Exhibit 10.5 - Form of Series B Warrants


    
      

      

    

    Exhibit
      10.5

     

    EXHIBIT
      D

    FORM
      OF SERIES B WARRANT

    


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

     

    


    


    NCOAT,
      INC.

    


    Series
      B Warrant To Purchase Common Stock

    


    Warrant
      No.: _______

    Number
      of
      Shares of Common Stock: _________

    Date
      of
      Issuance: May __, 2007 ("Issuance
      Date")

    


    nCOAT,
      Inc., a Delaware corporation (the "Company"),
      hereby certifies that, for good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, [______________], the registered
      holder hereof or its permitted assigns (the "Holder"),
      is
      entitled, subject to the terms set forth below, to purchase from the Company,
      at
      the Exercise Price (as defined below) then in effect, upon surrender of this
      Series B Warrant to Purchase Common Stock (including any Warrants to Purchase
      Common Stock issued in exchange, transfer or replacement hereof, the
      "Warrant"),
      at
      any time or times on or after the date hereof, but not after 11:59 p.m., New
      York time, on the Expiration Date (as defined below), ______________
      (_____________)1 
      fully
      paid nonassessable shares of Common Stock (as defined below) (the
      "Warrant
      Shares").
      Except as otherwise defined herein, capitalized terms in this Warrant shall
      have
      the meanings set forth in Section 15. This Series B Warrant is one of the series
      of Warrants to purchase Common Stock issued pursuant to Section 1 of that
      certain Securities Purchase Agreement, dated as of May __, 2007 (the
      "Subscription
      Date"),
      by
      and among the Company and the investors (the "Buyers")
      referred to therein (the "Securities
      Purchase Agreement").

     

     

     

    ___________________

    1 Insert
      the number of Conversion Shares underlying the Notes being issued to the Holder
      pursuant to the Securities Purchase Agreement.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 	
              1.

            	
              EXERCISE
                OF WARRANT.

            


    

     

    (a) Mechanics
      of Exercise.
      Subject
      to the terms and conditions hereof (including, without limitation, the
      limitations set forth in Section 1(f)), this Warrant may be exercised by the
      Holder on any day on or after the date hereof, in whole or in part, by
      (i) delivery of a written notice, in the form attached hereto as
Exhibit
      A
      (the
      "Exercise
      Notice"),
      of
      the Holder's election to exercise this Warrant and (ii) (A) payment to the
      Company of an amount equal to the applicable Exercise Price multiplied by the
      number of Warrant Shares as to which this Warrant is being exercised (the
      "Aggregate
      Exercise Price")
      in
      cash or by wire transfer of immediately available funds or (B) by notifying
      the
      Company that this Warrant is being exercised pursuant to a Cashless Exercise
      (as
      defined in Section 1(d)). The Holder shall not be required to deliver the
      original Warrant in order to effect an exercise hereunder. Execution and
      delivery of the Exercise Notice with respect to less than all of the Warrant
      Shares shall have the same effect as cancellation of the original Warrant and
      issuance of a new Warrant evidencing the right to purchase the remaining number
      of Warrant Shares. On or before the first (1st)
      Business Day following the date on which the Company has received each of the
      Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless
      Exercise) (the "Exercise
      Delivery Documents"),
      the
      Company shall transmit by facsimile an acknowledgment of confirmation of receipt
      of the Exercise Delivery Documents to the Holder and the Company's transfer
      agent (the "Transfer
      Agent").
      On or
      before the third (3rd)
      Business Day following the date on which the Company has received all of the
      Exercise Delivery Documents (the "Share
      Delivery Date"),
      the
      Company shall (X) provided that the Transfer Agent is participating in The
      Depository Trust Company ("DTC")
      Fast
      Automated Securities Transfer Program, upon the request of the Holder, credit
      such aggregate number of shares of Common Stock to which the Holder is entitled
      pursuant to such exercise to the Holder's or its designee's balance account
      with
      DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
      Transfer Agent is not participating in the DTC Fast Automated Securities
      Transfer Program, issue and dispatch by overnight courier to the address as
      specified in the Exercise Notice, a certificate, registered in the Company's
      share register in the name of the Holder or its designee, for the number of
      shares of Common Stock to which the Holder is entitled pursuant to such
      exercise. Upon delivery of the Exercise Notice and Aggregate Exercise Price
      referred to in clause (ii)(A) above or notification to the Company of a Cashless
      Exercise referred to in Section 1(d), the Holder shall be deemed for all
      corporate purposes to have become the holder of record of the Warrant Shares
      with respect to which this Warrant has been exercised, irrespective of the
      date
      of delivery of the certificates evidencing such Warrant Shares. If this Warrant
      is submitted in connection with any exercise pursuant to this Section 1(a)
      and
      the number of Warrant Shares represented by this Warrant submitted for exercise
      is greater than the number of Warrant Shares being acquired upon an exercise,
      then the Company shall as soon as practicable and in no event later than three
      Business Days after any exercise and at its own expense, issue a new Warrant
      (in
      accordance with Section 7(d)) representing the right to purchase the number
      of
      Warrant Shares purchasable immediately prior to such exercise under this
      Warrant, less the number of Warrant Shares with respect to which this Warrant
      is
      exercised. No fractional shares of Common Stock are to be issued upon the
      exercise of this Warrant, but rather the number of shares of Common Stock to
      be
      issued shall be rounded up to the nearest whole number. The Company shall pay
      any and all taxes which may be payable with respect to the issuance and delivery
      of Warrant Shares upon exercise of this Warrant. 

     

    


    
      
        
           

        

        
          -
            2 -

          
            

          

        

        
           

        

      

    

    


    (b) Exercise
      Price.
      For
      purposes of this Warrant, "Exercise
      Price"
      means
      $0.80, subject to adjustment as provided herein.

     

    (c) Company's
      Failure to Timely Deliver Securities.
      Upon
      the Company's receipt of an Exercise Notice or request for removal of
      restrictive legends on the shares of Common Stock issuable in connection
      therewith, the Company will deliver, or cause to be delivered, the certificates
      evidencing such shares of Common Stock to the Holder within three (3) Trading
      Days. If such delivery is made more than two (2) additional Trading Days after
      exercise or request for removal of legend, as the case may be, then the Company
      will compensate the Holder at a rate of $100 per day for each of the first
      ten
      (10) Trading Days and $200 per day thereafter for each $10,000 of securities.
      In
      such event, after the first such ten (10) Trading Days noted above, the Holder
      will also have the right to rescind its Exercise Notice for the Warrants. If
      the
      certificates have not been delivered by the fifth (5th)
      Trading
      Day after conversion or request for removal of legend, as the case may be,
      and
      the Holder has purchased (in an open market transaction or otherwise) Common
      Stock to deliver in satisfaction of a sale by the Holder of Common Stock
      issuable upon such conversion that the Holder anticipated receiving from the
      Company (a "Buy-In"),
      then
      the Company shall, within three (3) Trading Days after the Holder's request
      and
      in the Holder's discretion, either (i) pay cash to the Holder in an amount
      equal
      to the Holder's total purchase price (including brokerage commissions and other
      out-of-pocket expenses, if any) for the shares of Common Stock so purchased
      (the
"Buy-In
      Price"),
      at
      which point the Company's obligation to deliver such certificate (and to issue
      such Common Stock) shall terminate, or (ii) promptly honor its obligation to
      deliver to the Holder a certificate or certificates representing such Common
      Stock and pay cash to the Holder in an amount equal to the excess (if any)
      of
      the Buy-In Price over the product of (A) such number of shares of Common Stock,
      times (B) the Closing Bid Price on the Conversion Date. 

     

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

     

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

     

    B

     

    For
      purposes of the foregoing formula:

     

    
      	 	
              A=

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

            


    

     

    
      	 	
              B=

            	
              the
                arithmetic average of the Weighted Average Prices of the shares of
                Common
                Stock (as reported by Bloomberg) for the five (5) consecutive Trading
                Days
                ending on the date immediately preceding the date of the Exercise
                Notice.

            


    

     

    


    
      
        
           

        

        
          -
            3 -

          
            

          

        

        
           

        

      

    

    


    
      	 	
              C=

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

            


    

     

    


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

     

    (f) Limitations
      on Exercises. 

     

    (1) Beneficial
      Ownership.
      (A) The
      Company shall not effect the exercise of this Warrant, and the Holder shall
      not
      have the right to exercise this Warrant, to the extent that after giving effect
      to such exercise, such Person (together with such Person's affiliates) would
      beneficially own in excess of 4.99% (the "Maximum
      Percentage I")
      of the
      shares of Common Stock outstanding immediately after giving effect to such
      exercise. For purposes of the foregoing sentence, the aggregate number of shares
      of Common Stock beneficially owned by such Person and its affiliates shall
      include the number of shares of Common Stock issuable upon exercise of this
      Warrant with respect to which the determination of such sentence is being made,
      but shall exclude shares of Common Stock which would be issuable upon (i)
      exercise of the remaining, unexercised portion of this Warrant beneficially
      owned by such Person and its affiliates and (ii) exercise or conversion of
      the
      unexercised or unconverted portion of any other securities of the Company
      beneficially owned by such Person and its affiliates (including, without
      limitation, any convertible notes or convertible preferred stock or warrants)
      subject to a limitation on conversion or exercise analogous to the limitation
      contained herein. Except as set forth in the preceding sentence, for purposes
      of
      this paragraph, beneficial ownership shall be calculated in accordance with
      Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes
      of this Warrant, in determining the number of outstanding shares of Common
      Stock, the Holder may rely on the number of outstanding shares of Common Stock
      as reflected in (1) the Company's most recent Form 10-K, Form 10-KSB, Form
      10-Q,
      Form 10-QSB, Current Report on Form 8-K or other public filing with the
      Securities and Exchange Commission, as the case may be, (2) a more recent public
      announcement by the Company or (3) any other notice by the Company or the
      Transfer Agent setting forth the number of shares of Common Stock outstanding.
      For any reason at any time, upon the written or oral request of the Holder,
      the
      Company shall within one Business Day confirm orally and in writing to the
      Holder the number of shares of Common Stock then outstanding. In any case,
      the
      number of outstanding shares of Common Stock shall be determined after giving
      effect to the conversion or exercise of securities of the Company, including
      the
      SPA Notes and the SPA Warrants, by the Holder and its affiliates since the
      date
      as of which such number of outstanding shares of Common Stock was reported.
      By
      written notice to the Company, the Holder may from time to time increase or
      decrease the Maximum Percentage I to any other percentage in excess of 4.99%
      specified in such notice; provided that (i) any such increase will not be
      effective until the sixty-first (61st)
      day
      after such notice is delivered to the Company, and (ii) any such increase or
      decrease will apply only to the Holder and not to any other holder of SPA
      Warrants.

     

    


    
      
        
           

        

        
          -
            4 -

          
            

          

        

        
           

        

      

    

    


    (B)
      The
      Company shall not effect the exercise of this Warrant, and the Holder shall
      not
      have the right to exercise this Warrant, to the extent that after giving effect
      to such exercise, such Person (together with such Person's affiliates) would
      beneficially own in excess of 9.99% (the "Maximum
      Percentage II")
      of the
      shares of Common Stock outstanding immediately after giving effect to such
      exercise. For purposes of the foregoing sentence, the aggregate number of shares
      of Common Stock beneficially owned by such Person and its affiliates shall
      include the number of shares of Common Stock issuable upon exercise of this
      Warrant with respect to which the determination of such sentence is being made,
      but shall exclude shares of Common Stock which would be issuable upon (i)
      exercise of the remaining, unexercised portion of this Warrant beneficially
      owned by such Person and its affiliates and (ii) exercise or conversion of
      the
      unexercised or unconverted portion of any other securities of the Company
      beneficially owned by such Person and its affiliates (including, without
      limitation, any convertible notes or convertible preferred stock or warrants)
      subject to a limitation on conversion or exercise analogous to the limitation
      contained herein. Except as set forth in the preceding sentence, for purposes
      of
      this paragraph, beneficial ownership shall be calculated in accordance with
      Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes
      of this Warrant, in determining the number of outstanding shares of Common
      Stock, the Holder may rely on the number of outstanding shares of Common Stock
      as reflected in (1) the Company's most recent Form 10-K, Form 10-KSB, Form
      10-Q,
      Form 10-QSB, Current Report on Form 8-K or other public filing with the
      Securities and Exchange Commission, as the case may be, (2) a more recent public
      announcement by the Company or (3) any other notice by the Company or the
      Transfer Agent setting forth the number of shares of Common Stock outstanding.
      For any reason at any time, upon the written or oral request of the Holder,
      the
      Company shall within one Business Day confirm orally and in writing to the
      Holder the number of shares of Common Stock then outstanding. In any case,
      the
      number of outstanding shares of Common Stock shall be determined after giving
      effect to the conversion or exercise of securities of the Company, including
      the
      SPA Notes and the SPA Warrants, by the Holder and its affiliates since the
      date
      as of which such number of outstanding shares of Common Stock was reported.
      By
      written notice to the Company, the Holder may from time to time increase or
      decrease the Maximum Percentage II to any other percentage in excess of 9.99%
      specified in such notice; provided that (i) any such increase will not be
      effective until the sixty-first (61st)
      day
      after such notice is delivered to the Company, and (ii) any such increase or
      decrease will apply only to the Holder and not to any other holder of SPA
      Warrants.

     

    


    
      
        
           

        

        
          -
            5 -

          
            

          

        

        
           

        

      

    

    


    (2)   Principal
      Market Regulation.
      The
      Company shall not be obligated to issue any shares of Common Stock upon exercise
      of this Warrant or conversion of SPA Notes and no Buyer shall be entitled to
      receive any shares of Common Stock if the issuance of such shares of Common
      Stock would exceed that number of shares of Common Stock which the Company
      may
      issue upon exercise or conversion, as applicable, of the SPA Warrants and SPA
      Notes or otherwise without breaching the Company's obligations under the rules
      or regulations of any applicable Eligible Market (the "Exchange
      Cap"),
      except that such limitation shall not apply in the event that the Company (A)
      obtains the approval of its stockholders as required by the applicable rules
      of
      the Eligible Market for issuances of shares of Common Stock in excess of such
      amount or (B) obtains a written opinion from outside counsel to the Company
      that
      such approval is not required, which opinion shall be reasonably satisfactory
      to
      the Required Holders. Until such approval or written opinion is obtained, no
      Buyer shall be issued in the aggregate, upon exercise or conversion, as
      applicable, of any SPA Warrants or SPA Notes, shares of Common Stock in an
      amount greater than the product of the Exchange Cap multiplied by a fraction,
      the numerator of which is the total number of shares of Common Stock underlying
      the SPA Warrants issued to such Buyer pursuant to the Securities Purchase
      Agreement on the Issuance Date and the denominator of which is the aggregate
      number of shares of Common Stock underlying the SPA Warrants issued to the
      Buyers pursuant to the Securities Purchase Agreement (with respect to each
      Buyer, the "Exchange
      Cap Allocation").
      In
      the event that any Buyer shall sell or otherwise transfer any of such Buyer's
      SPA Warrants, the transferee shall be allocated a pro rata portion of such
      Buyer's Exchange Cap Allocation, and the restrictions of the prior sentence
      shall apply to such transferee with respect to the portion of the Exchange
      Cap
      Allocation allocated to such transferee. In the event that any holder of SPA
      Warrants shall exercise all of such holder's SPA Warrants into a number of
      shares of Common Stock which, in the aggregate, is less than such holder's
      Exchange Cap Allocation, then the difference between such holder's Exchange
      Cap
      Allocation and the number of shares of Common Stock actually issued to such
      holder shall be allocated to the respective Exchange Cap Allocations of the
      remaining holders of SPA Warrants on a pro rata basis in proportion to the
      shares of Common Stock underlying the SPA Warrants then held by each such
      holder. In the event that the Company is prohibited from issuing any Warrant
      Shares for which an Exercise Notice has been received as a result of the
      operation of this Section 1(f)(2), the Company shall pay cash in exchange for
      cancellation of such Warrant Shares, at a price per Warrant Share equal to
      the
      difference between the Weighted Average Price and the Exercise Price as of
      the
      date of the attempted exercise.

     

    


    
      
        
           

        

        
          -
            6 -

          
            

          

        

        
           

        

      

    

    


    (g) Insufficient
      Authorized Shares.
      If at
      any time while any of the Warrants remain outstanding the Company does not
      have
      a sufficient number of authorized and unreserved shares of Common Stock (an
      "Authorized
      Share Failure")
      to
      satisfy its obligation to reserve for issuance upon exercise of the Warrants
      no
      less than 120% of the number of shares of Common Stock as shall from time to
      time be necessary to effect the exercise of all of the Warrants then outstanding
      (the "Required
      Reserve Amount"),
      then
      the Company shall immediately take all action necessary to increase the
      Company's authorized shares of Common Stock to an amount sufficient to allow
      the
      Company to reserve the Required Reserve Amount for the Warrants then
      outstanding. Without limiting the generality of the foregoing sentence, as
      soon
      as practicable after the date of the occurrence of an Authorized Share Failure,
      but in no event later than sixty (60) days after the occurrence of such
      Authorized Share Failure, the Company shall hold a meeting of its stockholders
      for the approval of an increase in the number of authorized shares of Common
      Stock. In connection with such meeting, the Company shall provide each
      stockholder with a proxy statement and shall use its best efforts to solicit
      its
      stockholders' approval of such increase in authorized shares of Common Stock
      and
      to cause its board of directors to recommend to the stockholders that they
      approve such proposal.

     

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

     

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

     

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

     

    


    
      
        
           

        

        
          -
            7 -

          
            

          

        

        
           

        

      

    

    


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

     

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

     

    


    
      
        
           

        

        
          -
            8 -

          
            

          

        

        
           

        

      

    

    


    (iv)   Calculation
      of Consideration Received.
      In case
      any Option is issued in connection with the issue or sale of other securities
      of
      the Company, together comprising one integrated transaction, the Options will
      be
      deemed to have been issued for the difference of (x) the aggregate fair market
      value of such Options and other securities issued or sold in such integrated
      transaction, less (y) the fair market value of the securities other than such
      Option, issued or sold in such transaction and the other securities issued
      or
      sold in such integrated transaction will be deemed to have been issued or sold
      for the balance of the consideration received by the Company. If any shares
      of
      Common Stock, Options or Convertible Securities are issued or sold or deemed
      to
      have been issued or sold for cash, the consideration received therefor will
      be
      deemed to be the net amount received by the Company therefor. If any shares
      of
      Common Stock, Options or Convertible Securities are issued or sold for a
      consideration other than cash, the amount of such consideration received by
      the
      Company will be the fair value of such consideration, except where such
      consideration consists of securities, in which case the amount of consideration
      received by the Company will be the Weighted Average Price of such security
      on
      the date of receipt. If any shares of Common Stock, Options or Convertible
      Securities are issued to the owners of the non-surviving entity in connection
      with any merger in which the Company is the surviving entity, the amount of
      consideration therefor will be deemed to be the fair value of such portion
      of
      the net assets and business of the non-surviving entity as is attributable
      to
      such shares of Common Stock, Options or Convertible Securities, as the case
      may
      be. The fair value of any consideration other than cash or securities will
      be
      determined jointly by the Company and the Required Holders. If such parties
      are
      unable to reach agreement within ten (10) days after the occurrence of an event
      requiring valuation (the "Valuation
      Event"),
      the
      fair value of such consideration will be determined within five (5) Business
      Days after the tenth day following the Valuation Event by an independent,
      reputable appraiser jointly selected by the Company and the Required Holders.
      The determination of such appraiser shall be final and binding upon all parties
      absent manifest error and the fees and expenses of such appraiser shall be
      borne
      by the Company.

     

    


     

    


     

    


     

    


    
      
        
           

        

        
          -
            9 -

          
            

          

        

        
           

        

      

    

    


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

     

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

     

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

     

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

     

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

     

    


    
      
        
           

        

        
          -
            10 -

          
            

          

        

        
           

        

      

    

    


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

     

    
      	 	
              4.

            	
              PURCHASE
                RIGHTS; FUNDAMENTAL TRANSACTIONS.

            


    

     

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

     

    


    
      
        
           

        

        
          -
            11 -

          
            

          

        

        
           

        

      

    

    


    (b) Fundamental
      Transactions.
      The
      Company shall not enter into or be party to a Fundamental Transaction unless
      (i)
      the Successor Entity assumes in writing all of the obligations of the Company
      under this Warrant and the other Transaction Documents in accordance with the
      provisions of this Section 4(b) pursuant to written agreements in form and
      substance reasonably satisfactory to the Required Holders and approved by the
      Required Holders prior to such Fundamental Transaction, including agreements
      to
      deliver to each holder of Warrants in exchange for such Warrants a security
      of
      the Successor Entity evidenced by a written instrument substantially similar
      in
      form and substance to this Warrant, including, without limitation, an adjusted
      exercise price equal to the value for the shares of Common Stock reflected
      by
      the terms of such Fundamental Transaction, and exercisable for a corresponding
      number of shares of capital stock equivalent to the shares of Common Stock
      acquirable and receivable upon exercise of this Warrant (without regard to
      any
      limitations on the exercise of this Warrant) prior to such Fundamental
      Transaction, and reasonably satisfactory to the Required Holders
      and (ii)
      the Successor Entity (including its Parent Entity) is a publicly traded
      corporation whose common stock is quoted on or listed for trading on an Eligible
      Market and has "Substantially Similar Trading Characteristics" (as defined
      below) as the Company. For purposes hereof, an entity shall have Substantially
      Similar Trading Characteristics as the Company if the average daily dollar
      trading volume of the common stock of such entity is equal to or in excess
      of
      $500,000 for the 60th through the 16th day prior to the public announcement
      of
      such transaction.
      Upon
      the occurrence of any Fundamental Transaction, the Successor Entity shall
      succeed to, and be substituted for (so that from and after the date of such
      Fundamental Transaction, the provisions of this Warrant referring to the
      "Company" shall refer instead to the Successor Entity), and may exercise every
      right and power of the Company and shall assume all of the obligations of the
      Company under this Warrant with the same effect as if such Successor Entity
      had
      been named as the Company herein. Upon consummation of the Fundamental
      Transaction, the Successor Entity shall deliver to the Holder confirmation
      that
      there shall be issued upon exercise of this Warrant at
      any
      time after the consummation of the Fundamental Transaction, in lieu of the
      shares of the Common Stock (or
      other
      securities, cash, assets or other property) issuable
      upon the exercise of the Warrant prior to such Fundamental Transaction, such
      shares of stock, securities, cash, assets or any other property whatsoever
      (including warrants or other purchase or subscription rights) which the Holder
      would have been entitled to receive upon the happening of such Fundamental
      Transaction had this Warrant been converted immediately prior to such
      Fundamental Transaction, as adjusted in accordance with the provisions of this
      Warrant.
      In
      addition to and not in substitution for any other rights hereunder, prior to
      the
      consummation of any Fundamental Transaction pursuant to which holders of shares
      of Common Stock are entitled to receive securities or other assets with respect
      to or in exchange for shares of Common Stock (a "Corporate
      Event"),
      the
      Company shall make appropriate provision to insure that the Holder will
      thereafter have the right to receive upon an exercise of this Warrant
at
      any
      time after the consummation of the Fundamental Transaction but
      prior
      to the Expiration Date,
      in lieu
      of the shares of the Common Stock (or
      other
      securities, cash, assets or other property) issuable
      upon the exercise of this Warrant prior to such Fundamental
      Transaction,
      such
      shares of stock, securities, cash, assets or any other property whatsoever
      (including warrants or other purchase or subscription rights) which the Holder
      would have been entitled to receive upon the happening of such Fundamental
      Transaction had this Warrant been exercised immediately prior to such
      Fundamental Transaction. Provision
      made pursuant to the preceding sentence shall be in a form and substance
      reasonably satisfactory to the Required Holders. The provisions of this Section
      shall apply similarly and equally to successive Fundamental Transactions and
      Corporate Events and shall be applied without regard to any limitations on
      the
      exercise of this Warrant. 

     

    (c) 
      No
      sooner than fifteen (15) days nor later than ten (10) days prior to the
      consummation of a Fundamental Transaction, but not prior to the public
      announcement of such Fundamental Transaction, the Company shall deliver written
      notice thereof via facsimile and overnight courier to the Holder (a
      "Fundamental
      Transaction Notice").
      Notwithstanding the foregoing, in the event of a Fundamental Transaction in
      which a Successor Entity that is a publicly traded corporation whose stock
      is
      quoted or listed for trading on an Eligible Market does not assume this Warrant
      such that the Warrant shall be exercisable for the publicly traded Common Stock
      of such Successor Entity, then, at the request of the Holder, delivered anytime
      before the 90th day after such Fundamental Transaction, the
      Company (or the Successor Entity) shall purchase this Warrant from the Holder
      by
      paying to the Holder, within five Business Days after such request (or, if
      later, on the effective date of the Fundamental Transaction),
      cash in
      an amount equal to the Black Scholes Value of the remaining unexercised portion
      of this Warrant on the date of such Fundamental Transaction. 

     

    


    
      
        
           

        

        
          -
            12 -

          
            

          

        

        
           

        

      

    

    


    5.
       NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Certificate of Incorporation, Bylaws or through any reorganization, transfer
      of assets, consolidation, merger, scheme of arrangement, dissolution, issue
      or
      sale of securities, or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms of this Warrant, and will at
      all
      times in good faith carry out all the provisions of this Warrant and take all
      action as may be required to protect the rights of the Holder. Without limiting
      the generality of the foregoing, the Company (i) shall not increase the par
      value of any shares of Common Stock receivable upon the exercise of this Warrant
      above the Exercise Price then in effect, (ii) shall take all such actions
      as may be necessary or appropriate in order that the Company may validly and
      legally issue fully paid and nonassessable shares of Common Stock upon the
      exercise of this Warrant, and (iii) shall, so long as any of the SPA Warrants
      are outstanding take all action necessary to reserve and keep available out
      of
      its authorized and unissued shares of Common Stock, solely for the purpose
      of
      effecting the exercise of the SPA Warrants, 120% of the number of shares of
      Common Stock as shall from time to time be necessary to effect the exercise
      of
      the SPA Warrants then outstanding (without regard to any limitations on
      exercise).

     

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

     

    7.
       REISSUANCE
      OF WARRANTS.

     

    (a) Transfer
      of Warrant.
      If this
      Warrant is to be transferred, the Holder shall surrender this Warrant to the
      Company together with an opinion from Holder’s counsel, satisfactory to the
      Company and its counsel, that such transfer complies with the requirements
      of
      all applicable federal and state securities laws, whereupon the Company will
      forthwith issue and deliver upon the order of the Holder a new Warrant (in
      accordance with Section 7(d)), registered as the Holder may request,
      representing the right to purchase the number of Warrant Shares being
      transferred by the Holder and, if less then the total number of Warrant Shares
      then underlying this Warrant is being transferred, a new Warrant (in accordance
      with Section 7(d)) to the Holder representing the right to purchase the number
      of Warrant Shares not being transferred.

     

    


    
      
        
           

        

        
          -
            13 -

          
            

          

        

        
           

        

      

    

    


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

     

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

     

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

     

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

     

    


    
      
        
           

        

        
          -
            14 -

          
            

          

        

        
           

        

      

    

    


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

     

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

     

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

     

    12. DISPUTE
      RESOLUTION.
      In the
      case of a dispute as to the determination of the Exercise Price, the
      determination of the occurrence of a Dilutive Issuance which would trigger
      a
      reset of the Exercise Price,
      the
      arithmetic calculation of the Warrant Shares,
      or the
      determination of the Company entering into a transaction that would violate
      any
      of the Additional Issuance Restrictions (as defined in the Securities Purchase
      Agreement),
      the
      Company shall submit the disputed determinations or arithmetic calculations
      via
      facsimile within two Business Days of receipt of the Exercise Notice giving
      rise
      to such dispute, as the case may be, to the Holder. If the Holder and the
      Company are unable to agree upon such determination or calculation of the
      Exercise Price or the Warrant Shares within three Business Days of such disputed
      determination or arithmetic calculation being submitted to the Holder, then
      the
      Company shall, within two Business Days submit via facsimile (a) the disputed
      determination of the Exercise Price to an independent, reputable investment
      bank
(which
      is
      ranked in the top 10 investment banks nationally, by revenue) selected
      by the Company and approved by the Holder, or
      (b) a
      copy of the disputed agreement or other documentation pursuant to which the
      Holder believes securities may be issued pursuant to an Equity Line or as
      Variable Equity Securities, or which Holder believes may be a Dilutive Issuance
      which would trigger a reset of the Conversion Price, or which Holder believes
      may violate the Additional Issuance Restrictions, to an independent law firm
      selected by the Company and approved by Holder,
      or (c)
      the disputed arithmetic calculation of the Warrant Shares to the Company's
      independent, outside accountant (which
      is
      ranked in the top 10 accounting firms nationally, by revenue).
      The
      Company shall cause at its expense the investment bank, law firm or the
      accountant, as the case may be, to perform the determinations or calculations
      and notify the Company and the Holder of the results no later than ten Business
      Days from the time it receives the disputed determinations or calculations.
      Such
      investment bank's, law firm’s or accountant's determination or calculation, as
      the case may be, shall be binding upon all parties absent demonstrable
      error.
      The
      procedures required by this Section 22 are collectively referred to herein
      as
      the “Dispute
      Resolution Procedures.”

     

    


    
      
        
           

        

        
          -
            15 -

          
            

          

        

        
           

        

      

    

    


    13. REMEDIES,
      OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
      The
      remedies provided in this Warrant shall be cumulative and in addition to all
      other remedies available under this Warrant and the other Transaction Documents,
      at law or in equity (including a decree of specific performance and/or other
      injunctive relief), and nothing herein shall limit the right of the Holder
      right
      to pursue actual damages for any failure by the Company to comply with the
      terms
      of this Warrant. The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to the Holder and that the remedy at
      law
      for any such breach may be inadequate. The Company therefore agrees that, in
      the
      event of any such breach or threatened breach, specifically
      including but not limited to the Company’s failure to adjust the Exercise Price
      as required hereunder following a Dilutive Issuance, the
      holder of this Warrant shall be entitled, in addition to all other available
      remedies, to an injunction restraining any breach, without the necessity of
      showing economic loss and without any bond or other security being
      required.

     

    14. TRANSFER.
      This
      Warrant may be offered for sale, sold, transferred or assigned without the
      consent of the Company, except as may otherwise be required by Section 2(f)
      of
      the Securities Purchase Agreement.

     

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

     

    (a) "Black
      Scholes Value"
      means
      the value of this Warrant based on the Black and Scholes Option Pricing Model
      obtained from the "OV" function on Bloomberg determined as of the day
      immediately following the public announcement of the applicable Fundamental
      Transaction and reflecting (i) a risk-free interest rate corresponding to the
      U.S. Treasury rate for a period equal to the remaining term of this Warrant
      as
      of such date of request and (ii) an expected volatility equal to the greater
      of
      80% and the 100 day volatility obtained from the HVT function on
      Bloomberg.

     

    (b) "Bloomberg"
      means
      Bloomberg Financial Markets.

     

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

     

    (d) "Common
      Stock"
      means
      (i) the Company's shares of Common Stock, par value $0.0001 per share, and
      (ii) any share capital into which such Common Stock shall have been changed
      or any share capital resulting from a reclassification of such Common
      Stock.

     

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

     

    


    
      
        
           

        

        
          -
            16 -

          
            

          

        

        
           

        

      

    

    


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

     

    (g) "Eligible
      Market"
      means
      the Principal Market, The New York Stock Exchange, Inc., the American Stock
      Exchange, The NASDAQ Global Market, The NASDAQ Global Select Market, the NASDAQ
      Capital Market or the NASD’s OTC Bulletin Board.

     

    (h) "Expiration
      Date"
      means
      the date thirty-six (36) months after the Initial Closing Date under the terms
      of the Securities Purchase Agreement or, if such date falls on a day other
      than
      a Business Day or on which trading does not take place on the Principal Market
      (a "Holiday"),
      the
      next date that is not a Holiday.

     

    (i) "Fundamental
      Transaction"
      means
      that the Company shall, directly or indirectly, in one or more related
      transactions, (i) consolidate or merge with or into (whether or not the Company
      is the surviving corporation) another Person, or (ii) sell, assign, transfer,
      convey or otherwise dispose of all or substantially all of the properties or
      assets of the Company to another Person, or (iii) allow another Person to make
      a
      purchase, tender or exchange offer that is accepted by the holders of more
      than
      the 50% of the outstanding shares of Common Stock (not including any shares
      of
      Common Stock held by the Person or Persons making or party to, or associated
      or
      affiliated with the Persons making or party to, such purchase, tender or
      exchange offer), or (iv) consummate a stock purchase agreement or other business
      combination (including, without limitation, a reorganization, recapitalization,
      spin-off or scheme of arrangement) with another Person whereby such other Person
      acquires more than the 50% of the outstanding shares of Common Stock (not
      including any shares of Common Stock held by the other Person or other Persons
      making or party to, or associated or affiliated with the other Persons making
      or
      party to, such stock purchase agreement or other business combination), (v)
      reorganize, recapitalize or reclassify its Common Stock, or (vi) any "person"
      or
      "group" (as these terms are used for purposes of Sections 13(d) and 14(d) of
      the
      Exchange Act) is or shall become the "beneficial owner" (as defined in Rule
      13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate
      ordinary voting power represented by issued and outstanding Common
      Stock.

     

    (j) "Options"
      means
      any rights, warrants or options to subscribe for or purchase shares of Common
      Stock or Convertible Securities, other than those that may be issued as part
      of
      a compensation package of any employee of the Company or it Subsidiaries and
      which are exercisable at a price not less than the closing price of the
      Company’s Common Stock as reported on the Principal Market on the Trading Day
      immediately preceding the date of grant.

     

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

     

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

     

    


    
      
        
           

        

        
          -
            17 -

          
            

          

        

        
           

        

      

    

    


    (m) "Principal
      Market"
      means
      the NASD OTC Bulletin Board.

     

    (n) "Required
      Holders"
      means
      the holders of the Series B Warrants representing at least a majority of shares
      of Common Stock underlying the Series B Warrants then outstanding, provided
      fifteen percent (15%) or more of the Series B Warrants originally issued remain
      outstanding.

     

    (o) “SPA
      Notes” means the Notes (as defined in the Securities Purchase
      Agreement).

     

    (p) "SPA
      Warrants"
      means
      the Warrants (as defined in the Securities Purchase Agreement).

     

    (q) "Successor
      Entity"
      means
      the Person (or, if so elected by the Required Holders, the Parent Entity) formed
      by, resulting from or surviving any Fundamental Transaction or the Person (or,
      if so elected by the Required Holders, the Parent Entity) with which such
      Fundamental Transaction shall have been entered into.

     

    (r) "Trading
      Day"
      means
      any day on which the Common Stock are traded on the Principal Market, or, if
      the
      Principal Market is not the principal trading market for the Common Stock,
      then
      on the principal securities exchange or securities market on which the Common
      Stock are then traded; provided that "Trading Day" shall not include any day
      on
      which the Common Stock are scheduled to trade on such exchange or market for
      less than 4.5 hours or any day that the Common Stock are suspended from trading
      during the final hour of trading on such exchange or market (or if such exchange
      or market does not designate in advance the closing time of trading on such
      exchange or market, then during the hour ending at 4:00:00 p.m., New York
      time).

     

    (s) "Weighted
      Average Price"
      means,
      for any security as of any date, the dollar volume-weighted average price for
      such security on the Principal Market during the period beginning at 9:30:01
      a.m., New York City time, and ending at 4:00:00 p.m., New York City time, as
      reported by Bloomberg through its "Volume at Price" function or, if the
      foregoing does not apply, the dollar volume-weighted average price of such
      security in the over-the-counter market on the electronic bulletin board for
      such security during the period beginning at 9:30:01 a.m., New York City time,
      and ending at 4:00:00 p.m., New York City time, as reported by Bloomberg, or,
      if
      no dollar volume-weighted average price is reported for such security by
      Bloomberg for such hours, the average of the highest closing bid price and
      the
      lowest closing ask price of any of the market makers for such security as
      reported in the "pink sheets" by Pink Sheets LLC (formerly the National
      Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated
      for
      such security on such date on any of the foregoing bases, the Weighted Average
      Price of such security on such date shall be the fair market value as mutually
      determined by the Company and the Required Holders. If the Company and the
      Required Holders are unable to agree upon the fair market value of such
      security, then such dispute shall be resolved pursuant to Section 12 with the
      term "Weighted Average Price" being substituted for the term "Exercise Price."
      All such determinations shall be appropriately adjusted for any share dividend,
      share split or other similar transaction during such period.

     

    [Signature
      Page Follows]

    


    


    


    
      
        
           

        

        
          -
            18 -

          
            

          

        

        
           

        

      

    

    


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

    


    


    
      	 	
              nCOAT,
                INC.

            
	 	 
	 	 
	 	
              By:
                ____________________________

            
	 	
              Name:

            
	 	
              Title:
                

            


    

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    


    EXHIBIT
      A

    


    EXERCISE
      NOTICE

    TO
      BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    SERIES
      B WARRANT TO PURCHASE COMMON STOCK

    


    nCOAT,
      INC.

    The
      undersigned holder hereby exercises the right to purchase _________________
      of
      the shares of Common Stock ("Warrant
      Shares")
      of
      nCOAT, Inc., a Delaware corporation (the "Company"),
      evidenced by the attached Warrant to Purchase Common Stock (the "Warrant").
      Capitalized terms used herein and not otherwise defined shall have the
      respective meanings set forth in the Warrant.

    


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

    


    
      	 	
              ____________

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

            


    

    


    
      	 	
              ____________

            	
              a
                "Cashless
                Exercise"
                with respect to _______________ Warrant
                Shares.

            


    

    


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

    


    3.
      Delivery of Warrant Shares. The Company shall deliver to the holder __________
      Warrant Shares in accordance with the terms of the Warrant.

    


    Date:
      _______________ __, ______

    


    


    _____________________________________

    Name
      of
      Registered Holder

    


    


    
      	
              By:

            	
              _______________________________

            


    

    Name:

    Title:

    


    


    


    


    


    


    


    
      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

    

    


    ACKNOWLEDGMENT

    


    


    The
      Company hereby acknowledges this Exercise Notice and hereby directs Nevada
      Agency & Trust Company to issue the above-indicated number of shares of
      Common Stock in accordance with the Transfer Agent Instructions dated May __,
      2007 from the Company and acknowledged and agreed to by Nevada Agency &
Trust Company.

    


    


    
      	 	
              nCOAT,
                INC.

            
	 	 
	 	 
	 	 
	 	
              By: _____________________________________________

            
	 	
              Name:
                

            
	 	
              Title: