Document:

REGISTRATION RIGHTS AGREEMENT

      REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of December 31,
2004, by and among Western Goldfields, Inc., an Idaho corporation, with
headquarters located at 961 Matley Lane, Suite 120, Reno, Nevada 89502 (the
"Company"), and the undersigned investors (as listed on Schedule A hereto, as
amended from time to time, each, an "Investor" and collectively, the
"Investors").

      WHEREAS:

      A. In connection with the Subscription Agreement by and among the parties
hereto of even date herewith (the "Subscription Agreement"), the Company has
agreed, upon the terms and subject to the conditions of the Subscription
Agreement, to issue and sell to the Investors (i) Units consisting of (i) shares
(the "Issued Shares") of the Company's Series "A-1" Convertible Preferred Stock,
$0.01 par value per share (the "Preferred Stock"), and (ii) warrants
("Warrants") to purchase shares of Preferred Stock (as issued upon exercise of
the Warrants, the "Warrant Shares").

      B. To induce the Investors to execute and deliver the Subscription
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "Securities
Act"), and applicable state securities laws.

      NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors
hereby agree as follows:

      1. DEFINITIONS.

      As used in this Agreement, the following terms shall have the following
meanings:

            a. "Investor" means an Investor, any permitted transferee or
assignee thereof who purchases at least $150,000 of Registrable Securities and
to whom an Investor assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with Section 9,
any permitted transferee or assignee thereof to whom a transferee or assignee
assigns its rights under this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9 and any seller of
Registrable Securities pursuant to a Registration Statement.

            b. "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof, governmental agency or other
entity.

            c. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the Securities Act and pursuant
to Rule 415 under the Securities Act or any successor rule providing for
offering securities on a continuous basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").

            d. "Registrable Securities" means (i) the common stock, par value
$0.01 per share (the "Common Stock"), of the Company issued or issuable upon
conversion of (A) the Issued Shares or (B) the Warrant Shares, and (ii) any
shares of capital stock issued or issuable with respect to the foregoing as a
result of any stock split, stock dividend, recapitalization, anti-dilution
adjustment, exchange or similar event or otherwise, without regard to any
limitation on conversion of Preferred Stock sold in the Offering or exercise of
Warrants. In case the Company merges with another entity, the Common Stock
issuable upon conversion of the Issued Shares and Warrant Shares will be
exchanged or exchangeable into similar securities of the survivor entity and
such exchanged securities will be Registrable Securities.

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                  e. "Registration Statement" means a registration statement or
registration statements of the Company filed under the Securities Act.

      2. REGISTRATION.

            a. Mandatory Registration. The Company shall prepare, and, as soon
as practicable, but in no event later 30 days after the date of this Agreement
(the "Scheduled Filing Date"), file with the SEC a Registration Statement or
Registration Statements (as is necessary) on Form SB-2 (the "Registration
Statement") covering the resale of all of the Registrable Securities. In the
event that Form SB-2 is unavailable for such registrations, the Company shall
use such other form as is available for such registrations. Any Registration
Statement prepared pursuant hereto shall register for resale at least that
number of shares of Common Stock equal to the number of Registrable Securities
issued and issuable as of the date immediately preceding the date the
Registration Statement is initially filed with the SEC. The Company shall cause
the Registration Statement to be declared effective under the Securities Act no
later than the date (the "Effectiveness Deadline Date") that is ninety (90) days
(or, in the case of a full review by the SEC, one hundred and thirty-five (135)
days) after the Closing Date, or, if earlier, within five (5) days of SEC
clearance to request acceleration of effectiveness. The Company shall keep the
Registration Statement (or any subsequent Registration Statement) continuously
effective under the Securities Act until the expiration of the Registration
Period (defined in Section 3.a below).

            b. Piggy-Back Registrations.

            i. Each time that the Company proposes for any reason to register
      any of its Common Stock under the Securities Act in connection with the
      proposed offer and sale of its Common Stock for either for its own account
      or on behalf of any other security holders (a "Proposed Registration") on
      a form which is suitable for an offering for cash of shares of the Company
      held by third parties and which is not a registration solely to implement
      an employee benefit plan, a registration statement on Form S-4 (or
      successor form) or a transaction to which Rule 145 or any other similar
      rule of the SEC is applicable, the Company shall promptly give written
      notice of such proposed registration to the Investors and shall offer the
      Investors the right to request inclusion of the Registrable Securities
      held by such holders in the Proposed Registration.

            ii. Each Investor shall have 20 days from the receipt of such notice
      to deliver to the Company a written request specifying the number of
      Registrable Securities such Investor intends to sell and such Investor's
      intended method of disposition.

            iii. In the event that the Proposed Registration is, in whole or in
      part, an underwritten public offering, the Company shall so advise the
      Investor as part of the written notice given pursuant to Section 2.b.i,
      and any request under 2.b.ii must specify that the Registrable Securities
      be included in the underwriting on the same terms and conditions as the
      Common Stock, if any, otherwise being sold through underwriters under such
      registration.

            iv. In the event that the offering is to be an underwritten
      offering, the Investors proposing to distribute their Registrable
      Securities through such underwritten offering agree to enter into a
      customary underwriting agreement with the underwriter or underwriters
      selected for such underwriting by the Company.

            v. Notwithstanding the foregoing if, in its good faith judgment, the
      managing underwriter determines and advises the Company in writing that
      the inclusion of all Registrable Securities proposed to be included in the
      underwritten public offering, together with any other Common Stock
      proposed to be included therein other than Registrable Securities (such
      other shares collectively the "Other Shares"), would interfere with the
      successful marketing of such securities, then the number of shares that
      are entitled to be included in the registration and underwriting shall be
      allocated in the following manner: (A) first, securities the Company
      proposes to sell for its own account, (B) second, Registrable Securities,
      pro rata among the Investors on the basis of the number of shares for
      which each such Investor has requested registration, and (C) third, Other
      Shares, pro rata among the respective holders thereof on the basis of the
      number of shares for which each such requesting holder has requested
      registration.

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<PAGE>

      3. RELATED OBLIGATIONS.

      Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2, the Company will use its best efforts to
effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:

            a. The Company shall keep each of the Registration Statements
required to be filed hereunder effective pursuant to Rule 415 at all times until
the earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) promulgated under the Securities Act (or
successor thereto) assuming for this purpose that the Investors are not
officers, directors, affiliates or control persons of the Company, (ii) the date
on which (A) the Investors shall have sold all the Registrable Securities
covered by such Registration Statement and (B) none of the Preferred Stock or
Warrants is outstanding, or (iii) two years from the date hereof (the
"Registration Period"). The Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.

            b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the Securities Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement.

            c. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, all
exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as such
Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.

            d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as any Investor whose Registrable Securities are included in the
Registration Statement reasonably requests, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3.d, (y) subject itself to
general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
each Investor who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threat of any proceeding for such purpose.

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<PAGE>

            e. In the event Investors who hold a majority of the Registrable
Securities being offered in the registration select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering; provided, however, that the Company shall have
the right to consent to the selection of such underwriter, which consent shall
not be unreasonably withheld.

            f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor in writing of the happening of any event
as a result of which the prospectus included in a Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor (or such other
number of copies as such Investor may reasonably request). The Company shall
also promptly notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness and by overnight mail), (ii) of
any request by the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information, and (iii) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate.

            g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Investor who holds Registrable Securities being sold
(and, in the event of an underwritten offering, the managing underwriters) of
the issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.

            h. The Company shall make available for inspection by (i) any
Investor, (ii) legal counsel retained by the Investors, (iii) any underwriter
participating in any disposition pursuant to a Registration Statement, (iv) one
firm of accountants or other agents retained by the Investors and (v) one firm
of attorneys retained by such underwriters (collectively, the "Inspectors") all
pertinent financial and other records, and pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
deemed necessary by each Inspector in connection with the Registration
Statement, and cause the Company's officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall hold in strict confidence and shall not make any
disclosure (except to an Investor) or use of any Records or other information
provided by the Company hereunder. Each Investor agrees, and shall cause each
Inspector to agree, that it shall, upon learning that disclosure of such Records
is sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential.

            i. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement. The Company
agrees that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor, at the Investor's expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.

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<PAGE>

            j. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each securities exchange or market on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange or
market, or (ii) secure the inclusion for quotation on the over-the-counter
market on the electronic bulletin board for such Registrable Securities. The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3.j.

            k. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request.

            l. The Company shall maintain a transfer agent and registrar of all
such Registrable Securities not later than the effective date of such
Registration Statement.

            m. If requested by the managing underwriters or an Investor, the
Company shall: (i) immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investors agree should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and any other terms
of the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; (ii) make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any Registration Statement
if requested by an Investor or any underwriter of such Registrable Securities.

            n. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the distribution of such Registrable Securities.

            o. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.

            p. Within three (3) business days after a Registration Statement is
ordered effective by the SEC, the Company shall notify the transfer agent for
the Registrable Securities covered thereby that such Registration Statement has
been declared effective by the SEC.

            q. In the event that (i) the Registration Statement to be filed by
the Company pursuant to Section 2.a above is not declared effective by the
Commission within ninety (90) days from the Closing Date ninety (90) days (or,
in the case of a full review by the SEC, one hundred and thirty-five (135) days)
after the Closing Date or five (5) days of clearance by the SEC to request
effectiveness, or (ii) such Registration Statement is not maintained as
effective by the Company for the period set forth in Section 2.a above (each a
"Registration Default") then the Company will pay Investor (pro rated on a daily
basis) in cash or, at the option of the Investor, in shares of Common Stock at
the Conversion Price (as defined in the Articles of Amendment, as defined in the
Subscription Agreement) on the trading day prior to the date of payment, as
liquidated damages for such failure, and not as a penalty, two percent (2%) of
the aggregate market value of the Common Shares which would be issuable or that
have been issued upon conversion of the Preferred Stock on any date of
determination, and whether or not the Preferred Shares are then convertible
pursuant to their terms) and held by the Investor for each month thereafter
until such Registration Statement has been filed, and in the event of late
effectiveness (in case of clause (ii) above) or lapsed effectiveness (in the
case of clause (iii) above), two percent (2%) of the aggregate market value of
the Common Shares which would be issuable or that have been issued upon
conversion of the Preferred Stock on any date of determination, and whether or
not the Preferred Shares are then convertible pursuant to their terms) for each
month thereafter (regardless of whether one or more such Registration Defaults
are then in existence) until such Registration Statement has been declared
effective. Such payment of the liquidated damages shall be made to the Investors
in cash, within five (5) calendar days of demand, provided, however, that the
payment of such liquidated damages shall not relieve the Company from its
obligations to register the Registrable Securities pursuant to this Agreement.
The market value of the Common Shares for this purpose shall be the closing
price (or last trade, if so reported) on the principal market for the Company's
Common Shares each day during such Registration Default. Notwithstanding
anything to the contrary contained herein, a failure to maintain the
effectiveness of an filed Registration Statement or the ability of an Investor
to use an otherwise effective Registration Statement to effect resales of
Securities during the period after forty-five (45) days and within ninety (90)
days from the end of the Company's fiscal year resulting solely from the need to
update the Company's financial statements contained or incorporated by reference
in such Registration Statement shall not constitute a Registration Default and
shall not trigger the accrual of liquidated damages hereunder.

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<PAGE>

            If the Company does not remit the payment to the Investors as set
forth above, the Company will pay the Investors reasonable costs of collection,
including attorneys' fees, in addition to the liquidated damages. The
registration of the Registrable Securities pursuant to this provision shall not
affect or limit the Investors' other rights or remedies as set forth in this
Agreement.

      4. OBLIGATIONS OF THE INVESTORS.

            a. At least seven (7) business days prior to the first anticipated
filing date of a Registration Statement, the Company shall notify each Investor
in writing of the information the Company requires from each such Investor if
such Investor elects to have any of such Investor's Registrable Securities
included in such Registration Statement. It shall be a condition precedent to
the obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself as the Company may reasonably request, including, without limitation, the
Registrable Securities held by it and the intended method of distribution of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities, and shall execute such documents in
connection with such registration as the Company may reasonably request.

            b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.

            c. In the event any Investor elects to participate in an
underwritten public offering pursuant to Section 2.b, each such Investor agrees
to enter into and perform such Investor's obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Securities.

            d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.g or
the first sentence of Section 3.f, such Investor will immediately discontinue
distribution of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3.g or the
first sentence of Section 3.h.

            e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.

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            f. Each Investor agrees not to take any action to cause such
Investor to become a registered broker-dealer as defined under the 1934 Act or
to effect any change to such Investor's status that would preclude the Company
from using Form S-3 for the Registration Statement.

      5. EXPENSES OF REGISTRATION.

      All reasonable expenses (other than expenses incurred pursuant to Section
3.h and underwriting discounts and commissions) incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, and fees and disbursements of counsel for
the Company shall be paid by the Company.

      6. INDEMNIFICATION.

      In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

            a. To the fullest extent permitted by law, the Company agrees to
indemnify and hold harmless each Investor who holds such Registrable Securities,
the directors, officers, partners, employees, agents, representatives of, and
each Person, if any, who controls any Investor within the meaning of the
Securities Act or the 1934 Act, and any underwriter (as defined in the
Securities Act) of Registrable Securities, and the directors and officers of,
and each Person, if any, who controls, any such underwriter within the meaning
of the Securities Act or the 1934 Act (each, an "Indemnified Person"), against
any losses, claims, damages, liabilities, judgments, fines, penalties, charges,
costs, reasonable attorneys' fees, amounts paid in settlement or expenses, joint
or several, (collectively, "Claims") incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency or body or the SEC, whether pending or threatened,
whether or not an Indemnified Party is or may be a party thereto, to which any
of them may become subject insofar as such Claims arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact in
a Registration Statement under which such Investor's Registrable Securities were
registered or any post-effective amendment thereto or the omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.

      The Company shall reimburse each such Indemnified Person, promptly as such
      expenses are reasonably incurred and are due and payable, for any
      reasonable legal fees or reasonable other expenses incurred by them in
      connection with investigating or defending any such Claim.

      Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6.a: (i) shall not apply to
a Claim by an Indemnified Person arising out of or based upon a Claim which
occurs in reliance upon and in conformity with information furnished in writing
to the Company by or on behalf of such Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3.c or Section 3.f; (ii) with
respect to any preliminary prospectus, shall not inure to the benefit of any
such person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected in the prospectus, as
then amended or supplemented, if such prospectus was timely made available by
the Company pursuant to Section 3.c or Section 3.f, and the Indemnified Person
was promptly advised in writing not to use the incorrect prospectus prior to the
use giving rise to a violation and such Indemnified Person, notwithstanding such
advice, used it; (iii) shall not be available to the extent such Claim is based
on a failure of the Indemnified Person to deliver or to cause to be delivered
the prospectus made available by the Company, if such prospectus was timely made
available by the Company pursuant to Section 3.c or Section 3.f; and (iv) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld.

            b. In connection with any Registration Statement, each such Investor
agrees to severally and not jointly indemnify and hold harmless, to the same
extent and in the same manner as is set forth in Section 6.a, the Company, each
of its directors, officers, partners, employees, agents, representatives,
Persons, if any, who control the Company within the meaning of the Securities
Act or the 1934 Act (each a "Company Indemnified Party," and collectively and
together with an Indemnified Person, each an "Indemnified Party"), against any
Claim to which any of them may become subject, arising out of or are based upon
any written information furnished to the Company by or on behalf of such
Investor expressly for use in connection with such Registration Statement; and,
subject to Section 6.d, such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating, preparing or
defending any such action, claim, suit, inquiry, proceeding, investigation or
appeal taken form the foregoing by or before any court or governmental,
administrative or other regulatory agency or body or the SEC, whether pending or
threatened, whether or not a Company Indemnified Party is or may be a party
thereto Claim; provided, however, that the Investor shall be liable under this
Section 6.b for only that amount of a Claim as does not exceed the public
offering price of the Registrable Securities offered by such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Company Indemnified Party and
shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.

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            c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution of the Company's securities, to
the same extent as provided above, with respect to information such persons so
furnished in writing expressly for inclusion in a Registration Statement.

            d. Promptly after receipt by an Indemnified Party under this Section
6 of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Party
shall, if a Claim in respect thereof is to be made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Party shall have the right to retain its own counsel with the fees
and expenses to be paid by the indemnifying party, if, the Indemnified Party and
indemnifying party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the Indemnified Party
reasonably may be deemed to conflict with the interests of the indemnifying
party. The Company shall pay reasonable fees for only one separate legal counsel
for the Investors, and such legal counsel shall be selected by the Investors
holding a majority of the Registrable Securities included in the Registration
Statement to which the Claim relates. The Indemnified Party shall cooperate
fully with the indemnifying party in connection with any negotiation or defense
of any such action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified Party
which relates to such action or claim. The indemnifying party shall keep the
Indemnified Party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the Indemnified Party, consent to entry of any
judgment or enter into any settlement or other compromise which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action.

      7. CONTRIBUTION.

      To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the public offering price of the
Registrable Securities offered by such seller pursuant to such registration.

                                       8
<PAGE>

      8. REPORTS UNDER THE 1934 ACT.

            a. With a view to making available to the Investors the benefits of
Rule 144 promulgated under the Securities Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"),
during the Registration Period, the Company agrees to:

                  i. make and keep public information available, as those terms
            are understood and defined in Rule 144;

                  ii. file with the SEC in a timely manner all reports and other
            documents required of the Company under the Securities Act and the
            1934 Act so long as the Company remains subject to such requirements
            and the filing of such reports and other documents is required for
            the applicable provisions of Rule 144; and

                  iii. furnish to each Investor so long as such Investor owns
            Registrable Securities, promptly upon request, (i) a written
            statement by the Company that it has complied with the reporting
            requirements of the 1934 Act, (ii) a copy of the most recent annual
            or quarterly report of the Company and such other reports and
            documents filed by the Company with the SEC, and (iii) such other
            information as may be reasonably requested to permit the Investors
            to sell such securities pursuant to Rule 144.

            b. Each Investor agrees and acknowledges that this Agreement,
including, but not limited this Section 8, shall be subject to any agreements
relating to confidentiality to which the Company is the subject, and any
applicable statutes and regulations (including, but not limited to, Regulation
FD under the 1934 Act).

      9. ASSIGNMENT OF REGISTRATION RIGHTS.

      The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the
Securities Act and applicable state securities laws; (iv) at or before the time
the Company receives the written notice contemplated by clause (ii) of this
sentence the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein; (v) the transferee purchases or
acquires at least $150,000 of Registrable Securities; and (vi) such transfer
shall have been made in accordance with the applicable requirements of, and
subject to the restrictions set forth in, the Subscription Agreement; provided
that the Company shall only be required to effect one registration hereunder
with respect to any particular Registrable Securities.

      10. AMENDMENT OF REGISTRATION RIGHTS.

            Provisions of this Agreement may be amended and the observance
      thereof may be waived (either generally or in a particular instance and
      either retroactively or prospectively), only with the written consent of
      the Company and Investors who then hold or have the right to acquire
      two-thirds (2/3) of the Registrable Securities. Any amendment or waiver
      effected in accordance with this Section 10 shall be binding upon each
      Investor and the Company. No such amendment shall be effective to the
      extent that it applies to less than all of the holders of the Registrable
      Securities. No consideration shall be offered or paid to any Person to
      amend or consent to a waiver or modification of any provision of any of
      this Agreement unless the same consideration also is offered to all of the
      parties to this Agreement.

                                       9
<PAGE>

      11. MISCELLANEOUS.

            a. If the Company receives conflicting instructions, notices or
elections from two (2) or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities set
forth on the books and records of the Company.

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

            If to the Company: At the address above

            If to an Investor: To its address and facsimile number on the
                               Schedule of Investors attached hereto,

with copies to such Investor's representatives as set forth on the Schedule of
Investors or to such other address and/or facsimile number and/or to the
attention of such other person as the recipient party has specified by written
notice given to each other party five days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically generated by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of such transmission or (C) provided by a courier or
overnight courier service shall be rebuttable evidence of personal service,
overnight or courier delivery or transmission by facsimile in accordance with
clause (i), (ii) or (iii) above, respectively.

            c. Failure of any party to exercise any right or remedy under this
Agreement, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.

            d. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by the internal laws of
the State of Nevada, without giving effect to any choice of law or conflict of
law provision or rule that would cause the application of the laws of any
jurisdictions other than the State of Nevada. If any provision of this Agreement
shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of any provision
of this Agreement. Any dispute under this Agreement shall be governed and
resolved pursuant to the terms of the Subscription Agreement.

            e. This Agreement and the Subscription Agreement (and the documents,
instruments, agreements and exhibits related thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement and the
Subscription Agreement (and the documents, instruments, agreements and exhibits
related thereto) supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.

            f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.

            g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

            h. This Agreement may be executed in multiple identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.

                                       10
<PAGE>

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

            j. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.

            k. This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

                                   * * * * * *

<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.

COMPANY:                                INVESTOR:
-------                                 --------

Western Goldfields, Inc.                Name RAB Special Situations, LP___

By:  /s/ Mark Shonnard                  By: /s/ W.P.S. Richards
     ------------------------------        -------------------------------------
Name:  Mark Shonnard                       Name: W.P.S. Richards
Its:        CFO                            Its:  Director of General Partner

<PAGE>

                              SCHEDULE OF INVESTORS

      RAB Special Situations, LPWARRANT EXCHANGE AGREEMENT

                                  by and among

                            Sirna Therapeutics, Inc.

             and certain Warrantholders of Sirna Therapeutics, Inc.

                                   dated as of

                                December 30, 2004

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               PAGE
<S>                                                                                                              <C>
ARTICLE I EXCHANGE OF WARRANTS....................................................................................1

         1.1      Exchange of Warrants............................................................................1
         1.2      Exchange Procedures.............................................................................2
         1.3      Lost, Stolen, Destroyed or Never-Received Warrants..............................................2

ARTICLE II CLOSING................................................................................................3

         2.1      Time and Place..................................................................................3
         2.2      Deliveries of the Warrantholders................................................................3
         2.3      Deliveries of the Company.......................................................................3

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................4

         3.1      Organization, Good Standing and Qualification...................................................3
         3.2      Authorization...................................................................................3
         3.3      Governmental Consents...........................................................................3
         3.4      Offering........................................................................................3

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF WARRANTHOLDERS.......................................................4

         4.1      Authorization...................................................................................4
         4.2      Investment Experience...........................................................................4
         4.3      Investment Intent...............................................................................4
         4.4      Registration of Exemption Requirements..........................................................4
         4.5      No Legal, Tax or Investment Advice..............................................................4

ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY......................................................5

         5.1      Delivery of Warrants............................................................................5
         5.2      Representations and Warranties..................................................................5
         5.3      Performance.....................................................................................5
         5.4      Qualifications..................................................................................6

ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF THE WARRANTHOLDERS..............................................6

         6.1      Representations and Warranties..................................................................5
         6.2      Performance.....................................................................................6
         6.3      Qualifications..................................................................................6

ARTICLE VII REGISTRATION RIGHTS...................................................................................6

         7.1      Registration Rights.............................................................................6
         7.2      Assignment of Rights...........................................................................11

ARTICLE VIII LOCKUP..............................................................................................12

         8.1      Lock Up Agreement..............................................................................12
         8.2      Stop Transfer Instructions.....................................................................12
         8.3      Covenant not to Acquire........................................................................12
</TABLE>

                                      -i-
<PAGE>

<TABLE>
<S>                                                                                                             <C>
ARTICLE IX MISCELLANEOUS PROVISIONS..............................................................................13

         9.1      Notice.........................................................................................13
         9.2      Entire Agreement...............................................................................13
         9.3      Binding Effect.................................................................................13
         9.4      Waiver; Consent................................................................................14
         9.5      Counterparts...................................................................................14
         9.6      Severability...................................................................................14
         9.7      Governing Law..................................................................................14
         9.8      California Corporate Securities Law............................................................14
         9.9      Law Firm; Waiver of Conflicts..................................................................14
</TABLE>

                                      -ii-

<PAGE>

                           WARRANT EXCHANGE AGREEMENT

         THIS WARRANT EXCHANGE AGREEMENT (this "AGREEMENT") is dated as of
December 30, 2004, by and among Sirna Therapeutics, Inc., a Delaware corporation
(the "COMPANY") and those warrantholders of the Company listed on Exhibit A to
this Agreement (each a "WARRANTHOLDER" and collectively the "WARRANTHOLDERS")
who have executed this Agreement in one or more counterparts.

         WHEREAS, the Company has determined that it is in the best interests of
the Company to offer to exchange each warrant issued to the Warrantholders
(except that James Niedel and Sprout Group shall exchange only 25% of the
warrant shares issued under his or its warrants) pursuant to that certain Common
Stock and Warrant Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of
February 11, 2003, by and among the Company and the investors listed on Exhibit
A thereto, for two replacement warrants as follows: (i) the first replacement
warrant shall be in substantially the form attached hereto as Exhibit B, shall
be exercisable at the same price per share and for the same number of shares as
the warrant issued to the Warrantholder pursuant to the Purchase Agreement
(except for the Sprout-Niedel Original Warrants, as provided below) and have
terms and conditions substantially the same as in the warrant issued pursuant to
the Purchase Agreement except that such warrant shall only be exercisable for
cash and have no net exercise provision, shall expire on and not be exercisable
after February 7, 2005, and shall have the registration rights provided herein
and (ii) the second replacement warrant shall be in substantially the form
attached hereto as Exhibit C, shall be exercisable for 110% of the number of
shares as the warrant issued to the Warrantholder pursuant to the Purchase
Agreement (except for the Sprout-Niedel Original Warrants, as provided below)
and have terms and conditions substantially the same as in the warrant issued
pursuant to the Purchase Agreement except that such warrant shall have an
exercise price of $3.85 per share (as adjusted for stock splits, reverse stock
splits, stock dividends, recapitalizations or similar events), subject to
adjustment and anti-dilution protection as provided therein, the registration
rights provided herein, and shall not be exercisable after December 30, 2009;
and

         WHEREAS, the Warrantholders have determined that it is in their best
interests to exchange each outstanding warrant issued under the Purchase
Agreement held by them for two warrants as provided herein.

         NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:

                                   ARTICLE I

                              EXCHANGE OF WARRANTS

         1.1 Exchange of Warrants.

              (a) On the terms and conditions of this Agreement, the
Warrantholders who are signatories to this Agreement will tender the warrants
issued pursuant to the Purchase Agreement to the Company and the Company will
issue two replacement warrants as follows:

<PAGE>

              (i) the first replacement warrant shall be in substantially the
form attached hereto as Exhibit B, shall be exercisable at the same price per
share and, as set forth in Exhibit A hereto, for the number of shares as the
warrant issued to the Warrantholder pursuant to the Purchase Agreement
multiplied by 1.00 (except that, as set forth in Exhibit A hereto, the first
replacement warrant for each of the warrants held by the Sprout Group or James
Niedel, each of which are identified with an asterisk in Exhibit A (the
"SPROUT-NIEDEL ORIGINAL WARRANTS"), shall be exercisable for the number of
shares as the warrant issued to such Warrantholder pursuant to the Purchase
Agreement multiplied by 0.25) and have terms and conditions substantially the
same as in the warrant issued pursuant to the Purchase Agreement except that
such warrant shall only be exercisable for cash and have no net exercise
provision, shall expire on and not be exercisable after February 7, 2005, and
shall have the registration rights provided herein and

              (ii) the second replacement warrant shall be in substantially the
form attached hereto as Exhibit C, shall be exercisable for, as set forth in
Exhibit A hereto, the number of shares as the warrant issued to the
Warrantholder pursuant to the Purchase Agreement multiplied by 1.10 (except
that, as set forth in Exhibit A hereto, the second replacement warrant for each
of the Sprout-Niedel Original Warrants shall be exercisable for the number of
shares as the warrant issued to such Warrantholder pursuant to the Purchase
Agreement multiplied by 0.275 (such number being 25% of 1.10)) and have terms
and conditions substantially the same as in the warrant issued pursuant to the
Purchase Agreement except that such warrant shall have an exercise price of
$3.85 per share (as adjusted for stock splits, reverse stock splits, stock
dividends, recapitalizations or similar events), subject to adjustment and
anti-dilution protection as provided therein, the registration rights provided
herein, and shall not be exercisable after December 30, 2009.

         (b) Each warrant issued and outstanding immediately prior to the
exchange described in Section 1.1(a) above and tendered to the Company shall be
canceled and extinguished upon consummation of such exchange except that each
Sprout-Niedel Original Warrant shall not be canceled or extinguished but instead
(i) shall have typed or written thereon the following legend, "EXERCISE OF THIS
WARRANT IS SUBJECT TO THE WARRANT EXCHANGE AGREEMENT, DATED AS OF DECEMBER 30,
2004, BETWEEN SIRNA THERAPEUTICS, INC., THE HOLDER HEREOF, AND CERTAIN
WARRANTHOLDERS." and (ii) the number of warrant shares wherever set forth on
such Sprout-Niedel Original Warrant shall be crossed out and a new number equal
to such crossed-out number multiplied by 0.75 shall be typed or written thereon.

         1.2 Exchange Procedures. At each Closing (as defined below), the
Company shall issue (i) each Warrantholder participating in such Closing who has
both executed this Agreement and tendered all appropriate documents and
certificates as set forth herein, the two replacement warrants described in
Section 1.1 hereof and (ii) each holder of a Sprout-Niedel Original Warrant the
Sprout-Niedel Original Warrant modified in accordance with Section 1.1(b) above.
Thereafter such Warrantholders shall cease to have any further right, title or
interest in and to the warrants surrendered for exchange except that each holder
of the Sprout-Niedel Original Warrant shall have right, title, and interest in
his or its modified Sprout-Niedel Original Warrant in accordance with Section
1.1(b) above.

                                       2
<PAGE>

         1.3 Lost, Stolen, Destroyed or Never-Received Warrants. In the event
any warrant to be surrendered for exchange shall have been lost, stolen,
destroyed or never received, the Warrantholder shall nonetheless be entitled to
receive the replacement warrants in exchange therefor as set forth in this
Article I upon the making of an affidavit of that fact and receipt of an
indemnity reasonably satisfactory to the Company with respect to the securities
alleged to have been lost, stolen, destroyed or never received.

                                   ARTICLE II

                                     CLOSING

         2.1 Time and Place. The consummation of the exchange of securities
pursuant to Article I hereof (the "CLOSING") shall occur at O'Melveny & Myers
LLP, 2765 Sand Hill Road, Menlo Park, CA 94025, on the date hereof (the "CLOSING
DATE").

         2.2 Deliveries of the Warrantholders. At the Closing, the
Warrantholders participating in the Closing will execute and deliver or cause to
be executed and delivered to the Company: (i) the warrants to be cancelled (or,
in the case of the Sprout-Niedel Original Warrants, modified) in exchange for
the two replacement warrants (and, in the case of the Sprout-Niedel Original
Warrants, modified Sprout-Niedel Original Warrants) and (ii) such other
documents and instruments as the Company or its counsel reasonably shall deem
necessary to consummate the transactions contemplated by this Agreement.

         2.3 Deliveries of the Company. At the Closing, the Company will issue
two replacement warrants to each Warrantholder participating in the Closing and
to each holder of a Sprout-Niedel Original Warrant a modified Sprout-Niedel
Original Warrant, each as described in Article I of this Agreement.

                                  ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company hereby represents and warrants that:

         3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own and operate its properties and assets and to carry on its business as now
conducted and as presently proposed to be conducted.

                  3.2 Authorization. All corporate action on the part of the
         Company, its officers, directors and stockholders necessary for the
         authorization, execution and delivery of this Agreement, the
         performance of all obligations of the Company hereunder and the
         authorization (or reservation for issuance), sale and issuance of the
         warrants being issued hereunder (the "WARRANTS") and the shares of
         Common Stock issuable upon exercise of the Warrants (the Warrants and
         such shares of Common Stock being collectively referred to herein as
         the "SECURITIES") has been taken or will be taken prior to the Closing.
         This Agreement constitutes a valid and legally binding obligation of
         the Company, enforceable in accordance with its terms, except (i) as
         limited by applicable bankruptcy, insolvency, reorganization,
         moratorium and other laws of general application affecting enforcement
         of creditors' rights generally and (ii) as limited by laws relating to
         the availability of specific performance, injunctive relief or other
         equitable remedies.

                                       3
<PAGE>

                  3.3 Governmental Consents. No consent, approval, order or
         authorization of, or registration, qualification, designation,
         declaration or filing with, any federal, state or local governmental
         authority on the part of the Company is required in connection with the
         consummation of the transactions contemplated by this Agreement, except
         for: (i) the filing of a Notice of Transaction pursuant to Section
         25102(f) of the California Corporate Securities Law of 1968, as
         amended, and the rules thereunder, which filing will be effected within
         the time prescribed by law, and (ii) such other filings required
         pursuant to applicable federal and state securities laws and blue sky
         laws, which filings will be effected within the required statutory
         period.

                  3.4 Offering. Subject in part to the truth and accuracy of the
         Warrantholders' representations set forth in Article 4 of this
         Agreement, the offer, exchange and issuance of the Warrants as
         contemplated by this Agreement are exempt from the registration
         requirements of the Securities Act of 1933, as amended (the "SECURITIES
         ACT"), and the qualification or registration requirements of applicable
         blue sky laws. Neither the Company nor any authorized agent acting on
         its behalf will take any action hereafter that would cause the loss of
         such exemptions.

                                   ARTICLE IV

              REPRESENTATIONS AND WARRANTIES OF THE WARRANTHOLDERS

         Each Warrantholder hereby represents and warrants, for and as to itself
only, to the Company with respect to the Securities to be issued hereunder as
follows:

         4.1 Authorization. (i) Such Warrantholder has all requisite legal and
corporate or other power and capacity and has taken all requisite corporate or
other action to execute and deliver this Agreement, to exchange the warrants
issued pursuant to the Purchase Agreement for the Warrants and to carry out and
perform all of its obligations under this Agreement; and (ii) this Agreement
constitutes the legal, valid and binding obligation of such Warrantholder,
enforceable in accordance with its terms, except (A) as limited by applicable
bankruptcy, insolvency, reorganization, or similar laws relating to or affecting
the enforcement of creditors' rights generally and (B) as limited by equitable
principles generally.

         4.2 Investment Experience. Such Warrantholder is an "Accredited
Investor" as defined in Rule 501(A) under the Securities Act. Such Warrantholder
is aware of the Company's business affairs and financial condition and has had
access to due diligence information, and the opportunity to ask questions of,
and receive answers from, representatives of the Company, in each case
concerning the finances, operations and business of the Company, and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities. Such Warrantholder has such
sophistication, knowledge and experience in financial and business matters so as
to be capable of evaluating the merits and risks of investing in the Company,
and has the ability to bear the economic risks of investing in the Company,
including a complete loss of such investment.

                                       4
<PAGE>

         4.3 Investment Intent. Such Warrantholder is acquiring the Securities
for its own account as principal, for investment purposes only, and not with a
present view to, or for, resale or distribution thereof, in whole or in part, in
violation of the Securities Act. Such Warrantholder understands that its
acquisition of the Securities has not been registered under the Securities Act
or registered or qualified under any state securities law in reliance on
specific exemptions therefrom, which exemptions may depend upon, among other
things, the bona fide nature of such Warrantholder's investment intent as
expressed herein. Such Warrantholder will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Securities, except
in compliance with the terms of this Agreement and the registration requirements
of the Securities Act, and the rules and regulations promulgated thereunder, or
an exemption thereunder.

         4.4 Registration or Exemption Requirements. Such Warrantholder further
acknowledges and understands that the Securities may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available. Such Warrantholder
understands that the Securities will be imprinted with a legend to such effect.

         4.5 No Legal, Tax or Investment Advice. Such Warrantholder understands
that nothing in this Agreement or any other materials presented to such
Warrantholder in connection with the issuance of the Securities constitutes
legal, tax or investment advice. Such Warrantholder has consulted such legal,
tax and investment advisors as it, in its sole discretion, has deemed necessary
or appropriate in connection with its acquisition of the Securities.

                                   ARTICLE V

               CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY

         The obligations of the Company to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at or before the
Closing, of all the following conditions, unless waived in writing by the
Company:

         5.1 Delivery of Warrants. The Company shall have received the warrants
to be exchanged (or, in the case of the Sprout-Niedel Original Warrants,
modified) hereunder (or an affidavit and indemnity as provided in Section 1.3
above for any such warrant that such Warrantholder is unable to produce) held by
the Warrantholders participating in the Closing.

         5.2 Representations and Warranties. The representations and warranties
of the Warrantholders contained in Article IV shall be true and correct on and
as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.

         5.3 Performance. All covenants, agreements and conditions contained in
this Agreement or necessary or appropriate to allow the consummation of the
transactions contemplated by this Agreement shall be performed by the
Warrantholders on or prior to the Closing.

                                       5
<PAGE>

         5.4 Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body that are required in connection
with the lawful issuance of the Securities pursuant to this Agreement shall be
obtained and effective as of the Closing.

                                   ARTICLE VI

            CONDITIONS PRECEDENT TO OBLIGATIONS OF THE WARRANTHOLDERS

         The obligations of the Warrantholders to consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at or before the
Closing, of the following conditions, unless waived in writing by a majority in
interest of the Warrantholders participating in the Closing:

         6.1 Representations and Warranties. The representations and warranties
of the Company contained in Article III shall be true and correct on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.

         6.2 Performance. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to such Closing shall
have been performed or complied with in all material respects.

         6.3 Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body that are required in connection
with the lawful issuance of the Securities pursuant to this Agreement shall be
obtained and effective as of the Closing.

                                  ARTICLE VII

                            COVENANTS OF THE COMPANY

         7.1 Registration Rights. The Warrantholders shall have the following
registration rights:

              (a) Shelf Registration.

              (i) Registration. The Company shall prepare and file or cause to
be prepared and filed with the Securities and Exchange Commission ("SEC") no
later than ninety (90) days after the Closing, a registration statement (the
"REGISTRATION STATEMENT") including the prospectus, amendments and supplements
to such registration statement, including all exhibits and all materials
incorporated by reference or explicitly deemed to be incorporated by reference
in such registration statement, for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 of the Securities Act registering the
resale from time to time by the Warrantholders of the Common Stock issued or
issuable upon exercise of the Warrants ("the "REGISTRABLE Securities"). The
Registration Statement shall be on an appropriate form permitting registration

                                       6
<PAGE>

of such securities for resale by such Warrantholders in accordance with the
methods of distribution elected by the Warrantholders and set forth in the
Registration Statement. The Company shall use its commercially reasonable
efforts to cause the Registration Statement to be declared effective under the
Securities Act no later than the six (6) month anniversary of the Closing, and
to keep such Registration Statement continuously effective under the Securities
Act until the earlier of: (i) the second anniversary of the date hereof and (ii)
such date as all securities registered on such Registration Statement have been
resold (the earlier to occur of (i) and (ii) is the "EFFECTIVENESS TERMINATION
DATE"); provided, however, that the Company may suspend sales of Common Stock
pursuant to such Registration Statement for a period of not more than one
hundred twenty (120) days in the aggregate for all cases in which it determines
in good faith that such Registration Statement contains or may contain an untrue
statement of material fact or omits or may omit to state a material fact
required to be stated therein or necessary to make the statement therein not
misleading; provided further and subject to the provisions of this Section
7.1(a)(i), the Company shall promptly amend such Registration Statement in order
to correct any untrue statement and/or ensure that such Registration Statement
is not misleading. At the time the Registration Statement is declared effective,
each Warrantholder shall be named as a selling securityholder in the
Registration Statement and the related prospectus in such a manner as to permit
such Warrantholder to deliver such prospectus to purchasers of registered
securities in accordance with applicable law.

              (ii) If the Registration Statement ceases to be effective for any
reason at any time prior to the applicable Effectiveness Termination Date (other
than because all securities registered thereunder have been resold pursuant
thereto), the Company shall use its commercially reasonable efforts to obtain
the prompt withdrawal of any order suspending the effectiveness thereof.

              (iii) The Company shall supplement and amend the Registration
Statement if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Registration Statement, if
required by the Securities Act or, to the extent to which the Company does not
reasonably object, as reasonably requested by the written consent of a majority
in interest of the Warrantholders participating in the Closing.

              (iv) Each Warrantholder agrees that if such Warrantholder wishes
to sell securities pursuant to the Registration Statement, it will do so only in
accordance with Section 7.1 of this Agreement.

         (b) Expenses of Registration. All Registration Expenses (as defined
below) incurred in connection with the registrations pursuant to Section 7.1(a)
shall be borne by the Company. "REGISTRATION EXPENSES" shall mean all expenses
incurred by the Company in complying with Sections 7.1(a) hereof, including all
registration and filing fees, printing expenses, fees and disbursements of one
counsel for the Company and reasonable fees and disbursements of Investor
Counsel (as defined below) up to Five Thousand Dollars ($5,000), blue sky fees
and expenses, and the expense of any special audits incident to or required by
any such registration (but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company and Selling Expenses
(as defined hereinafter)). All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the Warrantholders. "SELLING
EXPENSES" shall mean all underwriting discounts and selling commissions
applicable to a sale of the Registrable Securities.

                                       7
<PAGE>

         (c) Registration Procedures. In the case of a registration, and any
qualification, compliance, or effectiveness effected by the Company pursuant to
this Section 7.1, the Company will keep the Warrantholders advised in writing as
to the initiation of such registration, qualification, compliance and
effectiveness and as to the completion thereof. At its expense the Company will:

              (i) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;

              (ii) Furnish to the Warrantholders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them;

              (iii) Use its commercially reasonable efforts to register and
qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Warrantholders, provided that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions;

              (iv) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering, provided that
each Warrantholder participating in such underwriting shall also enter into and
perform its obligations under such an agreement;

              (v) Notify immediately each Warrantholder holding Registrable
Securities covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing; provided, however, that the Company shall promptly
amend such Registration Statement in order to correct any untrue statement
and/or ensure that such Registration Statement is not misleading;

              (vi) Cause all such Registrable Securities registered hereunder to
be listed or included on each securities exchange or automated quotation system
on which similar securities issued by the Company are then listed or included;

                                       8
<PAGE>

              (vii) Provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration;
and

              (viii) Use its commercially reasonable efforts to furnish, at the
request of any Warrantholder requesting registration of Registrable Securities
pursuant to this Section 7.1, on the date that such Registrable Securities are
delivered to the underwriters for sale in connection with a registration
pursuant to this Section 7.1, if such securities are being sold through
underwriters, or, if such securities are not being sold through underwriters, on
the date that the registration statement with respect to such securities becomes
effective, (i) an opinion, dated such date, of counsel representing the Company
for the purposes of such registration, in form and substance as is customarily
given in an underwritten public offering (and reasonably acceptable to the
counsel for the Warrantholders), addressed to the underwriters, if any, and to
the Warrantholders, and (ii) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants in an underwritten
public offering (and reasonably acceptable to the counsel for the
Warrantholders), addressed to the underwriters, to the extent such letter is
permitted under generally recognized accounting practice.

              (ix) The Company shall reasonably cooperate with legal counsel
selected by a majority in interest of the Warrantholders participating in the
Closing (the "INVESTOR COUNSEL") in performing the Company's obligations under
this Section 7.1 and shall: (A) permit Investor Counsel to review and comment
upon any offering pursuant to this Section 7.1 and to review and comment upon
(1) the Registration Statement prior to its filing with the SEC and (2) all
amendments and supplements thereto (except for Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and any similar
or successor reports) prior to their filing with the SEC; and (B) furnish to
Investor Counsel, without charge, (1) any correspondence from the SEC or the
staff of the SEC to the Company or its representatives relating to any
Registration Statement, (2) promptly after the same is prepared and filed with
the SEC, one copy of any Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits, and (3) upon the effectiveness of any
Registration Statement, one copy of the prospectus included in such Registration
Statement and all amendments and supplements thereto; provided that the Company
will only be responsible for reasonable fees and expenses pursuant to this
Section 7.1(c)(ix).

         (d) Indemnification.

              (i) The Company will indemnify each Warrantholder, its officers,
directors, employees, partners, affiliates, agents, representatives and legal
counsel, and each person controlling (or deemed controlling) such Warrantholder
within the meaning of the Securities Act (collectively, the "WARRANTHOLDERS'
AGENTS"), with respect to which registration, qualification or compliance has
been effected pursuant to this Section 7.1, against all claims, losses, damages
and liabilities (or actions in respect thereof), joint or several, arising out
of or based on (i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other similar
document or any amendments or supplements thereto (including any related
registration statement and amendments or supplements thereto, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made, or (ii)
any violation by the Company of any federal, state or common law rule or
regulation applicable to the Company in connection with any such registration,
qualification or compliance or the failure of the Company to fulfill any
undertaking made in any registration statement or any amendments or supplements
thereto, and will reimburse each Warrantholder, and each Warrantholders' Agent,
for any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, as
incurred, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by an instrument duly executed by such Warrantholder
and stated to be specifically for use therein or furnished in writing by such
Warrantholder to the Company in response to a request by the Company stating
specifically that such information will be used by the Company therein.

                                       9
<PAGE>

              (ii) Each Warrantholder will indemnify, severally and not jointly,
the Company, each of its directors and officers, each legal counsel and
independent accountant of the Company, each person who controls the Company
within the meaning of the Securities Act, any underwriter, and each other
Warrantholder, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other similar document, or any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and will reimburse the
Company, such directors, and officers, control persons, underwriter and each
other Warrantholder for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, as incurred, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished in writing to the Company by an instrument duly executed
by such Warrantholder and stated to be specifically for use therein or furnished
by such Warrantholder to the Company in response to a request by the Company
stating specifically that such information will be used by the Company therein;
provided, however, that the indemnity agreement provided in this Section
7.1(d)(ii) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
written consent of the Warrantholder, which consent shall not be unreasonably
withheld. In no event shall a Warrantholder's indemnification obligation exceed
the net proceeds received from its sale of Registrable Securities in such
offering.

              (iii) Each party entitled to indemnification under this Section
7.1(d) (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has received written notice of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld). The Indemnified Party may participate in such defense
at such party's expense; provided, however, that the Indemnifying Party shall
bear the expense of such defense of the Indemnified Party if representation of
both parties by the same counsel would be inappropriate due to actual or
potential conflicts of interest. The failure of any Indemnified Party to give
notice within a reasonable period of time as provided herein shall relieve the
Indemnifying Party of its obligations under this Section 7.1(d), but only to the
extent that such failure to give notice shall materially adversely prejudice the
Indemnifying Party in the defense of any such claim or any such litigation. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.

                                       10
<PAGE>

              (iv) If the indemnification provided for in this Section 7.1(d) is
held to be unavailable to an Indemnified Party with respect to any loss,
liability, claim, damage or expense referred to therein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party hereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and of the Indemnified Party on the other in connection with the statements
or omissions that resulted in such loss, liability, claim, damage or expense as
well as any other relevant equitable considerations; provided, that in no event
shall any contribution by a Warrantholder under this Section 7.1(d) exceed the
net proceeds from the offering received by such Warrantholder. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.

              (v) The obligations of the Company and each Warrantholder under
this Section 7.1 shall survive the completion of any offering of the Registrable
Securities in a Registration Statement under this Section 7.1, any investigation
made by or on behalf of the Indemnified Party or any officer, director or
controlling person of such Indemnified Party and will survive the transfer of
securities.

         (e) Information by the Warrantholder. Each Warrantholder shall furnish
to the Company such information regarding such Warrantholder and the
distribution proposed by such Warrantholder as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Section 7.1.

         (f) Piggy-Back Registration. In addition to the registration rights
granted above, but subject to any normal underwriter's "cut-back," which shall
not exceed 30% of the number of shares proposed by each such Warrantholder to be
registered, during the period from the six (6) month anniversary of the Closing
until the fifth anniversary of the Closing Date, the Company shall grant the
Investors unlimited "piggy-back" registration rights with respect to any other
registration statement filed by the Company with respect to its Common Stock,
but only to the extent that (i) the grant or exercise of such "piggy-back"
registration rights will not violate any agreement to which the Company is now a
party and (ii), in the case of underwritten offerings of the Company's common
stock that occur after the second anniversary of the Closing Date, a
Warrantholder and its affiliates collectively hold at least 5% of the
outstanding shares of the Company's Common Stock, and (iii), in the case of
non-underwritten offerings of the Company's common stock that occur after the
second anniversary of the Closing Date, the Warrant shares held by a
Warrantholder may not be sold pursuant to Rule 144(k) (or a substantially
equivalent successor rule).

                                       11
<PAGE>

         (g) Demand Registration. In addition to the registration rights granted
to the Warrantholders pursuant to Section 7.1(a) above, at any time after the
Effectiveness Termination Date but on or before December 30, 2009, one or more
Warrantholders, holding in aggregate together with its or their affiliates at
least 5% of all of the outstanding shares of the Company's Common Stock and
unable to sell all of its or their Warrant shares pursuant to Rule 144(k) (or a
substantially equivalent successor rule), may make one written request (the
"INITIATING REQUEST") to the Company for the registration under the Securities
Act of all such Warrantholder's Registrable Securities, which request shall
specify the number of shares of Common Stock to be disposed of and the proposed
plan of distribution therefor. Upon the receipt of any Initiating Request for
registration pursuant to this Section 7.1(g), the Company will use its
commercially reasonable efforts to effect, at the earliest possible date (taking
into account any delay that may result from any special audit required by
applicable law), such registration under the Securities Act. The applicable
provisions of Sections 7.1(b), (c), (d) and (e) with respect to expenses,
registration procedures, indemnification and information shall apply to any
registration statement filed pursuant to this Section 7.1(g).

         7.2 Assignment of Rights. The rights to cause the Company to register
Registrable Securities pursuant to Section 7.1 may be assigned by a
Warrantholder only to an affiliate of such Warrantholder or, with the written
consent of the Company, which shall not be unreasonably withheld. In the event
of such assignment, the transferee shall furnish the Company written notice of
such assignment, and the assignee shall agree in writing to be bound by the
obligations of such Warrantholder under this Agreement.

                                  ARTICLE VIII

                                     LOCKUP

         8.1 Lock Up Agreement. Each of the Warrantholders hereby agrees that
until after the six (6) month anniversary of the Closing Date, the Warrantholder
will not, without the prior written consent of the Company: (i) sell, offer to
sell, contract or agree to sell, hypothecate, pledge, grant any option to
purchase or otherwise dispose of or agree to dispose of, directly or indirectly,
or file (or participate in the filing of) a registration statement with the SEC
in respect of, or establish or increase a put equivalent position or liquidate
or decrease a call equivalent position within the meaning of Section 16 of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the SEC promulgated thereunder with respect to, any Common Stock of the Company
or any securities convertible into or exercisable or exchangeable for Common
Stock, or warrants or other rights to purchase Common Stock, (ii) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or warrants or
other rights to purchase Common Stock, whether any such transaction is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise, or (iii) publicly announce an intention to effect any transaction
specified in clause (i) or (ii). The foregoing sentence shall not apply to: (a)
bona fide gifts, provided the recipient thereof agrees in writing with the
Company to be bound by the terms of this Article VIII and (b) transfers in
connection with distributions to the Warrantholder's partners, members or
stockholders provided that the transferees agree in writing with the Company to
be bound by the terms of this Article VIII.

                                       12
<PAGE>

         8.2 Stop Transfer Instructions. Each Warrantholder consents and agrees
to the entry of stop transfer instructions with the Company's transfer agent and
registrar against the transfer of the Warrantholder's securities of the Company
except in compliance with the restrictions set forth herein.

         8.3 Covenant not to Acquire. Each Warrantholder covenants and agrees
that it shall not purchase or otherwise acquire any securities of the Company
until after six (6) month anniversary of the Closing Date without an opinion of
counsel that such purchase or acquisition is in compliance with applicable
securities laws or other evidence satisfactory to the Company in its reasonable
discretion.

                                   ARTICLE IX

                            MISCELLANEOUS PROVISIONS

         9.1 Notice. All notices and other communications under this Agreement
shall be in writing and shall be deemed delivered upon mailing by registered or
certified mail, three days after mailing by first class mail, upon mailing by
reputable overnight courier, upon transmission by facsimile with a printed
transmission receipt, or upon personal delivery or delivery by a reputable
courier, to the party or parties at the address set forth on the signature pages
hereto, or at such other address that they designate in accordance with this
Section 9.1. Any party delivering notice to the Company shall also deliver a
copy to: O'Melveny & Myers LLP, 2765 Sand Hill Road, Menlo Park, CA 94025, Attn:
Sam Zucker, Esq., facsimile: (650) 473-2601.

         9.2 Entire Agreement. This Agreement and the documents referred to
herein embody the entire agreement and understanding of the parties hereto with
respect to the transactions contemplated hereby, and supersede all prior and
contemporaneous agreements and understandings, oral or written, relative to said
subject matter.

         9.3 Binding Effect. This Agreement and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the Warrantholders.

                                       13
<PAGE>

         9.4 Waiver; Consent. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by the Company and a majority in
interest of the Warrantholders participating in the Closing. Except to the
extent that a party hereto may have otherwise agreed in writing, no waiver by
that party of any condition of this Agreement or breach by the other party of
any of its obligations or representations hereunder shall be deemed to be a
waiver of any other condition or subsequent or prior breach of the same or any
other obligation or representation by the other party, nor shall any forbearance
by the first party to seek a remedy for any noncompliance or breach by the other
party be deemed to be a waiver by the first party of its rights and remedies
with respect to such noncompliance or breach.

         9.5 Counterparts. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.

         9.6 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.

         9.7 Governing Law. This Agreement shall in all respects be construed in
accordance with and governed by the laws of the State of Delaware, as applied to
contracts entered into and to be performed solely within Delaware solely between
residents of Delaware.

         9.8 California Corporate Securities Law. THE SALE OF THE SECURITIES
THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.

         9.9 Law Firm; Waiver of Conflicts. Each party to this Agreement
acknowledges that O'Melveny & Myers LLP, counsel for the Company, has in the
past and may continue in the future to perform legal services for certain of the
Warrantholders in matters unrelated to the transactions described in this
Agreement, including the representation of such Warrantholders in venture
capital financings. Accordingly, each party to this Agreement hereby: (i)
acknowledges that they have had an opportunity to ask for information relevant
to this disclosure; (ii) acknowledges that O'Melveny & Myers LLP represented the
Company in the transactions contemplated by this Agreement and has not
represented any individual, Warrantholder, stockholder or employee of the
Company in connection with such transactions; and (iii) gives its informed
consent to the representation by O'Melveny & Myers LLP of certain of the
Warrantholders in such unrelated matters and the representation by O'Melveny &
Myers LLP of the Company in connection with this Agreement and the transactions
contemplated hereby.

                                       14
<PAGE>

                  [Remainder of page intentionally left blank]

                                       15
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

                     SIRNA THERAPEUTICS INC.

                     By:
                          ------------------------------------------------

                     Name:
                            ----------------------------------------------

                     Title:
                             ---------------------------------------------

                     2950 Wilderness Place
                     Boulder, CO 80301
                     Facsimile: (303) 449-6995

                     INVESTORS:

                     DLJ CAPITAL CORPORATION

                     By:
                          ------------------------------------------------
                              Craig L. Slutzkin
                              Vice President

                     SPROUT CAPITAL IX, L.P.
                              By:  DLJ Capital Corporation
                              Its:  Managing General Partner

                     By:
                          ------------------------------------------------
                              Craig L. Slutzkin
                              Vice President

                 [Signature Page to Warrant Exchange Agreement]
<PAGE>

                     SPROUT ENTREPRENEURS' FUND, L.P.
                              By:  DLJ Capital Corporation
                              Its:  General Partner

                     By:
                          ------------------------------------------------------
                              Craig L. Slutzkin
                              Vice President

                     SPROUT IX PLAN INVESTORS, L.P.
                              By:   DLJ LBO Plans
                                    Management
                                    Corporation
                              Its:  General Partner

                     By:
                          ------------------------------------------------------
                              Craig L. Slutzkin
                              Attorney in Fact
                              Address:  ___________________________

                              ------------------------------------

                              ------------------------------------

                              Facsimile:  _________________________

                     VENROCK ASSOCIATES,
                              by a General Partner
                     VENROCK ASSOCIATES III, L.P.,
                              by its General Partner, Venrock    Management III
                     LLC
                     VENROCK ENTREPRENEURS FUND III, L.P.,
                              by its General Partner, VEF Management III  LLC

                     By:
                          ------------------------------------------------------
                     Name:  Bryan E. Roberts
                              As a General Partner or Member
                              Address:  ___________________________

                              ------------------------------------

                              ------------------------------------

                              Facsimile:  _________________________

                     OXFORD BIOSCIENCE PARTNERS IV, L.P.
                     By: OBP Management IV L.P., its general partner

                     By:
                          ------------------------------------------------------
                     Name:  Alan G. Walton
                     Title:  General Partner

                 [Signature Page to Warrant Exchange Agreement]
<PAGE>

                     MRNA FUND II, L.P.
                     By:  OBP Management IV L.P., its general partner

                     By:
                          ------------------------------------------------------
                     Name:  Alan G. Walton
                     Title:  General Partner

                              Address:  ___________________________

                              ------------------------------------

                              ------------------------------------

                              Facsimile:  _________________________

                 [Signature Page to Warrant Exchange Agreement]
<PAGE>

                     GRANITE GLOBAL VENTURES (Q.P.) L.P.
                     By:  Granite Global Ventures L.L.C. its general partner

                     By:
                          ---------------------------------------------------
                     Name:
                            ----------------------------------------------
                     Title:  Managing Director

                     GRANITE GLOBAL VENTURES L.P.
                     By:  Granite Global Ventures L.L.C. its general partner

                     By:
                          ---------------------------------------------------
                     Name:
                            ----------------------------------------------
                     Title:  Managing Director
                              Address:  ___________________________

                              ------------------------------------

                              ------------------------------------

                              Facsimile:  _________________________

                     An INDIVIDUAL PERSON

                     Signature:
                               -----------------------------------------------
                     James Niedel

                 [Signature Page to Warrant Exchange Agreement]
<PAGE>

                                    EXHIBIT A

                           SCHEDULE OF WARRANTHOLDERS

<TABLE>
<CAPTION>
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
                                                        SHARES
                                                       ISSUABLE
                                                      UNDER THE     SHARES ISSUABLE
                                                    SPROUT-NIEDEL      UNDER THE
                                                       ORIGINAL      SPROUT-NIEDEL
                                                       WARRANTS         ORIGINAL                           SHARES
                                                        BEFORE       WARRANTS AFTER       SHARES          ISSUABLE
                                  SHARES ISSUABLE    MODIFICATION     MODIFICATION    ISSUABLE UNDER     UNDER THE
                                     UNDER THE       PURSUANT TO      PURSUANT TO        THE FIRST         SECOND
                                   WARRANT TO BE       SECTION       SECTION 1.1(B)     REPLACEMENT     REPLACEMENT
         WARRANTHOLDER               CANCELLED      1.1(B) HEREIN        HEREIN           WARRANT         WARRANT
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
<S>                                                    <C>                <C>              <C>             <C>
Sprout IX Plan Investors, L.P.*          NA            102,077            76,557           25,519          28,070
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
Sprout Entrepreneurs Fund, L.P.*         NA              8,711             6,533            2,177           2,394
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
Sprout Capital IX, L.P.*                 NA          2,210,404         1,657,803          552,601         607,861
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
DLJ Capital Corporation*                 NA              4,845             3,633            1,211           1,332
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
James Niedel*                            NA             59,642            44,731           14,910          16,401
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
Venrock Associates                     194,337            NA               NA             194,337         213,771
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
Venrock Associates III, L.P.           863,721            NA               NA             863,721         950,093
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
Venrock Entrepreneurs Fund III,         21,593            NA               NA              21,593          23,752
L.P.
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
Oxford Bioscience Partners IV,         810,315            NA               NA             810,315         891,346
L.P.
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
mRNA Fund II L.P.                        8,130            NA               NA               8,130           8,943
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
Granite Global Ventures (Q.P.)         205,454            NA               NA             205,454         225,999
L.P.
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
Granite Global Ventures L.P.             3,511            NA               NA               3,511           3,862
--------------------------------- ----------------- --------------- ----------------- ---------------- ---------------
</TABLE>

<PAGE>
                                    EXHIBIT B

                        FORM OF FIRST REPLACEMENT WARRANT

                                                                  EXECUTION COPY

THIS WARRANT AND THE SHARES OF COMMON STOCK TO BE ISSUED UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (I) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (II) AN OPINION OF COUNSEL OR
OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION
IS NOT REQUIRED, (III) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES OR (IV) OTHERWISE COMPLYING WITH THE PROVISIONS OF
SECTION 7 OF THIS WARRANT.

                            SIRNA THERAPEUTICS, INC.

                      WARRANT TO PURCHASE _________ SHARES
                                 OF COMMON STOCK

                                                               Warrant No. W-[ ]

            THIS CERTIFIES THAT, for value received, __________________________
and its assigns are entitled to subscribe for and purchase __________ shares (as
adjusted pursuant to Section 4 hereof, the "Shares") of the fully paid and
nonassessable common stock, par value $0.01 per share ("Common Stock"), of Sirna
Therapeutics, Inc., a Delaware corporation (the "Company"), at the price of
$2.52 per share (such price and such other price as shall result, from time to
time, from the adjustments specified in Section 4 hereof is herein referred to
as the "Warrant Price"), subject to the provisions and upon the terms and
conditions set forth herein and in the Warrant Exchange Agreement, dated as of
even date herewith, by and among the Company and the other parties thereto. As
used herein, the term "Date of Grant" means DECEMBER 30, 2004. As used herein,
the term "Warrant" shall be deemed to include any warrants issued in exchange or
upon transfer or partial exercise of this Warrant unless the context clearly
requires otherwise.

         1. Term. The purchase right represented by this Warrant is exercisable,
in whole or in part, at any time and from time to time from the Date of Grant
through February 7, 2005.

         2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A-1
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a "Wire Transfer") of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased or (b) if in connection with a registered public offering of the
Company's securities, the surrender of this Warrant (with the notice of exercise
form attached hereto as Exhibit A-2 duly completed and executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by certified or
bank check or by Wire Transfer from the proceeds of the sale of shares to be
sold by the holder in such public offering of an amount equal to the then
applicable Warrant Price per share multiplied by the number of Shares then being
purchased. The person or persons in whose name(s) any certificate(s)

<PAGE>

representing the Shares shall be issuable upon exercise of this Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the Shares represented thereby (and such
Shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is exercised. In the event
of any exercise of the rights represented by this Warrant, certificates for the
Shares of stock so purchased shall be delivered to the holder hereof as soon as
practicable and, if requested by the holder of this Warrant, the Company shall
cause its transfer agent to deliver the certificate representing Shares issued
upon exercise of this Warrant to a broker or other person (as directed by the
holder exercising this Warrant) within the time period required to settle any
trade made by the holder after exercise of this Warrant.

         3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this Warrant.

         4. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:

                  (a) Reclassification or Merger. In case of any
         reclassification or change of securities of the class issuable upon
         exercise of this Warrant (other than a change in par value, or from par
         value to no par value, or from no par value to par value, or as a
         result of a subdivision or combination), or in case of any merger of
         the Company with or into another corporation (other than a merger with
         another corporation in which the Company is the acquiring and the
         surviving corporation and which does not result in any reclassification
         or change of outstanding securities issuable upon exercise of this
         Warrant), or in case of any sale of all or substantially all of the
         assets of the Company, the Company, or such successor or purchasing
         corporation, as the case may be, shall duly execute and deliver to the
         holder of this Warrant a new Warrant (in form and substance
         satisfactory to the holder of this Warrant), or the Company shall make
         appropriate provision without the issuance of a new Warrant, so that
         the holder of this Warrant shall have the right to receive upon
         exercise of this Warrant, at a total purchase price not to exceed that
         payable upon the exercise of the unexercised portion of this Warrant,
         and in lieu of the shares of Common Stock theretofore issuable upon
         exercise of this Warrant, the kind and amount of shares of stock, other
         securities, money and property receivable upon such reclassification,
         change or merger by a holder of the number of shares of Common Stock
         then purchasable under this Warrant. Such new Warrant shall provide for
         adjustments that shall be as nearly equivalent as may be practicable to
         the adjustments provided for in this Section 4. The provisions of this
         subparagraph (a) shall similarly apply to successive reclassifications,
         changes, mergers and transfers.

                                       2
<PAGE>

                  (b) Subdivision or Combination of Shares. If the Company at
         any time while this Warrant remains outstanding and unexpired shall
         subdivide or combine its outstanding shares of Common Stock, the
         Warrant Price shall be proportionately decreased and the number of
         Shares issuable hereunder shall be proportionately increased in the
         case of a subdivision or the Warrant Price shall be proportionately
         increased and the number of Shares issuable hereunder shall be
         proportionately decreased in the case of a combination.

                  (c) Stock Dividends and Other Distributions. If the Company at
         any time while this Warrant is outstanding and unexpired shall pay a
         dividend or make a distribution to all of its stockholders with respect
         to its Common Stock payable in Common Stock, then the Warrant Price
         shall be adjusted, from and after the date of determination of
         stockholders entitled to receive such dividend or distribution, to that
         price determined by multiplying the Warrant Price in effect immediately
         prior to such date of determination by a fraction (A) the numerator of
         which shall be the total number of shares of Common Stock outstanding
         immediately prior to such dividend or distribution, and (B) the
         denominator of which shall be the total number of shares of Common
         Stock outstanding immediately after such dividend or distribution.

                  (d) Adjustment of Number of Shares. Upon each adjustment in
         the Warrant Price, the number of Shares purchasable hereunder shall be
         adjusted, to the nearest whole share, to the product obtained by
         multiplying the number of Shares purchasable immediately prior to such
         adjustment in the Warrant Price by a fraction, the numerator of which
         shall be the Warrant Price immediately prior to such adjustment and the
         denominator of which shall be the Warrant Price immediately thereafter.

         5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief executive officer, chief
financial officer or any vice president setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price and the number of
Shares purchasable hereunder after giving effect to such adjustment, and shall
cause copies of such certificate to be mailed (without regard to Section 13
hereof, by first class mail, postage prepaid) to the holder of this Warrant at
such holder's last known address.

         6. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Common Stock on the date of exercise as reasonably determined in
good faith by the Company's Board of Directors.

         7. Compliance with Securities Act; Disposition of Warrant or Shares of
Common Stock.

                  (a) Compliance with Securities Act. The holder of this
         Warrant, by acceptance hereof, agrees that this Warrant, and the Shares
         to be issued upon exercise hereof, are being acquired for investment
         and that such holder will not offer, sell or otherwise dispose of this
         Warrant, or any Shares except under circumstances which will not result
         in a violation of the Securities Act of 1933, as amended (the "Act") or
         any applicable state securities laws. Upon exercise of this Warrant,
         unless the Shares being acquired are registered under the Act and any
         applicable state securities laws or an exemption from such registration
         is available, the holder hereof shall confirm in writing that the
         Shares so purchased are being acquired for investment and not with a
         view toward distribution or resale in violation of the Act and shall
         confirm such other matters related thereto as may be reasonably
         requested by the Company. This Warrant and all Shares issued upon
         exercise of this Warrant (unless registered under the Act and any
         applicable state securities laws) shall be stamped or imprinted with a
         legend in substantially the following form:

                                       3
<PAGE>

                  "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
                  UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
                  SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
                  WITHOUT (I) AN EFFECTIVE REGISTRATION STATEMENT RELATED
                  THERETO, (II) AN OPINION OF COUNSEL OR OTHER EVIDENCE,
                  REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION
                  IS NOT REQUIRED, (III) RECEIPT OF NO-ACTION LETTERS FROM THE
                  APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (IV) OTHERWISE
                  COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT
                  UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR
                  INDIRECTLY."

         Said legend shall be removed by the Company, upon the request of a
holder, at such time as the restrictions on the transfer of the applicable
security shall have terminated. In addition, in connection with the issuance of
this Warrant, the holder specifically represents to the Company by acceptance of
this Warrant as follows:

                           (1) The holder is aware of the Company's business
         affairs and financial condition, and has acquired information about the
         Company sufficient to reach an informed and knowledgeable decision to
         acquire this Warrant. The holder is acquiring this Warrant for its own
         account for investment purposes only and not with a view to, or for the
         resale in connection with, any "distribution" thereof in violation of
         the Act.

                           (2) The holder understands that this Warrant has not
         been registered under the Act in reliance upon a specific exemption
         therefrom, which exemption depends upon, among other things, the bona
         fide nature of the holder's investment intent as expressed herein.

                           (3) The holder further understands that this Warrant
         must be held indefinitely unless subsequently registered under the Act
         and qualified under any applicable state securities laws, or unless
         exemptions from registration and qualification are otherwise available.
         The holder is aware of the provisions of Rule 144, promulgated under
         the Act.

                                       4
<PAGE>

                           (4) The holder is an "accredited investor" as such
         term is defined in Rule 501 of Regulation D promulgated under the Act.

                  (b) Disposition of Warrant or Shares. With respect to any
         offer, sale or other disposition of this Warrant or any Shares acquired
         pursuant to the exercise of this Warrant prior to registration of such
         Warrant or Shares, the holder hereof agrees to give written notice to
         the Company prior thereto, describing briefly the manner thereof,
         together with a written opinion of such holder's counsel, or other
         evidence satisfactory to the Company, to the effect that such offer,
         sale or other disposition may be effected without registration or
         qualification (under the Act as then in effect or any federal or state
         securities law then in effect) of this Warrant or the Shares and
         indicating whether or not under the Act certificates for this Warrant
         or the Shares to be sold or otherwise disposed of require any
         restrictive legend as to applicable restrictions on transferability in
         order to ensure compliance with such law. Upon receiving such written
         notice and reasonably satisfactory opinion or other evidence, the
         Company, as promptly as practicable but no later than fifteen (15) days
         after receipt of the written notice, shall notify such holder that such
         holder may sell or otherwise dispose of this Warrant or such Shares,
         all in accordance with the terms of the notice delivered to the
         Company. If a determination has been made pursuant to this Section 7(b)
         that the opinion of counsel for the holder or other evidence is not
         reasonably satisfactory to the Company, the Company shall so notify the
         holder promptly with details thereof after such determination has been
         made. Notwithstanding the foregoing, this Warrant or such Shares may,
         as to such federal laws, be offered, sold or otherwise disposed of in
         accordance with Rule 144 or 144A under the Act, provided that the
         Company shall have been furnished with such information as the Company
         may reasonably request to provide a reasonable assurance that the
         provisions of Rule 144 or 144A have been satisfied. Each certificate
         representing this Warrant or the Shares thus transferred (except a
         transfer pursuant to Rule 144) shall bear a legend as to the applicable
         restrictions on transferability in order to ensure compliance with such
         laws, unless in the aforesaid opinion of counsel for the holder, such
         legend is not required in order to ensure compliance with such laws.
         The Company may issue stop transfer instructions to its transfer agent
         in connection with such restrictions.

                  (c) Applicability of Restrictions. Neither any restrictions of
         any legend described in this Warrant nor the requirements of Section
         7(b) above shall apply to any transfer or grant of a security interest
         in, this Warrant (or the shares of Common Stock obtainable upon
         exercise thereof) or any part hereof (i) to a partner of the holder if
         the holder is a partnership or to a member of the holder if the holder
         is a limited liability company, (ii) to a partnership of which the
         holder is a partner or a limited liability company of which the holder
         is a member, or (iii) to any affiliate of the holder if the holder is a
         corporation; provided, however, in any such transfer, if applicable,
         the transferee shall on the Company's request agree in writing to be
         bound by the terms of this Warrant as if an original holder hereof.

         8. Rights as Stockholders. No holder of this Warrant, as such, shall be
entitled to vote or receive dividends or be deemed the holder of Common Stock or
any other securities which may at any time be issuable on the exercise hereof
for any purpose, nor shall anything contained herein be construed to confer upon
the holder of this Warrant, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein.

                                       5
<PAGE>

         9. Registration Rights. The Company grants registration rights to the
holder of this Warrant for any shares of Common Stock of the Company obtained
upon exercise hereof as set forth in that certain Warrant Exchange Agreement,
dated as of even date herewith, by and among the Company and the other parties
thereto.

         10. Mergers. The Company shall provide the holder of this Warrant with
at least twenty (20) days' written notice prior to the closing thereof of the
terms and conditions of any of the following transactions: (i) the sale, lease,
exchange, conveyance or other disposition of all or substantially all of the
Company's property or business or (ii) its merger into or consolidation with any
other corporation (other than a wholly-owned subsidiary of the Company) or (iii)
any transaction (including a merger or other reorganization) or series of
related transactions, in which more than 50% of the voting power of the Company
is disposed of.

         11. Representations and Warranties. The Company represents and warrants
to the holder of this Warrant as follows:

                  (a) This Warrant has been duly authorized and executed by the
         Company and is a valid and binding obligation of the Company
         enforceable in accordance with its terms, subject to laws of general
         application relating to bankruptcy, insolvency, moratorium,
         reorganization and the relief of debtors and the rules of law or
         principles at equity governing specific performance, injunctive relief
         and other equitable remedies (regardless of whether enforcement is
         sought in equity or at law);

                  (b) The Shares have been duly authorized and reserved for
         issuance by the Company and, when issued in accordance with the terms
         hereof will be validly issued, fully paid and non-assessable;

                  (c) The execution and delivery of this Warrant are not, and
         the issuance of the Shares upon exercise of this Warrant in accordance
         with the terms hereof will not be, inconsistent with the Company's
         certificate of incorporation or by-laws, do not and will not contravene
         any law, governmental rule or regulation, judgment or order applicable
         to the Company, and do not and will not conflict with or contravene any
         provision of, or constitute a default under, any material indenture,
         mortgage, contract or other instrument of which the Company is a party
         or by which it is bound or require the consent or approval of, the
         giving of notice to, the registration or filing with or the taking of
         any action in respect of or by, any Federal, state or local government
         authority or agency or other person, except for the filing of notices
         pursuant to federal and state securities laws, which filings will be
         effected by the time required thereby; and

                  (d) There are no actions, suits, audits, investigations or
         proceedings pending or, to the knowledge of the Company, threatened
         against the Company in any court or before any governmental commission,
         board or authority which, if adversely determined, will have a material
         adverse effect on the ability of the Company to perform its obligations
         under this Warrant.

                                       6
<PAGE>

         12. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.

         13. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor on the signature
page of this Warrant.

         14. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Shares issuable upon the exercise or conversion
of this Warrant shall survive the exercise, conversion and termination of this
Warrant and all of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the holder hereof.

         15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.

         16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.

         17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Delaware.

         18. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.

         19. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.

                                       7
<PAGE>

         20. No Impairment of Rights. The Company will not, by amendment of its
certificate of incorporation or through any other means, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.

         21. Severability. Whenever possible, each provision of this Warrant
shall be interpreted in such a manner as to be valid, legal and enforceable
under all applicable laws and regulations. If, however, any provision of this
Warrant shall be invalid, illegal or unenforceable under any such law or
regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed
modified to conform to the minimum requirements of such law or regulation, or,
if for any reason it is not deemed to be so modified, it shall be invalid,
illegal or unenforceable only to the extent of such invalidity, illegality or
limitation on enforceability without affecting the remaining provisions of this
Warrant or the validity, legality or enforceability of such provision in any
other jurisdiction.

         22. Entire Agreement; Modification. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.

                  [Remainder of page intentionally left blank]

                                       8
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Warrant as of the
date first written above.

                                          SIRNA THERAPEUTICS, INC.

                                          By:__________________________________
                                          Name:
                                          Title:

                                          Address:  2950 Wilderness Place
                                                    Boulder, CO  80301

<PAGE>

                                   EXHIBIT A-1

                               Notice of Exercise

1.       The undersigned hereby:

         [ ]      elects to purchase _____ shares of Common Stock of the Company
                  pursuant to the terms of the attached Warrant, and tenders
                  herewith payment of the purchase price of such shares in full.

2.       Please issue a certificate or certificates representing said shares in
         the name of the undersigned or in such other name or names as are
         specified below:

         -------------------------------------
         (Name)

         -------------------------------------

         -------------------------------------

         -------------------------------------
         (Address)

3.       The undersigned represents that the aforesaid shares are being acquired
         for the account of the undersigned for investment and not with a view
         to, or for resale in connection with, the distribution thereof and that
         the undersigned has no present intention of distributing or reselling
         such shares, all except as in compliance with applicable securities
         laws.

                                        -------------------------------------
                                        (Signature)

                                        Dated:  _______________________________

<PAGE>

                                   EXHIBIT A-2

                               Notice of Exercise

1.       Contingent upon and effective immediately prior to the closing (the
         "Closing") of the Company's public offering contemplated by the
         Registration Statement on Form S-1, filed, _____________, the
         undersigned hereby:

         [ ]      elects to purchase _____ shares of Common Stock of the Company
                  (or such lesser number of shares as may be sold on behalf of
                  the undersigned at the Closing) pursuant to the terms of the
                  attached Warrant.

2.       Please deliver to the custodian for the selling stockholders a stock
         certificate representing such _____________ shares.

3.       The undersigned has instructed the custodian for the selling
         stockholders to deliver to the Company $_____ or, if less, the net
         proceeds due the undersigned from the sale of shares in the aforesaid
         public offering. If such net proceeds are less than the purchase price
         for such shares, the undersigned agrees to deliver the difference to
         the Company prior to the Closing.

                                        -------------------------------------
                                        (Name)

                                        -------------------------------------

                                        -------------------------------------

                                        -------------------------------------
                                        (Address)

Dated:  __________________________

<PAGE>

                                    EXHIBIT C

                       FORM OF SECOND REPLACEMENT WARRANT
                                                                  EXECUTION COPY

THIS WARRANT AND THE SHARES OF COMMON STOCK TO BE ISSUED UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (I) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (II) AN OPINION OF COUNSEL OR
OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION
IS NOT REQUIRED, (III) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES, OR (IV) OTHERWISE COMPLYING WITH THE PROVISIONS OF
SECTION 7 OF THIS WARRANT.

                            SIRNA THERAPEUTICS, INC.

                       WARRANT TO PURCHASE ________ SHARES
                                 OF COMMON STOCK

                                                               Warrant No. W-[ ]

            THIS CERTIFIES THAT, for value received, ____________________ and
its assigns are entitled to subscribe for and purchase ________ shares (as
adjusted pursuant to Section 4 hereof, the "Shares") of the fully paid and
nonassessable common stock, par value $0.01 per share ("Common Stock"), of Sirna
Therapeutics, Inc., a Delaware corporation (the "Company"), at the price of
$3.85 per share (such price and such other price as shall result, from time to
time, from the adjustments specified in Section 4 hereof is herein referred to
as the "Warrant Price"), subject to the provisions and upon the terms and
conditions set forth herein and in the Warrant Exchange Agreement, dated as of
even date herewith, by and among the Company and the other parties thereto. As
used herein, the term "Date of Grant" means DECEMBER 30, 2004. As used herein,
the term "Warrant" shall be deemed to include any warrants issued in exchange or
upon transfer or partial exercise of this Warrant unless the context clearly
requires otherwise. Notwithstanding any other provision in this Warrant to the
contrary, if a reduction in the Warrant Price pursuant to Section 4 would
require the Company to obtain stockholder approval of the transactions giving
rise to this Warrant pursuant to Nasdaq Marketplace Rules, then the Warrant
Price shall be reduced to the maximum extent that would not require stockholder
approval under such rules.

         1. Term. The purchase right represented by this Warrant is exercisable,
in whole or in part, at any time and from time to time from the Date of Grant
through December 30, 2009.

         2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A-1
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a "Wire Transfer") of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased or (b) if in connection with a registered public offering of the
Company's securities, the surrender of this Warrant (with the notice of exercise
form attached hereto as Exhibit A-2 duly completed and executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by certified or
bank check or by Wire Transfer from the proceeds of the sale of Shares to be
sold by the holder in such public offering of an amount equal to the then

<PAGE>

applicable Warrant Price per share multiplied by the number of Shares then being
purchased, or (c) exercise of the "net issuance" right provided for in Section
10.2 hereof. The person or persons in whose name(s) any certificate(s)
representing the Shares shall be issuable upon exercise of this Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the Shares represented thereby (and such
Shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is exercised. In the event
of any exercise of the rights represented by this Warrant, certificates for the
Shares of stock so purchased shall be delivered to the holder hereof as soon as
practicable and, if requested by the holder of this Warrant, the Company shall
cause its transfer agent to deliver the certificate representing Shares issued
upon exercise of this Warrant to a broker or other person (as directed by the
holder exercising this Warrant) within the time period required to settle any
trade made by the holder after exercise of this Warrant.

         3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this Warrant.

         4. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:

                  (a) Reclassification or Merger. In case of any
         reclassification or change of securities of the class issuable upon
         exercise of this Warrant (other than a change in par value, or from par
         value to no par value, or from no par value to par value, or as a
         result of a subdivision or combination), or in case of any merger of
         the Company with or into another corporation (other than a merger with
         another corporation in which the Company is the acquiring and the
         surviving corporation and which does not result in any reclassification
         or change of outstanding securities issuable upon exercise of this
         Warrant), or in case of any sale of all or substantially all of the
         assets of the Company, the Company, or such successor or purchasing
         corporation, as the case may be, shall duly execute and deliver to the
         holder of this Warrant a new Warrant (in form and substance
         satisfactory to the holder of this Warrant), or the Company shall make
         appropriate provision without the issuance of a new Warrant, so that
         the holder of this Warrant shall have the right to receive upon
         exercise of this Warrant, at a total purchase price not to exceed that
         payable upon the exercise of the unexercised portion of this Warrant,
         and in lieu of the shares of Common Stock theretofore issuable upon
         exercise of this Warrant, the kind and amount of shares of stock, other
         securities, money and property receivable upon such reclassification,
         change or merger by a holder of the number of shares of Common Stock
         then purchasable under this Warrant. Such new Warrant shall provide for
         adjustments that shall be as nearly equivalent as may be practicable to
         the adjustments provided for in this Section 4. The provisions of this
         subparagraph (a) shall similarly apply to successive reclassifications,
         changes, mergers and transfers.

                                       2
<PAGE>

                  (b) Subdivision or Combination of Shares. If the Company at
         any time while this Warrant remains outstanding and unexpired shall
         subdivide or combine its outstanding shares of Common Stock, the
         Warrant Price shall be proportionately decreased and the number of
         Shares issuable hereunder shall be proportionately increased in the
         case of a subdivision or the Warrant Price shall be proportionately
         increased and the number of Shares issuable hereunder shall be
         proportionately decreased in the case of a combination.

                  (c) Stock Dividends and Other Distributions. If the Company at
         any time while this Warrant is outstanding and unexpired shall pay a
         dividend or make a distribution to all of its stockholders with respect
         to its Common Stock payable in Common Stock, then the Warrant Price
         shall be adjusted, from and after the date of determination of
         stockholders entitled to receive such dividend or distribution, to that
         price determined by multiplying the Warrant Price in effect immediately
         prior to such date of determination by a fraction (A) the numerator of
         which shall be the total number of shares of Common Stock outstanding
         immediately prior to such dividend or distribution, and (B) the
         denominator of which shall be the total number of shares of Common
         Stock outstanding immediately after such dividend or distribution.

                  (d) Adjustment of Number of Shares. Upon each adjustment in
         the Warrant Price pursuant to Sections 4(a) through (c) above, the
         number of Shares purchasable hereunder shall be adjusted, to the
         nearest whole share, to the product obtained by multiplying the number
         of Shares purchasable immediately prior to such adjustment in the
         Warrant Price by a fraction, the numerator of which shall be the
         Warrant Price immediately prior to such adjustment and the denominator
         of which shall be the Warrant Price immediately thereafter.

                  (e) Warrant Price Adjustments; Issuance of Common Stock at
         less than Warrant Price. If the Company, at any time while this Warrant
         is outstanding and on or prior to June 30, 2005, shall consummate the
         issue or sale, or is, in accordance with any of the subsections of this
         Section 4(e), deemed to have consummated the issue or sale, any
         Additional Shares of Common Stock (as defined below) for a
         consideration per share less than the Warrant Price in effect
         immediately prior to the time of such issue or sale, then and in each
         such case (a "Trigger Issuance") the then-existing Warrant Price, shall
         be reduced, as of the close of business on the effective date of the
         Trigger Issuance, to a price equal to the lowest price paid per share
         for such Common Stock. If no Trigger Issuance occurs, the then-existing
         Warrant Price as of the close of business on June 30, 2005 shall equal,
         as may be adjusted pursuant to Sections 4(a) through (c) above, the
         lesser of $3.85 and the average closing selling price of a share of
         Company common stock traded on the Nasdaq National Market, as quoted in
         The Wall Street Journal, over the 15-day period ending on June 30,
         2005. For purposes of this subsection (e), "Additional Shares of Common
         Stock" shall mean all shares of Common Stock issued by the Company, or
         deemed to be issued pursuant to this subsection (e), in a private
         placement for the primary purpose of raising capital for the Company,
         other than Excluded Issuances (as defined in subsection (f) below). For
         purposes of this subsection (e), the following subsections (e)(l) to
         (e)(6) shall also be applicable:

                                       3
<PAGE>

                           (1) Issuance of Rights or Options. In case at any
         time the Company shall in any manner grant (directly and not by
         assumption in a merger or otherwise) any warrants or other rights to
         subscribe for or to purchase, or any options for the purchase of,
         Common Stock or any stock or security convertible into or exchangeable
         for Common Stock (such warrants, rights or options being called
         "Options" and such convertible or exchangeable stock or securities
         being called "Convertible Securities") whether or not such Options or
         the right to convert or exchange any such Convertible Securities are
         immediately exercisable, and the price per share for which Common Stock
         is issuable upon the exercise of such Options or upon the conversion or
         exchange of such Convertible Securities (determined by dividing (i) the
         sum (which sum shall constitute the applicable consideration) of (x)
         the total amount, if any, received or receivable by the Company as
         consideration for the granting of such Options, plus (y) the aggregate
         amount of additional consideration payable to the Company upon the
         exercise of all such Options, plus (z), in the case of such Options
         which relate to Convertible Securities, the aggregate amount of
         additional consideration, if any, payable upon the issue or sale of
         such Convertible Securities and upon the conversion or exchange
         thereof, by (ii) the total maximum number of shares of Common Stock
         issuable upon the exercise of such Options or upon the conversion or
         exchange of all such Convertible Securities issuable upon the exercise
         of such Options) shall be less than the Warrant Price in effect
         immediately prior to the time of the granting of such Options, then the
         total number of shares of Common Stock issuable upon the exercise of
         such Options or upon conversion or exchange of the total amount of such
         Convertible Securities issuable upon the exercise of such Options shall
         be deemed to have been issued for such price per share as of the date
         of granting of such Options or the issuance of such Convertible
         Securities. Except as otherwise provided in subsection 4(e)(3), no
         adjustment of the Warrant Price shall be made upon the actual issue of
         such Common Stock or of such Convertible Securities upon exercise of
         such Options or upon the actual issue of such Common Stock upon
         conversion or exchange of such Convertible Securities.

                           (2) Issuance of Convertible Securities. In case the
         Company shall in any manner issue (directly and not by assumption in a
         merger or otherwise) or sell any Convertible Securities, whether or not
         the rights to exchange or convert any such Convertible Securities are
         immediately exercisable, and the price per share for which Common Stock
         is issuable upon such conversion or exchange (determined by dividing
         (i) the sum (which sum shall constitute the applicable consideration)
         of (x) the total amount received or receivable by the Company as
         consideration for the issue or sale of such Convertible Securities,
         plus (y) the aggregate amount of additional consideration, if any,
         payable to the Company upon the conversion or exchange thereof, by (ii)
         the total number of shares of Common Stock issuable upon the conversion
         or exchange of all such Convertible Securities) shall be less than the
         Warrant Price in effect immediately prior to the time of such issue or
         sale, then the total maximum number of shares of Common Stock issuable

                                       4
<PAGE>

         upon conversion or exchange of all such Convertible Securities shall be
         deemed to have been issued for such price per share as of the date of
         the issue or sale of such Convertible Securities, provided that (a)
         except as otherwise provided in subsection 4(e)(3), no adjustment of
         the Warrant Price shall be made upon the actual issuance of such Common
         Stock upon conversion or exchange of such Convertible Securities and
         (b) no further adjustment of the Warrant Price shall be made by reason
         of the issue or sale of Convertible Securities upon exercise of any
         Options to purchase any such Convertible Securities for which
         adjustments of the Warrant Price have been made pursuant to the other
         provisions of subsection 4(e).

                           (3) Change in Option Price or Conversion Rate. Upon
         the happening of any of the following events, namely, if the purchase
         price provided for in any Option referred to in subsection 4(e)(l)
         hereof, the additional consideration, if any, payable upon the
         conversion or exchange of any Convertible Securities referred to in
         subsections 4(e)(l) or 4(e)(2), or the rate at which Convertible
         Securities referred to in subsections 4(e)(l) or 4(e)(2) are
         convertible into or exchangeable for Common Stock shall change at any
         time (including, but not limited to, changes under or by reason of
         provisions designed to protect against dilution), the Warrant Price in
         effect at the time of such event shall forthwith be readjusted to the
         Warrant Price which would have been in effect at such time had such
         Options or Convertible Securities still outstanding provided for such
         changed purchase price, additional consideration or conversion rate, as
         the case may be, at the time initially granted, issued or sold. On the
         termination of any Option for which any adjustment was made pursuant to
         this subsection 4(e) or any right to convert or exchange Convertible
         Securities for which any adjustment was made pursuant to this
         subsection 4(e) (including without limitation upon the redemption or
         purchase for consideration of such Convertible Securities by the
         Company), the Warrant Price then in effect hereunder shall forthwith be
         changed to the Warrant Price which would have been in effect at the
         time of such termination had such Option or Convertible Securities, to
         the extent outstanding immediately prior to such termination, never
         been issued.

                           (4) Stock Dividends. Subject to the provisions of
         this Section 4(e), in case the Company shall declare a dividend or make
         any other distribution upon any stock of the Company (other than the
         Common Stock) payable in Common Stock, Options or Convertible
         Securities, then any Common Stock, Options or Convertible Securities,
         as the case may be, issuable in payment of such dividend or
         distribution shall be deemed to have been issued or sold without
         consideration.

                           (5) Consideration for Stock. In case any shares of
         Common Stock, Options or Convertible Securities shall be issued or sold
         for cash, the consideration received therefore shall be deemed to be
         the gross amount received by the Company therefor, before deduction
         therefrom of any expenses incurred or any underwriting commissions or
         concessions paid or allowed by the Company in connection therewith. In
         case any shares of Common Stock, Options or Convertible Securities
         shall be issued or sold for a consideration other than cash, the amount
         of the consideration other than cash received by the Company shall be
         deemed to be the fair value of such consideration as determined in good
         faith by the Board of Directors of the Company, before deduction of any
         expenses incurred or any underwriting commissions or concessions paid
         or allowed by the Company in connection therewith. In case any Options
         shall be issued in connection with the issue and sale of other
         securities of the Company, together comprising one integral transaction
         in which no specific consideration is allocated to such Options by the
         parties thereto, such Options shall be deemed to have been issued for
         such consideration as determined in good faith by the Board of
         Directors of the Company.

                                       5
<PAGE>

                           (6) Record Date. In case the Company shall take a
         record of the holders of its Common Stock for the purpose of entitling
         them (i) to receive a dividend or other distribution payable in Common
         Stock, Options or Convertible Securities or (ii) to subscribe for or
         purchase Common Stock, Options or Convertible Securities, then such
         record date shall 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.

                  (f) Excluded Issuances. "Excluded Issuances" shall mean shares
         of Common Stock issued or issuable: (i) upon the conversion of shares
         of Preferred Stock; (ii) pursuant to the acquisition of another
         corporation or entity by the Company by way of merger, purchase of all
         or substantially all of the assets of the corporation, stock for stock
         exchange or other reorganization or recapitalization or pursuant to a
         joint venture agreement approved by the Board of Directors of the
         Company; (iii) to directors or employees of, or consultants or other
         service providers to, the Company under a stock option or other equity
         incentive plan or agreement approved by and in a manner determined by
         the Board of Directors (including restricted stock grants to directors,
         employees or consultants); (iv) upon the closing of any public offering
         of the Company's securities; (v) by reason of a dividend, stock split,
         split-up or other distribution on shares of Common Stock for which
         adjustment is otherwise made pursuant to Section 4; (vi) stock or
         options or warrants to purchase capital stock, issued to financial
         institutions, strategic partners or lessors in connection with any
         commercial credit arrangement, equipment financing, strategic
         partnership or similar transaction; (vii) shares of Common Stock issued
         upon the exercise, exchange or conversion of Options or Convertible
         Securities outstanding as of the date hereof; (viii) shares of Common
         Stock issued or issuable in connection with any settlement of any
         action, suit, proceeding or litigation; (ix) shares of Common Stock
         issued or issuable in connection with any sponsored laboratory or
         clinical research or development, strategic collaboration, or marketing
         agreement, or any license of any data, product, intellectual property,
         or technology, or any other similar agreement, license or strategic
         partnership approved by the Board of Directors; and (x) shares of
         Common Stock issued or issuable to suppliers or third party service
         providers in connection with the provision of any goods or services
         pursuant to a transaction approved by the Board of Directors.

         5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief executive officer, chief
financial officer or any vice president setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price and the number of
Shares purchasable hereunder after giving effect to such adjustment, and shall
cause copies of such certificate to be mailed (without regard to Section 13
hereof, by first class mail, postage prepaid) to the holder of this Warrant at
such holder's last known address.

                                       6
<PAGE>

         6. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Common Stock on the date of exercise as reasonably determined in
good faith by the Company's Board of Directors.

         7. Compliance with Securities Act; Disposition of Warrant or Shares of
Common Stock.

                  (a) Compliance with Securities Act. The holder of this
         Warrant, by acceptance hereof, agrees that this Warrant, and the Shares
         to be issued upon exercise hereof are being acquired for investment and
         that such holder will not offer, sell or otherwise dispose of this
         Warrant, or any Shares except under circumstances which will not result
         in a violation of the Securities Act of 1933, as amended (the "Act") or
         any applicable state securities laws. Upon exercise of this Warrant,
         unless the Shares being acquired are registered under the Act and any
         applicable state securities laws or an exemption from such registration
         is available, the holder hereof shall confirm in writing that the
         Shares so purchased are being acquired for investment and not with a
         view toward distribution or resale in violation of the Act and shall
         confirm such other matters related thereto as may be reasonably
         requested by the Company. This Warrant and all Shares issued upon
         exercise of this Warrant (unless registered under the Act and any
         applicable state securities laws) shall be stamped or imprinted with a
         legend in substantially the following form:

                  "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
                  UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
                  SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
                  WITHOUT (I) AN EFFECTIVE REGISTRATION STATEMENT RELATED
                  THERETO, (II) AN OPINION OF COUNSEL OR OTHER EVIDENCE,
                  REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION
                  IS NOT REQUIRED, (III) RECEIPT OF NO-ACTION LETTERS FROM THE
                  APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (IV) OTHERWISE
                  COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT
                  UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR
                  INDIRECTLY."

         Said legend shall be removed by the Company, upon the request of a
holder, at such time as the restrictions on the transfer of the applicable
security shall have terminated. In addition, in connection with the issuance of
this Warrant, the holder specifically represents to the Company by acceptance of
this Warrant as follows:

                                       7
<PAGE>

                           (1) The holder is aware of the Company's business
         affairs and financial condition, and has acquired information about the
         Company sufficient to reach an informed and knowledgeable decision to
         acquire this Warrant. The holder is acquiring this Warrant for its own
         account for investment purposes only and not with a view to, or for the
         resale in connection with, any "distribution" thereof in violation of
         the Act.

                           (2) The holder understands that this Warrant has not
         been registered under the Act in reliance upon a specific exemption
         therefrom, which exemption depends upon, among other things, the bona
         fide nature of the holder's investment intent as expressed herein.

                           (3) The holder further understands that this Warrant
         must be held indefinitely unless subsequently registered under the Act
         and qualified under any applicable state securities laws, or unless
         exemptions from registration and qualification are otherwise available.
         The holder is aware of the provisions of Rule 144, promulgated under
         the Act.

                           (4) The holder is an "accredited investor" as such
         term is defined in Rule 501 of Regulation D promulgated under the Act.

                  (b) Disposition of Warrant or Shares. With respect to any
         offer, sale or other disposition of this Warrant or any Shares acquired
         pursuant to the exercise of this Warrant prior to registration of such
         Warrant or Shares, the holder hereof agrees to give written notice to
         the Company prior thereto, describing briefly the manner thereof,
         together with a written opinion of such holder's counsel, or other
         evidence satisfactory to the Company, to the effect that such offer,
         sale or other disposition may be effected without registration or
         qualification (under the Act as then in effect or any federal or state
         securities law then in effect) of this Warrant or the Shares and
         indicating whether or not under the Act certificates for this Warrant
         or the Shares to be sold or otherwise disposed of require any
         restrictive legend as to applicable restrictions on transferability in
         order to ensure compliance with such law. Upon receiving such written
         notice and reasonably satisfactory opinion or other evidence, the
         Company, as promptly as practicable but no later than fifteen (15) days
         after receipt of the written notice, shall notify such holder that such
         holder may sell or otherwise dispose of this Warrant or such Shares,
         all in accordance with the terms of the notice delivered to the
         Company. If a determination has been made pursuant to this Section 7(b)
         that the opinion of counsel for the holder or other evidence is not
         reasonably satisfactory to the Company, the Company shall so notify the
         holder promptly with details thereof after such determination has been
         made. Notwithstanding the foregoing, this Warrant or such Shares may,
         as to such federal laws, be offered, sold or otherwise disposed of in
         accordance with Rule 144 or 144A under the Act, provided that the
         Company shall have been furnished with such information as the Company
         may reasonably request to provide a reasonable assurance that the
         provisions of Rule 144 or 144A have been satisfied. Each certificate
         representing this Warrant or the Shares thus transferred (except a
         transfer pursuant to Rule 144) shall bear a legend as to the applicable
         restrictions on transferability in order to ensure compliance with such
         laws, unless in the aforesaid opinion of counsel for the holder, such
         legend is not required in order to ensure compliance with such laws.
         The Company may issue stop transfer instructions to its transfer agent
         in connection with such restrictions.

                                       8
<PAGE>

                  (c) Applicability of Restrictions. Neither any restrictions of
         any legend described in this Warrant nor the requirements of Section
         7(b) above shall apply to any transfer or grant of a security interest
         in, this Warrant (or the shares of Common Stock obtainable upon
         exercise thereof) or any part hereof (i) to a partner of the holder if
         the holder is a partnership or to a member of the holder if the holder
         is a limited liability company, (ii) to a partnership of which the
         holder is a partner or a limited liability company of which the holder
         is a member, or (iii) to any affiliate of the holder if the holder is a
         corporation; provided, however, in any such transfer, if applicable,
         the transferee shall on the Company's request agree in writing to be
         bound by the terms of this Warrant as if an original holder hereof.

         8. Rights as Stockholders. No holder of this Warrant, as such, shall be
entitled to vote or receive dividends or be deemed the holder of Common Stock or
any other securities which may at any time be issuable on the exercise hereof
for any purpose, nor shall anything contained herein be construed to confer upon
the holder of this Warrant, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein.

         9. Registration Rights. The Company grants registration rights to the
holder of this Warrant for any shares of Common Stock of the Company obtained
upon exercise hereof as set forth in that certain Warrant Exchange Agreement,
dated as of even date herewith, by and among the Company and the other parties
thereto.

         10. Additional Rights.

         10.1. Mergers. The Company shall provide the holder of this Warrant
with at least twenty (20) days' written notice prior to the closing thereof of
the terms and conditions of any of the following transactions: (i) the sale,
lease, exchange, conveyance or other disposition of all or substantially all of
the Company's property or business or (ii) its merger into or consolidation with
any other corporation (other than a wholly-owned subsidiary of the Company), or
(iii) any transaction (including a merger or other reorganization) or series of
related transactions, in which more than 50% of the voting power of the Company
is disposed of.

         10.2. Right to Convert Warrant into Stock: Net Issuance.

                  (a) Right to Convert. In addition to and without limiting the
         rights of the holder under the terms of this Warrant, the holder shall
         have the right to convert this Warrant or any portion thereof (the
         "Conversion Right") into shares of Common Stock as provided in this
         Section 10.2 at any time or from time to time during the term of this
         Warrant. Upon exercise of the Conversion Right with respect to a
         particular number of shares subject to this Warrant (the "Converted
         Warrant Shares"), the Company shall deliver to the holder (without
         payment by the holder of any exercise price or any cash or other
         consideration) that number of shares of fully paid and nonassessable
         Common Stock as is determined according to the following formula:

                                       9
<PAGE>

                  X =   B - A
                        -----
                           Y

         Where:   X = the number of shares of Common Stock that may be issued to
                  the holder.

                  Y = the fair market value of one share of Common Stock.

                  A = the aggregate Warrant Price of the specified number of
                  Converted Warrant Shares immediately prior to the exercise of
                  the Conversion Right (i.e., the number of Converted Warrant
                  Shares multiplied by the Warrant Price).

                  B = the aggregate fair market value of the specified number of
                  Converted Warrant Shares (i.e., the number of Converted
                  Warrant Shares multiplied by the fair market value of one
                  Converted Warrant Shares).

         No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.

                  (b) Method of Exercise. The Conversion Right may be exercised
         by the holder by the surrender of this Warrant at the principal office
         of the Company together with a written statement (which may be in the
         form of Exhibit A-1 or Exhibit A-2 hereto) specifying that the holder
         thereby intends to exercise the Conversion Right and indicating the
         number of shares subject to this Warrant which are being surrendered
         (referred to in Section 10.2(a) hereof as the Converted Warrant Shares)
         in exercise of the Conversion Right. Such conversion shall be effective
         upon receipt by the Company of this Warrant together with the aforesaid
         written statement, or on such later date as is specified therein (the
         "Conversion Date"), and, at the election of the holder hereof, may be
         made contingent upon the closing of the sale of the Company's Common
         Stock to the public in a public offering pursuant to a registration
         statement under the Act (a "Public Offering"). Certificates for the
         shares issuable upon exercise of the Conversion Right and, if
         applicable, a new warrant evidencing the balance of the shares
         remaining subject to this Warrant, shall be issued as of the Conversion
         Date and shall be delivered to the holder within thirty (30) days
         following the Conversion Date.

                  (c) Determination of Fair Market Value. For purposes of this
         Section 10.2, "fair market value" of a share of Common Stock as of a
         particular date (the "Determination Date") shall mean:

                                       10
<PAGE>

              (i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the Securities and Exchange Commission, then the initial "Price to
Public" specified in the final prospectus with respect to such offering.

              (ii) If the Conversion Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:

                  (A) If traded on a securities exchange, the fair market value
         of the Common Stock shall be deemed to be the average of the closing
         prices of the Common Stock on such exchange over the five trading days
         immediately prior to the Determination Date;

                  (B) If traded on the Nasdaq Stock Market or other
         over-the-counter system, the fair market value of the Common Stock
         shall be deemed to be the average of the closing bid prices of the
         Common Stock over the five trading days immediately prior to the
         Determination Date; and

                  (C) If there is no public market for the Common Stock, then
         fair market value shall be reasonably determined by the Company's Board
         of Directors.

         If closing prices or closing bid prices are no longer reported by a
securities exchange or other trading system, the closing price or closing bid
price shall be that which is reported by such securities exchange or other
trading system at 4:00 p.m. New York City time on the applicable trading day.

              11. Representations and Warranties. The Company represents and
warrants to the holder of this Warrant as follows:

                  (a) This Warrant has been duly authorized and executed by the
         Company and is a valid and binding obligation of the Company
         enforceable in accordance with its terms, subject to laws of general
         application relating to bankruptcy, insolvency, moratorium,
         reorganization and the relief of debtors and the rules of law or
         principles at equity governing specific performance, injunctive relief
         and other equitable remedies (regardless of whether enforcement is
         sought in equity or at law);

                  (b) The Shares have been duly authorized and reserved for
         issuance by the Company and, when issued in accordance with the terms
         hereof will be validly issued, fully paid and non-assessable;

                  (c) The execution and delivery of this Warrant are not, and
         the issuance of the Shares upon exercise of this Warrant in accordance
         with the terms hereof will not be, inconsistent with the Company's
         certificate of incorporation or by-laws, do not and will not contravene
         any law, governmental rule or regulation, judgment or order applicable
         to the Company, and do not and will not conflict with or contravene any
         provision of, or constitute a default under, any material indenture,
         mortgage, contract or other instrument of which the Company is a party
         or by which it is bound or require the consent or approval of, the
         giving of notice to, the registration or filing with or the taking of
         any action in respect of or by, any Federal, state or local government
         authority or agency or other person, except for the filing of notices
         pursuant to federal and state securities laws, which filings will be
         effected by the time required thereby; and

                                       11
<PAGE>

                  (d) There are no actions, suits, audits, investigations or
         proceedings pending or, to the knowledge of the Company, threatened
         against the Company in any court or before any governmental commission,
         board or authority which, if adversely determined, will have a material
         adverse effect on the ability of the Company to perform its obligations
         under this Warrant.

              12. Modification and Waiver. This Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.

              13. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor on the signature
page of this Warrant.

              14. Binding Effect on Successors. This Warrant shall be binding
upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company relating to the Shares issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof.

              15. Lost Warrants or Stock Certificates. The Company covenants to
the holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.

              16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.

              17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Delaware.

                                       12
<PAGE>

              18. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.

              19. Remedies. In case any one or more of the covenants and
agreements contained in this Warrant shall have been breached, the holders
hereof (in the case of a breach by the Company), or the Company (in the case of
a breach by a holder), may proceed to protect and enforce their or its rights
either by suit in equity and/or by action at law, including, but not limited to,
an action for damages as a result of any such breach and/or an action for
specific performance of any such covenant or agreement contained in this
Warrant.

              20. No Impairment of Rights. The Company will not, by amendment of
its certificate of incorporation or through any other means, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant against impairment.

              21. Severability. Whenever possible, each provision of this
Warrant shall be interpreted in such a manner as to be valid, legal and
enforceable under all applicable laws and regulations. If, however, any
provision of this Warrant shall be invalid, illegal or unenforceable under any
such law or regulation in any jurisdiction, it shall, as to such jurisdiction,
be deemed modified to conform to the minimum requirements of such law or
regulation, or, if for any reason it is not deemed to be so modified, it shall
be invalid, illegal or unenforceable only to the extent of such invalidity,
illegality or limitation on enforceability without affecting the remaining
provisions of this Warrant or the validity, legality or enforceability of such
provision in any other jurisdiction.

              22. Entire Agreement; Modification. This Warrant constitutes the
entire agreement between the parties pertaining to the subject matter contained
in it and supersedes all prior and contemporaneous agreements, representations,
and undertakings of the parties, whether oral or written, with respect to such
subject matter.

                  [Remainder of page intentionally left blank]

                                       13
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Warrant as of the
date first written above.

                                         SIRNA THERAPEUTICS, INC.

                                         By:__________________________________
                                         Name:
                                         Title:

                                         Address:  2950 Wilderness Place
                                                   Boulder, CO  80301

<PAGE>

                                   EXHIBIT A-1

                               Notice of Exercise

1. The undersigned hereby:

         [ ]      elects to purchase _____ shares of Common Stock of the Company
                  pursuant to the terms of the attached Warrant, and tenders
                  herewith payment of the purchase price of such shares in full,
                  or

         [ ]      elects to exercise its net issuance rights pursuant to Section
                  10.2 of the attached Warrant with respect to ____ shares of
                  Common Stock.

2.       Please issue a certificate or certificates representing said shares in
         the name of the undersigned or in such other name or names as are
         specified below:

         -------------------------------------
         (Name)

         -------------------------------------

         -------------------------------------

         -------------------------------------
         (Address)

3.       The undersigned represents that the aforesaid shares are being acquired
         for the account of the undersigned for investment and not with a view
         to, or for resale in connection with, the distribution thereof and that
         the undersigned has no present intention of distributing or reselling
         such shares, all except as in compliance with applicable securities
         laws.

                                        -------------------------------------
                                        (Signature)

                                        Dated:  _____________________________

<PAGE>

                                   EXHIBIT A-2

                               Notice of Exercise

1.       Contingent upon and effective immediately prior to the closing (the
         "Closing") of the Company's public offering contemplated by the
         Registration Statement on Form S-1, filed _____________, the
         undersigned hereby:

         [ ]      elects to purchase _____ shares of Common Stock of the Company
                  (or such lesser number of shares as may be sold on behalf of
                  the undersigned at the Closing) pursuant to the terms of the
                  attached Warrant, or

         [ ]      elects to exercise its net issuance rights pursuant to Section
                  10.2 of the attached Warrant with respect to _____ Shares of
                  Common Stock.

2.       Please deliver to the custodian for the selling stockholders a stock
         certificate representing such _____________ shares.

3.       The undersigned has instructed the custodian for the selling
         stockholders to deliver to the Company $_____ or, if less, the net
         proceeds due the undersigned from the sale of shares in the aforesaid
         public offering. If such net proceeds are less than the purchase price
         for such shares, the undersigned agrees to deliver the difference to
         the Company prior to the Closing.

                                        -------------------------------------
                                        (Name)

                                        -------------------------------------

                                        -------------------------------------

                                        -------------------------------------
                                        (Address)

Dated:  __________________________

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