per
        share, as authorized on the date of the Subscription Agreement, and (b) any
        other securities into which or for which any of the securities described
        in
        (a) may be converted or exchanged pursuant to a plan of recapitalization,
        reorganization, merger, sale of assets or otherwise.
  (c) The
        term
“Other Securities” refers to any stock (other than Common Stock) and other
        securities of the Company or any other person (corporate or otherwise) which
        the
        holder of the Warrant at any time shall be entitled to receive, or shall
        have
        received, on the exercise of the Warrant, in lieu of or in addition to Common
        Stock, or which at any time shall be issuable or shall have been issued in
        exchange for or in replacement of Common Stock or Other Securities pursuant
        to
        Section 5 or otherwise.
  (d) The
        term
“Warrant Shares” shall mean the Common Stock issuable upon exercise of this
        Warrant.
   
  **THIS
        WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
        AND
        THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
        OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED** .
 
 Right
                  to Purchase 166,666 shares of Common Stock of Valcent Products
                  Inc.
                  (subject to adjustment as provided
                  herein)
 
 **CLASS
        A COMMON STOCK PURCHASE WARRANT**
  No. 2005-A-004 Issue
        Date: July 29, 2005
  VALCENT
        PRODUCTS INC., a corporation organized under the laws of the province of
        Alberta, Canada (the “Company”), hereby certifies that, for value received,
        MONARCH CAPITAL FUND LTD., c/o Beacon Capital Management Limited, Beacon
        Fund
        Advisors Limited, Harbour House, Waterfront Drive, P.O. Box 972, Road Town,
        Tortola, British Virgin Island, Fax: (284) 494-4771 ,
        or its
        assigns (the “Holder”), is entitled, subject to the terms set forth below, to
        purchase from the Company at any time after the Issue Date until 5:00 p.m.,
        E.S.T on the third (3 rd )
        anniversary of the Issue Date (the “Expiration Date”), up to 166,666 fully paid
        and nonassessable shares of Common Stock at a per share purchase price of
        $0.50.
        The aforedescribed purchase price per share, as adjusted from time to time
        as
        herein provided, is referred to herein as the "Purchase Price." The number
        and
        character of such shares of Common Stock and the Purchase Price are subject
        to
        adjustment as provided herein. The Company may reduce the Purchase Price
        without
        the consent of the Holder. Capitalized terms used and not otherwise defined
        herein shall have the meanings set forth in that certain Subscription Agreement
        (the “ **Subscription
        Agreement** ”),
        dated
        July 29, 2005, entered into by the Company and Holders of the Class A
        Warrants.
 
 As
        used
        herein the following terms, unless the context otherwise requires, have the
        following respective meanings:
  (a) The
        term
“Company” shall include Valcent Products Inc. and any corporation which shall
        succeed or assume the obligations of Valcent Products Inc. hereunder.
  (b) The
        term
“Common Stock” includes (a) the Company's Common Stock, no par value per
        share, as authorized on the date of the Subscription Agreement, and (b) any
        other securities into which or for which any of the securities described
        in
        (a) may be converted or exchanged pursuant to a plan of recapitalization,
        reorganization, merger, sale of assets or otherwise.
  (c) The
        term
“Other Securities” refers to any stock (other than Common Stock) and other
        securities of the Company or any other person (corporate or otherwise) which
        the
        holder of the Warrant at any time shall be entitled to receive, or shall
        have
        received, on the exercise of the Warrant, in lieu of or in addition to Common
        Stock, or which at any time shall be issuable or shall have been issued in
        exchange for or in replacement of Common Stock or Other Securities pursuant
        to
        Section 5 or otherwise.
  (d) The
        term
“Warrant Shares” shall mean the Common Stock issuable upon exercise of this
        Warrant.
   
  **THIS
        WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
        AND
        THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
        OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED** .
 
 Right
                  to Purchase 133,333 shares of Common Stock of Valcent Products
                  Inc.
                  (subject to adjustment as provided
                  herein)
 
 **CLASS
        A COMMON STOCK PURCHASE WARRANT**
  No. 2005-A-005 Issue
        Date: July 29, 2005
  VALCENT
        PRODUCTS INC., a corporation organized under the laws of the province of
        Alberta, Canada (the “Company”), hereby certifies that, for value received, CMS
        CAPITAL, 9612 Ventura Blvd., Suite 108, Panorama City, CA 91402, Fax: (818)
        907-3372 ,
        or its
        assigns (the “Holder”), is entitled, subject to the terms set forth below, to
        purchase from the Company at any time after the Issue Date until 5:00 p.m.,
        E.S.T on the third (3 rd )
        anniversary of the Issue Date (the “Expiration Date”), up to 133,333 fully paid
        and nonassessable shares of Common Stock at a per share purchase price of
        $0.50.
        The aforedescribed purchase price per share, as adjusted from time to time
        as
        herein provided, is referred to herein as the "Purchase Price." The number
        and
        character of such shares of Common Stock and the Purchase Price are subject
        to
        adjustment as provided herein. The Company may reduce the Purchase Price
        without
        the consent of the Holder. Capitalized terms used and not otherwise defined
        herein shall have the meanings set forth in that certain Subscription Agreement
        (the “ **Subscription
        Agreement** ”),
        dated
        July 29, 2005, entered into by the Company and Holders of the Class A
        Warrants.
 
 As
        used
        herein the following terms, unless the context otherwise requires, have the
        following respective meanings:
  (a) The
        term
“Company” shall include Valcent Products Inc. and any corporation which shall
        succeed or assume the obligations of Valcent Products Inc. hereunder.
  (b) The
        term
“Common Stock” includes (a) the Company's Common Stock, no par value per
        share, as authorized on the date of the Subscription Agreement, and (b) any
        other securities into which or for which any of the securities described
        in
        (a) may be converted or exchanged pursuant to a plan of recapitalization,
        reorganization, merger, sale of assets or otherwise.
  (c) The
        term
“Other Securities” refers to any stock (other than Common Stock) and other
        securities of the Company or any other person (corporate or otherwise) which
        the
        holder of the Warrant at any time shall be entitled to receive, or shall
        have
        received, on the exercise of the Warrant, in lieu of or in addition to Common
        Stock, or which at any time shall be issuable or shall have been issued in
        exchange for or in replacement of Common Stock or Other Securities pursuant
        to
        Section 5 or otherwise.
  (d) The
        term
“Warrant Shares” shall mean the Common Stock issuable upon exercise of this
        Warrant.
   
  1. Exercise
        of Warrant .
  1.1. Number
        of Shares Issuable upon Exercise .
        From
        and after the Issue Date through and including the Expiration Date, the Holder
        hereof shall be entitled to receive, upon exercise of this Warrant in whole
        in
        accordance with the terms of subsection 1.2 or upon exercise of this
        Warrant in part in accordance with subsection 1.3, shares of Common
        Stock
        of the Company, subject to adjustment pursuant to Section 4.
  1.2. Full
        Exercise .
        This
        Warrant may be exercised in full by the Holder hereof by delivery of an original
        or facsimile copy of the form of subscription attached as Exhibit A
        hereto
        (the “Subscription Form") duly executed by such Holder and surrender of the
        original Warrant within four (4) days of exercise, to the Company at its
        principal office or at the office of its Warrant Agent (as provided
        hereinafter), accompanied by payment, in cash, wire transfer or by certified
        or
        official bank check payable to the order of the Company, in the amount obtained
        by multiplying the number of shares of Common Stock for which this Warrant
        is
        then exercisable by the Purchase Price then in effect.
  1.3. Partial
        Exercise .
        This
        Warrant may be exercised in part (but not for a fractional share) by surrender
        of this Warrant in the manner and at the place provided in subsection 1.2
        except that the amount payable by the Holder on such partial exercise shall
        be
        the amount obtained by multiplying (a) the number of whole shares
        of Common
        Stock designated by the Holder in the Subscription Form by (b) the
        Purchase
        Price then in effect. On any such partial exercise, the Company, at its expense,
        will forthwith issue and deliver to or upon the order of the Holder hereof
        a new
        Warrant of like tenor, in the name of the Holder hereof or as such Holder
        (upon
        payment by such Holder of any applicable transfer taxes) may request, the
        whole
        number of shares of Common Stock for which such Warrant may still be
        exercised.
  1.4. Fair
        Market Value .
        Fair
        Market Value of a share of Common Stock as of a particular date (the
        "Determination Date") shall mean:
  (a) If
        the
        Company's Common Stock is traded on an exchange or is quoted on the National
        Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ"), National
        Market System, the NASDAQ SmallCap Market or the American Stock Exchange,
        LLC,
        then the closing or last sale price, respectively, reported for the last
        business day immediately preceding the Determination Date;
  (b) If
        the
        Company's Common Stock is not traded on an exchange or on the NASDAQ National
        Market System, the NASDAQ SmallCap Market or the American Stock Exchange,
        Inc.,
        but is traded in the over-the-counter market, then the average of the closing
        bid and ask prices reported for the last business day immediately preceding
        the
        Determination Date;
  (c) Except
        as
        provided in clause (d) below, if the Company's Common Stock is not
        publicly
        traded, then as the Holder and the Company agree, or in the absence of such
        an
        agreement, by arbitration in accordance with the rules then standing of the
        American Arbitration Association, before a single arbitrator to be chosen
        from a
        panel of persons qualified by education and training to pass on the matter
        to be
        decided; or
  (d) If
        the
        Determination Date is the date of a liquidation, dissolution or winding up,
        or
        any event deemed to be a liquidation, dissolution or winding up pursuant
        to the
        Company's charter, then all amounts to be payable per share to holders of
        the
        Common Stock pursuant to the charter in the event of such liquidation,
        dissolution or winding up, plus all other amounts to be payable per share
        in
        respect of the Common Stock in liquidation under the charter, assuming for
        the
        purposes of this clause (d) that all of the shares of Common Stock
        then
        issuable upon exercise of all of the Warrants are outstanding at the
        Determination Date.
  1.5. Company
        Acknowledgment .
        The
        Company will, at the time of the exercise of the Warrant, upon the request
        of
        the Holder hereof acknowledge in writing its continuing obligation to afford
        to
        such Holder any rights to which such Holder shall continue to be entitled
        after
        such exercise in accordance with the provisions of this Warrant. If the Holder
        shall fail to make any such request, such failure shall not affect the
        continuing obligation of the Company to afford to such Holder any such
        rights.
  1.6. Trustee
        for Warrant Holders .
        In the
        event that a bank or trust company shall have been appointed as trustee for
        the
        Holder of the Warrants pursuant to Subsection 3.2, such bank or trust
        company shall have all the powers and duties of a warrant agent (as hereinafter
        described) and shall accept, in its own name for the account of the Company
        or
        such successor person as may be entitled thereto, all amounts otherwise payable
        to the Company or such successor, as the case may be, on exercise of this
        Warrant pursuant to this Section 1.
  
  1.7 Delivery
        of Stock Certificates, etc. on Exercise .
        The
        Company agrees that the shares of Common Stock purchased upon exercise of
        this
        Warrant shall be deemed to be issued to the Holder hereof as the record owner
        of
        such shares as of the close of business on the date on which this Warrant
        shall
        have been surrendered and payment made for such shares as aforesaid. As soon
        as
        practicable after the exercise of this Warrant in full or in part, and in
        any
        event within four (4) business days thereafter, the Company at its expense
        (including the payment by it of any applicable issue taxes) will cause to
        be
        issued in the name of and delivered to the Holder hereof, or as such Holder
        (upon payment by such Holder of any applicable transfer taxes) may direct
        in
        compliance with applicable securities laws, a certificate or certificates
        for
        the number of duly and validly issued, fully paid and nonassessable shares
        of
        Common Stock (or Other Securities) to which such Holder shall be entitled
        on
        such exercise, plus, in lieu of any fractional share to which such Holder
        would
        otherwise be entitled, cash equal to such fraction multiplied by the then
        Fair
        Market Value of one full share of Common Stock, together with any other stock
        or
        other securities and property (including cash, where applicable) to which
        such
        Holder is entitled upon such exercise pursuant to Section 1 or otherwise.
  2. Cashless
        Exercise .
  (a) If
        a
        Registration Statement (as defined in the Subscription Agreement) (“Registration
        Statement”) is effective and the Holder may sell its shares of Common Stock upon
        exercise hereof pursuant to the Registration Statement, this Warrant may
        be
        exercisable in whole or in part for cash only as set forth in Section 1 above.
        If no such Registration Statement is available during the time that such
        Registration Statement is required to be effective pursuant to the terms
        of the
        Subscription Agreement, then payment upon exercise may be made at the option
        of
        the Holder either in (i) cash, wire transfer or by certified or official
        bank check payable to the order of the Company equal to the applicable aggregate
        Purchase Price, (ii) by delivery of Common Stock issuable upon exercise of
        the
        Warrants in accordance with Section (b) below or (iii) by
        a
        combination of any of the foregoing methods, for the number of Common Stock
        specified in such form (as such exercise number shall be adjusted to reflect
        any
        adjustment in the total number of shares of Common Stock issuable to the
        holder
        per the terms of this Warrant) and the holder shall thereupon be entitled
        to
        receive the number of duly authorized, validly issued, fully-paid and
        non-assessable shares of Common Stock (or Other Securities) determined as
        provided herein.
  (b) If
        the
        Fair Market Value of one share of Common Stock is greater than the Purchase
        Price (at the date of calculation as set forth below), in lieu of exercising
        this Warrant for cash, the holder may elect to receive shares equal to the
        value
        (as determined below) of this Warrant (or the portion thereof being cancelled)
        by surrender of this Warrant at the principal office of the Company together
        with the properly endorsed Subscription Form in which event the Company shall
        issue to the holder a number of shares of Common Stock computed using the
        following formula:
  X= Y
        (A-B)
 A
 
 Where  X
        = the
        number of shares of Common Stock to be issued to the holder
 
 Y=
              the
                  number of shares of Common Stock purchasable under the Warrant
                  or, if only
                  a portion of the Warrant is being exercised, the portion of the
                  Warrant
                  being exercised (at the date of such
                  calculation)
  A=
              the
                  Fair Market Value of one share of the Company’s Common Stock (at the date
                  of such calculation)
  B=
              Purchase
                  Price (as adjusted to the date of such
                  calculation)
  (c) The
        Holder may employ the cashless exercise feature described in Section (b)
        above
        only during the pendency of a Non-Registration Event as described in Section
        11
        of the Subscription Agreement.
  
  For
        purposes of Rule 144 promulgated under the 1933 Act, it is intended, understood
        and acknowledged that the Warrant Shares issued in a cashless exercise
        transaction shall be deemed to have been acquired by the Holder, and the
        holding
        period for the Warrant Shares shall be deemed to have commenced, on the date
        this Warrant was originally issued pursuant to the Subscription
        Agreement.
  3. Adjustment
        for Reorganization, Consolidation, Merger, etc.
  3.1. Reorganization,
        Consolidation, Merger, etc .
        In case
        at any time or from time to time, the Company shall (a) effect a
        reorganization, (b) consolidate with or merge into any other person
        or
        (c) transfer all or substantially all of its properties or assets
        to any
        other person under any plan or arrangement contemplating the dissolution
        of the
        Company, then, in each such case, as a condition to the consummation of such
        a
        transaction, proper and adequate provision shall be made by the Company whereby
        the Holder of this Warrant, on the exercise hereof as provided in
        Section 1, at any time after the consummation of such reorganization,
        consolidation or merger or the effective date of such dissolution, as the
        case
        may be, shall receive, in lieu of the Common Stock (or Other Securities)
        issuable on such exercise prior to such consummation or such effective date,
        the
        stock and other securities and property (including cash) to which such Holder
        would have been entitled upon such consummation or in connection with such
        dissolution, as the case may be, if such Holder had so exercised this Warrant,
        immediately prior thereto, all subject to further adjustment thereafter as
        provided in Section 4.
  3.2. Dissolution .
        In the
        event of any dissolution of the Company following the transfer of all or
        substantially all of its properties or assets, the Company, prior to such
        dissolution, shall at its expense deliver or cause to be delivered the stock
        and
        other securities and property (including cash, where applicable) receivable
        by
        the Holder of the Warrants after the effective date of such dissolution pursuant
        to this Section 3 to a bank or trust company (a "Trustee") having
        its
        principal office in New York, NY, as trustee for the Holder of the
        Warrants.
  3.3. Continuation
        of Terms .
        Upon
        any reorganization, consolidation, merger or transfer (and any dissolution
        following any transfer) referred to in this Section 3, this Warrant
        shall
        continue in full force and effect and the terms hereof shall be applicable
        to
        the Other Securities and property receivable on the exercise of this Warrant
        after the consummation of such reorganization, consolidation or merger or
        the
        effective date of dissolution following any such transfer, as the case may
        be,
        and shall be binding upon the issuer of any Other Securities, including,
        in the
        case of any such transfer, the person acquiring all or substantially all
        of the
        properties or assets of the Company, whether or not such person shall have
        expressly assumed the terms of this Warrant as provided in Section 4.
        In
        the event this Warrant does not continue in full force and effect after the
        consummation of the transaction described in this Section 3, then
        only in
        such event will the Company's securities and property (including cash, where
        applicable) receivable by the Holder of the Warrants be delivered to the
        Trustee
        as contemplated by Section 3.2.
  3.4 Share
        Issuance .
        Until
        the Expiration Date, if the Company shall issue any Common Stock except for
        the
        Excepted Issuances (as defined in the Subscription Agreement), prior to the
        complete exercise of this Warrant for a consideration less than the Purchase
        Price that would be in effect at the time of such issue, then, and thereafter
        successively upon each such issue, the Purchase Price shall be reduced to
        such
        other lower issue price. For purposes of this adjustment, the issuance of
        any
        security or debt instrument of the Company carrying the right to convert
        such
        security or debt instrument into Common Stock or of any warrant, right or
        option
        to purchase Common Stock shall result in an adjustment to the Purchase Price
        upon the issuance of the above-described security, debt instrument, warrant,
        right, or option and again at any time upon any subsequent issuances of shares
        of Common Stock upon exercise of such conversion or purchase rights if such
        issuance is at a price lower than the Purchase Price in effect upon such
        issuance. The reduction of the Purchase Price described in this Section 3.4
        is
        in addition to the other rights of the Holder described in the Subscription
        Agreement.
  4. Extraordinary
        Events Regarding Common Stock .
        In the
        event that the Company shall (a) issue additional shares of the Common
        Stock as a dividend or other distribution on outstanding Common Stock,
        (b) subdivide its outstanding shares of Common Stock, or (c) combine
        its outstanding shares of the Common Stock into a smaller number of shares
        of
        the Common Stock, then, in each such event, the Purchase Price shall,
        simultaneously with the happening of such event, be adjusted by multiplying
        the
        then Purchase Price by a fraction, the numerator of which shall be the number
        of
        shares of Common Stock outstanding immediately prior to such event and the
        denominator of which shall be the number of shares of Common Stock outstanding
        immediately after such event, and the product so obtained shall thereafter
        be
        the Purchase Price then in effect. The Purchase Price, as so adjusted, shall
        be
        readjusted in the same manner upon the happening of any successive event
        or
        events described herein in this Section 4. The number of shares of
        Common
        Stock that the Holder of this Warrant shall thereafter, on the exercise hereof
        as provided in Section 1, be entitled to receive shall be adjusted
        to a
        number determined by multiplying the number of shares of Common Stock that
        would
        otherwise (but for the provisions of this Section 4) be issuable on
        such
        exercise by a fraction of which (a) the numerator is the Purchase
        Price
        that would otherwise (but for the provisions of this Section 4) be
        in
        effect, and (b) the denominator is the Purchase Price in effect on
        the date
        of such exercise.
  
  5. Certificate
        as to Adjustments .
        In each
        case of any adjustment or readjustment in the shares of Common Stock (or
        Other
        Securities) issuable on the exercise of the Warrants, the Company at its
        expense
        will promptly cause its Chief Financial Officer or other appropriate designee
        to
        compute such adjustment or readjustment in accordance with the terms of the
        Warrant and prepare a certificate setting forth such adjustment or readjustment
        and showing in detail the facts upon which such adjustment or readjustment
        is
        based, including a statement of (a) the consideration received or
        receivable by the Company for any additional shares of Common Stock (or Other
        Securities) issued or sold or deemed to have been issued or sold, (b) the
        number of shares of Common Stock (or Other Securities) outstanding or deemed
        to
        be outstanding, and (c) the Purchase Price and the number of shares
        of
        Common Stock to be received upon exercise of this Warrant, in effect immediately
        prior to such adjustment or readjustment and as adjusted or readjusted as
        provided in this Warrant. The Company will forthwith mail a copy of each
        such
        certificate to the Holder of the Warrant and any Warrant Agent of the Company
        (appointed pursuant to Section 11 hereof).
  6. Reservation
        of Stock, etc. Issuable on Exercise of Warrant; Financial
        Statements .
        The
        Company will at all times reserve and keep available, solely for issuance
        and
        delivery on the exercise of the Warrants, all shares of Common Stock (or
        Other
        Securities) from time to time issuable on the exercise of the Warrant. This
        Warrant entitles the Holder hereof to receive copies of all financial and
        other
        information distributed or required to be distributed to the holders of the
        Company's Common Stock.
  7. Assignment;
        Exchange of Warrant .
        Subject
        to compliance with applicable securities laws, this Warrant, and the rights
        evidenced hereby, may be transferred by any registered holder hereof (a
        "Transferor"). On the surrender for exchange of this Warrant, with the
        Transferor's endorsement in the form of Exhibit B attached hereto
        (the
“Transferor Endorsement Form") and together with an opinion of counsel
        reasonably satisfactory to the Company that the transfer of this Warrant
        will be
        in compliance with applicable securities laws, the Company at its expense,
        twice, only, but with payment by the Transferor of any applicable transfer
        taxes, will issue and deliver to or on the order of the Transferor thereof
        a new
        Warrant or Warrants of like tenor, in the name of the Transferor and/or the
        transferee(s) specified in such Transferor Endorsement Form (each a
        "Transferee"), calling in the aggregate on the face or faces thereof for
        the
        number of shares of Common Stock called for on the face or faces of the Warrant
        so surrendered by the Transferor. No such transfers shall result in a public
        distribution of the Warrant.
  8. Replacement
        of Warrant .
        On
        receipt of evidence reasonably satisfactory to the Company of the loss, theft,
        destruction or mutilation of this Warrant and, in the case of any such loss,
        theft or destruction of this Warrant, on delivery of an indemnity agreement
        or
        security reasonably satisfactory in form and amount to the Company or, in
        the
        case of any such mutilation, on surrender and cancellation of this Warrant,
        the
        Company at its expense, twice only, will execute and deliver, in lieu thereof,
        a
        new Warrant of like tenor.
  9. Registration
        Rights .
        The
        Holder of this Warrant has been granted certain registration rights by the
        Company. These registration rights are set forth in the Subscription Agreement.
        The terms of the Subscription Agreement are incorporated herein by this
        reference.
  10. Maximum
        Exercise .
        The
        Holder shall not be entitled to exercise this Warrant on an exercise date,
        in
        connection with that number of shares of Common Stock which would be in excess
        of the sum of (i) the number of shares of Common Stock beneficially
        owned
        by the Holder and its affiliates on an exercise date, and (ii) the
        number
        of shares of Common Stock issuable upon the exercise of this Warrant with
        respect to which the determination of this limitation is being made on an
        exercise date, which would result in beneficial ownership by the Holder and
        its
        affiliates of more than 4.99% of the outstanding shares of Common Stock on
        such
        date. For the purposes of the immediately preceding sentence, beneficial
        ownership shall be determined in accordance with Section 13(d) of
        the
        Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
        Subject to the foregoing, the Holder shall not be limited to aggregate exercises
        which would result in the issuance of more than 4.99%. The
        restriction described in this paragraph may be waived, in whole or
        in part,
        upon sixty-one (61) days prior notice from the Holder to the Company. The
        Holder
        may allocate which of the equity of the Company deemed beneficially owned
        by the
        Subscriber shall be included in the 4.99% amount described above and which
        shall
        be allocated to the excess above 4.99%.
  
  11. Warrant
        Agent .
        The
        Company may, by written notice to the Holder of the Warrant, appoint an agent
        (a
“Warrant Agent”) for the purpose of issuing Common Stock (or Other Securities)
        on the exercise of this Warrant pursuant to Section 1, exchanging
        this
        Warrant pursuant to Section 7, and replacing this Warrant pursuant
        to
        Section 8, or any of the foregoing, and thereafter any such issuance,
        exchange or replacement, as the case may be, shall be made at such office
        by
        such Warrant Agent.
  12. Transfer
        on the Company's Books .
        Until
        this Warrant is transferred on the books of the Company, the Company may
        treat
        the registered holder hereof as the absolute owner hereof for all purposes,
        notwithstanding any notice to the contrary.
  13. Warrant
        Exercise Compensation .
        The
        Company has agreed to pay to Viscount Investments, Ltd. (“Finder”) Warrant
        Exercise Compensation as described in the Subscription Agreement equal to
        ten
        percent (10%) of the cash proceeds payable to the Company upon exercise of
        the
        Warrant. The Warrant Exercise Compensation will be paid by the Company to
        the
        Finder not later than the fifth (5 th )
        business day after the Company receives cash proceeds from the exercise of
        this
        Warrant. The Holder of the Warrant has no obligation or responsibility to
        pay
        Warrant Exercise Compensation.
 
 14. Notices .
        All
        notices, demands, requests, consents, approvals, and other communications
        required or permitted hereunder shall be in writing and, unless otherwise
        specified herein, shall be (i) personally served, (ii) deposited in the mail,
        registered or certified, return receipt requested, postage prepaid, (iii)
        delivered by reputable air courier service with charges prepaid, or (iv)
        transmitted by hand delivery, telegram, or facsimile, addressed as set forth
        below or to such other address as such party shall have specified most recently
        by written notice. Any notice or other communication required or permitted
        to be
        given hereunder shall be deemed effective (a) upon hand delivery or delivery
        by
        facsimile, with accurate confirmation generated by the transmitting facsimile
        machine, at the address or number designated below (if delivered on a business
        day during normal business hours where such notice is to be received), or
        the
        first business day following such delivery (if delivered other than on a
        business day during normal business hours where such notice is to be received)
        or (b) on the second business day following the date of mailing by express
        courier service, fully prepaid, addressed to such address, or upon actual
        receipt of such mailing, whichever shall first occur. The addresses for such
        communications shall be: (i) if to the Company to: Valcent
        Products Inc., 420-475 Howe Street, Vancouver, British Columbia, Canada V6C
        2B3,
        Attn: Douglas E. Ford, Director, telecopier number: (604) 606-7980, with
        an
        additional copy only by telecopier only to: George Orr, Suite 420-475 Howe
        Street, Vancouver, British Columbia, Canada V6C 2B3, telecopier number: (604)
        606-7980 ,
        (ii) if
        to the Holder, to the address and telecopier number listed on the first
        paragraph of this Warrant, with an additional copy by telecopier only to:
        Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York
        10176, telecopier number: (212) 697-3575, and (iii) if to the Finder, to
        Viscount Investments, Ltd., 832 The White House, Belvedere Road, London,
        SE1
        8YT, Fax: 011-44-207-207-0975.
  15. Currency .
        All
        references to currency herein shall mean the currency of the United States
        of
        America.
  16. Miscellaneous .
        This
        Warrant and any term hereof may be changed, waived, discharged or terminated
        only by an instrument in writing signed by the party against which enforcement
        of such change, waiver, discharge or termination is sought. This Warrant
        shall
        be construed and enforced in accordance with and governed by the laws of
        New
        York. Any dispute relating to this Warrant shall be adjudicated in New York
        County in the State of New York. The headings in this Warrant are for purposes
        of reference only, and shall not limit or otherwise affect any of the terms
        hereof. The invalidity or unenforceability of any provision hereof shall
        in no
        way affect the validity or enforceability of any other provision.
   
  IN
        WITNESS WHEREOF, the Company has executed this Warrant as of the date first
        written above.
  **VALCENT
                PRODUCTS, INC.**By:
              /s/Name:
                Title:Witness:______________________________
 
  
  **Exhibit A**
 
 FORM
        OF
        SUBSCRIPTION
 (to
        be
        signed only on exercise of Warrant)
 TO:
        VALCENT PRODUCTS INC.
 The
        undersigned, pursuant to the provisions set forth in the attached Warrant
        (No.____), hereby irrevocably elects to purchase (check applicable
        box):
 
 ___  ________
        shares of the Common Stock covered by such Warrant; or
  ___  the
        maximum number of shares of Common Stock covered by such Warrant pursuant
        to the
        cashless exercise procedure set forth in Section 2.
 
 The
        undersigned herewith makes payment of the full purchase price for such shares
        at
        the price per share provided for in such Warrant, which is $___________.
        Such
        payment takes the form of (check applicable box or boxes):
 
 ___  $__________
        in lawful money of the United States; and/or
  ___  the
        cancellation of such portion of the attached Warrant as is exercisable for
        a
        total of _______ shares of Common Stock (using a Fair Market Value of $_______
        per share for purposes of this calculation); and/or
 
 ___  the
        cancellation of such number of shares of Common Stock as is necessary, in
        accordance with the formula set forth in Section 2, to exercise this
        Warrant with respect to the maximum number of shares of Common Stock purchasable
        pursuant to the cashless exercise procedure set forth in
        Section 2.
 
 The
        undersigned requests that the certificates for such shares be issued in the
        name
        of, and delivered to _____________________________________________________
        whose
        address is
        ____________________________________________________________________________________________________________________________
 
 Number
        of
        Shares of Common Stock Beneficially Owned on the date of exercise: Less
        than
        five percent (5%) of the outstanding Common Stock of Valcent Products
        Inc..
 
 The
        undersigned represents and warrants that all offers and sales by the undersigned
        of the securities issuable upon exercise of the within Warrant shall be made
        pursuant to registration of the Common Stock under the Securities Act of
        1933,
        as amended (the "Securities Act"), or pursuant to an exemption from registration
        under the Securities Act.
 
 Dated:___________________(Signature
                  must conform to name of holder as specified on the face of the
                  Warrant)(Address)
 
  
  **Exhibit B**
  FORM
        OF
        TRANSFEROR ENDORSEMENT
 (To
        be
        signed only on transfer of Warrant)
  For
        value
        received, the undersigned hereby sells, assigns, and transfers unto the
        person(s) named below under the heading "Transferees" the right represented
        by
        the within Warrant to purchase the percentage and number of shares of Common
        Stock of VALCENT PRODUCTS INC. to which the within Warrant relates specified
        under the headings "Percentage Transferred" and "Number Transferred,"
        respectively, opposite the name(s) of such person(s) and appoints each such
        person Attorney to transfer its respective right on the books of VALCENT
        PRODUCTS INC. with full power of substitution in the premises.
  Transferees
              
              Percentage
                  Transferred
              
              Number
                  Transferred
 
 
 Dated:
                ______________, ___________(Signature
                must conform to name of holder as specified on the face of the
                warrant)Signed
                in the presence of:(Name)
              
              (address)ACCEPTED
                AND AGREED:[TRANSFEREE](address)(Name)
 
  
  **THIS
        WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
        AND
        THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
        OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED** .
 
 Right
                  to Purchase 266,666 shares of Common Stock of Valcent Products
                  Inc.
                  (subject to adjustment as provided
                  herein)
 
 **CLASS
        B COMMON STOCK PURCHASE WARRANT**
  No. 2005-B-001 Issue
        Date: July 29, 2005
  VALCENT
        PRODUCTS INC., a corporation organized under the laws of the province of
        Alberta, Canada (the “Company”), hereby certifies that, for value received,
        ALPHA CAPITAL AKTIENGESELLSCHAFT, Pradafant 7, 9490 Furstentums, Vaduz,
        Lichtenstein **,** Fax:
        011-42-32323196 ,
        or its
        assigns (the “Holder”), is entitled, subject to the terms set forth below, to
        purchase from the Company at any time after the Issue Date until 5:00 p.m.,
        E.S.T on the third (3 rd )
        anniversary of the Issue Date (the “Expiration Date”), up to 266,666 fully paid
        and nonassessable shares of Common Stock at a per share purchase price of
        $1.00.
        The aforedescribed purchase price per share, as adjusted from time to time
        as
        herein provided, is referred to herein as the "Purchase Price." The number
        and
        character of such shares of Common Stock and the Purchase Price are subject
        to
        adjustment as provided herein. The Company may reduce the Purchase Price
        without
        the consent of the Holder. Capitalized terms used and not otherwise defined
        herein shall have the meanings set forth in that certain Subscription Agreement
        (the “ **Subscription
        Agreement** ”),
        dated
        July 29, 2005, entered into by the Company and Holders of the Class B
        Warrants.
 
 As
        used
        herein the following terms, unless the context otherwise requires, have the
        following respective meanings:
  (a) The
        term
“Company” shall include Valcent Products Inc. and any corporation which shall
        succeed or assume the obligations of Valcent Products Inc. hereunder.
  (b) The
        term
“Common Stock” includes (a) the Company's Common Stock, no par value per
        share, as authorized on the date of the Subscription Agreement, and (b) any
        other securities into which or for which any of the securities described
        in
        (a) may be converted or exchanged pursuant to a plan of recapitalization,
        reorganization, merger, sale of assets or otherwise.
  (c) The
        term
“Other Securities” refers to any stock (other than Common Stock) and other
        securities of the Company or any other person (corporate or otherwise) which
        the
        holder of the Warrant at any time shall be entitled to receive, or shall
        have
        received, on the exercise of the Warrant, in lieu of or in addition to Common
        Stock, or which at any time shall be issuable or shall have been issued in
        exchange for or in replacement of Common Stock or Other Securities pursuant
        to
        Section 5 or otherwise.
  (d) The
        term
“Warrant Shares” shall mean the Common Stock issuable upon exercise of this
        Warrant.
   
  **THIS
        WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
        AND
        THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
        OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED** .
 
 Right
                  to Purchase 333,333 shares of Common Stock of Valcent Products
                  Inc.
                  (subject to adjustment as provided
                  herein)
 
 **CLASS
        B COMMON STOCK PURCHASE WARRANT**
  No. 2005-B-002 Issue
        Date: July 29, 2005
  VALCENT
        PRODUCTS INC., a corporation organized under the laws of the province of
        Alberta, Canada (the “Company”), hereby certifies that, for value received,
        PLATINUM PARTNERS GLOBAL MACRO FUND, LP, 152 West 57 th Street,
        New York, New York 10019, Fax: (212) 581-0002 ,
        or its
        assigns (the “Holder”), is entitled, subject to the terms set forth below, to
        purchase from the Company at any time after the Issue Date until 5:00 p.m.,
        E.S.T on the third (3 rd )
        anniversary of the Issue Date (the “Expiration Date”), up to 333,333 fully paid
        and nonassessable shares of Common Stock at a per share purchase price of
        $1.00.
        The aforedescribed purchase price per share, as adjusted from time to time
        as
        herein provided, is referred to herein as the "Purchase Price." The number
        and
        character of such shares of Common Stock and the Purchase Price are subject
        to
        adjustment as provided herein. The Company may reduce the Purchase Price
        without
        the consent of the Holder. Capitalized terms used and not otherwise defined
        herein shall have the meanings set forth in that certain Subscription Agreement
        (the “ **Subscription
        Agreement** ”),
        dated
        July 29, 2005, entered into by the Company and Holders of the Class B
        Warrants.
 
 As
        used
        herein the following terms, unless the context otherwise requires, have the
        following respective meanings:
  (a) The
        term
“Company” shall include Valcent Products Inc. and any corporation which shall
        succeed or assume the obligations of Valcent Products Inc. hereunder.
  (b) The
        term
“Common Stock” includes (a) the Company's Common Stock, no par value per
        share, as authorized on the date of the Subscription Agreement, and (b) any
        other securities into which or for which any of the securities described
        in
        (a) may be converted or exchanged pursuant to a plan of recapitalization,
        reorganization, merger, sale of assets or otherwise.
  (c) The
        term
“Other Securities” refers to any stock (other than Common Stock) and other
        securities of the Company or any other person (corporate or otherwise) which
        the
        holder of the Warrant at any time shall be entitled to receive, or shall
        have
        received, on the exercise of the Warrant, in lieu of or in addition to Common
        Stock, or which at any time shall be issuable or shall have been issued in
        exchange for or in replacement of Common Stock or Other Securities pursuant
        to
        Section 5 or otherwise.
  (d) The
        term
“Warrant Shares” shall mean the Common Stock issuable upon exercise of this
        Warrant.
   
  **THIS
        WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
        AND
        THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
        OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED** .
 
 Right
                  to Purchase 13,333 shares of Common Stock of Valcent Products Inc.
                  (subject to adjustment as provided
                  herein)
 
 **CLASS
        B COMMON STOCK PURCHASE WARRANT**
  No. 2005-B-003 Issue
        Date: July 29, 2005
  VALCENT
        PRODUCTS INC., a corporation organized under the laws of the province of
        Alberta, Canada (the “Company”), hereby certifies that, for value received,
        DAVID A. ROSE, 1701 Milford Street, Houston, TX 77098, Fax: (713)
        238-8008 ,
        or its
        assigns (the “Holder”), is entitled, subject to the terms set forth below, to
        purchase from the Company at any time after the Issue Date until 5:00 p.m.,
        E.S.T on the third (3 rd )
        anniversary of the Issue Date (the “Expiration Date”), up to 13,333 fully paid
        and nonassessable shares of Common Stock at a per share purchase price of
        $1.00.
        The aforedescribed purchase price per share, as adjusted from time to time
        as
        herein provided, is referred to herein as the "Purchase Price." The number
        and
        character of such shares of Common Stock and the Purchase Price are subject
        to
        adjustment as provided herein. The Company may reduce the Purchase Price
        without
        the consent of the Holder. Capitalized terms used and not otherwise defined
        herein shall have the meanings set forth in that certain Subscription Agreement
        (the “ **Subscription
        Agreement** ”),
        dated
        July 29, 2005, entered into by the Company and Holders of the Class B
        Warrants.
 
 As
        used
        herein the following terms, unless the context otherwise requires, have the
        following respective meanings:
  (a) The
        term
“Company” shall include Valcent Products Inc. and any corporation which shall
        succeed or assume the obligations of Valcent Products Inc. hereunder.
  (b) The
        term
“Common Stock” includes (a) the Company's Common Stock, no par value per
        share, as authorized on the date of the Subscription Agreement, and (b) any
        other securities into which or for which any of the securities described
        in
        (a) may be converted or exchanged pursuant to a plan of recapitalization,
        reorganization, merger, sale of assets or otherwise.
  (c) The
        term
“Other Securities” refers to any stock (other than Common Stock) and other
        securities of the Company or any other person (corporate or otherwise) which
        the
        holder of the Warrant at any time shall be entitled to receive, or shall
        have
        received, on the exercise of the Warrant, in lieu of or in addition to Common
        Stock, or which at any time shall be issuable or shall have been issued in
        exchange for or in replacement of Common Stock or Other Securities pursuant
        to
        Section 5 or otherwise.
  (d) The
        term
“Warrant Shares” shall mean the Common Stock issuable upon exercise of this
        Warrant.
   
  **THIS
        WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
        AND
        THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
        OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED** .
 
 Right
                  to Purchase 166,666 shares of Common Stock of Valcent Products
                  Inc.
                  (subject to adjustment as provided
                  herein)
 
 **CLASS
        B COMMON STOCK PURCHASE WARRANT**
  No. 2005-B-004 Issue
        Date: July 29, 2005
  VALCENT
        PRODUCTS INC., a corporation organized under the laws of the province of
        Alberta, Canada (the “Company”), hereby certifies that, for value received,
        MONARCH CAPITAL FUND LTD., c/o Beacon Capital Management Limited, Beacon
        Fund
        Advisors Limited, Harbour House, Waterfront Drive, P.O. Box 972, Road Town,
        Tortola, British Virgin Island, Fax: (284) 494-4771 ,
        or its
        assigns (the “Holder”), is entitled, subject to the terms set forth below, to
        purchase from the Company at any time after the Issue Date until 5:00 p.m.,
        E.S.T on the third (3 rd )
        anniversary of the Issue Date (the “Expiration Date”), up to 166,666 fully paid
        and nonassessable shares of Common Stock at a per share purchase price of
        $1.00.
        The aforedescribed purchase price per share, as adjusted from time to time
        as
        herein provided, is referred to herein as the "Purchase Price." The number
        and
        character of such shares of Common Stock and the Purchase Price are subject
        to
        adjustment as provided herein. The Company may reduce the Purchase Price
        without
        the consent of the Holder. Capitalized terms used and not otherwise defined
        herein shall have the meanings set forth in that certain Subscription Agreement
        (the “ **Subscription
        Agreement** ”),
        dated
        July 29, 2005, entered into by the Company and Holders of the Class B
        Warrants.
 
 As
        used
        herein the following terms, unless the context otherwise requires, have the
        following respective meanings:
  (a) The
        term
“Company” shall include Valcent Products Inc. and any corporation which shall
        succeed or assume the obligations of Valcent Products Inc. hereunder.
  (b) The
        term
“Common Stock” includes (a) the Company's Common Stock, no par value per
        share, as authorized on the date of the Subscription Agreement, and (b) any
        other securities into which or for which any of the securities described
        in
        (a) may be converted or exchanged pursuant to a plan of recapitalization,
        reorganization, merger, sale of assets or otherwise.
  (c) The
        term
“Other Securities” refers to any stock (other than Common Stock) and other
        securities of the Company or any other person (corporate or otherwise) which
        the
        holder of the Warrant at any time shall be entitled to receive, or shall
        have
        received, on the exercise of the Warrant, in lieu of or in addition to Common
        Stock, or which at any time shall be issuable or shall have been issued in
        exchange for or in replacement of Common Stock or Other Securities pursuant
        to
        Section 5 or otherwise.
  (d) The
        term
“Warrant Shares” shall mean the Common Stock issuable upon exercise of this
        Warrant.
   
  **THIS
        WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
        AND
        THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
        OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
        REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO VALCENT PRODUCTS INC. THAT SUCH REGISTRATION IS NOT
        REQUIRED** .
 
 Right
                  to Purchase 133,333 shares of Common Stock of Valcent Products
                  Inc.
                  (subject to adjustment as provided
                  herein)
 
 **CLASS
        B COMMON STOCK PURCHASE WARRANT**
  No. 2005-B-005 Issue
        Date: July 29, 2005
  VALCENT
        PRODUCTS INC., a corporation organized under the laws of the province of
        Alberta, Canada (the “Company”), hereby certifies that, for value received, CMS
        CAPITAL, 9612 Ventura Blvd., Suite 108, Panorama City, CA 91402, Fax: (818)
        907-3372 ,
        or its
        assigns (the “Holder”), is entitled, subject to the terms set forth below, to
        purchase from the Company at any time after the Issue Date until 5:00 p.m.,
        E.S.T on the third (3 rd )
        anniversary of the Issue Date (the “Expiration Date”), up to 133,333 fully paid
        and nonassessable shares of Common Stock at a per share purchase price of
        $1.00.
        The aforedescribed purchase price per share, as adjusted from time to time
        as
        herein provided, is referred to herein as the "Purchase Price." The number
        and
        character of such shares of Common Stock and the Purchase Price are subject
        to
        adjustment as provided herein. The Company may reduce the Purchase Price
        without
        the consent of the Holder. Capitalized terms used and not otherwise defined
        herein shall have the meanings set forth in that certain Subscription Agreement
        (the “ **Subscription
        Agreement** ”),
        dated
        July 29, 2005, entered into by the Company and Holders of the Class B
        Warrants.
 
 As
        used
        herein the following terms, unless the context otherwise requires, have the
        following respective meanings:
  (a) The
        term
“Company” shall include Valcent Products Inc. and any corporation which shall
        succeed or assume the obligations of Valcent Products Inc. hereunder.
  (b) The
        term
“Common Stock” includes (a) the Company's Common Stock, no par value per
        share, as authorized on the date of the Subscription Agreement, and (b) any
        other securities into which or for which any of the securities described
        in
        (a) may be converted or exchanged pursuant to a plan of recapitalization,
        reorganization, merger, sale of assets or otherwise.
  (c) The
        term
“Other Securities” refers to any stock (other than Common Stock) and other
        securities of the Company or any other person (corporate or otherwise) which
        the
        holder of the Warrant at any time shall be entitled to receive, or shall
        have
        received, on the exercise of the Warrant, in lieu of or in addition to Common
        Stock, or which at any time shall be issuable or shall have been issued in
        exchange for or in replacement of Common Stock or Other Securities pursuant
        to
        Section 5 or otherwise.
  (d) The
        term
“Warrant Shares” shall mean the Common Stock issuable upon exercise of this
        Warrant.
   
  1. Exercise
        of Warrant .
  1.1. Number
        of Shares Issuable upon Exercise .
        From
        and after the Issue Date through and including the Expiration Date, the Holder
        hereof shall be entitled to receive, upon exercise of this Warrant in whole
        in
        accordance with the terms of subsection 1.2 or upon exercise of this
        Warrant in part in accordance with subsection 1.3, shares of Common
        Stock
        of the Company, subject to adjustment pursuant to Section 4.
  1.2. Full
        Exercise .
        This
        Warrant may be exercised in full by the Holder hereof by delivery of an original
        or facsimile copy of the form of subscription attached as Exhibit A
        hereto
        (the “Subscription Form") duly executed by such Holder and surrender of the
        original Warrant within four (4) days of exercise, to the Company at its
        principal office or at the office of its Warrant Agent (as provided
        hereinafter), accompanied by payment, in cash, wire transfer or by certified
        or
        official bank check payable to the order of the Company, in the amount obtained
        by multiplying the number of shares of Common Stock for which this Warrant
        is
        then exercisable by the Purchase Price then in effect.
  1.3. Partial
        Exercise .
        This
        Warrant may be exercised in part (but not for a fractional share) by surrender
        of this Warrant in the manner and at the place provided in subsection 1.2
        except that the amount payable by the Holder on such partial exercise shall
        be
        the amount obtained by multiplying (a) the number of whole shares
        of Common
        Stock designated by the Holder in the Subscription Form by (b) the
        Purchase
        Price then in effect. On any such partial exercise, the Company, at its expense,
        will forthwith issue and deliver to or upon the order of the Holder hereof
        a new
        Warrant of like tenor, in the name of the Holder hereof or as such Holder
        (upon
        payment by such Holder of any applicable transfer taxes) may request, the
        whole
        number of shares of Common Stock for which such Warrant may still be
        exercised.
  1.4. Fair
        Market Value .
        Fair
        Market Value of a share of Common Stock as of a particular date (the
        "Determination Date") shall mean:
  (a) If
        the
        Company's Common Stock is traded on an exchange or is quoted on the National
        Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ"), National
        Market System, the NASDAQ SmallCap Market or the American Stock Exchange,
        LLC,
        then the closing or last sale price, respectively, reported for the last
        business day immediately preceding the Determination Date;
  (b) If
        the
        Company's Common Stock is not traded on an exchange or on the NASDAQ National
        Market System, the NASDAQ SmallCap Market or the American Stock Exchange,
        Inc.,
        but is traded in the over-the-counter market, then the average of the closing
        bid and ask prices reported for the last business day immediately preceding
        the
        Determination Date;
  (c) Except
        as
        provided in clause (d) below, if the Company's Common Stock is not
        publicly
        traded, then as the Holder and the Company agree, or in the absence of such
        an
        agreement, by arbitration in accordance with the rules then standing of the
        American Arbitration Association, before a single arbitrator to be chosen
        from a
        panel of persons qualified by education and training to pass on the matter
        to be
        decided; or
  (d) If
        the
        Determination Date is the date of a liquidation, dissolution or winding up,
        or
        any event deemed to be a liquidation, dissolution or winding up pursuant
        to the
        Company's charter, then all amounts to be payable per share to holders of
        the
        Common Stock pursuant to the charter in the event of such liquidation,
        dissolution or winding up, plus all other amounts to be payable per share
        in
        respect of the Common Stock in liquidation under the charter, assuming for
        the
        purposes of this clause (d) that all of the shares of Common Stock
        then
        issuable upon exercise of all of the Warrants are outstanding at the
        Determination Date.
  1.5. Company
        Acknowledgment .
        The
        Company will, at the time of the exercise of the Warrant, upon the request
        of
        the Holder hereof acknowledge in writing its continuing obligation to afford
        to
        such Holder any rights to which such Holder shall continue to be entitled
        after
        such exercise in accordance with the provisions of this Warrant. If the Holder
        shall fail to make any such request, such failure shall not affect the
        continuing obligation of the Company to afford to such Holder any such
        rights.
  1.6. Trustee
        for Warrant Holders .
        In the
        event that a bank or trust company shall have been appointed as trustee for
        the
        Holder of the Warrants pursuant to Subsection 3.2, such bank or trust
        company shall have all the powers and duties of a warrant agent (as hereinafter
        described) and shall accept, in its own name for the account of the Company
        or
        such successor person as may be entitled thereto, all amounts otherwise payable
        to the Company or such successor, as the case may be, on exercise of this
        Warrant pursuant to this Section 1.
  
  1.7 Delivery
        of Stock Certificates, etc. on Exercise .
        The
        Company agrees that the shares of Common Stock purchased upon exercise of
        this
        Warrant shall be deemed to be issued to the Holder hereof as the record owner
        of
        such shares as of the close of business on the date on which this Warrant
        shall
        have been surrendered and payment made for such shares as aforesaid. As soon
        as
        practicable after the exercise of this Warrant in full or in part, and in
        any
        event within four (4) business days thereafter, the Company at its expense
        (including the payment by it of any applicable issue taxes) will cause to
        be
        issued in the name of and delivered to the Holder hereof, or as such Holder
        (upon payment by such Holder of any applicable transfer taxes) may direct
        in
        compliance with applicable securities laws, a certificate or certificates
        for
        the number of duly and validly issued, fully paid and nonassessable shares
        of
        Common Stock (or Other Securities) to which such Holder shall be entitled
        on
        such exercise, plus, in lieu of any fractional share to which such Holder
        would
        otherwise be entitled, cash equal to such fraction multiplied by the then
        Fair
        Market Value of one full share of Common Stock, together with any other stock
        or
        other securities and property (including cash, where applicable) to which
        such
        Holder is entitled upon such exercise pursuant to Section 1 or otherwise.
  2. Cashless
        Exercise .
  (a) If
        a
        Registration Statement (as defined in the Subscription Agreement) (“Registration
        Statement”) is effective and the Holder may sell its shares of Common Stock upon
        exercise hereof pursuant to the Registration Statement, this Warrant may
        be
        exercisable in whole or in part for cash only as set forth in Section 1 above.
        If no such Registration Statement is available during the time that such
        Registration Statement is required to be effective pursuant to the terms
        of the
        Subscription Agreement, then payment upon exercise may be made at the option
        of
        the Holder either in (i) cash, wire transfer or by certified or official
        bank check payable to the order of the Company equal to the applicable aggregate
        Purchase Price, (ii) by delivery of Common Stock issuable upon exercise of
        the
        Warrants in accordance with Section (b) below or (iii) by
        a
        combination of any of the foregoing methods, for the number of Common Stock
        specified in such form (as such exercise number shall be adjusted to reflect
        any
        adjustment in the total number of shares of Common Stock issuable to the
        holder
        per the terms of this Warrant) and the holder shall thereupon be entitled
        to
        receive the number of duly authorized, validly issued, fully-paid and
        non-assessable shares of Common Stock (or Other Securities) determined as
        provided herein.
  (b) If
        the
        Fair Market Value of one share of Common Stock is greater than the Purchase
        Price (at the date of calculation as set forth below), in lieu of exercising
        this Warrant for cash, the holder may elect to receive shares equal to the
        value
        (as determined below) of this Warrant (or the portion thereof being cancelled)
        by surrender of this Warrant at the principal office of the Company together
        with the properly endorsed Subscription Form in which event the Company shall
        issue to the holder a number of shares of Common Stock computed using the
        following formula:
  X= Y
        (A-B)
 A
 
 Where  X 
        = the
        number of shares of Common Stock to be issued to the holder
 
 Y=
              the
                  number of shares of Common Stock purchasable under the Warrant
                  or, if only
                  a portion of the Warrant is being exercised, the portion of the
                  Warrant
                  being exercised (at the date of such
                  calculation)
  A=
              the
                  Fair Market Value of one share of the Company’s Common Stock (at the date
                  of such calculation)
  B=
              Purchase
                  Price (as adjusted to the date of such
                  calculation)
  (d) The
        Holder may employ the cashless exercise feature described in Section (b)
        above
        only during the pendency of a Non-Registration Event as described in Section
        11
        of the Subscription Agreement.
  
  For
        purposes of Rule 144 promulgated under the 1933 Act, it is intended, understood
        and acknowledged that the Warrant Shares issued in a cashless exercise
        transaction shall be deemed to have been acquired by the Holder, and the
        holding
        period for the Warrant Shares shall be deemed to have commenced, on the date
        this Warrant was originally issued pursuant to the Subscription
        Agreement.
  3. Adjustment
        for Reorganization, Consolidation, Merger, etc.
  3.1. Reorganization,
        Consolidation, Merger, etc .
        In case
        at any time or from time to time, the Company shall (a) effect a
        reorganization, (b) consolidate with or merge into any other person
        or
        (c) transfer all or substantially all of its properties or assets
        to any
        other person under any plan or arrangement contemplating the dissolution
        of the
        Company, then, in each such case, as a condition to the consummation of such
        a
        transaction, proper and adequate provision shall be made by the Company whereby
        the Holder of this Warrant, on the exercise hereof as provided in
        Section 1, at any time after the consummation of such reorganization,
        consolidation or merger or the effective date of such dissolution, as the
        case
        may be, shall receive, in lieu of the Common Stock (or Other Securities)
        issuable on such exercise prior to such consummation or such effective date,
        the
        stock and other securities and property (including cash) to which such Holder
        would have been entitled upon such consummation or in connection with such
        dissolution, as the case may be, if such Holder had so exercised this Warrant,
        immediately prior thereto, all subject to further adjustment thereafter as
        provided in Section 4.
  3.2. Dissolution .
        In the
        event of any dissolution of the Company following the transfer of all or
        substantially all of its properties or assets, the Company, prior to such
        dissolution, shall at its expense deliver or cause to be delivered the stock
        and
        other securities and property (including cash, where applicable) receivable
        by
        the Holder of the Warrants after the effective date of such dissolution pursuant
        to this Section 3 to a bank or trust company (a "Trustee") having
        its
        principal office in New York, NY, as trustee for the Holder of the
        Warrants.
  3.3. Continuation
        of Terms .
        Upon
        any reorganization, consolidation, merger or transfer (and any dissolution
        following any transfer) referred to in this Section 3, this Warrant
        shall
        continue in full force and effect and the terms hereof shall be applicable
        to
        the Other Securities and property receivable on the exercise of this Warrant
        after the consummation of such reorganization, consolidation or merger or
        the
        effective date of dissolution following any such transfer, as the case may
        be,
        and shall be binding upon the issuer of any Other Securities, including,
        in the
        case of any such transfer, the person acquiring all or substantially all
        of the
        properties or assets of the Company, whether or not such person shall have
        expressly assumed the terms of this Warrant as provided in Section 4.
        In
        the event this Warrant does not continue in full force and effect after the
        consummation of the transaction described in this Section 3, then
        only in
        such event will the Company's securities and property (including cash, where
        applicable) receivable by the Holder of the Warrants be delivered to the
        Trustee
        as contemplated by Section 3.2.
  3.4 Share
        Issuance .
        Until
        the Expiration Date, if the Company shall issue any Common Stock except for
        the
        Excepted Issuances (as defined in the Subscription Agreement), prior to the
        complete exercise of this Warrant for a consideration less than the Purchase
        Price that would be in effect at the time of such issue, then, and thereafter
        successively upon each such issue, the Purchase Price shall be reduced to
        such
        other lower issue price. For purposes of this adjustment, the issuance of
        any
        security or debt instrument of the Company carrying the right to convert
        such
        security or debt instrument into Common Stock or of any warrant, right or
        option
        to purchase Common Stock shall result in an adjustment to the Purchase Price
        upon the issuance of the above-described security, debt instrument, warrant,
        right, or option and again at any time upon any subsequent issuances of shares
        of Common Stock upon exercise of such conversion or purchase rights if such
        issuance is at a price lower than the Purchase Price in effect upon such
        issuance. The reduction of the Purchase Price described in this Section 3.4
        is
        in addition to the other rights of the Holder described in the Subscription
        Agreement.
  4. Extraordinary
        Events Regarding Common Stock .
        In the
        event that the Company shall (a) issue additional shares of the Common
        Stock as a dividend or other distribution on outstanding Common Stock,
        (b) subdivide its outstanding shares of Common Stock, or (c) combine
        its outstanding shares of the Common Stock into a smaller number of shares
        of
        the Common Stock, then, in each such event, the Purchase Price shall,
        simultaneously with the happening of such event, be adjusted by multiplying
        the
        then Purchase Price by a fraction, the numerator of which shall be the number
        of
        shares of Common Stock outstanding immediately prior to such event and the
        denominator of which shall be the number of shares of Common Stock outstanding
        immediately after such event, and the product so obtained shall thereafter
        be
        the Purchase Price then in effect. The Purchase Price, as so adjusted, shall
        be
        readjusted in the same manner upon the happening of any successive event
        or
        events described herein in this Section 4. The number of shares of
        Common
        Stock that the Holder of this Warrant shall thereafter, on the exercise hereof
        as provided in Section 1, be entitled to receive shall be adjusted
        to a
        number determined by multiplying the number of shares of Common Stock that
        would
        otherwise (but for the provisions of this Section 4) be issuable on
        such
        exercise by a fraction of which (a) the numerator is the Purchase
        Price
        that would otherwise (but for the provisions of this Section 4) be
        in
        effect, and (b) the denominator is the Purchase Price in effect on
        the date
        of such exercise.
  
  5. Certificate
        as to Adjustments .
        In each
        case of any adjustment or readjustment in the shares of Common Stock (or
        Other
        Securities) issuable on the exercise of the Warrants, the Company at its
        expense
        will promptly cause its Chief Financial Officer or other appropriate designee
        to
        compute such adjustment or readjustment in accordance with the terms of the
        Warrant and prepare a certificate setting forth such adjustment or readjustment
        and showing in detail the facts upon which such adjustment or readjustment
        is
        based, including a statement of (a) the consideration received or
        receivable by the Company for any additional shares of Common Stock (or Other
        Securities) issued or sold or deemed to have been issued or sold, (b) the
        number of shares of Common Stock (or Other Securities) outstanding or deemed
        to
        be outstanding, and (c) the Purchase Price and the number of shares
        of
        Common Stock to be received upon exercise of this Warrant, in effect immediately
        prior to such adjustment or readjustment and as adjusted or readjusted as
        provided in this Warrant. The Company will forthwith mail a copy of each
        such
        certificate to the Holder of the Warrant and any Warrant Agent of the Company
        (appointed pursuant to Section 11 hereof).
  6. Reservation
        of Stock, etc. Issuable on Exercise of Warrant; Financial
        Statements .
        The
        Company will at all times reserve and keep available, solely for issuance
        and
        delivery on the exercise of the Warrants, all shares of Common Stock (or
        Other
        Securities) from time to time issuable on the exercise of the Warrant. This
        Warrant entitles the Holder hereof to receive copies of all financial and
        other
        information distributed or required to be distributed to the holders of the
        Company's Common Stock.
  7. Assignment;
        Exchange of Warrant .
        Subject
        to compliance with applicable securities laws, this Warrant, and the rights
        evidenced hereby, may be transferred by any registered holder hereof (a
        "Transferor"). On the surrender for exchange of this Warrant, with the
        Transferor's endorsement in the form of Exhibit B attached hereto
        (the
“Transferor Endorsement Form") and together with an opinion of counsel
        reasonably satisfactory to the Company that the transfer of this Warrant
        will be
        in compliance with applicable securities laws, the Company at its expense,
        twice, only, but with payment by the Transferor of any applicable transfer
        taxes, will issue and deliver to or on the order of the Transferor thereof
        a new
        Warrant or Warrants of like tenor, in the name of the Transferor and/or the
        transferee(s) specified in such Transferor Endorsement Form (each a
        "Transferee"), calling in the aggregate on the face or faces thereof for
        the
        number of shares of Common Stock called for on the face or faces of the Warrant
        so surrendered by the Transferor. No such transfers shall result in a public
        distribution of the Warrant.
  8. Replacement
        of Warrant .
        On
        receipt of evidence reasonably satisfactory to the Company of the loss, theft,
        destruction or mutilation of this Warrant and, in the case of any such loss,
        theft or destruction of this Warrant, on delivery of an indemnity agreement
        or
        security reasonably satisfactory in form and amount to the Company or, in
        the
        case of any such mutilation, on surrender and cancellation of this Warrant,
        the
        Company at its expense, twice only, will execute and deliver, in lieu thereof,
        a
        new Warrant of like tenor.
  9. Registration
        Rights .
        The
        Holder of this Warrant has been granted certain registration rights by the
        Company. These registration rights are set forth in the Subscription Agreement.
        The terms of the Subscription Agreement are incorporated herein by this
        reference.
  10. Maximum
        Exercise .
        The
        Holder shall not be entitled to exercise this Warrant on an exercise date,
        in
        connection with that number of shares of Common Stock which would be in excess
        of the sum of (i) the number of shares of Common Stock beneficially
        owned
        by the Holder and its affiliates on an exercise date, and (ii) the
        number
        of shares of Common Stock issuable upon the exercise of this Warrant with
        respect to which the determination of this limitation is being made on an
        exercise date, which would result in beneficial ownership by the Holder and
        its
        affiliates of more than 4.99% of the outstanding shares of Common Stock on
        such
        date. For the purposes of the immediately preceding sentence, beneficial
        ownership shall be determined in accordance with Section 13(d) of
        the
        Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
        Subject to the foregoing, the Holder shall not be limited to aggregate exercises
        which would result in the issuance of more than 4.99%. The
        restriction described in this paragraph may be waived, in whole or
        in part,
        upon sixty-one (61) days prior notice from the Holder to the Company. The
        Holder
        may allocate which of the equity of the Company deemed beneficially owned
        by the
        Subscriber shall be included in the 4.99% amount described above and which
        shall
        be allocated to the excess above 4.99%.
  
  11. Warrant
        Agent .
        The
        Company may, by written notice to the Holder of the Warrant, appoint an agent
        (a
“Warrant Agent”) for the purpose of issuing Common Stock (or Other Securities)
        on the exercise of this Warrant pursuant to Section 1, exchanging
        this
        Warrant pursuant to Section 7, and replacing this Warrant pursuant
        to
        Section 8, or any of the foregoing, and thereafter any such issuance,
        exchange or replacement, as the case may be, shall be made at such office
        by
        such Warrant Agent.
  12. Transfer
        on the Company's Books .
        Until
        this Warrant is transferred on the books of the Company, the Company may
        treat
        the registered holder hereof as the absolute owner hereof for all purposes,
        notwithstanding any notice to the contrary.
  13. Warrant
        Exercise Compensation .
        The
        Company has agreed to pay to Viscount Investments, Ltd. (“Finder”) Warrant
        Exercise Compensation as described in the Subscription Agreement equal to
        ten
        percent (10%) of the cash proceeds payable to the Company upon exercise of
        the
        Warrant. The Warrant Exercise Compensation will be paid by the Company to
        the
        Finder not later than the fifth (5 th )
        business day after the Company receives cash proceeds from the exercise of
        this
        Warrant. The Holder of the Warrant has no obligation or responsibility to
        pay
        Warrant Exercise Compensation.
 
 14. Notices .
        All
        notices, demands, requests, consents, approvals, and other communications
        required or permitted hereunder shall be in writing and, unless otherwise
        specified herein, shall be (i) personally served, (ii) deposited in the mail,
        registered or certified, return receipt requested, postage prepaid, (iii)
        delivered by reputable air courier service with charges prepaid, or (iv)
        transmitted by hand delivery, telegram, or facsimile, addressed as set forth
        below or to such other address as such party shall have specified most recently
        by written notice. Any notice or other communication required or permitted
        to be
        given hereunder shall be deemed effective (a) upon hand delivery or delivery
        by
        facsimile, with accurate confirmation generated by the transmitting facsimile
        machine, at the address or number designated below (if delivered on a business
        day during normal business hours where such notice is to be received), or
        the
        first business day following such delivery (if delivered other than on a
        business day during normal business hours where such notice is to be received)
        or (b) on the second business day following the date of mailing by express
        courier service, fully prepaid, addressed to such address, or upon actual
        receipt of such mailing, whichever shall first occur. The addresses for such
        communications shall be: (i) if to the Company to: Valcent
        Products Inc., 420-475 Howe Street, Vancouver, British Columbia, Canada V6C
        2B3,
        Attn: Douglas E. Ford, Director, telecopier number: (604) 606-7980, with
        an
        additional copy only by telecopier only to: George Orr, Suite 420-475 Howe
        Street, Vancouver, British Columbia, Canada V6C 2B3, telecopier number: (604)
        606-7980 ,
        (ii) if
        to the Holder, to the address and telecopier number listed on the first
        paragraph of this Warrant, with an additional copy by telecopier only to:
        Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York
        10176, telecopier number: (212) 697-3575, and (iii) if to the Finder, to
        Viscount Investments, Ltd., 832 The White House, Belvedere Road, London,
        SE1
        8YT, Fax: 011-44-207-207-0975.
  15. Currency .
        All
        references to currency herein shall mean the currency of the United States
        of
        America.
  16. Miscellaneous .
        This
        Warrant and any term hereof may be changed, waived, discharged or terminated
        only by an instrument in writing signed by the party against which enforcement
        of such change, waiver, discharge or termination is sought. This Warrant
        shall
        be construed and enforced in accordance with and governed by the laws of
        New
        York. Any dispute relating to this Warrant shall be adjudicated in New York
        County in the State of New York. The headings in this Warrant are for purposes
        of reference only, and shall not limit or otherwise affect any of the terms
        hereof. The invalidity or unenforceability of any provision hereof shall
        in no
        way affect the validity or enforceability of any other provision.
   
  IN
        WITNESS WHEREOF, the Company has executed this Warrant as of the date first
        written above.
 **VALCENT
                  PRODUCTS, INC.**By:
                /s/Name:
                  Title:Witness:______________________________
 
  **Exhibit A**
 
 FORM
        OF
        SUBSCRIPTION
 (to
        be
        signed only on exercise of Warrant)
  TO:
        VALCENT PRODUCTS INC.
  The
        undersigned, pursuant to the provisions set forth in the attached Warrant
        (No.____), hereby irrevocably elects to purchase (check applicable
        box):
 
 ___  ________
        shares of the Common Stock covered by such Warrant; or
  ___  the
        maximum number of shares of Common Stock covered by such Warrant pursuant
        to the
        cashless exercise procedure set forth in Section 2.
 
 The
        undersigned herewith makes payment of the full purchase price for such shares
        at
        the price per share provided for in such Warrant, which is $___________.
        Such
        payment takes the form of (check applicable box or boxes):
 
 ___  $__________
        in lawful money of the United States; and/or
  ___  the
        cancellation of such portion of the attached Warrant as is exercisable for
        a
        total of _______ shares of Common Stock (using a Fair Market Value of $_______
        per share for purposes of this calculation); and/or
 
 ___  the
        cancellation of such number of shares of Common Stock as is necessary, in
        accordance with the formula set forth in Section 2, to exercise this
        Warrant with respect to the maximum number of shares of Common Stock purchasable
        pursuant to the cashless exercise procedure set forth in
        Section 2.
 
 The
        undersigned requests that the certificates for such shares be issued in the
        name
        of, and delivered to _____________________________________________________
        whose
        address is
        ____________________________________________________________________________________________________________________________
 
 Number
        of
        Shares of Common Stock Beneficially Owned on the date of exercise: Less than
        five percent (5%) of the outstanding Common Stock of Valcent Products
        Inc..
 
 The
        undersigned represents and warrants that all offers and sales by the undersigned
        of the securities issuable upon exercise of the within Warrant shall be made
        pursuant to registration of the Common Stock under the Securities Act of
        1933,
        as amended (the "Securities Act"), or pursuant to an exemption from registration
        under the Securities Act.
  Dated:___________________(Signature
                    must conform to name of holder as specified on the face of the
                    Warrant)(Address)
 
  **Exhibit B**
  FORM
        OF
        TRANSFEROR ENDORSEMENT
 (To
        be
        signed only on transfer of Warrant)
  For
        value
        received, the undersigned hereby sells, assigns, and transfers unto the
        person(s) named below under the heading "Transferees" the right represented
        by
        the within Warrant to purchase the percentage and number of shares of Common
        Stock of VALCENT PRODUCTS INC. to which the within Warrant relates specified
        under the headings "Percentage Transferred" and "Number Transferred,"
        respectively, opposite the name(s) of such person(s) and appoints each such
        person Attorney to transfer its respective right on the books of VALCENT
        PRODUCTS INC. with full power of substitution in the premises.
  Transferees
              
              Percentage
                  Transferred
              
              Number
                  Transferred
 
 Dated:
                  ______________, ___________(Signature
                  must conform to name of holder as specified on the face of the
                  warrant)Signed
                  in the presence of:(Name)
                
                (address)ACCEPTED
                  AND AGREED:[TRANSFEREE](address)(Name)