Exhibit 10.3 - Form of Series A Warrants


    
      

      

    

    Exhibit
      10.3

       

      EXHIBIT
        C

      FORM
        OF SERIES A 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
        A 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 A 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 A 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 April __, 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. 

       


      
        
           

        

        
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      (b) Exercise
        Price.
        For
        purposes of this Warrant, "Exercise
        Price"
        means
        $1.00, 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, if at any time after the twelve
        (12)
        month anniversary of the Issuance Date, a Registration Statement (as defined
        in
        the Registration Rights Agreement) covering the Warrant Shares that are the
        subject of an Exercise Notice (the "Unavailable
        Warrant Shares")
        is not
        available for the resale of such Unavailable Warrant Shares, the Holder may,
        in
        its sole discretion, exercise this Warrant in whole or in part and, in lieu
        of
        making the cash payment otherwise contemplated to be made to the Company
        upon
        such exercise in payment of the Aggregate Exercise Price, elect instead to
        receive upon such exercise the "Net Number" of shares of Common Stock determined
        according to the following formula (a "Cashless
        Exercise"):

       

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

       

      B

       

      For
        purposes of the foregoing formula:

       

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

       

      B=
        the
        arithmetic average of the Weighted Average Prices of the shares of Common
        Stock
        (as reported by Bloomberg) for the five 

       


      
        
           

        

        
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      (5)
        consecutive Trading Days ending on the date immediately preceding the date
        of
        the Exercise Notice.

       

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

      


      (e) 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.

       


      
        
           

        

        
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      (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.

       


      
        
           

        

        
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      (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.

       


      
        
           

        

        
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      (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. 

       


      
        
           

        

        
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      (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.

       


      
        
           

        

        
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      (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. 

       


      
        
           

        

        
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      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.

       


      
        
           

        

        
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      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 A 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.”

       


      
        
           

        

        
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      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.

       


      
        
           

        

        
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      (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 sixty (60) 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.

       


      
        
           

        

        
          -17-

          
            

          

        

        
           

        

      


      (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.

       

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

       

      (n) "Registration
        Rights Agreement"
        means
        that certain registration rights agreement by and among the Company and the
        Buyers.

       

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

       

      (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).

       

      


       

      


       

      


       

      


       

      


       

      


       


      
        
           

        

        
          -18-

          
            

          

        

        
           

        

      


      (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]

      


      


      


      


      


      


       

       

       

       

       

       

       

       

       

      
 

      


      



      
        
           

        

        
          -19-

          
            

          

        

        
           

        

      


      IN
        WITNESS WHEREOF,
        the
        Company has caused this Series A 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
        A 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: